As America's largest financial institutions begin to pay off nearly $700 billion in taxpayer money, many smaller lenders still face a rocky future – unable or unwilling to write the loans businesses need to jump-start the economy.
That's where The Main Street Lending Restoration Act, proposed earlier this month by Sen. Patty Murray (D-Wash.), comes in.
According to Murray, the legislation's main goal is to provide relief for small businesses dependant on access to low-interest loans to continue operations, grow their business and hire more workers. However, toxic assets stemming from the collapse in the residential and commercial real estate sector have bogged down many small lenders with bad debt-a situation at least partly to blame for the lack of business lending.
Murray's proposal would utilize $30 billion of unused or returned TARP funds to stabilize smaller community banks. So far this year, 140 banks, mostly those with deposits under $3 billion, have gone into receivership, according to the Federal Deposit Insurance Corp.
But Pat Schaefer, CEO of Riverview Community Bank, is skeptical that this plan will result in healthier financial institutions.
"It's not that we need more money, it's just that the economy is bad and we just haven't seen the demand," Schaefer said.
Community banks – defined as those with under $10 billion in assets – make up more than 90 percent of banks worldwide, and Schaefer is unsure the economic fallout is something the government can unilaterally resolve with legislation.
"Until they have a meeting of the minds between legislators on one hand and regulators on the other, I don't see banks getting into this," he said.
