Small Business Lending Bill Signed

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Updated with list of top Small Business Administration lenders in 2009.

WASHINGTON (TheStreet) -- President Obama signed a bill on Monday to provide $42 billion in loan incentives and tax cuts for small-businesses, after months of wrangling with Republican lawmakers.

During a speech at the White House, Obama touted the Small Business Jobs Bill as one that will provide "critical" aid to Main Street and bashed the other party for opposing the measure. Republicans sought to characterize the bill as similar to the $700 billion bank bailout.

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"It was critical that we cut taxes and make more loans available to entrepreneurs," Obama said. "So today after a long and tough fight, I am signing a small business jobs bill that does exactly that."

Obama first proposed the bill in January, but the legislation was stonewalled by deficit hawks. The House passed the legislation last week in a 237-187 vote with just one Republican, Rep. Walter Jones, of North Carolina, joining the majority; the Senate passed the bill in a 61-38 vote on Monday with two Republican senators, George Voinovich, of Ohio, and George LeMieux, of Florida, joining the majority.

The bill includes a $30 billion lending fund to encourage small, community banks to make small-business loans, along with $12 billion worth of tax breaks. Democrats pushed forward the bill as a way to win back support from Main Street voters, who are unhappy about the 9.6% unemployment rate and tight credit conditions and feel as though banks have been benefitting from billions in taxpayer dollars while average workers are suffering.

However, it's unclear how much good the new small-business bill will do.

Democrats estimate the incentives could provide up to $300 billion in new small business credit and create half a million jobs. Yet government incentives from other federal initiatives have done little to urge banks to modify troubled borrowers' mortgages, or to spur investors to buy up toxic assets.

Part of the problem with the lending freeze is that borrowers who complain about credit conditions don't match tighter underwriting standards, while qualified borrowers are simply not looking for loans. Incentives wouldn't solve that problem, although the Small Business Administration's quick run through nearly $700 million in earlier stimulus funds shows that there is some demand for new small-business loans. That agency guarantees debt that matches certain criteria, which therefore decreases risk for lenders and investors.

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Some banks like Wells Fargo (Stock Quote: WFC) and CIT Group (Stock Quote: CIT) have been writing new small business loans aggressively.

The top SBA lenders last year by dollar amount last year were Wells Fargo, with $678 million in new loans, U.S. Bancorp , with $261 million, Compass Bancshares (which was acquired by Banco Bilbao Vizcaya Argentaria ), with $172 million, Live Oak Banking Company, with $159 million, and Toronto Dominion's TD Banknorth division, with $145 million. The top five by number of loans were Superior Financial Group, with 2,690 new loans, Wells Fargo with 2,156, U.S. Bancorp with 1,896, Zions Bancorp , with 1,310, and JPMorgan Chase (Stock Quote: JPM), with 1,250.

Bank of America , the country's largest bank, issued 308 new SBA loans last year, with $18 million in new credit, while Citigroup , the other money-center giant, extended 29 new SBA loans, worth $14 million.

SBA Administrator Karen Mills called the new bill "the right step forward" to help small businesses and the broader economy.

"This bill ensures those very businesses have access to the capital they need by extending SBA's successful Recovery loan enhancements and putting local, community banks in a position to be a real partner for small businesses and entrepreneurs," Mills said in a statement last week, following the House vote.

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