Congress Fails to Reach Agreement on Additional Dollars for Small Business and Hospitals; Agencies Act to Provide CARES Act Funding to Key Sectors
Congressional negotiators failed to reach agreement yesterday on adding more emergency funds to various programs established in the Phase 3 Coronavirus Aid, Relief, and Economic Security (CARES) Act. Senate Majority Leader Mitch McConnell (R-KY) put forth the White House proposal to approve $250 billion in additional funding for small businesses, while Sen. Chris Van Hollen (D-MD) offered a Democratic proposal to combine small business aid with an additional $250 billion for hospitals and state and local governments. Both members unsuccessfully attempted to pass their measures by unanimous consent.
Treasury Secretary Steven Mnuchin initially requested immediate additional, interim funding for the Paycheck Protection Program (PPP) for small businesses on Wednesday. After receiving the Administration's request for additional PPP funding, House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) also called for an additional $100 billion for hospitals, community health centers and health systems, and $150 billion for state and locFal governments.
Leader McConnell countered Speaker Pelosi and Leader Schumer by noting that no other relief funds were nearing exhaustion. Speaker Pelosi expressed her dissatisfaction with Leader McConnell's proposal, outlining the need to couple small business assistance with an additional $50 billion in funding for the Economic Injury Disaster Loan (EIDL) Program, as well as additional funds for hospitals, and state and local governments. She also emphasized the need for oversight for allocation of funding and called for data on the impact on minority communities. House Minority Leader Kevin McCarthy (R-CA) held a press call, expressing disappointment with Senate Democrats for their efforts to block the additional funding for small businesses.
While Congress is unlikely to return April 20 as planned, members indicated that they will continue negotiating. Speaker Pelosi said that, as a self-described practicing Catholic, she does not plan to be engaged in negotiations on Easter. Looking ahead to another round of talks on follow-up legislation to the Phase 3 CARES Act, Speaker Pelosi indicated that she will continue to push to include funds and provisions for voting by mail in the bill.
Links related to this topic may be found below under Related Links and captioned "Phase 3.5." Should Congress enact this interim emergency legislation, members would then continue to work on a Phase 4 package that expands upon prior COVID-19 stimulus measures.
As public officials at all levels of government continue to escalate their responses to the pandemic, the latest actions and developments may be found below. Akin Gump will continue to provide regular policy developments related to COVID-19.
Several of Agencies Took Steps to Provide Funding Enacted under the CARES Act
- Today, the Department of Health and Human Services (HHS) announced that it is beginning the delivery of the initial $30 billion in relief funding to providers as part of the $100 billion in provider relief provided for in the CARES Act. This initial distribution will go to hospitals and providers that are enrolled in Medicare. Facilities and providers will be allotted a portion of the funds based on their share of 2019 Medicare fee-for-service reimbursements.
- U.S. Secretary of Education Betsy DeVos announced that the Department of Education will distribute more than $6 billion to colleges and universities to provide direct emergency cash grants to students through the Higher Education Emergency Relief Fund authorized by the CARES Act. Institutions will receive allocations and guidance for the institutional share of the Higher Education Emergency Relief Fund in the coming weeks.
- The Federal Reserve yesterday announced that its Main Street Lending Program ("Main Street loans") will offer four-year loans to companies with 10,000 or fewer employees or those with revenues of less than $2.5 billion. Under the expanded program, principal and interest payments will be deferred for one year. The announcement also stipulates that (i) eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses, and (ii) banks will retain a five percent share and sell the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans. Comments may be sent using the feedback form until April 16. Additional analysis of the Main Street Lending Program follows below.
Overview: Main Street Lending Program
The CARES Act promised an unprecedented injection of government financing for programs designed to provide liquidity to American business. For companies that were either unable to access Small Business Administration (SBA) lending programs, or for whom those programs were inadequate, the appropriation of at least $454 billion to the Department of the Treasury to support lending to distressed businesses stood out. Yesterday's announcement by the Federal Reserve that it was establishing a MSLP was the first step in putting that $454 billion to work.
The terms of the program are still being digested, and the Federal Reserve itself acknowledged that it was a work in progress. Its statement announcing the program says, "The Federal Reserve and the Treasury recognize that businesses vary widely in their financing needs, particularly at this time, and, as the program is being finalized, will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds." They are allowing feedback through April 16. This is an important opportunity for businesses harmed by the COVID-19 outbreak and economic shutdown to outline modifications to the program that would make it more accessible.
The Main Street Lending Program consists of two Federal Reserve facilities—the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF)—funded collectively with $75 billion from Treasury's $454 billion appropriation. This investment will allow the Main Street Lending Program to purchase up to $600 billion in loans from U.S. banks and savings and loans.
Borrowers have a choice of participating in the MSNLF or the MSELF, but cannot participate in both a Main Street Lending Program and the Primary Market Corporate Credit Facility. Borrowers under these programs are subject to CARES Act restrictions on executive compensation, stock repurchases and capital distributions.
Eligible borrowers are those businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. Businesses must be created or organized in the United States or under the laws of the United States with significant operations, and a majority of its employees, based in the United States. As a practical matter, businesses must also meet certain debt-to-earnings ratio requirements (between 4 times to 6 times debt-to-EBITDA), depending on the loan.
Borrowers must refrain from using eligible loans to repay other loan balances. They must also attest that financing is required due to circumstances created by COVID-19 and that any loan will be used to make reasonable efforts to maintain payroll and employees.
MSNLF - New Loans. For new loans made after April 8, the MSNLF will support loans with the following features:
- Unsecured loans
- Four-year maturity
- No payments for one year
- Low interest rates (adjustable rate of SOFR + 250-400 BPS)
- A loan size between $1 million and the lesser of $25 million or an amount that, when added to the borrower's existing outstanding debt (plus committed but undrawn debt), does not exceed four times the borrower's 2019 EBITDA
- No prepayment penalty.
MSELF - Upsizing Existing Loans. For loans made on or before April 8, the MSELF will support upsizing those loans, with the upsized tranche having the following features:
- Four-year maturity
- No payments for one year
- Low interest rates (adjustable rate of SOFR + 250-400 BPS)
- A loan size between $1 million and the lesser of (i) $150 million, (ii) 30 percent of the borrower's existing outstanding bank debt (and committed but undrawn bank debt) or (iii) an amount that, when added to the eligible borrower's existing outstanding debt (and committed but undrawn debt), does not exceed six times borrower's 2019 EBITDA.
- No prepayment penalty
- If loan is secured with collateral (under the original terms or at the time of upsizing), the collateral must secure the loan on a pro rata basis.
The Federal Reserve has indicated that this program will be amended, and likely supplemented. Beyond the fact that they are taking comments that will likely lead to a further liberalization of lending, it is important to look back at what Treasury still has left in the tank. Congress appropriated no less than $454 billion for Treasury to finance Federal Reserve facilities that would provide firms with the liquidity they need to operate. After yesterday's investments, Treasury still has over $300 billion sitting on the sidelines that can go to finance additional lending. Both the development of the CARES Act—and subsequent actions by SBA, Treasury, and the Federal Reserve—have moved in the direction of liberalization of lending to impacted businesses. We should expect that needle to continue to move in a business-friendly direction over the coming weeks as these Federal Reserve programs get further refinement.
White House Coronavirus Task Force Briefing Highlights
On Friday, April 10, the White House Coronavirus Task Force conducted a briefing from the White House Press Briefing Room. Highlights of the discussion included:
- President Donald Trump asserted that the government's aggressive mitigation strategies and public health recommendations to practice social distancing and close nonessential businesses are working, noting that hospital admissions in New York have been decreasing daily. He expressed confidence that the United States would be "substantially below" the originally predicted 100,000 mark for total deaths due to the tireless efforts of our health care workers, adding that the mortality rate in the United States is much lower than in other countries. Dr. Deborah Birx, White House COVID-19 Response Coordinator, indicated that they are finally beginning to see the "flattening of the curve" and rates of increase stabilizing, especially in metro areas.
- President Trump mentioned that he directed Secretary of Agriculture Sonny Perdue to use all of the "funds and authorities at his disposal to make sure that our food supply is stable, strong, and safe." Specifically, the Department of Agriculture will disburse $9.5 billion in direct assistance to livestock, specialty crop and local foods producers.
- When emphasizing the importance of reopening the economy, President Trump noted that many companies have business interruption insurance, but are unable to get payouts from insurance companies because such policies often do not cover communicable diseases. He stated, "I would like to see the insurance companies pay what they need to pay, if it's fair."
- On minority communities being disproportionately affected by COVID-19, Surgeon General Jerome Adams asserted that minority populations are not biologically or genetically predisposed to COVID-19. He explained the high rates of infection and mortality in minorities by noting that they are more likely to live in densely packed areas and less likely to have jobs that allow them to work from home, calling them "socially predisposed."
- Vice President Mike Pence stated that the United States has administered 2.1 million tests, adding that the antibody test will be available very soon, which would allow Americans to determine whether they have ever had COVID-19.
- When asked about energy production, President Trump mentioned that the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut back on oil production in an effort to reduce the surplus and ease the burden on places to store it. He noted that Mexico agreed to reduce its output by 100,000 barrels per day while the United States would cut its own production by 250,000 barrels per day to "pick up the slack."
- President Trump reemphasized the disparity in funding for the World Health Organization (WHO) between the United States and China, noting that he plans to look into the matter in greater detail next week. He argued that the United States should spend its money more wisely.
- President Trump mentioned that his Administration is planning to meet with Boeing's executives, stressing that he would do "whatever is necessary to do" to make the company "strong again."
Thursday, April 9 highlights:
- President Trump met yesterday with Secretary Mnuchin and U.S. Transportation Secretary Elaine Chao to discuss proposals regarding the airline industry. He further stated that the Administration will soon be releasing a proposal for the industry and will provide additional details over the weekend.
- The President spoke with Russian President Vladimir Putin and Saudi King Salman yesterday about oil production and assisting the oil industry in order to prevent layoffs.
- President Trump also spoke with metal health advocates yesterday to discuss their work, recognizing that the virus inflicts mental and emotional suffering on individuals.
- Pfizer revealed yesterday that it has found a promising treatment to prevent the virus from replicating, with the President noting that the company hopes to begin testing and clinical trials "very soon."
- President Trump highlighted Gilead's remdesivir clinical trials, noting that the company has expanded emergency use for new patients.
- The Federal Reserve announced that its Main Street Lending Program will offer four-year loans to companies with 10,000 or fewer employees or those with revenues of less than $2.5 billion.
- The Department of Education will distribute more than $6 billion to colleges and universities to provide direct emergency cash grants to students.
- Regarding congressional efforts to secure additional interim funding for the Paycheck Protection Program (PPP), President Trump noted that the Administration is working with Congress and hopefully will soon have bipartisan consensus. He asserted that Democratic efforts to secure additional funds for states and hospitals should hold for Phase 4.
- Vice President Pence stated that the White House has tasked the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS) to review the feasibility of allowing health care workers to use cloth gowns instead of disposable ones, noting that the Administration will have more guidance on this issue in the coming days.
- Vice President Pence noted that Abbott Labs has "thousands" of machines that can process large numbers of coronavirus tests, stating that the Administration is working with hospitals and labs around the country to activate these machines for the 15-minute test.
Wednesday, April 8 highlights:
- Data suggests that the number of U.S. cases of COVID-19 is beginning to stabilize as a result of aggressive mitigation efforts. The Institute for Health Metrics and Evaluation has revised its projection of U.S. deaths down to about 60,000.
- Officials emphasized that Americans must continue to follow social distancing guidelines in order for this trend to continue.
- The Centers for Disease Control and Prevention (CDC) released new guidance for essential workers who may have been exposed to someone with COVID-19.
- President Trump called on Congress to act this week to provide an additional $250 billion in funding for the PPP, while noting that there will still be a "Phase 4" package later and possibly an infrastructure bill.
- The President said he could not give a date by when businesses will reopen, adding that this may happen in phases or by region.
- The federal government continues to distribute ventilators to states and is ordering additional ventilators for the Strategic National Stockpile.
- There are now 10 potential COVID-19 therapies in clinical trials, and Henry Ford Health System is conducting a large study of hydroxychloroquine.
- Members of the task force will meet tomorrow with leaders from the African American community to discuss the disproportionate impact the virus is having on African Americans.
- The State Department has repatriated about 50,000 Americans since late January, and efforts are underway to repatriate several thousand more citizens who remain overseas.
- The President criticized the WHO, arguing that the group "got it very wrong" on COVID-19. He added that his Administration would reassess U.S. funding of the organization.
- Meanwhile, Secretary of State Mike Pompeo said it is "not the time" to be discussing a leadership change at WHO.
- Phase 3: HHS to Begin Immediate Delivery of Initial $30 Billion of CARES Act Provider Relief Funding
- Phase 3: GOP Ways and Means FAQs on CARES Act Provider Relief Funding
- Phase 3: Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy
- Phase 3: Secretary DeVos Rapidly Delivers More Than $6 Billion in Emergency Cash Grants for College Students Impacted by Coronavirus Outbreak
- Phase 3.5: House Democratic Interim Emergency COVID-19 Relief Act Summary
- Phase 3.5: Senate Democratic Interim Emergency COVID-19 Relief Act Text
- Phase 3.5: Senate GOP Interim Emergency COVID-19 Relief Text
- Phase 4: Senate Democrats' Proposal for Pandemic Premium Pay to Reward, Retain, & Recruit Essential Workers
- Phase 4: Pelosi Dear Colleague on Submission of House Documents
- Phase 4: House Financial Services Committee Chairwoman Waters (D-CA) Proposal
- FCC's COVID-19 Telehealth Program Application Portal Opens on Monday
- CISA Trusted Internet Connections 3.0 Interim Telework Guidance
- States: Updated Contact Information for FEMA Regional Offices
- States: The Wall Street Journal Guide to State Lockdowns
- States: National Governors Association (NGA) COVID-19 Resources
- States: Stateside Associates: New Executive, Legislative And Regulatory Actions Issued By State/Local Governments
Akin Gump Alerts and Other Resources
Centers for Disease Control and Prevention (CDC) Director Dr. Robert Redfield:
- Tweet at 7:38 PM, April 8,
- "Today, the White House, Centers for Disease Control and Prevention, and Department of Homeland Security provide strategies aimed at helping our most critical workers quickly return to work after potential exposure to COVID19, provided those workers are symptom-free. (Guidance)"
U.S. Department of Health and Human Services (HHS):
- Tweet at 11:08 AM, April 8,
- "Today, HHS through the Health Resources and Services Administration (HRSA), awarded more than $1.3 billion to 1,387 health centers as part of a historic U.S. response to the Coronavirus Disease 2019 (COVID19) pandemic. Read more here."
- Tweet at 4:05 PM, April 8,
- "Today, the Indian Health Service (IHS) is announcing its expansion of telehealth across IHS federal facilities. Telehealth services means patients can stay home and reduce their risk of infection and also help keep others safe from COVID19. Read more here."
The Federal Reserve:
- Tweet at 11:31 AM, April 8,
- "The Federal Reserve announces, due to the extraordinary disruptions from the coronavirus, it will temporarily and narrowly modify the growth restriction on Wells Fargo so it can provide additional support to small businesses: (Press Release)"
- Tweet at 8:20 AM, April 9,
- "The Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy...this funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic: (Press Release)"
- Tweet at 9:31 AM, April 9,
- "The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issue interim final rule to encourage lending to small businesses through the Small Business Administration Paycheck Protection Program: (Press Release)"
U.S. Department of the Treasury:
- Tweet at 10:40 AM, April 9,
- "Treasury underscores commitment to global flow of humanitarian aid in face of COVID-19 pandemic. (Press Release)"
Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma:
- Tweet at 12:50 PM, April 8,
- "CMS has issued a series of updated guidance documents focused on infection control to prevent the spread of COVID19, based on CDC guidelines: (Press Release)"
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