Shaheen leads bipartisan group of 32 Senate colleagues in calling on Obama to make credit more available by making changes to SBA regulations and the TALF program
U.S. Senator Jeanne Shaheen today led a bipartisan group of 32 Senators in calling on President Obama to address the growing credit crisis facing auto dealers by making changes in the Small Business Administration (SBA) and the Term Asset-Backed Securities Loan Facility (TALF) to increase auto dealers' access to credit. The bipartisan group wrote a letter to President Obama urging him to take swift action in support of auto dealers, a key provider of jobs and economic growth in New Hampshire and across the nation.
"New Hampshire's auto industry employs thousands of workers and plays a crucial role in our state's economy," said Shaheen. "Auto dealers are facing serious challenges with decreased demand and a frozen credit market, and I'm glad my colleagues have joined me in a bipartisan fashion to urge President Obama to take swift action to support our auto dealers. We must to do everything we can to make sure this important industry not only survives, but thrives."
Shaheen has taken an active role in supporting New Hampshire's auto industry during the economic crisis. In a recent letter to IRS Commissioner Douglas Shulman, Shaheen encouraged the IRS to interpret a provision in the American Recovery and Reinvestment Act that provides a deduction for state and local sales and excise taxes paid on the purchase of new cars to cover the local registration fee New Hampshire residents pay, which would stimulate demand for new cars in the state. Several weeks ago, Shaheen raised the challenge of frozen credit markets and how it is affecting auto dealers during a meeting with Chair of the Federal Reserve Ben Bernanke. And last week, Shaheen met in Dover with auto dealers from across the state to discuss how the current credit crunch is affecting their businesses and what needs to be done to get credit moving again.
Today's letter urges two measures to get credit flowing to auto dealers. First, the bipartisan group recommends authorizing the SBA to expand the loan size standard that excludes many dealers today and allowing the SBA to guarantee loans to auto dealers used for floorplan financing, which are currently ineligible for SBA guarantees. Second, the group urges the Federal Reserve to take appropriate steps to ensure that the TALF generates a workable plan to finance floorplan loans. Although TALF presently covers securities backed by floorplan loans, TALF has yet to finance the purchase of any such securities since the program's inception.
The full text of the letter follows:
April 7, 2009
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500
Dear Mr. President:
The undersigned members of the United States Senate are writing to urge you to address the worsening credit crisis that is adversely affecting the entire automotive retailing industry in America. The restoration of all types of credit - retail loans, working capital loans, and wholesale inventory (or "floorplan") loans - is essential for the nation's automobile dealers. We urge you to implement the two policies outlined below as soon as possible.
The franchised dealer network is an extraordinarily powerful economic force on Main Streets throughout the United States. Together, the country's 19,000 new car and truck dealerships employ approximately 1 million people and account for upwards of 20 percent of the nation's retail spending. Individually, each of these dealerships generates direct economic investment in real estate and improvements, significant employee payroll/benefits, and substantial tax revenue for local and state governments. This stream of economic activity is based in large part on the dealer's willingness and ability to buy inventory from the automaker. Despite the entrepreneurial spirit of the dealer body, the viability of this model is stressed. More than 1000 dealerships have closed in the past year, at a cost of more than 50,000 jobs, and even more are facing a similar fate this year.
Credit is the lifeblood of the franchised dealer's economic model. Since more than 94 percent of vehicle deliveries are financed, adequate retail credit is essential. Additionally dealers, like many other businesses, need sufficient working capital to maintain cash flow. Finally and most critically, floorplan credit - the financing dealers use to buy vehicle inventory - is essential. A dealer losing access to floorplanning will close within a matter of days.
The degradation of the floorplan lending market is alarming. Within the past six months, the number of floorplan lenders has declined and the lenders still in the market are insisting upon terms and conditions that are not affordable for many dealers. This contraction of floorplan availability is threatening the future of many dealers. This problem is not limited to dealers with domestic nameplates and is not limited to any one region of the country.
In light of these circumstances, we urge your Administration to take prompt action to avoid further erosion of sales and employment in the auto retailing network. The following actions would restore access to credit in auto retailing, thereby stabilizing employment and economic activity in a sector essential to the overall health of the American economy:
1. Expand access to Small Business Administration (SBA) lending capacity for automobile dealers. In 1980, President Carter directed SBA to provide liquidity to the dealers to meet a similar credit crisis. The Administration has the statutory authority to expand the SBA size standard that today excludes many dealers. Also, the Administration has the statutory authority to allow SBA's guarantee to be used for floorplan loans that currently are ineligible under the program. An emergency directive implementing these two changes would increase access to credit for small business dealers all across the country.
2. Restore liquidity for auto floorplan lenders. The Federal Reserve should take appropriate steps to ensure that the Term Asset-Backed Securities Loan Facility (TALF) provides a workable program for financing floorplan loans. Although TALF presently covers securities backed by floorplan loans, TALF has yet to finance the purchase of any such securities since the program's inception.
In closing, we wish to emphasize the importance of this issue in communities throughout the nation. Your prompt action will provide positive economic results on Main Street.
Jeanne Shaheen (D-NH) Richard Shelby (R-AL) Chris Dodd (D-CT)
Olympia Snow (R-ME) Mary Landrieu (D-LA) Bob Corker (R-TN
Jeff Bingaman (D-NM) Lamar Alexander (R-TN) Barbara Mikulski (D-MD)
Sam Brownback (R-KS)Chuck Schumer (D-NY) Kay Bailey Hutchison (R-TX)
Jim Webb (D-VA) Orrin Hatch (R-UT) Debbie Stabenow (D-MI)
John Cornyn (R-TX) Jon Tester (D-MT) Ron Wyden (D-OR)
Bill Nelson (D-FL) Kay Hagan (D-NC) John Kerry (D-MA)
Russ Feingold (D-WI) Bob Casey (D-PA) Tom Udall (D-NM)
Carl Levin (D-MI) Sheldon Whitehouse (D-RI) Evan Bayh (D-IN)
Sherrod Brown (D-OH) Jack Reed (D-RI) Max Baucus (D-MT)
Mark Pryor (D-AR) Ted Kennedy (D-MA)