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The Banks Don't Like Obama's New Plan
By Marc Tracy
Though the main target of President Obama's plan to increase small business lending is, naturally, small businesses--particularly those in need of credit--it appears to be something that would help the community banks, too. After all, they would be permitted to borrow money from the government to make small-business loans more cheaply than before (paying a 3% dividend instead of 5%), which sounds like a pretty good business proposition to us. Yet, Reuters reports (via Inc.), the banks are not biting.
It's not that they feel it's a bum deal on paper (it isn't). Their problems are, one, implied association with the bailout, and the negative publicity that could bring, should they benefit from the program (which is being funded, after all, with money from that original TARP fund). And, two, an old refrain: they simply do not see enough demand for small business credit to justify expanding their activities in the area. (A further complaint is that improving Small Business Administration-backed loans is all well and good, but the extensive paperwork remains a deterrent to applying for them.)
But clearly the main point here is the demand issue. The whole thing is just giving us one more opportunity to question why the administration is so focused on credit when other factors--primarily consumer spending, which can be tinkered with by wise stimulus--seem to be more important to the nation's small businesses.
Comments (0)October 29, 2009 11:04 AM
