WASHINGTON – President Barack Obama freed billions of dollars to help the nation’s small businesses on Monday, hoping to get credit flowing again to Main Street, not just Wall Street. He heaped praise on the little guys of American industry, often overshadowed in the blitz of government bailouts.
The centerpiece of Obama’s latest plan will allow the government to spend up to $15 billion to buy the small-business loans that are now choking community banks and lenders. That, in turn, could allow those banks to start lending money again to small companies to invest, pay bills and stay afloat.
“You deserve a chance. America needs you to have a chance,” Obama said in an appeal to all those who run small businesses or hope to one day.
Obama’s effort was, at one level, fundamental to helping the economy rebound. Small businesses have created about 70 percent of the new jobs over the past decade, and as their credit lines have dried up, so has their ability to thrive or survive.
There was also a political component to all the attention the president gave to small businesses. The White House is aware of the nation’s bailout fatigue; hundreds of billions of taxpayer dollars have gone to prop up financial giants who made poor decisions, while many others who have done no wrong have paid the price.
So Obama made clear to show he was on the side of everyday entrepreneurs.
He said small businesses “are the heart of the American economy” and “the heart of the American dream” and the core of “America’s story.”
Obama’s primary focus was on leaders of small companies and community lenders. He met with some privately in the White House’s Roosevelt Room and cited their stories as inspiration as he announced his details in the East Room.
Normally, primary bank lenders can issue loans to small businesses and then sell those loans to what’s known as a secondary market of bigger bankers. The sales allow the community lenders to make even more loans and keep the credit cycle going. But that isn’t happening. Skittish investors have been staying away.
So under Obama’s plan, the government will start buying up many of the loans directly, with terms to be worked out as soon as the end of the month. The $15 billion will come from a bailout plan already approved by Congress to rescue the financial sector. Obama aides say the plan will offer fast, direct help.
On Capitol Hill, House Republican Leader John Boehner was unmoved. He called Obama’s White House event “simply an attempt to provide political cover for the job-killing burden the president’s budget would place on our nation’s small businesses.”
The House Republican whip, Eric Cantor of Virginia, said Obama’s plan was welcome, but he predicted it would affect only a small portion of the loan market for small businesses, leaving others and their workers “in the cold.”
The White House unveiled a series of other steps to help lenders, including bigger lending guarantees, reduced fees and quicker turnaround times for loans. Geithner made a blunt appeal to banks to start lending to businesses again. He said the danger now is that banks are taking too little risk, not too much.
“You banks need to make the extra effort to make sure that good loans are getting to creditworthy small businesses, in order to serve the larger public good,” Geithner said. “And given that role that many banks played in causing this crisis, you bear a special responsibility for helping America get out of it.”
Geithner also ordered the Internal Revenue Service to issue new rules to help small businesses. One of them will allow businesses that make up to $15 million to claim losses for the past five years in the current tax year. The White House said that amounts to a rebate on taxes paid in previous years.