December 19, 2009 in Business

Small-business aid in works

Feds plan to set aside $30 billion to boost loans
Martin Crutsinger And Daniel Wagner Associated Press
 

What’s next

A Treasury official said key members of Congress were being consulted on the new plan, but final decisions were not expected until next year.

WASHINGTON – The Obama administration is setting aside $30 billion from the financial bailout fund for a program designed to encourage lending to small businesses to aid the economic recovery.

An internal document obtained by the Associated Press spells out how the Treasury Department plans to spend money from the fund before it expires in October 2010. The document shows $40 billion would go to consumer and business lending programs.

Of that amount, $30 billion would support lending to small companies, according to a Treasury official who spoke Friday on condition of anonymity because no final decisions on the program have been made.

President Barack Obama said in October that the administration would create an expanded business lending program, but officials have had trouble finalizing details.

Over the past year, the financial system has stabilized with the help of billions injected into banks to bolster their capital – the reserves they have to protect against loan losses. But critics charge that the $700 billion bailout fund, known as the Troubled Asset Relief Program, has failed to achieve its main goal: to get banks to lend more to consumers and small businesses.

When then-Secretary Henry Paulson pushed Congress to approve TARP in the fall of 2008, its main goal was to buy toxic assets. But Paulson abandoned this approach as the crisis worsened and switched to direct infusions of capital into banks.

The Treasury document projects that the commitments from the $700 billion TARP program will total $550 billion. Many parts of the rescue fund are projected to get no further money. The auto bailout program, for instance, won’t grow beyond the $87 billion the government has already committed.

The Treasury document shows that of the $482 billion committed so far from TARP, $370 billion has been disbursed. The government has received $163 billion in repayments. That figure includes announcements this week of planned repayments by Wells Fargo and Citigroup.

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