A bill that was intended to quickly boost small businesses and be at the center of President Obama’s second-year agenda has instead faced one of the most difficult and lengthy paths to passage on Capitol Hill.
The rollercoaster debate on a $30 billion lending fund underscores the difficulty Democrats have faced since last year in convincing the public that the party is helping small businesses recover and grow.
But more than seven months later, the bill remains stuck in the Senate, with the prospects for passage uncertain.
“It’s stunning. I mean, it’s like if there ever ought to be a place where there is common ground. Small businesses in my state are dying on the vine,” said Sen. Mark WarnerMark WarnerLive coverage: Senate intel holds first public Russia hearing Dem leaders give centrists space on Gorsuch Overnight Cybersecurity: Senators tout progress on Russia probe | Trump pressed to secure critical infrastructure | House beefs up cellphone security MORE (D-Va.). “I’m hopeful, but when people scratch their head and say things are kind of crazy up here [in the Senate] — case in point.”
The Senate has been unable to pass the bill for months, and even if the chamber finally approves the measure this week, it will have to head back to the House in September before reaching the president’s desk.
More than two-thirds of the public believes the government’s policies have done little to help small businesses, according to a July poll from the Pew Research Center. Even among Democrats, only 35 percent say the policies have helped small businesses. By contrast, the same poll showed that 53 percent of the public thinks the government is helping large banks.
While debate over the bill has played out on Capitol Hill, the small-business loan market has struggled. There was $700 billion in outstanding loans to small businesses in the first quarter of 2008; by the first quarter of 2010, the number had dropped to $660 billion, even as other parts of the economy began to recover from the recession, according to the Federal Reserve.
When the lending proposal was first announced, Obama wanted to redirect $30 billion from the Wall Street bailout to a new small-business-lending program. The fund was designed to provide capital to small banks with less than $10 billion in assets as an incentive to lend to small businesses.
The administration released a detailed summary of the program a week after Obama’s State of the Union address. The Independent Community Bankers of America (ICBA) quickly lent its support and was in close contact with the Treasury Department on the program.
Then progress slowed.
On Capitol Hill, lawmakers turned their attention to other goals. Senators turned away from the president’s proposal and began looking at other ways to boost aid to small businesses.
The community bankers association expressed concern in an e-mail to the Treasury that another program to boost loans for manufacturing would distract from the administration’s plan. Governors from Illinois, Michigan, North Carolina, Ohio, Pennsylvania and Wisconsin prodded the Treasury Department to set up a separate program. Rep. Sandy Levin (D-Mich.), along with 21 co-sponsors, proposed legislation directing money toward manufacturers.
Sens. Carl LevinCarl LevinSenate about to enter 'nuclear option' death spiral Devin Nunes has jeopardized the oversight role of Congress Ted Cruz wants to destroy the Senate as we know it MORE (D-Mich.), Debbie StabenowDebbie StabenowMembers help package meals at Kraft Heinz charity event in DC Senate braces for fallout over Supreme Court fight The Hill’s Whip List: 32 Dems are against Trump’s Supreme Court nominee MORE (D-Mich.) and Warner, among others, pushed for money to go toward state and local governments that have programs to free up capital for small businesses. Warner had first pushed for new small-business lending programs last October.
“I do recall that throughout that period it seemed to be that every senator had some idea of how to construct this program,” said Steve Verdier, executive vice president at the community bankers association.
By early May, the administration had reworked the plan and the president sent legislation up to Capitol Hill. Democrats wanted to draw a firmer line between the new lending program and the Wall Street bailout, the Troubled Asset Relief Program (TARP). Instead of redirecting bailout money, the fund would be financed with new money.
Small banks that had received money from the bailout package could also have a chance to refinance that aid through the new program.
And the administration supported up to $2 billion for a new “Small Business Credit Initiative” that could go to state small-business programs.
The House Financial Services Committee finally passed the bill on a straight party-line vote in late May. A month later, the House passed it, 241-182, with only three Republicans in support and 13 Democrats opposed.
From the beginning, most Senate Republicans branded the bill another bailout. Sen. Richard Shelby (R-Ala.) said it was “TARP II.” The bill finally received support from Republican Sens. George Voinovich (Ohio) and George LeMieux (Fla.), allowing it to overcome a filibuster.
But the fund is still hung up as part of a broader small-business bill that includes other tax incentives.
Sen. John ThuneJohn ThuneSenators move to bolster cyber resources for small businesses Optimism rising for infrastructure deal McConnell: ObamaCare 'status quo' will stay in place moving forward MORE (R-S.D.) panned the Democratic bill as a “Band-Aid.” The bill has won support from a range of industry groups, but while the U.S. Chamber of Commerce and National Federation of Independent Businesses (NFIB) have praised parts of the bill, they have not aggressively lobbied lawmakers to support it.
Even if the president signs the bill into law in September, the legislation gives the Treasury Department two months to write new guidelines, meaning it could take until Election Day to be fully up and running.