The Federal Government has focused an enormous amount of money and effort on stabilizing the banking sector of the economy. What has this done for the small business and commercial investor in regards to obtaining credit for expansion or commercial property loan rates?
Billions and billions of dollars have been pumped into these institutions in order to keep credit flowing to both consumers and small businesses. Many of the larger, too-big-to-fail, banks have been weathering the storm surprisingly well. In fact, it seems that the business within the business is back to normal. Some of the banks have already paid back the TARP funds to the government so that they can get out from under federal scrutiny. Bank of America is going to pay back $45 billion in loans so that they can find a new CEO and pay him/her a compensation package that would not be approved by the government. Other firms have set aside bonus pools that are worth more than $4 billion in additional compensation for employees.
What effect do these paybacks have on the lending capabilities of these institutions? It decreases them substantially. The Fed requires that banks and other lending institutions maintain assets to back up lending. The consequences? According to many studies, bank lending is contracting. This is the worst thing that can happen to this slowly recovering economy.
Small business needs capital to survive and expand. They are the drivers of the economic engine in the U.S. It’s not big business. It’s the entrepreneur. The small business fighting in the trenches to provide products and services to consumers in local and regional markets. These companies are finding it almost impossible to find commercial business and commercial property loan rates.
The large banks don’t want to lend and take chances. They are looking for safe investments. The smaller local and regional banks do not have the assets and lending capacity to provide the level of funding for small businesses. Companies like CIT Financial are no longer around to provide credit. Walmart is stepping in to act as a lender of last resort. Walmart?
Where is the Federal Government in all of this? Bernanke and the Fed need to take a serious look at small commercial funding. The SBA program is running out of funding. We need to make capital available to those companies that can help to drive the economy forward. We do not need a double-dip recession. If we don’t start creating jobs and a feeling of increased stability for consumers, we are in for a very long, very slow recovery. We need to find a way to make funding available for small businesses and small commercial property loans.