[Congressional Record Volume 147, Number 178 (Thursday, December 20, 2001)]
[Senate]
[Pages S13925-S13929]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              INVESTOR AND CAPITAL MARKETS FEE RELIEF ACT

  Mr. SARBANES. Mr. President, I rise to address an issue which I 
believe may merit the attention of the Securities and Exchange 
Commission following enactment of H.R. 1088, the Investor and Capital 
Markets Fee Relief Act.
  That bill has two main impacts. It authorizes the commission to raise 
the salaries of its staff to levels that are on a par with the 
compensation paid by other Federal financial regulators. Our securities 
markets are the envy of the world. It is important that the regulator 
of those markets be in a favorable position to attract and retain 
qualified employees. Enacting pay parity contributes towards this goal 
and will result in enhanced supervision of the securities markets.
  In addition, the bill reduces certain fees charged to investors and 
issuers. Section 11 of the bill provides an effective date for 
reduction of transaction fees on the later of, one, the first day of 
fiscal year 2002; or two, 30 days after the date on which a regular 
appropriation to the Commission for such fiscal year is enacted. 
Because the regular appropriation to the Commission (H.R. 2500) was 
signed into law on November 28, 2001, Public Law 107-77, the effect of 
Section 11 is to provide an effective date for transaction fee 
reduction of December 28, 2001, regardless of when the bill is enacted.
  The legislation was passed by the Senate on December 20, 2001, and 
still must be signed by the President. Thus, the industry will have at 
most only a few days to comply with the law. I have been informed by 
some market participants that this may not allow them adequate time to 
re-program and test their computers to make certain that the transition 
to the new fee structure goes smoothly and without flaws.
  I believe it would be appropriate, and consistent with the intent of 
this legislation, for the commission to review this situation and 
determine whether it is necessary or appropriate in the public 
interest, and consistent with the protection of investors, to use the 
commission's general exemptive authority to extend the effective date 
for the reduction of transaction fees for a brief period as may be 
reasonably necessary in order for market participants to comply with 
the new law fully and without disruption.
  Mr. GRAMM. I believe that the commission can and should alleviate 
this problem. When the Senate passed its version of fee reduction 
legislation in March, the bill, S. 143, provided for a delay of 30 days 
in the effective date for transaction fee reduction in order to provide 
securities firms and markets the necessary time to adjust their 
computer systems to accommodate the rate change. This language was 
changed when the bill was passed by the House in June, in order to 
comply with budget-scoring requirements. At that time, it was 
envisioned that congressional action on the bill would be completed 
well before the start of the new fiscal year in October, and that the 
effective date provision would not cause administrative problems for 
the securities industry.
  It is not our intention to impose an administrative requirement that 
would be impossible for industry to meet. In order to comply with 
congressional intent and to make this provision workable, I hope that 
the commission will consider using its general exemptive authority 
under Section 36 of the Securities Exchange Act of 1934 to extend the 
effective date for reduction of transaction fees.
  Mr. KERRY. Mr. President, I speak today on S. 1499, the American 
Small Business Emergency Relief and Recovery Act of 2001. This 
legislation provides help to small businesses hurt by the events of 
September 11th and to small businesses suffering in the weakened 
economy. Senator Bond and I have spent months trying to uncover who is 
behind the serial holds that have been placed on this emergency 
legislation and work out disagreements.
  This bill hasn't been ``hustled through,'' as some contend. It was 
drafted with the input of small business organizations, trade 
associations and SBA's lending and counseling partners through more 
than 30 meetings and conference calls--conference calls because we 
couldn't ask folks to fly in the immediate weeks after the attacks. It 
is cosponsored by 18 of the Small Business Committee's 19 members. And 
overall 62, senators, including 20 Republicans, have joined me in 
cosponsoring S. 1499.
  On the House side, the Committee on Small Business passed the 
companion to S. 1499. We attempted to move this bill quickly because it 
is emergency legislation. It is a good bill because it can do a lot for 
a lot of people. It is being held because of shameful politics.

[[Page S13926]]

 I say let's bring this bill up for a vote. Small businesses have a 
right to know exactly who is working against them and who is working 
for them.
  So what happened? On October 15th, when this legislation had cleared 
both cloakrooms for passage, the Administration had the Republican 
cloakroom put a last-minute hold on the bill so the Administration 
could announce its approach the next day. The next morning, the 
Administration lifted its hold, but a new hold was immediately placed 
by the junior Senator from Arizona, which he stated in the press was on 
behalf of the Administration. Last week, the Senator from Arizona 
lifted his hold, and I thank him for that, but unfortunately, we then 
learned that there was one or more anonymous Republican holds on the 
bill. This approach makes it very difficult to try to work out 
objections. Two other Republican senators told me that their objections 
were solely based on the Administration's problems with the bill. 
Therefore, I directed my staff to meet with the Administration, learn 
their concerns and try to reach a compromise so that this bill could 
pass before the recess.
  Last night, Senator Bond and I joined our staffs as they met with 
representatives of the Administration for the eighth time. I am very 
disappointed to report that the Administration came to the table and 
said that, although we had made some progress, it would not negotiate 
further. The ultimatum was for us to strike entire sections and 
provisions critical to the relief provisions of our bill.
  Specifically the Administration's representatives said:
  ``We cannot work with you on Section 6.'' That is the entire stimulus 
portion of S. 1499. As such, we were asked to eliminate the provision 
that would make it less expensive for small businesses to get loans and 
provide incentives to lenders to make these loans. We were told that, 
in their view, there is no credit crunch for small businesses.

  ``We cannot work with you on Section 10.'' Section 10 establishes a 
fund to help small businesses that were shut out of their Federal work 
sites or have suffered delays in accessing those sites because of 
national security measures. We offered to set it up in any way they 
thought it could work and to reduce its $100 million authorization 
level, but the Administration refused to work with us on that section.
  ``We cannot work with you on refinancing non-SBA business debt.'' 
This was an important part of the disaster relief that S. 1499 targets 
to those at ground zero in NY and VA, those located in airports and 
those adversely affected by Federal security actions. The 
Administration was unwilling to make this help available to these 
disaster victims.
  The administration can not go further in providing an incentive to 
small business lenders by reducing the lenders' loan fee by more than 
one-tenth of one percent. Despite numerous articles in reputable 
newspapers such as the New York Times, it is the Administration's view 
that lenders do not need incentives to make small business loans in 
this economic downturn. Senator Bond and I, as well as the 61 other 
cosponsors of S. 1499 believe that both lenders and small business 
borrowers need a break to encourage these loans to be made. With this 
capital, small businesses will stay in business and continue to employ 
people. Without it, we can expect greater business failures and 
bankruptcies.
  Senator Bond and I asked them to meet us halfway, and they said no. 
We asked them to give us alternative language, and they didn't give us 
any. We spent more than 20 hours negotiating on this bill and it 
appears as if the Administration never had any intention of finding 
common ground. It appears as if it was an exercise in delay.
  Let me describe briefly where I disagree with the administration 
about how to help small businesses battling bankruptcy and employee 
layoffs triggered by the terrorist attacks and economic downturn. The 
administration believes that all assistance should be delivered through 
the SBA's disaster loans, which are administered through only four 
regional offices. From talking to small businesses and SBA lenders, 
Senator Bond and I have concluded that small businesses would be better 
served through a combination of disaster loans and government 
guaranteed loans. Government guaranteed loans are almost five times 
cheaper than what the administration has proposed, have less exposure 
for the taxpayer, and can reach more small business owners because they 
are delivered through more than 5,000 private sector lenders who know 
their communities and have experience making SBA loans. Our proposal 
combines public and private sector approaches to ensure small 
businesses receive the maximum amount of assistance.
  We will never agree on each other's approach, mostly because the 
administration has told us in meeting after meeting that it does not 
believe there's a credit crunch and that small businesses are not 
having difficulty in accessing credit. They don't acknowledge articles, 
surveys and testimonials that state it has become harder and more 
expensive for small businesses, particularly minority and women-owned 
small businesses, to get loans over the past year.

  They ignore the surveys by the Federal Reserve that say, ``40 percent 
of domestic banks reported tighter standards [when lending to small 
businesses] over the past three months, up from 32 percent in August.'' 
Please keep in mind that this survey was released in October and 
doesn't even capture the affects of September 11.
  They ignore articles from economic authorities such as the Wall 
Street Journal. I read this last week on the floor but think it is 
absolutely worth repeating. Wall Street Journal, Tuesday, November 6th, 
2001. Here are the words of Mr. John Rutledge, Chairman of Rutledge 
Capital in New Canaan, CT, and a former economic advisor to the Reagan 
administration:

       Interest rate reductions alone are not enough to jump-start 
     this economy. We need to make sure cheaper credit reaches the 
     companies that need it. . . . The Fed is cutting interest 
     rates--but the money isn't reaching capital-starved small 
     businesses because Treasury regulators are cracking down on 
     bank loans. Credit rationing, not interest rates, is the real 
     problem with the economy. . . . This problem didn't start on 
     September 11th. For more than a year U.S. banks have been 
     closed for business lending. Unless the current Bush 
     administration takes steps to restore bank lending to small 
     businesses and heal the asset markets now, the economy will 
     stay weak.

  They ignore surveys published in the American Banker. On October 31, 
a survey of 80 lenders of all sizes by Phoenix Management Services 
found that 42 percent ``would be less likely to lend to small 
businesses, which they view as more risky because they foresee no 
improvement in the economy until late 2002 at the earliest.'' The 
article from November validated what before was characterized as ``less 
likely to lend to small businesses,'' by reporting lenders had actually 
``tightened their standards'' to small firms by more than 40 percent.
  Still, the administration maintains there's no credit crunch and that 
provisions in S. 1499 to provide improved access to credit are too 
expensive and unnecessary.
  The administration has also raised concerns about the cost of the 
legislation, which has been unofficially scored by Congressional Budget 
Office at $860 million. Let me be clear, that's million, not billion. 
$860 million to help all of our Nation's small businesses. Yet the 
administration objects to this, when they have sent up requests for 
billions in tax cuts for a select few large corporations, and when the 
administration's approach costs almost five times as much to help fewer 
small businesses. The bill's $860 million cost is too much to invest in 
the nation's small businesses, according to the administration's 
position.
  I regret very much for small businesses and their employees that 
their needs are being trivialized. I admire Senator Bond and the 
Chairman of the House Committee on Small Business for showing 
leadership in their party to help small businesses. I am very glad that 
we can work in such a strong bipartisan fashion to fight for small 
businesses. I thank the 62 members of this body who have come together 
in a bipartisan fashion to support this legislation and our nation's 
small businesses.
  Let me note here that the White House said in our meetings that 62 
cosponsors ``means nothing--that it happens all the time up here.'' I 
find that cavalier considering that, according to the Congressional 
Research Service,

[[Page S13927]]

only 13 out of 1,839 bills introduced in the 107th Congress have more 
than 60 cosponsors.
  The support for this bill is strong and bipartisan. I am very sorry 
that those Senators supporting S. 1499 have not had the chance to cast 
a vote in favor of this emergency legislation before they go home for 
the holidays and visit with the small businesses in their states. Small 
businesses deserve some good news. As for right now, we can only tell 
them what I told the administration in our meetings last night: When we 
come back in January, we intend to file cloture on this bill and take a 
vote.
  In closing, let me thank the many groups who have fought so hard on 
behalf of their members to get this legislation enacted. They have 
demonstrated all that is great about grassroots action and active 
involvement in the political and legislative process.
  In addition to including for the record the list of these groups, I 
also ask unanimous consent to have printed articles and letters from 
small business groups regarding the current credit crunch, the need for 
equitable adjustment provisions for our small business contractors and 
other provisions of S. 1499 be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                           S. 1499 Supporters

       Airport Ground Transportation Association, American Bus 
     Association, American Subcontractors Association, Associated 
     General Contractors of America, Association of Women's 
     Business Centers, CDC Small Business Finance, Chicago 
     Association of Neighborhood Development Organizations, 
     Citizens Financial Group, RI, Clovis Community Bank, CA, 
     Coastal Enterprises, ME.
       County of San Diego, Delaware Community Reinvestment Act 
     Council, Fairness in Rural Lending, Florida Atlantic 
     University Small Business Development Center, Helicopter 
     Association, HUBZone Contractors National Council, National 
     Association of Government Guaranteed Lenders, National 
     Community Reinvestment Coalition, National League of Cities, 
     National Limousine Association.
       National Restaurant Association, National Small Business 
     United, National Tour Association, New Jersey Citizen Action, 
     Rural Housing Institute, Rural Opportunities, Self Help 
     Credit Union, Small Business Legislative Council.
       U.S. Conference of Mayors, United Motorcoach Association, 
     United States Air Tour Association, United States Chamber of 
     Commerce, United States Tour Operator Association, Women's 
     Business Development Center.
                                  ____


          [From the Wall Street Journal, Tues., Nov. 6, 2001]

                  A Credit Crunch Imperils the Economy

                           (By John Rutledge)

       When the Federal Open Market Committee meets today it won't 
     be arguing over whether we are in recession. The economy is 
     weaker today than at any time since 1982. It will almost 
     certainly end the meeting by voting to reduce interest rates 
     again. This will bear the same results as all the previous 
     rate cuts this year: none.
       Interest rate reductions alone are not enough to jump-start 
     this economy. We need to make sure cheaper credit reaches the 
     companies that need it. Credit rationing, not interest rates, 
     is the real problem with the economy.
       The Fed's monetary stimulus has been hijacked by the bank 
     regulators. these credit highwaymen aren't bad guys, they are 
     just doing their jobs. The Treasury Department's Office of 
     the Comptroller of the Currency (OCC), which is charged with 
     regulating federally chartered banks, has a different agenda 
     from the Fed. Its job is to protect bank capital, period. It 
     does so with an army of bank examiners, who wield the blunt 
     instrument of credit rationing inside banks. For more than a 
     year, these regulators have been diverting bank reserves into 
     Treasury securities instead of business loans, in hopes of 
     restoring bank capital that was damaged by technology 
     lending. Companies that rely on banks for working capital 
     have been sucking air.
       To restore growth we need a functioning banking system. 
     This will require a level of coordination the Treasury and 
     the Fed have seldom achieved. But the current consensus for 
     growth could give President Bush the political Roto-Rooter he 
     needs to clear out the conduit.
       This problem didn't start on Sept. 11. For more than a year 
     U.S. Banks have been closed for business lending. The story 
     reads a lot like the real-estate blowout of the early 1990s 
     that ended with Resolution Trust Corp. auctions, except this 
     time it was undisciplined technology investments that did us 
     in. In the three years leading up to 2000, commercial banks 
     loaned enormous sums of money to telecom, cable and 
     technology companies to finance, capital-spending programs. 
     These loans weren't backed by assets, but were based on 
     projections that all three sectors would have sales growth 
     rates several times that of the economy for many years to 
     come.
       Last summer it became clear that sales growth would not 
     meet those heady projections. Instead of the 14% growth 
     projected by analysts for telecoms this year, for example, 
     actual sales will shrink. Companies without revenues don't 
     make interest payments. And so by the fall of 2000, OCC teams 
     were forcing regional banks to downgrade loans and reduce 
     business lending.
       The Fed is cutting interest rates--but the money isn't 
     reaching capital-starved small businesses because Treasury 
     regulators are cracking down on bank loans.
       Here's the catch. The loans to technology companies were 
     generally unrecoverable. The tech firms had spent the funds 
     on current operating expenses or to purchase assets with lots 
     of goodwill but little resale value. So the banks turned to 
     the one place they could get money back: reducing the 
     revolving credit facilities of their small business 
     customers.
       I got a personal glimpse of all this last October, when a 
     team of bankers visited our office to inform us their bank 
     had decided to reduce the credit rating of, as well as cash-
     flow loans to, one of the private companies we own, in 
     preparation for a bank examiner audit the following week. Our 
     loan went from a ``five'' to a ``six'' on their 10-point 
     internal risk management system, which meant the company 
     could no longer use its acquisition credit line. This caused 
     the company to halt discussions with an acquisition target 
     and to book the costs incurred up to that point as current 
     expenses.
       Other companies had it worse, with reduced revolving credit 
     facilities and increased fees. Some companies, under pressure 
     from their banks to raise equity capital, have been forced to 
     sell control in an illiquid equity market. Others have been 
     forced into filing for bankruptcy protection or liquidation.
       Deprived of working capital, U.S. companies have been 
     trying to shrink their way to solvency, by reducing 
     inventory, stretching vendors and laying off workers. This 
     has created the sharpest drop in industrial output in 20 
     years.
       Ironically, when the Fed became alarmed at the shrinking 
     economy and began to cut interest rate sin January, the bank 
     examiners, who report to a different master, tightened 
     further. The business loan market is far tighter today than 
     it was then. Two years ago banks were willing to lend a good 
     company four to five times Ebitda, or earnings before 
     interest, taxes, depreciation and amortization. Today banks 
     quote a market of just over two times Ebitda but money is 
     not, in fact available even at that level.
       A further irony is that although banks have refused to lend 
     to businesses, they have been throwing money at the consumer 
     through mortgage and equity credit lines. This has produced a 
     two-speed economy that has left many companies unable to 
     produce products or to ship orders for lack of working 
     capital. Stimulating consumer spending won't solve this 
     problem; we need a functioning bank market.
       The last period of nonprice credit rationing was the 1990-
     92 credit crunch. It caused tremendous damage to the economy 
     and cost the first President Bush his re-election bid. It 
     ended only after the RTC had finished its auctions and the 
     property and banking markets had stabilized.
       The lesson of that experience--that the economy is only as 
     healthy as its balance sheets--is as true today as it was a 
     decade ago. Unless the current Bush administration takes 
     steps to restore bank lending to small businesses and heal 
     the asset markets now, the economy will stay weak.
       The White House can do three things to put the economy back 
     on sound footing.
       First, it should bring the Fed and the Comptroller of the 
     Currency together to coordinate efforts to restore bank 
     lending. This can be done very quickly and would not require 
     new legislation.
       Second, it should introduce legislation to transfer the 
     regulation of federally chartered banks from the Treasury to 
     the Fed, which would make monetary policy function more 
     smoothly and prevent future credit-crunch situations.
       Third, the White House should make it, clear to 
     Congressional Democrats that the price for support of their 
     huge spending projects is fast action on a lower capital-
     gains tax rate and further action to lower marginal income 
     tax rates, both of which would increase asset market values 
     and improve bank capital.
       Forceful action to Roto-Rooter the business loan pipeline 
     is one thing we can do to make the economy grow again.
                                  ____


            [From The American Banker, Wed., Nov. 14, 2001]

                            (By Rob Garver)

       The slowdown in lending activity, evident through much of 
     the year, sharpened in recent months through diminished 
     demand and tighter lending standards even as banks addressed 
     a new round of credit quality problems in their loan 
     portfolios.
       According to the Federal Reserve Board's latest survey of 
     senior loan officers, which was released Tuesday, nearly half 
     the banks had lowered internal ratings on at least 5% of 
     their commercial lending portfolios.
       Internal loan ratings reflect a bank's assessment of the 
     risk that the borrower will default. The most likely 
     borrowers to be downgraded in the three-month period through 
     October were commercial airlines and nondefense aerospace 
     firms, followed

[[Page S13928]]

     closely by travel and leisure-related businesses such as 
     hotels and restaurants. The survey of the chief credit 
     officers of 57 domestic banks and 22 U.S. branches of foreign 
     institutions also found that most U.S. banks tightened their 
     underwriting standards for commercial loans, and that 
     commercial borrowers, for their part, were less willing to go 
     into debt. Terms and conditions for consumer loans tightened 
     slightly, the survey found, and demand for consumer loans 
     fell.
       The survey, taken four to six times a year, typically 
     contains a number of ``special questions'' in addition to 
     standard queries about loan terms, conditions, and demand. 
     The special questions, which usually address typical issues, 
     focused on the recent downgrading of commercial credits and 
     the changes in the loan market as a result of the Sept. 11 
     terrorist attacks on New York and Washington.
       After noting that debt rating agencies ``have revised their 
     ratings for a substantial number of firms'' recently, the 
     survey asked banks what portion of their commercial loan 
     portfolios, by dollar volume, had been downgraded in the past 
     three months.
       Among domestic institutions, 10.5% said they had downgraded 
     less than 1% of their portfolios, while 40.4% reported 
     downgrading between 1% and 5%. Banks that downgraded between 
     6% and 20% of commercial loans made up 42.1% of the total, 
     and an additional 7% of respondents reported downgrading 
     between 21% and 30%.
       The standard elements of the survey, which deal with 
     underwriting standards and loan demand, found that 50.9% of 
     banks had tightened their standards for large and midsize 
     firms. For loans to small firms, 40.4% reported higher 
     standards.
       The tightening of standards most frequently took the form 
     of premiums charged for making risky loans, and higher 
     interest rates. Loans to large firms were also likely to have 
     tighter loan covenants, while loans to small firms were 
     likely to carry higher collateralization requirements.
       The main reasons for the tougher underwriting standards 
     were a ``less favorable or more uncertain economic outlook'' 
     and a ``worsening of industry-specific problems.''
       While banks were tightening their standards, commercial 
     borrowers were reducing their demand for loans, the survey 
     found. Loan demand from large and middle-market firms was 
     down at 72% of banks in the survey, while demand form small 
     businesses was down 55.4%. The most common reason reported 
     for the decreased demand was a reduced investment by 
     customers in their plants and equipment.
       After noting that, in the aftermath of the attacks, the 
     Securities and Exchange Commission had relaxed its rules on 
     stock repurchases by public companies, the survey asked if 
     demand for loans to finance such repurchases had increased, 
     and if banks had altered the terms of such loans. In both 
     cases, more than 90% of respondents reported little or no 
     change.
       The survey also asked if the dislocation of businesses 
     after Sept. 11 had affected liquidity in the secondary loan 
     market. Two-thirds of the respondents reported decreased loan 
     trading volume, and 64.4% reported that since the attacks, 
     bid-ask had widened.
                                  ____


                     [From the Arizona Daily Star]

                    Kyl Accused of Blocking Aid Bill

                 (By Tiffany Kjos and Aaron J. Latham)

       Arizona Sen. Jon Kyl and an anonymous lawmaker are being 
     accused of blocking a bill that would provide low-income 
     loans to small businesses suffering as a result of the 
     country's economic downturn.
       The bill would provide financial help through existing loan 
     programs administered by the Small Business Administration: 
     7(a) working capital loans; and 504 loans for equipment and 
     building improvements. It would also lower fees for borrowers 
     and SBA lenders.
       Sen. John Kerry, a Democrat from Massachusetts and chairman 
     of the Senate small-business committee, introduced the bill 
     more than two months ago in hopes of moving it through 
     quickly. It has 60 co-sponsors in the Senate and dozens of 
     backers in small-business associations.
       ``I'm asking my Republican colleague to stop obstructing 
     this legislation,'' Kerry said.
       The Congressional Budget Office estimates the bill's cost 
     at $860 million, but it would result in $25 billion in 
     government-guaranteed loans and venture capital for 
     businesses, Kerry said. If the bill passes, Congress would 
     have to figure out where the money would come from.
       ``As each day passes, more and more small businesses are 
     left behind, facing financial hardships that are forcing them 
     to close their doors as a result of inadequate disaster 
     assistance, stifled availability of loans and limited access 
     to capital,'' Kerry said.
       Kyl, a Republican, has said the bill is too expensive, and 
     he told the Washington Post he is not blocking the bill but 
     acting as an agent for the Republican steering committee in 
     reviewing it.
       Kyl's anonymous colleague on the bill can remain 
     unidentified because Senate rules allow members to oppose 
     legislation without going public.
       The federal government already has in place a disaster loan 
     program that offers low-interest loans to businesses that 
     suffered directly or indirectly as a result of the Sept. 11 
     attacks. The Small Business Emergency Relief and Recovery Act 
     of 2001 would help those firms, plus any small business that 
     needs money to survive in the lagging economy.
       Like thousands of other small businesses across the 
     country, Tucsonan Maggie Johnson has seen a dropoff since 
     Sept. 11. Johnson's Malkia African Arts & Gifts at 272 E. 
     Congress St. is filled with African masks, fabric and 
     clothing, Egyptian beaded scarves, and colorful greeting 
     cards she makes by hand.
       ``I'm not selling necessities. I'm selling things people 
     buy with their disposable income. And everyone's sitting on 
     their disposable income now,'' she said.
       The consumer response to the attacks was immediate and 
     nationwide, she said.
       ``People are pulling back, retrenching--waiting is a good 
     word,'' she said. ``They're spending money on things they 
     have to have, food and basics.''
       The U.S. Chamber of Commerce is a strong supporter of the 
     measure. Giovanani Coratolo, director of small-business 
     policy for the Washington, D.C.-based group, was careful not 
     to criticize Kyl but did not say the chamber has been working 
     hard to get the bill through the Senate.
       ``We respect his opinion but we are not with him on this,'' 
     Coratolo said. ``We've been actively working to get co-
     sponsors and, quite frankly, it could have 80 co-sponsors, 
     (but) he is still determined to block it.''
       Normally the chamber would not endorse legislation that 
     would expand the government's role in small business, Corato 
     said--but these are special circumstances.
       ``Given the times and what we see from small businesses, 
     there's a lot of hurting going on and they do need help. 
     They're not looking for handouts. They're looking for access 
     to capital that will give them the ability to help them hang 
     in there,'' he said.
       Coratolo said the opposition's strategy has been to run out 
     the clock. The Senate will probably adjourn by the end of 
     this week and not return until late January, Coratolo said.
       ``Small businesses need the relief now, and actually they 
     needed it last month,'' he said. ``The existing programs and 
     loan programs that were meant to act as a safety net--some 
     are not there and some don't reach out far enough to help 
     those that really need the help.''
       SBA loans are guaranteed by the government, so lenders are 
     more apt to give them, Kerry said.
       While he opposes the small-business bill, Kyl is backing a 
     $500 per person tax credit for travel-related expenses.
       ``Sen. Kyl has a travel incentive bill going through that's 
     $10 billion, but he says our bill is too expensive. 
     Understanding how important small businesses are to our 
     economy, we are not denying that travel is important as well, 
     but we do need to get these small businesses some 
     assistance,'' said Dayna Hanson, Kerry's press secretary for 
     the small-business committee.
       Kerren Vollmer, who owned Nava-Hopi Tours in Flagstaff with 
     her husband, Roger, agrees. The couple closed their bus tour 
     business Oct. 26 because so many people canceled their travel 
     plans after Sept. 11. The Vollmers owned 10 tour buses and 
     operated charter tours as well as regular trips to Phoenix 
     and the Grand Canyon from Flagstaff.
       ``You still have to run regular schedules,'' she said. 
     ``You can't quit just because you have only three or four 
     people.''
       Vollmer is a lifelong Republican who voted for Kyl, ran for 
     county superintendent, and has worked in the voting precinct. 
     She tried to contact Kyl's office but received no response.
       ``I've sent e-mail, I've sent him a fax, begging him, 
     offering to talk with him or any of his staff, this is what's 
     going on,'' Vollmer said. ``When it's your own senator, it 
     hurts. Because I don't feel like he even recognizes what's 
     going on under his own nose.''
       Vollmer said the company tried to get a disaster loan but 
     couldn't even get the application, even with the help of the 
     Arizona Department of Revenue and the local community 
     college's small business development center. Whether the 
     latest measure will make it through the Senate is very much 
     up in the air, Coratolo said.
       ``Am I optimistic? It's about a 50-50 chance, and if it 
     does, it will be by the skin of its teeth,'' he said. ``Sen. 
     Kyl has been very, very effective at blocking it.''
                                  ____

         The National Association of Government Guaranteed 
           Lenders, Inc.,
                                                December 20, 2001.
     Hon. John Kerry,
     Chairman, Senate Committee on Small Business and 
         Entrepreneurship, Russell Senate Building, Washington, 
         DC.
       Dear Senator Kerry, On behalf of the members of the 
     National Association of Government Guaranteed Lenders 
     (NAGGL), the SBA's 7(a) lending partners, thank you for your 
     continuing efforts to improve capital access for small 
     businesses in this time of sharply heighted need. We strongly 
     support your efforts and the efforts of Senator Bond to enact 
     S. 1499.
       It is clear, especially in light of events of September 11, 
     that banks' profits continue to plunge. According to a 
     November 30 article in the Washington Post, ``Earnings for 
     the nation's banks dropped nearly 10 percent in the third 
     quarter because of the largest increase in expected loan 
     losses in more than a decade.'' The report goes on to say 
     that ``the dip in earnings can be partly attributed to losses 
     from the Sept. 11 terrorist attacks, with more expected to be 
     reported in the fourth quarter.''

[[Page S13929]]

       This drop in profits has resulted in an every-tightening 
     credit crunch, as can be inferred from just the headline of a 
     November 14 Wall Street Journal article that reads, ``Banks 
     Tighten Credit, Loan Standards In Past Months Amid Uncertain 
     Outlook.'' This article cities a Federal Reserve study that 
     ``aids fuel to growing concerns that an unwillingness among 
     bankers to lend is threatening to choke off investment, 
     hampering chances of a quick economic recovery.''
       In this economic climate, it has become exceedingly 
     difficult for even the most qualified small businesses to 
     access the capital they need for survival, and to help spur 
     the American economy to recovery and renewed prosperity.
       This is why the passage of S. 1499 is so important. While 
     the SBA's Disaster Loan Program is a necessary ingredient of 
     economic recovery, it cannot possibly provide the sweeping 
     help that the 7(a) program can, and S. 1499 addresses this 
     problem. S. 1499 creates a more attractive 7(a) program for 
     cautious lenders, and a more affordable 7(a) program for 
     hurting borrowers for one year's time--when both of them need 
     it most. And it utilizes private sector lenders that are 
     already in place and ready to provide necessary capital 
     immediately.
       We encourage you and your Senate colleagues to 
     expeditiously pass S. 1499 while it is still possible to help 
     small businesses and the American economy in their time of 
     greatest need.
           Sincerely,
                                             Anthony R. Wilkinson,
     NAGGL President & CEO.

                          ____________________