[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                    AN UNPRECEDENTED INVESTMENT FOR
                     HISTORIC RESULTS: HOW FEDERAL
                       SUPPORT FOR MDIS AND CDFIS
                       HAS LAUNCHED A NEW ERA FOR
                       DISADVANTAGED COMMUNITIES

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

                            VIRTUAL HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 16, 2022

                               __________

       Printed for the use of the Committee on Financial Services
       
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]       

                           Serial No. 117-69
                           
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-128 PDF                 WASHINGTON : 2022                     
          
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                HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

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

                   Charla Ouertatani, Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 16, 2022............................................     1
Appendix:
    February 16, 2022............................................    59

                               WITNESSES
                      Wednesday, February 16, 2022

Bynum, William J., CEO, Hope (Hope Credit Union/Hope Enterprise 
  Corporation/Hope Policy Institute).............................     4
Elam, Nicole, President and CEO, National Bankers Association 
  (NBA)..........................................................     5
Faulkender, Michael, Dean's Professor of Finance, Smith School of 
  Business, University of Maryland...............................    11
Sands, Everett K., CEO, Lendistry................................     7
Urrutia, Luz, CEO, Accion Opportunity Fund.......................     9

                                APPENDIX

Prepared statements:
    Bynum, William J.............................................    60
    Elam, Nicole.................................................    77
    Faulkender, Michael..........................................    87
    Sands, Everett K.............................................    89
    Urrutia, Luz.................................................    97

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the Bank Policy Institute...............   106
    Written statement of BMO Harris Bank.........................   124
    Written statement of Circle..................................   126
    Written statement of Creative Investment Research............   127
    Written statement of the Financial Technology Association....   141
    Written statement of the Independent Community Bankers of 
      America....................................................   144
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   148
    Written statement of Regions Financial Corporation...........   154
    Written statement of U.S. Bank...............................   156
    Written statement of various undersigned organizations.......   158
Torres, Hon. Ritchie:
    Written responses to questions for the record submitted to 
      Michael Faulkender.........................................   160

 
                    AN UNPRECEDENTED INVESTMENT FOR
                     HISTORIC RESULTS: HOW FEDERAL
                       SUPPORT FOR MDIS AND CDFIS
                       HAS LAUNCHED A NEW ERA FOR
                       DISADVANTAGED COMMUNITIES

                              ----------                              


                      Wednesday, February 16, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 12:03 p.m., via 
Webex, Hon. Maxine Waters [chairwoman of the committee] 
presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Meeks, Scott, Green, Cleaver, Perlmutter, Himes, 
Beatty, Vargas, Gottheimer, Gonzalez of Texas, Lawson, Axne, 
Casten, Pressley, Lynch, Adams, Tlaib, Dean, Garcia of 
Illinois, Garcia of Texas, Williams of Georgia, Auchincloss; 
McHenry, Huizenga, Wagner, Williams of Texas, Hill, Zeldin, 
Loudermilk, Mooney, Davidson, Budd, Kustoff, Rose, Steil, and 
Timmons.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``An Unprecedented Investment 
for Historic Results: How Federal Support for MDIs and CDFIs 
Has Launched a New Era for Disadvantaged Communities.'' I will 
now recognize myself for 5 minutes to give an opening 
statement.
    Minority Depository Institutions (MDIs) and Community 
Development Financial Institutions (CDFIs) are lifelines to our 
community. According to the latest data, there are 146 MDI 
banks, 518 MDI credit unions, and 1,333 CDFIs, including nearly 
600 non-depository loan funds. At a time when the pandemic 
placed many businesses owned by people of color at the brink of 
closing or being permanently closed down, MDIs and CDFIs jumped 
into action and provided much-needed support and relief.
    When millions of Black and Latino Americans found 
themselves shut out of traditional financial institutions, 
CDFIs and MDIs provided fundamental support to the long-term 
financial well-being of many. For that reason, I worked with 
Representative Velazquez, who is also the Chair of the House 
Small Business Committee, to secure $60 billion in Paycheck 
Protection Program (PPP) funding for community financial 
institutions, including MDIs and CDFIs, to ensure that relief 
reached underserved and minority-owned businesses after the 
largest banks ignored them.
    Several committee colleagues, including Representatives 
Meeks, Beatty, and Green, drafted legislation to support MDIs 
and CDFIs, and I worked with Ranking Member McHenry and our 
Senate counterparts, as well as Senator Warner, to include key 
provisions of my comprehensive bill, the Promoting and 
Advancing Communities of Color through Inclusive Lending Act, 
in the COVID-19 Relief Package that was passed in December 
2020. Specifically, the bill included an unprecedented $12 
billion in capital investments and grants to strengthen MDIs 
and CDFIs, and help them reach underserved communities.
    Additionally, the private sector, including megabanks, had 
made a lot of promises to address racial inequality and to 
support MDIs and CDFIs in the last few years, so we have 
invited megabank CEOs to testify. And we will continue to 
monitor their efforts to fulfill their commitments.
    The impact of our support with CDFIs and MDIs has reached 
communities all across this country. For example, in 2020, 
CDFIs provided loans and investments to more than 162,000 
businesses, and nearly 4 million consumers. They financed 
50,000 affordable housing units and hundreds of grocery stores, 
markets, and fresh-food projects.
    While our work has provided some success, we should bear in 
mind that the number of MDIs has declined by about a third in 
the decade following the 2008 financial crisis. With the number 
of Black banks declining by half, MDIs and CDFIs also face 
barriers to adapting to changes in the financial services 
marketplace, and accessing opportunities to meet the 
unprecedented needs of communities in this pandemic. What's 
more, the $9 billion Emergency Capital Investment Program was 
oversubscribed by $4 billion in funding requests that will go 
unmet, suggesting that Congress should provide more support.
    I look forward to hearing from our witnesses on these 
issues and learning what additional steps we can take to 
further support CDFIs and MDIs, and in doing so, strengthening 
our Black and Latinx communities.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. More than a year 
ago, Congress created the Emergency Capital Investment Program 
(ECIP) to support our nation's CDFIs and MDIs. This program was 
designed to provide specific funding in capital to help 
communities recover from the economic downturn caused by the 
pandemic. Funds have been allocated but have not yet been 
delivered. I look forward to seeing the impact that this type 
of program could have.
    Unfortunately, since this bipartisan moment, we have 
witnessed Democrat partisan actions slow our economic recovery. 
This has disproportionately harmed the very people this program 
was meant to serve. We may never have a good understanding of 
what this program's effect is now. But let's take a step back 
and look at the bigger picture here.
    Last month, the Bureau of Economic Analysis reported that 
the economy grew at an annualized rate of 6.9 percent for the 
4th quarter of 2021. Yet, initial estimates from Congress show 
only a .7 percent annualized rate of growth for the 1st quarter 
of this year. Consumer prices are up everywhere. Just last 
week, we saw a .6 percent rise in prices over the last year. 
Prices have gone up 7\1/2\ percent, which is the largest yearly 
increase in the last 40 years. So if your wages have not 
increased by more than 7\1/2\ percent over the last year, and I 
venture to say that most Americans haven't experienced that, 
then inflation has wiped away any wage gains they have made.
    For example, the Social Security Administration increased 
the cost-of-living adjustment to 5.9 percent over 2022. For the 
70 million Americans receiving benefits, this is a monthly net 
loss. What do all these stats mean? It means that American 
families and workers are hurting and Democrat policies are to 
blame. If you don't believe me, let's look at a few more 
examples.
    Until last Monday, the labor force participation rate 
remained stagnant under this Administration. Consumer sentiment 
fell through January, sinking to its lowest level since 
November of 2011. Overall competency in the government's 
economic policies is at its lowest level since 2014. Oh, and 
the national data surpassed $30 trillion on top of that. And we 
don't have a government funding deal either. We can't spend our 
way out of this mess, though. We are also seeing the impacts of 
anti-competition regulatory policies, where Democrat policies 
seek to control consumer choices rather than fostering a 
competitive environment.
    Take fintech firms and nonbank lenders, for them, banked 
and underbanked consumers, and small businesses in underserved 
communities, innovative financial products can be a lifeline. 
We should be doing everything we can to promote regulatory 
clarity for financial institutions in fintech partnerships to 
create a more inclusive financial system.
    Last week, the Federal District Court of Northern 
California affirmed the OCC's Valid When Made doctrine, further 
providing important regulatory clarity. This is positive, but 
much more needs to be done.
    As we discuss the impact of CDFIs and MDIs, we cannot lose 
sight of the bigger picture here and the work that remains for 
the return of our economy to the record growth experienced 
before the pandemic.
    And with that, I yield back.
    Chairwoman Waters. Thank you very much, Ranking Member 
McHenry.
    I want to welcome our distinguished witnesses: Mr. William 
Bynum, the CEO of the Hope Credit Union, the Hope Enterprise 
Corporation, and the Hope Policy Institute; Ms. Nicole Elam, 
the president and CEO of the National Bankers Association; Mr. 
Everett Sands, the CEO of Lendistry; Ms. Luz Urrutia, the CEO 
of the Accion Opportunity Fund; and Mr. Michael Faulkender, the 
Dean's Professor of Finance at the University of Maryland Smith 
School of Business.
    You each have 5 minutes to summarize your testimony. You 
should be able to see a timer that will indicate how much time 
you have left.
    And without objection, your written statements will be made 
a part of the record.
    Mr. Bynum, you are now recognized for 5 minutes to present 
your testimony.

  STATEMENT OF WILLIAM J. BYNUM, CEO, HOPE (HOPE CREDIT UNION/
       HOPE ENTERPRISE CORPORATION/HOPE POLICY INSTITUTE)

    Mr. Bynum. Thank you, Chairwoman Waters. Good afternoon, 
Ranking Member McHenry, and members of the committee. Madam 
Chairwoman, I would be negligent if I didn't begin by thanking 
you, your fellow Members of Congress, and members of the 
Administration, for acknowledging the vital role that mission-
driven CDFIs and MDIs play in the nation's economic health, and 
for making what had been truly historic investments in CDFIs 
and MDIs that have already dramatically increased our impact in 
financially-underserved places.
    As the CEO of an organization that works in a region where 
I cannot go for an hour without hearing echoes of social and 
economic justice icons--known ones like Emmett Till, Fannie Lou 
Hamer, the four girls in the Birmingham 16th Street Baptist 
Church, Dr. King, John Lewis, Medgar Wiley Evers, as well as 
scores of unknown warriors who fought battles that we are still 
waging today. If the committee takes nothing else from my 
comments today on behalf of millions of people of color, and 
persistent poverty in rural and urban communities, I implore 
you, I call on all of us that it is time to finish the job.
    Hope has established a bill on this legacy to ensure that 
race, gender, and whose one parent may be or where they are 
born, don't determine their ability to support their families 
and realize the American Dream. Over nearly 3 decades, we have 
generated over $3.5 billion in financing for underbanked and 
unbanked homeowners, small businesses, and other vital 
community infrastructure such as healthcare, education, rental 
housing, and healthy food that are all necessary for a stable, 
vibrant economy.
    I want to share a bit about our experience as a Black- and 
woman-owned financial institution and how the resources 
provided by Congress added rocket fuel to our ability to 
support financially-fragile people in communities during the 
health, economic, and social justice crisis.
    During the Paycheck Protection Program (PPP), we made over 
5,200 PPP loans, totaling $140 million. In a normal year, we 
made roughly 50 business loans, totaling $40- to $50 million, 
of which 89 percent went to borrowers of color, and half to 
women. The average loan amount was over $26,000, compared to 
$40,000, which was the national program average.
    In the process, we heard story after story from 
entrepreneurs who were turned down by institutions that they 
had entrusted to hold their money for many years. But we do 
more than just loan money. Many CARES Act programs managed by 
the States require local governments to expend funds up front 
for PPPs, firefighters and other lifesaving needs, and to later 
be reimbursed. This was impossible for many municipalities in 
places like the Delta and other persistent-poverty counties. 
These places were dirt poor before the pandemic, and even more 
devastated by the crisis. We structured it with the Black Belt 
Community Foundation, a program that advanced these towns up to 
$50,000, that was later repaid. In one town, the $24,000 was 
roughly half of the town's annual budget. It would have been 
impossible for them to expend that up front without 
reimbursement.
    We could not have done this without the funds provided by 
Congress. The Rapid Response Program, the Emergency Capital 
Investment Program, and the minority lending programs are all 
critically important. Using these over the next 6 years, we 
will double our community consumer mortgage and small business 
lending, and drive more resources into these communities.
    All CDFIs, however, do not perform alike. We see 
significant gaps in terms of who reaches the hardest-hit 
communities. And so, I encourage Congress to continue to 
increase funding for CDFIs in ways that are flexible, and to 
ensure accountability and transparency in how these funds are 
used.
    Given the outside impact of MDIs in reaching communities of 
color, Congress should drive resources to these communities and 
prioritize CDFIs and MDIs as partners in deploying Federal 
funds to financially-fragile communities.
    Members of Congress, the winter of 2020 represented an 
important first step to actually level the balance, the playing 
field in terms of closing the racial wealth gap. These actions 
have already saved lives and stabilized communities, and they 
need to be sustained.
    I urge you to continue to make bold investments in 
organizations that do it best, mission-driven CDFIs and MDIs. 
And we will bring other banks and credit unions into the flow 
along the way.
    In an increasingly-diverse nation, we cannot leave the 
majority of Americans on the outside of the economy withering 
away in opportunity deserts. Let's finish the job. Thank you so 
much for allowing me to share this with you today.
    [The prepared statement of Mr. Bynum can be found on page 
60 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Bynum.
    Ms. Elam, you are now recognized for 5 minutes to present 
your testimony.

 STATEMENT OF NICOLE ELAM, PRESIDENT AND CEO, NATIONAL BANKERS 
                       ASSOCIATION (NBA)

    Ms. Elam. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, good afternoon, and thank you for 
this opportunity to testify on how Federal support for MDIs and 
CDFIs has launched a new era for disadvantaged communities. My 
name is Nicole Elam, and I am president and CEO of the National 
Bankers Association, the leading trade association for the 
country's MDIs. A critical part of our mission is to advocate 
for MDIs and the communities they serve.
    MDIs are on the front lines of addressing the economic 
hardships faced by minority communities, serving consumers and 
businesses who are underserved by traditional banks. Decades of 
unequal access to capital, income disparity, and residential 
segregation have made communities of color the most vulnerable 
during a crisis. Yet, MDIs have been and continue to be best-
positioned to help our communities recover and to overcome 
systemic inequity. The House Financial Services Committee and 
Chairwoman Waters have been instrumental in including several 
provisions in relief packages which have ensured that MDIs in 
the communities we serve are not forgotten.
    The Emergency Capital Investment Program (ECIP) and the $3-
billion increase in funding to the CDFI Fund, will allow our 
institutions to scale up, and provide more access to credit to 
individuals and small businesses. The bipartisan infrastructure 
bill also provides billions of dollars that can be instrumental 
in addressing our community's needs. The legislation included 
as part of today's hearing aligns with the committee's goal of 
preserving and protecting MDIs and CDFIs. These measures 
provide transformational opportunities for these institutions 
to not only survive, but to thrive.
    We support each measure and look forward to working with 
the committee to ensure their passage into law, as well as 
continuing to work with you on additional legislation that 
would allow MDIs to continue to augment their capital bases, 
include our banks in communities and opportunities that flow 
from the infrastructure bill, and address a regulatory process 
that can hamper our bank's ability to bring the underserved 
into the financial mainstream.
    MDIs have served as engines of economic development in 
minority and low- to moderate-income (LMI) communities, and 
have been significant providers of mortgages and small business 
loans, often saying yes, when others say no. Their 
concentration in underserved communities and established 
relationships have made them a trusted financial partner. Our 
banks provide banking services to communities and racial 
minorities, especially Black and Hispanic, who are more likely 
to be unbanked and underbanked. Unfortunately, MDI's smaller 
size and historic lack of access to capital markets, especially 
among Black MDIs has not allowed us to respond as quickly or 
with as much as scale as the situations demand.
    MDIs only make up 3 percent of all banks, and Black-owned 
MDIs, only .4 percent. Since 2001, we have lost nearly 60 
percent of Black MDIs, and Black-owned banks only control 
27,000 of 1 percent of total bank assets in the United States. 
Tier 1 capital, or the equity invested in a bank, is the most 
critical component of the resilience of any bank, and it is 
what allows banks to grow in scale. Without sufficient Tier 1 
capital, not only are banks limited in the number of deposits 
they can take in, but they are also hampering their ability to 
withstand loan losses.
    Access to capital allows MDIs to not only respond better 
during times of crisis, but it allows us to reverse the 
economic conditions in our communities that exacerbated during 
a crisis. The ease of capital is an historic step in the right 
direction. But while 57 MDIs will receive $3.1 billion, many of 
our banks were not able to access ECIP due to prior regulatory 
challenges. This is largely based on examination standards that 
do not consider the unique business models many mission-driven 
banks need to employ to provide banking services in markets 
that would otherwise be ignored by traditional banks.
    We need regulators to be intentional and modernize the 
examination process for mission-driven banks. We also need to 
find additional ways to drive capital to ECIP and eligible 
banks and the communities they serve. For MDIs that were unable 
to access ECIP, we believe the remaining $300 million held in 
reserve for appeals should be prioritized for distribution to 
these institutions.
    In addition, we ask you to consider utilizing some of the 
remaining $1.75 billion in the CDFI Fund. By prioritizing these 
institutions, we believe that Treasury and the regulators can 
balance their obligations to protect Treasury funds, and at the 
same time, insist that these institutions operate in a safe and 
sound manner.
    We must act now to preserve and promote MDIs, and direct 
much-needed capital to banks that have a strong track record of 
serving the communities that Congress intended to target for 
the ECIP investment. The bipartisan infrastructure law, and the 
$29-billion provision in the proposed Build Back bill, present 
a generational opportunity to not only repair our nation's 
roads and bridges, and to direct investments toward climate 
resilience, but to be inclusive. MDIs must be included in the 
financing opportunities that arise, giving our banks an 
opportunity, but more importantly, allowing us to connect 
minority businesses to these communities. Intentionally 
including MDIs in our customers will strengthen small 
businesses, create more jobs, and make our communities more 
resilient.
    The NBA, again, applauds this committee for holding this 
important hearing and for its ongoing efforts. While we commend 
Congress on its leadership to responding to various crises, we 
certainly believe much work remains to be done. The NBA looks 
forward to working with the committee on workable solutions, 
and thank you for the opportunity to testify. I will be pleased 
to answer any questions.
    [The prepared statement of Ms. Elam can be found on page 77 
of the appendix.]
    Chairwoman Waters. Thank you, Ms. Elam.
    Mr. Sands, you are now recognized for 5 minutes to present 
your testimony.

         STATEMENT OF EVERETT K. SANDS, CEO, LENDISTRY

    Mr. Sands. Thank you for calling this hearing on the role 
that CDFIs and MDIs play in providing access to capital to 
undercapitalized communities. I appreciate the opportunity to 
explore with you additional steps that should be considered so 
that CDFIs and MDIs can maximize their potential for delivering 
positive economic impact. My name is Everett Sands, and I have 
more than 20 years of experience in lending at MDIs, one of the 
largest national banks, and the only fintech CDFI, Lendistry.
    For the past 6 years as founder and CEO, my focus has been 
on providing capital for responsible terms to underserved small 
businesses, and particularly those owned by minorities, women, 
veterans, and people in rural areas. Lendistry is a minority-
led fintech CDFI, a community development entity, a member of 
the Federal Home Loan Bank of San Francisco, and a proud 
signatory of the Small Business Borrowers' Bill of Rights. We 
are one of the nation's top Small Business Administration (SBA) 
loan lenders in the $50,000 to $250,000 range. And more than 70 
percent of our outstanding principal loan balance is with 
underserved borrowers. We also have a nonprofit technical 
assistance affiliate.
    Lendistry has been able to make an impact due to our focus 
on small, underserved businesses, our partnership with local 
and specialized organizations, and our proprietary technology 
and online application portal. Over the last 22 months, 
Lendistry has deployed approximately $8.4 billion in grants and 
loans to more than 570,000 small businesses, 94 percent of 
which employ less than 10 employees. And we expect that figure 
to grow to $10 billion by years-end.
    In addition to providing PPP loans in all 50 States, 
Lendistry has served as the administrator for relief grant 
programs in California, New York, and Pennsylvania, all of 
which were designed to ensure that funds are distributed 
equitably across rural and urban regions alike.
    I commend this committee for acting upon the COVID-era 
lessons. The small and underserved businesses are, far and 
away, more successful in accessing capital from CDFIs and MDIs. 
In response, Congress, with leadership from this committee, 
took decisive action to allocate significantly more capital to 
CDFIs and MDIs. Your work has provisioned the freight train of 
economic opportunity with capital. The urgent work that now 
remains with Congress is to enact a set of surgical repairs to 
the gaps in the track network that prevent the allocated 
capital from reaching communities more quickly, from having the 
maximum possible multiplier effect, and to flow into more 
distribution points.
    My written testimony outlines seven common bottlenecks in 
access to capital today. In the remaining time, I will discuss 
three of those recommendations and briefly summarize the 
others.
    My first two recommendations are aimed at enabling CDFIs to 
make a much larger impact with the same amount of capital by 
bringing Federal Home Loan Banks' (FHLB's) collateral policies 
for CDFIs in line with banks. FHLBs should be required to 
accept any federally-funded guarantees for small businesses, 
whether it is SBA, SSBCI, or others as collateral from CDFIs. 
This change would have an enormous positive impact, because 
when capital is funded by guarantees, capital can be 
multiplied, mostly on a 5-to-1 basis, so, $1 million of capital 
ballot can support $5 million in guaranteed loans. This goes 
even further when you assume repayment.
    Another way FHLB's policies prevent CDFIs from maximizing 
the impact of their capital is by assigning CDFIs a lower 
credit rating than banks, even though FHLBs have never 
experienced defaults from any member institutions. The lower 
credit rating has the effect of increasing CDFIs' collateral 
requirements from borrowing from FHLBs, and reducing CDFI's 
advance rates. FHLB and FHFA should be required to assign CDFIs 
the same credit rating as banks, or create a loan credit 
enhancement fund to support the borrower.
    The final bottleneck and recommendation I will elaborate on 
is the outdated State-by-State licensing requirement for CDFIs. 
A CDFI licensing exemption will bring about three clear 
benefits. First, CDFIs can move much faster to deploy capital 
where it is needed. Second, CDFIs can easily attain risk 
management benefits of geographic diversification. And third, 
many more lenders will be motivated to attain a CDFI 
designation. The effect of this would significantly increase 
the supply of capital provided on responsible terms, which, in 
turn, would crowd up predatory lenders and make those 
businesses less economically-viable.
    To very briefly summarize the other four recommendations 
that are discussed in my testimony, they are: to lower the 
minimum CDFI bond guarantee from $100 million to $25 million; 
to allow CDFIs access to the Federal Reserve discount window; 
to develop an accountability reporting system for Treasury 
capital deployment programs; and to create a Federal office 
dedicated to supporting the efforts of MLIs.
    Thank you, again, to this committee and the staff for the 
opportunity to present my perspectives and recommendations. I 
look forward to engaging you further.
    [The prepared statement of Mr. Sands can be found on page 
89 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Sands.
    Ms. Urrutia, you are now recognized for 5 minutes to 
present your testimony.

     STATEMENT OF LUZ URRUTIA, CEO, ACCION OPPORTUNITY FUND

    Ms. Urrutia. Good afternoon, Chairwoman Waters, Ranking 
Member McHenry, and members of the committee. Thank you for 
this opportunity. My name is Luz Lopez Urrutia, and I am the 
CEO of Accion Opportunity Fund, the leading CDFI providing 
access to responsible loans, coaching and support networks to 
underserved resourced entrepreneurs.
    After spending my career in both for-profit and nonprofit 
financial services, I have seen how small businesses make up 
the fabric of neighborhoods across the country and provide 
critical jobs, services, and support for their communities. 
Unfortunately, I have also seen that our financial system has 
left behind so many entrepreneurs, people of color, women, and 
immigrants, in rural and urban communities.
    To meet this need, Accion Opportunity Fund has deployed 
over $1 billion in small business loans and new market tax 
credit investments to underinvested communities since our 
inception.
    When COVID hit, we became economic first responders, 
providing PPP loans to many thousands of small businesses, 60 
percent of whom were people of color. We used the $1.8 million 
from the Rapid Response Program to deploy $10 million in loan 
capital, as a result of increasing our loan loss reserves and 
further reducing our already-low interest rates to provide 
entrepreneurs with critical resources.
    Accion Opportunity Fund did not just rely on government 
funding to support these entrepreneurs; we used this funding to 
leverage private-sector capital, including a partnership with 
American Express, which committed $40 million in capital, which 
will be leveraged to deploy $125 million in loans to Black-
owned businesses. This partnership with American Express was 
critical for business owners like Latrice, a Navy veteran, 
wife, and mother of three who runs the Digital Solutions Team, 
a tech support and system solutions company in Austin, Texas. 
She came to us after working with multiple lenders that did not 
offer her flexibility, or the terms that would make her 
business successful. She used our $25,000 loan to hire a full-
time operations manager and to scale up her business.
    As we transition to life beyond the pandemic, and the 
necessary crisis-level response from the government, the 
questions for CDFIs like us are, how can we translate the 
energy, the resources, and the awareness of the past 2 years 
into long-term systemic and sustainable growth? How can we 
invest in the CDFIs and MDIs in non-crisis times, so they are 
equipped for the next crisis? Our answer is that we must 
collaborate and decide on industry-wide, bipartisan, market-
based solutions that use the vast resources of the Federal 
Government to attract private capital so that we can scale up 
with integrity, and invest in CDFIs and MDIs to enable them to 
continue investing in our nation's small businesses.
    Examples of these collaborations are evident in 4 public-
private partnerships that launched in the past 2 years, enabled 
by the State Small Business Credit Initiative (SSBCI). These 
new community lending funds were created to provide lower-cost 
loans in 18 States, and have the ability to transform the 
lending landscape for under-restored small businesses across 
the country, bringing together government, banks, 
philanthropists, and CDFIs to deliver capital at scale. These 
funds have raised $350 million in private capital, and have 
disbursed $204 million to 3,400 small businesses to a network 
of 25 participating CDFIs, and 66 percent of the loans have 
gone to businesses owned by people of color and women.
    Entrepreneurs like Ethea in Houston benefited from these 
loan funds as she went from being laid off from her job, to 
starting to source and sell Ghanaian waist beads, which are 
draped around the waist, and connect Black women to their 
African Diaspora roots. Ethea used these loan funds to finance 
inventory, and to pay rent and payroll, as she opened a second 
location.
    I will conclude by sharing my deep gratitude for the many 
ideas we have seen from this committee, including your bill, 
Chairwoman Waters, to provide support for MDIs and CDFIs.
    The pandemic demolished small businesses across the country 
in a manner that fully unearthed our nation's racial wealth 
gap. And while CDFIs and MDIs were able to help provide for 
small businesses during this time, it is critical that the 
progress and momentum generated in the last 2 years continue 
onward. From maximizing the potential of the Federal 
Government's investment, to leveraging these funds to attract 
corporate and private capital, and building public private 
partnerships, our organizations have moved full force in 
providing capital and support for under-resourced 
entrepreneurs. Much more needs to be done in the form of 
increasing CDFI and MDI lending capacity, encouraging creative 
partnerships in financial innovation, and clearing the way for 
full transparency in the marketplace.
    I thank the members of this committee in advance for 
working together to invest in the support and resources to get 
this done.
    [The prepared statement of Ms. Urrutia can be found on page 
97 of the appendix.]
    Chairwoman Waters. Thank you very much, Ms. Urrutia.
    Dr. Faulkender, you are now recognized for 5 minutes to 
present your testimony.

 STATEMENT OF MICHAEL FAULKENDER, DEAN'S PROFESSOR OF FINANCE, 
        SMITH SCHOOL OF BUSINESS, UNIVERSITY OF MARYLAND

    Mr. Faulkender. Chairwoman Waters, Ranking Member McHenry, 
and members of the committee, thank you for the opportunity to 
speak with you today on the importance of capital to our 
nation's businesses, as well as the broader topic of the 
current performance of the United States economy.
    I had the privilege of serving as the Assistant Secretary 
for Economic Policy at the Department of the Treasury during 
the previous Administration. In that role, I worked closely 
with the Small Business Administration to quickly implement the 
Paycheck Protection Program and ensure that the economic 
devastation that might have resulted from the pandemic was not 
realized. Part of my team's work was to engage with a vast 
array of lenders across our nation to ensure that eligible 
small businesses were able to obtain their PPP funds. I worked 
closely with CDFIs and MDIs to better understand the issues 
they were confronting and to prioritize resolution of 
challenges they and their borrowers were facing.
    Treasury also worked quickly to bring fintech into the 
program. Recent academic work by Sabrina Howell and co-authors 
finds that fintechs disproportionately lent to minority 
communities with smaller-dollar loans. Their smaller physical 
footprint and investments in underserved communities meant that 
they could more economically serve these populations and 
improve PPP access.
    In December 2020, Treasury worked closely with Congress on 
legislative updates with PPP, an extension of a second round of 
loans for the hardest-hit small businesses, and an enactment of 
ECIP to provide additional capital funding for CDFIs and MDIs.
    The results of our efforts are apparent in the data. When 
the nation began shutting down, we were looking at weekly 
first-time unemployment claims of approximately six million per 
week. Quick passage and implementation of the CARES Act caused 
the unemployment rate to peak in April 2020 at just 14.7 
percent, well below the 20 percent many feared at the 
pandemic's onset. Instead of losing 8 million jobs in May 2020 
as many predicted, we saw more than 2\1/2\ million Americans 
return to their jobs.
    My coauthors and I estimate that as many as 17.7 million 
fewer Americans were unemployed during the pandemic as a result 
of PPP, with merely 13 million of those workers at companies 
with fewer than 100 employees. The pandemic recession has been 
declared the shortest in U.S. history, and we have been 
expanding since May 2020.
    While the funds deployed at the beginning of the pandemic 
proved vital in keeping us out of a depression and resulted in 
the V-shaped recovery once our economy reopened, challenges 
remain. All of us on the panel recognize that it is important 
for our nation's businesses to have access to the capital they 
need to operate and expand. ECIP provided the capital positions 
of CDFIs and MDIs, which will likely result in greater capital 
availability for their customers.
    However, while capital availability was a critical issue 
during the crisis, it is not now the primary issue confronting 
our nation's businesses. According to the most recent NFIB 
survey, just 3 percent of small businesses surveyed reported 
that their borrowing needs over the last 3 months were not 
satisfied. Instead, the National Federation of Independent 
Business (NFIB) survey reports that the main issues confronting 
our nation's small businesses are inflation and employment.
    Quoting their report, ``22 percent of owners reported that 
inflation was their single-most important problem, and 47 
percent of owners reported job openings that could not be 
filled.''
    Most of these problem are largely the result of poor policy 
decisions. Recent fiscal stimulus has proved greatly excessive, 
leading the household's liquid funds rising from $11 trillion 
at the end of 2019, to $14.4 trillion at the end of the third 
quarter of 2021, which is a 31 percent increase.
    Simultaneously, paying people to not work, taking energy 
resources out of our economy, mandates that remove people from 
the workforce, and excessive regulations have greatly reduced 
our capacity to meet the current level of demand.
    The number of Americans working is still more than 2 
million fewer than were employed prior to the pandemic. As a 
result of these factors, the Consumer Price Index was reported 
last week to have increased 7\1/2\ percent over the last 12 
months, the highest increase we have seen in the last 40 years. 
Even taking into account wage increases over the last year, 
this translates to an $800 reduction in annual purchasing power 
for the average worker.
    While we have seen a slight uptick in hiring over the last 
few months, arguably, this is the result of the expiration of 
some of the pandemic-era policies that should not have been 
expanded as long as they were. Since the expiration of enhanced 
unemployment benefits, job creation is approximately 50,000 
jobs per month higher than prior to the expiration.
    The recent expiration of the Child Tax Credit that lacked 
work requirements will also likely increase the number of 
Americans participating in the labor force. Such an expansion 
would be welcomed by our nation's employers, whom, according to 
the latest Job Openings and Labor Turnover Survey (JOLTS) data, 
reported 10.9 job openings at the end of December.
    While this committee's work to improve access to capital 
for American businesses is important, the most important thing 
we can do for our economy right now is to declare an end to the 
pandemic, and to reopen our economy. I look forward to 
participating in this important conversation.
    [The prepared statement of Dr. Faulkender can be found on 
page 87 of the appendix.]
    Chairwoman Waters. Thank you very much, Dr. Faulkender.
    I now recognize myself for 5 minutes for questions.
    Ms. Elam, when the Paycheck Protection Program launched, at 
the onset of the pandemic, we saw megabanks prioritize their 
wealthy customers, while smaller and minority-owned banks 
struggled to access relief. That is why I work to ensure MDIs 
and CDFIs could have deployed that aid to underserved small 
businesses. They later worked in a bipartisan way to secure $12 
billion for MDIs and CDFIs.
    Since then, Senator Mark Warner and I organized an advisory 
group with leaders in the community, developing finance capture 
to ensure Treasury disburses these funds in the most effective 
way. To date, the Treasury CDFI Fund has distributed $1.25 
billion in rapid response. And another 863 CDFIs have been 
helped. And we are now working on deploying $1.7 billion in a 
second CDFI grant program. And, of course, Treasury is also in 
the process of finalizing up to $8.75 billion in capital 
investments for CDFIs and MDIs, although Treasury received 
almost, I guess, more requests than they were able to deal 
with.
    An additional $4 billion is absolutely needed, because of 
the request that has been received for capital investments, and 
they will go unmet unless we are able to supply more money.
    Ms. Elam, how are these programs helping Black banks and 
other MDIs and CDFIs serve their communities? As the funding 
flows to CDFIs and MDIs, do you believe the legislative reforms 
we are considering today, including a proposal to provide more 
capital investments and grants to address technology 
challenges, would be helpful?
    Ms. Elam. Yes. A resounding yes. I think capital is 
certainly the number-one issue with which our MDIs have 
struggled. They have declined in size because of lack of access 
to capital. So, ECIP, the funds that have gone to the CDFI Fund 
are certainly things that are priorities.
    I think the thing we have been talking a lot about within 
our membership is that not all MDIs were able to access ECIP. 
And so, having a round two of ECIP would allow those banks that 
at the time of application were ineligible, to now be able to 
take advantage of those funds. We do not want to have a growing 
distinction between those that were able to access ECIP in 
those dollars, and those that were not, because what happens is 
that it impacts those communities.
    On the second point around technology, that is one of the 
biggest issues that our member banks are wrestling with today. 
Technology costs money. They oftentimes don't have the 
personnel to vet those technologies. So, having grant dollars 
in capital that focuses on technology is certainly going to be 
helpful as these banks modernize and serve their communities.
    Chairwoman Waters. Do you have any other recommendations 
that you would like to offer?
    Ms. Elam. Yes. I think one of the recommendations that I 
would like to offer is allowing some of those CDFI funds and 
allowing the second round of ECIP to be included for the ECIP 
noneligible banks. Also, I think another recommendation has to 
do with the Bank Holding Company Act. The 25,000, or 25 percent 
change-of-control provision really limits the number of 
investments that our small banks are able to get. Those would 
be two big things that I would prioritize, along with the 
examination process. We really need to do more to change the 
examination process. The examiners don't understand our banks, 
and as a result, they are negatively impacted during the 
examination process.
    Chairwoman Waters. Thank you very much.
    The gentleman from North Carolina, Mr. McHenry, the ranking 
member of the committee, is now recognized for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. Dr. Faulkender, 
the Emergency Capital Investment Program, which is the focus of 
today's hearing, is but one tool that can be utilized to help 
spread economic growth. And in addition to that program, the 
Democrats later reauthorized the State Small Business Credit 
Initiative, the government-sponsored investment initiative, in 
their massive spending bill enacted last year about this time. 
How effective are programs like those in creating long-term 
sustainable economic growth? Is direct government investment 
effective in narrowing wealth gaps, or do we need a broader 
approach?
    Mr. Faulkender. Generally, sir, we need a broader approach 
because it is not just capital availability, as I mentioned 
earlier, that is confronting businesses.
    Mr. McHenry. You mentioned that in your statement, and I 
mentioned that in my opening statement, about inflation. Tell 
us why the Democrats' spending bill, like the one they passed 
last year at this time, is responsible for higher inflation?
    Mr. Faulkender. Essentially, the outcome we see in our 
economy is the result of the desire of consumers and businesses 
to purchase things relative to their supply. And what the bill 
does is it greatly increases the availability of funds for 
people looking to purchase things. So, demand increase is 
significant, while simultaneously taking supply off the table. 
Whether it is reducing workforce participation due to making 
more money on unemployment claims than by working, or whether 
it is taking energy resources off the table, those things are 
going to expand demand, contract supply, and the outcome we 
necessarily receive from that is much larger inflation than we 
have witness for the last 4 years.
    Mr. McHenry. More fiscal spending can't lower consumer 
prices. And a bill like Build Back Better would be the opposite 
approach of what we need for lowering inflation. Would you 
agree?
    Mr. Faulkender. I would agree. We need to focus on the 
supply constraints that we are confronting in our economy, not 
further buoy demand.
    Mr. McHenry. Okay. The labor force participation rate is a 
critical measure of our labor market health. Up until 2 weeks 
ago, the percentage was at a near decade-low of 61.2 percent. 
Now, talk us through what this percentage means. Why is the 
labor force participation rate important? What do we need to 
know about this?
    Mr. Faulkender. The labor force participation is the 
percentage of adults who are actually either employed or 
looking for work. And if you think about what it takes to 
produce things, you need capital, and you need employment. So, 
when a much smaller percentage of the American citizens are 
participating in the labor force, you are generating that much 
lower output that is then sold into the economy.
    We took a lot of steps in the previous Administration to 
see what we could do to raise labor force participation. We 
were at a multi-year high. We were at the highest level since 
2013, just prior to the pandemic. And as you mentioned, we are 
still 1.2 percent below where we were. There is still work to 
be done to get people back in the workforce.
    Mr. McHenry. With this Administration, when the Democrat 
Congress is enacted, isn't helping the labor force 
participation rate or helping wages outpace inflation?
    Mr. Faulkender. Right. When people are paid more to not 
take employment than to take employment, that is going to tend 
to reduce participation in the labor force, even if it is not 
directly through unemployment benefits. But if there are not 
work requirements associated with generous social benefits, 
that will tend to depress labor force participation. And so, if 
we were to extend those things and make them more generous, you 
would likely see continued reduction in the participation in 
the labor force, and that would be bad for the country.
    Mr. McHenry. What are the right policies, then? What are 
the right policies to get people back participating in the 
labor force?
    Mr. Faulkender. The policies that we followed prior to the 
pandemic were lower tax rates, less regulation, benefits that 
were tied to work requirements, and then, expansion to domestic 
energy production, for instance.
    Mr. McHenry. So, that energy tax is significant for working 
Americans?
    Mr. Faulkender. Energy tax is permeated throughout the 
entire economy because transportation of goods and services are 
required in all sectors. And so, it tends to multiply 
throughout all sectors.
    Mr. McHenry. Thank you for your testimony. And I think this 
leads to the case that Committee Republicans are making, that 
we need a broader approach in these conversations.
    With that, I yield back.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from New York, Mrs. Maloney, who is also 
the Chair of the House Committee on Oversight and Reform, is 
now recognized for 5 minutes.
    Mrs. Maloney. Thank you so much, Chairlady Waters, for 
holding this hearing. And thank you to the witnesses for 
sharing your expertise with us. I have been an advocate and a 
fan of the work of CDFIs and MDIs. These institutions are able 
to effectively serve low- and moderate-income communities and 
communities of color at higher rates than their financial 
institution counterparts. Each year, on a bipartisan basis, I 
lead approximately 100 of our colleagues in requesting 
additional support for the CDFI Fund's annual appropriations. 
And this past year, we were successful in securing an increase 
of $60 million over the previous fiscal year in the House-
passed bill.
    The CDFI Fund provides resources for a range of innovative 
and effective programs through this appropriation that enables 
CDFIs to address the needs of their targeted markets. This 
committee knows MDIs and CDFIs are an integral part of ensuring 
equitable access to financial services. That is why we fought 
to ensure dedicated funds and boosted support for them in the 
various COVID recovery packages.
    I would like to ask, Mr. Bynum, can you speak to the unique 
role CDFIs were able to play in our COVID response?
    Mr. Bynum. Thank you, Congresswoman Maloney. CDFIs played 
an outside role in driving resources into the most 
economically-distressed communities, as you know. With the 
Paycheck Protection Program, initially, CDFIs were excluded 
from that program. When Congress and the Administration opened 
it up, we were able to drive funds to the mom-and-pop 
businesses that are so vital to creating jobs for individuals 
who may not have the high level of skills or education that are 
vital to stabilize the communities in supporting families.
    As I mentioned in my testimony, the average loan size of 
CDFIs that provided PPP loans was, for us, roughly $26,000, 
compared to $40,000 for the program overall, driving it to 
those mom-and-pop businesses that are so vital. Initially, sole 
proprietors were not eligible for the program. We were able to 
broaden that and make that possible, which was critical.
    In addition, with the Rapid Response Program, that was a 
part of the appropriations that you passed, the program was 
able to reach loan funds which were not a part of the emergency 
ECIP program, but which reached small institutions, small loan 
funds that are critical in rural persistent-poverty areas, and 
inner cities, where there are not larger CDFIs and there are 
not banks.
    We saw how with ECIP, we were going to be able to more than 
double our lending to these programs. Some of the smallest 
businesses, nonprofits that provide critical support services 
were excluded from--were not able to get in with very many 
banks through the PPP program, and CDFIs opened doors to those 
institutions. So, filling in the gaps, that's what CDFIs do 
well, particularly in rural, persistent-poverty communities and 
communities of color, and for women-owned businesses, and 
families. Thank you.
    Mrs. Maloney. Thank you. And as a quick follow-up, do you 
believe boosting annual funding for the CDFIs would help ensure 
more equitable recovery long-term?
    Mr. Bynum. Absolutely. It is very clear that in a normal 
year, in a normal environment, the programs are oversubscribed. 
The need is even greater now, even though some believe the 
pandemic is over. In the most hard-hit communities, that is 
certainly not the case. Families are still struggling. 
Businesses are still struggling to get open, and they need 
investment that, unfortunately, in our region, with the SBA 
program, banks in Arkansas make 1\1/2\ percent of their--1.2 
percent of the loans go to Black residents. In a State where 
the business population is 90 percent Black, and the overall 
population is 14 percent Black, banks are the primary users and 
drivers of those SBA programs.
    Relying on banks, unfortunately, has not gotten the job 
done. It is critical that CDFIs have the resources to step into 
the breach and fill the gaps.
    Mrs. Maloney. Thank you.
    Ms. Elam, as you described in your testimony, MDIs do a 
great job of reaching minority communities at higher rates than 
traditional banks. Are there other ways Congress and government 
agencies can be promoting or raising awareness about MDIs and 
building on the work done so far today?
    Chairwoman Waters. The gentlelady's time has expired.
    Mrs. Maloney. Okay. I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Missouri, Mrs. Wagner, is now recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Inflation is a 
tax on all Americans, and is at its highest rate in over 40 
years. The rising price on everyday items continues to erode 
the household spending power from my constituents here in 
Missouri's Second Congressional District, and consumer 
confidence in our economic policies is at its lowest level 
since 2014.
    Dr. Faulkender, could you detail the fiscal or regulatory 
policy actions that helped to create these price pressures on 
our economy?
    Mr. Faulkender. Certainly, Congresswoman. There are two 
major factors that are impacting the inflation that we are 
observing. The first is that we have an unprecedented level of 
money that flowed to households. As I mentioned, household 
balance sheets went from about $11 trillion in checking and 
savings account balances up to more than $14 trillion.
    Mrs. Wagner. And this was from the government spending that 
was doled out, is that correct?
    Mr. Faulkender. That is right. We have very liquid 
households, while simultaneously taking supply off of the 
market. We have reductions in oil. In energy production here in 
the United States, the workforce is a couple million lower than 
it was prior to the pandemic. You have this phenomenon where 
there is an enormous amount of demand that is built up during 
the pandemic with lots of money to go spend, and there is just 
not enough quantity out there to meet all of that demand, and 
the inevitable outcome to clear markets is much higher prices.
    Mrs. Wagner. We are seeing that because demand has also 
been affected by the supply side, and the fact that our shelves 
are empty, and our supply chain is also in a very difficult 
situation on top of the trillions and trillions and trillions 
of dollars in government spending. Can you explain the long-
term effects of this kind of inflation and price increases on 
Americans, especially the low-income Americans we are focused 
on here today?
    Mr. Faulkender. The thing about the price increases that we 
have seen is that wages have not kept up. So, we have seen 7\1/
2\ percent increases in prices, but only 5.7 wage growth, which 
means that the average worker's purchasing power has gone down 
by nearly 2 percent.
    For those Americans who get almost all of their income from 
labor, from working, they are hit hardest by it. They consume a 
much larger portion of their income, and their only source of 
income. They are not seeing some of the gains that others saw 
in financial wealth with the run-up in the stock market. It 
tends to exacerbate some of the inequities that we had prior to 
the pandemic.
    Mrs. Wagner. And Dr. Faulkender, during the pandemic, we 
witnessed successes of public-private partnerships, 
particularly with the private sector financial institutions and 
their participation in the Paycheck Protection Program, which 
you spoke about in your testimony. Could you explain why these 
partnerships worked so well?
    Mr. Faulkender. Absolutely. I had the privilege of being 
one of the Treasury leads on the implementation of PPP. And to 
understand the success is to recognize that there are certain 
advantages that the private sector has. They have the 
technologies, they have the resources, they have the know-how, 
and they have the relationships that the government does not 
have. So, what we did is, we leveraged their advantages. We did 
the things that the government needed to do. We provided them 
the resources. We provided them the rules, the structure, the 
forms, and then we let the private sector use its technology 
and its relationships to go out and serve the American people. 
And you saw that we able to deploy the first $350 billion of 
PPP money in only 2 weeks as a result of that public-private 
partnership.
    Mrs. Wagner. Right. Absolutely. And I think our economy 
would be in a much worse position, and, certainly, the economic 
engine of our economy, which is our small businesses, would be 
in a much worse position had we not had the private-public 
partnership and the work that Treasury did to really work with 
this committee and others.
    Dr. Faulkender, can CDFIs and MDIs solely fill the needs of 
the millions of unbanked and underbanked, particularly in 
minority communities in rural areas?
    Mr. Faulkender. They can't. We have an enormous diversity 
in our nation, and the best way to service that diversity is to 
likewise have a diversity of institutions. And as we saw during 
PPP, CDFIs and MDIs stepped in to fill some of the gaps, but so 
did the fintechs. They likewise played an unprecedented role in 
serving historically-underbanked communities. And there has 
been some academic work which shows the important contribution 
that fintechs had during PPP.
    Mrs. Wagner. I agree. And I am out of time, but I would say 
that fintech firms really gave access outside of the 
traditional sources, especially to those who were unbanked and 
underbanked. I thank you for your testimony. And, Madam 
Chairwoman, I thank you for this hearing. And I will yield back 
the remainder of my time.
    Chairwoman Waters. Thank you very much.
    Next, the gentlewoman from New York, Ms. Velazquez, who is 
also the Chair of the House Committee on Small Business, and 
who was instrumental in helping us to provide the $60 billion 
for small businesses after the big banks had ignored them.
    Ms. Velazquez. Thank you, Madam Chairwoman, and Ranking 
Member McHenry, for this important hearing. The data showed us 
that minority and underserved communities were left behind no 
matter how hard they tried to access PPP. And that is when we 
worked together, Chairwoman Maxine Waters and I, to change 
that.
    Ms. Urrutia, CDFIs are a critical component of our nation's 
lending system, particularly for our smallest businesses in LMI 
and communities of color, which are often left behind by the 
biggest banks. As the Chair of the House Small Business 
Committee, I directed additional PPP and other rescue resources 
to CDFIs and MDIs. How were you able to use the resources 
specifically directed to CDFIs and MDIs to support small 
businesses, and minorities, as well as rural communities 
throughout the pandemic?
    Chairwoman Waters. To whom did you direct the question?
    Ms. Velazquez. To Ms. Urrutia.
    Mr. Sands. Congresswoman, she is not on. I can take that 
question for you, if you would like.
    Ms. Velazquez. Sure.
    Mr. Sands. I think as CDFIs and MDIs, we recognized that 
small businesses were in a precarious position coming into the 
pandemic. And all of us tried to make our best decisions in 
order to react accordingly.
    I would also like to just let you know--to say that when 
you look at where we are at today, a pandemic doesn't always 
have to be a health emergency. A study of economics at the 
University of Pennsylvania recognized that catastrophes can 
come in many forms.
    For example, in Congressman McHenry's questions, he talked 
about the labor force, and we do have somewhat of a pandemic, 
epidemic coming. But there is a beacon of light. Four million 
small businesses have been created during the pandemic. It 
actually eradicated the labor shortages that were mentioned by 
Dr. Faulkender. We can look at these businesses, and we can 
help them and support them with capital. There is actually a 
unique opportunity here, very similar to the pandemic, where 
CDFIs and MDIs and fintechs, of which I find Lendistry is a 
part of both, could supply capital and could be very 
instrumental not only in what we did in PPP, but we can repeat 
that today as we look at things like infrastructure bills and 
other opportunities. Thank you.
    Ms. Velazquez. Thank you, Mr. Sands. And can you please 
explain how small businesses, particularly those that are 
women- or minority-owned often face an uphill battle in 
accessing credit on responsible terms? And why are our CDFIs 
and MDIs in a better position to serve those businesses?
    Mr. Sands. Sure. Whether we like it or not, when you 
haven't had access to mainstream financing, it is very hard to 
build your business. It is very hard to be able to have the 
sophistication needed to get to the next level and to grow that 
business and, therefore, employ more people.
    CDFIs and MDIs represent a couple of things, number one, a 
cultural competency which allows that small business owner to 
feel comfortable, and opportunities to build rapport and an 
understanding of not only the historical plight of possibly 
that small business owner, but also the current plight.
    So if a woman executive from a CDFI looks at a program for 
women entrepreneurs, she is going to have more insight on how 
to make that woman not only receive the proper business-advisor 
technical assistance, but the correct credit products, as she 
thinks about growing her business and ways that she can be 
successful.
    I believe that all of the CDFIs that are witnesses here 
have been very instrumental in trying to make that come to the 
forefront.
    Ms. Velazquez. Thank you. Thank you, Mr. Sands.
    Mr. Sands, Senator Bob Menendez and I have introduced the 
Small Business Lending Disclosure Act, which will expand the 
disclosure requirements for small business financing options 
under the Truth in Lending Act (TILA). Do you believe 
disclosures like the one we are advocating for would enhance 
protections for small businesses and allow them to accurately 
provide some support among lenders for their financing needs?
    Mr. Sands. Absolutely, Congresswoman Velazquez.
    I think we all know that even though sometimes, there might 
be a language barrier, even though there might be a reading 
barrier, what people have a tendency to understand is numbers. 
We have seen this in other access classes, personal loans, 
mortgage loans, et cetera.
    When you introduce the numbers into the equation, what TILA 
does, and we are supportive of your bill, it then gives the bar 
at least the option to make a decision, a credit decision, a 
financial decision, and the option to plan accordingly, which 
could be inclusive of maybe adding an extra dollar to the cost 
of pizza so that they can afford their loan, thinking about how 
they leverage their hours, thinking about how they renegotiate 
their rental contracts. There is a variety of different things 
that, once you know the numbers, you are able to act more 
proactively.
    Ms. Velazquez. Thank you. I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from Michigan, Mr. Huizenga, is now 
recognized for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman.
    CDFIs and MDIs clearly play an important role in serving 
those in our communities who are both unbanked and underbanked. 
Republicans on the committee have routinely highlighted the 
importance of harnessing private sector investment in these 
communities, while allowing for regulatory flexibility that 
does not stifle responsible innovation. Ultimately, this will 
provide greater access to credit, build financial security, 
and, most importantly, create a more-inclusive financial 
system, something I think we all agree on.
    Unfortunately, this has not been the current posture of 
this Biden Administration. In fact, this past December, the 
Director of the Consumer Financial Protection Bureau (CFPB) 
stated that, ``Our largest banks have become bigger and even 
more powerful, while rural communities have become banking 
deserts, putting family farmers and businesses at risk.'' I 
can't disagree with that.
    And having literally the second-poorest county in the State 
of Michigan, in the Second Congressional District, which is a 
very rural district and rural county with a very heavy African-
American component to it as a percentage of the population, we 
have seen this happening. And I would argue that it was 
overregulation under the Dodd-Frank Act that forced these 
small, often rural community banks to consolidate and merge 
before many eventually, oftentimes, went out of business. And 
the Fed's own data supports this, noting in 2020 that there 
were 13,000 fewer banks in the United States than in the 1980s, 
with many of those closures occurring in rural areas.
    I will note that my Democrat colleagues would argue and do 
argue that we have never seen an economy like this. It has 
never been better. And we have to celebrate this great economy. 
And their answer to that is, but we have to spend more money. 
We have to throw more money into the economy to keep this 
going.
    There is an old saying that, when you are a hammer, 
everything looks like a nail. I would maybe convert that to say 
that, when you are an uber-Keynesian economist, or maybe when 
you are a modern monetary theorist, everything looks like a 
spending opportunity. And that is exactly what we are seeing 
here today. In fact, despite well-recognized and agreed-upon 
disparities, we don't have to look far in the past to see the 
benefits of full employment, which should be our goal here.
    And in 2017 and in 2019--I want to make sure I have these 
numbers right, Madam Chairwoman--policies that supported the 
free market helped raise the socioeconomic barriers for all 
Americans. There is no better example than this period, 2017 to 
2019, when the unemployment rate for African Americans was 5.5 
percent. Hispanic employment reached 3.9 percent, and Asian-
American unemployment dropped to 2\1/2\ percent, collectively 
the lowest levels on record in the modern era, literally.
    We know what we can do to really, truly narrow that 
socioeconomic gap, which is to make sure people have the 
opportunity and the ability to be successful.
    What we also know is that inflation hits everyone, but it 
disproportionately affects lower-income and minority 
communities. And that ought to be our goal, to make sure that 
inflation is tamed. And I know my Democrat colleagues are 
frustrated that this side of the aisle often talks about what 
is happening but we [inaudible] Percent inflation, folks. Wages 
have not kept up. The situation is dire for these on the lower 
rungs of the socioeconomic ladder, and it is our duty to help 
them.
    Dr. Faulkender, we have talked quite a bit about this 
inflation situation. And when I am at home, constituents talk 
to me about it. And they certainly don't think it is 
transitory, as is often claimed. The National Federation of 
Independent Business (NFIB), who surveyed their members, says 
that the main issues confronting our nation's small businesses 
are inflation and job openings that cannot be filled.
    In my closing moments here, can you detail the fiscal or 
regulatory policy actions creating those price pressures?
    Mr. Faulkender. Certainly. Labor force participation, as 
you said, is still rather low. We are a couple million jobs 
fewer than where we were prior to the pandemic. So, when we 
provide trillions of dollars in fiscal stimulus, that 
discourages people from participating in the labor force, 
particularly when there are no work requirements attached to 
them. When we take energy resources out of our economy, when we 
impose massive increases in regulation and constantly talk 
about tax increases, that is going to delay and deter 
businesses from expanding and hiring.
    Mr. Huizenga. Madam Chairwoman, my time has expired.
    Chairwoman Waters. Thank you very much.
    Mr. Huizenga. I yield back.
    Chairwoman Waters. The gentleman's time has expired.
    The gentleman from Georgia, Mr. Scott, who is also the 
Chair of the House Agriculture Committee, is now recognized for 
5 minutes.
    Mr. Scott. Thank you, Chairlady Waters.
    And, once again, you are doing an extraordinary job, 
because I can't think of a hearing that is more timely, for, as 
you know, many of our CDFIs and minority communities are going 
to be receiving millions of Federal dollars very soon.
    I want to address my question to Ms. Urrutia. Here is the 
situation. I want to talk for a moment. I think one of the 
keys--and you use these--they are called microloans. Are you 
familiar with those?
    Ms. Urrutia. [Nonverbal response.]
    Mr. Scott. Okay. I think they are very, very helpful with 
getting capitalization there. And they are pretty much 
manageable.
    First of all, I want you to expand on the importance of 
accessing microloans for the first-time entrepreneur. And 
microloans, as I understand it, are those loans that can be 
accessed, but they must be below $50,000. Am I right?
    Ms. Urrutia. That is generally what microloans are 
described as, yes, sir.
    Mr. Scott. Okay. How do you feel about those? Do you agree 
with me that they are key?
    Ms. Urrutia. Yes. Absolutely. Microloans make a significant 
impact on the lives of a lot of small business owners who may 
need only a very small amount of capital.
    What we have seen over the years is that, unfortunately, 
small business loans of this size are not really attractive to 
financial institutions for a variety of reasons: the loan is 
too small; the credit of the business is perceived to be risky; 
or there is not enough profitability to make money because of 
that small amount of money. But that does not mean that small 
businesses, particularly in this situation that we are in right 
now where you have startups and businesses that really have 
lost a lot of their revenue, need a small amount of capital to 
sustain.
    Mr. Scott. Yes.
    Ms. Urrutia. A $10,000 or $20,000 loan for a small business 
is equivalent to $1 million for any bigger business.
    Mr. Scott. And that leads to my other question. Why are 
these traditional banks trying to downplay these microloans, 
when they have been so effective for beginning farmers? They 
can get the access that they need. Many of them failed to help 
young beginners and African Americans because they say the loan 
is too much. They don't have the capitalization. But here we 
come with $50,000 and a small, beginning businessperson can 
handle that. I just wanted to kind of get clarification on 
that.
    And I think you need to push for more advocacy, and explain 
how beneficial it is, because if we are going to ship out 
millions of dollars in Federal spending, and very shortly, we 
are going to do that, we need to make sure that the primary 
vehicle, which is microloans, to get beginners started, that 
they can get the loan, they can pay that, and then, they can go 
and get another one.
    I just want to raise that issue and concern and hope that 
you will--and by the way, your story needs to be exposed even 
greater, because from reading your story, you were an 
immigrant. You came over. You tried to get help. But then, you 
went on and started your own business. And here you are, trying 
to help the people who were in your situation.
    Let me commend you for that, but speak out and keep pushing 
these microloans. They are very beneficial.
    Thank you.
    Ms. Urrutia. Thank you.
    Chairwoman Waters. The gentleman from Arkansas, Mr. Hill, 
is now recognized for 5 minutes.
    Mr. Hill?
    Mr. Hill does not appear to be on the platform.
    The gentleman from Texas, Mr. Williams, is now recognized 
for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman.
    And full disclosure to our panel, I am a small business 
owner in rural America. And I can fix this whole thing. We cut 
taxes, we put more money in the hands of the banks, the people, 
et cetera, more and more startups, and we will begin to see. 
So, I think a lot of it is cutting taxes.
    But right now, I want to talk about inflation. Inflation is 
having a devastating effect on people all throughout our 
country. And people are seeing these prices increases at the 
gas pump, in grocery stores, and on their utility bills to heat 
their homes this winter. A recent report by Moody's Analytics 
put a dollar figure on the massive inflation increase, and the 
average American is paying $276 more each month to simply live 
their lives. This is disproportionately harming low-income 
earners and people on fixed incomes who are having the most 
trouble absorbing these higher costs.
    This is a drastically different reality than what we saw 
after we passed the Tax Cuts and Jobs Act in 2017. We saw wages 
outpacing inflation, the labor participation rate was rising, 
and more investments being made from small businesses. And it 
will not be an easy job to get inflation under control, but it 
is something that must be done if we are serious about helping 
our rural and underserved communities.
    Dr. Faulkender, can you discuss what you think needs to be 
done at the Federal Reserve and here in Congress to get us back 
to a high growth rate and a low inflationary environment?
    Mr. Faulkender. Sure. On the fiscal side, I would suggest 
prioritizing incentives to brings supply back into the 
marketplace.
    We have 10.9 million job openings right now. And yet, we 
are a few million jobs shy of where we were prior to the 
pandemic. There are a lot of American workers who are on the 
sidelines, who can come back into the workforce to serve in 
some of those job openings.
    The second thing is that we need to make sure that we have 
a tax environment that encourages both the businesses and the 
workers to participate in the labor force.
    Third, we need to bring our domestic energy supply back 
online.
    The fourth thing that we could do from a Federal Reserve 
standpoint is that we need to stop the accommodative monetary 
policy. We probably should have started pulling back on asset 
purchases a number of months ago, and started to raise rates. 
Now, it looks like the Fed is behind the curve. But Chairman 
Powell, of course, has indicated that there is some catch-up to 
do. The problem is that that many rate increases in a single 
year is going to be a shock.
    Mr. Williams of Texas. Thank you.
    Secondly, something that helped propel the economy under 
former President Trump was the regulatory clarity that he gave 
the business community. I can tell you firsthand, that was 
huge. There wasn't any uncertainty surrounding unexpected 
increased costs coming down the pipeline.
    Unfortunately, this is not the case under President Biden. 
The American Action Forum conducted a study which showed that 
in his first year in office, President Biden has already 
implemented over $200 billion--I repeat, $200 billion--in new 
regulatory compliance costs on American businesses and small 
businesses mainstream. These costs are amassed by an estimated 
increase of 131 million hours in new paperwork that must be 
conducted in order to be in compliance with all of the new 
regulations coming from the Federal bureaucracy. It is a 
disaster, to put it mildly.
    Banks feel the major part of this new regulatory burden. 
Instead of getting more money into their communities to finance 
job-creating entrepreneurs like we are talking about, they are 
forced to spend more money on compliance officers. These are 
costs on the books and a drag on the American innovators.
    Quickly, Dr. Faulkender, can you discuss some of the pro-
growth policies we should be focusing on so we can allow banks 
to get more money into the hands of Main Street America? And I 
have touched on one--you have, too--and that is cutting taxes.
    Mr. Faulkender. The other one you mentioned is regulatory 
clarity. The problem with regulation is that there is what an 
economist would consider a large, fixed-cost component of it. 
So whether you have 5 workers or you have 50 workers or you 
have 500 workers, just bringing yourself into compliance 
requires updating your activities and your processes. The 
larger businesses have a larger scale to spread that across, so 
a higher regulatory environment is generally more advantageous 
to larger entities, whether that is larger banks, larger 
businesses, or larger enterprises.
    And to the extent we want to spur small business 
entrepreneurship and we want to create an environment where 
small community banks can flourish, providing a less-regulated 
environment that reduces their cost structure, particularly on 
a per worker or per customer basis, is important as well.
    Mr. Williams of Texas. Yes, lower taxes, less regulation. 
At the end of the day, it works for everybody, doesn't it?
    Mr. Faulkender. It has wide-ranging benefits, yes, 
Congressman.
    Mr. Williams of Texas. Thank you, Madam Chairwoman.
    I yield back.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is also the Chair of the House Committee on Foreign 
Affairs, is now recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    MDIs and CDFIs, although smaller than many of their 
competitors, play an outside role in communities with a great 
demand for banking services. These institutions provide crucial 
help in areas that would otherwise be banking deserts, and they 
provide more affordable products than alternative financial 
service providers.
    And that is why I am so proud to reintroduce the Ensuring 
Diversity in Community Banking Act, which passed out of this 
committee last Congress with a bipartisan vote of 52-0, and 
passed in the House as well on suspension. This bill 
strengthens many programs that provide capital to minority 
banks, creates new impact-bank designations for banks that 
predominantly serve low-income communities, and provides for a 
streamlined CDFI application process.
    Ms. Elam, can you speak to why these programs are so 
crucial to ensuring that MDIs and community banks remain an 
integral part of serving underbanked communities?
    Ms. Elam. Thank you. First, I way to say thank you for your 
support of MDIs, and for the reintroduction of this important 
bill. I think what this bill does is it continues to preserve 
and promote MDIs, which is something that we are not seeing 
oftentimes from our regulators. So, not only does it focus on 
capital, but it focuses on making sure that they have the 
technology that they need to best serve communities.
    Technology continues to be one of the biggest issues that 
our member banks have, whether it is cost, it is not having the 
capacity to vet those, or it is the challenges with their core 
providers. And this allows them to grow and scale in a way so 
that they begin to serve more in their communities. So, this is 
certainly a hugely important piece of legislation. And we, 
again, thank you for that.
    Mr. Meeks. Thank you.
    And technology is changing the landscape of banking, as we 
know.
    Ms. Elam. Absolutely.
    Mr. Meeks. Whether financial institutions, including MDIs 
and CDFIs, are able to access and successfully leverage new 
technology can make or break their business model. I think that 
is right.
    Mr. Sands, let me ask you. As the largest minority-led 
deployer of capital in COVID relief funding, Lendistry has 
proven that technology can enable institutions to better 
penetrate harder-to-serve communities. Specifically, in my 
State of New York, Lendistry served more small businesses by 
being the sole designated entity to administer the Small 
Business Recovery Grant Program. I understand that you have a 
partnership also, I believe, with OneUnited Bank, an MDI.
    My question to you is, what are some of the challenges 
CDFIs and MDIs face when partnering with fintech companies, and 
how can Congress best ensure that such partnerships are 
successful and best serve consumers?
    Mr. Sands. Thank you, Congressman Meeks.
    I think the first thing we want to look at is the 
narrative. And the narrative should be that we support these 
partnerships, and the narrative should be that we encourage 
these partnerships, as you are already displaying.
    At Lendistry, we looked at helping underserved communities 
in a scaleable way by thinking about two things. First, meet 
the people where they are, and make the process seamless, 
efficient, user-friendly, and accessible.
    Second, help our community-based partners level up and 
scale up their technology resources, leveraging our technology. 
As you mentioned, with partners like OneUnited Bank and others, 
what we have been able to do is help them in terms of their 
scaling.
    Now, we do still have to get big processes like vendor 
management and other things like that, but I think the answer 
to your question is helping change the narrative so that these 
partnerships are encouraged both at a congressional level and 
at a regulatory level and supporting these partnerships. As you 
know, there will be so some highs and lows as we go through 
this. But I think the end goal will see some scaleable 
deployment of capital, as we have in the State of New York.
    Mr. Meeks. What would you recommend? Is there anything in 
addition to--I talked about the bill that we had. Is there 
anything in addition there that you think we should be doing in 
the United States Congress to make sure that we push that 
forward, so that the technology is there, and anything that we 
can do to be of further aid to create these partnerships and 
make sure they are secure?
    Mr. Sands. You mentioned Congress and this committee have 
recommended things like technology grants and different things 
like that. While I understand that there is a bit of 
apprehension in terms of deploying more capital into our 
economy, I do think we can take some surgical methods like 
focusing on technology, and focusing on skills that are going 
have long-term benefits. When we think about other things like 
cybersecurity and other obstacles that are going to come in the 
long term, I think there can be some laser-sharp focus on where 
those grants go.
    So, the specific uses of funds will be extremely important 
as we think about how we lay out these different programs.
    Thank you.
    Mr. Meeks. Thank you very much.
    My time has expired.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentleman from Tennessee, Mr. Kustoff, is now 
recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, and thank you to 
the witnesses for appearing today.
    Dr. Faulkender, you talked about the Paycheck Protection 
Program, and I think that Congress can pat itself on the back 
because that is an example of a bipartisan program that no 
doubt saved many small and medium-sized businesses across the 
country. And it really is a true benefit to say that it is a 
successful public-private partnership, and I appreciate the 
role that you had from Treasury in setting that up and making 
sure it was a success.
    In your written testimony, you talked about fintech firms 
and how fintech firms went a long way to helping serve 
underserved or maybe underbanked communities. Can you discuss 
why that is? Why were fintechs so successful in helping those 
underserved communities?
    Mr. Faulkender. Sure. The major advantage that fintechs 
have, and I think a number of analysts have mentioned this, is 
that traditional banks have high technology costs, coupled with 
the physical infrastructure that you normally have with 
providing branches. Fintechs are able to devote almost all of 
their capital resources, their capital investments towards the 
technology piece and scale that to serve communities that a 
geographic footprint often doesn't support.
    Particularly in rural communities, there is just not enough 
of a population close by to support a full-blown branch, 
whereas if you can still serve the depository and lending needs 
of that community almost entirely through an online platform, 
you are able to achieve reductions in costs that can then be 
passed along to the borrower.
    Mr. Kustoff. Thank you very much.
    I would like to take you back to an article or a column 
that you wrote in The Hill last year, I think in August of 
2021, and you were critical of the Biden Administration and the 
legislative agenda in terms of the spending. And you predicted, 
and I think correctly, that that added to or exasperated the 
inflation that we are experiencing today.
    We are in a position now where the Fed is going to have to 
use the tools in its toolbox to try to combat inflation, 
hopefully without triggering a recession. Can you forecast what 
the Fed should do and what they can do and in a way that it 
triggers, if you will, a soft landing?
    Mr. Faulkender. The Fed has a very delicate dance that it 
has to do because on the one hand with, as was mentioned 
earlier, $30 trillion in debt outstanding, raising interest 
rates is going to pass that along in higher debt service costs 
to our nation, which is problematic. But at the same time, they 
can use monetary policy to curb some of the excess demand that 
fiscal policy has generated.
    So, they have to try to find a balance where they bring 
down demand in order to reduce the increase in prices without 
putting us into a recession and without causing debt service 
costs for the nation to skyrocket to an unsustainable level.
    Part of that is going to be taking some of their 
accommodation in the asset purchases off the table. Some of 
that is going to be in the form of more guidance. They are 
going to be probably more tolerant of inflation than they were 
a number of years ago. But they are ultimately going to have to 
raise rates and reduce the asset purchases and do it very 
delicately because we are in kind of a tenuous position.
    Mr. Kustoff. I used the term, ``soft landing.'' Can they do 
those things? Can the Fed do those things without necessarily 
triggering or forcing us into a recession?
    Mr. Faulkender. Yes, it is possible. If they raise rates 
too quickly, it will force us into a recession, but if they 
don't raise rates quickly enough, we are going see this 
inflation continue. So, they are going to thread that needle. 
It is possible, but it is going to be difficult for them to do.
    Mr. Kustoff. Thank you very much.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is now 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I am also very 
grateful to serve under your leadership, and I am especially 
proud of the Small Business Credit Initiative, the State 
program, because this is a 1,000 1 million-dollar program, 
1,000 $1 million for small businesses. And the program will 
generate $100 billion.
    What I would like to do is have Ms. Elam, Mr. Sands, and 
Mr. Bynum, in that order, explain to us the importance of this 
program that I was honored to have the opportunity to work on 
with the chairwoman, and it became part of the American Rescue 
Plan Act of 2021.
    Let's start with you, Ms. Elam. Explain the importance of 
this program?
    Ms. Elam. I think the importance of SSBCI cannot be 
understated. Pushing capital into the hands of small businesses 
is vitally important. We know many of the businesses that are 
going to receive this or be the beneficiaries of this capital 
are small businesses that maybe were already struggling, and 
the pandemic exacerbated those struggles.
    What I am most excited about when I think about SSBCI 2.0 
versus 1.0, is the focus on Socially and Economically 
Disadvantaged Businesses (SEDB). I think the focus on those 
businesses is vitally important, and I think the push that you 
are seeing from Treasury to focus on utilizing MDIs and SSBCI 
2.0 is vitally important.
    Mr. Green. Thank you very much.
    Mr. Sands, if you would, please?
    Mr. Sands. Yes. I will piggyback on Ms. Elam's comments. I 
think that it is really, really vital, when we look at SSBCI 
2.0, there is a huge opportunity not only for credit 
enhancements and loan participations but also for venture 
capital.
    As we look at the 4 million businesses that have been 
started, as we think about inflation and some of the other 
tools and conversations that we have had here today, bringing 
these 4 million businesses into the forefront, letting them 
take their place in the workforce, letting them grow, letting 
them hire people, letting them raise wages--there is 
significant opportunity. SSBCI will give lenders that moment or 
that tool that they can leverage in order to make some credit 
decisions that they might not make in a post-pandemic 
environment or in a normal credit market environment.
    So, we are very excited to see that, as well as to see the 
equity go out in an equitable fashion, as Ms. Elam mentioned, 
related to the SEDB requirements and also 10 employees or less. 
And I should also say there is a huge technical assistance 
requirement. So, having technical assistance and business 
advising could be that momentum that we need to really take the 
businesses to the next level.
    Thank you, sir.
    Mr. Green. Thank you.
    But before I leave you and go to Mr. Bynum, let me ask you 
to elaborate on something else.
    Mr. Sands. Yes, sir.
    Mr. Green. Let's talk for just a moment about the venture 
capital aspect of this in a bit more detail, because people 
hear that term, and I don't think they understand what it 
really means in terms of the difficulty in acquiring venture 
capital. Can you say a few words about the difficulty?
    Mr. Sands. I think if we look at African Americans as a 
unit, roughly $16 trillion in GDP kind of flow, roughly $4.2 
million in VC capital, those numbers are misaligned clearly. 
And so, when we look at this opportunity, there is an 
opportunity for us to do 10 times leverage off the money, the 
venture capital money that is flowing through the SSBCI 
program.
    If we could have the forces of equitable capital deployment 
mixed with the right deployers of capital, mixed with it 
getting into the right hands, then when we look at things like, 
how do we encourage businesses in rural areas, how do we think 
about bringing products back or manufacturing back to the U.S., 
or how we just think about overall expansion, it represents a 
very unique and significant opportunity for all of us.
    Mr. Green. Thank you very much.
    Mr. Bynum, you have 1 minute left. Please explain to us how 
important this SSBCI program is.
    Mr. Bynum. No, absolutely. I think Ms. Elam and Mr. Sands 
hit the high points.
    I will underscore how critical CDFIs are to driving 
resources to where they are needed most. In the first round of 
SSBCI, CDFIs outperformed other distributors of SSBCI, driving 
almost half of their funds to low- and moderate-income areas, 
compared to 32 percent for non-CDFI lenders. And that just 
underscores their importance. I think in the Deep South, it is 
important that CDFIs are engaged with States on the front end 
of the design. CDFIs were not involved previously, and we are 
seeing some positive momentum in Tennessee and Arkansas that 
leads us in that direction.
    Mr. Green. I thank all three of you.
    And I especially thank you again, Madam Chairwoman. This 
program has really saved a lot of small businesses, especially 
with what I am calling the set-aside that is in the program.
    I yield back the balance of my time.
    Chairwoman Waters. Thank you so much, Mr. Green.
    The gentleman from Arkansas, Mr. Hill, is now recognized 
for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. And thanks for 
holding this hearing.
    Let me begin by saying hello to my old friend, Bill Bynum. 
It is so good to have your wisdom and support here. We are so 
grateful for your leadership.
    Bill and I got to spend 3 years together on the CDFI 
advisory board at the Treasury during the mid-2000s, and Bill 
was a great teacher and educator as we collaborated there.
    And thank you, too, Bill, for coming to Arkansas and 
serving West Memphis and Little Rock with your locations and 
beautiful College Station. So, thanks for helping our citizens 
here.
    Mr. Bynum. Thank you.
    Mr. Hill. The first question, Bill, is, thinking about all 
the new banks, existing banks that have been certified as 
CDFIs, it boosts the numbers of people who are certified as 
CDFIs. But does it dilute the mission, given sort of your 
intensity of effort and that of our mutual friend, Darrin 
Williams, the CEO at Southern Bancorp, probably the largest 
CDFI in the region and the largest in our State? Does that 
dilute the mission when we certify all of these other banks?
    Mr. Bynum. Congressman, thank you.
    I think it is important to note that, just like in any 
industry, all CDFIs are not created equal. Darrin, Liberty 
Bank, some others, are doing great work in driving resources in 
a way that is consistent with the purpose and intent of CDFIs. 
However, we saw as the follow opened up, a lot of banks were 
able to become CDFIs just because of their geography, not 
because they were driving funds into the most-needed places 
like the Arkansas and Mississippi Delta.
    And we have seen that in Mississippi, CDFIs banks, when you 
look at the HMDA data, only lend at 13 percent to Black 
borrowers, compared to 17 percent. Hope lends at 80 percent. 
So, there are disparities, and I think there is some 
accountability that should be incorporated into the program.
    Mr. Hill. Yes, because I do like the fact that we spread 
the resources and the networking of the resources out. But 
there is also a real specialty that comes with this niche and 
commitment and vocational commitment to it.
    Mr. Sands, congratulations on your great PPP performance in 
the fintech industry. Thanks for that leadership. We had a lot 
of challenges with the SBA in that program, standing it up. But 
I think they, with some changes, delivered pretty well. But now 
I am concerned about them suddenly displacing the banks and 
trying to replace the 7(a) program with a direct lending 
Program.
    Do you support the SBA cutting the banks out of 
underwriting in the 7(a) program?
    Mr. Sands. Congressman Hill, it's good to see you. I know, 
as a fellow community banker, we probably have some similar 
thoughts.
    I think there is definitely a fine line here. I think what 
we are seeing is that there are some smaller loans that are 
being underserved, and some small businesses that are being 
undercapitalized. We do have to take that into consideration, 
and if SBA could help with that, I think there is an 
opportunity there. I also think SBA could help by bringing in 
additional lenders and focusing on other programs as well.
    Mr. Hill. Let's talk about that and collaborate because the 
Economic Injury Disaster Loan (EIDL) program has been helpful, 
but sort of a black box and a bit of a disaster in the 
pandemic. It is not really designed for an ongoing emergency. 
It is designed for a very short-term weather or tornadic or 
hurricane-type emergency. I think there is a lot of need for 
reform there. I would be eager to hear your views on that as 
well as to make the 7(a) Program more effective.
    Let's talk about reporting small business loans. I noted 
that there are 38 percent fewer CDFIs, despite my comment of 
the additional certifications. Instead, the numbers are 
dropping just like the numbers of small banks are dropping. Are 
you concerned that this 1071 small business data collection 
will actually cause more people to leave the small business 
lending business, as it just adds too much cost?
    Mr. Sands. No, I think one of the things we actually 
recognize with PPP is that if we could have a streamlined, what 
I will call formatting process, and maybe leverage API's 
technology, et cetera, that we can get that information. I 
think it is critical. If I were sitting in your chair or in 
anyone on this committee's chair, to really understand the data 
that is coming in, because if you are sitting there and you are 
in Arkansas and you are saying, look, I would like to allocate 
resources or money to a certain place, it helps to just have 
the data to know where it should be at indicated, whether it is 
race, location, et cetera. And I think we have an opportunity 
with 1071 to get some of that information.
    Mr. Hill. I hope we can streamline it to make it a lot less 
costly for smaller institutions. The overhead to run a small 
institution is already overwhelming. I thank you for your 
advice, and I look forward to following up with you.
    Madam Chairwoman, I yield back.
    Mr. Sands. Thank you.
    Chairwoman Waters. Thank you very much.
    The gentleman from Missouri, Mr. Cleaver, who is also the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is now recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    This is, in some ways, related to the questions that were 
raised by Mr. Hill, but a little different case.
    Ms. Urrutia, I have adopted a plan to introduce the CDFI 
Bond Guarantee Program Improvement Act of 2022, which has been 
attached to today's hearing. The bill would make the bond 
program permanent, reduce the minimum bond size from $100 
million to $25 million, and would make a technical change 
requested by the CDFI Fund.
    How would this bill help CDFIs such as yours, if they were 
interested in participating in this program? And can you tell 
us how you might use these funds?
    Ms. Urrutia. Yes. Good afternoon.
    Our CDFI, Accion Opportunity Fund, does not currently take 
advantage of the bond program. We do find CDFI support to be 
very instrumental in helping us continue to deploy capital to 
underresourced communities. We are in full support of any type 
of program that can help us access capital and equity to scale 
up our lending operation.
    Mr. Cleaver. Just to be clear, if we made this technical 
change, this program would be of significant value to you, and 
would help CDFIs?
    Ms. Urrutia. Absolutely, yes. Any program that can provide 
capital access to CDFIs, which is part of our challenge, 
liquidity, accessing liquidity, and I want to back, because 
SSBCI, I think it goes without saying, that what SSBCI can 
bring to CDFIs is the ability to access liquidity and off-
balance sheet leverage and resources so that we can scale up 
our lending, which is really one of the limitations that CDFIs 
have today, because there is not sufficient capital. And 
because of the way that we are structured, where we have to 
raise equity via grants mostly, it becomes very difficult to 
continue to deliver the mission without having the access to 
these programs that are leveraging private sector capital.
    Mr. Cleaver. Historically, the limit on bond guarantees 
provided in the annual appropriations bill far exceeds what has 
been issued each year. The program has been authorized for $500 
million annually since Fiscal Year 2017, but CDFIs have 
successfully accessed only a fraction of the potential of the 
program.
    It is particularly unfortunate that I am receiving reports 
that smaller CDFIs and CDFIs in rural communities--I represent 
Kansas City, Missouri, and probably 30 little towns all around 
it, and I am also adding communities of color and indigenous 
communities--who would really love to benefit from long-term, 
low-cost capital but they are unable to participate.
    Do you or any of the panelists object to making the bond 
guarantee program more accessible to CDFIs?
    Ms. Urrutia. I think one of the things that you find is 
that CDFIs sometimes are like small businesses. We don't 
necessarily know all of the programs that are available to us 
to access. So, I think a recommendation from this would be for 
marketing and information provided by the CDFI Fund for all of 
the different programs that are available, the purpose of each, 
and how can those funds be accessed.
    Mr. Bynum. And, Congressman, if I could add, I think the 
reduction to $25 million is critically important in getting the 
resources to those smaller communities. They need projects, but 
they may not be $100 million or $200 million. And making more 
available CDFIs to drive funds into those communities is 
critically important and it allows them to leverage some of the 
other infracture dollars that are being made available by 
Congress as well.
    Mr. Cleaver. I think this has nothing to do with Democratic 
or Republican ideology. This is a common-sense kind of thing 
that would help communities both large and small.
    I think my time has run out, Madam Chairwoman. Thank you 
very kindly.
    Chairwoman Waters. Thank you so very much.
    The gentleman from Tennessee, Mr. Rose, is now recognized 
for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters and Ranking Member 
McHenry, for holding this hearing, and thanks to our witnesses 
for their testimony.
    I want to also express concern regarding the forthcoming 
cost of servicing our national debt. I will note that JPMorgan 
expects 5 rate hikes this year, Goldman Sachs and Bank of 
America are predicting 7 rates hikes, and HSBC is predicting a 
50-basis point hike next month, followed by 4 additional 25 
basis-point increases.
    Obviously, as has been noted, we have just surpassed $30 
trillion in debt and we need to get our fiscal spending on 
track and in order in this country if we are going to be able 
to support many of the programs that we need to have in place 
to assist historically-disadvantaged groups, and to make sure 
that every American has a chance to realize the American Dream.
    As my time is limited, I also want to touch on some other 
topics. But before I get to that, Mr. Bynum, I appreciated the 
conversation between you and my colleague, Mr. Hill from 
Arkansas. And as I sit here at my home today in Cookeville, 
Tennessee, I know that we have a number of functioning CDFIs 
here in Tennessee, including one right here in my hometown of 
Cookeville, the Tennessee Rural Development Fund, and, of 
course, Pathway Lending in Nashville, and The Housing Fund in 
Nashville.
    And I wonder, Mr. Bynum, are these CDFIs in my home State 
and in my home community--do you feel like they are getting the 
job done? And what could I do as a Member of Congress, what can 
our committee do, what can the Congress do to help them do the 
job that we intend for them to do, if they are not already 
getting it done?
    Mr. Bynum. Thank you, Congressman.
    I am really glad that we have housing partnerships, The 
Housing Fund and Pathway and CDFIs in Tennessee that are 
driving funds into rural parts of the State, as well as in the 
inner cities, in Memphis and in Nashville and Chattanooga. 
There are gaps that unfortunately small businesses, lower-
wealth families, and entrepreneurs don't have access to.
    You have some strong CDFIs, and the work that this 
committee, and this Congress has done to make sure that CDFIs 
have capital, flexible capital, that allows them to do what 
they do well, really tailor resources to meet the needs of 
their communities, not have a one-size-fits-all solution but 
sit down with businesses, with families and make sure they are 
their financial bankers, they are their financial problem 
solvers, which is what CDFIs do better than any other financial 
institutions.
    Thank you for supporting CDFIs and for making sure that 
they have the kind of capital they need.
    Mr. Rose. Thank you for that insight. And I hope we get the 
chance in the future to talk in greater detail.
    During the pandemic, regulators took important steps to 
provide temporary relief for community banking organizations 
who experienced unexpected and sharp increases in assets due to 
their participation in many of our Federal coronavirus response 
programs such as the Paycheck Protection Program. 
Unfortunately, in my view, that relief expired on January 1, 
2022. Regulatory compliance continues to be burdensome, 
particularly for these organizations.
    Dr. Faulkender, I think this brings up a broader question. 
Should we be looking into permanently raising these regulatory 
thresholds to allow for greater flexibility with these 
community banking organizations?
    Mr. Faulkender. Generally, the capital requirements and 
regulations we place on community banks are probably excessive, 
given the types of activities they engage in. We should not be 
thinking that they are megabanks and holding them to the same 
standards. At the same time, of course, we don't want to invite 
regulatory arbitrage.
    But, yes, we should differentiate the environment we impose 
upon them from a regulatory standpoint based on the activities 
in which they engage and how systemically important they are. 
We should not treat all of them uniformly. We should recognize 
the differential business models they have.
    Mr. Rose. Thank you. I appreciate that perspective, and I 
share that. And having served on the board of a community-based 
national bank, I can tell you firsthand that unfortunately, 
many of those regulations and that regulatory burden are what 
cause these small, for-profit financial institutions to 
oftentimes not be able to meet the needs of emerging businesses 
and smaller organizations. I share the view that we need to 
relax that standard and recognize the difference between big 
banks and our small community banks.
    Thank you, Chairwoman Waters. And I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Ohio, Mrs. Beatty, who is also the 
Chair of our Subcommittee on Diversity and Inclusion, is now 
recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, for holding this 
hearing. And to all of our witnesses, thank you very much.
    First, let me just say I would like to thank our 
distinguished panel of witnesses for being here today and for 
their testimony.
    My first question is for Ms. Elam, and you, Mr. Bynum. In 
your testimony, you cite the fact that Black-owned banks 
control 27,000ths of 1 percent of total bank assets in the 
United States.
    In 2020, in the aftermath of the murder of George Floyd, 
dozens of companies, as have you witnessed, made public 
commitments to racial justice within the outside of their 
workforces. Netflix, for example--we all know that they were 
going to place $100 million of their assets in Black-owned 
financial institutions. And they followed through.
    Ms. Elam, what kind of impact would this have if more 
companies made similar commitments?
    Ms. Elam. Thank you for that question. It is a phenomenal 
question if you had more than a few companies doing that, but 
if you had 10, 20, 30, 40, 50, or hundreds of companies doing 
that, you could certainly change the trajectory of these 
organizations, of these banks.
    There have been a lot of conversations around deposits and 
capital. But I think one thing that doesn't get enough 
conversation is, how are these companies integrating Black 
banks into the way that they do business? Are they integrating 
them into their financial services supply chain? When customers 
are swiping their credit cards, are they using our banks for 
merchant processing?
    Those are the things that we need to be focused on and 
talking about. Not only do we need more of them, but we need 
diversity in what they are doing. Everybody can't just do 
deposits. Everybody can't do equity investments. You need some 
of these long-term, systemic revenue-generating business 
opportunities in order to really change the dial.
    Mrs. Beatty. Thank you.
    Mr. Bynum, the Hope Credit Union received $10 million as 
part of this commitment. Can you briefly tell us the impact? 
Because I have one more question I am going to try to get to.
    Mr. Bynum. Certainly. When you think of the region that we 
serve in a place like Itta Bena, Mississippi, where Mississippi 
Valley State, an HBCU, is located, if we had all of the 
deposits, we would only have 1\1/2\, 1\1/4\ million dollars. 
So, the $10 million from Netflix imports capital into these 
capital-starved communities and allows us to make more 
mortgages loans, more business loans, to help make payday 
alternative loans that get people out of debt traps.
    Unfortunately, communities where you have such a dire 
wealth gap don't have the deposits to fuel their growth, so 
deposits are important, as is equity. It all goes together, and 
also contracts where they can buy from the businesses is 
something that we should also emphasize as well.
    Mrs. Beatty. Thank you.
    Here is my last question, and I will open it up to anyone 
whot wants to talk about this. I would, however, like to start 
with Ms. Elam.
    Here is the thing. This may sound a little self-serving. As 
you all probably know, I am the Chair of the Subcommittee on 
Diversity and Inclusion, and this is something that is in the 
forefront of Chairwoman Waters' and my leadership.
    Here in the Midwest, we unfortunately don't have MDIs--
currently, there are very few in the Midwest and none in my 
great State of Ohio. In my district, there is a group that has 
recently submitted an application for a banking charter that 
would now give Ohio its first MDI, right in the heart of my 
district.
    What resources are out there for persons or groups who want 
to form an MDI? What incentives are available for them? As a 
Member of Congress, I have this unique opportunity to go talk 
to my community and say, here is what I fought for, and here is 
what the experts told me to do.
    Ms. Elam. Starting a new bank is certainly challenging. Not 
only is it capital that prevents folks from starting new banks, 
but it is also the regulatory requirements that can be onerous 
for starting a new bank.
    At the NBA, what we try to do is we work--we have actually 
talked to that bank that is going to be starting in Ohio, to 
learn best practices. This is what you need to know. This is 
what you need to be focused on, when you are thinking about who 
is going to be doing deposits, because you want to have support 
from corporations, you want to have support from the State and 
local government. Who is going to be doing business with you? 
And those are some of the things that at the NBA--
    Mrs. Beatty. And I hate to cut you off, but I have about 15 
seconds.
    Is there anybody in particular? Should they call your 
organization?
    Ms. Elam. Yes, call our organization.
    Mrs. Beatty. Should they--
    Ms. Elam. Call the National Bankers Association, and we 
have already had a call with them, but they can certainly feel 
free to call our organization.
    Mr. Bynum. And inclusive is the National Association of 
Community Development Credit Unions.
    Mrs. Beatty. Thank you so much. I will follow up with both 
of you.
    Chairwoman Waters. Thank you very much.
    The gentleman from Ohio, Mr. Davidson, is now recognized 
for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. I appreciate 
this hearing, and it is timely that we talk about the 
consequences of all of this spending that has gone on.
    We want a Federal Government to exist. Our Founders created 
one on purpose. It is defined by our Constitution. But we have 
a limited government. Right now, we are only talking about how 
much more government we should have. And, unfortunately, there 
is not a way to pay for all the government that we already 
have.
    We have seen the Federal Government's balance sheet grow to 
the point where we have $30 trillion in debt. And that is not 
even debt that people lent us. The Federal Reserve's balance 
sheet has grown to over $9 trillion. So, in a way, we have 
monetized it. How did all this inflation happen? We monetized 
the debt. And I think that is really one of the big problems.
    And not only have we spent the money--and we spent it for 
things that were needed. We spend money when there is a time of 
war. But you have to pay for it. The country realized that, and 
other countries realized that at the end of World War II. In 
fact, the last time that the planet had as much debt as the 
planet has right now was World War II, total debt in relation 
to GDP. And at that time, the monetary system was reset.
    I wonder, Mr. Faulkender, if you could talk about the 
consequences for debt and deficits, the importance of paying 
that off, and whether you believe that this concept of modern 
monetary theory or quantitative easing, where we don't even 
need a lender, we can just keep creating money, is that fact or 
fiction and how will it turn out for people? And, frankly, any 
implications for the wealth gap if we keep doing this?
    Mr. Faulkender. Yes, thank you, Congressman, for that 
question.
    We have seen other nations historically have debt-to-GDP 
ratios in excess of 100 percent. That tends to be where you see 
the financial crises take place. When firms have fiscal 
policies that are sustainable relative to their overall 
economy, they are largely able to avoid panics and inflationary 
bouts, whereas when you see the kinds of debt that we were 
incurring recently and the urge to monetize it, then that is 
where you start to worry about inflation coming.
    So, I think it is important to recognize that inflation is 
a combination of both the fiscal and a monetary policy outcome.
    As I was saying before, the Fed has its work cut out for 
it, if it is going to curb some of the inflation we have seen 
recently. What we need is for fiscal policies not to exacerbate 
those challenges.
    Mr. Davidson. Yes, thanks for highlighting that. And we 
spent $6 trillion just COVID-related, not of any of the other 
spending, which we spend more than we can really fund in a 
normal process. But that $6 trillion didn't all go to GDP. What 
did it go to? It inflated assets. And I would hazard to guess 
that, as members of the committee, we have more assets than 
most of our constituents. And the wealth gap continues to grow.
    And, unfortunately, the solution that I hear from many--
most of my colleagues, frankly, is more government. And even 
when there is talk of taxes that would pay for some of the 
spending, the taxes don't even pay for all the new spending 
that they are talking about. There is no real cohesive plan to 
do this.
    I will say that it is a bipartisan problem. When Donald 
Trump was first President, he proposed a budget that balanced 
in 15 years, which was hardly aggressive, but at least it 
balanced. As we stare down a clock of funding that expires 
Friday, the 18th, there is only a plan to kick the can down the 
road until March 11th on the table right now. And my Democrat 
colleagues are just biding time to try to spend far, far more 
money than we have right now. It will burn inflation.
    And I think the last thing I would just focus on is that 
benefit cliffs are dividing people in another way, because when 
you do have inflation, the government policies don't catch up 
as much. And that is another barrier to people participating in 
the workforce.
    As my time expires, I just want to highlight a little bit 
of good news. Mr. Sands, throughout the pandemic, fintech 
companies have really focused in minority and disadvantaged 
communities in my own area and in rural areas. Fintech has 
really provided a lot of access to capital. Could you highlight 
how important fintech has been in the response to this current 
crisis?
    Mr. Sands. Thank you for opportunity, Congressman Davidson. 
I think fintech has been able to show that we can go into 
places that maybe others can't. And when we look at places like 
the rural United States, there is a huge opportunity for 
fintech to play a role. Thank you.
    Mr. Davidson. Thank you. My time has expired, and I yield 
back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Connecticut, Mr. Himes, who is also the Chair of our 
Subcommittee on National Security, International Development 
and Monetary Policy is now recognized for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman. And a big thank you 
to the panel for your testimony today, and for all of you who 
are operating in challenged areas, thank you for the work you 
do. For many years, I worked in affordable housing, and it was 
the CDFIs and MDIs that were serving the need and serving the 
need in some really challenged communities. So, I really have 
an appreciation for the work you do in Bridgeport, Connecticut, 
which I represent, and surrounding areas like New York City.
    I just have one question that I would like to direct to Ms. 
Urrutia, first, and then to Mr. Sands, and that question is, 
you have made a good case today for additional resources for 
some things that we could do to ease your passage in the work 
that you do. I recall from my own days in and around this 
sector really being impressed by the extent to which 
particularly extending credit, but also even just getting 
people banked was an incredibly labor-intensive process. It 
involved a lot of close-in underwriting. It involved a lot more 
technical assistance often to borrowers. Often, you have first-
time borrowers who require technical assistance that a more 
sophisticated borrower may not. That always struck me as just a 
nearly insurmountable barrier to extending credit at the rates 
that would we like to do it.
    My question is, setting aside everything that we have heard 
about the need for additional resources and other things today, 
what progress is being made in terms of upping the scalability? 
And Mrs. Urrutia, I would love to start with you. I have huge 
respect for Accion. My sister actually worked there for a long 
time. And I know you are at the forefront of doing a lot of 
really interesting lending. Let me ask you, for a minute-and-a-
half, and then I am going to turn to Mr. Sands. What data 
science, technical innovation, what is out there that would 
allow us to do this very good work but on a larger scale?
    Ms. Urrutia. Absolutely. That is a very good question. 
Thank you for asking. The city of my industry, if we are going 
to scale, we have to employ a combination of technology and 
data analytics. I think the pandemic catapulted many of us to 
accelerate a roadmap for online and remote servicing to replace 
the face-to-face interaction. Almost overnight, as an example, 
most customer interactions across the country went to digital 
platforms, texts, emails, phones, instead of the branch and 
community-based locations that have traditionally categorized 
or represented that CDFI.
    We believe that as much as possible, there should be 
technology involved for reaching businesses for different 
channels. Some people are ready to come to you online, others 
want help that you can provide for them via phone or text or 
chat. That is one piece, how do you engage with the customer? 
The other piece is, how do you improve and get to a quicker 
response to a loan request? And that is very important because 
accessing alternative data sources via APIs has gone up 
significantly.
    Looking at creditworthiness that extends beyond credit, 
there are a lot of immigrants who don't have credit and can 
file, they have bill payments and they have cash flows from 
their business, that is very important for us. And I do believe 
that CDFIs are starting to move in that direction. But it is a 
challenge because technology and investment and infrastructure 
and systems and people cost money, and that is why we are 
looking forward to the bill that the chairwoman has introduced 
to provide some grant funding for CDFIs to be able to invest in 
this capacity, to accelerate their lending, and to improve 
getting much more capital to underresourced communities.
    Mr. Himes. Thank you, Ms. Urrutia. Let me give my last 50 
seconds to Mr. Sands. Again, what can we to increase 
scalability here.
    Mr. Sands. Thank you, Congressman Himes. I think there is 
an opportunity to leverage kind of the tailwinds of social 
media and smartphones, et cetera, and kind of meet the 
applicant where they are at. Roughly, a couple of decades ago, 
we would always talk about that younger user in the household 
who was translating or helping out or going on the computer and 
filling out--well, that younger user is now our borrower, so we 
have some opportunity there. I think the other thing is to look 
at innovative products.
    One of the things we are leveraging is leveraging bank 
statements as an ability to repay, versus kind of traditional 
products where you say, okay, it is only a credit profile. Bank 
statements actually show an ability to repay, actually, I would 
say equally or better than the traditional credit model.
    The other thing I think we have an opportunity with, 
Congressman Himes, is to really take some of these technology 
partners and bring them into the fold, bring them into 
responsible lending. And that is one of the things, I think, 
that is out there, that could be a licensing exemption.
    Mr. Himes. Thank you. My time has expired.
    Mr. Sands. Thank you.
    Chairwoman Waters. Thank you so very much. And let me just 
say, I am surprised no one has talked about incubators and what 
they could do to respond to what Mr. Himes is talking about.
    The gentleman from Wisconsin, Mr. Steil, is now recognized 
for 5 minutes.
    Mr. Steil. Thank you very much, Madam Chairwoman. Thanks 
for calling today's hearing. It is a really important topic 
that we are covering. Let me tell you, though, we have been 
staring at the screen for 2 hours, and personally, I cannot 
wait until we get back to work in person. People in Wisconsin 
are back to work. They are off Zoom. They are getting it done 
in person. So, knock on wood that we are able to do that soon.
    But either way, this is a big topic here. And I want to 
piggyback on what my colleague from Ohio, Mr. Warren Davidson, 
was commenting on with you, Mr. Faulkender, if I can, in 
particular, the inflation environment that we are in. You wrote 
a great op-ed in The Baltimore Sun, back when inflation was at 
5 percent. We are now at 7.5 percent, when Chairman Powell was 
recently at the committee, I think about 18 months ago. I say 
that recently. I talked a lot about my concern about the 
monetary policy that we were doing, the implications that would 
have as it relates to inflation. We also have a fiscal policy 
going on in Washington where Washington continues to spend 
money like drunken sailors.
    And now, we are in an inflationary environment. And I think 
one of the big things with inflation is it doesn't hit everyone 
equally. If you are a homeowner, if you own assets, inflation 
isn't good for you, but your assets inflate along with 
everybody else. But if you are not a homeowner, if you are a 
renter, if you are somebody who doesn't have significant 
assets, inflation is really clobbering you.
    And let me tell you, in southeast Wisconsin, I hear it time 
and again, when I speak with our lower-income workers, and when 
I speak to seniors on fixed incomes--and so, we are here 
having, actually, I think, a good conversation about the 
importance of some of our Minority Depository Institutions, 
about community development work. Could you shine some light as 
to with this really high inflationary environment we are having 
due to monitory and fiscal policies that are running amok, the 
unique impact that that is having at some of our MDIs and 
CDFIs?
    Mr. Faulkender. Congressman, you raised a very important 
point that I should have distinguished earlier about how 
inflation is different this time than it has been 
traditionally. We are operating in a 7\1/2\ percent inflation 
environment, while the fund's rate is at 25 basis points. So, 
think about that differential that is going on. You have 
anybody who is in any kind of fixed income assets, anybody who 
is taking kind of a safer approach for their investment profile 
and is only realizing less than 1 percent rates of return on 
their assets--
    Mr. Steil. That is our seniors on fixed incomes. That is a 
huge issue. But let's also talk about people who are struggling 
to get by. I think of a single mom with two kids who doesn't 
own her home currently; she is renting. She is paying $800 to 
$900 a month, and rent is going up, and her wages aren't 
keeping up. How does that impact that type of a person that a 
lot of our MDIs are directly interacting with on a regular 
daily basis, low-income workers, in particular?
    Mr. Faulkender. It is low-income workers who are hit in 
particular, because they generally have less of a savings bump, 
or the difference between the 7\1/2\ price increases they are 
incurring, and the less than that increase in wages. And it is 
very much putting pressure on their budgets. They are having to 
cut back. When they can even find products that they are 
working for, they are having to reduce their quantities of 
them. And so, yes, there is then reliance upon local 
institutions, generally, for some kind of assistance. And yes, 
it is important that we have a diversity of financial 
institutions that conserve these needs. And let me also just 
stress the role that CDFIs and MDIs play in financial literacy.
    Mr. Steil. Being cognizant of time, this could be a great 
5-hour conversation we are having, but I think it is really 
important. I think Congress needs to get our fiscal house in 
order. And I would like to see the Fed get some more monitory 
policy in order.
    But let's jump because I had a great conversation--I served 
as the ranking member with Chairman Himes on the Select 
Committee on Economic Disparity & Fairness in Growth, and we 
held a hearing about banking the unbanked. And I think one of 
the most interesting things for me that came out of that was 
the percentage of Americans who now have a smartphone. And, in 
particular, it doesn't deviate as much with race, according to 
pure research, as it does with age. That study showed that 
while 85 percent of Americans have a smartphone, it was 83 
percent for Blacks, and 85 percent for Hispanics. So a 
difference, but not a massive difference, if you will. And I am 
wondering if you could comment on how fintech could really help 
us bridge the gap to the unbanked?
    Mr. Faulkender. Right. Fintech can bring down the cost of 
providing those services. The best experience of fintech 
arguably is overseas, where there is a much larger percentage 
of unbanked and underbanked, and similar cell phone 
penetration. You are seeing this shift in a number of 
developing countries to adopt cell phone-based technology to 
serve traditionally-underbanked communities that we can call 
upon if we--
    Mr. Steil. Mr. Faulkender, cognizant of the time, and I 
appreciate the dialogue, but, Madam Chairwoman, I will yield 
back.
    Chairwoman Waters. Thank you.
    The gentleman from Colorado, Mr. Perlmutter, who is also 
the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is now recognized for 5 minutes.
    Mr. Perlmutter. Thanks, Madam Chairwoman. I would like to 
get into a debate with Mr. Steil and Mr. Davidson, but I will 
start with a question that is on topic for you, Ms. Urrutia.
    In many cases, Community Development Financial Institutions 
are meeting the demand or small micro business lending demand 
where traditional financial institutions are not. This is a 
quote as reported by The Colorado Sun, from a small business 
borrower in Colorado who worked with a local CDFI after being 
turned away from traditional lenders: ``The traditional lenders 
didn't really want to take the risk. There just wasn't 
collateral in it for them to take that risk. I tried to pull 
every card I could--I am a female, I am a minority, I am a 
veteran--but traditional banks did not want to look at us.'' 
And then speaking of a positive experience, she said, ``It 
wasn't just money. The Colorado Enterprise Fund, the CDFI 
offered to help with marketing, offered to help with QuickBooks 
for accounting, and offered to help with getting our business 
plan together to make it stronger. They just gave us more 
support.''
    Ms. Urrutia, what makes CDFIs more able to make loans where 
other lenders take a pass? Uh-oh. She is frozen on my screen. 
Would anybody else like to take a shot at that?
    Mr. Sands. Sure, I could talk about it. I think the 
opportunities that CDFIs have or what CDFIs are leveraging is 
both the intentionality of working with those who might not be 
able to be in the mainstream credit. I think the other thing 
that we have talked about here is programs like SSBCI, which 
gives us an opportunity to take some of that risk and also 
leverage the opportunity to participate in credit enhancement 
and others to have some innovative credit products.
    Mr. Perlmutter. Let's talk about that for a second, Mr. 
Sands. So, you or other organizations, can you come in and help 
a particular business or organization with their accounting--
can you give additional assistance beyond what would be 
traditional banking?
    Mr. Sands. Absolutely. And that is--
    Mr. Perlmutter. Do you?
    Mr. Sands. We do. We have a nonprofit affiliate called The 
Center, and we give one-on-one classes. Today, they are via 
Zoom. They used to be face-to-face and Zoom and also seminars. 
We teach everything from procurement, which is obviously a hot 
topic right now with the infrastructure bill, et cetera, to 
more specialization, which could be things like restaurant 
funding and different things like that.
    Mr. Perlmutter. Let's talk about restaurant financing for a 
second.
    Mr. Sands. Sure.
    Mr. Perlmutter. Because Mr. Hill said earlier that we we 
don't need the SBA anymore. We are really out of the emergency. 
In Colorado, we have a big hospitality industry. And Omicron 
hit the restaurant business again. Now, we are coming out of 
it. It was a quick, sharp spike, but it basically shut down the 
restaurants from Christmas until a week ago. We are expecting 
half of our restaurants to fail. It is the one area where we 
are really seeing some trouble. How can CDFIs and MDIs help the 
restaurant industry? And are you all doing that? This is to the 
whole panel. I will start with you, Mr. Sands.
    Mr. Sands. During COVID, what we talked to the restaurant 
industry about was insurance, how to handle their team members, 
how to look at their leases, other things that will be 
important that aren't exactly QuickBooks and how you borrow 
money, right? So, we gave them that fortification and the 
understanding of how they want to move forward.
    Today, what we are talking to them about is, again, not 
only QuickBooks and financials, but we are talking to them 
about how they bring in the PPP, how they think about 
diversifying their business. It could be something like working 
with some of the DoorDashes, and the Uber Eats, and the 
different things to kind of modify their business, like getting 
a liquor license.
    We are teaching them other things in addition to just the 
traditional financial principles. And they are very supportive 
of us helping them to grow their business. And we are also 
connecting them with other businesses. So, if you think about 
the manufacturing within a restaurant, where they can get their 
goods and services and other things, that has also been very 
helpful for the restaurateurs' tours that we have been 
advising.
    Mr. Perlmutter. Okay. Thank you. And Madam Chairwoman, I 
would like us to have a hearing on inflation and the economy 
because we have a great economy. GDP is up more than it has 
been in 40 years, and unemployment is down, with 6 million 
people added to the job rolls.
    Mr. Faulkender, I can tell you that Peloton failed to 
produce--they have a glut of stuff, with prices dropping. 
Purell has a glut of stuff, and prices are dropping. So, we are 
not in a typical scenario. And we have troubled industries, 
like the restaurant industry. This isn't an ordinary 
inflationary cycle. I have been through a lot of these. I am a 
bankruptcy lawyer. I will yield back.
    Chairwoman Waters. Thank you so very much. The gentleman 
from South Carolina, Mr. Timmons, is now recognized for 5 
minutes.
    Mr. Timmons. Thank you, Madam Chairwoman, and thank you for 
holding this hearing today.
    Dr. Faulkender, I am going to begin with you. What type of 
financial institutions were most effective in helping minority-
owned businesses obtain PPP loans? Were there any noteworthy 
patterns that we, as policymakers, should take note of?
    Mr. Faulkender. In addition to CDFIs and MDIs that serve 
minority and underserved communities, the fintechs really 
stepped up. There is some academic research that has come out 
demonstrating that where some of the traditional banks may have 
underserved those communities, fintech has really filled that 
gap in order to help traditional unbanked borrowers gain 
access.
    Mr. Timmons. Sure. Thank you for that. Were there any 
trends in MDIs and CDFIs providing PPP loans for existing 
customers, new customers, unbanked, to underbanked? Again, I 
think it is important for us to examine what worked and what 
did not work, especially given that a significant portion of 
PPP loans were set aside for these institutions.
    Mr. Faulkender. Yes, my recollection is that the fintechs 
and the CDFIs did serve disproportionately minority borrowers. 
At the same time, as I recall from the data, the very largest 
banks served their clients pretty proportionately by the end of 
the program. It was really some of the smaller community--it 
was some of the smaller banks that saw some of the shift from 
them towards the fintechs during the PPP program.
    Mr. Timmons. Sure. Thank you. I think how PPP played out 
within the eyes of the CDFIs should inform how Treasury 
administers the Emergency Capital Investment Program. But 
moving on to a different topic, staying with you, Dr. 
Faulkender, the White House seems to think that some of the 
economic data coming out recently has proved that their 
policies are working. Yet, consumer confidence has not been so 
low since 2011. And GDP growth forecasts for the first quarter 
of this year estimates less than 1 percent growth. The 
President claims he created millions of new jobs last year. But 
who in their right mind thinks people finally going back to the 
jobs they were forced to leave because the government posted 
lockdowns as job creation? These jobs, which are still a few 
million short of pre-pandemic levels, came back despite what 
the Biden Administration and Democrats in Congress have done, 
not because of anything they have done. And now, because of the 
extremely dovish acts taken by the Fed over the last year, 
coupled with the reckless spending we have seen in this past 
Congress, we are facing the highest levels of inflation we have 
seen in literally 40 years.
    I did a little digging recently on how the Fed has 
responded to similar rises in inflation. I could not find an 
example in modern history where they successfully achieve a so-
called soft landing and avoided a recession, while 
simultaneously avoiding--we have problems. I don't want to keep 
going on and on, but consumers and business owners have seen 
the warning signs in the last several months, but it seems my 
colleagues across the aisle are just waking up to the 
seriousness of the situation. Hopefully, it is not too late.
    Mr. Faulkender, is inflation the primary culprit for the 
lack of confidence in the economy, or is it something else?
    Mr. Faulkender. The Consumer Sentiment Survey that came in 
from the University of Michigan really pointed to two things: 
number one was the Omicron variant; and number two was 
inflation.
    Mr. Timmons. And what are your thoughts on supply chain 
challenges? I can't help but think of the fact that people in 
California were getting paid $900-plus a week up until December 
16th, and they are just now getting back to work. We have lines 
of cargo ships in the Pacific. We have people who are being 
paid more to stay home. And it is no wonder that shelves in 
South Carolina are--we are having trouble keeping them stocked. 
What role do you think supply-chain challenges play in the 
inflation that we are seeing today?
    Mr. Faulkender. They play a significant role. The pandemic 
itself is going to challenge the supply chain, but when we have 
policies that then exacerbate those problems, then you get a 
delay in the realization of a return to normal. So, when you 
shock one particular manufacturing location due to, say, the 
pandemic, that is going to already create a delay. But then, 
when you have reductions in workforce participation, when you 
have truckers sidelined whether because they are making less 
working than they were paid on unemployment, or because you 
impose vaccine mandates, or some kind of other burden on them, 
that reduces participation, which is going to further elongate 
the delay in quantity. What happens in the interim? Prices go 
up on the products that you can find.
    Mr. Timmons. Sure. Thank you for that. Madam Chairwoman, I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Lawson, is now recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, for calling this 
hearing today. It is a very informative hearing. And because of 
the way things have gone, one of the things I would like to say 
is I have heard many of my colleagues make reference to some of 
the spending that we did in this past year with inflation. But 
one of the things I hope they realize is that if we hadn't 
spent a lot of this money, many of our businesses would be lost 
forever. It was necessary that we reinvest in the economy to 
make sure that the economy could respond to this pandemic.
    My question to the panel is--and anyone on the panel can 
comment on it--the ability to place small business loans with 
the Federal Home Loan Banks enables the lenders to make mobile 
loans with the funds prior from the Federal Home Loan Bank 
(FHLB). Under the Federal Home Loan Bank Act, only a small 
community bank under $1.2 billion can pledge small business 
loans to FHA Bank. Does this make sense to allow small banks' 
ability to use these loans to borrow it from the FHLB? Anybody 
on the panel can respond.
    Mr. Sands. Congressman Lawson, I brought this up in both my 
oral and my written testimony. I think we have a unique 
opportunity here for small banks, CDFIs, et cetera, to be able 
to pledge business assets. That is number one.
    Number two, I think there is another opportunity here to be 
able to leverage guarantees, SSBCI and others.
    And number three, I think there is a third opportunity here 
as we look at the credit rating within FHFA that flows down to 
FHLB in which CDFIs could be considered similar to banks, and/
or we could create some type of credit enhancement to make them 
feel more secure. We know that the FHLBs have never lost money. 
And we are not looking for them to lose money. What we are 
looking for is an opportunity to be able to leverage FHLBs to 
provide lower interest rates and also more capital to 
undercapitalized communities. Thank you.
    Mr. Lawson. Any other comments?
    Mr. Bynum. If I can piggyback on that. I think CDFIs and 
MDIs, particularly mission-driven CDFIs, should have full 
access to the toolkit of resources that are available to any 
bank. We play an outside role in driving capital, providing 
tools that help people climb the economic ladder. And we should 
not leave these critical frontline financial first responders 
with one hand tied behind their backs. And so, whether it is 
the Fed window, the Federal Home Loan Bank, or the SBA, CDFIs 
should be a priority consideration as these programs are 
designed and have full access to them.
    Ms. Elam. And just to double down on that point, I think 
PPP is the perfect example of, when you don't utilize small 
lenders, or when they don't have set-asides or access in a way 
that would be helpful to communities, those communities aren't 
served. And so, what happened with PPP was that small 
businesses weren't able to participate in the program because 
those lenders that serve them had challenges as well. So, any 
way that you can make it easier for these small lenders to 
participate in programs is helpful.
    Mr. Lawson. And, Dr. Faulkender, in your analysis about 
inflation and where we stand now in investments that the 
Federal Government made in order to stimulate this economy, do 
you think from an academic standpoint, that we went in the 
wrong direction, or did it really help the economy from where 
we are today?
    Mr. Faulkender. Thanks for that question, Congressman. I 
would differentiate between some of what we did early on in the 
pandemic versus what we had done more recently. I think that 
you would have pretty uniform agreement that the $3 trillion 
that we spent on the CARES Act was absolutely essential. 
Whether it was the various grounds of PPP funding, whether it 
was enhanced unemployment claims, we were looking at a 32-
percent drop in annualized GDP in the quarter in which we had 
the depth of the pandemic recession.
    We have been expanding since May of 2020. We have an 
unemployment rate that has been in the 4-percent range for a 
while. We have largely gotten our economy back open. And so, we 
don't need yet another round of fiscal stimulus when we already 
have an accessible amount of liquidity out there. What we need 
is for people to return to the workforce.
    Mr. Lawson. Your analysis, do you have any--I know what 
people are saying--why do you think people are not returning to 
the workforce?
    Mr. Faulkender. I think part of it is that when they have 
as much liquidity as they have, there is less reason to be in 
the workforce. When they are paid more on unemployment than 
they make working, they have also delayed being in the 
workforce.
    Mr. Lawson. Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from North Carolina, Ms. Adams, is now 
recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman. And let me say what 
a pleasure it is to be with you again. And I thank the ranking 
member as well for holding this hearing. And to our witnesses, 
thank you for your testimony. I want to briefly talk about the 
work that our committee and the Biden Administration is doing 
to uplift minority communities.
    As part of our second COVID relief bill, Congress included 
$9 billion--billion, with a ``b,''--for the Emergency Capital 
Investment Program (ECIP.) ECIP is historic, and it will be 
transformative for millions of Americans for whom access to 
capital is dependent on their MDI or CDFI, so, I would like to 
address some of you about ECIP.
    Mr. Bynum, your organization is a CDFI and a credit union. 
Can you tell me what kind of impact the ECIP dollars will have 
on the communities that Hope serves, and what does that mean in 
terms of support for your organization?
    Mr. Bynum. Thank you, Congresswoman. ECIP is a game 
changer, we are hoping for other CDFIs. It took us nearly 14 
years to grow to roughly $88 million. And in one injection, we 
are getting $88 million in capital that we can then leverage to 
grow to $900 million in deposits to drive into communities that 
have a much lower homeownership rate, where the businesses 
close at 40 percent compared to 20 percent for non-Black and 
Brown businesses. We are working to use these resources to work 
with Historically Black Colleges and Universities (HBCUs), with 
small towns led by people of color, and with inner cities to 
help them leverage some of the infrastructure dollars and drive 
them into those well-starved communities that need more 
infrastructure, need affordable housing, need healthy food 
stores, but don't have bank branches. And CDFIs are the only 
way that these dollars are going to get in. And then, we can 
bring Federal dollars and private capital from the Netflixs, 
and the Nikes, that are providing deposits that we are 
leveraging with the ECIP to help to improve conditions and 
close these capital gaps that have existed for centuries in 
these underserved communities.
    Ms. Adams. Thank you. As a proud, two-time HBCU graduate, I 
certainly appreciate that. But let me ask you in terms of 
follow-up, do you believe that CDFIs that aren't banks or 
credit unions should be eligible for support from Federal 
programs like ECIP? Why or why not?
    Mr. Bynum. Absolutely. There are many, many more non-
depository CDFIs. And so, we are relieving these vital assets 
on the sideline by not providing them with the similar type of 
equity capital that has fueled the depositories. These loan 
funds, these venture funds, these micro funds also need small 
balance sheets so that they can go to the banks, the Bank of 
Americas, the Citis, the Wells Fargos, and the Chases, and 
accept their debt. They don't give you grants at the level that 
we are talking about with ECIP. They will give you debt. And 
you can't take debt without the balance sheet support.
    So, it is critical that we inject capital into loan funds 
and into these small credit unions as well that were not able 
to get ECIP. They need more ability to leverage these funds as 
well.
    Ms. Adams. Thank you. Let me get another question in. Ms. 
Urrutia, your organization is a CDFI loan fund which was not 
eligible to participate in the ECIP program. If Congress were 
to fund a similar program, do you believe that CDFIs that 
aren't depositories should be eligible?
    Ms. Urrutia. Absolutely. The borrowers that we serve 
deserve the same opportunities as those of depository 
institutions. And these small business borrowers really face 
the same challenges, no matter who they are going to get their 
financial services from. ECIP or a similar program would allow 
us to offer extensive relief to small business owners, 
particularly, those who had been most impacted by COVID-19, and 
further allow us to continue investing in low-income 
communities. I mentioned earlier that we got part of the $3 
billion. We got $1.8 million, and we were able to leverage that 
to $10 million in capital to help 650 new businesses.
    So, this is very important, and we are pleased to be here 
today as a CDFI, having a seat at the table, and being able to 
share the importance and the impact of our work that we do with 
underserved communities.
    Ms. Adams. Thank you so much, Madam Chairwoman. I am out of 
time, and I yield back. Thank you.
    Chairwoman Waters. Thank you very much.
    The gentleman from Illinois, Mr. Casten, who is also the 
Vice Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is now recognized for 5 
minutes.
    Mr. Casten. Thank you, Madam Chairwoman, and I really 
appreciate all of our witnesses taking the time to testify 
today. And I hope this isn't overly intellectual, but I have 
this sort of trouble in my head in thinking about MDIs and 
CDFIs in the sense that we created these institutions to 
address the lower levels of wealth and lower rates of wealth 
creation in minority and disadvantaged communities, which is 
good. But we also created the circumstances that created those 
lower levels of wealth from racially-preferenced subsidized 
loans, blockbusting red line, and, of course, the whole parts 
of our ugly original sin that predated that.
    And I don't share all that to go into a history lesson, but 
I find myself wondering when the issue that we have is that we 
preferentially subsidized equity, not racial equity, cash 
equity, and the accumulation of equity among non-marginalized 
communities in our country is the best tool always to provide 
debt to the marginalized communities. That is a big, meaty 
question. I get it.
    But what I am wondering, and, Mr. Bynum, I will start with 
you, is, have you ever seen any good data, relative to total 
wealth? How indebted are the communities you serve? And are 
there tools that we could provide to help get those communities 
equity that you don't currently have? And I realize that is 
kind of open-ended, but it is intentional. I would love to hear 
your thoughts.
    Mr. Bynum. No, no, Congressman, I appreciate you driving 
there. I think you have to really acknowledge--and I appreciate 
your acknowledging the history that had created these 
conditions. And it goes back generations. If you look at a map 
of where you had the highest concentration of slaveholding, and 
where you have the lowest housing conditions, the worst 
education outcomes, or the fewest banks and the most payday 
lenders, they are largely the same areas. And these are in 
places where you have the highest wealth gaps--100 to one for a 
Black family with children, compared to a White family with 
children. So, layering debt onto them is not the solution. They 
need to be able to build equity in homeownership, and business 
ownership are the primary ways to accomplish that. Nothing 
closes those gaps more.
    And CDFIs play a critical role in that. But right now, in 
this still weak economy--and I would love to have a 
conversation about the state of the economy, but it is still 
very fragile in many communities. And so, making sure that we 
don't just layer debt, but we layer flexible capital along with 
equity, and make sure people have the ability to support their 
families and their children, it is a combination of tools. It 
is not just debt. It is what it is putting them on a path 
toward ownership and building assets.
    Mr. Casten. I guess what I am wondering is, at the end of 
the day, you are a bank. You are going to make money by loaning 
to people. I would love to see a world where we have a set of 
rules where you have a greater incentive to give somebody a 
scholarship than you do to give them a student loan, right? 
Because one of those creates equity, and one of them creates 
debt. I would love to see a situation where you have a greater 
incentive to help someone get out from under private mortgage 
insurance (PMI) rather than give them a mortgage. And maybe 
that is a Community Reinvestment Act (CRA) reform question, I 
don't know. But where within your business model could we 
provide you with tools to give people more accumulation of 
equity in the first instance, given that a lot of what I just 
described may feel more like charity than a business model?
    Mr. Bynum. No, and I acknowledge that our tool kit is 
limited as a regulated depository. Loan funds have more 
flexibility, but we are one piece of the ecosystem that is 
necessary to help these families and communities strengthen and 
climb the economic ladder. I also think it is really important 
to not vilify people for making smart decisions with some of 
these resources that have been made available to support their 
families. Full employment is our main goal, but we have 70 
percent of Black Mississippians who don't earn enough to cover 
basic expenses, or they lose their jobs for 3 months. So full 
employment, if you don't earn a living wage, is not adequate. 
We need to help people earn more, and build wealth. And, again, 
we are a piece of the puzzle, but making sure that people have 
opportunities to build wealth is critically important.
    Mr. Casten. Good. And, Ms. Elam, I was hoping to ask the 
same questions of you, but this clock is counting down, so 
maybe we can follow up with you off the record, so I don't eat 
into my colleague's time. But thank you all for your time, and 
I yield back.
    Chairwoman Waters. Thank you, Mr. Casten.
    The gentlewoman from Massachusetts, Ms. Pressley, who is 
also the Vice Chair of our Subcommittee on Consumer Protection 
and Financial Institutions, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Chairwoman Waters. Thank you for 
convening this hearing. And thank you to our witnesses for 
joining us today. Our small businesses are what is in our 
neighborhoods, their character, and our families, their jobs. 
While it is not easy to run a small business, the sacrifice 
creates opportunity, freedom, and tradition as well.
    Chairwoman Waters and Chairwoman Velazquez have been 
delivering for small businesses for decades. When I was on the 
Boston City Council, I fought to lift a cap on liquor licenses 
so that for the first time in decades, new, small, locally-
owned restaurants could open in neighborhoods like Roxbury, 
Mattapan, and Dorchester. Unfortunately, decades of hard-won 
progress like this can be unraveled in an instant.
    As a result of the COVID-19 virus, those same small 
restaurants that nourished my neighborhood have struggled. I 
once again found myself fighting for their very existence. With 
the rise of power and prevalence in multi-billion-dollar 
corporate companies, well-connected financial institutions and 
products, Congress must be precise and intentional about 
investing in small businesses, and Black-owned small businesses 
specifically, or else their doors will be the first to close 
and remain permanently shuttered. And yet, during the pandemic, 
many businesses applied for and waited on PPP funding that 
never came. Instead, billions of dollars went to large 
corporations and chains. And overwhelmingly, the majority of 
Massachusetts PPP recipients were White.
    Mr. Bynum, following advocacy from your organization and 
many others, certain changes were made to the PPP program to 
better engage CDFIs and MDIs. Can you describe those specific 
changes and how they benefited Black-owned small businesses in 
your network?
    Mr. Bynum. Yes, Congresswoman, thank you. First, it was 
opening up the PPP program to participation by CDFIs. We were 
not on the first round, and the resources went to larger 
businesses, businesses that had long-term relationships with 
the banks, and ignored smaller businesses, smaller--and sole 
proprietors were not eligible to participate in the first 
round. That was changed, which opened it up, and CDFIs 
outperformed banks, quite honestly, in driving capital into the 
small, underserved communities and to minority businesses, and 
rural businesses. That was critically important.
    I think the lessons from that also fueled the other 
recovery programs, the rapid response and the ECIP, which are 
driving resources more to mission-driven CDFIs. And I am glad 
that those lessons are being applied. All CDFIs aren't created 
equal, and so, making sure that you get the frontline 
institutions like minority depositories, community-developed 
credit unions, loan funds that are small but powerful in 
driving these resources has been critically important. And I 
hope we continue that going forward.
    Ms. Pressley. Thank you, Mr. Bynum. Again, I am grateful 
for your advocacy and that you raised your voice, and even more 
grateful that our Chairwoman Maxine Waters listened and heeded 
those calls and fought for those changes to be made. Certainly, 
CDFIs and MDIs are powerful opportunity-builders. One barrier 
to receiving financial and technical support for our Black-
owned businesses that I have noticed is the lack of awareness 
of the resources that are available in the first place. It is 
not true that if you build it, they will come, if they don't 
know about it, specifically, those made available by our CDFIs 
and our MDIs.
    Mr. Bynum, if the CDFI Fund is made easier for individuals, 
small businesses, and communities to locate CDFIs and MDIs, do 
you think that that would help Black-owned small businesses?
    Mr. Bynum. Absolutely. One of the things that we have seen 
is that Black banks and Black credit unions have shrunk 
dramatically over the past decade from the financial crisis. 
And so, it is essential that we stem that tide. The CDFI's 
programs are critical in making sure that happens. And it is 
not going to happen if those resources are not targeted in a 
way that benefits the communities that are hardest-hit, that 
are most financially-fragile. Again, small loan funds, small 
credit unions, and minority depositories, I think should be 
considered as priorities in investing CDFIs and Federal 
resources as we continue to climb out of this economic crisis.
    Ms. Pressley. Thank you, Mr. Bynum. And to the point that I 
raised a moment ago in terms of getting the word out, to any of 
the witnesses who would like to expound upon that, are there 
ways that Congress and government agencies can better raise 
awareness about CDFIs and MDIs and the capital and technical 
assistance that they provide?
    Chairwoman Waters. The gentlewoman's time has expired. But 
we would like you to get back to her directly with some 
responses on how to get the word out. Thank you.
    The gentlewoman from Pennsylvania, Ms. Dean, is now 
recognized for 5 minutes.
    Ms. Dean. Thank you, Chairwoman Waters, for this hearing. 
And thank you to all of the experts who are here with us today. 
This has been really enlightening. In the CDFI space, what I 
wanted to talk about is an area that I think does not get 
enough attention, which is the important role that CDFIs play 
in providing financial and technical assistance to people with 
disabilities. People with disabilities face a range of 
financial challenges, often encountering barriers in securing 
traditional financial services. According to the National 
Disability Institute, the percentage of unbanked households is 
more than 3 times higher for households with an individual with 
a disability. When you also consider race, the numbers are even 
more staggering: 17.8 percent of Black households include 
someone with a disability, and a full 28.5 percent of those 
households are unbanked. Moreover, according to the National 
Disability Institute, over 20 percent of households with a 
disability have an unmet need for basic credit.
    Given the financial challenges faced by households with a 
disability, CDFIs have a vital role to play, given the 
importance of CDFIs for ensuring that people with disabilities 
have access to credit. I have fought for targeted CDFI funding 
for financial and technical assistance for people with 
disabilities through something we have here in Pennsylvania, 
the Pennsylvania Assistive Technology Foundation.
    Mr. Bynum, Mr. Sands, Ms. Urrutia, do your organizations 
have experience lending to people with disabilities? Can you 
speak to the importance of CDFIs in this space? How can we do 
better? And who is being left behind?
    Mr. Bynum. Yes, we do. And it also speaks to the point of 
CDFIs as part of an ecosystem. We partner closely with other 
organizations that provide appropriate assistance that is 
culture-appropriate, that targets the needs of those 
communities that we are trying to serve, including the 
disabled. And the access to flexible capital is critically 
important, because you cannot--again, as we were talking about 
earlier--layer unaffordable debt that these families cannot 
sustain given their particularly fragile financial position. 
You have to make it stretch out. You have to make it work for 
them, and a combination of debt and equity and grants are 
necessary. Flexible capital allows us to put the tools that 
CDFIs have to best use.
    Ms. Dean. Mr. Sands, did you want to add anything, or Ms. 
Urrutia?
    Mr. Sands. Yes, I would say we are doing similar to what 
Mr. Bynum said, and I will just add a couple of extra things. 
We also adjusted all of our online applications so they would 
have accessibility. As you know, that is a big tool whenever 
you are trying to go online and you are trying to leverage or 
be able to make the--a wet tool or technical application a 
little bit more accessible.
    Now, the second thing we are doing is we are monitoring the 
data in which those who mark themselves disabled where they 
might be struggling with an application so that we can make our 
system more fluid for them.
    And then the final thing I will say is that we also 
introduced some online education tools, which we believe are 
going to be pretty expansive in terms of getting the education 
out. Again, leveraging cell phones, which we recognize that 
these individuals do have for a variety of tools that they are 
obviously using as basic services in their own lives. Thank 
you.
    Ms. Dean. And Ms. Urrutia?
    Ms. Urrutia. Yes, some of the same. We have launched a call 
center that is available 7 days a week, 15 hours a day, cross 
times with bilingual customer care and ability to offer support 
in other multiple languages. And then, one-on-one coaching 
directly through partnerships that work with the community. For 
us, it is continuing to evolve, I believe, technology and 
flexible capital which Bill spoke about are going to be key 
drivers in better supporting the community.
    Ms. Dean. Thank you. And maybe one of you would like to 
answer this. As the COVID-19 pandemic continues to evolve, many 
small businesses have yet to recover. In your work, how has 
small business lending changed during COVID-19, and again, who 
has been left behind? And I say this knowing that I am proud 
that my district has the largest number of small business 
employees in all of the Commonwealth of Pennsylvania. Would 
somebody like to give 10 seconds to that?
    Ms. Urrutia. Sure. I will start. Underwriting has evolved 
significantly. Credit scores are no longer what they used to 
be. They don't give us the view of the future; they only tell 
us about the past. And we know the past is very different. And 
we see how additional data sources and technology-driven 
solutions have become significantly more important for small 
businesses and access to flexible capital.
    Ms. Dean. Thank you. I yield back.
    Chairwoman Waters. The gentlelady's time has expired. Thank 
you very much.
    The gentleman from Massachusetts, Mr. Auchincloss, who is 
also the Vice Chair of the committee, is now recognized for 5 
minutes.
    Mr. Auchincloss. Thank you, Madam Chairwoman. I wanted to 
ask about incubators for small businesses, which are designed 
to help businesses in their earlier planning stages. And 
Congress, as I am sure our witnesses know, has a growing 
interest in small business incubators, including a billion 
dollars in funding to establish and uplift incubators to help 
entrepreneurs in underserved markets. That is included in the 
Build Back Better Act.
    Lendistry and Accion Opportunity, you participate in 
lending to small businesses, including using SBA financing. 
Have your companies, either of you, had the opportunity to work 
with incubators or entrepreneurs in underserved communities 
that are members of incubators?
    Mr. Sands. I will go first on this one. I think we both 
have--we absolutely have. And the way we tend to look at this, 
Congressman, is we look at this is there is a continuum of 
capital that we must make sure that the small business has. 
Accion Opportunity Fund is more focused on kind of 
microlending, and we are looking at that next stage of capital. 
And the game plan is not only technical assistance and business 
abidance with the accelerator's offer, but also thinking about 
that capital path so that they could be job creators as well.
    Ms. Urrutia. I would just add that when you look at a lot 
of startups, they do not have revenue to demonstrate their 
ability to pay loans. And so, we always say that a loan is not 
a replacement for revenue. And many of these smaller businesses 
that we work with need equity, but there is really not a fully-
developed equity market for the type of businesses that we are 
talking about here. In these situations, we try to work with 
them to find grants, and those are hard to find, but there 
needs to be a better-developed market for equity capital for 
these small businesses that have a longer-term view, as opposed 
to a view to get liquidity events.
    Mr. Auchincloss. That must be challenging, because unlike 
in the venture software industry, for example, there is the 
potential for uncapped upside. And so, equity is an attractive 
investment. For a small business incubator, that has to be a 
more challenging market to set up. Do you have any advice for 
Congress as we look at these uplift incubators for how we can 
attract equity, knowing that this is for small businesses?
    Mr. Sands. My suggestion would be some of the things that 
you have already put into place as you think about procurement, 
Build Back Better, and you think about the infrastructure bill. 
Naturally, we know that minorities have a tendency to focus on 
service-oriented businesses. However, I think there are also 
opportunities for them to expand beyond leveraging either 
technology resources that you somewhat described, but also, 
opportunities for larger contracts where they can get bonding, 
insurance, et cetera, that these accelerators are also helping 
them with. I think the ability to grow revenue overall will 
lead to more venture capital money. And so, if we can find ways 
to get them into components which drive revenue or opportunity 
for revenue, there are some huge opportunities there for the 
capital to flow accordingly.
    Mr. Auchincloss. Yes, and to be clear, the goal for a lot 
of these businesses is not necessarily venture capital 
investment. That is a very specific niche type of business. And 
we want a whole flourish, an ecosystem of small businesses, 
some of which are service-oriented and aren't going to have 
either venture scale chances to fail frankly, but also, venture 
upside, and that is perfectly appropriate.
    Both of you have emphasized that customer acquisition is 
really the key. Loans and grants are great, but they are not 
revenue. Procurement help with the government as a customer 
makes a lot of sense to me. Are there other important ways that 
small-business entrepreneurs in underserved communities can get 
help in accessing those first couple of key customers that you 
have seen really work?
    Mr. Sands. I think if you double down on the strategy of 
having government contracts be accessible, speedier pay or 
faster pay, when a government contractor is available. I would 
also encourage you to look at the Small Business Investment 
Compnay (SBIC) program. There has been some conversation about 
making that a better entry process for CDFIs, mission-aligned 
venture capitalists, et cetera. And I know I am using the 
venture capitalist, but just generally, investors. And I will 
pause there in case Ms. Urrutia has anything to add.
    Ms. Urrutia. Yes, the SBIC program at the SBA, I believe, 
already does that.
    Mr. Auchincloss. In a previous hearing, we discussed, and I 
had raised the accounts receivable payback time from the 
Federal Government. Do you ever hear any of your businesses 
complain about the amount of time it takes for Feds to pay 
their bills?
    Mr. Sands. In a simple word, yes. But I do believe that 
there has been some great progress lately in that.
    Mr. Auchincloss. Madam Chairwoman, I yield back. Thank you.
    Chairwoman Waters. Thank you very much. The gentleman from 
Illinois, Mr. Garcia, is now recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, for 
this important hearing today, and thanks to all of the 
witnesses. You know, 26th Street in the neighborhood of Little 
Village in Chicago is one of the most vibrant commercial areas 
in the country. Small businesses--restaurants, beauty salons, 
grocery stores, bars--primarily owned by immigrants, sustain a 
rich economy. But when the COVID-19 pandemic hit, even strong 
businesses that have been around for decades were worried. Many 
didn't have relationships with existing banks or the Small 
Business Administration. And that is where CDFIs like The 
Resurrection Project and Allies for Community Business stepped 
in.
    CDFIs and MDIs have proven their value. They strengthen and 
promote economic opportunity for underserved working-class 
communities like the ones I represent in Chicago and Cook 
County. They were a lifeline to immigrant small businesses when 
disaster struck in 2020. But it is imperative that we make the 
necessary investment to support these institutions that are 
vital to helping families recover and prosper in our economy.
    Ms. Urrutia, during the COVID-19 pandemic, Latino small 
businesses were hit particularly hard, and we know they could 
not access PPP funding at the same rate that other business 
owners did. What needs to be done to reach the Latino 
community? I heard it every day in my neighborhood. Do you 
think traditional lenders did a good job in providing Spanish-
language access to businesses during the COVID-19 pandemic?
    Ms. Urrutia. I think that every financial institution, 
large financial institutions, many of them announced that they 
have servicing in Spanish, but it is really very basic. I think 
we need the recognition that the Latino community is rapidly 
growing, and it is one of the fastest-growing populations in 
the U.S., and Spanish-speaking populations in general are one 
of the most underbanked communities in this country.
    In our roots, we are headquartered in California, so our 
expertise lending to Latino-owned businesses goes back several 
decades. And what we have found is that the service in what 
Spanish-speaking customers need, spans all the way the spectrum 
of lending products, technical assistance, and how to. As a 
result, we have launched--I mentioned a call center, and it is 
open 7 days a week, in Spanish, to help customers through the 
entire application process, to provide the support of coaching, 
webinars, and technical assistance in their language because 
that is how they feel comfortable interacting. And that is how 
you get to build trust with the community. I think that is a 
very important component for anybody who is going to address 
this community to engage and have culturally-competent 
engagement actions with the community.
    Mr. Garcia of Illinois. Thank you for that. Mr. Sands, how 
can the Small Business Administration be more responsive to 
businesses that don't have a traditional banking relationship? 
And do you think that changes that Congress made to broaden 
access to PPP loans will have permanent benefits?
    Mr. Sands. Yes, absolutely. Thanks for the question, 
Congressman Garcia. I think that, essentially, Congress has 
always had this army, the mission-based lenders. And the 
mission-based lenders, as you heard Mr. Bynum say, have kind of 
fought with one arm behind their backs. PPP was one of the 
first times there were changes made in policy to allow for them 
to have forward deployment, whether it be the PPPLF facility, 
some changes in SBA, or the ability for us to lend nationally. 
These are things that I think we have an opportunity to not 
wait for the next pandemic and to keep moving forward on, in 
addition to Congressman Cleaver's bill in terms of lowering the 
CDFI bond guaranteed entry level. I think there are many, many 
opportunities here for Congress to say, let's look at what was 
successful, and let's continue going regardless of whether or 
not there is a pandemic.
    Mr. Garcia of Illinois. Thank you. And Dr. Faulkender, 
there is no question that inflation is a challenge to our small 
businesses, but raising the interest rate can have unintended 
consequences. If we slow down our economy, and my neighbors 
have less money, small businesses will suffer too.
    Dr. Faulkender, when the Fed raised interest rates in the 
past, what impact has this had on small businesses in working-
class communities like mine, and has it hurt their ability to 
borrow? You are going to run out of time. I have about 15 
seconds.
    Mr. Faulkender. There is a tradeoff to raising interest 
rates in that you are going to benefit savers, but anybody who 
is in a credit position is going to pay a higher cost for it. 
But to the extent the price stability is an important mandate 
of the Fed, it is important that they use their tools to keep 
prices in check.
    Mr. Garcia of Illinois. Thank you.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from Texas, 
Ms. Garcia, who is also the Vice Chair of our Subcommittee on 
Diversity and Inclusion, is now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you to all of the witnesses. I know it has been a long hearing, 
but the end is in sight. We are near the end of the 
questioning, and it is always really great to see people who 
are so willing to be here, interested in providing so much 
information, because I have really learned a lot today.
    Madam Chairwoman, it is important to make note that low-
income Latinos are disproportionately impacted by an 
inequitable financial system. The FDIC estimates that 30 
percent of Latinos, many of whom are Spanish speakers, don't 
have a bank account or use alternative financial services. Lots 
of community banks have already adopted practices that make it 
easier for Spanish-speaking populations to use bank products. 
For example, many of them do employ bilingual staff or they 
translate materials in Spanish.
    However, adopting this program is not enough. It is a great 
first step, but we need to make sure that they also get into 
planning and give some careful thought to how they do this for 
our Spanish-speaking community and, frankly, other communities 
who have language barriers.
    The technical assistance program with the CDFI Fund is the 
perfect tool to ensure that grant recipients have the resources 
they need to thoughtfully set up language barrier services. 
Bolstering the technical assistance program to include training 
and resources could build upon CDFIs' existing capacity to 
serve Spanish-speaking populations.
    Ms. Urrutia and Ms. Elam, my question to you is, you heard 
my compadre, Mr. Garcia of Chicago, talk about some of these 
barriers. It is not enough to just go to Google Translate and 
translate materials, if people go home and don't really 
understand them. Or some banks and some companies provide the 
loans, but there is somebody else who services the loans, who 
then starts sending them everything in English.
    What could we do more in terms of the technical assistance, 
in terms of funding? And can you be specific of what else 
people should be doing other than just providing materials in 
Spanish?
    Ms. Urrutia. Sure. Just to comment on the technical 
assistance program offered by the CDFI Fund, we do not apply 
for it. It is a very small program. We applied for the 
financial assistance program award, and you cannot apply for 
both. The technical assistance, I believe, is $125,000.
    But I think that the most important thing here is that 
these awards need to be allocated more proportionately, 
according to the organization size and the impact and the value 
that they bring to the communities, and lending and technical 
assistance. For example, CDFIs that have drastically different 
portfolio slices generally are awarded the same amount as CDFIs 
in the financial assistance program and the technical 
assistance program.
    It would be prudent and really more impactful to allow for 
more funding to organizations that really wish to scale their 
lending and/or their technical assistance and can provide 
projections and prove portfolio and customer growth.
    To your second question about what can be done, the trust 
needs to be built by getting to know the customer. Not every 
Latino customer is created equal. They all have different 
situations and circumstances and needs. And I think it is 
incumbent for any lender or provider of financial technical 
assistance to really meet the customer where they are and to be 
able to design specific solutions, products, and coaching that 
meet the needs of that business owner at that moment in time.
    Ms. Garcia of Texas. Ms. Elam, would you care to add 
anything?
    Ms. Elam. Yes, I think Ms. Urrutia hit the nail on the head 
in terms of knowing your customer. I think you have to really 
know your customer in order to provide products and services 
that are responsive to their needs, as well as materials that 
are responsive to their needs.
    One of the things that I can say is when I think about my 
Hispanic banks is they are very intentional about working with 
their partners to ensure that their partners understand that. 
Whenever they are creating a new partnership with a fintech or 
a government agency, they are very intentional in making sure 
that their partners understand the uniqueness of the 
demographics that they are serving.
    Ms. Garcia of Texas. Right. And what about the contractors 
that you may use? I belong to a credit union, but I have always 
had problems with the folks who service the mortgage. I don't 
want to get into war stories, but they don't provide everything 
in Spanish, and that is where the problems begin, because that 
may lead to misunderstandings, delinquencies, and maybe even 
repossessions, depending on what they want.
    Chairwoman Waters. Thank you very much. The gentlelady's 
time has expired.
    Ms. Garcia of Texas. I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentlewoman from Georgia, Ms. Williams, who is also the 
Vice Chair of our Subcommittee on Oversight and Investigations, 
is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Madam Chairwoman, and 
thank to you all of our witnesses who have waited until the 
very end today.
    When marginalized communities can access capital, we can 
help secure the promise of the American Dream for all of us. 
And today, I would like to focus on the impact that lending 
from mission-driven financial institutions can have on solving 
the affordable housing crisis in this country. In metro 
Atlanta, we only have 29 affordable and available housing units 
per 100 extremely low-income households. The national average 
of 37 isn't much better. And we can't afford to not make big 
investments in building and updating our nation's affordable 
housing including by empowering mission-driven financial 
institutions focused on housing.
    As a CDFI in my district, the Atlanta Neighborhood 
Development Partnership Loan Fund has financed thousands of 
affordable housing units through the years.
    Mr. Bynum, how can we encourage more existing mission-
driven financial institutions to make affordable housing 
production the focus of their lending?
    Mr. Bynum. Thank you, Congresswoman.
    This is so important. As I mentioned earlier, nothing 
closes the wealth gap more than housing and ownership, business 
ownership, home ownership. Home ownership perpetuates business 
ownership. It yields equity and you can do things and you can 
invest in entrepreneurship.
    I think I also appreciate your distinction of mission-
driven CDFIs, ones that are actually going to drive capital 
into the communities that have not been able to get a mortgage 
loan from traditional financial institutions or developers that 
need financing to build affordable, quality, rental housing. 
And that is where CDFIs come into play.
    I think, again, building on the work that you have done, 
let's finish the job. Let's continue and sustain programs like 
ECIP and drive them to not just banks and credit unions but 
loan funds as well, and let's bring HUD into the picture. Down 
payment assistance is critically important. You cannot--we have 
100 percent down payment products. That is something that we 
choose to do because it helps us to drive 80, 90 percent of our 
loans to first-time home buyers, to minority and women 
borrowers. But down payment assistance will be critically 
important as well as making sure that CDFIs have the capital to 
provide the financing that these homeowners and developers need 
to provide the services that you described and that are so 
important.
    Ms. Williams of Georgia. And, Mr. Bynum, no place is this 
more evident on the need to close the racial wealth gap than 
Atlanta, which unfortunately leads the nation with the largest 
racial wealth gap. So, we clearly have our work cut out for us.
    In 2020 alone, CDFI dollars financed 50,000 new affordable 
housing units. However, when we are looking at a deficit of 
nearly 7 million affordable housing units across the country, 
we know that we still have a lot of work to do.
    Mr. Bynum, what kinds of changes or resources would it take 
to expand the number of mission-driven financial institutions, 
funding the development of affordable housing in a way that 
better meets existing need?
    Mr. Bynum. I think, again, more capital. You have members 
of Ms. Elam's association that are banks, that are ready to 
grow if they have the capital. It's the same thing with credit 
unions. NeighborWorks America--the organization you mentioned 
is a part of NeighborWorks America, which drives grants to help 
them build their capacity. I think Mr. Sands is a great 
example, as well as Ms. Urrutia's organization, of how fintech, 
properly targeted, can help expand the deployment capacity of 
CDFIs.
    I think also making sure that we use the tools that exist 
to hold banks accountable, as well as CDFIs. The Community 
Reinvestment Act, and the Fair Housing Act, have been under 
attack. And we need to make sure that those are shored up and 
that we ensure accountability in the deployment of capital that 
is supported by the Federal Government. We can't have CDFIs 
that widen the capital gap or banks that widen the capital gap. 
They have to be held accountable to deploy capital in a way 
that ensures access to everybody, regardless of their race, 
gender, or place of birth.
    Ms. Williams of Georgia. Mr. Bynum, when mission-driven 
financial institutions are best-positioned to invest in 
community assets like affordable housing and extend mortgage 
credit to borrowers of color, they can address longstanding 
economic inequities that impact people who look like me.
    You made several recommendations about how to best position 
mission-driven financial institutions to close the racial 
wealth gap. And if these are implemented, how would you 
characterize the impact that these financial institutions could 
have on closing the racial wealth gap?
    Mr. Bynum. It would be transformative. I also would 
encourage us to use Fannie Mae and Freddie Mac to drive them 
even more in this direction. They play a critical role, but it 
will transform this economy and make us the more perfect union 
that we say we want to be.
    Ms. Williams of Georgia. Thank you, Mr. Bynum.
    And, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    Do we have any more Members on the platform? If so, now is 
the time to identify them. We are about to close out this 
hearing.
    If not, I would like to take a moment to thank our 
witnesses for their testimony today. Your testimony here today 
will help me and the members of my committee keep our MDIs and 
CDFIs from being overlooked. And we will not only, not overlook 
them, we are here to make sure that we understand the capital 
needs, to make sure that there is cooperation with fintech, and 
to deal with all of those issues you have identified, whether 
it is CRA, or other kinds of issues. We are now focused. And we 
now have the opportunity to correct some of the ills that have 
been present for so long, dealing with financial institutions 
such as our MDIs and our CDFIs.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    I thank you all so very much, and this hearing is 
adjourned.
    [Whereupon, at 3:17 p.m., the hearing was adjourned.]

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