Big TARP Banks Not Helping Small Businesses: Warren

The government's bank bailout program may have helped big financial institutions weather the credit crisis but has failed in getting money to small businesses, the head of the commission overseeing the fund told CNBC.

Elizabeth Warren called it "infuriating" that the Troubled Asset Relief Program has not achieved its objective in funneling some of the $700 billion in appropriations to small businesses.

A report the commission released Thursday found that big-bank lending portfolios to small businesses dropped 9 percent from 2008 to 2009, more than double the 4.1 decrease of its overall lending portfolio.

"Two out of every three new jobs created in America come out of a small business. Fifty percent of the private work force is in small business," Warren said in an interview. "If they don't have access to credit it's not only a problem to them now, but they can't help fund the recovery."

The report found that several Treasury Department TARP initiatives to get money to small businesses have proven ineffective, in part because banks were not required to lend the billions they had received in capital through the program.

"Some borrowers looked to community banks to pick up the slack, but small banks remained strained by their exposure to commercial real estate and other liabilities," the commission's executive summary said. "Unable to find credit, many small businesses have had to shut their doors, and some of the survivors are still struggling to find adequate financing."

The Treasury Department said in a statement that it agrees more needs to be done to get capital to small businesses.

Warren said she hopes a new program, the proposed Small Business Lending Fund, will help address the problem. The $30 billion package still needs congressional approval.

But she also warned that it "may not be enough" and the consequences could be dire if the lending disparity isn't evened out.

"If we play that out over time and there's more money available to big businesses and less money available to small businesses, we really end up tilting the playing field...and that's not going to help us in the recovery," she said.