Obama mulls opening bailout to small business

updated 8:09 a.m. ET July 11, 2009

WASHINGTON - The Obama administration is considering using money from the $700 billion financial bailout fund to provide further assistance to the nation's struggling small businesses, in a continuing attempt to find a way to make up for clogged credit.

Officials said Friday that no plan had emerged although small business has been a subject of staff level talks in Obama's economic team.

But the officials stressed that the plans underscore that the White House and Treasury Departments, together with the Small Business Administration, are aware of the problems confronting main street America.

Three officials spoke on condition of anonymity because they were discussing internal administration deliberations in which no decisions have yet been announced.

One idea under consideration is using a program that helps banks lend to small businesses at low rates.

"This idea, among many others, has been discussed, but nothing is imminent," said White House spokesman Matthew Vogel. "The administration is continually in policy discussion focused on how we can best serve the taxpayers by speeding along economic recovery."

Under one approach being examined, the government would make working capital available by having the government help underwrite loans to small businesses. Many small businesses have been especially hurt in the current financial crisis because banks have pulled long-standing credit lines and made it difficult for small firms to get new loans.

Officials said the idea could ultimately end up being scrapped in favor of something else.

The administration is still trying to implement a program for small businesses that it announced last March when it devoted $15 billion from the Troubled Assert Relief Program to buy securities in secondary loan markets. The idea behind that plan was that the purchase of securities would improve credit conditions for small business.

One official said that the administration is trying to be careful that any money from TARP goes to businesses that have been hurt by the credit crisis, not simply troubled small businesses.

The Treasury Department has a team examining a variety of approaches to help small businesses, small banks and communities during the current hard times. Some ideas from the team were presented at a recent meeting of the president's National Economic Council, which is headed by Lawrence Summers.

Those Treasury proposals generated a sizable amount of debate and the meeting concluded with directions to Treasury staff to come up with answers to questions that had been raised.

"There has been a very clear understanding starting with the president and throughout the economic team that we have to be constantly looking for ideas to help viable small businesses weather this economic storm and start creating jobs again," said Gene Sperling, an adviser to Treasury Secretary Timothy Geithner.

The administration discussions were first reported on the Washington Post Web site.

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