Washington Report: Updates From the Capitol

GOP Candidate Skewered for Civil Rights Comments

Fresh off his victory in Kentucky’s GOP Senate primary in which he defeated a mainstream Republican,  Rand Paul, who is also a member of the Tea Party, set off a hailstorm of fury over comments he made suggesting that he might not have supported government forcing private businesses to comply with the Civil Rights Act in the ’60s.

The controversy began during an interview Wednesday night on MSNBC’s “Rachel Maddow Show” and by the next morning, Paul was backtracking. Skeptics were left wondering, however, whether the Tea Party does indeed use its libertarian ideology to mask what are in fact racist views.

“I believe we should work to end all racism in American society and staunchly defend the inherent rights of every person. I have clearly stated in prior interviews that I abhor racial discrimination and would have worked to end segregation,” Paul said in a statement issued by his campaign. He also claimed that critics are trying to score cheap political points.

But that doesn’t explain a letter Paul wrote a letter to a Kentucky newspaper in 2002 that said, “A free society will abide unofficial, private discrimination — even when that means allowing hate-filled groups to exclude people based on the color of their skin.”

It does, however, give Democrats hope that this tinge of racism could help their prospects in the midterm elections and diminish those of the Republican Party that continues to struggle with issues of race and encouraging blacks and other minorities to its brand.

Dewey Clayton, a political scientist at the University of Louisville, suspects that Tea Party candidates may cause the GOP “more pain or political problems than actual victories” this fall and that in the end Kentucky voters may find Paul too extreme. Libertarians may argue for limited government, he added, but clearly there are times when only government can step in to solve the nation’s problems, such as the economic freefall it has experienced.

Clayton reckons that President Barack Obama’s election is the true cause of so much conservative protest and upheaval.

“Part of what’s going on here is that people are looking at changing demographics, and there’s some general unease,” he said.

Small Business Lending Bill Moves Out of Committee

Washington lawmakers are making yet another attempt to boost lending to small businesses. This time it’s the Small Business Lending Fund Act (SBLF), which the House Financial Services panel voted out of committee on Thursday. The bill would establish a $30 billion fund to provide credit for small businesses and ultimately spur job creation.

Banks with assets under $1 billion and between $1 billion to $10 billion would be eligible to receive capital investments of up to 5% and 3%, respectively, of their risk-weighted assets. In addition, regulator approval and a small business lending plan would be required to participate.

Dividend rates would start at 5% and decrease a percentage point for every 2.5% increase in small business lending, to a minimum rate of 1%. After five years, the dividend rate would increase to encourage timely repayment.

Republican committee member Rep. Jeb Hensarling of Texas calls the bill TARP with lipstick or at the very least its “kissing cousin.”

Darius Davis, executive vice president and COO for the Harbor Bank of Maryland (No. 11 on the BE100s Banks list with $304.6 million in assets), believes that the bill will encourage banks to lend and provides much needed capital at a time when it’s scarce for most lenders. But he also thinks the terms could be better.

Still, Davis adds, the bill could potentially benefit minority small businesses. “But the business owner still has to apply for a loan and convince the bank that the business is a viable concern and the loan will be repaid.”

Report Blames Tight Lending Standards for Weak Hiring

Although mid-size and large business began to

increase hiring by the middle of 2009, small business hiring levels are well below pre-recession levels, according to a U.S. Congress Joint Economic Committee report. In fact, 2009 hiring was 20% below the annual average during the years 2001-2007.

The report, which blames tight lending for the weak hiring numbers, also found that Small Business Administration lending has dropped sharply and that the number of loans fell from 108,000 in 2007 to fewer than 46,000 in 2009.

Rep. Elijah Cummings (D-Maryland), who sits on the panel, said that the news is particularly devastating to black businesses that more often than not rely on lines of credit to stay in business.

“Clearly, the report said what I’m already feeling in my district and that is that small businesses do not have access to the capital they need and as a result they can’t take advantage of opportunities they normally would. And because of that they cannot hire people,” he said. Because of the lack of wealth in black communities, African American entrepreneurs, he added, cannot turn to relatives or other contacts for loans.

Cummings also said that lawmakers must do all that they can to encourage banks to lend more. Next month he will hold a hearing in his district with its local Federal Reserve and small and minority businesses.

What Will Washington Be Talking About Next Week

National Small Business Week, an annual event sponsored by the SBA that honors entrepreneurs and provides a series of educational forums kicks off next week. Featured speakers will include SBA administrator Karen Mills, Homeland Security Secretary Janet Napolitano, and Transportation Secretary Ray LaHood.

Jobs, jobless benefits, and black farmers. Democrats will take up a $190 billion package jointly crafted by Senate Finance Committee Chairman Max Baucus (D-Montana) and House Ways and Means Committee Chairman Sander Levin (D-Michigan). It reportedly includes a $1 billion summer jobs package that the Congressional Black Caucus has been fighting for as well as funding to compensate black farmers and a provision to extend unemployment benefits set to expire at the end of June.

Financial regulatory reform. Obama will soon be able to tick another big win off his list. Late Thursday night the Senate finally passed its version of a Wall Street reform bill with a vote of 59-39. It now must be reconciled with the House bill. But if the final version doesn’t include the Office of Minority Inclusion, which some experts say will render the bill useless in terms of protecting the interest of minority consumers and contractors, expect there to be a bit of a rumble.