The Associated Press published an article about President Obama's $15 Billion stimulus to small businesses. Obama and Treasury Secretary Timothy Geithner spoke to small business owners in the East Room of the White House today and described their plan which includes trying to reduce lending fees, easing the tax burden's and boost liquidity in banks to help get the credit ball moving once again.
"Obama called small businesses the heart of the American economy. He said they have created roughly 70 percent of new jobs in the last decade." Philip Elliot writes for the AP.
The administration is requiring the 21 largest banks that are receiving government money to report monthly on how much lending they do to small businesses as noted by Geithner that when small business prosper, the nation as a whole prospers.
Along with the big banks, all other banks getting money from the stimulus plan must report quarterly as to their lending to small business. Even banks that are not taking funds are being asked by the administration to "make an extra effort" to increase the lending they do to small businesses.
Elliot continues, "The announcement was part of a broad package aimed at boosting the credit available to struggling small business owners that President Barack Obama and Treasury Secretary Timothy Geithner were unveiling in an East Room ceremony. The White House figures that making billions in federal loans available to small businesses was one way to address misgivings over the widely unpopular bailout program, which has sent hundreds of billions to large financial institutions like Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. with few strings attached."
Elliot points out that the current rescue program has done little to soften credit, the lifeblood of the American economy.
The plan includes reducing small-business lending fees and increasing the guarantee the government provides on some Small Business Administration loans to 90 percent. Many banks sell their SBA loans in the secondary market, which then frees up the cash to again lend it to another small business. However, investors are being timid with their purchases nowadays making it difficult to sell these loans on the secondary market. This new program is aimed at helping free up this cash again by having the government step in and buy those loans when investors are not interested.
In theory, this will allow lenders to make new loans and keep the circle moving. The SBA generally takes in about $20 billion in loans every year, however it is expected to fall to half that this year.
Aside from the cash influx, the package also orders the IRS to issue new rules for temporary, yet significant tax breaks to small business owners.
For more information, read this article published by the Associated Press.