[Senate Hearing 117-154]
[From the U.S. Government Publishing Office]
S. Hrg. 117-154
THE PAYCHECK PROTECTION PROGRAM:
PERFORMANCE, IMPACT, AND NEXT STEPS
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
of the
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MARCH 17, 2021
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-626 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
----------
BENJAMIN L. CARDIN, Maryland, Chairman
RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma
MAZIE K. HIRONO, Hawaii TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas
Sean Moore, Democratic Staff Director
William Henderson, Republican Staff Director
C O N T E N T S
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Opening Statements
Page
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 4
Witnesses
Mensah, Ms. Lisa, President and CEO, Opportunity Finance Network,
Washington DC.................................................. 6
Griffith, Mr. Joel, Research Fellow, Financial Regulations, The
Heritage Foundation, Washington, DC............................ 17
Hoey, Mr. John K., President and CEO, The Y in Central Maryland,
Baltimore, MD.................................................. 27
Polumbo, Mr. Brad, Editor, Foundation for Economic Education,
Arlington, VA.................................................. 33
Alphabetical Listing and Appendix Material Submitted
Cardin, Hon. Benjamin L.
Opening statement............................................ 1
Forefront
Letter dated March 15, 2021.................................. 52
Griffith, Mr. Joel
Testimony.................................................... 17
Prepared statement........................................... 20
Responses to questions submitted by Ranking Member Paul and
Senator Young.............................................. 68
Hoey, Mr. John K.
Testimony.................................................... 27
Prepared statement........................................... 30
Marshall, Hon. Roger
Slides of Weekly COVID-19 Cases, Deaths, and Hospitalizations
Reported in Kansas......................................... 43
Mensah, Ms. Lisa
Testimony.................................................... 6
Prepared statement........................................... 8
Responses to questions submitted by Ranking Member Paul and
Senator Hirono............................................. 63
National Association of Federally-Insured Credit Unions
Letter dated March 16, 2021.................................. 71
Polumbo, Mr. Brad
Testimony.................................................... 33
Prepared statement........................................... 35
Paul, Hon. Rand
Opening statement............................................ 4
THE PAYCHECK PROTECTION PROGRAM:
PERFORMANCE, IMPACT, AND NEXT STEPS
----------
WEDNESDAY, MARCH 17, 2021
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m. in Room
301, Russell Senate Office Building, Hon. Ben Cardin, Chairman
of the Committee, presiding.
Present: Senators Cardin, Cantwell, Shaheen, Booker,
Duckworth, Rosen, Hickenlooper, Paul, Ernst, Young, Hawley, and
Marshall.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S.
SENATOR FROM MARYLAND
Chairman Cardin. The Small Business and Entrepreneurship
Committee will come to order. Let me welcome those of you who
are in this room, and we know we have members and witnesses
that are appearing through Webex, which is the new reality of
the world we are living in today.
So let me thank first Senator Paul for his help and
cooperation in putting together this first of our oversight-
type hearings on the programs that were put together in
response to COVID-19 for small businesses. It totals over $1
trillion that has been made available for small businesses, and
this Committee has the responsibility to oversight of those
programs we are operating. I know several members of the
Committee have raised those questions about oversight, and this
is our first opportunity to hear from private sector witnesses
who will give us their view on how these programs are working
to date.
I would also like the Committee to know that we anticipate
having an opportunity next week, with representatives of the
SBA present to answer questions that we may have in regards to
the small business programs, to continue our effort on
oversight.
In the meantime, let me also point out to the Committee
that yesterday the Senate confirmed Isabel Guzman as the
Administrator of the SBA, and again I want to thank Senator
Paul for accommodating the ability to get that nomination to
the floor in an expedited fashion. So we now have a confirmed
administrator. It was a strong bipartisan vote on the floor,
which I certainly appreciate, and I think we are off to a very
good start with the SBA.
We have one immediate issue that will be brought to our
attention next week, so let me make sure the Committee members
know about that. Many of you have already communicated with us
that we have a deadline coming up at the end of March for
applications for the PPP program. And since December, when
Congress acted on the second round of PPP and some additional
eligibilities, there have been significant challenges that have
been placed in administering the PPP program.
First, the second round of PPP requires different
verifications. There is a need base, so that has to be put into
the equation on the applications that are made for the second
round of PPP.
Secondly, we have had a real concern for the self-employed
and those who do not have employees as to the calculations of
the funds they can get under the PPP program, which was
recently clarified by the Biden administration. So we have now
some additional applications that are coming in with the
clarification on the formula.
We have had some changes in eligibility under the PPP
program, including what was recently done on the American
Rescue Plan. We had a change in administration. On January 20th
we changed from the Trump administration to the Biden
administration. All that has made it much more challenging for
us, for small businesses, to get their applications processed
by the March 31st deadline.
It is for that reason that we are looking at an extension.
The good news is that the resources are there. We have been
informed by the SBA that the extension of the deadline can work
within the funds that have already been made available by
Congress. This is not the first time we did this.
Let me remind the members that after the original PPP
program I brought a bill to the floor of the Senate, and
Senator Rubio worked with me on that, with an extension to give
more time for businesses to file for their PPP forgivable
loans. Senator Collins has filed legislation in the Senate. We
have bipartisan legislation to extend that date by two months.
The good news, again, is this legislation was just passed by
the House of Representatives by a 415 affirmative to 3 negative
vote, overwhelmingly passed by the House of Representatives.
Today, the Committee has received a letter, signed by 90-
some organizations, in support of a clean extension of the PPP
program. I would just point out that it includes the NFIB, it
includes the Chamber of Commerce, it includes so many other
organizations that are telling us that they need additional
time. And the reason I mention this is I hope that this will
clear the hotline and we can do it by consent as early as next
week. If not, Senator Schumer has told me that we can have four
times we may be on the floor next week in regards to the
extension.
I would urge my colleagues to continue in a bipartisan way
to support this extension in a clean manner. We will have
opportunities to look at changes or modifications in the
program, and I can assure you that the way that is going to be
done is in a bipartisan manner, both Democrats and Republicans
working together, as we have throughout the entire development
of the programs to help small businesses.
One year ago today, COVID-19 had just been declared a
global pandemic by the World Health Organization, as well as a
national emergency by the Trump administration, and there were
less than 1,500 reported cases of COVID-19 in America. Soon
after it became clear that the public health measures required
to prevent the spread of the virus would hurt small businesses,
so Congress had a duty to provide support, because our national
economy is only strong when we have healthy, robust small
businesses.
Small businesses are our job creators and are responsible
for two out of every three new jobs, and employ almost half of
our Nation's private sector workforce during the years leading
up to the pandemic. And they are where innovation happens in
our economy. They are the entities that are figuring out
better, more efficient ways of doing things. But they are not
as resilient as larger businesses, due to the razor-thin
margins and low cash reserves.
So we passed the historic, bipartisan CARES Act, which
created the Paycheck Protection Program as well as the EIDL
advance grant program and the Small Business Debt Relief
Program. PPP has played the largest role of all programs,
providing more than 7.9 million loans worth more than $700
billion in the past year.
I mention that because I know we all have our individual
stories. I am going to tell you, just this past weekend I went
to one of my favorite local restaurants, and I had a chance to
talk to the store owner. He is a businessperson with less than
ten employees. And he told me that without the help he has
gotten from the PPP program, and now this restaurant program
that has just passed, he would have had to close his doors. We
have kept him open, and he is a very creative innovator. He has
figured out different ways in order to keep revenue coming into
his business. But these programs have been essential so that
these small business owners can stay in business during the
pandemic.
The goal of the PPP was simple: help employers keep their
employees on payroll during the pandemic so our economy can
rebound more quickly afterwards. During the drafting of the
CARES Act, Senator Shaheen and I knew that while PPP would be a
lifeline for small businesses, the program's reliance on
private lenders would make it less useful to small businesses
and black, Latino, Native, and rural and other underbanked
communities that do not have strong relationships with banks.
So we put a provision in the bill that required the SBA to
issue guidance to banks participating in PPP to prioritize loan
applications for underserved small businesses. Unfortunately,
SBA did not do that, which led the SBA inspector general to
issue a report that found the SBA's implementation of PPP did
not fully align with the congressional intent in the CARES Act.
That is why Senate Democrats pushed for specific set-asides
in PPP for community development financial institutions,
minority depository institutions, microlenders, and other
mission-based lenders, each COVID-19 relief bill Congress has
passed since the CARES Act. When Congress replenished the PPP
funds in April of last year, we secured a $60 billion set-aside
for mission lenders. In the bipartisan Economic Aid Act, which
passed in December, we secured another $15 billion set-aside
for mission lenders, as well as an additional $60 billion set-
aside for the smallest small businesses with ten or fewer
employees.
We pushed for the lender set-asides because CDFIs and MDIs
and other mission lenders have a demonstrated history of
getting capital into the hands of entrepreneurs in underserved
and underbanked communities, as we push for the borrower set-
aside, because we had to ensure the funds would remain
available for the smallest mom-and-pop businesses that cannot
afford accountants and lawyers, so they need more time and
assistance to get their applications together.
I was proud last month when the Biden administration came
out with certain guidelines and made it easier for businesses
in underserved communities to be able to get those loans, by
having an exclusive time period and changing some of the rules
that would help deal with the underserved community.
I am proud to share that data from the SBA on the the
current amount of PPP shows that thanks to the Economic Aid Act
and steps taken by the administration we are seeing progress,
which indicates that more of the smaller, and more vulnerable
small businesses are receiving loans this time than during the
initial round of PPP.
The historic American Rescue Plan that President Biden
signed into law last week made further improvements to PPP by
expanding access to the program to more nonprofits. We have
witnesses today who will talk about that. I know that we have,
from Baltimore, John Hoey, who leads a nonprofit that was
unable to access PPP prior to the passage of the American
Rescue Plan, the YMCA of Central Maryland. So I am looking
forward to hearing directly how important access to PPP will
help organizations such as the Y.
I am also looking forward to hearing from Lisa Mensah, who
is President and CEO of the Opportunity Finance Network, a
network of CDFIs, about her members' experiences with PPP, what
has worked and what has not with PPP, as well as the need to
extend PPP to give borrowers additional time to get their
applications.
So for all those reasons I look forward to hearing from our
witnesses. I look forward to hearing from Mr. Polumbo, who is
personally present here, who can help us sort out the bill.
Joel Griffith, from The Heritage Foundation, is on, I think
Webex.
So we have an excellent group of panelists, and let me now
turn to the Ranking Member, Senator Paul.
OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM
KENTUCKY
Senator Paul. Thank you, Mr. Chairman. I would like to
welcome our panel today. Welcome today 367 of 15 days to slow
the spread. Proponents of the economic lockdowns promised it
would be just 15 days to flatten the curve. Instead of 15 days,
the lockdown has now gone on for over a year.
Early on in the pandemic, as we all remember, there were
projections that hospitals would be full and have to turn away
people, medical equipment was in short supply, businesses were
closing, what they hoped would be on a temporary basis as
governments started locking down their economies and telling
people to stay home. At that time, when programs like PPP were
created, no one was under the belief that we would still be
doing this a year later, with no end in sight.
The PPP program was devised as an emergency stop-gap to
keep businesses running and people on payroll, at their job,
instead of having to be laid off. It has been a year now. The
virus is in full retreat. Hospitalizations are declining
rapidly. Vaccines have been rolling out since December. Instead
of touting these incredible successes and offering people hope,
governments keep moving the goalposts. Our hospitals are not
overcrowded. We do not have PPE shortages. All the reasons the
economy locked down in the first place are no longer a concern.
It is time to reopen our economy.
What we have learned is that this continued stream of money
from Washington has encouraged way too many governors and
mayors to keep their economies closed indefinitely. They stifle
their economies, roll yellow police tape across store shelves
and threaten small businesses with revoking licenses, or worse,
then demand Washington cleanup their mess when the businesses
have to shut down for good. We should demand these elected
official stop imposing arbitrary rules and stop illogically
picking winners and losers. We simply cannot keep printing and
borrowing trillions of dollars when the best thing we can do to
provide relief now is to simply reopen the economy.
Congress has spent more than $800 billion on the Paycheck
Protection Program alone, and according to our estimates, we
burn through $3.5 billion a day in taxpayer dollars. In just
one year, the Small Business Administration went from being a
million-dollar agency to nearly a trillion-dollar agency. No
agency is equipped for that kind of exponential growth in such
a short time.
Without adequate controls, the program has benefited large,
well-financed businesses, alleged fraudsters and organizations
like Planned Parenthood. Despite the widespread evidence of
fraud and misuse within the PPP, Congress expanded and funded
the program four times. The President's recently signed $1.9
trillion packages provided even more funding for PPP, despite
signs of economic recovery, and many in Congress are discussing
yet another extension of the program past its March 31st
deadline.
Meanwhile, the Small Business Administration inspector
general has produced ten reports on the lack of SBA oversight
of this program. The Department of Justice has charged 184
defendants with crimes related to PPP fraud, and the Government
Accountability Office has now put emergency small business
loans on its high-risk list, for the first time in history.
Small businesses are thriving in states that have eased
restrictions. It is clear that there is pent-up demand for
Americans to go back to their normal lives. This is, in many
ways, a crisis of Congress' and governors' own making.
I look forward to our discussion today on how we can
improve the effectiveness and oversight of the program and how
small businesses get back to business.
Chairman Cardin. Thank you, Senator Paul.
Our first witness comes to us through Webex, and that is
Lisa Mensah, who is President and CEO of the Opportunity
Finance Network, the Nation's leading network of community
development financial institutions. Under her leadership, the
Opportunity Finance Network helps CDFIs leverage public funding
with private investment from mainstream financial institutions,
socially responsible investors, and philanthropic partners in
distressed communities across America.
For all of our witnesses, your full statements will be made
part of the record. We ask that you try to summarize your
testimony in five minutes.
Ms. Mensah.
STATEMENT OF LISA MENSAH, PRESIDENT AND CEO, OPPORTUNITY
FINANCE NETWORK, WASHINGTON, DC
Ms. Mensah. Thank you. Thank you, Chairman Cardin and
Ranking Member Paul and members of the Committee for the
opportunity to be here today.
I am here to speak for America's smallest businesses and
the lenders that matter most to them, community development
financial institutions, or CDFIs. I lead Opportunity Finance
Network, a network of more than 350 CDFIs, working in all 50
States.
The American people saw this past year just how valuable
our Nation's smallest businesses are to everyone. Ensuring that
Federal relief funds make it to these businesses requires
partnership with lenders that specialize in serving them. It
takes CDFIs.
CDFIs know how to quickly deliver responsible capital to
America's underserved businesses, including Paycheck Protection
Program loans. Through the Paycheck Protection Program,
Congress said to these businesses, ``You matter,'' and the
program also showed just how much lenders matter to these
businesses.
It is well-documented how the first round of PPP missed
many of these underserved businesses, in part because it missed
their lenders, CDFIs. An OFM has testified before this
Committee about the challenges that CDFI faced in the early
days of the program, and Congress listened.
I especially want to thank this Committee and Chairman
Cardin for all of your work to reform the PPP as part of last
December's COVID relief bill. Our industry is encouraged by
your recognition that CDFIs are best positioned to drive PPP to
businesses owned by people of color, businesses owned by women,
and many underserved by the mainstream financial markets.
And SBA heard us too. They prioritized the needs of these
small businesses in the second round. During the first week of
the most recent PPP round, the agency only accepted PPP
applications from community financial institutions, including
CDFIs, and this was a welcome improvement from the CDFI
experience in the earliest months of the original program.
And while there were real challenges in the rollout, CDFIs
and other small lenders made more than 60,000 PPP loans,
totaling more than $5 billion, and these loans helped small
businesses like Alcantara Driving School in Silver Spring,
Maryland. The CDFI Latino Economic Development Center provided
two PPP loans, totaling $35,000, to help the Latino-owned
business stay afloat after devastating revenue losses during
the pandemic.
We also saw the SBA's new calculations for the self-
employed and smallest businesses, and these changes will help
many minority businesses qualify for more funding.
I am so pleased to see CDFIs helping PPP reach more
underserved small businesses, but our work is not finished. We
need more time, and we need more help from Congress for the
Paycheck Protection Program to realize its full promise.
So we have two recommendations for PPP. First, extend this
program to May 31st. Congress needs to move quickly to adopt
the PPP Extension Act of 2021 and to give more businesses the
chance to get access to this important program. And second,
make retroactive the new income calculations. The changes to
income calculations for the smallest businesses, sole
proprietorships often, were an important policy change.
For example, the CDFI HOPE Enterprise shared that a Black
woman-owned boutique in Alabama qualified under the old rules
for a PPP loan of about $7,500, but with the changes she
qualified for a loan of more than $22,000. But the new rules
only apply to PPP loans made after March 3rd, so for those
businesses that already received PPP loans, we need
retroactivity so that they too can benefit from the change.
I see PPP as critical emergency relief, yet for the
American economy to rebound and flourish, small businesses need
more than PPP. They need responsible loans, credit
enhancements, and working capital.
So let me close on next steps. First, Congress must direct
the SBA to make CDFIs central to its strategy. The inability of
SBA's core programs to reach underserved communities was never
acceptable, and it cannot continue. The SBA need to fully
rethink how to reach underserved businesses in its entire suite
of programs, not just PPP and not just the Community Advantage
and microloan programs.
And second, Congress must double down on its efforts to
strengthen the financial institutions who are providing
responsible finance in low-wealth markets. And this can be done
by providing $1 billion in annual appropriations for the CDFI
fund.
Congress and the American people have pulled together to
help America's small businesses during this painful crisis, and
right now Congress can take steps to build a stronger and more
inclusive economy for the long term. CDFIs are pivotal to this
work, and I urge Congress to invest in the institutions that
are here, on the ground, in our rural, urban, and native
communities. Your investment in CDFIs tells our smallest
businesses that they matter today and tomorrow.
Thank you so much.
[The prepared statement of Ms. Mensah follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Well, thank you very much for your
testimony and for the work that you do in underserved
communities.
Our next witness is coming to us through Webex, Joel
Griffith, who is currently a Research Fellow for the Institute
for Economic Freedom and Opportunity at The Heritage
Foundation. He previously worked as a researcher for a former
member of The Wall Street Journal editorial board.
Mr. Griffith.
STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINANCIAL
REGULATIONS, THE HERITAGE FOUNDATION WASHINGTON, DC
Mr. Griffith. Thank you, Chairman Cardin and Ranking Member
Paul and other members of the Committee for this opportunity to
testify today. This testimony will provide an overview of the
economic calamity that has been impacting our Nation stemming
from the COVID-19 shutdowns, the varied strength of the
economic recovery from state to state, small business lending
conditions, and the Paycheck Protection Program, of course,
PPP.
Beginning in March of last year, our Nation witnessed an
historic plunge in economic output. For the first time in our
Nation's history, governments across the country intentionally
suppressed the supply of goods and services. Likewise,
restrictions on consumer activity artificially suppressed
demand. The Federal Government borrowed, printed, and spent
trillions of dollars in an effort to cushion the economic
downturn. But it is really the government-mandated closures
that are now deterring investment and suppressing economic
activity in parts, but not all, of the country.
In the weeks following the onset of the pandemic, some
Federal Government aid to businesses impacted by shutdown
orders was justifiable, but after a year, we know that serious
problems exist with PPP. It has been inefficient, untargeted,
and ineffective, and we know that those areas of the Nation
that have reopened are now experiencing an economic boom, a
far, far stark difference compared to New York City and L.A.
The small business loan problem has been ineffective at
boosting employment. Three initial assessments of PPP found
that the program cost between $109,000 and $380,000 per job
saved. On the other hand, the economic resurgence in Quarter 3
of 2020, even as PPP payments declined, underscores how
reopening can rapidly repair economic damage.
Unemployment rates and business conditions vary wildly
across the Nation, and that is dependent largely on the
restrictions that some governors and mayors continue to impose
on society. State and local policymakers oversee decisions that
affect businesses' abilities to operate, and they should assume
the potential costs of new and ongoing businesses, school, and
other closures that they, on the state and local level, impose.
States with the most restrictive economic policies are the ones
that are suffering the largest business and employment losses.
Federal taxpayers should not continue to subsidize state
and local decisions to shutter businesses and ruin livelihoods.
Continuing this PPP program moves the costs of overly
restrictive shutdowns to Federal taxpayers and it allows
governors additional latitude to keep society shuttered with
one-size-fits-all policies. Targeted, temporary, and local
economic restrictions may be necessary, but those decisions,
and the costs that they incur, should be weighed by the
responsible policymakers on the state and local level. PPP
continues to incentivize state and local policymakers to
continue destructive shutdowns and allows them to shirk their
responsibility.
PPP continues to be troubling in other ways as well. It was
intended to assist businesses impacted by the pandemic, but
often it benefits well-funded and well-connected nonprofits. In
New York City, millions in government loans, some of which are
forgivable, flowed to entities such as the Philharmonic, the
Vivian Beaumont Theater, and the School of American Ballet.
Left unsaid in all this is the fact that quarterly
charitable giving actually rose by 2 percent in 2020, compared
with the year prior. Private individuals and businesses are
generously contributing to nonprofits that are aligned with
their own objectives and personal beliefs.
Extensive fraud in PPP continues to stretch law
enforcement. A few noteworthy investigations include a Brooklyn
individual who took $2 million in loans by claiming to employ
50 people, and then spent the proceeds on luxury items. The
same instance occurred in the San Fernando Valley with a fraud
ring using $18 million in PPP proceeds to do the same.
Small businesses are actually being serviced by the credit
markets. It is a misnomer that credit markets are not providing
sufficient funds. Most small businesses are saying they are
generally not looking for more credit. Only 3 percent of
respondents in a recent NFIB survey reported that borrowing
needs are not satisfied. Small business credit conditions in
December, based on the percentage that are reporting easier
lending conditions versus harder, were identical to conditions
one year prior. Obtaining financing is the reported top concern
of just 1 percent of small businesses owners.
What we know is that the reopening economy is what is
saving small businesses. Real economic recovery does not stem
from stimulus checks or bailouts, and it does not stem from
PPP. It is largely a result of individuals and businesses at
last being allowed to legally interact with each other. The
historic rebound of the summer proves that those who were
properly informed of the actual risks of the virus are
enthusiastically participating in the reopening. Nationally,
economic growth in the third quarter smashed all records, even
as government transfer payments declined by 20 percent.
The bottom line is that the pace of the recovery varies
according to lockdown restrictions. The Federal Reserve State
Coincident Index estimates State GDP, and it illustrates how
variant this recovery is. At the end of 2020, economic output
in eight states was actually larger than the year prior, states
such as Georgia and Utah, which did not endure crushing, long-
lasting shutdowns. Meanwhile, places like Hawaii, Michigan,
Rhode Island, and Massachusetts are 10 percent smaller than
they were before.
The same can be said for unemployment rates. A number of
states have unemployment of 4 percent or less. These are states
that have reopened. Meanwhile, states like Connecticut, Nevada,
New Mexico, New Jersey have unemployment rates nearly twice the
rates in those states that have reopened.
Businesses across parts of the Nation certainly face
economic hardship as a result of the myriad COVID-19
restrictions that are still in place in some local governments.
Resolution requires governors and mayors to permit people to
once again freely create, work, shop, and engage. The misery,
economic misery, persistent across portions of the Nation
should not be used by Congress as an excuse to further expand
government control over the financial system and credit
allocation. Any additional Federal relief measures should
provide legal protections for businesses to reopen and tailor
any additional aid to meet the health crisis.
Thank you for having me today.
[The prepared statement of Mr. Griffith follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you, Mr. Griffith. I appreciate your
testimony.
We will now go by Webex to John Hoey, who is the President
and CEO of the YMCA of Central Maryland. Prior to the Y, John
worked in the private sector across four different industries
while also volunteering his time in the community. John has
been recognized for his leadership on many occasions, including
as an Ernst & Young Entrepreneur of the Year and one of the
Maryland Innovators of the Year.
Mr. Hoey.
STATEMENT OF JOHN K. HOEY, PRESIDENT AND CEO, THE Y IN CENTRAL
MARYLAND, BALTIMORE, MD
Mr. Hoey. Thank you, Chairman Cardin, Ranking Member Paul,
and the Committee for inviting me today to talk about an
incredibly important issue that has been little understood or
discussed since the COVID pandemic hit early last year. Let me
first start by thanking, in particular, Committee Chair Senator
Cardin of Maryland for his steadfast focus on ensuring that the
American Rescue Plan Act of 2021 included long overdue relief
for large nonprofits, which have been, for some reason, shut
out from all of the previous relief packages, and in many cases
have been pushed to the brink of bankruptcy while doing some of
the most important, essential work to support those most in
distress during these past 12 months.
I have the privilege of being the CEO of the Y in Central
Maryland, one of the largest and longest-operating community
service organizations in the greater Baltimore region. We are
also one of the largest YMCAs in the country. Prior to COVID,
our organization served over 300,000 central Marylanders
through a wide variety of programs and services that focus on
healthy living, youth development, and social responsibility.
While the Y may be best known for our large buildings that
bring individuals, families, and communities together, we are
also our region's largest early childhood and Head Start
provider, the largest provider of after-school enrichment,
mentoring, summer camp, and community school programming. In
short, we are the largest youth-serving organization in the
region and have a profound impact on the well-being of young
people and their families. What you should also know is that we
were one of the largest employers in our region, with over
2,700 people on our payroll.
As someone who worked in the private sector before being
recruited to do this work in 2006, I appreciate the incredible
uniqueness and strength of the Y's overall business model. Over
70 percent of our revenue, prior to COVID, came through
``earned revenue,'' meaning the membership and program fees
that people pay us to participate in the Y's programs and
services. The remainder of our revenue comes from Federal and
private grants and donations. The diversity of our business
model allows us to operate at scale and to be in the unique
position to connect people and families across the economic and
social spectrum to opportunities that smaller organizations
focused on only one thing or one small community could not
imagine doing.
In other words, scale matters, and at the Y we leverage
that scale for the good of our community in more ways than I
have time to describe here.
Unfortunately, when COVID hit and we were forced to close
most of our programs and buildings we operate, our scale and
earned revenue model worked against us. As we have now lost 50
percent of our members, shuttered most of our school-based
operations, and had to run through a dizzying array of local
and state requirements that changed sometimes daily, we also
became the State of Maryland's and local municipalities' go-to
organization to quickly spin up a wide range of services for
thousands of people who were most deeply impacted by COVID.
For example, the state's behest, we quickly opened 15 Y
sites to care for over 800 children of essential workers so
their parents could care for others. Partnering with food banks
and others, we launched a massive food distribution operation,
with over 500,000 meals distributed to date. We made thousands
of ``care calls'' to seniors who are members of ours and others
at risk for isolation during the shutdown.
We were able to keep our over 1,000 Y Head Start families
and children learning and well supported through virtual
learning and family engagement. We quickly pivoted our
mentoring work for over 600 youth to a virtual format, to
ensure that those young people still had a caring adult to
interact with. With schools closed and parents in need, we
opened 20 Y Academic Support Centers to provide safe, in-person
school support to help children and parents successfully
navigate virtual learning.
We did all this while having to eliminate over 1,000 of our
2,700 jobs at all levels of the organization, cutting salaries
for all Y managers, and burning all of our available cash in
the bank.
We did all of this because that is who we are and what our
community expects us to be, but we did it despite being shut
out of the PPP program. While so many worthy small non-profits
received PPP funds, even though their fundamental business
model was unaffected by the pandemic, we were left to almost
bleed out for the ``sin'' of having over 500 employees and the
audacity to operate at scale across the region. Our operating
revenue for 2020, expected to be around $92 million, was down
over $20 million last year, and is projected to be down $25
million from that number this year. We have spent all of the
cash we previously had on our balance sheet and we are now
using our line of credit to fund operations.
After 167 years of serving this community, it is really
hard to understand why Congress failed to help us until the
American Rescue Plan Act was passed just last week. On behalf
of the Y and this community, I am deeply appreciative that the
President made this legislation his first priority, and that
enough Senators understood the essential role that larger non-
profits play in this country.
For our Y, we anticipate that we will be eligible for
around $8 to $9 million from the Payroll Protection Program.
That means that we will likely not have to go any further into
our line of credit to fund operating losses this year, as we
ramp back up to hopefully being cash flow positive again by
year-end.
I am concerned, however, that the deadline for accessing
the program remains March 31st. After being shut out for the
past year, it is unreasonable to ask organizations that were
heretofore ineligible for the program to file their
applications within two weeks. I can also tell you that the
banks that we are talking to right now have told us that the
SBA will not have processes in place for large nonprofits to
apply for PPP for at least two weeks. So we are looking at
potentially getting shut out yet again. I think a three-month
extension is not only warranted, but owed to all of us after
what we have been through this past year.
Thank you again for the opportunity to speak to you today,
and thank you to Senator Cardin and those who understood how
critically important large nonprofits are to their communities
and to helping our country survive this past year.
[The prepared statement of Mr. Hoey follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you, Mr. Hoey. We will now go to our
fourth witness, who is here in person, Brad Polumbo, who is a
journalist and opinion editor at the Foundation for Economic
Education. He was previously a media and journalist fellow at
the Washington Examiner, and an editor at the media nonprofit,
Young Voices.
Mr. Polumbo.
STATEMENT OF BRAD POLUMBO, EDITOR, FOUNDATION FOR ECONOMIC
EDUCATION, ARLINGTON, VA
Mr. Polumbo. Chairman, Ranking Member Paul, members of the
Committee, thank you for the opportunity to testify here today.
I am an editor at the Foundation for Economic Education, where
I conduct policy reporting and analysis, and I have been doing
this for several years now, but this week was the first time
that tears flooded my eyes when I reported a story.
I was reporting an interview that the Associated Press did
with doctors across the globe, warning that lockdown orders are
leading to an international epidemic in child suicide.
``We are very surprised by the intensity of the desire to
die among children who may be 12 or 13 years old,'' a French
doctor said. ``We sometimes have children of 9 who already want
to die. It is a genuine wish to end their lives,'' this doctor
told the AP. And he told the AP that the number of youth
suicide attempts his hospital sees in a month has more than
doubled amid pandemic restrictions.
Here in the U.S., the Centers for Disease Control reported
that 25 percent of young adults considered suicide during the
COVID lockdowns, while overall mental health issues appear to
have spiked as well. CDC data show a 24 percent increase in
emergency room mental health visits for children ages 5 to 11,
compared to 2019. Among adolescents aged 12 to 17, that
increase is 31 percent.
The spike in depression and suicidality triggered by the
social isolation of pandemic lockdowns is most certainly not
what proponents of the restrictions intended. But as Henry
Hazlitt wrote in Economics in One Lesson, responsible
policymaking requires us to look beyond intentions and
immediate effects. It means taking into account a policy's
indirect consequences and its collateral damage. And sweeping
government interventions tend to be plagued by unintended
consequences, sometimes lethal ones.
There has been perhaps no more dramatic example of this
lethality than the unintended consequences of pandemic
lockdowns. Government officials took drastic, unprecedented
steps of closing businesses en masse, criminalizing citizens'
livelihoods, and essentially placing healthy Americans under a
form of house arrest. The lockdowns and restrictions have been
normalized, but they are not normal.
My colleagues and I at the Foundation for Economic
Education have spent the last year chronicling the myriad ways
that COVID lockdowns have led to unintended consequences. The
aforementioned mental health crisis is only one of many that
have emerged as a result of these unprecedented government
restrictions. We have also seen an enormous uptick in addiction
and drug overdoses. According to the CDC, over 81,000 drug
overdose deaths occurred in the United States in the 12 months
ending in May 2020. That is the highest number of overdose
deaths ever recorded in a 12-month period.
Now the full data will take years to analyze, but state and
local level examples of this tragic trend are too numerous to
list. Meanwhile, an analysis from the National Commission on
COVID-19 and Criminal Justice found that domestic violence
spiked 8.1 percent after lockdowns. The study's author said
that this figure is, if anything, ``a floor, not a ceiling.''
It is an underestimate.
None of this even touches on the economic devastation
wrought by government pandemic lockdowns. According to the
business website Yelp, 60 percent of the 163,735 businesses
that used the website which have closed will never reopen.
Small businesses, in particular, have been hit hardest by COVID
pandemic lockdowns. More than 100,000 small businesses
permanently shuttered last year, while polling shows that 60
percent of small business owners worry that their business will
not survive until June 2021.
From mental health to drug overdoses to domestic violence,
the immeasurable economic and social damage that lockdowns have
wrought cannot be made whole by any amount of welfare, by any
amount of stimulus payments, or by any amount business grants.
Lockdowns and continued pandemic restrictions are what is
crushing the American spirit and the American economy. Neither
the Paycheck Protection Program nor other fraud-rife and
inefficient Federal band-aids can heal this ailment.
Policymakers who continue to perpetuate lockdown policies
and heavy-handed pandemic restrictions must discover the
humility necessary to see that their sweeping actions have
consequences beyond their control, beyond their understanding,
and beyond their intentions. Until they do, millions of
Americans will continue to suffer silently. Thank you.
[The prepared statement of Mr. Polumbo follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you very much for your testimony. We
will now go to five-minute rounds for questioning.
Mr. Hoey, let me start, if I might, with you. You point out
the challenges that you have in navigating the program, that
you were not eligible, now you are eligible. Let me make it
even a little bit more complicated for you. The law requires
you not only to file an application by the end of the month,
you have to have it acted on by the end of the month by the
SBA, so it makes it even more challenging. And as you know,
there are certain requirements that have to be verified, under
certain order process, before a forgivable loan can be
approved.
I also want to underscore the point on nonprofits and then
give you a chance to sort of talk about how important it is to
extend the program beyond the March date, and that is,
according to Johns Hopkins University, which is really the
premier organization for reliable statistics in regards to
COVID-19, they have reported that the nonprofit employment
number is down about 1 million as a result of COVID-19, just
underscoring the point that you said, the financial challenges
in the nonprofit sector.
So I know you are active within the nonprofit community.
How critically important is it for nonprofits, but as well as
other small businesses, the change in the standard for the
self-employed to be able to calculate how much they are
entitled to? How important is it for us to extend that date?
Mr. Hoey. I think it is essential. We are fortunate to have
a really talented CFO, and we are doing our best. We also are
reaching out to as many banks as we can. And I can tell you, I
was just on a call this morning with colleagues of mine across
the country, and the level of confusion, the different
information being provided by different banks, which I do not
think are intentional but there is just a level of confusion,
given this bill was just passed last week. The SBA still is
trying to set up its protocols for handling organizations which
admittedly they do not typically administer programs for.
And at the end of the day, I am convinced that most worthy
and large not-for-profits will get shut out yet again if the
extension is not granted. I just do not think it is reasonable.
You know, this, to me, should not be a partisan issue. It
should simply be a practical issue of, you know, can you do
something this quickly, within two weeks' time, that requires,
you know, a bank and a Federal entity to coordinate? I do not
really think so. I do not think so at all.
So I think it would be a grave mistake not to extend the
period for 90 days. I think a lot of large nonprofits still do
not even know they are eligible, quite frankly. That is another
issue.
Chairman Cardin. And we have got to get that information
out. I understand that.
Ms. Mensah, let me turn to you, if I might in regards to
how effective the targeting of funds, or walling off for the
CDFIs or for the small of the small businesses. Do we have a
structure in place that gives us a better chance of reaching
the underserved community? We know there is a challenge to
start off with, with lack of banking relations with a lot of
the small businesses located in underserved communities, but
have the changes that we have made in the program over this
past year been helpful, and what additional changes do you
think we need?
Ms. Mensah. The changes were incredibly helpful, Senator
Cardin. This was a powerful change. You listened to the CDFIs.
You listened to the businesses in your communities. So the
changes made sense. The changes are working.
What we must do is extend this deadline, and what you
propose is a sensible extension, an extension to May 31st for
the program and two months for the agencies and the lenders to
do the back-office paperwork after that. That is the sensible
change we need, and it will make a difference.
And if I can also say, this income calculation that you
made a change, it is a very sensible one. But like what Mr.
Hoey spoke to, we need retroactivity. It came very late. So we
need to be able to capture more businesses, and there is
precedent for this. Congress made a similar income calculation
for PPP loans to ranchers and farmers, so we have done this
before. We listen to our constituents and to our fellow
Americans who are hurting.
So I simply urge you--you got it right. Let's give us time
to make this work and heal these businesses and our economy.
Chairman Cardin. Thank you. Senator Paul.
Senator Paul. Mr. Polumbo, thank you for reminding us, you
know, of the children who have suffered from these lockdowns. I
agree with you. I do not think anybody intentionally wanted
more children to kill themselves, to have more teenage suicide,
but it is an unintended consequence and I think no one is
really pushing back and saying it does not have something to do
with the isolation kids are feeling from being at home and
cooped up and not able to go to school.
It would be one thing if people could say, well, the locked
saved a million lives. Instead, I think it is very hard to look
at objective evidence that says the lockdowns have saved any
lives. And this will be debated for some time to come,
hopefully with less emotion and with more objectivity.
You mentioned Henry Hazlitt and the idea that responsible
policymaking looks at immediate intentions but also at ultimate
consequences, unintended consequences. Bastiat referred to this
as sort of the seen and the unseen. It is very easy to see the
PPP program. Someone gives you a whole bunch of money and you
buy something or you keep your employees employed for three
months and you see the seen. The unseen is what happens to so
much debt and so much borrowing over time. Can you describe
your opinion as to what will happen and what are the risks of
borrowing $6 trillion over a two-year period?
Mr. Polumbo. Yes, Senator Paul, and thank you for the
question. I can speak to this as somebody who will be paying
off this debt the rest of my life, in my 20s. We just have
spent a total of $6 trillion, in total, on COVID relief, though
according to PolitiFact, 90 percent of the last bill was not
directly related to COVID-19. Now that money will hang over my
generation the rest of our lives, and future generations in the
form of decreased economic growth and opportunity, higher taxes
every year just to meet the interest payments, and if interest
rates go up anywhere close to historical norms, that will
become an enormous expense on us.
So when we are talking about expensive programs, expensive
government programs, we have to see clear proof that they have
worked, if we are going to argue that they should be reiterated
in future iterations. And when it comes to the Paycheck
Protection Program and many of these other stimulus efforts,
that evidence just simply is not there.
An MIT economist found that the Paycheck Protection Program
only preserved roughly 2.3 million jobs in its first iteration.
That came out to $224,000 in taxpayer expenditure per job
preserved. That, for members of my generation who will be
paying the consequences the rest of our lifetimes, is not a
fair tradeoff.
Thomas Sowell said this, the famed economist. ``There is
only tradeoffs in policy.''
Senator Paul.
[Inaudible.] I do not know if you heard me because of my
microphone. Mr. Griffith, do you hear me now?
[No response.]
Senator Paul. All right. I will direct that question to Mr.
Polumbo then. Of the trillion dollars that is still left in the
pipeline, do you think we would be wiser to be looking at how
that money can be spent and will be spent rather than adding
another $2 trillion?
Mr. Polumbo. Yes, it is disturbing to me that we are
pouring more Federal money out the door like candy on Halloween
before even eating what we have already doled out. I just find
the way that this was done, in terms of sending money out, in
response to an emergency it is understandable, but it was done
with very minimal verification requirements, leading to
enormous fraud problems.
Here is what The Wall Street Journal reported. ``The
Federal Government is swamped with reports of potential fraud
in the Paycheck Protection Program. Evidence is growing that
many took advantage of the program's open-door design. Banks
the government allowed companies to self-certify that they
needed the funds, with little vetting. A Federal watchdog
within the Small Business Administration said there were strong
indicators of widespread potential abuse and fraud. They have
counted tens of thousands of companies that received PPP loans
for which they appear to be have been ineligible,'' The Journal
reports, ``and tens of thousands of organizations also appear
to have received more money than they should have, based on
their head counts.'' And this is just one of the many COVID
programs.
So we have already allocated so much money but we have not
fixed the glaring problems with how it is being spent, so to me
it is irresponsible that taxpayer resources go and send much
more out the door.
Senator Paul. Thank you.
Chairman Cardin. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman. You know, I find
this last point interesting just because, you know, when the
first PPP checks went out, during the Trump administration,
there clearly were problems. And we did not hear too much about
it other than people were concerned and that we should do
something. And then when we were getting to the next round,
which also was bipartisan, people heeded some of the problems
and made some corrections. But it is not as if this problem is
just now here.
And the other thing that we tried to is each round of PPP
funding we have actually not done a good job of reaching some
communities. So each time we have improved on the PPP program
with changes to say that we are trying to reach those who just
did not have a banker on speed dial. And when I think about
putting small business dollars out the door, I am glad that we
have made the effort, particularly on CDFIs, to make sure
that--and listen, I know some people who actually had bankers
on speed dial and still did not get PPP money.
So, look. This is an issue about getting access to capital,
which is really the fundamental issue of this Committee
overall, I think, is working with SBA and making continued
improvements so access to capital reaches more people. Why?
Because when women and minorities get access to capital, half
of the population, they actually help build the economy for the
future.
So I want to bring up Tribal communities, and this is for
Ms. Mensah. Tribal and Native-owned small businesses continue
to be on the underserved list. They face real challenges in
getting COVID relief. The Biden administration, I believe,
needs to focus on this, because they have been hard-hit by the
pandemic. Lenders have denied Paycheck Protection Program loans
to some Native-owned small businesses because they do not meet
the SBA lending documentation requirements, that is, that
Tribal businesses do not file a tax return because they do not
have to, under their treaty rights, they do not have an
employment identification number, and most are operating on
cash basis and do not have the same kind of banking or internet
systems.
Yet they are a part of our economy. Native businesses have
been--we have 20 federally recognized Tribes in the State of
Washington. They participate in treaty-right fisheries. The
Lummi Nation alone, just one of our Tribes, has over 470
registered vessels that provide over 1,175 jobs in the fishing
area. So this is very big, important businesses for us in the
north part of our State.
So the Lummi CDFI was able to help a very limited number of
Native fishermen get PPP loans, and my staff were told that a
majority of Tribal fisherpeople and other Native business
owners who applied on their own at local banks were either
denied by the SBA PPP loans or did not have the technical
support on their admissions.
So my question is to you, Ms. Mensah. The Recovery Act plan
that was signed by President Biden last week contains $175
million for community navigator pilot programs to better reach
underserved communities, including Tribal communities. The
Native CDFIs, like the Lummi CDFI, have been essential. What
should we be doing to make sure that the navigator pilot
program reaches more of these businesses, and what resources do
the CDFIs have to help with these lenders, to make sure that
these Tribal records help to bridge the gap here?
Ms. Mensah. Thank you, Senator Cantwell, for your question
and for raising the issue of Native communities and Native
CDFIs. There are 70 Native CDFIs. The Lummi CDFI that you
mentioned is an OFN member, as is the Northwest Native
Development Fund in Washington. They get up every morning to
help their Native communities and these Native businesses.
You have come a long way already, and I praise the
Committee and the administration for its inauguration of the
community navigator program. We expect to see great things out
of that program, but frankly, CDFIs have always played the
navigator role. We are capital-plus. We always work with our
communities. So strengthening CDFIs, which you can do through
that program but also through what we have called for, is an
increased appropriation to the CDFI fund. That will strengthen
the effects of the money of CDFI and others to reach our native
communities.
What we learned in this pandemic is that it revealed
historic inequalities and the ongoing inequalities. And when we
push, with your help, the SBA to pay attention to all
businesses, we are going to get the thriving economy that we
need.
So I have thanks for what you have done, I have great hopes
for the navigator program, and I think the more we double down
on our CDFIs and their ability to provide technical assistance,
and capital, we will see all communities prosper.
Senator Cantwell. Thank you. Thank you, Mr. Chairman.
Chairman Cardin. Next we hear from Senator Marshall, who
will be followed by Senator Booker on Webex.
Senator Marshall. Okay, Chairman. Thank you. Thanks for
having me today. My first question is for Ms. Mensah. I am very
proud of the Paycheck Protection Program. I think it is one of
the best programs the Federal Government has ever ran out. I am
proud of my community banks, the commercial lending
institutions, credit unions, the SBA, how they worked together.
Kansas alone saved 600,000 jobs, 50,000 loans, and 600,000
jobs.
I knew, from any type of a crisis, though, that minority-
owned businesses would have the hardest access to capital, that
that would be a challenge, and I specifically worked with my
staff, and I worked with the lending community, and I worked
with the local Chambers and especially the minority Chambers in
some of the more distressed counties, and said, ``This is a
priority. What can I do?''
And the first round, sure enough, there was a lot of
concern, and then the second round happened, and I went back to
those same people and said, ``How are things going?'' And they
said, ``Oh, we think it feels better. We think it is better.''
I said, ``Well, that is nice, but I need to see the data.'' And
here we are, a year later, and I am looking at data from NAICS
details from my particular State and trying to figure out, did
we help minority-owned businesses or not?
And the data I have got here, percent of total loans, 76
percent are unanswered. So we do not know if they were from
Black African Americans, Hispanic, Asian, or White. Seventy-six
percent of the loans we do not know who they went to. And I
went to the national data as well, and 87 percent are
unanswered.
So I guess I do not know. How did we do with minority
loans, and can you give me any help understanding? Is there
data out there that proves, that shows we are doing a good job?
Ms. Mensah. Senator, thank you for your interest and for
your concern with our minority businesses. That is the kind of
concern that helped our CDFIs and our local banks, credit
unions, to get this done.
Thankfully, the new administration is putting more focus on
accounting and reporting. We are hearing more. We, at CDFIs,
did not originally get easy data from the SBA, and we are
getting more now. So I know you will have opportunities to
bring in the SBA staff and hear more.
There is no question we lost businesses, but there is also
no question that are poised to double down on helping minority
businesses recover, and that is what these new resources are
doing.
Senator Marshall. So do you have good data that you could
share with me or send to us, to show us how we did in my State
with the institutions that you are responsible for, that work
with, what percentage of the loans went to minority businesses?
I am trying to figure out how do we measure success.
Ms. Mensah. Yes. I think we have to look countrywide,
statewide, but I will be happy to share with you what we have.
But we also received that data from the SBA itself. I will
share with you from my numbers. We have 350 members. About 50
of them did PPP, and most of them were helping in this
navigator role.
Senator Marshall. Someone smarter than me once said if you
cannot measure it, you cannot manage it. But thank you so much.
My next question for Mr. Polumbo. You know, I am sad that
here we are a year later, it is going to take someone like you
to have to show us what I intuitively knew, and Dr. Paul knew
as well, that shutting down the economy, shutting down schools,
shutting down society was going to create a mental health
crisis. And the records bore out--increased depression,
suicide, substance abuse, overdose, domestic violence--that
shutting down the economy, shutting down society would create
all these.
And I was always especially concerned about youth suicides.
You know, going back to last April, I said that more children
would die from suicides and substance abuse than the virus. We
already knew by then that this virus was not especially
virulent to children. And I thought that there was a safe and
responsible way to keep our kids in school, and certainly by
August I think there was enough data to prove that as well.
You know, I just want to submit for the record, in Kansas,
what the COVID cases are doing. The hospitalizations are going
down. I mean, we certainly are close to herd immunity. If I
could submit these for the record, please.
Chairman Cardin. Without objection, they will be part of
the record.
[Slides submitted by Senator Marshall follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Marshall. So we knew that these consequences would
be unattended but they were totally predictable. What would
your plea be to teachers, and thank you to the teachers that
are helping us at our schools. What would your plea be to the
teachers that are refusing to go back and teach?
Mr. Polumbo. Well, I would say that there are many great
teachers in this country, but teachers' unions have been a
pernicious force to fight to keep schools closed, and data
consistently shows, studies consistently show that schools are
not dangerous, if proper precautions are taken, and they have
demonstrated the achievement gap this will create for this
generation of children. We will have a generation of lost
children, to some extent, who will see lower incomes, according
to McKinsey analyses, of thousands of dollars a year, with
higher gaps for African American and Hispanic children. This
damage will follow them for the rest of their lives.
Senator Marshall. Thank you so much, and I yield back.
Chairman Cardin. Thank you. Senator Marshall, I just really
wanted to point out that under the leadership of Chairman Rubio
I joined him in asking for that type of granular information on
the PPP loans. We were not alone. The inspector general of GAO
also wanted to get that information. And for reasons that we
would not accept, they did not have that granular information
when the program was first implemented. We are now getting
better information. We now know the sizes and where they are
going. So we do have better information, but I join you in
wanting to see the granular information. We are going to get
that for the Committee.
Senator Marshall. Thank you.
Chairman Cardin. Senator Booker via Webex.
Senator Booker. Mr. Chairman, thank you very much. I am
excited about the promise and possibility and opportunity that
is going to be afforded so many families in peril and in
crisis. As a Senator that lives in a low-income, Black and
brown community where we do not confuse wealth with work, to
see the difference it is going to make for so many children and
so many families who have been impacted by this pandemic is
incredible, and the overall economy, as The Wall Street
Journal, who has boosted their average forecast for 2021 for
economic growth to 5.95 percent following the passage of this
bill. It is going to be really the fastest pace of growth we
have seen since 1983, is what they are predicting. That
benefit, because this bill, unlike the toxic Trump tax cuts,
which will cost about $1.9 trillion, were the top quintile, saw
most of the benefit, about 65 percent. This is actually going
to help communities like mine and working people all across the
country and all across the State of New Jersey really thrive
and succeed.
I am also happy that we addressed a lot of the problems we
were having, justice-involved entrepreneurs. We talked about
this. We got it addressed in this bill, and I am appreciative
of Senator Rubio and Senator Cardin for speaking out and
supporting my efforts there.
We saw a lot of the smallest businesses, women of color,
women and people of color, really get more targeted support in
this, as well as what we have already heard in this Committee,
is the nonprofit organizations that have really been
struggling.
I want to turn my question, in my remaining time, to Ms.
Mensah. In your testimony you outlined a number of issues that
underserved business owners are still up against--slow tech
rollouts, delayed guidance from the SBA and Treasury, and the
lack of communication, really, between the SBA and lenders and
customers. And I have heard about these repeatedly from my
constituents from north Jersey all the way to south Jersey,
small business owners who are really struggling to get through
what is a complicated process, trying to decipher the
requirements at the kitchen table.
The American Rescue Plan actually tried to address this by
including $175 million to establish community navigator pilot
programs to improve the support that these small businesses and
entrepreneurs are really receiving. Can you tell a little bit
more? I know you have talked about this a bit, but how CDFIs in
your network are actually going to do the work, engaging that
navigator role, and how we can expect that investment to
translate into really better serving small business owners.
Ms. Mensah. Thank you, Senator Booker, for your work and
for explaining the crucial role of navigators. We think you got
so much right in this plan.
When you do not have a banker on speed dial, or an
accountant or a lawyer on speed dial, you need help. You need
good advice that you trust, that is on the level, that you
trust, and that is where our CDFI partners come in. As I said,
maybe 50 of our members actually make the CDFI loans out of
their own resources. The others are active in actually helping
borrowers and pointing them many times to community banks or
others in their community--where can you get this help?
So this is what the navigator grants will allow, all this
technical assistance, and it is going to be important. It will
be important in our rural communities, you know, in places
where people are familiar, we are in, we are rooted, and in our
cities, like right in your hometown. We will be there as a
field of institutions, to help people connect to these
resources. It is a perfect partner, and we appreciate you
listening.
The only thing we need now is more time for this program to
work, so this extension gives us more time to get loans
forgiven, and what we hope is more resources for the CDFI field
in general, and more emphasis in the SBA on connecting once
this program is done, so that we are there for the long haul
for those businesses.
Senator Booker. And just really quick, in my remaining
seconds, you know, the time that you mentioned is so important
right now. The revised loan calculations for sole proprietors,
independent contractors, and self-employed individuals just put
out by the administration, just earlier this month, has meant
that a lot of these sort of micro-businesses can get some
relief. There was a North Carolina Black-owned florist shop
that got a PPP loan of $525 early this year, now is eligible
for $2,750. There is a Latino-owned marketing business that I
heard about in California. They received a loan of $1,500, now
is eligible for $2,600. These are big differences for those
small micro-businesses.
And so just really quick, to close me out, in your
experience if these micro-enterprises had the time that they
need and the resources to fully access the PPP, they could have
been more successful in getting these loans. But right now,
this time that you just talked about, and that help, could be a
difference-maker for tens of thousands of micro-businesses
around the country. Is that correct?
Ms. Mensah. That is correct. The changes will be game-
changing. What we need is retroactivity and we need the program
to extend.
Senator Booker. Thank you. Thank you very much, Mr.
Chairman, for allowing me the time, and I am grateful for this
very, very good panel.
Chairman Cardin. Thank you, Senator Booker. We will now go
to Senator Ernst who will be followed by Senator Duckworth via
Webex.
Senator Ernst. Thank you very much, Mr. Chair, and thanks
to our witnesses as well for being here today. And as we are
sitting here it has been just shy of one year since the CARES
Act was signed into law and the Paycheck Protection Program was
originally created. PPP has provided essential assistance for
our small businesses in Iowa and all across the country.
Though this program has saved millions of jobs and
continues to be a proven success, it is important that we
continue to consider ways to improve the program and make it
work for all forms of small businesses, including family
farmers and our self-employed folks, which is why I am glad
that we are having this hearing today.
And we will talk a little bit more. I am going to carry on
kind of where Senator Booker started. But Ms. Mensah, about the
recalculation issue, I would like to discuss that with you
today. In your testimony, you do discuss the new rules that
allow self-employed folks to calculate their loan based on the
gross income instead of the net income, which increases the
size of the loan that they would qualify for. And you also
reference the fact that the new calculation is not available
for those businesses who received a loan prior to March 3rd,
and I also agree with many others that this is unfair. I have
heard from Iowans who received loans as small as $80--$80--last
year, and these folks should be able to benefit from a higher
loan amount. But under the current rules, they cannot
recalculate their loan.
In your testimony you suggest that SBA make these changes
retroactive, just as you said, in the same way that we do for
farmers and ranchers. However, this would not fully solve the
issue. Under current rules, only farmers who have not been
approved for loan forgiveness yet are allowed to recalculate
for the higher loan amount, and as a result of this policy many
Iowa farmers lost out on thousands of dollars because they had
their loan forgiven shortly before the relief bill had passed
in December.
If we treat self-employed folks the same way, those who
already had their loan forgiven would still be left out, and I
believe that Congress should take this a step further and allow
all Schedule C and Schedule F filers, including those who have
already had their loans forgiven, to recalculate using gross
income. And what are your thoughts on this?
Ms. Mensah. Well, Senator Ernst, it is always impressive to
hear you are listening to all of the communities, including
rural communities, including those who derive their income from
ranching and farming. Many of our CDFIs work in rural areas,
supporting the many small businesses that are sustaining rural
communities.
So I stand with my testimony. We urge Congress to do the
two things that will help here. First, give us more time, and
so please extend to May 31st the true extension of the program,
and then please consider this retroactivity. We think this will
help. And with CDFIs on the ground to help work through these
changes we can help those businesses reapply.
So I hope you look at us as partners to working. This is
the best way government works, when you have a responsible,
fair partner on the ground who can help reach into the crevices
of the economy. So thank you for your listening ear on this.
Senator Ernst. Thank you, Ms. Mensah, and I would also
continue on. You are absolutely correct. We need to reach every
community possible, helping the folks in the urban areas as
well as our rural areas. We have difficulties all the way
around. And you also spoke of some glitches in the SBA's new
lending platform and delayed or incomplete guidance, and we
have heard those similar concerns from folks in Iowa. Do you
believe that there are any additional improvements that SBA
needs to make sure and ensure that no one gets left out of the
program, and can you explain a little more?
Ms. Mensah. We are pleased to see the SBA working with the
new administration and working quickly. We are pleased to see
the changes that have been made. Our principal recommendation
is to extend the time, and then once the Paycheck Protection
Program is over and you have the agency in front of you, to re-
look again, top to bottom, at how all of these programs can
better serve the most underserved. That is the group that is
having the challenge, so that is our principal recommendation.
Senator Ernst. Yep, absolutely. Thank you so much for your
time. To all of our witnesses today that have appeared in front
of the community, and thank you, Mr. Chair. This has been a
very, very helpful Committee hearing, I think as we look at the
Paycheck Protection Program. Thank you.
Chairman Cardin. Senator Ernst, let me just underscore a
point that was just made. We are going to have on the floor
next week the extension. It has passed the House by 415 to 3.
We are also going to find out from the SBA--I support the
retroactivity and we are going to have a bipartisan way of
trying to correct that. We need to work with the SBA, because
they have raised some administrative issues.
So we are going to work through that. As a matter of
fairness, we need to make that provision retroactive. So we are
going to try to figure out how to do it. And what Ms. Mensah
was saying, we want to make sure these programs are working
well, so the Committee is making that one of our priorities,
and I can assure you we are going to do this in the manner in
which this program has been handled since its inception, with
bipartisan, working together.
Senator Ernst. I appreciate the attention to it. Thank you,
Mr. Chair.
Chairman Cardin. Senator Duckworth via Webex.
Senator Duckworth. Thank you, Mr. Chairman. As President
Biden said last week, we are emerging from a dark winter to a
hopeful spring and summer, but we have to keep our foot on the
gas and take nothing for granted. We must sustain relief
efforts so that our businesses and nonprofits also can keep
their doors open and we can build back better than before.
So on that note, I want to turn to Mr. Hoey. First, I want
to thank you for everything you and your organization have done
over the past year. Essential workers and others needed the
help of nonprofits like yours, and you all stepped up.
Nonprofits in Illinois stepped up too. They helped those
struggling with severe and persistent mental illnesses, worked
through rapidly changing circumstances. They distributed PPE,
food, other resources, and they are a part of our effort to get
citizens vaccinated quickly. We owe a great deal of thanks to
our nonprofit leaders.
Now, many of these entities face another crisis with PPP
set to expire on March 31st. I agree with your testimony.
Congress expanded this program to nonprofits like yours and it
should certainly extend the program to allow it to happen.
Mr. Hoey, please describe, for the members of this
Committee, the services that you are currently providing to
bring us out of the pandemic and that you may have to shutter
if Congress does not take this simple action of extending the
PPP deadline.
Mr. Hoey. Thank you so much, Senator Duckworth. And by the
way, I applaud the Y in Chicago. I am very familiar with their
work and they have done yeoman's work as well.
Yes, the challenge here is that, you know, organizations
like ours, we have such a wide array of programs and services,
and because we are a not-for-profit and our charter is really
to serve the community, you know, we are on a very thin margin
and we can never accumulate enough cash for a pandemic, for
sure.
So this program is essential. Otherwise, we are going to
have to borrow a significant amount of money at market rate,
that will really stunt our work for years and years to come.
You know, there is just no way around it, and probably result
in further reduction of force.
During this pandemic and going forward, you know, we have
stepped up, and we have done so because we are really one of
the few organizations at scale that had the sites and the
structure to step in on food distribution. So we partner with
food banks. We have 100 sites around the region, and many of
those are in the most challenged neighborhoods so we were able
to get food to people more efficiently, using our sites and our
volunteer network. We opened up what we call academic support
centers with all the virtual learning that is going on, and
particularly parents that have to go to work and they do not
have the luxury of working from home. We provide a safe way for
kids to learn and make sure that they do learn, but they also
get socialization.
And then, you know, we had reopened our doors for our
regular service, by and large, but, you know, the community
relies on us, seniors rely on us to have a place to stay active
and healthy. Families rely on us to have a place to go to keep
their kids active and for them to connect. Our work is endless.
I mean, we have been providing wraparound services for schools
that are sort of in a hybrid situation, which is very tricky.
So one day we may be providing a full day of virtual learning
and the next day providing after-school programming.
So, you know, it has really been quite a year, I have to
say, and I am proud of the work that we have done, but not just
the Y but really not-for-profits. And like I said, I have to
emphasize the not-for-profit community stepped up, but the
larger not-for-profits were the go-to organizations for the
states and the counties, in Maryland and throughout the
country, to really get stuff done in the face of this, because
of our infrastructure and our expertise. We are proud to do it,
and all we are asking for is just now that this bill has been
signed, an extra 90 days to get our applications in.
Senator Duckworth. Thank you. Mr. Chairman, I would like,
at this time, to enter into the record a letter from several
nonprofits in my State, highlighting the importance of this
issue.
Chairman Cardin. Without objection, those statements will
be made part of our record.
[Letter submitted by Senator Duckworth follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Duckworth. Thank you, and I would like to submit
the rest of my questions for the record. It has to do with the
simplification of the forgiveness process for those with PPP
loans of $150,000 or less. I urge the Small Business
Administration to simplify this process, because so many of my
businesses are finding the process extremely onerous.
Thank you. I yield back.
Chairman Cardin. Thank you. We will now go to Senator Rosen
via Webex, and she will be followed by Senator Shaheen.
Senator Rosen. Thank you, Chairman Cardin. I appreciate
that. And I want to thank you really for holding this hearing
on the Paycheck Protection Program and how we can continue to
serve our small businesses as they recover from the economic
downturn caused by the pandemic. So, Mr. Chairman, I was proud
to join you, Senator Collins, Senator Shaheen in co-sponsoring
legislation to extend PPP through the end of May, and I look
forward to working with this Committee to pass that legislation
before the PPP expires in two weeks.
So I want to talk a little bit about EIDL, because COVID-19
has impacted our country of course in profound ways. It has
been particularly challenging for many of our small businesses
in Nevada. For travel and tourism, our industry has been hit
hard, and 99 percent of businesses in Nevada are small
businesses.
And while we are on the road to recovery, our economy is
just not going to come back to life with the flick of a switch.
It is going to take time. So that is why, two weeks ago, I
reintroduced by bipartisan EIDL for Small Business Act with
Senator Cornyn. My bill would lift the SBA's caps on EIDL loans
and EIDL advance grants, providing all eligible small
businesses with loans up to $2 million, and the full $10,000
grants regardless of size or location, just as Congress
intended to when we passed the CARES Act just about a year ago.
So I know we are here to discuss PPP. As our small
businesses continue to struggle, we cannot lose sight of the
other critical lifelines like EIDL.
But, Ms. Mensah, in your written testimony you talk about
the impact of reforms Congress has made to the SBA relief
program, including repealing requirement to deduct auto-advance
payments from PPP loan forgiveness. Could you talk about the
impact of that policy on our small businesses, and thinking
also a little bit, too, I guess as a second follow-up to that,
our businesses that CDFIs work with every day, what it would
mean if they got this full $10,000 from the EIDL advance grant
to keep their doors open.
Ms. Mensah. Thank you, Senator Rosen, for your concern and
your understanding of the nature of the small business economy.
We think you got so much right, and, you know, it is
disheartening when our CDFIs work with a business only to
conclude that the very thing that helps them reduces the amount
that they were supposed to get. That is tragic, that is hard,
and it is disheartening to go through all the work. So you got
the right proposal and we urge you.
We also think, key to this whole recovery, is the time on
task to get really these reforms ingrained, and when a business
can receive this kind of support and receive it skillfully, it
is game-changing and it is the bridge they need to retake their
place in the economy. This is the kind of bridge.
So we are thankful for the work you have already done. I
agree with also Senator Duckworth's point, streamlining the
forgiveness. That will also help our CDFI-supported businesses,
particularly when the loans for many are well under $150,000.
And that is what Congress' direction was, and I think if we can
keep that focus then our businesses can fully participate in
the recovery.
Senator Rosen. Thank you. I want to move on and talk a
little bit about our indoor air, making it germ-free or clean,
our indoor spaces, to build consumer confidence to help our
small businesses reopen safely. And, of course, for me, our
tourism industry, hospitality, restaurants, retail,
conventions, all of the live events.
And so I just introduced, with Kevin Cramer a bipartisan
act called the Fresh Air For Small Business Act. This
legislation is going to provide refundable tax credits for
small businesses to upgrade their HVAC systems to mitigate the
risk of COVID-19 in the air we breathe. I want people to go to
back indoors and feel confident.
So, Mr. Hoey, as someone whose organization brings the
community together indoors, can you talk about the importance
of making investments to ensure that our indoor activities are
safe, not just for the workers but for all of us who want to go
back and enjoy all of it. So how can investments in PPE,
ventilation, and other modifications, how does this help us
bring back members and protect workers?
Mr. Hoey. Yes, it is very important. Obviously, most
organizations or entities or companies have indoor spaces, and
they vary in size, so ventilation is a complicated issue and it
is so dependent on size and the structure of the building. But
the truth is most businesses, most organizations like ours did
not anticipate something of this nature, and so a lot of the
systems that we have, HVAC systems, do not have the
requirements. We were fortunate that a lot of our buildings are
newer so we were in a little better shape, but some of them are
not.
And so these are very expensive systems we are talking
about, and so I think support for that is wise, not just now
but I think going forward. Improving the air quality inside
buildings is very important, and I think it will be a good
investment, even when we all hopefully get vaccinated and can
move back to a more normal world.
Senator Rosen. Thank you. I could not agree more. I yield
back my time. Thank you.
Chairman Cardin. Thank you, Senator Rosen. We will now go
to Senator Shaheen, who will be followed by Senator
Hickenlooper. And in introducing Senator Shaheen I just really
want to thank her. She has been one of the leading architects
of trying to make sure we get the program tailored to those
small businesses that really need it, and one of the sponsors
of the amendment that would extend the date on the PPP program.
Senator Shaheen. Well, thank you very much, Mr. Chairman,
and I certainly appreciate the opportunity to have worked with
you and your leadership on this issue. And we are seeing
progress, which is very exciting. I want to thank all of the
witnesses for their testimony.
One of the issues that I have heard consistently from small
businesses in New Hampshire, and I just heard it again on
Monday with respect to the Restaurant Relief Fund that has been
incorporated into the American Rescue Plan, as well as the
Shuttered Venue Operators Grant program that was initially
passed in December and get $1.25 billion more help for that
program in the recent COVID package, is concern that there has
not been clear guidance that has been put out.
Now I do appreciate, and I tried to reassure people, that
we have been in a transition from one administration to the
other. We have a just-approved new administrator of the SBA.
But, Ms. Mensah, can you talk about how important it is for
small businesses to have that clear guidance from the SBA and
to know what the parameters are, so that they can move forward?
Ms. Mensah. Thank you, Senator Shaheen. You are so right.
What you are hearing is echoed through all of our CDFI
community. The lenders need the guidance so that they can
advise the businesses, and this has been a challenging time,
particularly for the changes you made, wisely, for sole
proprietors, it is now possible to get this assistance and it
was not as possible earlier.
So this clear guidance is important and time is what is
going to make that possible, time and the right partner. So I
would urge you the swift passage of this extension, and it is a
true extension. It is an extension to keep the program open
until the end of May, and then to have administrative side.
Already, lenders are having to stop lending. And so it is a
confusing time. I believe time will heal that confusion, and I
think there is a lot of good out there. There are so many CDFIs
that are in place in our communities that know how to help and
can come with better advice, better resources.
And so I urge you to look to the swift extension of this
program.
Senator Shaheen. Well, thanks very much, and I think an
extension is critical. I hope we will be able to get bipartisan
agreement for that. I also think it is very important for the
SBA to hear loudly and clearly from this Committee that the
focus should be on providing guidance for these new programs,
to make sure that that can get done just as soon as possible.
And now that Administrator Guzman has been approved, hopefully
she will be able to get in and see what help they might need.
And if it is a resource question, I hope they will come back to
the Committee, Mr. Chairman, and let us know what they need in
order to get this done.
I have a question, I guess it is Mr. Hoey?
Mr. Hoey. Hoey, yes. Thank you.
Senator Shaheen. Because I understand that yours was one of
those entities that previously could not qualify for PPP
because you were technically affiliated with the national YMCA,
and that now, under this new COVID rescue package we have
allowed for your organization, with the YMCA, to qualify. Can
you talk about what the impact will be on your workers and your
community if you are able to take advantage of the program?
Mr. Hoey. Sure, and thank you for that. Yes, the Y is what
is called a federated organization, so we are all independent
501(c)(3)s throughout the country. There are actually 800 of
those, and we are one of them, and obviously we all vary in
size. The larger Y's, like mine and many others across the
country, all have well over 500 employees, and so we were not
eligible. But this change now looks at the number of employees
by site, since we all are multisite, the large Y's are
multisite across regions.
So it is really a game-changer for us. I would tell you
that the alternative for us was really to go into debt, and we
already carry debt on many of our buildings. We have never had
to borrow money for operating purposes. In my 14 years doing
this, the idea of borrowing money just to operate on a day-to-
day basis is an anathema. We have always been one of those
organizations that was able to be financially sustainable.
And I have often said that, you know, the Y is one of the
best business models for a nonprofit you could think of, except
for during a pandemic. You know, it really would have put us on
our back, and also, with that incremental debt, additional
debt, I think we would have had to look at closing a lot of our
sites and not being able to justify doing some of our work, and
sadly, some of our work in some of the most distressed
communities, because, you know, we rely on some of our
operations to have better cash flow than others, and we make it
all work. But when you force organizations like ours into
borrowing for its operating needs you end up making some
choices that really have a negative impact in communities,
particularly communities that are more disadvantaged. I just
think that is the wrong thing to do, it is counterproductive,
it is short-sighted, and all we are asking for, and thankfully
this bill does this, and the extension will enable it, is to
let us get back to the point where we can be self-sustaining.
And that is what this is. This is essentially a bridge to our
normal self-sustaining financial model.
Senator Shaheen. Well, thank you very much. That is what I
have heard from the Y's in New Hampshire, and as you say, you
provide very valuable services, particularly to many
communities that have a lot of need from the folks who live
there. So thank you. I am glad to hear that this is going to be
helpful to you. I hope it is going to be helpful to our Y's in
New Hampshire as well.
Thank you, Mr. Chairman.
Chairman Cardin. Thank you, Senator Shaheen. Senator
Hickenlooper via Webex.
Senator Hickenlooper. Yes. Thank you, Mr. Chair, and I want
to thank all of the witnesses today for I think really an
illuminating session. One of the benefits that comes out of a
crisis is we do see our economy and the businesses that create
it and the nonprofits that create it, you know, with a clarity,
both in terms of the challenges but also the opportunities.
Ms. Mensah, can you discuss--well, or just try and parse a
little more deeply which small businesses will benefit from the
changes that the Biden administration has made around the
change involving sole proprietors, and these are, as I think,
the truly small businesses.
Ms. Mensah. Thank you, Senator, for that focus on a group
that, frankly, was left out and did not feel that they could
have meaningful participation.
So I described a client, HOPE Enterprise in Alabama, a
woman that under the old rules was running a boutique. All of
the things were filed. Her Schedule C filing only enabled her
to have $700. But when she could file under the new rules, she
could get $20,000. So that is the kind of power. It is fair.
You know, it was looking at gross income instead of net profit,
and this is the understanding this Committee and the SBA and
this administration took when it made the changes.
So this is so important, and as Senator Ernst and I
discussed this, there is a precedent for this in farmers and
ranchers before. So what we are proud of is that in the middle
of a crisis Senators came together, bipartisan worked together,
and worked to let us do our work, frankly. And they gave us
more time, you know, to come in and help these kinds of
businesses.
So we are ready. CDFI's get up and work on someone that may
be eligible for $400, so we are not making money off making
loans like that. We are helping businesses to thrive.
And so the real request here is all of the streamlining
that you put in place, but we need the time to get it done, we
need the simplification. One of the things that, you know, for
people coming back now with their forgiveness, if they are
under too much scrutiny all of our staffs have to switch to
helping people with the forgiveness phase, and they are unable
to help that next layer of people who now have eligibility as
sole proprietors.
So I would just urge the Senate, in its work with the
administration, to keep the pressure on. Let's take the time,
but then let's focus on what really needs to be focused on,
particularly in this forgiveness phase, where we need to keep
the focus on those loans that are $550, not worrying about
chasing down a $1,000 loan for forgiveness. We believe those
remain in good faith, and we look forward to seeing this
program sail forward for the months that should be left on the
program.
Senator Hickenlooper. Right. Well, I think you have been
doing great work there, and we really do hear many more success
stories this time, I think, than before. And certainly the SBA
has said it would create additional communication channels with
lenders to make sure that we got this new approach to PPP and
to the Shuttered Venue program, to get those lines of
communication.
I know that previously there was so much frustration. Have
you found a way to kind of create those channels of
communication, and is that something that might be a permanent
benefit, not just to your organization but to other people
providing loans to these truly small businesses?
Ms. Mensah. I think, as you began your remarks, you said
sometimes this crisis helps us see more clearly. And I think
the agency has done a good job now. They are doing more
reports. They are holding more briefings. They are opening
their website. They are giving us more data, which we did not
even have at the beginning. And I know they are working all the
time to do this. They are clearing out the error codes and they
are trying. So I appreciate that this is a difficult task, but
this is where we need to focus.
And the other thing I would say is that what this crisis
showed, what the nutshell of PPP showed was that all small
businesses are not equal, that some are truly smaller and more
disadvantaged. They are still part of this economy, still
essential to this economy. But it took more. They did not have
huge leagues of bankers and lawyers to help them, and so they
had CDFIs. And what we have learned from this crisis is that is
what matters.
And so I hope when SBA, when the dust clears and the
programs move to the more permanent side that what you will be
pushing the SBA to do is top-to-bottom review of all of its
programs. Let's make this agency help us get down to the bottom
of the economy, where so many people do need these programs to
work better. And that is the partnership we are urging with the
CDFIs.
Senator Hickenlooper. I appreciate that more than I can
say. You know, when I started a restaurant in 1988, back when
it only had eight people working there, when you are that small
it feels like you feel everything more intensely, like your
emotions are right on the surface of your skin. And you are
exactly right, we need to do a better job of going back into
the SBA and looking at how do we take these lessons learned and
make it part of their DNA.
Thank you very much. I thank you all for your testimony
today, and I yield my time.
Chairman Cardin. Senator Hickenlooper, thank you for those
questions. We, in the last Congress, tried to look at the
reauthorization of the SBA programs. We did not quite get
there. I can assure you, we are going to be looking at the
existing tools to see whether we cannot make them more
effective in carrying out the mission, particularly reaching
the traditionally underserved communities, and the smaller of
the small businesses. So we are going to be looking at those
programs.
Ms. Mensah, I want to ask you one additional question, if I
might. There were two changes made in December that affect
qualification for the second round of the PPP. One was to
reduce the size from 500 to 300, and the other was to put a
revenue requirement of a 30 percent reduction. Quite frankly, I
have not heard a lot of concern about those standards as to
needing an adjustment or not. I was wondering whether you have
heard any chatter as to hardships or whether this is the right
number and now we are tailoring it to the more in need. What is
your reaction to the two changes made in the second round of
PPP?
Ms. Mensah. Thank you, Senator Cardin. The reduction of
size from 500 to 300 was not a problem for CDFIs. It was a
welcome change. We knew that the group that was struggling had
300 and much, much less. So that I have not heard any
objections to from our CDFI community.
As for the revenue request, I am not aware of challenges to
this. My basic point is that we felt heard by this Committee.
We were invited to testify before. We felt you worked in a
bipartisan way. And we felt listened to, and we felt like
partners, as one of the lenders that should have always been
central to the kind of approaches. Even though we were smaller,
we felt listened to.
So I am here to say thank you for listening, thank you for
your invitation to come today and really dive into what the
impact has felt like in 50 States, diverse places throughout
this country, and to give us more time to do this right.
Chairman Cardin. Well, thank you. Quite frankly, I have not
really heard too much concern about those two changes that were
made. We do know that the initial information we are receiving
showing that it is tailoring to smaller small businesses, the
size of the loans and the targeting seems to have worked very
effectively. We do not have the numbers yet, and obviously we
want to see the numbers. And then, of course, we are using the
revenue standard losses for other programs, including some of
the priorities on Shuttered Venues, et cetera.
So it is a standard that looks like it is being accepted
and makes a great deal of sense. If you are trying to target to
those businesses that have suffered the most as a result of
COVID-19, looking at the revenue losses is certainly a
legitimate way to try to target money to those small businesses
that really need it.
And I noted some of the concerns that were raised initially
about the program. But let me point out, in March of last year,
when we started the PPP program, the objective was to get money
out quickly to small businesses so they could maintain their
payroll. The view was that it would be a better investment for
a small company to keep their workforce rather than having
their workforce go on unemployment, which it would cost
taxpayers equivalent sums of money without the benefits of
having the workforce maintained. This was very much a
bipartisan effort. Senator Rubio and myself, along with Senator
Collins, Senator Shaheen, and others worked together on this
program.
So the original PPP program was to get money out quickly to
as many small businesses as possible, and I think we achieved
that objective. But as you pointed out, Ms. Mensah, as we went
through the program we recognized that certain communities were
not treated as well as we wanted them to. They did not have the
relationship with the bankers. We knew that was going to be a
problem. We thought SBA would deal with it. That is why we put
language on page 30 for them to do that, but they did not. And
that was when Congress had to be more aggressive in targeting
funds.
And I just really want to point out, Secretary Mnuchin at
the time worked with us to get money into the CDFIs, which I
applaud him for working with us on doing it. We wanted to be
more aggressive than he wanted to be, but he was able to help
us in targeting money into CDFIs.
So this has been a bipartisan effort to try to evolve the
program to meet the current needs, and we are still on that
path, and I want to thank all of our witnesses for their
testimony. It has been extremely helpful. This is the beginning
of our record as to how we can make sure that the government
investment in the small business programs are working as
Congress intended, and this Committee will continue to hold
oversight hearings, including next week with representatives
from the Small Business Administration.
The record will remain open for two weeks for questions
from members of the Committee. I want to thank all four of our
witnesses for your attendance here today and your help in our
Committee work. And with that the Committee will stand
adjourned. Thank you all very much.
[Whereupon, at 4:16 p.m., the Committee was adjourned.]
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