Congress Clears Bill Aimed at Boosting Auto Dealers

WASHINGTON - The U.S. Congress gave final approval to legislation aimed at boosting lending to small businesses in what is likely to be the Democrats' final jobs bill before the Nov. 2 elections, Bloomberg reported.

The House passed 237-187 a measure offering tax cuts, loans and revived stimulus provisions to ease the flow of credit and show voters that Democrats are trying to boost the economy. The bill, approved by the Senate last week, goes to President Barack Obama for his signature.

The dealer portion of the legislation seeks to loosen credit by increasing the maximum size of a federally guaranteed loan that can be extended by the U.S. Small Business Administration.

It would enable small auto dealers to receive federally guaranteed loans of as much as $5 million -- up from $2 million. It would affect the SBA's year-old floorplan financing program for dealers, which has struggled to attract lender participation.

“The small-business jobs bill passed today will help provide loans and cut taxes for millions of small-business owners without adding a dime to our nation's deficit,” Obama said in a statement. “I look forward to signing the bill.”

Economist Alan Blinder, a former Federal Reserve vice chairman, said many small businesses have had “extreme” difficulty getting loans, though he said poor sales remain their biggest problem.

“They always have a hard time getting credit, and given the state of the markets they're having an even harder time now,” Blinder said in an interview. “This ought to be helpful on that score, but if the economy grows at one and a half percent, we're spitting in the wind because there's no demand.”

“The thing that drives small businesses over and above everything else is the ability to sell their product,” he said.

Republicans objected to provisions creating a $30 billion program in which the Treasury Department would buy preferred shares in community banks, with participants paying the government dividends on a scale depending on how much they increase lending. They said the plan amounted to little more than a smaller version of the Troubled Asset Relief Program.

“This is TARP, pure and simple,” said Representative Jeb Hensarling, a Texas Republican. “It is the capital purchase program with a different name.”

Thirteen Democrats voted against the measure. Walter Jones of North Carolina was the only Republican to support it.

For all the controversy over the lending initiative, it's far from certain banks will participate in the program, said Mark Zandi, chief economist for Moody's Analytics. Banks will probably be reluctant to take the government's money, he said, after seeing TARP recipients hit with retroactive executive-compensation limits amid a public outcry over tax dollars going to institutions paying million-dollar salaries.

“I'm skeptical that banks will actually take the government up on their offer,” said Zandi. “The memory of TARP will be in the minds of those lending institutions, and they'll be reluctant to use the capital.”