The majority of this is irrelevant, but someone online pointed out an interesting exchange between the President and a small business owner:
Q: My name is Steve Gordon. I'm from Clearwater. And I manufacture -- I own a small company, environmental company. I manufacture the Instant-Off water-saving device that fits on any faucet worldwide. I'm frustrated because I can create 500 jobs; I've gone to the banks, I can't get a loan. And I speak for all businesses in the United States. (Applause.) We are tired of dealing with banks. And I don't understand -- and this is my question for you, is that I know you care, I know you're trying. And I appreciate the pledge of $30 billion to small businesses. But lending it to the banks to lend to us is not the answer. It's just not.
What I suggest, and the question is, why can't you use the SBA just like you lent directly to Wall Street, you lent directly to the automakers, you lent directly to the banks -- why can't the government make small businesses available directly to us? (Applause.)
President Obama: [after his first response about success he sees so far, and an acknowledgement that Mr. Gordon may not see it as enough, the President continues] Keep in mind, a small business loan of any sort, or a large business loan of any sort requires some sense of, all right, what's the business plan, what are your projected earnings, et cetera, et cetera. And somebody has got to do that. Now, if the SBA were to suddenly take over that entire function we'd have to stand up a massive bureaucracy -- a huge one. And we'd have to train all those people and it would take too long, and you'd be frustrated -- why is it that this big government agency can't seem to run anything?
So what we've decided to do instead is to take $30 billion that was repaid by the banks and make that available under criteria that will encourage small banks to give those loans to you. And if we do that effectively, we can potentially get that money out the door more quickly.
Clearly, Obama is exactly the Socialist-bogeyman the Right has made him out to be, up there alongside the likes of Ronald Reagan, a notorious Communist-sympathizer.
I do understand where he's coming from. An expansion of the duties of the SBA, or any other government agency, would take time and money to set up. Obama believes that private enterprise, given government money with "encouragement" to lend, can respond more quickly and more efficiently. However, this ignores the role many of these very same enterprises had in the crisis, as well as the significant absence of reinvestment in the economy with the money received thus far.
I would argue that it could be useful to allocate at least some of the $30 billion to expand the scope of the SBA, to directly lend money to promising small businesses. This could run the danger of undercutting local banks, but something needs to change. As we've learned in class, the market's main characteristic is efficiency, efficiency of profitable return. A less profit-focused government agency might make funds available to proposals that are less efficient from a profit sense, but useful for the economy as a while and other reasons.
There is an immense interplay between government, banks, and business owners. What role do you believe is most appropriate and helpful for each actor? What are your thoughts in general?
