Funds shift to small banks, firms

LANDOVER, Md. —President Obama unveiled plans Wednesday to shift spending of the government's $700 billion bailout from Wall Street to Main Street.

Speaking at a small business in a suburb of Washington, D.C., Obama said the plan would make it easier for small banks to provide credit to small businesses. He is also asking Congress to raise limits on Small Business Administration loans.

"Over the past decade and a half, America's small businesses have created 65 percent of all new jobs in the country," Obama told about 150 employees in a warehouse at a storage business's warehouse.

"These companies are the engine of job growth in America," he said. "They fuel our prosperity. And that's why they have to be at the forefront of our recovery."

The shift in focus comes amid outrage over record payouts to executives at giant banks and financial firms. Obama has tried to show that he is interested in the struggle of everyday Americans, not just firms on Wall Street.

The president called on Congress to increase the maximum size of loans small businesses can receive.

The plan would also provide infusions of money to small banks at low rates, provided they agree to increase lending to small businesses. Lenders that serve low-income areas would get help at even lower rates.

The money would come from the $700 billion TARP rescue fund, but the administration wants to gauge the level of participation by banks before putting a price tag on it.

The TARP fund is set to expire at the end of the year. The administration, however, could ask for an extension until next October. The administration official, who requested anonymity because he was speaking ahead of the president's announcement, would not say whether the administration would seek the extension.

Bank industry officials predict the small bank program would have to extend into next year to function.

Obama is facing pressure from liberals, who want to refocus the massive financial bailout more toward reducing foreclosures and creating jobs, and from Republicans, who are pressing the president to end the rescue plan and use bank repayments to reduce the national debt.

An administration official said the Treasury Department intends to wind down and terminate bailout programs launched at the height of the financial crisis to stabilize Wall Street and aid the struggling auto industry.