[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                 THE ECONOMIC DISASTER AREA ACT OF 2009

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 19, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-48



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 19, 2009................................................     1
Appendix:
    June 19, 2009................................................    25

                               WITNESSES
                         Friday, June 19, 2009

Cardoza, Hon. Dennis, a Representative in Congress from the State 
  of California..................................................     4
Costa, Hon. Jim, a Representative in Congress from the State of 
  California.....................................................     6
Johnson, Bill, Director, Alabama Department of Economic and 
  Community Affairs, State of Alabama............................    11
Jones, Hon. Tommy, Mayor, City of Los Banos, California..........     9

                                APPENDIX

Prepared statements:
    Johnson, Bill................................................    26
    Jones, Hon Tommy.............................................    30


                 THE ECONOMIC DISASTER AREA ACT OF 2009

                              ----------                              


                         Friday, June 19, 2009

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 1:25 p.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Watt, 
Sherman, Moore of Kansas, Clay, Green, Kilroy, Peters, Maffei; 
Bachus, Biggert, Hensarling, McCarthy of California, Jenkins, 
and Lance.
    Also present: Representatives Cardoza and Costa.
    The Chairman. The hearing will come to order. Mr. Costa, 
would you take the witness stand right in front of you please? 
I'm sure Mr. Cardoza is on the way. I have explained to people 
that we had the very solemn process of an impeachment opening 
up. And so let me now officially begin this hearing. We are 
joined by the senior Republican, Mr. Bachus.
    The economic crisis that confronts us is nationwide, but it 
obviously does not apply uniformly in the Nation. We are a very 
large country with differing patterns of economic activity. And 
there are places that have been hit unduly hard through no 
fault of their own. The part of California represented by our 
colleagues, Mr. Cardoza and Mr. Costa, has been hit as hard as 
any. And we believe, many of us, that it is entirely 
appropriate for us to recognize that we are one Nation and to 
reach out.
    There are programs that subsidize public transportation in 
some parts of the country and other parts don't have it. There 
are programs that provide agricultural subsidies for crops that 
are not grown in much of the country. There are a variety of 
programs that help people in distress when there are natural 
disasters, we go to the aid of the people in that geographic 
region. We have, for the people in the areas represented by 
Representatives Cardoza and Costa, the equivalent of a 
prolonged national disaster in its economic impact, and we 
think it is appropriate of the Federal Government to respond.
    So we have asked our colleagues to join us today because we 
are having a hearing on legislation which they have drafted and 
they prepared. And I can tell you that I have spoken with the 
Speaker of the House and with the Secretary of HUD and others. 
There was a wide recognition of the legitimacy of the points 
that our colleagues have made and this is the beginning of a 
process in which I hope there will be some response.
    The gentleman from Alabama.
    Mr. Bachus. Thank you, Mr. Chairman, for holding today's 
hearing. And I welcome Congressman Cardoza and Congressman 
Costa, two very capable Members of the House, and look forward 
to your testimony. It is also a pleasure for me to welcome Mr. 
Bill Johnson, who will be testifying on our second panel of 
witnesses and welcome also back to the Financial Services 
Committee. We had the honor of his expert testimony last year 
at a Housing Committee hearing on the Gulf Coast Recovery 
Effort. Bill has an impressive record of service to the 
citizens of Alabama. In November 2005, Governor Riley appointed 
Bill as director of the Alabama Department of Economic and 
Community Affairs, ADECA. ADECA manages hundreds of millions of 
Federal grant dollars each year with some 230 employees. He 
also serves as the executive director of the Black Belt Action 
Committee, State alternative for the Appalachian Regional 
Commission, and State alternative to the Delta Regional 
Authority. We thank Bill for being here and look forward to his 
testimony.
    The Economic Disaster Area Act of 2009 attempts to solve 
the problem of rising unemployment and mounting declines in 
home prices by calling on the Community Development Block Grant 
program, CDBG, to set aside funds for economic disaster areas. 
I certainly sympathize with my colleagues from California and 
their efforts to address the financial hardships in their 
congressional districts. And I know that they are sincere.
    But I do have concerns that redirecting funds from the CDBG 
program may have unintended consequences for the overall 
program. CDBG funds are vital to the States. And finally, $1 
billion in CDBG funds were made available by this year's 
stimulus package. Unfortunately, expectations have not lined up 
with reality when it comes to getting stimulus funds out the 
door, and I know this is probably a problem in your districts 
as well as mine.
    In Mr. Johnson's testimony, he describes a process for 
distributing stimulus funds and the time it takes for the money 
to actually go to work in the local economies. I did vote 
against the stimulus bill, because I truly believe there are 
better ways to stimulate our economy. With that said, I would 
like to commend officials back in Alabama, the Governor and Mr. 
Johnson and others, for providing a dedicated Web site with 
information about all the projects funded by the stimulus. And 
some of these will obviously be of help.
    I think it is important for taxpayers to know how their 
stimulus funds are being used in real time.
    So I thank Congressman Cardoza and Congressman Costa as 
well as Mr. Johnson for their testimony and look forward to 
hearing from them and our other witnesses.
    The Chairman. The gentleman from California, a colleague of 
our two congressional witnesses, is recognized for 2 minutes.
    Mr. Sherman. Thank you, Mr. Chairman. Thank you for holding 
this hearing. I have learned in my many conversations with Mr. 
Cardoza and Mr. Costa what is happening in our Central Valley. 
I would be aware of it without their input but they have 
brought it home to me in example after example. I don't know 
what is the right policy to do something about it. But I do 
know that what has hit the Central Valley and other parts of 
California and some other parts of the country is every bit as 
great a disaster as the natural disasters that the Federal 
Government has responded to in the past.
    So I especially thank the chairman for holding these 
hearings, and I yield back.
    The Chairman. The gentleman from Texas for 3 minutes.
    Mr. Hensarling. Thank you, Mr. Chairman. Thank you for 
holding this hearing. I first want to commend my colleagues 
from California. I have no doubt that their particular 
districts have a lot of suffering, have a lot of human misery, 
and they are putting forth a public policy that they think is 
best to help their districts. I know it is a sincere effort. 
They should be commended for it. I do have a number of 
questions though about the approach and wonder if the approach 
of the legislation is indeed the best.
    Number one, unfortunately, in this economy, I don't believe 
there is any one individual, one city, one county, or one 
company that has a monopoly on human misery. Throughout our 
entire economy, people are suffering. And although the 
unemployment rate in these communities are higher than the 
national average under this formula, I think the unemployment 
rate that really counts is the unemployment rate in your 
household, which doesn't necessarily know geographical 
boundaries. That is where I believe that assistance should most 
be focused.
    We have to remember, I know this would enlarge the 
definition of who could apply for CDBG funds. I know that, at 
least initially, it doesn't perhaps add to the financial burden 
of the taxpayer. But as I look at history as my guide, the more 
people who qualify for the program, it is a matter of time 
before the expense of the program is going to go up. And I look 
around at $700 billion spent for the initial bailout money, 
$1.3 trillion for the stimulus plan, $410 billion for the 
omnibus, and now we have a proposed health care plan that could 
cost $1 trillion, and we are looking at a Federal debt that 
will increase three-fold, triple in 10 years, more Federal debt 
than created in the previous 220, and at what point do you get 
concerned that we are borrowing money from the Chinese, we are 
borrowing 46 cents on the dollar, and we are sending the bill 
to our children and our grandchildren.
    I also wonder if all communities are created equal in the 
responsibility in which they undertake, some communities may 
have funded extra golf courses where some didn't. Should a 
frugal community have to subsidize a nonfrugal community?
    Again, I think there are better ways to promote hope, jobs, 
and opportunity within our communities and within our country. 
I look forward to hearing the testimony of our witnesses and I 
yield back the balance of my time.
    The Chairman. We will now begin with seniority as we do 
around here when there is no other reason to pick with our 
colleague from California, Mr. Cardoza, who has been a strong 
advocate for effective action, both nationally and particularly 
with the region he represents.

STATEMENT OF THE HONORABLE DENNIS CARDOZA, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Cardoza. Thank you, Mr. Chairman. As I begin today I 
would like to submit for the record two documents that detail 
some of the challenges that are faced by my district.
    The Chairman. Without objection, all material that any of 
the witnesses wish to submit will be incorporated into the 
record.
    Mr. Cardoza. Thank you, Mr. Chairman.
    Members of the committee, thank you for holding this 
hearing and for having me here today. Generally when people 
think of California, they think of Disneyland, the beach, 
Malibu, San Francisco, Yosemite National Park. The Central 
Valley of California and my district might be referred to as 
the ``other California'' where we have drought stricken farms 
and vacant homes. In place of movie stars and beaches, we have 
block after block of abandoned buildings. You see one of those 
subdivisions right here.
    We are proud to grow more than half of the Nation's fruits 
and vegetables and tree nuts. Every house that can afford one 
still flies the American flag on the 4th of July. As many of 
you have heard me say repeatedly, my district in central 
California, in particular the communities such as Merced, 
Modesto, Stockton and you will soon hear from the mayor of Los 
Banos, need help. We needed help 6 months ago. We needed help 1 
year ago.
    What has been put forward to fix the rest of the country is 
not enough to help us back home.
    Just this week, the Brookings Institute released a study 
that placed the three communities in or near my district among 
the bottom 10 weakest performing metro regions nationwide. What 
has become of our region of California is nothing short of an 
economic disaster. I am here to ask you--no--I am here to plead 
with you to provide the relief we desperately need. My 
constituents have lost their homes. They have lost their jobs. 
And they have lost their hope. They are looking to Washington 
and all of you for help. We need Federal assistance, and we 
need it now. When Hurricane Katrina devastated the Gulf Shore, 
our Nation watched in horror as victims lost their jobs and 
their homes.
    Mr. Chairman, members of the committee, I have been saying 
for quite some time that the devastation in my district is very 
similar to that of Katrina, but was not caused by one extreme 
event over the course of a couple of days. In the Central 
Valley of California, we too have lost our jobs. We too have 
lost our homes. However, there has been no rescue operation. In 
fact, my constituents receive far fewer resources from the 
Federal Government than almost any region of our Nation.
    Regardless of whether your property ends up on the front 
lawn due to a storm or to an eviction marshal, you are still 
homeless and your property is still in the front yard. Can you 
imagine your family is evicted from your home and your child 
looks up at you and asks, Daddy where are we going to stay 
tonight? And starts to cry when she sees her favorite baby doll 
thrown out on the sidewalk. It is happening every day where I 
come from.
    Despite the collapsing economy and rising crime, higher 
poverty levels in my district, the Central Valley receives only 
half the national average of Federal dollars per capita. 
According to the Census Bureau, in 2008, the Federal Government 
disbursed an average of $8,475 per person across the country. 
In my congressional district, we received less than half of 
that. In Merced County, the number is 47 per capita, Stanislau 
County received 45, and San Joaquin County received 48. We 
can't cope with the situation that we have and not receive 
additional help.
    I understand, Mr. Hensarling and others, that our entire 
Nation is hurting right now. I get it.
    But the fact is, we are hurting much, much worse. When 
Federal Government disaster designations are declared, it is 
because the State and local governments cannot cope with the 
devastation that has been left in the wake. That is exactly the 
situation in our district. More than 13 percent of our 
mortgages remain in foreclosure, with 3 cities in my district 
having the 2nd, 4th, and 6th highest foreclosure rates in the 
country. Home values have plummeted 42 percent in my 
communities in the last year, the last 12 months, and nearly 70 
percent since the high of 2005.
    Despite the best efforts of the Obama Administration, our 
homes are so far underwater that we don't qualify for 
assistance. The 3 biggest cities in my district are in the top 
11 nationwide for unemployment. My constituents, the ones who 
still have work, make 33 percent less than the average American 
worker. Small businesses and neighborhood restaurants which 
were once packed with customers are now empty and shuttered. 
Our longest-serving community bank was swept into the 
foreclosure crisis and closed. On top of that, my dairy farmers 
are in crisis and we have the worst drought in the country.
    Chairman Frank, members of the committee, my district in 
the San Joaquin Valley is on the brink of falling off the map. 
I could stand before you and rattle off statistics all day, but 
we have entered them into the record instead. Every single 
economic indicator points in the same direction. California's 
Central Valley is in economic free fall and economic disaster, 
if you will.
    In meeting after meeting, I have told my friends in 
Congress that the solutions we have been pursuing simply aren't 
working for areas like mine. Today I am presenting one of my 
ideas of providing additional assistance to those who need it 
most. And I am looking forward to hearing your suggestions for 
ways to improve this idea and help me get it passed into law so 
my communities and others like them around the country facing 
dismal unemployment rates and alarming foreclosure rates can 
get the help they need.
    The bill we are discussing today seeks to create a 
permanent program within CDBG that would provide an additional 
safety net for the hardest-hit areas, cities and towns across 
the country use CDBG funds to rebuild communities, create 
economic development, provide housing to lower-income 
individuals. While in my district like others like it, more 
qualify as lower income communities than any place else. And 
now the local governments, and you will hear from Mr. Jones, 
are more cash strapped than ever. In his case, he is cut 50 
percent of his budget. And in order for them to keep the doors 
open, they need help.
    I am going to truncate my remarks and just say that we are 
looking for additional ways to fund CDBG money, not to cut 
other people's funds. We are trying to figure out ways to be 
creative in that. I am working with the chairman on those 
questions.
    Mr. Chairman, my district will not overcome this overnight. 
It will take unprecedented action to help us rebuild and 
recover. But on behalf of my constituents and from the bottom 
of my heart personally, I want to thank you for the work that 
you have done and for the assistance and the advice that you 
have personally given to me. I am eternally grateful to you for 
holding this hearing. I look forward to hearing from my 
colleagues on ways we can improve this bill. And I look forward 
to working with you as we hopefully schedule a mark-up, maybe 
in July or when you can put it on your calendar. Thank you very 
much.
    The Chairman. Thank you, Mr. Cardoza.
    Mr. Costa.

   STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Costa. Thank you very much, Mr. Chairman.
    I want to acknowledge the hard work that you and your staff 
have done, both the Majority and the Minority members and 
staff, to hold this legislation, this important legislation, 
for the San Joaquin Valley that includes Congressman Cardoza's 
district and mine and others that have been so impacted as a 
result of a combination of factors.
    Clearly on the outset of your comments, both the ranking 
member and Mr. Chairman, you talked about the deep-felt 
recession around the country, and that is obviously clear to 
everyone. Every part of the country is suffering. But what you 
need to know that I think makes it a bit of a distinction in 
the case of the San Joaquin Valley, is three factors, a 
combination of 3 years of drought combined with the fact of a 
meltdown of the dairy industry and of housing foreclosures that 
have led the Nation compounded together have created a 
circumstance in which we have unemployment numbers that have 
gone from the single-digit levels a year ago to now it is 16 
percent, 18 percent, 20 percent.
    I have a city in my district, Mendota, that has the highest 
unemployment levels in the State, 42 percent unemployment; Fire 
Ball, 38 percent unemployment; Delano, the home of Cesar 
Chavez, with over 50,000 people and 4 high schools, has 34 
percent unemployment. When one-third of the people in your 
communities and a similar number in your counties do not have 
jobs, that is depression numbers. We have moved from deep 
recession in the communities that Congressman Cardoza and I 
represent to depression unemployment numbers.
    It is compounded because there are two major industries in 
the valley, in the wonderful San Joaquin Valley that we are so 
proud to represent. They are agriculture and housing, and they 
are both in the tank.
    I am sad to tell you these illustrations point out part of 
the picture, and I have others that we could have brought of 
food lines. Because of the drought, some of the hardest working 
people you will ever meet in your life who would normally be 
working today to put food on America's dinner table sadly are 
in food lines, the irony of that because there is no water, no 
water to grow food, without the ability to grow, we have no 
jobs.
    This bill would provide the President with the ability to 
declare certain counties economic disaster areas. To be 
eligible, the counties should have high rates of both 
unemployment in the county and home value declines as 
Congressman Cardoza and your staff have worked on this 
legislation so well. These areas would be targeted for relief 
for job creation programs, economic development projects, 
rehabilitation of low-income housing units, helping to put 
people back to work and to revive local economies. Congressman 
Cardoza and I are here to fight for farmers and farm workers 
and the farm communities of the San Joaquin Valley.
    The ranking member noted about the impacts of the CDBG 
funds. It is important to note that this legislation would not 
rob other communities of their allocated funds. We obviously 
are sensitive to the plights of this deep felt economic 
recession around the country. But it would supplement them when 
extenuating circumstances warrant this as in the cases of these 
communities and other communities I would add in Detroit and 
other places where it is similarly felt.
    Economic disasters are no less devastating than a tornado, 
a flood, or an earthquake. But I will tell you what is 
frustrating for Congressman Cardoza and me. You see a tornado. 
It is television friendly. It is sad. It is awful. You see a 
hurricane as in New Orleans and people immediately see the 
disaster. A 3-year drought is not television friendly. People 
go, oh, well, you know, people are still there. Oh, yes, they 
are there, but they don't have jobs and the communities suffer.
    This is a powerful tool if this committee passes this 
legislation for areas like ours where unemployment has shot 
through the roof, the ability to undertake pending projects, 
put people back to work, help them keep from losing their homes 
under the foreclosure rates that Congressman Cardoza stated. 
The Central Valley of California is not the only area that has 
been ravaged by this nationwide recession. But we have 
extenuating circumstances that we have described to you.
    Counties in Michigan have also been severely impacted. But 
it is important to note that all of our regions throughout the 
country sometimes rely on one industry or another, and that is 
the case for the San Joaquin Valley with agriculture and 
housing. Local governments and State governments, particularly 
in California, we know are in the tank. They need additional 
support. And I think the Federal Government, just as I 
supported the efforts with Katrina, supported the efforts that 
have been devastated in the Midwest and otherwise, we want the 
same level of support for the communities that we represent.
    This legislation clearly is not a silver bullet. We have to 
do a lot of other things. But it will go a long ways toward 
helping deal with the regional economic challenges that we not 
only find in our San Joaquin Valley, the farmers and farm 
workers and farm communities that we are fighting for, but also 
for economic challenges that are felt across the Nation.
    Again, Mr. Chairman, and the ranking member, members of 
this committee, thank you, thank you again for your 
sensitivity, for your efforts to hold this hearing and to help 
us help people whom we represent as we deal throughout this 
great country of ours with the economic challenges that we face 
today.
    I would like to ask for the record to enter a University of 
California Davis study that talks about and substantiates these 
impacts.
    The Chairman. Without objection, everything will be put in. 
Thank you. I think we will excuse our colleagues now and call 
up our second panel, and we will have a chance to ask questions 
of them.
    I say that because we have a chance to question our 
colleagues during the time. We may lose our ability to do this 
because of the impeachment so. Did you want to--
    Mr. Bachus. I would like to say something.
    Let me say this, both Members, and I mean this sincerely, I 
am stunned by the testimony and by the mayor's testimony of Los 
Banos. I acknowledge upfront that most of our hurricanes and 
all of our tornadoes do not inflict this kind of damage on our 
communities. This is an unbelievable thing.
    The Chairman. It is the long-lasting duration. It is the 
duration.
    Mr. Bachus. This is the perfect storm. And so I want to 
express to you, Devin Nunes, Congressman Nunes, with the 
diversion of 500,000 what is it, a tremendous amount of water, 
500 acre feet of water, my gosh which has dried out part of the 
central valley, San Joaquin Valley, and both of you supported 
his amendment. And I will say that actually personally to me--
had you voted against that, which caused an economic 
devastation there, and then you come out and ask for this, you 
know, I might have asked you about that. But you supported 
that. That is causing some tremendous problems. So I just want 
to commit to the chairman, now I don't know that it is this 
legislation, but I want to commit to both you gentlemen and to 
the chairman that this side of the aisle stands ready to work 
with you.
    Mr. Cardoza. Thank you.
    Mr. Bachus. I am not just saying that. I sincerely mean it.
    Mr. Cardoza. You always have, Mr. Bachus, and I appreciate 
the friendship and the collegiality you are extending. We 
wouldn't be here asking if it wasn't an absolute necessity. The 
Central Valley delegation has a tradition of working together 
across party lines to try and do the right thing for our 
districts and what we believe is the right thing for our 
country. And we embraced Mr. Nunes yesterday as we always do. 
In the valley, that is our culture, and we just want to get it 
right.
    Mr. Bachus. Property values dropping 55 percent is just 
incredible.
    The Chairman. We want to move on to our witnesses, but I am 
impressed that Mr. Costa and Mr. Cardoza and Mr. Nunes have 
crossed party lines. Maybe one day they will cross ethnic lines 
as well.
    Mr. Costa. The Portuguese caucus.
    The Chairman. Obrigado to my witnesses and we will call--
    Mr. Costa. Oh, muito obrigado.
    Mr. Cardoza. Muito obrigado.
    The Chairman. We will ask Mr. Johnson to join Mayor Jones 
at the witness table.
    We have, as mentioned, Mayor Jones of Los Banos, and Mr. 
Bill Johnson--who is here at the request the ranking member--
who is the director of the Alabama Department of Economic and 
Community Affairs.
    Let's begin with Mayor Jones.

  STATEMENT OF THE HONORABLE TOMMY JONES, MAYOR, CITY OF LOS 
                       BANOS, CALIFORNIA

    Mr. Jones. Good afternoon, Chairman Frank, and members of 
the Financial Services Committee.
    I thank Congressman Dennis Cardoza for asking me to come 
speak with you today because he is tired of my calling him 
asking him for assistance for my community.
    Hello, I am Tommy Jones, mayor of Los Banos. For those of 
you who don't know where Los Banos is, we are the smallest town 
of 36,000 in the heart of central California. We are the small 
town that grew overnight to almost 3 times our size when 
residents in San Jose and the South Bay discovered we had 
affordable homes. We are the community that watched our home 
prices escalate to the point many of our hometown residents 
could not afford a house. We are the community that tried 
desperately to stay ahead of the curve of the boom, tried to 
charge the right fees so growth could pay for itself, and tried 
to anticipate the what-ifs of economic change. And today, we 
are the community that had made the LA Times, New York Times, 
Small Biz Magazine and Wall Street Journal because we are the 
hardest-hit community by this economic disaster.
    One in every five homes in Los Banos is either in 
foreclosure, has been foreclosed upon, or is about to go into 
foreclosure. Our unemployment rate is over 21 percent. The 
foreclosure rate is so high that when we applied for COPS 
funding, the Federal office called to see if we had made a 
mistake on our application. We didn't.
    We are small town America facing an extreme financial 
hardship, and as mayor and keeper of my City, I am here to ask 
for help. The Economic Disaster Declaration is a tool for 
cities like Los Banos who on the surface may appear healthy but 
in reality are suffering from an economic crisis as disastrous 
as Hurricane Katrina.
    Let me see if I can paint you a picture of what it is like 
in our community. We sit in the middle of cotton and tomato 
fields. Up until 10 years ago, most of our residents were in 
one way or another connected to agriculture, education, or 
government. Today, a large portion of our community drives more 
than an hour or an hour-and-a-half to the South Bay to work. 
Since the bust in the economy, many of those drivers have been 
laid off and with those layoffs came the loss of their homes.
    Loss of homes has meant an increase in our homeless; our 
homeless shelter now serves entire families two meals a day. 
Loss of homes has meant a steep decline in property and sales 
tax. Loss of sales has meant the closing of long-lived and new 
businesses in and a decline in police and fire services because 
of a loss of tax revenue.
    But it doesn't stop there. As I mentioned, we are an ag-
based community. We are one of the communities faced with water 
shortages for our farmers. Water shortages mean less fields are 
planted. Less fields planted mean layoffs of farm laborers. 
Layoffs mean loss of homes. You see where I am going with this.
    Our building construction community is now unemployed.
    Our banks have stopped lending. Commercial projects are 
currently stalled because they cannot get additional bank 
lending, even those companies that have perfect credit and have 
been in business more than 10 years. As a City, we have no 
money to assist.
    And I am still not done. Wednesday night, we were to 
approve our fiscal year budget. This year's budget was based 
upon a 35 percent reduction in property tax; 35 percent. This 
is on top of last year's decrease of 15 percent.
    But here comes the kicker. Before the Council meeting 
started, we received word from the County of Merced that our 
property taxes had not dropped 35 percent as predicted, but an 
unprecedented 55.27 percent. That means our staff will have to 
cut an additional $450,000 from the general fund.
    We have already had to cut law enforcement and fire 
positions. We have laid off personnel to the point those still 
employed look frazzled from the workload. We have reduced 
services, supplies and stopped future projects because we were 
out of money, and now we have to try to find another $450,000 
in cuts.
    Our sales taxes are down. We lost two car dealerships last 
year. Our property tax is 55 percent below what it was last 
year. One in every five homes is in foreclosure. Our 
unemployment rate is more than 21 percent. Our homeless 
population now includes complete families. We need your help.
    Our community, our county, tends to get overlooked. We are 
rural. We are small. We are laid out between wetlands and ag 
lands. But our needs for our citizens are not any smaller than 
the needs of those who have faced hurricanes or floods. We 
cannot provide enough fire and police to protect our citizens, 
but we may not qualify for COPS funding because we don't have 
the same large crime statistics as cities like San Francisco, 
Oakland, or Chicago.
    We have the highest foreclosure rate in the country but did 
not receive Federal stimulus dollars because of the HUD 
formula. Instead, we had to wait for the States's allocation, 
and I might add, we are still waiting.
    This is why I am here, to plead, to beg, and to pray for 
the Economic Disaster Declaration legislation. We need help. 
And we need it now. Our businesses cannot qualify for loans 
even though they have been in business 10, 15, even 20 years.
    CDBG funding given to our area because of our plight would 
provide them an opportunity to keep their doors open and stop 
the hemorrhage of unemployment. CDBG funding to assist people 
purchasing homes would help decrease the number of vacant 
neighborhoods and crime associated with those vacancies.
    Please think about Los Banos when you look at this 
legislation and think again about our numbers; in just 2 years, 
a 70 percent decrease in property tax; more than 21 percent 
unemployment rate; and 1 out of every 5 homes in foreclosure.
    This Wednesday marked a day when our City had to face the 
fact that we have no place else to go. We have bottomed out. 
Without your help, without a tool such as the Economic Disaster 
Declaration, what will cities like Los Banos do?
    I am Tommy Jones, mayor of Los Banos, and on behalf of my 
community, I am asking you to vote yes for this legislation. 
Please give our community a chance.
    And let me close with this. The last election was probably 
the greatest election that I have considered in my lifetime, 
being a young boy who grew up in the South where going through 
back doors was common, been a young man coming from my second 
tour of Vietnam and coming home with my friends, and I was not 
allowed to go into the same place that they were. I know what 
it feels like to be a second class citizen. But the citizens of 
my community now are experiencing that. And they are begging 
and praying for your help. Thank you very much. Thank you so 
much.
    [The prepared statement of Mayor Jones can be found on page 
30 of the appendix.]
    The Chairman. I invite our colleague, Mr. Cardoza, to join 
us, there being no objection, on the platform if he would.

  STATEMENT OF BILL JOHNSON, DIRECTOR, ALABAMA DEPARTMENT OF 
        ECONOMIC AND COMMUNITY AFFAIRS, STATE OF ALABAMA

    Mr. Johnson. Mr. Chairman, Congressman Bachus, I want to 
thank you for the opportunity to be here today to speak on this 
economic disaster legislation relating to the Community 
Development Block Grant program.
    I also want to thank Representative Cardoza for proposing 
it.
    There is no question that the economic devastation that we 
are seeing in this country is unprecedented, and it is 
incumbent on us as Representatives of Federal Government, State 
government, and local government to look everywhere we can to 
try to find solutions for these very pressing problems that are 
facing our communities now.
    As I hear the statistics that Mayor Jones and 
Representative Cardoza are relaying from California, I can't 
help but be astounded and shocked at the sheer depression that 
is hitting the area. And I want to say, my heart is out to you.
    We have been fortunate in Alabama. We have had a number of 
industries locate and the pressure and the momentum of that has 
kept up our economy and our home prices somewhat, but we are 
not an island. Our folks are suffering, too.
    In my position with this agency, the Department of Economic 
and Community Affairs, we represent, we have a number of 
funding streams that go out, and I am hearing, daily, 
continually, from constituents, homeless shelters, that their 
client base is going up, and their contributions are going 
down. Nonprofits, domestic violence shelters, the pressure of 
the stress from these financial situations is affecting our 
families and increasing domestic violence. There is virtually 
no segment of our society that is not touched by this. And I 
want to say I appreciate your looking at trying to do 
everything we can to address this situation.
    As recently as just before we walked in, Congressman Bachus 
and I were talking about a large homeless shelter housing over 
300 women in Birmingham, the Lovelady Center; 40 children who 
live there, struggling to get by, may have to close the doors, 
trying to find additional money out there to help them to stay 
open. So really we are in very desperate times.
    I want to reference also, I take the points that there has 
been a lot of help through CDBG for the disasters that have 
happened in other parts of the country. And we have benefited 
from some of those funds used that way. After Hurricane Ivan 
and Hurricane Katrina, we received supplemental Community 
Development Block Grant money. And we appreciate that.
    I do however want to say that some 3 years after Katrina, 
we still have folks living in FEMA trailers, even though we 
received Community Development Block Grant funds to help build 
housing. And really what I want to share with you all today is 
not, you know, any for or against the Community Development 
Block Grant legislation here, but just some of the challenges 
with trying to solve problems with the Block Grant funds in 
general.
    The Block Grant program, there has not been virtually any 
city or community or citizens of any community or city that 
have not benefited from this program over the decades it has 
been in existence. It is a program with a lot of safeguards in 
place. Very little of the money goes the wrong way.
    The problem with that is there are also a lot of strings 
attached to it, a lot of onerous regulations that make the 
implementation of this program very hard to do and for short-
term fixes. As I said, we still have, 3 years later, folks 
living in FEMA trailers. And we are still short $100 million to 
having enough money to help everybody who was affected on the 
Coast. And so the challenge of trying to use the Block Grant 
program is one that I think, as you go down this path of trying 
to see what you can do to declare certain areas economic 
disasters and use this particular program to help folks, the 
main thing that I would ask that you focus on is how can you 
speed up the implementation of the program.
    There are some requirements that, after doing this program 
for 6 years, I did not realize were imposed on us. I had an 
hour-long meeting with the State examiners yesterday because 
our folks apparently didn't fill in a box that even the 
examiners didn't know what the box was for, right on a 
Community Development Block Grant report. It is Form 60002. 
Whatever it is.
    But this is one of the onerous regulations. It slows up. 
When you are asking for help, if this legislation gets passed, 
you are going to want to see something in 3 months or 6 months. 
Your folks are going to be expecting that, Mayor.
    And I know after the hurricane, our folks were expecting 
it. And it is embarrassing 3 years later to still be trying to 
help folks with funds that are sitting in the bank and yet not 
be able to get out there and help people.
    I literally, within the last 2 months, went down to the 
coast to Ms. Darlene Culpepper who is in a wheelchair because 
of diabetes, living in a FEMA trailer, you know, still sick 
from the fumes of the FEMA trailer because we cannot get her 
help. So these are the challenges.
    The block grant program, as I said, has been a tremendous 
asset for the citizens of this country. But it is designed for 
very large--well, what has happened over the years is, because 
of the onerous regulations, the investments have tended to go 
to very big water and sewer type projects where you have like a 
single project that it is easy to report on these different 
requirements.
    When you start trying to use this program to do small 
projects, employ lots of people, it becomes very onerous to try 
to do this. Think about if you do a $400,000 sewer project, it 
is easy to figure out what you need to report, how many 
employees, things like that. Think about trying to build a 
house on a small lot, one house; it is very onerous.
    And if you can look at this as you are looking at this 
legislation, obviously your folks if this passes, they are 
going to want to see something happen very soon. And it is 
going to be very difficult and possibly embarrassing a couple 
of years later if we have not addressed these onerous 
regulations that hamstring what I think this great program is.
    I see that I am out of time, so, Mr. Chairman, I turn it 
back to you.
    [The prepared statement of Mr. Johnson can be found on page 
26 of the appendix.]
    The Chairman. Thank you, Mr. Johnson, you did very 
concisely and sensibly sum up the dilemma.
    On the one hand, we worry about abuse. And sometimes you 
can tighten it up too much. It is true that one of the great 
things about the CDBG program is there is always very little 
scandal connected with it when people talk about abuses. But it 
may well be that we have gone too far.
    And I will say this, when I was first on this committee in 
1981, 1983, the City of Fall River, Massachusetts, had gotten 
some flexibility in CDBG funding, letting them be much more 
flexible with City services. And they wanted that preserved. I 
offered to do that for a lot of the cities, and frankly, at 
that point, a lot of the city officials said, no, do not do 
that because we don't want to have more claimants. The more you 
open it up, the more people are going to come to us. So the 
City of Fall River, Massachusetts, continues to have written 
into the law at the time a degree of flexibility a lot of 
others don't.
    So I very much agree with that. And it is not a free gift 
necessarily. But it is important.
    I would also say to both of you this, I think when you are 
talking about housing, there are two levels at which you have 
to address this. One is aid to the municipalities. I know we 
say there are some partisan differences on this, and I know 
people talk about the niceness of tax cuts, but I first went to 
work in politics in 1967 in a campaign for mayor, and I have 
been watching it, and in 42 years, I have never seen a tax cut 
put out a fire. There is a level of public service that it 
seems to me we need to provide, and we have to be honest and 
say, at some point you have to come together and provide the 
revenue to do it. We don't want to put it on the deficit.
    But in addition, there are some things we need to do, and 
it is at two levels, and again, Mr. Cardoza has been the 
leading advocate in Congress to make this point joined by Mr. 
Costa and others; it is the foreclosure crisis, and that 
requires us both to provide the kind of funding that would help 
the municipalities and the States meet public needs. But also 
we have to improve our ability to help people avoid foreclosure 
as long as individuals are losing their homes. And of course, 
it is not just the individual people who have said to us, well, 
why do you use public money to stop foreclosures? People made 
the loans; let them live with the consequences when people took 
out the money.
    But as you point out, Mayor, the damage from foreclosure 
happens in concentric circles. The individual who loses the 
home is the first victim. But the neighborhood is a victim from 
having the vacant property, and the municipality because the 
property that used to pay taxes now eats taxes. You are going 
to send out the police and the fire and the water department 
and the sanitation department and the building department.
    So what I am hoping to work on is a dual effort, one that 
provides some more resources to the governments but also to do 
more about forestalling foreclosure, because as people have 
noticed, we have another wave of foreclosures coming; people 
who took out conventional loans that were perfectly sensible 
and responsible and well documented when they took them out, 
but who are now encountering a degree and duration of 
unemployment that wasn't anticipated along with the drop in 
property values that keeps them from being able to refinance. 
So we are looking at a program that would provide some kind of 
temporary help to people whose problem is not that they can 
never pay that mortgage, but that they can't pay it while they 
are out of work. And that is another area that we are working 
on that I worked on with Mr. Cardoza.
    That is really all I want to say. I have no questions. 
Usually you ask questions of people you disagree with. I don't 
disagree with you, so I have nothing to ask you.
    Mr. Bachus.
    Mr. Bachus. I am going to ask two questions but not because 
I disagree with anything you have said.
    The Chairman. Well, you are better at being agreeable than 
me.
    Mr. Bachus. Mayor Jones, I found your testimony very 
compelling.
    And I thank you for coming to Washington to share your 
story and express the hardships your community is facing.
    You mentioned you grew up in the South. My father was a 
contractor in Birmingham, Alabama. And one thing, when you hear 
the word Birmingham, Alabama, obviously, that carries some 
connotations. But I am proud of my father because he was the 
first, or one of the first contractors in Birmingham to step 
across the color line and hire black subcontractors. And his 
jobs were vandalized. But I can tell you that we have come a 
long way in Birmingham. And you know, we obviously as a country 
have come a long way. And I think last November was a testimony 
of that.
    I appreciate you sharing your stories about the hardships 
of your communities, and it is nothing but a nightmare, I must 
say. Is Los Banos eligible to receive moneys from the States 
CDBG program? And you testified you have not received those 
yet?
    Mr. Jones. We are eligible. The problem came down--with the 
CDBG funds, we have received some. The problems with the home 
stabilization program was it had to be 15 percent below market 
value, where our property has already fell 75 percent. So 
imagine 15 percent, that meant the money we could not use it; 
we would have to end up sending the money back to the State. So 
being the worst-hit area in the complete country, we couldn't 
even use the money which it was mainly I think was meant to 
help.
    Mr. Bachus. That is a shame. And as I said, I would be glad 
to work with this committee and with your Congressman, and 
Congressmen Costa and Cardoza.
    I appreciate both of you all bringing this to our 
attention.
    Mr. Johnson, you mentioned Alabama has received $7 million 
in stimulus. You mentioned that in your prepared remarks, but I 
think appropriately you responded, and I think in very good 
terms, about what they might face. What is the status of the 
money that Alabama is to receive? How much has been allocated?
    Mr. Johnson. We have received all the applications for the 
CDBG stimulus funds. And we are in the process of posting the 
preliminary awardees. There is a period that, there is a public 
comment period, and then HUD will come back and either approve 
or disapprove the awardees. We are getting them out as fast as 
we can.
    Mr. Bachus. But it hasn't been distributed yet? It is not 
out there?
    Mr. Johnson. No, sir.
    Mr. Bachus. I will yield any time I have left to 
Congressman Cardoza.
    The Chairman. We will recognize our colleague from 
California now. It is only 5 minutes.
    Mr. Cardoza. I thank the chairman.
    And I thank Mr. Bachus.
    And I think I can't embellish any greater on what Mayor 
Jones has said, and I think the words of Mr. Johnson are 
incredibly applicable: When there is a natural disaster, and 
the whole premise behind the Federal Government acting is that 
State and local authorities don't have the resources to deal 
with the crisis, and so, we expect that money not only to 
eventually get there but to get there in a manner befitting the 
fact that this is a crisis and people need immediate help.
    And we have to have safeguards, and those safeguards have 
to be put in place quickly enough that the purpose for 
expending the funds doesn't get lost.
    In the Neighborhood Stabilization Fund money, first of all, 
Maxine, Congresswoman Waters, and this committee did a fabulous 
job trying to get those funds. They were important concepts.
    And the reality is Merced County, the hardest-hit county, 
as you have heard, is still to receive those dollars. And so 
there have been challenges. We couldn't apply directly because 
we weren't big enough. And then the State application was 
rejected initially, and it had to be reworked.
    And frankly, the allocations to our State were less than 
other States that had this issue. And the State action just got 
approved, and the money is still--the checks are still in the 
mail. And that is a year after this committee's work and 
intention to do this. And we can't let that happen if we do 
this program.
    I thank Mr. Johnson for his testimony. He is dead on.
    And thank you Mr. Bachus for bringing him up here to do it.
    The Chairman. The gentleman from California, Mr. McCarthy.
    Mr. McCarthy of California. I thank the chairman and I also 
want to thank Mr. Cardoza and Mr. Costa, because, Mr. Mayor, I 
come from just down the road from you. I represent Kern County 
which, we are all in the Central Valley together.
    My district in Kern County has more than 15.9 percent 
unemployment as well. And what you talked about today is true. 
I was just on, before I was flying back last weekend, on the 
Yahoo page, and they had up there the top 10 cities that would 
recover the fastest and the top 10 cities that would have the 
slowest recovery. I was sad to see when you went to the lowest, 
they were all through the Valley, and we know the challenges 
that we have in housing, and I appreciate Mr. Cardoza bringing 
this bill forward. But we also have other challenges as well, 
and some of them come within the environmental aspect, 
especially when it comes to water, knowing Los Banos and the 
bread basket of America, people don't realize what this valley 
produces.
    One, I would like if you could touch a little upon the 
flexibility that this bill would allow and the challenges you 
have, but also let's allow this Congress to understand that 
this is isn't our only challenge. We may get these houses back, 
but we have to have people able to live in them; that our 
double-digit unemployment, there are cities with 40 percent 
unemployment, that the idea that there are certain restrictions 
that shut those pumps off from pumping water. Not only does it 
hurt our valley; it will hurt this Nation when it comes to 
feeding this Nation and feeding the world. And we will 
dependent on other places, and the price will continue to rise.
    But maybe as a mayor, you can touch on where the food banks 
are at, where the number of lines are showing up, where these 
people want to work in your city but because of manmade 
decisions we are not allowed to?
    Mr. Mayor?
    Mr. Jones. As I said, when you see the lines for the 
people, homeless people; during the day, I am a teacher. And 
when I see the kids come to me crying because they are put out 
of their houses. Their parents cannot work; they are 
unemployed. And then as we realize it is because of there is no 
rain, and there is no water, and they cannot plant crops.
    These are the hardest-working people in our complete 
Nation. They are unemployed. Their kids come with no place to 
stay. Many of them are sleeping in cars with their families. 
That is how desperate the situation is.
    And for water, we had a water march which we marched and we 
talked about just how desperate the situation is, how badly we 
need water. The farming community is dying. And that is the 
hardworking people who are working who cannot get water. They 
cannot grow the crops.
    The bad thing to look about this is, eventually, if we do 
not have a water master plan, if we cannot get water for the 
State to grow this food, will our food have to come from other 
countries? Will that food come in contaminated? How far will we 
go before we make a decision that it is very important to have 
our food grown in America?
    If you think foreign oil is expensive, try foreign food.
    Mr. McCarthy of California. I thank you, Mr. Mayor. I was 
just reading the headline where--many of you know where 
California is financially and one of the biggest deficits we 
have ever faced and the challenges where we had this special 
election, and we are going through that process.
    And the Governor was recently in Fresno, another city 
within this valley. And he went to talk about the budget, and 
there were a number of mayors there, a number in the City, and 
they said, stop talking about the budget. Talk about our number 
one problem: the water, creation of lack of water, 
deteriorating the valley, the reason we have the high 
unemployment, the reason we have the housing and others.
    So, one, I want to applaud Mr. Cardoza for his work not 
only on this but on the water issue as well and Mr. Costa, but 
Mr. Mayor, I appreciate you continuing to help educate as you 
move this bill and work on it.
    Also, for people to buy that house, we have to have water 
to grow the fields. And it is a fundamental issue that 
throughout this Valley for this Congress to know that lots of 
times when people think of California, they think of San 
Francisco, Los Angeles, and San Diego. They do not realize the 
value of what is within the Central Valley and how far behind 
we are and the statistics that show we will come out of this 
later than the rest of this Nation. And a lot of this problem 
is done by manmade. If we can have a waiver when you talk about 
some environmental issues, and we can put people before fish, 
it would go a long way.
    I yield back.
    The Chairman. The gentlewoman from California.
    Ms. Waters. Thank you very much, Mr. Chairman. I thank you 
for basically the way that you pay attention to the Members and 
try and help work through their problems no matter how 
difficult they may be. I really appreciate that.
    And for our witnesses who are here today, I thank you for 
the time that you are giving to deal with these, what almost 
seem intractable issues in your area. I am from California. I 
just met with Zoe Lofgren. We were on the telephone with John 
Burton and Roy Brown and some of the others, talking about, 
what can we do to bring more people together to talk about how 
we are going to deal with this $25 billion budget?
    We think that it is--we know it is an extremely difficult 
problem, and it is going to impact these areas even more. The 
cutbacks that are being anticipated are just awesome. And we 
are talking about, about 2 weeks out, when we won't be able to 
pay the bills and the salaries, etc, etc.
    So I am particularly sympathetic to those areas which are 
in real economic disaster even before the negative impact of 
the budget is going to hit on those areas, and of course, the 
water problem has been mentioned here. That has been something 
that the Valley has been concerned about for a long time, and 
the need to come up with water policy in California that is 
going to serve the farm community, etc.
    So all of these problems are very, very difficult. You have 
a Member of this legislature, of this House, who works full-
time at trying to come up with answers. And that is what this 
Economic Disaster Area Act is all about, a creative way to try 
and deal with problems that we have not been able to impact 
with all of the work that we have done. We thought at one point 
that the Neighborhood Stabilization Act was going to be 
extremely helpful. We recognize the problem that you are 
confronted with, the size of the area that you are dealing 
with. And what we will do is continue to work with your Member 
and do everything that we can to deal with, not only the 
foreclosure disaster, the unemployment, all of that, that is 
confronting your area maybe in even harsher ways than it is in 
other areas. So, again, I see what the attempt is here. We 
understand it and the discussion about the use of CDBG. And I 
will work with Mr. Cardoza to do everything that we possibly 
can to lend some help.
    Let me just ask before my time is up, Alabama, I remember 
that, while a lot of attention was on New Orleans and 
Mississippi, that Alabama was not being paid enough attention 
to. How are things going? Did you get your fair share of the 
CDBG money?
    Mr. Johnson. I appreciate you asking that question, 
Representative Waters.
    We are still struggling. We still have a lot of folks 
suffering in Alabama, and obviously most of the devastation 
happened in Mississippi and Louisiana. But I asked my staff 
right before I flew up here, how much were we short still for 
getting everybody, not better than they were but just back to 
even, you know, the low conditions they were in?
    And we are still short $100 million. I would like to 
respectfully ask, as you all move forward and consider, if it 
comes up in any way, as I have said, I visited folks just 
recently who are still living in FEMA trailers there, and we 
would greatly appreciate any assistance, we surely would.
    Ms. Waters. Mr. Chairman, I think we need to go back to the 
Gulf Coast. We need to go back to Mississippi, Louisiana, and 
Alabama and follow up on what has been done, and the money that 
we allocated, how it has been used, and that money that didn't 
get there yet, I think there may be still some resources that 
you, as you say, you know they are due to you, but we need to 
see what we can do to expedite it.
    The Chairman. Will the gentlewoman yield?
    I think we talked with Members on the other side of the 
aisle as well. There isn't any reason why FEMA should still be 
in the housing business years after a disaster. They are an 
emergency entity. HUD has the housing jurisdiction. And I have 
spoken to the chairman of the Committee on Homeland Security, 
Mr. Thompson, and the chairman of the Committee on 
Transportation, Mr. Oberstar. We need to reallocate this so 
that at some point after an emergency, the housing agency steps 
in, and part of the problem is there aren't clear lines of 
authority there.
    At this point, we have no questions here.
    The gentleman from North Carolina just announced that 
within 10 or 15 minutes, we will have 4 votes on impeachment, 
and I do not think it would be reasonable to expect people to 
come back after that, so we will have a chance to do another 15 
or 20 minutes of questioning, and that will probably end the 
hearing.
    The gentleman from North Carolina.
    Mr. Watt. Mr. Chairman, I won't take my entire 5 minutes. I 
just want to compliment Mr. Cardoza and Mr. Costa for bringing 
this matter before us, and express appreciation to the chairman 
for convening and accommodating Members who obviously are in 
distress and whose districts are in distress, not that all of 
our districts are not in distress, but there are relative 
degrees of distress.
    The one question I had, Mayor Jones, was I heard 
Representative Cardoza say that the Community Stabilization 
monies are finally coming through or have wound their way 
through the process. What was the amount of those? And will 
those be able to be used to address any of the water concerns 
that have been raised here? How are you planning to use those?
    Mr. Jones. Well, first of all, the amount for the 
Neighborhood Stabilization program was $2.4 million. But the 
problem was it had to be 15 percent below market rate. And our 
values have lost so much, we find it almost impossible to use, 
and we will have to return the money. And we are probably the 
worst hit community in the complete Nation, and we will not 
even be able to use the funds with those rules.
    Mr. Watt. You mean, it was designated? I am not sure I 
understand why you wouldn't be able to use it.
    Mr. Jones. Because a stipulation was put on by the State 
that it had to only go to purchase homes that were 15 percent 
below market value. Our houses have fallen almost 70 percent in 
value already.
    Mr. Watt. So that was a State stipulation. Okay. How would 
you address this water issue? I guess that would be the other--
maybe I should be addressing that to Mr. Cardoza, whether there 
might be ways that we could work with him to pursue that, 
because it sounds like that might be a longer-term solution to 
really create jobs and create employment, whereas CDBG money 
might not serve that long-term purpose. It would serve a 
purpose, no question about that.
    Mr. Cardoza. Would--
    Mr. Watt. I yield to the gentleman.
    Mr. Cardoza. I thank you, with the chairman's ability to 
let me take the yield here.
    Mr. McCarthy has mentioned that there are a number of 
things that we are working through, and we need a dialogue to 
deal with it. We are working with Secretary Salazar. We are 
hopeful on those fronts. And yesterday on the Floor, we were 
attempting to deal with it one way. There are other ways we can 
work it, and we will pursue every avenue.
    I think the reality, though, and the reason why we proposed 
the CDBG issue today is, without additional water, without 
court intervention, we are dealing with legal ramifications of 
Federal law. Without many different changes and without some 
direct assistance, there will be no way for us to get off the 
ground. And Mr. McCarthy is absolutely right; the new 
projections show us returning back to normal years after the 
rest of the country gets back on its feet.
    Mr. Watt. Well, I will certainly continue to work with your 
Representatives, Mayor Jones, and be as supportive as I 
possibly can. We have been hit pretty hard in North Carolina, 
too, so I can--and I have some rural parts of my congressional 
district that are suffering, but I am not sure to the extent 
that you have described today.
    So, Mr. Chairman, I yield back.
    The Chairman. With the indulgence of the members, the 
gentleman from Michigan has been here from the start. And if 
there is another area of the country that has taken a very big 
hit, it is Michigan. So, with the members' indulgence, I am 
going to recognize our colleague from Michigan, Mr. Peters, for 
5 minutes.
    Mr. Peters. Thank you, Mr. Chairman.
    I appreciate you yielding the time.
    And I would like to thank both Mayor Jones and Director 
Johnson for your testimony here today, and particularly thank 
Congressman Cardoza for your work on this bill. I couldn't 
agree with you more, that for many communities, communities 
that I represent as well in Michigan, the effect of this 
economic crisis is indeed just as disastrous as a flood or a 
hurricane.
    Michigan has had one of the highest foreclosure rates in 
the country for years now, not a recent phenomenon but for many 
years, and the rate of foreclosure in the Detroit metropolitan 
area has been consistently in the top 10 in the Nation. 
However, unlike some other areas where the foreclosure rate is 
due primarily to a burst in the housing bubble or steep 
increases in housing prices, the foreclosure problem in 
Michigan has been primarily caused by very high levels of 
unemployment.
    From May 2008 to May 2009, the State of Michigan has lost 
more than 300,000 jobs. And the unemployment rate now for the 
entire State is at 14.1 percent, the highest in the Nation. The 
University of Michigan economists have predicted that Oakland 
County, which I represent, is going to lose another 25,000 jobs 
this year. In fact, just about 3 weeks ago, we had the 
announcement from General Motors that 3 plants are being closed 
in my district, 7,000 jobs just in those 3 plants, not 
including the auto suppliers and all the other jobs.
    So I know that this committee and the Obama Administration 
have come up with a number of very important housing programs 
to help homeowners who are facing foreclosure because of 
housing price declines, but I am worried that not enough is 
being done to help communities and families who are affected by 
the foreclosure crisis in places like Michigan where the 
biggest contributing factor is not subprime mortgages or 
balloons coming due but simply a lack of jobs. So that is why I 
am certainly very supportive of the efforts of this bill and 
Mr. Cardoza's efforts to target more government assistance to 
those areas that need it most.
    I do have some questions about the formula, if I could get 
Mr. Cardoza's attention, please. A formula in this bill is that 
while most congressional districts in Michigan would likely 
quality of life under the criteria that you have chosen, there 
are other districts in Midwestern States, like Ohio, Indiana, 
and Illinois, that may not benefit despite the fact that they 
have also been impacted a great deal as a result of dislocation 
in this economy and rising unemployment rates. They have lost 
jobs, and foreclosure rates are in the top 10.
    Is there any effort to refine some of those criteria? And 
certainly I would like to work very closely with your office in 
refining some of the criteria to make sure areas in the 
Midwest, like Michigan, that may have had a longer experience 
of decline in housing prices and not the steep drop, but 
nevertheless they are suffering a great deal, would qualify?
    Mr. Cardoza. If the chairman would let me respond?
    The Chairman. Absolutely.
    Mr. Cardoza. I totally agree with the gentleman. And my 
purpose today, we purposefully labeled it a discussion draft 
because, frankly, we don't know the best way to do this.
    We want to include the communities that need to be 
included. Certainly, we don't want this to become a grab bag, 
but we want it to be focused on the areas that are most in 
distress. And yet, we wanted to get--because I don't want other 
areas to be like ours that have been waiting for 3 years to get 
the recognition.
    And so we have not come up with the perfect method to 
allocate the dollars, and we really leave that--we had to put 
something in the bill to start the discussion, but I am going 
to leave it to the chairman and this committee to figure that 
out, because these are tough challenges and money is finite 
around here. So I thank the gentleman for his question.
    Mr. Peters. Thank you for the response. I look forward to 
working with you.
    And, Mr. Chairman, as we refine some of the criteria, I 
appreciate that effort.
    The Chairman. The gentleman from California, it was his 
idea. We all have a lot of ongoing responsibilities. Our staff 
was glad to work with him, and this needs some further 
refinement. We will need a decision at some point from somebody 
as to what resources are available, and then once we know that, 
we will try to divide them up.
    I have said, and I have mentioned it to others, that one 
potential source for some help here, we are getting TARP funds 
repaid at a faster rate and in more dollars than we thought. We 
are getting a profit on the TARP funds to some extent from 
interest and dividends, and I am exploring what we might do to 
deal with that. And I think there is some economic justice in 
taking the money that originally went to keep the banks 
functioning and dealing with some of the problems that the 
banks caused.
    Let me just say, at this point, I think we will be able to 
accommodate our other three members when the vote starts. We 
will try to do that, if everybody sticks to 5 minutes. The 
gentleman from Kansas.
    Mr. Moore of Kansas. Thank you, Mr. Chairman.
    I will be very brief. And I apologize to the Chair, to the 
members, and to the witnesses for being tardy in getting here. 
But I have read the statements of the witnesses, and I 
certainly agree with my colleague who talked about not only the 
situation we are facing in our country, but in California, 
Alabama, and Michigan, there has certainly been a 
disproportionate share of suffering there as a result of some 
of what has happened.
    And I will just say that I want to work with my colleagues, 
too, to make sure that the people who have suffered mightily 
receive some additional help, because the unemployment rates, 
the foreclosure rates that you all have talked about, are 
something that is not sustainable. So we need to make sure that 
we take care of the people who suffered the very worst in our 
whole country, but the people--additional help for those folks 
who have suffered the worst. And I am going to, Mr. Chairman, 
with your permission yield back my time to the other members 
who were here and heard the testimony of the witnesses.
    The Chairman. I thank the gentleman.
    The gentleman from Texas, and then we will get to the 
gentlewoman from Ohio.
    Mr. Green. Thank you, Mr. Chairman. And I will probably 
yield back time as well.
    I want to apologize for my late arrival. I have been in 
Homeland Security, and we have had a markup all day today.
    I support the concept of an economic disaster area. I think 
that it provides us an opportunity to focus on giving to areas 
of the country that are in dire straits. There may be some 
things that we need to do to tweak it, but the concept seems to 
be pretty sound. We know that there are people who need help. 
This becomes a vehicle by which we can accord the help that is 
needed. So if we need to tweak it, I say, let's tweak it. But I 
don't think we should abandon the concept. And I yield back the 
balance of my time.
    The Chairman. The gentlewoman from Ohio.
    Ms. Kilroy. Thank you, Mr. Chairman.
    And thank you, Mr. Cardoza, for putting this issue before 
us. I also want to thank the witnesses for taking your time to 
travel here to present the information, to let those of us from 
other parts of the country understand what is going on in your 
world.
    I am from Ohio, and like the gentleman from Michigan, Ohio 
also has experienced a decline. But unlike maybe different from 
the sun coast or the central coast, or not caused by a 
hurricane, not caused by boom or bust, but really a longer and 
slower but nevertheless very significant decline, decline in 
jobs from the steel industry from a number of years back, now 
being hit hard with the auto industry. And, frankly, a 
migration in many instances of people leaving the State in 
search of other opportunities and a high unemployment rate and, 
in my community, an extremely high rate of foreclosure. 
Communities like Cuyahoga County, the City of Cleveland, home 
prices are incredibly low. And foreclosed properties are 
bringing down that; we are in that concentric circle problem 
that the chairman described.
    So I am glad that we are thinking about this and trying to 
figure out what the best vehicle is to provide help to the 
communities that need it. And I am glad that you helped me 
understand what is going on in your community.
    I yield back.
    The Chairman. I thank all the members. We are taking this 
seriously. We have a money problem, and that is why I mentioned 
taxes before. The problem we have is there are a lot of good 
reasons. To spend some of the money makes people nervous. 
Raising the deficit makes people nervous. We are in the classic 
dilemma here which was first expressed to me 40 years ago by an 
older politician in Boston who was surprised at my naivete of 
what I thought was an inconsistency. And he said, ``Hey, kid, 
ain't you heard the news? Everybody wants to go to heaven, but 
nobody wants to die.'' Spending the money is going to heaven; 
finding it is dying. But we are going to make a serious effort 
to do this. There is TARP money. There are other sources of 
funds.
    The gentleman from Alabama correctly pointed out, we are 
talking about something of limited duration. My sense would be, 
and it is certainly the hope, and there are problems with those 
parts of the country that may get it slower but that, by the 
end of 2010, we should be looking back on this. So we are 
probably talking about something of the duration of less than 2 
years. And, as I said, it has two components: as aid to those 
areas of government that have a problem; and as aid to the 
individuals in the foreclosure, as Mr. Peters and others 
mentioned. We will try. We will be working on trying to see if 
there is an allocation we can work with. Mr. Cardoza and others 
have taken that issue. The gentleman from Alabama was being 
very forthcoming in his bipartisanship here. And I think you 
will have a sincere effort.
    And let me just say this to you, that I counted about 15 
members who were in and out. It is Friday afternoon, and we 
have other things to do, but I will tell both witnesses you 
have not wasted your time by being here, and there are staff 
members here as well. You have made an impact, and I promise 
you that there will be some serious follow-up.
    The gentleman from Alabama.
    Mr. Bachus. I would like to make two points. One is that, 
as we do this, if as we expand that definition or the criteria 
and make it more inclusive, it actually will diffuse it more. 
And so sometimes I think it is more practical to concentrate 
it.
    The Chairman. If the gentleman would yield, it will take 
some constraint. Nobody in America is dancing these days about 
the economy, but I think it is going to be incumbent on some of 
us to recognize that some places are hit much harder than 
others and hold back and defer.
    Mr. Bachus. Particularly when, in this situation, you have 
a whole valley, and it is a drought, and it is a series of 
things.
    And, second, I will say, I think this is somewhat analogous 
to when we all were on TV, and we saw New Orleans and what was 
happening. We felt, my gosh, you know, that can't happen here. 
In this, you know, unfortunately for you, the TV cameras are 
not trained there every day. I think if they were, people would 
be demanding a solution.
    The Chairman. With that, the hearing is adjourned.
    [Whereupon, at 2:44 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             June 19, 2009

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