The reduction of credit during the worst of the recession raises questions about whether the $247 billion assistance program achieved one of its primary goals: to stimulate the economy by reviving the flow of credit to businesses and individuals.

USA TODAY and the American University Investigative Reporting Workshop used federal bank data to conduct the first comprehensive analysis comparing the behavior of 940 banks in the Troubled Asset Relief Program (TARP) and 7,400 banks outside it. Key findings about TARP's first year:

• Lending fell. The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn't.

• Employee pay rose. Average pay at banks getting aid rose 9.4% in the program's first year. By contrast, non-TARP banks increased salaries 1.8%.

• Cost-cutting limited. Banks in TARP cut costs less than those outside the program. Government-aided banks increased branches by 2.7% while non-TARP banks cut branches by 1.2%.

The differences narrowed in the last three months of 2009 as many banks repaid the government.

President Bush signed TARP into law on Oct. 3, 2008, at the peak of the financial crisis. The program sought to stabilize the financial system and restore the flow of credit. Banks have repaid about $181 billion, including interest and dividends.

Rep. Jeb Hensarling, R-Texas, says the analysis shows that TARP "has been highly ineffective."

The Treasury Department, which runs TARP, says the program succeeded. Treasury spokeswoman Meg Reilly says "overall lending is improving as a result of the government's actions."

Contributing: Wendell Cochran, senior editor of the Investigative Reporting Workshop at American University in Washington, D.C., analyzed federal bank data for this report.

Source: http://www.usatoday.com/money/industries/banking/2010-04-21-tarp-banks_N.htm?csp=hf

The American Small Business League plans a series of lawsuits aimed at prying loose information about large corporations that are receiving small business contracts.

“A lot of this information is being withheld by the government when it should be public record,” said Chris Gunn, a spokesman for the League.

The first lawsuit, filed in U.S. District Court in Northern California, seeks to require GSA to continue reporting the names of contractors receiving set-aside contracts. The League says GSA plans to drop that information from the Federal Procurement Data System, deleting 10 years of data and making it impossible to track violations.

A judge is scheduled to rule by the end of the month on ASBL’s request for a preliminary injunction.

The second action, also filed in Northern California, asks that SBA be required to release details of its public relations contracts. The League believes the contract documents will show that “SBA has spent American tax dollars to hire consultants to help them obscure the SBA’s role in diverting billions of dollars a month in federal small business contracts to Fortune 500 firms and other large businesses around the world.”

Gunn said approximately 10 other suits are in the works, seeking information about such things as prime contractors’ performance in meeting subcontracting goals and the names of contractors doing classified work.

The Small Business League’s president, Lloyd Chapman, has charged for years that large corporations were masquerading as small ones to qualify for set-aside contracts. Several federal investigations have found that many contracts intended for small businesses had gone to large companies, but SBA has blamed the discrepancies on data-entry errors or the acquisition of small contractors by large ones.

Gunn said the League believes the lawsuits could yield information documenting “the government’s efforts to cover those abuses up.”

Few issues have divided Americans as completely as health care reform. Proponents believe that making medical care available to 32 million uninsured people will open a new era of social responsibility and fulfill the government’s covenant with its citizens, a sort of 21st Century New Deal.

Opponents see it as an unprecedented loss of personal freedom and an apocalypse of government interference that amounts to full-frontal socialism, if not totalitarianism, that is, a 21st Century New Deal.

The language of the heath care reform bill, passed by Congress on March 21 and signed by President Obama on March 23, may be bureaucratic and its provisions may be labyrinthine, but the basic idea is simple: Almost every citizen and legal resident of the United States (excluding American Indians) must purchase medical coverage for themselves and their dependents or risk what will eventually be hefty tax penalties, beginning in 2014. This insurance may be provided through employer programs or purchased through new “marketplace” sources.

Certainly so-called universal health care will be expensive, to the tune of $940 billion in the first 10 years. Who pays for it?

The wealthy can expect to pay more for Medicare, and insurance companies will pay an excise tax on employer-sponsored health plans that cost more than $10,200 a year for an individual or $27,500 for a family; this comes after 2018. Drug companies, health insurers and medical device manufacturers will also face new fees and taxes, as, in a fine point, will owners of indoor tanning services.

“Obviously, the legislation presents lots of challenges,” said Tim Finnell, a partner at Name Search
Watch Service', TITLE, 'Learn More', WIDTH, 200, SHADOW, true, STICKY, 1, CLOSEBTN, true, CLICKCLOSE, true, BGCOLOR, '#e1e1e1', BORDERCOLOR, '#7d0200', TITLEBGCOLOR, '#7d0200')">Group Benefits LLC in Memphis. “Insurance premiums are going up, and they’re not going down. The good thing is that the law subsidizes low-income people by subsidizing tax credits. That begins in 2014.”

And then there are small businesses, defined by the government as a company that employs fewer than 100 people. According to the American Small Business League, 98 percent of the businesses in the U.S. employ fewer than 100 people, and 89 percent of those employ fewer than 20. Many restaurants fall into that category.

The Washington-based National Restaurant Association firmly opposed passage of the health care reform bill.

“We are extremely concerned that the health care bill will impose tremendous burdens on Americans’ restaurants,” said the group’s president and CEO, Name Search
Watch Service', TITLE, 'Learn More', WIDTH, 200, SHADOW, true, STICKY, 1, CLOSEBTN, true, CLICKCLOSE, true, BGCOLOR, '#e1e1e1', BORDERCOLOR, '#7d0200', TITLEBGCOLOR, '#7d0200')">Dawn Sweeney.

“It will hurt our industry’s ability to create and sustain jobs.”

The restaurant (or food service) industry employs 12.7 million Americans in 945,000 food outlets, according to the National Restaurant Association.

Restaurant sales in 2010, estimates Restaurant Industry Forecast, will represent about 4 percent of the U.S. gross domestic profit, and food service employees will account for 9 percent of the nation’s work force. The National Restaurant Association counts 380,000 restaurant members.

Name Search
Watch Service', TITLE, 'Learn More', WIDTH, 200, SHADOW, true, STICKY, 1, CLOSEBTN, true, CLICKCLOSE, true, BGCOLOR, '#e1e1e1', BORDERCOLOR, '#7d0200', TITLEBGCOLOR, '#7d0200')">Mike Miller, owner of Patrick’s Steaks and Spirits and president of the Memphis Restaurant Association, echoed Sweeney’s assessment.

“Everybody wants to do something for their employees,” he said, “but I can tell you that the way the bill was passed has restaurant owners shaking in their shoes. They’re terrified. I have under 50 employees, but if you have 90 or 100 employees, it’s going to cost $100,000 for coverage. Are you supposed to take a cut in pay? I’ve been talking to my accountants, and I think this will be devastating. The unintended consequence is that the law is a great incentive not to expand.”

What is everyone so terrified about?

Basically, small-business owners can look forward to these provisions (and thanks to businesspundit.com and csmonitor.com for the non-lawyerly explanations summarized here).

In 2010, businesses will receive a 35 percent tax credit if they have 10 or fewer employees earning less than $25,000 on average. The tax credit will be smaller if they employ 25 or fewer people with an average wage of $50,000 or less.

Starting in 2014, businesses could earn a 50 percent tax credit if they employ 10 or fewer people earning less than $25,000 on average.

If a business employs 50 or more people, it will be fined $750 per full-time employee if health insurance is not provided, though there won’t be a charge for the first 30 employees not covered, and there will be no penalty if fewer than 50 people are employed.

If health insurance is provided for employees, the business must cover no less than 72.5 percent of the cheapest health plan for individuals or 65 percent for families. Every employee must be enrolled, unless they choose not to be covered.

“I think there’s some general hysteria out there now,” said Finnell. “In terms of affecting businesses, we’re telling our clients that there’s not really a short-term effect. The provisions will probably add 2 to 4 percent to the cost of doing business, but not one will be forced to pay anything if they have 50 or fewer folks, but above that, yes, you will be paying more.”

Source:  http://www.memphisdailynews.com/editorial/Article.aspx?id=49374