Banks Repay TARP – Small Businesses Still in Trouble

Ciitigroup Inc., Bank of America Corp., and Wells Fargo, are repaying their TARP loans, $20.5 billion, $19 billion, and $25 billion respectively, but unemployment rates are still above 10% and small businesses are still suffering from a lack of access to capital. The Obama administration has recognized the need to reshape TARP money in order to benefit troubled homeowners and small businesses.

Few banks have signed up for extra money from the government which would be used to aid small businesses and a $15 billion program to buy securitized small businesses loans announced in March still has not started.
Treasury secretary Geithner has come under increasing scrutiny as he has become known more as a secretary of Wall Street rather than a secretary of the treasury for the public. According to a current Bloomberg Poll, 33% of the public viewed him unfavorable compared to 25% who viewed him favorably.

Obama blasted Wall Street and banks over the past weekend, asserting that lenders have a responsibility now that they are back on their feet to help rebuild the economy.  Small businesses have suffered the most in the recent economic recessions as banks have tightened their credit lines despite the fact that small businesses employ more than half the nation and have comprised more than 60% of new employment over the past 15 years.  Small businesses have higher expenses than large businesses and rely on 90% of their working capital from banks in comparison to large businesses who rely on 30% of their working capital from banks.

Many small businesses have searched for other methods of private funding like merchant cash advances and equipment loans.  While these loans are generally more expensive than traditional bank loans, with the current market, these businesses may not have much of a choice.

To see the original Bloomberg article click here!

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