[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
  CREATING OPPORTUNITIES FOR SMALL BUSINESSES IN AN ECONOMIC RECOVERY 

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

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                            October 28, 2008

                               __________

                      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 110-116
  Available via the GPO Web site: http://www.access.gpo.gov/congress/
                                 house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLES GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VERN BUCHANAN, Florida, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  


           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida

                                 ______

            Subcommittee on Rural and Urban Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLES GONZALEZ, Texas              MARY FALLIN, Oklahoma, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  
























                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES

Wilson, Stephen P., Chairman and CEO, LCNB Corporation, Lebanon, 
  Ohio, on behalf of the American Bankers Association............     4
Dorfman, Margot S., Women's Chamber of Commerce..................     5
Brown, Richard A., President and COO, Krause Corporation, 
  Hutchinson, Kansas, on behalf of the Association of Equipment 
  Manufacturers..................................................     8
Bradbury, Jim, President, Grand Rapids Controls CO., LLC, 
  Rockford, Michigan.............................................     9
FRANKE, Thomas, Executive Vice President and Chairman of the 
  Board, Riemeier Lumber, Cincinnati, Ohio.......................    12

                                APPENDIX


PREPARED STATEMENTS:
Velazquez, Hon. Nydia M..........................................    29
Chabot, Hon. Steve...............................................    31
Altmire, Hon. Jason..............................................    32
Wilson, Stephen P., Chairman and CEO, LCNB Corporation, Lebanon, 
  Ohio, on behalf of the American Bankers Association............    33
Dorfman, Margot S., Women's Chamber of Commerce..................    48
Brown, Richard A., President and COO, Krause Corporation, 
  Hutchinson, Kansas, on behalf of the Association of Equipment 
  Manufacturers..................................................    59
Bradbury, Jim, President, Grand Rapids Controls CO., LLC, 
  Rockford, Michigan.............................................    65
Franke, Thomas, Executive Vice President and Chairman of the 
  Board, Riemeier Lumber, Cincinnati, Ohio.......................    69

STATEMENTS FOR THE RECORD:
Mica, Hon. Daniel, President and CEO, Credit Union National 
  Association....................................................    71

                                  (v)

  


  CREATING OPPORTUNITIES FOR SMALL BUSINESSES IN AN ECONOMIC RECOVERY

                              ----------                              


                      Tuesday, September 28, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] Presiding.
    Present: Representatives Velazquez, Ellsworth, and Chabot.
    Chairwoman Velazquez. This hearing of the Small Business 
Committee is now called to order.
    This September, in the face of a collapsing housing market 
and a staggering crash on Wall Street, Congress took action. 
Since then, talk of the growing financial crisis has dominated 
American conversation. From Capitol Hill hearing rooms and 
newspaper editorial boards, to kitchen tables across the 
country, it seems everyone has a theory about how we got into 
this mess. Now, of course, everyone has an opinion on how we 
should get out of it.
    Congress is now contemplating the next steps in stemming 
the financial fallout. As the process moves forward, Congress, 
economic models and philosophies are up for consideration. But 
while it is all well and good to discuss the theory of 
financial crisis, it is far more important to hear from the 
people who are living it. It is far more important to 
understand and act on what Main Street is actually facing.
    In today's hearing, we will do just that. This morning, we 
will hear from small-business owners who are experiencing the 
full effects of the current downturn. Like the rest of the 
Nation, they have watched their home values plummet and their 
401(k)s evaporate. Now, they are seeing their piece of the 
American dream suffer too.
    This Committee recently compiled a report on the effects of 
the financial crisis on small businesses. The results of the 
study, which we are releasing today, were nothing short of 
outstanding. As today's witnesses can attest, small businesses 
in every corner of the country, spanning every segment of the 
economy, are suffering. The reality is that many small firms 
are struggling to meet the most basic obligations, such as 
making payroll and stocking their shelves.
    Not surprisingly, the credit crunch is largely to blame for 
this, and the extent to which that is true is quite startling. 
Small businesses are facing credit lines that have been 
drastically reduced and, in some cases, revoked all together. 
The recent Federal Reserve's Senior Loan Officer Survey found 
that 65 percent of lenders are enforcing stricter loan 
standards. That figure is up a full 58 percent from 1 year 
earlier.
    Even small firms that have been managed to make ends meet 
are now abandoning plans for growth, efforts that would 
otherwise create jobs. According to the National Federation of 
Independent Businesses' monthly index, few small firms have 
immediate plans to expand or hire additional workers.
    During past recessions, the Small Business Administration 
has served as a lifeline for struggling startups. 
Unfortunately, even these programs are on the decline. With SBA 
funding down 25 percent from 2007, many fledgling companies, 
the sort that drive innovation and expand industry, may never 
get off the ground.
    There are a lot of different takes on the current financial 
crisis and even more opinions on how we should dig our way out 
of it. But regardless of your thoughts on the matter, one thing 
is very clear: Small businesses will be the key to economic 
turnaround. Whether it is by expanding the SBA role or 
providing targeted tax relief, entrepreneurs must have access 
to all the tools they need. They have powered this country out 
of other recessions, and they can do it again today. While 
current circumstances may be different from those in the past, 
the blueprint for recovery remains the same: more jobs and 
greater economic growth. That is the formula we need, and that 
is the formula small businesses can provide.
    I would like to thank all of the witnesses in advance for 
their testimony and for taking time out of your busy schedule 
and jobs to be here with us. And I am pleased that they could 
join us, and look forward to their insight on this critical 
matter.
    With that, I yield to the ranking member, Mr. Steve Chabot, 
for his opening statement.
    Mr. Chabot. Thank you, Madam Chairwoman, and thank you for 
holding this important hearing this morning.
    I want to thank the panel for the testimony that they will 
be giving us here shortly.
    All of us are aware of the recent turmoil and continuing 
volatility of the financial markets. These problems also touch 
America's small businesses. Availability of credit is reduced, 
thereby dampening the capacity of small businesses to create 
needed jobs.
    Yet it is not just the availability of credit that bothers 
America's small-business owners. They are also ordinary men and 
women with the same concerns about the value of their homes, 
the safety of their investments, and outlook for the future of 
their children that every American has in these uncertain 
times.
    Given the current situation in the American economy, 
policies must be developed that help unleash the power, 
flexibility and vitality of America's small-business owners. 
Those policies require reductions in the Federal deficit, 
lowering taxes, and making health care more affordable for our 
small-business owners.
    Recent actions by the Federal Government have increased its 
borrowing and debt ceiling. The Federal Government then is 
competing for debt capital with all businesses, including small 
businesses. I suspect that the witnesses before us today 
probably cannot compete in the credit markets with the single 
most credit worthy borrower the world economy has ever known, 
the United States Government. Thus, to borrow money, small 
businesses represented here--and the 25 million small 
businesses across the country--will have to pay higher interest 
rates to attract the credit they need to operate and expand 
their businesses.
    We can reduce this hidden and insidious tax on America's 
business owners by reducing the Federal deficit and eliminating 
unnecessary and wasteful spending. In addition to the hidden 
tax associated with higher interest costs, some of America's 
small businesses also face the prospect of paying higher taxes 
under some of the proposals discussed in this year's 
presidential campaign.
    Increasing the cost of credit and increasing taxes that 
small-business owners must pay is a double whammy that these 
individuals and the American economy can ill afford. If we 
raise the cost of operating their businesses, America's small-
business owners will limit hiring and investment. In turn, this 
would reduce economic growth and inhibit recovery from the 
current turmoil in the economy.
    Any stimulus package that Congress considers must not raise 
taxes on the most productive part of the American economy, our 
small-business owners. In fact, the stimulus package should 
reduce taxes on small businesses so they have more money to 
spend in the manner they best see fit, rather that relying on 
how government bureaucrats think money should flow into the 
economy.
    There is no doubt that all American businesses have made 
cutbacks in spending, including providing health care to their 
workers. This has been a longstanding problem for America's 
small businesses that has been exacerbated by the recent 
volatility in the financial markets. Congress must find ways to 
make the provision of health care more affordable to America's 
small businesses. One such possibility would be to include the 
enactment of association health plans in any stimulus package. 
Such plans have met with bipartisan support, including my own 
and also that of the chairwoman.
    No one can deny that recent weeks and months are placing a 
strain on the finances of all Americans, including America's 
small businesses. Increasing the size of government, expanding 
the deficit and raising taxes simply is the wrong prescription 
for what ails America. Congress must exercise its power wisely 
by reducing the deficit, lowering taxes and improving the 
ability of small businesses to provide health care to their 
workers.
    Before closing, I would like to thank the witnesses, 
particularly Tom Franke from my district in Cincinnati, for 
taking the time out of their busy schedules and their hectic 
times in these up certain times in running their businesses to 
coming here to Washington and provide their views to this 
Committee. I know we all look forward to hearing it.
    And, with that, I yield back the balance of my time, Madam 
Chairman.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    It is my pleasure to welcome Mr. Stephen P. Wilson. Mr. 
Wilson is CEO of LCNB Corporation, the holding company for LCNB 
Bank and the banking insurance agency in Lebanon, Ohio. Mr. 
Wilson also serves as chairman and director to both companies.
    He is here to testify on behalf of the American Bankers 
Association. Founded in 1875, the American Bankers Association 
represents banks of all sizes on issues of national importance 
for financial institutions and their customers.
    Welcome, Mr. Wilson.

    STATEMENT OF STEPHEN P. WILSON, CHAIRMAN AND CEO, LCNB 
 CORPORATION, LEBANON, OHIO, ON BEHALF OF THE AMERICAN BANKERS 
                          ASSOCIATION

    Mr. Wilson. Thank you. Madam Chairwoman and members of the 
Committee, again, my name is Steve Wilson. I am from Lebanon, 
Ohio. I am chairman and CEO of LCNB National Bank. I am also 
pleased to be hear today to represent the American Bankers 
Association.
    Our Nation is certainly facing difficult economic 
conditions. It will clearly take time to work through these 
problems. We need to collectively look for solutions that will 
ensure a fast recovery. I have always believed that we must be 
realistic about the present and hopeful for the future. 
Hearings like this allow us to discuss these issues and work 
together to restore confidence in our financial system.
    In spite of the difficulties faced by all businesses, 
including banks, I want to assure you that the vast majority of 
banks continue to be well-capitalized and are opening their 
doors every day to meet the credit and savings needs of their 
customers.
    We applaud the efforts of Congress to find solutions. 
Although these actions are not ones that were requested by the 
regulated banking industry, we believe that they help unfreeze 
financial markets and help make credit available to consumers 
and businesses on Main Street.
    The focus on credit to small businesses is particularly 
important, as they are the drivers of new ideas, new employment 
and new economic growth. For banks like mine, small businesses 
are our bread and butter, and banks throughout our country 
continue to make small business loans.
    However, the demand for small business lending has fallen 
in recent weeks and is most pronounced in areas of the country 
hardest hit by the housing downturn. For example, in my area of 
Ohio, there are three plant closures that are expected to 
happen soon. That will eliminate 13,000 jobs. This will have a 
major, major impact on our region. So, ensuring that adequate 
liquidity and capital are available during this time is 
critical to maintaining the flow of credit to small businesses.
    The Emergency Economic Stabilization Act contains some 
provisions that should free up capital. Community bankers 
remain concerned about whether the Troubled Asset Relief 
Program can help them and, indeed, perceive that it may even do 
them harm. Banks will consider carefully its structure and its 
pricing. In addition, they believe that using TARP funds to 
guarantee loans would be more effective. This would leave the 
relationship between the bank and their customers intact and 
put a floor on losses, thus freeing up capital to meet new loan 
demand.
    Moreover, while the root of the current problems has been 
residential mortgages, the economic disruptions are spreading 
into the commercial real estate and into the small business 
lending area. Thus, TARP funds should be available to purchase 
or guarantee a broader class of loans.
    As TARP is implemented, it is important that regulators 
recognize that many well-capitalized banks have sufficient 
liquidity and are meeting the credit needs of their 
communities. These banks may not want to participate, and no 
negative regulatory consequences should arise from that 
decision. Indeed, all regulatory policy should be carefully 
monitored during this time. We are very concerned that a 
regulatory overreaction could worsen the credit crunch. As it 
did following the 1991 recession, we are hopeful that 
regulatory reason will win the day this time.
    There are several measures that would help banks support 
loans to small businesses. I want to briefly mention just one 
of those from my written statement regarding the SBA lending 
program.
    Loan volume declined by 30 percent last year in SBA's 
flagship 7(a) loan program. To help reverse this trend, 
Congress should reduce program fees, make the application 
process easier and less expensive for both small businesses and 
the banks, and, on a temporary basis, increase the Federal 
guarantee provided on SBA loans. This would extend the program 
to many more communities across our country and provide more 
loans to businesses.
    As Congress considers these and other changes, we urge 
caution not to enact policies or regulations that will 
inadvertently restrict the availability of credit that is so 
vital to our economic recovery. We stand ready to work with the 
Committee, Madam Chairwoman, to find effective ways to ensure 
lending flows to small businesses.
    Thank you very much.
    [The statement of Mr. Wilson is included in the appendix at 
page 33.)
    Chairwoman Velazquez. Thank you, Mr. Wilson.
    Our next witness is Ms. Margot Dorfman. Ms. Dorfman is the 
founder and CEO of the U.S. Women's Chamber of Commerce. Ms. 
Dorfman has an extensive background in business, business 
ownership, publishing and nonprofit leadership. The U.S. 
Women's Chamber of Commerce is dedicated to championing 
opportunities to create women's business growth, career and 
leadership advancement.
    Welcome, Ms. Dorfman.

   STATEMENT OF MARGOT DORFMAN, CEO, U.S. WOMEN'S CHAMBER OF 
                            COMMERCE

    Ms. Dorfman. Thank you.
    Chairwoman Velazquez, Ranking Member Chabot and members of 
the House Small Business Committee, I thank you once again for 
this opportunity to speak on behalf of the millions of small-
business owners, their employees and families nationwide who 
are scared, hurting and watching during this economic crisis 
while Washington focuses on corporate executives and big Wall 
Street bailouts instead of getting down to Main Street America, 
where jobs are created, families are fed and mortgages are 
paid, to get credit flowing and raise consumer confidence.
    I have five words for you: big, bold, simple, focused, and 
now.
    I am hearing every day from small-business owners who are 
very frustrated as they watch while Secretary Paulson and 
President Bush repeat the failures of the past by always 
looking out for corporate executives. Pouring billions of 
taxpayer dollars in at the top of the system in no way assures 
that a small-business owner in a local community is going to be 
able to get their line of credit increased during this abrupt 
economic slowdown.
    Our members are angry that the Federal Government is giving 
taxpayer money to big companies that have been horribly 
irresponsible, while responsible small businesses are not 
getting the money they need to keep their doors open. As one of 
my members said about her business, "I don't want to lose my 
company. We have 40 families that we provide for, and it is a 
big responsibility that I take very seriously."
    On behalf of the millions of American small-business 
owners, I implore you to act now with a big billion-dollar 
punch that will reach directly to the credit needs of small-
business owners. We have been surveying our members to get a 
clear look at this issue, and they tell us there are three key 
problems.
    First, consumer and business confidence is falling rapidly 
and creating a sudden contraction in business revenues.
    Second, lenders aren't lending. Our members report that, in 
the last 90 days, 53 percent are tapping into their own 
savings, 63 percent have turned to credit cards, and 24 percent 
have turned to family and friends for a loan. And business 
owners are telling us that they are downsizing their employees 
or independent contractor force in alarming numbers. Seventy-
one percent of businesses say they have downsized. Sixty-nine 
percent have seen their revenues drop. Thirteen percent say if 
economic conditions do not change, they may be forced to close 
their doors. Only 20 percent have seen revenues increase, and 
these businesses also cannot secure the capital that they need 
to grow their business.
    Third, the cost of credit, when available, is going up. 
Thirty-eight percent of businesses tell us that their credit 
card and loan rates have gone up in the last 90 days. Twenty-
two percent tell us their credit limits have been reduced, and 
17 percent have had their lines of credit halted.
    Among the comments I have received from our small-business 
owners, one in California mentioned that she has two lines of 
credit. One was cut in half. Another, with Bank of America, was 
$50,000, went to take $10,000 to meet payroll and was turned 
down. She is a customer of 20 years and runs millions of 
dollars through their bank, has three bank accounts, two 
personal accounts, and a credit score of 750.
    Congress must take legislative action to help restore the 
flow of credit and capital to small-business owners as soon as 
possible. And the Small Business Administration must take 
immediate administrative action to loosen lending operating 
procedures.
    You must focus on getting the cooperation of the lending 
community by keeping the solutions simple to implement by using 
existing systems, lowering the lender and oversight fees, and 
assuring the lending community that any new programs, rules or 
procedures will be in effect for at least 2 years. And use this 
opportunity to re-engage regional banks, so that we are not so 
reliant on a few big banking institutions.
    As you make legislative and administrative changes, don't 
forget the SBA is not the organization it used to be. Eight 
years of budget cuts and poor executive leadership have gutted 
the organization. The option of direct lending may totally 
overwhelm the capacity of the SBA infrastructure. Even now, we 
continue to hear that the SBA is not adequately supporting the 
businesses who are struggling, Katrina disaster victims and, 
again, who have been impacted by Gustav and Ike.
    It may be much better to incentivize banks to get back into 
lending with a specific pool of money made available for only 
small business lending. We have to hold banks accountable for 
providing loans or stop giving banks taxpayer-provided 
bailouts. And we must dramatically increase transparency.
    Additional actions are needed to help business owners get 
through these hard times. Congress should expediently pass 
another stimulus package, this time to support small 
businesses. We need lower small business taxes and penalties, 
delayed tax payments, delayed retirement accounts, and extend 
the amount of the period for loans against retirement accounts. 
Most importantly, you must take action to reduce health care 
costs.
    And finally, specifically speaking of women-owned small 
businesses, you must remember that our businesses are already 
at a disadvantage, as the SBA regularly lends smaller amounts 
to our firms. I encourage you to make sure that the lending 
programs reach to our marketplace so that we may leverage the 
resources necessary to keep our doors open and drive future 
growth. For instance, establishing a special 2-year look-alike 
of the Patriot Express lending program, with loosened 
administrative rules, hiring guarantees and greater lending 
authority, would quickly and greatly assist many of our members 
to keep their doors open.
    And you must take action to implement the 8-year-old 
Women's Federal Procurement Program as Congress had originally 
intended. We find with the recent 2007 goaling report that the 
Federal Government is still shutting out women-owned firms at 
an alarming rate. Numerous members have told us that receiving 
fair access to these Federal contracts could certainly provide 
business growth at this important time.
    In closing, I have five words for you: big, bold, simple, 
focused, and now. We need you to champion our needs now before 
it is too late.
    Thank you.
    [The statement of Ms. Dorfman is included in the appendix 
at page 48.]
    Chairwoman Velazquez. Thank you, Ms. Dorfman.
    Our next witness is Mr. Richard A. Brown. Mr. Brown is 
president and COO of Krause Corporation in Hutchison, Kansas. 
Krause was founded in 1916 and currently employs around 225 
people.
    He is here to testify on behalf of the Association of 
Equipment Manufacturers. The AEM is a trade association that 
globally represents more than 800 companies that manufacture 
equipment worldwide in the industries of agriculture, 
construction, forestry, mining and utility.
    Welcome.

   STATEMENT OF RICHARD A. BROWN, PRESIDENT AND COO, KRAUSE 
 CORPORATION, HUTCHINSON, KANSAS, ON BEHALF OF THE ASSOCIATION 
                  OF EQUIPMENT MANUFACTURERS 

    Mr. Brown. Thank you very much, Chairwoman Velazquez and 
Ranking Member Chabot, for the opportunity to testify.
    I am Richard Brown, the president and chief operating 
officer of Krause Corporation in Hutchison, Kansas. We were 
founded in 1916, and we are a privately held manufacturer and 
marketer of agricultural tillage products. Krause Corporation 
has survived the Great Depression, the Dust Bowl, two world 
wars, multiple other wars that drove material shortages, and 
numerous financial interruptions, and we intend to be here in 
the future.
    I also have the privilege of serving on the board of 
directors of the Association of Equipment Manufacturers. AEM is 
one of the oldest trade associations in North America, 
representing over 800 companies that manufacture agricultural, 
construction, forestry, mining and utility equipment.
    In addition to serving on the board, I am chairman of AEM's 
Small Enterprise Committee. If I can borrow the acronym SEC, 
the SEC represents the interests of and provides specific 
services for AEM member companies reporting less than $250 
million in annual revenue and that comprises 95 percent of 
AEM's membership.
    While Wall Street is on a financial roller coaster, I am 
here to tell you that many small businesses in America are in 
economic free-fall. This financial crisis is also taking a toll 
on rural America and agriculture. In my State of Kansas and all 
across the country, agriculture is the economic foundation for 
countless small businesses and thousands of Main Streets.
    Modern agriculture requires farmers to have access to 
credit so that they can make the large capital investments 
needed to plant and harvest crops. The tightening of the credit 
markets is coinciding with the rapid rise in the cost of 
agricultural inputs. It is also important to note that the 
record commodity prices, which earlier this year garnered 
intense media attention, have fallen sharply in the past few 
months. As an example, corn alone has fallen 50 percent below 
break-even.
    We are now seeing farmers delay their purchase of inputs 
from their normal preseason purchasing patterns, as they are 
having credit trouble. The ripple effects of tightened credit 
markets, at a time of increasing capital requirements for 
agriculture, will lead to economic hardships for rural America.
    I also perceive a growing sense of anger among rural 
Americans about this situation. Generally speaking, they did 
not buy homes they could not afford or run up huge credit card 
debt, but now are forced to deal with the consequences of other 
people's excesses and, as a result, are losing faith in the 
system.
    No question, these are hard times, but government can and 
should take steps to ensure the continued success of America's 
entrepreneurs. We have four recommendations.
    Number one, extend the bonus depreciation and enhanced 
expensing provision, which are a part of the stimulus act of 
2008. This extension will continue to help multiple sectors of 
the economy by enabling companies to purchase the modern tools 
they need to operate. Also, Congress should consider 
reinstating the 10 percent investment tax credit for new 
equipment purchases as a long-term way to encourage the use of 
modern, more efficient, production technology.
    Number two, invest in infrastructure. America is the 
world's largest importer and exporter, and we depend upon the 
efficient transportation of goods and services. Studies show 
that we need to invest from all sources $140 billion to $255 
billion annually to stay competitive. In addition, EPA 
estimates there is an annual shortfall of $23 billion of our 
investment in water infrastructure. Investing in infrastructure 
is one of the most productive short- and long-term investments 
the Government can make.
    Number three, help small businesses export. My company is a 
perfect example of what exporting can mean. We have increased 
our exports 20 to 25 percent and nearly 10 percent to Russia, 
who are aggressively funding food self-sufficiency. This is a 
catalog of Krause Corporation in Russia. That is why it is 
important for Congress to pass the pending free trade 
agreements with Colombia, Panama and South Korea. We at Krause 
Corporation have the products and technology, but we do need 
governmental assistance to break down trade barriers and 
improve transparency.
    Number four, please help control rising health care costs. 
Krause Corporation's annual health care costs represent $857 
per machine unit we sell, while none of our global competitors 
have a direct comparable expense. Our health care costs at 
current rates are doubling every 4 to 5 years, and represents a 
greater risk than even $100-a-barrel oil.
    Whatever actions are undertaken, I can't stress enough that 
we must restore the confidence in the marketplace. Times are 
tough, but I am confident we will survive to see better days. 
With proper Government action, these days can be closer than 
they appear.
    Thanks very much again for the invitation to testify, and I 
will be happy to answer questions.
    [The statement of Mr. Brown is included in the appendix at 
page 59.]
    Chairwoman Velazquez. Thank you.
    Our next witness is Mr. Jim Bradbury. Mr. Bradbury is 
president of Grand Rapids Controls Company in Rockford, 
Michigan. Grand Rapids Controls has developed from a small 
domestic cable supplier into a global supplier of motion 
control systems. Mr. Bradbury's company is a family-owned 
company and a major employer for Rockford, with around 200 
employees.
    Welcome.

  STATEMENT OF JIM BRADBURY, PRESIDENT, GRAND RAPIDS CONTROLS 
                  CO., LLC, ROCKFORD, MICHIGAN

    Mr. Bradbury. Hi. Thank you, Ms. Velazquez and the Small 
Business Committee, for inviting me here today to discuss how 
the economy has impacted my business. My name is Jim Bradbury, 
and I am president and CEO of Grand Rapids Controls Company, 
LLC.
    Today, I am going to share with you some background history 
on how the automotive and office furniture industry has changed 
how we do business, and how the current economy is different 
than it was just a few years ago.
    Founded in 1968, GRC designs and manufacturers motion 
controls for automotive and office furniture OEMs. When you 
adjust your seat, open a car door or window, you are likely to 
use our products. Headquartered in Rockford, Michigan, GRC also 
has manufacturing plants in Greenville, Michigan, and Qingdao, 
China. Known as a problem solver by our customers, GRC provides 
full-service support and R&D, testing and manufacturing of 
finished products. Two hundred people work for us in Michigan 
today.
    For the first 20 years, GRC mostly supplied a commodity 
product. In the early 1990s, the consumers' tastes changed, and 
more features were required on chairs and in vehicles. We 
responded by developing the ability to design new products for 
these applications.
    In response to the increase in offshore competition, GRC 
developed lean manufacturing techniques and automated machines 
to increase productivity. In 2001, the economy started to 
decline, as competition continued to increase. Chinese and 
Mexican competitors were achieving acceptable quality, while 
offering significant price savings to our customers. In just a 
couple of years we started to see large chunks of business move 
out of our plant to these far-off places. In the span of 3 
years, we saw sales slide 50 percent.
    In the summer of 2004, the owners of GRC sold the company 
to another family-owned business, The Charlton Group. The 
Charlton Group brought knowledge of international business and 
financial resources to grow the business. However, the new 
company needed to stop bleeding cash, and a new competitive 
business model was required.
    Immediately, we cut expenses, stepped up sales efforts, 
evaluated our products and met with customers to find out where 
they were headed. In talking with our customers, we were 
informed that we needed a plant in a low-cost country for them 
to continue doing business with us. We determined that our 
commodity product was too difficult to automate, so we 
collaborated with a partner to open a plant in China.
    This served two purposes. First, it positioned us well for 
China's future domestic growth. And secondly, it gave us a 
competitive model for a commodity product in the short term. 
The strategy worked, and we were awarded 17 new programs. By 
the end of 2007, we achieved over 85 percent growth, all of our 
plants were full, 100 new jobs were created in the U.S., and 
profitability was up.
    During the growth period, we had borrowed a great deal of 
money to reinvent the company. By the end of 2007, we had paid 
most of the new debt off, and 2008 looked to be another good 
year.
    But 2008 has proven a challenge to manage. In the first 
quarter of the year, a large supplier went on strike for 3 
months, reducing our sales by 20 percent. Material and gas 
prices rose dramatically at the end of the strike. Vehicle 
inventories were up. Customers started to slash orders, and the 
industry panicked with no end in sight to high gas prices.
    The office furniture industry was no exception, as the OEMs 
made a commitment to buy global companies and began to move and 
source existing products overseas. The end result was a 40 
percent decline in sales and loss of profitability. In response 
to the decline of revenue, we had to cancel wage increases and 
bonuses. Resources are restricted to operationally critical 
items, sales growth and cost reduction activities.
    Despite the pessimistic outlook for 2008, GRC has achieved 
some great results.
    The bigger hurdle may not be the loss of sales, but the 
effect that the tightening credit markets will have on 
unprepared small business. Financially, GRC uses a line of 
credit for daily operational activity. The limit on the line of 
credit is based on a formula that calculates a percentage of 
our qualified accounts receivable, plus a percentage of our 
qualified inventory. As sales fall, AR and inventory shrink, 
effectively reducing our line of credit. Banks aren't sure of 
the value of our assets and are taking a much more conservative 
approach to lending. Despite our best efforts, we are getting 
squeezed by unsecured creditors and loss of sales revenue.
    I have traveled all over the world, and I believe America's 
creative culture and can-do attitude are great strengths. I 
have also seen how Government can accelerate creativity in the 
support of research and development. However, I believe other 
countries have a competitive advantage over America's small 
businesses, because in an American company most of their R&D is 
passed on to customers in higher prices. In other countries, 
the Government partnerships are more aggressively supporting 
the supplier R&D expenses to offer the world a better price, or 
the Government allows the copying of the technology.
    Each year it becomes harder to compete in our home market. 
I encourage you to help American small business by providing 
the necessary resources to create a fair playing field and 
develop new technologies so that we can develop new 
technologies and we can grow.
    Thank you for taking the time to listen to my testimony, 
and I hope it provides insight into the plight of the small 
businesses in today's economy. We are doing everything we can 
to support our employees and our stakeholders in our effort to 
create a great company.
    The economy is fragile today, and it appears recovery is 
many months away. If credit is not available to small business 
and the field of play remains uneven, small business will 
continue to have an uphill battle and America will suffer.
    Thank you.
    [The statement of Mr. Bradbury is included in the appendix 
at page 65.]
    Chairwoman Velazquez. Thank you, Mr. Bradbury.
    The Chair recognizes Mr. Chabot for the purpose of 
introducing our next witness.
    Mr. Chabot. Thank you, Madam Chairwoman.
    And it is my pleasure to introduce Thomas Franke, executive 
vice president and chairman of the board of Riemeier Lumber in 
Cincinnati, Ohio.
    Riemeier Lumber is a fourth-generation building materials 
company founded in 1925 by Harry D. Riemeier and his son, 
Harold, to service the furniture and wagon industries. At the 
end of Prohibition, Riemeier grew by selling soft wood to 
distilleries and whiskey warehouses. During World War II, the 
company supplied lumber and plywood to the war effort and 
struggled with the challenges of price controls and scarce 
resources.
    Post-World War II expansion and the homebuilding boom led 
Riemeier to supply lumber to the homebuilding industry. Other 
family members joined the company as it expanded. Riemeier 
weathered volatility in the housing market over the years, and 
the business continued to grow.
    However, the housing downturn of the past 2 years, coupled 
with difficult economic conditions, caused the company to begin 
layoffs, including people who had worked for Riemeier for 20 or 
30 years. Although Riemeier sales were still strong, its bank 
would not allow the company to borrow against millions of 
dollars in receivables. Efforts to find investors or sell the 
property were unsuccessful. Last week, the company held an 
auction and closed.
    I want to thank Mr. Riemeier for coming to Washington to 
tell the story of his family's small business and to help us 
understand what we can do for similar companies that are 
struggling and need access to credit in these difficult times.
    Mr. Franke, welcome.

   STATEMENT OF THOMAS FRANKE, EXECUTIVE VICE PRESIDENT AND 
    CHAIRMAN OF THE BOARD, RIEMEIER LUMBER, CINCINNATI, OHIO

    Mr. Franke. First of all, thank you to the Committee for 
inviting us, and especially Congressman Chabot.
    I will be a little redundant here, but this is Riemeier's 
story. The Riemeier Lumber Company was founded in 1925. The 
company started out selling the industrial market hardwood 
lumber for furniture and wagon building. The end of Prohibition 
moved the company into the commercial market, selling lumber 
for distilleries and warehouses for storage of whiskey. The end 
of World War II vaulted Riemeier into the residential market, 
with the large need for housing. These three markets were the 
core of the business.
    The growth of Riemeier caused us to purchase and move into 
a new facility in May of 2000. The new facility more than 
doubled the acreage, warehouse and office space to allow for 
future growth.
    In November of 2005, a wall panel operation was started 
called Riemeier Structural Solutions. This was the process of 
constructing exterior and interior walls at the facility and 
delivering them to the job site, resulting in reduced costs and 
higher quality for the builder customers. The company was 
prospering, and by the end of 2005 Riemeier Lumber and Riemeier 
Structural Solutions had record sales of approximately $58 
million and roughly 150 employees.
    Customer demand for one-stop shopping placed the company in 
the market for a roof truss operation. The purchase of Panel 
Barn Lumber/Truss Design was agreed upon in 2006 and bank 
financed in February of 2007, adding roughly 30 jobs. We now 
had the business model that would carry us long into the 
future, being able to provide lumber, wall panels and roof 
trusses.
    As the housing market began to struggle in 2006, our sales 
declined by 5 percent from our prior year record sales, and 
Riemeier Lumber experienced its first layoff in history in 
November of 2006. Sales for the first quarter of 2007 were 
poor, and in April we made our second round of cuts.
    We managed to make minimal profit from April through August 
and added a second shift at truss in anticipation of a good 
September and October, as those were typically strong months as 
builders rushed to finish projects prior to winter. Sales 
during this period were well below expectations, and we had our 
third round of cuts in October.
    We finished 2007 down 24 percent in sales, causing a 
significant loss. Our banking relationship that was so strong 
in 2005, 2006 and 2007 as we grew and expanded the business 
deteriorated during the latter half of 2007 as the housing 
market continued to decline and the credit crisis accelerated.
    Our builder customers were affected by the downturn and the 
credit crisis. They were unable to pay us, which caused our 
credit to suffer, as their unpaid receivables were not 
considered good collateral by the bank. At the same time, our 
bank itself was suffering greatly in the credit crisis from its 
involvement with the subprime lending.
    As the credit crisis deepened at the end of 2007 and 
beginning of 2008, and its effect on our bank became more 
evident and public, only 10 months after receiving additional 
financing from our bank for the truss acquisition our bank 
declared Riemeier to be in default of its loan covenants.
    Whereas the bank had always previously insisted that it be 
the sole lender and banking institution for Riemeier, it now 
insisted that Riemeier find other sources of financing so that 
our bank's exposure would be reduced. Despite Riemeier's many 
attempts to comply with this request, it was not able to secure 
additional financing due to the condition of the industry and 
the continuing credit crisis. The company went through a bank-
supervised period of forbearance, during which interest rates 
and bank fees were increased, creating greater losses for our 
company.
    As our bank's action became public, we began to see a more 
rapid decline in our sales. On August 11th, the bank began the 
wind-down process, including letters to send to our customers 
and vendors explaining that we were going out of business. 
There was also a list of employees and their termination date 
and a list of our current jobs in process and whether they 
would be completed or not. This was accomplished by the bank-
mandated consultant that is under contract with Riemeier as 
required by the forbearance.
    The current state of the company is as follows. The real 
estate is currently for sale. Assets, including trucks, office 
furniture, mill equipment and tools, have been sold at auction. 
All material that could not be sold beforehand was also 
auctioned. There are five employees left, including Ken, myself 
and three accounting people to do collections until the last 
day that we will be at the facility, which is slated for 
November 6th. We will then close our door forever.
    Thank you.
    [The statement of Mr. Franke is included in the appendix at 
page 69.]
    Chairwoman Velazquez. Thank you, Mr. Franke.
    Mr. Bradbury, if I may, I would like to address my first 
question to you.
    The primary story line on the credit crunch has focused on 
major financial institutions on Wall Street. However, many have 
argued that these credit issues are creating even more daunting 
problems for businesses on Main Street.
    As a small-business owner, what have you seen in terms of 
accessible and affordable credit over the last 12 months?
    Mr. Bradbury. Currently, banks seem to be less interested 
in our business. We have had numerous people--we, like you, we 
were looking at moving into one bigger facility a year ago, 
because our facilities were full. Multiple banks looked at 
financing it for us. Today, most of them want to walk, and a 
lot of them just want to walk away from automotive. So we are 
getting new lenders in the market that don't understand our 
needs.
    They are also questioning the asset values. They are re-
looking at our asset values to see if we can borrow money or 
not against them in the future. And they also seem to have to 
go up higher in their chain of command to get decisions made, 
which slows down the process.
    Chairwoman Velazquez. Mr. Franke, you testified that 
Riemeier's long-time lender essentially told you to go 
elsewhere for finance when times were tough.
    Can you talk to us about the struggles that you faced in 
identifying alternative sources of credit for your company?
    Mr. Franke. We tried numerous sources, I guess, first-, 
second- and third-tier lending. We decided against third-tier 
lending, and we really couldn't find first- or second-tier 
lending. There were no banks that were interested.
    Chairwoman Velazquez. Can you talk to us as to the primary 
reasons why those financial institutions did not offer 
financing to you?
    Mr. Franke. We were on a pretty good cash burn. We lost 
significant money in 2007 and continued that into 2008. And 
that was the primary reason.
    Chairwoman Velazquez. Mr. Brown, you discussed that 
agriculture is the economic foundation for thousands of Main 
Streets across the country.
    Do you feel that the struggles facing rural America have 
been largely ignored in this recovery process?
    Mr. Brown. Yes, we do, Madam Chairwoman.
    The items I identified earlier, which are foundational 
health care costs that have continued to escalate at an 
unacceptable rate--usually, if you think of a farmer, it is a 
farmer and his family, and he has to buy his or her own health 
care.
    Secondly, agriculture, historically, is fully dependent on 
availability of credit to the farm. Farming is a very high-risk 
operation--the vagaries of weather, pestilence, disease, et 
cetera; and it requires significant money for feed, fertilizer, 
fuel at this time of the year for the spring plant. Likewise, 
it is not unusual for a 3,000-acre corn farmer to have to buy 
10,000 gallons of diesel fuel to run his or her combine in the 
fall.
    None of these, to the best of my knowledge, have been 
addressed in the economic programs discussed.
    I think rural lenders are attempting to do a very good job. 
I do not find fault with them, other than when you get on the 
down side of the slope and your financial ratios start to 
slide, when you need the help the most is rarely when you get 
it.
    Chairwoman Velazquez. Thank you, Mr. Brown.
    Ms. Dorfman, every day we hear stories, anecdotal stories 
in the papers, on TV, about small businesses complaining about 
the fact of the credit crunch, that they are not able to access 
affordable capital and lines of credit. The SBA and their 
business loan programs are there, and yet you think that this 
is a time for those programs to be basically used, and what we 
hear is that the lending volume for SBA loan programs have been 
declining.
    Based on what you hear from your members, do you believe 
that this is an accurate claim, that businesses simply are not 
seeking loans and capital during this economic downturn?
    Ms. Dorfman. I do not. We have surveyed several hundred 
members who have been looking for ways to access credit. And 
some of them have very good credit and have been paying on 
time, have had lines of credit, and they have been cut.
    When you take a look at the SBA loans, some of the issues 
that we hear are that the fees on both sides, the bank sides 
and the small business sides, are so enormous that it really is 
challenging to get an SBA loan just from that alone. We also 
see that the banks are not really, as you mentioned, being 
friendly to folks who have been with them for years and years 
and years.
    When we hear this bailout package, money goes to the banks, 
but where does it go then? It certainly has not gone down to 
the small-business owner to access capital. The capital, in how 
they are working, they have actually tightened the ability to 
get the loans and the capital that they need for small 
businesses.
    Chairwoman Velazquez. Mr. Wilson, during this recent 
downturn, we have seen steep declines in SBA lending year after 
year. And our hope was that these programs will do just the 
opposite and kick in when conventional lending pulled back.
    So why have we not seen this? What do you think is the 
primary reason or reasons for this steep decline in SBA lending 
programs?
    Mr. Wilson. I think it has a lot to do with the application 
process. I believe, also, that the costs have risen to the 
point where small businesses are concerned about making an 
application, maybe being denied, but having a lot of expense 
involved. Banks are concerned because of the process.
    So, as I stated in my testimony, I think there are some 
things that could be done with the SBA program, including 
raising the limit on guarantees so that more communities and 
more businesses would be touched by the SBA.
    And you are absolutely right. This is exactly the time when 
we need SBA to step forward and to take a larger role in 
funding small businesses.
    Chairwoman Velazquez. So you feel that the cost of the 
loans, that if the Government provides a higher loan guarantee, 
that it will incentivize financial institutions to make those 
loans?
    Mr. Wilson. That is correct.
    Chairwoman Velazquez. Thank you.
    I recognize Mr. Chabot.
    Mr. Chabot. Thank you very much, Madam Chair.
    Mr. Wilson, I will begin with you, if I can. Relative to 
the $700 billion, which then went up to $850 billion, bailout 
or rescue plan or whatever terminology one wants to use, there 
have apparently been a number of businesses and banks, in 
particular, that are thinking about or trying to use a fairly 
significant portion of that money to purchase other 
institutions.
    What are your thoughts about that? And how helpful is that? 
And how does that affect banks like your own?
    Mr. Wilson. Let's go back to the original bill that was 
passed. Certainly, a bank like ours was very conflicted as to 
whether to support or not support that kind of action.
    You know, there is a big difference between the regulated 
sector of the financial services industry and the nonregulated 
sectors. As a matter of fact, I have always learned that, to 
solve a problem, you have to understand, to be able to define 
the problem. And certainly one of the problems is the 
definition of the word "bank." Regulated, nonregulated, all 
called banks. Wall Street, Main Street, investment banks and 
commercial banks, all called banks. So it is difficult to 
understand the important differences between these firms.
    So in a bank like ours that stuck to sound lending 
principles, that has the capital and the liquidity and the 
earnings and the growth and the asset quality to continue to 
lend, to continue to meet the credit needs of our customers, it 
would have been very easy to say that that bill was a really 
bad idea.
    However, I don't think there is any doubt that it was 
needed. And it was needed because the credit markets were 
locked up and they had to be released.
    We have a small business in our area that is a retirement 
home. That retirement home has bonds outstanding for building 
their facility. When a series of those bonds came up, there was 
no market for those bonds. The same experience was repeated 
with a hospital in our area; that was repeated in lots of 
different ways. That was repeated by some of the banks that I 
am sure other witnesses are talking about, where they just 
simply did not have the liquidity to meet loan demand.
    So the bill had to happen. Now that it is there, how do we 
use it? And, as I said in my testimony, you could use it to 
inject capital, but you also could use it to guarantee loans. 
And in guaranteeing loans, you leave that relationship intact 
between the borrower and the bank. You leave intact the 
creation of capital if you guarantee those loans.
    So I think a better use would probably be to buy back 
loans. Obviously they are going to be buying back securities. 
And I presume that some capital injection makes sense, but I 
would prefer they did a lot more of the former.
    Mr. Chabot. Okay. Thank you very much.
    Ms. Dorfman, I will turn to you next, if I can. I think it 
is fair to say from your statement that the bailout, or, again, 
rescue plan, you had some real concerns about it in how it was 
structured and everything else. And, of course, it happened 
now, it is already done, so I won't ask you how you would have 
structured it.
    But now that it is the law, are there changes, 
modifications? Because Congress can always change things. How 
would you suggest that we modify this over the next upcoming 
months or year to make it more useful for small-business folks?
    Ms. Dorfman. Well, again, I think we need to ensure that 
there is a benefit to the small-business owner.
    And I would just like to reflect back on the lending. I had 
a member who went for a small business loan with Bank of 
America about 6 weeks ago, before the financial issues, and she 
was told that, "We don't do small business loans." And the 
question was, well, not even the SBA loans? No. But what they 
would give is a line of credit, or revolving credit, at 21 
percent interest.
    So, I really have a concern that the money that is out 
there is not being used appropriately in terms of assisting the 
small-business owner's access to capital. And I feel that is 
where the focus we should be, that we need to get the lines of 
credit back to where they were. Our members have been very good 
about paying them back. And the ones who are growing, they 
can't even get the capital they need so that they can hire more 
people and try and help turn the economy around. So I think 
that is where the focus needs to be.
    Mr. Chabot. Thank you very much.
    Mr. Brown, relative to the 2001 and 2003 tax cuts on 
capital gains and across the board and all the other ones that 
were passed, the Federal inheritance tax, the death tax, do you 
have an opinion as to whether--even though we haven't made them 
permanent yet, they haven't gone back up, but Congress, in its 
budget this past year, put us on the glide path for those tax 
cuts ending, and there has been a lot of talk about capital 
gains, taxes going back up.
    Do you have an opinion as to how that would affect small 
businesses and markets and job creation?
    Mr. Brown. Thank you, sir. We would support the 
continuation of those, not for profit taking, but for 
reinvestment. Most of our constituency are sole entrepreneurs, 
closely and privately held. The contribution of profitability 
from reduced taxes, the vast majority is reinvested in the 
business, either to buy equipment or to hire additional people.
    If I am allowed to comment on some of the earlier thrusts 
in regard to bankers and what can be done, I empathize greatly 
with Mr. Franke. Our company several years ago was on the verge 
of bankruptcy. I faced a choice, a very difficult one: Pay the 
banker, pay payroll, or pay a bankruptcy attorney. I sought to 
pay the bankruptcy attorney so I could hold the others at bay.
    There is a reason things are happening today the way they 
are, and it is called the pace of change. For a small company 
like most of ours, we don't have the critical mass to absorb a 
jolting change in the marketplace. I am going to use one 
example.
    Steel, which comprises the vast majority of our purchases, 
went up 85 percent in the months of April and May. Health care 
walked in and gave us a 28 percent price increase or cost 
increase. We don't have the resiliency to absorb that, and that 
often pushes smaller companies to the brink of things they 
prefer not to do.
    This may not sound very sophisticated in a legal term, but 
I would like to see incorporated in this environment a timeout 
so that the details of situations can be evaluated, so that 
declining or deteriorating financials on the part of a small 
business don't impair the bank's credit rating. Likewise, let 
us get the detail out and sort out. There may be some 
businesses legitimately that should go out, but with the pace 
of change that we are all experiencing, far too many are going 
out when they don't need to.
    Mr. Chabot. Thank you.
    Mr. Bradbury, you stated in your testimony, "In talking to 
the bank, the feeling I get is that at the lower levels, they 
do not have a clear direction on what they can or cannot do in 
regards to loan approvals."
    Could you go into that in a little detail, what you meant 
by that?
    Mr. Braden. Well, the bank we are using, because credit 
lines and things are coming down, and it is just through the 
natural progression, that when you need to go and get a 
decision made at a bank about funding future growth, they want 
to go to their corporate headquarters to get an answer versus 
being able to have a direction at the bank level. So the loan 
officer doesn't seem to have a clear picture of what he has 
approved and what decisions he can make, and they are still 
trying to figure that out.
    Mr. Chabot. Thank you.
    Mr. Franke, just a couple of questions. One, where do you 
all go from here? Do you have any kind of plans at this point? 
And how many employees were there that they lost their jobs 
over this period of time?
    Mr. Franke. At the high point we were roughly 170. And my 
brother and I have one thing maybe in the works. We are 
talking, we have a nondisclosure. But we also have a guarantee 
to the bank, so we have to resolve that before we can move 
forward.
    Mr. Chabot. And how many other small businesses did you use 
as suppliers? I assume that this will have an impact on them as 
well?
    Mr. Franke. Numerous, yes. There were independent wholesale 
people left in town, and some of the larger ones. But, yes, we 
used almost everybody that was involved in the building 
material supply.
    Mr. Chabot. Thank you very much.
    Mr. Wilson. Congressman Chabot, may I follow up on that 
question?
    Mr. Chabot. Sure.
    Mr. Wilson. One of the things I expressed in my testimony 
was a concern, and it is a natural concern, that in these times 
regulators become overly concerned about things, and they can 
contribute to a credit crunch. They are very concerned right 
now about commercial real estate, so all banks are under great 
scrutiny in that area. As a matter of fact, they have even set 
guidelines as to capital, as to how much a bank can have in 
commercial real estate.
    SBA guarantees protect banks from the regulators in that 
regard, so I would just add while we are on the subject of SBA 
and the ability of SBA to help in this particular case, again 
expanding the SBA guarantees allows banks to put more money 
into small businesses without receiving criticism from 
regulators.
    Mr. Chabot. Thank you very much.
    I yield back, Madam Chairman.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chairman, for hosting this 
meeting, and thank you all for your testimony. We learned quite 
a bit.
    Mr. Wilson, I was interested when you said you were 
conflicted on whether to support or at least take the rescue 
bailout and support that. We were conflicted, too. I think 
there were 435 Members that were conflicted.
    How did you come down to your conclusion to think it was 
maybe not a good idea, but the idea at the time, to support 
that or at least encourage that path? It may not have been the 
bill that you would have written, but it was what we faced. 
What did you use as criteria to say it was probably a good idea 
at the time?
    Mr. Wilson. I went back to how we got in the situation that 
we are in. And if you take a look the housing boom, the housing 
burst, the housing bubble, and you go back to 2006, which was 
kind of the banner year, 76 percent of the mortgage loans made 
that year, and we know that because of HMDA data, were made by 
the unregulated sector of the banking industry. That means that 
24 percent were made by the regulated portion.
    So, what happened was these loans were made no matter 
whether they were suitable or not. They were made by people who 
were receiving commission, not underwriting loans and putting 
them on their own books. So those loans were then sold, 
securitized, and amazing to me, but a lot of bankers bought 
those securities. So the net result was on the books of banks 
that may have said no to the loan, but said yes to the 
securities, those they are now calling toxic assets had tied up 
a tremendous amount of capital and liquidity. That had to 
change. There were banks in our area that simply could not meet 
the credit needs of their customers because they didn't have 
the liquidity or the capital to do that.
    The investment banks in particular, that you are very aware 
of, were locked up with these assets and couldn't provide 
liquidity. When companies from General Motors down to small 
businesses went out to borrow, they found that either there was 
nobody willing to buy bonds or make the loans, or in the case 
of bonds, if they could sell them, a corporate bond, they were 
at extraordinary rates, 30 percent, 40 percent, et cetera.
    In order to get our economy moving again, and if the 
economy doesn't work, no matter how good we are in Lebanon, 
Ohio, there is going to be a problem, the bill had to be 
passed, liquidity had to be injected into the system, and so I 
applaud Congress for taking that action.
    Mr. Ellsworth. Thank you.
    You said earlier in your written testimony that hearings 
like this allow us to discuss these issues and work together to 
restore confidence in our financial system.
    What do you see now moving forward to restore the 
confidence in the small business owner with the financial 
institutions to get that moving? What would you see? We want to 
restore confidence in these guys at this end of the table.
    Mr. Wilson. I think what they have to understand is the 
fact that we are small businesses also, for the most part. For 
example, the Small Business Administration defines a small 
business as less than 500 employees. By that definition, 8,100 
community banks are small businesses. As a matter of fact, that 
is 97 percent of the industry. And even more telling, over 
3,500, or 41 percent, have fewer than 30 employees. So there 
are a lot of options out there that maybe small businesses 
didn't pursue. Small business had access to a lot of different 
financing options, and many of them moved away from their 
community banks.
    I would suggest that there are a lot of community banks out 
there with the capital and the liquidity and the desire to make 
loans, and you just need to keep looking.
    Mr. Ellsworth. Thank you.
    Ms. Dorfman, this Committee probably has the best chance of 
changing things within the Small Business Administration, and 
thank you for being here again and your honest testimony.
    What changes do you seek, on this side of the table, could 
be made in the short term with SBA that we can really have an 
effect and we can go after between now and the end of the year 
or early next year that would provide the most short-term help?
    Ms. Dorfman. First of all, again, if you increase the loan 
guarantees and the limits, we do need to make sure that it is 
going to be 2 years or more. I personally faced a while ago 
when I got an SBA loan where it was 80 percent guaranteed, the 
banks--when it first came out that it was 80 percent, the banks 
had been lending at a 50 percent guarantee, and I was turned 
down, turned down, turned down, simply because they were not 
willing to restructure how they were going to be manufacturing 
the loan, in quotes. So if there is a long-term--you know, it 
is going to be that way for 2 years, then they are more likely 
to restructure how they do loans. So I think that is important.
    We need to have increased lending authority, lower fees 
absolutely. Loosen up the rules on the credit-worthiness and 
also loosen up equity injection rules. Relax the rules for 
refinancing, especially credit card debt, since many of our 
small businesses are now having to turn to their credit cards 
to make ends meet in this time frame. Relax life insurance and 
job creation requirements. And then also allow those with 
current SBA loans that may need to restructure them for a lower 
payment to be able to do so.
    So those are some of the thoughts we have had.
    Mr. Ellsworth. Could I ask another question, just another 
for clarification?
    Chairwoman Velazquez. Yes.
    Mr. Ellsworth. On that point, because loosening the rules 
of credit-worthiness, some would argue that is what got us into 
the loans that went to people that weren't worthy of loans, and 
that is why we are in this, and I am not talking about small 
business, maybe home loans.
    How would you argue that? When I go home and say that is 
one of the things we want to change, they are going, that is 
what got us into this problem to begin with.
    Ms. Dorfman. If you take a look at home loans especially, 
what has happened is if, quote/unquote, you own your own 
business, and they view you as self-employed, even though you 
are bringing in money all the time, it is very difficult to get 
the loans that you might need. So there are times when some of 
the regulations need to be loosened, and certainly you need to 
take a look at that.
    Mr. Ellsworth. Thank you, Madam Chairman.
    Chairwoman Velazquez. Thank you.
    Mr. Franke, the reason we called this hearing today is to 
hear from you and see how can Congress take actions to be able 
to provide tools and help to assist small businesses, which are 
the job creators in our country. I can tell you that help 
didn't come soon enough for your business, but I hope that in 
the process of discussing a second stimulus package, that we 
are able to use the insights that we are getting from you today 
to be able to have some input into the end product of that 
second stimulus package.
    So I would like to ask you, we know that the company you 
run has been in operation since 1925, and I am sure that you 
have faced many obstacles throughout that time. However, you 
discuss how the problems in the housing market compounded the 
challenges facing your lender.
    Do you believe that if credit was made more available, that 
companies like yours might be able to rebound rather than shut 
their doors?
    Mr. Franke. I think probably if they would have remained 
tightened earlier, we wouldn't have hit this wall. So now, yes, 
probably. But, yes, I would say probably so.
    Chairwoman Velazquez. Mr. Wilson, from your testimony, it 
is clear that banks want to lend, but again we have heard so 
many businesses express difficulty in getting loans. How can we 
resolve this disconnect and help businesses find lenders who 
are ready, willing and able to help?
    Mr. Wilson. Well, the first step was to unfreeze the credit 
markets. I know so often we look at the financial markets as 
the major stock market went up, stock market went down, but it 
is really the credit markets where the problem lies. And no 
matter what our desire as a small bank is to make loans, if the 
larger banks and if the bond market is tied up and 
nonfunctioning, it will be very difficult to meet all of the 
needs in our country for credit. So, again, I think that it was 
very, very important that you moved forward as you did.
    To Congressman Ellsworth's point, I know he was conflicted 
a bit, using that word again, on somebody wants a loan, we 
lower the standards, is that a good idea. And I would submit to 
you that it is not a good idea. I think that is what did get us 
into trouble. I believe that as a banker, we are doing our 
customer a favor when we tell them "no" if we truly believe 
they are not going to succeed. To make a loan to somebody that 
is going to result in their failure does not make sense, but to 
work with them to understand how they can move forward--and I 
know you indicated that if they would have kept their standards 
steady throughout, that you would still be in business today, 
and I believe that.
    I received an e-mail the other day. That e-mail was from a 
customer that said they had come in to see me, and I know the 
year, because they said they asked questions about Y2K, so it 
was the 1999 time frame. That customer indicated that they had 
liked my answers, and they had opened accounts with our bank, 
and subsequently we turned down a loan to them. They were 
frustrated, they were angry, and they left our bank. His e-mail 
was to say he shouldn't have been granted that loan; that he is 
back, because if we would have told him no, he would have been 
in better financial stature at this point in time; and that he 
moved back to our bank because he appreciates the fact that we 
underwrite loans, that we are concerned about the success of 
our customers and the suitability of loans.
    So, you are absolutely right. The answer is not to lower 
credit standards. It is to inject the capital and the 
liquidity.
    Chairwoman Velazquez. Yes, Mr. Bradbury.
    Mr. Bradbury. I would like to respond a little bit. I think 
we all can select anecdotal stories, in all fairness, Mr. 
Wilson.
    There is real math at work here, whether we talk about a 
farmer whose input costs have gone up 100 percent, over 100 
percent, his financials haven't changed, but to deny credit 
under those circumstances that is beyond his control, he or she 
hasn't changed a thing. In the case of our company, steel going 
up 85 percent. We spend $6 million to $8 million a month, and 
we don't get it back at the earliest until 90 days, usually 120 
days, and to deny credit in those circumstances based upon 
those facts to me is not appropriate.
    So, there are proper times when businesses are failing 
across the board, but we are in, in my view, very unusual times 
with $140, at one point, oil, steel up 85 percent, and some of 
the other figures. These for small businesses are just 
Draconian percentages that we have to deal with, and, frankly, 
we need the help of the banking community.
    Thank you.
    Chairwoman Velazquez. Mr. Bradbury, over the past few 
months, there has been a wide discussion of the challenges 
facing the automakers in the United States. How important is 
the domestic auto industry for small businesses like yours and 
others across the country?
    Mr. Bradbury. Well, in automotive, there are many tiers of 
suppliers. There are five tiers up to the OEM level. We fit in 
the tier 2 to 3, meaning we have a loot of tiers below us that 
support us.
    As credit tightens, there was a lot of weak companies 
already going into this. Fortunately for us, and I am going to 
kind of elaborate a little here, we have a fiscal 
responsibility to control our debt as a small company, and our 
stakeholders insist we pay our debts off.
    Had that not been the case, I might be sitting in his shoes 
today, because we were about ready to grow and expand, not even 
a year ago, and because we ran into some issues with some bond 
financing on the property, we decided not to, and luckily that 
saved us a lot of extra costs.
    But the communities, we supply $20 million in income into 
our community. That is a significant amount, in taxes, wages, 
not to mention all the other suppliers' products we buy. So 
there is a tremendous ripple effect that is present there if 
they start to collapse.
    Chairwoman Velazquez. Thank you.
    Mr. Brown, you discussed that many small manufacturers are 
currently struggling with decreased demand for their products. 
Has your company's sales been affected, and are you considering 
layoffs or delaying expansion plans?
    Mr. Brown. We actually are in a growth mode. We are in a 
growth mode because we were concerned about the volatility in 
America. We approached the Kansas World Trade Center and also 
the U.S. Department of Commerce.
    We didn't start exporting until just 3 years ago. With 
their help, we are now, as I mentioned in my testimony, 
exporting to Russia, Kazakhstan, Ukraine, Australia, a little 
bit to the U.K., and we are developing the skills. Frankly, 
there is a huge body of knowledge on how to finance it, Ex-Im 
Bank and the paperwork that is required. This is an area both 
for Krause and the small enterprise Committee that we are going 
to aggressively go after.
    Our strategy, because of the volatility within America, has 
been to stabilize by going global. When America goes through 
the spasms, and that, in my view, is what this is, this has 
provided a buffer. So, we actually are growing. I think 
agricultural equipment producers generally have been growing 
this past year because of the global shortage of food. 
Construction equipment, conversely, very much mirrors the 
general economy, the reduction in infrastructure, bridges, 
building, residential. They are hurting to a greater extent 
than my company is.
    Chairwoman Velazquez. Thank you.
    Mr. Chabot?
    Mr. Chabot. Thank you, Madam Chair. I just have a couple of 
questions.
    Mr. Wilson, could you comment on to what extent the high 
energy costs that we had over the last year or so, whether it 
is gas or diesel, what impact you think that had on small 
businesses and the economy, if it did, if you think it did; and 
then what, if any, impact do you think the rapidly falling 
price at the pump--I saw it as low as $1.99 in Cincinnati 
yesterday, at least four stations had it at that, so it has 
come down pretty quickly. Some of the reasons, unfortunately, 
aren't the best, obviously, because the economy is tough right 
now.
    Could you comment on that?
    Mr. Brown. I am sorry, I thought you said Mr. Wilson.
    Mr. Chabot. If I did, I apologize. I meant you. I have my 
next question for Mr. Wilson.
    We can't see your names down there. We spend all this money 
on the new room, and we can't see your names.
    Mr. Brown. Energy costs are critical in agriculture. 
Fertilizers, what has happened in fertilizer is extraordinary. 
By order of magnitude, 5 years ago, anhydrous ammonia, which is 
the primary nitrogen fertilizer, was between $120 and $180 a 
ton. This past year, it was $1,200 a ton. It is made from 
natural gas primarily. It has now, quote/unquote, dropped to 
$800 a ton.
    So the impact of high energy costs have driven inflationary 
ramifications throughout every industry, agriculture 
notwithstanding. Certainly on the construction side, the 
reduction of allegedly of 1 billion miles a month of driving 
and the order of magnitude like that has had a very dramatic 
impact as well.
    So, the drop for us personally, our company, the drop to 
$70 oil, while it will be helpful, pales in comparison to our 
cost of steel and health care.
    Mr. Chabot. Thank you.
    This time I did mean the question to you, Mr. Wilson, if I 
could. Did you have a comment?
    Mr. Bradbury. Yes. In automotive, plastics are all made 
with oil resins. So as oil went up, plastics went up, and you 
saw a lot of bankruptcies in the plastic industry because we 
can't pass our increases on to our end customers. We also get 
charged, we have daily shipments coming into our plants. There 
are surcharges on all of those for gas. So as that comes down, 
that does help us in that it will reduce costs over time.
    It also goes to the model mix in the automotive. Many 
people were buying large SUVs and trucks and vans. That changed 
overnight. I mean, there was a huge percentage drop in those 
vehicles. They are starting to creep back up, which will 
stabilize the market a little and buy time to meet the CAFE 
long-term.
    Mr. Chabot. Finally, Mr. Wilson, could you comment, you are 
familiar with the mark to market accounting changes that were 
made some time ago. Could you comment on the impact that that 
had on this whole financial mess that we have seen recently? 
There have been some changes suggested and I think that are in 
the process of being implemented. But could you comment on that 
whole process and how that has affected the banks and how your 
books look and why you can or can't lend because of that?
    Mr. Wilson. It has been a major impact, and the impact has 
been that it takes liquidity off our books. If we have to write 
down a security that we have no intention of selling, we are 
going to hold to maturity, it is going to be worth its face 
value, yet according to those accounting rules, it is worth 
today half, say, of what it was. Well, that is that much 
liquidity, capital, that comes off our books.
    Mark to market is an interesting thing. If we mark to 
market both sides of the balance sheet, if we mark everything 
to market, our buildings, et cetera, et cetera, both sides of 
the balance sheet, there might be some sense to it. But to just 
simply pick off things out of the balance sheet and have us 
mark them to market is a bad idea. It is an idea that when the 
FASB or the Accounting Standards Board comes up with something 
we have to comply with. That is why in my testimony I indicated 
that I would hope there could be an oversight board for 
accounting that would think of the consequences of these things 
to our economy. It is all done in the sense of transparency and 
making things more visible to shareholders, et cetera.
    Well, I would argue if you don't mark to market the entire 
balance sheet, you are causing wide swings that don't need to 
happen and are not representative of what is really going on 
with our bank's balance sheet.
    So, thank you for asking that, because that is something 
that is of great concern to us.
    Mr. Chabot. Thank you. That was one of the things which 
contributed to this credit crunch, where banks weren't able to 
loan, which put us in this terrible position; is that correct?
    Mr. Wilson. That is correct.
    Mr. Chabot. Thank you very much. I yield back, Madam Chair.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chair. I don't mean to 
ignore the three gentleman at this end of the table. My 
question seems to aim more at Ms. Dorfman and Mr. Wilson.
    If the both of you, on the chance that there are 
entrepreneurs out there watching this program today, what 
advice would you give to someone baking cookies or whatever on 
where they should go? They are having trouble getting credit, 
they are balancing the books, they are not balancing the books. 
What would you tell the entrepreneur today where to start 
looking for those lines of credit?
    Mr. Wilson, would you tell them come into the bank, check 
and see? Ms. Dorfman, what would you tell them, SBA? If you 
could touch on that.
    Ms. Dorfman. Well, first of all, most of our members are 
more what we call the midlevel businesses. They are 
manufacturers, technology, professional services, a lot of 
construction folks. So their challenges are quite a bit 
different than what you are referring to as a start-up.
    The start-up, there are resources out there, the Small 
Business Development Centers, they could stop in and start the 
process of understanding how to start a business and what is 
needed to move forward.
    I think with the businesses that we deal with, it has been 
very difficult, because they have relationships with their 
banks, and their banks have just cut them off, and that is the 
issue.
    Another example you had mentioned, you know, loosen up the 
rules of credit-worthiness. Well, in the cyclical world which 
many of our members operate in, they know that they are going 
to get the check in 30 or 60 or 90 days, but that is not going 
to fulfill what the bank has to do from a regulatory 
standpoint. So they are not able to access that credit for that 
short term to really be able to pay their employees and keep 
the business going. And that is the challenge.
    Mr. Ellsworth. Thank you.
    Mr. Wilson, any comment on what you would tell the person 
out there, the business owner?
    Mr. Wilson. A couple of things. Number one, I would not 
give up. I think that a lot of businesses that are in 
difficulty have not tried to access the SBA programs. That is 
one important way to go.
    Another thing is when you are talking to your community 
bank that you have worked with for a long time, if that is your 
relationship, and they tell you that they think building that 
new building or doing whatever is a bad idea because of 
numbers, cash flow, et cetera, I would suggest that they 
listen.
    It is a very difficult time right now, and while we want 
the economy to grow and prosper, individual businesses must be 
very cautious at this point in time, because if they are not, 
survival becomes an issue.
    Mr. Ellsworth. Thank you all very much, Madam Chairman. I 
yield back.
    Chairwoman Velazquez. Mr. Wilson, in your testimony you 
note that the economic disruption is now affecting commercial 
real estate and small business lending. Do you believe that 
small businesses will have greater access to financing if the 
TARP were used to purchase or guarantee a broader class of 
loans, including commercial real estate and small business 
loans?
    Mr. Wilson. I do indeed. If we expand that program to 
guarantee not just mortgage loans, but to guarantee commercial 
real estate and small businesses loans, there is no doubt that 
that would provide more access to credit. There are a number of 
things that I had in my testimony, the SBA, what Congressman 
Chabot referred to as accounting standards. Anything that 
provides more liquidity to the banking system is going to make 
them more able and more willing to lend.
    Chairwoman Velazquez. Mr. Wilson, I believe that Congress 
has given the authority to the Secretary of the Treasury to use 
TARP and to extend it to include commercial real estate and 
small business loans.
    Mr. Wilson. That program is not in place, to my knowledge, 
at the present time.
    Chairwoman Velazquez. They are working on regulations. What 
I am saying is we do not have to revisit the law that we 
passed, because the authority is already there, and we will 
work with Treasury for them to understand that it will be an 
important tool for small businesses.
    Mr. Wilson. Thank you.
    Chairwoman Velazquez. Mr. Brown, you mentioned that many 
rural Americans and small businesses as a result of the current 
crisis are losing faith in our economic system. Why do you 
believe that there is a crisis of confidence?
    Mr. Brown. Thank you. The rural Americans, frankly, are 
looking for solutions to the problem rather than handouts. The 
example I would use, and I will use both construction and 
agriculture, and I think I can speak for the gentlemen to my 
right, we would much rather have markets restored, a vibrancy 
of the competitive environment, that we can continue to do what 
we do best, rather than many of the programs that are being 
discussed.
    Rural America doesn't see or feel often these programs 
impacting them. I am not an accurate historian, but I am going 
to use an example. Twenty years ago when Japan went through a 
similar housing situation, they, meaning the central 
government, did not allow unemployment to exceed 6 percent. 
They invested hugely in roads and bridges and dams and other 
areas that continued business in all locales of the economy.
    So, the bottom line for rural Americans, it is kind of a 
tangible. Let us do something that is proactive and positive, 
rather than just dole out money.
    Chairwoman Velazquez. Mr. Chabot, do you have any other 
questions?
    Mr. Chabot. No.
    Chairwoman Velazquez. I would just like to ask my last 
question to any of the members of the panel. As you know, there 
are discussions here about a second stimulus package. And I 
hear you, Mr. Brown, but maybe other members of the panel have 
other opinions regarding any type of proactive action taken 
through a second stimulus package.
    If we do have the opportunity to work on a second stimulus 
package, what would you tell Congress should be the first or 
top priority regarding any second stimulus package?
    Mr. Wilson?
    Mr. Wilson. You have a very difficult task there. You are 
riding a very thin line between knowing when to stimulate the 
economy and not creating future problems. If you overstimulate 
the economy, if you do more than you have to do now, and I am 
not saying you are, it is just a challenge that you face, we 
are going to face increasing inflationary pressures in the 
future, we are going to increase the national debt in the 
future, so we are passing on to future generations what we do 
today.
    It is important to get the economy moving again. It is 
important that you look at things like additional packages, 
stimulation packages. But be cautious, be careful, because you 
don't want to overdo it.
    Chairwoman Velazquez. Any other comment from any of the 
other Members?
    Ms. Dorfman. I would agree that getting money back into the 
small business pockets, many of our members say, you know, give 
us the sales. That is what will keep us going. So if there are 
programs such as Mr. Brown had discussed where the small 
business owner actually gets access to those contracts, then 
that would be great. That would work very well for them.
    Chairwoman Velazquez. Mr. Brown?
    Mr. Brown. Yes, thank you again.
    I would strongly urge the first consideration be aimed at 
what we call the capital goods industry, manufacturing and 
producing something that has lasting and sustainable value.
    I personally face a decision whether to continue to build 
some of our product in the United States or build it in Russia, 
and I haven't got a clue what it is like to build in Russia. I 
am not sure I even want to do it.
    But if we don't start investing in basic manufacturing and 
the basic capital goods industry in this country, and we 
continue the outsourcing that has occurred, no amount of 
consumer stimulus will solve the problem.
    Chairwoman Velazquez. Mr. Bradbury?
    Mr. Bradbury. I agree with Mr. Wilson in the sense of what 
is the right amount of growth and what is the right amount of 
risk? How much debt is too much, and how much growth is too 
much?
    You know, we are in the automotive industry, and our 
industry has gone global in the last 3 years. We opened a plant 
in Asia, and we had to increase our overhead in order to manage 
it. In my testimony, I mention the fact that there is 
opportunity to challenge Americans to achieve new heights. We 
are a society that can rise to the challenge. We have seen it 
time and time again.
    The CAFE is a challenge. It is something that we have to 
achieve. It can drive a new business opportunity for Americans 
to aspire to become the leaders in the world in those types of 
things. But we need enough funding to be able to generate the 
type of investments we need to make to survive here in this 
country first.
    Thank you.
    Chairwoman Velazquez. Mr. Franke?
    Mr. Franke. I guess the only thing I could say is I would 
love to go back to 2005 and make some different decisions based 
on this isn't going to last forever. That is all.
    Chairwoman Velazquez. Mr. Chabot?
    Mr. Chabot. Just one final comment. I would like to again 
thank you holding the hearing and want to thank all the 
witnesses for their testimony. I think it has been very helpful 
and informative for the Committee.
    I want to especially again thank Mr. Franke. We have had a 
lot of witnesses from Cincinnati, and generally they have happy 
endings. Unfortunately, this is one that is very sad, 
especially for those employees whose jobs had to be eliminated, 
and I am sure for your family, to have been in existence for 
125 years. Obviously it was a very significant change in the 
environment that you operated in that has resulted in this.
    So our condolences, and we certainly hope that your family 
does as well as possible and the employees to the extent that 
you can help them as well. We thought this was a story that 
needed to be told in these very tough economic times. Thank you 
for sharing it with us.
    I yield back.
    Chairwoman Velazquez. I echo the comments made by the 
Ranking Member. I will say that the record of this hearing 
today will be made available during any discussion with the 
leadership in terms of a second stimulus package.
    The intent of this hearing was precisely that. Any time 
that we sit at the table to have meaningful discussions 
regarding how can we best stimulate our economy, and what type 
of tools can we provide for small businesses to enable them to 
continue to grow our economy, that was the main reason for us 
to call this hearing. So I want to take this opportunity to 
thank all of you for your insightful information.
    Mr. Franke, to you, thank you for your willingness to come 
and tell the story. So many times we discuss the economy and 
the numbers and the unemployment rate and the deficit, but 
there is a human face to all those numbers, and you signified 
that at such a great level.
    I ask unanimous consent that Members have 5 days to submit 
a statement and supporting materials for the record.
    Without objection, so ordered.
    Chairwoman Velazquez. This hearing is now adjourned.
    [Whereupon, at 11:40 a.m., the Committee was adjourned.]

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