October 11, 2013

Lost in the hand-wringing and teeth-grinding over the government shut-down is another unintended consequence of government intrusion into our lives. Yesterday the NY Times reported on a perplexed small business owner, Chris Leh of Ephrate, PA, who has been approved by Susquehanna Bank of Lititz, PA, for a $1.5 million loan to procure new machinery for his expanding business. Alas, the funds cannot be released until the SBA finalizes paperwork guaranteeing the loan. Leh risks losing a big contract if the machinery cannot be bought. Of course, SBA is currently shut down.

Were banks allowed to function free of government intrusion we would not need the SBA. Created in 1953 to promote small businesses after the Korean War, it has become a slush fund for large banks and should be eliminated. It now serves mainly big businesses applying through fabricated subsidiaries.

The Cato Institute, among others, has challenged the justification of the federal government to intervene in credit markets, stating “the SBA benefits a relatively tiny number of small businesses at the expense of the vast majority of small business that do not receive government assistance. SBA subsidies also represent a form of corporate welfare for the banking industry.” Cato notes the failure rate of all SBA loans cost taxpayers $6.2 billion in 2011.

Like, the Education Department, Commerce and selected (by me) others; it should be abolished.

Good luck, Mr. Leh.