Congressional Hearing — The Paycheck Protection Program: Performance, Impact, and Next Steps (Senate, 2021)
Summary
Printed Senate hearing record, S. HRG. 117–154, titled The Paycheck Protection Program: Performance, Impact, and Next Steps, before the Committee on Small Business and Entrepreneurship on March 17, 2021. Chairman Benjamin L. Cardin's opening statement says the COVID–19 programs total over $1 trillion made available for small businesses, and that the Senate confirmed Isabel Guzman as Administrator of the SBA the day before. It describes a deadline at the end of March for PPP applications and an extension that can work within funds Congress already made available. Rand Paul, Ranking Member, gives a separate opening statement. The witnesses include Lisa Mensah of the Opportunity Finance Network and Joel Griffith of The Heritage Foundation.
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- Chrg 117Shrg46626
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“Congressional Hearing — The Paycheck Protection Program: Performance, Impact, and Next Steps (Senate, 2021).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-117shrg46626/
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S. HRG. 117–154
THE PAYCHECK PROTECTION PROGRAM:
PERFORMANCE, IMPACT, AND NEXT STEPS
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
MARCH 17, 2021
Printed for the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
46–626 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
BENJAMIN L. CARDIN, Maryland, Chairman
RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma
MAZIE K. HIRONO, Hawaii TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas
SEAN MOORE, Democratic Staff Director
WILLIAM HENDERSON, Republican Staff Director
(II)
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C O N T E N T S
OPENING STATEMENTS
Page
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland .............. 1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky .................. 4
WITNESSES
Mensah, Ms. Lisa, President and CEO, Opportunity Finance Network, Wash-
ington DC .............................................................................................................. 6
Griffith, Mr. Joel, Research Fellow, Financial Regulations, The Heritage
Foundation, Washington, DC .............................................................................. 17
Hoey, Mr. John K., President and CEO, The Y in Central Maryland, Balti-
more, MD .............................................................................................................. 27
Polumbo, Mr. Brad, Editor, Foundation for Economic Education, Arlington,
VA .......................................................................................................................... 33
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Cardin, Hon. Benjamin L.
Opening statement ........................................................................................... 1
Forefront
Letter dated March 15, 2021 ........................................................................... 52
Griffith, Mr. Joel
Testimony .......................................................................................................... 17
Prepared statement .......................................................................................... 20
Responses to questions submitted by Ranking Member Paul and Senator
Young ............................................................................................................. 68
Hoey, Mr. John K.
Testimony .......................................................................................................... 27
Prepared statement .......................................................................................... 30
Marshall, Hon. Roger
Slides of Weekly COVID-19 Cases, Deaths, and Hospitalizations Reported
in Kansas ....................................................................................................... 43
Mensah, Ms. Lisa
Testimony .......................................................................................................... 6
Prepared statement .......................................................................................... 8
Responses to questions submitted by Ranking Member Paul and Senator
Hirono ............................................................................................................ 63
National Association of Federally-Insured Credit Unions
Letter dated March 16, 2021 ........................................................................... 71
Polumbo, Mr. Brad
Testimony .......................................................................................................... 33
Prepared statement .......................................................................................... 35
Paul, Hon. Rand
Opening statement ........................................................................................... 4
(III)
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THE PAYCHECK PROTECTION PROGRAM:
PERFORMANCE, IMPACT, AND NEXT STEPS
WEDNESDAY, MARCH 17, 2021
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m. in Room
301, Russell Senate Office Building, Hon. Ben Cardin, Chairman of
the Committee, presiding.
Present: Senators Cardin, Cantwell, Shaheen, Booker,
Duckworth, Rosen, Hickenlooper, Paul, Ernst, Young, Hawley, and
Marshall.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
CHAIRMAN, A U.S. SENATOR FROM MARYLAND
Chairman CARDIN. The Small Business and Entrepreneurship
Committee will come to order. Let me welcome those of you who
are in this room, and we know we have members and witnesses
that are appearing through Webex, which is the new reality of the
world we are living in today.
So let me thank first Senator Paul for his help and cooperation
in putting together this first of our oversight-type hearings on the
programs that were put together in response to COVID–19 for
small businesses. It totals over $1 trillion that has been made
available for small businesses, and this Committee has the respon-
sibility to oversight of those programs we are operating. I know
several members of the Committee have raised those questions
about oversight, and this is our first opportunity to hear from pri-
vate sector witnesses who will give us their view on how these pro-
grams are working to date.
I would also like the Committee to know that we anticipate hav-
ing an opportunity next week, with representatives of the SBA
present to answer questions that we may have in regards to the
small business programs, to continue our effort on oversight.
In the meantime, let me also point out to the Committee that
yesterday the Senate confirmed Isabel Guzman as the Adminis-
trator of the SBA, and again I want to thank Senator Paul for ac-
commodating the ability to get that nomination to the floor in an
expedited fashion. So we now have a confirmed administrator. It
was a strong bipartisan vote on the floor, which I certainly appre-
ciate, and I think we are off to a very good start with the SBA.
We have one immediate issue that will be brought to our atten-
tion next week, so let me make sure the Committee members know
(1)
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about that. Many of you have already communicated with us that
we have a deadline coming up at the end of March for applications
for the PPP program. And since December, when Congress acted on
the second round of PPP and some additional eligibilities, there
have been significant challenges that have been placed in admin-
istering the PPP program.
First, the second round of PPP requires different verifications.
There is a need base, so that has to be put into the equation on
the applications that are made for the second round of PPP.
Secondly, we have had a real concern for the self-employed and
those who do not have employees as to the calculations of the funds
they can get under the PPP program, which was recently clarified
by the Biden administration. So we have now some additional ap-
plications that are coming in with the clarification on the formula.
We have had some changes in eligibility under the PPP program,
including what was recently done on the American Rescue Plan.
We had a change in administration. On January 20th we changed
from the Trump administration to the Biden administration. All
that has made it much more challenging for us, for small busi-
nesses, to get their applications processed by the March 31st dead-
line.
It is for that reason that we are looking at an extension. The
good news is that the resources are there. We have been informed
by the SBA that the extension of the deadline can work within the
funds that have already been made available by Congress. This is
not the first time we did this.
Let me remind the members that after the original PPP program
I brought a bill to the floor of the Senate, and Senator Rubio
worked with me on that, with an extension to give more time for
businesses to file for their PPP forgivable loans. Senator Collins
has filed legislation in the Senate. We have bipartisan legislation
to extend that date by two months. The good news, again, is this
legislation was just passed by the House of Representatives by a
415 affirmative to 3 negative vote, overwhelmingly passed by the
House of Representatives.
Today, the Committee has received a letter, signed by 90-some
organizations, in support of a clean extension of the PPP program.
I would just point out that it includes the NFIB, it includes the
Chamber of Commerce, it includes so many other organizations
that are telling us that they need additional time. And the reason
I mention this is I hope that this will clear the hotline and we can
do it by consent as early as next week. If not, Senator Schumer has
told me that we can have four times we may be on the floor next
week in regards to the extension.
I would urge my colleagues to continue in a bipartisan way to
support this extension in a clean manner. We will have opportuni-
ties to look at changes or modifications in the program, and I can
assure you that the way that is going to be done is in a bipartisan
manner, both Democrats and Republicans working together, as we
have throughout the entire development of the programs to help
small businesses.
One year ago today, COVID–19 had just been declared a global
pandemic by the World Health Organization, as well as a national
emergency by the Trump administration, and there were less than
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1,500 reported cases of COVID–19 in America. Soon after it became
clear that the public health measures required to prevent the
spread of the virus would hurt small businesses, so Congress had
a duty to provide support, because our national economy is only
strong when we have healthy, robust small businesses.
Small businesses are our job creators and are responsible for two
out of every three new jobs, and employ almost half of our Nation’s
private sector workforce during the years leading up to the pan-
demic. And they are where innovation happens in our economy.
They are the entities that are figuring out better, more efficient
ways of doing things. But they are not as resilient as larger busi-
nesses, due to the razor-thin margins and low cash reserves.
So we passed the historic, bipartisan CARES Act, which created
the Paycheck Protection Program as well as the EIDL advance
grant program and the Small Business Debt Relief Program. PPP
has played the largest role of all programs, providing more than 7.9
million loans worth more than $700 billion in the past year.
I mention that because I know we all have our individual stories.
I am going to tell you, just this past weekend I went to one of my
favorite local restaurants, and I had a chance to talk to the store
owner. He is a businessperson with less than ten employees. And
he told me that without the help he has gotten from the PPP pro-
gram, and now this restaurant program that has just passed, he
would have had to close his doors. We have kept him open, and he
is a very creative innovator. He has figured out different ways in
order to keep revenue coming into his business. But these pro-
grams have been essential so that these small business owners can
stay in business during the pandemic.
The goal of the PPP was simple: help employers keep their em-
ployees on payroll during the pandemic so our economy can re-
bound more quickly afterwards. During the drafting of the CARES
Act, Senator Shaheen and I knew that while PPP would be a life-
line for small businesses, the program’s reliance on private lenders
would make it less useful to small businesses and black, Latino,
Native, and rural and other underbanked communities that do not
have strong relationships with banks.
So we put a provision in the bill that required the SBA to issue
guidance to banks participating in PPP to prioritize loan applica-
tions for underserved small businesses. Unfortunately, SBA did not
do that, which led the SBA inspector general to issue a report that
found the SBA’s implementation of PPP did not fully align with the
congressional intent in the CARES Act.
That is why Senate Democrats pushed for specific set-asides in
PPP for community development financial institutions, minority de-
pository institutions, microlenders, and other mission-based lend-
ers, each COVID–19 relief bill Congress has passed since the
CARES Act. When Congress replenished the PPP funds in April of
last year, we secured a $60 billion set-aside for mission lenders. In
the bipartisan Economic Aid Act, which passed in December, we se-
cured another $15 billion set-aside for mission lenders, as well as
an additional $60 billion set-aside for the smallest small businesses
with ten or fewer employees.
We pushed for the lender set-asides because CDFIs and MDIs
and other mission lenders have a demonstrated history of getting
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4
capital into the hands of entrepreneurs in underserved and under-
banked communities, as we push for the borrower set-aside, be-
cause we had to ensure the funds would remain available for the
smallest mom-and-pop businesses that cannot afford accountants
and lawyers, so they need more time and assistance to get their ap-
plications together.
I was proud last month when the Biden administration came out
with certain guidelines and made it easier for businesses in under-
served communities to be able to get those loans, by having an ex-
clusive time period and changing some of the rules that would help
deal with the underserved community.
I am proud to share that data from the SBA on the the current
amount of PPP shows that thanks to the Economic Aid Act and
steps taken by the administration we are seeing progress, which in-
dicates that more of the smaller, and more vulnerable small busi-
nesses are receiving loans this time than during the initial round
of PPP.
The historic American Rescue Plan that President Biden signed
into law last week made further improvements to PPP by expand-
ing access to the program to more nonprofits. We have witnesses
today who will talk about that. I know that we have, from Balti-
more, John Hoey, who leads a nonprofit that was unable to access
PPP prior to the passage of the American Rescue Plan, the YMCA
of Central Maryland. So I am looking forward to hearing directly
how important access to PPP will help organizations such as the
Y.
I am also looking forward to hearing from Lisa Mensah, who is
President and CEO of the Opportunity Finance Network, a net-
work of CDFIs, about her members’ experiences with PPP, what
has worked and what has not with PPP, as well as the need to ex-
tend PPP to give borrowers additional time to get their applica-
tions.
So for all those reasons I look forward to hearing from our wit-
nesses. I look forward to hearing from Mr. Polumbo, who is person-
ally present here, who can help us sort out the bill. Joel Griffith,
from The Heritage Foundation, is on, I think Webex.
So we have an excellent group of panelists, and let me now turn
to the Ranking Member, Senator Paul.
OPENING STATEMENT OF HON. RAND PAUL,
A U.S. SENATOR FROM KENTUCKY
Senator PAUL. Thank you, Mr. Chairman. I would like to wel-
come our panel today. Welcome today 367 of 15 days to slow the
spread. Proponents of the economic lockdowns promised it would be
just 15 days to flatten the curve. Instead of 15 days, the lockdown
has now gone on for over a year.
Early on in the pandemic, as we all remember, there were projec-
tions that hospitals would be full and have to turn away people,
medical equipment was in short supply, businesses were closing,
what they hoped would be on a temporary basis as governments
started locking down their economies and telling people to stay
home. At that time, when programs like PPP were created, no one
was under the belief that we would still be doing this a year later,
with no end in sight.
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The PPP program was devised as an emergency stop-gap to keep
businesses running and people on payroll, at their job, instead of
having to be laid off. It has been a year now. The virus is in full
retreat. Hospitalizations are declining rapidly. Vaccines have been
rolling out since December. Instead of touting these incredible suc-
cesses and offering people hope, governments keep moving the
goalposts. Our hospitals are not overcrowded. We do not have PPE
shortages. All the reasons the economy locked down in the first
place are no longer a concern. It is time to reopen our economy.
What we have learned is that this continued stream of money
from Washington has encouraged way too many governors and
mayors to keep their economies closed indefinitely. They stifle their
economies, roll yellow police tape across store shelves and threaten
small businesses with revoking licenses, or worse, then demand
Washington cleanup their mess when the businesses have to shut
down for good. We should demand these elected official stop impos-
ing arbitrary rules and stop illogically picking winners and losers.
We simply cannot keep printing and borrowing trillions of dollars
when the best thing we can do to provide relief now is to simply
reopen the economy.
Congress has spent more than $800 billion on the Paycheck Pro-
tection Program alone, and according to our estimates, we burn
through $3.5 billion a day in taxpayer dollars. In just one year, the
Small Business Administration went from being a million-dollar
agency to nearly a trillion-dollar agency. No agency is equipped for
that kind of exponential growth in such a short time.
Without adequate controls, the program has benefited large,
well-financed businesses, alleged fraudsters and organizations like
Planned Parenthood. Despite the widespread evidence of fraud and
misuse within the PPP, Congress expanded and funded the pro-
gram four times. The President’s recently signed $1.9 trillion pack-
ages provided even more funding for PPP, despite signs of economic
recovery, and many in Congress are discussing yet another exten-
sion of the program past its March 31st deadline.
Meanwhile, the Small Business Administration inspector general
has produced ten reports on the lack of SBA oversight of this pro-
gram. The Department of Justice has charged 184 defendants with
crimes related to PPP fraud, and the Government Accountability
Office has now put emergency small business loans on its high-risk
list, for the first time in history.
Small businesses are thriving in states that have eased restric-
tions. It is clear that there is pent-up demand for Americans to go
back to their normal lives. This is, in many ways, a crisis of Con-
gress’ and governors’ own making.
I look forward to our discussion today on how we can improve
the effectiveness and oversight of the program and how small busi-
nesses get back to business.
Chairman CARDIN. Thank you, Senator Paul.
Our first witness comes to us through Webex, and that is Lisa
Mensah, who is President and CEO of the Opportunity Finance
Network, the Nation’s leading network of community development
financial institutions. Under her leadership, the Opportunity Fi-
nance Network helps CDFIs leverage public funding with private
investment from mainstream financial institutions, socially respon-
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sible investors, and philanthropic partners in distressed commu-
nities across America.
For all of our witnesses, your full statements will be made part
of the record. We ask that you try to summarize your testimony in
five minutes.
Ms. MENSAH.
STATEMENT OF LISA MENSAH, PRESIDENT AND CEO,
OPPORTUNITY FINANCE NETWORK, WASHINGTON, DC
Ms. MENSAH. Thank you. Thank you, Chairman Cardin and
Ranking Member Paul and members of the Committee for the op-
portunity to be here today.
I am here to speak for America’s smallest businesses and the
lenders that matter most to them, community development finan-
cial institutions, or CDFIs. I lead Opportunity Finance Network, a
network of more than 350 CDFIs, working in all 50 States.
The American people saw this past year just how valuable our
Nation’s smallest businesses are to everyone. Ensuring that Fed-
eral relief funds make it to these businesses requires partnership
with lenders that specialize in serving them. It takes CDFIs.
CDFIs know how to quickly deliver responsible capital to Amer-
ica’s underserved businesses, including Paycheck Protection Pro-
gram loans. Through the Paycheck Protection Program, Congress
said to these businesses, ‘‘You matter,’’ and the program also
showed just how much lenders matter to these businesses.
It is well-documented how the first round of PPP missed many
of these underserved businesses, in part because it missed their
lenders, CDFIs. An OFM has testified before this Committee about
the challenges that CDFI faced in the early days of the program,
and Congress listened.
I especially want to thank this Committee and Chairman Cardin
for all of your work to reform the PPP as part of last December’s
COVID relief bill. Our industry is encouraged by your recognition
that CDFIs are best positioned to drive PPP to businesses owned
by people of color, businesses owned by women, and many under-
served by the mainstream financial markets.
And SBA heard us too. They prioritized the needs of these small
businesses in the second round. During the first week of the most
recent PPP round, the agency only accepted PPP applications from
community financial institutions, including CDFIs, and this was a
welcome improvement from the CDFI experience in the earliest
months of the original program.
And while there were real challenges in the rollout, CDFIs and
other small lenders made more than 60,000 PPP loans, totaling
more than $5 billion, and these loans helped small businesses like
Alcantara Driving School in Silver Spring, Maryland. The CDFI
Latino Economic Development Center provided two PPP loans, to-
taling $35,000, to help the Latino-owned business stay afloat after
devastating revenue losses during the pandemic.
We also saw the SBA’s new calculations for the self-employed
and smallest businesses, and these changes will help many minor-
ity businesses qualify for more funding.
I am so pleased to see CDFIs helping PPP reach more under-
served small businesses, but our work is not finished. We need
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more time, and we need more help from Congress for the Paycheck
Protection Program to realize its full promise.
So we have two recommendations for PPP. First, extend this pro-
gram to May 31st. Congress needs to move quickly to adopt the
PPP Extension Act of 2021 and to give more businesses the chance
to get access to this important program. And second, make retro-
active the new income calculations. The changes to income calcula-
tions for the smallest businesses, sole proprietorships often, were
an important policy change.
For example, the CDFI HOPE Enterprise shared that a Black
woman-owned boutique in Alabama qualified under the old rules
for a PPP loan of about $7,500, but with the changes she qualified
for a loan of more than $22,000. But the new rules only apply to
PPP loans made after March 3rd, so for those businesses that al-
ready received PPP loans, we need retroactivity so that they too
can benefit from the change.
I see PPP as critical emergency relief, yet for the American econ-
omy to rebound and flourish, small businesses need more than
PPP. They need responsible loans, credit enhancements, and work-
ing capital.
So let me close on next steps. First, Congress must direct the
SBA to make CDFIs central to its strategy. The inability of SBA’s
core programs to reach underserved communities was never accept-
able, and it cannot continue. The SBA need to fully rethink how
to reach underserved businesses in its entire suite of programs, not
just PPP and not just the Community Advantage and microloan
programs.
And second, Congress must double down on its efforts to
strengthen the financial institutions who are providing responsible
finance in low-wealth markets. And this can be done by providing
$1 billion in annual appropriations for the CDFI fund.
Congress and the American people have pulled together to help
America’s small businesses during this painful crisis, and right
now Congress can take steps to build a stronger and more inclusive
economy for the long term. CDFIs are pivotal to this work, and I
urge Congress to invest in the institutions that are here, on the
ground, in our rural, urban, and native communities. Your invest-
ment in CDFIs tells our smallest businesses that they matter today
and tomorrow.
Thank you so much.
[The prepared statement of Ms. Mensah follows:]
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Chairman CARDIN. Well, thank you very much for your testimony
and for the work that you do in underserved communities.
Our next witness is coming to us through Webex, Joel Griffith,
who is currently a Research Fellow for the Institute for Economic
Freedom and Opportunity at The Heritage Foundation. He pre-
viously worked as a researcher for a former member of The Wall
Street Journal editorial board.
Mr. GRIFFITH.
STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINAN-
CIAL REGULATIONS, THE HERITAGE FOUNDATION WASH-
INGTON, DC
Mr. GRIFFITH. Thank you, Chairman Cardin and Ranking Mem-
ber Paul and other members of the Committee for this opportunity
to testify today. This testimony will provide an overview of the eco-
nomic calamity that has been impacting our Nation stemming from
the COVID–19 shutdowns, the varied strength of the economic re-
covery from state to state, small business lending conditions, and
the Paycheck Protection Program, of course, PPP.
Beginning in March of last year, our Nation witnessed an his-
toric plunge in economic output. For the first time in our Nation’s
history, governments across the country intentionally suppressed
the supply of goods and services. Likewise, restrictions on con-
sumer activity artificially suppressed demand. The Federal Govern-
ment borrowed, printed, and spent trillions of dollars in an effort
to cushion the economic downturn. But it is really the government-
mandated closures that are now deterring investment and sup-
pressing economic activity in parts, but not all, of the country.
In the weeks following the onset of the pandemic, some Federal
Government aid to businesses impacted by shutdown orders was
justifiable, but after a year, we know that serious problems exist
with PPP. It has been inefficient, untargeted, and ineffective, and
we know that those areas of the Nation that have reopened are
now experiencing an economic boom, a far, far stark difference
compared to New York City and L.A.
The small business loan problem has been ineffective at boosting
employment. Three initial assessments of PPP found that the pro-
gram cost between $109,000 and $380,000 per job saved. On the
other hand, the economic resurgence in Quarter 3 of 2020, even as
PPP payments declined, underscores how reopening can rapidly re-
pair economic damage.
Unemployment rates and business conditions vary wildly across
the Nation, and that is dependent largely on the restrictions that
some governors and mayors continue to impose on society. State
and local policymakers oversee decisions that affect businesses’
abilities to operate, and they should assume the potential costs of
new and ongoing businesses, school, and other closures that they,
on the state and local level, impose. States with the most restric-
tive economic policies are the ones that are suffering the largest
business and employment losses.
Federal taxpayers should not continue to subsidize state and
local decisions to shutter businesses and ruin livelihoods. Con-
tinuing this PPP program moves the costs of overly restrictive
shutdowns to Federal taxpayers and it allows governors additional
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latitude to keep society shuttered with one-size-fits-all policies.
Targeted, temporary, and local economic restrictions may be nec-
essary, but those decisions, and the costs that they incur, should
be weighed by the responsible policymakers on the state and local
level. PPP continues to incentivize state and local policymakers to
continue destructive shutdowns and allows them to shirk their re-
sponsibility.
PPP continues to be troubling in other ways as well. It was in-
tended to assist businesses impacted by the pandemic, but often it
benefits well-funded and well-connected nonprofits. In New York
City, millions in government loans, some of which are forgivable,
flowed to entities such as the Philharmonic, the Vivian Beaumont
Theater, and the School of American Ballet.
Left unsaid in all this is the fact that quarterly charitable giving
actually rose by 2 percent in 2020, compared with the year prior.
Private individuals and businesses are generously contributing to
nonprofits that are aligned with their own objectives and personal
beliefs.
Extensive fraud in PPP continues to stretch law enforcement. A
few noteworthy investigations include a Brooklyn individual who
took $2 million in loans by claiming to employ 50 people, and then
spent the proceeds on luxury items. The same instance occurred in
the San Fernando Valley with a fraud ring using $18 million in
PPP proceeds to do the same.
Small businesses are actually being serviced by the credit mar-
kets. It is a misnomer that credit markets are not providing suffi-
cient funds. Most small businesses are saying they are generally
not looking for more credit. Only 3 percent of respondents in a re-
cent NFIB survey reported that borrowing needs are not satisfied.
Small business credit conditions in December, based on the per-
centage that are reporting easier lending conditions versus harder,
were identical to conditions one year prior. Obtaining financing is
the reported top concern of just 1 percent of small businesses own-
ers.
What we know is that the reopening economy is what is saving
small businesses. Real economic recovery does not stem from stim-
ulus checks or bailouts, and it does not stem from PPP. It is largely
a result of individuals and businesses at last being allowed to le-
gally interact with each other. The historic rebound of the summer
proves that those who were properly informed of the actual risks
of the virus are enthusiastically participating in the reopening. Na-
tionally, economic growth in the third quarter smashed all records,
even as government transfer payments declined by 20 percent.
The bottom line is that the pace of the recovery varies according
to lockdown restrictions. The Federal Reserve State Coincident
Index estimates State GDP, and it illustrates how variant this re-
covery is. At the end of 2020, economic output in eight states was
actually larger than the year prior, states such as Georgia and
Utah, which did not endure crushing, long-lasting shutdowns.
Meanwhile, places like Hawaii, Michigan, Rhode Island, and Mas-
sachusetts are 10 percent smaller than they were before.
The same can be said for unemployment rates. A number of
states have unemployment of 4 percent or less. These are states
that have reopened. Meanwhile, states like Connecticut, Nevada,
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New Mexico, New Jersey have unemployment rates nearly twice
the rates in those states that have reopened.
Businesses across parts of the Nation certainly face economic
hardship as a result of the myriad COVID–19 restrictions that are
still in place in some local governments. Resolution requires gov-
ernors and mayors to permit people to once again freely create,
work, shop, and engage. The misery, economic misery, persistent
across portions of the Nation should not be used by Congress as an
excuse to further expand government control over the financial sys-
tem and credit allocation. Any additional Federal relief measures
should provide legal protections for businesses to reopen and tailor
any additional aid to meet the health crisis.
Thank you for having me today.
[The prepared statement of Mr. Griffith follows:]
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Chairman CARDIN. Thank you, Mr. Griffith. I appreciate your
testimony.
We will now go by Webex to John Hoey, who is the President and
CEO of the YMCA of Central Maryland. Prior to the Y, John
worked in the private sector across four different industries while
also volunteering his time in the community. John has been recog-
nized for his leadership on many occasions, including as an Ernst
& Young Entrepreneur of the Year and one of the Maryland
Innovators of the Year.
Mr. HOEY.
STATEMENT OF JOHN K. HOEY, PRESIDENT AND CEO,
THE Y IN CENTRAL MARYLAND, BALTIMORE, MD
Mr. HOEY. Thank you, Chairman Cardin, Ranking Member Paul,
and the Committee for inviting me today to talk about an incred-
ibly important issue that has been little understood or discussed
since the COVID pandemic hit early last year. Let me first start
by thanking, in particular, Committee Chair Senator Cardin of
Maryland for his steadfast focus on ensuring that the American
Rescue Plan Act of 2021 included long overdue relief for large non-
profits, which have been, for some reason, shut out from all of the
previous relief packages, and in many cases have been pushed to
the brink of bankruptcy while doing some of the most important,
essential work to support those most in distress during these past
12 months.
I have the privilege of being the CEO of the Y in Central Mary-
land, one of the largest and longest-operating community service
organizations in the greater Baltimore region. We are also one of
the largest YMCAs in the country. Prior to COVID, our organiza-
tion served over 300,000 central Marylanders through a wide vari-
ety of programs and services that focus on healthy living, youth de-
velopment, and social responsibility.
While the Y may be best known for our large buildings that
bring individuals, families, and communities together, we are also
our region’s largest early childhood and Head Start provider, the
largest provider of after-school enrichment, mentoring, summer
camp, and community school programming. In short, we are the
largest youth-serving organization in the region and have a pro-
found impact on the well-being of young people and their families.
What you should also know is that we were one of the largest em-
ployers in our region, with over 2,700 people on our payroll.
As someone who worked in the private sector before being re-
cruited to do this work in 2006, I appreciate the incredible unique-
ness and strength of the Y’s overall business model. Over 70 per-
cent of our revenue, prior to COVID, came through ‘‘earned rev-
enue,’’ meaning the membership and program fees that people pay
us to participate in the Y’s programs and services. The remainder
of our revenue comes from Federal and private grants and dona-
tions. The diversity of our business model allows us to operate at
scale and to be in the unique position to connect people and fami-
lies across the economic and social spectrum to opportunities that
smaller organizations focused on only one thing or one small com-
munity could not imagine doing.
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In other words, scale matters, and at the Y we leverage that
scale for the good of our community in more ways than I have time
to describe here.
Unfortunately, when COVID hit and we were forced to close most
of our programs and buildings we operate, our scale and earned
revenue model worked against us. As we have now lost 50 percent
of our members, shuttered most of our school-based operations, and
had to run through a dizzying array of local and state requirements
that changed sometimes daily, we also became the State of Mary-
land’s and local municipalities’ go-to organization to quickly spin
up a wide range of services for thousands of people who were most
deeply impacted by COVID.
For example, the state’s behest, we quickly opened 15 Y sites to
care for over 800 children of essential workers so their parents
could care for others. Partnering with food banks and others, we
launched a massive food distribution operation, with over 500,000
meals distributed to date. We made thousands of ‘‘care calls’’ to
seniors who are members of ours and others at risk for isolation
during the shutdown.
We were able to keep our over 1,000 Y Head Start families and
children learning and well supported through virtual learning and
family engagement. We quickly pivoted our mentoring work for
over 600 youth to a virtual format, to ensure that those young peo-
ple still had a caring adult to interact with. With schools closed
and parents in need, we opened 20 Y Academic Support Centers to
provide safe, in-person school support to help children and parents
successfully navigate virtual learning.
We did all this while having to eliminate over 1,000 of our 2,700
jobs at all levels of the organization, cutting salaries for all Y man-
agers, and burning all of our available cash in the bank.
We did all of this because that is who we are and what our com-
munity expects us to be, but we did it despite being shut out of the
PPP program. While so many worthy small non-profits received
PPP funds, even though their fundamental business model was un-
affected by the pandemic, we were left to almost bleed out for the
‘‘sin’’ of having over 500 employees and the audacity to operate at
scale across the region. Our operating revenue for 2020, expected
to be around $92 million, was down over $20 million last year, and
is projected to be down $25 million from that number this year. We
have spent all of the cash we previously had on our balance sheet
and we are now using our line of credit to fund operations.
After 167 years of serving this community, it is really hard to un-
derstand why Congress failed to help us until the American Rescue
Plan Act was passed just last week. On behalf of the Y and this
community, I am deeply appreciative that the President made this
legislation his first priority, and that enough Senators understood
the essential role that larger non-profits play in this country.
For our Y, we anticipate that we will be eligible for around $8
to $9 million from the Payroll Protection Program. That means
that we will likely not have to go any further into our line of credit
to fund operating losses this year, as we ramp back up to hopefully
being cash flow positive again by year-end.
I am concerned, however, that the deadline for accessing the pro-
gram remains March 31st. After being shut out for the past year,
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it is unreasonable to ask organizations that were heretofore ineli-
gible for the program to file their applications within two weeks.
I can also tell you that the banks that we are talking to right now
have told us that the SBA will not have processes in place for large
nonprofits to apply for PPP for at least two weeks. So we are look-
ing at potentially getting shut out yet again. I think a three-month
extension is not only warranted, but owed to all of us after what
we have been through this past year.
Thank you again for the opportunity to speak to you today, and
thank you to Senator Cardin and those who understood how criti-
cally important large nonprofits are to their communities and to
helping our country survive this past year.
[The prepared statement of Mr. Hoey follows:]
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Chairman CARDIN. Thank you, Mr. Hoey. We will now go to our
fourth witness, who is here in person, Brad Polumbo, who is a jour-
nalist and opinion editor at the Foundation for Economic Edu-
cation. He was previously a media and journalist fellow at the
Washington Examiner, and an editor at the media nonprofit,
Young Voices.
Mr. POLUMBO.
STATEMENT OF BRAD POLUMBO, EDITOR, FOUNDATION FOR
ECONOMIC EDUCATION, ARLINGTON, VA
Mr. POLUMBO. Chairman, Ranking Member Paul, members of the
Committee, thank you for the opportunity to testify here today. I
am an editor at the Foundation for Economic Education, where I
conduct policy reporting and analysis, and I have been doing this
for several years now, but this week was the first time that tears
flooded my eyes when I reported a story.
I was reporting an interview that the Associated Press did with
doctors across the globe, warning that lockdown orders are leading
to an international epidemic in child suicide.
‘‘We are very surprised by the intensity of the desire to die
among children who may be 12 or 13 years old,’’ a French doctor
said. ‘‘We sometimes have children of 9 who already want to die.
It is a genuine wish to end their lives,’’ this doctor told the AP. And
he told the AP that the number of youth suicide attempts his hos-
pital sees in a month has more than doubled amid pandemic re-
strictions.
Here in the U.S., the Centers for Disease Control reported that
25 percent of young adults considered suicide during the COVID
lockdowns, while overall mental health issues appear to have
spiked as well. CDC data show a 24 percent increase in emergency
room mental health visits for children ages 5 to 11, compared to
2019. Among adolescents aged 12 to 17, that increase is 31 percent.
The spike in depression and suicidality triggered by the social
isolation of pandemic lockdowns is most certainly not what pro-
ponents of the restrictions intended. But as Henry Hazlitt wrote in
Economics in One Lesson, responsible policymaking requires us to
look beyond intentions and immediate effects. It means taking into
account a policy’s indirect consequences and its collateral damage.
And sweeping government interventions tend to be plagued by un-
intended consequences, sometimes lethal ones.
There has been perhaps no more dramatic example of this
lethality than the unintended consequences of pandemic lockdowns.
Government officials took drastic, unprecedented steps of closing
businesses en masse, criminalizing citizens’ livelihoods, and essen-
tially placing healthy Americans under a form of house arrest. The
lockdowns and restrictions have been normalized, but they are not
normal.
My colleagues and I at the Foundation for Economic Education
have spent the last year chronicling the myriad ways that COVID
lockdowns have led to unintended consequences. The aforemen-
tioned mental health crisis is only one of many that have emerged
as a result of these unprecedented government restrictions. We
have also seen an enormous uptick in addiction and drug
overdoses. According to the CDC, over 81,000 drug overdose deaths
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occurred in the United States in the 12 months ending in May
2020. That is the highest number of overdose deaths ever recorded
in a 12-month period.
Now the full data will take years to analyze, but state and local
level examples of this tragic trend are too numerous to list. Mean-
while, an analysis from the National Commission on COVID–19
and Criminal Justice found that domestic violence spiked 8.1 per-
cent after lockdowns. The study’s author said that this figure is, if
anything, ‘‘a floor, not a ceiling.’’ It is an underestimate.
None of this even touches on the economic devastation wrought
by government pandemic lockdowns. According to the business
website Yelp, 60 percent of the 163,735 businesses that used the
website which have closed will never reopen. Small businesses, in
particular, have been hit hardest by COVID pandemic lockdowns.
More than 100,000 small businesses permanently shuttered last
year, while polling shows that 60 percent of small business owners
worry that their business will not survive until June 2021.
From mental health to drug overdoses to domestic violence, the
immeasurable economic and social damage that lockdowns have
wrought cannot be made whole by any amount of welfare, by any
amount of stimulus payments, or by any amount business grants.
Lockdowns and continued pandemic restrictions are what is crush-
ing the American spirit and the American economy. Neither the
Paycheck Protection Program nor other fraud-rife and inefficient
Federal band-aids can heal this ailment.
Policymakers who continue to perpetuate lockdown policies and
heavy-handed pandemic restrictions must discover the humility
necessary to see that their sweeping actions have consequences be-
yond their control, beyond their understanding, and beyond their
intentions. Until they do, millions of Americans will continue to
suffer silently. Thank you.
[The prepared statement of Mr. Polumbo follows:]
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Chairman CARDIN. Thank you very much for your testimony. We
will now go to five-minute rounds for questioning.
Mr. Hoey, let me start, if I might, with you. You point out the
challenges that you have in navigating the program, that you were
not eligible, now you are eligible. Let me make it even a little bit
more complicated for you. The law requires you not only to file an
application by the end of the month, you have to have it acted on
by the end of the month by the SBA, so it makes it even more chal-
lenging. And as you know, there are certain requirements that
have to be verified, under certain order process, before a forgivable
loan can be approved.
I also want to underscore the point on nonprofits and then give
you a chance to sort of talk about how important it is to extend
the program beyond the March date, and that is, according to
Johns Hopkins University, which is really the premier organization
for reliable statistics in regards to COVID–19, they have reported
that the nonprofit employment number is down about 1 million as
a result of COVID–19, just underscoring the point that you said,
the financial challenges in the nonprofit sector.
So I know you are active within the nonprofit community. How
critically important is it for nonprofits, but as well as other small
businesses, the change in the standard for the self-employed to be
able to calculate how much they are entitled to? How important is
it for us to extend that date?
Mr. HOEY. I think it is essential. We are fortunate to have a real-
ly talented CFO, and we are doing our best. We also are reaching
out to as many banks as we can. And I can tell you, I was just on
a call this morning with colleagues of mine across the country, and
the level of confusion, the different information being provided by
different banks, which I do not think are intentional but there is
just a level of confusion, given this bill was just passed last week.
The SBA still is trying to set up its protocols for handling organiza-
tions which admittedly they do not typically administer programs
for.
And at the end of the day, I am convinced that most worthy and
large not-for-profits will get shut out yet again if the extension is
not granted. I just do not think it is reasonable. You know, this,
to me, should not be a partisan issue. It should simply be a prac-
tical issue of, you know, can you do something this quickly, within
two weeks’ time, that requires, you know, a bank and a Federal en-
tity to coordinate? I do not really think so. I do not think so at all.
So I think it would be a grave mistake not to extend the period
for 90 days. I think a lot of large nonprofits still do not even know
they are eligible, quite frankly. That is another issue.
Chairman CARDIN. And we have got to get that information out.
I understand that.
Ms. Mensah, let me turn to you, if I might in regards to how ef-
fective the targeting of funds, or walling off for the CDFIs or for
the small of the small businesses. Do we have a structure in place
that gives us a better chance of reaching the underserved commu-
nity? We know there is a challenge to start off with, with lack of
banking relations with a lot of the small businesses located in un-
derserved communities, but have the changes that we have made
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in the program over this past year been helpful, and what addi-
tional changes do you think we need?
Ms. MENSAH. The changes were incredibly helpful, Senator
Cardin. This was a powerful change. You listened to the CDFIs.
You listened to the businesses in your communities. So the changes
made sense. The changes are working.
What we must do is extend this deadline, and what you propose
is a sensible extension, an extension to May 31st for the program
and two months for the agencies and the lenders to do the back-
office paperwork after that. That is the sensible change we need,
and it will make a difference.
And if I can also say, this income calculation that you made a
change, it is a very sensible one. But like what Mr. Hoey spoke to,
we need retroactivity. It came very late. So we need to be able to
capture more businesses, and there is precedent for this. Congress
made a similar income calculation for PPP loans to ranchers and
farmers, so we have done this before. We listen to our constituents
and to our fellow Americans who are hurting.
So I simply urge you—you got it right. Let’s give us time to make
this work and heal these businesses and our economy.
Chairman CARDIN. Thank you. Senator Paul.
Senator PAUL. Mr. Polumbo, thank you for reminding us, you
know, of the children who have suffered from these lockdowns. I
agree with you. I do not think anybody intentionally wanted more
children to kill themselves, to have more teenage suicide, but it is
an unintended consequence and I think no one is really pushing
back and saying it does not have something to do with the isolation
kids are feeling from being at home and cooped up and not able to
go to school.
It would be one thing if people could say, well, the locked saved
a million lives. Instead, I think it is very hard to look at objective
evidence that says the lockdowns have saved any lives. And this
will be debated for some time to come, hopefully with less emotion
and with more objectivity.
You mentioned Henry Hazlitt and the idea that responsible pol-
icymaking looks at immediate intentions but also at ultimate con-
sequences, unintended consequences. Bastiat referred to this as
sort of the seen and the unseen. It is very easy to see the PPP pro-
gram. Someone gives you a whole bunch of money and you buy
something or you keep your employees employed for three months
and you see the seen. The unseen is what happens to so much debt
and so much borrowing over time. Can you describe your opinion
as to what will happen and what are the risks of borrowing $6 tril-
lion over a two-year period?
Mr. POLUMBO. Yes, Senator Paul, and thank you for the ques-
tion. I can speak to this as somebody who will be paying off this
debt the rest of my life, in my 20s. We just have spent a total of
$6 trillion, in total, on COVID relief, though according to
PolitiFact, 90 percent of the last bill was not directly related to
COVID–19. Now that money will hang over my generation the rest
of our lives, and future generations in the form of decreased eco-
nomic growth and opportunity, higher taxes every year just to meet
the interest payments, and if interest rates go up anywhere close
to historical norms, that will become an enormous expense on us.
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So when we are talking about expensive programs, expensive
government programs, we have to see clear proof that they have
worked, if we are going to argue that they should be reiterated in
future iterations. And when it comes to the Paycheck Protection
Program and many of these other stimulus efforts, that evidence
just simply is not there.
An MIT economist found that the Paycheck Protection Program
only preserved roughly 2.3 million jobs in its first iteration. That
came out to $224,000 in taxpayer expenditure per job preserved.
That, for members of my generation who will be paying the con-
sequences the rest of our lifetimes, is not a fair tradeoff.
Thomas Sowell said this, the famed economist. ‘‘There is only
tradeoffs in policy.’’
Senator PAUL.
[Inaudible.] I do not know if you heard me because of my micro-
phone. Mr. Griffith, do you hear me now?
[No response.]
Senator PAUL. All right. I will direct that question to Mr.
Polumbo then. Of the trillion dollars that is still left in the pipe-
line, do you think we would be wiser to be looking at how that
money can be spent and will be spent rather than adding another
$2 trillion?
Mr. POLUMBO. Yes, it is disturbing to me that we are pouring
more Federal money out the door like candy on Halloween before
even eating what we have already doled out. I just find the way
that this was done, in terms of sending money out, in response to
an emergency it is understandable, but it was done with very mini-
mal verification requirements, leading to enormous fraud problems.
Here is what The Wall Street Journal reported. ‘‘The Federal
Government is swamped with reports of potential fraud in the Pay-
check Protection Program. Evidence is growing that many took ad-
vantage of the program’s open-door design. Banks the government
allowed companies to self-certify that they needed the funds, with
little vetting. A Federal watchdog within the Small Business Ad-
ministration said there were strong indicators of widespread poten-
tial abuse and fraud. They have counted tens of thousands of com-
panies that received PPP loans for which they appear to be have
been ineligible,’’ The Journal reports, ‘‘and tens of thousands of or-
ganizations also appear to have received more money than they
should have, based on their head counts.’’ And this is just one of
the many COVID programs.
So we have already allocated so much money but we have not
fixed the glaring problems with how it is being spent, so to me it
is irresponsible that taxpayer resources go and send much more out
the door.
Senator PAUL. Thank you.
Chairman CARDIN. Senator Cantwell.
Senator CANTWELL. Thank you, Mr. Chairman. You know, I find
this last point interesting just because, you know, when the first
PPP checks went out, during the Trump administration, there
clearly were problems. And we did not hear too much about it other
than people were concerned and that we should do something. And
then when we were getting to the next round, which also was bi-
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40
partisan, people heeded some of the problems and made some cor-
rections. But it is not as if this problem is just now here.
And the other thing that we tried to is each round of PPP fund-
ing we have actually not done a good job of reaching some commu-
nities. So each time we have improved on the PPP program with
changes to say that we are trying to reach those who just did not
have a banker on speed dial. And when I think about putting small
business dollars out the door, I am glad that we have made the ef-
fort, particularly on CDFIs, to make sure that—and listen, I know
some people who actually had bankers on speed dial and still did
not get PPP money.
So, look. This is an issue about getting access to capital, which
is really the fundamental issue of this Committee overall, I think,
is working with SBA and making continued improvements so ac-
cess to capital reaches more people. Why? Because when women
and minorities get access to capital, half of the population, they ac-
tually help build the economy for the future.
So I want to bring up Tribal communities, and this is for Ms.
Mensah. Tribal and Native-owned small businesses continue to be
on the underserved list. They face real challenges in getting
COVID relief. The Biden administration, I believe, needs to focus
on this, because they have been hard-hit by the pandemic. Lenders
have denied Paycheck Protection Program loans to some Native-
owned small businesses because they do not meet the SBA lending
documentation requirements, that is, that Tribal businesses do not
file a tax return because they do not have to, under their treaty
rights, they do not have an employment identification number, and
most are operating on cash basis and do not have the same kind
of banking or internet systems.
Yet they are a part of our economy. Native businesses have
been—we have 20 federally recognized Tribes in the State of Wash-
ington. They participate in treaty-right fisheries. The Lummi Na-
tion alone, just one of our Tribes, has over 470 registered vessels
that provide over 1,175 jobs in the fishing area. So this is very big,
important businesses for us in the north part of our State.
So the Lummi CDFI was able to help a very limited number of
Native fishermen get PPP loans, and my staff were told that a ma-
jority of Tribal fisherpeople and other Native business owners who
applied on their own at local banks were either denied by the SBA
PPP loans or did not have the technical support on their admis-
sions.
So my question is to you, Ms. Mensah. The Recovery Act plan
that was signed by President Biden last week contains $175 million
for community navigator pilot programs to better reach under-
served communities, including Tribal communities. The Native
CDFIs, like the Lummi CDFI, have been essential. What should we
be doing to make sure that the navigator pilot program reaches
more of these businesses, and what resources do the CDFIs have
to help with these lenders, to make sure that these Tribal records
help to bridge the gap here?
Ms. MENSAH. Thank you, Senator Cantwell, for your question
and for raising the issue of Native communities and Native CDFIs.
There are 70 Native CDFIs. The Lummi CDFI that you mentioned
is an OFN member, as is the Northwest Native Development Fund
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41
in Washington. They get up every morning to help their Native
communities and these Native businesses.
You have come a long way already, and I praise the Committee
and the administration for its inauguration of the community navi-
gator program. We expect to see great things out of that program,
but frankly, CDFIs have always played the navigator role. We are
capital-plus. We always work with our communities. So strength-
ening CDFIs, which you can do through that program but also
through what we have called for, is an increased appropriation to
the CDFI fund. That will strengthen the effects of the money of
CDFI and others to reach our native communities.
What we learned in this pandemic is that it revealed historic in-
equalities and the ongoing inequalities. And when we push, with
your help, the SBA to pay attention to all businesses, we are going
to get the thriving economy that we need.
So I have thanks for what you have done, I have great hopes for
the navigator program, and I think the more we double down on
our CDFIs and their ability to provide technical assistance, and
capital, we will see all communities prosper.
Senator CANTWELL. Thank you. Thank you, Mr. Chairman.
Chairman CARDIN. Next we hear from Senator Marshall, who
will be followed by Senator Booker on Webex.
Senator MARSHALL. Okay, Chairman. Thank you. Thanks for
having me today. My first question is for Ms. Mensah. I am very
proud of the Paycheck Protection Program. I think it is one of the
best programs the Federal Government has ever ran out. I am
proud of my community banks, the commercial lending institutions,
credit unions, the SBA, how they worked together. Kansas alone
saved 600,000 jobs, 50,000 loans, and 600,000 jobs.
I knew, from any type of a crisis, though, that minority-owned
businesses would have the hardest access to capital, that that
would be a challenge, and I specifically worked with my staff, and
I worked with the lending community, and I worked with the local
Chambers and especially the minority Chambers in some of the
more distressed counties, and said, ‘‘This is a priority. What can I
do?’’
And the first round, sure enough, there was a lot of concern, and
then the second round happened, and I went back to those same
people and said, ‘‘How are things going?’’ And they said, ‘‘Oh, we
think it feels better. We think it is better.’’ I said, ‘‘Well, that is
nice, but I need to see the data.’’ And here we are, a year later,
and I am looking at data from NAICS details from my particular
State and trying to figure out, did we help minority-owned busi-
nesses or not?
And the data I have got here, percent of total loans, 76 percent
are unanswered. So we do not know if they were from Black Afri-
can Americans, Hispanic, Asian, or White. Seventy-six percent of
the loans we do not know who they went to. And I went to the na-
tional data as well, and 87 percent are unanswered.
So I guess I do not know. How did we do with minority loans,
and can you give me any help understanding? Is there data out
there that proves, that shows we are doing a good job?
Ms. MENSAH. Senator, thank you for your interest and for your
concern with our minority businesses. That is the kind of concern
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that helped our CDFIs and our local banks, credit unions, to get
this done.
Thankfully, the new administration is putting more focus on ac-
counting and reporting. We are hearing more. We, at CDFIs, did
not originally get easy data from the SBA, and we are getting more
now. So I know you will have opportunities to bring in the SBA
staff and hear more.
There is no question we lost businesses, but there is also no
question that are poised to double down on helping minority busi-
nesses recover, and that is what these new resources are doing.
Senator MARSHALL. So do you have good data that you could
share with me or send to us, to show us how we did in my State
with the institutions that you are responsible for, that work with,
what percentage of the loans went to minority businesses? I am
trying to figure out how do we measure success.
Ms. MENSAH. Yes. I think we have to look countrywide, state-
wide, but I will be happy to share with you what we have. But we
also received that data from the SBA itself. I will share with you
from my numbers. We have 350 members. About 50 of them did
PPP, and most of them were helping in this navigator role.
Senator MARSHALL. Someone smarter than me once said if you
cannot measure it, you cannot manage it. But thank you so much.
My next question for Mr. Polumbo. You know, I am sad that here
we are a year later, it is going to take someone like you to have
to show us what I intuitively knew, and Dr. Paul knew as well,
that shutting down the economy, shutting down schools, shutting
down society was going to create a mental health crisis. And the
records bore out—increased depression, suicide, substance abuse,
overdose, domestic violence—that shutting down the economy,
shutting down society would create all these.
And I was always especially concerned about youth suicides. You
know, going back to last April, I said that more children would die
from suicides and substance abuse than the virus. We already
knew by then that this virus was not especially virulent to chil-
dren. And I thought that there was a safe and responsible way to
keep our kids in school, and certainly by August I think there was
enough data to prove that as well.
You know, I just want to submit for the record, in Kansas, what
the COVID cases are doing. The hospitalizations are going down.
I mean, we certainly are close to herd immunity. If I could submit
these for the record, please.
Chairman CARDIN. Without objection, they will be part of the
record.
[Slides submitted by Senator Marshall follows:]
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Senator MARSHALL. So we knew that these consequences would
be unattended but they were totally predictable. What would your
plea be to teachers, and thank you to the teachers that are helping
us at our schools. What would your plea be to the teachers that are
refusing to go back and teach?
Mr. POLUMBO. Well, I would say that there are many great
teachers in this country, but teachers’ unions have been a per-
nicious force to fight to keep schools closed, and data consistently
shows, studies consistently show that schools are not dangerous, if
proper precautions are taken, and they have demonstrated the
achievement gap this will create for this generation of children. We
will have a generation of lost children, to some extent, who will see
lower incomes, according to McKinsey analyses, of thousands of
dollars a year, with higher gaps for African American and Hispanic
children. This damage will follow them for the rest of their lives.
Senator MARSHALL. Thank you so much, and I yield back.
Chairman CARDIN. Thank you. Senator Marshall, I just really
wanted to point out that under the leadership of Chairman Rubio
I joined him in asking for that type of granular information on the
PPP loans. We were not alone. The inspector general of GAO also
wanted to get that information. And for reasons that we would not
accept, they did not have that granular information when the pro-
gram was first implemented. We are now getting better informa-
tion. We now know the sizes and where they are going. So we do
have better information, but I join you in wanting to see the granu-
lar information. We are going to get that for the Committee.
Senator MARSHALL. Thank you.
Chairman CARDIN. Senator Booker via Webex.
Senator BOOKER. Mr. Chairman, thank you very much. I am ex-
cited about the promise and possibility and opportunity that is
going to be afforded so many families in peril and in crisis. As a
Senator that lives in a low-income, Black and brown community
where we do not confuse wealth with work, to see the difference
it is going to make for so many children and so many families who
have been impacted by this pandemic is incredible, and the overall
economy, as The Wall Street Journal, who has boosted their aver-
age forecast for 2021 for economic growth to 5.95 percent following
the passage of this bill. It is going to be really the fastest pace of
growth we have seen since 1983, is what they are predicting. That
benefit, because this bill, unlike the toxic Trump tax cuts, which
will cost about $1.9 trillion, were the top quintile, saw most of the
benefit, about 65 percent. This is actually going to help commu-
nities like mine and working people all across the country and all
across the State of New Jersey really thrive and succeed.
I am also happy that we addressed a lot of the problems we were
having, justice-involved entrepreneurs. We talked about this. We
got it addressed in this bill, and I am appreciative of Senator Rubio
and Senator Cardin for speaking out and supporting my efforts
there.
We saw a lot of the smallest businesses, women of color, women
and people of color, really get more targeted support in this, as well
as what we have already heard in this Committee, is the nonprofit
organizations that have really been struggling.
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I want to turn my question, in my remaining time, to Ms.
Mensah. In your testimony you outlined a number of issues that
underserved business owners are still up against—slow tech
rollouts, delayed guidance from the SBA and Treasury, and the
lack of communication, really, between the SBA and lenders and
customers. And I have heard about these repeatedly from my con-
stituents from north Jersey all the way to south Jersey, small busi-
ness owners who are really struggling to get through what is a
complicated process, trying to decipher the requirements at the
kitchen table.
The American Rescue Plan actually tried to address this by in-
cluding $175 million to establish community navigator pilot pro-
grams to improve the support that these small businesses and en-
trepreneurs are really receiving. Can you tell a little bit more? I
know you have talked about this a bit, but how CDFIs in your net-
work are actually going to do the work, engaging that navigator
role, and how we can expect that investment to translate into real-
ly better serving small business owners.
Ms. MENSAH. Thank you, Senator Booker, for your work and for
explaining the crucial role of navigators. We think you got so much
right in this plan.
When you do not have a banker on speed dial, or an accountant
or a lawyer on speed dial, you need help. You need good advice that
you trust, that is on the level, that you trust, and that is where
our CDFI partners come in. As I said, maybe 50 of our members
actually make the CDFI loans out of their own resources. The oth-
ers are active in actually helping borrowers and pointing them
many times to community banks or others in their community—
where can you get this help?
So this is what the navigator grants will allow, all this technical
assistance, and it is going to be important. It will be important in
our rural communities, you know, in places where people are famil-
iar, we are in, we are rooted, and in our cities, like right in your
hometown. We will be there as a field of institutions, to help people
connect to these resources. It is a perfect partner, and we appre-
ciate you listening.
The only thing we need now is more time for this program to
work, so this extension gives us more time to get loans forgiven,
and what we hope is more resources for the CDFI field in general,
and more emphasis in the SBA on connecting once this program is
done, so that we are there for the long haul for those businesses.
Senator BOOKER. And just really quick, in my remaining seconds,
you know, the time that you mentioned is so important right now.
The revised loan calculations for sole proprietors, independent con-
tractors, and self-employed individuals just put out by the adminis-
tration, just earlier this month, has meant that a lot of these sort
of micro-businesses can get some relief. There was a North Caro-
lina Black-owned florist shop that got a PPP loan of $525 early this
year, now is eligible for $2,750. There is a Latino-owned marketing
business that I heard about in California. They received a loan of
$1,500, now is eligible for $2,600. These are big differences for
those small micro-businesses.
And so just really quick, to close me out, in your experience if
these micro-enterprises had the time that they need and the re-
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48
sources to fully access the PPP, they could have been more success-
ful in getting these loans. But right now, this time that you just
talked about, and that help, could be a difference-maker for tens
of thousands of micro-businesses around the country. Is that cor-
rect?
Ms. MENSAH. That is correct. The changes will be game-chang-
ing. What we need is retroactivity and we need the program to ex-
tend.
Senator BOOKER. Thank you. Thank you very much, Mr. Chair-
man, for allowing me the time, and I am grateful for this very, very
good panel.
Chairman CARDIN. Thank you, Senator Booker. We will now go
to Senator Ernst who will be followed by Senator Duckworth via
Webex.
Senator ERNST. Thank you very much, Mr. Chair, and thanks to
our witnesses as well for being here today. And as we are sitting
here it has been just shy of one year since the CARES Act was
signed into law and the Paycheck Protection Program was origi-
nally created. PPP has provided essential assistance for our small
businesses in Iowa and all across the country.
Though this program has saved millions of jobs and continues to
be a proven success, it is important that we continue to consider
ways to improve the program and make it work for all forms of
small businesses, including family farmers and our self-employed
folks, which is why I am glad that we are having this hearing
today.
And we will talk a little bit more. I am going to carry on kind
of where Senator Booker started. But Ms. Mensah, about the recal-
culation issue, I would like to discuss that with you today. In your
testimony, you do discuss the new rules that allow self-employed
folks to calculate their loan based on the gross income instead of
the net income, which increases the size of the loan that they
would qualify for. And you also reference the fact that the new cal-
culation is not available for those businesses who received a loan
prior to March 3rd, and I also agree with many others that this is
unfair. I have heard from Iowans who received loans as small as
$80—$80—last year, and these folks should be able to benefit from
a higher loan amount. But under the current rules, they cannot re-
calculate their loan.
In your testimony you suggest that SBA make these changes ret-
roactive, just as you said, in the same way that we do for farmers
and ranchers. However, this would not fully solve the issue. Under
current rules, only farmers who have not been approved for loan
forgiveness yet are allowed to recalculate for the higher loan
amount, and as a result of this policy many Iowa farmers lost out
on thousands of dollars because they had their loan forgiven short-
ly before the relief bill had passed in December.
If we treat self-employed folks the same way, those who already
had their loan forgiven would still be left out, and I believe that
Congress should take this a step further and allow all Schedule C
and Schedule F filers, including those who have already had their
loans forgiven, to recalculate using gross income. And what are
your thoughts on this?
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Ms. MENSAH. Well, Senator Ernst, it is always impressive to hear
you are listening to all of the communities, including rural commu-
nities, including those who derive their income from ranching and
farming. Many of our CDFIs work in rural areas, supporting the
many small businesses that are sustaining rural communities.
So I stand with my testimony. We urge Congress to do the two
things that will help here. First, give us more time, and so please
extend to May 31st the true extension of the program, and then
please consider this retroactivity. We think this will help. And with
CDFIs on the ground to help work through these changes we can
help those businesses reapply.
So I hope you look at us as partners to working. This is the best
way government works, when you have a responsible, fair partner
on the ground who can help reach into the crevices of the economy.
So thank you for your listening ear on this.
Senator ERNST. Thank you, Ms. Mensah, and I would also con-
tinue on. You are absolutely correct. We need to reach every com-
munity possible, helping the folks in the urban areas as well as our
rural areas. We have difficulties all the way around. And you also
spoke of some glitches in the SBA’s new lending platform and de-
layed or incomplete guidance, and we have heard those similar con-
cerns from folks in Iowa. Do you believe that there are any addi-
tional improvements that SBA needs to make sure and ensure that
no one gets left out of the program, and can you explain a little
more?
Ms. MENSAH. We are pleased to see the SBA working with the
new administration and working quickly. We are pleased to see the
changes that have been made. Our principal recommendation is to
extend the time, and then once the Paycheck Protection Program
is over and you have the agency in front of you, to re-look again,
top to bottom, at how all of these programs can better serve the
most underserved. That is the group that is having the challenge,
so that is our principal recommendation.
Senator ERNST. Yep, absolutely. Thank you so much for your
time. To all of our witnesses today that have appeared in front of
the community, and thank you, Mr. Chair. This has been a very,
very helpful Committee hearing, I think as we look at the Paycheck
Protection Program. Thank you.
Chairman CARDIN. Senator Ernst, let me just underscore a point
that was just made. We are going to have on the floor next week
the extension. It has passed the House by 415 to 3. We are also
going to find out from the SBA—I support the retroactivity and we
are going to have a bipartisan way of trying to correct that. We
need to work with the SBA, because they have raised some admin-
istrative issues.
So we are going to work through that. As a matter of fairness,
we need to make that provision retroactive. So we are going to try
to figure out how to do it. And what Ms. Mensah was saying, we
want to make sure these programs are working well, so the Com-
mittee is making that one of our priorities, and I can assure you
we are going to do this in the manner in which this program has
been handled since its inception, with bipartisan, working together.
Senator ERNST. I appreciate the attention to it. Thank you, Mr.
Chair.
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Chairman CARDIN. Senator Duckworth via Webex.
Senator DUCKWORTH. Thank you, Mr. Chairman. As President
Biden said last week, we are emerging from a dark winter to a
hopeful spring and summer, but we have to keep our foot on the
gas and take nothing for granted. We must sustain relief efforts so
that our businesses and nonprofits also can keep their doors open
and we can build back better than before.
So on that note, I want to turn to Mr. Hoey. First, I want to
thank you for everything you and your organization have done over
the past year. Essential workers and others needed the help of non-
profits like yours, and you all stepped up. Nonprofits in Illinois
stepped up too. They helped those struggling with severe and per-
sistent mental illnesses, worked through rapidly changing cir-
cumstances. They distributed PPE, food, other resources, and they
are a part of our effort to get citizens vaccinated quickly. We owe
a great deal of thanks to our nonprofit leaders.
Now, many of these entities face another crisis with PPP set to
expire on March 31st. I agree with your testimony. Congress ex-
panded this program to nonprofits like yours and it should cer-
tainly extend the program to allow it to happen.
Mr. Hoey, please describe, for the members of this Committee,
the services that you are currently providing to bring us out of the
pandemic and that you may have to shutter if Congress does not
take this simple action of extending the PPP deadline.
Mr. HOEY. Thank you so much, Senator Duckworth. And by the
way, I applaud the Y in Chicago. I am very familiar with their
work and they have done yeoman’s work as well.
Yes, the challenge here is that, you know, organizations like
ours, we have such a wide array of programs and services, and be-
cause we are a not-for-profit and our charter is really to serve the
community, you know, we are on a very thin margin and we can
never accumulate enough cash for a pandemic, for sure.
So this program is essential. Otherwise, we are going to have to
borrow a significant amount of money at market rate, that will
really stunt our work for years and years to come. You know, there
is just no way around it, and probably result in further reduction
of force.
During this pandemic and going forward, you know, we have
stepped up, and we have done so because we are really one of the
few organizations at scale that had the sites and the structure to
step in on food distribution. So we partner with food banks. We
have 100 sites around the region, and many of those are in the
most challenged neighborhoods so we were able to get food to peo-
ple more efficiently, using our sites and our volunteer network. We
opened up what we call academic support centers with all the vir-
tual learning that is going on, and particularly parents that have
to go to work and they do not have the luxury of working from
home. We provide a safe way for kids to learn and make sure that
they do learn, but they also get socialization.
And then, you know, we had reopened our doors for our regular
service, by and large, but, you know, the community relies on us,
seniors rely on us to have a place to stay active and healthy. Fami-
lies rely on us to have a place to go to keep their kids active and
for them to connect. Our work is endless. I mean, we have been
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providing wraparound services for schools that are sort of in a hy-
brid situation, which is very tricky. So one day we may be pro-
viding a full day of virtual learning and the next day providing
after-school programming.
So, you know, it has really been quite a year, I have to say, and
I am proud of the work that we have done, but not just the Y but
really not-for-profits. And like I said, I have to emphasize the not-
for-profit community stepped up, but the larger not-for-profits were
the go-to organizations for the states and the counties, in Maryland
and throughout the country, to really get stuff done in the face of
this, because of our infrastructure and our expertise. We are proud
to do it, and all we are asking for is just now that this bill has been
signed, an extra 90 days to get our applications in.
Senator DUCKWORTH. Thank you. Mr. Chairman, I would like, at
this time, to enter into the record a letter from several nonprofits
in my State, highlighting the importance of this issue.
Chairman CARDIN. Without objection, those statements will be
made part of our record.
[Letter submitted by Senator Duckworth follows:]
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Senator DUCKWORTH. Thank you, and I would like to submit the
rest of my questions for the record. It has to do with the simplifica-
tion of the forgiveness process for those with PPP loans of $150,000
or less. I urge the Small Business Administration to simplify this
process, because so many of my businesses are finding the process
extremely onerous.
Thank you. I yield back.
Chairman CARDIN. Thank you. We will now go to Senator Rosen
via Webex, and she will be followed by Senator Shaheen.
Senator ROSEN. Thank you, Chairman Cardin. I appreciate that.
And I want to thank you really for holding this hearing on the Pay-
check Protection Program and how we can continue to serve our
small businesses as they recover from the economic downturn
caused by the pandemic. So, Mr. Chairman, I was proud to join
you, Senator Collins, Senator Shaheen in co-sponsoring legislation
to extend PPP through the end of May, and I look forward to work-
ing with this Committee to pass that legislation before the PPP ex-
pires in two weeks.
So I want to talk a little bit about EIDL, because COVID–19 has
impacted our country of course in profound ways. It has been par-
ticularly challenging for many of our small businesses in Nevada.
For travel and tourism, our industry has been hit hard, and 99 per-
cent of businesses in Nevada are small businesses.
And while we are on the road to recovery, our economy is just
not going to come back to life with the flick of a switch. It is going
to take time. So that is why, two weeks ago, I reintroduced by bi-
partisan EIDL for Small Business Act with Senator Cornyn. My
bill would lift the SBA’s caps on EIDL loans and EIDL advance
grants, providing all eligible small businesses with loans up to $2
million, and the full $10,000 grants regardless of size or location,
just as Congress intended to when we passed the CARES Act just
about a year ago.
So I know we are here to discuss PPP. As our small businesses
continue to struggle, we cannot lose sight of the other critical life-
lines like EIDL.
But, Ms. Mensah, in your written testimony you talk about the
impact of reforms Congress has made to the SBA relief program,
including repealing requirement to deduct auto-advance payments
from PPP loan forgiveness. Could you talk about the impact of that
policy on our small businesses, and thinking also a little bit, too,
I guess as a second follow-up to that, our businesses that CDFIs
work with every day, what it would mean if they got this full
$10,000 from the EIDL advance grant to keep their doors open.
Ms. MENSAH. Thank you, Senator Rosen, for your concern and
your understanding of the nature of the small business economy.
We think you got so much right, and, you know, it is disheartening
when our CDFIs work with a business only to conclude that the
very thing that helps them reduces the amount that they were sup-
posed to get. That is tragic, that is hard, and it is disheartening
to go through all the work. So you got the right proposal and we
urge you.
We also think, key to this whole recovery, is the time on task to
get really these reforms ingrained, and when a business can receive
this kind of support and receive it skillfully, it is game-changing
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and it is the bridge they need to retake their place in the economy.
This is the kind of bridge.
So we are thankful for the work you have already done. I agree
with also Senator Duckworth’s point, streamlining the forgiveness.
That will also help our CDFI-supported businesses, particularly
when the loans for many are well under $150,000. And that is
what Congress’ direction was, and I think if we can keep that focus
then our businesses can fully participate in the recovery.
Senator ROSEN. Thank you. I want to move on and talk a little
bit about our indoor air, making it germ-free or clean, our indoor
spaces, to build consumer confidence to help our small businesses
reopen safely. And, of course, for me, our tourism industry, hospi-
tality, restaurants, retail, conventions, all of the live events.
And so I just introduced, with Kevin Cramer a bipartisan act
called the Fresh Air For Small Business Act. This legislation is
going to provide refundable tax credits for small businesses to up-
grade their HVAC systems to mitigate the risk of COVID–19 in the
air we breathe. I want people to go to back indoors and feel con-
fident.
So, Mr. Hoey, as someone whose organization brings the commu-
nity together indoors, can you talk about the importance of making
investments to ensure that our indoor activities are safe, not just
for the workers but for all of us who want to go back and enjoy
all of it. So how can investments in PPE, ventilation, and other
modifications, how does this help us bring back members and pro-
tect workers?
Mr. HOEY. Yes, it is very important. Obviously, most organiza-
tions or entities or companies have indoor spaces, and they vary in
size, so ventilation is a complicated issue and it is so dependent on
size and the structure of the building. But the truth is most busi-
nesses, most organizations like ours did not anticipate something
of this nature, and so a lot of the systems that we have, HVAC sys-
tems, do not have the requirements. We were fortunate that a lot
of our buildings are newer so we were in a little better shape, but
some of them are not.
And so these are very expensive systems we are talking about,
and so I think support for that is wise, not just now but I think
going forward. Improving the air quality inside buildings is very
important, and I think it will be a good investment, even when we
all hopefully get vaccinated and can move back to a more normal
world.
Senator ROSEN. Thank you. I could not agree more. I yield back
my time. Thank you.
Chairman CARDIN. Thank you, Senator Rosen. We will now go to
Senator Shaheen, who will be followed by Senator Hickenlooper.
And in introducing Senator Shaheen I just really want to thank
her. She has been one of the leading architects of trying to make
sure we get the program tailored to those small businesses that
really need it, and one of the sponsors of the amendment that
would extend the date on the PPP program.
Senator SHAHEEN. Well, thank you very much, Mr. Chairman,
and I certainly appreciate the opportunity to have worked with you
and your leadership on this issue. And we are seeing progress,
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which is very exciting. I want to thank all of the witnesses for their
testimony.
One of the issues that I have heard consistently from small busi-
nesses in New Hampshire, and I just heard it again on Monday
with respect to the Restaurant Relief Fund that has been incor-
porated into the American Rescue Plan, as well as the Shuttered
Venue Operators Grant program that was initially passed in De-
cember and get $1.25 billion more help for that program in the re-
cent COVID package, is concern that there has not been clear guid-
ance that has been put out.
Now I do appreciate, and I tried to reassure people, that we have
been in a transition from one administration to the other. We have
a just-approved new administrator of the SBA. But, Ms. Mensah,
can you talk about how important it is for small businesses to have
that clear guidance from the SBA and to know what the param-
eters are, so that they can move forward?
Ms. MENSAH. Thank you, Senator Shaheen. You are so right.
What you are hearing is echoed through all of our CDFI commu-
nity. The lenders need the guidance so that they can advise the
businesses, and this has been a challenging time, particularly for
the changes you made, wisely, for sole proprietors, it is now pos-
sible to get this assistance and it was not as possible earlier.
So this clear guidance is important and time is what is going to
make that possible, time and the right partner. So I would urge
you the swift passage of this extension, and it is a true extension.
It is an extension to keep the program open until the end of May,
and then to have administrative side. Already, lenders are having
to stop lending. And so it is a confusing time. I believe time will
heal that confusion, and I think there is a lot of good out there.
There are so many CDFIs that are in place in our communities
that know how to help and can come with better advice, better re-
sources.
And so I urge you to look to the swift extension of this program.
Senator SHAHEEN. Well, thanks very much, and I think an exten-
sion is critical. I hope we will be able to get bipartisan agreement
for that. I also think it is very important for the SBA to hear loudly
and clearly from this Committee that the focus should be on pro-
viding guidance for these new programs, to make sure that that
can get done just as soon as possible. And now that Administrator
Guzman has been approved, hopefully she will be able to get in and
see what help they might need. And if it is a resource question, I
hope they will come back to the Committee, Mr. Chairman, and let
us know what they need in order to get this done.
I have a question, I guess it is Mr. Hoey?
Mr. HOEY. Hoey, yes. Thank you.
Senator SHAHEEN. Because I understand that yours was one of
those entities that previously could not qualify for PPP because you
were technically affiliated with the national YMCA, and that now,
under this new COVID rescue package we have allowed for your
organization, with the YMCA, to qualify. Can you talk about what
the impact will be on your workers and your community if you are
able to take advantage of the program?
Mr. HOEY. Sure, and thank you for that. Yes, the Y is what is
called a federated organization, so we are all independent
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501(c)(3)s throughout the country. There are actually 800 of those,
and we are one of them, and obviously we all vary in size. The larg-
er Y’s, like mine and many others across the country, all have well
over 500 employees, and so we were not eligible. But this change
now looks at the number of employees by site, since we all are
multisite, the large Y’s are multisite across regions.
So it is really a game-changer for us. I would tell you that the
alternative for us was really to go into debt, and we already carry
debt on many of our buildings. We have never had to borrow
money for operating purposes. In my 14 years doing this, the idea
of borrowing money just to operate on a day-to-day basis is an
anathema. We have always been one of those organizations that
was able to be financially sustainable.
And I have often said that, you know, the Y is one of the best
business models for a nonprofit you could think of, except for dur-
ing a pandemic. You know, it really would have put us on our back,
and also, with that incremental debt, additional debt, I think we
would have had to look at closing a lot of our sites and not being
able to justify doing some of our work, and sadly, some of our work
in some of the most distressed communities, because, you know, we
rely on some of our operations to have better cash flow than others,
and we make it all work. But when you force organizations like
ours into borrowing for its operating needs you end up making
some choices that really have a negative impact in communities,
particularly communities that are more disadvantaged. I just think
that is the wrong thing to do, it is counterproductive, it is short-
sighted, and all we are asking for, and thankfully this bill does
this, and the extension will enable it, is to let us get back to the
point where we can be self-sustaining. And that is what this is.
This is essentially a bridge to our normal self-sustaining financial
model.
Senator SHAHEEN. Well, thank you very much. That is what I
have heard from the Y’s in New Hampshire, and as you say, you
provide very valuable services, particularly to many communities
that have a lot of need from the folks who live there. So thank you.
I am glad to hear that this is going to be helpful to you. I hope
it is going to be helpful to our Y’s in New Hampshire as well.
Thank you, Mr. Chairman.
Chairman CARDIN. Thank you, Senator Shaheen. Senator
Hickenlooper via Webex.
Senator HICKENLOOPER. Yes. Thank you, Mr. Chair, and I want
to thank all of the witnesses today for I think really an illu-
minating session. One of the benefits that comes out of a crisis is
we do see our economy and the businesses that create it and the
nonprofits that create it, you know, with a clarity, both in terms
of the challenges but also the opportunities.
Ms. Mensah, can you discuss—well, or just try and parse a little
more deeply which small businesses will benefit from the changes
that the Biden administration has made around the change involv-
ing sole proprietors, and these are, as I think, the truly small busi-
nesses.
Ms. MENSAH. Thank you, Senator, for that focus on a group that,
frankly, was left out and did not feel that they could have meaning-
ful participation.
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So I described a client, HOPE Enterprise in Alabama, a woman
that under the old rules was running a boutique. All of the things
were filed. Her Schedule C filing only enabled her to have $700.
But when she could file under the new rules, she could get $20,000.
So that is the kind of power. It is fair. You know, it was looking
at gross income instead of net profit, and this is the understanding
this Committee and the SBA and this administration took when it
made the changes.
So this is so important, and as Senator Ernst and I discussed
this, there is a precedent for this in farmers and ranchers before.
So what we are proud of is that in the middle of a crisis Senators
came together, bipartisan worked together, and worked to let us do
our work, frankly. And they gave us more time, you know, to come
in and help these kinds of businesses.
So we are ready. CDFI’s get up and work on someone that may
be eligible for $400, so we are not making money off making loans
like that. We are helping businesses to thrive.
And so the real request here is all of the streamlining that you
put in place, but we need the time to get it done, we need the sim-
plification. One of the things that, you know, for people coming
back now with their forgiveness, if they are under too much scru-
tiny all of our staffs have to switch to helping people with the for-
giveness phase, and they are unable to help that next layer of peo-
ple who now have eligibility as sole proprietors.
So I would just urge the Senate, in its work with the administra-
tion, to keep the pressure on. Let’s take the time, but then let’s
focus on what really needs to be focused on, particularly in this for-
giveness phase, where we need to keep the focus on those loans
that are $550, not worrying about chasing down a $1,000 loan for
forgiveness. We believe those remain in good faith, and we look for-
ward to seeing this program sail forward for the months that
should be left on the program.
Senator HICKENLOOPER. Right. Well, I think you have been doing
great work there, and we really do hear many more success stories
this time, I think, than before. And certainly the SBA has said it
would create additional communication channels with lenders to
make sure that we got this new approach to PPP and to the Shut-
tered Venue program, to get those lines of communication.
I know that previously there was so much frustration. Have you
found a way to kind of create those channels of communication,
and is that something that might be a permanent benefit, not just
to your organization but to other people providing loans to these
truly small businesses?
Ms. MENSAH. I think, as you began your remarks, you said some-
times this crisis helps us see more clearly. And I think the agency
has done a good job now. They are doing more reports. They are
holding more briefings. They are opening their website. They are
giving us more data, which we did not even have at the beginning.
And I know they are working all the time to do this. They are
clearing out the error codes and they are trying. So I appreciate
that this is a difficult task, but this is where we need to focus.
And the other thing I would say is that what this crisis showed,
what the nutshell of PPP showed was that all small businesses are
not equal, that some are truly smaller and more disadvantaged.
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59
They are still part of this economy, still essential to this economy.
But it took more. They did not have huge leagues of bankers and
lawyers to help them, and so they had CDFIs. And what we have
learned from this crisis is that is what matters.
And so I hope when SBA, when the dust clears and the programs
move to the more permanent side that what you will be pushing
the SBA to do is top-to-bottom review of all of its programs. Let’s
make this agency help us get down to the bottom of the economy,
where so many people do need these programs to work better. And
that is the partnership we are urging with the CDFIs.
Senator HICKENLOOPER. I appreciate that more than I can say.
You know, when I started a restaurant in 1988, back when it only
had eight people working there, when you are that small it feels
like you feel everything more intensely, like your emotions are
right on the surface of your skin. And you are exactly right, we
need to do a better job of going back into the SBA and looking at
how do we take these lessons learned and make it part of their
DNA.
Thank you very much. I thank you all for your testimony today,
and I yield my time.
Chairman CARDIN. Senator Hickenlooper, thank you for those
questions. We, in the last Congress, tried to look at the reauthor-
ization of the SBA programs. We did not quite get there. I can as-
sure you, we are going to be looking at the existing tools to see
whether we cannot make them more effective in carrying out the
mission, particularly reaching the traditionally underserved com-
munities, and the smaller of the small businesses. So we are going
to be looking at those programs.
Ms. Mensah, I want to ask you one additional question, if I
might. There were two changes made in December that affect qual-
ification for the second round of the PPP. One was to reduce the
size from 500 to 300, and the other was to put a revenue require-
ment of a 30 percent reduction. Quite frankly, I have not heard a
lot of concern about those standards as to needing an adjustment
or not. I was wondering whether you have heard any chatter as to
hardships or whether this is the right number and now we are tai-
loring it to the more in need. What is your reaction to the two
changes made in the second round of PPP?
Ms. MENSAH. Thank you, Senator Cardin. The reduction of size
from 500 to 300 was not a problem for CDFIs. It was a welcome
change. We knew that the group that was struggling had 300 and
much, much less. So that I have not heard any objections to from
our CDFI community.
As for the revenue request, I am not aware of challenges to this.
My basic point is that we felt heard by this Committee. We were
invited to testify before. We felt you worked in a bipartisan way.
And we felt listened to, and we felt like partners, as one of the
lenders that should have always been central to the kind of ap-
proaches. Even though we were smaller, we felt listened to.
So I am here to say thank you for listening, thank you for your
invitation to come today and really dive into what the impact has
felt like in 50 States, diverse places throughout this country, and
to give us more time to do this right.
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Chairman CARDIN. Well, thank you. Quite frankly, I have not
really heard too much concern about those two changes that were
made. We do know that the initial information we are receiving
showing that it is tailoring to smaller small businesses, the size of
the loans and the targeting seems to have worked very effectively.
We do not have the numbers yet, and obviously we want to see the
numbers. And then, of course, we are using the revenue standard
losses for other programs, including some of the priorities on Shut-
tered Venues, et cetera.
So it is a standard that looks like it is being accepted and makes
a great deal of sense. If you are trying to target to those businesses
that have suffered the most as a result of COVID–19, looking at
the revenue losses is certainly a legitimate way to try to target
money to those small businesses that really need it.
And I noted some of the concerns that were raised initially about
the program. But let me point out, in March of last year, when we
started the PPP program, the objective was to get money out quick-
ly to small businesses so they could maintain their payroll. The
view was that it would be a better investment for a small company
to keep their workforce rather than having their workforce go on
unemployment, which it would cost taxpayers equivalent sums of
money without the benefits of having the workforce maintained.
This was very much a bipartisan effort. Senator Rubio and myself,
along with Senator Collins, Senator Shaheen, and others worked
together on this program.
So the original PPP program was to get money out quickly to as
many small businesses as possible, and I think we achieved that
objective. But as you pointed out, Ms. Mensah, as we went through
the program we recognized that certain communities were not
treated as well as we wanted them to. They did not have the rela-
tionship with the bankers. We knew that was going to be a prob-
lem. We thought SBA would deal with it. That is why we put lan-
guage on page 30 for them to do that, but they did not. And that
was when Congress had to be more aggressive in targeting funds.
And I just really want to point out, Secretary Mnuchin at the
time worked with us to get money into the CDFIs, which I applaud
him for working with us on doing it. We wanted to be more aggres-
sive than he wanted to be, but he was able to help us in targeting
money into CDFIs.
So this has been a bipartisan effort to try to evolve the program
to meet the current needs, and we are still on that path, and I
want to thank all of our witnesses for their testimony. It has been
extremely helpful. This is the beginning of our record as to how we
can make sure that the government investment in the small busi-
ness programs are working as Congress intended, and this Com-
mittee will continue to hold oversight hearings, including next
week with representatives from the Small Business Administra-
tion.
The record will remain open for two weeks for questions from
members of the Committee. I want to thank all four of our wit-
nesses for your attendance here today and your help in our Com-
mittee work. And with that the Committee will stand adjourned.
Thank you all very much.
[Whereupon, at 4:16 p.m., the Committee was adjourned.]
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