The American Recovery and Reinvestment Act (ARRA) should provide very specific opportunities for small, local, women and minority business enterprises as it attempts to establish a new economic platform for the 21 Century and stimulate the economy.  Based upon the lack of accountability and transparency from the early investment made by the Troubled Asset Relief Program (TARP) administrators, there is a great deal of skepticism by many small business owners and intermediaries.  The banks receiving TARP funds in the first round of funding were committed in principle to “loosen credit” in order to “jump start” the economy.  It simply never happened!  Instead taxpayer dollars were used to stabilize bank balance sheets and in other situations banks purchased weaker financial institutionsThe two fundamental challenges for small business, credit and contracts, have yet to be realized and need to be addressed in this next round of federal investment.

The second half of the TARP Funds, to be administered by the Obama Administration, must insure that banks accepting the money agree up front to immediately make available credit facilities to the small business sectors, that provide job growth and business expansion.  Some dollars should be targeted directly to the previously established federal “Empowerment Zones” that will attack chronic unemployment in rural and urban communities throughout America.  In addition, they must also agree to monthly reporting requirements.

TARP recipients serving the Massachusetts market like Mellon, Bank of America, State Street, Citi Bank, One United and others need visible and broadly publicized lending programs that are easily accessible by the small business community.  Those TARP recipients like State Street that do not have formal lending units should consider partnering with institutions like Mt. Washington, Tremont Credit Union and other local institutions that have established underwriting programs and familiarity with the intricacies of small business lending.

The Boston Federal Reserve should be encouraged to convene TARP banks, local lenders and small business groups to specifically focus on establishing the proper public policy imperatives and accountability templates for the Massachusetts market.  The accountability guidelines could easily be adapted from the requirements outlined in the Community Reinvestment Act, currently being used by lenders.  The Boston Fed took a strong leadership role a decade ago when it assisted banks in changing their “redlining” policies.  They have the experience and the creditability to once again facilitate the thawing of the credit markets in sectors that will provide job opportunities and business expansion.

As the American Recovery and Reinvestment Act moves through the Senate and ultimately to the conference committee, it should be punctuated with more entrepreneurial   provisions if it is to jump start the recovery and provide the “Street Stimulus” that has been promised.

At the primary contracting level many of the funded sectors, like transportation and science and technology, as examples, are likely to be awarded to very large firms that are not likely to be owned by woman and minorities.  Specific bill language should be encouraged for joint ventures, subcontracting and other strategic business alliances that get contracts to smaller businesses on the “Street Level”.  The Federal bill should be specific about the need for the states to package unbundled contracts to maximize the proposal and bidding opportunities.  Women and minority owned firms must not be left out of this bill.

The vast majority of those ARRA dollars will be pushed through to the local market with the states as the conduit.  Massachusetts is particularly equipped to work with the small business community.  Edith Silva has revamped the State Office of Minority and Women Business Assistance and her agency is a creditable channel for contracting information and outreach to insure an open contracting process.  Andre Porter developed an outstanding record of providing Technical Assistance and financing to the small business community when he worked for the City of Boston.   In his current role as   Executive Director for Small Business and Entrepreneurship for Gov Patrick, he is the perfect partner to join with SOMWBA to help manage the contracting process.  New Patrick appointments Secretary Greg Bialecki (Housing and Economic Development and Secretary James Aloisi, Jr. (Transportation) must set firm accountability goals if this local initiative is to work.

We also have a critical mass of small business intermediaries that know first hand the firms that have the capabilities to perform those contracts.  Women in Construction, Mass Black Business Alliance, Nextstreet, Initiative for New Economy, Women’s Center for Enterprise, New England Minority Contractors Association, New England Minority Purchasing Council, MLK Business Center (Worcester) and the Urban League of Eastern Mass and of Springfield can serve as a valuable partners in helping the state get contracts to “Main Street” throughout the Commonwealth.

Massachusetts is estimated to receive at least $6 Billion Dollars of contract opportunities, not including entitlement expenditures, from the ARRA Bill.  Lenders serving this market will receive billions more from the second round of TARP funds.  For the foreseeable future, the government is the de facto economy and has the power and the delivery mechanism to make certain that both credit and contracts reach the small business community.  President Obama’s promise for accountability, transparency and help for small business can and should be fulfilled in Massachusetts.

Richard L. Taylor

Former Deputy Chairman of the Board of the Federal Reserve Bank of Boston,

Former Secretary of Transportation and

Chairman of the Board of the Urban League of Boston