Although the Consumer Financial Protection Agency made it through the House more or less intact, the banking lobby is taking another, better shot at killing it in the Senate, and is planning to use the magic words: “big government” and “bureaucracy.” Elizabeth Warren wrote an op-ed for Tuesday’s Wall Street Journal that lays out the confrontation. For most of the past two decades, many Americans trusted the banking industry-not necessarily to be moral exemplars, but they trusted that the banks were basically doing what was right for customers and for the economy. Then in 2007-2008 that mood abruptly reversed, as it became apparent that unscrupulous mortgage lenders, the Wall Street banks that backed them, and the credit rating agencies had been ripping off mortgage borrowers on the one hand and investors on the other.

The big banks face a choice. They can agree to sensible reforms that protect consumers and rein in the excesses of the past decades. Or they can simply decide to screw customers, but do it openly this time, since they have so much market share it almost doesn’t matter what customers think. How else do you explain, say, Citigroup’s concocting a new credit card “feature” explicitly to get around a new requirement of the Credit CARD Act? Or Jamie Dimon saying that financial crises are something to be expected every five to seven years, so we should just get over it?

A year ago, it might have been possible to twist the banks’ arms hard enough to get them to agree to new ways of doing business (such as a CFPA), because they needed government support so badly. Now it’s too late. So the solution has to come from the other kind of arm-twisting-pressure from the president, the administration (that means you, Tim Geithner), and ordinary voters. If people feel screwed by the financial sector-and many of them should after the past decade-then they should want the CFPA.

But last month, Republican political consultant Frank Luntz wrote a memo laying out how Republicans could kill financial regulatory reform. “Ordinarily, calling for a new government program ‘to protect consumers’ would be extraordinary popular,” he wrote. “But these are not ordinary times. The American people are not just saying ‘no.’ They are saying ‘hell no’ to more government agencies, more bureaucrats, and more legislation crafted by special interests.” The goal is simple: to make Americans think that the CFPA is their enemy, because it’s part of the government, and that the banks are nice cuddly ewoks by comparison.

This is absurd.

We like to make fun of government in this country, but really, what are you and a few of your buddies going to do to fight JPMorgan Chase on your own? For all of our beloved rugged individualism (and our individual right to handguns), it doesn’t do much good when you’re up against your credit card issuer. There is no Chicago-school free market solution to an oligopoly that, on top of all its other advantages, has an implicit government guarantee that gives it a major funding cost advantage over its competitors. One of the purposes of government is to protect ordinary people from forces (hurricanes, terrorists, monopolies) against which free market forces do not provide adequate protection. This is why we need a Consumer Financial Protection Agency. And this is what Frank Luntz wants to trick people into forgetting.

Cross-posted at The Baseline Scenario

Read more: Big Banks, Elizabeth Warren, Banks, Wall Street, Cfpa, Consumer Financial Protection Agency, Economic Crisis, Consumer Protection, Bailout, Financial Crisis, Wall Stret Bailout, Business News

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James Kwak: Elizabeth Warren Calls Out Wall Street

Although the Consumer Financial Protection Agency made it through the House more or less intact, the banking lobby is taking another, better shot at killing it in the Senate, and is planning to use the magic words: “big government” and “bureaucracy.” Elizabeth Warren wrote an op-ed for Tuesday’s Wall Street Journal that lays out the confrontation. For most of the past two decades, many Americans trusted the banking industry-not necessarily to be moral exemplars, but they trusted that the banks were basically doing what was right for customers and for the economy. Then in 2007-2008 that mood abruptly reversed, as it became apparent that unscrupulous mortgage lenders, the Wall Street banks that backed them, and the credit rating agencies had been ripping off mortgage borrowers on the one hand and investors on the other.

The big banks face a choice. They can agree to sensible reforms that protect consumers and rein in the excesses of the past decades. Or they can simply decide to screw customers, but do it openly this time, since they have so much market share it almost doesn’t matter what customers think. How else do you explain, say, Citigroup’s concocting a new credit card “feature” explicitly to get around a new requirement of the Credit CARD Act? Or Jamie Dimon saying that financial crises are something to be expected every five to seven years, so we should just get over it?

A year ago, it might have been possible to twist the banks’ arms hard enough to get them to agree to new ways of doing business (such as a CFPA), because they needed government support so badly. Now it’s too late. So the solution has to come from the other kind of arm-twisting-pressure from the president, the administration (that means you, Tim Geithner), and ordinary voters. If people feel screwed by the financial sector-and many of them should after the past decade-then they should want the CFPA.

But last month, Republican political consultant Frank Luntz wrote a memo laying out how Republicans could kill financial regulatory reform. “Ordinarily, calling for a new government program ‘to protect consumers’ would be extraordinary popular,” he wrote. “But these are not ordinary times. The American people are not just saying ‘no.’ They are saying ‘hell no’ to more government agencies, more bureaucrats, and more legislation crafted by special interests.” The goal is simple: to make Americans think that the CFPA is their enemy, because it’s part of the government, and that the banks are nice cuddly ewoks by comparison.

This is absurd.

We like to make fun of government in this country, but really, what are you and a few of your buddies going to do to fight JPMorgan Chase on your own? For all of our beloved rugged individualism (and our individual right to handguns), it doesn’t do much good when you’re up against your credit card issuer. There is no Chicago-school free market solution to an oligopoly that, on top of all its other advantages, has an implicit government guarantee that gives it a major funding cost advantage over its competitors. One of the purposes of government is to protect ordinary people from forces (hurricanes, terrorists, monopolies) against which free market forces do not provide adequate protection. This is why we need a Consumer Financial Protection Agency. And this is what Frank Luntz wants to trick people into forgetting.

Cross-posted at The Baseline Scenario

Read more: Big Banks, Elizabeth Warren, Banks, Wall Street, Cfpa, Consumer Financial Protection Agency, Economic Crisis, Consumer Protection, Bailout, Financial Crisis, Wall Stret Bailout, Business News

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James Kwak: Elizabeth Warren Calls Out Wall Street

Although the Consumer Financial Protection Agency made it through the House more or less intact, the banking lobby is taking another, better shot at killing it in the Senate, and is planning to use the magic words: “big government” and “bureaucracy.” Elizabeth Warren wrote an op-ed for Tuesday’s Wall Street Journal that lays out the confrontation. For most of the past two decades, many Americans trusted the banking industry-not necessarily to be moral exemplars, but they trusted that the banks were basically doing what was right for customers and for the economy. Then in 2007-2008 that mood abruptly reversed, as it became apparent that unscrupulous mortgage lenders, the Wall Street banks that backed them, and the credit rating agencies had been ripping off mortgage borrowers on the one hand and investors on the other.

The big banks face a choice. They can agree to sensible reforms that protect consumers and rein in the excesses of the past decades. Or they can simply decide to screw customers, but do it openly this time, since they have so much market share it almost doesn’t matter what customers think. How else do you explain, say, Citigroup’s concocting a new credit card “feature” explicitly to get around a new requirement of the Credit CARD Act? Or Jamie Dimon saying that financial crises are something to be expected every five to seven years, so we should just get over it?

A year ago, it might have been possible to twist the banks’ arms hard enough to get them to agree to new ways of doing business (such as a CFPA), because they needed government support so badly. Now it’s too late. So the solution has to come from the other kind of arm-twisting-pressure from the president, the administration (that means you, Tim Geithner), and ordinary voters. If people feel screwed by the financial sector-and many of them should after the past decade-then they should want the CFPA.

But last month, Republican political consultant Frank Luntz wrote a memo laying out how Republicans could kill financial regulatory reform. “Ordinarily, calling for a new government program ‘to protect consumers’ would be extraordinary popular,” he wrote. “But these are not ordinary times. The American people are not just saying ‘no.’ They are saying ‘hell no’ to more government agencies, more bureaucrats, and more legislation crafted by special interests.” The goal is simple: to make Americans think that the CFPA is their enemy, because it’s part of the government, and that the banks are nice cuddly ewoks by comparison.

This is absurd.

We like to make fun of government in this country, but really, what are you and a few of your buddies going to do to fight JPMorgan Chase on your own? For all of our beloved rugged individualism (and our individual right to handguns), it doesn’t do much good when you’re up against your credit card issuer. There is no Chicago-school free market solution to an oligopoly that, on top of all its other advantages, has an implicit government guarantee that gives it a major funding cost advantage over its competitors. One of the purposes of government is to protect ordinary people from forces (hurricanes, terrorists, monopolies) against which free market forces do not provide adequate protection. This is why we need a Consumer Financial Protection Agency. And this is what Frank Luntz wants to trick people into forgetting.

Cross-posted at The Baseline Scenario

Read more: Big Banks, Elizabeth Warren, Banks, Wall Street, Cfpa, Consumer Financial Protection Agency, Economic Crisis, Consumer Protection, Bailout, Financial Crisis, Wall Stret Bailout, Business News

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James Kwak: Elizabeth Warren Calls Out Wall Street

NEW YORK — Former Merrill Lynch CEO John Thain, who brokered the investment bank’s controversial sale to Bank of America, is taking over as chairman and CEO of CIT Group as the commercial lender continues to restructure its business following a brief stay in bankruptcy protection last year.

CIT Group Inc., one of the nation’s largest lenders to small and mid-sized businesses, said Thain will take the helm immediately. The 54-year-old replaces acting interim CEO Peter J. Tobin, who will remain on CIT’s board. Tobin had stepped in while CIT searched for a permanent replacement for Jeffrey Peek, who retired as chairman and CEO on Jan. 15.

Read more: Merrill Lynch, John Thain, Wall Street, Economic Crisis, Bank of America, Cit, Goldman, Wall Street Bailout, Bailout, Financial Crisis, Business News

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John Thain To Lead CIT

NEW YORK — Goldman Sachs Group Inc. CEO Lloyd Blankfein is getting a $9 million stock bonus for 2009, a modest payday by Wall Street standards that appears aimed at quelling criticism of the bank’s compensation practices.

Blankfein will receive more than 58,000 shares of restricted stock that can’t be cashed in for five years, the bank said in a securities filing Friday. Blankfein will receive no cash as part of his bonus.

Read more: Tarp, Congress, Bailout, 2009 Bonuses, Goldman Sachs, Chase, Blankfein, Banks, Lloyd Blankfein, Bonuses, Wall Street, Goldman Sachs Bonuses, Jamie Dimon, Business News

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Goldman Sachs Bonuses: CEO Lloyd Blankfein Gets $9 Million Stock Bonus For 2009

The remorseful former banker who made Citigroup what it is today came to Capitol Hill on Thursday and systematically debunked the arguments that his former colleagues use to defend the practices that nearly crashed the financial system.

John S. Reed, 70, served as chairman and CEO of Citicorp from 1984 to 1998. After the 1998 merger with Travelers Group that created Citigroup, Reed served as chairman and co-CEO for two years. Late last year, he apologized for his role in creating the nation’s third-largest bank, a $1.9 trillion behemoth that’s now 34 percent-owned by the Treasury Department.

“There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.

“This clearly means that in designing a robust system, we cannot count on that capacity.”

Reed came out against the culture that has dominated Wall Street for the past generation. He said policymakers should not rely on banks to do what’s in their own best interest. And he also endorsed reforms related to the broken system of federal banking regulation, the government-sponsored housing finance system, the scope of the financial system, and the way consumer credit is extended.

Reed’s proposals read as if they came from a consumer advocate.

Among them:

• The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”
• The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”
• Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.
• A consumer-focused financial protection agency with a “clear and separate mandate” should be created.

The Wall Street Journal noted a particular exchange:

In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.

“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”

“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.

Coming from the man who presided over the firm that was among the first to create collateralized debt obligations — bundled loans whose cash flow is sold to investors — his swipe against securitized products and derivatives was particularly jarring. He said they were “flawed as credits” and were not distributed to “knowledgeable investors.”

Reed has gone further than the Obama administration, joining some members of Congress, including Republican Senator John McCain of Arizona, in calling for a separation between commercial banking and investment activities. For the past decade, the country’s biggest banks have engaged in both.

Reed called Congress’s 1999 repeal of the 1933 Glass-Steagall Act a mistake. Though Citigroup was formed before the law was officially revoked, the company had the Federal Reserve and the Clinton administration’s blessing to go ahead with the merger.

Read more: Volcker Rules, Derivatives, Regulatory Reform, Financial Reform, Cfpa, John Reed, Reform, Bailout, Consumer Financial Protection Agency, Financial Crisis, Wall Street, Citigroup, Business News

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Remorseful Citigroup Banker John S. Reed Parts With Former Colleagues, Calls For Fundamental Financial Reform

The remorseful former banker who made Citigroup what it is today came to Capitol Hill on Thursday and systematically debunked the arguments that his former colleagues use to defend the practices that nearly crashed the financial system.

John S. Reed, 70, served as chairman and CEO of Citicorp from 1984 to 1998. After the 1998 merger with Travelers Group that created Citigroup, Reed served as chairman and co-CEO for two years. Late last year, he apologized for his role in creating the nation’s third-largest bank, a $1.9 trillion behemoth that’s now 34 percent-owned by the Treasury Department.

“There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.

“This clearly means that in designing a robust system, we cannot count on that capacity.”

Reed came out against the culture that has dominated Wall Street for the past generation. He said policymakers should not rely on banks to do what’s in their own best interest. And he also endorsed reforms related to the broken system of federal banking regulation, the government-sponsored housing finance system, the scope of the financial system, and the way consumer credit is extended.

Reed’s proposals read as if they came from a consumer advocate.

Among them:

• The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”
• The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”
• Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.
• A consumer-focused financial protection agency with a “clear and separate mandate” should be created.

The Wall Street Journal noted a particular exchange:

In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.

“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”

“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.

Coming from the man who presided over the firm that was among the first to create collateralized debt obligations — bundled loans whose cash flow is sold to investors — his swipe against securitized products and derivatives was particularly jarring. He said they were “flawed as credits” and were not distributed to “knowledgeable investors.”

Reed has gone further than the Obama administration, joining some members of Congress, including Republican Senator John McCain of Arizona, in calling for a separation between commercial banking and investment activities. For the past decade, the country’s biggest banks have engaged in both.

Reed called Congress’s 1999 repeal of the 1933 Glass-Steagall Act a mistake. Though Citigroup was formed before the law was officially revoked, the company had the Federal Reserve and the Clinton administration’s blessing to go ahead with the merger.

Read more: Volcker Rules, Derivatives, Regulatory Reform, Financial Reform, Cfpa, John Reed, Reform, Bailout, Consumer Financial Protection Agency, Financial Crisis, Wall Street, Citigroup, Business News

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Remorseful Citigroup Banker John S. Reed Parts With Former Colleagues, Calls For Fundamental Financial Reform

The remorseful former banker who made Citigroup what it is today came to Capitol Hill on Thursday and systematically debunked the arguments that his former colleagues use to defend the practices that nearly crashed the financial system.

John S. Reed, 70, served as chairman and CEO of Citicorp from 1984 to 1998. After the 1998 merger with Travelers Group that created Citigroup, Reed served as chairman and co-CEO for two years. Late last year, he apologized for his role in creating the nation’s third-largest bank, a $1.9 trillion behemoth that’s now 34 percent-owned by the Treasury Department.

“There seems to have been a key failure that none of us anticipated,” Reed said in a prepared statement at a Senate Banking Committee hearing, “namely, individual institutions which are thought to take steps and exercise judgments to insure their self-preservation turned out ‘not to have’ or been incapable of so doing.

“This clearly means that in designing a robust system, we cannot count on that capacity.”

Reed came out against the culture that has dominated Wall Street for the past generation. He said policymakers should not rely on banks to do what’s in their own best interest. And he also endorsed reforms related to the broken system of federal banking regulation, the government-sponsored housing finance system, the scope of the financial system, and the way consumer credit is extended.

Reed’s proposals read as if they came from a consumer advocate.

Among them:

• The capital held by financial firms to protect against potential losses “should be significantly increased, maybe doubled.” He added that he thinks the concept of “risk adjusted capital,” a complex system used by regulators to judge whether a bank has adequate cash, “is flawed.”
• The industry should be “compartmentalized” to limit the spread of failures and to preserve “cultural boundaries.”
• Traded products (to the extent possible) should flow through exchanges. Much of the derivatives market is currently in the dark, traded over the phone rather than through a centralized exchange where regulators could know what’s going on.
• A consumer-focused financial protection agency with a “clear and separate mandate” should be created.

The Wall Street Journal noted a particular exchange:

In response to a question from Senator Bob Corker (R-Tenn.), who called Reed’s testimony “fascinating” given that he presided over Citigroup at a time when it was expanding in all these areas, Reed said it was exactly that experience that informs his view now.

“I learned a lot,” Reed said, joking that this may be the first time he has ever agreed with former Federal Reserve chairman Paul Volcker on anything. “There’s no question that when we put Travelers and Citi together we created a monster.”

“My honest belief having experienced it…is that the system would be stronger if we could provide for some separation where major depositories are not major actors in the capital markets,” Reed said.

Coming from the man who presided over the firm that was among the first to create collateralized debt obligations — bundled loans whose cash flow is sold to investors — his swipe against securitized products and derivatives was particularly jarring. He said they were “flawed as credits” and were not distributed to “knowledgeable investors.”

Reed has gone further than the Obama administration, joining some members of Congress, including Republican Senator John McCain of Arizona, in calling for a separation between commercial banking and investment activities. For the past decade, the country’s biggest banks have engaged in both.

Reed called Congress’s 1999 repeal of the 1933 Glass-Steagall Act a mistake. Though Citigroup was formed before the law was officially revoked, the company had the Federal Reserve and the Clinton administration’s blessing to go ahead with the merger.

Read more: Volcker Rules, Derivatives, Regulatory Reform, Financial Reform, Cfpa, John Reed, Reform, Bailout, Consumer Financial Protection Agency, Financial Crisis, Wall Street, Citigroup, Business News

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Remorseful Citigroup Banker John S. Reed Parts With Former Colleagues, Calls For Fundamental Financial Reform

Among Bank of America’s 50 million customers, Pierre Falcone was far from ordinary. An infamous global arms dealer who illegally sold weapons to Angola for its civil war and an international fugitive, Falcone was convicted of tax fraud and illegal arms dealing in 2007 and 2009 and is currently serving six years behind bars. Yet for nearly two decades, Falcone and his relatives freely used 29 different bank accounts to funnel at least $60 million into the US from secretive havens…

Read more: Bank of America, Lobbying, Crime, Lobbyists, Money Laundering, Business, Big Banks, Senate Report, Hsbc, Carl Levin, Senate, Bailout, Pierre Falcone, Teodoro Obiang, Cayman Islands, Citibank, Banks, Patriot Act, Shell Companies, Wachovia, Wall Street, Angola, Business News

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How Big Banks, Lobbyists, And Lawyers Moved Dirty Money Into The US

The Obama administration’s new proposal to stimulate the economy would send money to smaller banks, with the hope that they would then lend it to small businesses. But because the program would rely on incentives rather than directives, those banks could conceivably end up using the money for other things.

President Obama on Tuesday announced that $30 billion in repaid TARP money will be funneled to small- and medium-sized banks so they can increase their lending to small businesses.

But the original TARP was supposed to increase lending, too. And it didn’t.

The cost of the new capital under Obama’s program would be five percent, which is what the banks will pay the government annually for its investment. If banks increase their business lending by 10 percent from 2009 levels, the cost would be reduced to one percent — a locked-in rate they’d pay for the following three years.

“The more loans these smaller banks provide to creditworthy small businesses, the better deal we’ll give them on capital from this fund that we’ve set up,” Obama said.

But even the top rate is still cheaper than what banks typically pay to raise new capital in private markets. Banks pay an average of about 7.11 percent for equity capital, according to Aswath Damodaran, a finance professor at New York University’s Stern School of Business. That’s the cost of financing a business in exchange for giving investors a share of ownership.

So if banks want additional capital — whether to guard against future losses or simply strengthen their financial position — it would be cheaper for them to grab government money than to get it from private investors.

That’s what happened frequently with banks that received money from the TARP program. The money was so cheap, and banks were on such bad financial footing, that many simply kept it, rather than increasing their loans.

“It is cheap, and it shouldn’t be given to banks that just want to simply increase their capital,” said Molly Brogan, vice president of public affairs for the National Small Business Association, an advocacy group. However, the potential to lower the cost of the capital to one percent “is a pretty strong incentive” to lend, she said.

The administration is hoping the money will be lent to the type of businesses that have “created roughly 65 percent of all new jobs over the past decade and a half,” as Obama said Tuesday.

But getting smaller banks to take the money at all could be difficult.

“We’ve had a very hard time getting small banks to sign up for anything TARP related, because of the pounding it’s taken in Congress and in the media. So, our view is that even a non-TARP program (but one that utilizes TARP funds) will need somewhat lower dividend rates to be utilized,” said a senior administration official.

The type of banks eligible for this new program — the roughly 8,000 banks with less than $10 billion in assets — “devote the highest percentage of their lending to small businesses in their communities, accounting for over 50 percent of all small business loans nationwide, even though they make up only about 20 percent of all bank assets,” the administration said in a statement outlining its proposal.

The Independent Community Bankers of America support the new initiative. In a statement, the group pointed out that “every dollar of capital that goes into community banks has the potential to be leveraged eight to ten times — a substantial and positive impact for both small businesses and our communities.”

There’s no guarantee that money will go to making new loans.

Banks are already flush with cash — they were hoarding nearly $1.1 trillion in excess reserves as of December, according to federal banking data. That money could be used for making new loans. Supply of money isn’t the problem.

Simply put, demand — for loans, goods and services — is down. It happens in every recession. Thus, increasing the amount of money available for loans doesn’t strike at the heart of the problem.

Also, banks are wary of making more loans during a recession. Loan delinquency rates are up. Banks don’t want to suffer more loan losses, particularly after the hurting they’ve taken over the past two years. With cheap money coming their way, they could use it to buffer against future losses.

One idea that might work better would be to increase the initial cost of the new funds, yet still decreasing it if banks ramp up their lending.

Brogan cautions against making that capital too expensive, however, as it could deter banks from signing up at all.

Also, “offering this money at a higher rate would not have any congressional support,” said the senior administration official.

Creating a new program, separate from TARP, could make it more attractive for banks looking to avoid the TARP stigma, said Tanya Wheeless, president and CEO of the Arizona Bankers Association. Gene Sperling, a counselor to Treasury Secretary Timothy Geithner, said Tuesday that around 600 banks that had applied for TARP funds in early 2009 dropped out of the application process because of that stigma.

Still, Wheeless doesn’t expect too many banks to sign up for the program, particularly since it’s subject to change.

“It may look slightly more attractive now, on paper, but that could change,” Wheeless said, noting that the plan still has to go through Congress. “There’s no confidence the terms would remain.”

Some bankers say a better option would be to increase the government guarantee on loans made through a Small Business Administration program. The administration has done that too, but the $30 billion could instead be used to strengthen that initiative.

As Wheeless put it: “You’ve got the infrastructure already in place, so why design a whole new program?”

Read more: Financial Crisis, Small Business, Small Business Lending, Tarp, New Tarp, Small Banks, Community Banks, Obama Administration, Taxpayers, Bailout, Big Bank Bailout, Wall Street Bailout, Business News

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Banks Could Get Money From New Obama Proposal — And Still Not Lend