New Lending Program Evokes 'Cautious Optimism' in Small Biz Community

The chairwoman of the House Small Business Committee is cautiously optimistic about the move by the Federal Reserve today to provide up to $200 billion to investors who put the money toward small business and consumer lending.

"There is cautious optimism that the new facility, which is long-overdue, will begin to thaw the small business lending markets, which have all but stopped working," said Rep. Nydia Velazquez (D-N.Y.) today, reacting to the news. "More needs to be done, but this is a move in the right direction."

The announcement by the Fed is part of a broad, economic package designed to rekindle the nation's economic growth. It is largely separate from the $700 billion Troubled Asset Relief Program, administered by the Treasury Department and focused on shoring up the country's financial system.

"Continued disruption of these markets could significantly limit the availability of credit to households and small businesses and thereby contribute to further weakening of U.S. economic activity," the Fed said in a news release this morning.

UPDATE 3:49 p.m.:

Sen. John Kerry (D-Mass.), who heads his chamber's small business committee, said today's move by the Treasury signals an acknowledgment from the administration that federal help is needed for small businesses.

"The frozen lending market has left small businesses in the cold as we face the holiday rush," said Sen. Kerry. "I'm glad the secretary has taken our warnings seriously and taken this step forward. It should provide some needed relief at a critical time. We hope small businesses will continue to get the help they deserve as further steps are taken to repair our ailing economy."

By Sharon McLoone |  November 25, 2008; 12:07 PM ET Economy Watch , Funding
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