(Washington, D.C.) – Today, U.S. Senator Patty Murray (D-WA), a member of the U.S. Senate leadership, unveiled a major new legislative initiative to assist community banks in increasing lending to small businesses and families in an effort to create jobs and boost economic recovery efforts. Murray’s bill, The Main Street Lending Restoration Act, will direct $30 billion in unused Troubled Asset Relief Program (TARP) funding to community banks to help rid them of impaired real estate assets that are restricting their ability to lend, and in some cases, endangering their overall viability.
“Community banks have a major role to play in helping to create jobs and grow small businesses in their neighborhoods,” said Senator Murray. “But they’ve been handcuffed by the economic downturn. Instead of opening up the lending window to local businesses, they’ve been forced to lock up the vault.
“This legislation will get at the root cause of the problem by removing impaired loans from the books of community banks. This will help to expand community bank’s capacity to lend again, improve investor confidence, and enhance their ability to raise new capital. It will also help local businesses get the loans they need to expand and create jobs.”
Many community banks have impaired real estate-related assets on their books that stem from the collapse of the housing and commercial real estate markets and the overall economic recession. Because of these troubled assets, community banks have struggled to raise new capital and have had to cut back lending to small businesses and families in their communities because they anticipate they will need additional capital to cover against future losses on those assets. This has meant that banks can’t provide small businesses – our nation’s largest jobs creators - with loans to sustain day-to-day operations, grow and hire workers.
Under Senator Murray’s bill, $30 billion in TARP funding would be authorized to remove impaired loans from their balance sheets of community banks under the U.S. Department of Treasury’s Public-Private Investment Program (PPIP) for Legacy Loans. Removing impaired assets will help strengthen community banks and free up much of the capital that banks are setting aside to protect against future losses so that it can be used today to provide start-up loans, operating lines of credit, and capital for businesses to expand and create local jobs.
“The legislation introduced by Senator Murray could have a dramatic positive impact on community banks,” said John Collins, President and CEO, Community Bankers of Washington. “This legislation will free up dollars to be put back into the small business community to create jobs and stimulate the economy. Community banks have in the past and will continue in the future to be the stimulus to create jobs in the small business arena. We are thankful for the efforts Senator Murray and her staff have put into this legislation. Senator Murray understands the need to assist community banks to better serve and help stimulate their local communities.”
“We appreciate Sen. Murray’s recognition of the great challenges facing community banks and applaud her efforts to find creative solutions, such as contained in this bill, to help address these problems,” said Jim Pishue, President and CEO, Washington Bankers Association.
Small, community banks – those banks that have under $10 billion in total assets - constitute more than 90 percent of all banks nationwide. About 50 percent of all small-business loans under $100,000 and 30 percent of loans under $1 million are made by community banks.