The SBA Will Fall Next

First it was deadbeat firms like CountryWide and Ameriquest.

Then came the larger more reputable firms that should have known better; UBS, Lehman Brothers and Merrill Lynch.

Then it spilled over into the quasi governmental organizations, Freddie Mac and Fannie Mae.

And so I will predict the fall of another governmental agency which will then behoove an infusion of taxpayer cash to effectively contribute its small portion to a nearly trillion dollar transfer of income from the responsible people to the deadbeats; the Small Business Administration.

The SBA is often not thought about when it comes to the housing crash, but during my days as an analyst if a person wouldn’t qualify for a loan on their own, why the good ol’ federal government would come in the taxpayers’ (read – your) money and guarantee, sometimes up to 85%, of the loan if it were to go bad.

Of course this was primarily for business loans, not housing, but one must understand that large firms like GM and American Express don’t go to the SBA for loans. Small time sole proprietors and entrepreneurs do. And what is primarily the only form of capital a small individual has?

Their house of course!

And thus billions of dollars were lent out to small time proprietors for a bevy of ventures, all collateralized by housing and all guaranteed by the SBA (ie-the taxpayer, ie – you).

Now this would be fine if the loans made were good, high quality loans.

But they weren’t. At least not what I saw being shipped off to the SBA. I don’t know how many deadbeats that wanted to “start a sports bar” or “open a hair salon” or “raise cats.” And of course these ill-thought out plans were doomed from the beginning, but that doesn’t matter. The SBA was there to help those little people that those big bad banks wouldn’t.

And so I predict you will see (albeit, it may be kept hush hush in the media) the SBA getting a might big infusion of cash from the beloved taxpayer.