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




   THE SILENT DEPRESSION: HOW ARE MINORITIES FARING IN THE ECONOMIC 
                               DOWNTURN?

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 23, 2009

                               __________

                           Serial No. 111-89

                               __________

Printed for the use of the Committee on Oversight and Government Reform







  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform






   THE SILENT DEPRESSION: HOW ARE MINORITIES FARING IN THE ECONOMIC 
                               DOWNTURN?

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 23, 2009

                               __________

                           Serial No. 111-89

                               __________

Printed for the use of the Committee on Oversight and Government Reform






  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ------ ------
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director










                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 23, 2009...............................     1
Statement of:
    Morial, Marc H., president and CEO, National Urban League; 
      Janet Murguia, president and CEO, National Council of La 
      Raza; Lisa Hasegawa, executive director, National Coalition 
      for Asian Pacific American Community Development; 
      Jacqueline Johnson-Pata, executive director, National 
      Congress of American Indians; and Harry C. Alford, 
      president and chief executive officer, National Black 
      Chamber of Commerce........................................   141
        Alford, Harry C..........................................   202
        Hasegawa, Lisa...........................................   164
        Johnson-Pata, Jacqueline.................................   178
        Morial, Marc H...........................................   141
        Murguia, Janet...........................................   151
    Skinner, Raymond A., secretary, Maryland Department of 
      Housing and Community Development; James H. Carr, chief 
      operating officer, National Community Reinvestment 
      Coalition; and Christian E. Weller, Ph.D., senior fellow, 
      Center for American Progress Action Fund...................    40
        Carr, James H............................................    54
        Skinner, Raymond A.......................................    40
        Weller, Christian E......................................    96
Letters, statements, etc., submitted for the record by:
    Alford, Harry C., president and chief executive officer, 
      National Black Chamber of Commerce, prepared statement of..   204
    Carr, James H., chief operating officer, National Community 
      Reinvestment Coalition, prepared statement of..............    56
    Hasegawa, Lisa, executive director, National Coalition for 
      Asian Pacific American Community Development, prepared 
      statement of...............................................   167
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California:
        Black Chamber of Commerce study..........................   216
        Minority report entitled, ``The Role of Government 
          Affordability Affordable Housing Policy''..............     9
        Prepared statement of....................................    37
    Johnson-Pata, Jacqueline, executive director, National 
      Congress of American Indians, prepared statement of........   180
    Jordan, Hon. Jim, a Representative in Congress from the State 
      of Ohio, information concerning PLAs.......................   298
    Morial, Marc H., president and CEO, National Urban League, 
      prepared statement of......................................   144
    Murguia, Janet, president and CEO, National Council of La 
      Raza, prepared statement of................................   153
    Skinner, Raymond A., secretary, Maryland Department of 
      Housing and Community Development, prepared statement of...    42
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York, prepared statement of...............     4
    Weller, Christian E., Ph.D., senior fellow, Center for 
      American Progress Action Fund, prepared statement of.......    99

 
   THE SILENT DEPRESSION: HOW ARE MINORITIES FARING IN THE ECONOMIC 
                               DOWNTURN?

                              ----------                              


                     WEDNESDAY, SEPTEMBER 23, 2009

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10;03 a.m. in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Issa, Cummings, Kucinich, 
Tierney, Clay, Watson, Lynch, Quigley, Kaptur, Cuellar, 
Bilbray, Jordan, Flake, Chaffetz, and Luetkemeyer.
    Staff present: Beverly Britton Fraser, counsel; Kwane 
Drabo, investigator; Jean Gosa, clerk; Velginy Hernandez, press 
assistant; Adam Hodge, deputy press secretary; Carla Hultberg, 
chief clerk; Marc Johnson, assistant clerk; Phyllis Love, 
Christopher Sanders, and Alex Wolf, professional staff members; 
Mike McCarthy, deputy staff director; Leah Perry, senior 
counsel; Jason Powell, counsel and special policy advisor; 
Leneal Scott, IT specialist; Shrita Sterlin, deputy director of 
communications; Ron Stroman, staff director; Lawrence Brady, 
minority staff director; John Cuaderes, minority deputy staff 
director; Rob Borden, minority general counsel; Jennifer 
Safavian, minority chief counsel for oversight and 
investigations; Frederick Hill, minority director of 
communications; Dan Blankenburg, minority director of outreach 
and senior advisor; Adam Fromm, minority chief clerk and Member 
liaison; Kurt Bardella, minority press secretary; Benjamin 
Cole, minority deputy press secretary; Kristina Moore, minority 
senior counsel; and Mark Marin, minority professional staff 
member.
    Chairman Towns. The committee will come to order.
    Good morning and I thank all of you for being here.
    Our Nation faces the most daunting economic downturn since 
the Great Depression. One year ago, many of our Nation's 
largest and oldest banks teetered on the edge of collapse. The 
value of businesses and personal net worth plummeted as the 
Stock Market tumbled. In turn, companies downsized or closed 
their doors, leaving millions standing in unemployment lines, 
desperate for work.
    Home prices plunged and exotic home loans ballooned, 
creating sticker shock for many homeowners. Americans began to 
lose their homes to foreclosures at a terrible pace. In 
response, Congress extended unemployment benefits, created 
programs to preserve home ownership, and passed a massive 
economic stimulus program to retain and produce jobs.
    While our economy is still fragile, there are some signs of 
improvement. But as our Nation lays down the tracks of economic 
revitalization, we must be sure that every American has boarded 
the train headed toward recovery.
    Unfortunately, recent reports indicate that not only are 
many racial and ethnic groups being left behind, but many never 
received a ticket to board the recovery train. And that is the 
crux of our problem.
    For most racial ethnic minority groups, the great recession 
is, in reality, a great depression. People of color were worse 
off before the start of our Nation's economic downturn and have 
been losing their jobs and their homes at a faster rate ever 
since. Disparities in unemployment cut across age and gender 
lines, particularly among African Americans and Hispanics. And 
this is even evident when education is taken into account.
    The national unemployment rate is 9.7 percent. African 
American unemployment is 15 percent, and Hispanic unemployment 
is at 13 percent. In my home State, the unemployment rate for 
African American residents of New York City rose four times as 
fast as the jobless rate for Caucasians between the first 
quarter of 2008 and the first quarter of 2009.
    A similar difference is seen in home foreclosures, which 
are impacting minority groups at a far higher level than the 
national average. It appears that African Americans and 
Hispanics are far more likely to have higher-priced mortgages.
    As indicated in a report by the Center for American 
Progress, when borrowing from 14 of the Nation's top banks, 
such as Bank of America and Wells Fargo, in 2006, 17.8 percent 
of Caucasian borrowers were given higher-priced mortgages while 
30.9 percent of Hispanics and a shocking 41.5 percent of 
African Americans received them.
    There is evidence that African Americans and Hispanics may 
have been targeted for those pricier loans. I was appalled to 
learn of affidavits filed by former Wells Fargo employees which 
indicate that these loans were routinely called ``loans of mud 
people'' or ``ghetto loans.'' If true, and if this kind of 
reprehensible practice was widespread, it indicates the need of 
congressional reexamination of financial services regulations 
in general, and the home mortgage business in particular.
    Let me conclude by saying I look forward to hearing 
testimony on policy solutions that can ensure that all 
Americans see real economic recovery. For example, does the 
road map to equitable recovery include a further extension of 
unemployment benefits or stricter provisions within the 
mortgage modification program to ensure that banks are properly 
modifying the mortgages of all eligible homeowners?
    Again, I want to thank the witnesses for appearing today 
and I look forward to hearing your testimony.
    And just before I yield to my ranking member, in addition 
to receiving the testimony of the witnesses before us today, 
the committee has received several statements for the record 
from an array of experts. These statements are authored by the 
Economic Policy Institute, Pugh Charitable Trust, and the Asian 
American Justice Center. These organizations represent vital 
organizations that stand at the front lines in serving minority 
communities and examining our Nation's recession.
    Without objection, I enter these written statements into 
the record.
    [Note.--The information referred to may be found at the end 
of the hearing.]
    Chairman Towns. I will now yield to the gentleman from 
California, Congressman Issa, the ranking member, who has been 
very, very involved in all of the issues of this committee.
    [The prepared statement of Chairman Edolphus Towns 
follows:]



    Mr. Issa. Thank you, Mr. Chairman.
    I, too, would like to ask unanimous consent that a document 
be placed in the record. It is the minority report entitled, 
``The Role of Government Affordability Affordable Housing 
Policy.''
    Chairman Towns. Without objection.
    [The information referred to follows:]



    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Chairman, in preparation for today's hearing I met with 
my staff and many of my staff felt that this was a no-win 
hearing for Republicans. And, in fact, if we run away from the 
crisis that is before us today, it would be a no-win hearing.
    The truth is that Republicans share no small blame for the 
economic turn down. We were in charge during a time in which 
policies, some of them predating us, proliferated. We were very 
much involved in watching an explosion of home values that led 
to a lack of affordability, that led to both government and 
non-government entities finding more and more clever solutions 
to try to make sure that somebody could still secure a home 
mortgage even if, in fact, it bordered on being a Ponzi scheme 
and certainly depended on a future gain in order to exit or 
refinance that property.
    But today the hearing is going to go far beyond that. It is 
going to go into some of the core problems that have existed 
for a generation. The 9.7 percent national unemployment rate, 
as compared to the 15 percent unemployment rate for African 
Americans, is not a new figure. We have failed to deal with the 
disparity of employment versus unemployment for all of my life.
    Today, I believe we need to begin the process of honestly 
recognizing whether it is home affordability, home foreclosure 
or, most importantly, access to real employment, to real jobs, 
and access for entrepreneurs in the minority community to get 
to the American Dream through access that this committee has 
authority over, and that is Federal contracts and the 
disbursement of funds including the stimulus.
    I believe this is the beginning of an opportunity for the 
chairman and the Democratic Members along with the ranking 
member and the Republican Members to come to grips with the 
fact that, until there are jobs in the inner city that pay 
well, that in fact are jobs created by real entrepreneurial 
activity, by real products and services the American people 
want, we will not deal with that.
    Many leaders in the community, including a former Member of 
this body, Jack Kemp, have often said that we also have to come 
to grips with the other side of the problem. We have to come to 
grips with, in fact, the family structure, and whether the 
government encourages families to stay together. Families that 
stay together do better, finish education, go on to have better 
jobs and better lives.
    Additionally, we have to recognize that education, more 
than anything else, is an indicator of employment in our future 
economy. In the past, many good jobs were available in the 
unionized industries of auto, steel, rubber and, even today, 
when construction times are good, lesser skilled, lesser 
educated workers willing to work hard and acquire skills can 
often go through internships and journeyman programs and become 
highly paid. All of those jobs and more are beginning to be in 
our rearview mirror and not before us.
    The jobs of the future depend on an education. Not just a 
high school education, and not an education that simply talks 
about feeling good about your community but, in fact, gaining 
real, tangible skills in computer sciences, in math and in 
those skills that allow the future jobs to be available to all.
    So, although this is not the Committee on Education and the 
Workforce, this is not in fact the Appropriations Committee, we 
do have a special role. We have an ability to set policy for 
government contracting and government spending that has in fact 
disadvantaged the small entrepreneurial businesses.
    In my home State of California, we have more Hispanics than 
we have African Americans. In the home I grew up in Cleveland, 
we had more African Americans than we had Hispanics. But one 
thing that you see in any inner city in America is, in fact, 
more small businesses, more businesses that have limited 
capital and are less likely to get government contracts unless 
the government changes how they put contracts together, how do 
they outreach to those communities and how, in fact, they 
debundle the large contracts that generally mean the small and 
minority businesses are given only lip service for second or 
third tier contracts.
    We do have that jurisdiction. We do have an obligation to 
hear the witnesses today and to take that next step on a 
bipartisan basis to make sure that we do not come back a 
generation from now talking about unemployment and lack of 
opportunity when, in fact, the largest single spender in 
American is, in fact, the Federal Government and we have done a 
poor job.
    So, Mr. Chairman, I ask the remainder of my opening 
statement be placed in the record and I look forward to us 
working together on these important issues.
    [The prepared statement of Hon. Darrell E. Issa follows:]



    
    Chairman Towns. Without objection and I thank the gentleman 
for his statement.
    Any other Members seeking recognition?
    We will now turn to our first panel of witnesses. It is 
committee policy that all witnesses are sworn in, so Secretary 
Skinner, Mr. Carr and Dr. Weller, please stand and raise your 
right hands.
    [Witnesses sworn.]
    Chairman Towns. You may be seated. Let the record reflect 
that they answered in the affirmative. You may now be seated.
    Mr. Skinner, we will start with you and then we will just 
come right on down the line. And the way it works here is that 
when you start out the light is on green. And then, it switches 
to yellow, and that means you have 1 minute left. And then it 
becomes red. And red, all over the United States, means stop.
    Mr. Skinner. Thank you.
    Chairman Towns. But let me introduce you first, though.
    Mr. Raymond Skinner has served as secretary of the 
Department of Housing and Community Development for the State 
of Maryland since February 2007 and previously held the same 
position from 1998 to 2003. As Secretary, Mr. Skinner manages 
Maryland's home ownership, mortgage insurance and small 
business assistance programs, as well as housing development 
and community revitalization programs.
    Prior to his appointment as secretary, Mr. Skinner was 
president and CEO of the Skinner Group, providing consulting 
services in affordable housing finance and community and 
economic development. He also previously served as director of 
the Prince George's County Department of Housing and Community 
Development and as executive director of the District of 
Columbia Office of Business Development.
    He comes to us with a tremendous amount of experience.
    Let me just introduce the others before we call on you, Mr. 
Skinner.
    Mr. James Carr is the chief operating officer for the 
National Community Reinvestment Coalition [NCRC.] It is an 
association comprised of 600 local development organizations 
across the country whose mission is to improve the flow of 
capital to communities and stimulate economic growth.
    In addition to his current position, Mr. Carr is a visiting 
professor at Columbia University in New York and has also 
served as an international advisor on financial modernization 
and housing finance to China, Mexico, Turkey and Columbia.
    We welcome you, Mr. Carr.
    Dr. Christian Weller is a senior fellow at the Center for 
American Progress as well as an associate professor of Public 
Policy at the University of Massachusetts in Boston. Prior to 
joining the center, he was part of the research staff at the 
Economic Policy Institute where he remains a research 
associate.
    He has also worked at the Center for European Integration 
Studies in Germany, and served in the banking sector in 
Germany, Belgium and Poland. Dr. Weller comes before us today 
representing the Center for American Progress Action Fund.
    We welcome you, too, as well, Dr. Weller.
    So now, Mr. Skinner, if you move forward with those rules 
that we set. Thank you very much. We are delighted to have you.

     STATEMENTS OF RAYMOND A. SKINNER, SECRETARY, MARYLAND 
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT; JAMES H. CARR, 
   CHIEF OPERATING OFFICER, NATIONAL COMMUNITY REINVESTMENT 
   COALITION; AND CHRISTIAN E. WELLER, PH.D., SENIOR FELLOW, 
            CENTER FOR AMERICAN PROGRESS ACTION FUND

                STATEMENT OF RAYMOND A. SKINNER

    Mr. Skinner. Thank you, Mr. Chairman, and good morning Mr. 
Chairman, Ranking Member Issa and members of the committee.
    For the record, my name is Raymond Skinner, secretary of 
the Maryland Department of Housing and Community Development. 
It is my pleasure to be here this morning representing Governor 
Martin O'Malley, Lieutenant Governor Anthony Brown and the 
people of Maryland.
    I am going to focus my testimony this morning on the impact 
of foreclosures on minority households and communities in 
Maryland. But I hope to have an opportunity to talk about some 
of the other issues that you raised in your opening remarks. I 
have provided my written testimony for the record.
    Today's topic is of grave concern to Governor O'Malley. No 
part of the State of Maryland has been immune from the 
foreclosure and subprime lending crisis. But it has hit hardest 
on the communities that are predominantly African American and 
Hispanic.
    Recent figures from Realty Trac find that Maryland has the 
12th highest rate of foreclosure events in the Nation and the 
situation in our State is worsening as a result of the troubled 
economy.
    Foreclosures in Maryland are highly correlated with race. 
Baltimore City and Prince George's County, MD's two majority 
minority jurisdictions, account for 26 percent of the State's 
population, but 42 percent of the State's foreclosure events, 
according to the Realty Trac data.
    As can be seen on the map on page 4 of my written 
testimony, 74 percent of the most severely impacted hot spots, 
and we refer to hot spots as those areas of concentrated 
foreclosures, 74 percent of the most severely impacted hot 
spots, neighborhoods, are, in fact, in minority communities.
    The economic implications of foreclosure are devastating 
and impact homeowners, lenders, communities and can lead to 
longer term social costs. Foreclosures cost Maryland $4 billion 
in 2007, with the majority of those costs concentrated in 
minority communities including $963 million occurring in Prince 
George's County alone.
    This crisis was set off by the resetting of the subprime 
and exotic loans. But now, the context is really changing. An 
increasing number of foreclosures are tied to prime loans, 
which is likely the result of unemployment and reductions in 
income. In Maryland, African American residents accounted for 
51 percent of unemployment claims in 2008, versus being only 30 
percent of the population.
    Securing access to safe mortgages for minority households 
is key because they represent the growth area in the State. 
Between 2000 and 2007, white households actually declined in 
Maryland while the number of minority households grew 
substantially.
    I am proud to say that our department is working 
aggressively on this front to open the door for home ownership 
but in a safe and sustainable manner. In 2007, 53 percent of 
the over 4,000 mortgage loans that we financed through my 
department helped minority households to purchase a home. We 
dramatically outpaced private financial institutions which 
provided, in 2007, just 30 percent of their mortgages to 
minority households according to the HMDA data.
    At the same time, we did a better job of keeping households 
in their homes. As of March 31, 2009, our single family 
portfolio delinquency rate was 6.4 percent, which was 
considerably less than the remainder of the country which, for 
that same period, was a little over 8 percent.
    The success of our effort to facilitate greater financial 
access to minority households, while at the same time having a 
lower delinquency rate, underscores that banks and brokers can 
do a much better job of providing sustainable access to equal 
credit.
    In June 2007, in response to the mounting foreclosure 
numbers, Governor O'Malley created a Homeownership Preservation 
Task Force which I co-chaired. The task force gave a number of 
key recommendations which led to, first of all, legislative 
reforms that increase the time between default and foreclosure, 
ban prepayment penalties on certain loans, required that 
lenders make assurance that a borrower can repay a loan, and it 
enacted greater penalties for mortgage fraud and made the 
foreclosure process more transparent and fair.
    The Washington Post described the bills that were passed in 
the Maryland legislature as one of the most sweeping 
legislative and regulatory reforms in the country.
    Second, new loan programs to help homeowners who got stuck 
in some of the exotic expensive subprime loans, to help them, 
these homeowners who got stuck in these loans. We came up with 
new lending programs to help them get out of some of those 
subprime loans.
    Third, we initiated consumer education that included 
establishment of a Maryland HOPE hotline and a Web site, as 
well as a statewide network of housing counseling agencies. We 
have helped to structure workshops that have proved effective 
in bringing distressed homeowners face-to-face with counselors 
and attorneys and been able to work out foreclosure 
modifications on the spot.
    Maryland's efforts are continuing. But today, as the crisis 
continues, we find ourselves with limited ability and we are 
seeking some Federal help in a couple of areas, including more 
funding for our counseling agencies and more support for State 
housing finance agencies in general, including the ability of 
GSE's to purchase our bonds.
    Thank you for the opportunity to testify and I would be 
happy to answer questions.
    [The prepared statement of Mr. Skinner follows:]



    
    Chairman Towns. Thank you very much.
    Mr. Carr.

                   STATEMENT OF JAMES H. CARR

    Mr. Carr. Good morning, Chairman Towns, Ranking Member Issa 
and other distinguished members of the committee.
    On behalf of the National Community Reinvestment Coalition, 
I am honored to speak with you today about the racial 
dimensions of the current economic crisis.
    Despite talk of a recovery, the U.S. economy remains mired 
in the worst economic crisis in more than half a century and 
even the most optimistic economists are expecting a jobless 
recovery. For most people, a jobless recovery is a meaningless 
statistic in the real world where families are struggling to 
pay their mortgage, buy food, afford health care, pay the 
college tuition for their children, or save to ensure that they 
can retire in dignity.
    Already median income has fallen to the lowest level in 
more than 10 years and poverty is growing at an alarming rate. 
In fact, a close examination of the fine print of the positive 
earnings news of many firms further dampens the enthusiasm for 
the coming recovery. Recent positive earning reports, for 
example, for large financial firms reveals that creative 
accounting, massive Federal subsidies and one-time asset sales 
are largely responsible for a lot of the good news. In fact, at 
the current pace, the total number of bank failures this year 
will likely be the worst year in the industry's history.
    The reason for the disappointing nature of the recovery is 
that foreclosures, which was the problem that imploded the 
financial and credit markets and the economy, continue to rise. 
More than 1.5 million families have faced foreclosure this year 
and at least another 1.5 million are heading that way. In fact, 
the Center for Responsible Lending estimates that as many as 12 
million more foreclosures may occur by the year 2012.
    This is not an equal opportunity economic crisis. The 
current crisis is having a disproportionately negative impact 
on communities of color in two ways.
    First, communities of color were the disproportionate 
targets for the most abusive and reckless predatory loans and, 
as a result, they are experiencing much higher levels of 
concentrated foreclosures.
    Second, they are the most negatively impacted by rising 
unemployment. Unemployment rates for Latinos, African Americans 
and Native Indians living on Native reservations, as was stated 
earlier, are either close to, or more than twice that for non-
Hispanic White households.
    Because African Americans and Latinos have comparatively 
few savings, they are poorly positioned to survive long-term 
unemployment. Potentially millions of African Americans and 
Latinos could find themselves falling out of the middle class 
and into poverty before this crisis is over.
    Current wealth disparities are not the result of market 
forces or the invisible hand of Adam Smith. Rather, they are 
the consequence of the very visible hand of discrimination and 
its legacy.
    The peddling of high cost and irresponsible loans 
disproportionately to communities of color is only the most 
recent manifestation of continuing bias against minorities in 
the financial markets. Excessive subprime lending in lower 
income communities was not the result of pressure placed on 
financial firms through the Community Reinvestment Act. It had 
nothing to do with lenders attempting to increase homeownership 
among minority families.
    The subprime market collapsed because regulation of that 
market was woefully inadequate and, in many respects, non-
existent. Almost every institutional actor in the home mortgage 
finance process played a role in the collapse, including the 
brokers, lenders, appraisers, credit rating agencies and 
investment banks. Together, these institutions created a toxic 
mix that percolated for years until it boiled over and 
overwhelmed not just the mortgage markets, but the entire 
financial system.
    Five specific remedies should be pursued to address this 
crisis and I address them in detail in my written testimony.
    First, more must be done to stem the foreclosure crisis. 
The administration's ``Making Home Affordable Program'' has a 
number of important incentives to encourage intransigent 
servers to participate. But it lacks sticks. It needs some 
sticks, such as bankruptcy reform that would cost the American 
public nothing but potentially save millions of households from 
foreclosure.
    Second, we need to restructure the financial system 
regulation to focus on the protection of consumers. Protecting 
consumers' rights is the best way to ensure avoiding systemic 
risk to the system. In addition, we need to make sure that the 
Community Reinvestment Act is expanded so as to ensure that all 
communities receive access, equal access, to safe, sound 
products.
    Third, communities that have borne a disproportionate 
impact of the current crisis should be prioritized for funding. 
That is not happening currently.
    Fifth, the Federal Government must more actively combat 
discrimination which is the largest barrier to economic 
mobility.
    In conclusion, let me just state that within the next 35 
years, minorities will constitute half of the American 
population. Yet, this fastest-growing share of the Nation's 
population are among the most least well-housed, have the most 
limited access to labor and financial markets, and are 
disproportionately isolated from quality education and 
healthcare, which are key to economic mobility.
    Globalization represents a competitive challenge for 
America in this century that we have never had before. If 
America is to continue to be an economic, political and 
intellectual superpower, it must move further into the 20th 
century by eliminating the old paradigm of discrimination.
    All Americans must be prepared for and allowed to compete. 
Succeeding in a new, globalized, highly competitive world is 
not just an option. It is an imperative.
    Thank you.
    [The prepared statement of Mr. Carr follows:]



    Chairman Towns. Thank you very much, Mr. Carr.
    Dr. Weller.

                STATEMENT OF CHRISTIAN E. WELLER

    Mr. Weller. Well, thank you very much Chairman Towns, 
Ranking Member Issa and members of the committee for inviting 
me here today to speak to you.
    I will make three points in my testimony.
    First, minorities have experienced sharper drops in 
economic security during the recession and those drops occurred 
from lower levels of economic security than was the case for 
Whites.
    Second, there are economic structures and not just personal 
differences that can explain the worst experience minorities 
have had in this recession relative to Whites.
    Third, public policy can help in many ways to level the 
playing field for minorities by pursuing strong and sustained 
growth in good jobs, support for wealth creation and greater 
efficiencies in key markets such as credit markets.
    The economic experience of almost all families during the 
recession has been dismal. The experience of minorities 
generally has been worse than that of Whites. The unemployment 
rate of Whites increased by 4.2 percentage points from the end 
of 2007 through the middle of 2009. In comparison, the 
unemployment rate of African Americans and Hispanics rose by 
more than 6 percentage points at the same time, 50 percent 
faster than for Whites.
    We also see family incomes and employer benefits 
disappearing faster for minorities than for Whites during this 
recession. Minorities are losing access to good jobs at a 
faster rate than Whites during the Great Recession.
    This faster decline came after minorities were already in a 
weaker economic position than Whites before the recession 
occurred. The unemployment rate for African Americans at the 
end of 2007, for instance, was 8.6 percent or more than twice 
the rate for Whites, who had an unemployment rate of 4.2 
percent at that time. The unemployment rate of Hispanics at the 
end of 2007 was also substantially higher than that of Whites, 
sitting at 5.8 percent.
    Incomes and earnings were generally much lower, poverty 
rates much higher and health insurance coverage rates lower for 
minorities than for Whites before the crisis even began.
    These compensation-related differences were further 
exacerbated by larger differences in household wealth. 
Minorities, for instance, have much lower homeownership rates 
than Whites, before and during the current crisis. In 2008, the 
homeownership rate for Whites was 75 percent compared to 47.4 
percent for African Americans and 49.1 percent for Hispanics. 
This is the lowest level since 2002 for Whites and African 
Americans and since 2004 for Hispanics. We also just learned 
that the homeownership rates during the crisis dropped the 
fastest for Asian Americans.
    We also see large differences in other forms of wealth, 
most notably in employer-provided retirement plans. African 
Americans had a pension coverage rate of 46 percent in 2008, 
Hispanics had a participation rate of 30 percent, compared to 
56 percent for Whites.
    Finally, the evidence also indicates that minorities 
regularly face obstacles when building wealth. This is 
especially true for African Americans. My colleague, Andrew 
Jakabovics, just published a study on the origination of 
highest-priced mortgages at the Nation's largest banks. He 
finds that 32 percent of African Americans with incomes above 
twice their areas median income had higher priced mortgages in 
2006 compared to 29 percent for Hispanics and 11 percent for 
Whites.
    This confirms my own findings that loan applications for 
minorities are more likely to be denied than those of similarly 
situated Whites, and that African Americans paid more for their 
loans than similarly situated Whites. Minorities enjoyed less 
economic security before the crisis started and their economic 
security deteriorated more quickly since the end of 2007.
    These differences are unlikely to be fully explained by 
differences in other characteristics such as age, education or 
occupation. In a new report that we released today from the 
Center for American Progress, we find the changes in the 
unemployment rate for minorities and Whites in smaller sub 
samples, for instance by education, age and gender, the changes 
in the unemployment rate are almost universally larger for 
minorities than for Whites. These figures do not tell the whole 
story, but they are indicative of continued structural problems 
in the labor market.
    What are those structural problems? Structural problems can 
include segmented labor markets whereby minorities are 
disproportionately represented in occupations and industries 
that pay less than occupations and industries where Whites are 
more prevalent, and similarly segmented housing markets and 
transportation.
    Structural problems can also include heavy reliance on 
education levels and wealth where, again, minorities tend to 
have larger obstacles than Whites to building wealth and 
obtaining an education.
    The final structural problem is racially biased practices 
such as credit steering and discrimination in hiring, housing 
markets and other services.
    Policymakers thus can pursue three separate policy goals to 
create a level playing field for minorities with respect to 
economic security.
    First, pursue income opportunities through, for instance, 
the continuation of the economic stimulus, speeding up some of 
the ``spend out'' of the money, but also the extending of 
unemployment insurance benefits which stabilize the loss of 
income among minorities.
    Long-term structural policies to help income would mean an 
inflammation-indexed minimum wage, an improvement to the earned 
income tax credit, and labor law reform to make it easier for 
minorities to join a union. Minorities would particularly 
benefit from unionization rates since they tend to benefit 
larger from unionization rates than Whites.
    Wealth building policies. This would make it easier for 
people to save money through, for instance, automated 
retirement savings plans, progressive tax benefits and lower 
cost savings options.
    And finally, emphasis on market efficiencies to eliminate 
some of the practices that we see in terms of credit steering. 
I think a first step would be to audit the banks that have 
received TARP money for their credit practices to see if credit 
steering is a persistent problem. Such an audit could be a 
condition before banks are allowed to return the TARP money.
    Thank you very much for this opportunity. I am happy to 
answer any questions you may have.
    [The prepared statement of Mr. Weller follows:]



    
    Chairman Towns. Thank you very much.
    Let me thank all of the witnesses for their testimony.
    Let me begin with you, Dr. Weller, and then come back to 
Mr. Carr.
    As we work toward economic recovery, certain minority 
groups are being left behind at a shockingly disproportionate 
level. Why is this occurring?
    Mr. Weller. Well, I think we are still trying to understand 
some of these problems. But, as I said in my testimony, there 
is a whole range of what I call structural problems. As Mr. 
Carr already indicated, discrimination is certainly one part of 
it. Segmented housing markets and lack of access to adequate 
transportation plays a role. Unequal access to education tends 
to play a role. There is a whole host of obstacles for 
minorities to participate equally in the labor market and I 
think we need to take a larger view of this.
    Let me give you one example. I think in the past we just 
simply crossed our fingers and said like, well, OK, if job 
growth happens, good things will come out of it. But if you 
look at the data from 2001 to 2007, Hispanics, for instance, 
had stronger job growth than, for instance, African Americans 
or Whites. But what happened was those were often very low paid 
jobs with a lot of insecurity and very low levels of benefits.
    So, job growth by itself does not necessarily create a good 
level playing field for minorities. We do have to address the 
unequal access to good jobs and I think that has to happen 
through structural policies. For instance, by passing the 
Employee Free Choice Act to make it easier for people to join a 
union.
    Chairman Towns. Thank you very much, Dr. Weller.
    Mr. Carr.
    Mr. Carr. Sure. I would agree with all of those statements 
and just add that those structural problems go beyond just 
education. They also include mobility, and physical mobility. 
The ability to access areas where employers are hiring.
    And when I say that, I talk about the fact that it is 
important to recognize how highly segregated African Americans 
are, and Latinos as well, and, therefore, isolated from the 
growth opportunities.
    So, it is the structural in terms of the education, the 
training, the marginal jobs that they hold which are many of 
the first eliminated when the economy turns down. But it is 
also economic mobility and it is one of the reasons why purging 
and breaking the back of discrimination in housing is so 
important so as to allow individuals to actually access 
opportunities for which they are prepared right now. They 
simply just cannot live in the neighborhoods of their choice.
    And let me just build on that because one of the things 
that is interesting about this foreclosure crisis is it is 
going to create ripple effects in terms of lack of access. So, 
for example, it is unfairly damaging the credit scores of 
individuals who were prepared for home ownership and now have 
lost their homes because of predatory products. And, as you 
know, credit scores are now used for everything from getting a 
home to getting a job. And, in addition, much of the wealth has 
been stripped from Black and Latino neighborhoods which now 
enhances or further erodes their ability to actually move to 
areas of opportunity.
    So, there are multiple repercussions of the current crisis.
    Chairman Towns. Thank you very much.
    Let me just sort of switch to you, Dr. Skinner, I mean Mr. 
Skinner. I want to call everybody Doctor this morning for some 
reason. I guess because the problem is so serious.
    To all witnesses, but I will start with you, Mr. Skinner. 
Are the current recovery initiatives targeted enough to help 
the communities that really are affected by this most? Are they 
targeted enough?
    Mr. Skinner. Well, the Recovery Act included a host of 
dollars going to different programs, including some programs 
like the extension of unemployment, food stamps and so forth 
that, I think, for the most part probably did target a number 
of minority communities.
    On the other hand, more of the jobs-related, the programs 
that are related to construction jobs, for example, and 
transportation and, in my area, in housing, those, as one of my 
colleagues indicated, are probably not likely to be the areas 
where there are a concentration of minorities where minorities 
really have access to those jobs.
    So, I think we can probably do a better job in terms of 
things like training programs and so forth to make sure that 
the minority communities in fact have access to the jobs that 
will be created through the recovery program.
    Chairman Towns. Thank you very much, Secretary Skinner.
    I now yield to the ranking member, Congressman Issa.
    But before I do that, let me just make an introduction. We 
have with us today from the Job Corps Chanika Disney. She is 
here. Raise your hand. And, of course, Thomas Ash is also with 
us and, of course, Sherrie Jonas is also with us. Thank you for 
attending, the Job Corps, and now I yield to my colleague.
    Mr. Issa. Thank you, Mr. Chairman.
    Secretary Skinner, the stimulus that was passed out of 
Congress here earlier this year, the Recovery Act, is covered 
under Section 3 for hiring and reporting. Do you feel that it 
is being strictly adhered to? In other words, could it be doing 
more to ensure that the numeric reporting and hiring is being 
strictly adhered to so that the stimulus would get into the 
minority communities and employ in the minority communities?
    Mr. Skinner. Well, I mean I can only speak for what we are 
doing in Maryland.
    Mr. Issa. Just speak to Baltimore. I am happy. [Laughter.]
    Mr. Skinner. In terms of the reporting, you know, we are 
just starting to actually get the Recovery Act money out on the 
street to hire the workers, for example, in the weatherization 
program. We have $60 million in the weatherization program. We 
have set up both training programs and programs working with 
our community colleges to target certain communities in terms 
of the ability to identify folks who are unemployed, 
underemployed, that we can sort of target into those jobs.
    And, I think so far, in terms of what we have done in 
particular, I believe that it is working. It is working well. 
The reporting requirements are just kicking in. The first 
report is due to OMB on the job creation numbers on October 
1st, and we have, in fact, created several hundred jobs at this 
point, the majority of those, at least in Maryland, again, and 
in Baltimore, have been to minority hires.
    Mr. Issa. Mr. Carr, could you maybe make it a little 
broader. Nationally, is that an area, a shortfall, that in fact 
Congress has mandated that all of our spending covered by 
Section 3, but particularly the stimulus, disproportionately, 
or at least proportionately, be targeted and historically that 
has not been the case. What about this time?
    Mr. Carr. Congressman, to my knowledge the best analysis of 
this subject was performed by the Corwin Institute at Ohio 
State University that focuses on race and poverty. And they 
make an excellent review of the bill.
    One of the things that they highlight is that when you look 
proportionally at the types of jobs that are likely to get 
funded with the Economic Stimulus Package, and then look at the 
types of jobs historically occupied by people of color, you see 
that there are vast variations by race ethnicity.
    And the point that they make is that, without specific 
targeting to specific neighborhoods, to specific communities, 
you just will not achieve any significant disproportionate 
increase in employment among disaffected minority----
    Mr. Issa. So, if I can followup, what I think I hear you 
saying is that even though Section 3 of the HUD act may be in 
use, ultimately, if the type of money in this or future 
stimulus is not targeted to those communities of highest 
unemployment. We can comply, but we are going to comply with 
jobs that tend not to benefit those communities.
    Mr. Carr. That is right. And what they point out is a host 
of support mechanisms also needed in order to create and 
sustain jobs and that is job training, basic education, access 
to jobs and creation of jobs in the green economy which are 
sustainable jobs.
    So, one of the points that they make is there is a 
difference between a job that pays you today and a job that 
pays you in the future. So, the recovery spending could stand a 
lot more targeting around jobs of the future, targeted on 
neighborhoods that are most disaffected and specifically around 
communities of color because there is not any specific 
targeting in that way that would lead that money----
    Mr. Issa. Following up one more time before I run out of 
time. What I think I hear you saying is, if we do another round 
of stimulus, we probably would be better off having a year's 
worth of training for people who are unemployable for the 
current jobs as a disproportionate amount of the stimulus.
    In other words, spend that year and those dollars getting 
people able to take the job the next year, not simply find some 
``we piddle around'' jobs for them to do for 1 year the way we 
are right now at our National Parks, where we have a huge 
amount of money, but it is just going to cause people to put 
hats on for the summer and then they are back to where they 
were. Is that a fair assessment?
    Mr. Carr. I would say a more coordinated training program. 
Some might last a year, some might last longer, but some might 
last a significantly less amount of time to gear up people for 
more sustainable jobs.
    Mr. Issa. Dr. Weller, I am going to take issue with one 
thing. I just want to understand, from a standpoint of today's 
hearing, dramatically increasing unionization in the inner city 
of hardcore unemployed individuals who lack skills is going to, 
in fact, benefit them? Is it not true that, in fact, if you 
want to create enterprise zones and bring people into the inner 
city, you have to attract people by competing favorably and if 
I heard you, you were simply saying unionization is a panacea?
    If that is the case, then auto, steel and rubber would not 
have, in fact, left Cleveland, Pittsburgh and the cities where 
I grew up where that used to be an alternative but they have 
gone to the non-unionized areas of the country and left behind 
my friends and classmates unemployed in Ohio.
    Mr. Weller. Well, there is----
    Mr. Issa. I am not disagreeing with your unionization 
pitch. I am just saying as to getting jobs to the urban America 
for minorities----
    Mr. Weller. There are many examples of good unionized 
companies. Harley Davidson, Southwest Airlines, Boeing, many of 
the television stations are unionized companies that do 
extremely well.
    The evidence, though, rather than talking about individual 
cases, if you look at the literature from the World Bank and 
you look at the economics literature, generally, unionization 
tends to go along with higher benefits, better benefits. It 
also tends to go with stronger productivity, largely because 
unions create a channel between employers and employees to talk 
about professional development and training.
    Mr. Issa. I have to stay on subject, ``The Silent 
Depression: How Are Minorities Faring in Economic Downturn?'' 
We are trying to focus on that today. I certainly want to focus 
on the economic model, but I just want to know, are you, how 
would you equate that to getting, encouraging people to make 
investments in areas and job training and new employees that 
historically they have not? Is it not true that, in fact, 
although unionization has its place, it has not been a panacea 
for these communities?
    Mr. Weller. Well, generally if you look at the data for 
minorities when it comes to unionization it is actually a huge 
bonus. In particular, Hispanics tend to gain the largest from 
unionization rates, specifically with the aspects of training.
    If you look at the construction industry, where Hispanic 
men, for instance, are disproportionately represented, they 
tend to have successful training programs, long-term stick 
training programs. They have the ways to bring people from 
unskilled jobs into a career track in that industry.
    Mr. Issa. Mr. Carr, my time is up, but you look like you 
want to answer your view on how we might encourage 
urbanization, urban employment in the future.
    Mr. Carr. Yes, I think that one of the things that we 
should be doing is gearing up much more aggressively for jobs 
of the future in a green economy. We have talked a lot about 
it, but I believe we are a long way from having actually 
identified what those growth sectors are and thought through 
how to connect communities, disenfranchised communities, to the 
job training and the education that is necessary to promote 
that.
    And many of the most distressed communities in America are 
the areas in which some of the most important green investments 
should be made. They have been overlooked. They are struggling 
with deteriorated infrastructure, Brownfields and other things.
    So, I believe a much more coherent policy around green jobs 
is essential and specifically focusing on what is the job 
training and the technical skills needed to employ individuals 
as well as, I will add, to actually own those jobs in the 
future. Not just to have a job, to own jobs which would also 
lead to promoting small business lending. So, it is not all 
about bringing companies in. It is about incubating and 
building jobs.
    Chairman Towns. The gentleman's time has long expired. 
[Laughter.]
    The gentleman from Texas, Congressman Cuellar.
    Mr. Cuellar. Mr. Chairman, thank you very much for having 
this meeting. I certainly want to thank our witnesses for being 
here.
    I agree, when you look at the numbers, they certainly are a 
telling story. White unemployment is 8.8 percent, Hispanic 
unemployment is 13 percent, African American unemployment is 15 
percent. You go with the same numbers. Also, one of the areas 
that I always look at is the dropout rate in our schools.
    In Texas, if I can use Texas as an example because I used 
to do the budget there for both public and higher education, 
for students to go in the ninth grade and as soon as they get 
to the 12th grade for Anglos or for Whites it was 27 percent 
dropout rate. For the African Americans, there was a 34 percent 
dropout rate. And then for the fastest growing minority in the 
State of Texas, the Hispanics, there was a 49 percent dropout 
rate. So, you have those large numbers who are dropping out.
    We are looking at current situations here but if you look 
at what is happening in our schools, then we can see that if we 
do not make some of those long-term and certainly some of the 
short-term structural changes, we are not going to get out of 
this particular situation.
    My question is, and I know that the family, parents have a 
role in making sure that our kids go out and go get an 
education and become productive citizens, and I know the role 
of the private sector, I am a big supporter of that, but 
looking at the Federal Government, could you all give me three 
things that are doable? You know, keep in mind, let us say that 
we want to get a good friend like Mr. Issa on board, something 
that is doable, because I know that some of the things are very 
difficult.
    What could we pass here in a bipartisan way that is doable? 
Could you all, Mr. Secretary, we will start off with you, could 
you give me three things that Congress could do to help address 
this; whether it is short term or long term, whether it is 
structural changes. Same thing, Mr. Carr and Dr. Weller, or 
whoever wants to go first.
    Mr. Weller. I am not sure whether I can say three things, 
but I think one of the education outcomes are intrinsically 
linked to housing situations, stability of housing. So, I think 
focusing on stopping the foreclosure crisis, the sharp rise 
that we have seen in foreclosures, and ultimately maintaining 
equal access to sustainable housing solutions, I think, is 
ultimately going to feed into better education outcomes.
    That goes back to what Mr. Carr and I have been saying 
about leveling the playing field through access to lower cost 
and sustainable mortgages, for instance. I think those kinds of 
financial regulations can ultimately feed into a more stable 
housing situation and more stable education outcomes.
    Mr. Carr. I would say that there are three things. One is, 
and I will go back to something that Congressman Issa said when 
he started his conversation about education being the primary 
tool for upward mobility which I completely agree with. But 
what I would say is this issue of concentrated property in 
segregation is really important.
    The Pugh Charitable Trust just released a study which 
really was mind-boggling. It concluded that individuals who 
live in high-concentrated poverty areas, even if they are 
middle or upper income, have a 50 percent chance for their 
children to experience downward mobility compared to people who 
are living in areas with low concentrated poverty. And 
concentrated poverty was defined as simply 20 percent or more.
    They found that between 1985 and 2000, almost half of 
African Americans lived in neighborhoods with more than 20 
percent concentrated poverty, which predisposes them heavily to 
downward mobility. That compares to 1 percent for non-Hispanic 
White households.
    So, dealing with this issue of residential segregation is 
really important and it is often missed in conversations on the 
economy. But it is absolutely essential. And it costs us 
nothing except to regulate fairness in the system.
    The other thing I would say is that I completely agree on 
the issue of connecting housing policy and education policy and 
I have written about it pretty extensively in my testimony. I 
believe particularly in an area of scarce resources, now is the 
time to actually leverage our investments in housing and in 
education so as to make sure that when we are spending on those 
expenditures, including transportation policy, that we are 
doing so in a way that gives adequate access to all three of 
those resources so as to promote economic development. And as I 
said, in my testimony I have discussed it at some length.
    And the third thing, I would go back to small business 
development. Most people think of big corporations and Fortune 
500's, but most Americans do not work for Fortune 500 
corporations. So, helping individuals become more 
entrepreneurial, I think, is one of the easiest steps to 
promoting economic vibrancy in distressed communities. And that 
means opening the doors to finance individuals who are already 
qualified, as well as giving additional training and support to 
individuals who could be qualified with little additional help.
    Mr. Skinner. I agree with my colleagues and just want to 
add that I think transportation is also very important in that 
mix. The nexus of housing, education, and transportation in 
terms of access to better opportunities, community access to 
jobs, and educational opportunities all kind of fit together.
    Mr. Cuellar. Thank you. Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much, gentleman from Texas.
    Mr. Luetkemeyer from Missouri.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    I would like to start with Mr. Carr this morning. You 
mentioned the Community Reinvestment Act, I believe, in your 
testimony. Otherwise, I think I picked up something like that. 
I was just kind of curious. The Community Reinvestment Act has 
been around for about 30 years and is supposed to be intended 
to help folks in disadvantaged areas of their cities and their 
communities to be able to have access to credit.
    What has been your experience? Has it been working? Does it 
need to be tweaked? Is it a total disaster? Is it a monumental 
success? Where would you classify it and what kind of grade 
would you give it and where would we need to go to improve it 
or do something different?
    Mr. Carr. Sure. Thank you for the question.
    I think that law is one of the most critical laws on the 
books to ensure fair access to safe and sound credit. And one 
of the things that I think is important in this current 
foreclosure crisis is to recognize that, according to the 
Federal Reserve Board, only 6 percent of these high-cost 
reckless loans that were the center of this foreclosure crisis, 
6 percent were attributable to loans that were regulated under 
CRA. The vast majority, almost 95 percent, were non-CRA 
regulated. And so I think that speaks volumes about the power 
of that law to make sure that lending is done in a safe and 
sound way.
    What I would say, however, is that a major weakness with 
the law is actually not the legislation itself, it is the 
enforcement of the law, which was very poorly enforced and, in 
fact has, going beyond the poor enforcement, has a lot of 
loopholes and exceptions and opt outs and, again, in my 
testimony I go through those.
    So, for example, lots of financial institutions that are 
covered under CRA get to choose, almost like they get to choose 
their regulators, they get to choose which products they 
actually report under CRA. This makes no sense at all. So, it 
allows them to establish affiliates and do the same kinds of 
reckless things that Wall Street firms were doing, and implode 
not just the credit markets, but destroy the wealth of American 
communities. So, we need to eliminate those.
    We need to bring under control of CRA institutions, the 
full range of institutions, bring under control credit unions, 
bring investment banks, bring all these institutions under, at 
a minimum to report what and how they are doing things because 
one of the things we have found is that when you shine a light 
on misbehavior, a lot of that misbehavior ends right there.
    So, a big part of expanding CRA is to expand the data that 
we are looking at so we can be able to better understand and 
detect where disparities are occurring. And so we can eliminate 
a lot of the debates that happen back and forth as to is 
discrimination occurring, no your statistics say this, ours say 
that, but you are not including credit score. Let us eliminate 
the debate. Let us put good data in place. Let us regulate 
those institutions in law and then let us require that the 
financial regulatory agencies actually do their jobs, which is 
not happening now.
    One of the reasons, I was just going to say, the Consumer 
Financial Protection Agency, one of the reasons we are very 
strongly supportive of that and supportive of including CRA in 
that entity, is so that you will have an agency whose whole 
focus and mission in life is to focus on making sure that 
consumers get products that help to promote their economic 
mobility.
    It seems that the financial system should be all about 
promoting the economic mobility of the American public. But 
instead, it really is about, and has been for now increasingly 
a decade, making profits regardless of what the impact is on 
the American public. And those days really must come to an end.
    Mr. Luetkemeyer. OK, my question is going to be, where is 
the, you know, your criticism is that it is not being enforced 
correctly and where do we need to go to get that more well 
done? I assume you said that to the new regulatory agency. Do 
you want to empower it? Is that, do I understand you correctly?
    Mr. Carr. That is right. It is currently under the 
authority of the Federal Reserve Board.
    Mr. Luetkemeyer. Right.
    Mr. Carr. And, similar to their authority under the 
Homeowner Equity and Protection Act, which was enacted in 1994, 
and the final regulations were not issued until 2008, it is the 
same kind of regulation for the Community Reinvestment Act 
where it is lax oversight and not significant review of banks.
    For example, 97 percent of all financial institutions get a 
passing grade under CRA. But 10 million American households are 
unbanked and as many as 40 million are underbanked. So, how can 
we have all banks doing such a great job?
    We are in the middle of the worst financial, the worst 
housing crisis since the Great Depression, yet 97 percent of 
the banks are passing their ratings right now. And there are no 
fair lending or discrimination cases that have been brought 
forward by those Federal agencies in the middle of this crisis 
wherein everyone knows unfair and deceptive lending in minority 
communities against persons of color is a major cause of the 
origins of this crisis.
    Mr. Luetkemeyer. OK, thank you. I can see that I have to 
ask shorter questions here.
    Chairman Towns. We will give you a second round, OK? We 
will give you a second round.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Chairman Towns. The gentleman from Missouri, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman. Thank you for conducting 
this hearing.
    Secretary Skinner, as noted in your opening statement, the 
State of Maryland reacted to the foreclosure crisis by passing 
legislation in 2007 including the Homeownership Preservation 
Task Force and the Homeowners Preserving Equity Initiative. 
Despite these programs, Maryland was recently ranked as having 
the 12th highest rate of foreclosure in the Nation.
    What is working and not working within Maryland to prevent 
foreclosures and at what point are your hands tied in providing 
assistance to troubled homeowners? Essentially, is there a 
certain point where the State can no longer help, but instead 
aid must come from the Federal Government or the lending 
institution itself?
    Mr. Skinner. Thank you for your question. I think, first of 
all, that we in Maryland have really done a terrific job in 
focusing on the issue and putting tools in place to help 
homeowners to stay in their homes.
    We started out by funding a network of housing counseling 
agencies. We advertised to get people who were behind in their 
mortgage to come forth and set up a hot line that they could 
call. And through that hotline we referred them to this network 
of housing counseling agencies to help provide advocacy for 
them in working with these services in trying to get their loan 
modified.
    I think that program has been very successful. We have 
counseled over 12,000 families over the last year and a half or 
so. We have actually saved and can document close to 7,000 
families from going into foreclosure.
    What is happening now, and certainly we are troubled by 
what we see, is the increase in the number of foreclosures in 
the State, but we really attribute that more to what is 
happening in the larger economy as opposed to what was 
happening originally and that is the subprime mortgages that 
were adjusting where the payment went up and so forth.
    But now, people are losing their jobs. People are getting 
cut back on overtime, they are losing second jobs and you know 
that margin is enough to make them not be able to pay their 
mortgage. So we are starting to see that effect. In fact, the 
mortgage bankers' data shows that prime mortgages are now, the 
majority of the foreclosures have gone from the subprime to 
prime mortgages. And again, I think that can be primarily 
attributed to the unemployment or reduction of income through 
various sources.
    Mr. Clay. Well, that will take me to my next question for 
Mr. Carr and Mr. Weller and each of you can try to answer it.
    According to recent reports by the Center for American 
Progress, the foreclosure crisis is estimated to affect close 
to 9 million homeowners over the next 4 years. An additional 
one in eight mortgages are currently delinquent or are in the 
process of foreclosure. That statistic does not include a 
number of homes that are in default but have not reached 
foreclosure status.
    The magnitude of the foreclosure crisis has gone beyond the 
realm of the subprime predatory lending market and has affected 
homeowners with prime mortgages who have lost jobs and income. 
What practical policy measures are needed to establish a floor 
for home foreclosures and slow the rate of the crisis? And, are 
loan modification programs working?
    Dr. Carr, you try to answer as briefly as possible and then 
we will get Mr. Weller to also respond.
    Dr. Carr. Sure. The loan modification programs are not 
working largely because servicers and incentives, financial 
incentives, are at odds with both the investors and the 
borrowers. And so, despite the fact that the Making Home 
Affordable Program has a number of incentives, those incentives 
do not begin to rival the financial incentives the servicers 
have to taking a loan into foreclosure.
    Most servicers get a fee based on the outstanding 
principal, I mean, based on the total loan volume that they are 
servicing. So, for example, one of the things that is not done 
is forgiving principal balances. That is one of the major 
things that would create a sustainable loan but it is done in 
less than 10 percent of all cases.
    I say it is out of step with the interests of the investors 
because the loss of severity now in foreclosed loans is more 
than 60 percent. The loss is 10 times greater on a loan that 
goes to foreclosure versus that modified. So we need some 
sticks.
    One of the sticks would be to reform the bankruptcy code, 
as least on a temporary basis, to allow consumers to go to 
Bankruptcy Court to deal with that problem. That would serve as 
an incentive not just for those who actually go, but it would 
serve as an incentive for servicers to understand that a third 
party will have an opportunity to modify the loan in a 
reasonable way if they choose not to. So, that is one of the 
quickest things, I think, that could be done.
    Beyond that, I would just say that a nuance problem with 
this crisis is that more than 60 percent of the foreclosures 
now are actually being driven by unemployment and loss of 
income which makes modification much more difficult, and that 
suggests an even broader role for Federal intervention.
    Mr. Clay. Thank you.
    Dr. Weller.
    Mr. Weller. Well, I think clearly that bankruptcy reform is 
the first step. I think that is the quickest way of wielding 
that stick that Mr. Carr talks about.
    But I think we are losing a little sight of the fact that 
we now have a credit quality problem and that is largely driven 
by what we see in the labor market and that requires us to 
focus on strong and good job growth, that means continuing the 
stimulus, extending unemployment insurance benefits, but then 
also making sure that we make sure that the new jobs that are 
created are good jobs either through job training programs, 
through a higher minimum wage, through earned income tax 
credits, and through an easier way to join a union.
    Mr. Clay. Thank you so much.
    Mr. Chairman, I yield back.
    Chairman Towns. Thank you very much.
    I now yield to the gentleman from Ohio, Congressman 
Kucinich.
    Mr. Kucinich. Mr. Chairman, thank you very much for holding 
this hearing.
    I think it is really important to ask how minorities are 
faring in the economic downturn because those of us who 
represent constituencies of many different races and ethnic 
groups have seen the pervasive effects of policies on Wall 
Street. There is a certain amount of unemployment that is 
necessary for the proper functioning of the economy, which has 
seen the systematic discrimination against people of color on 
lending issues, it goes back a few generations.
    And now we are starting to see the effects of economic 
policies that, for those who have generally been struggling at 
the lower end of the social economic strata, this economy has 
increased its brutality.
    I just want to go back over some territory here, Mr. 
Chairman.
    Many of you will remember, especially those of you who 
started in politics many years ago, there was systematic 
redlining going on, that all across America there were people 
who did not get access to loans. And it was because it was 
based on color more often than not. When that was discovered, 
the Community Reinvestment Act was brought forward.
    Now, when I was mayor of Cleveland, we were one of the 
first cities to use the Community Reinvestment Act to force 
lending institutions to put money back into the communities it 
got the money from. Because communities were being strip-mined. 
People would put their money in local institutions, and then 
those local institutions would take their money not only out of 
their community, but out of the country. And people would 
wonder, why could we not get money to fix up our homes or to 
fix our businesses? This was going on.
    So, the Community Reinvestment Act passed. But then a few 
decades later someone figured out, well, they could increase 
their community reinvestment profile with subprime loans. And 
they shopped those subprime loans in the black community in 
Cleveland. And they did it in a way that was extraordinary 
because when the subprime loans finally went belly up, you had 
vast areas in neighborhoods across my community where people 
lost their homes.
    Now, let me speak to this for a minute from a personal 
standpoint. I grew up in a family of seven children. My parents 
never owned a home. We were renters. And we kept moving as the 
family expanded.
    There was a lot of discrimination against big families who 
were renters because, if you did not own a home and you rented 
as a family group, people would just, they would even have ads 
in newspapers that said two children only. We had seven. So we 
kept moving as the family expanded. My parents could not afford 
a home. We ended up living in 21 different places by the time I 
was 17, including a couple of cars.
    I understand what that dream of home ownership is about. 
Because the biggest day in my life came when I was able to have 
my own home. I understand what it is like for people who 
finally say well, this is the biggest day in our life as a 
family. We are going to finally have our home.
    And then they find that dream is just pulled out from under 
them by somebody who is gaming the system and making a lot of 
money on it, and then the people lose their home as a result 
and then they are thrown into a rental market where they are 
paying more money often for substandard housing.
    So, you have a housing crisis as part of the economic 
crisis. You have a massive unemployment crisis. Unemployment in 
the inner city, I would guess, Mr. Chairman, that we do not 
even know what it is, because people stop reporting. I was in 
my sister Marcia Fudge's District for a Labor Day parade and 
people were calling from the street corners, ``Hey, help me get 
a job.'' I would venture to say that in some areas of the inner 
city the unemployment is probably over 30 percent.
    So, there is talk about a recovery. For whom? Who is 
recovering? Wall Street? Jobless recovery? What is a jobless 
recovery? I want someone to tell me, what is a jobless 
recovery? We have at least 15 million Americans out of work. 
You have massive numbers of people who are underemployed. And 
it is hitting the communities of color the hardest.
    So, we need to penetrate the truth of what is going on here 
and call it for what it is, a systematic economic 
discrimination. And if we do not address it here, we cannot 
address it for anyone.
    Mr. Chairman, we need a massive job program, put all of 
America back to work, and I am still a believer that a rising 
tide lifts all boats. But this tide, at this point, is not 
coming back.
    Mr. Cummings [presiding]. Thank you very much.
    Let me just ask this. Dr. Weller, you know, we are in this 
health debate right now trying to get health insurance and take 
care of the American people. And whenever I go to a meeting 
where I have a majority of African Americans and I ask them 
this question, how many of you all have attended a funeral or 
know of someone who died within the last year who, when you 
walked out of the funeral, you said to yourself ``they should 
not have died, if they had had health insurance'' or ``if they 
had been treated properly they would still be here.'' I 
guarantee you that I have never gotten less than 70 percent of 
the people to raise their hand. Ever. And I ask that question 
all the time.
    How important do you see this health insurance, health 
reform debate, I mean, this getting health insurance for folk?
    It is interesting; just let me throw this out. In the movie 
``Sicko,'' one of the things that they said in that movie that 
I will never forget, they said if you can leave some people 
hopeless, helpless and unhealthy, you do not have to worry 
about them rising up. And there will always be a divide between 
those who have and those who have not.
    And with that, would you answer that question?
    Mr. Weller. Sure. I think health care reform is critically 
important on many levels. The first one is, if you reform 
health care, meaning you make the system more efficient, you 
increase coverage, you actually reduce the cost increases, you 
do a number of things. The first thing you do is you improve 
economic security because people have to worry less about 
losing their homes, losing their limited savings, if there is a 
health emergency. So that is the first step.
    The second part is it will ultimately help to create more 
jobs because you make the cost of health care substantially 
more predictable and that is one of the things that 
entrepreneurs are looking at, the predictable costs of business 
into the future. So, by reining in the cost increases of health 
care, I think you are ultimately going to boost job creation 
through business creation.
    And, ultimately, you free up some resources at the 
government level, both at the State and the Federal Government 
level, because you are putting the government on the path to 
fiscal responsibility and thereby can focus on other priorities 
such as wealth creation, such as education and so on and so 
forth.
    Mr. Cummings. Dr. Carr, when you appeared before the Joint 
Economic Committee a month or two ago, you spent some time 
talking about foreclosure and this issue of bankruptcy reform. 
You are of the opinion that, and it sounds like you still are, 
that is the way to go.
    Does that really help people? Secretary Skinner and I had a 
forum, we have done it twice now, and it seems that we have 
been able to help a lot of people, literally hundreds, by 
bringing them together with their bankers. But we started 
running into problems when people have no job.
    I think somebody else, I think it was Dr. Weller, one of 
you all said that. And so, when you have the person who has no 
job and is just getting unemployment benefits, do you see that 
as a source for them? I mean, does that work?
    Mr. Carr. That is a really good question. It is a difficult 
sort of crisis which we are heading into because, even though 
the bulk of these foreclosures now are unemployment, it is 
worth recognizing that we have a whole new generation of 
problematic loans that will begin to reset next year called Pay 
Option and Interest Only.
    So we are not out of the woods on the old fashioned product 
driven foreclosure. We are just sort of, in some respects, in 
the eye of a hurricane. We are in a new phase, and the old 
phase is about to come back with yet a new generation.
    Let me go to that question. The reason I say we need more 
than bankruptcy is you are correct. Some people will lose their 
jobs but they will only lose their jobs for a month or two or 
three, not everyone will be long-term unemployed.
    We need a program that actually provides some type of 
moratorium as a bridge for people who are temporarily 
unemployed rather than having them thrown out of their houses 
during unemployment. And rather than focus on them being 
reemployed, they are focused on what do they do about this 
foreclosure that is pending. So we need a bridge, a moratorium 
for foreclosure.
    In other cases, people who are long-term unemployed for 
whom, you just cannot help them. Well, we need some type of 
rental intervention. Because one of the problems with the 
economy is not just the foreclosures, it is the loss of the 
value of the home that comes as a result of using foreclosure 
as a trigger for abandonment of that home.
    So, we need to find a way to keep people in their homes so 
that we are not having a twofold impact from the foreclosure of 
destroying home prices further because that is the real heavy 
hammer on this economy and on individual wealth.
    And then finally, we need a program that is more 
comprehensive, that gets those toxic loans out of the bowels of 
financial institutions. Because that is why they are continuing 
to fail, despite the fact that it is estimated that we are 
standing, the American taxpayers are standing, behind those 
financial institutions with $23.7 trillion. That is the 
estimate by the Special TARP Inspector General. And they are 
still failing.
    So, we need a way to pull those toxic assets out and, 
unfortunately, it cannot be voluntary now. We need a process 
that literally does that so that we can modify those loans in a 
sustainable way because we have millions more on the horizon.
    Mr. Cummings. Thank you.
    Mr. Tierney. I see my time is up.
    Mr. Tierney. Thank you, Mr. Chairman.
    Mr. Carr, just to followup on what you were saying. Do you 
have a vision on what that rental program would look like in 
the instance where you cannot save the foreclosure necessarily, 
but you want to find a way to keep people in there as tenants?
    Mr. Carr. Yes. Years ago, the Homeowners Loan Corp. in the 
Great Depression was established and I think that we need an 
entity that is very similar to that which would allow, for 
example, HUD to potentially take over and manage or have a 
master servicing contract for renters to allow individuals to 
remain in those homes until such time as they can be sold at a 
reasonable price and those individuals themselves are ready to 
relocate and/or to purchase a new home.
    But I think that the real key here, I have not thought 
about the details of it, but the real key is to avoid that 
abandonment of that property.
    Mr. Tierney. I appreciate that. It is the details that we 
are always looking for on that.
    Mr. Weller, let me ask you a question. I do a lot of work 
on credit cards which, I think the evidence shows are pretty 
much putting a squeeze on all communities and certainly not the 
least minority communities.
    On that, I think some of the research that we were looking 
at here shows that the average credit card interest rate for 
low income households and people of color are around 22 
percent, which is a full 10 percent greater than Caucasian 
families in many instances, at least the high income families. 
Eighty percent of African American households have credit cards 
that are indebted versus about half, 50 percent, of Caucasian 
households and the Latino communities falling right along in 
that 80 percent area.
    So, interest rates are keeping low-income people in this 
trap. We did some legislation recently which took care of some 
of the more egregious practices of credit card companies in 
terms of fees being added and things of that nature. But at 
that time, several of us made the argument that unless you do 
something on capping interest rates you are going nowhere 
because whatever the banks and lenders lose on reforming one 
aspect they are going to make up by jacking up the interest 
rates.
    Do you have an opinion as to whether or not a good usury 
rate would be in order here and that we ought to try to 
establish it and enforce it?
    Mr. Weller. Let me talk about consumer credit generally. 
What we find when we look at consumer credit generally, for 
Whites versus minorities, we find that there is credit steering 
in two ways. One is geared more toward minorities, who steer 
more toward the higher cost products such as credit cards, 
installment loans and others, such as pay day lending. And then 
once they are in that category, they tend to pay more even in 
that category than Whites, so there is a double whammy here.
    I think I am a little bit cautious on the usury side 
because it is very hard to legislate and regulate even just one 
aspect of the cost of a credit card. So what you end up playing 
is a game of ``Whack-a-Mole'' where you cannot raise the credit 
card interest rate, but then the credit card company will lay 
on different fees, shorten the grace periods and other cost 
items----
    Mr. Tierney. That end we took care of in the last piece of 
legislation. All they did was shift the costs over onto the 
interest rates. So, I get your drift there. But I think you 
have to close all the doors.
    Mr. Weller. Right. Well, one thing we have learned is that 
the credit card industry and other financial service providers 
are extremely innovative when it comes to making a buck off 
people. So, I think ultimately what we want to go for is some 
sort of comprehensive legislation and regulation and I think 
the Consumer Safety Product Commission idea is the right way to 
go because it is a more flexible tool to regulate credit 
products and actually create the economic mobility that credit 
is meant for in that role.
    Mr. Tierney. Well, I do not want to get into an argument 
with you about that. I hear what you are saying and I have 
talked to the people that are responsible for that legislation 
and the administration, and they are missing the boat. No 
matter what you do in terms of that type of regulation, they 
are going to make it all up on the interest rates unless you do 
something there.
    It looks to me, and you can tell me if I am wrong, it looks 
to me that these credit card companies just are not doing any 
underwriting anymore. The reason they steer them into the 
credit card thing is that they have it figured out. I can jack 
the interest rates up on you over there and I can then force 
you, bludgeon you, in Bankruptcy Court because you can no 
longer get out on that side.
    So, I just make that point. I will not belabor much longer 
than that. But, if we do not do something there, and we had 
laws related to that until 1978.
    Mr. Weller. Well, I think----
    Mr. Tierney. We go back to the Babylonian ages when we used 
to think that this was a bad thing to do, just to let people 
just keep jacking up the interest rate all they want and in 
1978 it was knocked down just because it was not similar from 
State to State.
    Mr. Weller. You can probably do a number of things, in 
particular on transparency. Just before you start a commission 
or something like that, you have to say on the credit card 
statement as a company, this is how much we charged to a total 
dollars last month, or something like that, rolling it all 
together in one----
    Mr. Tierney. They make disclosure laws on transparency.
    Thank you very much, Mr. Chairman. I yield back.
    Mr. Cummings. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman, and thank you for 
holding this hearing today.
    Welcome. I apologize that I was not able to be here for 
your full testimony but I have read it and we thank you for 
your service to our people.
    Let me ask you, what mechanisms or plans have you heard 
about or are involved with that would bring justice to the 
American people in the situation we are facing? That is the big 
question.
    The housing market meltdown is really at the heart of our 
financial crisis. And, as you have indicated, it is going to 
just continue to unwind. And the commercial real estate bust 
has not even hit yet. That will happen next year.
    The megabanks had a plan, a massive plan to exploit the 
American people and they did it masterfully. They made billions 
and billions and billions and billions of dollars, a lot of it 
tucked away in anonymous hedge funds and offshore accounts. 
None of those people are being brought to justice right now.
    Meanwhile, they did this by raiding home equity through 
high risk schemes which, as we know, are very imprudent, very 
irresponsible and fraudulent in large numbers of cases. They 
are now dumping their paper on the American people. The FHA, at 
Fannie Mae, and Freddie Mac and, even though they have gotten 
hundreds and hundreds of billions of dollars in TARP funds from 
the people of the United States, they are not doing mortgage 
workouts.
    Only about 15 percent they claim of the millions and 
millions of mortgages that are out there, you know, they are 
biting at the edges, but they do not really want to resolve it 
because the Government big basket will be there to absorb their 
bad paper.
    The workouts have been occurring, those that have been, the 
few that have been, at a snail's pace purposefully because 
these same institutions can make more money off of 
delinquencies. And tax losses, and short sales, and by rigging 
the auction process, as you have probably seen in your 
communities, by taking a home that is worth $80,000 and then 
auctioning it off for $10,000 or $20,000 and then keeping it on 
their books and booking the losses in the next tax year.
    So, you know, they did some of the worst things. They 
preyed upon people's hopes and many times people without 
attorneys getting involved in mortgage loans that were 
fraudulent. So, my big question is, are you; my problem is I am 
worried about our country. I do not see a big enough force out 
there that is an idea of the magnitude that they came up with 
to hold them accountable and bring justice.
    So, my question to you really is, are you aware of groups 
of mayors getting together or aggrieved parties in our country, 
and bringing forth litigation, aggressive litigation, before 
judges in several jurisdictions? Are you aware of civil rights 
cases being brought to the Federal court system to rein them in 
and to bring them to justice? Are you aware of what can be 
done? Are there ideas that are cooking out there through our 
State attorneys general or our State Departments of Housing and 
Community Development to rein in the securitization process?
    Are you aware of ideas that are out there bubbling up 
across our country to force accountability and restructuring of 
our banking system itself in order to bring accountability and 
to create a system that is more prudent and more favorable to 
prudent home lending in the future?
    What I am not hearing from the country, I am not hearing an 
idea big enough to offset what they are doing and what they 
have done. So I am kind of pushing you a little bit in the 
questioning. It is not enough just to say, well, the Federal 
Government will do some more affordable housing. I am for that. 
I keep thinking, is there any amendment we can offer to the 
CRA, the Community Reinvestment Act, where we get dozens of 
attorneys general, dozens of Housing and Community Development 
directors across this country, dozens of mayors to come 
together and say, this is what we need, this is not enough?
    We have to bring justice to the system. How do we get that 
justice? I wish I could say I believe this institution will 
bring it. I have my doubts. Maybe I will be surprised.
    What is bubbling up out there on the outside that is a 
sufficient counterforce to meet the real challenge before us? 
Are you aware of anything like that?
    Please, Mr. Skinner?
    Mr. Skinner. I will start. We talked about a number of 
things today including financial reforms and so forth. Let me 
just give you one specific example.
    You talked about lawsuits. The city of Baltimore has filed 
a lawsuit against Wells Fargo, essentially alleging what you 
might call reverse redlining. Instead of not doing loans in a 
certain area, what is alleged is that Wells Fargo, and not only 
Wells Fargo but many of the other lenders, did was really 
target minority communities for these bad loans, the subprime, 
exotic loans.
    And the data that the city has come up with, for example, 
shows that in 2006 Wells Fargo made high cost loans to 65 
percent of its African American customers versus only 15 
percent of its White customers. And I think you can see 
examples of that all over the country.
    So, this is kind of, I guess, the first ``shot over the 
bow,'' if you will, in terms of a city actually filing suit 
against a lender seeking some recompense in terms of what this 
has done, the cost to the city in terms of foreclosures, 
deteriorated, vacant, boarded up houses that you see spotted 
all over the city of Baltimore in Congressman Cummings' 
district. We see it all over. So, I think that is one example 
of a local government being very aggressive and going after one 
of these lenders.
    Ms. Kaptur. So have other local governments joined you in 
that suit as affiliated parties?
    Mr. Skinner. Not as far as I know. It is the city of 
Baltimore right now.
    Ms. Kaptur. I want to compliment you on that. That is the 
level of idea that needs to come forward and, even though 
justice will be meted out slowly in the court system, we need 
the best minds in the country. We need civil rights lawyers. I 
am so upset about the Department of Justice and the lack of 
civil rights staffing there. I can tell you in the white collar 
financial crimes division we should have over 1,000 agents. We 
have 140 over there right now.
    I tried to get an amendment, an Appropriations bill. I am 
just putting this on the record so people know, in order to 
increase it to 1,000. We had 1,000 white collar crime 
prosecutors over there and agents when we had the savings and 
loan crisis. Now we have 140 with this level of fraud and abuse 
and gaming of the system? That Department of Justice has to 
wake up. And I am sharing this because perhaps you will be in 
audiences where you can help make this happen.
    But I am very concerned that, I am hoping that the judicial 
system will be able to help us get justice as we tried to get 
it through here, the legislative branch. So, I compliment you 
on that.
    I know in our State, in Cleveland, Judge Boykle has thrown 
out several cases because, when individual plaintiffs have come 
forward, the large banks cannot produce the note, the mortgage 
note. And most people are leaving their homes without even 
understanding that they have legal rights to that, having that 
note produced, and that they do not have to leave their houses.
    It is hit and miss. There are a few places where this is 
happening, but systemically it is not happening.
    Mr. Chairman, I know my time has expired. But if any of the 
other witnesses wish to comment, I would greatly appreciate it.
    Mr. Carr. Congresswoman, the challenge you put before us in 
that question is extraordinary. And it is hard to know where to 
start.
    I would start by saying, first of all, much of what you 
describe, I think we should recognize that while it was bad 
behavior on the part of the financial institutions, they were 
allowed to do it. We have a regulatory system that is just 
allowing them to do it. And by allowing them to do it, it is 
actually incenting them to misbehave against the interest of 
the American public.
    To the extent that it is still happening, the first thing I 
would say is that we need to enact meaningful regulation of the 
financial system now. Today. This afternoon. We really need to 
do it, because the misbehavior continues. It is not like it is 
all in the past.
    Second of all, it is important to recognize that everything 
that those institutions did was not fraud. As bad as it may 
have been, if it is legal, it is not fraudulent. And that is 
one of the problems with a lot of the laws in that they allow 
for financial institutions to exploit, legally exploit, the 
public.
    A third thing is that, to the extent that they did exploit 
the public illegally, there is insufficient and inadequate data 
for individuals to partake in legal actions in any significant 
way. I mean, bringing a legal suit against a financial 
institution for discrimination in lending is extremely time 
consuming and very costly. Where do non-profit organizations 
get those resources? We just simply do not. Unless Congress 
decides they want to start appropriating them specifically for 
that action, which I think would be a very good idea.
    Ms. Kaptur. You come and see me on that.
    Chairman Towns [presiding]. Let me say to the gentlewoman, 
your time has expired.
    I think that what has been pointed out here is that as we 
look for reform for the financial system that we need to look 
at a structure that is going to give us some feedback because, 
whatever we do, they find a way to do something different.
    And I think we need to look at a structure that gives us 
information, as a board of some type, because whatever we do, 
they just find a way to do whatever they want to do and, of 
course, it is legal. And that is the issue that we have to 
address because we cannot continue to let this thing move along 
without being checked because people are being hurt.
    So, I want to thank the gentlewoman for her comments and I 
want to thank you for your statements and we look forward to 
continuing to work with you on making certain that the money 
gets to where it is supposed to go and help the people that it 
is supposed to be assisting. There is $787 billion out there 
floating, and we need to make certain that the money does what 
it is supposed to do, and that is our concern.
    So, I want to thank you, Dr. Weller, I want to thank you, 
Mr. Carr, and Secretary Skinner for your testimony. Thank you 
so much.
    We will now move to our second panel.
    We welcome our distinguished second panel. As with the 
first panel, it is committee policy that all witnesses are 
sworn in. So would you please stand and raise your right hands 
as I administer the oath?
    [Witnesses sworn.]
    Chairman Towns. You may be seated. Let the record reflect 
that all of the witnesses answered in the affirmative.
    Let me introduce all of the witnesses. We have Ms. Janet 
Murguia, president and chief executive officer of the National 
Council of La Raza, the largest national Hispanic civil rights 
and advocacy organization in the United States of America, 
which serves millions of people in education, health care, 
immigration, civil rights and economy policies and services.
    Of course, prior to joining La Raza as president and CEO in 
2005, she served in the White House from 1994 until 2000 as 
deputy director of legislative affairs and, ultimately, became 
deputy assistant to the President of the United States, which 
was Bill Clinton at that time.
    We welcome you, Janet.
    Mr. Marc Morial is the president and chief executive 
officer of the National Urban League, the Nation's largest and 
oldest civil rights group. He is the director of that 
organization. Prior to becoming President of the National Urban 
League in 2003, Mr. Morial previously served for 8 years as the 
mayor of New Orleans and was the president of the U.S. 
Conference of Mayors.
    Welcome.
    Ms. Jacqueline Johnson-Pata is the executive director of 
the National Congress of American Indians, the oldest and 
largest tribal representative organization which coordinates 
with other 250 tribal governments to inform the Federal 
Government and the public on policy issues affecting American 
Indians' tribal communities.
    Prior to joining the NCAI, Ms. Johnson-Pata served as 
Deputy Assistant Secretary of Housing and Urban Development in 
the Office of Native American Programs.
    Let me welcome you, Ms. Johnson-Pata.
    Ms. Lisa Hasegawa has been the executive director of the 
National Coalition for Asian Pacific American Community 
Development, for many years and we are delighted to have her 
with us as well. We look forward to your testimony today.
    Also on the panel is Mr. Harry Alford. He is the president 
and chief executive officer of the National Black Chamber of 
Commerce, which was incorporated in Washington, DC, in 1993 
and, we are delighted to have you on the panel today as well.
    So, what I will do is just go right down the line. I will 
start with you, Mr. Mayor, and just come right down the line, I 
think, just right down. So we start with you.
    Thank you so much.

STATEMENTS OF MARC H. MORIAL, PRESIDENT AND CEO, NATIONAL URBAN 
 LEAGUE; JANET MURGUIA, PRESIDENT AND CEO, NATIONAL COUNCIL OF 
LA RAZA; LISA HASEGAWA, EXECUTIVE DIRECTOR, NATIONAL COALITION 
 FOR ASIAN PACIFIC AMERICAN COMMUNITY DEVELOPMENT; JACQUELINE 
JOHNSON-PATA, EXECUTIVE DIRECTOR, NATIONAL CONGRESS OF AMERICAN 
  INDIANS; AND HARRY C. ALFORD, PRESIDENT AND CHIEF EXECUTIVE 
          OFFICER, NATIONAL BLACK CHAMBER OF COMMERCE

                  STATEMENT OF MARK H. MORIAL

    Mr. Morial. Thank you very much.
    Good morning, Mr. Chairman, and I want to thank you and the 
committee for the opportunity to testify on behalf of the 
National Urban League this morning, to talk to you about the 
disparate impact that this current economic crisis is having on 
African Americans and to share with you recommendations on how 
to address them.
    In the past year, this Nation came face-to-face with a real 
enemy, an almost unprecedented economic crisis of the likes the 
Nation has not seen in more than half a century. Our economy 
does have a certain elasticity built into it that gives many 
people the room they need to survive tough times. However, 
because of decades of disparities, many African Americans do 
not have the benefit of that elasticity.
    In plain language, there is no more give to give and many 
of our communities across the country are at the breaking point 
and face desperate circumstances if we do not take swift and 
certain action now.
    I do not say this to alarm or inflame. I am just stating a 
plain fact based upon experience that includes decades of 
service delivery in 100 communities across this Nation and 
verifiable research.
    We see in the faces of the people who come to us for help 
each year the pain that this economic crisis has wrought. We 
hear it in the voices of the men and women and families who 
seek jobs that are just not there. We feel it in the pain of 
those who come to us for help keeping a roof over their heads. 
And this experience is amplified and supported by empirical 
research.
    Our ``State of Black America'' Report demonstrates that the 
typical Black family in this Nation possesses less than 10 
percent of the net worth of the average White family. That 
almost one-third of all African American families have zero or 
negative net worth. And far, far, far fewer African Americans 
than Whites benefit from inherited wealth or assets.
    This is a snapshot. But what it illustrates is that African 
Americans, by and large, do not have the economic cushion that 
protects many from catastrophe when times get tough and the 
economy goes into a freefall.
    We are starting to see some hopeful signs that indicate a 
turning around. However, even if this is the case, it does not 
mean that the African American community is out of the woods. 
In fact, we believe, and our research shows, that there is a 
troubling trend which must be recognized and reversed.
    So, I share with you today the following. Median household 
income during the 1991 expansion, after the recession in 1991, 
increased. After the recession of 2001, even though there was 
an economic recovery, median household income of African 
Americans declined. So what I want to emphasize is that in the 
recovery in the 1990's, median household income increased. In 
the recovery of this decade, median household income decreased, 
declined.
    And, the 6-year decline in unemployment for African 
Americans during the 1991 expansion, or rather the increase in 
employment of African Americans during the 1991 expansion, was 
six times greater than that during the post-2001 expansion.
    Here is the point. African Americans made great strides in 
employment in the 1990's. In the recovery of the last decade, 
that improvement was, for the most part, nonexistent.
    The economic downturn of today has exacerbated those 
circumstances. So the unemployment rate in August rose to 9.7 
percent across the board. For African Americans, it exceeds 15 
percent.
    Our economists believe that the real unemployment rate, 
when you factor in those who are not looking, those who may be 
working part-time, those who were recently laid off and not yet 
looking for a job, is far higher than that. We could, in the 
Black community today, we think face a real unemployment rate 
of over 20 percent and in the White community exceeding 10 
percent.
    In fact, the current recorded unemployment rate for White 
Americans of 8.9 percent is extremely serious. But it is the 
same as the unemployment rate for Black Americans during the 
so-called recovery of the last several years that preceded this 
recession.
    When I released our Homebuyer Bill of Rights 2 years ago, 
the subprime crisis was stripping wealth from our communities 
and victimizing our most vulnerable citizens. I am not talking 
about deadbeats. We are not talking about people who are trying 
to get something for nothing. These were people who did 
everything they were asked to do. They work hard, they saved 
their money, they bought homes and they were victimized by 
unscrupulous lenders who pillaged their hard-earned dollars.
    Chairman Towns. Mr. Mayor, can you summarize? Your time has 
expired.
    Mr. Morial. Yes. Unfortunately, there are those who, 
instead of focusing on solutions, have tried to deflect blame, 
obfuscate the truth, and delay fixing the problem by claiming 
that the Community Reinvestment Act, Fannie Mae and Freddie Mac 
were somehow solely responsible for the subprime crisis. That 
is flat out false and we call it a weapon of mass deception.
    Just quickly, recommendations. I urge the Congress to focus 
on the upcoming reauthorization of the Workforce Investment Act 
to ensure that job training maximizes the opportunity for those 
who have been locked out and left out to enter into the new 
economy of the future.
    We recommend that the discussions about the green economy 
and the alternative energy expansion, that policies and 
incentives, be placed in the law so that those jobs do not by-
pass urban communties and inner city America.
    We also believe that the CRA, the Community Reinvestment 
Act, needs to be strengthened. Its enforcement needs to be 
taken seriously as a mechanism and as a tool for increasing the 
flow of capital, private capital, back into urban communities.
    I will be happy to share other recommendations with the 
committee later on or at any time in the future. Thank you.
    [The prepared statement of Mr. Morial follows:]



    Chairman Towns. Thank you very much, Mr. Mayor.
    Janet Murguia, yes.

                   STATEMENT OF JANET MURGUIA

    Ms. Murguia. Thank you. Good morning.
    NCLR has been committed to strengthening America by 
promoting the advancement of Latino families for more than four 
decades now and I would like to thank Chairman Towns and the 
committee for inviting me to participate in this timely and 
important hearing.
    The number of Americans losing their jobs, homes and 
financial safety net is tremendously unsettling. Circumstances 
for Latino, Black, Asian and Native American families are even 
more disheartening. Without a targeted strategy, our 
communities are in danger of falling further behind the 
mainstream.
    Since the recession began, more than 1 million Latinos have 
lost their jobs. That is the largest increase in unemployment 
of any group. And the worst is yet to come. Greater than 
400,000 Latino families are predicted to lose their homes to 
foreclosure this year alone. These are staggering figures that 
call for a bold response.
    We urge Congress to provide relief to families and advance 
strategies that will help communities of color emerge from 
these tough economic times. Market forces and voluntary 
programs alone will not correct inequality. They will not end 
discrimination or close the gaps in service that minorities and 
underserved communities face. Instead, we need a targeted 
strategy that will close racial, wealth, and income gaps.
    Today, I just want to discuss briefly programs that 
Congress and the administration have put forth to improve 
economic conditions including Hope for Homeowners, TARP, 
American Recovery and Reinvestment Act and Making Home 
Affordable.
    Each of these programs has positive elements that could 
help communities of color. However, design flaws are preventing 
our families from receiving the assistance they need, which I 
will briefly summarize today. In my written statement, you can 
find detailed recommendations to improve these programs.
    I will start with the Hope for Homeowners. This program 
offers as much as $300 billion in Government guaranteed loans. 
It was supposed to help as many as 400,000 families at risk of 
foreclosure. Unfortunately, owners' restrictions and fees have 
made this program virtually unusable. In fact, only one person 
has successfully saved their home from foreclosure through this 
program. Even with proposed improvements, Latino families will 
still face barriers to accessing this program.
    TARP. TARP was established with two key goals: reduce 
foreclosures and increase lending activity that could have 
helped the Latino community. From where we stand, working with 
thousands of families every day, TARP has failed these goals. 
Treasury should have required TARP recipients to implement a 
systemic loan modification program and used funds to increase 
lending to communities. Instead, Treasury relied on voluntary 
efforts that have proven ineffective.
    Later, Congress invested nearly $800 billion in the 
American Recovery and Reinvestment Act. One of its primary 
purposes is to assist those most impacted by the recession. 
NCLR is concerned that this act is falling short of achieving 
this goal. Targeted policies are necessary to ensure that 
assistance and jobs reach hard hit communities. However, the 
final legislation lacked any such targeting.
    What we did was ``re-upped'' the appropriations formula 
that was already out there, instead of addressing some of the 
specific needs that we knew were being created by this 
downturn. As a result, the majority of funds have flowed 
through existing channels, leaving out our service providers in 
underserved communities.
    And finally, I will turn to President Obama's Making Home 
Affordable Program. While we applaud the comprehensive 
approach, processing delays and insufficient enforcement 
mechanisms keep this program from being as effective as 
possible.
    For example, the program allows servicers to start 
foreclosure on eligible families before their modification 
application has been processed. Those lucky enough to avoid 
foreclosure still end up owing thousands of dollars in legal 
fees.
    However, NCLR-funded foreclosure counselors report that 
some families have been foreclosed upon while still waiting on 
the results of their application. So, we will not be able to 
get our economy back on track until we get the hardest hit 
families in a position to secure high quality jobs and 
mortgages. It is that simple.
    To this end, I offer just to the following recommendations. 
Include the needs of Latino families and families of color, 
workers and homeowners, in federally funded relief programs. 
But that will require intentional strategies to address those 
communities and not reliance on the same formulas that do not 
take into account the new circumstances that we find ourselves 
in and the new challenges.
    We need support proven community based organizations 
involved in recovery and foreclosure prevention efforts. We are 
in the communities. We are close to these families. We can 
engage them with as much credibility as anyone else. Hold 
Federal programs publicly accountable for spending and 
performance.
    We have to tie more strings to this. There have to be 
performance benchmarks on these programs or else there is no 
accountability.
    Finally, restore stability to financial labor markets 
through consumer protections and investments in our 
communities.
    We look forward to working with all of you toward this 
goal. We think that many of these programs were well-
intentioned and some are having some effect. But we can improve 
these programs and we definitely need more oversight, more 
regulation, and more enforcement.
    I thank you and I would be happy to answer any questions.
    [The prepared statement of Ms. Murguia follows:]



    Chairman Towns. Thank you very much.
    Ms. Hasegawa.

                   STATEMENT OF LISA HASEGAWA

    Ms. Hasegawa. Good morning, Mr. Chairman. Thank you to all 
of the members of the House Oversight and Government Reform 
Committee for inviting me here today. I add my recommendations 
and support to my colleagues from NCAI, the National Council of 
La Raza and the National Urban League.
    In particular, I would like to thank you, Chairman Towns, 
for recognizing that communities of color have been 
disproportionately impacted by the foreclosure crisis and the 
economic downturn.
    Oftentimes, organizations like National CAPACD, we do play 
a unique role, particularly because we serve low-income Asian 
Americans and Pacific Islanders and Native Hawaiians. 
Oftentimes, Asian Americans and Pacific Islanders are 
considered the model minority and so, for us, it is a pleasure 
to be here to really talk about the disparities that some 
segments of our population do face.
    My name is Lisa Hasegawa and, again, I am the executive 
director for the National Coalition for Asian Pacific American 
Community Development. We go by National CAPACD for short, so 
when I say National CAPACD, I am talking about my organization.
    Again, we are dedicated to meeting the housing and 
community economic development needs of low-income Asian 
Americans and Pacific Islanders across the country. We have 
over 100 community-based organizations in our network. We are 
in 17 States and, again, focusing on those that are the most 
vulnerable in our communities.
    We have a network of groups that do job training programs, 
housing counseling programs, etc. and what is unique about them 
is that they do address the needs of limited English 
proficient, low-income and immigrant communities in particular 
and then also Native Hawaiians in Hawaii.
    I just also wanted to make sure that it was understood here 
today that what will help African Americans, Latinos and Native 
Americans will also help low-income Asian Americans and Pacific 
Islanders who have experienced discrimination, who have been 
targeted by predatory lenders and by subprime lending.
    Families are suffering from the worst recession since the 
Great Depression. Asian Americans, Native Hawaiians and Pacific 
Islanders are no exception. The rate of unemployment among 
Asian Americans has more than doubled since the fourth quarter 
of 2007. We believe that this is because of the high rates of 
self-employment in our communities and because of the broader 
economic recession, small business owners and those who are 
self-employed, are particularly hurting.
    Although trends in unemployment are unavailable for Asian 
American and Pacific Islander subpopulations, the American 
Community Survey did reveal that many AAPI groups faced high 
levels of unemployment before the recession.
    According to the 2005 through 2007 American Community 
Survey data, the rate of unemployment, just as an example, 
among Cambodians, Laotian and Hmong communities was around 6 
percent, which is higher than the national average, and among 
Samoans, Tongans and some Pacific Islander communities, the 
rate of unemployment was even greater at two times the national 
average. Those are the kinds of stories you do not see when you 
look at the data in the aggregate.
    Also, many of the Federal programs, I used to work at the 
White House Initiative on Asian Americans and Pacific Islanders 
to really look at how Federal programs needed to improve to 
serve particularly the needs of limited English proficient 
communities, and one of the things is that a lot of the 
programs, like the Workforce Investment Act that Mr. Morial 
mentioned, those programs before oftentimes did not meet the 
needs of our community because there was not a lot of support 
for those who, for example, needed to take English language 
classes in order to be able to successfully have a well-paying 
job.
    The crisis has particularly presented challenges for, again 
AAPIs who are self-employed and own small businesses. I wanted 
to also mention, we talked a little bit about credit cards. We 
are hearing from our member organizations that are working a 
lot with small businesses, particularly in California, that 
many times if you are a small business owner you purchase 
inventory based on the amount of credit that you have. Many of 
the banks now are decreasing the credit limits in their credit 
cards up to two-thirds, which is particularly many small 
businesses in a bind. So, we have heard that from our members 
who work with small businesses.
    Similar to what Janet just mentioned from La Raza, we did 
look also at the American Recovery and Reinvestment Act and 
TARP and have many detailed recommendations in our testimony. 
So, I think I am going to just going to basically go to some of 
our recommendations.
    There was an article that just came out from the Associated 
Press, on Monday. So, we were trying to pull together this 
testimony and so it was very timely. It basically stated that 
home ownership has dropped for Asian Americans in 2008 at a 
higher rate than any other ethnic group.
    Now, that is not usually a statistic that we see. So, if 
this is, again, and in the aggregate, so that to us is just a 
signal that things are not so good also in the Asian America 
and Pacific Islander community, particularly those that are low 
income.
    So, just in terms of my recommendations, I think that 
capacity building programs are very important for the vast 
array of non-profit groups that have a lot of expertise working 
in low-income AAPI communities. Many of the foreclosure and 
housing counseling programs that were put out to assist these 
communities did not fund the additional support and case 
management. You had to actually be a housing counseling 
organization that was certified. Many AAPI community 
organizations did not have that certification, were not 
eligible for the funds, and now are actually turning housing 
counselors away from their doors because they are going to have 
to do all of the translation, all of the outreach, without any 
resources.
    So, my recommendations are in terms of capacity building 
and direct funding for community based organizations to 
mobilize the expertise that they do have to help with the 
economic recovery. Those recommendations are listed here.
    I also have additional recommendations around data, in 
particular, and holding of the financial institutions and 
Federal agencies accountable to what is going on in low-income 
AAPI communities.
    So, thank you very much.
    [The prepared statement of Ms. Hasegawa follows:]



    
    Chairman Towns. Thank you very much.
    Ms. Johnson-Pata.

              STATEMENT OF JACQUELINE JOHNSON-PATA

    Ms. Johnson-Pata. Thank you. And I would like to join with 
the rest of the panel in thanking you, the chairman, and the 
members of the committee for including us in this particular 
hearing.
    On behalf of our country's tribal nations, the National 
Congress of American Indians is pleased to offer our 
recommendations gleaned from the experience of the Native 
American communities.
    Tribes offer unique innovations that can make significant 
contributions to the policy debate regarding the economic 
crisis. The title of this hearing is particularly relevant to 
our communities. Depression-like economic conditions have been 
evident in our Native American communities for decades and 
Federal policy responses have often been ineffective.
    Many of our recommendations directly address the fact that 
reliable data is not available to adequately assess the impact 
of economic crisis in our communities.
    While the national unemployment rate climbs closer to 10 
percent, on-reservation unemployment rate in the 2000 census 
was 22 percent, just 3 percent less than the unemployment rate 
during the Great Depression. Put simply, economic crisis in our 
community is not an occasional disaster, it is a daily reality.
    However, the Bureau of Labor Statistics does not include 
on-reservation unemployment rates in their monthly reports. 
Rates well above 50 percent, in some cases. The absence of this 
reliable current data is of significant concern to tribal 
leaders and should be that of those representing their States.
    Tribal governments can serve as significant incubators of 
economic and job growth. In spite of this potential, tribes 
were excluded from many job creation provisions in the Recovery 
Act, including many of the Department of Labor's initiatives.
    Green jobs represent an important new employment 
opportunity for disadvantaged communities. Tribal lands are a 
potentially rich source of renewable energy. The Department of 
Energy estimates that tribal alternative energy could meet 20 
percent of this Nation's energy needs through wind energy and 
up to 450 percent through solar energy.
    Tribes are positioned to prepare Native people and other 
rural residents to participant in the new green economy, but 
they have been left out of the Federal efforts.
    While the United States faces one of the most significant 
housing crises in our Nation's history, many forget that Indian 
housing has been a crisis for generations. Data related to the 
impact of the economic crisis on Native home ownership is weak, 
and we recommend that the Federal Government invest in quality 
data collection.
    While there is some evidence of challenges with 
foreclosures in Native communities, the real problems our 
communities face is not of foreclosures, per se, but access to 
home ownership opportunities in the first place, something I 
think Mr. Carr in the first panel discussed a little about.
    In 1999, there were a total of only 471 home mortgages on 
Indian lands. That represents only 1.2 percent of the 
households that had sufficient income to qualify for a 
mortgage. And that need for mortgages on reservations in a 
persistent problem.
    There are challenges in accessing financing on tribal 
lands. The 2001 Native American Lending Study found that 86 
percent of Native communities lacked a single financial 
institution within their borders, and 15 percent of Native 
Americans needed to travel over 100 miles to access a financial 
institution.
    The expansion of the Native CDFI field has helped prepare 
our tribal citizens for mortgage lending and opportunities and 
offered cutting edge financial education programs that 
developed financial skills for the whole community.
    Tribal governments have also played a role in regulating 
lending practices on tribal lands. Tribal jurisdiction must be 
protected in the same way as State government jurisdiction is 
protecting Federal statutes regarding things like predatory 
lending.
    Economic revitalization in Indian country is closely linked 
to business development. Federal strategies to expand access to 
contracting services for minority owned businesses are 
particularly critical in reservation communities. Tribal 
communities are generally located in rural areas with very 
limited economic opportunities, and tribal governments have a 
severely limited tax base. Tribes cannot impose property taxes 
on trust land. And an additional income tax on a community 
dealing with multi-generational poverty is not feasible.
    This means tribal citizens often have greater service needs 
than their non-Native counterparts. But their governments have 
fewer resources to serve their citizens.
    The Federal Government's Native 8(a) Contracting Program is 
one way entrepreneurs in Native communities build Native 
economies by helping our people secure government contracts. In 
a 2006 report, the GAO found that the management training 
programs were common among Native owned businesses. ADA 
Contracting Programs are vital strategies to raise both revenue 
and business sophistication in Indian country. The program also 
demonstrates Congress' commitment to promoting tribal self-
determination and self-sufficiency.
    In conclusion, we look forward to working with the 
committee to ensure that tribes have the same access to the 
Recovery Act resources and tools as other governments, 
unemployment data is available to measure the extent of the 
crisis and the recovery, and opportunities to partner with 
tribes are not missed.
    And we look forward to a future where Native people have 
the same opportunities for home ownership as other Americans, 
and small business opportunities at the heart of our rural and 
reservation communities and economies that are supported and 
expanded through effective Federal investments.
    I thank you for the opportunity of testifying today.
    [The prepared statement of Ms. Johnson-Pata follows:]



    
    Chairman Towns. Thank you very much, Ms. Johnson-Pata.
    Mr. Alford.

                  STATEMENT OF HARRY C. ALFORD

    Mr. Alford. Thank you, Mr. Chairman. And thank you, Mr. 
Chairman and Ranking Member Issa, distinguished members of the 
committee, my distinguished panelists, I am very honored to be 
here to discuss a very important part.
    Please keep in mind that in terms of housing, you cannot 
have a house without a job. And 70 percent of all new jobs are 
created by small businesses. So, the National Black Chamber of 
Commerce feels its mission is noble.
    When we were incorporated in 1993, there were 300,000 
Blacked-owned firms doing revenues of $30 billion. Today, I am 
happy to say there are over 1 million Blacked-owned firms doing 
revenue of over $88 billion. Still, despite that growth in 
numbers and dollar volume, in capacity, being able to do the 
job, being ready, willing and able, our share of the Federal 
procurement dollar has been dropping year by year. That also 
goes for Hispanic businesses as well.
    Why is that? One big reason. The SBA, when we were 
incorporated, had 5,000 employees with a budget of over $900 
million. Today, they have 1,700 employees with a budget of less 
than $400 million. That is not giving enough emphasis to the 
development of small businesses in this country. They are 
emaciated.
    So, we are happy to pick up that void with other 
associations. Section 3 of the HUD act, which has been 
mentioned here, HUD does not enforce Section 3 of the HUD act. 
It is being enforced in the State of Louisiana and in the city 
of New Orleans because your Members took it up after Katrina. 
That is the only place it is being enforced. There may be an 
exception here and there, but it is not being enforced in 
Maryland, it is not being enforced in Baltimore, it is not 
being enforced in any of your districts. That is true.
    And if it was enforced, we could have an additional 100,000 
jobs just in the Black community alone. This is a race-neutral 
program. It was written in 1968 after the Watts Riot. It was 
strengthened in 1992 after the Rodney King Riot by the late 
Jack Kemp. It is beautiful. It will hold the test in court, and 
it is a job creator. No training programs. Training programs do 
not work. You send kids to training programs, and then they do 
not get jobs. They never get connected to jobs. There is not a 
good training program unless there is a placement strategy.
    This here Section 3 is on-the-job training. They come and 
learn as they get paid, to drive a nail through some wood, to 
pick up trash, to landscape, to day care at a housing facility. 
It is simple stuff. But for some reason, we have been avoiding 
it.
    The Federal Highway Program, the DBE Program, was 
implemented in 1982 by President Reagan, written by the 
Honorable Harry Mitchell before that. In the 1980's, African 
American and Hispanic businesses through the Highway Program 
were doing about 8 percent of the volume. Today, African 
Americans do 1.1 percent of Federal Highway Fund volume, 
Hispanic businesses do 1.6 percent. That is 28 percent of the 
National population trying to come up with 2.7 percent of the 
volume.
    That $27 billion that goes to these State programs is being 
abused through corruption. Tony Soprano ``does well'' but 
African Americans and Hispanics do not. And I have volumes. I 
have documentation that goes back to 1995 on this. I have seen 
bid rigging with my own eyes in the State of Indiana. We need 
to clean it up, and then be inclusive, according to the Civil 
Rights Act of 1964, Title 6.
    Also, Executive Order No. 246, which is hiring, which 
enforces Title 7, Equal Opportunity in Hiring. The Federal 
Highways Program does not abide by Executive Order No. 11246. 
They canceled the reporting procedures. They do not even take 
the data.
    The Department of Labor is supposed to have their hammer, 
but construction unions who do not hire Blacks and Hispanics, 
and women want this action and so the Government, back in 1998 
and 1999, canceled Executive Order No. 11246, Reporting 
Procedures, in defiance of the law. It is illegal.
    So, when the stimulus money comes down, double down on 
transportation from $27 billion to $54 billion, we are not 
going to get any of that. And the problem with the stimulus 
plan is that it is throwing food in the trough, but you have 
the same pigs at the trough. We are not in there.
    So, maybe from the discretionary side, which is coming 
later, we can have some diversity and input and share in the 
stimulus bill. It is beautifully written.
    Project Labor Agreements. President George Bush canceled, 
forbade, Project Labor Agreements from Federal projects because 
``they discriminate against small business and minorities.'' So 
I am trying to figure out President Barack Obama's rationale to 
bring them back. I want to know the reason for that, other than 
letting construction unions, which discriminate against 
minorities and women, which cannot qualify under Executive 
Order No. 11246, to have exclusivity in Federal projects. 
Someone who discriminates should be banned from Federal 
projects. They should not give them exclusivity.
    Finally, the Waxman-Markey Bill. If that goes into 
fruition, we are going to lose 3.6 million jobs, according to a 
jobs study by CRA. Of those areas who are going to pay the 
most, if you take a pin and put it in Nashville and draw a 700 
mile radius around Nashville, you have territory that includes 
86 percent of the Black population. Coincidentally, that is the 
same area that is going to pay the most for this Waxman-Markey 
bill. I suggest that we go back and rewrite a bill that is 
going to be less painful and have some benefits.
    I was at a panel on Monday and we had people for, neutral 
and against the bill. No one could identify reasonable benefits 
of the energy bill. If we cannot realize reasonable benefits, 
why do we have it? I will reserve the housing remarks for 
question and answer.
    Thank you, sir.
    [The prepared statement of Mr. Alford follows:]



    
    Mr. Issa. Mr. Chairman.
    Chairman Towns. Yes?
    Mr. Issa. Because it is appropriate to his testimony, I 
would like to ask unanimous consent to have the Black Chamber 
of Commerce study on the impact of the cap-and-trade bill 
entered into the record.
    Chairman Towns. Without objection. So ordered.
    [The information referred to follows:]



    Chairman Towns. Let me thank all of you for your testimony.
    Let me begin, I guess, with you, Mr. Morial and, of course, 
Ms. Murguia.
    Many of the top banks issued a high portion of these 
subprime loans to Hispanics or African American borrowers. Is 
this an indication that minorities were targeted recipients of 
these exotic loans? I mean, was the program developed to go out 
and get them?
    Mr. Morial. It is an excellent question. I think there is 
ample evidence that African Americans in many cases were 
steered into subprime or high interest loans. The numbers we 
have looked at indicate that for the period, I believe, 2005, 
2006 and 2007, about 55 percent of all African Americans that 
took on home loans ended up with subprime loans.
    Now, you have to add to that the data shows that a large 
number of those that ended up with subprime loans could have 
qualified for prime loans. And that is the issue. That people 
who could have qualified were directed or steered by brokers, 
servicers and banks into higher-interest subprime loans.
    Certainly, there may have been those, in all fairness, who 
may have taken on more house than they could afford because the 
lack of requirements of income verification allowed that to 
occur. But, fundamentally, and this is what is important, the 
majority of all subprime loans went to White Americans.
    But a disproportionate share of all Blacks who got loans 
period ended up with subprime loans. And it is important to 
paint the picture with accuracy. And I think that information, 
Mr. Chairman and Members, should instruct the kind of 
regulatory reform we need in this Nation to prevent this from 
continuing to occur and to prevent this kind of crisis from 
occurring in the future.
    Ms. Murguia. I would just add, Mr. Chairman, that, you 
know, Latinos are 30 percent more likely to get high cost 
loans. So the steering problem is one that we see dramatically 
effecting the Latino community in particular.
    I think we believe that the foreclosure crisis was driven 
2by harmful loans, mostly made by mortgage finance companies 
due to the lax oversight there. And at the end of the day, I 
think a lack of common sense regulations is what caused the 
foreclosure crisis and where we did have regulations, it was 
the lack of enforcement. So, steering is a big problem for us 
in our community and we need to address that.
    Chairman Towns. Yes, yes, right. Let me just add, do you 
think the inability to speak the language had anything to do 
with it?
    Ms. Murguia. Yes, I think having home ownership counselors 
who are certified in the communities is one of the most 
important ways that we can assure that these individuals are 
getting accurate information. It is an important area that I 
think where we need to see more investment in addition to 
regulation and oversight, the funding could be directed.
    We need to make sure that we are doing more to create that 
pool of credible, certified, trusted housing counselors who are 
in the community who can break down all of those barriers and 
be trusted voices for those individuals seeking to get those 
loans.
    Chairman Towns. Ms. Hasegawa.
    Ms. Hasegawa. Ditto. Also, for Asian Americans, subprime 
loans almost tripled between 2004 and 2005. We heard from many 
companies that sort of started up in California that I think 
their entire business model was to target Asian Americans who 
were perceived as affluent, having a lot of cash, etc. So there 
was certainly targeting going on.
    They were very culturally and linguistically competent, I 
have to say, in terms of the mortgage brokers getting young 
people to get out there to get their, what do you call it, 
their commissions to basically do the loans, particularly in 
communities that spoke specific Asian languages, targeting the 
Vietnamese, the Koreans, the Chinese language speaking 
communities.
    And so, they were isolated from a lot of the mainstream 
products and outreach efforts that were conducted only in 
English. So, absolutely, I think that language was a barrier 
and we, as a non-profit organization, and the housing 
counseling groups, did not have the resources to be able to 
combat that on the streets with all of their media ads and with 
the unregulated brokers. So, absolutely.
    Chairman Towns. Yes. Mr. Alford, do you want to comment on 
that?
    Mr. Alford. Yes. Mr. Chairman, they are absolutely correct. 
But HUD issued billions of dollars in housing stabilization 
money last December and January. It is on the streets by now. 
So, where are these counselors that receive these billions of 
dollars? It was to fund counseling. It was to address the 
foreclosure problem. I think we need a quick audit as to who 
has that money and what they are doing with it because in the 
communities I visit, I cannot find any counselors.
    Mr. Morial. Let me just say this, because we do counseling 
and we do counseling in 35 communities and we are going to 
probably do about 100,000 cases this year. A counselor can only 
get a result if a lender is willing to play ball on a 
modification. A counselor is an advocate for a homeowner and 
has to knock on the door of the lender and say, will you work 
with this buyer, this purchaser, this homeowner, to modify a 
loan.
    I think the previous panel indicated that many servicers 
are reluctant, obstinate and not particularly favorable. And it 
goes back to, perhaps, the TARP. That the TARP could have 
required that those that received an injection of cash, an 
injection of cash out of the TARP, would be required, that it 
not be voluntary, to work with homeowners when it comes to the 
modification of these loans.
    Many of these modifications are helping people take a high 
interest rate and reduce it down, to reduce the payments so 
that they are affordable. Certainly, if you do not have a job, 
you cannot pay a modified loan. But that was the idea to give 
so the counselors, and those of us who do counseling, are 
working feverishly, aggressively in many communities, but in 
some cases we cannot achieve the result because the servicer or 
the lender is not willing to engage in a modification that the 
homeowner can afford.
    So, what we see now is double mods taking place, an 
original modification, and a further modification being needed 
by the homeowner so that they can stay in the home.
    Chairman Towns. I think my time has expired so let me just, 
well, I think it definitely expired. [Laughter.]
    The gentleman from Arizona, Mr. Flake.
    Mr. Flake. I thank the chairman and I thank the witnesses.
    I was interested in, I seem to detect a theme from all of 
you that the programs that we have, that we have implemented 
over the past year, are not working very well. What I hear is 
let us do more programs. Do some of them differently, perhaps. 
And I was interested in, Mr. Alford you mentioned that job 
training programs traditionally have not worked. It is a job 
that you can train on. Do you want to elaborate on that a 
little bit?
    Mr. Alford. Mr. Congressman, let me give you an example. I 
was doing a monitoring for a high school in York, PA and they 
wanted to implement or replicate that Section 3 program. So, 
down the street there was a grant recipient for a home bill, I 
believe it was, which is a HUD program for job training. So, 
naturally, I went to them saying we want to place your 
graduates to do work. These contractors will hire your 
graduates from the high school and get them into the work 
force. They were livid that I would approach them to try to 
place some of their students in jobs.
    In the end, they did not get their grant renewed. But what 
we did was on-the-job training. And a beautiful piece of on-
the-job training is Gulf rebuilding, where Bechtel and Fluor 
and Turner Construction and a lot of associations such as ours 
got together.
    We have trained 18,000 people in Louisiana, Texas, 
Mississippi and East Alabama. Eighth grade reading level, 
eighth grade math level, and drug free. You go through this 
course with the graduation into one of these companies that are 
sponsoring it. So, of the 18,000 people we have trained to 
date, 80 percent are working full-time now. And I am also proud 
to say that 70 percent are minorities.
    Mr. Morial. I want to respond to that because I think it is 
very----
    Chairman Towns. The gentleman from Arizona has the time.
    Mr. Morial. Yes, but I cannot leave it at a blanket 
indictment of job training programs, because we do it and we do 
place people. Mr. Alford is right that a good job training 
program has to have a placement component to it. But a blanket 
indictment of job training programs is not fair.
    What is fair to say is that some do not work. It is fair to 
say that some providers may not do a good job. But there are 
many job training programs that work, which are designed to 
help people access jobs in a variety of sectors. The placement 
component is very important.
    Mr. Flake. Do you have a placement rate that you could 
inform us?
    Mr. Morial. Different programs have different placement 
rates. We have some programs with a 50 percent placement rate. 
It depends on the population. If you are working with people 
who have no high school diploma, typically what you are trying 
to do is help them get a GED so that they get a sustainable 
job, not just a job for a month. We have done those types of 
work. If you are working with people who have a high school 
diploma and they are looking for some sort of more specified 
skill in the construction trades, for example, you may have a 
higher placement rate.
    Mr. Flake. Since I have very limited time here, I wanted to 
get to loan modification. It is something that has come up here 
and it is coming up again and again and many of us are opposed 
to it, and I want to get your perspective on it, the so-called 
``cramdown provisions'' which are allowing bankruptcy judges to 
basically modify mortgages.
    Could you just say yes or no across the board if you agree 
with cramdown? And my concern is that we may address those 
currently having problems with modification, and I am not 
suggesting that there are no problems out there with 
modification, but that we will make it far, far, far more 
difficult in the future for anybody with less than stellar 
credit to be able to get a loan if there is a prospect, 
prospectively, of a Bankruptcy Judge simply coming in and 
modifying a mortgage downward.
    Is that in the calculation that anybody is considering 
there? I would just like your perspective. We will go to Ms. 
Murguia, I guess, on ``cramdown provisions.''
    Ms. Murguia. Well, we think it is important to have some 
ability to modify those loans in the different venues and I 
think if there can be a fair assessment in that venue, then we 
would support it. I wanted to just----
    Mr. Flake. Is there a concern, though, moving forward, that 
if you have provisions that allow bankruptcy judges to 
basically rewrite mortgages, that you make it very difficult 
for anybody with less than stellar credit to get a loan in the 
future?
    Ms. Murguia. I think we have to be thoughtful about how we 
approach it, but I think that the needs are so great right now 
to have opportunities for folks to have these issues addressed 
that we want to make sure that we can move forward. But we 
should do so thoughtfully to ensure that there are no 
ramifications that we would not intend to occur.
    Could I just briefly, just because you mentioned, 
Congressman, that you said we supported, you know, we talked 
about some of the problems in the programs and we supported 
more programs, I just want to make it clear that what I said 
today is I want more accountable programs and I want more 
accountability in the programs that we have.
    I am not talking about creating more programs necessarily. 
But the Federal Government has a responsibility to ensure that 
accountability. And what I will tell you that we ought to 
target benchmarks and we ought to try to require and report 
more useful data for us so that we can have that 
accountability.
    Yes, there was a big rush to respond to this economic 
downturn. A lot of things happened very quickly. We are just 
merely pointing out that these programs can be improved and I 
wanted to clarify that.
    Mr. Flake. Well, I just, the concern that a lot of us have 
is we rarely, if ever, hear any witness say this is a bad 
program, it should be eliminated. It is always it should be 
better funded, it should be changed, and as an oversight body, 
at some point it would be nice to hear, hey, we ought to follow 
the GAO recommendations and close this program and just not do 
it anymore. And we just rarely hear that.
    I am sorry, my time is up. Thank you, Mr. Chairman.
    Chairman Towns. Time has expired. I recognize the gentleman 
from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. I just 
want to just refer to what Mr. Flake just said. I wish Mr. 
Flake could have been in my district last Saturday when we had 
1,000 people lined up there who were losing their homes.
    And so we talk about cramdowns, and I hate that term, but 
to have a bankruptcy judge sit, look through everything, 
determine what happened, Mr. Morial talked about it a moment 
ago, with people who basically were pushed into subprime loans 
when they were prime candidates, and then to bring some 
balance, particularly balance when the banks have been bailed 
out, they are now paying back some of the money that they got 
from us, from the United States of America, but yet and still 
homeowners in your district and mine, maybe your district is a 
lot better off, but in my district there are a lot of people 
who are suffering and about to be thrown out.
    And these are not people who are looking for a handout. 
These are hard working Americans who paid their taxes when then 
were working, gave their blood, their sweat, their tears to 
this country, and because of no fault of their own, now they 
are out of a house.
    So, it is easy to sit here in this place with our suits and 
the nice air conditioner, whatever, feeling good, but I am 
talking about Americans, Americans who have given everything 
they have. But now they just need a bridge to be able to stay 
in a house. I am not talking about living in some luxury 
condominium. I am talking about some of them have been in these 
houses for 20 years. They have kids. And they want to stay in 
those houses.
    So, I just get a little bit upset when I hear things like 
that, as if it does not matter that these folks have an 
opportunity, for example, to go before a judge. Judges are 
sworn, they have the things that they need, the assistance they 
need, to analyze all of this and figure it out.
    I just want to go to you, Mr. Morial. You were talking 
about these counseling programs with regard to jobs. I think 
one of the problem that we find, and I just want you to comment 
on this, some of the people that we are trying to train, and I 
live in the inner city, you have some hard, some folk did not 
get a decent education, they, in some instances they went to 
some of the worst schools.
    I have parts of my district, Mr. Morial and panel, where I 
go in one county you go to a public school it looks like a 
private school. But in Baltimore City, we have our problems. 
Then when they get to the 12th grade, or if they get to the 
12th grade, people expect those kids who came under those 
conditions to be able to compete with kids who have had 
computers ever since they were in Pre-K. I have high school 
students who do not have computers today.
    So, I am just trying to figure out, how do you all see, and 
Mr. Morial I will start with you, this education thing is 
serious. And how do we, because I see this as a key to, even 
after you do the counseling, first of all, you have to have a 
candidate to counsel, you counsel them, then they have to have 
certain qualifications even after you counsel them. So, I am 
just wondering----
    Mr. Morial. Let me give you an illustration, Congressman 
Cummings. You are absolutely right. We have a job training 
programs called the Urban Youth Empowerment Program. It was 
designed with the idea that people who would come to us would 
be high school dropouts but they would have seventh or eighth 
grade reading levels. And all we have to do is take them to a 
12th grade level.
    What we found, when we tested the people on intake, that a 
majority of them had a fourth grade reading level. And so, they 
were 19, 20 and 21 years old reading on a fourth grade level 
and, therefore, you were required to be successful to take them 
from a fourth grade reading level to 12th grade for them to get 
their GED before they could even qualify for most basic jobs. 
So----
    Mr. Cummings. In how much time? In how much time?
    Mr. Morial. Well, you know, in probably 6 to 8 months. In 
many cases, it is not possible. You might be able to move them 
from fourth to eighth grade. So, many of these job training 
programs are functioning as education remediation programs for 
people in urban communities. They are trying to fix the 
failures of 30 years of benign neglect in public education.
    And we have to recognize that, yes, that is why we seem to 
be fighting a losing battle, because the large numbers, if you 
just look at 1 million kids dropping out of high school each 
year and you add to that population 1 million each year, 1, 2, 
3, 4, 5, the large number of people. So, in the economy of 
today, where jobs require more skills and more education and 
more technical ability, many of these folks are not going to be 
able to qualify.
    That is a structural challenge with the economy of this 
Nation that we have to figure out a way to employ. It is the 
thing that is sucking jobs overseas. It is the thing that is 
promoting outsourcing to India and China and other places. And 
it is what we are fighting in urban communities like Baltimore, 
like Philadelphia, like New York, like Birmingham, like New 
Orleans, like Dallas, where young people who are high school 
dropouts come into these programs but it is difficult to get 
them to the skill level where they can qualify for the jobs 
that the economy was producing before this depression took 
place.
    Chairman Towns. Gentleman, your time has expired, but I am 
willing to, if you want to get answers from someone else.
    Mr. Cummings. If they will, Mr. Chairman.
    Ms. Johnson-Pata. I would like to respond to that because 
one of the programs that we have in Indian country is called 
the 477 Program. It is a model that I think that might be 
replicated someplace else because we are able to get the money 
from job training programs in the Department of the Interior 
and HHS and, rather than having this agency silos where you 
have very strategic, narrow focused programs and so then the 
counselors and job trainers have to work for them, we are 
actually able to pool the money together so that at the tribal 
level they can be more flexible in designing programs that have 
longer-term sustainable.
    So, given where the tribes' interest in economic growth is, 
they can challenge the educational training as well as the 
technical training to be able to have a more comprehensive 
support system for the job training, including, you know, any 
kind of family needs that need to be taken care of, etc., so 
our success rate is higher.
    It is a very small program that we have been trying to spur 
more growth in. But it is probably one of the most successful 
models that we have had.
    Mr. Alford. It is pretty overrated. You know, GED and high 
school, you have to complete high school. We have kids working 
in Louisiana right now building public housing facilities, 
making $20 to $30 per hour, and they could not fill out their 
application. We had people fill out their applications. But 
they know how to pick up some bricks, they know how to pour 
cement, they know how to grade a road, they know how to drive 
nails through wood. That is a start. They can get educated on 
the side, because that is what they should do.
    But that is not a job preventer. It is not a job preventer. 
One hundred thousand jobs in Section 3, and we should do that 
in Baltimore, and Federal Highway Program, I would like to sit 
with you Congressman and show you how your District is getting 
exploited out of jobs through the Federal Highway Program and 
how we can go after it and get them employed.
    I hung drywall in the seventh grade. It is no big thing.
    Chairman Towns. The gentleman's time is expired. I know, we 
are getting into it, and I am guilty of that quite often, but 
we want to just sort of stick to the rules here----
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Towns. Thank you.
    I now yield to Mr. Jordan of Ohio.
    Mr. Jordan. Thank you, Mr. Chairman. I yield 30 seconds to 
my colleague from Arizona.
    Mr. Flake. Thank you. I just want to address the issue that 
Mr. Cummings brought up and I appreciate his concern here.
    I am not saying that we should not renegotiate loans and 
that the bank should not. It is in everyone's interest to 
renegotiate the interest downward on some of these loans. But 
what I am having concerns about is the ``cramdown provisions'' 
that have been proposed which would allow them to reduce the 
principal amount as well. And that will very negatively affect 
those who want to get loans in the future because, unless you 
have stellar credit, banks will be loath to enter into an 
agreement with you.
    So, thank you.
    Mr. Morial. I did not get an opportunity to----
    Chairman Towns. No, no. He has the time, so we have to 
recognize him.
    Mr. Jordan. I thank you, Mr. Chairman. Let me just pick up 
where my colleague from Maryland left off with this education. 
Let me just ask, I want to do one question for everyone and 
then I want to direct a question to Mr. Alford if I could.
    Where do you all stand on the issue of school choice? Let 
me give you a quick background. I come from Ohio. We did one of 
the first scholarship programs in the country in Cleveland, OH 
in my days in the General Assembly. Back in 1997 we passed this 
program. I can remember the first day, the very first day, 
mostly minority families showing up for 2,000 spots, K through 
second grade. The scholarship was worth $2,200 at the time and 
Cleveland public schools were spending $7,000 per pupil. We 
only had 2,000 spots and thousands of families showed up.
    Think about what they were saying. They were saying keep 
the extra money, we want that scholarship and the ability to 
get our kid in a school we think he or she is going to get the 
kind of education they deserve, frankly the kind of education 
they need to achieve things, as all of you said earlier, and to 
achieve the American Dream.
    So, let me just ask you down the list. Do you support 
school choice programs that empower parents, particularly in 
urban areas, to give their kids the education that they think 
is better?
    Mr. Morial. I do not support publicly financed vouchers, 
but do support privately financed scholarships that allow kids 
to go to private or parochial schools.
    Mr. Jordan. Let me ask you this. Do you support the 
District of Columbia option that we have had in Federal law in 
the past?
    Mr. Morial. I do not support publicly financed vouchers at 
all.
    Mr. Jordan. OK. Next one.
    Ms. Murguia. You know, we have strongly supported charter 
schools and giving and empowering our parents' choices in 
seeking alternatives in their districts. But, for us, we have 
not taken a position on----
    Mr. Jordan. And can I ask, just real quick, for those of 
you who are against it, and so far it is two for two, why is it 
wrong to say the money that was going to spent on this child 
not be strapped on the back of that kid and follow that kid to 
the school his or her parents think they are going to get the 
better education? Why is that wrong?
    Mr. Morial. Well----
    Mr. Jordan. We are going down the line. I already got your 
answer.
    Ms. Hasegawa. We actually do not have a position on it 
either, but we do work with charter schools.
    Ms. Johnson-Pata. We do not have a position either because 
most of our schools are rural and very remote. There are not 
choices.
    Mr. Alford. We believe a parent has a right to a choice for 
their child's education and there is nothing wrong with that at 
all, sir.
    Mr. Jordan. All right.
    Let me just go to you, Mr. Alford. Let me ask, and somewhat 
related I guess, is it not true that most minority-owned 
construction firms are non-union?
    Mr. Alford. Ninety-eight percent of Black-owned firms are 
non-union, because, one big thing, if they got into the unions, 
their employees could not get into the union halls because of 
the color of their skin.
    Mr. Jordan. Let me just ask you then about your position on 
project labor agreements, or what are typically called pre-hire 
contracts, where they require the owner or the general 
contractor of a construction project to sign an agreement with 
unions representing crafts that will work on the project before 
the actual work force for the project is hired.
    February 6th of this year, President Obama signed Executive 
Order No. 13502, encouraging the use of project labor 
agreements. Tell me your thoughts on this. Do you think this is 
positive for minority-owned construction firms?
    Mr. Alford. It will double the rate of unemployment in the 
African American communities where there are significant 
Federal jobs or Federal projects. It will double it. And we 
spent a lot of time, my Board and I, spend a lot of time 
talking to OMB when they were threatening to do this and made 
it very clear that go over to the Department of Labor, look at 
the Office of Federal Contract Compliance Programs data on 
union projects, and you will see that Blacks, Hispanics and 
women do not work in them.
    They have the data over there. But the Secretary of Labor 
will not release the data. But the unions should not even be 
certified by the Federal Government because they discriminate.
    Mr. Jordan. Well, let me just ask you what I think is an 
obvious question. Why do you think the President signed that 
order?
    Mr. Alford. $200 million of campaign contributions, sir.
    Mr. Jordan. All right. Mr. Chairman, I yield back.
    Chairman Towns. Thank you very much.
    I now recognize the gentleman from California, Mr. Bilbray.
    Mr. Jordan. Mr. Chairman, if I could real quick. I have a 
few seconds.
    I would like to ask for unanimous consent for the comments, 
this is the comments by Ranking Member Issa, to be entered into 
the record concerning PLAs.
    Chairman Towns. Without objection, so ordered.
    [The information referred to follows:]



    Chairman Towns. Mr. Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman. I would love to go 
around, and we talk about the horse before the cart and the 
back and forth this issue of why the concern, or the 
disproportionate impact of downturns on certain segments of our 
community.
    I will tell you, Mr. Chairman, I was a county supervisor of 
a county of 3 million, bigger than 20 States in the Union, and 
it became real obvious as we were trying to do work there that 
we had people that would not even bother to fill out the 
practice application and it was because they could not read the 
application coming out of the public school systems.
    And all I have to say to the gentleman who says public 
school, public school, you look at my family. The two older 
boys went to parochial school; myself and my little brother 
went to public school. And let me tell you something. When you 
look at the difference between our two careers, there is no bet 
in the world that our public school education in a working 
class neighborhood matched up against the parochial school.
    Where disadvantage comes from, it comes in many different 
forms, and it is not just the color of people's skins. That 
background, that educational thing, is a hot one. And this 
whole disproportionate burden of having to bear bad education 
gets thrown on the working class which happens to be a high 
percentage of people of color. It is just the facts of life.
    I founded the Literacy Council in San Diego because I 
wanted to get to the root cause of the fact that people were 
not getting jobs. So, we have to go back and talk about this. 
But I just think that too often we say, let us defend the 
establishment as we know it and not be willing to hold them 
accountable. The fact is that outcome does matter.
    It is just really frustrating for those of us who try to 
work in the system to see that these sacred cows refuse to get 
over and the monopoly of public education has to be held 
accountable. I think it is absolutely essential that we have 
public education. But the outcome matters more than the 
facilities.
    Schools are not teaching institutions. They should be 
learning institutions. They are not employment opportunities. 
They are supposed to be education and learning opportunities. 
And we get all of that.
    Let us just talk about green jobs though. I want to get 
over this. We talk a lot about green jobs. The fact is that the 
working class community has some real opportunities here. But 
one of the things that I have run into is that we talk about 
the green jobs. Let us just say solar panels. You want to do 
solar panels, you want to assemble them. How much of our 
government regulation stands in the way?
    Now I will give you an example, a high-tech thing, algae 
fuel, new green fuel. My scientists at Scripps have developed 
an alternative that is a true gasoline, not this garbage called 
ethanol, a true environmental fuel. But they will not produce 
it, and cannot produce it, in California because the government 
regulation will not allow them to build the facility to provide 
the environmental opportunity. And I think on the tribal 
systems, we have some opportunity maybe to avoid that.
    But would you like to comment on the government 
obstructionism to those economic opportunities, especially with 
the green application?
    Mr. Alford. To me, sir?
    Mr. Bilbray. Yes.
    Mr. Alford. Yes. I have two very capable businesses trying 
to get into the solar industry and they are finding that most 
of the supplies are made in China to begin with. And then, at 
the Federal level, Norfolk Naval Station has an RFP out and one 
of my businesses doing $250 million a year went to try to 
compete for that and they told them that the minimum bid 
capacity would have to be $1 billion. So, they make it 
difficult.
    And then, all of these projects, the U.S. Chamber's Web 
site, part of their Web site, is Project/No Project where they 
list all of the potential solar projects and what have you that 
have been blocked by local regulation. It is thousands.
    So, do we want a green economy or do we not? But it seems 
like the very people who say we want one are blocking those 
businesses who try.
    So, in terms of green jobs, I have yet, I asked Ben Jones 
what is a green job and he could not tell me. There are no 
green jobs. As of yet.
    Mr. Bilbray. Well, but there is that advantage though. I 
mean, the Department of the Interior has 155 plus applications 
for solar panels in California.
    Mr. Alford. Yes, sir.
    Mr. Bilbray. Not permitted one. One of the great advantages 
that we have had with the tribal system is that wind generators 
have been able to go up because they have been able to avoid 
the Federal bureaucracy and the obstructionism and California 
is a real culprit on that.
    Ms. Johnson-Pata.
    Ms. Johnson-Pata. Exactly. Mirango is a good example of 
wind energy in California. But a couple of things that have 
been preventing that energy development happening in the other 
parts of the country is, one, tribes do not get access to say, 
kind of, the same kinds of funds that the States do for 
development and for expanding development. I have the data in 
my testimony. You can look at that.
    We need some other things that, economic tools that put us 
at par, like depreciation, accelerated depreciation, tax 
credits that are available to other investors, to be able to 
have transferable tax credits to our investors and our 
partners. You know, I have a number of things that I could 
share with you, a list that prevent us from being at par with 
the other folks in the arena for alternative energy 
development.
    Mr. Bilbray. Mr. Chairman, one of the things that I would 
like to investigate is that you have, I guess Rosebud was a 
good example of an aggressive nation that was trying to work 
with other nations at developing a resource to be able, one of 
the big problems we have this country, we have not built a new 
refinery in 30 years.
    Rosebud's looking at trying to be aggressive at that 
cooperative. We end of having the Federal Government walk in 
and step on them in an area that is grossly deficient when it 
comes to economic opportunity. Instead of encouraging, well, we 
do not trust you with your own environment.
    I really find it absolutely absurd that anybody in the 
Federal Government could go to a Native American and tell the 
Native American they do not know what the environment is all 
about. And I think this is one of those things that we have to 
talk about.
    What are we doing right? But most importantly, what are we 
doing wrong that are keeping people from being able to have 
those opportunities and be able to read, be able to read a blue 
print so that you just do not have to just pour concrete or be 
able to improve your neighborhood and create the economic 
opportunity in your own sovereign territory is something that 
we ought to be talking about.
    Thank you very much, Mr. Chairman.
    Chairman Towns. Thank you very much.
    And I now yield to the gentleman from Utah, Mr. Chaffetz.
    Mr. Chaffetz. Thank you, Mr. Chairman. And thank you all 
for being here. I do appreciate it.
    Mr. Alford, my first question is for you. Let us talk a 
little bit about cap-and-trade and the burden that is going to 
be put on Americans. How do you see that playing out in the 
United States?
    Mr. Alford. Well, as I said earlier, sir, we cannot find 
any identifiable benefit of cap-and-trade, other than Wall 
Street having a new toy to abuse. Cap-and-trade was invented by 
Enron and then it was pushed down the throats of Europe. And 
Europe is still complaining about it. They did not lower 
emissions. They lost a lot of money.
    Cap-and-trade is a scheme, derivatives and defaults and 
what have you and Wall Street doing money. We are spending all 
the money, losing all the jobs, and they are still doing the 
same game they are doing with the TARP.
    Mr. Chaffetz. And how do you see that, what effect is that 
going to have on lower income families across the country?
    Mr. Alford. It is going to knock us out. I believe the 
figure is about $2,000, close to $2,000, per African American 
family, 60 percent of which only make $50,000 a year. So, 
another $2,000 and if they have a job.
    And people, proponents on this bill, are saying people in 
Detroit and Cleveland, when you lose your jobs, you just move 
out to Montana and start over. You know, Grapes of Wrath. It is 
scary. It is very scary, very ill thought out.
    Mr. Chaffetz. Mr. Alford, one of my deep concerns is that 
we have lost our ability to manufacture in this country, that 
we are actually, as a Nation, going to actually have to create 
things and build things if we are going to be successful in 
this global economy.
    Specifically to cap-and-trade, and the other factors that 
are happening, what do you see this doing to the manufacturing 
base of this country?
    Mr. Alford. It is going to export a lot of our 
manufacturing to other nations. And let me go back to World War 
II. We survived World War II. We survived World War II because 
we had the manufacturing clout. That is what saved us, to turn 
our manufacturing into tank machines and planes and ammunition. 
We were 19th in ammunition production on Pearl Harbor Day--
19th. And in 2 years, we were the dominant force because we had 
the technology, the industry and the work force.
    Mr. Chaffetz. Well, what are the impediments today? Why are 
we not leading the world in manufacturing today?
    Mr. Alford. Regulation, basically.
    Mr. Chaffetz. What is the No. 1 thing, Mr. Alford, that you 
would like to see us do to help us stimulate and grow the 
economy? To my mind, it is the American entrepreneur, it is the 
men and women who are going to create jobs, not government.
    Mr. Alford. I would like to see us bring the Small Business 
Administration back. I would like to see us put emphasis on 
entrepreneurship and small business. That is the creator and 
that is the job maker and that ingenuity is what makes America 
great.
    Mr. Chaffetz. So how do we put the emphasis upon the 
entrepreneur? Is it going to be government that is going to do 
that?
    Mr. Alford. No. Entrepreneur and government, they do not 
really go too well together. I think it is pure capitalism, and 
the need of being able to be entrepreneurs.
    I have my twin sons back here. They are University of 
Maryland graduates and they went to all the finest schools and 
all that, but they are entrepreneurs. They came out of college 
and started their own businesses. Their friends, many of them 
are laid off now because of downturn. A lot of their friends 
are tending bar. They are out thriving and living.
    Mr. Chaffetz. Well, congratulations to you and to your two 
sons. We appreciate it.
    I know our time is short. I yield back the balance of my 
time.
    Mr. Issa. Did the gentleman yield?
    Mr. Chaffetz. Yes, I would be happy to yield to Mr. Issa.
    Mr. Issa. I thank the gentleman.
    I want to followup a little bit on this. When you talk 
about the Small Business Administration not doing its job, when 
I came to Congress in 2001, the Small Business Administration 
was not doing their jobs, Government contracts were bundled, 
Section 3 of the HUD act and other set asides and programs were 
not being enforced.
    One, can you give us any goods things that happened in the 
last 8 years? I am asking, as a Republican, was there any 
shining light in the last 8 years? And, since we inherited it 
from the previous one and it was broken, and it is clearly 
broken today minus whatever shining lights you put on it, tell 
us what we need to do to change that because I do not want this 
to be partisan. I want this to be about what we should do in 
the future.
    Mr. Alford. Yes, I think, go back to 1993 and I think the 
late Ron Brown really had a handle on it and was steering the 
Clinton administration in the right way. Right after his death, 
it all fell apart and it kind of went in reverse. They put 
people over there who were getting bonuses by putting a cap on 
their work force. If they could decrease their work force, they 
got a big bonus at Christmas time.
    So, it left the field units high and dry for manpower to 
where our members and other up and coming entrepreneurs in 
Seattle and Denver and places, had no technical assistance any 
more. There was no reach out there.
    I think with the Bush administration, as I reflect back, I 
believe his Cabinet had sensitivity. Not necessarily the SBA. I 
do not think President Bush, it still kept going down, the 
revenues for the SBA.
    But you look at HUD under Alphonso Jackson, who made 
records in procurement for women, Hispanics, African American 
procurements. He was up to 50 percent of HUD's procurement 
going to 8(a) firms and disadvantaged business firms, unheard 
of at the Federal level. And the only reason why he did it, he 
went to his procurement people and he said I want our 
procurement to look like America and I will be checking every 6 
months. And if it does not look like America, you may not have 
a future. That is all he had to say. And the outreach was 
there.
    So we started steering everybody to HUD. But he is gone now 
and I think HUD has gone back to its old ways.
    Chairman Towns. The gentleman's time has expired. Would you 
like to request your own time?
    Mr. Issa. I think it is a good time for me to take my time, 
Mr. Chairman.
    Chairman Towns. OK. All right.
    Mr. Issa. Continuing on along that line, I have looked for 
years at the laziness in the Federal procurement system. At DOD 
it is endemic. It is the same, though, in every large 
bureaucracy in the Federal Government. They just cannot help 
themselves. If they have a project to build houses on the East 
Coast and the West Coast, they will bundle them together and 
they will throw in Guam, and the Philippines and 10 other 
places and they will say, well, we are just looking for a 
vendor that can do it. And, of course, just like that Navy 
contract, you end up with two companies or three companies that 
can bond $1 billion.
    This committee does not directly control the Small 
Business. We have a committee for that. I hate to say it does 
not have enough authority. I wish it was in Energy and Commerce 
where it really probably needs to be with an A committee. But 
we do have specific authority over how we go to bid. And this 
committee can do a lot of reform.
    Let me ask you a question. If we are not getting 
enforcement of existing laws, what should this committee do? 
Who should we bring in? Who should we have before us to find 
out where the problem is in the bureaucracy? Because this 
committee owns the bureaucracy; we own all the oversight over 
it.
    Mr. Alford. Yes, I received a call from an intern from 
Senator Burton's office and he was frustrated that he could not 
get data on African American procurement and Hispanic 
procurement at the Department of Defense. They told him it did 
not exist, that it was just one lump minority. I told him that 
was just a lie.
    Cal Jenkins, Deputy Administrator now at the SBA, has been 
very astute and proficient in getting that data if he is 
allowed to get it. I have locked horns with the former SBA 
Administrator and asked for the data for the Gulf Region and he 
allowed Cal to get me that data and in 2 days I have every 
contract by Black contractors, Hispanic contractors, and women 
contractors for the Gulf rebuilding by NAIC code, all the 
distinctions.
    It is there. The data is there. But if this committee could 
say, Defense, we want to see the data on small businesses, 
African American, Hispanic, Native American, Asian, women and 
so forth, and we want it there and we want you to sign to it, 
that would expose a lot of opportunities.
    And we could go so forth on down the line: Interior, 
Energy, all of the other places. If you get the data, you can 
see the opportunities. And if they know they have to produce 
the data, then they go to work.
    Mr. Issa. I am going to go to Ms. Johnson-Pata but I want 
to ask just one followup question or make a small comment.
    Chairman Towns and I have worked together on a very 
bipartisan effort to try to take it one step further. We are 
trying to take it to where you, the consumer, you the bidder, 
and all the groups that oversee the Government, can see it 
online in real time. We are trying to get where there is a 
common flow to where, to be honest, where we are not looking, 
every group concerned is looking and sending it to it.
    Ms. Johnson-Pata. I agree with Harry Alford about the data. 
But the problem is making sure the data is consistent amongst 
agencies. That is also a challenge.
    Mr. Issa. Common format. Common format is what you are 
saying.
    Ms. Johnson-Pata. Common format and some kind of electronic 
portal. I know they are working on one, but it is only for the 
future.
    Mr. Issa. We call it XBRL here usually, or equivalent.
    Ms. Johnson-Pata. Right. So, those are some of the issues 
that we have. We put together a number of recommendations about 
what we think that could help some of the training that is 
necessary for the SBA and the contract officers, etc. That 
would be able to be helpful.
    But we have a whole list of recommendations on how to 
improve the entire process of government contracting and it is 
signed on by a number of other minority groups for those 
recommendations. But one of them is really the consistency of 
data.
    Mr. Alford. Do I have time?
    Mr. Issa. Please, yes.
    Mr. Alford. Do we have a law that would prevent contracting 
officers from going to work for some of these major prime 
contractors?
    Mr. Issa. No, unfortunately, the revolving door is one of 
our challenges on this side of the dais.
    Mr. Alford. Yes, so the ones you have frustrations with end 
up being vice presidents for some of these prime contractors 
later.
    Mr. Issa. Not at all unusual in DOD and throughout the 
Government.
    Let me ask one final question for all of you. What I am 
hearing today, and, Mr. Alford, I am hearing it most loudly 
from you, but I very much hear it from everyone, is that we 
have a problem getting what is already codified in the law, 
which is opportunity and investment in our inner cities and in 
areas of high unemployment and, in some cases, even rural 
areas, tribal areas, and so on.
    Is it, perhaps, that we have a set of rules in a 
bureaucracy to enforce? And then the very people who we need to 
have these opportunities tend to be small entrepreneurial 
companies that do not have the leverage, that cannot offer a 
senior vice presidency to somebody when they retire?
    Is it, perhaps, for this committee to look at something in 
between, the ability of companies to be formed for the specific 
purpose of aggregating small business collectives? If that 
billion dollar entity, if the government-facilitated companies 
that were nothing more than, in fact, destined against the big 
boys for purposes of having some percentage, maybe not 100, but 
50 or 60 percent, be to minority, disadvantaged, new companies, 
women owned companies, is that something that we should look at 
facilitating in the law so that we actually have some larger 
entity when the bureaucracy says we cannot break it down and 
your people cannot get access to it and your tribes cannot get 
access to it and, in fact, emerging Hispanic businesses cannot 
get access to it, am I hearing that we have an endemic problem 
over and above what we can solve from this side of the dais?
    Mr. Alford. Yes. And that scenario certainly works at the 
municipal level. But Mayor Stephen Goldsmith of Indianapolis, 
when he was mayor, they were doing their $600 million 
infrastructure project, he gave the program management fees to 
S.R. Smoot Construction, a Black-owned firm, with the proviso 
that he would go out and get two partners, major partners, and 
that the subcontracting level would reflect the population of 
Indianapolis. It was done on time, he saved the city $100 
million, and it had 35 percent minority participation.
    Mr. Issa. And the payroll stayed in the city.
    Mr. Alford. Yes, sir. Banks, lawyers, everything.
    Ms. Murguia. I would just comment that I think that we need 
to be creative in terms of how we are going to respond to these 
growing needs. You know, for us in the Latino community, 
Latinas, Latina-owned businesses, are the fastest growing 
segment of the business community. We have a great need to 
respond to them in terms of how we can best address their 
ability to establish these businesses and to make sure that 
they are sustainable.
    I would encourage you to look at proven, community-based 
organizations that can offer that direct support, can offer 
than guidance, can offer the ability to help navigate through 
the system and get them the support that they need and can help 
be a convener.
    For many of those small businesses that are struggling and 
are facing the various challenges, but many of those challenges 
are common challenges and, if we can use and leverage 
community-based organizations to bring those folks together and 
to engage them more effectively into how they can have access 
to this assistance and grow their ability to succeed.
    Mr. Issa. My time has expired. Just quickly, answers, if 
you have them.
    Ms. Hasegawa. Just quickly I would say that, you know, the 
SBA's success also depends on the partnership with financial 
institutions to offer those loans and those products. So, I 
think that it also a challenge that we have been facing. So, I 
think that also needs to be looked at.
    Ms. Johnson-Pata. I think there is one thing that prevents 
what you are talking about right now is not the incentives up 
front, because sometimes the contracts go out so quickly, you 
do not have time to put the partnerships together that take a 
little bit of time to steer that. So, it needs to be incentive 
up front to make that happen.
    I think if you look at something that, you know, the tribal 
governments, their ability to play that role right now, have 
been doing some of that.
    Mr. Issa. Alaskan Native American tribe, for example.
    Ms. Johnson-Pata. And that is the model that I am aware of, 
that, you know, you ask the question of should we allow or 
encourage those sort of preferential organizations? Ultimately, 
people have to bid and win but at least they would exist.
    Ms. Hasegawa. I think that technical assistance from the 
SBA, also, would be very helpful because I think a lot of the 
small business assistance centers are not specifically targeted 
to particular communities of colors and for Asian Americans and 
Pacific Islands. There are certainly language needs there.
    Ms. Issa. Thank you, Mr. Chairman. You have been very 
generous with the time and this has been a very productive 
hearing. I appreciate your indulgence.
    Chairman Towns. Thank you very much.
    Let me just say that I really appreciate your testimony. It 
points out that yes, we are sending out $787 billion to the 
community, but we have to make certain that money is targeted 
in a way that is going to truly make a difference and we have 
to make certain that people who have been left out are now in 
and to be able to do whatever we can do to keep people in their 
homes. I think that is just so important.
    And, of course, I want to thank you for your work and thank 
you for testimony. I look forward to working very closely with 
you in the days and months ahead to make certain that we are 
getting these resources out to the communities and that it is 
truly going to make a difference.
    I want to thank you all.
    This is the end of the hearing, Mr. Alford.
    Mr. Alford. I have a thank you for you, sir. I owe you a 
thank you. You sent a letter to President Bush after Katrina, 
suggesting that the White House work with the National Black 
Chamber of Commerce on rebuilding. As a result of that letter, 
we got $3 billion in contracts, and I thank you.
    Chairman Towns. Thank you very much. I appreciate your kind 
words. And I thank all of you for your testimony.
    The committee is adjourned.
    [Whereupon, at 1:05 p.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]




                                 
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