Clock Ticking on Debt Limit; Small Business Lending Fund Progressing Slowly

• Time is Running Out for Capitol Hill Lawmakers to Reach a Deal on the Debt Limit

Although President Barack Obama made it a priority to enter negotiations on the nation’s debt limit today, the clock continues to tick for Capitol Hill lawmakers on negotiations to beef up the limit. Republicans are adamant in their position that they will not agree to raising the limit without a commensurate level of cuts in the federal budget. Democrats are equally determined that revenue increases and economic stimulus measures must be part of any deal. Failure to come to an agreement by the Treasury Department’s August 2 deadline, could throw financial markets into turmoil and jeopardize the nation’s already weak economic recovery.

House Majority Leader Eric Cantor (R-Virginia) chose to walk away from the group led by Vice President Joe Biden that is working on the deal, eliciting criticism from Democrats and surprise from Republicans who were caught unaware that he was even considering such a move. Sen. Jon Kyl, Cantor’s counterpart in the upper chamber, also has chosen to no longer participate in the process.

Cantor said that he walked away from the negotiations because the group has reached an impasse over taxes that he believes has to be resolved between Boehner and President Obama.

“These talks are essentially in abeyance for now. They may or may not resume in different forms,” White House spokesman Jay Carney told reporters last week.

Congressional Black Caucus Chairman Emanuel Cleaver called Cantor’s decision irresponsible.

“There is an urgent need to resolve the debt ceiling issue and it is beyond irresponsible not to work toward increasing the debt limit immediately,” he said. “I am very disappointed that the Republican leadership has decided to walk away from such critical negotiations with the future of our economic viability in an indeterminate state. The American people do not deserve this.”

So now the ball is in Obama and Boehner’s court. The two and Senate Majority Leader Harry Reid (D-Nevada) are expected to take place at the White House this week.

Speaking on ABC’s This Week With Christiane Amanpour Sunday morning, House Assistant Minority Leader James Clyburn (D-South Carolina) said that he thought the bipartisan talks had been going well until the Republican leaders opted out. He also disputed Republican “talking points” that Democrats want to increase taxes, saying that they want to close the loopholes that enable corporations and the wealthiest Americans to pay lower taxes than they should.

“We want to close those loopholes up. We do not want to raise anybody’s tax rates. That’s never been on the table, and I wish they would get beyond their talking points and really get honest with the American people as to what these discussions are about,” Clyburn said.

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• Small Business Lending Fund is Moving Very Slowly

Remember the Small Business Lending Fund that President Obama’s administration boasted would provide a much-needed financial boost to small businesses and community development banks? In testimony before the House Small Business Committee last Wednesday, Treasury Secretary Timothy Geithner

admitted that the process has moved much slower than the administration had hoped.

Geithener said that the administration is both surprised and disappointed about the program’s pace, but blamed it on safeguards that Congress put in the legislation to protect taxpayers. He also said that it was taking more time than anticipated for regulators to evaluate applications and ensure that loans would be repaid. According to Geithner, the Treasury Department has received 869 applications requesting $11.6 billion in SBLF program funds.

“We require the applications to be reviewed by their primary bank supervisor and we don’t consider them unless they get recommended by the bank supervisor. That program leaves us vulnerable to the time it takes those regulators to be careful in a review. But also, we have to look independently at them, and we’re trying to be careful,” he said. “So we’re a little slower than we thought. But we’re very close to

moving ahead and again, I’m very confident you’re going to see a very meaningful impact on the institutions that are eligible. And we’re close to being able to unleash that capital.”

Rep. Allen West (R-Florida) said that during a meeting with a local chamber of commerce, community bankers expressed concern that they are facing a great deal more regulation that they do not have the resources to address. He suggested that there may be a need to review the Dodd-Frank bill to determine whether it is having an unanticipated adverse effect on small businesses and community banks. West also said that lawmakers need to find “that sweet spot, kind of like on a baseball bat” in terms of how much regulation is required.

Geithner acknowledged that bank examiners are only human and want to ensure that they are on the side of caution, but also said it was important to not overdo it.