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Obama Administration Finally Closes the Misguided SBLF

September 29, 2011 J

Yesterday evening, the Treasury Department announced the closure of the Small Business Lending Fund (SBLF). The program had set aside $30 billion in taxpayer funds to invest capital in small and community banks in hopes of easing the credit crunch on small businesses. After Tuesday’s final wave of investments, total funds distributed reached a mere $4 billion (just 13 percent of the funds set aside), with investments in only 332 banks across the country – yet another example of underwhelming participation in the government’s “main street” financial interventions.

The program’s early closure was a disappointment to those who believe the feds aren’t doing enough to stimulate the economy, but as I explained in the Daily Caller back in April, Treasury’s move brings a big victory for taxpayers and, ultimately, the economy as a whole.

SBLF’s error was that it wasted today’s resources on yesterday’s problems. At the height of the financial crisis small businesses struggled to find credit, but today they struggle more with depressed sales, high tax burdens, health care costs, and the red tape of government regulations. Moreover, banks already have plenty of capacity to lend – what they don’t have is a demand for loans in a still-sluggish economy. Injecting taxpayer money into small banks now only risks distorting healthy market operations by encouraging reckless lending.

The $4 billion in SBLF funds that have been invested to date will remain outstanding until the recipient banks pay them back, but that still leaves the program’s $26 billion of leftover funds unaccounted for. With the national debt standing well above $14 trillion and unending political wrangling about what to do about it, it is vitally important for Treasury to use these leftover funds for deficit reduction instead of spending it on some other wasteful “stimulus” project.

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