Small Business Lending Fund Act of 2010--Resumed

Floor Speech

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Mr. SHELBY. Madam President, I rise to oppose the Landrieu amendment. Only 1 day after the President signed the Dodd-Frank financial regulation bill into law, at that time proclaiming an end to taxpayer-funded bailouts, we find ourselves debating another bailout bill on the floor of the Senate. Just last week, we were told by the majority that the mere passage of Dodd-Frank would help revive our damaged financial system.

The bill was heralded as a thoroughly considered and comprehensive piece of legislation that would restore confidence in our financial system and revive our economy. What a difference a day makes.

If Dodd-Frank is really going to revive our economy, why do we need this bill? I think the answer is clear: The majority knows the Dodd-Frank legislation is going to reduce lending and undermine economic growth by imposing more regulations and taxes on banks. They know, I believe, that Dodd-Frank will do nothing to increase the availability or reduce the cost of loans to small businesses. But, rather than create a new regulatory system to strengthen our private sector, the majority decided to expand significantly the old system, thereby increasing the regulatory burden on American businesses--small, medium, and large.

I believe this is the same old song and dance: expand the reach of the heavy hand of government, increase taxes and the cost of doing business, and then complain that the private sector is not working. We have heard this before. Once the American business owner is sufficiently encumbered, the only alternative must be a brandnew big government program, such as envisioned here. How do we pay for this new ``necessary'' government program? We borrow money from future generations. Does that sound familiar to people here in the Senate?

This amendment is intended to help small businesses--a goal we can all support. Yet, in practice, the legislation would create a second TARP. Remember TARP? A lot of people wish they had not voted for it. Like TARP, this program does not lend money directly to small businesses. It would have the government take ownership interest in hundreds of banks and then require that they make loans. This is TARP II. In fact, banks could replace original TARP money with funds received from this program.

As I said, just 1 day after the enactment of Dodd-Frank, which contained a provision to speed up termination of TARP, we are voting on an amendment to extend TARP for at least another 10 years.

To force banks to participate in this program, this legislation would subsidize bank financing. Banks would generally pay dividends on the government equity investments at rates ranging from 1 to 5 percent. The current market yield on such investments, however, is between 7 and 8 percent. Hence, any bank that chooses not to participate could find itself at a competitive disadvantage. Moreover, this legislation forces taxpayers to what? Subsidize banks once again. In effect, we are taxing small business owners to pay banks to lend to small businesses. Even worse, the government's equity investments would be subordinated to all of a bank's existing debt. As a result, if a bank fails, existing creditors would get paid before the government, and taxpayers again would take the hit. I believe American taxpayers have lost their appetite for bank bailouts.

Finally, I also want to note that the legislation appears to exempt loans made under this program from existing underwriting regulations. The bank regulator would then have the authority to decide what types of underwriting standards apply to these loans. I believe this raises at least two issues. First, if the multitude of regulations required by Dodd-Frank are really necessary, why does this bill provide a carve-out for loans made under this program? Second, what statutory protections are there to ensure these loans are underwritten in a safe and sound manner so we do not create hundreds of new Freddies and Fannies? The answer, sadly, is none.

This legislation would continue the majority's assault on American business by having the government dictate how and to whom loans are made. Each participating bank would have to provide the government with a business plan for review. Rather than having loans approved based on the creditworthiness of a borrower, politics will now play a role. We should let the market, not bureaucrats, decide which businesses get loans. Unfortunately, the majority party is once again sacrificing our core economic values for a short-term economic gain.

The lack of credit for small business is a problem that needs to be addressed. I fully support the Banking Committee examining the issue and hope Chairman Dodd would consider holding a hearing on this issue. I think it is very important. It is relevant, and it should come out of the committee. I do not, however, believe we should try to solve this problem with another expensive and bureaucratic government program. TARP II is something we do not need and I hope will not be supported in the Senate.

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