Reuters: Treasury Releases Funds to Spur Business Lending

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Washington, Jul 7, 2011 | comments

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Treasury Releases Funds to Spur Business Lending
By Glenn Somerville, Reuters
July 7, 2011

Six community banks will get $123 million from a special fund at the U.S. Treasury Department that was created to spur lending to small businesses but has drawn criticism for being slow to kick into action.

Treasury said the disbursements, the first from the $30 billion Small Business Lending Fund, are "part of the first wave of capital" expected to flow from it in coming months.

The fund was approved by Congress last December, partly because small businesses said they were having particular difficulty in the wake of the 2007-2009 financial crisis in getting access to credit.

Small businesses are major employers so lawmakers were eager to approve a program that might induce more hiring.

The fund was designed to provide capital to smaller community banks with under $10 billion in assets. Banks pay interest for the money ranging from 1 percent to 5 percent and the more they increase their lending with the funds, the lower the rate they pay.

At a Capitol Hill hearing last month, Treasury Secretary Timothy Geithner was taken to task by lawmakers who questioned why no money had yet been disbursed.

"I wish it were otherwise, but we're doing what you would expect us to do," Geithner told the U.S. House of Representatives Small Business Committee. "We are being careful with the taxpayers' money."

At the time, Geithner said the lending program had received 869 applications from banks for about $11.6 billion in capital, or just over a third of the available funds.

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