The COVID-19 bailout is a bonanza for big business – and a wipeout for workers

Help us unmask the bailout bandits and hold accountable the hospitality companies that are collecting lucrative assistance while abandoning workers and customers.

(Money by Pictures of Money – CC BY-SA 2.0)

In the rush to respond to the COVID-19 pandemic, Congress has quickly enacted several programs to relieve the economy. The effort has quickly surpassed in size the economic interventions after 9/11 and the 2008-9 financial crisis, and may still grow.[i]

But key lessons from the last crisis have been forgotten. Namely, the bailout packages thus far have focused on shoring up big businesses without directly support workers’ wages and healthcare. The requirements for businesses to share assistance funds with their employees are weak where they even exist. Oversight of the funds is fractured and lacks the tools to make companies pay for misuse.[ii]

These problems are compounded for workers in the hospitality industry. One bailout plan, the Paycheck Protection Program, is intended to assist small businesses maintain payroll with forgivable loans. This is one of the few programs that requires bailout recipients to pass on funds to workers – 75% of loans must go to meet payroll costs. However, the country’s largest lobby group for hoteliers – the American Hotel and Lodging Association (AHLA) – is pushing Congress to relax these restrictions and devote more money to uses other than paying workers.[iii]

The job retention mission Congress intended for another CARES Act measure, the Main Street Lending Facility, was effectively negated before the program even got underway, after the Federal Reserve decided that “borrowers that have already laid-off or furloughed workers”[iv]  are eligible to receive the low-cost loans with delayed repayment features, and that a recipient need only make “commercially reasonable efforts to maintain its payroll and retain its employees during the time the Eligible Loan is outstanding.”[v] In other words, if a company with 12,000 employees lays off everyone but the night watchman, that company can get a multi-million loan from the program Congress created to encourage job retention, as long as it makes “commercially reasonable efforts” to keep that lonely watchman employed.

Perhaps sunlight is the best disinfectant against corporate welfare disguised as “stimulus.”   In that spirit, this website will chronicle which companies in the hospitality industry – hotels, casinos, restaurants, and other food service operations – are pursuing government grants and subsidies, including the lucrative corporate tax credits provided in the CARES Act. We will scrutinize what those companies are doing with their bailout bounties, and who is really benefitting.

Do you know of a hospitality company that has received federal coronavirus assistance, but hasn’t done right by its workers or customers? Please contact us here.

 

Notes
[i] Michael Collins and Deirdre Shesgreen, “The $2 trillion stimulus is the biggest in history. How does it compare to 9/11, financial crisis bills?,” USA Today, 3/25/20. https://www.usatoday.com/story/news/politics/2020/03/25/coronavirus-emergency-bill-how-does-it-compare-9-11-financial-crisis/5010452002/
[ii] Jesse Eisinger, “How the Coronavirus Bailout Repeats 2008’s Mistakes: Huge Corporate Payoffs With Little Accountability,” ProPublica, 4/7/20. https://www.propublica.org/article/how-the-coronavirus-bailout-repeats-2008s-mistakes-huge-corporate-payoffs-with-little-accountability
[iii] Letter re Corrections and Enhancement to CARES Act, AHLA, 4/27/20. https://www.ahla.com/sites/default/files/hotel_industry_cares_act_technical_corrections_and_enhancements_0.pdf; Analysis: Why PPP Loan Limits May Lead to More Hotel Layoffs, AHLA. https://www.ahla.com/sites/default/files/analysis_why_current_ppp_loan_limits_may_lead_to_more_hotel_layoffs_final_0.pdf
[iv] “Main Street Lending Program Frequently Asked Questions,” Federal Reserve, updated 4/30/20, p. 15. https://www.federalreserve.gov/monetarypolicy/files/main-street-lending-faqs.pdf
[v] “Main Street New Loan Facility,” Federal Reserve, 4/30/20, p. 3 (emphasis added). https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200430a1.pdf