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Banks Pull Another $1 Billion from Small Business Lending

The nation's biggest banks cut their collective small business lending balance by another $1 billion in November, according to a Treasury report released late Friday....
January 27, 2010

The nation's biggest banks cut their collective small business lending balance by another $1 billion in November, according to a Treasury report released late Friday. The drop marked the seventh straight month of declines. The 22 banks that got the most help from the Treasury's bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports on the tally. The banks' total lending has fallen 4.6 percent in that seven-month period, to $256.8 billion.

But there are signs pointing in the other direction, as well. Five of the 22 banks reported higher small business loan balances in November than they did in April. At others - such as Wells Fargo - the totals have fluctuated month to month. But 10 of the 22 banks have cut their small business balances every single month since April.

Banker Bonuses Blasted: Banks say they are lending less for two key reasons: Small businesses are risky borrowers, and fewer entrepreneurs are looking to borrow and take on more debt in the face of slower sales. But small business owners tell a different story. They say that tighter lending standards leave too many viable businesses unable to access the credit they need to grow or finance routine operations like buying materials to fulfill customer orders.

American taxpayers are starting to criticize the lack of small business lending by banks that the taxpayers just bailed out, pointing to the fact that many of the same banks have announced big bonuses for their employees. A bill was introduced in the House last week calling for a 50 percent tax on bonus compensation in excess of $50,000 at banks that received government assistance. All revenue raised from the tax would go directly to the Small Business Administration to fund a new direct lending program. Twenty-three members of the House of Representatives co-signed the bill.

Banks Cut Small Business Lending (CNN Money 1/18/10)