Obama admin considering TARP $ for small business

Two senior administration officials tell Fox the White House is considering breaking down walls separating TARP funds from non-financial rescue purposes (it's already done so with the auto industry) to aid small businesses struggling through the recession.

Gene Sperling, a top adviser to Treasury Secretary Tim Geithner, developed the idea of using TARP funds to help small businesses as part of a department-wide push to pump life into this ailing part of the economy. The concept is to use TARP funds to increase Small Business Administration loans (under what's known as the 7a program). Typically, the government backs 90 percent of the bank loan to qualifying small businesses.

It is unclear how much TARP money might be involved. Of the $700 billion appropriated, roughly $127 billion remains. The SBA has authority this year to provide $17.5 billion in small business loans. According to agency records, the SBA provided $6 billion in loans through June. In the stimulus law, the administration waived fees on small business loans so they could obtain the low at lower rates and no cost to each business.

Of the $127 billion in avaiable TARP funds, $70 billion has already been invested and returned to Treasury. Geithner has made it clear - all principal repayments will be available for further investment while TARP authority exists. TARP grows as banks repair their balance sheets and exit the bailout program.

Congress has begun to call for TARP help for small business. Democrat Mary Landrieu of Louisiana and Republican Olympia Snowe of Maine have specifically asked Geithner to study using TARP funds to improve the flow of credit as big bank TARP recipients appear not to be loosening loan requirements.

One business blogger has tracked the debate. Here are some links: http://www.allbusiness.com/banking-finance/banking-lending-credit-services/12278126-1.html ; http://www.allbusiness.com/banking-finance/banking-lending-credit-services/11748889-1.html.

Geithner, Fox was told, did not "specifically" endorse this TARP-to-SBA approach. But last week the idea made it before a White House meeting between representatives of the Treasury Department, the Small Business Administration and the President's National Economic Council. The TARP for small business idea would not have made here without considerable backing at Treasury - at minimal Sperling and quite probably Geithner.

According to an official, "a lively debate on the merits" ensued and the idea -- as with others to aid small businesses - was sent back to the drawing board. "Everyone agreed that the whole topic needed more work," the official said.

"There's a general agreement that it's worth exploring some additional mechanisms to help small business but there's still plenty of debate about how best to do that and whether to move forward," the official said.

White House Deputy Press Secretary Jen Psaki told Fox: "This concept, among many others, has been raised in discussions on small business, but certainly no proposals are imminent. The administration is constantly in policy discussion focused on how we can best serve the taxpayers by speeding along economic recovery."