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The Spectacle Blog
Another day, another bail-out!
The Obama administration is developing an initiative to take money from the $700 billion rescue program for the banking system and make it available to millions of small businesses, which officials say are essential to any economic recovery because they employ so many people, according to sources familiar with the plan.
The effort would represent a striking shift from the rescue program's original mandate, since it would direct billions of bailout dollars toward a plan that aims more at saving jobs than at righting the financial system. Some economists estimate that small businesses, defined as firms with fewer than 500 workers, employ most of the country's workforce.
A proposal being floated by senior Treasury Department officials calls for using the bailout funds to expand a government program that helps small companies borrow from banks at low rates to keep their businesses going, the sources said. These "working-capital" loans would come with few restrictions and could be used to buy inventory, hold on to employees and pay off short-term debt.
It would be tragic if there was even one business left in America that was not eligible for at least one bail-out. Obviously, the Obama administration isn't about to let that happen!
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More Blog Posts by Doug Bandow
http://spectator.org/blog/2009/07/12/well-its-only-money
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George Bruce| 7.12.09 @ 2:28PM
I know, I know! I've got a great idea about how to pump money into job creating small businesses!
Cut taxes.
Ron| 7.12.09 @ 4:46PM
The Obama Administration plan may sound quite feasible to policy makers living in Washington, D.C. with cushy jobs, no threat of losing them and plenty of money in the bank. The problem is if you are a small business in Ohio or New Jersey struggling to survive, the game has gotten ugly.
Those businesses need something else...they need direct loans. Many of the banks that we have looked at are not making government loans of any type. You can submit loan documents for a conventional loan with them and when you get a thumbs down on that, there is no place to turn with that bank. Banks have told us, the fees are not high enough for them to do these loans.
One business person we have followed over the years had a $500,000 line of credit cut to zero overnight. He had to lay off 5 of his 20 people because he could not resupply inventory that he needed. Some of the remaining 12 employees are not full time any longer. The guy has been in business for 25 years, is a pillar of his community. He had no part in the financial debacle that has befallen us, yet he is feeling it full force. Isn't there a way for the SBA to circumvent the banks and make direct loans? Maybe what the banks need at this point is direct competition. Or, better yet, perhaps the Obama Administration should begin making noises about opening The First National Bank of the United States to use taxpayer money to make direct loans. I bet that would kickstart the loan process at a lot of banks!
Ron
S. Ama| 7.12.09 @ 5:16PM
I'm pro-small business, but if the SBA loan approval process becomes extremely lax, this will be the next wave of loan defaults. If this administration wants to help small business, they need to lower taxes. We need to let go of this bailout mentality. This is going to kill us.
Aaron| 7.12.09 @ 5:16PM
"These "working-capital" loans would come with few restrictions" ... Such as the business must comply with and be a model for the new healthcare reform, reduce carbon footprint by XX percent, 1% lower interest if you are minority owned though!
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MLG| 7.12.09 @ 10:26PM
Here's an idea, two ways to get the economy moving: 1) Cut Taxes for Small Business, and let successful small businesses do what they do best, grow and make jobs. 2) Then just for thrills and grins, give everyone, regardless of income, who filed a tax return for 2008 a tax free stimulus check of $100K. The economy would jumpstart quickly, me personally, I have plenty of home improvement projects I could pay a small business contractor to do, appliances to upgrade etc, etc....
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