The problem is there’s not enough funding. ” For example, after acknowledging the joint examination guidance that indicates prudent small business lending will not be criticized, Congressman Bachus stated, “Sadly that guidance is not always filtering back to the operational level, as indicated by the constant stream of
comments I and my colleagues…receive from community banks and their small business customers…This has become so commonplace that it has become known as the mixed messages problem. ” At the same time, John D. Harrison, Superintendent, Alabama State Banking Department, emphasized the value of local expertise at the field level. “t looks like we’re all coming down from Washington,” he said. “We need to be sending that authority and that responsibility down to that region and that field level person that should be able to work with that institution, know that market, know the
economic conditions and come up with a sound judgment. ”In addition to communications issues, some participants suggested that some examiners and bankers are adopting an overly conservative approach to small business loans. For example, Senator Warner pointed out, “hether you are a lending officer or…a bank examiner,…human nature…pushes you to more conservatism. ” Similarly, some bankers, feeling pressure to improve their balance sheets, may be more restrictive when granting credit and partly attribute their reluctance to supervisory policies and examiners. As FDIC Chairman Bair noted, “ometimes our examiners are used as an excuse. may not really want to make the loan, and ‘Oh, our regulator won’t let me do that.
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White owned firms increased only about 13 percent during this period.
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The U. S. Census Bureau reports that during the economic expansion from 2002 to 2007, the number of businesses owned by minorities increased 45 percent, led by African American owners, who experienced a 60 percent increase in businesses owned. White owned firms increased only about 13 percent during this period. While minority owned firms now account for more than 20 percent of businesses, they remain relatively small, employing only around 5 percent of the nation's employees. The vast majority of small businesses are seeded with the personal or family savings of the founder. While the scale may differ, the reliance of savings differs little across ethnic groups. Reliance on home equity and credit cards, important sources of start up capital, also display only minor differences across race, with minorities being slightly more dependent on credit cards and whites more often tapping home equity. As inflation and record low interest rates reduced the returns to savings, this decline may explain some of the dramatic fall in new business creations. The long run trend decline in savings has been accompanied by a similar decline in entry rates among small businesses. However, non bank lending is becoming an increasingly important source of capital.
