WASHINGTON – President Barack Obama on Monday offered a fresh package of aid to small businesses — "the heart of the American economy" — in an aggressive push to get big banks that got federal bailout money to do more lending to these struggling entrepreneurs.
"You deserve a chance. America needs you to have that chance," Obama told small business owners gathered in the White House East Room as the administration detailed various steps to get credit flowing to small businesses.
With Treasury Secretary Timothy Geithner by his side, Obama said the nation has small businesses to thank for many of the new jobs, roughly 70 percent in the last decade. Geithner said as small businesses prosper, the nation does, a critical element to any economic recovery.
The White House announced a series of moves to get credit flowing to small businesses. The measures include boosting bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market, reducing lending fees and increasing loan guarantees, and easing the tax burden. The administration also announced that the 21 largest banks receiving government money must report monthly on how much lending they do to small businesses.
The goal is to help those businesses make payroll, buy equipment and maintain or even expand employment as the nation's economy is bleeding jobs.
"As president I will continue to do everything in my power to ensure that you have the opportunity to contribute to your community, to our economy and to the future of the United States of America," Obama said.
Meanwhile, Obama expressed fresh outrage about Wall Street behavior. He said he would try to stop insurance giant American International Group, which has benefited from more than $170 billion in federal bailout funds, from paying $165 million in executive bonuses.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" the president asked.
Geithner made a direct appeal to community banks to start lending again.
"When banks individually pull back out of a sense of prudence and caution, the collective impact of those actions will make the economy weaker and make each individual bank worse off," Geithner said. "By pulling back on credit, you push businesses to pull back, and this dynamic can feed on itself."
Geithner also ordered the Internal Revenue Service to issue a series of new rules for temporary but significant tax breaks, meaning that small businesses:
_That earn up to $15 million will be allowed to claim losses for the past five years in the current tax year;
_May write off up to $250,000 in investments this year.
_Can reduce estimated tax payments to 90 percent of the previous year's filing.
_Are allowed to take larger depreciation deductions within the first year of property purchases.
_And will see 75 percent of capital gains excluded for those who invest in small businesses.
The administration plan includes $730 million from the stimulus package to immediately reduce small-business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent.
Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away. Under the administration's initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of $10 billion to $20 billion.
While the SBA typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion, according to the administration.
The reporting requirements for financial institutions receiving government bailout funds are the first, the White House said.
The plan comes amid Republican efforts to cast doubt about Obama's ambitious budget, in particular the proposal to raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000. Those provisions also hit small businesses.
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