Obama administration proposes $30B small-business loan fund

  
Staff Report
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The Obama administration on Tuesday released plans for a Small Business Lending Fund that will transfer $30 billion from the Troubled Asset Relief Program to a new program supporting small-business lending.

The Fund would divert resources from the big-bank TARP bailout to community banks that have as their core customers small businesses.

Fifth District Congressman Tom Perriello backs the move.

“We must remember that two-thirds of job growth come from small businesses,” Perriello said in a statement. “This proposal is a solid first step in getting lending going again to our small businesses, while rewarding the community banks who have made responsible decisions instead of rewarding failure for the big banks that we have seen in the past. For those of us who have been clamoring about jobs and small business lending, it’s great to know that the Administration is finally taking proactive steps to shifting our economic strategy away from speculation on Wall Street and towards job creation on Main Street.”

The elements of the proposal from the administration:

– Limited to Community and Smaller Banks Which Devote a Higher Share of Lending to Small Businesses: The Small Business Lending Fund would support lending among small- and medium-sized banks (with assets under $10 billion). These banks devote the highest percentage of their lending to small businesses in their communities, accounting for over 50 percent of all small business loans nationwide, even though they make up only about 20 percent of all bank assets.

– Program Would Be Separate and Distinct from TARP to Encourage Participation: By transferring, through legislation, $30 billion to a new program that would be distinct from TARP, the Administration’s proposal would encourage broader participation by banks, as they would not face TARP restrictions.

– A Core Function of New Fund Would Be Offering Capital With Incentives to Increase Small Business Lending: The Administration’s core proposal for the new lending fund is an initiative to invest in smaller banks capital under terms that provide strong incentives to increase lending. As participating banks increase lending to small firms compared to 2009 levels, the dividend paid to Treasury on that capital investment would be reduced.

– Administration Will Discuss with Congress Additional Ideas to Enhance Credit for Small Businesses Through the Small Business Lending Fund. While the Administration is presenting its plan to provide capital with an incentive structure to maximize small business lending, it looks forward to discussing with Congress other ways that – in addition to what is described above – the Small Business Lending Fund could be fully deployed.

More information about the Small Business Lending Fund can be found here: www.whitehouse.gov/the-press-office/president-obama-outline-new-small-business-lending-fund.