$30B small business credit fund likely to clear Senate procedural hurdle after GOP defection

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Senate set to clear $30B credit for small business

WASHINGTON — President Barack Obama is poised to win a long-sought victory as Senate Democrats appear likely to win a key vote that would clear the way for a bill creating a $30 billion government fund to help open up lending for credit-starved small businesses.

Sen. George Voinovich, R-Ohio, who sided with GOP leaders in a filibuster in late July, has announced he will support the measure in Tuesday’s vote. Voinovich would join all 57 Democrats and two independents who vote with them to break a filibuster by Republicans protesting their inability to offer amendments to the measure.

Tuesday’s vote is expected to clear the way for the Senate to pass the measure later in the week. The step would return the measure to the House, which would have the choice of seeking further changes or shipping the bill to Obama for his signature.

The fund would be available to community banks with less than $10 billion in assets to help them increase lending to small businesses. The bill would combine the fund with about $12 billion in tax breaks aimed at both large and small businesses.

Democrats say banks should be able to use the lending fund to leverage up to $300 billion in loans, helping to loosen tight credit markets. Some Republicans, however, likened it to the unpopular bailout of the financial industry.

Democrats say the measure is needed to help small businesses cope with a credit crunch that worsened dramatically after the financial crisis two years ago.

“This bill is about righting a wrong that was done to small business when Wall St. closed Main St. down and cut off access to capital,” said Sen. Maria Cantwell, D-Wash.

“Small businesses are holding off on hiring while they wait for us to act,” said Senate Majority Leader Harry Reid, D-Nev. “Banks large and small are holding onto their capital while they wait for us to act.”

Congressional Democrats started the year with ambitious plans to pass a series of bills designed to create jobs, but they have relatively little to show for it just seven weeks before midterm elections that will determine whether Democrats keep their majorities in the House and Senate.

The small business tax cuts in the bill include breaks for restaurant owners and retailers who remodel their stores or build new ones. Larger businesses could more quickly recover the costs of capital improvements through depreciation. Long-term investors in some small businesses would be exempt from paying capital gains taxes. And loan caps under the Small Business Administration’s chief lending program would be significantly raised.

Democrats had hoped to pass the bill in July, but Democrats couldn’t win any GOP converts and fell just short of defeating a GOP filibuster.

Much of the bill would be paid for by allowing taxpayers to convert 401(k) and government retirement accounts into Roth accounts, in which they pay taxes up front on the money they contribute, enabling them to withdraw it tax-free after they retire. Taxpayers who convert accounts this year would pay the taxes in 2011 and 2012, generating an estimated $5.1 billion.