The trickle-down effect hasn't been isolated to manufacturing. In finance, regional banks are struggling as their "too-big-to-fail" rivals, such as Bank of America (BOA) and Citigroup (C), thrive with the help of government bailout funds.
"If the capital of a big bank falls low enough, the president of the bank calls the Treasury and asks for several billion dollars," says Steve Verdier, director of congressional affairs for the Independent Community Bankers of America in Washington. "If community bank capital falls low enough, the regulators have to close the bank." Of the 8,195 banks in the U.S., nearly 8,000 are community banks, according to the ICBA.
Community banks are seeking increased access to funding from the Troubled Asset Relief Program. They're also are asking that restrictions associated with receiving bailout funds and issuing loans be less stringent than those imposed on the big banks that hurt the economy. Until that happens, community banks may be hesitant to issue loans to risky companies, such as small manufacturers, Verdier says.
Obama met with community bankers to discuss such concerns last month, and the Senate is now considering the Bank on Our Communities Act, which would redeploy up to $15 billion in TARP funds to help small banks lend money to small businesses."We haven't seen anything concrete yet, unfortunately," says Molly Brogan, vice president of public affairs for the National Small Business Association, an advocacy organization. "Small-business owners are feeling slightly more confident than they were just six months ago, but if they're unable to get capital now to plan for future growth, it could be a major problem for the U.S. economy and our jobless rate." -- Reported by Carmen Nobel in Boston.