Bank Lending to Small Business --NOT

CNBC's Rick Santelli may have got it right when he commented about the proposed new tax on the largest US banks which received TARP assistance, "It's a little like throwing red meat in front of a bunch of lions, then ripping their stomachs open to get the meat."

What would have happened had the American taxpayer refused to cough up billions of dollars to bail out the biggest offenders of basic economic common sense?  Who was watching the hen house as the CEOs of the "too-big-to-fail'' lined their own pockets with bonuses, corporate jets and private excess at the reckless and irresponsible expense of their depositors and shareholders?

Unfortunately, the same people who were duped into depositing and investing their paychecks and savings in these institutions were the same group sucked into bailing them out. 

There is enough blame to go around and no one is denying the massive mess the previous federal administration got the United States into economically.  Many career employees and even a few appointees from inside the federal government tried sounding the alarms as early as 2000, only to find themselves isolated, fired or demoted by the most ruthless group of politicos since the early 1900's.

When the crisis could no longer be ignored or pushed into the next watch as some political strategists hoped, few believed it could be fixed by a new President.  Yet, a lot has changed.  The two or three percent of the richest US citizens have recovered much of their wealth and the stock market has tripled in less than a year.  Banks that have survived are fat and happy; their executives are set to get some of the biggest bonuses ever paid out in the history of their industry.

What has also changed is the constant shift of risk from banks and institutions who are granted public charters and operating licenses to make loans to small businesses and prudently earn and pay reasonable interest rates for the use of other people's money.  The silent and deadly creep of government guaranteed loans by federal agencies with little to no oversight has shifted most of the risk to the backs of US taxpayers leaving no incentive for lending institutions or their managers to be responsible or to do prudent lending --or any lending at all.  They don't have to lend to earn an honest living.  Instead, it is easier for banks and lending institutions to run back rooms and profit centers where they generate huge incomes from fees charged to their customers and usurious interest earned from credit cards.

What has not changed is how difficult it is for small business owners to get a loan of any amount from a local bank.  Many on Wall Street and even some in Washington, DC have begun to openly doubt that small business creates about 60% of the net new jobs in the US economy.  With all the stimulus money that has been pumped into the "too-big-to-fail" and more schools and less education than ever before, 15 to 20 million men and women in the United States stand idly in line waiting and hoping that someone will offer them a job --not a handout.

As one small business that has grown from three employees to fifteen during the last year, financing has not gotten easier --it has become more complex and more difficult.  We've not had one bank step up and say 'yes' to making funds available for equipment or growth.  Recently, one of our local lenders asked if I had a problem paying fees on our accounts and whether we would be willing to move all our accounts to his bank --including personal accounts.  My response was, "I thought you earned your income from interest on my loan." His response was, "I have a real problem with customers who don't like to pay fees for services my bank provides." Maybe it's just our generational difference. I'm 62; He's about 35 and schooled.

If banks refuse to make small business loans and federal agencies like the Small Business Administration merely provide loan guarantees to banks and other lenders, where should US small business owners turn? How and when will an economic recovery happen for the other 97% of US citizens?

Needless to say, our metal processing center, which removes over 1,000 tons of recycable iron and other metals from surrounding areas, is still looking for a lender who understands our small business --along with millions of other US small business owners who cannot get financing for equipment or growth.