Last week the crisis of far too few small business loans being made seemed to be getting some needed attention.
The Federal Reserve chairman, Ben Bernanke, is reported by the New York Times to have said Thursday “that banks needed to increase lending to small businesses to reduce unemployment and help the economic recover.”
Last Friday Republican Senator Olympia Snowe, ranking member of the U.S. Senate Committee on Small Business and Entrepreneurship, wrote to President Obama saying “it is imperative we invest in our nation’s small businesses to grow our economy and create new private sector jobs immediately.”
Even the Brits get it. UK Business Secretary Vince Cable spoke last Thursday of similar problems in their country. According to the Herald Scotland, Cable warned that the banking sector’s reluctance to lend to small businesses could stifle the fragile economic recovery and he pledged that the new government would bring pressure for change.
Just how important is it that money really starts flowing to small businesses again? Of all the net new jobs created nationwide in the last 15 years, 64 percent came from small businesses.
This problem has been recognized for some time. I have previously written about it in opinion editorials in The State and in Washington’s The Hill as well addressed it in a Capital Hill press conference with Senator Dick Durbin and others. I and other representatives of small business organizations met with numerous Congressional staffers back in April to call for action—Enhance SBA lending. Infuse federal funds into community banks to improve their financial stability and establish effective incentives to yield more loans to small businesses. Raise the business-lending cap on credit unions. All other vehicles for increasing lending to small businesses need to be nourished and enhanced.
Some financial institutions have started pushing back against the “not lending” criticism saying they would like to make more loans to qualified small businesses but the demand isn’t there. Mr. Bernanke unfortunately entertained this lame excuse saying “it was difficult to tell whether the decrease (in loans) was a result of reduced demand or tightened credit standards.” So it was the Brit Cable that had to drive a stake in the heart of that “blame the victim” argument. “The banks claim that there is no demand. That is not right. If the bar is set too high, of course, no-one is willing to jump.”
Now that Congress has healthcare reform under its belt, Wall Street reform is in conference committee this week, both parties are afraid to tackle immigration reform and Senator Lindsay Graham has turned down the fire under comprehensive energy/climate legislation; Congress can now tackle the one remaining serious problem slowing down the nation’s real growth in jobs—the small business loan crisis.