By Ian McKendry

WASHINGTON (MNI) – Treasury Secretary Tim Geithner said Wednesday
U.S. policymakers need to focus on improving the economy in the
near-term before worrying about long-term problems.

“Realistically we are going to have to focus on things that matter
now, that have traction right now, and not just the long-term reforms we
think are important,” Geithner said in testimony before a Senate Small
Business Committee.

“We need to be doing some things now, to get the economy to grow
more rapidly,” Geithner said.

Geithner was called before the committee to testify on behalf of
Treasury and the Administration’s Small Business Lending Fund which came
to a close September 27, one year after it was signed into law.

Congress gave Treasury the authority to lend up to $30 billion to
small banks with less than $10 billion in assets with the intention of
encouraging lending to small businesses.

By the time the program closed, only $4 billion had been lent, with
banks using the majority of the borrowed funds to repay previous debts
under TARP.

The committee’s ranking member, Olympia Snowe, a Republican from
Maine, criticized the program.

“They refinanced, this can be expected when a program encouraging
paying one taxpayer funded credit card, which was TARP, with another
which was the lending fund with a lower rate and fewer restrictions,”
she said.

“In reality we wasted an entire nine months on this program, nine
months before a single dollar was distributed and only $4 billion will
be utilized,” Snowe said, asserting that Treasury failed to
appropriately implement the program in way that would maximize the $30
billion it was given to help small businesses.

“Clearly the problems were anticipated, they were foreseen,” Snowe
added.

Geithner defended the program saying that while Treasury knew the
program would not be able to lend out all $30 billion the way it was
designed, it would make money for taxpayer’s and encouraged lending to
small businesses.

“CBO scored this initially as making money for the taxpayer,”
Geithner said, adding that Treasury could not force banks to participate
in the program.

In all, 933 institutions ended up applying for $11.8 billion in
funding, or roughly a third of the borrowing authority it was given, and
of those 933 institutions, only 400 were approved by the regulators —
something Geithner said contributed to the delay in making funds
available.

“We cant force banks to come,” Geithner said, adding that every
bank that did receive capital through the program had more capacity to
lend than they previously had.

In all, the program ended up distributing only $1.8 billion in
funds that went directly to small business lending.

While the program in the eyes of many may be viewed as a failure,
Geithner said Treasury continues to learn from past programs, refining,
them and making them more efficient.

“I am a big supporter of these programs,” Geithner added, saying
that he would be “completely willing” to continue to work with Congress
to create similar programs.

** Market News International Washington Bureau: 202-371-2121 **

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