Wall Street investors received government loans


  • Corporate News
  • Wednesday, 08 Jul 2020

Some investment firms, including those that run hedge funds or manage money for wealthy investors, are among the businesses approved for emergency US government loans to help small businesses pay employees during the coronavirus lockdown, according to data made public on Monday.

WASHINGTON: The government’s small business lending programme has benefited millions of companies, with the goal of minimising the number of layoffs Americans have suffered in the face of the coronavirus pandemic. Yet, the recipients include many you probably wouldn’t have expected.

Economists generally credit the programme with preventing the job market meltdown this spring from becoming even worse. More than 22 million jobs were lost in March and April. But roughly one-third of them were regained in May and June – a faster rebound than many analysts had expected.

The government acted quickly in early April, with Treasury lending the first US$349bil in just two weeks. The programme got off to a rocky start, one marked by confusion and difficulty for many companies that sought loans.

“The process was messy, and they couldn’t target it as much, ” Diane Swonk, chief economist at accounting firm Grant Thornton, said of Treasury.

Some investment firms, including those that run hedge funds or manage money for wealthy investors, are among the businesses approved for emergency US government loans to help small businesses pay employees during the coronavirus lockdown, according to data made public on Monday.

They included Semper Capital Management LP, which bets more than US$2bil on mortgage and other asset-backed securities; Domini Impact Investments LLC, a mutual fund manager with about US$2bil under management; Brevet Holdings LLC, a US$1.2bil lending firm; and Truvvo Wealth Management LP, which manages more than US$2bil for large families and institutions.

Emails to the firms seeking comment were not immediately returned. The data does not track which loans were disbursed, paid back, or if they will qualify for forgiveness.

All told, the US Small Business Administration said in a report on Monday that finance and insurance firms represented US$12.2bil across 168,462 loans, about 2.3% of the programme’s total lending as of June 30. The figures for investment firms alone were not immediately available.

Many investment and wealth management firms are relatively small, and staff pay varies widely, often far from the stereotype of the billionaire jet-set financier. Unlike restaurants and hotels, many financial businesses remained open during the lockdowns and shifted relatively smoothly to remote work.

Investment firms typically earn a percentage of assets under management and profits as fees. The markets rebounded sharply after hitting a low in late March, which would have reversed some of those losses.

The firms disclosed on Monday add to some already revealed in public filings.

Cohen & Company Inc, for example, said in May it had received US$2.2mil under the Treasury Department’s Paycheck Protection Programme (PPP), noting its small market capitalisation and lack of access to the public capital markets. The company declined a request for additional comment, beyond its previous statement that, in part because of the loan, it “does not anticipate any significant workforce reduction or reductions in compensation levels in the near future.”

Some financial firms initially approved for loans quickly canceled or returned them amid additional guidance from the Treasury Department and media scrutiny. One was Metacapital Management LP, according to managing member Deepak Narula.

A spokesperson for another hedge fund listed as a recipient in Monday’s data, Advent Capital Management LLC, said it explored the idea of taking a PPP loan but never completed an application and did not receive any aid.

Separately, AP reported that nearly 600 asset management companies and private equity firms were approved for money from the PPP programme, citing government data.

All told, authorised US$520bil for nearly five million mostly small businesses and nonprofits. On Monday, the government released the names and some other details of recipients who were approved for $150,000 or more.

That amounted to fewer than 15% of all borrowers. The Associated Press and other news organizations are suing the government to obtain the names of the remaining recipients.

Financial firms were generally not badly hurt by the coronavirus pandemic. Their employees were largely able to keep working. In addition, investment managers and private equity employees tend to be exceedingly well-paid occupations.

According to the data, those 583 companies reported supporting roughly 14,800 jobs collectively with the money from the program. That’s an average of 25 employees per company.

Among the recipients includes Kanye West’s clothing line. Its clothing-and-sneaker brand Yeezy received a loan of between $2 million and $5 million, according to Treasure data. The company employed 106 people in mid-February before the pandemic struck.

Yeezy is best known for its $250 sneakers. Its representative for Yeezy declined comment. Last weekend, West, a notable fan of President Donald Trump, tweeted that he was running for president.

Some other well-known fashion and retail names whose businesses were pummeled by store shutdowns were also approved for loans. — Agencies

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