President’s New Small Business Loan Proposal Important Step in Jobs-Creating Recovery, Congressman Garamendi Says
WASHINGTON, DC – Congressman John Garamendi (D-Walnut Creek, CA) today praised President Barack Obama’s proposed Small Business Lending Fund that will transfer $30 billion from the Troubled Asset Relief Program (TARP) to support small business owners. The newly available resources will primarily originate at community and smaller banks, and the proposal offers incentives for banks to increase small business lending.
"America is on a path to recovery, but further efforts to increase employment are needed," said Congressman Garamendi, who as California’s first elected Insurance Commissioner regulated the largest financial sector in America. "The big banks continue to deny loans to small businesses, and it’s time for a change."
While making up only about 20 percent of all bank assets, small-and-medium-sized banks are more attached to their local communities and account for more than 50 percent of all small business loans nationwide. The proposal by President Obama would create strong incentives for smaller banks to invest in small businesses. As participating banks increase lending to small firms compared to 2009 levels, the dividend paid to Treasury on that capital investment would be reduced.
"The Small Business Lending Fund will play an important part in our jobs-creating recovery," Garamendi added. "It transfers money from big bank bailouts into a fund that will invest in our local communities. This is an important step."
Congressman Garamendi is an original cosponsor of Congressman Peter Welch’s (D-Vermont) Wall Street Bonus Tax Act (H.R. 4426). The bill would tax bonuses at firms that have received assistance through the Troubled Asset Relief Program at a rate of 50 percent for all bonus compensation in excess of $50,000. Revenues generated through the tax would fund a new direct lending program administered by the Small Business Administration (SBA).
According to the Federal Reserve, America’s ten largest financial institutions hold 54 percent of our total financial assets, up from 20 percent in 1990. Over the past 20 years, as big bank conglomerates continue to merge with existing smaller banks, the number of banks in America has dropped from more than 12,500 to about 8,000. This has created a detrimental environment where large firms prefer to invest with other large firms at the expense of the primary incubators of job growth in America: small businesses.
"Banks once deemed 'too big to fail' are really just too big to let America grow to its full potential," said Congressman Garamendi.