Texas bank to give up bank charter so it can lend to small business

What is wrong with that headline?  Why would a bank need to give up its banking charter to lend to small business?

The headline from an article on page C1 of yesterday’s Wall Street Journal was “Fed Up: A Texas Bank Is Calling It Quits.”  It seems that Main Street Bank, a small but profitable bank in Kingwood, Texas was told by regulators to shrink its small-business lending to about 25% of its loan portfolio from 90%.

Main Street’s chairman is quoted as saying “We felt that servicing small business is something the country needs and that we’re really good at it.  I thought the model was working just fine.”

A chart accompanying the article reveals that U.S. small business lending has retreated to 2003 levels. (Non-farm, non-Residential loans in the amount of $100,000 to $250,000; FDIC).

Let me get this straight:  it is OK for banks to purchase bonds from insolvent countries, or corporations too big to fail.  But how dare them lend to small businesses who take risks and drive economic growth! Is there any wonder the economy is stuck?!

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