confidential and what can be released in a decision made on that require experienced >> could be made sobriety turned over everything? >> i'm not sure there are enough people in the world to look at everything we have to turn over everything, but we would do the best they could. >> my five minutes is up and i now yield to mr. clay. >> thank you, mr. alvarez. just one question. has the dramatic and i believe both an increase in transparency , including your own initiatives and those called for in the wall street reform act of 2010 had any adverse or troubling consequences either from policymaking or for the financial institutions you interact with. >> there protect really run

monetary policy we've taken in the last three years have been very helpful and responsive and have improved the understanding of the federal reserve family policy actions were trying to tape. we have provided a lot of deeds of information about credit transactions engaged in during the crisis. there have been congress we think struck an important balance between the need for access and providing a delay so that the dissidents in the transaction don't experienced stigma that often occurs when there is an immediate release of information, allowing there for an explanation for why institutions have participated in the facilities. ..

>> i think we all have to remember that we were really on the verge of collapse, that this was -- we had the great recession instead of the great depression because of the monetary policy in many of the steps that we took. one of those steps that we have taken to stabilize our markets and move forward is the dodd-frank bill. and in that we required the gao to conduct and not of the federal reserve -- conduct an audit of the federal reserve. we also required the fed to make information about the

transactions through emergency landing facilities from decemb december 2008 to march 2010 available to the public. in addition, dodd-frank required that the fed disclose information about the entities that use the discount window, or under i believe it was section 13-3 lending facility. but in addition to what we required in dodd-frank, the federal reserve has also already subject to robust congressional oversight. and i'd like to ask our two witnesses, can you give the committee some examples of the types of congressional oversight that you are already required to do? even before dodd-frank. >> two of the most important types of oversight are the chairman of the federal reserve,

the chairman of the fomc, provides testimony on the economy twice each year on the call of the house and the senate. and that is an important check on monetary policy in the state of the economy. another important method is this hearing and hearings like this that we are going through the staff and the governors and the chairman of the federal reserve, the presidents of the reserve bank have often been called to congress to report on every aspect of our duties and how we implement various policies. and we use -- you use those as oversight jewish -- to us in weeks by positions we've taken. so i think it's the interaction between the congress and the federal reserve interest one in particular that have been effective form of oversight. >> my time is about to expire, but as you know there's a gao audit authority now. was there anything that was excluded from the gao audit

authority? >> the gao is authorized to audit full range of the federal reserve's responsibilities. that includes all of the emergency transactions, the discount window, our transaction, our supervisory authority, our consumer authority, although there is aspects of authority. and -- an area that congress has reserved to the federal reserve is the application of monetary policy, the actual policymaking decision process. the gao does look at how we implement the policy in the form of making sure the transactions actually occur as appropriate, that they are accounted for properly for on the balance sheet, that they're fully disclosed. but the decision-making process for monetary policy is the one thing outside the geos scope of authority. >> mr. chairman, may i follow up with one brief question on why

that -- what are the arguments for excluding it? why was that exclude? what are the arguments for it? mr. alvarez. >> so, the accordance of allowing the federal reserve and the fomc to conduct monetary policy independently has been demonstrated throughout the world in both actions by other central banks, and in a variety of studies of monetary policy. the point i think is that, the congress want to reserve to the fomc the ability to have discussions that are full and free and frank, and to explore all the possibility alternatives for monetary policy to reach the best monetary policy decision. moreover, if gao, gao doesn't do audits in the sense of a technical audit like a financial auditor might do, but does performance reviews and policy reviews. so, that would mean that the gao

would review alternatives considered for monetary policy, how the decisions were made, whether the decisions were actually appropriate. that would cause second-guessing of the fomc, cast into doubt whether the fomc was actually making the policy decision, or whether the gao was making policy decisions and monetary policy. and make it more difficult for the monetary policy to be done effectively by the federal reserve. >> thank you. >> i now yield five minutes to the vice chairman, mr. jones from north carolina. >> mr. chairman, thank you very much, and i appreciate you holding these hearings. as others have said. you know, i want to take a little different approach. i represent the third district of eastern north carolina. it's a great district to represent. i had the camp lejeune base, marine air station and outer banks. and the frustration of the average business person down in

my district is very deep and severe. and we have had numerous inquiries from the third district, the citizens of the third district, about the federal reserve and how decisions are made. i know you cannot go into some of the backroom negotiations at the reserve, and i'm not even asking that. but how do you say to the small business owner that, you know, in this crises situation we seem to find ways to help foreign banks, foreign entities. and i'm looking at a note that my staff prepared for me that harley-davidson, mcdonald's, ge, verizon, toyota, and yet i've got people in my district saying that i go to the local banks and i can't get any loans, and my credit has always been

good. why and how does the federal reserve seemed to be able to find the way to help these entities that are gigantic, and through greed and manipulation, they cheated? and yet they get bailed out. they get the help when the average business person down in eastern north carolina, and probably across america, they can't even go to the bank that they been baking with for 15 or 20 years and get a load. and yet, here we are at the federal reserve looking at those foreign banks that might need some help or these corporations that might need some help. it really is. that's why this hearing is very important for transparency, the trust, that's a big word for me, trust, is just not there with the average citizen when it comes to the federal reserve.

and yet if it had not been for the push by, i won't have all the entities that pushed to tell you to show the bottom line, to show what was in the closet of decisions, who was being helped, we never would have known it. and yet i know you gentlemen are attorneys and you probably are not at the position where the personal ought to be that ought to put a hand on a bible to tell the truth to the american people, that's my concern is how do we build the conscience of the american people when we see what's happened at the federal reserve? >> congressman, we understand that, and feel that same frustration. the programs that were design and implement by the federal reserve during the financial crisis, were not designed to a big companies for the sake of eating big companies. the programs that we designed, for example, the talf prague and that we designed was designed to

pass money and credit liquidity onto the american people. so for example, the talf resulted in 3 million more out of those during the crisis than would have occurred, a million more student loans, almost a million small business loans. the programs you're talking about that aided harley-davidson and toyota and other companies were the commercial paper facility, which provided short-term funding to those companies so they could continue to keep employment up and manufacturing up in the united states so that they could continue to provide jobs and provide opportunities in the united states. it was our effort were all designed to try to keep the economy moving in order to help individuals and small businesses, not for the sake of helping the larger institutions. and i understand that there's a different perception.

part of that perception i think comes from the fact that most of the financial tools that were given are designed to work through banks, or work through large markets. and it's working -- so we use the tools the best we can in order to have the funding aid, the broadest range of people. >> well, i guess, mr. chairman, i know my time is about that but i guess in a way if it had not been for these bluebird and "wall street journal" and all these raising the question, doing their best investigation i don't know if we be having this hearing today. i don't know. >> i thank the gentleman. ideal five minutes to ms. maloney from new york. >> new york. >> i thank the chairman for yielding, and that he is well aware on friday, the jobs numbers come out. and the economy has been improving, not as fast as we would all like, but weird digging our way out of that hole. and now that we have the benefit of hindsight, and we are slowly

recovering from the financial crisis of 2008, i know that some have taken the position, a position that i do not agree with, that they've taken the position that the feds lending during this time actually helped contribute to the crisis. and some have argued that the fed didn't need to take the actions that it took because the situation would have stabilized on its own. but i would like to ask our panelists today, isn't it true that without the actions that the fed took, that by not setting up the facilities it did, by not getting institutions access to the discount window, to provide additional liquidity to our economy, that the crisis would have been far worse? so your comments, please,

mr. alvarez and mr. baxter. >> thank you, congressman. we deeply the facilities that we staffs at the federal reserve establish did ease the crisis, and they certainly were designed to do that. the studies that are beginning to come forward now are starting to show that they actually were successful in unfreezing various markets, commercial paper market, provide liquidity to the financial system that was important for the financial system to continue to operate. the funding that we provided was provided without any losses to the taxpayer. indeed, the emergency lending facilities resulted in $9 billion worth of interest in keys that are passed on to the treasury. as i was explained to congressman jones, the facilities were designed to provide real relief to

americans, american consumers and small businesses in the form of student loans come in the form of our loans, small business loans, credit card loans, as well as allowing the operation of companies that relied on the commercial paper market which had frozen up, to continue to find a source of funding to keep their operations going. so we think the facilities were successful, and were a good use of the taxpayer funds. >> i would say that there is an impression, and i hear, i think other members of congress here, if it is out there that all of the actions the fed took during the crisis served only to help financial institutions. but i want to make clear that the point that, and i want to make sure that people understand, that all of these actions were in the form of loans. and effect over 125 billion has

been returned to the treasury, over and above what was loaned out. that's what i read. i want to know if that is true. is that to? >> we in the last two years provided about $127 billion in earnings to the treasury. yes, that's correct. >> but can you bring this down to main street? can you give the committee members and the general public some examples of how that lending help, not only stabilize the economy and keep our financial institutions in place, but literally helped main street and working men and women? >> so, i would like to return to the talf program which was one specifically designed to make sure that loans were made in the united states to help students obtain education loans for college, to help small businesses have sba loans, credit card loans to provide

auto lending, to provide equipment leasing, and a variety of other kinds of loans that were not been made during the financial crisis because of liquidity shortages. that program was extraordinarily successful. it -- >> is it still operating? >> it has closed, but there are still about $14 billion in loans outstanding. there were $70 billion of credits extended through the program. much of it is being, has been repaid. >> i would like to ask about a number of programs that the fed engages in, including holding gold for foreign companies, for countries. account services, liquidity programs. in your experience are these common activities for central banks? >> yes, congresswoman, and they are, for central banks. it iscommon for central banks around the world to hold reserves. and as you know the dollar is

the principal reserve currency. at the federal reserve in new york we hold over $3 trillion on behalf of foreign central banks in countries. it is very important to hold those sizable reserves because those sizable reserves are principally invested in treasury securities which helps to finance the debt of the united states. so, so holding dollar reserves is a very important function of the federal reserve, and we do that at the new york fed. and it is similar to functions that other foreign central banks perform around the world. >> my time is expired. thank you, mr. chairman. >> thank you. i yield five minutes to mr. green context is. >> thank you, mr. chairman. thank the witnesses for appearing as well. and i'm interested in the central banks of other

countries, as compared to our country, and this that they compare in. i know the systems are not going to be the same, but with reference to disclosure come can you give some indication, have some sort of comparison? >> so, the practices of disclosure vary quite a bit across the world. but i believe the federal reserve is one of the come if not the most transparent central banks. many central banks in developed countries and do not, for example, announce their policy decision or the votes that are taken, the federal reserve does both of those and they do not announce or provide minutes for their meetings. the federal reserve does provide minutes three weeks after each meeting. many foreign central banks do not publish at all the transcripts of their meetings and the federal reserve publishes a transcript five

years after each meeting. on the discount window, lending, that is a common feature, common power the foreign central banks have, but they're much less transparent in that area as well. indeed, you may recall that in, at the start of the crisis, it was a leak about a discount window loans made by the bank of england to northern rock that resulted in a run on northern rock there. so, the foreign countries tend to be more circumspect about the information they disclose about their discount window lending operations. >> yes, sir? >> with respect to the incident that mr. alvarez described, the british parliament has written a report which is titled the run on the rock, and it has a section that describes how that run begin. and that was triggered by other

reports, and borrowing by the rock in. with the mission of the chair we could submit that report for the benefit of the subcommittee. >> thank you. one additional question if i may, mr. chairman. i know that you probably gone through this, but explain to those who arguing why it is important to have disclosure and why you try to achieve this balance that you have with reference to disclosure. for example, why not just out the cpa come in or summit coming edges audit everything all the time every day? what is the downside? >> so, we do have cpa come in, deloitte and touche currently to come in and do an audit of our financial statements including all of our transactions are discount window lending and our open market transaction. the thought on disclosure is

that disclosing the names of borrowers and the amount they borrowed provides the american people with more information to make sure that the federal reserve is acting in a responsible way in its lending facilities. the balance on the other side is that the discount window is a very important tool, both in good times and in bad times. in good times for providing short-term liquidity to institutions when they needed, and also as a monetary policy tool to help reduce the volatility of interest rates. and in emergency times, to provide liquidity to institutions that are generally healthy but where panic has caused asset values to be out of whack, as it were, so that they can't fund, the institution can't fund itself in an appropriate way. so the discount window is a very important tool. the concern is that because it's

often used by both healthy and troubled institutions, the public will be confused if it sees the names of a bar at the discount window and not be certain if the institution is healthy or not. and if a healthy institution is wrongly thought to be troubled because it's access the discount window, then that could cause problems for the institution. that causes institutions to back away from using the discount window and that makes it a much less effective tool both in good times and in bad times, or addressing liquidity crisis. so it's important to have a balance in the disclosure that's why we think the lag time, the two-year period between the actual loan and the announcement of the borrower is important. that leaves the institution some period of time to explain itself to demonstrate itself and cannot be tied to troubled transaction at a difficult time. >> i think my time is up. thank you, mr. chairman,. >> thank you.

i would like to direct this question to mr. baxter and i want to follow up on mr. jones' question about how some of these decisions are made and how sometimes the guys seem to benefit and little people lose their mortgages and lose their homes and they lose their jobs, and quite frankly it's very difficult times in this country because it seems like people were too little to save, people were too big, you know, to forget about them. too big to let them fail. but i want to direct the question about the foreign loans. and it seems to me, nearly one-third of all the loans during this period of time went to foreign banks. at one time at the peak of this, 80% of the overall discount window loans went to foreign banks. and then, but at the new york fed, i think practically

essentially 100% of the loans were going to foreign banks. and the answer i get is that, you know, they are foreign banks but they have subsidiaries and they qualify under the rules, i wouldn't say the law, but under the rules that they can, you know, go to the discount window. but it just seems to me way out of proportion when you think that tremendous amounts of loaning that went to these foreign banks. and this is not easy for the average american citizen to understand. could you enlighten us on why it seems to be disproportionate? i'm sure they don't represent that percentage of the financial problems that exist, did they? you know, a third of the problems didn't deal with foreign banks surely. what is the explanation for the? >> yes, chairman paul, thank you for that question.

first, the starting point is federal statutory law in section 13, paragraph 14 of the federal reserve act says to the federal reserve that with respect to discount window borrowing we are to treat the branch or the agency of a foreign bank just like we treat our own u.s. chartered depository institutions. so there's this principle of national treatment that we start with and it's a principle that is embedded in the federal reserve act itself. and so we must treat the branch and agency of a foreign bank in the same and we treat our own. so that's the starting point. second is, new york is the money center of the united states. and with respect to foreign banks that intend to come to our country and invest in our people and form branches and agencies in the united states, many of those foreign banking organizations look to form those organizations in the money center which is in new york.

>> so, the short answer to your question, chairman paul, is the law requires us to lend to branches and agencies, and with respect to new york in particular, that tends to be the place where foreign banking organizations enter our country. >> okay. proportionally it still seems to be out of whack. when this system invites foreign banks, you know, they're making most of their money overseas. let's just open up a subsidiary in new york and, therefore, they give a lot of credit and the protection of the bank. it's sort of almost like free insurance for them. do you think this is a good idea that a foreign bank, all they have to do is open up and get these bailouts? i mean, it just doesn't seem fair, at all. >> well, these were loans, chairman paul, they were not gifted anyway. the foreign banks have to repay just like everyone else, principal and interest. second, if a foreign bank, and some do, decided they would

prefer not to for mr. branch or an agency but to start a subsidiary bank in the united states, that is their option. and some foreign banks do just that. and, of course, the subsidiary bank which would have a u.s. chartered, that has access to the discount window as well. >> so i had one more thing. there's a limit on the amount that they can borrow. they are limited by the amount of collateral that they have, that they can post at the discount window, so that is dollar collateral in the united states. that doesn't allow the foreign central bank -- i mean the foreign bank to borrow to the full extent of its assets worldwide. it borrows in order to support its dollar activities, and those dollar activities are largely, though not exclusively, but largely in the united states. >> could the argument be made that maybe the banks increased should have had a lot more subsidiaries in new york, then greece wouldn't be in so much trouble. the fed would bail them out,

too. >> no, they are still, their assets are increase and they are great assets and to go to the greek central bank to borrow there, not to the united states. >> mr. green, do you care for another series? okay. mr. jones for five minutes. >> mr. chairman, thank you again. i, you know, looking through a lot of these reports, and i want to go to libya and see if you can help me understand the rationale by treasury and the reserve. i will just read one paragraph. lynde, part owned by the central bank of libya using new york branch to get 73 loans from the u.s. federal reserve in the 18 months after lehman brothers holdings collapsed.

help me understand so that i can explain to people back in my district that here we are an undeclared war, i mean, anytime, and i thank god we have lost any american military at this point, but we certainly have fired a bunch of missiles. and we are spending millions and millions of dollars, probably billions by now, and we're helping other countries. ..

how do you explain that to that person that each and every one of us to do that today they can't get the loans? >> how do you explain this to walter jones who happens to be a member congress so you can explain it to his people back home? >> so our banking corporation is a bank that is located in bahrain. it is not located in libya. it was at the time that her from the federal reserve, it was not not -- the libyans bought a substantial part of the bank after all the loans that were extended by the federal reserve were repaid. we work with the treasury department and state department, which the treasury and state departments have responsibilities for identifying banks that the united states should not do with the card says

foreign-policy reasons. responsibility for designated as they express with treasury and the state department. we consult with them to make sure we don't land to institutions we have determined we should not be landing to. at the time our credits were extended, our banking corp. was not identified by treasury or state department as a bank that was of concern. it was a foreign bank that had operation in the united states that was well they did in all respects like another foreign bank from a foreign country. >> mr. chairman, i tell you, knowing that you for many years have picked up more and more support, we will build legislation to audit the federal research. i wish truthfully it has nothing to do with you gentlemen here today, but i am telling you that

the distressed out here by the american people has teeth centers have ever seen and it does not own the congress of both, not only the administration that the federal reserve is just at this point at a low ebb as it relates to trust. and i'm not to talk about you personally. right now the federal reserve is not held in high esteem with. >> i have a few short questions. one hingis on a follow-up on what mr. jones says. the new speaker independence -- and i understand your terms and i disagree with the need for that, but i understand what people here, when you say independence committee hears secrecy. you know, you're going to keep it from us.

i'm not the point i made at the beginning, the sec is to pressure companies to reveal information, whether federal reserve does the opposite. they say we can't tell anything because it might disturb the markets. during the crisis or anytime you are whereas, has the federal reserve for treasury participated in any gold swaps arrangement? >> the federal reserve does not own any gold at all. we have not owned gold since 1934, so we have not engaged in a cold slap speared >> it appears on your ballot sheet. >> what is on our balance sheet is gold certificates. before 1934, the federal reserve did own cold. we turned it over by the to the treasury and received in return for the gold certificates. >> at the treasury entered under the exchange stabilization fund, i would just do you have the

legal authority to do it. you have the security for all the gold? >> they have the trust in the gold owned by the treasury. we have simply an accounting document that is called gold certificates that represents the value at a statutory rate that we gave to the treasury. >> and still measured at $32 an ounce, which makes no sense whatsoever. the conventional wisdom today says that gold is really not money. we don't want it to be money. i mean, if you are for the gold standard, there is something wrong with you. and yet we hold the gold. you know, there have been suggestions made in a soda, you know, encourage the suggestion. , you know, encourage the suggestion. , you know, encourage the suggestion. money. it's an asset and you don't use it because it's on your balance

sheet. would you have a position on this? why wouldn't they give it to the people? at the people have, would you advise us and say know, that not good. we had to hold the gold. do you think holding the cold it's a good idea or bad idea? >> i have no position on that dog. >> and as a matter for the treasury >> my opinion is that kerry with mr. alvarez. >> no position. >> it is amazing because i asked questions at the federal reserve, members of the board for years and whether it's been mr. greenspan, i can't recall what i've asked mr. bernanke, but it's always no, we have to hold onto these assets. but if it is not money we don't need it, were not on the gold standard, i mean, i would didn't they should be holding it.

the reason i ask that is the truth is gold as money and people don't throw it away and people to cling to it. but i would be really, a lot of people they suspect because of the lack of transparency, there's a tremendous amount of central banks sold a lot of gold after the last 10 years. a lot of the gold has gone to the east and the central banks now has positive trait relatives by the gold. there has to be a message in there and a significance, even for those who don't want to restrain of gold. there has to be a message up there that we should look at because we are in a financial mass and it has to do with our monetary system and is being reflect it today in rising prices and a weak economy and just printing office money is in doing any good.

all the stuff that's been done for three years and you look at economic statistics now, they are horrible. andy seybold who lost their jobs are still unemployed. the people who buy stocks in the year 2000. if they held on, they probably have it broken even. they probably less purchasing power. eventually i know this is off the subject a little bit, but is this reflected on the end that we don't know exactly what goes on in people and they don't know, they get suspicious and say well, it's kept secret from us. what are we to know them adjust my john. and the type of dollars we are talking about and when we hear about this money going to central banks and banks that gadhafi was a part owner in, i mean, this really stirs up the emotions of a lot of people. i do appreciate you being here and i know there will be a lot of questions.

there will be written questions submitted and we'd appreciate your cooperation and send us our answers back. >> thank you very much. >> thank you on a chairman. >> this hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> he was known in the day as they desire, not altogether a complement although he regarded it as flattering indeed. >> he was impugned as a tyrant because he overturned a long-standing custom in the house but the minority with you in april parliamentary footing majority.

>> today marks the first time in our legislative ranch in its entirety will hear on that medium of an indication through which most americans get their information about what our government and our country does. several times today, this has been referred to as an historic occasion. whether or not it will be an historic occasion is i think a subject for the judgment of history.

>> the house small business committee held a hearing wednesday, the committee small-business lending. bankers and business owners testified about the ease and availability of getting credit for your congressman sam graves of missouri chairs a 90 minute hearing.

>> i call this hearing to order and i want to thank all of our witnesses for being here today. we look forward to hearing your testimony. apologize for being a little bit later as a so-called. as america seeks to recover from this recession, which has obviously been a terrible blow to a lot of folks, we're going to to be relying on donations small businesses to help lead the way. for small businesses to expand and create jobs, they need adequate finance. small businesses tell us access to capital remains a hurdle in the current economy. despite i was on wall street and government efforts to loosen credit, in fact on the other side of the equation, lenders say their capital -- capital available to businesses are not as creditworthy as they were a few years ago. banks claim today's players have their credit scores and lower collateral value due to depressed real estate values.

if you want a nation's entrepreneurs to grow businesses and create jobs, we need to bridge the gap between lenders and more business buyers. we have called this hearing to examine challenges for small businesses and banks are facing when deciding to expand or land on me. in addition we're going to examine alternative kinds of financing for small businesses and avenues available to get the capital they need. i'm very pleased to have several distinguished witnesses to provide members of this committee with insight about the importance of capital for small businesses and impediments leading to lending by banks are experiencing today. i think this is going to be a hearing on a timely hearing and without i'm going to go to the ranking member for her opening statement and then we'll get started. >> thank you, mr. chairman. job creation is understandably for all americans right now. new data just this morning

suggests the economy at only 30,000 jobs in the month of may. of these, large firms cut the workforce assessment to clear some of the small businesses to creating power right now. i'm order for small firms to play third traditional job creating goal, several fact years must be in place. perhaps the most important ingredient is the availability. if small businesses are truly the back bone of the economy, and then it is the lifeblood. although challenges remained, there have been progress in this area. small business loans in the first quarter of this fiscal year with 15% over last year. small firms are falling behind or defaulting on loans, so just in better shape to take an additional debt and hopefully

expand. landing through the small business administration is always critical for seeking affordable capital. however, during economic downswing, would credit excised elsewhere, the sba's world becomes more important. several provisions this committee crafted in the recovery act boosted sba backed lending, racing down the sba loans to banks greater incentive to make small-business loans. other provisions made the loans more affordable for borrowers. as of now, it does have demonstrated the most quantifiable, proven results for the recent policy actions have yet to have it the same level of success. examining the amount of sba lending is only one macek for these clowns to ignite real job growth, the agency must

concentrate on the right kind of small businesses, namely startups with the highest potential for job creation. on average, cost nearly $75,000 to launch a new enterprise, a tough proposition under the circumstances. unfortunately, this small startup are not seen their fair share of sba loans. during the first half of fiscal year 2011, less than one quarter of sba loans dollars went to startups. it is my hope that today's discussion will generate new ideas about how congress, the sba and the lending community can expand all small-town finance inactions, but especially for those at the earliest stage of the business cycle aired as the committee must forward, we should examine the full spectrum of capital options for small firms. some businesses will do fine to conventional club, while others

can meet their capital needs with micro-finance team. for startups, a database solution may not make sense at all. investment capital might be a better fit. what works for a small amount may not be appropriate for a family internet feed to say nothing of it, technology start up in lower manhattan. on that note, i would like to thank our witnesses for taking time out of their busy schedules to be with us. their diverse views and experiences will be available to the community as we can see how best to make capital options and i yield that, mr. chairman. >> thank you, ranking member. if any other committee member has an opening statement autodesk use a minute for the record i'd like to explain to you real quick read each of your five minutes in the label be green after minute will turn

yellow and then read here we will be lenient on that. please try to stay within the five minute mark. our first witness today is william hall. mr. sabonis at dairy queen franchisee with five locations in texas i believe. mr. kottler serves on the international franchise association and shares her credit access committee. we appreciate you being here. they came along way and look forward to your testimony. >> thank you, chairman grays. i want to thank you as well as ranking member velazquez. five minutes apart for me to say hello, but i'm going to do my best. i'm at dairy queen franchisee is a member the international board of directors. i want to talk about the important role in the economy franchising hauled as ms. velazquez mentioned,

small-business startups are an important part of our economy and franchising meets that need, but with a little bit of a lifetime for the first row in the business because they do have a system of training that allows them and to start a business without being totally themselves. the world grew at a faster pace than the non-franchising with up to 2008 he had financial meltdown. since then, recovery has been very slow. markets have been frozen, very difficult to obtain financing. we greatly appreciate the work you guys get on the small-business jobs that have sp provisions have been a lifeline for franchising, send it would really do appreciate. but currently other than sba, there's very little lending out there for the entrepreneurs in the franchising world. to survive, the franchise community has cut back to live with what we had. we didn't add new jobs.

every model where we needed to because we were caught in a situation where he could fire when the money and that was pretty much across the board, too large. impacted all. we delete the new store acquisitions franchise is often accompanied them to their unit because they couldn't get the initial antsy. people pay the franchise fee, but couldn't get to financial going. we think small-business create 610 jobs in the country and if we don't have access to credit, we are not creating jobs we need. we think there's a 20% shortfall in funding to franchise this year and the sba has been critical in filling that need commit were still going to be 20% short and not as a lot of jobs will not be created that could be as liberal access to credit. franchising is all about small business. franchise and sometimes gets confused because people talk

about donald's commentary cleaned the large companies. i set it for nothing, had nothing to most of the people charged with one unit and grew from that. we are resilient as a group. we are diverse as a group in the franchising industry, 19% of the franchises around a minorities over 400 franchises within a program we feel like that's been a fantastic program coming back. you're in business for yourself, but not by yourself. it does in fact but essentially position where we can be a good borrower for the funders that when a class from which they need to make wants to be

successful. so we thought, how could we solve this problem without any help from anyone we decided as a group to get together and from the franchising growth reach out to the lenders to try to show what we have to offer because we knew they needed to make loans. as a franchise loan, we think it's a better love than a non-franchise low because you do have a system in place. training, support, the franchise does underwriting before you go to the lender, said there is some safety. so what we did is put together credit santa to bring together parties and i don't have the time. i wish we could perhaps introduce this piece into the record, which does describe to credit conference we had brought together vendors and franchise folks to try to come up with this elution, a private sector solution to the problem. as we go forward, we need help in this regard.

we need to help our lender friends to be able to loan money to rise. we are going to do our part. we are not trying to look for a bat phone. we are trying to put an improvement love that could be made and paid back. we do need help because those markets are close to us right now. without the sba lending right now, we'd be a lot less people employed in the u.s. with their help in your help to them i know there will be about for jobs available. we are not looking for a bailout. we just need access to credit so we can grow our businesses and provide more jobs and they want to thank everyone for having us here. i'd be happy to answer any questions. >> thank you, mr. hall. our next witness is live ozer at susquehanna bank and representing the national association of guaranteed lenders where she served on the

board of directors since 1988.o so thanks for coming up for it during which have to say. >> chairman grays, ranking minority member, velazquez and members of the committee, as sharon graves mentioned i am at a bank or a managed sba and a government guaranteed money throughout our banks for state footprint. the state chartered bank has approximately $14 billion in assets operating throughout 223 branches and mid-atlantic states. susquehanna is active in both s.b. 878 and 504 programs, currently holds a portfolio of approximately $300 million in government guaranteed loans. i am also here representing more than 700 members of the national association of government guaranteed lenders, nickel. for the past 23 years and served on the reason for many of those

years i served under executive committee and as chair of the technical issues committee. nicholas lender members are responsible for approximately 80% of the annual sna volume as well as most of the lender portions of the sba 504 alone. thank you for inviting me to testify and for holding this hearing on the port mysia small businesses, availability to access capital. in the interest of time, i will submit my full testimony for the record and provide just a brief summary. i want to begin by publicly bank for taking job creation and economic development. because of the exemplary efforts, both nato and isv today have a 70 loan program that is much better able to meet the capital needs of america's small business.

it is important to note that the isc work on this issue did not end with the passage of the small-business jobs act. approximately one year ago, while we were working on credit access issue on different tracks, nickel and isc began a dialogue that we have continued. through those encounters, we came to realize there is a significant overlap in the issues affecting both organizations membership and note that each group has much to learn from each other. so isam mccullough has forged a partnership intended to increase availability of capital to franchise small businesses. a highlight of my essays ongoing efforts to address the credit issue was the credit summit was organized and delivered in april. so how come it sure dieses credit committee has briefly describe some of the things i essays doing, but neither he nor ifa will tap the organizations work to bring attention to this

important issue and ifa's continuing commitment to the effort. i want to do that for him and them. i also want to specifically mention exemplary leadership by iac ceo, steve caldera who assert tirelessly to highly the important role that access to credit plays in creating jobs and increasing economic hope. the most important message that i can bring to the committee today is to reiterate what you already know. sba loans are critical to keeping small-business segment of the economy, the biggest job creating segment healthy. we are seeing signs of economic recovery, but for a variety of reasons, accessing capital continues to be difficult for small businesses. lenders want to be able to provide this necessary capital, but they are experiencing a perfect storm of circumstances. that together serve to state of

the conventional small-business site duties. lending activities. so our banks leading credit needs of small business customers? many lenders are increasingly turning to sba loan programs and in particular to the sba sevena loeb program. having a healthy 70 program is essential to keeping credits flowing because sba is the single largest provider of long-term cap oil to u.s. small businesses. it's loan guarantees account for well over 40% of all long-term small-business loans made in america. from the lender's viewpoint and a key benefit to the 7(a) program as it takes less capital to support an sba loan to make appeared from the small-business viewpoint, it allows increase access to capital, particularly the kind of financing appropriately matches the loan term to the life of the loan is being financed.

that is finances long-term assets with long-term loves. according to federal statistics, typical 70 7(a) none has conventional boats typically with the original maturity of three years or less with a significant majority of the maturities of one year or less. under maturities allows small business to access capital that would not be available as repayment or required substantially shorter periods. the small-business clearly demonstrates recent demand for the program. according to sba come the last two years the 7(a) at 504 provided approximately $42 billion in loans to all businesses. however, success of the 7(a) program caused a new problem. based on the loan approvals today come it appears highly likely that the program demand will exceed the 17.5 billion program levels set by congressional proofreaders. this means it is likely that

7(a) program will shut down late this summer unless congress acts to raise the program level. in order to avert this potential program suspension, nickel on behalf of its members is requesting congress that now to increase this year is programmable for sba business loan programs to $19 billion. this increase will not affect budget he has sufficient appropriations are already available to support the increase to the program level ceiling. we no small-business leads the way to create a new job cimino had a vibrant mall business segment in our economy is vital to continuing economic recovery we are seeing. we also know keeping sba's 7(a) and five a four programs available to the capital needs of tens of thousands of credit for the small businesses that now have nowhere else to turn is equally vital. to isolate time left?

sorry. that wraps it up. i am available to answer any questions. the macula more opportunity we get to questions. all turn to ranking member velazquez to introduce our next witness. >> it is my pleasure to introduce that are dennis jacobe, chief economy in this world leads gallup efforts to understand consumer public and the economy more broadly. he has designed many of gallup's financial indexes, including the small-business index and investor in retirement optimism index. professor jacobe focuses on behavioral economics to their idea of financial well-being. oakland. >> thank you, ranking member

velazquez german graves. i'm pleased to be here today. as he mentioned to my gallup chief economist and comments today on my own, not unfairly those of gallup. we at gallup are concerned about the economy and i'll summarize my statement very quickly, but we interview 1000 americans every night and we done so since the beginning of january 2008. and we ask them various questions about the economy and them a look at those results in record on a weekly and monthly basis. and what are numbers show us what you've aren't some of the economic data today and that is the economy is softening. we've seen it for quite a while. we think by asking americans about how they feel about the economy, we get some insight into where it is headed. so although the economic data you are seeing today? a little bit, we think our numbers are being confirmed by what is happening now.

we are certainly and a soft patch potentially in a stagnation or stagflation situation. some of the numbers we can show consumer spending and we have not been increasing. at the same time, we see unemployment at very high levels. the number will come out friday. i'm not sure what that will be, but the young unemployment rate. our member for me is 9.2%. that is not seasonally adjusted as an unemployment rate. when we look at what we call under employment, that is people who are unemployed or people who are working part-time looking for work, the number goes up to 19.2%. and we think people underestimate what the effects are on society and the economy of having one in five americans unemployed or underemployed. in addition to deserted daily monitoring, we do something we would call the wells fargo account up small-business index.

are we to enact a survey small-business owners across the country and asked them a variety of questions to see small-business operator environment. i've inserted a check and a testimony, that basically would happen as his earlier this year as consumer confidence was up, so was recovering from the last year and a half when it was low. in our latest measure, small-business confidence went down. we think that does not portend well, but fits with their other measures in terms of the economy overall. in terms of credit availability, as part of the index, we measure and ask small-business owners what they feel the credit is available to them as small-business owners. in my testimony, i include a chart that shows about 30% of small-business owners say it is difficult or very difficult to get credit right now. now that number may seem small,

but it is about three times with the difficulty of getting credit was raided by small-business owners prior to the recession. in terms of getting come up with your critic is easy to get, we have about 20% to say it is easy to get obviously those who are stronger financially and that number is down from over 50% prior to the recession. there is a slight improvement of credit availability for small businesses as has been mentioned by a lot of people. but it is far down the recession levels. there are a couple of different things i think are very important having to do his job creation and small businesses. i won't go through that discussion in detail except to say we find that about 40% of small businesses tell us they're hiring less people than they need. we think if we can turn that around and actually get them what they need, not necessarily to grow, there could be really

an explosion in terms of job creation that is unexpected than most economists. the question is how to do that effectively. the areas i mentioned that are not mentioned often, one has to do with education. i'd be glad to discuss that, but i think there needs to be some tied to education from pulling the small businesses. the houston real estate area can be poured more bad news, which is another area that's very important to small businesses and finally some of the energy problems. i'd be glad to answer any questions. >> thank you. next i will turn to representative landry, introduction of our final witness. >> thank you, german graves. i would like to introduce mr. bob kottler to you all. mr. kottler is a two-lane grad. we have got to landgrab on the

committee. by bernie bank is probably the executive vice president near my hometown at iberia bank in mafia, louisiana. he may be able to understand if your problems. mr. kottler has capitalized on its banking and finance expertise and has devoted his career to work and i'm what makes small businesses work great in his current role at iberia, he is retail operations, credit cards, sales to retail training of small-business. before joining to me was the executive vice president of the small-business banking at n., covering texas, louisiana, maryland, d.c., new york, new jersey and connecticut. i don't know how you could add texas and louisiana to the east coast. this teamwork in tandem with capital one small-business credit card team. mr. kottler headed the branch real estate division in the texas area and serve as the

chief officer before iberia's merger. he served as consumer bankers association in 1995 as a member cba small business committee. he has been extremely active over the last 16 years and its role such as chair of the membership committee and member of the board of directors for 10 years. in total, mr. kottler has more than 20 years and small-business access to capital credit. thank you for your service to our community and throughout the other states and i'm proud to approximately testify before assault today. >> i think mr. landry used up all your time. [laughter] >> high-yield. >> thank you. good afternoon, german graves and ranking member said three members of the committee. i am excited to be here. i am responsible for retail and small-business banking at iberia bank and also a member of the consumer bankers association

there is. cba has been a recognized voice of retail banking, including small-business for the nation's capital for 90 years. in my position at iberia and cba and 21 years of experience and small-business funding, they understand the challenges we face an especially getting through current economic environment. for the past four years has resulted in less consumer spending and consumer spending is critical to boost sales of small businesses and make them healthy. the decline in sales in the economic conditions have led to weaker than normal and inconsistent demand for small business loans. in fact the nfib study found that for sale and uncertainty continue to be greater problems for small-business owners and access to credit. in addition to declining sales, another fact dirt diminish the demand for its value of home equity and as many of you know, home equity is traditionally a

strong form of collateral that many business owners use to secure their business loans. the december study by the federal reserve bank of cleveland found the decline in home values has constrained the ability of small-business owners the credit they need to finance the business. it is important to understand how the decline in sales of home values have suspected small-business lending when banks underwrite loans, we look at two things. cash flow, both historical and project it as well as the collateral securing the loan. and the decline in the screechy area over the economic cycle have been significant factors behind reduction in monday and make it clear why lending has been so difficult. we do see it improving. cba members report increase in demand for small business loans in addition to the commerce department announced increase in consumer spending for 10 straight months, which we think is a positive find we are turning the corner.

so what is cba doing to improve lending? many banks have instituted aggressive outlook program, where banks will take a look at it though that might have been declined see if there is a way to approve it and are looking find ways to make more quality loans to that process. a number of banks also announced lending programs and commitments to small businesses in many cba members establish enhanced training and incentives to branches, which is often the primary place where customers come to ask for loans and also specifically improving use of sba programs. cba supported and will continue to support efforts of the committee to expand economic development. we believe sba program and improvements come including fido for an express are important and also the small-business lending fund and other enhancements in all of those things are taking us in the right direction to make more loans.

this spring, cba joined with the international finance association to sponsor a small-business lending summit here in washington d.c. through that summit and the dire lack that we had with ifa, we looked for ways to improve lending. as a result, the small-business committee is now working to develop a template that franchises can use to prepare the financing they need. this template to provide the bank information about the franchise and hopefully help us successfully underrate the loans. one final point i want to stress its importance of communications between borrowers and lenders come even before re-request is made. the better prepared and knowledgeable berbers and the more a lender knows about the pirate, the more successful the outcome. small businesses and lenders need to work harder to preach that divide and better understand one another and that is one of the things we have been working on with the ifa.

in closing, we are starting to see signs of growth in our economy and a successful demand for goods have a strong cash flow to prosper and we think the unemployment rate will continue to improve small-business funding of small-business growth. cba looks forward to working with the committee and small businesses to strengthen the nation's economy. thank you for the opportunity to testify not be available for questions. >> i am going to pass my line of questions to the end of the hearing because i have a lot, but i'm going to turn to our first member, mr. west. >> thank you, mr. chairman. also ranking member velazquez for taking the time to be with us. pity they're interesting morning. we went over and met with president obama in one of the interesting topics we brought up was that we are discussing here today as far as lending and especially the regulatory

burdens we placed upon small businesses. one of the things the president said with the desired independent regulators dealing with small businesses and really the government doesn't have any effect upon them. but i would like to note. have you seen an increase regulator coming down that are restraining or restrict teen the lending practices for small banks because that is a very important relationship we have fewer small businesses. i will refer to bankers for senate mr. hall. >> what we found is the fdic regulators are inconsistently applying regulations throughout the banking community and that is what is reported to the trade association. >> i think that the banks that are members of cba have not seen a lot of regulatory impact.

we are always concerned about it, but i ultimately think it is really improving the economy that is keeping more loans as the primary influence. >> well, by the way, i am from texas. no problem understanding here. mr. west, i think the issue is from the franchise perspective, we are hearing that are borrowers are being inconsistently treated in some ways that the bankers are being inconsistently treated that i have some banking interest myself and i do know that it is very difficult for the individual banks to know what to do. they are like we are in our business. it is very difficult time for this small pain and so, we here in the franchise inside there are significant restrictions on

credit, based on the inconsistency of the regulators and i am not -- i don't know a lot -- i'm not trying to pick on anyone. we need to find a solution to the problem. >> can you give examples of inconsistencies, one or two maybe. >> i can tell you what i heard. i'll defer to the bankers. unless they don't answer and then i'll tell you. >> hot potato. okay, what we hear is the sba loans and again, i know we had mr. greenberg and the vice chairman of the fdic speak at our program. he clearly said were trying to help you in this effort, but we here it is not getting filtered down to the local examiners in what is happening is the local examination level are looking at sba loans have some more whiskey because they are guaranteed and

therefore are substandard or getting pushed over into a more restrict the blind within the individual banks. we think franchise fonseca above, but because they are sba loans, there's apparently some biased against them. again, i'm only answering because u.s. and the question. >> well, this is the same information weoç have heard. some banks on the government guaranteed loans are asked for how your reserves than others on this theme guaranteed portions. it has been handled inconsistently and just exactly what mr. hall was saying, as far as the classification of the loans and the risk rating and that naturally affects how much capital has to be reserved for there is loans. >> thank you. mr. jacobe, one question. in your estimation, what are the two economic policies silver

bullet that would enhance access to capital for small businesses and help us to sustain a growth environment? >> i wish there were silver bullet, but two things that would really hope. i think one is stabilizing real estate arcades. i think as you hear from the bankers in terms of how small-business loans are made and i have worked with bankers for 25 years and they tell me the same thing. that is the lack of collateral, a lot of that is the housing situation. the second thing has to do with education. when we toot our polling prior to the recession and prior to the financial crisis, one of the things we found the small businesses had problems finding people who are skilled and have the skills they needed so they could grow. there remains the problem and when we pulled

>> thank you, mr. chairman. dr. jacobe, in your testimony, we discussed while credit conditions have been improved, as they're still considerably tighter than they were in 2006, 2007. i know that you mentioned three fact tears. one of them to housing and real estate markets. but dc-based on the third base that you take every night any conditions that are proving so that we could be to a point where we were five years ago?

>> well, actually until about january of this year, we started to see a lot of things improving and i thought we actually were going to build some economic momentum. and that is inserted -- in the last couple of months. i think that we could build surprising economic momentum and really get back there if we could unleash this pent-up basically nationally that we more quickly than people think. >> can you imagine where we++ would be today if we were not+ infuse capital in terms of helping prevent the capital collapse the capital markets from collapsing quite >> was interesting last night i was watching too big to fail entering a period of time when all those events took place, i

was pulling the day, not only national consumers, but also banking customers. and i could identify very well with some of the feelings that are portrayed. it's really hard for people to go back and imagine what conditions were at that time. but at that stage, there was support on almost anything because we were really afraid that things are going back to the stages of 1930s. i know a lot of people don't agree with that anymore, but that's a wee fella. >> do not at this small business index had increased 40-point between july 2010 and january 2011. what would you attribute this increase to and do you think that the federal stimulus played any role? >> well, certainly the ink and people disagree with how effective the federal stimulus was in office kind of things, but we really did see the economy start to recover from a

really bad point about a year ago and our numbers and consumer optimism and everything related to pick up late last year and this year. i think it was a combination of them having to do with a lot of uncertainty is being removed in the economy and people were much more optimistic. >> you just made a comment at the economy is strengthening and giving the numbers we heard in terms of job creation, adding on the 38,000, that could have an impact on capital availability or credit availability towards small businesses. up to this point last year we passed the small-business lending fund under the department of the treasury and is supposed to provide capital to the bank so they could lend to small businesses.

after this point on the 626 financial institutions have applied for the treasuries sbl. and none has been approved yet. so do you see this initiative have been major impact on small-business ability to secure capital? >> i don't think that anybody really expect it to have a huge impact on the program. at least the people i talked to particularly in the banking business that i was really going to turn things around. i am not surprised by the result. there are a bunch of issues around the program that just make it difficult for small banks to take advantage of it. and i am not sure that it will help than what i see this coming. >> when we were debating the legislation that created the small-business funding for, one of the concerns i raised was the fact that in the language there

was no requirement to the banks to mind. if you take that money, if you access that money, issued a small businesses. so in light that we didn't have, we do not have that requirement, will what do you think will have the impact on small-business access? >> i am not really optimistic that the program while other major impact. it is a little uncomfortable for me because i think conditions are bad enough that we had to do anything we can. anything that provides help in this area, i am floored. in terms of expectations, i wouldn't have greater expectations. >> all of questions for the other witnesses, but i will do in the second round. thank you, mr. chairman. >> mr. butler.

>> thank you, mr. chairman. my questions will be directed to you as well. i really found it interesting in the survey you provided us, when 40% of our small businesses are not hiring as much as they could but we are talking about it's difficult to create new businesses. in a state legislature ever does get new capital and expand and make in cuba need to protect disney's owners, those smart guys struggling right now should buy a media focus. that's the quickest way to get job growth in our country. at 13, 14% unemployment. double-digit unemployment for three years and my biggest counties. because we are primarily a small-business space economy. i was looking through these answers they gave you. 79% said they were worried revenues or sales but failed to justify new employees. so no one will buy what they're selling so it's not worth it to

expand. i'm worried about cash flow or ability to make payroll. i can tell you that small-business owners who have not taken a business check in several years to keep their employees employed. it's hard to find the education component and worried about the potential cost of health care. that is something we haven't talked about. we had a panel at complements ago. the only thing i was surprised i didn't see any of us with regard to the regulatory environment, but this is really much more -- this is much more big picture. it's not this regulation are that regulation. is that something that did not register or was that cloaked in the answers for these questions? >> i think it is overcome by the other answers. it is larger sample sizes, but a much smaller percentage.

>> it is a regulation. so going back to the certainty and confidence issue, you know, you have three suggestions or solutions. each one of them could take a significant amount of time and how do we stabilize housing values in education is obviously more of this day's responsibility, but there are federal workforce programs we could align perhaps. an energy and i know we're working on gas prices here, get more supply up there and hopefully we can drive down the costs. in getting to these three, where would she suggest we start? >> i think the most important thing that could be done and i know this is not the view of a lot of people is we need to do something about housing. i'd had housing has effects across the country that are under nested. it has had a major impact on collateral to small-business, ability to land the wealth of

the american people and in terms of going forward, we have a broken house finance position. if you go back in history is how housing was really stimulated, that has hmm this impact on communities and growth to small businesses and on the country. i know that is not a topic being generally discussed, but we're not going to get this economy going to potential without housing going. i think the growth is going to be a lot faster than most people in. >> and i yield back.÷?÷?÷?÷?÷?÷? x? mr. said to come you talked÷? about decline and went in having more to do with drops in cash flow in on collateral values over the years and that increas? catheter requirements and ÷?gulatory uncertainty has made? it difficult to manage.÷?÷?÷?÷? but i wanted to look at the÷?÷??

underwriting standards. what are the current underwriting standards for applicants seeking loans to small businesses and have they changed over the last three years?ç ñwçñçñçñwñççççñçññç

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of our member banks to processñ these in place to have añ supervisor or their managerñ takeover or another underwriter to go for the loans to see ifñ there is another question we could ask for information weñç could get, additional collateral ñwat would make it uncomfortable but something to try to take a look to see how we can make loans, and our members have seew anywhere from he whittled ourñw small business committeeññw anywhere from three to 20% left in the approval rates of those loans at helping small businesses for industry. >> you look like you have something to say on this. >> what i was going to add is the second to look program is just something that a lot of what we deal with at other banks that participate heavily with the small business administration is we do as a second look see if we can

utilize the small business administration guaranteed on these loans that don't meet our credit criteria on a conventional basis. the credit criteria of our banks in particular and i believe i'm speaking for most banks would have a credit itself has tightened due to regulations and losses and so forth, but what that means is the fault of their plate and land online as the government guarantees lending so that's why we've been doing more loans because we do look at the same exact criteria that he was speaking about but with the enhancement of the dr. guaranteed and that's why the vitality of that program is so important. >> thank you. i yield back. >> thank you, mr. chairman. briefly i think one thing we heard earlier bares repeating.

i was as surprised as colonel west when we met with president this morning we were told by him and his own mouth with little direct control how the regulatory environment and he mentioned one of the hurdles you had been facing in your business dealt with the fdic so i ask you who oversees the fdic. the treasury have? >> i think it's an independent agency. >> would be mr. geithner. we have a president with him in a few minutes and i'm going to ask his role for the regulatory environment. i was surprised to hear that. and i have a question you heard mr. hall talk about the role of franchising. i've been a franchiser and franchisee and he's absolutely right there's a tremendous pent-up demand in our industry. traditionally our industry has been sort of a stabilizer. it's been countercyclical when business got a bad and people got leadoff the return to

franchising to start their own business. we saw that in our own business demand for the restaurants went up dramatically. but the ability of people to open them fell to zero because no one could get financing. let me ask you this. you talked about what is preventing you folks from lending and i heard all the things i would ordinarily expect which is your cash flow and collateral makes perfect sense to me, but my question is their anything we can do or perhaps undue as a government to help you lend money? an example from another industry is the real-estate industry which is having a great deal of difficulty refinancing right now and it is in large part because of regulation that there is a rule in place that says if you refinance a real-estate loan even though it's perfectly healthy and performing if you refinance it automatically goes into a troubled asset category and to me that shows some opportunity to fix things. so what can we do to help you lend money to folks like

mr. hall? >> i think one of the things is to be supportive of the sba programs. a lot of our banks use them and the increases and the amount to land and some of the other things the were done have been pretty important, and banks have used that pretty aggressively through the economic environment to make loans. i think that is the primary thing other than just the more global economic things we have to continue to work on, and that will take care of a lot of it in the process. >> mr. hall makes an excellent point in your testimony if there was no sba lending now there we would have almost non-and our industry. have you ever done it alone? >> no i have not. >> could you tell the difference in terms of the paperwork involved behind getting an sba loan and a traditional loan? mabey mr. kottler can help on that was well because it is not apples to apples it is different

in an sba loan and an ordinary free market alone. >> of the amount of credit; information that is requiredxx from the bar where, the basic credit information is the same. in order to do your due diligence in the underwriting process that the congressman had asked about before, we need the same amount of financial information. however, when you are applying for an sba loan, there are rules and regulations, standard operating procedures that have to be followed. so if you decide to borrow money from a bank who has expertise in that area, there should not be a huge amount of difference for the individual borrower. but you do need to have a lender that has experience in that because there is credit underwriting on the bank level and then there is credit underwriting that has to be done on behalf of the small business

administration. so there is basically two times the amount of work. you can use the same credit underwriting but you do have forms and applications that need to be done. eligibility checklists that need to be done, tracking of use of proceeds and there is more of an administrative burden on the bank to do an sba loan. but the bar were themselves shouldn't really be experiencing more problems. >> i had the great pleasure of having an sba loan at the next time. it was between the ntsb a drought and the conventional route and the conventional route was preferable. mr. hall? >> i would add that while i haven't had an sba loan it looks like i'm going to be going after one, and that's -- i will just give you the real world perspective on that. in the past if i put a new unit and or a restaurant in i am typically putting a lot of capital in already in addition to the loan and in the times pass i might not have had to

guarantee the loan personally and in fact i wouldn't do it unless i had to. in today's environment, every bank is making me guaranteed that blown personally, so now faced with the fact that i probably can't get the loan that the commercial bank i am now saying okay i've got to go through the sba if i want to expand which i'm currently looking at right now i am going to expand my dairy queen to refurbish them during an sba program because that's really the only route i can take. am i excited about the paperwork and personally guaranteeing it with everything i have when i'm putting a lot of capital into it? no, i'm not but i don't really have a choice if i want to renovate my units. so that's the response about the sba. >> thank you mr. hall. mr. peters? >> thank you, mr. chairman. i want to talk a little bit about back to the bankers situation banking loans. i know things changed but they're seems to be two issues

with the banks talking to banks and credit unions and others is certainly the deals that are coming to you are different cash flows, different collateral but in terms of the questions we've been getting from other panelists as well as the f.d.i.c. involvement is oftentimes the fdic will go to a community bank what i'm hearing and i would like you to respond they are going to the community bank and say basically looking at your portfolio and say that your collateral you have backing at your portfolio has dropped so your collateral has dropped as a result of that and you need to have increased reserves which seems to be a prudent thing to do is to increase reserves as your collateral has dropped so that of course limits your ability to lend because you've got to bring in private capital which is a difficult thing to do in a tough economy and they don't like when i look in my area or you have to fall in the loans will reduce your ability, so the questions are from the banking industry that you're having trouble finding borrowers and to what extent is the fact that just because you're own

portfolios have dropped, collateral dropped in value you simply don't have the capitol to lend what is that balance? >> you know, i can tell you from our experience we have been very well capitalized and have very good lending performance through a cycle, so i will tell you that one of the reasons i came was to do small business lending. it was something the manager of the bank wanted to do and as a result i don't think -- my experience at least at our bank that has been an issue. the issue is more broadly -- >> more broadly in issue? >> - attended some different forms and banks certainly raise that issue, but i will tell you from my experience our bank is $10 million by experience in the larger bank i don't think it was >> my experience is similar in that we have to bring capitalñ and haveñ been able to landññ

throughout the crisis.ñññññ ñ do have issues with of theñ loan loss reserves and on aññ conventional basis they are looking more closely because of ñeññ regulations and the typ collateral that they are able t use yet the equity values haveñ decreased thief, but we haveññ available toñ us the way to mae loans is to utilize the government guaranteed, and we have been able to do that and t conserve capital because that's one of the major ñthings thatñ that program allows us to do.ñ the credit worthiness of the ba were at the present time theññ people that you're lñooking at now that come in to borrowñññ money, their experiences are leanñ and mean and have a topñ line problem and not aññ bottomline problem because ofñ the consumer ñspending, and th are the things, you know, thatñ makes the banks' nervous, and we used a government guarantee to do that on a conventional basis a lot of banks are requiringññ

borrowers to pay off theirñññ credit lines that they haveññ utilized all the way and they don't avañilability on it andñ then with an sba guarantee weñ ñn give them ten years to repa that loan as opposed to theññ banks requiring only to country for your loan.ñññññññññ so by applying a guarantee to i ññ increase the working capit available to the bar were to keep them in business. >> let me jump in with your use of the sba which is an important part is there is discussion on the fee in the sba loan that traditionally the fees have covered all the cost program. however now it is being subsidized and i know the administration and others have concerns about the subsidy of the fees. the fees can be relatively high for a small business right now. what impact do you think it would have if we do not -- or in a position we don't subsidize the fees' and don't have to raise the fee is? are you concerned about having to face even higher sba fees?ñ

>> on a ñpersonal basis, theñ borrower have that concern, but this also touches on whatñññ mr. hall was saying.ññññññ when you utilize the sbaññññ guaranteed loan it's becauseññ credit is not availableññññ elsewhere so these small businesses are either fighting to stay in business or they want to fight to start business, and the fees can be financed and amortized over the life of theñ loan which generally is a longe period of time than they wouldñ get on the ñconventional basis so as a lender, yes, it'sñññ concerning to read as a borrowe i sure that it's concerning asñ well except that if you are in  situation where it is the mostñ reasonable way to continue inñ business or start a business than we are going to continue to do it. >> i have a financial background with cpa which i started eight years doing that and i've been an entrepreneur since then and unfortunately the question i asked the bank now is not about the fees but what's the payment?

it's a situation where you need the credit, you need to finance something you're going to pay higher fees and be willing to pay a higher fee than you ever thought you would. it's an excellent deal on a personal guarantee. there was a time i said i would never personally guaranteed a loan of gentry imet those words today because to get a loan or expand or even survive i'm going to have to guarantee it personally and put on the table everything i've worked for my whole life. but i'm having to do that to grow. >> thank you, mr. chairman. >> i'm going to jump in here real quick because we are going to have votes coming up after bit. i don't know when they are but i did have a question for you, mr. hall, you mentioned earlier, and i heard this about possible bias out there against making it harder for the franchisees'. in fact, i've got friends who are trying to get loans on start-ups that are new franchises, and they get that impression that there is some

bias against that much tougher. can you expand on that and i would be curious to hear what the others have to say, too in the banking community. >> welcome you know, i think historically people have had a negative thought about the restaurant industry and about start of this just in general because the sba program is not about giving money to the loans that won't be back. that's a program yet to be the money that it has to be a plan in place. so, they're has been traditionally a bias against some of the franchises, but i think we are turning that around partially with the work with these other organizations because to us it's about we look at it as the glass as half full rather of and half empty. we are not putting the blame on you. this is our responsibility. we have to operate and grow and the way we are doing that is as a group with other people that need to make loans and the things we are doing are like the

underwriting issue that was brought up earlier. we accept some of that responsibility. we were not given the right information to these folks because we didn't know what to do so through the leadership we are creating this environment where we are showing our members both franchisers and franchisees' how to make that loan application and the things the bank needs to be successful so hopefully we are going to overcome that by yes that i think has been out there. but i certainly know that it has been there where is our effort of the future will be to try to overcome that. i don't know if that answers your question. >> i would only add that i think that startup loans are the most difficult loans to finance. the oftentimes have the least equity going in. they are oftentimes people who may or may not have been in that business and want to do something new so the lead issue is less of a body is and more just they are harder to do.

so i think one of the things that we've talked about with the isa is the cd a small business put together a template with a series of questions for the franchise how successful your franchise has been a and a whole series of questions and we are hoping as an industry starting that communication we will have more success with start-ups because i do think they are the most difficult to do. >> i want to back that up with a question and i would be curious when it comes to start-ups and this is the age-old question, too. if you're not wealthy you are limited when it comes to your personal guarantee. but you're trying to do a startup you have a good business plan. is their anything that can be done to make that process a little bit easier because those are the people why worry about more than anything else. we have got great ideas in many cases but if the individual isn't wealthy they don't have the personal banking or that personal guarantee, the equity,

so is their anything that can be done and i will just run right on the line and start with you, mr. hall. >> traditionally what has happened is those initial entrepreneurial type of efforts have been financed by friends, family, other outside people the bigot, borrow and steal to do what ever they have to do to get started, and i think that is sort of what happens. also in the franchise industry as well we have a lot of people coming into that that their initial capital is coming from what we call a jolt investors which is personal relationship with them, very difficult to get in the institutional investor to get involved in any kind of the small business loans we are talking about. but as a rule, i think that initial capital is comes from just the effort from the individual. very seldom in my history of

being in business have i seen a start up like that to find a place other than through some foundation or something to get the startup money, so my personal experience is normally have to take the first step to get into business which is one reason we love the franchise business because they are not taking the first step by themselves. they can accumulate some of the money and get in business with support of some one else to help them be successful before word and to grow. >> i agree totally with what mr. hall is saying when you look at as i have for years on projections and business plans to begin with. we see lots of people that we suggested they go back to a small business centers and the score offices and so forth to work on their business plans but the initial equity when you talk about that, that is the most difficult part. it is the startup capital. they go to friends and family and the investors, but we pulled

to 100% financing. what we find a lot of times as i see that these people have access money from credit cards, and a lot of times we see that that is how they start their businesses and then if they do have this wonderful idea they come to us where they have already proven some topline success and the of credit card debt and that is one of the duties of the lending we can refinance debt over a longer period of time because they've already proven that they can pay on a small oasis and that's how they get it but the initial capitalization, if you don't have it you have to get a gift letter from your friends and family and get investors. if you cancel the bank on your idea maybe you can still lead to somebody else and bring on partners and so forth because they do have to have some percentage of money to do that. i have information here on the percentage of startup loans on by the sba if you're interested in hearing that >> mr. chairman, will you

healed? this is my frustration because when we passed the jobs creation bill, it was with the purpose of helping provide to those who were not able to get through conventional or financial institutions, and what we have seen is the federal government on the sba is guilty of charge because what we are seeing is a concentration on the big loans. those we increase the loans from two to 5 million, and the percentage of the loans defined are those of less than 150,000 have declined through the sba guaranteed loans from 17% to 8%. so the problem with this recession compared to other recessions is that people lost

their jobs and the start of their businesses, they held and created business. this time around, because the standard has tightened and sba hasn't helped because basically those guarantee lenders are concentrated on making the big loans. debt financing do not createyçxy jobs.ñyyçñy >> with all due respect it is uy 6.3% and numbers and 38.8% inyçç dollars and 20,000 year to datey versus 2010 year to date.yçyçñyç there's 29% of the loans toyçzy start-ups which is defined asyçy business is under open for two years or less.yçyçyçñyñyyççç

deutsch have money as a startup to start their businesses they've either been laid off with a package or the our older and more successful people that have lost their jobs and they can do capitalization, so we are doing them and as far as the small loans falling off, a lot of people are using the sba express' loans less but using the larger loans more but we need those larger loans because as companies grow like mr. hall is saying people that have five and six, they get above the 2 million have to renovate their stores, they need 5 million.

so in my job we make loans -- >> i want to go back to my original question and that is i'm talking about people doing start-ups that don't have the equity of look and i would be interested to hear what you have to say about that or what can we do, what can be done to help those individuals out? we hear a lot about those people that have that money or something i'm talking about the people that don't. what can we do in your experience or what can be done in your experience? >> i think it is an ongoing process, so i don't think that there is one silver bullet gets it. i think it's a combination of them finding personal funds or friends and family to get started coming into the bank and working on business plans and begin a discussion. a think one of the most interesting things to me is customers who come and have discussions with your thinking

about with their linker and get to know them long before they actually come in for the loan request that helps a lot, so just making sure we have programs with the score to help out in a bank that i work for in the past we actually worked with the foundation to do first time business some similar to some of the first homeowners training and the was very successful. the people there graduated in those programs were more successful in their businesses and other start-ups so there's a whole bunch of different things we just need to put together to make it work as opposed to one big thing. >> do you have anything to add? >> we have done some surveys asking small business owners from their experience starting what did they do right and what did they do wrong? one of the things they highlight

it wasn't starting with enough capital. they tried to get in and didn't have enough capital to make it and i think in this environment the availability of the level of capital is even more necessary because they are not going to have immediate success so you don't want a lot of people going out there and chongging in this environment without some sort of capital foundation. >> thank you, mr. chairman. ms. ozner, you testified before that the issue is a demand issue or topline issue so for businesses that don't have adequate demand to support a pro forma that allows them to come

to a bank and secure a loan, and that is inhibiting their ability from a financial perspective to come in and be successful because they need to grow the top line in order to be successful to have the ability to repay the loan. is that it's fair summary of where you think businesses are at? >> i'm not sure we are communicating on the same -- line saying that existing businesses right now, i'm not talking about pro-forma. i am saying that what we are seeing is that the bottom line is profitable, but some of them have been experiencing downward trends in the top line. so that in order for us to make a loan we need to see year to year that either the bleeding stopped and they can still pay the expect increasing again. that puts them in a position where there isn't as much demand

for bank loans if they aren't having growth in the topline they clearly don't need a lot of credit for instance or to increase their line of credit because they are not buying additional raw material or product for resale. >> the refunding the receivables and need to have short term capital so they can find their daily activities. if they are not a cash business evin de level of business that they are doing the still need short-term credit lines to operate on their regular cash site. schenectady are not increasing level of their borrowing i am assuming? >> it all depends. a lot of them have -- they still need to maintain it and -- >> i didn't say maintain. i said increase. they are not increasing their borrowing because they don't have additional sales or product that they are purchasing. mr. hall, d1 to comment on that? >> let me put it in a dairy

queen perspective, mauney sales are not going up dramatically, but by an adult to have to borrow money to renovate those facilities to maintain my existing business or else you can be in business and not keep up with competition and you were just slowly going out of business. so, i wouldn't -- i would say to you certainly in my case i'm going to borrow money without the expectation of greater sale. i hope i'm able to get a high your bottom line, but at the end of the day i am probably going to have a lesser bottomline but i'm still going to be in business and i think there's a lot of that going on that maybe doesn't make much sense to you but if you think about it that caught my case and if the base goes away than where would i get my money. i'm going to grow by also growing jobs and keeping people employed and system in place. >> would it be fair to character

is what you're doing is more in the form of a capital loan as opposed to a working capital loan? >> in my business i have enough to make payroll so when i have to borrow that money to do the construction, that would be a capital loan, but in the business environment right now on the margins are so often you just literally -- there's no big question, we don't have a pile of money waiting. we are figuring out how to get where we need to be but i just wanted to respond to your point about the idea there will be a situation you can't always look at this and say i'm going to get this much return certainly in a small business environment because partly it's about the family and keeping these people employed and keeping the business going. >> obviously some of this would be true by increased sales. >> would be great. but love to have it. >> i also want to go back to something that mr. jacobe said

before. if we solve the housing problem that would do a number of beneficial things including the increasing available collateral for loans. what is the solution? i'm curious as to the bankers we have on the panel to the have a substantial amount of the foreclosed properties they are holding on the balance sheets were is that not an issue for your banks? >> for my think it's not and certainly for a number of the member banks who are some of the largest banks in the country they certainly have been working through those issues. but i think from the standpoint of the house and tell you we talk about startups and other kinds of small business, and once a borrower gets beyond personal credit cards and personal savings, the place that

the oftentimes go to next is their house. either as a personal loan or a business loan to fund their business, so as home equity values have gone down especially in certain parts of the country more thanz? others it's taken ay that source of collateral which has made it more difficult. >> mr. jacobe, what is the solution? >> i wish i knew. [laughter] the real solution is to get a bottom in housing and bottom and values so that everybody can start improving from that point on. and what the danger now if you've seen the latest reports is that there's everybody is during the double dip in housing and another step down. and that has the same kind of repercussions throughout the economy. you know, i think that traditionally americans have values, home ownership, some people seem to be moving away from that, but i think the nation needs to value homeownership and do whatever it can to stabilize housing and get

people by eating again in a secure environment. if you're going out to buy a house today leverage reverse works against you so if the price of the house are going to buy goes down by 5% you can lose your down payment. the point is you've got to stabilize that to get things going and i think people underestimate how important housing is to the future of the economy. >> thank you. i yield back. >> thank you, mr. chairman. there has been discussion about some of the banking regulators and in my community some of the smaller community banks were particularly hard hit, and their concern was the fault that there was an overreaction that to some degree they were paying for the sins of the big banks during the financial crisis, and for example the capitol reserved had a 20% increase early on in this

crisis, and the market niche seemed to be commercial real-estate which was particularly hard hit. i wonder if you can comment in terms of small business access to capital related to community banks. in your view was there an overreaction by the regulators? anybody? >> they are a little bit larger than a community bank had 14 billion in assets, but our commercial real-estate division was the most hard hit in our banks. as far as an overreaction is concerned, if the perception is the amount of capital that you have on reserve is going to be looked at if they say that it's supposed to be 10% you really need to have 13% or 15% so as such, i don't think that --

well, are you singing the regulators overreacted? >> regulators to the community banks. >> i don't know the answer to that. i just don't know but they have reacted appropriately in some cases. >> from a bar were perspective, most of the borrowers i know think there was an overreaction especially the small bank level because the was the most given response as to why they couldn't get the same credit they had in the past. we are facing increased regulations, and that's so from the borrowers perspective there certainly is the perception out there and just as a general comment, i mean it's -- the regulators in good times it seems to me they ought to be a little bit more conservative to get you to push stuff back and then in bad times it seems like the ought to be trying to help the good part or get through the tough times because we are talking about people that have a long history of performance, and

because of really something they don't have much control over our having a struggle. i think the community banks are in the same position so that gets back to the program where we are trying to match these two people we both have been in the same position to see if we can't get together and get some supply meeting the demand situation. >> i have a number of community bankers and informed me even if they had performing loans and commercial real-estate that those loans were downgraded and they should have been just may be a watch put on them but not downgraded to cause them to pull money available for lending int? the capitol reserves.? anybody else can comment on this. >> just one last question, and that is in terms of job creation which is the subject of today's conference or access to capital is very important. but what in george, in the majority eyes of a

small-business owner the majority of small businesses are structured as the service corporations. in terms of job creation would be the impact of increasing the income tax rates on job creation knowing that in the service corporations that essentially that's the tax rate that you pay? would anybody like to comment on that? please? >> i'm a sucker for this. as a small-business owner, as you know, as you already articulated, most of the money is disclosed from the businesses to the personal income tax return, and i don't -- nobody's going to tell you we want more taxes. i will tell you i'm not afraid to pay what is fair and needs to be paid but on the other hand, you know, we have been hit with the alternative minimum tax as a

lot of people have been hit by that over a period of time as it creeped up their business income is flowing through to their personal tax return and they are not getting any deductions and it's difficult. i know it sounds like a lot of money but i tell you in today's environment trying to survive and capitalize your business out of your personal situation which is what all small business people do, there are some issues as a taxpayer i don't want to have to pay more taxes. i'm willing to pay my fair share and i want to pay my fair share, but i also have to survive, and i will tell you if you start taxing, and unfortunately the same situation and health care, you're going to lose jobs. you are in the real world going to lose jobs. it just has to happen because there is no other -- we are squeezed so tight right now there is no place for it to go. >> thank you, mr. chairman. i yield back. >> thank you very much mr. ranking member and i would like to thank our panel for

their testimony today. we understand only when all of our nation's small businesses are active participants in a robust recovery that adds jobs when the nation fully recovers from the recent economic downturn. also understand that allowing the regulatory environment to return to one that allows for the financial collapse in the first place is irresponsible at best. today's testimony especially that of mr. jacobe will stress the difficult task facing the nation with a lack of consumer spending highlighted as the concern of small businesses, small business owners with regards to . this fact goes back to the anemic consumer spending. the fact private lenders are not lending even to those who would otherwise be deemed creditworthy has led to the issue that ms. ozner pointed out regarding program approaching its feeling

later this year. so my question is this, given that there is a need and also recognizing that returning to the last regulatory environment that curbs the current problem would be on why is, what else is needed to incentivize private lenders to free up the capitol that would allow small businesses to expand and hire your which in turn would turn around the weak consumer spending and get the economy back on track? >> that's a really tough question. i think there's a lot of things that could be done that would encourage local lenders to hold more loans. everybody that has tried to figure that out has had some difficulty in terms of how to do that effectively and you tried with various different kind of

programs. the big thing is to get consumers spending again and that's a larger issue. once that happens then everything turns positive. in the interim you can get a way to have lenders hold themselves instead of the government programs but get more loans and some kind of incentive that would help. >> i think that utilizing the government program is helping us to do that, but even at that level, i agree with dr. jacobe that the consumer confidence and consumer spending is all hand in hand and that's all tied up with more jobs, more disposable income and so forth, so if we can continue to try to get the money out there to businesses that hire people, then the outlook will go on, but it's a very difficult situation and i

tend to agree with him that on the home level until it comes back and they have confidence they are not going to lose their homes and that is their priority is where they live and that they have jobs and money is put on the table. when that comes back i think that the banks are doing everything they can with the tools they have to get money out there to small-business is. i know that in our bank someone asked about the foreclosure rate. if people are paying on the loan, we are working with them and not for closing even though they have been downgraded because the regulators are forcing us to downgrade because the ltv's aren't there but if they are being paid they are still in the bank so the banks are trying to work with the people that they have lent money to keep on the business is going to keep people employed.

>> did you want to -- you are a couple one, you have to have the answer. [laughter] [inaudible] [laughter] >> that's right. >> it's interesting when you watch far worse, so in a robust economy you see the borrower is coming in and they want working capital lines of credit to hire new people to fund contracts, they want to purchase new equipment which then leads more people to run the equipment to the jobs. coming out of the bottom of the recession what we saw was loan demand go up and i want to buy the building i am in because i've been leasing and that is worth less than i can get a good deal on. i want to buy my competitor whose weakened them, and that kind of loan request don't necessarily create jobs. to get consumer spending and we

start to see those kind of loans from of the established businesses be the kind of loans that say we are willing to commit and expand and we have seemed less of that up to this point. >> would you want to add anything at all? >> i yield back the balance of my time. i want to thank all of you for participating today and this committee is about job creation and helping small businesses. and we are going to do everything we can to try to make sure that we do what we can to provide access to capital for the small businesses, particularly the ranking member and i are very committed to helping the start-ups as best we can but again i want to thank all of you for being here and i would ask unanimous consent all members have five legislative days to support for the record and objection so ordered and with that hearing is adjourned. thank you very much for coming. [applause]

[inaudible conversations]

former massachusetts governor mitt romney announced today that he's running for president. it's his second bid for the republican presidential nomination. here are some of his remarks from new hampshire. >> this president's first answer to every problem is to take power from you and from your local government. and from your state so that the so-called experts in washington can make decisions for you.

and with each of those decisions, we lose more of our freedom. you and i understand that. we look at our country and we know we and our hearts that things aren't right and they aren't getting better. president obama's european answers are not the solution to america's challenges, and in the campaign to come, the american ideals of economic freedom and opportunity need a clear and unapologetic defense, and i intend to make it because i have lived it. [applause] >> you can watch his entire speech at 8 p.m. eastern on c-span2. on the 25th anniversary of c-span2's coverage of the u.s. senate we spoke with senate historian john ritchie and about how television has changed thel chamber. >> it was 25 years ago that the senate j officially went on tv,

and that picture right there is from june 2nd, 1986. you canfr see former majority leader, the late senator robertt byrd at the c-span control panel about to flip the switch.span cl it's a symbolic that he's about to flip the switch on the senate tv standing next to him with the tv. hair sitting next to him with the dark here it was the president of c-span, and of course, on the far left is the grand poobah of the c-span, brian lamb. it has been 25 years since the senate opened its proceedings to television not come here is day one from the senate 25 years ago -- opened its proceedings to television. here is a one from the senate 25 years ago.

but >> the senate will come to order. host: that was, of course, the late strom thurmond, gaveling in the senate for the first time on television. joining as is don ritchie, the historian for the u.s. senate. was the impact of the senate going on tv? guest: significant impact as it gears up c-span know, the senate is a traditional institution and does not change easily take it had debated bringing -- does not change easily. it had debated bringing television into its chambers for decades. they were afraid that it would make a significant change to the style and that tone and the atmosphere of the senate. eventually, they felt somewhat relieved that it did not change. host: mr. ritchie, how long did

it take for the senate to convince itself to go on tv after the house had been on tv for years? guest: in 1979, when the house went on, that established the experiment that the senators watch, and they noted that a lot more people are watching the house proceedings and that house members were becoming more familiar to citizens in some cases than the senators, which was a switch. as more house members were elected to the senate, there was more pressure for the leadership to adopt 8. howard baker tried very hard for 1981 to 1985, but he was constantly defeated. he could not get cloture on some of votes because a lot of the senators from both parties were strongly opposed. but eventually, as you mentioned, senator robert byrd

and senator bob dole, the democratic and republican leaders, got together and realize that something needed to be done. but even then, date required a four-week trial period in may 1986 before they would go live on june 2. then they allowed themselves of vote six weeks later as to whether or not to keep c-span in or out, and they voted overwhelmingly to keep television. host: how important was the support of robert byrd? guest: robert byrd was the foremost institution alist. he studied its history, its procedures, new rules inside out. he was the person who elected the other senators of what kind of behavior was required of a senator. he would not have allowed any significant change that he thought would have undermined the institution. i think his support was really

critical. if he was skeptical, the senate would have been skeptical. once he decided it was necessary, the senate came around. even so, there were 20-some-odd senators who voted against putting television -- bringing television. host: those are not c-span cameras in there. we just happen to put it on the air. we would like to hear your thoughts, whether it is important, effective, etc. is hard twitter address here in the morning program. do you think it was a good idea

for a senate to go on television do allow its proceedings to be televised? >> guest: i think it's an experiment that preceded. senats more people are much more aware of the senate that certainly can't. there are major debates. a lot of people are watching. there are constituents we know from constituent that people are watching these debates. citizens are better informed about what the congress is doing, the senate is doing. in large part of what senator has to do is build support behind the idea is that he or she is promoting. they can do this by standing in the senate chamber and speaking to the other senators and the people in the galleries and the congressional record. but television has vastly expanded the audience nationally and internationally. host: don ritchie, u.s. senate historian, thank you for spending a few minutes with us to talk about 25 years of the

senate television coverage. strom thurmond, former senator from south carolina, at a little bit to say on june 2, 1986 from the floor of the senate. here is the senator. >> the televising of the senate chamber proceedings represents a wise unwarranted policy -- wise and warranted policy. it recognizes the need of the citizens of our nation to know the business of our government. it will, i believe, lead to a more informed citizenry and hopefully improve the quality of our representative democracy. the ability of the electorate to study representation provided by senators will be greatly enhanced. in the long run, the quality of senate debate and decision making will be improved, and the nation will be the better for it.

host: mary and from chicago, good morning. what do you think about the senate on tv, congress being televised? caller: i love it, but it should be on regular tv, because a lot of people are not informed. they get their information from fox news or somebody else and it is not correct. host: what you mean, regular television? caller: it is not on cable. a lot of people think they are informed because they and listen to fox news. host: how often did you watch senate or house proceedings? caller: all day long. i wah this and i watch cartoons. usually i do it on the computer. host: next call is from michael in palm coast, florida. can ruin somebody's day --

you saw some familiar faces there, such as bob dole. senator chuck grassley was sitting in the sea, republican from iowa. there are still 14 senators -- who are still in the senate today. hatch, inouye, lugar, mcconn ell, rockefeller, among the 14 senators who were there 25 years ago when the senate began televising its proceedings. by the way, there were two women in the senate at that time, and are now 17. colorado, democrat. caller: thank you for c-span. i've learned so much from watching c-span. thank you, mr. ritchie, what you

are doing. you have one of all things on your show. -- wonderful things on your show. i wish that c-span could educate as a little bit more of about how the senate and house works, they do things that i do not understand, but i've learned so much, and thank you so much, because we need you very bad the. -- very badly. host: ned, what you think about congress on tv? caller: i enjoy it. it is so informative. i believe more people need to watch it. i don't think there is enough people in this country who know how things work. host: how often do you watch it? caller: i watch "washington journal" every day, booktv, you're the program, every weekend, all weekend long. i just wish we got the history

section, c-span3, here. host: all right. you don't get c-span3 in washington, indiana? .aller: no, we don't t host: do you know why? have you talked to provider? caller: they are getting ready to change, and i intend to write and ask about that. i would like to have all three channels. that would be really nice. host: we will put the numbers back on the screen if you want to comment about 25 years of senate on television. june 2, 1986, was one of the senate -- was when the senate broadcast its proceedings. the often exciting to order to powers a year of a quorum -- 202

hours a year of quorum calls. kathy. caller: i enjoy watching this and i find it very informative. i love to take part in it. i watch it as much as i possibly can, because it is so important to know what is going on -- host: all right, thanks for calling in. a reminder, turn down your volume before you go on the air. st. louis. hi, donna. caller: i enjoy watching c-span, and i trust the info i get because i am getting it from the horse's mouth. my cable company kept c-span1, it was on the house, but it left the senate channeled it 91, 97, i don't think most people know where it is any more.

if you could do something with my local cable company, that would be nice. host: what channel is c-span2 on? caller: the move it to 997 -- i accidently found it myself. i get the basic cable from 1 to 100, and they moved c-span2 way up to 997, and i doubt that eianybody sees it anymore, and that is the senate and on the one i'd like to watch the most. host: that is booktv, too. caller: i don't know why they moved it so far down the numbers. host: to you think there's a downside to having the senate on tv? caller: absolutely not. i watched the senate the most. host: the first senator to speak

in 1986 was also the first representative to speak when the house opened its proceedings in 1979, representative al gore, june 2, 1986, senator al gore. >> today marks the first time when our legislative branch in its entirety will get up here on the medium of communication through which most americans get their information about what our government and country does. the marriage of television and free debate in the senate will be a benefit to american citizens. it will bring changes to this institution, but whatever changes are due to the feeling that millions of americans are paying attention to what goes on on the floor of the senate will, in the final analysis, be good and positive changes. host: next call in 25 years of senate television coverage, congressional coverage, atlantic

beach, florida. caller: good morning, how are you? i want to say that personally, c-span is one of the greatest shows that has ever been invented. informs the populace, and that is what this country needs more of. like one of the previous callers, i am limited, because i only have the basic cable. they only have c-span, the main one. maybe you guys might want to rotate it every now and then, because they're a lot of guys who cannot afford the upgraded package and i am one of them proud i also hope you might have more senators on the -- i am one of them. i also hope you might have more senators on the air. you have a lot of congressmen, and i like that. as far as that man who made that comment earlier, you should not take offense to it.

people are people and you cannot take care of everybody. host: what you do? caller: i work for the local utility company. my day off, and plant it in front of the tv. but i have kids i have to take care of, and i am on a tight budget, so we basically have basic cable. hopefully in the future you might be able to switch over to the senate every now and then just to give us cspan jockeys what we need. -- junkies what we need. host: just a reminder, those are not c-span's cameras in the senate. good morning. caller: i have a suggestion. some of the things we see on c- span, especially in the house, because i also do not get the senate channel, are rather

complex, deep political terms. how do we get a crawler across the bottom of the screen that explains some of these things? i have no idea what "cloture" means. host: that is a great question. our programming operations department, run by people who are on this program from time to time -- i think they have adding a lot of those, especially during house proceedings, or during the senate proceedings -- "cloture" or "point of order is." they add a lot of definitions to the graphics, which is helpful to all of us. great,. organ, you want -- oregon, you are on. caller: i love "washington

journal." i am an early riser, retiree. i watched the senate meetings. i have a journal's on every vote, every amendment, every bill. i totally miss robert byrd, ted kennedy. i will say, i have a question as to when the dow are important amendments or an amendment to -- when there are important amendments or an amendment to an amendment to bill, why the senators don't have to be in there and listen to this. there are great points on actually both sites. i am a democrat, but i look at both sides. but they are preaching to the choir, and i feel like it is kind of planned. they come in, they vote, they leave, and you need to be an attorney to understand all the

clotures and the process you go through. but it is an incredible opportunity for american citizens, or even if you are not an american, to be able to have this opportunity to see what is going on before your eyes and to watch the speakers and to watch what they say and see what they say later. i just wish they all had to attend their votes instead of a vote and leave. i am truly appreciate it to have this opportunity. host: 10 we go back to your comment about keeping journals -- can we go back to your comment about keeping journals on every vote and bill? caller: yes, four years. host: do you transcribe what is going on? caller: the votes, how they voted, the senators' names.

i have a new representative, so i have been watching the house more than the senate, because of the change with the tea party people and getting acquainted with who they are. when i see some of this stuff -- i am not a fox news person, but i did used to watch fox news, but i am msnbc pretty much exclusively because i feel that they bring out what i have in my journal, not just some bogus statements or misquote of a percentage. i can go back and i'd look up and i think, this is not how they voted, this is not what they said, and i have their votes at how they voted at how many times they voted. you know, i am not well, so it is something that has kept me

going. at times it probably -- i am 76. i get very upset at some of the ways things go on, especially like last summer, the no votes. it is a lot of interesting things you learn about just how everything is played out when you watch it as closely as i do. it is just a great opportunity. so many countries cannot do this. they cannot even voice -- but i love the fact we can do this. host: all right, barbara, thank you for calling in and sharing your insights and some of your hobbies. we appreciate and that. i would just simply say that all

the posts -- the hosts on "washington journal" have other jobs. this is a parked thing we do on c-span -- part thing we do on c- span. gary, what you think? caller: i think it is beautiful. it is great. we get to see what is actually happening with our country. i do agree with the woman that says i wished there was more clarity as far as some things we simply don't understand. host: ok. caller: secondly, 25 years as many, many congressmen in there, and senators. why don't they make a term limit? the president has won, they should -- has one, they should. they are not paying into social

security, they are not doing this, not doing that. you want to talk about debt, you know -- host: all right, thanks for your comments. debbie in raleigh, north carolina. caller: it is difficult to be more effusive than some of the other callers, but i appreciate having access to the senate as well as other channels on c- span. i don't have cable tv at all. i get all of my c-span coverage across the internet. i stream it from the website. host: do you ever have problems with that? caller: no, i have excellent connection. it is probably behind the televised coverage by a few seconds, but i think that is a

tolerable delay, especially given one of your earlier callers. a little more delay would have been good for him. host: do you think there is any down side to having cameras in congress? caller: well, my i understanding is that the senate in particular -- i don't necessarily agree with the previous caller about term limits for senators, because we are a really large country. it helps to have experts in governance as much as anything else. especially for the senate, where my understanding is that most of what gets done and there is through relationships, and none of that we will be able to see on tv. but we can watch the result of

it, and that is when there are votes or committee hearings, and we get to see how they interact. this is an invaluable resource. is for me personally, because news coverage has dissolved into entertainment and opinion. host: all right, we are going to have to leave it there, debbie. and as is often the case, the twitter followers take a topic and make it their own and is a different topic and then what we were talking about, but it is interesting to see what they are talking about. a lot of them have suggested that "washington journal" put a twitter

sony's playstation network headed data breach which expose customers information and epsilon experienced a breach which revealed e-mail address is and passwords. here is part of the hearing. you can see all of it tonight on our companion network, c-span. >> chairman, ranking member butterfield and other distinguished members of the subcommittee, thank you for providing sony with this opportunity to testify in cybercrime and data security. my name is tim shah and i'm president of sony network entertainment international is a subsidiary of sony corp. based in california where we imply proximally 700 people in five offices around the state.

i am chiefly responsible for the business and technical aspects of sony's playstation network and curiosity an on line service that allows consumers to access movies, television shows, music and video games. sony network entertainment, sony on line entertainment and millions of our customers were recently the victims of an increasingly common digital age crime, cyberattack. indeed we have been reminded in recent days of the fact that no one is immune from the threat of cyberattack, businesses, government entities, public institutions and individuals can all become victims. the attack on us was we believe unprecedented in its size and scope. initially anonymous, the underground group associated with last year's wikileaks related cyberattacks openly called for and carried out massive denial service attacks against numerous on the internet sites in retaliation for sony bringing action to federal court to protect its intellectual property. during or shortly after those

attacks, one or more highly-skilled hackers infiltrated the servers of the playstation network and sony on line entertainment. sony network entertainment and sony on line entertainment have always made a concerted and substantial effort to maintain and improve their data security systems. we hired a well respected and experienced cybersecurity firm to enhance her defenses against the denial of service attacks threat and by -- but unfortunately no one today can foresee every potential cybersecurity threat. we are detailed for the subcommittee and are written testimony the timeline from when we first discovered the breach but to briefly summarize, the first indication of the breach occurred on tuesday april 19 of this year. on wednesday april 20, we mobilized an investigation and immediately shut down all of the playstation network services in order to prevent additional unauthorized activity. after two highly respected technical frantic firms were retained to assist in a time-consuming and complicated investigation on friday

april 22, we notify playstation network customers on the playstation blog that an intrusion had occurred. after third frantic firm was retained on monday april 25, we were able to confirm the scope of the personal data that we leave have been accessed and although there was no evidence credit card information had been accessed we could not rule out the possibility. there for the very next day to stable 26, we should a public notice that we believe the personal information of our customers have been taken and that while there was no evidence that credit card data was taken, since we could not rule out the possibility we have to acknowledge that it was possible. we posted this on our blog and began to e-mail each of our account holders directly. we did not merely make statements on our blog. on sunday may 1, sony on line entertainment and multiplayer on line videogame network also discover data may have been taken. on monday may 2, just one day later, sony on line

entertainment shutdown the service and notify customers directly to their personal information may have also been compromised. throughout this time we felt a keen sense of responsibility to our customers. we we we shut down an average to protect against further unauthorized activity. we notified her customers promptly when we had specific agreed and useful information. week thanked our customers for their patience and loyalty and address their concerns arising from this breach with identity theft protection programs for the u.s. and other customers around the world are available as well as a welcome back package of free subscriptions games and other services and we work to restore networks to stronger security to protect our customers interest. let a address the specific issues you are considering today. notification of consumers when data breaches occur, laws and common sense providing for companies to investigate breaches gather the facts and report data losses publicly. if you reverse that order issuing spigot of statements before you have specific and

reliable information you either send false alarms or so many alarms that these warnings may be ignored. we therefore support federal data reach legislation and look forward to working with the subcommittee on the particulars of the bill. one final point. as frustrating as the laws of networks for playing games was for customers the consequences of cyberattacks against financial or or defense institutions can be devastating for our economy and security. consider the fact the defense contractor lockheed-martin and the oak ridge national laboratory which tells of the department of energy security electric grid were attacked within the past two months. by working together to enact meaningful cybersecurity legislation, we can limit the threat posed to us all. we look forward to this initiative to ensure that consumers are powered with the information and tools they need to protect themselves from cybercriminals. thank you very much. >> epsilon is the leading provider of permission-based e-mail marketing services. our clients, some of the world's largest and best-known consumer

and financial services brands count on us to send their e-mail messages to their customers. the individual consumer. and as we all know, major brands through e-mail messages to provide consumers with timely information about new products and sales and events among other things. at salon ensures that these e-mail messages comply with the applicable legal requirements including the acts. to earning keep our clients trust at salon became the first in the industry in 2006 to certify that its information security program complied with the standards issued by the international association of standardization known as issa. i so i highly-regarded organization is recognized by over 160 countries around the world including the united states as identifying best practices for information security management. the standards are demanding requiring over a year to earn

initial certification. we are proud that epsilon led the industry and that we have achieved yearly recertification which requires proof that the company is improving its security programs each year. notwithstanding our internal security procedures, and their compliance with these rigorous data security standards as you know at salon was the victim of the criminal hacking incident at the end of march. since our information security program was designed to identify and respond to attacks and threats we were quickly able to detect the unauthorized download activity which triggered epsilon security response program. our investigation both internal and with an independent third party is coordinated closely with the secret service and is still ongoing but we can't say that the initial investigation confirms that only e-mail address is and in some cases first and last names, were affected by this attack. again, only e-mail address is

and in some cases first and last names were affected. the details of what happened after the attacker in my written statement that has been submitted for the record. we are greatly troubled that this criminal incident has called into question our commitment to data security but i want to leave you with four main points about what happened and how epsilon responded. our first internal response to the criminal attack was immediate. we isolated computers and changed employee access rates. second, our forensics investigation began within hours. we also reached out to law enforcement just as quickly. third, notification to our clients also occurred on the same day and we released a public statement and posted additional public information on our web site shortly thereafter. and finally, now and going forward, we reiterate our commitment to working at the secret service apprehending the hackers and improving our own

security. companies like epsilon are on the frontlines in the fight against data theft. >> today marks the first time in our legislative branch in its entirety will appear on that medium of communication through which most americans get their information about what our government and our country does. several times today this has been referred to as an historic occasion. whether or not it will be an historic occasion as i think a subject for the judgment of history. >> this week marks 25 years of televised coverage of the u.s. senate. on the first day in 1986 c-span2 was carrying a little more than 6.5 million homes and today it is available in over 89 million homes. watch that first day or any of the 21,000 hours of the senate coverage on line at the c-span video library. it is all searchable, shareable and free. the peabody award-winning c-span video library. it is washington your way.

>> the former massachusetts governor mitt romney announced today he was running for president. it is a second bid for the republican presidential nomination. here are some of his remarks from new hampshire. >> this process first answer to every problem is to take power from you and from your local government. and from your states so the so-called experts in washington can make decisions for you. and with each of those decisions we lose more of our freedom. you and i understand that. we look at our country and we know in our hearts that things aren't right and they are not getting better. president obama's european answers are not the solution to america's challenges and in the campaign to come the american ideals of economic freedom and opportunity meet a clear and unapologetic defense and i intend to make it because i have lived it.

>> can watch his entire speech at 8:00 p.m. eastern on c-span2. treasury secretary tim geithner met today with freshmen house republicans about raising the debt limit. secretary geithner has said that august 2 is the date the treasury department will run out of money to manage the government debt. on tuesday the house rejected a bill that would raise the federal debt limit without additional spending cuts. here are comments from members after the meeting. >> good evening. we are going to be very brief. we have floats going on on the floor right now. my name is austin scott. i'm -- and i will will turn it over to turn it over to diane black, tim scott and christie and other elected leaders. i just want to take a secretary geithner for coming in meeting with us and going through the

situation. we officially have a very serious economic situation we are in right now and we are here to solve it and so as far as we are concerned everything that we have and there is a step in the right direction and we are having open and honest dialogue and how we move forward. >> one of the most important things we heard in a premise we are looking for an equilibrium where republicans and democrats are willing to work together on a plan that both sides, i.e. we don't get what we want them either side does. from my perspective one of the things we heard that i found to be a big concern isn't conversation around a plan that includes tax increases nor to make this thing work. finally we need to sit -- specificity in the details from the other side for us to have a serious conversation about any increase. >> christine from south dakota. we had a very good conversation

and the secretary reiterated to as the president is not a plan that we can support and that is truly was we want to do because you can't compare plans of the president doesn't give us one. for me that his failure in leadership. i've been waiting for this president to step forward into the lead on this debt ceiling issue. it certainly is something he asked us to give a clean debt ceiling boat. we did not pass that off the house floor. we have that vote as well and then we are going to continue to ask for that. when he does plan. we need to have the american people in this discussion. they have only 11% of americans say that they would approve of a clean debt ceiling vote which is what the president asked for so we really recognize we have to have reform. we have to have a plan from this president and we have to make sure we do the right thing for our country. >> i am diane black from tennessee and i want to follow up on the representative know i'm just that. we have specifically in this meeting as we asked in a meeting yesterday with the president for a plan. or a specific plan that could be scored by cdo.

the republicans had put out a plan. did pass the house. in a specifically was in that plan and what has been scored. it is difficult to talk and have a conversation about what we are able to negotiate between the two if there is not a plan. therefore, i have drafted a letter. a number of my freshman colleagues are willing to sign over that letter that we will send to the president of the will ask him specifically in that letter for a plan, a plan that can be scored by cdo and then secondary to that, a plan that if by some chance the debt limit issue is not solved by august the second, what is their next plan on how we handle from that point forward. thank you. >> first of all how fast you think you will come to some sort of an agreement on the debt limit? do you think you can do it by august 2 and what will the concept will be if you don't raise the debt ceiling by august 2? t