Following up President Obama's pledge to thaw frozen credit conditions for small businesses, industry panelists and members of the several government agencies push for Congressional support of a new, temporary bailout fund.
Treasury Department Assistant Secretary for Financial Stability Herbert Allison said during a Feb. 26 joint hearing of the House Financial Services and Small Business committees that he believes a new stimulus effort, the Small Business Lending Fund, would attract more participation from reeling community banks than previous programs. He says the new program would not carry a stigma that was attached to borrowing through TARP and would not have the same type of expensive restrictions as TARP that made it difficult for small banks to participate.
Wes Smith, president of Michigan-based E&E Manufacturing, said community banks largely were not helped by previous government stimulus programs that appeared geared toward helping the largest banks.
"When the original TARP came out, the government picked winners and losers...and the small banks were left in the dark with a problem they didn't create," Smith said. Smith, speaking on behalf of the Motor & Equipment Manufacturers Association, added that smaller banks will continue to struggle to make loans because of the many potentially problem commercial real estate loans on their books, which could be alleviated by a government guarantee program, and catch-all draconian regulation that is inappropriate for banks that operate only on community and sub-regional levels. "Banks can't make loans because the regulators are stepping on their necks," Smith said.
Idaho-based Brighton Corp.'s David Turnbull agrees that prospects for small business and commercial real estate liquidity levels are doomed without being able to "offload some of its commercial real estate" from their books.
"Consider this: Without the existence of Fannie Mae, Freddie Mac and the Federal Housing Administration, we wouldn't have a housing market today, and we would be in a full-blown depression," said Turnbull. "The only equivalent we have today for these conduits in the commercial real estate market is TALF - the equivalent of the Fed creating a super-jumbo market for residential real estate while leaving the entry level to median-priced homebuyers dangling with no viable options. It will not solve the problem."
Brian Shappell, NACM staff writer