From OnWallStreet.com:
President Obama’s moves to spur more small-business lending are largely a grab bag of old ideas and minor tweaks that are unlikely to have much impact, observers said.
Flanked by Treasury Secretary Tim Geithner and Karen Mills, who leads the Small Business Administration, Obama Wednesday unveiled new terms designed to entice community banks to apply for funding under the Troubled Asset Relief Program, and backed plans to revamp SBA loan programs.
But critics were quick to dismiss the changes to Tarp, arguing the administration had not offered enough incentives to get community banks to sign on.
“We do not believe a large number of banks will participate in the program,” said Diane Casey-Landry, the chief operating officer of the American Bankers Association. “There has been so much negative publicity associated with banks that have taken [Tarp] money that it’s going to be a difficult decision to make.”
Under the changes, banks with less than $1 billion of assets may apply for capital from the Treasury if they can show they intend to use the funds for small-business lending. The Treasury agreed to reduce the required dividend paid on such funds to 3% from 5% for the first five years. But the government is leaving other restrictions intact, including limits on executive compensation and requirements for issuing warrants.
Industry representatives said the money could be attractive to some banks, but acknowledged that it was unlikely to broaden the pool of small-business lenders.
“This is fairly low-cost capital to a community bank,” said Camden Fine, the president of the Independent Community Bankers of America. “Those banks that are SBA lenders will probably apply for some of this.”
Many observers said the Treasury should have provided added incentives beyond a lower dividend if they wanted the program to have a large impact.
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