The people's voice., 1958-09-05


To put this money to work eacl
investment of public funds would bt
matched with private money; and, il
the plan is successful, it will attract
considerably more private than pub
lie resources. The public funds are
intended to set off chain reaction
of private investment in small enter
prises with big promise, chiefly
through the mobilization of com
munity financial resources.
One well-known financial writer
has called the Johnson-Patman Act
revolutionary. In a sense it is. For
the first time it provides recog-
nized channel of opportunity for the
practical realization of business
genius lacking money; the big chance
for men with sound ideas, but small
financial means; expansion of small
going concerns that have proved they
know how to do business, but have
not accumulated assets which they
can use as loan collateral.
Your reporter came to Washington
economist with the Securities and
Exchange Commission engaged in the
study of economic concentration be-
ing conducted by the Temporary Ma
tional Economic Commission. He
made a study of the financing of
small business in several western
cities. In Seattle group of business
men suggested plan very similar to
that which is embodied in the new
legislation. But even the New Deal
Administration and Congress were
not ready to take action on it 20
years ago.
TWO TEXANS BEHIND BILL
Even then, however, it had become
clear to those who had studied the
needs of small business that primary
investment capital was very difficult
to obtain. A. A. Berle, Jr., then As
sistant Secretary of State, was one
of the first to suggest the organiza-
ton of capital banks for small busi-
ness. But it remained almost two
decades before two Texans finally
whipped plan into shape that was
acceptable to Congress.
These two were Senator Lyndon
B. Johnson, Democratic leader of the
Senate, and Repr. Wright Patman
D-Texas), chairman of the House
Select Committee to Conduct Study |
and Investigation of the Problems of |
Small Business. Patman has worked |
on this plan for small business capital
banks for several years. The time
seemed ripe for it's introduction, and |
Lyndon Johnson was quick to see it's
advantages. Together they engineered
the legislation through Congress.
Some very conservative Republicans
aided them.
The principal attraction of the leg
islation is its invitation to local busi-
ness leaders and energetic small busi-
nessmen to form Small Business In
vestment companies with a minimum
capital of 100000. Half of this must
be contributed privately. The other
half can be had from the Small Busi-
ness Administration (SBA) through
the purchase of so-called "subordi-
nated'' debentures. These would be
bearing, the rate to be de-
termined by the SBA Administrator.
In addition, the SBA could lend up
to half the amount of the paid-up
capital and surplus of the Small Busi-
ness Investment Company (SBI Co...
There is no upper limit upon the
amount at which the privately owned
SBI Co. may capitalize, so far as the
dill is concerned. But the rules and
under which these COM t
oanies are to operate have yet to be
by the SBA. $
THE LOCAL ORGANIZATION t
The bill provides that there must
'e at least ten stockholders for each '
,BI Co. If it can be chartered under
tate laws, it must be so chartered.
'ut if state laws do not provide for =
;suance of such a charter, the SBA
may issue one. SBA II
harters would run for 80 years, but o
ould be renewed. 81
T h Subordinate debentures" 81
ould not call for repayment. They el
ould constitute claim on the as ol