The Los Angeles Lakers can pay LeBron James millions, but still needed a Paycheck Protection  Loan?
The Los Angeles Lakers can pay LeBron James millions, but still needed a Paycheck Protection Loan? AFP / HECTOR RETAMAL

At a time when the small business community needs help the most, the U.S. banking industry is beginning to look like the Blue Meanies, those music-hating villains from the Yellow Submarine, the 1968 Beatles animated film. It was bad enough that big banks seemed to be dragging their feet with the Paycheck Protection Program (PPP), the CARES Act initiative intended to help COVID19-stung companies, giving applicants the runaround and delaying disbursements of the loans.

And then news began surfacing as to which enterprises were among the few, the happy few, who actually received the forgivable funds. Among them--the winner of what we are dubbing the Coronavirus Chutzpah Award--were the Los Angeles Lakers. The Lakers, one of the most glamorous franchises in the National Basketball Association (not to mention the sports world), applied for and somehow received a PPP Loan of $4.6 million.

Stop and consider that the team's highest-paid player, LeBron James, signed a contract with the team before the start of the 2019-20 season that pays him an annual salary of $38.3 million.

Rubber-Stamped Requests

Now, it is not all the Lakers' fault, mind you. Thanks to the vagaries of the PPP mandate, the franchise technically had the right to apply for this type of assistance. The question that people should be asking--or yelling--is: Who in the world approved the loan?

Was the unknown underwriter simply star-struck at the unlikely notion of working closely with the team known throughout the sports world as Showtime? Did that individual think she or he might even rub elbows with the likes of LeBron?

Ridiculous as it is that such a well-heeled organization should have the audacity to seek loans earmarked for Mom and Pop businesses, it's even more outrageous that a lender should rubber-stamp the request. Especially while many of those self-same Mom and Pops were unable to even get an application submitted before the PPP ran out of funds.

The reactions to this news, when it broke, ranged from shock to outrage. The Lakers, sensing a public-relations and possibly legal firestorm, sensibly returned the money before it became a public scandal.

"I never expected in a million years that the Los Angeles Lakers, which, I'm a big fan of the team, but I'm not a big fan of the fact that they took a $4.6 million loan," Treasury Secretary Steven Mnuchin told CNBC on April 28. "I think that's outrageous and I'm glad they returned it or they would have had liability."

Protection For Whom?

The Lakers weren't the only large and well-off outfit to benefit from the PPP, only the most famous: Nearly 300 public companies reportedly received $1 billion from the program, and some of the loans were well over the $10 million limit, according to an analysis by the Washington Post.

The lenders who awarded these loans are effectively undermining not just the spirit of the program, but the Herculean efforts of small proprietors who have spent a lifetime continuing to keep alive the flame of businesses handed down from one generation to the next. They have managed to withstand challenges spanning hurricanes and earthquakes, not to mention the specter of crippling, ever-rising monthly rents in large cities. But this behavior may be the ultimate back-breaker.

Paycheck Protection Program? Protection for whom--and from whom?

The situation is especially galling since that it seems that the financiers have developed a collective case of amnesia. It was little more than a decade ago that Obama Administration, in a still-controversial decision, elected to bail out the banks and other financial institutions reeling from the subprime mortgage meltdown of 2008-09 that sparked a national recession. During a webinar hosted in Las Vegas, one of the hardest-hit COVID-19 cities in the nation, Joseph Amato, District Director for the SBA's Nevada District Office, commented, "Some of the big banks that had no problem in taking billions of dollars of free money as bailout in 2008 are now the biggest banks that are resistant to helping small businesses so that should tell you something."

Yes: They can take it, but they can't dish it out.

Where Is Washington?

Another question: Where are the politicians when their constituents need them to exercise their clout the most?

The Republican Party, desperate to hold on to its majority in the U.S. Senate and increasingly nervous as polls show President Trump trailing Democratic rival Joe Biden, is struggling to determine how best to help the beleaguered small-business community. But it is divided, as the Trump administration and prominent GOP senators push for additional forceful spending, while some senior party officials insist that this is now the time to begin cutting back.

For his part, President Trump advocates costly ideas, such as infrastructure programs and a payroll tax cut. But White House senior economic advisors are anxious to convince the nation that the additional measures won't further strain the enormous national debt. "At the same time, some senior Senate Republicans are increasingly warning about the effect on the nation's liabilities, even as some of their own members lobby expensive proposals to rescue an economy still free fall," the Washington Post pointed out on April 26.

And things for these business owners are likely to get worse before they can hope to return to some semblance of normalcy. On April 29, the Commerce Department announced that the gross domestic product--the closely watched measurement of goods and services generated in the U.S. economy--fell 4.8% in the first quarter of 2020. This spiral represents the first drop since 2014 and the worst three-month decline since the nation was stuck in a deep recession in 2008.

Worse Before Better?

Where does this all leave the owners of your local dry cleaner, hardware store, pharmacy, bodega, and hair salon in their struggle to survive? You couldn't blame them if they feel like the proverbial dog on a highway, afraid of getting run over whichever way they turn.

The coronavirus pandemic has produced an almost unimaginative burden on small businesses. People who shopped regularly in these kinds of stand-alone establishments--their customer base--have been in a weeks-long lock-down. The customers are afraid to leave their homes, much less stop in to buy even household staples, much less something as frivolous as a candy bar or a lottery ticket.

Now that May 1 has rolled around, many states have lifted the restrictions on commerce, decreeing that certain businesses can begin operations. However, there is no guarantee that people, even those needing haircuts and craving massages and, yes, tattoos (in the case of Georgia) will venture out to venues while Covid-19 remains a vivid health threat. Even with an easing back into ordinary life, there's a sense that time and money are running out for America's small business owners.

But maybe all is not lost. There is talk that the National Basketball Association will resume the interrupted 2019-2020 regular season and transition from there into the much anticipated postseason playoffs, eventually to crown a league champion. While they wait for customers to come back, the small business owners and employees can watch their millionaire sports heroes play on television.

Hey, maybe they're Los Angeles Lakers fans.