Small Firms Push for Better Bailout Bill

Many in the small business community are livid that Wall Street has put the nation's economy at risk and are urging Congress to get back to work after the House failed to pass a $700 billion financial bailout package Monday.

"The House action today is disappointing -- clearly there is more work to be done," said Sandy Baruah, acting administrator of the Small Business Administration. "The administration will redouble its efforts to ensure Americans and their representatives in Washington understand what is at stake. There is a real crisis happening in global financial markets that affects all Americans and businesses on Main Street."

Baruah went on to tell the Small Business blog: "One thing we don't want to do is overreact to the House vote. We should not allow the result to be changes in the bill that increase the size of government even further, or dilute the impact of this needed financial rescue package."

National Federation of Independent Business President and CEO Todd Stottlemyer said: "Small business owners...are angry and upset, and they have a right to be. Small business men and women did not create the financial mess on Wall Street."

He and other NFIB officials are "demanding that Congress get back to work" to deal with the crisis and protect Main Street.

Small businesses represent 99.7 percent of all employer firms, have generated close to 80 percent of net new jobs annually over the last decade, and pay nearly 45 percent of the total U.S. private payroll, according to the SBA's Office of Advocacy.

"While those on Wall Street were taking reckless risks and benefiting financially, small business owners across America continued to do what they have always done -- create jobs and serve as the leaders in our communities," Stottlemyer said.

A recent federal survey, which was conducted before a group of the nation's largest financial institutions began collapsing this month, found that more than 65 percent of U.S. banks have tightened their lending standards for loans to small businesses.

David French, vice president of government relations at the International Franchise Association, said he is disappointed that the package failed to pass in the House.

"Stakes are high for Main Street businesses that need a stable market in order to continue expanding their businesses," he said. "Franchise firms are beginning to feel the impact of the crisis right now, and the failure of the credit market will likely be felt by everyone in the coming weeks."

He urged congressional leaders to renegotiate and craft a workable bill. "Failure to do so would be catastrophic," French said.

Small Business and Entrepreneurship Council President and CEO Karen Kerrigan also urged for a better bill that would include proposals such as suspending the current capital gains tax rates for two years and returning rates to their current level when that two-year period expires.

Many small business owners are questioning why they and other taxpayers should bail out Wall Street giants in the first place. Kristie Darien, who heads legislative affairs for the National Association for the Self-Employed, said that "in a free market economy, NASE members have the opportunity to succeed or fail based on their own business acumen. When their business is not doing well, no one bails them out."

Deborah Markley, a rural entrepreneurship expert and researcher at the Center for Rural Entrepreneurship, said it's not clear what the economic turmoil is going to do to the psyche of small business people. "In the midst of this are they going to say 'yes, I'll build a new building' or 'I'll hire 10 people', or are they going to sit still and say 'I'm not going to be making investments right now or hire people'? That's a very rational thing to be doing even if it may not serve the national economy well," she said.

She added that as a few large banks remain in place shoring up the assets of others, Main Street businesses may see a lot of local branch turnover. "Local branches may change and a small business may have to deal with new lending officers," she said. Markley studied bank lending in New England in the early 1980s when there was national consolidation among the banking community. She said it can be a problem when national banks move into local branches because they may follow a set of national guidelines that do not necessarily reflect what is happening or what is best for a local community.

Despite their outrage, many small business owners were unsure of how a bailout package would impact them. The National Small Business Association conducted a poll last week asking its members if the bailout package would affect them positively or negatively. Forty-four percent of respondents said they weren't sure.

By Sharon McLoone |  September 30, 2008; 7:15 AM ET Economy Watch , Election 2008
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While I'm less than thrilled at bailing out the financial institutions, let me tell you our 'main street' story. It’s about our small business that pays wages, pensions and healthcare for 25 individuals with families. Our business' credit line has been frozen for over a week now, our personal savings (which we may need to tap into) is invested in the stock market... and now our business and its 25 employees are at risk. Expansion is one thing, we use our credit line to maintain the steady cashflow necessary to order inventory, pay vendors, and produce a payroll. Our company has been in business for 60 years, and like other companies this line of credit is a necessary tool for a healthy company. While I don’t know if the bailout package is the right answer, I do know that this is a serious time and we are all at risk. I expect our elected officials to listen to their constituents but to also take a broad view of what is currently best for our country. I don't want them to play politics at such a crucial time. I don't want them to vote based on their upcoming election prospects. If small/medium businesses start to fail due to lack of access to credit, the story will be much greater than 'wall street' and 'foreclosures'. If our 25 employees, who are paid good wages and great benefits, become unemployed, that's 25 new potential foreclosures, 25 families with a healthcare problem, and 25 individuals thrown into the unemployed statistics. Multiply this by the vast numbers of small and medium businesses who may currently be struggling. Another statistic is that HALF of all private sector employees work for small firms. This suggests a lot of jobs at risk. Please everyone, this affects you. Do what you can to communicate the urgency to your representatives to address this credit crisis.

Posted by: chris | September 30, 2008 6:25 PM

Giving Wall Street OUR money to lend back to US at interest is just plain insane!!
Banks are using BLACKMAIL

It would be far cheaper to mail every small business in the Country a check for $100,000 !!
So ASK why this METHOD?
pure theft for an administration on it's way out

Posted by: Dave Gillie | October 1, 2008 2:09 PM

so let's get this right ! if i had a company and made some bad desitions and ran it in to the ground , would the govoment bail me out , i think we need to see some of these high flyers jump of the 50 floor of some building on wall street. after all most of them will still be driving there BMW 's and going to cayman in the winner the reason most of the goverment want the bail out is that they all have played the stock market game and they do not want to lose there shirt

Posted by: Anonymous | October 1, 2008 3:16 PM

Today, on 10/1/08, at 4:30pm CST, Missouri Congressman Roy Blunt (R) spoke on NPR about why the American people don’t understand what’s really happening. I am paraphrasing and will accept any corrections, though his point was clear:

“This isn’t about the government buying $700 billion in bad debt. It’s about the government acquiring assests that are currently undervalued and holding them until the government can break even or make a profit. That’s just good business. If a junk car is on the side of the road, someone who knows what they’re doing can come along and fix the car and sell it for a nice profit. Now, if I buy this junk car, I would have to hire someone to fix it and I might not make any money on it.”

It’s this analogy that is currently fueling my anger. Congressman Blunt, due to either sleep deprivation or ignorance, is not understanding his own words. The government is not an auto mechanic in this situation. The government doesn’t know what to do with the junk car (foreclosed houses). The government has never been in the down-and-dirty real-estate business before, so they will HAVE to hire someone to “fix it up”. And guess who the mechanics are? The same lenders who got us into this mess to begin with and who are praying for the bail out plan to pass. In essence, the companies and people who were fraudulent to begin with will be saved by the bail out and then make a profit off of servicing the government’s newly acquired “junk car”.

Hello? Mic check? Is anyone listening to this insanity Congressmen like Roy Blunt are trying to throw out there?

Posted by: Drew McGee | October 1, 2008 6:43 PM

When do we get to see the small business bail out plan?! As a small business owner, I see the big picture. I see that inaction = death. I also see the little picture every morning when I walk up to my store. I see in the last 6 months three small businesses have gone under in our shopping center. I see that two more are struggling to make their rent while the big money "landlord" has put their space up for rent and are literally taking it out from under some when new renters become available. Three of us haven't made a dime of profit in the last 11 months, some longer than that. As a start up small business owner open only 18 months I have literally paid to come to work everyday since I left my former job. I took a risk and I don't expect someone to bail me out when or if it doesn't work out. A little help might be nice though. I hear that some businesses need credit lines for cash flow, but I also see that all businesses need more right now than just a line of credit to help them through a mess that we didn't create. My neighbors (literally and figuratively) made bad decisions when they chose to purchase houses that were well beyond their means. Lenders made bad decisions when they opted to fund those purchases. They made BILLIONS in profits, trillions perhaps. Where is their rainy day fund?

Posted by: J Crowder | October 1, 2008 9:35 PM

there appears to

Posted by: james gaynor | October 14, 2008 12:00 PM

there appears to be an attempt to manipulate and complicate a simple set of events,if you can follow the bouncing ball (debt/assets).recently enacted accounting procedures mark to market has certain flaws.first of all assets that predate this law should be grandfathered or phased in 10 or 20% per year.the phase in period 5,7,or10 years will allow companies time to absorb assets, as they mature or fail base on performance,these assets have been accumulating fo more than a decade and cant be expected to be absorbed in a month,quater,or a year of any company regardless of size with out catastrophic results.if we chose to grandfather these credit default swaps.these assets are self liquidating items,over time,based on performance these assets will make money or lose money.when you make an asset that is aquired under one standard,less valuable by another standard and hit the books current month or current qtr and reflect unrealized losses,you create a firesale and unrealized losses become realized losses and through accounting procedures an attempt to regulate without insight and scope of time, size,and possible impact on u.s. and world markets,this attempt to regulate becomes more an attempt to manipulate and only benefits someone shorting the market......

Posted by: james gaynor | October 14, 2008 12:39 PM

there appears to be an attempt to manipulate and complicate a simple set of events,if you can follow the bouncing ball (debt/assets).recently enacted accounting procedures mark to market has certain flaws.first of all assets that predate this law should be grandfathered or phased in 10 or 20% per year.the phase in period 5,7,or10 years will allow companies time to absorb assets, as they mature or fail base on performance,these assets have been accumulating fo more than a decade and cant be expected to be absorbed in a month,quater,or a year of any company regardless of size with out catastrophic results.if we chose to grandfather these credit default swaps.these assets are self liquidating items,over time,based on performance these assets will make money or lose money.when you make an asset that is aquired under one standard,less valuable by another standard and hit the books current month or current qtr and reflect unrealized losses,you create a firesale and unrealized losses become realized losses and through accounting procedures an attempt to regulate without insight and scope of time, size,and possible impact on u.s. and world markets,this attempt to regulate becomes more an attempt to manipulate and only benefits someone shorting the market......

Posted by: james gaynor | October 14, 2008 12:40 PM

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