In an attempt to grease the wheels on lending to America’s small businesses, President Barack Obama wants to provide community banks with a few billion dollars. The additional money may be just what’s needed to keep community and regional bank exchange traded funds (ETFs) moving.
Obama may provide community banks with $30 billion to encourage lending to small businesses, report Nicholas Johnston and Alison Vekshin for Bloomberg. Banks with assets between $1 to $10 billion would borrow up to 3% of their risk-weighted assets and banks with less than $1 billion in assets would receive up to 5% of their holdings. [Why regional banks could come out ahead.]
Obama and his economic advisors believe that small businesses’ new hiring will help reduce the unemployment rate, which is projected to average 10% this year. Additionally, Obama has called for a $33 billion in small business tax cuts and incentives for hiring and wage increases.
Yet, there are some community bankers that say their names may be tarnished if they are associated with the Troubled Asset Relief Program, which has been largely associated with big Wall Street names. Government officials have stated that the money provided to community banks would be separate from TARP and there won’t be any restrictions associated with the bailout. [Why regional banks are at the head of the pack.]
- SPDR KBW Regional Bank ETF (NYSEArca: KRE)
- First Trust NASDAQ ABA Community Bank Fund (NYSEArca: QABA)
Max Chen contributed to this article.
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