Mr. Chairman, I both express appreciation to you and commend you for your leadership in holding this hearing today. I want to commend Senator Hagel for his leadership and commitment to the objectives his legislation seeks to accomplish. As you know, I too, have sought a means to improve the flow of credit to rural small businesses. Although my efforts have been expended in a slightly different direction, the goals are similar and the approach employed by S.1423 is definitely complementary. In fact one of the witnesses at the Agriculture Committee hearing last fall noted that in most areas, competition among financial institutions, and even GSEs, has produced significant consumer benefits.
My state, the state of Utah, has 29 counties. 25 of these counties are classified as rural. Many of them have such small populations that they can only support one or two branch banks and the fear of concentration and credit risk combined with strict regulatory oversight often prevents these banks from extending credit to otherwise deserving enterprises. This in turn reduces their profitability and consequently reduces the financial services available in these rural areas.
I believe that this restricted credit availability also restricts economic growth in these rural areas. Restricted economic growth not only inhibits population growth, it leads to stagnation and even the gradual demise of some rural communities. I note that many rural communities have old and outdated community facilities such as schools, emergency and health care facilities, transportation and communication systems, energy distribution systems, and water and sewer and other critical utilities. Moreover, the aging population base in many of these communities, combined with the declining population base reduce the communities' tax base and their ability to improve these facilities and consequently, the quality of life they can bring to rural residents.
So, Mr. Chairman, I still maintain the hope that we can bring about a process through
the Agriculture Committee that allows Farmer Mac and the Farm Credit System the
opportunity to purchase rural small business whole loans. This will enhance secondary
market activity for these loans and strengthen rural lending activity. However, I believe
this proposal before us today is a complementary effort. One that will bring a more
stable financial environment to rural communities, with a broader range of financial
services, and at prices comparable to urban areas. This in turn will permit our rural
areas to realize their economic potential and make the contribution to our GDP that they
are truly capable of making. I applaud your efforts and look forward to hearing from our
witnesses today.
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