West is hardly the only billionaire to run a company that received a sizable loan. Rich people receiving government funds looks bad, especially considering how many non-famous owners found themselves unable to collect the money they needed to keep their businesses alive. But these companies were eligible for money including potentially forgivable loans, so it’s little wonder they pursued it.
Yeezy did not return a request for comment for this story.
The companies approved for these larger loans garnered around 75% of the program’s total funding — even though they represent a minority of the more than 4 million borrowers who took part in the program, according to the SBA and Treasury Department.
And some experts say that risk of disparity was evident from the get-go.
“Right at the beginning, I flagged that I didn’t think it was going to go well for [an] obvious reasons: They put the banks as the intermediaries,” said Joseph Stiglitz, a Nobel Prize-winning economics professor at Columbia University and author of “People, Power and Profits: Progressive Capitalism for an Age of Discontent.”
While the SBA managed the PPP funding, it was up to banks to disburse the loans. They had an “obvious incentive” to help well-off customers from whom they make a lot of money or had prior relationships, said Stiglitz, who was also an economic adviser to the Clinton Administration.
A bank might be more eager to lend to a company that had taken out previous business loans — a way for the bank to mitigate risk — than to, say, a small restaurant who was new to them. But that may have put some of the smallest enterprises at a disadvantage.
Beyond Yeezy, the list of companies that received the larger loans includes at least $9 million for elite membership club Soho House, controlled by billionaire Ron Burkle, and between $5 million and $10 million to Gores Vitac Holdings, a division of the company owned by billionaire Alec Gores.
“It was clearly not the intent of Congress, and it undermines the credibility of the bailout when you have money that was supposed to go to people on the verge of bankruptcy going to companies [with wealthy owners],” Stiglitz said.
How Yeezy and other big names received big loans
West’s Yeezy received a loan worth between $2 million and $5 million from California’s City National Bank to retain 106 jobs, according to the SBA data.
While Yeezy might not be the business intended by spirit of the program, the PPP was “designed to help any firm meeting the definition of a small business, in terms of employees or revenues,” said Shanthi Nataraj, senior economist and director of the labor and workforce development program at the nonpartisan think tank RAND Corporation.
“It wasn’t designed to [consider] if your owner has a certain amount of assets or is a well known person … Simply because you have a wealthy owner doesn’t mean you aren’t eligible.”
It’s unclear banks could have considered a business owner’s personal wealth as part of the application, even if they’d wanted to, Nataraj said.
There may be other reasons that the majority of the program’s funding has thus far gone to borrowers requesting larger loans. For example, Nataraj said, the loan amounts were tied to the number of jobs they would support — so companies with more employees would receive larger loans that would make up a greater portion of the overall pie.
“There is a trade off between speed and targeting,” Nataraj said. “Getting money out to small businesses was crucial, and getting it out quickly meant a lot of challenges in doing that … a lot of unintended consequences.”