There is now a simple test to determine if a candidate for political office is a Capitalist or a Financialist. Senator Dean Heller’s (R-NV) small spat with Nevada Governor Sandoval over job creation strategies places Heller firmly in the Financialist camp. Heller’s still trying to explain his vote against the Small Business Jobs Act of 2010. “It was a bailout. It was another bank bailout. Two things I vote against when I’m in Washington, DC: tax increases, more stimulus, more bailout. I guess that’s three. I put stimulus and bailout in the same picture. But that’s what I vote against.” [NNB] That would be three, as in three strikes against truly small businesses.
This commentary from Senator Heller deserves a Pants on Fire rating, because the 2010 Small Business Bill was anything BUT a bank bailout. The only way to stretch the “bail out” argument to fit the situation would be the convoluted argument that (1) banks with heavy burdens of toxic assets on their books constricted their lending to small businesses, (2) any support for small business lending via the Small Business Administration constitutes a bailout for those banks with constricted lending ability, therefore (3) any assistance with small business lending must be a bank bailout. Not. So. Fast.
What did the 2010 Act actually do? It opened some $12 billion in SBA lending support through 90% loan guarantees for SBA loans to small businesses, which leveraged about $505 million in subsidies for the Jobs Act into about $12 billion for overall small business lending.
The Act increased the limits for small business lending. Small manufacturers who could formerly obtain only $2 million in loans for expansion may now borrow up to $5 million. The limit for SBA microloans increased from $35,000 to $50,000, and the law temporarily increased turn around loans from $350,000 to $1 million.
The law provides for funding up to $20 million per year over the next three years for a pilot program that leverages local nonprofit organizations and other organizations that help small businesses that need loans up to $200,000.
The Act also created a $30 billion Small Business Lending Fund in the Treasury Department, providing smaller community banks with low-cost capital (as low as 1%) if they go above and beyond 2009 small business lending levels. Additionally, the law provides up to $1.5 billion to support state-run small business lending programs.
SBA loan guarantees, increased lending authorization, pilot programs for the encouragement of local business entrepreneurship, and a small business lending facility for community banks…. not a whit of this adds up to “bailout.”
Evidently, Senator Heller believes that slapping a label like “bailout” on Small Business Administration efforts to provide lending to small businesses and manufacturing firms will make the act instantly distasteful. Unfortunately, he slapped the label on the wrong bill.
Thus, while Senator Heller paints the Small Business Administration’s efforts to extend credit to small business as a (hiss/boo) “bank bailout,” Nevada benefited from the programs:
Nevada received the $13.8 million through the State Small Business Credit Initiative (SSBCI). Nevada expects to generate a minimum of $10 in new private lending for every $1 in federal funding.
Heller’s comments came as the U.S. Department of the Treasury on Monday released a report showing that the Meadows Bank of Las Vegas has increased its small business lending by $45.9 million since receiving capital through the Small Business Lending Fund (SBLF). [NNB]
What “friend of small business” objects to a government program which leverages $1 of government spending into $10 in private lending to small business owners?
Senator Heller’s opposition to increasing the capacity of the Small Business Administration’s loan programs for small businesses puts him well within the territory of those who support those major banks while pleading with the public to see their efforts as part of a Little Guy Support Network. In this instance the ploy is altogether too transparent.
If the function of the financial markets in our free market capitalist system to to encourage the transfer of money (capital) from sites of surplus to sites of shortage, then supporting the efforts of the Small Business Administration’s loan programs make perfect sense.
On the other hand, Senator Heller has availed himself of several opportunities to demonstrate his allegiance to the very Big Banks, which he says he’s ‘agin’.
Senator Heller voted in favor of H.R. 3060, which guts provisions of the Sarbanes-Oxley Act passed in order to prevent further financial depredations of the Enron variety. [DB] He’s called for the outright repeal of the Dodd-Frank Act which was written in the wake of the Wall Street debacle of 2006-08 to prevent the kinds of unregulated trading that caused the Mortgage and Credit Meltdown. [DB] [DB] It really doesn’t do to invoke one’s “anti-bank” street cred on one hand while actively waving the banner of financial sector deregulation with the other. Someone will eventually catch on.