Y 4.5m 1: B 22/3 BANK DEREGULATION AND ITS IMPACT ON SMALL BUSINESS LENDING HEARINGS BEFORE THE SUBCOMMITTEE ON TAX, ACCESS TO EQUITY OF THE COMMITTEE ON/SMALL BUSINESS NINETY-SEVENTH CONGRESS SECOND SESSION 96-535 O WASHINGTON, D.C., MAY 19 AND 20, 1982 Printed for the use of the Committee on Small Business SUBCOMMITTEE ON TAX, ACCESS TO EQUITY CAPITAL AND BUSINESS OPPORTUNITIES HENRY J. NOWAK, New York, Chairman BILLY LEE EVANS, Georgia BYRON L. DORGAN, North Dakota GUS SAVAGE, Illinois JOHN G. FARY, Illinois DAN MARRIOTT, Utah OLYMPIA J. SNOWE, Maine DANIEL B. CRANE, Illinois VIN WEBER, Minnesota BENSON S. GOLDSTEIN, Subcommittee Counsel RICHARD L. CENTNER, Minority Subcommittee Professional Staff Member (II) CONTENTS Dorgan, Hon. Byron L., a Representative in Congress from the State of Nowak, Hon. Henry J., chairman, Subcommittee on Tax, Access to Equity 115 1, 115 Auvil, Ken, president, Small Business United of West Virginia, and presi- 238 Banta, Robert R., executive vice president, Manufacturers and Traders Trust Co.; accompanied by Robert H. Edwards, vice president, counsel, Glover, Howard T., chairman, Committee on Development for Smaller Gulan, Jerry, vice president, National Small Business Association.. Laughlin, Robert E., chief executive officer, Western Food Equipment Co.. McCormick, Robert L., Jr., president, Independent Bankers Association of Scott, Jonathan A., assistant professor of finance, Southern Methodist University, and consultant, National Federation of Independent Busi- Swain, Frank, Chief Counsel for Advocacy, Small Business Administra- Willumstad, Robert B., senior vice president, small business and retailing, Additional material supplied for the hearing record: Auvil, Ken, president, Small Business United of West Virginia, and presi- Banta, Robert R., executive vice president, Manufacturers and Traders Glover, Howard T., chairman, Committee on Development for Smaller Associations, U.S. League of Savings Associations: Prepared statement 63 180 Scott, Jonathan A., assistant professor of finance, Southern Methodist University, and consultant, National Federation of Independent Busi- Willumstad, Robert B., senior vice president, small business and retailing, BANK DEREGULATION AND ITS IMPACT ON SMALL BUSINESS LENDING WEDNESDAY, MAY 19, 1982 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TAX, Washington, D.C. The subcommittee met, pursuant to notice, at 9:48 a.m., in room 2359-A, Rayburn House Office Building, Hon. Henry J. Nowak (chairman of the subcommittee) presiding. Mr. NOWAK. The subcommittee will come to order. I would like to welcome everyone here. We will start with a brief opening statement, and then we will get right to our witnesses. OPENING STATEMENT OF CHAIRMAN NOWAK Mr. Nowak. Today, we begin our investigatory hearings on banking deregulation and its impact on small business lending. The proposed measures to deregulate the banking industry could have a profound effect on the basic structure of traditional lending practices in this country. In view of this trend, it is important to examine the possible impact that these changes may have on credit availability, especially for small business. As a general rule, small business is experiencing difficulty in securing debt and equity capital. For instance, small firms, to a large degree, have been denied access to the bond market and the commercial paper market which are significant sources of debt capital for larger enterprises. Therefore, small business has consistently relied upon commercial bank credit to meet its financial needs. In fact, a recent survey of bankers by the Interagency Task Force on Small Business Finance indicates that 72 percent of the money borrowed by small businesses comes from commercial banks. In addition, the same survey points out that small and medium sized banks provide the bulk of the dollar volume of bank loans to small business. In view of the heavy dependence of small business on the banks and banking industry in meeting its financial needs, let us take a brief look at recent developments affecting the industry. The current high and volatile interest rates have left the thrift institutions on the verge of collapse. A recent business journal article indicates that savings and loan associations' losses totaled $5 billion last year and mergers were responsible for the elimination of approximately one thrift institution a day. (1) |