Obama Small Business Aid, Will It Work?

Today Obama adressed the nation and spoke about several aspects of the economy. Mistermoneyman paid attention to its viewers by reporting on the “small business aid” package that will be worked on once Congress comes back from their robust summer break. We dug deep to find the pros and cons on this potential aid. President Barack Obama is on the verge of creating as much as $300 billion in credit for small businesses as bankers raise doubt about whether there’s demand for new loans and how much will be repaid. The U.S. Senate may vote this week on a bill to funnel $30 billion of capital to community banks, whose business customers typically are small firms. Banks could leverage the sum to make $300 billion in loans that create jobs, according to a Senate summary. Let’s try and remember that the Senate is a group of politicians who are note Bankers and are not the Federal Reserve.  This capital could more than double the commercial and industrial loans at eligible banks as of the first quarter, according to data compiled by KBW Inc. Bankers say the problem isn’t scarce credit, it’s lack of demand from creditworthy firms in a weak economy. The result may be more loans given to distressed firms and higher losses. While bank regulators don’t compile default rates, the biggest lenders have charge-offs of 4 percent to 14 percent tied to small businesses. Eliot Stark, managing director at Capital Insight Partners Inc., said their credit record resembles “junk.” “The highest demand for loans is …Continue Reading