Lyndon B. Johnson photo

Remarks at the Signing of the Small Business Act Amendments of 1966

May 02, 1966

Distinguished guests and friends:

I welcome you here, Members of Congress, small business leaders, those in and out of Government, who have worked so long and so hard to increase small business' share of this Nation's national prosperity.

I have invited you here this morning to this historic East Room in the White House to ask you to witness the signing of a bill that will make the Small Business Administration a more effective friend of small business in America and to outline to you a progressive and reasonable method of financing the programs of the Small Business Administration and the other agencies of our Government.

There is an important relationship between these two. They are part of this administration's effort to make sure that our Government assistance programs are wisely planned and organized--that they are supported by private efforts wherever that is possible--that they are managed by the most competent men available for public service.

The bill I will sign today allows the Small Business Administration to set up two separate revolving funds, one for business loans, another for disaster loans.

In this way the disruptions in the business loan program, which have sometimes occurred when disasters have struck various communities, we think in the future can be avoided.

The bill that the Congress has sent me increases by $125 million the amount of loans that the Small Business Administration may have on its books at any one time. And we may expect the Small Business Administration to use this authority to serve more firms than it has ever served before.

These are necessary changes if the agency is to carry out its small business program I have proposed for the coming fiscal year.

Our budget for the fiscal year 1967 proposes that SBA make available about $725 million in loans, in guarantees, and in other commitments to the small businesses of this country. That $725 million is the largest amount of financing that the Small Business Administration has undertaken in its entire history. It is more than four times what the agency accomplished in 1960.

This is an impressive goal and an impressive program, as it must be if it is to keep pace with the growth of small business in the United States in the last 4 years.

There are now about 300,000 more small business firms operating in America than there were just 4 years ago.

There were 20 percent fewer failures among all businesses last year than there were in 1961. You know only too well that the great part of those failures came among the small businesses of this country.

Profits after taxes in small manufacturing corporations were nearly three times greater in 1965 than they were in 1961.

Small business has taken a much greater share of military prime contract awards. In 1961 the small firms obtained $3.6 billion of those awards. In 1965 that $3.6 billion had jumped to $4.9 billion, an increase of 36 percent in the last 4 years.

So we are planning and we are working for a growth industry--for almost 5 million businesses from the corner store to the small manufacturer for those millions of men and women who, by their initiative, their determination, and their hope, keep the wheels moving in our economy.

The reason we have asked so many Members of Congress to come here this morning is because this is basically and essentially an idea of theirs. This is a congressional program. Its interest is there, it was nurtured there, it was born there, and they watch over it zealously.

We feel this bill is essential for the growth and development of small business. But we believe it is only half the answer to what small business needs in this country.

This bill that the Congress has sent me gives the Small Business Administration the authority to carry out our program for the coming year. But it just gives us the authority, it doesn't give us the money. And authority without money doesn't amount to much.

So we proposed to the Congress last year a way of providing the funds--the money-that is necessary to carry out the small business program.

Today the Small Business Administration has only a limited amount of money for its lending operations. That does not mean the agency doesn't have assets. Far from it. It has in its revolving fund, in its loan portfolio today, loan paper that is worth more than a billion and a half dollars.

These tremendous assets, owed to the Small Business Administration by those small business borrowers who have taken their loans in the last few years, represent the taxpayer's money.

Their representatives in Congress have appropriated it to the Small Business Administration over the past several years to be used for a specific purpose; that is, investment in small business concerns.

But there is no reason for the Small Business Administration to clutch on and hold on to this large inventory. We think it can, and we think it should be able to sell its loans to private investors.

We believe that is the kind of cooperation we should have in our free enterprise system. In that way it would be able to generate new funds for its expanded lending program.

The Small Business Administration has long had the authority to sell its seasoned loans as well as to make them. It has used this authority over the years, to provide new capital to assist more small businesses.

But what we are asking for is an efficient and a practical way of achieving this goal. We believe that we should authorize the Small Business Administration to sell participations in its loan portfolio--they would be more attractive--to sell shares in this great billion and a half pool of outstanding loans.

Those shares would be guaranteed by the Small Business Administration. They would be sold to the private investors throughout America, large and small.

The Federal National Mortgage Association, the "Fannie Mae," would act as the trustee.

And once the certificates are sold, the proceeds would come back to the Small Business Administration. They would be available for lending to other dynamic small firms that today are hungry for capital that is fight and the desire to produce and to expand.

The legislation that we have asked for to achieve this was passed by the Senate by an overwhelming vote. It is under active consideration in the House of Representatives.

We believe that it is necessary for small business and we believe that it is sound for the Government and the people of this country.

The Small Business Administration is not the only Federal agency that is in need of financing authority. If selling certificates of participation makes sense, as all of our economists and most of our lenders believe, it makes sense as well for other Government programs and that is why we have urged the Congress to authorize these sound fiscal procedures for agencies throughout the Government.

We make no claim that this is a policy that is original with this administration. In 1954, in 1955, in 1956, in 1958, President Eisenhower and his administration affirmed his belief that private capital should be substituted for the Government's investment in housing mortgages. In 1954, President Eisenhower said, "The policy of this administration is to sell the mortgages now held by the 'Fannie Mae' as rapidly as the mortgage market permits."

In 1955, he made clear his position that "private capital will be gradually substituted for the Government investment until the Government funds are fully repaid and the private owners take over responsibility for the program."

President Eisenhower very wisely appointed a Commission on Money and Credit. In 1961 the Eisenhower Commission, made up of his Budget Director and others, called once again for the maximum substitution of private for Federal credit.

In 1962, President Kennedy's Committee on Federal Credit reported that "unless the urgency of other goals makes private participation infeasible, the methods used should facilitate private financing, should encourage long-run achievement of program objectives with a minimum aid from the Government."

As recently as 1963, the Republican members of the House Ways and Means Committee, led by Congressmen Byrnes, Curtis, and others argued, "The administration also can reduce its borrowing requirements by additional sales of marketable Government assets."

That is what we are trying to do through legislation that we have submitted. We are trying to further the substitution of as much private credit for public credit as possible and to ask their participation with us in this joint venture wherever and whenever we can under our sound, free enterprise system.

We want to extend the principle of private participation to SBA and to its sister agencies throughout the Government. We realize that we have come a long way.

This morning it will be my great pleasure to sign my name to the first part of this program, the program that gives us the authority. We call it the Small Business Act amendments of 1966.

We do treasure the hope that in the days to come that we will have another opportunity for all of you to come here and witness another signing which will do more than give authority, it will give the "do re mi" to carry out that authority.

Note: The President spoke at 11:35 a.m. in the East Room at the White House.

As enacted, the Small Business Act amendments of 1966 (S. 2729) is Public Law 89-409 (80 Stat. 132).

On May 24, 1966, the President approved the Participation Sales Act of 1966 (Public Law 89-429, 80 Stat. 164).

Lyndon B. Johnson, Remarks at the Signing of the Small Business Act Amendments of 1966 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/239207

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