May 13, 2010 / 4:05 AM / 8 years ago

U.S. small firms not benefiting from TARP-report

* Report says small-business lending severely cut back

* Says more information needed on impact on small firms

WASHINGTON, May 13 (Reuters) - The U.S. government’s program to bail out the banking industry is not be doing much to help small businesses play a part in the economic recovery, an overseer of the government’s bailout program said on Thursday.

In its latest monthly report on the $700 billion Troubled Asset Relief Program (TARP), the Congressional Oversight Panel said small-business credit remains severely constrained and the Treasury Department needs to gather more information on the program’s impact on small firms.

“Treasury did not collect good information when it put money in the hands of the banks initially and it hasn’t collected good information throughout this process,” said Oversight Panel chief Elizabeth Warren. “Without good data policymakers are flying blind.”

Warren said lending to small businesses has been severely cut back, much more than lending to large firms.

“Without these small businesses there will be no meaningful economic recovery,” she said.

The Congressional Oversight Panel was set up to monitor the bailout program and provide regular reports to Congress.

The May report said it remains unclear whether the TARP programs managed by the Treasury Department “can or will play a major role in putting small businesses on the path to growth.”

Small businesses are crucial to the overall economic recovery as they as they account for two out of every three jobs created in the economy, the report said.

The report said that the largest TARP program, the Capital Purchase Program (CPP), provided hundreds of billions of dollars of new capital to banks but that Treasury did not require recipients to use the money to improve access to credit.

President Barack Obama has proposed providing some $30 billion to help provide low-cost loans to small businesses, but even if the proposal is enacted into law it may be too late to help small businesses contribute to the economic recovery, the report said.

The oversight panel’s report said it was unclear whether the cutback in lending reflected weak demand for credit from small businesses or a shortfall of loans available for smaller firms. (Reporting by Donna Smith; Editing by Steve Orlofsky)

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