Some economists are already declaring the bank bailout effort a failure because fourth-quarter data shows that the biggest bailout recipients are actually lending less since getting the money.
The numbers aren't surprising. Small business owners have been fretting about a lack of capital for months now. While many banks claims their lending hasn't slowed, business owners tell a different story.
One such saga is playing out in a Houston courtroom between Comerica Bank of Dallas and Houston entrepreneur Clifford Wright. I detail the case in my column today:
Clifford Wright knows why the federal bank bailout isn’t working.
He says he watched a promising building supply business collapse because his bank, a recipient of a couple of billion in taxpayer dollars, rescinded his financing.
“We had a perfectly good, creditworthy deal, and they wouldn’t finance it, knowing it would put us in the tank,” said Wright, a Houston entrepreneur whose company, Simplex Building Products, shut down at the end of December.
Wright, who previously helped found Houston-based American Residential Services and Crown Plumbing and Heating, is no stranger to business startups and their financial requirements. He and his attorney claim Simplex is just one example in which Dallas-based Comerica Bank, which got $2.3 billion in federal bailout money in October, called small-business loans without warning.
“All of a sudden they yanked the rug out from under them,” said Wright’s attorney, Jason Gibson. “Comerica should be doing things to help small-business guys, because that’s in the best interest of the economy.”
Read more here.
What will it take to get banks lending again? Is the bailout program working? How can we tell?