A White House plan to boost lending to small business wants to offer capital to small community banks using the Troubled Asset Relief Program or TARP, at a lower interest rate.
But one KELOLAND bank says after it received 25 million dollars from the rescue fund, the price banks pay for the money is just too high.

In the last year, Home Federal Bank Chairman and CEO Curt Hage has learned all about taking money from the government.

"They actually went out and asked several of us if we wouldn't take the money because we didn't need it. But they wanted to have excess capital in the system on ready so when things got bad we'd have lending power," said Curt Hage of Home Federal

Hage says Home Federal planned to use the money to take over weaker, failing banks so the government wouldn't have to step in.

"It didn't take long before they said specifically; we don't expect banks to use this money to make acquisitions. We expect them to use to make new loans."

Hage says Home Federal was already making plenty of loans and the rules out of Washington for the money seemed to change every day. That's why he's advising local banks to think twice before taking TARP money now.

"Based on our experience if you don't need the money, don't take it. There are more strings attached than you can imagine and they're attaching more strings all the time," said Hage.

And trying to detangle from those strings was no easy task either.

"Tried to give it back. I tell people it took us six weeks to apply, qualify and get the money and it took us six months to give it back," said Hage.

Because Hage says the government had no program in place to accept repayment. And Hage thinks even if the bureaucracy that went along with the money wasn't a problem he doesn't think giving banks capital for small business lending will work anyway.

"The problem is it's not as much about the availability of money, but the credit worthiness of businesses who are stressed and don't have the earnings that support more credit," said Hage.

KELOLAND news talked with several banks in Sioux Falls, who told me they have assets over a billion dollars, so they don't qualify for the money.
But one banker tells me that because savings rates are up, banks already have more money on hand to lend to those who qualify for the money.