Sobering View

With a tip of the hat to one of my favorite bloggers The Big Picture, here is a sobering 3 minute review from the International Herald Tribune as to where we are now due to the housing crisis, which is effecting everyone.

The SBA and How This Administration Does Business

I cannot tell you how peeved I am at the SBA. Big supporter up to now as a solid option for small businesses who need capital. Still a supporter, but as a tax payer very mad. This excellent expose by Gretchen Morgenson looks at the recent fraud involved with a big operation active in Michigan which leaves the tax payers with a huge, albeit local, possible loss, reminds me of the days of the Savings and Loan bailout. She describes the nut:

"The S.B.A.’s own Office of Inspector General examined the agency’s oversight of BLX (recently the 2nd largest SBA lender in the country!!). That inquiry preceded the federal investigation of the company in Michigan, which found that BLX’s operation in that state had made $76 million in fraudulent loans. Last year, Patrick Harrington, a former BLX executive, pleaded guilty to fraud. Since then, 35 people not employed by BLX have been indicted and charged with being co-conspirators, Michigan prosecutors said."

Unbelievable, and she makes a case for very lax oversight. And to think I thought the SBA was underfunded - now we see some very badly mismanaged situations. To allow this much fraud to go on, and to not immediately fix it, is outrageous. Fat chance Congress will be impressed with the recent for increased funding.

From Bad Times to Worse for Small Business

According to this blog I site regularly:

- Business bankruptcies have tripled since the first quarter of 2006
- Nearly 29,000 companies filed for bankruptcy in the first half of 2008
- Given an estimate that as few as 1/3 of "deaths" go through bankruptcy, it is estimated that up to 90,000 businesses failed during the first half of 2008.

"The vast majority of these failed companies are among the nation's 23 million small businesses, with fewer than 100 employees.", according to recent analysis from McClatchy.

These failures are a primary force driving unemployment higher. The article makes the point that the BLS is under counting failures while over counting new business establishments. Regardless, the "death" statistics are very scary, especially for the small business community, and reinforce the need to hunker down, save some capital, and cut remaining fat to keep the business going.