communities. >> madame ambassador, i represent veterans for rethinking afghanistan. if you have made a comment and said that if we leave afghanistan and began troop withdrawal that perhaps we may have these adverse effect destabilizing afghanistan, clarification, anymore than we are already doing now with the drawn strikes and -- >> one of the things i'm concerned about this month pakistan think tank released a report saying there are 600 known al qaeda militants that the pakistani jails are releasing back to population because they don't have the proper governance and justice assets to keep them there if you can help me understand some of

that. >> let me say this began to the house audience it has been a runaway success and the first responsibly as american officials in the military and intelligence leaders to protect the united states and again i think our intelligence program is in that respect have been successful. but i think the question was about there is no question about the degree of messiness and afghanistan. the problem with pakistan is to hedge their bets and they have a better idea what's going to happen in afghanistan and the situation becomes a little more unstable every day afghanistan and that is the scary thing. the long-term prospect are frightening.

it's the groups coming together with an attack on pakistan in 2009 and its three different groups to tell each other their services and until pakistani leaders have a better perspective and more confidence was going to happen in afghanistan i don't think they are going to take the steps the country needs to stabilize their own situation. >> if i could add to that, in the january 1 of the things that surprised me in all of my encounters was the degree of fear among the elites of the disability of the country, and the leading fear was the economic year. i heard that even from the senior military officers that the economy was going to eventually get to the point of collapse but that's something that the u.s. has to look at and perhaps do a bit more than we have been doing their and traveling well down on that list was there were certainly internal instabilities, the radicalization of the population

about the fourth place was india which i found quite striking compared to the previous so there is an internal recognition that they have some very serious problems. one of the things i applaud the administration for giving in congress is helping move this direction as well as to reinforce programs aimed at the civilian government of pakistan. and we suggest the u.s. needs to continue to bolster the programs to exploit success to make sure the money gets spent effectively and getting the bang for the buck we know the money is going and it's more transparent and i see the whole moving in that direction. >> with regard to pakistan and al qaeda >> at the moment it is a trial going on in chicago, and testified which is the trigger

was a group responsible for the attack that saved 166 people including six americans. he said the number of the of the isi provided assistance that included financial military support and to what degree should it be a focus of the counterterrorism activities? is it a hard enough line against them and pushing the pakistani government part on the hockley network and the telegram deutsch we'd lose a degree of leverage on the other affiliated groups that are out there causing significant trouble? >> i think it's an important group and complicated one and one of its sort of aspects has been a little bit itself to hold onto its position as a word of the pakistani state and not jeopardize the assets it

controls inside of pakistan schools, hospitals, bank accounts, networks and volunteers it's a complicated hezbollah organization where there is a good degree of religious and social work blended in with violent means and young men who want to participate in international jihad. so there has been a pattern in which the younger volunteers have been kind of setting their identity cards of the home office and then going out to the frontier to participate in the al qaeda affiliated and express itself in the international ambition where it's even more dangerous and complicated is where it seems to serve as a proxy or partial proxy of the elements they want to weaken india by carrying out of violent attacks so for the mumbai attacks acknowledge and planning the attack go and the officials

with us uniquely about mumbai they have that question about a whole series of attacks that trace back to a certain author ship that includes retired elements in the pakistani state but they cannot sort of hold the state accountable for that activity and one reason why the relations are so frenzied right now and it's debilitating across the region including in afghanistan as because the pakistan-based eight is not accountable as a stage for what i think the indians regard as pretty convincing body of evidence that they would like to see coming through. now whether the pakistan-based it has the capacity to do everything of course these are serious problems. >> the same is true with us and the fact that there had to be some sort of collusion for osama

to be there and other people like haqqani and al qaeda. >> physically i don't think the fight is about the organization that was set up by pakistan's intelligence agency to engage in asymmetric warfare. and this has happened repeatedly and not just with let but other groups inside pakistan so they don't exercise control over this. i sat and the rest members in afghanistan and again, this is spreading and morphing into the groups are working with each other to essentials the threat in the pakistani state now. and i for one don't think they are entirely in control of the let. i think they still have contact with a lot of acts and yes it is particularly true of the groups in southern to john who have been out there for decades that

are now also more radicalized and more energized by the defense. >> the model of creating a terrorist groups to do your bidding as a regular warfare component of your security strategy has been broken down and now we are seeing these groups this is dangerous to the united states troops are in some cases taking on the transnational objectives which we have never seen until the last two or three years that makes us a complex problem than simply al qaeda version one point cero which is what we were after the 9/11 attacks. and in the first presence in the region we have to be cognizant of the threat from these other groups who are outside the media al qaeda logo becoming a standard as to the united states as al qaeda has been in the past and that appears to be growing which i think is troubling. >> on the regional engagement the first is what should we do with india to get them to help get afghanistan?

and i may want to protect to get them to perhaps pull back a little that potentially to diffuse concerns and islamabad and the second question from twitter to speak to iran and afghanistan. >> they can get the battalions to come over and set up shop in the kunar province i think we would get the entire pakistani army to suddenly be on -- [laughter] >> it's a very good question and pakistan is just incredibly sensitive about the activity inside pakistan. they will not hesitate to provide on every indian consulate and how many members

are posted inside afghanistan. i think india has been very helpful to the state of afghanistan and has done a considerable amount of state building and nation building over the last ten years especially in the network and the afghan and the indian government have good relations far better than the afghan and pakistani government by and large, so i think the u.s. needs to make a quiet dialogue about its activities and as we get into a cloture phase of potentially negotiating the taliban and talking to pakistan about how to settle and resolve the conflict we have to keep the dialogue going quietly as well. >> i was just going to say i don't think the united states months to suggest this is the should not be imprisoned by the paranoia in afghanistan as a transition. india has to be part of the solution. it's part of the context in which this lacertid proxy war kitfield has been going on for

35 years. and the strong relations that the general pointed out exists between president karzai and the indian government mulhern are stronger at the moment in the u.s. relations in kabul in some respects there's more confidence and the indians can help construct the political transition we were talking about earlier, and the pakistanis fear the indian presence in afghanistan completely unjustified just because you're paranoid doesn't mean from the perspective, but the consulate's in the separatism and so forth is overdrawn, and there are problems in the international support for the antipakistani groups which operate sometimes in the sanctuary as well as afghanistan but they're simply not on the skill to justify the paranoia and the argument.

what about iran? >> one of the traffic runs in afghanistan today is the highway, the indians through the area that go through the border and the indians see this as to the iranians as an alternative might collapse the arabian seas, and yet washington is such that obviously dealing with them as much more you know, could they be in a more constructive way to provide sort of leverage over the pakistanis and with regard to the afghans in this process to you think? >> pakistan may be asking on the -- i think a couple of aspects. one is the u.s. took to the afghan government about a long-term small u.s. troop

footprint there. the u.s. needs to do that with a view towards some cities have to work in afghanistan but certainly in the western part of afghanistan. iran has an economic impact all across western afghanistan. the power that drives comes from iran. all of the trade that generates comes from iran. they are closer in many ways to iran the and in kabul and that's not true of the whole western corner of afghanistan so i think the u.s. has to be thoughtful of the iranian interest out there and the troop presence. the second final point would be one of the things we recommend in every part is that the u.s. were to open up trade and transit across the region the route you just described is an example of a success story that the united states is ambivalent about right now who we have at best mixed relationships with, so that is an area where we can

do work to open up the time is and maybe perhaps even using the relations with iran to gain some advantages as we try to sort out what the and state in afghanistan is going to look like. >> i don't think that iran has much of their role in pakistan consideration. the lawyer agree with everything steve said about the relation in afghanistan. in baluchistan ascent real but i think maybe we haven't talked enough about this. the way through this is a political settlement, and certainly everyone in the administration. the only solution in afghanistan is some kind of political settlement, and iran and others have to move on to that at some point in pakistan there has to be a broader settlement associate. >> last question here. >> right over here.

>> with respect to eastern afghanistan and the groups to operate in the relationships with al qaeda, how critical to the overall mission is it that u.s. and coalition get after the troops in the east and a second front like we saw in the south and if we don't what the consequences in terms of president obama's objectives stated specifically with respect to al qaeda? islamic in terms of geography so the mountain on the pakistani side and on the afghan side is just another mountain and that's where they are right now on both sides because we are no longer in there. and the generals charts he had no intention of going back up into those areas. so for the extent they are up

10,000 feet, 7,000 from 8,000 feet and that's where they are. >> one thing about we're fighting a war might ended the war might and the question is how big we have to fight in which to deal with materials, and the one thing i see as being in terms of fighting this as an titer of this is i don't see the taliban, haqqani or the others the kind of material to make them if you will immaterial danger so they can be a pain in the neck and a lot of ways but wanted up in the mountains but getting that momentum to really move i don't see them getting. that is separate from them remaning as terrorists. >> i would like to add to that i don't think the connection to

get between al qaeda and the haqqani network is the primary driver. particularly in eastern afghanistan. my take is that the network was probably the most dangerous insurgent group the u.s. forces are dealing with today. it's going to require from inside of pakistan to neutralize the capabilities more so than fighting berkeley in eastern afghanistan. there are some initial indications it might be moving in that direction. i am moderately optimistic in the six months we're going to see some actions by the haqqani network and overt the and perhaps in some other arenas as well. >> i would like to thank the panel for the remarks here to investor patterson, steve, thank you very much for joining us today. fromunese]

june 2nd, 1986. you can see former, majority leader, the late senator robert, byrd, at the c-span control cnel about to flip the switch.n it's a symbolic but he's abouthh to flip the switch on the senato tv standing next to him with the dark hair is paul fitzpatrick dark here it was the presidentan

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 our twitter address here on the morning program. -- mr. ritchie, do you think it was a good idea for the senate to go on television? to allow its proceedings to be televised?t was a go idea >> i think it's an experiment that succeeded.evision? more people are much more aware of the senate that certainly sud went. there are major debates. awa a lot ofthe senate. there are major debates that people watching. we know from constituent responses 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 w things wor 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

>> several live events to tell you about tomorrow. coverage of the annual conference of the faith and freedom coalition is here and c-span2 beginning at 8:40 eastern.

>> now a hearing on small business lending with a panel of witnesses that includes business owners and bankers. this is an hour and a half. >> would call the chair and order and i think i -- tank or where this is for being here today and we look forward to hearing your testimony. apologize for being a little late as we had a focal. as america seeks to recover from this recession which is obviously a terrible blow to a lot of folks, we are going to be relying on the nation small businesses to help lead the way. for small businesses to expand

and create jobs they need adequate financing. however small business are telling us access to capital remains a hurdle in the current economy. despite rallies on wall street and government efforts to loosen credit, in fact on the other side of the equation are lenders to say that their capital that they have capital available but businesses are not as creditworthy as they were a few years ago. blanks claim today's borrowers have let her come -- lower credit scores due to the depressed real estate values. if we want to nation's entrepreneurs to grow their business and create jobs we are going to need to bridge the gap between lenders and small-business borrowers. a call this hearing today to examine the challenges that both small businesses and banks are facing and deciding to expand or to lend money or going addition we are going to examine alternative kinds of financing for small businesses in the oven is available for businesses to get the capital they need. again i'm very pleased to have several distinguished witnesses here today to provide members of this committee with insight

about the importance of capital for small businesses and big impediments leading to the banker or leading to lending that banks are experiencing today. i think this is going to be a very good hearing. is a very timely hearing obviously and with that i will yield to the ranking member for opening statement and we will get started. >> thank you mr. chairman. job creation is understandably a top rarity for all americans right now. new data just this morning suggests the economy added only 38,000 jobs in the month of may. large firms have cut their workforce this month. we could clearly use some of the job trading creating power right now. in order for small firms to play their traditional job creating role, several factors must be in place. perhaps the most important is the availability of capital.

a small businesses are truly the fact bone of the economy, then the capital is the lifeblood. although challenges remained, there has been progress in this area. small business loan approvals in the first part of this fiscal year are 15% over last year. small firms are falling behind or defaulting on loans, suggesting they are in better shape to take on additional debt and hopefully expand. lending through the small business administration is always critical for those seeking capital however economic downswing's and credit is tight elsewhere the role becomes more important. several provisions of this committee requested in the recovery act posted fda backed lending.

loans gave banks greater incentives to make small-business loans. other provisions made the loans more affordable for borrowers. as of now those steps have demonstrated the most quantifiable, proven results. at the recent policy actions have yet to exhibit the same level of success. examining the amount of fda lending is only one metric. for these loans 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, it cost nearly $75,000 to launch a new enterprise, top proposition under even the best circumstances. unfortunately, the small startups are not seeing 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 in the lending community can expand all small firms financing options especially for those at the earliest stage of the business cycle. the committee must -- is the committee moves forward we must examine the full spectrum of capital options. some businesses will do fine with conventional loans while other entrepreneurs can meet their capital needs with microfinancing. for startups, a solution may not make sense out. investment capital might be a better choice. at the works for a small manufacturer in ohio may not be appropriate for a family farm in tennessee to say nothing of the technology startups in lower manhattan. on that note, i would like to thank our witnesses for taking

time out of their busy schedules to be here with us. their diverse views and experiences will be valuable to the committee as we find how best to -- capital options and needs. i yield back mr. chairman. >> thank you ranking member. if any other committee member has an opening statement i would ask you submitted for the record and i would like to explain delays real quick. to they have five minutes and allies will bickering and when they get down to a minute manageable turn yellow. we will be a little leaning in on that but please try to stay within the five minute mark. our first witness today is william holtz who is the executive officer of william g. hauling company. mr. hall is a very queen franchisee and he has five locations in texas i believe. mr. hall serves on the board of directors for the franchise association and chairs are credit access to many. we appreciate you being here today. odyssey came along when we look

forward to your testimony. >> thank you chairman and i want to thank you as well as ranking member velazguez and the rest of the committee. thanks for having me here. as you said i'm a very queen franchisee and forward texas and a member of the international franchise association board of directors but i want to talk about the important role the u.s. economy franchising holds. as ms. velazguez mentioned, small businesses, startups are important part of our economy and franchising meets that need but with a little bit of a lifeline for the first role in the business because they do have a system of training and at allows a start of business without being in business totally by themselves. the franchise world grew faster pace up to 2008 when we had a financial meltdown. since then recovery has been very slow.

markets have been frozen. very difficult to obtain any sort of financing. we greatly appreciate the work you guys did on the small-business jobs that, the sba provisions. has been a lifeline for franchising, something we really do appreciate but currently sba does very little lending out there for the osborne or is in the franchising world. to survive, franchising community has cut back to live with what we had. we did net new jobs. we didn't remodel where we needed to, because we were caught in the situation where we couldn't borrow any money and that was pretty much across the board. it is small to large. impacted all sectors. we delayed the new store acquisitions, franchise ores had a problem because they couldn't put new people into their units because they couldn't get initial financing. people would pay the franchise fee that but couldn't get the initial funding to get going.

if we don't have access to credit than we are not creating the jobs we need. we think there is a 20% shortfall in the lending two franchises this year and the sba has been critical in filling the need but we are still going to be 20% shorter and that means there are a lot a lot of jobs not going to be created that could be if we had normal access to credit. franchising is all about small-business. franchising some things get confused because people talk about mcdonald's and very queen has being a large company. most of the people in on the franchising business started with one unit and grew from there. we are resilient as a group. we are diverse as a group and the franchising industry 19% of the franchising -- franchises are owned by minorities where's the non-franchise sector there 13% owned by minorities so we have a great program for veterans that come back home,

over 400 franchisors have been in a program to give it discounted startup opportunity for veterans. we feel like that has been a fantastic program and oversee than a great opportunity for veterans coming back. as i said in the franchising with you in business for yourself but not by yourself. that is china's benefit which does in fact what is into a position where we can be a good borrower for these lenders at want to make loans which they need to make loans to be successful. so we thought, how could we solve this problem without any help from anyone if we decided as a group to get together in the franchising berlin franchising berlin reach out to the lenders to try to show them what they have to offer because we knew they needed to make loans. so, as a franchise loan, we think it is a better loan than a non-franchise loan because you do have a system in place. there's training and supporting these franchise or -- franchise ores do underwriting before they

go to the lender so there are some safety there. so what we did is put together a credit summit to bring together all the parties. i don't want to take the committee's time to go through tonight on at the time but i would ask the chairman of the could introduce this piece into the record which does describe the credit conference we had brought together lenders and franchise folks to come up with a solution. a private sector solution to the problem. is to go forward, we need help in this regard. we need to help our lender friends to be able to be able to loan money to us. we are not trying to look for a bad loan. we are trying to put a proven loan that can be made and paid back, but we did it help because those markets are closed to close to us right now. without the sba lending right now we would have a lot less people employed in the u.s. and with their help and your help to them i know there will be a lot more jobs available. we are not looking for a

bailout. we just need access to credit so we can get -- grow our businesses and provide more jobs. i thank everyone for having us here and i will be happy to answer to questions. >> thank you mr. hall. our next witness i would like to introduce is lynn ozer. myths abrasive that the vice president of of the small-business and sba lending at susquehanna bank located in pottstown pennsylvania. she represents the national association of government guaranteed lenders where she served on the board of directors since 1988. thanks for coming and i look forward to hearing to what you have toso say. >> chairman grace, ranking minority member of alaska and all the members of the committee, as chairman grace mansion mentioned mention i'm these active vice president of susquehanna bank where he managed as bn government guaranteed lending throughout our bank for state footprint. says ghana bank is a state chartered bank with

approximately $14 billion in assets and operates throughout 223 branches in the mid-atlantic states. susquehanna is active and those sba seven a. and a.m. 504 programs, currently hosts a portfolio for approximately $300 million in government guaranteed loans. i'm also here representing more than 700 members of the national association of government guaranteed lenders, nagl, for the past 23 years. i've served on the board of directors and for many of those years i've served i have served on their executive committee and is chair of the technical issues committee. nagl members are responsible for approximately 80% of the annual seven a volume as well as the lender portions of the sba 504 loans. thank you very biting me to testify and for holding this hearing on the important issue of small businesses, availability to access capital. in the interest of time, i will submit my full written testimony for the record and provide just

a brief summary. i want to begin by publicly thanking the international franchise association, ifa, for taking a leading role driving the discussion on the direct correlation between access to credit, job creation and economic development. because of the exemplary effort of nagl and i say assayed today, we have a seven a loan program that is much better able to make the meet the capital needs of america's small-business. and it is important to note that the isc work on this issue did not and with the passage of the small-business jobs at. approximately a year ago, while we were working on credit access issue on different tracks, nagl and ifa begin a dialogue that we have continued. through those encounters we came to realize that there is a significant overlap in the issues affecting both organizations memberships and to note that each group has much to learn from each other.

so ifa and nagl have forged a partnership intended to increase the availability of capital to franchise small businesses. the highlight of ifa's ongoing efforts to address the credit issue was the credit summit that ifa organized and delivered in april. bill hall, chair of ifa credit committee, has briefly describe some of the things that ifa is doing but it neither he or ifa will tap the organizations work to bring attention to this important issue and ifa's continuing commitment to the separate. i want to do that for him and them. i also want to specifically mentioned the exemplary leadership shown by ifa's ceo steve caldera who has worked tirelessly to highlight the important role that access to credit plays in creating jobs and increasing economic output. 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 segments 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 that they are experiencing a perfect storm of circumstances. they together serve to stifle the conventional small-business activities. the lending activities. how our were banks meeting the credit needs of their small-business customers? many lenders are increasingly turning to sba loan programs and in particular to the sba 13 -- 7a program. having a healthy 7a program is essential to keeping credits going because sba is the single largest provider of long-term

capital to u.s. small businesses. is loan guarantees account for well over 40% of all long-term small-business loans made in america. from the lender's viewpoint a key benefit to the 7a program as it takes less capital to support an sba loan than a conventional. from the small-business viewpoint the sba guaranty allows increase access to capital particularly to the kind of financing appropriately matches the loan to the life of the loan assets being financed. that is, the long-term assets with long-term loans. according to statistics they typical 7a on has the maturity of 12 years for conventional small-business loans typically have an original maturity of three years or less. the significant majority of those loans have the maturity of one euro year or less. longer maturities allow small business to access capital that would not be available to them if repayment were required in substantially shorter peers. the importance of sba lending to

small business clearly demonstrates by recent demand for the program. according to sba in the last two years the 7a and by low-fare guarantees enable $42 billion in loans to small businesses. everett the success of the 7a probe in his ears causing any problem. based on the loan approval sedated appears highly like the that the programs demand will exceed the 17.5 billion program level set by congressional appropriate is. this means that it is likely that the 7a program will have to shut down sometime late this summer unless the congress acts to raise the programs level. in order to effort this potential program suspension nagl on behalf of its members is requesting congress acts now to increase this year's program level for sba's business loan program to $19 billion. this increase will not affect the budget because sufficient appropriations are already available to support the increase to the program levels.

we know small business leads the way to creating new jobs and we know having a vibrant small-business sector is as vital to continuing the fragile economic recovery that we are seeing. we also know that keeping sba 7a and 504 loan programs available to meet the needs of tens of thousands of creditworthy small businesses that now have nowhere else to turn is equally vital. do i still have time left? that wraps it up and i will be available to answer any questions. >> will have more opportunity when we get to questions and now i will turn to you ranking member alice was. >> is my pleasure to welcome and introduce dr. dennis jacobe. he is the chief economist. in his role he leads imports understand consumer public opinion and the economy more

broadly. he has designed many of gallup's special financial indexes including the small-business index and investor in retirement optimism index. he focuses on behavioral economics to the idea of financial well-being. welcome. [inaudible] thank you ranking member velazguez and chairman grades. i'm pleased to be here today. as you mentioned, i am gallup's chief economist and my comments today at are not necessarily those of gallup. we are concerned about the economy. i will summarize my statement very quickly, but we interview 1000 americans every night and we have done so since the beginning of january 2008. we questions about the economy

and we look at those results and report on them on a weekly and monthly basis. what are numbers show us is what you saw in some of the economic data today and that is the economy is softening. we have seen it for quite a while. we think by asking americans about how they feel about the economy that we get some insight into where it is headed, and so although the economic data you are seeing today lacks a little bit, we think our numbers are being confirmed by what is happening and we are certainly in a soft patch potentially in a stagnation or stagflation situation. some of the numbers that we show that consumer spending has not been increasing in and at the same time we we are seeing unemployment at very high levels. the number will come out friday. i'm not sure what that will be but gallop measures its own unemployment rate. the number for me is 9.2%. that is not seasonally objected

and when we look at what we call under employment, the 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 economy of having one in five americans unemployed or underemployed. in addition to the sort of daily monitoring, we do something we call the wells fargo gallop, small-business index. what we do and that is we serve a small-business owners across the country and asked them a variety of questions to try to measure small businesses operating environment. basically what happened is early this year consumer confidence was up and so a small-business confidence in was recovering from the last year and have one of the slow. in our lives measure in april's small-business confidence went down. we think that does not portend well with our other measures in

terms of the economy overall. in terms of credit availability, is part of that index we measure and as small-business owners what they feel the credit is available to them as small-business owners. in my testimony i included a chart that shows about 30% of small-business owners say it is difficult or very difficult to get credit right now. that number may seem small but it is about three times what the difficulty of getting credit was rated as small-business owners prior to the recession. in terms of getting, whether credit is easy to get, we have about 20% who say it is easy to get, obviously those are stronger financially than the rest of that number is down from over 50% prior to the recession. so there is a slight improvement in credit availability for small business as as been mentioned by

a lot of people, but it is far down from recent recession levels. there are a couple of different things that i think are very important having to do with job creation of small businesses. i won't go through that but that discussion in detail except to say we find about 40% of small businesses tell us that they are hiring less people than they need. we think that if we can turn that around and actually get them to hire just what they need, not necessarily to grow there could be really an explosion in terms of job creation that is unexpected by most economists. the question is how to do that effectively. three areas i mentioned that are not mentioned often i think, one has to do with education. i would be glad to discuss that but i think there needs some tie into education from our polling with small businesses. the housing and real estate area which you have hurt more bad news about this week which is another area that is very important to small businesses and finally some of the energy

from us. will be glad to answer any questions. >> thank you. next we will turn to representative landry for the introduction of our channel witness. >> thank you chairman grades. would like to introduce mr. bob cotler. mr. caller collars at tulane grad. we have at tulane grad on the committee actually. a former executive at the hibernia bank and the executive vice president in my hometown of iberiabank in lafayette louisiana. this may make him a certified -- that he may be the able to understand me. he is capitalized in his finance expertise and his devoted much of his career to working on what makes small businesses work. his current role at iberiabank he is responsible for the retail segment including retail

operations, credit card sales, retail training and small-business. before joining iberiabank you is the executive vice president of small-business banking at capital one covering texas louisiana maryland virginia d.c. new york new jersey and connecticut. i don't know how you connect texas and louisiana to the east coast. his team worked in tandem with capital one national small-business credit card team. mr. kottler headed capital one's branch division in texas and the texas area and served as iberia chief support sales office for iberia y. merger. mr. kottler started involvement of the consumer bankers association in 1995 as a member of cba's small business committee. is an extremely active over the last 16 years in his and his role such as chair of the number should committee and member of the board of directors for 10 years. mr. kottler has over 20 years of practical experience in providing small-business taxes to kaplan credit. mr. kottler thank you for your

service to our communities and with cnn throughout the other states and i'm proud to have you testified before assaulted a. >> thank you. i think mr. landry used up all your time. [laughter] >> that will be a hard one to follow. i yield. good afternoon chairman raise and ranking member velazguez and members of the committee. i'm excited to be here today. i am bob kottler and i'm responsible for small-business banking at iberiabank and also a member of the consumer bankers association board of directors. cba has been to recognize voice of retail banking including small-business lending for the nation's capital for 90 years. in my position at iberia and cba and 21 years of experience in small-business lending my understanding is the challenges we face an especially getting to the current economic environment. over the past few years high unemployment has resulted in less consumer spending and consumer spending is critical to

boost sales of small businesses and ate them healthy. the decline in sales and the weak economic conditions have led to weaker than normal and inconsistent demand for small-business loans. in fact your resent study found that poor sales and uncertainty continued to be greater problems for small-business owners and access to credit. addition to the sales another factor has diminished the demand for lending us the value of home equity and as many of the no you know home equity is traditionally a strong form of collateral that many business owners use to secure their business loans. december study by the federal reserve bank of cleveland bound declining home values has constrained the ability of small-business owners obtain the credit they need to finance their business. is also important to understand how the decline in sales and home values has effective small-business lending. and banks underwrite loans we look at two things, cash flow

both historical and projected as well as the collateral in securing the loan. and the decline in these two criteria over the economic cycle and significant fact there's behind the production let me make it clear why lending it's been difficult that we do see improving. cba members report increase in the demand for small-business loans. in addition the congress department announced an increase in consumer spending for the tenth straight month which we think is a positive sign that we are turning the corner. what is cba doing to improve lending? many banks have instituted aggressive the second look program where the banks will take a look at a loan that might've been declined and see if there's a way to approve it and are looking to find ways to make more quality loans to that process. a number of banks have announced new lending programs and commitments to small-business and many cba members have established enhance training and incentives to the branches which is often the primary place our

customers come to ask for a loan. also specifically improving use of sba programs. cba support and will continue to support the efforts of committee in congress to expand small-business lending and economic development. we believe s.b. and program improvements including 7a, 50 foreign express are important and also the small-business lending fund and other enhancements in all of those things are getting -- taking us in the right direction to make more loans. the spring of cba joined with the international finance association to sponsor a small-business lending seminar in washington d.c. and through that summit and the dialogue that we have had with ifa we have looked for ways to improve lending. as result the small-business committee is now working to develop a template that franchises can use to prepare the sick are the finance any. this will provide that bank

information about the franchise and hopefully will help them successfully underwrite the loan. one final point i wanted to stresses the importance of indications between borrowers and lenders even before a request is made. the better prepared and knowledgeable a borrower is about the process and the more the vendor knows about the borrower the more successful the outcome. small businesses and lenders alike need to work harder to bridge that divide them better understand one another and that is one of things we have been working on with the ifa. in closing we are starting to see signs of earth and our economy but we think we have a ways to go. and a successful small business needs have sufficient demand in good to have a strong cash flow and we think is the unemployment rate falls demand will increase which will continue to improve small-business lending and small-business growth and tba looks forward to working with this committee and small businesses to strengthen our nation's economy so thank you for the opportunity to testify

and i will be available for questions. >> thank you is esther kottler. i'm going to save my line of questions for the end of the hearing because i've a lot but i'm going to turn to our first member, mr. west, for questions. >> thank you mr. chairman and ranking member velazguez and thank you panel for taking the time for being with us. we had an interesting morning. we met with president obama and one of the interesting topics were brought up is what we are discussing here today as far as lending and especially the regulatory burden that we have placed upon our small-business. one of the things the president said is that these are independent regulators dealing with small businesses and they -- the government doesn't have an effect upon them so what i would like to know is that really the case or have you seen an increase of governmental regulators coming down that are restraining or restricting the lending practices for our small banks because that is a very important relationship we have fewer small businesses.

i will did -- deferred to her banking person and of course mr. hall. >> what we found is that the fdic regulators are inconsistently applying regulations throughout the banking community. that is what has been 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 that i ultimately think that it is really the improvement in the economy that keeps more loans from being made and that is the primary influence. >> mr. landry, i am from texas. i have no problem understanding you. mr. west i think the issue is

from a franchise perspective, we are hearing that are our awards are being inconsistently treated in some ways are the bankers are being inconsistently treated. the bankers are telling us i have some banking interest myself and i do know it is very difficult for the individual banks to know what to do. they are struggling just like we are in our business. it is difficult times for small banks, so we here in the franchising side that there are significant restrictions on credit based on the inconsistency of the regulators and i don't know enough about this and i'm not trying to pick on fda -- fdic or any one else. >> can you give examples of these inconsistencies? just one or two may be? >> i will defer to the bankers unless they don't answer and then i will tell you. [laughter] hot potato.

what we hear is that the sba loans and again i know we had mr. greenberg who is the vice chair. >> at our credit conference. he clearly said we are trying to help you in this effort, but we hear what is happening it is not getting filtered down to the local examiners and what is happening at the local examination level, they are looking at sba loans is being more risky because they are guaranteed and therefore are substandard and so they are getting pushed over into a more restrictive line within the individual banks. we think franchise loans are good loans but because they are sba loans there is apparently some bias and again i am not answering because you asked me the question. >> this is the same information that we have heard as well and some banks on the government guaranteed loans have higher

reserves than others on the same guaranteed verses and guaranteed portion so it has been handled inconsistently and just exactly what mr. hall was saying as far as the classification of the loan and the risk rating and then naturally that affects how much capital will be reserved for those loans. >> thank you and mr. jacobe one question. in your estimation what are the two economic policy silver bullets that would enhance access to capital or our small businesses and help us to sustain a growth environment? >> i wish there were a silver bullet, but two things that would really help. i think one is stabilizing the housing and the real estate markets. i think as you hear from the bankers in terms of how small-business loans are made, and i've worked with bankers for 25 years and they tell me the

same thing and that is a lack of collateral. a lot of that is related to the housing situation. the second thing has to do with education. when we did our polling prior to the recession, prior to the financial crisis, one of the things we found was that small businesses had problems finding people who were skilled and had the skills they needed so that they could grow to go that remains a problem and when we polled recently among the other problems they still can't find the skilled people they need and talented people they need in the areas that are growing so those are two things i would focus on. >> thank you very much and i yield back mr. chairman. >> thank you mr. chairman. mr. jacobe in your testimony you discussed while credit conditions have improved for small businesses they are still considerably tighter than they were in 2006 and 2007.

i know that you mentioned three factors, one of them the housing and real estate market. but do you see based on their surveys that you take every night any conditions that are improving so that we could be to a point where we were five years ago? >> actually january of this year we started to see a lot of things improve and i thought we actually were going to build some economic momentum. and that has been sorted -- did the last couple of months. i think that we can build surprising economic dominance them and we could really get back there if we unleashes pent-up demand in the small-business sector and just do a few things basically recover very much more quickly than people think. >> can you imagine where we

would be today if we were not+ infused with capital in terms of helping prevent the capital collapse, the market -- capital market from collapsing? >> it is really interesting. last night i was watching too big to fail and during the period of time when all those events to lace i was pulling nightly, not only national consumers but also banking customers. and i could identify very well with some of the feelings that are per trade in that show. it is really hard for people to go back and imagine what conditions were at that time. at that stage, i was among the group of people who would support almost anything he could as we were really afraid that things were going back to the stages of the 1930s and i know a lot of people don't agree with that anymore. that is what we tell. >> fill. >> it is interesting that you

know most businesses have increased 40 points between july 2010 and january of 2011. what do you attribute this increase to end you think that the federal stimulus played any role? >> well, certainly i think and people disagree about how effective this federal stimulus wasn't all those kinds of things but we really did see the economy start to recover from a really bad point about a year ago. our numbers and consumer optimism, everything, really did start to pick up late last year and into early this year. i think it was a combination of things having to do with a lot of uncertainties being removed in the economy and people are much more optimistic. >> and you just made a comment that the -- and given the numbers that we heard in terms of job creation, normally

38,000, and that could have an impact on capital availability or credit availability for small businesses. up to this point, last year we passed the small-business lending act under the department of treasury and it is supposed to provide capital to the bank so that they could lend to small businesses. up to this point only 626 financial institutions have applied for the treasuries sbl, and none have been approved yet. so do you see this initiative having a major impact on small distances ability to secure capital? ..

was no requirement to the bank to lend. if you take that money, if you access that money it should go to small businesses. so, in a light that we didn't have, we do not have that requirement, would you -- what do you think will have the impact it will have on small business access? >> i'm not really optimistic that the program will have a

major impact. it's a little uncomfortable for me because i think businesses are bad enough we ought to do everything we can so anything that provides hope in this kind of area i am for, but in terms of expectations i wouldn't have great expectations. >> i will have question for the other witnesses but i will do it in the second round. thank you, mr. chairman. >> ms. butler. >> thank you mr. chairman, and my questions are going to be more directed towards you as well. i found it interesting in the survey you provided us when 40% of our small businesses are not hiring as much as they could, we are not talking about -- it's difficult to create new businesses. in my state legislature i heard that it new capital and expand and i kept thinking we need to protect the business owners, those small guys struggling right now should be the focus. that's the quickest way to get

job growth in the country. i have 13, 14% unemployment, double-digit unemployment for three years now in my county because we are primarily a small business based economy and i was looking through these answers that they gave you. 79% said they were worried revenues wouldn't be doubled to justify the new employees someone's going to buy what they are selling so it's not worth it to expand, worried about cash flow or ability to meet payroll. i can tell you a lot of small-business owners who haven't taken a paycheck in several years to keep their employees employed. hard to find qualified employees which lives to your education component, and then or read about the potential cost of health care. that's something we haven't talked about at all and we had a panel of the couple of months ago. the only thing i was surprised i didn't see on here is with regard to the regulatory environment and meet the health care if it's under that, but if

this is much more big picture. is that of an something that registered with this part or was cloaked in the answers for these questions? >> i think it's overcome by the other answers. it's sort of under there and when we have a larger sample sizes it shows up as a much smaller percentage. >> they get that specific. it's a regulation. so going back to the certainty and confidence issue, you know, you have three suggestions for solutions, each one of them could take a significant amount of time, how do we stabilize the housing values and education is obviously more of the state responsibility but there are federal workforce programs we can align perhaps and then energy and we are working on gas prices here get more supply out there and hopefully we can drive down the cost.

in getting to these three where do you suggest we start? >> the most important thing but can be done and i know that this isn't the view of a lot of people is we need to do something about housing is housing has affects across the country that are underestimated and has had a major impact on small business, on the collateral the small business has come the ability to lend, the wealth of the american people and in terms of going forward we have a broken housing finance system i used to be housing economists many years ago and if you go back in history as the housing was really stimulated that has a tremendous impact on communities and on growth of small businesses and in the country so i know that's not a topic is being generally discussed but that's we are not going to get this economy going potential without housing we get housing going and it's going to be a lot faster than most people think.

>> and i yield back. >> you talked about the decline? in london have to do with the÷?? drop in cash flow and home÷?÷?÷? collateral for use over÷? the÷?? years and that increased capita? requirements and regulatory÷?÷?? uncertainty have made it÷?÷?÷?÷? difficult to land.÷?÷?÷?÷?÷?÷?÷? but i wanted to look at the÷?÷? ñçrwriting standards.÷?÷?÷?÷?ç

the number right. first is the cash flow of the business, but how the businessñ is on historic lake and in theñç trip projected cash flows whatç kind of contracts do they have,ç what kind of opportunities and ç one of the difficulties has been that obviously as the economyçç has been tough the last couple of years the historic cash flowç of the businesses don't look as good as they did in the yearsç before the downturn so that certainly goes into the underwriting. the second piece is the second resource rebuke or thea? collateral of the bar and that' where housing has come in andçç we've been all cognizant ofççç making sure appraisals or herç right and they represent theçç true value of the property and then the third is generally theç personal guarantee of the business and when we look to th owner of that business to makeñw sure that they are strong andóç can also support the businessç

through any issues a would have, so why don't know that it's asç much that the underwriting hasñ changed more than being veryçç cautious to make sure to goñç through each of those steps and a lot of cases and the borrower doesn't look as strong as they did in the years before the downturn. >> are there any barriers in thw process that could keep a business from securing a loan even though they might be a goow candidate for the loan?ññw >> i am not aware of any.ñwñ i think banks are in theñç business of lending money.ñwñw it's what we do.ç and i think that we all want tow make loans.ñw i can tell you in my business iw it grows that's what we want it to you. so i think the real issue isñwñw just getting a the economy on track, the jobless rate down,ñww removing any other uncertaintyñç that would cause small businesses from expanding. it's if those things happen thaw might think we will begin toññw make loans. i will also tell you thatñw lending is a considerably fromñ the bottom but we are still not

all the way back to where we were as an industry and as an association of members from the top. >> i looked with interest that your program by the consumers bankers association which remember of board of directors.w so what would trigger a secondñw look at a good candidate?ñw >> i think that oftentimes loan will get declined by an underwriter and we put manyñ member banks but process sees in place to have a supervisor or manager to go for another underwriter taking a look atñwñ those loans to see if there isñç another question we could ask, more information we could get, additional collateral the would make the bank comfortable, butñw something to try to take a look at to see how we can make loans, and members have seen anywhereñs from people the small businessñw

committee from three to 20% left in the approval ratings of thosw loans, so it's actually worked, it's something that's been successful in helping small businesses for the industry. >> you look like you have something to say on this. >> what i was going to add is the second look program is just something that a lot of -- that we do and that other banks are participating heavily with the small business administration is we do as a second look see if we can utilize the administration guarantee on these loans that don't meet our credit criteria on a conventional basis. the credit criteria of our lincoln particularly and i believe i'm speaking for most banks the credit itself has tightened due to regulations and losses and so forth. but what that means is the businesses that no longer qualify for conventional lending falloff their plate and land on

maudine as the director of government guaranteed lending. so that's why we've been doing more loans because we do look at the exact same criteria that mr. to kottler spoke about with the enhancement of the guarantee we make more loans to businesses by utilizing that and that's why the vitality of the program is so important. >> thank you. i yield back. >> mr. maldon eni? >> 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 the president this morning and were told by him from his own mouth he had very little direct control over the regulatory environment. and ms. ozer you mentioned one of the hurdles you had been facing in your covetousness velte the fdic so who deals with the fdic? is the treasury? >> i think it's an independent agency. >> it would be mr. geithner and

we have a meeting with him and i'm going to ask about his role in the regulatory environment. i'm surprised to hear that. let's come to the issue at hand and i have a question for mr. kottler. you heard mr. hall talk about the role franchising please. i've been a franchiser and franchisee and he is absolutely right there's a tremendous pent-up demand in the industry. tremendously our industry has been sort of a stabilizer, countercyclical when business got bad and people got leadoff dewitt turned to franchising as a way to start their own business. we saw that in our own business, the demand for our restaurants went up dramatically but the ability of people to actually open them fell to zero because nobody could get financing. mr. kottler, 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 is their anything we can do or

perhaps on do as a government to help you lend money and give the example i took from another industry which is the real-estate industry which is having difficulty refinancing right now and in large part because of regulation that there is a cruel and blease that says if you refinance a real estate loan even though it's perfectly healthy and performing if you refinance and automatically goes into a troubled asset category, and to me that shows some opportunity for us to fix things so what can we do or on do to help you lend money to folks like mr. hall? >> i think one of the things is to be supportive of the sba program. a lot of our banks use them and the increase is done and the amount to lend and some of the other things that were done have been pretty important, and banks have used that pretty aggressively through this economic environment to make loans. i think that's the primary thing other than just a more global

economic things i just think we have to work on and that will take care of a lot of it in the process. >> mr. kottler talks to become xm excellent point and you talk about effective there were no es ta lending out there we would have almost none in our industry. have you ever done an sba loan? >> no, i have not. >> i know ms. ozer has pitted can you tell the difference in terms of the paperwork involved behind getting an sba loan and a traditional loan? mabey mr. kottler can help because it's not apples to apples it's much more difficult to get an sba loan the and to get an ordinary free market alone. >> the amount of credit information that's required from the borrower, the basic credit information is the same. in order to deutsch to 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 come standard operating procedures that have to be followed. so a few tv to if you decide to borrow money from a bank 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's credit underwriting on the bank's level and then there's credit underwriting that has to be done on behalf of the small business administration. so there's basically two times the amount of work. you can use the same underwriting but you have forms and applications that need to be done, eligibility checklists that need to be done, tracking of the use of proceeds, and there's more of an administrative burden on the bank to deutsch an sba loan. but the bar were themselves shouldn't really be experiencing more problems. >> i had a great pleasure of

having an sba loan at one time. it was a great experience but it was the conventional route was always preferable. yes, sir. >> i would add that we really haven't had an sba loan it looks like i'm going to be going after one. and i will just give you the real world perspective on that. in the past if i put a new unit and orie restaurant in i typically am putting a lot of capital in the already in addition to the loan and in times past i may not have had to guarantee the loan personally, and in fact i wouldn't do it unless i absolutely have to in today's environment every bank is making me guarantee that flem personally. so now, faced with the fact i probably can't get the loan at the commercial bank i am now saying okay wife got to go through sba if i want to expand my dairy queen's which i'm looking at right now i'm going to expand my dairy queen to refurbish them through an sba program because that is really the only route i can take well

to all the site of the paper work and putting capital into it? not but i don't have a choice of i want to renovate my unit. so, that's the response about the sba. >> thank you mr. hall and mr. chairman. mr. peters? >> thank you, mr. chairman. i want to talk a little bit about back to the bankers situation with making loans and i know how the deals have changed but they're seems to be two issues with the banking industry account talking to my credit unions and others is that certainly the deals that are coming to you are different cash flows, different collateral, but in terms of some of the questions we've been getting from other panelists as well as fdic is oftentimes the fdic will go to a community bank for example and i would like you to respond they are going to the community bank and say basically looking at your portfolio and say your collateral you have backing up your portfolio realistic has dropped so your

collateral has dropped as a result of that you need to have increased reserves which seems to be prudent thing to do to increase reserves as your collateral has dropped to that of course limits your ability to lend because you have to bring private capital which is a difficult thing to do in a tough economy a lot of small lakes don't look a great investment to a lot of people particularly my area where you've got to call and loans or reduce your ability to lend. so the question goes to the two folks from the banking industry to what extent is the fact that you're having trouble finding creditworthy borrowers and to what extent is it the fact just because you're own portfolios to not come collateral dropped in value to simply don't have the capitol to land? what is the balance? >> i can tell you from our experience we have been very well capitalized and have very good lending performance through the cycles. so, i will tell you that one of the reasons i came was to do more small-business lending. this is something the manager of the bank wanted to do and as a

result i don't think my experience at least in our bank debt that is still an issue. the issue is -- >> more broadly than your bank? >> it's interesting. i've attended some different forums over the last few years and some of the smaller banks certainly raise that issue but i will tell you from my experience our bank is $10 million experience in a larger bank i don't think it was. >> my experience with our bank is similar to that we have capitalized and have been able to lenñd throughout the crisis. we do have issues with loan-los reserves and on a conventionalñ basis they are looking moreññ closely because of regulationsñ and the types of collateral the are able to use.ññññññññ the equity values have decreased.ññññññññññ but we have available to us the way to make loans is to utilize the government guarantee, and we have been able to do that and t

conserve capital because that's one of the major things thatññ that program allows us to do.ñ the credit worthiness of the ba were at the present time theññ people that you're looking atñ now thatñ come to borrow money they're expensive and lean andñ mean and most have a top lineñ problem andñ not a bottom line because the consumer spendingñ and those areññ the scenes th make the banks' nervous, and we use the government guarantee to do that on the conventional basis a lot of banks areññññ requiring borrowers to pay off their credit lines that the few ñe highest all the way and the don't have availability on itñ and then with an sba guaranteeñ ñ can get ten years to repayñ that loan as opposed to the ban requiring only two, three, four year loan.ññññññ so by applyingñ a guarantee we increase the working capitalññ 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 for you is there is discussion on the fees assessed on sba loans that traditionally covered the cost of the program, however, now it's being subsidized and i know the administration and others have concerns about the subsidy of the fis, the fees can be relatively high for a small business right now. what impact do you think it would have if we are in a position we don't subsidize the fees and actually have to raise those fees, to all the panelists are you concerned about havingñ to face high year sba fees'?ññ >> on a personal basis, theññ barbers have that concern, butñ this tñouches on what mr. hall was saying. whenñññ you utilize an fdañ guaranteed loans because credit is not available elsewhere.ññ so the small businesses are either fighting to stay in business or they want to? fight to start a business, and the fees can be financed and amortized over the life of the loan which generally along theñ period of time than they wouldñ get on a conventional basis.ññ

so as ña lender, yes, it'sññ concerning.ñññññññññ ñ a bar where i'm sure thatñ it's concerning asñ well, exce for that if you are in aññ situation where it is the mostñ reasonable way to continue in business or start in business than we will continue to do it. >> i've been an entrepreneur since then and unfortunately the question i asked the bank now is about the fees. >> you need the credit, you need to finance something, you're going to pay high your fee and higher than you ever thought you would. and even those words today because to get a loan and extent to even survive i'm going to have to be guaranteed it personally, but put on the table everything that i've worked for all my whole life, but i am

happy to do that to grow. >> thank you, mr. chairman. i yield back. >> we're going to have some votes coming up here after bit. i don't know where they are. but i do have a question for you, mr. hall, you mentioned earlier and i heard this about the possible bias against making it harder for the franchisee in fact i have friends that are trying to get loans on start-ups that are new franchises, and they get that impression that there's bias against that for 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. >> well, you know, i think historic the people have had a negative thought about the restaurant industry and about startups just in general because the sba program isn't about giving money to loans that won't be paid back. it's a program you have to pay back and has to be a plan in place and so, i think they're

probably has been traditionally a body is against some of the franchises, but i think we are turning that around with partially the work that we are doing with these other organizations because to us it's about we look at it as the glass as half full rather than half empty. we are not putting the blame on you guys. we've got to operate, we have to grow and the way we are doing that is working together as a group with some other people that need to make loans, and does things we are doing are like the underwriting issue that was brought up earlier, we accept some of that responsibility, we probably were not given the information to these folks because we didn't know what to do we are creating this environment where we are showing our members on both franchisees how to make the loan application and the things that the bank needs to be successful in so hopefully we are going to

overcome the bias that i think has been out there but i certainly know that it has been there with our effort in the future is going to be to try to overcome that. i don't know if that answers your question. any thoughts? >> i would 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 that may not have been in that business and they want to do something new. so the issue is less biased and more just they are just harder to do. so i think that one of the things that we talked about with the ifa is the small business to begin to the cut of committee put together questions for the franchise, how successful your franchise has been and a whole series of questions, and we are hoping as an industry by starting that communication that we will have more success with the start-ups, because i do think they are the most difficult things to do.

>> let me back that up with a question, too and i would be curious when it comes to start-ups, and this is the age-old question, if you are not wealthy or very limited when it comes to your personal guarantee your trying to do a startup to 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 that i worry about more than anything else, we have some great ideas out there in many cases but if the individual isn't wealthy they don't have the personal backing of that personal guarantee, the equity so is their anything that can be done and i will run down 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, they borrow and steal whatever they have to do -- [laughter] they do whatever they have to do to get started, and i think that

is sort of what's happened so also in the franchise industry as well we have a lot of people coming into that that their initial capital was coming from what we call annual investors which has a personal relationship with them. very difficult to get the institutional investor involved in any kind of small business to clone that we are talking about, but as a rule, i think the 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 go in and find a place either through some foundation or something get the startup money. so my personal experience is normally have to take a first step to get into business which is one reason we let the free tours business because they aren't taking the first step by themselves. the accumulated some of the money and get in business with support from someone else to help them be successful going forward and to grow.

>> senator? >> i agree totally with what mr. hall is saying when you look at as i have for years projections and business plans to begin with. we see lots of people we suggested they go back to the small business development centers and the 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 in the loan is the startup capital. they go to friends and family and the investor but we want to 100% financing. we see that these people have access money from credit cards and we see that that's how they start their businesses and then if they do have this wonderful idea they come to us where they've already proven some top line success and that's one of the duties of the lending is we can refinance debt over a longer period what time because they already proven that they can pay

it in a salles basis. and the initial capitalization if you don't have it you have to get a gift letter from your friends and family, you have to get investors. if you could sell the bank on your idea than you could sell that to somebody else and bring on partners and so forth because they do have to have some percentage of money to do that. it's done by the sba if you're interested in hearing that. >> mr. chairman, would you yield? this is my frustration when we passed the job creation still it is with the purpose of helping to provide affordable copies to those who were not able to get it through conventional or financial institutions and what we have seen is the federal government and the sba is guilty of charge because what we are

seeing is a concentration on big loans. those that increase and the percentage of smaller loans defined as those less than 150,000 has declined through the sba guaranteed loans through a 17% to 8% so the problem with this recession compared to other recessions is that people lost their jobs and they started off businesses, they created businesses. this time around because they've tightened and the sba because those guaranteed lenders are concentrated on making the big loans. debt financing does not create jobs, start-ups.ççñyñyxçñyñyñyyç

it's at 6.3% in the numbers and 38.8% in dollars and 20,011 yeay to date versus 2,010th year toyç date.ççyç there's 29% of the number of loans as businesses under open for two years or less. there were 2,740 loans made to start-ups so far this year versus 9,856.yçñy its 3.255 billion year to date versus 2.346 billion last year. but the information that i have seen just in my bank is there's been a lot of start-ups and some of these people that are out of work actually do have money as a startup to start their

businesses because they've either been laid off with a package or they are older, 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 they are using the larger loans more but we need those larger loans because as companies grow, like mr. hollen saying, people that have five and six, they get above the 2 million, they have to renovate their stores, they need 5 million. so we make loans -- >> i want to go back to my original question and that is i'm talking about people who are doing start-ups that don't have the equity out there for the personal. i would be interested in hearing what you have to say. >> what can we do, what can be done to help those individuals out? we hear a lot about, you know, those people that have that money or have something to back them up but i'm talking about

the people that don't. what can we do in your experience or can we have done in your experience? >> i think it's an ongoing process, so i don't think that there is one silver bullet that gets it. i think it's a combination of them finding personal funds or other to get started coming into the bank working on business plans and beginning a discussion not think one of the most interesting things to me is customers who come in and have discussions with your thinking about with their pingree and get to know them long before they actually come in for the loan request and that helps a lot, and i and then just making sure that we have programs with a score and to help out in a bank that i work for in the past we actually worked with the cost foundation to do first time business owners loans. some similar to some of the

first by home training. it was very successful to people they graduated in those programs that were more successful in their business than other start-ups so there were different things we need to put together to make it work as opposed to one big thing. >> mr. jacoby, do you have anything to add? >> we have done some surveys asking small business owners from their experience starting what did they do and what did they do wrong. one of the things that the highlight it was not starting with enough capital. they tried to get in and they didn't have enough capital to make it and some availability of at least some kind of minimum level of capital is even more necessary because they are not going to have immediate success. so you don't want to lot of people going out there and chongging in this environment without some kind of capital foundation.

>> thank you mr. chairman. you testified before that the issue is a demand issue or topline issue so that for businesses they don't have adequate demand to support a pro forma that allows them to come to a bank and secure a loan, and it is inhibiting their ability from a financial perspective to come in to be successful in the loan process because the need to grow the top line in order to be successful to repay the loan. is that it's fair summary of what you think that where the businesses are not? i'm saying existing businesses

right now, not start-ups, not performance, 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 to make a loan we need to see year to year that either the bleeding has stopped and they can still pay and that it's back to increasing again. >> okay, but that obviously puts them in a position where there is not as much demand for bank loans if they are not having growth in the top line they don't need a line of credit for instance or to increase their line of credit because they are not buying additional rall material or product for resale. >> they are funding their receivables and need to have short-term capital so they can find their daily activities. if they are not a cash business, even the level of business they are doing the short believe to meet short-term credit lines to

operate on the regular cash flow. >> but they are not increasing the level of the borrowing i am assuming. senate it all depends. a lot of them have -- they still need to maintain -- >> i didn't say maintain, i said increase. they are not increasing, they are borrowing because they don't have additional sales or additional product they are purchasing. >> de want to comment on that? >> yes, sir, but we put it in a dairy queen perspective. my sales are not going up dramatically, but i am about 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 the competition and you are just slowly going out of business. so why wouldn't -- i would say

to you i'm going to borrow money without the expectation of greater sales. i hope i will to get a high your bottom line but at the end of the day i'm going to have a lesser bottomline but i am 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 i've got my base and if it goes away then where would i get my money. so we don't accept less profit to grow but i'm also doing is growing jobs and keeping people employed and my system in place. >> would it be fair to characterize what you're doing in the form of a capital loan as opposed to a working capital loan? >> welcome in my business i have to make payroll and so when i have to borrow that money to do the construction, certainly that would be a capital loan, but i'm telling you in the business environment right now the margins are so thin that there's no big cushion. we don't have a big pile of

money waiting. we are figuring out how to get where we need to be but i want 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 serve the small business environment because partly it's about the family, it's about people keeping these employees and business is. >> i love to have it. >> more is good for me. >> i also want to go back to something mr. jacobe said before and if we solve the housing problem that that would do a number of beneficial things including presumably increasing available collateral for loans what is the solution there. schenectady have a substantial amount of foreclosed properties they're holding on their balance sheets or is that not an issue

for your banks? >> for might think it's not certain the number of the member banks for some of the largest banks in the country they have been working through those issues but i think from the standpoint of housing value we talk about startups and other kind of small businesses and one's a born a word gets beyond personal credit cards and personal savings, the place that the oftentimes go to next either as a personal loan or a business loan to fund their business, and so some equity value has gone down especially in certain parts of the country more than others. it's taken away the source of collateral which has made it more difficult. >> mr. jacobe, what is the solution? >> i wish i knew.

>> the values so that everybody can start improving from that point on. the danger now if you've seen the latest reports is that there's everybody fearing the double dip in housing, another step down, and that has the same kind of repercussions through the economy. i think that traditionally americans have valued home ownership, some people seem to be moving away from that, but i think the nation is to value homeownership and do whatever it can to stabilize housing and get people bodying again in a secure environment. if you buy a house today leverage works against you. and so if the price of the house you're going to bite 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.

>> there has been discussion about the banking regulators and in my community some of the smaller community banks were particularly hard hit, and their concern was the felt that there was an overreaction, that to some degree they were paying for the sins during a financial crisis, and that for example the capitol reserve 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 the small business access to capital related community banks? in your view was there an overreaction by the regulators? anybody? >> we are a little bit larger than a community bank having 14 billion in assets but our

commercial real-estate division was by the most hard hit in our banks, so as far as an over reaction is concerned, the perception is that the amount of capital you have on reserve now is going to be looked at if they say that it's supposed to be 10% then you need to have 13 or 15% so as such i don't think that the -- are you saying that the regulators are overreacted? >> to the community banks. >> i don't know the answer to that. i don't know if the overreacted but they reacted appropriately in some cases. >> from the bar weren't prospective most of the borrowers are no think there was an overreaction especially the smaller bank level the was the most given response and the same credit they would have in the

past they are facing increased regulations and that so from the borrowers perspective there is a perception out there, and the regulators in good times seems to me they ought to be more conservative and then in bad times seems like the ought to be trying to help the good borrowers get through the tough times because we are talking about people that have had a long history of performance in the though they don't have much control over our having to have struggles. unfortunately the community banks are in the same position so that gets back to the program where we are trying in to match these two people to see if we can't get together and some supply meeting the demand situation. >> even if they had a performing

loan with commercial real estate, if the loans are downgraded and they should have been just maybe a watched on them but not downgraded the cause in the money available for lending into the capitol? reserves. anybody else comment on this? just one last related question, and that is in terms of job creation which is the subject of today's conference call access to capital was very important. but what in the majority i was a small business owner in the corporation, and the majority of small businesses are structured to serve as corporations. in terms of job creation, would be the impact of increasing the income tax rate on job creation knowing that in the service corporations 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 is going to tell you we want more taxes. i tell you right now i'm not afraid to take what is fair and needs to be paid but on the other hand, 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. people that their business income is flowing through to their personal tax return and they are not getting deductions and it's difficult. i know it sounds like a lot of money but you try to capitalize a lot of your own social mission which is what a lot of small business people do, there are some issues as a tax payer 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 i have read the same situations with health care you're going to lose jobs. you don't realize it but in the real world you are going to lose jobs. it's going to happen because we are squeezed so tight right now that there's no place for it to go. >> thank you. on a congealed back. >> thank you mr. chairman and ranking member. i would like to thank our panel for their testimony today. we all understand only when all of our nations and small businesses are active participants in a robust recovery that adds jobs. will the nation fully recover from the recent economic downturn. i also understand allowing the regulatory environment to return to one that allows for the financial collapse in the first place is still responsible at best. today's testimony especially

that of mr. jacobe and mr. kottler illustrate the difficult tasks facing the nation with a lack of consumer spending highlighted as the top concern of small businesses, excuse me, small-business owners with regard to hiring. this fact that private lenders are not lending to those evin who would otherwise be deemed creditworthy has led to the issue that has ms. ozer pointed out approaching its ceiling later this year. so my question is this. >> and recognizing that returning to the lax to regulatory environment that caused the current problem would be unwise what else is needed to incentivize private lenders to free up the capitol that would allow small businesses to expand and hire which would turn around the weakened consumer spending

and get the economy back on track? >> that's a really tough question. there's a lot of things that could be done that would encourage local lenders to hold more loans. everybody who's tried to figure that out has had some difficulty in terms of how to do that effectively, and you tried with various kinds of programs. you know, the big thing is to get consumers spending again and that is a larger issue. once that happens, then everything turns positive. in the interim you can to get out a way to get lenders to hold more loans themselves instead of the government programs, but it more loans and some kind of incentive that would also. >> i think that utilizing the government program that's

helping us to do that, but even at that level, i agree with dr. jacobe and the fact that the consumer confidence and the consumer spending is all hand-in-hand and that is 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 that the outlook will go on and it's a very difficult situation and i tend to agree with him that until the home levels values 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 to put on the table. when that comes back i think that the banks are doing everything they can with the tools that they have to get money of their to small

businesses. i know that in our banking someone else asked about the foreclosure rate. if the people are paying all loans, we are working with them and not for closing even though they've been downgraded because the regulators are forcing us to downgrade because the lt fees aren't there but if they aren't being paid they are still in the bank so they aren't trying to look at the things they led money to to keep the business is going, to keep people employed and keep people spending money it's just a cycle. >> mr. kottler, you got to have the answer. [laughter] >> you know it's interesting when you watch far worse, so in a robust economy you see border was coming in and they want working capital lines of credit to buy your new people to fund the contracts. they want to purchase new

equipment, which then leads to more people to run the equipment to more jobs. coming out of the bottom of the recession what we saw was we started to see the loan demand go up, but it was for things like i want to buy the building that i in because it has been leasing it and now what is worth less than i can get a good deal. i want to buy my competitor whose weekend and i can do that. those requests don't necessarily create jobs so as we get more consumer spending and we get more economic growth then we will start to see those loans from the established businesses be the kind of loans that say we are willing to commit and expand, and we have seen less of that up to this point. >> did you want to add anything at all? >> okay, i yield back the balance of my time. >> i want to thank you for

participating in 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 their small businesses particularly the ranking member and i were committed to helping the start-ups as best we can but i want to thank all of you for being here and i would ask unanimous consent of the members have five legislative days for the materials for the record and without objection so ordered and with that the hearing is adjourned, thank you all very much for coming in. [inaudible conversations]oc

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melhem a discussion of political uprising in the arab world including yemen and syria. the center for the new american security hosts this hour-long panel. [inaudible conversations]

>> i'm karen elliott hall i'm on the board here and i've spent many years in washington as aate diplomatic correspondent for "the wall street journal" and then became acr bureaucrat for "t "the wall street journal" ine mt charge of with some business bottom-line responsibility, and the publisher of the journal in 2006 and writing a book about b saudi arabia, so i'm looking forward to hearing the panel. and going to make some briefakes introductions and then moderate some discussion and then go adic [inaudible] you come to things like this too ask have the oqupportunity to ask than aons that people like me and there's nothing worse than t know w moderator who doesn't knowhe whn to share and shut up.i am goi

i'm going to start by just mentioning the internet freedom study that meet mentioned it does give a really good discussion of the issue ofe the technology and the mouble-edged sword that is, ando hopefully we will hear some more about that because one of the authors is on our panel. we had a genuine experts here this morning in different areas. on my immediate right, colin r powell who's the deputy assistant secretary of defensete for the middle east, and prior to that was a fellow here at tht center and a teacher atgh he tes georgetown although he tells mes now he has one shot at thehe c pentagon he can't have a side job the way he did here.

he is an expert on counterterrorism,counrterrori counterinsurgency because the consequences of violent civild e and ethnic conflict, so well tat positioned to talked about topic here in the middle east. on my left is dr. hamid who jusm flew in last night fromhe is brookings. he is an expert on islamic political parties and .. long be spring. on my far right is richard fontaine to as i mentioned is the author of the internet freedom study and has experience on the hill, five years as the is the foreign-policy adviser for senator mccain.

.. >> with the adviser to general stanley mcchrystal and the author of this man's army. and has a degree of the police stearns study from the americanhe university and has spent from all over the region but particularly in egypt after the revolution.

i have watched the administration be somewhat conflicted about how to respond to events in the middle east. where to support stability of autocratic regimes and democracy. on which america stands provide suspect we have all been conflicted because not all middle eastern regimes are the same there areth gradations of authoritarian is some and all strategic importance of these countries to the u.s.. which allianz is something we can draw people. i would argue that is not strategicallye important to

the u.s. but syria it is equally but is far more and then a call if only because it serves as the iranian proxy. whether we and right egypt and ignore syria. it was relatively important but we helped reebok from saudi arabia which is paternalistic cleese mothering regime and by farfar the most important country in the region and our president could not even under its u name in the latest

speech which i feel very interested. butr the "wall street journal" which has no responsibility has abdicated the strategy ought to be protected and support our friends and the rich aegean change with our enemies. even so that we could agreere and i will not go on with iran and pakistan which is more important then saudi arabia. with the backdrop i will get you to lay out the principles of the uses. those that have burialit sure -- aerial chevron that say your principles and

policies ought to be so clear you just go take up the crop is and it tells you what to do. >> we want them to have that plan on the shelf. say in january the middle east is to find a little bit and the then in tht e pentagon might officece c covers the region up through is right -- israel. down through the arabiane peninsula i don't deal with afghanistan or pakistan. [laughter] it says about the revolutioney l

they look possible and also inevitable that is never been more true than the middle east. one thing i will say is the internet did not cause this but had tension in this part of the world and the l relationship between this parten of the world that has been around for dec -- decades in now on a leash. secretary gates with another 30 days has like and what we are seeing to the shifting of tectonic plates with anl tsunami of change. we don't know where will go and we need to bebo humble but a couple of words as we go into this that we don't go in assets realist or pie in

the sky but we see a set of challenges in the region and is set of opportunities and i say we think of these asphalt baskets of challenges. how this will affect our relationship with so many countries to include our part years if you look at those that areerun democratizino that is more responsive to political will and is alsot trueun of government tonr survive the democratic gun restive also be more responsive. also more cooperation mayo havep had that with specificmeti government's and new actor bring new uncertainties in our relationship. at the same t time, one of the opportunities of this chain

of events representative presents to build the enduring relationship that more appropriately aligned with the values. they're not simply determined by a handful of leaders that run deep across the region. so it will create some tension but long term in the u.s. interest. the secondst basket is the violent basket but those countries we see today will have opportunities for violent extremist with other areas without kriet and the arabianin peninsula holding more terrain than they did sixn months ago but to have fundamentalu opportunity toally destroy the narrative about the pathway for change.ried pointing to the irony of the

fact obama's sit -- osama bin w laden watching the egyptian people do what he could never accomplish was to topple the mubarak government with peaceful political change in advance of universal values as opposed to those that are 1,000 years old and those that are described to as mostbs people two al qaeda in combination with the bin laden death as a sign very much on the decline. we have been very close that iran did not cause this then secretary gates said no country in the history of the world had the ability to create this much change in a short period of time.n n' >> they are hoping to capitalize. shortly after the unrest started said this was

inspired by the islamicrevo resolute -- revolution. these were not inspired by iran but to push for the iranian style theocracy but while there maybe some evidence in the long term this will not work to the advantage. swov the country in this part oflo the world if we go through arab governments the area to exploit theb grievances will be marginalized over time. you also see rival democratic states like egypti that will ultimately be counter weights against iranians influence them lastly there is the fundamental hypocrisy that iran we'll stand up forot protest movementess everywhere

where brutal repression has denied the freedoms that we have expressed and then the middle east peace process it has created anxiety egypt is the pillar of arab-israeli piece and in botthhae placestive those perspectives are nowe shaky bet on the other hand, to become of peace between people and on the palestinian question to get out in front of the populist waves it is not about israel it will be an issue to take arguments away to use thethe relationship with the palestinians against the

interest. basically tackling it in two ways to have a common set of principles we oppose violence and only to invite more opposition and also to have an obligation not to engage in violence. we support universal rights theout exception asl e president said in cairoclud including freedom of speech and assembly for people to protest and the right to have access to information we support political and economic reform to the region statuss quo like aeronaut it is gone. it was not sustainable and there's a real opportunity now to new-line our principles and values. that is the top line messagen

and we have been consistente've but we have to adopt the policy it is not hypocrisy are choosing values over interest but navigating the pragmatic -- pragmatic way forward to do have a different influence in different places. so in countries like egypt and tunisiaco, we're supportive of democracy also to stand up to consolidate democracy in iraq and look forward to a long-term partnership with them.u >> do think iraq had any impact of what made this happen? >> i don't know. the toppling of sadam

hussain in 2003 the gooda news it guarded of the dictator it was thousands of iraqis displaced and send a message democratization is from uncertainty it has to sort out the iraqi fact because without relegating the past because moving forward believing you do need to consolidate democracy and a long-term partnership for all the reasons that were true six months ago but let me say of few words then i will shut up. in yemen we have vitalting interests a in that country not being a completelymple filled stay and at the samewe time h encouraging to live up

to make that happen. and we have been reassuring to our partners we have cooperated before with encountering eight ambitions and all of these areas where are the same as sixu months ago that we have a common interest in stability. that requires the evolutionary progress and that has been the messagean and most particularly that is the message with bahrainecti who move back in a positive position that we continue to navigate.'s the president was very clear they face a fundamental choice.e

they can. stay or leave. if he does not lead it does not look that likely yesterday announced-- then showing more villages. if he doesn't stop the human rights abuses or allow investigators to come in the alternative is clear. will face more isolation and more demand.e era so we have a general set of principles trying tow navigate our way to theums levels and i would be happy to talk about these or whatever you would like. >> what do you think someoneat who is studying the region region, what do you think caused the tectonic shifting of the plates?is

is there any common cause? >> there is a narrative thate this was surprising but it is since. for them to say the status quo was untenable that is the line may hurt for quite some time. we have to a acknowledge thewe fact that democracies don't last forever there was ain sense that these regimes word durable and last some s how but somehow immune from the broader sweep we saw in s the broader regions of the world the factors were all there. h but what happens to have tunisia provided the initial spark with the high levels of unemployment and underemployment and the fact people live under thesh dictatorships this has been going on for such a long

time. this is important not just about domestic policy arabs are angry the autocratic leaders lourdes to pro u.s. and reflecting their own preferences if you put that together it was a matter of time. >> maybe you can talk about your own views of technology and social media? >>a first of all,, and his right is not the internet caused revolution the people cause the revolution in those that did is what we talked about but it seems to me that the tools did matter in a way that is in different from what we have seen the past of other form

of communications and technologies. they matter in a couple of different ways. one thing the speed with which the demonstration happens in one country and people throughout the middle east could seek damages to get a information what is happening in countries where previously it would be much more limited to do. there has been educational informational process and a politicizing effect. there has been a growing sentiment among people that their view which may have been in opposition is not theno only one there was a shared sense of opposition technologies have been used quite obviously on facebook and things like that and there has been int interaction with satellite tv so in a place like yemenl

a lot of those images are youtube video so there is interaction there but i would point* out that describes the democratic protester side of the equation. there is there regime side that very carefully was trying to use the tools to do just the opposite which was to crack down. onrs organized protest or also the entire one is ine the country a pull the plug after it was monitoring people and in syria which was billed as an concessiona that they felt was banned they went back on line under suspicion is this could of been the best thing thosef people who do not know how to use facebook in a secure fashion the regime would

have access to make it thatng much easier to crack down.nari it is a contested space but here are the initial ways to see how there was the overall effect of the political change. >> sketching out which was an optimistic scenario that we would be better off in the middle easti because we would have a more solid french up foundation not just a dictator. i would like to ask you andrew. [laughter] look ahead. but currently beinga legitimized.

buzzed if people do not wind up with more dignity and a better economic situation, then they will be in search of something else ; the start of to reinforce the things my fellow panelists have talked about. not just because i disagree with the former debate d champion but i think al qaeda hasas been weekend and the arabs spring was the demise of al qaeda.to also if you talk aboutmi technology in the middleic east which is done so in the reportwa you have to look at it asp part and parcel of what is developing over the last 20 years and mark was with us on the way to egypt nobody is better at

describing that the year and if you look at the way in which not just satellite television but newspapers and later the internet has created the unified public's fear in the arabic speaking world. that is true but on the other hand, the conditions deferred greatly. p now the president of the american university of cairolat and talk about the fundamental differences that the states like libya would face and talk but egypt and tunisia we spend a lot of time worrying about then direction egypt will go by libya doesit not even have that.av not only did they inherit, my wife this

italian but did the war outbuilding of institutions during the colonial area and then followed by muammar qaddafi who had no interest to build up the state institutions. looking at the challenges they will face, egypt should worry tremendously because that is typical of the arabic speaking world, talk about security sector reform and making political and ri institutions responsive to the public. that is all good. but places like libya, this situation could be much more dire going forward.r i worry more with libya going for the and thesi administration. >> i think the phrase era of the spring is the most -- misnomer misnomer it brings the idea of farmers embossing and that is not

what we are seeing right now. w i was there when mubarak step down it was one of the most beautiful things i have seen an remarkable to be there at that time. unfortunately that euphoria of was premature. within a couple of months we have seen what has happened and hoped leaders would use less force when i using more force birkenau we are beyond the transition. it has killed more than i 1,000 of its ownsans. citizens. that is a remarkable level for syria and talk about libya, bahrain, they are waging war against their own people.eing i think this is where the u.s. role becomes importants because it hasn't spread throughout the regioni talking about two countries were thereo has beenthat revolution at of 20. that is a low percentage.

going forward their rhetoric is great talk of freedom and democracy but in practice that is not what is happening if you look at the perspective from the arab world they view as very differently than we see it and the u.s. is being on the wrong side of history. we have been behind the curve in almost every single arab countries. really support them after they have been not before and that is the true test obamacare out with great words supporting the aspirations only after the president had left thean country on a plane. that will not cut it. >> i want to mention theunme unmentionable country of saudi arabia because they do say there are no institutions. >> there is a bigger serve arabia problem talk about

women's rights and freedom of worship and did not mention saudi or maybe it anywhere in this speech but talk about the right to minorities the one thing that will this obey my a rule and pick a fight a little bit but we have been hypocritical with respect to bahrain. it is not just us. about out jazeera, the coverage was pretty crappy and we were prettythe supportive of the movement in egypt but when saudi arabia invaded another country, we were pretty quiet about that.y there is some good reasons for doing so but it is quite laughable to talk about therve intervention when you have those nations occupying.

>> they tried to drive a protective crouch. >> the same thing happened with the nasty dictatorship civic now includes morocco and jordan. >> now we have one thing in common. >> we should take questions from the kings andf queens year who wants to ask a question? now i will ask. >> we have a question on twitter. >> i could not do it with the microphone. >> i will add-on to the twitter question how doese

that provide process where emergence out as what can the u.s. due to shape and already going in the wrong direction. how much authority and influence do we have otherwise varying from country to country. or if weom attempt toe encourage bahrain do we screwed it up? >> as was said before.t policy has it will be b continued to be but we say it is ago on the basis and then say nothing about it. that is true.i >> the fact