The Dec. 19 editorial “The SBA needs reforming” seemed to support the idea of consolidating the Small Business Administration (and five other agencies) into one gargantuan department. The idea seems to be that hiding the SBA within the web of a much larger bureaucracy would “enable small businesses to navigate the dizzying array of programs supposedly designed to help them.” The logic of that conclusion continues to elude us.

But beyond the agency’s place on the federal organizational chart, the editorial also questioned whether the SBA’s loan programs have a substantive reason for being, even though the editorial acknowledged the argument that traditional small-business lending has suffered from “a market failure that argues for government intervention.” Credit scoring has not miraculously solved the difficulties small businesses encounter in the credit markets. In fact, the fixed costs of bank oversight and regulatory burden for smaller community banks have made smaller loans less and less profitable, further exacerbating the historic problems in the small-business credit markets.

Finally, the main SBA-guaranteed loan program doesn’t cost the taxpayers a penny; it is funded entirely by fees paid by lenders and borrowers. As such, its elimination would represent an odd starting point for a streamlining of federal excess or corporate welfare.

Todd O. McCracken, Washington

The writer is president of the
National Small Business Association.