[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.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    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.
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