President Barack Obama announced his plan to support the nation’s small businesses yesterday during a news conference in the East Room of the White House. The President called together small business owners and Congressional leaders, including the chair of the House Small Business Committee, Rep. Nydia Velazquez (D-NY) and the ranking Minority member Rep. Sam Graves (R-MO).
The President prefaced his comments by taking on insurer American International Group (AIG) over bonuses paid to company executives. AIG has been the beneficiary of billions of dollars of federal aid to keep the company from collapsing. Mr. Obama said, “This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?” The President went on to say that he has asked Treasury Secretary Timothy Geithner to use “every single legal avenue to block these bonuses and make the American taxpayers whole.” Many experts suggest that there is little the federal government can do to block the bonuses since they are contractual obligations of AIG but the White House could use the payments as leverage for any additional maneuvers by the company. In addition, later in the day New York Attorney General Andrew Cuomo announced his intention to subpoena company officials to surrender the names of individual who received bonuses. By the end of the day the company did not respond, suggesting a possible show down between the New York attorney general and AIG executives.
Mr. Obama then turned his attention on the nation’s small business owners. He said, “Small businesses are the heart of the American economy. They're responsible for half of all private sector jobs –- and they create roughly 70 percent of all new jobs in the past decade. So small businesses are not only job generators, they're also at the heart of the American Dream.” The President spoke of provisions in the “American Recovery and Reinvestment Act of 2009” that are meant to assist business owners, including tax cuts and incentives to encourage investment in small businesses. He said, “My recovery plan, as already been noted, raises the guarantees on SBA loans to 90 percent and eliminates costly fees for borrowers and lenders that can be too costly in a recession.”
President Obama underscored the importance of small business to the nation’s economy. “Smaller companies produce 13 times more patents per employee than large companies,” he noted, “Now, think about it. Hewlett-Packard began in a garage. It was a small business. Google began as a research project -- small business. The first Apple computers were built by hand one at a time -- small business. McDonald's started with one restaurant.”
He also announced that the Treasury Department would begin purchasing $15 billion in SBA loans through the Troubled Asset Relief Program (TARP) that is now part of his larger Financial Stability Plan. In addition, Mr. Obama said the federal government would increase the liquidity of community banks to ensure that they would start loaning monies again. The President said, “Now, this plan is the latest step –- but by no means the last step –- in our ongoing efforts to stabilize the financial markets on behalf of businesses and consumers.”
The President also noted that his budget includes a reduction in the capital gains tax fir investments in small of startup businesses to zero and making permanent one of the tax cuts in the economic stimulus package. He also pointed out that as part of his larger health care reform effort his budget calls for tax credits and help small businesses cover their employees.
Mr. Obama ended his remarks by calling attention to a small business owner from Raleigh North Carolina who wrote the President several weeks ago. He described how the owners of the small interior design service company took no compensation but still had to lay off fourteen employees due to the economic downturn. The President described the difficulty the company is having securing a line of credit despite the fact that it has never been late on a payment. He pledged, “You deserve a chance. America needs you to have that chance. And as President, I will continue to do everything in my power to ensure that you have the opportunity to contribute to your community, to our economy, and to the future of the United States of America.”