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The USDA's Losing Effort: Costly Loan Program for Rural Businesses Yields Dubious Results

Under a program to create jobs in rural America, the U.S. Department of Agriculture guaranteed $1.6 million in loans to Aztec Environmental Inc., an asbestos-removal company in Panama City, Fla.

Aztec did create jobs -- for hundreds of workers from Guatemala. "Locals didn't want the work," said Debbie Livingston, one of the owners.

Three years later, in February, Aztec went out of business after a federal investigation into allegations of environmental abuses and the hiring of illegal immigrants. Now, the USDA could lose hundreds of thousands of dollars on the loan.

The Aztec case is one graphic example of the scores of troubled loans that the USDA has backed in a little-known part of the agency's vast system of farm subsidies. Since the 1970s, the loan program has endured nearly $1.5 billion in losses while backing almost $14 billion in guarantees to private banks, a Washington Post investigation found.

Actual losses are almost surely higher, according to a Post analysis of thousands of USDA loans and grants. USDA officials refuse to disclose losses on loans to individual companies, even after they go out of business, arguing that it "could substantially harm" the companies' competitive positions.

More than three decades after the loan program was created, USDA officials still don't know whether it works. Funds have gone to firms that have hired foreign workers instead of Americans. Millions more have gone to failing and bankrupt businesses. Most of the jobs are not new. Many are low-tech and low-wage.

Full Story:  http://www.washingtonpost.com/wp-dyn/content/story/2007
/12/04/ST2007120402047.html