September 8, 2010

Financial Times Article

FT.com

Republican's backing aids $30bn stimulus bill

By Tom Braithwaite in Washington

Published: September 7 2010 23:52 | Last updated: September 7 2010 23:52

A $30bn White House plan to boost lending to small business has secured the support of a key Republican senator, putting Democrats on course to pass the first in a series of mini-stimulus bills.

George Voinovich, the Republican senator from Ohio, has agreed to back the long-delayed legislation at a vote due next week, according to Republicans and Democrats familiar with talks between Mr Voinovich and Harry Reid, the Democratic leader in the Senate. The bill would set up a $30bn Treasury-backed loan facility to encourage banks to lend more to small companies. It also contains more than $12bn in tax breaks for the struggling sector that, unlike large multinational companies, cannot circumvent troubled banks and tap the bond market.

The centrist Mr Voinovich is often a Democratic target for persuasion but he has usually stuck with his party's line. However, he is retiring this year and pledged his vote on the basis that the legislation would not increase the national debt and because businesses in Ohio requested his support.

Other Republicans could end up voting in favour of the bill, which failed in July after the debate descended into partisan squabbling over how many amendments would be allowed.

"We hope to have the votes to finish up the bill next week," said Jim Manley, a spokesman for Mr Reid.

The House passed a version of the legislation in June, that then went to the Senate, where it has been bogged down for more than eight weeks. Democrats need the support of at least one Republican to obtain an unassailable 60-vote majority.

But even as the Senate edges closer to passing the bill, moderates on both sides are warning that it could be derailed by Democrats in the House of Representatives if they insist on sticking to their initial bill or try to make new changes.

Both the House and the Senate versions of the legislation contain the core $30bn lending facility but there are differences in the detail that makes merging the bills problematic.

Senators led by Carl Levin, the Democrat from Michigan, have demanded that existing state small business-lending programmes are backed in the legislation, a move that does not have unanimous support in the House. Some Democrats in the House want to channel more money to minority-owned businesses.

The difficulties in passing the small business legislation, parts of which were first outlined by President Barack Obama in a speech to the Brookings Institution last December, bode badly for the other economic "sons of stimulus" initiatives that the Obama administration has floated in recent days.

Democrats in Congress are sceptical that any other measures will be passed before the midterm elections in November.