The credit freeze: Can the govt. make short term loans directly to small businesses?

[Barack_America]

So that they are able to borrow for operational costs, including payroll? (i.e. via the SBA)

:shrug:

Can the govt. keep mortgages available, perhaps via the FHA?

Is there anyway that the govt. can put a tourniquet on the financial sector hemorrhaging so that it affects the "common man" less?

Is there anyway we can do this bailout with buying up less of Wall Street's junk assets and investing more directly in Americans?


It just seems to me that the govt. already has a number of institutions available to channel money to the right places, with some regulations and oversight already in place. Would this head off the problem faster than sending all the money to Wall Street and squabbling over how the oversight will be structured, what it will be spent on, who will decide what is a worthy investment, etc.?

Thoughts?

[DJ13]

1. The Federal Reserve has emergency powers to do that

They could even lend directly to individuals if they needed to.

[Barack_America]

2. So why don't we funnel extra money into existing programs?

And sort out which Wall Street assets to buy (and at what price) later?

Would that work?

[RollWithIt]

3. Yes, but the problem is the red tape involved....

I couldn't imagine securing anything from the Government until after Christmas at the earliest. By then I'll probably have laid off most of my staff and be running a skeleton operation until things turn around.

[Barack_America]

4. Could you elaborate on the red tape?

If you've experienced it personally, that is.

[RollWithIt]

5. Well, not personally, through the government that is....

I'm a small business owner myself, I've always just done business with banks (Wachovia and Bank of America). Most of my credit lines were through Wachovia though. Anyways, while I've never personally tried to get a loan through the government, I would imagine there would be a fairly stringent application process that would take weeks and weeks. I mean if the entire system freezes up, it's not like the government can just start writing checks. I would expect any government checks (to individual small business owners) to take months.

Just my 2 cents.

[Barack_America]

6. Thanks.

Although I do have to wonder if there could be a way to streamline the process.

If the govt. is going to throw my money away, I'd rather it be on ordinary Americans.

[ContinentalOp]

7. So why not have the government give money to the banks...

with the stipulation that it must go toward new lines of credit?

[RollWithIt]

8. Well, the problem the banks have right now is their debt.....

Writedowns on bad mortgage and credit investments. So while they continue to pay on those bad assets, the money they would normally use to extend credit to customers just isn't there. In a way, that's what the bailout does, allow the banks to turn themselves right side up and begin loaning again (With much stricter guidelines.)