PETERS CALLS FOR ACTION TO SPUR SMALL BUSINESS LENDING12/22/09
FOR IMMEDIATE RELEASE
Tuesday, December 22, 2009
CONTACT: Cullen Schwarz
Office: (202) 225-5802
After Voting against Democratic Stimulus Bill Last Week, Peters Advocates Alternative to Provide $50 Billion in Small Business Loans
Washington, D.C. – After voting against last week’s Democratic stimulus bill, Congressman Gary Peters announced today he is pushing for new action to bolster the nation’s economy by supporting American small businesses. Congressman Peters and 15 other Members of Congress have sent a letter calling on the Obama Administration to use unallocated TARP funding to leverage additional capital from banks to provide $50 billion in public/private loans to small businesses across the country. The letter argues that unused and paid back TARP (Trouble Asset Relief Program, a.k.a. the “Wall Street bailout”) funds should also be used to reduce the national debt.
“The more I talk to Oakland Country residents and national experts, the more I believe a lack of small business lending is the number one obstacle standing in the way of economic recovery,” said Congressman Peters. “I talk to small business owners across Oakland County who want to grow and add jobs but cannot because they do not have access to credit at reasonable terms. Providing small businesses with access to lending is the key to creating more jobs in Michigan and across the U.S and is in line with TARP’s original purpose. Supporting small businesses and reducing the national debt should be the top priorities right now, so I think using TARP for these purposes is entirely sensible.”
Congressman Peters issued the letter along with other members of the New Democrat Coalition, a caucus of moderate pro-business Democrats Peters joined upon first taking office in January. The letter, addressed to Treasury Secretary Geithner, calls for the Treasury to use $40 billion in not yet allocated TARP funding to leverage up to $10 billion in additional private sector bank loans to quickly provide access to $50 billion in capital to small businesses. The letter also urges that this plan require that all TARP funds remain off banks’ balance sheets to ensure all government funding is used for lending, not used to bolster banks’ capital positions.
Last Thursday Congressman Peters voted against the stimulus bill introduced by his own party’s leadership that would have used $75 billion in TARP funds for a variety of job creating programs. Rep. Peters said then that he objected to the bill because it contained so little—only $354 million—for support for small businesses.
Peters has been advocating for measures to bolster small business credit markets for some time, inviting members of Congress to participate in an official hearing on the matter that took place in Southfield November 30, and writing his own letter to Secretary Geithner last week based on the findings of that hearing and cosigned by hearing participants Reps. Moore, Dingell, Schauer and Levin. That letter called for the Treasury Department to undertake two solutions advocated by witnesses at the hearing: reducing the liability for lenders to manufacturing companies and partnering with community banks to spur small business lending.
To view an official copy of the Congressman Peters/New Democrat Coalition letter to Secretary Geithner, click here.
The text of the letter is below:
December 18, 2009
The Honorable Timothy F. Geithner
Secretary of Treasury
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Geithner,
As members of the New Democrat Coalition, we write to you today in support of measures that will help provide much needed capital to our nation’s struggling small businesses. New Dems have long been committed to policies that empower the U.S. to grow economically and maintain a vibrant job market while adhering to fiscally responsible policies that reduce our nation’s debt.
Last year, New Dem Members overwhelmingly supported the Troubled Asset Relief Program (TARP) because it was vitally necessary to stave off a collapse of our nation’s financial system, which would have crippled every American who uses a credit card, has a car or college loan, runs a business or is employed by one. We continue to see evidence that our financial system has been stabilized, but to date it appears that small and medium sized businesses on Main Streets throughout the United States continue to struggle to access capital from this system to create new jobs.
This presents a significant challenge for a complete recovery of the economy and employment because of the important role these businesses play in job creation. As you are aware, 64 percent of the net new jobs over the past 15 years have been created by small businesses, and those businesses employ more than half of American workers. Yet throughout the current economic recession, each of us has heard from these businesses which, due to a lack of credit, continue to struggle and are unable to invest in inventory, employees, or growth. Recently, these concerns have seemed to grow worse.
While we want banks to improve their strength and overall health, the loss of available credit caused by banks rebuilding capital and the disappearance of the shadow lending system is crippling businesses and the capacity of our economy to create new jobs.
We believe there is need for a targeted, fiscally responsible program that will jumpstart small business lending without harming the capital position of our banks, and that we should simultaneously begin work on paying down our growing national debt. We suggest that the following steps be taken towards addressing these two essential objectives.
First, we propose that Treasury re-obligate a portion of existing unused TARP funds to create a loan pool specifically for small business lending. If $40 billion were pooled and used to leverage an additional $5 to $10 billion from participating banks, , an additional $50 billion in credit could be made available very quickly.
Individual banks would be required to place some of their own money at risk, perhaps accounting for 10% or 20% of each loan, and should be responsible for the first dollar of loss, in order to further compel these institutions to make responsible lending decisions and maximize the potential impact of this loan pool. All financially sound banks would be eligible to participate and be incentivized to do so through fees and interest generated by the loans. However, community banks would be uniquely competitive in this program because they have excelled in maintaining small business lending capabilities and are more likely to know the entrepreneurs, business owners and customers within their communities.
We believe government funds should remain off balance sheets so banks cannot use the funds simply to bolster their own capital. Additionally, funds should be time-limited and restricted to operating companies – not real estate development companies – which will ensure that these funds quickly reach those business owners who need it most. We believe it may also be useful to set any loan limits well above those used by the SBA in order to ensure that businesses too large for SBA but too small to directly access credit markets will have access to desperately needed funding.
Banks that are awarded management of loan pool funds should make individual lending decisions, subject to fraud prevention oversight. Treasury would serve as the primary sponsor of the program, but rely upon SBA and Federal banking regulators for technical advice, oversight and delivery capability.
To ensure independence, we request that you include appropriate protections to prevent political interference in lending decisions.
Second, following the aforementioned investment in small businesses and job creation, we propose that the bulk of remaining un-obligated TARP funds, along with those being repaid by financial institutions, be used to reduce the federal deficit. The Treasury Department’s own estimates have suggested that almost $200 billion could be available in the coming months for deficit reduction following the obligation of TARP funds to small business lending. Doing so would send a strong signal about our nation’s commitment to fiscal responsibility and represent an important first step in reducing our debt burden, which in turn, poses serious long-term economic challenges to individuals and American families.
It is essential that we expeditiously and prudently take steps to address two of the most pressing issues facing our nation and the fragile economic recovery, job creation and deficit reduction. We believe that paying down the deficit with unused TARP funds, and enabling an additional $50 billion in loans to small businesses while utilizing our community banks, would both refocus the TARP to directly and substantially help small and medium size businesses, lead to more job creation in communities of all sizes, and set us on a course to fiscal and economic sustainability. We stand ready to assist you and the Treasury Department as policies are implemented to meet our nation’s continuing economic needs.
Rep. Joe Crowley Rep. Adam Smith
Rep. Ron Kind Rep. Allyson Schwartz
Rep. Jim Moran Rep. Bob Etheridge
Rep. Lois Capps Rep. Rush Holt
Rep. Rick Larsen Rep. Artur Davis
Rep. Russ Carnahan Rep. Ron Klein
Rep. Charlie Wilson Rep. Gerry Connolly
Rep. Martin Heinrich Rep. Gary Peters