Re:9.2% Unemployment? Blame Microsoft.
by iqster on Monday July 18, 2011 @03:41PM
(#2777858)
There is theory and there is practice. Before suggesting any additional funds for SBA loans, I would suggest you read David Einhorn's book "Fooling Some Of The People All of the Time". In short, when the govt. guarantees loans, loan standards go down and fraud goes up. Yes, there are checks and balances in place but motivated parties find ways to scam the system. It is a travesty how much wastage there is in the process.
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And for a real life example, just take a look at Fannie May and Freddie Mac.
Perhaps if it were a national system that is centrally-controlled and disbursed end-to-end, fraud could be rampant; but if it were placed in a credit union-type "trusts" managed by each participating states, it would cut down alot more on the inherent single-point-of-fraud scenarios you envision, or at the very least contain it to the few fraudulent areas.
In 5 years all of those trusts will have merged into Small Business Loans of America Corporation, and all the loans will be sold on the derivatives market within a month of origination, and an army of loan brokers will individual figure out how to massage the paperwork originate a bogus loan and collect a commission.
We've done this already.
At best, we might have the benefit of the fraud benefiting a million individuals, like in the housing bubble, instead of a handful, like in the S&L days.