Despite pressure from the Obama administration to pump up small business lending, the country’s biggest banks cut small business lending by $1 billion in November, according to a Treasury report released Jan. 15.

The 22 banks that got the most help from the Treasury’s bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports, according to CNNMoney.com.

Bankers defend the cuts, saying small business loans are too risky and fewer entrepreneurs are seeking credit because of the recession.
But many small business owners say lending standards have grown more restrictive the past three years, and a report from the Federal Reserve backs that up, said CNNMoney.com.

Earnings at most big banks have turned around. JPMorgan, for example, reported earnings of $3.3 billion in the last quarter of 2009.

A number of politicians including the president have railed against bank executives for their unwillingness to free up credit while continuing to dole out huge employee bonuses.

Rep. Peter Welch, D-Vt., introduced a bill calling for a 50 percent tax on bonus compensation in excess of $50,000 at banks that received government bailout money. All revenue raised from the tax would go directly to the Small Business Administration to fund a new direct lending program, said CNNMoney.com.

Tags: bailout programs, credit, direct lending program, employee bonuses, federal reserve, government bailout money, JPMorgan, lending, Small Business Administration, small business lending, small business loan, Small Business Loans, small business owners

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