Bailed Out Banks Continue to Cut Small Business Loans

According to a recent U.S. Treasury report, the nations largest banks (including Bank of America) cut their small business lending balance by $1 billion in November. November makes the seventh straight month of these drops.

Of course, this news comes right after the December meeting President Obama held with a dozen of these banks' CEOs to discuss reversing these drops and increasing small business lending. Despite the President's urging and the promise made by Bank of America after the meeting, small business lending is still at a low.

According to the Treasury Department Data, five of all twenty-two of these large banks, which also received the most help in the bail out, reported higher small business loan balances in November than in previous months. However the other banks have either fluctuated month to month or continued a steady decline in their small business loan balances.

Small businesses and the general public are appalled at the thought that these big banks are pocketing money that should be reinvested into bailing out our economy. So, on Thursday a representative in congress introduced a bill calling for a 50% tax on bonus compensation in excess of $50,000 at the banks that received assistant from the federal government.

According to the banks, loan balances are low because small business owners and entrepreneurs aren't looking to take on any more debt at this time of economic troubles. However, entrepreneurs and small business owners say that the lending standards have become too tight and are causing businesses capable of taking on these loans and expanding their businesses unable to grow or access any credit.

According to a Senior Loan Office Study conducted by the Federal Reserve, small business lending standards have steadily gotten increasingly restrictive over the past three years. At the top twenty-two banks in the bailout program, small business loans have been cut by $12.5 since April. The President continues to put pressure on these banks to reverse the loan-declining trend in hopes that 2010 will bring in more growth and credit for small businesses.