[Congressional Record Volume 148, Number 119 (Thursday, September 19, 2002)]
[Extensions of Remarks]
[Pages E1609-E1610]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         SBA 504 AND 7(A) LOAN PROGRAM SUBSIDY RATE CALCULATION

                                 ______
                                 

                          HON. DARRELL E. ISSA

                             of california

                    in the house of representatives

                     Wednesday, September 18, 2002

  Mr. ISSA. Mr. Speaker, I rise today because I am concerned about the 
effects of an unjust tax on borrowers. Every time the Small Business 
Administration makes a 504 or 7(a) loan, the borrower pays an arbitrary 
and unnecessary fee.
  The subsidy rates for the 504 and 7(a) have not reflected the actual 
performance of these loan portfolios over the past 11 years since the 
passage of the Credit Reform Act in 1990. The House Small Business 
Committee has repeatedly raised this issue with the Office of 
Management and Budget. OMB continues to use a flawed methodology to 
determine the cost of these loan programs to the government and SBA 
borrowers are forced to pay excessive fees that, since 1999, have 
totaled nearly $2 billion.
  Today, the typical SBA 504 borrower pays more than $10,000 in excess 
fees and the typical 7(a) borrower pays more than $2000 in excess fees 
to the government because OMB fails to accurately determine the subsidy 
rates of these loans. Congress never gave OMB the right to impose a 
$10,000 tax on every 504 borrower or a $2000 tax on every 7(a) 
borrower. Yet that is what OMB is doing by continually overstating 
these subsidy rates.
  The SBA is responsible for more than 40 percent of all long-term 
lending to small businesses. The inability of OMB to accurately 
estimate the cost of subsidizing small business loans draws needed 
resources from the very businesses these programs are intended to 
assist.

[[Page E1610]]

  Mr. Speaker, this problem is not a partisan problem. It has existed 
throughout the previous administration and the current administration. 
It requires immediate action. It is time to require OMB to recalculate 
the 7(a) and 504 program subsidy rates for FY 2003.

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