New Disclosure on Farm Programs
The Washington Post reported last month that a Department of Agriculture loan program created to spur rural development had cost taxpayers at least $1.5 billion in losses, created few new jobs, undercut some existing businesses and suffered from a lack of oversight.
But the department refused to release the names of the companies receiving the loans and the amount of their losses, saying that the businesses could be harmed.
Now, The Post's Gilbert M. Gaul reports, the department has reversed its decision and agreed to make the information public after a legal appeal by the newspaper.
The data, received yesterday, show that the USDA suffered more than $209 million in losses between fiscal years 2000-2006 in its Business & Industry Guaranteed Loan Program, and recovered some portion of the bad loans in less than 1 in 5 cases. The 344 loans resulted in an average loss to taxpayers of nearly $608,000.
The Business & Industry Guaranteed Loan Program is the USDA's biggest and most popular program aimed at spurring jobs and economic development in Rural America. Although the loans are underwritten by private banks and other lenders, the USDA may agree to back up to 90 percent of the face value of the loan. If the loan goes bad, the agency covers most of the lender's loss and then tries to recover the collateral, if any.
The program's loss ratio since the 1970s far exceeds that for commercial loans and comparable government loan programs. In some cases, loans have gone to companies that have been in and out of bankruptcy or have checkered pasts.
The newly released data show that one-quarter of the USDA-backed loans that resulted in losses occurred in just four states --Louisiana, Pennsylvania, Missouri and Michigan. Nearly 14 percent of the loans -- or 44 loans -- resulted in losses to taxpayers of $1 million or more. The largest loss of $15.6 million was for a USDA-backed loan to the Pacific Northwest Sugar Company, LLC, in Moses Lake, Wash.
The Post previously reported that the Washington state delegation lobbied the agency to guarantee the loan even though the borrower was in default on existing loans. Within months the plant defaulted on its goverment-backed loan leaving taxpayer with a huge loss.
The investigation of the loan program was part of The Post's Harvesting Cash series, a two-year examination of waste and fraud in farm subsidy programs.
--Gilbert M. Gaul
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