Smaller Banks to Receive Troubled Asset Relief

Written by Adam Peck Category: Injury Law January 14th, 2013 2 min read

President Obama said that he will shift spending of the government’s multibillion-dollar financial bailout away from large financial institutions and toward smaller banks in an effort to bolster small business, which he says forms “the backbone of the American economy.”

Speaking at a family-owned storage business in suburban Washington, Obama said smaller financial institutions are in greater need of capital to grow and expand — and that the country’s large banks have moved past their need for what’s left of the $700-billion Troubled Asset Relief Program.

“The major banks that were in critical condition a year ago need no new assistance from the government,” Obama said, “and so we are winding down that portion of the TARP program.”

In order to spur lending to small businesses, he said, it is “essential that we make more credit available to the smaller banks and community financial institutions that these businesses depend on. These are the community banks who know their borrowers, who gave them their first loan, who have watched them grow from down the street, not from Wall Street.”

The shift comes just more than a year after Congress approved the bailout; the fund has about $138 billion left to dole out. The U.S. Treasury will decide how much of that should go to smaller financial institutions by the end of the year after talking it over with community bankers around the country.

The amount of money still on hand is enough to significantly boost lending to small business, a senior administration official said today.

In addition to the shift in bailout spending, Obama is asking Congress to increase the maximum size of Small Business Administration loans, including those designed to encourage them to invest in machinery, equipment, land and buildings and to expand their payrolls.

Increasing the maximum loan size of so-called micro-loans to $50,000 from $35,000 will help start-up companies in particular, administration officials predict.

“America’s 29 million small businesses have been hard hit in this recession,” Small Business Administration chief Karen Mills said. “Increasing maximum loan sizes will allow the SBA to ensure that more small-business owners and entrepreneurs can get access to the credit they need to expand their operations and create jobs.”

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.