The Wall Street Journal
By: Martin Vaughan
June 17, 2010
WASHINGTON--The U.S. House approved legislation Thursday to create a $30 billion fund to boost lending to small businesses through community banks.
The vote was 241-182.
The bill will now be combined with a $3.5 billion package of tax cuts directed at small businesses, which the House passed earlier this week and sent to the Senate for approval.
"This bill will increase credit to small businesses and get them back on their feet, and help them continue to add jobs," Rep. Ed Perlmutter (D., Colo.) said during House floor debate.
House Republicans derided the bill as more government bailout spending, labeling the $30 billion fund "TARP junior," after the Troubled Asset Relief Program.
The House defeated a Republican motion which would have subjected the program to the oversight of the special inspector general of the TARP. Democrats contend that the fund is already under oversight of Treasury's permanent inspector general, and that it is unrelated to TARP.
Industry groups representing regional and large national banks backed the legislation, as did some small business and real-estate groups.
Banks with total assets of less than $10 billion would be eligible to receive capital investments from the fund, under the bill from House Financial Services Committee Chairman Barney Frank (D., Mass.). Banks with higher rates of lending to small businesses and farms would qualify to have interest rates lowered on those capital infusions.
The bill would also provide $1 billion, to be matched by private capital, for a new equity financing program for start-ups. That fund will be overseen by the Small Business Administration.
"Twenty years ago, entrepreneurs were likely to rely on loans and credit cards to launch or expand their businesses. This met the needs of most entrepreneurs, but today's start-up costs have grown dramatically," said House Small Business Committee Chairwoman Nydia Velasquez (D., N.Y.), explaining the intent behind the start-up fund.
The bill also includes another $2 billion for state programs intended to leverage private bank lending to small businesses.
The lending bill will be paired with tax incentives passed earlier this week by the House. That includes a proposal from President Barack Obama to eliminate capital-gains taxes on sales of certain small business stock.
The combined cost of both measures is roughly $7 billion over 10 years, all of which is offset by revenue provisions. For instance, the bill would put curbs on the use of grantor-retained annuity trust to avoid estate taxes.
The cost of the $30 billion fund is estimated at $3.3 billion over 10 years. This is because to the extent the capital lent out to banks is paid back, it is not counted against the federal budget.
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