President Barack Obama’s new plan to give money to banks with the promise that banks will lend the money to small business looks good on paper.
But the odds are that the banks will keep the money and it won’t find it’s way to the public.
Like the original program that was supposed to increase lending, the plan doesn’t really force the banks to funnel the money to its customers.
The Obama administration’s new proposal to stimulate the economy would send money to smaller banks, with the hope that they would then lend it to small businesses. But because the program would rely on incentives rather than directives, those banks could conceivably end up using the money for other things.
President Obama on Tuesday announced that $30 billion in repaid TARP money will be funneled to small- and medium-sized banks so they can increase their lending to small businesses.
But the original TARP was supposed to increase lending, too. And it didn’t.