The SBA lending program is intended to help more small businesses open and hire. Image: Flickr / chrisweaverphotos / CC-BY

Three states have qualified to get big money from the Treasury Department. The Treasury Department has infused $53.4 million into lending programs in Connecticut, Vermont and Missouri. All three states have created programs that are intended to stimulate $10 worth of small business lending for every $1 invested.

The Small Business Jobs Act

Small businesses in the United States represent about 50 percent of all private-sector jobs in the United States, and 64 percent of new jobs created in the last 15 years have been created by small businesses. In order to encourage small business growth and hiring in the United States, Congress passed the Small Business Jobs Act in 2010. The Act authorized the Treasury to hand out $1.5 billion in loan guarantees to states with solid plans to increase small business investment through loan guarantees and other lending programs.

Connecticut’s $13.3 million plan

Connecticut’s plan, now funded and supported by the Treasury department, is to provide business insurance loans. The Connecticut Development Authority, a government-supported financial group, will be using the $13.3 million investment to insure investment portfolios. Nineteen financial institutions will be given access to the CDA funds in order to provide loans to small businesses.

Vermont’s plan for $13.2 million for small businesses

Vermont expects that the $13.2 million in small business credit from the Treasury will spur $132 million in new small business lending. Four programs will each get a share of the business loans, which are similar to bad credit personal loans not payday loans. And $3.3 million will go to the Small Business Loan Program, which provides loans that support purchase of fixed assets (such as equipment) for businesses. The Technology Loan Participation Program will get $3 million; that program aims to increase IT and Bioscience businesses in the state. Vermont will use $5.9 million to fund the Commercial Loan Participation Program, which helps build facilities, and the final $1 million will go the portfolio insurance for lending institutions.

How Missouri will spend $26.9 million

Missouri qualified for the largest loan guarantee of the three states, at close to $27 million. The money will be distributed to two separate funds. $10 million will go into the already-established Grow Missouri Loan Participation Fund, which is specifically focused on businesses that employ 499 or fewer people. The Loan Participation Fund provides loans of up to $3 million to help state businesses grow. The final $16.9 million will create a new venture capital fund that will focus on high-tech startup businesses.

Sources

CNN Money
Small Business Administration

Treasury Secretary Timothy Geithner is due to unveil some proposals concerning Freddie Mac and Fannie Mae soon. Image from Wikimedia Commons.

Mortgage backing companies Freddie Mac and Fannie Mae could become a thing of the past. An upcoming Treasury report will make proposals about what should be done with the two government sponsored enterprises. One proposal is to let them both go under.

Proposed cut of Freddie and Fannie would take years

The Department of the Treasury has several proposals about what to do with government sponsored mortgage insurance companies Fannie Mae and Freddie Mac, according to CNN. The mortgage backing companies were placed in conservatorship when the real estate market crashed. Since then, more than $150 billion in emergency loans was lent to Freddie and Fannie to keep the housing market afloat. The government has been trying to figure out what should be done with Freddie and Fannie. One proposal is to withdraw the government from the mortgage market altogether. However, that would mean that low cost loans for homes would likely become a thing of the past.

Other possibilities

Freddie and Fannie own or insure half of all mortgages in the United States, from Birmingham, Alabama, to Anchorage, Alaska. Phasing the mortgage houses out, according to Bloomberg, or other proposals will take time to implement. It is also rumored that the size of loans that the companies can insure will be reduced. Currently, only loans less than $729,500 can be backed by either company. It is also thought that Freddie and Fannie could be reduced to being mortgage backers of last resort.

Vital role in keeping mortgage costs low

Freddie Mac and Fannie Mae play a role in keeping risks and costs in the mortgage market low. The companies repackage mortgages as securities that are sold to investors and guarantee lenders and investors compensation if borrowers default. The goal is to make sure loan lenders are willing to lend by creating more lending capital and decreasing risks that lenders will lose money if borrowers default. If Freddie and Fannie are axed, the cost of mortgages could increase and make it difficult for anyone other than the wealthy to get a loan for purchasing a home.

Sources

CNN

Bloomberg

A GM IPO has just been filed, and the installment loans from the Treasury will get a huge payment toward them. Image from Wikimedia Commons.

General Motors has finally put in the papers for what has been anticipated for weeks. A GM IPO has just been filed, although exact details are not known yet. So far, what is for sure is that GM will be offering preferred shares, but how many shares is unclear. This will bring the company a good amount of debt settlement relief, as it might pay off a good chunk of its debt to the U.S. Treasury. It will get the company closer to independence, and maybe get it some big time cash quick.

GM IPO to begin soon

General Motors filed for a GM IPO today. According to the New York Times, it could be quite the pay day for an IPO. The company will be offering preferred shares. However, GM hasn’t announced the total number of shares the company will be selling. Chairman and CEO Ed Whitacre announced he will retire completely from GM by the end of the year; he’d previously said he’d retire once the company was back on track. An initial sale of shares will probably liquidate a lot of debt.

Clearing of debt a major bonus

Among the many benefits of this sale of shares, and re-listing of General Motors, will be paying off a large part of the installment loans from the Treasury. According to CNN Money, the Treasury has agreed to sell some of the government’s stake in General Motors. Currently, the U.S. Government holds 60.83 percent of GM shares, and the Canadian government holds a further 11.67 percent. GM has paid the Treasury back about $7 billion so far.

Getting back into the black

General Motors, with this Initial Public Offering, will get at least part way to paying the debt the company owes to the U.S. government. GM is posting profits again, so it isn’t as if GM will need another loan until payday from the taxpayers again. The IPO would have to clear about $67 billion for taxpayers to break even on the auto bailout.

Further Reading

New York Times

CNN Money