There was an interesting article in today’s Boston Globe entitled, “4 Mass. banks get $18m from US”. It really should have been titled, “4 Mass. banks get $18m from us, but, that is not the reason for the post.
The money is part of Obama’s Small Business Lending Fund. This is a $30 billion program under which small community banks are awarded funds which they are then supposed to use to make loans to small businesses so they grow, hire more Americans, and thus reduce unemployment.
Jason Tepperman, the Treasury official in charge of the program says,
[w]e think the funds will help provide a powerful spark for job creation.
So, what exactly is happening with those funds.
The program is controversial because many of the banks are using the money to repay the federal aid they received under TARP, with better terms. For example, Mercantile Capital Corp., parent of Mercantile Bank and Trust Co. in Boston, plans to use half the $7 million it will receive to repay TARP.
The new money will likely cost Mercantile just 1 percent a year in dividends, compared with the 5 percent it had been paying under TARP. [emphasis supplied]
And, another bank, Central Bank Corp Inc., plans to use the entire $10 million it will receive to repay TARP.
This sounds reminiscent of the great fanfare given last year when GM announced it was repaying its loans from the federal government. And then we learned that GM was borrowing the money from the federal government to repay the government loans.
You really can’t make this stuff up.