Today, the Congressional Oversight Panel -- the independent watchdog that oversees the Obama administration’s Troubled Asset Relief Program -- issued a report
“„A small business loan is, at its heart, a contract between two parties: a bank that is willing and able to lend, and a business that is creditworthy and in need of a loan. Due to the recession, relatively few small businesses now fit that description. **To the extent that contraction in small business lending reflects a shortfall of demand rather than of supply, any supply-side solution will fail to gain traction. Treasury should be mindful of this concern and should consider creative solutions that engage banks, state-based lending consortia, and other market participants. **
“„****The debate over whether small business lending is constrained by supply or demand is a reminder of the absence of high-quality data about current lending practices. Such poor data have made it far more difficult to pinpoint the causes of today’s problems and, as a result, to find effective solutions. Treasury should take active steps to gather more detailed and dependable data about small business lending, and put data-reporting requirements in place so that in the future policymakers will not be forced to make decisions with too little information about what is actually happening.