CQ Politics
President Obama announced Monday an initiative designed to ease the credit crunch on the countrys small business owners.
Obama joined by Treasury Secretary Timothy F. Geithner and flanked by several leaders of the small business community said the Treasury will purchase up to $15 billion in securities backed by the Small Business Administration (SBA) in an effort to jumpstart small business lending. The action is in response to criticism that major bailout initiatives have only helped Wall Street.
Even though small business owners are maintaining profitable businesses their credit lines are being pulled" Obama said Monday. And that obviously has huge consequences for employment because small businesses are one of the biggest drivers of employment that we have."
Treasury has hired an investment manager to implement the program which will allow Treasury to purchase SBA-backed securities originating on or after July 1 2008. The program will run until the end of 2009 and also would waive borrower and lender fees on several SBA loan programs.
The Treasury-run initiative is specifically aimed at unlocking an SBA program developed to provide long-term financing on property or buildings. The program combines loans backed by the SBA with private loans mortgage loans many of which have frozen as the credit crisis has worsened in the past 5 months. The Obama program would allow Treasury to purchase first-lien mortgages connected with the program by May of this year.
The SBA typically guarantees around $20 billion in loans per year. This year new lending is trending below $10 billion administration official said.
Treasury under the new program also would guarantee up to 90 percent of loans provided under an SBA program designed to lower the risk for lenders looking to provide loans to small business owners. Previously the government would guarantee up to 85 percent of loans less than $150000 and 75 percent of larger loans. The initial outline of this proposal was included in the $787 billion stimulus package enacted last month.
