Small Business Lending Fund Act Of 2010

Floor Speech

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Mr. MERKLEY. Madam President, I also rise to discuss provisions of this bill and would like to begin by saying, when one gets into the details, you see there is a spectacular array of provisions that have been put together by the Small Business Committee to assist small businesses in helping them get themselves back on track, and, in the course of doing so, get our Nation back on track.

Particularly, I thank the chair of the Small Business Committee, the Presiding Officer, Senator Landrieu, for working in such a bipartisan manner to bring together the best ideas that can be brought to bear in that effort to assist our small businesses.

I will mention just a few of them. A 100-percent exclusion of small business capital gains will be big factor for helping our small businesses, a carryback provision so small businesses can take and balance out losses against former profits, making the general business credit not subject to the alternative minimum tax, increasing the Small Business Administration loan limits, eliminating the Small Business Administration loan fees, and so on and so forth.

These are terrific provisions to assist small businesses. But I wish to particularly speak to two additional parts of this bill. One is the Small Business Jump Start Act. This is intended to help businesses get started in their first year. Under this provision, it allows the deduction not of $5,000 in startup expenses but of $10,000. So it is a doubling of kind of a jump-start or a boost to getting businesses off the ground. It is for those entrepreneurs who say: Here is an opportunity, and I am going to take a big risk, and I am going to take my savings or borrow against my house or utilize my credit card in order to jump in and seize this opportunity.

It is giving those folks additional help in that first year, and who knows when those first-year efforts--when so much is at risk--are going to turn into the successes that employ person after person after person on Main Street in communities throughout this Nation.

The second piece I wish to address is the Small Business Lending Fund. I think every legislator who has been spending time back home in townhalls has heard from owners of small businesses, has heard the stories of how a long-term banking relationship--a relationship in which they knew they could always turn to their community bank for help--has not been able to yield the credit they need at this moment and not through the fault of the community bank. The community bank wants to lend but because the community bank's capital has diminished, they are at the limit of their ability to make loans. Unless they bring in additional capitalization, they are not able to make additional loans, no matter how good that opportunity might be.

We have heard about small businesses that, in fact, are having to rely upon their credit cards. The percent of small businesses in America that are currently turning to their credit cards has increased 14 percent in a single year--14 percent more small businesses having to rely on a credit card because they cannot get access to traditional lending from their community bank.

Well, this chokepoint in our system is essential to address because if the small business entrepreneur cannot access credit to seize an opportunity or to expand on a successful formula, then we will not be putting businesses back to work, we will not be putting citizens back to work for those businesses. So that is what the Small Business Lending Fund does.

There are a number of questions that have been raised about it. I wish to address each of those. But I wish to note the potential of taking $30 billion in recapitalization, which actually makes a profit for the taxpayer--CBO estimates a profit of $1.1 billion--and in addition will bring in additional revenue through the taxes on the additional folks who are employed and the larger small business profits. So the $1.1 billion, that is just the base. That is not including the additional revenue that will flow from the success of small businesses and the restoration to employment of workers across this Nation.

So one of the questions has been: Will these funds recapitalize or bail out failing banks? The answer is absolutely not. This is a program for small business, making capital available to small businesses through healthy community banks. That is a very important distinction, and there are ratings in which the regulators evaluate the health of banks. They range from 1 through 5. They are called CAMELS ratings, and only those banks with ratings of 1, 2, or 3--that is, healthy banks--will be eligible for this program.

A second question has been: Well, if we help recapitalize community banks, is there a possibility they will sit on the funds, prepare for a rainy day or a rainier day? The answer is no. The program is structured so that if funds are lent out, then the dividend rate falls to 1 percent. But if they are not lent out, the dividend rate rises to as high as 7 percent. Well, that 7-to-1 distinction means you are not going to borrow money if you do not have an intention of using it to leverage funds to lend out because you will be losing money, and you want to take advantage of that incentive to only pay a 1-percent dividend. So there is a lot of carrot in this in a structure that makes it illogical for a bank to seek these funds in order to sit on them.

A third question is: Why utilize community banks to help get lending to small businesses? Why not just do it in some other direct government fashion?

Well, the answer can be discerned by anyone exercising a small portion of common sense. Main Street banks are in the business of evaluating opportunities, entrepreneurial opportunities, and funding those opportunities to make a profit. That is what community banks do. That is their expertise. This approach builds on the expertise of Main Street banks to produce successful Main Street small businesses across our country.

Another question that was raised was: Will recapitalization cause banks to have to rush to make speedy loans and not take the time to evaluate that business opportunity thoroughly? The answer is it will not, because this program was designed so there is a 2-year span of time in which a bank has the opportunity to make that transition from capitalization to lending before the dividend rate is locked in. So there is no incentive for a rush to judgment.

I ask all my colleagues: Is not this the type of bipartisan problem-solving America wants us to undertake, bringing forth, through the committee process, through an open discussion--with television cameras running--the consideration of this idea and that idea being merged together to bring to the floor a coherent piece of thoughtful legislation to help address one of the major challenges in America, which is getting our small businesses back on track? Is not this what we are being brought here to do?

So I applaud the Small Business Committee. I applaud the work of the chair and all the members of the committee who produced this type of concrete aid to put Main Street back on track, to create employment for citizens across this Nation, and, by so doing, put our Nation back on track.

Thank you, Madam President.

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