[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                    REGULATORY REFORM: EXAMINING HOW


                     NEW REGULATIONS ARE IMPACTING

                     FINANCIAL INSTITUTIONS, SMALL

                       BUSINESSES, AND CONSUMERS

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



                             FIELD HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 31, 2011

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-79





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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Ms.ouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Ms.ouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Ms.ouri          JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

                   Larry C. Lavender, Chief of Staff
       Subcommittee on Financial Institutions and Consumer Credit

             SHELLEY MOORE CAPITO, West Virginia, Chairman

JAMES B. RENACCI, Ohio, Vice         CAROLYN B. MALONEY, New York, 
    Chairman                             Ranking Member
EDWARD R. ROYCE, California          LUIS V. GUTIERREZ, Illinois
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JEB HENSARLING, Texas                RUBEN HINOJOSA, Texas
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
THADDEUS G. McCOTTER, Michigan       JOE BACA, California
KEVIN McCARTHY, California           BRAD MILLER, North Carolina
STEVAN PEARCE, New Mexico            DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Ms.ouri          GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             JOHN C. CARNEY, Jr., Delaware
FRANCISCO ``QUICO'' CANSECO, Texas
MICHAEL G. GRIMM, New York
STEPHEN LEE FINCHER, Tennessee


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    October 31, 2011.............................................     1
Appendix:
    October 31, 2011.............................................    47

                               WITNESSES
                        Monday, October 31, 2011

Bauer, Kurt R., President/Chief Executive Officer, Wisconsin 
  Manufacturers & Commerce.......................................    19
Erickson, Hon. Alan, Mayor of Mosinee, Wisconsin.................     7
Matthiae, Mark A., President, Crystal Finishing Systems..........    17
Nagel, Todd, President, River Valley Bank........................    11
Reinhart, Marty, President, Heritage Bank........................     9
Sanchez, Bethany, Director of Community Development, Metropolitan 
  Milwaukee Fair Housing Council.................................    21
Wesenberg, Patricia, President and Chief Executive Officer, 
  Central City Credit Union......................................    13
Willer, Mark, Chief Operating Officer, Royal Credit Union........    16

                                APPENDIX

Prepared statements:
    Bauer, Kurt R................................................    48
    Erickson, Hon. Alan..........................................    50
    Matthiae, Mark A.............................................    52
    Nagel, Todd..................................................    56
    Reinhart, Marty..............................................    58
    Sanchez, Bethany.............................................    62
    Wesenberg, Patricia..........................................    65
    Willer, Mark.................................................    68


                    REGULATORY REFORM: EXAMINING HOW


                     NEW REGULATIONS ARE IMPACTING


                     FINANCIAL INSTITUTIONS, SMALL


                       BUSINESSES, AND CONSUMERS

                              ----------                              


                        Monday, October 31, 2011

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:30 a.m., at 
the Wausau City Hall, 407 Grant Street, Wausau, Wisconsin, Hon. 
Shelley Moore Capito [chairwoman of the subcommittee] 
presiding.
    Members present: Representatives Capito, Renacci, Huizenga, 
and Duffy.
    Chairwoman Capito. Good morning to everybody. I appreciate 
everybody coming, and I certainly appreciate the opportunity 
for me, Shelley Moore Capito. I'm the Chair of the Subcommittee 
on Financial Institutions and Consumer Credit, which is a 
subcommittee of the House Financial Services Committee in 
Washington.
    It's an honor for me to be here on my very first visit to 
Wisconsin. So thank you for holding back on the snow. I guess 
we did that on the East Coast. And I would like to thank 
Congressman Duffy for inviting us here today.
    I'm just going to talk a little bit--I have an opening 
statement. I want to tell everybody how it's going to roll out, 
because we're doing a hearing very similar to what we would do 
in Washington.
    As the chairperson, I will make an opening statement. Then, 
I will turn it over to Congressman Duffy, and he's going to 
make an opening statement; and our other two Members will have 
a word to say as well.
    And then, I'm going to have Congressman Duffy introduce the 
witnesses. All of the witnesses have submitted written 
testimony and I appreciate that. And they will each be 
recognized for 5 minutes for an oral statement.
    They entrusted me, as the only woman on the congressional 
panel, with the red, green, and yellow button. This is power 
right here. So I'm going to put it here. We'll try to keep to 5 
minutes, and the reason we'll do that is because a lot of 
times, the most significant portion of our meetings is the 
question-and-answer section.
    After we have our opening statements, I'll begin 
questioning for 5 minutes and then we'll go through. We might 
go through more than once or twice, if that's okay, seeing how 
time goes.
    So I appreciate everybody being here. And with that, I will 
begin with my opening statement.
    I brought my handy-dandy gavel with me, so I'm ready to 
roll.
    This field hearing will come to order.
    Again, I want to thank everybody for being here. And I 
would like to thank, in particular, Representative Sean Duffy 
for inviting us, the Financial Institutions and Consumer Credit 
Subcommittee, to his district.
    This is our second field hearing. We actually had a field 
hearing in Georgia, where they have had 64 bank failures, by 
the way.
    And so now we're going to find out the unique challenges 
facing Wisconsin financial institutions, credit unions, small 
businesses, housing advocates, and see, really, in general, 
what we can do in Washington to get this economy moving again, 
to make sure that we have the best possible playing field for 
our country's economics.
    Representative Duffy also has led the effort in the U.S. 
House of Representatives to bring greater transparency and 
accountability to the Consumer Financial Protection Bureau. He 
had a bill put forward to ask for appropriate consumer 
protections, but also ensuring that the Federal Government is 
not overly involved in our everyday personal financial 
decisions.
    Today's hearing builds on several hearings that we have had 
in the subcommittee so far this year. We frequently hear from 
small business owners that they're having difficulty obtaining 
loans from financial institutions. And many times, the 
financial institutions cite concerns about the difficulties 
with Federal regulators as a large contributor to the difficult 
lending environment.
    Sometimes, it seems as though everybody from the President 
on down is saying to financial institutions, lend, lend, lend 
to small businesses, because we know small businesses are the 
job creators.
    And at the same time, the regulators are saying to the 
financial institutions, hold your capital, hold your capital, 
hold your capital.
    It's a conflicting message, and it makes it difficult for 
the qualified small business to be able to expand and grow 
their business and thereby create more jobs in their local 
communities.
    If we're going to get our economy going again, we need 
these financial institutions to make these small business 
loans.
    We need regulators, financial institutions, and elected 
officials to work together.
    There's a new concept: We're going to work together in 
Washington to address these challenges.
    This is the primary reason why we're here today. We need 
common-sense recommendations. And hopefully, we'll get some of 
those here today.
    Again, I would like to thank Representative Duffy and the 
people of Wausau for hosting the subcommittee.
    And I would like to recognize Mr. Duffy for the purposes of 
making an opening statement for 5 minutes.
    Mr. Duffy. I appreciate everyone coming in and 
participating in today's hearing, specifically Chairwoman 
Capito, her willingness to come all the way to central 
Wisconsin and participate in what I think is a very important 
conversation about how the rules and regulations and the 
regulators are affecting our small financial institutions, our 
small banks, and our small credit unions and their ability to 
get dollars out the door to businesses, manufacturers, and 
farmers.
    I also appreciate Representative Bill Huizenga coming in 
and participating with us. He's from right across the pond in 
Michigan. And then Representative Renacci from Ohio who flew in 
this morning in the fog. So I appreciate everyone coming in.
    They're all members of the Financial Services Committee, 
and the Financial Institutions Subcommittee, all freshman 
colleagues of mine, and they have been doing an outstanding job 
representing their districts, but also actively engaging in the 
conversations that we have in our committee.
    If you look at what has happened over the course of the 
last several years with regard to the financial crisis, I think 
many of us would look back to 2008 and say we--we need to look 
at what happened and how do we reform the rules and regulations 
to make sure that it doesn't happen again.
    Whenever you have a crisis, whenever you have an issue like 
that that in your economy, you want to take a hard look and 
implement changes to make sure it doesn't happen again.
    And so that process started after the crisis. But instead 
of using a scalpel to look at the problems that we faced in our 
regulations, we got a sledgehammer, which came down by way of 
Dodd-Frank, a 2,000-page bill that implemented a number of 
rules and regulations. There are actually 400 rulemakings 
coming out of Dodd-Frank.
    And some might say that's great; it's wonderful that we 
have all those rules in our financial sector.
    One of the problems that we face in our committee is that 
many of the rules that came down from Dodd-Frank, that are in 
the process of coming down from Dodd-Frank, aren't specifically 
focused on the bad actors from the financial crisis.
    I think all of us would agree that it was big Wall Street 
banks that helped cause this crisis. It wasn't our small 
community banks and credit unions in central and northern 
Wisconsin that caused the crisis.
    But the rules, the regulations, and the pressure coming 
from the regulators on our community banks and credit unions 
has been immense; the ones that had nothing to do with the 
crisis.
    And that breeds great concern for me because, if we're 
going to grow our economy, if we're going to put people back to 
work in central Wisconsin, we have to make sure that we have 
our economic base growing.
    And what do we have here? We have small businesses, we have 
small manufacturers, we have farmers. If they can't access 
dollars, if they can't access capital, they can't grow. And if 
they can't grow, they can't put people back to work.
    So these financial institutions in our community are very 
important to make sure that the growth in jobs takes place.
    And when you have a crack in that system, it makes it very 
difficult to put our hard-working families back to work.
    I think today's hearing is important because so often, we 
see the bullhorn in the hands of Wall Street banks. Today, the 
bullhorn comes to central Wisconsin, where we're able to come 
together, and I think it's a great panel that we have today, to 
talk about the issues that we face right here. And we make sure 
that Washington understands that the rules and regulations that 
they pass have a true impact on our community.
    This is our time to come together and share the impact that 
it has. I believe that this is the first time the subcommittee, 
or the committee as a whole, has ever been to central 
Wisconsin.
    So I'm happy that we're here and I'm happy that my 
colleagues were willing to join me.
    I know my time is just about up. With that, I would yield 
back to Chairwoman Capito.
    Chairwoman Capito. Thank you.
    I would like to welcome Mr. Huizenga from your neighboring 
State of Michigan.
    As I was thinking about the four of us up here, and the 
four States that we represent, we really have a lot of 
similarities in terms of the heartland of the country; a lot of 
reliance on manufacturing.
    And so we all know that we have had difficulties, 
certainly, in our four States. Everybody has, but we have the 
same and similar difficulties.
    So I want to thank Jim Huizenga for coming in, and I 
recognize him for the purpose of an opening statement.
    Mr. Huizenga. Madam Chairwoman, thank you.
    And to my friends Sean and Jim, I know that speaking, 
probably, for all of us, this has been quite a ride the last 10 
months as a freshman on this committee.
    I hope I don't shock anybody here, but Washington can 
operate in a bubble. That has been very evident. And it's field 
hearings like this that help break us out of that bubble and 
help make sure that not only I'm being connected in with west 
Michigan, when I'm going home every weekend, but I get to hear 
what the people in Congressman Duffy's district think. And, the 
same thing with Congressman Renacci.
    This is very important to go do this, but I do feel I need 
to make a slight confession here. In central Wisconsin, I'm 
seeing a lot of red out in the audience. MSU quarterback Kirk 
Cousins is a constituent and went to the same high school I 
did. I know that might cause a bit of a riot, and my apologies 
to you all, as well as being a Lions fan. I know this is tough.
    Hopefully, to try to regain a little credibility in your 
eyes, I have shot a number of grouse up here near Clam Lake 
Lodge and in Sean's district here. So I have been very pleased 
to be up here a few different times, and you have a great area 
up here.
    As Sean was saying, I think that's a concern that I have, 
as well. So often, whether it's New York or Chicago, you hear 
sort of the buzz that surrounds a lot of these big banks and 
what's happening. And we know that, so often, the small 
community banks, the regional mid-sized banks, the credit 
unions, all get caught up in that same regulation.
    And unfortunately, we have a one-size-fits-all kind of 
prescription. All it takes is visiting Zeeland, Michigan, my 
hometown, or Wausau here, or somewhere else, to know that we're 
a little different than New York and Chicago.
    And we like it that way, but we can't necessarily have the 
same rules apply the exact same way, because we simply don't 
have the ability to add three more people into a compliance 
department. Why? Simply because we're adding on 15 telephone 
books on new, the size of new regulation onto things. That, 
frankly, if they had just implemented the rules that were on 
the books as they were, we would have been able to avoid a 
number of these things.
    So I'm pleased to be here today and I appreciate Chairwoman 
Capito's willingness to take this subcommittee that I proudly 
serve on. Sean and I sit next to each other on the committee, 
and we compare notes on a lot of different things.
    I'm still trying to catch up to him. I only have five kids; 
he has six.
    But it truly is a pleasure to be here, and I appreciate 
your willingness to share your experiences so that I can take 
that back, as well as the rest of the members of this 
committee.
    So thank you very much. I yield back.
    Chairwoman Capito. Thank you.
    And I would like to welcome and thank Mr. Renacci. He's the 
vice chairman of the subcommittee and has a wealth of 
experience in a lot of different areas ranging from small 
business to financial institutions, as well.
    So welcome, Mr. Renacci from Ohio.
    Mr. Renacci. Thank you, Madam Chairwoman.
    I want to also thank all of you for being here today. I 
want to thank Congressman Duffy for having us here, and my 
colleague Congressman Huizenga for being here, too.
    It's important that we continue to hear, outside of 
Washington, what's going on. Now, for me, because as a CPA, as 
a small business owner, as a small town mayor at one point in 
time, I have created jobs and I understand the problems with 
financing.
    But what I really never did understand was why Washington 
put so many constraints on the financing for small banks and 
small credit unions and small business owners because that is 
the lifeblood, as we all know, of small business.
    And it's been interesting as, also, a board member of a 
small community bank in my community, to see what the Dodd-
Frank legislation has done to many of the small community 
banks, whether it comes to the regulations, whether it comes to 
the appraisals, all of those things that are putting 
constraints on the ability for our businesses, our small 
businesses, to get the credit they need.
    It's interesting, and I use this all the time, what happens 
sometimes in government--I know, in somebody's testimony, as I 
read that, we talked about the blanket effect. You take a 
blanket and throw it over everything.
    And even though we did have people and companies and large 
banks in the industry that caused us problems in 2008, this 
blanket has been thrown over everyone, and it's causing 
constraints now that are occurring that are not allowing the 
capital to flow out to the small business owners.
    I was also a small town fireman. And one thing I have used 
as an example many, many times, and sometimes I think 
Washington does this; I always remember the theory that you run 
into a building--this is before I had the training--and you 
start dumping water on the fire, and that's the answer; you 
just dump as much water as you can.
    But as a fireman, and anyone who has ever really fought a 
fire, you realize that the more water you dump on it, the more 
regulations you put on it, sometimes the fire jumps in other 
places. And sometimes it jumps behind you, sometimes it jumps 
around you, and sometimes you can cause a building to actually 
burn down quicker.
    With that in mind, I went to Washington thinking, why do we 
do this. It has been an interesting learning experience for the 
last 9 or 10 months because I do believe we need to be cautious 
on how much water we dump on the fire. When you do that, so 
many other things can happen.
    I'm really interested in hearing from the panelists here 
today some of the issues I know they're running into and some 
of the things that we can do to maybe change some of the 
direction we have in Washington.
    I know the panel here--we have been working very hard, 
looking at a lot of issues with Dodd-Frank.
    And again, there are probably some things that were 
necessary, but clearly, throwing the blanket over everything is 
not the right answer.
    So, again, this is my first visit to central Wisconsin. 
Although, being from Ohio, as we all know, the Buckeyes ended 
up beating Wisconsin this weekend. It was kind of a fluke play.
    But I was also from Pittsburgh originally, and you guys--
the Packers were able to beat the Steelers in the Super Bowl. 
So we're back and forth, one on one.
    Maybe this year, the Steelers will get back with the 
Packers, and we'll see what happens.
    But I do appreciate being here and I look forward to your 
testimony.
    Thank you so much.
    Chairwoman Capito. Thank you.
    We will now get to the testimony of the witnesses. And I'm 
going to ask Mr. Duffy to introduce the witnesses.
    Mr. Duffy?
    Mr. Duffy. Thank you, Madam Chairwoman.
    We'll start over here and go around. I do appreciate the 
panel coming in and sharing their testimony. I think it's a 
great panel that has nice breadth, involving different sectors.
    Let's start off with Pat Wesenberg. She is the president 
and CEO of Central City Credit Union in Stevens Point. Central 
City is a $179 million credit union serving 22,000 members. 
Thank you for being here, Pat.
    We have Mark Willer, who is the chief operating officer for 
Royal Credit Union in Eau Claire. He's responsible for deposits 
and lending that affect 140,000 members. So thank you for 
coming over this morning, Mark. We appreciate that.
    Marty Reinhart, he is the president and CEO of Heritage 
Bank in Spencer. Heritage is a $100 million asset community 
bank located right here in central Wisconsin.
    And then Todd Nagel, maybe a little bit bigger bank, is at 
River Valley right here in Wausau. They have 18 branches 
throughout central Wisconsin and the UP of Michigan. So thank 
you all for coming in.
    And then, she might have traveled the furthest to get here, 
Bethany Sanchez, who came up--I think you're in Milwaukee; is 
that right?
    Ms. Sanchez. That's right.
    Mr. Duffy. She came up from Milwaukee. She directs the Fair 
Lending Program at the Metropolitan Milwaukee Fair Housing 
Council. That's a 34-year nonprofit civil rights organization 
serving the State of Wisconsin with offices in Milwaukee, 
Appleton, and Madison. So thanks for making the drive up today.
    And then, we have Kurt Bauer. He is the CEO of Wisconsin 
Manufacturers & Commerce. WMC is Wisconsin's largest business 
and industry trade association.
    And then we have Al Erickson. He is the Mayor of Mosinee, 
but he also owns various businesses in the area and also serves 
as chairman of the economic development committee for the City, 
and, I think, has a wide range of background and unique 
perspectives.
    And last but not least, Mark Matthiae is the owner of 
Crystal Finishing Systems in Schofield. He and his wife, Laurie 
are a true story of a couple of folks who lived the American 
dream, worked hard, invested, and grew what started out as a 
two employee firm that began with $6,000, grew it into an $80 
million business, employing 400 people right here in central 
Wisconsin.
    It started in 1993. I had a chance to, a couple of weeks 
ago, go tour the facility, and they're doing a fantastic job 
and I think have some unique insights into what's happening 
here with capital flow.
    So with that, I appreciate the panel coming in. And I turn 
it back over to Chairwoman Capito.
    Chairwoman Capito. Thank you. And again, welcome.
    I have a listing here of an order, and you're not seated in 
order. So I'm going to go by my listing, and I'm going to 
recognize the Honorable Al Erickson, the Mayor of Mosinee, 
Wisconsin.
    Welcome, Mr. Mayor.

  STATEMENT OF THE HONORABLE ALAN ERICKSON, MAYOR OF MOSINEE, 
                           WISCONSIN

    Mr. Erickson. Thank you, Madam Chairwoman.
    I wear two hats as I sit here before you today. First, I am 
here as a member of the small business world of north central 
Wisconsin.
    I feel the pain, as others do, of the decreasing revenues 
and increasing expenses. As the owner of Small Business World 
Web Hosting and Design, I witness the decline in the amount of 
money spent in the area of promotion and--for small business, 
even though these are the times when promotion is essential, 
businesses find paying operational costs as critical.
    As the owner of Little Bull Falls Trolley Company, I have 
realized a major decline in the use of unique transportation 
opportunities for weddings and special events.
    As the owner of three commercial buildings which offer 
lease space or retail and/or service business, I, as well as 
others, are faced with the challenge of obtaining and retaining 
tenants.
    Secondly, I am here with you today as the mayor of the City 
of Mosinee and the chairman of the economic development 
committee for the City.
    We, as a City, have been aggressive in our economic 
development efforts in all commercial and downtown development. 
Within the last 2 years, at least 3 large commercial 
developments have been stalled in the City of Mosinee because 
they were unable to obtain the necessary financing.
    Small businesses have had difficulty obtaining the credit 
that they need to expand, and in some cases, even to continue 
operating.
    I believe most small business owners are excited about the 
new future but can't get the loans they need to grow.
    But the economic recovery is pinned to job creation, and 
job creation is pinned to entrepreneurship and small business. 
And small business owners are having difficulty having the 
confidence--they do have the confidence, I'm sorry, to invest 
in and grow their businesses over the long haul.
    Many small businesses have been operating at a loss for the 
last couple of years and are unable to get bank loans. They are 
sitting on land and buildings that they own which are next to 
impossible to sell in this economy.
    If they close down part of their operation to save 
operational costs, this also means that they limit production 
and eliminate jobs.
    Banks are pointing to two reasons for the drop in real 
loans: lack of collateral; and renewed sense of risk aversion.
    For lack of collateral, business owners who were once able 
to borrow against assets--their land, building or equipment--
have seen their property values diminish along with everyone 
else.
    As far as risk goes, banks say that regulators are getting 
in the way of them making good loans. For business owners, 
though, those problems are arguable.
    But while banks are closing the windows for small business 
loans, they happily open the back door to any business that 
wants that money in the form of a credit card loan.
    For a small business, credit card terms are generally far 
worse than regular bank loans. Most small businesses rely on 
lenders to provide the capital they need to either open a 
business or to finance capital improvements.
    Without loans, many small business owners would be unable 
to realize their dreams of opening business, renovating their 
buildings, or expanding their operations.
    But long-term planning isn't possible with credit card 
financing. When they need to get together money to keep going 
and the loan isn't there, there aren't many options that don't 
involve plastic.
    Bankers worry that companies won't be able to find access 
to capital, which is ironic, given the banks are primarily 
responsible for lending out that capital. Increasingly, bankers 
worry government regulation will become a major issue for small 
business.
    I'm not a believer in the blanket approach to management 
decision-making. Who gets hurt? Those who did it right. Who 
suffers? All those people and the organizations they serve.
    We need to stimulate the system from the bottom up. It's 
about jobs. We create jobs by investing.
    I believe our economy would be better stimulated if low-
interest loans are made available for small business.
    I would like to ask why the government hasn't provided 
stimulus for smaller businesses. Government needs to rethink 
the concept of trickle-down economics.
    Thank you.
    [The prepared statement of Mayor Erickson can be found on 
page 50 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness is Mr. Marty Reinhart, president of the 
Heritage Bank. Welcome, Mr. Reinhart.
    Mr. Reinhart. Thank you.

     STATEMENT OF MARTY REINHART, PRESIDENT, HERITAGE BANK

    Mr. Reinhart. Thank you, Chairwoman Capito, amd members of 
the subcommittee. I'm Marty Reinhart, president of Heritage 
Bank, a $100 million community bank located in central 
Wisconsin, formed in 1908. So, we have been around for a while.
    I'm pleased to be here today to represent the 200 members 
of the Community Bankers of Wisconsin.
    Thank you for convening this field hearing examining how 
new regulations are impacting the financial institutions and 
small businesses and consumers in our area.
    Community banks are playing a significant role in the 
broad-based economic recovery of our Nation because we serve 
rural, small town, and suburban customers and markets that are 
not comprehensively served by larger banks.
    Localized credit decisions made one by one by thousands of 
community bankers support small businesses, economic growth, 
and job creation.
    While there has been publicity that banks have been 
unwilling to lend, a recent report published by the Community 
Bankers of Wisconsin shows banks with assets less than $10 
billion, community banks, have an increase of over 4 percent in 
commercial and industrial loans, as well as small business 
loans of a million dollars or less, year over year.
    And I'm pleased to say that, over the past 2\1/2\ years, 
Heritage Bank has increased our RSA loans by over 30 percent.
    I recognize the seriousness of the financial situation that 
existed prior to the passage of the Wall Street Reform Act and 
the need for Congress to take action.
    The community banking industry appreciates the efforts that 
were made to distinguish between the large money center banks 
and smaller community banks. The new system for computing FDIC 
premiums will lower assessments for smaller community banks for 
98 percent of the institutions throughout the country.
    And allowing community banks to be exempt from examination 
from the Consumer Financial Protection Bureau maintains the 
current examination and oversight conditions that exist today.
    And finally, making the FDIC insurance coverage of $250,000 
permanent benefits not only the banking industry, but it eases 
concerns our depositors have about their money being safe.
    Having said this, with regulatory and paperwork 
requirements, both new and old, there continues to be a 
disproportionate burden placed on the banking industry and 
community banks.
    The uncertainty associated with how new regulations will be 
written and interpreted causes anxiety about the future of our 
industry and our ability to compete.
    While there are many examples of costs associated with 
regulations, I would like to highlight some of those associated 
with a residential mortgage loan.
    The application process has been changed several times 
within the HUD regulations and RESPA requirements. The process 
for ordering and reviewing appraisals has become more 
cumbersome and involved.
    Extra forms, early disclosures, and having to register and 
fingertip our mortgage loan officers, adds to the costs 
associated with this type of lending. It creates delays, 
additional costs, and confusion on the part of the borrower, 
and a typical mortgage file has more than 100 pages by the time 
the loan is closed.
    While it's too early to tell how many of the new 
regulations of the Dodd-Frank Wall Street Reform Act will 
affect community banks, one source of concern is the new 
Consumer Financial Protection Bureau.
    We remain concerned about regulation to which community 
banks will be subject.
    In particular, we are hoping that we will not have to 
implement new rules that will adversely impact the ability of 
community banks to customize products to meet customer needs.
    On behalf of the Community Bankers of Wisconsin, I would 
like to take this opportunity to thank Representative Duffy, 
Chairwoman Capito, and other members of the subcommittee who 
support H.R. 1315, the Consumer Financial Protection Safety and 
Soundness Improvement Act, which passed the House. Thank you 
for that.
    While there is recognition that there has been some 
improvement as the number of problem banks has diminished, the 
current examination environment is hampering lending at the 
very time that the bank credit is needed to sustain economic 
recovery.
    Community bankers nationwide have reported that bank 
regulators are often demanding significant capital increases 
above the minimum regulatory levels established for a well-
capitalized bank.
    As a result, banks are forced to pass deny sound loan 
opportunities in order to preserve capital. There has to be a 
reasonable regulatory balance.
    What is particularly frustrating to us is the field 
examination practices are often not consistent with directives 
from Washington.
    We understand that examiners have a difficult job, and the 
stakes were raised sharply by the financial crisis, but I 
believe many examiners have overreacted with adverse 
consequences for banks and the economy.
    I understand examiners are not evaluated on the bank's 
contributions to support the local economy. They have become 
overly cautious in their analysis of the bank's condition. And 
as a result, an examiner's incentive is to err on the side of 
writing down loans or demanding additional capital.
    Finally, I would like to advocate for an important piece of 
legislation that would help to relieve community banks of 
certain burdensome regulations they face, both in examination 
and compliance, and help community banks serve customers.
    The Communities First Act would improve the regulatory 
environment and community bank viability to the benefit of 
their customers and communities, and has gained support of 34 
State community banking associations.
    There's no question that the current regulatory and 
examination environment is an impediment to the flow of credit 
that will create jobs and advance the economic recovery.
    I appreciate the opportunity to testify today. Thank you.
    [The prepared statement of Mr. Reinhart can be found on 
page 58 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness will be Mr. Todd Nagel, president of the 
River Valley Bank.
    Welcome, Mr. Nagel.

     STATEMENT OF TODD NAGEL, PRESIDENT, RIVER VALLEY BANK

    Mr. Nagel. Thank you, Chairwoman Capito, and members of the 
subcommittee. My name is Todd Nagel, and I am president of 
River Valley Bank. We're a $957 million asset bank based here 
in Wausau, Wisconsin.
    Thank you for taking the time to bring the House Financial 
Services Committee to your district.
    Wisconsin is home to 270 banks which employ 30,000 people. 
Wisconsin banks are performing better than their peers and have 
the fourth greatest loan-to-deposit ratio in the Nation.
    Wisconsin banks help young people buy their first cars, we 
help newlyweds take the first step toward the dream of owning 
their own home, we help entrepreneurs turn ideas into small 
businesses.
    We live among our customers, employees, and shareholders, 
and we are always available during good times and bad, because 
we recognize the value that banks play in the community.
    That important service to our neighbors is imperiled, 
however, by the excessive government regulation coming from 
Washington.
    The amount, intensity and uncertainty of new Federal 
regulations, chiefly the Dodd-Frank Act, have forced banks to 
allocate an enormous amount of time and resources to 
compliance, and away from our primary mission of serving our 
customers.
    Wisconsin banks are not Wall Street investment firms, 
despite the fact that the media and others generically refer to 
all financial firms as banks.
    In Wisconsin, you can't call yourself a bank unless your 
deposits are insured by the Federal Deposit Insurance 
Corporation. Traditional banks are insured depositories and 
lenders; investment banks are the Wall Street traders.
    Some may argue that this is splitting hairs when we point 
out the difference. We disagree.
    We must continue pointing out the difference between 
traditional banks and Wall Street investment firms because the 
distinction continuation is lost on some in Washington.
    Federal laws meant to regulate Wall Street ought to not 
adversely impact Main Street, but that is precisely what is 
happening.
    Uncertainty about what expensive new regulation will come 
out of the growing Federal bureaucracy hampers our ability to 
lend, which, in turn, stifles job growth in our communities.
    I would like to give some examples of the effect on 
regulatory burden. This economy needs capital investment, as 
everyone has said here today, by small businesses to create 
jobs.
    Today, banks are required to maintain the highest liquidity 
and capital ratios in the history of banking. That money is 
just sitting there. What does that mean? In our case, it 
relates to capital. It restricts $20 million to $40 million of 
capital investment into loans. It is capital that is just 
sitting there due to the higher ratios.
    We want to make more loans. We need incentive to lend, not 
fear. We can't save more money in the form of capital and take 
more risk in the form of loans. The math simply does not work.
    Regarding lending decisions, today, unfortunately, we are 
not making lending decisions on the financial performance or 
character of borrowers. Rather, we are only giving loans that 
will make the regulators happy in order to not be criticized in 
our next field exam. When a loan is criticized, we have to 
reserve additional capital expense for each loan.
    Appraisal requirements, which you referred to: Our 
institution has $780 million in loans; $575 million of those 
loans are to small businesses; most of them are secured by 
commercial real estate.
    The problem: We keep terms and balloons short on these 
loans to match-fund the obligation of the market conditions. 
That is pretty simple banking. What this means is, re-evaluate 
the loan at the time of the balloon or renewal. Now, we are 
required to get a new appraisal, which costs the customer 
money.
    When the real estate value is less, which is most of the 
time, an examiner, a field examiner, will criticize the loan, 
effectively paralyzing the borrower, which forces us to start 
liquidation on a substandard loan, even if it is performing. In 
other words, they're making their payments.
    A quick example is, we have a $100,000 appraisal on a piece 
of commercial real estate. We lent them $80,000. We get a new 
appraisal that comes in at $70,000. They're making their 
payments, and now we have a criticized loan. That makes no 
sense.
    Consumer home mortgages: Today, we get penalized by 
regulators for helping homeowners stay in their homes. If we 
try to extend the term, lower the rate, we now have a 
criticized or substandard loan, which means we must reserve 
more loan dollars for the loan.
    Regulators would rather us liquidate the loan and get the 
toxic asset off of our books. We want to help people stay in 
their homes and stop criticizing restructured loans.
    Due to new residential home mortgage reform, again, that 
Marty referred to, banks must send out 20 to 30 documents for a 
new mortgage application within 3 days of applying.
    If the customer changes their mind and they want to borrow 
more money, which we like to do, we have to redisclose those 
documents. At closing, you will have an additional 20 to 30 
documents.
    This regulation was supposed to protect the consumer and 
create a more transparent process. Sixty documents is not 
transparency; it's regulatory burden.
    Some quick solutions: Create a one-page truth-in-lending 
disclosure that shows the fees the customer will pay, the 
interest rate on the loan, and how much profit the bank makes. 
Then, at the closing, have them sign a note and a mortgage. 
Three documents.
    What can you do? Capital: For banks that grow their loan 
portfolios, incent them to have a lower cap ratio. If they're 
taking the risk and they're out there investing in America, let 
them lower their capital ratios.
    Regarding liquidity: Incent banks to deploy their liquidity 
into the asset loan growth.
    Appraisal requirements: Simply stop requiring new 
evaluations on performing loans.
    Troubled debt restructure: Use this already-established 
structure to incent banks to help borrowers who are 
experiencing financial stress. Instead of making this a 
criticized category, make it a good category, a thank-you-for-
helping-your-neighbors category.
    Restrict the category to 10 percent of asset size and put a 
24 limit on construction.
    Again, thank you for allowing me the opportunity to speak 
today, and thank you for coming to central Wisconsin.
    [The prepared statement of Mr. Nagel can be found on page 
56 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness is Ms. Pat Wesenberg, president and chief 
executive officer, Central City Credit Union. Welcome.

STATEMENT OF PATRICIA WESENBERG, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, CENTRAL CITY CREDIT UNION

    Ms. Wesenberg. Thank you.
    Chairwoman Capito and members of the subcommittee, thank 
you very much for the opportunity to testify at today's 
hearing.
    As was stated before, I am the chief executive officer at 
Central City Credit Union, which is a $179 million credit 
union, and we serve 22,000 members in the central Wisconsin 
area.
    I am also a member of the board of directors of the Credit 
Union National Association.
    As you know, credit unions did not cause the financial 
crisis, but we have been affected by it. In the wake of the 
financial crisis, credit unions face what might best be 
described as a crisis of creeping complexity related to 
regulatory burden.
    It is not necessarily any one single regulation that is 
overly burdensome; but rather, the totality of all regulations, 
the frequency with which the regulations change, and sometimes 
varying application of the regulation by field examiners, which 
conflicts with or expands upon the original intent of the 
regulation.
    The barrage of regulations creates an unnecessary burden 
without any measure of the effectiveness of these changes. They 
are costly, both in time and personnel, to implement. And they 
are confusing to our membership.
    We would prefer to spend our resources on promoting our 
mission of financial literacy and the development of new 
products to serve the needs of our members within our local 
communities.
    However, the recent increase in regulatory burden has 
forced us to hire a full-time compliance person, just to stay 
on top of all the changes.
    In addition to that, my vice president of lending has 
dedicated about one-third of her time to all of the changes 
that impact the lending staff. This is valuable time that could 
be spent trying to develop products that would help serve our 
membership better during these extremely difficult times.
    The financial cost to Central City Credit Union doesn't end 
with increased staffing costs. There are also costs to update 
all of our software to make sure our forms are in compliance.
    For a large financial institution, the compliance costs, 
even if large, are just a very small slice of their total 
costs. For smaller institutions, like my credit union, they 
represent a huge increase in relative costs.
    While I realize the basis of the changes is to help the 
consumer be better informed, today our biggest regulatory 
obstacles involve keeping up with ongoing and piecemeal changes 
to the various consumer protection regulations.
    If regulations continue to come from so many directions, I 
don't see how we will be able to keep up.
    As an example of the frequency in which the regulatory 
requirements change, in January of 2010, financial institutions 
were required to completely amend and overhaul the RESPA Good 
Faith Estimate and comply with new disclosure requirements 
regarding the Department of Housing and Urban Development, HUD, 
settlement statements.
    This took a tremendous amount of staff time to retrain 
mortgage lending and compliance personnel to adapt our systems 
and staff to these regulatory changes.
    On the heels of our completed implementation throughout the 
spring of 2010, HUD issued a series of frequently-asked 
questions documents, some 50-plus pages in each version with 
yet additional instructions and clarifications as to how these 
particular forms were to be completed.
    And now, not even 2 years later, these forms are yet again 
being completely revised and amended, with new regulations 
being written to implement these changes.
    There are costs associated with any change in regulation, 
even if the intent is to reduce regulatory burden.
    Updating and changing documents on a continual basis is 
hitting the budget hard, especially for smaller financial 
institutions, not to mention the time spent by staff to try to 
meet deadlines, take additional time to explain the new forms 
to our members, and the additional time and resources that are 
required for training and education.
    While the new Consumer Financial Protection Bureau seems to 
be approaching its job with a watchful eye towards minimizing 
regulations and has sought ongoing input from credit unions on 
its work, concerns remain.
    The CFPB rules may not necessarily change how credit unions 
operate; but if we are not careful, they could result in 
increased costs associated with changing processes, 
documentation, and training to comply with new rules.
    That is why credit unions, through our national trade 
association, have been working closely with the CFPB staff 
during this transition period, and we have encouraged them to 
establish an office of regulatory burden monitoring. We are 
pleased that they have established an office of community banks 
and credit unions.
    The CFPB was designed to regulate instead of, and not in 
addition to, the Federal Reserve Board and other regulators.
    With respect to the 19 consumer protection laws that it now 
implements under the Dodd-Frank Act, credit unions are 
concerned with how the CFPB and the NCUA will coordinate 
regarding the implementation of consumer financial protection 
laws.
    There are also concerns about whether credit unions will be 
subjected to burdensome data collection requirements, and how 
NCUA's own office of consumer protection fits into the consumer 
protection regulatory regime.
    CUNA has urged the NCUA to take several steps to improve 
the regulatory process and relieve credit unions' regulatory 
burden.
    And I would ask that a copy of the letter that CUNA sent to 
NCUA Chairman Deborah Matz be inserted into the record.
    Chairwoman Capito. Without objection, it is so ordered.
    Ms. Wesenberg. Thank you.
    Among other recommendations, we have called on the NCUA to 
impose a moratorium on new regulations for at least the next 6 
months.
    We have also called on the agency to reinstate the 
Regulatory Flexibility Program, which provides well-managed and 
well-capitalized credit unions an exemption from certain 
regulations which are not statutorily required.
    We believe that there is considerable merit to these 
recommendations because there are no new material systemic 
problems within the credit union system.
    And current safety and soundness concerns with a natural 
person and corporate credit persons are being well-managed.
    Madam Chairwoman, thank you very much for coming to 
Wisconsin and holding this hearing.
    Credit unions remain committed to serving their members. 
The ever-increasing regulatory burdens we have make it very 
difficult.
    We appreciate the attention you're giving to this issue and 
look forward to working with you to solve the problem.
    [The prepared statement of Ms. Wesenberg can be found on 
page 65 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness is Mr. Mark Willer, who is chief operating 
officer of the Royal Credit Union. Welcome.

STATEMENT OF MARK WILLER, CHIEF OPERATING OFFICER, ROYAL CREDIT 
                             UNION

    Mr. Willer. Thank you.
    Welcome to all of you. Thank you, Representative Duffy, for 
coordinating this subcommittee.
    I welcome all the Representatives from our neighboring 
States. It's great to have you here. We would welcome you back 
in January, when it's a little colder, as well.
    But I appreciate the opportunity to testify before the 
subcommittee.
    Royal Credit Union is a community-based credit union 
serving 140,000 consumers in 18 counties in Wisconsin, in west 
central Wisconsin, and 12 counties in eastern Minnesota.
    Our members, as well as their financial services needs, are 
diverse.
    In our statement of commitment developed by our board of 
directors and management team, we state, ``As a member-owned, 
not-for-profit financial cooperative, RCU is committed to our 
members. We will uphold our fundamental responsibility to 
actively serve people within our field of membership and in the 
communities in which we live. We will continue to deliver a 
wide range of products and services to the diverse economic 
needs and social make-up of our members and potential 
members.''
    RCU's strategic plan includes efforts that encourage our 
members to become financially self-sufficient and successful. 
We will continue to place a high importance on consumer 
education and financial thrift.
    RCU strives to offer services designed to improve the 
economic and social well-being of all members from all socio-
economic backgrounds and to return financial value to all those 
who participate in our member-owned financial cooperative.
    The current regulatory environment creates a significant 
challenge to achieve the statement of commitment.
    As a result of the ongoing economic crisis, Congress has 
enacted legislation that has created a significant burden on 
the financial services marketplace. The well-intentioned 
legislation has had significant unintended consequences that 
confuse and financially harm the very consumers it's intended 
to protect.
    The regulatory pendulum has swung so far that the financial 
institutions are faced with eliminating services or charging 
for them to offset the cost and increased regulatory burden of 
providing them.
    Many of the new regulations are intended to address abuses 
in the financial marketplace or prevent unethical financial 
practices that harm consumers.
    For example, the new rules that are being developed on a 
consumer's ability to repay mortgage loans and debit 
interchange provisions in the Dodd-Frank Act were advocated to 
correct problems that some may have engaged in.
    Yet, I would challenge any member of this subcommittee to 
find a single local community credit union or community bank 
that has been accused of such practices. To the contrary, we 
are seen as the trusted local financial services provider.
    Unfortunately, new regulations do not consider this. As a 
result, costs to provide services have increased. 
Unfortunately, these costs are passed on to our members.
    Costs include training and education for credit union 
personnel, forms or form revisions to reflect rule changes, 
brochures, software programming costs, and compliance and 
auditing expenses, just to name a few.
    The consumers are confused.
    Mr. Reinhart pointed out the number of pages now required 
for a mortgage loan. I assure you, consumers have a hard time 
wading through a one- or two-page application, let alone 30 
pages' worth of disclosures.
    I can provide a sample real estate file, as well, to show 
the difference between an auto loan and an example of a 
mortgage loan; it is significantly different.
    The cost of regulatory burdens to credit unions has been 
enormous. At RCU, we have an executive vice president who 
oversees our compliance function.
    As a result of the increase in regulations and rule 
changes, we recently hired a full-time compliance specialist. 
This is in addition to an internal manager that we have and two 
internal auditors.
    Additionally, RCU hires multiple third-party providers to 
ensure compliance with any and all regulatory requirements. 
These are real costs that ultimately are passed on to the 
consumer.
    As we are coming out of the financial crisis, we have a new 
government agency to deal with: The Consumer Financial 
Protection Bureau.
    Like many of my colleagues in the credit union system, I'm 
afraid the CFPB will only add a layer of regulation, not 
replace a layer of regulation, as it was intended to do.
    We understand that the intentions are to protect the 
consumer. Unfortunately, history has shown that regulations, 
rules, and bureaucracies reach beyond their original 
intentions.
    We hope Congress will exercise prudent oversight of the 
CFPB, especially in the early days of its operations.
    Thank you for the opportunity to provide this testimony.
    [The prepared statement of Mr. Willer can be found on page 
68 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness will be Mr. Mark Matthiae, president of 
Crystal Finishing Systems.
    Did I say your last name correctly?
    Mr. Matthiae. It's ``Matthiae.''
    Chairwoman Capito. ``Matthiae.'' I made it French, I think. 
Welcome.
    Mr. Matthiae. It's actually German.
    Chairwoman Capito. German.
    Mr. Matthiae. Yes.

  STATEMENT OF MARK A. MATTHIAE, PRESIDENT, CRYSTAL FINISHING 
                            SYSTEMS

    Mr. Matthiae. Good morning. I would like to thank 
Chairwoman Capito and the members of the subcommittee for the 
invitation and for allowing me to speak to you this morning.
    My wife and I have lived the American dream, starting small 
businesses, creating jobs, supporting our family and community, 
and building our dream home.
    So I'm giving you our perspective not only on small 
business and banking, but also as homeowners.
    We have enjoyed the success with the help of our local 
banking system, the SBA, Wisconsin Business Development 
Corporation, McDEVCO Corporation, and a great customer base.
    Our core business is aluminum extrusion, painting, powder 
coating, and fabrication, along with distribution of our 
customers' products.
    Our current business employs 430 full-time employees, with 
an annual payroll over $13 million.
    Our company annually pays, in real estate taxes, our share 
of payroll taxes, fuel tax, over $2.2 million before our 
company makes one dime of profit.
    I feel this is important, as a perception of the public 
today is that businesses and business owners do not pay their 
fair share of taxes.
    If we are fortunate to have profits, these profits result 
in additional tax contributions, as well.
    During the past 3 years, we have employed as many as 468 
full-time staff and as low as 305 due to the severe economic 
conditions. We have gone from a business that banks were 
competing to do business with to a company that struggled to 
keep enough financing to keep our business running.
    The large banks simply look at either your market segment, 
your ratios after current appraisals and past history; 
experience or track record mean nothing.
    I have seen a true shift in the current banking climate 
that has American homeowners and small business owners worried 
about even renewing a loan, let alone seeking new money for 
updates or expansion.
    In today's competitive business climate, locally, 
nationwide, and worldwide, without constant upgrades to 
equipment, infrastructure, and facilities, it is nearly 
impossible to grow a business, create jobs, or simply remodel 
your home.
    We have spent countless hours on renewals, thousands of 
dollars in fees, appraisals, just because we are looked at 
being equal to that risky short-term investment return greed of 
Wall Street when all we want to do is run a business with good 
long-term business plans.
    But the pressure on the banks currently today to simply 
look at the bottom-line ratios along with deflated appraisals 
on real estate, equipment, and property, both small businesses 
and homeowners are losing their equity.
    This loss of equity is a direct result of a lack of 
consumer confidence and a lack of consumer demand, resulting in 
more economic pressure on businesses and workers alike.
    As a homeowner, you fear to do a home loan, only to find 
out not only do you not qualify for more money against the 
equity you thought you had in your home, you may find out your 
loan is undercollateralized and the bank may actually ask you 
to write a check to pay the loan down further.
    By forcing banks into the situation of analyzing loans not 
on the merit of the project or the past relationship of the 
customer, you are ultimately compounding the already depressed 
housing market and the commercial real estate market alike.
    If banks are no longer able to do the right thing with 
their customers and negotiate payment terms, etc., without 
having to be punished, our economy will not recover anytime 
soon.
    If this same climate existed when Laurie and I started our 
business, there would be no Crystal Finishing, there would be 
no 430 jobs today, no $13 million payroll, and no tax 
contribution of $2.2 million annually from our company, before 
profits.
    I again would like to thank you for allowing me the time to 
share our experience with you.
    [The prepared statement of Mr. Matthiae can be found on 
page 52 of the appendix.]
    Chairwoman Capito. Thank you very much.
    Our next witness is Mr. Kurt Bauer, who is president of the 
Wisconsin Manufacturers & Commerce.
    Welcome, Mr. Bauer.

STATEMENT OF KURT R. BAUER, PRESIDENT/CHIEF EXECUTIVE OFFICER, 
               WISCONSIN MANUFACTURERS & COMMERCE

    Mr. Bauer. Thank you.
    Chairwoman Capito and members of the subcommittee, I very 
much appreciate you coming to Wisconsin, although I could have 
gone without knowing that two of the Members were Ohio State 
and Michigan State fans, respectively. It was a tough 2 
weekends in my household.
    I am Kurt Bauer, president/CEO of Wisconsin Manufacturers & 
Commerce. We're the largest business trade association in the 
State. We represent about 3,500 businesses from all sectors of 
the economy.
    The vast majority of our members, however, are small 
businesses, under 50 employees; and about 53 percent of our 
members are in the manufacturing sector, which is Wisconsin's 
largest business sector.
    In preparing my remarks for today, I went back and I looked 
at the surveys that we do of our membership and also of our 
chamber of commerce partners to see whether or not credit 
availability was an issue that was raised. And the answer was 
``no.''
    There are a lot of things that they're concerned about, but 
credit availability has not been a major one.
    I also went and looked at the U.S. Chamber of Commerce. 
They do a small business survey on a quarterly basis. Credit 
availability was not mentioned.
    And then also, we have a partnership with the National 
Association of Manufacturers, and they do a survey quarterly, 
as well, with IndustryWeek.
    Their most recent one did show that 6.1 percent of their 
more than 300 small business respondents said that credit 
availability was a challenge.
    So you can see that it's not a major issue that's bubbling 
up to the surface to our membership via our surveys; but having 
said that, we are certainly aware that credit availability is a 
concern.
    We hear anecdotal stories. We had a phone call to the 
office last week on the topic. And it's something that we're 
certainly concerned about.
    I should have mentioned that I spent 18 years in the 
banking business prior to coming to WMC. So I'm very much 
familiar with Dodd-Frank and how massive that piece of 
legislation is.
    Forgive me. I don't remember exactly how large Glass-
Steagall was, but I often like to try and compare the two, 
because Glass-Steagall was another landmark piece of banking 
legislation that was passed in reaction to a crisis; and I 
believe that was around 30 pages, or certainly nowhere near the 
2,300 pages of Dodd-Frank.
    Mr. Duffy. It was 78 pages, I believe.
    Mr. Bauer. Seventy-eight pages, okay. Very good.
    So we're aware that there are concerns. And we're 
monitoring it very closely because, like the other panelists 
have said, credit is, without a doubt, the lifeblood of our 
economy.
    And without having partnerships with financial 
institutions, particularly our small member businesses, we 
would not be able to be successful. I think that was very well 
pointed out by Mr. Matthiae.
    I think it's also important to point out here that it's not 
just Dodd-Frank. New regulations certainly are a problem, but 
you have to also look at the examination environment, and that 
has been expressed by the bankers and credit union panelists.
    But you are seeing a lot of regulation by fiat, by 
examiners in the field, and of course, by the regulatory 
agencies themselves with the reinterpretations of rules.
    And I imagine that they're reacting to a lot of the 
pressure that they feel for supposedly having allowed the 
financial crisis to occur, which I don't think is a fair 
criticism on their part because I think that there are a lot of 
different factors that caused the financial crisis. And there's 
a lot of blame that can be pointed in a number of different 
directions.
    But from our perspective at WMC, I think we're seeing a bit 
of an overreaction, which has been compounded by 
overregulation. And I'm afraid to say, also, that scenario of 
overreaction, overregulation is not unique to the banking 
sector.
    We're seeing that, as well, in some of the other areas that 
we monitor at the WMC such as environmental protection, OSHA 
regulations, health care reform, etc.
    So from our perspective, we have a broader view, and Dodd-
Frank is certainly something that very much concerns us, but I 
think it's all part of this deluge of regulation coming from 
Washington.
    And I guess my final comment would be that, when I talk to 
my members, it's pretty clear that they believe that Washington 
is the biggest drag on economic recovery, more so than anything 
else that they face.
    Thank you.
    [The prepared statement of Mr. Bauer can be found on page 
48 of the appendix.]
    Chairwoman Capito. Thank you very much.
    Our final panelist is Bethany Sanchez, director of 
community development, Metropolitan Milwaukee Fair Housing 
Council.
    Welcome.

      STATEMENT OF BETHANY SANCHEZ, DIRECTOR OF COMMUNITY 
    DEVELOPMENT, METROPOLITAN MILWAUKEE FAIR HOUSING COUNCIL

    Ms. Sanchez. Thank you, Madam Chairwoman, and members of 
the subcommittee. I appreciate your invitation to come here 
today to provide my perspective on these important issues.
    Let me share with you the basis for my perspective.
    I have worked in the housing and economic development field 
for almost 35 years. In addition to my 10 years at the Fair 
Housing Council, I'm on the board of the Urban Economic 
Development Association of Wisconsin, and I'm the current chair 
of the board of the National Community Reinvestment Coalition.
    The Fair Housing Council works to eliminate discrimination 
and increase housing choice in Wisconsin. My work on this issue 
is important to the Fair Housing Council because increased 
housing choice and healthy communities depend on access to 
reasonably-priced home and small business loan products.
    All of the organizations I'm affiliated with work in 
partnership with small, medium-sized, and large banks, credit 
unions, and other financial institutions. We collaborate on 
projects and policy work that will help create and sustain 
healthy neighborhoods and strong, stable communities across the 
State and the country.
    To answer the credit needs question, yes, there's an unmet 
demand for small business loans and home loans in the 
communities that we serve.
    Small business owners and those who work with them have 
often shared their frustration with me over their lack of 
access to credit and capital.
    And just this past Friday, the need for small business 
loans was again highlighted at a community development forum I 
attended at the Marquette Law School.
    There's also a big demand for home mortgages and for home 
repair loans. But the financial crisis and the uncertainty it 
created has resulted in loans not being made, even to well-
qualified borrowers.
    Regulations can and will help address this need. Federal 
regulations already in place, like the Community Reinvestment 
Act, encourage depository institutions to make home loans and 
small business loans to all sectors of the community, including 
the low- and moderate-income areas that we work to assist.
    CRA does not, as some people insist, force banks to make 
bad loans. On the contrary, it requires safe and sound loans.
    Our experience in Milwaukee and, indeed, the experience of 
organizations across the country has shown that CRA provides 
underserved communities with a mechanism that encourages 
institutions to work with us to do a better job of meeting the 
community needs and to make a profit along the way.
    In addition to CRA regulations, Dodd-Frank will also be 
important to our economy, providing safeguards to borrowers in 
the mortgage market and ensuring that large institutions 
looking to acquire another bank will need to evaluate not only 
the bank's records in CRA assessment areas but whether the 
acquisition would be a significant benefit across the country.
    A month ago, and in testimony at the Federal Reserve, Chris 
Cole, who is a senior vice president of the Independent 
Community Bankers of America, noted the importance of Dodd-
Frank's requirements to consider the extent to which a proposed 
acquisition results in greater or more concentrated risks to 
the stability of the United States banking or financial system.
    In Milwaukee, we know firsthand the impact of creating too-
big-to-fail institutions and allowing them to engage in overly 
risky business practices.
    In Milwaukee County, since 2008, on average, over 500 homes 
per month have gone into foreclosure. Within the City's limits, 
we still have over 2,000 vacant foreclosed homes, and another 
6,200 in the foreclosure process.
    And the foreclosure crisis has affected, as you know, the 
entire economy, creating more job loss.
    Had Dodd-Frank been in place, the damage could have been 
contained. Dodd-Frank's provisions are aimed not only at ending 
too-big-to-fail, but are also designed to level the playing 
field between the mega banks and the rest of the industry, our 
colleagues around the room today, and to provide a way to warn 
of the systemic risk before toxic financial products and those 
activities threaten the economy.
    It was crafted as a response to consumer advocates like me 
and my colleagues at NCRC, as well as small businesses and 
community bankers who had been asking Congress to modernize and 
strengthen financial regulations to ensure that mortgage 
brokers and independent mortgage companies could not continue 
the practices that started this subprime mortgage crisis.
    In tacit acknowledgment that small banks did not cause the 
crisis, most of the provisions of Dodd-Frank apply only to a 
few dozen of the country's largest banks, those with more than 
$50 billion in assets.
    And Dodd-Frank allows community banks to pay lower premiums 
for deposit insurance and to continue to work with their 
existing regulators.
    In some respects, no one likes regulations, even me. 
Complying with regulations and doing reports is not my idea of 
a good time.
    My work days are often spent writing reports to our various 
private and public funding sources, detailing the outcomes of 
our work, which takes away from the time spent actually doing 
the work that I'm funded to do.
    But regulations and reporting provide accountability, 
accountability that in this case is a necessary framework for 
our large, complicated, and interconnected economy.
    The Dodd-Frank law is long and complicated, but please give 
it a little time. Don't throw out the baby with the bathwater. 
Ninety percent of it is yet to be implemented.
    I would support the position articulated at the Fed hearing 
by Chris Cole with the ICBA when he said, ``ICBA strongly 
recommends that the regulators impose a moratorium on all 
acquisitions and mergers involving financial institutions with 
over $100 billion in assets, including Capital One's 
acquisition of ING Direct. This moratorium should continue 
until the banking agencies have finalized all the rules under 
Dodd-Frank.''
    He went on, and that's in the testimony.
    Dodd-Frank's provisions have been characterized by some as 
generating job-killing uncertainty. But as Christopher Dodd 
recently wrote in the Washington Post, ``In fact, it was the 
uncertainty inherent in a nontransparent and reckless financial 
system that made Dodd-Frank necessary in the first place.''
    Dodd went on to say, ``The truth is that the catastrophe 
was years in the making caused by regulatory negligence and 
Wall Street gambling. We can't expect to rebuild our prosperity 
overnight, but we can't rebuild it at all if we let false 
political talking points undermine our efforts to restore 
confidence in our financial system.'' I agree.
    Dodd-Frank was created in response to immense gaps in our 
modern financial system which allowed profits and greed to 
supersede the prudent extension of credit and the systems that 
support that activity.
    Wisconsin residents and the rest of the country need the 
opportunities and safeguards generated by CRA and Dodd-Frank. 
Rather than pushing new legislation that would weaken Dodd-
Frank before it's even fully implemented, please concentrate 
your efforts on helping the CFPB staff to understand the areas 
of concern and assist them as they write rules that can truly 
help everyone.
    I look forward to working with you on that. Thank you very 
much.
    [The prepared statement of Ms. Sanchez can be found on page 
62 of the appendix.]
    Chairwoman Capito. Thank you.
    I would like to thank all the witnesses, and now we're 
going to proceed to the question portion of the hearing. And I 
get to be the first one to ask the questions.
    I'm going to start with a comment, but I'm going to put 
myself on the clock, because I don't want to go past my 5 
minutes of questions.
    In partial response to Ms. Sanchez's 5 minutes of 
testimony, in terms of, was regulation needed? Absolutely. I 
think we agree on that.
    But I think what you heard is the great disconnect. The 
disconnect of what Congressman Duffy alluded to in his opening 
statements of what was happening on Wall Street and what has 
been happening on Main Street and the frustrations of the 
regulatory burden that we have now pushed, not just to Wall 
Street because of the lack of transparency and accountability, 
but how it's bleeding out into our smaller institutions that 
don't have the capacity and don't, quite frankly, probably need 
the capacity to fulfill a lot of the demands of a large 
regulatory environment.
    So I think that's the balance that we are trying to reach.
    We are having a hearing next week on CFPB in our 
subcommittee--actually, it's this week, on Wednesday. And we'll 
be delving into some of the questions that Ms. Sanchez brought 
up in her testimony.
    I would like to, on my first question, Mayor, you mentioned 
why has government not helped small businesses in terms of 
being able to get financing. And we need to stimulate from the 
bottom up.
    I would say that there was a small business lending 
program, I don't know if any of your financial institutions 
have--did you all, banks, apply for that.
    It was supposed to last for a year, but because the 
regulations only got going 9 months into the year, only 3 
months of lending. It was only $4 billion, which it could have 
been $30 billion. But of that, a lot of the banks that availed 
themselves of the small business lending fund used the Federal 
dollars to pay back the Federal TARP dollars that they owed to 
get out from under the TARP program.
    So there's a big disconnect here, did it ever really reach 
Main Street, and I think the answer is no, it didn't.
    And that's a frustration for us, as policymakers, that 
policies are going forward without legislative approval that 
really are not meeting the challenges.
    What would be a good way for us to stimulate small business 
lending?
    We have heard a lot about forms and all those kinds of 
frustrations. Is it more leeway on--in terms of performing 
loans? We've heard a lot about that in committee. Do you have 
any suggestions on that?
    Mr. Erickson. That's an excellent question.
    I wish I had more suggestions. But I look at it from 
situations I've been involved with from the--I'm also on the 
board of directors of McDEVCO, and, of course, working with our 
small business in our community and other areas.
    But it seems like so many of the programs that are aimed to 
small business are aimed to small businesses who--they say, how 
many jobs are you going to create from it? If you're going to 
get this money, how many jobs are you going to create? If you 
can't demonstrate that you're going to create a number of jobs, 
then it's very difficult to get help.
    Chairwoman Capito. Right.
    Mr. Erickson. And I would like to say that we forget that, 
when we talk a lot of small business, we have a lot of 
operations out there, mom-and-pop operations.
    Again, just for an example, a good friend of mine has a 
florist business, and he's really struggling right now. He has 
40 years in. He's wondering if he's going to lose everything 
he's worked for for 40 years.
    There's no help for the mom-and-pop small business-type 
operations. I just use that for an example because I'm saying--
they say, what kind of jobs do they create?
    If it wasn't for the thousands and thousands of independent 
florists that are all over the country, we wouldn't have the 
floral distribution, we wouldn't the big business we have 
with--that's worldwide as far as buying those products. It all 
starts down with the small business.
    Chairwoman Capito. Right. Right.
    Mr. Erickson. They create a lot of jobs, but their help--
they can't demonstrate and say, I'm going to be able to be 
trained or create a hundred new jobs. No, they're not going to 
be able to do that.
    Chairwoman Capito. In terms of how can we help that person, 
it's creating a good solid economic environment where we're 
growing jobs so more people are buying flowers. And they have 
the confidence that if they extend $100 to a floral arrangement 
for a wedding or whatever, that they're going to be able to pay 
for that and they're not going to--people are hunkered down now 
in their own personal spending habits, and several of you have 
alluded to the lack of confidence.
    Let me ask you, Mr. Matthiae. I tried to make your name 
French.
    You mentioned the SBA. I think, in your statement, you 
mentioned that you have recently gotten an SBA loan. Is that 
correct? Or have you been funded--
    Mr. Matthiae. We have actually used the SBA over the years 
to help get us going and we have used--USDA has been our most 
recent.
    Chairwoman Capito. Rural development?
    Mr. Matthiae. Yes.
    Chairwoman Capito. And has that process been easier? Are 
you still using the same financial institutions, or do you use 
different ones for--
    Mr. Matthiae. We still use some of the same institutions.
    Chairwoman Capito. So we're talking--you mentioned a lack 
of consumer confidence, a lack of demand. Part of it is this 
feeling of the regulatory burden. Part of it is this feeling of 
inability to make new acquisitions.
    As an employer, do you feel hunkered down into your 
business? Are you just sort of in survival mode? Do you feel 
any confidence coming back? How are your long-term and short-
term projections?
    Mr. Matthiae. Short-term, if you would have asked a year 
ago--how long have you been with WMC, Kurt?
    Mr. Bauer. Seven months.
    Mr. Matthiae. Seven months.
    I think, if his survey would have been a year ago, there 
would have been a great deal of frustration over access to 
capital.
    What businesses have done is we have gotten very lean. We 
have actually cut spending. We have had to pull back in a lot 
of areas, and a lot of businesses have stabilized.
    And the businesses that did not address the rapid pullback 
in the economy probably didn't make it.
    Chairwoman Capito. Right.
    Mr. Matthiae. Our business did. We have just enjoyed the 
best year we have ever had as far as growth. The future looks 
great. We're buying equipment, we're building buildings, and 
we're working kind of like we were in 2008 and 2007 and prior.
    I think the biggest concern out there right now is really 
the ratios. And what I think is--it's almost a double standard. 
You take out a 20-year loan and you anticipate paying it off in 
20 years. Nothing's for sale. It's no different than a stock, 
everything is fine.
    But then a third of the way through, they--because the 
economy falls, they do this appraisal out of the blue, and you 
lose all of your equity. That's what's causing the hardships.
    And, I think Todd did a very good job of pointing out the 
fact that businesses can get in big trouble, homeowners can get 
in big trouble, because they need this ratio, 70, 80 percent.
    Chairwoman Capito. Right.
    Mr. Matthiae. If you had 20 percent down, but the real 
estate fell by 25 percent, you haven't even caught up to that 
yet on a normal payment. So you have done nothing but what you 
have signed a contract to do. And now, the rug is kind of 
getting pulled out on a lot of businesses and a lot of 
homeowners.
    And it's not right. Somewhere, it should be illegal, I 
think.
    At the end of the day, I thought the contract was that you 
made your payments, and if you make your obligations, that 
should be it.
    Chairwoman Capito. Right.
    Mr. Matthiae. And the negotiation was about interest rates. 
If the rate went up, that's a chance you took in short-term. It 
shouldn't be about, geez, did I buy the right piece of property 
and is it going to be worth that same amount all the way 
through when I--that is what I think is driving a lot of the 
frustration for the banks on the lending side and I think for 
tboth the businesses and homeowners alike.
    Access to the capital is there. There is no question it's 
out there. But you really have to work to get it.
    Chairwoman Capito. Right.
    Mr. Matthiae. And it's the time lag. There are times, like 
this year, we purchased four major pieces of equipment. We 
didn't have time to get--if we would have had to finance it and 
we couldn't pay cash in some areas, it never would have 
happened. And we wouldn't--we hired people and we put people to 
work on those, on that equipment, but we didn't have 6 months 
to get a loan approved or 90 days.
    In years past, once you had your line of credit, you had 
your operating--within a week to 2 weeks, it was approved, 
you're going, you're ordering that equipment, you're moving. 
You can't--business needs to move fast.
    Chairwoman Capito. Right.
    Mr. Matthiae. It cannot be moving at the speed of 
government. It has to actually function in a real-time format.
    Chairwoman Capito. Thank you.
    My 5 minutes is up, but I will make a comment. When you 
said, when you saw the downturn coming and you saw the 
difficult times, one of the first things you did, and 
businesses across the country did, was cut spending.
    Sound familiar?
    That's what we're trying to do in Washington. It's very 
difficult, as you know.
    But--and then you said, the next thing you said, was the 
cutting the spending and then led to your growth. This is a big 
debate we're having in Washington right now. And I'm glad to 
hear you sort of reinforce that concept. Certainly for me, it's 
very helpful.
    So with that, I'll go to Mr. Duffy for 5 minutes for 
questions.
    Mr. Duffy. Many of you may know we had a jobs fair here in 
central Wisconsin last week, and it was well-attended. We had 
about 100 businesses that came that were looking to hire and we 
had about 1,200 folks who were looking for a job, folks who had 
lost their jobs the week before, some had been out of work for 
a month, some for years.
    But one of the continual things I heard from the employers 
was the quality of workers in central Wisconsin who were coming 
through looking for the opportunity to get back to work.
    And there was, I think, a great area of improvement, once 
the economy turns around, for a great workforce that we have 
here.
    Ms. Sanchez, I thought of that as I heard your testimony. 
I'm not as familiar with your organization down in Milwaukee, 
but the folks that you represent, are those the higher-income, 
wealthier folks of the Milwaukee community?
    Ms. Sanchez. For the most part, no. We actually don't have 
any income requirements for people we serve, but the bulk of 
the people who come to us for assistance are low- and moderate-
income folks.
    And my work on fair lending and CRA work is directed at 
low- and moderate-income communities.
    Mr. Duffy. Okay. I want to make sure I have an 
understanding, as well, because if you look at some of the 
rules and regulations that came out, specifically, say, in 
Dodd-Frank--and I'll ask this to our banker/credit union panel 
here: Have the interchange changes that have taken place with 
debit cards and the new rules and regulations, have they helped 
you continue to give free checking and free debit cards to your 
customers? Or has it made it more difficult to provide free 
checking and free debit cards? Anyone on the panel can take 
that.
    Mr. Nagel. Absolutely not. It has made it more difficult.
    The regulatory burden--I would disagree with Ms. Sanchez's 
comments completely. The regulatory burden from Dodd-Frank 
has--it did create a new job at our bank, but now we have six 
people focusing on regulatory burden.
    And it has certainly diminished our revenue 10 to 15 
percent on interchange alone, just the interchange, which was 
one piece of that legislation.
    Mr. Reinhart. I know, in the bill, there was kind of a 
carve-out that said community banks weren't going to be 
impacted by the interchange, but the fact of the matter is, 
markets work the way markets work. We're all concerned that, 
ultimately, that's going to have an impact on us, and it will.
    Have we made any changes to pass on those costs to our 
consumers at this point? Not yet. But whether or not it will 
have an impact, it certainly has a bottom-line impact on our 
operation.
    And at a time when we're trying to comply with all the 
regulations and having to spend resources, both financial and 
with employees to comply, we're looking for every opportunity 
to try to continue to be a viable organization. Certainly, that 
is something we'll have to think about.
    Mr. Duffy. Would you all agree with that?
    Multiple Speakers. Yes. Yes.
    Mr. Duffy. Oftentimes, folks in our communities are 
struggling to pay their bills and is it--I have to imagine it 
would be tougher for them to start to have to pay extra bank 
fees for their checking accounts or for the use of their debit 
card, especially in these difficult times. Would you not agree?
    Ms. Wesenberg. I would certainly agree. And I would say our 
membership is mostly low to moderate income, as well.
    And, even if you're talking the $5 a month that Bank of 
America is talking about--or is implementing, for some of our 
members, that is what pushes them over the edge.
    I think there are many unintended consequences when these 
regulations occur. People don't understand that the opposite 
side of the Dodd-Frank Act, or the interchange piece, is that 
credit unions and banks, we have to absorb all the losses. The 
merchants don't really have that piece of it.
    And so, part of these fees that people are talking about is 
to recoup some of those costs.
    Mr. Duffy. I think you guys talked about the increase in 
the application size for home loans. Is that a fact? Have they 
increased recently?
    Mr. Willer. Yes. We have actually had two or three people 
retire indirectly as a result of the rest of the changes. It 
just has become so burdensome, so complicated, the training is 
never-ending, the changes are never-ending.
    Again, the intent is to help the consumer. And what has 
happened is it has created a lot of confusion.
    Mr. Reinhart pointed out the number of pages, and I just 
have a hard time imagining anybody being able to wade through 
all that information and come to any conclusion as to whether 
or not they have the best deal available.
    Mr. Duffy. I'm a big fan of transparency. I want to make 
sure that customers who have come into the bank know the 
products which they're going to get and they understand the 
cost and what the arrangement is.
    And one of my concerns is, when you make the process so 
much more complex, you add that much more paperwork to it, I 
don't see that our customers are going to want to wade through 
more paperwork and that they're going to understand more what 
the arrangement is and what the deal is.
    I think simplifying it, condensing it so they can 
understand it, would be beneficial.
    You get your credit card statements where they're going to 
change the rules on you, where you have four pages of small 
type, I don't know who reads through that.
    And if you have a better understanding of what the 
arrangement is with your credit card, I bet most people might 
throw it away.
    Simplifying, streamlining the process, I think, would help 
consumers, instead of stacking up more documents on them, 
because they're not going to go through it.
    Do you guys disagree with my assessment?
    Mr. Willer. Just as an example, this is the paperwork for 
an auto loan. So as you can see, there are probably 5 to 10 
pages there. That's probably too much, to be honest with you.
    I think Mr. Nagel hit it right on the head: Three pieces of 
paper, and that can contain all the necessary disclosures.
    Mr. Duffy. I have a lot more questions, and I think we're 
going to be able to go through our panel a few times, but I'll 
yield back. My 5 minutes are up, and we'll have a chance to 
come back.
    Chairwoman Capito. All right. Mr. Huizenga, for 5 minutes 
for questions.
    Mr. Huizenga. Thank you, Madam Chairwoman.
    I appreciate all of you coming and giving this testimony. 
And it is similar testimony to what I've been hearing as I've 
been going around the 2nd District in Michigan, which is about 
a 250-mile stretch of Lake Michigan shoreline; really a pretty 
unique mix of manufacturing, and a number of tier 1 and tier 2 
automotive suppliers, office furniture, largest three office 
furniture makers are in the district; everything from tool and 
die and extrusion and metal forming. It's also very heavily 
agriculture and food production, and then it's also tourism.
    So we have seen a lot of different effects on that. But I'm 
struck by the similar themes that I'm hearing about lack of 
certainty, especially, as we're talking about credit 
availability and what businesses are doing or not doing as 
they're trying to make those decisions.
    And I think it was Ms. Wesenberg who was talking about the 
piecemeal consumer protections that were being put in place.
    My background is in real estate developing. My family is 
involved in construction. I own a sand and gravel company with 
three employees, third generation. My Dad and my uncle had 
started a ready-mix concrete company, which at one time had 
about 18 employees, and it's down significantly, as you can 
imagine, construction in Michigan.
    And I'm struck by that exact same point. The thing I wrote 
down, as I was starting to hear some of this testimony, is that 
more documents don't necessarily equal more transparency.
    It's sort of that old concept of hiding in plain sight. 
Right? How do you confuse somebody? Flood them with all this 
information that you just kind of go, whatever, I'm not sure.
    And I think Ms. Sanchez, getting to sort of what 
Congressman Duffy was talking about, are we really serving 
constituents, really serving customers, by doing what we've 
been doing?
    That's one of my main concerns with Dodd-Frank. And I would 
like to hear your point again, because I know, when I was going 
through my real estate licensing 20 years ago, I was taught 
that people aren't brown, people aren't white, people aren't 
yellow; they're green.
    People are green, and they can either afford things or they 
can't afford things. And that, I think, would be very healthy 
if we could--I can't remember who exactly, maybe Mr. Nagel, was 
making the comment that we're not making decisions based on 
people's ability to pay and those kinds of things. We're 
looking at what's going to please the regulator.
    So I don't know if you care to address that at all.
    Ms. Sanchez. Thank you for giving me the opportunity, 
because I think there--I do have a fair amount of agreement 
with a number of the points made by the other witnesses, 
including this issue of regulation and--not regulation, well, 
some on regulation, but the disclosures in particular.
    Yes, I don't think a stack of papers is helpful in helping 
anybody except for maybe a lawyer. And, generally, lawyers that 
I've talked to even say, I don't read that at my closing, why 
would I expect anybody else to have read it.
    So no, I don't think that long disclosures are effective. I 
do think that short disclosures, if they're structured right, 
can be much more effective in helping people to understand what 
they're getting into.
    Mr. Huizenga. But I you thought I heard you say, also, sort 
of, let Dodd-Frank play out here a little bit, give it some 
time, and we'll see where we're at. That's my concern. I'm not 
sure that we have that ability or that time.
    Ms. Sanchez. As has been noted, there is a lot in Dodd-
Frank. And the protection that Dodd-Frank gives to borrowers is 
the part that I'm concerned about and the part that I support.
    When there are regulations that are duplicative or that 
don't make any sense for our small businesses and for our small 
bankers and credit unions, then yes, let's take a look at 
those. And that's what I said at the end. Let's figure out how 
to make it work.
    But don't repeal Dodd-Frank, because we need the 
protections that are in Dodd-Frank. We need the playing field 
to be level. We need a more overall look at our financial 
system in terms of too-big-to fail and other kinds of issues 
that it raises.
    Mr. Huizenga. That has been the interesting part, having 
come in there at the implementation side of it. I wasn't there 
for the creation of it, but I'm there living with the after-
effects of it.
    And the stunning part to me has been it is treated like 
holy writ on high that neither a jot nor a tittle can be 
changed in this bill, especially by the former chairman whose 
name happens to be attached to it, or on the Senate side, as 
well.
    So you see, I think any discussion of trying to hit some of 
those reasonable accommodations is treated in a very hostile 
manner.
    I think that's my goal, personally, and I think that is the 
goal of my colleagues here, as well, but I appreciate that 
input.
    So thank you. I think my time is up. Thank you, Madam 
Chairwoman.
    Chairwoman Capito. Thank you.
    And next, we'll go to Mr. Renacci for 5 minutes for 
questions.
    Mr. Renacci. Thank you, Madam Chairwoman.
    Ms. Sanchez, you made the comment, ``Most of the provisions 
of Dodd-Frank apply to only a few dozen of the country's large 
banks, those with only $50 billion in assets.''
    Would any of the witnesses here agree to that?
    Mr. Nagel. No.
    Mr. Renacci. That's what I thought.
    ``Most'' is, I guess, a unique word to use there.
    I think one of the problems with Dodd-Frank is the blanket 
effect. And you also made the comment, ``Had Dodd-Frank been in 
place, the damage could have been contained.''
    There are some who say that if the regulations that were in 
place in 2008 were followed, the damage could have been 
contained.
    Would you agree with any of that?
    Ms. Sanchez. I think that if the Fed had the ability to 
regulate the banks more effectively, if they had the ability, 
under unfair and deceptive practices, to do a better job of 
regulating banks and mortgage companies that were abusing the 
system and abusing borrowers, but the overall structure of how 
Dodd-Frank regulates the mortgage system, if that had been in 
place, I think it would have gone a long way.
    Mr. Renacci. Would you possibly agree that if we would have 
taken the things that didn't work and tried to fix those, and 
left some of the other stuff alone for now, that might have 
been the better approach, versus throwing the blanket over 
everything?
    Ms. Sanchez. I haven't read all 2,000 pages of the Act, so 
I'm probably not qualified to answer that.
    Mr. Renacci. Okay. But you did say that you were hoping 
that it would stay intact, without reading the whole 2,000 
pages. So that's a--
    Ms. Sanchez. I hope that the aspects of the bill that help 
the borrowers that we serve, and keep things fair for borrowers 
across the country, including small businesses, and encourage 
small business lending, remain in place.
    Mr. Renacci. And again, I think that's a good point. There 
might be some pieces in there. The problem is we wrote a 2,000-
plus page bill that is affecting credit unions and small banks 
and community banks in so many ways that maybe we should have 
taken a look at what didn't work and fixed that first but--
    Mr. Bauer, you mentioned that Washington is the biggest 
drag on the economic development. I think that was one of the 
things you closed on. Can you give me some specific examples?
    Mr. Bauer. Yes, I would be happy to.
    If you would look at--and this is directly from the 
membership surveys that we have done and the feedback that we 
got back, not only from our specific surveys but also the 
surveys that I read from, conducted by the U.S. Chamber at the 
National Association of Manufacturers.
    But I mentioned EPA, National Labor Relations Board, of 
course, Dodd-Frank, and health care reform.
    On EPA Industrial Boiler MACT Rule, and in particular in 
this area, in central Wisconsin, which is a heavily papermaking 
area, that rule alone could cost thousands of jobs in Wisconsin 
because it disproportionately impacts papermaking in that 
process.
    There are other regulations that are being implemented that 
we're very concerned about.
    And to the point on EPA, it disproportionately affects us 
because we're coal-dependent in Wisconsin, very similar, 
probably, then, to the chairwoman's home State of West 
Virginia. We tend to get our coal from Wyoming, however. But 70 
percent of the energy that we use in Wisconsin for industrial 
use is coal.
    Because the EPA regulations have really gone after fossil 
fuels, and coal in particular, it has a disproportionate effect 
on us.
    We say, at WMC, that there are two major threats to 
manufacturing in Wisconsin, which, again, is our largest 
business sector, an important sector, because it creates jobs 
not only in factories but in other sectors of the economy.
    Workforce, making sure that we have that quality workforce 
that Congressman Duffy talked about; and then energy because, 
as energy costs go up, it makes us less competitive, not only 
here in the United States, but certainly to our competitors 
internationally.
    Mr. Renacci. Thank you.
    Mr. Matthiae, you indicated that your business is booming 
today, but credit was an obstacle. Can you give me some ideas 
of how you're capitalizing your new purchases and your growth?
    Is it through cash flow? Is it because--or are you still 
able to borrow money?
    Mr. Matthiae. With the USDA's help, we were able to get 
financed. We were able to convert leases that we had actually 
had equipment that was worth something. So we were able to 
actually draw a value out of that.
    We were able to--first of all, we, again, cut our costs, 
and we got ourselves profitable again.
    And it all starts with not necessarily the bottom line, but 
also, we got very aggressive in sales. And we expanded our 
markets. We really--I guess I am a believer that if you're 
going to wait for something to happen to you, it's not going to 
happen. And so we decided that maybe we should make it happen, 
and we hired additional sales staff and really got aggressive. 
We had a 39 percent growth this year, which is, for a company 
our size, a lot of growth.
    Future, we are regulated, certainly, with what the ratios 
are, and where we should be. All businesses should have to 
follow good business practices. Consumers should have to do the 
same thing, keep the house in order.
    When you're a fast-growing, high-capital business like we 
are, there's never enough cash and there's never enough time.
    So at the end of the day, I encourage you to support the 
USDA, the SBA. They are good programs. They don't cost money. 
They help lending institutions borrow where traditional rates 
may not happen and traditional borrowing may not happen.
    Some of our loans were actually held up because the USDA 
was out of money. The loans were approved but the USDA was 
underfunded at that point.
    But yes, we are getting enough funding to operate today.
    Mr. Renacci. But it's through current cash and the USDA?
    Mr. Matthiae. Correct.
    Mr. Renacci. In the past, did you use the small--whether 
it's a small bank, small community banks? Were those dollars 
available to you in the past? Are they available to you today?
    Mr. Matthiae. Not in the same form, no.
    Our traditional banking, we have not been able to do that 
today.
    Mr. Renacci. All right. Thank you. That's--
    Mr. Matthiae. We needed the help of the USDA.
    Mr. Renacci. Thank you.
    I see my time is up. I have other questions, but I'll wait 
until the next round.
    Chairwoman Capito. Okay. I'm going to start over again here 
and ask a question of the credit union and community bankers.
    We have heard Dodd-Frank--how large it is and the 
regulatory structure that's just now beginning, because it 
hasn't even been fully implemented. And there are a lot of 
carve-outs in there. I think the four of you, your 
institutions, are supposed to be carved out.
    I just want to re-emphasize, because we are going to be 
having this hearing with the CFPB on Wednesday, that your 
feeling is that you're not, in reality, exempted, because it--
could somebody speak to that issue one more time for me, 
please?
    Mr. Nagel. I think I can.
    Most banks and credit unions, for that matter, borrow from 
larger banks. So I think that's the largest myth out there, 
that we need larger banks or correspondent banks to do our 
relationships.
    So as it relates to interchange, the $10 billion bank, or 
whatever the limit is, they issue our debit cards and credit 
cards. That's where our interchange comes from.
    What happens--it's the spin-off effect of this legislation 
that's happening. And we're already feeling it across our 
revenue streams in many different areas.
    I agree with Representative Renacci, though. If regulators 
did have the power to stop this crisis--all the regulations 
that were in place, had they been followed, we wouldn't be in 
this situation.
    Chairwoman Capito. Mr. Nagel, let me ask you, when we had 
our field hearing in--no, Mr. Reinhart, I want to ask you this 
question.
    When we had our field hearing in Georgia, when you talked 
about the re-appraisals of the properties and we--this is what 
has sunk their 64 banks. This is the commercial real estate 
issue.
    And there was a frustration from the community bankers 
that, and I alluded to this in my opening statement, on the one 
hand, there's a pressure to lend. But the regulators--and you 
all talked about this--come in and tighten down.
    And you mentioned you could make loans but only if they're 
the ones that make the examiner's report look favorable.
    Is this a change of behavior from the last 2 or 3 years? 
Obviously, you think it's an unfavorable change. How can we 
make that connection?
    Because we did have the regulators at that hearing to hear 
what our community bankers and those in Georgia were saying.
    That's a big disconnect, I think. Do you have a comment on 
that? First of all, is it a change? You have been in banking 
for--
    Mr. Reinhart. Thirty-five years.
    Chairwoman Capito. --35 years.
    Mr. Reinhart. Yes, it has been a big change.
    And we can all appreciate the fact that we have been 
through a very, very difficult period of time.
    One of the changes that's happening is, because of the 
pressure that has been put on the regulators, the FDIC, etc., 
we're getting examination teams from all over the country. 
They're coming in from Iowa or Kentucky or wherever. They don't 
have the same perspective of having worked with you over the 
years and knowing the management team and knowing what your 
strengths and weaknesses are, so you have to kind of go through 
that whole educational process as part of it.
    The other thing is that, because of the concerns about 
capital and liquidity that was mentioned, we have to be overly 
sensitive about how our loans portfolio is going to be viewed; 
are they going to be classified, not classified, because that 
has a big impact on our reserve requirements.
    And so, whereas in the past, a lot of the credit decisions 
were based on historical performance, character, collateral, 
not that we weren't looking at cash flow and capacity and--and 
all of the five ``Cs.''
    But it seems like there's been more and more pressure put 
on, as was pointed out, getting updated appraisals. And if 
those appraisals come in poorly, how are you going to deal with 
it? Is the loan going to be classified, not classified? If it 
is, you have to have more reserve requirements.
    And cash flow requirements have become much more 
complicated than they were in the past, and you need to look at 
more factors.
    When we're trying to determine what kind of provisions for 
loan losses that we have to make, we have to go through a much 
more involved calculation today than we used to. And it has 
become so difficult.
    So, whereas the examiners are erring on the side of being 
conservative, some banks feel like they have to do the same 
thing for fear of the next examination and how you're going to 
be viewed.
    Chairwoman Capito. Do you have this phenomenon--one of the 
bankers in Georgia mentioned that he sits down with the review 
team, and the report is verbalized to him. And then the report 
comes out, I don't know, a month later, the written report, and 
it doesn't even look like the same; it doesn't look like the 
same review because of what is written. They have to cover 
themselves so much more.
    Is that an area where you have seen any differences, or not 
really?
    Mr. Reinhart. Yes. Certainly, from my perspective, and 
having talked to people, there's definitely a disconnect.
    You really don't know exactly what's going to be in that 
document when it shows up 2 or 3 months later.
    Chairwoman Capito. Even after you've had the verbal review?
    Mr. Reinhart. Correct.
    Chairwoman Capito. Let me ask Ms. Sanchez one quick 
question, because my time's up.
    Does your organization--have you acquired any of the 
Neighborhood Stabilization money?
    Ms. Sanchez. No.
    Chairwoman Capito. No?
    Ms. Sanchez. We work with the City on their NSP programs, 
and try and get the word out on the programs as they're working 
on it, but we don't get--
    Chairwoman Capito. Okay. But you mentioned--
    Ms. Sanchez. We don't get NSP money directly.
    Chairwoman Capito. You didn't get NSP money.
    You mentioned in your statement that there were 2,000 
vacant homes in Milwaukee?
    Ms. Sanchez. Right.
    Chairwoman Capito. That had been foreclosed on?
    Ms. Sanchez. Yes.
    Chairwoman Capito. Is the City using that Neighborhood 
Stabilization?
    Ms. Sanchez. It is.
    Chairwoman Capito. To do what with the properties?
    Ms. Sanchez. To--
    Chairwoman Capito. Rehab and resell?
    Ms. Sanchez. Right. Exactly.
    Chairwoman Capito. Is that meeting with success, or--
    Ms. Sanchez. Limited success. It's not enough and it's not 
fast enough. My understanding is this is sort of a low bar, but 
compared to NSP programs around the country, we're quite 
successful.
    Chairwoman Capito. It's a little discouraging, just because 
there's billions and billions of dollars in there.
    And in the Dodd-Frank Act, there was another, I think, 
billion dollars that was put into that program. I was wondering 
how successful it was being.
    I will go to Mr. Duffy for more questions.
    Mr. Duffy. You have all--I think we were talking about the 
traditional analysis you do on your loans, whether it was 
historical performance, collateral, character, there's a whole 
bunch of different factors you would look at.
    What I keep hearing is those traditional factors, based on 
your relationship with the individual, that has been thrown 
out, and you're managing your loans for the file. So when the 
regulators come in, the file looks appropriate.
    Is that the case? Or are you still able to go with some of 
these traditional analyses? Anyone on the panel?
    Ms. Wesenberg. I would have to agree with your comments. I 
think we certainly know the businesses that we've dealt with 
for a long time that have the character.
    We do try to back into it and make it look good on paper, 
so to speak. But sometimes you can't because of property values 
declining. It could be a good performing loan, but because of 
that, you can't renew. And that is because of the examiners.
    If we had an option on those loans, we would most likely 
renew because we have a good relationship, we know that 
borrower, but it puts us in a position not to.
    Mr. Duffy. But to be clear, the performing loan is--there's 
no default?
    Ms. Wesenberg. Correct. It means they're making their 
payments.
    Mr. Duffy. They're making their payments every month, but 
because of changing valuations and pressure from regulators, 
you'll pull those loans? In essence, is that what's happening?
    Ms. Wesenberg. Yes.
    Mr. Duffy. I just wanted to make sure I was clear on that.
    Before I come back over to the right, I want to talk to you 
about the CFPB because we passed a bill in the House that's 
waiting in the Senate. And it was going to streamline the CFPB, 
and make it more accountable.
    One of my concerns with that bill was that, basically, to 
have FSOC review rules that came from the CFPB, you almost had 
to have a complaint that the rule from the CFPB was going to 
create systemic risk to the economy as a whole.
    And one of my concerns about that was--I don't know how any 
of the four of you go to FSOC and make the claim that the way 
this rule impacts you and your credit union or your bank is 
going to create systemic risk to the economy as a whole.
    Maybe you guys are more compelling than I think you are, 
but now, if you're Bank of America, if you're U.S. Bank, if 
you're Wells Fargo, those bigger banks are able to go in and 
make that argument. They have a far larger claim that the rules 
that impact them can affect the economy.
    Am I wrong in that assessment? Do you think you can go in 
there and make those claims and change rules that come from the 
CFPB the way the law has been currently written?
    Because if I'm wrong on that, I want you to tell me.
    I think that what's important is we want to make sure that 
we give a voice to our small financial institutions to have 
push-back on rules that impact them. Because if they impact 
you, they impact our community as a whole.
    And I think we see the connection between lending, 
expansion, and jobs.
    One of my concerns was with what Mr. Matthiae indicated, 
and I have heard this before: Folks who have been in business 
for a while will say, if I had to start my business today, I 
wouldn't be able to do it.
    I will use Ron Wanek as a example. He started Ashley 
Furniture, he says in 1971. He knew how to make furniture, and 
he knew how to sell it. He started his business in a little 
shop and grew it into a billion dollar business.
    He said, ``If I had to do it today, I'd never be able to do 
it because of all the mandates and regulation and the red 
tape.''
    And to hear you say that as well is disturbing. What has 
changed, do you think, between 1993 and today that makes it so 
much more difficult for folks with an idea to pursue that dream 
and invest and work hard?
    Mr. Matthiae. My original business plan was, they have 
parts, I'm going to paint them. That was the plan.
    I had 3 weeks to get the financing, find a building, get 
the equipment, and I had a whole lot of cash. Not.
    That wouldn't happen today, pure and simple.
    Is that how every business would start? Heck, no. I 
wouldn't recommend that for anybody, by the way.
    But at the end of the day, that's why I'm here today. It's 
not for myself, it's not for--my company is fine now. We are 
actually a better company, I think, than we were 3 years ago.
    But when you go to start a business, there are very few 
business plans that are going to show a profit in that first 
couple of years, no matter how good that business is.
    If you present that to a bank or any--you lay it out, and 
it's already a classified loan, and you haven't even--the ink 
isn't dry. So you're already in a classified segment.
    The amount of cash you need down would be so high that 
those loans are just--you can ask the banks that question, but 
I don't think any of them would touch me today if--other than 
the bank that I went to, which happens to be across the table, 
and in the back of the room, actually.
    They knew that I was a hard worker and that I knew what I 
was doing. And at the end of the day, that meant something. I 
don't know of a form that you can fill out that says, okay, 
this guy knows what he's doing. There has to be that heartbeat 
there. And there's no wiggle room anymore, with all these forms 
you're creating.
    With all the restrictions, it's difficult. Business was 
much simpler back then, as well.
    Today, we have a very good relationship with our local DNR, 
but the DNR and the EPA aren't on the same page.
    So you can be totally compliant with the DNR, and the EPA 
can come in and shut you down because you're not. We have 
specialists in just that part of regulation.
    It's unfortunate that you feel that you're complying and 
then you potentially could not be because another agency says 
you're not.
    But it's those types of issues that are stopping small 
businesses from either starting or--I feel for the florist who 
is struggling. They're not going to be able to create any jobs. 
They've been a two-person company or a business forever, and 
they're happy and they were successful. And for whatever 
reason, things are happening to them. Who does help those 
people?
    It's not right. And it's certainly going to do--when you 
hear that businesses are--and homeowners are making their 
payments but, again, it comes down to these appraisers that 
are--that the market is flooded with foreclosed properties.
    Obviously, you could never replace these facilities or 
buildings or homes for what they're getting sold for. In some 
cases, the higher the value, the worse it is.
    So, at the end of the day, let banks be banks and judge 
people. And somewhere there should be a--if you're going to do 
a rating, that should count for something. Somewhere, that 
experience, that--whether it's a college education, something 
substantial with your past business experience.
    I graduated from high school, by the way, and then I got a 
ton of education form the school of hard knocks. I have paid 
for many Harvard educations by several mistakes. And so, I have 
one of the most expensive educations you can get. I have made 
more mistakes than most people, but you learn from your 
mistakes and you go forward.
    At the end of the day, let banks judge people and give that 
some credit. It still should be a solid loan.
    And I agree, this Wall Street mentality, the quick strike, 
make the quick buck and get out of it, small business isn't 
like that. Homeowners aren't like that. They want to live in a 
home. This is their home they want to buy.
    A business is--this is my--I want to sell these flowers. 
But they need to keep on selling flowers. If they're making 
their payments and, just because an appraiser says their 
property is worth less than what they may or may not owe, that 
was a solid loan in 2007. Today it's junk? And you've made 
payments for 5 years? It makes no sense.
    Mr. Duffy. Just quickly, are you a billionaire?
    Mr. Matthiae. I'm not a billionaire, but I am a 
millionaire, yes.
    Mr. Duffy. Are you a corporate jet owner?
    Mr. Matthiae. No.
    Mr. Duffy. Are you involved in big oil?
    Mr. Matthiae. I do have a jet ski.
    Mr. Duffy. And you just--you guys just hired 30 new people; 
is that right? Or roughly 30?
    Mr. Matthiae. We have hired, since the first of the year, 
about 120.
    Mr. Duffy. 120. So let me just--I'm going off in a little 
different area.
    If we could just raise your taxes a little more, would that 
help you create more jobs in central Wisconsin? If we just got 
a little more money out of your pocket into the Federal 
coffers, could you do a better job of putting more people to 
work?
    Mr. Matthiae. If you would do a better job of spending that 
money.
    I think, at the end of the day, I don't have a problem 
paying taxes. I have been at both ends of the spectrum. If I'm 
paying taxes, that means I'm successful.
    However, there is a limit. And when--when cash is--you need 
to keep building a balance sheet. How do you build a balance 
sheet when you pay 30, 40 percent in taxes?
    You have your depreciation. You have all these tax items 
going on. Yet, at the end of the day, you could tax-smart 
yourself right out of business, according to Ms. Wesenberg 
there.
    You could make your payments, but you could have your 
accountants write your business down so far that you're going 
to be out of ratio and guess what, you're out.
    Mr. Duffy. What you're telling me, and I want to make sure 
that I'm clear on this, is as a constituent and as a job 
creator, you would say that you could create more jobs if we 
tax you more?
    Mr. Matthiae. Oh, no. No.
    Mr. Duffy. I just want to be clear. I want to help you 
create jobs. And if we could really do that by raising your 
taxes, I would.
    Mr. Matthiae. The deal was if you did a better job of 
spending money that I pay in, then it would be a good 
investment.
    You guys are not going to spend your way out of this. You 
need to cut the programs. You need to cut spending. You need to 
get your own house in order.
    And to keep taking us further in debt isn't the answer. I'm 
working very hard to get out of debt. I'm working very hard to 
get my balance sheet in order. And I work every day at that, 
and I think most people sitting here do that.
    So it's unfortunate that our country, which is--I never 
served in the military, but I think if I ever served in the 
military, I would be pretty upset with where things are going 
today.
    The freedoms are being eaten up every time we make a new 
law. And these laws are made for--there's consequences.
    In business, any business, when you make a change, you have 
to follow that change through the whole process. Because what 
started out very good, with good intentions, doesn't turn out 
so good always. And I think the same thing is true with the 
regulations and with laws.
    Mr. Duffy. I yield back.
    Chairwoman Capito. Thank you.
    Mr. Huizenga?
    Mr. Huizenga. I appreciate that. I'm going to have to use 
that line, ``jet ski owner.''
    It is interesting. As you were talking, I was reflecting 
back on my own family business. How my family got involved in 
ready-mix concrete was because when my dad and my uncle were 
digging basements and building roads for people, they finally 
looked around and said, we don't have enough concrete coming 
in.
    And, as you said, it's not a way to start a business, but I 
think that's exactly how most businesses start. They see that 
need and they go to fill it.
    That's a concern I have, as well, is now, with the 
parameters that have been placed on there, all--and many times, 
for good intentions, we have just created these choke points 
that people can't get beyond.
    I appreciate my colleague from Wisconsin here with his line 
of questioning about the CFPB. And that's something that we get 
to pursue. I sit on the subcommittee, and we get to pursue that 
on Wednesday.
    Right, Madam Chairwoman?
    Chairwoman Capito. Right.
    Mr. Huizenga. He's probably too modest to tell you that was 
his bill that was trying to introduce some modicum of 
reasonableness into this whole process.
    And all of us on that committee were pretty much vilified 
as we were trying to protect the small banks and the credit 
unions here in central Wisconsin, and I was trying to do it in 
west Michigan, I know Jim was trying to do it in Ohio.
    That is the kind of attitude that I think is getting in the 
way of trying to find new solutions as we're moving forward on 
this. And so that gives that sort of, that holy writ from on 
high sort of aura around this piece of legislation.
    We just have to be honest with ourselves, and that's why I 
appreciate that conversation.
    And Mr. Bauer, right? Kurt, right? You had talked a little 
bit--this is a point that we all need to know about. Boiler 
MACT--M-A-C-T--Maximum Achievable Control Technology.
    There were two pieces of legislation, one dealing with 
boilers, the other one dealing with cement plants. I happen to 
know a little bit about that one, and you're right.
    I also have a constituent who owns a company that makes 
those boilers. And under the regulation that has been proposed, 
not quite implemented yet, but proposed by the EPA, in the case 
of cement plants, we would shut down 20 percent of all the 
cement plants in the United States.
    Forty-six percent of all cement is created in China. Guess 
where it's going to be coming in from? And they have a little 
bit less concern about what they're putting into the 
environment than what we do.
    Exact same thing with the boilers. Last week, when I was 
back in the district on our district work period, I sat down 
with this owner from Hines Corporation--H-I-N-E-S--not the 
ketchup people.
    But he was telling me he has a number of contracts, 
potential contracts, for these boilers and that they're frozen; 
that lack of certainty has caused these people who are wanting 
and needing to buy a new boiler from him to not do so, because 
even if they bought that brand new boiler, which would almost 
double their efficiency, it still would not come in compliance 
with what the proposed rules were from the EPA.
    And in the area of the cement, the EPA was proposing 
regulations that were 5 times more stringent than the European 
Union--5 times more stringent than the European Union. And it 
parallels that with the boiler.
    So that is the kind of thing that I'm very concerned about. 
I believe it was you who said, it's not just Dodd-Frank; it's 
overregulation on a lot of different areas.
    I am just wondering if you can maybe expand on that 
uncertainty element and how that may be affecting the business 
owners?
    And, Mayor, if you have any businesses in your area that 
are dealing with some of those things?
    Mr. Bauer. I'll just make a comment, and then I'll yield to 
the mayor, because I've already had a chance to talk a little 
bit about this.
    You look at the stimulus package that we passed, I think 
that was in 2009, almost a trillion dollars and a lot of 
consternation on whether or not that was effective.
    It was supposed to prevent us from going over 8 percent on 
unemployment, and we're somewhere north of 9 percent. We're a 
little bit better here in Wisconsin.
    But I think that a lot of the Federal spending has been 
undermined by the compression layer of regulation coming down 
from Washington. It absorbs the benefit and negates the impact 
on the economy.
    So I think, if there's a message that I can deliver, 
whether it's Dodd-Frank, whether it's EPA, whether it's some of 
the things that we're seeing from the Department of Labor with 
OSHA regulations and what we're seeing with health care reform 
and the uncertainty that creates for small businesses in 
particular, try and create certainty because--
    Mr. Huizenga. I'm sorry. I have to interrupt, though.
    So you're not in favor of small children becoming 
asthmatic?
    Mr. Bauer. No. No.
    Mr. Huizenga. Or elderly people dying?
    Mr. Bauer. I think the--
    Mr. Huizenga. Or workers being injured on the job?
    Mr. Bauer. No, we're not in favor of that.
    Mr. Huizenga. I just wanted to clarify that.
    Mr. Bauer. But the OSHA regulations, in particular, 
considering you ended with that, is analogous, I think, to 
what's going on in banking because you have the rules and then 
you have the examiners who go on site and they have tremendous 
leeway.
    And what we're hearing is is that they go on site, they 
give the factory or the work site a clean bill of health, and 
then they come back the next day and say, I was told that I 
have to write you up on something.
    It creates more and more uncertainty and frustration. And I 
do think that is just another example of the problem that we're 
talking about here today.
    Mr. Erickson. Just to expand a little bit, too, Madam 
Chairwoman, when we're talking about how do we stimulate small 
business, how do we get things going there, I think--and I said 
it's a tough question. And it really is. But I just wanted to 
expand on that a little bit, as it relates directly to what 
we're referring to here.
    It's not--I don't know if it's stimulus money coming down 
here as much, or how it can be done for small business. We're 
talking about the mom-and-pop organizations that are 20-year 
loans.
    The big issue is, it can be stimulus money, but it has to 
come from a different direction.
    Most small businesses--and I'm talking, again, the 20 and 
smaller. Once they develop and they start to grow, they're--and 
I did the same thing. You look at concentration.
    I mentioned before that I do have some commercial 
buildings. And I told my son this, who is working into the 
business, you have to have some stability. Your stability 
becomes the properties. That's the only way you can stabilize 
your business.
    You build the equity in those properties, and then you look 
at it saying, I need working capital. If I don't have money 
here, I can go borrow against that. And now it's really 
difficult to do that.
    It also means retirement for so many of the small 
businesses. That's what they work for and that's what they 
build. And they put all their energies and efforts into real 
property. And all of a sudden, this real property isn't worth 
anything anymore.
    Now, you're looking and saying, how do I maintain, how can 
I keep operating? You go to the bank and they say, it doesn't 
matter if you are over 800 in your credit rating; we can't give 
you any money.
    Why? Because you don't have that equity in your property 
anymore. Why don't they have equity in their property anymore? 
Because it has been devalued.
    And it's frustrating. I look at my son coming into the 
business. It's frustrating as heck for him because I always 
told him, too, sweat equity. You put everything in.
    A lot of the buildings we purchased needed--they were 
projects, not that it wasn't a good investment on our side from 
the standpoint of building stability. But, we looked at, then, 
also building equity, because the more we put into it, the more 
they're worth.
    Now, they're twice the building that they ever were, but 
they're worth half as much. And so a lot of sweat, but not much 
equity.
    And so now we're looking at it, and we're looking at 
growing, with him being young. At my age, I'm not looking at a 
lot of growth anymore. But--gray hair.
    But we're looking at the--what's in it for him, and I'm 
saying--he's saying, we should do this, Dad, we should move 
forward here, and I agree with you 100 percent. And I say, 
okay, where are we going to get the dollars to do it, because 
you're absolutely right, that's where we have to go.
    But if you go talk to the bankers that we're working with 
all along--and my banker is apologetic all the time. He says, 
jeez, I know your credit rating is awesome; I know you have 
everything going for you and you have always done everything 
right; but, there's no money in your building anymore. No. You 
have already borrowed what you can.
    That's where the stimulus needs to come in, because I still 
believe that it's those small businesses that create all the 
jobs. That's where they come from.
    Mr. Huizenga. My time has expired.
    Chairwoman Capito. All right.
    Mr. Renacci?
    Mr. Renacci. Thank you, Mayor; and I would agree with you. 
What is interesting about stimulus from Washington is, when it 
goes up, it never comes back down in the same amount.
    The best stimulus is what Mr. Matthiae talked about. When 
you cut costs, you can get your costs down to where you can 
stimulate your own business by using your own dollars.
    Mr. Matthiae, I also appreciate your comments. At age 24, I 
borrowed $265,000 with $10,000 in the bank and just the 
background experience that the bankers believed in me that I 
was able to start my own business, too.
    The concern I have now, and I'm going to look over on this 
side, is I'm concerned about those who have started their 
business and--and I know there are some examples in my 
district, where people started their business, they're 
profitable, they're making the dollars they need to make, 
they're making maybe even the same amount of money they made 3 
or 4 years ago. But their building value went down in one 
example, from $5.5 million down to $4 million, and their notes 
are being called.
    And now, all of a sudden, even though they're making the 
same dollars and they're the same stable company, just because 
their building value went down, their business is somewhat in 
trouble because they can't refinance.
    Can you tell me some examples, not specifics, but how many 
times you're starting to see that in the banking industry? And 
even in the--either of the bankers, is that something that's 
happening here, too, and you're seeing that often?
    Mr. Nagel. I would say that's what I was alluding to 
earlier, and what Mark was alluding to earlier is we're seeing 
equipment hold its values; but as it relates to real estate, an 
example I use it that it is devalued 30 percent.
    If we don't have collateral to shore up that loan and the 
bank examiner walks in, they'll require us to downgrade the 
credit or create a--make it substandard, which we'll have to go 
from a 1 percent reserve on a million dollar loan to a 15 
percent reserve. So the expense to the bank is quite large.
    We'll be ``forced'', is the word I use, to go to the 
customer and ask them for more collateral, which they don't 
have, which then creates a default, which then creates a piece 
of property on the market that's already devalued that, once 
the bank has it, now it gets devalued to 50 percent.
    So it just--the downward spiral is going to continue every 
time the renewal comes up because real estate values are 
continuing to go down.
    The same thing is happening in the residential market. 
That's why there are 2,000 foreclosed homes that no one's 
buying in Milwaukee, because they're not worth anything.
    Mr. Renacci. So how many customers are you seeing this 
occur to? Five percent, 10 percent? I'm talking about good 
solid businesses. Their model hasn't changed, their economics 
haven't changed. The only thing changed is some of their assets 
have been devalued through foreclosures of other properties.
    Mr. Nagel. Yes. Almost all of our small business customers 
are seeing their commercial real estate devalued. All of them.
    We had a conversation with a customer last year who's 
performing, everything is excellent with it, and we had to ask 
them for more collateral.
    They went and called another bank and the bank told them 
the same thing. So it's happening daily. I don't know the exact 
percentage, but I think anyone who is attached to commercial 
real estate is seeing them going down, even on brand new 
buildings.
    We're seeing it in--another example is, Friday we had a 
residential appraisal that, because of market comparables, came 
in 25 percent less than the cost to build, than the actual cost 
to build. So we can't give them that loan unless they come up 
with the extra dollars, according to the regulation.
    Mr. Renacci. Right. It's the regulators. It's the 
appraisals.
    Mr. Nagel. Right.
    Mr. Renacci. And that's what I keep trying to get at.
    So I think of the person who has started that business, and 
now has been in business for 20 years, they are coming to you 
and saying--or you're going to them and saying, we need you to 
put more capital in?
    Mr. Nagel. Right. The simple solution is to let us lend on 
cash flow. If the customer cash flows and the debt coverage 
ratio is adequate, let us lend; don't criticize the loan. 
That's the solution.
    Mr. Reinhart. Just a couple of comments on the subject.
    Number one, the commercial real estate appraisers are 
coming under a lot of pressure as well, because they've been 
criticized because of the fact that when these properties 
become distressed, they go down in value.
    So I think that there's a chilling effect with them, as 
well; that they have a tendency to appraise these properties 
for less than they did in the past, for their own protection so 
that they can be safe.
    Separate from the fact of whether or not you're going to be 
able to continue to work with a company, as was pointed out, 
the ability to fund expansions and help businesses grow, 
because of those collateral values, is a very limiting factor.
    You may be able to continue to work with a company to help 
them through these difficult times, difficult times meaning 
because their real estate is worth less, but your ability to 
significantly loan more money to them to help with the 
expansion is impacted.
    Mr. Renacci. In my district, there was a business that 
appraised for $2.7 million, had a million dollars' worth of 
debt on it, and a $100,000 line of credit. When the $100,000 
line of credit came due, the bank didn't have the cash to pay 
the $100,000 line of credit. That business today is in 
foreclosure and is being sold at probably $200,000 to $300,000, 
even though the bank had $1.3 or $4 million worth of debt on 
it.
    So again, the process that we're talking about is hurting--
and this business was making money. It's sad that we're seeing 
that. That's why my concerns are that it's affecting those 
business owners today.
    I see I've run out of time. Thank you.
    Chairwoman Capito. Thank you.
    I have no further questions. Mr. Duffy wants to make a 
closing comment and then I'll close up.
    Mr. Duffy. Again, I appreciate the subcommittee coming and 
hearing everyone's views here today, to take the insight and 
information back to Washington.
    I appreciate the panel coming in and sharing your views. I 
know sometimes it's not always easy to come in and tell us what 
you think and do it publicly. We appreciate that.
    And I guess I would just leave all of you with a message 
that I do think, especially in the House, there is a movement 
afoot to say, let's try to do things better.
    It's not--no one's saying let's get rid of Dodd-Frank, 
let's not have any regulations. That's not what we're saying. 
But we can do it more effectively. We can streamline it. We can 
make it easier for our businesses to expand and grow and create 
jobs, easier for our banks and credit unions to get capital out 
and still be safe and sound.
    And I guess my pitch to all of you would be, if you have 
any ideas, if you have any information, don't be afraid to 
share it. I think the best ideas do not come from Washington. I 
guarantee you that. They come from right here.
    And so, if you're willing to share those ideas with us, you 
have a Committee and a House with open ears, and we'll take 
those ideas and implement the best ones.
    I appreciate you coming in today. Hopefully, this is just 
the starting point of many more conversations that we can have 
to hopefully make government work better.
    Thank you all for coming in. And I thank the chairwoman and 
my colleagues for joining us today, as well.
    Chairwoman Capito. Thank you.
    I would like to thank you, again, Mr. Duffy, for inviting 
us here. This has been, I think, very interesting and 
illuminating.
    And I hope that you feel that it was worth your time. It 
certainly was worth our time to come and listen and hear.
    I'm certain that we would hear very similar things in all--
and I have been hearing that in my district.
    And please take heart that there's a lot of cynicism around 
Members of Congress. What are we down to now? A 9 percent 
approval rating?
    And a lot of is, I think, a view that we don't listen and 
that we don't take back what we hear, that this is just window 
dressing. And I want to assure those in the audience and those 
who have taken time out of their valuable business days, that 
we are listening and we are going to take this back.
    I just leaned over to Mr. Huizenga and I said, ``What do 
you do about the appraisal issue?'' That is obviously a 
resounding theme here.
    And so, we're already starting to think what kinds of 
built-in mechanisms we can put in to help with that.
    The Chair notes that some Members may have additional 
questions for this panel which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for Members to submit written questions to these 
witnesses and to place their responses in the record.
    And with that, this hearing is adjourned. Thank you.
    [Whereupon, at 12:45 p.m., the hearing was adjourned.]


                            A P P E N D I X



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