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More ‘Stimulus’ Chicanery With Your Tax Dollars

Yesterday, we Growled that the IRS allowed “millions in erroneous car deductions to prisoners, dead people, kid,” as reported by news sources, Tax Prof Blog, and a report by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS wasn’t alone in squandering stimulus money, however. According to CNS News, an audit at the U.S. Department of Agriculture found the agency “may have given out more than $4 billion in stimulus housing loans to ineligible borrowers.” CNS based the report on an AP story, which reported:

“A preliminary report from the USDA inspector general made available Friday says a sample of 100 loans out of 81,000 showed that almost a third were given to ineligible borrowers - including some with income that exceeded the program limits, others who already owned homes and borrowers who purchased homes with swimming pools. The loans were paid for by the 2009 economic stimulus.

“The inspector general's report says the loans precluded other, eligible borrowers from receiving the help. Based on the sample results, the report estimates that 27,206 loans worth about $4 billion - or more than a third of those granted - could be ineligible.”

The USDA IG's report (requires Adobe) was prepared by the department’s Inspector General. The following text from the report expands upon CNS News’ reported, including:

“Our preliminary analysis of the 100 loans identified 28 loans where lenders had not fully complied with Federal regulations or Recovery Act directives in determining borrower eligibility.  We found borrowers with annual income that exceeded program limits, borrowers that did not meet repayment ability guidelines, borrowers who had the ability to secure credit without the need for a government loan guarantee, borrowers who obtained loan guarantees even though they already owned adequate homes within their local commuting areas,4 and borrowers who purchased homes with swimming pools. For each of these categories the agency’s guarantee precluded other eligible applicants from receiving loans.  In our judgment, the borrowers that did not meet repayment ability guidelines also have a higher risk of becoming delinquent and defaulting on their loans.  Based on the sample results, we estimate that 27,206 loans (over 33 percent of the portfolio) may be ineligible with a projected total value of $4.0 billion.

“Rural Development exhausted its appropriations for this program (both Recovery Act and existing program) during the spring of 2010 and lenders then accumulated applications for future funding.  Agency officials informed us in September 2010 that lenders had accumulated applications amounting to over $1.6 billion.  Based on our statistical projection above, we concluded that the backlog of accumulated applications could have been reduced, and maybe eliminated, if lenders had properly determined the eligibility of all applicants who received guarantees with Recovery Act funds.  In September 2010, agency officials informed us that they received additional funding to guarantee the accumulated backlog of loan applications, which they estimated at about $2.2 billion.”

As we asked in yesterday’s Growls, do you think the members of Congress who voted for the “stimulus” bill in February 2009 knew that USDA did not have adequate controls to ensure that only eligible families qualified for guaranteed loans? Would any of them have even cared? Or is it just another reason why the "stimulus" bill stimulated so little economic activity? No wonder so many critics called it Porkulus.

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