Thursday, April 01, 2010

Nodler: Federal regulations harm small business job growth

In his latest column, Sen. Gary Nodler, R-Joplin, a candidate for Seventh District Congress, continues to blame the federal government for all ills:

Small business growth is a key aspect of economic prosperity. Economists estimate that over the past 25 years, two-thirds of new jobs originated among small businesses. There is a lot of talk on federal and state levels about ways to better the economic climate and support our small businesses, but there is one big problem that has not yet been addressed: the unavailability of credit. Federal regulations put in place are forcing banks into a situation where regulations not only make it close to impossible to make loans, but actually create an environment that discourages issuing credit.

Small business owners throughout the country are facing the same situation. They go to their community bank for a line of credit. They are good customers, who have never been late with a payment, and have an established small business. These customers are being turned down because federal regulators are discouraging banks from making loans. It puts our small business owners in a bind because they are unable to expand or hire new employees without having cash on hand.

Community banks’ hands are tied because they face tighter regulations from the Comptroller of the Currency, Federal Reserve, and Missouri Division of Finance. Examiners are downgrading the ratings of performing loans because the value of the collateral (often commercial real estate) has dipped or because the banks happen to be located in an “economically distressed” area. Regardless of how well a bank in the community might know their customers, they are unable to loan to creditworthy borrowers because federal regulations are actually impeding their ability to do business.

Federal examiners should be more careful in light of the financial crisis, but creating an environment where small businesses can’t get access to credit is not the way to stimulate recovery. An overly restrictive credit environment actually provides banks with an incentive not to issue loans. Banks are able to maintain a better rating if they have less risk in their portfolio, and the result is that they don’t make loans they would otherwise approve.

The Senate recently approved my Senate Concurrent Resolution 33 to discourage the federal government from continuing to harshly regulate our community banks and to instead give community banks the right tools to start lending again. With House approval, the legislation could be adopted and Missouri’s support for better access to credit would be clear to Congress. Expanding job growth in this state is my top priority, and SCR 33 would do just that by supporting our community banks and small businesses.

2 comments:

Anonymous said...

The value of commercial real estate has dipped. Quite a bit, actually. Should this basic economic reality not be reflected in the way in which commercial loans are handled? I'm not sure I see Nodler's point here.

Does anyone have a better understanding and can explain it here?

Anonymous said...

Oh sure, loan away to the small businesses who are closing a mile a minute in this economy. Legislate it. MAKE those banks make bad loans and then blame the President when it blows up. After all HE was in charge right?

Sorry. I say tighten up the lending rules like we did in the old days (hey, that would make ME Conservative right?) and let the chips fall where they may.

Much of our economy is based solely on credit. It's wrong. We have seen many people we thought were rich standing in a food line with the rest of us. They are not as rich as they thought and throwing money at them will only mean the taxpayers are on the hook AGAIN to pay it back.

Same goes for housing. The taxpayers are on the hook for every "incentive" to rescue this industry (which in the end won't work).

We were mad when they bailed out the banks. We were mad when they bailed out GM. So why are we not mad that their bailing out realtors and small businesses? Same thing. It's ALL our money and no one program is any different from the other.

Nothing conservative about supporting this.