[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





 
 TAKING ON MORE RISK: EXAMINING THE SBA'S CHANGES TO THE 7(A) LENDING 
                            PROGRAM PART II

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              MAY 17, 2023

                               __________

                              
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

            Small Business Committee Document Number 118-013
             Available via the GPO Website: www.govinfo.gov           
             
                               ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 52-170              WASHINGTON : 2024       
             
             
             
             
             
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Mr. Tony Wilkinson, President and Chief Executive Officer, 
  National Association of Government Guaranteed Lenders (NAGGL), 
  Frisco, TX.....................................................     5
Mr. Ami Kassar, Founder and Chief Executive Officer, Multifunding 
  LLC, Ambler, PA................................................     7
Ms. Alice Frazier, President and Chief Executive Officer, Bank of 
  Charles Town, Charles Town, WV.................................     8
Mr. Manuel Flores, President and Chief Executive Officer, 
  SomerCor, Chicago,IL...........................................    10

                                APPENDIX

Prepared Statements:
    Mr. Tony Wilkinson, President and Chief Executive Officer, 
      National Association of Government Guaranteed Lenders 
      (NAGGL), Frisco, TX........................................    38
    Mr. Ami Kassar, Founder and Chief Executive Officer, 
      Multifunding LLC, Ambler, PA...............................    53
    Ms. Alice Frazier, President and Chief Executive Officer, 
      Bank of Charles Town, Charles Town, WV.....................    60
    Mr. Manuel Flores, President and Chief Executive Officer, 
      SomerCor, Chicago, IL......................................    64
Question and Answer for the Record:
    Question from Hon. Velazquez to Mr. Flores and Answer from 
      Mr. Flores.................................................    74
Additional Material for the Record:
    American Bankers Association.................................    77
    California Association for Micro Enterprise Opportunity 
      (CAMEO)....................................................    82
    Credit Union National Association (CUNA).....................   105
    National Association of Development Companies (NADCO)........   107
    National Association of Federally-Insured Credit Unions 
      (NAFCU)....................................................   134


 TAKING ON MORE RISK: EXAMINING THE SBA'S CHANGES TO THE 7(A) LENDING 
                            PROGRAM PART II

                              ----------                              


                        WEDNESDAY, MAY 17, 2023

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:03 a.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Luetkemeyer, Stauber, 
Meuser. Van Duyne, Molinaro, Alford, Crane, Bean, Velazquez, 
Landsman, McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, 
and Davids.
    Chairman WILLIAMS. I now call the Committee on Small 
Business to order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    The Committee is here today to hear testimony about 
proposed changes to the 7(a) loan program and how it will 
affect lenders and borrowers.
    Thank you all, again, for being here to testify today. I 
now recognize myself for my opening statement.
    I want to welcome you all again into today's hearing, which 
will focus on the Small Business Administration changes to the 
7(a) loan program. At last week's full Committee hearing on 
this vital issue with the SBA, many of our questions went 
unanswered. So I hope today we can serve as a constructive 
conversation on how these changes add unnecessary risk and 
threaten the 7(a) Program's long-term integrity.
    Just 1 day after our hearing last week, Associate 
Administrator Patrick Kelly, who testified before us, was 
dismissed from the agency. While the circumstances around his 
departure are still not clear, there are two logical 
suggestions.
    First, his contempt for the basic congressional oversight 
was apparent, and the SBA did not think his behavior was 
appropriate for the agency. Or second, he submitted his 
resignation months ago and the SBA decided to send someone to 
testify on these major rule changes knowing that he could be 
parting ways with the agency shortly after. Kind of a lame-duck 
witness. Whichever scenario is accurate, both of these are 
extremely concerning as we do our congressional due diligence 
over these new rules.
    Members of this Committee on both sides of the aisle still 
have unanswered questions regarding these changes and are 
concerned that the SBA is continuing to move forward without 
the leadership in place to help make these transitions as 
smooth as possible.
    This concern is not only bipartisan here on this Committee, 
but also is shared by our colleagues in the Senate. Yesterday, 
I, along with Ranking Member Velazquez, Chairman Cardin, and 
Ranking Member Ernst joined a pen letter together to 
Administrator Guzman saying it is our collective belief that, 
at the very least, it is best to find a new permanent head of 
the Office of Capital Access before we begin these changes and 
before they go into effect.
    Finalizing the proposed rule represents the most 
significant changes to the program in decades, and I hope that 
we will be able to have a productive discussion about how the 
changes to the lending criteria will add more risk to the 
taxpayer-backed loan portfolio and how these changes will 
weaken the credit elsewhere test and take the SBA away from 
being the lender of last resort.
    In addition, I hope to discuss SBA's capabilities as a 
regulator and if they are properly equipped to take on this 
increased responsibility, and also if the proper guardrails 
have been installed since the agency let billions of taxpayer 
dollars be stolen from the pandemic loan programs.
    For decades, the 7(a) program has been operating on a 
bipartisan basis to help business get off the ground with their 
capital needs. Unfortunately, I am afraid that these changes 
will lead to a greater default rate that will rely on the 
program to continue to be subsidized by Congress in order to 
remain in existence.
    I am not alone in raising these concerns. The SBA's 
Inspector General himself testified before this Committee and 
noted that there are significant challenges that the agency 
will face in managing the increased loan volume going forward 
as well as the significant shortages of staff within the 
department that oversees this program. So we can not allow the 
SBA to get these rules wrong.
    I will once again call on the Biden administration to slow 
down until we can properly determine how these changes will 
work in practice. And without objection, I would like to submit 
statements for the record from ABA, QNA, and NAFCU regarding 
these rule changes.
    I want to thank you all again for being here with us today, 
and I am looking forward to a more constructive conversation 
today.
    And with that, I will yield to our distinguished Ranking 
Member from New York, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman, for bringing us 
back together on this important topic.
    I would like to start by entering into the record the fact 
that money from taxpayers was stolen because the Trump 
administration didn't put in place the guardrails that were 
needed in order to protect taxpayers' money. I want to be fair 
in terms of that qualification.
    In just one week, there have been quite a few developments, 
so I look forward to our discussion. As we have already 
detailed, the SBA issued two final rulemakings that have 
substantial implications for critical lending programs. Not 
only do the rules make significant modifications, the interplay 
between them and the programs to which they apply are vast and 
complicated. Not every program will be impacted in the same 
ways.
    Last week, much of our hearing focused on the 7(a) program 
and rightly so because it is the agency's flagship initiative, 
providing nearly $15 billion in loans to small firms all over 
the nation.
    Today, I am hoping to hear what these rules mean for 
another program, the 504 CDC loan guaranty program, which is 
administered through nonprofit CDCs. The 504 program provides 
long-term fixed rate financing for major assets such as land, 
buildings, and equipment.
    Through a 100 percent SBA guaranty venture, the CDC 
provides up to 40 percent of financing, while a third-party 
lender provides at least 50 percent, leaving the applicant with 
at least 10 percent of the financing. Last year, the 504 
program delivered over $9.2 billion in capital access, and so 
far this year, it is needing $4 billion.
    As one of our own Members has stated in previous hearings, 
the 504 program can be slow and complicated, making it right 
for an improved streamline process. The affiliation rule helps 
bring some improvements that I welcome by the industry and 
borrowers alike.
    The disparity between the rulemaking's application to the 
SBA lending programs highlights just why this committee is 
taking a deep dive into these policy changes. It is incumbent 
upon us to look at every aspect of what the details truly mean 
and their potential consequences, good or bad. SBA instituted 
these rules to address persistent gaps in access to capital as 
part of the Biden administration's broader economic agenda.
    As I have continuously stated, increasing access to capital 
for underserved entrepreneurs remains my top priority, but I 
would be remiss in my obligation to borrowers and program 
integrity if I didn't do my due diligence. And that is why we 
are here again today--to listen to the industry stakeholders 
and understand their views of the rules on the programs they 
participate in.
    Ensuring the businesses owned by women, people of color, 
and underserved groups have the resources needed to succeed is 
an important goal, and I look forward to hearing another 
perspective of SBA's actions. I remain committed to filling the 
gaps in the market in a bipartisan and thoughtful way and 
pledge to work with SBA stakeholders and my colleagues on the 
House and Senate Committees to find a solution.
    Thank you, Mr. Chairman. I yield back.
    Chairman WILLIAMS. Thank you, Ranking Member Velazquez.
    And I will now introduce our witnesses.
    I will now introduce our witnesses. And it is my pleasure 
and privilege to introduce our first witness, Mr. Tony 
Wilkinson.
    Mr. Wilkinson has served as the president and CEO of the 
National Association of Government Guaranteed Lenders in 
Frisco, Texas for more than 30 years. And prior to joining 
NAGGL, Mr. Wilkinson spent 13 years with the Stillwater 
National Bank as senior vice president and was responsible for 
the bank's SBA lending activities. Mr. Wilkinson is a graduate 
of Oklahoma State University, home of the cowboys, right?
    And, Mr. Wilkinson, thank you for being here today. We look 
forward to the conversation ahead.
    I now recognize--Meuser is not here, and he was going to 
introduce you, Mr. Kassar. So I am going to do it in a Texas 
way, okay? All right.
    Our next witness is Mr. Ami Kassar. Mr. Kassar is the 
founder and CEO of MultiFunding LLC located in Ambler, 
Pennsylvania. Mr. Kassar has dedicated the last two decades of 
his career to ensuring that businessowners and entrepreneurs 
get the best possible financing to grow their businesses. He 
knows far too well the impact that poor financing choices have 
on the ability for a small business to grow.
    In his work as a public speaker and as a founder and CEO of 
MultiFunding LLC, Mr. Kassar has helped thousands of business-
owners and entrepreneurs structure their debt to optimize 
growth and in turn help to create tens of thousands of jobs. 
Mr. Kassar is a graduate of Brandeis University and the 
University of Southern California where he received his 
master's in business administration.
    Mr. Kassar, thank you for being here today, and we look 
forward to the conversation ahead.
    Next, our next witness is Alice Frazier. Ms. Frazier serves 
as president and CEO of Bank of Charles Town in Charles Town, 
West Virginia. She also has recently been appointed to the 
board of directors of the Federal Reserve Bank of Richmond.
    Including her current position with BCT, Ms. Frazier has 
over 32 years of local banking experience, including with 
Cardinal Financial Corporation as executive vice president and 
chief operating officer, BB&T as senior vice president in 
Loudoun County, and Middleburg Financial Corporation as chief 
financial officer and chief operating officer, which is where 
Ms. Frazier began her banking career. Prior to that, she worked 
for 4 years in public accounting with a national and regional 
firm.
    Ms. Frazier is a graduate of Stonier. Is that how you say 
it? Stonier Graduate School of Banking and Radford University.
    Ms. Frazier, thank you for being here today, and we look 
forward to the conversation ahead with you.
    And I now recognize the Ranking Member from New York, Ms. 
Velazquez, to briefly introduce our last witness appearing 
before us today.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    It is my pleasure today to welcome back to our committee 
Mr. Manny Flores, President and Chief Executive Officer of 
SomerCor, an SBA Certified Development Company located in 
Chicago, Illinois.
    In addition to making 504 loans, SomerCor is an active 
lender in the SBA Community Advantage Pilot Program and a 
Member of the National Association of Development Companies, or 
NADCO.
    Mr. Flores first joined SomerCor as a Board Member in 2016 
and was appointed to his current role in 2018. Prior to 
SomerCor, he held elected office as a Chicago city 
Councilmember and served as Director and Acting Secretary of 
the Illinois Department of Financial and Professional 
Regulation.
    We are glad to have you with us today. Welcome.
    I yield back.
    Chairman WILLIAMS. Thank you, Ranking Member Velazquez.
    And we appreciate all of you, again, being here today.
    Now, before I recognize the witnesses, I would like to 
remind all of you that your oral testimony is restricted to 5 
minutes in length. If you see the light turn red in front of 
you, it means your 5 minutes have concluded, and you should 
wrap up your testimony. And if you don't wrap it up, I will 
beat on the gavel, and you will get the idea, okay?
    So with that, I now recognize Mr. Wilkinson for his 5-
minute opening remarks.

   STATEMENTS OF TONY WILKINSON, PRESIDENT & CEO, NAGGL; AMI 
    KASSAR, FOUNDER & CEO, MULTIFUNDING LLC; ALICE FRAZIER, 
   PRESIDENT & CEO, BANK OF CHARLES TOWN; AND MANUEL FLORES, 
                   PRESIDENT & CEO, SOMERCOR

                  STATEMENT OF TONY WILKINSON

    Mr. WILKINSON. Thank you, Mr. Chairman, Ranking Member 
Velazquez, and Members of the Committee.
    Let me start by saying, Mr. Chairman, I agree with your 
opening statement. In the 36 years I have been NAGGL's CEO, I 
have never seen changes more sweeping and potentially damaging.
    SBA is removing long-standing underwriting guardrails that 
have assured prudent lending in the 7(a) program, while 
simultaneously adding an unlimited number of nonfederally 
regulated lenders. Worse, SBA will serve as primary regulator 
for these new entities, a role that it is not equipped for.
    SBA's stated intent for these changes is laudable, increase 
access to capital for underserved markets, and streamline 
processes. The lending industry wholeheartedly supports those 
goals, but the recent rules do not achieve what SBA is setting 
out to do.
    And the biggest change between the proposed and final 
rules, SBA removed any mention of underserved markets from the 
regulatory language. SBA's data shows that in fiscal year 2022 
more than 75 percent of all loans are estimated to be small-
dollar loans, 68 percent of all loans going to underserved 
markets, far exceeding SBA's 43 percent goal, and nearly one-
third of all loans going to minority-owned businesses. There is 
always room for progress, but these numbers don't show the 
market failure that SBA has described.
    First, on underwriting, the rules remove guidelines that 
ensure lender behavior and portfolio performance stay at an 
acceptable level. SBA has described the new standard as ``do 
what you do'', leaving it up to lenders to determine what is 
prudent. I fear that removing these guardrails creates a race 
to the bottom in credit quality.
    Today's 7(a) loans are not funded by taxpayer dollars 
because current loss rates assure that the borrower and lender 
fees cover the cost of loans. Removing the underwriting 
guardrails mean that losses could increase, and Congress either 
will have to raise fees on borrowers and lenders or provide an 
appropriation; otherwise, this program shuts down. A lose-lose.
    After throwing out the rule book, SBA is telling the new, 
nonfederally-regulated lenders--presumably fintech--that they 
can do whatever they think is prudent. SBA said in 2021 rules 
that it could not be the primary regulator for more lenders 
because it will lack the oversight capability and cited an 
increased risk to the agency.
    Just 22 months and later and with no evidence of changed 
capacity, SBA has reversed itself. And despite SBA's assertion 
that it will add just three additional regular SBLC licenses, 
the truth is, it is just three for now. The rule doesn't have 
any limits. And SBA is also adding mission lenders currently 
participating in the Community Advantage Pilot Program as 
SBLCs, which is more than 100 entities.
    The capacity and resources of SBA's oversight functions 
both fall short. Funding has been stagnant for nearly 10 years. 
There is a failure to even meet current oversight requirements, 
and the IG identified staff vacancies of 40 percent, just to 
name a few concerns.
    But even with more resources, SBA still lacks the 
regulatory framework necessary to oversee lenders on an 
enterprise risk level. This is made worse because the final 
rule removed the restriction that limited SBLCs to only making 
SBA loans, increasing the oversight burden significantly.
    Currently, SBA does not regulate for Bank Secrecy Act or 
Know Your Customer or even the most basic consumer protections. 
And the rules go even further. SBA now allows a business to 
qualify as small, even if it is controlled by a large business. 
It will be the large business, not the small, that will be the 
primary beneficiary of an SBA loan.
    SBA also drastically altered the credit elsewhere to 
nothing more than a check-the-box exercise, inviting fraud like 
we saw in PPP. And now SBA allows borrowers with significant 
personal wealth to qualify for loans, flying in the face of the 
statutory mandate to only give a 7(a) loan to borrowers who 
could not get credit elsewhere.
    Finally, politicizing SBA decisions should concern 
everyone. Under the affiliation rule, the SBA administrator can 
now reverse a loan denial. This change allows politics to seep 
into determining SBA loans. And the biggest concern, the harm 
to borrowers, particularly the underserved, who would be faced 
with higher fees, the possibility of receiving loans they 
cannot repay, and lenders who have no federal regulator that 
ensures consumer protections.
    This Treasury Department, Mr. Clyburn, House Oversight 
Committee, the IG community, and more all point out significant 
concerns with the concepts and the underlying rules, yet SBA 
has not heeded any warnings. Lenders are not concerned about 
competition, nor is this about being anti-fintech, but SBA is 
not inviting fintech into the program we all know and trust. 
SBA is inviting fintech into a very changed program devoid of 
guardrails.
    I am profoundly opposed to imprudent changes that could 
harm underserved markets and damage the 7(a) loan program. 
Participating in a government program requires responsible 
stewardship, especially when the current portfolio is nearly 
$107 billion in outstanding principal balances with the 
government liable for roughly 75 percent of that. Congress 
should require strong guardrails when the federal government is 
the backstop.
    While SBA could change course, I see little evidence it 
will, especially when it has repeatedly ignored congressional 
and industry concerns. I implore you to legislatively act 
because the future of this program might very well depend on 
Congress reversing these rules. Otherwise, the program that 
fuels mainstream America will be in jeopardy and our most 
vulnerable small businesses harmed. Thank you.
    Chairman WILLIAMS. Thank you. Right on time. I appreciate 
that.
    Next, I will recognize Mr. Kassar for his 5-minute opening 
remarks.

                    STATEMENT OF AMI KASSAR

    Mr. KASSAR. Thank you for the honor of testifying today to 
share my thoughts on the changes to the SBA program that deeply 
concern me.
    My name is Ami Kassar, and I am the founder and CEO of 
MultiFunding LLC, a loan brokerage and consultancy company 
based in the suburbs of Philadelphia. Since 2010, my team and I 
have heard the stories of thousands of entrepreneurs over the 
years. In our work, we strongly recommend the SBA 7(a) program 
and have helped borrowers receive nearly $400 million of 7(a) 
loans nationwide.
    There are three primary points I want to leave you with 
today. First, traditional SBA 7(a) lending has few similarities 
to the EIDL program or the Restaurant Revitalization Fund that 
we heard about last week.
    Secondly, when entrepreneurs take loans without a clear 
path to pay them back, there can be devastating consequences 
for both the lenders and the entrepreneurs. All of the proposed 
SBA changes will make it much easier to get a loan, leaving 
many to take loans before they are ready for them.
    And finally, if you make wholesale changes to the SBA 7(a) 
program all at once, it will be impossible to understand the 
impact of each change.
    Let's begin with comparing the 7(a) program to the EIDL 
program and Restaurant Revitalization Fund, which was a common 
thread of testimony in front of this Committee last week.
    The Restaurant Revitalization Fund was a grant program. It 
did not issue loans, and recipients did not have to repay the 
grants. Therefore, comparing this program to the 7(a) program 
is nonsensical to me. The EIDL program is a story that requires 
unpacking.
    First, 378 billion was lent to 3.9 million small businesses 
without proof of economic injury. The repayment data has barely 
started to come in. That said, I suspect we will learn a lot 
from EIDL loans about what happens when you lend money to 
businessowners who don't have a clear plan to pay it back. And 
this is what I fear will happen if we simplify SBA lending.
    In this spirit, I want to share a story with you. One night 
during the pandemic, I was asked to teach a virtual SBA class 
for a female entrepreneurship group at an African American 
church in Philadelphia. About a dozen women who were trying to 
get side hustles off the ground attended.
    As the session began, I quickly realized that the last 
thing these entrepreneurs needed was a loan. You see, like many 
entrepreneurs, they thought they needed more money to get 
started than they did. But in every case, there were far less 
expensive ways to get their concept off the ground than they 
thought.
    One woman wanted to start a business baking desserts for 
restaurants that didn't offer them. She was convinced she 
needed to borrow $50,000 to open a kitchen. She had yet to 
consider that she could prove her concept by baking in her home 
kitchen or renting a kitchen during off-hours at a local 
restaurant to get started.
    But here is the thing. If an unregulated fintech lender 
offered these budding entrepreneurs an SBA loan that will land 
in their bank accounts in a few days, every one of these 
entrepreneurs would jump on the opportunity. Is that what we 
want for the SBA program?
    In today's world, borrowers write business plans, build 
projections, and make business cases for their needs. They have 
to have their books in order. Now, the SBA wants to throw much 
of this out of the window. It is a recipe for disaster and will 
lead to much higher delinquencies, in my opinion. And a 
delinquent debt to the United States Government is not a good 
mark on a budding entrepreneur's resume.
    I am all for change, but you take significant risk if you 
make too much change too quickly. Broadening access to capital 
is a worthy goal. But now the SBA proposes changing too much, 
too soon in an uncontrolled environment. If all these changes 
go forward as it looks like they will, I predict we will return 
to this room in 2 years to try to explain the growing default 
rates. And the problem will be we won't be able to understand 
the root causes because of all the vast changes being made all 
at once.
    I remember some important lessons from science class in 
high school. If you are going to try and experiment, test one 
variable at a time. You cannot read the results if you try 
everything at once. The checks and balances of the SBA system 
can be exceedingly frustrating, but they help borrowers and 
lenders in the long run.
    We are in the business of issuing loans insured by the U.S. 
taxpayer. This is not a responsibility we take lightly. With 
these simultaneous changes, we risk blowing up a long-standing 
healthy program, like the SBA, that positively impacts our 
economy.
    I implore Congress to slow down the SBA train that has 
already left the station and create a more cautious path for 
the SBA in the future. Let's evolve and grow and try new things 
but in a measured and thoughtful way. Thank you very much.
    Chairman WILLIAMS. Thank you. Good job on the timing.
    And now, I would like to recognize Ms. Frazier for her 5-
minute opening remarks.

                   STATEMENT OF ALICE FRAZIER

    Ms. FRAZIER. Chairman Williams, and Ranking Member 
Velazquez, and Members of the Committee, I am Alice Frazier, 
president and CEO of Bank of Charles Town, a $790 million 
community bank serving the markets of West Virginia, Maryland, 
and Virginia.
    I testify today on behalf of the Independent Community 
Bankers of America where I am Chair of the Bank Operations 
Committee and a Member of the Board.
    My bank has been an SBA lender for over 40 years, and I am 
proud to say that more than half of the SBA loans over the past 
18 months were made to minorities or women borrowers. And we 
share with this Committee the goal of preserving and protecting 
the integrity of the SBA 7(a) program, while continuing to make 
prudent loans to smaller and underserved businesses.
    The new SBA rules, which were rushed through the process 
without any input from Congress or industry, will undermine 
this critical goal. And we recommend the agency hit the pause 
button, convene a working group of existing SBA lenders to 
determine how we can better align the program with the SBA 
mission of reaching the smallest businesses and entrepreneurs.
    Current lenders know where the challenges lie and should be 
given the opportunity to craft a program that works better. We 
believe the SBA's new small business lending company rule, 
which would admit nonbank financial technology companies or 
fintechs to the 7(a) program, is a serious threat to its 
integrity.
    And moreover, the new affiliation rule and revisions to the 
SOP appear to be specifically designed to accommodate nonbank 
fintechs. Online-only lending can never be a substitute for on-
the-ground community bank lending. The business model of a 
nonbank fintech that snap approval and rejection of a loan and 
quick disbursement of funds is often not in the borrower's best 
interest.
    We have a client who had previously obtained two quickly-
disbursed fintech loans of less than $30,000 each. The fintech 
provided no counseling on how to put that money to good use. In 
fact, he was overpaying himself, resulting in losses each year. 
He won a Navy contract, but couldn't find a lender because of 
his losses. And we worked with him to help him understand what 
lenders look for in reviewing a credit application. And 
ultimately, we were able to secure for him a $150,000 SBA loan.
    You see, the community bank model is really quite 
different. We partner with our small business borrowers and are 
vested in the long-term growth and success. The reality is that 
once the loan is funded, that relationship has really only just 
begun. We provide practical, real-world business counseling and 
networking opportunities, particularly for start-ups, in a way 
that can never be matched by an online-only lender.
    The best thing for an underserved borrower is to work with 
a lender that is committed to their success. A small African 
American 8(a) government contractor applied to us for a 
$150,000 loan. She had recently won a couple contracts, but her 
low credit score made it impossible for us to approve her loan 
application at that time. And rather than just turn her away, 
we worked with her for over a year and a half to increase her 
credit score and then celebrated when we were able to give her 
an SBA loan. I cannot imagine a nonbank fintech lender standing 
by a loan applicant for a year and a half.
    We are committed to working with this Committee and the SBA 
to ensure the 7(a) program is reaching the smallest underserved 
borrowers. But I also think we should appreciate what the 
program is already achieving. For example, according to the 
SBA's own data, 68 percent of the loans in fiscal year 2022 
were made to underserved borrowers. This far exceeds the 
agency's target of 43 percent. And also in fiscal year 2022, 
one in three 7(a) loans were to minority-owned businesses.
    I fully expect nonbank fintech loans to have a higher 
default rate and higher incidents of fraud, similar to the 
results of the Paycheck Protection Program. The cost associated 
with more defaults and fraud will drive fees higher and make 
the program more costly and less accessible.
    We urge this Committee to exercise robust oversight on the 
7(a) program with the goal of safeguarding its integrity. Thank 
you, again, for this opportunity to share my perspective, and I 
am happy to answer any questions you may have.
    Chairman WILLIAMS. Thank you very much, Ms. Frazier. Good 
job.
    I now recognize the witness, Mr. Flores, for his 5-minute 
opening remarks.

                   STATEMENT OF MANUEL FLORES

    Mr. FLORES. Chairman Williams, Ranking Member Velazquez, 
and distinguished Members of the Committee, thank you for 
having me today.
    My name is Manuel Flores, and I am the president and CEO of 
SomerCor, a Certified Development Company based in Chicago, 
Illinois, a Member of the National Association of Development 
Companies. I am honored to represent the CDC industry to 
discuss rule changes affecting the lending programs at the 
Small Business Administration.
    CDCs are nonprofit organizations certified by the SBA who 
meet our economic development mission through the delivery of 
the SBA's premier economic development program, the 504 loan 
program, as well as the 7(a) Community Advantage Pilot Program, 
the microloan program, and other federal and state initiatives.
    My comments today will focus particularly on the 
affiliation and lending criteria as it relates to the 504 
program. The 504 loan program is a prime example of the 
successful public-private partnership with a loan structure 
that pairs the CDC--which provides up to 40 percent of the 
financing for an eligible project through 100 percent SBA-
backed venture--with a banking partner, typically, which 
provides 50 percent of the financing, thus requiring only a 10 
percent down payment from the small business borrower.
    The program finances commercial real estate, including 
construction costs and equipment, with terms of 10, 20, and 25 
years at a fixed below-market interest rate. An important 
cornerstone and differentiator of the 504 loan program is its 
economic development mission. To be eligible for a 504 loan, 
the project must create jobs or meet a public policy or 
community development goal.
    The result is a zero-subsidy program that has served more 
than 175,000 small businesses, provided more than $100 billion 
into ventures, and leveraged private sector financing for an 
estimated total investment of more than $250 billion in local 
economic development, all at no cost to the taxpayers.
    In addition, the 504 programs have a collective performance 
of a 0.5 percent charge-off rate over the last decade. This is 
in part a result of the multi-stop underwriting and approval 
process that includes loan review by the CDC, a third-party 
lender, and the SBA. Combine the extensive oversight of CDCs by 
the SBA with the underwriting and approval process of the 504 
program, and it becomes clear why it performs so well.
    Unfortunately, despite some of the program's successes, the 
504 program can be weighed down by a complex approval process 
that can adversely affect the borrower. The CDC lending 
industry has advocated for regulatory changes to create 
efficiencies in the approval process for over a decade, 
including many of the adjustments to affiliation and 
underwriting included in the recent final rule.
    Now, NADCO largely supports the intent of these changes, 
which will provide CDCs the flexibility to be reasonable while 
continuing to use prudent underwriting practices that focus on 
ensuring repayment ability.
    As you consider congressional action in response to these 
rules, I offer the following recommendations. First, there are 
several lending programs that the SBA impacted by these rules 
who operate differently, and a one-size-fits-all approach is 
not the best way to expand small business lending. It is 
important to continue differentiating the programs and 
approaching their implementation through this lens.
    Second, while Congress continues to weigh the rules and 
their impact, the CDC lending industry and our banking partners 
need time and open communication with the SBA to understand 
these changes. Trainings, open dialogue, and a collaborative 
approach is integral for industry participants to understand 
and adapt to the rule changes without fear of being penalized.
    Finally, I would like to also draw attention to a program 
change initiated by Congress, but for which the SBA has not yet 
published a final rule. The Economic Aid Act enacted in 2020 
made integral changes to the 504 Debt Refinance Program. It is 
critical the SBA remove administrative barriers that restrict 
borrower access to the program and release a final rule as soon 
as possible.
    These changes made in the Economic Aid Act are particularly 
important in the current interest rate environment where the 
lower fixed rate of the 504 program can provide enormous cost 
savings to small businesses.
    The CDC lending industry cares deeply about maintaining our 
role as a trusted partner for small business success. We will 
continue to focus on our collaboration and communication with 
the SBA and Congress to meet our collective goal of making 
lending programs like the 504 easier, faster, and more secure 
in support of a strong small business ecosystem nationwide.
    I appreciate the opportunity to testify this morning. I 
look forward to answering any questions.
    Chairman WILLIAMS. Thank you very much. Good job. 
Plagiarism is an evil thing.
    Mr. FLORES. I was inspired, Chairman.
    Chairman WILLIAMS. Well, I thank all of you. Good job.
    And we will move now to the Member questions under the 5-
minute rule, and I recognize myself for 5 minutes.
    Mr. Wilkinson, given your extensive experience with the SBA 
programs, I wanted to start off by asking you to quickly 
clarify a few statements that former SBA official Patrick Kelly 
made at our hearing last week.
    He said that the changes to the 7(a) lending program are 
not terribly new but would simply put the program in line with 
the SBA's Express loan program.
    So, Mr. Wilkinson, can you describe why this comparison by 
the SBA is not accurate?
    Mr. WILKINSON. Until recently, the SBA Express program has 
been limited to $350,000 in size. The expansion of doing what 
you do up to a $5 million loan size is a vastly different 
approach.
    I would also add that we would have a little bit of a 
concern about the loss rate that has been seen in the Express 
portfolio. It has got a 50 percent guaranty, so you would 
intuitively think you would have a lower loss rate, and that 
has not been the case. It is running about two times the loss 
rate that the regular 7(a) program is.
    Chairman WILLIAMS. Okay. He also claimed that as part of 
their oversight of small business lending companies, they give 
lenders guidance on how they should be compliant with the Bank 
Secrecy Act and other anti-money laundering laws.
    So have any of your Members received guidance on how to 
fulfill these requirements from the SBA?
    Mr. WILKINSON. No.
    Chairman WILLIAMS. Okay. And finally, Mr. Wilkinson, can 
you clarify what would need to happen to keep the program 
operational if loan defaults were drastically increased?
    Mr. WILKINSON. Well, we are hopeful that this Committee 
will address that through legislation, putting back in the 
guardrails that have been there for decades to make sure that 
the underwriting guidelines stay in place and we keep lenders 
between the lines.
    Chairman WILLIAMS. Don't try to fix what is not broken.
    Mr. WILKINSON. Correct.
    Chairman WILLIAMS. Thank you for those answers.
    I also sit on the Financial Services Committee, as several 
of us do here, and for the last few weeks, we have been 
discussing the recent wave of bank failures.
    So, Mr. Kassar, can you describe the similarities you see 
with the fall of Silicon Valley Bank to what the SBA is 
attempting to do by increasing access to capital to small 
businesses that might not be ready for prime time? And you have 
talked about that.
    Mr. KASSAR. I have seen a lot of term sheets from Silicon 
Valley Bank over the years. And for the life of me, I don't 
understand how they make the loans that they do. I don't know 
other lenders who could match them.
    So a loose credit culture, I believe, is part of what the 
problem was, that cultural program at Silicon Valley Bank, and 
I am concerned that a loose credit culture at the SBA will lead 
us sadly to think about SBA and SVB in the same sentence in a 
couple years if we completely loosen so many of the guardrails.
    Chairman WILLIAMS. All right.
    Now, yesterday, the Ranking Member and I sent a letter 
along with Chairman Cardin and Ranking Member Ernst in the 
Senate to the SBA asking for them to pause on attempting or 
implementing these rules until a full-time head of the Office 
of Capital Access is installed.
    Ms. Frazier, you touched on that. But do you think this 
would be a good idea given the expected--unexpected departure 
of the former associated Members who sat in that seat last 
week? And can you describe outstanding questions you still have 
about the new rules?
    Ms. FRAZIER. Thank you. Well, given that the new rules were 
rushed and just recently put out, many of us as lenders are 
still trying to absorb what is in them and how would they be 
affected. So the pause--not only a pause would be necessary, 
but I think also gathering existing lenders together that have 
experience with the current SBA rules and reflect upon what 
could be changed to make it simpler, but maintain prudent 
lending standards.
    And I would also recommend not only the pause, but should 
the changes go into--any changes go into effect, give it time 
for the current lenders to process and absorb them and see the 
impact before we allow any more small businesses lending 
companies into the program.
    Chairman WILLIAMS. Thank you very much.
    I now recognize the Ranking Member for 5 minutes of 
questions.
    Ms. Velazquez.
    Ms. VELAZQUEZ. Yes.
    Mr. Flores, your testimony demonstrated it is important to 
differentiate the 504 and the 7(a) loan programs, which are 
both impacted by the rules we are discussing today, and you 
yourself stated that in your opening statement.
    The 504 loan program is an economic development program 
with job creation goals. Can you walk us through the 504 
underwriting process and why you believe the changes in the 
affiliation rule will benefit 504 loan borrowers?
    Mr. FLORES. So, Ranking Member Velazquez, thank you for 
your question. Thank you for your question.
    The 504 loan underwriting process is unique because it 
includes three different parties and multilayers of 
underwriting and examination, all with a goal of ensuring 
borrower solvency.
    So you have the Certified Development Company with staff 
who has expertise in underwriting also governed by policies and 
procedures, risk weighting, and concentration tracking, all 
which have to meet SBA requirements, which also includes 
independent loan review by a loan committee as well as the 
board.
    In addition to the CDC, you have a lending partner, 
typically a bank, that will also have to follow its own loan 
procedures, safety and soundness, prudent lending. I need not 
remind this Committee here that banks are also regulated by 
banking regulators. I was a former banking regulator for State-
chartered institutions. And then you also have the SBA that 
also reviews the loans for the purposes of, again, underwriting 
and then also eligibility requirements.
    Ms. VELAZQUEZ. I have a lot of questions, so please be 
brief.
    Mr. FLORES. Oh, apologies.
    So a very thorough process, Ranking Member.
    Ms. VELAZQUEZ. Okay. Thank you.
    As lenders, borrowers, and even those of us here in 
Congress try to get up to speed on the details of these two 
rules on the SOP, I understand mistakes will be made.
    What has your interaction with the SBA been like? Have they 
tried to explain the details of the rules to your organization 
in order to help you comply?
    Mr. FLORES. So a lot of the changes that we are seeing, 
frankly, have come from years of communication with the SBA in 
engagement with the CDC industry. And just as recently as last 
week, we had a number of meetings with the SBA leadership and 
other Members to reflect upon some of the changes.
    That being said, I do believe, Ranking Member Velazquez, 
that it is prudent that the SBA continue to gauge the industry. 
I agree with the notion of openness, transparency, and 
collaboration in making sure that all of the stakeholders 
understand the changes so that we can do our jobs in helping 
small businesses access these amazing programs.
    Ms. VELAZQUEZ. Thank you. Thank you.
    Mr. Wilkinson, I am sure you are aware I have been 
advocating for more small-dollar loans, those from 50- to 
150,000. There has been a decline, about a 50 percent decline 
in those type of loans.
    My question is, why is it that lenders are not making these 
loans?
    Mr. WILKINSON. Well, I think from where we sit, you know, 
50 percent of our loan approvals by number of loans are 
$150,000 or less. So those are small-dollar loans.
    In any given year, based on economics or lender business 
models, those numbers changes. They fluctuate. And if you go 
back 5 years, we had a couple of major SBA Express lenders exit 
the program, so you saw a decline in small-dollar loans at that 
point in time.
    But if you go look today, you'll see our small-dollar loans 
are coming back up. I think the fee waivers are playing an 
important role.
    Ms. VELAZQUEZ. We have issues with the data, right, that is 
coming to us from SBA itself.
    What would you say to those that say that this is simply 
about market competition? How do you respond to that?
    Mr. WILKINSON. It couldn't be further from the truth. Banks 
can enter this program today, leave tomorrow. We get banks 
entering all the time.
    Ms. VELAZQUEZ. In terms of myself as Ranking Member of this 
committee and as Chair of this committee for 30 years now, I 
have been advocating for the smaller of the small businesses. 
And for those small loans from 50- to 150,000, the truth of the 
matter is that there is a decline. I want to make this effort a 
reality to get loans to underserved businesses who need it the 
most.
    My question is, how can we achieve this goal using the 
rules as a framework?
    Mr. WILKINSON. Well, first of all, I was starting down the 
path of--the fee waivers are working right now. We are seeing 
an uptick in small-dollar loans. We are seeing an increase in 
$150,000 and under. We are running ahead of last year's pace 
by--goodness, we are 25 percent ahead of last year's pace on 
loans of $150,000 and under. So we are making progress.
    We could expand the microloan lender network because they 
are specifically focused on loans of $50,000 and under, and 
they add the technical assistance component. And then perhaps 
if we gave lenders some credit in their PARRiS reviews if they 
did a specific percentage of loans under 150,000.
    Ms. VELAZQUEZ. Thank you.
    I yield back.
    Chairman WILLIAMS. Thank you very much.
    Next, I now recognize Mr. Luetkemeyer from the great State 
of Missouri for 5 minutes.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    Welcome to the panelists.
    Mr. Wilkinson, let me start with you this morning. I have 
got in front of me this morning a copy of the Federal Register 
which publishes rules and regulations that are promulgated by 
different agencies.
    The particular pages I have in front of me are with regards 
to the Small Business Administration, and they say--and I 
quote, the SBLCs are nondepository lending institutions 
authorized by SBA only to make loans pursuant to section 7(a) 
of the Small Business Act and loans to intermediaries and SBA's 
microloan program, which says only those kind of loans.
    But then it says later on that SBA agrees with the previous 
paragraph, which mentions that they are going to do away with 
that, and it says, we will revise the paragraph by removing the 
word ``only'' to make it clear that SBLCs and Community 
Advantage SBLCs may participate in other lines of business in 
addition to 7(a) lending or making loans to intermediaries.
    Mr. Wilkinson, what is the impact of that?
    Mr. WILKINSON. Well, I have huge concerns about that 
because this change--as you note, there is now nothing in the 
regulation to prohibit an SBLC from making other types of loans 
or engaging in other business products.
    More importantly, this change significantly would add to 
the SBA's oversight burden, since when it is evaluating 
institutional safety and soundness, they would now have to be 
up to speed on all the other related lines.
    Mr. LUETKEMEYER. What is the mission of an SBLC?
    Mr. WILKINSON. Mission of an SBLC?
    Mr. LUETKEMEYER. Yeah.
    Mr. WILKINSON. Well, currently, the SBLCs are standalone 
separate corporations that only do 7(a) loans.
    Mr. LUETKEMEYER. Okay. So what they are going to do is they 
are going to make these mini-banks. Is that where we are going 
to be? Is that another way to frame it?
    Mr. WILKINSON. That is another way to frame it.
    Mr. LUETKEMEYER. So, Ms. Frazier, you are a banker. Do you 
like this competition? Having the SBA be the new bank lender in 
your community for small businesses, when they are supposed to 
be the lender of last resort, and now they are your main 
competition. How do you think about that?
    Ms. FRAZIER. I don't think very highly of it, quite 
frankly.
    As I testified before, when the direct lending was being 
proposed from that perspective--is that what you miss and what 
many--what many of us are saying here is the relationship and 
the coaching and the counseling many of these borrowers need in 
this process--and they need the education towards their 
financials--and to create an online process that scored, and 
the decision is made against a few metrics or factors, you 
don't achieve what I believe is what everyone desires as a 
successful entrepreneurship and business.
    So I am not excited about that kind of competition, only 
because I think it diminishes really what the SBA is trying to 
achieve.
    Mr. LUETKEMEYER. Well, it would seem to me that what would 
happen is you will turn somebody down because they are not 
creditworthy or they have got a problem, and they are going to 
run across to an SBLC who now has no criteria.
    Last week, we talked about this with Mr. Kelly. And they 
don't have Know Your Customer stuff. We don't have all these 
other things in place that, during the PPP program, really 
differentiated between the banks and the fintechs and how they 
were able to get the funds out the door and be able to do this.
    We found that the fintechs were basically the problem 
children with the PPP program with the way that they did not do 
the oversight that they really needed to do with regards to 
their customers.
    So it looks to me like we have got a real problem with 
direct lending here, especially when at the SBA--when the EIDL 
program was fraught with fraud. And so now we are going to make 
them a direct lender in multiple areas.
    Ms. FRAZIER. Right. Not a good thing because the 
relationship isn't long-standing. It is, package up a 
portfolio, sell it, service it, and you miss the opportunity to 
really develop business and help with economic success.
    Mr. LUETKEMEYER. Mr. Kassar, would you like to elaborate a 
little bit on that? I think you said a minute ago something 
about loose credit culture. This, to me, is our whole problem.
    It is that SBA does not know how to do direct lending. It 
is proven by the programs that they have, the losses they have 
sustained. They don't do their due diligence on underwriting. 
And now, suddenly, they want to expand those programs and be in 
direct competition with the banks who we already know do it 
right. And so now, it looks to me like we are going to wind up 
putting a big burden on the taxpayers to underwrite this whole 
situation.
    Would you like to comment on that?
    Mr. KASSAR. Absolutely. In addition to the prior point you 
are making, if these new SBLCs can do any other kinds of loans, 
if for whatever reason a borrower does not qualify for an SBA 
loan, they can quickly move the mover to a high-interest, very 
expensive loan that many--not all, but many of these fintechs 
are doing that creates a high-speed debt treadmill, which is--
--
    Mr. LUETKEMEYER. One more quick question.
    Where are the SBLCs going to get their funds to loan? If 
they are going to expand their loan program, where do they get 
the money for that?
    Mr. KASSAR. They might get them from private lines from 
banks.
    Mr. LUETKEMEYER. I yield back. Thank you, Mr. Chairman.
    Chairman WILLIAMS. Next, I now recognize Mr. McGarvey from 
the great State of Kentucky for 5 minutes.
    Mr. MCGARVEY. Thank you, Mr. Chairman.
    Thank you all for being here today and talking about this 
incredibly important issue.
    Last Congress, after an extensive investigation into the 
Paycheck Protection Program, the House's Subcommittee on the 
Coronavirus Crisis found that fintech and other nondepository 
institutions failed to establish systems that would stop 
obvious and preventable fraud and profited off of processing 
fees for each loan they completed, leaving little incentive to 
find the fraud.
    The Subcommittee issued a report in December recommending 
that, quote, any plans by SBA to again open 7(a) to fintechs 
and other unregulated, nondepository institutions must be 
accompanied by a well-defined, more rigorous, and better-
resourced initial review process, and that such entities should 
be subject to continuous monitoring to confirm their adherence 
to SBA rules.
    Mr. Wilkinson, you talked a little bit about this in your 
opening statement. I just want to go a little bit more in depth 
with you on it.
    Do you feel that the rule changes proposed by the SBA are 
just that: Well-defined, more rigorous, and provide a better-
resourced initial review process?
    Mr. WILKINSON. No, they're not. They are devoid of any 
guardrails. SBA lacks the capacity to be the prudential 
regulator for the new SBLCs. So, no, I disagree that they have 
done a good job here.
    Mr. MCGARVEY. What do you think should be happening?
    Mr. WILKINSON. Well, there is a whole long list. First of 
all, many of the guardrails should remain in place.
    I would tell you that when the fintech group came to lobby 
us, they asked for higher interest rates. They asked for the 
ability to charge higher fees. They got that. It is in the new 
SOP. They asked for the ability--and I am sorry. Mr. 
Luetkemeyer just left--they asked for the ability to sell 100 
percent of the loan, not just the guaranteed piece.
    So there is a program underway at SBA to allow fintechs to 
sell a significant portion of the loan. That is where they are 
going to get their funding. And they asked for us to help them 
get rid of the credit elsewhere test. And at that point in 
time, we knew we were not going to be on the same page with 
these folks. So the fintech groups that are trying to get in 
right now have a vastly different idea of what this program 
should look like than we do.
    Mr. MCGARVEY. And tell me, what is the practical effect of 
that, to people looking for SBA loans?
    Mr. WILKINSON. Well, I suspect that there will be more 
folks that will get the loans, many of whom probably shouldn't. 
It is going to be down to an algorithm that is done online.
    And the practical effect for us sitting in this room is you 
are going to see significant increases in loss rates, which is 
going to put an upward pressure on the cost of the program. And 
we will all be right back in here talking about how we are 
going to raise fees on borrowers and lenders, or are we going 
to be able to come up with an appropriation, with the 
discussion being--you are doing riskier lending. Why should you 
guys appropriate money? And that is going to be a hard one to 
defend.
    But rest assured, losses are going to significantly 
increase with these rule changes.
    Mr. MCGARVEY. I appreciate your input and insight into 
that.
    And obviously one of the things I am concerned about--you 
have heard Ranking Member Velazquez talk about this--is making 
sure that people who need these loans, particularly the 
smallest of the small businesses, the people who are 
underserved, the people who have not had access to capital get 
that type of access to capital.
    It is clear that fraud was an issue with the fintechs. So 
we have established that. I don't think you are seeing a debate 
in this Committee. But we also know they did reach more women 
and minorities than traditional lenders did.
    So, Mr. Flores, what changes do you think are out there 
that you would propose to current rules to allow for lenders to 
serve more diverse and underserved populations while also 
protecting borrowers?
    Mr. FLORES. You know, that is what makes the Certified 
Development Company network very unique, is that we are about 
economic development. So our charge is to make sure that not 
only are we informing and educating the public about small 
business lending, but in particular, also providing technical 
assistance and partnership with other organizations.
    And our mission is to make sure that we not only promote 
the SBA lending programs, but that we do it in a way where the 
borrower is able to actually derive the whole benefit of that 
loan.
    So a lot of work goes into engagement and communication, 
and it is done in partnership with the Small Business 
Administration and individual CDCs, other economic development 
organizations.
    I just--again, I would hearken back to the comments that I 
made as a former banking regulator as well, is that the Small 
Business Administration working with the industry is critical 
in making sure that we are able to track the performance of 
these programs objectively and also to not lose sight that, at 
the end of the day, while we may have deep concerns about, you 
know, whether or not the new guidelines may impact certain 
types of loans, that we not forget about the need--the gap that 
exists with regard to access to capital for minority-owned 
businesses and rural-based enterprises.
    We have small businesses that need this access to capital, 
and I think we can balance both prudence with increased access 
to groups that have been historically left behind in terms of 
access to capital.
    Mr. MCGARVEY. Thank you very much. I would love to ask more 
questions. I appreciate the conversation that we are having 
here today. But I am out of time.
    So, Mr. Chairman, I yield back.
    Chairman WILLIAMS. Thank you very much.
    I now recognize Ms. Van Duyne from the great State of Texas 
for 5 minutes.
    Ms. VAN DUYNE. Thank you very much, Mr. Chairman, and thank 
you for holding this important hearing highlighting how this 
proposed rule change will be detrimental to small businesses 
across the country and will lead to an increased risk to the 
American taxpayer.
    Just 4 weeks ago, we had the SBA Inspector General in this 
room, where he shared the same concern we are hearing today. It 
is clear that the SBA is in no position to take on additional 
responsibilities.
    From allowing fraud to run rampant in pandemic relief 
programs to this unprecedented weakening of lending standards 
in the 7(a) lending program, I am deeply worried by the Small 
Business Administration's pattern of incompetence and seemingly 
disdain for taxpayers.
    One major concern with this rule is the change to credit 
available elsewhere, which requires that a lender look 
elsewhere for credit before looking at the SBA for funding. As 
for this proposed rule, SBA eliminated the requirement of 
providing the reason and is instead moving towards a loan 
volume over loan quality.
    So, Mr. Wilkinson, I appreciate you being here, and I 
appreciate the testimony that you have provided so far in your 
answers to a number of questions. But I am the Co-chair of the 
Congressional Franchise Caucus, and I am particularly concerned 
by the impact of this rule on our franchised small businesses, 
which are a vital part of our economy, especially in North 
Texas.
    Seeing as the SBA is going to stop publicizing the 
franchising directory that allowed lenders to quickly reference 
whether an entity qualifies for an SBA loan, are you concerned 
that this will make lenders more hesitant to lend to 
franchisees?
    Mr. WILKINSON. It absolutely will. And you are correct that 
the Franchise Directory is no longer being maintained on the 
SBA website. We instructed our lenders to download the latest 
list of approved franchisors the day before they discontinued 
it so lenders could still review--go back to that Directory to 
see who would still be eligible.
    But correct. There is going to be a lot of lenders who are 
going to be very hesitant based on the new rules to engage in 
franchise financing.
    Ms. VAN DUYNE. I appreciate that.
    In the recently-issued SOP, which takes effect on August 1, 
SBA revised the requirements regarding what a lender has to do 
to prove that the loan complies with what the statute requires, 
which says a borrower can't get a 7(a) loan if they can obtain 
credit elsewhere.
    Mr. Wilkinson, what did SBA change about credit elsewhere, 
and why do we need to know about these changes? What do we need 
to know about these changes?
    Mr. WILKINSON. Two important changes.
    First of all, every time you make an SBA loan today, you 
have to have a narrative in the credit file to specifically say 
why that borrower cannot obtain credit elsewhere. It has got to 
be detailed out.
    The rule change has been made, in my opinion, to benefit 
the fintech group, who wants a computer-driven algorithm low-
touch program, so they have made this a check-the-box exercise. 
So all you have to do is, as the lender, is check a box, and it 
is done.
    Secondly, they have changed the personal resources test. 
Beforehand, if a borrower had significant personal wealth, that 
would be a source of funds that we would say had to be tapped 
first before borrowing through a SBA loan. That has been 
changed. So personal wealth is no longer an issue. So, yeah, 
rich people can get 7(a) loans.
    Ms. VAN DUYNE. I appreciate you saying that.
    Mr. Kassar, you had mentioned earlier that not everybody 
who applies for a loan needs a loan.
    If we are going to turn to basically just checking a box 
now, do you think that the SBA or that these fintech lenders 
are going to able to provide the same type of quality of 
service that you can by walking through everybody who applies 
for a loan, whether or not they need it, the level that they 
need it, and whether they can pay it back?
    Mr. KASSAR. Absolutely not. Remember that SBA lending, it 
is a work of passion, often more art than science. So it is 
underserved or served borrowers across the spectrum.
    The first thing you have to really ask them and understand 
is, what is this money for? What do you want to do with it? 
What is your plan? How do you propose to make more money with 
this loan than it is going to cost you to service?
    Ms. VAN DUYNE. So you are saying you don't treat everybody 
the same?
    Mr. KASSAR. I am not saying you don't treat everyone the 
same. What I am saying is that you have to have a thoughtful 
conversation with a borrower to begin to understand what is the 
root of their ask. Do they have a good reason for not needing 
this money? And if they don't, you have to counsel them to take 
some time and do some planning and some thinking, and then come 
back to the table when they are ready.
    Ms. VAN DUYNE. So you think that the personalized service 
is of a greater value than just checking the box----
    Mr. KASSAR. 100,000 percent.
    Ms. VAN DUYNE. Do you think that actually helps people not 
have to borrow beyond their means?
    Mr. KASSAR. 100,000 percent.
    Ms. VAN DUYNE. Do you think that actually helps them to be 
better small businessowners?
    Mr. KASSAR. 100,000 percent. If you borrow too much money 
too quickly or without a plan, you get into trouble.
    Ms. VAN DUYNE. And do you think that the SBA is actually 
providing that with this change in service?
    Mr. KASSAR. Absolutely not. They are trying to streamline 
it and make it quick, fast, and automated.
    Ms. VAN DUYNE. I appreciate that.
    I have one quick question. During my Oversight hearing with 
IG Weir, Mr. Weir shared his concerns with self-certification, 
and now the SBA is moving forward with self-certification for 
the credit elsewhere test.
    Mr. Wilkinson, how do you think this effect will--how do 
you think this will affect lender behavior?
    Mr. WILKINSON. Well, it is going to make it much easier for 
fraud to enter the program.
    I think--we are instructing our lenders to--when SBA says 
``do what you do'', we are telling them do what you should do 
because there is going to be a point in time in the future----
    Chairman WILLIAMS. Time is up.
    Ms. VAN DUYNE. All right. Thank you very much.
    I yield back.
    Chairman WILLIAMS. I now recognize Ms. Gluesenkamp Perez 
from the great State of Washington for 5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair. Mr. Flores, 
thank you for being with us today. I know this is a hearing 
nominally on the 7(a) program, but I want to first address the 
504 lending program.
    So before I came to Congress, I actually own a small 
business and got a 504 loan. It took me a year to do. It was 
about the size of a phonebook. I know you share of my goal of 
creating efficiencies in the 504 program to streamline the 
process for small businessowners. The affiliation rules changes 
the underwriting criteria for both the 7(a) and 504.
    So am I correct to say that there are multiple layers of 
underwriting and examination of the 502 program?
    Mr. FLORES. So, Congresswoman, if you recall from the 
process, you were dealing with a certified development company, 
a third party lender, and also the SBA. The SBA actually had to 
review all the work that was done and then ultimately decide 
whether or not it was a worthy loan. So there are multilayers 
just by virtue of the structure of the program, which is very 
unique. And, again, I want to reenforce the differentiates--the 
504, it is a differentiator between the 7(a).
    But beyond that, as you recall, and I do want to reference, 
you know, you referred to just the process that there are 
certain complexities built in that we believe that with some of 
these changes, it will make it easier for that borrower to 
access this amazing program without, again, compromising any 
level of integrity or oversight over the loan program.
    Again, we want to make prudent loans. It is everyone's best 
interest to make sure that the 504 loan program continues to 
succeed as it has and to provide greater access to capital for 
small businesses.
    Ms. GLUESENKAMP PEREZ. So how exactly do the affiliation 
rule reforms fit into the multiple layers of the 504 program 
approval process and streamline it for small businesses?
    Mr. FLORES. So a couple of things. I reference one 
particular story where you had relatives who were given the 
opportunity to own a couple of the restaurants--actually, the 
father started. Ultimately, then, a couple of the siblings 
wanted to move forward on a particular project, and the third 
sibling did not want to share particular financials that were 
required under the SOP.
    And it ultimately led to a particular situation where the 
project couldn't go forward because one of the siblings did 
not--who was not involved in this other new venture wanted to 
put forth financials.
    Ultimately, the family got together and cooperated. But, 
again, that was a situation where you had this very unique 
complex process that didn't really apply to that particular 
situation. It almost deprived that family from being able to 
access the 504 loan.
    With regards to franchises, again, one of the challenges 
that a lot of franchisees have to manage is getting--showing, 
demonstrating that the franchise is not going to have some 
level of ownership in the particular business going forward.
    So now where you have that removal, there is no issue with 
regards to control. Now, it makes it easier for that small 
business to move forward if it is a franchisee.
    So the whole notion here is to make sure that we are 
providing guardrails, but guardrails that apply to what is 
really happening with regards to the small business needing the 
capital for their particular business need and moving forward.
    Again, I would say that the process in place with CDC 
working in partnership with a third party lender and the SBA, 
you have layers of oversight to protect the integrity of the 
program.
    Ms. GLUESENKAMP PEREZ. Thank you. Mr. Wilkinson, it is go 
to see you again. Could you speak to how the 7(a) programs 
structures differ from the 504 program?
    Mr. WILKINSON. So our structure is a guarantee program. So 
the lender makes the loan with a percentage of that loan 
guaranteed by the SBA. But the lender actually funds the entire 
loan.
    Ms. GLUESENKAMP PEREZ. So is it safe to say that the 
reforms that benefit one SBA program may not work for another 
SBA program?
    Mr. WILKINSON. They may not.
    Ms. GLUESENKAMP PEREZ. Yeah, and thank you for that 
insight. I agree that we should not being painting these with 
an overly broad brush. In this last minute, I would love to 
hear some insight on what we can do to streamline the 504 and 
make sure that those dollars are getting to small 
businessowners that need it. Ms. Frazier, if you have thoughts 
on that.
    Ms. FRAZIER. Thank you. I think the reference to the 
phonebook is quite adequate. And I think it is overwhelming at 
times from borrowers who are maybe not as sophisticated and 
have borrowed money for commercial real estate and their 
property before.
    So I think anything we can do to help streamline but not 
lose prudent underwriting standards in the process would be 
helpful. Even the documentation, getting that down to something 
that folks can absorb and understand, and it is simplified, and 
I think those types of things would be helpful from the 
process.
    Ms. GLUESENKAMP PEREZ. Thank you. Mr. Chair, I yield back.
    Chairman WILLIAMS. Thank you very much. I now recognize Mr. 
Bean from Florida, the great state of Florida for 5 minutes.
    Mr. BEAN. Thank you very much, Mr. Chairman. Good morning 
to you. Good morning, Small Business Committee. Good morning, 
panelists, we are glad to have you here. I have only been here 
22 weeks. I am a new guy, 22 weeks, and I have discovered that 
this place is crazy town. It is crazy town. Because only in 
crazy town can a government agency come and have an abysmal 
record of losing taxpayer money, and then come and say, Hey, we 
want more money, and we want to ease the standards of giving it 
away more frequently.
    Yesterday, in crazy town, I was on a committee and spent 4 
hours listening why it is a great thing that we would give away 
taxpayer moneys in the form of student loans; why that is a 
great thing. And then even finding out--and this was in crazy 
town--a big sizable part of those student loans didn't even go 
for tuition, they want for trips and cars and stereos. How 
about that? But that is what happened in crazy town.
    So and as a former banker--I know there is some bankers up 
there--it is just unfathomable that we would ever forgive a 
loan after the person agreed this is the terms of the agreement 
without even trying back. So it is a toss-up for the panelists. 
Are we in crazy town? Who wants to answer that question? Are we 
in crazy town? Is this crazy town?
    Mr. WILKINSON. I would love to take that question.
    Mr. BEAN. Jump in, my friend. Welcome to crazy town.
    Mr. WILKINSON. Well, thank you for that question. I would 
tell you that over the last several decades that I have been 
involved with this program, we have taken steps as we have seen 
lender behavior--and borrower behavior as well--to put 
guardrails in place at SBA to make sure that this program 
operates on a sound basis. We view this as a three-legged stool 
with the lenders, the borrowers, and the federal government 
representing the taxpayer. We need it to work for all three of 
us.
    And so I would say over the last, especially the last two 
decades, you can go look at our performance, and it has been 
really, really good. In the last probably five fiscal years, 
our charge-off rates have been running under a half a percent. 
I think it is a very well-managed program. It is working for 
the taxpayer, it is working for the borrower, and it is working 
for the lender.
    So I think in this being particular case, the 7(a) program, 
as the Chairman said, it is not broken. It is working just 
fine.
    Mr. BEAN. So to make these moves, we wouldn't be going to 
crazy town? Is that your testimony today before we are going to 
crazy town making these changes?
    Mr. WILKINSON. I believe these changes will lead to 
significantly higher losses in the 7(a) program.
    Mr. BEAN. Very good. Mr. Kassar, you have been sitting 
there. I want you to jump in. I want you to jump in because it 
used to matter, criteria used to matter. And I made loans 
myself a small bank in northeast Florida. And it used to 
matter, could the customer pay us back? That was the number one 
question my boss and my committee--can they pay us back? That 
was important. I had to answer that. But it seems the SBA is 
less concerned about getting paid back, but is that what they 
do in crazy town? Mr. Kassar, welcome.
    Mr. KASSAR. Thanks for having me. Listen, one of the things 
I have loved about SBA lending, being involved in it for the 
last almost decade and a half is that it hasn't felt like crazy 
town until now.
    So to the point, we have had a balancing act, and it has 
worked for all the parties involved. And it has helped tens of 
thousands or hundreds of thousands of businessowners and 
entrepreneurs. But it feels like crazy town when you say we are 
going to throw it all up, we are going to change it all up all 
at once. That feels like crazy town to me.
    Mr. BEAN. And then you got to add this to the mix. After 
their horrible report card, and it is just--they do it with a 
smile and say, okay, we have done such a horrible job, give us 
more, and let us ease the standards so we can get more taxpayer 
funded programs out the door. And then, like I said, in the 
committee yesterday, let's just forgive all debt. But that is 
what they do in crazy town.
    Mr. KASSAR. I think it is super important to note, though, 
the conventional SBA 7(a) lending that has been around for 
decades is not the EIDL program, we are not the PPP, we are not 
the restaurant revitalization fund. And that is starting to get 
a little crazy town when you are comparing them, because you 
are comparing dramatically different programs. And you have to 
be really careful to separate those guardrails.
    Mr. BEAN. Gotcha. Typically, Ms. Alice, it would matter if 
the borrower could pay us back, but we are in crazy town. So 
should it matter that the borrower could pay us back, Ms. 
Alice?
    Ms. FRAZIER. It should always matter. And one of the things 
that you know as a former banker that you are looking for some 
skin in the game from the borrower as well. And that is part of 
the new rules is there is no necessary reason to show any skin 
of the game from that perspective. And that is part of paying 
it back from that perspective. I would also say to become a 
preferred lender, you have to prove yourself trustworthy and to 
be trusted with what the government is allowing you to do on 
their behalf. And in that point we all take that very 
pridefully. And to remove these rules, it is not the same 
anymore.
    Mr. BEAN. Amen. Ladies and gentlemen, thank y'all so much 
for coming forward. And welcome to crazy town. Mr. Chairman, I 
yield back.
    Mr. MEUSER. [Presiding.] The gentleman yields back. I now 
recognize Ms. Scholten from Michigan for 5 minutes.
    Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thank you 
to all of our witnesses for coming today. We truly appreciate 
your testimony. I said this last week to Mr. Kelley, but, of 
course, it bears repeating today, that these rules are nuanced. 
And now that the SBA has finalized them, it is up to Congress 
to do the necessary oversight of the SBA to make sure that they 
are implemented correctly. And we do have concerns, as you have 
heard today.
    So my first question is for Mr. Frazier. In your testimony, 
you state that the best thing for an underserved borrower is to 
work with a lender that is committed to their success. I 
completely agree. I have seen this first hand. I have heard 
from financial institutions in my district about their concerns 
regarding Fintechs that may become authorized SBA lenders under 
this new finalized rule. One of the top concerns I have heard 
about.
    What services does your bank offer underserved borrowers 
that a Fintech cannot? And what guardrails do you think the SBA 
should have in place to ensure predatory lenders are not 
allowed to participate in the SBA program?
    Ms. FRAZIER. For our bank, I will speak for us, is we are 
involved with a number of initiatives locally. Through 
chambers, there are typically some programs focused on women 
and minority borrowers to help educate them. We also work 
closely with the NAACP organizations, et cetera. And then we 
also have education programs that we hold for our, you know, 
local clients and the prospects. But I don't think that I am 
unique in that. I believe most of our community banks across 
the nation do the same thing because we are committed to the 
communities we serve overall.
    And I am concerned from the Fintech perspective, it is not 
about what you are doing to actually help the economics and 
help the businesses grow, and help them use the money 
appropriately and to get the right size loan that is 
appropriate that they don't go too far into debt. And in that 
situation, this is where the banker becomes more of a partner 
to them than necessarily just a place to get money. And that 
partnership lasts for a long time and can serve all very well.
    Ms. SCHOLTEN. Okay. Thank you. I apologize for saying 
``Mr.'' at the outset. Or maybe you didn't hear me.
    Ms. FRAZIER. I will just let that slide.
    Ms. SCHOLTEN. Good for you. I get called ``Mr.'' all the 
time, actually. I don't mind. So I have a second question, 
another concern that I have heard from financial institutions 
in institutions in my district is changes to the underwriting 
criteria the SBA is making in the affiliation rule. This is 
also a topic that Mr. Kelley discussed at length last week.
    Ms. Flores--I am kidding--Mr. Flores, my question is for 
you. In your testimony, you express support for the intent 
behind the SBA's changes to the underwriting standards. From 
your perspective, how significantly do you think the 
underwriting standards will change because of the affiliation 
rule? How will these changes to underwriting criteria impact 
the level of consistency in local evaluating and processing?
    Mr. FLORES. Thank you. So from our perspective, we are 
going to continue to use our prudent lending practices. We have 
guidelines, we have policies and procedure that we have to vet 
from our own internal loan committee board of directors as well 
as the SBA. We are still going to be using the five Cs of 
credit, capacity, capital, collateral, conditions, character. 
And, frankly, the three, you know, there has been discussions 
of moving from nine to three various credit factors.
    But if you take a look at the actual SOP, the language of 
the SOP. And I quote: Lenders and CDCs must use appropriate and 
prudent generally acceptable commercial credit analysis, 
processes, and procedures consistent with those used for their 
similarly sized nonSBA guaranteed commercial loans. Lenders, 
CDCs, SBAs may use the business credit score model.
    When we read that, we are looking at, okay, also our 
banking partner has to make sure that they are following their 
rules and procedures. They can't run afoul those procedures 
because they will get in trouble or banking regulator. The SBA 
itself, OCRUM. We are going to have to be--we are going to be 
measured and gauged by whether or not we are following our own 
policies and procedures, and if we are also being prudent in 
our lending.
    Now, the streamlining here is to, in my opinion, and the 
opinion of many in the CDC industry here is how do we make it 
easier and less burdensome on the small businessowners so that 
they don't have to come in with a telephone book, as it was 
just described earlier, and where it frankly doesn't have to 
take a whole year? Think about what happens in the real world. 
You have small businesses who want to make investments. And 
sometimes--and at the end of the day, time is money, and time 
is opportunity. But here with the 504 program, it is not just 
about what is in the best interest for that small business, it 
is also about the impact that we have in creating more jobs, 
bringing the local investment. So it is in everyone's best 
interest to make sure that the 504 loan program gets in the 
hand of the small business borrower in a shorter timeframe 
responsibly. And then the benefit here is you are also seeing 
more investment in our communities and greater access to 
minority-owned businesses and rural-based enterprises.
    Ms. SCHOLTEN. Thank you. I appreciate that testimony. I 
yield back the reminder of my time. Thank you.
    Mr. MEUSER. The gentlewoman yields back. I now recognize 
myself for 5 minutes. I thank you all again for being here.
    Chairman Williams mentioned the letter earlier that was 
just sent, I believe in the last couple of days, also signed by 
Ranking Member Velazquez and the Ranking Member and Chairman 
from the Senate to the SBA stating that this program needs to 
be needs to be delayed due to the lead person on this Patrick 
Kelley no longer being with the SBA. We are all sitting here 
stating, and your concern is that potentially unworthy 
businesses will be receiving loans and will increase your 
subsidy rate for the program, and among other things, 
obviously.
    So clearly this is a bipartisan understanding that they are 
moving forward in real serious haste, which could have real 
serious ramifications on taxpayers as well as yourselves. Is 
there anything about this that you find reasonable? Is there 
anything about this initiative that could work for you that you 
think actually can be a positive thing? Anything at all? I am 
going to ask you, Ms. Frazier.
    Ms. FRAZIER. Well, certainly. Thank you for that question. 
But certainly there are pieces in there that could help smooth 
the process, make it easier to get credit there. But I think 
taken as a whole----
    Mr. MEUSER. Right.
    Ms. FRAZIER.--it is too much risk.
    Mr. MEUSER. Okay.
    Ms. FRAZIER. And so it needs to be dissected. You need to 
get--I really recommend as part of the ICBA, bring lenders in 
and dissect it----
    Mr. MEUSER. Right.
    Ms. FRAZIER.--and pick the best parts----
    Mr. MEUSER. Right.
    Ms. FRAZIER.--so that we remain prudent. That we keep--safe 
the monies that are put out there and do the right things for 
the borrowers.
    Mr. MEUSER. Good. Absolutely. Then and I am absolutely 
favorable to that, and that is exactly how we should proceed.
    Mr. Kassar, good to see you. Thanks for making the trip 
down from Pennsylvania. I make that route quite a bit myself. 
You stated that the SBA is focused on a misguided solution in 
your testimony, broadening access to capital, and burdening 
future generations of taxpayers with the fallout. You seem to 
have some existential concerns about the 7(a) program due to 
this initiative. Could you expand on that?
    Mr. KASSAR. Sure, again, I think there are many elements 
that could be terrific. I think there should be some role for 
Fintech. It is very careful to put Fintech in one category. 
Fintech is a broad industry with different players, with 
different philosophies. Better use of technology in the program 
at different stages is good. What is dangerous here is doing it 
all at once.
    Mr. MEUSER. Yeah.
    Mr. KASSAR. And because--I don't know if the SBA has 
produced any forecasts about what will happen to default 
rates----
    Mr. MEUSER. Right.
    Mr. KASSAR.--as a result of these changes, and if they have 
one, I don't know how they did it. So if we say we are going to 
try this for this quarter, and then we will be able to measure 
it, and then we will add this element next quarter, and this 
element next quarter, you will start to see and understand what 
is working or not. To say that the SBA program shouldn't evolve 
and innovate and change or leverage technology----
    Mr. MEUSER. Sure.
    Mr. KASSAR.--I think is irresponsible. But to do it all at 
once----
    Mr. MEUSER. Right.
    Mr. KASSAR.--like the big crazy science experiment----
    Mr. MEUSER. Right.
    Mr. KASSAR.--I think creates a lot of risk.
    Mr. MEUSER. And as businesspeople and entrepreneurs, I can 
understand that you all would have that sentiment.
    Mr. Wilkinson, let me ask you this, the 7(a) loan program 
statistics looked like for smaller dollar loans and underserved 
market loans, the SBA stated that the 7(a) program does not 
succeed in underserved market lending. Do you want to comment 
on that? Is the 7(a) program working as effectively as it 
should be right now.
    Mr. WILKINSON. Well, you know, we can always do more, but 
we have got just over 50 percent of our loans and loans under 
$150,000, and with SBA's new definition of small-dollar loans 
being at $500,000, about three-quarters of our units. That is a 
significant portion of our portfolio are in small-dollar loans. 
You also have to keep in mind that it is the larger 
transactions that pay the cost for the smaller ones. And so we 
got to have a pretty good mix of both.
    Mr. MEUSER. Right. Okay. And last week the former Associate 
Administrator Patrick Kelley told the committee that all the 
concerns amounted to a lot of fuss that has been made about 
banks being upset about three Fintech companies being included 
in the program. What do you have to say about that comment.
    Mr. WILKINSON. Well, we welcome in lenders to this program 
all the time. We would be happy to have quality lenders who are 
capitalized, who understand the rules and regulations of the 
SBA program, and who are appropriately regulated.
    Mr. MEUSER. Sure.
    Mr. WILKINSON. What we don't want is lenders who don't know 
what they are doing that aren't appropriately regulated abusing 
program. But I would echo Mr. Kassar's comments about Fintech. 
We have a number of Fintechs that work with our lenders today. 
We have a Fintech who is a lender. They went out, and they 
bought a bank. They are capitalized, they are regulated by OCC, 
and they are a good corporate partner.
    Mr. MEUSER. Thank you. Mr. Flores, I want to ask you 
something quick. Your testimony described the 504 program as 
successful public, private partnership. What did you mean by 
that, and you have got one second to elaborate.
    Mr. FLORES. Banks, private lenders, CDCs, SBA with a 
support of Congress. That is winning calculation.
    Mr. MEUSER. All right. Thank you very much. I yield back.
    I now recognize Ms. Chu from California for 5 minutes.
    Ms. CHU. Mr. Flores, I want to make it clear that I share 
many of the concerns raised today particularly around 
unregulated entities being able to make loans when there is 
still questions regarding fraud and PPP. But I also want to 
ensure that a response to these rules is nuanced and recognizes 
the positive impact these rules will have on lending in 
underserved communities.
    For example, you testified that the affiliation and lending 
criteria rule implements some welcome changes to the 504 
Community Development Program. And, in fact, CDCs had 
specifically asked for these changes to be applied to the 504 
program after they were first applied in April of last year to 
Community Advantage Lenders. As a CDC that makes both 504 and 
community advantage loans, can you discuss how the changes to 
the affiliation in lending criteria will help lenders like you 
better fulfill your mission of reaching underserved businesses? 
And, in fact, you have an example in your testimony about a 
specialty food brand that you had loaned to for the property, 
and then 10 years later they sought additional financing, but 
they had grown and had 40 affiliates. And the burden of 
providing documentation on 40 different affiliates, many with 
no direct ties to the business seeking financing was too 
arduous to close a loan. So how would it be different with 
these rules?
    Mr. FLORES. What it does is it makes it, it loosens up. 
Again, not loosens it--it makes it easier in a more streamline 
efficient way for us to determine whether or not the borrower 
is meeting the spirit of being able to access the 504 loan 
program. Knowing that we are providing some very favorable 
terms to that borrower; to provide that access to capital; to 
create job to make local investments. And the particular story 
that you just referenced, it was sad to see here a very 
successful business operator who had a dream. We provided an 
SBA 504 loan. That individual continued to grow their business, 
meet other unrelated investments. But because of those older 
rules had to--was asked about all of these other unrelated 
essentially entrepreneurial endeavors. And then now, the 
individual said, you know, I just simply have no time to comply 
with all these requests. I am talking away. I do not have time 
in order to be able to make additional investment. And that was 
a real lost opportunity.
    I just want to reinforce, again, that we are talking 
about--you know, that is why it is important to differentiate 
between the 7(a) and the 504 loan program. And I want to make 
that clear here. And that differentiation is important so that 
as we are thinking through of how to apply the rules, we have 
to look at them from the perspective of the difference between 
the two programs.
    Again, I want to also reinforce just the customer service 
experience and how critical that is. If you have customers who 
don't have faith in the program, they are not going to come to 
the SBA for the 504 loan. They are going to say, hey, I am 
going to look for a more expensive, more--a different option 
because it is easier. You know, and what does that mean? It 
also has a negative effect, frankly, on our lending partners. 
If our lending partners or the bankers or other private lenders 
believe that it is too onerous to do a 504 loan, they are not 
going to help us promote the 504 loan. They are going to say to 
their borrower, hey, you should do something else because it is 
going to be easier and faster for you.
    Ms. CHU. Mr. Flores, your testimony also urges sufficient 
time and communication from SBA so that lenders could 
understand and implement all the changes to the two rules. As 
we know, since the final rules came out in April, the SBA has 
released a number of agency notices laying out various lender 
and program requirements in a piecemeal fashion. There has been 
a lot of twist and turns in this. And then last week the SBA 
released a 400-plus page SOP, which lenders have to review and 
comply with by August 1. So that takes only 2 months away.
    So do SBA lenders, particularly, smaller mission-based 
lenders like CDCs, which may have fewer resources to navigate 
various program changes, do they need more time from SBA to 
implement these new rules? And what specific additional 
resources do you need from SBA as you seek to become compliant 
with these new rules.
    Mr. FLORES. So as a former regulator, when I dealt with 
banks and other financial service institutions that were 
impacted by changes that we were making as an agency, 
engagement with the industry was always part of the process. I 
do give the SBA some positive remarks in terms of some of the 
already engagement that they have undertaken with us. However, 
I do think that we still need a continuous open dialogue. I 
think we need to continue to have actual meetings, technical 
assistance, and providing that a reasonable on-boarding ramp--
and not just for certified development companies, but also for 
our lending partners.
    Ms. CHU. Thank you. I yield back.
    Mr. MEUSER. The gentlelady yields back. I now recognize Mr. 
Alford from Missouri for 5 minutes.
    Mr. ALFORD. Thank you, Mr. Chairman, and Ranking Member 
Velazquez for holding this important hearing today. And thank 
you to our witnesses for coming in today. I really appreciate 
it.
    One of this committee's core functions is to conduct 
oversight as a small business administration. I am glad to be 
hear today with my colleagues to continue that and discuss the 
Biden-Harris administration SBA's disastrous rules that really 
compromise the soundness of the 7(a) program and puts taxpayers 
and small businesses at risk. Like many of my colleagues, I am 
worried that the SBA is not able effectively regulate this 
space and this activity.
    As a previous small business owner, I know how important 
capital is to small business, and I also understand access to 
capital can be a challenge especially in districts like mine 
which really has banking deserts. So let me be clear, I am not 
anti-Fintech, but I am against the rules that decrease 
standards and increase risks threatening the integrity of the 
current system and leaving taxpayers on the hook when something 
goes wrong. The SBA released procedural notices about these 
rules the night before last week's hearing, the night before, 
leaving us zero time to review them.
    I am here to tell you today, Americans deserve better than 
that. They deserve better than the fly-by-night Biden-Harris 
SBA, which is why I am pleased to learn that the departure of 
the SBA official chiefly responsible for these rules who is 
with us last week. Mr. Kelley's blatant disrespect to this 
committee and its Members last week showed a disregard for 
Congress, and it showed a disregard for small businessowners. 
It also underscores the importance of congressional oversight. 
So and unelected bureaucrat cannot shamelessly advance an 
agenda.
    Now, with no one at the helm of the SBA's Office of Capital 
Access, adding to the vacancy the offices already have, which 
are many, the Biden-Harris administration must put a pause on 
these rules and do it today.
    Mr. Wilkinson, if you Google federal financial regulators, 
the SBA does not show up, nor does the SBA show up in a March 
2020 congressional research service report titled: Who 
regulates whom, an overview of the U.S. Financial Regulatory 
Framework. The SBA is not a financial regulator. But if a 
Fintech only participates in a 7(a) lending program, you will 
be sole federal regulator. Fintechs facilitated so much PPP 
fraud as well.
    Mr. Wilkinson, given your experience and perspective with 
7(a), should this committee and taxpayers trust the SBA as the 
sole federal regulator of Fintechs in this program, why or why 
not?
    Mr. WILKINSON. At this point in time, no. I am a fan of the 
job, the effort, the folks in the Office of Credit Risk 
Management at SBA are doing, but they are understaffed they are 
under-resourced. They are 40 percent understaffed right now. 
They have got so many vacancies. It will be hard for them to 
catch up. I think the will is there to be a regulator, but they 
are not given the resources to do so. But they also don't have 
the framework to be the prudential regulator like an OCC or 
FDIC. SBA is really good at looking at transactional risk, 
looking at the loan, but they are not looking at the 
capitalization and the interest rate risk and the other 
interest bucket that will be looked at by a prudential 
regulator.
    Mr. ALFORD. Mr. Wilkinson, we have been told that this is a 
Biden-Harris administration effort. But Joe Biden said he wants 
to increase regulations for banks while at the same time this 
rule removes most underwriting and prudent lending standards. 
What reason is the FBA giving for saying something that 
directly conflicts with the White House.
    Mr. WILKINSON. That is an interesting question, because 
most of the other warning signals are coming up are warning to 
go slow with the addition of Fintech. Yet SBA is, I guess, 
hanging their hat on the PPP program where they are saying that 
Fintechs were able to reach down into more underserved markets. 
But the PPP program was not a loan program; it was a grant 
program. It was very--there was no underwriting to it. It was 
if you made your payroll, you got your loan forgiven. End of 
story. This is a vastly different program. You have got to 
underwrite it to see whether the borrower can be paid and then 
service it going forward. Probably not something that would be 
high on the Fintech list.
    Mr. ALFORD. Thank you. Mr. Frazier, I am greatly concerned 
SBA is not prepared to handle this. The Inspector General 
report published March 21 just a few weeks ago noted oversight 
staffing levels in the Office of Credit Risk Management 
decreased from 42 to 26 employees, 38 percent. This staff 
reduction could affect SBA's fiscal 2023 goals for oversight 
reviews which helps ensure lending compliance with program 
requirements.
    How do questions surrounding the SBA's competency affect 
what lenders do and the small businesses that rely on these 
loans?
    Ms. FRAZIER. As we talked about many times already today, 
there is a necessity to gain that access to capital for the 
businesses in a timely fashion, but not at the risk of prudent 
underwriting and not at the risk of doing things. But, however, 
if their office is not appropriately staffed, it does put the 
whole process into great risk.
    Mr. ALFORD. Thank you. We are out of time. Again, I call on 
the Biden administration to put a pause on these rules today. 
Mr. Chairman, I yield back.
    Mr. MEUSER. The gentleman yields back. The Chair now 
recognizes Mr. Thanedar from Michigan for 5 minutes.
    Mr. THANEDAR. Thank you, Chairman. According to Federal 
Reserve Bank of Chicago, the small businessowners in my 
district are routinely denied loans due to lower credit scores, 
lack of sufficient collateral, and lacking access to banking 
services.
    In 2022, two out of three businessowners who sought credit 
did not receive the full amount they requested. To that end, I 
believe small businessowners should have access to more 
responsible lenders.
    My question to Mr. Flores is the SBA has spoken at length 
about the need to increase lending opportunities for 
underserved small businesses as the reason for these two rules. 
But nowhere in either of these rules does it state a 
requirement to lend to small businesses in underserved markets. 
How do you guarantee that smaller loans are being made and 
targeting the small businesses in the communities we are all 
trying to reach? Mr. Flores.
    Mr. FLORES. Thank you. Again, I reference the Certified 
Development Company and its framework and its mission as an 
economic development set of organizations is our commitment to 
ensure access to capital, and not only to work with businesses 
that had been operating for a few years and have a track 
record, but also for those who are trying to get there. And so 
what that means is being very proactive and engaged, working 
with the small business development centers that are also part 
of the SBA network--organization such as score--and also local 
chambers of commerce and other units of government, locally, 
that are focused on providing programs that help grow that 
small business ecosystem. The Community Advantage Loan Program 
is one such program, as well as others.
    So, you know, a number of Certified Development Companies, 
our community advantage lenders, we are committed to continuing 
that program in our organization, and we believe that there is 
an opportunity here to continue to grow that initiative. We are 
obviously open to other ideas. And, obviously, there is a very 
robust debate here and concern. And I appreciate that. I think 
that there is a way for us to balance risk and at the same time 
prioritize that access to capital to folks who had been 
historically left out and also rural-based enterprises. There 
are folks in central and southern Illinois, for instance, who 
have less opportunities. How do we make sure that those 
entrepreneurs aren't left behind? We think programs like the 
premier advantage program can be effective.
    Mr. THANEDAR. Thank you. Now, most of the fraud that 
offered during the PPP loan scheme undertaken by the SBA came 
from Fintech companies. I feel without strong oversight 
regulations, bad actors might fraudulently take advantage of 
small businessowners seeking loans.
    Ms. Frazier, in your testimony you state nonbank Fintech 
lending is no substitute for community bank lending. Can you 
expand on the statement? What services does your bank provide 
that a Fintech cannot?
    Ms. FRAZIER. Well, on the basis of a Fintech is through the 
web and through the internet. And, oftentimes, there may not be 
even someone to speak to. Answers are given all electronically. 
As noted by many of us here, you know, it is about the business 
plan; it is about being able to sit with the borrower and to 
speak with them about what are the plans; how do you see this 
growing; what happens if you don't reach those goals; how will 
you pay the loan back? And I think that those elements are 
missing. And I believe, in a community bank world, that 
personal relationship is there and is guiding them. And if 
things go south for a business, and they do, the bank is able 
to work with them to really help them through those troubled 
times. And I think that is where the difference belongs.
    Mr. THANEDAR. Thank you, and I yield back.
    Chairman WILLIAMS. Next, I now recognize Mr. Crane from the 
great state of Arizona for 5 minutes.
    Mr. CRANE. Thank you, Mr. Chairman. Thank you all for 
coming today. Last week I asked Mr. Patrick Kelley, I raised a 
concern that these rule changes would leave taxpayers on the 
hook to bail off the SBA. Along those same lines, Mr. Kassar, 
you mentioned default rates to Mr. Meuser. Do you believe these 
rules will lead to more or fewer defaults on government-backed 
loans?
    Mr. KASSAR. It is hard to imagine a scenario where these 
would lead to significantly higher defaults because of the 
complete loosening of controls. And the danger is we won't 
understand what levers created them. Because so many levers are 
being pulled and changed at the same time.
    Mr. CRANE. Yeah, you mentioned that a couple of minutes 
ago. If that is the case, sir, who will eventually be on the 
hook to bail out the SBA?
    Mr. KASSAR. The taxpayers or the small businesses we will 
levy heavier fees against them to continue the program.
    Mr. CRANE. Mr. Frazier, how would you rate the SBA's 
customer service? Is it easier to get in contact and receive 
answers from them when a problem arises? Ms. Frazier, I am so 
sorry. We are not playing some sick joke on you, ma'am. I 
apologize.
    Ms. FRAZIER. All good here.
    Mr. CRANE. There are long weeks up here.
    Ms. FRAZIER. I completely understand. Thank you. You know, 
I believe that having the right relationships within the SBA 
helps facilitate quick and easy answers, but it can be 
difficult at times just given the current staffing situations.
    Mr. CRANE. Thank you, ma'am. Mr. Kassar, finally, are you 
concerned these rule changes could allow lenders to focus more 
on maximizing their own fees by increased loan volume rather 
than focusing on quality of loans given?
    Mr. KASSAR. Absolutely.
    Mr. CRANE. Thank you. You know, Mr. Kassar, you said a 
second ago, you are talking about this crazy science experiment 
if we are doing this smartly as an entrepreneur would do it, we 
would take one step at a time, and then we would evaluate it. 
Is that correct?
    Mr. KASSAR. Yeah, though, sometimes entrepreneurs are crazy 
scientist.
    Mr. CRANE. That is true. We are. But I think the reason 
that we take one step at a time if we are being wise and smart 
and a little bit of cautious is so that we don't sink the boat. 
Is that correct?
    Mr. KASSAR. A hundred percent. Lending is a carefully--you 
have to think very carefully. There are a lot of levers.
    Mr. CRANE. You know why they don't care how many elements 
we take on at one time, right?
    Mr. KASSAR. I have my theories.
    Mr. CRANE. Because it is not their money. It is the 
American people's money. They don't care. It is obvious. That 
is one of the things I have noticed since I have been up here, 
they could care less. It is so easy to spend somebody else's 
money. That is why this administration just put out a budget, 
it was another, close $7 trillion.
    And that is the thing that bothers me about this. My 
colleague over here, Mr. Thanedar, we just came from Homeland 
Security together, and he was talking about, hey, some of my 
constituents, they don't have enough capital or collateral. 
Well, maybe they don't need a loan then. Maybe they need to be 
working on their business, their business plan to get to a 
point where they can actually have enough capital, enough 
collateral where they can actually secure a loan. Because that 
is one of the things going on in this country, we live in such 
an entitlement country now where it is like people don't feel 
like they need to pay anything back. And who is always on the 
hook for it.
    Mr. KASSAR. There is another element to this program which 
is part of the vicious cycle, which is many borrowers today, 
particularly, underserved have opportunities on the internet to 
get money in their bank in 24 to 48 hours. And it is so 
enticing. Many of them come from Fintech lenders. We have to be 
careful not to call Fintech all at once. And so sometimes they 
will get one, and they will get another, and they will get 
another, and it becomes a vicious cycle. And then they come to 
us because--and it is--often it is too late to help. So some of 
the issues that has to be thought about in my opinion by 
Congress about serving entrepreneurs is what is happening on 
the other side of the coin? Where are they getting their money 
today, and often times are going to the other side because it 
is simpler and faster. And that also leads to devastating 
consequences.
    Mr. CRANE. Well, what I will tell this panel is I represent 
Arizona's Second Congressional District. It is a very rural 
district. We have a lot of hardworking folks in my district. 
You know, so I know that they probably don't have the same 
access to capital that some of these more metropolitan 
districts do. But all I will say is as a country when you are 
$32 trillion in debt, there needs to be a return to fiscal 
responsibility. And I just don't see that with this program. I 
don't see that with these rules changes. And for that reason I 
don't support it. Thank you Mr. Chairman, I yield back.
    Chairman WILLIAMS. Thank you very much. I next recognize 
Mr. Molinaro from the great state of New York for 5 minutes.
    Mr. MOLINARO. Thank you, Mr. Chairman. Thank you all for 
being here. I am happy that I was here for Mr. Crane's comments 
because it does, in fact, set up what I think is ultimately the 
problem. I am old enough--although I may not look it--to 
remember when we were all living fat and happy and encouraging 
access to capital for home purchasing to underserved 
communities. A noble and important goal that led to a mortgage 
crisis that we have not rebounded from since. And I couldn't 
think of a less apt organization than the SBA to manage a less 
restrictive and more irresponsible set of new rules. And this 
is not me being political. I spent the last 12 years as a 
county leader, lived through COVID and PPP, and I can 
absolutely say, local chambers of commerce, local business 
organizations, they all share the exact same concerns that we 
are voicing today. The SBA, despite its relationships, despite 
partnerships for not for profits and partners in the community 
just is inadequate to do and to manage what they are proposing 
in those rule changes. And so I want to start, in fact, with 
the underserved populations. Because I think actually the SBA 
does a reasonably good job partnering to provide access to 
capital to underserved communities.
    And so, Ms. Frazier, you spoke a little bit about the 7(a) 
lending program demonstrates strong lending patterns already to 
underserved borrowers. One in three 7(a) loans were to 
minority-owned businesses. So with the SBA's complete overhaul 
of the program, would you give us some idea how these rules 
could negatively impact what we already do somewhat 
successfully to serve those underserved populations? What is 
the risk that we open with these rule changes?
    Ms. FRAZIER. Thank you. And I am going to go back once 
against that oftentimes another loan or a loan is not what the 
borrower needs or what the new businessowner needs. Oftentimes, 
they need coaching, they need counselling, they need to have a 
better business plan and work through that. And I don't believe 
unleashing very loose credit standards is going to be effective 
to ensuring the integrity of the program, but also ensuring 
economic viability for the underserved.
    Mr. MOLINARO. And so despite coming from New York State, 
meaning most people think it is an urban place--I represent 
rural communities all throughout upstate New York, and access 
to capital is a concern. And we do have difficulty, small 
businesses, accessing. So your point what the SBA is doing is 
eliminating all of or basically throwing out the guide rails 
that would protect us in the case of fraud and abuse.
    And, Mr. Wilkinson, you and I spoke yesterday. So thanks 
for that conversation. To avoid what we know or to help avoid 
the circumstances of fraud and abuse here, what protections or 
rules should the SBA keep in order to provide the appropriate 
integrity 7(a) lending? And I kind of asked this of you 
yesterday. What are some of the rules that do make sense that 
this should not be thrown out.
    Mr. WILKINSON. Sure. There is a list of eight or nine 
criteria that were in regulation that have been taken out. We 
would suggest that those be put back in statutorily. But I want 
to go back to the previous question and just note that year to 
date we have got about 24 percent of our borrowers who do not 
note on their loan application a particular race. So our loans 
to minorities are most likely underreported. We probably have a 
much better track record than the numbers present.
    Mr. MOLINARO. So SBA doing a better job in recording, 
report, and then transparency. I know Mr. Chairman believes, as 
we do as a committee, the SBA should be more forthcoming with 
much of its data. And, by the way, I would say out loud the SBA 
should be more forthcoming in its interaction with the industry 
and the development of these rules, which does lend us to some 
concern and certainly frightens us.
    Mr. WILKINSON. A conversation just like this before the 
rules were implemented would have been very helpful.
    Mr. MOLINARO. Yeah, I am concerned about the conversation 
that the SBA may have had with the folks who benefit from the 
rule changes before the rule changes. But I am just saying that 
as a happenstance. Perhaps it may or may not have occurred.
    Before I finish up, Mr. Kassar, is it a fair assessment to 
say that without the appropriate regulations and clear defined 
requirements, it will ultimately be extremely difficult to 
determine if borrowers are acting in good faith or not? There 
are bad actors. They will act badly. That is a known fact in 
humanity.
    Mr. KASSAR. A hundred percent.
    Mr. MOLINARO. Thank you, Mr. Chairman, I yield back.
    Chairman WILLIAMS. Thank you. Next, I want to recognize Mr. 
Stauber from great state of Minnesota for 5 minutes.
    Mr. STAUBER. Thank you very much, Mr. Chair. I want to 
thank the panel for joining us today as well as for the 
important role that you play in supporting our small 
businesses. Like you, I have serious concerns over the 
misguided 7(a) loan program rules that the Biden administration 
has put forth. As I shared during last week's hearing, the 7(a) 
loan program has been instrumental in helping to grow small 
businesses, which I believe are the engines of innovation in 
our economy. I am committed to upholding the integrity and 
fiscal solemnness of this program. Information shared by the 
SBA and the supplemental guidance and its final SBLC rule 
indicated that the SBA only intends licences to three new 
SBLCs, and that it expects these three new SBLCs to make a 
total of 425 loans over the next 4 years. However, the final 
SBLC rule does not contain any limit on the number of new SBLCs 
that can receive a license.
    Mr. Wilkinson, how many license for nonfederally regulated 
lenders do you think the SBA will actually grant?
    Mr. WILKINSON. Well, that is unknown. In the narrative, 
they said they were only going to do three, but in the actual 
regulatory language, there is no limit.
    Mr. STAUBER. What do you expect these new lenders, loan 
activity to be? Do you think the figures provided by the SBA 
are accurate?
    Mr. WILKINSON. No, sir, I do not. I think they are low by a 
significant amount.
    Mr. STAUBER. Thank you. Ms. Frazier, approximately, how 
many financial industry regulators oversee the operations of a 
community bank like the Bank of Charlestown.
    Ms. FRAZIER. I actually have three. I will speak for 
myself. We have the state regulator, West Virginia and the 
FDIC. And then our holding company also has the Federal 
Reserve. So for most community banks, two to three. As well as 
aside from that, the SBA does come in and do their own 
oversight and regulation of what we have done by looking at the 
loans.
    Mr. STAUBER. Do you believe the Small Business 
Administration has supervision and regulatory expertise and 
bandwidth on power of the comptroller of the currency, FDIC, or 
Federal Reserve?
    Ms. FRAZIER. No, I don't believe they are prepared for 
that. Taking on not only just reviewing the credit files for 
whether or not they agree with the SOPs, but understanding the 
whole processes, controls, and the way, the company, the 
capital, and the things related to any company and nonbank 
Fintech would have.
    Mr. STAUBER. You know, during our hearing last week, when I 
pressed Mr. Kelley, he tried to explain that the SBA will have 
the ability to provide the necessary supervision and oversight 
to the nonfederally regulated Fintech companies that will flood 
the 7(a) program under the Biden administration's new rules. 
This is even as new loan activity far outpaces the unrealistic 
figures the SBA has provided.
    Just yesterday, I sat down with a group of small community 
bankers from across northern Minnesota who shared their concern 
that the SBA is not capable of overseeing these Fintech 
companies in the 7(a) program, particularly given the SBA's 
track with PPP. And you all know it is approaching $900 billion 
in fraud and counting.
    I trust my local community banks to be responsible 7(a) 
lenders due in part to the layers of supervision and scrutiny 
that they face from several different financial industry 
regulators. They also live and work in the communities they 
serve and have deeply personal relationships with the small 
businesses they help grow and support.
    I, unfortunately, cannot say the same of Fintech companies. 
I agree with my local lenders in Minnesota and worry that the 
uneven lax oversight of Fintech sector entering the 7(a) 
program will put the entire program at risk. And I want to 
thank the local community banks who kept us afloat during the 
pandemic. Had it not been for our community banks, I believe 
this nation will be in dire straits today. Thank you. Mr. 
Chair, I yield back.
    Chairman WILLIAMS. Thank you very much. And while we have a 
minute to go, I just want to reinforce what my colleague said 
about the community banks. We have talked about this, but I 
compare what you all did to what our bomber plants did and our 
manufacturing plants did in World War II. They turned it around 
overnight and got our country going. Y'all did the same thing, 
getting money injected in the economy that actually brought a 
return on investment back to America. So I want to thank you 
for that.
    I also want to thank the witnesses, all of you today, for 
being here and appearing before us. Without objection, Members 
have 5 legislative days to submit additional materials and 
written questions for the witnesses to the Chair, which will be 
forwarded to the witnesses. So I ask the witnesses to please 
respond promptly when that happens. And if there is no further 
business, without objection, the committee is adjourned.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]
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