Small Business Early-Stage Investment Act of 2009

Mr. Chairman, I yield myself such time as I may consume.

I rise today in opposition to H.R. 5297. My opposition is not a question of whether or not I support small businesses, it's a question of whether or not this bill will actually help small businesses. Unfortunately, my conclusion is that this bill will not help them, but will cost the taxpayers another $33 billion--by the way, $33 billion that we don't have.

As a former small business owner, as well as a former lender, I understand firsthand the need for small business to have access to credit. Access to credit has tightened, but demand for credit from worthy borrowers has also declined.

What small businesses really need more than anything in the current economic environment is more certainty so they can invest and can plan for the future. What they have gotten from Congress is more and more uncertainty.

Small businesses will face a costly tax penalty if they can't comply with the added cost of the new health care law. One business owner in my district told me he had plans to expand and to create jobs, but he has put those on hold now because his business would not grow over 51 employees and then be subject to the new law.

Small businesses are worried about how much their energy costs will go up under the proposals of cap-and-tax

bills. Finally, they have no idea how much their taxes will be next year. Not only are they worried about new taxes to pay for more government spending, but they know that taxes will also go up automatically if Congress does not do anything to address the expiring tax provisions.

No wonder small businesses are in a holding pattern and are not creating new jobs, and this bill does nothing to provide any certainty for small businesses. Rather than doing something that creates more certainty for small businesses to grow and to add jobs in this economy, the majority is repeating the same failed initiatives that have helped our national debt grow to $13 trillion in the past 2 years. This bill follows the model of the TARP program, minus the stronger oversight, and it puts another $30 billion into banks in the hopes that lending to small businesses will increase.

In the words of Neil Barofsky, the Special Inspector General who oversees the TARP, ``In terms of its basic design,'' he says, ``its participants, its application process, from an oversight perspective, the Small Business Lending Fund would essentially be an extension of the TARP's Capital Purchase Program.''

From the Congressional Oversight Panel for TARP, chaired by Elizabeth Warren, she says, ``The SBLF's prospects are far from certain. The SBLF also raises questions about whether, in light of the Capital Purchase Program's poor performance in improving credit access, any capital infusion program can successfully jump-start small business lending.''

This bill allows for another $33 million in spending that will be added to the government's credit card. The CBO tells us that the bank lending portion will ultimately cost taxpayers $3.4 billion when market risk is taken into account.

We have had record bank failures, including the failures of four banks that were TARP recipients. When those TARP recipient banks failed, the taxpayers' investments of $2.6 billion were essentially wiped out. More than 100 banks that have received TARP funds so far have missed their dividend payments. These missed dividend payments have cost the taxpayers almost $200 million. It turns out that many of these banks that received TARP funds were far from healthy.

Do we really think there will be no more bank failures or missed dividend payments among banks that receive funds out of this new TARP program? We know there will be, and the CBO says there will be, which will lead to more losses for the taxpayers.

This fund is just like the TARP's Capital Purchase Program, except for the stronger oversight. I am extremely disappointed that the Rules Committee blocked a sensible amendment that would have improved the oversight of this new lending fund by bringing it under the oversight of the Special Inspector General for TARP. SIGTARP has developed significant experience in looking out for the taxpayers when it comes to the TARP program. SIGTARP's expertise should be used for this fund to protect the taxpayers.

H.R. 5297 will lead to more losses for taxpayers and to no more improvement in credit for small businesses. A lack of credit is not even the largest problem facing these small businesses. According to the National Federation of Independent Business, the top problem facing small businesses is the lack of sales and demand. If businesses are not confident they will have customers, they are not going to borrow; they are not going to expand, and they are not going to add jobs.

This $33 billion bill is not going to help increase demand from small business customers. Instead, we need the government to step back and to stop prolonging the uncertainty that is crowding out economic growth in our country. The sad thing is that there are things that Congress could actually be doing to help small businesses. Instead, the majority has chosen to bring up bills that will cost the taxpayers billions and that will do nothing to help the small businesses. They have denied our side the ability to offer substantial amendments.

I think it was appalling, quite honestly, Mr. Chairman, that the majority awarded themselves 66 amendments to this bill and that they awarded the Republicans one. Now, if that is the bipartisanship that this leadership is talking about, I don't think the American people are buying that that is bipartisan, because many of the amendments that we offered, Mr. Chairman, were to add additional protections for the taxpayers. Obviously, the majority is not interested in protecting the taxpayers' investments with this $33 billion. By the way, this is $33 billion that we don't have.

I am hoping that the majority is going to tell us this morning where the proposal of the $33 billion is going to come from. Well, I can tell you where it is going to come from. We are going to charge it to our children and to our grandchildren. You know what? I think we've just about reached the limit on the amount of money we should charge to our children and to our grandchildren.

So, Mr. Chairman, I am going to urge my colleagues to insist that we do better for small businesses. We must do something for small businesses, but this is not the answer, and I am going to encourage my colleagues to vote ``no.''

I reserve the balance of my time.

Mr. Chairman, one of the things that is interesting is that this program is designed to put more capital into the banking system.

According to the Federal Reserve's April survey of senior loan officers, three factors that exerted the greatest influence on banks' business lending practices over the past 3 months were competitive pressures, the economic outlook, and the tolerance for risk in the business loan market. Lack of capital was not mentioned as one of the driving forces for lending decisions that are being made.

So, basically, Mr. Chairman, what this bill tries to do is to solve a problem that, according to the Federal Reserve, doesn't exist. There is plenty of capital, but there is this competitive pressure, this economic outlook, and this tolerance for risk.

Going back to my earlier point, when I traveled around the 19th Congressional District, I talked to a number of lenders. At the same time, I visited businesses in their communities. What I learned during that process is that many of the small businesses just said, Congressman, things are just too uncertain right now. We don't know what Congress is going to do with taxes. We don't know what they're going to do with this energy bill. We don't know exactly. We are trying to figure out how this new health care bill is going to impact our businesses, how it is going to impact our bottom lines.

Then I went over and talked to the lenders. Many of the lenders are sitting on record amounts of cash and capital in their banks. They are looking as hard as they can for good lending opportunities. What they said is, Unfortunately, some of our customers are not creditworthy. The economy has hurt their sales, and so it wouldn't be

prudent to loan those businesses more money. Others said, Our good customers, customers who are creditworthy, are not coming to us and borrowing any money because, again, of this uncertainty.

So, again, our opposition to this bill is that it is not really addressing the real issue in our economy, which is needing to bring some certainty and to leave the capital in the companies, to leave the capital in the economy, instead of the Federal Government's continuing to create uncertainty and taking money out of the economy.

I reserve the balance of my time.

Mr. Chairman, I continue to reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

I appreciate the majority leader coming and telling us that this won't cost the taxpayers any money. We have asked the majority for an updated CBO score on this bill with the revisions, and we have not seen that yet. So we don't actually know that for certain. But what we do know is that from the TARP program, there were losses incurred in the TARP program. And this program has been identified by people who are very familiar with the TARP program as another TARP program, except some people want to call this TARP II, TARP Jr. But by and large, this is another TARP program.

You know, there is no question today that all of us realize that small businesses are the number one job creator in our country. Mr. Chairman, in fact, I am a small businessman. I came to Congress not from being a lifelong politician, but from creating jobs in this country, of making payrolls. I have made a payroll. I have borrowed money. I have actually been a lender. And if you really want to get the economy going back in America, as the majority has tried throwing money at the problem--and I would have thought that they would have learned by now that all this money, the trillions of dollars that they have thrown at the economy hasn't created any jobs. We still have almost 10 percent of the American people who are unemployed in this country today. The numbers show that 17 percent of the American people are either unemployed or underemployed, so throwing money at the problem isn't the answer.

If you want to create jobs in America, I will tell you how you create jobs in America. Number one, you bring some certainty in America. Right now the American people are questioning what the future of their country is. They are seeing record deficits by this administration. This year alone, if we had a budget--we don't know what the deficit is going to be this year because, one, we haven't passed any appropriation bills in this Congress.

And, secondly, the leadership of the majority hasn't brought a budget to the floor, and maybe they are not going to because they don't want their Members to have to take a vote on a budget that's going to say: for every dollar we're going to spend, we are going to have to borrow 42 cents. I am sure they would be embarrassed. And it would be more embarrassing if you voted for a budget like that.

But the way you bring certainty to the country is, one, we are going to have to start cutting back our spending and reducing these deficits. Leaving money in the economy. As a small businessman, when I had the capital in my business, and the government wasn't taxing away my capital, I was able to take that capital and leverage it, and go to my lender, be a responsible borrower, and it would be prudent to lend to me, and we could expand our business that way.

The other thing is, yesterday this body had an opportunity to do something for small business, and that was to repeal the mandate for health care

that was in the Democrats' health care bill. Unfortunately, there was not enough votes, but some of our Democratic colleagues understand the same thing we do: if you want to bring certainty, create jobs in America, you take that off the backs of small businesses.

So, really, I wish that this bill would do something for small businesses in this country because small businesses are the lifeblood and the engine for our country. Unfortunately, this bill will not do anything for small businesses; but it will put the taxpayers, again, at risk to underwrite and to invest in banks.

You know, I figured this: it's simple back there in Lubbock, Texas, that, you know, if somebody wants to invest their dollars in a bank, let them invest their dollars in a bank. Don't take the money away from the taxpayers and invest it because the government thinks that they know what is a better program. So, again, I urge my colleagues to vote for small business, but not this bill. This bill doesn't help small business.

And with that, I yield back the balance of my time.

Mr. Chairman, I rise to claim the time in opposition, although I am not opposed to the amendment.

The bill currently includes language regarding women and minority-owned business, and adding the veteran-owned businesses makes sense. And so with that, we support this amendment and we thank the gentleman for bringing it forward.

I yield back the balance of my time.

Mr. Chairman, I rise to claim the time in opposition.

Mr. Chairman, I am opposed to this amendment because it removes some of the safeguards to ensure the banks use the money in the way that they are supposed to and not simply just building up their capital buffers. Allowing recipients to self-certify that they have increased small business lending guts all of the other protections in this bill.

If we are going to allow recipients to pay dividends as low as 1 percent, we need to make sure that the money is used the way the legislation is intended. We already have less oversight of this money than we did in the TARP program, and even though it is the same program, cutting back even further is the wrong approach.

Already under this bill, banks are getting a good deal on the cost of capital, thanks to the taxpayers. Community banks that issue preferred equity paid dividends of 9 percent or more in the private market, here we have the government giving them the capital for 5 percent, or as low as 1 percent.

This amendment changes the incentives in the wrong way, and we need more safeguards for the taxpayers, not fewer.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I just want to repeat that when we are going to give a dividend, a lesser dividend rate for the more performance that these banks have, letting themselves certify is not a good check and balance. Certainly we want them to increase their lending, but we need third-party validation to make sure that if they are going to get as low as a 1 percent capital dividend rate, that some third-party validation validates that because obviously that has impact on this program.

I reserve the balance of my time.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I seek time in opposition, although I am not opposed to the amendment.

I appreciate the gentleman's point here of trying to create a new source of capital in commercial real estate at a time when there is a significant amount of stress on our community banks. Financing for commercial real estate, particularly the smaller loan market that serves small businesses, has been limited. The commercial mortgage-backed securities market, the CMBS market, which accounted for nearly 50 percent of the commercial real estate lending in 2007, remains dormant.

So while I continue to believe the $30 billion lending fund will not improve lending for small businesses, I do not oppose the gentleman's amendment.

I yield back the balance of my time.

Mr. Chair, I am opposed to the amendment.

Certainly I am sympathetic to the many community banks coping with real estate assets on their books that have lost their value; however, I am not sure this amendment is the best solution.

This amendment would essentially allow certain banks to hide losses for up to 10 years. The practice of legislative forbearance is a dangerous one and could result in problems that only get worse because they are not properly addressed. Accounting rules function to provide a clear record of the health of the institution. This amendment does just the opposite by hiding the losses.

The amortization provided by this amendment does not take effect for 2 years, when the increase in small business lending is measured; thus, it doesn't really address the current credit problems that this bill attempts to solve. This amendment creates the wrong incentive of allowing banks to hide losses for longer periods of time based on making even more loans. Instead of continuing to distort the market, the government should instead create an expansionary environment where we are lowering taxes and providing regulatory certainty and not hiding accounting losses.

I urge opposition to this amendment.

I yield back the balance of my time.

Madam Chair, I claim time in opposition, although I don't think I'm going to oppose the amendment.

I just wanted to clarify something that the gentleman said.

I understand that the bank will disclose to the borrower that they are loaning them funds because they are participating under this program, and then the gentleman went on to say that the Treasury would then post a report on their Web site. Now, would that list the names of the borrowers? Will the Treasury report list on their Web site the names of each borrower that borrowed money under this program?

I yield.

I thank the gentleman because I was concerned about the privacy of those business owners, you know, letting the world know how much money they're borrowing. So I'm not opposed to the gentleman's amendment. I think disclosure is a good thing.

I just want to make a point that there have been several discussions up here today that this is not going to cost the taxpayers any money, and only in Washington, D.C., can you go spend $33 billion and say it's not going to cost anything. The problem is, if this program is participated up to $33 billion, we don't have $33 billion, and so we're going to go have to borrow $33 billion from the Chinese to loan banks to loan to small businesses in this country.

And a lot of folks I think understand that kind of how we got here was that the whole world, small businesses, individuals, and governments, have been on this borrowing and spending binge, borrow and spend, borrow and spend, and quite honestly, that's how we wove this web where we've got our financial markets in somewhat of a wrinkle right now.

So, while I applaud the gentleman's amendment, I still go back to the fundamental point here that, one, this bill will not help small businesses have any additional capital, but more importantly, we are going to go spend $33 billion that we don't have, and I don't think that's the right prescription for our country.

With that, I reserve the balance of my time.

I appreciate the gentleman.

I still go back to the point, and I think that's where we get kind of in a, we're living in Wally World here in Washington, D.C., where you still have to have $33 billion. If you're going to go invest in the preferred shares of these banks, you've still got to find the $33 billion. And the truth of the matter is for every dollar we're going to appropriate or allocate in this country this year, we're going to have to borrow 42 cents of it.

So I guess the question is, should we go out and hock another $33 billion for a program that many people think that there's adequate capital and liquidity already in the banking industry? Some people have been quoted as saying, well, 42 percent of the small businesses have been turned down for loans in this country. Well, you know, I was in the loan business, and everybody that came in to my borrow money from me when I was a loan officer wasn't credit-worthy or it wasn't in their best interest to leverage their business further.

So I'm afraid that we're out here trying to encourage behavior that the marketplace may be already taking care of.

My good friend from Georgia did make a point that the regulatory folks are sending mixed messages. I think that's a bad policy. I think the regulators need to be more consistent with their policy, again bringing that certainty because what we've heard time and time again, whether it's from the business community or from the lending community, all of this uncertainty about what Congress is doing and the regulatory reforms that are going on, all of this is creating a huge amount of uncertainty. And so what happens when we have uncertainty in the marketplace, people just sit on the sidelines.

If you want to get businesses going again, if you want to get the economy going again, we've got to get the government out of the banking business. We've got to get the government out of all these huge regulations. We've got to bring economic certainty by not imposing more restrictions on companies on their health care; cap-and-trade affecting what they're potentially going to pay for energy in the future; uncertainty with our tax code, where we don't know what provisions are going to expire, what provisions aren't.

And you know, wouldn't it be nice for the American people to get to see a budget of how Congress is planning to spend their money, instead of going through a daily, monthly, weekly exercise of spending money without a budget? The American people don't do their business that way. They're a little bit concerned that the United States Congress just keeps on spending money but without a budget.

So, with that, I yield back the balance of my time.

Madam Chair, I rise to claim time in opposition to the bill.

This new capital injection program is designed to operate exactly like the TARP program but without any of the taxpayer protection or oversight bodies. Now, this amendment is intended to substitute for putting the experience of the Inspector General for this type of program in charge of this new fund.

Republicans had an amendment that put the Special Inspector General for TARP, or SIGTARP, in charge of the oversight of this new fund, but the Rules Committee blocked it. Really, this creates a new regulator where we had an existing regulator in place for TARP-like programs, which this is, and we think that that was a better alternative. And now we want to put someone that doesn't have as much experience with this type of program in charge of oversight, and we just don't think that's in the best interest of the taxpayers.

Republicans, as I want to remind the chairman, offered a number of amendments that would have given the taxpayers much more protection even than this amendment would. Unfortunately, again--and I don't want to be redundant here, but the Rules Committee, which is controlled by the majority, only allowed one Republican amendment to be heard while we've

had 16 amendments from the majority. Again, we wondered why Republican amendments to provide better protection and better oversight were blocked by the majority when I think the American people think that any kind of amendment that would have provided them more opportunity, more protection, and more oversight would have been in their best interest.

We don't think that this amendment does the job that it needs to do, and therefore we're opposed to it.

Madam Chair, I reserve the balance of my time.

I concede to the gentleman that none of this money is coming from the TARP program; it probably should have because it's a TARP program. I want to just remind the gentleman that Neil Barofsky, the Special Inspector General who oversees TARP, said, In terms of its basic design, its participants, its application process, from an oversight perspective the Small Business Lending Fund would essentially be an extension of TARP's capital purchase program.

From Elizabeth Warren, the SBLF's prospects are far from certain. The SBLF also raises the question whether, in light of the capital purchase program's poor performance in improving credit access, any capital infusion for the program can essentially jump-start small business lending. So everybody but the Democrats understands that this is a TARP program.

Now, why did we want SIGTARP to have oversight? Because this is a TARP-like program. And just today it was released that SIGTARP helped bring a new lawsuit today for $1.9 billion in fraud collection with the failure of Colonial Bank. Colonial Bank received $553 million in TARP funds. To say that you're going to go out and put $33 billion into the marketplace and not suffer any losses at a time when we have over 100 banks that have already missed one dividend payment--we've had one bank that has missed six dividend payments--and that several billion dollars have already been lost from some of these banks that were defaulted and were closed after the taxpayers had put money in there.

And I go back to you saying, well, it doesn't cost the taxpayers any money. I keep asking the majority, where is the $33 billion for this program coming from?

I yield to the gentleman.

No. I would like the gentleman to answer the question----

I will reclaim my time if the gentleman is not going to answer my question. The question to the gentleman was, Where is the $33 billion coming from? If the gentleman wants to answer that question, I would love to yield him time. If he's not prepared to tell me where the $33 billion is coming from, then I would not yield the gentleman time.

No. The pay-for was to cover any potential losses, supposedly. But where is the $33 billion that you're going to invest in these banks coming from?

I will reclaim my time because the gentleman obviously doesn't know where the $33 billion is coming from, which is part of the problem up here. People just think this money appears when you start saying I'm going to put $33 billion here or $100 billion here, $250 billion here; and nobody knows where the money is coming from. But the bottom line is we know where the money is coming from. We're going out and borrowing that money because the Treasury doesn't have $33 billion.

Madam Chair, we do not object to this amendment.

Madam Chair, I rise to claim time in opposition, although I am not opposed to the bill.

I thank my friend from Texas.

I think this is a commonsense amendment. I think if you're going to do this program--certainly, I don't support the underlying program, but if we are going to do it, we are going to put this capital into some of these banks for lending, it certainly ought to be in areas where they have the highest unemployment. That makes sense.

I still think we can do better for small businesses by providing an environment where there's less uncertainty; more certainty on what the tax situation is going to be, and less uncertainty about what the regulatory environment is going to be. But I think the gentleman's amendment makes the underlying bill better. So we would not object to it.

I yield back the balance of my time.

Madam Chair, I claim opposition to the amendment, but I am not opposed to it.

Well, I thank the gentleman for this commonsense amendment. It's unfortunate that we have to bring an amendment to the floor of the House of Representatives to tell government agencies to write out the instructions in plain English. But I appreciate the gentleman's amendment. I think it makes the bill better.

I yield back the balance of my time.

I rise to claim the time in opposition, although I am not opposed to the amendment.

As the provisions in the bill say, loans to farmers in rural areas count as small business lending under the provisions of this bill. But just like the sponsor of the bill, I represent an agricultural district and understand how important access to credit is for farmers. I think this sense of Congress emphasizes that farming and ranching and agriculture is an integral part of our economy. It is an integral part of our small business community, and I think it highlights that. So I appreciate the gentleman from Iowa bringing that forward. I support the amendment.

I yield back the balance of my time.

I rise to claim the time in opposition, although I am not opposed to the bill.

I thank the gentleman for that. Basically, the amendment would require an applicant for the Small Business Lending Fund to plan for logistically and culturally appropriate outreach and require that such outreach is performed after receiving the funds. I think that could be appropriate there. And as I understand it, the requirements of this fall to the eligible institutions; and there's no additional money appropriated for that; but they would do that out of their own operating expenses. Is that correct?

Thank you. I appreciate it.

I yield back the balance of my time.

Mr. Chairman, I yield myself 5 minutes.

Mr. Chairman, our Nation's economic rebirth relies upon the ability of our community businesses to innovate, develop, and market solutions that deliver measurable value to their customers. Their success drives the majority of new jobs in our Nation. They are the engine of innovation, and their resiliency to reinvent their business models and adapt to emerging growth markets is critical. It's their creativity that drives 13 times more patents per employee than larger firms. They are the cornerstones of our economy and our communities. Beyond the goods and services and the jobs they provide, they invest in the bricks and mortar/real estate in our communities. They have supply chains that depend on their business. They do charitable giving, and they mentor young people in their communities.

Congress has done much to address the challenges small businesses face. Among the $288 billion in tax breaks in the Recovery Act were crucial small business tax provisions, such as accelerated bonus depreciation and an expansion of the net operating loss carryback that has already rebated $2.8 billion to businesses across our Nation.

U.S. manufacturing is growing, we're adding new jobs every month in 2010, and GPD is now trending positively, moving from a negative 6 to positive 6 in the year following the Recovery Act and it's now holding at 3 percent. But as I talk with small businesses in my district and across the Nation, the issue that has continued to be an obstacle to business expansion and diversification is access to credit.

The financial crisis of 2008 severely tightened small business access to credit and affordable terms. When businesses can't access financing, they're prevented from entering into new contracts, buying new equipment, hiring new employees, and other expansions. In the worst cases, business owners must cut payrolls, go into bankruptcy, or close their doors for good. Congress has taken steps to alleviate that problem. The Recovery Act included valuable changes to the SBA loan programs, reducing fees for lenders and borrowers on the 7(a) and 504 loan programs and increasing government guarantees to attract more capital. As a result, weekly SBA loan approval volumes have increased by over 90 percent.

The improvements to SBA loan programs and other measures we've taken have helped, but much more needs to be done. Earlier this year, commercial and industrial loans declined for the seventh straight quarter, down more than 17 percent from 2009, and banks are receiving mixed messages. On the one hand, Congress and the administration are urging them to lend more; on the other, bank regulators are telling them to hold back on lending. In fact, our colleague, Mr. Price, has an amendment expressing a sense of Congress on that point.

In addition, banks have greater risk aversion due to their exposure on their balance sheets--stemming especially from the instability of the commercial real estate sector. That brings us to this important bill on the floor today. The Financial Services Committee has held several hearings on the restriction of credit for small business. The bill before us today builds on those hearings and was considered in the open process the committee is known for.

During markup of the bill, the committee adopted 15 amendments, including seven Republican amendments, and today we will consider 17 additional amendments, the vast majority of which are to the Financial Services portion of the bill.

The Small Business Lending Fund Act is a significant step to boost small business lending through our community banks. This legislation builds on the effective financial stabilization measures Congress has previously taken by establishing a new $30 billion small business loan fund to provide additional capital to community banks that increase lending to small businesses. This $30 billion investment on which the government will be collecting dividends and earning a profit per the CBO estimates can be leveraged by banks into over $300 billion in new small business loans. This is an important investment by the Federal Government in our small business that brings tremendous returns.

The terms of the capital provided to banks are performance based; the more a bank increases its small business lending, the lower the dividend rate is for the SBLF capital. If a bank decreases its small business lending, it will be penalized with higher dividend rates.

This legislation includes strong safeguards to ensure that banks adequately utilize available funds to increase lending to small businesses, not for other lending or to improve their balance sheet. There will be oversight consistently throughout the program, plus it requires that the capital be invested only in strong financial institutions at little risk of default and the best positioned to increase small business lending.

It's important for Americans to understand that although this fund has a maximum value of $30 billion, it is estimated to make a profit for taxpayers in the long run. And the money will ultimately go not to banks, but to the small businesses and their communities that they lend to. As our financial system stabilizes and our community banks recapitalize, these funds will be repaid to Treasury with full repayment required over the next 10 years.

Also included in the Financial Services portion of this bill is the State Small Business Credit Initiative championed by our colleague, Mr. Peters. The underlying bill provides $2 billion in funding for new or existing State lending programs.

I yield myself 1 additional minute.

This program provides funding for States to expand or create lending programs that use small amounts of public resources to generate private bank financing and are designed to address critical reasons why banks are having trouble making increased investments now--lack of adequate capital reserves on the part of lenders and collateral shortfalls on the part of borrowers.

The State Small Business Credit Initiative is required to leverage $10 of private funding for every $1 of government funding. Many of the existing capital access programs leverage 30 private dollars for every 1 government dollar. By supporting existing programs and using an easy- to-replicate model, this program will be quickly ramped up to increase small business lending which will retain and create jobs.

Small businesses are the job creators of our Nation. Supporting their ability to grow and innovate is key to a robust and stable economic recovery. I commend the leadership of Chairman Frank and Chairwoman Velazquez in bringing this package to the floor, which will provide critical support to the half of all American workers who either own or work for a small business.

Mr. Chairman, I reserve the balance of my time.

I yield 1 minute to the gentleman from Connecticut (Mr. Larson).

I thank the congressman for his concerns, and I have similar concerns.

In my home State of Illinois, we also have institutions that would like to participate but would be unable to because of the asset cap. I know Chairman Frank agrees on this point.

I reserve the balance of my time.

Mr. Chairman, I yield 2 minutes to the gentleman from Texas (Mr. Hinojosa).

Mr. Chairman, I yield 30 additional seconds to the gentleman from Texas.

Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from Michigan (Mr. Peters).

I yield 1 minute to the majority leader.

I yield myself the balance of time.

Well, first I would like to address some of the points our colleague from Missouri suggested, that all we need to do for business is less Federal action and less regulation. And on that point, I would have to agree, the minority has delivered--less action and less regulation, a culture of deregulation that led to the financial crisis and the recent oil spill in the gulf. But this bill isn't about regulation. It's about credit.

And I would then like to move to the point of my colleague from Texas who suggested that this bill adds $33 billion to the national debt. That's disingenuous, as the gentleman knows. This is not a $30 billion cost, according to the nonpartisan CBO. The legislation, in fact, will reduce the deficit. Now, these funds are an investment, and there are clear safeguards that ensure that taxpayers are repaid with interest. Also, his concern for small businesses fearing higher taxes is unwarranted, as taxes are, in fact, at historic lows; and in the Recovery Act, of the $288 billion in tax cuts, many of those went to our community businesses.

He also cited the NFIB to claim that access to credit is not a serious problem, yet the NFIB's own data shows that only 40 percent of small business owners attempting to borrow last year had all of their credit needs met, and nearly one-quarter of would-be borrowers, 25 percent, had none of their credit needs met. Now, he did suggest that some businesses--or he suggested all businesses--are just in a holding pattern, when the reality is, some of them are, and that's not who this legislation is directed to. There are many others who have started to see their pipeline build and their forecasts develop and are seeking to expand their operations and hire people, and they need that access to capital.

This Small Business Lending Fund Act is for those who are going to grow us out of this recession. I urge my colleagues to support this important investment in those community businesses that are the cornerstone of our economy.

I yield back the balance of my time.

I claim time in opposition, even though I'm not opposed.

I yield myself such time as I may consume.

I want to acknowledge Congressman Price's amendment and its recognition of the challenges facing not only community businesses seeking loans but the community bankers that are trying to provide them. His amendment recognizes mixed messages between legislators urging more lending while regulators and examiners are often urging less, particularly in the area of commercial real estate. That's why I have a bill that addresses both priorities by expanding the SBA 504 program to allow banks to lend to small businesses for owner-occupied properties, while easing the exposure on their bank's balance sheet with investments from the CDCs.

I also want to acknowledge that this amendment recognizes the credit crisis that's challenging our country and our small businesses particularly, which is the point of this underlying bill. And I hope my colleague will support the underlying bill as it addresses those credit challenges.

I yield back the balance of my time.

I just want to applaud Congressmen Driehaus, Connolly, and Moore's efforts to improve the oversight of the SBLF program. This amendment importantly expands oversight to ensure taxpayer dollars are protected. I urge my colleagues to adopt the amendment.

I would further rebut our colleague from Texas' inaccurate assertion that the program is not paid for. The gentleman knows full well that it is fully paid for and that, according to the CBO, the government will earn a profit.

Madam Chairwoman, I just want to acknowledge Congressman Braley's efforts recognizing the challenges Americans have reading many government documents, particularly lending disclosures, which are very difficult to understand. This amendment is a commonsense approach to making the program more accessible. And I commend his leadership to expand plain language to all government documents.

Madam Chair, I move that the Committee do now rise.

Mr. Chairman, I yield myself such time as I may consume.

Small businesses, which represent 99.7 percent of firms, are key to the recovery of the U.S. economy. Through innovation and hard work, they are able to not only create jobs but to also build the foundation for future growth. We saw this after the recession of the early 1990s. As we emerge from the latest downturn, small firms will again lead the way.

This downturn has affected every facet of the global economy. Most of the focus has been on repairing the residential housing market and homeowners in particular. It is important to note that this has greatly impacted small businesses as well. Through the Recovery Act, we were able to help them, providing more than $28 billion in assistance through the SBA. H.R. 5297 builds on this by establishing additional lending initiatives that will give small businesses even greater financing options.

This legislation, Mr. Chairman, also recognizes that capital markets are changing dramatically. Credit standards are stricter, and small businesses are now looking not only to loans and to credit cards to finance their operations, but they are also looking to equity investment to turn their ideas into reality. This has become even more pronounced as asset values have declined, leaving entrepreneurs with less collateral to borrow against.

Unfortunately, small firms' access to venture capital and to equity investment has declined. Last year, such investments plummeted from $28 billion in 2008 to only $17 billion last year. This is due, in part, to the previous administration's decision to terminate the SBA's largest pure equity financing program--the Small Business Investment Company Participating Securities program. This has left many entrepreneurs who need equity investment to fulfill their business plans without a source of such financing.

As a result, it has become more difficult to start a new business and to create the jobs that come with such activity. This is seen in data from the Bureau of Labor Statistics, which show that self-employment declined by 7.5 percent between 2007 and 2009. Less entrepreneurship is never a good thing, but during a recession, it is particularly problematic as small firms generate two-thirds of net new jobs.

In order to address this, title III creates a $2 billion investment fund at the SBA. Under this program, the agency will provide matching funds to qualified privately managed investment companies, which will, in turn, invest in small companies. To ensure that the public and private sectors' interests are aligned, the SBA's funding would be provided at a 1-to-1 ratio of private investment capital.

Funds from the program will only be given to investment companies that have a proven record of returning a profit to its investors. These managers must have experience in investing in small, early-stage companies. They must have the ability to provide leadership as these entrepreneurial endeavors grow. In selecting investment firms to participate in the program, the SBA will give a special preference to Small Business Investment Companies, which already have substantial experience in financing small firms. In exchange for receiving funds, participating investment funds must convey an equity interest to the SBA, similar to that of which individual investors will receive.

The equity interest shall entitle the SBA to a repayment of its investment and a proportion of any profits made by the investment company. As a result, the government is on a level playing field with private-sector investors, and the taxpayer stands to benefit from the growth and success of these small companies.

By giving entrepreneurs access to $2 billion in equity investment, we will provide them the resources to grow and create the types of long- term employment gains we need. It goes without saying that the groundbreaking, innovative firms that rely on such investment tend to be some of our most prolific job creators. Between 2006 and 2008, these companies created eight times more jobs than other businesses. That is exactly the kind of job growth Americans need right now.

Mr. Chairman, I support this legislation.

I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

I want to use this time to respond to those who are making the assessment that this money, that there are not safeguards into this legislation to make sure that the money goes to small businesses. First, banks must apply to the Treasury to receive funds, with a detailed plan on how to increase small business lending at their institution. This language was included at my insistence that we need to make sure that small businesses will get the benefit of this legislation.

Second, this capital, repayment of the government loans will be at a dividend rate starting at 5 percent per year. This rate will be lowered by 1 percent for every 2.5 percent increase in small business lending over 2009 levels. It can go as low as a total dividend rate of just 1 percent if the bank increases its business lending by 10 percent or more, incentivizing banks to do the right thing. To ensure that banks actually use the funding they receive, the rate will increase--and there are penalties--to 7 percent if the bank fails to increase its small business lending at their institution within 2 years. To ensure that all federal funds are paid back within 5 years, the dividend rate will increase to 9 percent for all banks, irrespective of their small business lending, after 4\1/2\ years.

Let me just make it clear: What the CBO estimates through what they provided to the Congress and telling us, CBO estimates that this provision will save taxpayers $1 billion over 10 years, as banks are expected to pay back this loan over 10 years, with interest.

I reserve the balance of my time.

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, the face of American small business is changing--and rapidly. Twenty years ago, entrepreneurs were likely to rely on loans and credit cards to start up or expand their businesses. This met the needs of most entrepreneurs, but today's startup costs have grown dramatically. This has caused many small companies to turn to equity investment, particularly those in high-growth, technology-based sectors which show the greatest promise to create new jobs. For these firms, their assets are not buildings or machinery; they are people, ideas and skills. For this new generation, the old method of securing capital, through debt, is no longer sufficient by itself.

In a world where revolutionary new products are conceived in dorm rooms, and companies are launched in garages, new ways of meeting businesses' capital needs are needed. Through the Small Business Early Stage Investment program, this bill recognizes this fundamental shift and takes steps to meet the capital needs of our new businesses. Our Nation's entrepreneurs have led us out of every previous recession, and they can do so again, but only if we give them the right tools. This legislation will make loans more affordable for existing businesses so they can grow and add to their payrolls. And for the enterprises just getting off the ground, it will reinvigorate investment in cutting-edge startups.

A vote for this bill is a vote in favor of the American traditions of innovation and entrepreneurship. I urge my colleagues to vote with the small businesses in their district; vote ``yes.''

I yield back the balance of my time.

I thank the gentleman for yielding.

Mr. Chairman, since the financial crisis struck in 2007, much has already been done to help banks and financial institutions stay solvent. Those steps were necessary. I firmly believe that without them, the financial crisis would deepened, unemployment would have been higher, more Americans would have suffered, and our economic recovery may have been delayed for many years.

Despite these efforts, our entrepreneurs are still struggling to tap into the credit they need. As we revisit this problem once more, it is vital that we ensure that the benefits of this bill reach small businesses. That is the intent of this legislation. But without the right safeguards, this will be another attempt that fails to address the underlying problem of small business access to capital.

If this measure is not crafted properly, loans which go to large businesses could qualify under the program. Mr. Chairman, I support this amendment.

Madam Chair, while I am not opposed to the amendment, I rise to claim the time in opposition.

America's small businesses have always pioneered new economic fields and sectors. Today, small businesses continue to be some of our most creative innovators. As our Nation shifts away from the fossil fuels and seeks clean sources of energy, entrepreneurs are leading the way. Today, small businesses represent 90 percent of those companies operating in the renewable and energy efficiency industries.

Small firms are also making important contributions in the realm of life sciences and biomedicine, uncovering groundbreaking therapies and medicines. Technologies used in our national defense have also been advanced by small businesses. Components of the Predator drone, for instance, were developed by small firms. And small businesses are helping develop new information technology and digital media services that better connect our world.

The United States must continue to lead in all these areas if our economy is to remain strong in the long term. This type of innovation creates good-paying, highly skilled jobs. However, before these businesses can develop the next game-changing defense technology, unearth the next medical breakthrough, or discover a new source of clean energy, they need capital. The amendment before us simply ensures that the Small Business Early-Stage Investment program is targeted to fields like these, where there will be the biggest payoff for economic growth and job creation.

Madam Chair, this is a good amendment. It will ensure the industries of tomorrow and future companies can secure financing to get off the ground. I urge my colleagues to vote ``yes.''

I yield the balance of my time to the gentleman from Missouri (Mr. Graves).

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, today, I rise in opposition to H.R. 5297, the Small Business Lending Fund Act. Although my colleagues on the other side of the aisle claim that this bill would improve small business access to much-needed capital, I am not convinced. In fact, there is virtually no guarantee that small businesses will benefit whatsoever from the funding in this bill.

Nothing in Title 1 of the bill assures that banks will lend the capital, much less to small businesses. Title 2 authorizes lending by State programs to businesses that the Small Business Administration would consider large. And only Title 3 of this bill is targeted to assist small businesses. Nevertheless, the overall bill is badly flawed, and I can't support it, nor can I support the excessive small business assistance spending in Title 3.

Now more than ever, our Nation is relying on small businesses to create jobs and to lead us in our economic recovery. But without sufficient access to credit or capital, small businesses can't expand operations or hire new employees. There's little doubt that efforts to bail out banks and other major financial institutions has not led to improved access to capital by small businesses.

Last session, I strongly supported H.R. 3854. It was a comprehensive, bipartisan revision to the capital access programs overseen by the Small Business Administration. That bill, unlike the one before us today, would have improved access to needed capital by small businesses.

Incorporated into that bill was H.R. 3738, which provided a streamlined process to enable qualified venture capitalists to bootstrap their investment with additional Federal moneys to provide needed early-stage equity capital to small businesses. Successful operators would pay back the Federal Government before they took their own profits. Although the legislation came with a relatively modest price tag of $200 million, its benefits were sure to far outweigh the cost. Moreover, if the program did not succeed, the cost of failure was going to be very modest.

That certainly isn't the case today with the bill we have before us. The cost has increased by 500 percent without any previous testing of its potential to succeed. This will pile unnecessary risk or costs onto taxpayers at a time when we're dealing with record debt and unsustainable deficit spending. Even if Title 3 of this bill--the small business portion--even if Title 3 stood alone, given the dramatic increase in costs, I couldn't support it. But yet here it is. It remains attached to a bill that has even greater costs--and costs that are fully not paid for in the short term.

So let's lay this out. We still do not have a budget for fiscal year 2011. Our national debt has reached a new record high of $13 trillion. And the administration and the majority in the House continue to rely on unsustainable borrowing and spending to keep things running. When you consider the complete chaos our fiscal house is in, the idea of more spending seems foolish. Completely foolish. But that's what's being proposed by this legislation today, and I refuse to support it.

If my colleagues want to get serious about supporting small businesses and encouraging their growth, there are lots of ways to do so, and I'm very happy to help. But H.R. 5297 is yet another ill- conceived effort that, at the end of the day, will only further punish American entrepreneurs.

With that, Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I don't have any other speakers on this.

I just might comment on this bill. One of the frustrating things about our economic recovery right now, and we continue to hear over and over and over again, that small businesses are uncertain about what the future is. They don't know what's going to happen with cap-and-trade and what's going to happen with the energy tax, particularly those businesses that are using a lot of energy to produce whatever it is. They're uncertain about what's going to happen with this health care bill and all the mandates that are coming out. They're uncertain about what's going to happen with their taxes. They're uncertain about what's going to happen with the amassing debt that's taking place, because somebody is going to have to pay for it. And this administration continues to look at small businesses to be able to provide that.

So here we come along with a bill that supposedly is supposed to help small businesses, which the way it is right now, there's no guarantee whatsoever that that money is going to be loaned to small businesses. As the bill stands right now, a commercial loan could qualify, any commercial loan could qualify if it's a loan less than a million dollars.

The fact of the matter is, Mr. Chairman, there's no guarantee. There's no guarantee.

Small businesses are the ones that need help. And the fact of the matter is, too, that if the government would just get out of the way, then small businesses would lead us back into this economic recovery. They provide 7 out of every 10 jobs in this country, and they are the ones that are going to lead us. But nobody is going to expand and nobody is going to add any new productivity, any new hires, until they know what's going to go on and what's going to be around the corner. With this administration, they don't know what's going to happen to them.

I reserve the balance of my time.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I rise in support of the amendment offered by the gentleman from Virginia.

Under the program, the way it was reported out of the Financial Services Committee, the bill bases its lending on the size of loans, and assumes that loans of under $250,000 and $1 million will be made to small businesses. However, there is no such assurance in the bill, and loans of those sizes could be made to large businesses, but count as small business lending. If this is a small business lending program, then it should use the definition of small business used throughout the government, and that is the one in the Small Business Act. The approach offered by the gentleman from Virginia (Mr. Nye) does just that. It makes that sensible change.

The other change that the gentleman's amendment does is to include small business lending companies. These institutions are not overseen by the Federal financial regulators, but are authorized by the Small Business Administration to make guaranteed loans. If the idea of the program is to increase lending to small businesses, small business lending companies should not be excluded from this program.

For these reasons, I definitely support the gentleman's amendment, and I appreciate his offering it.

Thank you, Madam Chair.

Madam Chair, I rise in support of the amendment from the gentlewoman from California. If we're going to enact a program that's designed to target investment in certain industries, then selection of the applicants should be based on the likelihood that a venture capital company will make those amendments. As a result, I believe it provides a very important technical clarification to the bill, and I support it.

Madam Chair, I have an amendment at the desk.

I yield myself 3 minutes at this time.

Madam Chair, this is an important amendment. This amendment will not be a perfect amendment with references to what it seeks to do, but it is a perfecting amendment. This amendment seeks to provide disclosure and enhance accountability, and I'd like to make it known that this amendment received a lot of help and input from the Office of Congressman Hensarling, and I thank him for what he has done.

This amendment would provide that an institution engaged in the lending process with the funds from the program, that this institution will on applicable loan documents indicate that the funds being loaned are funds that are coming from the fund. This is important because the public desires to know where the money is going, how it is being utilized.

This amendment would also require, if the institution has a Web site, it will require that that Web site contain the written reports of the Treasury Secretary. These reports would indicate, to the extent that loans have been made, how the money has been utilized, and this, again, would provide additional transparency which will lead to accountability.

Finally, the amendment will require lending institutions to make known to the capable, competent, and qualified borrowers that they will have the opportunity to participate in the program by way of receiving loans and that these loans must be based upon the law as it is written and not allow any type of discrimination, invidious discrimination to infiltrate the program.

I think this is an amendment that goes a long way toward helping us improve our transparency and accountability. It is not a perfect amendment, but it is a perfecting amendment.

I reserve the balance of my time.

If the gentleman would yield to me?

It will indicate what transactions took place, and it will indicate who the banks, the lending institutions, that engaged in the transaction. The borrower's name would not be a part of the information.

Let me simply say in response that the bill anticipates that loans will be repaid. It's not a circumstance where persons are going to receive or businesses will receive loans that are not going to be paid. And the bill causes banks or lending institutions to make the loans because they will receive a better interest rate upon making loans such that they are incentivized to make these loans.

So, while the bill will not cure all of the ails of society, all of the ills that we have, it certainly will go a long way towards stimulating small business lending, which is important to the economic recovery.

I believe in this bill. I believe that this amendment will help with transparency and accountability. And I also believe that it is time for us to do all that we can to help the small businesses in this country. I believe that this is something we can do, and I believe that it is the something that will make a difference.

I reserve the balance of my time.

I yield myself such time as I may consume.

While I appreciate the gentleman from Texas' desire to make sure that budgets are balanced and to make sure that we have accountability and transparency, I do have to remind the gentleman that the desire and the need to balance the budget did not start this year, nor did it start last year. We should have had a balanced budget for the 8 years of the prior administration.

I think that you find this administration burdened with the problems that were created by the past administration. I believe that in an effort to correct these problems, we will have to take some necessary steps toward helping small business.

I hear my colleagues on the other side quite regularly contending that small businesses need help. This is help, and my trust and my hope and my belief is that the small business help will be supported by not only this side of the aisle, but by both sides of the aisle.

Madam Chair, I yield back the balance of my time.

Madam Chair, as the designee of the gentlewoman from California, I have an amendment at the desk.

Madam Chair, this amendment is one that will add additional language to the requirement that there be minority outreach in this program. It's important for me to state that I have a district that I represent that is currently about 36 percent African American, 31 percent Latino, 21 percent Anglo, and 12 percent Asian. It's important to note that in my district the ballot is printed in three languages. It's printed in English, Spanish and Vietnamese.

This amendment furthers the notion that persons who speak languages other than English will have an opportunity to have materials that are linguistically and culturally sensitive. This amendment would require that appropriate materials, when published, be in languages that are culturally and linguistically sensitive. It also requires that advertising receive the same sort of consideration, given that we are trying to reach markets wherein we do have persons who can better understand what is being conveyed if they have the opportunity to do so in a language that they are comfortable with.

By the way, I would add that many people who speak English have difficulty with financial documents, as was indicated by a previous amendment. Imagine, if you will, speaking English, but it is not a language that you are as comfortable with as perhaps another language. This would assist persons with the understanding that they should have, so as to participate in the program.

The amendment also would have data disaggregated. We find that the information that we collect too often does not disaggregate as it relates to the Asian American community, and we would have this information disaggregated so that we might ascertain whether or not we have persons who are not only of wealth in the community but also find out about persons who may not be as wealthy as many others.

With this said, I will reserve the balance of my time.

If the gentleman yields, I would add that your assumption is correct.

Madam Chair, at this time I yield as much time as she may consume to the gentlewoman from California (Ms. Chu).