GDP, PCE, BK, SBA, EIDL, PPP, OIG and USSS
GDP was the news this past week. So was PCE.
GDP – Gross Domestic Product – was in the news for good reasons. It did very well in the third quarter.
GDP is essentially the country’s total sales.
Adjusted for seasonality and inflation, it was up an annualized rate of 4.9%.
That’s almost running hot. Almost.
The stock market reacted, just not in the way you would expect.
It dropped. Go figure, but no one wants to make the Fed raise rates.
The items driving GDP were consumer spending on services and goods, comprising over half the increase on its own.
All of this came at the cost of savings, which were 3.8% of income in Q3. It was 5.2% in Q2. So, people spent their money this last quarter.
We will see if they should have saved it for Christmas.
PCE was also in the news; this is another measure of inflation.
PCE was higher month over month at 0.3%, but the annual core PCE – Personal Consumption Expenditures - was down ever so slightly, from 3.8% to 3.7%. And this is the index the Fed keeps an eye on.
This was good Good News as it is expected that the Fed will NOT raise rates this week.
This week: The Fed meets on All Saints Day. Oh, the irony.
Small Business Bankruptcies are on the rise.
The goal of the Fed in raising rates was to slow down the economy. Since rates were so low, it took some time for the impact to be felt. When you are paying 3.25% for your loan, and it goes to 4.25%, not a big deal.
Now it’s at 8.5%. And that’s if you are a better-than-average borrower. Many of you are paying 10% at your bank. That’s a big difference.
And businesses are feeling it.
Nearly 1,500 businesses have filed for bankruptcy under Subchapter V (5 – it’s a Roman numerals thing), which is more than filed in all of 2022.
Part of that is Subchapter V is newer, having been put in place in 2020, and lets the debtor have a higher debt load of $7,500,000 before having to jump through more hoops.
This has enabled more companies to jump into the BK pool than normally would have.
I don’t know if that’s a good thing or bad thing, but if you can avoid bankruptcy, do so.
Just so you know, once you declare BK – bankruptcy – don’t expect to get bank financing in the future.
Hard money, yes. Bank money, no.
In a Goldman Sachs survey, 73% of small businesses stated that high-interest rates were having a detrimental effect on their business.
Such as squeezing cash flow.
Speaking of cash, this is so 2020!
You can have idle workers, your car can idle and you can even have an American Idol, but do you remember the EIDL loan you may have received in 2020 or 2021?
That’s an Economic Injury Disaster Loan for those of us in the know.
Remember when money was flowing out of the Federal Reserve like a water main break on Sunset Blvd.?
That was all EIDL, PPP, CARES and any other acronym you care to have fit on your Scrabble board.
Here’s an alert: For you fraudsters out there, you better watch out for Hannibal.
Hannibal Lecter? John “Hannibal (I love it when a plan comes together)” Smith?
Nope. Hannibal Ware, the Inspector General from the Office of Inspector General for the United States Small Business Administration – the OIG for the SBA.
That’s a heck of a name for an Inspector General. Heck, I’d vote for him on his name alone.
I mention this because whenever EIDL or PPP or government money, in general, comes up in a conversation, the fraud that goes along with it is mentioned, and how those fraudsters never get caught.
You may also recall that I have mentioned a number of times in these pages that you can steal my money, your neighbor’s money, California’s money, and you can basically loot any business in California, but DO NOT steal Federal money.
They don’t like it, and they have unlimited – and I mean unlimited – resources to get it back and/or put you in prison.
Using numerous tools – email addresses, IP addresses, phone numbers, EINs and some pretty advanced statistical correlation analysis, the OIG “will leverage and marshal the resources available across the federal law enforcement community to bring wrongdoers to justice.”
And they have.
Their investigations have resulted in:
1,011 indictments, 803 arrests and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023.
They estimate that 17% of all PPP and EIDL funds were disbursed to fraudulent actors.
Not to be confused with bad actors, like Jean-Claude Van Damme and Arnold Schwarzenegger.
The OIG collaboration with SBA, the U.S. Secret Service, other federal agencies, and financial institutions has resulted in nearly $30 billion in COVID-19 EIDL and PPP funds being seized or returned to SBA.
Now that’s good use of government money.
We should start a petition to get Hannibal Ware to Sacramento. But I digress…
Of the more than 250,000 OIG Hotline complaints received since the start of the COVID-19 pandemic, they have identified more than 90,000 actionable leads.
They are coming for you, and here’s the fun part…
Thousands of investigations will ensue for years because the statute of limitations is 10 years for COVID-19 EIDL and PPP fraud.
That’s a long time for fraud actors (not bad actors) to hold their breath.
More EIDL
Did you receive an EIDL loan? Many businesses did. And now, because of the two-year interest deferment period, many of those businesses have forgotten that they did.
To refresh your memory…
These were NOT PPP loans and are not forgivable.
These are loans provided directly from the SBA – not your bank - that had interest deferred – not waived – for two years.
You then have 28 years to pay them back.
That’s a long time.
Folks, if you have one and have not made a payment, check your spam/junk email and then make a phone call to the SBA.
1-800-827-5722
You need to get this squared away.
The Quote of the Week goes to Byron Wien, who passed away this past week, still employed at the age of 90. I’m not sure I agree with it, but you can’t refute it.
“Never retire. If you work forever, you can live forever. I know there is an abundance of biological evidence against this theory, but I’m going with it anyway.”
62 days left in 2023.
