Skip to comments.SBA bailouts draw little notice
Posted on 11/09/2009 10:44:54 AM PST by FromLori
A federal bailout of AIG last year attracted angry protesters who for weeks gathered outside the insurance giant's headquarters in New York and stalked company executives at their homes.
But there has been little response to the bailout of Peter Miller, who runs a two-person lobster-fishing crew in Maine.
Miller, who gets 50 cents on the dollar for his catch these days, a few months ago received a $35,000 loan from a new Small Business Administration program that was crafted in February during final negotiations on the federal stimulus package. The loan program offers an unprecedented 100 percent guarantee to banks, vs. the SBA's standard 75 percent. The loans' anticipated default rate is 60 percent, compared with the agency's average 10 percent. And all of the funds must be used to repay other delinquent loans -- another first for the SBA.
"Logic tells you this is a bad idea. By definition these businesses are already failing, but we are lacking standards right now; our world has been turned upside down," said Barry Bosworth, an economist with the Brookings Institution.
Just how $255 million in federal funds was set aside for the program -- called American Recovery Capital -- is a classic Washington story.
When Congress negotiated the final details of the American Recovery and Reinvestment Act, Democrats needed to secure a few key votes from Republican colleagues for the stimulus bill to pass. This allowed Sen. Olympia J. Snowe (R-Maine) to ask for a few concessions -- including a loan program aimed at helping her home state's ailing lobster industry.
(Excerpt) Read more at washingtonpost.com ...