[Senate Hearing 117-289]
[From the U.S. Government Publishing Office]
S. Hrg. 117-289
AN ECONOMY THAT WORKS FOR EVERYONE:
INVESTING IN RURAL COMMUNITIES
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HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING INVESTMENT IN RURAL COMMUNITIES
__________
APRIL 20, 2021
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
47-903 PDF WASHINGTON : 2022
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
Laura Swanson, Staff Director
Brad Grantz, Republican Staff Director
Elisha Tuku, Chief Counsel
Tanya Otsuka, Counsel
Beth Cooper, Professional Staff Member
Dan Sullivan, Republican Chief Counsel
Alexander LePore, Republican Detail
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Charles J. Moffat, Hearing Clerk
(ii)
C O N T E N T S
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TUESDAY, APRIL 20, 2021
Page
Opening statement of Chairman Brown.............................. 1
Prepared statement....................................... 38
Opening statements, comments, or prepared statements of:
Senator Toomey............................................... 4
Prepared statement....................................... 39
WITNESSES
William J. (Bill) Bynum, Chief Executive Officer, Hope Enterprise
Corporation, Hope Credit Union, Hope Policy Institute.......... 6
Prepared statement........................................... 41
Responses to written questions of:
Senator Warren........................................... 86
Senator Sinema........................................... 89
Senator Warnock.......................................... 90
Stacy Mitchell, Coexecutive Director, Institute for Local Self-
Reliance....................................................... 8
Prepared statement........................................... 59
Responses to written questions of:
Senator Warren........................................... 95
Senator Warnock.......................................... 97
Marcia Erickson, Chief Executive Officer, GROW South Dakota...... 10
Prepared statement........................................... 75
Responses to written questions of:
Senator Warnock.......................................... 98
Affie Ellis, Wyoming State Senator, District 8................... 11
Prepared statement........................................... 78
Kathleen Sgamma, President, Western Energy Alliance.............. 13
Prepared statement........................................... 82
Additional Material Supplied for the Record
Declaration of Mark N. Fox, Chairman of the Mandan, Hidatsa, and
Arikara Nation, also known as the Three Affiliated Tribes...... 105
Letter From State Education Leaders.............................. 111
(iii)
AN ECONOMY THAT WORKS FOR EVERYONE: INVESTING IN RURAL COMMUNITIES
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TUESDAY, APRIL 20, 2021
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., via Webex, Hon. Sherrod
Brown, Chairman of the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman Brown. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order. Thank you all for joining
us. The hearing is in the virtual format. A few reminders as we
begin.
Once you start speaking, there will be a slight delay
before you are displayed on the screen. To minimize background
noise, please click the mute button until it is your turn to
speak or ask questions.
You should all have one box on your screens labeled
``Clock'' that will show how much time is remaining. For
witnesses, you will have 5 minutes for your opening statements.
For all Senators, the 5-minute clock still applies to your
questions.
At 30 seconds remaining, you will hear a bell ring to
remind you your time has almost expired. It will ring again
when it has expired.
If there is a technology issue, we will move to the next
witness or Senator until it is resolved. To simplify the
speaking order process, Senator Toomey and I have agreed to go
by seniority for this hearing.
For years, the work of the Committee on Banking, Housing,
and Urban Affairs has been far too much about Wall Street, far
too little about housing, and almost nothing about people's
everyday lives in urban and rural communities.
``Urban Affairs'' may be in our Committee's title, but we
have jurisdiction over matters integral to the economic health
and vibrancy of all communities--including rural America.
Whether you live in Philadelphia or Cleveland or Atlanta, Perry
County, Pennsylvania, or Perry County, Ohio, the work of this
Committee is vital to the shared prosperity of all Americans,
urban and rural.
This is the first full Committee hearing dedicated to rural
America, believe it or not, in nearly a decade. Senator Toomey
to his credit held a Subcommittee hearing on rural banking in
2015, and I thank him for that. I am sure he will agree that it
has been too long since we focused on the issues facing rural
America.
The hopes and dreams of all Americans are pretty similar.
We want jobs with dignity. We want to be valued for the work we
do. We want a community where our families can grow and
flourish. And we want the opportunity to join with friends and
family and neighbors to leave the world better than we found
it.
The 46 million Americans who live in rural communities
share these dreams. They reflect the vibrant diversity of our
country. From the foothills of Appalachia in Pennsylvania and
Ohio, to Native American tribal lands on the Great Plains, from
Black communities in the Deep South, to Hispanic and Asian
communities in the West, we find resilient, hard-working men
and women trying to make a better life for themselves, their
families, and their communities.
I know the pride people have in their hometowns, like I
have in my hometown of Mansfield, Ohio. They want these places
to be successful. They do not want to be told to pick up and
leave to find better opportunity. Crumbling infrastructure,
high unemployment rates, low wages, and gaps in access to
banking and housing and transit make rural areas especially
vulnerable in an economic downturn. Workers and families and
community leaders pour their hearts and their resources into
these communities, trying to preserve the legacy and grow more
new businesses and attract new investment.
But these same communities have watched for decades as
investment dries up, plants are shuttered, storefronts are
boarded over. University economists, CEOs, and conservative
Washington politicians make public pronouncements about
capitalism's ``creative destruction''--dismissing workers'
anger, informing us that these actions are the inevitable
result of free and unfettered markets.
Corporations close down factories; they move good-paying
union jobs abroad where they can pay lower wages and exploit
workers. Ohio workers from Bucyrus to Lordstown know what this
feels like. Big corporate agriculture has made it harder for
small family farms to compete. Local, independent businesses
close shop because they cannot compete with Amazon. Big banks
buy up their smaller competition and close local branches,
leaving communities 30, 40, sometimes 50 miles from a place to
deposit a check or build crucial relationships at their bank.
The banks claim people can just use online banking, but that
does not help if your community does not even have reliable
broadband.
As the banking sector gets more concentrated, it is harder
for small businesses and farms and families to get loans to
hire more workers or expand their operation or to buy a home.
The biggest banks and the largest corporations look at
quarterly profits, oftentimes not considering the long-term
economic impact on these communities and small businesses.
And despite the simplistic picture we often see in the
national media, these communities are not only made up of
people who look like--they are no longer made up of people who
just look like me. Rural America is as diverse and culturally
vibrant as the rest of the country. Centuries of violence and
displacement and structural racism have pushed rural
communities of color even further behind.
Native communities have some of the highest levels of
poverty. Many families suffer from overcrowded housing without
plumbing, without heat. The same is true for Black families and
farmers that have faced decades of discrimination, including
lending discrimination.
Many rural families of all backgrounds do not have a safe,
affordable home. If there is not affordable housing,
communities cannot attract new business because there is
nowhere for workers to live.
Last month, I was talking to the CEO of a credit union in
southeast Ohio who knows the housing needs in his Appalachian
community. He wanted to do something about it. He meets lots of
well-qualified families who could pay a mortgage, but they
cannot afford a 20-percent downpayment. So his credit union
created a new mortgage program for members of his community to
have that pathway to home ownership. That is the kind of
ingenuity we see all over the country from lenders who actually
live in and understand these places. We learn from them.
Our witnesses today know what it means for the local
economy when the big banks abandon rural towns or when a big-
box chain store forces out small businesses. They know how
working low-wage jobs makes it impossible to make the rent, let
alone save for a downpayment. And they know that homegrown,
local businesses understand better than anyone what their
communities need.
Anyone who has raised a family or started a business in
Appalachia or Indian Country or the Carson Valley knows these
places cannot rely on Wall Street banks and corporations to
help them. People in rural towns and counties remember how the
biggest firms recovered after the last financial crisis, and
they were left behind. They saw history repeat itself over the
past year--when big franchises got help from big banks, small
businesses were shuttled to the back of the line, and Black and
Hispanic businesses were far less likely than White businesses
to get loans at all.
Over and over, I hear the same thing from communities large
and small, rural and urban: They need more resources. They have
tried to make it on their own because they have to--not because
they do not want investment or do not want their fair share of
our country's prosperity.
To recover from this crisis and rebuild a stronger economy,
rural communities need direct investment in infrastructure and
economic development. We have made a good start with the
American Rescue Plan. Now we look forward to the American Jobs
Plan to help us invest in our rural communities--in central
Pennsylvania, in southeast and northwest Ohio--for the long
term.
We will invest in broadband and rural buses and affordable
housing and the next generation of American manufacturing. We
will invest in new energy technology to address climate change
and create good-paying jobs in communities of all sizes. And if
we make these investments, these local communities will be
strong and resilient in the face of the extreme weather
events--wildfires, flooding, and hurricanes--that threaten our
rural communities, as they do all of this Earth, more and more
each day.
When we put communities, not corporations, at the center of
our policy, when we invest in local people and businesses who
make up our rural communities, we will get an economy that
works for everyone.
Senator Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator Toomey. Thank you, Mr. Chairman.
You know, I think what we are going to hear today are two
competing visions for how we help rural America. On the one
hand, we are going to hear that the Federal Government must
play the central role. Just expand the size of Government,
increase spending, put more people on welfare, have more
Government programs, and that will solve the problems.
But there is another vision, and that is one in which we
implement policies that allow rural areas to thrive. And we
know Americans can succeed if we just give them the chance.
One of the many spectacular examples of this was the U.S.
energy renaissance of recent years. It has been a game changer
for so many rural communities. My home State of Pennsylvania
has a lot of rural areas, and some are certainly struggling and
others are thriving. I do not know any of them that want to be
long-term dependents on the Government. The goal should be to
have thriving communities of self-reliant people.
As we consider the state of the rural economy, it is
important to remember where we were just a little over 1 year
ago, because before COVID came along, we were experiencing an
almost unprecedented economic boom, including in rural America.
We had the lowest unemployment rate in 50 years. In rural
America, unemployment had dropped to 3.5 percent in 2019--its
lowest level in a decade. Nationally, including in rural
America, Black and Hispanic unemployment rates hit all-time
lows in 2019. We had more jobs than people looking for jobs. We
had a record-low poverty rate. We had wage growth across the
board, and wages were growing fastest for workers of the lowest
income. So we were narrowing the income gap. These are all
objectives that my Democratic colleagues say they support. But
we were achieving them just over a year ago. My suggestion is
let us get back to the best economy of my lifetime.
And we know how we got there. It was a combination of
reform to our Tax Code that made America much more competitive,
rolling roll back excessive regulation. We ran an experiment in
economic freedom, and lo and behold, once again it worked,
especially for low-income workers.
An important part of that whole story was America's energy
renaissance. In 2019, the U.S. became a net energy exporter for
first time since 1952. We did it in large part by becoming the
third-largest exporter of liquefied natural gas. And as gas
replaced coal as the fuel for America's power plants, CO2
emissions actually declined--not relative to projections. They
actually declined in absolute terms. In fact, in 2019, the U.S.
led the world in reducing energy-related CO2 emissions. In
2019, we had the lowest CO2 emissions since 1992, the lowest
per capita CO2 emissions since 1950.
Across the country, the oil and gas industry was supporting
more than 10 million jobs, very often in rural communities. In
Pennsylvania--which is the second-largest producer of natural
gas--the oil and gas industry has supported 300,000 jobs up and
down the supply chain. A majority of gas production in
Pennsylvania occurs in rural areas, like Susquehanna County. It
is our largest natural gas-producing county; it is also one of
our least densely populated counties.
But as we know, last March, our powerful economy was roiled
by COVID-19, and we were facing the very real threat of a full-
blown depression. No question about it. In 2020, Congress in a
bipartisan fashion repeatedly stepped up to prevent a full-
blown depression, providing almost $4 trillion in relief. And,
fortunately, our economy is now in a very robust recovery mode,
as it has been for months. The unemployment rate has dropped
from almost 15 percent last April to 6 percent this March.
Twenty-three States have unemployment rates at or below 5
percent, and many of these are rural States. Real GDP growth is
expected to be extremely strong this year.
My point is we can and should continue this robust
recovery, and we can recapture the best economy of my lifetime,
which was only a year ago, as long as the Federal Government
policies do not undermine our ability to do it. Unfortunately,
that is exactly what some of our Democratic colleagues and this
Administration are threatening to do.
For example, the spending bill that our Democratic
colleagues passed on a party-line vote actually pays people
more not to work than they can make working, so it is not a big
surprise that in March the NFIB monthly survey found 42
percent--almost half--of small businesses had job openings they
could not fill. That is a record high.
The Biden administration has proposed massive tax increases
and regulatory burden increases that will undo the tremendous
success we had just achieved. Some of these are going to hit
rural America particularly hard. Some already have. Take, for
example, President Biden's termination of the construction of
the Keystone oil pipeline. He has indefinitely banned new oil
and gas leases on Federal lands. The Biden administration is
also seeking to coerce banks and investors to stop providing
capital to fossil fuel companies and stifling U.S. agricultural
exports by maintaining tariffs on Chinese goods and materials.
Today we are going to hear from two witnesses about the
harm that has been caused by the attack on the energy industry,
and particularly the harm to rural communities.
Kathleen Sgamma is the president of the Western Energy
Alliance. She will testify that these policies cause
significant job losses.
And Senator Affie Ellis is a member of the Wyoming Senate.
Her State ranks first in the Nation for natural gas production
on Federal lands and second in oil production on Federal lands.
She will describe how the leasing ban harms Wyoming's economy
and education budget, which receives substantial funding from
Federal energy royalties.
I wish we could all agree that it would be a worthy goal to
get back to the best economy my lifetime. We can do that
without wasting more taxpayer dollars, without imposing massive
tax hikes, and without increasing regulatory burdens on
businesses. We should be rolling back the harmful Biden
administration policies that are threatening the U.S. energy
renaissance, and if we did, we would be doing a lot of good for
the rural economy.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Toomey.
I will introduce today's witnesses, and they will begin
their testimony.
Mr. William Bynum is the CEO and founder of Hope Enterprise
Corporation, Hope Credit Union, and the Hope Policy Institute,
collectively known as HOPE, which serves communities in
Alabama, Arkansas, Louisiana, Mississippi, and Tennessee. He
has served in a number of nonprofit and Government leadership
roles, including the Treasury Department's Community
Development Advisory Board.
Ms. Stacy Mitchell is the codirector of the Institute--I am
sorry. I just lost that. I do not quite know what I did there.
She is the author of the books ``Big-Box Swindle'' and
``The Home Town Advantage''.
Ms. Marcia Erickson is Chief Executive Officer of GROW
South Dakota, which advances housing, education, and economic
opportunities throughout South Dakota. She serves on the Rural
Advisory Council for the Rural Local Initiative Support
Corporation as part of the New Markets Tax Credit Advisory
Board for the Midwest Minnesota Community Development
Corporation. She recently became president of the board of
directors for the National NeighborWorks Association.
The Honorable Affie Ellis is a State Senator in Wyoming
representing southwest Laramie County. Senator Ellis was first
elected in 2016. She is the first Navajo, the first Native
American woman to serve in the Wyoming Senate. She currently
serves as the chairwoman of the Wyoming Senate Travel,
Recreation, Wildlife, and Cultural Resources Committee and is
an attorney with the law firm Holland & Hart.
Ms. Kathleen Sgamma is the founder of Western Energy
Alliance, which engages in public lands, environmental and
regulatory issues on behalf of the Western oil and natural gas
industry. Prior to joining the alliance 15 years ago, she spent
11 years in the information technology sector and 3 years as a
military intelligence officer in the U.S. Army.
Welcome to all of you. Mr. Bynum, if you would begin.
STATEMENT OF WILLIAM J. (BILL) BYNUM, CHIEF EXECUTIVE OFFICER,
HOPE ENTERPRISE CORPORATION, HOPE CREDIT UNION, HOPE POLICY
INSTITUTE
Mr. Bynum. Thank you. Good morning, Chairman Brown, Ranking
Member Toomey, and Members of the Committee. Thank you for
holding this hearing and for inviting me to speak today.
My organization, HOPE, provides financial services and
engages in policy advocacy to help ensure that people,
regardless of where they live, their gender, race, or place of
birth, have the opportunity to support their families and
realize the American dream. The majority of HOPE's 36,000
owners are Black families and women. This is significant
because it speaks to whom we are accountable. But I also
represent thousands of White, Latino, and other families across
the Deep South who are too often on the wrong side of the
economy.
I would like to underscore a few points. One is that rural
regions of persistent poverty suffer from systemic
underinvestment, particularly those where a large share of the
population is people of color. Persistent poverty is a
predominantly rural phenomenon. Of the country's 395
persistent-poverty counties that have been over 20 percent for
three decades in a row, eight out of ten are nonmetro. A third
of these are in Alabama, Louisiana, and Mississippi. Housing
conditions, health conditions, education, and employment
outcomes are all worse in rural persistent-poverty counties,
and not coincidentally, some of the highest rates of unbanked
and underbanked households are also in these counties.
Mississippi, where my organization is headquartered, is
only one of four States where half the population lives in
rural areas. Mississippi also has the highest poverty rate in
the Nation, the highest percentage of Black residents; 60
percent of people who live in persistent-poverty counties in
Mississippi are people of color.
The Library of Congress has a map that illustrates the
concentration of slave holding on the eve of the Civil War in
the United States. If you fast-forward 400 years and overlay
that map with one of today where the poverty rate has exceeded
20 percent for more than half a century--not the Federal
definition, but for half a century--you will see that
Mississippi and the Louisiana Delta and the Alabama Black Belt
stand out on both maps.
It takes me to my second point. Creating rural communities
that work for all must include strategies for building wealth
through home ownership and small business ownership. The
primary source of wealth on America's balance sheet is the
home. Downpayment assistance for first-time homebuyers is one
of the most effective tools for increasing economic mobility in
rural communities and communities of color. We should replicate
and expand programs like NeighborWorks' LIFT program that
provides downpayment assistance for low-income homebuyers,
teachers, servicemembers, and first responders who get special
provisions.
Also small business ownership reduces the Black-White
wealth gap, which is 10:1, 100:1 for families with children, to
3:1--not equal ratio but from 3:1. Minority-owned businesses
are more likely to hire people of color, and increasing access
to this capital is critically important. This was made evident
during COVID-19 where so many small businesses and
entrepreneurs of color did not have access to PPP financing.
Third, to close these gaps, banks have to do more. As I
mentioned earlier, these persistent-poverty areas are products
of systemic underinvestment. Black families in Mississippi
making $150,000 are more likely to be denied a mortgage loan
than a White family that makes $50,000. Similar circumstances
for Black entrepreneurs. In Arkansas, where 16 percent of the
population is Black, only 1.5 percent of SBA 7(a) loans went to
Black businesses. CRA is one important way to address this.
My fourth point is that CDFIs, community development
financial institutions, are vital to closing these gaps. Over
the past year, we increased our business loan output from 40 in
a year to 4,000 PPP loans, most of them to small mom-and-pop
businesses in rural areas. Also, we were about to route funds
to poor rural municipalities that could not get CARES Act funds
from their local governments. We are thankful that Congress
realized the important role played by CDFIs and increased
funding to CDFIs.
That brings me to my last point. Future investments have to
go to those institutions that have a record of deploying these
funds where it makes the biggest difference. Just like any
business, CDFIs vary. In Mississippi, an analysis of HMDA data
show that CDFI banks in Mississippi actually had a lower rate
of mortgage lending to African-Americans than the overall
banking sector in the State. So we have to make sure that those
investments target those entities that have the greatest track
record of closing gaps, prioritize investments in CDFIs that
have a track record, and hold State governments accountable for
achieving the result intended by Congress. The outcomes are
very different in rural Deep South States than they are in Ohio
or California or Massachusetts. Accountability with the use of
Federal funds is absolutely vital.
Thank you, Mr. Chairman, Ranking Member Toomey.
Chairman Brown. Thank you, Mr. Bynum.
Ms. Mitchell, you are recognized for 5 minutes. I am sorry
to bungle your introduction there. Welcome.
STATEMENT OF STACY MITCHELL, COEXECUTIVE DIRECTOR, INSTITUTE
FOR LOCAL SELF-RELIANCE
Ms. Mitchell. Thank you so much, and good morning, Chairman
Brown, Ranking Member Toomey, and Members of the Committee.
Thank you for inviting me to participate today. My name is
Stacy Mitchell. I am the codirector of the Institute for Local
Self-Reliance, a research and advocacy organization focused on
strengthening local communities.
One of the most troubling trends we have seen in recent
years is widening regional inequality. We have a few
``superstar'' cities, mostly on the coasts, that are
prospering. Meanwhile, much of rural America, on the other
hand, is falling further and further behind. Good jobs are
rare. Poverty is high. Grocery stores and banks are closing.
Black and Native American communities have been especially hard
hit.
At the root of much of rural America's distress is the
concentration of economic and financial power. Corporate
concentration has harmed rural communities in multiple ways. It
has allowed a few dominant agribusiness giants to drive down
the prices that farmers, ranchers, and food production workers
are paid. It has led to plant closings and layoffs. The town of
Eden, North Carolina, for example, lost its two main employers,
Anheuser Busch and Ball Corp., after each acquired a rival and
then shuttered its local operations.
Concentration has also led to a sharp decline in small
businesses. These losses are happening everywhere, but they are
especially damaging in rural communities where small businesses
play an outsize role in the social fabric and in creating jobs.
We have long assumed that small businesses are closing because
they cannot compete. But, in fact, the real culprit is more
often the brute exercise of market power by dominant
corporations.
Take the case of independent pharmacies. Research shows
they provide lower prices and provide better service, yet many
are closing. Ohio alone has lost more than 400 pharmacies since
2013.
Why are local pharmacies disappearing? The problem is that
giant, vertically integrated health care corporations,
including CVS Health, not only compete with local pharmacies,
they also control how much they are reimbursed by insurers.
These companies have been slashing reimbursements to local
pharmacies and steering the business to themselves.
Similarly, local grocery stores are closing across rural
America. They are being driven out on the one hand by the
predatory tactics of Dollar Store chains in States like Georgia
and Kansas, and at the same time, as a recent study documented,
by the fact that big chains like Walmart are using their buyer
power--their dominant power as buyers to demand that suppliers
give them better prices and terms while charging higher prices
to independent grocers.
Amazon's stranglehold over the online market has been
another major blow to independent businesses. While
corporations are cutting off small businesses' access to
markets, our concentrated banking system is starving them of
capital. Since 2010, bank lending to small businesses has
fallen dramatically. Many businesses, especially Black-owned
businesses, are struggling to obtain capital. In rural
communities, small business lending peaked in 2004 and is now
half of what it was then.
This problem is structural. Big banks do very little small
business lending. Most small business loans come from community
banks, but community banks are fast disappearing. Between 2006
and 2018, we lost a staggering 41 percent of our community
banks. Today more than one-third of rural counties lack a
community bank. This is a national crisis.
People say that the problem of big banks is that they are
too big to fail. But the deeper issue is that these banks are
too big to succeed. They are too big to succeed at doing
exactly what we need banks to do, which is to provide
productive loans. Their scale is fundamentally mismatched to
the needs of local economies. This was dramatically illustrated
last year with the Paycheck Protection Program. In States like
North Dakota, where, owing to an unusual State policy,
community banks are numerous, more than twice as many small
businesses were able to get a PPP loan than in States like
Nevada, where community banks are rare and big businesses
dominate.
This matters all the time, of course. Research has found
that places that lack community banks have fewer startups,
fewer businesses, and fewer new jobs. Today's extreme levels of
market concentration are the result of deliberate policy
choices. This includes, most notably, the systematic weakening
of antitrust policies since the 1980s and the dismantling of
our banking institutions in the 1990s.
To bring life and hope back to rural communities, we must
restore the vigor of our antitrust policies and break up
concentrated power. Small businesses are not asking for
handouts. They are asking for a level playing field. My
organization has been deeply engaged in the crucial work to do
this. It is now happening in the House and Senate Judiciary
Committees, and we are also eager to engage with this Committee
in thinking about how to restructure the banking system and
rebuild financial institutions.
My written testimony offers several policy approaches for
doing this, including capping bank market shares, strengthening
bank merger reviews, creating more public banks and postal
banks, as well as other ideas.
Thank you so much.
Chairman Brown. Thank you, Ms. Mitchell.
Ms. Erickson is recognized for 5 minutes. Welcome.
STATEMENT OF MARCIA ERICKSON, CHIEF EXECUTIVE OFFICER, GROW
SOUTH DAKOTA
Ms. Erickson. Thank you Chairman Brown, Ranking Member
Toomey, Senator Rounds from my home State of South Dakota, and
Members of the Committee, for the opportunity to provide
testimony today.
As a lifetime of rural South Dakota, CEO of GROW South
Dakota, and the president of the board of the National
NeighborWorks Association, I am very passionate about
addressing the needs of rural communities. One of the needs
that I work to address is housing.
Housing is the foundation of success for our rural
communities across the country. During the pandemic, housing
became even more sacred than ever before. Rural communities
across our State and country continue to express a variety of
housing needs. However, rural and Native communities are both
challenged to secure flexible capital to meet those needs.
One source of flexible capital is NeighborWorks America,
but the need is much greater than what one organization can
address alone. Gap financing for home ownership is needed as
the cost to build is higher in rural areas. Along with that,
there is a difference between the appraised value and actual
costs. Lumber and material prices have also increased, further
impacting this challenge.
This complicates addressing the current housing shortages.
Homes that are available may be in the higher price range or
need substantial renovation, and then when it comes to selling
a home, the number of appraisers available are very limited.
Appraise and construction internships may be part of the
solution.
To further address home ownership rates on Native lands, a
loss mitigation pool should be considered. A capital pool that
sets aside funds to mitigate the risks that a lender may
encounter would be helpful.
Another solution to the housing challenges in rural America
would be to find accountable national entities in order to
provide capital to meet the unique needs of rural areas. This
funding could then be used to support mission-based lenders.
Mission-based play a critical role in reaching underserved
markets. These organizations are the frontline servicers that
already have established a presence in rural communities.
Mission lenders are not governed by banking regulations and can
provide financing where traditional lenders cannot. Along with
making capital accessible to underserved populations, these
organizations often pair loans with technical assistance to
coach businesses or provide housing counseling to prepare
homebuyers.
Homebuyers and rural businesses could both benefit from
changes in program regulations. For instance, the Community
Development Financial Institution Fund provides access to
lending capital for both housing and business loans. One
challenge of the CDFI funding is the requirement of nonFederal
match. Match is especially difficult to secure in rural markets
that lack access to private funding sources. We would recommend
the CDFI Fund lift the match requirement.
The USDA Rural Development Intermediary Relending Program
is also an excellent source of loan capital to relend to
businesses. This loan also has a non-Federal match requirement.
Match funds are currently restricted until the rural
development loan is paid in full. We recommend match funds are
released pro rata with the debt that is paid down to rural
development. IRP funds should also be considered for first
mortgage lending.
The Small Business Administration Microloan Program assists
businesses needing financing in the amount of $50,000 or less
and provides for technical assistance. Currently, SBA has
waived the requirement on the percentage of preloan technical
assistance versus postloan. This is the type of flexibility
that is needed to better assist businesses seeking to startup
or expand. This waiver should be implemented permanently.
Consideration should also be given to simplify HOME funding
and the Department of Energy Weatherization Assistance Program
through regulation reform. These are greatly needed sources of
capital for our housing needs, and with small regulation
changes, these funding sources could be much more efficient and
effective.
In closing, I strongly support needed funding sources into
housing and mission-based community lenders. Effective
organizations like those that are members of NeighborWorks
America, the CDFI Fund, and other accountable organizations
should be allocated increased funding. Let us build, rebuild,
and address the lack of quality housing and access to capital.
Investments like this are essential to revitalizing our rural
economy. I urge you to make large-scale investments to help our
rural communities and economy grow for decades to come.
Thank you for the opportunity to testify on the needs of
the rural communities.
Chairman Brown. Thank you, Ms. Erickson.
Senator Ellis is recognized for 5 minutes. Welcome.
STATEMENT OF AFFIE ELLIS, WYOMING STATE SENATOR, DISTRICT 8
Ms. Ellis. Good morning, Chairman Brown, Ranking Member
Toomey, and Members of the Committee. My name is Affie Ellis,
and I am State Senator from Wyoming. It is an honor to appear
before you today.
Wyoming is one of the largest land-based States, though we
are the least populated State in the country with fewer than
600,000 people. Though we are small, we are mighty in the sense
that we power America. Wyoming produces 14 times more energy
than it consumes, and it is the biggest net energy supplier
among the States. Wyoming has ranked first in the Nation for
natural gas production and second in oil production on Federal
lands. In 2019, the oil and gas industry delivered $1.67
billion to State and local governments in Wyoming, and it
employed nearly 20,000 people.
I grew up in Wyoming, and I am thankful for all the
opportunities it provided me. My parents are both Navajo, and
they grew up on the Navajo Reservation. They attended boarding
schools where my dad was taught to weld. When they graduated in
the mid-1950s, my dad found a job working as a welder in
Jackson Hole, and they started our family there. As the
youngest of four kids, I was the first in my family to attend
college and eventually earned my law degree.
I decided to run for the Wyoming Senate in 2016 to give
back to the State which has given me so much. At the time we
could see on our horizon a downturn in energy production, which
would impact almost all the services Wyoming provides to its
citizenry. Wyoming has among the most volatile year-over-year
revenue collection in the Nation, which has forced us to
recognize boom years for what they are and plan accordingly.
As a result, we have saved and we continue to save a
significant portion of the revenue derived from mineral
production to offset years when development is not as robust.
We have worked to support our other top industries, which are
tourism and agriculture, and to develop new industries,
particularly in the field of technology. Despite these efforts,
there is no other sector that produces the kind of revenue for
Wyoming that energy provides.
With declines in energy production, Wyoming has cut its
budget significantly in the last several years, which has
impacted things like health care services, support for our
seniors, and the developmentally disabled. With continued
assaults on domestic energy production, we are now working to
resolve a $300 million per year projected structural deficit in
K-12 education. Wyoming leaders recognize the precariousness of
revenues derived from energy production. We know we cannot
control global markets, and we know we cannot predict the price
of oil. However, we have significant concerns when leaders
within our own country attack and undermine our energy economy.
Nearly half of the surface lands in Wyoming are managed by the
Federal Government. The Bureau of Land Management, for example,
has lands that significantly support oil and gas leasing,
including BLM lands that are intermixed with private lands and
State lands in what we refer to as ``the checkerboard.''
Because Federal land management decisions impact the
livelihood of our citizens and the strength of our State so
heavily, we commissioned a study to understand the potential
impacts of an oil and gas lease moratorium and drilling ban on
Federal lands. A link to that study is included in my written
testimony.
For Wyoming, the study found that ``either a moratorium or
an outright drilling ban would constitute a significant shock
to the Wyoming economy, reducing tax revenues, income, and
employment.'' By the end of President Biden's first term, a
moratorium would cause Wyoming to lose an average of 15,269
jobs annually, lose cumulatively $8.3 billion in gross domestic
product, $3.8 billion in personal income, and $1.8 billion in
State tax revenues. An outright ban would be even more
devastating.
You can imagine how we felt on January 20, 2021, when the
U.S. Department of the Interior called for an immediate 60-day
suspension of new oil and gas leases and drilling permits on
Federal lands. I want you to think of your State's number one
priority. This order is akin to banning rubber and plastic
manufacturing in Ohio or banning gaming in Nevada. The
moratorium has been extended, and our State is gravely
concerned it will be extended indefinitely or that an outright
ban is soon to follow.
Accordingly, our Governor has filed a lawsuit which
explains how this halt on new oil and gas leases violates
several existing Federal laws, and it asks the court to require
the Bureau of Land Management to resume quarterly oil and gas
lease sales.
Additionally, one of Wyoming's two tribes expressed its
opposition to the leading moratorium because, although Indian
tribes themselves are exempt from the moratorium, the adverse
impact on Wyoming also adversely impacts tribal members, who
are also citizens of our State. I hope we can reverse course.
As Wyoming continues to navigate its way out of these
incredibly challenging economic times, we appreciate your
willingness to support policies that support economic recovery
in rural places like Wyoming. As the U.S. Senate considers not
only what the Federal Government should do, it should also
discuss what the Federal Government should not do. Wyoming
needs you to understand how Executive orders, signed with a
stroke of a pen without congressional approval, can literally
devastate our State's economy. We want the freedom, stability,
and support from our Federal leaders to be able to invest in
ourselves.
Thank you for this opportunity to provide written
testimony. I am happy to answer any questions.
Chairman Brown. Thank you, Senator Ellis.
Ms. Sgamma is recognized for 5 minutes. Welcome to the
Committee.
STATEMENT OF KATHLEEN SGAMMA, PRESIDENT, WESTERN ENERGY
ALLIANCE
Ms. Sgamma. Thank you, Mr. Chairman, and thank you, Ranking
Member Toomey and Members of the Committee. I really appreciate
the opportunity to talk today about how the oil and natural gas
industry is part of an economy that works for everyone and
invests in rural communities. I think Senator Toomey summed it
up well in that most of oil and natural gas development in this
country takes place in rural areas, so we are definitely a
solution in rural areas, and we invest billions of dollars in
rural areas.
Western Energy Alliance represents about 200 companies
engaged in all aspects of environmentally responsible oil and
natural gas development in the Western States. Because we are
in the West where it is predominated by public lands, our
members operate on public lands, and they are independents who
are those small businesses with an average of 14 employees. So
we are definitely those small businesses that some of the
panelists talked about earlier, investing in rural communities.
You know, our impact goes well beyond the States like
Wyoming and Pennsylvania where there is a lot of natural gas
and oil development. We provide $1.3 trillion in economic
impact across the entire country, and we employ 10.3 million
people, indirectly, directly, and induce jobs that are
supported by the wealth that we create here in the United
States.
We also invest in rural communities through our royalty
returns to individual royalty owners. I would like to highlight
that individual Native American royalty owners also receive
billions of dollars--are also part of those royalty owners that
receive billions of dollars every year. For example, Navajo
Indian allottees receive--about 21,000 Navajo allottees receive
about $96 million in royalties every year, and that is
investment and sustenance of families that otherwise are in a
rural area that definitely suffers from unemployment and
poverty. So we help sustain that community in the Four Corners
region of New Mexico, Colorado, Arizona, and Utah.
So we are proud of that investment, but as Senator Ellis
mentioned, you know, when you look at some of the policies
coming out of the Biden administration and their impacts in
rural communities, it is definitely at odds with the goals that
we have heard expressed from other panelists today. The
investment that would be lost from the leading ban that
President Biden announced within a week of taking office would
kill 32,000 jobs this year alone, and most of those are in--
well, all of those would be in eight States in the West that
provide 97 percent of Federal oil and natural gas production.
So that is very contrary to those goals of investing in rural
communities.
Likewise, the cancellation of the Keystone Pipeline
immediately killed 1,000 union jobs in Montana, Nebraska, and
South Dakota. And, you know, another 10,000 jobs will not be
created from contracts that the company would have moved
forward with if they were allowed to continue building the
Keystone Pipeline. So that is a total of 11,000 jobs that will
not be created this year or actually killed, those 1,000 union
jobs.
Likewise, the offshore ban, although I represent a
landlocked region, we are talking about rural communities all
across the country, and coastal communities on the Gulf of
Mexico will see about 102,000 jobs killed if that leasing ban
persists. So the job loss is just contrary to the goals of this
Committee.
I would also like to point out something that is often
forgotten, which is that oil and natural gas is about the sole
source of funding for conservation on public lands. The Land
and Water Conservation Fund is 100 percent sourced from
offshore oil and natural gas. The Great American Outdoors Act
enabled about $1.9 billion a year to go directly from oil and
natural gas royalty revenue into national parks conservation
and infrastructure. So President Biden's order banning leasing
on Federal lands puts at risk $2.8 billion every year in
conservation funding, with no other source of revenue to
support that.
So thank you very much for the opportunity to appear before
you today. I look forward to questions.
Chairman Brown. Thank you, Ms. Sgamma.
The questioning will begin with Senator Tester. He has an
Appropriations Subcommittee he needs to chair, and he played a
major role with Laura and Tonya and others on my staff in
putting together this hearing. So, Senator Tester, you are
recognized for 5 minutes.
Senator Tester. You are very kind, Mr. Chairman. I want to
thank you for that opportunity.
I have listened to most of the testimony, and I could tell
you that I am more than a little bit displeased at the
politicization of this hearing. I have been around since 1956.
I have watched through the 1960s, the 1970s, the 1980s, the
1990s, the 2000s, the teens as rural America has dried up and
continues to dry up. And the folks who were testifying, the
ones that I heard just lately, want to pin this on energy.
Let me tell you what the biggest industry in Montana is. It
is agriculture--grain, pulse crops, cattle. And I have watched
through the 1960s, the 1970s, the 1980s, the 1990s, the aughts,
and the teens. Our markets get consolidated and consolidated
and consolidated. And, quite frankly, in the private sector,
there is no capitalism when you go sell your grain or your
cattle or your pulses on the market, because you have four
companies that control 80 percent of the food supply--not in
the United States--in the world. And we have watched schools
like the one I graduated from go from 160 kids in the 1970s to
less than 50 kids today. And we are just going to focus on
energy.
I got news for you, folks. This is a hell of a lot bigger
issue than energy. This is about rural America that has been
drying up for decades, and there has been one person that I
have heard talk about what the real problem is, and it is
consolidation. And, by the way that consolidation occurs in
energy also.
And so my question is for Stacy Mitchell, and that is, as I
look at my small town of now 500 people when it used to be
1,100 people, where we used to have five grain elevators to buy
our grain and now we have none, can you tell me what the
Federal Government should be doing to encourage capitalism, to
encourage competition, to encourage the private sector to play
by the rules and not consolidate and beat the hell out of folks
that are in production agriculture.
Ms. Mitchell. Thank you, Senator Tester, for that question.
I really appreciate your comment and very much agree with it.
You know, we are just--we do not have a market anymore. We do
not have markets. We have allowed a few big corporations to
effectively regulate our markets. We are being governed by
private entities when we go out into the marketplace, these
giant corporation things that are harming farmers, that are
harming small businesses, pharmacies, grocers, and working
people across the country. And what we need to do about that is
resurrect our antitrust laws. You know, we became really
captivated by this idea beginning in the 1970s and 1980s that
bigger is better, and we turned our antitrust laws on their
head, and we effectively changed how we interpret them and,
thus, their enforcement. And the result is that we have allowed
a few companies to grow dominant across the economy.
You know, I am really encouraged that there is growing
attention to this problem and that we are in the process
hopefully of having legislation come through Congress to
restore the vitality of our antitrust laws and to break up some
of the biggest concentrations in the market, including Amazon.
I think this is really critical to restore what it means to
live in an equitable society, to restore liberty, to restore
democracy, and to really restore the power of communities to
direct their own future.
I think that is a lot of what is going on in rural America,
certainly in my State of Maine, is this incredible sense of
powerlessness that people have, because more and more we are
beholden to Wall Street banks, to giant corporations like
Walmart who run our lives and control our future.
Senator Tester. I want to thank you for that, Stacy, for
those comments.
Marcia, I would like to get your perspective on this also.
Ms. Erickson. Thank you, Senator. I am from a five-
generation farm, and my two sons will be taking over our
farming operation. Ag is our primary economic driver in South
Dakota. It really is. We continue to have the population losses
that you spoke to. I am from a community of 100, and I just say
please continue to invest in and support our farmers. They need
it. They are at the mercy of the markets, and I thank you for
bringing this to our attention.
Senator Tester. Well, I want to thank you both for that
comment. I will tell you that Senator Rounds, your great
Senator from South Dakota, is concerned about this issue, too,
and it is just about what we can do about it to really get our
arms around it because, quite frankly, if we do not have good
old-fashioned capitalism in our marketplaces, then we are in
trouble.
So I just want to thank the Chairman for allowing me to go
first. I appreciate it, because I do have conflicts. I owe you
one, Sherrod. Thank you.
Chairman Brown. Thank you, Senator Tester.
Senator Toomey is recognized for 5 minutes.
Senator Toomey. Thank you, Mr. Chairman. And let me just
follow up with an observation. The consolidation that we have
seen in agriculture, that has happened all across the country.
In my State of Pennsylvania, which has been dominated by small
family owned farms, it is much more difficult to make ends
meet. We have a lot of dairy farms. In most years they lose
money.
The truth of this whole situation that we have got to weigh
and think about is the reason this has happened is because more
efficient farming systems and approaches and companies deliver
lower-cost food for consumers. And that is going to mean that
the folks who have a hard time competing with that, those
communities are going to be hurt. But how much more do we want
to force low-income people to have to pay for their food so
that we can preserve a status quo that we remember from decades
ago? I think we have got to be honest about the whole picture
here.
Ms. Mitchell, you made, I thought, a very salient point
about the lack of community banks, the consolidation in
banking, and it is not just consolidation. It is an almost
complete absence of new community banks. Up through 2007, it
used to be very typical for the FDIC to approve over 100 new
charters for community banks, which exclusively serve their
community. They are aptly named. In 2007 itself, there were 190
applications that were approved. But from 2009 through 2019,
the average annual number of new community banks approved in
this country was 5\1/2\ single digits.
Why is that? I will tell you a big part of the reason is
because we have a Fed that has engineered zero interest rates,
and at the same time we have dramatically increased the
regulatory requirements. The zero interest rates makes it very
hard for a bank to have any net income margin, and the added
expense of compliance with regulation has simply meant nobody
can figure out how to launch a community bank that can survive.
Not nobody, but almost nobody. And I think that is a real
problem.
I want to get to a couple of--go back to energy because I
know that the Senator from Montana thinks this is a diversion,
I guess, but the fact is rural communities that are able to
evolve and find new industries, that is a part of the success
of those areas, and that has totally been the story in energy.
And I am wondering if Ms. Sgamma--you know, in Pennsylvania not
only has it been hundreds of thousands of jobs, but there has
also been tremendous savings for consumers. Gas prices in
Pennsylvania dropped 65 percent when our rural communities
started producing gas. And I guess my question for you is: If
the Biden administration continues this policy of banning new
leases and maybe goes even further, what is the impact going to
be on rural communities for the cost of the energy that they
need?
Ms. Sgamma. Well, that is absolutely correct. We have saved
consumers hundreds of billions of dollars over the last decade
in lower energy prices, both natural gas and oil. I do feel a
little bit attacked by Senator Tester. I mean, I am not here to
represent agriculture. I think if the Committee wanted more
agriculture representatives, they could have. But the point is:
Why kill other jobs just because this--you know, I am not here
representing agriculture, but certainly the Administration
should not be attacking energy jobs as a way to solve
agriculture jobs. They both can be mutually supportive.
Senator Toomey. Thank you.
Senator Ellis, one of the things I was wondering if you
could share with us is what will the impact be on Wyoming's
schools, and including rural schools? Most of Wyoming, as you
point out, is rural. These schools, my understanding is they
depend significantly on royalties from oil and gas, and if this
Administration's ban on new leases remains in effect, is that
going to have a significant adverse impact on the rural schools
of Wyoming?
Ms. Ellis. Thank you, Senator Toomey. The answer is yes.
You know, Wyoming is very blessed in that we have an abundance
of natural resources, including robust minerals. And we have
relied on that mineral industry to provide for significant
revenues in our State's budget. And so it is not just about
severance taxes and ad valorem. It really is a trickle-down of
other industries, you know, that supports local welders and
other related businesses.
So when we see a tax on our energy economy, it really does
hurt rural America, because as we see students move out, then,
you know, declining enrollment. But as we look at declines in
production and the cost of, you know, things like the price of
oil, we are looking at a $300 million annual structural deficit
out of a $1.5 billion statewide K-12 education budget.
We are working through those issues, and we are happy to do
that, knowing that our economy is very reliant on a volatile
industry that depends on commodity prices. However, when our
Government leaders start attacking our economy directly, that
is where we have significant concerns. And I would echo Ms.
Sgamma's sentiment that, you know, I am happy to talk about
some effects that we have in our agricultural industry in
Wyoming. It is important for us to support our ag producers. We
have large cattle ranching opportunities. Our State legislature
often has tried to take aggressive stands to provide more
opportunities for our ag producers in kind of breaking up some
of that consolidation that was mentioned. However, when we look
at our forecast for the future, it really depends on our energy
economy for how we are going to fund all of our essential
services.
Senator Toomey. Thanks very much.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Toomey.
Ms. Mitchell, let me start with you. I understand that you
have a degree in labor history. We have seen the links that
corporations like Amazon will go to stop its workers from
organizing a union and gaining power on the job over wages and
benefits and scheduling. We all witnessed how Amazon unleashed
all its power to fight its own Alabama workers, the people who
make its company successful.
How can supporting workers and strengthening unions improve
local rural economies and communities?
Ms. Mitchell. Thank you, Senator, for that question. You
know, I think it is important to note Amazon just incredibly
dominates just a core infrastructure of our economy. They
capture two-thirds of online shopping traffic. They are a major
provider of web services. They increasingly dominate the
logistics industry, and the list goes on and on and on.
Amazon attained this level of dominance in large part by
exploiting shifts in public policy. They exploited tax
advantages that were not available to their competitors. They
exploited lax labor laws. And they exploited the weakening of
our antitrust laws to engage in tactics like predatory pricing
to seize market power and to push other companies out of
business.
You know, I think we are fooling ourselves if we imagine
that people can organize against Amazon's incredible market
power and succeed if democratic Government is not doing its job
to attack that power directly. In the 1940s, 1950s, 1960s, when
we had the highest rates of unionization, when we had the
broadest prosperity and the gap between working people and the
wealthy was shrinking, in that period we not only had strong
labor laws, but the Federal Government was aggressive in its
antimonopoly policies. Companies like A&P, we broke them up. We
prevented them from engaging in abusive market practices, and
that is what opened the way for working people to actually be
able to unionize those companies.
And so I think it is really critical we think about how
these things work together, and it would be--you know, breaking
up Amazon's power, restoring the rights of unions and small
businesses to thrive in this country would be one of the best
things we can do for rural America.
Chairman Brown. Thank you, Ms. Mitchell.
Mr. Bynum, a couple years ago, Hope Credit Union reported
that almost all of its mortgage loans were to first-time
homebuyers and people of color in the Deep South. Two
questions. Why do you think so many families of color cannot
get a mortgage from other lenders? And what should Congress and
the Biden administration do to close the racial home ownership
gap and allow more families of all backgrounds to join the
middle class?
Mr. Bynum. Thank you, Mr. Chairman. We have seen that
barriers in our region include encountering banks that do not
have the products or service or interest to serve low-income
people and people of color. High levels of discrimination exist
at every stage. As I mentioned earlier, for example, in
Mississippi, a Black family making $150,000 a year is more
likely to be denied a mortgage than a White family making
$50,000 a year. These are data reported by the Mississippi
Housing Finance Authority to the Federal Government.
It is clear that systemic discrimination in our banking
system needs to be addressed. The Community Reinvestment Act is
one way to do that. I am encouraged by some of the movement
that the Federal Reserve Bank has taken to mitigate the
devastating rules put in place by the OCC, and hopefully that
will improve conditions. But as importantly is preserving home
ownership among families of color who already have it.
The Treasury Department's Homeownership Assistance Fund is
a critical way to reach those families that have been affected
by the pandemic. For example, we saw after Hurricane Katrina a
housing crisis, and we are seeing it again during COVID, those
families who are most vulnerable or at risk of losing their
primary asset. Fannie Mae and Freddie Mac also need to do more
to support home ownership, if not through the banks then for
CDFIs like HOPE and other credit unions that are closing the
gaps that traditional banks will not and have not served.
Chairman Brown. Thank you, Mr. Bynum.
Ms. Erickson, and be brief, if you can. As you said, rural
communities like other communities in this country have a lack
of safe, affordable housing options for both renters and
homeowners. What do we need to do to preserve the homes we have
to make sure that low-income families can afford them?
Ms. Erickson. Thank you, Senator. There are a number of
things that we need to do in the rural economy to preserve our
housing stock, and some of that starts with regulation reforms
in some of our programs that are currently out there working.
They are great programs; they just need some amendments. Thank
you.
Chairman Brown. Thank you very much. That really was brief.
Thank you.
Senator Rounds from South Dakota, Ms. Erickson's home
State, is recognized for 5 minutes.
Senator Rounds. Thank you, Mr. Chairman.
Let me just begin, and I want to in particular thank all
the witnesses for participating in today's hearing, and I want
to thank you in particular, Marcia, Marcia Erickson from GROW
South Dakota, for representing our State before the Committee
today.
Marcia, in your written testimony, you talk about the
number of challenges that you have seen in the housing sector.
Can you tell us to what extent these challenges have been
exacerbated by COVID-19?
Ms. Erickson. Thank you, Senator. Yes, COVID-19 has really
brought to light how important housing is for rural America.
There is overcrowding many times and substandard housing on
Native American lands, and they were having difficulty social
distancing during that time, because often they are living in
the same households. So we need additional housing for our
Native lands and for our rural communities because things like
COVID just make these problems more difficult to deal with.
Senator Rounds. Yes, that is kind of a good lead-in because
it is exactly the--I guess my next series of questions would
have to do with housing in particular, and there was recently
an article in the Wall Street Journal just this last week that
found that the U.S. housing market is nearly 4 million homes
short of the current buyer demand. This significant deficit is
making it especially challenging for first-time buyers to gain
access to home ownership. Among the reasons for the gap the
article cited, it cited shortages of labor, materials, and
suitable land.
Can you speak to some of the specific reasons for housing
shortages in South Dakota and rural America more broadly? And I
am thinking in particular, you know, when we talk about Native
American reservations and so forth, we see real shortages
there. And you talked about COVID-19 and about the impact and
what it really focused on. We have got lots of homes in rural
South Dakota on Native lands that basically will have two,
three, four different generations or members of different
families living together because of the shortages there. And
yet reservations not only because they are on trust land, which
makes it more difficult for many lenders to be able to get an
appropriate mortgage, because they are not used to dealing with
trust land issues, but also because so many of those areas are
poverty-stricken, but there are other issues as well in terms
of those rural and Native American locations.
Can you talk a little bit--because you are right in the
middle of it. Can you talk a little bit about the challenges
that are there?
Ms. Erickson. Yes, there are many barriers to creating
affordable housing in rural communities and Native lands. Lack
of contractors is one of them, the cost of development, and
many of the homes that are there need substantial renovations.
There is a general lack of lots to build. Those are just some
of the barriers.
Other barriers on Native lands are the HUD Section 184, for
example. I have not worked directly with that, but in order for
our Native members to get home ownership, this is a great tool.
However, I understand the guidelines from the program have been
lagging for years behind the rest of the industry, and I have
heard from experts in industry that say it is actually harder
for Native Americans to get a loan through that program than
other programs. So there are opportunities for those guidelines
to be revised or maybe removed.
One thing that was pointed out was the environmental review
process, and currently there are two environmental reviews done
for a tribal member to get a loan. First, the BIA does an
approval of the Environmental Assessment during the recording
of the lease, and then it is my understanding that HUD requires
another one after that.
One way to address some of the housing shortages and needs
is to invest in community development financial institutions,
community action programs, CDFIs, members of other entities
across the U.S. that work daily, day in and day out, to address
the dire needs. There are so many. Every community has needs.
It is just how do we address them best and to the greatest
extent. Thank you.
Senator Rounds. Thank you.
Mr. Chairman, I really appreciate Marcia participating, and
before I wrap up, I just have to take a moment to respond to
Ms. Mitchell's remarks about the large financial institutions.
Her comments about mega banks leaving rural America really
could not be further from the truth, at least with regard to
South Dakota. Two of the eight U.S. G-SIBs are chartered in my
State and are among South Dakota's largest private employers.
Another, JPMorgan, offers credit cards to one in eight South
Dakotans, and a fourth, BNY Mellon, provides treasury services
to our State government and helps local jurisdictions in South
Dakota access their bond markets.
A full and a quick rollout of the PPP would not have been
as successful in our State without the back-end work that these
same institutions undertook. So, look, I just want to say those
banks really have provided services, and for those of us in
South Dakota, we have appreciated what they have brought in.
All of those different tools cannot all be done by just the
smaller banks. Larger banks also have tools that are available
and that do help us in our rural communities as well.
Thanks, Mr. Chairman.
Chairman Brown. Thank you.
Senator Van Hollen is recognized for 5 minutes.
Senator Van Hollen. Thank you, Mr. Chairman, and thank you
to all the witnesses.
Mr. Chairman, thank you for mentioning in your opening
comments the importance of 100 percent broadband connectivity
in our country, and this, of course, is an important issue to
all parts of our States and country, but is very important in
rural areas. The pandemic has shone a harsh light on the
digital divide. I remember even before the pandemic I had
introduced a bill to close what we called the ``homework gap,''
kids who could not access the internet to do their homework.
That has become a full-blown learning gap, and I was very
pleased to see that the American Jobs Plan proposed by
President Biden allocates $100 billion to make sure we have 100
percent connectivity in our country, making small businesses in
rural areas better able to compete to connect our students and
to help connect more people with banking services. And I would
also point out that in rural areas we have twice the rate of
households being unbanked than in suburban areas.
Mr. Bynum, you have spoken about how many small businesses
without financing fall prey to predatory lending institutions
and payday lenders, and you have spoken about how CDFIs are so
important in these communities to help provide some access to
capital. As you know--and you mentioned this in your
testimony--the Treasury's $9 billion Emergency Capital
Investment Program flowing from the December legislation is
being set up. What are some of the things you think we should
keep an eye on and need to happen to make sure those funds get
to where they are most needed?
Mr. Bynum. Thank you, Senator. I appreciate your question.
The Congress has made historic levels of investment in CDFIs in
your recent actions, but it is critical that we do not repeat
some of the mistakes that have actually resulted in a widening
of opportunity gaps in areas. As I mentioned in my testimony
earlier, CDFIs play a critical role, but all CDFIs are not the
same, just as any organization types have differences.
CDFIs banks in Mississippi proliferated after TARP. Many
got resources that stabilized their balance sheets. Some of
them do great work. But the mortgage lending by CDFI banks in
Mississippi to Black homeowners is a lower rate than non-CDFI
banks in Mississippi, by all mortgage lenders in Mississippi,
so you cannot have Federal resources widening the gap, and that
is a terrible unintended consequence. So the $9 billion in the
Emergency Capital Improvement Program should prioritize
institutions that have a track record of lending to communities
and people who need it most. That is absolutely essential. We
should incentivize deep investments in places that have the
highest levels of need.
Senator Van Hollen. I appreciate your flagging those issues
as we work on the implementation of that program.
I also saw what I think is an important article that you
wrote back in November of last year called, ``The Wolf Is Back
at the Door'', you know, and it goes to the issue of predatory
lending. You pointed out that, ``In Arkansas, the wolf is back
at the door, this time wearing sheep's clothing.'' A Federal
regulatory rule finalized on October 27th of last year
``undermines our State's constitutional provisions against
usurious interest and once again makes thousands of our
neighbors vulnerable to predatory payday'' lending. This is a
rule that has a nice-sounding name, like a lot of these, the
true lender rule. But I agree with you, this just opens the
door for more predatory lending, and Congress is going to be
looking into this. I hope we will roll back the rule.
Can you speak to that and the dangers of that rule?
Mr. Bynum. Absolutely. OCC finalized the rule essentially
on rent-a-banks, and rent-a-banks--the OCC's rule must be
nullified. We have seen the devastation of how high-cost loans
cost people in our region and undermine some of the strongest
protections in the country. Arkansas' 17 percent rate cap
should eliminate this, but these rent-a-banks, these many
fintech lenders, find a loophole. We have seen members
experience how these loans are piling on top of existing credit
loans, and they are struggling to repay. So it is critical that
these rent-a-bank lenders and the rules be nullified. They do
not make a real assessment of a borrower's ability to pay.
Senator Van Hollen. Thank you.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Van Hollen. Next week,
as you know, we are doing a hearing on the rules that you
brought up, so thank you for that.
Senator Tillis from North Carolina is recognized for 5
minutes.
Senator Tillis. Thank you, Mr. Chairman, and thank you to
all of the witnesses for being here.
You know, we consistently hear energy-producing rural areas
need to diversify and find other industries to support their
economies, and I think a lot of policymakers use this to brush
off the criticism of the decisions that have gutted economic
opportunities for rural areas.
How can you, on the one hand, be expected to diversify in
the rural areas? It is largely agriculture and for many States
like Senator Toomey mentioned, Pennsylvania, where energy
opportunities there, natural gas, are great opportunities that
are being shut down. So, Senator Ellis, I was kind of curious
if you could speak to the challenges Wyoming has faced with
these policies that seem to be incongruent--on the one hand,
diversify; on the other hand, take out all the opportunities
that you may have to do just that.
Ms. Ellis. Thank you, Mr. Chairman and Senator Tillis. In
my testimony, I go to some great lengths to talk a little bit
about how Wyoming in recent years has worked to diversify its
tech economy. Certainly living in a rural area, we have had to
think outside the box in how we deliver some of our services,
and I think COVID-19 has really kind of amplified our ability
to look at how we deliver education remotely, utilizing
telehealth better and just kind of digging deeper in some of
those areas.
Over the last several years, we have invested significantly
in trying to expand the number of data centers that we have in
our State, making sure our kids are being exposed to computer
science at all grade levels. And so some of this does take
time. But at the end of the day, no matter what we do, you
know, I think we do need to realize that we play to our
strengths, and our greatest strength when it comes to revenue
production and job production is through energy.
In addition to the traditional forms of revenue generation
of severance tax, ad valorem tax, whenever we look at sales
tax, for example, the cost of energy companies when they buy
that kind of equipment in our State certainly is a contributor
to things like sales tax. Assaults on our domestic energy
production in Wyoming, it hits us in a lot of different levels,
and so, you know, we are happy to continue to diversify our
economy. You know, tourism is our second largest industry, and
we welcome people to come to Wyoming. But at the end of the
day, energy is our strongest strength, and we are proud to
power America. And, you know, how these things weave together,
I think it is also important to recognize that as our
technology needs grow, every picture you take, every video you
record that is sent up to a cloud requires that information and
data to be housed in a data center. And so we do need to kind
of have a better understanding of just our carbon footprint and
our energy demands as technology becomes more prevalent in our
society.
Senator Tillis. Thank you, Senator Ellis.
Ms. Sgamma, you have spoken about the lost economic
opportunity related to the pause, President Biden's pause on
the XL Pipeline and Federal leasing. We had something similar
occur in North Carolina. We are not extracting energy, but we
were going to be a host to the Atlantic Coast Pipeline that was
going to create 17,000 construction jobs and about 22,000
ongoing in operations.
This happens to be--it was mapped through some of our most
challenged areas, both in terms of just job growth, but also
for an agriculture community that could greatly reduce its
energy cost if they had access to natural gas.
So in your experience, you frequently see jobs like the
often-promised energy jobs, green energy jobs materialize when
projects like the Atlantic Coast Pipeline and the XL Pipeline
are canceled? Do you see them make up, that they net out?
Ms. Sgamma. Thank you, Senator. It points to the fact that
they are not mutually exclusive. The fact that there are wind
and solar jobs today does not mean that if we kill oil and
natural gas development we create more wind and solar jobs. In
fact, when we kill oil and natural gas production here in the
United States, we send it overseas. So we are sending those
jobs overseas, but we are not replacing that energy because
over 70 percent of our energy comes from oil and natural gas.
So until there is an alternative that does everything that
oil and natural gas do, all we do is ship those jobs overseas.
So it is much better to have those jobs, create those jobs in
rural areas. And I like the way you put that about the
arrogance of telling rural areas to diversify their economies.
It is like telling Northern Virginia and the D.C. area to
diversify its economy away from the Federal Government. If you
are in Rio Blanco, northwestern Colorado, an extremely rural
area, you have got 75 percent of Federal lands and 85 percent
of your revenue comes from oil and natural gas development. Do
not take away their economic base and make that rural community
disadvantaged.
So I appreciate your framing that question that way.
Senator Tillis. Well, thank you, and, you know, I for one
think that there is a place for solar and renewable. I
supported a renewable portfolio standard when I was Speaker of
the House. We benefited famously from that. But this all-or-
nothing approach I think is dangerous, and if we really are
having this hearing to focus on what we can do for rural
communities, we need to stop handcuffing them on the great
opportunities that they already have and that they were
benefiting from.
Thank you, Mr. Chair.
Chairman Brown. Thank you, Senator Tillis.
Senator Smith from Minnesota is recognized for 5 minutes.
Senator Smith. Thank you, Mr. Chair.
Mr. Chair, I would like to take a moment to acknowledge the
passing of Walter Mondale, a dear friend whom we lost
yesterday. Fritz Mondale exemplified decency and strength and
compassion in his six decades in public life. His memoir was
entitled, ``The Good Fight: A Life in Liberal Politics'', and
really that title captures who he was. And here in the Banking
Committee, I want to just take a moment to recognize his
leadership as a young Senator who helped to pass the Fair
Housing Act.
So the Fair Housing Act prohibits discrimination around the
sale or rental or financing of housing on the basis of race,
religion, national origin, or sex. And back in the 1960s, even
though the Supreme Court decisions had declared housing
discrimination unconstitutional, the historic impacts of
housing discrimination were rampant in segregated neighborhoods
and the lack of access to home ownership and financing for
Black families.
In fact, Black and Hispanic servicemembers were returning
from risking their lives in Vietnam in the 1960s and then
struggling to buy a home, and their return really laid bare
these deep and systems inequities.
So Mondale, who had only been in the Senate a few years and
was a member of the Banking, Housing Committee, went about the
work with other Senators of righting this wrong. And on April
4th, the day of the Senate vote, Dr. Martin Luther King was
shot and killed in Memphis, Tennessee. This tragedy galvanized
members of both parties to come together to pass this historic
legislation, which Lyndon Johnson signed into law.
Now, I know from my many conversations with Mr. Mondale
that this was one of his proudest accomplishments in the
Senate. And I also know that he reminded us that the tenets of
the Fair Housing Act have never been fully enforced, leaving us
all to keep up the fight and to fulfill the promise of his
landmark legislation. So thank you, Mr. Chair, for giving me a
moment to appreciate our friend, Vice President Walter Mondale.
I also really appreciate this hearing. This testimony is
showing us both the challenges as well as the assets that we
find in small towns and rural areas. This is certainly true in
Minnesota and all across this country. You know, I have seen in
small-town Minnesota the incredible innovation and community
spirit and collaboration and kind of ``let us just figure it
out'' mentality in so many communities, like Luverne and
Bemidji and New London and all the rural spaces in between
those communities. And I have also seen in these communities--
and I have seen families that have struggled with chronic
racism and disinvestments in housing and broadband and so many
other issues.
Ms. Mitchell, I really appreciate so much how you laid out
these challenges in rural communities. So I just have a minute,
a couple of minutes, but I want to focus in a little bit on
this question of access to financing and capital, focus the
value of community-based organizations, community banks, credit
unions, CDFIs.
You know, my grandmother was the president of a small
community bank in northern Indiana, so she was born in 1898,
and I saw through her eyes the power of having local
institutions who know their customers provide the services to
those customers because they know them and they trust them. And
I am sorry to say that that bank no longer exists. It has been
gobbled up by another big bank.
So, Ms. Mitchell, is this consolidation that we have been
talking about today, is this consolidation just sort of the
natural result of economies of scale? Or is there something
else going on here? And what is the impact of this
consolidation on access to capital and credit and financing in
small communities?
Ms. Mitchell. Thank you so much for that question, and my
organization has our headquarters in Minnesota, in Minneapolis,
and so I just wanted to acknowledge the connection. And I also
really appreciate the story about your grandmother and want to
learn more about that bank and her life.
You know, this consolidation is not a result of simply
market forces. You know, we know that community banks charge
lower fees than big banks, that they in many measures operate
more efficiently, and they also just do a better job of making
the kinds of productive loans that we need.
Community banks are able to access--and by ``community
banks,'' I also mean credit unions and CDFIs. They are able to
access this rich trove of soft information. They get to know
their borrowers. They get to know their communities. And what
that enables them to do is to make a much broader range of
loans to small businesses and do so successfully.
The structural problem with those banks is that they just
do not have eyes on the ground, and they are not able really to
take advantage of that kind of soft information at their scale,
and so they are just not as successful at making small business
loans, and they shy away from it. So we really need to tackle
that directly.
I know that we are coming to the end of the time, but just
to say that consolidation of banking is, a lot of research
shows, the direct result of changes that we made to our banking
policies in the 1990s. We really tipped the scales in favor of
the big banks, and we undermined the local institutions.
Senator Smith. Thank you so much.
Senator Toomey [presiding]. So my understanding is the
Chairman had to step out, and he has asked me to moderate this.
So next I think we have Senator Hagerty.
Senator Hagerty. Thank you, Ranking Member Toomey. I
appreciate your holding this important meeting today, and I am
sorry the Chairman is not here, but I wanted to thank him for
mentioning his own Perry County, because we have a Perry County
in Tennessee, and Perry County is exemplary of rural life in
Tennessee, the finest that Tennessee has to offer. And it is
our rural counties that have suffered tremendously through this
pandemic.
You know, rural communities like Lobelville, which is the
county seat of Perry County, are really, again, the lifeblood
of America and the essence of Tennessee. And as they have
suffered through this pandemic, I am very pleased that we are
looking at ways to help our rural communities navigate this.
That means supporting important efforts like rural broadband,
like rural workforce development, supporting our community
banks, our farm credit institutions, and other rural lenders
who, in fact, did a tremendous job in Tennessee administering
the PPP program to help our rural communities and our rural
small businesses navigate their way through the economic
shutdown that was associated with the pandemic. It also means
avoiding one-size-fits-all policies that have harmed our [audio
disruption] burdened job creators at a time when we can least
afford to do it.
This hearing is also a great opportunity to encourage our
bank regulators to continue to work together to expeditiously
modernize and improve outdated Community Reinvestment Act
provisions. They have also got to promote market stability,
increase transparency, and ultimately enhance our banks'
ability to help underserved areas in a safe and sound manner.
And this Congress and the Administration should continue the
great work of the last Congress and Administration to focus on
underserved communities, from designating opportunity zones,
that has spurred private sector investment, that has spurred
job creation, that have really created self-sufficiency in
economically distressed communities, to maximizing access to
the Payroll Protection Program, to help our small businesses
and rural communities navigate the economic shutdown, again,
that accompanied this pandemic.
I would like to ask my first question of Mr. Bynum, please.
Mr. Bynum, thank you for your testimony, and thank you for your
work to advance economic opportunity in rural areas. I know
that since 1994 HOPE has generated more than $2 billion of
financing that has benefited some 1.7 million people in States
like Alabama, Arkansas, Louisiana, Mississippi, and, of course,
my home State of Tennessee. I want to thank you, and I look
forward to continuing to working together with you in your
efforts.
I want to thank you for your unprecedented effort in this
public-private partnership.
What I would like to do is ask you, in addition to quickly
deploying the Emergency Capital Investment Program's funding
into CDFIs, what more can the Treasury Department and its CDIF
Program do to support rural areas?
Mr. Bynum. Thank you, Senator, and I appreciate the
question. CDFIs are uniquely effective because they are closest
to the ground. They are financial first responders in so many
communities that are disproportionately on the outside of the
economy. Even with community banks that do a good job, CDFIs
are uber-focused on closing gaps in historically underserved
communities, such as rural small towns like the one you
reference.
Through the PPP program, we saw that CDFIs in Louisiana
made seven times more loans to businesses below $150,000 than
the largest banks, five largest banks in the country combined.
So that illustrates the unique power and focus of CDFIs.
So, again, targeting the precious and rare resources that
Congress has allocated CDFIs to institutions that have a track
record of serving those underserved rural communities, Native
communities, communities of color, low-income mom-and-pop
businesses is vital. It is also critical that CDFIs be equipped
to access home ownership assistance programs. One of the
speakers mentioned NeighborWorks America. They provide critical
downpayment assistance that helps close the gaps.
We bring in resources from the Wall Street banks and target
them to the communities that do not have access to those banks,
where banks closed in record numbers after the financial
crisis. Without CDFIs, rural communities will continue to be on
the outside looking in.
Senator Hagerty. Thank you for your great work, Mr. Bynum,
and thank you, Ranking Member Toomey.
Senator Toomey. Thank you, Senator Hagerty.
Senator Ossoff.
[No response.]
Senator Toomey. Is Senator Ossoff with us?
[No response.]
Senator Toomey. If not, Senator Lummis.
[No response.]
Senator Toomey. OK. Senator Cramer.
[No response.]
Senator Toomey. Senator Daines?
[No response.]
Senator Toomey. Is there any Senator who is present and has
not yet had a chance to ask questions?
[No response.]
Senator Toomey. OK. In that case, Cameron, do you happen to
know whether the Chairman is expected to be back momentarily,
or are we basically finished here?
Mr. Ricker. It sounds like he is finishing up, but Senator
Lummis just signed on.
Senator Toomey. OK, terrific. Senator Lummis, if you can
hear me, you are recognized.
We can see you, Senator Lummis. You are recognized.
Senator Lummis. Thank you, Senator Toomey. Can you hear me?
We are having some difficulties here.
Senator Toomey. We can see and hear you.
Senator Lummis. Thank you so much. I appreciate this
opportunity, and I particularly want to thank State Senator
Affie Ellis for joining us today from Wyoming. She is deeply
involved in these issues, and the fact that she is willing to
provide testimony today is deeply appreciated, as are our other
Western witnesses, because the West experiences so many of the
issues that are the subject of this hearing today.
So my first question is for Senator Ellis. What percentage
of natural gas and oil development comes from Federal lands in
Wyoming?
Ms. Ellis. Mr. Chairman, Senator Lummis, I believe that
about 90-plus percent from Federal lands' natural gas, that is
the origin, and then more than half, 50 percent of oil.
Senator Lummis. And I am so glad that you had those numbers
at the ready because I do not think people understand how
significant mineral production is on Federal lands in Wyoming.
So when there is a moratorium or a prohibition on producing
minerals on Federal land in Wyoming, that essentially removes
90 percent of our production. And since we are the largest
exporter, net exporter of energy in the Nation, it puts a
tremendous burden on our education system, because such an
important component of education funding in Wyoming comes from
oil, gas, and coal development on Federal lands.
So, again, Senator Ellis, according to the Wyoming
Department of Education, how much did the oil and gas industry
contribute to Wyoming K-12 education in 2019?
Ms. Ellis. Mr. Chairman, Mr. Ranking Member, and Senator
Lummis, thank you. In 2019, the oil and gas industry delivered
$1.67 billion to State and local governments. Of that,
approximately $740 million went to our K-12 budget. As I
mentioned in my written testimony, that is about half of our
entire expenditure for K-12 education alone. We have about
90,000 students in Wyoming, and we finance our education system
well. But it is more expensive to educate kids in rural areas.
You know, if you look at our larger cities, places like
Cheyenne, we do see some efficiencies of economy. But when it
comes to rural areas, there is no other substitute, so those
dollars are critical for supporting rural America through our
rural schools.
Senator Lummis. Well, thank you. And as you know, the oil
and gas industries can move. They can go to the Permian Basin
where it is private land, and the only one that gets hurt is
the State of Wyoming and our school kids. It does not hurt the
oil and gas companies. It does not stop them from producing oil
and gas. It only hurts Wyoming and the people who live there.
Mr. Chairman, I ask unanimous consent that a letter to
President Biden from Wyoming Superintendent of Public
Instruction Jillian Balow regarding the fiscal impact on
Wyoming students and schools be entered into the hearing
record.
Chairman Brown [presiding]. Without objection, so ordered.
Senator Lummis. Thank you, Mr. Chairman.
Senator Ellis, how difficult has it been for the Wyoming
Legislature to adequately fund education over the last decade?
Ms. Ellis. Funding education remains probably the biggest
challenge that I am working on our horizon. As I mentioned, we
have a $1.5 billion annual budget for K-12 operations, and we
are looking at a $300 million structural deficit. You know,
certainly the Federal Government has passed things like the
American Recovery Plan Act. We have received that funding, but
a lot of that comes with some strings. So, unfortunately, as we
have been studying that issue and how to allocate that to our
school districts to maintain equity and maintain our effort,
you know, I think at the end of the day my biggest concern is
that we are going to see our cliff actually grow because we are
really limited in our ability to rein in some of the spending
on K-12 education.
So we are looking at that act and trying to understand some
of those challenges that are there, but that is the number one
issue that I have been working on and that many of my
colleagues are focused on going forward.
Senator Lummis. And how much of the State's tax revenue,
including education funding, is projected to be lost from
President Biden's moratorium?
Ms. Ellis. So the Wyoming Legislature is very concerned
about any moratoriums or drilling bans that affect our Federal
lands. Several years ago, we appropriated some dollars to
commission a study. The University of Wyoming was selected, and
a UW economist produced a report in December of 2020. The
report statistics were sobering. Over the next 4 years, it
looks like Wyoming will lose about $1.8 billion with the
moratorium on new drilling leases, lease activity. A full ban
would be even more devastating. And to put that, again, in
perspective, our annual operations for just the general fund of
our government is $1.3 billion. This removal would really take
out an entire year of us being able to fund our State
government operations and more if the moratorium were to
continue indefinitely or if more dramatic steps occur in the
future which would ban drilling on Federal lands outright.
Senator Lummis. I have so many more questions, Senator
Ellis, but, unfortunately, my time is up. Thank you so much for
your testimony.
Mr. Chairman, I yield back.
Chairman Brown. Thank you, Senator Lummis.
Senator Ossoff from Georgia is recognized for 5 minutes.
Senator Ossoff. Thank you, Mr. Chairman. And thank you to
our diagnosis panelists for this opportunity to discuss issues
of particular concern to rural Georgians, particularly as we
debate this upcoming infrastructure initiative.
Mr. Bynum, thank you for your work at HOPE. You note in
your testimony that in the Deep South ``this longstanding trend
of disinvestment, racial and economic inequality, and then a
pandemic and economic downturn mean that rural communities
continue to lose funding, resources, population, and
hospitals.'' And I want to highlight in particular the closure
of rural hospitals. We have lost nine rural hospitals in the
last 10 years in the State of Georgia.
For example, Southwest Georgia Regional Hospital in
Cuthbert, Georgia, closed last October in the middle of a
pandemic, and it served a patient population that was largely
uninsured or underinsured, and the people of Cuthbert and the
surrounding areas now have to drive an hour and a half or 2
hours just to get to an emergency room.
The State of Georgia has also refused to expand Medicaid,
although I and many hope that State leaders will now move to
expand Medicaid since Senator Reverend Warnock and I secured $2
billion in incentives in the recent American Rescue Plan.
Mr. Bynum, can you please discuss the importance of
hospitals like Southwest Georgia Regional Hospital in Cuthbert
to rural communities and Medicaid expansion?
Mr. Bynum. Thank you, Senator Ossoff. Absolutely. Rural
Georgia has a great deal in common with rural Alabama,
Louisiana, and Mississippi. HOPE has financed rural health
centers and hospitals in persistent-poverty counties such as
the county where Cuthbert is located, and so we are familiar
with the importance and challenges.
These hospitals are critical sources of jobs and health, as
we have seen during the pandemic, and you do not find
traditional banks running to these projects, largely in part
due to their dependence on Federal support, because so many
low-income patients who are underinsured, again, in the absence
of Medicaid expansion. So the only way we would have been able
to finance these hospitals is because of access to CDFI
resources like the New Market Tax Credit Program, which is hard
to come by, particularly in persistent-poverty areas. Our
analysis shows that only 5 percent of new market tax credit
allocations have gone to rural persistent-poverty counties from
2003 to 2017. So there is significant access to resource gaps
that limit opportunity and limit these rural communities from
getting access to these critical lifesaving resources.
Senator Ossoff. Thank you, Mr. Bynum, and I would like to
discuss as well the importance of rural broadband internet
access as we build this interference bill. Georgia's Department
of Community Affairs has reported that approximately 70 percent
of the locations lacking high-speed internet access are in
rural Georgia. There is particular need in the rural areas
around Augusta and in rural areas of south Georgia south of
Savannah and around Valdosta, for example. Can you please
discuss the economic impact and the importance of expanding
rural broadband internet access particularly in south Georgia
and rural Georgia?
Mr. Bynum. Certainly, and, again, it is very similar
conditions as we find across the rest of the Deep South. It
will be critical for the Administration to connect
infrastructure resources with CDFIs who make sure that those
funds reach the most vulnerable areas. As we have seen during
the pandemic, the lack of broadband has limited access to
educational opportunities for low-income and rural communities.
Telehealth is limited because of the lack of access to rural
broadband. We cannot provide adequate mobile banking services
in the absence of adequate broadband infrastructure.
So to get these needs to the communities that are so
vitally underserved without being subject to the whims of
Southern State policymakers that have unfortunately a
deplorable track record of directing resources to the most
vulnerable communities, particularly communities of color, it
is critical that resources be directed--be refunneled directly
to grass-roots, on-the-ground organizations such as community
development financial institutions.
Senator Ossoff. Thank you, Mr. Bynum.
With my brief remaining time, rural transit, the Chairman
has admirably focused us on the importance of rural transit in
the upcoming infrastructure bill. Could you just comment on the
importance of rural transit to expand economic opportunity and
access to basic services, particularly in communities like the
Chattahoochie River Valley of west Georgia, which you know
well, in and around surrounding Muscogee County along the
Alabama line. How can investment in rural transit improve
quality of life in the Chattahoochie River Valley?
Mr. Bynum. If you do not have access to adequate transit,
then you may as well be unemployed in rural areas because you
just have so much territory to cover. If you do not have a car
or truck in rural areas, you may as well be unemployed. Low-
income people and people of color in rural communities are more
likely to be preyed upon and receive access to high-cost
predatory financing to get access to mobile car loans and truck
loans. And so transit solutions are vitally important.
Again, CDFIs have a history track record of addressing
transit-related needs and financing to help close
infrastructure gaps such as transit and health care and
education.
Senator Ossoff. Thank you, Mr. Bynum.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Ossoff.
Senator Cramer from North Dakota is recognized for 5
minutes.
Senator Cramer. Thank you, Mr. Chairman. Thank you. And
thanks to all of our witnesses. I have followed this as closely
as I can from two committees. They are both really important,
and I thank you. It is good stuff.
I think, Mr. Chairman, just as a note of some encouragement
up front, I wanted to talk about a bill that Senator Luj n and
I just introduced. It is called the ``Revive Economic Growth
and Reclaim Orphaned Wells Act of 2021'', and the reason this
is good for rural economies and why it has got both a
Republican and a Democrat introducing it is because it helps
clean up--provide jobs cleaning up old orphaned oil and gas
wells that were, you know, drilled and made long before there
were reclamation laws and regulations. And there are about
56,000 of them around the country, and, you know, Ben Ray and I
just feel like this is a good opportunity for the two parties
to come together and do something constructive that enhances
the economies of local communities and States where there has
been obviously some dropoff in workers in the oil patch because
of demand. I am not even talking about the current
Administration's policy, but because of a drop in demand. It is
a good opportunity to put people to work in a field that
obviously they know something about, good-paying jobs as well
as cleaning up the environment.
With that, I want to stay on the topic of energy policy in
rural America because, of course, we know a thing or two about
that in North Dakota, and get real specific here and real
current. Yesterday--and I will not go through all the history,
but yesterday was an important day in Washington, DC, in the
district court because Judge Boasberg had set yesterday as the
deadline for supplementing the record as it relates to the
decision ultimately whether or not to shut down the Dakota
Access Pipeline, which moves about 570,000 barrels of North
Dakota per day to market and has been doing that now safely for
about 4 years. And it is being litigated, and I will not go
through all those details.
But yesterday was an important day, and I wanted to offer
just a couple of words from a filing yesterday in the district
court here in D.C. by Mark Fox, the chairman of the Mandan,
Hidatsa, and Arikara Nation, also known as ``Three Affiliated
Tribes.'' The Fort Berthold Reservation is sort of in the heart
of the Bakken, and I will just give you a couple of things from
his statement. Then I am going to ask unanimous consent to
insert it into the record, Mr. Chairman. But he says that the
MHA Nation's cost of health insurance alone exceeds $40 million
per year. Just think about that. They spend $40 million a year
for health care for the members of the Mandan, Hidatsa, and
Arikara Nation.
Now, what about the shutting down of the Dakota Access
Pipeline, which is being litigated? And it has become important
because, of course, we are talking about Federal lands; we are
talking about rural economies. But he says here--there is this
short paragraph. He said, ``I directed MHA Nation staff and
consultant experts to provide a study of the financial harm
that could be done to the MHA Nation in the event DAPL was shut
down. They have estimated that the losses will exceed $160
million over the first year, exceed $250 million over 2
years,'' and, of course, that goes on forever if that pipeline
gets shut down, and I will not go through all the other issues,
but I would just ask unanimous consent to put this into the
record.
Chairman Brown. Sorry. My mic was off. Without objection,
so ordered. Sorry, Senator Cramer.
Senator Cramer. No problem. Thank you, Mr. Chairman.
What has this all got to do with Banking? Well, obviously,
we are also facing serious discrimination in certain aspects of
our economy, certain industries within our economy, by
particularly large banks. Obviously, the oil and gas industry
as well as the coal industry and the utilities that generate
the electricity, that generates more electricity, and that
captures the carbon and pipes it to locations, all of the
opportunity for not only job creation, wealth creation, but--
and I might ask Ms. Sgamma about this. I do not really see
global demand shrinking a great deal real fast. Perhaps over
time that will happen. Somebody is going to meet that demand. I
do believe that climate change is global. We hear that a lot,
that it is global. What I worry about is, first of all, Mandan,
Hidatsa, and Arikara Nation, they are going to produce that
oil. And if it does not move by a pipeline and if there are
banks--if the banks and financial institutions stop financing
things like pipelines because of pressure from advocates, it is
going to be trucked; it is going to be railed. It is going to
go to the coasts and get on barges, all of which is many, many
more greenhouse gases than does a pipeline. Or worse than that,
it is going to be produced in Russia or Venezuela or Nigeria.
And I might just ask, Ms. Sgamma, do any of these other
countries or, for that matter, any major oil-producing country,
do they have cleaner environmental protections or better
environmental protections than the United States?
Ms. Sgamma. Not those countries you mentioned, Senator, but
certainly Canada and Norway I would say are the only ones who
are comparable to the United States.
Senator Cramer. So that brings us to the Keystone XL
Pipeline. Isn't that ironic? You know, I sited the first
Keystone Pipeline through North Dakota, 600 landowners' land.
Not one inch of it had to be condemned. It is ironic, isn't it,
that oil from Canada displaces oil from Venezuela. We have not
even talked about the national security implications. My point
is if we are going to have a serious discussion about rural
economies, we have to talk about certainly agriculture and we
have to talk about energy production. And I would just plead
with my friends--and this is why I started by talking about the
bill that Senator Luj n and I have introduced together. Let us
look for real solutions to the climate crisis, regardless of
what people might believe about it, whose fault it is, how fast
it is coming, all of those things. If the goal is to reduce
emissions, let us work with our banking friends or financial
friends. Somebody is going to invest in these things, and most
likely the investment will be more expensive and less insured
than our banking communities.
Could I just ask you, Ms. Sgamma, are you familiar with any
of the challenges and have you seen any specific examples of
the financial industry, you know, discriminating against----
Chairman Brown. Ms. Sgamma, we are way over time, so be
brief, if you can, on that answer. Thank you.
Ms. Sgamma. Certainly we have seen activists try to deny
the industry of banking and financial resources, and that would
definitely mean less investment in rural areas.
Senator Cramer. Thank you.
Thank you, Mr. Chairman.
Chairman Brown. Thanks, Senator Cramer. I appreciate it.
Senator Daines just popped up, so the Senator from Montana,
Senator Daines, is recognized for 5 minutes.
Senator Daines. Just in time, Mr. Chairman. Thank you. We
are all doing the quick Zoom shuffle here. Thanks.
So I just spent some time in eastern Montana. I was hearing
from our community leaders, businesses, Montanans, about the
impact of President Biden's decision on day one to kill the
Keystone XL Pipeline. Today's hearing is about investing in
rural communities. I tell you, I wish we could take President
Biden and many Members of this Committee to go out to eastern
Montana to these rural communities and hear firsthand what is
needed. I can tell you what is needed is the Keystone XL
Pipeline.
Instead of investing in rural communities through common-
sense, extensively studied, privately funded projects like the
Keystone Pipeline, the Administration plans to rip away jobs
and leave these communities literally in the dust. This is
infrastructure paid for by private sources. It generates tax
revenues, like $80 million. This goes directly to our schools.
There is a beautiful gymnasium that was built out in eastern
Montana in a small community that had six kids in their
graduating class. I said, ``How did you afford the gymnasium?''
They said, ``Pipeline tax revenues.''
So it generates tax revenues, and, third, of course, the
Keystone Pipeline, it generates less carbon emissions than the
alternative of either rail or truck to transport the oil. So it
has kind of left us scratching our heads about why this project
was killed when it is positive on every front here for these
rural communities. That is real investment.
Ms. Sgamma, the Biden administration is saying they
canceled the Keystone XL Pipeline to protect the environment
despite the fact we know the Keystone XL Pipeline would reduce
transportation emissions, and the company planned to run the
pipeline at a net-zero emission standard. Could you speak to
how these heavy-handed, top-down decisions from President
Biden, frankly, ideologically based, not based on science, like
killing the Keystone XL Pipeline, stopping oil and gas leases
on Federal lands, they only hurt communities, kill jobs, and
actually have a negative impact on the environment?
Ms. Sgamma. Absolutely. Since natural gas is the No. 1
reason the United States has reduced more greenhouse gas
emissions than any other country since 2000, it is largely
because of displacement in the electricity sector, more natural
gas electricity generation has reduced greenhouse gas
emissions, more emissions than have wind and solar combined. So
we are very proud of that record. I cannot really add anything
to what you just said about Keystone operating at zero
emissions. But I would add that immediately that decision
killed $1.6 billion of investment in Montana, South Dakota, and
Nebraska along that pipeline route and killed 11,000 jobs that
would have come from that investment.
Senator Daines. Thank you, Ms. Sgamma. The $80 million a
year of tax revenues in perpetuity was a huge windfall,
frankly, for these impoverished eastern Montana counties that
need those dollars for schools, teachers, law enforcement,
basic taking care of infrastructure like plowing roads in the
wintertime, as an example.
Senator Ellis, you know firsthand how important energy and
pipeline revenues are for local communities. Can you speak
about how we can support our rural communities by investing in
our energy economy?
Ms. Ellis. Thank you, Mr. Chairman and Senator. You know,
first and foremost from Wyoming, the purpose for me to be here
today is to urge Members of Congress and the Presidential
Administration to remove this halt and moratorium on oil and
gas leasing on Federal lands. You know, certainly over the
years we have invested a lot in developing not only our energy
resources but other natural resources as well. And Wyoming and
our country have a lot to be proud of. We do regulate these
activities very fairly and do our best to make sure that we are
conserving our natural resources. And so I think, you know, any
effort and movement that we can to recognize that we are
protecting our natural resources and conserving them while
having robust domestic energy production, that those two
activities coexist certainly are appreciated in my neck of the
woods.
Senator Daines. Thank you. We talked about natural gas and
oil and so forth. I want to talk a little bit about forestry.
The timber sector in Montana was once a major economic driver
for our rural communities across our State. In fact, when I was
growing up, we had over 30 sawmills in Montana. Now that number
has dwindled to seven. It has been devastating to our rural
economy not only through job loss but through the financial
hardships that accompany an increase in catastrophic wildfires.
And, remember, when timber harvest was higher, Montana forests
functioned as a carbon sink. Forests absorb carbon. Wildfires
emit carbon. Montana forests now yield net positive carbon
emissions, and this will only increase unless we dramatically
improve forest management.
Senator Ellis, I understand over time Wyoming has lost all
timber processing capacity, and now your forests are in the
same boat as Montana, operating as a carbon source rather than
a carbon sink. Could you speak to the job opportunities and
environmental benefits of forest management and what needs to
happen in order to restore a healthy wood product sector in our
communities?
Ms. Ellis. Yes, over the last 100 years, I think we have
seen a dramatic shift in how we manage our forests in this
country. Usually, occasional fires that would go through the
area were healthy and natural events that helped sustain
forests. But, obviously, we started using our forests--you
know, they are housed in the Department of Agriculture at the
Federal level, so I think they were always viewed as a crop or
a product that we would utilize in providing timber sources for
our country. Over the years we have started limiting and
putting out wildfires when we see them, and now we are starting
to see forests that are more and more condensed and clogged and
creating really unhealthy conditions. So certainly in Wyoming,
you would think that that would be a great opportunity for
private sector activity to go in and clear out some of those
dead trees and harvest trees, but we have seen declines in that
because of how we manage our forests, and it really is this
kind of assault on overall health forest management. It has
created a situation where I am greatly concerned about the
number of dead trees as I drive through the national forests in
Wyoming. I think it is just a tinderbox, and, you know, one
unfortunate thunderstorm or campfire that gets out of hand will
not only devastate the environment, but just the activity
overall really hinders our ability to utilize that resource for
good jobs in the West.
Senator Daines. Thanks, Senator Ellis. I am out of time. It
is remarkable that we cannot even get in and cut down dead
trees because of radical environmentalists who litigate a lot
of these timber projects. Thanks, Senator Ellis. I appreciate
your comments.
Chairman Brown. Thank you, Senator Daines.
I have one last question, and then we will close. For you,
Mr. Bynum, we have heard a lot about how we should rely on big
energy companies to save our rural economies. We have not heard
much from panelists about the devastating environmental impacts
they have. Communities of color, as you know, are particularly
vulnerable to climate change. Rural communities are no
exception.
My question for you, Mr. Bynum: How do we increase
accountability of corporations and banks as well as State and
local governments to ensure that we invest Federal resources in
a way that protects all communities from flooding and wildfire
and other natural disasters made worse by climate change?
Mr. Bynum. Thank you, Senator. It is only prudent that we
invest in strategies that mitigate the long-term environmental
distress that has been put on rural communities, particularly
communities of color. The best way to do this, again, is to get
resources to the people and organizations closest to the
ground, closest to the problems that we are trying to resolve.
When they go through State government and legislatures here in
the Deep South, often resources do not get directly to the
communities that are most distressed.
One example is the State Small Business Credit Initiative.
We saw that during the previous round some States got it right
and made more direct investments; whereas, some in our part of
the country did not, and the results were not beneficial to
those mostly underserved communities. And so I really
appreciate that Congress did put some safeguards in the most
recent legislation that put requirements on States and ensure
more accountability in how these funds are deployed. I really
think that is important, as the infrastructure resources go
forward, as more recovery resources go forward, that
accountability and safeguards are in place to ensure that the
intent of Congress and that those most vulnerable communities
are the ultimate recipients and are able to climb the economic
ladder.
Chairman Brown. Thank you, Mr. Bynum, for saying that. I
have heard in zillions of--we all do--Zoom calls over the last
year, I have heard from so many local officials, as many
Republican mayors as Democratic mayors, as many Republican
county commissioners as Democratic county Commissioners, to
focus directly on local governments to help, not run it through
a State government--that is no insult, of course, to Senator
Ellis in the State Senate, but State governments tend to grab
too much of that for themselves. So thank you all.
For anyone who could not be at today's hearing, I am going
to encourage them to go back and listen to Senator Tester's
words talking about how this is a hell of a lot bigger than
energy. It is about rural America that has been drying up for
decades, the words he used. I know Senator Tester is tired of
lectures, as I am, about the rural economy from people in this
town who oppose any effort to actually invest in these
communities or to foster real competition or stop the corporate
consolidation, particularly in the ag sector, that is hollowing
out our towns. They give corporations tax breaks to ship jobs
in my State overseas. They have spent years pushing a trade
policy that leaves workers behind. They do nothing-- nothing--
to position rural communities to lead in the industries of the
future, and then they leave workers on their own when these
local economies are devastated. The people I talk to in rural
Ohio and small cities and towns all over my State are tired of
politicians selling them empty promises that coal mines, for
instance, will reopen. Ohioans know that, as Senator Toomey has
noted and Ms. Sgamma suggested, it is natural gas, not
Government regulation, that pushed out coal. There is no war on
coal. To suggest otherwise is to deceive and disrespect
communities seeking a better future. We welcome domestic energy
production. We know the boom-and-bust cycle that extractive
industries create and that it creates economic uncertainty.
That is why, while we support domestic energy production, we
must treat communities with respect and honesty and help them
plan for our futures and their futures. It is time for all
communities to have the resources and the respect for the
dignity of work and the respect they need to be successful.
Thank you to the five witnesses today for being here. Your
testimony was incisive and helpful.
For Senators who wish to submit questions for the record,
those questions are due 1 week from today, on April 27th. For
witnesses, we ask you within 45 days to respond to any of these
written questions. Thank you again.
With that, the hearing is adjourned.
[Whereupon, at 12 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
For years, the work of the Committee on Banking, Housing, and Urban
Affairs has been far too much about Wall Street, far too little about
housing, and almost nothing about people's everyday lives in urban and
rural communities.
``Urban Affairs'' may be in our Committee's title, but we have
jurisdiction over matters integral to the economic health and vibrancy
of all communities--including rural America. Whether you live in
Philadelphia or Cleveland, Perry County, Pennsylvania, or Perry County,
Ohio--the work of this Committee is vital to the shared prosperity of
all Americans, urban and rural.
This is the first Full Committee hearing dedicated to rural America
in nearly a decade. Senator Toomey held a subcommittee hearing on rural
banking in 2015 and I thank him for that. I'm sure he will agree that
it has been too long since we focused on the issues facing rural
America.
The hopes and dreams of all Americans are pretty similar. We want a
job with dignity and to be valued for the work we do. We want a
community where our families can grow and flourish. And we want the
opportunity to join with friends, family, and neighbors to leave the
world better than we found it.
The 46 million people who live in rural communities share these
dreams, and they reflect the vibrant diversity of our country.
From the foothills of Appalachia in Pennsylvania and Ohio, to
Native American tribal lands on the Great Plains; from Black
communities in the Deep South, to Hispanic and Asian communities in the
West, we find resilient, hard-working men and women trying to make a
better life for themselves, their families, and their communities.
I know the pride people have in their hometowns--like I have in my
hometown of Mansfield, Ohio. They want these places to be successful.
They don't want to be told to pick up and leave to find better
opportunities.
Crumbling infrastructure, high unemployment rates, low wages, and
gaps in access to banking, housing, and transit make rural areas
especially vulnerable in an economic downturn.
Workers and families and community leaders pour their hearts and
their resources into their communities, trying to preserve their
legacies and grow new businesses and attract new investment.
But these same communities have watched for decades as investment
dried up, plants were shuttered, and storefronts were boarded over.
University economists, CEOs, and conservative Washington politicians
make public pronouncements about capitalism's ``creative
destruction''--dismissing workers' anger, informing us that these
actions are the inevitable result of free and unfettered markets.
Corporations close down factories, and move good-paying union jobs
abroad where they can pay lower wages and exploit workers. Ohio workers
from Bucyrus to Lordstown know what this does to communities.
Big corporate agriculture has made it harder for small family farms
to compete. Local, independent businesses close shop because they can't
compete with Amazon.
Big banks buy up their smaller competition and then close local
branches, leaving communities 30, 40, even 50 miles from a place to
deposit a check or build crucial relationships at their bank.
The banks claim people can just use online banking--but that
doesn't help if your community doesn't even have reliable broadband.
As the banking sector gets more concentrated, it's harder for small
businesses, farms, and families to get loans to hire more workers or
expand their operation or to buy a home.
The biggest banks and the largest corporations only look at
quarterly profits, without considering the long-term economic impact on
these communities and small businesses.
And despite the simplistic picture we often see in the national
media, these communities are not only made up of people who look like
me. Rural America is as diverse and culturally vibrant as the rest of
the country. But centuries of violence and displacement and structural
racism have pushed rural communities of color even further behind.
Native communities have some of the highest levels of poverty and
many families suffer from overcrowded housing without plumbing or heat.
The same is true for Black families and farmers that have faced decades
of discrimination, including lending discrimination.
Many rural families of all backgrounds don't have a safe,
affordable home. And if there isn't affordable housing, communities
can't attract new business because there's nowhere for workers to live.
Last month, I was talking to the CEO of a credit union in southeast
Ohio who knows the housing needs in his Appalachian community, and
wanted to do something about it. He meets lots of well-qualified
families who could pay a mortgage, but just can't afford a 20 percent
downpayment. So his credit union created a new mortgage program for
members of his community to have a pathway to home ownership.
That's the kind of ingenuity we see all over the country from
leaders who actually live in and understand these places. And we can
learn from them.
Our witnesses today know what it means for the local economy when
the big banks abandon rural towns, or when a big-box chain store forces
out small businesses. They know how working low-wage jobs makes it
impossible to make the rent, let alone save for a downpayment.
They know that homegrown, local businesses understand what their
communities need.
Anyone who's raised a family or started a business in Appalachia or
Indian Country or the Carson Valley knows these places can't rely on
Wall Street banks and corporations to help them out.
People in rural towns and counties remember how the biggest firms
recovered after the last financial crisis, while they were left behind.
And they saw history repeat itself over the past year--when big
franchises got help from big banks, small businesses went to the back
of the line, and Black and Hispanic businesses were far less likely
than White-owned businesses to get loans at all.
Over and over, I hear the same thing from communities large and
small, rural and urban: they need more resources. They've tried to make
it on their own because they have to--not because they don't want
investment, or don't want their fair share of our country's prosperity.
To recover from this crisis and rebuild a stronger economy, rural
communities need direct investment in infrastructure and economic
development.
We've made a good start with the American Rescue Plan. Now we can
look forward to the American Jobs Plan to help us invest in our rural
communities for the long term.
We will invest in broadband and rural buses and affordable housing
and the next generation of American manufacturing. We will invest in
new energy technology to address climate change and create good paying
jobs in communities of all sizes.
If we make these investments, these local communities will be
strong and resilient in the face of the extreme weather events--like
wildfires, flooding, and hurricanes--that threaten our rural
communities more and more each day.
When we put communities, not corporations, at the center of our
policy--when we invest in local people and businesses who make up our
rural communities--we will get an economy that works for everyone.
______
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Chairman Brown. What we have here are two competing
visions for how to help rural America.
One vision is that we should implement policies that allow rural
areas to thrive. We know Americans can succeed if we give them a
chance. Our recent U.S. energy renaissance shows this. It's been game
changer for many rural communities.
Another vision--shared by some Democrats--is to provide Government
welfare to these communities. They do it through different vehicles,
but at the end of the day, it's welfare.
My home State of Pennsylvania has a lot of rural areas. Some
struggle, some thrive, but I don't know any that want to be long-term
dependents of the Government. Our goal should be thriving communities
of self-reliant people.
As we consider the state of the rural economy, it's important to
remember where we were a little over a year ago. Before COVID, we were
experiencing an economic boom. We had the lowest unemployment rate in
50 years. In rural America, unemployment dropped to 3.5 percent in
2019--its lowest level in a decade. Nationally, including in rural
America, Black and Hispanic unemployment rates hit all-time lows in
2019.
We had more jobs than people looking for work, a record low poverty
rate, wage growth across the board with wages growing fastest for the
lowest income earners, and ultimately a narrowing of the income gap.
These are all objectives that Democrats support, and that we had
achieved. All of this was spurred on by the steps Republicans took to
reform our tax code and roll back excessive regulations.
An important part of that strong economy was America's energy
renaissance. In 2019, the U.S. became a net energy exporter for first
time since 1952. We did it in part by becoming the third-largest
exporter of liquefied natural gas. As gas replaced coal as the fuel for
America's power plants, CO2 emissions actually declined. In fact, in
2019, the U.S. led the world in reducing energy-related CO2 emissions.
Across the country, the oil and gas industry has supported more
than 10 million jobs, often in rural communities. In Pennsylvania--
which is the second-largest producer of natural gas--the oil and gas
industry has supported 300,000 jobs up and down the supply chain. A
majority of gas production in Pennsylvania occurs in rural areas, like
Susquehanna County. It's our largest natural gas producing county and
one of our least densely populated counties.
Last March, our strong economy was roiled by COVID-19. We were
facing the very real threat of a full-blown depression. In 2020, a
bipartisan Congress helped to prevent that from happening by providing
almost $4 trillion in relief.
Fortunately, our economy is now in full recovery mode, and has been
for months. The unemployment rate has dropped from almost 15 percent
last April to 6 percent this March. Twenty-three States have
unemployment rates at or below 5 percent--many of them are rural
States. Real GDP growth is expected to be extremely strong this year.
We should continue to have a robust economic recovery, unless the
Federal Government undermines it. Unfortunately, that's exactly what
Democratic policies are threatening to do. For example, the Democrat
spending bill pays people more not to work than to work, so it's little
surprise that in March's NFIB monthly survey, 42 percent of small
businesses had job openings they could not fill--a record high.
The Biden administration has also proposed massive tax increases
and imposed burdensome regulatory policies. All of these policies will
harm workers and slow economic growth. But some Biden administration
policies will hit rural America particularly hard--some already have.
For example, President Biden has terminated construction of the
Keystone XL oil pipeline and indefinitely banned new oil and gas leases
on Federal lands. The Biden administration is also seeking to coerce
banks and investors to stop lending to fossil fuel companies and
stifling U.S. agricultural exports by maintaining tariffs on Chinese
goods and materials.
Today, we will hear from two witnesses about the harm caused by
these attacks on the energy industry, particularly in rural
communities.
Kathleen Sgamma is the President of the Western Energy Alliance.
She will testify that these policies cause significant job losses. For
example, President Biden's termination of the Keystone XL pipeline,
according to the pipeline's developer, caused more 1,000 union workers
to immediately lose their jobs, and ended a project that was expected
to employ more than 11,000 Americans in 2021--the majority of them
union workers--and create $1.6 billion in wages. By the end President
Biden's first term, his ban on new oil and gas leases on Federal land--
according to one study--would destroy an average of 58,676 jobs
annually.
Senator Affie Ellis is a member of the Wyoming Senate. Her State
ranks first in the Nation for natural gas production on Federal lands
and second in oil production on Federal lands. She will describe how
the leasing ban harms Wyoming's economy and education budget, which
receives substantial funding from Federal energy royalties.
I wish I understood why Democrats are so determined to prevent us
from getting back to the best economy my lifetime. Instead of wasting
more taxpayer dollars, imposing massive tax hikes, and increasing
regulatory burdens on businesses, we should be rolling back the harmful
Biden administration policies that are threatening the U.S. energy
renaissance, which has done so much good for the rural economy.
______
PREPARED STATEMENT OF WILLIAM J. (BILL) BYNUM
Chief Executive Officer, Hope Enterprise Corporation, Hope Credit
Union, Hope Policy Institute
April 20, 2021
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
PREPARED STATEMENT OF STACY MITCHELL
Coexecutive Director, Institute for Local Self-Reliance
April 20, 2021
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
PREPARED STATEMENT OF MARCIA ERICKSON
Chief Executive Officer, GROW South Dakota
April 20, 2021
Thank you Chairman Brown, Ranking Member Toomey, Senator Rounds
from South Dakota, and Members of the Committee. My name is Marcia
Erickson, Chief Executive Officer for GROW South Dakota. I started my
career over 30 years ago working at GROW South Dakota and have been the
Chief Executive Officer for more than half of that time. I carry a
Master of Science Degree in Community Economic Development from
Southern New Hampshire University. I'm also a graduate of Achieving
Excellence in Community Development from Harvard's Kennedy School of
Government. Some of my current affiliations are: National NeighborWorks
Association Board President, Rural Local Initiative Support Corporation
Rural Advisory Committee, Small Business Development Center Advisory
Board (South Dakota), South Dakota Community Action Partnership, and
NeighborWorks America Rural Advisory Committee. Past affiliations
include Chair of the Federal Home Loan Bank Advisory Council, Langford
Area Community Foundation Advisory Board Member and Founder, and
Marshall County Healthcare Board Chair.
My testimony draws on all of these experiences and a diverse set of
programs delivered by GROW South Dakota. GROW South Dakota is a
statewide organization that provides several Federal, State, and local
programs through three separate private nonprofit organizations under
our branding umbrella. We assist South Dakota residents and communities
in the areas of community, housing, and economic development. GROW
South Dakota is a certified Community Development Financial Institution
(CDFI), Community Action Agency, an exemplary rated member of
NeighborWorks America, a member of the Rural Local Initiatives Support
Corporation, an Opportunity Finance Network member, and we administer a
Small Business Development Center.
I provide my testimony today on the state of the rural economy
including challenges of rural communities with regards to housing,
access to capital, community development, the role of mission-based
community lenders, and challenges in underserved communities. I would
like to share with the Committee some of the issues that are critical
to our agency and the rural economy.
Housing
Housing is the foundation of success and is an essential and vital
part of our rural communities across the country. During the pandemic,
housing became even more sacred than ever before. People in rural
communities, across our very rural State and this country, continue to
express a need for housing. Housing needs that are requested from
residents regularly are home improvements for the aging housing,
infrastructure, senior housing, long-term care facilities, rental
development and renovation, single-family development, downpayment
assistance programs, and removal of blighted property.
Rural America has an aging housing stock that is in desperate need
of repair and rehabilitation. As an example, GROW SD provides home
improvement programs in eastern South Dakota. We currently have a
waiting list with over 140 nonpriority households waiting for home
repair or rehabilitation. If we continue with the current priority
categories identified by program regulations as seniors or disabled
households, at best, we will only able to reach approximately 14
nonpriority households per year. This translates into a wait time
approaching 10 years to address deteriorating housing stock, adversely
affecting the housing market for low-income households and the
community in general.
Rural and Native American communities are both challenged to secure
flexible capital to meet the needs for affordable, quality, and safe
housing stock. Gap financing for home ownership is needed as the cost
to build is higher, and continues to rise, and Native lands and rural
areas are negatively affected by the difference between the appraised
value and the actual costs. Higher costs are partially due to the fact
that contractors often need to travel to rural and tribal areas due to
the lack of contractors in these areas. To further impact this issue,
the cost to construct, repair or renovate properties is approximately
10 percent-30 percent higher, or more, than last year for the same
construction materials and supplies. Local lumber yards have further
indicated lumber is approximately double, sheet goods have tripled, and
material availability is very tight on many products. Materials are
also being delayed due to supply chain issues, adding to the increased
costs of construction and renovation According to the Board of
Governors of the Federal Reserve System, 2021, there are widespread
supply chain disruptions. The report further cited, ``Sustained high
demand and tight supply of single-family homes further pushed up
prices, and builders noted ongoing production challenges, including
rising costs. Cost increases were partly attributed to ongoing supply
chain disruptions, temporarily exacerbated in some cases by winter
weather events. Contacts generally expect continued price increases in
the near term.''
Across rural communities there is a shortage of housing stock and
increased costs and material availability making it even more difficult
to address this challenge. Homes that are available either need
substantial renovation or are increasingly more expensive and out of
reach for many in our community. The needed repairs and renovations
include electrical, plumbing, energy efficiencies, shingles, and
addressing issues of safety. The costs to provide these updates often
exceed the valuation of the property leading lenders to deny loan funds
to address these issues. As a result, housing stock is often left
vacant or remains severely deteriorated. The lack of housing and
affordable reliable broadband contributes to the lack of workforce for
our small communities. The shortage of housing stock cannot be
addressed without an injection of capital to construct housing that is
affordable or to complete needed repairs and renovations on the homes
that do exist. Home ownership on Native lands and in rural areas is
also challenging. The COVID-19 pandemic has brought to light many
underlying housing issues especially in South Dakota's Native
communities. Overcrowded and substandard conditions have exacerbated
the impact of the virus. The number of appraisers available, especially
in Native American areas, is also very limited. Promoting housing
stability through appraisal apprenticeships and construction
internships may be part of the solution.
To further address home ownership rates on Native lands, a loss
mitigation risk pool needs to be considered. Most tribal ordinances in
South Dakota provide the right of first refusal to tribes to purchase
units with mortgages that are in default or otherwise at risk of
foreclosure. This early intervention strategy is underutilized by
tribes due to a lack of resources to finance the purchase of the unit
at risk. One model utilized by the Sisseton Wahpeton Oyate tribe is a
risk pool of funds to mitigate the property disposition risk that
lenders encounter with tribal borrowers.
Another solution to the housing challenges in rural America would
be to provide funding to proven, reliable, and accountable nonprofits
such as NeighborWorks America, the Community Development Financial
Institutions Fund, and other national established and proven entities
in order to provide access to capital through their established
networks. The key is to provide the capital with flexibility in mind to
get the funds working in our communities as quickly and efficiently as
possible in order to better address the unique needs of the rural
economy.
Mission-Based Lenders
Mission-based community lenders, such as Community Development
Financial Institutions, play a critical role in reaching underserved
and rural markets. These organizations are the frontline servicers that
already have established a presence in rural communities. Because of
the vast amount of programming that mission-based lenders have, they
are a known resource in rural areas. Mission lenders are flexible in
meeting communities' needs and providing financing where traditional
lenders are unable. Along with making capital accessible to underserved
populations and persistent poverty areas, mission lenders often pair
capital loans with technical assistance, counseling to coach
individuals on their small business, and provide needed housing
counseling.
Policy Recommendations Mission-Based Lenders
Policy change is needed to shape the course for housing, rural
business development, and access to capital for our rural communities.
The Community Development Financial Institution Fund provides
opportunities to access lending capital for both housing and business.
One challenge of CDFI funding, especially in rural markets that lack
access to private funding sources, is the requirement of non-Fderal
match. Currently, there is not a match requirement for Native CDFIs
which we fully support and hope will continue into the future. However,
it remains a challenge for all organizations in rural markets to meet
the non-Federal match. We recommend that CDFI temporarily, if not
permanently, lift the match requirement or reduce the match
requirements to 50 percent for all CDFIs, especially in rural markets.
Additionally, the $1 million maximum Financial Assistance award should
be increased to $2 million or greater with additional flexibility in
the CDFI objectives described as an increase in the volume of financial
products or services, expansion into a new geographic area, new
financial product or service, new development service, or new targeted
area. These changes will lead to increased impact in our communities
and communities across the country.
The USDA Rural Development Intermediary Relending Program (IRP) is
an excellent resource for low-interest loan capital to relend to
businesses throughout rural America. This program also has non-Federal
match requirements in order to have a successful scoring application.
These match funds continue to be restricted until the full loan is
repaid to USDA Rural Development (30-year term). Even though regular
principal and interest payments are made to Rural Development by the
intermediary, the full match must remain restricted. Match funds should
be released pro-rata with the debt as it is paid down with Rural
Development consistent with loan amortization schedules. By keeping
non-Federal match funds restricted for 30 years, it limits the
leveraging power for rural agencies to access additional flexible
capital.
The IRP program also restricts the maximum dollar amount per
business loan. We support the proposed change of the maximum dollar
amount per loan that an intermediary may lend to a project be increased
to $400,000. The costs to start up or purchase a business in rural
America has increased over time but the maximum loan limitation using
IRP funding has not increased for several years. IRP funds should also
be considered for intermediary lending of first mortgage loans.
Mission-based lenders in rural America need long-term capital to
address financing gaps in first mortgage lending..
The Small Business Administration (SBA) Microloan Program assists
women, people who are low-income, veterans, minority entrepreneurs, and
other small businesses in need of financing in amounts of $50,000 or
less in conjunction with business technical assistance. This program
provides low-interest loans to organizations to relend to businesses.
It also provides a technical assistance grant to the intermediary to
help businesses both pre and post-loan. Currently, SBA has waived the
requirement on the percentage of preloan training and technical
assistance (not more than 50 percent of grant funds) versus postloan
training and technical assistance provided to borrowers. This is the
type of flexibility that is needed to better assist businesses seeking
to start up or expand. This waiver should be implemented permanently in
regulations.
Due to the pandemic, SBA provided existing borrowers funded with
SBA loan capital payment assistance. The first round included all
borrowers, but the second round of CARES Act Section 1112 debt relief
payments is confusing as borrowers with microloans were categorized for
payments based on when their loans were closed. Loans closed before
March 27, 2020, received up to a certain number of payments; loans made
from March 28, 2020, through January 31, 2021, received no payment
assistance; and those loans made after February 1, 2021, receive a
different amount of payment assistance. It would have reduced
administrative costs if it would have included all borrowers regardless
of the date closed. Loans that are made under USDA Rural Development
Intermediary Relending Program or the Rural Microentrepreneur
Assistance Program did not receive any payment assistance although
these, too, are federally funded loan programs.
Policy Recommendations Housing
Consideration should be given to modify or simplify the HOME
Investment Partnership Program funding regulations. The costs to bring
a home to HUD quality standards often exceeds the maximum limits.
Additionally, the contractor requirements of the Davis-Bacon Act are
challenging. Most small contractors do not have the administrative
staff to track the reporting requirements on these jobs. Payroll needs
to be certified by job and county prevailing wage every week. HOME also
requires SAM.gov registration. Contractors, especially smaller
contractors, have difficulty navigating the system and getting
registered. We understand this requirement will not go away, however,
we recommend that SAM.gov improve the registration process.
HOME multifamily compliance requirements are not aligned with other
programs. Consistency across the board would be beneficial. For
instance, USDA uses adjusted income for individuals and HOME uses gross
income. Approval for rent level changes, even if they are within the
HUD limits, is required.
The Department of Energy Weatherization Assistance Program is
needed to improve energy efficiency and safety concerns in homes.
However, regulations have again made it difficult to administer. A few
examples with recommendations include:
1. Currently, there is a separate certification required for DOE
Weatherization Auditor and Quality Control Inspector (QCI)
certifications. The Auditor/QCI should be one certification as
the trainings and tests are very similar. We also recommend
that testing for an inspector to remain certified be increased
from 3 years to 5 years as long as staff remain current with
Continuing Education Units.
2. If the home is in need of electrical wiring replacement, it
limits the weatherization measures that can be installed on the
home. We recommend allowing electrical wiring replacement and
other essential home repairs under DOE if it prevents
weatherization from being completed.
3. Department of Energy Weatherization Assistance Program does not
allow a change of fuel sources for heating systems. Often
homeowners ask to change to a different heating source/system.
Oil furnaces are currently difficult to purchase and not many
HVAC contractors service or install them anymore. A change to
allow a new fuel source for heating systems is recommended.
As a provider of programs and services addressing Native and rural
needs, I strongly support needed increases of funding and regulatory
changes to address the needs of housing and access to capital in our
communities, in South Dakota and across our country. Let's build,
rebuild, and address the lack of quality housing for all. Housing is
infrastructure. Access to capital for both housing and mission-based
lending through flexible and accountable entities is needed. I urge
this Committee to initiate and support large-scale investments into
housing and support mission-based lenders to help our communities and
economy grow for decades to come.
Thank you for the opportunity to testify on the needs and
challenges we face in rural communities.
Work Cited
Federal Reserve District. ``The Beige Book: Summary of Commentary on
Current Economic Conditions''. Board of Governors of the Federal
Reserve System, 14 Apr. 2021, www.federalreserve.gov/
monetarypolicy/beigebook202104.htm.
______
PREPARED STATEMENT OF AFFIE ELLIS
Wyoming State Senator, District 8
April 20, 2021
Introduction
Good morning, Mr. Chairman and Members of the Committee. My name is
Affie Ellis and I am State Senator from Laramie County, Wyoming. It is
a pleasure and honor to appear before you today. Thank you for inviting
me to testify on the topic of our country's economy and the importance
of investing in rural communities.
Wyoming is one of the largest land-based States, though we are the
least populated State in the country with fewer than 600,000 residents.
As you talk about rural, even frontier, communities, it's more than
appropriate to focus on a place like Wyoming. Though we are small, we
are mighty in the sense that we power America. According to the U.S.
Energy Information Administration, \1\ Wyoming produces 14 times more
energy than it consumes, and it is the biggest net energy supplier
among the States. Wyoming has been the top coal-producing State since
1986, accounting for about 39 percent of all coal mined in the United
States in 2019, and the State holds more than one-third of U.S. coal
reserves at producing mines. In 2018 Wyoming's coal mining industry
provided 5,534 jobs and delivered nearly $680 million to State and
local governments. \2\ Wyoming was the eighth-largest crude oil-
producing State in the Nation in 2020, accounting for slightly more
than 2 percent of U.S. total crude oil output. The State was the ninth-
largest natural gas producer and accounted for almost 4 percent of U.S.
marketed gas production. Of particular note, in 2020 and numerous
preceding years, Wyoming has ranked first in the Nation for natural gas
production on Federal lands and second in oil production on Federal
lands. \3\ In 2019, the oil and gas industry delivered $1.67 billion to
State and local governments and employed 19,416 people. Additionally,
wind power in Wyoming has more than doubled in the last 20 years and
accounted for 12 percent of the State's electricity net generation in
2020. The State installed the third-largest amount of wind power
generating capacity in 2020, after Texas and Iowa. As I said, we are a
small, but mighty State powering America.
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\1\ U.S. Energy Information Administration.
\2\ Wyoming Infrastructure Authority.
\3\ U.S. Department of Agriculture, Office of Natural Resources
Revenue.
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Before I talk in greater detail about Wyoming's energy economy and
how it supports the services Wyoming provides to its citizens,
including funding K-12 education, let me introduce myself. I grew up in
Wyoming. I'm proud of my State and thankful for all the opportunities
it provided me. My parents are both Navajo and they grew up on the
Navajo Reservation located in the Four Corners area of Arizona, New
Mexico, Colorado, and Utah. Starting in the late 1800s and through much
of the 1900s, our country developed policies to assimilate native
children into the dominant non-Indian culture. Both of my parents, for
example, attended boarding schools on the Reservation and eventually
they were sent to the Intermountain Indian School in Brigham City, UT.
My dad's father was a renowned Navajo silversmith, so my dad was taught
to weld. My mom learned general home economics. When they graduated in
the mid-1950s, my dad found a job working as a welder in Jackson Hole,
Wyoming, where he and my mom started our family. My dad eventually
started his own welding shop, which he continues to run today in his
80s, and my mom, who passed at the age of 83 just a few years ago,
worked in a drycleaner Monday through Friday and cleaned motel rooms on
the weekends. I am the youngest of four children and much of my
childhood involved enjoying the beautiful outdoors of this special
place and working with my mom cleaning motel rooms.
Wyoming provided me with so many opportunities. I was the first in
my family to attend college through a substantial scholarship from the
University of Wyoming. I eventually earned my law degree and I
currently practice in the area of energy, natural resources, and
Federal Indian law. My husband and I have three children who all attend
public schools in Cheyenne. I don't know how it is in other States, but
I appreciate that Wyoming affords people like me, who come from humble
and hardworking families, the chance to serve in our Legislature and
testify before all of you today.
Wyoming Is an Energy Producing State
I decided to run for the Wyoming Senate in 2016 to give back to a
State that has given me so much and ensure that such opportunities are
available for current and future generations. At the time, Wyoming
could see on its horizon a downturn in energy production, which in
turn, would impact almost all services Wyoming provides to its
citizenry. Development of oil, natural gas, coal, trona, and uranium
are our primary revenue raising mechanisms. Wyoming taxes and generates
revenue from the mineral industry in a variety of ways, including
severance tax, ad valorem tax, property tax, sales tax, personal
property tax, Federal mineral royalties, and lease bonus payments.
Indeed, significant revenue derived from lease bonus payments allowed
Wyoming to build new schools across our State these last two decades.
Unlike most States which rely on local bond revenues for such capital
construction, Wyoming's K-12 education system is highly centralized.
Further, counties with mineral wealth provide what we call ``recapture
payments'' to fund school operations statewide to ensure our financing
system is equitable.
Declines in mineral production have significant effects on
statewide budgets as well as county and city budgets. Consequently,
Wyoming has among the most volatile year-over-year revenue collection
in the Nation. That revenue volatility has forced us to recognize boom
years for what they are and plan accordingly for nonboom years. Wyoming
saves a significant portion of the revenues derived from mineral
production. For example, our constitution directs a percentage of
severance tax revenue to be deposited in our Permanent Mineral Trust
Fund (PMTF). Income earned from the PMTF--not the corpus of the fund
itself--supports our State's General Fund. Wyoming also established a
Legislative Stabilization Reserve Account (LSRA), which we often refer
to as our ``rainy day fund.'' Wyoming has one of the Nation's largest
rainy-day reserves. \4\ Our reserves could support operating costs of
our government for more than a year. By contrast, other States only
have the capability to operate a few months, some a few weeks, others a
few days, and in more dire examples, only several hours, on their
reserves.
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\4\ ``Budget Surpluses Are Helping Many States Boost Their
Savings'', Pew Trusts (March 11, 2019).
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Wyoming recognizes its reliance on energy production. We often hear
that Wyoming ``needs to diversify its economy.'' I agree with the need
to diversify, but it's easier said than done. Tourism is our second
largest industry, followed by agriculture. In recent years, we've
worked to grow our technology sector. The rural nature of Wyoming
provides a perfect laboratory to see how we can improve things like
remote work, telehealth, and virtual learning, to name a few. Wyoming's
dry cool climate, coupled with tax incentives, has made our State a
destination for data centers. Too often we forget that every picture we
take or video we record on our cell phones requires electronic storage
space for that data. And data centers consume energy. A lot of energy.
Everything we send to ``the cloud'' has a carbon footprint.
Additionally, Wyoming has been a leader in passing blockchain
legislation. We recently created Special Purpose Depositary
Institutions (SPDI) (also referred to as ``speedy banks'') to accept
digital asset deposits, or ``crypto currency.'' On the education front,
we were the first State to require our schools to provide computer
science for all grade levels because we want our children to not only
understand how to consume technology but have the skill set to create
technology. We are trying to prepare our children for jobs that don't
even exist yet, recognizing that technology will continue to advance
and play an increasing role in all sectors, including Wyoming's legacy
industries of energy, tourism, and agriculture. Despite these advances
in diversifying our economy, there is no other sector that produces the
kind of revenue for Wyoming that energy provides.
Restrictions and Bans on Leasing on Lands Federally Managed Lands
Wyoming is a citizen legislature and budgets on a biennial basis.
In rough numbers, we appropriate approximately $1.3 billion each year
for the operation of general government and another $1.5 billion for
our K-12 education budget, with more than half of that amount coming
from State appropriations. With declines in energy production, Wyoming
has cut departments and programs supported by our General Fund, which
has impacted health care services, support for our senior citizens, and
the developmentally disabled. This year alone, we just completed our
legislative General Session, cutting more than $300 million from
General Fund supported expenditures. Our K-12 budget has remained
largely intact, but with continued assaults on domestic energy
production, we are now working to resolve a $300 million per year
projected structural deficit in K-12 education.
Wyoming leaders recognize the volatility of revenues derived from
energy production. We know that we cannot control global markets or
predict the price of oil. However, we have significant concerns when
leaders within our own country attack and undermine our energy economy.
Nearly half of the surface lands in Wyoming are managed by the
Federal Government through agencies such as the Bureau of Land
Management (BLM), U.S. Forest Service, and National Parks Service.
These lands, including the Wind River Indian Reservation and other
Federal enclaves, are not subject to State property taxation, though we
receive modest compensation through the Federal Payment in Lieu of
Taxes (PILT) program. BLM lands support significant oil and gas
leasing, including BLM lands that are intermixed with private lands in
the ``checkerboard,'' primarily located along the southern portion of
our State. Below is a BLM Land Status Map.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Federal land management decisions are an ongoing source of concern
for elected leaders in Wyoming because those Federal decisions impact
the livelihood of our citizens and the strength of our State.
Accordingly, the Legislature commissioned a study a few years ago to
understand the potential impacts of an oil and gas lease moratorium and
drilling ban on Federal lands. In December of 2020, a University of
Wyoming energy economist released this study exploring potential
scenarios that affect nine Western States, including Wyoming, New
Mexico, Colorado, Utah, North Dakota, Montana, California, and Alaska.
\5\
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\5\ ``The Fiscal and Economic Impacts of Federal Onshore Oil and
Gas Lease Moratorium and Drilling Bank Policies'', Dr. Timothy J.
Considine, Professor of Energy Economics, School of Energy Resources,
University of Wyoming (Dec. 14, 2020).
---------------------------------------------------------------------------
For Wyoming, the study found that ``either a moratorium on new
Federal leases or an outright drilling ban would constitute a
significant shock to the Wyoming economy, reducing tax revenues,
income, and employment.'' \6\ The study concluded that in Wyoming, by
the end of President Biden's first term, a moratorium would cause
Wyoming to lose an average of 15,269 jobs annually and lose
cumulatively $8.3 billion in gross domestic product (GDP), $3.8 billion
in personal income, and $1.8 billion in State tax revenue. \7\ The
study's conclusions regarding an outright ban were even more
devastating for Wyoming's economy, as we would lose an average of
18,228 jobs annually and lose cumulatively $10.3 billion in GDP, $4.7
billion in personal income, and $2 billion in State tax revenue. \8\ If
the ban continued for the next twenty years until 2040, Wyoming would
lose cumulatively $132.9 billion in GDP, $60.1 billion in personal
income, and $30.5 billion in State tax revenue and lose an average of
75,475 jobs annually from 2036 through 2040. \9\
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\6\ Id. at 17-18.
\7\ Id. at 16-17, 44.
\8\ Id.
\9\ Id. at 16-17.
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The study also explained that a moratorium or ban on leasing would
not only limit production on public lands, but would affect potential
production on State, private, and Indian lands because of the
checkerboard of surface lands and minerals rights across the West. In
other words, adjacent lands not directly covered by a Federal
moratorium or ban can become isolated and non-Federal oil and natural
gas resources may be stranded when Federal access is denied.
In addition to examining the financial impacts, the report also
shed light on the relative costs of achieving reductions in greenhouse
gas emissions with a moratorium on Federal oil and gas leases. The
report stated, ``Even if in the unlikely event a leasing moratorium or
a drilling ban were to reduce emissions, they would be achieved at
great cost. There are many cost effective technologies and strategies
to reduce greenhouse gas emissions. Restricting development of oil and
gas on Federal lands is not one of them.'' \10\ Indeed, Wyoming has
invested and continues to invest in alternatives to offset carbon
emissions. We opened the Wyoming Integrated Test Center in May of 2018
to provide a space for researchers to test carbon capture, utilization,
and sequestration. \11\ Further, Wyoming Governor Mark Gordon recently
joined other governors in sending a letter to Members of Congress
urging support for the SCALE Act which would provide low-income loans
and grants to build out a transportation network for carbon, similar to
Government support for water or highway infrastructure development.
\12\
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\10\ Id. at xi.
\11\ Wyoming Integrated Test Center.
\12\ ``Wyoming Governor Calls for Federal Support for Carbon
Capture'', Casper Star Tribune (Apr. 6, 2020) (access to the letter
included in the link).
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Wyoming cares deeply about out natural resources. As the Chairwoman
of the Senate's Travel, Recreation, Wildlife and Cultural Resources
Committee, I can tell you that Wyoming works to find the right balance
of supporting our energy industry with conserving our natural
resources. For example, Wyoming was a leader among Western States in
developing a Sage-Grouse Conservation Strategy to ensure energy and
other development projects avoid and minimize impacts in core and
noncore sage grouse habitat areas to protect these species well in
advance of an Endangered Species Act listing.
Wyoming established a Wildlife and Natural Resource Trust Fund
(Trust) which set aside more than $115 million in its corpus to support
projects that enhance wildlife, such as building wildlife overpasses
and underpasses to prevent and reduce vehicle collisions. This effort
brings industry, conservation groups and other stakeholders together.
Since 2006, the Trust has funded 538 proposals and allocated $59
million in on-the-ground projects. \13\
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\13\ Wyoming Conservation Legacy.
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We care about our wildlife and our environment. We hunt, fish,
mountain bike, hike, camp, kayak, and paddle board. We snowmobile, ski,
and snowshoe. We gaze at stars that city folks cannot see because of
light pollution. We breathe the cleanest air and we can spend days
exploring Wyoming's wilderness without seeing another soul. We not only
enjoy these natural wonders on our own but recognize that people from
all over the world travel to experience our beautiful State, home of
Yellowstone, the country's first national park, and Devil's Tower, the
country's first national monument. During the widespread closures due
to COVID-19 last year, Wyoming saw dramatic increases in places like
our State parks. People across this country were reconnecting with
nature and we were proud that they came to Wyoming. Our State is a
wonderful example of how conservation of our natural resources can and
does coexist with robust domestic energy production.
You can imagine how we felt on January 20, 2021, when the U.S.
Department of Interior (DOI) announced Secretarial Order No. 3395, a
two-page document which called for an immediate 60-day suspension of
new oil and gas leases and drilling permits for U.S. lands and waters.
\14\ Think of your State's number one industry and imagine receiving an
undebated Executive order that contradicts numerus Federal statute
coming from Washington, DC, which would hurt not only that industry and
the men and women employed in that sector, but the revenues it provides
to fund your schools, roads, and health care programs. The Order is
akin to banning corn growth in Iowa, banning rubber and plastic
manufacturing in Ohio, or banning gaming in Nevada. Although the
initial 60 days have passed, the moratorium has been extended by the
Department of the Interior pending a ``review and reconsideration'' of
leasing practices. \15\ Our State is gravely concerned that this
moratorium will be extended indefinitely and that the current
Presidential Administration will also impose an outright ban on all oil
and gas drilling on Federal lands.
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\14\ U.S. Department of the Interior Secretarial Order no. 3395
(Jan. 20, 2021).
\15\ U.S. Department of the Interior Memorandum (Mar. 19, 2021);
Executive Order 14008, Tackling the Climate Crisis at Home and Abroad,
at Section 2078 (Jan. 27, 2021).
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Our Governor filed a lawsuit in the Federal District Court of
Wyoming which explains how the halt on new oil and gas leases on
Federal lands violates the National Environmental Policy Act, the
Administrative Procedure Act, the Mineral Leasing Act and the Federal
Land Policy Management Act. \16\ The lawsuit asks the court to require
the BLM to resume quarterly oil and gas lease sales, which have been
suspended since the order was signed. Our Governor has rightly pointed
out that our world will continue to need and use oil and gas for the
foreseeable future. The question is whether those resources will be
produced under the environmental safeguards in place on Federal lands
in Wyoming, or in other countries which do not have strong
environmental regulations.
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\16\ Wyoming v. Haaland, CV 21-00056, Petition for Review of Final
Agency Action (March 24, 2021).
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As I mentioned, the Wind River Indian Reservation, home to the
Eastern Shoshone Tribe and Northern Arapaho Tribe, is located in
central Wyoming. On February 22, 2021, the Northern Arapaho governing
body sent a letter to the Department of the Interior to express its
opposition to leasing moratorium because although tribes themselves are
exempt from the moratorium, the impact on Wyoming impacts tribal
members who are also citizens of our State. Reductions in State
services affect tribal members, including native children attending
Wyoming public schools funded by the State. The Northern Arapaho also
expressed support for the nomination of Secretary Deb Haaland, who is
the first American Indian to serve at the secretarial level of a
Presidential Administration. As a Navajo woman, it is inspiring to see
a native sister serving in this capacity. Unfortunately, this
remarkable milestone of having an indigenous woman serve as an
Executive cabinet official has been clouded by the moratorium because
it threatens the livelihood of thousands of hardworking families in
Wyoming and in New Mexico, Secretary Haaland's home State. I hope we
can reverse course.
As Wyoming continues to navigate its way out of these incredibly
challenging economic times, we appreciate your willingness to support
policies to promote economic recovery in rural places like Wyoming. As
the U.S. Senate considers not only what the Federal Government should
do to help rural America, it should discuss what the Federal Government
should not do. Wyoming needs you to understand how Executive orders,
signed with a stroke of a pen without congressional approval, can
literally devastate our State's economy. We want the freedom,
stability, and support from our Federal leaders to invest in ourselves.
Thank you for the opportunity to present this testimony to you
today.
______
PREPARED STATEMENT OF KATHLEEN SGAMMA
President, Western Energy Alliance
April 20, 2021
Chairman Brown and Ranking Member Toomey, thank you for the
opportunity to testify today. I'm delighted to appear before the
Committee to talk about how the oil and natural gas industry is part of
an economy that works for everyone and invests in rural communities,
particularly in the West.
Western Energy Alliance represents about 200 companies engaged in
all aspects of environmentally responsible exploration and production
of oil and natural gas in the Rocky Mountain West. Alliance members are
independents, the majority of which are small businesses with an
average of 14 employees.
Because the West is predominated by Federal lands and lacks any
major oil and natural gas production areas that do not contain some
Federal mineral estate, we are the leading trade association on public
lands issues for the industry. With few exceptions Federal oil and
natural gas activities take place in rural areas. Ours is the primary
industry supporting rural areas such as the Permian Basin in eastern
New Mexico, the Uinta-Piceance Basin straddling the Utah/Colorado
border, the Powder River Basin in northeastern Wyoming, and the
Williston in western North Dakota.
The American oil and natural gas industry is proud to be an
integral part of an economy that works for everyone. We generate $1.3
trillion in economic activity annually, and sustain 10.3 million
American jobs, both directly and indirectly. \1\ A large portion of the
direct jobs are in rural communities. We have saved consumers hundreds
of billions of dollars by increasing production and making energy more
affordable. \2\
---------------------------------------------------------------------------
\1\ ``Impacts of the Oil and Natural Gas Industry on the U.S.
Economy in 2015'', PWC on behalf of the American Petroleum Institute
(API), 2017.
\2\ ``The Impacts of Horizontal Multi-Stage Hydraulic Fracturing
Technologies on Historical Oil Production'', International Oil Costs,
and Consumer Petroleum Product Costs, ICF International on behalf of
API, Oct. 30, 2014.
---------------------------------------------------------------------------
Besides investing in rural communities and creating jobs, we also
develop the mineral resources of rural land and mineral owners, who are
ordinary citizens mostly of otherwise modest means. The industry
generates over $21 billion in royalties to individual mineral owners,
further stimulating the economies of rural communities. \3\ The Bureau
of Indian Affairs reports that Navajo mineral owners receive about $96
million annually in royalties. \4\ These royalties sustain 21,000
mineral owners and their families in an impoverished region plagued by
high unemployment. As such, the oil and natural gas industry furthers
environmental justice goals in otherwise disadvantaged rural areas.
---------------------------------------------------------------------------
\3\ ``Billions in Gas Drilling Royalties Transform Lives'', AP,
January 27, 2013.
\4\ Final Audit Report: Bureau of Indian Affairs' Federal Mineral
Office, Office of the Inspector General, U.S. Department of the
Interior, February 3, 2017.
---------------------------------------------------------------------------
Conversely, President Biden in just the first week of his term
destroyed thousands of jobs and economic opportunity in rural areas. I
provide details below regarding the revocation of the Keystone XL
pipeline permit and the ban on Federal leasing, which together will
kill up to 145,700 jobs and $15.8 billion in economic activity this
year alone, mostly in rural areas. Further, these two policies will
deprive rural communities of their share of $3.1 billion in government
revenues for vital services this year such as education,
infrastructure, public health, safety, and COVID recovery. The policies
also put at risk $2.8 billion in conservation funding sourced almost
exclusively from the oil and natural gas industry. This committee could
ensure investment in rural communities that works for everyone simply
by urging President Biden to reverse these policies.
Keystone XL Pipeline
The cancelation of the Keystone pipeline elicited this statement
from North America's Building Trades Unions (NABTU) President Sean
McGarvey: ``Environmental ideologues have now prevailed, and over a
thousand union men and women have been terminated from employment on
the project.'' \5\ The environmental lobby indeed has compelled another
decision that is bad for the environment and public safety, as
transporting oil by pipeline is safer and has fewer greenhouse gas
emissions than transporting by rail and truck.
---------------------------------------------------------------------------
\5\ North America's Building Trades Unions Statement on KXL
Pipeline Cancellation Announcement, January 21, 2021.
---------------------------------------------------------------------------
Besides the immediate loss of 1,000 union jobs, indirect jobs in
hotels, restaurants, supply stores, and other small businesses in rural
areas along the route through Montana, South Dakota, and Nebraska will
be lost. TC Energy signed $1.6 billion in contracts with suppliers that
would have supported up to 11,000 jobs in 2021 had it not been for
President Biden's action. \6\ That investment will not be easily
replaced in these States, and certainly not with vague promises of
green jobs that have yet to materialize.
---------------------------------------------------------------------------
\6\ TC Energy Awards More Than $1.6 billion in American Contracts
to Build Keystone XL, Project to Create Over 8,000 Union Jobs in 2021
---------------------------------------------------------------------------
Federal Onshore Leasing Ban
Likewise, the leasing ban on Federal lands and waters signed on
January 27th will kill jobs and economic opportunity in rural areas of
the West and coastal communities along the Gulf of Mexico. \7\ Many
rural counties with majority Federal land ownership would be devastated
by a complete ban on Federal oil and natural gas. By losing their
economic base, previously sustainable rural communities become newly
disadvantaged. And the jobs lost would impact blue-collar jobs held by
a diverse workforce.
---------------------------------------------------------------------------
\7\ Executive Order 14008 on Tackling the Climate Crisis at Home
and Abroad, January 27, 2021.
---------------------------------------------------------------------------
The ban on onshore leasing alone will kill 32,700 jobs this year,
growing to 58,676 jobs destroyed annually by the end of President
Biden's term. \8\ Similarly, $4.95 billion in Gross Domestic Product
(GDP) and $1.3 billion in tax revenue lost in the first year will grow
to $33.5 billion and $8.3 billion lost, respectively, by the end of his
term. The economic impact will be felt primarily in rural communities
in the eight Western States that represent over 97 percent of Federal
onshore oil and natural gas production.
---------------------------------------------------------------------------
\8\ ``The Fiscal and Economic Impacts of Federal Onshore Oil and
Gas Lease Moratorium and Drilling Ban Policies'', Dr. Timothy J.
Considine, University of Wyoming on behalf of the Wyoming Energy
Authority, December 14, 2020.
---------------------------------------------------------------------------
Although the ban is characterized as a ``pause'' on just new
leasing, the Executive order directs a wide-ranging analysis of all
Federal oil and natural gas exploration and production activities, not
just leasing.
The comprehensive review will be a years-long analysis with the
ultimate goal of stopping or at least severely curtailing all oil and
natural gas development on new and existing leases. If taken to the
ultimate goal of banning all Federal onshore oil and natural gas, by
2040 annual job losses would be 351,554 and the cumulative losses over
20 years would total $300 billion in wages, $670.5 in GDP and $159
billion in State tax revenues. Rural communities in the West will bear
the brunt as funding for education, roads, public safety, and other
vital services dries up.
The impacts of the President's leasing ban accumulate quickly in
the first year because of the complex nature of Federal development and
the interlocking land and mineral ownership of the West. The leasing
ban is already affecting existing projects awaiting adjacent leases. It
will affect Indian, State, and private horizontal wells that cannot
avoid Federal minerals that lie along their laterals. New Federal
leases are necessary to move forward with projects on existing leases
in both these common situations. By isolating adjacent lands, a blanket
Federal leasing ban affects development of tribal and Indian allottee
lands, despite the reassuring statement that the ``order does not
restrict energy activities on lands that the United States holds in
trust for Tribes.'' Companies cannot efficiently develop pockets of
tribal and Indian minerals isolated amongst Federal lands, and the
energy tribes that wish to develop their oil and natural gas resources
will be negatively impacted. Depriving the energy tribes of their
primary source of economic activity is contrary to environmental
justice goals and ensuring a fair economy that works for everyone.
Duchesne County, Utah, is a good example of a western rural
community that will be adversely affected. The county is the size of
Rhode Island and home to 20,000 people. Its land surface is comprised
of 65 percent Federal and 18 percent Uintah and Ouray Indian
Reservation. \9\ The county and Ute Indian Tribe rely heavily on oil
and natural gas development, which is why both came out strongly in
support of oil and natural gas development on Federal and tribal lands.
\10\
---------------------------------------------------------------------------
\9\ ``Duchesne County Resource Assessment'', USDA Natural
Resources Conservation Service, August 2005.
\10\ See the Duchesne County Commission resolution and Ute Indian
Tribe letter available on our Western Voices page.
---------------------------------------------------------------------------
There are similar rural counties across the West that have a
majority of public lands and a similar reliance on oil and natural gas,
such as Rio Blanco, Colorado (75 percent Federal lands, 85 percent
county revenue from oil and natural gas), \11\ and Sweetwater County,
Wyoming (90 percent of the budget comes from fossil fuel taxes.) \12\
Rural communities in the Permian Basin of eastern New Mexico and the
San Juan Basin in the northwest will likewise bear a heavy economic
cost if the leasing ban remains in place. Because 63 percent of New
Mexico's production is Federal and the State stands to lose $709
million in education funding from just a 10 percent decline in
production, Governor Michelle Lujan Grisham has opposed the leasing
ban. \13\
---------------------------------------------------------------------------
\11\ Testimony of Rio Blanco County Commissioner Shawn Bolton
before the House Committee on Natural Resources, April 20, 2016.
\12\ ``Facing a Reckoning, Wyoming Wrestles With a Transition From
Fossil Fuels'', NPR, February 10, 2021.
\13\ Governor Lujan Grisham's letter to President Biden, March 15,
2021.
---------------------------------------------------------------------------
Federal Offshore Leasing Ban
Although Western Energy Alliance represents the landlocked Rocky
Mountain West, I point the Committee to a study by the National Ocean
Industry Association (NOIA) that finds the offshore leasing ban will
kill 102,000 jobs, $9.2 billion in GDP, and $1.8 billion in government
revenue annually. \14\ Further, $300 million that would otherwise go in
the Land and Water Conservation Fund (LWCF) will be lost. Offshore oil
and natural gas royalty and leasing revenue is the sole source of
revenue for the LWCF.
---------------------------------------------------------------------------
\14\ ``The Economic Impacts of the Gulf of Mexico Oil and Natural
Gas Industry5'', Energy & Industrial Advisory Partners on behalf of
NOIA.
---------------------------------------------------------------------------
Conservation Funding
Conservation is an impact that I do not believe President Biden was
advised of before he signed the order banning Federal leasing. Under
the Great American Outdoors Act (GAOA) passed by Congress in an
overwhelming bipartisan fashion last summer, $1.9 billion annually,
predominantly from Federal oil and natural gas leasing and royalty
revenue, is available for conservation and infrastructure in national
parks, national wildlife refuges, Bureau of Land Management lands, and
Bureau of Indian Affairs schools. The act also permanently funds the
LWCF to the tune of $900 million annually for the first time in its 56-
year history.
Since the Federal oil and natural gas program is almost exclusively
the source of this funding, President Biden is risking $2.8 billion
annually for national park and public lands conservation and
infrastructure. That funding could support 108,364 jobs in rural
communities near national parks and other public lands across the
entire country. \15\ Interior Secretary Haaland just announced the
distribution of $1.6 billion this year from GAOA funds, \16\ including
to State recipients that do not contribute oil and natural gas royalty
revenue: \17\
---------------------------------------------------------------------------
\15\ ``Restoring Parks, Creating Jobs'', The Cadmus Group on
behalf of Pew Charitable Trusts, June 2019.
\16\ ``Interior Invests $1.6 Billion To Improve Infrastructure on
Public Lands and Tribal Schools'', Department of the Interior Press
Release, April 2, 2021.
\17\ ``National Park Deferred Maintenance Needs'', The Pew
Charitable Trusts, November 11, 2020.
---------------------------------------------------------------------------
Virginia--$247.5 million
North Carolina--$153.8 million
New York--$50.5 million
Washington--$50.3 million
New Jersey--$28.3 million
Massachusetts--$25.4 million
Oregon--$12.5 million
Western Energy Alliance urges the Committee to help us convince the
President to overturn these policies that disproportionately impact
rural communities in the West. We ask that you also consider the
conservation impact across the entire country. Thank you.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM WILLIAM J. (BILL) BYNUM
Q.1. In your written testimony, you noted your support of the
Congressional Review Act resolution to reverse the OCC's ``True
Lender'' rule. Can you please describe the ways in which that
rule, if allowed to go into effect, would impact the
communities your institution serves?
A.1. Given the experiences of our members, the OCC ``true
lender'' rule if allowed to go into effect would add to the
burdens of high-cost lending in our region. In all five Deep
South States, high-cost lenders, such as payday and car title
lenders, are already saturating our communities. For example,
in 2017 in Tennessee, there were over 1,200 payday loan
storefronts, more than McDonald's and Walmart locations
combined. \1\ In terms of fees drained by payday and car title
lenders, Mississippi, Alabama, Louisiana, and Tennessee are in
the top 10 States, and high-cost lenders drain more than $1.6
billion every year from low-income borrowers in these four
States. \2\
---------------------------------------------------------------------------
\1\ Metro Ideas Project, ``Fighting Predatory Lending in
Tennessee'', 2017 https://metroideas.org/projects/fighting-predatory-
lending-in-tennessee/.
\2\ Center for Responsible Lending, ``Payday and Car-Title Lenders
Drain Nearly $8 Billion in Fees Every Year'', April 2019, https://
www.responsiblelending.org/sites/default/files/nodes/files/research-
publication/crl-statebystate-fee-drain-apr2019.pdf.
---------------------------------------------------------------------------
The rule would facilitate lenders' evasion of Arkansas'
voter-affirmed Constitutional interest rate limits of 17
percent, a protection which saves over $137 million in year in
fees otherwise drained by high-cost lenders. \3\ The benefits
of Arkansas's law are documented in a recent report about how
borrowers are faring several years after the enforcement of the
rate cap. As one person said, they are doing ``[m]uch better
financially. \4\ You don't continue to repeat the vicious
cycle.'' \5\ Beyond Arkansas, other State law protections in
our region are at risk, such as but not limited to, Louisiana's
rate cap for consumer installment loans. In recent years,
payday lenders and high-cost lenders have made attempts to move
legislation that would undue these caps in Arkansas and
Louisiana, but thankfully, these efforts have failed to gather
the support needed by the respective State legislatures to come
to fruition. The OCC must not override the policy decisions of
the States as it is doing with this rule.
---------------------------------------------------------------------------
\3\ Arkansas Constitution of 1874 Amendment 89, 3. Maximum
interest rate on other loans. https://codes.findlaw.com/ar/arkansas-
constitution-of-1874/ar-const-amend-89-sect-3.htm.
\4\ Center for Responsible Lending, ``Shark-Free Waters: States
Are Better Off Without Payday Lending'', April 2019, https://
www.responsiblelending.org/research-publication/shark-free-waters-
states-are-better-without-payday-lending.
\5\ Southern Bancorp, ``Into the Light: A Survey of Arkansas
Borrowers Seven Years After State Supreme Court Bans Usurious Payday
Lending Rates'', May 2, 2016, https://banksouthern.com/sbcp/into-the-
light/.
---------------------------------------------------------------------------
HOPE's concerns about the harms of these loans are not
hypothetical. HOPE members have been trapped by loans
facilitated by rent-a-bank partnerships, putting their economic
success in jeopardy and thus frustrating our mission to build
wealth among low-income communities and communities of color in
the Deep South. From our members' experiences, at least three
key themes of harmful lending practices emerge:
Despite claims to the contrary, rent-a-bank loans
are going to people who already have credit.
Rent-a-bank loans are deepening people's financial
burdens, not relieving them.
There is a clear disregard for borrowers' ability
to repay, evidenced either by making new loans when
someone is already struggling with another and repeat
relending or refinances.
These harms are neither exclusive nor exhaustive. We hear
first-hand from our members and people in the communities where
our branches are located about the troubles caused by
unaffordable high-cost loans, such as difficulty paying other
bills, the psychological stress caused by unaffordable debt,
and the subsequent inability to build wealth in the future.
The devastating financial consequences of loans made via
the rent-a-bank arrangements would be troubling for anyone, but
they are particularly pronounced in the Deep South, where
economic inequality is deeply entrenched and persistent poverty
is prevalent. The five States of our region all have higher
rates of unbanked and underbanked populations than the national
average. The high-cost loans that will occur through the OCC
``true lender'' rule will only serve to increase these rates as
people are exposed to practices that ultimately damage their
financial standing.
Q.2. In response to questioning from Chairman Brown, you spoke
of the ``devastating rules put in place by the OCC'' related to
the Community Reinvestment Act. Please describe how this
current rule would impact access to credit for families of
color and what improvements can be made as the agencies revisit
the CRA rulemaking in the coming months.
A.2. The Community Reinvestment Act (CRA) has long been a
vital, though imperfect, tool for lessening financial service
gaps in low-income communities, rural communities, and
communities of color in the Deep South. The ability to attract
and leverage CRA-accountable investment has been critical to
HOPE's work on behalf of to support underbanked people and
communities. Building on this experience, HOPE's
recommendations focus on significantly increasing lending,
services, investment and accountability by banks in meeting the
financial service needs of rural, high poverty areas.
The OCC's final CRA rule in the totality of its parts,
essentially moves the CRA--and economic opportunity for our
communities--further out of reach in the Deep South communities
we serve. The change to dollar value rather than number for
measuring community development activities will incentivize
fewer, larger projects potentially reducing the smaller, more
intensive investments that Deep South communities so often
need. This, combined with a multiplier and a low threshold for
Community Development Activities would actually result in fewer
CDFI investments. A proposed balance sheet evaluation, would
allow banks to count investments that are already on their
books, year after year, with little regard to recent or new
investments over time.
A reduction of bank investments will result in a
significant reduction of capacity for CDFI credit unions, loan
funds, and banks to lend in low-income communities and
communities of color, particularly those not reached by banks.
CRA-motivated bank investments are a significant source of CDFI
capital. To understand the importance of bank investments in
CDFI capitalization, HOPE analyzed information reported by CDFI
Fund awardees to the U.S. Treasury. Based on HOPE's analysis of
CDFI Fund Awardees from 2015 to 2017, bank investments
accounted for nearly 20 percent of total capitalization--
essentially $1 out of every $5 dollars of capital--compared to
philanthropy which accounted for about 2 percent. \6\ CRA-
motivated investments by banks into CDFIs are vital; however,
the benefit of this capital is not evenly or equitably shared.
In FY2017, there were 315 CDFI Fund awardees. Even though
minority-owned CDFIs accounted for 27 percent of these CDFIs,
they held only 11 percent of the total $34 billion in bank-
infused capital held. White-led CDFIs, accounted for 66 percent
of CDFI Fund awardees, and held 89 percent of that bank-infused
capital. \7\
---------------------------------------------------------------------------
\6\ Bill Bynum and Diane Standaert, Comments to the OCC, Notice of
Proposed Rulemaking, Community Reinvestment Act Regulations, Docket ID
OCC-2018-0008, RIN 3064-.AF22, April 8, 2020, available at http://
hopepolicy.org/blog/hope-opposes-proposed-changes-to-the-community-
reinvestment-act/.
\7\ Capital held, as required to be reported to the CDFI Fund for
CDFI Fund awardees, represents the amount of investment capital
received from the CDFI Fund at reporting end. Investment capital
includes idle capital that is available to lend and invest, deployed
capital, and capital only reflected on the organization's balance
sheet. CDFIs are required to designate the capital investments by
source, and in this analysis, we use ``cap-Bank'' designation, which is
capital ``received by banks or other regulated financial institution.''
Community Development Financial Institutions Fund. ``CDFI Institution
Level Report Instructions CIIS 15.0''. Pp. 9-11.
---------------------------------------------------------------------------
Another troubling element of the OCC rule is the use of
deposit-only thresholds to determine new assessments areas
beyond the banks' physical location. HOPE's analysis has shown
that the deposit-only metric will bypass already underserved
communities, such as persistent poverty communities and
communities of color, thereby, again, reducing bank incentive
for investment in these areas. By their very nature, low-income
communities have very little money and therefore very few
deposits. The small Delta town of Itta Bena, Mississippi, where
HOPE is the only depository institution, provides a good
example. Itta Bena has a 42 percent poverty rate, median income
of about $20,000, and 91 percent of its residents are Black.
HOPE estimates the total deposit potential in Itta Bena is
approximately $1.1 million. It will be nearly impossible for
such areas to meet a deposit-based threshold to qualify as a
new assessment area under the OCC's rule.
Ultimately, the OCC's overhaul of the CRA will move this
tool for incentivizing bank investment in distressed
communities further out of reach of the most financially
distressed places in the Deep South, ultimately widening
existing racial and economic inequality. HOPE supports the
Congressional Review Act and other efforts to roll back the
OCC's CRA rule.
By contrast, as described further in HOPE's comments to the
Federal Reserve Board of Governor regarding its CRA proposal, a
reformed CRA should explicitly state and work towards an
objective of significantly expanding--as much as three fold--
bank lending, services and investment in low-income communities
and communities of color. \8\ In addition to increasing the
amount of bank activity, a reformed CRA must also ensure these
investments actually reach people and communities that have
both been historically underserved and divested of their
resources. A key way the CRA can help do this is to expand
assessment areas beyond banks' physical locations, and to
delineate those assessment areas based on both deposit and
lending activity. Another strategy incentivizes investments
into designated areas of need, based on low levels of per
capita mortgage and small business lending. These designated
areas of need could be both inside and outside of a bank's
assessment area. And, finally, the CRA should incent and guide
investments into CDFIs and MDIs with strong, demonstrated track
records of reaching underserved communities, particularly rural
persistent poverty communities and communities of color. One
way the CRA can do this is to adopt into its framework, the
definition of ``minority lending institutions,'' as defined by
the Consolidated Appropriations Act of 2021.
---------------------------------------------------------------------------
\8\ Bill Bynum, Diane Standaert, and Sara Miller, Comments to the
Federal Reserve Board of Governors, Advance Notice of Proposed
Rulemaking, Community Reinvestment Act Regulations, Docket No. R-1723
and RIN 7100-AF94, Fed. 16, 2021, available at http://hopepolicy.org/
blog/hope-submits-comment-to-federal-reserves-proposed-changes-to-the-
community-reinvestment-act/.
---------------------------------------------------------------------------
Race should be included in the specific metrics by which
banks are evaluated for CRA purposes. Race is inextricable from
the CRA's history, purpose, and the ``ongoing systemic inequity
in credit access for minority individuals and communities.''
Currently, more than 98 percent of banks pass their CRA exam,
despite the glaring racial and economic inequities in the
banking system.
The racial wealth gap is deep, and the economic and social
benefits of closing it are vast. The financial system,
particularly banks' lending practices, has been a driving
factor in this gap, and must play a significant role in closing
it. Closing the gap in access to capital for people and
communities of color is a critical pathway to closing the
racial wealth gap. Lenders and communities alike will benefit
from the resulting economic activity from a fairer, more robust
marketplace. The CRA can be a helpful tool in guiding banks'
actions to ensure they repair, rather than repeat, centuries of
racial and economic inequality.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
FROM WILLIAM J. (BILL) BYNUM
Q.1. In your testimony, you advise the Small Business
Administration and banks to increase the accessibility of their
programs and products to historically underserved businesses.
In addition to your recommendation of increasing investment in
CDFIs and MDIs, what other specific strategies and practices
would you recommend to ensure SBA and bank products have more
equitable reach and serve the underserved?
A.1. There are a number of things SBA and banks can to increase
access to historically underserved businesses.
A few of these options include:
Ensure redress for small businesses that did not
receive the full benefit of Paycheck Protection Loans,
namely Schedule C filers. As described in my written
testimony, microbusinesses in which the owner is the
only employer were both locked out of the PPP program
during its first full week, and even once provided
access received unnecessarily small loans due to
underwriting guidelines requiring the use of net profit
rather than gross income. This exclusion these
microbusinesses in accessing PPP relief efforts
disproportionately affected small businesses owned by
people of color. For example, 96 percent of Black and
Latino-owned businesses in the Deep South fall into
this category, compared to 84 percent of White-owned
businesses. \1\ SBA should implement efforts to assess
the scope of this inequity and seek to deploy a grant
program available to these microbusinesses.
---------------------------------------------------------------------------
\1\ ``Hope Policy Institute Analysis of Statistics for Non-
Employer Firms by Industry, Sex, Ethnicity, Race, and Veteran Status
for the U.S. States, and Metro Areas: 2017'', Annual Business Survey
Program.
SBA should, across all of its grant and loan
programs, establish goals to ensure at least 10 percent
of its capital flows to persistent poverty communities,
and at a minimum evaluate the amount of loans and
grants are flowing to these communities, disaggregated
---------------------------------------------------------------------------
by rural and metro persistent poverty counties.
SBA must do must to ensure its programs reach Black
businesses, the level of lending to which is currently
unacceptable. For example, in Arkansas, for example,
from 2017 to 2020, just 1.5 percent in SBA 7(a) loans
went to Black businesses, even though Black-owned
businesses comprise 9 percent of businesses in the
State. \2\ Nationally, between 2015 and 2020, 28
percent of approved 7(a) loans went to minority-owned
businesses. \3\ However, when looking at Black
businesses alone just 2.5 percent of approved SBA 7(a)
loan capital went to Black borrowers ($3.7 billion out
of $144 billion). These levels are woefully in adequate
in light of a long-history of discriminatory and
exclusionary lending practices effecting Black
borrowers, communities, and businesses.
---------------------------------------------------------------------------
\2\ Precise Data Consulting, LLC, ``Arkansas Small Business Access
to Capital Study'', prepared for Winthrop Rockefeller Foundation and
Winrock International, June 2019, https://
d2yzrxf02jgvo7.cloudfront.net/files/capital?access-report-final-146-
7ecf.pdf.
\3\ SBA, ``Weekly Approvals Report With Data as of 09/30 for Each
FY'', https://www.sba.gov/sites/default/files/2020-10/WebsiteReport-
asof-20200930-508.pdf.
Banks should commit to tripling their current
levels of small business lending, services, and
investments into historically underserved businesses,
such as those owned by people of color and small
---------------------------------------------------------------------------
businesses located in persistent poverty communities.
Banks, and other lenders, should support the
expedient implementation of the Consumer Financial
Protection Bureau's rulemaking under Section 1071 of
the Dodd-Frank Wall Street Reform and Consumer
Protection Act. Robust and transparent data reporting
by lenders about the their small business lending
practices, particularly by race and gender, are
critical to ensuring a fair marketplace and closing
existing capital gaps for historically underserved
businesses.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
FROM WILLIAM J. (BILL) BYNUM
Q.1. Thank you, Chairman Brown, for holding this important
hearing focused on our rural communities. I recently did a tour
across rural Southwest Georgia with Congressman Sanford Bishop
to visit with my farmers. At every stop, I asked these farmers
about their broadband connectivity. Many attendees on this tour
said their connection was either spotty or too expensive.
Considering the State overall, approximately 10 percent of
Georgians live in areas where there is no broadband connection
and almost 39 percent of Georgians live in an area where there
is only one internet provider. Issues with broadband access and
affordability prevent rural communities from fully accessing
telehealth services, participating in virtual learning, and
connecting to e-commerce opportunities.
Mr. Bynum you also mentioned broadband in your written
testimony, referring to it as ``critical infrastructure'' that
is connected to economic mobility. How can access to a reliable
and affordable broadband connection affect the economic
mobility of families in rural communities? If Congress were to
make significant investments in the expansion of rural
broadband, how would this impact the economic mobility of
families in rural communities?
A.1. Substantial investments in broadband infrastructure will
increase the financial inclusion of rural communities, both in
increasing access to basic financial needs for individuals and
small businesses, but also in the opportunity to create jobs
and attract additional investments in to these areas.
Even before COVID, affordable high-speed internet was rural
communities' lifeline to basic needs, such as education or
online bill paying. This became even more essential during the
pandemic. Deep South rural communities have less access than
rural areas in the U.S. as a whole, thus disproportionately
hindering their access to life saving services or basic
infrastructure to grow their business. Table 1. Roughly 40
percent of rural residents of Arkansans, Louisiana, and
Mississippi, lack the most basic level of broadband access,
compared to 25 percent of rural residents nationally.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
This broadband gap matters for understanding the reach of
financial services into these communities, underscoring the
importance of bank branches and recognizing that online
technology alone will not close the gaps in financial access.
It also matters for assessing whether and how COVID-19 relief
dollars will reach these communities, as many assistance
programs, from rent relief to small business relief, require
internet access to both apply for and receive the funds.
Finally, given the proliferation of e-commerce and other
digital enterprises, the absence of high-speed internet limits
the full participation of rural communities in both the U.S.
and global economy.
---------------------------------------------------------------------------
\4\ https://crsreports.congress.gov/product/pdf/RL/RL30719/101
(December 2017 data, minimum speed of 25 Mbps/3 Mbps).
---------------------------------------------------------------------------
Many low-income and rural communities have been caught in
generations-long cycles of poverty and have little equity on
which to build. More communities need access to prime market
lending in order to sustain and build wealth.
Q.2. Please highlight some of the challenges unbanked and
underbanked face as it relates to building wealth and a solid
financial foundation for growth, in the absence of equity.
Please include any legislative reforms that could help these
communities accrue equity and a foundation for financial
success.
For a host of reasons, including online and technology-
enabled banking, we have seen an apparent acceleration of
banking sector consolidation, and retrenchment of bank
branches, leaving what is commonly referred to as banking
deserts. What can we learn as we grapple with the emergence of
banking deserts today, from your research into the
circumstances and outcomes of those who live lived in banking
deserts decades ago, enabled by Jim Crow laws?
A.2. Much of the Deep South is considered a banking desert. For
example, of the 20 largest banks in the Southeast, analysis
conducted by the Federal Reserve Bank of Atlanta, found that
only one bank has branches in the Mississippi Delta. \5\ In the
absence of branches, large bank Community Reinvestment Act
assessment areas fail to reach into rural communities--limiting
another source of capital for redevelopment. \6\ As currently
structured, absent a physical location in the community, a bank
has no obligation to lend or invest there. This means
communities in banking deserts, such as those in the Deep
South, have harder time attracting the resources needed to
finance community needs such as affordable housing, hospitals,
museums, or other job-creating activities. Analysis conducted
by the Opportunity Finance Network underscores this phenomenon
with Community Development Financial Institutions. In looking
specifically at rural Community Development Financial
Institutions (CDFIs), only 31 cents of every dollar borrowed by
rural CDFIs came from a bank. In contrast, over half of
borrowed funds from urban CDFIs came from banks. \7\ Rural
communities also bear the heaviest burden of bank closures and
within rural communities those bank closures most likely to
occur in communities with a higher share of Black residents.
\8\
---------------------------------------------------------------------------
\5\ Federal Reserve Board of Atlanta, ``Community Reinvestment
Act: Geographies and Strategies in the Southeast'', Aug. 2015, https://
www.atlantafed.org/community-development/publications/partners-update/
2015/04/150824-cra-geographies-and-strategies-in-southeast (accessed
Apr. 18, 2021).
\6\ Housing Assistance Council, CRA in Rural America, ``CRA in
Rural America'', 2015, http://www.ruralhome.org/sct-information/mn-hac-
research/mn-rrr/1090-rrr-cra-in-rural-america.
\7\ Opportunity Finance Network, ``Bank Investment Falls Short in
Rural America'', Feb. 2020, available at https://ofn.org/advocacy-
tools-and-fact-sheets.
\8\ Board of Governors of the Federal Reserve System,
``Perspectives From Main Street: Bank Branch Access in Rural
Communities'', Nov. 2019, https://www.federalreserve.gov/publications/
files/bank-branch-access-in-rural-communities.pdf.
---------------------------------------------------------------------------
One natural consequence of this trend is that the Deep
South is home to the highest rates of unbanked households in
the country. Even though nationally, the unbanked rate is the
lowest it has been since the Great Recession (5 percent), for
Black households in Mississippi and Louisiana, the rate is over
20 percent. \9\ Likewise, for rural communities the Deep South
rate is higher than rates nationally (Table 1). Notably, over
40 percent of the population in Louisiana and Mississippi's
rural counties are people of color. \10\
---------------------------------------------------------------------------
\9\ FDIC, ``2019 How America Banks: Household Use of Banking and
Financial Services'', available at www.economicinclusion.gov.
\10\ U.S. Census Bureau, American Community Survey, 2017.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Finally, mass incarceration plays a role here too. As
explored further in HOPE's recent paper, ``Examining the
Intersection Between Criminal Justice and Financial Services in
the Deep South'', four out five Deep South States are in the
top 10 States with the highest incarceration rates in the
county. \11\ Many of these same communities already experience
high rates of unbanked and underbanked households. See Map 1.
As just one example of the intersection of these two systems
which contribute to financial exclusion: people reentering
society often do not have even the basic identification in
order to open a bank account. This is either because they are
not provided one upon reentry or because that identification,
such as a driver's license, is taken away as a penalty for
unpaid criminal justice debt.
---------------------------------------------------------------------------
\11\ Calandra Davis, ``Examining the Intersection Between Criminal
Justice and Financial Services in the Deep South'', Hope Policy
Institute, Jan. 13, 2021, http://hopepolicy.org/manage/wp-content/
uploads/Criminal-JusticePaper.pdf.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
These communities face not just an absence of financial
capital, but also contend with predatory lending practices,
which extract it. Payday and car title lenders extract over
$1.6 billion in fees annually from Deep South residents trapped
in loans with annual interest rates region as high as 500
percent. \12\ Rent-a-bank arrangements in which online lenders
partner with out-of-State banks to subvert State consumer
protection laws to make high-cost loans in the region also
impose high costs on the region's residents. \13\ Strong
consumer protections a such as a Federal 36 percent rate-cap,
repealing the OCC's true lender rule, and strong rules by the
Consumer Financial Protection Bureau, will ensure support
people's financial stability by halting this billion-dollar fee
drain from already economically distressed communities.
---------------------------------------------------------------------------
\12\ Asset Center for Responsible Lending, ``Payday and Car-Title
Lenders Drain Nearly $8 Billion in Fees Every Year'', April 2019,
https://www.responsiblelending.org/sites/default/files/nodes/files/
research-publication/crl-statebystatefee-drain-apr2019.pdf.
\13\ Hope Policy Institute, ``HOPE Submits Comments Opposing OCC
True Lender Rule'', Sept. 2, 2020, http://hopepolicy.org/blog/hope-
submits-comments-opposing-occ-true-lender/.
---------------------------------------------------------------------------
As described further in my coauthored paper, ``Opening
Mobility Pathways by Closing the Financial Services Gap'',
strengthening investments into community development financial
institutions (CDFIs) and establishing universal basic accounts
for all Americans are cornerstones of a national strategy to
ensure economic opportunity. \14\ As noted in the paper,
---------------------------------------------------------------------------
\14\ Bill Bynum, Ed Sivak, and Diana Elliot, ``Opening Mobility
Pathways by Closing the Financial Services Gap'', U.S. Partnership from
Mobility to Prosperity, Feb. 2018, https://www.mobilitypartnership.org/
opening-mobilitypathways-closing-financial-services-gap.
encouraging or requiring all financial institutions
that receive Federal deposit insurance to offer all
customers a ``universal basic account,'' a free account
that is simple, transparent, and does not charge
overdraft or other hidden fees. The accounts would
ensure that all low-income Americans have access to the
financial tools and consumer protections inherent in
the banking system, and they would mitigate the impact
of high-cost and abusive financial practices. These
safe, affordable bank accounts could save the 15.6
million Americans adults who currently lack access to
such a service hundreds of dollars a year and tens of
thousands of dollars over their lifetimes. This money
could go toward food, housing, and other basic needs.
The savings would help millions of Americans better
serve as their own safety net, potentially decreasing
---------------------------------------------------------------------------
the need for public assistance.
In short, these unbanked/underbanked rates represent
opportunity gaps that, if closed can provide a pathway for
economic mobility and resiliency. They signal the opportunity
to savings billions in dollars of fees, and greater control of
finances, and importantly a pathway for building wealth and
economic opportunity in the region.
One final solution for building equity includes the
expansion of Down Payment Assistance programs. Given the well-
documented extent of the racial wealth gap, the widening of the
gap through disparate intergenerational wealth transfers and
the role of home ownership in building wealth for most
Americans, downpayment assistance grants represent a proven
strategy for overcoming barriers to home ownership when the
structural absence of savings prevents a person of color from
obtaining a mortgage. \15\
---------------------------------------------------------------------------
\15\ Urban Institute ``An Essential Role for Down Payment
Assistance in Closing America's Racial Homeownership and Wealth Gaps'',
April 2021, An Essential Role for Down Payment Assistance in Closing
America's Racial Homeownership and Wealth Gaps (urban.org).
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM STACY MITCHELL
Q.1. Your written testimony mentioned the role of financial
consolidation in depriving rural communities of capital and
investment. Last year, the Department of Justice solicited
comments on updating its Bank Merger Review Guidelines and
suggested that it intended to weaken those guidelines even
further by loosening the existing concentration thresholds that
are used to determine whether a merger would have an
anticompetitive effect in a certain geographic market.
Do you believe the current DOJ Bank Merger review process
has sufficiently protected rural communities from the negative
effects of financial sector concentration?
A.1. Rural communities have suffered as the financial industry
has undergone seismic consolidation over the past 40 years.
Consolidation has had outsized impacts in low- to moderate-
income communities, including many rural communities,
increasing the cost and reducing the availability of credit to
farmers, small businesses, and other borrowers, exacerbating
existing inequality. \1\
---------------------------------------------------------------------------
\1\ See, e.g., Comment of FTC Commissioner Rohit Chopra and
Professor Jeremy C. Kress to the U.S. Department of Justice, November
4, 2020.
---------------------------------------------------------------------------
Survey data from the Board of Governors of the Federal
Reserve System suggests that ``banking customers in rural areas
may be harmed if mergers in rural areas are treated more
leniently,'' and that rural communities have reported higher
costs to access financial services in part because branch
closures ``reduce rural consumers' choice alternatives and
increase rural banks' market power.'' \2\ The DOJ's permissive
approach to bank mergers has exacerbated the loss of bank
branches in rural areas and around the country.
---------------------------------------------------------------------------
\2\ ``How Do Rural and Urban Retail Banking Customers Differ?''
David Benson, Serafin Grundl, and Richard Windle, FEDS Notes, June 12,
2020.
---------------------------------------------------------------------------
For example, regulators including the DOJ's Antitrust
Division approved the merger between SunTrust and BB&T in 2019.
The merger was conditioned on the sale of 28 branches. As of
2020, however, the merged company had closed 175 branches and
planned to close at least 800 branches in the coming years. \3\
In March, the DOJ and bank regulators approved the merger of
TCF Financial and Huntington Bancshares, conditioned on the
divestment of 14 branches; those companies say they will
shutter nearly 200 branches postmerger. \4\
---------------------------------------------------------------------------
\3\ ``Back to Basics: The Principles of Bank Merger Review'',
Christopher E. Rhodes Jr., North Carolina Banking Institute 273 (2020)
\4\ ``Huntington, TCF To Close 198 Branches for Planned Merger'',
J.C. Reindl, Detroit Free Press, January 26, 2021
Q.2. I agree with FTC Commissioner Chopra and Professor Kress
that the current DOJ Bank Merger review processes ``are
woefully inadequate to protect consumers and the broader
economy,'' particularly in rural and low-income areas, and that
the current guidelines ``have failed to protect U.S. consumers
and businesses from the negative consequences of bank
consolidation.'' \5\
---------------------------------------------------------------------------
\5\ Comment of FTC Commissioner Rohit Chopra and Professor Jeremy
C. Kress to the U.S. Department of Justice, November 4, 2020.
---------------------------------------------------------------------------
Do you believe that the merger review process can be
strengthened so that bank mergers occur only when they are in
the public interest? If so, do you have any specific
recommendations for ways these guidelines can be improved.
A.2. Reviews of bank mergers can and should be strengthened to
ensure they serve the interest of depositors, borrowers, and
the overall public. One way to help eliminate harmful mergers
and slow further industry consolidation would be to lower the
current deposit share cap for bank mergers. Under current law,
a bank merger is barred if the combined bank would hold more
than 10 percent of the country's deposits. This current cap has
already allowed banks to expand to dangerous proportions. This
threshold could be lowered or changed to a significantly
smaller portion of GDP in order to prevent further
consolidation.
The current Herfindahl-Hirschman Index screen of 1800/200
concentration ratio has not prevented banking mergers that have
led to significant consumer and economic harm. This threshold
could be lowered to better screen for harmful mergers,
particularly in rural communities and elsewhere without access
to robust banking competition.
Another, stronger approach would be for the DOJ should
implement bright-line structural thresholds for rural banking
mergers to prevent communities from losing access to financial
resources through mergers.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
FROM STACY MITCHELL
Q.1. Many low-income and rural communities have been caught in
generations-long cycles of poverty and have little equity on
which to build. More communities need access to prime market
lending in order to sustain and build wealth.
Please highlight some of the challenges unbanked and
underbanked face as it relates to building wealth and a solid
financial foundation for growth, in the absence of equity.
Please include any legislative reforms that could help these
communities accrue equity and a foundation for financial
success.
A.1. People who are unbanked or underbanked often must rely on
high-cost, predatory alternatives, such as check-cashing
outlets and high-cost online lenders. This further exacerbates
poverty, and makes it impossible to build the savings and
credit needed to purchase a home, obtain financing for a small
business startup, or invest in education.
Policy approaches that would help communities that lack
financial institutions include postal banking, more capital and
support for community development financial institutions
(CDFIs), and program to help more communities create credit
unions. In addition, lawmakers should crack down on predatory
lenders.
Q.2. For a host of reasons, including online and technology-
enabled banking, we have seen an apparent acceleration of
banking sector consolidation, and retrenchment of bank
branches, leaving what is commonly referred to as banking
deserts. What can we learn as we grapple with the emergence of
banking deserts today, from your research into the
circumstances and outcomes of those who live lived in banking
deserts decades ago, enabled by Jim Crow laws?
A.2. While technology-enabled banking has contributed to the
growth of ``banking deserts,'' my read of the data is that the
more significant driver of this trend is the decline of locally
owned, community-based financial institutions, which has
disproportionately affected rural, low-income, and Black and
Brown communities.
Between 2006 and 2018, the U.S. lost a staggering 41
percent of its community banks. Today, there are just over
5,000 community banks and their market share stands at 17
percent. \1\ According to FDIC data, nearly 1,100 counties,
more than one-third of the total, now lack a community bank, up
from about 650 counties in 2006. Most of these counties are
rural, and the data show that counties with a larger share of
African-Americans have been especially hard hit by these
losses. \2\
---------------------------------------------------------------------------
\1\ Institute for Local Self-Reliance analysis of data from the
Federal Deposit Insurance Corporation (FDIC) and the National Credit
Union Administration (NCUA).
\2\ Ibid.
---------------------------------------------------------------------------
In my view, the key to solving the problem of banking
deserts is not to try to prod or cajole the big banks into
serving communities that they clearly have no interest or
motivation to serve. Instead, we should adopt policies that
dramatically reduce the size and market dominance of these big
banks and create a regulatory environment in which community
based financial institutions can thrive.
To this end, we should reconsider the Federal policy
changes in the 1980s and 1990s (including the Riegle Neal
Interstate Banking and Branching Efficiency Act and the Gramm-
Leach-Bliley Act) that led to consolidation and the decline of
community banks.
While the Dodd-Frank Act of 2010 purported to curb the
excesses of an outsized financial industry, the law in many
ways did the opposite. Dodd-Frank had important regulatory
successes, including the Consumer Financial Protection Bureau,
but it essentially doubled-down on the policy status quo. It
failed to seriously challenge big bank power. It also created
new compliance burdens for community banks, credit unions, and
bank startups, including lengthy quarterly regulatory filings.
Since the passage of Dodd-Frank, the market share of the
megabanks has swelled.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
FROM MARCIA ERICKSON
Q.1. Thank you, Chairman Brown, for holding this important
hearing focused on our rural communities. I recently did a tour
across rural Southwest Georgia with Congressman Sanford Bishop
to visit with my farmers. At every stop, I asked these farmers
about their broadband connectivity. Many attendees on this tour
said their connection was either spotty or too expensive.
Considering the State overall, approximately 10 percent of
Georgians live in areas where there is no broadband connection
and almost 39 percent of Georgians live in an area where there
is only one internet provider. Issues with broadband access and
affordability prevent rural communities from fully accessing
telehealth services, participating in virtual learning, and
connecting to e-commerce opportunities.
You noted in your testimony, ``The lack of housing and
affordable, reliable broadband contributes to the lack of
workforce for our small communities.'' How would our rural
workforce be strengthened by ensuring that reliable broadband
is both accessible and affordable? What would this connectivity
mean for the prosperity of our rural communities?
A.1. Reliable and affordable broadband is critical to our rural
communities. Our family farming operation depends on broadband
for a successful season. Broadband is essential to follow and
evaluate commodity markets, make production decisions, and
become more efficient. Access to reliable internet is also
essential for field imagery to reduce pesticide and insecticide
use. Broadband helps farmers achieve optimal yield and maximize
their profits.
Broadband is also critical to the success of our businesses
in rural America. My daughter-in-law opened an online boutique
that has allowed her to be at home with her young children
rather than commute one hour to work. This business would not
have been possible without broadband. All sales, marketing, and
accounts receivable are fully based on the internet. She does
not have a physical storefront. In a community with a
population of 300, this would not have been possible without
access to internet. Yet, many communities and individuals in
rural America do not have this opportunity due to the absence
of broadband.
As the Chief Executive Officer of GROW South Dakota, a
statewide nonprofit, that provides community, housing, and
economic development across the State, our company also relies
on broadband to serve our customers. For instance, when
NeighborWorks America provided us downpayment assistance funds,
our organization was able to provide assistance to over 200
individuals throughout the State in a very short time period
via online applications. When a customer did not have access to
broadband, we provided an alternative method of applying for
assistance. This gap in access needs to be closed to give every
person fair access to opportunities.
Many of today's value-added agricultural industries prefer
to locate in our segments of Rural America, due to the
availability of livestock or crops, as well as quality land. In
most cases, such value-added industries are located in wide-
open geographic areas, which may lie within gaps of broadband
service, or in difficult to serve topography. This also
exacerbates the housing challenges of our region in addition to
technology challenges. The areas that still need available and
reliable broadband infrastructure are the most difficult to
install and serve.
South Dakota Governor Noem reported that ``half of South
Dakota's counties have rural areas where one in four people do
not have adequate internet access. Some counties consist of
rural areas where half the residents don't have reliable
access'' (Yost, 2021, para. 2). Not having reliable internet
access affects businesses greatly. Governor Noem stated that we
must ``close the broadband gap to ensure South Dakotans can
work and hire locally while selling globally'' (para. 2). This
is true across the United States. We must invest in broadband
to further our workforce opportunities and to remain
competitive as a Nation.
In a written comment to the Federal Communications
Commission, Marietta Rodriguez, President and CEO of
NeighborWorks America noted that the NeighborWorks network have
focused together on broadband needs in affordable multifamily
homes and in communities lacking broadband access--particularly
through our network's Rural Initiative. Large swaths of rural
areas, tribal areas, and areas of persistent poverty lack
access to reliable high-speed internet (Rodiguez, NeighborWorks
America President and CEO, 2021). As part of the advisory
committee for the NeighborWorks Rural Initiative, I am fully
aware of the challenges of broadband access throughout rural
areas of America.
Federal sources are needed to help close the broadband gaps
and provide fully accessible and affordable means for farm
operations, business growth and success, nonprofits, and also
areas of telehealth, and education. For our communities to be
fully competitive, advancements in broadband are needed.
Broadband is necessary to all, and high speed access that is
affordable is critical to providing services in rural America.
Now is the time to make broadband investments.
Q.2. Please highlight some of the challenges unbanked and
underbanked face as it relates to building wealth and a solid
financial foundation for growth, in the absence of equity.
Please include any legislative reforms that could help these
communities accrue equity and a foundation for financial
success.
A.2. Rural and minority communities face challenges as it
relates to building wealth for all residents but especially for
the unbanked or underbanked. Unbanked individuals need access
to affordable and mainstream financial systems to build wealth.
One area that is directly related to building wealth is home
ownership. However, current market conditions have put home
ownership out of reach for many.
In a May 14, 2021, article on SDnewswatch.org, Danielle
Ferguson reported, ``First-time homebuyers or those looking for
properties at an affordable price have found themselves in
bidding wars with others willing to pay $20,000 to $60,000
above list price. Everyone is competing for a smaller pool of
homes on the market, and some South Dakota homes are selling in
less than two days'' (Ferguson, 2021, para. 3). This frenzy has
created frustration for many would-be homeowners, but
especially for those that lack access to traditional lending
institutions.
Without prior banking relationships, low to moderate income
individuals seeking home ownership have even less of a chance
for home ownership with the current housing market.
Ferguson further states, ``The frenzied market is pushing
up home prices and making it more difficult for low- to medium-
income residents to achieve home ownership. The $45,000 average
yearly income in South Dakota cannot compete with the
purchasing power of a six-figure, out-of-State salary. Those
longtime residents who normally would be able to purchase a
home are forced to remain in rental properties, further putting
a limit to the available rental units for families in need of
affordable housing'' (para. 5).
The proposed Neighborhood Homes Investment Act (NHIA) would
help address some of the gaps. However, as much flexibility as
possible is necessary with the implementation of this
initiative. The areas that are eligible for assistance need to
be widened and available to individuals with low to moderate
income regardless of location or census tract. The NHIA
information states, ``In markets where the `numbers don't
work'--e.g., it costs more to build or rehab a house than the
property can be sold for--owners will walk away from homes that
are no longer habitable and can't be refinanced or sold.
Without a financing tool to close the value gap, even the most
resourceful housing developers cannot (and will not) be able to
address the thousands of vacant R-1 zoned properties that
burden distressed neighborhoods'' (Neighborhood Homes
Coalition, n.d., para. 4). This is exactly what South Dakota is
experiencing across the State and in every community.
Another recommendation is to continue support of
accountable Community Development Financial Institutions
(CDFIs) by providing continued and greater access to low-cost
and longterm capital or grants. CDFIs are often the first stop
for unbanked or underbanked. These investments revolve, with
mission at the forefront, to provide a means for affordable,
quality, and safe housing. Access to mission-based lenders is
even more critical as the current market has caused an even
greater gap between the appraised value and sale cost. Costs to
build are also higher in rural and tribal areas of South Dakota
due to delivery costs and lack of local contractors. This gap
is widened further with the current housing markets. Many
communities lack the capacity to complete projects related to
workforce and housing efforts, and they are unable to support
economic development staff. CDFI's in these communities are
able to help build the capacity of the local economic
development staff and assist them in finding key resources for
their needs.
A second recommendation is to provide additional access to
capital to assist small businesses in rural, persistent poverty
areas, and minority areas so essential capital is available to
community residents. Currently, residents may need to travel
long distances to purchase basic necessities. Mission based
lenders, such as CDFI's, can help meet this need for access to
capital, but most Federal programs require a non-Federal match
which is difficult to obtain in these areas. Waiving or
eliminating the match requirement for CDFIs and other nonprofit
lenders would enhance the availability of lending products to
those that need the capital the most. Nonprofit lenders also
often pair their lending serves with free one-to-one coaching
and financial education which also can help to build credit
scores and promote individual financial health.
CDFI's play an important role in providing mortgage credit,
small business lending, and other services to minority and low
and moderate-income communities and individuals. Funding should
be allocated with a focus on both rural and minority areas to
help reach the underbanked. This funding should be partnered
with individual financial coaching. One of the best avenues for
this approach is through CDFI's that have a proven history.
Q.3. For a host of reasons, including online and technology-
enabled banking, we have seen an apparent acceleration of
banking sector consolidation, and retrenchment of bank
branches, leaving what is commonly referred to as banking
deserts. What can we learn as we grapple with the emergence of
banking deserts today, from your research into the
circumstances and outcomes of those who live lived in banking
deserts decades ago, enabled by Jim Crow laws?
A.3. As a practitioner in the field, delivering community,
housing, and economic development services, I have seen rural
community lending institutions struggle to keep their doors
open. Online banking is bringing change to our communities,
often creating intense competition for small banks. National
banks are gaining the market share from smaller banks and
credit unions. There is also a growing preference for digital
banking. Customers are moving their business to larger banks
due to their online capabilities. Many small banks are
disappearing. Part of the challenge of the disappearance of
community banks is the increasing costs to technology and
security, the minimum scale required for banking to be
competitive, along with increasing regulation.
These challenges are creating bank deserts. These deserts
are often found in areas of low-income, minority, and rural
populated areas. These banking deserts, where no banks are
located, are increasing. According to a Federal Deposit
Insurance Corporation survey, 8.4 million households in the
United States were unbanked. An additional ``24.2 million were
underbanked, meaning that the household had a checking or
savings account but also obtained financial products and
services outside of the banking system'' (Federal Deposit
Insurance Corporation, 2020, para. 3).
South Dakota is fortunate to be served by a system of high-
quality independent community banks and a few national banks.
Many are locally or regionally owned and known in our
communities. Supporting our independent community banks in
their roles to serve our small, remote, and geographically
isolated areas is the challenge.
Losing local banking institutions creates disadvantages
especially for minorities, persistent poverty areas, and rural
communities. There is also lost community and personal benefit.
Banking deserts limit adequate access to essential banking
services similar to what Jim Crow laws brought about. Banking
deserts create the same type of diminished or unequal access to
essential banking and financial services. Examples of lost
services are access to safety deposit boxes, making deposits or
cash withdrawals, and cashing checks. There is also lost
opportunities for mortgage loans and small business lending.
Marietta Rodriguez, NeighborWorks America President and
CEO, noted in a written comment to the Federal Communications
Commission, ``To the extent that a bank has branches, they
should be accessible to LMI area residents on an equitable
basis. Particularly in LMI communities, the physical presence
of a bank, and by extension the safe, regulated financial
products that it offers, is a necessary counteroffering to the
title lenders, payday lenders, and other similar enterprises
that frequently appear in these neighborhoods that offer unsafe
or predatory products. Personal interactions, such as the
chance to ask questions about unfamiliar lending or banking
procedures, cannot be duplicated by mobile banking or ATMs''
(Rodriguez, 2018, p. 9).
The personal connection with bank tellers remains prevalent
in South Dakota where individuals, especially low-income and
elderly, are often seen cashing their paycheck or Economic
Impact Payment Coronavirus Aid checks, or securing important
documents or items in safety deposit boxes. Without the local
banking institution, these individuals may resort to other
means of high cost services. Elderly and low-income individuals
often do not have access to internet or do not have the skills
needed to access online banking.
The FDIC reported, ``Households may rely on bank branches
not only to access an account but also for a variety of other
activities, such as individuals eligible for an Economic Impact
Payment authorized by the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) but without direct deposit information
on file with the Internal Revenue Service may have received
their payment by paper check or prepaid card. Some individuals
that received a paper check may have used a nonbank check
casher to get the funds'' (Federal Deposit Insurance
Corporation (FDIC), 2019, p. 55). The FDIC survey further notes
that the use of cash for paying bills in a typical month was
also higher among lower-income households, less-educated
households, younger households, Black households, Hispanic
households, American Indian or Alaska Native households,
working-age disabled households, and households with volatile
income (pp. 1-2).
The need for community banks remains; however, there
continues to be a decrease in banking institutions which leads
to further inequality of services. A November 2019 report of
the Federal Reserve System, Perspectives From Main Street: Bank
Branch Access in Rural Communities, found that between 2012 and
2017, there was a substantial increase in the number of
communities with no bank headquarters, the majority of which
were rural. Over the same 5-year period, over 40 percent of
rural counties lost branches, with some rural counties
experiencing considerable declines (Board of Governors of the
Federal Reserve System, 2019, p. 3).
According to the 2019 FDIC Survey, ``Physical access to
bank branches remains important despite the increase in the use
of mobile banking and the decline in the use of bank tellers
for account access. Households may rely on bank branches not
only to access an account but also for a variety of other
activities'' (FDIC, 2019, p. 55).
In a report from the National Community Reinvestment
Corporation, they compared data from 80 years ago with more
current economic and demographic information in areas of low-
to-moderate income (LMI), middle-to-upper income (MUI), or
majority-minority. ``To a startling degree, the results reveal
a persistent pattern of both economic and racial residential
exclusion. This is evidence that the segregated and
exclusionary structures of the past still exist in many U.S.
cities'' (Mitchell, 2018, para. 10).
To combat the decreasing numbers of community banks,
regulations should be reviewed and amended. Regulations have
made it increasingly difficult for community banks to operate
their business. Community banks are disproportionately affected
by increased regulation and are less able to absorb the
additional cost or may not have the staffing levels required to
oversee the regulation. For instance, many of our rural small
banks do not offer mortgage lending due to the complexity in
this service. The regulatory burden contributes to the loss of
local banking institutions and unequal access to needed
services. Equitable access to banking services, home mortgages,
and small business loans is needed for equitable inclusion and
wealth building.
References
Board of Governors of the Federal Reserve System. (2019,
November). ``Perspectives from Main Street: Bank Branch
Access in Rural Communities''. Washington, DC. Retrieved
May 18, 2021, from https://www.federalreserve.gov/
publications/files/bank-branch-access-inrural-
communities.pdf.
Federal Deposit Insurance Corporation (FDIC). (2019). How
America Banks: Household Use of Banking and Financial
Services, 2019 FDIC Survey. Retrieved from https://
www.fdic.gov/analysis/household-survey/2019report.pdf.
Federal Deposit Insurance Corporation. (2020, October 19).
FDIC. Retrieved May 18, 2021, from 2017 FDIC National
Survey of Unbanked and Underbanked Households: https://
www.fdic.gov/analysis/household-survey/2017/index.html.
Ferguson, D. (2021, May 14). South Dakota News Watch. Retrieved
from Frenzied housing market putting home ownership out of
reach for some South Dakotans: https://www.sdnewswatch.org/
stories/frenzied-housing-market-putting-homeownership-
further-out-of-reach-for-some-south-dakotans/.
Mitchell, B. (2018, March 20). NCRC National Community
Reinvestment Corporation. Retrieved from HOLC ``Redlining''
Maps: The Persistent Structure of Segregation And Economic
Inequality: https://ncrc.org/holc/.
Neighborhood Homes Coalition. (n.d.). Neighborhood Homes
Investment Act. Retrieved May 18, 2021, from Investing in
America's Neighborhoods: https://
neighborhoodhomesinvestmentact.org/.
Rodiguez, M. (2020, April 6). Community Reinvestment Act
Regulations, Notice of Proposed Rulemaking (OCC Docket ID
OCC-2018-0008, FDIC Docket ID RIN 3064-AF22). Washington,
DC, USA. Retrieved from https://www.neighborworks.org/
Documents/.
Rodiguez, M. (2021, January 21). NeighborWorks America
President and CEO..
Rodriguez, M. (2018, November 19). Docket ID OCC-2018-0008.
Washington, DC. Retrieved from https://
www.neighborworks.org/Documents/AboutUs-Docs/PublicPolicy-
Docs/CommentLetters-Docs/CommentLetter-
CommunityReinvestmentAct-ReformingRegulatoryFramework.aspx.
Yost, R. (2021, May 4). Keloland.com Original. Retrieved May 9,
2021, from $100 million to help us catch up on internet
speed, quality: https://www.keloland.com/keloland-
comoriginal/100-million-to-help-us-catch-up-on-internet-
speed-quality/.
Additional Material Supplied for the Record
DECLARATION OF MARK N. FOX, CHAIRMAN OF THE MANDAN, HIDATSA, AND
ARIKARA NATION, ALSO KNOWN AS THE THREE AFFILIATED TRIBES
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
LETTER FROM STATE EDUCATION LEADERS
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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