A Tale Both Positive and a Cautionary: President Obama’s Phantom $15 Billion Program for Small Businesses
EmailLast March 16, President Obama and Treasury Secretary Tim Geithner announced a new $15 billion program to help encourage loans to small businesses — the Unlocking Credit for Small Businesses, or UCSB program.
Subsequently, wrote Neil Barofsky, Special Inspector General of the Troubled Asset Relief Program, in his latest report, "two additional initiatives were announced to support small-business lending, and Treasury announced an increase of the TARP funding dedicated to support these efforts to $30 billion."
But oddly, Barofsky noted, as of December 31, 2009, "the details of the initiative under this program had not been announced and no funds had been disbursed."
A $15-30 billion program for small businesses and no details have been released?
And no money disbursed??
I asked Treasury Secretary Tim Geithner about this on Sunday.
"Look, the programs that the president supported in the Recovery Act were very, very effective," he said after I asked him about the UCSB program. "You saw small — lending by the Small Business Administration increase by more than 70 percent — 75 percent from the lows. And we have been very effective at trying to make sure we're opening up the broader credit markets to companies around the world."
The Treasury Secretary didn't directly answer my question, but another administration source shed some light.
The source told me that the reason the program has not been officially utilized was twofold.
One, almost every potential participant declined to cooperate because they didn't want the stigma of using TARP funds given the tremendous public anger towards Wall Street and resentment about the $700 billion bailout.
Two, the specific purpose of the plan – to get the secondary market moving again for these SBA loans – was largely accomplished.
Once the program was announced, the source said, the market started to recover dramatically, and the activity on these particular markets increased four times compared to January 2009. Many market experts credited the mere announcement of the administration's willingness to be a buyer of last resort as helping to unfreeze that market.
The Small Business Administration reported that the number of SBA 7(a) loans sold on the secondary market was just $86 million in January 2009.
Between June and December 2009 the number of those loans sold on the secondary market averaged $357 million a month, higher than even pre-crisis levels.
Additionally, the weekly volume for SBA’s main loan programs increased 86% compared to the weeks before the stimulus bill passed in February 2009.
In April 2009, the Coleman CPR Report, an industry newsletter, quoted Scott Evans, of Government Loan Solutions Partners, saying, "We do not have a healthy market or a liquid situation yet, but there is a more optimistic feeling among SBA broker-dealers and lenders today." The Coleman CPR Report wrote that "a handful of loans are being sold to the market at 104 – 106%. These select increases in activity and premium rates seem to be directly tied to the March 17th announcement by the Obama Administration of $15 billion in TARP funding to raise liquidity in the secondary market.”
And GovGex wrote that in the week since the UCSB program was unveiled, "GovGex had an 11-fold increase in the daily number of loans offered for sale relative to the prior 90 days. Premiums have shown a significant upward trend. According to Brian O'Boyle of GovGex.com, loans with the most desired structure are receiving premiums exceeding 105%, compared with 101-102% premiums during the preceding 90 day period.”
But even with this positive response, sources say the Obama administration went through detailed term sheets with potential but ultimately almost every participant did not want to take on the "TARP stigma" and so unless the economic situation deteriorated sharply again, they opted not to participate.
Thus the announcement of this program was both a positive and cautionary tale, the source said.
The positive — that simply announcing a government backstop can have the intended effect without the program being utilized.
The cautionary tale — by Spring, the TARP stigma had grown so strong that potential participants were only willing to take part in a TARP program unless matters were to become truly dire.
-jpt
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“The positive — that simply announcing a government backstop can have the intended effect without the program being utilized.”
Financial markets are about balancing risk and reward. It is no surprise at all that the government announcing a program that limited the downside risk would have a big impact even if no one ever needed to use that safety net. People are a lot more willing to play poker than Russian Roulette…
Posted by: jhw539 | February 8, 2010, 3:38 pm 3:38 pm
This is pure idiocy. Supposedly the Jackassocrats have only wasted 2/3 of the stimulus money so far.
Why do we need to get another $15 billion in hock to the Red Chinese when there is still $500 billion the idiots still haven’t blown yet that was allegedly going to create jobs?
Posted by: Barney | February 8, 2010, 4:06 pm 4:06 pm
After watching the government’s total takeover of GM, AIG and several big banks and lending institutions with TARP, who in their right mind would want to sign up for an identical fate with UCSB program?
Having “strings attached” is one thing; a complete takeover is quite another. It’s little wonder the program was a non-starter!
Turbo-Tax Tim’s response, of course, was classic gobbledygook.
Posted by: Dell | February 8, 2010, 4:09 pm 4:09 pm
After watching the government’s total takeover of GM, AIG and several big banks and lending institutions with TARP,
Dell | Feb 8, 2010 4:09:54 PM
Please name “several big banks and lending institutions” that the government “total(ly)” took over. Unless that part was just another Big Lie.
Posted by: jhw539 | February 8, 2010, 4:22 pm 4:22 pm
“Please name “several big banks and lending institutions” that the government “total(ly)” took over. Unless that part was just another Big Lie.”
Posted by: jhw539
There are a total of 70 of them. You look them up. I did.
Posted by: Dell | February 8, 2010, 4:28 pm 4:28 pm
Giving the administration a blank check doesn’t sound very smart to me.
Posted by: Jeff | February 8, 2010, 4:30 pm 4:30 pm
“Please name “several big banks and lending institutions” that the government “total(ly)” took over. Unless that part was just another Big Lie.”
Posted by: jhw539
There are a total of 70 of them. You look them up. I did.
Posted by: Dell | Feb 8, 2010 4:28:21 PM
____________________________________
Source and date please.
Posted by: tierra | February 8, 2010, 4:38 pm 4:38 pm
“After watching the government’s total takeover of GM, AIG and several big banks and lending institutions with TARP,”
There are a total of 70 of them. You look them up. I did.
Dell | Feb 8, 2010 4:28:21 PM
You are lying. And when called on it, you just make up another lie? The only banks subjected to a “total take over” are ones that failed and were taken over by the very long-established (and successful since the Great Depression) FDIC program, not TARP.
You have to wonder how strong a person’s argument is when all they have to support it is lies.
Posted by: jhw539 | February 8, 2010, 4:45 pm 4:45 pm
I used to support President Barack Hussein Obama, I really did, but with all due respect, Barack Hussein Obama is a bold faced liar.
Obamacrat for Palin | Feb 8, 2010 4:32:52 PM
Speaking of bold faced liars, when exactly did you support Presiden Obama? Seeing as how you were posting as Obamacrat for McCain before Obama was ever elected…
Posted by: jhw539 | February 8, 2010, 4:47 pm 4:47 pm
Obama Hits Lowest Approval Mark
February 8, 2010 12:58 PM | Permalink | Comments (327) | Share This
Independent voters see Pres. Obama in a negative light by a nearly 2-1 margin, according to a new Marist College survey, while almost half of voters say he has failed to meet their expectations.
The poll, conducted Feb. 1-3, showed just 44% of registered voters approving of Obama’s job as president. 47% disapprove. But among indie voters, Obama’s approval rating sits at a terrible 29%, while his disapproval rating is at 57%.
Obama’s 44% job approval rating is the lowest he has scored in any non-internet poll since moving into the WH, according to a review of data compiled by Pollster.com.
And while GOPers strive to avoid attacking Obama personally, for fear of offending voters who see him in a favorable light personally, even that aura of invincibility is wearing off. Independent voters view Obama negatively, too, by a 39% favorable to 52% unfavorable margin. All registered voters still see Obama favorably by a 50%-44% margin, but that’s down 5 points in just 2 months.
Voters are disappointed in what they got with Obama’s first year. The poll shows 47% believe Obama has failed to meet their expectations — including a quarter of Dems, 65% of GOPers and 53% of indie voters — while just 42% say he has met their expectations. 38% say Obama’s policies are moving the country in the wrong direction, while 37% say they’re making the country better.
America has Awakened
Posted by: What? | February 8, 2010, 4:53 pm 4:53 pm
Just more stupidity from the Obama administration. The only reason employers would take on new employees is if there is more work than the current number of employees can handle.
There is virtually no one in this administration that has any private sector experience and has any clue as to the basics of business.
Posted by: Barney | February 8, 2010, 5:04 pm 5:04 pm
More wasteful spending, that will accomplish nothing.
Community banks have said they have money, but prudent small business, is not seeking loans in these troubled times. A smart move, in my view.
Posted by: Rick McDaniel | February 8, 2010, 5:06 pm 5:06 pm
Dow drops 100 more points as Obama economic policy is seen as a failure
Dow drops more than 700 points in 3 weeks as Obama “dithers”
Mr President.. where are those jobs you promised
Posted by: What? | February 8, 2010, 5:07 pm 5:07 pm
The poll, conducted Feb. 1-3, showed just 44% of registered voters approving of Obama’s job as president. 47% disapprove.
What? | Feb 8, 2010 4:53:43 PM
Facist Hyena is that you? Or just someone else trying to find a more authoritarian poll than the one taken in 2008?
Posted by: jhw539 | February 8, 2010, 5:08 pm 5:08 pm
Dow drops 100 more points as Obama economic policy is seen as a failure
What? | Feb 8, 2010 5:07:13 PM
DOW when Obama took office: 7,920
DOW now: 9,908
So you hate Obama enough that you consider a 2000 point, 25% RISE a “failure”?
Posted by: jhw539 | February 8, 2010, 5:12 pm 5:12 pm
Dems Rake In Record Corporate Donations
Obama needs a new bed to go along with his sleeping partners
Posted by: What? | February 8, 2010, 5:17 pm 5:17 pm
Community banks have said they have money, but prudent small business, is not seeking loans in these troubled times. A smart move, in my view.
Rick McDaniel | Feb 8, 2010 5:06:08 PM
Your view is completely unhinged from reality, that was actually documented in this very blog post. Small businesses ARE seeking loans, and now they ARE getting them. What do you base your opinions on?
“The Small Business Administration reported that the number of SBA 7(a) loans sold on the secondary market was just $86 million in January 2009.
Between June and December 2009 the number of those loans sold on the secondary market averaged $357 million a month, higher than even pre-crisis levels. “
Posted by: jhw539 | February 8, 2010, 5:18 pm 5:18 pm
RFK, Jr. 15 months ago: Global warming means no snow or cold in DC… ????????????
Posted by: What? | February 8, 2010, 5:20 pm 5:20 pm
KISS OF DEATH: Obama predicts Colts victory in Super Bowl…
Hasn’t he learned anything from NJ, Va, Mass?
Posted by: What? | February 8, 2010, 5:22 pm 5:22 pm
‘The great global warming collapse’…
Posted by: What? | February 8, 2010, 5:24 pm 5:24 pm
Dems Rake In Record Corporate Donations
What? | Feb 8, 2010 5:17:56 PM
Is that headline before or after all the ‘Banking Industry Now Donating Heavily to Republicans’?
Posted by: jhw539 | February 8, 2010, 5:25 pm 5:25 pm
Let’s see, expand loans to help small business better serve non-existent customers…Brilliant!
Posted by: Osteoblast | February 8, 2010, 5:56 pm 5:56 pm
DOW when Democrats took Congress in 2006: 12,218.01
DOW now: 9,908
Posted by: Huh? | February 8, 2010, 6:24 pm 6:24 pm
1) Ask banks to take TARP funds to do their part to instill consumer confidence in the overall system (re: everyone took some).
2) Attack banks that take TARP and try to use their taking of TARP funds to dictate salaries / play class warfare with them / make business decisions for them.
3) Be surprised when they won’t take part in a new program with TARP funds…
Posted by: thomass | February 8, 2010, 6:54 pm 6:54 pm
Isn’t this the Obama administration in a nutshell?Claim to establish a program and then manage it so incompetently that it doesn’t distribute a single dollar.Then the excuse is that the program wasn’t needed,but somehow it was beneficial.And this is the Secetary of the Treasury.At least with Corpseman Obama we can understand why he doesn’t understand the market-he has no experience, nor has he ever had a real job out side of politics,nor has he ever met a payroll.But Geithner? He really is an intellectual overachiever with the credentials to back it up,unlike Corpseman Obama.He has no excuse to push this tripe.
Posted by: Nephron | February 8, 2010, 6:59 pm 6:59 pm
1) Ask banks to take TARP funds to do their part to instill consumer confidence in the overall system
_______________________________
Faulty premise makes for a faulty argument.
Posted by: tierra | February 8, 2010, 7:00 pm 7:00 pm
Is that headline before or after all the ‘Banking Industry Now Donating Heavily to Republicans’?
Posted by: jhw539 |
Where did you make up that quote from?
The banking industry owns the Democrats. If and when Republicans can be useful to them again then they will rebalance their politician portfolio.
Posted by: Foghorn Leghorn | February 8, 2010, 7:37 pm 7:37 pm
Well, out here in the real world lending to small business is still basically non-existent and existing credit lines are being cut or closed. There is such a huge disconnect from the people in Washington and the real world that it boggles the mind.
- John
Posted by: johnc | February 8, 2010, 7:57 pm 7:57 pm
John,that is a myth.My office manager secured a 7 figure loan to set up a new business without difficulty.If you have a good business idea the money is there-the speculative projects may have some difficulty;that is a reflection of our new rational approach to investment.Perhaps Corpseman Obama could learn something about investment by talking to the people actually creating jobs.
Posted by: Nephron | February 8, 2010, 9:09 pm 9:09 pm
Details, details. $30 billion isn’t much money…
Posted by: Barry | February 8, 2010, 11:16 pm 11:16 pm
The Treasury Secretary didn’t directly answer my question, but another administration source shed some light.
I can’t imagine why!
Posted by: GS Rulz | February 8, 2010, 11:22 pm 11:22 pm
Perhaps Corpseman Obama could learn something about investment by talking to the people actually creating jobs.
Posted by: Nephron | Feb 8, 2010 9:09:55 PM
_____________________________________
He has. And does. And will.
Please quit with your extremist pretence to the contrary.
What is it you think he should be doing?
Posted by: tierra | February 9, 2010, 1:00 am 1:00 am
Why do you publish administration sources like the one that said the potential beneficiaroies of the President`1s progtram declined to avoid the TARP stigma?
First, TARP funding is not the stigma, it is what the banks did with their gains that stinks. Any business that used taxpayer funds to create jobs would be heartily applauded. Furthermore, if TARP is seen as a defective vehicle for addressing the jobs problem, why is TARP the funding mechanism currently being promoted to address unemployment in the budget proposal unveiled this week?
Posted by: Luke Abrams | February 9, 2010, 8:53 am 8:53 am
It is very difficult to start a new business with the economy slow and the unemployment high… could be a case of Grand Opening / Grand Closing.
The government has supplied a lot of stimulus in the form of cheap money… but only the wealthy can really take strong advantage (up to this point).
Posted by: DontGet818OnMeNow | February 9, 2010, 9:04 am 9:04 am
A “tax credit” requires the employer to hire the employee and foot the bill for a year until the next tax year, when, IF HE MADE A PROFIT… he can claim the tax credit and use it to pay the taxes on that credit.
And the small businessman probably has to hire a lawyer or tax accountant to figure out all the “gotchas” in the law.
Wonder why the president’s plan doesn’t sstimulate?
Posted by: Karl Q | February 9, 2010, 11:24 am 11:24 am
How to make the majority hate you:
First, announce you are offering tax cuts or refunds to stimulate the economy; then make the law so full of restrictions and “gotcha” clauses that a person has to waste hours trying to figure out if he/she qualifies, and then feels they are taking a legal risk if they claim the benefit in their taxes because…. even after consulting advisors…. no one is really sure.
E.g. “$6500 credit” for buying a new home: a) actually “up to” $6500, b) must have lived in current residence for 5 years or more, c) can’t be buying for investment or from family member, d) can’t have income greater than X,
etc. etc. etc.
I’ll focus on one point: is it rational to exclude someone who has been living in his/her residence for 4.95 years, yet owned it for 8+ years (was renting to daughter before Katrina destroyed previous primary residence.)
Crazy. ALL LAWS should be proportional (no arbitrary deadlines or brackets), treat all people equally (picking no winners, making no losers), have clear motivations and measures of performance.
If the goal is to stimulate the recovery of the home building industry, why confuse us all with restrictions more intended to redistribute wealth than to actually stimulate home building?
….or is “stimulus” only an excuse for wealth redistribution?
All of this creates doubt, divides the community into waring factions, with the result that stimulus fails and you, mr politician, have a majority who come to hate the job you did!
Think about it.
Posted by: Karl Q | February 9, 2010, 11:38 am 11:38 am
The lemonade stand that I own is losing money because of this darn global warming which keeps dumping snow, keeping my customers at home where it’s warm. If I could only get a no question asked, government backed loan from my banker, I could afford to take a vacation and wait for the hot times that are coming.
Posted by: Sigmonde | February 9, 2010, 1:46 pm 1:46 pm
Faulty premise makes for a faulty argument.
Posted by: tierra
—
Ignoring the facts makes for an empty argument.
Posted by: smartlillena | February 9, 2010, 8:02 pm 8:02 pm
Never mind using something like the fair tax system to stimulate the entire country.If not the Fair tax then a NEW system.But why, when they are getting all the $ and benefits the commnon folks pay and suffer for.
PURE ARROGANCE. Vote them all OUT OF OFFICE.
Posted by: mad American | February 10, 2010, 2:43 pm 2:43 pm