Obama, Geithner Outlining Plan to Boost Small-Business Lending
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By Roger Runningen and Kim Chipman
March 16 (Bloomberg) -- President Barack Obama and Treasury Secretary Timothy Geithner today are outlining a plan to free up credit for the nation’s struggling small businesses by raising federal loan guarantees and bolstering bank liquidity.
“Small businesses are one of the biggest drivers of employment we have,” Obama told a gathering of small-business owners, community banking executives and lawmakers at the White House today. “This is going to be a first step” of a continuing effort to help small business.
The Small Business Administration currently guarantees payment on 85 percent of a loan up to $150,000, and as much as 75 percent on loans of more than $150,000. The administration is raising the guarantee to 90 percent, reducing lender risk, and waiving fees of as much as $75,000 that are paid by borrowers.
Obama also is planning steps to thaw the secondary credit market using more than $10 billion from the $700 billion bank rescue fund. The estimated $375 million for the small-business lending initiative will come out of the $787 billion economic stimulus plan passed by Congress last month.
The administration also announced that the 21 largest banks getting government money must provide monthly reports on how much they are lending to small businesses.
The administration is seeking to restore confidence in the economy and build public support for Obama’s strategy in battling a recession that has pushed the unemployment rate to 8.1 percent last month. The president also is trying to head off backlash over government efforts to rescue banks and Wall Street firms.
Crucial Role
Obama says small businesses will play a crucial role in restoring economic growth because they are an engine for job creation. Yet many companies are struggling as credit dries up. While the Small Business Administration typically guarantees $20 billion a year in loans, new lending is on track to fall below $10 billion this year, according to administration officials.
The plan to use between $10 billion and $20 billion to unlock frozen credit markets for SBA loans will help banks become more liquid and spur lending to small businesses.
“We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them,” Christina Romer, who heads Obama’s Council of Economic Advisers.
To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Kim Chipman in Washington at kchipman@bloomberg.net
Last Updated: March 16, 2009 12:01 EDT
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