Banks Seek to Head Off Regulation With PR Offensive

After President Obama called the heads of 12 of the largest banks into his office to lecture them about not lending enough to small businesses, the message was clear: It’s time to get to lending, or the government will get to regulating. So while banks are busy lobbying themselves out of regulation and back into moral hazard, they’re also launching a huge public relations offensive to convince the public that they really are lending to small businesses.

JPMorgan Chase is running newspaper advertisements in major media markets — not an inexpensive endeavor — touting its “Helping Small Business in Even Bigger Ways” campaign that will increase its loans to “small” businesses from $6 billion to $10 billion in 2010. Unlike the federal government, which defines small businesses as those with fewer than 500 employees, Chase will define them as companies with less than $20 million in revenue. Apparently, that’s “small” by Chase standards.

Huntington Bancshares will up its small business lending to $4 billion over three years, offering $1.2 billion in new business loans in 2010, up from $890 million in 2009. Well Fargo plans on increasing its small business lending by 25 percent over 2009 to a total of $16 billion.

But according to June 2007-June 2008 data from the Small Business Administration — which already showed a slowdown in lending rates — for all the institutions, even their increased lending will be lower than in previous years. The SBA considers business loans of under $100,000 to be “microlending” loans, and loans of between $100,000 and $1 million to be larger small business loans, figuring that, on the average, they square with the definition of a company of 500 employees or fewer. Their data shows that, between June 2007 and June 2008, Chase made $25.7 billion in small business loans, with $15.5 billion in microloans and $10.2 billion in loans to larger small businesses. Huntington made $4.6 billion in small business loans in that time period, offering its clients $679 billion in microloans and $3.9 billion in larger small business loans. Wells Fargo loaned $27.2 billion to small businesses in that same period: $10.1 billion in microloans and $17 billion in larger small business loans.

Public relations initiative aside, the banks’ own numbers, combined with the pre-crash data, show that small business loans fell off dramatically during the crisis — despite the public bailout of Wells Fargo and Chase (among others). Those two banks alone, it is worth remembering, raked in nearly $8 billion and $11.7 billion, respectively, in profits for 2009. They can put whatever spin they want onto their efforts to ramp up small business lending but the truth is that they have no intention of loaning out as much money in 2010 as they did in 2007 or 2008.