|And Its Gone!
The last few months have been painful for small businesses across America. These businesses often have a difficult time getting a bank loan. Bubbling up to the surface is the recognition the Fed has played a major role in pushing inequality higher. This was highlighted when Federal Reserve chairman Jerome Powell admitted it’s tough for the Fed to boost lending to smaller businesses. “Trying to underwrite the credit of hundreds of thousands of very small businesses would be very difficult,” Powell said. He acknowledged that many of these small loans are really nothing more than the personal promises of people struggling to keep the doors of their business open.As the financial pain from the pandemic and government restrictions placed on businesses continue, much of the money thrown out to ease our pain has rapidly flowed into the hands of Wall Street and big business. The reality that most small businesses close in failure underlines the risk involved in loaning money to such concerns. Still, it is difficult to deny the importance of small business in the overall economy. It plays a major role in communities by both creating jobs and allowing individuals to better their lot in life.
During a recent exchange between House Financial Services Committee Chairwoman Rep. Maxine Waters of California and Powell, it became evident that Powell was not rushing to implement changes in the way things are done in an effort to aid small businesses and level the playing field. Waters suggested the Fed and Treasury Department lower the minimum size of the loans under the Main Street Lending Program to $100,000 from the current $250,000 to help a larger number of small companies that have been hurt by the pandemic. Powell even went so far as to claim there was little demand for loans below $1 million.
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