To his credit, President Obama focused 14 different occasions on the need to assist small businesses during his recent State of the Union address. This is a far cry from the infrequent references to small businesses in the last State of the Union address by former President Bush and Obama’s first State of the Union address, where small business was referred to on only three occasions.
The most promising part of the references to small businesses is the decision of the president to overrule Secretary of the Treasury Tim Geithner and order $30 billion of unused Troubled Asset Relief Program funds to be released to community banks to lend to small businesses. When it met with Geithner in March, the Latino Business Chamber urged a similar proposal that was received but in effect rejected by the secretary.
In discussing the benefits of this release of $30 billion in TARP funds, we feel constrained to offer three cautionary observations.
• Will the funds be used for truly small businesses? That is, will the loans go primarily to the 99 percent of businesses (25 million) that have one hundred or fewer employees? Or will they largely go to medium-size corporations that in the past have often been the primary beneficiaries of Small Business Administration lending?
• Since almost 75 percent of bank assets are with banks that are “too big to fail,” we are concerned that the Goldman Sachs and J.P. Morgans of the world will remain free to lend primarily to global corporations that create jobs overseas.
• The definition of community banks should be broadly defined in metropolitan areas to be $75 billion or less in assets.
To help ensure that the $30 billion small business commitment is effective, our board of directors is determined to co-host an early meeting with the chief executives of the major community banks lending in Southern California, including City National Bank, East West Bank, Cathay Bank and Union Bank.
Los Angeles Mayor Antonio Villaraigosa recently met with several area chambers and informed us that the creation of jobs was a major priority for the city. In response to our question regarding initiating a city request for TARP funds for small business lending, he responded that this was an exciting concept and one that he would further like to discuss. We will seek to have him co-host the event, along with the leadership from the Los Angeles Area Chamber of Commerce and minority business associations, such as the Black Business Association.
Just as California, because of its astute planning, will be receiving 30 percent of the $8 billion allocated for high-speed rail by the Obama administration, we will seek up to 30 percent of these small business funds, or $9 billion, for Southern California small businesses with one hundred or fewer employees.
SoCal focus
This has the advantage of promoting Obama and Congress’ highest priority, job creation. Our nation’s 25 million small businesses, including almost 2 million in Southern California, are in a unique position to create jobs quickly and where they are most needed. Southern California’s real unemployment rate, including discouraged workers and underemployed workers, is 23.3 percent. For noncollege graduates, including the vast majority of Latinos and African-Americans, the real unemployment rate exceeds 30 percent.
Since more than three-fourths of lending capacity is with “too-big-to-fail” financial institutions, we will be asking members of our Advisory Board from Bank of America, Wells Fargo, US Bancorp and Comerica, to help convene a similar meeting for the big and medium-size banks not within the Obama definition of “community bank.”
At our follow-up meeting with Villaraigosa, we will urge that either he or his new jobs czar, Austin Beutner, join the Latino Business Chamber for meetings in Washington on March 17 to 19 with Federal Reserve Chairman Ben Bernanke; Federal Deposit Insurance Corp. Chair Sheila Bair; and, hopefully, Geithner and Larry Summers, Obama’s economic czar.
Early last year, the Latino Business Chamber presented to Geithner; Bernanke; Bair; and Rep. Barney Frank, chairman of the House Financial Services Committee, a proposal to allocate up to $100 billion in TARP funds for small business lending and capacity building; and on three subsequent occasions, the Latino Business Chamber urged the Obama administration, including SBA Administrator Karen Mills, to promote this job creation approach.
Not too long ago, Southern California was an entrepreneurial inspiration across the globe. With the support of the Obama administration, the banks and perhaps the head of the SBA, we believe that the up to $9 billion in loans from community banks (and possibly as much as $25 billion from the larger banks) could revitalize all of Southern California. This could help slash the official unemployment rate in Los Angeles County by more than half – from 12.4 percent to the prerecession level of 5 percent.
Jorge C. Corralejo is chairman and chief executive of the Latino Business Chamber of Greater Los Angeles, and Gilbert Vasquez, a certified public accountant and head of Vasquez & Co. LLC, is the vice chairman.
