The American Bankers Association recently urged Congress to exercise care when seeking solutions to the current financial turmoil so as not to enact policies or regulations that will unintentionally restrict the availability of credit, particularly for small businesses.

Testifying before the House Small Business Committee, Stephen Wilson, Chairman and CEO of LCNB National Bank and incoming Chairman of ABA’s Government Relations Council, stated that even though the demand for lending has fallen recently, banks are continuing to make loans to small businesses.

“The focus on credit to small businesses is particularly important, as they are drivers of new ideas, new employment, and new economic growth,” said Wilson.  “For banks like mine, small businesses are our bread and butter, and banks throughout our country continue to make these loans.”
    
“It is vital to keep this economic activity moving as the economic situation moves toward resolution,” he said.
    
Wilson offered some suggestions to the Committee regarding measures that could help small businesses, including provisions for modifying Small Business Administration lending.
    
Noting that SBA’s flagship 7(a) loan guarantee program declined in volume by 30 percent last year, Wilson suggested that Congress could reverse this trend by reducing program fees, making the application process easier and cheaper for small businesses and banks, and temporarily increasing the federal guarantee provided on SBA loans.
    
“Now is the time to make this process easier and cheaper for small businesses and the banks who serve them,” he said.  “This would extend the program to many more communities across the United States and provide more loans to deserving small businesses.”
      
Wilson further noted that while provisions in the Emergency Economic Stabilization Act will help assure that capital is available to meet credit needs, many community bankers are uncertain as to whether government cash infusions can help them.  He stated that all regulatory policy should be carefully monitored during this time of economic uncertainty, and that banks are concerned that a regulatory over-reaction could worsen the credit crunch.
    
“As the emergency program is implemented, it is very important not to create a conflict in policies – on one hand encouraging lending through new capital released from the TARP program and on the other hand discouraging lending through restrictive examination policies,” he said.  “This would be like spurring a horse to run faster while pulling back on the reins.”

Source:  For more information contact: The American Bankers Association ,1120 Connecticut Avenue, N.W. Washington, DC 20036, 1-800-BANKERS, web site:  www. ABA.com