I have often felt that policy-makers inside the beltway just don’t understand small business. Even though they know that most of the job growth in this country comes from small businesses, they really don’t get how any operation with fewer than, say, 100 employees, can do anything worthwhile.

The Small Business Loan Fund is an eminent example. I wrote before that many of the banks that could really use money from the fund can’t apply for it. I was referring to banks with poor CAMELS ratings, but a reader pointed out to me that sub S banks can’t apply for the money either. Today’s American Banker newspaper carries an informative article on this topic.

Can you believe that Treasury comes up with a program designed to promote small business lending, and it doesn’t bother to include subchapter S or mutual banks? This is evidence to me that the folks at Treasury just don’t get small businesses. Sub S banks and small business lending go together like peanut butter and jelly. About a third of the nation’s banks have sub S status. How do you come up with a program and exclude the very portion of the industry that could benefit from the program the most?

The industry has been all over this. Here is a letter the ABA sent to Treasury last month. ICBA sent this letter earlier this week. It should not be difficult for Treasury to include sub S banks. All they have to do is follow the template the developed for TARP, another program that initially ignored sub S banks.

People wonder why bankers are skeptical of regulators and policy-makers. It’s because while they say they appreciate the role of community bankers and Main Street businesses, policy-makers and regulators often take actions which exclude, ignore or even deter them.