Small Business Lending Fund Act of 2010

Floor Speech

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Mr. WARNER. Mr. President, I appreciate the opportunity to join my colleague and friend, the chair of the Small Business Committee, the Senator from Louisiana, in support of this very important piece of legislation. Let me first of all say: In her inimitable style, she has been relentless on this issue. The Presiding Officer and I are both new Members. I think we have seen, in our short time here, certain Members who get that bit in their mouth and just will not let it go. On this issue, Senator Landrieu has truly been a leader. It is an issue of paramount importance.

I wish to answer the question of the Senator, but I wish to first of all preface it by saying what I hear in Virginia--and I know what the Senator hears in Louisiana, with all the other challenges Louisiana has--is our constituents want us to focus on jobs. On any historic basis coming out of recession, 65 to 70 percent of all the new jobs created come from small businesses.

And while we can point to certain positive signs in our economy right now--the Dow at 10,500 from a low of 6,500, 15, 16 months ago; corporate balance sheets, large Fortune 500 companies with more money on their balance sheets than at any point in recent history--good news. But if they are not hiring--and I hear from corporate CEOs, as well, their concern that the small businesses that are in their supply chain are going out of business, not just the small businesses that would normally go out with a traditional recession, but this recession has been so deep and so hard that we have now cut through the fat and we are into the muscle and bone. And if we continue to lose small businesses at the rate we are, then the ability to create a robust recovery will be dramatically stymied.

So what do we do? There is no single silver bullet. And what the Senator from Louisiana has crafted is a menu of options for small businesses, to get them that additional assistance, particularly in terms of access to credit, that will allow them to get back and do what they do best--continue to innovate, grow, and create jobs.

The Senator asked me what I am hearing from other Governors. Other Governors, Democratic and Republican alike, are saying that we in Congress have to focus on jobs. The issue of credit and access to credit to small businesses is paramount to all of them, and they want to see this legislation passed.

I was a former chair of the NGA. This is the kind of issue where Governors of both parties come together because we don't see these issues simply through Democratic or Republican partisan lenses. And sometimes this is the kind of bill that, candidly, as I remember as Governor, you kind of scratch your head and say: This is kind of a no-brainer. This bill is paid for. Why would not the Congress do all it can to support small business?

The Senator has outlined, and I know I was repeating some of the items, but I want to reinforce again--I want to particularly focus on one part of this legislation, but there are really four buckets here. They are, how can we expand some of the initiatives within the Small Business Administration that were put in place, particularly in the trough of the downturn, to make sure that these SBA programs, which have been vitally important to small business lending, are maintained--the 90-percent matches, some of the other loan guarantee programs?

I should acknowledge right here that I think the Administrator of the SBA, Karen Mills, has done a remarkable job in streamlining a lot of the processes. I have heard from banks for years about their challenges in dealing with SBA. Well, the current SBA team realizes this is a moment of crisis, and they have done everything possible to streamline their procedures. They need to have these tools put back in place so that the SBA can continue to do the very important work and, candidly, work that goes much broader in terms of a portfolio of small businesses that they are now attracting to their programs than in the past.

I would also acknowledge the dramatic increase in the number of particularly independent and community-based banks that are now accessing and using SBA programs. If we don't pass this legislation, these programs will be dramatically cut back, No. 1.

No. 2, the Senator has crafted, again, at her committee, in a bipartisan way, a whole series of targeted small business tax cuts, a kind of accelerated depreciation that will have the ability to write off core investments, the ability to focus on these job creators. How can we give them a little bit of a break right now, during these challenging times, in our Tax Code?

The third bucket in this program is building on a proposal the Senator and I and others had. We actually suggested this to the administration last October, but they have now built in a $30 billion lending program. The interesting thing about this lending program is it actually, on CBO scoring, scores as a net positive. So this is money not only that we will recover, but we will make--albeit a small one--a profit on it, to shore up particularly independent and community-based banks and give them a direct incentive in terms of increasing their small business lending.

Then a fourth bucket, one that I have been working on--and I wish to commend both my colleagues from Michigan, Senator Levin and Senator Stabenow. They have been very active in this as well--which is saying: Can we take what is already working in the marketplace at a State level and build upon it? This is the so-called Capital Access Program. Twenty-six States in America already have this program in place, and those States that do not have it can, in effect, piggyback on other State programs. So there is no need to create new bureaucracy. There is no need to create tons of new paperwork.

I hear, I say to the Senator, from my banking community that this particular initiative is one that they are perhaps even the most supportive of because they know how to do it, they know how to access it, and it can immediately generate a great deal of additional lending.

Let me take a moment, at the Senator's discretion and time--I know this is her hour, but I wish to take one moment to explain it because I think we have focused on the lending facility, we focused on SBA, we focused on some of the tax cuts, but the Capital Access Program has not received as much attention. Each State has slight variations, but let me describe how this initiative works.

Basically, the independent bank, frankly, at this point is probably a little leery of making a loan, even to a relatively healthy small business because chances are, most small businesses coming out of this recession, their cash flows are down, and if they have real estate as collateral, it has perhaps declined in value. So while I have great sympathy for the small businesses that cannot get their credit lines renewed, I also understand the bankers' predicament in that small business credit isn't quite as good as it was, perhaps, in 2007.

So how does this program work to benefit these small businesses? What it basically does is it creates a separate loss reserve pool for small businesses that fall into this category. What does that mean? If a small business was coming to a bank, a local bank in Baton Rouge or a local bank in Martinsville, VA, wanting to borrow $100,000, the bank would charge that small business a couple of extra points--$2,000 or $3,000 out of that loan that would go into a separate loss reserve pool. We, with this Capital Access Program, would then match that separate loss reserve pool for, again, a matching amount of points, 2 or 3 additional points. So on a $100,000 loan, you would have $6,000 that would be absorbed, first dollar loss, if this loan went into default. Now, the bank still has to do its due diligence because if you eat through that $6,000, the bank has to bear the burden. But it gives you a little cushion there. It takes that marginal credit and makes it creditworthy during these challenging times.

Think about this $100,000 with that $6,000 loss reserve pool taken times a hundred or times a million. You could have a $100 million basket of small business loans with a $6 million reserve, and suddenly you have a very valuable tool that can be used by banks across the country.

The roughly $1.4 billion, $1.5 billion that is in the legislation in this program, it has been estimated it will be leveraged. And I know ``leverage'' is a bad word in this Hall at this point, and I particularly have pointed out some of the concerns of overleveraging. But because the person who is receiving the loan is putting up money and we from the government side are putting up money, we actually double every dollar we put out, and on an actual dollar basis, we are going to be leveraging the Federal dollar commitment 20 to 30 times. So that means this $1.4 billion, $1.5 billion can create $50 billion of additional small business lending. Think about the power of this tool, a tool that banks are familiar with, a tool that already exists in 26 States, a short-term shot in the arm for an awful lot of small businesses that might not prefer to use the SBA program, might not want to go through a bank, that might want to access the lending facility. It just gives us one more tool.

So I hope my colleagues and folks who are watching and listening will recognize that what the Senator from Louisiana has tried to create is a menu of options because there is no one-size-fits-all in the case of small businesses. Their needs are different. The banking community's desires are different. I think she has crafted a great tool that will dramatically help small business lending.

If we want to go back to our constituents in the month of August and talk about a real, live deliverable, if we want to talk about what we have done in a tangible way that will get credit back into the small business lending pool, that could be delivered by Labor Day, we need to make sure we move forward on this important piece of legislation.

I again commend the chair of the Small Business committee for her relentless work on this issue. I hope our colleagues from the other side of the aisle will hear all of the various business organizations across the political spectrum that are supporting this legislation. My hope is that we can deal with the amendments, get those amendments dispensed with at some point during the day, and pass this bill today because it is very important to making sure this recovery we are just starting to creep into is actually not a jobless recovery but a recovery that creates jobs. To do that, we have to have these small businesses healthy.

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