NASHUA, N.H. (AP) - Seeking to reconnect with voters and sell his economic agenda, President Barack Obama returned to politically significant New Hampshire on Tuesday to tour a small business and hold a town hall session with residents known for their tough questions.

Obama's visit is meant to draw attention to a proposal highlighted in his State of the Union address last week: funneling $30 billion to local banks so they can lend small businesses money they need to grow their enterprises and create jobs.

The trip comes two weeks after Democrats suffered the stunning loss of a Senate seat in neighboring Massachusetts, and the president is working to shore up his party's standing heading into the November midterm elections to avoid heavy losses in the House and the Senate, both of which are under Democratic control.

In New Hampshire, Obama is touring a business that makes energy efficient light bulbs and was set to hold his second town hall in six days, a format that allows him to show engagement with the public and counter a sense of "remoteness," as he has put it, that people have had with his policy agenda.

"Jobs will be our No. 1 focus in 2010," he said in excerpts of his prepared remarks, which the White House released early. "And we're going to start where most new jobs do - with small businesses. These are companies that begin in basements and garages when an entrepreneur takes a chance on his dream, or a worker decides it's time she became her own boss."

The $30 billion in loan financing would come from money repaid by big banks that got help from the $700 billion Troubled Asset Relief Program, the vastly unpopular bailout for those on Wall Street whose actions led to the economic downturn.

That $30 billion would be used to create the Small Business Lending Fund, separate and distinct from TARP.

"When you look at what's causing the problem, the problem is that small community banks might lack capital and how are we going to get them to send money out to small businesses," Small Business Administration chief Karen Mills told reporters traveling with Obama aboard Air Force One.

The fund would be open to banks with assets of $10 billion or less. About 8,000 such small and community banks would be eligible.

Banks that increase lending to small businesses would see reductions for up to five years in the dividend tax rate they owe the government.

Obama was calling on Congress to pass legislation creating the new fund, one of several ideas he has promoted recently to help small businesses. He has called for tax credits for those small businesses that hire new workers or raise wages, and for eliminating all capital gains taxes on small-business investment. He also has proposed tax incentives for all businesses to invest in new plants and equipment.

Sen. Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee, denounced the attempt to use money from the bailout program. He said it was a stunt so Obama could kick off in the Granite State his campaign for the $3.8 trillion budget he sent Congress on Monday.

His voice rising, Gregg told White House Budget Director Peter Orszag at a hearing that the legislation setting up the bank bailout program requires any leftover funds be used to pay down deficits.

"It's not for a piggy bank," Gregg said.

Orszag replied that that is why the administration was asking Congress for legislation to create the new small-business lending program.

White House officials said the new fund will bolster banks' balance sheets and enable them to make more loans to small businesses.

But many in the banking industry say lending is not hampered by a lack of capital. Even well-capitalized banks are having trouble finding creditworthy borrowers. Small businesses also are reluctant to borrow money in a sluggish economy for expansion or improvements.

The White House officials argued that banks capital reserves are one of several factors limiting credit. They said it will become more important as the economy improves.

The proposed new lending program is a refined version of a plan the administration first announced in October.

But the administration ran into resistance from bankers who believed they would be stigmatized if they accepted TARP funds. The Treasury Department has worked since then to try to make the program acceptable and to remove some of the requirements that applied to banks that accepted TARP money during the financial crisis.

Fixing the economy is the nation's top worry and the centerpiece of Obama's efforts. The degree to which he is successful will play out in states like New Hampshire, where two House seats and a Senate seat are in play in November.

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Associated Press writers Ben Feller, Jim Kuhnhenn, Tom Raum and Daniel Wagner contributed to this report.



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