[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]





 
                      PROMOTING INCLUSIVE LENDING

                     DURING THE PANDEMIC: COMMUNITY

                   DEVELOPMENT FINANCIAL INSTITUTIONS

                  AND MINORITY DEPOSITORY INSTITUTIONS

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

                            VIRTUAL HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON CONSUMER PROTECTION
                       AND FINANCIAL INSTITUTIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 3, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-93
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]       





                          ______                      


             U.S. GOVERNMENT PUBLISHING OFFICE 
42-893 PDF           WASHINGTON : 2021 
 

                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
     Subcommittee on Consumer Protection and Financial Institutions

                  GREGORY W. MEEKS, New York, Chairman

NYDIA M. VELAZQUEZ, New York         BLAINE LUETKEMEYER, Missouri, 
DAVID SCOTT, Georgia                     Ranking Member
WM. LACY CLAY, Missouri              FRANK D. LUCAS, Oklahoma
DENNY HECK, Washington               BILL POSEY, Florida
BILL FOSTER, Illinois                ANDY BARR, Kentucky
AL LAWSON, Florida                   SCOTT TIPTON, Colorado, Vice 
RASHIDA TLAIB, Michigan                  Ranking Member
KATIE PORTER, California             ROGER WILLIAMS, Texas
AYANNA PRESSLEY, Massachusetts       BARRY LOUDERMILK, Georgia
BEN McADAMS, Utah                    TED BUDD, North Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   DAVID KUSTOFF, Tennessee
JENNIFER WEXTON, Virginia            DENVER RIGGLEMAN, Virginia
AL GREEN, Texas

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 3, 2020.................................................     1
Appendix:
    June 3, 2020.................................................    41

                               WITNESSES
                        Wednesday, June 3, 2020

Mensah, Lisa, President and Chief Executive Officer, Opportunity 
  Finance Network (OFN)..........................................     6
Pugh, Michael T., President, Chief Executive Officer, and Board 
  Member, Carver Federal Savings Bank............................     8
Scott, Samuel C. III, Founder and Chairman, Black Chicago 
  Tomorrow, and Co-Chair, American Business Immigration Coalition 
  (ABIC).........................................................    10
Sills, James H. III, President and Chief Executive Officer, M&F 
  Bank, on behalf of the Independent Community Bankers of America 
  (ICBA).........................................................    12

                                APPENDIX

Prepared statements:
    Mensah, Lisa.................................................    42
    Pugh, Michael T..............................................    52
    Scott, Samuel C. III.........................................    60
    Sills, James H. III..........................................    63

              Additional Material Submitted for the Record

Meeks, Hon. Gregory:
    Written statement of CDBA/inclusiv...........................    70
    Written statement of Citi....................................    73
    Written statement of CUNA Mutual Group.......................    76
    ``Strategic Allocation of Coin Inventories''.................    78
    Written statement of inclusiv................................    80
    Written statement of the National Bankers Association........    83
    Written statement of David M. Solomon, Chairman and CEO, 
      Goldman Sachs..............................................    88
Luetkemeyer, Hon. Blaine:
    FDIC report entitled, ``Preservation and Promotion of 
      Minority Depository Institutions Report to Congress for 
      2019''.....................................................    92
    May 2020 Board of Governors of the Federal Reserve System 
      report entitled, ``Preserving Minority Depository 
      Institutions''.............................................   132
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   157
    National Credit Union Administration report entitled, 
      ``Preserving Minority Depository Institutions--2019 Annual 
      Report to Congress''.......................................   159


                      PROMOTING INCLUSIVE LENDING

                          DURING THE PANDEMIC:

                         COMMUNITY DEVELOPMENT

                       FINANCIAL INSTITUTIONS AND

                    MINORITY DEPOSITORY INSTITUTIONS

                              ----------                              


                        Wednesday, June 3, 2020

             U.S. House of Representatives,
                Subcommittee on Consumer Protection
                        and Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 11:33 a.m., 
via Webex, Hon. Gregory W. Meeks [chairman of the subcommittee] 
presiding.
    Members present: Representatives Meeks, Velazquez, Clay, 
Heck, Foster, Tlaib, Porter, Pressley, McAdams, Wexton, Green; 
Luetkemeyer, Tipton, Loudermilk, Budd, Kustoff, and Riggleman,
    Ex officio present: Representatives Waters and McHenry.
    Chairman Meeks. The Subcommittee on Consumer Protection and 
Financial Institutions will come to order. Without objection, 
the Chair is authorized to declare a recess of the subcommittee 
at any time. Also, without objection, members of the full 
Financial Services Committee who are not members of this 
subcommittee are authorized to participate in today's hearing.
    Members are reminded to keep their video function on at all 
times, even when they are not recognized by the Chair. Members 
are also reminded that they are responsible for muting and 
unmuting themselves, and to mute themselves after they are 
finished speaking. Consistent with the regulations accompanying 
H.R. 965, staff will only mute Members and witnesses as 
appropriate and not recognize to avoid inadvertent background 
noise. Members are reminded that all House rules related to 
order and decorum apply to this remote hearing.
    Today's hearing is entitled, ``Promoting Inclusive Lending 
During the Pandemic: Community Development Financial 
Institutions and Minority Depository Institutions.''
    This is the Financial Services Committee's first-ever 
virtual hearing. So, let's all be patient with one another and 
with ourselves, and be kind to our witnesses who have 
graciously joined us in testing this new phase of committee 
work.
    And again, please, everyone remember to put yourselves on 
mute when you are not speaking.
    I will now recognize myself for 4 minutes to give an 
opening statement. I want to thank Chairwoman Waters, Ranking 
Member McHenry, my colleague, Mr. Luetkemeyer, who is the 
ranking member of this subcommittee, and all of my other 
colleagues for your participation in today's hearing.
    We are living in unprecedented times, and our nation's 
unemployment rate is the highest since the Great Depression: 43 
million Americans have lost their jobs since the start of the 
COVID-19 pandemic; and over 100,000 Americans have died, and 
many more are expected to die before the pandemic is over. In 
Queens, New York, where my district lies, they have lost more 
people than most States in the union. And now, compounding our 
nation's suffering and turmoil, the persistence of violence and 
brutality against Black men and women across this nation has 
sparked a nationwide movement for desperately-needed reforms.
    We are a great nation. And I continue to believe in the 
potential and promise of America. I have to say that the last 
few months have amplified what we have all been observing for 
years, and what many places of worship have taken to saying: We 
are all in the same storm, but we are not all in the same boat. 
While some consult in place and work seamlessly from home and 
have their every need and convenience delivered to their 
doorsteps from the convenience of an app, millions more have 
lost their jobs, or are forced to literally risk their lives to 
perform tasks such as delivering the mail, keeping essential 
stores and services open, and, of course, ensuring the 
continued availability of healthcare.
    While the connected few big companies, universities with 
massive endowments, and even professional sports teams all 
inappropriately assessed millions of dollars from the PPP 
program, the small employers, the family businesses, and the 
local nonprofits for which Congress established the program 
were forced to shut their doors and to furlough millions of 
their employees. While COVID-19 does not discriminate, it has 
laid bare the structural inequalities in our healthcare, 
education, banking, and transportation systems, and, yes, even 
in our system of police and justice.
    The Black and Hispanic communities have borne a 
disproportionate burden in this pandemic, as have Native-
American communities, which we don't talk about enough. 
Congress moved quickly to establish and fund programs to help 
middle-class and low-income families, which were already 
struggling to make ends meet in what was supposedly a 
prospering economy.
    Congress moved expeditiously to structure and to fund 
programs to keep homeowners and renters in their homes, and to 
avert the next housing crisis. We passed record funding to 
support small businesses and entrepreneurs, who form the 
backbone of our nation's employment engine. But we need 
accountability on the implementation of these programs, and 
confirmation that Congress' intent to reach the most vulnerable 
and those most at risk has been followed.
    I would like to thank the witnesses for their participation 
here today, and for their work in serving the underbanked and 
vulnerable communities, and I look forward to a robust 
discussion about how we can leverage our banking laws and 
Community Development Financial Institutions (CDFIs) to achieve 
a balanced and equitable recovery from these dark days.
    I now yield to the ranking member of the subcommittee, Mr. 
Luetkemeyer, for 4 minutes.
    Mr. Luetkemeyer. Thank you, Chairman Meeks. And thank you 
to all of the witnesses for joining us today. Today's hearing 
focuses on promoting inclusion in lending, particularly with 
respect to Minority Depository Institutions (MDIs), and 
Community Development Financial Institutions (CDFIs). As we 
know, MDIs and CDFIs make up a significant portion of the 
banking services for minority-owned businesses, in majority/
minority neighborhoods.
    In light of the events over the last few weeks, it is 
important that we conduct this hearing with the understanding 
that every member of this subcommittee agrees that there is no 
place for racism in banking, and, more importantly, in our 
society. We have all seen the horrific video of the death of 
George Floyd. There is not a person present at this hearing who 
isn't disgusted by the actions of that police officer, and the 
officers at the site who did nothing to stop it. I can't 
imagine the pain Mr. Floyd's family is feeling, and I hope they 
will be able to find some peace and justice that must and will 
be served.
    While banking policy can seem menial at a time when the 
country is recovering from a once-in-a-century pandemic, and as 
protests continue around the country, the services that our 
witnesses and financial institutions across the U.S. provide 
are fundamental to rebuilding our economy.
    Unfortunately, the damage left in the wake of the looting 
and rioting by people who have hijacked peaceful protests will 
also require significant investment and work from financial 
institutions on top of what was already a monumental task. 
Congress and the Administration took decisive action to pass 
the Coronavirus Aid, Relief, and Economic Security (CARES) Act 
in the wake of the economic shutdown due to the novel 
coronavirus. This legislation included many provisions designed 
to provide relief and forbearance to American families and 
businesses.
    Most notably, it established the Paycheck Protection 
Program (PPP). At first, Congress appropriated $350 billion for 
the PPP. Not only did Treasury have to set up this program 
within 2 weeks, but the program sent out more funding in 14 
days than the Small Business Administration (SBA) had done in 
14 years. The success of the first round led Congress to 
appropriate an additional $310 billion for PPP.
    However, to insure small institutions, one of the drivers 
of this program, Congress set aside $30 billion for financial 
institutions with below $10 billion in assets, and another $30 
billion for those with between $10 billion and $50 billion in 
assets. The latest PPP numbers on May 30th showed that the 
average PPP loan is $114,000, and roughly 80 percent of loans 
made are below $100,000. Furthermore, the number-one industry 
receiving PPP funding is the critical healthcare and social 
assistance sector. MDIs and CDFIs have played a vital role in 
thisprogram as well by making a combined $15.8 billion in 
loans. Put in perspective, that is more money than 42 States 
received under this program.
    What is most notable about these statistics is that 170 
Minority Depository Institutions made 107,000 loans, totaling 
more than $10 billion. That averages out to 630 loans per 
Minority Depository Institution, averaging $95,000 per loan. 
While these numbers express the success of the PPP program, 
there is no government program that goes off without a hitch. 
Since the passage of the CARES Act, I have had conversations 
with bankers across the country from Washington State to 
Florida, and heard many concerns that financial institutions, 
particularly smaller community institutions, were having with 
the program. I know there were many concerns with SBA's e-tran 
portal, loan documentation, and forgiveness documentation, just 
to name a few.
    With the demand for PPP loans slowing down and the Congress 
looking to take action, amending the program to extend the 
covered period and offer forgiveness parameters, we should take 
this opportunity to examine what issues have plagued 
institutions of all types, and specifically, MDIs and CDFIs.
    I thank all of you for being here today. I look forward to 
hearing your testimony. With that, Mr. Chairman, I yield back.
    Chairman Meeks. Thank you, Mr. Ranking Member.
    Is Chairwoman Waters here? If not, I will yield 1 minute to 
the ranking member of the Full Committee, Mr. McHenry, for an 
opening statement.
    Mr. McHenry. Thank you, Chairman Meeks and Ranking Member 
Luetkemeyer. I welcome the witnesses' discussion today. I think 
we all have an interest in ensuring that the broad base of the 
populous in our country, whether rural or urban, whether living 
on the margins or those who have newly found themselves living 
on the margins, that they have equal access to financial 
products, and especially the ones we urgently put in place in a 
bipartisan way through the CARES Act.
    So, I welcome the discussion today. It is a very important 
and topical one, given the state of what is happening across 
America today.
    Finally, on a personal note, I think we all were deeply 
affected by what occurred in Minneapolis, and what is now 
occurring across the country. There is something sickening and 
awful about what we witnessed happen to Mr. Floyd. This should 
not occur, we are better than that as a populace and a people, 
and we should respond together.
    So with that, thank you, and I look forward to the 
witnesses' testimony.
    Chairman Meeks. Thank you, Mr. McHenry.
    Now, let me introduce the witnesses. First, Ms. Lisa 
Mensah, president and chief executive officer of the 
Opportunity Finance Network (OFN). Under her leadership, OFN 
helped CDFIs leverage public funding with private investment 
from mainstream financial institutions, socially responsible 
investors, and philanthropic partners in distressed communities 
across America.
    In 2014, Ms. Mensah was nominated by President Obama and 
confirmed by the United States Senate for the position of Under 
Secretary of Agriculture for Rural Development. In this role, 
she managed a long portfolio of $215 billion, directing annual 
investments of $30 billion in critical infrastructure for rural 
America. Ms. Mensah developed new partnerships with private and 
philanthropic partners to generate $128 million in private 
grants and loan guarantees for the persistently poor rural 
communities.
    Before her appointment as Under Secretary, she was the 
founding executive director of the Initiative on Financial 
Security at the Aspen Institute, where she led a national 
bipartisan effort for leaders of financial institutions, 
nonprofit executives, and experts to promote savings, 
homeownership, and retirement policies and products.
    She began her career in commercial banking at Citibank 
before joining the Ford Foundation, where she was responsible 
for the country's largest philanthropic grant/loan portfolio of 
investments in rural America.
    Second, Mr. Michael T. Pugh, president and chief executive 
officer and board member of the Carver Federal Savings Bank. A 
banking veteran of more than 22 years, Mr. Pugh has led teams 
of up to 600 associates in retail business banking, commercial 
and residential lending, and call center operations. He has led 
bank technology integrations, launching new lines of business, 
and executing new growth market strategies.
    Prior to joining Carver in August of 2012, Mr. Pugh worked 
at Capital One as a senior vice president, a regional 
executive, and market president of the Eastern Maryland, 
Delaware, and Washington, D.C. markets, where he was 
responsible for revenue production, customer service, and bank 
operations for approximately 75 banking centers and $3 billion 
in deposits.
    In addition, he led the bank's community development 
strategy for 1,200 associates in 8 counties. Mr. Pugh is a 
board member of several not-for-profit organizations including 
the Community Development Bankers Association, and the Society 
for Financial Education and Professional Development, where he 
serves as its Chair.
    Third, Mr. Samuel C. Scott, chairman, Black Chicago 
Tomorrow, and co-chair of American Business Immigration 
Coalition. Mr. Scott founded Black Chicago Tomorrow to pull 
together the resources of the public and private sector, to 
address the needs of vulnerable and minority communities of 
Chicago, and to help set them on a path to a brighter future.
    Mr. Scott also serves on the board of the American Business 
Immigration Coalition, which provides a strong and effective 
voice for American businesses under the national immigration 
conversation, and advocates for sound, coherent immigration 
reform, and the integration of immigrants into our economy as 
consumers, workers, entrepreneurs, and citizens.
    Mr. Scott is the retired chairman, president, and chief 
executive officer of Corn Products International, today known 
as Ingredion, Incorporated. He also serves on the board of the 
Bank of New York Mellon, where he is chairman of the Corporate 
Governance, Nominating and Social Responsibility Committee. He 
served on the board of Motorola Solutions Incorporated from 
1993 to 2019, retiring as their lead director. He also served 
on the board of Abbott Laboratories from 2007 to 2020. And he 
serves on the boards of Northwestern Medical Group and the 
Chicago Council on Global Affairs.
    He recently retired from the boards of the Chicago Urban 
League and World Business Chicago. He is also the chairman of 
Chicago Sister Cities International.
    And our final witness will be Mr. James H. Sills III, 
president and chief executive officer of M&F Bank, testifying 
on behalf of the Independent Community Bankers of America 
(ICBA). Mr. Sill has over 30 years of banking and technology 
management experience. His background includes executive 
experience with large-scale banking operations, community 
banks, and governmental organizations. He has served as 
president and CEO of M&F Bank and M&F Bancorp since 2014.
    Prior to this position, Mr. Sills was appointed by Delaware 
Governor Jack Markell as the cabinet secretary and chief 
information officer for the State of Delaware, Department of 
Technology and Information, in January of 2009. Mr. Sills was 
responsible for providing strategic direction and management 
for information technology operations supporting over 34,000 
end users. In 2014, Mr. Sills was selected as IT Executive of 
the Year by Government Technology Magazine.
    Prior to starting his own company in 2007, Mr. Sills was an 
executive vice president of MBNA America Bank, now Bank of 
America, where he served as the director of corporate 
technology solutions for the $80 billion U.S. Card Division. 
Prior to that, he served as the president and CEO of the 
Memphis First Community Bank (now Landmark Community Bank) in 
Memphis, Tennessee.
    Mr. Sills serves on a number of boards, including the North 
Carolina State Chamber of Commerce, the Carolina Small Business 
Development Fund, the ICBA Minority Banking Council, the FDIC 
Minority Banking Advisory Committee, and the Federal Reserve 
Bank of Richmond.
    So, we have five distinguished witnesses here today, and 
you will each be recognized for 5 minutes for an oral 
presentation of your written testimony. And without objection, 
your written statements will be made a part of the record.
    I now recognize Ms. Mensah for 5 minutes.

    STATEMENT OF LISA MENSAH, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, OPPORTUNITY FINANCE NETWORK (OFN)

    Ms. Mensah. Thank you, Chairman Meeks, Ranking Member 
Luetkemeyer, and members of the subcommittee.
    As you have all noted, these are sober times. Our country 
is reeling from a pandemic, the economy is in distress, and 
there is growing civil unrest brought on by years of systemic 
racism and oppression. Yet, I am honored to be here today to 
talk about inclusive lending and how Community Development 
Financial Institutions (CDFIs) can be partners in the critical 
work facing our nation.
    The CDFI industry was borne out of the civil rights 
movement, and the riots of the 1960s and 1970s, and has grown 
to more than 1,000 institutions, managing more than $222 
billion in assets. Opportunity Finance Network (OFN) is a 
national network of more than 300 CDFIs, and we have a deep 
history and proven experience. Our customers are 85 percent 
low-income, and 58 percent people of color. CDFIs provide 
capital, plus its financing, and financial coaching, and 
business counseling. We blend private and public capital to 
provide responsible and affordable financing in low-wealth 
markets.
    Our most important public sector partner is the Treasury 
Department CDFI Fund, which provides equity capital in the form 
of grants to strengthen CDFIs and help us grow. CDFIs are the 
financial first responders in times of crisis, during 
recessions, natural and man-made disasters, and periods of 
civil unrest. When banks restrict lending, CDFIs lean in. For 
example, after the protests and uprising in Baltimore following 
the death of Freddie Gray, nearly 400 businesses were damaged. 
CDFIs, like the Latino Economic Development Center, were there. 
They were providing the microloans to help businesses survive 
when aid was slow to arrive from the government.
    In the aftermath of Michael Brown's death, the 2016 
Ferguson Commission explicitly highlighted the work of CDFIs, 
which led to the creation of the St. Louis CDFI Coalition, a 
partnership among eight institutions that deploys loans and 
resources to some of St. Louis' most economically distressed 
counties.
    From the very first days of the COVID-19 crisis, CDFIs have 
understood the threat facing our borrowers, and immediately 
reached out with whatever accommodations they could to ease the 
economic disruption, principal and interest payments 
essentials. They made emergency loans or other emergency 
products to help borrowers weather the crisis.
    And after you enacted the CARES Act, CDFIs were eager to 
become lenders under the Paycheck Protection Program, so that 
very small and minority-owned businesses could get access to 
this valuable emergency relief.
    Yet, as you have noted, the early days of PPP were 
frustrating, as the program rules prevented many CDFIs well-
positioned to reach the hardest-hit small businesses in our 
rural communities, and in our urban, and our Native 
communities, from qualifying as PPP lenders.
    The first round of first-come, first-served, funding was 
disbursed quickly, primarily by the largest financial 
institutions to their existing customers. That meant that too 
many small and minority-owned businesses could not obtain a PPP 
loan. But thankfully, there was bipartisan recognition that 
leaving CDFIs and MDIs out of the PPP meant that too many of 
their customers were left out. And OFN applauds the regulatory 
changes and set-asides that were put in place recently for the 
second round of funding.
    To date, CDFIs have made more than $7 billion in loans 
which have gone to very small, and rural, and Native, and 
minority businesses. Last week's announcement of a further set-
aside is so welcome. And we recommend that the Administration 
create a similar set-aside for MDIs.
    So now, while PPP is helpful in emergencys in short-term 
release, vulnerable small businesses need much more as they 
tackle the difficult work of reopening and recovery. The 
nation's CDFIs must be strong to support medium- and long-term 
economic recovery in the low-wealth communities where we 
operate.
    To meet this challenge, CDFIs need a new infusion of equity 
capital, and Congress must increase support of the CDFIs during 
this critical stage by approving $1 billion in rapid response 
grants for the CDFI industry. The House took an important step, 
and we were so pleased to see the $1 billion appropriation to 
the Department of the Treasury's CDFI Fund, included in the 
Health and Economic Recovery Omnibus Emergency Solutions 
(HEROES) Act.
    In closing, I want to share a note that I received from a 
CDFI in Minneapolis. He shared that, ``Our buildings are in a 
war zone with buildings being burned down on either side of the 
midtown global market, and a looter killed across the street. 
This is our community, and we will survive and rebuild.''
    So when the cameras leave and the media moves on to other 
stories, CDFIs will remain. Congress must help these CDFIs to 
be stronger than ever. Inclusive lending was critical before 
the pandemic, it is critical today, and it will be critical in 
the days ahead as the nation works to build a more equitable 
and inclusive economy. Thank you so much.
    [The prepared statement of Ms. Mensah can be found on page 
42 of the appendix.]
    Chairman Meeks. Thank you, Ms. Mensah.
    I now recognize Mr. Pugh for 5 minutes.

   STATEMENT OF MICHAEL T. PUGH, PRESIDENT, CHIEF EXECUTIVE 
     OFFICER AND BOARD MEMBER, CARVER FEDERAL SAVINGS BANK

    Mr. Pugh. Thank you. Good afternoon, Chairman Meeks, 
Ranking Member Luetkemeyer, and members of the subcommittee. It 
is my pleasure to be here with you today. And thank you for 
inviting me to discuss the important work of Community 
Development Financial Institutions and Minority Depository 
Institutions during the COVID health and economic crisis.
    As mentioned, my name is Michael Pugh, and I am the CEO and 
president of Carver Federal Savings Bank, a CDFI and an MDI 
based in New York. I also serve on the board of the Community 
Development Bankers Association (CDBA), and Chair the 
membership committee. The CDBA is the national trade 
association and voice for banks that are certified as CDFIs.
    First, I want to thank the members of this subcommittee for 
their support of CDFIs and MDIs, and particularly for approving 
$1 billion of funding through the CDFI Fund in the HEROES Act; 
and second, I wish to acknowledge the ongoing events associated 
with George Floyd and countless others, which underscore the 
outcry of communities insisting on equality.
    Some of the recent approaches may by controversial, yet the 
demand for equality in our great nation will inevitably improve 
our future.
    Carver Federal Savings Bank is a federally-chartered 
savings bank founded in 1948 to serve African-American 
communities which did not have equality because of limited 
access to mainstream financial services. Despite our 72-year 
history, there is much more to do. The outcome of our work 
should be the economic empowerment and dignity of all people, 
regardless of their racial background. Carver is a CDFI because 
of our dedication to the economic viability of our community.
    We provide access to reasonably priced loans, and no-cost 
financial education to aspiring minority- and women-owned 
businesses. Also, we have been an influential contributor to 
the New Markets Tax Credit Program in greater New York City. I 
am especially proud of my colleagues who have served as 
financial first responders during the COVID-19 crisis. This 
crisis has hit our communities especially hard. Black and 
Latino people in New York represent a higher percentage of 
COVID-19 deaths than the overall population, at least partially 
due to their overrepresentation in front-line positions in 
essential industries.
    Historic exclusions to mainstream finance leaves us 
economically vulnerable. Black small-business owners are 
approved for business loans at a rate just half that of white 
businesses. People of color represent about 40 percent of the 
population, but about only 20 percent of the nation's business 
owners with employees. Minorities comprised 37 percent of the 
labor force in February, but accounted for 58 percent of the 
newly unemployed in March.
    Like all CDFIs, at least 60 percent of our lending and 
activities targets low- to moderate-income communities. Carver 
has also responded through the PPP program. We have made 147 
loans, totaling $30 million, and preserving 3,147 jobs, and 
assisted businesses as diverse as hardware stores, the Greater 
Harlem Chamber of Commerce, and daycare centers.
    I have focused my recommendations on three areas: 
appropriations for the CDFI Fund; modifying the PPP; and 
ensuring regulatory flexibility. My strongest recommendation to 
Congress is to provide at least $1 billion in emergency 
stimulus to the CDFI Fund.
    Also, the PPP must be more flexible. Last week's $10 
billion set-aside for CDFIs was exciting, but deployment 
requires changes. Borrowers have a range of needs, so 
increasing the non-payroll portion of expenses to 40 percent is 
insufficient. We ask that you look at that again.
    Congress should also extend the application period and 
rehiring deadlines through December 2020, and make forgiveness 
simpler for small borrowers. I also recommend that Congress 
extend a temporary regulatory provision lowering the community 
bank leverage ratio. It expires after 2 quarters, but should 
last 5 years. We know that this crisis may take longer. 
Congress should recognize that recovery will be slowest in low- 
and moderate-income and minority communities, and help by 
making sure that practitioners have the tools they need.
    In conclusion, I thank Chairman Meeks, Ranking Member 
Luetkemeyer, and the members of the subcommittee for the 
opportunity to talk about the work of Carver Federal Savings 
Bank and the hardships faced by the communities we serve.
    Thank you for your time.
    [The prepared statement of Mr. Pugh can be found on page 52 
of the appendix.]
    Chairman Meeks. Thank you, Mr. Pugh.
    I now recognize Mr. Scott for 5 minutes for his testimony.

 STATEMENT OF SAMUEL C. SCOTT III, FOUNDER AND CHAIRMAN, BLACK 
 CHICAGO TOMORROW, AND CO-CHAIR, AMERICAN BUSINESS IMMIGRATION 
                        COALITION (ABIC)

    Mr. Scott. Good afternoon, Chairwoman Waters, Ranking 
Member McHenry, Chairman Meeks, and Ranking Member Luetkemeyer, 
and members of the subcommittee, thank you for the opportunity 
to participate in today's discussion.
    Today, I would like to talk about some of the problems 
facing the Black communities in our country and what the COVID-
19 pandemic has done to amplify the economic disparities in 
Black communities. The coronavirus is deadliest for the Black 
population, both in a health situation and an economic outcome. 
While our entire nation is suffering immensely from the 
pandemic, the reality is that members of the Black community 
are dying at an exponentially higher rate than other groups. In 
major cities with Black populations between 20, 25, and 30 
percent, Black people are dying at double that rate.
    Black-owned businesses and nonprofits are at increased risk 
of being forced to close, as compared to their white 
counterparts. Black entrepreneurs are routinely shut out of 
economic opportunities, while their white peers succeed. 
According to research from the Brookings Institution, white-
owned businesses start with 3 times more capital than their 
Black peers, and only 1 percent of Black business owners are 
able to secure loans in their first year, as compared to 7 
percent of their white counterparts. Without significant 
intervention, this trend will continue.
    We have already seen the entrenchment of such inequities 
during the opening days of PPP by prioritizing clients that 
already had existing credit lines in banks. Black businesses 
and nonprofits found themselves, yet again, excluded from 
lifesaving relief.
    The second round of PPP has been better, but it is still 
not reaching a majority of the small Black and Brown 
businesses, and that is why we pushed so hard for a set-aside. 
With a $10 billion set-aside, the CDFIs and MDIs serve minority 
businesses. We can at least get some of the money started into 
the communities that need it most.
    Over the past month, ABIC has conducted webinars with small 
businesses on how to apply for a loan, and how to file for 
forgiveness. Thousands have attended, but a very small 
percentage of that group have been minority-owned businesses.
    In the Chicago Area, Cook County Board President Toni 
Preckwinkle heard of our webinars, and she provided money for 
ABIC to hire a person to locate and bring small Black and Brown 
businesses to the application process. In one week, this new 
staff person found over 200 Black-owned businesses, and had an 
average loan value of $37,000. These are businesses that, for 
some reason, did not apply or did not know about PPP. ABIC also 
provided a pro bono accountant to walk these small businesses 
through the PPP application process, and now they have their 
money, which came through a local Black bank, owned by a CDFI. 
Through this process, we learned a lot about what is working 
and what needs improvement.
    But let me step back for a second to speak of some of the 
root causes of the economic and health disparities within the 
Black community prior to COVID. I will speak from my 
experiences in Chicago.
    Chicago was, at one time, arguably the Black capital of 
business in America. We had businesses like Johnson Publishing, 
Johnson Products, and Soft Sheen. But today, violence is a 
singular dominating narrative for Chicago, and it has been for 
a few years. I have been traveling to Chicago for almost 50 
years, and have lived there for the past 32 years. I have seen 
the Black community in Chicago go from its heyday to where it 
is today. It is that loss and the violence in the City that 
motivated me to start Black Chicago Tomorrow in 2016 to regain 
the prominence in the Black community that it once had.
    My contention is that no one thing, including PPP, can fix 
the problems in our community. Our community suffers from 
violence problems, policing problems, job and career problems, 
housing problems, educational issues, health and healthcare 
problems, poverty, and, most importantly, a lack of hope. But 
we cannot limit examining all of these problems, we have to do 
things to fix them. These are very complex issues, and one 
solution does not fit all. All of these issues must be 
addressed and dealt with at the same time to bring our 
communities back.
    This is a start to doing the right thing today for our 
small businesses. Without that, there is little hope that we 
can ever start to deal with these other issues that I have 
addressed. Ten billion dollars set-aside to reach more minority 
businesses is encouraging. And I am encouraged that the House 
has unanimously passed a 24-week extension and greater 
flexibility in the loan forgiveness process. We hope the Senate 
will concur quickly, but we still have more to do.
    Here are some of my recommendations: first, open the 
technical assistance community to community-based nonprofits, 
or 501(c)(3) organizations, to navigate the complex world of 
institutions, business loans, and document preparation; second, 
allow small businesses of color to apply for a second round of 
PPP, and simplify the forgiveness process; and third, provide a 
long-term recovery plan to develop a coherent policy and 
programmatic agenda for businesses of color.
    In addition, we need one-to-one financing, coaching, 
regular training and webinars, access to capital, and help with 
strategies to survive the pandemic. If we implement the current 
program as intended, and get the money to the small minority 
businesses that really need it, we do have a chance to save 
many of them. But as I have said throughout this presentation, 
much more needs to be done.
    Thank you for the opportunity to testify, and I look 
forward to answering any questions.
    [The prepared statement of Mr. Scott can be found on page 
60 of the appendix.]
    Chairman Meeks. Thank you, Mr. Scott.
    And I now recognize Mr. Sills for 5 minutes.

STATEMENT OF JAMES H. SILLS III, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, M&F BANK, ON BEHALF OF THE INDEPENDENT COMMUNITY 
                   BANKERS OF AMERICA (ICBA)

    Mr. Sills. Good afternoon, Chairwoman Waters, Chairman 
Meeks, Ranking Member Luetkemeyer, and members of the 
subcommittee. I am James Sills, CEO and president of M&F Bank, 
located in Durham, North Carolina, which is both a Minority 
Depository Institution and a Community Development Financial 
Institution.
    I testify today on behalf of the Independent Community 
Bankers of America (ICBA), where I serve as the vice chairman 
of the Minority Bank Council. Thank you for the opportunity to 
testify in today's hearing.
    We must ensure that the pandemic does not set back the 
critical policy goal of promoting credit and prosperity in 
America's minority communities. The social unrest from protests 
that we are witnessing today, not only in our cities, but in 
suburbs and in smaller towns as well, only raises the stakes 
for achieving this goal. Today's hearing is well-timed.
    M&F Bank is a $265 million, State-chartered bank, with over 
70 employees. We are headquartered in Durham, and we serve the 
five largest urban markets in North Carolina. Let me give you a 
little bit of background on M&F Bank. M&F Bank was founded in 
1907 by a group of 9 businessmen in Durham to serve African 
Americans who had few opportunities to obtain credit or other 
banking services. Our rich history continues to form our values 
and our mission today: to promote personal and community 
development to a diverse customer base; and to continue to be 
the financial literacy leader helping customers make the right 
financial decisions.
    I would like to focus my remarks on the Paycheck Protection 
Program, or PPP, and refer you to my written statement for 
discussion of additional recommendations for strengthening MDIs 
and CDFIs to promote inclusive lending.
    The PPP has played a critical role in helping small 
businesses maintain their employment, survive, and prepare for 
the reopening of the economy. We were an active Small Business 
Administration (SBA) lender before the PPP, and the program fit 
our customer profile perfectly: small businesses; the self-
employed; nonprofits; and churches. As an MDI and as a CDFI, we 
enjoy strong connections to our communities, silent 
relationships, and a feedback loop where we are already in 
place before the launch of the PPP. When there was a doubt or a 
question, our borrowers simply picked up the phone to resolve 
it.
    Overall, the PPP is definitely working as intended. We 
estimate that M&F's PPP loans have supported the retention of 
some 1,200 employees. I am confident that other MDIs and 
community banks generally have had similar results. To date, we 
have closed 130 loans, totaling $12.6 million. In phase one, 
our average loan size was $155,000; in phase two, it was 
$57,000.
    The PPP has had a significant positive impact, and we are 
undoubtedly in a better place economically because of the 
program. Thousands of community banks worked around the clock 
to process a flood of applications in a very short timeframe. I 
met with SBA Administrator Carranza last week in Charlotte, 
North Carolina, and I was impressed with her commitment to 
making the program work.
    ICBA is supportive of provisions in the Paycheck Protection 
Program Flexibility Act of 2020, H.R. 7010, which passed the 
House last Friday. The bill provides more flexible parameters 
for spending PPP funds, and a more realistic timeframe of 24 
weeks in which they must be spent. These changes will help 
businesses remain open and avoid layoffs.
    While these two provisions are critical, ICBA supports 
additional changes to the forgiveness process, which is far too 
complex. It is my fear that we will be working with borrowers 
on forgiveness applications for the remainder of 2020. This 
will be a distraction from the critical, the fundamental task 
of lending money to help rebuild local economies, working with 
troubled borrowers, and reopening our branches in a safe manner 
for the public.
    Finally, I would just like to note that the $30 billion 
carveout of phase two for MDIs and community banks made a real 
difference in terms of channeling funds to minority firms. 
Again, I refer you to my written statement for a broader 
discussion on the theme of inclusive lending. Thank you, again, 
for convening today's hearing, and for the opportunity to offer 
my perspective.
    [The prepared statement of Mr. Sills can be found on page 
63 of the appendix.]
    Chairman Meeks. Thank you for your testimony, Mr. Sills.
    I now recognize myself for 5 minutes for questions.
    My first question goes to you, Mr. Pugh. Your bank is one 
of the last remaining Black MDIs in the City of New York. In 
fact, there are very few, period, and they are closing all 
around this country. You have been active there, and a number 
of Members from New York happen to be on this committee. After 
the PPP program was offered, my office was swamped by calls 
from local minority small businesses complaining about being 
summarily rejected from applying by big banks, and having their 
local community bank unable to even assess the SBA platform.
    Can you please speak to these challenges, and how our 
efforts to carve out funds for MDIs and CDFIs change your 
capacity to serve local minority small businesses, if it did?
    Mr. Pugh. Sure, I would be happy to. I think that there 
were several operational issues that were associated with being 
able to get the program up and running. First and foremost, we 
saw that some of the largest financial institutions were able 
to take care, special care of their larger businesses, that 
were existing banking relationships. This created a bottleneck, 
and ultimately prevented the true small businesses from having 
the opportunity to be able to participate in the first tranche 
of the program.
    When you look at the SBA's definition of small businesses, 
it is much larger in scale relative to the small businesses 
that CDFIs are focused on every day.
    If you think about some of major communities that we focus 
on, like Carver Federal Savings bank, small businesses with 
less than 75 employees are crucial to the overall economic 
empowerment and systemic growth of the communities. Yet, those 
businesses were not able to necessarily participate in that 
first tranche, because of the bottleneck and the volume again, 
that was pushed through the program from the larger financial 
institutions that have bandwidth and capability to get the big 
loans into the first tranche.
    The other thing I would offer is that for nonprofit 
organizations in our communities, they remain very important. 
They play a key role in terms of helping communities thrive. 
And the SBA did not have a system that was set up in design to 
process and accept loans for nonprofit organizations under the 
PPP, so that required some adjustment and finagling to be able 
to get them into the system.
    Truly, we saw much better results in the second tranche as 
a result of the work from Congress and the efforts that were 
made to be able to get the program operationalized at a 
different level, but I would offer to you those challenges I 
presented, just two of them, and there were, frankly, many 
more.
    Chairman Meeks. Thank you. I have a question I want to ask 
you, as well as Mr. Scott. I am working on legislation to have 
the CDFI Funds offer direct support, including equity to the 
CDFIs and MDIs and impacted banks, which I define in my bill, 
in my MDI bill, as small community banks that predominantly 
serve poor, rural, and urban Americans. Any thoughts? Can you 
weigh in on that, on the direct support including equity? Let 
me start with Mr. Scott, and then Mr. Pugh, you weigh in also.
    Mr. Scott. Sure, Mr. Chairman.
    Equity is critical for the small minority businesses in 
this country. For the most part, Black businesses and Brown 
businesses don't have friends and family funding to start out 
with, and they can't get the angel investments. In my 
experience in Chicago, in trying to find equity for small 
business startups, it is almost impossible because people 
aren't ready to invest. If the government is able to put 
together programs such that there is equity available through 
CDFIs or MDIs, it would be terrific. There would be a lot more 
work involved to be able to get the money to the right 
businesses, but certainly, it is a start to be able to move 
businesses and entrepreneurs in the right direction.
    Chairman Meeks. Let me ask you, Mr. Scott, I know I 
mentioned Mr. Pugh, but I saw that I am running out of time. I 
also believe that corporate America has a critical role to play 
in recruiting, promoting, investing, and training for the jobs 
of tomorrow, and ensuring representation in the seats, suites, 
and boards. Can you weigh in on that for us? Also, how private 
equity firms and others help give some equity capital to the 
CDFIs and MDIs?
    Mr. Scott. Absolutely. My contention is that corporate 
America has to lean into this program. It has been interesting 
today on the news, and yesterday, that all of the CEOs are 
coming forward with ideas and programs of what it is they are 
going to do. This problem didn't start yesterday, or last week, 
or last year. The problem has been existing in the Black and 
Brown communities for years. And it is time corporate America 
steps up to the plate and starts doing something. They can put 
the money in, but more importantly, they can lean into problems 
that I addressed in my prepared remarks, and start dealing with 
committees to work on these issues.
    Healthcare is an example. On the south and west sides of 
Chicago, Black folks die 10 to 15 years earlier than their 
white counterparts in downtown Chicago. Chicago has one of the 
largest educational systems, universities, pharmaceutical 
companies, and hospital systems in the country. It seems to me 
that if those groups came together to work on and address 
problems in our community, some of the issues we have seen with 
COVID-19, and some of the issues we have seen prior to that 
would not exist. So to me, a major role here is in corporate 
America stepping up, and not just because of the murder that 
took place last week. They should have done it a long time ago.
    Chairman Meeks. Thank you, Mr. Scott. My time has expired.
    I now recognize the ranking member of the subcommittee, the 
gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and I thank all 
of our witnesses for being here today. It is a great panel, and 
I appreciate your comments. They were very succinct on a number 
of issues.
    I would like to talk a little bit about--and specifically, 
I guess, with Mr. Pugh and Mr. Sills, since they are currently 
bankers--forbearance, because I don't believe we are going to 
get out of this economic mess unless the regulators give the 
bankers forbearance, so the bankers can give forbearance to 
their customers that can retain their businesses, that can 
retain jobs and keep the local economies going.
    So, I think it is a change situation here that if we don't 
do this, we are going to wind up with the situation that we had 
in 2008, where the regulators actually went in and just got rid 
of wholesale lines of business, and entire communities 
collapsed, and banks collapsed as a result of this.
    So, I guess, Mr. Pugh and Mr. Sills, my question to you is, 
have you had any interaction with regulators to this point with 
regards to this issue of forbearance? And if you have, what did 
they do? And if you haven't, are you getting any forbearance or 
flexibility for your customers with regards to how they are 
doing with their loans? In other words, are you deferring 
payments, altering loan terms, changing interest rates, or 
whatever? Let me start with Mr. Pugh, please?
    Mr. Pugh. Thank you. As you know, there are forbearance 
guidelines that exist today under the CARES Act that will 
support residential mortgages, borrowers, and, of course, on 
the commercial side to have this available. We think it is 
important. We have seen a sizable number of homeowners and 
small businesses that have commercial real estate loans with us 
request those forbearances. However, what I would ask Congress 
to also think about is--I would recommend that there be a rent 
abatement program made available for commercial real estate 
owners and multi-family landlords. This rent abatement would 
allow a direct pass-through to the tenant so that they would 
have an incredible opportunity to jump-start their business, or 
recover on the other side of this pandemic.
    And so again, if this were made available, and assuming 
that the landlords could show proof of that at the end of the 
year, perhaps they would be able to benefit from a tax credit, 
and we would be able to see the benefit of small businesses 
retooling and restarting their businesses in a viable way, and 
homeowners, again, be able to rebuild on the other side of this 
pandemic.
    Mr. Luetkemeyer. Very good, thank you. Mr. Sills?
    Mr. Sills. Thank you for that question. Yes, our bank has 
been working with our customer base. We have offered our 
customers a 90-day deferment, and if they want to come back to 
us at the end of 90 days, we can extend it for 6 months. The 
regulator community has been checking in with our institution 
just to find out how we are handling those deferments, what is 
the percentage of our portfolio.
    We still don't know the total extent of this actual 
pandemic. So, we want to make sure that we are working with our 
customers, and we are informing our regulators. This may go 
beyond 6 months. There is some language that they have actually 
utilized to, kind of, guide us for a 6-month period that this 
particular loan will not become a TDR. So if this pandemic goes 
longer than 6 or 7 months, we feel we should have some 
flexibility to work with those customers.
    Mr. Luetkemeyer. Well, you hit on my concern, Mr. Sills. My 
real concern here is that this situation doesn't go away in 3 
or 4 months, or 6 months, maybe even by the end of the year, 
whenever the CARES Act forbearance provision goes away. So, 
what happens then? Our experience with the bankers and credit 
union people through this pandemic is that they are very 
reluctant to become engaged because of the past overregulation, 
if you will, of them, and heavy-handedness by the regulators. 
So I think we need to have something in place that allows you 
to be able to get the kind of forbearance that you need, but 
they have to give forbearance to you.
    Just one quick comment, both of you talked about PPP 
forgiveness. Mr. Sills, I signed a letter just last week to ask 
the Treasury to minimize, and have sort of a mini-forgiveness 
program for everybody under $350,000, a loan size which would 
help 93 percent of the loans. Do you think that would be 
something that would solve some problems?
    Mr. Sills. Yes. Yes, I do. The ICBA has put out a position 
statement related to presumption of compliance below a certain 
loan amount. And given that 80 percent of the loans are below 
$100,000, and given the complexity of the forgiveness 
application, which is, I believe, 11 pages long, I think there 
should be some accommodation for some of the smaller loan 
amounts to just be forgiven, if the borrowers certify that they 
used the funds in accordance with what they stated they were 
going to use the funds for.
    I do like the idea of reducing the percentage of--that was 
supposed to go towards the payroll from 75 percent down to 60 
or even 50 percent.
    Mr. Luetkemeyer. Thank you. I yield back, Mr. Chairman.
    Chairman Meeks. The gentleman's time has expired.
    I now recognize the distinguished Chair of the full 
Financial Services Committee, the gentlelady from California, 
Chairwoman Maxine Waters.
    If the chairwoman is not there, I will now move to the 
gentlelady--
    Chairwoman Waters. Yes, I am here. I was muted. Am I 
unmuted now?
    Chairman Meeks. We hear you now.
    Chairwoman Waters. Thank you so very much.
    I want to thank you for holding this hearing today. It is 
so very important, particularly at a time when we have tried to 
organize a response to the pandemic and to COVID-19. We have 
learned an awful lot as we have wrestled with some of the 
problems of PPP and CDFIs. And, of course, I am very pleased 
that we were able to target some $60 billion when we came back 
with the supplemental appropriations to deal with the problems 
that we encountered with the PPP. But in addition to that, we 
learned an awful lot, particularly working with some of the 
non-bank CDFIs. For example, there was a requirement that in 
order to get money from the CDFI Fund to make loans, you had to 
have dealt with at least $50 million in loan business. Well, we 
got that reduced to $10 million.
    And I think one of the lessons that I have learned in 
working on these issues is that many of those individuals in 
government who have been dealing with loan amounts, et cetera, 
in various ways, really don't have the same definition of 
``small businesses'' that we do. And in the communities that 
many of those who are here today are serving, we are talking 
about people who could absolutely benefit from $50,000, 
$25,000, $100,000.
    So when I see some of the definitions and requirements for 
participation, like we saw with the $50 million requirement 
with the CDFIs, I think we are going to have to do a lot of 
educating of folks about what the communities need, that have 
not had access to the kind of capital that would lead them not 
to need small loans. That is also true with the mainstream 
program that we are looking at.
    But I want to ask our MDIs here today: I have learned that 
there may be some concerns that if you don't dot all of the 
I's, cross all of the T's, and be perfect, that you will not 
get your payment from the Small Business Administration. Do we 
need something called substantial compliance in order not to 
hold up the reimbursement for the funds that you have spent?
    And let me just start with Mr. Sills on that, would you 
please respond to that? Have you seen any problems with that? 
Or do you anticipate any problems with that?
    Mr. Sills. Chairwoman Waters, that is a great question. I 
strongly believe that banks like ours need some type of 
liability protection, because we are having to guide those 
borrowers through the process, and rely on their borrower 
attestations that they have used their PPP loans correctly. And 
it puts us in an uncomfortable situation. We are here to help 
our borrowers and our small and medium-sized businesses. But if 
there was that ability to protect us, yes, we would continue to 
do more lending in the communities that we currently serve.
    Chairwoman Waters. Thank you. I am going to take a look at 
that, working with Mr. Meeks. Mr. Meeks and I, of course, have 
been focused on the problems that many of our MDIs face, a lack 
of capital,and the ability to lend in our communities where 
these loans are so desperately needed. We have learned that 
some of the bigger banks are talking about giving back the fees 
that they have earned in the PPP program to MDIs. Have any of 
you heard about that? And let me direct this to Mr. Pugh at the 
Carver Federal Savings Bank. Have you been involved in any 
discussions with any of the larger banks about helping with the 
capital problem that you may have?
    Mr. Pugh. Thank you, Chairwoman Waters. We have not been 
involved in those discussions, nor have we heard about this 
opportunity. I would certainly say that it would be a welcome 
opportunity for us to discuss it. As you so rightly pointed 
out, these loans are being provided to communities that frankly 
need them, and for MDIs and CDFIs, we do not have the capital 
and bandwidth to withstand risk if they are not going to be 
guaranteed by the FDIC.
    Chairwoman Waters. Thank you very much. Let me thank you 
all for helping us to understand how we can be more supportive 
with PPP and other kinds of programs.
    I yield back. Thank you, Mr. Meeks.
    Mr. McHenry. I think the chairman is muted, but I will take 
it from here, according to the order we have. I want to thank 
the panelists for being available for the Zoom, and I want to 
thank the staff, the committee staff, on both sides of the 
aisle, for making this technology work as best we can. However, 
Members are also left to their own devices on using their mute 
button, which is always a challenge, no matter how many times 
we do this, for all of us.
    I want to turn to you, Mr. Sills. Thank you for your 
testimony. I want to ask you about technology, because there is 
some opportunity for us to have regulatory changes so you can 
better use technologies and institutions as a way for financial 
inclusion, or to achieve financial inclusion. There is a Pew 
Report from last year that says that approximately 81 percent 
of Americans own a smartphone, and that is up from 35 percent 
of Americans a decade ago. So, Mr. Sills, could you describe 
the ways in which your bank, your institution, is adapting to 
increased technology in smartphone use by customers, and what 
effect that is having, if it has been beneficial, or an 
additional way for you to reach out in new communities?
    Mr. Sills. Thank you for that question. Today, banks are 
actually technology firms. We have invested quite a bit over 
the last 3 or 4 years in our mobile platform, but also our 
online banking platform. The majority of the large banks have a 
high percentage of their transaction activity actually go 
through mobile online banking and ATMs, and it is actually in 
the 50 to 75 percent range.
    Most CDFIs and MDIs, our percentage is not that high. We do 
not have the capital to invest in technology like some of the 
larger institutions in the United States. It is all moving to a 
digital format and a digital platform. And customers today are 
accustomed to actually interacting with banks from a digital 
experience standpoint.
    And so, I think it is critical that CDFIs receive some 
investment, or some technical grants that would allow them to 
upgrade their technology to be more mainstream, to provide a 
better customer experience
    Mr. McHenry. Do you think that technology can lead us to 
driving financial inclusion? Do you think it is an opportunity 
for us to reach the underbanked and the unbanked consumers, and 
especially the small business owners who are not so well-
connected? They instantly have a banking relationship from a 
family member, or somebody in the larger social network. Is 
there a way for us to do this? And does it have an opportunity?
    Mr. Sills. Yes, today, almost 90 percent of all of the 
citizens in the United States have a smartphone. About 5 years 
ago, that statistic was around 66 percent. So today, it is just 
normal to access your data, your account information, to 
transact business, to even apply for a loan through your 
smartphone or through your tablet. So, I do think that will 
level the playing field. But, again, most of the MDIs and CDFIs 
do not have that technology. Most of the larger--
    Mr. McHenry. I'm sorry to interrupt, but is the partnership 
model one that you are utilizing?
    Mr. Sills. No. We utilize a large core processor, and so, 
we are kind of at their mercy in terms of the types of 
technology that they deploy for institutions like ours. But, 
sure, we would love to partner with other fintech companies and 
other companies whereas we could provide really robust 
technology that is simple to use, and just gives a really good 
digital experience to that end customer.
    Mr. McHenry. Along those lines, let me ask you about 
regulation. What can we do to help an institution like yours? 
What regulatory limitations or burdens do you think would 
benefit your ability to help your customers and help the 
communities that you serve here in North Carolina?
    Mr. Sills. There are so many regulations that we are 
actually subject to. The biggest one for us is, we are a small 
institution with 70 employees, and just the regulatory burden 
of compliance with the Bank Secrecy Act (BSA) and the Home 
Mortgage Disclosure Act (HMDA) strangles us almost in terms of 
when there is a new regulation, such as beneficial ownership, 
it just hampers our ability to serve the customer because we 
are having to invest in technology, we are having to train our 
staff, we have to educate the customers, and it just takes us 
away from our core mission of providing capital to small and 
medium-sized businesses and to the communities that we actually 
serve.
    Mr. McHenry. Thank you.
    Chairman Meeks. Thank you. The gentleman's time has 
expired. Let me apologize for being on mute. I will, however, 
state that I won't let that happen, again. The House Committee 
Rules do not allow for Members to recognize themselves, and I 
know this is a big process, so I have to stay on the ball also, 
and make sure that I am unmuted.
    I now recognize the gentlelady from New York, Ms. 
Velazquez, who also happens to be the Chair of the House Small 
Business Committee, for 5 minutes for questions.
    Ms. Velazquez. Thank you, Mr. Chairman. And thank you, 
Chairwoman Waters, and the ranking members for this important 
hearing.
    Mr. Pugh, unfortunately, MDIs were not included in the set-
aside created last week by the Administration. However, as 
Chair of the Small Business Committee, I remain committed to 
pushing the Administration to create opportunities for MDIs as 
well. It is also important to note that Democrats included a 
set-aside for MDIs in the HEROES Act as well. What will this 
mean for PPP borrowers, particularly in New York City?
    Mr. Pugh. Thank you. This is an important question because, 
frankly, what it will mean is the opportunity for MDIs, and by 
broader extension, I also want to call out the importance of 
CDFIs as a whole. It will mean the opportunity for them to 
actively be involved in helping small businesses and 
communities rebuild on the other side of this pandemic.
    I think we can all agree that for many, they didn't recover 
from the Great Recession, and to now relive a very similar 
situation, as noted, approximately 40 million jobs in terms of 
loss here. So, CDFIs and MDIs will play a very critical role in 
the rebuilding, and having this allocation will allow us to 
help in a number of very important ways, which includes small 
business loans, financial education programs, strategic 
partnerships with nonprofit organizations, and various other 
offices that will be involved in this.
    Ms. Velazquez. Thank you, Mr. Pugh.
    Ms. Mensah, and Mr. Pugh, again, I have also been vocal in 
my criticism of the Administration for its failure to provide 
transparency and information regarding the recipients of PPP 
loans. I believe that without this critical information, it is 
difficult to determine how much is going to underserved 
borrowers and communities of color. This was an issue that was 
recently highlighted by the inspector general as well. Does 
this concern either of you?
    Ms. Mensah?
    Ms. Mensah. Yes, Chairwoman Velazquez. Thank you for your 
concern. We wholeheartedly endorse your pressure to continue to 
get data from this powerful program. It has been huge. It is 
huge in our communities, and to miss a moment to understand 
where these funds have flowed would be a terrible thing. We 
also applaud your interest in the CDFI Fund itself, and we 
would urge you to continue to seek data on the recipients and 
on the leadership of those institutions.
    Ms. Velazquez. Thank you. Mr. Pugh?
    Mr. Pugh. Thank you. I will just echo the comments that 
have been offered, and say that the impact data will be 
important because it will make the direct connection between 
the work that CDFIs need to do in order to help restore our 
communities.
    Ms. Velazquez. Thank you.
    Mr. Scott, or Ms. Mensah, or Mr. Pugh, yesterday in the 
Senate, H.R. 7010, the PPP Flexibility Act, was quick-lined for 
unanimous consent, but several holds were put on it by 
Republican Senators.
    Have any of you have heard of any policy issue related to 
the PPP from the Republican Senators? This is legislation that 
passed the House with 417 votes.
    Ms. Mensah. I have not, and we urge its speedy, speedy 
passage. We need to fix this program, as you already have done, 
so that it can be used, especially the extensions that have 
been discussed. I have heard of no policy issues.
    Ms. Velazquez. Thank you.
    Mr. Scott. I have not heard, but I agree completely with 
what Lisa just said.
    Ms. Velazquez. Thank you.
    I yield back.
    Chairman Meeks. Thank you. The gentlelady yields back.
    I now recognize the gentleman from Florida, Mr. Posey, for 
5 minutes.
    Mr. Posey, you may want to unmute.
    Mr. Luetkemeyer. Mr. Chairman, Mr. Posey is having a little 
difficulty getting on with us with the video connection today. 
I think he is on with his phone, and I think they are trying to 
work out something where he may be able to ask questions later 
on, so if he doesn't pop up here in the next couple of seconds, 
if you wouldn't mind putting him at the end of the queue, we 
are going to try and get him to where he can get involved.
    Chairman Meeks. Very good.
    I now recognize Mr. Tipton from Colorado for 5 minutes, and 
we will put Mr. Posey back into the queue.
    Mr. Tipton. Thank you, Mr. Chairman. I appreciate the 
opportunity to be able to listen to our panel today. This is a 
challenging time for all of us, and all of our communities, 
especially rural counties like I represent throughout our 
district. In Durango, Colorado, in my district, First 
Southwest, a CDFI, is doing an outstanding job of responding to 
the needs of the community. Through the Paycheck Protection 
Program, First Southwest has secured nearly $55 million in 
funding, which has gone directly to 747 small businesses across 
83 Colorado towns, and retained an estimated 6,666 jobs. In 
addition to rising to meet the challenges of the pandemic 
through the PPP, First Southwest has gone above and beyond 
through its $8 million Community Fund Initiative. Through its 
community fund, First Southwest-associated 501(c)(3), First 
Southwest has prioritized COVID-19 pandemic responses for small 
businesses. The community fund has stood up a microloan grant 
program targeted toward rural businesses, and an emergency loan 
program, and a rapid response and recovery fund to be able to 
help with recovery loss. Over 67 percent of the applicants did 
not receive or apply for PPP loans.
    On top of all of this, First Southwest has also offered 
1,656 hours of pre-financial counseling to 1,141 individuals in 
the first 5 months of 2020 alone. Currently, then, CDFIs do 
have a unique ability to be able to serve communities where 
they are centralized, and an important role to play in response 
to a crisis.
    If one dedicated CDFI in my district can have such an 
impact on its community, to be able to help others, so, too, 
can other CDFIs have an uplifting effect across the country.
    I would like to encourage all of my colleagues to work 
together on both sides of the aisle to continue to support 
funding CDFIs during the appropriations process. Additionally, 
the CDFIs can have such an impact on the communities they 
serve, we should also think about expanding their reach. That 
starts with examining the on-ramp process of the CDFI 
designations.
    Mr. Sills, how hard is it to become certified as a CDFI by 
the CDFI Fund?
    Mr. Sills. Thank you for that question. It is actually a 
very difficult process. We have been a CDFI since 2002. 
Initially, when the process began, you had to recertify every 3 
years. Today, we have to recertify on an annual basis. We have 
to submit a lot of information to actually recertify.
    Our bank has been in existence for 113 years. We are an MDI 
and a CDFI, and we have been serving our community 
tremendously. We have received an outstanding CRA rating for 
the past 24 years. So, I think there should be some flexibility 
for institutions like ours to go back to certify--recertifying 
us on an every 3-year basis, since we are an MDI/CDFI, and we 
have the data and the proof to show that we are actually 
serving our communities.
    But to answer your question specifically, yes, it is very, 
very difficult. It is an onerous process to become a CDFI.
    Mr. Tipton. In addition to some of the flexibility that you 
just mentioned, do you have any other thoughts in terms of 
being able to make the certification process less burdensome?
    Mr. Sills. One idea is to provide some technical assistance 
that would allow the applicant to maybe leverage a third party 
to help them create that information that they have to submit 
to become certified. Maybe, our regulator community could 
assist in that, or a third-party firm could help with that 
evaluation of that data as that firm is applying.
    Mr. Tipton. Well, thanks. I did appreciate, and wanted to 
follow up on, the ranking member's comments in regards to 
mobile access to be able to open up accounts. Last Congress, we 
passed and had signed into law the MOBILE Act that I sponsored, 
to enable people to open up accounts on their mobile devices 
using their driver's license.
    You indicated that there aren't resources available to help 
assist CDFIs in terms of trying to be able to expand that 
reach. Was that correct?
    Mr. Sills. Yes. The CDFI Fund has some flexibility, or they 
need more flexibility to maybe redirect some of their grant 
opportunities to focus more on technology projects for CDFIs, 
because that would really help level the playing field. I agree 
with you that mobile is the way to go. Most citizens in the 
United States have a smartphone, but we need more funding to 
fund the infrastructure and the development of those 
applications if we are going to be relevant going into the 
future.
    Mr. Tipton. Thank you, Mr. Sills.
    And Mr. Chairman, I am out of time, and I yield back.
    Chairman Meeks. Thank you. The gentleman's time has 
expired.
    I now recognize the gentleman from Missouri, Mr. Clay, for 
5 minutes.
    Mr. Clay. Thank you, Mr. Chairman. Thank you for this 
historic hearing, and let me welcome all of the witnesses. I 
would like to start with Ms. Mensah. We, in Congress, had to 
fight to secure a carveout for smaller banks and CDFIs and 
MDIs. We achieved some success with the $30 billion carveout in 
the second round of PPP, but only got the concession from 
Treasury and SBA to target $10 billion of second round PPP 
funds for CDFI.
    Can you please discuss why this matters?
    Ms. Mensah. Thank you, Congressman, for your question, and 
thank you for your fight. We felt it, and we appreciate it. The 
$30 billion was essential, but even more so is this recent $10 
billion set-aside for PPP funds. This is essential because it 
ensures that you are going to use what we call the capillary 
system of the nation's financial infrastructure. It will flow 
through some of our smallest institutions, the CDFI Funds, in 
order to reach the smallest institutions, smallest businesses, 
and nonprofits in those rural areas well beyond the reach of 
broadband and deep inner cities. So, it is essential.
    We thank you for that, and also for the other fixes that 
you have been doing to the PPP program to extend it. Both are 
needed, and we appreciate your insight on this.
    And as I mentioned in my testimony, your acknowledgement of 
more additional funds in the appropriation for CDFIs, those are 
the critical steps.
    Mr. Clay. Very good.
    Mr. Scott, could you please highlight the significance of 
greater CDFI participation in the PPP, and how it could impact 
small businesses, especially minority-owned businesses?
    Mr. Scott. As I mentioned in my remarks, we pushed very 
hard to get the $10 billion specifically to CDFIs. The reason 
for that is that they are right in the communities, they 
understand the businesses, and they are working with the 
smaller businesses. As I mentioned also, the average loan that 
we had for these 200 organizations that we found was about 
$37,000, which is much less than all of the other numbers you 
have heard today.
    So, we are talking about mom-and-pop operations that are 
dealing with this particular issue, and it is critical we do 
that. But more importantly, or as importantly, we have to 
provide technical assistance for these organizations, these 
smaller companies, to be able to even access this $10 billion, 
because they have not been able to do that before we provided 
assistance to them, and they have been able to navigate the 
programs much more effectively.
    Mr. Clay. Thank you for that response.
    Mr. Pugh, and Ms. Mensah, can you please speak to the 
challenges faced in helping smaller businesses and businesses 
operating in low-income areas to prepare their files for 
submission to the SBA platform for PPP loans?
    Ms. Mensah. Thank you, again, Congressman, for recognizing 
the role in addition to the money. We call it capital plus. It 
is the support that a business needs. Many of our businesses 
don't have private attorneys that they can call on, and 
accounting firms ready to go, and so they are working with our 
staffs at CDFIs, often in this remote setting, to try to get 
those forms correct so that the payroll things are appropriate.
    We have had people working through the night to get the 
businesses, clients they know, nonprofits they know, through 
the process of PPP. So, it is essential, and it is because of 
what you said. They don't have all of these other relationships 
in hand, so the CDFIs and MDIs are performing those roles.
    Mr. Clay. Wonderful.
    Mr. Pugh, anything to add?
    Mr. Pugh. Sure. For the reasons stated by Ms. Mensah, the 
CDFIs play a very critical role in terms of helping small 
businesses because of the capacity issue that they have, 
frankly. But I would also add that on the other side of this 
program, once the loan has been granted, we know that the 
compliance aspect will be very daunting for many of the small 
businesses. We would also ask Congress to think about ensuring 
that there is no more than a two-page requirement for many of 
these small businesses that are applying for small-dollar 
loans, versus the 11 pages that exist today, again, because 
they, frankly, just don't have the bandwidth to be able to 
navigate through these very complicated documents, and then 
continue to focus on surviving on the other side of the 
pandemic as well.
    Mr. Clay. And just to conclude, the Missouri Bankers 
Association has just recommended to Secretary Mnuchin and the 
SBA that there be some kind of easy process, an easy form, like 
you said, a one-page or a two-page form to comply.
    With that, Mr. Chairman, I thank the witnesses for their 
responses, and I yield back.
    Chairman Meeks. Thank you, Mr. Clay.
    I now recognize the gentleman from North Carolina, Mr. 
Budd, for 5 minutes.
    Mr.Budd, you may want to unmute.
    Mr. Budd. I associate myself with Ranking Member McHenry's 
remarks on Members and their mute buttons. I thank the Chair. I 
appreciate the time.
    Mr. Sills, it is good to see you, again. It is good to have 
somebody from North Carolina on the panel. I look forward to 
seeing you in person, again. Last week, along with several of 
my colleagues, I sent a letter to Treasury Secretary Mnuchin 
and SBA Administrator Carranza asking for the Treasury and the 
SBA to work towards crafting a simplified, streamlined 
forgiveness application for loans that were under $350,000.
    So, what challenges are you and your customers facing as 
they begin applying for PPP loan forgiveness? We have been 
hearing from some small businesses and owners that the 
application is quite complicated and challenging to fill out. 
And if they do it wrong and they are denied, that could stick 
them with a loan that they were not anticipating.
    Our intentions behind the PPP was to give much-needed 
relief to small businesses, and not to further burden them. 
First of all, what are you seeing and what would be your 
suggestions for simplifying this process? Again, Mr. Sills?
    Mr. Sills. Congressman Budd, it is great to see you, again. 
Thank you for your question. Just looking at this from this 
standpoint, the original application was only three pages, and 
the primary number was, how much do you spend on payroll on a 
monthly basis, times 2\1/2\, and this new form that came out on 
May 15th is 11 pages. It is very complex.
    So, I feel that the SBA should produce a more simplified 
form, like a 1040EZ form. And I also feel that they should 
create an automated forgiveness calculator, because I know that 
we are going to be inundated with questions from our borrowers, 
because no one wants to retain more of the loan in terms of 
paying it back over time when they really need the majority of 
the loan to be forgiven, given the economic situation that we 
are in.
    I anticipate receiving a whole lot more questions as we go 
through the new era of, now we are in the forgiveness process 
of this process, so to speak.
    Mr. Budd. Very good, and thank you for that.
    Mr. Sills, in a prior role, earlier in your career, you 
served as the chief information officer for the State of 
Delaware, even though we are proud to claim you as a North 
Carolinian now, and I believe you were even a member of the 
Governor's Cabinet in Delaware. You also led extensive efforts 
in IT consolidation, cloud-computing technology, cybersecurity, 
and other areas. You were named IT executive of the year by 
Government Technology Magazine. I don't yet have that 
subscription. I apologize.
    But it is safe to say you have an impressive record in 
technology and you are--obviously, now that you are in banking 
and have shown a demonstrated track record of success there, 
the latest in technology in the banking world.
    Ranking Member McHenry had some questions and comments and 
thoughts on that, and so has Representative Tipton from 
Colorado about technology. But we have really seen a 
technological revolution take place over the last decade, banks 
and fintechs finding new ways to innovate. Do you worry that a 
lot of the smaller community banks and MDIs are being left 
behind, in the tech revolution that the banking sector is 
experiencing? And if so, what are some ways that Congress can 
help these institutions keep up with innovation? Not even just 
keep up, but get ahead?
    Mr. Sills. Again, thank you, Congressman Budd, for your 
question. Small banks like ours are falling behind every single 
day. Some of the larger banks are investing billions of dollars 
per year into their online platforms, into artificial 
intelligence, into end-to-end systems where you don't even have 
to interact with a customer service representative.
    And so, yes, I am concerned that our bank eventually will 
not be able to keep pace with some of the larger institutions.
    As I mentioned earlier, the CDFI Fund has some flexibility, 
I believe, that would allow them to provide grants to 
institutions like ours so that we could improve our technology. 
We are not going to be able to compete directly with some of 
the largest financial institutions in the world, but we, at 
least, want to be in the game. And so, if there was an 
opportunity to carve out some additional funding specifically 
to level the playing field for CDFIs and MDIs to receive some 
funding to improve their technology, I think that would help 
everybody.
    And, again, our institution is very close to the 
communities we serve, so I really love the role we have been 
playing over the last 8 weeks. And if we had additional 
technology, we could serve our customers with a truly end-to-
end digital experience similar to what other large institutions 
did with their PPP loan process.
    Mr. Budd. Thank you, Mr. Sills. Let's continue that 
conversation over the months ahead.
    And I thank the Chair. I yield back.
    Chairman Meeks. Thank you. The gentleman's time has 
expired.
    I now recognize the gentleman from the State of Washington, 
Mr. Heck, for 5 minutes.
    Mr. Heck. Thank you, Mr. Chairman. Indeed, thank you for 
holding this hearing, and thank you to all of you who are 
participating in this incredibly important discussion about 
inequality during a critical week. I am grateful to all of you.
    Frankly, amidst the great tragedy of the last week, I have 
found some inspiration in those who have come together to be 
united to grieve for George Floyd.
    On Saturday, I was honored to be able to participate, with 
56 members of the Pierce County Black Ministerial Alliance, in 
a public prayer vigil, and yesterday, I participated in a 
similar event with about 1,500 of my neighbors here in Olympia, 
Washington, all mourning the death of far too many Black 
Americans. But in addition to sharing their grief, they were 
also united in sharing a belief that we can't accept the status 
quo, that it is time to change, and that it is past time to 
change, and that we will address racial inequality.
    This brings me to what I think is a second pivotal moment 
we are experiencing, amid all of this economic devastation. 
Congress has the power to set a course for our economic future, 
and we will all pray that it will be a better economic future.
    As we have provided the funds to begin to deal with this, 
we have had to ask hard questions, difficult questions: Will 
small businesses emerge from quarantine ready to rebuild, or 
are they going to be devastated? Will Americans be able to stay 
in the place they call home throughout the crisis, or will 
missed rent and mortgage payments catch up with them? And will 
efforts to help America recover from this recession make a 
difference in structural inequality, or will we maintain the 
status quo? And the inequality is structural. Until we 
acknowledge it as such, we cannot make progress.
    Congress, in our response, put a pretty heavy emphasis on 
small businesses hit by the pandemic. I think that was the 
right approach, but we are remiss if we do not pay special 
attention as we have here today--thank you, again, Mr. 
Chairman--to neglected minority workers and minority-owned 
small businesses who have been impacted the most by structural 
inequality.
    I have been following labor data over a very long period of 
time, and the truth is, it took these workers to whom I refer 
over a decade to climb structural barriers and return to 
unemployment percentages prior to the 2008 recession. Last in, 
first out, and we are experiencing that now.
    So, we have struggled mightily to provide help, and have 
improved upon our efforts as this has advanced. I thank 
Chairwoman Waters for her leadership in this regard. But in the 
midst of this discussion today, here is what I am struck by. 
There are 100 ideas on how we can do this better. There are 
maybe 1,000 ideas on how we can do this better, and many of 
them are going to be incorporated, but we are at risk of 
getting lost in the avalanche of ideas.
    So, I am going to ask each of the three witnesses to make a 
very difficult kind of a response to this question. If you had 
to distill the two most important things that we can and should 
do, that would have the most impact on addressing inequality, 
help us focus, please, amongst the hundreds of ideas, what are 
the two most important, highest-impact things that we could do?
    And I would like to start with Ms. Mensah, if I may, 
please?
    Ms. Mensah. Thank you, Congressman Heck. And I don't have a 
hard time with this question. I welcome it. The most important 
thing to do is to ensure that this country has a robust set of 
CDFIs and MDIs positioned in the next decade to make a serious 
contribution to the recovery that the country needs. There is 
one thing we need, and that is a more serious appropriation in 
the Treasury's CDFI Fund.
    The HEROES Act emergency appropriation of $1 billion, to an 
industry that has $222 billion under management, is not 
outsized. In fact, it should be the annual appropriation for 
this field. That is my one recommendation, because it is the 
thing that will keep us strong for the recovery. We do not have 
an ability, we will leverage those funds. There will be many 
more partnerships. But that is the one idea that I urge the 
Congress to stay focused on.
    Mr. Heck. Thank you.
    Mr. Scott?
    Mr. Scott. I think a couple of things have to be done, and 
I support what Lisa just said, but I think also we have to work 
on putting together an overall strategy that is going to 
address these issues. And it can be a public-private 
partnership that works on it, but we have addressed it verbally 
for years, and we have not really sat down and done the work 
that has to be done to put it together. I think, certainly, 
from the position of the government, we can put money into 
equity for smaller businesses to get them to grow, but we have 
to deal with all of the issues that I mentioned, and they all 
have to come together to set this problem up, because only 
setting up small businesses will not do it. We have other 
issues in our communities. They have to be fixed, and we have 
to have an overall strategy to get it done.
    Mr. Heck. Thank you.
    I yield back, Mr. Chairman.
    Chairman Meeks. Thank you. The gentleman's time has 
expired.
    I now recognize the gentleman from Tennessee, Mr. Kustoff, 
for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman, and thanks to the 
ranking member for convening today's hearing. I also thank the 
witnesses for appearing as we experiment and try to reinvent 
our process of conducting committee hearings.
    Mr. Scott, I appreciate your opening remarks. I would like 
to follow through with a question about technology before 
COVID-19, and you may agree or disagree. It seemed like the 
public saw very few customers under the age of 30 actually come 
into your branch. The younger generation is more reliant on 
technology, and now with COVID-19, obviously, there are a lot 
of new normals, including in the area of banking and peoples' 
banking habits. And, of course, their inability to travel 
outside their homes and go to their banks.
    Can you talk from your standpoint of a leading MDI, the 
challenges that MDIs face as it relates to technology? And, 
again, if you could kind of expound--I think a lot of these 
questions had gone previously to Mr. Sills, some of the 
solutions that you see that Congress could provide as it 
relates to availability and accessibility, which are probably 
two different things?
    Mr. Scott. Congressman, I think you are addressing that 
question to Michael Pugh, not to me. I am not a banker.
    Mr. Kustoff. Okay. I'm sorry. Yes, Mr. Pugh.
    Mr. Pugh. I think that there are at least a couple of very 
critical issues. The challenges that MDIs and CDFIs are often 
faced with is the ability to take to scale the technology 
demands that are needed because of the capital investment that 
is required. Many of the CDFIs and MDIs are at the mercy of our 
core providers, so it's the top few core providers that 
ultimately get to determine whether or not the technology can 
be integrated into our core systems. What I would offer for us 
to perhaps think about is a couple of key things. One, perhaps 
there is an opportunity for Congress to support incentivizing 
core providers through a technical assistance protege program, 
and this program would then allow those core providers to play 
a critical role in working with MDIs and CDFIs, so that we can 
meet the demands of our small businesses and our customers as 
we move into this digital age.
    We think this is important, and we know that, frankly, 
precedent is established through the U.S. Treasury through 
their existing mentor-protege mentoring program that has been 
set up. And, perhaps, that model, again, could be used to help 
implement this recommendation.
    The other thing that, frankly, we are faced with is the 
ongoing capital investment that you heard me mention. And so, 
because it is a significant spin, if Congress would look at 
this as an opportunity, frankly, for MDIs and CDFIs to 
participate in grant opportunities that would allow it to be 
used towards improving your overall technology, we think that 
this would be extremely important. Remembering that the MDIs 
and CDFIs are often serving low- to moderate-income communities 
that need the access to mainstream financial services the most, 
we can play a critical role in that.
    Mr. Kustoff. Thank you, Mr. Pugh.
    With my remaining time, Mr. Sills, if I could come to you, 
and I am speaking to you from Memphis, Tennessee, your former 
home. You answered this kind of broadly when Mr. McHenry and 
Mr. Tipton asked you, but are there specific initiatives that 
you think Congress could take in terms of the accessibility and 
the availability, in my remaining time?
    Mr. Sills. Thank you, Congressman, for your question. I 
actually think it all comes back to capital. Capital is 
critical to build scale. If we had an additional $5 million in 
capital, that would allow us to make those kinds of investments 
that you are talking about. It would also allow us to help more 
of our customers in the markets that we serve. It would allow 
us to add an additional $50 million in assets to our balance 
sheet.
    So if there were opportunities for this committee to 
recommend strategies to inject capital into CDFIs and MDIs, I 
just think it would help the institutions, but, also, the end 
customers that we serve on an everyday basis.
    Mr. Kustoff. Thank you, and I yield back.
    Chairman Meeks. Thank you. The gentleman's time has 
expired.
    I now recognize the gentleman from Florida, Mr. Lawson, for 
5 minutes. Mr. Lawson, you may want to unmute. Mr. Lawson? I 
don't see the gentleman from Florida. I will put him back in 
the queue if he should come back.
    I now recognize the gentlelady from Michigan, Ms. Tlaib, 
for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman, and thank you 
so much to--I would like to call you all the community banks, 
because when you start saying CDFIs to my residents, it doesn't 
actually click, but when I tell them it is people like us who 
are running a lot of these community-based financial 
institutions, it is very important.
    As you all know, we are going through a very difficult 
time, and some of us are obviously attending events and we are 
mourning and we are trying to heal, but I think we want to get 
to structural issues, especially those that have been set up 
against a lot of our Black neighbors across the country. And 
one area I want to talk about is, according to the Urban 
Institute, since 2001 the Black homeownership rate has seen the 
most dramatic drop of any racial or ethnic group in the 
country, declining 5 percent.
    In Wayne County, Michigan, alone, in my district, the 
percentage of Black people who own their own home dropped in 
Michigan more than any other State, down to 40 percent from 
just over a half in 2000, according to the report. The horror 
of African Americans throughout the country--they have lost the 
most ground relative to other racial and ethnic groups, and 
middle-aged homeowners, aged between 45 to 64, the homeowners 
having lost their homes during the 2008 crisis find themselves 
unable to move back into homeownership as they approach 
retirement age.
    And you all know, and we all know, that some of the 
backbone in really building stability for families and economic 
stability for families is homeownership. And so, Mr. Scott, 
your organization has been very vocal about the broad 
challenges facing our Black communities across the country 
which puts them at a higher risk, as you know, into poverty 
traps.
    And so, my question to you is, can you please elaborate on 
this, and how the pandemic has led--late bear the practical 
economic challenges for our communities, again, African-
American communities throughout the country?
    Mr. Scott. Thank you. I think it is obvious from what we 
have seen with respect to the health data, the unemployment 
data, and everything else that we have seen that the pandemic 
has impacted the African-American community more so than ever 
before. But prior to it, even, the housing situation you talked 
about was reality. Black folks did not own homes, were moving 
out of Black neighborhoods because neighborhoods were going 
down, and it is something we have to fix.
    I think municipalities have to, again--and I keep going 
back to engaging with corporate America. I think that is 
responsible for them to do it. When we look at municipal 
housing authorities, they are not nearly as efficient as some 
of the private sector organizations that can do it. I have met 
with them. They said they can do things much cheaper. We can 
provide homes at a much more effective cost level. And then, if 
we devote the rest of the things and get people into those 
homes, I think they will start moving back into their 
communities. But right now, it is an overall situation, and it 
is tough to deal with.
    Ms. Tlaib. Yes, but Mr. Scott, one of the things I hear 
from a lot of my community-based organizations doing housing 
counseling is that corporate America doesn't see them the same 
way. They see the Black community as well as other communities 
of color very differently. They are approaching it very much 
transactionally. Okay, I did a little bit, I am done. And so, 
my next question was about the fact that the private sector, 
what I call the captains of the industry, have a really 
critical role to play in addressing this, and what more can the 
private sector be doing. But I think it is some systemic issues 
and culture issues where we have to force it. You all know that 
prior to the Fair Housing Act and the Community Reinvestment 
Act, all of that was because we had to force them to see Blacks 
as equal humans. It is true. We had to force them. The numbers 
now of homeownership are even just--the levels of what we see 
access to homeownership or banking, is actually lower now among 
our Black communities across the country than it was prior to 
even passing FHA and CRA.
    And so, what can we do to mobilize more equity under 
capitalized communities and minority small businesses? I feel 
like we almost need to force it to happen versus these little 
snippets of, if you do this as like a little check box, but 
almost inject changing the complete culture of how they 
approach these communities?
    Mr. Scott. I agree. I think it has been a check box, and I 
think it has been verbally addressed, but it has never been 
actually addressed. I think that we are in a situation right 
now where if we don't get the corporate community to do 
something, it is not going to change. No company that I know of 
gets anything done without a vision and a long-term strategy. 
That is how we got things done when I was working, and it is 
how things get done today. If, in fact, that is not put in 
place to resolve this issue, it is going to continue to be 
verbal. We will continue to see dollars thrown at projects. We 
have seen hundreds and hundreds of millions of dollars thrown 
at our communities, and they have gotten progressively worse to 
your data. That is not acceptable in most corporations. We have 
to change it and we have to bring them together to the party do 
it. And then, there has to be money for the folks to be able to 
buy those homes.
    Ms. Tlaib. Thank you so much.
    Mr. Chairman, when that little beep goes off, that means 
time is up?
    Chairman Meeks. Your time has expired.
    Ms. Tlaib. I had more, but thank you so much, Mr. Chairman. 
And thank you so much, Mr. Scott.
    Chairman Meeks. Thank you. The gentlelady's time has 
expired.
    I now recognize the gentleman from Virginia, Mr. Riggleman, 
for 5 minutes.
    Mr. Riggleman. Thank you so much, Mr. Chairman, and I thank 
the witnesses for being here today. I am so excited to talk 
about this, and I think with CDFIs and MDIs, they continue to 
play an important role in helping urban economically distressed 
and rural communities like mine. My district is bigger than New 
Jersey, 10,000 square miles, so it is really neat that we have 
been able to leverage that. I want to thank you for your 
testimony.
    I want to start with something about data. I am a little 
bit different, and just listening to Mr. Scott, I sort of 
changed my questions here, so thank you for doing that.
    When you are talking about data and corporate America 
getting sort of involved with this, my question about CDFIs is, 
how much they exchange data. And I went through and looked at 
all of the websites for CDFIs. Is there a way, and you are 
talking about corporate sort of donations, or not donations, 
but corporate funding and sort of corporate participation. Can 
CDFIs--I think there are over 1,000, and tell me if I am 
wrong--look at a way to maybe have a one-stop shop or a portal 
with data where you can direct people using ZIP Code or 
business loan type going forward, because data is where I like 
to sit. I have owned companies in the data space.
    Would that work even with ZIP Codes and maybe some 
competition within ZIP Codes? You see where there could be a 
one-stop shop to actually absorb that data, where people go 
into one place and are able to parse where they are at to get 
those types of loans, or to get that type of support like the 
ability to call out proactively to say, we have these products.
    Do you think that is something that we could actually do 
with CDFIs, to have a one-stop shop, or a portal, where it is 
not piecemeal with the data that we could use to actually make 
decisions to go forward?
    Ms. Mensah. I will step in, Congressman, as the leader of 
an association that has, in fact, a CDFI locator on our website 
right now. We have been partnering with Google, and we have had 
early conversations with Facebook. We know that entrepreneurs 
are searching now for where to go.
    So right now, we have a locator, and you can see, where is 
the CDFI? It would pop up and it would show that Capital Impact 
Partners and Community Capital are making loans right now in 
Virginia. All of these things can be improved.
    And the other combination is, are we talking to individuals 
seeking loans, or are we trying to find other partners? We have 
partners in government, mayors. So I think you are onto 
something. It is very important. It started in a nascent way, 
at Opportunity Finance Network, and this is why our CDFI Fund 
and its ability to keep data is so important to us.
    Mr. Riggleman. Yes. I was wondering about a federated way 
to attack these problems, and while I was listening today, I 
had these other questions, because it seems to me that with the 
CDFIs out there and the different customer base when you are 
talking about the income levels that they are at, I want to 
direct legislation at those income levels, or where we could 
help CDFIs in these certain areas based on the requests that 
they have.
    So that is why I was going to ask some pretty technical 
questions about, is there one place where we could see how many 
loans CDFIs have looked at? Who has been accepted for those 
loans? How hard was it for PPP? For Mr. Sills, when he was 
talking about this, I was very engaged in, what made it easier 
for PPP? Were there things already in place that legislation 
had helped?
    And I will ask Mr. Sills, was there legislation already in 
place that helped, or processes that helped, that we can 
improve on going forward, maybe for customer outreach, because 
I would think that the CDFIs would want to be proactive, to go 
after their customers to say, we have these specific type of 
products that are available right now, and we can help you 
streamline the process?
    Were there things that we can improve on, Mr. Sills, that 
were out there already that helped, or what can we do 
technically maybe through legislation to help CDFIs?
    Mr. Sills. Congressman, that is a great question. Luckily 
for us, we were already an existing SBA lender. I think the big 
difference in terms of how we were able to help our customers 
is that we did a lot of hand-holding initially as they were 
submitting the applications. Then, once we started processing 
the applications, we shifted gears and we actually emailed them 
the loan documents and the notes to sign electronically.
    Now, I am an old-school banker, and generally speaking, 
prior to this pandemic, we really did require a wet signature. 
So to answer your question, we have to be connected to the 
community and to our borrowers. We were happy to participate. 
But it comes down to, we were already entrenched as an SBA 
lender. Our biggest challenge was liquidity. We initially did 
not have enough funding to actually fund all the loans, all the 
loan applications that we received. So, that was our biggest 
challenge with the PPP program.
    Mr. Riggleman. Well, the timing was perfect with that, and 
I thank you all so much for this.
    And I yield back.
    Thank you so much for that, Mr. Sills.
    Chairman Meeks. Thank you, Mr. Riggleman. The gentleman's 
time has expired.
    I now recognize the gentlelady from California, Ms. Porter, 
for 5 minutes.
    Ms. Porter. Hello. I have been in touch with CDFIs and 
community banks in my district about some of the issues that 
they are having with regard to unclear or restrictive SBA 
guidance and loan terms. Tustin Community Bank told me that 
their next hurdle is getting clarity and simplification from 
the SBA about what it is going to take to get forgiveness of 
these loans.
    Ms. Mensah, do you have any concerns about how to explain 
the forgiveness requirements to your customers? Do your 
customers have questions about what they need to do? Can you 
identify for me opportunities for SBA to improve its guidance?
    Ms. Mensah. Thank you, Congresswoman Porter. Simplify, 
simplify, simplify. We should have extremely short, simplified 
documents, and I stand by the comments of others to simplify 
the forgiveness period, and to make that very clear. Thank you 
for your added pressure. Thank you for the work the committee 
has already done to pass encouragement for changes with PPP in 
this second round.
    Ms. Porter. My next question is about the importance of PPP 
transparency, and I have introduced a bill called the PPP 
Transparency Act to require the SBA to publicly report the 
details of PPP loans. We have all heard the stories about abuse 
of the program, but what is getting lost is all the credible 
work and the success stories of the PPP.
    So, I wanted to ask you about the bill that I have, the PPP 
Transparency Act, which would require the SBA to put online 
every PPP loan, and what Treasury has said is they are only 
going to be auditing PPP loans over $2 million, but that means 
that there has been no audit for 99.5 percent of these loans.
    Because many of you are SBA-approved lenders, you are 
already required, if you make a 7A loan, to put this 
information online. Can you talk to me about whether or not you 
support this kind of transparency requirement, and what benefit 
it might have in terms of giving taxpayers confidence about the 
importance of funding our CDFIs?
    Ms. Mensah. I can start. Again, we support your 
legislation. And I appreciate your ability to lift up the 
stories that are actually very, very positive. We are in a 
field that is very used to already, as you said, extensive 
reporting, both to the CDFI Fund and to SBA, so we support it.
    Ms. Porter. Mr. Pugh?
    Mr. Pugh. I echo the comments about supporting the 
legislation. I think the key here is for us to be able to 
understand if the small businesses truly intended for the 
program have been able to receive the benefit. I also think 
that from an impact standpoint, we want to be able to look at 
this information and determine where the sore spots or gaps 
exist in order for us to continue our journey in terms of 
helping to restore on the other side of COVID-19.
    Ms. Porter. Thank you. And I think one of the things that 
might be important to recognize is, the PPP Transparency Act 
that I am sponsoring would require the disclosure of the 
location of the loan, the congressional district, the MACIS 
code, the number of employees, and really importantly, minority 
ownership status of the business.
    And so, the goal here is to really show the American people 
that these PPP loans are working in our community. I think, 
without this kind of transparency, we are going to see a few 
stories of abuse, and these larger loans that will get audited 
kind of carry the day for the narrative.
    One difference between the PPP Transparency Act that I am 
cosponsoring, and my colleague, Dean Phillips's TRUTH Act, is 
that the TRUTH Act would have required an explanation of the 
decision-making processes under which such funds were 
disbursed.
    And one of the concerns I had is that that would be an 
unduly burdensome and difficult requirement, both for the 
lenders and the SBA to comply with.
    So, I wondered if you had any feedback for me on my bill, 
if any of the items that I mentioned that would be required to 
be gathered would create regulatory hurdles or difficulties for 
you?
    Ms. Mensah. I have no particular feedback.
    Mr. Sills. I would like to answer your question, also. My 
answer probably differs a little from my co-panelists. As a 
community banker, we have so many compliance and data reporting 
requirements. We have HMDA, CTR, SARS, CRA, CDFI reporting, 
call reporting, State reporting, and all of this additional 
reporting is going to require additional staffing and systems 
to collect the data.
    I wanted to share with you one statistic. We only process 
PPP loans for our existing customers. Most of those customers, 
in terms of an average, have been in business for 18 years, and 
most of them had banked with us for over 10 years, so we really 
know our customers. So if someone was to come in and audit our 
bank and ask, ``Where did the money go? Who received it?'', I 
could provide that information, but to just put additional data 
reporting requirements on community banks like ours is a 
burden.
    Chairman Meeks. Thank you.
    The gentlelady's time has expired.
    I now recognize the gentlelady from Massachusetts, Ms. 
Pressley, for 5 minutes.
    Ms. Pressley. Thank you, Chairman Meeks and Chairwoman 
Waters, and thank you to our witnesses for lending your 
expertise and your insights to today's discussion. We do find 
ourselves experiencing a gravity of hurt and disparate impact, 
in both historic times and familiar times.
    I want to take a moment just to acknowledge an event that 
has far too much precedent in our nation's history. This week 
marks the 99th anniversary of the Tulsa Race Massacre, also 
known as the Black Wall Street Massacre. Nearly a century ago, 
mobs of white residents stormed through Tulsa's Greenwood 
district, or Black Wall Street, attacking Black residents and 
businesses and decimating what was then the country's 
wealthiest Black community. Homes, businesses, and churches 
were destroyed and at least 300 lives robbed. While they tried 
to--
    Chairman Meeks. We are having technical difficulty. The 
gentlelady from Massachusetts has frozen.
    Are you back?
    Ms. Pressley. You tell me. Can you hear me?
    Chairman Meeks. Yes, we hear you now. I want to roll the 
clock back. I watched when we couldn't hear you.
    Ms. Pressley. Thank you, Mr. Chairman.
    Chairman Meeks. Go back to 3:50.
    Ms. Pressley. Okay. Thank you very much. Maybe, I am just 
providing too much truth-telling today, Mr. Chairman.
    But, again, I do think this historic contextualizing is 
important, given the timeliness of today's hearing. Nearly a 
century ago, mobs of white residents stormed through Tulsa's 
Greenwood District or the Black Wall Street, attacking Black 
residents and businesses and decimating what was then the 
country's wealthiest Black community.
    Homes, businesses, and churches were destroyed, and at 
least 300 lives robbed. While they tried to rebuild, the denial 
of basic social and economic rights, including housing, 
healthcare, and education effectively ensured they never would. 
From a lack of reparation to redlining, government policies 
guaranteed that Greenwood's demise was permanent.
    Now, there might be some who think that this historical 
contextualizing and elevating this in this moment is not 
germane to the work of this committee, but our nation's 
financial center is named after a structure erected by slaves. 
Wall Street then served as a site where they were bought and 
sold. Slave owners turned to property insurance to protect what 
they saw as an investment, and banks issued loans using slaves 
as collateral.
    Today, predatory lenders set up in Black communities where 
predetermined help and economic outcomes ensure a steady stream 
of customers. There is no separating the history of racism from 
the history of financial services in this country.
    So, how do we respond to this current crisis? How we 
respond to it means we cannot deny that history, or exacerbate 
existing disparities? The financial crisis of 2008 was a Great 
Depression-level event for Black Americans, wiping out decades 
of wealth building, primarily in homeownership. However, a 2013 
study found that Black banks were 10 times less likely to 
receive bailout funding during the crisis, and nearly half have 
gone under since 2007.
    Mr. Pugh, how does the disappearance of Black banks further 
exacerbate the racial wealth gap?
    Mr. Pugh. As you have rightly pointed out, the 
disappearance creates a real cognitive disconnect in our 
communities in terms of the ability for small business 
entrepreneurs, women- and minority-owned businesses to have a 
bank, to access mainstream solutions. Examples would be, if I 
think about my area of Brooklyn, it has had some of the 
largest, women entrepreneurs in terms of growth in that 
particular borough. And by not having access, with the 
exception of Carver, to other options, in many cases, it could 
have, and has undoubtedly, created some real limitations.
    Across our country, we have seen the ongoing closing of our 
banks. And it really gets down to capital and capacity. So, I 
think we frankly must look at, for an MDI, the ability to 
ensure that they have access to capital through various 
programs. Congress can play a very critical role in that and 
then capacity.
    On the capacity side, again, very much working with 
fintechs, big banks, small banks, to ensure that there are real 
programs to build technology to scale, that, again, allows us 
to be able to ultimately serve people of color.
    Ms. Pressley. Thank you, Mr. Pugh.
    One of the Paycheck Protection Program's many missteps was 
automatically disqualifying those with a criminal history or an 
arrest. Anyone on the panel who would like to weigh in, was 
this punitive exclusion something your institution advocated 
for? And do you support our call to Secretary Mnuchin, asking 
for removal of this exclusion?
    Ms. Mensah. We would absolutely support that call.
    Chairman Meeks. Thank you. The gentlelady's time has 
expired. I now recognize the gentlelady from Virginia, Ms. 
Wexton, for 5 minutes.
    Ms. Wexton. Thank you, Mr. Chairman. And thank you very 
much to the panelists for joining us here today for this really 
important discussion. Now more than ever, I think it is 
incumbent upon us to make sure that CDFIs and MDIs get the 
support they need.
    Now I, like everybody else on this committee, heard from my 
small business owners during the first round of PPP funding, 
that it was almost impossible to navigate the process, that 
they were being shut out, that the big borrowers and 
institutional clients were getting all of the loans. And that 
was especially so in the first couple of weeks, when the 
guidance was really slow to come.
    Now, with the second round, as was mentioned by the 
witnesses, the second round was much more effective, thanks in 
no small part to set-asides for smaller lending institutions, 
CDFIs and MDIs, which this committee, and the chairwoman in 
particular, really insisted upon including in there. And I am 
glad we are able to do that and help so many small businesses 
gain access to the PPP, but we still don't know the extent to 
which this program really helped the minority-owned and small 
businesses that the SBA really needs to help.
    And the SBA has not made this information public. In fact, 
the SBA has said that the inspector general found that the SBA 
has not been registering PPP loans by their taxpayer 
identification numbers, which in some cases, has resulted in 
borrowers getting the funds twice, and even 3 times. It could 
amount to hundreds of millions of dollars. Meanwhile, others 
are denied entirely. And they are also not collecting the 
demographic data that is necessary to determine the extent to 
which underserved rural minority communities are being helped 
by the program.
    So, I wrote to the SBA last week requesting increased 
transparency regarding loan demographics to ensure that 
Congress is using the program to help the businesses it was 
intended to help, and that the $660 billion that we 
appropriated to it is not going to help those businesses who 
really don't need it.
    But we may not find out any kind of transparency with 
regard to minority businesses or demographic data about where 
the money actually went.
    Ms. Mensah, can you talk a little bit about why it matters 
to disclose racial and gender diversity data for these loans 
going out any time, not just for the Paycheck Protection 
Program, but what difference does it make?
    Ms. Mensah. Thank you, Congresswoman Wexton. And I want to 
double-down on what you said, at any time. I thank you for your 
fight to get greater transparency. It is how we will know who 
was able to be helped with this emergency funding, and to show 
where the gaps are, that you are holding this hearing and you 
are focusing on CDFIs, because you understand that gaps in the 
financial system exist, and that we are needed to be what I 
said, the capillary system to get the money out.
    Increased transparency is most important though, as we 
continue our fight for greater CDFI Fund appropriations. And I 
urge the committee to continue the data requests there, and to 
not lose sight of the minority statistics that are no longer 
being gathered in the same way since 2017, so I would urge your 
fight; it matters where you lend, and whom you lend to, and 
this is an industry that has crafted a specialty in that. So, 
thank you for your interest.
    Ms. Wexton. And at least in that respect, we will be 
assured that it will go to the people in businesses that need 
it most. Absolutely, good advice.
    The set-aside in the second round of PPP funding did help 
get more funds out to businesses who really needed it, but 
there was quite a delay and quite a lag.
    Mr. Pugh, do you have any insights into how that may have 
affected some businesses in your district? I know that I had 
businesses in mine that were hanging on by a thread and weren't 
able to wait for the second round of funding to keep their 
doors open before they had to lay off their employees. Do you 
have any such stories in your lending?
    Mr. Pugh. Sure. Thank you for asking. We know that many 
small businesses really didn't get a chance to participate in 
the first tranche of the PPP program. We heard that in some 
communities, they are similar, like Harlem, as many as 40 
percent of the small businesses on the other side of the 
pandemic may not be in a position to reopen. Those numbers are 
staggering, and they are indicative of really two issues: 
first, is the bottleneck in terms of the process that was 
created through the program while we recognized that there was 
a lot of effort and work to operationalize this program; and 
second, many of these small businesses will need continued 
assistance and support to think about how to service their 
customers on the other side of this pandemic.
    Ms. Wexton. Thank you very much. I yield back, Mr. 
Chairman.
    Chairman Meeks. Thank you. The gentlelady's time has 
expired.
    I now recognize the gentleman from Texas, Mr. Green, who is 
also the Chair of our Oversight and Investigations 
Subcommittee, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I am excited about the 
hearing and want to compliment you on the outstanding job you 
are doing. I thank the ranking member as well, and the Chair of 
the Full Committee, for the outstanding job she is doing.
    I have a couple of pieces of legislation that I would like 
to call to the attention of the witnesses, who have done an 
outstanding job. I neglected to say a word about the staff. 
Thank you for putting this together. It really is something 
that, I believe, will be of great benefit to us as we move 
forward.
    The first bill is H.R. 6868, and it creates the Community 
Capital Investment Program (CCIP) which will provide direct 
capital investments to MDIs and CDFIs, as well as smaller banks 
and credit unions that serve low-income borrowers, and there is 
a $3 billion earmark and direct capital investments and loans 
for MDIs.
    I would like to know from you, Mr. Pugh, does Carver Bank 
support this piece of legislation, H.R. 6868, and the creation 
of the Community Capital Investment Program?
    Mr. Pugh. I think the program, as you have described it, 
will have a significant impact for institutions like Carver, 
because we are an MDI and a CDFI. And ultimately, again, as you 
have heard us talk so much about, capital is an important part 
of what we need in order to continue doing the work that we are 
focused on in the communities that we serve.
    Mr. Green. Thank you very much.
    I have another bill, H.R. 6476, which would provide 
liquidity advances to eligible CDFIs and MDIs, as well as rural 
banks, with the purpose of providing more PPP loans for 
underserved small businesses, and would do so quickly.
    Ms. Mensah, do you agree that H.R. 6476 would enhance the 
current PPP initiative and get funds more quickly to those 
small businesses and the employees hardest-hit by the pandemic?
    Ms. Mensah. Congressman Green, we thank you for your 
ability to focus on the liquidity challenges of our sector. 
That is exactly where the stress has been. So, we support the 
notion of liquidity. Things tend to take a long time, so we are 
even more supportive of the idea that you already passed in the 
HEROES Act, of more funds for the CDFI appropriation. Thank you 
for putting a finger on the liquidity challenge.
    Mr. Green. Thank you. With my time left, I would like to 
just mention something that I am introducing. It is a piece of 
legislation that will cause to come into being a department of 
reconciliation, charged with the responsibility of ending 
invidious discrimination. This will be a Cabinet-level 
department, and there will be a Secretary of Reconciliation. It 
will be properly funded because it will get at least 10 percent 
of the funding from the Defense Department. And this is 
something that I think will have a long-term impact. It gives 
us the opportunity to develop a strategy to deal with invidious 
discrimination and racism over the years.
    I think that a Cabinet-level position such as this would 
cause the country to be able to continually focus on invidious 
discrimination, as opposed to it only being an issue for us 
when something is triggered, usually something associated with 
policing.
    Banking will then become something where we can focus on 
lending, because we know of the empirical evidence indicating 
that there is discrimination in lending and banking.
    So, my question to the panel would be simply this: Given 
that we have a Department of Labor that deals with labor 
issues, and we have various other departments, would it be good 
to have a Cabinet-level Department of Reconciliation to deal 
with the long-term relief needed as it relates to invidious 
discrimination and racism? And I will start with Mr. Pugh.
    Mr. Pugh. I think the issue of racism and discrimination is 
a broad and complicated one that is systemically tied to 
education, affordable housing, healthy foods, and the ability 
to make sure that you have proper healthcare. If this Cabinet-
level position is one that can help to play a critical role in 
galvanizing key leaders, bringing them to the table with the 
private and public sectors to continue to solve for these 
issues and be candid about addressing them, then yes, it will 
be valuable.
    Mr. Green. I thank you, Mr. Chairman. And again, I thank 
the staff. I yield back.
    Chairman Meeks. Thank you. That is our final Member. I now 
yield 2 minutes to the ranking member, Mr. Luetkemeyer, for 
purposes of a closing statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. And again, Mr. 
Posey was unable to get on today as a result of his computer 
problems, and because our Rules indicate that you have to be at 
least visible at one point on video to be able to participate. 
He was not able to participate on his phone. He did say that 
most of the questions he had were asked by other Members, so 
just to give you a heads-up on Mr. Posey's participation.
    I would like to thank each one of the panelists for being 
here today. I certainly appreciate your comments, and your 
suggestions, and we will certainly take those under advisement. 
I think it has been a very productive session. I know that the 
biggest thing we have to do is get our economy going. You all 
talked about getting small businesses up and running. And I 
think they are the backbone of our economy. We have to get them 
going. If we get them going, as an economy, we will get going.
    I know you talked a little bit about the importance of 
CDFIs to do that, as well as MDIs. They are an integral part of 
getting this whole picture worked out, as a country, getting 
going again. I know that there were comments with regards to 
the PPP and the forgiveness portion of it. Having worked on it 
a lot, it is interesting, I always told the bankers and the 
folks who were administering the program, be careful what you 
wish for when you start talking about the forgiveness part of 
this, because you allow the accountants and the attorneys to 
get involved, and you are going to get a whole lot of paperwork 
at the very end, when this is a really, really simple process. 
All you have to do is take a copy of your note, a copy of the 
approval of SBA, a copy of your updated expense information, 
and a cover letter that says, send me a check; that is all it 
would take.
    But now, everybody had to have a forgiveness, 11-page 
document, which now we are trying to compact down to 2 or 3 
pages. So again, I hear what you are saying. We are going to 
try to work on it. But sometimes, be careful what you wish for.
    With that, Mr. Chairman, I yield back. And thank you again 
for a job well done on the committee today.
    Chairman Meeks. Thank you, Mr. Luetkemeyer.
    I now recognize myself for closing remarks. I wish to thank 
our witnesses today for their testimony and for the work that 
they do serving underbanked and vulnerable communities. Let me 
also thank the chairwoman of this committee for her great work 
and guidance on our subcommittee, as well as the ranking member 
for his work. I want to thank all of the Members for their 
cooperation on this first-ever virtual hearing that we have 
had. Thank you for your cooperation and for working together.
    Let me also thank the staff, the Democratic staff and the 
Republican staff, for working together and making sure we were 
as prepared as we possibly could be for this hearing, which I 
think was successful.
    We are living through some of the most trying times for our 
country. All of us came to this hearing with heavy hearts and 
genuine concern for the communities we live in, and for our 
neighbors and friends. The last few months have been incredibly 
trying for us as a country, for businesses, for families, for 
the U.S. Government. Historically, we have found ways to pull 
together as a country and as a people, even as we grapple with 
social division and choices that would define the character and 
the future of our nation.
    You cannot, and must not, sugarcoat the depth of the 
multitude of crises that we face. The COVID-19 pandemic is far 
from over. Over 100 million Americans have already died and 
many more expected to lose their lives before it is over. The 
civil unrest resulting from police brutality and the spattered 
brutality in killing the Black men and women has struck a nerve 
for the whole country. But despite the images of riots and 
violence that dominate the news media, I know that the majority 
of Americans are coming together.
    We have seen simple but important acts of kindness and 
bravery from average Americans across this nation to support 
their fellow man during the pandemic. Whether it was farmers 
donating their harvest to the hungry, people sewing masks and 
3D-printing face shields at home, or people checking in and 
helping elderly neighbors, Americans have continued to 
demonstrate their capacity for kindness and compassion during 
the pandemic.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
This hearing is now adjourned.
[Whereupon, at 2:22 p.m., the hearing was adjourned.]

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