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Small-business loans resulting from a government program jumped by 20% during the fourth quarter, with the Treasury estimating it has helped more than 38,000 total loans since it began nearly two years ago.
April 3 -
Most of the program's participants are increasing business loans, though some are having to reduce lending rates to book the best loans.
August 27
A pass-the-buck mentality by the Treasury Department and federal regulators allowed a number of banks to use proceeds from the Small Business Lending Fund to exit the Troubled Asset Relief Program, according to a report issued Tuesday by the independent watchdog that oversees Tarp.
Rather than use the $30 billion-dollar SBLF program to boost small-business lending, two dozen banks didn't increase small-business loans at all, Christy Romero, the special inspector general for Tarp, wrote in the report. Another 14 Tarp recipients used SBLF funds to pay dividends to common shareholders. Roughly 700 banks participated in Tarp.
One problem was a bewildering lack of communication between Treasury and federal regulators, Romero wrote in her report. That led to the Treasury saying it was the responsibility of federal regulators to analyze banks' proposals to increase business lending. Regulators, in turn, pointed to the Treasury. "There wasn't a method to see to it that these banks live up to their promises," Romero wrote.
Romero's report, which did not identify any specific banks, also criticized the Treasury for including the $2 billion it has received in SBLF funds in its total Tarp repayment figures.
The Treasury has called the SBLF a success, in part because of cooperation between it and regulators, the agency said in a March 28 letter sent to Romero's office.
"Treasury's coordination with regulators … was extensive and complete," Don Graves, deputy assistant secretary at the Treasury Department, wrote. The Treasury also noted that Congress specifically authorized the agency to let banks use SBLF money to exit Tarp.
Treasury also noted that Congress specifically authorized Treasury to allow banks to use SBLF money to exit Tarp.
Some small bankers have said that SBLF works, with many
Any perceived failure of the SBLF is tied to difficult economic conditions, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency said in separate letters to Romero. The Federal Reserve Board said that it adequately reviewed banks' lending plans when it was the primary regulator.
But the weak loan environment should have been an additional prompt for regulators and Treasury to have communicated more readily and done a better job of analyzing banks' lending plans, Romero wrote. "That should have been even more reason to have worked with these banks to increase small business lending," she wrote.
"When compared with banks that did not participate in SBLF, former TARP banks report an increase in total business lending over three times greater than that of their direct peers, and over six times greater than the increase reports by community banks," Treasury wrote in its letter to Romero.
