Tae Kwon Do Beating

Last week, a man tried to quietly rob a Tae Kwon Do studio in suburban Milwaukee.He ended up face to face with the Tae Kwon Do master. You could just imagine what took place. Fast-Forward and the robber is pinned to the floor while the Tae Kwon Do master, still holding the robber by the neck, calmly calls the Police and waits for them to arrive.

Yesterday, the new administration announced its plan to help small businesses by raising the federal guarantee on small-business loans up to 90%. So far, it’s been easy to give money away, but do we have the right controls and systems in place to keep tabs? On one side, the borrower did not change their ways, so this like sending the same robber back to the Tae Kwon Do studio in hopes that he would not get caught again. On the other side, lenders are still driven by profit, so we could be subjecting the robber to the same kind of beating he received on his first attempt.

It is true that small businesses accounted for about 70% of the new jobs created over the past decade, and credit has been drying up for them, but throwing money at the problem does not address fundamental issues. How is this different from what got us in this mess? We just finished blaming lenders for relaxing their underwriting guidelines and giving money to people who could not afford to make payments, on the bet that house prices will keep increasing? Along those same lines, the administration is relaxing the rules and giving money to businesses that might not afford to make payments, on the bet that the economy will get better soon?