Loans Expert

The Obama administration is trying to prop up small businesses with more funding for community development banks.

Obama’s fiscal 2011 budget seeks $250 million in additional funding for community development financial institutions, or CDFIs, a Treasury Department official told Congress Tuesday.

“We strongly believe that further support is needed for CDFIs to help serve distressed areas manage through the economic downturn,” said Michael Barr, assistant secretary of the U.S. Treasury for financial institutions.

Barr testified before the House Financial Services Committee, which is considering proposals for making federal funding more accessible to small businesses.

The Obama administration’s proposed Small Business Lending Fund looks attractive to local bankers.

They can’t help but wonder, however, if the plan’s beauty is more than skin deep.

The program, outlined by President Barack Obama on Tuesday, would utilize $30 billion of remaining Troubled Asset Relief Program (TARP) funds and make it available to banks with assets of less than $10 billion. Those banks account for 50 percent of small business loans nationwide.

The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released.

The Federal Reserve extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still “fragile.”

The Fed also plans to give securities dealers options for tapping one of the loan programs to ensure financing through the ends of quarters, when funding needs can jump. Commercial lenders will be able to borrow from the central bank for a longer period, and the Fed boosted its swap line with the European Central Bank.