MSNBC; By: Kent Hoover

The federal government wants banks to lend more money to small businesses, but regulators’ demands for more capital, higher deposit insurance premiums and fears about what Congress may do next are working against that goal.

Business lobbyists shook their heads at the latest example of the government working at cross-purposes: Legislation that would impose a hefty tax on bonuses awarded by companies that receive large investments from the government’s financial rescue program. These bills target executives and derivatives traders at American International Group, which recently awarded $165 million in previously contracted retention bonuses. But the fallout may be felt by all businesses that need credit, according to the U.S. Chamber of Commerce.

This retroactive change may make investors wary of participating in the Treasury Department’s new program to purchase real estate loans and mortgage-backed securities, chamber officials said. These so-called toxic assets are dragging down banks’ balance sheets, and selling them is seen as a necessary step in getting credit flowing again.

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