USDA loan-backing unit doesn't create as many jobs as it claims; some deals have been losers

A federal loan-guarantee program, created as part of the economic stimulus package of 2009 to help bring jobs to rural areas, claims to have brought many more jobs to small towns than the actual workers employed by companies, Gretchen Morgenson reports for The New York Times. (Peninsula Daily News photo by Keith Thorpe: Peninsula Plywood in Port Angeles, Wash., closed in 2011)

The program is part of the U.S. Department of Agriculture's Rural Development unit, which "has called its $1.6 billion business and industry loan program a rousing success," Morgenson writes. "Not surprisingly, the department often trumpets the number of jobs that are expected to result from these loans — figures that it gets from the borrowers themselves."

For example, the USDA website says  Carolina AAC, a company that got $10.4 million in late 2010 to build a concretecplant in Bennettsville, S.C., population 9,000, would create around 197 new jobs," Morgenson writes. "But Carolina AAC said in a January 2011 news release that only 36 jobs would be created," and a spokesperson for the company said it has only 10 employees. "Troubling for taxpayers is that the government backs 90 percent of the loans and they are in liquidation."

Singleteary Food Solutions, which received $4.36 million in USDA-guaranteed loans to create 220 jobs in Wells, Minn., population 2,300. "Singleteary was expected to be the second-largest job creator in the program; it also received a Small Business Administration loan for about $4 million," Morgenson writes. The plant, which only had 30 employees, never opened, the loans are in default, "and the bank that wrote the guaranteed loan and sold it to investors took back the property in May."

Peninsula Plywood Group of Port Angeles, Wash., population 19,000, was supposed to be the program's largest job creator. It got about $2 million in 2010 to create 334 jobs. Morgenson reports, "The facility opened for production later that year but ran into financial trouble and closed in late 2011. Local news reports said it employed 130 people at most. The loan has been liquidated and the Agriculture Department paid a loss claim of $958,000." (Read more)