INITIATIVES TO PROMOTE SMALL BUSINESS LENDING, JOBS, AND ECONOMIC GROWTH HEARING BEFORE THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION MAY 18, 2010 Printed for the use of the Committee on Financial Services Serial No. 111–137 ( U.S. GOVERNMENT PRINTING OFFICE 58–047 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 18:24 Oct 28, 2010 Jkt 058047 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\58047.TXT TERRIE HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California MICHAEL N. CASTLE, Delaware CAROLYN B. MALONEY, New York PETER T. KING, New York LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California NYDIA M. VELA´ ZQUEZ, New York FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina RON PAUL, Texas GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois BRAD SHERMAN, California WALTER B. JONES, JR., North Carolina GREGORY W. MEEKS, New York JUDY BIGGERT, Illinois DENNIS MOORE, Kansas GARY G. MILLER, California MICHAEL E. CAPUANO, Massachusetts SHELLEY MOORE CAPITO, West Virginia RUBE´ N HINOJOSA, Texas JEB HENSARLING, Texas WM. LACY CLAY, Missouri SCOTT GARRETT, New Jersey CAROLYN MCCARTHY, New York J. GRESHAM BARRETT, South Carolina JOE BACA, California JIM GERLACH, Pennsylvania STEPHEN F. LYNCH, Massachusetts RANDY NEUGEBAUER, Texas BRAD MILLER, North Carolina TOM PRICE, Georgia DAVID SCOTT, Georgia PATRICK T. MCHENRY, North Carolina AL GREEN, Texas JOHN CAMPBELL, California EMANUEL CLEAVER, Missouri ADAM PUTNAM, Florida MELISSA L. BEAN, Illinois MICHELE BACHMANN, Minnesota GWEN MOORE, Wisconsin KENNY MARCHANT, Texas PAUL W. HODES, New Hampshire THADDEUS G. McCOTTER, Michigan KEITH ELLISON, Minnesota KEVIN McCARTHY, California RON KLEIN, Florida BILL POSEY, Florida CHARLES A. WILSON, Ohio LYNN JENKINS, Kansas ED PERLMUTTER, Colorado CHRISTOPHER LEE, New York JOE DONNELLY, Indiana ERIK PAULSEN, Minnesota BILL FOSTER, Illinois LEONARD LANCE, New Jersey ANDRE´ CARSON, Indiana JACKIE SPEIER, California TRAVIS CHILDERS, Mississippi WALT MINNICK, Idaho JOHN ADLER, New Jersey MARY JO KILROY, Ohio STEVE DRIEHAUS, Ohio SUZANNE KOSMAS, Florida ALAN GRAYSON, Florida JIM HIMES, Connecticut GARY PETERS, Michigan DAN MAFFEI, New York JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel (II) VerDate Nov 24 2008 18:24 Oct 28, 2010 Jkt 058047 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\58047.TXT TERRIE C O N T E N T S Page Hearing held on: May 18, 2010 ..................................................................................................... 1 Appendix: May 18, 2010 ..................................................................................................... 57 WITNESSES TUESDAY, MAY 18, 2010 Atkins, Hon. Paul, Member of the Congressional Oversight Panel, and former Securities and Exchange Commissioner ............................................................ 13 Brown, Paul, Manager, Capital Markets Development, Michigan Economic Development Corporation .................................................................................... 11 Determan, Jim, Hord Coplan Macht, Inc., on behalf of the American Institute of Architects (AIA) ................................................................................................ 16 Johansson, Hon. Christian S., Secretary, Maryland Department of Business & Economic Development .................................................................................... 10 MacPhee, James D., Chief Executive Officer, Kalamazoo County State Bank, on behalf of the Independent Community Bankers of America (ICBA) .......... 18 Mica, Hon. Daniel A., President and Chief Executive Officer, Credit Union National Association (CUNA) .............................................................................. 15 Sperling, Gene B., Counselor to the Secretary of the Treasury, U.S. Depart- ment of the Treasury ........................................................................................... 8 APPENDIX Prepared statements: Atkins, Hon. Paul ............................................................................................. 58 Brown, Paul ...................................................................................................... 66 Determan, Jim .................................................................................................. 71 Johansson, Hon. Christian S. .......................................................................... 78 MacPhee, James D. .......................................................................................... 85 Mica, Hon. Daniel A. ........................................................................................ 94 Sperling, Gene B. .............................................................................................. 111 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Frank, Hon. Barney: Written statement of the American Bankers Association (ABA) ................. 119 Written statement of Associated Builders and Contractors (ABC) .............. 124 Written statement of ACCION USA ............................................................... 125 Written statement of the Financial Services Roundtable ............................. 126 Written statement of the International Franchise Association (IFA) .......... 129 Written statement of the National Association of Federal Credit Unions (NAFCU) ........................................................................................................ 130 Written statement of the National Association of Home Builders ............... 132 Peters, Hon. Gary: Written statement of the Motor & Equipment Manufacturers Association (MEMA) ......................................................................................................... 142 Written statement of various State Governors .............................................. 144 (III) VerDate Nov 24 2008 18:24 Oct 28, 2010 Jkt 058047 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\58047.TXT TERRIE VerDate Nov 24 2008 18:24 Oct 28, 2010 Jkt 058047 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\58047.TXT TERRIE INITIATIVES TO PROMOTE SMALL BUSINESS LENDING, JOBS, AND ECONOMIC GROWTH Tuesday, May 18, 2010 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The committee met, pursuant to notice, at 1 p.m., in room 2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. Members present: Representatives Frank, Waters, Maloney, Velazquez, Watt, Sherman, Moore of Kansas, Baca, Lynch, Miller of North Carolina, Scott, Green, Cleaver, Bean, Moore of Wis- consin, Perlmutter, Donnelly, Foster, Carson, Minnick, Adler, Kil- roy, Himes, Peters; Bachus, Royce, Biggert, Hensarling, Posey, Lee, and Lance. The CHAIRMAN. The hearing will come to order. We are here today to discuss a very important program which has been forwarded to us by the Administration. The lack of credit available to smaller businesses has been a serious problem in the economy and has concerned the Members here. We have had pre- vious hearings on the subject, one in which blame for that situation was somewhat passed around. We have had arguments that the regulators have been too tough, that the banks have not been will- ing to lend, and that the demand is not there on behalf of the small businesses. We will continue to deal with this. But today, we will hear a pro- posal that should alleviate the situation from all accounts by mak- ing more funding available to the small banks in a way that in- cludes some serious effort to ensure that money is in turn lent. Clearly, getting more funding for small businesses that are ready to expand or that need funding to even stay where they are is a critical part of our number one job right now, which is to continue the recovery. We are seeing the beginnings of a recovery. There have been very encouraging signs, including very good job numbers last week, somewhat obliterated 2 weeks ago by the stock market gyrations. But that is an argument for doing more, not less. I believe the economy has been responding to a variety of public policy initia- tives, in addition of course to the dynamism of the economy itself and the natural countercyclical efforts; as inventory is drained, in- ventory gets restocked. (1) VerDate Nov 24 2008 18:24 Oct 28, 2010 Jkt 058047 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\58047.TXT TERRIE 2 But it is important for us to build on initial successes and not in any way be complacent because there are very serious needs in the economy and we believe this is a very thoughtful approach. I should say at the outset that there is one thing which we under- stand is not here in the bill, and that this is how this will be paid for. There is a CBO score, it is an interesting situation, which CBO tells us I believe that this will cost some money in the first 5 years, but over 10 years, will make money for the Federal Government. That is a factor that we will be keeping in mind. But the bill that we have before us today, which will be marked- up tomorrow and could go to the Floor next week, is, for that rea- son, an authorization. If this bill were to pass unanimously in the House tomorrow or next week, it would not lead to the spending of money until the