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Wall Street and Small Business Lending |
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Wednesday, 16 December 2009 00:00 |
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At his Monday meeting with the CEO’s of 12 of the country’s largest banks, President Obama challenged the bankers to explore every responsible way to increase lending. “I urged these institutions here today to go back and take a third and fourth look at how they are operating when it comes to small business and medium-sized business lending,” he said.
Many of our nation’s largest banks have responded to the President’s call for greater credit availability. This week, Bank of America announced that it plans to increase 2010 lending to small- and medium-sized businesses by at least $5 billion over 2009 figures. So far, Bank of America has provided more than $12 billion in credit through the first three quarters. JP Morgan Chase also announced a number of initiatives, including plans to increase lending to small businesses by up to $4 billion in 2010, the hiring of 325 additional small business bankers, and the establishment of a program to take a “second look” at all previous small business loan applications. U.S. Bancorp CEO Richard Davis has said that his bank plans to take a second look at every small business loan it rejects, and last month, Goldman Sachs launched its 10,000 Small Businesses Initiative, which will make $500 million available to small businesses, $300 million of which will be invested through a combination of lending and philanthropic support to Community Development Financial Institutions.
It should be noted, however, that the demand for most major categories of loans has weakened as a result of the economic downturn. In the most recent Federal Reserve Board survey of bankers, 90% of respondents indicated that demand for business loans has either stayed the same, or decreased. Also, tighter oversight and higher capital requirements imposed by regulators have made it that much more difficult to make credit available.
As the economic recovery extends and gains strength, small businesses will play a central role – particularly with regards to job creation. Historically, small businesses have accounted for two-thirds of all new jobs. Our nation’s largest financial institutions will continue to find ways to provide businesses of all sizes with the credit they need to fuel economic growth and job creation in the United States.
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