I don’t think we’re making enough out of incompetence as a primary reason we’re mired in a zero-growth decade. For instance, the Federal Reserve, empowered with enormous control over the economy, simply didn’t perform well over the last three years in using unconventional monetary policy to give a boost to the economy. They left the real possible actions that could have driven some economic improvement on the table, and what they did end up doing didn’t have much of an effect.
But the Fed are a bunch of right geniuses compared to the Treasury Department:
Nearly nine months after its formation, a $30 billion government fund to foster small-business lending has yet to pay out a single dime, even as the nation struggles with traumatic levels of unemployment.
Now, Rep. Sam Graves (R-Mo.) wants an explanation. And as chairman of the Small Business Committee, he hopes his sole witness at a hearing Wednesday — Treasury Secretary Timothy Geithner — can shed some light on the holdup.
“This isn’t a witch hunt in any sense of the word,” Graves said. “We’re just trying to figure out why the fund isn’t performing as advertised.”
Yes, I would like to know the same thing.
This was one of the few successful bills passed that had anything to do with jobs last year. In theory, it was supposed to use $30 billion to lever up to $300 billion in small business lending through community banks. When it was signed last September, the theory was it could help create 500,000 jobs.
There has not been a lack of effort: 844 businesses have applied for $11.6 billion from the Small Business Lending Fund, according to Politico. It’s just taken nine months to “vet the financial soundness of each bank,” according to Treasury. An official said he expects the money to start going out this month, which is what you would say when cornered like this.
There’s some industry grousing about capital requirements here, but that’s bunk. You’re talking about $30 billion untethered to those requirements. Not that I often quote someone from the American Bankers Association, but this matches with the expected experience at Treasury:
James Ballentine, senior vice president of grass-roots and political operations for the American Bankers Association, said new programs usually experience holdups. His organization’s initial concerns dealt more with implementing the fund properly rather than how quickly it would release money.
Still, Ballentine said, the approval period has dragged on much longer than anticipated.
“When you speak with officials with Treasury, they tell you it will be in a week or two,” he said. “Then a week or two goes by.”
I think we have to include rank incompetence in the mix here. Sure, there are areas where the top officials have perverse incentives, or are just craven in their sellout to moneyed interests. They also may just be bad at their jobs. It happens.
UPDATE: Sen. Jeff Merkley was one of the leaders who got the small business lending bill passed last year. I asked his office about this story today. “Senator Merkley has been extremely frustrated with the slow pace of Treasury in setting up the Small Business Lending Fund – and urged Treasury last month to pick up the pace,” they said. You can read Merkley’s letter to Treasury here. Simply put, Merkley’s office believes this fund should be the highest priority at Treasury, especially with unemployment so high, and he doesn’t see that kind of commitment yet.