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Small Businesses Refused TARP Money

From Jake Tapper at ABC News:

A Tale Both Positive and a Cautionary: President Obama’s Phantom $15 Billion Program for Small Businesses

Jake Tapper

February 08, 2010

Last March 16, President Obama and Treasury Secretary Tim Geithner announced a new $15 billion program to help encourage loans to small businesses — the Unlocking Credit for Small Businesses, or UCSB program.

Subsequently, wrote Neil Barofsky, Special Inspector General of the Troubled Asset Relief Program, in his latest report, "two additional initiatives were announced to support small-business lending, and Treasury announced an increase of the TARP funding dedicated to support these efforts to $30 billion."

But oddly, Barofsky noted, as of December 31, 2009, "the details of the initiative under this program had not been announced and no funds had been disbursed."

A $15-30 billion program for small businesses and no details have been released?

And no money disbursed??

I asked Treasury Secretary Tim Geithner about this on Sunday.

"Look, the programs that the president supported in the Recovery Act were very, very effective," he said after I asked him about the UCSB program. "You saw small — lending by the Small Business Administration increase by more than 70 percent — 75 percent from the lows. And we have been very effective at trying to make sure we’re opening up the broader credit markets to companies around the world."

The Treasury Secretary didn’t directly answer my question, but another administration source shed some light.

The source told me that the reason the program has not been officially utilized was twofold.

One, almost every potential participant declined to cooperate because they didn’t want the stigma of using TARP funds given the tremendous public anger towards Wall Street and resentment about the $700 billion bailout.

Two, the specific purpose of the plan – to get the secondary market moving again for these SBA loans – was largely accomplished.

Once the program was announced, the source said, the market started to recover dramatically, and the activity on these particular markets increased four times compared to January 2009. Many market experts credited the mere announcement of the administration’s willingness to be a buyer of last resort as helping to unfreeze that market…

[S]ources say the Obama administration went through detailed term sheets with potential but ultimately almost every participant did not want to take on the "TARP stigma" and so unless the economic situation deteriorated sharply again, they opted not to participate

Thus the announcement of this program was both a positive and cautionary tale, the source said.

The positive — that simply announcing a government backstop can have the intended effect without the program being utilized.

The cautionary tale — by Spring, the TARP stigma had grown so strong that potential participants were only willing to take part in a TARP program unless matters were to become truly dire.

We strongly suspect that the source is leaving out an important factor. For even if the mere announcement freed up loans, why would small businesses turn down cheap TARP loans from the government?

We find it hard to believe that it was out of fear of any stigma about getting federal funds. After all, just how many people would have ever known or cared which small business took TARP money?

No, we strongly suspect instead that it was far more a matter of these small businesses not wanting to be under the thumb of the Obama administration.

After all, even small businessmen have eyes. They have seen what has happened to every business, great and small, that has taken Obama’s silver.

They either have become effectively owned by the government, or at the very least controlled by the White House — and now they face new punishing taxes even after paying back the TARP money. That is the cautionary tale here.

And most small businesses seem to have already learned the important lesson: don’t take any government money if you can possibly avoid it.

This article was posted by Steve on Tuesday, February 9th, 2010. Comments are currently closed.

5 Responses to “Small Businesses Refused TARP Money”

  1. Right of the People says:

    “No, we strongly suspect instead that it was far more a matter of these small businesses not wanting to be under the thumb of the Obama administration.”

    The O’Blarney administration is like the mob, they loan you the money then they call the note all at once and when you can’t pay, they now own a piece of your business.

  2. proreason says:

    We’ve come to see the wizard, the wonderful wizard of Oz.

    Just by merely announcing the program, the objective was realized.

    Imagine, just imagine if our little boy king ever announces the end to the depression, or the end to terrorism.

    What a leader he is.

    And he still has time to play golf, basketball, bowl, host 3 parties a week, romance the little wife, give the occasional speech and be the greatest dad evah.

  3. Liberals Demise says:

    Now really ……….. how bad do you need that loan?

    Willing to kiss some ash ashe?

  4. TwilightZoned says:

    My husband told me the story of his grandfather who refused to take government money when he decided to open a lumber mill back in the 40’s. He knew the government would some how own or tell him how to operate his business. The man was way a head of the learning curve. This was the same guy who chased off, by shot gun, a goon who tried to begin a union.

  5. Chuckk says:

    TARP was a giant transfer of wealth from the people to the politically connected.

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