Sunday, September 26, 2010

Small Banks Wary of 'Help'

Obama's weekly $30B expenditure last week was directed at small banks. The idea was to give banks more 'capital', so they would be more willing to loan to small businesses. The bankers are reluctant this time:
And then there's concerns that the government money will have strings attached.

The fears stem from what happened under TARP, the Troubled Asset Relief Fund, formed at the height of the financial meltdown to pump money into banks. Banks that accepted TARP money had to later cut dividends to shareholders and limit compensation to top executives. They were also penalized for early repayment.

In this new legislation, the government is taking steps to avoid the tarnish that accompanied TARP. The key part of this effort: Banks can return the money without penalty if rules governing the small business loans change.

But Chase, the bank CEO in Memphis, isn't convinced. "The rules can be changed any time," said Chase.

If you accept government money, many will argue this implies that the government has a right to micromanage your business.

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