WASHINGTON — Small business gave its support to a $700 billion bailout plan in advance of the vote last week that pushed the bill through Congress. President Bush signed the bill into law on Friday to help relieve a growing credit crisis that threatens the nation’s banking system.
“No one — least of all small-business owners — is happy that this bailout is necessary,” said a statement issued by Todd Stottlemyer, president and CEO of the National Federation of Independent Businesses (NFIB). “They did not create this financial mess, and they are extremely frustrated and angry that they are being asked to clean it up. But they understand that their ability to access credit to grow their businesses, send their kids to college and save for their retirement depends upon stability in the financial markets.”
At the center of the bailout plan is the Troubled Asset Relief Program (TARP), which will use tax dollars to buy “toxic” mortgages and mortgage-backed securities from lenders to stabilize the banking system and loosen credit. The plan as passed also added “Main Street” provisions to slow foreclosures, address executive compensation and restore faith in the banking system among consumers and small businesses.
First, the plan raises the guarantee on bank deposits from the Federal Deposit Insurance Corp. (FDIC) from $100,000 to $250,000 per account — a provision largely targeting small businesses. Additional sweeteners that helped the bill pass include tax deductions for retail improvements, state and local sales taxes, and state and local property taxes. The plan also now offers tax breaks for renewable energy technologies and plug-in electric vehicles.
Last, the bill contains provisions to clear the community banks, where many entrepreneurs do business, of bad debts that limit lending capacity. “If we fail to clear these assets off the books of community banks, it could decrease the banking system’s lending capacity by as much as $450 billion,”? Stottlemyer said.