From NBC's Athena Jones
Treasury Secretary Tim Geithner today called on banks to make an extra effort to "serve the larger public good" by making loans available to creditworthy borrowers, as he and the president announced a plan to help small businesses get the loans they need to grow and to create jobs.
President Obama and other officials have said repeatedly that unlocking the credit markets was key to economic recovery. The program announced today would temporarily increase government guarantees for Small Business Administration loans to 90% and eliminate fees on loans as well as buy $15 billion in securities backed by SBA loans to help jumpstart the secondary markets that are key to liquidity in the system.
Part of the reason government help for struggling banks has drawn the ire of much of the American public is that the help has not translated quickly into more loans for companies that want to expand and individuals that want to purchase cars, homes, or send their children to college.
Today, Geithner made a point of urging banks to get on board. "You banks need to make extra effort to make sure that good loans are getting to creditworthy small businesses in order to serve the larger public good of moving this nation to recovery," he said. "And given the role that many banks played in causing this crisis, you bear a special responsibility for helping for helping America get out of it."
He also warned that banks that had previously taken on too much risk were now taking on too little -- at great detriment to the entire economy. In order to monitor progress on this front, Geithner said the government would seek to require that the largest 21 banks receiving federal aid include small business loans in their monthly reports and would ask bank regulators to call for quarterly reporting on small business loans.
The small business leaders and community bank representatives gathered at the East Room event applauded when Geithner announced that, starting today, the IRS would allow companies to "carry back" their operating losses for five years instead of the usual two years to increase their cash flow. The administration said the move would effectively give a rebate on taxes paid in previous years to businesses with gross receipts of up to $15 million, increasing liquidity for small businesses by $4.7 billion by September.
Since the fall campaign, Obama has portrayed himself as a man of the people who understands the pain and the concerns of ordinary Americans. In recent days, Obama and administration officials have increasingly sought to show that they will hold banks and companies that are benefiting from taxpayer bailouts accountable -- one reason for the new reporting rules Geithner put forward.
Obama addressed the frustration with banks when he addressed the joint session of Congress. In the Feb. 24th speech, he said he knew how unpopular it was to help banks when ordinary Americans were suffering. But he argued "we cannot afford to govern out of anger, or yield to the politics of the moment."
In the same speech, the president promised "I will not spend a single penny for the purpose of rewarding a single Wall Street executive."
That's one reason he took a moment at the beginning of his speech today to castigate the giant insurer American International Group for planning to pay executives millions in bonuses, despite having received billions in federal bailout money and yet posting a historic loss last quarter.
"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said, before going on in an incredulous tone "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean How do they justify this outrage to the taxpayers who are keeping the company afloat?"
The president said he had asked Geithner to use the government's leverage as a lender of last resort to the company to find a way to block the bonuses.
It remained unclear what the administration could do to stop them. On Sunday, Larry Summers, director of the National Economic Council, said that while the bonuses were outrageous, they represented contracts that could not be broken.
When pressed repeatedly today about what could be done to stop that money from going to the executives to whom it was promised nearly a year ago, White House press secretary Robert Gibbs delivered this refrain: "The president asked them [his economic team] to redouble any efforts that have been made to ensure that all legal avenues are examined in order to take a look at these bonuses."