President Obama set to use leftover TARP dollars to help small businesses

The Obama administration on Wednesday said it will use leftover funds from the $700 billion financial bailout to help small businesses.

The new plan would use some funds from the Troubled Asset Relief Program (TARP) to increase lending at smaller and more community-based banks.

Banks would be required to submit plans on how they would lend to small businesses to secure the funds.

Senior administration officials said they could not yet provide an estimate on the size of the program, but maintained that there are sufficient funds left in TARP to finance the initiative.

A report from the TARP’s official watchdog estimated that there is $317 billion left in the program, a sum that includes funds paid back to the government by some banks.

The effort comes as bigger banks on such as Goldman Sachs and JP Morgan Chase are recording record profits a year after the financial crisis. Businesses, however, are still running into problems in winning loans from smaller banks, which have not seen the same recovery as the giants on Wall Street.

“Small businesses are still facing a perfect storm in terms of a too-weak labor market, the remnants of the financial crisis, and continuing credit problems going forward,” a senior administration official said in a conference call with reporters.

“We've decided we're going to wait to go through our consultations to see the degree of demand,” the official said. “These programs announced today are clearly programs that can be done within the existing resources that are available. They are not dependent upon repayments.”

The administration will also seek legislation to allow the Small Business Administration (SBA) to dole out larger loans to businesses.

In addition, the president will ask Treasury Secretary Timothy Geithner and SBA Administrator Karen Mills to huddle with key lawmakers and small-business owners to discuss concrete steps the government can take to help small businesses.

The new program comes in response to grumbling from some lawmakers over time that the initial wave of bailouts for large financial firms did little to bolster the credit markets for small businesses, and that the $700 billion in funds were largely used to balance large banks' books.

To that end, 33 senators wrote President Barack ObamaBarack ObamaCrime pays: How Michael Brown’s family cashed in Trump lawyer: Why isn't a special counsel investigating Obama? Overnight Finance: GOP divided over welfare cuts in budget | Lawmaker loses M on pharma stock he pitched | Yellen says another financial crisis unlikely in our lifetimes MORE on Wednesday asking for specific redirection of funds from TARP, in partnership with funds from participating banks, to create a $50 billion small-business loan program.

“We believe there is a need for a targeted program that will jumpstart small-business lending without harming the capital position of banks,” the senators wrote.

The idea for the $50 billion fund had initially been floated by Sen. Mark WarnerMark WarnerSenate Intel asks 21 states to publicize election hacking Overnight Finance: GOP divided over welfare cuts in budget | Lawmaker loses M on pharma stock he pitched | Yellen says another financial crisis unlikely in our lifetimes Overnight Cybersecurity: Obama faces new scrutiny for Russia response | UK parliament cyberattacked | Election hacking fears put heat on DHS | Feds appeal to Supreme Court over data warrants MORE (D-Va.). A spokesman for Warner characterized the Obama administration’s announcement as a positive start, but said it still leaves Warner hoping for more ambitious actions.

Administration officials said they would seek to make the program operational as soon as possible, arguing that it would provide confidence in the small-business credit market beyond the actual benefits drawn from small lenders’ utilization of the program.