    [Senate Hearing 117-370]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-370

    THE ROLE THAT COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS AND MINORITY
            DEPOSITORY INSTITUTIONS SERVE IN SUPPORTING COMMUNITIES

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                 FINANCIAL INSTITUTIONS AND CONSUMER PROTECTION

                                     of the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

    EXAMINING CDFI'S AND THE EFFECT THEY HAVE ON COMMUNITIES, JOB CREATION,
                       OUR ECONOMY, AND SMALL BUSINESSES
                                   __________

                                FEBRUARY 9, 2022
                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

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

                        U.S. GOVERNMENT PUBLISHING OFFICE

    48-644 PDF                 WASHINGTON : 2022

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  MIKE CRAPO, Idaho
    MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
    ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
    TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
    KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
    JON OSSOFF, Georgia                  JERRY MORAN, Kansas
    RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                         STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                     Brad Grantz, Republican Staff Director

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                            Pat Lally, Hearing Clerk

                                     ______

         Subcommittee on Financial Institutions and Consumer Protection

                        RAPHAEL WARNOCK, Georgia, Chair

             THOM TILLIS, North Carolina, Ranking Republican Member

    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  TIM SCOTT, South Carolina
    MARK R. WARNER, Virginia             MIKE ROUNDS, South Dakota
    ELIZABETH WARREN, Massachusetts      BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA LUMMIS, Wyoming
    CHRIS VAN HOLLEN, Maryland           JERRY MORAN, Kansas
    KYRSTEN SINEMA, Arizona              KEVIN CRAMER, North Dakota

                    Max Virkus, Subcommittee Staff Director

               Ryan Adams, Republican Subcommittee Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                          WEDNESDAY, FEBRUARY 9, 2022

                                                                       Page

    Opening statement of Chairman Warnock............................     1
            Prepared statement.......................................    23

    Opening statements, comments, or prepared statements of:
        Senator Tillis...............................................     3
            Prepared statement.......................................    24

                                   WITNESSES

    Robert James II, President and CEO, Carver Financial Corporation,
      and Chairman, National Bankers Association, Savannah, Georgia..     6
        Prepared statement...........................................    25
        Responses to written questions of:
            Senator Tillis...........................................    43
    Jeanne Kucey, President and CEO, JetStream Federal Credit Union,
      on behalf of the National Association of Federally Insured
      Credit Unions, Miami Lakes, Florida............................     7
        Prepared statement...........................................    29
        Responses to written questions of:
            Senator Tillis...........................................    47
    Joel Griffith, Research Fellow, Financial Regulations, Heritage
      Foundation, Washington, DC.....................................     9
        Prepared statement...........................................    38

                  Additional Material Supplied for the Record

    Letter submitted by Circle Internet Financial LLC................    49
    Statement submitted by ICBA......................................    50
    Letter submitted by CUNA.........................................    53

                                     (iii)

    THE ROLE THAT COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS AND MINORITY
            DEPOSITORY INSTITUTIONS SERVE IN SUPPORTING COMMUNITIES

                                  ----------

                          WEDNESDAY, FEBRUARY 9, 2022

                                   U.S. Senate,
    Subcommittee on Financial Institutions and Consumer
                                            Protection,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Subcommittee met at 2:31 p.m., via Webex and in room
    538, Dirksen Senate Office Building, Hon. Raphael G. Warnock,
    Chair of the Subcommittee, presiding.

               OPENING STATEMENT OF CHAIR RAPHAEL WARNOCK

        Chair Warnock. This hearing will now come to order.
        Welcome to the first hearing of the Subcommittee on
    Financial Institutions and Consumer Protection this year. This
    hearing is in a hybrid format. Our Members are in person, but
    we will have witnesses testifying both in person and by video.
    We are grateful for their presence.
        For those joining remotely, just a few reminders. Once you
    start speaking, there will be a slight delay before you are
    displayed on the screen. To minimize background noise, please
    click the mute button until it is your turn to speak or ask
    questions. I guess I should practice that. You should all have
    one box on your screens labeled ``clock'' that will show how
    much time is remaining.
        As we are all here in person, our speaking order will be as
    is traditional, that is, by seniority of the Members here when
    the gavel came down and then by seniority of Members arriving
    later, alternating between Democrats and Republicans.
        I am honored to chair this Subcommittee and to work with
    Ranking Member Tillis to ensure stability in our banks, our
    credit unions, and other financial institutions that serve
    families, small businesses, and communities in Georgia and
    around our country, and to ensure that our communities have
    equal access to the financial resources that build an economy
    that works for all Americans.
        Now that brings me to the topic of our hearing today, which
    will examine Community Development Financial Institutions, or
    CDFIs, and Minority Depository Institutions, or MDIs, and the
    role that they play in supporting communities, creating jobs,
    boosting our economy, and helping small businesses to thrive.
    We will also examine the roles they play to help communities
    build resiliency against a crisis, like the pandemic, overcome
    crisis, and importantly, recover from the crisis so that our
    communities do not simply survive but thrive. Finally, I hope
    that our witnesses will discuss ways that Congress can better
    support the work that they do every day to grow our economy
    from the bottom up.
        The economic turbulence of the COVID-19 pandemic has pushed
    working families to the brink, often forcing them to choose
    between their health and their livelihoods. Thanks in part to
    the aid passed by Congress to combat the pandemic, our Nation
    is experiencing one of the quickest job market recoveries ever
    seen. Last month, the Georgia Department of Labor reported that
    the State's unemployment rate is now 2.6 percent, with 97
    percent of jobs lost during the height of the pandemic now
    recovered. Last week, the jobs report showed that jobs rose by
    467,000, defying the expectations of many experts. Critical in
    facilitating this recovery has been the work of CDFIs and MDIs,
    and I appreciate that we have two before us here today to talk
    about the work that they are doing even now in their respective
    communities.
        Let me say that this is also personal for me. This is not
    theoretical stuff. In addition to serving as a Senator for
    Georgia, I am also Senior Pastor of the historic Ebenezer
    Baptist Church, spiritual home of Martin Luther King, Jr., and
    John Lewis. And the bank that our church uses, Citizens Trust
    Bank, is in fact one of the many CDFIs and MDIs in Georgia that
    have been helping families and institutions in our community to
    thrive. I know this firsthand.
        And as a pastor and as a Senator, I see my work is grounded
    in serving others and my community, and that is what CDFIs and
    MDIs are doing. They are serving others and the community.
    Whether it has been acting as our Nation's fiscal first
    responders immediately there to assist families and small
    businesses facing the financial unknown during the first weeks
    of the pandemic or facilitating the flow of Federal aid to
    communities, CDFIs and MDIs provided economic stability and
    certainty to millions of Americans, allowing them to focus on
    the health and the safety of themselves and their children.
        In Georgia, the Atlanta-based CDFI, Access to Capital for
    Entrepreneurs, or ACE, immediately sprung to action early in
    the pandemic to help small businesses. In the first months of
    the pandemic, they worked with their clients to offer emergency
    funds, including Paycheck Protection Program loans, and they
    worked with local development authorities and investment
    partners to give flexibility for small business borrowers as
    the economy recovered. These actions by just one CDFI saved
    hundreds of jobs in my home State of Georgia.
        The Federal Reserve Bank of San Francisco has rightly
    referred to CDFIs as economy shock absorbers for communities in
    the worst of the downturn. These institutions make sustainable
    investments within our communities. They are members of our
    community. They know the folks in the community. They
    understand these communities. And, they have the correct
    incentives to help communities prepare, work through, and
    recover from the crisis.
        CDFIs are also helping communities protect themselves
    against climate disasters. In Georgia, CDFIs have collaborated
    to begin offering green loans, which is capital provided to
    small businesses in the State to help them have a business that
    is more ecofriendly, such as funding energy efficiency
    improvements. These investments help to create green jobs, and
    they push Georgia and our Nation toward a sustainable future.
        Even with the work done by CDFIs and MDIs to help
    communities, the data show that we still have more work to do.
    In the crisis we are currently living through, there is no
    doubt that the jobs recovery, as strong as it is, is uneven.
    Men have entirely recovered their job losses since the pandemic
    began while there are one million fewer women in the labor
    force than in February of 2020. The recovery has been uneven.
    And unemployment among Black Americans remains elevated. And if
    history is any indicator, rural communities, like those in my
    home State of Georgia, will lose resources and these same
    communities will struggle to bounce back as they see resources
    leave their communities.
        The number of MDIs fell by 31 percent. The number of
    Minority Depository Institutions fell by 31 percent from 2008
    to 2018 even as the need for these institutions remains higher
    than ever.
        And there are even those who wish to defund the CDFI Fund
    program permanently. I think that is wrong-headed. And I
    believe Congress, and this Subcommittee in particular, has an
    important role to play to ensure that the financial
    institutions that support underserved communities, small
    businesses, and working families traditionally overlooked by
    larger banks, have the resources, the tools, and the support to
    continue their important work, that is, to ensure that ours is
    an economy and a capitalism that gives communities, all of our
    communities, a chance to thrive.
        And so this hearing is about helping people. It is about
    helping communities and helping small businesses. Hardworking
    American families are on the front line when a crisis strikes a
    community, whether it is a natural disaster made worse by
    global climate change, economic recession caused by greedy
    corporate business practices, or a public health crisis such as
    the ongoing COVID-19 pandemic. As families, small businesses,
    and communities recover, we must ensure they have the resources
    they need not only to survive but to thrive.
        Thank you and I will now turn to Ranking Member Tillis for
    his opening statement.

                OPENING STATEMENT OF SENATOR THOM TILLIS

        Senator Tillis. Thank you, Chairman Warnock, and thank you
    for holding this hearing. It is our second in this Congress,
    first this year. I appreciate it. I also want to thank the
    witnesses for being here to testify.
        I have long been an advocate for a resilient and diverse
    banking ecosystem, one that blends a healthy mix of globally
    systemic financial institutions, super-regionals, and
    regionals, all the way down to local community banks. Banks and
    credit unions of all different sizes bring varied missions and
    capabilities to their customers, allowing individuals to select
    the banking experience best tailored to them and their
    communities. I also would agree that CDFIs and MDIs fit into
    that important ecosystem.
        And we only have to look at the experience in our response
    to the pandemic, when the financial institutions of various
    sizes mobilized to actually get desperately needed resources
    out to businesses through the Paycheck Protection Program. In
    total, the SBA approved over 1.8 million Paycheck Protection
    loans, totaling 799 billion in dollars. CDFIs, for their part,
    approved over 350,000 PPP loans, totaling $8.4 billion. I want
    to thank you all for the mobilization.
        And, Chairman Warnock, I was struck by the fact that when
    we were mobilizing, having worked in the banking industry in a
    regulatory environment for a part of my career, that they were
    willing to mobilize when the rules were literally being
    written, when they were just putting facts out with the
    Treasury. The fact that they were willing to do that, I think,
    is extraordinary. And I want to--in this setting, want to thank
    the CDFIs and the MDIs who also mobilized and answered the
    call.
        But that said, I raised concerns in the previous
    Subcommittee hearing over the lack of transparency, data, and
    transparency, that happened to be related to unemployment
    benefits. But I think the flooding of the zone of resources and
    various studies point to the fact that we can do a better job
    with transparency, accountability, and measuring efficacy in
    these programs so that people like me, who believe in them,
    will continue to support and sustain them. Policymakers simply
    do not receive enough information to adequately judge how
    effective the lending operations of the CDFIs are.
        A report from the Carsey Institute up in New Hampshire, on
    behalf of the Department of Treasury said this: ``In developing
    this report, the research team encountered significant data
    limitations at every turn . . . '' and identified inadequate
    data and nonstandardized auditing practices as significant
    barriers to CDFIs achieving better capitalization.
        The authors go on to say, `` . . . it is currently simply
    impossible to make the most routine analyses that are normally
    conducted with other classes of loan assets. It is not
    possible, for example, to create a breakdown of default rates
    or prepayment speeds for a given class of CDFI loans, or even
    to provide a breakdown of borrower or credit scores.''
        ``What is ironic about this''--I am going on with the
    report ``is that CDFI managers feel they are swamped with
    reporting requirements, which they routinely fulfill. It is
    difficult to reconcile how CDFIs can be doing so much reporting
    . . . '' Yet, we have so little to show for it in terms of
    meaningful information for people like me, who want to continue
    and build on these programs.
        And I mention that not to vilify CDFIs but to point out
    that I believe there are systemic deficiencies in the CDFI
    oversight and transparency that can prevent them from most
    effectively serving the communities that they reside in. Given
    the tremendous level of funding bestowed on CDFIs and MDIs over
    the course of COVID-19, I believe these deficiencies are
    especially important to examine and rectify.
        Just last year, the CDFI Fund received the same level of
    funding that would have previously been appropriated over a
    decade, a more than 10-fold increase. Additionally, Congress
    established the Emergency Capital Investment Program (ECIP),
    which provided an additional $9 billion fund to help stabilize
    CDFIs and MDIs.
        My colleagues on the other side of the aisle also
    reinstated the Obama era State Small Business Credit Initiative
    (SSBCI) in the, what was arguably partisan, reconciliation
    package that they passed last year. This $10 billion program,
    which will also direct money toward CDFIs, was rightly allowed
    to expire due to chronic inadequacies that resulted in only 4
    States whose SSBCI programs were in compliance, according to
    the Inspector General's report.
        And North Carolinians are familiar with the lack of
    oversight over taxpayer dollars that the SSBCI doled out. The
    founding President of the North Carolina Rural Center resigned
    and was withheld severance following a State audit which
    detailed financial malpractice at the organization.
        So without greater transparency and data requirements, I am
    concerned we could see the same situation play out again. With
    a price tag in the tens of billions between SSBCI, ECIP, and
    the 12-fold increase to the CDFI Fund, it is crucial that
    policymakers are equipped with concrete data that provides an
    accurate view of the impact of CDFIs and MDIs. While a press
    release touting how much money went out the door is good,
    comprehensive data, greater transparency, a better
    understanding of efficacy is also very, very important.
        So, Mr. Chairman, I had a brief conversation with a member
    on the floor and briefly with a witness before us. I want to
    make it very clear that I think that CDFIs and MDIs are a
    critical part of a healthy ecosystem for financial--of all
    financial institutions. We need to provide access to capital to
    unserved and underserved communities. But we also owe it to
    those same institutions to make sure that we are getting right,
    that they are accountable, and we understand what programs are
    working and what programs are not.
        I look forward to the witnesses' testimony.
        Chair Warnock. Thank you so very much, Ranking Member
    Tillis, for your opening statement.
        Now let us turn to our witnesses. Testifying today will be
    Mr. Robert James II. He is the President and the CEO of the
    Carver Financial Corporation. It is a CDFI and an MDI from my
    home city of Savannah, Georgia. In fact, Carver State Bank is
    right down the street--literally, right up the street from
    where I grew up. He is also the Chairman of the National
    Bankers Association.
        Also testifying is Ms. Jeanne Kucey, President and CEO of
    JetStream Federal Credit Union, Miami Lakes, Florida, on behalf
    of the National Association of federally Insured Credit Unions.
    JetStream was one of the first CDFI credit unions in South
    Florida, and we are grateful to have Ms. Kucey here today.
        Finally, our last witness is Mr. Griffith, a research
    fellow at the Heritage Foundation, where he focuses on
    financial regulations.
        We appreciate your testimony, and we look forward to this
    important discussion.
        Mr. James from Savannah, Georgia, God's Country, I will now
    turn things over to you.

        STATEMENT OF ROBERT JAMES II, PRESIDENT AND CEO, CARVER
         FINANCIAL CORPORATION, AND CHAIRMAN, NATIONAL BANKERS
                     ASSOCIATION, SAVANNAH, GEORGIA

        Mr. James. Thank you, Chairman Warnock, Ranking Member
    Tillis, and Members of the Subcommittee. Good afternoon. And I
    appreciate this opportunity to testify on how MDIs and CDFIs
    support communities.
        Again, my name is Robert James II, and I am President of
    Carver Financial Corporation, which is the parent of Carver
    State Bank in Savannah, Georgia, and I am Chairman of the
    National Bankers Association.
        The NBA is the leading trade association for the country's
    MDIs. A critical part of our mission is to advocate for all
    MDIs on legislative and regulatory matters affecting our banks
    and the communities we serve. Like Carver, many of our members
    are also CDFIs with a primary mission to serve those who are
    underserved by traditional banks. Our banks are on the front
    lines, trying to eliminate the racial wealth gap that makes our
    communities the most vulnerable during good times and bad.
        Decades of income disparity, unequal access to health care,
    and residential segregation have made communities of color and
    other low-income communities less resilient. The COVID-19
    pandemic and climate crisis bring this inequity to light.
    Eliminating the racial wealth gap is not only the best way to
    combat environmental and health injustice, and ensure
    resilience in communities of color, but recent research shows
    that eliminating this gap would add trillions of dollars to
    America's GDP. We believe our banks are best positioned to help
    our communities become more resilient in the face of climate
    change, health emergencies, and systemic issues that have
    placed them at an economic disadvantage.
        The Senate Banking Committee has taken concrete steps to
    ensure that MDIs and communities we serve are not forgotten
    during times of crisis. For example, the bipartisan ECIP
    program and increased funding for CDFIs can help many MDIs and
    CDFIs scale up and provide more access to capital in
    underserved communities. The bipartisan Infrastructure Bill
    provides billions of targeted dollars that can be instrumental
    in addressing systemic environmental injustice while also
    providing new economic opportunities.
        The NBA looks forward to working with Congress on
    additional legislation to ensure that our communities hardest
    hit by the pandemic and system inequity experience lasting,
    material changes. I would like to highlight today the need for
    legislation that will allow MDIs to continue to augment our
    capital bases, push to include banks, our banks and
    communities, in opportunities that will flow from the
    Infrastructure Bill and address a regulatory process that can
    hamper our banks' ability to bring the underserved into the
    financial mainstream.
        Traditionally, MDIs and CDFIs have served as anchor
    institutions in minority and low-income communities.
    Unfortunately, our smaller size, particularly among African-
    American MDIs, has not allowed us to respond as quickly or with
    as much scale as these situations demand. MDIs make up only 3
    percent of all American banks, and Black-owned MDIs, only 0.4
    percent. When looking at total bank assets, the disparity is
    even more stark. As of the second quarter of 2021, Black banks
    held about $6 billion in total combined assets as compared with
    over $22 trillion in total assets in the U.S. banking system.
    Put another way, Black-owned banks only control 27,000ths of 1
    percent of total bank assets in the United States. We need more
    capital to scale.
        Tier 1 capital, or the equity invested in a bank, is the
    most critical component of our resilience, and it is what
    allows us to grow and scale. MDIs have historically lacked
    access to capital markets, limiting our scale and ability to
    invest and make our communities more resilient. The ECIP
    program is a historic step in the right direction, but
    unfortunately, many of our banks were not able to access it due
    to the uneven application of regulations that have failed to
    consider the unique business models mission-driven banks must
    employ to provide basic banking services in markets that are
    otherwise ignored by mainstream banks. We need regulators to be
    intentional and modernize the examination process for mission
    driven banks that do not do business in wealthy areas.
        The bipartisan infrastructure law presents a generational
    opportunity to not only repair our Nation's roads and bridges
    but also to be inclusive. NBA members are eager to participate
    in the financing of major projects in our communities and to
    connect minority businesses to these opportunities, especially
    in new areas like EV charging. Intentionally including our
    banks and our customers will strengthen small businesses,
    create good jobs, and make our communities more resilient.
        The COVID-19 pandemic spurred us to start addressing the
    root causes of racial inequity in health outcomes, many of
    which revolve around economic disparity. It is time now to
    expand the conversation to address the economic roots of
    environmental injustice and ensure that all Americans are
    protected from the worst effects of climate change. In this
    regard, the NBA looks forward to working closely with the
    Committee and Subcommittee on workable solutions that ensure
    that underresourced communities will not only survive but
    ultimately thrive.
        Thank you for the opportunity to testify and for your
    efforts to ensure equity for all communities across the
    country. I will be pleased to answer any questions.
        Chair Warnock. Thank you so very much, Mr. James.
        Next, we will hear from Ms. Kucey, who will also testify
    virtually.

    STATEMENT OF JEANNE KUCEY, PRESIDENT AND CEO, JETSTREAM FEDERAL
        CREDIT UNION, ON BEHALF OF THE NATIONAL ASSOCIATION OF
         FEDERALLY INSURED CREDIT UNIONS, MIAMI LAKES, FLORIDA

        Ms. Kucey. Well, good afternoon, Chairman Warnock, Ranking
    Member Tillis, and Members of the Subcommittee. My name is
    Jeanne Kucey, and I am testifying today on behalf of the NAFCU.
    I am the CEO of JetStream Federal Credit Union, a low-income
    CDFI and MDI serving Miami Dade County, Florida, and Puerto
    Rico.
        Credit unions are proud of their record of diversity and
    helping their communities. At the end of 2020, there were 520
    MDI credit unions, and the number of CDFI credit unions has
    been growing, with 416 at the end of 2021.
        As we continue the pandemic recovery, NAFCU urges Congress
    to consider increased funding levels for the CDFI program. It
    is this program that gives credit unions like JetStream an
    important resource to help create initiatives to serve our
    communities.
        At JetStream, we are heavily vested in the prosperity of
    the communities we serve, having supported them through
    hurricanes, Government shutdowns, and during the COVID-19
    pandemic. Our membership is diverse and reflective of the
    communities that JetStream serves; 71 percent of our members
    are classified as low-income or below, 67.5 percent are
    Hispanic, and 18.8 are African American.
        Since 2011, JetStream has received $5.8 million in CDFI
    grants to sponsor a variety of programs, including small
    business lending and a resettlement loan program for low-income
    members. The grants also supported the Whole Again loan
    program, an initiative that provided $17 million in consumer
    loans to replace goods and vehicles destroyed by Hurricanes
    Irma and Maria. The two hurricanes were a life-defining moment
    for many of our members, and we knew that we had to act through
    no cost, zero percent APR short-term loans, deferment of
    existing loan payments, elimination of transactional fees, and
    financial coaching for our members who were dealing with active
    insurance cases and attempting to rebuild their homes.
        In 2020, JetStream launched a multipronged COVID-19
    emergency relief program that included emergency loans, lines
    of credit, a 6-month payment deferral, and fee waivers.
    Consumer loan deferments totaled $10.5, and our fee income was
    reduced by 32 percent. Additionally, by strictly following CDC
    guidelines, JetStream maintained normal operating hours
    throughout the crisis.
        Our low-income members are more likely to live in urban
    heat islands with fewer trees and more pavement as well as
    residing in housing with older building materials and
    appliances. To address these climate-related challenges of our
    members, we are fortunate to have recently been approved for a
    CDFI grant for a green loan program. This will address these
    challenges with innovative products and underwriting created to
    improve efficiencies for low-income homeowners and also help
    those who need major repairs to their homes, resulting in
    improved housing stock and increased household income. Thanks
    to the CDFI Fund, we are looking forward to unveiling this
    program to our community later in 2022.
        My written testimony outlines a series of steps that can
    help MDI and CDFI credit unions continue to serve their
    communities and members. Some of these include increased
    funding for the CDFI Fund and the NCUA's Community Development
    Revolving Loan Fund, creating a CDFI Crisis Fund to quickly
    make capital available to CDFIs to address a crisis, improving
    and streamlining the process for certification and
    recertification as a CDFI, allowing credit unions to serve
    underserved areas and have longer loan maturities, requiring
    the FHFA and FHA to establish specialized mortgage loan
    programs for MDIs and CDFIs, and improving the process for de
    novo credit unions.
        In conclusion, MDIs and CDFIs play a vital role for
    millions of Americans. We urge Congress to support funding for
    these programs and take steps to make it easier for credit
    unions to serve their members and communities.
        Thank you again, Chairman Warnock, Ranking Member Tillis,
    and the Members of the Subcommittee, for the invitation to
    testify before you today. I welcome any questions you might
    have.
        Chair Warnock. Thank you, Ms. Kucey.
        Next, we will hear from Mr. Griffith who is in person.

        STATEMENT OF JOEL GRIFFITH, RESEARCH FELLOW, FINANCIAL
            REGULATIONS, HERITAGE FOUNDATION, WASHINGTON, DC

        Mr. Griffith. Chair Warnock, Member Tillis, and Members of
    the Senate Subcommittee, thank you for the opportunity to
    testify today. My name is Joel Griffith. I am a research fellow
    at the Heritage Foundation. The views I express today are my
    own and should not be construed as representing any official
    position of Heritage.
        Taxpayer dollars diverted to CDFIs and the CDFI Fund all
    too often hinders competition and misallocates limited economic
    resources, benefiting select interests. In addition, a lack of
    transparency has yielded lax accountability and has resulted in
    lost confidence in the fairness of our financial system.
        The 2021 Emergency Capital Investment Program highlights
    the elevated risk that dominates CDFI lending. Congress, in
    March 2021, authorized the Treasury Department to invest up to
    $9 billion in CDFIs to enable them to meet capital requirements
    and to continue lending even as the threat of defaults on loans
    previously made by CDFIs grew. In just an 8-month span, one in
    three CDFI depositories requested Treasury investment through
    this emergency program. This suggests that distressed loans
    threaten the operational capacity of more than one-third of the
    CDFI depositories. The extent of the demand for taxpayer
    assistance through this emergency program over the past year
    underscores the dangers stemming from looser underwriting
    standards, Government subsidization of the CDFI business model,
    and the lack of transparency.
        Another troubling component of the new Government largess
    for CDFIs is the State Small Business Credit Initiative. The
    American Rescue Plan provided $10 billion to restart this
    initiative that funds State programs that provide loan
    guarantees to politically favored entities. Numerous problems
    have plagued this program in the past. For instance, the
    Treasury's Office of Inspector General identified noncompliant
    expenditures related to California's loans which constitute a
    ``reckless misuse of funds.'' The Inspector General also
    identified reckless misuse of funds and conflicts of interest
    in the New York SSBCI program related to one of the venture
    capital firms participating. These States were not alone. The
    Inspector General found only four States were in full
    compliance with this program that funds CDFIs.
        Although marketed as a pandemic response, SSBCI funding is
    now available for years into the future, and this basically
    allows CDFI funding to operate as a slush fund for politicians
    across this country. The fact is Government-provided capital is
    sponsoring political ambitions and padding the pockets of
    special interests, but it is not filling an unmet funding need
    of small businesses.
        The vast majority of small businesses are saying they are
    generally not looking for more credit. Only 3 percent of
    respondents in a January 2022 NFIB survey reported that their
    borrowing needs were not satisfied. Only 1 percent of small
    businesses reported financing as their top business problem
    late last year. In fact, only 2 percent of businesses are
    reporting that their most recent loan is any more difficult to
    achieve than their last one.
        Well, favoritism and inefficient allocation of capital is
    even more of a concern now with CDFIs with the advent of
    Opportunity Zones because CDFIs are now providing below market
    rate debt to finance investment projects in favored
    neighborhoods. Unfortunately, research shows that current
    residents of targeted areas do not see an increase in wages
    following this development aid, but they do experience rising
    rental costs. Higher living costs without higher wages result
    in a lower standard of living in the communities that
    policymakers are trying to help, and these place-based
    subsidies have a history of unintended consequences and
    corruption.
        In conclusion, State and local governments share a
    responsibility to eliminate the artificial barriers that
    prevent economic growth and that limit affordable housing. This
    includes minimum wages, occupational licensing, unreasonable
    zoning restrictions, and of course, the failed public education
    system, the monopoly that fails millions of students who are
    subsequently unable to compete in the labor market. In contrast
    to these specific policies just outlined, more Government
    investment in CDFIs will fail to yield consistent increases in
    employment, wages, or advances to general economic
    opportunities. Placed-based programs cannot resolve the
    complicated institutional barriers to economic opportunity.
        Government-subsidized, placed-based lending and investment
    fails to address the underlying causes of concentrated poverty.
    These causes are educational choice, the lack thereof,
    restrictions on worker freedom, and continued onerous local
    regulation and mismanagement.
        Thank you to the Subcommittee for your time and the
    invitation.
        Chair Warnock. Thank you all so much for your testimony. We
    turn now to questions.
        We know that not all communities have equal access to small
    business capital; they simply do not. The institutions we are
    discussing today are specifically designed to help these rural
    and underserved parts of our communities.
        To help protect jobs during COVID-19, Congress passed the
    Paycheck Protection Program, or PPP, a new forgivable loan
    program for small businesses. However, when launched, small
    businesses in underserved communities nationwide discovered
    that they were shut out of the process. They were at the back
    of the line. The Shake Shacks of the world were in front of the
    line. And these entities were shut out of the process by some
    of the Nation's biggest banks. It was community lenders that
    stepped up to help.
        And when the PPP program ended, institutions like CDFIs and
    MDIs were the ones most likely to reach small businesses in
    underserved communities, with 77.9 percent of their loans for
    under $150,000. Smaller size loans like these are critical for
    mom-and-pop businesses, and so-called microbusiness loans are
    especially an important tool that CDFIs and MDIs can use to
    help their communities.
        Ms. Kucey, how has JetStream used these microloans to help
    your members meet the needs of your community?
        Ms. Kucey. Well, it was--we found that access to
    microbusiness loans was the largest unfunded financial need in
    our local community. Whenever I attended chamber of commerce
    meetings or just even feedback from our employees and our
    membership, members were looking for these loans, and they were
    not able to find them through the banks in the local
    communities.
        So we did receive a CDFI grant, and it helped us fund a
    very robust business lending program. We offered microbusiness
    loans from 10 to 50,000. I can tell you 100 percent of those
    loans went to minority borrowers and almost 50 percent went to
    female borrowers. The loans funded a variety of businesses in
    our local communities, including a professional such as a CPA,
    real estate agents. We helped launch or expand businesses that
    were involved in food service, janitorial, mentoring.
        We have a lot of interesting stories. We had one lady come
    to us. She had designed and manufactured dancewear, and she
    wanted a loan to market this dancewear nationwide. We gave her
    that loan, and almost immediately through the marketing she
    obtained a contract for the Miami Heat cheerleaders. And that
    was such a visible contract that her business expanded
    exponentially from there. And this was someone that we gave a
    $25,000 loan to, and she is now a very successful entrepreneur.
        And I could go on with these stories all day, but I know
    that there is a clock. So if you have any other questions, I
    would be happy to answer them.
        Chair Warnock. Thank you so much. That is a wonderful
    story. But can you tell me what are some other hurdles that
    still exist between these small and needy borrowers and
    microlending services that Congress might still address?
        Ms. Kucey. Well, the availability is an issue. There is
    definitely not a wide availability of these loans, particularly
    to minority and low-income business borrowers. And the rates
    and terms are often not favorable. So you know, I would say
    those are the largest obstacles.
        Chair Warnock. Mr. James, big banks have historically
    underserved rural areas, but small businesses in these
    communities face the same capital needs that any small business
    faces. Would you speak to your experience with CDFIs in helping
    rural communities and small businesses in Georgia? What
    difference do they make?
        Mr. James. Sure. Thank you very much, Chairman Warnock. Our
    institutions really focus on all the areas that are
    underserved, and as you know, in Georgia, that means many
    swaths of our community that are rural in nature. And so we
    have taken--at Carver, we have taken a special effort to reach
    out to many of those rural communities, including those with
    persistent poverty. So for example, we joined up with the city
    of Statesboro, Georgia, to make a special loan program
    available to Main Street businesses in Statesboro that were
    impacted by the pandemic and were not able to get enough
    funding from the PPP loan program. We have made additional
    efforts in other rural communities around the State. And so
    those are just a few examples of how we reach out to rural
    communities across a State and across the Nation.
        Chair Warnock. Thank you so very much for clarifying the
    role, unique role, that these institutions play.
        Ranking Member Tillis.
        Senator Tillis. Thank you, Mr. Chairman, and again thanks
    to all the witnesses. I told the Chairman I had them call the
    vote. I was going to step out, but I wanted to hear your
    opening testimony. And I have a few questions for you, and then
    I will move to the next vote that is pending now.
        But, Mr. Griffith, I just wanted to start--when you were
    talking about that survey of businesses and their needs being
    satisfied. One of the things that I believe that CDFIs and MDIs
    do is get to people that may never get to that survey, and I
    have to use a personal example. Back probably in 1974, I was
    pretty good at carpentry and drywall work because my father
    made a living for six kids by doing construction repairs for
    insurance jobs. So, a kitchen fire or something.
        He did not have the resources to fund even the materials.
    So what he would do is he had a relationship with a local bank
    that--at that time, when banks were able to do more on
    relationship banking versus some of the regulatory hurdles that
    have made that very difficult for them to do today, we would
    get the money to go to the lumber yard to get the materials,
    finish the job, and pay it back. Those are businesses of one or
    two, or in some cases, with some of the MDIs and CDFIs, five-
    or six-person businesses. It may not be caught up into the
    entire need of the community.
        So I do agree that there are a lot of banking needs that
    probably can be fulfilled through some of the other members of
    the ecosystem, but I just intuitively believe that there are
    fathers and mothers out there like mine that are searching for
    capital and may have limited options, particularly based on
    their revenue, their credit history. I am sure at that time the
    Tillis Family credit history was not that good. So that is more
    of a statement for you, and if I have time I will come back
    with a question.
        But, Mr. James and Ms. Kucey, first off, have either of you
    read the Carsey report?
        Mr. James. I have not, Senator.
        Ms. Kucey. I have not either.
        Senator Tillis. OK. Well, we will make sure our staff gets
    you a copy. So I am not going to be unfair and ask you to talk
    about any of the specific findings, but I just intuitively
    believe that you all probably, given the nature of the
    relationships you build--I actually worked pretty closely with
    an MDI down in North Carolina when I was Speaker of the House,
    and I was actually pretty impressed with their portfolio
    projects. They were not all successful, but they were more
    successful than not, and that is the nature of lending.
        But would you agree that it would be better if we were
    equipped with information on efficacy, accountability, some of
    the things that Mr. Griffith mentioned, so that in future
    committees we are equipped with data that really instruct us on
    how to move forward with more of a fact basis for that? Now I
    know that when I say that you are probably rolling your eyes
    and thinking, oh, gosh, that means more reporting and more
    data.
        Do you also agree that some of the current reporting
    requirements that you have today could be made leaner so that
    we can grab this information that would be helpful to us to
    administer the programs over time?
        And, Ms. Kucey, we will start with you, and then we will go
    to Mr. James.
        Ms. Kucey. You know, credit unions are highly regulated. So
    a lot of that information is available through the requirements
    that are reported to the NCUA.
        Senator Tillis. That is actually--Ms. Kucey, I am sorry to
    cut you off. I just want to be sensitive to time; I know you
    have been. But that is true. I am very familiar with credit
    unions.
        But, Mr. James, maybe you can chime in and give me your
    perspective.
        Mr. James. Sure. Thank you very much, Ranking Member
    Tillis. Yes, I would agree that we can streamline and make more
    efficient all of our reporting requirements as CDFIs and MDIs.
    Our institutions are similar to Ms. Kucey's, highly regulated.
    We are federally insured banks, and so we are very, very highly
    regulated.
        But I also think that the infusion of new capital into our
    sector really does provide us with an unprecedented opportunity
    not just to make new loans but also to develop better
    infrastructure for capturing and reporting on impact data. So
    at the NBA, for example, we have been very intentional over the
    past year, including creating a new nonprofit arm that has
    through one of its main pillars been gathering and reporting
    impact data from the Minority Depository Institutions sector to
    make sure that we are tracking our impact and reporting it out
    in a much more useful way. And so we look forward to building
    out that infrastructure with new resources and being able to
    report much more data back to all our stakeholders, including
    Members of Congress.
        Senator Tillis. Yeah. Well, thank you for that. And I would
    just close by saying that I think the Chairman, and most likely
    his able staff, picked two good witnesses to come before the
    Committee, but we are talking about hundreds of CDFIs and MDIs.
        In the banking industry, where I spent most of my career,
    looking for some of this baseline data is relative easy to
    gather. So I am trying to get at why for the Carsey study and
    for other ones it seems to be more difficult. It seems like
    there is something more that we can do there that ultimately
    benefits you and then it either proves or disproves some of the
    concerns that Mr. Griffith has mentioned in his opening
    testimony.
        Mr. Chairman, I am going to go vote. Thank you for holding
    this hearing.
        And I thank the witnesses. And I will make sure that my
    staff gets you a copy of the report, and I would be interested
    if you could either submit for the record or informally your
    feedback on it, positive or negative. That would be very
    helpful as we move forward.
        Thank you, Mr. Chairman.
        Chair Warnock. Thank you very much, Ranking Member Tillis,
    for staying and missing the vote to hear their testimony, to
    engage in this important conversation.
        We are waiting on some other members to come, probably, I
    am sure, from the vote. We have gone into the second vote for
    the afternoon. But as we prepare for them, I am going to change
    the topic just a little bit.
        Last year, over 2 million Georgian children received $300
    per month in the expanded Child Tax Credit. This is the largest
    tax cut for working and middle class families in American
    history. Eradicating childhood poverty is an issue that touches
    me deeply, and championing this tax cut has been one of my
    proudest moments in the Senate. We really ought to extend it.
        The expanded Child Tax Credit not only helped give working
    families in Georgia and across the Nation financial stability
    and peace of mind, but it also boosted the economy for all of
    us. Unfortunately, last month was the first time since the
    summer that these monthly checks did not arrive for families in
    need, the same communities served by these MDIs and CDFIs.
        Mr. James, community institutions such as your own, Carver
    State Bank, literally right down the street from where I grew
    up, are acutely aware of the economic well-being of the
    communities they serve. What effects did you notice on your
    customers and your bank customers while the expanded CDC
    payments were being distributed?
        Mr. James. Chairman Warnock, thank you for that question.
    And you are very familiar, as you stated, with exactly where
    our bank is located and the community that we serve. We are
    located in the lowest income census tract in Savannah and--
    which is where our headquarters is, and that is because there
    is a high concentration of public housing in that census tract.
    And so we have a number of customers who maintain accounts with
    very, very small balances.
        One of the things that we noticed during the payments that
    were coming in is that a lot of those customers had a little
    bit more cushion in their accounts. We did not have to spend as
    much time helping people monitor and make sure that they did
    not have overdrafts, for example. We saw that there was fewer,
    you know, instances where people did not have the ability to
    make certain basic payments. And so we applauded the influx of
    capital to many of those customers who are, you know, at the
    lowest end of the spectrum in the local Savannah community, and
    we think that those additional funds were certainly very
    beneficial to them as they sought to make ends meet for all
    their everyday needs.
        Chair Warnock. Thank you so much. And I will continue to
    fight to make this expanded Child Tax Credit permanent.
        Looks like we are still waiting on other members.
        Last year, to provide pandemic relief, Congress provided
    $12 billion in capital investments and grants to CDFIs and MDIs
    to support their efforts in low-income and minority
    communities. These Federal capital investments will help fund
    loans for communities who face barriers when accessing capital
    and will be used to leverage private funding to amplify the
    transformation effects the funds will have on communities.
        Mr. James, again, how important are these capital
    investments and grant programs to ensure underserved
    communities continue to get support they typically receive from
    CDFIs and MDIs?
        Mr. James. Mr. Chairman, these capital programs have a
    historic--we have a historic opportunity with these capital
    programs to make an incredible difference that is long-lasting
    and in these communities that are so underserved and have been
    chronically underserved.
        As you mentioned, there were $12 billion that were
    allocated. Only $1.2 billion of those funds have actually been
    distributed so far. The remaining $9 billion in the ECIP
    program has been earmarked but not distributed yet, and the
    remaining dollars are in the CDFI Fund awaiting their
    development of a new program for institutions that focus on
    minority lending.
        I just want to emphasize that our institutions are focused
    on expanding not only our scale of lending but also building
    and improving on our infrastructure so that we can be more
    efficient and get these needed loans and services out to
    communities of need in a much more efficient way. And so at
    Carver, for example, we are focusing on building our technology
    capabilities and being able to reach out not just in the
    Savannah community but across the State of Georgia. By having
    better technology, we will be able to reach into those rural
    communities with much more efficiency and be able to provide
    services such as the kind of small business lending, home
    ownership opportunities, community development lending, and
    other kinds of services and products that are so needed.
        Chair Warnock. Thank you so very much, Mr. James.
        Senator Warren has arrived.
        Senator Warren. I have. Thank you, Mr. Chairman. And let me
    start by saying, thank you very much, Mr. Chairman, for holding
    this hearing. Community Development Financial Institutions and
    Minority Depository Institutions provide a range of critical
    supports to underserved communities. They do everything from
    ensuring that families have access to basic financial services
    to fostering small business creation and being on the front
    lines of emergency relief when disaster strikes.
        So I want to talk about, though, another area where CDFIs
    and MDIs play a key role, and that is in promoting the supply
    of safe and affordable housing in communities that need it
    most, that is, in low- and moderate-income neighborhoods, in
    communities of color, and in tribal lands.
        Our country is facing a historic housing crisis, with the
    impact falling hardest on low-income families and communities
    of color. I have one stat on this that just knocks me over.
    About 60 percent of very low-income renter households and
    nearly 30 percent of Black renter households are putting more
    than half their income toward rent.
        So, Mr. James, if I could, I would like to start with you.
    You have decades of experience in community development,
    including promoting affordable housing in Savannah. So let me
    ask you just a hypothetical here. If a developer wants to fund
    new construction or the rehabilitation of existing housing
    units in a low-income minority or Native community, is it easy
    for that developer to get traditional financing to fund an
    investment in affordable housing? What do you say, Mr. James?
        Mr. James. Thank you for the question, Senator Warren.
    Unfortunately, the answer is no, it is not easy. Even in
    smaller urban markets like Savannah or in rural markets
    surrounding us in southeastern Georgia, it is extremely
    difficult to make traditional loans to finance affordable
    housing development without some sort of subsidy.
        In urban markets, with skyrocketing land costs and
    compliance with development regulations and standards, and just
    the overall high demand for new housing, makes it very
    difficult for developers to create affordable product. In rural
    markets, the higher costs of construction are having a similar
    effect.
        And we are not just talking about housing for low-income
    people. We are talking about teachers, firefighters, police,
    and even those with middle incomes that are increasingly unable
    to afford rents but much less home ownership. So we do need to
    see more programs and products that will allow us to be able to
    effectively make loans for those kinds of developments.
        Senator Warren [presiding]. So I appreciate that. Thank you
    very much for your expert opinion on that, Mr. James.
        So here we have families who need housing, and you have got
    developers who may want to provide that housing, but it is hard
    for them to be able to reach traditional funding sources. We
    all know that one of the tools that Congress has to support
    CDFIs in expanding the supply of housing in financially
    underserved communities is the Capital Magnet Fund, which
    provides grants to CDFIs and nonprofit organizations in order
    to spur investment in affordable housing. The idea is to bridge
    the gap between what traditional financing would provide and
    what it is that these communities need.
        My American Housing and Economic Mobility Act would invest
    $25 billion in the Capital Magnet Fund over 10 years, an
    investment, just to put that in some perspective, that is about
    30 times larger than the total amount of awards the Fund has
    made up to now. In other words, a whole lot more money.
    According to an independent analysis, this investment, which
    would be leveraged 10 to 1 with private capital, would fund the
    construction of about 770,000 new affordable housing units, so
    a real way to get something done.
        Mr. James, can I ask, in your view, what would an
    investment of this size in the Capital Magnet Fund mean for
    housing markets and for families in underserved communities and
    communities of color all around our country?
        Mr. James. Thank you again for that question, Senator
    Warren. The legislation that you are proposing would help us
    achieve a scale of investment that matches the scale of the
    problem. This legislation would provide CDFIs with critical
    resources that would allow us to increase the velocity and
    volume of financing for affordable housing. In most communities
    around the country, housing demand is, again, far outstripping
    the supply, and we just do not have enough resources. And so we
    can be a part of that solution if we have more resources to
    support affordable housing, so we would definitely support
    legislation of this type.
        Senator Warren. Well, that is a good partnership. Let us
    see what we can do on this, Mr. James.
        You know, for CDFIs in Massachusetts, like One United Bank
    and Worcester Community Housing Resources, increased access to
    funding that support the construction and rehabilitation of
    high-quality, affordable housing could help bring down rents
    and open the door to home ownership for thousands families. We
    need to use every tool we have to address the affordable
    housing crisis that is worsening by the day. By leveraging
    close relationships that they have on the ground to ensure that
    communities are getting the resources they need, CDFIs and MDIs
    are able to bring capital to people and to places where
    traditional financial institutions either cannot go or will not
    go. Ramping up investments in these institutions and the
    Capital Magnet Fund to expand the supply of safe, affordable
    housing in communities that are feeling the crunch most acutely
    is a tool we just cannot afford to ignore.
        So, Mr. James, I appreciate your offer of partnership. I
    sure hope we can get this done.
        And with that, I want to call on Senator Menendez. Our
    Chairman has had to go vote. So, Senator Menendez, it is up to
    me to recognize you for your questions.
        Senator Menendez. Thank you, Senator Warren. Good
    afternoon, everyone. Throughout the pandemic, we saw that
    minority- and women-owned small businesses were hit
    particularly hard. And at the same time, we saw that the vast
    majority of funding under the Paycheck Protection Program went
    not to these businesses that were most affected but to
    predominantly White-owned businesses with preexisting
    relationships with banks.
        So I know that you all worked pretty hard at trying to meet
    that challenge. But what lessons did you learn from the
    pandemic that can be brought forward to mitigate
    disproportionate harm to minority- and women-owned businesses
    in the future? And any one of you.
        Ms. Kucey. I definitely think that providing ongoing
    funding to these businesses. And I earlier talked about our
    microbusiness loan program, where we offered 10 to 50,000
    dollar loans in our community to minority and low-income
    business owners. And through the various catastrophes,
    Hurricanes Irma and Maria, the COVID pandemic, we have been
    working very closely with those businesses, and we have been
    offering payment deferrals, loan restructures, additional
    loans, and also counseling and advice. So I think it is being a
    close partner in good times and bad times.
        Senator Menendez. Mr. James, any insights?
        Mr. James. Senator Menendez, thank you. It is an excellent
    question. We learned quite a few lessons in my bank, Carver
    State Bank in Savannah, as well as across the National Bankers
    Association. One of the lessons that we learned is that our
    institutions really needed to scale up. We need more capital so
    that we can invest in technology and people so that we can be
    ready to meet a crisis when it happens but also to be ready to
    deploy more capital in these communities, to make them more
    resilient so that they can withstand the crisis before it
    comes.
        So for example, our institution will be using ECIP dollars
    to partner with a fintech company to make consumer loan
    products that are safe, effective, and low-cost, available to
    communities that are subject to predation from title pawn
    lenders and others in the State of Georgia that take advantage
    of communities. We also want to be able to automate the small
    business lending process and make it much more efficient so
    that we can make more small business dollars available in
    communities across the State, not just in the Savannah market.
        The other lesson that I learned from it was just personal,
    that many of the minority businesses that we were able to
    help--you know, our bank made probably 90 percent of our loans
    to minority-owned businesses, but some of them came from
    outside of our market, well outside, people who were in
    California or in New York, who found us online and were able to
    get a PPP loan even when they had a bank account at another
    bank but their large bank was not prioritizing their loan
    application.
        And so those are the kinds of lessons that we learned, that
    we need more capital so that we can scale and we need to be
    able to reach out to those communities and people who are
    underserved.
        Senator Menendez. Thank you for those great insights. You
    know, with climate change causing more frequent and more
    intense natural disasters, small businesses face unprecedented
    risk to their operations. Furthermore, low-income and minority
    communities have been found to be more likely to face the
    impacts of these natural disasters. In the aftermath of
    Hurricane Sandy, New Jersey Community Capital, a CDFI in my
    State, raised $3 million in lending capital in a matter of
    weeks and provided small businesses with flexible, low-interest
    loans to help recover from the storm, resulting in over 100
    jobs that were saved. That is just one example.
        Ms. Kucey, what role should CDFIs have in helping small
    businesses and communities recover from natural disasters? And
    how have MDIs played a role in disaster recovery, in Puerto
    Rico particularly, after Hurricane Maria?
        Ms. Kucey. Well, we were the first credit union to reopen
    in Puerto Rico after the hurricane. So that really enabled us
    to help a lot of people. We knew it was a life-defining moment
    for many of our members, and we knew that we had to act fast.
        And we did that through offering no-cost, zero percent APR,
    short-term loans, deferment of existing loan payments,
    elimination of transactional fees, and financial coaching for
    our members who were dealing with active insurance cases and
    attempting to rebuild their homes. We also provided $17 million
    in loans to assist people and enable them to replace household
    appliances, furniture, and autos.
        And after the hurricane, we actually had a very unique
    program where we assisted Puerto Ricans that were moving from
    the mainland, and we assisted them in transporting their
    vehicles and coming up with first and last month rent and
    rental deposits which, as you can imagine, quite high in Miami.
        So we offered a variety of programs to get them through and
    help them recover after the hurricane.
        Senator Menendez. I see. I see my colleague, Senator
    Tester. I do not know if he has had a chance to ask his
    questions yet, but if not, I will yield to him.
        Senator Warren. Thank you, Senator Menendez. It is my
    responsibility to call on Senator Tester now. Thank you.
        Senator Tester.
        Senator Menendez. I did not know if you were still on.
    Thank you.
        Senator Tester. Well, thank you, Senator Menendez and
    Senator Warren. It is great to get doubly recognized today.
        And I want to thank the panelists for being here.
        Look, CDFIs and MDIs in my State of Montana, they provide
    critical resources for communities all across our State. Their
    efforts have been tireless and persistent, and it has allowed
    our Main Street businesses to access the Paycheck Protection
    Program as this pandemic started.
        And I want to tell you a comment was made previously, I
    think, by Mr. James. The work that the CDFIs did in our State
    to get this Paycheck Protection Program out, when big banks
    could have cared less, it was stellar. And I want to thank you
    for that.
        But they also help us in home ownership, down payment
    assistance programs, and allow Montana families to realize the
    dream of home ownership, piecing together the financing for new
    and improved community facilities. The small community folks
    and nature of these institutions is a part of what makes their
    work so impactful, but it also can mean that it is harder for
    folks to get access or even know about these great resources.
        So, Mr. James, from your work in the industry, are there
    barriers to the growth and scale necessary to reach more of the
    folks in your community left out of the financial mainstream?
        Mr. James. Thank you, Senator Tester. The short answer is,
    yes, there are barriers. The biggest one in my estimation, in
    particular for the MDIs, is lack of scale, and that lack of
    scale is due to a lack of capital. And in particular in the
    African-American community our institutions have had a very
    historic, longstanding lack of access to the traditional
    capital markets, which has constrained our ability to grow and
    be able to reach deep into the community, to make sure that
    they have access to mainstream financial services.
        So that is one of the reasons why we are so enthusiastic
    about the ECIP program, which is going to put some historic
    amounts of capital at play in our sector. But I do want to make
    sure that I point out that many of our institutions were unable
    to access ECIP because of an unfortunate situation in regards
    to how regulation gets applied to many of our institutions.
        So our banks are regulated just like every other bank. We
    are FDIC-insured, and so we have to be regulated by either the
    OCC or the FDIC. And those regulatory bodies are under a
    congressional mandate from the Financial Institutions Reform,
    Recovery and Enforcement Act of 1989 or FIRREA. In section 308
    of that act it says that the regulators and the Department of
    Treasury and the Federal Reserve have an obligation to preserve
    and promote MDIs.
        Yet, since 2008, over half of the Black-owned banks have
    failed. And what we found is that there is an uneven
    application of regulation when it comes to our supervisory
    authorities that do not take into account the mission that we
    provide and the specialized business models that we have to use
    in order to serve underserved communities.
        And so one of the things that we would like to see is a
    revisiting of how our institutions are regulated, not to make
    them less safe or sound, but just to take into account the fact
    that we are banking people who are harder to reach, who have
    less resources and are harder to serve so that we can be able
    to keep more MDIs around and alive so that we can access more
    capital and provide more services to these communities that are
    so desperately in need.
        Senator Tester. Thank you for that. Thank you for that
    answer, and you answered my second question almost.
        Ms. Kucey, are there similar barriers that you see in the
    credit union world?
        Ms. Kucey. I am sorry. Could you repeat that question?
        Senator Tester. Are there similar barriers that you have
    seen in the credit union world?
        Ms. Kucey. Well, you know, we are not able to raise money
    through the capital markets. There is no secondary market or
    subordinated debt. So you know, I know that that is a challenge
    to many credit unions.
        Senator Tester. OK. And for both of you, is one of the
    barriers that you see that Americans simply do not know about
    CDFIs? Go ahead.
        Ms. Kucey. I mean, that is possible, definitely. You know,
    I am sure Mr. James is the same. We are involved in quite a bit
    of outreach to get the word out there.
        Mr. James. Yes, I agree. I mean, there is a lot of
    outreach, but I do think that we can make the public much more
    aware of what we are doing and the services that we provide.
    And so--you know. But again that goes back to scale and the
    ability to, you know, engage in the kind of marketing campaigns
    that are necessary to kind of get people--make sure that people
    are aware of what we are doing.
        We do a lot of this on a one on one basis, and it is
    relationship based. And we do not want to ever lose that. But
    every time I turn on the TV and I see an ad for a new neobank
    or a digital, you know, sort of bank replacement or fintech
    company, I think about the fact that they are kind of targeting
    a lot of the same communities that we want to serve. And we
    want to make sure that we are able to give those communities
    fair and responsibly priced products in addition to, you know,
    a slick marketing campaign.
        Senator Tester. Well, I just want to thank you both for
    what you do, and I appreciate you being in front of the
    Committee today. And hopefully, we can continue this
    conversation moving forward because I think you are an
    incredibly important resource to have out there for folks to
    really allow our Main Street businesses and families to thrive.
        With that, I will kick it back to you, Senator Warren.
        Chair Warnock [presiding]. Thank you so very much.
        Our Chairman of this Committee, Senator Brown.
        Chairman Brown. Well, thank you, Mr. Chair.
        A couple of first comments I would like to say. Thank you,
    Mr. James, for your support of a fellow Georgian, Lisa Cook,
    for the Federal Reserve. It is one of the President's
    outstanding appointments and one that I would credit your
    Senator with helping to encourage the President. They call our
    role in nominations--the President does the nominations, but we
    advise and consent. And let us just say that your Senator, Mr.
    James, your Senator did a lot of advising to the President on
    this for the banker, not the banker, the economist from
    Milledgeville, Georgia. And so thank you for weighing in and
    thanks for what you do with the National Bankers Association,
    too.
        And, one other comment and then I just have one question. I
    am so appreciative of Senator Warnock as the Chair of the
    Subcommittee. We, the Democrats, have been in control of this
    Committee, been chairing this Committee and other committees,
    in large part because of his victory and the other Georgia
    Senator.
        But one of the things I have really liked watching is our
    Subcommittee chairs on this Committee, Subcommittees that were
    not very active in the past, have become very active. This is
    Senator Warnock's second hearing, first one this year. Senator
    Warren, Senator Smith, Senator Menendez, and Senator Warner all
    understand the role of subcommittees, and it makes this place
    run better. So thank you for that.
        And thanks to the witnesses on the importance, the critical
    importance, of CDFIs and MDIs.
        So my question, Mr. James, is for you. I will just have one
    question. I know Senator Warnock is doing many things today.
    Mission-based lenders like yours are often the best and
    sometimes the only option for workers to get basic financial
    services and for small businesses and underserved communities
    to get the funding they need to start or expand their
    businesses. It is what I hear from MDIs and CDFIs, and I hear
    that from communities in Ohio.
        In Build Back Better, we include additional funds,
    investments for CDFIs that support affordable housing and
    investments. You have touched on those issues with my
    colleagues. What will happen--walk through what happens if we
    are successful with Build Back Better in doing more investments
    in CDFIs and MDIs. What does it mean to Carver Financial? What
    does it mean nationally with the way you look at things from a
    National Bankers Association perspective?
        Mr. James. Chairman Brown, thank you so much for the
    question and thank you for your support and comments regarding
    Dr. Cook and Senator Warnock.
        Yes, in response to your question, what I see is with both
    the ECIP program, the infrastructure package, and with the
    proposed Build Back Better legislation really a virtuous cycle
    where we can not only strengthen the institutions but also,
    much more importantly, strengthen the communities that we serve
    and make them much more resilient.
        And so, for example, if we can connect the dots between the
    capital that is coming into our sector through ECIP and the
    dollars that are going to be invested in America's
    infrastructure, and make sure that not only our banks have an
    opportunity to provide financing where it is needed on
    infrastructure projects that are to rebuild communities that
    oftentimes were destroyed by the way that infrastructure in
    America has been placed over many decades but also put people
    to work, put minority-owned businesses to work, rebuilding that
    infrastructure, doing new things like placing EV charger--EV
    charging stations in communities of color across the country,
    and let our banks be the financing entities for that.
        If we can connect all those dots, we really, you know, lift
    the entire economy. We help to reduce the racial wealth gap. We
    can reduce the home ownership gap. We can create long-lasting
    job opportunities for everyone and have the kind of
    environmental impacts and overall health impacts that we would
    like to see. And so that is what I sort of envision if we are
    able to see all these different pieces come together, not just
    in words but also with action and intentionality.
        Chairman Brown. Thank you, Mr. Chair.
        Chair Warnock. Thank you so very much, Chairman Brown, and
    thanks to all of our witnesses. Thank you, Mr. James, Ms.
    Kucey, Mr. Griffith, for sharing your important perspective
    here today.
        It was particularly poignant for me to hear, even as Mr.
    James made his closing statement, talk about the work being
    done by the CDFI that is Carver Savings Bank, literally sits in
    the kind of community that he described, communities that have
    literally been split in two. Federal public policymakes a
    difference, sometimes positively, negatively. That bank sits
    near Interstate 16, which literally split a historic Black
    community in two, putting people on the other side, literally,
    of prosperity. This is something that this Committee has also
    tried--is focused on addressing as we talk about reconnecting
    communities. That bill seeks to address that.
        And it is right there that that CDFI, like others, are
    doing their work. Similarly, Citizens Trust Bank, near my
    church, near a community split in two in the name of urban
    renewal at a different time in America. And so these banks are
    responding to disinvestment over a long period of time.
        And so I am grateful for all of our witnesses for taking
    the time to be with us today and for providing their testimony.
    Today's hearing highlighted how important these institutions
    are in helping families and small businesses and communities to
    prepare, survive, and recover from crisis. And I look forward
    to working with my colleagues on both sides of the aisle to
    continue to ensure that they have adequate resources to achieve
    their mission of helping the underserved.
        I am grateful for Ranking Member Tillis's comments. We
    certainly are not adverse to transparency, accountability,
    getting the kind of data that we need in order to make these
    institutions as effective as possible.
        And as I said at the onset, this topic is about creating an
    economy that works for all Americans and about ensuring that
    hardworking families are not swindled out of a shot at
    financial stability.
        For Senators who wish to submit questions for the record,
    those questions are due 1 week from today. That is Wednesday,
    February 16th.
        For our witnesses, you have 45 days to respond to any
    questions. Thank you again.
        And with that, this hearing is adjourned.
        [Whereupon, at 3:48 p.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                  PREPARED STATEMENT OF CHAIR RAPHAEL WARNOCK
        I'm honored to Chair this Subcommittee and to work with Ranking
    Member Tillis to ensure stability in our banks, credit unions, and
    other financial institutions that serve families, small businesses, and
    communities in Georgia and around our country, and to ensure that our
    communities have equal access to the financial resources that build an
    economy that works for all Americans.
        Now that brings me to the topic of our hearing today, which will
    examine Community Development Financial Institutions, or CDFIs, and
    Minority Depository Institutions, or MDIs, and the role that they play
    in supporting communities, creating jobs, boosting our economy, and
    helping small businesses to thrive. We will also examine the roles they
    play to help communities build resiliency against the crisis, like the
    pandemic, overcome crisis, and, importantly, recover from the crisis,
    so that our communities do not simply survive, but thrive.
        Finally, I hope that our witnesses will discuss ways that Congress
    can better support the work they do every day to grow our economy from
    the bottom up.
        The economic turbulence of the COVID-19 pandemic has pushed working
    families to the brink, often forcing them to choose between their
    health and their livelihoods. Thanks in part to the aid passed by
    Congress to combat the pandemic, our Nation is experiencing one of the
    quickest job market recoveries ever seen.
        Last month, the Georgia Department of Labor reported that the
    State's unemployment rate is now 2.6 percent, with 97 percent of jobs
    lost during the height of the pandemic now recovered. Last week, the
    jobs report showed that jobs rose by 467,000, defying the expectations
    of many experts.
        Critical in facilitating this recovery has been the work by CDFIs
    and MDIs. I appreciate that we have two before us here today, to talk
    about the work that they are doing even now, in their respective
    communities.
        Let me say that this is also personal for me: this is not
    theoretical. In addition to serving as a Senator for Georgia, I'm also
    the Senior Pastor of the historic Ebenezer Baptist Church, spiritual
    home of Martin Luther King, Jr., and John Lewis.
        The bank our church uses, Citizens Trust Bank, is in fact one of
    the many CDFIs and MDIs in Georgia that have been helping families and
    institutions in our community to thrive. I know this firsthand.
        And as a pastor and as a Senator, I see my work as grounded in
    serving others and my community--and that's what CDFIs and MDIs are
    doing: they are serving others and the community.
        Whether it has been acting as our Nation's fiscal first responders,
    immediately there to assist families and small businesses facing the
    financial unknown during the first weeks of the pandemic or
    facilitating the flow of Federal aid to communities, CDFIs and MDIs
    provided economic stability and certainty to millions of Americans,
    allowing them to focus on the health and safety of themselves and their
    children.
        In Georgia, the Atlanta-based CDFI Access to Capital for
    Entrepreneurs, or ACE, immediately sprung to action early in the
    pandemic to help small businesses. In the first months of the pandemic,
    they worked with their clients to offer emergency funds, including
    Paycheck Protection Program loans, and they worked with local
    development authorities and investment partners to give flexibility for
    small business borrowers as the economy recovered. These actions by
    just one CDFI saved hundreds of jobs in my home State of Georgia.
        The Federal Reserve Bank of San Francisco has rightly referred to
    CDFIs as ``economy shock absorbers for . . . communities in the worst
    of the downturn.'' These institutions make sustainable investments
    within our communities. They are members of our community. They know
    the folks in the community. They understand these communities. And they
    have the correct incentives to help communities prepare, work through,
    and recover from the crisis.
        CDFIs are also helping communities protect themselves against
    climate disasters. In Georgia, CDFIs have collaborated to begin
    offering Green Loans, which is capital provided to small businesses in
    the State to help them have a business that is more eco-friendly, such
    as funding energy-efficiency improvements. These investments help to
    create green jobs and they push Georgia and our Nation towards a
    sustainable future.
        Even with the work done by CDFIs and MDIs to help communities, the
    data show that we still have more work to do. In the crisis we are
    currently living through, there's no doubt that the jobs recovery, as
    strong as it is, is uneven. Men have entirely recovered their job
    losses since the pandemic began, while there are 1 million fewer women
    in the labor force than in February 2020.
        Unemployment among Black Americans remains elevated, and if history
    is any indicator, rural communities, like those in my home State of
    Georgia, will lose resources and these same communities will struggle
    to bounce back, as they see resources leave their communities. The
    number of minority depository institutions fell by 31 percent from 2008
    to 2018, even as the need for these institutions remains higher than
    ever, and there are even those who wish to defund the CDFI Fund program
    permanently.
                                     ______

                   PREPARED STATEMENT OF SENATOR THOM TILLIS
        I want to thank Chairman Warnock for holding this hearing, our
    second for the Subcommittee on Financial Institutions and Consumer
    Protection. Also thank you to the witnesses for your willingness to
    testify today.
        I have long been an advocate for a resilient and varied banking
    ecosystem, one that blends a healthy mix of globally systemic financial
    institutions, super-regionals and regionals, all the way down to local
    community banks. Banks and credit unions of all different sizes bring
    varied missions and capabilities to their customers, allowing
    individuals to select the banking experience best tailored for them.
    And I agree that CDFIs and MDIs fit into an important niche in that
    system.
        This was apparent during the pandemic, when financial institutions
    of varying sizes across the banking ecosystem stepped up to provide
    economic relief to American businesses and workers, most notably
    through the Paycheck Protection Program (PPP). In total, the SBA
    approved over 11.8 million PPP loans, totaling $799.8 billion. CDFIs
    for their part, approved over 350,000 PPP loans totaling $8.4 billion.
    For that I thank you all.
        That said, just as I raised concerns in our previous Subcommittee
    hearing over the lack of data and transparency that has likely led to
    significant fraud in the COVID-era unemployment insurance programs, I
    likewise have concerns with the similar lack of data and transparency
    that critics of the CDFI Fund have long identified.
        Put bluntly, policymakers simply do not receive enough information
    to adequately judge how effective the lending operations of CDFIs are.
    Consider a report on CDFIs and the CDFI Fund compiled by the Carsey
    Institute at the University of New Hampshire on behalf of the
    Department of the Treasury. The authors write, ``In developing this
    report, the research team encountered significant data limitations at
    every turn'' and identify ''inadequate data and nonstandardized
    auditing practices'' as significant barriers to CDFIs achieving better
    capitalization.
        The authors go on to say, `` . . . it is currently simply
    impossible to make the most routine analyses that are normally
    conducted with other classes of loan assets. It is not possible, for
    example, to create a breakdown of default rates or prepayment speeds
    for a given class of CDFI loans, or even to provide a breakdown of
    borrower credit scores. What is ironic about this is that CDFI managers
    feel they are swamped with reporting requirements, which they routinely
    fulfill. It is difficult to reconcile how CDFIs can be doing so much
    reporting yet have so little to show for it.''
        I mention this not to vilify CDFIs but to point out what I believe
    are systematic deficiencies in CDFI oversight and transparency that can
    prevent them from most effectively serving the communities they reside
    in. Given the tremendous level of funding bestowed on CDFIs and MDIs
    over the course of COVID-19, I believe these deficiencies are
    especially important to examine and rectify.
        Just last year, the CDFI Fund received the same level of funding as
    it previously would have been appropriated over an entire decade.
    Additionally, Congress established the Emergency Capital Investment
    Program (ECIP) which provided an additional $9 billion fund to help
    stabilize CDFIs and MDIs.
        My Democratic colleagues also resuscitated the Obama-era State
    Small Business Credit Initiative (SSBCI) in the partisan reconciliation
    package they passed early last year. This $10 billion program, which
    will also direct money towards CDFIs, was rightly allowed to expire due
    to chronic inadequacies that resulted in only 4 States whose SSBCI
    programs were in compliance according to an Inspector General report.
        North Carolinians are certainly familiar with the lack of oversight
    over of taxpayer dollars that SSBCI doled out. The founding president
    of the NC Rural Center resigned and was withheld severance following a
    State audit which detailed financial malpractice at the organization.
        Without greater transparency and data requirements, I'm concerned
    we could see the same situation play out again. With a price tag in the
    tens of billions between SSBCI, ECIP and the 12-fold increase to the
    base CDFI Fund, it is crucial that policymakers are equipped with
    concrete data that provides an accurate view of the impact that CDFIs
    and MDIs are making. While a press release touting how much money went
    out the door is good, comprehensive data and greater transparency on
    how the money was spent and how successful it was in supporting
    economic opportunity is better. I look forward to examining these
    questions with the witness here today. Thank you Mr. Chairman.
                                     ______

                     PREPARED STATEMENT OF ROBERT JAMES II
    President and CEO, Carver Financial Corporation, and Chairman, National
                     Bankers Association, Savannah, Georgia
                                February 9, 2022
        Chairman Warnock, Ranking Member Tillis, and Members of the
    Subcommittee, good morning and thank you for this opportunity to
    testify on roles Minority Depository Institutions (MDIs) and Community
    Development Financial Institutions (CDFIs) serve in supporting
    communities. It gives me great hope that one of this Subcommittee's
    first hearings of the new year is aimed at shining a light on this
    critical issue.
        My name is Robert James II, and I am President of Carver Financial
    Corporation, parent of Carver State Bank of Savannah, Georgia, and
    Chairman of the National Bankers Association (NBA). The NBA is the
    leading trade association for the country's MDIs. A critical part of
    our mission is to serve as an advocate for the Nation's MDIs on all
    legislative and regulatory matters concerning and affecting our member
    institutions as well as the communities they serve.
        Like Carver, many of our member institutions are also CDFIs and are
    the only banks with a primary mission to serve consumers and businesses
    who are underserved by traditional banks and financial service
    providers. Members of our association are on the front lines, trying to
    reduce the economic hardship in minority communities, which are
    historically the most vulnerable during good times and bad. We believe
    our banks are best positioned to help our communities bolster their
    defenses in the face of climate change, health emergencies, and
    overcome many of the systemic issues that have placed them at an
    economic disadvantage.
        The Senate Banking Committee and Chairman Warnock have been
    instrumental in the inclusion of several provisions in multiple
    legislative packages adopted during the course of the last year that
    ensure that MDIs and the communities we serve are not forgotten during
    times of crisis.
        The creation and implementation of the Emergency Capital Investment
    Program and the $3 billion increase in funding the CDFI fund can help
    banks like those within the NBA scale up and provide more access to
    credit for individuals and small businesses in low- and moderate-income
    communities most impacted by the pandemic. The Bipartisan
    Infrastructure Bill also provides billions of targeted dollars that can
    be instrumental in addressing the needs in our communities created by a
    changing climate and systemic environmental injustice. The NBA applauds
    the Congress for the adoption of these important measures and very much
    look forward to continuing to work with you on additional legislation
    to ensure that our communities, hardest hit by the pandemic and
    systemic inequity, experience lasting, material changes that will
    support broad and deep economic growth that will benefit all Americans.
        The growing climate crisis has disproportionately hit low-income
    Black and Brown communities in great measure because they are under
    resourced. These are the same communities that have been hit hardest by
    the COVID-19 pandemic. The unequal burden that COVID-19 and climate
    change has placed on communities of color is not coincidental. Decades
    of income disparity, unequal access to health care, housing
    discrimination, and residential segregation have resulted in uneven
    resiliency among communities of color and other low-income communities.
    This inequity threatens our Nation as a whole.
        Low-income neighborhoods are disproportionately victimized by
    environmental hazards and are far more likely to live in areas with
    heavy pollution or elevated flood risk. African Americans, Latinos, and
    Native Americans get sick and die from the COVID-19 virus and other
    health pandemics at rates higher than their White counterparts, and
    higher than their shares of the population. Similarly, people of color
    are more likely to die of environmental causes, and more than half of
    the people who live close to hazardous waste are people of color. These
    communities are most likely to suffer in natural disasters like floods
    and hurricanes, or man-made disasters such as pollution-related
    illness.
        Tackling economic inequity and eliminating the racial wealth gap is
    the best way to combat environmental and health injustice and ensure
    resilience in communities of color. This goal is important not just for
    those directly impacted by racial discrimination but also for society
    at large, as research shows that racism harms the whole economy and
    manifests in different ways, even in the distribution of Government
    aid.
        One of the most noticeable effects of environmental injustice
    occurs during natural disasters. After a natural disaster hits a
    community, Government aid is typically sent to the area to rebuild
    infrastructure and restore homes and businesses. However, the unequal
    dispersal of aid is one way in which minorities and low-income
    communities are hurt by natural disasters. In a study done by Rice
    University and the University of Pittsburgh, it was found that
    predominately White counties saw an increase in average wealth after
    natural disasters while predominantly minority counties saw a wealth
    decrease. The study notes that White communities saw higher levels of
    reinvestment in their communities after natural disasters in comparison
    to their minority counterparts.
        Additionally, it was found that White families in communities with
    significant damage from natural disasters saw an increase in wealth due
    to generous reinvestment initiatives. However, minority families in
    communities with similar damage from natural disasters saw a smaller
    increase in wealth or they actually saw a decrease in wealth.
    Furthermore, low-income Americans are more likely to suffer from the
    consequences of tropical storms due to inadequate infrastructure and
    lack of proper insurance. Low-income and minority populations are also
    more likely to live near industrial facilities and are therefore at a
    higher risk for chemical spills and toxic leaks resulting from tropical
    storms. For example, 60 percent of African Americans in Baltimore live
    within one mile of a Toxic Release Industry, and 70 percent percent of
    African Americans live within 2 to 4 miles of one.
        Traditionally following natural disasters, MDIs and CDFIs have
    served as a source of strength and an economic development engine due
    to their relative concentration in minority and low-income communities,
    and established relationships. This is especially true in African-
    American communities. Many of our institutions participate in numerous
    relief programs offered by various State and Federal Government
    agencies. Unfortunately, MDIs' smaller size, especially among African-
    American MDIs, has not allowed us to respond as quickly or with as much
    scale as many of these situations demand.
        Our banks provide basic banking services to communities that are
    more likely to be unbanked or underbanked, but our impact is limited
    due to our small size, both in total assets and in number of
    institutions. Racial minorities, especially Black and Hispanic, are
    more likely to be unbanked and underbanked according to a Federal
    Reserve Report on the Economic Well-Being of U.S. Households in 2020.
    MDIs can be a solution to this problem if our banks can access more
    capital and scale up. Several studies have shown that minorities,
    especially Black and Brown Americans, are more likely to have bank
    accounts and access to fair and reasonably priced mortgage and small
    business loans if there is an MDI in their neighborhood. \1\ It is
    important to note that an average of 70 percent of minorities do not
    have a bank branch in their neighborhood. At the same time, MDI
    branches are in census tracts with a 77 percent minority population.
    Properly scaled, MDI banks are best positioned to provide access to
    capital for minority communities.
    ---------------------------------------------------------------------------
         \1\ Broady, et al., ``An Analysis of Financial Institutions in
    Black-Majority Communities: Black Borrowers and Depositors Face
    Considerable Challenges in Accessing Banking Services'', Brookings
    (2021); Florant, et al., ``The Case for Accelerating Financial
    Inclusion in Black Communities'', McKinsey and Company (2020); Barth,
    et al., ``Minority-Owned Depository Institutions: A Market Overview'',
    Milken Institute (2019).
    ---------------------------------------------------------------------------
        Unfortunately, MDIs' smaller size, especially among African-
    American MDIs, has not allowed them to respond as quickly or with as
    much scale as the current economic situation in LMI communities
    demands. MDIs only make up 3 percent of all American banks, and Black-
    owned MDIs only 0.4 percent. When looking at total bank assets, the
    disparity is even more stark. As of the second quarter of 2021, Black
    banks held about $6 billion dollars in total combined assets, as
    compared to over $22 trillion dollars in total assets in the U.S.
    banking system as a whole. Put another way, Black-owned banks only
    control 27 thousandths of one percent of total bank assets in the
    United States.
        Given the important role these institutions play in the communities
    they serve, we need to do more to preserve and promote them. Our
    obligation in this regard is not just morally justified but required by
    Federal statute. Passed into law in 1989, Section 308 of the Financial
    Institutions Reform, Recovery, and Enforcement Act, or FIRREA, requires
    the Treasury, Federal Reserve, OCC, and FDIC to preserve and promote
    MDIs in a variety of ways, including preserving the number of MDIs.
    This statutory obligation should be considered a part of Treasury and
    the regulators' overall mission to maintain stability and public
    confidence in the Nation's financial system.
        The Treasury and bank supervisory agencies have unfortunately
    failed to preserve and promote MDIs. The overall number of MDIs has
    declined by 33 percent since 2008, and among Black-owned MDIs, the
    problem is especially pronounced, as Black-owned banks have suffered
    from many of the same conditions and structural lack of access to
    capital as the Black community as a whole. Of the 4,377 total insured
    commercial banks in the U.S., only 144 are MDIs, and only 19 of those
    are controlled by Black people. Prior to the Great Recession of 2008-
    2009, there were 41 Black-owned commercial banks in the United States,
    a loss of more than 50 percent.
        Like most community banks, MDIs primarily make loans secured by
    real estate. The legacy of redlining and associated chronic
    undervaluing of real estate in Black communities created lower asset
    values for minority banks' collateral, which led to massive write-downs
    of bank collateral.
        Tier 1 Capital, or the equity invested in a bank, is the most
    critical component of the resilience of any bank, and it is what allows
    banks to grow and scale. MDIs, particularly African-American MDIs, have
    historically lacked access to capital markets that would allow them to
    scale. Without sufficient Tier 1 Capital, not only are banks limited in
    the amount of deposits they can take in, but they are also hampered in
    their ability to withstand loan losses. Without access to capital
    markets or large pools of high-net-worth investors, many Black MDIs
    were forced to exhaust their capital reserves, failing as a result.
    Those who have been able to participate in relief efforts have been
    limited in the amount of loans that can be extended, even with Federal
    guarantees or direct support, as they are unable to weather loan
    significant loan losses. Following natural disasters, many financial
    institutions, especially those in underserved communities, often have
    increased delinquent loans. Although Federal Government efforts to
    stand up loan loss reserve and other similar programs have been
    somewhat beneficial, it has been the experience of many MDIs many of
    these programs are not sufficient without adequate capital at the bank
    level and less red tape at the Federal level. Both create bottlenecks
    when speed is necessary.
        Access to capital will allow MDIs to not only respond better during
    times of crisis but allow us to reverse the situations in our
    communities that lead to worse outcomes during natural disasters. The
    ECIP capital is a historic step in the right direction, but
    unfortunately many of our banks were not able to access ECIP due to
    prior regulatory challenges, based on examination standards that do not
    take into account the unique business models many mission driven banks
    need to employ to provide basic banking services in markets that would
    otherwise be ignored by the financial services mainstream. We need to
    find additional ways to direct capital and business opportunities to
    those banks and the communities they serve.
        President Biden and Congressional Democrats have made good on their
    promise to steer money toward frontline communities as the United
    States makes historic investments in climate resilience and mitigation.
    Provisions in the recent enacted infrastructure law and a $29 billion
    provision included in the proposed Build Back Better bill go a long way
    in achieving this goal, but MDIs must be included in the financing
    opportunities that will arise, giving our banks opportunity, but more
    importantly allowing us to connect our customers to opportunities to
    strengthen their businesses, add more jobs, and thereby make their
    communities more resilient.
        While there are many provisions in the Bipartisan Infrastructure
    Law aimed at addressing environmental inequities, I will focus on one
    in the context of today's hearing. The law invests in the deployment of
    electric vehicle (EV) charging infrastructure as one of many important
    ways to confront the climate crisis. Through a National Electric
    Vehicle Formula Program (EV Charging Program), the law provides funding
    to States to strategically deploy EV charging infrastructure and to
    establish an interconnected network to facilitate data collection,
    access, and reliability. The law also establishes a discretionary grant
    program for Charging and Fueling Infrastructure (Charging and Fueling
    Infrastructure Program) to strategically deploy publicly accessible EV
    charging infrastructure and hydrogen, propane, and natural gas fueling
    infrastructure along designated alternative fuel corridors or in
    certain other locations that are accessible to all drivers of such
    vehicles. The law directs DOT, in coordination or consultation with the
    Department of Energy (DOE), to develop guidance for both programs. We
    believe that MDIs and our customers--minority owned businesses--should
    be direct and active participants in the deployment of this new
    infrastructure.
        The implementation of the new EV charging station programs and the
    disbursement of unprecedented levels of Federal funding will provide
    for more access to cleaner vehicles, reduced demand for polluting fuels
    and provide job opportunities. While the law does not speak to specific
    financing models, the Biden administration has been vocally committed
    to ensuring that the funds available be utilized in LMI communities and
    that institutions who serve these communities be intrinsically
    involved. We believe this is an area where MDIs should actively
    participate. However, the need for capital at our institutions poses a
    challenge for broad participation by many of our institutions. We can
    combat this lack of capital by banding together in syndicates to
    provide financing for this critical infrastructure in our communities.
    We can also manage Federal contract funds in a transparent and
    equitable way. Perhaps most importantly, our banks can connect
    underrepresented minority owned businesses to contract opportunities to
    build the infrastructure in their communities, providing not only
    critical new infrastructure, but strengthening minority businesses,
    creating quality jobs, and making the communities we serve more
    resilient. We believe our participation is crucial as it ensures that
    the promise of the program will be realized in the communities we serve
    for generations to come.
        The pending BBB contains a provision establishing a ``Greenhouse
    Gas Reduction Fund'' that for the first time would infuse green
    investments into a vast network of local financiers--some of which have
    decades-long connections with the very communities that are already,
    and disproportionately, feeling the effects of rising temperatures.
    Among them are MDIs and CDFIs.
        As Senator Van Hollen recently noted ``The bottom line is we have
    two important goals. Obviously, we want to deploy clean energy
    technology as quickly and efficiently as possible. And we also want to
    make sure that . . . communities that have been overlooked in the past
    are not overlooked again. CDFIs have an essential role to play in the
    Build Back Better agenda, right? I mean, [especially in] making sure
    that communities that have often been overlooked when it comes to
    important investments have that capital available to them.''
        While we agree with the Senator's sentiment, many MDIs and CDFIs
    still face barriers to expanding their green portfolios. Those
    obstacles include hiring and training staff to develop and run new loan
    products and forming partnerships with the installers or service
    providers of electric vehicle charging stations, heating, ventilating
    and air conditioning systems; solar panels; and more.
        Most, if not all, of our member institutions already have robust
    vetting and risk assessment processes in place when it comes to
    examining, for example, mortgages or small business loans. But many
    still are working to build the same sort of capacity and expertise when
    it comes to clean energy. Additional Federal funding focused
    specifically on global warming in conjunction with increased capital
    could help chip away at those obstacles.
    Conclusion
        The NBA again applauds the Subcommittee for holding this important
    hearing and for the full Committee's ongoing efforts to ensure equity
    for all communities across the country. People of color are on the
    front lines of the climate crisis and the health crisis. For decades,
    power imbalances have constrained the ability of communities of color
    to respond to the impact of climate change and contribute local
    knowledge to climate solutions. These same imbalances leave our
    communities more vulnerable to health crises. Building political and
    economic power, as well as speaking up about the challenges, are
    critical components of climate resilience and improving the social
    determinants of health like stable employment and quality housing. We
    have begun the monumental task of addressing the root causes of
    inequity in health outcomes, many of which revolve around economic
    disparity. It's time to expand the conversation to include the economic
    roots of climate injustice to ensure that all people, regardless of
    race and ethnicity, are guaranteed protections from the worst effects
    of climate change. While we commend Congress on its leadership to date
    in responding to the current crisis, we firmly believe much work
    remains to be done in supporting the MDI sector as we respond to the
    needs of the communities and small businesses that our member
    institutions serve that have disproportionately shouldered the burden.
    In this regard, the NBA and its member banks look forward to working
    closely with the Committee and Subcommittee on workable solutions that
    ensure LMI communities and minority small business do not just simply
    survive but ultimately thrive. Thank you again for the opportunity to
    testify. I will be pleased to answer any questions.
                                     ______

                       PREPARED STATEMENT OF JEANNE KUCEY
      President and CEO, JetStream Federal Credit Union, on Behalf of the
     National Association of Federally Insured Credit Unions, Miami Lakes,
                                    Florida
                                February 9, 2022
    Introduction
        Good afternoon, Chairman Warnock, Ranking Member Tillis, and
    Members of the Subcommittee. My name is Jeanne Kucey, and I am
    testifying today on behalf of the National Association of Federally
    Insured Credit Unions (NAFCU), where I served on the Board of Directors
    for 9 years including the final 2 years as Board Chair. I currently
    serve as CEO of JetStream Federal Credit Union, a low-income designated
    Community Development Financial Institution (CDFI) operating in Miami-
    Dade County, Florida, and Puerto Rico. We are also classified as a
    Minority Depository Institution (MDI). Thank you for holding this
    important hearing today. We appreciate the opportunity to share our
    views on the important role that CDFIs and MDIs play in the economy and
    our communities. In addition to our testimony, NAFCU member credit
    unions look forward to continuing to work with you beyond this hearing
    to ensure access to robust financial services products for all
    Americans.
        Founded in 1948 and headquartered in Miami Lakes, Florida,
    JetStream FCU has $240 million in assets and serves more than 18,000
    members in five locations, including one in Puerto Rico. Membership is
    open to those who live or work in Miami-Dade County, Florida, or in
    Carolina, Trujillo Alto, or San Juan, Puerto Rico. Today, the credit
    union offers a variety of products, including checking and savings
    accounts, credit cards, auto loans, home equity lines of credit,
    business loans, several types of green loans, and no credit check
    loans. We also offer a complete menu of remote services through mobile
    banking and various digital channels.
    Background on Credit Unions
        Credit unions serve a unique function in the delivery of necessary
    financial services to Americans. Established by an act of Congress in
    1934, the Federal credit union system serves to promote thrift and make
    financial services available to all consumers, many of whom would
    otherwise have limited access to financial services. Every credit union
    is a cooperative institution organized ``for the purpose of promoting
    thrift among its members and creating a source of credit for provident
    or productive purposes'' (12 U.S.C. 1752(1)). Congress established
    credit unions as an alternative to banks and to meet a precise public
    need, and today credit unions provide financial services to over 127
    million people. Since President Franklin D. Roosevelt signed the
    Federal Credit Union Act (FCU Act) into law nearly 88 years ago, two
    fundamental principles regarding the operation of credit unions remain
    every bit as important today as in 1934:

      1.  Credit unions remain totally committed to providing their members
            with efficient, low-cost, personal financial services; and,

      2.  Credit unions continue to emphasize traditional cooperative
            values such as democracy and volunteerism.

        The Nation's approximately 5,000 federally insured credit unions
    serve a different purpose and have a fundamentally different structure
    than traditional banks. Credit unions exist solely for providing
    financial services to their members, while banks aim to make a profit
    for a limited number of shareholders. As owners of cooperative
    financial institutions, united by a common bond, all credit union
    members have an equal say in the operation of their credit union--``one
    member, one vote''--regardless of the dollar amount they have on
    account. These singular rights extend all the way from making basic
    operating decisions to electing the board of directors, something
    unheard of among for-profit, stock-owned banks. Unlike their
    counterparts at banks and thrifts, Federal credit union directors
    generally serve without remuneration, epitomizing the true volunteer
    spirit permeating the credit union community.
        Credit unions continue to play a very important role in the lives
    of millions of Americans from all walks of life. Since the Great
    Recession, consolidation of the commercial banking sector has
    progressed at an increasingly rapid rate. At a time when for-profit
    banks are deemphasizing the human touch for financial services, credit
    unions are second-to-none in providing their members with quality
    personal financial services at the lowest possible cost.
    Credit Unions as MDIs, CDFIs
        Credit unions are proud of their record of diversity. As you can
    see from the charts on the next page, credit unions outpace banks when
    it comes to MDIs and in having female CEOs. According to NCUA's ``2020
    Minority Depository Institutions Report to Congress'', at the end of
    2020 there were 520 federally insured credit unions designated as MDIs,
    417 of which also have the low-income credit union designation. Credit
    union MDIs are located in 37 States, Washington, DC, Puerto Rico, and
    the U.S. Virgin Islands. These institutions serve over 4.3 million
    members and tend to be smaller institutions; 82 percent of MDI credit
    unions have assets of $100 million or less. They also tend to
    underperform growth in all categories, including asset size,
    membership, and loan volume, in comparison to the rest of the credit
    union industry, and the disparity is growing.
        Credit unions are also proud of their participation in the CDFI
    program, which provides grants to allow credit unions to better serve
    low-income members and underbanked communities. There were 416 CDFI-
    designated credit unions as of December 28, 2021, up from 285 in
    November of 2018, serving nearly 17 million predominantly low-income
    consumers and communities of color. In addition to helping credit
    unions in low-income areas serve members in need, the CDFI program
    gives credit unions access to funds that they are not able to raise
    from the capital markets. As the country continues its pandemic
    recovery, NAFCU urges Congress to consider increased funding levels for
    CDFI programs in any future Fiscal Year appropriations bills. It is
    this program that gives credit unions like JetStream an important
    resource to help create programs to serve their communities.
        Furthermore, while Congress is considering support for the CDFI
    funds, we urge you to ensure that the Treasury Department is given the
    necessary resources to clear out the current CDFI application backlog.
    As the number of credit unions applying to become CDFI designated
    institutions continues to grow, many applicants have seen the
    application process drag on as they await approval. NAFCU also supports
    legislative measures to streamline and modernize the requirements and
    application process to make it easier for institutions to be approved
    as a CDFI.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        In 2011, JetStream became an NCUA designated low-income credit
    union, and a year later became CDFI certified. We were the first credit
    union to service both Miami-Dade County, FL, and Puerto Rico to do so.
    We are heavily vested in the prosperity of the communities we serve. We
    have supported our members during hurricanes, Government shutdowns, and
    most recently during the COVID-19 pandemic. Since 2011, JetStream has
    received $5.8 million dollars in CDFI grants to support a plethora of
    programs, including small business lending and a resettlement loan
    program for low-income members. The grants also supported the Whole
    Again loan program, an initiative that provided $17 million in consumer
    loans to replace goods and vehicles destroyed by Hurricanes Irma and
    Mar!a. In 2021, JetStream was awarded a grant to fund green energy and
    home rehabilitations. Since 2014, we have worked to ensure that every
    person employed at JetStream, including interns, receive certification
    in Community Development Certified Financial Counseling from the
    National Cooperative Business Association. This program trains our
    staff to identify financial distress within our membership and
    proactively work to prevent financial catastrophe.
        Our membership is diverse, and reflective of the communities
    Jetstream serves:

        71 percent of JetStream members are classified as low-
            income or below;

        40 percent are classified as extremely low income;

        67.5 percent of our members are Hispanic (27 percent of
            which are Puerto Rican)

        18.8 percent of our membership is African American.

        JetStream is also a ``Juntos Avanzamos'' credit union (Together We
    Advance), which is a community of credit unions committed to serving
    and empowering Hispanic communities. We were the first credit union in
    Florida to receive such a designation. JetStream is committed to
    meeting the needs of our members, and that has led us to offer a number
    of products to help immigrants and those with lower incomes, such as a
    second chance checking program, low dollar loans, and even a
    resettlement loan program for those moving from Puerto Rico to the
    mainland.
        Jetstream, along with NAFCU, regularly works with Inclusiv, a
    certified CDFI intermediary and a national network of nearly 450 CDFI
    certified and minority designated credit unions. Inclusiv provides
    capital, makes connections, builds capacity, develops innovative
    products and services for community development credit unions (CDCUs).
        Due to the geographical areas JetStream services, Hurricane Irma
    and Hurricane Maria critically affected our membership in September
    2017. The two Hurricanes were a life-defining moment for many of our
    members, and we knew that we had to act. JetStream provided $2.5
    million of critical financial relief to our members during the first 8
    months of recovery, including no-cost, zero percent APR short-term
    loans, deferment of existing loan payments, elimination of
    transactional fees, and financial coaching for our members who were
    dealing with active insurance cases and attempting to rebuild their
    homes.
        We played a big role for our members with small businesses after
    the hurricanes. When Hurricane Maria hit the island of Puerto Rico,
    almost every household was affected. During this time, residents looked
    for ways to help their neighbors. One of our members saw the necessity
    on the island for accessible diesel gas to refuel generators in
    people's houses. He and his wife bought a truck in the States and
    brought it to the island to start their new business, Chester Energia y
    Transportes. He worked with the credit union to open a business account
    to help their business get off the ground. Due to high demand, their
    business took off rapidly and they were able to assist other large and
    small businesses.
        When the COVID-19 pandemic hit, Jetstream decided that the credit
    union's branches would stay open. By strictly following CDC guidelines,
    we were able to keep our employees safe while serving our membership in
    their time of need. Jetstream maintained normal operating hours
    throughout the crisis. This also meant support for members of other
    credit unions through shared branching. Jetstream's shared branching
    activity skyrocketed, earning recognition from Florida Credit Union
    Shared Services in their annual report.
        In 2020, Jetstream launched a multipronged COVID-19 emergency
    relief program that included emergency loans, lines of credit, a 6-
    month payment deferral for qualifying loans, and fee waivers. Consumer
    loan deferments totaled 1,291, for a total of $10.5 million, and fee
    income was reduced by 32 percent. Jetstream saw a reduction of $348,011
    to its net income. Net income for 2021 was positive, but not quite back
    to prepandemic levels. For us, this was an investment in our members
    during their time of need. I am proud of our team and their dedication
    to serve our members.
        Our low-income members are more likely to live in urban heat
    islands with fewer trees and more pavement, as well as reside in
    housing with older building materials and appliances. In Miami, 65
    percent of the housing stock is over 50 years old. As a result, there
    is a huge need for major repairs and retrofitting such as new roofs,
    installing impact windows, performing mold remediation, replacement of
    air conditioning units, and making energy-efficient upgrades. While our
    current Home Equity Credit Line product enables many of our members to
    finance these repairs, we have identified a segment of our membership
    that does not qualify for this type of loan due to a lack of equity,
    poor credit history, or high debt ratios. They are trapped in older,
    energy inefficient homes that are often in dire need of substantial
    repairs.
        Our answer was JetStream's Increasing Climate Resiliency and Health
    Equity through Energy Efficiency (ICRHEEE) strategy, and we are
    fortunate to have recently been approved for a CDFI grant for this
    program. The ICRHEEE addresses these challenges with innovative Green
    Loan products and underwriting created to improve energy efficiencies
    for low-income homeowners and also help those who need major repairs to
    their homes, resulting in improved housing stock and increased
    household income. This strategy includes loan options that do not
    require equity and are lenient with respect to debt ratios and poor
    credit. The strategy also includes financial counseling, coaching, and
    community outreach. We are looking forward to unveiling these new
    products and services to our members in 2022 in an effort to meet more
    of the needs of our membership and the local community.
        Energy costs have been rising across the U.S. and these rising
    costs have a disproportionately high impact, also known as energy
    burden, on low- and moderate-income (LMI) communities and communities
    of color. These are precisely the communities that have not had
    equitable access to financing critical energy efficiency and clean
    energy building upgrades that could ease this energy burden. As
    financial cooperatives committed to investing in strong and healthy
    communities, CDFIs, like JetStream, are uniquely poised to serve as
    vehicles to deploy affordable green loan programs that combat climate
    change while helping to lower the high energy burden on low- and
    moderate-income and communities of color. CDFI credit unions have the
    underwriting expertise and financial coaching capacity to reach a broad
    range of consumers and to connect the benefits of clean energy to
    household budgets.
        As we work to address this, and as part of our involvement with
    Inclusiv, we have sent our lending team through their Solar Finance
    Training Program for CDFIs and other community-based lenders. In this
    training, CDFIs design and launch affordable green loan products for
    their communities--something we will bring to our ICRHEEE strategy.
    Recommendations
        As the Subcommittee examines approaches to aid CDFIs and MDIs, we
    believe it is important to properly fund Federal support for CDFIs and
    MDIs. This includes increased funding through the annual appropriations
    process for both the CDFI Fund and the NCUA's Community Development
    Revolving Loan Fund (CDRLF). The CDRLF is an important tool for credit
    unions to serve low-income areas by providing grants to low-income
    credit unions to meet needs in those areas, often to provide technology
    resources to help members. During the pandemic, CDRLF requests have far
    outpaced available funding. NCUA Chairman Todd Harper has specifically
    called for additional CDRLF funding to help low-income credit unions.
        Additionally, we would support creating a CDFI Crisis Fund that
    would automatically make additional capital available to CDFIs to
    address natural disasters and economic crises when they occur in their
    community as proposed by Senator Brian Schatz.
        Finally, we would urge you to consider the following areas to
    assist CDFI and MDI credit unions:
    Improve the Process for Certification as a CDFI
        As noted earlier in my testimony, NAFCU has heard from many credit
    unions that have been waiting several months for certification as a
    CDFI with little clarity or insight on their status. While it is
    important that the CDFI Fund have the resources to handle the volume of
    applications in a more timely manner, it is also critical that
    technical issues or overburdensome requirements do not hamper efforts
    by credit unions to serve those who want to help members in need. We
    believe that the CDFI Fund is best situated as a resource for
    institutions, and not a regulator. Additionally, transparency is key.
    As such, we believe the process for certifying, and maintaining
    certification, for a credit union, as an insured depository institution
    (IDI), should recognize our unique nature. Examples of how this can be
    done include:

        Ensuring that the ``primary mission test'' is not a hurdle
            for credit unions as not-for-profit member-owned cooperatives;

        The ``target market test'' for certification should focus
            on those to whom the credit union provides a wider range of
            financial services, and not just to whom it has already made
            loans, to meet thresholds; and

        Allowing a longer ``cure period'' to maintain certification
            that ensures credit unions can keep existing CDFI-backed
            programs in place. Credit unions, as not-for-profit, member-
            owned financial institutions, often face limited resources and
            staffing, which may impact their ability to quickly cure any
            issues, but they are still required to meet the same regulatory
            burdens and subject to the same market pressures as large, for-
            profit banks. A longer ``cure period'' for CDFI credit unions
            will allow us to meet the challenges of unforeseen events like
            natural disasters and pandemics--and deal with existing
            regulatory requirements, some of which are unique to credit
            unions--all while continuing to serve our communities.
    Allow All Credit Unions To Serve Underserved Areas
        As has been noted by Members of Congress across the political
    spectrum, credit unions were not the cause of the Great Recession, and
    an examination of their lending data indicates that credit union
    mortgage lending outperformed bank mortgage lending during the
    downturn. This is partly because credit unions did not contribute to
    the proliferation of subprime loans. Before, during, and after the
    financial crisis, credit unions continued to make quality loans through
    sound underwriting practices focused on providing their members with
    solid products they can afford.
        In addition, both during and after the crisis, credit unions have
    been committed to helping the portions of their communities that are
    most in need obtain high quality products and services. This has been
    demonstrated once again during the pandemic. Unfortunately, credit
    unions that want to do more are limited in who they can serve by the
    FCU Act, which restricts credit unions to serving a distinct field of
    membership. Many credit unions want to help those in underserved areas
    but the ability to add underserved areas to their fields of membership
    is limited. Currently, only multiple-common-bond credit unions have the
    authority to add underserved areas. We urge the Committee to amend the
    FCU Act to allow all credit unions the ability to add underserved areas
    to their fields of membership.
    Loan Maturity Limits
        The FCU Act has a general statutory limit on Federal credit union
    loans of 15 years, with a limited number of exceptions, such as
    mortgage loans for a primary residence. The rigid and limited set of
    exceptions to the FCU Act's general 15-year maturity limit does not
    provide the NCUA with the ability to expand the types of loans that may
    be made with a longer maturity limit through regulation. For example,
    many military members may purchase a home to move to when their service
    ends, but because it is not their current primary residence, they may
    be unable to obtain a loan with a term longer than 15 years.
    Additionally, a number of credit unions have been approached by members
    wanting to obtain financing for solar loans with a longer term to make
    the loan more affordable. Both of these examples highlight the fact
    that the current 15-year limit is outdated and does not conform to
    maturities that are commonly accepted in the market today, resulting in
    credit unions turning away members in need and losing market share in a
    growing area of climate-friendly lending. In a rising interest rate
    environment, it is important that consumers have options for longer
    maturity products. We urge you to support S. 762, the Expanding Access
    to Lending Options Act, introduced by Senators Tim Scott, R-SC, and
    Catherine Cortez Masto, D-NV, to address this issue.
    Allow GSEs To Purchase Non-Conforming Loans From CDFIs
        An important aspect of the CDFI Fund is that it provides awards to
    CDFI institutions to allow them to finance mortgage lending for first-
    time homebuyers and be able to provide flexible underwriting for
    community facilities. CDFIs often provide educational services such as
    credit counseling and homebuyer classes to help their borrowers use
    credit effectively and ensure they are able to keep up with their loan
    obligations. However, the majority of the mortgages originated by CDFIs
    are considered nonconforming (as they do not meet the loan-to-value,
    debt-to-income, FICO score, or other requirements), and Fannie Mae and
    Freddie Mac (the Government-Sponsored Enterprises (GSEs)) are unable to
    purchase these loans. NAFCU has urged the Federal Housing Finance
    Agency (FHFA) to create a pilot program to allow the GSEs to buy such
    nonconforming loans from CDFIs because they are serving the exact
    communities that the GSEs aim to serve through their statutorily
    mandated missions.
        Credit unions that are classified as CDFIs are best situated to
    originate loans to the communities most in need. NAFCU believes that
    one way to help address the widening home ownership gap for minorities
    would be for the FHFA to permit the GSEs to purchase mortgages like the
    ones made by CDFIs to their communities through new pilot programs with
    less stringent purchase criteria. Establishing such pilot programs will
    facilitate the development of a vibrant secondary market, thus ensuring
    the long-term viability and even expansion of such lending programs in
    the primary mortgage market. This would mean CDFIs could make more of
    these loans to support their communities and help resolve some of the
    access and equity issues currently impacting many borrowers. Should the
    FHFA prove unwilling to allow the GSEs to purchase these mortgages, we
    urge you to consider taking legislative action on behalf of CDFIs and
    the underserved areas they serve to bring about this change.
    Federal Housing Administration (FHA) Lending
        Credit unions in general, and especially credit unions designated
    as CDFIs and MDIs, play a vital role in supporting underserved
    communities. As noted above, to obtain and maintain their
    certification, CDFIs must demonstrate that at least 60 percent of their
    lending activity is directed to one or a combination of target markets:
    economically distressed geographies (Investment Areas); low-income
    targeted populations (LITP) and minority communities, specifically
    African Americans, Hispanics, and Native Americans (other targeted
    populations--OTP). One of CDFIs' most important values to these
    communities is their ability to provide responsible and affordable
    mortgage lending for first-time homebuyers, lending to small
    businesses, and offer flexible underwriting for community facilities.
    The financial products offered by CDFIs are designed to support the
    specific needs of the borrower, particularly low- and moderate-income,
    as well as minority borrowers, as most are fixed-rate and self-
    amortizing with lower origination fees. This keeps payments affordable
    and allows borrowers to decrease the principal, so the loan is actually
    paid off at the end of the term. Although these products provide much-
    needed credit in their respective communities, their specialized nature
    may set them apart from conventional mortgage products. NAFCU has urged
    the Federal Housing Administration (FHA) to introduce additional
    programs that provide insurance for CDFI loans and that make it easier
    for these communities to have access to FHA-backed mortgage products.
        We recommend that Congress require the U.S. Department of Housing
    and Urban Development to conduct a study to determine the level of
    participation of CDFIs in FHA loan insurance programs and offer
    targeted training and resources to grow the number of CDFIs that are
    FHA-approved lenders.
    De Novo Credit Unions
        The rising cost of compliance deters many would-be de novo (start-
    up) credit unions. Additionally, the initial capital infusion and cash
    outlays are often too great for many communities and associations, and
    there is little to no return on investment. Starting a new credit union
    is essentially an altruistic endeavor, as there is no ultimate
    financial incentive for those that are successful, and the costs and
    hurdles can be discouraging. Furthermore, the complex chartering
    process is relatively easy and straightforward when compared to what a
    de novo credit union will face once it is chartered and operating. All
    of these factors contribute to a significant decline in the pace of de
    novo credit unions post financial crisis.

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        The chart above outlines the number of de novo federally insured
    credit unions chartered since the year 2000.
        The NCUA takes an active role in helping new credit unions form and
    provides support. NAFCU appreciates the NCUA's strategic focus on
    easing barriers to the formation of new credit unions, including
    streamlining the chartering process, offering assistance to groups
    attempting to establish a new credit union in earlier stages, and
    providing newly formed credit unions with additional flexibility in
    meeting regulatory requirements.
        Still, the NCUA's abilities are limited by what is allowed under
    statute. NAFCU urges Congress to modernize the FCU Act to promote the
    chartering of de novo credit unions and to provide greater flexibility
    regarding prompt corrective action capital requirements for de novo
    credit unions. Although the FCU Act gives the NCUA the authority to
    offer some prompt corrective action flexibility for new credit unions,
    expanding the agency's authority would be helpful.
    Subordinated Debt
        Congress may provide more flexibility to credit unions' ability to
    serve low- and moderate-income individuals in their communities by
    supporting the NCUA in its efforts to permit credit unions to issue
    subordinated debt. Currently, low-income credit unions are able to
    offer a form of subordinated debt called secondary capital. Low-income
    credit unions may issue secondary capital accounts to non-natural
    persons and these accounts are generally treated as regulatory capital.
    The approval process to offer secondary capital can, however, be
    complex. NAFCU appreciates the NCUA's recent supervisory guidance
    pertaining to the evaluation of secondary capital plans, as it provides
    valuable insight into why a secondary capital plan may be denied.
    Nonetheless, NAFCU continues to urge the agency to provide further
    support and guidance to low-income credit unions so they can better
    utilize this important resource.
        NAFCU advocates for a more streamlined process for the approval of
    secondary capital applications. Although every secondary capital plan
    is necessarily different depending on the credit union in question, the
    process should be more standardized to help credit unions anticipate
    and better prepare their secondary capital plans for approval.
    Additional flexibility, guidance, and other resources, particularly on
    how credit unions can more comprehensively project future performance
    over a reasonable time horizon would be helpful as many low-income
    credit unions continue to face obstacles in the approval process.
    Additionally, NAFCU supports improved flexibility in credit unions'
    capital framework to enhance consistency across regions regarding the
    treatment of secondary capital as it applies to a credit union's net
    worth calculation. Taking the steps outline above, as well as
    supporting existing proposals such as S. 3441, the CDFI Bond Guarantee
    Program Improvement Act offered by Senators Tina Smith, D-MN, and Mike
    Rounds, R-SD, would go a long way to helping meet the needs of CDFIs
    and allowing us to meet the challenges that arise.
    Conclusion
        MDIs and CDFIs play a vital role in the daily lives for millions of
    Americans. Preserving MDI and CDFI credit unions and fostering the
    development of new ones would continue to grow the financial industry
    as an inclusive part of the American economy.
        Credit unions throughout the country are proud of the work they
    have done to serve minority and underserved populations. We urge the
    Subcommittee to support improving the CDFI experience, including
    regulatory relief for credit unions and support for modernizing and
    updating the FCU Act. Allowing established credit unions to service the
    communities that need the most help and providing pragmatic regulatory
    relief for chartering new credit unions would bring more Americans into
    financial institutions that put their financial well-being over
    profits.
        Thank you again, Chair Warnock, Ranking Member Tillis, and Members
    of the Subcommittee for the invitation to testify before you today. I
    welcome any questions you might have.
                                     ______

                      PREPARED STATEMENT OF JOEL GRIFFITH
         Research Fellow, Financial Regulations, Heritage Foundation,
                                 Washington, DC
                                February 9, 2022

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            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                          FROM ROBERT JAMES II

    Q.1. I appreciated your participation in the February 9, 2022,
    Subcommittee hearing. As we discussed during the hearing, a
    common refrain by those concerned by CDFis is the lack of
    concrete data that can be used to analysis and vet their
    efficacy. Specifically, the Carsey Institute at the University
    of New Hampshire, which issued a report on CDFis at the behest
    of the CDFI Fund, notes, ``In developing this report, the
    research team encountered significant data limitations at every
    turn'' and identifies ``inadequate data and nonstandardized
    auditing practices'' as significant barriers to CDFis achieving
    better capitalization.
        Can you speak to the current data limitations you believe
    exist in the CDFI structure and their data reporting
    requirements?

    A.1. Senator, while we would agree that there are limitations
    on how the data provided to the Fund is standardized and
    utilized the NBA does not agree that there is a lack of
    sufficient data provided on the operation of CDFIs. Much of the
    limitations on standardizing the data is due to the wide array
    of institutions that are certified as CDFI (loan funds, credit
    unions, MDIs, nonprofits, etc.) In many instances, the only
    common thread amongst these different types of CDFIs is their
    mission-driven mandate. We believe it is critically important
    to take this into consideration when examining the data
    available on the operation of individual or classes of CDFIs
    from a capitalization perspective.
        CDFIs as a whole provide extensive data, often at great
    expense, on an annual basis to the Community Development
    Financial Institutions Fund (CDFI Fund) as part of their
    certification requirements and prudential regulator as a part
    of their Community Reinvestment Act (CRA) reporting
    obligations. There is significant overlap in the data provided
    to each respective entity and in our view is sufficient to
    provide insight into the capital needs of these institutions.
    The CDFI Fund produces an annual certification and data
    collection report (ACR) which allows the Fund to gain insight
    on the CDFI industry. Certified CDFIs are required to submit
    ACRs on an annual basis through the CDFI Fund's Awards
    Management Information System (AMIS). CDFIs are required to
    submit their ACR within 90 days of the end of their
    organization's fiscal year. Failure to submit a required ACR
    may result in a loss of Certification status and additional
    sanctions for CDFIs that are award program recipients. This ACR
    report provides key summary data and comparisons by CDFI
    institution type (including banks/thrifts, credit unions, loan
    funds and venture capital funds).
        The ACR is comprised of four main sections:

        Section 1: Organizational Information--collects
            organizational profile information, line(s) of
            business, governance structure, and details related to
            the seven requirements for Certification.

        Section 2: Financial Data Detail--collects
            information and data related to a Certified CDFI's
            assets, liabilities, income, expenses, and loan and
            investment portfolio.

        Section 3: Financial Products Portfolio Breakdown
            Detail--collects specific data related to Financial
            Products, types and subtypes of loans and investments,
            as well as detailed Target Market activity.

        Section 4: Development Services Detail--collects
            information on Development Services provided by a
            Certified CDFI, including clients served and
            Development Services provided in Target Markets.

        These annual data reports provide evidence of how CDFIs are
    providing Financial Products and Development Services to
    distressed communities and underserved populations while
    maintaining safety and soundness. Below is a snapshot from the
    2020 ACR report from the CDFI Fund.
        Loan funds constitute the largest share of Certified CDFIs.
        Certified CDFIs are located in all 50 States as well as
    several U.S. territories.
        Loans are the dominant Financial Product (in contrast to
    equity investments and loan guarantees) offered by Certified
    CDFIs by dollar amount and count.
        Consumer financing is the most reported type of financing
    provided in both count and dollar amount.
        Financial education is the most popular Development Service
    used by clients of Certified CDFIs.
        Certified CDFI credit unions report the highest total
    assets amount and the most financing capital available.

    Q.2. The authors of the Carsey report go on to say, `` . . . it
    is currently simply impossible to make the most routine
    analyses that are normally conducted with other classes of loan
    assets. It is not possible, for example, to create a breakdown
    of default rates or prepayment speeds for a given class of CDFI
    loans, or even to provide a breakdown of borrower credit
    scores. What is ironic about this is that CDFI managers feel
    they are swamped with reporting requirements, which they
    routinely fulfill. It is difficult to reconcile how CDFIs can
    be doing so much reporting yet have so little to show for it.''
        I believe we must reconcile the lack of actionable data
    from CDFIs with the feedback that CDFI managers feeling
    ``swamped with reporting requirements.''
        What areas of CDFI reporting requirements should
    policymakers look at to broaden pertinent data sets?
        Likewise, what areas would be helpful for policymakers to
    streamline to ease burdens?

    A.2. Senator as noted previously we believe our member
    institutions as a class of CDFI provides significant data on
    the financial products we offer to the communities that we
    serve. I will speak for that class, MDIs, with regards to your
    very important question. The NBA strongly support the purposes
    and objectives of CRA, but we believe it is long overdue for an
    overhaul that recognizes the differences between the types of
    institutions that are subject to it. Enacted 40 years ago, CRA
    has been instrumental in ensuring LMI communities have access
    to credit and financial services, but the last significant
    regulatory overhaul of CRA occurred two decades ago. In that
    time, the financial services industry has radically changed
    but, CRA has not. We strongly support modernization that
    ensures CRA does not lose effectiveness for LMI communities and
    that also creates a regulatory framework that streamlines
    financial institutions' ability to comply with the CRA. The
    success of CRA reform effort should be measured by whether it
    will result in more credit and services delivered to LMI
    communities that doesn't create unnecessary regulatory burdens
    on the financial institutions that best serve these
    communities.
        Federal regulators and Congress have recognized that MDIs
    play an important role in addressing the need for financial
    services in minority communities. Regulators have been charged
    by Congress to regulate in a way to promote and sustain MDIs.
    This is done as a way to help remedy past practices by the
    banking industry and the Federal Government that have made it
    more difficult for minorities to achieve financial success. Yet
    CRA rules as currently written are applied in a way that puts
    MDIs at a disadvantage compared to mainstream banks. We have
    consistently provided feedback on modernizing the CRA, but
    unfortunately this has taken place after proposals have already
    been released by regulators. In this instance we are glad to
    provide you our view ahead of the proposed rules in an effort
    to have those changes reflect the reality all of our member
    institutions face while serving our communities.
        As previously noted, the vast majority of the Association's
    member institutions are also CDFIs requiring that they annually
    certify that no less than 60 percent of their lending activity
    occurs in LMI communities. In many instances, the work that the
    Association's member institutions do to retain their CDFI
    certification would either be sufficient for meeting their CRA
    obligations or includes activities that should largely be CRA
    qualifying activity. Unfortunately, there is no reciprocity
    between the CDFI certification, data collection, reporting, and
    recordkeeping process and what is required for CRA examinations
    despite clear overlap in objectives and qualifying activity
    regarding both the CRA and the requirements for CDFI
    certification. We believe that regulators should use this new
    proposed rule as an opportunity to change this dynamic.
        Many of our smallest member institutions that are CDFIs
    expend staff and financial resources to comply with competing
    regimes that should otherwise be aligned. The proposed
    regulations do not provide accommodations for CDFIs that would
    streamline their CRA obligations or that allows CDFIs to enjoy
    a rebuttable presumption of CRA compliance (at least a
    ``Satisfactory'' rating). We believe that the proposed
    regulations in the past consistently missed the opportunity to
    eliminate--or at least reduce--the regulatory burdens that
    mission-driven lenders face and to harmonize what should be
    complementary regulatory regimes. Specifically, we would
    recommend considering the following accommodations for MDIs in
    meeting their CRA obligations:
        MDIs should be able to submit their Annual Certification
    and Data Collection Report Form and be deemed in compliance
    with both the existing CRA reporting, data collection, and
    reporting requirements as well as the newly proposed
    requirements; and
        Deemed compliance shall constitute an ``Outstanding
    Rating'' given the kinds of investments and the scale of
    investments (60 percent of a CDFI's financing activities must
    occur in LMI areas) necessary to obtain and maintain CDFI
    certification.
        While we hope regulators will exempt MDIs from the current
    CRA regime based on their mission and CDFI compliance, if that
    is not possible, we hope the following recommendations are
    considered in the base text of any new proposed rule. First,
    providing clarity around the description of CRA qualifying
    activity regarding MDIs. We recommend modifying the current
    language to include ``capital investment, deposits, loans, all
    loan participations, other financial and nonfinancial support,
    or other ventures undertaken.'' We believe this will eliminate
    any ambiguity with examiners that the full range of non-MDI
    bank support to MDIs is always CRA qualified activity.
        In addition to the support our institutions receive from
    non-MDIs, we believe the CRA should encourage MDIs to invest in
    themselves. The CRA regulations should not impose more
    stringent qualification criteria on MDIs than it does on other
    banks. Something that is CRA qualifying at a mainstream bank
    should also be CRA qualifying at an MDI. If a mainstream bank
    invests some of its earnings and capital in an MDI instead of
    paying it as dividend to shareholders, it receives CRA credit.
    But if an MDI retains some of its earnings and invests in
    itself instead of paying that portion of earnings as a dividend
    to shareholders, it does not receive credit. Similarly, a
    mainstream bank can get CRA credit for buying or selling
    participation interests in loans to or from MDIs. But MDIs
    routinely buy and sell loan participations among one another in
    order to increase our lending and reduce risk, but MDI banks do
    not get CRA credit for this. The reason that has been given is
    that this is business as usual for an MDI and not a CRA
    initiative. But should a bank not get CRA credit for building
    CRA goals into its core business model and only get credit if,
    as with mainstream banks, it is something only done through the
    CRA Department of the bank.
        Another example of MDI status being disregarded under the
    current CRA rules is that an outreach program by a large
    mainstream bank to a particular ethnic group may receive CRA
    credit, but a program by a minority bank aimed at the same
    ethnic group might not receive positive mention because it is
    viewed as part of their business as usual and not part of their
    specific CRA program. We do not believe these results are
    mandated by the current CRA law or rules but that is how they
    are often implemented. An MDI, where CRA is business as usual,
    should get the same CRA credit for the same activities as a
    mainstream bank where the activity is done through the CRA
    Department.
        Second, we feel it is important for the CRA to provide for
    a multiplier for capital investments in MDIs--irrespective of
    an MDI's location. The soon to be withdrawn rule addresses this
    issue with respect to the kinds of activity that potentially
    warrant CRA multipliers to encourage banks to engage in certain
    types of activity and we hope this language is included in the
    revamped rule. The Association takes the position that our
    institutions over-index in the impact that our activity has in
    meeting the credit needs of LMI and/or communities of color.
    And, like many minority-owned businesses, our member
    institutions often encounter significant barriers to raising
    capital due in part to the mission-oriented lending our banks
    tend to engage in. The Act has long provided for CRA credit for
    capital investments in MDIs, but the instances where
    institutions have taken advantage of this provision to make
    capital investments in MDIs has been sporadic at best. To that
    end, we believe that a multiplier for capital investments in
    MDIs above a specified minimum threshold sends the appropriate
    signal to the potential bank investors, and it would directly
    support the community development work that CRA seeks to
    encourage and that MDIs already engage in. We also recommend
    that capital investments in MDIs always be CRA-eligible
    multiplier effect activity even if an MDI is not in the CRA
    assessment area of the institution making the capital
    investment. This reflects the limited geographic reach of many
    MDIs, and if adopted, would maximize the potential
    opportunities for CRA-qualified capital investment in MDIs.
    Finally, any final rule should vary the multiplier across
    qualifying activity with an MDI such that capital investments
    receive the highest multiplier.
        We strongly believe these long overdue changes will lead to
    a much more robust MDI sector and allow regulators to adhere
    more closely with their charge of to regulate in a way to
    promote and sustain MDIs.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                           FROM JEANNE KUCEY

    Q.1. I appreciated your participation in the February 9, 2022,
    Subcommittee hearing. As we discussed during the hearing, a
    common refrain by those concerned by CDFIs is the lack of
    concrete data that can be used to analysis and vet their
    efficacy. Specifically, the Carsey Institute at the University
    of New Hampshire, which issued a report on CDFIs at the behest
    of the CDFI Fund, notes, ``In developing this report, the
    research team encountered significant data limitations at every
    turn'' and identifies ``inadequate data and nonstandardized
    auditing practices'' as significant barriers to CDFIs achieving
    better capitalization.
        Can you speak to the current data limitations you believe
    exist in the CDFI structure and their data reporting
    requirements?

    A.1. Many CDFIs are smaller financial institutions where
    increased data collection could become a significant burden,
    which could present increased costs and hinder the mission of
    the Fund to help communities in need. We believe the Fund
    should recognize the role of mission-driven regulated financial
    institutions, such as credit unions, that are already heavily
    regulated and supervised and/or examined by a Federal
    regulator, as compared to other entities that participate in
    the CDFI program and are certified by the Fund. Credit unions
    are subject to regulatory audit requirements and must maintain
    comprehensive financial statements. Expanded data reporting
    should only serve as a way for the Fund to oversee these other
    entities that may not be regulated elsewhere by the Federal
    Government.

    Q.2. The authors of the Carsey report go on to say, `` . . . it
    is currently simply impossible to make the most routine
    analyses that are normally conducted with other classes of loan
    assets. It is not possible, for example, to create a breakdown
    of default rates or prepayment speeds for a given class of CDFI
    loans, or even to provide a breakdown of borrower credit
    scores. What is ironic about this is that CDFI managers feel
    they are swamped with reporting requirements, which they
    routinely fulfill. It is difficult to reconcile how CDFIs can
    be doing so much reporting yet have so little to show for it.''
        I believe we must reconcile the lack of actionable data
    from CDFIs with the feedback that CDFI managers feeling
    ``swamped with reporting requirements.''
        What areas of CDFI reporting requirements should
    policymakers look at to broaden pertinent data sets?

    A.2. I appreciate the Committee's effort to improve the data
    regarding lending done by CDFI's. We all want to ensure that
    taxpayer dollars are used efficiently and properly. I think
    that the best answer to your question about CDFI's and their
    reporting burdens is to look at the totality of reporting
    required for small institutions like mine. Many CDFI's are very
    small financial institutions, with limited staff. Small insured
    depository CDFIs are still subject to the whole array of
    reporting requirements for a depository institution, including
    HMDA, SARs, CTRs, and many more. These requirements all carry
    with them liability for penalties from the regulators for
    mistakes and errors. At a smaller institution, like many CDFI
    credit unions are, these reports are often filled out by just
    one or two people. Adding on yet another report would be
    another burden to bear. So, while I support the goal of having
    good information, when I look at the potential burden of
    layering on yet another reporting requirement for being a CDFI
    for my credit union, I have to question whether we could take
    on yet another regulatory reporting requirement. Every dollar
    spent on regulatory reporting requirements is one less dollar
    available to serve our members.

    Q.3. Likewise, what areas would be helpful for policymakers to
    streamline to ease burdens?

    A.3. We believe measures such as the National Credit Union
    Administration's (NCUA) streamlined application for CDFI
    certification must be maintained. Currently, smaller, low-
    income designated credit unions can use a streamlined
    application process, which is helpful for these smaller and MDI
    credit unions as it reduces the burdens associated with the
    certification application. Unfortunately, the Fund has
    announced that new requirements for transaction level data that
    will go into effect in 2023, which will lead the NCUA to phase
    out this streamlined process as they do not have that data to
    assist credit unions with the application. This is an example
    of how more data (from an already heavily regulated entity) may
    provide little additional benefit, but could actually hurt the
    overall program mission as it drives smaller institutions out
    of the program due to increased costs and burdens.
                  Additional Material Supplied for the Record
               LETTER SUBMITTED BY CIRCLE INTERNET FINANCIAL LLC

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                            LETTER SUBMITTED BY CUNA

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