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View Full Version : Another Bank Bailout, This Time for Small Banks (TARP Jr)




tsai3904
06-21-2011, 07:32 PM
http://articles.boston.com/2011-06-20/business/29680556_1_tarp-troubled-asset-relief-program-small-business-lending-fund


Hundreds of small banks that received US aid after the financial crisis appear to have found a creative way to repay the funds: obtain money from a different government program.

Most of the 627 banks that still hold money from the controversial Troubled Asset Relief Program, or TARP, have filed applications to roll the obligations into the government’s new Small Business Lending Fund, according to Treasury officials and the banks.

More at link above.

Details on the Small Business Lending Fund from the Treasury here (http://www.treasury.gov/resource-center/sb-programs/Pages/Small-Business-Lending-Fund.aspx).


Enacted into law as part of the Small Business Jobs Act of 2010 (the Jobs Act), the Small Business Lending Fund (SBLF) is a $30 billion fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.

The U.S. Department of the Treasury will provide banks with capital by purchasing Tier 1-qualifying preferred stock or equivalents in each bank.

The dividend rate on SBLF funding will be reduced as a participating community bank increases its lending to small businesses. The initial dividend rate will be, at most, 5%. If a bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%.

The Treasury is buying stock in small banks and encouraging the banks to lend by tying the dividend rate the banks pay the Treasury to the amount of change in lending.