This just in from the Associated Press on what President Barack Obama wants from banks and small business.
By DARLENE SUPERVILLE
Associated Press Writer
Obama’s message of the day was a proposal highlighted in his State of the Union address last week: funneling $30 billion to local banks so they can lend small businesses money they need to grow their enterprises and create jobs.
He toured a business that makes energy efficient light bulbs and held his second town hall in six days, a format that allows him to show engagement with the public and counter a sense of “remoteness,” as he has put it, that people have had with his policy agenda.
“Jobs will be our No. 1 focus in 2010,” he told the estimated 1,600 people in attendance in opening remarks, before taking a handful of questions. “And we’re going to start where most new jobs do — with small businesses. These are companies that begin in basements and garages when an entrepreneur takes a chance on his dream, or a worker decides it’s time she became her own boss.”
The $30 billion in loan financing would come from money repaid by big banks that got help from the $700 billion Troubled Asset Relief Program, the vastly unpopular bailout for those on Wall Street whose actions led to the economic downturn. A refined version of a plan the administration first announced in October, that $30 billion would be used to create the Small Business Lending Fund, separate and distinct from TARP.
The fund would be open to banks with assets of $10 billion or less. About 8,000 such small and community banks would be eligible.
Banks that increase lending to small businesses would see reductions for up to five years in the dividend tax rate they owe the government.
The idea is to bolster banks’ balance sheets and enable them to make more loans to small businesses, who can use the money to expand, hire or make other investments.
But many in the banking industry say lending is not hampered by a lack of capital but by trouble finding creditworthy borrowers. Small businesses also are reluctant to borrow money in a sluggish economy for expansion or improvements.
Obama called on Congress to pass the legislation necessary to create the new fund, one of several ideas he has promoted recently to help small businesses. He has called for tax credits for those small businesses that hire new workers or raise wages, and for eliminating all capital gains taxes on small-business investment. He also has proposed tax incentives for all businesses to invest in new plants and equipment.
Sen. Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee, denounced the attempt to use money from the bailout program. He told White House Budget Director Peter Orszag at a hearing in Washington that the legislation setting up the bank bailout program requires that leftover funds be used to pay down deficits.
Orszag replied that that is why the administration was asking Congress for legislation.
Back in October, the administration ran into resistance to the new lending ability from local bankers who believed they would be stigmatized if they accepted TARP funds. The Treasury Department has worked since then to try to make the program acceptable and to remove some of the requirements that applied to banks that accepted TARP money during the financial crisis.
Know a small business you think we should write about? Contact Herald writer Amy Rolph at arolph@heraldnet.com.
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