Last year, President Obama signed into law the $30 billion Small Business Lending Fund as a way to stimulate job creation.
“It’s going to speed relief to small businesses across the country right away,” Obama said at the time.
It was supposed to help create 500,000 jobs.
Well, not so much.
Not only has the program been a dismal failure, with few banks applying to participate, but it turned into another giant taxpayer handout to bankers.
Only $4 billion was handed over to banks under the lending scheme. The bankers didn’t use it to boost small businesses, and it turned out they weren’t even required to. Instead the bankers used more than $2 billion to pay off their bailout debt to the Troubled Asset Relief Program, according to a story in the October 12 Wall Street Journal (no link).
“It was basically a bailout for a 100-plus banks,” Giovanni Coratolo, vice-president of small-business policy at the U.S. Chamber of Commerce, told the Journal.
None of this should come as a surprise. Bankers said at the time that the problem was not that they didn’t have enough money to lend, but that demand for loans was weak because of the continuing bad economy.
“Until you start to see the economy improve and job growth you won’t see lots of loan demand,” Thomas Dorr, chief financial officer of Bank of Birmingham in Michigan, which received $4.6 million from the program, told Bloomberg. “You can’t force banks to lend.”
The lending program was either just another veiled handout to the banks or another lame attempt at trickle-down stimulus. Either way it contributes to the strong impression that our political leaders aren’t actually working on solutions, they’re getting in our way.