By Brady Dennis
Washington Post Staff Writer
Thursday, April 9, 2009
The chairman of the House Committee on Small Business yesterday urged the new head of the Small Business Administration to try to jump-start lending by using provisions in the economic stimulus bill that so far have sat idle.
"With every day that goes by, viable small businesses are being forced to close," Rep. Nydia M. Velázquez (D-N.Y.) wrote in a letter to SBA Administrator Karen Gordon Mills, who was confirmed last week. "Without the lifeline that this program can provide to small businesses, our economic recovery will be slowed."
One item authorized by the stimulus bill, the Business Stabilization Loan Program, provides for loans of up to $35,000 to small businesses so they can make payments on their outstanding debt. The loans would be 100 percent guaranteed by SBA. The stimulus package also authorized the SBA to guarantee pools of small-business loans held by broker-dealers, and to set up a new program to help inject more money into lending markets.
Congress set timetables for certain programs to get up and running -- anywhere from 15 to 30 days.
"It has now been fifty-one days since the President signed these measures into law," Velázquez wrote. "Given the current economic climate, it is critical that these programs get underway."
An SBA spokesman yesterday said the agency has implemented some stimulus measures, such as upping the level of its guarantees on loans. Other programs referred to in Velázquez's letter are "in the pipeline," he said. "We're moving as quickly as we can to get this up and running."
The Obama administration last month announced it would spend up to $15 billion to help small businesses get the loans they need to weather the economic crisis. The administration's strategy included plans to buy the small-business loans that are clogging the books of community banks and other lenders, allowing the institutions to start lending again. The government will also increase its guarantee of the SBA's primary loan program, reducing the amount of money lenders can lose if borrowers default.
The Obama administration said that it would tap the $700 billion Troubled Assets Relief Program to pay for the initiatives. Critics have questioned whether major lenders will participate in the government's plan given limits on executive pay and other restrictions.
Almost from the start, the government's plan encountered widespread skepticism. Major providers of small-business loans expressed serious doubts that the plan would work as designed. Because the money would come from the TARP, the financial firms involved could be forced to surrender ownership stakes to the government and limit executive pay. Numerous company officials have said those requirements are so off-putting that they do not intend to participate.
In her letter yesterday, Velázquez also expressed skepticism about whether the administration's plan alone was enough to trigger new lending to small businesses.
"Given the unprecedented size and scope of the problems in our credit markets, it is doubtful that these steps alone will be sufficient," she wrote. "For that reason, the SBA must expeditiously implement these provisions as Congress intended and instructed in the [stimulus] Act."