Just over a year ago, I wrote:
My prediction is the next big thing (since ultimately nobody will learn from
the lessons of today and we're a country just dying to invest in something) will
be small-business loans. Someone will get the idea in their head that while
lending to home borrowers with the hope of the property value increasing was a
bad idea, lending to people who want to start up businesses with the stated goal
of making money will be a much better idea. And while the intent will be noble
at first, particularly in an economy coming out of a recession and people
looking for new job creation, it will become so perverted by special interests
that eventually lenders will find themselves giving money to unqualified people
with hair-brained business schemes that don't have a chance of turning a profit,
much less paying back the money.
And from Reuters this past Saturday:
President Barack Obama urged banks on Saturday to make more loans to
small businesses and said his administration would do everything it can to push
them to do so...
..."These are the very taxpayers who stood by America's banks in a
crisis -- and now it's time for our banks to stand by credit-worthy small
businesses, and make the loans they need to open their doors, grow their
operations, and create new jobs," [President Obama] said.
Like housing, "credit-worthy" is going to turn out to be a very subjective term, and banks are bound to find themselves lending money where it shouldn't be lent. Although my initial prediction was that lenders would be the first behind this initiative with special interests getting involved at a later point and encouraging the bad lending, that this is first coming from the Obama administration, a special interest if there ever was one, is downright frightening.