Senator Kerry Calls for Action to Help Small Businesses Facing Credit Crunch

by Dan Perkins

based on a Release issued by Sen. Kerry's office dated Monday, May 5, 2008 

A report released on Monday, May 5th by the Federal Reserve found that more than half of America’s banks have tightened standards on loans to small businesses.

The report, entitled The April 2008 Senior Officer Opinion Survey on Bank Lending Practices, examined changes in the supply of and demand for bank loans to businesses and households over the first three months of the year. 

A total of 56 domestic banks and 21 U.S. branches and agencies of foreign banks responded to survey questions contained in the report.  Based on the responses, the Fed determined that domestic and foreign institutions had further tightened their lending standards and terms across a broad range of loan categories over the first three months of 2008.  The Fed also observed that loan standards had also increased significantly for consumer and commercial and industrial loans, and were close to, or above, historical highs for nearly all loan categories covered by the survey.

The survey also revealed that demand for bank loans from both business and households had weakened further over the first three months of the year, although by less than had been the case over the previous survey period. 

Responding to the report, Senator John Kerry (D-Mass.), Chairman of the Committee on Small Business and Entrepreneurship, urged passage of legislation he drafted calling for increased lending to small firms by reducing loan fees.

In February, Senator Kerry introduced the Small Business Lending Stimulus Act (S. 2612) to temporarily reduce fees on government-backed loans to small businesses. At a hearing before the Committee on Small Business and Entrepreneurship last month, bankers and small businesses testified that reducing loan fees would be a big help in increasing loans to entrepreneurs. Kerry’s bill would provide nearly $200 million to cut borrower and lender fees in the Small Business Administration’s 7(a) loan program for working capital and the 504 loan program for financing fixed assets. It would also provide $12 million for the microloan program and allow small firms to refinance business debts using the 504 loan program.

Noting that the credit crunch has gotten even worse, Senator Kerry stated, "Over half of our banks have tightened their lending standards, making it harder for small businesses to expand their payrolls and invest in new equipment. The Bush Administration and Republicans in Congress have bailed out Wall Street and done nothing to help small businesses on Main Street.”

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