Would a shutdown tank the economy?

TPM has a rundown of what a shutdown would mean in terms of government functions and services. It includes this, which spooked me,

Small Business Administration–The SBA would stop approving business loan guarantees and direct loans, which would have a “significant impact” on the economy, the official said.

Federal Housing Authority–All loan guarantees would cease during this period. In 1995, during the last government shutdown, the FHA-guaranteed loans represented 12 percent of the mortgage market. Today, that figure has grown to 30 percent.

“We’re in peak home-buying season when a disproportionate number of home transactions are done so having the FHA not able to guarantee loans would have an impact on our economy, which is very fragile,” the official said.

No business loan guarantees and direct business loans? A halt to 30% of the housing market? Really? This certainly sounds serious. Somebody needs to look into this. The markets aren’t reacting negatively right now, so maybe there is less to this than I fear. Can anyone shed some light?


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