Small banks are refusing loans from the Troubled Asset Relief Program because their small-business clients do not seek loans, according to the National Federation of Independent Business. The Obama administration is taking steps to make TARP more available to smaller banks. But a survey by the federation shows only 4% of its members see financing as their most difficult challenge, and only 10% think they cannot not obtain needed loans. Small banks also find TARP conditions too strict, the federation said. "TARP is too onerous. Unless the costs, rules and restrictions are dramatically changed, it's not an attractive option," said Paul Merski, senior economist at the Independent Community Bankers of America.

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