New Proposal Will Try To Get Banks To Lend To Small Business

It sounds like a really good idea. But really, this is bribery. And it wouldn't have been necessary to give them everything they want if Geithner an

It sounds like a really good idea. But really, this is bribery. And it wouldn't have been necessary to give them everything they want if Geithner and pals put reasonable conditions on the bank bailout in the first place:

The Obama administration is developing a major initiative to tackle the economic and political problem of unemployment by getting federal bailout funds into the hands of small businesses.

The proposal involves spinning off a new entity from the Troubled Assets Relief Program that could give banks access to the government money without restrictions, such as limits on executive pay, as long as they use it to make loans to small businesses. But officials are not yet certain whether carving the program out of TARP would be the best way to lure banks to participate in small-business lending, said sources familiar with the matter who spoke on the condition of anonymity because the plans were not final.

As an alternative, officials are prepared to ask Congress to modify TARP itself, easing the pay limits and other restrictions that would be imposed on small-business lenders taking the money, the sources said.

Since the summer, the administration has been facing an uncomfortable dynamic in the economy. The ranks of the jobless have been growing, while big financial firms that got taxpayer bailout money have been thriving. In response, officials have been trying to recast TARP as aid for Main Street rather than Wall Street.

Treasury Secretary Timothy F. Geithner told a congressional oversight panel Thursday that TARP would focus on aiding small-business lending, community banks and homeowners struggling to keep up with their mortgage payments, and he hinted at the new program.

Banks are "very reluctant to come and do business with the government and they're concerned that, if they come, they will be stigmatized and they will be subject to the risk of conditions in the future that might make it harder for them to run their businesses," Geithner told the TARP oversight panel. Solving that problem, he added, is "going to be something we cannot do on our own. It's going to require some help from Congress to help deal with those basic concerns."


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Elizabeth Warren, who heads the oversight panel, chided Geithner for taking so long in setting up several other small-business lending initiatives, two of which were announced last spring.

"It's not news to anyone that small-business lending is important," she said. "Small businesses are closing every day. But Treasury has now announced three plans and clearly has not gotten the job done."

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