How the Paycheck Protection Program went from good intentions to a huge free-for-all

When the Paycheck Protection Program launched during the pandemic shutdowns of spring 2020, it immediately became a chaotic free-for-all.

Called PPP for short, the program offered simple-to-get, potentially forgivable government loans to small businesses. Yet billions of dollars went to companies owned by wealthy celebrities, including Tom Brady and Khloe Kardashian, and companies that thrived during COVID, like many manufacturing and construction firms.

Government officials acknowledge that the program was rife with fraud and did not weed out undeserving applicants. But there was a way to remedy those early errors: Deny forgiveness. That could have thwarted scam artists and forced businesses that prospered to repay the money.

Yet nearly three years after the rollout of PPP, the vast majority of loans have been forgiven.

An NPR analysis of data released on Jan. 8 by the Small Business Administration found that 92% of the loans issued have been granted full or partial forgiveness. That includes loans to companies with mega-rich owners.

"The PPP program seems to have resulted in billions of dollars of fraudulent loans that have ultimately turned into grants," said Samuel Kruger, an assistant professor of finance at the University of Texas at Austin who co-authored a paper estimating that $64 billion of the nearly $800 billion in loans issued show signs of fraud, such as suspiciously high payrolls and multiple businesses listed at the same home address.

The SBA disputes those findings, but its own inspector general has estimated that at least 70,000 loans are potentially fraudulent. An unknown additional number of loans went to companies that didn't need PPP funding to survive the pandemic.

And although the Justice Department and other federal agencies have up to 10 years to prosecute pandemic fraud, the SBA's inspector general has called that pursuit a "pay-and-chase" situation unlikely to recover much money.

NPR dissected the decision-making behind the Paycheck Protection Program that led to it being widely seen as a massive government giveaway. We spoke with numerous bankers, economists and