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

                       FINANCIAL AND ECONOMIC CHALLENGES
                            FACING SMALL BUSINESSES

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

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  HEARING HELD
                               NOVEMBER 20, 2008

                                   __________

                       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 110-117
    Available via the GPO Website: 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

    Krosner, Hon. Randall S., Governor, Board of Governors, Federal
      Reserve System.................................................     4
    Ramanathan, Mr. Karthik, Acting Assistant Secretary for Financial
      Markets, U.S. Department of the Treasury.......................     6

                                    APPENDIX

    PREPARED STATEMENTS:
    Velazquez, Hon. Nydia M..........................................    30
    Altmire, Hon. Jason..............................................    33
    Ramanathan, Mr. Karthik, Acting Assistant Secretary for Financial
      Markets, U.S. Department of the Treasury.......................    34
     Krosner, Hon. Randall S., Governor, Board of Governors, Federal
      Reserve System.................................................    38

                                      (v)

           FINANCIAL AND ECONOMIC CHALLENGES FACING SMALL BUSINESSES

                                  ----------

                          Thursday, November 20, 2008

                         U.S. House of Representatives,
                                   Committee on Small Business,
                                                        Washington, DC.
        The Committee met, pursuant to call, at 10:38 a.m., in Room
    2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
    [Chair of the Committee] Presiding.
        Present: Representatives Velazquez, Shuler, Michaud,
    Cuellar, Clarke, Sestak, Chabot, Westmoreland, and Gohmert.
        Chairwoman Velazquez. This hearing of the Small Business
    Committee is now called to order. Despite actions taken by the
    Federal Government this September, the fallout from our
    Nation's financial crisis continues to grow. In the face of a
    collapsing housing market, tightening credit crunch and record
    unemployment, it is clear that the current course of action is
    neither stabilizing nor galvanizing the economy. This is
    particularly apparent within the struggling small business
    community. Rather than trickling down resources from the
    Treasury and the Federal Reserve are pulling and stagnating at
    the top.
        As a result, small businesses from tech start-ups to
    convenience stores are bearing the brunt of severely restricted
    lending. In a report released last month, the Federal Reserve
    found that 75 percent of domestic banks have tightened their
    small business loan standards. On top of that, 90 percent of
    respondents said they have raised the cost of small business
    credit lines. At a time when large financial institutions are
    enjoying Treasury handouts, it will only make sense for small
    firms, the backbone of our economy, to receive comparable
    assistance. But unfortunately, even loans from the Small
    Business Administration are on the decline. In fact, SBA
    lending has dipped 50 percent in the last year.
        In today's hearing, we will analyze the current conditions
    facing small firms and evaluate what actions the Treasury and
    the Federal Reserve have taken to address those circumstances.
    Regardless of continued declines, positive steps have been made
    through the Economic Recovery and Stabilization Act. The
    Federal Reserve's commercial paper facility, for example, has
    succeeded in partially easing the credit crunch. But
    unfortunately, the Fed missed a real opportunity to help small
    firms when it chose to limit this provision to big businesses.
        As a result of that particular oversight, the small
    business credit markets are as frozen today as they were when
    the crisis began. To remedy this we ought to look for a concept
    similar to what the FDIC is now doing for homeowners. Sheila
    Bair has outlined an innovative new plan for restructuring
    mortgages, and something similar might work for small business
    loans. Despite these instances of government ingenuity
    implementation of the recovery legislation has largely failed
    entrepreneurs.
        For example, the Treasury's troubled asset relief program,
    or TARP, has done nothing to solve the small lending freeze. In
    fact, the banks benefiting from TARP have all but shut down
    lending operations. And while billions of dollars have been
    earmarked for big banks and AIG, thousands of small firms
    across the country have been forced to close their doors.
    Shutting small businesses out of stabilization efforts just
    isn't logical. Current legislation while not designed as a
    stimulus per se was intended to do more than simply steady the
    markets. It was expected to help jump-start the economy.
    Because small firms are proven drivers of economic growth it
    only makes sense to give them the tools they need to spark
    recovery. Our financial system is entering an era of
    unparalleled turmoil and confusion.
        But amidst the upheaval, one thing has become abundantly
    clear, we cannot rely on the policies of the past. It has been
    said before that extraordinary times call for extraordinary
    measures. Well, these are certainly extraordinary times. If we
    are to match them to our measures then we must take a page from
    the entrepreneurs playbook. Through ingenuity and
    resourcefulness we can find innovative new ways to give small
    businesses and the rest of the economy the resources they need
    to get back on track.
        With that I look forward to a frank discussion, an open
    discussion this morning, and thank the witnesses in advance for
    their testimony. With that I now yield to the ranking member,
    Mr. Chabot, for his opening statement.
        Mr. Chabot. Thank you, Madam Chairwoman. And I, first of
    all, want to note and congratulate you on being elevated to
    chairwoman of the Hispanic caucus.
        Chairwoman Velazquez. Thank you.
        Mr. Chabot. That just happened today so I wanted to say
    good luck and congratulations on that. And I want to thank you
    for holding this hearing. The issues that will be addressed in
    today's hearing are vital to the economy and the ability of
    current and future small business owners to lead us to a
    brighter economic future. When Congress adjourned early
    October, there was an expectation in some circles that the bill
    enacted by Congress would help resuscitate the economy. Those
    hopes and expectations have been dashed on the rocks of
    continuing economic turmoil. Despite promises of better times
    ahead after passage of the bailout consumer confidence remains
    low.
        Many companies are laying off workers and three automobile
    manufacturers with a significant presence in my home State of
    Ohio, as well as many other States around the country, appear
    to be teetering on the abyss of failure. There is, no doubt, in
    these troubling times that solutions must be found to these
    financial problems. One glimmering light in these times is the
    agility, resourcefulness and drive of America's entrepreneurs.
    As larger enterprises lay off workers, small businesses will
    help to fill the gap, either through hiring of new employees or
    the creation of entirely new enterprises. But the ideas of
    America's entrepreneurs require something that has been in very
    short supply recently, and that is capital.
        Today's hearing will focus on the current availability of
    capital for small business owners and possible solutions to
    increase liquidity in the small business lending markets. From
    all that I have been hearing, there is little available capital
    for small businesses. Banks are cutting back on credit for
    entrepreneurs, venture capital remains scarce and the safety
    net of SBA lending programs have seen dramatic reductions in
    loan approvals. If we are relying on small businesses to lead
    us out of the current economic situation, the absence of
    available capital is fraught with serious consequences.
        During the debate on the financial rescue, there was an
    expectation that the funds injected into firms would then be
    loaned to firms requiring new capital. That has not occurred,
    and the members of this committee are certainly interested in
    knowing why that has not occurred. This should not be viewed as
    laying the basis for blame or recriminations; rather, it is
    necessary to ensure that Congress and future legislative action
    does not repeat the errors of the past.
        I would be very interested in hearing from the witnesses
    any mistakes they may believe have been made. Further efforts
    to inject capital into the credit markets will increase the
    debt ceiling in Federal borrowing. As I noted in a previous
    hearing, small business owners cannot compete against the
    Federal Government in a market for debt capital. So any
    solution to the current liquidity crisis and the small business
    debt market must address the cost of capital to America's
    entrepreneurs. Simply making the capital available, which is no
    doubt important, will be of little use if the cost of such
    capital is so high that prudent small business owners will not
    take the risk of the higher debt payments, particularly in
    uncertain economic times. I would be very interested in
    suggestions on how the balance between further liquidity
    injections and balance those with the cost of debt capital for
    small business owners. No one can deny that recent weeks and
    months are placing a strain on the finances of all Americans,
    including America's small businesses. Solutions must be found
    that increase liquidity of small businesses without presenting
    them with unaffordable capital. Again, I thank the chairwoman
    for holding this hearing and I yield back my time.
        Chairwoman Velazquez. Thank you, ranking member. And before
    I introduce the witnesses I would like to take a minute to say
    that this committee has had a very productive 2 years, and that
    was largely thanks to your leadership, Mr. Ranking Member.
    While we may not have been seeing eye to eye on every policy, I
    always appreciated your input. I knew that it was motivated by
    what you deemed best for small business. Nine times out of ten
    we ended up with a better product as a result.
        And of course, let us not forget how much, how much you
    taught me about ANWR. I now know more about that place than I
    ever dreamed or hoped to know. So I could go on and on about
    you, Steve, but I don't want these witnesses to think that they
    are going to get off easy. But seriously, it has been a
    pleasure getting to work with you and getting to know you.
    Thank you for your service, and you have a friend here in the
    House of Representatives.
        Mr. Chabot. Well, thank you very much, Madam Chairwoman. It
    has been a pleasure working with you. And I think we were able
    to work together in a bipartisan fashion for the good of the
    small business community across the country. And I consider you
    not only a colleague but a friend. And even though we are
    different parties and different philosophies relative to a lot
    of issues, we did work together, and our staffs did too. And I
    think we both have excellent staffs, and it has been a pleasure
    working with you.
        Chairwoman Velazquez. And now it is my pleasure to welcome
    the Honorable Randall S. Kroszner. Mr. Kroszner is a member of
    the Board of Governors of the Federal Reserve System. Dr.
    Kroszner took office on March 1, 2006, to fill an unexpired
    term ending January 31, 2008. Before joining the board, he
    served the Federal Reserve System in several roles, including
    visiting scholar at the Federal Reserve banks of New York, St.
    Louis, Kansas City and Minneapolis. The Federal Reserve System
    was founded by Congress in 1913 to provide the United States
    with a safer and stable monetary system. Welcome, sir.

        STATEMENT OF HON. RANDALL KROSZNER, GOVERNOR, BOARD OF
                GOVERNORS OF THE FEDERAL RESERVE SYSTEM

        Mr. Kroszner. Thank you very much. Chairwoman Velazquez,
    Ranking Member Chabot and Members of the Committee, I am very
    pleased to appear here on behalf of the Federal Reserve Board
    of Governors. My remarks will briefly address how the ongoing
    financial turmoil and weakening macroeconomy appear to be
    affecting small business credit. In addition, I will discuss
    how recent policy actions of the Federal Reserve, the Congress
    and other government agencies should assist small business
    going forward. To summarize, the information we have received
    indicates that over the last 6 months, it has become more
    difficult for small businesses to access credit. But that at
    the same time the demand from small businesses for credit has
    also declined. Commercial banks, the most common source of
    credit for small business, have generally both imposed more
    stringent credit standards and increased the interest rate
    spreads and fees.
        In addition, deteriorating financial positions in both
    small businesses and the household sector are almost surely
    reducing the credit worthiness of many small businesses and
    thereby constraining their access to credit. That said, the
    information we have on the volume of small business loans
    suggests that credit is still generally available, albeit on
    significant stricter terms. Small businesses generally report
    that reduced demand for their products and services caused by a
    lower level of economic activity is a more serious concern than
    is the tightening credit supply conditions.
        Importantly, there is some evidence that concern over
    access to credit is relatively stronger at larger businesses. I
    will now highlight a few specifics from the much more detailed
    written testimony that I have submitted to you. In the Board's
    most recent senior loan officer opinion survey on bank lending
    practices conducted in October that Madam Chairwoman had made
    reference to, a net 75 percent of domestic banks surveyed
    reported they had tightened standards applied when approving
    commercial and industrial loans to small businesses. But small
    businesses were not alone. Almost a net 85 percent of domestic
    banks reported having tightened credit standards on such loans
    to large and middle market firms. Importantly, the net
    fractions of banks reporting tighter lending standards and
    tighter price terms on loans and businesses of all sizes were
    very high by historical standards going back to 1990.
        Business surveys such as the recent monthly surveys from
    the National Federation of Independent Businesses NFIB suggest
    that finance conditions for small business have deteriorated
    substantially over the past several months. That said,
    financing conditions have continued to be ranked as a top small
    business concern by only a modest fraction of small businesses;
    5 percent in the October survey. Changes in the quantity of
    loans at banks also suggest that small businesses have
    generally maintained their access to bank credit, although new
    grants of credit tend to be subjected to stricter standards and
    terms.
        During the credit demand, the NFIB survey results are quite
    pessimistic. For example, the survey indicates that small
    business optimism dropped in October to its lowest level since
    the monthly surveys began in 1986. Some 23 percent of firms
    indicated that sales were their main concern. Results such as
    these when combined by other survey data suggest that demand
    concerns generally provide the most serious challenge currently
    facing businesses. Policymakers both in the United States and
    other countries have taken a series of extraordinary actions
    aimed at restoring market functioning, improving investor
    confidence and stimulating economic active. The benefits to
    small business from these actions will be largely indirect but
    nevertheless real.
        For example, improving interbank funding markets and
    restoring public confidence in banks and other financial
    institutions benefits small businesses by lowering
    intermediaries and thereby small businesses lowering costs and
    increasing the volume of loans that banks can extend.
    Importantly, some of these policy actions will also directly
    benefit small businesses. For example, recent reductions in
    Federal funds rate should result in small businesses facing
    lower borrowing costs.
        In addition, stronger economic activity from lower interest
    rates should result in small businesses enjoying increased
    demand for their products and services. Going forward the
    evolution of small business access to credit will be strongly
    influenced by the success of these and other recent policy
    actions. Given the current financial and economic environment
    the sizes and effects of the recent policies on both the
    economy and small business directly are highly uncertain.
        For these reasons, the Federal Reserve will continue to
    monitor the financial markets and economic conditions and their
    affects on small business access to credit as part of their
    efforts to restore the health of the U.S. financial system and
    our economy. Thank you very much and I look forward to your
    questions.
        Chairwoman Velazquez. Thank you Dr. Kroszner.
        [The statement of Mr. Kroszner is included in the appendix
    at page 38.]
        Chairwoman Velazquez. Our next witness is Mr. Karthik
    Ramanathan. Mr. Ramanathan is Acting Assistant Secretary For
    Financial Markets in the U.S. Department of Treasury. He serves
    as senior advisor to the Secretary, Deputy Secretary and Under
    Secretary on extensive matters. Mr. Ramanathan also serves as
    the senior member of the Treasury Financing Group. In addition,
    he oversees the Office of Debt Management and the Office of
    Government Financial Policy as well as the operation of the
    said commissions and board staff. While he started working at
    the Treasury Department in 2005, he began his current position
    in 2006. Welcome sir.

    STATEMENT OF KARTHIK RAMANATHAN, ACTING ASSISTANT SECRETARY FOR
        FINANCIAL MARKETS, UNITED STATES DEPARTMENT OF TREASURY

        Mr. Ramanathan. Thank you. Chairwoman Velazquez, Ranking
    Member Chabot and members of the Committee, thank you for this
    opportunity to testify this morning. Small businesses are
    crucial to the health of the U.S. economy. They provide the
    entrepreneurial talent that keeps the economy flexible and
    dynamic. Small businesses employ over half the U.S. work force
    and are estimated to generate 70 percent of all new jobs. Thank
    you for the opportunity to address this timely topic and stress
    the importance of this sector.
        As the acting assistant secretary for financial markets, I
    serve as a senior advisor to the Secretary, Deputy Secretary
    and Under Secretary on broad matters related to domestic
    finance, financial markets, including the Federal debt. My
    office is also responsible for the issuance of over $5 trillion
    in annual debt and for overseeing the $10 trillion U.S. debt
    portfolio. As you know, the economy is currently working
    through a prolonged housing correction that has impacted credit
    markets and financial institutions. The downturn in the housing
    market, as well as financial and credit market pressures, have
    negatively impacted the real economy.
        Small businesses and consumers have often felt the
    headwinds as employment, capital investment and consumption
    have declined. Community banks, thrifts and credit unions are
    vital components of the financial markets, and ensuring their
    health helps encourage the lending and borrowing activity that
    is critical for small businesses and consumers. To alleviate
    credit market strains, the Treasury, the Federal Reserve and
    the FDIC, along with our international counterparts, have taken
    unprecedented and extraordinary steps to address the current
    financial crisis, steps aimed at strengthening bank's balance
    sheets, easing strains in the interbank lending markets and
    provided needed liquidity. While the long-term economic
    prospects of the United States are solid the United States, as
    well as the global economy, faces considerable challenges in
    the near term. The slowdown has affected nearly every sector of
    the U.S. economy.
        Small businesses have also felt these strains. And when
    small businesses suffer, the rest of the economy does as well.
    Let me just cite a few examples: Small businesses, in the
    retail and restaurant trade sector which represent 90 percent
    of all such firms, have been particularly affected by recent
    economic conditions. The retail sector is estimated to have
    lost over 250,000 jobs in the past year. The home construction
    industry where small businesses make up 80 percent of firms has
    also particularly been affected by declining home values and
    credit market conditions. Equipment manufacturers, so important
    for small businesses, have also reported large declines in new
    orders, capital spending and technology investment and are
    drying up as a result of the liquidity. These businesses are
    less able to obtain loans and even meet payrolls at times.
        The global financial crisis and tightened credit market
    have made it harder for small businesses to borrow the money
    they need to meet their payrolls, create new jobs and invest in
    the future. As the son of a first generation Indian-American
    engineer who has been building electrical and power generators
    across the United States for the past 40 years I have a
    particular insight into the difficulties facing small business.
    I hear stories about orders for new equipment and contracts for
    new engineering investments slowing dramatically. This
    illustrates stories we are hearing firsthand and reading about
    in newspapers in which our committee is well aware.
        To counter these difficulties, Treasury has applied the
    authorities Congress has provided to stabilize the financial
    system which will apply the flow of credit while protecting the
    taxpayer to the maximum extent possible. We have opened our
    capital purchase program to smaller community banks which
    interact on a day-to-day basis with small businesses.
    Importantly, many of these privately held institutions have
    strong long-lasting ties with local businesses in your
    communities. By providing capital to such institutions Treasury
    is directly assisting these small businesses so that they have
    an ability to make loans, mitigate funding pressures and
    promote growth locally.
        In addition to providing capital directly to banks, we are
    also examining strategies to support access to credit outside
    the banking system. With the Federal Reserve, we are exploring
    the development of a liquidity facility for highly rated triple
    A asset backed facilities. Such a facility could lower costs at
    increased credit availability for consumers and small
    businesses, and I would be happy to talk about that. Addressing
    the need of securitization sector will help get lending going
    again, helping consumers and supporting the U.S. economy. It
    will take time for the measures we have taken to have their
    full impact on an economy in which many consumers and
    businesses are struggling, but we have seen some encouraging
    signs. Treasury is mindful of the challenges and difficulties
    affecting the small business community. We will continue to
    focus on stabilizing the overall financial markets and
    reestablishing the flow of credit so that small businesses,
    consumers and all Americans can more easily obtain credit.
    Thank you for this opportunity to appear today, and I will be
    happy to take your questions.
        Chairwoman Velazquez. Thank you very much Mr. Ramanathan.
        [The statement of Mr. Ramanathan is included in the
    appendix at page 34.]
        Chairwoman Velazquez. I would like to address my first
    question to both of the gentlemen. The bailout has clearly been
    a massive financial expense for taxpayers. Since March, the Fed
    and Treasury have lent, invested and guaranteed over $1
    trillion to shore up the financial system. And you can see it
    there. Capital purchase program, $290 billion. Fed credit line
    to facilitate JP Morgan purchase of Bear Stearns, $30 billion.
    And the list goes on and on and on. Unfortunately, much of this
    money has found its way to large corporations, including JP
    Morgan, General Electric, Goldman Sachs, and has not yet made
    its way to small businesses, homeowners or consumers. Starting
    with Assistant Secretary Ramanathan, why has this massive
    bailout expense failed to reach Main Street?
        Mr. Ramanathan. Thank you, Chairwoman Velazquez. I would be
    happy to answer that question. Let me step back and take a
    moment. Over the last 53 business days, we have seen Federal
    Home Loan Bank, Fannie Mae, Freddie Mac come under tremendous
    pressure, and we have stabilized them. We have seen Lehman
    Brothers go under. We have seen AIG have considerable strains,
    we have seen Merrill Lynch sold, we have Goldman Sachs and
    Morgan Stanley turn into bank holding companies, we have seen a
    tremendous shift in the financial markets. Moreover, banks in
    the UK, Ireland and France have also had considerable fails, so
    this isn't a local issue, it is fully global. The effects of
    these have had tremendous strains on small business. Let me
    start with what happened in September-October when markets
    froze. Commercial paper, which is the life blood of business,
    both small and large, froze. Companies like Dana Corp in Toledo
    or Goodyear in Akron, Deere in Illinois or Tribune in Chicago
    all had difficulty and all drew on their bank lines.
        Chairwoman Velazquez. Those are all big businesses. Can you
    talk to me about small businesses?
        Mr. Ramanathan. Absolutely. But all these businesses are
    supported by many, many, many suppliers who are small
    businesses. So a failure in one of these companies or an
    inability to finance themselves would have had tremendous
    impacts across the system. Interbank lending seized. Banks
    didn't trust each other. They were concerned about credit
    quality. Money market funds. A run on a money market fund
    caused tremendous panic across the markets. And without halting
    that, we could have seen potential issues across the markets.
    Corporate credit issuance seized.
        Chairwoman Velazquez. Can you talk to me about a specific
    action taken by Treasury targeting small businesses?
        Mr. Ramanathan. Absolutely. Let me mention our capital
    purchase program in which we are investing capital in big
    banks, as well as small banks and community banks. Our first
    nine banks that we invested in compose 55 percent of all
    deposits in the United States. As Governor Kroszner mentioned,
    65 percent of small businesses get their funds from large
    commercial banks and other depository institutions. We opened
    our capital purchase program on Monday to private companies,
    privately held banks. We currently have over 1,000 applications
    from privately held banks who loan in their private districts.
    In terms of small firms, I would have come to a bank in--
    Mountain First Bank in Hendersonville, for example, where we
    should lend it $200 million, which will be lending to the local
    community.
        Chairwoman Velazquez. How much money do you have, a number
    as to how much money has been provided in credits to those
    small businesses? Because you mentioned that these big
    businesses and these big banks provide funding money for small
    banks or small businesses.
        Mr. Ramanathan. Yes.
        Chairwoman Velazquez. 48 percent of small businesses get
    their financing from small community banks that have $1 billion
    and less in assets.
        Mr. Ramanathan. Yes.
        Chairwoman Velazquez. Until very recently the Treasury has
    excluded most of these banks from participating in the capital
    purchase program which provides equity injection. This left
    only $60 billion left from the first installment of the TARP
    for the nearly 6,000 banks that were initially denied access.
    So are you concerned that there is not enough money funds for
    these institutions?
        Mr. Ramanathan. As you recall, there are 8,400 eligible
    institutions, financial institutions. 1,800 are public, 3,400
    are publicly held, 2,500 are S Corp and about 625 are mutual
    corporations. We began this program, this legislation on
    October 1st when we were granted authority. We went out to the
    market on October 14th with applications. And on November 14th
    we closed the first batch. We tried to build the core of the
    nine biggest banks with 55 percent of deposits initially to
    ensure that there was a strong financial base. This Monday, we
    opened the capital purchase program to thousands of banks,
    local and community. We had been funding them actively, and we
    believe there is tremendous amount of TARP capital left for
    these institutions. We look forward to them and encourage them
    to apply, and it is not on a first-come-first-serve-basis.
        Chairwoman Velazquez. My question is the $60 billion that
    are left that will deal with the 6,000 small banks that are out
    there, plus everything else, do you think that that will be
    enough?
        Mr. Ramanathan. We believe that that is enough.
        Chairwoman Velazquez. So you are telling us today that that
    will be sufficient money to deal with all the banks that are
    out there that has not gotten any help to this point, up to
    this point, and that we are going to get credit going trickling
    down to small businesses?
        Mr. Ramanathan. And what I would say to that is this: Banks
    can apply to their regulator, their Federal regulator; the OTS,
    the OCC, the FDIC, or the Federal Reserve. There is a process
    which they go through. And if they are approved by the
    regulators it comes to Treasury for our decision to provide
    capital or not. We look forward to providing capital to these
    institutions which are viable and which make a tremendous
    impact on local communities. One of the items to note is every
    dollar that is invested in these local community banks go a
    much further way in providing lending to smaller--
        Chairwoman Velazquez. So why are you waiting so long?
    Because let me tell you something, you know. We all know that
    in order to stabilize our economy and to get this economy
    growing, what do we need to do? Create jobs. It is not JP
    Morgan or Merrill Lynch or none of the big corporations that
    weren't creating jobs. Small businesses are the ones. They
    should have been the first ones to get the financial support
    and the money, the capital infusion that they needed.
        Mr. Kroszner, last month we held a hearing with several
    small business owners in this committee. They discussed that
    the Treasury and Fed's action were not reaching Main Street
    America. In fact, if you take today's papers, any paper, you
    are going to see stories there about small businesses
    complaining that they cannot get the credit that they need, the
    capital that they need. So one business that was here
    testifying, which has survived the Great Depression, announced
    that it was closing its door altogether because of the
    inability to secure financing. We keep hearing how the Fed's
    and Treasury's actions aren't working. But why then are so many
    small businesses unable to secure the capital they need to
    survive? Sir, time is running out for them. What are you
    telling them?
        Mr. Kroszner. This is very, very important, because the
    economy is facing significant challenges. Small business and
    large business are facing a much lower demand than they have in
    the past. We have seen the economy does not have the robustness
    that it has had in the past. That means that demand is much
    lower for the goods and services that are produced by the
    Nation's work force and by the Nation's both small and large
    businesses. And so it is extremely important that we try to
    make sure that credit worthy borrowers still have access to
    credit. And this is one of the reasons why we very much look
    carefully at the surveys from senior loan officers asking about
    the changes in credit terms to small and large business.
        As I mentioned, significant increases in tightening, or
    increases in the standards and terms. We ask for about small
    business versus large business. It has been happening, as I had
    noted, for both small and large business. This is a real
    challenge for businesses to get credit in these difficult
    times. And so it is very important for us to work to make sure
    that credit is available. And I think a number of the actions
    that we have undertaken to try to provide confidence to the
    banking system generally and provide greater liquidity to that
    system will help to make the banks more stable and more able to
    lend.
        Chairwoman Velazquez. Well, let's discuss the Fed's
    commercial paper facility that has been in operation for the
    last 3 weeks now. Clearly, this facility was created for large
    corporations that issue this type of debt. General Electric,
    American Express, Ford, Chrysler and GM are some of the
    companies using this facility. Why hasn't the Fed create a
    facility to provide similar support to the small business
    financing market?
        Mr. Kroszner. Well, first, I think by providing some relief
    in these markets, providing some alternative to bank borrowing
    by the larger banks that helps to put more capacity available
    by the banks for smaller businesses. Because as you noted,
    Madam Chairwoman, the small business do not issue commercial
    paper, only large firms do so. The credit that AmEx is getting,
    that General Motors and others are getting, is helpful to
    support consumer lending in these areas. So it is getting to
    consumers.
        Chairwoman Velazquez. My frustration, sir, is why haven't
    you taken any action to great a vehicle that is specifically
    dealing with the reality that small businesses are not getting
    the financing that they need? With this new commercial paper
    facility you are taking new risk. Why can't can you expand a
    facility that you have to include, for example, the 7(a) and
    504 that are already backed by full faith and credit of the
    Federal Government? Why can't you do that?
        Mr. Kroszner. And so we have focused first on the
    commercial paper facility to provide credit to the system. And
    we are trying to make sure to provide credit throughout the
    system. As I mentioned earlier, and mentioned in the testimony,
    that both small banks and big banks are very important
    providers of credit to small business. As you all know, that is
    the primary place that small business get their credit. And if
    you define small business credit as loans under $1 million and
    define large banks as those with over $1 billion, roughly two-
    thirds of small business lending actually comes from large
    banks and the other third comes from smaller banks.
        So by trying to provide more ability for banks to lend by
    having greater capacity for them to lend, greater liquidity and
    that they don't have to lend to large banks, they can then do
    what is very valuable for small business to do and lend to
    small business.
        Chairwoman Velazquez. I know that the committee staff has
    been working and having discussion with the Fed, including
    providing your agency firsthand accounts of the severe problems
    in small business financing market. If the Fed were to permit
    nonprimary broker/dealers to have access to a Federal lending
    facility, it could increase lawmaking to small firms. Would you
    make a commitment today to pursue this proposal?
        Mr. Kroszner. Well, we are certainly looking at a wide
    variety of different proposals. I can't make any particular
    commitments here. But as you know we have ongoing discussions
    on a variety of different facilities.
        Chairwoman Velazquez. Well, it is the same story this week
    before the Financial Services Committee with Secretary Paulson
    and Mr. Bernanke dealing with the issue of restructuring
    mortgage foreclosures. You continue to examine strategies. As I
    said that day, people are struggling, they are losing their
    homes. Small businesses are struggling and they are losing
    their businesses. We do not need for you to continue to study.
    We need actions this week. Mr. Chabot.
        Mr. Chabot. Thank you, Madam Chairwoman. Mr. Kroszner,
    there has clearly been a tremendous amount of government
    involvement in all kinds of private sector entities in the last
    few months. Is it possible to go too far in that direction in
    trying to correct the current economic situation and the
    challenges that we face and thereby potentially adding
    additional and unforeseen problems later? Could we make it
    worse by getting this far involved or are we too far down the
    road now?
        Mr. Kroszner. That is a very important question to make
    sure we are responding to the challenges, the real changes that
    both you as ranking member, Madam Chairwoman, have mentioned
    that are being experienced in the small business sector and
    throughout the entire economy. And so I think it is very
    important to be active and proactive right now. But we do have
    to be mindful of the programs that we put out to make sure that
    they help to restore market functioning in the short term to
    immediate term to support true market functioning as we go
    forward. So I think we are very mindful of that in the design
    of the different programs.
        Mr. Chabot. Thank you. Mr. Ramanathan, could you point to
    any instance in which the injections of capital to banks have
    generated substantial amounts of new lending to small
    businesses?
        Mr. Ramanathan. Let me take a step back and again mention,
    it was just about 25 or 30 business days ago--and I say
    business days casually because we have been working night and
    day on this, over weekends, you name it, to ensure that the
    core banking system is operating. Because without the core
    banking system the impact to small business, to consumers, to
    employment are tremendous. And without bank lending and without
    the major banks, whether this is a Main Street or a Wall Street
    issue it is not, it is our issue. And so strengthening that
    center core, ensuring their balance sheets are strong will
    rebuild confidence. And once that confidence is restored, we
    will see lending occur.
        We have seen, despite some of the comments that lending has
    not occurred, there has been lending that has been occurring.
    Recently this morning a major bank announced that is up 15
    percent in the last just two months. So there is confidence
    building, but the loans are going to be made on a prudent and
    sound basis. I would expect, and Governor Kroszner is probably
    better aware of some of these issues, but the way in which
    liquidity will filter down to the system will occur but it will
    take time.
        And I come back to a point, and perhaps earlier I didn't
    have a chance to discuss this, but we have taken extraordinary
    actions, aggressive actions to ensure that the stability of the
    financial market, that it stays intact. Before we attack
    specific problems of specific sectors we need to make sure that
    companies can pay their payrolls, that you can get cash at your
    ATM machines, that your checks can be cashed and that your
    payrolls can be met. The commercial paper facility was a major
    impact in terms of protecting and ensuring that banks can lend
    and that companies can lend and meet their payrolls. Interbank
    lending guaranteeing a bank's debt for 3 years had a tremendous
    impact in ensuring that liquidity flew through the system. The
    AIG stabilization which took place that is a significantly
    systemic institution had tremendous repercussions by focusing
    on it and ensuring that it made sure it was stabilized.
        And when I talk about the money market fund guarantee, I
    don't take this lightly. Within a couple days, the U.S.
    Treasury came up with a solution to stop what could have been a
    $200 billion or $500 billion run in money market funds which
    impacts every single one of us. We are very interested in
    making sure that the financial system stays intact, as are our
    counter-parties abroad. And we do believe when you talk about
    LIBOR, which has been talked about quite a bit, it is an exotic
    term, but LIBOR, London Interbank Offered Rates, are present in
    every mortgage term sheet, in every mortgage contract out
    there. That is how you base your benchmarks for loans. That
    loan was at about 5-1/2 percent at a peak earlier this year
    just about 4 weeks ago. It is at close to 2 percent now. We
    have made tremendous strides. While we look at the equity
    markets going up and down, there is a lot going on behind the
    scenes that we may not recognize immediately.
        Mr. Chabot. Thank you. Madam Chairwoman, because we have so
    many members here, I will yield back and let them question.
        Chairwoman Velazquez. Thank you. Mr. Sestak.
        Mr. Sestak. If I could--I am sorry I missed your comments.
    I wanted to wait to see how the vote came out on Waxman-
    Dingell. My question, I guess, has to do with the Chairman's
    comment that a lot of people are losing their homes. And I do
    appreciate your comments about LIBOR. Actually, I think it
    actually hit 6.2 percent for a while and 50 percent of all
    credit cards, all credit cards are tied to LIBOR, and 50
    percent of all arms. And that is what I am interested in, is
    the small businesses and the, let us say, loans, mortgages. My
    take on this issue that we are in is you have to start to fix
    the lending problem.
        The first week in October was the first time in the U.S.
    history of this Nation, no bond was ever issued for a whole
    week. So I understand what you are talking about at this macro
    level, we have got to fix the lending problem. But my take on
    this is that with 85,000 homes going into foreclosure in
    October, a 25 percent increase from a year ago, and 3 million
    homes are in default at an annualized rate, that the bills we
    have is that trying to stop this foreclosure problem is really
    the long rail that you have to have for the economy.
        And by stabilizing the housing market, you will finally
    stabilize the economy. You have lending going, but this cycle
    of foreclosures that house prices stop, people got out, no one
    is buying homes. My take on the bills that have passed here,
    the FHA reform, although we had hoped 500,000 people might take
    advantage of it, you know where we wrote it down, to say to
    date appraisal is 90 percent of today's market value, probably
    only 200,000 people are going to take advantage of that, or
    small mortgage brokers or whoever owns the--and I understand we
    have kind of nationalized the Fannie and Freddie, so we can
    make some credit more available so that would help.
        But my take on it is much more needs to be done in this
    housing area, which will go a long way toward small businesses.
    And I would be interested first in Treasury's comment on that
    and yours, because there has been this debate in the
    administration. I think the FDIC has talked about it, maybe I
    have the wrong agency. But my take is this is really an area
    that has so much to do with small businesses and communities
    and school taxes as we stop having blighted neighborhoods. But
    until we address this issue, which I don't think we have done
    in a comprehensive way, we are really going to have a rail
    going out there that is not joined up to stabilizing this
    overall economy. Could you comment on that?
        Mr. Ramanathan. Yes, I would be pleased to. Your point,
    sir, very valid regarding the fact that this economic downturn
    is being prolonged by what is going on in the housing market.
    We have had 2 years now approximately of housing market
    declines.
        Mr. Sestak. Two years of?
        Mr. Ramanathan. Of housing price declines approximately.
    Since last year, Treasury has attempted to tackle this issue on
    a number of fronts. When we discuss HOPE NOW, a volunteer
    program, it has helped 2 1/2 million Americans to date, that is
    not a small number. And we would expect 200,000 more per month
    going forward. We have put Fannie and Freddie Mac, as you
    mentioned, into conservatorship, the FHFA has. And at the same
    time, we have offered confidence in that market.
        Mr. Sestak. I know what we have done. My question is we
    have 85,000 foreclosures last month, a 25 percent increase over
    a year ago, despite all your efforts and Congress'. What needs
    to be done?
        Mr. Ramanathan. We have--I would say this: The recent
    actions by the GSEs, as well as several major banks to have
    streamlined modifications is a very good step in the right
    direction following on the examples that the FDIC put in place
    with IndyMac. We are going to see the fruits of those type of
    actions in the near future. When we see the private sector
    taking over some of the practices that the public sector has
    implemented that is a very good sign, and I think that is going
    to spread as well.
        Mr. Sestak. So basically you are okay with status quo, yes
    or no?
        Mr. Ramanathan. No. I think at this point we are, as
    Secretary Paulson mentioned, we are exploring all of our
    operations. We are very interested in Sheila Bair's plan. We
    need to discuss that further. But as I said, we are never
    satisfied with the status quo.
        Mr. Sestak. Sir, could you answer the same question,
    because we are at our 32-month, consecutive month, despite all
    the great actions by Congress and the executive branch, of
    where each of the months has been greater in foreclosures than
    the same corresponding month a year earlier. Could you tell me
    if you kind of feel good about the present plans we have going
    on in view of that every month it is getting worse?
        Mr. Kroszner. This is an incredible challenge, and I have
    done a lot with the Fed to travel around the country to see the
    on-the-ground challenges in a lot of different districts. In
    Cincinnati, for example, I was there with the uptown coalition
    and saw the incredible challenges in these neighborhoods. So
    what you talk about is very real. These are not just large
    statistics, but these are really affecting individual
    homeowners. And I do think that we can definitely be doing
    more.
        Mr. Sestak. What would that be?
        Mr. Kroszner. Well, I think we have just had some new
    proposals from Hope For Homeowners, and the approaches that
    they are taking there that may involve some principle write-
    downs, I think those were just announced in the last few days,
    and so I think they have some potential to be helpful. I think
    we do need to do more streamline--
        Mr. Sestak. That was the legislation that we had passed, if
    I am correct, back with the Fannie and Freddie and all they did
    was implement the procedures. You know, they went from 90
    percent and they said, by the way, if you make more than
    $100,000 some now it is 96 percent, that is just implementation
    of the same rules, that is nothing new.
        Chairwoman Velazquez. The time is expired. If the gentleman
    will yield for one second. Ms. Bair from FDIC she has a
    proposal on the table that is a drop in the bucket, $25
    billion. While you are studying what the next proposal is going
    to be she has a plan. Why can't you take on that plan? Why
    can't you support that plan?
        Mr. Kroszner. Well, I think the Chairman described earlier
    this week, we have been in very much a lot of discussions with
    the FDIC and the other agencies to come up with a most
    effective plan. I think he had noted there are some design
    issues that still have to be worked out.
        Chairwoman Velazquez. How long do you think it is going to
    take for you to come up with a real plan that will tackle the
    issue of foreclosures?
        Mr. Kroszner. Well, we are trying to tackle them in a
    variety of ways. I can't give you a specific timetable but we
    are working expeditiously.
        Chairwoman Velazquez. Mr. Westmoreland.
        Mr. Westmoreland. Thank you, Madam Chairwoman. I want to
    thank you for having this hearing. And let me say I don't
    really know where to start from having talked to my small
    business people and my small bankers, but you two gentlemen
    need to get out more. And you need to take Mr. Bernanke and Mr.
    Paulson with you. And you need to walk around some town
    squares. I invite you to Newnan, Grantville, Thomaston,
    Barnesville, to get to talk to people, because from what I hear
    you saying, you think this is working. And I can tell you right
    now that the majority of my constituents don't think it is
    working.
        We were told by Secretary Paulson this is something that
    had to be done immediately on September 19th. 17 days later is
    when it passed. We said did you look at any alternatives? No.
    Do you know that this will work? No. Now, those are two answers
    that I think were truthful. But now we are looking at other
    alternatives. Things are going in a different direction. This
    thing is changing on the fly, yet some of these things were
    never looked at prior to.
        And let me tell you about some of the things that is going
    on in the real world. What is going on in the real world is
    that I have got bankers that I met with at different events
    that tell me that the only way that they want some cash from
    the TARP program is so they can buy smaller banks. I am not
    seeing any relief from the smaller banks. I have community
    bankers calling me every day. We need to look at some things
    that we can help immediately with them. We need to look at the
    mark to market. And I know there was some proposal in the bill,
    or at least the SEC said they were going to look at it. You
    should be demanding the mark to market. Because what is
    happening, if you think the home foreclosure rate is bad right
    now, you take the builders and the developers that have had
    relationships with these small banks, and we have every
    different type of regulator come in from these--we need to
    consolidate those regulators. Because they have come in and
    say, look, you need to get this guy to put in more capital. If
    they put in more capital, they are going too lose all the other
    properties. This thing is going to snowball. It is going to
    become enormous.
        You have got to look at some things other than giving these
    big banks cash to make this system work. And you can do that
    partly with your regulators and you can do it partly with the
    mark to market. There are a lot of things that you can do
    immediately to help these situations. For some reason, we have
    a government and we have agencies that think that the only way
    that they can help is to throw money at something. Well, you
    are throwing money in the wrong places. You need to get out and
    you need to talk to the real world and find out exactly what is
    going on. People are hurting out there. These foreclosures are
    great, but we are not doing anything for immediate relief on
    them. We are not doing anything for immediate relief on the
    small businesses. I want to ask you, do you think that this
    money that you are giving to these banks should be used to
    acquire other banks rather than freeing up credit? Because the
    one story I heard continuously about the bailout was this
    traffic jam on the expressway. And until they got that wreck
    cleared out of the way the small business loan was behind it,
    the credit card bill was behind it. And the credit flow
    couldn't get cleared until this wreck was cleared. The wreck
    has been cleared. The credit flow is not there. And the purpose
    of creating this highway, opening this highway to get the
    credit going back and forth, seems to be detoured, redirected.
    We are now looking at auto loans, credit cards and other things
    rather than looking at this small business. And what has
    happened is rather than the credit being freed up, the detour
    has come for now this money to be used to buy smaller banks. I
    want to hear what you think about that and if you found out
    that some of these banks were taking this money just to buy
    competitors and smaller banks is that the purpose that you
    originally, either one of you or your bosses, originally
    intended for this money to do?
        Mr. Ramanathan. Thank you for that question. Regarding the
    capital purchase program, which is what you are referring to in
    terms of capital injections in banks, I need to, I guess, step
    back again and say 31 business days ago, we started these
    injections, and they have reached over 60 percent of the
    deposits in this country. We have 3,400 banks in line now,
    small banks, first come first serve--not first come first
    serve. Any of them can apply. Applications are there. We are
    ready to provide funding to them if they ask.
        Mr. Westmoreland. For credit or for purchasing other banks?
        Mr. Ramanathan. For credit and providing loans to them.
    Now, the plan of the TARP was to, and remains. To stabilize the
    financial system. If a bank can make loans it is healthier, can
    get this capital and become a healthier bank with its balance
    sheets, with confidence rebuilding, that is a very good sign.
    If it can help the entire community by making a smaller
    purchase, that is a good sign to help stabilize the system. You
    don't want one bank to do well and one bank to fail. We think
    that is something that would not be beneficial to a community.
        Regarding some of the other items you discussed, whether it
    is credit cards or auto loans, one of the points that Secretary
    Paulson made last week was a proposal, and that we are working
    on closely with the Federal Reserve, regarding securitization
    markets. And this a very important market which has seized up
    and has caused tremendous pressures to small business and
    banks. And let me just explain it very quickly. When auto loans
    and student loans and small business loans and credit card
    loans aren't being originated, that is, banks cannot make these
    loans, cannot package them and resell them, they are all good
    loans, they are guaranteed by the government, many of them, and
    they are still not being purchased because there is no
    securitization market functioning right now, that is a problem.
    And so while we think the clog is unclogged, it is not
    unclogged. We are still going through this process right now.
    We have a way to go. And we do believe--again, in this, I
    guess, day and age when we look at minute-by-minute stock ticks
    it has been 31 days and banks are lending on the top end and,
    they will be flowing to the bottom end.
        And I mention this again, we have close to 4,000 potential
    applications that can come in the next 3 weeks. We intend to go
    through them and we intend to ensure that small banks,
    community banks, thrifts have access to capital that they need
    that can be made as loans to small businesses. And I sincerely
    believe that.
        Chairwoman Velazquez. The time is expired. Mr. Shuler.
        Mr. Shuler. Thank you Madam Chair. I couldn't agree more
    with my colleague from Georgia. It is time that we get off of
    Capitol Hill and we get into our small communities. I come from
    a region where the tourism business was very strong, our number
    one industry, that promotes the economy in our area to see the
    Great Smokey Mountain National Park, the Blue Ridge Parkway.
    The problem that a lot of my small businesses are having now is
    during the off season, if you will, through the wintertime when
    we don't have the tourism, they are usually dependent and
    relying upon these lines of credits to be able to pull their
    businesses through the shortfalls in the wintertime until the
    spring, the summer and the fall picks back up, what is being
    done?
        Let me give you a little bit of a history. A lot of these
    lines of credits now are being called. They haven't been
    tapping into them for the last 9 months, therefore, the banks
    just said let us just go ahead and call those banks. Now they
    don't have access to these lines of credits. We saw a slowdown
    because of the gas prices. We saw a slowdown in our region
    based upon the tourism industry.
        So we saw about a 20 percent decline of the overall
    visiting of the parks, therefore we seen a lot of that in our
    small businesses. Their bank statements, their K-1s are
    certainly different this year than they were a year or two
    years ago. What is being done to ensure that these small
    businesses can have these lines of credits through the tough
    times in order to they can get back on pace once the economy
    picks back up or and in our particular situation the season
    picks up?
        Mr. Ramanathan. Once again, that was a very good question
    because it brings up a number of topics that are related.
        You know, I mentioned earlier Mountain First Bank in
    Henderson, North Carolina--I believe that is in your district--
    where we recently granted $200 million to a small bank with 165
    employees. It has been there for quite a while. We believe
    these types of loans are going to filter down to the community,
    and we are actively looking to make those types of investments.
        Let me also step back and mention, back in February and
    March, Congress, along with Secretary Paulson and the
    administration, passed a $168 billion stimulus program. While
    at the time that was viewed as small or perhaps early, given
    the high energy prices and given what happened to gas, it was
    particularly timely, in some ways preventing us from earlier
    potential problems. Every $1 drop in gas prices equals roughly
    $100 billion in additional stimulus. So I would imagine this
    will also filter down to small businesses.
        When we look at other companies like, again, in your
    district, I believe it is Thermo Fisher and BorgWarner, and
    there are a lot of other smaller firms out there who depend not
    just on tourism but other industry or businesses, we want to
    make sure they can meet payroll, they can get loans, and they
    can make sure that they function on a day-to-day basis. These
    capital investments will help that.
        And once again, I mention again, 31 days since we have been
    out there doing this. It will reach many, many firms in your
    district and others.
        Mr. Kroszner. I agree very much that it is very important
    to get out, and I have been trying to do that as much as
    possible. I have been to a variety of cities around the
    country--Cincinnati, Cleveland, Atlanta, Boston, Philadelphia,
    and quite a few others--where they are facing tremendous
    challenges in the housing markets and for small businesses. And
    so I think it is extremely important to try to provide the
    macroeconomic support so that there is sufficient demand for
    the small businesses.
        You had mentioned that your area has a lot of tourism and
    that tourism demand has been going down. Unfortunately, demand
    has been going down in a lot of different areas. And so,
    perhaps one of the most effective tools that the Federal
    Reserve has is monetary policy to try to provide some stimulus
    to the economy or at least some offset to the reduction in
    demand.
        And, as you well know, we began cutting interest rates more
    than a year ago and aggressively did that in January of this
    year and have done so again over the last 2 months.
        So I think, as a complement to the specifics of trying to
    restore confidence in the banking system, provide liquidity to
    the system so that the banks have the wherewithal to be able to
    lend. Providing that sort of macroeconomic support is extremely
    important.
        Mr. Shuler. Madam Chair, I know I have just a couple of
    seconds.
        So how long can I tell my small businesses and my community
    banks they are going to see relief? And we are talking about
    business days here. How many more business days is it going to
    be before I can tell my small businesses, "Hey"--it is a trust
    factor. And that is the reason I didn't vote for the bailout, I
    didn't trust it. And now they are not trusting the system, as
    well.
        How many days are we looking at?
        Mr. Ramanathan. I can guarantee you that civil workers and
    ourselves and our staffs are working night and day to ensure
    that we get through the applications that are coming through
    all of your districts, to ensure that they get the credit they
    need. I can't put a date and I won't speculate on a date for
    it. But, again, as the bank in your district has noted, we do
    act and we will act aggressively.
        Chairwoman Velazquez. I guess, Mr. Shuler, that we all
    should feel very good about the fact that the bank in your
    district, a small bank in your district, got $200 million,
    while the biggest bank got $290 billion.
        And my frustration here is still there are 6,000 community
    banks, small banks out there that have not seen any money at
    all. And they are struggling because they lack liquidity at
    this point, since it is not trickling down like you promised
    us.
        I will recognize now Mr. Gohmert.
        Mr. Gohmert. Thank you, Madam Chair. And I also appreciate
    you having the hearing, and appreciate you all coming up here
    to the Hill.
        We, of course, back in the late days of September, saw and
    heard plenty from Secretary Paulson and Chair Bernanke.
        But anyway, I would like to identify myself with the
    comments of my colleagues. I think it sounds like we are very
    bipartisan in our feelings on this.
        But I would hope that the Treasury Department--of course,
    you know, your days of this--the leadership in this Treasury
    Department are coming to an end. But I hope there has been some
    valuable lessons learned.
        For example, when the Secretary of the Treasury comes out
    and says, in private conference with Members of Congress, when
    he knows information is going to go out and says publicly,
    "Gee, we are about to have a stock market crash, a depression,
    this terrible economy," it becomes a self-fulfilling prophecy.
    It does. And I hope that people will learn from the mistakes.
        Our economy in east Texas, much of it rural, I was
    constantly checking with home builders. We never overbuild. We
    didn't have the explosion in growth, so homes were modestly
    priced, and home builders were still going good until the
    crying out from the Fed, but especially the Secretary of the
    Treasury, who should have known better. You can't go in a
    theater and scream "fire," and especially you can't go in a
    theater, lock the doors, and say, "If you don't give me $700
    billion, you are all going to go up in flames." You can't scare
    a volatile market like that.
        Because what has happened now, in my banks, where they had
    plenty of money, they are hesitant to loan it, because they
    want to see if Secretary Paulson knew what he was talking about
    when he says, "We are in big trouble. Oh, it is going to be
    bad." So everybody has frozen their credit.
        We have people who were going--September was not a bad
    month for car sales in my district until Secretary Paulson goes
    out and scares people, and they begin to say, "Gee, maybe we
    had better not buy a car right now." Builders were saying after
    Paulson went public, then they got calls saying, "We are going
    to hold up building right now because the Secretary says we are
    in for a big depression unless you give him $700 billion."
        And I know it may have been a shock to some like Secretary
    Paulson and the administration that people actually believed
    him because of some of the past things that have been said and
    done and occurred, but people did. They said, "We better wait
    and see if he knows what he is talking about." You can't scare
    the stock market like that.
        And then we had people coming up here, economists, saying,
    "Well, gee, fix the mark-to-market rule and you don't have to
    lose these banks," and then the Treasury Secretary telling us,
    "Gee, once these banks start falling, it is going to be
    dominos; you can't stop them." Well, there is self-fulfilling
    prophecy in that.
        But the other thing, I hope there was a lesson learned. And
    I would like to think that there was nothing in the way of mens
    rea behind the comments. But when the Secretary of the Treasury
    says, "We are in an emergency situation, but we are going to
    stand good for every dollar in money market accounts; and over
    here in the most solid area, not the investment bank, but the
    community commercial banks, you are only going to be good for
    $100,000 that the government stands behind," he surely knew
    what was going to happen: the huge run he created on the most
    solid part of my economy in east Texas and in much of the
    Nation, who were not involved in the MBSes and some of these
    other things. But he caused a huge run on my banks, where
    people who had more than $100,000 came in, took it down to the
    $100,000 level, and then transferred it to Mr. Paulson's former
    or current friends on Wall Street in the money markets.
        He surely had to know that, when he came out screaming
    "fire" and said, "But we are going to have a safe haven in
    money markets, but only good to $100,000 in the banks," he
    would cause a run on banks. I hope future administrations
    understand that is not something we can do.
        And I realize my time is running short. But I would like to
    ask, now that some damage has substantially been done, I
    believe, by some of the pronouncements--and, by the way, I have
    two bills I have filed today. I don't know if they will get to
    the floor, but I would like to cut off the last $350 billion of
    authority that Secretary Paulson has and just--and my bill is
    not a resolution, just "you can't spend any more."
        One of them, I hope, would get bipartisan support because I
    am open to using it for infrastructure, because the
    Constitution says we post roads in Congress, build it for--
    whatever. And another says, we will use the private market
    concepts of encouraging things, encouraging investment.
        And then, also, a bill dropped today that takes President-
    Elect Obama at his word, and it says if you make less than
    $250,000 and you go buy a car in the next 6 months, you get a
    $1,500 tax credit.
        If I could just ask, is there anything immediately that
    would be done with the money that the Treasury has in the slush
    fund that would go toward SBA loans immediately?
        Mr. Ramanathan. Thank you for the comments. But, yes--
        Mr. Gohmert. I am not sure it is what you wanted to hear,
    but it sure is on my heart. And it is not just emotional, it is
    in my head and heart.
        Mr. Ramanathan. I appreciate it. And, as I said, in Tyler,
    I know there are a lot of issues going on, and you have your
    frustrations, and you shared them with us as well.
        With the SBA market, the Small Business Administration
    loans, as you know, the way this works is a lender makes a loan
    to a small business; the lender's loan is then guaranteed
    roughly up to 80 percent by the Federal Government.
        As Governor Kroszner mentioned, demand for such loans has
    actually decreased as the economy has gone lower. At the same
    time, the cost has gone up, because the securitization markets
    have frozen up.
        So one of the items that was mentioned that could be
    potentially very helpful is using part of the funds in the
    Troubled Asset Relief Plan that could be used as a
    securitization vehicle. What does this mean?
        Chairwoman Velazquez. And what about, sir, if I may,
    including pools of small business loans?
        Mr. Ramanathan. Yes, that is what I was getting to.
        Chairwoman Velazquez. Okay. We have been proposing that for
    the longest now.
        Mr. Ramanathan. Yes, and now we have the authority to
    actually--
        Chairwoman Velazquez. No, you always had the authority--
    don't--you had the authority, sir.
        Mr. Ramanathan. The Small Business Administration is
    different from Treasury. We--
        Chairwoman Velazquez. The Secretary of the Treasury has the
    authority to include small business loans within the definition
    of troubled assets.
        Mr. Ramanathan. Correct. And we are working with the Fed,
    creating a program that will promote the securitization of
    these products--not just these products, auto loans, credit
    card loans, student loans.
        Let me take a step back. Student loan markets--student
    loans are 97 percent guaranteed by the Federal Government, and
    no one is buying them right now.
        Chairwoman Velazquez. Sir, time has expired, but let me
    ask, when are we going to see that?
        Mr. Ramanathan. We are working on it, and when the--as I
    stated, we are working on it expeditiously. So when we roll it
    out, it will be well-functioning and it actually impacts the
    most individuals out there.
        Mr. Gohmert. Madam Chair--
        Chairwoman Velazquez. Since September, we have been
    discussing this issue with you, and you still continue to
    further discuss it and examine it?
        Mr. Gohmert. Madam Chair, if I might mention to you and in
    case there is anybody here who has not read the authority that
    Secretary Paulson has, that authority is what scared me about
    the bill, is so broad. I don't think Congress has ever since
    1787, the new constitution, given that much authority. If he
    wanted to put money in the SBA, he could put it there, he can
    put it in foreign banks, he can buy whatever he wants to. If he
    wants this program to go, right now he has an incredible amount
    of authority to do that. And if anybody is not aware of that,
    including the Secretary, he needs to read the "dad-gum" bill,
    because he has that kind of authority.
        Thank you, Madam Chair.
        Chairwoman Velazquez. Time has expired.
        Ms. Clarke?
        Ms. Clarke. Thank you very much, Madam Chairwoman and
    Ranking Member Chabot, for holding this very timely and
    important hearing.
        Thank you, gentlemen, for coming and bringing as much
    information as you can.
        I have to tell you that I was elected in the 110th session,
    and, since I have been here, I have heard of the creation of so
    many programs to help small businesses that have yet to be
    implemented. So, you know, it is very hard for us to sit still
    and hear about the dynamic taking place within the Treasury of
    creating a program and not having a timetable, not coming with
    clarity about how it is going to be implemented and when it is
    going to be implemented, particularly in a time of crisis, with
    all due respect.
        As we all know and we are too keenly aware, small
    businesses remain the linchpin of the U.S. economy because they
    are the foundation of our country's job markets and an
    essential element of job creation, providing close to 80
    percent of employment opportunities for Americans. According to
    the Commerce Department's Minority Business Development Agency,
    about 3 percent of all minority-owned businesses generate more
    than $1 million in revenues annually.
        Unfortunately, the financial crisis has created a catalyst
    for much broader and complex economic problems. At the same
    time, the Federal Reserve has reported that domestic banks said
    that they tightened their lending standards for small business
    loans over the previous 3 months in July and said they were
    charging more for these loans.
        I am from New York City. This uncertainty, created by home
    price declines and financial market stress, has been
    detrimental for New York's economy. And jobs leveled off in New
    York City, and little has changed since that time. Our
    emergency economic recovery plan has not stabilized the
    financial markets the way that Treasury Secretary Paulson and
    President Bush had hoped. Despite the $700 billion recovery
    plan for financial institutions, which was supposed to
    encourage commercial banks to start lending again, getting a
    loan these days is still extremely difficult, even for those
    with immaculate credit ratings.
        In order to improve these economic trends, we must continue
    to implement sound policies that are expedient and timely. That
    goes to the whole question of creating policy and implementing
    it. And I am just, kind of, frustrated by the fact that I have
    just heard about so many programs and none of them have been
    implemented. And if perhaps we had looked at expediting them
    earlier on, perhaps there would be some fluidity within our
    markets at this time.
        But I am particularly concerned about women- and minority-
    owned business. What has been the impact of the current
    financial and credit market dislocation over small businesses,
    particularly women- and minority-owned business, the most
    vulnerable of the entrepreneurial ecosystem?
        Mr. Kroszner. Thank you very much.
        This is something, of course, that is extremely, extremely
    important, to make sure that all entrepreneurs, women- and
    minority-owned business entrepreneurs, make sure that they have
    access to credit. So that is something that is very important.
    And they have been very much affected, as we have been
    discussing the small-business owners have been affected.
        From our 2002 survey of business owners for African
    American- and female-owned businesses, personal or family
    assets tend to contribute about as much to the capital needs of
    the start-up of businesses as did business loans. So the
    challenges in the housing markets are extremely important for
    this segment of entrepreneurs.
        The survey also documents that African American- and
    female-owned businesses tend to rely both on personal and
    business credit cards. And so that is why trying to make sure
    that people do have access to credit, trying to stabilize the
    markets to provide a sound liquid financial system that can
    provide lending, can provide some stability to the housing
    market is extremely important, because these are businesses
    that are very much affected by the macroeconomic turmoil we are
    facing.
        Ms. Clarke. It is great to know that you, sort of, have a
    handle on, you know, what the problem is. And I think what we
    are trying to get here are, you know, what are the mitigation
    factors taking place as we speak that are going to assist these
    business owners? And we are not getting that from you.
        And I think that some of what you are hearing today--I want
    to know, is there evidence that the current credit and
    financial crisis related to the mortgage markets is
    disproportionately affecting minority- and women-owned
    businesses? Have you seen the evidence of it? Are there numbers
    coming in to you so that you are clear on the extent of the
    impact?
        Mr. Kroszner. We are certainly looking at exactly these
    kinds of issues and gathering data at the local level
    throughout the Federal Reserve system to try to asses exactly
    these kinds of issues.
        As I noted from our earlier surveys, they suggest that
    women- and African American-owned businesses tend to rely more
    heavily on using their housing. And, obviously, housing having
    such a challenge suggests that, even though we don't have the
    final data in, that these groups of entrepreneurs are affected
    very much.
        Ms. Clarke. So are there mitigative measures that are in
    the pipeline or that are ready to be deployed, knowing that
    this particular sector has relied on that methodology of
    entrepreneurship? Are we doing anything currently to mitigate
    the impact and the blow to their ability to continue to operate
    in our system?
        Mr. Kroszner. That is something that is very important, and
    so what we are trying to do is, by providing confidence in the
    financial system, by providing liquidity in the financial
    system, that that will allow borrowing to take place, to the
    extent that they do borrow. And we are certainly trying to work
    on a variety of loss-mitigation and foreclosure-mitigation
    techniques, working very closely with industry. We have Hope
    for Homeowners. We have the HOPE NOW Project.
        Ms. Clarke. I understand that. But we know that these
    groups have historically not been able to go the traditional
    route for financing for their businesses. That has been a
    longstanding challenge, historically. Why are we looking at
    those measures now, when we know that is the X factor for those
    businesses? They can't and have not been able to access the
    traditional lending institutions, as the majority has.
        Is there something being done to focus on these businesses
    specific to the nuances of how they access financing?
        We know how they access financing. It is not the
    traditional route. And what you are working on right now is
    freeing up those banks that have historically not lent to these
    businesses.
        Mr. Kroszner. Well, it is very important to try to continue
    to have credit provided so that people who use credit cards--as
    I mentioned, a lot of financing comes through business and
    personal credit cards--make sure that that market operates as
    well as it can, because that is certainly very important for
    providing credit to these important groups of entrepreneurs.
        And also the personal assets in housing is very important.
    And so the variety of foreclosure-mitigation programs and loan-
    modification programs will be focused exactly on these groups
    that rely most heavily on that rather than rely on traditional
    bank lending.
        Chairwoman Velazquez. Time has expired.
        Ms. Clarke. Thank you very much, Madam Chair.
        Chairwoman Velazquez. Mr. Michaud?
        Mr. Michaud. Thanks very much, Madam Chair and Mr. Ranking
    Member, for having this hearing.
        And I want to thank our panelists.
        I have a couple of questions.
        When you look at freeing up credit to help small
    businesses, have you looked at credit unions. For instance,
    they are subject to a cap on the amount of loans that they can
    give to businesses to 12.25 percent, yet they do have the
    resources to give loans out.
        Have you looked at that area to free up credit for
    businesses? And, if not, why not?
        Mr. Ramanathan. I think that is a question for the
    regulator, actually. We are working, though, with the 2,500 S-
    Corps out there, as well as the 625 mutuals--
        Mr. Michaud. Do you think it is a good idea? I mean, if you
    are trying to get credit to businesses--
        Mr. Ramanathan. I think it is a good idea to give credit to
    businesses. I can't opine on what the correct ratios should be.
        Mr. Michaud. I mean, do you think it is a good idea that
    they are limited by regulation or statutes to a cap. Increasing
    the cap, whatever the number is, whether it is 15 or 20, why
    wouldn't that be a good idea?
        Mr. Ramanathan. As I said, I think it is a good idea to
    lend to business. I don't know how all of that works, but I can
    look at that and get back to you.
        Mr. Michaud. Okay.
        Mr. Kroszner. And so, again, it is a complex set of
    different regulations that interact, with some safety and
    soundness issues and also credit provision issues. And so, to
    discuss the specifics of it, I would need to get back to you on
    that.
        But I very much agree that lending to credit worthy
    borrowers is exactly what the Federal regulatory agencies want
    the banks to do and are encouraging them to do.
        Mr. Michaud. My second question, I have heard from
    constituents that when you look at the interest rates on some
    credit cards they are as high as 35 percent? Do you think that
    you ought to look at what they are actually charging for
    interest rates on credit cards?
        It is important to have credit, but here again you don't
    want the gouging that currently appears to be happening. I
    would like both of you to comment on the high interest rates
    with which some credit card companies are gouging their
    customers.
        Mr. Kroszner. Well, as I think you know, we at the Federal
    Reserve have put out a significant set of regulations, or
    proposed regulations I should say, using their unfair and
    deceptive acts and practices authority, as well as changes in
    disclosure regulation, to try to address a variety of issues in
    the credit card market.
        And we continue to gather data and monitor that market very
    carefully. And we hope to be proposing those new rules--we are
    finalizing those rules before the end of the year.
        Mr. Michaud. Does the Treasury have any comment on that?
        Mr. Ramanathan. Well, I think, regarding credit cards and
    higher rates, what we are seeing here--I mention, again, we are
    still in the midst of a crisis. We are still seeing pressures
    on rates in certain sectors and a freezing of credit in certain
    markets.
        And what Secretary Paulson mentioned last week regarding
    the securitization markets and the roughly $1 trillion of
    nonmortgage-related assets out there that are affected, amongst
    them are credit cards.
        As credit card securitization is frozen up, rates do rise.
    It is the same for student loans, auto loans, SBA loans. If we
    can help impact that market, unfreeze some of that credit
    through some of our actions, it will benefit, and it will
    benefit in terms of credit card rates.
        Mr. Michaud. You had mentioned that a lot, when you look at
    the market, has to do with confidence. And we heard earlier
    about the affect on the confidence of the Treasury Secretary
    coming out with his remarks--I mean, that does not instill
    confidence in the market or, quite frankly, confidence that I
    have in the Secretary of the Treasury. It is just the reverse;
    the same way with Bernanke. You do not go on television and
    say, "If you don't pass something by X date, then we are going
    to have a meltdown in the market." That is just inexcusable,
    and it does not instill confidence. Actually, to me, it is
    incompetence on the part of both of those individuals.
        What are you doing to encourage the Securities and Exchange
    Commission to look at the mark-to-marketing rules? What is
    happening in that particular area?
        Mr. Ramanathan. With regards to the SEC, I won't speak for
    them, but I know they are exploring the issue and how it is
    going to work.
        With regards to confidence, I come back to, again, a point
    about what was occurring in September and October, where no
    corporate debt was issued--
        Mr. Michaud. Well, I don't need you to defend the
    Secretary. I mean, that is my personal opinion and the opinion
    of alot of Members of Congress, about his actions.
        On the mark to marketing, the Federal Reserve, what are you
    doing to encourage them to move forward in that particular
    area, if you think they should?
        Mr. Kroszner. Well, certainly there are studies that are
    going on, I think one that was required through some
    legislation to be looking at that. And so we provide whatever
    technical support is necessary to be able to get the right
    answer.
        Mr. Michaud. I see my time has expired. I just would
    encourage you to do more, because the confidence is not there,
    and it is still not there. And until we have confidence in
    those who are running these programs, the market is going to--
    you are going to see it continue doing what it is doing.
        Chairwoman Velazquez. Mr. Cuellar?
        Mr. Cuellar. Thank you, Madam Chair.
        I thank both of you all for being here with us.
        I would like to focus on the smaller banks, community
    banks, the independent banks. I have a lot of those in my
    congressional district. And I think you have some stats on
    everybody here, so if you can start looking at District 28, if
    you have those numbers.
        But I am interested in the small, independent community
    banks, because they, on a day-to-day basis, they do interact
    with the small businesses. So they do have that direct impact
    with the small businesses.
        But as you all have expanded, I guess you call it, the
    Capital Purchase Program to the smaller banks, we have been in
    contact with your office, with the Department of Treasury, and
    we understand there is about 46 small banks who are all in the
    same situation where there is a timetable involved with the
    shareholders' means that they need to have.
        And what my bankers are complaining about, and one in
    particular in my district, is saying, "Look, supposedly there
    is a crisis, and the Secretary has said this, and they want us
    to move quickly. We put in our application, but all of a sudden
    everything stops, and we haven't been able to do this." We
    called, and I will say, your department, and they keep saying,
    we can't give you a timetable. And then we have to face our
    constituents, our bank presidents, and tell them, "I can't get
    you an answer." "Well, what do you mean you can't get us an
    answer?" "I can't get you an answer. The Department won't give
    us an answer."
        What status do you have on those small community banks that
    want to participate, that want to lend to small businesses? How
    fast can we move that particular program to the smaller banks?
        Mr. Ramanathan. As I said, this is very important to us
    here at Treasury. Having been involved in this, I see the flow
    of applications. And one of the important things to notice,
    from October 14th to November 14th, we opened this to public
    banks, and we received a number of applications, many which we
    have already gone through and vetted. They have gone through
    the regulators, the primary regulators; then they are sent to
    us. We vet them, and we provide capital if necessary.
        Regarding the smaller banks, the privately held banks,
    again, there are roughly 3,400, a number in your district, as
    well. That application process went up on Monday, just 3 days
    ago. It is open for another month. It is not on a first-come,
    first-served basis. Anyone can apply. And we have adequate
    capital to provide to them.
        We have gone through and we expect thousands of
    applications over the next couple weeks, which we will be
    working on night and day. And when I say that, I say that
    seriously. We will be working on them. We are going through
    them as fast as we can. So are the regulatory agencies, who are
    stretched right now to the limits. Civil workers are working
    night and day, as well, to make sure these are processed, sent
    to us. We are working night and day with our staff to make sure
    they are processed out.
        Chairwoman Velazquez. Will the gentleman yield for a
    second?
        Mr. Cuellar. Yes.
        Chairwoman Velazquez. Can you tell me how long it takes
    once an application goes in, small community banks or
    independent banks, how long it takes, the whole process?
        Mr. Ramanathan. I can't cite a specific example, but the
    process works in a very simple manner. A community bank goes
    through their local Federal regulator, which is one of four
    items: the OTS, the FDIC, the Federal Reserve, or the OCC. They
    review the application and decide whether they should move this
    forward to our committee or whether they should deny it. It is
    all done confidentially, so there is no stigma attached, which
    is what we want. We review those, process them. It goes through
    our staff, and then it is either approved or disapproved.
        Chairwoman Velazquez. But--
        Mr. Ramanathan. I guess to give you an idea, 107
    applications went out roughly in 31 days. We are moving as fast
    as we can in this process.
        Chairwoman Velazquez. But, given previous applications that
    you processed already, can you give us a timetable, in terms of
    how long the process takes? How does it--
        Mr. Ramanathan. It moves very quickly. To the best of our
    ability and, again, vetting and going through the regulators--
    and, again, it has to go through the regulators--
        Chairwoman Velazquez. Does it move as quickly as it moves
    for the 10 biggest banks?
        Mr. Ramanathan. It moves very quickly.
        Chairwoman Velazquez. Thank you for yielding.
        Mr. Cuellar. Thank you.
        Do you have--at least if you can help us, so we can be able
    to relate something. Could you designate somebody in your
    office--and we get Congressional Affairs, I understand that.
    And they keep telling us the same thing, "Can't do it, can't
    get you the information." Could you designate, at least to the
    members here, somebody that we can call so we can get an
    answer?
        And I understand, you know, we are all overworked, and I
    understand all of the time constraints and the pressure. I
    understand that. But, at the same time, we have to be able to
    relay some information to our community banks. So could you all
    designate somebody that we could talk to?
        Mr. Ramanathan. We will try to do that, yes.
        Mr. Cuellar. But I am okay with Congressional Affairs, but
    I need somebody that can tell me something more than, "We will
    get back to you."
        Mr. Ramanathan. Okay.
        Mr. Cuellar. Thank you, Madam Chair.
        Chairwoman Velazquez. And the Chair recognizes Mr.
    Westmoreland.
        Mr. Westmoreland. Thank you, Madam Chair.
        The mortgage-backed securities was supposedly the wreck on
    the expressway. And the auto loans and the student loans and
    the small business loans and the credit card was behind the
    wreck. And we were going to clear this wreck out to get these
    things moving again. But it seems to me like now we are just
    going to leave the wreck there and reroute the traffic that is
    behind it. Because what I hear you saying is that is kind of
    what the plan the Secretary has got now.
        Mr. Ramanathan. That is not the plan. We have $250 billion
    allocated to the Capital Purchase Program, of which we have
    disbursed $158 billion. We continue and we expect to disburse
    the rest to local community banks, banks across the Nation,
    both small and large, to ensure that credit flows.
        Since the passage of the legislation, as you have noted and
    your committee has noted, things have deteriorated
    significantly. Washington Mutual failed. Wachovia nearly
    failed. A number of other institutions were pushed to the
    brink.
        We did our best to ensure that the financial system
    remained intact. And I continue to emphasize this: Your ATM
    machines continue to work. Your checking accounts, you can
    still draw on them. You still get your payrolls. That is the
    type of financial stability we have provided.
        We are still in the middle of this, and there will be
    problems along the way. We mentioned securitization as another
    way to help consumers and small businesses, and we are going to
    look at that very closely.
        Mr. Westmoreland. But these toxic loans, they were
    supposedly the cause of all this, and yet there has been, I
    feel like, very little done to help that situation.
        But I do have a list of questions from some of the banks
    that are on the courthouse squares in some of these small towns
    that I represent.
        And, Madam Chair, I would like to submit those to the
    witnesses, if I could, and expect an answer to those that I can
    get back to my constituents on. Because I don't have time ask
    all of those questions to you.
        Chairwoman Velazquez. Without objection, so ordered.
        Mr. Westmoreland. And with the other--you know, I just want
    to make sure that--let me just ask: Is anything being done to
    consolidate the amount of regulators and the different
    regulators that go into banks today that is causing some of the
    problems? Is there anything under way right now to consolidate
    these regulators?
        Mr. Kroszner. Well, that would be something that Congress
    would have to do. Congress has given the authorities to
    different regulators to regulate different aspects of a
    different institution or regulate different institutions. And
    so that would have to be a change that Congress would make if
    there is going to be a change in the regulatory structure.
        Mr. Westmoreland. Okay. And, Madam Chair, I would love to
    look into that, to see if we can't do something to that.
        And so, but we are looking at mark to market?
        Mr. Kroszner. I believe that there is a study that the
    legislation required the Securities and Exchange Commission to
    do. And, as I said, we are providing whatever technical support
    we can to help them to have the data to be able to get to the
    right answer.
        Mr. Westmoreland. You know, when I was in business, a
    small-business guy, you would call somebody and the only answer
    they would give you is, "Let me check on that for you," we
    called them "the checkers." I feel like I am dealing with "the
    studiers" today, in that everything that we ask either one of
    you, you are studying it.
        We need to get some advanced studies here and get these
    things out as soon as possible, because studying this situation
    is causing a lot of people a lot of grief. And so I hope that
    you can study these things as fast as you can to get some
    immediate help to small business, which is the backbone, as you
    may know, to our economy.
        Thank you, Madam Chair.
        Chairwoman Velazquez. Thank you.
        Ranking Member, you don't have any more questions?
        Well, let me take this opportunity again to thank you all.
    And I hope that you understand we are not here questioning your
    commitment, but, at least on my end, I am here questioning your
    priorities. I hope that we are going to hear from you soon--the
    SBA loan facility, to unfreeze the SBA secondary market that
    you mentioned before. And as soon as we come back, we will be
    reaching out to you, or you will be reaching out to us, to see
    that something has been done.
        And, with that, I ask unanimous consent--I hope that you
    get the message here, gentlemen. We are not pleased with your
    actions. And we need to have actions taken targeting small
    businesses, small banks, and that you work as fast and quick as
    you did with the 10 largest banks in our Nation.
        Small community banks, independent banks, they must play a
    role in stabilizing the markets. And they are the ones in our
    communities that are lending to small businesses, who, at the
    end, are the ones creating the jobs that will get this economy
    growing again--not the largest bank, not the big corporation,
    those small institutions in our community.
        With that, I ask unanimous consent that members will have 5
    days to submit a statement and supporting materials for the
    record. Without objection, so ordered.
        This hearing is now adjourned.
        [Whereupon, at 12:12 p.m., the committee was adjourned.]

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