Watchdog calculates more than $200 billion were stolen from US Covid relief funds

The US Small Business Administration (SBA) inspector general, a federal watchdog, reported that fraudsters took $200 billion from federal covid relief funds.

The number is close to independent estimates. An Associated Press analysis placed it in over $280 billion.

The analysis looked at several government agencies, like the IRS, but stated the SBA was the most affected. The agency has distributed $1.2 trillion since 2020.

Those funds have financed two of the most relevant relief programs: Paycheck Protection and COVID-19 Economic Injury Disaster Loans, both handled by the SBA.

According to the Inspector general report, around 17% of the programs' funds were disbursed to potentially fraudulent applicants.

According to experts cited by the AP, the high demand led to many mistakes in evaluating applicants.

The SBA undertook too much, too quickly. It granted $169 billion in less than six months in 2020. Before that, the agency had only granted $67 billion in disaster loans in seven decades.

Investigators and outside experts explained to the AP the Government conducted too little oversight and did not institute enough restrictions. They told the agency the grift was "way too easy."

The experts referred to policies from the CARE Act that allowed loan seekers to self-certify their submitted information. With that, SBA officials did not have to ensure it was true.

The act also barred the SBA from looking at tax return transcripts, said the AP. Using that tool, the agency could have banned some loan seekers.

After a few months, President Trump backed down on those policies. However, most of the grifting happened in the first months of the CARES Act. Now, the Justice Department has charged 2,230 people.

The money came from the COVID-19 relief funds, intended to stabilize the economy and fight the worst pandemic recent in history.

In March 2020, President Trump signed an economic stimulus package called the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Congress Republicans and Democrats passed the act to help fight the economic toll that the pandemic brought. According to CNBC, it passed unanimously 96-0 in the Senate.

The package gave $3.2 trillion in direct payments to individuals, unemployment insurance, business loans, funds for local administrations, and hospital aid in exchange for coverage for covid.

The immense package was only the beginning. In 2021, President Biden signed the American Rescue Plan Act, which built upon many measures of the CARES Act.

According to CNN, Biden approved an additional $1.9 billion for more generous stimulus checks, more aid for the unemployed, food and housing programs, and testing and vaccination funds.

Those additional $1.9 trillion added to what CNBC already called the most significant economic rescue package in US history. Both programs amounted to more than $5 billion.

It affected several government agencies, an IRS program, for example, providing tax benefits to the wrong people in 1% of the cases, explained the AP. It accounted for $8 billion of the losses.

The grift also had other consequences. According to a University of Texas research paper cited by the AP, the fraud inflated house prices.

The study found that Paycheck Protection fraudsters were likelier to buy a house. Housing prices increased 5.7% on average in ZIP codes with high amounts of fraud during the pandemic.

The SBA administrator, Isabella Casillas Guzman, told the AP that the agency was taking "effective measures" to "fight fraud and hold bad actors responsible."

Dan Fruchter, chief of the fraud and white-collar crime unit at a US Attorney's office, told the AP the same thing. "Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn't legal," he said.