Banco Popular's Liar Loans

Banco Popular was recently admonished for its approval of Small Business Association (SBA) loans to companies that it did not properly analyze for earnings and repayment potential. According to this report, the Small Business Administration rebuked the bank for participating in lending chicanery.

Experts think that the real reason Banco Popular was singled out was that its vice president admitted to the SBA that the bank had not bothered to verify earnings projections from franchise borrowers. Although the SBA's Office of Inspector General (OIG) focused on 12 loans that the bank provided to Huntington Learning franchise owners, it looks like the number of loan applications with bogus earnings projections extend far beyond the confines of the bank, and far beyond Huntington Learning Centers franchisee borrowers.

Analysis

While it might be easy to suggest that these liar loans are part of the larger systemic corruption on the island, I would remind everyone of one thing. Never ascribe to fraudulent activity, what plain old incompetence can explain.