Dean proposing Fannie Mae-like loan entity

[pruner]

Kent Hoover
Washington Bureau Chief

Former Vermont Gov. Howard Dean, the current front-runner for the Democratic presidential nomination, proposes creating a new Fannie Mae-like corporation to sell securities backed by small business loans.

Initially, the Small Business Capital Corporation would be a government corporation inside the Small Business Administration. But it would be converted to a private-sector company in 15 years, which would provide it with additional resources through the sale of stock to the public.

The purpose of the SBCC is to increase the availability of capital to small businesses. Dean's plan says the SBCC will "bring the same efficiencies to small business lending that Fannie Mae and Freddie Mac have brought to home financing, and Sallie Mae brought to the student loan program."

Sen. Olympia Snowe, the chair of the Senate Small Business and Entrepreneurship Committee, agrees that the ability to sell securities based on returns from SBA loans would encourage more lenders to enter the small business market, but she has proposed a much less ambitious program than Dean's. The Maine Republican has introduced legislation that would encourage lenders to securitize pools of small business loans under a three-year pilot program.

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http://washington.bizjournals.com/extraedge/washingtonbureau/archive/2003/11/03/bureau1.html

[La_Serpiente]

1. Is he trying to make some Republican allies in the Senate?

[w13rd0]

4. I don't know...

...but as a "small businessman", he's solidified his having made alliances with me. I also know quite a few others that will like the sound of this. Investors, fund managers, interested parties.

[On the Road]

6. Small Businesses Should be Part of the Democratic Coalition

Smart move on Dean's part. He's proposing using a combination of public and private institutions to allow small businesses the financing to grow. A domestic version of the microloan program.

I visited a local gas station two weeks ago with a friend of mine who wanted to buy and operate it. He was unable to move forward because buying the business cost $250,000 and he could not borrow that amount as an unsecured loan. (Although cash flow was very good, the purchase price did not include the real estate or much in the way of tangible assets.) Lots of businesses go unsold or fail because of financing.

For that matter, I have three small investment homes and have found it difficult to borrow even with the house as collateral. Wells Fargo wanted to charge me 10.4% with four points, and I turned them down.

In renovating these houses, I have worked with a number of people with building trades skills who have the ability to start their own operation, but not the funding.

This is a big issue. Yes, there are regulatory concerns. I just hope if Dean wins, he has the right people to work out the details.

[beyurslf]

9. RiboFunk

Try Bank of America. I am a n underwriter here. Depending on credit and LTV (amonut you borrower compared to the value of the home) you could have 5.5 with 3.7 points or 6.625 with no points. (30 year term)

I couldn't come up with any examples for a 10% rate at this time.

[LuminousX]

2. I'll have to read more on this, but

I like what I see so far.

[DoveTurnedHawk]

3. I'm a Securities Lawyer, Among Other Things

I'll have to read more about this, but I have about five zillion regulatory concerns.

DTH

[On the Road]

8. DoveTurnedHawk, Can You Share More?

I'm sure there are lots of ways to abuse a program like this. But I think it's a great area to pursue. The Small Business Agency isn't the answer -- not how it operates today, anyway.

There's a lot of abuse of unemployment, diability, and almost every government program you can think of. But one difference between the parties is that while Democrats may ignore potential problems, Republicans see a legitimate problem and write off the whole effort.

[onebigbadwulf]

5. Dean

Is going to do to everything in his power to empower small business and murder big crooked companies.

I can't wait to see what he will do with Walmart.

[Eloriel]

7. A little more insight on this

One of the big pieces of Dean's economic agenda (and he talks about it a lot in his stump speeches) is the fact that small businesses hire more people and don't move their jobs overseas.

(I should point out that "small business" usually means way more than mom&pops or franchise operations. They can be multi-million dollar corporations, employing hundreds of people.)

Eloriel