WASHINGTON, Aug. 18 (UPI) -- The U.S. Treasury Department is doling out funds to small banks in a program critics say is a way to extricate banks from the unpopular TARP program.
The $30 billion program known as the Small Business Lending Fund is available to banks that have paid off the Troubled Asset Relief Program funds, The Boston Globe reported Thursday.
Nearly two-thirds of the $1 billion handed out so far has gone to TARP recipients, with banks typically using the funds to pay off their TARP loans, which are more expensive.
For example, four banks in Massachusetts this week were given $18 million. In the mix, Mercantile Capital Corp. is set to receive $7 million and half will go to pay off the bank's TARP obligation, the Globe reported.
The SBLF, which is being touted as a way to boost lending to small businesses that expect to expand and hire more workers, will cost banks 1 percent a year in dividends, about one-fifth of what TARP costs.
"In that regard, SBLF is particularly helpful in permitting Mercantile to assist its customers and the local economy to grow," said Mercantile Chief Executive Officer Charles Monaghan.
Republicans in Congress are denouncing the program, which some have dubbed "TARP Jr.," the newspaper said.
Neil Barofsky, the former special inspector general who oversaw the TARP program, said the new program "has always been more about giving Treasury the opportunity to rebrand an unpopular TARP program than actually stimulating small business lending."
Sen. Olympia Snowe, R-Maine, has introduced a bill to disqualify TARP recipients from participation in the SBLF program, a move some say would effectively end SBLF.
TARP was put together by the George W. Bush administration and signed into law in October 2008 as a way to stem a financial crisis in the nation's largest banks.