Obama to unveil small biz lending plan drawn from bailout funds

[babylonsister]

Obama to unveil small biz lending plan drawn from bailout funds
By Michael O'Brien - 02/02/10 06:00 AM ET


President Barack Obama on Tuesday will call for a new, $30 billion small business lending fund drawn from bailout funds as part of his push for new job creation.

The president will unveil his new "Small Business Lending Fund" during an appearance in Nashua, N.H., part of the series of new proposals meant to bolster economic growth and new jobs.

"Jobs will be our number one focus in 2010," Obama will say, according to excerpts of prepared remarks released by the White House. "And we’re going to start where most new jobs do – with small businesses."

The plan closely resembles a proposal floated by freshman Sen. Mark Warner (D-Va.) last winter, which will see the new fund would support lending to small businesses by smaller and community banks. The funds for the new proposals will be drawn from unspent leftovers of the Troubled Asset Relief Program (TARP).

"These are the small, local banks that work most closely with our small businesses – that provide them their first loan, and watch them grow through good times and bad," Obama will say. "Combined with my proposal back in December to continue waiving fees and increasing guarantees for SBA-backed loans, this will help small banks do even more of what our economy needs – ensure that small businesses are once again the engine of job growth in America."

more...

http://thehill.com/blogs/blog-briefing-room/news/79167-obama-to-unveil-small-biz-lending-plan-drawn-from-bailout-funds

[dkf]

1. As long as it doesn't land up collapsing the community banks.

Small business loans in a recession are probably pretty risky.

[jefferson_dem]

2. Technically, we are no longer in a recession.

Targeting dollars to small businesses in order to encourage hiring is a smart move, in my opinion.

[dkf]

3. I thought it should be done through the sba.

I was reading about the huge numbers of bank failures in Georgia. They had a history of community banking there and strict regulations on banks with branches all over the place. They removed the restrictions but their tradition of small community banks led to failure after failure. I used to watch the FDIC list every Friday. Very sad.

[rucky]

5. The government is mitigating that risk by underwriting it.

I don't see an alternative, other than having more businesses (and community banks) shut their doors.

[dkf]

7. Meaning the govt is guaranteeing?

[rucky]

8. It's a two-pronged plan:

TARP + expansion of SBA loans.

[dkf]

9. So no downside exposure for banks doing the lending then?

Is it like FNMA, where the Govt takes the principal loss if the loan defaults?

[rucky]

10. You mean GNMA?

Fannie Mae is just like Freddie Mac - buying loans wholesale, packaging & selling on Wall Street.

and SBA loans work more like FHA mortgage loans.

The TARP stimulus will hopefully give banks cheap money to lend out, but my experience is their lending practices tend to be pretty conservative. It still may be tough for a struggling business to get a loan with a community bank - even with the reduced risk, they prefer to lend on their terms.

[mkultra]

11. any increase in SBA lending is helpful at some level

It may not be rocket fuel be enough programs like this could be.

[Clio the Leo]

4. Kick. NT

[babylonsister]

6. Just brought this up at the townhall, fyi. nt

[riderinthestorm]

12. This is great news but it's probably too late in my experience.

As a small biz owner, I know multiple others who are just stretched too thin. They've already gone to their large and small banks for lines of credit and been turned down because their bottom line is too trashed.

Many months later, so many of them are hanging by a thread that they simply have nothing to demonstrate to any bank that would incentivize them to lend to these businesses, even with Obama trying to (now) prime the pump. These include two nurseries, a catering biz, a local bakery, my sister's small restaurant, a foundry, three construction companies, a lawyer who works for a smallish law firm, and a self-employed architect who has two other partners.

Even if anyone of them do somehow qualify for a line of credit, I know that none of these people are going to hire anyone, everyone's hunkering down and working exponentially harder.

I'm not trying to be Debbie Downer - I really appreciate that small businesses are finally getting attention but frankly, it's pretty late in the game and after 18 months of this recession nobody's in good shape anymore.

[brand404]

13. k&R