October 21, 2008 / 9:14 PM / 11 years ago

UPDATE 1-Fiscal hawks say no new US aid to ethanol makers

(Grain trade group opposes guarantees; paragraphs 6-7 new)

WASHINGTON, Oct 21 (Reuters) - The U.S. government would waste its money on ethanol, “the Fuel to Nowhere,” if it uses a loan guarantee program to prop up struggling ethanol makers, said officials from anti-waste groups on Tuesday.

The officials criticized the prospect that ethanol makers could obtain up to $25 million in bank loans carrying an Agriculture Department guarantee. The business and industry loan guarantee program, open to rural businesses, was created years ago.

“Ethanol has demonstrated that it is truly the Fuel to Nowhere,” Andrew Moylan of the National Taxpayers Union said in a statement. He said the government should not bail out ethanol makers under financial strain because of high-priced corn.

USDA spokesman Keith Williams said “no, there’s not” a bail-out nor was USDA creating a program for ethanol firms. Credit-worthy rural businesses must qualify for loans from private lenders before a guarantee is considered, he added.

A business’s cash flow, equity, financial statements and the status of its industry, among other factors, are reviewed by USDA before the bank gives the loan, said Williams.

Trade group National Grain and Feed Association said USDA should not selectively shield companies from losses on the market. It urged USDA “to reconsider this ill-conceived idea.”

NGFA represents grain handlers, exporters and processors.

Officials from Taxpayers for Common Sense, Citizens Against Government Waste and the American Conservative Union joined Moylan in saying said there was no reason to provide more subsidies to the ethanol industry.

Besides a tax credit available for blending ethanol with gasoline, federal law requires the use of 9 billion gallons of fuel ethanol this year and 10.5 billion gallons of biofuels next year.

Since Friday, there has been discussion the loan guarantee program could be used by ethanol makers who need capital because they agreed to pay high prices for corn, the feedstock for most ethanol plants, before the recent market declines. (Reporting by Charles Abbott; Editing by Christian Wiessner)

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