TARP funds could be used to help small banks

By Lance Henderson

The Obama Administration has announced plans to create a new Small Business Lending Fund using capital investments from the government’s Troubled Asset Relief Program (TARP) funds and a bill has already been introduced in the U.S. Senate.

Sen. Patty Murray (D-Wash.), a member of the U.S. Senate leadership, has introduced a bill called, the “Main Street Lending Restoration Act,” which Murray said will assist community banks in increasing lending to small businesses and creating jobs by using TARP funds to take toxic assets off the books of smaller banks.

“If small businesses are the driver behind local hiring, then community banks are often the engine that keeps the whole system running,” Murray said in a statement. “The problem is that they’ve been handcuffed by the economic downturn. Instead of opening up the lending window to local businesses, they’ve been forced to lock up the vault.”

Tony Repanich, senior vice president of retail banking at Lynden-based Peoples Bank, said while he has not studied the details of the federal government proposals, he is skeptical about this method of shoring up community banks.

“We are in support of programs that make lending to small businesses easier, but we are not certain if this is the right approach,” Repanich said.

In a Senate Budget Committee hearing on Feb. 4, Sen. Murray questioned U.S. Treasury Secretary Timothy Geithner on fiscal policies that she believes have focused too heavily on Wall Street at the expense of Main Street and urged Geithner to support her community bank legislation that will help small businesses get the loans they need to hire.

“Assistance was immediately provided to Wall Street, but a year later it remains absent on Main Street,” Murray said to Geithner. “And I’m angry — especially when I see that Wall Street banks have returned to profitability and a ‘Bonus-As-Usual’ mentality.”

At the hearing, Geithner pledged to work with her.

“I know you have thoughtful legislation in this area designed to try to get directly at the legacy assets that are still on the books of the banking system,” Geithner said in response to Murray. “I completely agree with you about this concern. We share the basic objectives.”

For more information on Senator Murray’s Main Street Lending Restoration Act, visit her Web site.

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