Senator Charles Grassley, R-Iowa, has written to White House officials questioning why big banks are benefiting from a Small Business Lending Fund that was supposed to be used to help finance small businesses.
In a letter to Jennifer Psaki, deputy assistant to the President and deputy communications director, Grassley asked her to account for the contradiction between a White House blog post and statements from the Secretary of the Treasury and other officials about the relationship of the SBLF to the Troubled Asset Relief Fund, or TARP.
“There was a lot of concern last year about this small business program being another government bailout like TARP,” said Grassley. “Supporters insisted it would not be. Instead, they promised it would be a way to help small businesses get back on their feet and create jobs. Unfortunately, and with $30 billion on the hook, it seems like the skeptics were correct. So far, the small business loan fund may primarily have created jobs for banks shuffling public money around. Beyond that, some smaller banks indicate they don’t even want to use the fund because of the red tape and uncertainty involved.”
In the letter, Grassley asked for responses to questions about whether Congress passed the Small Business Jobs Act without receiving fully accurate information from the White House about the contents of the program. The $30 billion SBLF was created by legislation Congress passed last fall and with assurances from the measure’s supporters in the Democratic leadership and the White House, including the blog post in question, that the fund was separate from TARP.
Earlier this year, Grassley expressed concern about reports about big banks using taxpayer money from the SBLF to repay TARP loans. In response to questions from Grassley, Treasury Secretary Tim Geithner said last month that banks could use the funds that were said to be for small business loans to repay TARP loans.
In the letter, Geithner said the Treasury would “break out and report separately any TARP investments repaid using SBLF funds.” However, he denied Grassley’s assertion that the Small Business Lending Fund would be used as a “backdoor repayment mechanism” for the TARP program. “This is not the case,” Geithner wrote. “Treasury has recovered approximately $251 billion from institutions that participated in TARP bank programs through repayments, dividends, interest and other income. That exceeds the original investment Treasury made through those programs ($245 billion) by nearly $6 billion. However, it does not include any money from the SBLF program. To date, Treasury has not disbursed any SBLF money to any institutions, including those that received TARP assistance.”
Earlier in the spring, the Acting Assistant Secretary of the Treasury said of the department’s decision to approve applications for SBLF dollars by TARP recipient banks: “I do expect them to approve the applications of many TARP recipients to their loans under the small business lending fund.”
Grassley said these statements directly contradict assertions posted on the White House Web site last year by Psaki. Her post was presented as a fact check of an Associated Press story about the SBLF. Psaki labeled as “fiction” a part of the report that said: “The administration’s haziness about whom the program [the SBLF] benefits has fueled comparisons to the $700 billion bailout known as the Troubled Asset Relief Proram, or TARP.” Psaki also claimed as a “fact” that the SBLF is “…separate from TARP.” This blog post was used during Senate debate in support of the Small Business Jobs Act.
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