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♪ >> and he had one today. and i know there are so many friends and colleagues sitting out there who have their great holbrook stories that this could go on for another couple of hours. the people from "south pacific" want to put on their show tonight. i ask you for just a moment to remain seated while the family leaves the auditorium, and our distinguished speakers make their exit. and as you exit, we'll remember richard again with the photographs of his life. thank you so much. [applause]

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[inaudible conversations] [inaudible conversations] [silence] [silence] >> you with watch the memorial service for richard holbrooke again in it's entirety at 1:20 p.m. eastern on our companion network, c-span.

>> secretary of state, hillary clinton, provided overview of hu jintao's visit to washington, d.c. next wednesday. this is about 40 minutes. [applause] [applause] >> ambassadors, dignitaries, welcome, deputy secretary steinberg, good friend jeff bater from the white house, all

friends of ambassador holbrooke. it's great to have you all here for the inaugural high school -- holbrooke lecture. if you walk into the pacific affairs, you are confronted from the dignitaries on both sides. some of the greatest names, rusk, and others who have served with great distinction for many, many years. these are all suitably somber black-and-white photos, men holding pipes, all expect one. there's one man, enormous big hair, very young, unconsciousbly young, younger assistant secretary ever to serve. looks more like a drummer in the doors than a distinguished diplomat. that was our predecessor in the wonderful job, ambassador

holbrooke who served with great distinction in a period of our history. he was one the key architects between the united states and china, it was only fitting that the inaugural lecture that was going to be given to you in a moment by secretary clinton be about the relationship, the incredibly consequential relationship that will define the 21th century. because further ado, it's my great honor to welcome and introduce secretary of state, hillary clinton. [applause] [applause] >> thank you. >> well, this is a bittersweet moment for me personally. to deliver this first inaugural lecture. i want to thank curt for that

introduction and for reminding everyone that you are a tough act to follow, my friend. along with deputy secretary jim steinberg and his terrific team at the state department have brought left and division to our diplomacy in asia. wherefore i go, people always have a curt campbell story to tell. some of them are even flattering. [laughter] >> so thanks to my great team here at the state department, jim, curt, and everyone for all of your hard work and leadership. it is a special honor to welcome my colleague, foreign minister built along with so many distinguished ambassadors, including ambassador john. to this inaugural richard holbrooke lecture in the ben franklin room, for nearly half a

century as the young service officer, as the tireless negotiator, as the special representative for the afghanistan and pakistan, richard holbrooke grappled, and left a mark on this development and on this country, and on the world. because of his efforts america is more security, millions of people around the world have had the opportunity to give up to their full god-given potential. and we are honoring richard's legacy in many ways. this afternoon many of us will gather at the kennedy center to share stories and remembrances. and one the ways we have chosen is the new lecture series. which reflects richard's passion for questions and the conviction that they deserve serious discussion.

richard had a hand in nearly every crucial foreign policy challenge of the last 50 years. if he was not invited to have a hand, his hand was there anyway. and i look around this room, not only at americans, but at many of our friends from across the world, and many of you know what i'm talking about. he was tireless, he was relentless, he would not take no for an answer, because i would give him no over and over again. and it was not the answer that he wanted. he worked with many of us on these important issues. and today i would like to focus on one that he knew well and that is on everyone's mind as we prepare for the important arrival of president hu jintao. the future of u.s.-china relations as a state departments youngest ever assistant secretary of east asia and pacific affairs, richard was, as curt has said, a key player in the brokering of the opening of

formal diplomatic relations with china in 1979. later, he served, for many years, as the president of the asia society. throughout his career, richard understood that a strong u.s.-china relationship would bolster stability and security in the asia pacific region. and he was also clear-eyed about the many obstacles to our cooperation. most of all though, he saw the success of the relationship depends on it's ability to deliver positive results to the people of both our nation's first and foremost, but also to the rest of the world. these insights remain just as relevant today. and we heard them underscored this week by secretary gates in beijing, and secretary geithner and locke here in washington. three decades after our nation's first open the door to engagement, our relationship is

marked by great promise and real achievements. but also by significant challenges. as one would expect. and more than ever, we will be judged on the outcomes that we do produce. for greater peace, prosperity, and progress in our own countries and throughout the world. america and china have arrived at a critical juncture, a time when the choices we make both big and small, will shape the trajectory of this relationship. and over the past two years in the obama administration we have created the opportunity for deeper, broader, and more sustained cooperation. we have seen some early successes, and also some frustrations. and moving forward, it is up to both of us to more consistently translate positive words into effective cooperation. it is up to both of us to deal with our differences, and there

will be always differences because two great nations. we need to deal with them wisely and responsible. it is up to both of us to meet our respective global responsibilities and obligations. these are the things that will determine whether our relationship delivers on it's potential in the years to come. now we have already come a very long way since the first tentative steps of the diplomatic opening in 1979. after many years of virtually no contact, we have had three decades of intense engagement. in the beginning, our relationship was almost exclusively focused on the common threat posed by the former soviet union. and during the 1990s, we began to engage on broader regional issues. and i remember with great fondness the trip that my husband and i and our daughter

took to china as part of that intense engagement. today, our relationship has gone global. we debate and discuss nearly every major international issue in both bilateral dialogues and multilateral meetings. and these are on issues that we have concerned together on, and these are on issues in which we have fundamental disagreements such as human rights. the breath of our engagement will be on full display next week when president obama welcomes president hu to the white house. these three decades of relations between our countries have also been three decades of impressive growth for china. when richard holbrooke and his colleagues first visited china, it's gdp barely topped $100 billion. today it is almost $5 trillion. trade between the countries used to be measured in the hundreds

of millions, today it surpasses $400 billion annually. china's transformation made by the hard work of it's people and the vision of it's leaders. it was also aided by an open and dynamic global economy, and by the american power that has long secured stability in the region. it has lifted hundreds of millions out of grinding poverty, and now helps drive global prosperity. the united states has welcomed this growth, and we have benefited from it. today our economies are entwined and so are our futures. despite it's process in the past 30 years, china still faces great challenges. when i speak with my chinese counterparts, they often talk to me in passionate terms about how far their country still has to

go. because even with all of that growth, china's gdp is only 1/3 of the size of america with nearly four times the people. and our trade with european union is still greater than our trade with china. as secretary geithner noted this week, china has a lot of work to do to move from a state-economy powered by technology, to a more oriented economy powered by innovation. more of it's people are seeking greater respect for their cultural and religious beliefs. they are seeking more opportunity for improved working conditions and for the recourse for injustices. understanding these strengths and challenges is essential for us and others to understand today's china. and it provides important

context to the countries changing role on the world stage into the future of the u.s.-china relationship. history teaches that the rise of new powers often ushers in periods of conflict and uncertainty. indeed, on both sides of the pacific we do see some trepidation about the rise of china and about the future of the u.s.-china relationship. some in the region and some here at home see china's growth as a threat that will lead either to cold war style conflict, or american decline. and some in china worry that the united states is bent on containing china's rise and con training china's growth. a view that is stoking a new streak of assertive chinese nationalism. we reject those views. in the 21st century, it does not make sense to apply zero-sum

19th century theories of how major powers interact. we are moving through uncharted territory. we need new ways of understanding the shifting dynamics of the international landscape. a landscape marked by emerging centers of influence, but also by nontraditional, even nonstate actors and the unprecedented challenges and opportunities created by globalization. this is a fact that we believe is especially applicable to the u.s.-china relationship. our engagement, indeed, i would say our entanglement can only be understood in the context of this new and more complicated landscape. i said when i first went to china as secretary of state early in my tenure that there was an old chinese saying that you are in the same boat, you

have to row in the same direction. we are in the same boat. and we will either row in the same direction or we will unfortunately, cause turmoil and whirlpool that is will impact not just our two countries, but many people far beyond either of our borders. this is not a relationship that fits neatly into the black and white categories like friend or rival. we are two complex nations with very different histories, profoundly different political systems and outlooks. but there's a lot about our people that reminds us of each other. an energy, an entrepreneurial dynamism, a commitment to a better future for one's children and grandchildren. we are both deeply invested in the current order. and we both have much more to gain from cooperation than from conflict. now that doesn't mean we will

not be competitors. that's the nature of human endeavors. it's who we are as people, but there are ways of doing it that are more likely to benefit than not. a peaceful and prosperous asia pacific region is in the interest of both china and the united states. a thriving america is good for china and a thriving china is good for america. our friends and allies across the asia pacific region would agree. they also want to move beyond outdated, zero-sum formulas that might force them to choose between relations with beijing, and relations with washington. all of this calls for careful, steady, dynamic stewardship of this critical relationship. and an approach to china on our part that is grounded in reality, focused on results, and true to our principals and interests. and that is how we intend to

pursue a positive, cooperative, and comprehensive relationship with china. now i'm sure you will hear that phrase quite a bit over the next week. positive, cooperative, and comprehensive relationship. because that really does capture our hopes for the future and that is how our two presidents have described this relationship. but you cannot build a relationship on aspirations alone. that is what makes this a critical juncture. as i said at the outset, the choices we both make in the months ahead will help determine whether our relationship lives up to it's promise, and it's up to both of us to translate high-level pledges of summits and state visits into action. real action, on real issues. to keep our relationship on a positive trajectory, we also

have to be honest about our differences. we will address them firmly and decisively as we pursue the urgent work that we have to do together. and we have to avoid unrealistic expectations that can be disappointed. this requires steady effort over time to expand the areas where we cooperate into narrow the areas where we diverge while holding firm to our respective values. as we build on our record of the past two years and shape the future of our relationship, the obama administration is pursuing a strategy with three elements that all reinforce one another. we are practicing robust, regional engagement in the asia pacific, we are working to build trust between china and the united states, and we are committed to expanding economic, political, and security cooperation wherever possible. let me start with regional

engagement. the united states by our blessing of our geography is both an atlantic and a pacific power. we are committed to our relationships through both of these great oceans. we are firmly embedding our relationship with china within a broader regional framework because it is inseparable from the asia pacific web from alliances, economic network, and social connections. in doing so we will remain perspective on the relationship. today it is as important as any bilateral relationship in the world. there is no such thing as a g2. both of our countries reject that concept. there are other key actors, allies, institutions, and emerging powers who will also work with us to shape regional and global affairs. over the past two years, the united states has reaffirmed our

commitment to be an active participant and leader in the asia pacific. as i said in hawaii this fall, we are practicing what we call forward deployed diplomacy. expanding our presence in terms of people, programs, and high-level engagement in every corner and every capitol across the region. america has renewed and strengthened our bonds with our allies, japan, south korea, thailand, australia, and the philippines. we have deepened our partner with india, vietnam, malaysia, singapore, and new zealand. we are taking steps to make sure our defense posture fits the region. we are working to ratify a free trade agreement with south career,, -- south korea, and hep create new americans companies

and support new jobs here at home. those goals will be front and center when we host the asia pacific economic cooperation forum in hawaii later this year. we will work to strengthen in the asia pacific, including signing the aseon treaty, and increasing engagement in the pacific island form. a more robust and coherent regional architecture in asia benefits all of us, especially the united states and china. it helps ensure that every nation and point of view is heard, and reinforces the system of rules and responsibility from protecting intellectual property to freedom of navigation that form the basis of a just, international order. in these multilateral settings, responsible behavior is rewarded with ledge -- legitimacy and respect. we can work together to hold

account to those who have counterproductive actions towards peace and prosperity. our regional engagement places the relationship in the appropriate context. the second element of our strategy is to focus on building bilateral trust with china. we need to form habits of cooperation and respect that help us work together more effectively, and weather disagreements when they do arise. the most notable of our efforts is the strategic and economic dialogue which brings together hundreds of experts from dozens of agencies across both of our governments not only to discuss an unprecedented range of subject, but to infiltrate the ethic across our two governments. secretary geithner and i are looking forward to hosting the counterparts this spring for the third round of the s & ed. this is a good start.

i would be the first to admit that distrust lingers on both sides. the united states and the international community have watched china's efforts to modernize and expand it's military. we have sought clarity as to the intentions. as secretary gates stressed in beijing, both sides with benefit from sustained and substantive military to military engagement that increases transparency. we need more high-level visits, more joint exercises, more exchanges from our professional military organizations and other steps to build that trust understanding of intentions and familiarity. this will require china to over come it's reluctance at times to join us in building a stable and transparent military to military relationship. we think it is so much in both of our interests, and we will continue to raise it and work on it with our chinese friends. but building trust is not just a project for our governments. our peoples must continue to

forge new and deeper bonds as well. in classrooms and laboratories, or sports fields, and trading floors, our people make the everyday connections that build lasting trust and understanding. that is why we have launched a new bilateral dialogue on people to people exchanges and new initiatives such as the 100,000 strong program that is sending more chinese, more american students to china. those students are on the front lines of charting the future of our relationship. i saw this for myself first hand at the shanghai expo. where we were delighted to have seven million chinese visitors come to our expo. they were all greated by american students speaking chinese. it came as quite a surprise that we had so many american students who had studied chinese and were excited about being part of such a tremendous international effort as the expo. the third element of our strategy is expanding our work

together along with the rest of the international community to address these shared challenges. global recession, nuclear proliferation, terrorism, piracy on the high seas, these are threat that is affect all of us, including china. and china is joining us in confronting them. so we continue to encourage china to help us do even more together. to work more actively with us to solve these problems. we have a wide ranging agenda, a number of areas where we will ultimately be able to judge where our relationship is producing real benefits. on the economic front, as secretary geithner discussed earlier this week, the united states and china do need to work together to orient our economies to assure strong, sustained, balanced future and global growth. in the aftermath of the global financial crisis, the united states and china worked effectively through the g20 to help spur recovery.

can you imagine where we were economically if either china or the united states had failed to work together so constructively? it almost is a frightening prospect to imagine. we must build on that cooperation, and in his speech secretary geithner note that had chinese firms want to be able to buy more high-tech products, make more investments here, be accorded the same terms of aspects that market economies enjoy. at the same type, the u.s. firms want toen sure that the $50 billion of american capital invested in china creates a strong foundation for new market and investment opportunities that will support global competitiveness. we can work together on these objectives. china still needs to take important steps towards reform. and in particular we look to china to end unfair discrimination against u.s. and other foreign companies or against the innovative technology to remove preferences

and measure that -- and any measures that disadvantage foreign intellectual property. we need to open up more opportunity for american manufactured goods, farm, ranch products and services, as well as allowing currency to appreciate more rapidly. these reformses, we believe, would not only benefit both countries, but global balance, predictability, and broader prosperity. we need to work on some of the issues in front of us. take climate change. china and the united states are the two largest emitters of greenhouse gases. our cooperation at the u.n. climate conference in mexico was critical to the conclusion of the cancun agreements. now we must build on that progress by implementing the agreements on transparency, funding, and clean emergency technology. there is no time to delay.

the united states with china working with other partners, including the eu, japan, and india, will set the pace and direction for the world to move rapidly toward a clean energy future. on international development, we could make a significant impact by aligning our investments and coordinating projects. we would ask that china embrace internationally recognized standards and policies that ensure transparent i and sustain -- transparency and sustainability. i often here in my discussion here china's leaders say their country speaks for the developing world because of their progress. but the development practices in africa and elsewhere have raised serious concerns. we welcome the commitment to development, but we would like to work together to have common standards and approaches. on security issues, there is also room to work more closely and constructively.

on iran, we've made progress. now we have to follow through. as a permanent member of the united nations security council, china helped enact tough sanctions. we look to china to help the international communities send a clear message to iran's leaders to cease the nuclear activity. let me go on to a problem that has vexed us over the last two years, and particularly in the last several months, namely north korea. the united states and china both understand the urgent need to maintain peace and stability on the korean peninsula, and the denuclearization of north korea. for our part, america will continue to stand with our allies, as they content with their belligerent neighbor. north korea nuclear and

ballistic programs are becoming a direct threat to the united states itself. this is not just about peace and stability in northeast asia, we are standing with our allies. this is becoming, unfortunately, more of a national security challenge to our own shores. from the early months of our administration, the united states and china along with our partners, south korea, japan, and russia joined together to condemn north korea's provocative missile and nuclear test. and with china's support last year we adopted enhanced sanctions in the security council. these efforts showed clearly when china plays a very constructive part we can produce results together that send an unequivocal message to north korea. and we have emphasized to our colleagues in beijing that china as a country with unique ties to north korea and chair of the six-part talks has a special

role to play in helping to shape north korea's behavior. we fear and have discussed this in depth with our chinese friends that failure to respond clearly to the sinking of a south korean military vessel might embolden north korea to continue on a dangerous course. the attack on i i don't think pe i don't think island. as a result of intense engagement in recent weeks, we have begun to work together. we are building momentum in support of the dialogue that respects the legitimate concerns of our south korean ally and that can set the stage for

meaningful talks on implementing korea's 2005 commitment to irreversibly end it's nuclear program. it's vital that we work together with china. we need to make it clear to north korea that it's recent provocations, including the announced uranium enrichment are unacceptable and in violations on not only security council resolutions, but north korea's own commitments in the 2005. until north korea demonstrates in concrete ways it's intention to keep it's commitment, china along with the international community must vigorously enforce the sanctions adopted by the security council last year. in taiwan, we are encouraged by the greater dialogue and economic cooperation between the mainland and taiwan. as witness by the historic

completion of the economic cooperation framework agreement, our approach continues to be guided by our one china policy based on the three joint communiques in the taiwan relations act. in the period ahead, we seek to encourage and see more dialogue and exchanges between the two sides, as well as reduce the military tensions and deployments. finally, and crucially, on the issue of human rights, it's a matter that remains at the heart of the american diplomacy. america will continue to speak out and to press china when it sensors bloggers and imprisoned activist, when religious believers, particularly those in unregistered groups are denied full freedom of worship, when lawyers and legal advocates are sent to prison simply for representing clients who challenge the government's position, and some when mr.

chung are persecuted even after he's released, i know many resent our advocacy of human rights as an intrusion on sovereignty. but as a founding member of the united nations, china has committed to respecting the rights of all it's citizens. these are universal rights, recognized by the international community. so in our discussions with chinese officials, we reiterate or fall for the release of political prisoners in china, including those under house arrest and those in forced appearances. we urge china to protect the rights of minorities in tibet, and the rights of all people to express themselves and worship freely in the rights of civil societies and religious organization to advocate the positions within a framework of the rule of law.

we strongly believe that those who advocate peacefully before reform within the constitution such as the charter '08 signatories should live up. when china lives up to the obligations of respects and protecting human rights, it will not only benefit one billion people, it will benefit the long-term peace, and prosperity of china. independent, impartial judicial system and respect for the rule of law would protect citizens property and guarantee investors can profit from their ideas. freedom of expression from everyone from political act -- activists that is essential to creation in a innovative economy. a vibrant, civil society would help address some of china's most oppressing issue from food

safety, to pollution, to education, to health care. this promise is already apparent in the work of individuals and ngos who volunteered after the earthquake. the longer they miss out on the opportunities, and noble prize winners empty chairs will remain the nation's unfulfilled promise. i know they could shake the stability of their country and get in the way of it's continuing essential, economic growth. we have seen nation after nation from south korea to indonesia, where once they realize that denying people the right to express their discontent can create more unrest, and reforms can strengthen society and unlease new potential for

development. it is clear that we cannot paper over differences, but the future of our relationship can be strong if we each meet our responsibilities as great nations. the world is looking to china. and there's a lot of excitement about this. because we think that there are ways that china can be a unique leader in the 21st century. embracing the obligations that come with being a 21st century power will help to realize a future that will give the chinese people even more, in fact, unimagined opportunities. but that means accepting a share of the burden of the softing common problems, abiding by and helping to shape a rules-based international order. you know, the united states first emerged as a true world power nearly a century ago. there were times when frankly we resisted taking on new obligations beyond our borders.

there's a strong internal position that goes back in our history where we just want to tend to ourselves and let everybody else worry about the future. whenever americans turned inward, attempting to avoid accepting that responsibility, events intervened. and we were summoned back to reality. our leadership in the world and our commitment to tackle it's greatest challenges have not drained our strength or sapped or resolve. quite the opposite. they have made us who we are today. a force for peace, prosperity, and progress across the globe. this is a critical juncture, yes, but i would say to my fellow americans, this is not a time to fear for the future. the world has never been in greater need of the qualities that distinguish us, our openness, and innovation, our determination, our devotion to

universal values. the world looked to the united states for leadership to manage the changing times and to ensure that this junctionture leads to greater stability, peace, progress, and prosperity. that is what we have always done. it is what we will always do. that is what america is all about. and we have a tradition of moving beyond past problems and conflicts. it is sometimes hard to imagine that in the lifetime of my mother, the united states was involved in two world wars, terrible depression where we sent many of our best young people off to war and far off places and yet we have forged close relationships with former adversaries. today we have a positive relationship with china. and the chance for a very

positive future. the united states welcomes china as a rising power. we welcome china's efforts not only to lift their own people out of poverty, but to export prosperity and opportunity. and we look to china to join us in meeting the channels of today and tomorrow. we look forward to a time when our future generations can look back and say of us, they didn't just talk about a positive cooperative, and comprehensive relationship, they made the right choices. they worked together, they delivered results, and they did leave us a better world. that is our vision and that is our commitment for this most important relationship. thank you all very much. [applause] [applause]

>> weekend on c-span2's book tv. on afterwards, former advisor to martin luther king jr. with a behind-the-scenes look leading up to the historic washington and i have a dream speech, also the weekend a critical assessment of stereotypes and our first president. sign us to get our schedules e-mailed protectly to our inbox with our booktv alert. this weekend on c-span3 american history tv, historians discuss the importance much their work on pop culture at the american historical association conference in boston. and oral history and founding member of the congressional

black caucus. a visit to the bureau of engraving and printing to learn about the currency, and part of the series on the civil war, a discussion about the first state to succeed. south carolina, experience american history tv all weekend, every weekend on c-span3. see the complete schedule on c-span.org/history, or press the button and have our c-span's schedule e-mailed to you. >> this hour and a half discussion included officials from the fdic, moderated by cnbc john harwood. >> we're going to keep it going. we're going to get down in the weeds on some of these issues and big your out -- figure out the solutions. first of all, don graves, deputy assistance of the department of

treasury. we are -- we are keeping some misindustry around the panel. they are hiding on the other side of the wall. there's going to be eight of them. so we got to get chairs for everybody. if i could sing and dance, you would be doing that at the moment. all right. everybody is coming out. don graves, deputy secretary of the treasury, steven smits, associate director of the small business association, rebecca rainey chairman and ceo of central bank, kathleen sowa from

bank of america, jorge corralejo, from the business of chamber of commerce, and denny dennis from the international business association. welcome to our new panel. let me start out to get everybody's brief take on the central conundrum that was addressed by the previous panel. that was the seeming contradiction with the fact that banks say they are ready to lend, but small businesses say they can't get loans. is it a regulatory problem, is it some other problem in the economy? don? >> i think there are a number of issues at play here. i think we are obviously coming out of the worst economic conditions that i think any of us have faced in our lifetime. because of that, you've seen some tightening of regulatory

requirements on a lot of the banks. >> appropriate tight sentencing >> appropriate tightening, absolutely. i think you've seen some changes to borrowers credit, and that's had an impact on their ability to access credit because they've had some dings. and i think you have some banks that are a little bit scared because of what they've seen over time. having gone through that period, i think we are now at the point where we are going to see a lot more lending going forward. we've taken a number of steps at the federal level to try and help banks do more to increase their lending. as you may know, we just passed a small business bill that the president signed into law in september, and because of that, there are two programs that are very focused on providing banks with the capital that they need so that one, they can get the help from -- they can get the easing of the regulatory

constraints by the regulators, so they can lend, and also so that they can feel more confident that they can get those dollars out and use them appropriately. >> rebecca, how much of a difference is the small business lending facility going to make? we heard some of the objections for people proposed, some are going to pose it as mini t.a.r.p. and not be associated with the sigma. -- stigma. >> i think they did a good job differentiating what the small business fund will be compared to t.a.r.p. for those that had in the community, it will be a difference between night and day. it'll be an opportunity to get back to lending. >> steve, do you agree? >> i agree. i think we've gone through a crisis. something that many of us haven't seen in our professional lifetimes. i think our businesses are beat

up, our small businesses -- our banks are beet up. -- beat up. this provides an opportunity for banks looking for capital. i think it will do good at the right time. >> let me get a show of hands here. is there anybody on this panel -- does anybody on the panel agree with the proposition that 12 months from now the economy is going to be in a lot stronger shape than now? anybody disagree with that? >> a lot. >> a lot. >> a lot. >> talk about it, a little. >> well, just coming from my experience in california, if you look at the levels of unemployment and you look at the number of foreclosures and in 2011, we're looking at losing another approximately two million homes added to about 7 million. that's going to keep things very, very rough. i mean perhaps there's a major growth, but i think in the small business sector, that's what we will hear about today, i think it will be not dramatic at all.

that's unforfortunate, the large corporations are doing better. that's good. however, the money that we are making are not going into job creation and the study that we've seen, it goes more into shock buybacks and these kinds of things. we need to examine as this afternoon, what are the opportunities for the economic recovery without a small business that generated 75% of the jobs. >> kathleen? >> i think you could say a lot more for larger businesses. but small businesses it's starting to improve. many are invested in real estate, commercial, and residential. until we get that, it's going to be a slow recovery. >> john, tell me from your perspective, to what degree are we suffering from over react by

regulators and how much improvement can we get by turning the dials as opposed to waiting for the economy to lift the whole process? >> well, the reaction is real the way that we see it from our banks in alabama. it's not a single one of them probably that if you dialed them up would not say they feel regulatory pressure when they are looking at trying to make a loan. but on the flip side of that, you know, banks cannot survive without lending. so, you know, we have tried to pull, we have tried to partner, we have tried to be involved from every aspect of making sure our banks were involved in the lending process based on what we hear from that banks don't want to lend or not lending. :

>> i think that's a large part of the issue. you know, when i talk in your loaded and it will comments, especially from bankers and congressional, i bet it is the regulators that caused the credit crunch, banks do not win. when i talked to individuals and non-paneled and a done examination, tell me we are open for this, like the comment was

made and were ready to make loans and is not the a lot of businesses and the people that we bang for your site and, just not enough in a predicament right now what they wanted to expand their business. businesses themselves are trying to conserve capital, they're trying to make sure their business plan is still going to be feasible and reasonable going forward. so i think it's a combination. >> do you agree with? do think lack of demand that the business level is the fundamental problem? >> no, i think there's problems below lack of demand. they're certainly more fundamental. the clear lack of demand is there. in 2009 we saw about 55% of all employers, small employers had made some attempt at getting credit somewhere. in 2010 it was 48%. the number of approvals edged up slightly, so i'm not sure that the total numbers changed all

that much from year to year. but clearly, demand at least in terms of numbers of firms that wanted it was down and reasonably substantial. now we saw the fed survey of borrowers or of lenders that come out of the major banks, of course not the small ones, show that we began to see something down, that the downward trend really began to reverse itself. in october, we were beginning to see. in october, we were beginning to see, but still demand is the real issue. >> what identifies a perspective on the small business lending front? good stuff by government will make a significant difference or not? >> we supported it as a chamber when it was before the congress,

but is it going to make a difference? not really. because which are looking at is a situation where it makes assumptions. the first assumption is that banks don't have money to lend. and that's not true for the most part. now there are certain banks that do. but we see that in a lot of small banks with lots of money that are sitting there and putting in annuities because they don't have customers they can lend it to. and so you go through and you start looking at these and that merrily is that you have any money, but do like to deal not sort of a theme? i would be curious to know how many banks have applied for this so far. i mean, i saw that march 11th was kind of recommended that, you know, applied before then or whatever. i haven't heard how many banks are interested. >> don, let me ask you. you know that gene sperling, and

the new director of the economic council broke his back in a small business funding for to congress. and if he broke his back, with the wasting his time? >> i respectfully disagree with my colleague from the nfib. we have heard from businesses all across the country who are saying, you know, we can't get access to credit. and i think there's an issue here. it's a little bit more nuanced. there's a bit of a geographic dispersion for credit demand around the country. certainly there's some parts of the country where you if banks were flush with money and don't have far worse. but there's large parts of the country where businesses can't get access to lending because the banks are constrained from providing them with those loans for a number of different reasons. we think the small business lending fund, which is a $30 billion capital fund, will provide hundreds of billions of dollars in london small

businesses across the country. sure it's not for everyone, not for every bank, not to get to every business out there, but i think at the end of the day you're going to see a huge uptick in the amount of lending by banks because of the program. >> for backup, you are the reality check. who is right? >> i think there's a lot going on. our particular banks are not sure because we do have a credit can we do have capital and we need to demand. and so, in looking out a lot of my colleagues across the country, i think that there is an opportunity, there is a need for banks and anti-capital capital so they can. there's capital concentration. there's been a number of things that they're up against, that they are not able to land. and so a lot of those organizations, this'll be determined as. it's not the solution for everything, but it's a part of at least getting a spare. >> kathleen, rebeca just ducked. who is right? >> i think it's somewhere in

between. [inaudible] >> i wonder how many banks in the capital into debbie's pointer will be interesting to see was applied for it. i know there's a reluctance to apply given some of the stigma that can be associated with it. so i do think it will help some of the community banks. there are provisions in their better run x a sponsor states. i think that can help. those are parts of the margin. sba lending isn't a total solution. it will help some borrowers that the margin. >> john. >> in alabama, are banking department is a proponent of t.a.r.p. we thought it was an absolutely outstanding way for banks to get a much-needed capital that we thought they were going to need. the assumption was that it was a government bailout, therefore they took an awful lot of heat from their customers and from the press and from the public in general when actually it was a great investment for the

government and for the banks as it's being repaid with interest. this is the same thing with this fund. i see that our banks in alabama, we have some that made additional capital and absolutely the private equity market are pretty rough and this is an opportunity for them to be able to acquire capital. however, sometimes i look at whether the real criteria, the ones that probably need the capital and could make it and use it or not going to be able to qualify because they have some problems in there. so the ones that are strong and healthy probably don't need the capital, therefore they're not going to want it to use this program. today we have around 145, 50

banks somewhere in the neighborhood of $250 billion in assets and i think we have one application on file. >> steve. >> you are going to tell me i doubt. the answer really is it's going to be good for some institutions and other institutions are going to make a decision they don't need it and that's the honest truth. >> when he put it this way. is it a good thing congress created it? >> it's a very good thing. it provides another resource and a tool for the banks that really look at this. >> critic sites if they $30,000 slush fund. >> i don't see that at all. i see this as supporting our community banks. our community banks play a vital role in providing access to capital to our small businesses. and again, this is another resource and a tool to help strengthen these banks.

>> jorge, do you agree with? >> i think the concept is excellent. that's about as innovative as you'll see from the government. you know, there's an community banks and we have a ton in california. >> do you have an opinion of people working in government? >> no, i don't. we have some good folks here this morning. i think their hearts and their minds are into governing. but my point is this. i think it's a really good concept. there are a lot of other aspects in that jobs program that is so innovative, additional innovative in terms of sba and broadening expansion of sba lending. the biggest problem is that is a digit too small. if you look at the major of small business across the country and the need for funding. but there other things so important about this, like lending to the cdif. we have friends in california, alternative means of providing credit. and i think by looking at these

kinds of things, that you're looking that's an extraordinary measures that could serve some good. the problem is there's not enough funding. >> i want to shift gears for a minute. i've got some cards with questions that were submitted by some in the audience and some who are not here. one of the ones that treat me with this question, which said there is no proof that the use of the personal credit score is a major barrier to lending for some small businesses. what can be done about that? >> well you know, i'm not sure if i would agree with that concept. i know when banks are looking at their lending function and deciding on making a credit score may be one of the issues they're going to look at, especially personal credit. a lot of small a lot of small-business individuals are using their homes as collateral. you know, the personal wealth to get the financing approved in those types of things. but the credit score is just one factor. i think posts by lenders in the

bank as i talked to have a variety of issues they look at consider. >> is that a big issue or not at issue? >> it's not a big issue. there's less reliance on credit scores than i was at the height of lending what we were doing doing income income verification of her drink or traditional lending on small business credits, not relying on the credit score. >> this question might have come from someone in this room. if you're in a sermon that was your question, do you want to rebut any of the statements that it's not a big deal. >> well-built a platform -- [inaudible] [inaudible] >> let me let me have you go to the microphone so we get all this and repeat the question. identify yourself and will start again.

>> thank you. my name is mitch jacobs, an entrepreneur at a technology company. we are using technology to collect financial metrics for small businesses, main street businesses and solve the problem of all the time that goes into evaluating the financial health of the business come using automation to solve that problem. banks feel like the reliance on the personal credit score is still very important and if they were to approach the regulator with a portfolio that had a lot of 600 psychos and it, they would have an enormous problem. but the psycho score is not at all relevant to the overall health of the business. it's a chairman for nike said before, the work involved in evaluating businesses too much work. >> rebeca come as a personal business gory big deal at your bank? >> is part of the equation,

certainly. we're working with individuals. it's their business. >> would you lend to 600 fico? yes, there's several honor book. it's part of the equation. what we do as bankers' book of the entire story and sometimes it's good and sometimes it's bad. >> the other issue is the 50 to $100,000 of loans, with as many of those that need to be made to get this thing kick started again and i think that's where the challenge comes in. i would be surprised with my experience and there should be a conversation about this is that when you're dealing with those smaller the, you rely on the credit work as a major obstacle. >> does anyone think he's got a good point in the financial system and banks need to adjust to that point? >> you know, he's got an extraordinary point. and i think our chamber does loan packaging for members and other small business. and we've been a strong advocate of technical assistance for small business.

and part of that is that we can bring loans to a banker, where we have a technical assistance agreement with them long-term. it's not to suggest everyone having technical assistance will be eligible for loan. however, we can improve it is operating efficiently, has ability to repay the loans and opportunity for growth. and that could really be a measurement for a substitute is part of the credit analysis. >> what you think about this question? >> first of all, i'm fascinated by it. anything like this is always of great interest. the second thing i keep thinking about is in this phase i've done using paybacks rather than fico, which is the bright score. there is currently a relationship between who is better off and who's not. there is a direct relationship there. but it's interesting because you are developing a new type of credit score that just doesn't

use fico is what it sounds like to me. >> is for smaller businesses. you don't go below and they can't access business capital. >> yeah, but my point still goes to the point you're starting a new type of credit score, just not using fico. and that's a very interesting thing. i mean, i'm very interested and i hope to go ahead and networks. i'm all for you. >> i just think this country has extraordinary technology assets and there should be more discussion about using technology assets as they try to solve the problem of delivering n. main street. thank you. >> i want to shift to a question about collateral. we had a discussion in previous kennel about real estate as collateral and i was very difficult. here's a question. since small-business funding is mostly based on collateral, which values 30% to 50%, what other kind of financial products

are possible for small business? why not take warrants or preferred stock in investing upstart? is that a viable way to compensate for what happened to real estate? and how could that come to pass? >> depends what business you're talking about. in my business, if you're really trying to get to rural america, it's tough when you're looking from a collateral perspective. and yes you can look at the history of the business, but if we make a bunch of business loans without collateral, i'm not sure my friends at the fdic will treat us fairly. there is an impasse, russia when you're talking rural america. >> so anthony, is this a dead-end suggestion? >> i think the premise here, the majority of our institutions when they are enjoying lending and looking at which one they're going to approve or find, they're looking at repayment capacity. collateral is looked at as a secondary source. i think most bankers, anything they think they can liquidate at

the end, if they have to go that route and get repaid, they will probably consider it. the list of our bankers, the majority are looking at repayment capacity. what is the cash flow? what is the business plan? will you be here a year from now, three years or not to pay that loan? >> there is a gentleman named arthur lipper on the west coast was a match for an hour in southern california. that has been developing things along this way -- or along the spine, where it's much more of a negotiated thing in a nontraditional way. he does talk about giving different types of paybacks and different types of work in a college -- anyway, he is tying up certain types of ownership shares and so on. but it's negotiated sort of thing. but the thing that makes it useful is that it goes for a certain type of business, which is a little larger small

business. it's not basically the main street, the other 20s and 30s. it tends to be the larger one and that's where you think opportunities arise for such things that you're talking about. >> one of the other things that was mentioned earlier is that we've taken a number of steps that the federal level to support small business. it's recognizing there are these collateral issues. one of the programs that was part of the small-business jobs act as the billion and a half state small-business credit initiative. that is specifically aimed at assisting states with their innovative credit support programs all around the country. those programs really do -- are really aimed at the porting businesses that have had collateral deterioration issues. their loan loss reserve our portfolio insurance programs for collateral support programs all across the country. these innovative programs that avert the state level, you know,

obviously with fiscal constraints of the state governments are facing these days, the federal government can step in and provide them with that type of additional funding we think it a bare minimum we'll see about $15 billion worth of additional funding for those businesses that are having the most trouble. >> collateral is an issue that the primary issue. our number one reason for decline is lack of adequate cash flow. so is the repayment ability and that is the primary issue. when you bring appointees, the reality is a lot of these businesses via an equity injection. it's not finding. they need equity and i think the previous panel spoke to that as well. and the angel investor network just doesn't exist today. >> we are approaching martin luther king holiday on monday. and i got this question from the audience and i invite -- i'm going to read the question, but invite the person to submit it to follow up over getting the answers we can have a dialogue.

what can the president do before the 2012 election 126 million for more than 30 americans who are unemployed or underemployed? >> i think they're a number of things the president could do without any congressional action. i think part of it is in data collection. first before you know we are going, you have to see what you've done and whether it's a contract or lending, these kind of things. the key is on generating contracts for small businesses. and if you generally look what it is available and it's not generally got available, but it can be made, there's very few contracts to small business or even their prime contractors. so we need to analyze what is the measure of contract and when you go into small-business because this would generate jobs. it would create some collateral. the data collection is really

critical. and the president -- >> what about the idea of making requirements sponsored an amount of contracting? >> that's a possibility. but you cannot analyze what you do with a small business if you don't know what's going on. so once we can analyze that can make some strong recommendations. but the president can simply ask his cabinet members and regulators to provide him with data on contract gain data on small-business lending. and if you look at small-business, 24 of the 27 million for people that do less than 10 million a year and less than 100 employees a year. so that kind of analysis is really critical to dealing with unemployment, dealing with contractors, dealing with lending. all of these things are a combination of those. >> steve, this president has come in a certain way, some people use the term post-racial, not been an advocate for a specific solution. he's been talking about solutions that some may be

targeted towards lower income or less advantage businesses. but what can be done specifically for minority business person? would talk about things we are doing as well at the opposite x s. i looked at our role is actually filling a lending gap. our programs are designed to address where there are gaps in lending. and so with that said, it's very clear that our underserved communities are disproportionally hard-hit by this recession were going through. and that's the facts. so to me that is a gap. and i take that as capital access for the sba as i take that as a responsibility to how can we fill that gap? one way we are doing that as we recently announced our programs, which are actually addressing our underserved communities. we are going to be offering our sba 7(a), was our flagship

government guarantee program, were for the first intermission based lenders, nonprofit small lending organizations that are inside of these communities all over country that will now have the opportunity to provide 7(a) loans to the underserved communities. why is that important? is important because they think we talked about this a little bit, technical assistance. before joining the sba, i spent 20 some years in the trenches as a lender, is small-business lender. and my philosophy is really simple. it's that the attention that the small-business owner places before those front doors of that business first open can be all the difference between a successful business or not a successful business. so most of our underserved communities really need what we call smaller loans. $250,000 under. the challenge for many banks,

larger institutions is in order for the economics providing a valid under $250,000 has to be very streamlined quick decision. not a lot of handholding. these mission based lenders are built upon the platform of handholding. attention upfront and entrenched in their communities, they understand dynamics of that community and that will translate into success for the small businesses in the future. >> sure, if this is your question, let me just ask you how satisfied are you with how the government is filling in the gap that steve mentioned and how effectively are major institutions are filling that gap. >> they're not filling the gap. we got into contracts. one of the great things about the dodd-frank though, in our

opinion, is that comes with maxine waters and congressman frank supported. that is a significant piece of legislation. it was a great impact on minority owned businesses and businesses in general because it requires an institution and other corporations doing business with the federal government to submit data to them regarding not only the risk of their employees, but the contract, if you will. and as was pointed out earlier called the federal government we've been trying to get data for the past two years to find out what percentage of the contracts or lending business is? right down the we have is from 2005, says that less than 1% of latinos like on businesses, asian owned businesses, so we

think this legislation is critical. and we have taken it on ourselves that the banking industry is where some people have contracts with the federal government adhere to that part of the legislation. >> dawn and steve, let me ask you, why are the numbers so low as you cited? and secondly, why is the data not better? jorge was saying we needed more data, why don't we have it? i can't speak because i don't know the numbers right now. i know we have a strong commitment. the president has a strong commitment. i know secretary geithner has a strong commitment and administrator mails to ensuring we do the most we can to support success of businesses in all parts of our community. as today, i think the speaker is exactly correct. data is crucial to getting a

better handle on where we're doing a good job and we were not doing a good job. and i think this president is certainly secretary geithner are willing to own up to problems that are there in the government and we want to work to do our best to ensure that a wide range of businesses have access to the opportunity. >> so you think the gap is not being filled? >> i don't want to speak to the numbers. that's not my area in the sba. what i can tell you is a strong commitment as the sba in our world that we play to ensuring that small businesses have access to contracts and i think we've done great strides. i think i've seen a significant amount of progress made with working with other government agencies to ensure hours mall businesses and our firms, are minority firms have access to participate in this contrast.

>> albright. he mentioned one of the strands of the dodd-frank bill. but make it a show of hands, how many people think the dodd-frank bill is positive and won't make a difference for the better in the financial system? and who thinks would be better off had it not past? [laughter] >> i'm not going to give you that. there are parts that are fine and part are not so good. i'm not sure that i like the balance. >> what is the biggest single problem in your view? at the end of day the administration and democrats are saying you want the old system you want something new? and had to go do something on this is what's in front of us to what you think is the biggest single problem? >> well, the biggest single problem is the whole regulatory structure that's going to be required of it. that doesn't mean something shouldn't have been done. clearly, too big to fail is a major issue that has to be

addressed. i mean, it's just ridiculous we haven't done it before. and there are lots of aspects to it. but the whole way of going about it i'm not sure is the most appropriate way to do it. i think in the long term, in terms of small business, i'm not sure that's going to have a big effect on small business. this is going to be a large bank that disagree with me, but i'm not sure it's going to filter down to us. >> the impact is going to at the time, cost, complexity to the lending process because we'll have to more information. it's definitely doable. but we're concerned about is having absolute clarity in as much simplicity and the processes as possible. but it won't inhibit small-business lending. >> it will not inhibit small-business lending? >> i want to shift to a different issue which occupies much of the first years of the obama administration and that was health care. i'm trying to get a sense for

the panel, especially beginning with rebeca and kathleen as to how the passage of the health care bill is going to affect the viability of business in the near term. we had a question from the audience that the small business formation, particularly with so many people over 45 losing their jobs is very dependent on health insurance. why not scrap the employer-based system altogether for a completely portable system? now, that's water under the bridge. but i'm wondering, having passed the big health care bill, what do you think it's going to make a better or worse for small business? >> that such a huge question. i think as with a lot of regulation, there's a lot of unknowns. i think it my business i'm still trying to figure out for my health insurance but the impact to be. we went through health insurance bills. there's a lot of questions. it has one more sane for small businesses are having to small

out. something needed to happen, so i agree. [inaudible] >> i think so. but there's a lot of questions that need to be answered. >> i think the uncertainty around how it's going to play out of what it means for small biz is this just another thing small business has to do with today that's the challenge. >> you know, it's complex in the health care bill brings a lot of positives. there's still a lot more work to do on this. it's far from over. but with businesses losing their health care services, the situation is a lose lose situation because companies are losing policies. witnesses are giving it up for themselves, for their employees. for the health care billeting provide some opportunities for some health care, minimal at least, but it is positive, particularly given these times. >> i suspect i know where you're coming from, but are they to hear you explain it and also

whether you think the bipartisan move toward repealing that reporting requirements on small business transactions in 1099, whether this is going to make a big difference. >> first of all, it's a financial disaster. you can't add 30 million people to the rolls. and say that's not going to have an enormous demand effect. >> the cbo said of the bills repealed last week it will raise the deficit by $230 billion. >> just a second. just a second. first of all -- first of all, the major problem with them for the last several years and a small business major problem in this step is going up at double-digit rates every year. in the last decade come it's gone up by 130%, where wages and the cost are gone up by 20%. so you're seeing this huge gap going into health care. you've got to get controls under

on the spending side or on the cost side. so what do we do? we go out to make it worse by adding 30 million more people to the system, with no additional supply. so were already going to be short 120,000 positions if nothing else happens. now add this demand. so my point is essentially were going to have a supply demand is going to be just unbelievable. the second thing is along those lines is that the financial shenanigans that have gone in and of course cbo has to abide by certain restrictions. it's basically a 10 year window frame. one of the ways that this thing supposedly works financially is that we started a system of long-term health care for seniors, which we begin to pay for in the timeframe, but which extends way out he on the

timeframe when the benefits have to be paid. the program doesn't even come anywhere close to paying for itself according to the chief actuary of the social security at frustration. so you've got all these sorts of things that cbo has to abide by, that are essentially allowing anyone who wants to to really play with the numbers. so we've got a huge financial problem. our rates are going to go out. [inaudible] >> again, i respectfully disagree with my colleague. >> you disagree with the numbers? >> listen, listen, the millions of people were now going to be able to access safe and affordable health care is going to fundamentally change the way that our economy function. you are -- you are basically helping those folks, from a

business perspective, you drag on the economy because they have not health care. they've had to go to the emergency room to get their services. you are now putting them into a system where they can access the health care they need to visit.there's an be part of that process of receiving the health care system that you can diagnose problems before they become acute. so i disagree with you. if you backed up going to be a long-term saver for the economy. secondly, for small businesses and large businesses alike, these employees are going to be able to get -- will be much more productive because they now have the health care they didn't have before. you won't find them taking sick days are missing work because they were taking care of their health. they now have the ability to go to adopt her, take care of their issues and come back to work and be it. >> what you think about that? >> i think that's a good point. when you look at the small

businesses, is not the small-business lending. the business at else that has to be able to make a profit and they've got that additional problem, plus they had to set up what was going to happen on the tax issue. so when you have the combination of the two, is there a business demand out there for the lending? now i understand -- >> the tax issue has gone away. >> they are not applying for, and therefore the banks cannot lend it. now when you get into if they qualified, some of them would be marginal. and we hope that's where we could partner with our sba and has a leveraging the money would be what would work and be good for all and we could get those that needed it to get loans with

sba, but there still is to me the perception that health care is a fear to the small-business owner who wants to go out and create more jobs. >> let me shift gears. we've got a very interesting question from taylor webb who is a congressional intern who is somewhere in this audience. and if you did show up, make your way to the microphone. his question was not about regulators are about financial to two shins. it's about individual entrepreneurs. in light of the financial crisis, the attitude for risk has been reduced at the individual level. what you believe is the best path to encourage individuals to take on large risks such as starting a small business? what's the answer to that? who wants to take that? >> entrepreneurship is interesting because people are willing to take risks. and that does not seem to have slowed down. >> you don't think this problem exists at the individual? >> it does exist.

i'm saint hochberg are still rising create businesses. a lot of businesses are coming up. a lot of them for minorities, the latino community has grown at over 30% in entrepreneurship. but i think of course there are problems, you know, with lending in these kinds of things. what i'd like to suggest is that again, speaking for my point of reference in california, there's a lot of opportunities for entrepreneurs that are developing in california. the access to capital programs for a small and medium-sized businesses, the work is still 1155 that offers money for these kind of angel investors that have gone away. so there are a number of dynamic things in the works that we need to flesh out and perhaps get government that pension funds as well. >> may i suggest this is going to be a real problem and i'm not sure it has to do with attitudes as one would think a comma that

the entrepreneurial spirit is dying. really, a lot of it will have to do with access to finance caused by a housing. a lot of people who begin use their home as the piggy bank, unfortunately, if you can call it that. we are scenic courses with the deflation of the housing market that isn't there anymore. and so, you're having a series of folks who might ordinarily go when, who cannot do so. but we are seeing right now the statistics are beginning to start coming through, not for the first time in my memory, were having fewer starts in the last couple of years than we've had in the previous years. and so, we not only have this group going out, but we have fewer coming in and a lot of it is tied to housing. >> i want to come back to the housing thing. but taylor, do you want to

follow up. and how jorge was suggesting that the problem that the individual level was less significant than you think it is, but go ahead. >> just to give you some background, i'm from highly michigan cannot we say michigan has really been hit by this economic crisis. also, my grandpa start a small business. my dad had a manufactured home business that's basically going down as well. that is sort of the background for this question. but even so, being from my hometown and been in a family that has lots of relatives who have started small businesses, i can see the pinch in their pockets when yes, their home is sort of the base for the loan for the small business. and secondly, as far as -- there may be areas in the country that are more conducive to the small-business for being given now. how do you see these new policies that are supposedly been put in place actually expanding in getting to some of the areas in the country that

may be host hard-hit, or housing prices like michigan have totally collapsed? >> steve, is it a small-town problem he's describing? >> theirs without a doubt part of the country that are feeling the pain much more than others and it's not going to be simple, we're out of the woods. it's going to be regional. you're going to see parts of the country and i definitely see when we first started talking, we talked about are we headed in the right direction? i see good signs. i look at numbers every single day. where we had an? what are we doing? i saw last quarter that the sba, as far as my loan programs, have the highest level of volume in the history of our programs suffer. the week before christmas was the highest week of loan volume activity other. that's all good. you know, again i go back to do i measure success by how much volume we do?

know, i measure success i had with lovett if the gap is shrinking. you know, that does also tell me that there is then a big gap. however, were starting to the lending. they taken advantage of government programs. we provide tools. my mission really is i provide access -- i ensure access to capital to her small businesses through our lending partners, to small businesses that otherwise cannot access capital on reasonable terms and conditions. and so really, by watching our volume go up, it tells me that we're doing something right. okay, with the recovery act and the extension of the jobs that at the end of september, our flagship program, the sba 7(a) had a higher loan guarantee in the fee abatement for small business owners and the fees

they pay for the government enhancement. basically created insurance and also encouraged our lenders, you know, with a higher guarantee. the other thing i looked at and this is actually made me slap quite a bit is i was wondering, you know, i wonder how many of our loved -- when businesses buy equipment, you know, that tells me that they're making a conscious decision to make an investment that usually translates into growth, correct? at the long-term decision. i took a look at our flagship program and say what proportion of those 7(a) are going to the equipment purchases? the recovery act cake and we talked about these provisions kick in in february 2009 and extended to the jobs act in september. the chart is absolutely incredible. it doubled. the percentage of our loans that

went to equipment purchases doubled february 2009. so that tells me that the arch of her numerous, business owners and making a conscious decision to invest. and with the growth in our loan partners, it tells me that our lenders are looking at, you know, lenders need to land. lenders want to land. however, everything we've talked about our challenges. so it takes a little bit of time to find that it do i do with that challenge? and one of the way to do you worry what the challenges is how do we make it make economic sense and how can we also control the risks? >> i want to go back to the real estate issue, which danny brought up because it came up at the previous panel, too. tom bellamy was asked what you'd like to see government to come he said do something about the interstate problem. and of course i'm the one hand, we have people saying government

is pouring money down rat holes in the deficit is too big and they have to stop spending. on the other hand, do something about this real estate finkel out there. let me ask rebeca and kathleen and denny and jorge, what should the government do about the real estate problem? >> i don't know. i mean, i think this is such a regional issue, too but i think it's very challenging. you know, there's an unknown on appraisal these days about evaluations are coming coming from, how it markets you don't have a lab columns what you do. where you're in luck as we are having to buy or sell properties. what did that due to the underlying evaluation? i think part of it is the regulators somehow were working through some of these problem credit. it's also regional terms of local markets and how they go about dealing with it. >> i know the first panel didn't

really answer the question. i was looking for their entire. and i do think it's a huge issue and no easy solution. i think we need to get the foreclosures behind us and we still have a lot of people in their homes that can't even close to afford being in the homes. >> what is the role of government? >> i think up in the lenders get through the process. we continue to hear about delays here and there and i think getting a problem behind us is very important for small business to move forward. >> denny, let me ask you that endured one small thing at the end, which as everyone is talking about tax reform. take away deductions and get the rates down. mortgage interest deductions, when they're talking about, is that a good idea to much we do about real estate? >> i wish i had the golden parachute with the magic bullet on this one. i can tell you more about the problem than i can the solution. but for smaller firms, it's unbelievably important. i mean, just a few numbers,

okay? 95% or 94% own a home, much higher than the average. i median and 60% more valuable. but for those who don't have a home-based business, they have an office or whatever you want to call it, almost half of those on that, particularly in the rural areas. and if we wanted to take it a step further, almost 40% on investment real estate. over half of which own more than one. so the small business owners are heavily into real estate to say the least. now one of the critical reasons we have it. clearly the issue you talk about on tax reform is going to come up. and i got is that small-business owners are going to to like a particular provision for what probably will be a major discussion on tax reform and that is either elimination of

the home interest deduction or at least capping it. my guess is capping it will be either one. and it's going to be central. it has to be central to the discussion. in the short term it's going to be really, really tough because we have this horrible problem and we have sat on it for two years and done nothing basically. actually it's been about three, four years where we sat on it. and heaven only knows what we'll do in the next couple of years. >> what do you think will be done on corporate tax reform? secretary geithner's management of chief financial officers from several companies in talking about the possibilities that removing deductions that businesses may like and getting rates down. when i was talking to an analyst at the chamber the other day, they said half of all business income goes to businesses that aren't organized as corporations and you can't do corporate tax reform and bring every down because those businesses will be paying 35%, therefore thought to

be done together somewhere down the road. >> it's the s corp is what you're referring to. clearly, tax reform is on the agenda, should be on the agenda. i'm old enough to remember the 86 act. that worked pretty well another suddenly started putting holes in it again and so on and so forth. so i think this is something good that can benefit smaller firms in the long term, particularly when it comes to simplification. there were certain parts that are going to have to remain relatively complicated, just because when you talk about depreciation and things like that have to be there. but there's a whole series of things that don't have to be like they are. the home office deductions are the ones for examples. doesn't have to be anywhere close that complicated, but it is. the whole idea of what an employee doesn't have to have 25. >> can i get done -- can tax reform at the individual corporate level are both be done

before the 2012 election? or will it take longer than that? >> i think you can only discuss it for a couple years. i mean, this is huge. this is very, very big. and i don't think you can do it well in two years. >> getting back to your house in question, though, it's extraordinary complex as well. but i think the government can continue to play a major role in that instead of outlay money for principal reductions, which generally are just not working, if you ask people under water and underwater for far more than a minor principal reduction, it's a waste of money. i think those monies can be better used for homeownership counseling. and i think you could utilize these counseling sessions to put people into new homes, which what i think reverse the trend that we have. that's the short note on that.

but that is something that we've been discussing and taking a look at. and when you look at the principal reductions versus the new homeownership. so instead of continuing to lose existing housing your income you can buy something more affordable and reverse the trend that way. >> i want to ask john anthony a question that came in in the notes that were sent by rebeca, so i think i know where she stands on it, but i'd like to get your perspective on this. and he goes to some of the things congress did in 2009, 2010 that sounded really popular. what's one that fees, overdraft fees, debit card fees, that sort of thing. the question is at the end of the day banks have to be profitable and viable to support small business lending. but the aggressive new regulations and restrictions on income from overdraft and interchange fees jeopardizing banks ability to land and ultimately hurting borrowers? john and anthony. >> you know, when we look at

overdraft fees in any of the fees that banks are bringing in as a large portion of income for some of our banks, especially small committee banks. but you know, i think the overdraft policy that we have put forth that fdic is looking at the trade-off between the utility of what's being provided to consumers. you know, we definitely don't want to put that hampered down on any innovative parts of the business line, but we want to make sure that a consumer is getting some value for what they're getting. >> i concur with anthony that overdraft fees are certainly important to using banks and large banks, too. but their assets for the strengths that we had to use to protect consumer and that's part of it. but i don't think where we see any of it that it has any

reflection or creates any problems with lending. >> so from our perspective, if you don't think it makes real problems with lending, d.c. it is appropriate protection as a consumer is supposed to play into the grandstand in terms of voters in doing something that sounds great but may ultimately have unintended consequences? >> yes. yeah, i think it is important and the premise of the dances that were trying to protect consumers, making sure in the end that they know exactly what they're getting, what value they're getting for the cost their pain. >> were back up, join to >> these guys down? [laughter] >> all be nice. it's a fascinating issue. if i were all banks hard dumped on transplant into one category. when the grocery store next to these folks. when i point to take advantage to these consumers. we have overdraft programs that allow us to clear when we need to. they don't have the automatic

program of some of the different that that has been created. but to look at it as a community bank. just about everything i do these days is now being regulated. what does that do to our object in a real spirit and our ability to balance, knowing there will be times when bunting is soft. how do we balance, how do we maintain the balance sheet so we can do what they do and not take a stereotypical approach to regulation and so can really get problems where there are problems because i agree. some of these programs have been taken advantage of. with interchange and not sure that the consumer protection issue, but it's something that's really going to get at the heart of community organization. >> is that not a consumer protection issue or is there? >> i think they're a number of parts of the legislation that would fit into the consumer protection bucket, including this one. i think we needed to take some steps to ensure that consumers understood the products that they were getting or were not

getting charged to high fees on most products and that we did it in a way that also ensure the long-term safety and soundness of the system. so i think we struck a pretty good balance in the congress to be very good job on that. i understand there are differences amongst the bank community in terms of size and the types of products and services they offer. that said, i think what the legislation did was establish a baseline. that was not providing the types of fees the requirements on banks that a lot of folks i think in certain parts of the lobbying community or the advocacy community wanted. they weren't as strong as those folks wanted. but at the same time, i think they were appropriate and necessary steps.

>> rebeca, letting us do this. since you're from taos and would've voted for the health care bill coming or democrat? >> yes, i am. >> as a democrat, does it make you more credible critic. this would be great with a charge the obama has gone bananas with legislation? >> no. [laughter] headlines in the top news tomorrow. you know, there's a commonplace and there is some need. i think what we're doing a lot with regulation these days is painting with a wide brush. and yes there may be some quick fixes, but there's a lot of unintended consequences that go with them. >> does anybody want to jump? >> i wanted to address and agree with rebeca and i found out she was a democrat. [laughter] i don't know how i want to do that now. she is still on the head and it doesn't matter whether there is fees and exchange charges are

what, but you know, we've got to realize that we can't all be painted with the same brash and that has to do with state regulations and the state regulators are the size of the bank and the environment but it operates in. we've still got to go back to some basic common sense examination of banks and look at them individually, look at them geographically and make sure we are doing the best job to protect what is our main job and that is protect from my standpoint, safety and soundness of the institution. >> john, as the federal government and federal regulators capable of commonsense examination? [laughter] [inaudible] [laughter] >> that's a good question and

one that i will answer very candidly. there used to be -- i see today more so that it appears that since we -- we've had this financial problem, banks have been suspect. we still have a number of problem banks on our list. and it looks like now that whether you're a primary regulator, whether it's the sec, whether it's looking like were all coming down from washington. at least what i see is that everybody wants to say well, we can't do what we can do, but washington is making those calls. and to me, that's not where we need to go. we need to be sending that authority and that responsibility down to that region and down to that level person should be able to work with that