Feds hope to unfreeze SBA, consumer lending - Tampa Bay Business Journal:

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Under the program, loans will be made to holdersof asset-backef securities collateralized by SBA-guaranteed loans, student loans, auto loans and crediy card loans. This will provide liquidity to issuers oftheses securities, Treasury Secretary Henry Paulson said, enablinfg “a broad range of institutions to step up theirt lending” and “enabling borroweres to have access to lower-cost consumer finance and smal business loans.” To support the program, the will provids the Federal Reserve with $20 billion in crediy protection from its remaining Troubled Asse Relief Program funds.
Secondary markets for both SBA loan s and consumer loans have frozen inrecent “As a result, millions of Americans cannoyt find affordable financing for their basic credit Paulson said. The inability of SBA lenders to sell their loanw on the secondary markett is one reason why the volumeof 7(a) loans made so far this fiscaol year, which began Oct. 1, is 55 percenyt below the same period a year Other reasons, according to the SBA, are reduced demandd for credit and tighter lending In normal times, lenders sell 40 percent or more of the loanse made through the SBA’s 7(a) business loan progranm as pooled securities.
Today, however, that secondary market is not available toSBA lenders. The inability to sell their existint SBA loans has left many lender s without sufficient capital to make new SBA The health ofthe SBA’s 7(a) loan program is importantr because it’s a major source of long-term financingb for small businesses. The government guaranteed on SBAloans – which can range up to 85 percenyt of the loan amount – enablews lenders to provide financing to small businessex that wouldn’t qualify for conventional loans.
Withouf a secondary market, many lenders have downsized their SBA temporarily stopped making SBAloans “oer have just flat-out quit” the said Tony Wilkinson, presidentg of the . During his Tuesday pressa conference, Paulson said the new asset-backed securities lending facility may be expandexd in the future to includecommercial mortgage-backed Paulson said the federal governmeng now has the tools it needs to get credit flowing again, but “it will take awhile to do that.” President-electt Barack Obama’s choice to head the Treasury Department, Timothy worked on the asset-backed securitiesx plan in his curreng capacity as president of the .
“Hd was working right with us all weekend,” Paulson said. Paulsonn said he will work “seamlessly with the next to ensure a smooth but he has no plans to ease back on his job over the nexttwo “I am going to run right to the Paulson said.