An “Epic Fail”…

I try to keep politics out of these rants; that will not be possible today because politics lies at the heart of the topic.  Earlier this week, reports say that the LA Lakers applied for and received a $4.6M loan from the Small Business Administration (SBA) as part of the Federal legislation to help small businesses survive during the economic shutdown caused by COVID-19.  To their credit, the Lakers have returned that money to the SBA.  With the money returned to the government so it might be distributed to small businesses that really need those funds, one can consider this a Shakespearean comedy and just say All’s Well That Ends Well.  Except that is not the case…

Forbes said prior to the onset of the pandemic that the Lakers’ franchise was worth $4.6B.  Surely their profit for their current fiscal year will be damaged by the pandemic and the franchise value may drop the next tine Forbes applies its methodology.  Nevertheless, it would take an extreme contortion of logic to think that the Lakers were in the category of “small businesses” to receive pandemic assistance at this time.

The granting that loan was a monumental screw-up; I believe the current jargon would call it an “epic fail”.  So, riddle me this:

  1. Who thought it was a good idea for the Lakers to apply for said loan?
  2. Who thought it was a good idea to grant the LA Lakers a “small business loan”?

Let me take the first question first.  Either someone in the Lakers’ organization figured out that they would qualify for the loan under the guidelines or someone outside that organization told them the same thing.  If it was an “internal source”, that reveals something about the person that is not flattering; but at least, the return of the money shows that there is a sense of honor and fair play in the organization at some higher level of decision making.  If it was an “external source” – – like maybe a lobbyist hired by the Lakers to represent their interests in Washington? – – that plumbs new depths of shadiness for a person.  Given all of the wrangling and the reporting of that wrangling that led to the passage of this legislation, no person smart enough to know that Mount Rushmore is not a rock group could mistakenly think that any of this money belonged in the Lakers’ account.

It is unlikely that we will ever know the answer to Question 1 above.  That is too bad, but it is not nearly as bad as the fallout from addressing Question 2.

The fact is that the Lakers qualified for this loan under the CARES Act; so, when they applied for it, they got it.  They did not violate the law; they did not even stretch the law; they went to a bank that was handing out these SBA loans and presented their application and they received the funds.  As they approached the bank, they may have been wearing a mask as is the guidance in these days of COVID-19, but I am sure they did not also level a firearm on any bank officer as part of the “loan process”.

There is no reporting that the bank granted that loan in error.  If that is indeed the case, then the bank has minimal culpability here; they granted a loan to a legally practicing business that met the guidelines for that loan.  Maybe the folks involved in the processing and approval of that specific loan might have done a double take at the recipient and sent that application much higher in the bank’s organization for approval, but that is about all I would fault them for.

We are getting closer to the source(s) of the problem here.  Clearly, the criteria set by the SBA by which businesses would qualify for these loans turned out to be “less than perfect”.  [Note: I am trying to be politically correct and sort of generous with some of my remarks today.]   In addition to finding out that the Lakers got a big chunk of the loan money provided, we also know now that a lot of money went to large restaurant chains as opposed to local “Mom and Pop” restaurants.  Like the situation with the Lakers, those entities qualified under the criteria set by the SBA; those chain restaurants did not violate the law; the problem lies in the criteria.

But that is not the end of the line in the hunt for culpability in this mess.  Let us look at the source of all that money, the $2.2 Trillion contained in the CARES Act.  That came from the same place that all government money comes from – – the Congress of the United States.  So, what do we know about that?

  • The CARES Act itself is 880 pages long.  Here is a link to the text of that Act in case anyone has 3 days’ worth of time they do not know what to do with.
  • Contained in all of that verbiage and motivated by all the dealing and compromising required to reach some sort of consensus here, there are not sufficiently clear statements to the SBA to hand this money out to small businesses that are actually small businesses.

Why is all that a big deal?  The Congress of the United States will soon turn around and tell everyone that they are going to provide oversight as to how this money is spent and administered.  Really?  There has not been a single suggestion that the “Lakers’ loan” or any of the other loans to large chain restaurants violated the CARES Act.  So, when the Congress “oversees” how and why this miscarriage of logic happened, is it likely to point any fingers at itself for nonfeasance – – the failure to put language in those 880 pages spelling out where the money was supposed to go?

I had a former colleague who had a yardstick that he used in measuring the value and the likely success of complex development projects.  Here is that yardstick:

  • If you cannot tell me in 3 simple declarative sentences what you want to achieve, you will never get where you think you want to go.

The majority of the 535 Congressthings had their fingers in this mess.  When they stand up and point those fingers at others to assign blame and when they stand up and solemnly promise to get to the bottom of this “mischief”, please hold up a large mirror for them so that they can see the problem.

Finally, in keeping with today’s political theme, let me present a definition from The Official Dictionary of Sarcasm:

Election:  An ongoing part of the democratic process in which politicians and the post office team up to make sure American citizens have enough leaflets.”

But don’t get me wrong, I love sports………



7 thoughts on “An “Epic Fail”…”

  1. Here is the relevant question. Who is more likely to be a political donor whose name a polittician will remember? Will it be Tony & Maria at a neighborhood pizza & pasta joint in Jersey City or the CEO of Dine Brands Global? I will give you a few minutes to Google Dine Brands.

    1. Doug:

      In addition to the political donor angle, consider the banking part of this. If one of the Buss family went to a bank in SoCal to apply for this loan, do you think the bank manager would recognize them – and their business – more readily than the owners of any Greasy Spoon in the city?

  2. Staying with the political theme: there are only 2 solutions in the Repuglican arsenal for solving problems.
    1. Tax cuts for the rich;
    2. Throwing more money to rich folks.

    1. willie jones:

      The CARES Act was passed unanimously in the Senate – – so whatever motivations you ascribe to Republicans and Democrats would seem to have been included therein.

      The CARES Act was passed in the House by a voice vote – – so we will never know who if anyone voted for or against it. Political cover for both sides…

      This is not a partisan issue in my mind; this is my recognition of the rot at the core of the current political climate exists in the US Congress.

  3. Some pertinent information.
    This might not be relative.
    The SBA over the last 10 plus years as processed over 1,000,000 loans.
    They processed 1.4M loans in 14 days.

    1. Bob:

      Of course the rate of loan applications and loan approvals over such a short period of time is an important consideration. I pretty much absolve the banks acting as the SBA agents in this enterprise; I do think that the SBA strictures to those banks could have been a bit tighter than they appear to have been. The focus of my attack is on the US Congress who had time to craft an 880 page bill – – but not time to build in the proper safeguards. And now, they – those same Congressthings – are going to try to convince you and me that they are going to do some strict oversight.

      Sorry. I have bought my last carload of that nonsense…

Comments are closed.