Promoting Inclusive Lending During the Pandemic: Community Development Financial Institutions and Minority Depository Institutions, House hearing transcript (June 3, 2020), GovInfo CHRG-116hhrg42893, PDF
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This is the Government Publishing Office PDF of “Promoting Inclusive Lending During the Pandemic,” a virtual hearing of the Subcommittee on Consumer Protection and Financial Institutions of the House Committee on Financial Services on June 3, 2020 (Serial No. 116–93), with Chairman Gregory W. Meeks presiding. Witnesses were Lisa Mensah of Opportunity Finance Network (OFN), Michael T. Pugh of Carver Federal Savings Bank, Samuel C. Scott III of Black Chicago Tomorrow, and James H. Sills III of M&F Bank for the Independent Community Bankers of America (ICBA). Meeks said 43 million Americans had lost their jobs since the start of the COVID-19 pandemic. Ranking Member Luetkemeyer said 170 Minority Depository Institutions made 107,000 Paycheck Protection Program (PPP) loans totaling more than $10 billion.
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PROMOTING INCLUSIVE LENDING
DURING THE PANDEMIC: COMMUNITY
DEVELOPMENT FINANCIAL INSTITUTIONS
AND MINORITY DEPOSITORY INSTITUTIONS
VIRTUAL HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
JUNE 3, 2020
Printed for the use of the Committee on Financial Services
Serial No. 116–93
(
U.S. GOVERNMENT PUBLISHING OFFICE
42–893 PDF WASHINGTON : 2021
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina,
NYDIA M. VELÁZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN MCADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESÚS ‘‘CHUY’’ GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
CHARLA OUERTATANI, Staff Director
(II)
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SUBCOMMITTEE ON CONSUMER PROTECTION AND FINANCIAL INSTITUTIONS
GREGORY W. MEEKS, New York, Chairman
NYDIA M. VELÁZQUEZ, New York BLAINE LUETKEMEYER, Missouri, Ranking
DAVID SCOTT, Georgia Member
WM. LACY CLAY, Missouri FRANK D. LUCAS, Oklahoma
DENNY HECK, Washington BILL POSEY, Florida
BILL FOSTER, Illinois ANDY BARR, Kentucky
AL LAWSON, Florida SCOTT TIPTON, Colorado, Vice Ranking
RASHIDA TLAIB, Michigan Member
KATIE PORTER, California ROGER WILLIAMS, Texas
AYANNA PRESSLEY, Massachusetts BARRY LOUDERMILK, Georgia
BEN MCADAMS, Utah TED BUDD, North Carolina
ALEXANDRIA OCASIO-CORTEZ, New York DAVID KUSTOFF, Tennessee
JENNIFER WEXTON, Virginia DENVER RIGGLEMAN, Virginia
AL GREEN, Texas
(III)
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CONTENTS
Page
Hearing held on:
June 3, 2020 ...................................................................................................... 1
Appendix:
June 3, 2020 ...................................................................................................... 41
WITNESSES
WEDNESDAY, JUNE 3, 2020
Mensah, Lisa, President and Chief Executive Officer, Opportunity Finance
Network (OFN) ..................................................................................................... 6
Pugh, Michael T., President, Chief Executive Officer, and Board Member,
Carver Federal Savings Bank ............................................................................. 8
Scott, Samuel C. III, Founder and Chairman, Black Chicago Tomorrow, and
Co-Chair, American Business Immigration Coalition (ABIC) .......................... 10
Sills, James H. III, President and Chief Executive Officer, M&F Bank, on
behalf of the Independent Community Bankers of America (ICBA) ............... 12
APPENDIX
Prepared statements:
Mensah, Lisa ..................................................................................................... 42
Pugh, Michael T. ............................................................................................... 52
Scott, Samuel C. III .......................................................................................... 60
Sills, James H. III ............................................................................................ 63
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Meeks, Hon. Gregory:
Written statement of CDBA/inclusiv .............................................................. 70
Written statement of Citi ................................................................................. 73
Written statement of CUNA Mutual Group ................................................... 76
‘‘Strategic Allocation of Coin Inventories’’ ...................................................... 78
Written statement of inclusiv .......................................................................... 80
Written statement of the National Bankers Association .............................. 83
Written statement of David M. Solomon, Chairman and CEO, Goldman
Sachs .............................................................................................................. 88
Luetkemeyer, Hon. Blaine:
FDIC report entitled, ‘‘Preservation and Promotion of Minority Depository
Institutions Report to Congress for 2019’’ .................................................. 92
May 2020 Board of Governors of the Federal Reserve System report
entitled, ‘‘Preserving Minority Depository Institutions’’ ............................ 132
Written statement of the National Association of Federally-Insured Credit
Unions ............................................................................................................ 157
National Credit Union Administration report entitled, ‘‘Preserving Minor-
ity Depository Institutions—2019 Annual Report to Congress’’ ............... 159
(V)
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PROMOTING INCLUSIVE LENDING
DURING THE PANDEMIC:
COMMUNITY DEVELOPMENT
FINANCIAL INSTITUTIONS AND
MINORITY DEPOSITORY INSTITUTIONS
Wednesday, June 3, 2020
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON CONSUMER PROTECTION
AND FINANCIAL INSTITUTIONS,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The subcommittee met, pursuant to notice, at 11:33 a.m., via
Webex, Hon. Gregory W. Meeks [chairman of the subcommittee]
presiding.
Members present: Representatives Meeks, Velazquez, Clay,
Heck, Foster, Tlaib, Porter, Pressley, McAdams, Wexton, Green;
Luetkemeyer, Tipton, Loudermilk, Budd, Kustoff, and Riggleman,
Ex officio present: Representatives Waters and McHenry.
Chairman MEEKS. The Subcommittee on Consumer Protection
and Financial Institutions will come to order. Without objection,
the Chair is authorized to declare a recess of the subcommittee at
any time. Also, without objection, members of the full Financial
Services Committee who are not members of this subcommittee are
authorized to participate in today’s hearing.
Members are reminded to keep their video function on at all
times, even when they are not recognized by the Chair. Members
are also reminded that they are responsible for muting and
unmuting themselves, and to mute themselves after they are fin-
ished speaking. Consistent with the regulations accompanying H.R.
965, staff will only mute Members and witnesses as appropriate
and not recognize to avoid inadvertent background noise. Members
are reminded that all House rules related to order and decorum
apply to this remote hearing.
Today’s hearing is entitled, ‘‘Promoting Inclusive Lending During
the Pandemic: Community Development Financial Institutions and
Minority Depository Institutions.’’
This is the Financial Services Committee’s first-ever virtual
hearing. So, let’s all be patient with one another and with our-
selves, and be kind to our witnesses who have graciously joined us
in testing this new phase of committee work.
And again, please, everyone remember to put yourselves on mute
when you are not speaking.
(1)
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2
I will now recognize myself for 4 minutes to give an opening
statement. I want to thank Chairwoman Waters, Ranking Member
McHenry, my colleague, Mr. Luetkemeyer, who is the ranking
member of this subcommittee, and all of my other colleagues for
your participation in today’s hearing.
We are living in unprecedented times, and our nation’s unem-
ployment rate is the highest since the Great Depression: 43 million
Americans have lost their jobs since the start of the COVID-19
pandemic; and over 100,000 Americans have died, and many more
are expected to die before the pandemic is over. In Queens, New
York, where my district lies, they have lost more people than most
States in the union. And now, compounding our nation’s suffering
and turmoil, the persistence of violence and brutality against Black
men and women across this nation has sparked a nationwide move-
ment for desperately-needed reforms.
We are a great nation. And I continue to believe in the potential
and promise of America. I have to say that the last few months
have amplified what we have all been observing for years, and
what many places of worship have taken to saying: We are all in
the same storm, but we are not all in the same boat. While some
consult in place and work seamlessly from home and have their
every need and convenience delivered to their doorsteps from the
convenience of an app, millions more have lost their jobs, or are
forced to literally risk their lives to perform tasks such as deliv-
ering the mail, keeping essential stores and services open, and, of
course, ensuring the continued availability of healthcare.
While the connected few big companies, universities with mas-
sive endowments, and even professional sports teams all inappro-
priately assessed millions of dollars from the PPP program, the
small employers, the family businesses, and the local nonprofits for
which Congress established the program were forced to shut their
doors and to furlough millions of their employees. While COVID-
19 does not discriminate, it has laid bare the structural inequal-
ities in our healthcare, education, banking, and transportation sys-
tems, and, yes, even in our system of police and justice.
The Black and Hispanic communities have borne a dispropor-
tionate burden in this pandemic, as have Native-American commu-
nities, which we don’t talk about enough. Congress moved quickly
to establish and fund programs to help middle-class and low-in-
come families, which were already struggling to make ends meet
in what was supposedly a prospering economy.
Congress moved expeditiously to structure and to fund programs
to keep homeowners and renters in their homes, and to avert the
next housing crisis. We passed record funding to support small
businesses and entrepreneurs, who form the backbone of our na-
tion’s employment engine. But we need accountability on the imple-
mentation of these programs, and confirmation that Congress’ in-
tent to reach the most vulnerable and those most at risk has been
followed.
I would like to thank the witnesses for their participation here
today, and for their work in serving the underbanked and vulner-
able communities, and I look forward to a robust discussion about
how we can leverage our banking laws and Community Develop-
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3
ment Financial Institutions (CDFIs) to achieve a balanced and eq-
uitable recovery from these dark days.
I now yield to the ranking member of the subcommittee, Mr.
Luetkemeyer, for 4 minutes.
Mr. LUETKEMEYER. Thank you, Chairman Meeks. And thank you
to all of the witnesses for joining us today. Today’s hearing focuses
on promoting inclusion in lending, particularly with respect to Mi-
nority Depository Institutions (MDIs), and Community Develop-
ment Financial Institutions (CDFIs). As we know, MDIs and CDFIs
make up a significant portion of the banking services for minority-
owned businesses, in majority/minority neighborhoods.
In light of the events over the last few weeks, it is important
that we conduct this hearing with the understanding that every
member of this subcommittee agrees that there is no place for rac-
ism in banking, and, more importantly, in our society. We have all
seen the horrific video of the death of George Floyd. There is not
a person present at this hearing who isn’t disgusted by the actions
of that police officer, and the officers at the site who did nothing
to stop it. I can’t imagine the pain Mr. Floyd’s family is feeling, and
I hope they will be able to find some peace and justice that must
and will be served.
While banking policy can seem menial at a time when the coun-
try is recovering from a once-in-a-century pandemic, and as pro-
tests continue around the country, the services that our witnesses
and financial institutions across the U.S. provide are fundamental
to rebuilding our economy.
Unfortunately, the damage left in the wake of the looting and ri-
oting by people who have hijacked peaceful protests will also re-
quire significant investment and work from financial institutions
on top of what was already a monumental task. Congress and the
Administration took decisive action to pass the Coronavirus Aid,
Relief, and Economic Security (CARES) Act in the wake of the eco-
nomic shutdown due to the novel coronavirus. This legislation in-
cluded many provisions designed to provide relief and forbearance
to American families and businesses.
Most notably, it established the Paycheck Protection Program
(PPP). At first, Congress appropriated $350 billion for the PPP. Not
only did Treasury have to set up this program within 2 weeks, but
the program sent out more funding in 14 days than the Small Busi-
ness Administration (SBA) had done in 14 years. The success of the
first round led Congress to appropriate an additional $310 billion
for PPP.
However, to insure small institutions, one of the drivers of this
program, Congress set aside $30 billion for financial institutions
with below $10 billion in assets, and another $30 billion for those
with between $10 billion and $50 billion in assets. The latest PPP
numbers on May 30th showed that the average PPP loan is
$114,000, and roughly 80 percent of loans made are below
$100,000. Furthermore, the number-one industry receiving PPP
funding is the critical healthcare and social assistance sector. MDIs
and CDFIs have played a vital role in thisprogram as well by mak-
ing a combined $15.8 billion in loans. Put in perspective, that is
more money than 42 States received under this program.
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4
What is most notable about these statistics is that 170 Minority
Depository Institutions made 107,000 loans, totaling more than $10
billion. That averages out to 630 loans per Minority Depository In-
stitution, averaging $95,000 per loan. While these numbers express
the success of the PPP program, there is no government program
that goes off without a hitch. Since the passage of the CARES Act,
I have had conversations with bankers across the country from
Washington State to Florida, and heard many concerns that finan-
cial institutions, particularly smaller community institutions, were
having with the program. I know there were many concerns with
SBA’s e-tran portal, loan documentation, and forgiveness docu-
mentation, just to name a few.
With the demand for PPP loans slowing down and the Congress
looking to take action, amending the program to extend the covered
period and offer forgiveness parameters, we should take this oppor-
tunity to examine what issues have plagued institutions of all
types, and specifically, MDIs and CDFIs.
I thank all of you for being here today. I look forward to hearing
your testimony. With that, Mr. Chairman, I yield back.
Chairman MEEKS. Thank you, Mr. Ranking Member.
Is Chairwoman Waters here? If not, I will yield 1 minute to the
ranking member of the Full Committee, Mr. McHenry, for an open-
ing statement.
Mr. MCHENRY. Thank you, Chairman Meeks and Ranking Mem-
ber Luetkemeyer. I welcome the witnesses’ discussion today. I
think we all have an interest in ensuring that the broad base of
the populous in our country, whether rural or urban, whether liv-
ing on the margins or those who have newly found themselves liv-
ing on the margins, that they have equal access to financial prod-
ucts, and especially the ones we urgently put in place in a bipar-
tisan way through the CARES Act.
So, I welcome the discussion today. It is a very important and
topical one, given the state of what is happening across America
today.
Finally, on a personal note, I think we all were deeply affected
by what occurred in Minneapolis, and what is now occurring across
the country. There is something sickening and awful about what
we witnessed happen to Mr. Floyd. This should not occur, we are
better than that as a populace and a people, and we should respond
together.
So with that, thank you, and I look forward to the witnesses’ tes-
timony.
Chairman MEEKS. Thank you, Mr. McHenry.
Now, let me introduce the witnesses. First, Ms. Lisa Mensah,
president and chief executive officer of the Opportunity Finance
Network (OFN). Under her leadership, OFN helped CDFIs leverage
public funding with private investment from mainstream financial
institutions, socially responsible investors, and philanthropic part-
ners in distressed communities across America.
In 2014, Ms. Mensah was nominated by President Obama and
confirmed by the United States Senate for the position of Under
Secretary of Agriculture for Rural Development. In this role, she
managed a long portfolio of $215 billion, directing annual invest-
ments of $30 billion in critical infrastructure for rural America. Ms.
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5
Mensah developed new partnerships with private and philan-
thropic partners to generate $128 million in private grants and
loan guarantees for the persistently poor rural communities.
Before her appointment as Under Secretary, she was the found-
ing executive director of the Initiative on Financial Security at the
Aspen Institute, where she led a national bipartisan effort for lead-
ers of financial institutions, nonprofit executives, and experts to
promote savings, homeownership, and retirement policies and prod-
ucts.
She began her career in commercial banking at Citibank before
joining the Ford Foundation, where she was responsible for the
country’s largest philanthropic grant/loan portfolio of investments
in rural America.
Second, Mr. Michael T. Pugh, president and chief executive offi-
cer and board member of the Carver Federal Savings Bank. A
banking veteran of more than 22 years, Mr. Pugh has led teams
of up to 600 associates in retail business banking, commercial and
residential lending, and call center operations. He has led bank
technology integrations, launching new lines of business, and exe-
cuting new growth market strategies.
Prior to joining Carver in August of 2012, Mr. Pugh worked at
Capital One as a senior vice president, a regional executive, and
market president of the Eastern Maryland, Delaware, and Wash-
ington, D.C. markets, where he was responsible for revenue pro-
duction, customer service, and bank operations for approximately
75 banking centers and $3 billion in deposits.
In addition, he led the bank’s community development strategy
for 1,200 associates in 8 counties. Mr. Pugh is a board member of
several not-for-profit organizations including the Community De-
velopment Bankers Association, and the Society for Financial Edu-
cation and Professional Development, where he serves as its Chair.
Third, Mr. Samuel C. Scott, chairman, Black Chicago Tomorrow,
and co-chair of American Business Immigration Coalition. Mr.
Scott founded Black Chicago Tomorrow to pull together the re-
sources of the public and private sector, to address the needs of
vulnerable and minority communities of Chicago, and to help set
them on a path to a brighter future.
Mr. Scott also serves on the board of the American Business Im-
migration Coalition, which provides a strong and effective voice for
American businesses under the national immigration conversation,
and advocates for sound, coherent immigration reform, and the in-
tegration of immigrants into our economy as consumers, workers,
entrepreneurs, and citizens.
Mr. Scott is the retired chairman, president, and chief executive
officer of Corn Products International, today known as Ingredion,
Incorporated. He also serves on the board of the Bank of New York
Mellon, where he is chairman of the Corporate Governance, Nomi-
nating and Social Responsibility Committee. He served on the
board of Motorola Solutions Incorporated from 1993 to 2019, retir-
ing as their lead director. He also served on the board of Abbott
Laboratories from 2007 to 2020. And he serves on the boards of
Northwestern Medical Group and the Chicago Council on Global
Affairs.
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He recently retired from the boards of the Chicago Urban League
and World Business Chicago. He is also the chairman of Chicago
Sister Cities International.
And our final witness will be Mr. James H. Sills III, president
and chief executive officer of M&F Bank, testifying on behalf of the
Independent Community Bankers of America (ICBA). Mr. Sill has
over 30 years of banking and technology management experience.
His background includes executive experience with large-scale
banking operations, community banks, and governmental organiza-
tions. He has served as president and CEO of M&F Bank and M&F
Bancorp since 2014.
Prior to this position, Mr. Sills was appointed by Delaware Gov-
ernor Jack Markell as the cabinet secretary and chief information
officer for the State of Delaware, Department of Technology and In-
formation, in January of 2009. Mr. Sills was responsible for pro-
viding strategic direction and management for information tech-
nology operations supporting over 34,000 end users. In 2014, Mr.
Sills was selected as IT Executive of the Year by Government Tech-
nology Magazine.
Prior to starting his own company in 2007, Mr. Sills was an exec-
utive vice president of MBNA America Bank, now Bank of Amer-
ica, where he served as the director of corporate technology solu-
tions for the $80 billion U.S. Card Division. Prior to that, he served
as the president and CEO of the Memphis First Community Bank
(now Landmark Community Bank) in Memphis, Tennessee.
Mr. Sills serves on a number of boards, including the North
Carolina State Chamber of Commerce, the Carolina Small Business
Development Fund, the ICBA Minority Banking Council, the FDIC
Minority Banking Advisory Committee, and the Federal Reserve
Bank of Richmond.
So, we have five distinguished witnesses here today, and you will
each be recognized for 5 minutes for an oral presentation of your
written testimony. And without objection, your written statements
will be made a part of the record.
I now recognize Ms. Mensah for 5 minutes.
STATEMENT OF LISA MENSAH, PRESIDENT AND CHIEF EXECU-
TIVE OFFICER, OPPORTUNITY FINANCE NETWORK (OFN)
Ms. MENSAH. Thank you, Chairman Meeks, Ranking Member
Luetkemeyer, and members of the subcommittee.
As you have all noted, these are sober times. Our country is reel-
ing from a pandemic, the economy is in distress, and there is grow-
ing civil unrest brought on by years of systemic racism and oppres-
sion. Yet, I am honored to be here today to talk about inclusive
lending and how Community Development Financial Institutions
(CDFIs) can be partners in the critical work facing our nation.
The CDFI industry was borne out of the civil rights movement,
and the riots of the 1960s and 1970s, and has grown to more than
1,000 institutions, managing more than $222 billion in assets. Op-
portunity Finance Network (OFN) is a national network of more
than 300 CDFIs, and we have a deep history and proven experi-
ence. Our customers are 85 percent low-income, and 58 percent
people of color. CDFIs provide capital, plus its financing, and finan-
cial coaching, and business counseling. We blend private and public
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7
capital to provide responsible and affordable financing in low-
wealth markets.
Our most important public sector partner is the Treasury De-
partment CDFI Fund, which provides equity capital in the form of
grants to strengthen CDFIs and help us grow. CDFIs are the finan-
cial first responders in times of crisis, during recessions, natural
and man-made disasters, and periods of civil unrest. When banks
restrict lending, CDFIs lean in. For example, after the protests and
uprising in Baltimore following the death of Freddie Gray, nearly
400 businesses were damaged. CDFIs, like the Latino Economic
Development Center, were there. They were providing the
microloans to help businesses survive when aid was slow to arrive
from the government.
In the aftermath of Michael Brown’s death, the 2016 Ferguson
Commission explicitly highlighted the work of CDFIs, which led to
the creation of the St. Louis CDFI Coalition, a partnership among
eight institutions that deploys loans and resources to some of St.
Louis’ most economically distressed counties.
From the very first days of the COVID-19 crisis, CDFIs have un-
derstood the threat facing our borrowers, and immediately reached
out with whatever accommodations they could to ease the economic
disruption, principal and interest payments essentials. They made
emergency loans or other emergency products to help borrowers
weather the crisis.
And after you enacted the CARES Act, CDFIs were eager to be-
come lenders under the Paycheck Protection Program, so that very
small and minority-owned businesses could get access to this valu-
able emergency relief.
Yet, as you have noted, the early days of PPP were frustrating,
as the program rules prevented many CDFIs well-positioned to
reach the hardest-hit small businesses in our rural communities,
and in our urban, and our Native communities, from qualifying as
PPP lenders.
The first round of first-come, first-served, funding was disbursed
quickly, primarily by the largest financial institutions to their ex-
isting customers. That meant that too many small and minority-
owned businesses could not obtain a PPP loan. But thankfully,
there was bipartisan recognition that leaving CDFIs and MDIs out
of the PPP meant that too many of their customers were left out.
And OFN applauds the regulatory changes and set-asides that
were put in place recently for the second round of funding.
To date, CDFIs have made more than $7 billion in loans which
have gone to very small, and rural, and Native, and minority busi-
nesses. Last week’s announcement of a further set-aside is so wel-
come. And we recommend that the Administration create a similar
set-aside for MDIs.
So now, while PPP is helpful in emergencys in short-term re-
lease, vulnerable small businesses need much more as they tackle
the difficult work of reopening and recovery. The nation’s CDFIs
must be strong to support medium- and long-term economic recov-
ery in the low-wealth communities where we operate.
To meet this challenge, CDFIs need a new infusion of equity cap-
ital, and Congress must increase support of the CDFIs during this
critical stage by approving $1 billion in rapid response grants for
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8
the CDFI industry. The House took an important step, and we
were so pleased to see the $1 billion appropriation to the Depart-
ment of the Treasury’s CDFI Fund, included in the Health and
Economic Recovery Omnibus Emergency Solutions (HEROES) Act.
In closing, I want to share a note that I received from a CDFI
in Minneapolis. He shared that, ‘‘Our buildings are in a war zone
with buildings being burned down on either side of the midtown
global market, and a looter killed across the street. This is our
community, and we will survive and rebuild.’’
So when the cameras leave and the media moves on to other sto-
ries, CDFIs will remain. Congress must help these CDFIs to be
stronger than ever. Inclusive lending was critical before the pan-
demic, it is critical today, and it will be critical in the days ahead
as the nation works to build a more equitable and inclusive econ-
omy. Thank you so much.
[The prepared statement of Ms. Mensah can be found on page 42
of the appendix.]
Chairman MEEKS. Thank you, Ms. Mensah.
I now recognize Mr. Pugh for 5 minutes.
STATEMENT OF MICHAEL T. PUGH, PRESIDENT, CHIEF EXECU-
TIVE OFFICER AND BOARD MEMBER, CARVER FEDERAL
SAVINGS BANK
Mr. PUGH. Thank you. Good afternoon, Chairman Meeks, Rank-
ing Member Luetkemeyer, and members of the subcommittee. It is
my pleasure to be here with you today. And thank you for inviting
me to discuss the important work of Community Development Fi-
nancial Institutions and Minority Depository Institutions during
the COVID health and economic crisis.
As mentioned, my name is Michael Pugh, and I am the CEO and
president of Carver Federal Savings Bank, a CDFI and an MDI
based in New York. I also serve on the board of the Community
Development Bankers Association (CDBA), and Chair the member-
ship committee. The CDBA is the national trade association and
voice for banks that are certified as CDFIs.
First, I want to thank the members of this subcommittee for
their support of CDFIs and MDIs, and particularly for approving
$1 billion of funding through the CDFI Fund in the HEROES Act;
and second, I wish to acknowledge the ongoing events associated
with George Floyd and countless others, which underscore the out-
cry of communities insisting on equality.
Some of the recent approaches may by controversial, yet the de-
mand for equality in our great nation will inevitably improve our
future.
Carver Federal Savings Bank is a federally-chartered savings
bank founded in 1948 to serve African-American communities
which did not have equality because of limited access to main-
stream financial services. Despite our 72-year history, there is
much more to do. The outcome of our work should be the economic
empowerment and dignity of all people, regardless of their racial
background. Carver is a CDFI because of our dedication to the eco-
nomic viability of our community.
We provide access to reasonably priced loans, and no-cost finan-
cial education to aspiring minority- and women-owned businesses.
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Also, we have been an influential contributor to the New Markets
Tax Credit Program in greater New York City. I am especially
proud of my colleagues who have served as financial first respond-
ers during the COVID-19 crisis. This crisis has hit our communities
especially hard. Black and Latino people in New York represent a
higher percentage of COVID-19 deaths than the overall population,
at least partially due to their overrepresentation in front-line posi-
tions in essential industries.
Historic exclusions to mainstream finance leaves us economically
vulnerable. Black small-business owners are approved for business
loans at a rate just half that of white businesses. People of color
represent about 40 percent of the population, but about only 20
percent of the nation’s business owners with employees. Minorities
comprised 37 percent of the labor force in February, but accounted
for 58 percent of the newly unemployed in March.
Like all CDFIs, at least 60 percent of our lending and activities
targets low- to moderate-income communities. Carver has also re-
sponded through the PPP program. We have made 147 loans, total-
ing $30 million, and preserving 3,147 jobs, and assisted businesses
as diverse as hardware stores, the Greater Harlem Chamber of
Commerce, and daycare centers.
I have focused my recommendations on three areas: appropria-
tions for the CDFI Fund; modifying the PPP; and ensuring regu-
latory flexibility. My strongest recommendation to Congress is to
provide at least $1 billion in emergency stimulus to the CDFI
Fund.
Also, the PPP must be more flexible. Last week’s $10 billion set-
aside for CDFIs was exciting, but deployment requires changes.
Borrowers have a range of needs, so increasing the non-payroll por-
tion of expenses to 40 percent is insufficient. We ask that you look
at that again.
Congress should also extend the application period and rehiring
deadlines through December 2020, and make forgiveness simpler
for small borrowers. I also recommend that Congress extend a tem-
porary regulatory provision lowering the community bank leverage
ratio. It expires after 2 quarters, but should last 5 years. We know
that this crisis may take longer. Congress should recognize that re-
covery will be slowest in low- and moderate-income and minority
communities, and help by making sure that practitioners have the
tools they need.
In conclusion, I thank Chairman Meeks, Ranking Member
Luetkemeyer, and the members of the subcommittee for the oppor-
tunity to talk about the work of Carver Federal Savings Bank and
the hardships faced by the communities we serve.
Thank you for your time.
[The prepared statement of Mr. Pugh can be found on page 52
of the appendix.]
Chairman MEEKS. Thank you, Mr. Pugh.
I now recognize Mr. Scott for 5 minutes for his testimony.
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STATEMENT OF SAMUEL C. SCOTT III, FOUNDER AND CHAIR-
MAN, BLACK CHICAGO TOMORROW, AND CO-CHAIR, AMER-
ICAN BUSINESS IMMIGRATION COALITION (ABIC)
Mr. SCOTT. Good afternoon, Chairwoman Waters, Ranking Mem-
ber McHenry, Chairman Meeks, and Ranking Member Luetke-
meyer, and members of the subcommittee, thank you for the oppor-
tunity to participate in today’s discussion.
Today, I would like to talk about some of the problems facing the
Black communities in our country and what the COVID-19 pan-
demic has done to amplify the economic disparities in Black com-
munities. The coronavirus is deadliest for the Black population,
both in a health situation and an economic outcome. While our en-
tire nation is suffering immensely from the pandemic, the reality
is that members of the Black community are dying at an exponen-
tially higher rate than other groups. In major cities with Black
populations between 20, 25, and 30 percent, Black people are dying
at double that rate.
Black-owned businesses and nonprofits are at increased risk of
being forced to close, as compared to their white counterparts.
Black entrepreneurs are routinely shut out of economic opportuni-
ties, while their white peers succeed. According to research from
the Brookings Institution, white-owned businesses start with 3
times more capital than their Black peers, and only 1 percent of
Black business owners are able to secure loans in their first year,
as compared to 7 percent of their white counterparts. Without sig-
nificant intervention, this trend will continue.
We have already seen the entrenchment of such inequities dur-
ing the opening days of PPP by prioritizing clients that already had
existing credit lines in banks. Black businesses and nonprofits
found themselves, yet again, excluded from lifesaving relief.
The second round of PPP has been better, but it is still not
reaching a majority of the small Black and Brown businesses, and
that is why we pushed so hard for a set-aside. With a $10 billion
set-aside, the CDFIs and MDIs serve minority businesses. We can
at least get some of the money started into the communities that
need it most.
Over the past month, ABIC has conducted webinars with small
businesses on how to apply for a loan, and how to file for forgive-
ness. Thousands have attended, but a very small percentage of that
group have been minority-owned businesses.
In the Chicago Area, Cook County Board President Toni
Preckwinkle heard of our webinars, and she provided money for
ABIC to hire a person to locate and bring small Black and Brown
businesses to the application process. In one week, this new staff
person found over 200 Black-owned businesses, and had an average
loan value of $37,000. These are businesses that, for some reason,
did not apply or did not know about PPP. ABIC also provided a pro
bono accountant to walk these small businesses through the PPP
application process, and now they have their money, which came
through a local Black bank, owned by a CDFI. Through this proc-
ess, we learned a lot about what is working and what needs im-
provement.
But let me step back for a second to speak of some of the root
causes of the economic and health disparities within the Black
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community prior to COVID. I will speak from my experiences in
Chicago.
Chicago was, at one time, arguably the Black capital of business
in America. We had businesses like Johnson Publishing, Johnson
Products, and Soft Sheen. But today, violence is a singular domi-
nating narrative for Chicago, and it has been for a few years. I
have been traveling to Chicago for almost 50 years, and have lived
there for the past 32 years. I have seen the Black community in
Chicago go from its heyday to where it is today. It is that loss and
the violence in the City that motivated me to start Black Chicago
Tomorrow in 2016 to regain the prominence in the Black commu-
nity that it once had.
My contention is that no one thing, including PPP, can fix the
problems in our community. Our community suffers from violence
problems, policing problems, job and career problems, housing
problems, educational issues, health and healthcare problems, pov-
erty, and, most importantly, a lack of hope. But we cannot limit ex-
amining all of these problems, we have to do things to fix them.
These are very complex issues, and one solution does not fit all. All
of these issues must be addressed and dealt with at the same time
to bring our communities back.
This is a start to doing the right thing today for our small busi-
nesses. Without that, there is little hope that we can ever start to
deal with these other issues that I have addressed. Ten billion dol-
lars set-aside to reach more minority businesses is encouraging.
And I am encouraged that the House has unanimously passed a 24-
week extension and greater flexibility in the loan forgiveness proc-
ess. We hope the Senate will concur quickly, but we still have more
to do.
Here are some of my recommendations: first, open the technical
assistance community to community-based nonprofits, or 501(c)(3)
organizations, to navigate the complex world of institutions, busi-
ness loans, and document preparation; second, allow small busi-
nesses of color to apply for a second round of PPP, and simplify the
forgiveness process; and third, provide a long-term recovery plan to
develop a coherent policy and programmatic agenda for businesses
of color.
In addition, we need one-to-one financing, coaching, regular
training and webinars, access to capital, and help with strategies
to survive the pandemic. If we implement the current program as
intended, and get the money to the small minority businesses that
really need it, we do have a chance to save many of them. But as
I have said throughout this presentation, much more needs to be
done.
Thank you for the opportunity to testify, and I look forward to
answering any questions.
[The prepared statement of Mr. Scott can be found on page 60
of the appendix.]
Chairman MEEKS. Thank you, Mr. Scott.
And I now recognize Mr. Sills for 5 minutes.
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STATEMENT OF JAMES H. SILLS III, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, M&F BANK, ON BEHALF OF THE INDE-
PENDENT COMMUNITY BANKERS OF AMERICA (ICBA)
Mr. SILLS. Good afternoon, Chairwoman Waters, Chairman
Meeks, Ranking Member Luetkemeyer, and members of the sub-
committee. I am James Sills, CEO and president of M&F Bank, lo-
cated in Durham, North Carolina, which is both a Minority Deposi-
tory Institution and a Community Development Financial Institu-
tion.
I testify today on behalf of the Independent Community Bankers
of America (ICBA), where I serve as the vice chairman of the Mi-
nority Bank Council. Thank you for the opportunity to testify in to-
day’s hearing.
We must ensure that the pandemic does not set back the critical
policy goal of promoting credit and prosperity in America’s minority
communities. The social unrest from protests that we are wit-
nessing today, not only in our cities, but in suburbs and in smaller
towns as well, only raises the stakes for achieving this goal. To-
day’s hearing is well-timed.
M&F Bank is a $265 million, State-chartered bank, with over 70
employees. We are headquartered in Durham, and we serve the
five largest urban markets in North Carolina. Let me give you a
little bit of background on M&F Bank. M&F Bank was founded in
1907 by a group of 9 businessmen in Durham to serve African
Americans who had few opportunities to obtain credit or other
banking services. Our rich history continues to form our values and
our mission today: to promote personal and community develop-
ment to a diverse customer base; and to continue to be the finan-
cial literacy leader helping customers make the right financial deci-
sions.
I would like to focus my remarks on the Paycheck Protection Pro-
gram, or PPP, and refer you to my written statement for discussion
of additional recommendations for strengthening MDIs and CDFIs
to promote inclusive lending.
The PPP has played a critical role in helping small businesses
maintain their employment, survive, and prepare for the reopening
of the economy. We were an active Small Business Administration
(SBA) lender before the PPP, and the program fit our customer pro-
file perfectly: small businesses; the self-employed; nonprofits; and
churches. As an MDI and as a CDFI, we enjoy strong connections
to our communities, silent relationships, and a feedback loop where
we are already in place before the launch of the PPP. When there
was a doubt or a question, our borrowers simply picked up the
phone to resolve it.
Overall, the PPP is definitely working as intended. We estimate
that M&F’s PPP loans have supported the retention of some 1,200
employees. I am confident that other MDIs and community banks
generally have had similar results. To date, we have closed 130
loans, totaling $12.6 million. In phase one, our average loan size
was $155,000; in phase two, it was $57,000.
The PPP has had a significant positive impact, and we are un-
doubtedly in a better place economically because of the program.
Thousands of community banks worked around the clock to process
a flood of applications in a very short timeframe. I met with SBA
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Administrator Carranza last week in Charlotte, North Carolina,
and I was impressed with her commitment to making the program
work.
ICBA is supportive of provisions in the Paycheck Protection Pro-
gram Flexibility Act of 2020, H.R. 7010, which passed the House
last Friday. The bill provides more flexible parameters for spending
PPP funds, and a more realistic timeframe of 24 weeks in which
they must be spent. These changes will help businesses remain
open and avoid layoffs.
While these two provisions are critical, ICBA supports additional
changes to the forgiveness process, which is far too complex. It is
my fear that we will be working with borrowers on forgiveness ap-
plications for the remainder of 2020. This will be a distraction from
the critical, the fundamental task of lending money to help rebuild
local economies, working with troubled borrowers, and reopening
our branches in a safe manner for the public.
Finally, I would just like to note that the $30 billion carveout of
phase two for MDIs and community banks made a real difference
in terms of channeling funds to minority firms. Again, I refer you
to my written statement for a broader discussion on the theme of
inclusive lending. Thank you, again, for convening today’s hearing,
and for the opportunity to offer my perspective.
[The prepared statement of Mr. Sills can be found on page 63 of
the appendix.]
Chairman MEEKS. Thank you for your testimony, Mr. Sills.
I now recognize myself for 5 minutes for questions.
My first question goes to you, Mr. Pugh. Your bank is one of the
last remaining Black MDIs in the City of New York. In fact, there
are very few, period, and they are closing all around this country.
You have been active there, and a number of Members from New
York happen to be on this committee. After the PPP program was
offered, my office was swamped by calls from local minority small
businesses complaining about being summarily rejected from apply-
ing by big banks, and having their local community bank unable
to even assess the SBA platform.
Can you please speak to these challenges, and how our efforts to
carve out funds for MDIs and CDFIs change your capacity to serve
local minority small businesses, if it did?
Mr. PUGH. Sure, I would be happy to. I think that there were
several operational issues that were associated with being able to
get the program up and running. First and foremost, we saw that
some of the largest financial institutions were able to take care,
special care of their larger businesses, that were existing banking
relationships. This created a bottleneck, and ultimately prevented
the true small businesses from having the opportunity to be able
to participate in the first tranche of the program.
When you look at the SBA’s definition of small businesses, it is
much larger in scale relative to the small businesses that CDFIs
are focused on every day.
If you think about some of major communities that we focus on,
like Carver Federal Savings bank, small businesses with less than
75 employees are crucial to the overall economic empowerment and
systemic growth of the communities. Yet, those businesses were not
able to necessarily participate in that first tranche, because of the
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bottleneck and the volume again, that was pushed through the pro-
gram from the larger financial institutions that have bandwidth
and capability to get the big loans into the first tranche.
The other thing I would offer is that for nonprofit organizations
in our communities, they remain very important. They play a key
role in terms of helping communities thrive. And the SBA did not
have a system that was set up in design to process and accept
loans for nonprofit organizations under the PPP, so that required
some adjustment and finagling to be able to get them into the sys-
tem.
Truly, we saw much better results in the second tranche as a re-
sult of the work from Congress and the efforts that were made to
be able to get the program operationalized at a different level, but
I would offer to you those challenges I presented, just two of them,
and there were, frankly, many more.
Chairman MEEKS. Thank you. I have a question I want to ask
you, as well as Mr. Scott. I am working on legislation to have the
CDFI Funds offer direct support, including equity to the CDFIs
and MDIs and impacted banks, which I define in my bill, in my
MDI bill, as small community banks that predominantly serve
poor, rural, and urban Americans. Any thoughts? Can you weigh
in on that, on the direct support including equity? Let me start
with Mr. Scott, and then Mr. Pugh, you weigh in also.
Mr. SCOTT. Sure, Mr. Chairman.
Equity is critical for the small minority businesses in this coun-
try. For the most part, Black businesses and Brown businesses
don’t have friends and family funding to start out with, and they
can’t get the angel investments. In my experience in Chicago, in
trying to find equity for small business startups, it is almost impos-
sible because people aren’t ready to invest. If the government is
able to put together programs such that there is equity available
through CDFIs or MDIs, it would be terrific. There would be a lot
more work involved to be able to get the money to the right busi-
nesses, but certainly, it is a start to be able to move businesses and
entrepreneurs in the right direction.
Chairman MEEKS. Let me ask you, Mr. Scott, I know I mentioned
Mr. Pugh, but I saw that I am running out of time. I also believe
that corporate America has a critical role to play in recruiting, pro-
moting, investing, and training for the jobs of tomorrow, and ensur-
ing representation in the seats, suites, and boards. Can you weigh
in on that for us? Also, how private equity firms and others help
give some equity capital to the CDFIs and MDIs?
Mr. SCOTT. Absolutely. My contention is that corporate America
has to lean into this program. It has been interesting today on the
news, and yesterday, that all of the CEOs are coming forward with
ideas and programs of what it is they are going to do. This problem
didn’t start yesterday, or last week, or last year. The problem has
been existing in the Black and Brown communities for years. And
it is time corporate America steps up to the plate and starts doing
something. They can put the money in, but more importantly, they
can lean into problems that I addressed in my prepared remarks,
and start dealing with committees to work on these issues.
Healthcare is an example. On the south and west sides of Chi-
cago, Black folks die 10 to 15 years earlier than their white coun-
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terparts in downtown Chicago. Chicago has one of the largest edu-
cational systems, universities, pharmaceutical companies, and hos-
pital systems in the country. It seems to me that if those groups
came together to work on and address problems in our community,
some of the issues we have seen with COVID-19, and some of the
issues we have seen prior to that would not exist. So to me, a major
role here is in corporate America stepping up, and not just because
of the murder that took place last week. They should have done it
a long time ago.
Chairman MEEKS. Thank you, Mr. Scott. My time has expired.
I now recognize the ranking member of the subcommittee, the
gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman, and I thank all of
our witnesses for being here today. It is a great panel, and I appre-
ciate your comments. They were very succinct on a number of
issues.
I would like to talk a little bit about—and specifically, I guess,
with Mr. Pugh and Mr. Sills, since they are currently bankers—for-
bearance, because I don’t believe we are going to get out of this eco-
nomic mess unless the regulators give the bankers forbearance, so
the bankers can give forbearance to their customers that can retain
their businesses, that can retain jobs and keep the local economies
going.
So, I think it is a change situation here that if we don’t do this,
we are going to wind up with the situation that we had in 2008,
where the regulators actually went in and just got rid of wholesale
lines of business, and entire communities collapsed, and banks col-
lapsed as a result of this.
So, I guess, Mr. Pugh and Mr. Sills, my question to you is, have
you had any interaction with regulators to this point with regards
to this issue of forbearance? And if you have, what did they do?
And if you haven’t, are you getting any forbearance or flexibility for
your customers with regards to how they are doing with their
loans? In other words, are you deferring payments, altering loan
terms, changing interest rates, or whatever? Let me start with Mr.
Pugh, please?
Mr. PUGH. Thank you. As you know, there are forbearance guide-
lines that exist today under the CARES Act that will support resi-
dential mortgages, borrowers, and, of course, on the commercial
side to have this available. We think it is important. We have seen
a sizable number of homeowners and small businesses that have
commercial real estate loans with us request those forbearances.
However, what I would ask Congress to also think about is—I
would recommend that there be a rent abatement program made
available for commercial real estate owners and multi-family land-
lords. This rent abatement would allow a direct pass-through to the
tenant so that they would have an incredible opportunity to jump-
start their business, or recover on the other side of this pandemic.
And so again, if this were made available, and assuming that the
landlords could show proof of that at the end of the year, perhaps
they would be able to benefit from a tax credit, and we would be
able to see the benefit of small businesses retooling and restarting
their businesses in a viable way, and homeowners, again, be able
to rebuild on the other side of this pandemic.
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Mr. LUETKEMEYER. Very good, thank you. Mr. Sills?
Mr. SILLS. Thank you for that question. Yes, our bank has been
working with our customer base. We have offered our customers a
90-day deferment, and if they want to come back to us at the end
of 90 days, we can extend it for 6 months. The regulator commu-
nity has been checking in with our institution just to find out how
we are handling those deferments, what is the percentage of our
portfolio.
We still don’t know the total extent of this actual pandemic. So,
we want to make sure that we are working with our customers,
and we are informing our regulators. This may go beyond 6
months. There is some language that they have actually utilized to,
kind of, guide us for a 6-month period that this particular loan will
not become a TDR. So if this pandemic goes longer than 6 or 7
months, we feel we should have some flexibility to work with those
customers.
Mr. LUETKEMEYER. Well, you hit on my concern, Mr. Sills. My
real concern here is that this situation doesn’t go away in 3 or 4
months, or 6 months, maybe even by the end of the year, whenever
the CARES Act forbearance provision goes away. So, what happens
then? Our experience with the bankers and credit union people
through this pandemic is that they are very reluctant to become
engaged because of the past overregulation, if you will, of them,
and heavy-handedness by the regulators. So I think we need to
have something in place that allows you to be able to get the kind
of forbearance that you need, but they have to give forbearance to
you.
Just one quick comment, both of you talked about PPP forgive-
ness. Mr. Sills, I signed a letter just last week to ask the Treasury
to minimize, and have sort of a mini-forgiveness program for every-
body under $350,000, a loan size which would help 93 percent of
the loans. Do you think that would be something that would solve
some problems?
Mr. SILLS. Yes. Yes, I do. The ICBA has put out a position state-
ment related to presumption of compliance below a certain loan
amount. And given that 80 percent of the loans are below $100,000,
and given the complexity of the forgiveness application, which is,
I believe, 11 pages long, I think there should be some accommoda-
tion for some of the smaller loan amounts to just be forgiven, if the
borrowers certify that they used the funds in accordance with what
they stated they were going to use the funds for.
I do like the idea of reducing the percentage of—that was sup-
posed to go towards the payroll from 75 percent down to 60 or even
50 percent.
Mr. LUETKEMEYER. Thank you. I yield back, Mr. Chairman.
Chairman MEEKS. The gentleman’s time has expired.
I now recognize the distinguished Chair of the full Financial
Services Committee, the gentlelady from California, Chairwoman
Maxine Waters.
If the chairwoman is not there, I will now move to the
gentlelady—
Chairwoman WATERS. Yes, I am here. I was muted. Am I
unmuted now?
Chairman MEEKS. We hear you now.
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Chairwoman WATERS. Thank you so very much.
I want to thank you for holding this hearing today. It is so very
important, particularly at a time when we have tried to organize
a response to the pandemic and to COVID-19. We have learned an
awful lot as we have wrestled with some of the problems of PPP
and CDFIs. And, of course, I am very pleased that we were able
to target some $60 billion when we came back with the supple-
mental appropriations to deal with the problems that we encoun-
tered with the PPP. But in addition to that, we learned an awful
lot, particularly working with some of the non-bank CDFIs. For ex-
ample, there was a requirement that in order to get money from
the CDFI Fund to make loans, you had to have dealt with at least
$50 million in loan business. Well, we got that reduced to $10 mil-
lion.
And I think one of the lessons that I have learned in working on
these issues is that many of those individuals in government who
have been dealing with loan amounts, et cetera, in various ways,
really don’t have the same definition of ‘‘small businesses’’ that we
do. And in the communities that many of those who are here today
are serving, we are talking about people who could absolutely ben-
efit from $50,000, $25,000, $100,000.
So when I see some of the definitions and requirements for par-
ticipation, like we saw with the $50 million requirement with the
CDFIs, I think we are going to have to do a lot of educating of folks
about what the communities need, that have not had access to the
kind of capital that would lead them not to need small loans. That
is also true with the mainstream program that we are looking at.
But I want to ask our MDIs here today: I have learned that there
may be some concerns that if you don’t dot all of the I’s, cross all
of the T’s, and be perfect, that you will not get your payment from
the Small Business Administration. Do we need something called
substantial compliance in order not to hold up the reimbursement
for the funds that you have spent?
And let me just start with Mr. Sills on that, would you please
respond to that? Have you seen any problems with that? Or do you
anticipate any problems with that?
Mr. SILLS. Chairwoman Waters, that is a great question. I
strongly believe that banks like ours need some type of liability
protection, because we are having to guide those borrowers through
the process, and rely on their borrower attestations that they have
used their PPP loans correctly. And it puts us in an uncomfortable
situation. We are here to help our borrowers and our small and me-
dium-sized businesses. But if there was that ability to protect us,
yes, we would continue to do more lending in the communities that
we currently serve.
Chairwoman WATERS. Thank you. I am going to take a look at
that, working with Mr. Meeks. Mr. Meeks and I, of course, have
been focused on the problems that many of our MDIs face, a lack
of capital,and the ability to lend in our communities where these
loans are so desperately needed. We have learned that some of the
bigger banks are talking about giving back the fees that they have
earned in the PPP program to MDIs. Have any of you heard about
that? And let me direct this to Mr. Pugh at the Carver Federal
Savings Bank. Have you been involved in any discussions with any
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of the larger banks about helping with the capital problem that you
may have?
Mr. PUGH. Thank you, Chairwoman Waters. We have not been
involved in those discussions, nor have we heard about this oppor-
tunity. I would certainly say that it would be a welcome oppor-
tunity for us to discuss it. As you so rightly pointed out, these loans
are being provided to communities that frankly need them, and for
MDIs and CDFIs, we do not have the capital and bandwidth to
withstand risk if they are not going to be guaranteed by the FDIC.
Chairwoman WATERS. Thank you very much. Let me thank you
all for helping us to understand how we can be more supportive
with PPP and other kinds of programs.
I yield back. Thank you, Mr. Meeks.
Mr. MCHENRY. I think the chairman is muted, but I will take it
from here, according to the order we have. I want to thank the pan-
elists for being available for the Zoom, and I want to thank the
staff, the committee staff, on both sides of the aisle, for making this
technology work as best we can. However, Members are also left
to their own devices on using their mute button, which is always
a challenge, no matter how many times we do this, for all of us.
I want to turn to you, Mr. Sills. Thank you for your testimony.
I want to ask you about technology, because there is some oppor-
tunity for us to have regulatory changes so you can better use tech-
nologies and institutions as a way for financial inclusion, or to
achieve financial inclusion. There is a Pew Report from last year
that says that approximately 81 percent of Americans own a
smartphone, and that is up from 35 percent of Americans a decade
ago. So, Mr. Sills, could you describe the ways in which your bank,
your institution, is adapting to increased technology in smartphone
use by customers, and what effect that is having, if it has been
beneficial, or an additional way for you to reach out in new commu-
nities?
Mr. SILLS. Thank you for that question. Today, banks are actu-
ally technology firms. We have invested quite a bit over the last 3
or 4 years in our mobile platform, but also our online banking plat-
form. The majority of the large banks have a high percentage of
their transaction activity actually go through mobile online bank-
ing and ATMs, and it is actually in the 50 to 75 percent range.
Most CDFIs and MDIs, our percentage is not that high. We do
not have the capital to invest in technology like some of the larger
institutions in the United States. It is all moving to a digital for-
mat and a digital platform. And customers today are accustomed
to actually interacting with banks from a digital experience stand-
point.
And so, I think it is critical that CDFIs receive some investment,
or some technical grants that would allow them to upgrade their
technology to be more mainstream, to provide a better customer ex-
perience
Mr. MCHENRY. Do you think that technology can lead us to driv-
ing financial inclusion? Do you think it is an opportunity for us to
reach the underbanked and the unbanked consumers, and espe-
cially the small business owners who are not so well-connected?
They instantly have a banking relationship from a family member,
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19
or somebody in the larger social network. Is there a way for us to
do this? And does it have an opportunity?
Mr. SILLS. Yes, today, almost 90 percent of all of the citizens in
the United States have a smartphone. About 5 years ago, that sta-
tistic was around 66 percent. So today, it is just normal to access
your data, your account information, to transact business, to even
apply for a loan through your smartphone or through your tablet.
So, I do think that will level the playing field. But, again, most of
the MDIs and CDFIs do not have that technology. Most of the larg-
er—
Mr. MCHENRY. I’m sorry to interrupt, but is the partnership
model one that you are utilizing?
Mr. SILLS. No. We utilize a large core processor, and so, we are
kind of at their mercy in terms of the types of technology that they
deploy for institutions like ours. But, sure, we would love to part-
ner with other fintech companies and other companies whereas we
could provide really robust technology that is simple to use, and
just gives a really good digital experience to that end customer.
Mr. MCHENRY. Along those lines, let me ask you about regula-
tion. What can we do to help an institution like yours? What regu-
latory limitations or burdens do you think would benefit your abil-
ity to help your customers and help the communities that you serve
here in North Carolina?
Mr. SILLS. There are so many regulations that we are actually
subject to. The biggest one for us is, we are a small institution with
70 employees, and just the regulatory burden of compliance with
the Bank Secrecy Act (BSA) and the Home Mortgage Disclosure
Act (HMDA) strangles us almost in terms of when there is a new
regulation, such as beneficial ownership, it just hampers our ability
to serve the customer because we are having to invest in tech-
nology, we are having to train our staff, we have to educate the
customers, and it just takes us away from our core mission of pro-
viding capital to small and medium-sized businesses and to the
communities that we actually serve.
Mr. MCHENRY. Thank you.
Chairman MEEKS. Thank you. The gentleman’s time has expired.
Let me apologize for being on mute. I will, however, state that I
won’t let that happen, again. The House Committee Rules do not
allow for Members to recognize themselves, and I know this is a
big process, so I have to stay on the ball also, and make sure that
I am unmuted.
I now recognize the gentlelady from New York, Ms. Velazquez,
who also happens to be the Chair of the House Small Business
Committee, for 5 minutes for questions.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you,
Chairwoman Waters, and the ranking members for this important
hearing.
Mr. Pugh, unfortunately, MDIs were not included in the set-aside
created last week by the Administration. However, as Chair of the
Small Business Committee, I remain committed to pushing the Ad-
ministration to create opportunities for MDIs as well. It is also im-
portant to note that Democrats included a set-aside for MDIs in the
HEROES Act as well. What will this mean for PPP borrowers, par-
ticularly in New York City?
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Mr. PUGH. Thank you. This is an important question because,
frankly, what it will mean is the opportunity for MDIs, and by
broader extension, I also want to call out the importance of CDFIs
as a whole. It will mean the opportunity for them to actively be in-
volved in helping small businesses and communities rebuild on the
other side of this pandemic.
I think we can all agree that for many, they didn’t recover from
the Great Recession, and to now relive a very similar situation, as
noted, approximately 40 million jobs in terms of loss here. So,
CDFIs and MDIs will play a very critical role in the rebuilding,
and having this allocation will allow us to help in a number of very
important ways, which includes small business loans, financial
education programs, strategic partnerships with nonprofit organi-
zations, and various other offices that will be involved in this.
Ms. VELAZQUEZ. Thank you, Mr. Pugh.
Ms. Mensah, and Mr. Pugh, again, I have also been vocal in my
criticism of the Administration for its failure to provide trans-
parency and information regarding the recipients of PPP loans. I
believe that without this critical information, it is difficult to deter-
mine how much is going to underserved borrowers and commu-
nities of color. This was an issue that was recently highlighted by
the inspector general as well. Does this concern either of you?
Ms. Mensah?
Ms. MENSAH. Yes, Chairwoman Velazquez. Thank you for your
concern. We wholeheartedly endorse your pressure to continue to
get data from this powerful program. It has been huge. It is huge
in our communities, and to miss a moment to understand where
these funds have flowed would be a terrible thing. We also applaud
your interest in the CDFI Fund itself, and we would urge you to
continue to seek data on the recipients and on the leadership of
those institutions.
Ms. VELAZQUEZ. Thank you. Mr. Pugh?
Mr. PUGH. Thank you. I will just echo the comments that have
been offered, and say that the impact data will be important be-
cause it will make the direct connection between the work that
CDFIs need to do in order to help restore our communities.
Ms. VELAZQUEZ. Thank you.
Mr. Scott, or Ms. Mensah, or Mr. Pugh, yesterday in the Senate,
H.R. 7010, the PPP Flexibility Act, was quick-lined for unanimous
consent, but several holds were put on it by Republican Senators.
Have any of you have heard of any policy issue related to the
PPP from the Republican Senators? This is legislation that passed
the House with 417 votes.
Ms. MENSAH. I have not, and we urge its speedy, speedy passage.
We need to fix this program, as you already have done, so that it
can be used, especially the extensions that have been discussed. I
have heard of no policy issues.
Ms. VELAZQUEZ. Thank you.
Mr. SCOTT. I have not heard, but I agree completely with what
Lisa just said.
Ms. VELAZQUEZ. Thank you.
I yield back.
Chairman MEEKS. Thank you. The gentlelady yields back.
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I now recognize the gentleman from Florida, Mr. Posey, for 5
minutes.
Mr. Posey, you may want to unmute.
Mr. LUETKEMEYER. Mr. Chairman, Mr. Posey is having a little
difficulty getting on with us with the video connection today. I
think he is on with his phone, and I think they are trying to work
out something where he may be able to ask questions later on, so
if he doesn’t pop up here in the next couple of seconds, if you
wouldn’t mind putting him at the end of the queue, we are going
to try and get him to where he can get involved.
Chairman MEEKS. Very good.
I now recognize Mr. Tipton from Colorado for 5 minutes, and we
will put Mr. Posey back into the queue.
Mr. TIPTON. Thank you, Mr. Chairman. I appreciate the oppor-
tunity to be able to listen to our panel today. This is a challenging
time for all of us, and all of our communities, especially rural coun-
ties like I represent throughout our district. In Durango, Colorado,
in my district, First Southwest, a CDFI, is doing an outstanding
job of responding to the needs of the community. Through the Pay-
check Protection Program, First Southwest has secured nearly $55
million in funding, which has gone directly to 747 small businesses
across 83 Colorado towns, and retained an estimated 6,666 jobs. In
addition to rising to meet the challenges of the pandemic through
the PPP, First Southwest has gone above and beyond through its
$8 million Community Fund Initiative. Through its community
fund, First Southwest-associated 501(c)(3), First Southwest has
prioritized COVID-19 pandemic responses for small businesses.
The community fund has stood up a microloan grant program tar-
geted toward rural businesses, and an emergency loan program,
and a rapid response and recovery fund to be able to help with re-
covery loss. Over 67 percent of the applicants did not receive or
apply for PPP loans.
On top of all of this, First Southwest has also offered 1,656 hours
of pre-financial counseling to 1,141 individuals in the first 5
months of 2020 alone. Currently, then, CDFIs do have a unique
ability to be able to serve communities where they are centralized,
and an important role to play in response to a crisis.
If one dedicated CDFI in my district can have such an impact on
its community, to be able to help others, so, too, can other CDFIs
have an uplifting effect across the country.
I would like to encourage all of my colleagues to work together
on both sides of the aisle to continue to support funding CDFIs
during the appropriations process. Additionally, the CDFIs can
have such an impact on the communities they serve, we should also
think about expanding their reach. That starts with examining the
on-ramp process of the CDFI designations.
Mr. Sills, how hard is it to become certified as a CDFI by the
CDFI Fund?
Mr. SILLS. Thank you for that question. It is actually a very dif-
ficult process. We have been a CDFI since 2002. Initially, when the
process began, you had to recertify every 3 years. Today, we have
to recertify on an annual basis. We have to submit a lot of informa-
tion to actually recertify.
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Our bank has been in existence for 113 years. We are an MDI
and a CDFI, and we have been serving our community tremen-
dously. We have received an outstanding CRA rating for the past
24 years. So, I think there should be some flexibility for institu-
tions like ours to go back to certify—recertifying us on an every 3-
year basis, since we are an MDI/CDFI, and we have the data and
the proof to show that we are actually serving our communities.
But to answer your question specifically, yes, it is very, very dif-
ficult. It is an onerous process to become a CDFI.
Mr. TIPTON. In addition to some of the flexibility that you just
mentioned, do you have any other thoughts in terms of being able
to make the certification process less burdensome?
Mr. SILLS. One idea is to provide some technical assistance that
would allow the applicant to maybe leverage a third party to help
them create that information that they have to submit to become
certified. Maybe, our regulator community could assist in that, or
a third-party firm could help with that evaluation of that data as
that firm is applying.
Mr. TIPTON. Well, thanks. I did appreciate, and wanted to follow
up on, the ranking member’s comments in regards to mobile access
to be able to open up accounts. Last Congress, we passed and had
signed into law the MOBILE Act that I sponsored, to enable people
to open up accounts on their mobile devices using their driver’s li-
cense.
You indicated that there aren’t resources available to help assist
CDFIs in terms of trying to be able to expand that reach. Was that
correct?
Mr. SILLS. Yes. The CDFI Fund has some flexibility, or they need
more flexibility to maybe redirect some of their grant opportunities
to focus more on technology projects for CDFIs, because that would
really help level the playing field. I agree with you that mobile is
the way to go. Most citizens in the United States have a
smartphone, but we need more funding to fund the infrastructure
and the development of those applications if we are going to be rel-
evant going into the future.
Mr. TIPTON. Thank you, Mr. Sills.
And Mr. Chairman, I am out of time, and I yield back.
Chairman MEEKS. Thank you. The gentleman’s time has expired.
I now recognize the gentleman from Missouri, Mr. Clay, for 5
minutes.
Mr. CLAY. Thank you, Mr. Chairman. Thank you for this historic
hearing, and let me welcome all of the witnesses. I would like to
start with Ms. Mensah. We, in Congress, had to fight to secure a
carveout for smaller banks and CDFIs and MDIs. We achieved
some success with the $30 billion carveout in the second round of
PPP, but only got the concession from Treasury and SBA to target
$10 billion of second round PPP funds for CDFI.
Can you please discuss why this matters?
Ms. MENSAH. Thank you, Congressman, for your question, and
thank you for your fight. We felt it, and we appreciate it. The $30
billion was essential, but even more so is this recent $10 billion set-
aside for PPP funds. This is essential because it ensures that you
are going to use what we call the capillary system of the nation’s
financial infrastructure. It will flow through some of our smallest
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institutions, the CDFI Funds, in order to reach the smallest insti-
tutions, smallest businesses, and nonprofits in those rural areas
well beyond the reach of broadband and deep inner cities. So, it is
essential.
We thank you for that, and also for the other fixes that you have
been doing to the PPP program to extend it. Both are needed, and
we appreciate your insight on this.
And as I mentioned in my testimony, your acknowledgement of
more additional funds in the appropriation for CDFIs, those are the
critical steps.
Mr. CLAY. Very good.
Mr. Scott, could you please highlight the significance of greater
CDFI participation in the PPP, and how it could impact small busi-
nesses, especially minority-owned businesses?
Mr. SCOTT. As I mentioned in my remarks, we pushed very hard
to get the $10 billion specifically to CDFIs. The reason for that is
that they are right in the communities, they understand the busi-
nesses, and they are working with the smaller businesses. As I
mentioned also, the average loan that we had for these 200 organi-
zations that we found was about $37,000, which is much less than
all of the other numbers you have heard today.
So, we are talking about mom-and-pop operations that are deal-
ing with this particular issue, and it is critical we do that. But
more importantly, or as importantly, we have to provide technical
assistance for these organizations, these smaller companies, to be
able to even access this $10 billion, because they have not been
able to do that before we provided assistance to them, and they
have been able to navigate the programs much more effectively.
Mr. CLAY. Thank you for that response.
Mr. Pugh, and Ms. Mensah, can you please speak to the chal-
lenges faced in helping smaller businesses and businesses oper-
ating in low-income areas to prepare their files for submission to
the SBA platform for PPP loans?
Ms. MENSAH. Thank you, again, Congressman, for recognizing
the role in addition to the money. We call it capital plus. It is the
support that a business needs. Many of our businesses don’t have
private attorneys that they can call on, and accounting firms ready
to go, and so they are working with our staffs at CDFIs, often in
this remote setting, to try to get those forms correct so that the
payroll things are appropriate.
We have had people working through the night to get the busi-
nesses, clients they know, nonprofits they know, through the proc-
ess of PPP. So, it is essential, and it is because of what you said.
They don’t have all of these other relationships in hand, so the
CDFIs and MDIs are performing those roles.
Mr. CLAY. Wonderful.
Mr. Pugh, anything to add?
Mr. PUGH. Sure. For the reasons stated by Ms. Mensah, the
CDFIs play a very critical role in terms of helping small businesses
because of the capacity issue that they have, frankly. But I would
also add that on the other side of this program, once the loan has
been granted, we know that the compliance aspect will be very
daunting for many of the small businesses. We would also ask Con-
gress to think about ensuring that there is no more than a two-
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page requirement for many of these small businesses that are ap-
plying for small-dollar loans, versus the 11 pages that exist today,
again, because they, frankly, just don’t have the bandwidth to be
able to navigate through these very complicated documents, and
then continue to focus on surviving on the other side of the pan-
demic as well.
Mr. CLAY. And just to conclude, the Missouri Bankers Associa-
tion has just recommended to Secretary Mnuchin and the SBA that
there be some kind of easy process, an easy form, like you said, a
one-page or a two-page form to comply.
With that, Mr. Chairman, I thank the witnesses for their re-
sponses, and I yield back.
Chairman MEEKS. Thank you, Mr. Clay.
I now recognize the gentleman from North Carolina, Mr. Budd,
for 5 minutes.
Mr.Budd, you may want to unmute.
Mr. BUDD. I associate myself with Ranking Member McHenry’s
remarks on Members and their mute buttons. I thank the Chair.
I appreciate the time.
Mr. Sills, it is good to see you, again. It is good to have somebody
from North Carolina on the panel. I look forward to seeing you in
person, again. Last week, along with several of my colleagues, I
sent a letter to Treasury Secretary Mnuchin and SBA Adminis-
trator Carranza asking for the Treasury and the SBA to work to-
wards crafting a simplified, streamlined forgiveness application for
loans that were under $350,000.
So, what challenges are you and your customers facing as they
begin applying for PPP loan forgiveness? We have been hearing
from some small businesses and owners that the application is
quite complicated and challenging to fill out. And if they do it
wrong and they are denied, that could stick them with a loan that
they were not anticipating.
Our intentions behind the PPP was to give much-needed relief to
small businesses, and not to further burden them. First of all, what
are you seeing and what would be your suggestions for simplifying
this process? Again, Mr. Sills?
Mr. SILLS. Congressman Budd, it is great to see you, again.
Thank you for your question. Just looking at this from this stand-
point, the original application was only three pages, and the pri-
mary number was, how much do you spend on payroll on a month-
ly basis, times 21⁄2, and this new form that came out on May 15th
is 11 pages. It is very complex.
So, I feel that the SBA should produce a more simplified form,
like a 1040EZ form. And I also feel that they should create an
automated forgiveness calculator, because I know that we are going
to be inundated with questions from our borrowers, because no one
wants to retain more of the loan in terms of paying it back over
time when they really need the majority of the loan to be forgiven,
given the economic situation that we are in.
I anticipate receiving a whole lot more questions as we go
through the new era of, now we are in the forgiveness process of
this process, so to speak.
Mr. BUDD. Very good, and thank you for that.
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Mr. Sills, in a prior role, earlier in your career, you served as the
chief information officer for the State of Delaware, even though we
are proud to claim you as a North Carolinian now, and I believe
you were even a member of the Governor’s Cabinet in Delaware.
You also led extensive efforts in IT consolidation, cloud-computing
technology, cybersecurity, and other areas. You were named IT ex-
ecutive of the year by Government Technology Magazine. I don’t
yet have that subscription. I apologize.
But it is safe to say you have an impressive record in technology
and you are—obviously, now that you are in banking and have
shown a demonstrated track record of success there, the latest in
technology in the banking world.
Ranking Member McHenry had some questions and comments
and thoughts on that, and so has Representative Tipton from Colo-
rado about technology. But we have really seen a technological rev-
olution take place over the last decade, banks and fintechs finding
new ways to innovate. Do you worry that a lot of the smaller com-
munity banks and MDIs are being left behind, in the tech revolu-
tion that the banking sector is experiencing? And if so, what are
some ways that Congress can help these institutions keep up with
innovation? Not even just keep up, but get ahead?
Mr. SILLS. Again, thank you, Congressman Budd, for your ques-
tion. Small banks like ours are falling behind every single day.
Some of the larger banks are investing billions of dollars per year
into their online platforms, into artificial intelligence, into end-to-
end systems where you don’t even have to interact with a customer
service representative.
And so, yes, I am concerned that our bank eventually will not be
able to keep pace with some of the larger institutions.
As I mentioned earlier, the CDFI Fund has some flexibility, I be-
lieve, that would allow them to provide grants to institutions like
ours so that we could improve our technology. We are not going to
be able to compete directly with some of the largest financial insti-
tutions in the world, but we, at least, want to be in the game. And
so, if there was an opportunity to carve out some additional fund-
ing specifically to level the playing field for CDFIs and MDIs to re-
ceive some funding to improve their technology, I think that would
help everybody.
And, again, our institution is very close to the communities we
serve, so I really love the role we have been playing over the last
8 weeks. And if we had additional technology, we could serve our
customers with a truly end-to-end digital experience similar to
what other large institutions did with their PPP loan process.
Mr. BUDD. Thank you, Mr. Sills. Let’s continue that conversation
over the months ahead.
And I thank the Chair. I yield back.
Chairman MEEKS. Thank you. The gentleman’s time has expired.
I now recognize the gentleman from the State of Washington,
Mr. Heck, for 5 minutes.
Mr. HECK. Thank you, Mr. Chairman. Indeed, thank you for
holding this hearing, and thank you to all of you who are partici-
pating in this incredibly important discussion about inequality dur-
ing a critical week. I am grateful to all of you.
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Frankly, amidst the great tragedy of the last week, I have found
some inspiration in those who have come together to be united to
grieve for George Floyd.
On Saturday, I was honored to be able to participate, with 56
members of the Pierce County Black Ministerial Alliance, in a pub-
lic prayer vigil, and yesterday, I participated in a similar event
with about 1,500 of my neighbors here in Olympia, Washington, all
mourning the death of far too many Black Americans. But in addi-
tion to sharing their grief, they were also united in sharing a belief
that we can’t accept the status quo, that it is time to change, and
that it is past time to change, and that we will address racial in-
equality.
This brings me to what I think is a second pivotal moment we
are experiencing, amid all of this economic devastation. Congress
has the power to set a course for our economic future, and we will
all pray that it will be a better economic future.
As we have provided the funds to begin to deal with this, we
have had to ask hard questions, difficult questions: Will small busi-
nesses emerge from quarantine ready to rebuild, or are they going
to be devastated? Will Americans be able to stay in the place they
call home throughout the crisis, or will missed rent and mortgage
payments catch up with them? And will efforts to help America re-
cover from this recession make a difference in structural inequality,
or will we maintain the status quo? And the inequality is struc-
tural. Until we acknowledge it as such, we cannot make progress.
Congress, in our response, put a pretty heavy emphasis on small
businesses hit by the pandemic. I think that was the right ap-
proach, but we are remiss if we do not pay special attention as we
have here today—thank you, again, Mr. Chairman—to neglected
minority workers and minority-owned small businesses who have
been impacted the most by structural inequality.
I have been following labor data over a very long period of time,
and the truth is, it took these workers to whom I refer over a dec-
ade to climb structural barriers and return to unemployment per-
centages prior to the 2008 recession. Last in, first out, and we are
experiencing that now.
So, we have struggled mightily to provide help, and have im-
proved upon our efforts as this has advanced. I thank Chairwoman
Waters for her leadership in this regard. But in the midst of this
discussion today, here is what I am struck by. There are 100 ideas
on how we can do this better. There are maybe 1,000 ideas on how
we can do this better, and many of them are going to be incor-
porated, but we are at risk of getting lost in the avalanche of ideas.
So, I am going to ask each of the three witnesses to make a very
difficult kind of a response to this question. If you had to distill the
two most important things that we can and should do, that would
have the most impact on addressing inequality, help us focus,
please, amongst the hundreds of ideas, what are the two most im-
portant, highest-impact things that we could do?
And I would like to start with Ms. Mensah, if I may, please?
Ms. MENSAH. Thank you, Congressman Heck. And I don’t have
a hard time with this question. I welcome it. The most important
thing to do is to ensure that this country has a robust set of CDFIs
and MDIs positioned in the next decade to make a serious contribu-
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tion to the recovery that the country needs. There is one thing we
need, and that is a more serious appropriation in the Treasury’s
CDFI Fund.
The HEROES Act emergency appropriation of $1 billion, to an
industry that has $222 billion under management, is not outsized.
In fact, it should be the annual appropriation for this field. That
is my one recommendation, because it is the thing that will keep
us strong for the recovery. We do not have an ability, we will lever-
age those funds. There will be many more partnerships. But that
is the one idea that I urge the Congress to stay focused on.
Mr. HECK. Thank you.
Mr. Scott?
Mr. SCOTT. I think a couple of things have to be done, and I sup-
port what Lisa just said, but I think also we have to work on put-
ting together an overall strategy that is going to address these
issues. And it can be a public-private partnership that works on it,
but we have addressed it verbally for years, and we have not really
sat down and done the work that has to be done to put it together.
I think, certainly, from the position of the government, we can put
money into equity for smaller businesses to get them to grow, but
we have to deal with all of the issues that I mentioned, and they
all have to come together to set this problem up, because only set-
ting up small businesses will not do it. We have other issues in our
communities. They have to be fixed, and we have to have an over-
all strategy to get it done.
Mr. HECK. Thank you.
I yield back, Mr. Chairman.
Chairman MEEKS. Thank you. The gentleman’s time has expired.
I now recognize the gentleman from Tennessee, Mr. Kustoff, for
5 minutes.
Mr. KUSTOFF. Thank you, Mr. Chairman, and thanks to the
ranking member for convening today’s hearing. I also thank the
witnesses for appearing as we experiment and try to reinvent our
process of conducting committee hearings.
Mr. Scott, I appreciate your opening remarks. I would like to fol-
low through with a question about technology before COVID-19,
and you may agree or disagree. It seemed like the public saw very
few customers under the age of 30 actually come into your branch.
The younger generation is more reliant on technology, and now
with COVID-19, obviously, there are a lot of new normals, includ-
ing in the area of banking and peoples’ banking habits. And, of
course, their inability to travel outside their homes and go to their
banks.
Can you talk from your standpoint of a leading MDI, the chal-
lenges that MDIs face as it relates to technology? And, again, if you
could kind of expound—I think a lot of these questions had gone
previously to Mr. Sills, some of the solutions that you see that Con-
gress could provide as it relates to availability and accessibility,
which are probably two different things?
Mr. SCOTT. Congressman, I think you are addressing that ques-
tion to Michael Pugh, not to me. I am not a banker.
Mr. KUSTOFF. Okay. I’m sorry. Yes, Mr. Pugh.
Mr. PUGH. I think that there are at least a couple of very critical
issues. The challenges that MDIs and CDFIs are often faced with
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is the ability to take to scale the technology demands that are
needed because of the capital investment that is required. Many of
the CDFIs and MDIs are at the mercy of our core providers, so it’s
the top few core providers that ultimately get to determine whether
or not the technology can be integrated into our core systems. What
I would offer for us to perhaps think about is a couple of key
things. One, perhaps there is an opportunity for Congress to sup-
port incentivizing core providers through a technical assistance
protege program, and this program would then allow those core
providers to play a critical role in working with MDIs and CDFIs,
so that we can meet the demands of our small businesses and our
customers as we move into this digital age.
We think this is important, and we know that, frankly, precedent
is established through the U.S. Treasury through their existing
mentor-protege mentoring program that has been set up. And, per-
haps, that model, again, could be used to help implement this rec-
ommendation.
The other thing that, frankly, we are faced with is the ongoing
capital investment that you heard me mention. And so, because it
is a significant spin, if Congress would look at this as an oppor-
tunity, frankly, for MDIs and CDFIs to participate in grant oppor-
tunities that would allow it to be used towards improving your
overall technology, we think that this would be extremely impor-
tant. Remembering that the MDIs and CDFIs are often serving
low- to moderate-income communities that need the access to main-
stream financial services the most, we can play a critical role in
that.
Mr. KUSTOFF. Thank you, Mr. Pugh.
With my remaining time, Mr. Sills, if I could come to you, and
I am speaking to you from Memphis, Tennessee, your former home.
You answered this kind of broadly when Mr. McHenry and Mr.
Tipton asked you, but are there specific initiatives that you think
Congress could take in terms of the accessibility and the avail-
ability, in my remaining time?
Mr. SILLS. Thank you, Congressman, for your question. I actually
think it all comes back to capital. Capital is critical to build scale.
If we had an additional $5 million in capital, that would allow us
to make those kinds of investments that you are talking about. It
would also allow us to help more of our customers in the markets
that we serve. It would allow us to add an additional $50 million
in assets to our balance sheet.
So if there were opportunities for this committee to recommend
strategies to inject capital into CDFIs and MDIs, I just think it
would help the institutions, but, also, the end customers that we
serve on an everyday basis.
Mr. KUSTOFF. Thank you, and I yield back.
Chairman MEEKS. Thank you. The gentleman’s time has expired.
I now recognize the gentleman from Florida, Mr. Lawson, for 5
minutes. Mr. Lawson, you may want to unmute. Mr. Lawson? I
don’t see the gentleman from Florida. I will put him back in the
queue if he should come back.
I now recognize the gentlelady from Michigan, Ms. Tlaib, for 5
minutes.
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Ms. TLAIB. Thank you so much, Mr. Chairman, and thank you
so much to—I would like to call you all the community banks, be-
cause when you start saying CDFIs to my residents, it doesn’t actu-
ally click, but when I tell them it is people like us who are running
a lot of these community-based financial institutions, it is very im-
portant.
As you all know, we are going through a very difficult time, and
some of us are obviously attending events and we are mourning
and we are trying to heal, but I think we want to get to structural
issues, especially those that have been set up against a lot of our
Black neighbors across the country. And one area I want to talk
about is, according to the Urban Institute, since 2001 the Black
homeownership rate has seen the most dramatic drop of any racial
or ethnic group in the country, declining 5 percent.
In Wayne County, Michigan, alone, in my district, the percentage
of Black people who own their own home dropped in Michigan
more than any other State, down to 40 percent from just over a
half in 2000, according to the report. The horror of African Ameri-
cans throughout the country—they have lost the most ground rel-
ative to other racial and ethnic groups, and middle-aged home-
owners, aged between 45 to 64, the homeowners having lost their
homes during the 2008 crisis find themselves unable to move back
into homeownership as they approach retirement age.
And you all know, and we all know, that some of the backbone
in really building stability for families and economic stability for
families is homeownership. And so, Mr. Scott, your organization
has been very vocal about the broad challenges facing our Black
communities across the country which puts them at a higher risk,
as you know, into poverty traps.
And so, my question to you is, can you please elaborate on this,
and how the pandemic has led—late bear the practical economic
challenges for our communities, again, African-American commu-
nities throughout the country?
Mr. SCOTT. Thank you. I think it is obvious from what we have
seen with respect to the health data, the unemployment data, and
everything else that we have seen that the pandemic has impacted
the African-American community more so than ever before. But
prior to it, even, the housing situation you talked about was re-
ality. Black folks did not own homes, were moving out of Black
neighborhoods because neighborhoods were going down, and it is
something we have to fix.
I think municipalities have to, again—and I keep going back to
engaging with corporate America. I think that is responsible for
them to do it. When we look at municipal housing authorities, they
are not nearly as efficient as some of the private sector organiza-
tions that can do it. I have met with them. They said they can do
things much cheaper. We can provide homes at a much more effec-
tive cost level. And then, if we devote the rest of the things and
get people into those homes, I think they will start moving back
into their communities. But right now, it is an overall situation,
and it is tough to deal with.
Ms. TLAIB. Yes, but Mr. Scott, one of the things I hear from a
lot of my community-based organizations doing housing counseling
is that corporate America doesn’t see them the same way. They see
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the Black community as well as other communities of color very
differently. They are approaching it very much transactionally.
Okay, I did a little bit, I am done. And so, my next question was
about the fact that the private sector, what I call the captains of
the industry, have a really critical role to play in addressing this,
and what more can the private sector be doing. But I think it is
some systemic issues and culture issues where we have to force it.
You all know that prior to the Fair Housing Act and the Commu-
nity Reinvestment Act, all of that was because we had to force
them to see Blacks as equal humans. It is true. We had to force
them. The numbers now of homeownership are even just—the lev-
els of what we see access to homeownership or banking, is actually
lower now among our Black communities across the country than
it was prior to even passing FHA and CRA.
And so, what can we do to mobilize more equity under capital-
ized communities and minority small businesses? I feel like we al-
most need to force it to happen versus these little snippets of, if
you do this as like a little check box, but almost inject changing
the complete culture of how they approach these communities?
Mr. SCOTT. I agree. I think it has been a check box, and I think
it has been verbally addressed, but it has never been actually ad-
dressed. I think that we are in a situation right now where if we
don’t get the corporate community to do something, it is not going
to change. No company that I know of gets anything done without
a vision and a long-term strategy. That is how we got things done
when I was working, and it is how things get done today. If, in
fact, that is not put in place to resolve this issue, it is going to con-
tinue to be verbal. We will continue to see dollars thrown at
projects. We have seen hundreds and hundreds of millions of dol-
lars thrown at our communities, and they have gotten progres-
sively worse to your data. That is not acceptable in most corpora-
tions. We have to change it and we have to bring them together
to the party do it. And then, there has to be money for the folks
to be able to buy those homes.
Ms. TLAIB. Thank you so much.
Mr. Chairman, when that little beep goes off, that means time
is up?
Chairman MEEKS. Your time has expired.
Ms. TLAIB. I had more, but thank you so much, Mr. Chairman.
And thank you so much, Mr. Scott.
Chairman MEEKS. Thank you. The gentlelady’s time has expired.
I now recognize the gentleman from Virginia, Mr. Riggleman, for
5 minutes.
Mr. RIGGLEMAN. Thank you so much, Mr. Chairman, and I thank
the witnesses for being here today. I am so excited to talk about
this, and I think with CDFIs and MDIs, they continue to play an
important role in helping urban economically distressed and rural
communities like mine. My district is bigger than New Jersey,
10,000 square miles, so it is really neat that we have been able to
leverage that. I want to thank you for your testimony.
I want to start with something about data. I am a little bit dif-
ferent, and just listening to Mr. Scott, I sort of changed my ques-
tions here, so thank you for doing that.
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When you are talking about data and corporate America getting
sort of involved with this, my question about CDFIs is, how much
they exchange data. And I went through and looked at all of the
websites for CDFIs. Is there a way, and you are talking about cor-
porate sort of donations, or not donations, but corporate funding
and sort of corporate participation. Can CDFIs—I think there are
over 1,000, and tell me if I am wrong—look at a way to maybe
have a one-stop shop or a portal with data where you can direct
people using ZIP Code or business loan type going forward, because
data is where I like to sit. I have owned companies in the data
space.
Would that work even with ZIP Codes and maybe some competi-
tion within ZIP Codes? You see where there could be a one-stop
shop to actually absorb that data, where people go into one place
and are able to parse where they are at to get those types of loans,
or to get that type of support like the ability to call out proactively
to say, we have these products.
Do you think that is something that we could actually do with
CDFIs, to have a one-stop shop, or a portal, where it is not piece-
meal with the data that we could use to actually make decisions
to go forward?
Ms. MENSAH. I will step in, Congressman, as the leader of an as-
sociation that has, in fact, a CDFI locator on our website right now.
We have been partnering with Google, and we have had early con-
versations with Facebook. We know that entrepreneurs are search-
ing now for where to go.
So right now, we have a locator, and you can see, where is the
CDFI? It would pop up and it would show that Capital Impact
Partners and Community Capital are making loans right now in
Virginia. All of these things can be improved.
And the other combination is, are we talking to individuals seek-
ing loans, or are we trying to find other partners? We have part-
ners in government, mayors. So I think you are onto something. It
is very important. It started in a nascent way, at Opportunity Fi-
nance Network, and this is why our CDFI Fund and its ability to
keep data is so important to us.
Mr. RIGGLEMAN. Yes. I was wondering about a federated way to
attack these problems, and while I was listening today, I had these
other questions, because it seems to me that with the CDFIs out
there and the different customer base when you are talking about
the income levels that they are at, I want to direct legislation at
those income levels, or where we could help CDFIs in these certain
areas based on the requests that they have.
So that is why I was going to ask some pretty technical questions
about, is there one place where we could see how many loans
CDFIs have looked at? Who has been accepted for those loans?
How hard was it for PPP? For Mr. Sills, when he was talking about
this, I was very engaged in, what made it easier for PPP? Were
there things already in place that legislation had helped?
And I will ask Mr. Sills, was there legislation already in place
that helped, or processes that helped, that we can improve on going
forward, maybe for customer outreach, because I would think that
the CDFIs would want to be proactive, to go after their customers
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to say, we have these specific type of products that are available
right now, and we can help you streamline the process?
Were there things that we can improve on, Mr. Sills, that were
out there already that helped, or what can we do technically maybe
through legislation to help CDFIs?
Mr. SILLS. Congressman, that is a great question. Luckily for us,
we were already an existing SBA lender. I think the big difference
in terms of how we were able to help our customers is that we did
a lot of hand-holding initially as they were submitting the applica-
tions. Then, once we started processing the applications, we shifted
gears and we actually emailed them the loan documents and the
notes to sign electronically.
Now, I am an old-school banker, and generally speaking, prior to
this pandemic, we really did require a wet signature. So to answer
your question, we have to be connected to the community and to
our borrowers. We were happy to participate. But it comes down
to, we were already entrenched as an SBA lender. Our biggest
challenge was liquidity. We initially did not have enough funding
to actually fund all the loans, all the loan applications that we re-
ceived. So, that was our biggest challenge with the PPP program.
Mr. RIGGLEMAN. Well, the timing was perfect with that, and I
thank you all so much for this.
And I yield back.
Thank you so much for that, Mr. Sills.
Chairman MEEKS. Thank you, Mr. Riggleman. The gentleman’s
time has expired.
I now recognize the gentlelady from California, Ms. Porter, for 5
minutes.
Ms. PORTER. Hello. I have been in touch with CDFIs and commu-
nity banks in my district about some of the issues that they are
having with regard to unclear or restrictive SBA guidance and loan
terms. Tustin Community Bank told me that their next hurdle is
getting clarity and simplification from the SBA about what it is
going to take to get forgiveness of these loans.
Ms. Mensah, do you have any concerns about how to explain the
forgiveness requirements to your customers? Do your customers
have questions about what they need to do? Can you identify for
me opportunities for SBA to improve its guidance?
Ms. MENSAH. Thank you, Congresswoman Porter. Simplify, sim-
plify, simplify. We should have extremely short, simplified docu-
ments, and I stand by the comments of others to simplify the for-
giveness period, and to make that very clear. Thank you for your
added pressure. Thank you for the work the committee has already
done to pass encouragement for changes with PPP in this second
round.
Ms. PORTER. My next question is about the importance of PPP
transparency, and I have introduced a bill called the PPP Trans-
parency Act to require the SBA to publicly report the details of
PPP loans. We have all heard the stories about abuse of the pro-
gram, but what is getting lost is all the credible work and the suc-
cess stories of the PPP.
So, I wanted to ask you about the bill that I have, the PPP
Transparency Act, which would require the SBA to put online
every PPP loan, and what Treasury has said is they are only going
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to be auditing PPP loans over $2 million, but that means that there
has been no audit for 99.5 percent of these loans.
Because many of you are SBA-approved lenders, you are already
required, if you make a 7A loan, to put this information online.
Can you talk to me about whether or not you support this kind of
transparency requirement, and what benefit it might have in terms
of giving taxpayers confidence about the importance of funding our
CDFIs?
Ms. MENSAH. I can start. Again, we support your legislation. And
I appreciate your ability to lift up the stories that are actually very,
very positive. We are in a field that is very used to already, as you
said, extensive reporting, both to the CDFI Fund and to SBA, so
we support it.
Ms. PORTER. Mr. Pugh?
Mr. PUGH. I echo the comments about supporting the legislation.
I think the key here is for us to be able to understand if the small
businesses truly intended for the program have been able to receive
the benefit. I also think that from an impact standpoint, we want
to be able to look at this information and determine where the sore
spots or gaps exist in order for us to continue our journey in terms
of helping to restore on the other side of COVID-19.
Ms. PORTER. Thank you. And I think one of the things that
might be important to recognize is, the PPP Transparency Act that
I am sponsoring would require the disclosure of the location of the
loan, the congressional district, the MACIS code, the number of
employees, and really importantly, minority ownership status of
the business.
And so, the goal here is to really show the American people that
these PPP loans are working in our community. I think, without
this kind of transparency, we are going to see a few stories of
abuse, and these larger loans that will get audited kind of carry
the day for the narrative.
One difference between the PPP Transparency Act that I am co-
sponsoring, and my colleague, Dean Phillips’s TRUTH Act, is that
the TRUTH Act would have required an explanation of the deci-
sion-making processes under which such funds were disbursed.
And one of the concerns I had is that that would be an unduly
burdensome and difficult requirement, both for the lenders and the
SBA to comply with.
So, I wondered if you had any feedback for me on my bill, if any
of the items that I mentioned that would be required to be gath-
ered would create regulatory hurdles or difficulties for you?
Ms. MENSAH. I have no particular feedback.
Mr. SILLS. I would like to answer your question, also. My answer
probably differs a little from my co-panelists. As a community
banker, we have so many compliance and data reporting require-
ments. We have HMDA, CTR, SARS, CRA, CDFI reporting, call re-
porting, State reporting, and all of this additional reporting is
going to require additional staffing and systems to collect the data.
I wanted to share with you one statistic. We only process PPP
loans for our existing customers. Most of those customers, in terms
of an average, have been in business for 18 years, and most of
them had banked with us for over 10 years, so we really know our
customers. So if someone was to come in and audit our bank and
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ask, ‘‘Where did the money go? Who received it?’’, I could provide
that information, but to just put additional data reporting require-
ments on community banks like ours is a burden.
Chairman MEEKS. Thank you.
The gentlelady’s time has expired.
I now recognize the gentlelady from Massachusetts, Ms. Pressley,
for 5 minutes.
Ms. PRESSLEY. Thank you, Chairman Meeks and Chairwoman
Waters, and thank you to our witnesses for lending your expertise
and your insights to today’s discussion. We do find ourselves expe-
riencing a gravity of hurt and disparate impact, in both historic
times and familiar times.
I want to take a moment just to acknowledge an event that has
far too much precedent in our nation’s history. This week marks
the 99th anniversary of the Tulsa Race Massacre, also known as
the Black Wall Street Massacre. Nearly a century ago, mobs of
white residents stormed through Tulsa’s Greenwood district, or
Black Wall Street, attacking Black residents and businesses and
decimating what was then the country’s wealthiest Black commu-
nity. Homes, businesses, and churches were destroyed and at least
300 lives robbed. While they tried to—
Chairman MEEKS. We are having technical difficulty. The
gentlelady from Massachusetts has frozen.
Are you back?
Ms. PRESSLEY. You tell me. Can you hear me?
Chairman MEEKS. Yes, we hear you now. I want to roll the clock
back. I watched when we couldn’t hear you.
Ms. PRESSLEY. Thank you, Mr. Chairman.
Chairman MEEKS. Go back to 3:50.
Ms. PRESSLEY. Okay. Thank you very much. Maybe, I am just
providing too much truth-telling today, Mr. Chairman.
But, again, I do think this historic contextualizing is important,
given the timeliness of today’s hearing. Nearly a century ago, mobs
of white residents stormed through Tulsa’s Greenwood District or
the Black Wall Street, attacking Black residents and businesses
and decimating what was then the country’s wealthiest Black com-
munity.
Homes, businesses, and churches were destroyed, and at least
300 lives robbed. While they tried to rebuild, the denial of basic so-
cial and economic rights, including housing, healthcare, and edu-
cation effectively ensured they never would. From a lack of repara-
tion to redlining, government policies guaranteed that Greenwood’s
demise was permanent.
Now, there might be some who think that this historical
contextualizing and elevating this in this moment is not germane
to the work of this committee, but our nation’s financial center is
named after a structure erected by slaves. Wall Street then served
as a site where they were bought and sold. Slave owners turned
to property insurance to protect what they saw as an investment,
and banks issued loans using slaves as collateral.
Today, predatory lenders set up in Black communities where pre-
determined help and economic outcomes ensure a steady stream of
customers. There is no separating the history of racism from the
history of financial services in this country.
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So, how do we respond to this current crisis? How we respond to
it means we cannot deny that history, or exacerbate existing dis-
parities? The financial crisis of 2008 was a Great Depression-level
event for Black Americans, wiping out decades of wealth building,
primarily in homeownership. However, a 2013 study found that
Black banks were 10 times less likely to receive bailout funding
during the crisis, and nearly half have gone under since 2007.
Mr. Pugh, how does the disappearance of Black banks further ex-
acerbate the racial wealth gap?
Mr. PUGH. As you have rightly pointed out, the disappearance
creates a real cognitive disconnect in our communities in terms of
the ability for small business entrepreneurs, women- and minority-
owned businesses to have a bank, to access mainstream solutions.
Examples would be, if I think about my area of Brooklyn, it has
had some of the largest, women entrepreneurs in terms of growth
in that particular borough. And by not having access, with the ex-
ception of Carver, to other options, in many cases, it could have,
and has undoubtedly, created some real limitations.
Across our country, we have seen the ongoing closing of our
banks. And it really gets down to capital and capacity. So, I think
we frankly must look at, for an MDI, the ability to ensure that they
have access to capital through various programs. Congress can play
a very critical role in that and then capacity.
On the capacity side, again, very much working with fintechs, big
banks, small banks, to ensure that there are real programs to build
technology to scale, that, again, allows us to be able to ultimately
serve people of color.
Ms. PRESSLEY. Thank you, Mr. Pugh.
One of the Paycheck Protection Program’s many missteps was
automatically disqualifying those with a criminal history or an ar-
rest. Anyone on the panel who would like to weigh in, was this pu-
nitive exclusion something your institution advocated for? And do
you support our call to Secretary Mnuchin, asking for removal of
this exclusion?
Ms. MENSAH. We would absolutely support that call.
Chairman MEEKS. Thank you. The gentlelady’s time has expired.
I now recognize the gentlelady from Virginia, Ms. Wexton, for 5
minutes.
Ms. WEXTON. Thank you, Mr. Chairman. And thank you very
much to the panelists for joining us here today for this really im-
portant discussion. Now more than ever, I think it is incumbent
upon us to make sure that CDFIs and MDIs get the support they
need.
Now I, like everybody else on this committee, heard from my
small business owners during the first round of PPP funding, that
it was almost impossible to navigate the process, that they were
being shut out, that the big borrowers and institutional clients
were getting all of the loans. And that was especially so in the first
couple of weeks, when the guidance was really slow to come.
Now, with the second round, as was mentioned by the witnesses,
the second round was much more effective, thanks in no small part
to set-asides for smaller lending institutions, CDFIs and MDIs,
which this committee, and the chairwoman in particular, really in-
sisted upon including in there. And I am glad we are able to do
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that and help so many small businesses gain access to the PPP, but
we still don’t know the extent to which this program really helped
the minority-owned and small businesses that the SBA really
needs to help.
And the SBA has not made this information public. In fact, the
SBA has said that the inspector general found that the SBA has
not been registering PPP loans by their taxpayer identification
numbers, which in some cases, has resulted in borrowers getting
the funds twice, and even 3 times. It could amount to hundreds of
millions of dollars. Meanwhile, others are denied entirely. And they
are also not collecting the demographic data that is necessary to
determine the extent to which underserved rural minority commu-
nities are being helped by the program.
So, I wrote to the SBA last week requesting increased trans-
parency regarding loan demographics to ensure that Congress is
using the program to help the businesses it was intended to help,
and that the $660 billion that we appropriated to it is not going
to help those businesses who really don’t need it.
But we may not find out any kind of transparency with regard
to minority businesses or demographic data about where the money
actually went.
Ms. Mensah, can you talk a little bit about why it matters to dis-
close racial and gender diversity data for these loans going out any
time, not just for the Paycheck Protection Program, but what dif-
ference does it make?
Ms. MENSAH. Thank you, Congresswoman Wexton. And I want
to double-down on what you said, at any time. I thank you for your
fight to get greater transparency. It is how we will know who was
able to be helped with this emergency funding, and to show where
the gaps are, that you are holding this hearing and you are focus-
ing on CDFIs, because you understand that gaps in the financial
system exist, and that we are needed to be what I said, the cap-
illary system to get the money out.
Increased transparency is most important though, as we continue
our fight for greater CDFI Fund appropriations. And I urge the
committee to continue the data requests there, and to not lose sight
of the minority statistics that are no longer being gathered in the
same way since 2017, so I would urge your fight; it matters where
you lend, and whom you lend to, and this is an industry that has
crafted a specialty in that. So, thank you for your interest.
Ms. WEXTON. And at least in that respect, we will be assured
that it will go to the people in businesses that need it most. Abso-
lutely, good advice.
The set-aside in the second round of PPP funding did help get
more funds out to businesses who really needed it, but there was
quite a delay and quite a lag.
Mr. Pugh, do you have any insights into how that may have af-
fected some businesses in your district? I know that I had busi-
nesses in mine that were hanging on by a thread and weren’t able
to wait for the second round of funding to keep their doors open
before they had to lay off their employees. Do you have any such
stories in your lending?
Mr. PUGH. Sure. Thank you for asking. We know that many
small businesses really didn’t get a chance to participate in the
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37
first tranche of the PPP program. We heard that in some commu-
nities, they are similar, like Harlem, as many as 40 percent of the
small businesses on the other side of the pandemic may not be in
a position to reopen. Those numbers are staggering, and they are
indicative of really two issues: first, is the bottleneck in terms of
the process that was created through the program while we recog-
nized that there was a lot of effort and work to operationalize this
program; and second, many of these small businesses will need con-
tinued assistance and support to think about how to service their
customers on the other side of this pandemic.
Ms. WEXTON. Thank you very much. I yield back, Mr. Chairman.
Chairman MEEKS. Thank you. The gentlelady’s time has expired.
I now recognize the gentleman from Texas, Mr. Green, who is
also the Chair of our Oversight and Investigations Subcommittee,
for 5 minutes.
Mr. GREEN. Thank you, Mr. Chairman. I am excited about the
hearing and want to compliment you on the outstanding job you
are doing. I thank the ranking member as well, and the Chair of
the Full Committee, for the outstanding job she is doing.
I have a couple of pieces of legislation that I would like to call
to the attention of the witnesses, who have done an outstanding
job. I neglected to say a word about the staff. Thank you for put-
ting this together. It really is something that, I believe, will be of
great benefit to us as we move forward.
The first bill is H.R. 6868, and it creates the Community Capital
Investment Program (CCIP) which will provide direct capital in-
vestments to MDIs and CDFIs, as well as smaller banks and credit
unions that serve low-income borrowers, and there is a $3 billion
earmark and direct capital investments and loans for MDIs.
I would like to know from you, Mr. Pugh, does Carver Bank sup-
port this piece of legislation, H.R. 6868, and the creation of the
Community Capital Investment Program?
Mr. PUGH. I think the program, as you have described it, will
have a significant impact for institutions like Carver, because we
are an MDI and a CDFI. And ultimately, again, as you have heard
us talk so much about, capital is an important part of what we
need in order to continue doing the work that we are focused on
in the communities that we serve.
Mr. GREEN. Thank you very much.
I have another bill, H.R. 6476, which would provide liquidity ad-
vances to eligible CDFIs and MDIs, as well as rural banks, with
the purpose of providing more PPP loans for underserved small
businesses, and would do so quickly.
Ms. Mensah, do you agree that H.R. 6476 would enhance the cur-
rent PPP initiative and get funds more quickly to those small busi-
nesses and the employees hardest-hit by the pandemic?
Ms. MENSAH. Congressman Green, we thank you for your ability
to focus on the liquidity challenges of our sector. That is exactly
where the stress has been. So, we support the notion of liquidity.
Things tend to take a long time, so we are even more supportive
of the idea that you already passed in the HEROES Act, of more
funds for the CDFI appropriation. Thank you for putting a finger
on the liquidity challenge.
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38
Mr. GREEN. Thank you. With my time left, I would like to just
mention something that I am introducing. It is a piece of legislation
that will cause to come into being a department of reconciliation,
charged with the responsibility of ending invidious discrimination.
This will be a Cabinet-level department, and there will be a Sec-
retary of Reconciliation. It will be properly funded because it will
get at least 10 percent of the funding from the Defense Depart-
ment. And this is something that I think will have a long-term im-
pact. It gives us the opportunity to develop a strategy to deal with
invidious discrimination and racism over the years.
I think that a Cabinet-level position such as this would cause the
country to be able to continually focus on invidious discrimination,
as opposed to it only being an issue for us when something is trig-
gered, usually something associated with policing.
Banking will then become something where we can focus on lend-
ing, because we know of the empirical evidence indicating that
there is discrimination in lending and banking.
So, my question to the panel would be simply this: Given that
we have a Department of Labor that deals with labor issues, and
we have various other departments, would it be good to have a
Cabinet-level Department of Reconciliation to deal with the long-
term relief needed as it relates to invidious discrimination and rac-
ism? And I will start with Mr. Pugh.
Mr. PUGH. I think the issue of racism and discrimination is a
broad and complicated one that is systemically tied to education,
affordable housing, healthy foods, and the ability to make sure that
you have proper healthcare. If this Cabinet-level position is one
that can help to play a critical role in galvanizing key leaders,
bringing them to the table with the private and public sectors to
continue to solve for these issues and be candid about addressing
them, then yes, it will be valuable.
Mr. GREEN. I thank you, Mr. Chairman. And again, I thank the
staff. I yield back.
Chairman MEEKS. Thank you. That is our final Member. I now
yield 2 minutes to the ranking member, Mr. Luetkemeyer, for pur-
poses of a closing statement.
Mr. LUETKEMEYER. Thank you, Mr. Chairman. And again, Mr.
Posey was unable to get on today as a result of his computer prob-
lems, and because our Rules indicate that you have to be at least
visible at one point on video to be able to participate. He was not
able to participate on his phone. He did say that most of the ques-
tions he had were asked by other Members, so just to give you a
heads-up on Mr. Posey’s participation.
I would like to thank each one of the panelists for being here
today. I certainly appreciate your comments, and your suggestions,
and we will certainly take those under advisement. I think it has
been a very productive session. I know that the biggest thing we
have to do is get our economy going. You all talked about getting
small businesses up and running. And I think they are the back-
bone of our economy. We have to get them going. If we get them
going, as an economy, we will get going.
I know you talked a little bit about the importance of CDFIs to
do that, as well as MDIs. They are an integral part of getting this
whole picture worked out, as a country, getting going again. I know
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39
that there were comments with regards to the PPP and the forgive-
ness portion of it. Having worked on it a lot, it is interesting, I al-
ways told the bankers and the folks who were administering the
program, be careful what you wish for when you start talking
about the forgiveness part of this, because you allow the account-
ants and the attorneys to get involved, and you are going to get a
whole lot of paperwork at the very end, when this is a really, really
simple process. All you have to do is take a copy of your note, a
copy of the approval of SBA, a copy of your updated expense infor-
mation, and a cover letter that says, send me a check; that is all
it would take.
But now, everybody had to have a forgiveness, 11-page docu-
ment, which now we are trying to compact down to 2 or 3 pages.
So again, I hear what you are saying. We are going to try to work
on it. But sometimes, be careful what you wish for.
With that, Mr. Chairman, I yield back. And thank you again for
a job well done on the committee today.
Chairman MEEKS. Thank you, Mr. Luetkemeyer.
I now recognize myself for closing remarks. I wish to thank our
witnesses today for their testimony and for the work that they do
serving underbanked and vulnerable communities. Let me also
thank the chairwoman of this committee for her great work and
guidance on our subcommittee, as well as the ranking member for
his work. I want to thank all of the Members for their cooperation
on this first-ever virtual hearing that we have had. Thank you for
your cooperation and for working together.
Let me also thank the staff, the Democratic staff and the Repub-
lican staff, for working together and making sure we were as pre-
pared as we possibly could be for this hearing, which I think was
successful.
We are living through some of the most trying times for our
country. All of us came to this hearing with heavy hearts and gen-
uine concern for the communities we live in, and for our neighbors
and friends. The last few months have been incredibly trying for
us as a country, for businesses, for families, for the U.S. Govern-
ment. Historically, we have found ways to pull together as a coun-
try and as a people, even as we grapple with social division and
choices that would define the character and the future of our na-
tion.
You cannot, and must not, sugarcoat the depth of the multitude
of crises that we face. The COVID-19 pandemic is far from over.
Over 100 million Americans have already died and many more ex-
pected to lose their lives before it is over. The civil unrest resulting
from police brutality and the spattered brutality in killing the
Black men and women has struck a nerve for the whole country.
But despite the images of riots and violence that dominate the
news media, I know that the majority of Americans are coming to-
gether.
We have seen simple but important acts of kindness and bravery
from average Americans across this nation to support their fellow
man during the pandemic. Whether it was farmers donating their
harvest to the hungry, people sewing masks and 3D-printing face
shields at home, or people checking in and helping elderly neigh-
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40
bors, Americans have continued to demonstrate their capacity for
kindness and compassion during the pandemic.
The Chair notes that some Members may have additional ques-
tions for this panel, which they may wish to submit in writing.
Without objection, the hearing record will remain open for 5 legis-
lative days for Members to submit written questions to these wit-
nesses and to place their responses in the record. Also, without ob-
jection, Members will have 5 legislative days to submit extraneous
materials to the Chair for inclusion in the record.
This hearing is now adjourned.
[Whereupon, at 2:22 p.m., the hearing was adjourned.]
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APPENDIX
June 3, 2020
(41)
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File and source
- File
- CHRG-116hhrg42893.pdf
- Size
- 27,897,711 bytes
- SHA-256
- 6c9739e6301c65121a2bd1837444b1074254eadf5fb516c88c3edf4aeccb5537
- Our copy
- CHRG-116hhrg42893.pdf
- Original
- www.govinfo.gov