The Positive Voices

  Not long ago, I testified before a subcommittee of the Senate Banking Committee on a vital issue to Michigan: ensuring that small businesses have access to the credit they need. We need credit to flow to these Main Street businesses if we’re going to beat back unemployment. Recent economic data suggest that, from a technical standpoint, our economy is rebounding. But despite the fact that our economy is becoming productive again, it is not providing job growth. If we do not act quickly to help restore employment, the “green shoots” for which we have so much hope will wither. When I talk to employers in Michigan, often the first problem they discuss with me is the difficulty in obtaining the capital they have traditionally relied on to finance their operations: capital to meet payroll, to finance inventory, to update their equipment or to expand their business. Dozens upon dozens of businesses have come to us, worried about their inability to keep their lines of credit or get new ones. Even those with an excellent credit record and plenty of orders to fill cannot get the financing they traditionally have obtained. At times my office has worked on a one-on-one basis with individual businesses and local banks, trying to find solutions that can keep business humming. We have had discussions with the Michigan Bankers Association and with state officials to try to match worthy businesses with banks willing and able to lend. But the problem persists. For much of this crisis, our attention has been focused on the largest financial institutions in our country. Programs like TARP provided large sums of capital to these large institutions because their failure would endanger the entire economy. But now, while giant firms such as Citi and Goldman Sachs report massive profits, the real lifeblood of many local economies – local banks – are struggling. Recently, the FDIC released a report that demonstrates the scope of the problem. At the end of 2009, the report said, 702 banks across the United States were in at least some danger of failure. That was up 27 percent from just three months before, and a whopping 1,400 percent from the end of 2006, when only 50 banks were on that list. Not surprisingly, as these community banks have struggled, bank lending has plummeted, down 7.5 percent from 2008 to 2009. And in Michigan, the problem is worse. By one estimate, bank loan volume in Michigan declined by 74 percent from 2007 to 2009. We must do something to support community banks so that they can lend to the small businesses that are key to creating jobs in our communities. That’s why I have co-sponsored a bill offered by Sen. Jeff Merkley of Oregon that would provide support to community banks so they can begin lending again. Another factor that keeps businesses from getting loans is similar to something most homeowners are coping with. Just as the value of our homes has fallen in this recession, so has the value of the inventory and equipment held by businesses. Because those assets are worth less, banks are less able to provide loans that use them as collateral. Our own Michigan Economic Development Corporation has a program that is designed to help support the collateral values of borrowers in this situation. And for years, the state has operated a Capital Access Program, which can also help borrowers with decreased collateral values. That program funds reserve accounts for loans to businesses that need collateral support. I think we can draw from the experience of these programs, and craft legislation that will directly help Michigan businesses get the capital they need to begin growing again to put people back to work. Contact Senator Levin’s office at 202.224.6221 or 616.456.2531.