[Senate Hearing 116-605]
[From the U.S. Government Publishing Office]
S. Hrg. 116-605
IMPLEMENTATION OF TITLE I OF THE CARES
ACT
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JUNE 10, 2020
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
43-667 PDF WASHINGTON : 2023
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SIXTEENTH CONGRESS
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MARCO RUBIO, Florida, Chairman
BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
Meredith West, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
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Opening Statements
Page
Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida......... 1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from
Maryland....................................................... 4
Witnesses
Mnuchin, Hon. Steven, Secretary of the Treasury, U.S. Department
of the Treasury, Washington, DC................................ 7
Carranza, Hon. Jovita, Administrator, U.S. Small Business
Administration, Washington, DC................................. 12
Alphabetical Listing
American Council of Life Insurers
Statement dated June 10, 2020................................ 92
Cardin, Hon. Benjamin L.
Opening statement............................................ 4
Carranza, Hon. Jovita
Testimony.................................................... 12
Prepared statement........................................... 14
Responses to questions submitted by Ranking Member Cardin and
Senators Shaheen, Scott, Booker, Ernst, Coons, Young,
Hirono, Kennedy, Duckworth, and Rosen...................... 52
Independent Community Bankers of America
Statement dated June 10, 2020................................ 94
Mnuchin, Hon. Steven
Testimony.................................................... 7
Prepared statement........................................... 10
Responses to questions submitted by Ranking Member Cardin and
Senators Shaheen, Scott, Booker, Ernst, Coons, Young,
Hirono, Kennedy, Duckworth, and Rosen...................... 52
National Associated Federally Insured Credit Unions
Letter dated June 9, 2020.................................... 97
Rubio, Hon. Marco
Opening statement............................................ 1
IMPLEMENTATION OF TITLE I OF THE CARES ACT
----------
WEDNESDAY, JUNE 10, 2020
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 10:00 a.m., in
Room SR-301, Russell Senate Office Building, Hon. Marco Rubio,
Chairman of the Committee, presiding
Present: Senators Rubio, Risch, Scott, Ernst, Young,
Kennedy, Romney, Hawley, Cardin, Cantwell, Shaheen, Booker,
Coons, and Rosen.
Also present: Senator Collins.
OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR
FROM FLORIDA
Chairman Rubio [In process]. As nationwide lockdowns shut
down the economy, we, who worked on this, every member of this
Committee and those outside of it, have two main priorities--
the size of it, we wanted to make sure it reached enough
businesses and people, and we needed to do it fast. This was
not something we had weeks or months to work on. And I am proud
that both of those goals were met.
The scope of the lockdown meant we needed sizeable relief.
The appropriated funds for this program are now at $670
billion. It sounds--it is a lot of money. It is larger than any
other program enacted by the CARES Act. It is larger than the
2008 stimulus bill. By some estimates, it is the largest
program since the New Deal.
But the speed of the lockdown also meant we needed to get
funds to small businesses quickly. The CARES Act, just to walk
everybody through this, was signed into law on March 27th.
Exactly seven days later, thanks to extraordinary and tireless
work, which is easy to criticize for some who are watching from
the outside, but we are talking about people that were there
overnight, 4, 5, 6, 7 in the morning, you know, barely time to
get home, shower and change their clothes--thanks to the
tireless work of people working under Secretary Mnuchin, and
the Secretary himself, people working under Administrator
Carranza, and herself, the Paycheck Protection Program began
approving loans seven days after Congress passed it and the
President signed it.
Small businesses received PPP funds before, millions of
Americans received tax refunds before people started receiving
unemployment checks, and other lending programs run through the
Federal Reserve are only just now beginning to operate. That is
not a criticism of those things. That is just to describe the
extraordinary effort that it took to stand up a program that
did not exist in just seven days.
When this program began on April 3rd, no one on Planet
Earth had ever made a PPP loan, had ever approved a PPP loan,
had ever processed a PPP loan, or had ever applied for one, and
in seven days that began.
The achievement of these priorities came at the expense of
others. Some companies who should not have received the loans
received them. We have read all about it. It should not have
happened. They represent the minuscule percentage of the
overall program, however, and most have since returned them.
Computer systems were strained under unprecedented levels of
activity. Guidance released to solve problems created
unanticipated problems.
But again, I want to be clear. The bumps in the road were
and are the price to pay, unfortunately, for a program that, in
hindsight, we now know is among the most successful programs
that government has ever done to rescue an economy.
Economists and financial forecasters predicted last month
that May 2020 would be the worst month for job losses during
the duration of the pandemic. It was expected. This is what
everyone expected--eight million Americans would lose their
jobs in May. They predicted that unemployment would be 20
percent. Some even speculated that it might end up surpassing
the Great Depression's 24 percent rate.
What would that have looked like, and what would that have
looked like given everything else that is going on in the world
and our country right now? Well, I can tell you, on an economic
point, it would have bankrupted the central promise of economic
opportunity in our Nation. Without PPP's temporary lifeline,
tens of millions of Americans would have been permanently
separated from their livelihoods and stripped for long periods
of time from the opportunity of dignified work. Many would
quickly be condemned to poverty, some over generations. Parents
would be unable to provide for their families, tied
indefinitely to government assistance.
Without PPP, we would have faced the extinction of small
businesses we know, and countless blocks of urban and suburban
America would have been hollowed out. Vast expanses of empty
lots with brick-and-mortar stores once stained communities. It
is tough out there. There is still a lot of suffering, economic
pain, and, of course, the pain related to this terrible
disease.
But the most catastrophic visions did not come to pass.
Instead, forecasters--to the surprise of forecasters and
everyone, last month, 2.5 million Americans got their jobs
back. The over $500 billion in Paycheck Protection Program
funds disbursed through April and May enabled businesses to
keep or to quickly rehire workers as conditions allowed.
To date, 4.5 million American businesses have received
loans equal to over $500 billion, and this--we will know more
when the forgiveness begins to come in--but this is equal to 50
million jobs. The average loan size is now down to $112,000, an
amount that, based on eligibility criteria, means that the
average business receiving a PPP loan would one with 10
employees.
A recent survey by the National Federation of Independent
Businesses noted that 77 percent of surveyed small business
owners had applied for a PPP loan, and of that 77 percent, 93
percent had received funding.
As of June 6th, there are currently 424 community
development financial institutions and minority depository
institutions now in the program. They have accounted for more
than 190,000 loans, valued at $15.8 billion. And the SBA and
Treasury have also set aside $10 billion in PPP funds for CDFIs
to continue to lend.
This is the record of a successful program, and again I
want to thank everyone--the Secretary, the Administrator, all
the members of the Senate, and our partners in the House, and,
of course, the President--for not just passing this but working
to implement it.
I do want to comment on the Economic Injury Disaster Loan
program. The SBA, for the first time in its history,
administered a nationwide disaster and grant advance program
through an expanded version of the EIDL program, offering
direct government lending and grants to eligible entities
suffering injury due to the pandemic.
To date, the SBA has approved more than $1.13 million
loans, of these loans, emergency loans, totaling about 79,
almost $80 billion, and 3.1 million emergency EIDL advances
totaling another $10.2 billion. The program has realized
numerous challenges, both previously in responding to regional
disasters, and, of course, under this current one.
In drafting the CARES Act, I raised concerned with the
deficiencies of the existing EIDL program as a whole, which
only accounts for roughly 2 percent of the disaster loans made
by SBA. In particular, I was concerned that it would be
challenging for the agency to handle a disaster of this
extraordinary magnitude. As such, the concept of using
traditional lenders instead of direct government loans to
ensure capital was reaching the hands of small businesses as
fast as possible was one of the reasons that gave rise to PPP.
I commend the agency for standing up the EIDL program
nationwide to respond to an unprecedented volume of
applications within a very short period of time. Today,
unfortunately, we see similar and new EIDL challenges for
borrowers, including long processing and disbursement timelines
and communication issues. As many businesses are also relying
on assistance through EIDL to rebuild after the economic
disruptions caused by this pandemic, we look forward to the
agency addressing the current EIDL challenges and how Congress,
how we, on this side, can work to support the agency in making
improvements to this program.
Today is an oversight hearing. There are many issues that
myself and members of this Committee would like to raise to
help keep this program running smoothly, especially as some
businesses approach filing for loan forgiveness as early as
this month. But we should begin by putting these issues in
perspective and recognizing the choices that Congress and the
administration had to make in order to make this program
succeed.
With that I now recognize the Ranking Member, Senator
Cardin, for his opening statement.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A
U.S. SENATOR FROM MARYLAND
Senator Cardin. Well, Mr. Chairman, first thank you for
convening this hearing, but more importantly, thank you for
your leadership in the role that this committee has played in a
nonpartisan manner in order to help the small businesses of
America. This has been a proud moment of our Senate careers in
working together to develop three very, very important programs
to help small businesses during COVID-19. We did that in a way
that put the interest of our Nation first and the interest of
small business and their workers.
Secretary Mnuchin, welcome to the Committee. I personally
want to thank you for your availability. You have been always
available to talk with us, to try to work out how this program
could be administered in a seamless way. And I thank you for
your personal leadership to make these programs work as
effectively as we can through the administration and then
working with Congress as to the need for legislative changes.
Administrator Carranza, please accept our appreciation for
the incredible work of your agency. As Senator Rubio pointed
out, you stood up a program literally overnight that has
provided 4.5 million loans, over $510 billion, in an incredible
effort, and we thank you very much for the hard work of the
members of your agency.
This Committee helped craft, and I was proud to be part of
a drafting committee consisting of four Senators--Senator
Rubio, Senator Collins, who is with us today, Senator Shaheen,
and myself--that put together and listened to all the members
of this Committee and the Senate and stood up three programs--
the PPP program that has received most of the attention, but
also the EIDL grant program, as well as the loan forgiveness
program.
When we initially created the 8-week-long PPP program in
March, we thought that our economy would be performing at a
more normal level than it is today. So an 8-week period for
small businesses to spend their loan seemed reasonable. As
communities began the process of reopening, it is now clear
that many small businesses will not be up and running at the
end of the 8-week period, which, for many, as Chairman Rubio
has pointed, will occur this month.
I was proud to see the Senate act responsibly last week,
passing bipartisan legislation that gives businesses with
existing and new PPP loans the discretion to use those loans
over a 24-week period, rather than the 8-week period.
PPP is working for many employers, and the May monthly job
report released by the Labor Department last Friday is proof.
Of the 2.5 million jobs added back to the American economy last
month, more than 1.4 million were jobs of employers in the food
service industry, many of whom secured loans through our
programs.
However, the depth of the economic challenge facing this
country, the National Bureau of Economic Research announced
this week that the United States economy is in a recession, and
that the unemployment rate remains at a historic high level,
13.3 percent, a level that we have not seen since the Great
Depression. For minorities, the unemployment rates are even
much higher.
While the PPP's success is a laudable accomplishment, there
have been challenges in the program that have come into sharper
focus, given the massive protests our Nation has witnessed over
the past two weeks. The protests sparked by the death of George
Floyd has raised the awareness of the disparate public health
and economic consequences of the COVID-19 pandemic on
communities of color, black Americans in particular.
Civil rights is still the unfinished business in America.
More than 50 years ago, the Kerner Commission created by
President Lyndon Johnson warned of the negative consequences of
continued inequality. That was 50 years ago. The Commission
wrote in its report that America was headed toward two
societies, one black and one white, separate and unequal.
Mr. Chairman, there is no question that our country has
made strides in the decades since the Kerner Commission
released its report, but there remains an economic divide
between black and white America. In 1968, a typical middle-
class black family had less than one-tenth of the wealth of a
typical middle-class white family. It is the same today, and it
exists at every level of education attainment. A 2018 report
found that there are no actions that black Americans can take
unilaterally that will have much of an effect on reducing the
racial wealth gap.
For black small business owners and other underserved
entrepreneurs, the wealth gap is even made worse by the
difficulty in getting lending. Minority business owners are two
to three times more likely to be denied loans than non-minority
business owners, and are more likely to receive less funding
and pay higher interest rates on the loans that they do
receive.
It is with this inequality in mind that Senator Shaheen and
I drafted language in the CARES Act instructing the SBA and
Treasury to issue guidance to financial institutions
participating in the PPP program to prioritize loans from
underserved small businesses. We wanted to prevent history from
repeating itself, because we knew that during the 2008
financial crisis, small business lending to minority-owned
businesses fell dramatically and never fully recovered.
Secretary Mnuchin and Administrator Carranza, these well-
documented disparities are why I was so disappointed to read,
in the SBA IG's recent Flash Report, which was prepared at the
request of Senators Schumer, Brown, and myself, the report
found that the SBA's implementation of PPP did not fully align
with congressional intent of the CARES Act, because the SBA did
not provide guidance on prioritizing underserved and rural
markets.
Further, the report found that the SBA has failed to
collect demographic information for small businesses seeking
SBA loans. While I appreciate the SBA will be collecting
demographic information on loan forgiveness forms, and has set
aside an additional $10 billion, that the Chairman mentioned,
and Secretary Mnuchin announced in regards to the CDFIs, it is
important that the SBA follow the Inspector General's call to
provide guidance to lenders that prioritize underserved
markets.
Underserved markets often do not have access to traditional
banking institutions. That is why the SBA's existing Economic
Injury Disaster Loan and grant programs are so important. I
remain discouraged that these programs, which have great
potential to help small businesses seek to adapt to the new
reality of the post-COVID economy, have reached fewer small
businesses than we had hoped.
We are not alone in this. We have a copy of a letter from
all the members of the House Small Business Committee, all the
Democrats and Republicans, expressing their frustration on the
administration of the EIDL program, the slowness of getting
grant applications approved, the closing of the window in
regards to non-agricultural applications, the arbitrary cap
that was put on the program, as well as the fact of the lack of
transparency.
We need to do better. EIDL serves a particular role for
businesses. It can be used for working capital needs and may be
more desirable for the smallest of small businesses that do not
have many employees. The program is especially important for
minority-owned and other underserved small businesses, which
are less likely to have more than one employee, and have fewer
employees on average.
Unfortunately, the administration has not administered EIDL
in a manner that makes it a reliable resource for small
businesses. The administration has put in place requirements
and limitations without notifying borrowers, such as a decision
to cap the loans at $150,000, even though the statute allows
the loans to go up to $2 million.
In May, the administration also made the decision to stop
taking applications from non-farm small businesses, meaning
restaurants, retailers, and other mom-and-pop establishments
have not had access to EIDL since mid-April. Small businesses
are relying on you to make EIDL loans more accessible. The
administration must become more transparent. In the months
since the passage of the CARES Act, Congress has been pushing
for additional data on who is receiving this aid, and I
appreciate that Chairman Rubio and I have joined together in
making that request, and we have worked with the
administration, and we have gotten some of the information, but
we need more of the information.
We are extremely disappointed to learn that GAO has had the
same problems that we have had, and has not gotten the
information they need to carry out their oversight function in
the Executive branch, as well as the difficulties we have in
the Legislative branch. How can we know which businesses still
need help if we do not know which businesses have received
help?
Senators Coons, Shaheen, and I are pursuing legislation to
help those most in need to receive additional PPP funding, but
we need the data to ensure this assistance is as effective as
possible. I think we all agree there is going to be a need for
a second round, but how are we able to get that second round if
we do not have the full information on how the first round has
operated?
We believe that the aid should go to the smaller of the
small businesses. We believe it should go to those that are
most in need. There should be a needs test. We believe it
should go to the underserved communities, particular rural
areas, minority businesses, but we need to have the data in
order to make those decisions.
Finally, we must do more to ensure that underserved small
businesses have the tools and resources they need to adjust to
the long-term economic effects of COVID-19. I was proud to work
with Senator Booker to release a plan outlining steps Congress
can take to provide greater help for small businesses in
underserved communities with regard to start-up and operating
capital, as well as technical training and mentorship.
The aim of our plan is to ensure that when we make it
through this pandemic and when we have the next economic
downturn we have institutions, programs, and knowledge to
support small businesses, underserved small businesses in a
timely way.
Mr. Chairman, I am under no illusions about the tall tasks
ahead of the Senate as we work to finally rid our Nation of
these inequalities. Before we can begin to make further
progress we must work hard to secure the progress we have
already made, which is at risk in regards to COVID-19.
Last week, at our hearing, Connie Evans of the Association
of Enterprise Opportunity, told our Committee that the economic
consequences of COVID-19 are projected to erase decades of
minority enterprise growth in the underserved markets. We
cannot let that happen.
The Wall Street Journal headline today says ``Virus
Obliterates Black Job Market.'' We need to take action to make
sure this does not happen.
I look forward to this hearing and learning more from
Secretary Mnuchin and Administrator Carranza about what the
Trump administration is doing to ensure that minority-owned and
other underserved businesses are not left behind during this
crisis.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you. I will now turn to our
witnesses. Secretary Mnuchin, welcome to the Committee and
thank you for joining us here today.
STATEMENT OF HON. STEVEN MNUCHIN, SECRETARY OF THE TREASURY,
U.S. DEPARTMENT OF THE TREASURY
Secretary Mnuchin. Chairman Rubio, Ranking Member Cardin,
and members of the Committee, thank you for this opportunity to
highlight the efforts of the Treasury and the SBA to provide
relief to businesses and their workers through the Paycheck
Protection Program. We are committed to working with you to
ensure that every American gets back to work as quickly as
possible.
America's economy has begun to rebound and our recovery is
underway. While estimates predicted nearly 8 million jobs lost
in the month of May, the actual data showed 2.5 million jobs
gained, the largest one-month jobs gain in recorded history.
Both the jobs that were saved and the jobs that were hired are
a large extent as a result of this program, so thank you very
much.
Several other indicators show that we are well-positioned
for a strong, phased reopening of our economy. The U.S. Chamber
of Commerce announced last week that 79 percent of small
businesses are at least partially open, with half of the
businesses that remain closed planning to reopen very soon.
The personal savings rate, released on May 29th, had a
record high 33 percent of disposable income, indicating that
people have built up cash reserves during the pandemic and will
be in a position to resume consumer activity as businesses
open.
This economic positioning is the direct result of the
administration and Congress working together to pass bipartisan
legislation to provide necessary liquidity to workers and
markets. The PPP has kept tens of millions of employees
connected to their jobs. The National Federation of Independent
Business found that 73 percent of its members surveyed rehired
or retained workers due to the PPP. Economic Impact Payments
and enhanced unemployment insurance are providing relief to
millions of families and workers experiencing distress. The
announcement and implementation of the Federal Reserve lending
facilities are also enhancing the flow of credit for industries
across the economy.
We continue to monitor conditions closely, as certain
industries are rebounding more quickly than others. For
example, after losing nearly 1 million construction jobs in
April, nearly half of those jobs returned in May. By contrast,
retail lost over 2 million jobs in April and 16 percent of
those positions returned in May. We remain confident that the
overall economy will continue to improve dramatically in the
third and fourth quarters of this year.
Turning to the PPP, the SBA and Treasury worked together to
launch this unprecedented program in a very, very short period
of time. In less than two months, the PPP is supporting the
employment of approximately 50 million workers and more than 75
percent of the small business payroll in all 50 states. This is
an extraordinary achievement and we appreciate the work of this
Committee.
As you might expect with a program of this magnitude
executed on a national scale in record time, we initially
experienced some complications. We resolved them quickly. To
implement this program, our teams have worked with Members of
Congress on a bipartisan basis to issue a series of rules and
guidance to provide clarity to the members of the public, as
well as borrowers and lenders. By standing up the program
quickly, we were able to support tens of millions of workers
who may have otherwise been laid off or furloughed.
Aside from the administration's implementation efforts, we
have worked closely with Members of Congress in both parties to
pass two subsequent pieces of critical legislation. We reached
agreements on a second round funding for over $300 billion,
providing businesses with more time and flexibility to keep
their employees on the payroll, and ensure continued operations
as we safely reopen. Thank you, Mr. Chairman, and the other
members of this Committee for your work in building this
program and helping workers and families throughout our Nation.
I would note that while the PPP is a very important part,
it is only one part of the CARES Act, but the single largest
economic relief effort in history. Treasury has been hard at
work:
Economic Impact Payments. We have distributed nearly 160
million payments worth more than $260 billion, in record time.
Programs to Support Aviation and other Eligible Businesses.
We have approved the disbursement of over $27 billion to more
than 500 airlines and other businesses, preserving hundreds of
thousands of jobs.
The Coronavirus Relief Fund. We have disbursed nearly all
of the $150 billion appropriated for state, local, and tribal
governments. In doing so, we have provided recipients with as
much flexibility as possible under the statute.
And with the Federal Reserve Facilities, we have committed
approximately $200 billion in credit support for Federal
Reserve lending facilities under the CARES Act. That money that
is going to promote the flow of credit to businesses,
households, and state and local governments, as well as to
restore liquidity and funding to credit markets. The Federal
Reserve, in consultation with the Treasury, has modified the
terms of the lending programs since they were announced to
ensure broad access to credit and liquidity. We have over $250
billion remaining to create new or expanded programs with the
Fed, as needed.
In conclusion, I am proud of the work we have done with all
of you. We will overcome the unprecedented challenges before us
together and make sure that every American gets back to work as
quickly as possible. I look forward to your questions. Thank
you.
[The prepared statement of Secretary Mnuchin follows:]
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Chairman Rubio. Thank you. And Administrator Carranza,
welcome back to the Committee.
STATEMENT OF HON. JOVITA CARRANZA, ADMINISTRATOR, U.S. SMALL
BUSINESS ADMINISTRATION
Ms. Carranza. Thank you, Chairman. Good morning, Chairman
Rubio, Ranking Member Cardin, and members of the Committee.
Thank you for inviting me to testify on the progress in
implementing the CARES Act.
The CARES Act created extraordinary programs for the
agency. Our work over the last three months has been
unprecedented. Let me provide you with some perspective on the
historic work that the SBA has been engaged in over the last
several months.
SBA, in very close coordination with Treasury, stood up the
multi-billion-dollar Paycheck Protection Program in a matter of
days. The dedicated and professional staff at SBA helped to
launch the program three days ahead of the 10-day deadline
imposed by the CARES Act. In fact, during the first round of
funding, SBA processed more than 14 years' worth of loans in
less than 14 days. In order to help businesses who needed
assistance, we also created a simple, two-page application for
borrowers, to streamline the process.
Since late March, we issued 16 interim rules and 48
Frequently Asked Question documents, while providing your
offices with regular reports on daily lending data, coupled
with detailed program overviews.
As of today, the PPP has approved over 4.5 million loans
for over $511 billion in much-needed financial relief to
America's small businesses.
We administered this program with an eye focused on
recognizing that this pandemic had been particularly harmful to
socially and economically disadvantaged businesses. In fact, 45
percent of the PPP loans, both in terms of volume and total
value were disbursed in low-income areas.
To achieve this, we also reduced administrative roadblocks
so that more lenders could participate in the program. The
agency signed up 3,600 new lenders, including community banks,
credit unions, fintech companies, farm credit lenders, and
hundreds of CDFIs and MDIs that specialized in providing
liquidity in unprecedented communities--in underrepresented
communities.
As of today, the PPP still has $130 billion in available
funds. I ask for your assistance in continuing to raise
awareness among your constituents that funds are still
available for small businesses that need assistance. In our
Entrepreneurial Development Program, the agency worked closely
with the resource partner associations as well as Committee
staff to allocate dollars for 62 SBDCs and 113 Women Business
Centers. We also allocated funds and worked with the
associations on deployment of a web site now available for all
small businesses to utilize.
With our Disaster Assistance Program, the Agency worked
around the clock to create and implement a new system for EIDL
advances. This was a first for the Agency, and we have now
processed and disbursed monies to all businesses requesting an
emergency grant, except for certain businesses that still need
to clarify their information.
With our EIDL loans, we have distributed more dollars for
COVID than for all disasters combined in the 67-year history of
the Agency. All of you remember the devastation created in
2017, by Hurricanes Harvey, Irma, and Maria, three of the
costliest storms on record. SBA disbursed over $7 billion. That
amount represented 8 percent of the total COVID-related
disaster funding approved by the Agency since mid-March.
With respect to the debt relief provisions of the Act, SBA
issued guidance and conducted outreach to lenders and
borrowers. The Agency has provided over $2 billion in principal
and interest payments on current SBA business loans over the
last two months.
Before I close, let me briefly discuss how we are improving
SBA's operations. Under my leadership, we have managed all the
CARES Act programs while also continuing to build an
organization. I have created an internal oversight plan for
each CARES Act program, and to manage the millions of business
and disaster loans. The Agency has brought on thousands of
staff to support our COVID disaster operations, while still
servicing 175 natural disaster declarations.
We have hired a new CFO, CIO, General Counsel, and Program
Director for the Office of Faith-Based Initiatives. I have also
overseen changes within our contracting and investment
programs, which many of you raised with me previously. For
instance, in March, I changed leadership in the Office of
Investment and Innovation, streamlined the licensing process,
and licensed our first active SBIC in Puerto Rico in over two
decades. We are also on track to fund new licenses for women
and minority firms.
I have partnered with other Federal agencies, among them
USDA, CFPB, Treasury, GSA, and FEMA. They have helped inform
our immediate economic response efforts and several continue to
advise us on the important task of long-term small business
economic recovery, and we have done all this while operating on
a telework status, as many of you have.
Thank you again, Mr. Chairman and members of the Committee,
for the opportunity to testify today.
[The prepared statement of Ms. Carranza follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Rubio. Thank you to both of you. I am going to
defer the balance of my questions so we can get to all the
members. I just have one sort of matter I want to clear up.
Secretary Mnuchin, in a joint statement you released with
the Administrator this week you indicated that borrowers which
failed to spend 60 percent of their loan on payroll costs will
continue to be eligible for partial loan forgiveness. Can you
confirm that this statement means that borrowers failing to
meet the 60 percent requirement will still receive loan
forgiveness equal to their payroll costs and a proportional
amount of non-payroll costs?
Secretary Mnuchin. Yes.
Chairman Rubio. Thank you. To the Ranking Member, Senator
Cardin.
Senator Cardin. Once again, thank you both for your work
and for being here today. I want to ask my first question on
the EIDL program, and we have talked about this, but I just
want to underscore why this is so important to us. And I am
going to give you a specific example of a Maryland Small
Business owner, Nick Johnson, who runs a small furniture
company, 28 workers. He applied for a PPP loan and got it. He
applied for the EIDL, because he needed the funds for working
capital and it gave him a 30-year loan program so that he could
use it for working capital.
He applied for it immediately, in March. Two months later,
he heard he was eligible to receive $380,000 under the formula,
but was capped at $150,000, rather than $380,000. As a result
of not being able to get those funds, he had to go into his PPP
funds and lay off workers.
So we intended for the EIDL program and the PPP program to
work together. And Madam Administrator, I appreciate the fact
that you have issued so many EIDL loans compared to the
historic record, but we have never had a universal disaster
before. And the volume level, as we understand it, only 15
percent of the loans were processed and that there is still a
huge backlog in processing these loans. And we made
significantly more capacity available to you through the
appropriation process so that you could issue a lot more of
these loans.
You put a cap on the program. We do not understand why. You
have delayed the applications of those that have already been
filed, and you have closed the window on non-agricultural
programs. Why is the EIDL program not being used to its full
capacity, and what can we expect in the future, moving forward?
Ms. Carranza. Senator Cardin, I agree with your frustration
and your assessment of the delayed process. However, let me
start out with the agricultural, small farms and the co-ops. We
have since, when it was announced that we were able to accept
the ags, over 146,000 ag concerns. They have several billion,
close to $2 billion in loan value. They have also taken
advantage of the advance, the grant.
The average loan that we are experiencing currently is
$68,000. We expected them to really be the community that was
going to access the $150,000.
We were averaging about--we were anticipating about $83,000
in average loan and they are coming in at $63,000, $65,000.
Senator Cardin. But what is the rationale for $150,000 cap
when the law says--the statute says up to $2 million?
Ms. Carranza. Well, when we first opened up the portal to
accept disaster, or EIDL COVID applications back in March, we
went from 85,000 loans in one day, and in four days the input,
the demand increased to 3.8 million applications.
Senator Cardin. But as I understand it, with the additional
appropriations you can go up to $350 billion in EIDL loans, and
I do not think you are anywhere close to a fraction of that
today.
Ms. Carranza. Yes, but at that time, sir, we had $7 billion
available. We exhausted those $7 billion to the subsidy, given
the approval----
Senator Cardin. The same thing was true with PPP. We made
money available. The window opened quickly. You processed the
new loans quickly. You have not done that for EIDL. We made
more funds available and they have not been processed.
Ms. Carranza. I understand, sir, but when you look at an
EIDL government loan program it is exactly that, whereas PPP
was designed with various distribution channels. So if you go
from 1,800 banks in the PPP up to about 5,400 banks, they now
have--the small businesses have over 5,000 access channels,
whereas----
Senator Cardin. I understand that. So let me just point
out, the PPP applications have slowed down. We have not seen
the EIDLs pick up. This is unacceptable. The EIDL program has
to operate at a much more efficient level. You need to let us
know if you need more help.
Secretary Mnuchin, I want to ask one question in regards to
those who had criminal records. You issued a regulation that
prevented them from participating in the PPP program. We have
talked about this. There is bipartisan legislation and broad
support in the Senate to allow those that have repaid their
debt to society to be able to participate in the PPP program,
with the exceptions of those that have committed economic fraud
type offenses.
We have been trying to do this administratively. Can we get
it done administratively, or are we going to have to pass a
bill?
Secretary Mnuchin. So thank you, and first of all we
appreciate all the communication we have had with you on this
issue and other issues. We are actually in the process of
putting out guidance that I think will come out today, reducing
it from five years to three years, as a result of your input,
and we are happy to work with you and the Chairman to see if we
should reduce it even more.
Senator Cardin. Well, I appreciate that. I did not
appreciate it was put in in the first place, but I appreciate
the fact that we have made some progress. I can assure you that
we would like you to go probably further than that. We will
have those conversations, and if we have an opportunity let's
work together on legislation so we do not run into this problem
in the future. It is bipartisan.
Senator Portman, Senator Lankford and others have all
joined in this legislation. The Chairman has interest. So let's
see whether we cannot work that out.
Thank you, Mr. Chairman.
Secretary Mnuchin. And I would suggest, I am happy to speak
to you and Chairman Rubio tomorrow, and if you want us to
shorten it we will consider that even more quickly.
Senator Cardin. Thank you. I appreciate it.
Chairman Rubio. Senator Risch.
Senator Risch. Well, Secretary Mnuchin, I think this is a
historical moment, the first time we have had the Secretary of
the Treasury before this Committee, I think.
Chairman Rubio. I think it was the change in leadership.
Senator Risch. Yeah, I think it is probably the strength of
the leadership of the Committee that has caused that. But
anyway----
Chairman Rubio. He was up here----
Senator Risch. He knows that. Steven, when they write the
history of this, I think you are going to have your own chapter
in that history book. You know, I have spent all my life in
public service, one way or another, and I have got to tell you,
when this whole thing hit, this was a tremendous challenge for
the United States of America. And I always am reticent to
believe that the government can step in and fix things easily.
Sometimes they make things worse than what they are.
But I have to tell you, I have just been incredibly
impressed by your leadership as we have gone through this. I do
have some inside information, because Senator Crapo and I are
very, very close personal friends, and I know you and he are on
speed dial with each other and talk regularly. And I had some
issues with it, with the program, like everybody did, and I was
just absolutely stunned at the way that you stepped up,
personally, to take on these issues, and the team that you put
around you to take on these issues, and your willingness to be
flexible as far as making these things work.
This has been a great success. You do not read that in the
media or hear it on cable news. They are focused on the
glitches, and when you are talking about throwing $3 trillion
against the wall there are certainly going to be glitches.
They are focused on that.
But I can tell you, as I get out there and talk with the
business people in Idaho, and for that matter around the
country, there is tremendous appreciation for what the
government has done, particularly appreciation for what the
United States Treasury has done administering these programs.
And there are millions of businesses and there are tens of
millions of people who are a lot better off, because of your
leadership and the administration's leadership in taking this
thing on head-on.
So thank you for what you did. I want you to know that
notwithstanding a lot of the stuff you read, there is great
appreciation amongst the American people. I think history is
going to judge you very favorably as we go forward.
I have got just a couple of quick questions for you. Number
one, are you as surprised as I was as to how the economy is
bouncing back? I mean, if somebody would have told me 60 days
ago that the NASDAQ was going to set a new record in early
June, I would have bet the farm against that. Were you as
surprised as a lot of people that the economy is coming back as
quickly as it is coming back, admittedly with some sectors more
so than others. What are your thoughts on that?
Secretary Mnuchin. Well, let me just say, first of all,
thank you for those kind words. As I have repeatedly said, this
was a unique situation. This was not due to economic issues.
This was due to government action and shutting down the economy
as the result of COVID-19. So as I have said before, the
traditional economic models are not good at predicting things.
I was somewhat surprised, and very pleasantly surprised, by the
recent numbers. I thought that we were going to actually bottom
in June and not May.
But let me just say, as it relates to the markets and the
economy in these numbers, this is a direct result of the
bipartisan work of the Senate and the House in responding in
unprecedented fashion. So not only the $3 trillion that we
pumped into the economy but the money that you entrusted to us
to work with the Federal Reserve has unlocked markets. And
without spending a dime of taxpayer dollars, companies like
Boeing, who we thought would have to come to the government for
help, were able to raise $25 billion in the markets. Thank you.
Senator Risch. Well, thank you. I am just absolutely amazed
that the tools that really have been developed over the years
were used as well as they were used in this regard, and the
fact of the matter is that, really, it was the first test of
them. The fact that they worked so well is just stunning.
I have written to you about creating a little bit more
simple process for PPP loan forgiveness. I hope you have gotten
that communication. Seeing as how you have looked at everything
else, I have no doubt you are going to look at that. We are
getting some input from the sector that the process and the
application is overly complicated. If you would have a look at
that, I would sincerely appreciate it.
Secretary Mnuchin. Let me just comment. As a result of the
safe harbor that is in the new bill, we will be writing new
guidance and new forms which will make it substantially
easier----
Senator Risch. Thank you.
Secretary Mnuchin [continuing]. For people to check the
safe harbor.
Senator Risch. We appreciate that, and I have no doubt--I
had no question that you would probably do that.
Let me just say, Administrator Carranza, my time is up, but
you are getting the same kind of kudos out there from the small
business community, as far as being able to make the programs
work that you have had, so we appreciate that. And I want you
to know that appreciation is there for you too.
The criticisms that have been made, you guys have stepped
up, both of you, and America sincerely appreciates it. Accept
America's thanks, both of you, for what you have done.
Ms. Carranza. Thank you, Senator Risch, and I am very
pleased to announce that by next week all of the EIDL loans
will be in the process, in the loan portal. So all of the 5
million applications that we have, that actually represent over
7 million employees, and obviously 5 million small businesses,
will actually be in the loan portal. There are two sections to
that portal. One is the application and the other one is the
loan processing, which means within a week's time that those
loans will be processed and we will be over with the EIDL.
Senator Risch. Well, again----
Ms. Carranza. I feel really encouraged by that.
Senator Risch. In closing, just let me say that, again, the
media has really focused on some glitches, but the big story
here--and it is a big story--is how successful all this has
been. And you are to be commended for it. You will not get the
credit that you deserve for it, at least now. Maybe you will in
the history books. But again, thank you for what you have done.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman. Well, let me add
my thanks to you, Mr. Chairman, and Ranking Member Cardin, for
your bipartisan effort, and to those who are also
participating, Senators Shaheen and Collins, for all the work
that has gone into the small business agenda. It is really
historic to show this bipartisan level, and frankly, we need
it. We are not through this and we need it to come through
again.
Access to capital is a persistent issue for small business,
and one of the great things, I was proud that our side focused
on, was the CDFI issue. I can see, in my state, where the CDFIs
are basically getting out and marketing themselves and getting
access to capital to, frankly, small businesses who just got
turned down by banks. So I know you cannot guarantee how banks
operate, but obviously this has been a problem, and we need to
figure out solutions. People with good banking relations got
turned down, and people without good banking relations probably
never had a chance. So the CDFI process has been working, and
we should figure out how to continue it.
The issue that comes before us now today is that there are
a lot of women- and minority-owned businesses, always also a
pervasive problem with access to capital, and this Committee
has done good work with that in the past, prioritizing smaller
loan grants and a whole variety of things to get capital.
But I do think that we should be looking at what my
colleagues, Senators Cardin and Shaheen, are recommending that
we prioritize smaller-sized small businesses. I particularly
think 10 and under, but make sure that we are getting access to
capital. There are a lot of women and minorities that are small
businesses under, you know, 10 employees, and again, how do
they keep that business going if they do not have access to
capital?
So I hope in this next round we will prioritize that, and I
hope both of you will agree on that.
I can say, because I worked a lot on various aspects of
other parts of the bill, in addition to the small business,
that I saw Secretary Mnuchin many hours, day and night, working
around the clock on these provisions, so I thank him for that.
I want to ask you--so do you both agree that we should
prioritize--figure out some way to make sure we are sending a
message that we want small businesses prioritized, under 10
people?
Ms. Carranza. Yes, absolutely. There is a focus at SBA--and
I apologize for jumping in--there is a focus at SBA with sole
proprietors and independent contractors, because they are
really not ones that are going to aggressively pursue loans.
And so we have a task force at SBA dedicated to those
particular communities, as well as dedicated resources to look
at how we can optimize the CDFI community. We have done really
well up to 400, 430-plus, but we can do more.
Senator Cantwell. Thank you. I have two questions for you,
Mr. Secretary of the Treasury, Secretary Mnuchin, and that is,
when we were doing the aviation part of the bill we definitely
thought that the aviation supply chain was critical to
America's security. We thought of that as the aviation
commercial supply chain, not just the defense supply chain.
So we have had a couple of hearings in Commerce, and we
want the dollars to go out the door to someone who is in the
supply chain, who is making commercial manufacturing parts for
the supply chain. We think that those dollars should be
eligible to them. Do you agree?
Secretary Mnuchin. I am more than happy to follow up with
you and talk to you about that. Many of the aviation supply
chain is getting advances we have been monitoring, but to the
extent there are specifics, I am happy to address them with
you.
Senator Cantwell. Well, the $17 billion that was there, we
believe the definition of important to national security is
commercial. You did not have to be engaged in a defense
contract, that keeping the commercial supply chain is critical
to our national security, because if we do not have an aviation
sector it is going to impact us. So definitely want those
dollars out the door, and there seems to be a problem.
Another area that there are problems with is $8 billion for
our Tribal governments, and as somebody who represents 29
different entities in the Northwest, definitely want to see
those dollars out the door. Can you tell me when the $8 billion
for Tribal governments will be distributed?
Secretary Mnuchin. Yeah. I will tell you, the second
tranche of that money is going to go out tomorrow, and that the
only thing that is going to be held back at that point is the
litigation issue associated with Alaska.
Senator Cantwell. Okay, on the Tribal issue, you are
saying.
Secretary Mnuchin. Yes.
Senator Cantwell. Okay. Thank you.
Secretary Mnuchin. Yeah, but the money--the first tranche
went out.
The second tranche is literally going out tomorrow.
Senator Cantwell. Thank you.
Secretary Mnuchin. Or actually maybe Friday. I apologize.
It is either tomorrow or Friday. But it is going out this week.
Senator Cantwell. Okay. Well, then I am going to follow it
up with aerospace, and again, everybody, let's keep working in
a bipartisan basis but let's not forget those that are getting
left behind. It is complex. It has always been a problem.
Getting access to capital, for those who are small, is always
hard. Thank you.
Chairman Rubio. Senator Scott.
Senator Scott. Thank you, Mr. Chairman, and thank you to
the panel for being with us this morning. I certainly
appreciate both of you all's commitment to making sure that we
have the resources available to really help small businesses
survive the economic crisis that they have never seen in their
lifetimes. Every single small business owner that I spoke to
around the country had the exact same words, that without the
Paycheck Protection Program they would not have survived.
So survival was the key and the focus, but now the focus
turns from survival to recovery. And so as we think about
recovery, my question is, as June 30th comes sooner than some
would like, many are asking about a second bite of that apple.
Is there an opportunity, as you all think through where we
should go, is there an appetite for folks to perhaps see
another four weeks of the PPP in addition to what they already
have, and/or are there any other ideas that are on the table
that speak to the recovery aspect of where we are and not
simply the survival mode that we have been in?
To either panelist.
Secretary Mnuchin. Senator Scott, thank you, and I
appreciate all of your help. I definitely think we are going to
need another bipartisan legislation to put more money into the
economy. I think as we have said, we do not want to rush into
that, because we want to be both careful, at this point, in
seeing how the money is in the economy. A lot of the money is
still not in it. And two, I think we need to be much more
targeted at this point.
So I think at the point when we were in an emergency we had
to put a lot of money in the economy, and we know that it would
not be perfection. But I think whatever we do going forward
needs to be much more targeted, particularly to the industries
and small businesses that are having the most difficulty in
reopening as a result of COVID-19. And we look forward to
working with you and the rest of the Committee over the next
few weeks as we think about that.
Senator Scott. Thank you. Administrator, as we rolled out
the program, one of the--perhaps one of the more exciting
aspects of the roll-out included taking the 7(a) program from a
few, 800 lenders to I think over 5,000 ultimately were engaged
in the process, which was phenomenal from our perspective.
The fintech world also provided a lot of traction to
smaller businesses that may not have had that relationship. I
certainly think that we are emerging into a new part of the
process where fintech and unorthodox folks should be a part of
that process going forward. What was your experience, and how
should we anticipate the use of fintech as a part of the next
wave of opportunities?
Ms. Carranza. Thank you for your question, Senator, because
this allows me an opportunity to share with the Committee that
we had dedicated resources to work with the fintech companies
that approached us and indicated that they could provide
microloans to thousands of people in the underserved markets.
And so that seemed like a real appeal for us and a way to
really penetrate the underserved community.
So I will not mention their names but we had four fintech
companies. We had two dedicated resources, one from Treasury,
and the other from CFPB, to be focused in on working with
Treasury to get them licensed or authorized to be a preferred
lender for us. So it really worked well. And they are still in
play.
Senator Scott. Excellent. My final question to either, as
Senator Cantwell discussed, CDFIs, that was not one side of the
aisle or the other side of the aisle. That was frankly just
common sense from both sides of the aisle. But perhaps America
needs to see a little bit more common sense from both sides of
the aisle.
Secretary, you and I had many conversations, that I recall,
on MDFIs as well as CDFIs and MSIs. And I hope that as we look
into the future with the new fintech platform, looking for ways
to serve minority communities that have had a challenging time
of having access to capital, that that will be a part of our
forward looking. And the ability to help fund some of the MSIs
to market, as we did through the Minority Business Development
Agency, to provide resources for the marketing of these
resources in minority communities also proved to be helpful as
well. So more of a comment than a question.
Secretary Mnuchin. If I could just comment on, you know,
the technology and working with the CDFIs is very important. I
want to give a shout-out to Robert Smith, who spent a lot of
time with us, and has dedicated technology without making any
fees to those CDFIs, so that they can outreach more people. But
he and his company have been very accessible, and I think we
have done a good job, but we need to do a much better job going
forward.
Senator Scott. Yes, sir. Thank you. Any final thoughts,
Administrator?
Ms. Carranza. I was just going to comment on Robert Smith,
but you beat me to it. We were collectively working with that
entity.
Senator Scott. Robert has a very busy phone because he
keeps calling because he has good ideas, and they actually
work. So thank you all for being receptive to the private
sector being engaged in this process. I think it was one of the
bright spots of the relief package, without question. Thank
you.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman and Ranking Member
Cardin, and thank you both for being here this morning. I
certainly applaud, as all of us do, the important difference
that the small business programs made, the PPP programs and the
EIDL programs have made for businesses in New Hampshire. We
have had 22,000 businesses that have received over $2.5
billion.
Senator Cardin, though, very eloquently expressed my
frustration at not being able to get information, as we were
looking at changes that we need to make to the program, so that
we could ensure that what was working continued and what was
not working could be changed. And so it is like closing the
barn door after the horse has gotten loose, but I think all of
us would like to feel like we are getting regular information,
so that as we are trying to perform not just our oversight
mission but to look at what we need to do to make changes, that
we have that data in front of us. And so I hope that that will
be more forthcoming in the future than it has been in the past.
I want to follow up on Senator Scott's question about a
second round of help, because we are hearing--our office is
hearing from a lot of small businesses in New Hampshire who got
the original PPP loans, who are about to run out of money this
week or next week. They did everything that was prescribed in
the program. You know, they hired back their people, they, you
know, have been waiting to start up their businesses, many in
the hospitality and tourism industry, which are the last to
open up, and in New Hampshire that is a significant part of our
economy.
And now they are about to run out of money, about to be in
the position of having to lay off those employees again, and
are worried about whether they are going to go under in the
next couple of weeks.
So I have been--Senator Cardin talked about the legislation
that he and Chris Coons and I have been working on to try and
look at a second round. When we have got $140 billion still
remaining in the PPP program, I would hope that we could all
agree that this is an opportunity that we should take advantage
of for those businesses that need continued help.
I know the jobs numbers were better than expected last
week, but 13 percent unemployment is still not acceptable, and
we do not want another whole round of layoffs because we have
small businesses who got help and now cannot get additional
help when they need it.
So I hope you will both be open to that. I do not know if
you have a view. You talked, Secretary Mnuchin, about needing
some more time to look at that, but for some of these small
businesses they do not have extra time.
Secretary Mnuchin. Again, let me just emphasize, we are 100
percent committed to making sure that people that have lost
their jobs get back to work, and people that have their jobs
can keep their jobs. That is an absolute priority of ours. As
you have said, the unemployment rate is still way too high, no
fault of their own, and there is no question that small
businesses in many industries are going to need more help.
So we looking forward to working with the Committee and the
rest of the Senate, on a bipartisan basis, to include
incentives, and whether it is through the PPP or others or tax
credits, we are open minded. But we absolutely believe small
business, and, by the way, many big businesses----
Senator Shaheen. Sure. Absolutely.
Secretary Mnuchin [continuing]. In certain industries are
absolutely going to need more help.
Senator Shaheen. Thank you. Administrator Carranza, you
talked about the effort to move the EIDL loans through the
program, and I think that is probably the program that we have
heard the most frustration from businesses in New Hampshire
about. And we are still hearing from them on a daily basis,
that they cannot get information about the status of the EIDL
loans.
So you talked about expecting all of the ones that are in
the queue to be approved by next week, or to be acted on by
next week. What can we tell those businesses that are calling
our office about how to get information, because they are not
able to get through on the toll-free line and the SBA to get
answers to their questions.
Ms. Carranza. Senator, I will emphasize the amount of
resources that we have added at the phone center. There are
3,000 versus the few hundred that we had a couple of months
ago, and then we have added approximately another 1,000 when we
talk about the paralegals and whatnot, to reconcile some of the
loans.
With regards to--and I will--I am going to get in the weeds
a little bit to explain----
Senator Shaheen. Good.
Ms. Carranza [continuing]. Why the visibility of a loan is
not realized with this new automated system. What we
understand, on the traditional legacy system, it had a lot of
visibility. That is the system that would manage all of the
natural disaster loans. When we had to ramp up and do a surge
processing, input and throughput, what was not built was what
we call a loan tracking visibility, and that is why it has
limited visibility. We have visibility on the intake, and then
when they get notified by email that their loan is progressing,
and now it is a matter of they make a decision whether they
want to pursue the loan and whatnot.
So there is this gap that there is no visibility. We did
not have--because of time, because of the urgency to just get
that machinery up and running, we did not allow the engineer to
build that piece. And so now it requires particular loan
officers to view that. We are in the process of fixing that,
because we are now being prepared to accept more applications,
besides the ag, and we have a few hundred thousand waiting in
the queue, and we would like to take them on. We have learned a
lot--the amount of communication that is necessary, the amount
of personal face-to-face contact, not just emails. Because we
have made available up to nine contacts within the time frame
that we are speaking to, about a loan status.
We have about 65,000 that want to re-enter and be
reconsidered for more funds, and we are working through that as
well. So there are about two or three portfolios we are working
through to make sure that we provide a lifeline. It may not be
the $2 million, but what we can provide is a lifeline to many
more at that particular cap. And so we are looking to active
that.
When I made reference to applications being all in the
queue by next week, all of the 5.4 million applications that we
have had since March to this date are now going to be in that
loan portal, which they are making an assessment on. And the
reason we are able to do that is that we went from a production
where a loan officer processed about 3 to 5 loans a day, to now
50 loans a day. And so because of that surge we are realizing
more efficiency, and I look forward to resolving those issues
very quickly.
And I do look forward to communicating with you now more
often. We did have conference calls with the Committee and
members, such as the Chairman and the Ranking Member, Senator
Cardin. It was not frequent enough. But I have pulled away from
the operations and now I will be able to personally meet with
everyone and update you much more frequently.
Senator Shaheen. Well, thank you. I think that is very
important, and I am out of time. But the more transparent we
can be, the more people understand what is going on with the
program, the less frustration and the more understanding we
will have.
So thank you both, and I hope we can continue to have a
bipartisan approach to helping the small businesses in this
country. Thank you.
Chairman Rubio. Senator Kennedy.
Senator Kennedy.
Senator Kennedy. Yes, sir.
Chairman Rubio. Unless you have nothing to say, which I
doubt.
Senator Kennedy. Thank you, Mr. Chairman. Thank you, Mr.
Secretary and Madam Administrator. I have had some oral
surgery, as you can probably tell, so my speech is--my accent
is the same but my speech is a little impaired. That is a
blessing or a curse.
Mr. Secretary, do you have economists on your staff that
can put a value on the amount of damage that was done to
businesses from the looting and the burning from the rioting,
not the economic impact of the peaceful protests, protests in
America, or as American as baseball, but felony looting is not.
Do you have economists that can put a value on the economic
impact of those small and larger businesses?
Secretary Mnuchin. I do have economists. I will ask them
whether they have data that they can look at and do that, and
get back to you. I do not know the answer.
Senator Kennedy. Okay. We have about, what, $130 billion we
have not disbursed for the PPP program. Is that correct?
Secretary Mnuchin. That is.
Senator Kennedy. So it would appear we are going to have
some money left over. Is that correct?
Secretary Mnuchin. It is.
Senator Kennedy. I am going to introduce a bill that I
would like you and your very able--and I mean that sincerely--
colleagues at Treasury to look at, to take some of that money
and make it available to the businesses, mostly small
businesses, but to the businesses that have been lost as a
result of the burning and the looting and the felony rioting. I
think they are going to need help.
Secretary Mnuchin. We are more than happy to look at that
with you.
Let me just comment on the----
Senator Kennedy. Pull that mic closer for me, if you would,
Mr. Secretary.
Secretary Mnuchin. I said we are more than happy to follow
up with you on that. And let me just comment on the extra
money. As you recall, Congress gave us an extra $60 billion,
more than we needed, because everybody was so skeptical that we
were going to run out. So some component of this extra money we
did not anticipate we would be able to put to work, but we look
forward to working with you on potentially repurposing it.
Senator Kennedy. Well, I am going to introduce that bill--
we are drafting it now--and if we do have an additional
coronavirus bill I would like to consider--I would like you to
consider making that a part of it.
Secretary Mnuchin. We will absolutely work with you, Mr.
Senator.
Senator Kennedy. And I would like, if you could put some of
your best minds, you and the Administrator, to quantifying the
damage done from the rioting.
Secretary Mnuchin. I will----
Senator Kennedy. I would envision that we have arrested a
lot of people, our law enforcement authorities, who caused
this, who did the burning and looting, and I would, we are
probably going to put a provision in our bill where the
authorities have to go after them for civil liability,
basically take their assets and offset the money that taxpayers
would have to spend. But I would like you to take a look at
that.
Secretary Mnuchin. We will. Thank you.
Senator Kennedy. And talk to the President about it.
Number two, I want to cut to the chase here. If you were
king for a day, what would you put in the next coronavirus
bill, other than the idea I just articulated to you?
Secretary Mnuchin. If I were king for a day I would say we
should spend the next 30 days looking at a lot of different
things that will be in that bill.
Senator Kennedy. Yes sir, but--I know you have been
thinking about it, and I would like to get your general
thoughts now of what we should be thinking about.
Secretary Mnuchin. I think that, one, we are going to need
money for business, to encourage businesses to rehire people,
especially in areas that have been most impacted. So whether it
is the travel, leisure, restaurants. You cannot get hotel
capacity back up to speed without hiring people first. I will
just use that as an example.
Senator Kennedy. What else?
Secretary Mnuchin. I think we are going to need to fix
unemployment. So we knew there were issues with the enhanced
unemployment, where, in certain cases, we were paying people
more not to work than work. I think we have seen, from the
recent numbers, that did not have a big impact because people
want their jobs. But we will have a significant amount of
unemployment and we are going to need to look at doing
something that. I think we are going to seriously look at
whether we want to do more direct money to stimulate the
economy.
But I think this is all going to be about getting people
back to work, and we look forward to working with the entire
Senate on this.
Senator Kennedy. What about--and I am going to try to be
quick here--what about incenting investors to invest in the
economy, capital gains treatment that would be relaxed, that
sort of thing?
Secretary Mnuchin. It is something we have discussed. My
opinion right now is that the Fed facilities have unlocked the
capital markets. There is a lot of liquidity for investment.
That is something we will look at. But I think we are much more
targeted at getting people back to work, and I think investors
are prepared to invest a lot of liquidity that they have right
now.
Senator Kennedy. Well, the Federal Reserve has done a great
job, and yes, they have unlocked the credit markets, but at
great expense. We can talk another day about the size of the
balance sheet now at the Federal Reserve. But, look, I think
Jay Powell is a rock star. I think he did great.
Final thought. A lot of the banks and the small
businesswomen and businessmen think that the Federal Government
is going to double-cross them on the forgiveness of these
loans. You need to be mindful of that. You and the
Administrator need to take some of those smart minds in your
office, and you have plenty of them, and try to reduce that 11-
page form to about half. And you both need, in my opinion--I am
not trying to tell you how to do your job, but articulate to
the businesspeople out there that the Federal Government is not
looking for ways to catch the banks or the businesses who took
this money in a minor mistake so the loans can be turned into
loans.
Secretary Mnuchin. I assure you that is the case. And let
me just emphasize, in the recent bill there is an extension
from 2 years to 5 to 10 years, but I do not expect businesses
are going to need to use that, because I think the majority of
this money is going to be forgiven in the next few months, and
that is our intent. And I would just highlight----
Senator Kennedy. And know that, Mr. Secretary, but they do
not trust us.
Secretary Mnuchin. I understand----
Senator Kennedy. And for good reason.
Secretary Mnuchin [continuing]. And that is why we are
going to get the job done quickly. And there is also--let me
just give a little pitch--there is a third-party calculator
that you can put in all the information and you can get the
forgiveness forms done in 15 minutes. And as I said, with the
next legislation, with the safe harbor, it is going to be even
easier.
So trust me. I have had people ask us about the form EZ,
Senator Collins and others. You know, I would like to make this
as easy as possible. We do have a law that we are required to
work within. But I want to assure people that have taken this
money, our intent is to get this stuff processed quickly.
And I should have also mentioned, you know, we have been
speaking with you and others, obviously, on the state issue,
and I know you have potential legislation, so I should have
also put that on the list, obviously, that we will address on a
bipartisan basis.
Senator Kennedy. Think about helping the businesspeople who
were hurt from the looting and the burning.
Secretary Mnuchin. Thank you.
Senator Kennedy. Thank you, Mr. Chairman.
Chairman Rubio. Senator Coons.
Senator Coons. Thank you, Mr. Chairman, Ranking Member
Cardin, and thank you, Secretary Mnuchin and Administrator
Carranza. As many of my colleagues have remarked, this is a
rare bright spot of bipartisanship and of partnership that has
delivered a lot of relief to millions of businesses and lots of
households and families. There are some aspects of our work
together that have not been realized as quickly as many of us
had hoped. The EIDL loans have ended up being a challenge to
deliver. There are others where there is more work to be done
together to make the forgiveness process swift and clear and
appropriate.
I want to focus for a few minutes on a piece of the CARES
Act, the Small Business Debt Relief Act that maybe has not
gotten the visibility it needs and where we could, I think,
make some more progress.
Before COVID-19, African American business owners were
typically denied bank loans at triple the rate of non-minority
business owners, and some of the pressures of this recession
are compounding preexisting inequalities, and that is exactly
one of the core reasons I worked, and many colleagues worked to
get the Debt Relief Act into CARES Title I. It gives six months
of principal, interest, and free relief for 7(a), 504, and
microlending programs, programs that, by definition, existed in
order to help those who were denied loans elsewhere.
Just a quick example. Orange Theory Fitness in Pike Creek,
Delaware, right near where I grew up, is a black-owned business
that is now saving $9,000 a month because of this automatic
debt relief program. I spoke to its owner, Yvonne Gordon, last
week, who has been working tirelessly to reopen her small
business and to go back to serving customers.
But I am concerned that there are not enough small
businesses that are required, not just eligible but required by
law to receive this benefit. There are some remaining who have
not.
So Administration Carranza, if you would, has the SBA
identified all the businesses eligible to receive this
automatic relief and who their lenders are, and what are you
doing to make sure that every single covered borrower is fully
participating in this automatic relief program of six months?
Ms. Carranza. We have seen an uptick. It started off with
about one and a half billion and now it is up to two billion
that have recognized the principal and the interest and
coverage. And the email was sent out. We spoke to the banks,
but we have to do a better job of that, another level of
outreach. We saw the increase, and we need to do a better job
of not only tracking the businesses but also making sure we
work with the lenders. It is supposed to be an automatic
transaction and it has occurred for many, but I believe
knowledge is power and we will have to do a better job in that
area, sir.
Senator Coons. Thank you, Administrator. I do think we are
still falling short in reaching every business. The businesses
I have heard from in Delaware that have benefited from this, it
has made a critical and timely difference.
There is also a question that Senator Duckworth wanted me
to ask. She is at an Armed Service Committee hearing. We have
both worked on--it is a small technical issue. It was a
drafting error, I am convinced, in the CARES Act--but the cap
for 7(a) and PPP are tired. We passed, on a bipartisan basis
here in the Senate, a technical fix. It has been held up in the
House. Just if you would speak briefly to how important is it
to avoid a shutdown of the 7(a) loan program because of this
drafting error?
Ms. Carranza. We do not see an exposure on the 7(a)
shutting down. We actually have available funds for that
particular program. So I need to get back to you on that. I
have not heard of any such position at this point. We are
actually doing really well on our 504 and our Community
Advantage. We are looking to develop another loan option for
our underserved communities. So I look forward to getting back
to you on that.
Senator Coons. I am happy to talk to you about it.
Ms. Carranza. Please.
Senator Coons. I know it is a minor issue but it has been
flagged by staff on both sides of the aisle, and I think we can
work through it.
Three more quick questions, if I can. The CARES Act gave
$200 million to the GAO for oversight. The Ranking Member,
Senator Cardin, referenced this. The SBA makes data on
individual loans available on its web site for the 7(a) loan
program, and the administration says it plans to do so for PPP
loans at a future date.
Why have you not made individual loan PPP data available,
and can you assure that the GAO is going to get the access to
the data they need to do their job of oversight within the
Executive branch?
Secretary Mnuchin. I can comment on that.
Senator Coons. Thank you, Mr. Secretary.
Secretary Mnuchin. First of all, let me just say we
absolutely believe in transparency and we were very clear
across the programs on agreeing to significant transparency,
especially in the Fed facilities, which were not required.
As it relates to the names and amounts of specific PPP
loans, we believe that that is proprietary information, and in
many cases for sole proprietors and small businesses is
confidential information. So the reason why we are not
disclosing the names and individual amounts, unlike in the 7(a)
program, is because of that issue, but we are working with the
GAO from an oversight to make sure that they are comfortable
and they do have access to information.
Senator Coons. Thank you, Secretary. I do think it is
critical that GAO have access to all the data they need to do
their job. And a quick question for you, Mr. Secretary, to
follow up on something Senator Kennedy referenced. As retail
and hospitality are reopening, there are supply chains which
often rely on credit, or finding, you know, three months later
there is a lot of concern about the cost. There is much more
liquidity. But credit insurance and factors are becoming key
blockages.
I have heard from a number of restauranteurs and folks in
retail that rely on credit to finance restarting, that they are
really having difficulty. I hope you are looking at credit
insurance and sort of the backstop end of the credit side of
those supply chains.
Secretary Mnuchin. Yes, and I am happy to follow up with
you and your office on that.
Senator Coons. Thank you. Your engagement has been
terrific.
If I could ask just one last question.
Secretary Mnuchin. Have you looked at the clock?
Senator Coons. I am. I am a minute and 45 over, and in 15
seconds I will simply say I hope for a positive response on a
bill referenced by Senators Cardin and Shaheen that we are
introducing for a Prioritized Paycheck Protection Program. For
a genuinely small business that has suffered significant
revenue loss, it would give them a chance for another PPP loan
if they have responsibly completely one, given that we have
$140 billion in unused funds.
Thank you for your forbearance.
Chairman Rubio. Senator Romney.
Senator Romney. Thank you, Mr. Chairman. I want to
subscribe to the comments that Jim Risch indicated about
support across our country for the help that your respective
agencies has provided for our economy and for the people who
work in our economy. I also recognize there have been more than
a few glitches and concerns and errors that have occurred. I am
thinking about the banana stand on Arrested Development. If
they went from 2 customers to 2,000 customers, it would make it
kind of difficult for the guy dipping the bananas in the
chocolate sauce, and the peanuts, and so forth. And you have
had to staff up very quickly, and I think what you have done
has been to rescue many, many jobs for our country, and I
appreciate that very much.
What I hear as I talk to people in our small business
community is how much they appreciate these loans, but also
they are beginning to be concerned about whether or not they
are going to be qualified for forgiveness. And they note that
in some cases they tried to rehire employees. They found it
hard to do so. In some cases, people are making more by not
working than they were by working, so they are not able to get
them back, or others have moved elsewhere to get employment or
opportunity elsewhere with family.
I hope, and underscoring what Senator Kennedy said, that as
you look at ways to determine if people qualify for
forgiveness, that we are not sticklers, that we instead are
looking to help people get forgiveness as opposed to exacting
penalties on that.
That being said, in terms of loan forgiveness, I am
concerned about circumstances where businesses applied for a
loan, received money, but actually saw no reduction in revenues
at all, and remain fully profitable. And I hear about those
circumstances. I see them written about in various journals.
And I believe that given the fact that in the loan application
you noted, quote, ``that this loan is necessary to support
ongoing operations,'' that if a business did not see a
reduction in revenue that it should not qualify for
forgiveness, that it should be maintained as a loan.
Is that something which you think guidance can be provided
on, or do you subscribe to that thought?
Secretary Mnuchin. So, Senator Romney, thank you, and, you
know, I personally had the opportunity to talk to you about
these issues and many others. I know that the revenue test was
something that the Committee actually considered when this was
written at the time, and I think the general idea we had was so
many people were going to be impacted by this, not to include
the revenue test.
Now as I have said publicly, when we put in that
certification we thought that people would self-select
appropriately, and unfortunately there were a number of
companies that were high profile that took the loans, and I
publicly came out against that. We did get about $12 billion
returned. I think to a large extent it was from large public
companies and some large sporting teams that I am a big fan of.
You know, and I had many discussions with many people on
this Committee on a bipartisan basis about this test on the
certification. We made a judgement that the majority of the
small businesses, 98 percent by number, were under $2 million,
and most likely legitimately took it, so we issued a safe
harbor. And on 2 percent of the loans, that are the larger
loans, we will do a review. Some of that will be an automated
review. And we hope to have the proper balance on that.
Away from that there will be a more general audit, just to
make sure that people--there is not fraud in other things. But
I look forward to speaking to you and others on this issue.
Senator Romney. Thank you. Mr. Secretary, you noted in your
opening comments that we expect a strong, phased recovery in
the third and fourth quarter, that there has been substantial
cash resources of our consumers, and that we expect a dramatic
improvement in Quarter 3 and Quarter 4.
So I am puzzled by the statement that you make that we are
going to need a stimulus to get the economy going again. I
understand very much that there are going to be certain sectors
of the economy--hospitality and so forth--that will need
ongoing help, but there may be small businesses that will need
help and, therefore, we may want to extend the PPP program
beyond the end of the month.
But do you believe that we are going to need a stimulus, or
is the economy poised to come back--again, with those outliers,
is the economy poised to come back without further stimulus?
Secretary Mnuchin. Well, I said it is one of the things we
want to consider, and the reason not to jump into CARES 4 is
hopefully we will not need a CARES 5 and a CARES 6. I do think
the economy is going to rebound significantly, but I would also
say there is still significant damage in parts of the economy.
And we are going to consider using all of our fiscal tools,
working with Congress, to make sure that we restore this
economy back to where it was and where it should be, and to
make sure that the many Americans that still do not have job
get back their jobs.
So we look forward to your business experience and working
with you and others to make sure we do this appropriately.
Senator Romney. Thank you, Mr. Chairman.
Chairman Rubio. Thank you. And before I turn it over to
Senator Booker, I just want to comment on the revenue thing. We
talked about it quite a bit, and Senator Cardin, Collins, and
Shaheen will recall. We had two concerns about it. The first,
on the front end, is that it would create all this paperwork.
The small business would have to accumulate all of this
paperwork to show what the revenue was so they could compare
it. So I was concerned it would slow down that process. Because
I know at first blush, especially, we were all very--I am very
sympathetic to this argument that if you are making a bunch of
money, why do you need this loan?
The other thing we were concerned about is what is a
business do, and sometimes they get creative and they reinvent
themselves in a crisis. For example, maybe you made clothes but
now you are making masks and PPP, not just to keep people
employed but reinvent themselves and provide a need. And we did
not want to discourage or punish people from doing it. It is a
complicated issue. I think it is one we should continue to talk
about. We certainly do not want people taking advantage of it.
But those are some of the things we were worried about when
we were talking about all this at the front end. Senator
Booker.
Senator Booker. Thank you very much. I just, first of all,
want to just echo a lot of the comments that have been made by
people on both sides of the aisle about the work that not just
the two of you have done in this really difficult time in
American history but, frankly, your teams, the civil servants
that work under you. Your agencies have been able to do things
that we could not even imagine just at the end of last year. So
I just want to give my gratitude for the difference it has made
in my state. It has just been extraordinary, and there are a
lot of folks that are happy.
And I just want to echo, also, the pride I have in working
in such a bipartisan way. We have seen people on both sides of
the aisle on this Committee come together and just do really
good work, I think. In Senator Rubio's opening comments he
talked about the fact that so many of us rose to the occasion,
put aside politics, and really focused on people and
businesses. So I am really thankful for that.
I come at this next issue in a very personal way but also a
very bipartisan way. A lot of it is my own faith in Matthew 25,
just being concerned with people who are often marginalized.
Eighty-seven of us Senators voted to think that a lot of the
sentences we give to people are just too dag-nab long.
And we are, in a bipartisan way, doing a lot on criminal
justice reform. I worked with the administration, talked to
Jared. My Fair Chance bill passed, about people coming out of
prison and eliminating that box that they often have to check.
And so I am still perplexed, though I am grateful that you,
Secretary Mnuchin, offered to revisit this issue.
And I am grateful, again, in a bipartisan way, Senators
Portman, Cardin, Lankford, and others put together legislation
to eliminate the restrictions that are preventing people from
getting access to these loans, incredible entrepreneurs in
cities and communities all across America who are now denied
the aid, or seeing their small businesses collapse, which are
often critical pillars in many communities. This bipartisan
issue, it has been endorsed and supported by everybody from the
ACLU to the American Conservative Union, and FreedomWorks.
And so I just, again, Mr. Secretary, want to know, do you
believe in an individual who has started a business, is
contributing to the local economy, is creating jobs, who has
prior unrelated convictions, should really be barred from
participating in the PPP program?
Secretary Mnuchin. Well, first let me say we want to work
with you and others to fix this and fix this really quickly. As
I said, the original 7(a) program had seven years. We reduced
it to five years. We thought we would reduce it. We are happy--
if there is bipartisan support we are happy to make the change
this week and reduce it even more.
So again, I know there is--we obviously have some issue
about people who were convicted for financial crimes and other
things.
Senator Booker. You and I both know that is an easy thing
to eliminate, the financial crimes.
Secretary Mnuchin. Again, this is--we are happy to be
responsive on this.
Senator Booker. I am grateful. I have limited time so I
will just say that this is not a small issue. This is thousands
of people, affecting tens of thousands of jobs. This just basic
ideal of justice. It seems incredible.
And to that extent I would like to put something else on
your radar screen, something called pretrial diversion. We know
what pretrial diversion is, but for those who may not, these
are specifically designed programs to allow individuals to
plead guilty, and subject to completion of certain court-
mandated programming their guilty plea is vacated, and they do
not have that mark of a criminal record, which has 40,000
collateral consequences if you have a criminal conviction.
It is a good program. And it only happens when the judge,
the prosecutor, and the defense attorney, all components of our
criminal justice system, agree. They come together and agree
that the individual should not have to suffer those collateral
consequences associated with a criminal conviction.
So despite the consensus of the entire criminal justice
community, we are doing the contrary. We are denying people
that are in these pretrial diversion programs, who are
entrepreneurs, contributing to our economy, employing other
Americans, we are denying them what prosecutors, judges, and
defense attorneys all agree should not be a bar, should not be
a bar on collateral consequences.
The PPP program is being denied to those folks, and this
should shock the conscious of us all.
Secretary Mnuchin. Yeah. Let me just say, I am not aware of
that but I will work with the Administrator, and if that is the
case we will make that fix immediately.
Senator Booker. Oh, hallelujah. Thank God. Pass the
collection plate. Thank you, sir. I really appreciate that.
That commitment is noted, and I am really grateful.
I want to be respectful of the time. In 10 seconds, I just
want to echo what a lot of my colleagues have already said
about still not an equitable distribution of the funds. A lot
of minorities are falling out of this program, and a lot of it
is just because small businesses, the smallest sort of, as we
call them, mom-and-pop shops, are not. Senator Daines and I
have mentioned it to you before, have a bill to help those
funds that are started up--New Jersey has one through our
Economic Development Authority, they are all across our
country--to seed them with resources to help, because they are
better targeted toward those smaller mom-and-pop shops. It will
address issues of equity and getting a lot of funds out the
door.
I just, again, make that appeal to my colleagues on this,
to look at our bipartisan effort to do this. And again, I
respect and appreciate your willingness to help this. But thank
you very much for the comments you just made about people in
pretrial diversion. It makes me extraordinarily happy. So thank
you.
Thank you, Mr. Chairman.
Chairman Rubio. Thank you, and thank you for raising that
issue.
And, in fairness, the Secretary has told us, in numerous
conversations, that if we could come up with bipartisan
language that we support, he would be more than happy to
facilitate it on the criminal justice issue. I think we are
fairly close on that, and I think time is of the essence, given
the June 30th date that awaits on the cutoff of the program.
Secretary Mnuchin. Yeah, and I will reiterate that, on
behalf of the Administrator and I. If we get a letter from the
Chair and the Ranking Member, we will institute the changes. We
had said that on the call. So again, we will make your change
immediately, but in regards to other changes on this issue, we
are happy to implement them as soon as we get guidance from
both of you.
Senator Booker. Thank you very much.
Chairman Rubio. Thank you.
Senator Ernst.
Senator Ernst. Thank you, Mr. Chair, and I would like to
associate myself as well with the concerns of Senator Booker.
In Iowa, of course, we are very short in our labor pool, and we
truly value those that have served their time, their commitment
to the great State of Iowa and those that want to find a
positive path forward through entrepreneurship, and starting
small businesses. So certainly I think that a number of us
would want to engage in those activities to make sure that we
are extending opportunity for everyone that does deserve that
opportunity.
But thank you, Chairman, and thank you, Secretary, very
much, for being here. And we are seeing some strong numbers
coming forward, and I am thrilled. And I think because of the
work that has been done through the Small Business
Administration, through the Treasury, through especially the
Paycheck Protection Program, we have been able to save,
preserve a number of small businesses and jobs across the
United States, and that has been reflected in the numbers that
we are seeing. In May, it was projected that we would lose 8
million jobs, and instead we were able to add back 2.5 million.
And again, I credit so much the program that you have put into
place, that we have enacted, in playing a key role for a really
stunning turnaround in the economy, so thank you for that.
I do appreciate your hard work in implementing the program.
There is still a lot of work to do, things that have been
identified, just as Senator Booker did. But we are definitely
heading in the right direction.
I do have a question, Administrator. Last month we found
out that Planned Parenthood affiliates received $80 million
through PPP, despite the fact that SBA's affiliation rules
disqualify them. What actions are being taken to ensure that
Planned Parenthood returns those funds and is held accountable
for the violation of SBA rules?
Ms. Carranza. Well, SBA takes the affiliation rules very--
we look at it very closely and very fairly. And at this point I
would just say that all affiliations are being looked at, and I
am not in a position to speak about any one particular borrower
at this point.
Senator Ernst. But they will be reviewed, not just Planned
Parenthood but all of the other affiliations that have unfairly
taken advantage of the SBA.
Ms. Carranza. Yes. The necessary course of action, yes.
Senator Ernst. Okay. Thank you.
Ms. Carranza. Thank you.
Senator Ernst. And then, as well, for the Secretary,
forgiveness, of course, has become a large issue now that we
are moving into a state of recovery. The PPP forgiveness
application, it is very complicated, and I hear that from
Iowans time and time again, where the application process was
fairly simple for them, but the forgiveness portion of that
application process is very confusing.
Our banks and our small businesses have told us that a team
of lawyers and accountants would be necessary just to help
those businesses fill out that forgiveness application, which
puts our smallest businesses at a significant disadvantage.
Do you believe that Treasury and SBA have the authority to
simplify the application for small borrowers, and if not, would
you be willing to work with the Committee on this issue?
Secretary Mnuchin. First of all, let me just tell you, I
personally looked at and helped design the application form,
and I personally reviewed the forgiveness form, and I do not
want this to be any more complicated than all of you do. There
are requirements in the bill that make it difficult on the
forgiveness. I do think, in the new law, the safe harbor, for
people who check the safe harbor, will make it significantly
easier, and will not have to do most of the calculations.
And we are coming out with new forms for people who check
that.
And again, I would also just advertise, there is a third-
party calculator that if you put in all the information it
fills it out in 15 minutes, but I can assure you we will work
with you very closely. We want to make this easy for people to
do, and now with the safe harbor most people will have the
benefit of that.
Senator Ernst. Very good. I appreciate that. Thank you very
much.
Chairman Rubio. We just got a call from the lawyers and the
accountants. They are upset at what you just said.
[Laughter.]
Senator Rosen. Senator Rosen. The light is on, but I think
it----
Secretary Mnuchin. I figured out in the beginning it works
without the light.
Senator Rosen. All right. You can hear me now, anyway. I
want to thank you, Chairman Rubio, for always taking my call.
Ranking Member Cardin, Administrator Carranza, Secretary
Mnuchin, you know, you have really provided leadership in
helping our small businesses; especially for those of us in
Nevada, you really helped us with that critical support that we
needed during these challenges and unprecedented times. I want
to really thank you in public for your willingness to provide
our small Nevada gaming business up and down the state. People
think of just the big hotels and the strip, but it is up and
down our state everywhere, and everyone is very, very
appreciative.
But I want to talk a little bit about EIDL reform, and
over, of course, the past few months, the coronavirus pandemic
has just devastated small business in Nevada: 99 percent of our
business is small business. We also have, unfortunately, the
highest unemployment rate, 28 percent, up over 24 percentage
points from last year. And so it is clear that our unemployment
rate, of course, is a reflection of the overall state that the
pandemic has had on small business.
My office has directly helped more than 560 of these small
businesses with their questions with the CARES Act. I am going
to give a shout-out to our Small Business Administrator, Joe
Amato. He has done over his hundredth webinar. I have been able
to participate on a lot of those. But the one common complaint
that we have received repeatedly is about the SBA's $1,000 per
employee cap on EIDL advance grants and its $150,000 cap on the
EIDL loans. That is a 93-percent reduction from the $2 million
level that we authorized in the CARES Act.
Many Nevada businesses, of course, have contacted my
office, telling me that the $150,000 just is not enough, does
not provide enough support, and they are going to probably have
to permanently close their businesses.
So Ranking Member Cardin earlier spoke about this. These
filing caps were not the intent of Congress when we passed the
CARES Act. They were not part of any deal that small business
owners thought when they applied for their EIDL support.
Senator Cornyn and I and others, we have sent a letter recently
on this same issue back in April. I have raised it up. I raised
it a few weeks ago when we were on the phone.
So, Administrator Carranza, following up on the Ranking
Member's question earlier, why has the SBA placed that $150,000
borrowing limit on the EIDL loans? How did you come up with
that number? And if the reason is funding, why didn't you come
back to us for support?
Ms. Carranza. Senator Rosen, I appreciate your question
because it has been raised, and I have been dealing with it
personally because small businesses approach my office as well.
I mean, I get personal emails and follow-up on their requests.
So I am very close to the situation.
But I want to reassure every member on this Committee that
it was not an arbitrary number. It was a matter of realizing
that we had over 5 million applications in the queue, and
thanks to this Committee and thank you, Senator Cardin, for
providing the council the opportunity to speak with you and the
Chairman about what was in the pipeline, the fact that we had
already exhausted the $7 billion that we had in the pipeline,
and then also what we had available was to ensure that we gave
not just something but based on 6 months of operating cost,
that is basically how the formula is calculated. And the
average loan at that given time was being realized at about
$83,000, so we thought if I can manage that--the decisions were
made that if we could manage the 5 million applicants that were
already in the queue, that had been waiting for the funds, that
we could cover all with the $50 billion subsidy.
Senator Rosen. And the $1,000 per employee, that has also
been extremely difficult.
Ms. Carranza. Well, the grant was the same calculation in
the sense that we looked at $1,000 per employee. The first
applicants, where there were about 700,000 that were sole
proprietors, they had one to four employees, and, again, to
allocate that many applicants a grant, we needed to scale to
cover----
Senator Rosen. So how will you be assessing this going
forward so my businesses in Nevada, over nearly 300,000, which
only about 83,000 have been able to take advantage of PPP or
EIDL.
Ms. Carranza. Yes, Senator Rosen. We did not want to
discourage anyone in that queue, in the EIDL queue, and we sent
them a couple of emails indicating and demonstrating the
comparison of EIDL, what was available, and what they could
achieve with the PPP program because there were still
sufficient funds in the program up to this point. And that is
the other option we tried to clarify, that there is another
loan option that they can consider if they are in need of
greater funds.
At this time, as I mentioned earlier, there are individuals
that miscalculated their operating costs from 6 months to 3
months. We are revisiting those particular businesses----
Senator Rosen. I had a chance to reply.
Ms. Carranza. Yes, yes. And so we have about 65,000 of
those that we are reconciling, so that if they needed up to
150,000, we have it available to them. And as of next week, we
will be taking in new applicants as well, the non-ags.
Senator Rosen. Thank you.
Ms. Carranza. You are welcome.
Senator Rosen. We are not a very large ag state. We have
some but not as much as others, and so that has hurt us
disproportionately.
Ms. Carranza. But I look forward to working with your
office. If there is a particular sector that is really
problematic, I look forward to working with you on that.
Senator Rosen. Thank you. I appreciate it.
Ms. Carranza. You are welcome.
Chairman Rubio. Thank you. All right. Just to update you,
we have a nearly perfect attendance today. We have Senator
Hawley, Senator Collins, and then if there are any wrap-up
items, I will ask them, and then we will send you on your way.
Senator Hawley.
Senator Hawley. Thank you very much, Mr. Chairman. Thanks
for holding this hearing.
I have been closely monitoring the implementation of the
relief programs, the various relief programs Congress has
established, and I have to say I am thrilled, given last week's
job numbers, I think, that the PPP has played a vital role, has
been a vital lifeline during the shutdowns. It has clearly
helped to stop the economic hemorrhaging and put us in a place
now for recovery. And so that is, I think, a great success
story, and I want to thank the Chairman for his outstanding
work on this.
I do have some questions about EIDL, following up on what
Senator Rosen was just asking about. I want to come back to
those. Let me start, Administrator Carranza, with you, just on
the Planned Parenthood issue. Planned Parenthood has 16,000
employees. And this is not a gray issue; it is a black-and-
white issue. They talk about it in all of their organizing
documents. I am just wondering. When 37 Planned Parenthood
offices, 37 separate offices, applied for PPP funds, why did
the internal system at the SBA not flag the applications?
Ms. Carranza. Senator, our system accepts applications and
assigns a loan number, and then loan arrangement is made
between the borrower and the lender. So when you have about 5
million applications being injected into our system, we do not
have a system that flags affiliations or any particular
industry. It just assigns a loan number, and that is why it is
very important for us that when we looked at sectors--and some
sectors had certain tendencies and certain loan values, we
then--and the affiliations were one of them--we started to
assess, you know, the value of how they exercised or
interpreted the----
Senator Hawley. So what you are telling me is that the SBA
did not have any safeguards in place on this particular
question. You did not have any system in place to flag
applications like----
Ms. Carranza. At that given time, that is correct.
Senator Hawley. Despite the fact, I might add, that the
affiliation rule was pretty fiercely debated as part of the PPP
package, as part of the CARES package, amended several times.
Tell me about the Planned Parenthood affiliates that
wrongly received funds. How many of those has SBA contacted
now.
Ms. Carranza. At this point I would not be able to speak
about a particular loan situation, so----
Senator Hawley. Why?
Ms. Carranza. It is proprietary information, and it is----
Senator Hawley. I am not asking you about a loan situation.
I am asking you how many you have contacted. The SBA has put
out a statement saying that you have contacted the affiliates.
You have sent letters. That has been publicly reported. How
many?
Ms. Carranza. The office did receive your letters, and we
acted accordingly. But at this point, given the detail on a
particular borrower would just not be----
Senator Hawley. So you can confirm for the record that you
have sent letters to Planned Parenthood affiliates, but you
will not tell us how many? That is your testimony?
Ms. Carranza. No. I am saying that the affiliation or any
borrower that we are taking a course of action is that indeed,
and I do not talk about the particulars.
Senator Hawley. How many Planned Parenthood affiliates have
returned the funds?
Ms. Carranza. Again, I have to take the position that I am
not able to share that borrower information at this----
Senator Hawley. When are you going to be able to? And how
are we going to conduct oversight if you will not give us the
information?
Ms. Carranza. I look forward to speaking with you in your--
--
Senator Hawley. I am sorry?
Ms. Carranza. I look forward to meeting with you and
discussing the situation, but at this point, I will not be able
to speak to it publicly.
Senator Hawley. Well, what is different between discussing
it with me in person and discussing it here when you are under
oath?
Ms. Carranza. Just to clarify, again, the SBA position, I
would not be able to divulge any of the details, just explain
what our practice and our policy is.
Senator Hawley. Well, how are you going to provide this
Committee with information about this breach of the rules that
are in the statute so that we can conduct oversight? How are we
going to conduct our oversight if we do not know any of the
details? And since you will not do it now, when will you do it?
What are the guidelines that you will follow in disclosing this
information?
Ms. Carranza. Well, Senator, what I would like to do is to
review with you the controls that we have put in place and the
course of action that we take with all affiliations, not just--
--
Senator Hawley. Okay. We will follow up with you. For the
record, I would like to state it is important that this
Committee conduct its oversight of rules that are written in
the statute, and I want answers about how Planned Parenthood,
which it is forbidden by the statute that this Congress wrote
and passed into law--it is not a rule; it is not a regulation.
It is in the statute. I want to know how it happened that $80
million was diverted to Planned Parenthood affiliates that is
plainly not permissible under the statute. This Committee has
an obligation to perform oversight, and I want answers on that.
And I will not accept that you cannot tell us or that you do
not know. So I want answers.
So we will follow up with you. We will follow up with the
Department of Justice. But I am just saying for the record it
will not be acceptable to me that you are not going to tell us,
you are not going to get back to us, you are not going to be
responsive.
Ms. Carranza. No, Senator----
Senator Hawley. And, frankly, the pattern of
unresponsiveness from the SBA throughout this process has been
disturbing, which I have said for the record and I will say it
again today, I am disturbed by it.
Mr. Chairman, one other question, if I could, just on----
Ms. Carranza. Senator Hawley, if I----
Senator Hawley. I have got to move on. You have made your
position clear----
Ms. Carranza. I want to let you know that I do know the
status----
Senator Hawley [continuing]. And you are not being
responsive.
Let me ask you another question while I have got you here.
On the EIDL applications, you answered an earlier question that
EIDL applications are now in the portal. I would like to know
the timeline of when they will be processed. I have had
applicants in my state that have waited 80 days--8-0 days--for
any kind of a response on their EIDL applications. Senator
Rosen was just talking about there are similar problems in her
state. When will they be processed. We have repeatedly asked
for answers. They cannot get answers. I cannot get answers.
When will they be processed? And when will these good folks get
some response to their application?
Ms. Carranza. Senator Hawley, I can extract all of the
applications that pertain to your particular state, and I can
review with you the status of them. At this current time, we
have about 2.5 million applications that have been processed.
There is a high number of declines. We are reinstating those
particular declines once they fix their information. The other
two and a half will be injected by next week, so all of the 5.4
million applications that we had in the queue since March will
now be in what we call the ``loan processing portal.''
I will have visibility when that loan is positioned there,
and I can share with you exactly where your loan portfolio
stands.
Senator Hawley. My time has expired. I will follow up with
you. I just want to emphasize again that it is absolutely vital
for people who have been waiting for 80 days plus that----
Ms. Carranza. I agree with you, Senator.
Senator Hawley [continuing]. Their application be
processed. And they do not care what you label the queue, you
are in this queue or that queue. They just want it processed.
They need an answer. They are waiting on a vital lifeline. So
we look forward to working with you on that.
Thank you, Mr. Chairman.
Ms. Carranza. Thank you, Senator.
Chairman Rubio. Thank you.
Senator Collins.
Senator Collins. Thank you, Mr. Chairman.
Mr. Chairman, let me start by thanking you for the
invitation to join your Committee today. I also want to say
what a rewarding experience it was to work with you, with
Senator Cardin, and Senator Shaheen in developing the PPP
program, which has been of tremendous benefit to more than 4
million small businesses and their employees.
I want to turn to our witnesses, and, first, I want to
emphasize a point that many other Senators have brought up
today, and that is that many small businesses are reaching the
end of their 8-week loan period. And yet they are still unable
to fully reopen because of state restrictions. For example, in
the State of Maine, there are three counties that still are
under tough restrictions where they cannot have in-restaurant
dining.
I want to read to you the words from a restaurant owner in
Portland which really summarizes it well. It is a woman-owned
restaurant, a great place to eat. She writes: ``The PPP is the
only thing that has kept us in business up to this point. Our
staff has been so grateful. It has not only allowed us to pay
them and open for business, but allowed us to pay our rent in
full. There is no question without the PPP we would not be
operating right now and would have furloughed all of our staff.
With that being said, we did just run out last week. We now
have curbside and only six outdoor tables, and we can only
serve a maximum of 28 people a night.''
She writes that she lives in fear of a rainy night, in
which case she cannot serve anybody in those outside tables.
And she says, ``Without the State easing the restrictions on
indoor seating, I just do not see how we can continue much
longer.''
This is an extremely viable business that was doing very
well until the state restrictions and the coronavirus hit. So
we now know that we have $130 billion of funding for this
program that remains available. So I want to press you a little
bit more. I know you have said that you do think that there
should be more support. But would you support allowing small
borrowers in heavily affected sectors, such as the tourism
industry, that cannot fully reopen because of state
restrictions, to seek additional PPP funds, apply again or
extend perhaps for another 4 weeks, so that they can just make
it through this period where they are forced to be closed?
Because they are viable businesses, and it is not their fault.
Mr. Secretary.
Secretary Mnuchin. Well, first of all, I want to personally
thank you for your involvement in this, and we have become
texting buddies, so all of your help along the way. I am
especially sympathetic to the restaurants. I would just say we
had a large number of restaurant owners and industry people
come in and meet with the President, and we heard the 24-week
issue. And I am very pleased that Congress responded to that.
As I said before, I think that restaurants, and hotels in
particular, do need more help. We have taken great pride in the
bipartisan work, so if there is support for you in the
Committee on a bipartisan basis, we are very seriously going to
look at that issue.
And let me just give a pitch on indoor seating. I am happy
that in D.C. they have now allowed restaurants open. I have
tried to support restaurants. I do not see why on an indoor
basis socially distanced that restaurants cannot be serving
indoors, particularly in parts of the country where COVID is
under control. So I agree with you this distinction between
indoor and outdoor seems a bit random, and I do not know what
people would do when it rains.
Senator Collins. Thank you.
I have one technical question, if the Chairman would
indulge me. It is a very quick question for the Secretary, and
that is, I am getting a lot of questions about the timing for
seeking forgiveness, and there are some businesses that have
gone through the 8 weeks. They are reopened, and they would
like to close it out now. But they are wondering, with the
extension to 24 weeks, if they have to wait until the 24 weeks.
Can they close out at any time?
Secretary Mnuchin. If you have used all your money, you can
apply for forgiveness. The 24 weeks is only meant to be an
option for you. If you have not used your money, specifically
if you are not open or otherwise, you can extend it. But, no,
we would encourage people that, as they have used all their
money properly, please seek forgiveness so we can process these
loans and get them off of the books.
Senator Collins. And that would be helpful for workload
purposes for both of you as well. Thank you very much, and
thank you both.
Thank you, Mr. Chairman. Thank you, Senator Cardin.
Chairman Rubio. Thank you. Since I reserved my time, I am
just going to touch on some quick points here. We will go to
the Ranking Member who has some additional thoughts, and we
have a vote that starts at 12:15 so we are almost done here,
and very nearly perfect attendance today, which is--we have not
had that before, so I appreciate you both coming in.
Just a quick question. After the changes that were made
last week with the additional flexibility, down to 60 percent
for payroll, 24 weeks to pay it back, have we seen businesses
that said the old PPP did not work for me, but the new one
does? Have we seen any sort of uptick or any indication that
there are more businesses lining up now to use the program as a
result of that change?
Secretary Mnuchin. My expectation is that we will
definitely see businesses that were on the sidelines and now
take it, especially restaurants that had issues. But, yes, I
would expect we will see that.
Chairman Rubio. So we just do not know on the nightly
numbers if that has been reflected yet?
Ms. Carranza. We do not have actual numbers at SBA, but
there has been expressions of relief that there is more time,
so it is worthwhile for----
Chairman Rubio. I guess the curiosity is whether--I am
confident that people have already gotten the loan or feel
better about being able to use what they already have. I am
curious whether there are people out there or businesses out
there now who think this works for us and may access this. We
will keep a close eye on that as we get down the stretch here
with about 2\1/2\ weeks left before the June 30th cut-off.
The observation, I am glad you talked about targeted relief
and what we do moving forward. One of the things that does
concern me is a disparity in the recovery. I will just give you
one example of what I just read awhile back, not long ago,
earlier today, on what was what a recent study estimated. It is
pretty shocking. It found that in majority African American
neighborhoods, 95 percent of small businesses in those
neighborhoods had a cash buffer of less than 2 weeks. In
majority white neighborhoods, non-white, non-Hispanic
neighborhoods, 30 percent had less than 2 weeks cash on hand.
Clearly, the 30 percent in those neighborhoods need help. There
is no disputing that. But 95 percent versus 30 percent is a big
disparity.
And so one of the things that I think we need to think
through as we structure this, is avoiding those--[audio system
cuts out]--is that what it is? They cut out the microphones?
So this is something we want to keep an eye on.
I think we are up to 5,400 total lenders, something around
that number, something over 5,000. And about 4,400 to 5,400
appear to be smaller community-based lenders, nonbank lenders.
And I would just say as we move toward future efforts, whether
it is a program like this or some things we do in the future,
this is, I think, a really important infrastructure that has
been created for delivering relief that I do not think we
should abandon the mechanism, that we should look for
opportunities to repurpose for just general operations but for
any additional relief. To this is an impressive stable of
participants that I think is going to matter a lot.
I have two questions for the Administrator. First, it was
the clear intent of us who sat around and wrote this up that
you use them both PPE and EIDL, that you use them both as long
as they were not for the same purpose. We specifically
discussed the case of someone who had already applied for EIDL
before PPP was created, and we wanted to make sure that once
PPP came online they had the opportunity to go back and either
get PPP or swap it out or what have you. We still do not have
any guidance, we are awaiting guidance on how these two
programs are supposed to intersect. When are we going to have
guidance, Administrator, on these two programs and how they
would work together and particularly businesses in that
predicament?
Ms. Carranza. Yes, our staff has been working all weekend
to process that. I believe that has been released. Yes, that
has been released.
Chairman Rubio. Do we have that guidance? Okay. We say we
have not seen that. You say we haveB
Ms. Carranza. No, Senator, I am corrected by my assistant
administrator. We have worked on it. It has not been released
but we are soon releasing it.
Chairman Rubio. All right. That is important.
Ms. Carranza. Yes.
Chairman Rubio. And my last question is GAO has reached out
to numerous congressional offices, including my own, as
recently as yesterday, and here is what they are saying. They
are telling us that the SBA is preventing the GAO from
accessing the information it needs to fulfill, something we
required in the statute, and that is that they report to
Congress. So the CARES Act requires the GAO to issue bimonthly
reports to Congress on agency implementation of the act with
the first report due on June 25th, which is coming up. This is
what they are telling us. They are saying that of all the
agencies, the SBA is the only one that has not cooperated and
that lack of cooperation has impacted their efforts to gather
information that they need to fulfill the mandated reporting
requirement that we put in place in the law.
I imagine you have heard the same thing from them. What is
happening there? Because we need to get that solved.
Ms. Carranza. Chairman, I spoke to Chairman Quigley
yesterday from Appropriations, and I expressed to him that by
next week we should be able to resolve some data that his staff
has been asking for. So I told him that we would be very
punctual with it and as thorough as we possibly can. So we had
a meeting of the minds yesterday and clarified what the delay--
the reasons for the delay. But that should not continue.
Chairman Rubio. So your expectation is that at some point
next week----
Ms. Carranza. Yes.
Chairman Rubio [continuing]. This should no longer be an
issue?
Ms. Carranza. We are preparing the data for the DATA Act,
and so that is in about a week or two, max, yes. Chairman, I
will keep you posted on when that is going----
Chairman Rubio. Yeah, we just need to get that fixed. That
is something that is in the law, and it reflects poorly on----
Ms. Carranza. Absolutely.
Chairman Rubio. Okay.
Ranking Member.
Senator Cardin. Well, let me thank both of our witnesses
again. This was very, very helpful. A couple observations.
First, on the EIDL program, you are hearing from all the
members of this Committee that it is not working at the level
that we anticipated it. I think we can understand that
initially there were certain administrative decisions that had
to be made because of the volume. But two things have happened
that are really not acceptable, and that is, people, business,
have been left in the dark as to the status of their EIDL loans
and have been delayed beyond it being useful for them to plan
their businesses during this period of time. That needs to be
corrected.
And, secondly, the cap that was put on, the $150,000,
really makes no sense today. I will be very surprised if the
final numbers of loans given out under EIDL come anywhere close
to the capacity that you have as authorized by Congress. So I
would just urge you to look at correcting the program as
quickly as possible from the timely status of applications and
the dollar volume.
The second thing, there seems to be a growing consensus of
a need for a second round for small business, and, Mr.
Secretary, in response to one of our members, I could not agree
with you more. We had to get money out quickly on the first
round. The second round we can be more discerning. So I hope
that we can start that conversation now about how we could
configure a second round for small business. I understand you
might have beyond small businesses, but it would be helpful, I
think, to try to get those discussions started now because, as
the Senate normally operates, as Congress normally operates, we
usually get panicked around a deadline. So it would be nice if
we could flesh this out a little bit earlier.
We took a little bit earlier lead on small business than
the other parts of the CARES Act, and it allowed us to have, I
think, a more thoughtful draft legislation than some of the
other sections.
The third point is that it seems to me, in regards to those
that have criminal records, there is a consensus, and I would
hope that this week we could get all of us together and try to
resolve that issue in a broader manner, as we have talked about
at this hearing.
The last point I want to mention is Senator Hawley's
comments in regards to the affiliate rules. I could not
disagree with him more as it relates to the conclusory
statements he made in regards to Planned Parenthood, and I
appreciate the Administrator not talking about a specific case,
which I think is appropriate. So I agree with you on that.
But let me just point one of the reasons we would like to
get more granular data so that we can understand the scope of
the issues. We wrestled with how to deal with affiliates for
the new categories of businesses that qualify for the PPP
program that did not qualify for the traditional 7(a) program,
including the nonprofit and veterans organizations. And we
specifically put the provision in the CARES Act that said the
provisions applicable to affiliations under Section 121.103 of
Title 13, Code of Federal Regulation, to a nonprofit
organization or veterans organization in the same manner as
with respect to a small business concern. So we expected you to
use the same affiliate rules that you use currently to quality
for 7(a) loans for the for-profit community for the new
eligible PPP 7(a) borrowers.
So it would be helpful for us--and then we were concerned
when publicity arose under the Planned Parenthood that we do
not start imposing an ideological test on affiliation, and the
Democratic members of the Senate wrote a letter in May to you
saying it is critical that the SBA implement the PPP as
Congress directed without ideological efforts to treat certain
nonprofit organizations from others.
So I just really want to put that in the record in regard
to Senator Hawley's comments, but it does underscore how
important it would be for us to get the granular information as
to the number of loans that are issued to affiliates and so
that we can get a feel for how many organizations would not
have qualified if we included all the affiliates in the numbers
for the 500.
But it is also true in the NIC code exception. It would be
nice for us to have that granular information. It might also be
helpful for us to have that information in regards to use that
use the alternative test for determining the number of
employees to qualify for a small business loan.
So the more of that type of information we can get, we can
then analyze what those exceptions mean. But we should not draw
a conclusion that one particular organization was treated
differently than any of the other organizations because of
their organizing mission, and that is one thing that I would
just urge us to be very careful that we do not start to
discriminatorily implement ways of implementing laws that are
passed by Congress.
Ms. Carranza. I understand that, Senator, and I look
forward to meeting with you to discuss the process that we have
found.
Senator Cardin. Thank you. Thank you, Mr. Chairman.
Chairman Rubio. Thank you. Look, we are very grateful that
you came in today. It is important. As you saw, the level of
interest is extraordinary in the Senate, across the country,
and obviously, we have got some follow-up to work through. But
we appreciate the answers you gave us here today. They are
important.
As a housekeeping item, the hearing record will remain
open, and any statements or questions for the record should be
submitted by Wednesday, July 1st, at 5:00 p.m. And, with that,
thank you both and this hearing is adjourned.
Ms. Carranza. Thank you.
Secretary Mnuchin. Thank you.
[Whereupon, at 12:19 p.m., the Committee was adjourned.]
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