[Congressional Record (Bound Edition), Volume 156 (2010), Part 8]
[Extensions of Remarks]
[Page 10986]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      AMERICAN BANKERS ASSOCIATION

                                 ______
                                 

                          HON. RUBEN HINOJOSA

                                of texas

                    in the house of representatives

                        Wednesday, June 16, 2010

  Mr. HINOJOSA. Madam Speaker, I would like to submit a letter from the 
American Bankers Association in support of H.R. 5297, the Small 
Business Lending Fund Act.

                                 American Bankers Association,

                                     Washington, DC, June 9, 2010.
     To: Members of the U.S. House of Representatives
     From: Floyd E. Stoner, Executive Vice President, 
         Congressional Relations & Public Policy
     Re: H.R. 5297, the Small Business Lending Fund Act
       On behalf of the members of the American Bankers 
     Association (ABA), I am writing to express our support for 
     H.R. 5297, the Small Business Lending Fund Act. As proposed, 
     Treasury would invest in community banks through a new 
     program that would be separate and apart from the Troubled 
     Assets Relief Program (TARP). This legislation will serve as 
     another tool for community banks to meet the needs of small 
     businesses in their communities, and we urge the House to 
     pass this legislation.
       Even with the general economy starting to improve, there 
     are still many areas of the United States that struggle under 
     the weight of the severe downturn. Since banks are a 
     reflection of their communities, they are suffering with the 
     communities they serve. Yet even in areas beset by poor 
     economic conditions there are strong borrowers.
       Meeting the needs of these borrowers has been made more 
     difficult as regulators pressure many banks to increase their 
     capital-to-asset ratios. Given the severity of the downturn, 
     it is difficult if not impossible for community banks to find 
     new sources of capital. Thus, the only option for many banks 
     is to shrink, which can mean making fewer loans. H.R. 5297 
     would allow banks to avoid that result and continue meeting 
     the needs of their communities. With an improving economy and 
     public investments, such as those proposed in H.R. 5297, 
     lending can increase faster in some of the hardest hit areas 
     of the country. Community banks, which are the life blood of 
     many communities, can provide the needed capital.
       While we are supportive of this legislation, we believe the 
     fund could be more effective if it recognized the dynamic 
     nature of a bank's loan portfolio. Roughly 20 percent of a 
     community bank's small business loan portfolio is repaid each 
     year. Under H.R. 5297, a bank would not be viewed as 
     increasing its small business lending until it made enough 
     loans to replace that 20 percent. Recognizing all of a bank's 
     small business lending would make the program more attractive 
     to many community banks.
       The program's success also will hinge on whether it is made 
     available to banks who actually need the capital. If the 
     program is made available only to those banks who do not need 
     it, the program will fail. There are many viable community 
     banks that would benefit greatly from a comparatively modest 
     investment by the government to help them weather the current 
     economic storms. Past initiatives have left this group of 
     banks on the sidelines and, in many cases, have made it more 
     difficult for them to attract private capital. We encourage 
     you to support making the Treasury program available to banks 
     that are viable on a post-investment basis.
       The bill also includes a State Small Business Credit 
     Initiative, which we find very promising. Efforts like this 
     in Michigan, for example, have shown great promise over the 
     years they have been in place. Under the Michigan Strategic 
     Fund (MSF), the MSF deposits the cash into an interest 
     bearing account with that lender and this account will then 
     be pledged as collateral on behalf of the borrower. Based on 
     an amortization schedule, the MSF will draw down the account 
     as the loan principal is paid. In the event of full default, 
     the lender will have rights to the account less a liquidation 
     fee. The proposed State Small Business Credit Initiative 
     would function in a similar manner and, we believe, could 
     provide much needed support for loans made by participating 
     banks. As with the Small Business Lending Fund, ABA 
     recommends that all viable community banks be allowed to 
     participate.
       While we shall continue to work with Congress as this 
     legislation moves forward, we believe that the legislation 
     can serve as a real tool to help community banks meet the 
     credit needs of their communities. We support passage of H.R. 
     5297.

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