Community banks may soon be able tap a $30 billion government fund to help them increase lending to small businesses.
Democrats in Congress said the banks should be able to use the money to leverage up to $300 billion in loans to small businesses, helping to loosen tight credit markets. GOP opponents called it another unwise bank bailout.
A measure creating the fund overcame a Republican filibuster in the Senate Thursday evening by a 60-37 vote with two Republicans joining Democrats in support of the fund.
The measure, supported by President Barack Obama, will be added to a bill providing a series of tax breaks aimed at small businesses, which could come up for a vote in the Senate next week. The House passed a bill establishing a similar lending fund in June.
The money would be available to banks with less than $10 billion in assets.
"One of the biggest hurdles is the ability for businesses to secure loans or investors," said Sen. George LeMieux of Florida, one of only two Republicans to vote in favor of the measure. "This bill primes the engine for investment."
LeMieux and Sen. George Voinovich of Ohio were the only Republicans to join Democrats in voting to advance the measure. Other GOP lawmakers called the bill another bank bailout that would do little to increase lending to small businesses.
"I believe that American taxpayers have lost their appetite for bank bailouts," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.
But Sen. Mary Landrieu, D-La., chairwoman of Senate small business committee, fumed at the comparison to the bank bailout.
"Contrary to what some are saying about this lending fund, this program is not to bail out the big banks, it is for the small businesses across this country," Landrieu said. "We are simply using the healthy community banks as a conduit to get money flowing to these businesses."
Banks that tap the fund would issue preferred stock to the Treasury Department, paying dividends based on how much they increase lending to small businesses. The more they lend, the lower the payments.
The nonpartisan Congressional Budget Office estimated that the fund would generate a $1 billion profit for the government over the next decade, from loan repayments and dividends.