WASHINGTON Dec 11 The Obama administration, in
an effort to boost credit to small businesses and encourage
them to hire, wants to tap money from a controversial bank
bailout fund by cutting strict strings that Congress attached
to the cash, an official familiar with talks said on Friday.
The official said the administration was looking at setting
up a special purpose vehicle to be a conduit for money from the
Troubled Asset Relief Fund, or TARP, that would get around
restrictions on executive bank pay.
A senior administration official said that nothing had been
decided at this stage.
"Work is being done to see if there is such a credit policy
using TARP resources that can be effective, but no final
decisions have been made," the official said.
Community bankers separately said that they had discussed
ways with Treasury to make funds from TARP more "usable."
"Existing TARP restrictions make it extremely unattractive
for banks to use that money and it is the fault of Congress.
Treasury is trying to do the right thing," said Paul Merski,
chief economist of Independent Community Bankers of America.
The 8,000 U.S. community banks are a valuable channel of
credit to small businesses, which in turn are a vital source of
U.S. job creation.
President Barack Obama, fighting double digit unemployment
that has hurt his popularity, said on Tuesday that he had asked
Treasury Secretary Timothy Geithner to continue to mobilize
TARP funds to boost lending to small businesses.
The $700 billion fund was set up by Obama's Republican
predecessor George W. Bush to rescue Wall Street during last
year's financial crisis, and turned out to cost around $200
billion less than initially thought.
Geithner separately said that measures were being
considered to find a way of exploiting the remaining TARP money
and that Congress would play a role in that process, hinting
the TARP law may need to be changed, which could take time.
"We have to find some way to mitigate both the stigma of
coming and the fear of changes in the future rules of the game
that are going to apply to them," he told the Congressional
Oversight Panel, a TARP watchdog body, on Thursday.
Some of the money could be diverted to the Small Business
Administration, which guarantees loans to small businesses and
was able to leverage $375 million made available under an
emergency stimulus package signed by Obama in February into
over $16 billion in credit.
That initial money has run out and Senator Mary Landrieu, a
Democrat from Louisiana, and Sen. Olympia Snowe, Republican
from Maine, on Thursday sponsored a bill to lift the size of
loans the SBA can guarantee and secure it more money.
(Additional reporting by David Lawder)
(Reporting by Alister Bull)