As the effects of the economic collapse began pouring down Main Street last year, the government was left holding a record $2.1 billion in write-offs of small business loans it had guaranteed. Officials expect the number of defaults to rise as the nation continues to climb out of the recession. Records obtained by the Associated Press under the federal Freedom of Information Act show the public is paying to offset bank losses on small business loans across the country, from a convenience store in the tiny Canadian border town of Houlton, Maine, to a graphic arts design company on the island of Hawaii, more than 5,000 miles away.
The Gulf Coast fishing industry, battered by hurricanes Katrina and Rita in 2005, has been hit especially hard. Half of the 10 cities with the highest industry-specific write-offs are New Orleans, Lafayette, Abbeville, Biloxi, Miss., and Ocean Springs, Miss. All told, the shellfish fishing industry had 45 loans charged off, at a total cost of $19.5 million.
Despite having loans written off, little companies are barely scraping by. It’s a sign that even as record profits re-emerge on Wall Street, thanks to massive government loans and guarantees for banks deemed too big to fail, the pain on Main Street is as profound as it’s been in half a century. The companies that were not too big to fail are failing. Their plight is a shift from previous recessions when small businesses bounced back ahead of big employers, says Todd McCracken, president of the lobby group National Small Business Association.
