Increasing Small Business Lending Act of 2011

Mr. President, I rise today on behalf of myself, Senator Carper and Senator Casey to introduce the Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act of 2011, or the STARTUP Act. This bill would allow unemployed Americans to use the unemployment insurance, UI, system to create jobs for themselves and for others.

In too many cases, the current unemployment assistance programs allow the experience and expertise of America's unemployed workers to sit on the sidelines. The STARTUP Act promotes an alternative approach that gives the unemployed the ability to start their own businesses and get in the game, self-employment assistance, SEA.

In Oregon, we have got this program up and running and think other states should be encouraged to do the same. By failing to take advantage of self-employment assistance, we are missing an opportunity to not only help currently unemployed workers but also to help our economy grow and create more jobs. I know this program works, its record in Oregon is strong and can be found in letters and testimony from individuals who have used the program.

Take, for example, software developers Adam Lowry and Michael Richardson who joined the ranks of the unemployed when the tech startup they worked at went under in 2009. With little capital, they turned to Oregon's self-employment assistance program which allowed them to draw unemployment benefits while they and two friends launched the mobile software development company Urban Airship, which is now one of the best-known technology startups to emerge in Oregon in recent years. Just yesterday, Urban Airship announced $15.1 million in strategic investment from Salesforce.com and Verizon, among others. Last week an additional acquisition brought the company's total payroll to 51 employees and an additional 22 open positions. At the root of Urban Airship's success are four entrepreneurial-minded individuals and a jump start from self-employment assistance.

Expanding self-employment assistance is a creative way to use the current unemployment insurance structure to create new businesses and additional jobs beyond that of the immediate beneficiary. We often talk about the benefits of small businesses in this country, yet our unemployment insurance programs actually prevent aspiring entrepreneurs from putting their ideas to work. Under the unemployment insurance systems in most states, if you stop looking for a job or you turn down a job, you lose your unemployment benefit even if you are working to start your own business. States with active self-employment assistance programs, like Oregon, allow a small percent of the unemployed to focus full time on starting their own business while drawing down their unemployment benefits in the form of self-employment assistance. Anyone who has started a new business knows that getting it off the ground is a full time job in and of itself, and allowing would-be UI recipients to focus full-time on their new business vastly increases their likelihood of success. Rather than rely on others to create jobs for them, self-employment assistance allows determined entrepreneurs to create jobs for themselves and others.

The President's proposal in the American Jobs Act is a step in the right direction; it allows states to quickly enter into an agreement with the Department of Labor and allow the long-term unemployed, those on extended unemployment compensation, to draw down their UI benefits in the form of self-employment assistance. However, this does little to encourage states to make self-employment assistance a part of their permanent strategy. We must be more far-sighted. We ought to provide states with a little assistance so that they can start self-employment programs of their own, not just for periods of extended unemployment compensation.

I want to be clear: this is no giveaway. In order to get this benefit, unemployed workers have to meet the same wage and hour requirements as they would to receive UI and they must prove they have a viable business plan. The beneficiaries of self-employment assistance really have something to offer, they have solid work experience and solid ideas; and put into action, that combination can snowball into a successful business with multiple employees.

There are 2.5 million micro businesses in the U.S., representing 88 percent of all businesses. They generate $2.4 trillion in receipts, account for 17 percent of GDP, and employ more than 13 million people. If one out of every three of these businesses hired just one additional employee, the U.S. economy would achieve full employment. Expanding self-employment assistance helps us get there.

A study by the Department of Labor found that self-employment participants were 19 times more likely than eligible non-participants to be self-employed at some point after being unemployed. Moreover, they were four times more likely to obtain employment of any kind. The average cost to create each of those jobs is $3,350. According to estimates from Princeton economist and former Federal Reserve Board Vice Chairman Alan Blinder, it takes about $93,000 worth of garden- variety fiscal stimulus to create an average job. It is not hard to see that job creation through SEA is an incredible bargain.

This program has been creating jobs and businesses in Oregon for nearly two decades. Earlier this year, Pat Sanderlin, who coordinates Oregon's program, conducted an informal ``census'' of enrollees since 2004. He found that 77 percent of businesses started by SEA beneficiaries are still up and running. According to Mr. Sanderlin, the companies' combined annual payroll totals $7,888,210.

Despite widespread support for self-employment and entrepreneurial programs, only a handful of states offer SEA, and those that do take advantage of it typically administer benefits to a small share of the unemployed. Only about 2,400 Oregonians have used the program since its inception in 1995. Though states currently have the option of taking advantage of self-employment assistance, the administrative costs to start a new program often prevent them from doing so. Because Federal law prevents self-employment benefits from being paid out while an individual is in a period of extended unemployment, the long-term unemployed cannot take advantage of the program.

The STARTUP Act encourages states to utilize self-employment assistance by: allowing the long-term unemployed who remain eligible for regular or extended unemployment benefits to draw down those benefits in the form of self-employment assistance; providing technical assistance and model language from the Department of Labor for states that create new self-employment programs; and providing financial assistance to aid states in establishing, implementing, improving and/ or administering self-employment programs.

Self-employment benefits can serve as a guaranteed source of startup capital for businesses. And unlike traditional unemployment insurance, workers who successfully exit this program by starting their own business can create more new jobs as business expands. When unemployment is high and workers face extended periods of joblessness, this is exactly the type of program we should embrace.

I encourage my colleagues to support this legislation to expand self- employment assistance programs so that more unemployed workers have an opportunity to create jobs for themselves and for others.

Mr. President, I was here last week in this Chamber to discuss a variety of areas in which the American people are not getting a straight deal compared to special interests and folks who have a lot of power for themselves and their industries in Washington. In that speech I proposed a number of concrete steps we could take to help restore the balance of power in our Nation between ordinary Americans on the one hand and the giant corporations and special interests that give themselves special deals and privileges that the American people do not share on the other hand.

Today I am here to introduce legislation to take one of those steps; that is, to protect ordinary consumers from runaway interest rates on credit cards from Wall Street banks. This is something that has gone unchecked for far too long. In the last Congress we passed two pieces of banking legislation. We passed the Credit Card Act, which ended some of the worst tricks and traps hidden in credit card contracts, and we passed the Dodd-Frank Act, which restructured our system of financial regulation and created a new agency to protect consumers from hazardous mortgages and credit cards.

Regrettably, one particularly bad practice was not addressed in either of those two pieces of legislation: the runaway credit card interest rates with which families are too often burdened. I will add it is not just families. I went through Olneyville in Providence about 2 weeks ago and spoke to a small business owner who was having tough times. His bank had pulled his line of credit, so he was having to fund his business off his credit card, and they had bumped up his credit card rate to--you guessed it--30 percent.

The Empowering States' Right to Protect Consumers Act, which I am introducing today, would pick up where the Credit Card Act and Dodd- Frank left off by restoring to our 50 sovereign States the power which they have properly had through the vast bulk of the history of this Republic to protect their home State consumers with limits on credit card and other loan interest rates. This is not a new power to States. This is not a new principle or idea. This is the restoration of a historic States right which was just eliminated a few decades ago.

When you and I were growing up, a credit card offer with a 20-percent or 30-percent interest rate might be something to bring to the attention of law enforcement. Such interest rates were illegal under most State laws. Today, in contrast, credit card companies routinely charge rates of 30 percent or more. We may not know, going through our credit card agreement, that is where we are going to end up. They may have a teaser rate up front that is a lower rate. But make one of those mistakes in that 20-page-long contract that is full of tricks and traps, and, pow, there we are at 30 percent.

What happened between our childhood when a 30-percent interest rate was something to bring to the attention of law enforcement, and now, when ordinary families are bedeviled

with 30 percent interest rates on their credit cards? Before 1978-- which is for the first 202 years of the American Republic--each State had the ability to enforce usury laws, interest rate limits to protect their citizens. Our economy grew and flourished during those two centuries, and lenders profited while complying with the laws in effect where they operated.

Then came 1978 and a seemingly uneventful Supreme Court case. It was little noticed at the time. It was decided in Marquette National Bank of Minneapolis v. First of Omaha Service Corporation. The Supreme Court had to decide what State's law to apply when the bank was domiciled in one State but the customer lived in a different State.

The Court looked at the word ``located'' in the National Bank Act of 1863, and it decided it meant the location of the bank and not the location of the customer. They did not get it right away, but it did not take long before some big banks spotted the opportunity. They could avoid interest rate restrictions by reorganizing as national banks and moving to States that had weak interest rate protections and comparatively weak consumer protections. The proverbial race to the bottom followed as a small handful of States eliminated interest rate caps and degraded consumer protection in order to attract lucrative credit card business and related tax revenue to their States.

That is why the credit card divisions of major banks are based in just a few States and why consumers in other States are often denied protection from outrageous interest rates and fees, even though those outrageous interest rates and fees are against the law of the consumer's home State.

My bill would reinstate the historic longstanding powers of States to set interest rate caps that protect their own citizens.

Let me be clear about what this bill would not do. It would not prescribe or recommend any interest rate caps nor would it impose any other lending limitations. It is pure States rights. It would restore to the States the power they enjoyed for over 200 years from the founding of the Republic: the power to say enough, the power to say that 30 percent or 50 percent or whatever the State deems appropriate should be the limit on interest charged to their people.

The current system is not only unfair to consumers, it is unfair to our local lenders and retailers who continue to be bound by the laws of the State in which they are located. This is a special privilege for big national banks that can move their offices to whatever State will give them the best deal in terms of lousy consumer protection and unlimited interest rates. A small local lender has to play by the rules of fair interest rates. Gigantic credit card companies can avoid having any rules at all. We need to level the playing field to eliminate this unfair and lucrative advantage for Wall Street banks against our local credit unions and other small lenders.

When we pass this bill, States can dust off or reenact their usury statutes--most of which still limit interest rates to 18 percent or less--and once again begin protecting their consumers from excessive interest rates. This is the historic norm in our constitutional Republic. It is the 30-percent and over interest rates that are the recent anomaly that are the historic peculiarity. We should go back to the historic States rights norm, the way the Founding Fathers saw things under the doctrine of federalism and close this modern bureaucratic loophole that allows big Wall Street banks a special deal to gouge our constituents.

As I close, I thank Senators Levin, Durbin, Begich, Franken, Reed of Rhode Island--most significantly my senior Senator--Sanders, and Merkley for their cosponsorship of this bill. In the past, similar legislation has garnered bipartisan support. It did so as an amendment to Dodd-Frank, and I hope my Republican colleagues will consider giving this bill a close look and join with us. This is purely an issue of restoring the balance of power to the States and to the people of those States as voters--federalism, something I know many Republicans support in other contexts.

I ask all of my colleagues for their consideration and support.

Mr. President, I join with my friend from New York to discuss the needs of our National Guard. We are introducing two important pieces of legislation today that I believe will help address those needs.

I have always been a strong supporter of our brave men and women of the Missouri National Guard, who contribute greatly to the safety and security of our country. Those who serve or who have served deserve America's deepest respect and must receive the resources they need when they come home.

Since the events of September 11, 2001, the men and women of the Missouri National Guard have answered the call of our Nation by volunteering to go into harm's way. Many of our soldiers and airmen in the National Guard have been deployed numerous times, working and training side by side with our active duty members. As you can imagine, multiple deployments take a toll on both our guardsmen and women and their families.

The Missouri National Guard is an emergency response force for disasters readiness and relief. They have responded to a wide range of State and national emergencies including flooding, tornadoes and even hurricanes on the Gulf Coast. During the historic floods this summer, the Missouri Guard had more than 600 guardsmen serving 14 counties across Missouri to assist with flood relief. After the devastating tornado in Joplin, MO, the 1-138 Infantry Regiment helped to remove debris and assisted in gathering and provided information for those seeking local, State and Federal resources. Members of 1139 Military Police Battalion helped to aid law enforcement officers with traffic control and security.

As part of their Federal mission, from 2008-2009 our Missouri National Guard deployed more than 1,000 citizen-soldiers to Kosovo, and in 2009 we deployed 2,352 soldiers and 1,670 Airmen to support overseas contingency operations in Iraq and Afghanistan. Currently 1,101 Missouri Guardsmen are deployed. After serving admirably in their tours, our Guardsmen and women return home, yet they do not always receive the resources they need to provide for themselves and their families. The National Guard Outreach Act of 2011, introduced by Senator Gillibrand, will help to correct this deficiency.

The active Army health plans only cover service men and women for 6 months after they have returned from their deployments. For many, this time period is spent simply adjusting back to civilian life. Studies show the real stress of combat and separation from one's family takes its toll on our service members and their loved ones for up to two years after they return home. Over the past several years, Congress has extended the coverage for returning National Guard soldiers with money from Overseas Contingency Operations funding, better known around here as supplementals. Since this funding is being normalized, I believe it's important that we continue to provide for the needs of our returning citizen-soldiers.

The National Guard Outreach Act of 2011 would help to provide those returning home with secure health services, marriage and financial counseling, substance abuse treatment and other services necessary to aid in a smooth transition for those returning home from Iraq and Afghanistan. Undiagnosed illnesses, left untreated, have long-lasting social, emotional and financial impacts long after service members are reintegrated into a community. Many Guardsmen and women today lack health insurance and go without health care as well as behavioral health care. I thank Senator Gillibrand for introducing this legislation and for working with me on the bill.

I am also introducing the National Guard Employment Protection Act of 2011 to amend the Uniformed Services Employment and Reemployment Rights Act of 1994, USERRA, to authorize the Secretary of Defense to include

Full Time National Guard Duty for possible exemption from the USERRA 5- year limit on service. These exemptions cover service during a time of war or national emergency, support of missions where others have been ordered to duty under an involuntary call-up authority, and for other critical missions or requirements.

Usually, certain types of active duty service are exempted from the five-year reemployment limit under USERRA. However, the needs of today have left our Guardsmen and women performing duties which are not covered under the USERRA, forcing Guard units to return to duty much sooner than usual. This, in turn, keeps service members away for longer periods of time, often beyond the 5-year limit. When National Guardsmen and women are working side by side with their Active Duty counterparts supporting critical active duty missions, they should not be forced to decide between keeping their civilian jobs and supporting critical national security missions.

At no time in America's history has the National Guard played such a critical role in the defense and security of our homeland, both as partners with our active forces and allies on the continuing War on Terror and as a critical component of homeland emergency preparedness and disaster response. We must make sure all of our Nation's heroes can fulfill their missions without worrying about supporting their families when returning home.

As a Nation, we must honor our men and women in uniform, providing them with the resources they need, both in combat and when they return home to their families and civilian lives. This is why I am proud to play a lead role in supporting the National Guard Employment Protection Act of 2011 and the National Guard Outreach Act.

Mr. President, once again, too many of our Nation's small businesses are facing difficulty in gaining access to capital. That is why today I am introducing the Increasing Small Business Lending Act to increase access to capital for our Nation's small businesses to help them sustain and build their businesses, create jobs and expand our economy.

In October 2008, markets froze. Credit lines were cut. A lending gap was created in the market. Even Small Business Administration guaranteed loans, that help reduce risk for lenders, were stalled. Congress stepped up and enacted temporary measures to help fill the gaps in small business lending, saving nearly 90,000 small businesses.

One such business is LazerCraze in North Andover, Massachusetts that received an SBA loan to expand to a second location and purchase state- of-the-art equipment that allowed them to hire an additional 37 full time employees.

SBA, administrator Karen Mills has said that the previous temporary changes to the SBA loan programs were a success, ``In short, it worked. We engineered a turnaround in SBA lending even though conventional credit was, and still is to some extent, very tight. Taxpayers got a big bang for the buck. With just over a billion dollars in total subsidy, we supported about $42 billion in lending. In fact, SBA had its highest-ever weekly loan volume the week before Christmas when we supported nearly 2 billion dollars in lending, 10 billion total last quarter. Here is the headline: overall, that is nearly 90,000 small businesses that are not surviving this recession, but growing and creating jobs.

Unfortunately, the temporary small business loan provisions ran out of funding in January 2011, ahead of the authorization which expired in March 2011. Since then, small business lending has declined, making it more difficult for small businesses to create jobs and for our economy to emerge from our economic downturn.

The legislation I am introducing today is similar to the Small Business Lending Market Stabilization Act, which I introduced in 2008 that was included in both the American Recovery and Reinvestment Act of 2009, P.L. 111-5, and extended in the Small Business jobs Act, P.L. 111-240. The Increasing Small Business Lending, Act will eliminate for one year the fees for 7(a) and 504 Small Business Administration loans and increase SBA loan guarantee of 90 percent, policies that were started as part of the American Recovery and Reinvestment Act and extended in the Small Business Jobs Act.

According to the SBA, total small business loans outstanding, loans under $1 million, actually declined during the first half of 2011 after the temporary provisions ended. Loans outstanding to small businesses at the end of the second quarter totaled only $607 billion, which is the slowest since the economic downturn began in 2008.

We can't afford to have our economic progress reversed by a decline in access to capital for small businesses. Since the increased guarantee and reduced fees have expired, our economic recovery could be impeded if we don't act to continue the policies that we know work. By extending key provisions to bolster access to capital, small businesses will have the assurance and support they need to put their innovative ideas into practice and get more Americans back to work.

My legislation will complement the existing Small Business Lending Fund that encourages lending to small businesses through smaller community banks. Small businesses are the backbone of our economy and I ask all Senators to support job growth and small businesses by supporting this legislation.

Mr. President, once again, too many of our Nation's small businesses are facing difficulty in gaining access to capital. That is why today I am introducing the Increasing Small Business Lending Act to increase access to capital for our Nation's small businesses to help them sustain and build their businesses, create jobs and expand our economy.

In October 2008, markets froze. Credit lines were cut. A lending gap was created in the market. Even Small Business Administration guaranteed loans, that help reduce risk for lenders, were stalled. Congress stepped up and enacted temporary measures to help fill the gaps in small business lending, saving nearly 90,000 small businesses.

One such business is LazerCraze in North Andover, Massachusetts that received an SBA loan to expand to a second location and purchase state- of-the-art equipment that allowed them to hire an additional 37 full time employees.

SBA, administrator Karen Mills has said that the previous temporary changes to the SBA loan programs were a success, ``In short, it worked. We engineered a turnaround in SBA lending even though conventional credit was, and still is to some extent, very tight. Taxpayers got a big bang for the buck. With just over a billion dollars in total subsidy, we supported about $42 billion in lending. In fact, SBA had its highest-ever weekly loan volume the week before Christmas when we supported nearly 2 billion dollars in lending, 10 billion total last quarter. Here is the headline: overall, that is nearly 90,000 small businesses that are not surviving this recession, but growing and creating jobs.

Unfortunately, the temporary small business loan provisions ran out of funding in January 2011, ahead of the authorization which expired in March 2011. Since then, small business lending has declined, making it more difficult for small businesses to create jobs and for our economy to emerge from our economic downturn.

The legislation I am introducing today is similar to the Small Business Lending Market Stabilization Act, which I introduced in 2008 that was included in both the American Recovery and Reinvestment Act of 2009, P.L. 111-5, and extended in the Small Business jobs Act, P.L. 111-240. The Increasing Small Business Lending, Act will eliminate for one year the fees for 7(a) and 504 Small Business Administration loans and increase SBA loan guarantee of 90 percent, policies that were started as part of the American Recovery and Reinvestment Act and extended in the Small Business Jobs Act.

According to the SBA, total small business loans outstanding, loans under $1 million, actually declined during the first half of 2011 after the temporary provisions ended. Loans outstanding to small businesses at the end of the second quarter totaled only $607 billion, which is the slowest since the economic downturn began in 2008.

We can't afford to have our economic progress reversed by a decline in access to capital for small businesses. Since the increased guarantee and reduced fees have expired, our economic recovery could be impeded if we don't act to continue the policies that we know work. By extending key provisions to bolster access to capital, small businesses will have the assurance and support they need to put their innovative ideas into practice and get more Americans back to work.

My legislation will complement the existing Small Business Lending Fund that encourages lending to small businesses through smaller community banks. Small businesses are the backbone of our economy and I ask all Senators to support job growth and small businesses by supporting this legislation.