[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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