There are good stimulus measures and poor stimulus measures. The evidence appears to be mounting that many of those in February's $787 spending package were of the latter variety. They're taking too long to bring relief, and their impact is has been muted at best. But today, President Obama announced a stimulus measure that makes a lot of sense. He seeks to provide an incentive to community banks to provide small business loans.
Here's Bloomberg reporting:
The plan would make community banks with less than $1 billion in assets eligible for lower-cost capital if they submit a small business lending plan and document their lending in quarterly reports, according to a White House fact sheet.
If approved by regulators, these banks would pay the government an initial 3 percent dividend, instead of the previous 5 percent rate.
Obama also said he will seek legislation raising the limits for Small Business Administration loans from $2 million to $5 million and as much as $5.5 million for manufacturing.
Although credit is flowing again, it's flowing mostly from big banks to larger corporations who are considered safer bets and more important clients. Small businesses are still struggling. By providing liquidity to community banks to give them cheaper funding, you keep them to afloat, and even help small business expansion drive recovery.
It's also sensible to do this through community banks. They could use the business. Although many were bailed out, they don't have as easy a time getting new capital as the big banks do.
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