President Barack Obama moved to boost U.S. job creation on Monday by making it easier for small business owners to borrow money and by spending up to $15 billion to ensure credit is available for small business loans.
Obama, facing criticism over his moves to bail out Wall Street, said help was on the way for small business owners who also are hurting in the deep U.S. recession.
Small businesses are the heart of the American economy, he said during an event attended by small business leaders at the White House. They're responsible for half of all private sector jobs and they created roughly 70 percent of all new jobs in the past decade.
The programs announced on Monday build on the $730 million for small businesses included in the $787 billion stimulus package approved by Congress last month to help the economy out of recession and curb the worst financial crisis in decades.
Some of those funds will be used to reduce the fees on the Small Business Administration's main loan program, and others will be used to expand the portion of the loans guaranteed by the federal government to 90 percent.
Obama also announced action to get credit flowing to the small business loan market, using up to $15 billion to buy up small business loans held by community banks. The funds would come from the Troubled Asset Relief Program approved by Congress to help stabilize ailing financial institutions.
Less lending leads to fewer jobs and lower spending, which leads to less lending, a vicious cycle that delays our recovery, Obama said.
Obama's announcement of the aid to small business followed a weekend of bad publicity for other bailout efforts.
Insurance giant AIG, which received up to $180 billion in taxpayer help to stay afloat, detailed hefty bonuses to top employees and huge payments owed large banks, prompting a chorus of anger on Capitol Hill where doubts had already been growing about the bailout process.
Obama on Monday called the AIG bonuses an outrage and ordered officials to seek legal ways to block them.
He made clear that his administration sees aid to small business as crucial to driving recovery from the recession that started more than a year ago.
Small businesses don't just provide jobs, they provide the innovations that help us lead in the global economy, Obama said.
Treasury Secretary Timothy Geithner joined Obama in unveiling the plan, which calls for increasing federal guarantees under the SBA's most widely used loan program.
The current maximum guarantees are 85 percent of loans under $150,000 and up to 75 percent of larger loans. The guarantee will be raised to 90 percent with the aim of reducing risk and encouraging banks to make loans.
Geithner also said the Internal Revenue Service will allow small businesses bigger tax breaks on their operating losses to aid recovery.
The administration also plans to eliminate a number of borrower and lender fees on loans originated through its main loan program and a program to encourage long-term borrowing for major fixed assets like land and buildings.
(Editing by Bill Trott)