[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE SMALL BUSINESS
ADMINISTRATION AND DEPARTMENT OF TREASURY PANDEMIC PROGRAMS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 17, 2020
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-088
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
41-299 WASHINGTON : 2021
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 3
WITNESSES
The Honorable Jovita Carranza, Administrator, U.S. Small Business
Administration, Washington, DC................................. 5
The Honorable Steven Mnuchin, Secretary, U.S. Department of the
Treasury, Washington, DC....................................... 7
APPENDIX
Prepared Statements:
The Honorable Jovita Carranza, Administrator, U.S. Small
Business Administration, Washington, DC.................... 43
The Honorable Steven Mnuchin, Secretary, U.S. Department of
the Treasury, Washington, DC............................... 47
Questions and Responses:
Questions from Hon. Velazquez, Hon. Evans, Hon. Houlahan,
Hon. Hern, Hon. Burchett, and Hon. Bishop and Responses
from Secretary Mnuchin..................................... 51
Additional Material for the Record:
Letter from William Manger, Associate Administrator, U.S.
Small Business Administration.............................. 62
National Association of Federally-Insured Credit Unions
(NAFCU).................................................... 69
OVERSIGHT OF THE SMALL BUSINESS
ADMINISTRATION AND DEPARTMENT OF TREASURY PANDEMIC PROGRAMS
----------
FRIDAY, JULY 17, 2020
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 10:31 a.m., Room
2118 and via Cisco WebEx, Rayburn House Office Building. Hon.
Nydia Velazquez [chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Finkenauer, Golden,
Kim, Crow, Davids, Chu, Mfume, Evans, Schneider, Espaillat,
Delgado, Craig, Chabot, Balderson, Hern, Hagedorn, Stauber,
Burchett, Joyce, and Bishop.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order. Without objection, the Chair is authorized to declare a
recess at any time.
I want to thank everyone, especially our witnesses, for
joining us today for our committee's hybrid hearing. I want to
make sure to note some important requirements.
Let me begin by saying that standing House and committee
rules and practice will continue to apply during hybrid
proceedings. House regulations require Members to be visible
through a video connection throughout the proceeding, so please
keep your cameras on. Remember to remain muted until you are
recognized to minimize background noise.
In accordance with the rules established under H.R. 965,
staff have been advised to mute participants only in the event
there is an advertent background noise.
I urge Members and staff to wear masks while in the hearing
room, and I thank you in advance for your commitment to a safe
environment for all here today.
Secretary Minuchin, Administrator Carranza, welcome to the
Small Business Committee, and thank you for being here today.
Let me start by saying I want to give a sincere thank you
to all the staff at both of your agencies who have worked
tirelessly over the last few months responding to this crisis.
I am deeply appreciative of all the work which helps support
millions of American jobs in a moment of unprecedented
uncertainty. These are extraordinary circumstances, and I would
like to paint a picture for you of the magnitude of the
devastation that small businesses are going through right now.
Back in March, it became clear that COVID-19 will tear
through our communities leaving almost no sector of our economy
unscathed. The heat on small businesses was in many cases
deeper than their larger counterparts.
I have been on phone calls with small business owners in my
district who have been mainstays in the community for decades,
who have lived through 9/11 and the Great Recession and are now
holding back tears telling me that if we do not do more to fix
the Payroll Protection Program (PPP) and find long-term
solutions, that they cannot imagine their business, the source
of income for themselves and their employees, to survive the
COVID-19 pandemic. In fact, about 110,000 small businesses have
already closed their doors permanently, and an estimated 7.5
million additional firms are at risk for the same fate.
On top of all that, they turn on the news and see headlines
like ``Trump friends and family cleared for millions in small
business bailout'' and ``SBA exempted lawmakers, federal
officials from ethics rules in $660 billion loan program.''
Let me tell you, that is a gut punch to the small
businesses that this program was intended to serve, the ones
that did not have the top-notch financial connections to
quickly get a PPP loan. While we are grateful to SBA for
providing data that I have been calling for since the start of
PPP, it is no secret that there have been errors that are cause
for concern. I am troubled by the Bloomberg News Report that at
least 226,000 loans were likely misreported by congressional
districts, making it even harder for us to understand how
businesses in our district fared in the program.
Meanwhile, a report from the New York City controller
suggests that PPP loans were made in greater frequency in
states that were less hit by COVID-19 than in epicenters like
New York City.
As we all know, the pandemic has been especially
unforgiving for our communities of color. Minorities have bore
the brunt of the health consequences of this terrible virus. We
cannot let their businesses also disproportionately bear the
economic consequences.
According to a survey, a mere 12 percent of Black and
Latino business owners who applied for PPP loans reported
receiving what they asked for, and nearly half anticipated
being forced to close permanently in the near future. We do not
even know how Asian and Native American business owners fared
because demographic data was not asked to be voluntarily
provided. That is why collecting demographic data on these
loans was imperative. I will continue to press to set aside
more resources for minority and women-owned businesses, and I
hope that we will commit to do more for these businesses in
what are sure to be tough months ahead.
I am sure you both can understand many in our country are
frightened. They are angry and they are hurting. We are here
today to bring transparency and accountability to ensure that
America knows they have a government that works as well for
them as it does for the well-connected corporations and friends
of this administration.
As lockdown orders started in March, storefronts were
shuttered, and waves of layoffs were taking place. In response,
Congress provided relief to reeling business owners and their
employees.
First, Congress established the Paycheck Protection Program
to provide forgivable loans to businesses and nonprofits for
mainly covering payroll.
Second, to help small businesses that needed financing
beyond PPP, Congress enhanced SBA's EIDL program to get more
flexible working capital to more businesses faster. Knowing
that small businesses operate on razor-thin margins, Congress
created the EIDL Grant Program to get cash into the hands of
small businesses quickly to bridge the gap until their loans
are dispersed. Despite the flaws in their implementation, these
programs have been a lifeline for millions of entrepreneurs and
job creators, injecting over $670 billion into the economy.
To address concerns and make the programs work better, our
committee held numerous hearings and forums with small
businesses, lenders, and leading policy experts over the past
few months. One of the top issues we heard from PPP
stakeholders is the incomplete and everchanging guidance.
Borrowers testified that they have very little guidance
regarding how to spend their loans so they could qualify for
full forgiveness. Lenders are still reporting the process for
seeking forgiveness is unclear and unworkable.
If forgiveness is the centerpiece of the program, a
streamline efficient process for getting those loans forgiven
should be a priority. Turning briefly to EIDL, the lack of
clear communication has been an ongoing issue. Given the
urgency of this pandemic and the uncertainty for so many small
businesses, SBA must do a better job communicating. As the
spread of COVID-19 has accelerated in recent weeks and lockdown
orders return, it will be extremely important that we take
lessons learned since March to stave off unnecessary
bankruptcies and make sure these programs are working for
America's small firms. We also need to explore other ways SBA
can support our small business sector, like turning to tried
and true program enhancements that work after the Great
Recession.
Once again, thank you for being here today. I know yield to
Ranking Member Chabot for his opening statement.
Mr. CHABOT. Thank you, Madam Chair. And I want to thank
Administrator Carranza, as well as Secretary Mnuchin, for being
with us here today and taking time out of your very busy
schedule. So thank you so much for being here, both of you.
While we all agree we must be forward-looking as we
continue to respond to the COVID-19 pandemic, the topic of
today's discussion is equally important. We must continue to
work together to ensure the Federal government's relief efforts
face sound and prudent oversight. These programs were developed
to assist the Nation's smallest firms. Instances where
ineligible businesses and entities, including political
organizations who benefitted from the programs must be examined
closely.
Take, for example, the over $300,000 taxpayer-backed loans
that were received by the Ohio Democratic Party in May, and
Madam Chair, for the record, I would oppose such a bailout for
the Republican Party as well, but it happened to be the
Democratic Party in Ohio that took advantage of this. And I do
not think it was ever intended for that type of thing to
happen.
Additionally, oversight of how well the billions of dollars
allocated to assist small businesses was utilized is
imperative. That will help us to formulate a future strategy
and to make well-informed decisions that benefit the greatest
number of Americans.
I happen to represent most of the City of Cincinnati. For
the past few months I visited with countless small businesses,
and obviously, many of their employees as well. And I and my
staff have spoken with representatives from the Cincinnati
African American Chamber of Commerce and the Urban League. And
some of our smallest businesses, particularly those in minority
and economically disadvantaged communities, oftentimes the
smallest businesses, and typically under 10 employees, when
this started, and many of them still do not, they did not have
the strongest relationship with banks or credit unions when
they were seeking these loans. So I think that it is something,
and I know as this has evolved and the Chair has been
instrumental in that effort as well and we have worked with her
and her staff on that, but we have to make sure that those
folks in these economically disadvantaged areas have access to
this. Because as I say, oftentimes the relationship they have
had with the banking institutions, financial institutions just
is not there. So it makes it even tougher for them.
Now, it is impossible to legislate from Washington for
every single situation across the country. Likewise, it is
impossible to regulate from Washington for every scenario that
may come up. All of the folks in this room recognize this and
have been reminded since March of that structural
impossibility. Congress acted quickly earlier this spring.
Speed was paramount in getting funds into the hands of small
business owners to keep them afloat when they were forced to
shut down through no fault of their own. Consolidating 6 months
of legislative work in a little more than 6 days, the
Coronavirus Aid Relief and Economic Security (CARES) Act was
passed with overwhelming bipartisan support, Republicans and
Democrats working together, and it was signed into law by
President Trump on March 27th. This more than $2 trillion
economic relief package delivered on our commitment to do
everything possible to protect the American people from the
public health and economic impacts of COVID-19.
The CARES Act created the Paycheck Protection Program.
Following passage of this landmark legislation, the SBA and the
Department of the Treasury worked tirelessly to execute the law
and issue regulations to inform borrowers and lenders alike how
the program would be administered. To the credit of everyone
involved, the first loans flowed from private lenders 7 days,
just 1 week later on April 3rd. Since that date, the PPP
program has distributed nearly 5 million loans to small firms
in the amount of over half a trillion dollars. In my district
and the surrounding area alone, small businesses utilized the
program to preserve nearly a half a million jobs.
These successes cannot be ignored, and Ohio is not alone.
This program provided small businesses and their workers a
lifeline across the entire Nation. Were there bumps in the
road? Of course. As I stated earlier, it is very difficult to
get a program this size up and running in a week. Have there
been communication issues between the Federal government and
the lenders and the borrowers? Undoubtedly.
But that is one of the reasons why we are here today. We
must examine and learn from the past and prepare for the
future. Unfortunately, there are still challenges that are
presenting obstacles for the Nation's smallest firms. Because
we continue to face this threat, we must be forward-thinking.
More needs to be done, and we have proven that when we work
together across the aisle, across the capital, and across the
different ends of Pennsylvania Avenue, we can move mountains.
We are not done yet, and I look forward to engaging with
you, Madam Administrator, and you, Mr. Secretary, as well as
you, Madam Chair, as we continue to work for American small
businesses. I want to thank you both for being here, and again,
thank the Chair for holding this hearing today. And I yield
back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
I would like to take a moment to explain how this hearing
will proceed. Each witness will have 5 minutes to provide a
statement, and each committee Member will have 5 minutes for
questions. Please ensure that your microphone is on when you
begin speaking and that you return to mute when finished.
With that I would like to introduce our witnesses.
Our first witness today is The Honorable Jovita Carranza,
Administrator of the SBA. Administrator Carranza has an
inspiring background. Born in Illinois to an immigrant family
from Mexico, she began her career at UPS as a part-time
employee, ultimately climbing the corporate ranks to become
President of Latin America and Caribbean operations. In 2006,
President Bush named her Deputy Administrator for the Small
Business Administration, and most recently was the Treasurer of
the United States. Welcome back to our committee, Administrator
Carranza.
Our second witness is The Honorable Steven Mnuchin, the
Secretary of the U.S. Department of Treasury. Mr. Mnuchin had a
successful career as a banker at Goldman Sachs for multiple
decades before leaving to join other hedge funds throughout the
2000s. He was appointed Treasury Secretary by President Trump
where he has served for the last 3 years. Welcome to the House
Small Business Committee, and thank you for joining us today,
Mr. Mnuchin.
Administrator Carranza, you are recognized for 5 minutes.
STATEMENTS OF THE HONORABLE JOVITA CARRANZA, ADMINISTRATOR,
U.S. SMALL BUSINESS ADMINISTRATION; THE HONORABLE STEVEN
MNUCHIN, SECRETARY, U.S. DEPARTMENT OF TREASURY
STATEMENT OF JOVITA CARRANZA
Ms. CARRANZA. Thank you, Chairwoman. Thank you.
Chairwoman VELAZQUEZ. The mic is not on.
Ms. CARRANZA. It says green and talk.
Chairwoman VELAZQUEZ. Okay. Maybe bring it closer to you.
Ms. CARRANZA. Can you hear me now?
Chairwoman VELAZQUEZ. Okay, now. Right.
Ms. CARRANZA. Thank you, Chairwoman Velazquez, Ranking
Member Chabot, and members of the Committee for the invitation
to testify this morning. I am eager to update you on the
progress that has been made by the agency in helping small
business weather the coronavirus pandemic.
Since March, the SBA has processed more loan volume than it
has in the entire 67-year history of the agency. As of this
morning, the PPP has approved nearly 5 million loans for over
$518 billion in much-needed fiscal relief to America's small
businesses.
We administered this first of its kind program with an eye
towards equity, recognizing that this pandemic has been
particularly harmful to socially and economically disadvantaged
businesses.
We mobilized thousands of new lenders, including community
banks, credit unions, FinTech companies, farm credit lenders,
and hundreds of CDFIs and MDIs that specialize in providing
liquidity to underrepresented communities.
Through economic injury disaster loans and EIDL advances,
the agency has reached over 8 million small businesses,
disbursing nearly $170 billion in assistance. That amount is
more than all other disasters combined in the history of the
agency. EIDL loans are currently being processed in just 5 days
with disbursements occurring in just 2 days. These programs
help the small business sector survive ``once in a lifetime''
disruption.
Since early June, I have made a concerted effort to
personally speak to businesses left reeling by this pandemic
and to financial institutions so that I can see for myself what
is working and where improvements need to be made.
One of the scores of business I visited was an African
American logistics management firm in Dallas. SBA loans
provided him with a bridge, a financial bridge over the most
tumultuous waters he has ever experienced. It helped him not
only keep his employees on the payroll, but also hire new
workers who received comprehensive skills training and
professional certifications.
Many small business owners use that term ``bridge'' to
describe how SBA loans provided them with time and the space
needed to rethink, innovate, and to adapt their business models
for success in this new environment. One African American
manufacturer in Greensboro, North Carolina, told me that an SBA
loan helped her develop brand new lines of revenue online. SBA
loans helped a whiskey distiller in Travis City, Michigan,
transition his manufacturing operation to hand sanitizer to
meet both a social need and financial gaps.
This pandemic has been an impetus for innovation in the
small business sector. But Chairwoman, it also has accelerated
modernization at the SBA. For example, we have created an
internal oversite plan for each CARES Act program, and we have
looked long term at our management responsibilities for
millions of businesses and disaster loans.
The agency has brought on thousands of staff to support our
COVID disaster operations while simultaneously servicing 175
natural disaster declarations.
We have significantly corrected the customer service
experience for EIDL applicants by accelerating processing of
our loan queue, helping them to better plan. Our dedicated SBA
professionals have been working hard to achieve this largely on
telework status and as a result we are more nimble, more
responsive, and better prepared for tomorrow.
Before I conclude, I want to say a few words about the PPP
data disclosure made earlier this month. The data reflects
information about loans approved by lenders and entered into
the SBA loan system by those lenders.
It does not mean that SBA has determined that a borrower
has complied with program rules or is eligible to receive a
loan and forgiveness.
We are reviewing all loans. Moreover, we have provided the
opportunity for business or lenders who believe that their
reported information is inaccurate, to contact us, and we will
work with them to fix it.
At the same time, we should not lose sight of the fact that
this unprecedented program has emerged as one of the most
successful and consequential Federal economic response efforts
in history. That success is the result of a collaborative
effort that includes the White House, Treasury, SBA, the
lending community, chambers of commerce, and importantly, each,
and every one of you.
I know that there is more work to be done and we all share
the same goal of helping small businesses across the country. I
look forward to working with this Committee and other members
of Congress. Thank you.
Chairwoman VELAZQUEZ. Thank you, Administrator Carranza.
Secretary Mnuchin, you are now recognized for 5 minutes.
STATEMENT OF STEVEN MNUCHIN
Secretary MNUCHIN. Thank you very much.
Chairwoman Velazquez, Ranking Member Chabot, and members of
the Committee, I am pleased to join you today to discuss how
the Department of the Treasury and the SBA are working together
to provide relief to businesses and their workers through the
PPP. We remain committed to working together until every
American gets back to work as quickly as possible.
America's economy continues to recover from the challenges
posed by COVID-19. For the second month in a row, the jobs
report vastly exceeded forecasts, with a record of nearly 5
million jobs. This brings the 2-month gain to approximately 8
million jobs. While the unemployment rate is still historically
high, we are seeing additional signs and conditions of
improvement. The Blue Chip Report is forecasting that our GDP
will grow by 18 percent in the third quarter. The U.S. Chamber
of Commerce reports that 79 percent of small businesses are at
least partially open, and half of the remaining businesses will
open soon. Retail sales rose by 18 percent in May, and by 7.5
percent in June.
But let me point out, June was actually 1.1 percent higher
than June 2019. This is a result of all of our programs and
working with Congress.
Investors and businesses have historically high cash
positions and are beginning to put them back to work. We are in
a strong position to recover because the Trump Administration
worked with Congress to pass legislation on an overwhelmingly
bipartisan basis and provide liquidity to workers and markets
in record time. In particular, the PPP is keeping tens of
millions of employees in their jobs. Economic impact payments
are also helping millions of families. We are monitoring
economic conditions closely. Certain industries, such as
construction, are recovering quickly, while retail and travel
are facing longer-term prospects. We are sensitive to the fact
that certain areas of the country are experiencing increased
numbers of cases. The Task Force, working with state and local
officials, is helping to ensure that people can work safely in
this environment. We look forward to continued conversations
with this Committee and other members of Congress to address
these critical issues.
Turning to the PPP, the SBA and Treasury worked together to
launch this in unprecedented time. We approved over 5 million
loans for $517 billion to support the employment of over 50
million jobs. This is truly an extraordinary achievement, and
we are pleased that the loans were broadly distributed and made
across diverse areas of the economy, with 27 percent of the
funds going to low- and moderate-income communities, which is
consistent with the proportion of the percentage of the
population.
As you might expect with a program of this magnitude,
executed on a national scale rapidly, we initially experienced
some complications. We resolved them quickly. To implement the
program, our teams worked with members of Congress on a
bipartisan basis to issue rules and guidance to provide
clarity. By standing up the program quickly, we were able to
support tens of millions of jobs.
We have worked closely with members of Congress in both
parties to pass three subsequent pieces of critical
legislation. We also reached a second round of funding for over
$300 billion. I look forward to these continued bipartisan
efforts. A next phase of relief should extend the PPP, but on a
more targeted basis for smaller companies and those that are
especially hard hit, such as restaurants, hotels, and other
travel and hospitality businesses.
The Treasury Department is implementing the CARES Act with
transparency and accountability. We have released a significant
amount of information on our website reporting on
USAspending.gov, and providing updates to Congress. We are
cooperating with various oversight bodies.
Regarding the PPP, Treasury and SBA regularly released
data. On programs, the Treasury and IRS have made data and
information regarding millions of economic impact payments
available on their websites and to the GAO. We are pleased that
the Treasury, working with the Federal Reserve, has announced
to add to existing disclosure on the liquidity facilities by
posting additional information on the website.
Chairman Powell and I have had very productive discussions
with the members of the Congressional Oversight Commission. In
addition to the PPP, we had 160 million payments for the
economic impact payments. We have made massive amounts to
support air carriers. We have had $150 billion to the
Coronavirus Relief Fund. The Federal Reserve Facility is up and
running. I am pleased to announce that Main Street made its
first loan for $12.3 million to doctors' offices consisting of
15 practices in Wisconsin. The lender was Starion Bank, a
family-owned $1.2 billion community bank. There is a $50
million construction loan which will save over 3,000 jobs in
the working.
I look forward to working with Congress next week on a
bipartisan basis to pass additional legislation.
I would like to thank the members of this Committee for
working with us to help the American people, and I look forward
to answering your questions.
Chairwoman VELAZQUEZ. Thank you, Mr. Secretary.
I will begin by recognizing myself for 5 minutes.
Secretary Mnuchin, ethics rules were waived
administratively in the PPP, allowing friends of the Trump
Administration to get access without any further review.
Meanwhile, there are thousands of small businesses, many owned
by women or minorities and located in rural areas that were
desperately seeking assistance. Were you concerned about those
optics?
Secretary MNUCHIN. Well, let me just say as it relates to
certain loans as the administrator said, there will clearly be
loans that are reviewed for appropriateness. But let me just
comment on the conflict of interest rules.
I had very specific discussions with Senator Schumer and
McConnell on the conflicts rules, and it relates to the direct
loans from Treasury and the loans from the Federal Reserve.
There were very specific requirements and certifications that
were required for members of Congress and the administration.
As it relates to the SBA program, Congress could have
included those same requirements but decided not to do so, and
indeed, the SBA followed their standard provisions for the SBA.
The SBA Standards Conduct Commission determined that the PPP
loans should be governed by similar disaster programs and
explicitly, and again, this was a Committee that did not
consist of political people, explicitly decided to provide the
same waivers that they have done for other programs. So again,
we look forward to working with Oversight Committees to make
sure that proper rules and regulations were followed.
Chairwoman VELAZQUEZ. Well, I welcome that, and we intend
to exert our responsibility and our constitutional duty to be
at the table. I am the first minority female chairing a
committee, and when we are discussing lending programs that are
within the jurisdiction of this committee, I will demand for
the Ranking Member and myself to be at the table. I insisted
that ethics rules should not be waived. These are lending
programs. If it is good for the 7(a) and 504 and FDIC, it
should be good for this type of lending and I will insist on
that when we sit down to discuss going forward.
I understand EIDLs were capped at $150,000 in an effort to
stretch the funding. However, I ask you, Administrator, the
appropriators asked you, and the Senate asked you on numerous
occasions if you needed additional funding, and the answer was
not. Yet here we are. It is our small businesses that are
suffering. Moving forward, you must work with us and I ask that
you remove the cap for new EIDL loans immediately and allow
those with existing loans to obtain the capital they deserve.
You still have $200 billion of loan-making authority left in
the EIDL program while small businesses are hurting. Help us
help you because Members of this committee and businesses who
came to testify before this committee, they said that they
might remain open but will not be able to keep those businesses
open because when they were thinking that they were applying
for the maximum allowable loans, then you reduced it to
$150,000. We need to do better than that. This is not going
away and too many businesses are suffering.
Mr. Mnuchin, the pandemic has cost the rate of Black-owned
businesses to drop by an astonishing 41 percent and the rate
for Latino-owned businesses by 32 percent. These numbers are
unacceptable and are only going to get worse unless we act now
and meet reports. Should we not set aside a percentage of the
remaining funds for small businesses that need it most? I just
heard you saying that you are going to ask for hotels,
restaurants, the traveling industry. What about minority
businesses?
Secretary MNUCHIN. I agree with you. There should be a set-
aside for small minority businesses.
Chairwoman VELAZQUEZ. Thank you. Thank you.
Can I count on your support that we could set aside funding
for mission-based lenders? Because, you know, we are discussing
here the smaller of the small businesses who have no
connection, who have no preexisting banking relationships with
those financial institutions. Those who have relationships are
mission-based, like CDFI, like MDI, like microlenders, and I
hope that we could going forward work with you on that issue.
My time has expired, and now I recognize Ranking Member
Steve Chabot.
Mr. CHABOT. Administrator Carranza, I will go to you first.
Given the overwhelming response to this emergency, is the
SBA prepared to respond to other disasters such as floods and
hurricanes and fires? We know they are coming at some point.
Are you all prepared for that?
Ms. CARRANZA. Yes, Mr. Chabot. At this point we have about
three type of disaster declarations that are being submitted by
the governors. It is either economic disruption based on civil
unrest or it is natural disaster, and then, of course, the
March declaration of economic disaster. So, we are processing
all three as we speak.
Mr. CHABOT. Very good. Thank you.
Secretary Mnuchin, I will move to you next.
Does the loan forgiveness process need to be simplified any
more? For example, I know there are some members of Congress
that have suggested perhaps even forgiving all the loans under
$150,000, for example. I am not saying we should or should not
do that, but I would love to hear your kind of thoughts about
it. I have heard a lot of concerns from folks out there about
how complicated the forgiveness process can be. If you could
talk a little about that.
Secretary MNUCHIN. We look forward to working with this
Committee and the Senate Small Business Committee to simplify
the process. There were provisions in the existing act that
made it complicated. We tried to issue as much guidance as we
could. I know one of the things that we will talk about is
should we just have forgiveness for all the small loans? I
think that is something we should consider. We should obviously
make sure there is some fraud protection. But we look forward
to working with this Committee and others.
Mr. CHABOT. Thank you.
As you know, at this point there is approximately $130
billion that is still in the PPP program. So everyone is
talking about, so what do we do with that? You know, do we
reduce the number of employees eligible from say 500 down to
100? Or do we stick with what we have? Do we do a second PPP?
And I know these are negotiations that everyone is having now,
including the Administration, the House, the Senate, this
Committee and others. What are your current thoughts about
that?
Secretary MNUCHIN. The administration supports using the
existing money and topping it up with some additional money and
that will be discussed and allowing for a second payment to the
businesses that are especially hard hit. And Chairwoman, let me
just say, I was only giving examples of businesses. I did not
mean to in any way imply that those are the only businesses
that are hard hit. I think this time we need to have a revenue
test and make sure that money is going to businesses that have
significant revenue declines. That is something that Congress
did not have in the first provision, but make sure that the
businesses that are especially hard hit, particularly small
businesses, and put in certain safeguards so some of the types
of people we saw that took out loans, and I look forward to
working with Congress. If Congress wants to put back in the
conflict rules, we are more than happy to work with Congress.
The Administration supports, we will participate on the same
basis of the House and the Senate.
Mr. CHABOT. Secretary Mnuchin, also one of the things that
you all were operating under impossible time constraints. You
know, we passed this. I was at the signing ceremony on a
Friday. The next week the loans were literally going out the
door, although not that many, and it was not glitch-free. We
all know that. But you all got your act together pretty quickly
and saved a whole lot of businesses all across the country. And
God bless you all for doing that. And this Committee was
involved in it and many others as well.
I know one of the things that was frustrating, and again, I
do not want to be critical here, but it was frustrating. I
heard this from lenders. I heard this from small business
folks. I heard it from our staff. Was just the time it took to
get the guidance out, so people knew what the rules were, what
we were all operating under. Do you have any thoughts for the
future as to what we might be able to do with respect to that?
Secretary MNUCHIN. Sure. Let me say in one of the more
ridiculous statements I have ever made, I committed we get the
program up in 2 weeks. And working with the SBA and the staffs,
we were able to do that. Now, obviously, in doing that it ran
into a lot of issues, but we made the judgment it was more
important to get it up and running quickly, that sending money
to people 4 months later was not going to help small
businesses. Now that we have it up and running, especially to
the extent there are minor changes to the PPP and the EIDL
programs, working with the SBA, we can get the guidance out
very quickly. We will not have the technology issues we had
last time. And again, I would encourage this Committee to work
in the context of these programs and put more restraints.
The other thing I think you should consider on the EIDL is
now that we have Main Street open for loans above $250,000,
that we really do focus EIDL on loans that are $250,000 and
below.
Mr. CHABOT. Thank you very much. My time has expired, Madam
Chair.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentlelady from Iowa, Ms. Finkenauer,
for 5 minutes.
Ms. FINKENAUER. Thank you, Madam Chair. I appreciate you
holding this hearing.
So just for Secretary Mnuchin and Secretary Carranza, for
you guys to understand, the district that I represent is in
Northeast Iowa. It has three bigger city centers and the rest
is pretty rural. And our district has been hit very hard on a
number of levels, whether it has been the attacks on our
agricultural community over the last few years or now this
pandemic and how it has affected not just our cities but also
our rural areas as well. And one of the things I want to touch
on, Secretary Mnuchin, I know you brought this up, but I really
want to dive into this, are those economic impact payments.
Those direct assistance payments that are important for
individuals who are worried about how are they going to pay
their mortgage, their rent, put food on the table, but also for
our local businesses as well who have been able to stay open to
have some sort of economic stimulus here during this pandemic.
And one of the things that I was really concerned about is
when these went out to folks, obviously, if they had a direct
deposit set up those went into their accounts, most of them.
However, we heard from 700 people within my district about
these payments who did not receive them or they received them
but they were in the debit cards and did not realize that they
were these economic impact payments. And so why was this set up
the way that it was? Why was there no real communication out to
these districts, out to folks who need it, to understand how
these were coming out? And then also, I know we wrote you a
letter, actually, Secretary Mnuchin, about the fees and
reissuing these cards because so many folks were throwing them
away. I am glad you listened and decided to waive that $7.50
charge for replacing, but why does it cost $17 to priority ship
these cards to folks? Why do taxpayers who need their money now
have to wait longer and it cost the more? This is just
something again that needs to be dealt with, and I am glad you
fixed a piece of it, but what are we going to do down the road
when hopefully we issue more support to folks and actually have
that education, and why was this done in the first place?
Secretary MNUCHIN. Well, thank you for your comments. And
let me just say, the fact that there were 700 of those in your
community is inexcusable. And if you have specific issues, we
are happy to follow up.
I would say the IRS and Fiscal Services did an
extraordinary job in sending out over 150 million payments,
again, in a record period of time. The debit cards you did
point out something; we did not realize that the debit cards
were sent in unmarked envelopes. We will correct that going
forward. I do think the debit cards actually was an interesting
addition for two reasons. One, it allowed us to get payments
out quicker since we could only create so many checks. And two,
going forward, debit cards----
Ms. FINKENAUER. I am sorry. I am sorry, Secretary Mnuchin,
how long did we have to wait to put those out because the
President decided to have his name on those checks or on the
paperwork that went out with those? How long----
Secretary MNUCHIN. I can assure you there was zero delay
associated with either one of those issues. It had no impact on
the timing. We were limited in the number of checks we could
print per week but that had no impact on it.
And I think the fees were waived. If the fees were not
waived and you have constituents that still have issues, again,
I am happy to follow up on that.
Ms. FINKENAUER. Yeah. The fee of $7.50 to replace was
waived, but then there is the $17 that it cost for the priority
shipping of the cards.
Secretary MNUCHIN. You let me know and we will follow up.
That should be waived as well.
Ms. FINKENAUER. Thank you.
And then I also have a question about the PPP program.
Obviously, this has been incredibly important all over the
country and in districts like mine, but I have to be honest; I
was really disappointed at the beginning when this rolled out.
I mean, we allocate these dollars, and then they go to these
agencies. So they go to SBA, they go to Treasury to set up how
these are doled out. And communities like mine, quite frankly,
were left behind because we have the highest concentration of
community-based financial institutions in the entire country
within my district. And so the first batch essentially went to
big banks and people who were connected with their banks and
left out communities like mine. Did either of you think about
how this would impact our folks who lend with community-based
financial institutions? Why was this done the way that it was
at the very beginning? I know we have that set aside now for
those dollars, but how can we ensure that as we continue to
look at this, that we are doing what we should here with these
agencies to make sure we do not forget about rural areas.
I mean, on the SBA, I understand as well that we lost the
head of Rural Affairs. Actually, she got moved. I know we are,
you know, short on staffing to deal with this but it is not the
time to move somebody that represents rural areas and then----
Chairwoman VELAZQUEZ. Time has expired.
If you wish to answer the question, sir.
Secretary MNUCHIN. I can assure you we are very focused in
making sure that the community banks and the CDFIs have equal
access. And you are correct. Unfortunately, there were issues
in the beginning. We corrected it very quickly.
Chairwoman VELAZQUEZ. Thank you.
The gentleman from Ohio, Mr. Balderson, is recognized for 5
minutes.
Mr. BALDERSON. Thank you, Madam Chair. Thank you both for
being here today.
My first question is for the administrator. Thank you again
for being here today, administrator. I greatly appreciate your
leadership through this pandemic. I would also like to convey
to you that your local office in my district, Columbus, Ohio,
SBA, has been a phenomenal partner and resource for me. We have
been doing a Back to Business tour for the last 3 weeks.
Everett Woodel from your office has been with me along the way
and his team, and we are very grateful to see the business
owners that encounter the SBA while we are there and to put a
face with the name is very pleasing for them as well. So thank
you.
An issue that I have heard more and more from my
constituents is the lack of clarity on PPP forgiveness.
Specifically, I hear this often from business owners looking to
have their businesses bought out. This could be because of the
pandemic or a planned sale prior to COVID-19 that has been
placed on hold because of the virus.
In this situation, the business owner took PPP in order to
support their employees and now they cannot sell their business
with this forgivable loan on the books. Why is this?
Ms. CARRANZA. Thank you, Congressman.
This is a situation that I would have to speak with you
personally or address the particular case because this is news
to me about them taking a PPP and then wanting to sell. It is
not a new incident where small businesses that are ready to
sell because they do not care to go through another pandemic or
another crisis. They are in a position and interested in
selling their company but the PPP or the EIDL loan issue was
not raised when we had those discussions. But I have experience
similar to you that there are businesses that are ready to
sell. But I would have to look into it, and I will confer with
the Treasury, on how to manage that situation and the
forgiveness. We have not addressed that at this point, an
entity wanting to sell their firm and they have a loan.
Mr. BALDERSON. We will work with you on that.
Ms. CARRANZA. Yes.
Mr. BALDERSON. And the business, for example, that I have
been in communication with, they were doing an exchange in
January before the pandemic hit. So most of them that I have
been in contact with have been having this issue before the
pandemic even started. So we will work with your office and
address that. Thank you very much.
Ms. CARRANZA. Look forward to it.
Mr. BALDERSON. Mr. Mnuchin, thank you. My next question is
for you.
I have introduced legislation with my colleague from across
the aisle, Congresswoman Brenda Lawrence, that would provide a
tax credit for small businesses to purchase and install PPE and
related safety equipment. This legislation would help small
businesses that are suffering financially under the weight of
mandatory closures, be able to afford the personal protective
equipment required to reopen their doors. Are you open to
working with myself and Ms. Lawrence to ensure small businesses
are safely prepared to welcome customers again?
Secretary MNUCHIN. Yes, absolutely. And I am not familiar
with this specific legislation, but I like the concept a lot.
Mr. BALDERSON. I appreciate it. It is up to $25,000 tax
credit, so thank you. I look forward to that.
Administrator, back to you. If a business owner decides to
use personal finances, monies that is not associated with their
business to pay off their PPP loan in order to move forward
with the sale of the business, they just have to eat this as a
loss? And again, that may be something that you and I may need
to sit and discuss.
Ms. CARRANZA. Yes. I agree. I need to understand all the
nuances to that particular situation.
Mr. BALDERSON. Understand.
Ms. CARRANZA. And perhaps there are other businesses that
may be facing the same thing that we need to look into.
Mr. BALDERSON. Thank you very much.
Ms. CARRANZA. You are welcome.
Mr. BALDERSON. Mr. Secretary, my last question is for you.
I greatly appreciate your leadership. It has been fascinating
to watch you.
As we look towards the next aid package, much of the focus
seems to be on providing aid to schools, hospitals, and first
responders. I support these efforts but also believe we must
continue consideration of America's economic engine, small
business and I know that Madam Chair and Ranking Member Chabot
have both talked about this. What types of considerations for
small businesses and workforce development efforts are also
being considered?
I did not leave you much time, Mr. Secretary.
Secretary MNUCHIN. Various items, but again, I think that
is something that should be considered, and we look forward to
working with you.
Mr. BALDERSON. Thank you, sir.
Madam Chair, I yield back my remaining time.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Maine, Mr. Golden, for
5 minutes.
Mr. GOLDEN. Thank you, Madam Chair.
Secretary Mnuchin, I have a question that I would like to
raise with you, but first I just want to point out, as you were
talking in your opening statement about extending the PPP
program but perhaps trying to target the assistance to
businesses that need that help the most, as well as maybe
learning from some of the lessons along the way. As we work on
the PPP program together, I want to encourage you to look at
the Restart Act introduced in the Senate by Senators Bennett
and Young, and here in the House by myself. This bill builds
upon the PPP program. It models itself after that, but I think
importantly, it has some provisions in there that would target
the aid to businesses that can demonstrate that they have, in
fact, suffered revenue losses over the past several months
related to coronavirus and the economic impact.
I do not know if you are familiar with the Restart Act, but
I would encourage you to give it a look as you are looking to
improve upon whatever it is that we do next to assist
businesses here in the United States as we shift into a
recovery phase.
Secretary MNUCHIN. I am familiar with it, and I think parts
of it should be incorporated.
Mr. GOLDEN. Thank you for that. And I look forward to
working with you and with the senators and House members on
something similar to PPP and the program proposed in Restart.
I wanted to raise an issue with you on behalf of critical
access care hospitals, including some in my district. Are you
familiar with critical access hospitals?
Secretary MNUCHIN. A little bit.
Mr. GOLDEN. You know, federally defined as providing
important healthcare access in rural areas, in rural
communities. These are hospitals that are going to operate
under very thin margins and struggle financially, but it is
important the Federal government recognizes how important they
are to access to care. In addition to access to health care,
they are often the largest employers in a rural region and
therefore are just critically important.
Your department has I think rightly looked at organizations
applying for PPP who are forgoing, you know, undergoing
bankruptcy as ineligible. I understand why you would do that
under normal circumstances but there are a number of critical
care hospitals in the Nation who are undergoing chapter 11
restructurings. And given the fact that we are dealing with a
pandemic and a recession and that these hospitals have a very
unique, Federally-recognized mission, and are providing
important access to health care in areas where it is going to
be hard even in good times to be making money. These are really
like nonprofit hospital organizations.
I was wondering if you would consider reconsidering
eligibility for critical care hospitals undergoing chapter 11
restructurings for the remaining PPP funding that you have. To
date they have been excluded and you can imagine during this
pandemic and the recession, the fact that they could not do
certain types of services that they normally would be doing,
they are really struggling and several of them are at risk of
closing which would be a terrible loss for these communities.
Secretary MNUCHIN. I am very sympathetic to those types of
hospitals and we look forward to working with you and
considering that.
Mr. GOLDEN. Well, I appreciate that very much. As you know,
the Treasury and SBA have been able to make some changes in the
program for eligibility for organizations to include some
nonprofit hospitals that are tax exempt under Section 115 and
hospitals owned by state or local government as well as others.
But I think, you know, those jobs are obviously very important
in rural communities, but even more important is ensuring the
access to CARES is preserved. And they have been applying for
PPP. They were rejected. In some instances, some of these
hospitals have gone to courts who essentially have said that
the determinations made by the Treasury and SBA would have to
be changed or Congress would have to act. So I do not know if
you think that you need some kind of legislative action or if
you think that you have the authority you do to look at this
and make that change yourself. But I want to thank you for
working with both my office but also Senator King and Senator
Collins from Maine, and I am sure other senators who represent
similar hospitals in similar situations are eager to work with
you to try and help these hospitals.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from Oklahoma, Mr. Hern.
Mr. HERN. Thank you, Madam Chair, Ranking Member Chabot.
Mr. Secretary, Administrator, thank you both for being here
in person for this. This is unprecedented times.
Mr. Secretary, our office has dealt with many people who
have waited weeks and weeks for their unemployment checks to
get approved at the state level. Hundreds of thousands across
the country I am sure.
As you may remember, we discussed this on a phone call over
4 months ago where we noted that under the current capacity,
states were ill-equipped to handle the influx of unemployment
applications. To combat this problem and to keep hardworking
Americans employed, Congress worked in a bipartisan way,
unprecedented actually in today's times, to establish the
Paycheck Protection Program. And while I believe this program
could have been expanded and more could have been done to help
the 40 million Americans who are currently unemployed, this
program has successfully saved 51 million jobs in America,
which was designed so that when we come out of this pandemic
that we can quickly stand up the economy which is what we have
been seeing happen in May and June and continue to see that
happen now.
You have stated many times that the priority of the PPP was
to predominantly preserve and save jobs and employees rather
than the business owners themselves. Would you still agree with
that statement?
Secretary MNUCHIN. Yes.
Mr. HERN. Additionally, could you discuss what you have
learned from this or strategies that the Federal government can
implement in the future to better prepared for this next
situation or the situation in the future?
Secretary MNUCHIN. Well, let me just comment on one of the
things that we liked about the PPP was all the money we were
spending on the employment side of this was money we saved on
unemployment. I think one of the issues we have learned and we
have to fix in the next legislation is the technical issue
wherein certain cases states with the top up were paying people
more not to work than to work. And as you said, some of the
states were better prepared; some of the states have 40-year-
old computers.
I also want to just say one thing. I know a lot of people
use this 40 million people unemployed. Fortunately, it is not
40 million unemployed. People thought we would get to that, but
fortunately, right now we only have 18 million unemployed, and
we have about 14 million more than where we started this. And
we have got to get those people back to work. But thank you.
Mr. HERN. Thank you.
Further, my casework team has worked with hundreds of
people who have had difficulties receiving their stimulus
check. And I know you are aware of this. We have talked to your
offices. Can you briefly explain, very briefly, what we have
seen happen and why? Is there a big issue here or are all these
one-offs?
Secretary MNUCHIN. I mean, let me just say, all these one-
offs, I am sympathetic because these are real people who want
their checks. So I do not mean to in any way minimize this. But
again, we sent out over 150 million checks in record time and
yes, there were certain cases, because they were either done
off of previous tax returns or other information that we got
and that is unacceptable, but we will work with you on it.
Mr. HERN. Thank you.
Administrator Carranza, 2 weeks ago, Associate
Administrator Rivera testified before the Committee regarding
the EIDL program. And during my conversation with the
administrator, he committed to providing this Committee with a
document outlining some best practices by the end of the third
quarter, September 30, 2020. This will be a document to explain
what the SBA has learned and how you all believe you could be
prepared in the future should another pandemic arise.
Just as a side note in that, the administrator stated he
had been here since 9/11. He had been through 9/11, the
financial crisis, and you know, we keep reinventing the wheel.
And it seems with all of us engaged in this in a very
bipartisan way that we could put a pandemic playbook in place
so that we could learn from our mistakes and not repeat them
again. Because when we make mistakes, people are harmed. Or at
least not given stimulus when they need it. So if we could
learn from those mistakes and do better that would be great.
And I think that would be a way to do it, in a nonpolitical way
that we could put these on the shelf.
One of the key components to this document will be to
design a communication plan for future pandemics which would
greatly help all of us work together.
Would you commit to seeing that get done by the end of the
third quarter?
Ms. CARRANZA. Yes, Congressman. We have already begun. We
have prepared the first deck on how we are addressing fraud. We
have also staffed up. I started with two additional executives,
SESs, in ODA, so we are going to reinforce the leadership in
ODA for future situations and in preparation for the end of the
year.
So, definitely, you will have a full SOP on lessons
learned.
Mr. HERN. And as businesspeople, and many are in this room.
I have been in business 35 years. You know, we can talk about
what happened but that does not really solve a problem. So if
we can indel in a document what those issues were so that we
can not make those again, we will make new ones, and that is
human nature. But if we can get that done that would be great
for us. Madam Chair, Ranking Member, I think you for allowing
us to have this meeting, and it is very important. And thank
both of you for being here, for what you have done in these
unprecedented times.
Ms. CARRANZA. I look forward to continuing to work with
you. Thank you.
Mr. HERN. Thanks.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Now we recognize the gentleman from New Jersey, Mr. Kim,
for 5 minutes.
Mr. KIM. Thank you, Chairwoman, for convening this hearing.
Thank you to the witnesses for showing up.
Secretary Mnuchin, I wanted to start with you. You
rightfully noted in your testimony that small businesses are
continuing in the face, a dire circumstance right now. Even
those that have received Paycheck Protection Program loans are
telling me that they are unsure whether or not they are going
to be able to survive. And there are a lot of concerns about
just the bigger state of our economy and whether or not our
economy is going to be able to pursue through these coming
months, and if not, is that going to have a negative impact on
our small businesses?
In my home state in New Jersey, we have gone through a
really tough time over the last couple of months and we face a
tough challenge up ahead when it comes to our state economy. It
has been crippled. We have dramatically hampered our recovery,
especially for small businesses. And these are not just about
COVID-related expenses. It is about loss of revenue that could
very well create widespread layoffs, decrease consumer
spending, weaken our investment in our communities.
Secretary, I wanted to ask you if you would commit to
working with Congress to ensure that we have the necessary
funding to our states and local municipalities to solve the
crisis that we face and create a strong economic recovery.
Secretary MNUCHIN. Well, I think as you know, we allocated
significant amounts of money to COVID-related expenses. We have
tried to issue guidance to be very clear that money can be used
for law enforcement, first responders, and others. I think the
issue of lost revenues is a much more complicated issue and the
issue of taxing authorities between the state and the Federal
government. But we will be working with Congress on this.
Mr. KIM. I raise this because, you know, I have heard you
talk about before what could potentially come next with state
and local funding on this. And I think it is really important
and central to this discussion that we are going to be having
over the coming weeks about this. When I have heard you talk
about it before you have purposefully described this money as
bailouts for some states. And so I just wanted to hear from you
a little bit more on that front. I believe that for you,
perhaps you do not want to see this funding going to states
that you characterize as mismanaging funds be fair, that it
would not be fair to other states that are working hard on
their economy and their budget, so why have them cover for
other states? Is that sort of a correct interpretation of your
assessment?
Secretary MNUCHIN. What I have said and I agree with this,
if there were financial conditions that states had coming into
this, it is not the Federal government's role to bail them out
of that. Now, we have through Main Street--excuse me, through
the Fed facilities, we have provided lending facilities to the
states and municipalities. But the issue of taxing authority,
the Federal government has taxing authority and the states have
taxing authority. So where there are lost revenues, I think
there is a fairness issue of how those get allocated across the
country.
Mr. KIM. Well, I agree with you that there is a fairness
issue here at stake. And in New Jersey, our state only gets
back somewhere around 75 cents to 81 cents for every dollar
that we put into the Federal government. It is one of the
lowest in the Nation. Other states get back well over $1. Some
$2. Kentucky gets back abut $2.35 last I saw. So I guess I
would ask you, is that fair? Is that fair to the residents of
New Jersey?
Secretary MNUCHIN. Let me just say, I have lived in New
York and California, and both New York and California cite
those numbers as well. I do not believe that that is an
appropriate number because the answer is more rich people live
in those states. And because of the way we have taxes and the
rich people are the ones who pay the preponderance of Federal
taxes. I do not believe the calculation as a result is the
right way to look at things.
Mr. KIM. Okay, well, that is helpful for me to understand
how you are approaching this problem, and I want to continue to
work with you on that because from my standpoint, if New Jersey
is often calculating that we give in to the Federal government
about $20 billion more than what we get back every year, I
think there is an issue of fairness here. And I really do not
want us in the middle of a pandemic to get to a situation where
we are trying to pit states against each other. We saw that
with personal protective equipment, and now with funding, I
think there is a chance for us to really come together here and
try to think about this, especially when we know that current
and former Fed chairs all have said and reportedly warned that
economic recovery could be hampered if we do not appropriate
more aid to state and localities.
Just switching gears here at the very end, Administrator
Carranza, I understand that the Economic Injury Disaster Loans
were capped at $150,000 to ensure all borrowers could access
the funds. However, this policy shortchanged many businesses.
So I wanted to ask you, moving forward, will you commit to
removing this cap for new EIDLs and to allow the existing loans
to obtain more funding in phrase two?
Ms. CARRANZA. Congressman, what our experience is currently
is that the average loan has dropped from 63,000 to 57,000 down
to about 43,000 since we have opened in June--July, excuse me.
And so, at this point, the operating expense that people apply
for are not hitting the cap in great numbers. About 1 percent
of the applicants are pursuing that amount. Eighty percent of
the loans that we have processed come in significantly under
the $150,000. But I will continue assessing it. We are
reviewing that on a daily basis, Congressman, so I look forward
to working with your office.
Mr. KIM. Thank you.
Chairwoman VELAZQUEZ. Would you yield?
Mr. KIM. I will.
Ms. CARRANZA. Thank you.
Chairwoman VELAZQUEZ. We are out of time. I expect for you
to lift that cap, especially when there are other states that
are facing the pandemic now. You cannot predict if any business
from those states will need more than $150,000, so the fact
that now, from those other states you are not getting those
type of applications or that type of amount does not mean that
that will apply to every order. Businesses should have the
opportunity to be able to apply for over $150,000 if that is
what they need.
Ms. CARRANZA. Congresswoman, at this time, since we opened
the portal, we have an additional 5 million applications. We
have probably about 15 to 20 days remaining with the remaining
funds. So, if I keep that level of $150,000, I will be able to
serve 5 more million small businesses.
Chairwoman VELAZQUEZ. Sure. From the beginning,
appropriators, myself included, Senator Cardin and some other
senators asked you if you needed more than what we included in
the bill and you said yes. Come to us. Tell us when we ask if
that is enough.
Ms. CARRANZA. Yes. I will work with your office.
Chairwoman VELAZQUEZ. Thank you.
Now we recognize the gentleman from Minnesota--who is----
Mr. STAUBER. Thank you.
Chairwoman VELAZQUEZ.--Mr. Stauber.
Mr. STAUBER. Thank you, Chair Velazquez----
Chairwoman VELAZQUEZ. Yes, Mr. Stauber.
Mr. STAUBER.--and Ranking Member Chabot. I also want to
thank the two witnesses for being here today.
So, Secretary Carranza, this kind of follows what the
Chairwoman just talked about. I would first like to share with
you some concerns that I have heard from my constituents. And
it seems that the SBA has taken some liberties to reduce the
cap of loans given out from the 2 million to 150,000. While
this is likely to ensure the maximum number of businesses
receive some sort of funding during this crisis, my
constituents are rightfully upset. They feel that they are
being cheated out of what they were promised by their
government.
I heard from your colleague Mr. Rivera on this issue a
couple of weeks ago. But I wanted to give you the opportunity
to respond today.
Ms. CARRANZA. Yes, Congressman. I also receive emails where
their calculation on operating expenses may have not reached
the 150,000, and we have taken those under special
reconsideration and looked at ways where we could increase that
amount.
Secondly, to exceed the 150,000 at this given time would be
premature because we have 5 million applications currently. As
I stated to the chairwoman, if there are needs for funds, then
we will bring that up for discussion.
What we do with the applicants that need more funds is we
counsel them that there is the PPP program, that is a
forgiveness loan and we provide technical assistance. We don't
influence nor do we recommend. We just share that there is also
another option that they can consider.
We don't take lightly the fact that businesses need funds.
It is an emergency lifeline that we initially thought it was
going to--this pandemic was going to be 2 weeks and now it is a
couple of months. And so, we recognize the fact that they need
greater funds.
Mr. STAUBER. Thank you----
Ms. CARRANZA. You are welcome.
Mr. STAUBER.--Madam Secretary. You know, as I have said
before, the SBA and the Treasury were given a nearly impossible
task. And while there have been some bumps in the road, we
appreciate the work that you, Secretary Carranza and Secretary
Mnuchin, and your respective teams, have put into helping the
small businesses across this Nation during this pandemic.
My last question will go to Secretary Mnuchin. You know,
shifting gears a little bit, I have been hearing from local
grocery stores and convenient stores of the coin shortage. What
are your thoughts for addressing this issue and have you
considered some type of public messaging or political PR
campaign to help jump-start the coin circulation across the
Nation? Secretary Mnuchin.
Secretary MNUCHIN. Thank you. We are working very closely
with the Mint and the Federal Reserve on the coin shortage, and
the Mint is working overtime. As you said, as a result of
COVID, a lot of the coinage is stuck, but we will--we are
working on a public messaging and we will get updates to your
office.
Mr. STAUBER. Thank you, Mr. Secretary. I would say this
Committee would be happy to help you in that public relations
campaign.
And with that, Madam Chair, I yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back. Now we
recognize the gentleman from Colorado, Mr. Crow.
Mr. CROW. Thank you, Madam Chair. And thank you,
Administrator Carranza and Secretary Mnuchin, for joining us
today.
Administrator Carranza, on July 6th, the SBA sent to
Congress a list of the loans distributed by congressional
district. And they sent to my office a list showing 317 small
businesses within my district received loans over 150,000, and
over 3,600 received loans less than that. I knew that wasn't
right given the number of small businesses in my district, so
we conducted our own analysis and determined that there were
actually over 1,400 businesses in my district that received
loans over 150,000 and over 10,000 that received them under
150,000. So, that data was way off. What are you doing to fix
it?
Ms. CARRANZA. I would like to visit with you and address
those particular statistics. It would be premature to comment
on these particular data points that I am not familiar with at
this point, so I look forward to working with you.
Mr. CROW. So, you will commit to work with me and every
other Member of Congress to----
Ms. CARRANZA. Absolutely.
Mr. CROW.--make sure that data is correct?
Ms. CARRANZA. The entire Committee, yes.
Mr. CROW. Okay. And, Secretary Carranza, I was very pleased
to hear from--I am sorry, Administrator Carranza, I was very
pleased to hear from Secretary Mnuchin that he would commit to
work with us to look at how to get that 100 billion-plus PPP
money that is still available to members of the Black and Brown
community and to women-owned businesses and others especially
hard-hit. Do you share that commitment and will you commit now
to work with us to develop a program to give money to those
businesses?
Ms. CARRANZA. Yes, I do. We have been working in concert
with Treasury. We have worked together on the CDFIs, the credit
unions, the savings and loans, the fintech organizations. Many
of the community banks are the ones that are very specialized
in providing funds to these particular underserved communities,
so we are working in tandem. Definitely I agree with----
Mr. CROW. Thank you.
Ms. CARRANZA.--Secretary Mnuchin.
Mr. CROW. I appreciate that.
Ms. CARRANZA. Thank you.
Mr. CROW. I appreciate that commitment, Administrator.
Secretary Mnuchin, to you. You have had a long career in
investment banking and banking, correct?
Secretary MNUCHIN. I haven't been in investment banking in
close to 18 years, but I have been in banking.
Mr. CROW. In banking. And when you were in banking you
advised your banks on where to send money and to whom to give
loans and funds to, correct?
Secretary MNUCHIN. No, I didn't. I had a regional-based
bank. I didn't advise where to give money. I served on a loan
committee, but we gave----
Mr. CROW. Your banks would make decisions, though----
Secretary MNUCHIN.--across the board in the community.
Mr. CROW.--where to send money, whom to give loans to,
correct?
Secretary MNUCHIN. I am sorry, I couldn't hear you. Could
you repeat that, please?
Mr. CROW. Your banks would make decisions to where to send
money and to give loans to, correct?
Secretary MNUCHIN. Well, customers--again, customers
applied for loans and the bank made credit decisions.
Chairwoman VELAZQUEZ. Mr. Crow, we cannot hear you.
Mr. CROW.--closure requirements as to whether or not an
employee of that bank, a family member of you or one of your
employees, or a close business relationship was one of the
recipients of that money, correct? There are disclosure
requirements in the financial industry?
Secretary MNUCHIN. There are disclosure requirements. There
are also requirements by the FDIC and the OCC that we would
follow.
Mr. CROW. And what are the purpose, in 20 seconds, what are
the purpose of those disclosure requirements?
Secretary MNUCHIN. Well, the real focus is the conflict of
interest. And to the extent there is a conflict of interest, in
many cases it has to go to the board of directors to be
approved. So, it is more focused on conflict of interest than
disclosure.
Mr. CROW. But you need to have that disclosure in order to
do that analysis, correct?
Secretary MNUCHIN. Again, most banks do not publicly
disclose----
Mr. CROW. No, Secretary Mnuchin, you have to have the
disclosure of that information in order to do the analysis on
conflicts of interest, correct?
Secretary MNUCHIN. Disclosure within the bank, yes, that is
correct.
Mr. CROW. Okay. So, by that same rationale, is it important
that members of the Trump family, associates of the Trump
organization, or employees of the administration disclose their
interest in entities that are receiving PPP money so you can
conduct that conflict of interest analysis?
Secretary MNUCHIN. Again, let me repeat, and I repeated
this before, as it relates to----
Mr. CROW. No, Secretary Mnuchin, I asked you a very
specific question. Do you believe that disclosure is necessary
in the context of the administration?
Secretary MNUCHIN. Again, I don't believe that because,
again, this was not an issue that was required by Congress.
This was a very specific issue and there were no restrictions.
Now, I am not aware if they took loans or they didn't. But
let me be clear, there was no restrictions on the PPP. There
were restrictions for the administration and Congress, same
terms, on the other official----
Mr. CROW. Well, I won't take it----
Secretary MNUCHIN. And I believe----
Mr. CROW.--as a no then.
Secretary MNUCHIN.--the Trump administration----
Mr. CROW. It is don't believe----
Secretary MNUCHIN.--should be held to the same standard as
Congress on the PPP. So, there----
Mr. CROW. But they should not be held to the same standards
that your banks and financial industry was held to during your
career?
Secretary MNUCHIN. Again, I think you are misrepresenting
my comments on, again, conflict of interest versus disclosure.
Mr. CROW. I think I was very clear. My time is out. I yield
back, Chairwoman. Thank you.
Chairwoman VELAZQUEZ. The gentleman's time has expired, so
how we recognize the gentleman from Tennessee, Mr. Burchett. Is
he here?
Mr. BURCHETT. Yes, ma'am. Yes, ma'am. Can you hear me----
Chairwoman VELAZQUEZ. Yes.
Mr. BURCHETT.--Chairlady?
Chairwoman VELAZQUEZ. Yes, I can hear you.
Mr. BURCHETT. Thank you. I am sure my melodious voice
carries well over the internet. Hey, let us see, thank you all
for letting me be here, Chairlady and Ranking Member.
Administrator Carranza, and I might have missed this
earlier, I have had some technical difficulties, having trouble
hearing what people are saying, so if I have done this, you
just give me the brief answer, that would be great. As of last
Friday, the SBA still does not have a portal of a process for
accepting loan forgiveness applications. Why is this? And what
can we do to speed this portal and process up?
Ms. CARRANZA. The forgiveness portal or the application or
guidance will be out very shortly. We are resolving some of the
language between Treasury and SBA, but it is going to be
available very, very soon.
Mr. BURCHETT. When do you think that would be? I know
government very soon is like a glacier and I am in Tennessee
and people----
Ms. CARRANZA. Well, I haven't been allowed that luxury
lately, not under this pandemic. So, you can trust that we will
work it as expeditiously as we can. We are trying to make it
right the first time and address all the issues that have been
raised by not only the lenders, but the borrowers, as well.
So, if I can tell you within a----
Mr. BURCHETT. Okay.
Ms. CARRANZA. If I can tell you by August, that will be a
target date.
Mr. BURCHETT. Of 2020?
Ms. CARRANZA. Yes, sir. Yes, sir.
Mr. BURCHETT. Okay. Yes, ma'am. I had to get that clear
since we are----
Ms. CARRANZA. Yeah, thank you.
Mr. BURCHETT. Yes, ma'am. Secretary Mnuchin, in your
opinion, how should we in Congress utilize the remaining 103
billion in the PPP funding?
Secretary MNUCHIN. My suggestion is that Congress would
reauthorize the program to allow for a second check, a second
payment to the businesses that are most hard-hit.
Mr. BURCHETT. And which would those be, in your opinion?
Secretary MNUCHIN. I think we should use a revenue test.
So, as opposed to I don't think any specific industry should be
targeted. I think that----
Mr. BURCHETT. Okay.
Secretary MNUCHIN.--we should use a revenue test and
something significant.
Mr. BURCHETT. I caught part of that earlier, but it cut
out.
Also, Secretary Mnuchin, do you believe the Nation's
smallest businesses, those with 10 or less, received the
assistance they needed to survive this emergency?
Secretary MNUCHIN. Many of them did. I am sure there were
some that fell through the cracks, but we are very proud of the
majority of the loans went to very small businesses.
Mr. BURCHETT. Okay. And, Ms. Carranza, what measures are in
place in the SBA to reduce the waste and fraud and abuse in the
EIDL and the PPP?
Ms. CARRANZA. We have developed an infrastructure that is
overseen by our CFO and we have contracted a vendor, as well,
so that we can have institutional knowledge as it relates to
experience in the lending sector. So, we have a very
comprehensive approach to oversight not only for the PPP, with
the EIDL, but ongoing audits of the CARES Act implementation at
SBA in total.
Mr. BURCHETT. Okay. Do we have a flowchart or something
that we could have just to talk to--when we talk to our folks
and our local media about that----
Ms. CARRANZA. Yes.
Mr. BURCHETT.--when we get inquiries?
Ms. CARRANZA. Yes, I have no hesitation reviewing what our
deck looks like or strategy appears with the Committee. I look
forward to review that.
Mr. BURCHETT. Yes, ma'am. If you could----
Ms. CARRANZA. Not a problem.
Mr. BURCHETT. If you could get that to the Committee, I
would be very grateful.
Ms. CARRANZA. Will do, this year.
Mr. BURCHETT. Yes, ma'am. This year, yes, ma'am, by August.
Noting that August is my birthday month, so that would be
great.
Ms. CARRANZA. Okay.
Mr. BURCHETT. Okay. Thank you, Chairlady. It is always good
to see you----
Ms. CARRANZA. You are welcome.
Mr. BURCHETT.--even on the camera.
Ms. CARRANZA. Likewise. Thank you.
Chairwoman VELAZQUEZ. Thank you.
Mr. BURCHETT. Yes, ma'am. And I yield the rest of my time.
Chairwoman VELAZQUEZ. The gentleman yields back. Now we
recognize the gentlelady from Kansas, Ms. Davis.
Ms. DAVIDS. Good afternoon, everyone. Thank you, Chairwoman
Velazquez and Ranking Member Chabot, for holding this very
important hearing today.
Secretary Mnuchin and Administrator Carranza, I appreciate
the both of you appearing before this Committee to answer our
questions and discuss the way forward in supporting our small
businesses through this unprecedented crisis.
You know, we enacted the Paycheck Protection Program to
ensure that our country's small businesses can keep their
employees on payroll and keep businesses afloat during the
crisis. And I know many small businesses in my home state of
Kansas, especially the minority-owned ones, struggled to access
the program during what was a critical time. And, at the same
time, we saw well-connected and even publicly traded companies
getting these loans with little to no problems, and were even
borrowing when they had already borrowed from their own
executives.
And I believe Kansans need to know that their tax dollars
are not being used to pay back high-dollar salaries of
executives. And that is why I have been working alongside my
colleagues on this Committee to push for accountability and
transparency that the public deserves. In fact, I introduced
the PPP Accountability Act, which would ensure that both
Congress and the public are able to see the information about
the loan recipients for themselves. And I appreciate that you
listened to some of these concerns and have made some of the
initial data public.
And, you know, from this information, we know that in the
Kansas Third, close to 100,000 jobs were retained and
preserved. And we also know that there is a lot of information.
We have heard about it from some of my colleagues today, a lot
of information that we still don't know, like what loan
forgiveness rates will look like, the rate at which minority
businesses have received loans. And this information is
essential to our Congress to provide the oversight that we are
constitutionally mandated to provide.
So, I think I will start with, Secretary Mnuchin and
Administrator Carranza, can you tell us what your plans are for
releasing the data of the recipients for the loan forgiveness
portion here?
Secretary MNUCHIN. Well, let me first say I agree with your
comment on the public companies and you know there was about
$30 billion of it returned. And as the administrator has said,
we are going to have a very robust process to review loans
before loans are forgiven.
And, yes, in the forgiveness process people will be
required to provide much more data and that data will be
released.
Ms. DAVIDS. Well, so can we--I know you had mentioned
earlier and it was highlighted a couple of times that there is
definitely a commitment to making sure that minority-owned,
women-owned businesses, and some of the most marginalized or
disadvantaged small businesses out there should be getting
access to these loans at the same rate as everyone else. And,
you know, some of the fields included in the data are optional.
And when we talk about how many jobs are saved through
loans and demographic information about the ownership of the
business being optional, I am curious what your plans are to
evaluate the effectiveness and reach of the program without
this information.
And I appreciate the commitment that you have to making
sure that some of the most vulnerable businesses out there are
getting loans. I am just curious how you are going to get there
with some of this information being optional?
Secretary MNUCHIN. Well, the jobs numbers will be required,
so when people apply for forgiveness, they are going to have to
be very specific in how much money was used for payroll and the
number of jobs. So, that will be required.
As it relates to demographics, this is optional. There are
legal issues associated with forcing people to report
demographics.
As I commented in my opening testimony, we have looked at
low- and moderate-income census tracts, and we are pleased that
money was distributed proportionately. But we look forward to
working with you and the Committee on transparency and
collecting more of this information.
Ms. DAVIDS. Well, I appreciate that. And I know that this
has certainly been an iterative process, particularly when we
are thinking about the rollout of the guidance and the rules
around these programs.
And I know that folks are working really hard at the SBA
and Treasury Department. I have a lot of appreciation for the
career folks, who have been putting in tons of hours. And thank
you both for continuing to show up and listen to our concerns.
I want to particularly thank you for listening to the concerns
that my office put forward about the Tribal enterprises and
making sure that the Paycheck Protection Program was accessible
to all Tribal enterprises. So, thank you for that.
And I will look forward to continuing to working with you
to make sure that our small businesses are taken care of in
this country.
Chairwoman VELAZQUEZ. Time has expired. Now we recognize
the gentleman from Pennsylvania, Dr. Joyce, for 5 minutes.
Mr. JOYCE. Chairwoman Velazquez and Ranking Member Chabot,
thank you for convening us here today in Washington.
Administrator Carranza and Secretary Mnuchin, thank you both
for joining us here. Thank you for your leadership during this
what is an incredibly difficult time.
Small businesses which we in this group frequently state
are the backbone of America, and during this COVID crisis truly
we have seen that these small businesses have become the heart
of America. According to data that you provided to us from the
SBA, my district, fortunately, has received $295 million in PPP
loans. This number represents over 2,700 small businesses which
were able to retain their employees, pay their benefits, their
health insurance. This was a significant relief for the small
businesses in Pennsylvania.
This number would be substantially lower had it not been
for your attentiveness for the needs of the farmers. On behalf
of Pennsylvania farmers, I thank you for your willingness to
work with my office on adjusting these programs to fit the
needs of our agricultural producers, those who every day feed
us safe and nutritious food.
Administrator Carranza, as we continue to reopen our
economy it is possible that people may increasingly rely on the
internet platforms to purchase goods and services and to even
work from home. While these platforms provide enormous
opportunities for small businesses, this transition could
further stretch the digital divide between urban small
businesses and access to affordable and reliable broadband in
the rural areas who have less reliable internet options.
This response to COVID-19, as you so eloquently stated, has
been an impetus for innovation. Those words were very striking
to those of us sitting here in the Committee.
Would you support further modifications of the PPP that
would allow funding to be used for broadband improvements or
other costs associated with the tools and the infrastructure
that is so necessary to allow rural small businesses to
telework effectively and utilize online platforms.
Ms. CARRANZA. Congressman, I have always been a strong
proponent of cost-effective broadband for the rural areas and
the most underserved markets. And so, I look forward to working
with your office to continue that discussion. Yes.
Mr. JOYCE. Thank you, Administrator. So, those in our rural
areas can more readily access the necessary avenues of
commerce, thank you for this consideration and thank you for
allowing us to continue this discussion and evaluate the use of
PPP to support rural broadband.
Secretary Mnuchin, thank you for acknowledging that
utilizing the remaining funds in PPP can positively affect
small businesses that have been and continue to be drastically
affected by COVID.
Thank you for focusing on different businesses and
considering the additional economic impact and qualifying by
economic impact on the businesses. I think that is a reliable
model that will allow us to move forward and effectively
utilize the remaining PPP funds.
Thank you for your continued work with us, Secretary
Mnuchin, and for the efforts to return those remaining workers
to their jobs. Do you feel that utilizing the additional PPP
resources will allow us to continue to see those additional
workers return to full employment?
Secretary MNUCHIN. Yes.
Mr. JOYCE. Thank you both for being here today. Thank you
for continuing your work, and I yield the remainder of my time.
Chairwoman VELAZQUEZ. The gentleman yields back. Now we
will recognize the gentleman from Maryland, Mr. Mfume.
Mr. MFUME. Madam Chair, thank you very much for the
opportunity. I want to thank you for your relentless efforts at
trying to bring about fairness and equity to this issue and to
the overall sear of what is happening with small businesses in
this country and, even more so, what is not happening. I want
to thank the Ranking Member and I obviously want to thank our
guests who are here.
There is, from where I sit, a great deal of skepticism in
many circles across the Nation from people who see the awarding
of PPP funds and the rollout of this project as being
discriminatory; as being something that works for others, but
does not work for them; and as something that they believe was
set up to be that way.
Now, people, for whatever reason, have their own beliefs
and their own shortcomings and misgivings about things, but
when they look at the fact that the President's lawyer received
PPP funding, that Members of Congress have received it, that
private equity chains have received this funding, it is kind of
hard to look at those persons and say, well, no, that is not
the case. These are just coincidences.
And so, it is out of that backdrop, for me at least, and,
as I said, from where I sit, that I am concerned that we
continue to have this discussion about bringing equity to Black
and Brown and Korean businesses where if we, I think, were true
to what we were saying to begin with, whether it was this
program or any program that preceded it, that would be
something that we would look for. We would automatically have
that as a threshold, as something we would want to try to
achieve.
And as I said the other day, Madam Chair, after having
served on this Committee 10 years through the '80s and the
'90s, through three presidential administrations, and then to
be fortunate enough to return to 24 years later to be a part of
this Congress and, again, this Committee, it is disheartening
for me to look back over that period of time and to recognize
that many of the same arguments advocating on behalf of Black
and Brown and Korean businesses for fairness and equity are
still being made. I mean, it is almost unconscionable, it is
unbelievable. And if I didn't live it myself through the 10
years that I was here and the 24 years that I was gone, I
wouldn't believe it.
People are concerned, Secretary Mnuchin and Madam
Administrator, that what they see does not gel with what they
have been led to believe. They think that the awarding of this
program in some way represents Robin Hood in reverse, that the
people who really should be getting some of this money on a
fair basis are not getting it. They anticipate that there will
be another review, another study on the study, and then another
Plan B for the Plan A that failed. So, I want to get that on
the record because these people oftentimes don't have an
opportunity to speak for themselves.
Let me just say to you that in the hearing conducted by
this Committee on June 17th, we learned of many issues that
many borrowers and lenders have faced in applying and in using
PPP dollars; witnesses outlining various areas of improvement,
including and not limited to more explicit rules, clearer
guidance around loan forgiveness, and more accessibility for
minority-owned and underserved businesses. And they believe
those are crucial issues.
We learned that the structure and the implementation of PPP
continues, as has been said, to disadvantaged, smaller
businesses, specifically businesses of color. And that is due
to the structural limitations that are built into the program.
I think both of you would probably agree that PPP funding
is heavily dependent on traditional financial institutions and
prior banking relationships. Many of those institutions have
been documented to have bias in their awarding of loans and
bias in their consideration of loans, not to mention a
different assignment of risk for persons who may be Black,
Latino, or Asian.
And so, those things have traditionally hampered Black
businesses. And now when we get to this stage and this
juncture, persons like myself, at least you have got to show me
that this is not true.
Prior to the June 17th hearing, both of you know that a
letter was sent to each of your departments inquiring how and
why minority businesses have had so much trouble and being
denied in many instances outright for the EIDL and the Paycheck
Protection Program. We needed transparency. We requested that
you immediately begin publishing the demographic data on PPP
recipients. On July 6th, that data was released and our worst
anecdotal observations were confirmed, especially in my
congressional district, where in the entire State of Maryland,
which is not a large state--this is not California or Texas;
there are only eight congressional districts--the district that
I represent got----
Chairwoman VELAZQUEZ. The gentleman's time----
Mr. MFUME.--2.7 percent of the funding. And I thank you,
Madam Chair. I am good.
Chairwoman VELAZQUEZ.--time has expired. Yes, sir, you can
finish your--yeah, okay.
Now we recognize the gentleman from North Carolina, Mr.
Bishop.
Mr. BISHOP. Thank you, Chairman Velazquez and Ranking
Member Chabot, and especially to all the Committee members
physically present right here in this hearing room in
Washington, along with our distinguished witnesses, which
demonstrates the kind of the leadership the American people
need to see. Thanks.
I join those who have complimented you and those serving
with you, especially for your historic accomplishment in
implementing the Paycheck Protection Program.
Secretary Mnuchin, as you have observed, the key to that
historic success and speed was enlisting private sector
financial institutions, including traditional banks, fintechs,
credit unions, CDFIs, to serve as the conduit for massive
relief to huge numbers of small businesses.
Given that fantastic success, if Congress legislates
additional relief we would be wise to continue the model of PPP
and keep private sector lenders enlisted in the mission. But we
have heard that lender fatigue is an issue. This is
attributable in part to the fact that after these business
entities jumped to respond to the call of the Federal
Government, a number now face frivolous lawsuits, proving that
too often when government is concerned, no good deed goes
unpunished.
As the administration looks at additional relief measures,
it seems to me that we should try to prove that adage wrong for
once, mainly by clarifying that the current ``hold harmless''
language which protects PPP lenders from liability applies
throughout the life of the loan.
Mr. Secretary and Madam Administrator, isn't it important
to fight lender fatigue in this way? And will you work with us
on this protection for lenders who have done so much to help in
the current crisis?
Secretary MNUCHIN. Yes, we will work with you. Thank you.
Mr. BISHOP. Madam Administrator?
Ms. CARRANZA. Likewise.
Mr. BISHOP. Shouldn't we also be looking at that same issue
for small businesses who face similar concerns, that is
frivolous liability--or frivolous lawsuits?
Ms. CARRANZA. Yes. One of the concerns I had was that we
don't take any measures that would be punitive to the borrower
or the lender, especially when we have started with 1,800
authorized lenders and grew that to 5,500. And the Secretary
and I are still working on additional nontraditional lenders
that are still applying to provide PPP loans. And we are
looking forward to making sure that the underserved, the sole
proprietors, and the independent contractors, really have an
opportunity with this over $100 billion that remain.
Mr. BISHOP. Thank you, ma'am. Administrator Carranza, I
want to follow up on an issue that has disturbed millions of
Americans. It is now widely known that abortion provider
Planned Parenthood brazenly violated the law concerning
business affiliation by taking $80 million of PPP loans via its
affiliates. The American people want to know how the SBA failed
to act in real time to prevent this wrongdoing and how it will
act quickly to compel the return of those funds and prosecute
those responsible.
Ms. CARRANZA. I will answer that question in two manners.
One, we do not discuss individual loan issues publicly. And
secondly, we will be reviewing all affiliations and all loans
closely.
Mr. BISHOP. Madam Chairman, I request unanimous consent to
submit for the record the May 19, 2020, letter of SBA Associate
Administrator William Manger to Planned Parenthood of Delaware,
Incorporated, including the investigative document request and
interrogatories appended thereto.
Finally, Mr. Secretary, your testimony referred to your
anticipation of additional relief to business and, importantly,
that it will be targeted to the parts of the economy that need
it most as our economy is starting to move from lockdown to
restart. Undoubtedly, the lockdowns hit certain industries
harder and I was pleased to hear that your answer to Ranking
Member Chabot that in targeting the relief, the administration
proposes to rely on neutral standards, such as documented
pandemic-related revenue loss.
Can you elaborate on the threshold you have in mind of
revenue loss that would warrant relief? And do you believe that
relief would be graduated in proportion to the degree of
revenue loss?
Secretary MNUCHIN. Well, I look forward to working with
this Committee and the Senate committee to determine those
issues. Again, as you just raised, we should look at whether it
should be a specific number or graduated. So, yes, we look
forward to working with you.
But I think it is important that we target this to the
businesses that are hardest hit.
Mr. BISHOP. Agreed, Mr. Secretary. And I guess the last
point, I am curious if you would agree that the reason to do
that, to target it according to revenue loss rather than, say,
picking specific industries, is that to do the latter would be
both overinclusive and underinclusive. And you might
arbitrarily pick winners and losers rather than responding to a
particular need.
Secretary MNUCHIN. Yes.
Mr. BISHOP. Thank you, Madam Chairman.
Chairwoman VELAZQUEZ. Time has expired. The gentlelady from
California, Ms. Chu, is recognized for 5 minutes.
Ms. CHU. Yes. Administrator Carranza, I would like to
follow up on this issue of Planned Parenthood. You know,
Planned Parenthood has been a lifeline for healthcare
providers. Their affiliates serve nearly 3 million patients
annually and is an important healthcare provider for many low-
income people across this Nation. And let me say that Planned
Parenthood affiliates operate independently from the national
organization, each having their own CEOs and board of
directors, and, therefore, qualify for PPP.
On May 28th, I co-wrote a letter to your agency along with
Chairwoman Velazquez. It was signed by 166 Members of Congress.
And we asked you to administer the PPP program in a uniform
manner and specifically not to exclude any entity or nonprofit
on the basis of political ideology.
Now, this letter came in response to numerous Planned
Parenthood affiliates learning that they were under
investigation for violation of the PPP affiliation rules, even
though they were not. So, I am deeply concerned about the
motivations which would have prompted the SBA to conduct these
investigations into the eligibility of Planned Parenthood
affiliates, especially after several of them learned about
these investigations first from Fox News rather than from the
SBA directly.
So, Administrator Carranza, of the over 500,000 healthcare
and social assistance entities that have received PPP loans,
can you tell the Committee how many investigations into
violations of affiliation rules have been conducted? And has
the SBA initiated such investigations against any other
nonprofit organization for violation of affiliation rules under
the PPP?
Ms. CARRANZA. Congresswoman, as I addressed Congressman
Bishop, at this point I am not able to discuss any particular
loan review, and I am not in a position to discuss any others
that we are reviewing. The specific one that you are referring
to is under review, as well as others. But I will not get into
any specifics about that, I am sorry.
Ms. CHU. Well, now let me focus in on another issue. Mr.
Secretary and Ms. Administrator, I would like to (inaudible)
two mandates of the CARES Act. One is that all COVID-19 loan
programs be translated into the 10 most commonly spoken
languages other than English. The other mandate is that PPP
should prioritize underserved businesses, such as those owned
by women, minorities, and veterans. Despite this clear mandate,
Treasury and SBA failed to even collect demographic data of PPP
applicants.
As a result, the loan level data released by your agencies
show that, for instance, in California, only 6 percent of loans
under 150,000 included information on race and ethnicity. And
in May, the SBA inspector general testified to the Subcommittee
that I Chair, the Oversight Committee, that agencies have
failed to issue any formal guidance to lenders on how to
prioritize underserved businesses and, of course, to adequately
collect data.
So, to demonstrate the seriousness of this failure, just
this week the National Community Reinvestment Coalition
published a study showing that Black business owners with
identical or better finances than White business owners were
less likely to be offered Federal assistance by participating
PPP lenders.
So, Mr. Secretary, please explain why you haven't provided
this guidance to lending institutions on how they should be
prioritizing the underserved and what you are doing to address
this issue, as well as the collection of demographic data.
And, Ms. Carranza, I do appreciate your testimony saying
that the SBA has translated its resources to 17 languages. But
the EIDL application still is not translated, and what is
happening with that?
Secretary MNUCHIN. So, first----
Ms. CHU. So, Mr. Secretary?
Secretary MNUCHIN. Yeah, first, let me just say the
demographics information was always really intended to be
collected on the forgiveness. So, again, this is something that
we couldn't force people to do, but we hope that people do this
and there will be a lot more information disclosed.
We have made major efforts to work with the CDFIs for
greater access. And, as I said, we do have access to census
tracts, so, again, that is well represented. But we can always
do a better job and we will.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Ms. Carranza, you may answer the question.
Ms. CARRANZA. Yes. Concerning the language, you are
correct, we have 17 languages, interpretations of the PPP
application. I will have to look into how many languages in the
EIDL, but that program was also to have bilingual.
Chairwoman VELAZQUEZ. The gentleman from Pennsylvania, Mr.
Evans, is recognized for 5 minutes.
Mr. EVANS. Thank you, Madam Chair, for your leadership,
especially on this subject and staying relentless on this
subject. We are all concerned about it.
Madam Chair, is it possible for the gentleman from
Baltimore, that I could yield some of my time, I don't have
much, to get the answer to this question?
Chairwoman VELAZQUEZ. The gentleman from Maryland is
recognized.
Mr. EVANS. Yes.
Mr. MFUME. Thank you, Madam Chair. I want to thank the
gentleman from Pennsylvania. I will not take much of it.
The point that I was trying to make, though, is that when
the data did finally get released after our letter, the data
that was released to all of us on July the 6th, it showed, Mr.
Secretary and Madam Administrator, that in the State of
Maryland, which only has eight congressional districts, the one
that I currently represent now got 2.7 percent, 2.7 percent, of
all of the funding, even though it is the most diverse district
with Black, Latino, and Korean businesspersons anywhere in the
state.
Now, this district had been previously represented by the
late Elijah Cummings, and so we have been without a
representative for some time until I got sworn in. But there is
no reason in God's world that there should be that kind of a
disparity so obvious in a state and a district, in particular,
that diverse.
And I will yield back the time to the gentleman from
Pennsylvania, and I appreciate it.
Mr. EVANS. Thank you.
Chairwoman VELAZQUEZ. Thank you.
Mr. EVANS. I want to specifically go to the Secretary of
the Treasury and kind of piggybank a little bit on what was
just stated. The question I want to ask, what are you doing to
address the discriminatory loan practices? And what are you
going to do to hold these banks accountable in terms of this
process?
We have seen that. I think the Chairperson and Chairwoman
Maxine Waters, they work together about CDFIs, initial
investment. What are you specifically as Secretary of
Treasury--because, obviously, Black borrowers have been treated
differently than White borrowers. So, can you speak to that,
Mr. Secretary?
Secretary MNUCHIN. Well, let me first say I have had
multiple calls with Chairwoman Waters and they have been very
constructive and very helpful. We have also made a major effort
to work with the CDFIs and expand the CDFIs, and we are pleased
with their work. Robert Smith, as I have commented before, has
been particularly helpful. We have had weekly conference calls
with him and his team.
And we have to do a better job to make sure that all areas
and all communities have access to these funds. And to the
extent there are specific situations of discrimination or
others, obviously we want to research that.
Mr. EVANS. Well, when you say ``better,'' you have a lot of
experience. I heard the gentleman from Colorado ask you about
your banking background. Can you in a very specific way tell us
what tools you intend to use, especially when you know that
this problem does exist?
Secretary MNUCHIN. Well, let me just repeat, the statistic
we have on low- and moderate-income housing is we did have
proper representation. Now, that obviously is different than
other demographics.
The CDFIs, I think, are best used at being able to access
the underserved communities, and that is why we proactively put
a CDFI set-aside as something we very much support. And we
support an additional legislation making sure that the CDFIs
have the proper resources to serve these communities.
Mr. EVANS. Go to the administrator real quick. The EIDL
program relating to constituents of mine who called about it,
the question around credit and what, tell me what was your
thinking in terms of receiving that information. Was there a
ranking of order relating to EIDL distribution of grants? How
exactly was yours or management around you relating to the EIDL
program?
Ms. CARRANZA. The EIDL advance administration was based on
the number of applications that were, again, in the queue
applying for the advance. And we based it on $1,000 per
employee. It wasn't just an arbitrary number. It was a well-
assessed and analyzed strategy. It was discussed with Members
of the Senate Small Business Committee.
We advised them that in order to cover the number of
applicants, the number small businesses that were applying for
the advance, we needed to do something so that many more people
would receive the funds. The average for both the agriculture
and as well as normal businesses were about three employees per
business, so it was about 3,000.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Mr. EVANS. Thank you, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman from Illinois, Mr.
Schneider, is recognized for 5 minutes.
Mr. SCHNEIDER. Thank you, Madam Chair. And I want to thank
you for holding this hearing. Congressional oversight of these
unprecedented programs is critical, especially as we thinks
strategically about our posture going into the fall. I want to
thank you as always and to the Committee staff for the work you
have been doing throughout this process.
Secretary Mnuchin and Administrator Carranza, thank you for
joining us today and for your work assisting small businesses
throughout this pandemic.
Administrator Carranza, you assured me that many of our
complaints about the EIDL program, the lack of communication to
borrowers, the backlog of applications, have been addressed. I
heard you say today that you have compressed the time of
processing to only 5 days. But I am concerned that, you know,
at this moment, as we are in this kind of lull and it is kind
of like a diner in between the lunch and the dinner rush,
things are quiet, but it is going to get busy again soon when
the money starts to run out.
When you talked about the $150,000 as a cap and earlier you
had mentioned that we, through our work, had provided a bridge,
when you created that arbitrary cap that is a bridge that goes
partway across the river. But without a full bridge, many of
these businesses are going to find themselves in the river
getting wet and many of them will drown. We need your help and
I hope you will lift that cap and give the help that many of
these businesses need.
Economic uncertainty continues and will continue in the
months ahead. Small businesses are still going to need more
help in the fall. And so, today what I would like to discuss is
Treasury and SBA's preparations to anticipate the expected
surge in challenges in the fall.
Earlier this week, I sent both of you a letter with
questions I would like to discuss on the PPP and EIDL loans.
How well they were implemented, how they helped the businesses,
what gaps remain, and what your agencies are doing to
anticipate that.
In that vein, Secretary Mnuchin, what economic forecast
remodeling, if any, has Treasury done to anticipate future
needs?
Secretary MNUCHIN. So, I think economic modeling is
particularly hard at the moment because of the fact that we
closed down the economy. This is not a typical economic
situation. But we are relying upon our economic models where we
do anticipate as we open the economy that we will have a
significant improvement, as I have said, in the third quarter.
But there will be industries, and we have done economic
modeling within the Treasury on the industries that are going
to be hit the hardest and the sizing that we need of additional
PPP funds to address that. And we will be working with this
Committee and with the Senate on that.
Mr. SCHNEIDER. Do your models take into account the fact,
as we are seeing in California, Texas, Arizona, Louisiana,
Florida, a serious spike in cases? In California, you are
seeing businesses close down again. Do the models take that
into consideration?
Secretary MNUCHIN. Well, again, let me just first say that
traditional economic models, given the medical situation, are
very hard. But, yes, we are looking at this across the entire
U.S. and certain scenarios, as you said, where there will be a
slowdown in opening and certain areas where things are doing
better. But, again, that is the reason why I think we need
additional funds to help these hardest hit businesses.
Mr. SCHNEIDER. And I appreciate it is hard, but it is
necessary. And it is also necessary for these businesses and
other organizations, like our schools, to have clear and
consistent guidance. I have had countless conversations with
businesses, yesterday I had a group call, Zoom call, with
school superintendents, and all of them are talking about the
challenges they are facing with the lack of clarity and the
guidance coming from both your Department, as well as others.
And I asked the superintendents about the teachers. The
teachers said they are absolutely terrified about going back to
work. I don't think the government is doing nearly enough to
provide that guidance. I hope we can see more guidance.
But as you are looking at forward-thinking and what we
might need, how do you incorporate the data you have, the
uncertainty that lies ahead to make sure we can give better
guidance to our businesses going forward?
Secretary MNUCHIN. Well, I can assure you that the task
force will be working and continues to work with the states on
guidance. And obviously, the states refine it based upon the
different areas.
And on your comment, I expect that we will have a
significant amount of money dedicated to K to 12 education to
help them deal with, as they--the areas that reopen have the
proper money to fit, so that it is safe for students and for
teachers.
Mr. SCHNEIDER. Thank you. Let me just say it is critical,
not just the money, which desperately is needed, but the
guidance on how to use that money and how best to open safely.
In my last few seconds, Administrator Carranza, when we
spoke last, I gave you last month a letter asking for an update
on 59 businesses in my district that still have not received a
decision on their EIDL application. As of today, 12, more than
20 percent, of those companies are still waiting. Can you give
us an estimate of when we will get these? Companies like Easy
Cut in my districts are waiting and trying to get that
information to survive this pandemic.
Chairwoman VELAZQUEZ. The gentleman's time has expired. You
may proceed to answer the question.
Ms. CARRANZA. Congressman, I look forward to working with
your office to identify the remaining balance of those
businesses to come to a conclusion.
Mr. SCHNEIDER. Thank you.
Ms. CARRANZA. You are welcome.
Mr. SCHNEIDER. With that, I yield back.
Ms. CARRANZA. Thank you.
Chairwoman VELAZQUEZ. The gentleman from New York, Mr.
Espaillat, is recognized for 5 minutes.
Mr. Espaillat, you need to unmute yourself.
We cannot hear you, so I am going to recognize the
gentleman from New York, Mr. Delgado, for 5 minutes.
Mr. DELGADO. Thank you, Chairwoman. I want to thank both
Administrator Carranza and Secretary Mnuchin for being with us
today.
And while the PPP and EIDL programs have been critical for
small business owners, I want to take a moment to highlight a
bill that I introduced that was included in the CARES package,
the Small Business Repayment Relief Act, now known as the Small
Business Debt Relief Program, which provides 6 months of
payments--principal, interest, and fees--for qualified SBA
loans, including SA, 504, and microloans.
In the month of April, the SBA made payments to lenders
just over 1 billion. And these payments corresponded to 263,192
total borrowers. However, estimates provided by the
Congressional Research Service indicate that there are about
320,000 outstanding loans across these three programs.
Administrator Carranza, you noted during a Senate Small
Business Committee hearing last month that the SBA had taken
steps to notify borrowers of this benefit, but needed to do
more outreach to ensure borrowers who are eligible are aware of
this benefit. Can you tell me what concrete steps you have
taken to ensure that every eligible borrower is able to take
advantage of these 6 months of payments?
Ms. CARRANZA. Yes, we dealt with the lenders and
intensified the communication. As a result of that, we have
realized it has gone from $1 billion to $3 billion of debt
relief. And we can do more because, as you stated, there is
still an opportunity to work not only with the existing
businesses, but others that are interested.
And our 7(a) has grown significantly, which we are very
pleased about; 504 is not growing as quickly, so we need to
intensify in that particular area. I am very pleased to
announce that within the HUBZone, as you know, the 504 falls
into that area, the underserved market, we have over $106
billion that have been appropriated under the PPP program.
I look forward to working with your office if you have any
particular areas that you would like me to concentrate on.
Mr. DELGADO. Well, I would like to just follow up, if I
may. You said you contacted the lenders and then you said you
can do more. So, I am curious if you would be able to detail
what the more would include.
Ms. CARRANZA. Follow-up calls to the individuals that we
initially contacted through our Office of Capital Access.
Mr. DELGADO. Anything else?
Ms. CARRANZA. Again, I look forward to speaking with you
and working up a strategy that would--if you have a particular
area that you believe we could do a better job of. I will go
back to the office and inquire as to how are we working with
all of the other program offices.
Again, 7(a) has progressed well; 504 not as strong. But the
debt relief has seen an increase of a couple of billion dollars
since we last spoke. That is to say since the hearing. Thank
you.
Mr. DELGADO. Given that 7(a) has increased well, are there
things that are being done with regards to that loan that could
be utilized with regards to the other major loans that could
help closing the gap we are speaking of now?
Ms. CARRANZA. Well, Congressman, we have been talking about
perhaps strengthening up all of the flagship loans and we have
been communicating that information to Treasury.
Mr. DELGADO. Okay. We should definitely coordinate with our
offices and talk through a bit more what other concrete steps
we could take to help facilitate this. You know, we also don't
know how much has been spent through this program since May. We
don't know how much has gone to new qualified loans compared to
existing. We don't know how many borrowers have yet to receive
it. We don't know which lenders have failed to comply.
On June 5th, Senator Coons and I sent a letter requesting
this information. Do you have this information available or
when can we expect this information?
Ms. CARRANZA. I look forward to working with your staff.
And if we have the data, which we reconcile on a quarterly
basis, from what I understand, we can make that available to
you in short order.
Mr. DELGADO. We sent the letter on June 5th, and I just
want to know have you been in receipt of the letter?
Ms. CARRANZA. I am sure our congressional legislative
office is working on it, sir, so I look forward, again, to
connect with your office and resolve that particular issue
and----
Mr. DELGADO. Yeah, we certainly----
Ms. CARRANZA.--provide you the information that you need
Mr. DELGADO. I appreciate that. We certainly would like to
expedite this process given, you know, the urgent needs on the
ground.
Ms. CARRANZA. Thank you.
Mr. DELGADO. And I am sure you can imagine the importance
of that. So, with that, I will yield back my time.
Chairwoman VELAZQUEZ. The gentleman yields back.
Mr. Espaillat is recognized for 5 minutes. He is not ready.
They are having some technical issues.
The gentlelady from Minnesota, Ms. Craig.
Mr. ESPAILLAT. Can you hear me now, Madam Chair?
Chairwoman VELAZQUEZ. Yes, I can hear you.
Mr. ESPAILLAT. Okay. Will you allow me to proceed?
Chairwoman VELAZQUEZ. Go ahead.
Mr. ESPAILLAT. Thank you, Madam Chair, and thank you----
Chairwoman VELAZQUEZ. The gentleman is recognized for 5
minutes.
Mr. ESPAILLAT. Thank you, Madam Chair, and thank you,
Ranking Member. Thank you, Administrator Carranza and Secretary
Mnuchin.
Several months back, I spoke at this Committee and I said
that small businesses, mom-and-pop stores, throughout New York
were really upset and were mad as hell. Because we all know,
and I am really amazed to see how everybody is praising the PPP
program and how it began, because we all know it was a debacle.
The portal crashed. Traditional banking institutions went to
their preferred customers. And only the well-heeled and
connected were able to get access to the PPP program to the
degree that many of them were shamed into returning the money
because they were publicly embarrassed that they were accessing
this money.
And small businesses throughout America felt that Main
Street should be bailed out. We have already bailed out Wall
Street. We already bailed out the airline industry. We already
bailed out a bunch of industries. But Main Street needed to be
bailed out, and the start-up of the PPP program was a debacle.
In fact, it took a carve-out of some money and acknowledging
that we needed to engage community-based banking and CDFIs to
access dollars and give them to the small businesses across
Main Street in America.
But even with that, we have just recently seen how a New
York Times--a Wall Street Journal report on an investigation
made by the New York City comptroller revealed that only 12
percent of the 1.1 million businesses, employee-based
businesses, in New York City got PPP loans in comparison to 20
percent of businesses in states like Montana, Kansas, Iowa,
Wyoming, et cetera. While the pandemic was ravaging New York,
the PPP program was giving money to those states that were the
least impacted by the pandemic.
So, my first question is to you, Secretary. You mentioned
that you will carve out some money for minority- and women-
owned businesses. How much money from the remaining part of the
PPP program and additional funding that will come for it will
you carve out for that particular part of the economy?
And the second question is, Mr. Secretary, will you
consider having some parity in the level of access to the PPP
program for states like New York, which contributes far more to
the Federal coffers and contributes in ways that other states
don't, and yet they get far less back? Again, only 12 percent
of businesses here got that as opposed to 20 percent in states
like Kansas and Wyoming and Iowa and Montana.
Those are my two questions. How much money will you carve
out for minority- and women-owned businesses? And do you want--
is there an effort to give states like New York, which are
hammered--the Bronx, which was hammered by the pandemic, had
one of the lowest numbers of PPP loans given to their
businesses. In fact, if you look at who got the loans you will
see that many management consulting firms got it, legal
services firms got it, as opposed to, let us say, for example,
nursing homes, which I think were critical in bringing life-
and-death services to people impacted by the pandemic.
So those are my two questions, Mr. Secretary.
Secretary MNUCHIN. So, as it relates to the first question,
a specific dollar amount for the set-aside, I will be working
with this Committee and with the Senate to see what both
committees think is appropriate for that. And I am sure we can
reach an agreement that--something that is appropriate and
significant.
As it relates to New York, I am not sure why more PPP loans
haven't been made there. There is still money available. So, to
the extent there are businesses in your area that need loans,
we are more than happy to work with you.
I don't believe there should be set-asides for certain
states. And I think, again, it took a while to get this up and
running, but I think now we have a system that will work well
in the next round.
Mr. ESPAILLAT. Well, now, Mr. Secretary, now that the
pandemic is ravaging the rest of the country, states like
Florida, you must agree, right, that Florida, Texas, Arizona
are getting hard-hit right now. And, in fact, some of those
businesses may have to shut down.
Perhaps as New York looks to reopen, this is the perfect
time to focus in places in New York to see how we can help out
New York. As goes New York goes the rest of the country. And
so, is there a commitment to help, you know, small businesses,
minority- and women-owned businesses, in New York State?
Chairwoman VELAZQUEZ. The gentleman's time has expired. Now
we recognize the gentlelady from Minnesota, Ms. Craig.
Ms. CRAIG. Thank you so much, Madam Chairwoman. And I want
to say thank you to Administrator Carranza and Secretary
Mnuchin for your efforts over the course of the last 3 months.
This Committee has been really a model of bipartisan efforts to
save our small businesses. So, I just want to say thank you to
my colleagues across the aisle, as well.
Secretary Mnuchin, I was going to ask you and Administrator
Carranza about extending the PPP applications for a second
loan. You have indicated that you are open to that idea. I
actually have the bill here in the House that would allow those
hardest hit sectors, like restaurants and retail and
hospitality, to come back and get a second forgivable loan if
their revenue has been impacted by 50 percent or more and the
size of their business is 100 or fewer employees with that
remaining approximately $130 billion.
I also had the bill a couple of weeks ago that passed the
House, and thank you to the President for signing the extension
of the loan program through August 8. I will tell you that I
already this week have been meeting with small lenders,
community lenders, who have been telling me that smallest of
smallest businesses, loans of $6,000, $9,000, people are coming
back and getting the PPP loan for the first time in the
smallest of loans, which is really heartwarming. And I thank
you for extending that.
Secretary Mnuchin, can you just say a little bit more about
the program as you would envision it of allowing those hardest
hit sectors to come back? And I just want to make sure that I
understand the direction that you and the administration are
thinking, as well.
Secretary MNUCHIN. Well, my suggestion and, again, let me
just say we look forward to working with you and the Committee
and the Senate, but my suggestion would be we have a program
that works. We try to keep as many parts of the program
consistent, we allow a second check, and that we put a
limitation on a revenue decline and a size. And I understand
your bill. I think that is a reasonable approach, but
something, again, we are going to want to look--work with you,
this Committee, the Senate to figure out what the appropriate
revenue decline should be, what the size of the businesses
should be, whether it should be 100 or slightly higher than
that.
But, again, we have complete agreement. There should be a
second check available to the businesses that are hardest hit
and there should be requirements around that.
Ms. CRAIG. Thank you so much. My lenders and my small
businesses as of this week are starting to ask the question,
Administrator Carranza and Secretary Mnuchin, if there is any
thought with respect to the smallest of smallest loans. I know
there is a Senate bill that defines it as 150,000 or less, but
that would absolve these businesses from essentially filling
out those loan forgiveness applications just from the
perspective of the bureaucracy of doing that.
Is there any thought on either of your parts that whatever
number we might not require or should we be advising our small
businesses get your materials ready, everybody is going to have
to fill out this loan forgiveness application?
Secretary MNUCHIN. Well, we have put out what we call the
EZ Form, and I think there are certain things that we can work
with the Committee on in new legislation to simplify this even
more. I am somewhat hesitant to just say a blank check, if you
were 150,000 or less, you don't have to do anything, because,
again, I am concerned about fraud and want to make sure that
the oversight committees are comfortable that this money was
used appropriately. So, I think some level of reporting in a
simple way is important.
Ms. CRAIG. Thank you so much. And then two final things
very, very quickly.
The initial CARES Act with the $1,200 Economic Impact
payment, I know over the course of the next couple of weeks you
are going to be working with the Senate, with the House perhaps
on a second--or an additional bill. The 17- and 18-year-olds
were left out as dependents, adult disabled dependents, college
students like mine, who were back in my basement eating us out
of house and home, were left out as dependents.
Secretary Mnuchin, would you be open to including them in
the next package and making that retroactive?
Secretary MNUCHIN. So, let me just say from a policy
standpoint, I understand that issue and I am sympathetic to it.
There are some technical issues that the IRS and we have in
administering that because of the way dependents were reported
on tax returns. But we are trying to figure out if there is a
way to do that.
Ms. CRAIG. I appreciate that very much, sir.
And with that, Madam Chairwoman, I will yield back.
Chairwoman VELAZQUEZ. The gentlelady yields back. Let me
thank the Administrator and the Secretary of the Treasury.
Thank you again for being with us today to discuss your
agencies' response to the COVID-19 pandemic.
I am dedicated to pushing SBA and Treasury to prioritize
our very small and underserved businesses because these
communities are hurting. The programs have been fraught with
challenges for participants and a lack of transparency for
those of us seeking to conduct oversight.
With that said, I expect regular updating to the data on
PPP and forgiveness in the future. I also ask that you publish
a comprehensive program guide. We cannot continue to operate
this way. It is not good for borrowers; it is not good for
lenders either. We cannot work when there are at least 22
entering final rules and 49 frequently asked questions that
borrowers and lenders must navigate. Understanding that this
program was stood up with extraordinary speed, it is long
overdue that a comprehensive guide is published.
I ask unanimous consent that Members have 5 legislative
days to submit statements and supporting materials for the
record. Without objection, so ordered.
If there is no further business before the committee, we
are adjourned. Thank you.
[Whereupon, at 12:48 p.m., the committee was adjourned.]
[Hon. Jovita Carranza did not submit his QFR's in a timely
manner.]
A P P E N D I X
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