The Great Stupid, SBA Variant

Equity! Is there anything it can’t do?

The Small Business Administration, which  administered the Wuhan virus assistance Paycheck Protection Program, now says it will not pursue collection on loans that are  in default as long as the amount owed is $100,000 or less. In fact, most of the 12 million loans given out in 2020 and 2021 were under $100,000.

Hey, free money! Is this a great country or what? May we be so bold as to ask why this largess is being offered to deadbeat businesses?

The SBA claims that the decision to forego collections will ensure “equitable” treatment of  smaller sole proprietor borrowers and larger incorporated borrowers. The SBA reasons that if they pursued collections, the individuals associated with the generally larger incorporated borrowers would hide behind their corporate shield, while individual sole proprietors would be on the hook—-for the money they accepted with a promise to pay it back. Can’t have that! Right? If it’s theoretically possible for rich individuals to duck the loan obligation by having their business declare bankruptcy, it’s unfair to make smaller deadbeats pay back the money they owe. Equity!

The SBA’s Inspector General is not impressed with this logic (he must be a Trump hire), and reported in part,

“SBA ending collections on PPP loans valued at $100,000 or less is not in compliance with applicable criteria. SBA is potentially increasing the taxpayer burden by missing the opportunity to collect on these delinquent PPP loans…Ending collections could set a precedence for future stimulus programs and incentivize ineligible borrowers to obtain loans valued at $100,000 or less. However, continuing to pursue collections will help ensure accountability from delinquent borrowers and promote program integrity…SBA made a decision to formally end collections on purchased PPP loans with an outstanding balance of $100,000 or less. SBA’s rationale for the decision was to provide equitable treatment between smaller sole proprietor borrowers not protected by an incorporation shield and larger incorporated borrowers.

“Therefore, borrowers that have a purchased PPP loan with an outstanding balance of $100,000 or less would not be referred to the U.S. Department of the Treasury for collections or other collection measures….SBA purchased these PPP loans because the lender identified that the borrowers were 60 days or more past due on scheduled loan payments. However, SBA did not pursue collections on these loans. Instead, SBA charged off these loans and made no referral to Treasury, without conducting a sufficient cost benefit analysis to support ending collections…We also did not find any evidence that SBA made any attempts to collect on the purchased PPP loans. At the onset of SBA purchasing the PPP loans in July 2021, it decided not to pursue debt collection for the purchased PPP loans…

The short version is that the SBA is setting a precedent that will encourage fraud, and is unethically spending tax-payer funds on specious (and, the IG says) unproven assumptions while using “equity” as a justification.

In a response to the IG, the SBA said, in essence, “Yeah, well, you can’t stop us, so there!” claiming that it wasn’t worth recovering money because it had little success doing so in a similar program, recording only 0.28% of the amount it was owed. Isn’t that classic government logic? Instead of figuring out how to collect on owed loans when the previous method didn’t work, you don’t fix the problem, you just decide not to collect the loans.

The SBA also argues that Office of Management and Budget policies and guideline do not legally apply to it. The entire $4 trillion coronavirus stimulus program was corrupted by federal agencies’ cavalier attitude to ward fraud,with at leats $60 billion in fraudulent unemployment insurance claims,  the Government Accountability Office has reported.

Yeah, whatever.

On a separate but related issue, I can find no mention of this infuriating scandal in the major mainstream media news.


Pointer and Source: The Daily Wire. (I usually don’t use the DW because I have found the site misleading and unreliable in the past. I can’t believe, however, the Ben Shapiro’s baby would make this up, and the IG’s report is both clear and damning.)

6 thoughts on “The Great Stupid, SBA Variant

  1. The covid over reaction: the biggest fiscal and public health policy disaster in the history of the United States. “We have to do something!”

  2. Reading between the lines, I also suspect that one of the major reasons they aren’t going to try and collect on these debts is because they simply don’t know where the money went. I suspect savvy individuals showed up at the door, said “my company, Dewey, Cheatum, and Howe is having troubles because of covid. Can we have some money now?” And the answer was, of course, “Sure!” The small business line just has a pair of bonuses – make it look like you’re doing the little guy a favor, and reinforce how dastardly those big guys are. You’re just leveling the playing field! Now please stop asking where the 4 trillion dollars went.

  3. What!? These loans were also “free money” if used to make payroll and that was properly documented. I know of cases of people working on contract (think civil engineers and the like) and small businesses (RE broker, small restaurant) that did exactly that and got to keep the money – sometimes just by using it to pay themselves when there was no income. That was in the contract from the beginning. Any business, small or large, that failed to do that level of basic due diligence does not deserve to keep the money.

  4. We forgive student loans, we forgive these business loans, we forgive credit card debt, we forgive tax debt. When is someone going to forgive my mortgage and car payments?

    BTW every and all government programs, at any level, are vehicles for fraud, and corruption!

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