Introduction: The latest investigation report reveals that there is a serious fraud problem in the US federal COVID-19 relief project, and more than 200 billion dollars of funds have been stolen. The project, originally aimed at helping small businesses overcome the pandemic crisis, has become the target of fraudsters. This figure is far higher than the previous prediction, which reveals the vulnerability of the “compensation protection plan” and the “COVID-19 economic injury disaster loan plan” to fraud at the initial stage of the epidemic.
According to the investigation report of Hannibal “Mike” Ware, the federal regulatory agency and the chief inspector of the Small Business Administration (SBA), the COVID-19 economic relief project faces a huge fraud risk. It is estimated that over $200 billion in funds may be stolen by fraudsters. These funds were originally intended to help small businesses overcome this unprecedented public health crisis.
The Inspector General’s report indicates that at least 17% of the funds have been paid to potential fraudsters. Among them, the “COVID-19 Economic Injury Disaster Loan Program” is estimated to have more than 136 billion dollars of fraud, accounting for 33% of the total expenditure of the program; The ‘Salary Protection Plan’ is estimated to be $64 billion.
Gene Sperling, a senior White House official responsible for overseeing epidemic relief spending, admitted that 86% of fraudulent or potential fraudulent activities occurred nine months prior to the outbreak of the epidemic during President Trump’s presidency. He said, “$200 billion is a very large number, but we believe that the actual fraud amount is much smaller, possibly around $40 billion. Regardless, this number is unacceptable
Bob Wesselkamper, former executive director of the Federal Epidemic Response Responsibility Committee, expressed shock and incomprehension at this number. He pointed out that “the rapid allocation of funds and the integrity of projects are not mutually exclusive. The government could have done both at the same time. They should implement basic fraud control measures to verify people’s identities and ensure targeted relief falls into the hands of the right people
The latest research also found that the fraudulent expenditure of the COVID-19 rescue project has produced a series of consequences. Research by John Griffin, a professor of finance at the McCombs School of Business at the University of Texas at Austin, and his colleagues shows that people who obtain “salary protection plan” loans through fraud are more likely to buy houses, leading to rising house prices. In areas with high fraud rates, housing prices have increased by an average of 5.7 percentage points, even after controlling for factors such as land supply, previous housing price growth, and remote work. This means an increase of up to $22800 for houses worth $400000.
Griffin pointed out that the inflow of fraudulent funds also leads to an increase in consumer spending, which may exacerbate broader inflation issues. He warned that if fraudulent behavior drives up housing prices, causing homebuyers to pay exorbitant fees and ultimately lead to a decline in housing prices, these homebuyers will become victims of the unintended consequences of fraudulent behavior. This is also another reason why we should pay attention to fraudulent behavior.
To sum up, the federal COVID-19 relief project is facing serious fraud problems, and more than 200 billion dollars of funds have been stolen. This has raised doubts about the safety and regulatory measures of the “Compensation Protection Plan” and the “COVID-19 Economic Injury Disaster Loan Plan”. This fraudulent behavior not only seriously damages the interests of small businesses and those affected by the epidemic, but also has a negative impact on the real estate market and the overall economy. In order to protect public funds and ensure the fairness and transparency of rescue measures, the government and relevant institutions must take stricter fraud prevention measures and hold fraudulent behavior accountable seriously to restore public confidence and trust.
