WASHINGTON — Louisiana’s two U.S. senators on Tuesday split in their opinions of a federal small-business lending program that issued $4 billion out of $30 billion available to banks over the past year.
The money will lead to the investment of at least $9 billion over the next few years, said Sen. Mary Landrieu, D-La., chairwoman of the Senate Small Business and Entrepreneurship Committee.
“While we did not release as much as we had hoped, we had a degree of success nonetheless,” Landrieu said.
Sen. David Vitter, R-La., criticized a provision in the law creating the Small Business Lending Fund that allowed banks to use their money to pay back the federal government on loans received from the bank bailout. That program is known as the Troubled Asset Relief Program.
“One half of all the money that went out was used to repay TARP money,” Vitter said. “It has a very limited impact when a majority of the money was used to pay back TARP.”
Treasury Secretary Timothy Geithner appeared before the committee to review the 2010 Small Business Jobs Act that created the fund a year ago.
The program ended on Sept. 27, releasing $4 billion to 332 community banks nationwide.
But 933 institutions applied for $11.8 billion in funding.
Half of the applicants were not deemed financially strong enough to receive the loans, Geithner said.
“We had to be careful to make sure that taxpayer resources were going to banks that were viable,” Geithner said.
Of those eligible, 132 used some or all of the small business money to repay the TARP loans.
Geithner defended the provision in the law allowing it, saying that repaying the federal loans freed up more money to lend to small businesses.
The TARP program overall will result in a return of $10 billion to the federal government, Geithner said.
“It’s still, on its merits, a very cost-effective way to help mitigate some of the financial pressures businesses still face,” Geithner said.
Sen. Olympia Snowe, R-Maine, blasted Geithner, saying the federal government is not doing enough for small businesses to generate job growth. Snowe called the lending program a failure.
“I would like to take you on a street tour,” said Snowe, the lead Republican on the committee. “You really need to listen to the average American and what they are facing.”
Snowe told Geithner that the Treasury Department should have known how the lending fund program would have worked out.
The administration’s “trial and error era” should end because people are hurting, Snowe said.
“Rome is burning,” Snowe added. “We’re facing the decimation of our communities.”
At the start of the hearing, Landrieu said small business lending for the past three quarters through various programs is up over pre-recession figures, making the current small-business lending the most successful in history.
“This was an entirely unique program,” Landrieu said. “The Treasury Department did not have a readily available road map sitting on the shelf to take down from the shelf to steer.”