The Small Business Administration spent $18 billion over 15 years on taxpayer-financed loans to businesses that ended up failing, according to a report
from Open the Books, a nonprofit group that focuses on government transparency.
The agency accumulated a loan portfolio that totaled $24.2 billion and included 160,000 individual loans between 2000 and 2015. Of that amount, $18 billion had to be written off, indicating that the recipients had become delinquent on their debts.
Some of the $18 billion in defunct loans went to failed auto dealers, country clubs, jewelers, boat dealers, and restaurants.
The report found that $191.7 million in defaulted loans went to dealers of luxury cars like Lamborghinis and BMWs, $44.5 million went to country clubs and golf courses, $49.3 million went to jewelers, $41.5 million went to boat dealers and marinas, and $2.2 billion went to restaurants, bars, breweries and wineries.
"Restaurants and lodging are by far the biggest culprits of Small Business Administration defaults, amounting to a combined $3.3 billion," the report states. "Taxpayers—through the Small Business Administration—underwrote the national rollout and distribution plans of these companies."
The group released a report in 2014 showing that many loans were being awarded to wealthy recipients. "Our report found that loans and guarantees of $160 million flowed into exclusive country clubs; more than $250 million went to subdivisions of the Fortune 100; and $9.2 billion flowed to investment bankers," the group said. "Many other loans flowed to companies, clubs, or other entities serving the wealthy lifestyle, where the recipients later defaulted."
The agency also gave loans to suffering industries. The report pointed out that the agency gave million-dollar loans to small business printers even though the paper printing industry was consolidating because more consumers were going digital.
"When the Small Business Administration or any agency gets into the business of picking winners and losers, the losers always win," said Adam Andrzejewski, founder and CEO of Open the Books. "This is what we’ve documented in our oversight report."
"There’s always a cost to taxpayers either directly or indirectly because wasting scarce dollars on unproductive enterprises diverts dollars away from productive enterprises," Andrzejewski said. "It’s a rigged game in which the house—always wins."
The Small Business Administration did not respond to requests for comment.