[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                                                      
 
                    ROUNDTABLE ON REGULATORY ISSUES

=======================================================================

                               ROUNDTABLE

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, MARCH 17, 2005

                               __________

                            Serial No. 108-7

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          MICHAEL MICHAUD, Maine
RIC KELLER, Florida                  LINDA SANCHEZ, California
TED POE, Texas                       JOHN BARROW, Georgia
MICHAEL SODREL, Indiana              MELISSA BEAN, Illinois
JEFF FORTENBERRY, Nebraska           GWEN MOORE, Wisconsin
MICHAEL FITZPATRICK, Pennsylvania
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

W. TODD AKIN, Missouri Chairman      MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana              ENI F. H. FALEOMAVAEGA, American 
LYNN WESTMORELAND, Georgia           Samoa
LOUIE GOHMERT, Texas                 DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ED CASE, Hawaii
STEVE KING, Iowa                     LINDA SANCHEZ, California
TED POE, Texas                       GWEN MOORE, Wisconsin

                     Joe Hartz, Professional Staff

                                  (ii)




                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small 
  Business Administration........................................     3
Stalknecht, Mr. Paul, President and CEO, Air Conditioning 
  Contractors of America.........................................     4
Collins, Mr. Francis, President, Advanced Digital Solutions, 
  Computing Technology Industry Association......................     5
Clayton, Mr. Ken, Chief Legislative Counsel, American Bankers 
  Association....................................................     8
Crowe, Mr. David, Senior Staff Vice President, Federal Regulatory 
  & Housing Policy Area, National Association of Home Builders...    12
Green, Mr. Rob, Vice President, Federal Affairs, National 
  Restaurant Association.........................................    13
Hearne, Mr. Michael, President, Lafayette Federal Credit Union, 
  Credit Union National Association..............................    15
Parrish, Mr. Don, Senior Director, Regulatory Relations, American 
  Farm Bureau....................................................    16
Strock, Mr. John, Policy Manager, Associated Builders and 
  Contractors....................................................    16
Purser, Mr. Craig, Vice President, National Beer Wholesalers 
  Association....................................................    17

                                Appendix

Opening statements:
    Akin, Hon. W. Todd...........................................    18
Prepared statements:
    Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small 
      Business Administration....................................    19
    Stalknecht, Mr. Paul, President and CEO, Air Conditioning 
      Contractors of America.....................................    21
    Collins, Mr. Francis, President, Advanced Digital Solutions, 
      Computing Technology Industry Association..................    26
    Clayton, Mr. Ken, Chief Legislative Counsel, American Bankers 
      Association................................................    30
    Crowe, Mr. David, Senior Staff Vice President, Federal 
      Regulatory & Housing Policy Area, National Association of 
      Home Builders..............................................    35
    Green, Mr. Rob, Vice President, Federal Affairs, National 
      Restaurant Association.....................................    49
    Hearne, Mr. Michael, President, Lafayette Federal Credit 
      Union, Credit Union National Association...................    53
    Parrish, Mr. Don, Senior Director, Regulatory Relations, 
      American Farm Bureau.......................................    59
    Strock, Mr. John, Policy Manager, Associated Builders and 
      Contractors................................................    67
    Purser, Mr. Craig, Vice President, National Beer Wholesalers 
      Association................................................    72
Attachments
    Frisby, Mr. Bradford, Associate General Counsel, National 
      Mining Association.........................................    76

                                 (iii)




                    ROUNDTABLE ON REGULATORY ISSUES

                              ----------                              


                        Tuesday, March 17, 2005

                  House of Representatives,
   Subcommittee on Regulatory Reform and Oversight,
                                Committee on Small Business
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 2:07 p.m. in 
Room 2360, Rayburn House Office Building, Hon. W. Todd Akin 
[chairman of the Subcommittee] presiding.
    Present: Representatives Akin, Kelly and Poe. 

    Chairman Akin. I do not have a gavel, but let us bring the 
meeting to order here.

    Ms. Velazquez. He is ready to go.

    Chairman Akin. Let me just say though usually what we do is 
we have witnesses come in, and everybody speaks a certain 
amount of time; not quite as many witnesses as we have here.
    The purpose of this meeting is really to help us set 
priorities particularly for this year, but for the next two 
years, and so what I was thinking about instead of having it be 
quite so formal is everybody go around and make opening 
statements and that sort of stuff would be rather to try to 
have a more free-flowing just like a regular business meeting.
    The thing that we are trying to understand is particularly 
in terms of regulatory burden on small business. Where are 
those problems coming from? If you were made king for a day and 
you got one wish or whatever it is where would you go? I think 
those are the kinds of directions we want to go.
    Let me at least do my opening statement. I do not want to 
disappoint the staff certainly.
    Ladies and gentlemen, I would like to call this meeting to 
order. Welcome, everybody, and thank you for your participation 
today. I was recently honored to be selected Chairman of the 
Regulatory Reform and Oversight Subcommittee of the House 
Committee on Small Business.
    I look forward to working with all of you, especially our 
distinguished Ranking Member from Guam, Congressman Bordallo--

    Ms. Velazquez. No, no, no. Congresswoman.

    Chairman Akin. Congresswoman.

    Ms. Velazquez. Practice.

    Chairman Akin. All right. Thank you.
    --as we address the immense regulatory burden affecting 
small businesses. Too often efforts to reform and reign in 
overreaching regulations have met with resistance from the 
government bureaucracy even when it is in the hands of a small 
business-friendly Administration.
    This is my first official action as Chairman of this 
Subcommittee. I hope to take from this event and develop some 
priorities that we will focus on for the 109th Congress.
    In a time when our economy relies so greatly on small 
business to keep our country moving, we cannot afford to stifle 
that progress by continuing to add cost and regulations to 
disadvantage these businesses. Half of our national workforce 
is employed by small businesses. Two-thirds to three-quarters 
of new jobs are created by small business.
    Now it is time. We must do everything in our power to limit 
the reach of regulations and lower the cost of regulations to 
small business.
    I look forward to the testimony of all our participants. I 
ask that you hold your--we are not going to do the hold opening 
statements. We are just going to have a free-for-all here. I 
think that covers the beginning.
    Ranking Member?

    Ms. Velazquez. Well, thank you very much. Congresswoman 
Bordallo from Guam is the Ranking on this Subcommittee, and she 
is in Guam today. Anyway, I am here. I am the Ranking Member 
from the Small Business Committee.
    I just want to tell you that this might be the only 
Committee where things try to get done because we truly believe 
that there is no Republican nor Democratic approach to deal 
with that issues that are important to small businesses.
    We all say that small businesses are the job creators in 
our economy, and if we want to get this economy back on track 
we have to create and help the government to create a climate 
that is conducive for you to do what you do best.
    One issue that is important to me and to the Democratic 
Members of the Small Business Committee is to see how can we 
reduce regulation and paperwork to the extent that yesterday I 
held a roundtable with small business groups from across the 
country to deal with the issue of the proposed regulation on 
the size standards and what impact it is going to have on small 
businesses.
    The economic impact that the proposed changes to RESPA, for 
example, will have on small businesses in the real estate 
industry, that is another issue that I have been dealing with.
    Examining how the proposed Do Not Fax rule will impact 
small firms and the new requirements of Sarbanes-Oxley, many of 
which impose regulatory burdens on smaller companies and are 
creating barriers to capital markets for these small firms.
    We want to do what is right on behalf of small businesses, 
and the best way to do it is by listening. One thing that I 
asked yesterday to everyone who was represented or sitting down 
around the table was if there is one thing that you know in 
terms of regulation that will help your industry, your company, 
what may that be? I know about the only way we could reduce 
regulation is by starting here in Congress.
    Welcome, all, and thank you very much for being here today.

    Chairman Akin. Thank you.
    Just before we get started I do want to recognize the 
Honorable Tom Sullivan, who has been kind enough to join us and 
I think probably about one of the best friends small business 
could have.
    Tom works hard at trying to review the kinds of rules and 
regulations that are written by various agencies, federal 
agencies, and to try to see that those things are not 
oppressive or unnecessarily burdensome.
    We appreciate the consistent advocacy that you provide, 
Tom. If you would like to make a statement or two you can, or 
we will just get started.

    Mr. Sullivan. Sure.

STATEMENT OF THE HONORABLE THOMAS SULLIVAN, U.S. SMALL BUSINESS 
                         ADMINISTRATION


    Mr. Sullivan. Thank you, Mr. Chairman and Ranking Member.
    I guess I will just let the cat out of the bag about what 
my office's secret is. Our secret is working with the Small 
Business Committee. I think it is something that certainly the 
Chair and the Ranking Member know and all the staff know, but 
not many other folks really know that.
    At the Office of Advocacy at the Small Business 
Administration we have a team of economists who try to measure 
all of your impact on the economy and then push it out to 
policymakers so they have greater sensitivity to how their 
policies affect small business.
    We also have a team of lawyers, and the lawyers enforce a 
law called the Regulatory Flexibility Act. Basically this law 
requires that every federal agency consider their impact on 
small business before they regulate. I mean, that is really the 
stress point of the Regulatory Flexibility Act.
    Now, we use any method available to convince agencies to 
follow that law. One of those methods is when they maybe are 
straying from the path a little bit we work very closely with 
this Committee and, believe it or not, they tend to get back on 
the path pretty quickly when the Chairman of the full Committee 
and the Chairmen of the Subcommittees and the Ranking Member 
all join together to say we will not tolerate unfairness in how 
regulatory agencies treat small business.
    That stick for our office has been very, very effective. 
There is absolutely a shoulder-to-shoulder fighting that goes 
on cooperatively to make sure that regulatory agencies listen 
to all of you.
    Mr. Chairman, if I were king for a day and had that one 
wish in the regulatory world it would be that uniformly 
agencies not only listen to all of you before they make 
regulations that affect you, but actually act on your 
recommendations. That would be my one wish. It is also 
ironically my job, so we will make sure to try to make that 
wish come true as best we can.
    It is a pleasure to be here, and I too am going to learn 
from the different business organizations so that you all can 
help my office prioritize for the coming year and the coming 
years ahead.
    Thank you, Mr. Chairman.
    [The Honorable Sullivan's statement may be found in the 
appendix.]

    Chairman Akin. Thank you very much.
    Okay. I think we are just going to jump in. I was happy 
with your question as an opening question. I just want to know 
if you had one thing or even one area of red tape and 
regulations as troublesome, let us talk about that.
    The next thing I am going to ask so you know kind of where 
I am going also would be my background in engineering. I came 
out of the business world and slid down the totem pole of life 
all the way into politics.
    The one thing we used to talk about is the old 80/20 rule. 
I have to believe that red tape, probably like many things, 
follows that; that 80 percent of the nasty red tape may come 
from a particular source, so I am going to be asking sort of 
categorically where problems come from as well.
    If anybody wants to jump in, you are just welcome to start 
with your pet excessive red tape. No problem with red tape?

    Mr. Stalknecht. Since I am over on this side of the table 
maybe I will jump in first.

 STATEMENT OF PAUL STALKNECHT, AIR CONDITIONING CONTRACTORS OF 
                            AMERICA


    Mr. Stalknecht. I am Paul Stalknecht. I am president and 
CEO of the Air Conditioning Contractors of America. We have 
roughly about 5,000 members nationwide, almost all of which are 
in small business.
    Two issues that we really have--I am going to take two. The 
first one is to thank Chairman Akin for being a co-sponsor of a 
bill to accelerate the depreciation rules for HVACR equipment. 
We appreciate your support of that. That would be my one wish.
    My second wish would be that many of our members are 
concerned about the issues that we discuss here today, but 
being parochial we have one issue. Refrigerants are an integral 
part of our industry and heavily regulated by the EPA. The 
Clean Air Act amendment signed into law in 1990 created 
additional regulations for the handling and recycling of 
refrigerants containing chlorine, commonly known as CFCs, and 
hydrofluorocarbons, HCFCs. They are under currently 608 of the 
regulations.
    The Clean Air Act contains a strong enforcement system for 
violators of those rules. Fines can be up to $27,000 a day. 
Unfortunately, EPA has not actively enforced the Section 608 
recovery rules.
    The bad actors in the industry are not recovering and 
recycling ozone depleting refrigerants, and they are unfairly 
competing against good contractors who are doing so. Some 
significant loopholes exist involving the unintentional and 
inadvertent leak of refrigerants and the sale of some of the 
refrigerants.
    What we are asking for is actually we support the 
regulations, but we would ask for the EPA to strongly enforce 
its existing regulations and put all small contractors in the 
HVACR industry on a level playing field.
    [Mr. Stalknecht's statement may be found in the appendix.]

    Chairman Akin. Okay. What was the first thing that you 
mentioned before that? I am sorry.

    Mr. Stalknecht. It was a bill that you co-sponsored. It was 
regarding the accelerated depreciation of HVACR equipment.

    Chairman Akin. Right.

    Mr. Stalknecht. Right now you can depreciate over a 39 year 
lifespan. The equipment will only last 15 or 20 years. We are 
asking to accelerate that up to about 15.

    Chairman Akin. Others? Yes. Just to bring you up to speed, 
this is a little bit more informal structure. We are trying to 
find out where are some problems with red tape, and because of 
the time schedule of votes coming up soon instead of 
introducing each witness we are just basically letting people 
go and talk.
    Yes?

   STATEMENT OF FRANCIS COLLINS, ADVANCED DIGITAL SOLUTIONS, 
           COMPUTING TECHNOLOGY INDUSTRY ASSOCIATION


    Mr. Collins. My name is Francis Collins, first of all. I am 
with Advanced Digital Solutions. We are a local small computer 
reseller.

    Chairman Akin. If you could pull the mike closer to 
yourself that would probably help too. Thank you.

    Mr. Collins. Again, I am Francis Collins. I am with 
Advanced Digital Solutions. We are a small systems integrator, 
a computer reseller in Fairfax, Virginia.
    My concern primarily is not so much what we face nowadays, 
but what we see coming down the pike specifically related to 
computer recycling. Right now we are looking at a hodgepodge of 
rules and regulations being enacted by the states that are 
going to create a tremendous burden on us, the small companies.
    Most people think of computer sales and the issues related. 
If you look at IBM and Dell, the large companies, they still 
only represent probably about 40 or 50 percent of the total 
system sales in the country.
    The majority of the sales are from countries such as 
ourselves, and we are very concerned that the computer 
recycling rules as they are presently popping up piecemeal from 
state-to-state are going to create a tremendous burden for us 
because we are small here, but we do sell into Florida. We sell 
into California. We sell into Texas.
    I would like to see some action relative to specifically 
any rules that are enacted that specifically looks at the 
majority of the computer manufacturers in the country who are 
small business based as opposed to the large resellers like 
Dell and that earnings are specifically taken into account.
    [Mr. Collin's statement may be found in the appendix.]

    Chairman Akin. I do not even know what computer recycling 
is. When I recycle, I throw it in the garbage.

    Mr. Collins. There you go. Right now you are talking 
probably 40 to 50 percent of the recycled waste nowadays is 
technology related, so it is all CFC related. It is plastics-
based. It leaks mercury. It leaks lead. It leaks arsenic, et 
cetera.
    There is a move afoot for the manufacturers to start 
footing the recycling bill, so if you buy a new computer there 
is a $50 fee tacked onto the new computer that allows the 
manufacturer to recoup the cost of recycling that computer so 
it does not go into a landfill.
    The idea is to try to get some encouragement somewhere so 
they do not get thrown away, so when your monitor is dead you 
do not put it out for the trash man.

    Chairman Akin. Are you advocating that we should put like a 
cost on computers so that when they are recycled--like a 
recycled tire kind of thing?

    Mr. Collins. Yes. What specifically looks like is going to 
be coming down the pike is that if I sell a monitor I am 
responsible for recycling the old one.

    Chairman Akin. And you are advocating that we should have 
laws that do that?

    Mr. Collins. I am advocating that if there are laws that 
are enacted we are not looking at how they affect Dell, IBM, 
HP, but you look at how they affect Advanced Digital Solutions 
and the other 40 percent of the computer resellers who are 
selling these.
    Dell, HP, they could absorb those regulations. It would put 
us out of that business.

    Ms. Kelly. Can you sell recycled computer parts reclaimable 
with the new parts?

    Mr. Collins. I guess that is the question. It is apparently 
not enough reclaiming that it has become an industry that is 
profitable. There is enough waste out there right now that if 
there were money to be made doing that it would not be a 
problem. You would have companies knocking on your door.

    Ms. Kelly. Kind of like batteries?

    Mr. Collins. It is like batteries. I do not know what the 
economics of that industry are, but the reality is that you do 
not have anybody coming knocking on your door saying hey, do 
you have an old monitor that you want to give me so I can 
recycle it?
    The business has not developed, which to me implies that 
there is no economic incentive to do it or no profit motive to 
do it, so it really becomes a cost burden to somebody, whether 
it is the taxpayer, whether it is the manufacturer, whether it 
is the folks like me who are putting them out in the field.
    At some point I agree wholly that from an environmental 
standpoint it needs to be addressed. Who is bearing the burden 
of that cost? We are really just looking at the small business 
community. There are needs, and the expense of the regulatory 
burden is addressed when this subject comes up.
    I am not sure that it is within this Committee that that 
legislation would fall, but if it is environmental and if there 
are going to be regulations at some point it is going to cause 
us probably either significant expense or probably to get out 
of the business just with some of the things we have seen 
coming out of the states.

    Chairman Akin. Okay.

    Ms. Kelly. Can I ask another question?

    Chairman Akin. Go ahead.

    Mr. Collins. Sure you can.

    Ms. Kelly. My concern is that [inaudible] I believe, and if 
we can work [inaudible].

    Mr. Collins. Absolutely.

    Ms. Kelly. [Inaudible].

    Mr. Collins. Are you talking in the context of--

    Ms. Kelly. [Inaudible.]

    Mr. Collins. In other words, if I am going to be a 
collector of old computer parts and a recycler of the elements 
contained within, that is a business. I am the person who is 
selling the new computer who has now potentially got a 
regulatory burden to see what is going to happen to the old 
computer.
    If there is an avenue established where I could easily turn 
that over to a recycler, and if it incurs an additional $20 per 
computer cost to the consumer, like I said, somebody has to pay 
for that somewhere along the line.
    There are plenty of statistics both environmentally in 
terms of the volume of waste that is being generated, as well 
as the volumes and values of the recyclable elements within 
that. Right now there is a whole industry where that stuff is 
just shipped overseas, and you end up with all these poisons 
leaching into, you know, the backyards of poor countries.
    What we could see happening is there are going to be a lot 
of regulations coming up with this because it is a big problem 
in the environmental space, and I do not deny that at all. It 
is going to become a problem for us. The larger companies--

    Chairman Akin. I think the purpose of what we are doing 
here is to just take a look in a very general perspective, so 
let us save the solution of this--

    Mr. Collins. Okay.

    Chairman Akin. --to more specific kinds of meetings.
    Other topics? Yes, Ken? Go ahead.

     STATEMENT OF KEN CLAYTON, AMERICAN BANKERS ASSOCIATION


    Mr. Clayton. Thank you, Mr. Chairman. Mr. Chairman, my name 
is Ken Clayton, and I work for the American Bankers 
Association.
    I think Mrs. Velazquez and Mrs. Kelly are very familiar 
with some of our issues, but maybe to give you a sense of what 
our institutions face and how that then translates to them as 
small businesses and to those that they serve, the small 
businesses they lend to, since 1990 801 new regulations have 
been issued for banks by bank regulators, and that does not 
count other things that come out of the SEC, that come out of 
accounting regulators, that come out of FTC and other agencies 
that have some kind of jurisdiction over our industry. That has 
a significant consequence on small businesses.
    I would note to you we meant to bring today we have a 600 
page summary of regulations for our institutions in terms of 
how they can learn to work with the regulatory burden they have 
to work under. We are a heavily regulated industry.
    Now, how does that translate into--

    Chairman Akin. Who issues those regulations?

    Mr. Clayton. Well, there is a group of five major bank and 
credit union regulators, as well as others, so the Fed, the 
FDIC, the OCC, the OTS, and there are others. We are heavily 
regulated as the case might be.
    I guess we are trying to point out two things here. One is 
that if you looked at the 9,000 or so banks that are out there 
this year, out there now, approximately 8,000 of them are small 
businesses. They are under $500 million in assets. Three 
thousand of those actually are 25 or fewer employees. They have 
a significant burden on them when you think about it not just 
in training them the first time, but when we have staff 
turnover we have to train them again.
    Those institutions, some of the things they do, are clearly 
in terms of trying to protect safety and soundness. They try to 
protect consumer protection laws. They likewise also try to 
perform government services. We help fight money laundering. We 
help discover terrorist financing. We help the IRS try to kind 
of deal with tax evasion issues, so we do a lot of things on 
behalf of the government that unfortunately the cost of such 
regulation gets passed on to consumers.
    Let me just leave you with two big numbers to think about.

    Chairman Akin. Ken, are you the state banks?

    Mr. Clayton. No. Both. We are talking about the whole 
thing.

    Chairman Akin. Federal and state?

    Mr. Clayton. Federal and state.

    Chairman Akin. Okay.

    Mr. Clayton. Although I would note that a lot of regulation 
comes out of the federal government and that the states then 
supplement that, so it is not just--banks are highly regulated, 
and I think the Financial Services Committee Members can 
actually kind of probably fill you in more than you would want 
to know on some of that.
    As a practical matter we looked at some of the numbers 
here. It turns out that some research done in 1990 by some 
surveys we did along with the Federal Reserve is that the total 
cost of bank compliance at that time was somewhere between $27 
billion and $42 billion per year. That is a lot of money in any 
case.
    When you start though thinking about how it translates into 
real dollars being lent to real companies and the small 
businesses that your Committee has jurisdiction over, if you 
were to be able to cut 20 percent of that regulation and turn 
it back into capital the way things with leveraging we could 
probably provide probably close to $55 to $83 billion in 
additional funding. That is real jobs for real people in real 
communities.
    Now, you asked if there were a couple of areas that we 
would focus on. Again, Mrs. Velazquez and Mrs. Kelly are very 
familiar with this, but we talked a little bit about the 
Sarbanes-Oxley Act and some of its unintended consequences.
    As a practical effect, accounting firms are now charging 
our community banks two to three times what they were charging 
last year, not necessarily because they pose a higher risk, but 
because they have responsibilities under the Sarbanes-Oxley Act 
that then translate into higher costs to the businesses they 
serve.
    So we would ask you to kind of focus in on some of those 
unintended consequences and recognize that, while still 
recognizing that there is a value in the law and not trying to 
undercut that law, but recognizing that different institutions 
get treated disproportionately, and I think small businesses 
are the ones that get the kind of raw end of that deal.
    The second thing is dealing with the Bank Secrecy Act 
regulation, which deals with money laundering and financing and 
issues like that. It has a significant interest in our ability 
to do business. It costs a lot of money. Mrs. Kelly is smiling 
because she knows there is a lot of interest on the Committee 
in various places at the Treasury Department and otherwise on 
this issue.
    It costs a lot of money to comply with. Banks, if they do 
it wrong, are subject to potentially millions and millions of 
dollars in penalties, so it has a real impact in terms of cost 
to the institutions and cost of their human and capital 
resources.
    On the other hand, it also affects our ability to serve 
businesses. I will give you an example. Grocery stores, 
convenience stores, gas stations that provide check cashing 
services to low income people that may be living from month to 
month that may not be part of the traditional banking system.
    If they are bringing a paycheck that is around $1,000, if 
they bring it in they have to be considered money services 
businesses regulated by the Treasury and subject to all the 
money laundering rules. If they do not do it right, the 
potential is that the bank that that company, the convenience 
stores or the gas station, whoever does business with them, can 
be subject to liability and penalties in the $1 million range 
for the failure of that company to do it right.
    What is happening is that our institutions are going to 
have to stop doing business with those companies because they 
cannot deal with the infrastructure. Yes, there is I guess a 
minute risk that there is a chance of somebody trying to funnel 
money into the banking system for illegal reasons, but as a 
practical matter these are real businesses, traditional, 
legitimate and are trying to be helpful to their communities 
but will be denied banking services as a result of somebody's 
unintended consequences.
    I will just leave that with you.
    [Mr. Clayton's statement may be found in the appendix.]

    Chairman Akin. Thank you. So the source of that regulation 
is very specialized, and it is a whole series of Committees?

    Mr. Clayton. Well, it is mostly the House Financial 
Services Committee and the Senate Banking Committee.
    I will tell you when I look at our laws--I had a 
compilation of laws--it is 1,500 pages. That does not count the 
regs that come out of that too. We are heavily regulated, but 
the impact is significant not just to us, but to the people we 
serve because we cannot make the loans.
    Again, for every dollar we get to save we can lend $7 out. 
That is where you get these big numbers of billions and 
billions of dollars that can be lent to small businesses that 
can employ more people in their communities.
    All we ask in addition to some specifics is that Congress, 
wherever you are sitting, be mindful of the impact, some of 
these unintended consequences. While there may be something 
that needs to be addressed that is a problem, recognize that 
there are consequences to the solution that may be more costly 
than the problem itself.

    Mr. Sullivan. Mr. Chairman, actually I would like to point 
out to many of the folks who are around the table who are all 
affected really by unintended consequences of the Sarbanes-
Oxley law.
    There is a little glimmer of hope in that the SEC 
Commissioner has in fact established a Small Business Advisory 
Task Force or team and so right now as far as striking when the 
iron is hot please try to familiarize yourself with that 
advisory group and get in your parochial issues so that they 
are on the table or on the radar screen.
    You see certainly the leadership in Congresswoman Kelly, 
Congresswoman Velazquez and Congressman Akin. Once that 
advisory committee starts chugging along it is certainly 
appropriate for the Financial Services and Small Business 
Committee to simply ask them how is their work going and how 
are they addressing some of these unintended consequences.
    It really is I think up to all of us to exploit that good 
news to the extent possible so that SEC has a full 
acknowledgement of the unintended consequences coming out of 
that task force.

    Ms. Velazquez. I would like to ask you if given the fact 
that these small banks not only are small businesses, but also 
are providing services not only to low income communities, but 
small companies, firms, given that there is a role for the 
Office of Advocacy to work with them and this task force and be 
a bridge.

    Mr. Sullivan. Yes. Actually, we have a secret insider over 
at the American Bankers Association. James Ballantine is a 
great friend of our office. Ken, we work with him a great deal 
and really want to thank the Bankers Association and, I mean, 
all of the folks who are here.
    You all keeping my office busy is what makes us effective. 
They actually were fantastic to point out an ill-conceived 
proposal by Department of Treasury about a year and a half ago, 
and because of their activism on--I am going to screw up the 
name. I apologize. It was the non-resident alien interest 
reporting proposal.
    Did I get it right, Craig? Something like that.
    Because of the Bankers' activism, we were able to convince 
Treasury to withdraw it, so we will continue to do that, 
Congresswoman.

    Ms. Kelly. Mr. Sullivan, what are some of the government 
agencies you've been working with?

    Mr. Sullivan. The answer to the Congresswoman about which 
agencies we have established good relationships with. SEC 
actually, the Securities and Exchange Commission, we have seen 
some good progress.
    The OCC we have not established the same level of 
relationships that we should, so one of the priorities that I 
am going to take back is perhaps we should try to establish 
some better relationships there.
    Thank you for that comment.

    Mr. Clayton. We would be glad to help you.

    Mr. Sullivan. Thanks.

    Chairman Akin. Thank you, Ken.
    Let us move on. Mr. Crowe?

 STATEMENT OF DAVID CROWE, FEDERAL REGULATORY & HOUSING POLICY 
          AREA, NATIONAL ASSOCIATION OF HOME BUILDERS


    Mr. Crowe. Thank you, Congressman. My name is David Crowe. 
I am with the National Association of Home Builders. I hold the 
title of Senior Staff Vice President for Regulatory Issues, so 
this is a very appropriate chance to address three Members of 
Congress, as well as the SBA Advocacy Office.
    I submitted suggestions for six different issues. I 
certainly will not go through every one of those. I will say 
that they run the gamut of federal agencies, so you have your 
pick of lots of places to dwell on with the home builders, 
which is a very concentrated small business industry.
    Four out of five of our members build fewer than 25 homes a 
year. We are an industry of very small companies. There are a 
few obviously very large national companies, but the bulk of 
the industry is small businesses run by usually a proprietor 
and maybe even that person's spouse or some other close 
relative and so these businesses are very affected by the sorts 
of things you are hearing about.
    We appreciate your giving us the opportunity to talk to you 
today. I will raise one issue that I think probably if I had to 
pick one, if I was forced on one, and I will stick with that 
admonition, is EPA.
    E.P.A. is charged with the job of making sure that the 
waters of the United States are clean, a laudable goal, a 
reasonable thing to do, but they have approached the home 
building industry like it is a factory with a pipe coming out 
of the end of it and so they are dealing with the home building 
industry in an entirely inappropriate way to stop runoff from 
construction sites, which is the industry's contribution to 
pollution if you will, dirt in the water. That is what we do.
    As a consequence of this overregulation of the industry and 
attempt to stop water runoff, they are citing our members for 
paperwork violations, which is also a very onerous task to 
begin with. The agency requires constant reporting, daily 
inspections, plus they are compounded by various levels of 
government taking on effectively the same operation.
    E.P.A. has actually assigned this authority to 45 of the 
states. Five have decided and the District has decided not to 
do it, but 45 states said we will take on that responsibility, 
but EPA has not stepped back completely from enforcement so we 
still get the double or even triple whammies because local 
governments will also step in.
    Our industry is not saying we should not do our job in 
making sure that the runoff is protected and contained. What we 
are concerned with is that the agency is looking at this as a 
paperwork issue and not as a viable environmental issue.
    I also have wonderful examples at Fish and Wildlife, at HUD 
and at Rural Housing Service, but I will let you read our 
submitted testimony for that.
    [Mr. Crowe's statement may be found in the appendix.]

    Chairman Akin. David, I think what I am hearing you say is 
we sort of stepped out of the realm of common sense, and they 
are just basically handpicking you with a lot of bureaucracy as 
opposed to have we done anything to the environment or has 
there really been any serious problem with runoff. That is not 
it. The serious problem is you have not filled out the paper 
the right way, right?

    Mr. Crowe. No. You said it exactly right, Congressman.

    Chairman Akin. If you had to pick one agency, EPA is tough?

    Mr. Crowe. It is very tough.

    Chairman Akin. Worse than IRS?

    Mr. Crowe. Yes, actually. In our industry's case, I would 
say that we hear many more complaints about EPA and Fish and 
Wildlife than we do about IRS.

    Chairman Akin. In some other forums I have had I asked 
people what would be the thing that is the biggest source of 
red tape, and what I heard is that EPA probably generates 
more--I mean the IRS generates more for businesses in general, 
so it is interesting to hear you say that.
    Any questions on Home Builders?
    [No response.]

    Chairman Akin. Go ahead, Rob.

 STATEMENT OF ROB GREEN, FEDERAL AFFAIRS, NATIONAL RESTAURANT 
                          ASSOCIATION


    Mr. Green. Thank you, Mr. Chairman. I will be brief. I know 
you have a series of votes coming up. Rob Green, National 
Restaurant Association.

    Chairman Akin. Rob, I do not mean to pick on you or 
anything. They have called us for a vote here pretty quick, so 
we are going to have to scoot right along.

    Mr. Green. Yes. I will make it as short as I can.

    Chairman Akin. Yes.

    Mr. Green. Restaurants. You all know our industry. We are 
big chains, and we are independents. Seven out of 10 have fewer 
than 20 employees.
    The ADA has posed some issues for the restaurant industry. 
The Department of Justice puts out what is known as the 
Americans With Disabilities Accessibility Guidelines, which 
instructs businesses how to comply with the ADA. Our members 
want to comply with the ADA and we advise all of our members to 
be in compliance with ADA.
    There is a new rulemaking out from the DOJ which will 
substantially redo the requirements for certain businesses 
under the ADA, and in particular for restaurants it will impact 
parking spaces, employee work areas such as kitchens and even 
dining rooms, and it will involve for small businesses 
potentially huge reconstruction/remodeling costs.
    We are currently trying to work with DOJ. We are submitting 
comments. It is not only the restaurant industry that is 
concerned. There are a number of other organizations and 
companies that are very, very concerned that these new 
guidelines reflect the fact that small businesses--it is 
challenging with the resources they have.
    They are in current compliance with the ADA, but the new 
guidelines might put them out of compliance, and it is a very 
significant cost.
    Another ADA issue is frivolous lawsuits. In certain parts 
of the country there are some unscrupulous lawyers that go look 
for restaurants that are not in total compliance or apparently 
not in compliance or there is question about compliance with 
ADA and file lawsuits to try to get some relief for their 
client. In many cases these are indeed frivolous.
    Because of the unique nature of the restaurant industry, 
our members are very small. They are doing the best they can. 
We are asking for just a limited period of time if there is a 
lawsuit to understand what the lawsuit is about and to mitigate 
the problem if appropriate.
    We are currently in discussions with the disability 
community, with other folks on the Hill, to try to come up with 
a solution that would not infringe upon the rights of the 
disabled, but would eliminate these types of drive-by lawsuits.
    Last, but not least, the SBA size standards. Congresswoman 
Velazquez did have a roundtable yesterday. The SBA did have a 
proposal, which has since been withdrawn last year, but there 
is a new notice, an advance notice of proposed rulemaking, on 
the table to try to streamline and simplify the current number 
of size standards to a smaller number.
    The restaurant industry is just concerned that the last 
proposal did disproportionately impact the industry. It would 
have taken a lot of restaurants out of the classification of 
small business.
    Issues that we are concerned about are the part-time nature 
of our workforce. The average employee works about 24 hours per 
week compared to 33 hours for a typical industry, and many of 
our employees are seasonal. Some restaurants are only open six 
months out of the year, and in the summertime restaurants 
employ seven percent more employees than in the wintertime. Any 
proposal from SBA should recognize that.
    It also takes a lot more employees for a restaurant to earn 
an equal amount of revenue for another business. One employee 
in the restaurant industry generates $38,000 worth of revenue.
    If you look at other industries, even convenience stores, 
one employee generates $210,000 worth of revenue, so we are a 
lot more labor intensive so the size standard issue is one we 
are watching very closely.
    Thank you.
    [Mr. Green's statement may be found in the appendix.]

    Chairman Akin. Thank you very much.

    Mr. Sullivan. Mr. Chairman, Rob was being really polite 
about the frivolous lawsuits. The lawsuits that he is talking 
about are extortion. Make no bone about it.
    Congressman Foley has had a bill before the House in the 
past. It is worth looking at anew. It is the worst type of 
lawsuit abuse.

    Chairman Akin. Thank you.
    We have got just a few more minutes. We have to catch the 
train to get on over to do our voting. I am trying to think. 
How many more people would like to kick in on this meeting?

    Mr. Hearne. I will take less than one minute.

    Chairman Akin. Okay. Less than a minute. Two? I do not mind 
if we want to try and do it in three minutes. We probably can 
do it in three minutes.
    Okay. Let us just go real fast.

 STATEMENT OF MICHAEL HEARNE, LAFAYETTE FEDERAL CREDIT UNION, 
               CREDIT UNION NATIONAL ASSOCIATION


    Mr. Hearne. My name is Mike Hearne. I am president and 
chief executive officer of Lafayette Federal Credit Union in 
Kensington, Maryland.
    We recently started a small business lending program and 
for the record have submitted some detailed comments, but I 
just wanted to let you know that most of the things that I have 
complaints about as far as regulations are addressed in the 
Credit Union Regulatory Improvement Act, which should be 
crossing your desk again this spring.
    Primarily though what we are looking at is the arbitrary 
nature of the limits on business lending to credit unions. I 
think access to capital is always one of the big issues facing 
small businesses. We are right now currently limited to 12.25 
percent, 12.25 percent of our assets, which in effect means 
that a $500 million credit union is only half as competent at 
making business loans as a $1 billion credit union, which just 
is not the case.
    There is a point where you are too small to really run a 
program. You do not have the investment capacity. My credit 
union, for instance, happens to be SBA's credit union and 
USAID's. My board members are all MBAs, finance folks, 
accountants. They know exactly what they are getting themselves 
into.
    We have 50 years' worth of small business lending 
experience on staff, and I think it is just arbitrary that we 
can make half as many loans as say a $600 million firefighters 
federal credit union.
    I would like to certainly see that addressed. There are 
different ways to regulate the safety and soundness of 
business--

    Chairman Akin. Are those in your comments, your written 
testimony?

    Mr. Hearne. Yes.

    Chairman Akin. Good. Thanks. We better scoot to--

    Mr. Hearne. Okay. Our last thing is please fund the SBA 
fully. They are a big help to the industry and small business.
    [Mr. Hearne's statement may be found in the appendix.]

    Mr. Clayton. Mr. Chairman, we would welcome the opportunity 
to participate in that discussion. I will leave it at that.

    Chairman Akin. I was thinking you might, yes.

 STATEMENT OF DON PARRISH, REGULATORY RELATIONS, AMERICAN FARM 
                             BUREAU


    Mr. Parrish. Don Parrish from the American Farm Bureau 
Federation. We represent farmers and ranchers, the 
quintessential small business.
    Most of the issues that we focus on and where we are 
running up against problems is the issues in dealing with land 
use and water. Obviously that is the EPA in terms of water 
quality regulations and how far you can extend the 
jurisdictional reach of the Clean Water Act.
    I mean, we have ditches and uplands being called waters of 
the U.S. and farmers being regulated as to what they can do 
next to them. That is a real concern for us because being able 
to maintain our operations so that we can be productive and 
competitive in world markets is hugely important.
    I am going to leave it at that. Waters of the U.S., 
endangered species with Fish and Wildlife Service, all of 
those. I mean, 80 percent of the endangered species in this 
country are on private lands, and if you manage endangered 
species you manage private lands. That is a huge and costly 
burden for individual farmers.
    [Mr. Parrish's statement may be found in the appendix.]

 STATEMENT OF JOHN STROCK, ASSOCIATED BUILDERS AND CONTRACTORS


    Mr. Strock. I will be quick because I know Craig wants to 
get in here as well. I am John Strock. I represent Associated 
Builders and Contractors.
    The issue I want to bring up quickly is OSHA's misguided 
direction as far as new and proposed regulations. They seem to 
be focusing far too much on small regulations that are not 
killing people every day, and it takes away attention from 
falls and caught-betweens and the big four fatality causing 
incidents in construction. We would like to see that addressed.
    We have addressed it several times through the Advisory 
Committee on Construction Safety and Health, and that is just 
an issue that we would like to see addressed if you guys can 
help.
    [Mr. Strock's statement may be found in the appendix.]

    Chairman Akin. You will have to make it quick.

    Mr. Purser. Thank you.

    Chairman Akin. We have to leave for votes.

     STATEMENT OF CRAIG PURSER, NATIONAL BEER WHOLESALERS 
                          ASSOCIATION


    Mr. Purser. Craig Purser. I am with the National Beer 
Wholesalers Association.
    Lots of regulatory concerns. We are creatures of regulation 
to a certain extent, but a non-regulatory issue that is the 
number one issue for my members is permanent repeal of the 
death tax.
    If I leave you with one message I would be practicing 
advocacy malpractice if I did not make that my number one 
issue. These folks have waited long. They are family owned and 
operated businesses. They are privately held, and they need 
some permanent relief in order to plan for the future.
    Thank you very much.
    [Mr. Purser's statement may be found in the appendix.]

    Chairman Akin. That was brief. If you would like to make 
any other additional comments maybe you could take the comments 
for us.

    The Reporter. Absolutely.

    Chairman Akin. We are going to have to shoot over and vote 
or we will have a little black mark for not getting our votes 
in.
    Thank you all. The hearing will be closed, but you will be 
able to make comments up here if you would like. Thank you.

    [Whereupon, at 2:48 p.m. the Subcommittee was adjourned.]


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