Washington (AP) — The Treasury Department will invest up to $1 billion in small banks that serve poor communities as part of the Obama administration’s efforts to spur more lending to small businesses, according to the department.
The money will come from the $700 billion bank bailout fund. About 210 banks, thrifts and credit unions that are certified by the Treasury Department as Community Development Financial Institutions will be eligible.
Banks and other financial institutions that target more than 60 percent of their small business lending to lower-income rural and urban communities can qualify as CDFIs.
“These institutions operate in areas where unemployment is way above the national average,” said Treasury Secretary Timothy Geithner.
The banks will pay only 2 percent interest on the investments, lower than the 5 percent that large banks were required to pay under the bank bailout or Troubled Asset Relief Program.
Administration officials said about 60 banks and thrifts, and 150 credit unions would be eligible for about $500 million to $1 billion of investments under the CDFI program. CDFIs will be able to apply by the end of the month.