Bank Loans To Small Business

There is a lot of talk about how the banks aren’t loaning money to small business either to start up or to help them with operating expenses enabling them to stay in business. The talking heads say this is because before the melt down the banks would loan money to small businesses that were not well run or for some other reason were not good risks and defaults were high. Now the bankers say they won’t loan to a small business that doesn’t have a good business plan or that has a history of poor management. They say they need to be sure a small business will be able to repay the loan. I wonder why they didn’t do this before the melt down. Maybe it was because they got paid bonuses for making loans instead of on the profit made from a loan when it was repaid.

Since small business is the number one source of new jobs in America it is important to give them the money they need to operate or start up. But the banks are just not loaning money to enough small businesses to stimulate employment and decrease the jobless rate. It is more profitable for the banks to gamble on credit default swaps and other creative financial schemes than it is to make loans and so there really isn’t much incentive for them to make loans to small business.

Over the past twenty years there has been an enormous increase in wealth in America. The problem with this is that the increase hasn’t been distributed evenly. Those at the very top of the income scale, the owners of by far the largest share of the business community, the corporations, have gotten virtually all of the increase. The working class, the line workers and small business owners, are actually worse off now. Their buying power is down from what it was twenty years ago. So there isn’t the profits generated that are needed to pay for the expansion that would create new jobs.

Lack of banking regulation has resulted in this sad state of affairs we find ourselves in. Since the Supreme Court has ruled that the corporations can spend as much as they want to on political campaigns and politicians, there isn’t likely to be any new regulation of the kind necessary to change this. The banks will continue to gamble instead of making loans to small business and the unemployment rate will remain high.

I see no solution to this problem except for the masses of people to demand that our representatives pass an amendment to the Constitution to take money out of politics. As long as the corporations can buy the influence of our lawmakers there isn’t much chance that they will act on behalf of the common citizen instead of the corporations.