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A Senator Sees 'Moral Hazard' in SBA Loan Program

Senator Jeff Sessions (R-Ala.) talks to a member of the press on Jan. 6 in Washington
Senator Jeff Sessions (R-Ala.) talks to a member of the press on Jan. 6 in WashingtonPhotograph by Alex Wong/Getty Images

A Republican senator is questioning whether the Small Business Administration’s flagship loan program puts taxpayer money at risk without enough oversight.

Earlier this month, Senator Jeff Sessions of Alabama wrote to new SBA chief Maria Contreras-Sweet, to raise concerns that the agency “has not met the high standards required in providing loan guarantees.” Specifically, the lawmaker says that the agency’s 7(a) program, which backstops private lenders by guaranteeing up to 85 percent of the value of small business loans they make, allows banks to lend with little regard to whether the borrower will be able to pay.