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NAFCU and CUNA have joined forces with the American Bankers Association to scuttle a provision in President Biden's "Build Back Better" bill that would allow the U.S. Small Business Administration to lend some money directly to businesses — an issue that dates back nearly 70 years.
The three organizations, along with three other banking groups, sent a letter Wednesday to Senate Majority Leader Chuck Schumer (D-N.Y.) and Minority Leader Mitch McConnell (R-Ky.) asking that they drop the provision that would provide $2 billion over 10 years to allow the SBA to offer loans of $150,000 or less directly to small businesses or through partnerships with third parties.
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"Like (the) SBA, we agree that the smallest of the small businesses need increased access to capital," the groups wrote.
"However, a government run program is not the solution to this problem. Instead, (the) SBA should be given the necessary funds and resources to bolster the successful 7(a) program.
"By expanding the existing pool of SBA lenders, providing greater education to small business owners and committing more resources to reduce application waits, Congress can take proactive steps to ensure more access to capital without undermining existing relationships between financial institutions and their customers," they wrote.
The groups said the SBA would have only 90 days to promulgate rules. "The complexity of standing up a lending program in such a short timeframe will lead to numerous issues that may ultimately drive potential applicants away from any type of SBA lending."
CUNA, NAFCU and the bankers said they were joining a "wave of opposition against the proposal following a letter from Reps. Blaine Luetkemeyer (R-Mo.) and French Hill (R-Ark.) to SBA Director Isabella Casillas Guzman, expressing similar concerns with the program."
The specter of SBA direct lending goes back before there was an SBA.
In May 1953, the American Bankers Association was at the vanguard of opposition when Commerce Secretary Sinclair Weeks proposed giving a new federal agency to be called the "Small Business Administration" authority to make some direct loans to small businesses.
Sinclair Weeks Two officers from the American Bankers Association submitted testimony opposing the direct lending authority to the House Banking Committee, which was considering the bill that would create the SBA. The bankers testified there is "no need for any governmental agency at this time" to make loans because the banks are able to take care of small business credit needs, according to a story carried in The New York Times from the United Press, a wire news service.
President Dwight D. Eisenhower had picked Weeks for the job only a few months earlier. Weeks had been an officer in the national Republican Party, a former banker and former head of the American Enterprise Institute.
Weeks is perhaps better known for his role in the 1956 highway bill signed by Eisenhower that created the U.S. interstate highway system.
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
