Even Obama Can’t Increase Lending To Small Business. Or Can He?

Monday, Bank of America acquiesced to the Obama administration's urging to open up lending to small and medium sized businesses. BoA promised to do that to the tune of $5 billion next year. CEO Ken Lewis promises that his company will do everything they can to help small business.

The fact that BoA is saying this is important because they are, aside from Wells Fargo, the largest small business lender in the United States. If they begin to open up lending, then perhaps a trickle down effect will follow. Bank of America is certainly not alone. If you're a small business person, you're likely well aware of the near impossible task of trying to pry money from the hands of any bank over the last year. Maybe that's why you're on Factor King's site: to drum up some much needed cash via factoring.

But, let's get back to the point. In his gathering with CEO's of the nation's 12 biggest lending institutions, Obama reminded the banks of the "extraordinary assistance" the financial industry received from taxpayers this past year. "We expect some results," Obama told the group. "I'm getting too many letters from small businesses who explain that they are credit worthy, and banks that they've had a long-term relationship with are still having problems giving them loans."

Banking industry reps simply need only to point out rising default rates to demonstrate just how hard it will be for BoA to fully come through on their promises. The bank reps told Obama that while they do wish to lend money, they're having trouble finding creditworthy small business borrowers. And even though Obama brushed off that complaint, it is still a worthy consideration: banks are not in the business of welfare. They will do what they feel is right when it comes to their very survival.

So, the point here is that there is no guarantee that banks will begin lending any time soon. Paying lip service to politicians is something that CEO's having been doing since the dawn of time. As an example, there have been many recent attempts by Washington policymakers to revive the small business lending market, yet bank vaults have remained, for the most part, closed. Give credit to The White House for trying change that. Just don't plan next year's budget based on the idea that your friendly neighborhood banker will be writing out a check to you any time soon.

Pessimistic? Maybe I am. But a good amount of pessimism is usually necessary when speaking about politics and big business.