Comments on: White House Sorta, Kinda Thinkin’ ‘Bout Using TARP Money for Small Business Loans as Small Business Lenders Go Bust

By: earthypoet

earthypoet — Fri, 17 Jul 2009 22:35:19 +0000

I’m left asking myself why the concept that strength lies in the foundation hasn’t been considered when deciding where to focus bailouts and stimulus efforts. In our economy the foundation is small business and if that is weakened, the whole thing will come apart. The premise of helping only those businesses that are “Too Big to Fail” should include helping those businesses that are too important to fail.

By: NOTaREALmerican

NOTaREALmerican — Sat, 11 Jul 2009 20:14:24 +0000

Re: But can someone tell these clowns that increasing the concentration at the big end of the financial system increases systemic risk?

I think "the clowns" know this. But, if you're a socialist/fascist clown, do you want lots of small CIT's or one HUGE CIT. The answer is obvious, which is why these guys (and George Bush) aren't clowns.

By: FairEconomist

FairEconomist — Sat, 11 Jul 2009 19:47:15 +0000

If the administration was concerned with being fair and doing what was best for the economy, they'd do with CIT what they've done with GM and Chrysler – BK the company, hand investors the losses they've earned, and move the functional, valuable operations to a new, potentially viable company.

Sadly, companies that play important roles in the real economy don't receive the coddling well-connected banks do.

By: DocG

DocG — Sat, 11 Jul 2009 16:50:20 +0000

How long will it take economists to realize that there are NO good solutions to the current mess? If the gov't supports the largest institutions at the expense of the smaller then it increases systemic risk, for sure. But if it doesn't support the largest institutions to the fullest extent of its ability, then the systemic RISK already inherent in them will morph into system FAILURE, pure and simple.

As I see it, there is no future for our current financial system, it must be allowed to collapse of its own weight.
http://amoleintheground.blogspot.com/2009/04/shifting-paradigm.html

By: marsha donner

marsha donner — Sat, 11 Jul 2009 16:12:15 +0000

PS it will fly in some form because it is a direct pass through to banks or some banks at least. risk free loans, dah! plus administration fees on a no bid basis, dah!
how can summers and timmy help their friends? here is a great way..through them some risk free business opportunities.
seems a no brainer really.

By: marsha donner

marsha donner — Sat, 11 Jul 2009 16:07:39 +0000

My guess.......the gov't will have the banks administer and make the loans so the banks can reap the profits and gov't will guarantee against failure (all off the books of course). AGAIN, head they win..tails they still win; taxpayers on the hook for any losses.

And by taking banks off the hook to lend to small businesses because the gov't is doing it as they were expected to from the 1st/2nd and 3rd bailouts.....they can use their money to continue to manipulate the markets for gains and profit..build the bottom line and show that the markets are up. After all, markets being up is an indication of progress, success and green shoots and a public confidence booster.

Or they might pick just a couple banks to 'run and administer' the program...like GS or MS and pay an administration fee on top of the interest profits that will be guaranteed against losses of course.

Why is this normal, legal..considered ok and moral?

I quess if they use the SBA for this program they will be accused of growing gov't and doing what private (banks) should do. ironic really.

Why don't we hear more from other banks who are being put at a disadvantage daily as the gov't continues to pick big winners in all this?? (oh, the smaller banks don't have a big voice in the MSM is probably part of the answer to this question.) and the taxpayers are too fragmented and dealing with day to day to even notice...not that they have a MSM source to help educate us.....and congress, in the bag of course along with the economic leadership of the administration. OMG!!

Michael/Marsha Donner

By: ronald

ronald — Sat, 11 Jul 2009 14:45:35 +0000

The government via the SBA already provides dollars to small business which Obama beefed up several months ago. Greater main street government funding will be coming next spring in time for the election cycle.

By: X

Sat, 11 Jul 2009 13:40:06 +0000

"Beg the question" is a phrase with a technical philosophical definition that is often misused in the media. Or rather always misused since I don't think I have ever seen it used correctly including this piece. It does not mean what everyone seems to assume it does, i.e. somehting like "a natural followup that should be asked". Question begging is a logical fallacy involving assuming something that should be proven by argument. It is similar to circular reasoning. No offense intended but the phrase is becoming so common as to almost be cliche, yet it is never ever even used correctly. The safest general rule to avoid misusing it is to never utter the phrase unless you have a philosophy degree.

By: Bruce Krasting

Bruce Krasting — Sat, 11 Jul 2009 11:51:07 +0000

Yves,
I agree with you that there is no 'leak' of news from D.C. This story is a trial balloon to see what the reaction to a plan like this is.

My view: Laura Tyson dropped a bomb on Tuesday with her comment that, "we need a second stimulus plan". I do not think even Obama could get a second stimulus through right now. So re-use the $150b of TARP money that has already been funded by Congress. They could probably get away with that and it could be spent very quickly. It would be advantageous to get this up and running by September so that some checks could be out there by November, just in time for some important off year elections.

On CIT. Based on the price action in the bonds this company is not going to make another week. It is a pretty big deal as there is 70+bil in liabilities. This does not meet my definition of 'too big to fail' but it is pretty close. This one is not going to go down easy.

There is a very small private market for financing hard assets for small franchise owners (Dunkin Donut, etc.). The deals I have seen typically have a two to one asset coverage but no personal guarantee. A few years ago these were being packaged up with a coupon of 8-10% and a four year payback. Those numbers have now moved to 15% and one year deals. There are no takers.

In the next year or so a tremendous amount of this type of ST debt against long assets is coming due. There is no roll over money so there will be lots of defaults. The Administration must be aware of this. There is no easy solution. So bring on the recycled TARP dough.

We have heard a million times of the critical importance of the small business owner in our economy. It would appear that there is another leg downward in front of us.

By: skippy

skippy — Sat, 11 Jul 2009 09:36:16 +0000

Whom, is living off whom, have the blood suckers, realized a flow problem, coagulation to their life support.

Skippy…Successful parasites don't kill their host eh.