[Senate Hearing 112-]
[From the U.S. Government Publishing Office]



 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2012

                              ----------                              


                        WEDNESDAY, MAY 25, 2011

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Richard J. Durbin (chairman) 
presiding.
    Present: Senators Durbin, Moran, and Kirk.

                     SMALL BUSINESS ADMINISTRATION

STATEMENT OF HON. KAREN G. MILLS, ADMINISTRATOR, SMALL 
            BUSINESS ADMINISTRATION

             OPENING STATEMENT OF SENATOR RICHARD J. DURBIN

    Senator Durbin. Good morning. I'm pleased to convene this 
hearing of the Appropriations Subcommittee on Financial 
Services and General Government. Today we're going to examine 
funding provided for small business and community development 
programs under our jurisdiction.
    I welcome my Ranking Member, Senator Jerry Moran of Kansas. 
And other colleagues may join us during the course of the 
hearing.
    Also, we welcome the Small Business Administrator, Karen G. 
Mills and the Director of the Department of the Treasury's 
Community Development Financial Institutions Fund (CDFI), Donna 
J. Gambrell. I'll welcome the second panel of witnesses in 
short order.
    In the face of recent pressure to reduce the deficit, we 
have tried to focus on those programs which make a difference 
and have an impact on communities. I have supported the Small 
Business Administration (SBA) and the CDFI Fund programs 
because I think they produce real outcomes. But, we continue to 
ask the hard questions and demand proof that is what is 
actually happening.
    For the SBA for fiscal year 2011, we were able to maintain 
funding at the 2010 level, despite the need to make some 
painful cuts in other parts of the budget. Put simply, small 
businesses, we believe, are the key to economic recovery. Small 
businesses create nearly 2 out of every 3 new jobs, employ one-
half the Nation's private sector workforce, and generate 44 
percent of private payroll. The SBA has been on the front line 
of this economic crisis, working to help small business owners. 
Small businesses have faced some difficulty gaining access to 
capital, and turned to the SBA for help. The SBA overseas a 
loan portfolio of $85 billion and, in a typical year, makes or 
guarantees more than $20 billion in loans.
    On our second panel, Mr. Warner Cruz will tell us about how 
the SBA helped his small business not only stay afloat during 
the credit crisis, but also helped him to make a major 
expansion of the business, including a renovation of an 
abandoned building in Rolling Meadows, Illinois. Mr. Cruz's 
business, restoring damaged homes and businesses from flooding, 
fires, and storms--unfortunately, for the people who were 
owners, but fortunately for him--is now flourishing with 85 
full-time staff and many part-time staffers.
    SBA programs also supported counseling services for budding 
entrepreneurs and small business owners. I'm concerned about 
proposed cuts in those programs, which we'll talk about during 
the hearing.
    The budget request for 2012 for the SBA is $985 million. 
Now, that's a $256 million, or 35 percent, increase in the 
current level. I said to my staff when they said that to me, 
``Can you be honestly realistic about that? A 35 percent 
increase in 1 year, in light of what we're going through?'' 
Much of the funding has become necessary for the SBA Business 
Loan Program and disaster loan programs to stay operational. 
Some of it reflects accounting realities, which we'll get into 
here. We'll talk about those.
    The CDFI Fund for fiscal year 2011 is provided $227 
million. I placed a high priority on maintaining investment in 
this fund because of its unique ability to leverage private 
sector investment in community development, like affordable 
housing, retail development, and community centers, as well as 
lending to small businesses. Federal grants for the CDFI Fund 
have never been earmarked for specific projects. Instead, the 
Treasury makes competitive grants that can best demonstrate a 
capacity to help communities.
    With just a small amount of seed funding, the CDFI Fund can 
transform communities. Nationwide, the CDFI Fund leverages an 
average of $13 for every Federal $1 invested. In 2010, Federal 
grants helped to create or maintain more than 80,000 jobs. I've 
got quite a bit of information here about the impact of the 
CDFI Fund. I visited the King Legacy Apartments in a tough part 
of Chicago which used to be a vacant, pretty ugly lot--you get 
to see it here in before and after photos. I can tell you, from 
driving through the area surrounding it, that this really made 
a difference in terms of people's attitudes toward their 
community, toward their neighborhood. And let me show one other 
example of a CDFI Fund investment in Illinois--before-and-after 
pictures of Wilson Yard, a major project in Chicago's uptown 
area. It was built on the site of a former rail yard and is now 
a mixed-use development. And you'll see, off to the right, a 
huge Target store, which took over that vacant lot, along with 
other businesses. And of course, former Mayor Daley's pride and 
joy, rooftop greenery. We have a lot of that in Chicago. We're 
very proud of it. And the CDFI Fund helped to make that a 
reality.




                  King Legacy Apartments area--before.




                     King Legacy Apartments--after.




                          Wilson Yard--before.




                          Wilson Yard--after.

    Senator Durbin. On our second panel, we're going to hear, 
after we've listened to the testimony of our two first 
witnesses, from Warner Cruz, whom I mentioned earlier--he was 
the Illinois small business person of the year for 2010 and an 
SBA borrower; Calvin Holmes, president of the Chicago Community 
Loan Fund who will tell us about the impact of the CDFI Fund in 
Illinois; and Ray Moncrief, from Kentucky Highlands, an 
investment corporation based in London, Kentucky, will talk 
about participating in the CDFI Fund and the SBA microloan 
program.
    And at this point, I want to turn it over to my colleague 
Senator Moran, who told me he had three hearings at 9:30 a.m. 
and made this one a priority.
    Thank you.

                    STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. Mr. Chairman, thank you very much.
    I've already instructed my staff that next year we're going 
to have visuals, as well. You have upped the ante. Although, I 
doubt any of ours will show greenery on the rooftops.
    I thank you for calling this hearing. And I welcome our 
witnesses. Nice to see both of you, and I look forward to your 
testimony.
    The American economy is facing many difficult challenges, 
and we need to get our country moving again. It seems to me, in 
two aspects of getting our financial house in order, moving 
toward balancing the budget, reducing our deficit spending is 
an important priority. At the same time, we need to grow our 
economy. And we need to make certain that the opportunities are 
there for small business and entrepreneurs to succeed.
    And so, while much of the discussion in the Congress today 
is about reduced spending--and I support that effort--there's 
also another, in fact, perhaps more enjoyable way of helping us 
reduce our deficit, and that's putting people to work. And so, 
I'm particularly interested in finding the right balance with 
your agencies to see that we don't spend money that we 
shouldn't be spending, that we don't--that we're not 
inefficient or waste money. But, I also want to make certain 
that the tools are there for business to grow to succeed and, 
in the process of pursuing that success, put lots of Americans 
to work and put food on families' tables.
    So, I look forward to hearing your testimony.
    One of the things, Ms. Mills, that I'm particularly 
interested in is the role in regard to disasters. I just 
returned from Kansas over the weekend--Reading, Kansas--saw the 
tornado damage there; a small town of about 270 folks with half 
the homes destroyed. As a Member of the House of 
Representatives, I represented Greensburg, Kansas, a town 
totally destroyed by an F5 tornado, in which the SBA played a 
significant role in helping for recovery. And of course, 
Kansans, and all Americans, extend their sympathies and 
concerns to the people of Joplin and places across our country 
that have experienced tremendous storm damage. And so, I am 
interested in hearing your thoughts about your appropriations 
request, particularly as they relate to weather-related 
disasters that we're currently experiencing.
    And again, Mr. Chairman, thank you for the opportunity. I 
look forward to hearing the testimony.
    Senator Durbin. Thank you, Senator.
    Both of our witnesses will have 5 minutes each for an 
opening statement. Administrator Mills, please start.

                  SUMMARY STATEMENT OF KAREN G. MILLS

    Ms. Mills. Thank you. Chairman Durbin, Ranking Member 
Moran, and members of the subcommittee, I'm very pleased to be 
testifying before the subcommittee.
    Small businesses, as the Senators have just described, are 
the backbone of our economy. They create 2 out of every 3 jobs, 
and more than one-half of working Americans own or work for a 
small business.
    The SBA is a small agency, but we have a big mission. We 
put the maximum possible resources directly into the hands of 
small businesses, focusing on access to capital, contracts, 
counseling, and disaster assistance. Last year, we helped more 
than 50,000 small businesses get capital to grow and hire. We 
put about $100 billion in Federal contracts get into the hands 
of small businesses. We counseled more than 1 million small 
businesses in every State across the country. And as we speak, 
as the Senator from Kansas mentioned, SBA employees are on the 
ground, in Missouri, Kansas, Alabama, and elsewhere, assisting 
victims of the disasters, including some deployment that we 
just did overnight, to Oklahoma, where there were additional 
tornados.
    This is the worst tornado season, as you know, in nearly 
six decades. We are there to help homeowners, renters, and 
business owners with long-term, low-interest loans. And even if 
a business wasn't damaged directly, but the customers are 
suffering and not coming into the business, the SBA can help 
with business interruption loans.
    We're doing this efficiently. The turnaround times for 
disaster applications are about 10 days. After Hurricane 
Katrina, they were about 70 days. So, we're down from 70 days 
to 10 days.
    We put these resources into the hands of small businesses 
while providing the taxpayers a big bang for their buck. For 
example, after credit froze in 2008, the American Recovery and 
Reinvestment Act (ARRA) and the Small Business Jobs Act allowed 
us to support more than $42 billion of SBA loan guarantees into 
the hands of small business, at a subsidy cost of $1.2 billion. 
Many small businesses suffered greatly from the recession, and 
our job is to support them as they grow and create jobs.
    This job is not done. The President's proposed fiscal year 
2012 budget for the SBA of $985 million will support up to $27 
billion in loan guarantees, as well as many other tools and 
resources to help small businesses across the country. At the 
same time, the budget reflects a commitment to tighten our 
belts, streamline our processes, and eliminate duplication. 
This includes ideas from the Congress. For example, we looked 
hard at our technical assistance programs to be sure that each 
one was unique and nonduplicative. As a result, we proposed 
eliminating the Program for Investment in Micro-Entrepreneurs 
program. With the work of our microlenders and new efforts to 
recruit community-based lenders, which you will hear more about 
today, we can continue to provide technical assistance in a 
more cost-effective way.
    The largest increase in our budget, that the Senator 
referred to, reflects the fact that we have reached the 
statutory limit for fees that we can assess. The budget 
reflects the need for additional subsidy because losses, 
including those from loans approved when collateral, such as 
real estate was inflated, have pushed up subsidy costs. We will 
also request a legislative fix to return to near zero subsidy. 
The budget also builds on our strong efforts over the past 2 
years to remove fraud, waste, and abuse in our contracting 
programs. And it supports the new women's contracting program. 
I know that both of these issues are a high priority for many 
Members of Congress.

                           PREPARED STATEMENT

    Overall, our priorities are twofold. We have placed a focus 
on the SBA programs that put money and support directly into 
the hands of small business owners in the places where they 
live. And we will continue to invest in oversight to preserve 
the integrity of these programs and to protect the interest of 
taxpayers.
    I look forward to working with you to ensure that small 
businesses can continue to grow, create jobs, and lead us to a 
full recovery.
    Thank you.
    [The statement follows:]
                  Prepared Statement of Karen G. Mills
    Chairman Durbin, Ranking Member Moran, and members of the 
subcommittee. I'm pleased to testify before the subcommittee.
    Small businesses are the backbone of our economy. They create 
nearly 2 of every 3 new jobs. And more than one-half of working 
Americans either own or work for a small business.
    The Small Business Administration (SBA) is a small agency, but we 
have a big mission. We put the maximum possible resources directly into 
the hands of small business, focusing on access to capital, contracts, 
counseling, and disaster assistance.
    Last year, we helped more than 50,000 small businesses get the 
capital to grow and hire. We helped put about $100 billion in Federal 
contracts in the hands of small businesses. And we counseled more than 
1 million small businesses in every State across the country.
    As we speak, SBA employees are on the ground in Missouri, Kansas, 
Alabama, and elsewhere, assisting the victims of disasters, including 
those suffering after the worst tornado season in nearly six decades. 
We are there to help homeowners, renters, and business owners with 
long-term, low-interest loans. Even if a business wasn't damaged 
directly, but customers are suffering and not coming in to the store, 
SBA can help with business interruption loans.
    And we're doing this efficiently. Turnaround times for disaster 
loan applications are about 10 days, down from about 70 days in the 
weeks after Hurricane Katrina.
    We put these resources in the hands of small business while 
providing taxpayers a big bang for their buck. For example, after 
credit froze in 2008, the American Recovery and Reinvestment Act and 
the Small Business Jobs Act supported more than $42 billion in SBA 
loans at a subsidy cost of $1.2 billion.
    Many small businesses suffered greatly from the recession. Our job 
is to support them as they grow and create jobs. This job is not done.
    The President's proposed fiscal year 2012 budget of for the SBA of 
$985 million will support up to $27 billion in loan guarantees as well 
as many other tools and resources to help our country's small 
businesses. At the same time, this budget reflects a commitment to 
tighten our belts, streamline our processes, and eliminate duplication. 
This includes ideas from the Congress.
    For example, we looked hard at our technical assistance programs to 
be sure each was unique and nonduplicative. As a result, we propose 
eliminating the Program for Investment in Micro-Entrepreneurs program. 
With the work of our microlenders and new efforts to recruit community-
based lenders, we can continue to provide technical assistance in a 
more cost-effective way.
    The largest increase in this budget reflects that we have reached 
the statutory limit for fees that we can assess. This budget reflects 
the need for additional subsidy because losses--including those from 
loans approved when collateral such as real estate was inflated--have 
pushed up subsidy costs. We will also request a legislative fix to 
return to near zero-subsidy.
    The budget also builds on our strong efforts over the past 2 years 
to remove waste, fraud, and abuse in Federal contracting. And it 
supports the new women's contracting program. I know that both of these 
issues are a high priority for many Members of Congress.
    Overall, our priorities are twofold. We have placed a focus on SBA 
programs that put money and support directly into the hands of small 
business owners, in the places they live. And, we will continue to 
invest in oversight to preserve the integrity of these programs and to 
protect the interest of taxpayers.
    I look forward to working with all of you to ensure that small 
businesses can continue to grow, create jobs, and lead us into full 
recovery.

    Senator Durbin. Thank you, Administrator.
    Director Gambrell, your turn.

                       DEPARTMENT OF THE TREASURY

           Community Development Financial Institutions Fund

STATEMENT OF DONNA J. GAMBRELL, DIRECTOR
    Ms. Gambrell. Good morning, Chairman Durbin, Ranking Member 
Moran, and distinguished members of the Senate Appropriations 
Subcommittee on Financial Services and General Government. 
Thank you for inviting me to speak today about the CDFI Fund's 
fiscal year 2012 budget request and the critical ways in which 
the CDFI Fund is creating jobs and transforming low-income 
communities across this country.
    I've been Director of the CDFI Fund for more than 3 years, 
during a time when our Nation has endured the most turbulent 
economy in generations. The financial crisis has had far-
reaching consequences for our country, but nowhere has there 
been a more detrimental impact than on our low-income 
communities. My principal role as Director is to ensure that 
the CDFI Fund is doing everything possible to alleviate the 
economic burden on those at-risk communities, primarily through 
support of CDFIs.
    There are now almost 1,000 certified CDFIs across the 
Nation serving every State. These CDFIs take a variety of 
forms, including loan funds, credit unions, community banks, 
and venture capital funds. They serve local, regional, and even 
national markets to spur economic and community development in 
distressed areas, at the grassroots level.
    CDFIs have pioneered new financial education initiatives, 
encouraged the development of green industries in rural 
manufacturing, and invested in transit-oriented developments, 
charter schools, healthcare centers, and community facilities. 
And they've created thousands of jobs through the steady 
support of entrepreneurs and small businesses.
    As a vital component of the Treasury Department, the CDFI 
Fund closely aligns itself with the Treasury's core priority of 
strengthening economic growth through its support of CDFIs. The 
CDFI Fund's programs are designed to generate a maximum 
economic benefit to low-income communities with a minimum 
Federal cost.
    On average, a CDFI Fund awardee will take their initial 
grant and use it to attract private investment by a factor of 
13. This unique ability will enable CDFIs to generate more than 
$1 billion worth of investment stemming from the $105 million 
in CDFI Program awards that I announced last year.
    Through strategic and targeted private and local 
partnerships, CDFIs have achieved remarkable success with their 
CDFI Fund grants. In fiscal year 2010, CDFI Fund awardees 
created or maintained more than 80,000 jobs, almost 30,000 of 
which were a direct result of new loans and investments. 
Awardees reported financing more than 12,000 businesses and 
nearly 6,000 affordable housing units and provided financial 
literacy and other training to 140,000 individuals. The CDFI 
Fund is critical to maintaining the growth of a strong 
community development finance industry, an industry that will 
make long-lasting and continual impacts across the Nation.
    CDFI Fund programs are consistently oversubscribed. For 
example, in this current round of the CDFI Fund program, 393 
applicants requested almost $500 million when only $145 million 
is available. Due to this high demand, we've been forced to cap 
our rewards at lower levels in order to provide grants to as 
many highly qualified applicants as possible. The strong and 
continuous demand for CDFI Fund awards and the proven impact 
that these awards make and the capacity of CDFIs to increase 
loans, investments, and financial services in low-income and 
distressed communities, demonstrate that it's essential to 
fully appropriate the President's fiscal year 2012 budget 
request for the CDFI Fund.
    The President's request guarantees our ability to continue 
our valuable programs, including the CDFI Program's Financial 
and Technical Assistance Awards, the Healthy Food Financing 
Initiative, and our successful and much needed Native 
Initiatives. This request also includes funding for the new 
Bank on USA initiative and administrative requirements. Through 
the administration of these programs, the CDFI Fund will 
continue to serve our Nation's lowest-income communities.

                           PREPARED STATEMENT

    The CDFI Fund has seen considerable support from this 
subcommittee in recent years for program development and 
appropriations. My deepest thanks go to its members and to 
Chairman Durbin for your unwavering confidence in the CDFI Fund 
and our important mission.
    Thank you. And I look forward to taking your questions.
    [The statement follows:]
                Prepared Statement of Donna J. Gambrell
                              introduction
    Good morning Chairman Durbin, Ranking Member Moran, and the 
distinguished members of the Senate Appropriations Subcommittee on 
Financial Services and General Government. My name is Donna J. Gambrell 
and I am the Director of the Department of the Treasury's Community 
Development Financial Institutions (CDFI) Fund. Thank you for inviting 
me to speak today about the CDFI Fund's fiscal year 2012 budget request 
and the critical ways in which the CDFI Fund is promoting economic 
development efforts throughout the country.
    I would like to start by expressing my deep appreciation to this 
subcommittee and to the Congress for its long history of support. The 
CDFI Fund's programs stimulate the economy in communities often 
considered too risky for mainstream financial institutions. CDFIs are 
strategically positioned to help some of the most vulnerable 
populations in the Nation at a time when they are facing many 
financially challenging situations. CDFIs are often the only source of 
financing in underserved communities. CDFIs support productive small 
businesses, affordable housing for low-income Americans, high-quality 
community facilities, and provide retail banking services to the un-
banked and others often targeted by predatory lenders.
    I have been Director of the CDFI Fund for more than 3 years, during 
a time when our Nation has endured the greatest recession in 
generations. The recession has had far-reaching consequences for our 
entire Nation, but nowhere has there been a more detrimental impact 
than on distressed and low-income communities. Many of these same 
communities were already suffering before the financial crisis, and 
their recovery will now take much longer than in other parts of the 
country.
    My principal role as Director is to ensure that the CDFI Fund is 
doing everything possible to alleviate the economic burden on low-
income communities, primarily through support of CDFIs and other 
institutions that focus their efforts on serving these at-risk 
communities.
    CDFIs are financial institutions that take a variety of forms--they 
are loan funds, credit unions, community banks, and venture capital 
funds. They are local, regional, and even national organizations that 
spur economic and community development in distressed areas from a 
grassroots level. CDFIs, as a class of financial institutions, have 
years of experience providing financial products and credit counseling 
services that permit borrowers to enter into and participate 
successfully in the financial mainstream. CDFIs fill a critical gap in 
the financial industry--they serve target markets that are historically 
underserved and they provide economic development services for niche 
areas that require specialization. The CDFI Fund encourages the growth 
and capacity of this valuable industry through a strategic deployment 
of resources.
                 cdfi deg.the cdfi fund's role
    The United States Congress established the CDFI Fund as a 
bipartisan initiative under the Riegle Community Development and 
Regulatory Improvement Act of 1994 (Public Law 103-325). Recognizing 
the need to bolster a fledgling industry that was making significant 
inroads in economic development in low-income communities, the bill's 
authors designed the CDFI Fund to provide financial and technical 
support to CDFIs with the goal of improving economic conditions in low-
income neighborhoods across the country. The mission of the CDFI Fund 
is to increase economic opportunity and promote community development 
investments for underserved populations and in distressed communities 
in the United States.
    As a vital component of the Department of the Treasury, the CDFI 
Fund closely aligns itself with the Treasury's core priority of 
strengthening economic growth. The CDFI Fund's programs are designed to 
generate a maximum economic benefit to low-income communities with a 
minimum Federal cost.
    It begins with CDFI certification. To be certified as a CDFI by the 
Treasury Department, organizations are required to meet a strict set of 
criteria, including having a primary mission of community development, 
as well as serving a target market that meets at least one of the CDFI 
Fund's definitions of a distressed or low-income community. One common 
type of target market is a Census tract that has a poverty rate of at 
least 20 percent, or an unemployment rate 1.5 times the national 
average, or a median family income at or below 80 percent of the 
statewide or metropolitan average.\1\ As organizations must be 
certified as CDFIs in order to be eligible for funding under many of 
the CDFI Fund's programs, the certification criteria allow the Treasury 
to verify that awards are going to the neighborhoods that need them the 
most. Almost 200 CDFIs were certified or recertified in fiscal year 
2010 alone, and as of April 2011 there are 949 certified CDFIs across 
the Nation and the United States territories.
---------------------------------------------------------------------------
    \1\ In order to become certified, an organization must submit a 
CDFI certification application to the CDFI Fund for review and 
approval. The application must demonstrate that it meets each of the 
following requirements:
      -- Be a legal entity at the time of certification application;
      -- Have a primary mission of promoting community development;
      -- Be a financing entity;
      -- Primarily serve one or more target markets;
      -- Provide development services in conjunction with its financing 
activities;
      -- Maintain accountability to its defined target market; and
      -- Be a nongovernment entity and not be under control of any 
government entity (tribal governments excluded).
    An eligible target market may consist of an:
      -- Investment Area.--A geographic unit or contiguous geographic 
units that have a poverty rate of at least 20 percent; or an 
unemployment rate 1.5 times the national average; or a median family 
income at or below 80 percent of the statewide/metropolitan average; or 
is wholly located within an Empowerment Zone or Enterprise Community; 
or
      -- Low-income Targeted Population.--A geographic unit comprised 
of individuals whose median family income is at or below 80 percent of 
the statewide/metropolitan average; or
      -- Other Targeted Population.--An identifiable group of 
individuals who lack adequate access to capital and have been 
historically denied credit.
---------------------------------------------------------------------------
    Once certified, the most common way for a CDFI to participate in 
the CDFI Fund's programs is through our core program, the CDFI Program. 
The CDFI Program provides Financial Assistance and Technical Assistance 
awards to qualified CDFIs. These awards are intended as seed money to 
attract more private capital into CDFIs and their investments in 
distressed communities. The awards also allow CDFIs to leverage 
resources to increase the size of their service area and to build their 
own internal capacity so that they can better serve their target 
markets.
    Demand for CDFI program awards has significantly increased over the 
years. For the fiscal year 2011 award round, the CDFI Fund received 393 
applications from CDFIs requesting a total of almost $465.9 million in 
assistance, nearly three times the $169.7 million available. Because of 
the continual high demand coupled with limited resources, the CDFI Fund 
capped the maximum award at $1 million in fiscal year 2009, and even 
lower at $750,000, in fiscal year 2010.
    Another CDFI Fund program, Native Initiatives, also continually 
faces demand well beyond its available resources. Native Initiatives 
provides Financial Assistance awards, Technical Assistance grants, and 
training to Native CDFIs and other Native entities proposing to become 
or create Native CDFIs. Through the Native American CDFI Assistance 
Program (NACA program) demand for financial and technical assistance 
continues to grow at a rate that eclipses available resources. In 
fiscal year 2011, the CDFI Fund received more applications than ever in 
the history of the NACA program, receiving 88 applications requesting 
$35 million--a 48 percent increase more than the $23.7 million 
requested in fiscal year 2010. Such an increase in demand demonstrates 
that Native Initiatives is successfully reaching and building the 
lending capacity in communities that have lacked such capabilities 
until now.
    The CDFI program and Native Initiatives are complemented by efforts 
to provide technical assistance and training to CDFIs. First, is Native 
Initiatives' ``Economic Developments in Indian Country'' workshops, co-
sponsored by the Federal Reserve Bank of San Francisco, Seattle branch. 
The 2010 workshop series featured presentations by four other Federal 
development agencies, and allowed the participants to network and 
brainstorm solutions to economic development difficulties in Native 
communities.\2\ Forty percent of the fiscal year 2011 NACA program 
applicants attended at least one of the workshop sessions in 2010.
---------------------------------------------------------------------------
    \2\ The other Federal agency participants in the 2010 Economic 
Development in Indian country workshops were the Department of 
Commerce, the Department of the Interior's Office of Indian Energy and 
Economic Development, the Small Business Administration, and the 
Department of Agriculture,Rural Development.
---------------------------------------------------------------------------
    Second, the CDFI Fund's Capacity Building Initiative provides 
support to all forms of CDFIs in areas of key business practices or 
economic development interests. The Capacity Building Initiative was 
designed based upon input received from CDFIs nationwide to 
significantly boost the ability of CDFIs to deliver financial products 
and services to underserved communities. The initiative has already had 
a phenomenal response from the industry. CDFIs have demonstrated a 
demand for the initial four capacity-building training and technical 
assistance tracks, which will allow them to build their own internal 
capacity and expand their expertise in key areas currently affecting 
the communities they serve, such as affordable housing, business 
lending, and providing financing for healthy food activities. In 
addition to training, the CDFI Fund has also commissioned a research 
project to review CDFI coverage in distressed communities across the 
Nation, which will allow CDFIs to determine where low-income 
communities are lacking access to CDFI services.
    One of the key drivers of the Capacity Building Initiative is that 
innovation and a nimble response to changing economic conditions are 
stalwart traits of the CDFI industry. CDFIs have demonstrated these 
traits time and time again during the uncertain economy of recent 
years.
    The CDFI Fund also administers other programs in support of 
community and economic development. The Bank Enterprise Award Program 
(BEA program) rewards banks for completing community development 
investments in eligible census tracts. To date, the CDFI Fund has made 
more than $336 million in awards under this program, supporting 
increases in investments in CDFIs and low-income communities across the 
Nation. Beginning in the fiscal year 2009 funding round, the CDFI Fund 
required that all BEA awardees use their BEA awards for future CDFI 
support and community development activities, as defined under the BEA 
program regulations. Awardees that receive awards more than $50,000 are 
required to report to the CDFI Fund on how the award was deployed.
    No overview of the CDFI Fund's programs would be complete without 
the New Markets Tax Credit program (NMTC program), although it does not 
fall under the purview of this subcommittee. The NMTC program attracts 
investment capital to low-income communities by permitting individual 
and corporate investors to receive a tax credit against their Federal 
income tax return in exchange for making equity investments in 
Community Development Entities (CDEs). CDEs in turn make loans and 
investments in businesses and real estate projects in low-income 
communities. CDEs must apply for the authority to issue New Markets Tax 
Credits to their investors. In any given application round, requests 
are generally 7 to 8 times higher than the available allocation 
authority. To date, NMTC investors have invested more than $20 billion 
into low-income, urban, and rural communities throughout the United 
States, approximately two-thirds of which has been invested in 
communities characterized by severe economic distress-census tracts 
with a poverty rate of 30 percent or with a median income at or below 
60 percent of the area median family income.

                   CDFI deg.impact of cdfis

    CDFIs serve distressed and low-income communities through 
innovation, specialization, and targeted services. The customers of 
certified CDFIs, on average, are 70 percent low income, 60 percent 
minority, and 52 percent female. These traditionally underserved target 
markets benefit from services provided by CDFIs that they could not 
receive from mainstream financial institutions.
    For example, Boston Community Capital, a CDFI headquartered in 
Massachusetts, has developed a new Stabilizing Urban Neighborhoods 
Initiative, where the CDFI partners with other organizations to buy 
foreclosed properties and sell them back to the original owners with a 
reduced mortgage payment, preventing displacement. As a result, low-
income urban neighborhoods in Boston are at less risk of population 
loss due to unaffordable housing costs.
    Another organization, Access to Capital for Entrepreneurs (ACE), 
which is a certified CDFI as well as an SBA Microloan Intermediary and 
USDA Intermediary Relender, has done excellent work encouraging the 
growth of small business ventures in the rural Southeast. For example, 
an ACE microloan to Melissa Bennett allowed her to expand her cosmetics 
store to a second retail location in Georgia and to hire more help. The 
Dazzle Cosmetic Company now has eight employees in a rural area with a 
high poverty rate.
    CDFIs have pioneered new youth financial education initiatives; 
encouraged the development of green industries and rural manufacturing; 
invested in transit-oriented development, charter schools, healthcare 
centers and other community facilities; and have created thousands of 
jobs through the steady support of small businesses. After both 
Hurricane Katrina and the gulf coast oil spill, CDFIs were at the 
forefront of re-building the gulf coast region and providing support 
for small business owners who saw their livelihoods threatened.
    The CDFI Fund supports the growth of a stable community development 
financial institution industry that will make long-lasting and 
continual impacts across the Nation.
   cdfi deg.the president's fiscal year 2012 budget request
    The CDFI Fund's programs offer critically needed funding and 
resources that result in sustainable growth for the nationwide network 
of CDFIs. Due to the phenomenal track record of CDFIs leveraging the 
CDFI Fund's awards with private investment, there is a clear benefit of 
a large local impact for a small Federal cost. In fact, CDFI Fund 
awardees leverage their awards with private investment by a factor of 
13:1 on average, so it is possible that we may ultimately see more than 
$1 billion worth of investment stemming from the $104.8 million in CDFI 
program Financial and Technical Assistance awards that were announced 
in fiscal year 2010. The broad impact that the CDFI Fund's awards make 
in low-income and distressed communities throughout the country is why 
the President's 2012 budget request included funding for the CDFI Fund.
    The President's 2012 budget request includes funding for Financial 
Assistance and Technical Assistance grants for the CDFI program. The 
stability inherent in a CDFI program Financial Assistance award 
provides the most patient capital available to CDFIs, which is one of 
the reasons why this program is in such demand. The continued 
oversubscription of this program guarantees that there will be a high 
demand for the full amount of funding requested in the President's 
budget. In a similar vein, the funding proposed for Native Initiatives 
will support a growing economic development industry in Native 
communities that consistently request more funding than the CDFI Fund 
has available.
    Included in the CDFI program is grant funding for the Healthy Food 
Financing Initiative (HFFI). The HFFI is a multi-year, multi-agency 
effort to increase the availability of affordable, healthy foods in 
underserved urban and rural communities. Through HFFI, the CDFI Fund 
will provide competitively awarded grants to CDFIs that are improving 
access to healthy food in low-income and underserved communities, 
particularly through the development or equipping of grocery stores, 
farmers' markets, and other healthy food retailers.
    The CDFI Fund also requests administrative funding for fiscal year 
2012. These funds will allow staff to meet the resource demands, and to 
address the significantly increased compliance monitoring requirements. 
The CDFI Fund anticipates increased information technology and research 
investment needs in order to continue serving and monitoring CDFIs 
effectively.
    The President's 2012 budget request also supports the Bank on USA 
Initiative. Designed to address the troubling fact that more than 1 out 
of every 4 American households is unbanked or under-banked, the Bank on 
USA Initiative will promote access to affordable and appropriate 
financial services and basic consumer credit products for households 
without access to such products and services. Bank on USA will support 
community-based efforts to identify strategies for serving unbanked and 
under-banked populations, including the development and delivery of 
innovative products and services.
    The CDFI Fund has seen considerable support from this subcommittee 
in recent years for program development and appropriations. My deepest 
thanks go to its members and to Chairman Durbin for your unwavering 
confidence in the CDFI Fund and our programs. As the economy continues 
to recover, the CDFI Fund will continue to effectively administer its 
programs, so that the hardest-hit communities in the country have every 
opportunity for success and growth.
    Thank you and I look forward to continuing to work with you in the 
future.

    Senator Durbin. Thank you very much.

                SBA deg.BUDGETING FOR DISASTERS

    Administrator Mills, I visited a major insurance company in 
New York, and I've certainly visited a lot of them in Illinois. 
If they write property and casualty insurance, they focus more 
on weather than almost anything else. They make strategic 
decisions for their insurance companies as to whether they're 
going to continue to write insurance in given parts of the 
country, based on their ideas of weather patterns. A lot of 
companies moved out of Florida, saying they think there are 
going to be more hurricanes, that they're going to be 
increasingly expensive, and that, ``We don't want to run the 
risk.''
    So, what can we make of what we're going through now, in 
terms of the Government's role when it comes to disasters? I 
happen to think we're seeing some changing weather patterns. 
That turns out to be a pretty hot political debate in 
Washington. But, insurance companies agree with me, in terms of 
what they're doing, how they're investing, and where they're 
protecting homes and businesses. What should we be thinking, at 
the Federal level, as these changing weather patterns suggest 
that our vulnerability, our liability as a Government, may 
increase in the years to come?
    Ms. Mills. Well, we stand, at the SBA, ready to help 
homeowners and small businesses in every State across the 
country. And, in fact, we have a state of readiness to go 
anywhere where we are needed. We have more than 2,000 ready 
reservists who are not paid----
    Senator Durbin. No, I understand that. What I'm asking you 
to join me in thinking about is a little bit of long-term 
thinking, which is hard for us in Government, even in business. 
But, I'm asking you--okay, look ahead--are you looking ahead? 
Do you see weather patterns and damage emerging that are just 
episodic--it's going to come and go--or is this something that 
we need to be thinking about and planning for the future?
    Ms. Mills. So, we look ahead. And, with National Oceanic 
and Atmospheric Association, we have briefings on what the 
assessments are for the coming seasons. I think it's very 
difficult to say, you know, for future years. But, certainly 
for the near-term hurricane seasons, we do take an assessment 
of how that is.
    That said, no--there was no prior indication that we were 
going to have the worst tornado season. And we have very often, 
in the past, had other extraordinary events. We've had 
flooding, we've had terrible hurricanes. And, as I said, we 
have established, after Hurricane Katrina, a much elevated 
level of readiness. And one of the things we did is put out 
this ready reserve so that if there is a pocket of geographic 
difficulty, as there is right now, we fly in resources to that 
geography----
    Senator Durbin. I guess----
    Ms. Mills [continuing]. And that allows us to be where 
others might not be.
    Senator Durbin. I don't question what we do. I'm just 
questioning about whether or not we have thought about the next 
year and the year after, and what it means, in terms of our 
thinking ahead, preparing resources for the eventuality. And 
maybe that's just very difficult to predict.
    Ms. Mills. Well, that's a good question.

            SBA deg.COST OF SMALL BUSINESS LENDING

    Senator Durbin. Well, let me ask you this. When it comes to 
this 35 percent increase in funds requested for the SBA--I 
think what you talked about here are actually defaults on 
loans, and you track that back to real estate values. And I 
don't question that. I think everyone involved in the credit 
business in America knows that's a major problem. One of the 
reasons businesses can't borrow is that they can't pledge the 
warehouse and the real estate as collateral, because there's a 
question of the value. Now, that has not, at this point, 
bottomed out. We've been plumbing for the bottom here, on real 
estate values, and we're still looking. And sadly, we have many 
people underwater in their home mortgages, and more 
foreclosures coming. So, is what we're seeing this year in your 
budget request likely to be reflected in years to come as real 
estate values continue to be questionable and lead to more 
default?
    Ms. Mills. As you mentioned, we've asked for $250 million 
in additional subsidy in this budget, which is an increase of 
$132 million from the prior year. And the reason for that is 
that we try to cover our subsidy costs with our fees, but our 
fees are capped. And we plan to come back, in future years, 
with a request to allow us the fee flexibility to cover subsidy 
costs.
    Senator Durbin. Which means raising fees.
    Ms. Mills. Yes, which means raising fees. That said, we are 
seeing the default rates that are causing the credit subsidy to 
go up. Those are from the 2005, 2006, and 2007 cohorts. So, 
those were the times when people borrowed against very inflated 
real estate costs. That piece is working its way through the 
system, and we are seeing it being more resolved--on the trend 
to being resolved rather than on the trend to increasing.

                SBA deg.BANK ON USA INITIATIVE

    Senator Durbin. I'm going to save, for the second round, 
some questions about counseling. But, Ms. Gambrell, I want to 
go to this Bank on USA Initiative, which means a lot to me. You 
cannot go into the poorer sections of my State, in Springfield 
or Chicago, you name it, without seeing evidence of title 
loans, pawn shops, currency exchanges, the kind of predatory-
lending practices and charges which really take advantage of 
people in low-income categories. It is almost a shock to know 
that 1 out of 4 people in America are unbanked; they have no 
access to banking services. And they really just survive on the 
street, paying exorbitant fees to cash checks and pay bills and 
the like.
    So, Bank on USA is trying to step in and make a difference. 
Can you give me any kind of numbers about what we have done, 
what it has cost, and what the need is?
    Ms. Gambrell. Thank you for the question, Chairman Durbin. 
And to your point, certainly we recognize that, when it comes 
to the unbanked and the underbanked in this country, we're 
talking about, in many ways, an epidemic. We look at the impact 
that it's having on low-income communities, minority 
communities, and others, and you see that--with alternative 
check-cashers and predatory lenders--that oftentimes these 
populations are being preyed upon, and there's a devastating 
impact upon that community, and overall.
    The Bank on USA Initiative has multiple components to it. 
And what we want to do is really go beyond financial education.
    Senator Durbin. What's what I'm looking for is some kind of 
quantification--what we're spending, what we serve, what the 
universe of need is.
    Ms. Gambrell. Okay. Thus far, with the Bank on USA 
Initiative, that program is not funded for fiscal year 2011. We 
are requesting funding and the President's budget includes this 
request for 2012. So, thus far, we have not spent funding on 
the initiative itself. But, we certainly have worked with other 
partners, including bank regulatory agencies and others, to get 
a better handle of the program, to look at the research 
numbers, as well.
    Senator Durbin. Can you point out any bank, or banks, or 
credit unions, that you think are making an extra effort to 
address this problem?
    Ms. Gambrell. Yes. And actually, I think, when you look at 
some of the banks in your State, as well as other parts of the 
country, you have community banks, you also have CDFIs that are 
not only community banks, but clearly focused on community 
development--that are focused on financial education programs, 
but also going beyond that. They're looking for ways in which 
they can create affordable bank accounts and other types of 
affordable financial services and products for low-income 
communities.
    Senator Durbin. I'm going to turn it over to my colleague, 
but I'd ask you to follow up on that. And if you could give me 
the names of some of these institutions----
    Ms. Gambrell. Absolutely.
    Senator Durbin [continuing]. I'd like to be in touch with 
them.
    [The information follows:]

ACCION Chicago,
Chicago, Illinois
ACCION Texas, Inc.,
San Antonio, Texas
ACCION USA, Inc.,
New York, New York
African Development Center,
Minneapolis, Minesota
Alternatives Federal Credit Union,
Ithaca, New York
Appalachian Community Enterprises, dba Access to Capital for 
Entrepreneurs,
Cleveland, Georgia
Aura Mortgage Advisors,
Boston, Massachussetts
Bethex Federal Credit Union,
Bronx, New York
Broadway Federal Bank,
Los Angeles, California
Columbus Housing Initiative,
Columbus, Georgia
Communicating Arts Credit Union,
Detroit, Michigan
Economic and Community Development Institute,
Columbus, Ohio
First Nations Oweesta,
Rapid City, South Dakota
Frontier Housing, Inc.,
Morehead, Kentucky
Grow Iowa Foundation, Inc.,
Greenfield, Iowa
Homewise, Inc.,
Santa Fe, New Mexico
Hope Enterprise Corporation/Hope Federal Credit Union,
Jackson, Mississippi
Indianapolis Neighborhood Housing Partnership, Inc.,
Indianapolis, Indiana
Kalamazoo Neighborhood Housing Services, Inc.,
Kalamazoo, Michigan
Kentucky Highlands Investment Corporation,
London, Kentucky
La Fuerza Unida Community Development Corporation,
Glen Cove, New York
Latino Community Credit Union,
Durham, North Carolina
Latino Economic Development Corporation,
Washington, District of Columbia
Low Income Investment Fund,
San Francisco, California
Montana Community Development Corporation,
Missoula, Montana
Nebraska Enterprise Fund,
Oakland, Nebraska
Neighborhood Development Center, Inc.,
St. Paul, Minnesota
Neighborhood Housing Services of Waco Inc.,
Waco, Texas
New Hampshire Community Loan Fund Inc.,
Concord, New Hampshire
New Mexico Community Development Loan Fund,
Albuquerque, New Mexico
Northeast Entrepreneur Fund, Inc.,
Virginia, Minnesota
North Side Community Federal Credit Union,
Chicago, Illinois
Northwest Ohio Development Agency,
Toledo, Ohio
Northeast South Dakota Economic Corporation,
Sisseton, South Dakota
Opportunity Fund,
San Jose, California
Oregon Microenterprise Network,
Portland, Oregon
Pacific Community Ventures, Inc.,
San Francisco, California
Premier Bancorp Inc.,
Wilmette, Illinois
Rural Community Assistance Corporation,
West Sacramento, California
ROC USA Capital,
Concord, New Hampshire
Seedco Financial Services,
New York, New York
Self-Help Federal Credit Union,
Durham, North Carolina
St. Louis Community Credit Union,
St. Louis, Missouri
The Housing Assistance Council,
Washington, District of Columbia
The Housing Fund, Inc.,
Nashville, Tennessee
TMC Development Working Solutions,
San Francisco, California
Valley Economic Development Center,
Van Nuys, California
Vermont Community Loan Fund, Inc.,
Montpelier, Vermont
Western Massachusetts Enterprise Fund Inc.,
Holyoke, Massachusetts
Wisconsin Women's Business Initiative Corporation,
Milwaukee, Wisconsin
Wyoming Women's Business Center,
Laramie, Wyoming
                                 ______
                                 
    For more information please visit http://www.cdfifund.gov/docs/
Financial%20 Education%20and%20CDFIs%20062911.pdf

    Senator Durbin. Senator Moran.
    Senator Moran. Chairman, thank you.

                CDFI deg.CDFIS IN RURAL AMERICA

    Ms. Gambrell, I want to bring the rural aspect to your 
attention--of what you do. My home State of Kansas has received 
only 17 awards in the last 14 years, totaling $4.7 million. I 
think this comes from information that you provided.
    Ms. Gambrell. Correct.
    Senator Moran. And, at this time, there's only two 
certified CDFIs in Kansas, one in Topeka and one in Wichita. 
And my question is, What are you doing--what's the agency doing 
to make certain that rural aspects of your mission are cared 
for, are provided for?
    Ms. Gambrell. Thank you, Senator Moran. The CDFI Fund is 
focused on both urban and rural populations in rural 
communities. And, in fact, when you look at the number of CDFIs 
that are serving rural markets, you'll see that it's somewhere 
close to 24 percent. In your State of Kansas, you're right, 
about $4 million have been made through awards to organizations 
in Kansas.
    But, I would call your attention, as well, to the 
investments that happen in your State from those CDFIs that are 
not located in Kansas. And it's close to about $10 million, I 
believe, where regional or other national organizations have 
looked at projects and initiatives within the State and said, 
``We'd like to make investments there.''
    Now, I'm not satisfied that there are such a low number of 
CDFIs in the State of Kansas. I'd like to remedy that. I think 
we can do better. And one of the things that we continue to do 
as an organization is to work with Members of Congress, but 
also look at ways in which we can address some of those gaps 
where there are not CDFIs in certain communities, and really 
look for ways in which we can build upon that.
    Senator Moran. Is--are the--is the circumstance in Kansas--
is it representative of rural America?
    Ms. Gambrell. No, not----
    Senator Moran. Or are we unique in what at least appears to 
me to be a low number of participants?
    Ms. Gambrell. You're--you--Kansas may be a little unique. 
We certainly are seeing, in other rural communities, where 
there is a larger number of CDFIs. We're also seeing where 
there are larger amounts of investment. Now, that's not to say 
that in rural communities there are not challenges, as there 
are, I think, in all parts of the country. But, clearly, what 
we want to do is to build the capacity of those organizations 
and help reach out to the residents in those rural communities 
to identify, in a very targeted fashion, those initiatives and 
those projects that are actually going to help transform 
communities.
    Senator Moran. I look forward to--assuming that you're 
willing--to follow up with you and see if we can't help in that 
regard.
    Ms. Gambrell. I look forward to that, Senator. Thank you.
    Senator Moran. Thank you very much.

    SBA deg.BANKING REGULATIONS AND SMALL BUSINESS LENDING

    Ms. Mills, a couple of questions. First of all, do you see 
a connection between what I believe, and what I hear from my 
bankers, is an--my commercial bankers--is an increasing 
regulatory environment--the uncertainty of what's next, kind 
of, in the financial regulatory world, that I think has a 
consequence upon ability to make loans? As a--if that's true--
if you agree with that, that there is an increasing regulatory 
environment upon financial institutions, is there a greater 
demand, then, for the SBA guarantee and loan programs to assist 
those banks to make those loans more likely? Is there an 
increasing demand, based upon the regulatory environment that 
financial institutions are facing?
    Ms. Mills. Well, certainly--Senator, it certainly was the 
case in October 2008 when the credit markets froze, many, many 
banks faced increased scrutiny from their regulators, and that 
came down in a number of ways. As a result of that, many banks 
pulled back, and they were afraid to take risk. And they had to 
also put up greater capital reserves, and that, once again, did 
not allow them the latitude to back all the small businesses in 
their community.
    We saw--when we put out the ARRA grants and we increased 
our guarantees to 90 percent, we saw an enormous jump in our 
loan volumes. And, in fact, our loan volumes are back at 2008 
levels. So, we have filled the gap that was created by many 
banks pulling back out of the market.
    We are seeing that ease, because we have pushed very hard 
on the regulators to be clear in their communications. And what 
bankers and small businesses don't like is conflicting 
responses. So, we have made sure that the guidance that is 
given around small business lending has more and more clarity 
and that it opens up the opportunity for these banks, 
particularly community banks, to come back in the lending game, 
in addition to the way they've come back to the SBA.
    We've added 1,200 new community banks, who had not made an 
SBA loan since 2007, in ARRA and in the Small Business Jobs 
Act.
    Senator Moran. Do you see that number flattening, 
continuing, or decreasing the number of those loans or the 
number of banks making those loans?
    Ms. Mills. We see the number of banks--we have about 5,000 
of the 8,000 banks that are out there that now have some kind 
of SBA activity on their books. So, we have very strong 
penetration. What we are concerned about is that the recovery 
has gaps in it, and some of the gaps are in small loan sizes 
and in underserved markets. So, we have accelerated our efforts 
in those two areas with programs called ``Small Loan 
Advantage'' and ``Community Advantage'', which actually works, 
with CDFIs and other financial institutions, to reach places 
where we don't have enough points of access now.

                  SBA deg.SBA DISASTER LOANS

    Senator Moran. Tell me about the relationship between the 
SBA and the Federal Emergency Management Agency (FEMA). And do 
the requirements for SBA assistance following a disaster--do 
they mirror FEMA's designation of a disaster area?
    Ms. Mills. We work extremely closely with FEMA. And I have 
been traveling with Secretary Janet Napolitano and with the 
FEMA administrator, who has been just terrific. And we 
colocate, in almost every location, with FEMA, when we are 
jointly at disasters. There are occasions where it is not a 
Presidentially declared disaster, it is a State disaster, and 
the Governor--will be a smaller disaster--the Governor would 
ask me, at the SBA, to declare that disaster. And we would go 
in independently. And in that case, we would carry the burden 
of, you know, helping those homeowners and small businesses. 
But, in all of the ones you're seeing right now, we are jointly 
active with FEMA.
    Senator Moran. In the absence of a Presidential 
declaration, a Governor's declaration of a disaster is 
sufficient for you to provide loan services to those affected 
by that disaster?
    Ms. Mills. Correct. A certain number of houses and a 
certain number of businesses are damaged. The Governor will ask 
me to declare that area. And we also do the surrounding areas, 
because a business in one area might draw its business from 
surrounding counties. So, we include those, and then they 
become eligible for SBA, and we drop people into the location.
    Senator Moran. You mentioned housing, and yet the word 
``businesses''--it's the SBA. What role do you play in 
assistance for housing following a disaster?
    Ms. Mills. Because we are on the ground, and in order to 
avoid duplication of folks there, we also take on the 
responsibility for making home loans to people whose homes have 
been affected by the disaster. So, we make three kinds of 
loans: injury to homes, injury to businesses, and economic 
injury to businesses, where your roof is still fine, but your 
business is affected. And this was very true in the gulf area. 
So, we do all three.
    Senator Moran. And the advantage to the person who suffers 
the disaster is the certainty of the availability of credit and 
a lower interest rate than would presumably be available 
elsewhere?
    Ms. Mills. Correct. These are long-term, low-interest 
loans. And we tend to provide a broader set of insurance--
broader set of financing than insurance will provide. So, 
insurance, when they get their insurance receipts, they repay 
the piece of the loan, but we will generally cover more.
    Senator Moran. The recent Government Accountability Office 
report indicates that there is perhaps duplication between FEMA 
and SBA in programs. I assume that you've seen the report, read 
the report. Do you agree? Are there things that--are--that are 
duplicative in regard to your two agencies?
    Ms. Mills. I have not actually seen that piece, but we will 
look into it. But, I do not believe--and I have been out in the 
field now--I've been to the flooding in Nashville; I've been to 
the tornados in Mississippi; I've been to the tornados in 
Alabama and to see, also, hurricane damage. And we operate side 
by side with FEMA. If someone does not qualify for an SBA loan, 
we refer them to FEMA, and they may qualify for FEMA grants. 
So, we actually are very highly aligned and not duplicative.

                    SBA deg.LOAN SERVICING

    Senator Moran. My final question, Mr. Chairman, is I have 
heard, from Kansas bankers, some frustration with the level of 
services provided by the SBA. They attribute that to a 
consolidation of processing in--apparently, in a facility in 
Virginia. Is that a complaint that you're aware of? And is 
there something that's being done? And are my bankers telling 
me the truth?
    Ms. Mills. Senator Moran, I am aware of your Kansas bankers 
and their concerns. In--several years ago, we consolidated all 
of our loan approvals in centers around the country to ensure 
oversight and nonduplication. Before that, every single office 
had its own loan approval authority. And frankly, in order to 
save money and eliminate duplication and increase the quality 
of the credit decisions and the uniformity of the credit 
decisions, we centralized those functions some years ago.
    Many bankers and offices miss that ability to make a local 
decision. That said, we track very carefully the turnaround 
times. They are in days. And we are very, very good now at 
aiding customers and processing these loans across the country. 
And we are happy to talk further to your bankers to make sure 
they're getting the service they need.
    Senator Moran. I'll do the same. I guess, my question is--I 
wanted to make certain that there is not an unnecessary delay 
in this consolidation. And I'll be glad to have that 
conversation with you and my bankers, perhaps at the same time.
    Mr. Chairman, thank you very much.
    Senator Durbin. Thanks a lot, Senator Moran.
    Senator Kirk.
    Senator Kirk. No questions. I'm waiting for the second 
panel.
    Senator Durbin. Okay. If I can ask a follow-up question or 
two.

                    SBA deg.SBA MICROLOANS

    Administrator Mills, let's talk about microloans for a 
second. The average microloan to small businesses is about 
$13,000. And I'm concerned, here, that your request for next 
year's budget dramatically cuts, by 55 percent, the amount of 
money available to counsel microloan borrowers. Those would 
seem to be the small businesses most in need of counseling. 
They are looking for small loans. I would guess that many are 
startup businesses. And we know the failure rate of businesses 
in the early days. So, how can we justify cutting back on 
counseling when it comes to this level of lending?
    Ms. Mills. The first thing I want to say is how much we 
appreciate your support of the Microloan Program. And, in fact, 
for next year, I want to emphasize that the actual amount of 
money going into the microloans is remaining at the current 
levels. We think this is a critical program. Our volumes are 
up, and we track it very carefully. And we have very, very good 
results from this program.
    We looked across this issue of duplication of counseling 
benefits, and one of the things that we found is that we think 
that counseling in the microloan arena is better done by our 
partners, and that our contribution really should be to create 
more loan product, more lending dollars, and make sure that the 
counseling, which we think is absolutely critical, is done by 
our lending partners who are on the ground.
    So, what we have done, in Community Advantage, is try to 
make a shift to doing what we do best and what we do the most 
efficiently, which is provide the dollars, and to work with 
them to make sure they take advantage, if not of the counseling 
and those operations, the counseling in nearby women's centers 
and small business development centers.
    Senator Durbin. I was going to ask you, when you say 
``partners'', to whom are you referring to?
    Ms. Mills. Well, we have a set of counseling partners all 
across the country. And that involves 900 small business 
development centers, 110 women's centers, and 12,000 Service 
Corps of Retired Executives (SCORE) members and 350 chapters. 
We want to focus on those, making sure that those programs are 
functioning, they're cost effective, and that they're not 
duplicative, and focus our attention, in the microloan arena, 
in the area where I think we really give a much better bang for 
the buck, which is providing loan capital.
    Senator Durbin. So, let me ask you about that aspect. The 
Microloan program can accommodate up to 300 lenders. There are 
only 177 SBA-approved microloan lenders. In fact, in Illinois, 
there's just one: ACCION Chicago. Many small businesses in the 
rest of Illinois don't have easy access to SBA microloans. It 
appears to me, we need to increase the number of microlending 
partners, which mean that more small businesses will have 
access. What are we doing about that?
    Ms. Mills. We actually have a program that was funded in 
the Jobs act. The request for additional lenders just went out 
for intermediaries. And we are looking to add to that. In 
addition, we implemented ``Community Advantage,'' where we take 
CDFIs and we allow them access to our 7(a) program. This is 
really powerful. And the community has been asking for this for 
many years, because the 7(a) program is a broad and powerful 
program with much stability. And we now allow CDFIs--many of 
whom are our microlending intermediaries, to come into that 
program. It gives them enormous capacity.

                  CDFI deg.CDFI HEALTHY FOODS

    Senator Durbin. Director Gambrell, one last question. And I 
thought Senator Moran was going to ask this. I'll ask it 
instead. And it's about the Healthy Foods program. In my 
hometown of East St. Louis, Illinois, it was literally a food 
desert for the 25,000 or 30,000 people living there. There was 
just no place to shop. And, as a consequence, they were stuck 
with high prices, limited variety, and certainly not the 
healthiest alternatives, when it came to shopping. Then, along 
came Schnucks, a major grocery chain in St. Louis, opening up a 
store at 25th and State Street, my old neighborhood. And it 
transformed the town. They had a place to go. Everybody went 
shopping.
    Same thing happened in Chicago, on Roosevelt Road. There 
was a day when there were just no grocery stores in that area. 
And now there are a lot of them, which reflects a changing 
population and a commitment by these grocery chains.
    So, the First Lady and the President are pushing these 
healthy food alternatives, particularly for low-income 
families. And I know that they have an initiative that they've 
started. Can you tell me a little bit about what has been 
achieved to date and what you anticipate achieving in that 
regard?
    Ms. Gambrell. Thank you, Senator. So, the Healthy Foods 
Financing Initiative is one that the Treasury Department is 
proud to be a partner with the Department of Health and Human 
Services, as well as the Department of Agriculture--three 
agencies that have committed to looking at ways in which to 
address issues in food deserts.
    For the Treasury's part, the CDFI Fund is, again, a major 
partner. Thus far, we have sent out a healthy food supplemental 
questionnaire, as part of our competitive award round, under 
our Financial Assistance Awards, and we'll be getting that back 
from those applicants that have said, ``Yes, we want to be a 
part of this initiative, and this is how we can be''----
    Senator Durbin. Who received the questionnaire?
    Ms. Gambrell. These are from the applicants that actually 
have already applied for Financial Assistance Awards and 
indicated that they had an interest in applying for a healthy 
food----
    Senator Durbin. Can you generally describe them? Are they 
farmers' markets? Are they grocery chains?
    Ms. Gambrell. It really runs the gamut. And that, I think, 
is what we have certainly seen within the CDFI Fund industry, 
that we are looking for those CDFIs that are interested in 
bringing retail outlets, grocery stores, to those low-income 
communities. But, they are also involved in co-op markets, farm 
markets, distribution channels that actually transport food 
from local farmers into those food outlets, as well. So, it 
really does run the gamut.
    Senator Durbin. Great. Thank you. Any other questions?
    Senator Moran. Mr. Chairman, I apologize for not living up 
to your expectations. The food deserts are an important 
aspect--and again, I would--of something we're trying to make 
certain it doesn't continue. And there--I would just want to 
point out, once again, and--often thought of a food desert as 
an urban area. And we have those circumstances in Kansas. But, 
it's also--very much a rural issue, as well.
    And I'd again just highlight my earlier emphasis on making 
certain that our programs are designed to reach all areas of 
the country. And nutrition--in my view, one of the best things 
we can do for improving the healthcare of Americans, and 
thereby saving healthcare costs, is related--are nutrition, 
diet, exercise, and just this general wellness.
    And so, these are important issues. And I didn't want 
Chairman Durbin to be disappointed in my failure to express my 
views. But, more importantly, I want to make sure that we 
follow up and work together to figure out how we address this 
issue that's apparently particularly Kansas oriented.
    And you maybe have been telling me that there are CDFIs in 
Kansas City, Missouri, who are providing services in Kansas, as 
I thought about your answer about other States. And that makes 
some sense to me--our significant urban area along the Missouri 
border. So, look forward to having that dialogue.
    Thank you.
    Ms. Gambrell. As do I, Senator. Thank you.
    Senator Durbin. Senator Moran, thank you very much.
    And as Senator Kirk and I can tell you, there are parts of 
Illinois, downstate, that look an awful lot like Kansas. So, we 
have communal interest in a lot of these issues.
    Thanks, to this panel. We appreciate your testimony. And 
we'll be back in touch with some other follow-up questions as 
we prepare the budget for the next year.
    I'm going to welcome our second panel to the table and 
introduce them as they come up. Our first witness is Warner 
Cruz. He secured a loan, under an SBA program, to expand his 
business during the worst part of the recession. Mr. Cruz is a 
graduate of Augustana College, in Rock Island--which Senator 
Kirk just visited--and has a degree in international business 
administration and finance, minoring in Japanese. He worked for 
3 years in Japan. And even while working in Japan, he stayed 
integrated in the company that his father had started. He's now 
the president of J.C. Restoration, a small business that 
restores commercial and residential properties that suffered 
loss from fire, water, or storm damage.
    Next, we welcome Calvin Holmes, president of the Chicago 
Community Loan Fund, a Chicago CDFI. Mr. Holmes' community 
development career spans 25 years--he looks too young for that, 
but that's what it says--including work as a budget planner for 
rapid transit projects and property manager of a 200-unit 
assisted-living housing portfolio. Under his leadership, CCLFs 
lending has averaged nearly $1 billion in additional public and 
private sector capital in more than 55 lower wealth Chicagoland 
communities. He holds a master's degree in urban regional 
planning from Cornell and a BA in African-American urban 
studies from Northwestern.
    Finally, we welcome Ray Moncrief. He's the Executive Vice 
President and COO of the Kentucky Highlands Investment 
Corporation. He manages investing activities, including 
analyzing new investments. Mr. Moncrief has traveled nationally 
and internationally, speaking about the use of equity 
instruments as an economic development strategy. He sits on the 
board of several financial institutions and on the advisory 
boards for government agencies, to support community and small 
business development and venture capital. He's a graduate of 
Louisiana Tech.
    We're going to start with Mr. Cruz for an opening 
statement, allow that to the other two witnesses, and ask a few 
questions.
    Please be my guest.
STATEMENT OF WARNER CRUZ, ILLINOIS SMALL BUSINESS 
            PERSON OF THE YEAR, 2010, PRESIDENT, J.C. 
            RESTORATION, ROLLING MEADOWS, ILLINOIS
    Mr. Cruz. Good morning, Senator Durbin, Senator Moran, 
Senator Kirk, ladies and gentlemen. My name is Warner Cruz, and 
I am 38 years old. I am a husband, a father, and a proud owner 
of a successful family business that is overwhelmed with 
blessings.
    I'm here before this panel to testify about the tremendous 
impact the SBA's 504 loan program had on my firm. In fact, I am 
confident that if it were not for the 504 blessing, I would not 
be here today.
    The name of my business is J.C. Restoration (JCR), located 
in the suburbs of Chicago. The ``J.C.'' stands for Jose Cruz, 
my father, who immigrated here from Guatemala in the early 
1970s. With no money, formal education, or the ability to speak 
English, he eventually incorporated the business in 1982. 
Today, JCR is an industry leader in the disaster restoration 
field. Our core business is to restore commercial and 
residential properties that have suffered loss from fire, 
water, or storm damage across the United States.
    In 2002, I purchased the business from Mom and Dad and 
became 100 percent owner. After 7 solid years of 25 to 35 
percent average growth, I felt it was time for JCR to really 
expand. Thanks to the SBA 504, I was able to obtain a loan and 
more out--move our business from a 13,000 square foot warehouse 
to our current 102,000 square foot, state-of-the-art facility. 
We invested more than $3 million on seven acres in transforming 
this once abandoned eyesore that sat dormant on seven--
beautiful acres of land off of a major expressway. Our new 
building gleamed with a completely new energy efficient roof, 
light fixtures, and mechanicals, all designed with green in 
mind. Life was good.
    But, I haven't told you about the blessing yet. By the end 
of the third quarter in 2009, JCR sales plummeted 9 months in a 
row, due to the economic recession. The shock of moving into 
our new facility with great hopes of being able to handle the 
overabundance of work from the previous years was quite 
unnerving. Our sales decreased 29.4 percent, and we had to go 
into our own disaster response mode. The hardest thing I had to 
do was lay off 19 of our employees.
    The true blessing was this: if it weren't for the SBA 504 
that stabilized my $2 million loan at a fixed rate of 4.4 
percent over 20 years, I don't know what I would have done. The 
program preserved my working capital to where it was needed the 
most. I had great ease of mind knowing a conventional banker 
wasn't going to call me to raise their rates or devalue my 
property. The SBA 504 worked beautifully in the way the program 
was designed to protect me from inflationary pressures that I 
had never anticipated would happen.
    My testimony today is out of gratitude to the SBA. Not only 
did my business survive, today JCR is on pace to exceed sales 
of $20 million, after having our best year, last year, at $13.8 
million. We currently employ more than 150 full-time and part-
time jobs. The SBA 504 loan program helped save my business.
    But, more powerful is, in 2010, JCR kept 67 businesses in 
business, including two hospitals and a major manufacturing 
plant that employs more than 300 workers, after they suffered a 
major disaster. The SBA should be proud in knowing they 
indirectly assisted in this creation and retention of hundreds 
of American jobs by blessing JCR with the 504 loan program.
    Thank you.
    Senator Durbin. What a great story. I was just telling 
Senator Moran, we knew a little bit about your background, and 
it's just wonderful that you can come and tell us that story.
    Calvin Holmes, your turn.
STATEMENT OF CALVIN HOLMES, PRESIDENT, CHICAGO 
            COMMUNITY LOAN FUND, CHICAGO, ILLINOIS
    Mr. Holmes. Okay. Thank you, Sir. Good morning Chairman 
Durbin, Ranking Member Moran, and Senator Kirk. And thank you, 
Chairman Durbin, for showcasing two of our recent investments 
in low-income communities in Chicago.
    It's an honor to speak with you today about the critical 
and effective role that CDFIs play in promoting economic 
growth. Thank you for the opportunity and for your long-term 
support of the CDFI Fund, which is the critical permanent 
capital financier to CDFIs.
    I know that you've already heard from Director Gambrell, 
but I also want to thank her, because, in my humble opinion, 
she is the venture capitalist to the poor.
    I run the Chicago Community Loan Fund (CCLF), a private, 
nonprofit financial institution certified by the CDFI Fund and 
a member of the Opportunity Finance Network. Since 1991, CCLF 
has been investing in nonprofit and for profit community 
developers, providing flexible financing and--for economic 
initiatives, and filling gaps in the marketplace as they arise.
    At $28 million in capital, we are clearly dwarfed by 
regulated financial institutions. However, we have lent our 
dollars over and over again to help our borrowers attract more 
than $900 million in additional capital for their projects to 
make 222 loans, supporting 6,400 units of housing, 1,300 jobs, 
and 2.1 million square feet of commercial and facility space. 
Historically, we have leveraged $20 for every $1 we invest. Our 
cumulative charge-off rate, over all this time, remains below 1 
percent. Without the CDFI Fund program investments, little of 
this would be possible.
    Given high unemployment rates in underserved communities, 
we are especially proud of two recent projects. One of them is 
on the board. Last July, one of our borrowers opened a $150 
million Wilson Yard project that included 178 units of 
affordable housing, a Healthy Foods, new Target and Aldi 
stores, and additional retail space for more goods and 
services. Target hired 300 workers, 80 percent of whom live 
within a 2-mile radius of the store. The CCLF's $1 million 
predevelopment loan helped the project move forward.
    The CCLF is very involved in helping stabilize communities 
devastated by foreclosures, providing loans to small developers 
to rehab abandoned homes through the city of Chicago's 
Neighborhood Stabilization Program (NSP). Our loans are not 
only stabilizing housing, but keeping small firms afloat during 
the housing market downturn. We estimate that more than 50 
percent of the 23 developers participating in the NSP might be 
out of business without the program, and 458 tradesmen and 
women have been kept employed.
    Simply, a lender like us that makes a loan before all the 
takeout financing is in place, and to smaller organizations, 
must have high capital ratios. Without question, the CDFI Funds 
awards are the most important way we do so. Every $1 we have 
received from the CDFI Fund at a critical juncture has allowed 
us to recruit at least $3 more in private capital. For these 
reasons, it is vitally important that the $227 million in the 
President's fiscal 2012 budget requested for the CDFI Fund is 
appropriated. We know that there are many tough decisions to 
make, but supporting distressed communities in this way is 
critical.
    I look forward to continuing to work with you, and thank 
you again for your support.
    Senator Durbin. Thanks, Mr. Holmes.
    Mr. Moncrief, it's good to have you here. Your perspective 
from Kentucky is a little different that the big city 
perspective, so we're anxious to hear your testimony.
STATEMENT OF RAY MONCRIEF, EXECUTIVE VICE PRESIDENT AND 
            CHIEF OPERATING OFFICER, KENTUCKY HIGHLANDS 
            INVESTMENT CORPORATION, LONDON, KENTUCKY
    Mr. Moncrief. Thank you, Chairman Durbin, Ranking Member 
Moran, Senator Kirk. It's a pleasure being here.
    It's an honor to sit before you today to tell you about 
what we do, connecting the SBA and the CDFI Fund. I hope that, 
when I leave today, that my testimony shows that they don't 
compete, but they complement one another. And they're very 
vital, specifically in the area that I work, Senator Moran. I 
live in rural eastern Kentucky. Your comments on the radio the 
other day resonated with me where I live.
    I work for an organization that was just 43 years old who 
stimulates the local economy through the creation of businesses 
that hire people through employment. They accomplish this 
through financings in equity capitals, through subordinated 
debt, difficult financings to do. We do this with small 
businesses. And by ``small businesses,'' let me explain. The 
SBA defines a ``small business'' as any business, 500 or fewer. 
The average size of a small business that I deal with are 14 
employees, excluding government employees, schools, et cetera. 
So, I deal with very small businesses that require significant 
counseling.
    In addition to that, the banking crisis has been dramatic 
in our area. One example that I'd like to leave with you is 
that we have a manufacturer that hires 200 people whose bank 
was acquired by a larger regional. They were on the edge. They 
had not been profitable for 2 years. And they were told to seek 
their financing elsewhere. Because of where we are, we were 
able to put a financing together with another local community 
bank and provide a $1.5 million working capital line of credit 
for that facility to maintain those 200 jobs.
    The Microloan program is very important to us. We've--we 
have borrowed more than $3.8 million since its inception in 
1992. We've invested in more than 300 businesses. Last year 
alone, we did 36 financings for $850,000.
    Administrator Mills spoke about the Community Advantage 
Program. We are one--we were the very first Community Advantage 
lender in the United States, connecting the dots between the 
CDFI Fund and the SBA.
    The product called the SBA loan--Administrator Mills said 
that many of the banks in our area don't use that program. They 
don't, because of the rural nature, the hard-to-get-to, the 
size of the community banks, et cetera. So, we, as a CDFI Fund 
that's using the Community Advantage Program--it's vital for us 
to be able to offer the guaranteed loans that we do. The CDFI 
Fund is absolutely paramount, because we have to have the money 
to make the guaranteed loans. And the CDFI Fund and its FA 
awards allow us to capitalize our balance sheet and use those 
funds to indeed make those guaranteed loans under the 7(a) 
program.
    So, it is with that I'd urge this subcommittee to keep the 
SBA Microloan Program alive, thriving, as well as the CDFI 
Fund, at its current level of funding. Both are extraordinarily 
important to what we do, where we do it.
    Thank you.
    Senator Durbin. Thanks, Mr. Moncrief.

   CDFI deg.FORCLOSURE CRISIS AND DEVELOPMENT OPPORTUNITIES

    I'm going to, in the second round, address the other two 
witnesses. But, I'm just going to ask Mr. Holmes a question now 
so the other Senators have their chance.
    I've seen this movie before. I grew up in East St. Louis, 
Illinois. It was a town of 80,000 people, now in the range of 
25,000. In the early 1960s, white flight meant that people just 
left their homes behind. And as they did, the homes were 
abandoned, burned out, gutted, eventually bulldozed, and now it 
looks like a victim of some aerial bomb attack; the city just 
has so many vacant lots. Same thing is going on in Detroit. 
It's going on in a lot of places. I fear what's going to happen 
in the Chicagoland area, because I can see the same story 
playing out in areas like Marquette Park, where there are high 
foreclosure rates in otherwise long-time stable neighborhoods 
with great home stock--you know, these brick homes that we 
valued in Chicago became the trend after the Chicago fire.
    But, I'm asking you--because you talked about something 
that really catches my attention, of trying to help people 
finance the reconstruction or reoccupation of these homes. One 
of the obstacles I've seen in this is trying to find a bank 
that will cooperate. It seems that many banks are hell bent for 
foreclosure. And I don't understand why, because their asset is 
going to disintegrate to zero value if they go through 
foreclosure and don't have quick sale or reoccupation of the 
property. So, tell me--put this in perspective--tell me how it 
works, where you've been able to make it work to go into these 
foreclosure scenes, and what we might do to make sure that 
there's a better opportunity for that.
    Mr. Holmes. Got to remember to turn the talk button on.
    Senator Durbin, let me first say, it's really heartwarming 
to me to hear you talk about my hometown, as well. You may 
recall that I'm also a native of East St. Louis and my mother 
still lives there, at 88th and State Street. And, as you talked 
about the Schnook store that came online at 25th and State, I, 
too, celebrated not having the entire town be a food desert. 
So, it's always good to see, as they say in our neighborhood, a 
``homeboy''.
    So, the foreclosure crisis, it is a pretty daunting 
experience, right? We are working with one- and two-person 
general contracting shops, many of them who would have been out 
of business today if they were not getting construction bridge 
loans for us in order to rehab these homes and to keep their 
crews alive. That's one of the things I very much wanted to do.
    One of the reasons that we are able to operate in this 
environment--and you so astutely noted, earlier, that the real 
estate values are continuing to decline in a number of these 
neighborhoods. So, when we look at loan-to-value, it's hard to 
get your comfort there. What we have, through the NSP, is a 
guarantee from the city of Chicago, is that they will work with 
us to make sure that, one way or the other, we will get to the 
finish line, so that, as a lender, if--we can make sure that 
the construction process is handled well and goes to plan, and 
get that building rehabilitated. If for some reason the 
absorption is not there, there isn't a home buyer on the other 
end immediately, the city assures us that they will work with 
us to make sure that we don't lose our shirts. So, that's one 
of the ways in which we work.
    Increasingly, however, in partnership with the city of 
Chicago and its administrator, through the MSP program, Mercy 
Portfolio Services, we are having a series of conversations 
with local banks, both regional and national, to bring them to 
the table so that they can provide end mortgages so that, at 
the end of our construction loan, there is a home buyer. And 
we're also working with them on other commercial mortgage 
products so that they can help us accelerate the rate at which 
we rehabilitate these homes in our devastated communities.
    Senator Durbin. My last question goes right to that point. 
The problem I've run into in the foreclosure situation is 
figuring out who makes the decision. You have a servicing bank, 
you have many lenders, you have all kinds of loan instruments 
and derivatives. It's hard to get anyone who can say yes or no. 
How do you break through all that to finally find someone who 
can make a critical decision about the future of that 
property--to get the bank to answer the phone and cooperate?
    Mr. Holmes. Well, Senator Durbin, it's a complicated 
process, as you well know. So, one of the initiatives that 
we're involved in, in Chicago, to be able to help the banks 
understand that it's in their best interest to participate with 
the community, is something called the Regional Home Ownership 
Preservation initiative, where we have a number of 
stakeholders, both at the public sector level, the private 
sector level, and the community organizations, who, through 
this collaboration, can get the attention of the decisionmakers 
and get them to make decisions. And there are some successes, 
where we have a number of banks who are offering up portions of 
their real-estate-owned portfolio, so that the community can 
take possession, or a nonprofit, or a joint venture between a 
for-profit and nonprofit, and rehabilitate those homes. So, 
through this collaborative nature, with the public sector at 
the table as a convener, we're starting to make some headway.
    Senator Durbin. Thanks.
    Senator Moran.
    Senator Moran. Chairman, thank you.

     CDFI deg.PUBLIC-PRIVATE PARTNERSHIPS IN CDFI PROJECTS

    Mr. Holmes, the Target photograph and the story that you 
told, I assume that Target, or any other company, would not 
have made that decision without some support. And I just want 
you to describe for me what it was that was--you were able to 
do that induced Target to believe this is a profitable 
location.
    Mr. Holmes. Well, the simplest way to think about our role 
in a $150 million transaction is, we help our borrower, who's 
the real estate developer, acquire all of the property, take 
care of all the encumbrances that make it really messy for a 
large retailer to even think about a site like that. So, by 
putting $1 million on the table earlier on in the deal--and 
there were other CDFIs, thankfully, that were involved in the 
process, as well; this is a really big project, so there were 
some other layers of even predevelopment financing--but, we all 
worked together to take care of that site, so that Target knows 
their developer----
    Senator Moran. You created the--excuse me for interrupting, 
but you created the environment by which Target now believes it 
can succeed, as compared to providing any kind of direct 
benefit to Target.
    Mr. Holmes. Exactly. But, a real easy way to think about it 
is that Target is not going to spend its R&D time, its staff 
focus time, its marketing time, its business planning time if 
the developer that is trying to recruit Target does not have 
site control. If Target doesn't believe that a developer can 
pull off the project, then they're not going to plan to open a 
store there. So, our money helps the developer go to Target and 
say, ``Don't worry about this. The city's behind us. We've got 
our financing lined up. We've got site control. We've taken 
care of all the encumbrances. We've still got other layers of 
financing to put in place, but you can rest assured that this 
project will move forward.''

       CDFI deg.GROCERY STORES AND COMMUNITY DEVELOPMENT

    Senator Moran. Mr. Moncrief, you also mentioned grocery 
stores. For much of the time I've been in the Congress, in the 
House, I have told my colleagues that--it goes back to the food 
desert conversation we had earlier--that, particularly where I 
came from as a Member of the House of Representatives, economic 
development can be whether or not there's a grocery store in 
town. It's what many people would consider very much the 
basics.
    I recall, after the tornado, in Greensburg, of now about 5 
years ago. Greensburg was the town hit by the F5 tornado--
destroyed the entire town. One of the first conversations that 
people had with me and others--community leaders--was, Is 
Dillon's going to rebuild the grocery store? It was a 
determining factor as to whether anybody was going to live 
there. And I wonder if you have the experiences that would help 
keep Kansans and others figure out how we have those basic 
services in communities. How do we make sure the grocery store 
is there?
    Mr. Moncrief. Thank you, Senator Moran. Indeed, we have 
invested in grocery stores in those food deserts, where people 
don't have access to healthy foods.
    First of all, grocery--the grocery business, if it's 
nonchain, is very entrepreneurial. It requires all the products 
that we're talking about, things like SBA microloans, things 
like some of the money that we use from the CDFI Fund, and 
others, including venture capital.
    We recently did a grocery store in a rural part of 
Congressman Roger's district, where people had to drive 25 
miles to buy any type of grocery. We worked with that business 
to help it grow. And ultimately, it grew to such a size that it 
was actually sold out to a larger chain, which really had an 
impetus in that particular area, so that they brought all of 
the multiline food products to that particular area.
    The problem that we faced in the interior of Appalachia 
truly is one of healthy foods. There are people that don't have 
access to the basic amenities in the mountains of Appalachia, 
much less groceries. They have to drive miles and miles and 
miles. And according to the Appalachian Region Commission, many 
times Sunday lunch is a bag of Frito Lay potato chips. So, it 
is a problem that we're facing constantly, working with 
entrepreneurs to help them organize and create grocery products 
in those food deserts.

       CDFI deg.IMPACT OF REGULATIONS ON COMMUNITY BANKS

    Senator Moran. Mr. Moncrief, one of the other things that 
you mentioned that particularly caught my attention was about 
the ability for a local bank to provide lending to a near-
failing company, I guess, or a company that was struggling. And 
it's one of the concerns I have that I've tried to highlight, 
both here in this subcommittee, but as a member of the Senate 
Banking Committee. In my view, the regulatory burden that 
community banks are facing, increasing the cost of being in 
business, which generally means that either a marginal bank no 
longer continues to exist in a community or it becomes a branch 
of some larger banking organization. And I was hoping that 
you--you don't have to confirm my belief that the regulatory 
environment is the cause of this, but I would love to have you 
confirm that there are dramatic consequences to the ability of 
our communities to survive, to prosper, to grow in the absence 
of that hometown financial institution. And if we can alleviate 
that trend, or reduce the likelihood--I suppose I'm willing to 
see small banks, small financial institutions go out of 
business if that's the nature of the market forces, there's no 
option, but for them to go out of business because Government 
is putting such a regulatory burden upon them that the cost of 
being in business is so high that they have no choice but to 
spread those costs among a much larger financial institution--
my question to you is, Can you give me the evidence, can you 
support my premise, that there is a bad consequence that occurs 
in the absence of hometown financial institutions?
    Mr. Moncrief. Senator Moran, I would have traveled to 
Washington, DC, just to answer this very question. It's a very 
important question. Bank consolidation is the worst threat to 
rural economic development that exists, so much so that we find 
banks that we've worked with, in the years that I've been doing 
this, that we no longer work with, because they've been 
acquired by a larger regional that's been consolidated, and the 
corporate headquarters are in a distant city, which means that 
those banks that aren't bankable, under--according to credit 
scoring sorts of things, don't receive the financing that they 
need.
    There literally are trillions of dollars pent up in the 
banking institutions today that cannot be lent because of the 
regulatory environment that we in, at present. There are banks 
that I go to every day--a typical example is, today, I was 
sharing that I am in a problem with a small business, that's 
paying $5,000 a month for one of its loans, that breached a 
covenant and is in foreclosure procedures today. It will put 
about 35 people on the street if we don't avert that, working 
in the special assets section of this bank, because of 
regulations that says that this bank had a--or, this company 
had a loss, it doesn't have quite the cash liquidity, although 
it is servicing its debt, that bank--that company likely will 
be sold, likely would go out of business, if we don't avert the 
foreclosure procedure by that bank.
    Regulation is gruesome, is brutal and burdensome, and it is 
the regulators that decide who to preserve on the balance sheet 
and take income for those loans.
    Senator Moran. I'm glad you made the trip to Washington, 
DC. And thank you for confirming both aspects----
    Mr. Moncrief. Absolutely.
    Senator Moran [continuing]. Of my premise.
    Mr. Cruz, thank you for your testimony. The key to our 
country's future of success is the ability of entrepreneurs and 
small businessmen and women to succeed. In the process of 
pursuing a profit or pursuing the creation of wealth, you put 
people to work. And anytime we can tell the story and see the 
role model, the success that you provide today, it's a great 
story for America. And it ought to be goal--and I'm certain 
that it is--the goal of every Member of the Senate to see that 
the American Dream can be fulfilled, as you and your family are 
doing so. Thank you for the inspiration.
    Thank you, Mr. Chairman.
    Senator Durbin. Senator Kirk.
    Senator Kirk. Well, Mr. Cruz, I also want to congratulate 
you as an ``Augie''. I just got back from Augustine, and I'm--
yesterday--and President Bahls would be pretty proud of you and 
what you did. I just moved into, I think, a 600 square foot 
apartment. So, to think about a 100,000 square foot facility, 
that is more space than I can possibly imagine, given what I 
just did.
    And, Calvin, you're a fellow Cornellian, and I'm very proud 
of you, as well, and what you've been able to do here. I don't 
know if you ever worked with Karen Muchin, very much in the 
CDFI Fund world--I've known her for 25 years, and very 
impressed with this--what you've been able to--done.

                  SBA deg.SBA LOAN PROCESSING

    To Mr. Cruz, I should say, gracias, or more--the language 
you're probably more familiar with, arigato, in Japanese. Let 
me just ask you about what else we could do for you. One of the 
big reasons why I ran for the Senate was to enact the Small 
Business Bill of Rights--10 new policies to help out small 
business. One of the things I've been worried about is how 
burdened you are with State and Federal paperwork. And a role 
for the SBA also to ideally take advantage of 21st century 
technology and have one Web site, where all of your Federal 
bureaucracy is taken care of--IRS, OSHA, and EPA. What struck 
me is how many times you have to write your own name on all of 
these Federal forms--and address and TIN number and everything 
else. And it should be the mission of the SBA to farm all this 
data out to the bureaucracy, with a goal of 200 hours per year, 
maximum, per entrepreneur, to fill out government paperwork. 
But, can you describe--how much time are you spending now, 
and----
    Mr. Cruz. In terms of--thank you, Senator Kirk--in terms of 
the question on the SBA loan, we were very fortunate, where we 
had a local SCORE office that was very, very helpful, and we 
used a company called Growth Corp, who pretty much guided us 
through the process. And surprisingly, it was very seamless. 
And it wasn't until after we received the loan and we actually 
did the construction that I realized, speaking with other 
people that had tried to obtain an SBA loan, the amount of work 
and paperwork that they went through, that some of them even 
gave up. So, I'm--I was very fortunate, where I didn't have 
that much trouble. And meeting with Mrs. Mills last year, and 
thanking her for that, she had said that's one of the 
initiatives that the SBA is working on is, to try to make it 
easier for businesses, paperworkwise.

       SBA deg.ATTRACTING INVESTMENT BY MAJOR RETAILERS

    Senator Kirk. Right. Calvin, You've got a big-box store, 
here. And so, I am totally impressed with what you've done, and 
think you should keep on going. But, there are a lot of people 
in Chicago that say, ``A Walmart shouldn't come into the 
community.'' What do you think of this view that some big boxes 
are okay and some big boxes--and does that hurt your ability to 
attract new investment and exactly what you've done?
    Mr. Holmes. So, I knew one of you would give me a very 
tough question. And I'm not sure I'm in a position to speak to 
whether or not we should have unions, or not. I can tell you 
that a number of our constituents really do believe in livable 
wages. And the union question is a----
    Senator Kirk. So, you shouldn't----
    Mr. Holmes [continuing]. Big part of that.
    Senator Kirk. You should not be allowed to work with a 
Walmart, is what you're saying.
    Mr. Holmes. What we do is not finance the big national 
retailers, per se. We actually finance the developer who's 
going to bring the brick and mortar envelope to the site for 
that retailer.
    Senator Kirk. Would this have been a bad idea, if Walmart 
had come?
    Mr. Holmes. We think that it's important to have a wide 
variety of high-quality goods and services in working class 
communities, Senator Kirk.
    Senator Kirk. Right.
    Mr. Holmes. And we understand that there is a range of 
national and regional and chainlets that can do that. We are in 
a community of people who are incredibly concerned about making 
sure that there are employers who will pay a fair and decent 
wage to working class families. Some of the retailers are 
really questionable in that respect. So, there are lots of 
things that we're trying to get our arms around. At the end of 
the day, we want a healthy mix of retailers in working class 
communities.
    Senator Kirk. One of the other arguments against big boxes 
is, all the little retailers on all the other streets who would 
oppose a Target coming in. How did you handle that?
    Mr. Holmes. I can tell you, I don't have the exact quote, 
but there is a small business owner who owned a salon just a 
couple of blocks to the north of the Target store, near the 
Wilson ``L'' stop, and her last name actually happens to be the 
same as mine. And she said, when we were at the grand opening 
with Mayor Daley, that she welcomed the Walmart sorry, not the 
Walmart--the Target--because she saw it as an economic engine 
that was going to increase the foot traffic in the general 
vicinity. Therefore, she thought she would benefit from having 
the national retailer so close to her store.
    Senator Kirk. I think that's exactly the point. I think the 
big boxes can totally transform a neighborhood. So, I think 
what you've done is exactly right. And I'm hoping that we don't 
have ``politically correct'' tests. My hope is that your job is 
economic development, and we keep it on that, without the SEIU 
or other unions coming in, saying that you cannot work with a 
certain party who would bring another $150 million into another 
neighborhood.
    Thank you, Mr. Chairman.

      SBA deg.FAMILY-OWNED SMALL BUSINESS AND SBA LENDING

    Senator Durbin. Mr. Cruz, if I'm not mistaken, I met your 
mother and father at a luncheon in Chicago. And I just want to 
make sure that, although your father receives a great deal of 
credit, that your mom is also acknowledged.
    If you'd like to say a word about her role in the 
development of your business.
    Mr. Cruz. Thank you, Senator Durbin. My parents wanted to 
come here so badly, to be part of this, to witness this. My 
mother and father did, together, start this business. And as a 
child--I have three sisters, and I remember--there was a time 
where they were in their--in our small home with a small 
garage, and both of them were cleaning furniture after smoke 
damage--thinking that these two people are my heroes. And I 
will share your compliments with them. Thank you for asking.
    Senator Durbin. If I remember correctly, your dad came to 
this country with limited English skills and went to work at 
this business and, when the owner finally decided to give it 
up, offered it to your father. And that's what launched where 
you're sitting today.
    Mr. Cruz. That's correct.
    Senator Durbin. It's a great, great story. How did you find 
out about this SBA program?
    Mr. Cruz. Well, my conventional banker had mentioned the 
process to me. And 4 years previous, probably 5 years previous, 
we had started to fill out an application to see if we would be 
able to obtain an SBA loan. And, like I had said to Senator 
Kirk, the paperwork was unbelievable. So, I went to a local 
SCORE office, and they gave me a bunch of literature, and read 
it, and then found----
    Senator Durbin. For the record, tell us what SCORE is. I 
know, and I think most of the members do. But, let's put it in 
the record.
    Mr. Cruz. SCORE are local offices that share information 
about helping your businesses grow, and specifically the SBA 
and the different programs----
    Senator Durbin. These are retired
    Mr. Cruz [continuing]. That they----
    Senator Durbin [continuing]. Executives----
    Mr. Cruz. Correct.
    Senator Durbin [continuing]. That give you----
    Mr. Cruz. Correct. Ex-business owners. So, it was very 
great, talking with them, because they understood our 
challenges and the time that we didn't have to fill out all the 
paperwork, and what we needed to do to make it happen. They 
introduced us to an office that specialized in SBA loans. And 
again, it was seamless, this what we were able to do is 
amazing. And I'm extremely grateful to the program.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. Great. Thank you very much.
    I want to thank the entire panel. It's terrific to hear, 
firsthand, your experience with these Federal agencies, and 
demystify some of this regulatory gobbledygook, and put it into 
real life terms. Thank you very much for that.
    And we may have some follow-up questions. We'll get back in 
touch with you.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
                Questions Submitted to Donna J. Gambrell
            Questions Submitted by Senator Richard J. Durbin
    Question. Treasury's fiscal year 2010 Performance and 
Accountability Report states that the Community Development Financial 
Institutions (CDFI) Fund awardees created or maintained more than 
80,000 jobs through loans and investments in fiscal year 2010 compared 
to the 2008 level of 29,500. As Federal CDFI funding has grown, the 
program has been able to maintain and actually improve on job creation 
per Federal dollar spent. Between fiscal year 2008 and fiscal year 
2010, funding increased by 250 percent, but job creation increased by 
275 percent.
    Does the CDFI Fund rely on CDFI self-reporting to determine job 
creation estimates? Does the CDFI Fund audit awardees after the fact to 
verify this data and track program outcomes? How else does the CDFI 
Fund hold awardees accountable after awards are made?
    Answer. Each CDFI program awardee is required to sign an assistance 
agreement prior to receiving an award, which provides the terms and 
conditions of the award use. Failure to meet the terms and conditions 
may cause the CDFI Fund to impose one or more sanctions, which may 
include requiring the awardee to return award funds.
    CDFI program awardees are required to self report on their 
financial performance and community impacts, including job creation 
estimates \1\ annually for a 3-year period following receipt of the 
award. Award recipients report their annual performance through a Web-
based reporting system, the Community Investment Impact System (CIIS). 
Each awardee has 180 days from its fiscal year end to report key 
financial performance and community impact data through CIIS. This 
allows the awardee to complete and support its annual audit and enables 
the CDFI Fund to verify reported information through desk reviews 
against the organization's audit.
---------------------------------------------------------------------------
    \1\ Jobs maintained are jobs at the business at the time the loan 
or investment is made. Jobs created are new jobs created after the loan 
or investment is made. Total jobs are computed as FTEs based on at 
least a 25-hour work week. Part-time employees are combined to FTEs.
---------------------------------------------------------------------------
    The CDFI Fund collects full-time equivalent (FTE) data through 
annual Institution Level and Transaction Level reports. Data is 
provided by awardees, based on the source \2\ listed for their 
estimates; the data are compared to benchmarks derived from Federal 
statistical agencies (e.g., Bureau of Labor Statistics) for accuracy 
and ``reasonableness'' as defined by the CDFI Fund.
---------------------------------------------------------------------------
    \2\ Source of job estimates includes new hires as a result of the 
financing; estimates based on State or local wage data; estimates based 
on economic impact modeling systems (i.e., IMPLAN, RIMSII, or REMI); 
real estate developer estimates about jobs created by type of business 
and square-footage built; or other sources.
---------------------------------------------------------------------------
    The annual reports filed by awardees detail an organization's 
financial position, current assets and liabilities, summary of income 
and expenses, loan purchases and sales, lending and financing 
activities, portfolio-at-risk, populations, and geography served by 
target markets, community impacts including job creation and businesses 
financed, development services, depository offerings, award compliance, 
and summary ratios used for compliance monitoring.
    In past years, CDFI Fund awardees were measured on their ability to 
increase total assets. While growing assets may illustrate a healthy 
financial institution, it is critical to know that CDFIs are using 
their resources to make loans and investments in distressed 
communities. Beginning this year, awardees are now measured by the 
number and amount of loans originated during the fiscal year, not the 
total portfolio outstanding on their books. This helps the CDFI Fund 
hold awardees accountable for their ability to continually deploy 
capital each year of the reporting period.
    Question. The statute authorizing the CDFI Fund requires that 
financial assistance awards be matched with funds from sources other 
than the Federal Government on a one-to-one basis. However, for fiscal 
year 2009 and fiscal year 2010 CDFI Fund awards, our appropriations 
bill waived the matching requirement due to the tightening of the 
credit markets and difficulty in raising funds from philanthropic 
sources. For fiscal year 2012, the administration requests to reinstate 
the matching fund requirement for CDFI Fund programs.
    Has the economy recovered to the point where the private sector and 
philanthropic community is now more able to contribute matching funds 
to enable greater leveraging of public resources?
    Would reinstating the matching fund requirement disadvantage CDFIs 
in the most distressed communities?
    Answer. For decades, CDFIs have met the challenge of providing 
access to capital and credit in communities impacted by economic 
turbulence. For fiscal year 2012, the CDFI Fund does not recommend 
waiving the matching fund requirement for CDFI programs. While Treasury 
realizes that challenges raising private sector matching funds may 
exist, matching funds address several related objectives. First, 
private matching funds multiply the impact of scarce Federal funds. A 
one-to-one match means that each Federal $1 generates $2 for CDFIs and 
cuts the Federal cost of job creation, affordable housing development, 
and other community benefits in half. Second, CDFIs use the match 
requirement to attract private sector contributions. The Federal match 
encourages private support. Third, private match provides external 
validation that a CDFI applicant has the capacity to forge partnerships 
with the private sector. Private providers of matching funds have 
independently vetted the applicant and demonstrated their support with 
money. Fourth, a private source of matching funds is more likely to 
stay involved with a CDFI, often in ways that go beyond the funding 
itself.
    Because demand for the program in recent years has been so 
competitive, the administration believes that those CDFIs that receive 
awards from the CDFI Fund will be able to honor the match requirement 
for fiscal year 2012. However, the administration realizes that many 
challenges still remain for CDFIs to raise the private sector matching 
funds that could prevent some CDFIs from applying. While it is likely 
that the CDFI Fund will not receive as many applications by reinstating 
the match requirement, the CDFI Fund believes that this is the most 
responsible way to handle the trust placed by the Congress to provide 
grants to the highest-qualified applicants.

                          SUBCOMMITTEE RECESS

    Senator Durbin. I thank those who attended this hearing.
    At this point, the hearing stands recessed.
    [Whereupon, at 11:20 a.m., Thursday, May 25, the hearing 
was concluded, and the subcommittee was recessed to reconvene 
subject to the call of the Chair.]


              MATERIAL SUBMITTED SUBSEQUENT TO THE HEARING

    [Clerk's Note.--The following testimonies were received 
subsequent to the hearing for inclusion in the record.]
  Prepared Statement of the Community Development Bankers Association
    The members of the Community Development Bankers Association (CDBA) 
thanks Chairman Durbin and Ranking Member Moran for the opportunity to 
submit testimony on the Obama administration 2012 budget request for 
the Community Development Financial Institutions (CDFI) Fund of the 
Department of the Treasury. We thank you for your past support of the 
CDFI Fund, the community development finance sector, and the Low and 
Moderate Income (LMI) people and communities we serve.
    We strongly urge you to support the President's budget request of 
$227 million for the CDFI Fund. CDBA is the national trade association 
of the community development bank sector. We are the voice and champion 
of banks and thrifts with a mission of serving LMI people and 
communities.
    Currently there are 91 certified CDFI banks with approximately 
$28.3 billion in aggregate total assets and a median asset size of 
approximately $200 million.\1\ While we account for less than 10 
percent of the total number of CDFIs we comprise approximately 50 
percent of the total assets of the CDFI industry.
---------------------------------------------------------------------------
    \1\ Source: FDIC call report data at March 3, 2011.
---------------------------------------------------------------------------
    CDFI banks are regulated FDIC-insured financial institutions 
subject to the same standards and regulatory scrutiny as other 
traditional banks. Yet, we are distinctively different as demonstrated 
by our track record of commitment to our communities. All of CDBA's 
members have been certified by the Department of the Treasury as CDFIs, 
meaning at least 60 percent of their total activities are targeted to 
LMI communities--with most targeting significantly more of their 
resources to these areas. As documented by analysis of the National 
Community Investment Fund (NCIF) \2\, significantly more of our lending 
and service activity is concentrated in low- to moderate-income 
communities than traditional financial institutions.
---------------------------------------------------------------------------
    \2\ National Community Investment Fund's annual Social Performance 
Metrics analysis (see http://www.ncif.org/).
---------------------------------------------------------------------------
    CDFI banks provide financing that is catalytic in sparking economic 
activity within their communities. For example:
  --The Central Bank of Kansas City is financing an exciting economic 
        revitalization project in the long-neglected Rainbow Corridor 
        of Kansas City, Kansas. 39Rainbow is a 26,000+ square foot 
        mixed-use retail, residential, and hotel development that will 
        create hundreds of jobs and serve as an anchor to spark the 
        revitalization of the surrounding neighborhood. The project has 
        strong civic support with the city of Kansas City (KS) and 
        State of Kansas providing tax and development incentives to 
        promote investment in the urban core.
  --The Pan American Bank helped the Velez family grow their small 
        wholesale seafood business--which serves food product retailers 
        in Chicagoland. Pan American financed El Ray Seafood's 
        expansion to larger facility and it has now grown to employ 
        eight people.
  --The International Bank of Chicago enabled the Trinh family to 
        expand their tofu and bean sprout production business through a 
        loan to buy a warehouse in a low-income Chicago neighborhood. 
        The business couldn't fully respond to customer demand due to 
        the limited size of their facility. Now settled into their new 
        facility, they have just hired two additional employees.
  --Southern Bancorp helped stabilize and expand Strohm Manufacturing 
        located in Clarksdale, Mississippi, one of the poorest counties 
        in the South. Following the death of the founder and increasing 
        global competition, Strohm struggled to stay in business. 
        Southern Bancorp helped restructure this family's business debt 
        and provided them with a line of credit. Strohm now employs 10 
        people.
    Illinois is home to 43 certified CDFIs--of which 16 are CDFI banks. 
Illinois CDFIs have received more than $115.5 million in support from 
the CDFI Fund since 1996. This Federal money has been absolutely 
critical to combating long-term poverty, unemployment, and social ills 
of too many Illinois communities and citizens. Loss of--or reductions 
in--funding for the CDFI Fund will have a direct and immediate impact 
on our ability to serve our communities and facilitate economic 
recovery and job creation.
    Since 1996, hundreds of CDFIs and banks have participated in the 
programs of the CDFI Fund. The programs of the CDFI Fund have a proven, 
documented track record of creating impact and have become invaluable 
in helping banks find ways to serve credit markets and communities that 
otherwise might not be served. The programs of the CDFI Fund use very 
modest public resources to leverage large amounts of private dollars. 
Analysis by the Treasury Department estimates that the leverage factor 
is as high as 20 to 1. This finding makes the CDFI Fund one of the 
smartest investments of Federal resources to solve some of the Nation's 
most critical economic problems. The CDFI Fund is truly one of the 
Federal Government's best market-based strategies for leveraging and 
channeling needed resources to our most challenged communities.
    CDBA wholeheartedly supports all of the CDFI Fund's programs. The 
CDFI Fund's Bank Enterprise Awards (BEA) program is particularly 
important to CDFI banks and the communities they serve; it supports new 
investment in CDFIs of all types and provides resources to reach the 
most underserved communities. BEA resources are well-targeted to the 
neediest communities by requiring that direct lending and services be 
targeted to places with at least 30 percent poverty and 1.5 times the 
national unemployment rate. BEA is also focused on the smallest and 
most mission-focused banks. In fact, since 2007, CDFI banks have 
received 78 percent of all BEA awards and the smallest banks (with less 
than $250 million in total assets) have received more than 57 percent 
of all funding. Of the $227 million requested in the President's 
budget, we ask that at least $22 million be reserved for the BEA 
Program.
    We fully recognize that Federal appropriators face great challenges 
this year. But, as you know, low-income families and communities are 
among the hardest hit during periods of economic distress. This 
recession has been no exception. The CDFI Fund has already endured a 
$20 million cut in funding between fiscal year 2010 and fiscal year 
2011. In the interests of promoting new jobs and economic recovery in 
the hardest hit rural and urban communities of our Nation, we urge you 
to maintain fiscal year 2011 funding levels of $227 million for the 
CDFI Fund in fiscal year 2011. Any further reductions in the CDFI 
Fund's appropriations will directly result in the loss of jobs, 
affordable housing, and small business credit that will be felt across 
the Nation in the places that need it most.
    We strongly urge you to support continued funding at the fiscal 
year 2011 level and as requested in the President's budget.
    We thank Chairman Durbin, Ranking Member Moran, and the members of 
the subcommittee for the opportunity to express our views.
                                 ______
                                 
               Letter From Women Impacting Public Policy
                                                      May 18, 2011.
Hon. Richard J. Durbin,
Chair, Subcommittee on Financial Services and General Government,
Washington, DC.
    Dear Senator Durbin: We are writing to express our views on the 
Small Business Administration's (SBA) proposed budget for fiscal year 
2012. Women Impacting Public Policy (WIPP) supports funding for 
programs and services that benefit the women-owned business community 
including the Women's Procurement Program, Women Business Centers 
(WBCs), and SBA's Office of Advocacy. WIPP is a national, nonpartisan 
organization representing 54 organizations and more than 500,000 women 
business owners nationwide.
    WIPP supports the proposed $1 million funding for the Women Owned 
Small Business Federal Contract program included in the President's 
proposed budget. This program, which has taken 11 years to enact, is 
designed to give women-owned businesses greater access to Federal 
contracting. It will allow contracting officers, for the first time, to 
restrict competition for Federal contracts to women-owned businesses. 
This program will also assist Federal agencies with reaching the 
Federal goal of awarding at least 5 percent of contracts to women-owned 
businesses. Central to the success of this program are procurement 
center representatives (PCRs), breakout procurement center 
representatives (breakout PCRs), and commercial marketing 
representatives (CMRs). We supported increased funding for PCRs, 
breakout PCRs, and CMRs because of their importance in ensuring small 
business participation in the procurement process.
    In addition, we support the proposed $14 million in funding for 
Women Business Centers (WBCs). WBCs provide essential training, 
counseling, and mentoring to help women looking to start or grow a 
successful business. According to the SBA's Office of Entrepreneurial 
Development (ED) 2010 Impact Report, WBC's clients who received 3 or 
more hours of counseling reported a 47 percent increase in sales while 
clients who received less than 3 hours of counseling reported only a 36 
percent increase in sales. Businesses that receive assistance from WBCs 
have significantly higher survival rates that those businesses not 
receiving similar support.
    WIPP also supports the Microloan and technical assistance (TA) 
programs at the SBA. These programs support entrepreneurs and small 
businesses seeking grow their businesses in underserved communities 
across the country. In addition, we support continuing the PRIME 
program, which is the only major program designed to provide TA funding 
to intermediaries which are not lenders.
    Last, we support funding for the Office of Advocacy. WIPP supports 
the President's recommended funding of $9,120,000 for SBA's Office of 
Advocacy. Small businesses need to have an independent voice in Federal 
regulatory process.
    We urge you to support funding for these important programs.
            Sincerely,
                                            Barbara Kasoff,
                                                         President.
