A new watchdog report alleges that $200 billion in COVID emergency-relief loans has been discovered to have been stolen.
Key Details
- Released on Tuesday, the report argues that 17% of the $1.2 trillion in loans dispersed to assist small businesses has disappeared.
- Purveyors of fraud are alleged to have taken as much as $136 billion from Economic Injury Disaster Loan program and $64 billion from the Paycheck Protection Program (PPP).
- According to the Office of the Inspector General of the U.S. Small Business Administration (SBA), relaxed internal controls due to the political necessity to rush money to small businesses, resulting in limited oversight.
- The office argues that many of these loan applications were submitted from foreign countries, many from the same IP addresses, and have defaulted on reimbursement payments.
- The SBA officially disputes these results, arguing that the severity of the fraud is severely overstated, saying at least 74% of businesses have partially or totally repaid their loans. About 12% are past due, and 14% are still in a deferment period.
Why It’s Important
It remains to be seen whether the fraud claims will be proven correct. The SBA is already away of thousands of fraud cases and is actively seeking charges where applicable. The Inspector General’s report confirms this, noting that more than 1,000 indictments have already been made, CNBC notes.
However, the report is not the first significant claim of fraud. NBC News reported last year that as much as $160 billion had been stolen from PPP—in addition to $90 billion to $400 billion stolen from unemployment programs.
Some amount of fraud is always going to be expected with large organizations and programs. The Association of Certified Fraud Examiners tells ABC News that as much as 5% of an organization’s money can be expected to face fraud issues, but numbers approaching a fifth of the SBA’s funds could be damaging or embarrassing to the organization.
Notable Quote
“A decision was made at the outset of the pandemic: speed was the key. It was a bad choice. It was the wrong choice. It never should have happened,” Pandemic Response Accountability Committee Chair Michael Horowitz told ABC News in March.
Backing Up A Bit
The situation also denotes the fiscal carelessness of both the Trump administration and Biden administration at the height of the pandemic. The Federal Reserve printed trillions of dollars in the years following the outset of the pandemic, with millions of jobs being suddenly laid off and rent payments and student loan payments being paused for two years.
According to a report from TechStartups, the Fed printed 80% of all the U.S. currency ever printed between January 2020 and October 2021, resulting in inflation rates as high as 9.1% in 2022. The Fed has been subsequently forced to increase interest rates by five percentage points in 14 months, risking sparking a recession and a collapse of the job market.
