Two weeks after President Obama announced a $15 billion initiative to spark lending for small businesses, every major provider of these kinds of loans says the plan will not work as designed.
The conditions attached to the program, which require these financial firms to surrender ownership stakes to the government and limit executive pay, are so off-putting that these companies say they will not participate.
Joseph J. DePaolo, chief executive of Signature Bank, said the decision by Congress to crack down on Wall Street bonus payments in recent weeks has made him wary of participating in any government program, let alone the small-business initiative.
The limits on compensation are a significant factor for his firm because it rewards its bankers according to how much business they bring in. That pay scheme is critical to attracting and retaining its employees, he said."Why would you participate? How can you do business if the government at any time can change the rules of the game to protect its investment? That unknown today . . . puts us in a position that we don't feel is prudent."
Signature Bank, has 80 percent of the market share in this business. Associations say most of the smaller players are also unlikely to participate.
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