Small Business Administration (SBA) Administrator Kelly Loeffler announced Friday the suspension of 111,620 borrowers in California. This action involves 118,489 Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
The total value of these loans exceeds $8.6 billion. According to an SBA news release, the agency aims to secure accountability regarding pandemic-era financial programs.
Partisan Enforcement Action Targets $8.6 Billion in Pandemic Loans
Loeffler stated the SBA is “taking decisive action” to “deliver accountability in a state whose unaccountable welfare policies have created a culture of fraud and abuse.” The Administrator indicated that federal officials are collaborating with law enforcement to identify individuals who defrauded taxpayers and to recover distributed funds.
The SBA identified specific instances of suspicious activity during site visits. Loeffler cited a San Diego location where 14 distinct business entities formed during the pandemic. These entities received over $2 million in loans that remain unpaid. Loeffler asserted, “the era of abuse is over,” and claimed that “under the Trump administration, any fraudster who broke the law will no longer get a free pass.”
Gavin Newsom Speaks Out Against Trump
Governor Gavin Newsom responded to the federal crackdown, characterizing the SBA’s statements as a partisan maneuver. In a recent press briefing, Newsom asserted that his administration remains “committed to fighting fraud in the state” but suggested the federal focus on California is “political theater” aimed at destabilizing the state’s economic standing.
Newsom highlighted that the state has previously identified and addressed internal fraud, such as within the unemployment system, and argued that the current federal narrative ignores California’s proactive enforcement efforts.
The Democratic caucus views these retroactive enforcement actions as a politically motivated “witch hunt” orchestrated by the current administration. Democratic leaders, including Governor Newsom, argue that the Biden administration prioritized rapid economic stabilization during a global crisis, which necessitated the swift distribution of capital to prevent a total market collapse.
From this perspective, any subsequent oversight gaps were an unavoidable byproduct of preventing a second Great Depression rather than a lack of diligence.
Congressional Democrats suggest that the focus on California and Minnesota is a targeted effort to disparage blue-state governance models. Party strategists maintain that the Biden administration did not “ignore” fraud but rather focused on systemic recovery.
Many Democrats believe that by “turning the other cheek”—focusing on legislative achievements like infrastructure and energy rather than engaging in aggressive rhetorical battles over these audits—they will secure more midterm votes. The party’s internal consensus is that voters prefer a focus on future economic growth over what they characterize as a Republican-led effort to criminalize the emergency measures of previous years.
