By Lloyd Chapman
CIT Group Inc. has been the number one Small Business Administration (SBA) 7(a) lender for nine consecutive years. They have also been the top lender to women, minority and veteran owned small businesses for six consecutive years. CIT has been a lender to roughly one million small and mid-size businesses. Without help from the federal government CIT could face a very serious challenge to their future that may include bankruptcy.
President Obama should not let that happen for several good reasons.
America's small businesses are responsible for approximately 50 percent of the gross domestic product (GDP). According to the latest U.S. Census Bureau data, small businesses with less than 100 employees are responsible for over 97 percent of all net new jobs in America. These firms employ over 56 percent of the private sector workforce and are responsible for the majority of technical innovations. Small businesses are unquestionably the foundation our of national economy.
These are the firms CIT has been serving since 1908. CIT makes successful loans available to thousands of hardworking small business owners that had been turned down repeatedly by other lenders. CIT's unique ability to work with new entrepreneurs and small business owners trying to expand their businesses will be impossible to duplicate.
CIT received $2.3 billion in TARP funds. As far as I know, they didn't use the money to give their top executives millions in bonuses, buy a new corporate jet or spend a million dollars remodeling the president's bathroom like many firms in their industry.
I admit, I am not an economist and the detailed and complex inner workings of the financial industry are not my area of expertise. I am a hardcore small business advocate and a taxpayer. If my tax dollars are going to be used to rescue banks and other financial institutions, CIT is the kind of firm I want to see saved.
It looks like President Obama and the people in his administration get to decide who succeeds and who fails in the financial industry. In making those life and death decisions I believe President Obama would be wise to consider the crucial role small businesses will play in our nation's economic recovery. Over 50 percent of the GDP and over 95 percent of all net new jobs are very compelling statistics in favor of supporting America's 27 million small businesses.
President Obama recently rolled out his ARC loan program that will provide interest free $35,000 loans to small businesses. The program is capped at $255 million. CIT made $770 million in loans under the SBA's backed loan program in 2008.
If you consider the total volume of federal funds that have been allocated to stimulate the nation's failing economy, the figure is over $2.5 trillion. To date, the nation's 27 million small businesses have received less than 1 percent of those funds. To help put that in perspective, more tax dollars have gone to help J.P. Morgan than all American small businesses combined. The Wall Street executives that helped create the worst national economic disaster since the Great Depression have received more money than 27 million small businesses, over $18 billion in bonuses.
If our economy is going to recover any time soon, President Obama needs to come to the realization that small businesses will lead the way out of this recession, not Wall Street and not Fortune 500 firms. Politicians in Washington pushed the Wall Street bailout bill and the American Recovery and Re-Investment Act by saying small businesses need access to capital. The truth is, and has been widely reported, that access to capital for most small businesses has actually decreased.
An effective economic recovery will require lenders like CIT to get money into the hands of qualified small businesses.
If our hard earned tax dollars are going to be used to save financial institutions, we should use those funds to save firms like CIT that have a 100-year track record of helping those small businesses where most Americans work, the businesses that are responsible for over 50 percent of the GDP and create over 97 percent of all net new jobs.
President Obama needs to invest our tax dollars wisely and I can't think of a better use for those funds than to invest in a firm like CIT that has been the nation's top lender to small businesses and firms owned by women, minorities and veterans.