Senate Democrats

Whose Side Are They On: Senate Republicans Say ‘No’ to Small Business Job Creation

Unfortunately for the millions of hard-working Americans who depend on small businesses, Senate Republicans are once again saying “no” to job creation in the private sector.  While the economy is recovering from the worst economic crisis in almost 100 years, sustainable recovery will only be achieved when coupled with long-lasting job creation.  Senate Democrats have already taken a number of key steps as part of our year-long, multi-bill jobs agenda.  However, more than 15 million Americans are out-of-work and the national unemployment rate is just below 10 percent – clearly immediate action is required. 

That is why Senate Democrats have brought forward job-creating legislation aimed at the backbone of the American economy: small businesses.  Over the past 15 years, small businesses have created approximately 12 million, or two-thirds of America’s new jobs.  Small businesses historically have borne the brunt of employment losses during recessions, and the current recession is no exception.  Over the past two years, small firms have accounted for between 64 and 80 percent of net job losses.

The fully paid-for bill would support small businesses through tax credits, enhancements to Small Business Administration lending, counseling and contracting programs, and the development of new community bank lending facilities.  One of these programs is the Small Business Lending Fund (the Fund), which would provide the Treasury Department with the ability to purchase preferred stock and other debt instruments from eligible financial institutions.

Highlights of the Fund include:

·         Targeted Incentives to Lenders that Extend New Credit.  Eligible institutions include insured depositories, bank and savings and loan holding companies, and certain community development loan funds.  Participating institutions would pay a five percent dividend rate on the preferred stock, but this rate could be reduced to as low as one percent if a bank demonstrated a 10 percent increase in small business lending relative to a baseline set using the four quarters prior to enactment.  The dividend rate would be increased to seven percent after two years, if the bank did not increase its small` business lending. 

·         Limited to Small Lenders. Ninety percent of the eligible institutions have less than $1 billion in total assets.  These smaller community banks could apply to receive investments of up to five percent of their risk-weighted assets.  Eligible institutions between $1 billion and $10 billion in total assets could receive investments of up to three percent of risk-weighted assets. 

·         Provide Needed Capital to Community and Smaller Banks.  The program will provide an estimated $30 billion in capital to small banks, which will leverage up to 10 times that amount in new lending, while saving taxpayers an estimated $1.1 billion.

Unable to attack the Small Business Lending Fund on its merits, some Republicans have claimed it is another TARP initiative.  Not surprisingly, these criticisms are unfounded and untrue.  The Fund is a new program completely separate from TARP, designed specifically to support lending from small banks.  The financing mechanisms for the Fund would  be authorized through new legislation and would have no connection to TARP or contain any TARP-like restrictions.  Instead, the Fund would face strict oversight by the Treasury Inspector General and new taxpayer protections, including a required “small business lending plan” and reports on how funds have been used under the program.

Republican opposition is a striking blow to the sector responsible for two-thirds of the jobs created over the past 15 years.  Rather than making false claims about this job-creating legislation, Senate Republicans should support the critical role that small businesses continue to have in our nation’s economic recovery. 

Bookmark and Share