Small equipment companies see lack of fairness in federal bailouts

Monday, June 15, 2009

Some business leaders and economists have expressed concern that federal bailout funds could lead to distorted markets in sectors such as agriculture equipment and long-term debt that could hurt the economy in the long haul, according to a report in the Wall Street Journal.

As an example, the report cited farm equipment maker John Deere's purchase of a financial thrift that allowed it to get a government guarantee on $2 billion of its debt through a Federal Deposit Insurance Corp. program.

Because the FDIC program didn't cover smaller equipment providers, the Equipment Leasing and Finance Association (ELFA) lobbied the Fed to expand the Term Asset-Backed Securities Loan Facility (TALF) program to include sales of farm equipment and other machinery, which it agreed to do.

But smaller companies that don't qualify for the federal guarantees are facing pressures to cut costs to stay alive and claim that the federal financing is unfairly advantaging their larger competitors, the Journal reported.

Meanwhile, the latest ELFA monthly leasing and finance index, which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for April declined by 42.5 percent when compared to the same period in 2008.