The business model that relies on governmental largesse functions only as long as the profligacy remains concealed, but now that the charade has been exposed, will this force banks to refine their definition of “creditworthiness”? Yes, the waste and fraud uncovered by the Department of Government Efficiency (DOGE) have been breathtaking, but what now? Federal employees will be fired and entire agencies deleted, but what will happen to banks’ loan portfolios that not only include governments as borrowers but nonprofits as well? As stated roughly a year ago:
Governments produce nothing. The money they have is either lent to them and/or taken from the people they allegedly serve. This is why there’s no such thing as a gift from a government; there are only transfers. Because governments generate no revenue, it’s not the government that repays the loan. Again, with governments, there are only transfers, so yes, a government, on paper, is the primary borrower, but the guarantor is the people. Talk about a perverse incentive, as some of those very same people are also the bank’s clients.
Hans-Hermann Hoppe elaborates:
Businessmen (capitalists) and their employees cannot earn an income unless they produce goods or services which are sold in markets. The buyers’ purchases are voluntary. By buying a good or service, the buyers (consumers) demonstrate that they prefer this good or service over the sum of money that they must surrender in order to acquire it. In contrast, politicians, parties, and civil servants produce nothing which is sold in markets. No one buys government “goods” or “services.” They are produced, and costs are incurred to produce them, but they are not sold and bought. On the one hand, this implies that it is impossible to determine their value and find out whether or not this value justifies their costs. Because no one buys them, no one actually demonstrates that he considers government goods and services worth their costs, and indeed, whether or not anyone attaches any value to them at all.
The nonprofit, nongovernmental organizations (NGOs) that DOGE sniffed out are valued by only those who were enriched by them. No need to compete in the marketplace when governmental grants keep afloat their worthless services. And despite the fact that those NGOs couldn’t survive without governmental grants, banks were lending to them anyway, relying on—to put it diplomatically—a severe misallocation of resources for the loan’s repayment. As asked roughly a year ago, “Why would a bank take on that kind of risk—a risk that’s borne of political whims, not of real, economic constraints?” Asked differently: because governments and nonprofits don’t profit, why would a bank expect to profit from lending to these organizations? Chief credit officers can no longer answer that question with, “The government has guaranteed the loan.” And with the guarantee lost, proponents of this corruption will cry, “But we’re supporting our communities!” No, from a prudent bank’s perspective, supporting one’s community means lending to the businesses and individuals who are voluntarily supported by their community.
DOGE has accomplished something truly incredible; however, the most shocking aspect of all hasn’t garnered much attention: if we extrapolate DOGE’s work to its logical conclusion, one will determine that it’s not just trillions wasted but that the entire government is wasteful, parasitic, and an affront to civilization. There’s no legitimate need for such an invasive monopoly, as Elon Musk personifies. Musk sells Teslas to those who wish to buy them—no coercion required. Unlike the so-called valuable services from the government, no one is required to buy a Tesla. But when banks fund nonprofits that couldn’t exist without involuntary payments from others—including payments from their own clients—they implicitly state that their social preferences should be imposed on the community they allegedly serve. That the funding of such NGOs has been devoid of transparency is reason enough to conclude that banks should steer clear of them. The hubris required to believe that most people yearn for government services is grotesque. Let the people decide.
DOGE alone can’t stop the malfeasance by simply exposing the malfeasance. Banks lending to governments and nonprofits lend legitimacy to a wholly illegitimate endeavor: “My goods/services are woefully inadequate, but instead of closing shop—which would benefit society—I’ll perpetuate my dishonest existence via loans from banks which believe they’re serving my community.” It’s an absolute disgrace, and perhaps banks would be wise to devote their clients’ savings to their greatest utility, especially when considering that the only way a government can financially support an entity is by first robbing the people it claims to serve, including robbing a business in order to support that business’s competitor(s). Lending to ‘businesses’ that can’t exist without the theft of the private, productive class is as bad for a bank’s business as it is bad for the bank’s reputation. The entire government—every government—is a cancer, and a smaller, more efficient cancer is still a cancer. The cancer must be eradicated, and banks must stop aiding its metastasis.
