Nashua, N.H. – February 2, 2010 -  During a town hall meeting at Nashua North High School in N.H. today, President Obama outlined the creation of a new Small Business Lending Fund.  Under this proposal, $30 billion in Troubled Asset Relief Program funds would be transferred, through new legislation, to a new program outside of TARP to support small business lending.

The new program is aimed at complementing other SBA lending initiatives the President has already announced – including support for higher SBA loan limits and extending Recovery Act provisions for higher loan guarantees and temporary fee eliminations – as well as additional tax cuts to encourage small businesses to invest, hire new workers and raise existing workers’ salaries.

The Obama administration plans to discuss with Congress additional ideas for enhancing credit for small businesses through the new fund along with other ways that the fund can be fully deployed, says the White House.

Last week, President Obama outlined a new Small Business Jobs and Wages and Tax Cut to encourage hiring and create incentives for employers to increase wages for already existing employees. 

On Monday, Whitehouse spokesman Robert Gibbs said, “We have to create 100,000 to 150,000 jobs a month just to keep that unemployment rate at — roughly keep that unemployment rate steady.  As the economy begins to pick up, that will also put increased pressure as we do begin to add jobs because more and more people — in addition to that, just the sheer population growth — but more and more people that had stopped looking for work will enter into the process of looking for work.”  

Senator Patrick Leahy, D-Vt., commented on the announcement of the President’s new lending fund Tuesday, “I strongly support the President’s plan to help small businesses find the affordable capital they need to grow and hire. More than a year after the financial freeze that imperiled the economy, many small businesses are still struggling to find the working capital they need to invest in new jobs and new markets.”

TARP loans (TARP was enacted by Congress and the Bush Administration late in 2008),were designed to keep the biggest firms in our financial system from collapsing and bringing down our entire economy. 

Leahy said, “It is fitting to reclaim these funds from Wall Street and shift them to Main Street to help ease the small business credit crunch that is holding back the recovery. Recycling this lending capital will give these funds a second life in helping small businesses take the recovery to a higher level. Small businesses are the backbone of Vermont’s economy and the engine of our national economic recovery. Congress should listen to small businesses’ warnings about this credit squeeze, and Congress should work with the President to enact this small business credit relief without obstruction or delay.”

Congressman Peter Welch, D-Vt.,  said, “As I’ve met with small business owners from St. Albans to Bennington and White River Junction to Rutland, the number one thing I’ve heard is that Vermont businesses need access to credit,” Welch said. “As Wall Street banks have turned their back on small business lending, Vermont’s community banks have stepped in to support their local economies. The President’s plan will provide much-needed support to those who do the most to create jobs and rebuild our economy.”

Job creation is among the top priorities of the Obama Administration, even above the budget deficit, says Gibbs, “We have to get our economy moving again, we have to create jobs.  That will improve our medium- and long-term deficit picture.” 

 A tough challenge  now facing Obama is that by next year, if Congress approves the budget and the projections there come true, the budget deficit will be back to basically what it was when the President took office.

-Vermont Daily News staff report

 

Key elements of the new Small Business Lending Fund are below:

Limited to Community and Smaller Banks Which Devote a Higher Share of Lending to Small Businesses: The Small Business Lending Fund seeks to 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 hopes to encourage broader participation by banks, as they would not face TARP restrictions.
A Core Function of the 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 should be reduced.