U.S. Small-Business Aid May Create $300 Billion of ‘Junk’ Loans

[blazespinnaker]

I guess bloomberg isn't in favor of this. Seems like a great idea to me.

http://noir.bloomberg.com/apps/news?...OU.3Frz4&pos=8

[vinoveri]

Re: U.S. Small-Business Aid May Create $300 Billion of ‘Junk’ Loans

I guess bloomberg isn't in favor of this. Seems like a great idea to me.

http://noir.bloomberg.com/apps/news?...OU.3Frz4&pos=8

Maybe if you're a business owner who can't qualify for a loan (i.e., b/c your business plan is not viable) it is a great idea. More debt is not the way though. Perhaps equity?

Perhaps this will be the start of a new bubble in "small business" ... we can all start flipping businesses instead of houses once this really gears up and wall street begins securitizing the business loans ... and while we're at it, we'll need to create another GSE to make small business affordable. Everybody deserves their own small business of course and by goodness the gov can play a role in insuring this .....

[c1ue]

Re: U.S. Small-Business Aid May Create $300 Billion of ‘Junk’ Loans

Banks could leverage the sum to make $300 billion in loans that create jobs, according to a Senate summary.

...

Terms call for banks with assets of less than $10 billion to receive U.S. Treasury Department investments in preferred stock or other instruments to promote small-business loans, according to Senate documents.

Sounds nice, but in reality it is much more likely to just reduce the capital losses these community banks have suffered due to CRE and residential mortgage defaults.

Taxpayers could break even if the program is properly structured so that interest and fees cover losses, Stark said. Banks will be charged an initial interest rate of 5 percent, declining to 1 percent if they increase small-business loans or rising as high as 7 percent if the loans stay the same or decrease, according to Richard Carbo, spokesman for the Senate Small Business and Entrepreneurship committee.

I dunno, but this looks suspicious to me.

Borrow more money, and pay less interest. Ponzi/pyramid scheme anyone? Extend and pretend for the small banks? If it bleeds, bury it?