Kerrigan in American Banker: Fed Policies Continue to Batter Small Businesses

By SBE Council at 9 November, 2023, 12:12 am

Federal Reserve Board actions and policies are taking a painful toll on small businesses. First, the consequences of unprecedented loose monetary policy have come home to roost. Rather than vastly reigning in supply, the Fed quickly jacked up interest rates, which is causing angst and financial pain for small businesses. Furthermore, in response to the Fed’s lack of action and oversight on known problems with a few regional banks earlier this year, Fed regulators are punishing responsible and competent banks through its proposal to increase capital requirements.

As explained by SBE Council president & CEO Karen Kerrigan in an American Banker Op-ed:

“This policy would shred access to capital for American entrepreneurs by severely increasing the cost of lending, a significant blow for business owners who rely on affordable and accessible loans and credit to operate and expand.”

Small business owners are reporting tough conditions due to higher interest rates and uncertain economic conditions. SBE Council’s latest Small Business Check Up Survey finds that 62% of small business owners rate credit and capital availability as fair or poor, with nearly 50% conveying that a lack of access to capital is hampering their operations.

Members of Congress are expressing concern and alarm about the Fed’s policy choices, and as Kerrigan writes in her Op-ed:

“As summarized by Congressman Dan Meuser (R-Penn.) at a recent Small Business Committee hearing, ‘The proposal will require banks to keep more money on the sidelines, where it will not be utilized to fulfill the lending needs of particularly small businesses…These are not theoretical concerns. They are real issues that can close the doors of our small businesses, impacting the lives and livelihoods of everyday Americans. Due to this proposal, banks will have less flexibility than ever, and again, small businesses will receive the brunt of the lending pullback.’”

Questions continue to persist about Fed actions. Why didn’t regulators take action (when they could have on Silicon Valley Bank when they knew there were problems)? And, why should sound banks and small businesses be forced to bear the brunt of poor regulatory oversight and incompetency?

SBE Council will continue to work with our advocacy allies and friends in the Congress to push back against this unreasonable and misguided Fed proposal.