Small biz lending fund is a bust

John Dimsdale Oct 18, 2011
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Small biz lending fund is a bust

John Dimsdale Oct 18, 2011
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Kai Ryssdal: Treasury Secretary Timothy Geithner went to Capitol Hill today. He was defending a government jobs program that launched with much promise a year ago. Alas, the execution left much to be desired: Only 15 percent of the money that was intended to get small businesses hiring actually went out the door.

From Washington, Marketplace’s John Dimsdale explains what happened.


John Dimsdale: The Small Business Lending Fund was designed as an answer to small businesses that said banks were too scared to lend them money. Congress allocated $30 billion for community banks, which do most of the lending to small businesses. But a year later, only a little over $4 billion was out the door. Geithner says the government was just as skittish as the banks were to lend.

Timothy Geithner: We had to be careful to make sure the taxpayers’ resources were going to banks that were viable. And we were not going to take too much risk.

More than 900 banks jumped at the chance for extra capital, but the government only approved a third of the applications. Banks said between Treasury and their usual regulators, they got mixed messages.

Tom Broughton, the CEO of ServisFirst Bankshares in Alabama, managed to get a $40 million capital infusion. But he says the bureaucracy didn’t make it easy.

Tom Broughton: My thought is, we already have a number of regulators, so what’s one more? I already have the state of Alabama banking department, I have the FDIC, I have the Federal Reserve. So why not add the Treasury as a regulator?

Despite the botched execution, some lending did result. Broughton says he’ll make loans to women, minorities and veterans who run small businesses around Alabama.

In Washington, I’m John Dimsdale for Marketplace.

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