Timothy Geithner, President Obama, and Karen Mills

Timothy Geithner, President Obama, and Karen Mills

Treasury Secretary Tim Geithner spent most of the day Wednesday with small-business owners and bankers, discussing ways to ease the credit crunch that’s stifling economic recovery on Main Street.

Geithner and Karen Mills, head of the Small Business Administration, hosted the Small Business Financing Forum, fulfilling a promise President Barack Obama made when he announced initiatives last month to boost lending to small businesses.

Neither of these initiatives have been implemented yet. Under the president’s plan, the Treasury Department would tap TARP funds to provide low-cost capital to community banks, which they would use for small-business loans. Obama also called for increasing the size limit on SBA loans to help healthy small businesses expand as the economy recovers.

The Treasury Department is working on the final terms on the low-cost capital program, and that could be up and running in early December. Community banks may be leery about participating in the program, however, because of conditions Congress has imposed on recipients of TARP funds.

Congress, meanwhile, hasn’t passed legislation to increase the size limits on SBA loans. The House did pass a bill that overhauled all of SBA’s loan programs, including a loan-size increase that’s less than what Obama requested. But that bill included several controversial provisions and isn’t going anywhere in the Senate.

The Obama administration also supports legislation that would extend provisions in the economic-stimulus bill that increased the SBA’s guarantee on 7(a) loans, its main loan program, to 90 percent and reduced or eliminated fees on 7(a) loans and 504 loans, which primarily are used for real estate. These provisions led to a rebound in SBA lending, but the money for these enhancements will run out in December.

At Wednesday’s forum, small-business owners and SBA lenders agreed these provisions need to be extended. Congress, however, hasn’t managed to get this done either.

Congress also could solve the problems associated with taking TARP money by exempting banks that use the money for small-business lending from these restrictions. Geithner, however, may be asking the impossible: He wants Congress to give small-business lenders “the confidence that if they take capital today from our new programs, they will not face a change in our rules tomorrow.”