After State Sen. Mike Ranzenhofer's press conference today on his jobs bill, I spoke with him for a minute about his position on the governor's budget.
My question was, with all of the proposed spending cuts from Gov. David Paterson, why aren't Republicans falling more in line with supporting the governor's proposed budget. Here's what he said:
I certainly support the cuts the governor has talked about and I don't think there's been a lot of push back from Republicans. But what Republicans are concerned about is that...(if) you actually take a look at the budget -- last year it was $131 billion, this year it's $134 billion -- spending goes up this year. Not withstanding all the comments about cuts, cuts, cuts, he's actually spending $3 billion more this year in his proposed budget than what happened last year.
So that's where the criticism is, that you can't say one thing and then introduce a budget that actually increases spending by $3 billion. When you look at the fine print, that's what what it actually does. If there's been any opposition, that's where the opposition has been.
The criticism and the push back is not from the Democratic Party or the Republican Party. When you talk about his low poll numbers, these are the residents our our state who are saying this -- that's their reaction to what he has done because they've seen what he said and compared it to what he did. I mean last year, he introduced a budget that was not that bad to start off, but at the end of the day, the budget he finally adopted was $12 billion in new spending. So people are very leery about what he actually says and what actually gets enacted at the end of the budget session.
FOR IMMEDIATE RELEASE:
FOR IMMEDIATE RELEASE: February 3, 2010
SCHUMER URGES OBAMA ADMINISTRATION TO CONSIDER TAKING NEW YORK'S CREDIT FOR SUCCESS PROGRAM NATIONWIDE; SPUR LENDING TO SMALL BUSINESSES TO CREATE JOBS
New York State's Program Began in Ulster County, Provides Credit to Job-Creating Small Businesses Hard Hit by Recession
Small Businesses Create 65% of All New Jobs; Their Success Vital to Attacking Unemployment and Boosting Economic Recovery
Schumer: As We Fight Our Way Out of This Recession, Small Businesses Can Lead the Charge -- But Only if They Have Access To Capital, Without Lowering Lending Standards; New York Program is the Way to Go for Country
Today, U.S. Senator Charles E. Schumer urged the Obama Administration to increase lending to small businesses that have been hard hit by the current recession. In a personal letter to the President, Schumer urged the Administration to consider using New York’s Credit for Success Program as a model for a national small business lending program.
New York’s Credit for Success Program is an innovative approach to small business lending started by Ulster County Executive Mike Hein and taken statewide by Senator Schumer. Schumer urged the President to set aside a modest amount of money for the nationwide expansion of this program. Schumer said that such a program would be complimentary to the initiative that the President proposed this morning to provide capital to community banks to lend to small businesses. Credit for Success has the advantage of putting taxpayer money to work only when loans will actually be made, rather than providing cheap capital to banks in the hope that they will turn around and lend it out to small businesses.
In his State of the Union Address, President Obama pledged to “take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat”. Schumer shares the President’s goal of increasing small business lending and views the Credit for Success program as the most effective way to increase small businesses’ access to capital.
“Because they create more jobs than any other entity, small businesses will be at the tip of the shovel that digs out of this down economy, but only if we can get them the resources we need, and prevent the credit crunch from strangling their efforts to expand,” said Schumer. “The bottom line is that we need to create more jobs and making sure that well-run small businesses have access to capital to run and expand their operations is essential to attacking unemployment. Taking New York’s successful model nationwide will give businesses, which during normal times would have had access to credit, the tools they need to grow and continue to be the backbone of the economy and the force behind the recovery.”
The current recession and the ensuing credit crunch have severely restricted the ability of well run small businesses to gain access to capital. In the current economic environment, successful businesses that would otherwise have access to credit are being turned away because banks are fearful of making any loans. Small businesses often use these loans to hire more employees, expand their infrastructure or expand their business into a different area.
The key to the effectiveness of the Credit for Success Program is the safe way that loans are made. Under the program, banks and development corporations pool together their resources. This innovative structure enables banks to increase their small business lending. The consortium structure provides the benefits of “syndicated” lending – i.e., risk sharing among lenders – on a smaller scale, so that businesses that would have ready access to credit in good economic conditions, but are having trouble accessing credit in the current environment, will once again be able to access much-needed capital to create jobs. This process also has the added benefit of spreading the risk among the banks so that more banks are eager to lend. Under the New York program, lending decisions are made by the New York Business and Development Corporation pursuant to rigorous underwriting standards. All loans must comply with SBA lending criteria.
Recently Schumer announced that across the state 24 banks agreed to join various regional consortiums, and several banks committed to more than one region. There are at least 4 banks in each region of New York, and a total of $6.1 million has already been pledged by these banks. The money is distributed as loans to small businesses struggling to get credit because of the massive credit crunch.
Small businesses are expected to drive the economic recovery -- historically they provide 65% of new jobs. Despite the fact that most banks continue to lend to small business, there is a clear perception that creditworthy borrowers are not able to access credit. This can harm business confidence and keep otherwise stable companies from operating at full capacity.
Schumer noted, "In our program we don’t give money away, and not everybody gets a loan, but this program helps to ensure that deserving companies in New York at least get a second look- and successful small businesses across the country deserve the same."
Recently, Schumer gave the following example of how the New York program works:
Eileen’s exterminating business has expanded from 5 employees to 10 employees and eventually to 15 employees over the last 10 years. At each expansion, Eileen has received a $50,000 loan. She has repaid each loan on time, and her businesses has grown and become more profitable. Eileen now wants to expand her business again, and add another 5 employees. She goes back to her bank, and is this time turned down for a loan, despite that the fact that her business has only become more profitable and safer investment. She is told that with the credit crunch, there is less money to lend, and the bank couldn’t meet her request.
Eileen can now turn to the local consortium for a second look. Because the risk is spread over a greater number of parties, she has another opportunity for a loan. Her application will still be subjected to rigorous underwriting standards, and must meet SBA guidelines, but she will get a second look she wouldn't have gotten before and with the benefit of risk-sharing she is more likely to get access to the credit she needs.
Assuming she gets the loan, the funding will come from one of the regional pools of money, committed by banks with a footprint in the local area. Banks participate on a voluntary basis. Participating in these loan funds allow banks to make a profit, while sharing risk.
Schumer added, “This is a win-win-win: it is a win for small businesses, a win for the economy, and a win for job creation.”
Below is a copy of the letter Schumer sent to the Obama Administration
February 3, 2010
The President
The White House
Washington, D.C. 20500
Dear Mr. President:
In the State of the Union address last week, you pledged to “take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat”. I share your goal of increasing small businesses’ access to credit, as small businesses are the backbone of our economy and will be at the forefront of our efforts to get Americans back to work.
That is why I wanted to draw your attention to an innovative program called “Credit for Success” that I am currently working to expand in New York State, and encourage you to consider creating a similar program nationwide. “Credit for Success” brings together local banks in each region, together with the New York Business Development Corporation (NYBDC), to create lending pools for promising and high-performing area businesses that have been turned down by their primary lender due to the ongoing credit crisis.
The first Credit for Success program was developed in Ulster County, New York, by Ulster’s County Executive. I have been working with the County, NYBDC and the New York Bankers Association to set up lending pools in every region of New York State. So far, 26 banks have committed a total of over $6 million in eight different regions.
Under the New York program, local businesses who have been denied credit by their primary lender can apply to NYBDC for a loan. Applications will be rigorously reviewed and all credit decisions are made by NYBDC, based on its own long-standing lending criteria as well as Small Business Administration (SBA) eligibility criteria (every loan is guaranteed by the SBA). If a loan is made, NYBDC will syndicate the loan on a pro-rata basis to all participating banks in that consortium, retaining a portion of the loan for its own account.
The combination of shared risk, as a result of the “syndicated” structure of the consortiums, and the SBA guarantee, allows banks to lend more to small businesses than they would be able to do on their own. The program is narrowly targeted, and designed to help small businesses that would have access to credit under ordinary circumstances, but due to the credit crunch cannot obtain the credit they need to expand their business, or just to maintain business as usual.
I applaud your administration’s recent efforts to jumpstart small business lending in our country. As part of those efforts, I respectfully encourage you to consider setting aside a portion of the money dedicated to increasing small business lending to create a national Credit for Success program. The program could be administered by local Certified Development Corporations (CDCs), operating under legislatively expanded authority to provide Section 7(a) loans. CDCs are well-placed to act as the necessary intermediary in carrying out this program, interface regularly with SBA and are familiar with SBA’s programs. In addition, each state has one or more CDCs with the local presence and expertise to have the program up and running in short order.
Credit for Success has the advantage over other similar proposals of putting government money to work only when loans will actually be made, rather than providing cheap capital to banks in the hope that they will turn around and lend it out to small businesses. As we have discovered over the last year, simply providing additional capital to banks is not sufficient to ensure that they provide the credit to our small businesses necessary to foster a real economic recovery.
I appreciate your thoughtful consideration of this proposal.
Sincerely,
Charles E. Schumer
United States Senator
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Thanks for posting that Bea.
Thanks for posting that Bea. I must say, I disagree with Senator Schumer on EVERYTHING humanly possible. But, you certainly have to give him credit - he's true to his beliefs, he works very hard to further his beliefs, and he works very hard to bring NY money and attention for the projects that he thinks will make the state better.