DISCLAIMER: This is based on my knowledge and experience alone. There may be some discrepancies and your mileage may vary.
Somewhere in the pages of the Stimulus Package was this gem of an SBA loan called ARC. What ARC was supposed to be was a no-interest loan given to itty-bitty businesses which had previously been profitable but were having problems staying open due to the huge losses associated with this Recession.
It was specifically written not to care about the Owners' credit score, because, it was assumed, these owners were "all in" and had tapped out their own home equity, credit cards, cash, stocks, whatever, in an attempt to keep their doors open when credit froze and sales tumbled.
What the cash could be used for was, really, anything that would keep the doors open: rent, buying inventory, the purchase or repair of machinery, and could even be used to pay off the credit cards that were used to buy inventory or equipment. It was written to be as loose as possible to provide the maximum benefit to the most people.
As SBA loans went, these were considered micro-loans, topping out at 30 or 35k.
Businesses should have been lining up for these loans, and, with them, honestly, doors would have stayed open, people would have stayed employed, new inventory and machinery would have meant more need for the factories to produce, and repair would have meant more even-smaller businesses, handymen, plumbers, electricians, getting more work.
So, what happened to ARC, which really should have been a shot-in-the-arm for the entire economy? And why haven't you heard of ARC spoken of in glowing terms like Pell Grants?
Because they never got written. The loans were never made. It's not that businesses weren't lining up for them: they were. It's that no one was writing the loans. Oh, sure, certain banks made a few loans, but not to the people they should, and certainly not for the reasons they should.
These loans didn't go to new equipment or inventory. They didn't go to hiring and training new employees. They didn't go to new computers or presses or dry cleaning equipment.
They went to banks.
That's right. That ARC money... which should have saved the economy... it went right into banks' pockets. And how did that happen?
Yes, the banks... which were supposed to manage these loans. Well, they realized that one of the things that ARC could be used for was to pay off higher interest loans. Loans, oddly enough, that the banks had already written, and which had seen a skipped payment or two to boost the interest rates.
So, the bank writes a conventional loan, sees that, because of the Recession, the businesses that the loans went to were on shaky ground, and they got those businesses ARC loans, to pay off the existing loan written by that bank. These loans were not used for inventory or to invest in machinery or pay rent or whatever would have kept people working and generated new jobs. No, the loans went to the banks who were writing them so that they could pass their risk along to the taxpayers. Socialize risk, privatize profits... no muss, no fuss, no smell.
So, when you calculate how much of the stimulus dollars have gone to Wall Street and how much have gone to Main Street, make sure you put the few ARC dollars that were ever distributed into the right column.