The banking industry’s use of the Small Business Lending Fund is being criticized again by the Wisconsin Credit Union League for what the league claims is misuse.
At issue is $30 billion approved by Congress in 2010 for U.S. banks in an effort to get credit flowing to struggling small businesses. To date, the fund has distributed $4 billion, according to the U.S. Treasury Department, which oversees the program.
The Wisconsin league has joined a growing number of critics of the loan fund saying the money is not being funneled to small businesses but is actually being used by banks to repay debt acquired through the Troubled Assets Relief Program.
Signed into law by former President George W. Bush in 2008, TARP was to provide $700 billion to aid banks impacted by the subprime mortgage crisis. So far, 829 banks have collected $540 billion, according to Treasury data.
“Banks claim that paying off higher-interest obligations frees up capital for business lending, but that ignores the shell game by which Main Street citizens are footing the bill, and average citizens who own or are employed by small businesses won’t be the ones who benefit,” said Brett Thompson, WCUL president/CEO.
According to the league, Wisconsin banks and lending agencies have received more than $100 million through Treasury’s small business lending fund.
Thompson said credit unions are restricted by the current 12.25% member business lending cap but could help more small businesses without the aid of government funding if the threshold was lifted.
“[At] the same time, banks have left small businesses in the lurch – threatening the vitality of hundreds of Main Street communities sustained by small businesses – by opposing federal legislation that would allow credit unions to meet small businesses’ credit needs at no cost to taxpayers,” Thompson said.