Partisan Divide in D.C.? Not Over the S.B.A.

The New York Times
June 15, 2012

By ROBB MANDELBAUM

 

How small-business issues are shaping politics and policy.

In this election season, the leitmotif to the story taking shape in Washington is that the partisan divide is vast and growing vaster — if last year it was difficult to pass bills that were once routine, now it has become impossible. But there appears to be at least one exception to the emerging rule: the Small Business Administration. Last week, the Republican-led House Appropriations Committee unveiled its bill (pdf) to finance the S.B.A. and several other government agencies, and what is most notable about the four pages dealing with the S.B.A. is the prospect for comity, not conflict.

In all, House Republicans have proposed appropriating $1.16 billion to the S.B.A. — $989 million when disaster funding is excluded — about $40 million more than the Obama administration has sought and $237 million more than the agency received this year. In its broad outlines, the funding proposal from the House is remarkably similar to the administration’s request. The main difference is that the House finances subsidies that would permit the S.B.A. to guarantee more lending in its main loan programs than the administration would. The increase may not have a meaningful impact on lending, though, since these figures are ceilings, and it’s not clear that lending will reach them. (If the first eight months of the 2012 fiscal year are indicative, the agency won’t come close to bumping up against the 2013 ceilings.) More meaningfully, the House would direct $112.5 million to small business development centers, as much as the centers received last year and $11.5 million more than the administration requested.

All of this is quite a turnabout from a few years ago, when the Bush administration struck many observers as indifferent at best to the S.B.A. and the Republican-led Congress was parsimonious in funding it. Perhaps most strikingly, House Republicans have agreed to support the S.B.A.’s microloan program at the same level the Democratic administration requested — whereas the Bush White House sought to eliminate microlending altogether. However, as we reported when the White House made its request public back in February, the proposal is less than the program received in 2011 or 2012. Indeed, while the S.B.A. would technically get more money under the budgets proposed by the White House and the House, most of that increase goes to subsidizing loan-making, which has become more expensive in recent years as the amount of risk has increased.

On Thursday, the Senate Appropriations Committee produced its own bill financing the S.B.A. (among other agencies) and largely followed the same template, proposing $1.12 billion. That is less than the House bill, but it directs more money to microlending and to the counseling programs than either the House proposes or the administration wants. At the same time, it pares back the House’s loan subsidy (and corresponding lending limits) to the administration’s request.

Elsewhere in its bill, the House is not nearly as conciliatory toward the Obama administration and the Senate. For example, it denied the White House additional money for the Internal Revenue Service to carry out provisions of the Affordable Care Act, and it would prohibit the administration from transferring money to the I.R.S. for that purpose. This could conceivably make it harder for the I.R.S. to process the health care tax credit for small businesses. But an aide to the House Appropriations Committee said that the bill does not prevent the agency from using the money appropriated to it to carry out the health care overhaul. “The I.R.S. would not be prohibited from implementing the tax credit,” the aide said. The agency would have to choose its priorities from an expanded portfolio of responsibilities.

The Senate bill provides the I.R.S. with about $700 million more than the House bill does.

http://boss.blogs.nytimes.com/2012/06/15/partisan-divide-in-d-c-not-over-the-s-b-a/

Corporate America's wealth

My friend Lew Prince finally found a bank willing to give him a $175,000 line of credit.  He had talked to six other banks since the summer of 2010 all of which turned him down because he wouldn’t put up his house for collateral, something they would never ask of a big business.

I tell you this story because what we typically hear from the big banking industry is that the reason they aren’t making more small business loans is because there is little demand for loans or the loan requests they receive are not from credit worthy businesses.  They don’t want to add risky loans to their portfolios.

So let’s look at Lew’s business, a 32-year old family business in St. Louis called Vintage Vinyl.  The business grosses well over $1 million a year, has 24 employees and has paid back on time all previous business loans with never a late payment.  By all accounts Vintage Vinyl is a successful small business with customers worldwide.

Every day across this country small businesses go to Small Business Development Centers, put together financial plans and promptly get them rejected by the banks.  The truth is that the banks, mostly big banks , alone are sitting on $1.6 trillion in reserves (80 times the $20 billion they had in reserve four years ago), money that could quickly jumpstart our economy according to a just released report from University of Massachusetts economists.

If America's largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they're hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

It’s time for Congress to tell our financial institutions, most of whom the taxpayers bailed out to make them healthy, to put most of that cash they have sitting around to work or start paying taxes on excessive loan reserves.  Corporate America can complain all it wants about government being a problem but the reality is that our big corporations have no interest in helping the economy recover.