By Ian McKendry

WASHINGTON (MNI) – The U.S. Treasury’s efforts to help community
banks make more credit available to small businesses is moving slowly
because the federal government is being careful with taxpayer funds,
U.S. Treasury Secretary Timothy Geithner said Wednesday.

“We are a little disappointed,” Geithner said during testimony
before the House Small Business Committee. He was commenting on the pace
at which capital provided to small community banks through the Small
Business Lending Fund is being dispersed.

The SBLF is a $30 billion dollar fund designed to encourage lending
to small businesses by providing capital in the form of purchases of
preferred stock and debt instruments by Treasury in small community
banks with assets less than $10 billion. It provides incentives for
those banks to lend specifically to small businesses.

Despite the $30 billion in funds available, and the estimated 8,000
to 9,000 U.S. banks eligible, only 869 banks have applied for a total of
$11.6 billion in funding.

And while only a limited number of banks have applied for the
funds, there has yet to be any capital provided to small banks through
the program.

Geithner said part of the delay is the lengthy review process for
applications.

“Examiners across our banking agencies, state and federal are
trying to be more careful, maybe too careful in some ways,” Geithner
said.

Geithner said the Treasury relies on regulators to review
applications and then does its’ own independent review.

“There are various strong protections to protect the taxpayer,”
Geithner said.

However, he added, “we are close being able to unleash that
capital.”

Geithner said one of the reasons the administration implemented the
SBLF is because some banks shied away from TARP because of the stigma
associated with the program.

“We saw hundreds of banks withdraw their applications because they
were worried about the stigma,” Geithner said.

“They withdrew in waves and therefore that instrument was not as
powerful as we thought it would be for small banks, that’s partly why we
tried to design a complementary program that had less stigma,” Geithner
added.

Geithner also addressed Dodd-Frank regulation during his testimony,
saying the “main challenge” is finding the right balance.

“We have to be careful that we do not overdo it,” Geithner said.

Geithner was asked about the ongoing budget debate in Congress, and
he said passing a budget would help instill confidence in the economy.

“I agree very much that if Congress can find a way to reach a
bipartisan comprehensive balanced agreement, that would help,” Geithner
said.

“It would be a sign that Washington works,” he added.

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

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