Sen. Richard Shelby (R., Ala.) said Thursday he was skeptical of a new White House plan to use $30 billion banks have returned from the Troubled Asset Relief Program and to help small banks offer more business loans.
President Barack Obama briefly mentioned the plan during his State of the Union speech Wednesday night but provided few details. People familiar with the matter said the plan could allow small banks to obtain government loans up to the equivalent of 5% of their assets. The dividend these banks would have to repay the government could be reduced if their loan volume to small businesses increased, these people said. Obama administration officials have already approached some lawmakers and regulators with outlines for their idea, which could be finalized by next week.
Its just another use, maybe a good use, but just another use of TARP funds that wasnt originally intended, Mr. Shelby said. He said government officials should push to recoup all of the outstanding TARP money and then begin discussions about any new program.
I do believe the banks can make a difference if they are not overtaxed, and can make a difference in our economy, he said in an interview. But right now we are still in the crisis mode. A lot of banks are sick, and I dont believe temporary things will work. We need to get to the fundamentals.
The Obama administration would likely need bipartisan support for their plan, as any changes to the way TARP funds are used could need congressional approval. Banks will likely want fewer strings attached to the funds than the original TARP capital purchase program, which forced some banks to limit their executive compensation and eventually carried a bailout stigma.
The White House might be able to win support for the plan even if Sen. Shelby doesnt eventually sign on. Several Republican lawmakers have complained about a lack of access to credit for small businesses, and White House officials could try to pitch their plan as a way to free up more credit to companies.
Read WSJ.coms 1/26/10 description of the program.