Senate Votes to Include $30 Billion Lending Fund in Small Business Aid Package
Small business lending may get a boost thanks to a controversial $30 billion fund for community banks.
The Senate voted late Thursday 60-37 to include the proposed program -- which would direct up to $30 billion in taxpayer money via regional banks -- in a package of aid for small businesses. Two Republicans joined with Democrats to support the amendment. President Barack Obama also supports the measure.
Community banks should be able to use the fund to leverage up to $300 billion in loans to small businesses, Democrats in Congress said. Republicans denounced it as another bank bailout, with Senator Bob Corker, the Tennessee Republican, calling it "the brother of TARP," a reference to the Troubled Asset Relief Program, the government's rescue of the financial system, on the Senate floor.
"This won't increase the deficit and it will return more than $1 billion to the Treasury over time," Senator George LeMieux, Republican from Florida, said on the Senate floor Thursday night. "It's not a deficit it's a surplus." LeMieux and Ohio Senator George Voinovich were the two Republicans who voted for the amendment.
Added LeMieux: "This has nothing to do with [TARP]. These are small banks. This is the banker you know down the street – the banker who's at your rotary, who you see at church or synagogue. This is not some Goldman Sachs banker. This is the community banker who loans to the tailor, to the construction business, the folks that employ people in your hometown."
The amendment will be tacked onto a bill that includes some $12 billion in tax breaks for small businesses, including an increase to $500,000 of limits on expensing small business equipment purchases. The bill could come up for a vote in the Senate next week. The House passed a bill establishing a similar lending fund in June.
The money would be available to banks with less than $10 billion in assets.
"One of the biggest hurdles is the ability for businesses to secure loans or investors," LeMieux said. "This bill primes the engine for investment."
The Treasury Department helped design the program, which would have banks that tap the fund issuing preferred stock to the Treasury, paying dividends based on how much they increase lending to small businesses. The more they lend, the lower the payments.
According to estimates from the nonpartisan Congressional Budget Office, the fund would generate a $1.1 billion profit for the government over the next decade, thanks to loan repayments and dividends.
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.