Feb 4, 2010

Program Offers Money to Banks to Help Small BusinessBy Sewell ChanNYTimes.com

Washington — The Treasury Department will invest up to $1 billion from the federal bank bailout fund in small banks and credit unions that make loans to small businesses in some of the communities most ravaged by the economic downturn, officials announced on Wednesday.

About 210 institutions will be eligible for low-cost capital under the Troubled Asset Relief Program, created in 2008 to buy assets from troubled banks, Treasury officials said. The eligible institutions are 60 banks and thrifts with a total of $21 billion in assets and 150 credit unions with a combined $5 billion in assets.

They are among 834 certified by the Treasury as community development financial institutions, meaning that they make at least 60 percent of their small-business lending in low- and moderate-income areas. Many of the institutions are nonprofits.

The Obama administration first announced the program on Oct. 21. Banks will have to pay only 2 percent on the Treasury’s capital investments, compared with the 5 percent rate for large banks in the bailout program. (The rate will increase to 9 percent after eight years, compared to five years for large banks taking part in the program.)

But only 26 small banks have signed up since then, prompting Treasury officials to make the program more accessible.

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