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



                                                      S. Hrg. 116-433
                    EXAMINATION OF THE MAIN STREET 
                            LENDING PROGRAM

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


 
                                HEARING

                               BEFORE THE

                   CONGRESSIONAL OVERSIGHT COMMISSION

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                                   ON

   EXAMINING THE MAIN STREET LENDING PROGRAM CREATED BY THE FEDERAL 
                   RESERVE, PURSUANT TO THE CARES ACT

                               __________

                             AUGUST 7, 2020

                               __________

     Printed for the use of the Congressional Oversight Commission

                 
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                 Available at: https://www.govinfo.gov/


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		      U.S. GOVERNMENT PUBLISHING OFFICE

41-488 			    WASHINGTON : 2021




                   Congressional Oversight Commission

FRENCH HILL, Representative          DONNA E. SHALALA, Representative
BHARAT RAMAMURTI, Commissioner       PATRICK J. TOOMEY, Senator
                       Amber Venzon, Chief Clerk


   EXAMINATION OF THE MAIN STREET LENDING PROGRAM ESTABLISHED BY THE 
               FEDERAL RESERVE PURSUANT TO THE CARES ACT

                               ----------  


                         FRIDAY, AUGUST 7, 2020

                                     U.S. Congress,
                        Congressional Oversight Commission,
                                                    Washington, DC.
    The Commission met by videoconference and in person, 
pursuant to notice, at 10:02 a.m., in Room G50, Dirksen Senate 
Office Building, the Hon. French Hill, Acting Chairman, 
presiding.
    Present: Representative Hill, Mr. Ramamurti, Representative 
Shalala, and Senator Toomey.

                 OPENING STATEMENT OF MR. HILL

    Mr. Hill. The hearing will come to order.
    This is a hearing, a hybrid hearing, meaning that some of 
our Commissioners are appearing in person and witnesses will 
testify remotely. Before I begin, let me offer a few 
videoconferencing reminders.
    Once before you start speaking, there will be a slight 
delay before you are displayed on the screen. To minimize 
background noise, please click the mute button until your turn 
to speak or to ask a question. If there is a technology issue, 
we will move to the next speaker until it is resolved.
    You should all have one box on your screens labeled 
``Clock'' to show you how much time is remaining. All members 
and witnesses need to be especially mindful of the 5-minute 
clock. At 30 seconds remaining, I will gently tap the gavel to 
remind members that their time has almost expired.
    To simplify the speaking order process, the Commission has 
decided to order ourselves alphabetically.
    With that, welcome to this virtual hearing convened by the 
Congressional Oversight Commission. Pursuant to Section 4020 of 
Title IV subtitle of the CARES Act, the Commission must conduct 
oversight of the $500 billion authorized for the Exchange 
Stabilization Fund. As a part of our oversight work, the 
Commission has decided to hold this hearing today which will 
examine the Main Street Lending Facilities.
    The Federal Reserve established the Main Street Lending 
Program to support lending to small and medium-sized businesses 
and nonprofit organizations that were in sound financial 
condition before the onset of the COVID-19 pandemic. The 
program operates through five facilities which we will learn 
more about this morning.
    The program is being administered by the Federal Reserve 
Bank of Boston. Today's hearing will have two panels. President 
Eric Rosengren, President and Chief Executive Officer of the 
Federal Reserve Bank of Boston will testify during the first 
panel, and the second panel will include industry participants.
    In the absence of a Chair, the Commissioners have agreed to 
each have 1 minute of opening remarks. I will now recognize 
myself for an opening statement.
    Our Commission is pleased to convene this hearing of the 
Main Street Lending Program. Thank you to our witnesses for 
lending your expertise today. I believe this is an extremely 
timely and important discussion.
    I also commend my fellow Commissioners. Together we have 
worked in a bipartisan, bicameral way to release three reports 
and organize this inaugural hearing.
    I would also like to thank our personal staffs for their 
diligence in this area, particularly in the absence of a Chair, 
and on behalf of all Commissioners, I welcome our new Chief 
Clerk, Amber Venzon, and thank you to the U.S. Senator for 
these facilities today. Findings from today's hearing will be 
reflected in our next report.
    The Main Street Lending Program term sheet was released on 
April 9th and finally became operational on July 6th. Leading 
to its implementation, the program generated significant 
interest and engagement. However, in the months since the 
program has been available, $95 million of the $600 billion 
allocated has been loaned to eligible businesses. I hope we 
find answers today that will help explain why it took 3 months 
to stand up the program and what, if anything, needs to be done 
to alter the program to expand the universe of eligible 
borrowers.
    I yield back, and I now recognize Commissioner Ramamurti 
for 1 minute.

               OPENING STATEMENT OF MR. RAMAMURTI

    Mr. Ramamurti. Thank you, Mr. Chairman, and thank you to 
each of the witnesses appearing today.
    Four months ago, Congress gave the Treasury Department half 
a trillion dollars to stabilize the economy. The Treasury 
quickly pledged $75 billion of those dollars to the Federal 
Reserve's Main Street Lending Program for small and mid-sized 
companies. After taking 3 months to set up the program, the Fed 
has now been operating it for about a month. In that time, it 
has supported only 18 loans for a total of $104 million. That 
is 0.017 percent of the $600 billion lending capacity that the 
Fed touted for the program in April.
    While all this money has been sitting on the sidelines, 
tens of thousands of businesses have permanently closed, and 
millions of Americans have lost their jobs. By any measure the 
Main Street Program has been a failure. My goal today is to 
figure out why the program has failed and how to fix it quickly 
before more Americans lose their jobs and more good businesses 
have to shut their doors.
    Thank you, Mr. Chairman.
    Mr. Hill. Thank you, Commissioner.
    I now recognize Congresswoman Shalala for 1 minute.

                OPENING STATEMENT OF MS. SHALALA

    Ms. Shalala. Thank you. Good morning. I would like to thank 
our witnesses for being here today. I represent Florida's 27th 
Congressional District, which includes most of Miami-Dade 
County.
    COVID-19 is out of control in my district. We have a raging 
community spread. As a result, we have a financial disaster 
with 50 percent of businesses laying off workers and others 
going bankrupt.
    In South Florida, our economy is heavily reliant on 
tourism. Actually, we are reliant on crowds. Unlike big 
businesses that can rely on capital markets for funding, small 
and mid-sized businesses are more susceptible to being 
permanently shut down.
    Recognizing this, we approved funding in the CARES Act in 
March to support up to $600 billion in lending to these 
businesses. However, while some Florida businesses have 
benefitted from the Main Street loans, what has been 
accomplished to date is simply not enough.
    We all agree that these businesses need help to survive the 
crisis, and I am here today to understand why the money has not 
been deployed and what the impact has been on workers.
    I yield back.
    Mr. Hill. Thank you, Congresswoman.
    I now recognize Senator Toomey for 1 minute.

              OPENING STATEMENT OF SENATOR TOOMEY

    Senator Toomey. Thank you very much, Mr. Chairman, and I 
also want to thank all the witnesses for participating in this 
hearing today.
    Look, I think the big questions that I am looking forward 
to learning about is certainly why relatively few borrowers 
have participated in this program, why it appears not to have a 
tremendous amount of demand. I want to understand whether 
through this program banks are likely to originate loans that 
they would not otherwise engage in anyway. And at some point, 
we need to have a discussion about the fact that we are in a 
different place than we were when we first designed these 
programs back in March.
    We intended, at least I did as one of the negotiators of 
this legislation, to provide liquidity so that business could 
survive what we hoped would be a very brief, although we knew 
would be a severe downturn. Now we have the prospect of 
possibly excess capacity in a number of industries that could 
persist for some time. That is a new and different challenge.
    So I look forward to exploring all of these and, again, 
want to thank the witnesses for joining us.
    Mr. Hill. Thank you, Senator Toomey.
    All Commissioners' statements will be added to the hearing 
record. We are fortunate today to have five witnesses appearing 
and appreciate their time.
    President Rosengren is the President and CEO of the Federal 
Reserve Bank of Boston, one of the 12 regional Federal Reserve 
banks. Dr. Rosengren is a participant in the Federal Open 
Market Committee, the monetary policymaking arm of the United 
States. As CEO, he leads the Boston Fed's work, which includes 
economic research and analysis, banking supervision and 
financial stability efforts, community economic development 
activities, and a wide range of payments, technology, and 
finance initiative.
    Ms. Lauren Anderson serves as the senior vice president and 
associate general counsel of the Bank Policy Institute. In this 
role, she oversees the BPI's advocacy across a range of 
domestic and international issues. She brings with her over a 
decade of experience in financial regulation and resolution 
oversight, most recently serving as the senior adviser at the 
Bank of England and, before joining the Bank of England, served 
as Special Adviser to the Deputy of Policy at our FDIC.
    Mr. Tom Bohn serves as the chief executive officer of the 
Association for Corporate Growth. ACG serves 90,000 investors, 
executives, lenders, and advisers to the growing middle-market 
set of companies. Prior to joining ACG in December 2019, Mr. 
Bohn served as CEO of the North American Veterinary Community 
where he oversaw unprecedented growth.
    Mr. Vince Foster serves as the executive chairman of the 
Main Street Capital Corporation, a position he has held since 
November of 2018. Mr. Foster previously served as Main Street's 
CEO from 2007 until November of 2018 and served as Main 
Street's president from 2012 to 2015. He also has been a member 
of the management team's investment committee since its 
formation. Main Street Capital offers capital solutions for 
lower middle-market companies.
    And our final witness, Ms. Gwen Mills, secretary-treasurer 
of UNITE HERE. Ms. Mills has been working with UNITE HERE for 
20 years. She served as the political director from 2015 to 
2017 and was elected secretary-treasurer in 2017. UNITE HERE 
has 300,000 members, largely serving the travel and tourism 
industry.
    We will now proceed to President Rosengren's testimony. He 
will testify, and we will move into two rounds of 5-minute 
questioning. Immediately following the questioning, I will 
recognize the second panel of witnesses for their testimony, 
and then we will move into that questioning. Each of the 
witnesses' full written testimony will be made a part of the 
official hearing record.
    President Rosengren, welcome, and you are now recognized 
for 5 minutes.

  STATEMENT OF ERIC S. ROSENGREN, PH.D., PRESIDENT AND CHIEF 
       EXECUTIVE OFFICER, FEDERAL RESERVE BANK OF BOSTON

    Mr. Rosengren. Representative Hill, Commissioner Ramamurti, 
Representative Shalala, and Senator Toomey, thank you for the 
opportunity to speak about the Main Street Lending Program, 
which the Boston Fed administers for the Federal Reserve 
System. My written testimony contains charts and details I hope 
will be useful to you, but I will be brief in this overview.
    In addition to tragic loss of life, the pandemic poses an 
unprecedented shock to our economy. Many entities impacted by 
the pandemic rely on bank for loans. The Main Street Program is 
designed to facilitate lending to small and medium-sized 
businesses and nonprofits that have suffered disruptions. It 
provides credit support for entities that have temporary cash 
flow problems due to the pandemic and that, given the uncertain 
outlook, may have difficulty obtaining credit. It can provide a 
bridge as loans have no interest or principal payments in the 
first year and no principal payments until year 3.
    Unlike facilities that purchase standardized credit 
instruments, this program purchases interests in loans that 
are, by nature, bespoke agreements often with complex, 
borrower-specific terms and conditions. Since our portal opened 
for registration on the 15th of June, 509 institutions have 
registered, and their assets represent over $14 trillion, about 
58 percent of banking assets in the United States.
    Main Street relies on lenders to underwrite loans and keep 
skin in the game by banks retaining 5 percent of the loan. 
Borrowers need to meet the lender's underwriting standards and 
the program's terms and conditions and be able to make 
certifications and commitments, including those required by the 
CARES Act.
    The program includes three loan facilities for for-profit 
businesses and two for nonprofits that have been announced but 
are not yet live. Nonprofits and their lenders can, 
nonetheless, use the published terms and documents to begin 
discussing program loans. I will describe early results.
    As of Tuesday, over $530 million in loans are active in the 
portal, 54 loans. Eighteen loans with a combined value of $109 
million have our commitment for purchase or have settled. We 
opened for purchases on July 6th, and the numbers are 
consistent with the gradual pace of the initial activity, more 
recently expanding.
    The 54 loans submitted represent 29 distinct lenders. The 
largest number of loans are by institutions in the $10 to $50 
billion range, but relatively small community banks have 
participated. To date, there has been limited activity by banks 
with over $50 billion in assets.
    But the program's modest initial numbers seem to be giving 
way to more uptake as participants and banks become more 
familiar with the program. Quickly scaling up a program that 
purchases participations in loans from diverse borrowers in a 
decentralized market that lacks standardization is inherently 
difficult and a significant achievement.
    The eventual size of the program will be determined by the 
path of the pandemic and the economy. Should conditions worsen, 
which we hope does not happen, I would expect interest to 
expand more rapidly. Credit interruptions prolong recessions 
and harm individuals. In administering the program, we will do 
all in our power and purview to support the firms, nonprofits, 
and workers that make up our Nation's economy.
    Thank you for the opportunity to provide this overview. I 
would be happy to address any questions.
    
    [The prepared statement of Mr. Rosengren follows:]
    
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    Mr. Hill. Well, thank you, Mr. President, for your 
testimony, and I will recognize myself for 5 minutes of 
questions.
    First, let me say that I was pleased to see the CFO 
confidence survey from Duke University recently showing that 
business believes that they are doing better than maybe they 
thought they would at this stage of business reopening and that 
market access is improving. They are concerned mostly about 
obviously the demand for their products.
    Also, I was encouraged yesterday that 1.8 million jobs were 
created and that the unemployment rate fell to 10 percent. We 
still have a long way to go, and we are going to be talking 
about that today as we still have over 10 million people eager 
to go back to work.
    And then in my home State of Arkansas, we had a very 
positive week in the sense that tax revenues, particularly 
sales tax revenues, were actually over trend and set a record. 
Our income taxes were 4 percent over forecast, and our sales 
taxes were 16 percent over forecast and 15 percent over 2019. 
So, clearly, the economy is reopening, and as Senator Toomey 
says, we have to keep that in mind as we think through these 
Federal Reserve facilities and what their best structure should 
be to accelerate that and get more people back to work in this 
country.
    I am concerned, Mr. Rosengren, about the affiliation rules. 
When I looked at the Main Street term sheets, I am concerned 
about two things. One, it took 3 months to get the program up 
and running, and I would like you to address that first. And, 
secondly, it appears to me in this middle market that these 
affiliation rules that the Federal Reserve has adopted in the 
Main Street Program really are a significant barrier to more 
entrepreneurial middle-size companies that do not have access 
to PPP and do not have access to the public markets to have 
access. And I wondered why the Fed, in your view, adopted the 
SBA 7(a) type limitations on affiliation rules. Could you 
handle those two for me, please?
    Mr. Rosengren. Certainly. First, why don't I address the 
question that you raised in your opening statement and have in 
this question about why it took so long for this facility to 
get set up.
    This facility is very different than some of the other 
traditional kinds of facilities that central banks operate 
during a time of crisis. So most of our facilities operate 
through markets. Market securities, you can purchase them very 
easily through the market. They clear usually in a couple days, 
depending on the security. So it is relatively easy to quickly 
purchase a large number of securities and hold those securities 
over time.
    This facility is facility we did not have during the 
financial crisis and really tries to get to a different segment 
of the population, which is those businesses that are bigger 
than the PPP program was designed for and smaller than what the 
corporate facilities are designed for.
    Bank loans are inherently difficult because they are an 
agreement between a bank and a borrower. They take a long time 
for banks to negotiate with the borrower, and this facility has 
a variety of complex elements including the requirements of the 
CARES Act and the 13(3) requirements.
    So in order to design this program, we first had an initial 
term sheet. There were very substantial revisions to that term 
sheet. Again, we came out with another term sheet, which was 
then again revised. And each of those times where we revised 
the term sheet, we were expanding the ability of more 
businesses to access the facility.
    So the types of changes that were made included lowering 
the loan size, changing the repayment terms, and lowering the 
Fed participation amount.
    The final term sheet for the for-profit businesses started 
on June 8th. On June 15th, we had the lender registration, and 
on July 6th, we had loan participation intake. I would 
highlight as part of this process that it is a highly automated 
process. We have to do programming, so we needed the legal 
documents to be in order. We needed the final term sheet to be 
completed, and we needed to be able to do the programming and 
then check and make sure that the programming worked as 
expected and met all the security needs of this program.
    So that does take some time. It did take time to start up. 
And I think that gives you some idea of the complexity of the 
program and why it took so longer.
    Mr. Hill. Yes. Thank you for that. I think the key thing is 
if we want to change the program, you do not anticipate it 
taking another 3 months to produce a different kind of Main 
Street term sheet if that were necessary.
    Mr. Rosengren. It would depend on what the nature of the 
term sheet changes were. If the term sheet does not affect the 
underlying legal documents, it is much easier to implement. So 
there are changes that have been made as we have had changes in 
the term sheet. That is true for the nonprofit term sheet as 
well. Depending on the nature of what the changes were would 
determine how long it took us to actually get set up.
    Mr. Hill. Thank you, sir, very much. I yield back and turn 
to Commissioner Ramamurti for 5 minutes of questioning.
    Mr. Ramamurti. Thank you, Mr. Chairman.
    President Rosengren, you admit that the Main Street Program 
is off to a slow start, but your testimony is that interest in 
the program will likely pick up if ``the pandemic and the 
economy worsen.''
    But if you look at the data, Main Street companies are 
already getting crushed. The latest middle-market indicator and 
economic outlook survey of executives of mid-sized companies 
shows that, in the second quarter, these companies experienced 
the largest decline in employment in the survey's history. They 
also had the biggest drop-off in revenue in the survey's 
history.
    Other surveys like the U.S. Chamber of Commerce's Middle 
Market Business Index show the same thing: massive layoffs and 
furloughs and widespread revenue declines.
    So my question is: How much worse do things have to get 
before companies are interested in the Main Street Lending 
Program?
    Mr. Rosengren. Well, I think we actually have seen 
significant pickup recently in the portal. Just as an example, 
there were $109 million in loans committed or settled as of 
last Tuesday, and 2 days later we now have 29 loans and $189 
million. So there is a pickup in volume. It is particularly in 
the community and mid-sized banks. Similarly, we had $530 
million in loans in the portal 2 days ago. As of last night, 
that is $635 million.
    And so I think this is early stages of this program, and 
the reason is because banks and borrowers have to negotiate the 
terms. They had to know what the term sheet was. They had to 
understand the characteristics of the program and how the 
portal worked. And so it takes some time for the banks and the 
borrowers to get familiar with the program and to start 
pledging those loans to the facility.
    So in the first couple of weeks, the banks have not 
completed that process, and the borrowers have not completed 
the process, and there was not much volume. And we are slowly 
seeing an increase in volume over time that I would expect to 
continue.
    So one of the challenges with trying to deal with bank 
loans as opposed to securities is it does not happen quickly. 
If you talk to large firms about a renegotiation of a line of 
credit, it can frequently take many, many months before they 
get the negotiation completed.
    So one of the advantages of a bank loan is that you are 
able to tailor it to the needs of the borrower and the bank. 
There are conditions that a different bank may put on that same 
kind of loan, and there are a lot of differences across both 
banks and borrowers and what these loan agreements look like. 
So this is----
    Mr. Ramamurti. Thank you, President Rosengren. In the 
interest of time I will move on, and I will just note that even 
$530 million, which you said is in the pipeline right now, that 
is still a tiny fraction of the total lending capacity that was 
created for this program.
    Look, as I said in my opening remarks, I think this program 
has been a failure, and the basic reason for that is that the 
Fed could only offer loans. The data show that companies, even 
distressed companies, are not looking for loans. Just this 
week, the Fed released a survey of senior loan officers finding 
that, in the second quarter of 2020, demand for loans from 
companies of all sizes went down. Similarly, the most recent 
National Federation of Independent Business Survey of small 
businesses found that only 3 percent of business owners 
reported that all their borrowing needs were not satisfied. And 
in the testimony they submitted today, the Bank Policy 
Institute, which represents some of the biggest banks in the 
country, said they have seen ``a lack of demand for Main Street 
Program loans from their clients.''
    So, President Rosengren, if the Main Street Program can 
only offer loans and it is clear that most small and mid-sized 
firms are not looking for loans right now, even though they are 
already struggling badly, then how is this program going to 
stop widespread business closures and job losses?
    Mr. Rosengren. So this program is tailored to organizations 
that will be helped by loans. So if you are a business that has 
had no problem from the pandemic and have a pristine balance 
sheet, you are probably going to get better financing than the 
Main Street Program provides. If you are a business that is 
deeply troubled and is in danger of closing imminently, this 
program is not going to solve the problem because debt does not 
solve that kind of problem, equity does.
    This program is designed for a business that had a 
disruption in short-term credit, that was in good shape prior 
to the crisis, and who, after the pandemic subsides, would be 
able to be a viable business as well. There are businesses that 
fit those characteristics. We are seeing some of those 
businesses actually coming to the facility. I am expecting over 
time that we will see more pickup.
    Again, we are seeing some significant activity by some of 
the community banks and mid-sized banks, particularly those 
located in States like Florida, Texas, and places that have 
been badly impacted by the pandemic recently.
    Mr. Ramamurti. Okay. Thank you, President Rosengren. Look, 
I recognize that you and the Fed staff have done a lot of work 
on this, but I think the issue is that the Fed is trying to 
solve a problem that does not exist and it is incapable of 
solving the problem that does exist. By law, the Fed can only 
support loans, and more loans are not the answer here for most 
companies. And this is a giant hole in our economic response to 
the crisis. Congress helped small businesses through the PPP. 
Congress helped large companies that are big enough to issue 
bonds by empowering the Fed to purchase corporate bonds and 
reduce the cost of borrowing. But the only thing that the 
Government has offered all these companies in between is the 
Main Street Program, and it is just not working. And these mid-
sized companies employ 45 million people and represent a third 
of private-sector GDP.
    So, look, I do not think continuing to tweak this program 
is going to work. I think Congress needs to act to provide 
direct support to mid-sized firms and for that money to come 
with real strings attached so the money benefits working 
people.
    Thank you, Mr. Chairman.
    Mr. Hill. The gentleman yields back. Thank you.
    Congresswoman Shalala is recognized for 5 minutes.
    Ms. Shalala. Thank you. Let me follow up a little on that. 
Particular sectors like the hospitality industry have been very 
hard hit by the virus, in my district in particular. And as has 
been noted, only $109 million of the $600 billion has been 
injected into the economy.
    I want to know whether there is actually a design flaw, not 
the issue that Bharat raised about whether we should have this 
program at all, but whether it is designed in a way which is 
another way of getting at that. In particular, some have 
suggested the terms of the program, such as the leverage ratio 
requirements and the loans' priority and security requirements, 
are better designed to protect the Government from losses than 
the provide liquidity to a broad range of small and mid-sized 
businesses.
    Could you respond to that?
    Mr. Rosengren. Yes. So this program is designed as a cash 
flow program. So it is designed for a business that expects to 
be able to pay off the debt and pay off the debt with the cash 
flow from its normal business operations. So that first for 
many businesses. It does not fit for all businesses.
    For the smallest type of businesses, I agree that the PPP 
program is a much better program for them. It is more of a 
grant program than it is a debt program, and debt may not help 
them in that situation.
    In terms of the underwriting standards, the debt-to-EBITDA 
standard follows industry practice. So depending on which of 
the facility parts, you either have a debt-to-EBITDA of 4 or a 
debt-to-EBITDA of 6. Many fellows expect to have a debt-to-
EBITDA below that, and so I think that this program actually 
closely mirrors the kind of coverage that NAB banks themselves 
are expecting when they are looking for a loan to be bankable. 
So it is a combination of an underwriting standard--there are 
not many underwriting standards in this program. It is 
basically a debt-to-EBITDA and the fact that the bank is 
willing to underwrite the loan themselves and take a 5-percent 
stake.
    Ms. Shalala. The Federal Reserve recently reported that 
banks were actually tightening their credit standards due to 
the uncertain economic outlook that has resulted from the 
pandemic. The Fed allows banks to use these tighter credit 
standards in determining whether or not to make a loan under 
the Main Street Lending Program. If the goal is to get money 
out to needy borrowers, doesn't the policy of letting the banks 
use their tighter credit standards undermine that goal?
    Mr. Rosengren. So the challenge is that this is a lending 
program, and so loans have to be paid back. And we are asking 
banks to voluntarily participate in the program, and we are 
asking banks to be sure that when they underwrite the loan, it 
is a loan that is to a business that has had their credit 
disrupted, but that over time you expect it to be a thriving 
business. So that does not qualify all businesses. It qualifies 
a particular kind of business that is appropriate for this 
program.
    So business has been disrupted, and it is likely to be 
suffering. That is not attractive for this program, and from 
the perspective of the bank, they might not be willing to do 
that loan otherwise. Let me just give a simple example: a movie 
theater. So if you are a movie theater located in Miami and you 
have been closed in the spring, you opened up temporarily, and 
now you may have to be closed again because of the restrictions 
either imposed at the State level or because people do not want 
to be in a movie theater at a time of a pandemic.
    The bank may be quite uncertain about when that loan would 
actually be paying because they do not know how long the 
pandemic will occur; they do not know when there will be a 
vaccine or a treatment and might not be willing to take that 
loan at this kind of rate given that uncertainty.
    So because they are providing 95 percent of the loan to the 
Federal Reserve, they might be willing to provide support to 
that movie theater because the bulk of the risk is being taken 
by the Federal Reserve. So this is a lending program. It is 
focused on, in part, getting most of these loans paid. That is 
a requirement of the 13(3) procedures.
    Ms. Shalala. Ms. Anderson, who is here on behalf of the 
Bank Policy Institute, suggested in her written testimony that 
if the Fed wants banks to lend to borrowers who do not meet the 
bank's current underwriting standards, which have tightened in 
response to the economic uncertainty caused by the pandemic, 
the Fed must modify the design of the program to provide 
downside credit risk protection. In making this observation, 
she cites the negative treatment of these loans by regulators 
as disincentivizing banks to loosen their underwriting 
standards.
    Has the Fed considered this issue?
    Mr. Rosengren. Yeah, we have spent quite a bit of time 
thinking about the supervisory issues related to these loans. 
So the pandemic, like other natural disasters, if there was a 
hurricane that hit Miami, we then use guidance to make clear 
that we want to have a little more leeway given to those loans 
because of the nature of the crisis that occurred. The same 
thing has been done for this pandemic. So we have asked our 
bank examiners to work with bank management in the instances in 
which we are making a decision such as a Main Street loan where 
the borrower has been disrupted. The other regulators have 
agreed to this and are following the same general guidelines. 
So I think that in the end the loan has to have the same 
classification standards that a standard loan does, but the 
regulators now are looking at loans a little bit differently 
and asking the banks to work with their borrowers.
    Mr. Hill. Thank you.
    Mr. Rosengren. And that is what they are doing for the 
pandemic. That is what we do during other natural crises.
    Mr. Hill. Thank you, Doctor. The gentlewoman's time has 
expired.
    Senator Toomey.
    Senator Toomey. Thanks, Mr. Chairman. Dr. Rosengren, thank 
you for testifying today.
    Let me just start by pointing out, you know, Government 
money can never be a replacement for an economy, and we have 
spent many hundreds of billions of dollars covering 8 weeks of 
payroll for very small companies. This program was never 
designed to pick up the tab for the payroll of the American 
workforce.
    What it was designed to do, as I recall, was to provide 
emergency liquidity in the hopes that it would keep viable 
companies alive so that workers would have a place to go back 
to. Part of the reason that we made unemployment benefits so 
much more generous than they have ever been in the history of 
the country is because we knew that it was inevitable that in a 
very, very severe, hopefully brief recession, there would 
unavoidably be people laid off who had no work to do because in 
some cases their companies were closed, forbidden from working.
    What I would like to understand--and this has come up, and 
maybe this is just another way to think about this, but to what 
extent do you think that the loans that have been made so far 
through this program are loans that would not have been made in 
the absence of the program? In other words, is this designed in 
such a way that the only loans that are going to take place are 
loans that would have happened anyway, especially given the 
underwriting requirements on the banks and their required 
participation?
    Mr. Rosengren. I mean, these loans have a different 
characteristic than the traditional bank loan, so it is not 
traditional that you have no payment of principal or interest 
the first year and no payment of principal the second year. 
That really is designed for disrupted cash flow with the 
ability of the borrower over time to actually be able to make 
payments.
    When we have talked to some of the banks that have been 
making the loans, they have told us that these are loans that 
more than likely they would not have made in the absence of 
this program. The reason is because there is a great deal of 
uncertainty right now.
    Congresswoman Shalala highlighted the uncertainty and the 
survey of terms of lending that she cited. Uncertainty is very, 
very high right now, and that is a situation where banks become 
more reluctant to lend because they do not know what the 
condition of the borrowers will be. So I do think that this 
plays an important role in reducing the risk, and if the 
pandemic gets worse in the fall, as at least some 
epidemiologists are saying, this program will probably be more 
extensively used.
    I completely agree with your observation that a 13(3) 
facility does not solve the pandemic problem. It is primarily a 
public health problem. But we can certainly mitigate the costs 
of that public health problem by trying to help those 
businesses that have been disrupted, but were very good 
businesses prior to the pandemic and will be very good 
businesses after the pandemic.
    Senator Toomey. And just a technical question about the fee 
structure because it is a little confusing the way it appears 
in the term sheets. When a bank makes a loan and 95 percent of 
it is taken by the Fed, the fee structure that the bank keeps, 
certainly they have the net interest income that they can earn 
on the 5 percent that they keep. The fee structure, which if it 
is 100 basis points, which I think is contemplated in the term 
sheet, does the bank keep 100 basis points on the 5 percent 
that it keeps and the balance goes to--how does that fee 
structure work out?
    Mr. Rosengren. It is on the total loan. This is an 
incentive for the banks to participate in the program.
    Senator Toomey. So the banks start off with 20 percent of 
their credit exposure in fee income. Is that correct?
    Mr. Rosengren. That is correct, but there are costs to 
doing the underwriting of the loan.
    Senator Toomey. Of course there are. But if you do a 
large--that is extremely unusual, right? One of the--so that 
would appear on the surface to be an inducement and 
encouragement and incentive to take more risk. But the banks 
are institutionally not oriented towards lowering their 
standards because there is an outsized source of revenue. Would 
there be other kinds of lending institutions, for instance, 
BDCs that might be more inclined by their nature to be able and 
willing to take more credit risk because they recognize that 
coming out of the block with 20 percent of your credit risk in 
fees covers a lot of risk?
    Mr. Rosengren. There are other types of organizations that 
provide loans in the market other than banks. This program is 
designed for depository organizations. In part, we want to be 
able to get this facility up and running quickly. In part, we 
have to make sure that BSA, AML, and Know Your Customer kinds 
of conditions are also met. So that is why this program has 
primarily been operated through the banking system.
    Senator Toomey. Well, I see I am out of time, but I do want 
to follow up on the possibility that this kind of risk-return 
structure might be even better suited for other financial 
institutions. That is not to say that banks should not 
participate, but maybe we should broaden the universe of 
institutions that are permitted to participate.
    Thanks, Mr. Chairman.
    Mr. Hill. Thank you, Senator Toomey. We are going to do a 
second round now with Dr. Rosengren, and I will start that with 
5 minutes. And as I start my second round, I want to ask 
unanimous consent to put two letters in the record: one from 
Senator Crapo dated July 31st with comments about the Main 
Street Lending Facility, and also a letter dated August 4th 
from Senators Loeffler, Cornyn, Braun, and Tillis on the Main 
Street. Not hearing any objection, those will be included in 
the record.
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    Mr. Hill. Dr. Rosengren, you have talked about you limited 
to depository institutions to get up and running quickly, and 
yet there are only 150 banks or so listed on the Fed's website 
thus far as registered lenders. And I cite that because in the 
emergency environment, right at the end of March and April, we 
were able to stand up the PPP program over in the CARES Act, 
and 5,400 banks swung into action in a patriotic way and in 7 
days began distributing $520 billion and making 5 million PPP 
loans.
    Granted, certainly the underwriting was very different. The 
mission was very different. I got that. But I am concerned 
about the reluctance of banks to participate in the program. 
Arkansas has 86 banks and yet only two banks headquartered in 
my State that are local banks have agreed to participate. So I 
really hope as we have this hearing today we will talk more 
about that.
    Let me turn and talk about the term sheet. As you have 
noted, it is really a cash flow lending exercise based on a 
pre-tax, pre-depreciation, amortization multiple and implied 
leverage. In other words, it looks like a very traditional bank 
loan.
    Where is the higher risk component that was contemplated in 
the CARES Act section that encourage help for particularly 
distressed sectors of the economy? Could you comment on that, 
Dr. Rosengren?
    Mr. Rosengren. So I think these loans already are going to 
be risky. Doing lending in the middle of a pandemic, 
particularly if it is a sector of the economy where social 
distancing is difficult, so tourism, hotels, retail have all 
been badly affected by the pandemic. And some of those, as we 
have seen, there have been very large bankruptcies of 
retailers, for example. So these loans are not without risk, 
and I fully expect that some of the loans that we are going to 
do over time will have a loss. So that is why we have a 
Treasury backstop.
    So I think this program has taken on a fair bit of risk. I 
think that over time, as the portfolio grows, we are going to 
have some significant losses. Hopefully that does not occur. 
Hopefully everybody is able to pay back the loan completely. 
But if the economy does not do well, particularly if the 
pandemic worsens, it is quite possible that we will experience 
significant losses.
    Mr. Hill. Thank you----
    Mr. Rosengren. So I expect that this program did focus on 
trying to get loans to fairly risky borrowers.
    Mr. Hill. Thank you for that. But when you do look at the 
terms, I mean, you really are--I agree, companies at the margin 
are certainly middle-market companies that could not access the 
public markets or were not eligible for PPP, many would qualify 
here. But as I noted earlier, I think the affiliation rules 
make that more difficult. And I think the very traditional 
lending profile that is contained in this term sheet also could 
be a detriment to companies.
    Let me give you an example, and this was talked about with 
Secretary Mnuchin and Chairman Powell at our meeting of a few 
weeks ago, and that is, someone who does not have good EBITDA 
in 2019, they certainly do not have it in 2020. But at the end 
of the year in 2019, they had very good collateral valuation. 
They had a low loan-to-cost potentially. They had a low loan-
to-value potentially. They have room to lend, but they cannot 
meet the EBITDA standards. And both Jay Powell and Steve 
Mnuchin said they were ``interested in looking at a collateral-
dependent or asset-based loan.''
    Can you tell us what the status of that look is?
    Mr. Rosengren. So the Main Street Program is a cash flow 
program. As a base financing----
    Mr. Hill. But there are a lot of Main Street firms, Mr. 
President, that do not have cash flow in 2019, but they are 
absolutely a small middle-market type company. And so I know 
the Main Street term sheet is currently a cash flow. I am 
asking, is there current discussion underway to expand a 
different Main Street Facility that would be more of an asset-
based loan rather than a cash flow loan?
    Mr. Rosengren. I know there are discussions about asset-
based financing and some of the difficulties experienced, for 
example, in commercial real estate. So there have been ongoing 
discussions about this, but there is no term sheet that is 
imminent.
    Mr. Hill. Thank you for that.
    Also, startup companies, truly people in the startup space 
have a disproportionate amount of costs. Are you looking at 
startups and what they might need in the Main Street arena?
    Mr. Rosengren. Many times startups need equity more than 
they need debt, so I think frequently a true startup is going 
to find other types of financing vehicles more attractive. This 
is more of a program for established businesses that have 
experienced a disruption of cash flow.
    Mr. Hill. Thank you, Mr. President.
    Let me yield to my friend Mr. Ramamurti for 5 minutes.
    Mr. Ramamurti. Thank you, Mr. Chairman.
    In early April, the Fed announced the first version of the 
Main Street Lending Program. That announcement described 
certain basic features of the program like the maximum loan 
amount and the rates and terms for loans.
    A few weeks later, the Fed announced major changes to the 
program. Many of those changes lined up exactly with what 
members of the oil and gas industry had requested. That did not 
appear to be a coincidence. Shortly before the changes were 
announced, President Trump publicly promised that oil and gas 
companies would be taken care of. And then shortly after the 
changes were announced, the Energy Secretary went on TV and 
bragged about how he and Treasury Secretary Mnuchin had 
succeeded in getting the Fed to make changes that the oil and 
gas industry wanted.
    But when asked by reporters, a spokesperson for the Fed 
denied that the Fed had made any adjustments out of 
consideration for the oil and gas industry. Instead, the Fed 
said that the April changes reflected the more than 2,000 
public comments that the Fed had received about the initial 
design of the program.
    So, President Rosengren, as the Regional Fed President 
responsible for the Main Street Program, do you stand by the 
Fed's earlier statement that certain adjustments were not made 
specifically to help oil and gas companies?
    Mr. Rosengren. I do. This is a broad-based program. It has 
been a broad-based program from the start. 13(3) facilities 
require broad-based kinds of terms, and so it is not targeted 
at specific firms or specific industries. 13(3) facilities are 
not available for that kind of lending.
    Mr. Ramamurti. Thank you. And, look, I want to focus 
specifically on the changes that were made to the facility in 
April. Let us look at one of them. According to Reuters, in 
mid-April one of the key changes the Energy Secretary and 
Treasury Secretary were pushing for to help the oil and gas 
industry was increasing the maximum loan amount to at least 
$200 million. A couple of weeks later, when the Fed announced 
its changes to the Main Street Program, the maximum loan amount 
had gone up to exactly $200 million.
    President Rosengren, out of the more than 2,000 public 
comments that were submitted to the Fed on the Main Street 
Program, are you aware of a single one that requested 
increasing the maximum loan amount to $200 million?
    Mr. Rosengren. We got many comments from both banks and 
businesses that if the loan amount was larger, that it would be 
a more attractive facility for them. Remember, a lot of this 
discussion was occurring in March and April. The economic 
conditions and the pandemic conditions were very different at 
that time, and there was a lot of concern that some fairly 
large businesses would have difficulty getting financing.
    Fortunately, the pandemic subsided, at least for a couple 
months, and as a result, many of those large borrowers that 
thought that they were going to need the financing at least to 
date have not actually accessed the program. I would 
highlight--
    Mr. Ramamurti. Thank you. Just in the interest of time, I 
want to move on because, look, I reviewed each and every one of 
those 2,000-plus comments, and there was not a single one that 
requested specifically a $200 million maximum loan amount. The 
only people making that request were the Energy Secretary and 
the Treasury Secretary after meetings with the oil and gas 
industry.
    Here is another change. The first version of the Main 
Street Program required companies to say in writing that they 
needed the loan ``due to the exigent circumstances presented by 
the COVID-19 pandemic.'' Advocates for the oil and gas industry 
pushed to eliminate that requirement, presumably because many 
oil and gas firms were struggling before COVID and could not 
satisfy the requirement. And, again, in the final version, the 
Fed eliminated that requirement.
    President Rosengren, again, out of the more than 2,000 
public comments that the Fed received, are you aware of a 
single one outside the oil and gas industry that requested that 
the Fed remove this important requirement?
    Mr. Rosengren. In the discussions I have been involved in, 
we do not discuss specific industries. We discuss how we can 
provide a broad-based financing scheme.
    Mr. Ramamurti. Okay. I appreciate that. But, again, I 
reviewed the public comments, and there was not a single one 
that requested this change. Only the oil and gas lobby had 
requested it.
    So I just want to ask one more time. Despite evidence that 
President Trump wanted oil and gas companies to get Federal 
relief, that the Energy Secretary and the Treasury Secretary 
pushed the Fed for specific changes to accommodate the oil and 
gas industry, and that the Fed made changes that the oil and 
gas industry requested but no other industry or group 
requested, is it still your position that the Fed did not make 
certain changes to accommodate the oil and gas industry?
    Mr. Rosengren. It is my position that the focus has been a 
broad-based lending program, not focused on any particular 
industry.
    Mr. Ramamurti. Okay. Look, I think that, again, my focus is 
on specifically the changes that were made, not the overall 
scope of the program. And I think the evidence here is strong 
and deeply concerning. This is just not how the Fed is supposed 
to operate. The Fed is not supposed to be changing the rules of 
these programs so that the President's favorite companies can 
get access to billions of dollars in public money. In fact, it 
is illegal for the Fed to structure these lending programs to 
help specific companies avoid bankruptcy.
    I urge this Commission to further investigate this issue, 
including by requesting all communications on this topic 
between the Fed and the Energy Secretary, the Treasury 
Secretary, and any representatives of the oil and gas industry.
    Thank you, Mr. Chairman.
    Mr. Hill. Thank you. The gentleman yields back.
    Congresswoman Shalala is recognized for 5 minutes.
    Ms. Shalala. Thank you. My colleague is appropriately 
asking why the loan is as big as it is. I am actually 
interested in why it is not smaller.
    Commentators have speculated the minimum loan amount of 
$250,000 is too large and precludes participation by many small 
and mid-sized businesses. I am aware that the Fed has already 
reduced the minimum loan amount down from $1 million to 
$250,000, which may still be too high. For instance, the 
American Bankers Association and the Marketplace Lending 
Association have separately suggested that $50,000 may be a 
more appropriate amount.
    Has the Fed conducted studies on whether the $250,000 loan 
minimum excludes parts of the market that this program is 
supposed to help? What changes can be made to make the program 
more broadly acceptable and accessible?
    Mr. Rosengren. So for many of those smaller businesses, the 
PPP program was designed to target that segment of the 
industry. The PPP program is much more attractive to a small 
business because it has the ability to be a grant. So this 
program was really designed for businesses that did not qualify 
for the PPP program and, nonetheless, might have a need for 
credit.
    So if you look at the actual loans that are in our portal, 
just the loans that are actually in the portal is $1 to $5 
million. That is, the type of loan that we are seeing is dental 
companies, construction companies, design companies, retailers. 
These are businesses that frequently are going to have a $1 to 
$5 million loan, and it is not surprising that that is what we 
are actually seeing.
    Now, we have seen some loans that are much bigger. We have 
seen some loans that are much smaller. But I would say that so 
far has been where we have seen the bulk of the activity.
    Ms. Shalala. So you are not considering going below 
$250,000?
    Mr. Rosengren. I think there are probably other programs 
that are better designed, so a real question is whether a cash 
flow lending program such as Main Street is appropriate for 
very small businesses and whether there might be better 
targeted tools that can address that.
    In particular, will more debt help that small business, or 
might it push it towards bankruptcy and closure? So we want to 
make sure that we provide debt to businesses that can use it 
and actually pay it back. We do not want to give businesses so 
much debt that they are not able to survive.
    Ms. Shalala. Thank you. Let me talk about the nonprofit 
organizations. A few weeks ago, you expanded the Main Street 
Lending Program to nonprofit organizations. Although these 
facilities are not yet live, I am concerned that the program 
requirements are too rigorous and will preclude participation 
by many of the nonprofits that need credit to survive the 
pandemic.
    For example, the minimum loan size is $250,000, which may 
be too large for many smaller organizations. Borrowers are also 
required to have at least 60 percent of their expenses covered 
by non-donation revenue, which can be very hard for many 
nonprofits to achieve.
    Can you talk about why the program was designed this way? I 
am very familiar with nonprofits, and that 60-percent 
requirement seems to me will block many nonprofits. I would 
appreciate hearing about any analysis that the Fed has done 
regarding the nonprofit interest and eligibility in the 
program. Have you considered changing any of the eligibility 
requirements? And, lastly, when do you expect the program to be 
launched?
    Mr. Rosengren. So in terms of the nonprofit term sheet, 
when the first term sheet came out, we got extensive comments 
from a wide variety of nonprofits and a wide variety of banks. 
Many banks actually do not lend to nonprofits because it is a 
very different nature. Many of the large nonprofits--the 
University of Wisconsin, which you used to be associated with, 
probably goes to debt markets rather than relying primarily on 
bank markets. That is true for many hospitals as well.
    So this is a market that has not been extensively tapped by 
many banks, and I think it is a new market for many banks. I 
think there is an opportunity for more nonprofits to be able to 
access bank financing through this program. We did make 
significant adjustments in the term sheet. When we were 
thinking about the term sheet and the adjustments we made 
between the first and the second term sheet, we spent an 
extensive amount of outreach understanding how banks underwrote 
these loans and how rating agencies underwrote these loans. 
These criteria broadly match what many of the banks told us the 
criteria was that they used. And between the first and second 
term sheet, we did relax it in response to the comment that it 
was being too restrictive.
    In terms of when this facility is going to be up, we just 
got the legal documents up. The term sheet is now finished. We 
are in the process of doing the programming now. It is going to 
probably take us another several weeks before it is up and 
running. But I would highlight that now that the legal--bank 
loans do not get made quickly. So now that the legal documents 
are up and running, now that the term sheet is widely 
available, banks can start the negotiation with nonprofits 
about what facility is available. They are able to quickly 
submit it to the facility and get it funded.
    So because of the long lags in making these kinds of 
agreements----
    Mr. Hill. Thank you, Doctor.
    Mr. Rosengren [continuing]. I think that this will be about 
the time that if a bank was going to do a nonprofit loan, that 
we will probably be up and running around the time that they 
complete the agreement with the borrower.
    Mr. Hill. Thank you, Dr. Rosengren. The gentlewoman's time 
has expired.
    Senator Toomey.
    Senator Toomey. Thanks, Mr. Chairman.
    Dr. Rosengren, I would like just to have final clarity on 
this. Just answer this, if you would. Is there any Main Street 
Lending Program that is available only to the oil and gas 
sector?
    Mr. Rosengren. No.
    Senator Toomey. And is there any program the terms of which 
are suitable only to the oil and gas sector?
    Mr. Ramamurti. No.
    Senator Toomey. Thank you.
    I want to underscore a point that Congressman Hill raised, 
which is some real challenges with the affiliation rule, firms 
that, when we were drafting this legislation, we did not think 
would be automatically excluded from financing. I also want to 
underscore his point about considering asset-based facilities. 
I think you are very well aware there are some real challenges 
in the commercial mortgage-backed security market right now. In 
particular, the hotel subset of the commercial mortgage-backed 
sector is experiencing some real difficulties. And because they 
generally do not qualify for the EBITDA criteria, there is no 
access to this. As you know, the problem is exacerbated by the 
obligation of the servicers to go on and make payments, you 
know, irrespective of the ability of the borrower to do so.
    So I would like to encourage you, as I have encouraged 
Secretary Mnuchin and Chairman Powell, to consider whether 
there should not be an asset-based category if there is an 
appropriate loan-to-value, that maybe that is a criteria that 
we ought to consider. Do you have any thoughts on whether we 
ought to stand up a facility specifically designed--it would be 
designed generally for the broad category of real estate, I 
think, and other categories that would be more suitable for an 
asset-based lending than they are for an EBITDA constraint?
    Mr. Ramamurti. Yes, so an asset-based program would differ 
from what we have for Main Street, so it would be a different 
facility if it was done through a facility. Most of that type 
of lending has a much longer maturity than 5 years, so as you 
know, these are 5-year loans with a balloon payment at the end 
of the 5 years. That is probably not appropriate, for example, 
for retail or commercial real estate such as hotels.
    So the nature of that program would be quite different. I 
know there is work being done thinking about how asset-based 
can be addressed, including through the SBA. So I think there 
are a number of proposals that are being considered. I am 
certainly aware that there are many concerns in the commercial 
real estate industry, and those concerns will get even worse if 
the pandemic gets worse.
    Senator Toomey. Okay. So I want to go back to that. On page 
11 of your testimony, you indicated that you believe that 
should the pandemic and the economic circumstances worsen, we 
might very well see greater interest in the Main Street Lending 
Programs. And I can certainly understand that leading to 
greater demand on the corporate borrower side. But could you 
address why you believe that that would not be offset by 
greater reluctance on the part of banks to take on the exposure 
in that scenario in which the environment worsens?
    Mr. Rosengren. So there are many borrowers who could take 2 
or 3 months of disrupted cash flow, and if it was only 2 or 3 
months, those may be bankable loans right now, and they might 
be able to get a rate that is better than LIBOR plus 300 basis 
points.
    However, if we go through another 3 months so that in 1 
year's time they have experienced 6 months of badly disrupted 
cash flow, some of those loans that might have been attractive 
to get direct financing from the bank through the standard 
bank-borrower relationship may no longer be possible, and the 
bank may only be willing to do it if the Federal Reserve takes 
the 95-percent stake that is part of this Main Street Program.
    So I agree with you that risk aversion by banks may 
increase if the pandemic gets worse, and there already is very 
substantial uncertainty. But many borrowers that cannot get 
access from their banks are going to be looking to the Main 
Street Program to provide that type of financing.
    Senator Toomey. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Hill. The gentleman yields back. Thank you, Mr. Toomey.
    And now we will hear from Ms. Anderson on our second--well, 
first let me thank Dr. Rosengren from his testimony today. We 
very much appreciate your written testimony and the interaction 
with our Commissioners.
    And now let us turn to our second panel. We are going to 
hear from Ms. Anderson with the Bank Policy Institute first. 
Ms. Anderson, you are recognized for 5 minutes.

    STATEMENT OF LAUREN ANDERSON, SENIOR VICE PRESIDENT AND 
        ASSOCIATE GENERAL COUNSEL, BANK POLICY INSTITUTE

    Ms. Anderson. Thank you. Members of the Commission, my name 
is Lauren Anderson, and I am a senior vice president and 
associate general counsel at the Bank Policy Institute. I thank 
you for the opportunity to be a witness at today's hearing 
regarding the Main Street Lending Program. BPI is a nonpartisan 
public policy, research, and advocacy group, representing the 
Nation's leading banks. Our members employ nearly 2 million 
Americans, make 72 percent of all loans and nearly half of the 
Nation's small business loans. BPI strongly supports the 
efforts to date as well as ongoing efforts by Congress, the 
Treasury, and the Federal Reserve to tackle the COVID crisis 
and provide much needed relief to households and businesses.
    At the outset, it is worth noting how unique the Main 
Street Program is in relation to emergency lending programs 
established during the pandemic--or even in 2008 and 2009. It 
is not a loan forgiveness or grant program like the PPP, and it 
is not a market liquidity program for debt of investment grade 
borrowers. Main Street requires credit underwriting decisions 
on a heterogeneous set of individual nonbank borrowers, which 
is challenging and not something the Federal Reserve has done 
before. With the expansion of Main Street to nonprofit 
organizations, which themselves are very different across 
different sectors, the Federal Reserve ventured even further 
into unchartered territory. BPI, working with commercial 
lending experts from our member banks, has been actively 
engaged in commenting on the program since the initial term 
sheets were published in early April and through subsequent 
iterations.
    The focus of our comments has largely been on ensuring the 
terms of the program are consistent with market practices and 
ensuring prudent risk management to safeguard taxpayer funds. 
We commend the Federal Reserve for seeking public comment on 
the terms of the program and engaging in an iterative process 
to try to improve the end result.
    We are very pleased that the program began accepting lender 
registration in June and officially became operational on July 
6. Since then, lenders continue to register, and loans, albeit 
a small amount, are being made. Many BPI member banks have 
registered and are in the process of reviewing borrower 
inquiries. While the limited number of loans made thus far has 
been a concern to some, it must be assessed in the context of a 
larger commercial credit ecosystem.
    First, for many small businesses, Main Street may not be 
the right fit given the complexity of the program and the 
compliance requirements. However, BPI member banks helped to 
provide over 1.6 million PPP loans totaling over $188 billion 
to help small businesses meet payroll needs.
    Second, larger corporates retain access to capital markets, 
which remain extremely active with the support of numerous 
Federal Reserve programs. Investment grade debt and corporate 
debt has been issued at record levels, with U.S. companies 
raising over $1 trillion year to date.
    Third, and perhaps most significantly, over the course of 
March and April, both small and large businesses drew down on 
existing credit lines. Between February 12 and April 1, bank 
loans increased by approximately $700 billion. Thus, the lack 
of demand for Main Street loans likely indicates that many 
other eligible businesses are finding credit through other 
market channels.
    A second reason why there is limited demand for Main 
Street, the fact that the program not only requires borrowers 
to meet certain eligibility criteria, but also to satisfy bank 
underwriting standards. And if a borrower can meet bank 
underwriting standards, it is not surprising that they are 
finding credit solutions through traditional market channels. 
Where the Main Street Program may become more useful is if 
banks become balance sheet constrained and cannot lend the full 
amount needed by a creditworthy borrower. If there were to 
occur, Main Street may provide the solution. But so far bank 
balance sheets are robust in weathering the crisis. If, 
however, Congress, the Treasury, or the Federal Reserve desires 
to provide further relief to small and mid-sized businesses 
experiencing acute stress due to the pandemic, including less 
creditworthy borrowers who would not currently pass bank 
underwriting standards, the design of the program would need to 
be modified. At the moment the program is not designed to 
provide loans to less than creditworthy borrowers. If banks are 
to provide loans to borrowers who cannot meet current bank 
underwriting standards, the Government would need to provide 
downside credit risk protection that would allow Main Street 
loans to be considered lower risk.
    I thank you again for the opportunity to be a witness for 
the Commission, and I look forward to answering your questions. 
Thank you very much.
    [The prepared statement of Ms. Anderson follows:]
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    Mr. Hill. Thank you, Ms. Anderson. We appreciate your 
testimony.
    We will now turn to Mr. Bohn. You are recognized for 5 
minutes.

    STATEMENT OF THOMAS BOHN, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, ASSOCIATION FOR CORPORATE GROWTH

    Mr. Bohn. Well, thank you. Good morning, and thank you for 
the invitation to speak today.
    Congressman Hill, Commissioner Ramamurti, Congresswoman 
Shalala, and Senator Toomey, I appreciate the gravity of the 
responsibility before you, admire your willingness, and respect 
your commitment to ensure that Federal relief programs enacted 
through the Coronavirus Aid, Relief, and Economic Security Act 
are both accessible and effective.
    I am here this morning to provide testimony from the 
perspective of middle-market borrowers to help answer the 
question that you all are asking of who the Main Street Lending 
program is helping. Regrettably, I have no answer to offer you. 
We could neither borrow from the program nor find someone in 
our membership who has received a loan through it.
    To help illustrate the current obstacles to securing loans 
through MSLP, I would like to share some comments from our 
members who completed a survey administered in recent days. I 
will not read all of them. These are their words, not mine:
    The program is moving too slowly, whereas COVID-19 
dramatically and quickly caused an impact.
    We actively solicited a MSLP loan for a Minority Business 
Enterprise, a company whose performance is only 10 to 15 
percent lower during the pandemic as it was beforehand. We 
approached 15 lenders. Not one was interested.
    If the MSLP applies to the lower middle market, it is news 
to me. If it does, please send guidelines.
    We were excited about the program initially and had two 
companies that would be perfect for the program, but the banks 
will not do it.
    We had plenty more comments that address the challenges 
faced by both borrowers and lenders which I am happy to provide 
the Commission for its review and reporting purposes.
    As the CEO and president of the Association for Corporate 
Growth, ACG, I come before you today as an employer and the 
leader of an association that represents a vitally important 
segment of the economy which employed some 45 million Americans 
prior to the pandemic. Founded in 1954, ACG's 15,000 members 
operate, advise, and grow approximately 200,000 middle-market 
companies.
    As a networking organization which hosted more than 1,100 
live events annually, ACG, like many other associations, was 
devastated by COVID. I lead a staff of nearly 30 people based 
out of Chicago, or now all over the country, as well as oversee 
operations in 60 chapters, primarily in North America. When the 
Paycheck Protection Program was announced, a grant through it 
would have served as an $800,000 lifeline for my Chicago team 
and staff members dispersed throughout the country. However, as 
a 501(c)(6), we too were ineligible.
    Consequently, we made more than $600,000 in salary cuts--
currently forecasted to continue through December and beyond. 
Since March, every conversation with our members finds them in 
the same position--with their employees at the forefront of 
their operations, they managed cash flow, tried to prevent 
layoffs, and worked diligently to retain employees and not lose 
institutional knowledge.
    When PPP was closed to us, like many other associations and 
a large percentage of our member companies, we looked in 
earnest at the Main Street Lending Program. A loan would allow 
us to invest in the digital enhancements to our infrastructure 
that would ensure we could continue to deliver strong member 
value and the necessary tools for business development in this 
new virtual world.
    But there, too, we found another closed door, as did our 
members. Perhaps naively, we thought the Main Street Lending 
Program would be accessible to organizations and companies 
excluded from the PPP. Suffice to say it has not been accessed 
by many. In your recent report, you talked about the Goldman 
Sachs estimating that some 45 million Americans or 40 percent 
of private-sector are employed by companies who are eligible 
for MSLP, yet very few had purchased a loan. Further, Chairman 
Powell recognized the challenges with the small and medium-
sized businesses for which MSLP is intended. It is new 
territory for the Federal Reserve and very complex because 
these businesses are a ``broad and heterogeneous class of 
borrowers''' with diverse needs.
    In our opinion, the challenges with the Main Street Lending 
Program are twofold and equate to awareness and access.
    Our recent survey found 22 percent of the respondents 
completely unaware of MSLP. And of the respondents who want to 
apply for the loans through the program, 81 percent were 
unable. When asked what changes could help, they suggested the 
removal or the overhaul of the following items, which some of 
you have talked about today:
    Removal of adherence to the SBA affiliate definition. We 
talked about the EBITDA/leverage size based test which excludes 
many companies, particularly those early in their life cycle 
and family-owned businesses; distribution dividends 
restrictions for 1 year after loan payoff; employee 
compensation restrictions for 1 year after loan payoff; 
decreasing the minimum loan size.
    Look, creating a greater awareness of the MSLP and 
increasing accessibility should result in a groundswell of 
applicants. We believe that. The effect should help companies 
retain jobs and maintain operations, and consequently preserve 
health care insurance for millions of Americans in this 
increasingly unpredictable economy tethered to COVID 19.
    We stand to support you in any way you need and hope to 
answer any questions you may have today. Thank you.
    [The prepared statement of Mr. Bohn follows:]
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    Mr. Hill. Thank you, Mr. Bohn.
    And now we will hear from Mr. Foster. You are recognized 
for 5 minutes.
    Mr. Foster. Okay. Can you hear me.
    Mr. Hill. We can.
    Mr. Foster. Great.

STATEMENT OF VINCENT D. FOSTER, EXECUTIVE CHAIRMAN, MAIN STREET 
                      CAPITAL CORPORATION

    Mr. Foster. Members of the Commission, thank you for 
inviting me today to testify on the state of the Federal 
Reserve's Main Street Lending Program. I am Vince Foster, 
executive chairman of Main Street Capital. Main Street Capital 
is an active member of the Small Business Investor Alliance in 
Washington. We provide long-term debt and equity financing to 
lower middle-market U.S. businesses. We currently have 
investments in 68 lower middle-market businesses in 26 States, 
in which our average ownership is 36 percent. These businesses 
on average each have roughly 200 employees.
    The Main Street Lending Program, while enacted to assist 
businesses like our portfolio companies weather the economic 
storm brought on by the pandemic, is not responsive to their 
needs as currently structured. The principal structural 
problems are:
    Number one, requiring lenders to undertake full credit 
underwriting for small to mid-sized borrowers seeking 3.5 
percent, four to six times EBITDA loans results in a risk/
reward mismatch. Lenders are better off expending their time 
and capital underwriting conventional loans.
    Number two, requiring 15 percent amortization in year 3 of 
the loans is a non-market and very onerous provision, 
effectively requiring the loans to be refinanced after 2 years.
    Number three, prohibiting contractual subordination (in the 
case of the new loan facility) and requiring (in the case of 
the priority loan facility) senior or pari passu priority to 
existing debt is problematic in that most companies will have 
preexisting senior debt outstanding, the terms of which will 
have to be renegotiated.
    Number four, testing the maximum number of employees and 
revenue utilizing the affiliation rules contained in the Small 
Business Administration regulations applicable to 7(a) loans, 
without the exceptions including the PPP program, dramatically 
reduces the number of companies eligible for the Main Street 
Lending Program.
    The lending facilities as currently structured are 
unattractive to those borrowers that are reasonably 
creditworthy as less restrictive financing is likely to be 
available from conventional sources. Yet the facilities remain 
unavailable due to lender reluctance to accept balance sheet 
exposure with respect to less creditworthy borrowers.
    The following structural changes would make the program 
more attractive to both lenders and borrowers to advance 
Congress' objectives:
    Number one, the loans should be unsecured and subject to 
preexisting contractual subordination and rank junior in 
priority to other preexisting senior debt.
    Number two, the loans should have a term of 7 years, 
generally sufficient to allow them to mature after the maturity 
dates of preexisting debt. Amortization should not begin until 
the end of year 4.
    Number three, the multiples of 2019 adjusted EBITDA should 
be increased from 4 times in the new loan facility and 6 times 
in the priority facility to 6 times and 7 1/2 times, 
respectively. There should also be elective asset-based 
criteria (such as a percentage of loan-to-value and/or a 1.2 
times minimum debt service coverage ratio) instead of using 
solely leverage multiples for all industries.
    Number four, experienced nonbank lenders should be 
permitted to participate as eligible lenders (similar to the 
PPP program); the loans should have an interest rate of LIBOR 
plus 400 rather than 300 basis points; and the upfront 
origination fee payable to the lenders should be increased to 
200 basis points paid by Treasury.
    Number five, the affiliation rules should not limit an 
affiliated group to a single Main Street facility or a single 
lending facility's size limitation when more than one group 
member would like to access that or another Main Street lending 
facility.
    And, finally number six, one of our lenders, a highly 
respected and conservative regional bank, has elected not to 
participate in the Main Street Lending Program. Instead they 
confirmed that their primary regulator had no issues with the 
bank utilizing the 1- and 2-year deferral of interest and 
principal feature utilized by the program in the bank's regular 
lending program. This will help provide certain qualified 
pandemic-affected borrowers the liquidity they need. 
Accordingly, it may be helpful to coordinate with the 
appropriate regulators as to whether this type of regulatory 
action might encourage other banks to similarly modify their 
lending programs to assist affected borrowers.
    Thank you again for the opportunity to speak to you today, 
and I look forward to your questions.
    [The prepared statement of Mr. Foster follows:]
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    Mr. Hill. Thank you, Mr. Foster.
    And now, Ms. Mills, you are recognized for 5 minutes.

         STATEMENT OF GWEN MILLS, SECRETARY TREASURER, 
                           UNITE HERE

    Ms. Mills. Thank you, members of the Commission. My name is 
Gwen Mills. I am secretary-treasurer of the hospitality union 
UNITE HERE. While I will focus on our members' experiences, the 
recommendations I make are supported by the AFL-CIO, 
representing 55 national unions and 12 million workers.
    Our 300,000 members work primarily in the hotel, casino, 
food service, and airline catering industries--all sectors that 
are heavily dependent upon travel and tourism.
    Before the CARES Act became law, 90 percent of our members 
were laid off. Today 85 percent remain unemployed.
    A majority of our members are women and people of color. 
Many are recent immigrants. Most have lost or will soon lose 
their health care--benefits won often after giving up wage 
increases to secure family health care.
    Hundreds of our members or their family members have died 
from coronavirus--22 in Las Vegas alone, where 350 have been 
hospitalized.
    Our industries are the most severely affected in terms of 
unemployment, so I believe our story is a cautionary tale of 
what awaits American workers across the board if we fail to 
correct course.
    At heart is the question of requiring employers to maintain 
employment as a condition of Federal assistance. The Main 
Street Lending Program requires only commercially reasonable 
efforts to maintain employees in spite of clear congressional 
intent. Treasury and the Federal Reserve said they will not 
enforce even that.
    We have seen this movie before, and we know how it ends for 
working people. We have seen how powerful lobbyists transform 
the PPP and Payroll Support Programs into subsidies for real 
estate investors.
    We have identified 200 outlets where we have members that 
received PPP loans, and they have not protected paychecks or 
health care.
    One company--Omni Hotels--received 34 PPP loans worth at 
least $53 million. Meanwhile, Omni hotels in Boston, 
Providence, and New Haven were shut down in March, and it is 
unclear when they will reopen. In Providence, the company then 
cut off medical benefits in violation of their union agreement, 
and there are many similar stories.
    What they reveal is how a powerful industry turned a 
program designed to keep workers on payroll into one that could 
keep hotel owners current on their mortgages.
    The Main Street Program will yield even worse results for 
workers if this mission drift is allowed. Now hotels demand a 
bailout of $86 billion worth of CMBS loans using the Main 
Street Program. This Commission reported that the Fed has 
considered establishing an asset-based lending facility that we 
fear would do just that.
    Who would benefit most from a hotel CMBS bailout? Lobbyists 
want you to believe it would mom-and-pop hotels. But the 
largest beneficiaries are sophisticated real estate investors.
    Our analysis of loan data finds that: the 11 largest 
borrowers had at least $1 billion each in hotel CMBS; those 11 
had a combined $30 billion in loan balances or about a third of 
the total outstanding; four were private equity firms, two were 
REITs, one a hedge fund billionaire, and the rest were 
developers or billionaire investors. The 12 belong to the 
Fontainebleau Miami Beach, whose owner refinanced its debt 
twice in 2 years, borrowing more to cash out millions. Now 
Fontainebleau has stopped health care for hundreds of laid-off 
employees despite subsidies provided by the Employee Retention 
Tax Credit.
    Lobbyists claim if the Fed does not rescue CMBS borrowers, 
hotels will default and workers will not have jobs to come back 
to. But that is not our experience, and this is not the first 
time hotel owners got themselves in trouble using these 
inflexible loans. After the financial crisis, there were scores 
of defaults across the country. But defaults and foreclosures 
did not lead to closed hotels. Hotel workers who are used to 
seeing absentee owners come and go understand that jobs are 
driven by occupancy, and only ending the pandemic can fix that.
    Almost half of hotel CMBS mortgages mature within 2 years, 
before the industry is projected to recover. Should the Fed 
refinance the entire hotel lending market while real estate 
investors lay off 85 percent of hotel workers and end their 
health care in a pandemic?
    There is a second critical lesson here which relates to the 
Main Street Program. There is no question that stabilizing 
credit markets is extremely important in a crisis, and the Fed 
has done that. But the real mission should be to protect jobs 
of American workers. The exclusive focus on markets and not on 
jobs means our members, most of whom are brown and black, are 
thrown off payrolls while their employers, whose boards and 
shareholders are predominantly white, can simply tap their 
credit lines and ride out the crisis.
    It is no longer acceptable for the Fed to just stand by and 
watch us fall off a fiscal cliff. Millions of American workers 
are right behind us on the precipice.
    Instead, what if program designers at the Fed take the 
CARES Act mandate to heart? What if credit terms were loosened 
so long as--and here is the important part--so long as there 
were airtight requirements, not incentives, not 
recommendations, but requirements that recipients keep workers 
on payroll? It is what the PPP could have done if it had not 
been hijacked by the real estate industry.
    The Fed and Treasury must learn from PPP and reform Main 
Street lending so that it actually contributes to the 
employment of working Americans. But please do not bail our 
real estate investors while they push workers off the cliff.
    Thank you for this opportunity, and I welcome your 
questions.
    [The prepared statement of Ms. Mills follows:]
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    Mr. Hill. Thank you, Ms. Mills. Appreciate your testimony 
today.
    We will now have a round of questioning, and I recognize 
myself for 5 minutes.
    Let us start with Ms. Anderson. You were talking about your 
view of the banks taking up of these loans and what 
modifications might be made for less than creditworthy 
borrowers. I understood that point. But as I said in my earlier 
questioning, 5,000 banks jumped on the opportunity to help in 
the PPP environment under the CARES Act, and we have got very 
few banks that are engaging here.
    What is the Bank Policy Institute doing to promote banks 
participating in the Main Street Program?
    Ms. Anderson. Thank you for your question. In terms of BPI 
member banks, the vast majority of our members are 
participating in the program. I cannot speak, obviously, for 
all banks across the country, but I think when you think about 
the complexity of the program, it is difficult not just for 
small borrowers but also for smaller lenders. The program is 
set up as a participation structure, which is typically used in 
the syndicated loan market. Many smaller banks may not actually 
be active in that space, familiar with it, and there is quite a 
lot in terms of going through the legal documentation and 
setting up the infrastructure to actually lend in that manner 
and comply with the terms of the program. So while we certainly 
have our members participating, it may be more challenging for 
smaller banks.
    Mr. Hill. Thank you. And do you agree with the testimony on 
our panel that it is possible to make a very creditworthy loan 
that is not based on the EBITDA multiples and the senior nature 
of the term sheet? In other words, that if one were to have 
sufficient collateral coverage and a 1.25 debt service coverage 
ratio but a junior lien, wouldn't that be considered a 
creditworthy loan as well?
    Ms. Anderson. So a number of our members have said that 
they would be interested possibly in lending at a junior 
facility, something that is collateralized. I think it would be 
up to the Fed and the Treasury to decide exactly what their 
risk appetite would be in such a structure and structure the 
terms appropriately. So it may not be 1.2 but something 
similar. So, yes, I do think banks would be interested if there 
was a junior facility available.
    Mr. Hill. Do you think the Fed and the Treasury are not 
setting the risk parameters appropriately in their existing 
Main Street term sheets? In other words, are they too strict? 
Are they too much like a traditional senior bank loan with not 
even a step in the direction towards a slightly distressed--
solvent, creditworthy, but distressed, temporarily distressed 
borrower?
    Ms. Anderson. So I think the eligibility criteria that the 
Fed and the Treasury established probably fit the program that 
they set out to design, as President Rosengren said, in terms 
of the liquidity program. But there is a key element. So even 
if you reduced some of the stringency of those terms, you still 
have the underwriting element. And in this environment, 
underwriting on today's information will be difficult for many 
borrowers in that distressed space. So I am not sure that 
actually loosening the criteria is necessarily the right 
answer.
    But I think also in terms of what President Rosengren said, 
if companies really need equity, then a Federal Reserve lending 
program is not the right solution for them.
    Mr. Hill. Understood. Thank you for your response.
    Mr. Bohn, let us talk about the affiliation rules. You 
heard my conversation with Dr. Rosengren that the Fed here in 
the Main Street Facility has adopted those Small Business 
Administration 7(a) lending affiliation limitations. For this 
middle market of non-super small businesses and certainly those 
not eligible to raise capital in the public markets, are those 
affiliation rules a serious impediment? And can you give us an 
example?
    Mr. Bohn. Thank you, Congressman. I think that what we are 
seeing and hearing and what was evident in the survey that we 
had is that these businesses were originally excluded from the 
PPP, and there was hope initially that in the Main Street 
lending provision that there would be opportunities for them to 
utilize benefits and lending from Main Street in order to not 
only keep jobs but also invest in some of the changes that they 
need to do as people start to pivot based on the economy and 
whether that is setting up plexiglass and rearranging their 
buildings or whether or not that is related to simply doing 
business in a much different way. But we have heard from them 
loud and clear that their inability to access them has had a 
significant impact on their business. When we first went out 
there and talked to our members----
    Mr. Hill. Thank you. Let me--thank you for that. We will 
have another round, but my time has expired.
    Let me turn to Mr. Ramamurti for 5 minutes.
    Mr. Ramamurti. Thank you, Mr. Chairman. And thank you, Ms. 
Mills, for your testimony today. You noted in your written 
testimony that hundreds of your union's members and family 
members have died from COVID, and many more have been 
hospitalized. I just want to extend my condolences to them and 
their families and to you, and I think it is a powerful 
reminder that this is first and foremost a health crisis, and 
that front-line workers like the people that you represent are 
bearing the brunt of it.
    You represent a lot of people who work in hospitality and 
in tourism as front-line service workers, hotel housekeeping, 
bellmen, wait staff, cooks, bartenders, casino workers. You 
mentioned in your opening statement that a majority of your 
members are people of color and that a majority are women.
    When the companies who employ your members struggle, who 
are the first people to suffer via layoffs or furloughs?
    Ms. Mills. Yeah, thank you for your question. Across the 
board it is the front-line workers first, our members, who are 
laid off.
    Mr. Ramamurti. Right.
    Ms. Mills. And our experience is that the white middle 
management are able to keep their jobs.
    Mr. Ramamurti. And when they are laid off or furloughed, it 
is not just lost income, right? In many cases they are losing 
access to health care, to retirement contributions, and to 
other benefits?
    Ms. Mills. Absolutely, yes.
    Mr. Ramamurti. And so among the hundreds of thousands of 
travel and tourism industry workers that you represent, 4 
months into this crisis are you aware of a single job that has 
been saved by the Main Street Program or even a single hours 
cut or furlough that the Main Street Program has stopped?
    Ms. Mills. No.
    Mr. Ramamurti. And as the Main Street Program is currently 
designed, do you think it will help workers in the future, even 
if more companies participate in it?
    Ms. Mills. No. As I said in my testimony, not without 
binding requirements that employees be rehired from the first 
day of the aid.
    Mr. Ramamurti. Right. So, in other words, even if a lot of 
companies end up getting loans through this program, you do not 
think that the benefits of those loans will flow through to 
workers?
    Ms. Mills. No, not without binding requirements.
    Mr. Ramamurti. So 45 million people work at companies that 
are eligible for the Main Street Program. If the goal is to 
help those millions of workers, do you think the Fed can just 
make tweaks to the Main Street Program to achieve that? Or do 
you think Congress needs to come up with a brand-new approach?
    Ms. Mills. In this case I do not think tweaks will work. I 
think Congress does need to come up with a new approach.
    Mr. Ramamurti. So let us talk about that a little bit. In 
your experience, what kind of new approach do you think would 
be helpful to your workers? In your experience and the 
experience of your members, does providing financial support to 
businesses help workers without express and enforceable 
requirements that businesses actually use that aid to support 
workers?
    Ms. Mills. No. Time and again in many different programs, 
without enforceable requirements, support to businesses does 
not help workers.
    Mr. Ramamurti. So of the $500 billion that Congress gave to 
the Treasury in the CARES Act in March, there is currently more 
than $200 billion sitting unused and uncommitted. If you were 
to use that money to develop a program that would be most 
helpful to your members, what would you do with it?
    Ms. Mills. The two things that matter are health care and 
wages, so we would fund COBRA payments so that we could 
continue health care, and then give direct support to workers.
    Mr. Ramamurti. Thank you. And one final question about 
this. Did the Treasury Department ever reach out to your union 
as it was designing this lending program that was ostensibly 
about helping workers?
    Ms. Mills. No.
    Mr. Ramamurti. Thank you, Ms. Mills. Look, I share your 
views and, frankly, I think it is time we started to listen to 
working people, not executives and investors and their 
lobbyists, when we design these programs that are supposed to 
be ultimately about helping workers.
    Thank you, Mr. Chairman. I yield back.
    Ms. Mills. Thank you.
    Mr. Hill. Thank you, Mr. Ramamurti.
    Congresswoman Shalala is recognized for 5 minutes.
    Ms. Shalala. Thank you. Let me follow up with Ms. Mills 
since I represent a district that has a huge number of workers 
that work in the tourism industry, particularly in the hotels, 
including the Fontainebleau, which you mentioned.
    We had a debate with the Fed over whether their term 
``commercially reasonable'' was better than ``reasonable,'' but 
it sounds to me from what you said that either one does not 
mandate that these programs keep people employed or even 
furloughed workers keeping their health care so that they can 
get on unemployment and keep their health care. I take it that 
we would have to really fine-tune that requirement in these 
programs to make a difference for not only the workers that 
UNITE represents, but the thousands of workers that work in 
this industry.
    Ms. Mills. Yes, thank you, Congresswoman, for your 
question. I mean, our great concern about the Main Street 
Lending Program is that the hotel industry is seeking changes 
so that they can use the program to pay their CMBS mortgages, 
like there is a $975 million loan at the Fontainebleau Miami 
Beach that is in your district. As I mentioned, the 
Fontainebleau stopped paying health care for hundreds of our 
laid-off members. We believe it is a violation of our contract, 
and so it would be wrong for taxpayers to fund a year or two 
worth of Fontainebleau's debt payments of $39 million a year 
while laid-off workers lose their health insurance and rely on 
the public hospital system. So fine-tuning absolutely 
requirements would be necessary, and I really appreciate your 
question today because one of the Fontainebleau workers died 
this morning of COVID in the hospital without his medical or 
life insurance.
    Ms. Shalala. I heard that, and I am so sorry. I want to 
point out that those workers are also taxpayers, because we are 
talking about their money being used for the mortgage payments.
    So you do not see anything in the Main Street Program that 
could be significantly improved unless it was totally 
restructured in terms of helping workers in this country?
    Ms. Mills. I think that is right. It would need to be 
restructured with requirements off the bat for bringing workers 
back as soon as any assistance was issued, yes.
    Ms. Shalala. Well, thank you very much.
    Let me ask Ms. Anderson a question. The Main Street Lending 
Program allows banks to employ their own underwriting standards 
to loan applications. Does that mean that banks are making 
loans under the program that they would have made anyway absent 
the Fed program? And if so, is the Main Street Lending Program 
providing any benefit to borrowers at all?
    Ms. Anderson. Thank you for your question. In terms of the 
loans that are being made, I think they are quite specific in 
terms of the circumstances, because you are absolutely right, a 
borrower who can meet a bank's basic underwriting standards is 
typically finding out that there is a product that is more 
suited to them given their credit needs. So, for example, maybe 
a term loan really is not what they need and they really need 
something more like a flexible working capital facility. So our 
banks are actually many times finding better solutions for 
these borrowers when they inquire about the program.
    In terms of the live cases that look like they might go 
through, one example is a travel company that basically came to 
one of our banks as a new lender--a new borrower, sorry, and 
the bank would be comfortable possibly lending the 5 percent. 
And in a normal circumstance they would go out and syndicate 
that loan to the market. But given the timing that it takes to 
do that and the need to actually get finances to these 
borrowers, that is one where they think it makes sense to use 
Main Street because the Government is there ready and waiting, 
so they do not have to go through a syndication process. But, 
you know, whether there are lots of borrowers in those specific 
circumstances I think is questionable.
    Ms. Shalala. One more quick question. Many of the small to 
mid-sized businesses that were able to get by in the first few 
months, they used the PPP program, are now at the end of their 
ropes. Goldman Sachs reported that more than 80 percent will be 
out of PPP money. If that is the case, where are they turning 
for funding? Are your banks seeing an uptick in loan requests?
    Ms. Anderson. I would not say we are seeing a huge uptick 
in loan requests, but something that is interesting is that the 
vast majority, so probably over 70 percent, of new borrower 
inquiries that our banks are getting are actually borrowers who 
think Main Street is a PPP program. So they think it is a loan 
forgiveness program or a grant program. And once they hear the 
details, then they realize it is actually not for them. So they 
are looking for something that is equivalent to a PPP type 
structure.
    Mr. Hill. Thank you.
    Ms. Shalala. I yield back.
    Mr. Hill. Yes, thank you, Congresswoman Shalala. Your time 
has expired.
    Now we will turn to Senator Toomey for 5 minutes.
    Senator Toomey. Thank you, Mr. Chairman.
    I just want to go back and review very briefly a little bit 
of the history about how these programs came together, because 
we debated the extent to which we should have mandates to 
retain a workforce and how best to do that. And for small 
businesses, we thought that it might be possible for 
businesses, even businesses that are essentially closed, have 
no business, it might be possible to maintain the payroll if we 
pay for it, if we had the taxpayers pay for it. And so that is 
what the PPP program was designed to do, take a finite period 
of time and have the taxpayer just pick up the tab for the 
payroll. And to a very significant degree, I think it has 
worked, and it was probably necessary.
    With the Main Street Lending Program, the idea was that 
these would be loans. And while obviously everybody wants to 
maximize employment opportunities, maximize jobs, we are all 
celebrating record-low unemployment, record-high job 
opportunities for everybody in America, most especially the 
African American community, the Hispanic community, people who 
have historically have higher rates of unemployment. We are 
seeing tremendous gains. This was all great.
    But the idea that we would require companies to borrow 
money for the purpose of maintaining a payroll for people who 
they did not have work for because the business was closed, 
that did not seem to make sense, which is why we made 
unemployment benefits more generous; we did direct payments of 
$1,200 to everyone to offset the lost income that was notable.
    So let me try to illustrate this another way with a 
question, and maybe Mr. Bohn or Mr. Foster would want to take a 
shot at this. If a business is losing money, probably 
massively, as it collapses in sales, has no orders coming in 
because of this contraction that was underway, and hopefully is 
in the process of getting behind us, and, therefore, has no 
work for its workers, if that business goes out and borrows a 
lot of money to pay those workers anyway, does that make that 
business more viable, more likely to succeed, more likely to be 
there at the end of this contraction to be able to bring 
workers back?
    Mr. Bohn. Well, Senator Toomey, thank you. If I could, I 
will take a stab at that. I think what we are talking about 
here is really two separate things. I think, yes, PPP was 
definitely designed to save jobs in the immediate term and as 
quickly as possible. What we are hearing and seeing from 
middle-market organizations, though, is that the loans, if they 
were able to get them, would go to investment in opportunities 
that would create jobs or bring back jobs within their company. 
So if you even use the example of ACG as an organization, there 
is a lot we have to do and do not have the finances to be able 
to really exist well equipped in this new virtual environment. 
We are seeing that time and time again, whether it is for our 
restaurants and how they are having to handle how they prepare 
for orders and utilize technology, so there are opportunities. 
But at the end of the day, it is a moot point because there is 
such a large number of them who are not able to access the 
program overall.
    Senator Toomey. Thank you.
    Mr. Foster, do you have a comment on this?
    Mr. Foster. Yes, I mean, I think that the main thing right 
now is for the type of business that you illustrated is to keep 
the business, because the business is in survival mode. And you 
need to let the business owner do what is necessary with the 
capital to keep the business alive. Certainly payroll is a part 
of it, but frequently they are behind on lease payments, and 
they could lose their facility. They have stretched their 
suppliers. You know, you just have to leave it up to the 
business owner because they really need--they are in survival 
mode.
    Senator Toomey. Let me ask a question of Ms. Anderson. My 
understanding is that the Federal bank supervisors have made it 
clear that they will treat the Main Street Lending loans in a 
manner consistent with their supervisory approach to other 
commercial and industrial loans. So here is my question: If 
they were to change that and they were to take, say, a less 
restrictive view in their supervisory capacity, would bank 
behavior be likely to change? Or is bank behavior so driven by 
the existing set of internal rules that they would be unlikely 
to change?
    Ms. Anderson. Thank you. So some bank behavior might 
change, but it may not be actually the behavior that is 
desirable overall. I think one thing to be clear is we do not 
think it is appropriate to have supervisory forbearance. The 
transmission of risk from the corporate sector to the banking 
sector is really not in the best interest of anyone, and 
certainly if you ask banks to go and make riskier loans right 
now, it might be okay for 12 months. But the credit problem 
will still be there just down the road.
    So I think banks basically are looking at that, and even 
where supervisory requirements were relaxed somewhat, I think 
they can see that it is not worthwhile to rack up bad loans on 
their balance sheet that they will have to basically work out 
at some point in the future.
    Mr. Hill. Thank you, Ms. Anderson. Senator Toomey, your 
time has expired.
    Senator Toomey. Thank you.
    Mr. Hill. The gentleman yields back.
    We now have a second round of questioning for this panel, 
and I will yield myself 5 minutes to start that.
    Some of these questions we are faced with today and that 
the Fed and the Treasury are faced with are not new questions. 
I would like to read a quote: ``If it is a pawnshop in which 
necessitous borrowers are compelled to hock assets worth two to 
three times the amount of the loan, we are opposed, and we 
think most business people will be as well. We see no reason 
why the Government should be engaged in a careful pawnbrokering 
enterprise, niggling over security, haggling over interest, and 
competing with other lenders.''
    That was written back in 1933 as the Reconstruction Finance 
Corporation and the Fed struggled with how to get credit out to 
the American marketplace in a very tough economic recession of 
the 1930s, and I think we are dealing with that issue now in 
this middle-market segment that we are talking about today.
    Mr. Foster, you offered some very good, constructive 
comments on specific loan term changes, but can you also 
address the affiliation question that I posed earlier?
    Mr. Foster. Sure. Let me try to do that by giving you an 
example, and I want to compare and contrast with PPP. So when 
PPP, which used the same 7(a) program affiliation rules with 
relaxation for companies with an SBIC investment, the 
hospitality industry, et cetera, so you do not even have that 
in Main Street. So in PPP, if you had two commonly owned 
businesses that had 200 employees each, and they each had, you 
know, say $20 million in preexisting debt, they could each 
access up to $10 million of PPP for a total of 20. They needed 
to have the requisite cost structure that would do that.
    You switch over to Main Street, two companies under common 
control, 7,000 employees each, each with $20 million in 
preexisting debt, 14,000 total employees, they have to share--
if one of them wants to do the new loan facility, they have to 
share $15 million in total assistance under that program, and 
it really does not make any sense from an employee perspective, 
that 14,000 employees have access in total to a $15 million 
loan versus under PPP you had 400 employees that had access to 
up to $20 million.
    So it really is poorly designed, and it does not make any 
sense for these kind of companies to have to run through really 
complicated and really severe 7(a) regulations that are really 
focused on making sure companies with more than 500 employees 
do not have access to a 7(a) loan.
    Mr. Hill. Thank you. That is helpful. I appreciate that 
example.
    Ms. Mills, let me turn to you and first echo the comments 
of our fellow Commissioners about condolences. So many of our 
families across the country have really suffered in this 
pandemic. We have to remember when we are doing our oversight 
work that, first and foremost, this is a public health crisis 
that has led to an extraordinary economic crisis. And so I 
appreciate the comments you made and the care you have for all 
of your members and your advocacy today.
    And I also agree with Senator Toomey that the Main Street 
Program is not the solution to all challenges in this pandemic 
either, and that is why we have the unemployment compensation, 
the direct payments to our families, the forbearance in 
mortgage and rental payments, the payment for leave, the 
payment for testing, the flexible furlough program in the 
States so that people can be furloughed and maintain some 
benefits and get unemployment compensation, and obviously the 
aforementioned PPP. So all these Federal policies work together 
to try to minimize the impact on our families and help them get 
through the pandemic and also help get our economy back to full 
capacity.
    In looking at your testimony, though, 74 percent of CMBS 
are less than $20 million, and in my district Asian American 
hotel owners are the classic small business entrepreneurs. And 
as I understand it, over 50 percent of hotel rooms are owned by 
these kinds of classic small business entrepreneurs across the 
country. And they are worried about getting October property 
tax payments in Arkansas, is, I know, one of their concerns, 
because they want to bring their staff back. They want to bring 
their staff back commensurate with the economy reopening. And, 
also, owners of CMBS securities are mostly pension funds and 
people's retirement accounts, and so they are all benefitted by 
trying to get capital into the industry and get people hired 
back and reopen.
    So I am empathetic to your testimony. I thank you for being 
here very much and for your comments. But I think that the Main 
Street Program's mission is to try to get our hotel and 
hospitality open, and I hope we can find a such that does that.
    Let me yield back and turn to my friend Mr. Ramamurti for 5 
minutes.
    Mr. Ramamurti. Thank you, Mr. Chairman.
    Mr. Bohn, thank you for your testimony as well. I want to 
ask you the same type of questions that I asked Ms. Mills 
earlier. You come at this from a different perspective. You run 
a mid-sized company. Your organization represents a lot of such 
companies. But you seem to agree with Ms. Mills that this 
program has not been helpful so far. In fact, not a single one 
of your member companies has actually been helped by the Main 
Street Program so far. Is that right?
    Mr. Bohn. That is correct.
    Mr. Ramamurti. And it is in your testimony that the program 
needs to be changed. Can you describe the kinds of ideas you 
have in mind for that?
    Mr. Bohn. Yeah, we list a couple of ideas in there that 
start with the removal of the affiliate exclusion, reducing the 
EBITDA requirements to make it more appealing to a broader 
class, particularly in the lower middle market, and we also 
talk specifically about the loan size and bringing the loan 
size down even further. Those are just some of them that we 
think--and, again, this is not only, you know, our team 
internally talking. These are is the direct comments we 
received back in the survey we just did.
    Mr. Ramamurti. You also mentioned eliminating the 
restrictions on shareholder payouts and on executive 
compensation. Is that right?
    Mr. Bohn. Correct.
    Mr. Ramamurti. So, look, I agree with you on the diagnosis 
here, which is that the Main Street Program has not really 
helped anybody so far very much, and it is also unlikely to 
help a lot more companies without significant changes. But I am 
concerned about the proposed solution that you are offering. 
You propose changing the rules so that every company can get a 
loan even if before the crisis they had a lot more debt than 
they had earnings, you know, in other words, no matter how much 
risk there is that the public is going to end up holding the 
bag at the end of this. And at the same time, you propose 
eliminating restrictions on companies spending the loan money 
on payments to their shareholders and eliminating restrictions 
on executive pay. So I guess my question is: Why should the 
American people be willing to give billions of dollars to 
potentially failing companies that can just use that money to 
pay shareholders and executives while firing workers?
    Mr. Bohn. Well, I think, Commissioner Ramamurti, when we 
talk about things like EBITDA and whether or not the company 
was at a higher risk prior, if you consider a large part of the 
lower middle market, which are oftentimes family-owned 
businesses, EBITDA in that case can be a misleading indicator 
because a lot of the costs and expenses roll through salaries 
and other types of things, and at the end of the day the EBITDA 
is not something significant. We see this a lot of times when 
purchases and acquisitions are made where there is a lot of 
debate and discussion over EBITDA and what is published through 
their regular financials.
    So I think when we are looking at that, we tend to 
eliminate the opportunity for companies, particularly family-
owned companies who are in that lower middle market, who at the 
end of the day their margins, their EBITDA are very, very 
limited and small, but yet they have been very successful for 
years, employ a number of different people.
    Mr. Ramamurti. Can I ask just a follow-up question on that? 
On, let us say, the executive compensation restriction 
specifically, if a company exists that is not interested in the 
Main Street Program because of the executive compensation 
restriction, isn't it a fair guess to say that the reason that 
they are not interested is because they want to use some of 
that money to increase executive compensation? Otherwise, why 
is it a deterrent to them?
    Mr. Bohn. Well, again, so that particular comment comes 
directly from some of our members of why they are not 
interested. What their particular reason for not being 
interested, I cannot go to that intent. But I will say that if 
there is anything that limits their ability to eventually sell 
the company upon paying the loan or to derive the benefits that 
they have built for building a company over time, I think that 
that is going to absolutely preclude them from wanting to 
utilize the funds that could otherwise be available to them.
    Mr. Ramamurti. Thanks. Look, just to sum up quickly, I 
think we have actually seen a remarkable consensus emerge at 
this hearing, which is that the Main Street Program as 
currently designed is failing. The representative of the 
banking industry told us that we are not seeing meaningful 
demand for loans right now from their clients. The 
representative of small and mid-sized businesses told us that 
the program would not help its members as currently designed. 
And Ms. Mills, representing hundreds of thousands of workers, 
told us that the Main Street Program has not helped a single 
worker and is not likely to.
    I do not question the hard work of President Rosengren and 
the Fed staff, but more loans are not going to solve this 
crisis. Struggling small and mid-sized companies cannot take on 
more debt right now, so the only tool in the Fed's belt is the 
wrong one. This program was given $75 billion and months to 
succeed. It did not and it cannot. It is time to stop tinkering 
around the edges with adjustments to loan eligibility and loan 
terms when the fundamental problem is with the nature of the 
loans themselves.
    It is time for Congress to step back in so that we can 
actually save small and mid-sized businesses, and when it does, 
it needs to tie the assistance to meaningful, enforceable 
protections for workers, and not just hand money to executives 
and trust them to take care of workers' interests.
    Thank you, Mr. Chairman.
    Mr. Hill. The gentleman yields back, and we now turn to 
Congresswoman Shalala for 5 minutes.
    Ms. Shalala. Thank you very much.
    Ms. Mills, one of the problems with the loan program, it 
seems to me, including this program, which clearly has flaws in 
it, is that loans protect the health care of executives but not 
of workers. Nothing that we have done--unemployment insurance 
to support workers--protects their health care, unless these 
hotels, for example, furlough people and keep their health 
care.
    So, fundamentally, what the Fed has done will protect the 
health care of a lot of executives, but there is nothing that 
we have done, particularly in the unemployment insurance 
system, that protects the workers' health care. I think that 
was one of your points.
    Ms. Mills. Yes, thank you. That is correct that the 
extension of the wages that the Congressman mentioned has been 
appreciated, although it is now ending. That is problematic. 
But there has not been an extension of health care. And even in 
a case where we have some health care negotiated, companies 
like the Fontainebleau, you know, are not abiding by that. So 
that is absolutely correct.
    Ms. Shalala. Thank you.
    Ms. Anderson, three of the five facilities require that 
Main Street loans be senior or pari passu with, in terms of 
priority and security, the borrower's other loans or debt 
instruments other than mortgage debt. Are lenders willing to 
subordinate or dilute their priority and security? What impact 
does this provision have on an applicant's ability to borrow 
under the Main Street Lending Program?
    Ms. Anderson. Thank you for your question. This is a true 
issue in the sense that many mid-sized companies have existing 
debt structures and having senior credit come in at this point 
basically has to be negotiated with those existing lenders, 
many of whom are not bank lenders, and that then becomes a 
complex process in terms of an inter-creditor agreement. And I 
know that has certainly put off some borrowers in terms of 
trying to go through that process when you may not receive the 
consent from the other lenders who may just not have the same 
incentives as the originating bank. So it is a problem, and it 
is complex.
    Ms. Shalala. Thank you.
    I have a question for Mr. Bohn. In your written testimony, 
you stated that the challenges with the Main Street Lending 
Program have a lot to do with whether people actually 
understand it. Do you have some specific recommendations in 
that regard?
    Mr. Bohn. Thank you, Congresswoman Shalala, and as I am 
sitting here in Orlando, Florida, thank you for representing 
our great State here on the Commission and in general.
    So, yes, I think that one of the things we heard back from 
our survey was that there was--unlike the PPP, where there was 
significant awareness about the various provisions and tenets 
of it, there was a lot more ambiguity and misunderstanding. 
Some of that related to how long it is taking for the program 
to come together, some of that because there was a little bit 
of misunderstanding thinking that it would be different than 
PPP because it was loans and not carve-out 501(c)(6)'s or 
affiliated groups.
    So I think that there is an opportunity here, regardless of 
where the changes are made, to make sure that the program is 
much more clearly communicated on a wider basis, and we are 
willing and able to help with that in any way we can.
    Ms. Shalala. Do you have a specific recommendation on the 
loan size?
    Mr. Bohn. Well, I have a specific recommendation on the 
loan size that it should come down to closer to $50,000, and 
here is what makes me say that. There were a number of smaller 
family-owned businesses in the middle market that I have spoken 
to recently right here in Orlando who have said, look, we do 
not need $250,000 but we do need $50,000 or $75,000 in order to 
prepare what we think is going to be a longer haul to deal with 
the fallout from COVID, whether that is safety equipment or how 
we run our operation. But $250,000 is too large of a haul for 
them, and, again, do not want to get out over their skis 
financially. So, yes, a specific recommendation on that, yes, 
ma'am.
    Ms. Shalala. Thank you. I yield back.
    Mr. Hill. Thank you, Congresswoman, and now we will yield 
to Senator Toomey for 5 minutes.
    Senator Toomey. Thank you very much, Mr. Chairman. This has 
been very, very helpful and informative, and I really 
appreciate the testimony of all of the participants.
    My own view is it is way premature to come to the 
conclusion that this has all been a failure. Okay, I think 
there are definitely some improvements we ought to be looking 
at, and there might be entire new versions of Main Street 
Programs that we ought to contemplate. We talked about 
affiliation rules, which I think need to be changed. There may 
be terms that ought to be modified. I am interested in 
something that would be more asset-based rather than just 
income-based.
    But let us keep in mind it took a long time to get this up 
and running. That was always going to be the case because of 
the nature of the complexity of doing this kind of funding. 
There has been a recent acceleration in use. If the 
acceleration continues, we may see significant pickup.
    Mr. Bohn makes the argument that there is a high level of 
unawareness or low level of awareness about this. There is a 
lot we could do to remedy that which could result in more 
participation.
    And then, finally, this leads to my question. You know, I 
would argue that the corporate bond programs, which are not the 
ones we are here to talk about today, but the 13(3) facilities 
that set up the corporate bond-buying programs have been 
enormously successful despite the fact that the Fed has 
purchased very, very few bonds. It was the standing up of the 
program, the existence of the program, that allowed the private 
market to operate, to operate actually at an all-time record 
volume, after having been frozen. That is a remarkable success 
story, despite the fact that there was not a lot of history.
    So that gets me to my question, and maybe I should have 
asked this at the beginning, and, Ms. Anderson or Mr. Bohn or 
Mr. Foster, any of you might have a thought on this. But how 
should we best determine objectively the extent to which credit 
needs are being met or not being met? I have heard anecdotally 
from Pennsylvania companies and Pennsylvania banks that when 
this pandemic resulted in a shutdown, there was a massive 
drawdown on existing credit lines. People piled up as much 
liquidity as they possibly could. Then after a little time 
passed, they started to pay down some of those balances. But, 
you know, we can certainly seek bankruptcy filings; at that 
point it is kind of too late.
    What should we be looking at on a day-to-day basis, what 
metric should we be using to determine how significant the 
unmet credit demands are in this space? And, Ms. Anderson, 
maybe you could lead it off.
    Ms. Anderson. Sure. Thank you. So I think you make a good 
point in that, by and large, credit demands for many companies 
are being met. We saw record lending from banks early on in the 
pandemic, so $700 billion plus was lent over the course of 3 
months.
    Since then, we have seen about $200 billion in that C&I 
lending space be repaid, so I think you are right, businesses 
are, you know, paying down some of that liquidity that they 
took in in the early days of the crisis.
    And speaking to our banks, the demand for credit has 
lessened. They are not getting millions of inquiries from their 
customers, new or existing. And I think that really says 
something, and they have all been segmenting their books trying 
to see who needs credit or other solutions, and I think really 
is a temporary liquidity credit need, then the banks by and 
large are providing that. If it is a solvency need, that is not 
something that banks provide to companies.
    Mr. Foster. Senator, I think one simple way to figure out 
if there is unmet credit needs is to ask the banks how many 
Main Street loans have been requested by borrowers that the 
banks have rejected. If you could capture that data, you would 
get a real good idea, because I am aware of probably a hundred. 
And it is not the banks' fault. You know, we have a restaurant 
group in Florida and the bank who signed up for the program 
said, ``I cannot take any more restaurant exposure in my 
portfolio,'' because they are approaching it like a bank. They 
are not approaching it differently. They are not relaxing 
underwriting standards. If you are a restaurant group, you are 
not getting a bank loan. And if we do not capture that data, 
you figure it out.
    Senator Toomey. I think that is a very interesting point.
    Ms. Anderson, is there a way that that data is being 
collected systematically so that we could access that? Or does 
that not exist in a centralized place?
    Ms. Anderson. So it is not being collected systematically 
at this point in time. Certainly we could work with our members 
to get you additional data on that in terms of our members who 
are active in the program. They are receiving between 500 to 
maybe 2,000 inquiries in relation to the Main Street Loan 
Program, and as I said before, you know, upwards of three-
quarters of those actually do not understand the program and 
think it is a grant program. So it is really not a high level 
of inquiries even.
    Senator Toomey. Thanks very much. Mr. Chairman, I see my 
time has expired.
    Mr. Hill. I want to thank our witnesses again, both panels. 
Excellent discussion. I want to thank our Commissioners for 
their participation today and for their thoughtful questions. 
And on behalf of the Commission, in addition to thanking the 
witnesses, let us thank the staff as well for their preparation 
in putting the hearing together.
    This hearing is adjourned.
    [Whereupon, at 12:04 p.m., the Commission was adjourned.]

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