To Create Jobs, Let’s Help Small Business, Not Just Big Banks

by Seth Michaels, Dec 14, 2009

When our banking system was in crisis last year, Congress acted with lightning speed to bail out banks—but although Wall Street and the banksters have seen a recovery, working families are still facing a crisis of disappearing jobs.

One of the best ways to make sure our economy is creating new jobs is to take funds from the Troubled Asset Relief Program (TARP) and rather than using them to just bail out the big banks, direct the funds to their intended purpose: restoring lending and credit to put people to work and our economy on the right track. That’s one of the key elements of the AFL-CIO’s five-point plan for job creation.

TARP, unfortunately, bailed out Wall Street and big banks without helping Main Street. Billions of dollars have gone to these big banks—but too often those dollars turned into executive pay and bonuses and Capitol Hill lobbying, not lending to spur economic growth. Even before the economic crisis, lending by banks to small and medium businesses was declining—and bank bailouts have not restored this critical lending.

The AFL-CIO proposes to use bank bailout funds to create a fund dedicated only to small and medium sized business lending, and to have that fund managed by community banks. The community banks would co-invest in the fund, so they would have an incentive to manage it prudently. The fund would then lend directly to the small- and medium-sized businesses that desperately need credit to hire workers. 

TARP has done this kind of program over and over again in credit markets that matter to Wall Street—like asset-backed securities. It’s high time we did the same for the credit markets that matter to Main Street.

Properly administered, this wouldn’t represent a cost to government: it would be an investment that would be repaid—and everyone would reap the benefits of a stronger economy in the meantime.

The Small Business Administration estimates that one job is created or saved for every $24,000 in small business lending. Small and medium businesses are more dependent on bank lending by larger businesses, and the jobs they create are essential to having a broad economic recovery.

The AFL-CIO’s proposal for utilizing bank bailout funds to assist working families is just one part of a broader agenda that includes direct aid to families in need, aid to states facing budget crises and federal job creation through spending on critical infrastructure needs.

Congress and President Barack Obama must act quickly to get our economy moving again. The top priority next year must be jobs, jobs and more jobs.

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