I would like to get others thoughts on the role of the SBA. The SBA in each state works with local banks to get them to make more loans. The SBA gaurantees loans, ensures loans meet certain criteria, helps businesses work through red tape of getting work with the state, and makes loans during emergencies. Do you think the SBA is a microcosm of the moral hazard created by the Fed in gauranteeing the wall street banks? In other words, if a bank is reasurred they will have a 'bailout' then they lower their standards for loan applicants, which sends money to businesses that other wise would not be getting a loan, and potentially getting bailed out by tax payers (or printed Fed money).
I would like others thoughts if you think the SBA is a smaller version of the Fed and how it bails out the Wall Street banks?
john m: I would like others thoughts if you think the SBA is a smaller version of the Fed and how it bails out the Wall Street banks?
My thoughts are that the SBA is a bureaucratic mess like any other government program. It is unnecessary. What small business needs is working capital. And the source of working capital is retained profits. But profits are taxed, and the taxman wants CASH, not increased receivables, inventory or equipment. So, a small business must pay income tax which is a direct brake on its ability to grow. It must therefore seek bank financing. See the connection between the income tax and the banking system?
If Congress wanted to help small business, they would abolish the income tax. But of course, they won't do that. If they did, small business could finance its growth internally. Capital would find its way into productive structures of production. Unemployment would drop (less dependency on government), freedom and liberty would rise. We can't have that.
The SBA is not a smaller version of the Central Bank. Yes, it guarantees bank loans, but it can't engage in monetary policy. Overall, SBA lending is tiny bump on the mountain of debt.
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
Chloe. Yes, the director of the SBA in my state presented at a conference I was at and he bragged about the "free services" offered through the SBA. Although he believed in entreprenuership and free markets I believe he lacked understanding of true free markets.
My take on it is we don't need the SBA or the Department of Economic Development. The director of the DED presented as well and he bragged about new "sustainability" positions being created in corporations and how a foriegn company just moved into the state and they bought a bunch of land because the dollar was so weak...good grief.
john m:he bragged about the "free services" offered through the SBA.
Free services? Yes, that is puzzling.
john m:Although he believed in entreprenuership and free markets I believe he lacked understanding of true free markets.
Very few people understand the free market (the unhampered market).
john m:The director of the DED presented as well and he bragged about new "sustainability" positions being created in corporations
What did he mean by "sustainability positions"? Is this something to do with environmental activism? Does he mean if a company accepts SBA funds, it must comply with certain environmental requirements like putting trash in a recycle bin? And, it must hire a person to implement such policies?
john m:and how a foriegn company just moved into the state and they bought a bunch of land because the dollar was so weak...good grief.
What was his point here? Sounds like good thing, actually, unless I misunderstand.
Bottom line, we have in interventionist economy and an interventionist society. Few people can conceive of life under liberty. It comes down to a very simple point: Where does "government" get its money? I put government is quotes because "it" is actually the "people in power". So, from where do the "people in power" get the money they want to spend? Ask the SBA diretor that question and you might get fired for embarrasing your employer or you will get a convoluted answer. I actually believed the SBA was a good program back when I was ignorant about sound economics.
I would be interested to know how the 504 program is doing given the commercial real estate disaster. (for forum readers, that's an SBA program whereby the the SBA advances 50% of the purchase price on a commericial property, the bank advances 40% but the bank gets a 1st position deed of trust, and the borrower advances 10%). I bet these deals are underwater and the SBA (taxpayer) will get hit again. Watch the news over the next year.
Chloe...Yes, "Sustainability" has to do with environmental activism.
My reference to the foreign company buying land was the fact that the dollar is weak due to the Fed printing press and I don't think that is a good thing for Americans who are saving in dollars.
Thank you for the input.