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White House Sorta, Kinda Thinkin’ ‘Bout Using TARP Money for Small Business Loans as Small Business Lenders Go Bust

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storefrontBy Yves Smith    Naked Capitalism   July 11, 2009

The Washington Post has a pretty bizarre story up tonight. The Administration is thinking about releasing TARP funds as loans to small businesses.

Stress the thinking part. As in big-time thinking. As in long way from action. Which begs the question as to why this is a news story. Since I am of the view that pretty much every news story is a plant or a leak, at least if any semi-well run entity is involved, one then must ponder the purpose in having such an early-stage idea come to light. Is it to flush out support, or to give opponents a chance to rally? …………

The further you get into the story, the more apparent it becomes that this program will never see the light of day, or if it does, it will be more PR than substance:

Aiding small businesses could be a gamble because they have a poorer record than large corporations when repaying loans; it would be the riskiest government investment so far under the bailout plan. Officials are trying to design the program to exclude companies that are likely to fail even if they received federal aid, people with knowledge of the discussions said.

Some administration officials hoped to present several proposals to President Obama last week. But the meeting has been put on hold indefinitely while the Treasury conducts a deeper analysis of the problems afflicting small companies.

Yves here. I cannot believe we have this “corporations have a better odds of repayment” twattle. Did they put AIG and Citi in their sample?…..

I am not saying CIT should be saved. But can someone tell these clowns that increasing the concentration at the big end of the financial system increases systemic risk?

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Written by laudyms

July 14, 2009 at 9:22 am

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