    [Senate Hearing 117-]
    [From the U.S. Government Publishing Office]

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2022

                                  ----------

                            WEDNESDAY, JUNE 23, 2021

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

        The subcommittee met at 2 p.m., in room SR-138, Dirksen
    Senate Office Building, Hon. Chris Van Hollen (Chairman)
    presiding.
        Present: Senators Van Hollen, Leahy, Coons, Hyde-Smith,
    Moran, and Kennedy.

                           DEPARTMENT OF THE TREASURY

                 OPENING STATEMENT OF SENATOR CHRIS VAN HOLLEN

        Senator Van Hollen. Welcome Madam Secretary; and everybody
    joining us. The subcommittee hearing will come to order.
        And I want to begin by welcoming Ranking Member Hyde-Smith;
    and our colleagues on the Senate Appropriations Subcommittee on
    Financial Services and General Government.
        Madam Secretary, welcome. Thank you for joining us to
    testify on the fiscal year 2022 Department of Treasury budget.
    And I would also like to acknowledge now some of the members of
    our second panel for today's hearing, who are joining us to
    discuss: The Community Development Financial Institutions
    Program.
        They are deputy assistant secretary, Noel Poyo, from the
    Department of Treasury; Mr. Joseph Haskins, the chairman of
    Harbor Bank in Baltimore; and Mr. Andy Anderson, president of
    the Bank of Anguilla, in Anguilla, Mississippi.
        It was welcome news, Madam Secretary, to see that this
    year's budget request proposes an increase in funding for the
    CDFI Program, and not the elimination of the program that we
    saw in budgets from the previous administration. Since its
    inception, the Department of Treasury has played a central role
    in maintaining a strong economy, spurring economic growth and
    promoting opportunity in the United States.
        That mission has been essential to our Nation's financial
    health, as we work urgently to build back better and stronger
    from the economic damage of COVID 19. Under the leadership of
    Secretary Yellen, the Department of Treasury has been charged,
    not only with providing historic relief in close coordination
    with Congress, but also supporting a dynamic economy that
    harnesses the potential of each and every American.
        This work is far from simple and requires our full effort
    and attention but, thankfully, the Department has moved full
    steam ahead to help those hardest hit, jumpstart our recovery,
    and pave the way to a fairer economy. We are already seeing
    proof of that fact. In particular, I would like to salute you,
    Madam Secretary, for helping to ensure a quick and efficient
    rollout of the expanded child tax credit benefits that were
    secured in the American Rescue Plan.
        Under that plan eligible families will now receive $3,600
    for each child under 6 years old, and $3,000 for each child
    between the ages of 6 and 17. And starting in mid-July,
    families will start receiving their expanded child tax credit
    in monthly payments of up to $300 per child. It is estimated
    that this move will cut child poverty in half this year. And I
    hope we can work together to extend that credit beyond 2021, as
    proposed in President Biden's budget.
        Madam Secretary, I also want to commend you on the success
    in moving toward a global minimum tax rate for corporations to
    help stop the current race to the bottom that we are seeing
    between nations as many seek the shelter of tax havens.
    Congratulations on reports of today's news of the G20, and we
    will be following up with some questions on that front. It is
    really important that our major multinational corporations pay
    their fair share of taxes, and your work has moved us closer to
    that point.
        The fiscal year 2022 budget proposes an appropriation for
    the Treasury Department of almost $15 billion, an increase of
    $1.4 billion over last fiscal year. There is no question that
    the Treasury has been asked to play a large role in addressing
    the pandemic, and making sure that the United States economy
    recovers, and to achieve these goals, they have asked us for
    additional funding for departmental offices, so everyone at the
    Treasury can do their job.
        There is no doubt that we have asked your Department to do
    a lot more over the last year-and-a-half. Within that total,
    you have requested $13.2 billion for the IRS, an increase of
    $1.2 billion. Your budget also request $80 billion over 10
    years in additional funding for the IRS, split between
    mandatory funds and a discretionary cap adjustment for tax
    enforcement activities, which would be $417 million for fiscal
    year 2022.
        This subcommittee heard from the IRS Commissioner on many
    of these issues. He laid out a very solid case for providing
    these funds to close the tax gap, somewhere between $500
    billion to $1 trillion in each--taxes that are owed mostly by
    very wealthy individuals, but not paid. And the additional
    information can go to address badly needed services to provide
    all Americans, through the IRS, with respect to the
    Department--with the IRS functions.
        Before I end, Madam Secretary, I would just like to commend
    you and your staff on your responsiveness to our questions, and
    grateful for the assistance your team has provided as we
    prepared for this hearing.
        With that, let me end where I began, by thanking all of you
    for coming today to share your perspectives. And now I want to
    turn it over to Ranking Member, Senator Hyde-Smith for her
    opening statement.

                 OPENING STATEMENT OF SENATOR CINDY HYDE-SMITH

        Senator Hyde-Smith. Thank you, Mr. Chairman. And I welcome
    you, Secretary Yellen, to our hearing today, and I look forward
    to your testimony this afternoon, and the testimony of our
    second panel as well. I am very pleased to have a Mississippian
    with me today, a friend, Mr. Andy Anderson of the Bank of
    Anguilla in Mississippi; and Mr. Joseph Haskins from The Harbor
    Bank of Maryland; and Mr. Poyo, deputy assistant secretary at
    the Treasury.
        Thanks for being part of this, and thank you for your
    willingness to serve and doing all you do. And we are here
    today to examine the Treasury's Department budget request for
    fiscal year 2022. Treasury's offices execute multi functions,
    important functions that promote economic growth, and combat
    illicit finance, administer the internal revenue code, and
    operate the Federal Government's collection systems, and
    deposit system.
        Secretary Yellen, in addition to the traditional
    responsibilities, you really have a full plate. You have also
    are going to execute emergency response programs for a variety
    of industries and businesses. And since the beginning of the
    pandemic, the Treasury Department has been at the forefront of
    all of these relief programs. But unfortunately under the Biden
    administration, we have seen government programs that were
    intended to be targeted and temporary during the pandemic
    become permanent.
        And we are also seeing some spending levels warranted only
    in times of crisis become common. As these health threats of
    the pandemic recede, the Biden administration continues to
    press ahead with even greater spending and higher taxes, which
    is a concern for me and many Americans, concerning the budget.
    But the first time in American history a president submitted a
    budget to Congress that proposes annual deficits exceeding $1
    trillion deficits in every single year of the next decade.
        In fiscal year 2019, the Federal Government spent $4.4
    trillion, which is still a truly remarkable sum. Now the Biden
    administration proposes to be spending more than $6 trillion
    next year, and in every fiscal year thereafter. As a result,
    the Biden budget would add $15 trillion to the national debt,
    over the last 10 years.
        And 10 years ago I remember being really concerned about
    the debt levels, and now in 2011, that just doesn't seem that
    long ago that, you know, just recently this has been occurring,
    and I think about the timeframes and timelines when Prince
    William married Kate Middleton that year in the so-called
    ``wedding of the century'', just wasn't that long ago. But in
    2011, the U.S. debt stood at $14 trillion total, in 2011. And
    in 2031, 10 years from now, the national debt will rise to $39
    trillion under the Biden administration's spending plan. Let me
    say that again, $39 trillion, from $14 trillion to $39 trillion
    in 10 years.
        So I look forward to hearing from you, but these are
    certainly the concerns that I have for the Department and your
    funding request.
        Thank you, Mr. Chairman.
        Senator Van Hollen. Thank you, Senator.
        We have been joined by Senator Kennedy as well. Welcome.
        And Madam Secretary, let me turn it over to you for your
    opening statement.
    STATEMENT OF HON. JANET YELLEN, SECRETARY OF THE
                TREASURY
        Secretary Yellen. Thank you. Chairman Van Hollen, Ranking
    Member Hyde-Smith, thank you for inviting me to join you today,
    I look forward to your questions.
        But first I want to briefly discuss the state of our
    economy and the state of the Treasury Department, because I
    believe one depends on the other. When I took office back in
    January, the most urgent problem confronting our economy was
    obviously the pandemic, helping people make it to the other
    side of the crisis, and ensuring they were met there by a
    robust recovery.
        Thanks to this Congress and its passage of the American
    Rescue Plan, I believe we are well on our way toward that goal.
    However, the ARP and its predecessor legislation are not self-
    executing. As you know, in order for relief dollars to
    effectively reach their intended targets, we have to stand up
    and manage new Federal programs.
        Treasury has been tasked with much of this work and we are
    proud to do it, but our challenge is that while our portfolio
    has grown to match the urgency of this moment, our annual
    budget has not grown in tandem, and the funding provided to
    administer new programs is temporary. Not accounting for
    inflation, our annual budget is still at the same enacted level
    as in 2010, and critical policy offices like domestic finance,
    economic policy, and tax policy have seen their budgets cut by
    as much as 20 percent since 2016.
        The mismatch is very stark, when you take a moment to scan
    the new bodies of work we have undertaken. Treasury has built a
    $350 billion program to help State, local, and Tribal
    governments start operating normally again. The CERTS program
    will provide $2 billion to bus and ferry companies. There are
    two separate multi-billion-dollar programs to help people pay
    their rent and mortgages. And of course, Treasury administers
    economic impact payments. The IRS entered the pandemic as an
    agency that processes tax filings and returns once a year, and
    managed to marshal its forces to disperse more than 460 million
    payments totaling approximately $800 billion across three
    separate tranches.
        Now the IRS is preparing to make monthly payments of the
    expanded child tax credit to families of more than 88 percent
    of American children. Our team has done valiant work
    implementing these programs with the resources at our disposal.
    But we cannot continue to be good stewards of this recovery,
    and tackle the new bodies of work that Congress assigns to us
    in the years beyond, with a budget that was designed for 2010.
        Our Administration has released its formal budget, and
    there are several critical areas where funding is needed. For
    instance, the Financial Crimes and Enforcement Network, FinCEN,
    is tasked with building a massive database that collects and
    secures beneficial ownership information, but Congress has not
    yet provided any funding to do it.
        Then there are the Community Development Financial
    Institutions. Congress has dramatically expanded funding for
    CDFIs with supplemental appropriations, and rightly so. These
    institutions are very effective at injecting capital into areas
    the financial sector has not traditionally served well.
    However, it is challenging for the CDFI Fund to distribute
    greater resources and scale these programs without additional
    administrative funding.
        The IRS is in need of additional resources, too. Over the
    next 10 years, the American people could see roughly $7
    trillion dollars fall through the cracks of our tax system.
    Why? Because many of the country's wealthiest taxpayers do not
    pay their full tax bill, and the IRS is not nearly staffed up
    enough to ensure compliance.
        Today, the IRS has fewer auditors than at any time since
    World War II. Our proposal would give the IRS the funding it
    needs. For fiscal year 2022, it includes $13.2 billion from
    discretionary appropriations, plus $417 million for the first
    year of a program integrity allocation adjustment as part of
    the multi-year American Families Plan.
        Let me just say one final word about the IRS: Many of you
    have expressed concern about the recent ProPublica report. I am
    deeply troubled by it as well. And it is important to stress
    that an unauthorized disclosure of taxpayer information is a
    crime, and that it has been referred to the FBI, Federal
    prosecutors, and Treasury Department oversight authorities.
        We don't yet know what occurred, but all is being done to
    get to the bottom of this criminal activity. And we will be
    sure to update you as we learn more.
        With that, I am happy to take your questions.

        [The statement follows:]
                   Prepared Statement of Hon. Janet L. Yellen
        Chairman Van Hollen, Ranking Member Hyde-Smith, thank you for
    inviting me to join you today. I look forward to your questions, but
    first, I want to briefly discuss the state of our economy and the state
    of the Treasury Department. Because I believe one depends on the other.
        When I took office back in January, the most urgent problem
    confronting our economy was obviously the pandemic: helping people make
    it to the other side of the crisis and ensuring they were met there by
    a robust recovery. Thanks to this Congress--and its passage of the
    American Rescue Plan--I believe we are well on our way toward that
    goal.
        However, the ARP and its predecessor legislation are not self-
    executing. As you know, in order for relief dollars to effectively
    reach their intended targets, we have to stand up and manage new
    Federal programs.
        Treasury has been tasked with much of this work. We are proud to do
    it. But our challenge is that while our portfolio has grown to match
    the urgency of this moment, our annual budget has not grown in tandem,
    and the funding provided to administer new programs is temporary.
        Not accounting for inflation, our annual budget is still at the
    same enacted level as 2010, and critical policy offices--like Domestic
    Finance, Economic Policy, and Tax Policy--have seen their budgets cut
    by as much as 20 percent since 2016.
        The mismatch is very stark when you take a moment to scan the new
    bodies of work we've undertaken.

      --Treasury has built a $350 billion program to help State, local, and
            Tribal governments start operating normally again.
      --The CERTS program will provide $2 billion to bus and ferry
            companies.
      --There are two separate multi-billion-dollar programs to help people
            pay their rent and mortgages.
      --And of course, Treasury administers economic impact payments. The
            IRS entered the pandemic as an agency that processes tax
            filings and returns once a year--and managed to marshal its
            forces to disburse more than 460 million payments totaling
            approximately $800 billion across three separate tranches.
      --Now, the IRS is preparing to make monthly payments of the expanded
            child tax credit to families of more than 88 percent of
            American children.

        Our team has done valiant work implementing these programs with the
    resources at our disposal. But we cannot continue to be good stewards
    of this recovery--and tackle the new bodies of work that Congress
    assigns to us in the years beyond--with a budget that was designed for
    2010.
        Our Administration has released its formal budget, and there are
    several critical areas where funding is needed.
        For instance, the Financial Crimes and Enforcement Network--
    FinCEN--is tasked with building a massive database that collects and
    secures beneficial ownership information, but Congress has not yet
    provided any funding to do it.
        Then there are the Community Development Financial Institutions.
    Congress has dramatically expanded funding for CDFIs with supplemental
    appropriations--and rightly so. These institutions are very effective
    at injecting capital into areas the financial sector hasn't
    traditionally served well. However, it is challenging for the CDFI Fund
    to distribute greater resources and scale these programs without
    additional administrative funding.
        The IRS is in need of additional resources, too. Over the next 10
    years, the American people could see roughly $7 trillion dollars fall
    through the cracks of our tax system. Why? Because many of the
    country's wealthiest taxpayers do not pay their full tax bill, and the
    IRS is not nearly staffed up enough to ensure compliance. Today, the
    IRS has fewer auditors than at any time since World War II.
        Our proposal would give the IRS the funding it needs. For fiscal
    year 2022, it includes $13.2 billion from discretionary appropriations,
    plus $417 million for the first year of a program integrity allocation
    adjustment as part of the multi-year American Families Plan.
        Let me just say one final word about the IRS: Many of you have
    expressed concern about the recent ProPublica report. I am deeply
    troubled by it, as well. It is important to stress that an unauthorized
    disclosure of taxpayer information is a crime, and that it has been
    referred to the FBI, Federal prosecutors, and Treasury Department
    oversight authorities. We don't yet know what occurred--but all is
    being done to get to the bottom of this criminal activity. And we will
    be sure to update you as we learn more.
        With that, I'm happy to take your questions.

        Senator Van Hollen. Thank you, Madam Secretary. And I am
    pleased we have been joined by Senator Coons as well. And we
    will have 7-minute questioning periods for our subcommittee
    Members.
        Madam Secretary, one of the key planks, the central planks
    of the American Jobs Plan is to ensure that big multinational
    corporations pay their fair share of taxes, and that we stop
    giving companies perverse tax incentives to ship jobs and
    equipment overseas.
        You have talked about ending the global race to the bottom
    where countries cut corporate taxes to keep up with each other,
    and that the only winners are those multinational corporations
    and their stockholders, not the people in the countries in
    which they do business.
        I referenced that in my opening statement, today's report
    from Reuters, about the G20, to endorse the deal on global
    minimum corporate tax. Could you elaborate on why this is
    really important to American workers, and American jobs and
    wages that we move forward with this proposal?
        Secretary Yellen. Thank you for that question. So we are
    hoping to gain endorsement, at the G20 for the core pieces of
    our international tax proposal. Most importantly, we are trying
    to get a very large number of countries through an OECD
    process, almost 140 countries are participating in that, and we
    are trying to gain agreement that all countries will establish
    a minimum tax that their corporations must pay, wherever they
    operate in the world.
        At the G7 in London week before last, the G7 supported the
    idea that this global minimum tax should be set at least at 15
    percent. And we are working toward an agreement, a similar
    agreement at the G20. Now I think this is really important
    because what has happened globally is that labor is a factor of
    production that is not mobile. Most people continue to live
    where they were born in their native countries.
        But capital is highly mobile, and it can move from one
    place to another in response to tax differentials and other,
    other discrepancies. And that has triggered, over decades now,
    what we refer to is a race to the bottom. Countries try to
    attract business to their shores by setting lower tax rates
    than their neighbors. And then our corporations feel if we have
    higher taxes that they are not competitive, and we see them
    offshoring activity, real activity, and also profits activity,
    and tax havens particularly benefit from that.
        And as countries try to out-compete one another, in terms
    of cutting their corporate tax rates to attract business to
    their shores, we see a race to the bottom in corporate
    taxation. And this is really a global problem. And we think
    that the only way to solve this problem is to try to get an
    agreement among almost all countries and certainly among the
    G20 countries that we will stop doing this. That we will agree
    that tax--our tax rates will be set at a level, and we are
    negotiating on what the rate is, but we are looking for
    agreement at least 15 percent.
        You know, I think corporations contribute corporate tax
    revenue to the Federal coffers amounting to only around 1
    percent of GDP. Now, that is less than before the tax law was
    passed in 2017, and it is less than in most of our neighbors.
    And to raise revenue for the important programs that we truly
    need, investment in public infrastructure, investment in R&D,
    investment in our people to make our companies truly
    competitive and to make our workers and people who live and
    grow up in this economy, able to compete, we need tax revenue
    to support those programs.
        So we are very hopeful that this initiative will enable
    companies, globally, to compete on the things that should
    really matter, the quality of their ideas, and the skills of
    their people.
        Senator Van Hollen. Thank you, Madam Secretary. Of course,
    the corporations here in the United States benefit from an
    educated workforce, a well-trained workforce, and that does
    require investments.
        With my remaining time, Reuters published an analysis
    yesterday, finding that U.S. corporations currently pay
    significantly less than their foreign competitors today, and
    that this would remain the case even if the full Biden tax plan
    was enacted. In fact, they found that U.S. corporations
    currently pay an effective tax rate of 16 percent compared to
    24 percent for their foreign competitors. And that if the Biden
    plan was enacted, those U.S. corporations would pay an
    effective rate that is 5 points higher, or about 21 percent.
        Does that analysis, line up with your Treasury Department
    analysis? And what does that say with respect to some of the
    concerns that have been raised about the Biden tax plan?
        Secretary Yellen. So I have read the Reuters article, I
    have not had a chance to review the analysis carefully, but it
    is in line with our own thinking. I can tell you that at this
    level of statutory rates, as well, the United States' corporate
    rate, including Federal and State, is below the G7 average, and
    if we were to raise it in line with the President's proposals,
    it would remain in the middle of the pack.
        Senator Van Hollen. Thank you, Madame Secretary.
        Senator Hyde-Smith.
        Senator Hyde-Smith. Thank you, Mr. Chairman.
        Madam Secretary, you have already referenced the article
    that was in ProPublica, a leaning--a left-leaning media outlet
    that has published a series of articles that disclose some very
    confidential information in very significant detail. But these
    unauthorized disclosures occurred amid renewed calls that
    significantly increased taxes, and expand the funding and
    responsibilities of the IRS.
        The same agency that pursued a vendetta against
    conservative groups during the Obama administration, and since
    you have referenced that, can you tell me what the Department
    is doing to prevent further unauthorized disclosures?
        Secretary Yellen. Well, there are very important
    safeguards, many of them in place to protect taxpayer privacy.
    And this is an extremely important priority, and one that we at
    Treasury care deeply about. Part of the money that we are
    asking to be allocated to the IRS would better enable it to
    modernize its IT systems, and put in place investments that
    would better enable it to protect against threats to the
    security of the tax system.
        So I do think we need to modernize the technology that the
    IRS has. A striking statistic I can share with you is that the
    IRS faces 1.4 billion cyber attacks each year, and they are
    running the tax system on technological infrastructure that
    dates back to the 1960s. So it is a priority for Treasury. It
    is a priority for the IRS. We will keep it absolutely top
    priority to protect private information, but we also need to
    beef up the resources of the IRS to enable it to enhance its
    defenses.
        Senator Hyde-Smith. And in addition to the private taxpayer
    data that was leaked, a separate Treasury employee was
    sentenced to prison earlier this month, following her
    conviction for unlawfully disclosing suspicious activity
    reports, and other sensitive information, and your budget calls
    for new reporting requirements to the IRS for inflows and
    outflows for businesses, as well as personal accounts. How are
    Americans to trust the security of the Treasury Department data
    when private information is shared publicly again and again?
        Secretary Yellen. Well, again, I agree that protection of
    private information is critically important, and we must take
    every step to ensure that it is protected. The IRS obtains
    billions of reports every year on W-2 forms, and 1099s, and
    other information that is provided to the IRS to enable them to
    check returns, to make sure that income is being reported
    accurately.
        I can tell you that studies by the IRS show that, for
    example, wage and salary income that is reported to them on W-
    2s is almost completely 98 percent, 99 percent reported
    faithfully on tax returns. That $7 trillion over the next
    decade tax gap that I have cited, largely reflects individuals
    or corporations where sources of income are not reported on a
    regular basis to the IRS.
        And that is why adding to the information flow is really
    critical at trying to reduce the size of that gap. And the
    proposal that, the President has put forth in the American
    Families Plan, it is really only calling for two additional
    pieces of information that would be added to the Form 1099-INT
    on which financial institutions routinely provide the IRS with
    an annual report of interest paid on accounts.
        And the two pieces of information would be the aggregate
    inflows into the account during the year, and the aggregate
    outflows. And those would not be detailed transaction level
    information. This would be directly communicated along with
    other routine information to the IRS, and it would better help
    the IRS tax audit crew, target their resources in deciding
    where audits are in order. So, of course, every step would be
    taken to protect that information.
        Senator Hyde-Smith. Okay. And referring to the trillions of
    dollars, Congress has appropriated nearly $6 trillion in
    emergency spending during this pandemic. And there are some
    calls in Congress for an additional $6 trillion in
    ``infrastructure'' spending that seems to include everything
    under the sun. And these are mounts are in addition to the
    regular discretionary and mandatory spending levels each year.
    But consumer prices rose by 5 percent last year, the largest
    increase since 2008. And according to a survey conducted by the
    Federal Reserve Bank of New York, consumer expectations, are
    that inflation will be 4 percent over the next year.
        These trends are vastly different than your budget's
    assumption of inflation reaching only 2 percent. And you have
    called these trends transitory and the result of the economy
    reopening after the pandemic. Do you still believe this? And
    what data points would cause you to change your mind on these
    trends only being temporary?
        Secretary Yellen. Well, I do continue to believe that I
    think that for 2021 inflation will come out at a high rate, as
    you mentioned, but remember that in the previous years,
    inflation was exceptionally low. And part of what is going on
    is that prices that fell dramatically, when the pandemic hit
    the economy, airfares, hotel, room rates and the like, now that
    the economy is opening back up again, some of those prices are
    reverting toward more normal levels.
        So we do have a bunch of supply bottlenecks. It is a bumpy
    path to reopening, but the economy is growing successfully, and
    creating jobs, and I believe that after the year is over
    inflation rates will go back to normal. Most measures of
    inflation expectations remain low, and well contained and most
    professional forecasters and the signals we get from markets
    about inflation expectations that are--we can read from
    inflation compensation in the treasury market suggests that
    beyond this brief period of, say, a year in which inflation is
    high, that inflation expectations going further out are very
    stable in the neighborhood of 2 percent, and that inflation
    will revert to those levels.
        Senator Hyde-Smith. Okay. I would like to thank you for
    your time. Thank you.
        Senator Van Hollen. Thank you, Madam Secretary.
        Please, we are joined by the Chairman of the Full
    Committee. And I recognize Senator Leahy.
        Chairman Leahy. Thank you very much. Secretary Yellen, it
    is awfully good to see you, and thank you for being here. What
    is the saying about, may you live in interesting times. You
    have done that both at the Federal Reserve, and now. I am
    delighted you are there. I know that the Treasury Department
    over the past year has had to undertake all kinds of
    initiatives to administer the funding as directed by Congress
    through the CARES Act, the historic American Recovery Act, and
    so on.
        But let me go me go into that a little bit. The American
    Recovery Plan provided $350 billion to support State, local,
    Tribal, and territorial governments to deal with the
    consequences of COVID. It was specifically allocated money to
    States and territories, separately to counties, cities, and
    towns. Now, some of the States, of course, do not have a county
    government, like my own State of Vermont. In those cases, the
    law states, pretty clearly, the money be provided directly to
    the States, then passed from the State onto the local
    municipalities based on population.
        In most of the country, that is happening, but the Treasury
    Department has somehow chosen to rely on a definition from the
    Census Bureau to define what constitutes a county government--a
    definition that was not specified in the law. I remember when
    the law was written, and it was not specified there. It gives a
    totally strange conclusion in our State.
        Counties in Vermont are not generally units of government.
    We have 14 counties; the only county officials in Vermont are
    part-time side judges. I think they get paid a certain amount
    per day. They run our county courts, but even that is a minimal
    thing to make sure the lights get turned on, and the doors get
    opened. No other services.
        All our health, education and government services are
    provided by local municipalities. Yet, under the Treasury's
    arbitrary decision to apply the Census Bureau's definition,
    these side judges who might, throughout the whole State,
    normally handle a few thousand dollars, are now going to be
    required to administer over $121 million of COVID relief
    dollars. They are kind of like: What do we do with this? Or
    just say: You know, we have no way of administering this. We
    will give it back to the Treasury.
        Well that is not what the law intended. It was supposed to
    go to the States and municipalities. Now, your Department has
    been speaking with my staff, and with the others in the Vermont
    delegation. I just want to know when will the Treasury
    Department administer the law--as we specifically wrote it, and
    intended it--and release the money to the State of Vermont?
        Secretary Yellen. So Senator, I certainly understand your
    concern and, you know, our staff has done its best to
    administer the funds in line with its understanding of the law.
    The country is complicated, counties in different States have
    different kinds of governmental responsibilities and they try
    to make those distinctions.
        But we want to work with you to find a path forward and to
    resolve the concerns that you have. And I--you know, you have
    pointed out that there are distinguishing factors with respect
    to how Vermont counties operate relative to counties in many
    other States across the country. You know, if you will work--
    have your office work with our staff, we will try to find a----
        Chairman Leahy. We are doing that now. I thought the law
    was pretty clearly written. If you don't have a county
    government as such, I mean if you have got a county government
    where two people arrange to have the snow plowed around the
    courthouse and they suddenly got 10- $15 million. They are
    like, even in our best year we don't get that much snow.
        I think it is written in such a way, the law--read it, as I
    read it--is written the money goes to the States, and the
    States can then distribute it to the municipalities. We do have
    municipalities, of course, we do have everything from police
    forces to normal town, city government, and they could use the
    money. So we are working with your staff, but please tell them
    to go back and read, read the law. I think it is pretty clear
    on the face.
        Secretary Yellen. I think part of the issue was: Do the
    counties have governmental responsibilities, and it sounds like
    in Vermont, they have some, but they are exceptionally limited.
        Chairman Leahy. It is like, turn the lights on in the
    courthouse. If it is a county with a county court.
        Secretary Yellen. So my staff understand that this is a
    significant concern and we will work closely with you to try to
    find a resolution.
        Chairman Leahy. Well, I would also point out another thing.
    In rural States the IRS is one of the only elements of the
    Federal Government that taxpayers interact with annually. Now,
    if you don't have Internet service, or they rely on phone or in
    person, it is a problem because the IRS is nearly impossible to
    reach by phone or in person, they are getting less and less
    centers.
        I live 6 miles outside of our State capital, I pay premium
    amount for my Internet service and there have been days that it
    has worked. We usually mark it down the calendar as a very
    special day. We celebrate those. I think I paid for it for a
    year, and I can count on at least a week or two out of the
    year.
        But the point is, I don't have to worry. I go to my office
    at Montpelier or Burlington or home down here. I have got
    things I have to go back and forth. I can do it. But in many
    rural areas, in States that we all represent, that is not the
    case. So, take a look at this because we can joke about it, but
    it is a real problem in rural America.
        Secretary Yellen. And the funds can be used for broadband
    and the Rescue Plan contained other funds and programs also
    that can be used for broadband.
        Chairman Leahy. But again, I am delighted to see you here,
    and I offer you congratulations.
        Secretary Yellen. Thank you.
        Chairman Leahy. Or condolences, whichever they might be.
        Secretary Yellen. Thank you very much, Senator Leahy.
        Senator Van Hollen. Thank you, Senator.
        Senator Kennedy.
        Senator Kennedy. Thank you, Mr. Chairman.
        Madam Secretary, thank you for being here. According to the
    Department of Labor, I believe inflation was--annualized was 5
    percent in May. I know you are not clairvoyant, but you are
    experienced. Where do you think inflation will be at the end of
    this year?
        Secretary Yellen. Well, let me go to 2022.
        Senator Kennedy. No, if you could go to the end of 2021
    first for me.
        Secretary Yellen. So I believe that my expectation,
    although there is a lot of uncertainty, is that the monthly
    data, the data that would pertain to what happened in a given
    month, that those numbers will come down, but----
        Senator Kennedy. But by the end of this year, do you expect
    the inflation to be more than 5 percent or less?
        Secretary Yellen. I believe that the monthly numbers are
    likely to generate annual inflation rates. If you take the
    monthly number and ask what would inflation be if it continued
    at that pace for a year, I believe that will come down toward 2
    percent, but typically inflation rates----
        Senator Kennedy. Madam Secretary, I am sorry to interrupt
    you, but my question was pretty simple. Right now in May, on an
    annualized basis, we both know what that means, inflation was 5
    percent. I know you are not clairvoyant, but where do you think
    it will be at the end of this year?
        Secretary Yellen. So most, the type of inflation number you
    are talking about compares to the level of prices this month
    with what they were a year prior.
        Senator Kennedy. That is correct.
        Secretary Yellen. And that is different than what happened
    over the span of the month.
        Senator Kennedy. I understand that, but I am asking you----
        Secretary Yellen. But by the end inflation----
        Senator Kennedy [continuing]. Based on a year ago, this is
    not a complicated question. I am not trying to be rude, but
    this is not a complicated question. We are at 5 percent now
    based on where it was a year ago. So now we know what we are
    both talking about.
        Secretary Yellen. For the rest of this----
        Senator Kennedy. Will it be higher at the end of this year,
    or will it be less?
        Secretary Yellen. Twelve month--I believe it will come
    down.
        Senator Kennedy. Do you think it will be less by the end of
    this year.
        Secretary Yellen. Than 5 percent. Yes.
        Senator Kennedy. Okay. What makes you think that?
        Secretary Yellen. Because I believe that as the economy is
    opening up again, prices that fell enormously at the beginning
    of the pandemic are returning now back toward normal levels.
    And so what we are seeing in these year-over-year comparisons
    is of prices which are now reasonably normal, or in many cases
    at levels that are still somewhat below normal, we are
    comparing those levels with highly depressed prices----
        Senator Kennedy. I understand that.
        Secretary Yellen [continuing]. The year before.
        Senator Kennedy. I understand that.
        Secretary Yellen. And that will----
        Senator Kennedy. I have got a limited amount of time, Madam
    Secretary. If you are thinking 5 percent inflation in May, and
    you think it will be less at the end of the year.
        Secretary Yellen. Yes.
        Senator Kennedy. Then why did the Federal Reserve announce
    that it was going to--thought they were going to have to move
    their interest rate increases sooner and faster than what they
    had originally expected?
        Secretary Yellen. Well, I don't really want to comment on
    the Fed, but I would simply say that is not an announcement
    that they made.
        Senator Kennedy. Well, the market sure reacted; sounds like
    the Federal Reserve is worried about inflation.
        Secretary Yellen. I would just refer you to the comments
    that Chair Powell made in testifying yesterday, and at his
    press conference.
        Senator Kennedy. But I am talking about the action the
    Federal Reserve took. The Federal Reserve met recently, and
    they said: Look, we know we told you this, but things have
    changed. And we are now telling you that we are likely to have
    to raise rates sooner and faster----
        Secretary Yellen. And----
        Senator Kennedy [continuing]. Let me just finish--than we
    originally told you. Why do you think they did that?
        Secretary Yellen. That is the----
        Senator Kennedy. Because they are concerned about
    inflation, aren't they?
        Secretary Yellen. That is not what they did. Several
    individuals----
        Senator Kennedy. Sure it is.
        Secretary Yellen [continuing]. Several individuals wrote
    down in their own individual forecasts, which were published,
    that they saw it appropriate to raise rates sooner than
    previously.
        Senator Kennedy. Why then did the Federal Reserve last week
    raise the interest rate on excess reserves?
        Secretary Yellen. That is a technical adjustment that they
    made because the Federal funds rate had fallen to the very
    bottom of their target range. And it was a purely technical
    adjustment. Look, it is not appropriate for me to discuss Fed
    policy, or I don't want to comment on----
        Senator Kennedy. With no disrespect, but it is. It is. I am
    not asking you to make Fed policy. I am asking your opinion.
    And usually when the Federal Reserve raises interest rates on
    excess reserves, they are trying to contract money supply.
        Secretary Yellen. No. It is----
        Senator Kennedy. And the reason they are trying to contract
    money supply is because they are worried about inflation.
        Secretary Yellen. It is a purely technical adjustment. They
    made clear in that the stance of monetary policy has not
    changed at all, but because short-term, overnight rates were
    drifting to the very bottom of their target range, they made
    small adjustments to the policy rates----
        Senator Kennedy. Okay. Let me--I will stop because I have
    only got a minute left. Here is my worry, Madam Secretary. And
    I hate to have to interrupt you, but we only have so much time.
    I know your job is to put the best face on it, and I understand
    the Federal Reserve's job is to put the best face on it. But
    inflation at 5 percent annualized gets my attention.
        When the Federal Reserve says, or even certain Members,
    they say: nothing to worry about here, nothing to see, but by
    the way, we are probably going to have to raise interest rates
    sooner and faster than we thought. And when I see them raise
    the interest rate on excess reserves, to get money out of the
    money supply; that tells me they are worried about inflation.
        And here is my question. Nobody is clairvoyant. A lot of
    these experts that you talked about never called the recession
    in 2008, 2009, and a lot of these were experts at the Reserve--
    at the Federal Reserve, what if they are wrong?
        And the President has been adamant that he is not going to
    raise taxes on middle-class Americans. He is allowing that to
    happen right now, because inflation prices are rising higher
    than wages, and 5 percent inflation is a tax, it is a tax on
    food, it is a tax on energy, and it is a tax on everything. And
    we can say it is temporary, but the actions of the Fed indicate
    to me, they don't think it is temporary. Your thoughts?
        Senator Van Hollen. Madam Secretary. I am going to have to
    leave it at that, Senator. We will have another round, but----
        Senator Kennedy. Well, others went over, Mr. Chairman.
        Senator Van Hollen. But Senator----
        Senator Kennedy. Others went over.
        Senator Van Hollen. Actually they went over about the same
    time. But let me call him on----
        Senator Kennedy. Well, can I get an answer?
        Senator Van Hollen [continuing]. On the next--we will have
    another round, because I am just trying to keep everything
    within the fair range here. I understand that Senator Coons has
    been very patient, has been understanding. Let Senator Moran
    have a short statement, and then we will go to Senator Coons.
        Senator Moran. Chairman, thank you. And Senator Coons,
    thank you for allowing me 30 seconds. I hope that is not a
    terrible burden on your schedule. Thank you.
        Madam Secretary, you and I visited, I questioned you in the
    Banking Committee in March, and I just wanted to be here today.
    I have two other hearings that are ongoing at the same time,
    but I wanted to be here to thank you for making clear in
    Treasury's, updated frequently-asked-questions. It was just
    released today, that the Coronavirus State and local fiscal
    recovery funds may be used, may be used for grants to small
    businesses, to nonprofits, to cover utility costs.
        This will alleviate a lot of consternation across Kansas
    and Midwestern States impacted by a February cold snap and
    elevated natural gas prices in the midst of dealing with the
    economic impacts of the pandemic. So thank you for making that
    clear. And I assume that I am telling the story as it is, as
    true.
        Secretary Yellen. I believe so. Thank you.
        Senator Moran. Yes ma'am.
        Senator Van Hollen. Thank you, Senator.
        Senator Coons.
        Senator Coons. Well, thank you, Chairman Van Hollen,
    Ranking Member Hyde-Smith. Senator Moran is going back to serve
    as the Ranking on the CJS subcommittee hearing that I, too, I
    am supposed to go back to. I am very much looking forward to
    the second panel.
        Appreciate Secretary Yellen's testimony and leadership; and
    Chairman Van Hollen, good to see you leading this subcommittee
    so ably; and to see the team that supports and makes possible
    the work of FSGG.
        Madam Secretary, if I might, you and five other former
    Treasury secretaries have noted year-after-year, Congress-
    after-Congress, that the IRS lacks the resources to effectively
    and fully enforce tax payment. In fact, you made the somewhat
    striking and memorable assertion that the IRS at this point has
    the fewest auditors since the Second World War, and the tax gap
    is estimated as somewhere between $600 billion and a trillion a
    year, and it is something that is the topic of active
    negotiation right now, in terms of how to pay for a bipartisan
    infrastructure bill.
        How would the IRS ensure that new auditors, new enforcement
    efforts are focused on high net worth individuals, individuals
    with complex financial situations, and international, and
    multinational corporations, which are more difficult to audit,
    as opposed to lower-income people whose returns are more simple
    to audit?
        Secretary Yellen. Well, the purpose of the mandatory
    funding that the President has requested for the IRS, he has
    requested $80 billion over a decade, is really supposed to be a
    long run, program allotment that would enable IRS to hire,
    train auditors who have the skills and a long-term perspective
    to be able to focus on high-net-worth individuals, high-income
    individuals, and partnerships and complex arrangements in
    corporations. That is where the tax gap is.
        Senator Coons. Right.
        Secretary Yellen. And the purpose of that funding would be
    to improve compliance in those groups where underreporting is
    highest.
        Senator Coons. And what is your rough estimate at this
    point of the multiplier for dollars spent on additional
    enforcement dollars received in terms of additional compliance?
        Secretary Yellen. I believe we estimate that the $80
    billion appropriation would generate around $240 billion over
    10 years. The long-run payoff is, I think it is estimated by
    the IRS to be close to five to one. And I want to emphasize,
    you know, it takes a long time----
        Senator Coons. Right.
        Secretary Yellen [continuing]. Both to build up the
    resources.
        Senator Coons. Understood.
        Secretary Yellen. And these complex cases take many years,
    and so there are enormous gains beyond the 10-year horizon, as
    well, that you would see in the budget. So I believe the IRS
    estimates are something like five to one in terms of income
    collected per dollar spent.
        Senator Coons. Madam Secretary, for the years that I served
    on FSGG, I have also paid close attention to the most frequent
    complaints from Delawareans who often reach out to my
    constituent services folks to say that they are having
    difficulty getting someone on the phone, getting their tax
    returns and refunds processed, more recently getting the
    economic impact payments. I am assuming that an increased
    budget for IRS taxpayer services will directly benefit and
    impact that. And I would love to hear your thoughts on that.
        But first, I am going to go to a more complex subject for a
    minute, since we may have a return of another Member who wants
    to question. I am very interested in how you see carbon border
    adjustments working out, both competitively for the United
    States and in terms of its impact. I am someone who is
    introduced to a number of bills, one bipartisan, more recently
    ones that are just Democrats that would place a price on
    carbon, and I am convinced that that has the single greatest
    leverage in terms of achieving progress on climate change.
        I am the co-chair of the bipartisan Climate Solutions
    Caucus, and we have debated and discussed this with many
    leaders, from the private sector, from financial services,
    different advocates and organizations. And I think that there
    is a moment here where, as discussed at the G7, the EU is on
    the verge of implementing a border carbon adjustment, and there
    is the possibility that the United States, without imposing a
    fee on carbon, could simply deem the social cost of carbon and
    of other greenhouse gases at a certain amount, and begin to
    implement that in order to avoid other countries imposing a
    carbon tariff against our exports and making us less
    competitive.
        How do you see that playing forward? What do you think are
    the models for the actual cost of greenhouse gases sufficiently
    detailed for us to be able to implement something like this?
    And how is the administration thinking about border carbon
    adjustments in ways that would keep American industries and
    services competitive globally?
        Secretary Yellen. So I think we are just beginning to get a
    handle on this question. There is a lot of work to do to think
    this through. I mean, as you know, the President has proposed
    an ambitious and comprehensive agenda to try to reduce U.S.
    greenhouse gas emissions, and he has made our nationally-
    determined contribution----
        Senator Coons. Right.
        Secretary Yellen [continuing]. Is an ambitious one. And,
    you know, he has proposed to do that through a whole variety of
    different carrots and sticks. Remove existing subsidies for
    fossil fuels, tax credits for renewables and for electric
    vehicles. He hasn't taken the approach that some countries have
    of simply having one system with a single carbon price.
        Senator Coons. Right.
        Secretary Yellen. But I think that if we do make the
    progress that we hope for that the areas that are covered will
    be covered, say by EU carbon border adjustment, that we will
    also be producing those goods in a manner that is
    environmentally friendly. And if we are able to do that, my own
    view would be that we should not be subject to, say, the EU's
    carbon adjustment price.
        Senator Coons. Right. So if I hear you right to summarize,
    in a larger sense, if the Biden administration's plan and
    agenda is fully implemented, we ought to be able to go to our
    Canadian neighbors, to our EU trading partners and say, we
    shouldn't be subject to this border adjustment tax, because we
    are making robust progress towards our national goals. Let me
    just close, and I would love to hear more from you about this.
        Secretary Yellen. Certainly.
        Senator Coons. I was talking to ``Jay'' Powell about this
    yesterday, and the research that is being done within the
    Federal Reserve System, because there is a lot of research to
    be done for this to be better understood. I just want to thank
    you for what I think is an appropriately robust request for
    funding for the GEF and the Green Climate Fund, a modest but
    necessary request for $15 million to continue to implement the
    Tropical Forest and Coral Reef Conservation Act. I am working
    with Senator Portman on reauthorizing it.
        And I will just simply note for the record that my
    constituents are pleased when the wait times go down, and just
    desperately annoyed and angry when the wait times go up, and
    improving IRS service standards is something that I would hope
    all of us could agree is well worth investing in.
        Secretary Yellen. I completely agree. I mean, that will be
    an important use of funds, is to greatly improve taxpayer
    service.
        Senator Coons. Thank you very much, Madam Secretary. Thank
    you, Mr. Chairman.
        Senator Van Hollen. Thank you, Senator Coons.
        Madam Secretary, we are going to do another 5-minute round
    of questions.
        Secretary Yellen. Okay.
        Senator Van Hollen. I don't know if--whether other Members
    of the subcommittee will or will not be returning. But I do
    want to quickly turn to the debt ceiling, because as you well
    know, the debt ceiling is currently suspended until July 31,
    just end of next month. After that point, the Treasury
    Department can prevent a default for a brief period of time
    with its so-called ``extraordinary measures'', but Congress
    must ultimately raise the debt ceiling to prevent a default of
    the full faith and credit of the United States.
        There are murmurings that some Members of the Senate may
    want to try to use this as a political cudgel to extract
    concessions on other things. Could you speak briefly to the
    consequences of a default on our national debt, or even
    creating uncertainty around whether or not we are going to make
    good on our full faith and credit?
        Secretary Yellen. I think defaulting on the national debt
    should be regarded as unthinkable. Failing to increase the debt
    limit would have absolutely catastrophic economic consequences.
    It would be utterly unprecedented in American history for the
    United States Government to default on its legal obligations. I
    believe it would precipitate a financial crisis. It would
    threaten the jobs and savings of Americans, and at a time when
    we are still recovering from the COVID pandemic.
        I would plead with Congress simply to protect the full
    faith and credit of the United States by acting to raise or
    suspend the debt limit as soon as possible. Preferably, you
    mentioned July 31 is the date that the debt limit suspension
    ends, and I would really urge that the debt limit be raised or
    suspended again before that.
        And, you know, this is not about authorizing additional
    spending, this is simply about the government paying its bills,
    making good on the payments that are implied by the tax and
    spending decisions that Congress has made.
        Senator Van Hollen. I appreciate your underscoring that
    very important point. And this is about paying the bills that
    are already due and owing. Do you have an estimate as to how
    long use of the emergency measures would last us in this
    current economic environment?
        Secretary Yellen. Well, we are constantly trying to refine
    our notions on that. I don't have anything specific but, you
    know, these are times, especially because of the pandemic and
    the programs that we are engaging in when there is a lot of
    uncertainty around payment flows, and the timing of payment
    flows. And, you know, we don't want to just look at what is the
    most likely time that we could make it too with extraordinary
    measures.
        We can't tolerate any chance of defaulting on the
    government debt. And there is a lot of uncertainty. It is
    possible that we could reach that point while Congress is out
    in August. And I would really urge prompt action on raising--
    raising the limit or suspending it.
        Senator Van Hollen. Thank you, Madam Secretary. I just want
    to put two issues on your radar screen. And I don't expect an
    answer today but--so Senator Toomey and I, in the last
    Congress, authored the Hong Kong Accountability Act, it was
    passed into law. I was pleased to see the Biden administration
    sanction a number of officials who have been complicit in
    undermining democracy and human rights in Hong Kong. But that
    law also requires sanctions against any financial institutions
    that are aiding and abetting, or facilitating those
    individuals.
        And Treasury has not imposed sanctions on those financial
    institutions. Maybe you haven't been able to identify any such
    institutions yet.
        Secretary Yellen. We have not.
        Senator Van Hollen. I think Secretary Toomey and I are in
    the process of asking for a briefing, with respect to
    treasuries capacity to monitor these things.
        The other thing I wanted to mention is the BRINK Act. This
    is also legislation that Senator Toomey and I, and others
    pushed for, did apply secondary--secondary sanctions on North
    Korea.
        Secretary Yellen. Yes.
        Senator Van Hollen. And here there is a discrepancy because
    the U.N., a panel of experts just earlier this year, you know,
    found that there were huge holes in the sanctions regime, that
    there were Chinese entities that were essentially facilitating,
    you know, payments to North Korea that would be subject to
    secondary sanctions. And so, we do want to follow up with you
    on that as well.
        Secretary Yellen. We would be--we would be glad to discuss
    that in follow up.
        Senator Van Hollen. Thank you, Madam Secretary. I don't
    know if--great.
        Madam Secretary, thank you for your testimony. Thank you
    for requesting this increase in funds for CDFIs, which play an
    essential role. And now we are going to get some first-hand
    accounts of how important they are. Thank you. Thank you very
    much.
        Secretary Yellen. Thank you very much.
        Senator Van Hollen. All right. Next, we are going to bring
    up our distinguished next panel. All right, welcome, everybody.
    We have three terrific witnesses for our next panel.
        Mr. Noel Andres Poyo, who is the deputy assistant secretary
    at Treasury, for Community and Economic, Development, and is a
    real expert in this area of CDFIs, and I have had the privilege
    of talking to him previously, and grateful for your being here.
        We also have Mr. Joseph Haskins, Jr. He is the chairman and
    CEO of The Harbor Bank of Maryland, which is in Baltimore. And
    on a personal note, somebody who I really rely on for advice on
    how we can make sure that our most distressed businesses, and
    businesses that are sometimes left out of the financial system,
    get the support and help they need, which was important, of
    course, during the pandemic, but also important to make sure we
    build an economy and a community that ensures that everybody
    has a chance to succeed. So I am really grateful that he is
    here.
        And I am going to turn it over to Ranking Member Hyde-Smith
    to introduce our third panelist.
        Senator Hyde-Smith. Thank you, Mr. Chairman. And I am
    really pleased to have with us Andy Anderson of Anguilla,
    Mississippi, and that is kind of hard to pronounce, and we are
    a long way from Anguilla, Mississippi, right now, but I so
    appreciate each of you coming, and be willing to give of your
    time, because it is really important that we hear from you and
    what you go through.
        And Andy Anderson chairs the Board of Directors and
    Executive Committee at the Mississippi Bankers Association, he
    is the chairman this year. He has 37 years' experience in the
    banking business, and all at the Bank of Anguilla. So if you
    ever visit Mississippi, be sure to come by and visit with him.
    Thank you.
        Senator Van Hollen. Thank you.
        Mr. Poyo, why don't we start with you as the administration
    witness, and then we will turn to our other two witnesses.
    STATEMENT OF NOEL ANDRES POYO, DEPUTY ASSISTANT
                SECRETARY, COMMUNITY AND ECONOMIC
                DEVELOPMENT, U.S. DEPARTMENT OF THE
                TREASURY
        Mr. Poyo. Very good. Thank you, Chairman Van Hollen,
    Ranking Member Hyde-Smith. It is my honor and pleasure to speak
    with you today. My name is Noel Andres Poyo, I am the deputy
    assistant secretary of Community and Economic Development at
    the Treasury Department. And I am also a former CEO of a CDFI.
        And I appreciate the opportunity to provide testimony on
    Treasury's fiscal year 2022 budget, and specifically about
    community development, financial institutions, and Treasury
    CDFI. So CDFIs, as you both know, are specialized financial
    institutions, including loan funds, credit unions, community
    banks, venture capital entities that have a common goal of
    filling financing gaps in underserved and low-income areas,
    with responsible financial products and services.
        CDFIs are accountable to the communities they serve, and
    possess a particular sensitivity to the needs of local
    residents and businesses. This is a key reason that CDFIs often
    deliver capital in places where traditional banks have not met
    the market demand. CDFIs provide not only financing, but also
    development services to help prepare borrowers for success.
        Since the creation of the CDFI fund more than 25 years ago,
    CDFIs have played an increasingly important role in opening
    access to capital and economic opportunity in low-income
    communities and for low-income people. And so keep in mind that
    at the end of 1997 there were 196 certified CDFIs with total
    assets of $4 billion. Now, there are more than 1,200 certified
    CDFIs operating in every State and with assets of over $220
    billion.
        The collective capacity of this field to deliver fair and
    responsible financing is growing rapidly. And before this year,
    the CDFI Fund had awarded nearly $4 billion to CDFIs and other
    community development entities. CDFI Fund has also allocated
    $61 billion in tax credits to the New Markets Tax Credit
    Program and guaranteed $1.6 billion in bonds through the CDFI
    Bond Guarantee Program. And as you well know, the CDFI Fund
    investments are leveraged many times over.
        So the Consolidated Appropriations Act, 2021, made
    available historic funding for CDFIs under three programs being
    implemented by Treasury. $1.25 billion in grants to CDFIs under
    the Rapid Response Program, through the CDFI Fund $1.75 billion
    in grants to CDFIs under the Minority Lending Program, and then
    $9 billion for Treasury investments under the Emergency Capital
    Investment Program, which is available to credit unions and
    banking entities that are either CDFIs or minority depository
    institutions.
        You may have heard on June 15, the Vice President and
    Secretary Yellen announced that the CDFI fund was awarding
    $1.25 billion through the Rapid Response Program to 863 CDFIs
    across the country. More than 70 percent of all certified CDFIs
    submitted applications. The RRP awards will provide CDFIs with
    an unprecedented level of flexible capital that will allow for
    growth across the industry.
        The Minority Lending Program, the $1.75 billion program
    will be rolled out later this year. And ECIP, the Emergency
    Capital Investment Program, will encourage low- and moderate-
    income community financial institutions to augment their
    lending to support small businesses and consumers in their
    communities.
        Under this program, Treasury will invest up to $9 billion
    in capital into depository institutions that are CDFIs and
    MDIs, minority depository institutions.
        I want to turn to the CDFI budget. The CDFI funds currently
    offers programs to help CDFIs and other community development
    entities access financial products and services in low-income
    communities. And in fiscal year 2022 the CDFI Fund request $330
    million that is approximately $60 million above the fiscal year
    2021 enacted level, an increase of 22 percent. It includes
    primarily increases in the mainline CDFI Program, the FA
    Program, about a 30 percent increase, similarly about a 30
    percent increase in the Native American CDFI Assistance
    Program. And about a $4.6 million increase in administrative
    dollars.
        Additionally, we are requesting $500 million in a
    commitment authority and proposing legislation to expand the
    Capital Magnet Fund as a part of the American Jobs Plan.
        So on behalf of everyone at Treasury, and particularly
    within the CDFI Fund, I would like to express our gratitude to
    the subcommittee, to the subcommittee for its support, and look
    forward to working with you in this coming year.

        [The statement follows:]
                     Prepared Statement of Noel Andres Poyo
                                  introduction
        Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of the
    subcommittee, it is my honor and my pleasure to speak with you today.
    My name is Noel Andres Poyo. I am the Deputy Assistant Secretary for
    Community and Economic Development at the Treasury Department. Thank
    you for the opportunity to provide testimony on Treasury's fiscal year
    2022 budget and specifically about Community Development Financial
    Institutions (CDFIs) and Treasury's CDFI Fund.
        CDFIs are specialized financial institutions, including loan funds,
    credit unions, community banks, and venture capital entities, that have
    a common goal of filling financing gaps in underserved and low-income
    areas with responsible financial products and services. CDFIs are
    accountable to the communities they serve and possess a particular
    sensitivity to the needs of local residents and businesses--this is a
    key reason that CDFIs often deliver capital in places where traditional
    banks have not met the market demand. CDFIs provide not only financing
    but also development services to help prepare borrowers for success.
        Since the creation of the CDFI Fund more than 25 years ago, CDFIs
    have played an increasingly important role in opening access to capital
    and economic opportunity in low-income communities and for low-income
    people. At the end of 1997, there were 196 certified CDFIs, with total
    assets of $4 billion. There are now more than 1,200 certified CDFIs,
    operating in every State, with assets of over $220 billion. The
    collective capacity of this field to deliver fair and responsible
    financing is growing rapidly.
        Before this year, the CDFI Fund had awarded nearly $4 billion to
    CDFIs, community development organizations, and financial institutions
    through its funding programs. The CDFI Fund has also allocated $61
    billion in tax credits through the New Markets Tax Credit Program and
    guaranteed $1.6 billion in bonds through the CDFI Bond Guarantee
    Program. The CDFI Fund's investments are leveraged many times over.
    Though the leverage ratio varies from program to program, and
    recognizing that leverage ratios may vary in the future, one analysis
    of past transaction level reporting found that on average CDFI Fund
    investments attract at least $8 of private capital for every $1 of
    Federal spending.\1\
    ---------------------------------------------------------------------------
        \1\ CDFI Fund analysis of Awardee Transaction Level Reports, 2017
    ---------------------------------------------------------------------------
        In fiscal year 2020, CDFI Program award recipients reported
    originating more than 1 million loans, financing more than 41,000 units
    of affordable housing, and funding more than 87,000 businesses--all in
    distressed and underserved communities lacking access to traditional
    lending or banking institutions. It is also worth noting that, over the
    past year, CDFIs provided many small business owners and nonprofit
    organizations with access to the Paycheck Protection Program.
         status of funds from the consolidated appropriations act, 2021
        The Consolidated Appropriations Act, 2021 made available historic
    funding for CDFIs under three programs being implemented by Treasury:

      --$1.25 billion in grants to CDFIs under the CDFI Rapid Response
            Program (RRP), to respond immediately to the economic impact of
            the pandemic;
      --$1.75 billion in grants to CDFIs under the Minority Lending
            Program; and
      --$9 billion for Treasury investments under the Emergency Capital
            Investment Program (ECIP), which is available to credit unions
            and banking entities that are either CDFIs or Minority
            Depository Institutions.

        On June 15, 2021, the Vice President and Secretary Yellen announced
    that the CDFI Fund was awarding $1.25 billion through the RRP to 863
    CDFIs across the country. More than 70 percent of all certified CDFIs
    submitted an application. RRP recipients included 58 organizations
    receiving a total of $54.6 million that committed to direct their
    awards to investments in Native American, Native Alaskan, and Native
    Hawaiian communities, and 90 organizations designated as minority
    depository institutions receiving a total of $133.9 million in awards.
    The RRP awards will provide CDFIs with an unprecedented level of
    flexible capital and will allow CDFIs to help businesses keep their
    doors open, help families make ends meet, and help maintain important
    community facilities as the country continues to grapple with and
    recover from the economic crisis caused by the COVID-19 pandemic.
        Under the Minority Lending Program, Treasury will provide $1.75
    billion of grants to CDFIs to expand financial activity in distressed
    minority communities and to minorities that have significant unmet
    capital or financial services needs. The Minority Lending Program will
    be rolled out later this year.
        The ECIP will encourage low- and moderate-income community
    financial institutions to augment their efforts to support small
    businesses and consumers in their communities. Under the program,
    Treasury will invest up to $9 billion of capital directly in depository
    institutions that are CDFIs or minority depository institutions (MDIs)
    to, among other things, provide loans, grants, and forbearance for
    small businesses, minority-owned businesses, and consumers, especially
    in low-income and underserved communities, that may be
    disproportionately impacted by the economic effects of the COVID-19
    pandemic. Treasury has conducted extensive outreach to the private
    sector, including through meetings with CDFIs, minority depository
    institutions, trade associations, community groups, and civil rights
    groups. Treasury has also consulted extensively with the Federal
    banking agencies regarding the terms of Treasury's investments under
    this program. Based on this input and consultation, Treasury
    anticipates releasing additional guidance for applicants in the near
    future.
                                cdfi fund budget
        The CDFI Fund currently offers programs to help CDFIs, Community
    Development Entities, banks, credit unions, and community development
    organizations generate economic opportunity by increasing access to
    financial products and services in low-income communities. In fiscal
    year 2022 the CDFI Fund requests $330 million broken down as follows:

      --$215.4 million for the CDFI Fund's flagship program, the CDFI
            Program, which spurs economic growth and increases access to
            capital in low-income communities;
      --$23.0 million for the Healthy Food Financing Initiative, which
            supports investment in businesses that increase access to
            healthy and affordable food in low-income communities;
      --$21.5 million for the Native American CDFI Assistance Program,
            targeting support to CDFIs primarily serving Native
            communities;
      --$26.0 million for the Bank Enterprise Award Program, which awards
            FDIC-insured depository institutions that successfully
            demonstrate an increase in investment in mission-driven lenders
            or in their own lending, investing, or service activities in
            distressed communities;
      --$8.5 million for the Small Dollar Loan Program, which enables CDFIs
            to provide consumers access to mainstream financial
            institutions and combat high-cost small-dollar lending;
      --$2.0 million for the AmeriCorps CDFI Economic Mobility Corps to
            place national service members at certified CDFIs to strengthen
            their capacity; and
      --$33.6 million for administration of the CDFI Fund, which includes
            support for the New Markets Tax Credit Program and the CDFI
            Bond Guarantee Program.

        The fiscal year 2022 budget request is approximately $60 million
    above the fiscal year 2021 enacted budget, an increase of 22 percent.
    The budget includes:

      --$50.4 million increase for the CDFI Program (increase of 28.9
            percent);
      --$5 million increase for the Native American CDFI Assistance Program
            (Increase of 30.3 percent); and
      --$4.6 million increase for administration (increase of 15.9
            percent).

        The proposed increase in support for the CDFI Program can support
    larger Financial Assistance awards to increase the loans and financial
    products offered by CDFI Program award recipients, as well as
    additional Technical Assistance awards for emerging CDFIs. Additional
    support for the Native American CDFI Assistance Program can support
    larger Financial Assistance awards and improving technical assistance
    and capacity-building for Native CDFIs.
        Additionally, we are requesting $500 million in commitment
    authority and proposing legislation to expand the Capital Magnet Fund
    as part of the American Jobs Plan.
                                   conclusion
        On behalf of everyone at Treasury and the CDFI Fund, I would like
    to express our gratitude for the support of this subcommittee, and I
    look forward to working with you.

        Senator Van Hollen. Thank you for your testimony. You
    probably heard the bells going off. So Senator Hyde-Smith is
    going to go vote, and then return. And I will have to go vote
    after that.
        But let me now turn it over to Mr. Haskins. Thank you for
    being here.
    STATEMENT OF JOSEPH HASKINS, JR., CHAIRMAN AND CEO, THE
                HARBOR BANK OF MARYLAND
        [Clerk's Note: Materials were submitted for the hearing
    record by the Harbor Bank of Maryland, and are in the
    ``Submitted Materials for the Hearing Record'' section at the
    end of the hearing.]

        Mr. Haskins. Thank you very much, Senator Van Hollen. I
    just have to take a moment to acknowledge the Senator and his
    commitment to our State of Maryland, and particular Baltimore
    City, because he has actually made a visit to my institution,
    and that is somewhat unusual. And to me I am deeply gratified,
    and proud to say that you represent our community.
        Also I would like to acknowledge Senator Hyde-Smith for her
    role and participation in this panel, and to the other
    representatives who are present. So I thank you again for the
    opportunity to be able to present the role of Harbor Bankshares
    Capital Corporation, the parent Harbor Bank of Maryland, before
    this subcommittee, the Financial Services and General
    Government Committee.
        My name, again, is Joseph Haskins. And by way of
    background, again, I am chairman, CEO, but because of my
    commitment to the community very early on, and I am now in my
    46th year of banking and financial services, having started at
    what is now the JPMorgan Chase, I returned home to Baltimore to
    help found a bank. So not only do I chair, but I am one of the
    founding members of an institution that is now 39 years old.
        So by way of history, Harbor Bank was founded with the
    intent of addressing issues that we saw that reflected an
    absence of access to capital by the minority community of
    Baltimore City. So at the end of the late-1960s and the early-
    1970s, there were members of the community that said: How can
    we improve economic opportunities to those who have not had
    ready access to capital, or had ready access to banking and
    financial services.
        And as a result of those questions, and having identified
    that shortcoming, The Harbor Bank was founded. I am proud to
    say that we opened the doors in 1982, and I am proud to say
    that for the first 16 years of operation, the Bank was a
    profitable organization. It wasn't until the great recession
    that we experienced a real loss. And many of you know that
    period.
        But the founding of Harbor Bank was focused in three areas,
    which we saw as vital to providing access to capital, banking
    services, and economic opportunities. Those three areas we
    identified involve small business lending, faith-based lending,
    and residential mortgages. So today we have now grown to a bank
    of $350 million in size, and as the $350 million bank, we have
    been able to operate an offer great financial benefits and
    services to the community.
        In 1992 we formed a holding company because we found that
    they were great needs--needs beyond what the Bank could
    contribute. And as such, we formed three additional
    subsidiaries.
        And so what I would want this subcommittee to know is that
    in our community, we have been instrumental in revitalizing
    communities that were pretty much dormant, distressed,
    forgotten, and overlooked. The Inner Harbor of Maryland was led
    in terms of financing by Harbor Bank. The Canton community was
    led by Harbor Bank with the development of housing, the
    restoration of all abandoned warehouses, as well as creating
    retail space for business enterprise.
        A couple of significant projects that we worked on that we
    saw that brought to the table all of the programs--is East
    Baltimore's redevelopment of 88 acres. In that case, we were
    able to bring BEA-related loans, we were able to bring advisory
    service, we were able to bring lower cost funding, and we used
    New Market Tax Credits to stimulate the development of a
    science park. The first two science buildings done in that
    Johns Hopkins, Science Park were done and initiated resulting
    from the New Market Tax Credits that provided the incentive for
    that development.
        The New Markets Tax Credit Program, as we see it, is
    critical in addition to the BEA Program, the FA Program, the TA
    Program, because when you can bring all of those programs to
    the table at once, you can revitalize the area. Resulting from
    our efforts, we have created more than $3 billion of economic
    development in the Baltimore community, which represents more
    than 4,000 additional jobs as a success that is now a national
    model.
        So with this, I ask the subcommittee to strongly support
    the request for additional financing, new subsidy of the CDFI
    Program. And I thank you, Senator Van Hollen, and Senator Hyde-
    Smith for allowing me the opportunity to speak to this critical
    issue, and the critical needs in our respective communities.

        [The statement follows:]
                   Prepared Statement of Joseph Haskins, Jr.
        Chairman Van Hollen, Ranking Member Hyde-Smith, and Members of the
    subcommittee, good afternoon. Thank you for inviting me to discuss the
    important work of Community Development Financial Institutions (CDFIs).
        My name is Joseph Haskins. I am a founding Director, Chairman and
    CEO of Harbor Bankshares Corporation, headquartered in Baltimore,
    Maryland.
                                  bank history
        The Harbor Bank of Maryland (Harbor Bank) opened its door for
    business in September of 1982. The Bank had its origin dating back to
    the early 1970s when Baltimore's African American leadership was
    seeking ways to enhance economic opportunities for minority communities
    in Baltimore City.
        One of the major issues identified as limiting economic
    opportunities was the lack of access to capital and more importantly
    access to banking. To address these issues Harbor Bank was found.

        Harbor Bank focused on providing banking services in the following
    areas:

      --Minority Business/Commercial Lending
      --Faith Based (Church Financing)
      --Residential Mortgages

        Increased demands for financial services coupled with increasing
    bank regulations required and expanded operations.
        In 1992, Harbor Bank formed a holding company, Harbor Bankshares
    Corporation (The Corporation), allowing for additional financial
    services.
        Establishing the holding company led to the formation of three (3)
    subsidiaries and a non-profit Community Development Corporation (CDC).
        Today, The Corporation oversees a $350 million Bank and
    subsidiaries that directly and indirectly control another $300 million.
    While the Bank remains the primary subsidiary, the other operations
    provide the Baltimore community with access to more diverse capital and
    financial services.

        Some of the expanded services include:

      --Lower priced loans
      --Equity investment support
      --Financial literacy programs
      --Real estate development programs
      --Specialized tax benefits

        Over the past thirty-nine (39) years, the significance of the
    Corporation and Bank to the development/revitalization of communities
    is evidenced by:

      --The development of the Inner Harbor East where Harbor Bank was the
            first money to help build a hotel, office building, and
            residential housing.
      --The Canton Community where Harbor Bank was the first money to
            support a residential housing project and the converting of old
            warehouses to office and retailed space.
      --East Baltimore Development Inc. (EBDI), a non-profit, was aided by
            Harbor Bank's seed money to help an 88-acre community known for
            poverty and crime to be revitalized and become livable. Johns
            Hopkins Science Park is a part of this community's
            revitalization. This community is now a national model.
      --University of Maryland at Baltimore (UMAB) Science Park where
            Harbor Bank was the first money to support land and project
            development West of Martin Luther King Boulevard.

        As a corporation in the financial services space, our role evolved
    to that of being a catalyst and advocate for revitalizing and restoring
    abandoned, forgotten, and disregarded communities in Baltimore.
                                 the cdfi role
        The Corporation and Bank seeking to enhance financial services and
    bring more resources to the Baltimore Community applied over 20 years
    ago to become certified Community Development Financial Institutions
    (CDFI). Today, the Corporation and two of its subsidiaries are CDFIs.
    Also, The Corporation's non-profit CDC is a certified CDFI.
        Under the Department of Treasury's CDFI Program, the Corporation
    and its subsidiaries have participated in several of funds programs and
    have successfully won/earned:

      --13 Bank Enterprise Awards (BEA) totaling $3,893,753 which helped to
            increase lending in lower income communities. The BEA Award is
            important to CDFI Banks because of its leverage capacity.
            Records show that 90 percent of BEA monies go to the lowest
            income census tracts.
      --Financial Assistance (FA) award totaling $649,000. ($500,000 was
            for loans and $149,000 persistent poverty).
      --Nine rounds of New Market Tax Credit (NMTC) awards totaling $384
            million helping to leverage over $3 billion of development and
            create 4,000 jobs. Projects include science buildings,
            community schools, and healthcare facilities.

        Many projects involve multiple level of participation from The
    Corporation. A project could include New Market Tax Credit (NMTC),
    Harbor Bank loan and advisory services.
                                maryland profile
      --The programs of the CDFI Fund are very important to the State of
            Maryland. Maryland is home to 15 CDFIs, two of which are banks
            or bank holding companies, while two additional CDFI banks
            based in the District of Columbia provide significant services
            within the State.

        --In 2020, Maryland-based CDFIs and CDFI banks serving Maryland
                (Maryland and D.C. based) received $6.7 million in CDFI
                Financial Assistance (FA) and Technical Assistance (TA)
                awards. CDFI banks serving Maryland received $202,898 in
                BEA funds.
        --In the past 3 years Maryland-based CDFIs and CDFI banks serving
                Maryland have received $31.4 million in FA and TA awards,
                while CDFI banks serving Maryland have received $1.15
                million in BEA funds.
        --Since the CDFI Fund's inception in 1996, Maryland-based CDFIs and
                CDFI banks serving Maryland have received $119.5 million in
                total awards. In that same period, CDFI banks serving
                Maryland have received $14.5 million in BEA funds.

      --Maryland is among the poorest states in the nation. Like other
            states with persistent poverty, Maryland has a lot to lose if
            the CDFI Fund and BEA Program do not have adequate funding.

        --Approximately 9.1 percent of all Marylanders live in poverty--
                with the poverty rate in 8 counties (Somerset, Baltimore,
                Dorchester, Allegany, Wicomico, Garrett, Kent and
                Washington) equal to or exceeding the 12.3 percent United
                States total
        --Baltimore City, Maryland's USDA designated persistent poverty
                county, has a poverty rate 160 percent higher than the
                United States total. Somerset County has a poverty rate 190
                percent higher than the United States total.
                               covid-19 pandemic
        The crisis of COVID-19 highlighted the importance of CDFI banks and
    other community based financial institutions. CDFI banks reached and
    helped the businesses that required loans to survive, the ones
    disproportionately operating in low to moderate income communities and
    desperate for banking services and in particular financial assistance.
    The government offered stimulus programs--especially the Paycheck
    Protection Program (PPP) proved to be a lifeline to many of these
    businesses, especially in the distressed communities.
        Harbor Bank stepped to the front of the line providing assistance
    through the PPP program. Harbor Bank met and assisted over 1,000
    potential PPP applicants and processed 674 applications totaling $67.5
    million. Adjusting out the 10 largest borrowers, the average size of
    Harbor's PPP loan was $52,000.
        The government met the economic call from the community and Harbor
    Bank was a part of the delivering channel.
        In summary, the Treasury's CDFI Program is vital to the growth and
    restoration of the communities that have been depressed or deprived for
    years. It is difficult to provide the capital that these communities
    need without a CDFI Program. My fear today is that the absence of the
    PPP Program will render businesses incapable of continuing on the
    survival path.
        I urge the Members of the subcommittee to recognize the significant
    economic benefits of funding the CDFI Fund programs. Not only do these
    programs provide access to capital in historically disadvantaged
    regions of the country, but they do so by leveraging private
    investment. The CDFI Fund programs are a market-based strategy for
    addressing chronic economic challenges.
        I thank Chairman Van Hollen, Ranking Member Hyde-Smith, and the
    Members of the subcommittee for the opportunity to tell you the story
    of Harbor Bankshares Corporation, the work we do, and the communities
    that we serve.

        Senator Van Hollen. Thank you for your testimony, Mr.
    Haskins. Next we will turn to Mr. Anderson.
    STATEMENT OF ANDY ANDERSON, PRESIDENT AND CEO, BANK OF
                ANGUILLA
        [Clerk's Note: Materials were submitted for the hearing
    record by the Bank of Anguilla, and are in the ``Submitted
    Materials for the Hearing Record'' section at the end of the
    hearing.]

        Mr. Anderson. Good afternoon. My name is Andy Anderson. I
    am the president and CEO of Bank of Anguilla, in Anguilla,
    Mississippi. I am also chairman of the Mississippi Bankers
    Association, and a board member for the Community Development
    Bankers Association.
        Mississippi is home to the largest concentration of CDFI
    banks in the country. Thus the Treasury Department CDFI Fund is
    extremely important to my bank and the communities we serve in
    my entire State. I appreciate the opportunity to testify on
    this topic today.
        I thank the Members of this subcommittee for their long-
    standing support of the CDFI Fund, and providing $270 million
    last year in recognition of the important roles CDFIs play in
    promoting economic opportunity in underserved communities. As
    you consider your next appropriation, I strongly urge you to
    increase overall support for the CDFI Program, and particularly
    for the Bank Enterprise Award Program.
        Bank of Anguilla has $171 million in total assets, and it
    is the only financial institution in two persistent poverty
    counties that are among the most economically distressed places
    in the Nation. Established in 1904, helping our neighbors and
    providing a pathway to financial stability is core to the
    purpose of Bank of Anguilla.
        Many people do not grasp all the challenges that rural
    communities like the ones we serve face. Our community and our
    counties have a combined population of only 5,648 people, of
    which 33.6 live in poverty and 69 percent of the population is
    minority. The medium household income is $24,208. There are no
    traffic lights. There are no major retailers or national chain
    restaurants in either county. There is no broadband Internet.
        It is an hour drive to shop at a Walmart, or visit a
    clothing store, or department store, which creates challenges
    for many of our citizens that don't own a vehicle. New home
    construction is nonexistent, and existing housing the quality
    is often poor, as the cost of renovation often exceeds the
    market value. Many of our neighbors struggle to make utility
    payment, put food on the table, or buy school books or clothes
    for children. CDFI banks, like Bank of Anguilla help these
    struggling individuals to meet these challenges.
        Fifty-one percent of the Bank's current loans are consumer
    loans made to local residents. We have no minimum loan amount
    and roughly 10 percent of our total current loans have an
    original balance of $2,500. Like all CDFIs, at least 60 percent
    of our lending and activities target LMI communities. With
    solid underwriting practices, civic pride, and mission-driven
    empathy, CDFI banks, like Bank of Anguilla, bridge the gap for
    financially vulnerable customers.
        Over the past decade, the CDFI fund has played a critical
    role in Bank of Anguilla's ability to serve our communities and
    remain a locally-owned institution. Since 2010 Bank of Anguilla
    has received nine BEA awards totaling $1.7 million. BEA has the
    strongest demand among the CDFI programs, and is far
    oversubscribed compared to other programs.
        In 2020, only $1 in BEA funding was available for every
    $5.68 in request. Given the benefits generated by the BEA
    Program, it is critical to increase funding. Since 2016, the
    number of CDFI banks increased by 48 percent, yet, BEA funding
    increase from only $18.2 million to $25.2 million. Through the
    financial benefits of the BEA program, Bank of Anguilla is able
    to make commercial loans to small minority businesses and
    consumer loans to individuals that need financial help. Most
    financial institutions would decline these requests.
        We recently made two loans with the help of a local
    agency's Minority Business Enterprise Loan Program to help a
    minority owner purchase an established restaurant. We made
    another loan to establish a minority-owned physical therapy
    clinic. We also just financed the opening of a new minority-
    owned restaurant. We support our local hospital and clinics,
    where approximately 80 percent of the patients are minority,
    and most of these poor. I could spend hours telling you the
    small-dollar loans we have made, but this would take a whole
    lot of time here.
        Demand for all CDFI-funded programs far exceeds funding
    available. I urge the Members of the subcommittee to recognize
    the significant economic benefits of funding to CDFI Fund
    programs. Not only do these programs provide access to credit
    in historically disadvantaged regions of the country, like
    mine, but they do so by leveraging private investment.
        I urge this subcommittee to support the CDFI Fund Program,
    by providing a robust budget for the CDFI Fund, and include an
    extremely robust increase for the bank enterprise award
    program.
        I thank Chairman Van Hollen, Ranking Member Hyde-Smith, and
    the Members of this subcommittee, for the opportunity to tell
    you the story of Bank of Anguilla, the work we do in the
    communities that we serve. And I look forward to answering your
    questions.
        Senator Van Hollen. Well, thank you very much for your
    testimony, Mr. Anderson, and to all three of you. And I have a
    question which really goes to all three.
        I am going to start with Mr. Poyo, about the emergency
    capital investment program, that was part of the December
    legislation, and legislation after that, providing a $9 billion
    investment into community development financial institutions,
    and minority depository institutions. I understand that
    applications are not due until July 6, but what has the
    response been to date? And how do you anticipate dealing with
    the demand?
        Mr. Poyo. Thank you, Mr. Chairman. So the Emergency Capital
    Investment Program has had a great deal of interest as you
    might imagine from the day that it was passed. And we opened
    the application round quickly, in March, and received a great
    deal of feedback from those institutions that were--that are
    potentially eligible applicants about how to structure the
    program in a way that would most effectively achieve the goals
    laid out by the statute and by Congress.
        And so we have really listened to the banks and the credit
    unions that are eligible applicants here, as well as engaged in
    significant engagement with regulators, who are our partners in
    administering any program, in carrying out a program with
    regulated institutions. And so we are expecting strong demand
    for the emergency Capital Investment Program, insignificant
    part, because I believe that we have listened very carefully to
    the institutions that are eligible for it, work closely with
    regulators.
        And, we will be, soon, releasing some additional updates,
    that help you address many of the questions that we have seen
    from the field. But I think listening to the field has really
    put us in a strong position to see this program be effective.
        Senator Hyde-Smith. Thank you very much. And we are going
    to continue with questions, as Senator Van Hollen had to go
    vote, Van Hollen had to go vote, and I just ran back.
        So I will start with my questions. And this is for Mr.
    Anderson. The Bank of Anguilla is headquartered in the South
    Delta, Mississippi, one of the poorest regions in the country.
    And I have received two statements on the impact that your bank
    has had on the local area that I would like to enter into the
    hearing record. But what would a funding increase to the BEA
    Program mean for your community, there in Anguilla, and where
    your branches are?
        Mr. Anderson. Sure. As I said earlier, BEA is very
    important to Bank of Anguilla, and an increased BEA award means
    we could do so much more. We are only a $170 million bank in
    assets, and we don't have access to capital markets, so grants
    like this from the fund are really impactful for us. We have
    received an award each of the last 10 years, which is great,
    but the amount of the actual dollars we receive is trending
    downward due to the increased demand in the program.
        We are grateful to receive the award, but if we could just
    get the amount bumped up, we could sure do a whole lot more in
    our community. And BEA is important because it is not just a
    one-time allocation. It is award that we have come to depend
    on, and is a tool that helps us mitigate the risks that we
    inherently have to absorb in serving predominantly LMI
    customers.
        Increasing this award could mean that in two of the poorest
    counties in the Nation, borderline profitable small businesses
    could remain open, potential small new businesses could be
    started, and the lives of those in poverty in our area could be
    better improved through the work of the Bank of Anguilla. The
    BEA Program is helping to keep small, rural, impoverished
    communities afloat, and that is a good thing.
        Senator Hyde-Smith. Thank you. And your opening statement
    touches on the difficulty many Americans face in just
    understanding the true meaning of the words ``rural'' and
    ``poor'' in our country unless you have experienced regions
    like in the Delta. Will you elaborate on this and the
    communities you serve? And how has prior BEA funding benefited
    them?
        Mr. Anderson. Sure. One important point to state, that Bank
    of Anguilla, like many community banks and CDFIs across the
    country, we literally know most of our customers, our customers
    are our neighbors, and neighbors help neighbors. They come into
    our office and they laugh, they cry, they show pictures of
    their family, and they look for us for guidance and help.
        And banking is more than looking at a loan application to
    see if it will fit into a box. Bankers are missing a blessing
    if they haven't made a $500 loan to an elderly woman to visit
    her dying sister, or made a $300 loan to an elderly lady for
    clothes for a funeral, or made a $400 loan to a man over 100
    years old that needed money for his utilities and to put food
    on his table for Thanksgiving, or made a $1,000 loan to a
    disabled woman to help pay for the funeral expenses of a
    granddaughter that passed away in a fire.
        And we might add that Bank of Anguilla employees made up
    the difference for the expenses of that funeral. We later made
    $5,000 loan to this same lady, so she could take in two
    grandchildren. She had to have beds for them so human services
    wouldn't take them away. All of these loans were made unsecured
    to people that were poor. BEA funds not only help us to make
    business loans that might not otherwise get made, but it helps
    Bank of Anguilla, and other CDFIs who saw the risk of making
    small loans to impoverished individuals who need help with the
    basics of life.
        Senator Hyde-Smith. Wow, tremendous testimony, tremendous
    story, for real people.
        And I am going to turn it over to Senator Coons. I think he
    has a question. I recognize you.
        Senator Coons. Thank you very much, Senator.
        As someone who has long been interested in, and concerned
    about CDFIs, and I am eager to see them play a more significant
    role, I am so excited by this panel. I enjoyed reading your
    testimony beforehand. If I might, forgive me--the questions I
    had hoped to ask.
        Mr. Haskins, The Harbor Bank of Maryland is a certified
    CDFI that helps communities in Baltimore. What impact have you
    seen the COVID-19 relief funding for small businesses and the
    CDFI Fund have on your community? And forgive me, I wanted to
    ask that question, of both witnesses, from CDFIs. Forgive me,
    sir.
        Mr. Haskins. Well, speaking to the Paycheck Protection
    Program, I can tell you that we probably interviewed more than
    1,000 different applicants. We ended up processing 674
    applications for a total of roughly $67 million. If we tease
    out the 30 largest borrowers, our average loan to the borrowers
    was roughly about $52,000. We know that we kept businesses'
    inability to operate and survive because we were there. And I
    don't want to speak to some of my larger brothering, but I can
    tell you that in our community, it was difficult for many of
    them to access loans, especially when they were of a smaller
    size.
        When you looked at loans in, for half-million or in the
    multi-million dollar size, we could process those loans in a
    couple of hours. When we got to the $25- and $30,000 loans, we
    were spending weeks getting those loans processed because you
    had to walk individuals through the process. When you thought
    you had clear understanding you didn't, you ended up actually
    drawing up many of the documents so that they could apply.
        The reason I mentioned that we talked to in excess of
    1,000, because I engage all of our eligible staff to work in
    the processing, because we had such requests and the demands
    were so heavy, there was a third of those that we couldn't get
    to. The reason I think it is important to know that, is because
    those individuals are still struggling, and I will suggest to
    you, many will not survive because they didn't get the lifeline
    that the PPP Program extended for those businesses that were so
    impacted by the pandemic itself.
        And so I would just say to you that it is an extremely
    important role. And I just want to mention, I know it was
    raised about the BEA award, and I want you to know that, as my
    colleague, Andy, pointed out with reference to Mississippi, in
    Baltimore where we are 160 percent impoverished beyond what is
    considered the national average, we find ourselves dealing with
    many of the same issues in terms of meeting those needs.
        Twenty years ago we applied and won CDFI certifications. I
    have been successful in winning 13 BEA awards, which total
    $3,893,000. Those dollars have gone back in to provide some
    financial support for businesses, vital to communities that
    have not readily received. Unfortunately, in many urban
    communities, what we know and hear about as food deserts, have
    become bank deserts. And so they are not easy and readily
    access to financial resources. Harbor Bank has stepped in to
    help bridge that gap and bring financial resources.
        And the last comment I will make is that, Harbor, and in
    our community, we are more than a bank, we are a catalyst for
    economic development, and we are advocates for financial
    resources. So when you talk about these funding sources, you
    are talking about funds that we can point to specific projects
    that are there because of us. We are so knowledgeable of the
    community that we can go into communities that other financial
    institutions will not look at, and invest our dollars to ignite
    economic development. And we bring in the others.
        Senator Coons. Thank you, Mr. Haskins.
        Mr. Anderson, my experience in Delaware has been that we
    have CDFIs that provide access to financial services, much as
    Mr. Haskins was describing, in both the urban core of
    Wilmington, Delaware, and in our most rural, lowest-income
    corners of our State. I was intrigued by reading your testimony
    about your experience in Anguilla, Mississippi.
        If you just please tell me, briefly, if you could, as well,
    about why you support the CDFI Fund. Why the BEA program is
    particularly important, and how you think we can make the best
    use of taxpayer money in deploying CDFIs as economic
    development, access to credit, facilitators across our country
    from both urban and rural communities?
        Mr. Anderson. Sure. As I stated earlier, banks like Bank of
    Anguilla in rural areas have very limited access to capital. We
    just don't have it. Our capital grows by local investors and
    the small amounts we make in profits. If we didn't have the BEA
    designation, if there were--if there wasn't a designation such
    as CDFIs, we would still make the loans that we are making now.
    We would do it, but at much greater risk.
        What the BEA Program allows us to do, is absorb some of
    these risks and go even farther outside the box to help the
    people in our communities, Sharkey. Issaquena counties, where
    we operate, to have just a basic existence in life. So many of
    us take for granted the daily necessities. There are people
    across the country that don't have these basic necessities, and
    they look to us to be able to build--to fund these. And they
    looked to us for advice, as Mr. Haskins said.
        The CDFI Program is important to banks like us. And it is
    very important that that dollar amount continues to grow for
    us, because too often banks get an image as the bad guys, but
    we are there for our customers. Our bank, just like probably
    most of the CDFIs across the country, we have a heart and soul.
    We have a heart and soul for missions, and that is what we do.
    Our employees, each one of my employees, I am so proud of them,
    they have a heart for missions. They seek ways to help out
    people.
        And it all boils down to people, whether it is a business
    loan or a consumer loan, it all boils down to people,
    individuals, and family. And I stress a lot on the individual
    level, the consumer level, but the BEA Fund and CDFI Program is
    so important to economic development too.
        Senator Coons. Well, thank you. Thank you both. I have
    gotten to know CDFIs throughout my State, and I have been
    really struck at the mission orientation, the willingness to
    invest the time to do the hard work, to get to know your
    customers, and to do banking, I would say the good old
    fashioned way, meaning it is a lot of work, but it provides
    people opportunity and access. Thank you. Thank you for your
    testimony.
        Mr. Anderson. Thank you.
        Senator Van Hollen. Thank you, Senator Coons.
        I have a few questions. But let me defer to Senator Hyde-
    Smith, if you have some. Sorry, as you can see, we are in the
    middle of voting, so that is why you see everybody being----
        Senator Hyde-Smith. Oh, yes. I just have one more. Of
    course Mississippi is home to more CDFI banks than any State in
    the country. And why is that? And you know, that we have more,
    and what benefits do these institutions bring to our State that
    handle these?
        Mr. Anderson. Mississippi, as so many people know, and it
    is well-publicized, is one of the poorest States in the Nation.
    CDFIs are mission-driven and are committed to serve in
    economically distressed areas. And we have a lot that fit that
    description of Mississippi. And we also have many community
    banks CDFIs that are committed to providing economic
    opportunity for everyone in their communities.
        So there is a natural alignment between Mississippi
    community banks that are committed to growing the economy in
    rural underserved areas and the goals of the CDFI fund. This
    alignment has benefited our State, and provided opportunities
    for banks like mine to finance projects and to help the
    underserved. We have a lot of communities around the State that
    are struggling, particularly in my home of the Mississippi
    Delta, and combining public dollars with private funds for
    targeted impact, like the CDFI Fund does, is really an
    important way to combat persistent poverty. There is a lot of
    work to do, so the fund does a great job of helping all of us
    to do that.
        Senator Hyde-Smith. Thank you.
        Senator Van Hollen. Thank you, Senator.
        And to Mr. Haskins and Mr. Anderson; I had to leave after I
    had asked Mr. Poyo the question about the new capital funds,
    the emergency capital fund that was developed. Are either of
    your two CDFIs applying for those funds?
        Mr. Haskins. Senator, yes we are. And as I reported a
    little bit earlier, and just to reiterate, we are fortunate in
    that not only is the Bank CDFI certified, my holding company is
    CDFI certified, and we have a second subsidiary that is CDFI
    certified with a nonprofit that we have certified. So we intend
    to apply for the max.
        And one of the examples that I can give you, if I can real
    quickly; to say, why it can get used for us, one of the
    stimulus programs early on from last year, the Main Street
    Program, while some institutions had trouble deploying it, in
    the last quarter of 2020, we actually deploy $92 million in
    funds. So I say that to say that there is no lack of
    opportunity there.
        And one other piece that I will give you, if those of you,
    and I always invite people to visit Baltimore and the area,
    north of Johns Hopkins hospital, because many of these
    hospitals, and many of the universities in urban areas are
    surrounded by low-income and highly distressed communities.
    Well, 88 acres north of Johns Hopkins University was
    revitalized because we were able to bring tax credits to the
    table, Harbor Bank direct loans to table, we were able to bring
    CDC, low-income loans to the table, and we provided advisory
    service.
        Well, there are several other projects that need funding
    there, and so we believe that this is a real opportunity for us
    to make major impact far beyond the communities that are
    already identified, and so we will be applying for the full
    amount, which will be $70-some million, in terms of our
    institution.
        Senator Van Hollen. Thank you.
        Mr. Anderson.
        Mr. Anderson. As I stated earlier, we have limited access
    to capital in the markets we serve. So we will definitely be
    applying for capital through the program. In fact, we will have
    our application, and hope to finish by Friday, so we are moving
    forward with that. We think this could be a game changer in our
    area. We hope it will be. We believe we could invest in
    technology to help deploy something like remote deposit
    capture, which we don't have right now, and other mobile
    technology that we think will help banking access across our
    community.
        When you look across our community, it seems that everybody
    has a cell phone. And so we believe that this will help. ECIP
    capital will also help us to grow our lending areas in some
    nearby small communities that no longer have local bank
    branches, these communities are bank deserts now, and we hope
    to be able to lend to the people in those areas. So ultimately
    we plan on using the ECIP capital to broaden the service and
    lending products we are able to offer. And we anticipate that
    this will continue to help us fight poverty in the Mississippi
    Delta.
        Senator Van Hollen. Thank you.
        Mr. Poyo, we have been talking about the additional
    emergency funds that were provided both in capital as well as
    in the Rapid Response Program, but of course, you have got your
    annual appropriation request. And as we said earlier when the
    Secretary was here we appreciate that request. Some have asked,
    you know, given the fact that we have just provided these large
    amounts of funds to CDFIs, through the earlier legislation,
    whether there is the capacity to absorb this additional
    request. What is your response to that based on your current
    experience, and your previous experience in this area?
        Mr. Poyo. Yes. Thank you, Mr. Chairman. So as a former CDFI
    CEO, as well as in my position now, it is my experience that
    the CDFI field is something like parched earth, right. Can soak
    up, still a lot of capital, a lot of that water in the
    metaphor. And what we see is, you know, the Paycheck Protection
    Program, which you were talking about earlier. There was a lot
    of question about whether CDFIs would be able to play a really
    robust role in the deployment of Paycheck Protection Program
    dollars.
        And indeed CDFIs outstripped, I think, anyone's
    expectation. And so the constraint, the fundamental constraint
    that I think the CDFI field faces is capital constraint. And so
    when we talk about capacity, it is very difficult to hire
    staff, or build your IT systems, or all of those things that
    are--that are good for an institution's building capacity, if
    it is not in the service of actually putting capital on the
    street and meeting people's needs.
        And so I believe the capital that we have seen, which is a
    historic investment, and really appreciate that the Congress
    did this, we expect to see that capital absorbed by the field,
    and believe that the annual appropriation--that there is an
    opportunity to grow the annual appropriation to match that
    increase in capacity that we see in the field.
        Senator Van Hollen. Thank you. And, you know, as you know,
    that the Emergency Capital Investment Program, currently only
    applies to ensure depository institutions, bank holding
    companies, savings and loans, and federally insured credit
    unions. You and I have discussed this in the past, but we have
    heard from CDFI loan funds that they would also benefit from
    the longer term capital infusions that would be provided under
    this kind of program.
        Question one: Is there a non-legislative fix to that issue?
    And question two is: Do you believe that the CDFI loan funds
    would also benefit from a capital infusion?
        Mr. Poyo. So taking your first question first. We have
    looked very closely at this question, and really, I think the
    constraint is in the statute. I am not sure that there is any
    way, and we have looked at it from a bunch of angles, to really
    construe that loan funds could be eligible as the statute is
    currently written.
        That being said, loan funds receive significant benefit
    from the Rapid Response Program, which of course was just
    recently announced. And I do believe that loan funds can
    continue to absorb capital. And so I am--really appreciate you,
    sort of, focusing on and thinking through what are ways in
    which dollars could be crafted to loan funds. But of course, we
    have--we have both put the Rapid Response Program on the
    street, and the Minority Lending Program will be coming later
    this year, which will create opportunity for some loan funds.
        Senator Van Hollen. Thank you. No, and I look forward to
    working with you on that issue. And my final question goes to
    both Mr. Haskins and Mr. Anderson, because it is great to have
    you here, as really good, important examples of why the CDFI
    funding is so important to get capital and money into
    communities.
        And two issues have come up, Mr. Haskins, you mentioned as
    well, the New Market Tax Credits in one of your earlier
    responses. And then there was also the discussion of the role
    CDFIs played in the deployment of the PPP Program. I think we
    all remember in the early days of the rollout of the PPP
    Program, a lot of those funds were working there through large
    financial institutions, but at the end of the day, it was the
    smaller financial institutions and CDFIs that really helped
    push that money out.
        So let's start with you, Mr. Haskins. Can you talk about
    the role you played in the deployment of the PPP funds, but
    also some of the other things that you have been able to do
    with New Market Tax Credits, and what important role they play
    in putting together the pieces for some of these important
    investments?
        Mr. Haskins. Thank you again for allowing me to speak about
    the PPP Program. What we found is that Harbor, because of our
    role in the community, and a comfort level that many of these
    businesses have with our institution, there was a greater
    involvement that we were able to have than some of the other
    institutions. And, as my colleague, Andy Anderson, has pointed
    out, we are not just there in the community, we are there with
    a real serious committed interest to the welfare of those
    communities.
        And so we reached out to those that had not reached out to
    us to make sure that they were aware of the opportunity to
    proceed, many kind of automatically believe that when something
    is announced, they automatically know and understand how to
    process, but many don't. And, and so we understand that about
    our community. And so those who had not applied, we were able
    to get to apply.
        And we can point specifically to businesses that are vital
    to the community, the stability of their communities that are
    there. One sector that often people miss in many urban areas,
    especially many areas that are older communities, is the role
    that the churches, the faith-based organizations play in those
    communities. Many of those organizations employ heavily out of
    their respective communities.
        And so we were able to get many of the faith-based
    organizations to apply, and thereby keep employment and keep
    services which were daycare centers, job training centers, food
    preparation centers, et cetera, et cetera, we were able to keep
    those functional because appropriate dollars were allocated
    through the PPP Program for that purpose.
        Switching over to New Market Tax Credits, because while it
    is not a direct funding program, it is significant because it
    focuses on low-income, distress communities, and it is
    formulaic in terms of how it is applied. But so many of these
    communities, both urban and rural have high distress community
    areas based on the demographics, et cetera.
        What we have been successful in winning is nine different
    grounds totaling $384 million, but it is leveraged over $3
    billion worth of development. And as a result of doing that
    because of the way that the definitional requirements are,
    employment is a part of it.
        So one example, and I will say this, and be brief, one of
    the last science buildings we did in East Baltimore is 1812
    Ashland Avenue. Through our working relationship we were able
    to get Starbucks to put a roaster, the only roast in Maryland,
    one of the first roasters in the Delmarva area, in a low-income
    community, and the folks employed in that roaster are from the
    community.
        So we created new jobs that were not identifiable with that
    community. And so what we know and what we see is that through
    these programs, we can help leverage greater opportunities for
    economic revitalization and development. And that's just a
    simple example of one.
        Senator Van Hollen. Wow. That is a great example. And part
    of the success, I think, of this program. Thank you, thank you
    very much.
        Mr. Anderson.
        Mr. Anderson. Sure. Our local economy was hurt of course,
    by the pandemic, just like everybody else. A few restaurants
    that we have, their doors were closed for a certain amount of
    time. And then when they reopened, they were reopened to
    limited capacity. Churches and faith-based organizations are
    very significant in our area in helping where there are needs.
    Church offerings were significantly down, and any donations
    made to these faith-based organizations were down.
        Between the 2019 flood, we had an extensive flood in 2019
    that lasted about 8 months, and the pandemic in 2020, our
    community was really, really hurt. Given the limited number of
    businesses we have, we were still able to make 218 PPP loans in
    an area where there is just over 5,000 people, and limited
    businesses, making these loans helped our county survive,
    tremendously helped our county to survive.
        If there is a business in our two counties, most likely we
    financed that business. I can't think off the top of my head of
    any business that is existing right now we didn't finance. And
    businesses in small, rural counties have a hard time surviving,
    but we are there for them. And the PPP Program helped our area,
    and they all sought out Bank of Anguilla. And like Mr. Haskins
    said, our average loan was about $23,000.
        Most of our applicants had no idea how to fill these forms
    out or what information was needed. So we spent, literally
    spent hours on each loan, helping our customers out. And so
    between the PPP loans that we made all through the pandemic
    that has helped out so much, and with the money that we will
    have coming in through the Rapid Response Program, and then
    through--hopefully through ECIP that is going to be a game
    changer for our communities.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Van Hollen. Well, let me thank all three of you.
    Thank you for your testimony. Most of all, thank you for what
    you are doing to help empower communities, and bring more
    opportunity to more people in small businesses.

        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                  Questions Submitted to Hon. Janet L. Yellen
                  Questions Submitted by Senator Patrick Leahy
              county funding under the american recovery plan act
        Secretary Yellen, as we discussed during the hearing, the
    Department of the Treasury has chosen to rely on a definition from the
    Census Bureau to define what constitutes a county government. No such
    definition was specified in the American Recovery Plan Act, and the
    Treasury Department's arbitrary decision to apply it has led to an
    unacceptable result in Vermont.

        Question 1. The Vermont Congressional Delegation, as well as the
    State of Vermont, have expressed disappointment in the Treasury
    Department's response to these concerns. What steps is the Department
    taking to work with the State of Vermont to ensure that Vermonters
    receive the dollars provided under the ARPA, as directed by Congress?

              Answer. On July 30, Treasury issued guidance on CLFRF funds
            for counties that are not units of general local government
            (non-UGLG). In this guidance, all of Vermont's 14 counties have
            been classified as non-UGLG counties. As such, the funds
            allocated to Vermont's counties will be made available to the
            State of Vermont for payment to its units of general local
            government within those counties.

        Question 2. In your testimony, you indicated your intent to work
    with us to find a resolution. It does not help the people of Vermont to
    have the money Congress appropriated sitting in the Treasury here in
    Washington. Please confirm that you have found a resolution so that the
    funds can be allocated to the State, where the money can be used for
    the purposes appropriated.

              Answer. Yes, please see the guidance referenced in the
            previous question.
                               affordable housing
        Vermont has used significant portions of its State and Local Fiscal
    Recovery Funds from the CARES Act and the American Rescue Plan Act to
    support housing construction. The State hopes to ensure that Vermonters
    can find affordable housing, including the more than 2,000 Vermonters
    currently being sheltered in hotels to prevent homelessness. Vermont
    has a strong history of building affordable housing in areas of
    opportunity. However, recent Treasury guidance on eligible uses of
    State and local relief money does not offer clear guidance for whether
    this funding can be used to construct affordable housing in areas of
    opportunity, leading to confusion among Vermont affordable housing
    groups.
        The guidance states that ``Treasury will presume that certain types
    of services are eligible uses when provided in a Qualified Census Tract
    (QCT), to families living in QCTs, or when these services are provided
    by Tribal governments. Recipients may also provide these services to
    other populations, households, or geographic areas disproportionately
    impacted by the pandemic. In identifying these disproportionately-
    impacted communities, recipients should be able to support their
    determination for how the pandemic disproportionately impacted the
    populations, households, or geographic areas to be served.'' I am
    concerned by this guidance for a number of reasons.
        Not explicitly allowing affordable housing construction,
    acquisition or rehabilitation outside of low-income areas (QCTs) runs
    counter to the public policy consensus and mandate to deconcentrate
    poverty and create affordable homes in areas of opportunity. This
    limitation threatens to further segregation and discrimination.

        Question 3. Will you revise Treasury guidance to ensure that
    spending State and Local Fiscal Recovery Funds does not undermine long-
    standing housing best practices and policies regarding construction of
    affordable housing in areas of opportunity?

              Answer. The Treasury Department is deeply committed to
            supporting the creation of and addressing affordable housing
            needs under each of the programs it administers under the
            American Rescue Plan Act. Treasury's Interim Final Rule for the
            State and Local Fiscal Recovery Fund (SLFRF) encourages
            recipients to prioritize services for low-income individuals
            and families hard-hit by the pandemic, including those living
            in Qualified Census Tracts (QCTs).
              The Interim Final Rule explicitly allows affordable housing
            development to increase the supply of affordable and high-
            quality living units as an eligible service for SLFRF.
            Recognizing the disproportionate impacts of the pandemic to
            low-income communities, affordable housing is automatically
            eligible when provided in a QCT, to families living in QCTs, or
            when these services are provided by Tribal governments. In
            addition, recipients may also provide these services to other
            populations, households, or geographic areas that they identify
            as disproportionately impacted by the pandemic. This provides a
            simple and expeditious way for governments to invest in
            disadvantaged communities, while giving them the flexibility to
            also identify and serve other populations, households, or
            geographic areas. For example, a relatively higher-income city
            could determine that its low-income residents faced
            disproportionate impacts and develop affordable housing
            targeted to these households; this could include affordable
            projects in higher-income neighborhoods near jobs and well-
            resourced schools.
              Treasury's comment public period for the Interim Final Rule
            has just closed. As part of its review process, Treasury will
            carefully consider public comments and consult with other
            Federal agencies as relevant in order to support the
            development of affordable housing in communities across the
            country.

        The data used to determine Qualified Census Tracts does not take
    into account other measures of need used by other Federal or State
    agencies, including areas identified in State and local housing plans,
    Difficult Development Areas determined by the Department of Housing and
    Urban Development (HUD) or Rural Economic Area Partnership Zones
    determined by the U.S. Department of Agriculture (USDA).

        Question 4. Will you commit to working with your counterparts at
    other Federal agencies to ensure that areas of identified need beyond
    Qualified Census Tracts can benefit from affordable housing investment
    via State and Local Fiscal Recovery Funds?

              Answer. The Interim Final Rule recognizes that the COVID-19
            public health emergency disproportionately impacted certain
            communities, including in QCTs. In addition, the Interim Final
            Rule provides a framework for recipients to identify other
            populations that were disproportionately impacted, including
            considerations for identifying those populations. This approach
            helps provide recipients with flexibility to respond to their
            communities.
              Treasury is carefully reviewing comments received on the
            Interim Final Rule, including on other communities
            disproportionately impacted.

        Question 5. Will you commit to engaging on the ground stakeholders
    to establish a simple process by which recipients of State and Local
    Fiscal Recovery Funds can determine additional disproportionately
    impacted areas and document these decisions for the Treasury?

              Answer. The Interim Final Rule recognizes that the COVID-19
            public health emergency disproportionately impacted certain
            communities, including in QCTs. In addition, Interim Final Rule
            provides a framework for recipients to identify other
            populations that were disproportionately impacted, including
            considerations for identifying those populations. This approach
            helps provide recipients with flexibility to respond to their
            communities.
              Treasury is carefully reviewing comments received on the
            Interim Final Rule, including on other communities
            disproportionately impacted. It is well-documented that lower-
            income households have been disproportionately impacted by the
            COVID-19 pandemic, but as part of the Interim Final Rule
            comment review process, Treasury will carefully consider public
            comments and consult with other Federal agencies as relevant in
            order to offer clarity on how a State can demonstrate this
            disproportionate impact.

        It is well-documented that lower-income households have been
    disproportionately impacted by the COVID-19 pandemic, but current
    Treasury guidance offers no clarity on how a State can demonstrate this
    disproportionate impact. This creates ambiguity that will divert
    administrative capacity and delay urgently-needed new housing.

        Question 6. Will the department consider revising guidance to
    provide clarity that housing affordable for households at or below 100
    percent of the Area Median Income is an eligible use of State and Local
    Fiscal Recovery Funds, if it is located in an area where the need for
    housing has been shown?

              Answer. The public comment period on Treasury's Interim Final
            Rule recently closed on July 16. Treasury is carefully
            reviewing comments received and will take public feedback into
            account when developing the final rule.

        The majority of homes in Vermont are owned rather than rented, but
    Treasury guidance on the provision of affordable housing with State and
    Local Relief Fund money makes no mention of providing support to help
    struggling low and moderate income households become homeowners.

        Question 7. Will you commit to revising Treasury guidance to
    allowing State and Local Fiscal Recovery Funds to be spent on
    homeownership for low- and moderate-income families, such as down
    payment assistance and new construction of affordable homes for
    ownership?

              Answer. The public comment period on Treasury's Interim Final
            Rule recently closed on July 16. Treasury is carefully
            reviewing comments received and will take public feedback into
            account when developing the final rule.
                               taxpayer services
        For many Americans, especially those in rural States like Vermont,
    the IRS is one of the main faces of the Federal Government where
    communities have the ability to interact with the agency on a regular
    basis. Countless taxpayers without Internet service rely on phone or
    in-person IRS services to answer questions and resolve problems with
    their returns. Before the pandemic, the IRS only answered 31 percent of
    the phone calls it received and taxpayers who managed to get through
    waited on hold for an average of 38 minutes.
        With all the tremendous work the IRS is doing to provide
    coronavirus relief and roll out the new child tax credit, along with
    the 18 million or so unprocessed tax returns, taxpayers have even more
    questions for the IRS. Unfortunately, the IRS has become nearly
    impossible to reach, either by phone or in-person as the number of in-
    person Taxpayer Assistance Centers continues to decline. The agency's
    growing reliance on digital tools and virtual assistance centers is
    only amplifying the digital inequalities across rural America.

        Question 8. How will the Department ensure that the tax assistance
    services provided by the IRS are accessible in rural America?

              Answer. The President's Budget includes resources to improve
            the experience of all taxpayers as they interact with the IRS,
            making sure that customer service representatives stand ready
            to answer the phones when they call with questions and that
            they get access to the tax credits, refunds, and other benefits
            that they are entitled to. This includes investing in Taxpayer
            Assistance Centers across the country, including in rural areas
            where their presence is vitally needed. In addition, as you
            know, the President's budget proposals are estimated to
            generate over $700 billion in additional tax revenue over the
            course of the next decade, both through investing in
            enforcement focused on high-income, partnership, and corporate
            misreporting--but also through a meaningful investment in
            taxpayer services, which impact voluntary compliance.

        Question 9. How will the Department ensure that the tax assistance
    services provided by the IRS remains accessible to all Americans, even
    the 19 million Americans who lack sufficient access to affordable,
    high-quality broadband, as the agency continues to virtualize its
    services?

              Answer. In order for the IRS to have the capacity to ensure
            that tax assistance services are accessible to all Americans,
            it needs resources to invest in the provision of these
            essential services. That means updating outdated technological
            infrastructure to ensure that the agency can communicate with
            taxpayers in an efficient and timely manner--but it also means
            investing in telephone customer service and at Taxpayer
            Assistance Centers. The President's budget includes resources
            to improve the experience of all taxpayers as they interact
            with the IRS, making sure that customer service representatives
            stand ready to answer the phones when they call with questions
            and that they get access to the tax credits, refunds, and other
            benefits that they are entitled to.
                                     ______

              Questions Submitted by Senator Christopher A. Coons
        1. Many smaller municipalities across the Nation, including Dover,
    Delaware, participate in the CDBG program to improve the housing and
    other aspects of life for residents. Many of these municipalities,
    because they are of less than 50,000 population and are part of a
    designated metropolitan area, were adversely impacted by the decision
    to use the CDBG formula to allocate the American Rescue Act's funds. As
    a result, the City of Dover received far less funding ($8.6 million v.
    approximately $20 million) than it would have if the allocation was
    population-based, as applied to Non-Metropolitan municipalities (Non
    Entitlement Units).

        Question 1a. What regulatory or statutory changes would be needed
    for these municipalities to receive at least the same level of funding
    that would have been received if the approach used for NEUs was
    applied?

              Answer. The American Rescue Plan Act defines, for purposes of
            the Coronavirus Local Fiscal Recovery Fund (CLFRF),
            metropolitan cities to include those that are currently
            metropolitan cities under the Community Development Block Grant
            (CDBG) program, as well as those cities that relinquish or
            defer their status as a metropolitan city for purposes of the
            CDBG program. This definition of a metropolitan city is
            provided in statute. To arrive at the universe of eligible
            metropolitan cities for CLFRF, Treasury consulted with the
            Department of Housing and Urban Development, which administers
            the CDBG program. The allocations to metropolitan cities are
            based on a number of factors identified in the statute
            implementing the CDBG program, including population. The
            allocations to NEUs are based entirely on population numbers.

        2. In the roll out of the $1,400 Economic Impact Payments (EIP),
    thousands of households who were eligible for the payment did not
    receive it. My casework staff have been told by IRS staff that the
    agency is trying to pay these people over the course of this summer,
    but if it is unsuccessful, taxpayers can claim the missing EIP on their
    2021 tax returns, similar to what people had to do for missing EIPs on
    their 2020 tax return.

        Question 2a. What is the status of the IRS trying to pay eligible
    taxpayers the Economic Impact Payments?

              Answer. Shortly after enactment of the American Rescue Plan,
            the Treasury Department, Bureau of the Fiscal Service, and the
            IRS disbursed more than 90 million third-round Economic Impact
            Payments, totaling more than $242 billion. As of July 21,
            approximately 171 million payments have been disbursed to
            eligible Americans, which represent a total amount of more than
            $400 billion.
              For example, during that week, approximately 1.3 million
            payments were disbursed, which represented a total amount of
            approximately $2.6 billion. These payments were disbursed to
            eligible individuals for whom the IRS previously did not have
            information to issue a third- round Economic Impact Payment but
            who recently filed a tax return. This payment batch also
            included additional ongoing supplemental payments for people
            who earlier this year received initial third-round Economic
            Impact Payments based on their 2019 tax returns, but who are
            eligible for a new or larger payment based on their recently
            processed 2020 tax returns. In the last six weeks, more than
            900,000 of these ``plus-up'' payments have been disbursed, with
            a value of more than $1.6 billion. In all, more than 9 million
            of these supplemental payments have been disbursed this year,
            worth approximately $18.5 billion.
              The Treasury Department, Bureau of the Fiscal Service, and
            the IRS will continue to disburse third-round Economic Impact
            Payments on a weekly basis through December 2021. If eligible
            individuals do not receive the full amount of third-round
            Economic Impact Payment to which they are eligible, they can
            receive the remaining amount by claiming a 2021 Recovery Rebate
            Credit on their 2021 tax return.
              The IRS has provided an online Non-Filer tool to allow
            individuals who were not required to file (and have not filed)
            a tax return for 2020 to file a simplified tax return.\1\ This
            simplified tax return allows eligible individuals to register
            for advance Child Tax Credit payments and a third-round
            Economic Impact Payment, as well as claim the 2020 Recovery
            Rebate Credit. Free tax return preparation also is available
            for qualifying people.\2\
    ---------------------------------------------------------------------------
        \1\ See Child Tax Credit Non-filer Sign-up Tool, available at
    https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-
    up-tool.
        \2\ See Free Tax Return Preparation for Qualifying Taxpayers,
    available at https://www.irs.gov/individuals/free-tax-return-
    preparation-for-qualifying-taxpayers.
    ---------------------------------------------------------------------------
              Individuals can check the Get My Payment tool on IRS.gov to
            view the status of their payments.\3\ An extensive library of
            information regarding the third round of Economic Impact
            Payments also is available on IRS.gov.\4\
    ---------------------------------------------------------------------------
        \3\ See Get My Payment, available at https://www.irs.gov/
    coronavirus/get-my-payment.
        \4\ See Coronavirus Tax Relief: Economic Impact Payments, available
    at https://www.irs.gov/coronavirus/economic-impact-payments.

        Question 2b. How is the IRS specifically helping people
    ---------------------------------------------------------------------------
    experiencing homelessness get Economic Impact Payments?

              Answer. Throughout 2021, the IRS has worked to help homeless
            individuals receive all of the Economic Impact Payments to
            which they are eligible by conducting a national public
            outreach campaign and leveraging partnerships with
            organizations that work with homeless communities. These
            efforts have been applied to ensure that the individuals in
            these communities receive their third-round Economic Impact
            Payments, the 2020 Recovery Rebate Credit, the Earned Income
            Tax Credit, and 2021 advance payments of the Child Tax Credit.
              Similar to the first and second rounds of Economic Impact
            Payments, the IRS has continued to undertake a sweeping
            outreach and education campaign to help Americans understand
            their eligibility for a third-round Economic Impact Payment and
            ensure that those who normally do not have a tax return filing
            obligation are aware of their eligibility. The IRS continues to
            share information nationwide, reaching stakeholders inside and
            outside of the tax community. In addition to providing
            information materials to news media and on social media and
            websites, this national public awareness campaign has included
            IRS partnerships with a wide spectrum of community and
            professional groups. Throughout this campaign, the IRS has
            reached homeless organizations, food banks, and social service
            groups, as well as national, State, and local organizations
            (and associations to which these organizations belong).
              The IRS continues to hold special weekend summer events to
            help people who do not normally file taxes receive advance
            Child Tax Credit payments and Economic Impact Payments. During
            these events, with the help of a new Non-filer Sign-up Tool on
            IRS.gov,\5\ volunteers, community stakeholders, and IRS
            employees provide assistance to eligible families in
            underserved communities.\6\ The new Non-filer Sign-up Tool is
            an update of last year's IRS Non-filer Tool on IRS.gov, and
            allows individuals to complete and file a simplified tax return
            to register for advance Child Tax Credit payments and the
            third-round Economic Impact Payment, as well as claim the 2020
            Recovery Rebate Credit.
    ---------------------------------------------------------------------------
        \5\ See Child Tax Credit Non-filer Sign-up Tool, available at
    https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-
    up-tool.
        \6\ See https://www.irs.gov/newsroom/irs-holds-additional-weekend-
    events-july-23-24-to-help-people-with-child-tax-credit-payments-and-
    economic-impact-payments.

        3. In May, the Department of the Treasury issued an interim final
    rule to implement the Coronavirus State Fiscal Recovery Fund and the
    Coronavirus Local Fiscal Recovery Fund established under the American
    Rescue Plan Act (ARPA). I've heard concerns from housing advocates in
    Delaware that State, county, and local governments are hesitant to
    ---------------------------------------------------------------------------
    utilize ARPA funds for the construction of affordable housing.

        Question 3a. From page 35-36 of the interim final rule, how can a
    government define and demonstrate ``disproportionate impact'' for the
    eligible service of ``Affordable housing development to increase supply
    of affordable and high-quality living units?''

              Answer. The Interim Final Rule explicitly allows affordable
            housing development to increase the supply of affordable and
            high-quality living units as an eligible service for SLFRF.
            Recognizing the disproportionate impacts of the pandemic to
            low-income communities, affordable housing is automatically
            eligible when provided in a QCT, to families living in QCTs, or
            when these services are provided by Tribal governments.
            However, recipients may also provide these services to other
            populations, households, or geographic areas that they identify
            as disproportionately impacted by the pandemic.
              This provides a simple and expeditious way for governments to
            invest in disadvantaged communities, while giving them the
            flexibility to also identify and serve other populations,
            households, or geographic areas. Treasury's comment public
            period for the Interim Final Rule has just closed. As part of
            its review process, Treasury will carefully consider public
            comments and consult with other Federal agencies as relevant in
            order to support the development of affordable housing in
            communities across the country.
    Question Submitted to Noel Andres Poyo, Deputy Assistant Secretary for
         Community and Economic Development, Department of the Treasury
        4. I appreciate the fiscal year 2022 budget request increases
    funding for the CDFI Fund and requests $2 million to continue funding
    the Economic Mobility Corps program that I helped create. This new
    program in partnership with the Corporation for National and Community
    Service (CNCS) is meant to increase the talent and human capacity at
    CDFIs and help cultivate the next generation of community development
    workforce leaders.

        Question 4a. When will the first awards be announced?

              Answer. On August 11th, the CDFI Fund and AmeriCorps
            announced $2.5 million in awards for three CDFIs through the
            inaugural round of the AmeriCorps CDFI Economic Mobility Corps
            (EMC) Program.

        Question 4b. What impact do think the program will have on the CDFI
    industry?

              Answer. Economic Mobility Corps provides an opportunity to
            train the next generation of community development finance
            professionals. It offers a hands-on experience by offering
            national service members the chance to work in a Community
            Development Financial Institution to provide substantive
            financial counseling, planning and literacy activities in
            distressed and underserved communities across the Nation. The
            communities served by EMC members will benefit from the
            increased capacity of CDFIs receiving EMC funding to provide
            critical financial services. As the community and economic
            development fields grows in scale to meet the challenge of
            producing greater and more equitable growth in our economy,
            there will be a need to scale programs like EMC to build a
            pipeline of qualified professionals.

        Question 4c. What recommendations do you have to Congress to
    improve or expand the program?

              Answer. Currently, the EMC program is funded as a set-aside
            in the CDFI Fund's appropriations. Treasury recommends
            consultation with AmeriCorps on opportunities to expand or
            improve the program.
                                     ______

                  Questions Submitted to Hon. Janet L. Yellen
                  Questions Submitted by Senator John Boozman
        1. The Federal Insurance Office (FIO) recently issued a request for
    information (RFI) for a study on the affordability and availability of
    auto insurance. The RFI notes that the office is undertaking a
    ``holistic analysis'' of ``disparities in premium pricing'' and ``the
    impact of non-driving underwriting factors.''
        The auto insurance industry is both one of the most highly
    competitive and closely regulated industries in the country. State
    insurance commissioners are already empowered to monitor their markets
    for unfair pricing or discrimination. The last thing I would want to
    see is the excellent work of Arkansas Insurance Commissioner McClain
    being second-guessed by the Treasury Department applying standards,
    analyses, or methodologies which are wholly unsuited in an insurance
    context.

        Question. Is it Treasury's intention to apply a disparate impact
    standard in its analysis of auto insurance pricing? What kind of
    methodology will FIO apply to analyzing data and information submitted
    for the RFI? What is the ultimate objective of the RFI?

              Answer. The Federal Insurance Office (FIO) is authorized
            under the Dodd-Frank Act to, among other things, monitor the
            extent to which traditionally underserved communities and
            consumers, minorities, and low-and moderate income persons have
            access to affordable insurance products. The U.S. personal auto
            insurance sector is a significant part of the U.S. economy,
            both in terms of its aggregate size and its impact on
            individual consumers and their economic well-being. FIO plans
            to undertake a holistic analysis of the personal auto insurance
            business, focusing on: (1) affordability of coverage and
            disparities in premium pricing, with particular attention to
            traditionally-underserved communities and the impact of non-
            driving factors; and (2) market evolution and structural shifts
            in the conduct of the business, including the effects of
            technology and the use of big data, as well as changes related
            to the COVID-19 pandemic. As the next part of its work on auto
            insurance, FIO will be reviewing the comments received in
            response to the request for information. FIO looks forward to
            engaging with interested stakeholders, including your office,
            on its work relating to personal auto insurance.

        2. The President's budget request includes a proposal to require
    financial institutions to report data on all inflows and outflows over
    just $600, a significantly lower reporting threshold than the current
    $10,000, and would apply to all deposit, loan, and investment accounts.
        I have two concerns. First, this presents serious privacy issues
    for taxpayers. The IRS had a high-profile leak just last month, and
    this would collect the financial information of most Americans. Asking
    the IRS to secure that much data is a huge job for the Federal
    Government.
        I'm also concerned that Treasury would have ``broad authority'' to
    issue implementing regulations. This proposal would impose additional
    costs and complexities on some of our smallest banks, which serve as
    the backbone to our small business community. That burden, coupled with
    broad flexibility for Treasury and the IRS to design new reporting
    requirements, creates the potential for regulatory overreach.

        Question. Are Treasury and the IRS equipped to securely handle that
    much data? And if this proposal becomes law, can you commit to both
    considering existing reporting requirements before issuing regulations
    and ensuring that Treasury won't place onerous, duplicative burdens on
    financial institutions?

              Answer. The Administration has designed this regime with
            taxpayer privacy concerns front of mind. That is why, as
            opposed to other compliance proposals that have been advocated
            by outside actors, in the Administration's framework,
            information is flowing only one way--from financial
            institutions to the IRS, as is the case with existing
            information reporting. The proposal also includes significant
            resources to protect taxpayer information more broadly, giving
            the IRS the resources it needs to invest in overhauling
            antiquated technology and meet threats to the security of the
            tax system, like the 1.4 billion cyberattacks the IRS
            experiences annually. In designing this proposal, Treasury
            spent a lot of time with small financial institutions to think
            about minimizing burdens associated with a new regime, and we
            are continuing to work with them to create a simple,
            implementable regime.

        3. Last year, Congress passed a bipartisan appropriations bill that
    created a $25 billion Emergency Rental Assistance program. Earlier this
    year, the partisan American Rescue Plan created a second round of $21
    billion in rental assistance, and unfortunately changed the parameters
    and safeguards for how the funding can be used. In total, that's
    roughly $46 billion in rental assistance.
        What concerns me is that I've heard from constituents and
    colleagues that Treasury hasn't been able to provide detail about how
    and where that money is being spent and that, as a result, States are
    having difficulties setting up the program.

        Question. Can you commit to working with Congress to address any
    potential mismanagement of the emergency rental assistance program, and
    any other potential areas of mismanagement around Treasury-administered
    programs?

              Answer. Treasury is committed to working with Congress and
            oversight entities to ensure the integrity and effectiveness of
            the Emergency Rental Assistance Program, as is the case with
            all programs that the Department administers. Treasury has
            rapidly distributed appropriated funding to States,
            Territories, Local governments and Tribes, consistent with the
            statute. Treasury has also taken swift action to develop
            program rules that provide grantees with the flexibility that
            they need to meet the pressing need for rental assistance in
            their communities, while protecting program integrity. Treasury
            has been transparent, publishing data about program performance
            on a monthly basis. We encourage reporting any specific and
            credible reports of fraud, waste and abuse to the Treasury
            Office of the Inspector General.
                                     ______

                  Questions Submitted by Senator John Kennedy
                                 savings bonds
        1. As of April 30, 2021, approximately 80 million savings bonds,
    totaling $29 billion, have matured but have not been redeemed.

        Question. How many bonds are totally unrecoverable, damaged, or
    lost?

              Answer. Bond owners, not Treasury, have possession and would
            know the condition of unredeemed paper savings bonds. Treasury
            has a process in place that allows bond owners to claim lost or
            destroyed bonds, including bonds destroyed in natural disasters
            or other circumstances. Last year, for example, Treasury
            processed 5,600 claims worth over $50 million. On average,
            Treasury processes approximately 6,900 claims worth $59 million
            per year. During the claims examination process, Treasury
            confirms rightful owners to the bonds. Bond owners can use
            TreasuryHunt.gov to search for information about savings bonds
            that may have been lost or damaged.
                                   sanctions
        2. In May 2021, the Biden Administration waived mandatory new
    sanctions on Nord Stream II AG, its chief executive officer, and
    corporate officers; Nord Stream II AG is a Swiss-based company that
    Russia's State-owned Gazprom established to construct and operate the
    pipeline.

        Question. What steps are you taking to ensure that unraveling of
    these sanctions will not undermine the European energy independence?

              Answer. The Department of the Treasury is committed to
            countering Russia's use of energy as a weapon to achieve
            aggressive political ends.
              On May 21, 2021, Treasury implemented sanctions imposed by
            the Department of State pursuant to the Protecting Europe's
            Energy Security Act of 2019, as amended (PEESA), by including
            additional Nord Stream 2-related entities and vessels on Office
            of Foreign Assets Control (OFAC) sanctions lists.
              In addition to implementing State Department sanctions
            pertaining to Nord Stream 2, Treasury has worked with the State
            Department to engage directly with governments and entities
            involved with the Nord Stream 2 pipeline to explain the
            sanctions risks pursuant to multiple U.S. sanctions
            authorities.
              Treasury is supporting the Administration's efforts to obtain
            commitments from allies to strengthen European energy security
            and the security of Ukraine and Central and Eastern Europe. In
            the July 21, 2021 Joint Statement of the United States and
            Germany on Support for Ukraine, European Energy Security, and
            our Climate Goals, for example, Germany committed to utilizing
            all available leverage to facilitate an extension of up to 10
            years to Ukraine's gas transit agreement with Russia; committed
            to taking action and pressing for effective measures at the
            European level, including sanctions, should Russia attempt to
            use energy as a weapon or commit further aggressive acts
            against Ukraine; committed to establishing and administering a
            Green Fund for Ukraine to support Ukraine's energy transition,
            energy efficiency, and energy security; committed to expand its
            engagement with the Three Seas Initiative to strengthen energy
            security in Central and Eastern Europe; and underscored its
            support for the European Union's Third Energy Package of
            diversity and security of supply.
              Treasury is also engaged with the Government of Ukraine to
            implement long outstanding anti-corruption and good governance
            reforms for the long-term viability and efficiency of Ukraine's
            energy sector, and to reduce Russia's ability to manipulate the
            country's energy infrastructure for political gain.
              More broadly, Treasury takes seriously the range of Russia's
            harmful foreign activities and has developed a tailored
            approach that leverages all of our tools and authorities to
            impose costs upon those acting on or behalf of the Kremlin
            against U.S. interests while mitigating the potential
            unintended economic consequences on partners and allies. Under
            the Biden Administration, Treasury has taken significant action
            to counter Russian malign influence, including by taking action
            under Russia-related Executive Order (E.O. 14024), which was
            signed by President Biden on April 15, 2021, to sanction
            several technology firms supporting Russian intelligence
            services and to impose new prohibitions on Russian sovereign
            debt.

        3. Recent reports indicate the Biden Administration is reevaluating
    how the U.S. imposes sanctions.

        Question a. Will you commit to working with Congress on these
    changes?

              Answer. As I discussed during my confirmation hearing, I've
            asked Deputy Secretary Adeyemo to lead a review of our use of
            economic and financial sanctions. This Treasury-led review is
            focused on identifying successes, opportunities for change or
            improvements, and steps for implementation, so that our use of
            sanctions remains relevant, rigorous, and fit to purpose,
            effectively advancing the national security, foreign policy,
            and economic aims of the United States. Congress is an
            important part of this process. Our team has and will continue
            to engage with Congress as we carry out the review.
              Treasury looks forward to continuing to work with Congress on
            the use of the sanctions tool.

        Question b. What steps are you taking to ensure these changes do
    not undermine U.S. national security?

              Answer. Economic and financial sanctions are an important
            tool to advance U.S. national security, foreign policy, and
            economic objectives. Treasury is committed to working
            intensively to use sanctions to advance an array of strategic
            priorities, from pushing back on Russian threats, to addressing
            challenges from China, to combatting terrorist threats and
            human rights abusers.
              The sanctions review that Treasury is undertaking is not
            focused on individual sanctions programs or individual
            designations, and the determination to apply sanctions to a
            particular national security, foreign policy, or economic
            challenge should be made in the context of a broader U.S.
            strategy to address that threat.

                               SUBCOMMITEE RECESS

        So with that, this hearing is adjourned.

        [Whereupon, at 3:56 p.m., Wednesday, June 23, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

                   SUBMITTED MATERIALS FOR THE HEARING RECORD

                                  ----------

                                BANK OF ANGUILLA

                           ROLLING FORK, MISSISSIPPI

                            Bank of Anguilla Awards

    ------------------------------------------------------------------------
               Awardee             City   State   Year   Program    Amount
    ------------------------------------------------------------------------
    Bank of Anguilla............  Anguil  MS     2021    RRP      $1,826,265
                                   la
    Bank of Anguilla............  Anguil  MS     2020    BEA         202,898
                                   la
    Bank of Anguilla............  Anguil  MS     2019    BEA         245,547
                                   la
    Bank of Anguilla............  Anguil  MS     2018    BEA         233,244
                                   la
    Bank of Anguilla............  Anguil  MS     2017    BEA          75,564
                                   la
    Bank of Anguilla............  Anguil  MS     2016    BEA         227,282
                                   la
    Bank of Anguilla............  Anguil  MS     2015    BEA         265,496
                                   la
    Bank of Anguilla............  Anguil  MS     2014    BEA         355,000
                                   la
    Bank of Anguilla............  Anguil  MS     2013    BEA          90,000
                                   la
    Bank of Anguilla............  Anguil  MS     1999    BEA           3,750
                                   la
    ------------------------------------------------------------------------

                            Letter From Tracy Harden

        Our hometown bank, Bank of Anguilla, means to me stability, action,
    care, and love. I've seen them back our whole community during some
    difficult years. It is always a comfort to know that you can go to
    anybody at the bank for help, but especially being able to call your
    president of you bank and watch him work things out for you. We've
    struggled through a couple of hard years, not just me, but the whole
    community. All of us, the rich and the poor, have struggled. We've had
    it rough but there has never been a time we could not call on our bank
    to help us. Other business owners and I, didn't know how we would fare
    after all of this flooding, nor how we would come back from it all.
    After the devastating flooding, corona hit us. We started hearing about
    the PPP loans and the potential benefit to business owners. All it took
    was a quick call to the bank and they worked the loans all out for us.
    Not only did they make sure we had the loans to keep our employees
    working but the bank as a whole would go out of its way to support our
    business. They did this by feeding their staff lunch from my restaurant
    or buying lunch in town for people in town who were having it rough.
    Minorities were hit especially hard being that a lot of them worked
    with the farmers and once the farmers couldn't plant, they weren't able
    pay their employees. Bank of Anguilla stepped in and provided small
    loans until they could get on their feet again. All of that just means
    the world to us. We love our little town and community. Without our
    bank, I just don't know where we would be.

    Regards,

    Tracy Harden

                            HARBOR BANK OF MARYLAND

                              BALTIMORE, MARYLAND

                       Harbor Bank and Affiliates Awards

    ----------------------------------------------------------------------------------------------------------------
                  Awardee                        City             State       Year        Program          Amount
    ----------------------------------------------------------------------------------------------------------------
    Harbor Bank of Maryland Community    Baltimore             MD             2021   RRP                    $526,000
     Development Corporation.
    Harbor Bank of Maryland............  Baltimore             MD             2021   RRP                   1,826,265
    Harbor Bank of Maryland............  Baltimore             MD             2019   CDFI-FA                 649,000
    Harbor Bank of Maryland Community    Baltimore             MD             2019   CDFI-TA                 125,000
     Development Corporation.
    Harbor Bankshares Corporation......  Baltimore             MD             2019   NMTC                 50,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2018   BEA                      96,300
    Harbor Bankshares Corporation......  Baltimore             MD             2018   NMTC                 35,000,000
    Harbor Bankshares Corporation......  Baltimore             MD             2017   NMTC                 55,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2017   BEA                     233,389
    Harbor Bankshares Corporation......  Baltimore             MD             2016   NMTC                 70,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2016   BEA                     112,489
    Harbor Bank of Maryland............  Baltimore             MD             2015   BEA                      90,771
    Harbor Bank of Maryland............  Baltimore             MD             2014   BEA                     355,000
    Harbor Bankshares Corporation......  Baltimore             MD             2013   NMTC                 33,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2013   BEA                     323,000
    Harbor Bank of Maryland............  Baltimore             MD             2012   BEA                     415,000
    Harbor Bank of Maryland............  Baltimore             MD             2011   BEA                     500,000
    Harbor Bankshares Corporation......  Baltimore             MD             2010   NMTC                 21,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2010   BEA                     517,243
    Harbor Bankshares Corporation......  Baltimore             MD             2009   NMTC                 20,000,000
    Harbor Bankshares Corporation......  Baltimore             MD             2008   NMTC                 50,000,000
    Harbor Bankshares Corporation......  Baltimore             MD             2003   NMTC                 50,000,000
    Harbor Bank of Maryland............  Baltimore             MD             2003   BEA                     663,818
    Harbor Bank of Maryland............  Baltimore             MD             2002   BEA                     231,000
    Harbor Bank of Maryland............  Baltimore             MD             2001   BEA                     229,053
    Harbor Bank of Maryland............  Baltimore             MD             2000   BEA                     126,690
    ----------------------------------------------------------------------------------------------------------------
                                         ....................  ...........  .......  .................  $391,020,018
    ----------------------------------------------------------------------------------------------------------------

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