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Details of Obama's Small Business Plan Emerge

By Marc Tracy

Today, President Barack Obama headed out just past the Beltway to Landover, Md.--home of, among other things, FedEx Field, the stadium of perhaps the National Football League's most hapless franchise (Impeach Dan Synder!)--to tout his new plans to help small business (which we first reported on yesterday). Accompanied by Small Business Administration head Karen G. Mills, he declared, "There is still too little credit flowing to our small businesses."

Then, he announced how the federal government will try to help rectify that. Under his proposal, community banks--that is, banks with under $1 billion in assets--may apply for particularly low-cost capital from the government (they'd pay a 3% dividend, instead of the current 5%) if it is as part of a broader plan to increase small-business lending; some credit unions (those that qualify as community development financial institutions, a phenomenon we've looked at before) could also apply. Under his plan, the money for all this will come from last autumn's TARP fund. Additionally, Obama wants to increase the ceiling on SBA-backed loans from the current $2 million to $5 million--$5.5 million for manufacturers. The specific terms of the credit program will be hammered out by the Treasury Department. Raising the SBA loan ceiling, meanwhile, will require legislation.

We very much like the notion of going through the small banks, rather than the big ones, in trying to increase small business credit. (We've actually advocated this for months now.) The wisdom of such a move is confirmed by Fortune Small Business's report that the 22 largest TARP recipients--in other words, the country's biggest banks--have lowered their small-business credit balance by over 3%, or $8 billion, in just the past half-year (!).

As for the question: why this, why now? Robb Mandelbaum has a very intriguing, and persuasive, theory. It has to do with our favorite senator, Olympia Snowe (R-Me.). He notes that the proposal regarding the SBA ceiling closely tracks legislation that Snowe--the ranking member of the Small Business & Entrepreneurship Committee--has already introduced. And Snowe's power has absolutely never been higher: also a member of the Finance Committee, she provided the solitary Republican vote for the famed Baucus Bill, allowing Democrats to boast that the crucial piece of health-care legislation received bipartisan support. “The administration is very, very aware that this is Senator Snowe’s top priority,” a "senior Senate Republican aide" tells Mandelbaum. “We’ve been pushing this with senior White House officials and the SBA."

We very much buy this theory. (Eight months ago, we wrote, "as a moderate Republican in a Senate in which Democrats alone come just short of a filibuster-proof 60 votes, [Snowe] can, if she likes, wield lots of power and get the Democratic Senate leadership and the Democratic president to give her lots of what she wants.") The administration needs Snowe; Snowe wants help for small business; therefore, the administration needs to help small business. The juxtaposition of the Baucus Bill vote and these proposals is about as much of a coincidence as the fact that Obama's pick to head the federal agency that oversees small businesses is, like Snowe, a moderate woman from Maine.

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