The potential 'deal' being $30 billion in new capital for community banks, who would then use it as a base to increase lending to small-sized/medium-sized businesses by up to $300 billion -- credit that's urgently needed and may prove to be a pivotal factor concerning the U.S. economic expansion's sustainability.
"If we can help the big banks, then we should certainly be able to help small-business lending," President Barack Obama said June 30, Bloomberg News reported. The Senate may consider the bill as early as this week; the program, called the Small Business Lending Fund, passed the U.S. House last month
Monetary/Economic Analysis: The program is structured so that its costs would be paid by banks, not by U.S. taxpayers.
The critique is that the program would prompt community banks to make loans that they would not otherwise make on a risk-analysis basis, but the reverse is closer to the truth: Too many small-sized/mid-sized businesses are being denied the loans they need to expand their businesses, and that's hindered hiring.