SBA scrapped ethics review for agency employees, lawmakers in emergency loan program

A little-noticed rule issued by the Small Business Administration earlier in the pandemic allows agency employees, lawmakers and other federal officials to sidestep an ethics review that is meant to prevent conflicts of interest.

The exemption pertained to loans from the $659 billion Payment Protection Program (PPP), a lending facility Congress approved with the goal of getting money quickly to small businesses hit hard by the coronavirus lockdowns.

SBA regulations normally require applicants with potential conflicts of interest to obtain a waiver from a Standard of Conduct Committee before the agency can extend them a loan. The regulation is in place to protect taxpayer dollars from being distributed to well-connected people who might not otherwise be eligible.

But the SBA, led by Administrator Jovita Carranza, issued a blanket waiver for that rule as part of PPP.

The Washington Post first reported the rule change Friday, noting it was issued by the SBA in April.

The SBA, in a statement Friday, said the rule was meant to remove additional barriers from people getting the much-needed loans, and that disaster assistance funds don’t require the conflict of interest waivers for the same reason.

“The Standard of Conduct Committee gave a blanket approval rather than case-by-case consideration in recognition that PPP loans were in some respects akin to disaster loans (which do not require any Standards of Conduct Committee approval) and in anticipation of the large volume of potential cases that might come before the Committee,” SBA spokesperson Jim Billimoria said in a statement.

The SBA and Treasury Department have come under scrutiny for a lack of transparency and oversight of the emergency lending program, which offers forgivable loans.

The Government Accountability Office released a report Thursday that said SBA has not been forthcoming with information about the PPP.

“We encountered the most difficulty trying to obtain information from the Small Business Administration (SBA),” the report said. “SBA to date has failed to provide information critical to our review.”

SBA disputed that characterization, saying it was providing information on more than 4.7 million loans.

On Thursday, Treasury Secretary Steven Mnuchin said he would increase transparency by providing certain congressional committees with access to specific information about PPP loans under $150,000.

Unlike larger loans, Mnuchin was not expected to release that information publicly, but agreed under pressure from Democrats to make the information available to key committees.