Government expects lending fund to turn taxpayers a profit

http://money.cnn.com/2012/02/07/smallbusiness/lending_fund/index.htm?iid=SF_E_LN 

As reported in this news, The Obama administration lending program , which set up to funnel cash to small banks , is expected to turn a profit of $80 million. This program is estimated to cost taxpayers 1.3 billion. Under the program, banks that seek an infusion of money spelled out how they would use taxpayer money to spur lending to small businesses.  Once the treasury accepted a bank’s plan, it became an investor in the bank; So far, this program has disabused $4 billion of the $30 billion it was allotted. According to Independent Community Bankers of America chief economist Paul Merski, in fact, the $4 billion infusion could eventually spur $32 billion in lending.  One successful example is Alma Bank received $19 million from the program and it reported one of the largest increases in lending to small firms. As the CEO of Kirk Karabelas which obtained the loan from the bank says, “we did need this money. It helped us dedicated more to small business lending, and God knows there are plenty of businesses right now that can use this. “

However, the turnabout is not all good news. The author states  that the Treasury Department’s Small Business Lending Fund helped far fewer banks than Congress intended. Furthermore, of more than 7000 community banks small enough to potentially qualify for the loans. However, only 933 applied. And a mere 332 community banks and organizations made the cut to receive the funding. Treasury explained that fewer banks are healthy enough to qualify for these funds. But, some small business leaders and banks are discontented with the low participation rate. They argued that the government officials are too stringent about which banks can get the money or that money banks had trouble navigating the application process.  On the other hand, some bankers or small business leaders have a different take on the lending fund. As the New Jersey Community Bank President, Bob O'Donnell, said he avoided the program entirely because he feared that the funds would allow the government to place restrictions on his bank.  In summary, government regulations are necessary to facilitate a healthy functioning economy, especially when during a depression or other difficulties. However, how much the government should do to regulate the economy is always an issue to be discussed.