By Jay Heflin - 07/22/10 02:44 PM EDT
“There is no evidence that this new lending program will work,” said Senate Minority Leader Mitch McConnell (R-Ky.). “Even the Congressional Oversight Panel has expressed skepticism it will even be effective in increasing small-business lending. That panel’s report is skeptical it will improve access to credit. Moreover, the panel says, this provision looks uncomfortably similar to the TARP bailout.”
Under the Troubled Asset Relief Program (TARP), the Treasury was in charge of giving money to banks that were on the verge of collapse.
Senate Small Business Chairwoman Mary Landrieu (D-La.), who authored the small-business bill, told reporters Wednesday that the lending pool is nothing like the TARP.
“This is a program for small businesses; it’s not a program for banks,” she said. “The TARP program was a Bush program designed to bail out weak banks. This program is not even a bank program; it’s a small-business lending program using healthy — not troubled, but healthy — community banks as partners.”
Banks that receive TARP funds were supposed to extend credit to suffering companies, which never really materialized.
Sen. Jeff Merkley (D-Ore.) said that scenario is unlikely to occur under the small-business bill since banks will incur higher interest payments on the funds they receive if they don’t loan it to small businesses.
“They’re paying interest in a structure that encourages them to get the loans out the door,” he said. “That’s critical.”
Senators will have an opportunity to oppose the lending pool once the Senate begins debate on the bill.
The lending pool has been stripped out of the bill and will be the only amendment to the legislation, Landrieu said.
The package’s two other sections — $12 billion in small-business tax relief and an extension to Small Business Administration loans — are noncontroversial.