19 Mar Implementing Federal lending
The central problem now is how the Federal government can lend money to businesses that need it — without a budget blowout. I proposed letting people borrow from the IRS which has a pretty good mechanism for getting repaid. Martin Lowy has a more detailed suggestion along these lines:
- Credit for any business that needs it, so long as the business’s history suggests that it will have the capacity to repay, given enough time.
- A simplified underwriting system based solely on filed tax returns. Bank-style underwriting is a cumbersome process that would impede the flow of credit and would tend to make it subjective and political—and therefore a subject of criticism all along the way.
- A repayment period of something like 36 months that begins a few months after the crisis has passed. A business cannot begin to repay until it has had some time to get back on its feet.
- Use of the income tax mechanism to enforce repayment so that no new bureaucracy is required and so that the system will be seen as fair, rather than based on subjective criteria.
- A mechanism to assure that recipients of these loans will continue to use them in part to continue to pay their employees.
Read the Full Article here: >The Grumpy Economist