The U.S. House of Representatives could vote as early as this week (week of June 7) to approve legislation that would create a $30-billion fund aimed at spurring small-business lending. The bill embodies a plan first floated by President Barack Obama in his State of the Union address in January. But in a change from the administration’s original plan, the $30-billion fund would not be financed with money from the politically toxic Troubled Asset Relief Program (TARP).
The Treasury Department, which announced the move away from TARP funding earlier this spring, feared that small, healthy banks wouldn’t want to participate in a program that would associate them with TARP, which has drawn intense criticism from lawmakers and average Americans alike since its inception. Instead, the fund’s money would come from Treasury.
Under the House bill, the $30-billion fund would be used to make loans to banks with less than $10 billion in assets. The fund seeks to give incentives to community bank participants to make more loans to small businesses by reducing the dividend or interest rate on the money it gets from the fund relative to how much a bank increases its small business lending. The measure is part of a broader administration effort to boost lending to credit-strapped small businesses. Other efforts include several tax breaks and changes to Small Business Administration lending programs.
“The small businesses that drive our local economies rely on community banks for affordable capital. While stability has returned to large financial institutions, we need this fund to help our local banks, which remain challenged in their efforts to expand loans to our job-creating businesses,” said Rep. Melissa Bean (D, IL), a co-sponsor of the House bill.
The House could vote on the measure late this week, though consideration could slip to next week, according to House aides. The House Financial Services Committee approved the legislation 42-23 in a party-line vote on May 19.
The legislation’s path forward in the Senate remains unclear. No standalone legislation has been introduced in the chamber. Sen. Mark Warner (D, VA), who led a group of senators in urging the Obama Administration to launch a similar program starting last Fall, is among those in the Senate working on the issue. He and others are still looking for an opportunity to move the bill, according to Senate aides.