fayetteville. go ahead. >> caller: good morning. i don't like the ad. i'm a big supporter of herman cain. many of my friends are supporters of herman cain. and i would much prefer to see his face talking to us and telling us why we should be voting for him. i didn't like his smile especially i thought it was too sly. and just a very bad performance at all. >> host: and the smoking part? >> caller: again, it's just part of the overall amateurish appearance of the ad. >> host: what do you think of the attention, though, it's been getting? >> caller: well, i guess that's good. but i think giving a lot of people ammunition to re-enforce the negative aspects of his campaign >> host: lawton, oklahoma, sylvia, others that support others. go ahead. ruler on, ma'am. go ahead. >> caller: oh, okay. you're asking me about the ad of

the smoking. i think it's -- it's crazy. it's not nice. he's smiling. i don't know how to explain it. it's just not at all to me and then also he said with the electricity with the illegals, this is not a president like that. you don't do stuff like that and that smoking, no, no, no. that thing he did over pizza, no. i'll tell you something, president obama is the president. he will never make it and he's not going to win. thank you, sir. >> host: there is a polling that's done by the "new york times" this morning taking a look at views of the president weighing in this morning with 46% approving of his job as president. 35% approving of his -- the way he does job creation and when it comes to the economy it comes to

38% foreign policy 50% and with the situation with iraq at 60% approval ratings when it comes to president obama. one of the commentators on the shows last night was john king of cnn who took to the airwaves talking about the ad, particularly talking about the use of smoking. >> a question bloc on his newfound fame he said, quote, america needs to get a sense of humor. block said i smoke. it's a choice. yes, humor is a critical ingredient, in life and in politics. but so is leadership. smoking is a choice. and mr. block and everyone else is free to make it. but to celebrate it is to encourage it and it is indisputable fact that smoking kills. >> host: again one of the comments from the airing of the campaign ad from herman cain. and for our first -- or next half hour this is what we're going to talk about. get your thoughts not only on the ad itself the message it

sends, the way it's done. sacramento, california, on our line for those who support others. wesley. >> caller: hi. thank you for taking my call. herman cain is reminiscent of alan keyes -- [inaudible] >> caller: obama when he was in illinois as soon as he got his little spiel and his -- [inaudible] >> caller: same thing is going to happen to herman cain. i think the guy is a joke. he's a disgrace. and he's not a president. thank you for taking my call. >> host: the president in denver today to announce plan that deals directly with wall street loans. the centerpiece of the plan, mr. obama is unexpected to unveil here would allow the estimated 5.8 million people who hold both direct government loans and government-backed private loans to consolidate their debt into one government loan. the switch would help ours

because the u.s. would essentially be refinancing the private lane at a lower government rate. borrowers could receive a reduction up to .5% in their interest rate. wednesday will be the third day in a row mr. obama has announced an executive action aimed at bypassing congress including a housing refinancing plan and a proposal to train and hire veterans. the switch and emphasis comes in republican opposition to his jobs package which hasn't advanced despite weeks of presidential advocacy. columbia, missouri, a supporter of missouri. jay, hello. >> well, this just shows how liberals are hypocrites and dogs because the president of the united states smokes and it's okay for him but we're not allowed. >> host: what about the ad itself. >> caller: the ad itself just illustrates your hypocrisy. no one complained about the president.

>> host: east jordan, michigan. cathy, supporter. good morning. >> caller: good morning, pedro. i have to say i agree with the having of a sense of humor. i just loved the ad. for the first time we saw a cigarette hanging off the lips of a campaign manager. and the reason i liked it is because smoking is legal. and our personal has been taken away. yet, smokers pay a lot in taxes. for me, it is just a choice in the united states. choices are taken away if other people being that you should not have it. i do not feel that we needed a seat belt law. if i get hurt in an accident,

maybe insurance should not cover it. i do not think that we need a lot. i think that smokers are the part of our society that pay a lot of taxes and are very limited on what they can do. host: aside from the smoking, if campaign ads are meant to send messages, what is the message that you take away from this first advertisement? caller: personally, what i take away from it is that we need to get america back in america's pocket. bring it back to what it was before. that is the message that i got out of it. host: the line that supports others. tampa, florida. rod, go ahead. caller: very funny. i had never seen an advertisement like that before. even his devilish, smug smile

was funny. still, i would not support anyone like that. it felt but -- felt more like humor. so the take-away you get is just that it's humorous. >> caller: the take-away i got from the herman cain overall he's probably marketing his book a lot. i don't think he really feels that he has a chance to win the election and he's probably making some good change, i'm thinking. >> host: the financial times this morning in a piece this morning talking about youth vote especially when it comes to the president's re-election campaign. this is the higher than in the financial times chooses, obama loses magic for young voters and the president's approval rating among people under 30 which was at 75% the week he took office now regularly comes in below 50% according to gallup. charlie cook an influential political forecaster said mr. obama would need young

voters more than ever in 2012 to help offset some of the groups that have been coming even more disillusioned with them as white people -- such as white people over 50 us a young people leave college with huge debt and struggling to find a job, it will take more than policy pronouncements and a slick online messaging to win them over. that's according to larry a political analyst who teaches at the university of virginia, quote, the president can tweet all day and all night and it won't compensate for those baseball problems. so we'll continue on with the idea talking about herman cain's ad and we'll continue on to about 7:40 or so. if you want to get your chances to go in again, we've set aside two lines this morning for those who support herman cain and all others. you can choose the line that best represents you. back to our topic for our remainder of our time for about 10 minutes or so on the first campaign ad from the herman cain campaign bedford, virginia, thank you for waiting first and foremost, a supporter of herman

cain, joseph, good morning. >> caller: good morning, how are you? >> host: fine, thank you. >> caller: i'm not necessarily a herman cain supporter but at this point i would vote anybody before i would vote for obama. the message i get from this is that you guys are a joke, man. i mean, obama got on stage yesterday and gave a speech how students are going to lose their college loans, sick people are going to die and he's trying to scare people -- everybody to death. the guy is a divider. he's not a uniter. you guys want to make big news out of a herman cain commercial when there's serious stuff in this commercial. you should be ashamed of yourself. >> host: we cover herring james aragon here how he tweets in this morning. if i didn't already know his policies it would attract me to him but he's still an expert seeker without a backbone. lafayette, louisiana, edith on our other line. good morning.

>> caller: good morning. yes, thank you for taking my call. please excuse me but i'm very upset this morning over this commercial. i am a cancer survivor. and i have heard herman cain is a cancer survivor also. to be able to put on a commercial like this to make light of the issue of cancer by having his campaign manager smoking in this commercial is despicable. it is totally despicable. there's nothing funny about it or humorous about it and for the people that called in earlier that thought the commercial was funny and think we have a right to smoke in this country. we do have the right to kill ourselves but for somebody to glorify that doesn't make any sense. anybody who's been through cancer is not going to find this cute or find it funny. cancer is a serious thing and this is -- this is totally ridiculous and for him to have no sensitivity regarding this issue -- this man -- he cannot be serious. he cannot be serious.

how can he be pro-life if he's going to pushing cigarettes to do a commercial like this is going to give the impression that, okay, we have validation. this is okay. it's okay to smoke. it's really not a bad thing. lung cancer is nothing to make fun of. it's nothing to joke about. this is incredible. it's despicable. he owes the american people an apology for this. >> host: front page story on the "usa today" about the middle class income. the author is saying income is shifting to the top tier of households especially those in the top 5%. the top 5% earn more than $181,000 annually. in 2010, the top one-fifth of u.s. households collected 53.3 of all the nation's income. that's up from 49.9% in 2006. the lowest one-fifth of households collected just 3.3% of the nation's income. that's down from 3.4% in 2006. that leaves three-fifths of households in between a common

definition of a broad middle class -- they collected 43.3 of income last year that's down from 46.7% in 2006. analysts call it middle class squeeze. lou, good morning. >> caller: good morning. i support herman cain. i'm not a republican or a democrat. i've been voting libertarian -- >> host: paul, are you there. >> caller: yes. >> host: you got to stop listening to the television. just go ahead with your thought. >> caller: i support herman cain. now, c-span, i hope you're not going to cut me off. i've been voting libertarian for the mid-'90s. this country is in a big problem. we have a federal government that's totally, totally out of control. the thomas jefferson said it best, government is evil. government is corrupt. that's why limited government works best.

>> host: the message of the ad? >> caller: as far as the ad is concerned i don't really have a problem with it. it was different, okay? but you know what? i don't really care about these ads with those pompous politicians all dressed up looking nice and sharp. where has it gotten us, okay? we had the evil pollists the evil dem is the -- >> host: florida, a viewer in florida, i think the message of this might be that he wants to get government out of american lives and end some of the silly political correctness. lynn, good morning. >> caller: good morning, i do like the ad. i do think that it emphasizes that he's an outsider. just what the other caller said as far as the style of it goes, i think that everybody in the beltway is expecting the politicians to spend all their

money on these commercials and this is a very rough raw style and it lets us know that he's frugal with his money. and i don't think it's negative or insulting. i don't drink but when i see people drinking it doesn't offend me. so obama smoked and people die from cancer who have never smoked. so obama he's taxed our smoking, our tanning, upped our taxes in many, many ways that the public just doesn't know about. now, as far as the student loan thing goes, i don't know why obama keeps doing this but he keeps dragging up old ideas that are already in place. i did that with my student loan six years ago. >> host: john edwards in the news this morning. kim writing out of greensboro, north carolina, in the pages of the "new york times" today. it talks about his campaign finance case saying that lawyers for mr. edwards will head to federal court to ask the judge

to dismiss the charges that he violated campaign finance laws that he used money to -- closure >> host: tampa, florida, on our others line, gail? >> caller: i'm just calling to say that i think the ad is ridiculous. and that the republicans are just using herman cain behind him just like they did with the

black man that was the head of the rn and when they're finished with him they are just going to throw him away. thank you. >> host: columbus, mississippi, on our supporters line. peter, good morning. >> caller: yes. the reason i'm calling -- i'm a world war ii veteran. i'm 91 years old. and a lot of senior citizens are mad about the last three years. we didn't get any income increase in social security because -- everything kept going up. but the reason -- one of the other reasons i'd like -- myself and a lot of others don't understand that 9-9-9. and furthermore, i would like to see mr. cain and newt gingrich, he's got the knowledge of washington. if cain is elected president, walk in any traps like carter did. >> host: and your thoughts -- and i don't know if you made

them on the campaign ad on itself. what do you think about it? >> caller: repeat that, please. >> host: what are your thoughts on the campaign ad itself? >> caller: i think he's doing a great job. i like the way he talks and everything. >> host: the new york poll times it was a poll that was taken -- here's the headline that the story that came out of it. a new poll finds the stress in government 7 in 10 americans think the policies of congressional republicans favor the rich. two-thirds object to the tax cuts for corporations and a similar number refer increasing incomes on millionaires on tuesday the congressional budget office released a new study concluding that income distopposing had become much more uneven in the last three decades a report that could figure prominently on a battle to handle the economy and rein in the federal debt. yes. >> caller: herman cain and his campaign manager are pandering to a certain type of voter.

the dumbing down of america although i wish you would show the other herman cain ad. it shows three guys, one was black and they were all hitting each other like the three stooges. >> host: from twitter this morning, anthony napoli has this to say about the ad. cain ad a flop people make it about smoking. cane ad a hit. it's about cain name recognition. this is calvin, go ahead. >> caller: thank you. i support the commercial. i think it's perfect for the republican party. they need someone like him to run because that would definitely give obama the presidency for another wonderful four years. >> host: why is the commercial perfect. >> caller: pardon me? >> host: why is the commercial

perfect. >> caller: apparently he was the campaign manager -- the white fellow? >> host: uh-huh. >> caller: okay. i can almost smell his breath from my television set which is amazing to me. but anyway i think he ought to pick sarah palin to run. i think that's a perfect outfit for the t-bagging republicans. >> host: one more bit of tape to show you. this is president obama who sat across from jay leno yesterday. here's a portion of that interview. >> i'm going to wait until everybody is voted off the island. l[laughter] [applause] >> once they narrow it down to one or two i'll start paying attention. >> host: that from last night. harrisville, pennsylvania, joe, a supporter, go ahead. >> caller: yeah. everybody i talked to around here loved that ad. number 1, it isn't just about smoking. he says at the end we're going to put united back in the united

states. that means we should be united in respecting the rights of other people. we're sick and tired of hollywood and congress and michelle obama telling us what we can eat, what we can drive, where we should go. we love the ad even though we're not total supporters we're on the fence right now but he had a message for middle america that most of us really love and they can take their elite ideas and you know what. [laughter] >> host: hammond, indiana, you are next. kathleen on our other line. >> caller: good morning. a couple things real quick. number 1, everybody is missing one real major important point about this ad. if you notice at the bottom of the ad it says friends of herman cain. well, guess who those friends

happen to be? it is the koch brothers, okay? the koch brothers, the entity that has taken over and is buying government. >> host: how do you know -- >> caller: pardon me? >> host: how do you know for sure. >> caller: it's already been proven the koch brothers are the main funders of herman cain, okay? it's public record. well, they try to keep it nonpublic but it's -- it is very well-known that the koch brothers are the ones behind herman cain. now, i hear all these people -- i mean, i don't understand where this ignorance is coming from. if you listen very closely and listen to these people like herman cain and the two-faced phony baloney mitt romney, you know, seniors, we need to get this, mitt romney, rick perry

are the first ones that are going to get into that office and they will be the first ones to say, hey, senior citizens, sorry, we can't help you anymore. you're on your own. don't look to government to help you anymore. sorry. medicare, medicaid -- sorry, government -- sorry, people, government is not going to help you. all -- you people have got to be really paying attention. you're going to have -- here's another one, ask him why congress has an 86% disapproval rating. because republicans are not about to help me, a 99 percenter or my poor grandchildren that i'm helping to support them. >> host: this is salon.com this morning talking about the ad giving some perspective on it.

the headline is herman cain behalfling weird smoking ad but it's in the second page that you want to focus on. the author says, this is steve corniac saying that the intent of the smoking shot is unclear but it could represent cain's defiant run as head of the national restaurant association during which time he aligned with the lobbying group with the tobacco industry. as the "new york times" report in a profile that ran over the weekend the restaurant association opposed higher taxes on cigarettes and the use of federal money to prosecute cigarette makers for fraud. matt myers president of tobacco-free kids had little to do with the restaurant business. there's more on salon.com. two more calls. san francisco, california for our line who supports others, john, good morning? >> caller: good morning. the ad really upset me. i had a daughter that died from

lung cancer from smoking. but i don't want a president that's going to run ad like that. it's unsensitive for family members. >> host: one more call of vero beach, california, john. >> caller: good morning. yeah i'm a supporter of herman cain. i'm not really sure he will win. he's doing pretty good in the polls but this is another typical reason of why we shouldn't -- but, you know, just not listen to these people. i mean, we're picking apart the smoking ad. we're not concentrating on the issues. what he has to offer. i'm a white american. i support him -- i've been listening to him on radio for years. the man is a true american. and the people -- like your

cancer smoker lady, well, you know, we don't have to have the government or mothers or fathers to tell us that smoking is bad for us. anything you put in your body, your lungs is bad other than air. the cancer smoker who picked apart the ad, you know, the man has -- he has some good qualities and he's a true american. that's what we should try to concentrate on. i'm a white american. he's black. that has nothing to do with me. but these issues that we're picking apart, they're the same issues that people -- 'cause he's black nobody wants to say, oh, you're racist or whatever. no, they have and try and find something else and we're picking apart a smoking ad. this is ridiculous. >> coming up at 1:00 eastern we'll have more live coverage today at capitol hill. the head of the small business administration karen mills will be testifying about her agency's

loan programs. and that's live in just over half hour on c-span2. until then, conversation from this morning's "washington journal" about members of congress and their financial investments. >> host: it is wednesday at 9:15 and what we do every week at this time we take a spotlight on magazines in which we take an article and kind of talk with a guest about it. this week our guest megan mcardle. you can find the piece on the atlantic.com if you want to read it for yourself. but megan>> guest: so in the 90s there was a professor who did a study where he actually basically -- it was a study of kind of observational data. he looked at what the disclosure forms the members of congress have to file and he tracked those things with -- things that

had happened to companies they owned. bensen bought some dairy companies before regulations that affected what they were doing in terms of prices and so forth. and so there was a -- a business professor in the south who saw this. it made sort of splash on one of those news shows and like 60 minutes-type shows he said and so he was watching and he thought that's not right. you need to do this right and you need to look and see if as a whole does congress outperform the market and so it took him forever. he had to get all these disclosure forms. this is back before really the internet and they weren't really available and so he actually goes through. he gets a team together including his wife and biggest into exactly -- puts a data set together and do they outperform a standard kind of portfolio. the first one was published in 2004 and that was the senate and

the answer was they outperform by about 30% which is huge. it doesn't sound like that much. but first of all, this is the '90s. so we're talking about, you know, anyone who can breathe and like hit a key on a keyboard can make 20% in the market and so to outdo that is enormous. then he followed up this year with a study on the house where he actually shows that indeed the senate didn't overperform quite as well. they got about 6% but that's still an enormous -- an enormous overperformance compared to the rest of the market. >> host: before we get too far. how do we define insider trading? >> guest: this is interesting. it's a little more complicated than that. for example, if you work for a publicly traded company and you are aware that, say your new product line isn't doing so well, and you are under the original law guilty of insider

crime and this became a crime in the '30s before that it was something people wasn't to get in the action. they didn't really think -- they expected everyone was crooks. and so that's definitely insider trading. on the other hand, what's definitely not insider trading if you are talking about this with another employee in the men's room of a movie theater and i think it's empty but it turns out someone is in the stall and they overhear you and they run out and trade that's totally legal and there's a gray area in between and that's where actually a lot of the controversy comes. so, for example, there was a printer in the '70s, i think, who -- he had -- when they print prospectus for murder they try to hide the identity until literally the press is run. but he -- but they have to prepare the prospectus and he deduced what the companies were and he went out and traded on them and the supreme court ruled this is not insider trading

because he didn't have a fiduciary to hold this information private. however, a few years later a fellow named r. foster winans who was writing heard on the street columns for the "wall street journal" was essentially leaking what was going to be in the column to traders who would trade on that information before it ran. and he was also done for insider trading and in this case they ruled against him. and what they said was he had misappropriated information that belonged to his employer you might have actually gotten the same issue but they didn't try for that particular -- that particular crime. they said he misappropriated information and this is really different from a fraud on the market because as one law professor that i actually talked about this implies this is perfectly legal for the "wall street journal" to front-run its own trades, right? >> host: uh-huh. >> guest: if you're talking about confidence which is what a lot of people do. they say well, it undermines confidence in the fairness of the market, well, would it

somehow less undermine confidence of the brookings -- beknew they went out before they printed anything and traded in those stocks? of course not. the law is very complicated. how does this apply to congress? the problem with getting congress for insider trading is who do they have -- who employs them? who would they actually be misappropriating this information? and they're not actually -- you can see say morally they're employees of the united states people and i think i agree. >> host: uh-huh. >> guest: and law professor has actually argued this that they have a fiduciary and it's not clear. it's not clear that they would actually violate the rules we currently have surrounding insider trading. >> host: our guest with us until 10:00 to talk about this topic and if you want to ask her questions you can do so our line.

has a member of congress ever been found guilty of insider trading? >> guest: no. as far as i was able to scanner, they've never been convicted of it. no one has ever gone after a congressman for insider trading and sort of anecdotally i tried to talk to people who prosecute these cases. i did not get a lot of interest in talking to a journalist about it which i think to means there's not a lot of interest in pursuing the issue because it's not only, i think, because it's your boss who wants to go after your boss for insider trading ultimately for a lot of these attorneys, right, it's the u.s. attorneys, but also because it's sort of inherently political. it's very difficult to -- you know, who get targeted by ethics investigations and so forth. it's not always true. there are really egregious cases that gets gone after no matter whose party it is but the boundary cases often get prosecuted when your party loses control and so i don't think a lot of prosecutors want to kind

of dive into that. >> host: what kind of information would members of congress have if it were happening to make these kind of decisions. >> guest: if you think about how many decisions congress is making that could affect the cases. the lloyd benson cases it mainly have been convenient although it may not have been investigated. if you're a big dairy processor, knowing what the controlled price of milk is going to be or knowing how -- are they going to lift the subsidies in the next -- in the next farm bill, is the highway bill going to go through land that's owned by, you know, a company that could sell it for a lot of money, how are you going to regulate various products? you know, congress can and has in the past put companies almost out of business by changing the regulations that surround what they do. pollution regulations, cafe standards for automakers, all of

those things have enormous impact on companies. so it would be relatively easy if there were no controls on it and if you didn't really have any sort of compunction about it. it would be relatively easy to make money by knowing what regulations you have. >> host: first call for her is fort walton beach, florida, a republican line. mike, good morning. >> caller: good morning. how are you? >> guest: i'm fine, thanks. how are you. >> caller: outstanding. a true professional you are. i want to make a point i think the problem that we have in our history when the executive branch and the legislative branch have run amuck in corruption which i think has actually happened and you'll never get anybody in congress because they have friends, families that do investing for them and then it all gets run through different things that's never going to happen but in our history the media and the newspapers used to be the ones that had the power of another

check and balance to where they could inform the public of the culture of corruption and such. but what we have now is, i think, the media is corrupt as well. because if you look at big business media and who they're in cahoots with as well look at the martha stewart case. that case was just a pea pod and they busted her on telephone calls and such and that and the media covered that 24/7. >> host: caller, thanks. >> guest: there's a lot there. i think one of the big issues is that -- the old latin saying, who watches the watcher and who guards the guardians. and the fact is congress is in charge of regulating itself largely because of the dangers of having congressmen subject to kind of executive oversight or so forth. law enforcement is in an executive function. it's not to say they never are subject to the law.

they absolutely are. but having someone else watch them is problematic and so they watch themselves and that is going to lead -- as with any group that's self-regulates. doctors have this problem. police have this problem. journalists have this problem as the caller says is that groups that self-regulate, you don't want to layer yourself with onerous disclosure regulations when you know you're doing nothing wrong. >> host: delray beach, florida, on our democrats line, keith, go ahead. keith, are you there? keith, one more time before we move on. >> caller: are you talking to me? >> host: yeah, go ahead. >> caller: okay. it's debbie, and i had a question regarding the recent solar company with nancy pelosi's, i guess, brother-in-law and i was wondering if maybe that was being investigated. and also do you consider lobbying insider trading and

thirdly, countrywide loans if a congress person gets a sweetheart deal through congress. >> guest: these are three separate questions and i think the first question about pelosi's brother-in-law really -- illustrates the limits of this. even if you required congress to divest themselves of all their stocks, they would still have family and friends, people they love who, you know, if mom has a family farm and sells cows and sells milk you're going to care about dairy regulations in a way more than someone who doesn't have a direct financial stake in their family. you can't get rid of that. you can't require nancy pelosi not to have brother-in-laws who make investments. you know, on lobbying, it's a complicated question and i think certainly -- but a little bit outside the scope of this article which pertains directly to the question of is something that is a crime for everyone else not a crime for congress people? you know, more broadly we can

catch people who have their brother -- it's actually very common for people try to evade regulations by having family members trade for them and they do get caught. there's a recent case of an fda employee who was policing these trades through family members in china. they still caught him and it's harder than you think to get away with it consistently because we now have computer programs that pick these things out if someone is looking. you know, so -- >> host: i have copy of a financial statement that's required by congress. couldn't you say that members of congress have to fill this out then you could find those trends if people are getting benefits from trading? >> guest: well, sort of. they do have to fill out financial disclosure forms and i do not want to imply that most members of congress are not honest about filling these out. i have no reason to think otherwise but if you look at a case like charlie rangel who had all sorts of interests he wasn't disclosing either on these forms or to the irs, this went on for

years where he had tax income from rental housing in costa rica that he wasn't reporting. he had all sorts of sweetheart deals with developers who were giving him rent-controlled appointments from one developer basically which is three more than what you're supposed to have in the city of new york for your own use. it's really hazard to catch because no one is auditing these forms and lots of cases, for example, two of the professors that i talked to -- interestingly people have done follow-up and they underperform the market a little bit. they're kind of like grandma it's still in connection whether or not this is actually happening or whether maybe the financial disclosure forms on these studies have maybe made people think twice about doing this. you don't know but what they said to me there's not a space to report short selling and if you think of all the regulations that could adversely affect a company short selling is the

obvious thing to do. you've found out we just discontinued a big bombing of boeing. >> host: according to open secrets when it comes to disclosure forms the source and amounts have to be reported $200 but not the amount of a spouse's income over $1,000. a cap on outside income. that was $24,000 in 2005. when it comes to assets worth more than $1,000 at the end of the calendar year, the value type and amount of income produced more than $200 and purchases and sales in change of the amounting of more than $1,000 along with the date and the amount of transaction. what other information could be put on these forms that might be of interest of those who would -- >> guest: well, in short sales would be a big one but more broadly the question of auditing is the real issue is that these forms are only reported retrospectively so you only get the data years after it happened

at which point it's really old knows, who care. so charlie rangel traded some stock a few years ago. it's harder to get the energy to do these cases. that was a hypothetical, by the way, i'm not adding new charges to charlie rangel's ethics investigation but so the audit i think -- the frequency of reporting insiders who trade in their own stock have to report these things much more like -- much more closer to real time. and it seems to me reasonable to at the very least require congress to do that but i actually think when you think about not just the possibility for insider trading when you think about all of the conflicts of interest and i think all of us know no matter how hard you try to not think about conflicts of interest, it's difficult to divorce yourself entirely. how easy is it to cancel a fighter if you own a big chunk of boeing stock? and so maybe we should think about having congressmen put their assets into blind trusts. >> host: ft. knox, kentucky,

peter, independent line. >> caller: yes, good morning. >> host: go ahead, sir. >> caller: yes, very quickly. ma'am, is there any way possible that your organization and yourself could do some investigating into the history of congressional conflict of interest since the vietnam era. i'm from that period of time when it was a known fact out on the street that many of your members of congress and their staff members had what was called stock holdings in defense contract companies that were engaged in contractual operations in vietnam. and since then, it's another source of information for these congressmen to quickly move along. is also because they have connections with these lobbyists of these companies, the lobbyists -- who's not to say

they're bringing information to them about potential contracts that are coming up in war zones. unfortunately, that would be known as war profiteering. to get to my question, will you and your organization conduct a series which covers congressional connections with lobbyists of these corporations? >> host: we'll leave it there? >> guest: i think people do do these sorts of investigations. the information available. you can see at least to the extent that they put it on their disclosure forms who owned what. but as i say, this really goes back to the core problem which is unless we have them divest all of their assets so that they don't know what's in the blind trust, there's always going to be conflicts of interest if there isn't defense contracts it could well be agribusiness or many of the other things but the fact that congress affects every day. >> host: a view asks how about a disclosure for the supremes.

that's in quote. i suppose he means the supreme court courts. is this if congress -- >> guest: i assume what he's referring to is clarence thomas has been widely sort of -- there have been a lot of people suggesting that clarence thomas should recuse himself because his wife has been an active campaigner against health care. i think that's a little bit of a stretch in a bunch of ways. it's not really shocking that clarence thomas' wife is campaigning against health care. she was an activist before they got married. and it's not clear -- she doesn't necessarily do worse if health care passes, right? if it stays live, it's not like she goes that way. she gets to raise more money to fight against it so there's not a conflict of interest the way there is in a corporate form.

>> host: good morning, clay, a republican line. >> caller: i have a question and my question is, do we know what industry that congress is actually exceeding in? >> guest: i'm not sure what the -- what the question is there. >> caller: well, it was my understanding that congress members in the market exceed 6% on average. >> guest: they don't look at that. what they look at is -- there is some occasion from some of the people who have done follow-up work on this that it may be a lot of -- a few big traders who did really well and then everyone else kind of goes along making about what the rest of us do, which is not much right now. but they don't look at other individual industries. what they look at do you outperform the market systematically? i mean, at this point in america, congress regulates all of it. so if you're willing to inside trade on one you're willing to inside trade on the other.

>> host: for megan mcardle, arkansas, woodie? >> caller: good morning, megan. >> guest: morning. i was just wondering, we're talking about insider trading in congress and people talking about the supreme court. i think it goes all the way to the white house. a few years ago when george w. bush was in office, a lot of people don't realize but he met with the president of fannie mae with the student loans and they met with an executive order, i was wondering did you investigate that? >> guest: the top executive branch officials who have kind of financial stakes in this -- they put their money in blind trusts and so, for example, there was actually a big issue with this with hank paulson who is the secretary of treasury came in in the last years of the bush administration. and at the time, before the financial crisis he was the president of goldman sachs before he became treasury

secretary and he had a huge chunk of goldman stock that he had to sell and put the assets in a blind trust. at the time people were saying well -- and he had to actually give up some part of it that was deferred compensation and people were saying, wow, this is a huge sacrifice that he has to make well, it turned out because then the market and financial stocks crashed, he actually did very well out of putting his assets in a blind trust but in general this is not an issue with the president with the secretary of the treasury. it is an issue occasionally with people lower down. as i said, with the fda official who was trading based on his knowledge about drug approvals. it can happen but they do watch it and those people definitely are subject to prosecution in the case they are discovered. >> host: for those that gets looked at for this is this top tier or is it the staff of these congressmen that gets looked at as well as far as their trading habits? >> guest: well, the staffs are actually -- they are subject to insider trading laws. so, you know, a lot of insider

trading isn't detected by financial disclosure. it's detected because the sec can see patterns. what they do is various agencies not just the sec look at what's happening in the market. do i see statistically abnormal patterns in trading and once they see those patterns they investigate and sometimes it's just some dude got lucky. but other times if it happens over and over again and that's, as i understand it, how they caught the fda guys. that there were these statistically abnormal patterns right before every drug approval that he knew about. >> host: the ethics and government act of 1978 requires members of congress, candidates for federal office, senior congressional staff, nominees for executive branch positions, cabinet members, the president the vice president, the supreme court justices to file annual reports disclosing their personal finances. you mentioned representative luis slaughter in this story. why is that? >> guest: because she has something called the stock act which is, i think, for a lot of

people who are interested in this issue it doesn't go far enough but it tightens the disclosure requirements. it would make people file more frequently. and it's gone nowhere. it hasn't even come up for a vote. it's been actually kind of remarkably -- people have shown remarkably little interest in this given i think how bad it makes congress looks. if it were me and i weren't doing any insider trading, yes, it's a pain. you have to file quarterly reports but i have to file quarterly estimated taxes now on my freelancing column and it's not that onerous and the suggestion that this is happening is a real black eye for congress but they have not so far been interested in fixing it. >> host: brian is on our republican line from zanesville, ohio. >> caller: good morning. >> guest: good morning. >> caller: my question is this, if i receive insider information -- let's say, for instance, i have a buddy who's an executive at a corporation, he lets me know that the previous quarter for their

company earnings and revenue are well below the street's expectations, i know i can't act on that information immediately. but is there a period of time that i have to wait before i can dump that stock? is it a month? is it a year? when can i within the parameters of the law do something with that stock? >> guest: well, unfortunately, what you would have to do is wait until have released those earnings and so you cannot benefit from that information because you know that it came from someone who had an obligation not to disclose it. >> host: this is part of our regular spotlight on magazine series which we do every wednesday at 9:15. the atlantic.com is where you can find our guest's article and other articles she has written. capital gains is the cover. are members of congress guilty of insider trading and does it matter? what interests you about writing this story? why did you write it?

>> guest: for starters, just because i'd seen these studies come out and nothing happened. you know, like three libertarian blogs covered them. and that was about the extent, you know, the wall street will run a feature and the issue just dies and it strikes me not because i'm particularly worried about fraud on the market. because, in fact, insider trading if you really think about it it's not obvious there's a crime. if i buy a stock from you and you're willing to sell it at that price. i haven't defrauded you you were going to sell it obviously other people who buy it got a lower price but it's hard to identify who you've hurt. it's not the problem with this. the problem with this is that there is a suggestion that our top officials are enriching themselves by using the trust that we've given them, the knowledge about future legislation that they're using that to make money for themselves that the public doesn't know about. and that's a huge issue.

i mean, trust in congress and approval of congress is at record low levels. what i ultimately saw when i wrote this was that the reason -- this didn't outrage us that we already figured it was happening. that we trust congress so little that this doesn't even surprise you and that is truly corrosive. and that's why i think that congress should be acting to make themselves kind of above ra-approach because our public trust is really an important institution and you might say the stock in congress is at an incredibly low level. >> host: pikesville, indiana, charles, hello. >> caller: i heard you mentioned republicans and i heard everybody so much on the law of checks and balances. megan, until you really understand that it's the 80% of the big people who are getting away with all this corruption,

yet, you guys do your -- you know, your inquiries and you guys catch some normal people doing, you know, some of the crimes like it's about the people who are in charge of this country and they're not just going to let, you know, people who -- they're not going to let somebody come in and, you know, inspect them and just kind of get caught, you know -- i mean, the people who are in charge right now are in the power and are the people who haven't got caught and they will not let people open the doors and it's going to take a lot for even your guys' organization or anybody -- i respect what you guys are doing and i know you guys are trying but the government is not just going to let somebody come in and, you know, inspect their books. and basically it's just the same old -- just like you said, yep, you hear that story about somebody gets caught and it goes away and it's always going to be like that. some guy said yep we're going to catch them and nobody will hear my voice again and it's the same

old story and i know it's trying and it's hard for us who sit at home and hear this. >> host: we'll let our guest respond. >> guest: i think the outrage is real and justified. the problem is not that this has definitely happened is that we don't know and we don't have good ways to verify that it hasn't. i don't think that is a counsel of despair. the fact is we have don't more disclosure. we have don't more oversight of congress. it erodes when the legislators are not being accountable. i would say i think it's true that they're not doing a good job of watching themselves. but i also think they're not doing a good job of watching themselves because we're not forcing them to do it. and it can be done. there has been efforts in the past that have forced more disclosure, more transparency, less sort of old boys club on various levels of government. and that could happen again but we have to get, you know -- voters have to get exorcised

about this issue. >> host: long island, new york, anthony, democrats line. >> caller: thank you very much, megan, you're a very articulate woman and i commend for you putting a light on this country. power corrupts, absolute power corrupts absolutely and this is precisely why our elected officials will spend so much money for a job that pays so little and take so much of their time and it seems as though the rampant corruption is at every level of government not just on congress. here on long island i know that the village of quag the mayor got busted for corruption. his wife is the judge and his son is the smokes liaison for the chief of police. my county executive was in collusion with the president of the united states and the president handed out a pardon to a man who stole $30 million from a h.u.d. program to help the poor and it just seems our government has become a kangaroo government in that it does conduct itself through means of

corruption. there is no honesty anymore in government. it's almost a wink and a nod and dick cheney -- i mean, he started a war that benefited the company that he was a part of a week prior or, you know, a month prior coming into the white house as our vice president -- >> host: caller, do you have a question for our guest? >> caller: jeez, megan has got a handle on it and i commend her for her efforts and she will carrying on informing the voters without an educated electorate we're in trouble. >> host: we'll leave it there. >> guest: well, thank you. i think that is ultimately -- you know, there's two parts of this. i don't think that all congressmen are corrupt or all people who go in office looking to enrich themselves. i think actually more of it is that the temptation is there. and that some people succumb. and how you prevent people from succumbing, you make it really difficult and the way you do it is on the one light sunlight, on the other hand voters who go out who demand congress take action when that information is

exposed. >> host: when you were talking about the reporting of insider -- one line says one possibility is that insider trading has gotten harder. >> guest: in a lot of ways. first of all, it's out there. now anyone who wants to you can go to the web and get this database. the sunlight foundation has made sure that it's on the web for free for anyone who wants to look at these forms which means that if people get interested, they can be watching. they can be watching the watchers. they can be the guardians here. so there's more disclosure. there's more attention on disclosure and it's easier for people to kind of freelance oversight as it were. it's also true that the computer programs at the sec uses have gotten better at detecting this and so it's likely to come out. but it's quite possible what you had in the '90s and i think we don't know at this point we'll never really know but that original study uncovered was a few bad apples. in fact, you looked alt some of

the traits when they were described to mother jones in the mid-'90s. they said newt gingrich while he -- he helped kill an amendment to a contract that would have hurt boeing who eventually got this contract, well, at the time he was in the minority. this is before, you know, the contract with america. he didn't know that boeing was going to get the contract because it hadn't been awarded he killed the amendment for other reasons. and some do look bad and maybe there are a couple of bad apples and they either left the senate or they got scared because the disclosure forms are out there on the internet and there's people looking at them. it's becoming news. and then maybe it's time to stop. >> host: we have a republican from wells, beach, maine. >> caller: yes, i have one question to ask. don't you think all you politicians are crooked? you all got money. i haven't seen a -- >> guest: i tend to think people -- there's not as much

variation in sort of the goodness and badness of people as we usually think. that it's not usually a question of evil people. it's a question of how do you put people in situations where they're tempted and it's relatively easy to go astri. i don't want to deny the existence of serial killers but the majority of people are people who are kind of greedy and they kind of get tempted they know aren't quite right. and, you know, i don't think that they're all terrible or corrupt. i don't think -- i think the problem is that we don't have an institution which looks like it's very good at preventing and revealing corruption. it takes a long time for these ethics investigations to happen. nothing much seems to happen when they're done. who even remembers the last verdict with the ethics investigation, right? and so it seems like it's kind of a humiliating experience as people go through them but there's not a real serious, you know, kind of with and ensures

justice supplied with the kinds of violations that people do not routinely get away with. .. >> we're leaving washington journal. you can see this segment in its entirety and our web site c-span.org. go to the c-span video library. we are heading to capitol hill

to hear the house small business committee hearing testimony from karen mills, she is talking about her agency's loan program this afternoon. we will also hear from representatives of credit unions, community banks and other things that invest in small business. we want to let you know president obama just finished speaking to college students at the university of colorado in denver. he talked about a college affordability initiative. we will bring that to you after this hearing. >> good afternoon. we call a hearing to order. today. the most important thing this committee can do is create an environment in which entrepreneurship is fostered by economic recovery. there are many aspects in creating this environment. we will focus on one of those which is access to capital. the committee has heard on multiple occasions through small business that cannot get funds to operate and expand their business. at the same time banks testified

before the committee that they have funds available to lend. small business administration overseas a number of programs working in conjunction with private sector partners to bridge this gap between needs and availability of capital. statistics show volume in its financing programs has increased. these efforts have been supplemented by promises from banks to raise lending to small businesses. it remains an open question whether these are sufficient to provide necessary funds for small business to expand and create jobs. the programs operate with low guarantees issued by the federal government. congress determined at the risk to taxpayers are outweighed by benefits providing capital to small business. irrespective of that determination this committee has a responsibility to ensure the desire to get money in the hands of small business has not come at the expense of exercising due diligence on making loans especially when taxpayers are on the hook for big government bad decisions. therefore the committee needs to know partners are complying with

requirements of small business act and not issuing loans with document deficiencies the inspector general recently found. ultimately the committee needs to understand whether the programs are currently constitute enabling small business to create jobs. if not the committee will meet to examine legislative changes to promote access to capital and to be placing the taxpayer at risk. with that i yield to the ranking member for opening statement. >> in the last year the nation's economy experienced steady private sector job creation. it has not been enough to have a sizable impact on the unemployment rate which remains high at 9.1%. the reality is we still have a long road ahead with millions of americans seeking work that cannot find it. the solution is small business. in every previous downturn it

has been small business that created product and services to lead us forward. one half of the company's in the 2009 fortune 500 list were launched during a recession or a bear market with 50% of the firms on the 2000 list of america's fastest growing companies. whether it is silicon valley's or mom-and-pop it is clear small-businesses are the nation's job creators. to continue to play this traditional job creating role it is essential they are able to access capital. doing so provide fuel for innovation and economic expansion across the spectrum of entrepreneurship. it enables unemployed individuals to start their own business, helped domestically companies to sell their goods in foreign markets and allow high tech to reinvest in r&d.

small-businesses face real challenges in capital markets. lending conditions and credit standards, companies have not recovered from the financial crisis and recent recession. it has left many without the assets to power against lower revenues in years past. as a result business owners have fewer options to affordable financing. lending is always critical to this point. several provisions crafted in the recovery act came forward boosted fda lending. raising guarantees and qualities on sb a loans demand what is key for the record spanning year they experienced with records of all volume of $20 billion. an increase of 50%. is clear these policies worked. impressive growth in the fdic

programs as well as other groups in the 504 program confirmed the important role this initiative played in the capital markets. with this growth came other challenges in the portfolio. the average loan grew by 40% while there were percentage declines in small start ups. during economic downturns, special importance on the other agencies' costs $75,000 to launch a new enterprise. with an average seven or eight loans eyes, $365,000, five times the cost, we must make sure the agency is not forsaking its rules solely to set records. during today's hearing i am hopeful we will not just talk about performance but focus on how we can expand access to capital for all business especially those at the earliest stage of the business cycle.

start up, particularly those in the high-growth sectors remain essential to our economic recovery and it is critical we expand their ability to secure financing. now is not the time to constrain access to capital and problems like those at fda are critical to creating jobs. getting financing in the hands of would-be entrepreneurs has never been so important and doing so is not just critical to reducing unemployment but also to increasing tax revenue and decreasing the nation's debt. i know the next few months are critical in this regard and i will focus on making sure small-businesses are not dealt a bad hand when the committee makes its final supercommittee makes its final recommendation. on that note i would like to thank the witnesses for taking their time to be here. i am interested in hearing their thoughts on how to make a

entrepreneur's capital needs to create the jobs we badly need. >> thank you. as mentioned in my opening statement our first witness is karen mills who is administrator of the small business administration. she has been the sba administrator since 2009 and is no stranger to this committee. prior to joining the small business administration miss mills was an investor in small business with the struggles business have in obtaining capital. very familiar to you. thank you for being here and appreciate you coming in. >> thank you very much, chairman graves and ranking member velazquez and members of the committee. thank you for asking me to testify and access to capital for small business. the fiscal year that just closed, the sba hit an all-time record in its 60 year history. we supported over $30 billion in lending to 60,000 small businesses and brought back 1200 lenders, mostly community banks

and credit unions who have not made an sba loan since 2007 and had a record year in investment company programs with $2.6 billion in overall financing. this is the zero subsidy program targeting high growth small-businesses, the main driver of new jobs. today sba's lending volumes are at pre recession levels. it is our agency's continued obligation to identify and fill gaps where the market is not working. this is particularly true for low dollar loans and loans to businesses in underserved communities. as i describe these efforts i want to be sure the committee understands that all of the sba programs and initiatives have been implemented in accordance with our authority as provided by this congress. so first, low dollar loans.

under 150,000 have not come back. we found three root causes. they have a high cost of processing relative to their size so banks don't want to make them. to answers that we streamlined and simplified paperwork on the close to incentivize lenders to step up. we need more points of access to get small loans to entrepreneurs in underserve markets. that is why we develop community advantage to let community-based lenders with proven track record and historically low default rates make 7 a loans for the first time. surge, when many of the large banks withdrew from lending during the recession and the credit crunch in october of 2008 small loans to small-businesses were very hard hit. that is why we have secured $20 billion in additional commitments over the next three years from 13 of our largest

banks, many of them will focus on underserve markets. i also want to be sure the committee fully understands the facts about loan performance and subsidy costs. loan default rates have begun to fall. they are not rising. loans made in the past three years are actually performing significantly better than the cohorts of 2005-2006-2007. as i testified before we are also focused on lender oversight and elimination of fraud. the waste and abuse through a three pronged approach. we look at up front eligibility to make sure the loans are flowing to the intended recipients and continued monitoring and oversight of our lending partners and finally we enforce -- we focus on enforcement efforts to pursue fraud and bad actors. my commitment is we will

continue to expand access to capital while protecting taxpayer dollars as we embark on another critical year in sba lending. thank you very much. >> thank you. we will turn to mr. kaufman for opening questions. >> thank you. chairman, secretary mills, since bank loans are always a small percentage of overall small-business lending, what steps are you taking to encourage private small-business lending? >> as you heard me say earlier, we have as you described, on a good day, a small portion of the market may be 10% of the market so the entire market, the conventional market for small business lending needs to also come back. we went out to are 13 largest

lending partners. all the large banks. we have not come back to lending and other lending. they come back to sba but had not shown enough numbers in conventional lending and asked for increased commitment and promised to work with them to make sure they had access to the demand we see out there. they have committed $20 billion of additional capital in criminal -- >> who are they? >> 13 banks. we can give you the list. it was public. our primary partners. j. p. morgan chase, wells fargo, u.s. bancorp, pnc, huntington bank and the aggregate amount is $20 billion incremental small-business lending over the next three years. >> thank you. secretary mills, do you have any

analysis to determine what sba backed lending would be without redressed fees and higher guarantee? 75% to 80% guarantee supervising banks to mitigate risk? >> we do have evidence and in a chart which was attached to my testimony, you can see what happened. the actual 90% guarantees were ended on december 31st last year. we had a big spike before that happened so we have a recovery dip and we came back to a level fat was significantly above 2010 and also above 2008 levels. it seems to be working. >> i yield back. >> ranking member?

>> thank you. since rates typically rise during economic downturns you might expect to see a rise in lending to such entrepreneurs. however, small dollar loans and loans to start off the line as a percentage of sba lending last fiscal year. does this mean agencies shifting away from making these types of loans and focusing on larger loans? to more mature companies? >> no. the agency believes as you do that there is a gap in small dollar loans and in fact one of the real reasons for the high unemployment right now is we are down 100,000 new business starts. so we have been extremely concerned as i know you have been about the fact the market did not come back. that is why we came out with

this three pronged approach to promote -- >> why is it that last year fda spent $70 million, 84% of your loan subsidies or loans of $1 million or more. by contrast subsidy for loans of $250,000 or less for which there is the greatest need right now with just $1.9 million. does it seem fair that so much money goes to benefit fewer than one in ten? >> we are in complete agreement with your analysis of this problem in that there is a gap in small-business lending. we have continued to focus on that. but the job is not nearly done.

we are -- we have made slight progress over the last year in the smaller loan sizes but there's still a very large gap. >> what do you think it will take so that we can see more loans going to smaller start up businesses? that is where the need is. >> it will take banks coming back to that area. what we have done is try to make it more cost-effective to use an fda loan for a small loan. we tried to bring together large lending partners and get them to focus on it. we tried to bring more points of access to make small loans like our community development financial institutions, give them access to sba lending. we will look at every possible program within our authority to do that.

>> thank you. last week your agency issued final rules to permit wholesale refinancing of commercial real estate in the 504 program. with foreclosure is expected to climb this year, how much will this new refinancing program contribute to the subsidy rate? >> this refinancing program has the authority to pay for itself. it is separate from the subsidy rate. >> so you don't expect to refinancing initiative to contribute to the subsidy rate? >> no. >> that is what we heard before regarding regular financing 504 program. you came back and next year you will require $90 million in subsidies. what would you do for your

agency will do if default on 504 loans begin to exceed the chart to cover the flows? >> this program is authorized to charge additional fees and we will charge the fees necessary. >> it is the same situation we have with the 504 regular program. and when you continue to charge those fees and increased those fees to cover for those losses you could reach a point where you reach the maximum cap allowed by the law. what will you do then? you will have to come back here and ask for subsidies to take over those losses. >> the refinancing program ends a year from now. >> okay.

>> you say a year from now that will end. the same situation we find with the stimulus on the 504. it will expire in december. the loan approval has fallen back to levels not seen since the worst of the credit crunch. why is it that two years after the credit crisis began, fda cannot find a long-term solution to providing meaningful levels of credit? >> the fact that you just stated them are not correct. if you look at the chart next to my testimony you will see that even in the last three quarters we have rebounded to levels that

are at 2008. >> half of all your lending last year occurred in the first quarter when the incentives from the stimulus package were in place. the only reason lending was up as high as it was. every month since those provisions expired we have seen the lowest number of loans that have been issued. by the federal government. >> with respect, i believe the fact are not correct. >> it is not the amount of money lent. it is the amount of loans that have been made. >> the number of loans that we have right now is impacted as you mentioned before by the fact that the decline -- most of the

loans are in no small level. in the previous year those have not come back. >> mr. tipton? >> thank you, mr. chairman and miss mills for being here. appreciate your efforts and everything you do to help small business in the country. listening to your testimony, i would like to get clarification. you mentioned in order to get the banks to start making loans again, you streamlined some paperwork. can you describe the actual cost savings to the bank in the streamlining of that paper work? >> i know we have that but i don't have it here. >> i think we would like to hear that because we often hear government as simple things and

that is rarely the case. in terms of trying to create cost savings because that is a real issue. you also mentioned nonperforming loans are dropping. is that result of improving economy or people simply going bankrupt and no longer on the board? >> our loan portfolio is made up of cohorts that were performing -- that were made in 2005-2006-2007. many of those when you look at our delinquency rates failed in the recession. therefore caused a peak about 14 months ago in august of 2008 of portfolio, overall default rate peaked and now it is improving slowly. >> so the stabilization was basically business went belly up.

>> actually the new loans are defaulting early but they are devolving at a much lower rate measured by from months from inception. the loans from those previous cohorts. we anticipate that the improvements will continue. we no credit scores in the current portfolio of loans made in recent years are much stronger. >> you have mentioned there is the commitment of $20 billion in commitments from larger banks. how much are they down? >> we made the announcement on this three or four weeks ago so probably not very much yet but it is coming. >> looking to your written testimony you gave a tip of the hat to the president with regards to the $467 million stimulus and indicated it was paid for. my concern and a lot of constituents concerns that are

small businesses this is being paid for on the backs of businesses better struggling in terms of increased tax rates. can you speak to that? >> we are talking about the american jobs act. the american jobs act has received very strong support from the small business community because it includes a payroll tax cut which they are very eager to get because it means cash in their pocket right away. as i understand that those specifics have been decided because the bill is in the hands of congress. definitely small businesses are looking for that cash from the payroll tax cut in their pocket. >> do you think small-businesses will be concerned about increased tax rates? i have a letter from jim bartlett, small construction

company in colorado. basic cecil small business and because of a lack of access to capital he taped down his line of credit to zero, went back to the banks try to get that line of credit he actually purchased if you're familiar with construction to grind up rocks to put on roads. try to grow his business and create jobs but because of regulatory compliance the banks wanted to loan the money but could not loan the money. he had to line up is equipment and sell it off and call in 24 employees and tell them they no longer had a job. but under the president's calculations, we both need to pass on the message to a plan that is not paid for. he would have been labeled as rich a couple years ago. do you think it is counterintuitive and counterproductive to be raising taxes on small businesses at

this time? >> if you have another small business like this or he is still available please tell your small-business owner in that situation to get on sba.gov and coming to our office because that is the situation where we can help. one of our jobs and my task before me is to make sure small-businesses are aware that when the bank can't because of regulatory issues, they are guaranteed always and often. >> that is a lot of cleanup we can do in addition to streamlining paperwork. eliminating those regulatory requirements on banks so that they can loan. wouldn't you agree? >> we have sat with banks and i said on a continuous basis with regulators to make sure the guidance they have given small business lending at the top is making its way all the way down

to the regional -- their regional regulators so that we have a consistent set of regulations at the bank and so that they can open their doors to small-businesses and get this money out. >> hope that will happen. my time is expired. thank you. >> miss mills, i am ranking chair of the contract in subcommittee and lastly congressman michael rainey and i had a hearing in los angeles in my area and it was about fda and at that hearing, the ceo of pan american bank testified about his small business lending program. doing the job under communities with all bending -- lending options it is not easy but they are successful. they don't operate a seven day

loan program and said the reason they don't is because you need a team of experts to ensure that they meet requirements and get the sba guarantee. the teams are expensive and not cost-effective for the bank in that if sba find out some requirement isn't met table withdraw the guarantee and the bank's liable for the entire loan. why would teams of experts be necessary to operate an sba 7 day loan and ease the process for smaller banks like pan-american bank? >> they are now on our list to hopefully come and do some training and out reach so that we can get into the program. the problem you describe we have put forward what we call a ten tab program. what happens is when a bank

makes a loan we have developed a ten cab system where they put the right paperwork in every single tab. when they come forward at some point to have us honor the guarantee if there's an issue we will go that every piece of that paper work is in place. if we speak to mr. koren as we will teach the ten tab business and alleviate the need for the extra costs he is concerned about and assure him that. all the paper will be in place. we do have paperwork and rules. we will not make payments on guarantees if those things are not in place. >> is this a program you have in place, technical assistance program for smaller banks that need this kind of training? >> it is run for district offices and that is one of the primary focuss. >> how often do you withdraw the guarantee so that the bank might

be held liable? >> we honor the guarantee in 95% of cases. >> on another topic, something we learned from field hearing in los angeles is microloans are incredibly important. in particular the prime program seems to really work especially now that big banks are now likely to deal in millions of dollars. these microentrepreneurs create jobs for themselves and contribute to our economy and might start with one or two persons and before you know it could be a major company. many of these offer for norplant only need $50,000 or couple hundred thousand to get started. but i understand in the sba's 2012 budget you say the prime budget is duplicative of the small-business micro loan program but i believe the prime program is different in that the prime program gets under for nors ready for alone whereas

microalone technical assistance program trains already existing programs for growth. .. >> we look for programs where we could execute those activities through other programs we had, or through partners. and it turns out that our

micro-loan into development financial institutions provide terrific technical assistance. and that we felt that our value added was to provide them with the ability to use our seven program, get access to capital and that we would use public-private partnerships and public public partnerships, to war together with them to make sure that the technical assistance through our entire network of small business developer centers, micro-lenders, women's business centers, was still robust and growing. >> thank you. i'd like to get that list of the partners you think would help get these micro-entrepreneurs ready. >> yes, we can do that. >> and i yield back. >> mr. bartlett.

>> thank you, mr. chairman. ms. mills, i represent pennsylvania's 11th congressional district in northeastern pennsylvania. my district has one of the highest unemployment rates in the state of pennsylvania. on september 8, after hurricane irene and tropical storm wade, we have experienced the worst flooding in history of our area. many people, many businesses, as you can see, have lost everything. many people did not have flood insurance as they were told they were not in a floodplain. as i traveled, traveled around talking to the residents there, many businesses were saying they're not going to open again. they just don't know what they are going to do. many of the folks there, a lot of them senior citizens, again asking what were the federal government do to help us? and what i have to tell them was

that they could qualify for an sba loan if you're an individual, get a loan at 2.7% interest. if you're a business and you can't get credit anywhere else will give you a loan at 4%. but if you could get credit somewhere else, we'll give you a loan at 6% interest. i've got to tell you i was almost embarrassed to tell the people back home that. especially after, you know, whenever a disaster strikes somewhere else in the world, america, being the most generous country that we are, are always the first to help people. in fact, in the last two years we gave pakistan $215 million for flood disaster relief. no interest, no payback. i don't know about you but i think we should help america and americans first. what do you say that i tell the

people back home in northeastern pennsylvania why the interest rate would be 6%? >> well, i'm familiar with your district, and it was extraordinarily hard hit by both irene and tropical storm lee. and for the benefit of those were on the committee, we were on ready reserve at 2000 disaster, operators who actually, within 24, 36 hours of on the ground in these areas, assessing damage, speaking with people, collocating with fema. we have a two-page application. we do homeowners, we do businesses that are damaged, and we do economic injury. so make sure that they know even if they didn't have physical damage but because the area was cut off, business suffer damage or because they're still in distress, they can get 30 year

loans, 4% economic injury loans. the issue about -- >> credit elsewhere? >> we are responsible for good use of taxpayer money, and the reason for an uptick is that if there is a private sector mechanism, a bank where they can get credit elsewhere, then the markets should provide it. if they can't, then that is our job and that is where we step in and try to get the most credit. >> i guess the problem i'm having is we gave pakistan $215 million for flood disaster relief. so should i tell the people in northeastern pennsylvania they would've been better off if they were in pakistan than if they were right here at home? i don't know. i think some point we should take care of america and americans first and america's businesses. we can't afford to lose any more

jobs. i introduced a bill, this has changed my life, this flood. i walk with these people. i cried with them and watch them as they put their lives possessions out on the curb to be taken away. i introduced a bill that would change the way america handles disasters by introducing a bill that would give a 1% loan for 30 years, to cover administrative costs. if we can help other people, i think we can help americans at a time a disaster first. thank you. i yield back. >> mr. barletta, will yield? >> i will. >> i really welcome your position. in fact, after katrina i tried to reduce the interest rate and even provide regional zero interest rate, and it didn't happen. i didn't have the support from your side, so maybe this time around speak you want to get on the bill with me? i think we can change the way we handle disasters. thank you. >> mr. schrader? >> thank you, mr. chairman. i'm pleased that some people in the majority party begin to rethink having require to pay for fema reimbursements up front when there's a disaster.

and real people are hurting. as soon mr. barletta was obvious he was those that was not one to hold up the fema bill, have to pay for at the time so i appreciate his help. >> will yield? >> i have a limited amount of time. i want to talk about i think the successes that the small business administration at over the last few years, when i came here, administrator mills came in at the same time and i was a little bit aghast at the status of the small business administration had been hacked at, cut back dramatically by the previous administration, not just the one before but over the years and it was in total disarray. we had a lot of testimony about waste, fraud, and abuse that we've had several subsequent sessions with the administrator. of the things have gotten frankly a lot better. there's a new sheriff in town and i appreciate that, madam administrator. and i think there is some misinformation here. i mean, people are talking about, they haven't been here i

guess. but there's talk about what the role of the sba years. and i assume that you're not trying to supplant private enterprise. you're trying to work with private enterprise, yet for some reason banks, credit unions, mortgage lenders can't step in. that's where you step in. so there's going to be some defaults. there's going to be some default. but i think i need to hear clarity, you mentioned it, but it seems to me that a lot of the subsidy rates that we have endured where we are payback the treasury for quote bad loans, unquote, where under the previous administration's watch and actually our rate of default censure taken over is down even though the economy is worse, you think he would have higher default rates. and let him correct? >> thank you. on your point about the current rates, we've turned the corner on our default rates, and they peaked in august 2010, and i've

been reducing each month. and our current default rates over all are actually quite low. our loss rates tend to be under 5%. hours default rates tend to be under 5%. our loss rates tend to be much lower. they are about two points higher than the normal federal reserve credit because we are giving credit where you can't get credit elsewhere. >> i appreciate that. that's the bottom line. you hit the nail on head. we've got to get small business back in the business of hiring and growing the economy and growing america. and so you take a teeny bit of a risk, and i'm amazed the default rates are where they are. i also remember, some members on this committee are new, one of our big angst when you took over was the process is too bureaucratic, trying to get a loan is impossible, the applications, we asked again and again can to streamline this

application process. can you make it simpler? so that people can actually get in there and get the loans they need. we also were worried about the value of debt, were and on the spot businesses to get a little start up in the e.u. try to get to the next level. all of a sudden you can get that credit. you develop some pilot programs or some controversy about that. i appreciate that. but i soon they are in response to our direct requests, or am i not correct on that? >> that's correct. so if we look at the small business investment company program, i do want to thank our team and note that not going to do have a record year, they took the process turnaround time for licensing new funds down from over 15 months to five and half months. >> that is a big deal. >> they are bring in new funds. they are bring in some of the best funds and they're putting more money into those funds, and those funds are putting more money into small businesses.

we do have some gaps that we have orchestrated to -- 2 other sets of funds under the sbic authority. sbic authority was not being fully utilized. it's easier subsidy program. it pays for itself, and, therefore, we want to make sure we put as much money through it as the authorization has. so we have a new impact fund, which is designated to go to areas hard hit. the first one was in michigan. and then we have a new early stage equity fund which will be launched this year. >> i appreciate your efforts. just a less common in the remaining seconds but it does have a lot to do with you, but i can't don't have one after how disappointed i am in the treasury department and the way they are not run as sufficient as you. the fun having created horribly when small businesses needed access to capital, the critical

time and the regulars were beaten up on the banks, having too much of this type of loan, this was a great opportunity to free up capital. my state, not a single bank got a loan. and a ton of them applied and i'm sure some are probably tougher shape that let on, not also very disappointed with the treasure. i would like to have a hearing with the treasury officials starting bashing sitting right where administrator mills is and i yield back. >> thank you, mr. chairman. welcome. ms. mills, thanks for coming in today. my colleague, mr. schrader, mentioned that it's the purpose of sba to help small businesses access capital when they can't do that in the private marketplace. what's sba's mission in 20 seconds? >> in the access to capital area, we also have disaster

operations. we run small business, $100 billion of federal contracts go to small business. and that's just a win-win situation. and we have a network of counselors, mentors, advisors that are as equally as important as the capital. under access to capital, where the market is functioning, where small business can get a loan for the market, from the market, why should taxpayers subsidize that activity because the market is handling it? but there are many, many small business out there that don't have access and opportunity and that is where we've been able to step into the market, as you just saw in this credit crisis, and provide access and opportunity. >> i actually share the access to capital subcommittee, and we held a hearing a couple months

ago. and brought in heads of community and small banks, and ask them pretty directly why they were not lending to small businesses. knowing full well this is where the bulk of small business gets their capital. and in their answer was fairly clear and equally direct. our hands are tied. government regulations have made it darn near impossible for us to link to small business. i'm curious, have you heard the same sort of thing? >> as i said earlier, we worked very closely with the regulators on guidance to small business. and out in the field we had the same thing you have, which is that the guidance has come down from washington has been interpreted more tightly at the regional levels. and when we have had these conversations we have gotten very strong assurance that the regulators will work with us to

make sure that the guidance that they think is proper is the guidance that is being affected at the community bank level and in the regional level. we want to make sure the pendulum is in the right place and it hasn't swung too bad far back. >> take the pendulum, do you feel that it has swung too far? i can tell you that i have probably spoken to the heads of 20 or 30 community banks in my district in the last six months, and to a man and a woman, they all say it has the last couple of years. a have seen a noticeable uptick. are you sensing any of that? >> well, that's a metaphor the regulators, but our role was to bring it to their attention that we were hearing concerns, and to make sure that they took their guidance all the way down. our job is actually to make sure that we also provide the product that can take some of that risk

out of the system, and allow them the opportunity to make some loans they want to make, but for various reasons can't fulfill the total risk profile on their books right now. >> but you have heard that concern at that level? >> we have communicated -- i go out every week. i'm somewhere different in this country, and every week i had a roundtable of bankers and small business owners, and so i have a pretty good sense that in the middle of the summer i think everybody, small business owner, bankers, everybody, had a moment of pause. and we did go to the regulators and have conversations to make sure that everybody stays on the same page and access to capital is within the proper constraints available to small businesses, as much as possible. >> if you're out there as you say, and i believe that you are, i'm convinced then that you've heard the same thing, most of us

have heard when you speak to small and community banks. that they are suffocating right now. their hands are tied. many of them authored specifically to dodd-frank. >> dodd-frank will not apply to those community banks whose holdings, whose assets are less than $10 billion. and those are the community banks that are in our districts. i am a member of financial services and i work on dodd-frank. >> and i will close with this, and thank you. i guess they are not convinced of that. thank you. thank you, mr. chairman. >> thank you, mr. chairman. thank you, ms. mills, for being here. going back to ranking member velazquez was talking about, the spiking lending that you had at the end of the first quarter of fy11, and then as december 31, 2010 hit, the precipitous drop

in thinking that i think the figure she used was half of your lending took place in the first three months for the entire fiscal year, and some of the information i've been given, sba used to come to the congress so that you get appropriation to cover, to weigh the up front bar with these on 70 program but you didn't do it this time. and i've been told that you have $500 billion of jobs act my that you might've been able to use to alleviate some of the. i'm just curious as our economy was going the way it was, why you chose not to ask for that appropriations at the point our wide you didn't use the 500 night in jobs act my? >> i assure you we have used everybody of jobs act money for fee reduction that would possibly add. >> is there a reason you didn't ask for a waiver or didn't ask us for an appropriation so you could wave the up front bar of

the? >> and we did waive all the up front, although borrowing fees through the end of the jobs act period. and we use every single penny and we're very grateful for it, thank you. >> okay. one quick thing, and this bill to what mr. walsh was you're saying is i notice in your statement that you say that you brought 1200 lenders back to sba lending. and, obviously, some of my banks, community banks must be over that 10 billion in assets because they are asking and talking about how some of the regulations that they're having to meet are hindering them lending money, or some of the capital requirements that they have to keep are hurting in the way they lend money. i was listening to you as you were saying you convene roundtables and to talk to banks all the time. i to be curious to hear what your suggestions are on the way we can be more effective or help you be more effective in getting

money out and getting these small businesses. >> well, thank you. i want to make sure that you're properly connected, and i think you are, in your location to all of our resources that are on the ground. so, we have district offices, we have small business development centers, and we have a small small businesses that we match with banks. to the extent that you come in contact with banks and with small business owners who have concerns, who are struggling, who want to make more small business loans, we can help them with our programs. so we are in high outreach mode, and the best thing to do would send them to us. >> i know your administrator has called an awful lot, he's a friend of mine, and i can even say where all the sbic's are in my district as those who we are

pretty well plug-in. you know, my banks are not talking about having troubles with lending money. it's not just sba money. aisha i have a letter for me from one of my banks that it's the treasury program that mr. schrader was mentioning that one of the rules to get the treasury loan is that the company has just start bashing certified you are not a child sex offender. is a parliamentary trick played last year to defeat this bill. and as we got included so now they're having trouble they need the money because of this provision, because the small business owners are insulted that they have to certify, not that they are murderers, but they are not child sex offender gets i appreciate your efforts but i'm not going to belabor the point. my office is always available, it wouldn't be any help, and i appreciate the work you are doing. >> mr. mulvaney? >> thank you, mr. chairman. ms. mills, thank you very much for doing this. at the risk of repeating what

may have been said, i apologize for being a few minutes late, i want to thank the chairman and ranking member for getting the and congresswoman sheila the opportunity to have a field in last week in the san gabriel valley where ms. chu is the representative. instead of asking questions i'd like to report back briefly to you on what we heard because it was very educational for me. this was an area that is literally driven by small business that takes up an inordinate size of a con in that part of southern california, very few large national fortune 500 companies, but a very, very active small business community, entrepreneurs, large parts, a large part from the immigrant community. and here's what we heard. we have small business lenders there, small banks, and one of the things they told us was they were doing lots of lending to small business but no small business lending. they were not using any of the programs that were unable to

them. when we asked them what they said it was too hard. and they said that the large banks were doing it, and really with a large banks have done was put together teams of professionals who did nothing but small business lending, so wells fargo, bank of america of the world, they would have small business units because it was especially and it had especially because were so complex, and they didn't have the human capital or the money of able to develop that area of expertise. so they asked us to please do whatever we could to simplify the process. we also heard that one of the things they focus on is microlending. they do a lot of micromini. we heard great stories about loans under $100,000, how successful it they've been used. when i asked them, one of the things they said they looked at it but the paperwork for $50,000 loss is almost the same for a million dollars loan. in return, it simply wasn't worthwhile. so they asked us to please take

a look at anything, if anything, looking at making microlending somehow streamlined. so that they could do more of these things. again, this was a large majority of the loans they were issuing to the businesses in that area were under 100, $150,000. we also learned about the difficulties of opening a small business development center, that eric had lost its sbic in the recent past and there were a couple of organizations that were interest in reopening it only define it was going to take at least three years to go to the paperwork necessary to open another, a new sbtdc. one of the things that we suggested or that mrs. chew and i talked about, maybe suggesting to you, a grandfather process. it was an organization that wasn't sbtdc that close, but maybe they could be put on a fast track to reopen since the contador process at one point in the past. i guess the last thing that we heard was that many of them had

not heard of many of the programs that you offer. they were not aware of the mentor protége program, only one of them even had ever been to the sba website so i don't know what you'll are doing in terms of outreach to the small community banks. and maybe they dismiss it because of their impression it's too difficult to work with the sba because of past history. again, not letting anyone here. that's not the point of the presentation. but if the opportunity to reach out to educate these lenders, because again, the basic message i took away was their lending to small business and they want to do more but they're not using any other tools that are made of able to them through the small business administration. again, not a question. i appreciate your attention. thank you, mr. chairman. i yield back. >> mr. pearce? >> thank you, mr. chairman. and ms. mills, it's great to have you with us today and i appreciate all the sba has been doing, particularly instead michigan. you mention innovative programs yet engaged in the state and i thank you. we been particularly hard hit as

result of what's been happening in the economy and thankfully the auto industry is responding and been adding jobs in our area, but we all know that it's not just the auto industry or large industry in a particular region that's important, but a small businesses that are in the region. you have been a key player in helping us do that in michigan so i wanted to thank you for that first off. and before asking a couple specific questions i also want to get your sense on a statistic that you mention in your opening comments that job creation is down by over 100,000 i believe was the quote you have. we on this committee are all big live in small business and understand small business is the engine for growth were economy. we also know that is heavily skewed to startups in order to get that kind of job creation. i just want to get your assessment. you have been a very successful businessperson prior to your current position. as to what do you think accounts for that, just a result of lack of demand in the economy, a very

weak economy we're in, or are there some structural impediments like financing? how would you weigh those and what sort of things should we be thinking of as members of the small business committee to address the start of issues in particular? >> thank you, and i've enjoyed working in michigan with all the great small businesses that are there. we focus on both main street small business and the kind of high-growth small businesses that could be part of the next, you know, large public company, and employer. we are down 100,000 starts, and that is contributing to parts of the employment problem. we do know that access to capital for startup businesses and for small growth amounts of those businesses is constrained, that as they say the valley of death has widened. we do have some programs,

particularly the new what we're going to launch, but there is still a need for a continued focus on getting more access to capital, particularly in underserved communities, particularly in distressed areas, particularly in places which have not traditionally have venture capital because we know there are small innovative businesses and entrepreneurs waiting to start up in all of those areas. >> along those lines, and you mentioned the success that you had in the recovery act as a result of that, you able to increase lending considerably which had higher guarantee rates as well as as well as a waiver of fees. ..

smaller companies in particular get impacted by these more than anything else. and i am very concerned about access for certain communities. and represent a community that has an unemployment rate well in excess of troopers sent. the detroit area. he talked about the program underserved markets in particular what does it mean by in particular and how do you define underserved and how we

will monitor what was going on with these banks and some sort of brought success. focusing completely and underserved areas. >> once again this is a voluntary program the private-sector banks came and because we asked them to step up . each bank has a different set of activities and commitments that they are interested in pursuing. many of those banks have demonstrated part of that commitment will be around underserved markets. we will partner with them making sure community developments in financial institutions making sure their contributions go as much as possible to help prevent programs that will get money in the hands of small-business. so wide array of programs. >> thank you very much and thank

you for your time. >> mr. west. >> thank you, mr. chairman and ranking member, velazquez. i wanted to give my comments recognizing the great an extra work. $3 billion in annualized average. remains untapped. i understand that that early stage innovation and investment

funds intended to leverage a portion of that existing and untapped authority with the help of propelling it into the hands of start-ups and the entrepreneurial that we need to be successful. i no there are some of strains that indicate the need for released its capital equity financing for small businesses summer in the neighborhood of $60 billion annually. also trying to encourage new start-ups and the small businesses. so particular, just to give you an example, seemed technologies which has developed an anti microbial material to be used on medical devices to combat health care associated with sections with huge potential for serious in health care and housing. they have been working with as bse. i'm just wondering how the early

says innovation impacted the investment fund would help a company like that really get through the valley, the most challenging time and getting to that place where they can create jobs and grow our economy. >> as you know, i am a person is bins quite a bit of time and ryland. but as this family is all there. i know you have a fabulous entrepreneurs. the fund had a record year. header record year in a number of ways. number one, it had a record year in the financing the one of the door to small businesses, and number two it had a record year, as you see in the charts in the back of my testimony in commitments to the firm. we would like to fully utilize that authorization because, as i said earlier, this is a zero

subsidy program, and it directly impacts jobs. we have built a very great pipeline of credible funds who are applying. they can come into the regular program or they can apply to do an impact fund which is really very much similar to the regular program, but it is always directing potential investors to areas that are distressed and are trying to turn around and have had a difficult impact by this recession. the early stage fund will be run slightly differently. it will be one deadline fiscal 2012 activity. for each of those two programs we have committed a billion dollars, hundred million per program per year for five years. so those will ramp up.

we are doing it in as expeditiously a manner as possible. a licensing time has gone down from 15 months to five and a half wants. they need to deploy it out says the small companies. there will hear that in the next testimony. also during that because we want to maintain this program at its boss of levels. >> will that be acting as early states equity funding for those two funds? >> correct. current funds are actually within the early stage, a mechanism where they can essentially be an earlier stage equity. >> well, thank you. i hope that there will really focus on both innovative and

creative ways to do this kind of financing because we have a lot of financing tools that are designed during a different age of industrial and manufacturing. we really need to have this government to be a will to respond to this new economy and have financing mechanisms to provide the kind of support for our small businesses and entrepreneurs and capital. so i look forward to the results. thank you and i yield back. >> wonderful to listen to you today. i know why we are bringing forward problems and issues that we have heard in our districts, it's clear that you and the entire small business administration is working i think daily to try to do what

your intention is, which is really to support our small businesses and try to get the capital into the hands of start-ups, current businesses, and i think you're doing a great job. since i have been on the small business community the numbers i have been doing more than me. that is actually going to a meeting with small businesses in my district. i think come up to 80, just in the last month that i have met with personally. i have held a round tables. i have walked into their businesses on announced. i am beginning to hear sort of a common theme, which i think you have heard today which is, you know, the paperwork that is needed to apply for these small business loans. many times its daunting. as we have heard, some of them feel like it is not really even

worth their time. you know, as of february of this year the fda preferred lenders can approve loans using the new small loan advantage process. the goal of this program is to expand the availability of small loans by allowing existing lenders to make loans under 250,000 using a two page application. shorten the approval time to minutes in the application is submitted and from five to ten days for non delegated lenders. it seems to me that this small loan advantage program is exactly the type of solution that i think small businesses are looking for. what do you think we can do to expand this program and make it accessible to everyone? how can we ensure the preferred lenders are using a small loan advantage process for all of the small loans?

>> well, thank you, congressman. thank you for your letter. and you met with over 650 small businesses. currently you just said it better than i could. we have a product the redesigned we are reducing our paperwork, increasing our turnaround times, keeping a level of underwriting to make sure we have risk oversight, taking those principles and the product exactly as u.s. in know, one of those things that i heard from my small businesses was under the loan guarantee program, the criteria that the fda has to qualify for the loan is sometimes broadened but they actually go to access the loan.

the banks put on more criteria and then s.p.a. requires. one of the issues they brought forth to me was well as be a guarantee of the loan guarantee program does not require collateral, real estate as collateral, when they go to the bank the banks saying, by the way, we are going to require that you put up real-estate as collateral. what can we do in working with our banks, our lenders, you know, to not add criteria or add restrictions to these loans when the fda is clearly not setting these criteria for a for small businesses as a means to qualify. >> we work with about 5,000 of the eight dozen banks. so the first line in the credit process is generally the bank.

the bank will make a credit decision. because they are on the hook for summer between 50 and, you know, 25 percent of the loan as well. so they have to have an independent credit decision. we have tried to a, you know, coordinate, paperwork reduction, but we have to make sure that both of us are satisfied because we share. >> well, again, i would urge you to maybe work with some of our partners out there. many -- again, that clearly stops many of these small businesses, the startup companies from accessing this capital. if you could work with them on may be trying to keep their criteria at least the same as yours. in the last thing else and i review my letter. i would like to invite you to sunny southern california and come to my district.

i know that would be a great honor to have you there, and i think it would be a lot of folks out there that would really enjoy listening to you and really hearing more about the programs that are available to small businesses. >> come during the winter. >> mr. richmond. >> thank you, mr. chairman. thank you, secretary. one thing, and it's out of order, but we are talking about making sure that small businesses have the capitol and access to capital so that they can flourish and fulfill their mission and continue to employ people. it is an important aspect of it, with the other aspect of it which stars are businesses demand. how do we increase demand so that those businesses can

continue to sell their projects or whatever it is that they're doing. >> well, we have seen this in the american jobs act we want to put more cash in the hands of small business right now because we have seen is that when they have more cash available such as in their payroll tax deductions, reducing the payroll taxes, they have to pay it in half. they can take that money and put it into advertising. they can put it into inventory. that creates more demand for their product. that creates more jobs, and then they can come for financing expansion. so that is one of the first things. >> also, let me thank you for your administration and coming down and participating in my

small business fair that we had. over 347 small-business is signed up. i had a chance to talk to almost 120 of them on opening night. many of them are saying the phrases are our local sba office in terms of the out of reach in the systems that they give. now the new push which is very important, helping them understand that 95 percent of the consumers in the world are outside the united states and china and up and gets up one where we can sell our goods over there. a few of them are taking as up on the offer of attempting to do that, and many of them left the small business fair with contracts with new vendors. so that was a very good thing. part of the -- two issues into suggestions that they gave to me, and i think we submitted them to you, and i will just give them to you. when the president announced

expedited paid for contractors working with the government that wanted to make sure that that trickle-down to the subcontractors to make sure that when the prime contractor was paid but they don't necessarily hold up the subcontractors. a program to in years ago where the prime contractor had to indicate that the sums were paid or be paid. they don't have the resources to flow apparel and all those other things away on the payments. the of the suggestion that was made was i'm sure it would ease a lot of members of congress is workload, if we can put this status of age a and other programs, application process on-line, almost like colleges can do now where they can log

into a secure account and see if all of their documents are turned in, see if they need anything else, on the background check phase or whatever because a lot of times if they know then they can make better decisions. i think that now with technology we can offer that's so that they can keep up with that. other than that, i don't have much else to offer. i would just, again, thank you for what you're doing and give you an opportunity to offer anything that you think you can need or what we need to do to help. i will say that we are looking forward to the working more and maybe another round of grants and opportunities which we were not successful in the first round, so maybe we can look at second and additional rounds to see if we can't participate.

thank you, mr. chairman. >> mr. kaufman has won more. >> thank you, mr. chairman. i think you had mentioned the issue about banking regulations and its impact on small business your view was as it filters down that at the top there is certainly clarity and balance, but that as it filters down perhaps there is not balanced. i just want to say that there is in balance, and i think it has hurt small business lending, particularly the community bank level where you do have a wide latitude for which the regulators can go, yet they obviously take the most conservative approach just in case anything ever happens. their fingerprints aren't on it, and you have performing loans

out there that are being downgraded, causing these institutions to increase their capital requirement and pull in their ability to lend. i just think that is a huge issue impacting small business at the community in bank level. one thing, dissing businesses last week in the district. you know, you always wonder if you got the red cross section. but it seems like there were some signs of life. it seems like although we felt like we were still skipping along the bottom that the firms that survived this seemed to have adapted. you know, they adjusted their business model. they made changes. adding some employees, a manufacturer, three service companies last week. very different picture from 2009 when the economy was in free

fall and these four, these small businesses were getting a credit line just cut off. i mean everybody was just going down. and so that was tough. i will get a better picture next week when i'm doing the job fair back in the district. i no they're is a lot of unemployed folks that have been out of work for a very long time and this last point, if you could just respond to these. very concerned about the impact. these are kind of relatively low rates employees. one was a dry cleaner who had a chain of dry cleaning stores. well over 50 employees. janitorial firm. the impact on the health care bill on their firm in their abilities to keep these

employees. i will turn it over to you. >> well, number one, i think you characterized it exactly right. we are seeing some signs of life among small business. we have some demand, and we have to make sure that they get access and the virginity. october 2008i was hearing and need a loan to save my business. now i here i need a loan to buy the next piece of equipment, make the next expansion. that is good news, but it also means that we have to be there with access and opportunity. >> let me just say real quick that i was able to -- one of them that i did mention was a restaurant that is being built. think your department for that. >> i would also ask small businesses to come to our website rican walked in through the affordable care act.

we know a small businesses now pay 18 percent more than large businesses. that premium will go down or disappear. so there are many good prospects. there is also the health care tax credit. we have a tool on the website to see if they qualify. those would be opportunities. >> thank you, mr. chairman. i yield back. >> you are recognized, the need to increase lenders in your loan program. last year you have 2007 under 27 total lenders. 1,339 may three loans less. my guess is some of the lenders that came into the program were attracted by the provisions of the recovery act. once those provisions expired i wondered how many of those lenders are still active and making those long.

in the second panel we will have the credit union testifying. my question to you is, what will you do to retain the lenders that are participating in sba loan programs, but also what are you doing to increase credit union participation in your own programs? >> thank you. credit unions are about 10% of the current activity. we love credit unions, and rethink that they can do a very good job. we are bringing them in through training, education, participation, active participation with their association. and on the ground you're exactly right. we have to work very, very hard not to make sure that we continue to meet one of our base bowles, which is active lenders. we have about 5,000 of the 8,000 banks actually hold an sba loan.

but we track how many have made a loan within that year, and that is the number that is around 3,000, the high 2000's. so we need to keep that number up. we are going to be working. we hold lender education, when the round tables, simplify programs. we walked in through applying. everything that we can. so if you have lenders in your community, particularly those who are on the ground and knows good, small businesses we will bring them in. that is why we're opening our doors to community development financial institutions to have good lending track records, and we want to be there with as many doors, points of access as possible. >> the challenges that i see when it comes to community banks or credit unions is that you need the personnel, and they

don't have that type of capital. expertise. so what will you do to help them? its is not walking through. because of the pressure coming from regulators. complying with credit standards. >> as you know, we are looking. we have a product. one artur three or four loans. they are able to come into our program without undue burden. >> thank you for being here today. i appreciate it. i think that is the end of the questions and we will go ahead and seek the second panel if we

could. [inaudible conversations] >> all right. [inaudible conversations] [inaudible conversations]

>> them when you're five minutes is up it will go to read. with that, i'll introduce our first witness today. which is the net taken state, executive vice president of business and 20 bank at regions

bank, regions bank is headquartered in birmingham, alabama. one of the largest full service providers of financial services with 1800 bank offices in 16 states across the midwest and south. ms. steed joined regions in 1992 and is responsible for managing credit underwriting documentation administration for small businesses. she's testifying on behalf of the community bankers association. thank you for coming. look forward to hearing your testimony. you might want to turn on your mic, too. there we go. >> thank you. if you want to go ahead and give testimony then will go through each one and open it up for question. >> chairman graves, ranking member velazquez and members of the committee my name is lynetta tipton steed and i'm executive vice president and division head for business and community banking for regional financial. regions is a full-service financial company headquartered in birmingham, alabama, with over 1800 branches and 2200 atms in our 16 state

footprint. i'm also a member of the consumer banking associations small business committee which includes top small business banker to share the goal of improving the state a small business banking including sba programs. small businesses are facing a number of challenges. weak economic conditions, high levels of unemployment, low consumer confidence have led to low sales volumes which have resulted in a lack of demand for small business loans. despite the decline in overall loan demand we continue to see healthy sba lending. the sba 7a and five under for progress have been affected during these times. earlier this month the sba announced his support $3 billion in fiscal year 2011 brings a three year total to over 70 billion in support of small business lending. regions recognize that i of sba partnership and have a proven track record with its brogue rand. having been a preferred lender since 1996.

in 2010 regions identified increased sba lending as a strategic initiative. significant resources have been devoted to this initiative to improve delivery and efficiency of our sba lending efforts. as a result we have more than doubled our linking staff. regions has ranked in the nation's top five for overall 504 loan approvals for the past two years and also dramatically increase our 7a lending over the past year by 82%. in addition to the sba 504 and 7a programs regions participate in the americas recovery capitol dome pro grant when it was in place and recently added the export working capital and export programs as well. we intend to implement the newly named working capital program in the first quarter of 2012 and we're strongly considering the contract can't find program as well. so what can be done to make things better? the phone and had to provide under last year small business

jobs act and allow the sba to raise guarantee on its 7a and weight certainties of both 7a and 504 loans. while in effect these that it commits impact on the ability of banks and small businesses to utilize these important programs. as an example of this effectiveness in the fourth quarter of 2010, regions application trends and approval trends increased by more than 25% over the prior quarter. the small business jobs act increase in 7a and 504 limits from $2 million to $5 million, and its permanent increase in microloans limit from 35,000, to 50,000 have been helpful. however, the act only temporary increased the caps on sba express loans, a subprogram of 7a. 350,000-1 million. in order to expand access to much-needed working capital. further streamline 7a process would help farmers attain loans were easily. the sba has done a good job enhancing the process in many ways by the are relatively easy

to implement adjustments that could be made to the process that would expedite originations of small business loans. for example, of our financial institutions to use their own application and notes for all sba loans would be helpful. sba currently allows lenders to use their own nose in credit policies on express loans which is greatly improved that process. affect sba lender oversight is another crucial area of concern. lebanese to be strong and consistent lender scrutiny fluctuating economic conditions often call for flexibility. over all, cba members have all reported increased efforts to help small business axis capital. many cba members have hired new small business bankers, initiated second loan programs to ensure that every possible vote is being made, and incorporated other initiatives to improve delivery of sba programs. i could cite many good outcomes for sba programs but as we look forward, cba encourages congress to monitor the sba guaranty levels.

it is also important that they have the funding and authorization necessary to continue to work with the private sector in financing american small businesses. in conclusion, we support for improvements in the sba loan structure but there's also a need for greater certainty in sba programs, especially during the difficult economic time. cba looks for to working with this committee and sba to improve lending to small businesses. thank you for the opportunity to appear before the committee to discuss the sba, and the current state of small business lending. i will be happy to address any question you may have. >> our next witness is sally robertson, president and executive or chief executive officer of business finance group community government company located in fairfax, virginia. ms. robertson is testifying today on behalf of the national association of development companies. she has served business finance group for 15 years. she's been involved in several cdc industry organizations and serves as vice chair of the board of directors of the

national association. thank you for being here. >> thank you very much. again, my name is sally robertson, president of business finance group in fairfax, virginia. we are a nonprofit company and also serve as vice chair of the national association of development companies. i'm very pleased to provide comments regarding nhl by the 504 program for small businesses are seeking long-term capital to grow and create jobs. successful small businesses are innovators who often bucked the trend and go to realize the market advantage. many small businesses are now ready to take that next growth step but banks are constrained by impact on the capital in the face regulatory criticism for their real estate than in small business lending. as the need for new capital increases, conventional sources and financing are less available. what's the real impact? with a capital even successful businesses cannot grow. capital is the greece that enables businesses to grow and add new jobs. without new jobs and america

cannot pull itself out of this jobless recovery. as you all know if 504 is a leverage program that incentivizes banks to lend small businesses i sharing the risk of a long-term loan. small business owners benefit from a 20 month and an attractive 20 year fixed rate along with terms that allow them to preserve cash flow for growth. with short-term deposits, banks can offer the same terms to small businesses. as a participant in the 504 project banks are able to offer a low risk conventional loan that provides a return to the stockholders. the 504 program is an excellent match of the private sector and public sector working together to provide capital for growing small businesses. best of all, 504 projects create new jobs and save jobs in communities across the country. the 504 program is the most successful economic development financing program provided by the federal government. a study completed by california state university three years ago demonstrated that in just a

two-year period 504 loans directly create 54,000 new jobs. and indirectly led to another 66,000 jobs. further, for every dollar sba spent to operate the 504 program, federal, state and local governments realize $94 in new tax revenues. we would like to note that natko zrncic-dim to sba oversight and we applaud sba steps to improve those functions. sba is currently staffing senior managers to the office of credit risk management and we encourage sba to rethink its oversight systems. today sba has two different 504 portfolio oversight systems operated by two different departments. surprisingly these sometimes come up with different reviews of the cdc's own performance. we encourage sba to move toward a single portfolio monitoring system establishing boundaries, making the most clear and providing consistent oversight was a to stronger lending process that reaches program

needs yet curbs abuses. during the recent recession to 504 program saw dramatic increases in default over historical levels. what the statistics however don't show are the small businesses that were safe. with troubled -- however the cdc and sba have some flexibility with the second trust. these successful workout situations have resulted in the business are fighting that might have otherwise failed resulting in more lost jobs in the fragile economy. the 504 program has been one of the most successful programs in the federal government by leveraging its guaranty authority in private sector capital and sba has directly insisted integration of minutes of jobs to more than 150 billion in 5041st mortgages by banks and 5042nd mortgages by cdc's. the public-private partnership is a unique program feature that encourages the investment of private capital in growing small

businesses. the value of the 504 program can also be seen in successful small businesses who have use the 504 program to finance the next level of growth. every cdc in every state can provide stories of small businesses who would not have achieved their current success without the ability to use the 504 program. and as we begin to climb out of this terrible recession there are small businesses who continues assistance is result of successful workout hammered out by cdc's and sba on their behalf. we are excited to be working with the skilled and innovative sba management team to look carefully at how the 504 program can continue to be relevant and beneficial to future small businesses. we hope this effort will lead to improved oversight, improve processing and more flexibility encourage more bank and borrow to participate in the 504 lump rogue ran. small businesses that are nimble and forward thinking will lead us out of this recession by creating the new jobs we need. let's help them do it sooner, working together we can get america working. our thanks to chairman graves,

ranking member velazquez and the committee for your leadership and support for america's small business. thank you. >> thank you very much, mr. chairman. i'm pleased to welcome to the committee this afternoon a constituent of mine from cincinnati, ohio, roger davis. mr. davis is cofounder and managing director of north creek mezzanine, a small business investment company located in our community. mr. davis is testifying on behalf of small business investor alliance, the industry association for small business investment companies. mr. davis has 25 years of experience in the banking sector, including commercial banking, real estate, leveraged finance, direct equity and fund investing to name but a few areas of his expertise. we welcome you here this afternoon, mr. davis and look forward to your testimony. >> thank you and thank you to the receiver to me the chance to talk today. i'm proud to represent the small business investor alliance as

congress and put out. that is the full nasdaq. my name is roger davis, cofounder and managing partner of north creek, a $70 million fdic fund located in cincinnati. to put that in perspective that puts us at the small end of the range for sbic funds and fred we think that is a good thing. we can focus on smaller companies. my partner and i are lifelong bankers to small businesses and when prominent was sold in 2004 we set out to create a fund dedicated to lending and investing in small businesses, really continued what we love to do at the bank. the credit crunch in '08 and '09 really serve as a catalyst for the creation of our fund. our research quickly listed as bic program for several reasons. we were comfortable with the regulatory oversight, licensing process, the program is targeted exclusively toward small business where we felt there was the greatest need. a good answer let our private capital through the use of low-cost leverage from sba to

venture program. to me that sbic pro can is the perfect example of a public-private partnership that works. so in the spring of 2010 would open our doors for business. the biggest surprise i think that we experienced so far has been the overwhelming response to the nation small business need for capital. we reviewed over 350 business plans from company owners nationwide seeking capital. we originally thought we would see a lot of companies losing money that frankly didn't deserve the capital. but it's been quite the opposite. there are many companies that we been able to help that we would have liked to. unfortunately, for most small businesses traditional credit markets remain constrained or closed altogether. i have a few thoughts on why that is still the case. many companies reside in the workout area the banks because the revenues and profits decline in the recession. until that backlog clears, these companies will have a very difficult time growing as all

dedicated, all cash flow rededicate paying down the bank debt. i can call this the hangover from the credit crunch. bank consolidation although there has been as much in recent years continue to have a negative impact on lending to small business. as a former banker i understand the need for process ratios systems, credit scoring, but for us it's about meeting management team, listening to the story and determine if they deserve the capital. regional and small committee banks are helping but it's not enough. so herein lies the value of our program and a firm like north creek. in a year and half we have made seven loans the five companies. these companies are located in cincinnati, ohio, austin, texas, elkhart, indiana, boulder, colorado, and stanford, florida. i find the statistical remarkable myself but these five companies have added over 200 new jobs, and really less than year. that's a 20% increase over their

base employment. you can see the impact on a management team that now has the capital to grow. and if they were hit with a bank lending is still very tight. but they were thank you for the sbic program because of the capital they receive from us, they are now in a position to grow and prosper. randy and rick in florida would be the capital they receive from north creek now puts them back on offense and they cannot take advantage of growth opportunities in the market. troy in cincinnati would say the acquisition he's making more than double the size of his company would not have been possible without sbic pro ram and north creek. just a few thoughts on the future of the program. we need to make sure we keep successful fund managers in the program, and congressman schauer let's bill will help by raising single and family fund limits. what happens is as funds go to bump up against single and family fund limits and those need to be kept modernize to keep up with funds as they grow

so we keep them in the program. secondly, we need to make sure banks continue to be active investors in the program. banks have been longtime supporters of sbic, it's a great partnership. we can work with their many staff and they can work with us. let's make sure they stay in the program in a big way. lastly i just want to make sure you understand by raising taxes for small fund managers like me, the only impact will be the aisle have less capital to put into small businesses. a management fee that we earn basically the overhead of the business, we only make money on the carried interest in our company prosper and grow. so thank you. >> mr. chairman, it's my pleasure to introduce to the committee mr. gary grinnell come his the president and ceo of corning federal credit union, located in corning, new york. he is testifying today on behalf of the on behalf of the national association of federal credit unions, a leading advocate of america's credit unions and all of their members. welcome.

>> good afternoon, chairman graves, ranking member velazquez, and members of the committee. my name is gary grinnell and i'm testifying today on behalf of of matthew. we purchase for the opportunity to persist in this discussion and refinancing programs under the small business administration. at corning credit can have a well diversified business lending portfolio with minimal billing duties. for the last two years we've been recognized as the top small community lender by the small business administration in the 34 counties that make up the sba district in which we are located. we started our business service program in 2006 and have been an important source of funding for small businesses in our areas ever since. during the recent economic downturn many banks in our markets stop lending to their clients. corning credit union has been able to fill the void and provide these businesses with the funny thing need to continue to grow and to create jobs. since her sba programs inception we have made 71 sba loans

totaling over $8.2 million. our average sba loan is about $116,000. we participate in the sba 7a, sba express and patriot express loan programs. many of our sba loans are for entrepreneurs wanting to starting a business business and create new jobs. in 2011 study commissioned by the sba indicated that credit union small business financing increase in terms of the percentage of assets both before and during the recent financial crisis, while bank small business lending has decreased. this demonstrates a credit unions continue to be the capital needs of the business members even during the most difficult times. fortunately when congress passed the credit union member access act in 1998, it put in place an artificial cap on the ability of credit and to offer member business loans. it should be noted that nonguaranteed portions of sba loans count towards this arbitrary cap. at corning credit union we are

pushing the cap and expect to reach next year. this would ultimately impact our ability to make member business loans including sba loans to the small businesses we serve. fortunately, there's bipartisan legislation in the form of h.r. 1418, small business lending enhancement act pending before the financial services committee that would address this issue. we urge committee members to support this important bill. some nafcu never tells that scale back on the number of small sba loans and the response to comment arising from sba examination. these credit unions feel the sba's lender evaluation and schooling process disadvantages those that make a number of small lesser collateralized loans and compares them with those institutions making large fully collateralized loans in their evaluations and schooling. if this type of evaluation process is not change they may eventually drive a number of small loans from lenders portfolios. nafcu members have requested the sba address this and would help the small business committee

will be able to help as well. at corning credit union we are and improve sba lender. we're fortunate we have hired an experienced sba lending officer with knowledge of the system to help run our program. still one of the hurdles we see is that our local sba 7a loan applications are sent off to national offices for review by underwriters who do not understand our local economy. this in personal step as time to the approval process for the small business owner. furthermore the lack of having local sba underwriters to interact with, they discourage those lenders who don't have the expertise we do on their staff. this makes it harder for those institutions that may want to the sba loans, but would only have limited volume that doesn't justify hiring an in house sba expert. as a result some credit unions in this situation may opt not to get involved in sba lending at all. there is a way this concern can be addressed. nafcu supports the reintroduction of the credit union small business lending

act. this bill would make it easier for issue for crediting credit to become more involved in sba lending and opened the door to more access to credit for the small businesses and communities served by credit unions. in conclusion, small businesses are the driving force of our economy and the key to its success. the ability for them to borrow and have improved access to capital is vital for job creation. while the sba's financing programs are providing much-needed opportunities to businesses, there are still obstacles from holding the programs from their full potential. are confident this committee will do what is necessary to ensure that these programs are successful. thank you for the opportunity to testify before you today. i would welcome any questions that you may have. >> thank you to all our witnesses, and i have one question for each of you actually. out of curiosity, how responsive is the sba, if you come to them with problems within the programs, how responsive are they to try to rectify those? are the very open for

suggestion, or for criticism? >> i will start. i would say that the sba is more receptive today, more than ever, and on addressing issues that the committee faces were lending. an example would be a rewriting of the 504 refinance provision we talked about earlier. that will have a dramatic effect on a lot of these small businesses have conventional loans that are ballooning and it allows them to access the capital, access the equity to use for capital. so anytime we have given feedback to them to have been very responsive and very helpf helpful. >> ms. robertson? >> i was certain have to concur. the sba has been extraordinarily responsive anytime we've gone to them with issues and concerns. it's a large agency. it may not happen as quickly as we would like but i think they have tried their best to listen in to actually come up with workable solutions. >> i have found them to be very

responsive. i think if you talk as a people in it interesting that finding cannot be responsive is because probably something i'm very and. >> we have nothing to be responsive as well. the main change we've seen from a negative perspective is the consolidation to the national offices it as i mentioned in my report. as opposed to the local focus of where it used to be. spirit how about when it comes to loans getting approved, i've had people come to talk to me about the fact, particularly if they're doing, if it's a new start and have construction issues and its delayed in getting that loan approved, and as that delay spreads out in their costs go up, contractor costs go up. where is the breakdown? is sba approval? is it just requires that you will have in the process lacks because in some cases it seems to just drag on and drag on and drag on, and then you have to ask for more money or apply for more money on the one which

creates more problems because the costs are going up. >> i can speak to that. we would certainly like to see the process quicker. again, i think it goes back to trying to work with somebody out of one of the national offices who doesn't understand the local economy. we've seen a less experienced people over the last couple of years and we think that slows down the process. sometimes they can take up to three or four weeks to get a loan approved but if we're doing that loan in house to take a couple of days. so we see that as an area for improvement. >> ms. robertson? >> from the 504 standpoint, we are now required to provide construction bids at the time the 504 application is a bit on a construction project for approval. commercial reasonable standard would be that construction documents are provided at the time of the construction loan closing with a bang rather than at the time of sba approval. so that is certainly delaying the approval process, and likely

causing borrowers funds, not only delaying their settlement on a property but also if contractors are charging them fees for those kind of things, they're having to pay those in the dance of having a loan approval. >> thanks, mr. chairman. ms. steed, you heard a lot of the members here asking question to the administrator regarding the need to have more smaller loans, those defined as $150,000 or less. and since the jobs act increased the maximum sba, sba loans eyes to 5 million, the percentage of smaller loans have declined from 17% of total lending, dollars, in 2009, to just 8% in 2011.

and the administrator when i asked why this is happening, she said that banks are not making those smaller bones. my question to you is why? >> i can't speak for all banks. i can only speak for my bank, and the members that i set out with a small business community with the cba. we are not finding it difficult to fund those customers. it's an opportunity that would have for 7a and are expressed progress. it's a core program. we already have in play today. we also have a small loan advantage. we did not participate in that separately because we have the core programs that accomplish the same thing. so we are not find that to be a challenge. it's just a matter of incentivizing them to get in the game, make sure they have the business plan -- >> the sba loans at your bank bank, what are the% of smaller

loans? >> i don't have that on the top of my head. >> can you find a? >> absolutely. >> okay. ms. robertson, last week the sba released final rules for the 504 rebinding program that would allow cdc lenders to make loans in excess of $12.5 million. with no requirement that they create a single job. and as we all know with this jobless economy, and the challenges that we have is job creation. so, given that fact, was a good idea for the agency to abandon this critical element of the 504 program? >> i think the intention here is to save businesses that might not be able to find financing, or alternatively provide a financing structure that's more appropriate to the business, improving their cash flow so that hopefully they can then add

jobs. >> the intent of the program, 504, always been economic development and job creation. antony, this flies in the face of the regional purpose of 504. the fact that it requires to create jobs doesn't take away the debt refinancing, even if you tell me, well, it didn't create new jobs but at least we are preserving. mr. davis, the sbic program has had proven success at helping later stage businesses, but have struggled to reach early stage and start up since participating securities broken was a limited. are there ways that the venture program could be adopted to help meet the needs of earlier stage business? >> well, i think the first

comment, the venture program because it has a current pay interest future, we need to be sure that we have portfolio companies that are paying our investments current. now, some sbic firms can take lower leverage and so they can sprinkle in some additional equity investments that could go towards more early stage. but the classic to the one leverage which we are, it's really incumbent upon us to stay away from those. we need to be financing companies that are just going to the next level. so i think lower leverage could be an avenue. and maybe just look at what was wrong with the participating securities program and look at retrospectively and said what could we have done differently. >> thank you. mr. grinnell, and your testimony you emphasize the continuing need for credit, especially on businesses who are seeking smaller bones. do you believe that the sba large bank lenders over

empathize more profitable loans, like phones to establish businesses with the larger credit, greater credit needs to the detriment of smaller firms? >> well, in terms of our credit union we like to make small loans to help our members, and i think credit unions in general like to make small loans. we have seen very strong demand throughout the entire financial crisis. as i mentioned before we are almost at our business loan cap and we're going to have to stop lending. from what we heard from our members, the banks have turned them away. we have helped some entrepreneurs get started with very small loans that the banks were not interested in. and those members are now hiring additional individuals, additional employees in our communities and making a real positive impact in our communities. >> ms. steed, i do have some numbers here, how your bank

increased staff by 50% in terms of your loan by 146. and it seems to me that you are making much larger loans, at the expense of smaller bones. and i would encourage the bank at least when you're doing 7a loans, that you tackle the gap that exists. because you have a responsibility. you are participating on a program that is a guarantee by the federal government. and the same is true with a lot of the other banks. ms. robertson, beginning this year taxpayers will be paying $90 million to subsidize 504 loans. in the past some cdcs have provided their executive staff with salaries and benefits.

i would just like to hear, we know that ig did an investigation. what is it that your members are doing, your companies doing to ensure that this type of practice doesn't take place anymore? you have executives making, or at least was making $800,000 in salaries. so i would like to hear what you're saying because we have to protect taxpayer dollars. >> absolutely. i think our trade association is extraordinary concerned about those practices. we have provided guidance to our members on irs requirements for nonprofits, on board governance. we've talked to sba about oversight and enforcement. unfortunately, the trade association is not really an

enforcement or police vehicle, but is doing its best to provide training to members on those topics. >> training, i'm happy to have that discussion because i know you cannot enforce how much salary you're going to provide any of these salaries, but is a good pr that might benefit the entire association. >> absolutely. >> thank you. >> mr. mulvaney. >> thank you, mr. chairman. a few quick questions just to clarify to make sure i heard correctly the first time through. ms. steed, did you say that your organization have doubled sba lending staff over the course of the last period of time? >> yes, sir. >> do they specialize in sba lending, or are they doing sba link part of the time and regular commercial lending? >> they specialize in sba link it if they build out from under one, packaging, everything so that the process is streamlined,

we educating our relationship managed out in the field with this new, we have the streamlined process because that is a negative connotation. we heard earlier today when administrator mills was speaking, it's cumbersome. what we're going to do is streamlined so we have opportunity you don't have to -- that is dedicated sba spent one of the things regions is a large bank. they have a presence in my district. they're good folks. i'm from south carolina so you'll have a presence there. >> yes to i guess what i'm struggling with is, here's my question, in your opinion has sba lending gotten to the point where it's so complex that you have to do that in order to do it in a cost-effective manner? >> i think the impression is, that is the impression for your borrowers out there and the bankers. we educating them is important that you can streamline it. you have to get back out and we educate because that perception is out there. >> got you. thank you very much. you also mentioned i think the

sba now allows you to use your own notes, is that right? >> for the 7a programs. we're suggesting that could be something we could look out for all core programs to streamline it. >> i used to do some corporate work. you can tell folks why that's important. >> you don't have to duplicate your efforts. one application one time, it goes to the process easier. when the extra documentation from the sba you seem to be duplicating your efforts. this makes it very convenient, very fast and to get onto getting that love. >> the standardization, allowing you to use your own documentation. is it just in 7a or are using it and other program? >> right now i believe it is just 7a express and we're trying to get that broad and. we are making that suggestion. >> thank you very much. mr. grinnell, you said some of your members, and again i come from an area text communities, very strong credit union presence from where i'm from. you said some of your members have scaled back on their smaller bones, is that correct?

did i hear that right? >> i said that, well, we have very small to mid. continue to make very large number of small loans as a credit union. what i've heard from other credit unions is based on the way the sba does their best ratings and deductively compare apples to apples. it compares institutions that do a lot of small loans with institutions that do very few larger loans. and based on that, so if you have more small loans that go past due, back and basically perjure rating. so it could potentially discourage institutions from making the smaller dose. >> is there a fix to that? >> i believe they should change the risk rating system. >> in getting an example. i'm not the mother with that system. >> first of all i should say that's also what we've heard with talking to other credit

unions, other nafcu members but as a credit union we've not had a particular challenge with this issue. so i'm not an expert on exactly what needs to change but we have definitely heard that. it just doesn't make, just commonsense approach. you're comparing apples, not comparing apples to apples. >> gotcha. mr. davis, i think a heard you say that there was some level of consolidation going on within your industry and i think you said that lead to less small business lending. is that accurate? >> the statistics probably may or may not support that. what it does though is significant changes it. >> in what fashion? >> for example, if you have fewer assets, service company for example, a lot of the larger banks now, they will be happy to give you an asset base alone. very simple. very easy to standardize. so it's different. i'm sure the large banks would say we are making small business

loans but they're not making small business loans to companies that have a wrinkle in the past, and a lot did. i call asset light companies service companies. specialty manufacturing companies. those are very difficult for the large banks to make. so, you know again, we are in the market day in, day out. i will give you an example. we report for the company a force that went out to the market, great company, very light in terms of assets, they went out to 10 banks, got one proposal. great company but it just didn't have, it didn't fit the box. if you don't fit the box, and you're in trouble. so you need a firm like us to step in and work with a bank that can do a small piece that is simple, straightforward and doesn't have a wrinkle to it. >> thanks very much. thank you, mr. chairman. >> thank you very much, mr.

chairman. first, and how will an increase in leverage limits for sbic's as proposed in the legislation that would introduce, h.r. 3219 as you had mentioned, how will that affect the ability to provide capital to more small business in? >> what happens, you get fund managers like ourselves, this is our first fund. it's a $70 million fund. if we're successful, and i hope we are and i'm confident we will be, we will go out for a second loan. will probably be able to raise more capital for the second fund your to our family of funds can start bumping up into an aggregate limit that the sbic program korea has. in addition there are single aggregate limits. and so there's a lot of successful fund managers that started the sbic program and then a graduate out of it and move on to a non-sbic program.

and as they move out they may or may not stick with small business. they may move on. by expanding the family of funds limit you will keep more managers dedicated to small business. >> thank you. you mentioned, i think you have 70 million available funds come and i think you had seven loans out to five companies. how much of the 70 would you have used up in those loans, approximately? >> 12.3 million. >> so we are making, again, we are on the small end of the range for sbic and i think that's a good thing, especially for our market. there's a lot of small business owners that don't need $10 million or $20 million. our average loan size is about $1.8 million. we've got a half million dollar loan was her first love it turned out to be a great loan. the company has now made to subsequent acquisitions and have doubled the number of employees they have. >> that's great. now, as far as, i think you said

you had about 350 companies that you would look at? >> correct. >> those are applications that go into the process, or is that what it was? >> we manage a pipeline database. every transaction that we value is logged in energy. so we will have received information on the company but if we just a phone call and it's not as if we don't enter into the pipeline. so i think we put in a business plan to the sba we would review 200, 250 business plans in a year and it's almost double that. the other interesting part is, we that we get a lot of just no right out of the gate but we announcing that. we are seeing a lot of companies that are making money, that have a business, that deserve capital. now you know, we pick and choose the ones we think are best for our fund. with icing a high percentage of very viable candidates. >> what were the other what's missing are wanting? if there were only seven loans and you had 350 applications,

what -- and they were good, you know, what -- >> it just may be the structure, it may be the business. again, we've got private investors our job is to take the best of what we see. and we do that. it could become we lost it to a competitor. someone else out differently than we did and was willing to price it differently. there's a whole host -- we have some bias. been an industry a longtime so i've seen certain industries be good candidates for loans and sunday not quite a good candidate for loans, so we make that distinction as well. >> thank you. this is a little broader question and i'll be happy, anyone would want to take this one on. there's been a lot of talk lately, whether it's the president's jobs bill or talk that was related to the debt ceiling debate that occurred last summer, and various things about increasing taxes.

in one capacity or another on investors, or the top 1% are paying their fair share but i don't think it's really the top 1% they're talking about. they are talking about a lot bigger percentage of that it is not paying their fair share. what effect would actually increasing taxes, especially in these economic times, what sort of effect do you believe that would have on the economy overall in small business investing in particular? >> that's actually a topic that we watch in the banking industry quite closely. we were starting to see increase in the application volume the summer, and then when the media started paying a lot of attention to the debt ceiling discussions that were happening, you could literally just watched the application volume drop. so what's happening in small business owners are tuning into anything that creates a level of uncertainty and i responded to by holding back, they be sitting

on the sidelines, not expand, not hiring new people. they've learned to do more with less. they are just not sure what's happening. anything we can do to keep certainty around, that's taxes, any regulation, anything that is coming out that creates a level of unknown, they are doing a wait and see and that's not helping us to get them back in again. >> thank you. spent anybody else, mr. chairman? spent i would just chiming. we heard the same thing from our business mentors but it's just the uncertainty, whether it is taxation or regulation, and it just, you know, it puts them or on the sidelines from a borrowing perspective. we definitely hear evidence of that. >> thank you very much. i yield back. >> i have a question. then you told us that your

credit union hired an expert, wright, on the 7a? >> correct. >> so how can we encourage all the credit unions who might not have needed the resources to hire someone to be able to participate in the sba loan program? >> i think there's a couple different ways. one of them i mentioned was the increasing of the cap because credit unions can only been up to 12.25% of the vote. so that itself is -- only about 2200 credit unions out of 7300 offer business loans. so that in itself would help credit unions to do more sba lending. the other would be the reintroduction and passage of the credit union small business lending act. there are provisions in there that are designed to encourage more sba lending. back to your comment about our expertise. if we did not have the expertise

on staff we would not be doing a number of sba loans that we're doing today. we would not be winning sba towards if we did not have the expertise on staff. it's critical because of the paperwork intensive process. >> let me ask you a quick question, afford you to clarify to me. they guarantee portion of sba loans do not count against the membership cap, is that right? >> that's correct. >> thank you. >> with that i want to thank all of you for participating today and this has been a very enlightening and time hearing, as a matter that. without i would ask unanimous consent that all mentors have final -- without any objection, it is so ordered. and with that, the hearing is adjourned. thank you. [inaudible conversations] [inaudible conversations]

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>> if you missed any of this hearing you can see it tonight at 8:00 eastern on c-span3. and anytime at c-span.org. the co-chairman of the joint deficit reduction committee, senator patty murray, said today that she's hopeful the group will be able to come to an agreement.

>> i don't want every story to be 1800 words spent last month joe evers and became the first woman to hold the post of executive editor at "the new york times." she believes that times is more irreplaceable than ever but also envisions the few changes. >> there is a certain lack of discipline, sometimes a point is repeated too many times in a story, or they are three quotes making the same point where one would do. and i would like to see a variety of stories. >> she will discuss her career, her new book and the future of the time sunday night on c-span's q&a. >> president obama announced a new plan today to reduce student loan debt. he wants to cap loan payments to 10% of the barbers in, come and lunch will be forgiven after 20 years. the president made the announcement this afternoon at the university of colorado in denver.

[cheers and applause] [cheers and applause] hello, denver. [cheers and applause] thank you. thank you. well, it is great to be back in colorado. [cheers and applause] and it is great to be here at cu-denver. i can have some pretty good members -- memories about

denver. we had a little gathering here of two years ago, at mile high. so, coming here gets me fired of even when it's snowing outside, i'm fired up. [cheers and applause] i don't know where else you can go sledding in halloween. [laughter] what's up, what's up with the snow? is this actually late? this is late for denver. well, i want to start by thanking the wonderful introduction and for sharing her story, which i know resonates with a lot of young people here. i want to thank your outstanding governor here, who is in the house. [cheers and applause] there he is.

the mayor of denver, michael hancock. in the house. [applause] the lieutenant governor, joe garcia, is in the house. [cheers and applause] and one of the finest public servants, somebody you are wise enough to elect and then reelected as tonight state senator, michael bennet is in the house. [cheers and applause] you guys do a good job when it comes to the electing officials from colorado, i just want you to know. you have a good eye for talent. now, and i love you back. [cheers and applause] i've been doing a lot of traveling lately, and the reason i've been hitting the road so much is because the folks i'm talking to in cities and small

towns, communities all across america, let's face it, they are making a little more sense than the folks back in washington. [cheers and applause] here in colorado, you've got folks who are spending months, some years, looking for work. you've got families are making tough sacrifices just to pay the bills. or the mortgage, or college tuition. and americans know we need to do something about it. and i know this is especially hard for a lot of young people. you know, you guys came of age at a time of profound change. globalization, technology have all made the world much more competitive.

although this offers unmatched opportunities. i mean, the way the and world is now linked up in sync up means that you can start a business that is global from your laptop. but it also means that we're going to have to adapt to these changes. and for decades to many of our institutions, from washington to wall street, failed to adapt. or they adapted in ways that didn't work for ordinary folk. for middle-class families, for those aspiring to get into the middle class. we had an economy that's based more on consuming things and piling up debt than making things and creating value. we had a philosophy that said if we cut taxes for the very wealthiest and we got

environmental regulation and we don't enforce labor regulation, and somehow, you know, if we let wall street just write the rules, that somehow that was going to lead to prosperity. and instead, what it did was culminate in the worst financial crisis and the deepest recession since the great depression. now, for the last three years we've worked to stabilize the economy, and we've made some progress. an economy that was shrinking is now growing, but too slowly. we've had private sector job growth but it's been offset by layoffs, teachers, firefighters, public sector. and we've still got a long way to go. and now as you young people are getting ready to head out into the world, i know you're hearing stories from friends and

classmates, siblings who are struggling to find work, and you're wondering what's in store for your future. and i know that can be scary. [cheers and applause] so,. [inaudible] all right. thank you, guys. we are looking at right now. no decision has been made. and i know your deep concern about so we will address it. [inaudible] >> now, so here's what i also know. and i know that's true for folks who are concerned about the environment, folks were concerned about foreign policy, but also folks who are concerned about the economy. when i look out at all of you, i

feel confident, because i know that as long as there are young people like you who still have hope and are still inspired by the possibilities of america, then there will be better days for this country. i know that we're going to come through this stronger than before. and when i wake up every single morning, what i'm thinking about is how do we create an american in which you have opportunity, in which anybody can make if they try, no matter what you look like, no matter where they come from, no matter what race, what creed, what faith. and the very fact, the very fact that you are here investing in your education, the fact that you're going to college, the fact that you're making an investment in your future tells me that you share my faith in america's future.

[cheers and applause] you inspire me. your hope and your dreams and your opportunities. and so, the truth is the economic problems we face today didn't happen overnight and they won't be solved overnight. the challenges we face on the environment or on getting comprehensive immigration reform done, on all these issues, we are going to keep on pushing. and it's going to take time to restore a sense of security for middle-class americans. it's going to take time to rebuild an economy that works for everybody, not just those at the top. [cheers and applause] but there are steps we can take right now to put americans back to work and give our economy a boost. i know it. you know what. the american people know it. you've got leaders like michael bennet and mark yudof and diane

to get better looking out for you, but the problem is there are some in washington -- there are some in washington who don't seem to share the same sense of urgency. you know, last week for the second time this month, republicans in the senate blocked a jobs bill from moving forward. [booing] now, this is a jobs bill that would have meant, would have made nearly 400,000 teachers and firefighters and first responders back on the jobs. [applause] it was, it was a kind of proposal but in the past have gotten democratic and republican support. it was paid for, by asking those who have done the best in our society, those who have made the most, just do a little bit more.

and it was supported by an overwhelming majority of the american people. but they still said no. and it doesn't make sense. how can you say no to creating jobs at a time when some people are looking for work? it doesn't make any sense. so, the truth is the only way we can attack our economic challenges on the scale that is necessary, the only way we can put hundreds of thousands of people, millions of people back to work is if congress is willing to cooperate, the executive branch and we're able to do some bold action. like passing the jobs bill. [cheers and applause] that's what we need. and that's why i'm going to keep, i'm going to keep forcing these senators to vote on commonsense paid for jobs proposals, and i'm going to need you to send them the message. you don't need to tell michael bennet. he's already on the page.

but i'm going to need you guys to be out there calling and tweeting, all the stuff you do. [laughter] .. >> so where they won't act, i will. [cheers and applause] and that's why in recent weeks we've been taking a series of executive actions. we decided we couldn't stop, we couldn't just wait for congress to fix no child left behind.

we went ahead and decided let's give states the flexibility they need to meet higher standards for our kids and improve our schools. [cheers and applause] we said we can't wait for congress to help small businesses, we're going to go ahead and say to the federal government, pay small businesses faster if they're contracted so they've got more money and they can start hiring more people. [applause] we said we're not going to wait for congress to fix what's going on in our health care system, we eliminated regulations that will save hospitals and patients billions of dollars. [applause] and yesterday, yesterday we announced a new initiative to make it easier for veterans to get jobs, putting their skills to work in hospitals and community centers. [cheers and applause] on monday we announced a new policy that will help families whose home values have fallen to refinance their mortgages and to save up to thousands of dollars a year. all these steps aren't going to

take the place of the needed action that congress has to get going on. they're still going to have to pass this jobs bill, they've got to create jobs, they've got to grow the economy, but these executive actions we're taking can make a difference. and i've told my administration we're going to look every single day to figure out what we can do without congress. what can we do without 'em? [cheers and applause] that's the step that can save you money and make government more efficient and responsive and help heal this economy. so we're going to be announcing these steps on a regular basis, and that's why i came to denver today, to do something that will be especially important to all of you here at cu denver and millions of students and former students all across america. [cheers and applause] i mentioned that we live in a global economy where businesses can set up shop anywhere where

there's an internet connection. so we live in a time when with over the next decade 60% of new jobs will require more than a high school diploma. and other countries are hustling to outeducate us today so they can outcompete us tomorrow. they want the jobs of the future. i want you to have those jobs. [cheers and applause] i want americans to have those jobs. i want america, i want america to have the most highly skilled workers doing the most advanced work. i want us to win the future. so that means we should be doing everything we can to put a college education within reach for every american. [cheers and applause] that has never been more important. it's never been more important, but let's face it, it's also never been more expensive. there was a new report today,

tuition gone up again. on average. much faster than inflation. certainly much faster than wages and incomes. be over the past -- over the past three decades, the cost of college has nearly tripled. ask that is -- and that is forcing you, forcing students to take out more loans and rack up more debt. last year graduates who took out loan left college owing an average of $24,000. student loan debt has now surpassed credit card debt for the first time ever. now, living with that kind of debt means making some pretty tough choices when you're first starting out. it might mean putting off buying a house. it might mean you can't start a business idea that you've got. it may mean that you have got to wait longer to start a family. or, certainly, it means you're putting off saving for

retirement because you're still paying off your student loans. and when a big chunk of every paycheck goes towards student loans instead of being spent on other things, that's not just tough for middle class families, it's painful to the economy and harmful to our recovery because that money's not going to help businesses grow. and let me say this, this is something michelle and i know about firsthand. i've been in your shoes. we did not come from a wealthy family. i know -- [cheers and applause] i, you know, i mean, i was raised mostly by a single mom and my grandparents, and michelle, michelle, you know, she had sort of a leave it to beaver, perfect family. [laughter] you know, but -- she did. they're wonderful.

but, you know, her dad was a blue collar worker, and her mom stayed at home, then when she did go to work, she worked as a secretary. so our folks didn't have a lot of money. we didn't even own our own home, we represented most of the time that -- rented most of the time that we were growing up. so by the time we both graduated from law school, we had between us about $120,000 worth of debt. you know, we, we combined and got poorer together. [laughter] so we combined our liabilities, not our assets. [laughter] so we were paying more for our student loans than we paid on our mortgage each month. and, look, obviously, we were lucky to have gotten a great education, we were able to land good jobs with a steady income,

but it still took us almost ten years to finally pay off all our student debt. and that wasn't easy, especially once we had malia and sasha because now we're supposed to be saving for their college, but we're still paying for ours. [laughter] so the idea is how do we make college more affordable, and how do we make sure you are burdened with less debt. now, college -- keep in mind, college suspect just one of the -- isn't just one of the best investments you can make in your future, it's one of the best america can make in our future. so we want you in school. [cheers and applause] we want you in school. but we shouldn't saddle you with debt when you're starting off. so that's why since taking office we've made it a priority to make be college more affordable and reduce your student loan debt.

last year we fought to eliminate these taxpayer subsidies that were going to big banks. they were serving as middlemen in the student loan program. some of you may have heard about this. so even though the loans were guaranteed by the federal government, we were still paying banks billions of dollars to be pass-throughs for the student loan program. and we said, well, that's not a good idea. [laughter] that's not a good -- now, of course, there were some in washington who opposed me on this. that's surprising. [laughter] i know, shocking. [laughter] so you had some republicans in congress who fought us tooth and nail to protect the status quo and to keep these tax dollars flowing to the big banks instead of going to middle class families. one of them said changing it would be an outrage. the real outrage was letting banks keep these subsidies while students were working three jobs just to try to get by. [cheers and applause]

that was the outrage. and that's why, that's why we ended the practice once and for all to put a college education within reach of more americans. then in last year's state of the union address i asked congress to pass a law that tells one million students they won't have to pay more one million studenty won't have to pay more than 10% of their incomes in student loans, and we won that fight too. [cheers and applause] and that will take effect by -- that law is scheduled to take effect by the time freshmen graduate. but we decided let's see if we can do a little bit more. so today i'm here to announce that we're going to speed things up. [cheers and applause] we're going to make, we're going to make these changes work for students who are in college right now. [cheers and applause] we're going to put them into effect not three years from now,

not two years from now, we're going to put them into effect next year. [cheers and applause] because our economy needs it right now, and your future could use a boost right now. [applause] so here's what this is going to mean. because of this change, about 1.6 million americans could see their payments go down by hundreds of dollars a month. [cheers and applause] and that includes some of the students who are here today. [cheers and applause] what we're also going to do is we're going the take steps to consolidate student loans so that instead of paying multiple payments to multiple lenders every month, and let me tell you, i remember this. i remember writing, like, five different checks to five different loan agencies, and if you lost one that month, you couldn't get all the bills together, and you missed a payment, and then suddenly you were paying a penalty. we're going to make it easier for you to have one payment a

month at a better interest rate. [cheers and applause] and this won't cost, it won't cost taxpayers a dime, but it will save you money, and it will save you time. [cheers and applause] and we want to start giving students a simple fact sheet. we're going to call it know before you owe. [laughter] know before you owe. so you have all the information you need to make your own decisions about how to pay for college. and i promise you, i wish michelle and i had had that when we were in your shoes. so these changes will make a difference for millions of americans. it will save you money. it will help more young people figure out how to afford college. it can put more money in your pocket once you graduate. and because you'll have some certainty knowing that it's only a certain percentage of your income that is going to pay off your student loans, that means

you will be more confident and comfortable to buy a house or save for retirement, and that will give our economy a boost at a time when it desperately needs it. [cheers and applause] so this is not just important to our country right now, it's important to our country's future. when michelle and i tuck our girls in at night, we think about how we are only where we are because somewhere down the line somebody decided we're going to give everybody a chance. doesn't matter if you're not born wealthy, it doesn't matter if your dad's, you know, disabled or, you know, doesn't own his own home. it doesn't matter, you know, if you're a single mom, had to take food stamps. you know, you're still going to get a shot. you're still going to get an education. this country gave us a chance. [applause] and because of our participants

and their -- our parents and their generation worked and sacrificed, they passed on opportunity to us. can they didn't do it alone -- and they didn't do it alone. it was something that we as a country did together, and now it is our turn. because the dream of opportunity is what i want for you, and i want for my daughters, and i want them for your children, i want them for all young people because no matter how tough times are, no matter how many obstacles stand in our way, we are going to make the dream that all americans share real once again. and that starts right now. [cheers and applause] it starts with you. [cheers and applause] it starts with you. i am gonna keep doing everything in my power to make a difference for the american people. but, denver, i need your help. [cheers and applause] some of these folks in washington still aren't getting the message. i need your voices heard. i especially need your young --

young people, i need you guys involved, i need you active, i need you communicating to congress, i need you to get the word out. like i said, tweet 'em. [laughter] tweet 'em. they're all tweeting all over the place. you tweet 'em back. [laughter] whatever works for you. tell them, do your job. tell them, the president has ideas that in the past have been supported by democrats and republicans. there's no reason not to support them just to play politics. [cheers and applause] it's time to put country ahead of party. it's time to put the next generation ahead of the next election. [cheers and applause] it's time for all of us in washington to do our job. it's time for them to do their job. [cheers and applause] too many people out there are hurting. too many people are out there hurting for us to sit around and doing nothing. and we are not a people who just sit around and wait for things to happen. we're americans.

we make things happen. [cheers and applause] we fix problems. we meet our challenges. we don't hold back, and we don't quit. and that's the spirit we need right now. so, denver, let's go out and meet the moment. let's do the right thing, and let's go once again show the world just why it is the united states of america is the greatest nation on earth. [cheers and applause] god bless you. god bless the united states of america. thank you. [cheers and applause] ♪ ♪ ♪ ♪ finish. ♪ ♪ ♪ ♪

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>> coming up tonight on c-span at 8 eastern, a house homeland security committee hearing on iran's alleged covert operations in the u.s. here on c-span2 at 8, a hearing of the joint deficit reduction committee. the director of the congressional budget office testified today. and over on c-span3 at 7 p.m. eastern marine corps commandant james amos speaking to the council on foreign relations. >> middle and high school students, it's time to get those cameras rolling for this year's c-span student cam video competition. make a 5-8 minute video on this year's theme, "the constitution and you." send it to c-span by the deadline of january 20th, and you could win the grand prize of $5,000. for complete details go to studentcam.org. >> although this headline proved

false, dewey's defeat by harry truman was iconic, and he continued to impact political history. this week on "the contenders," follow the career of thomas e. dewey, a dominant force in new york state politics as three-time governor and influencing national old ticks in the elections of dwight eisenhower and richard nixon. "the contenders" live from the roosevelt hotel in new york city friday at 8 p.m. eastern on c-span. >> president obama announced plans last week to send 100 u.s. military advisers to uganda and several other african nations. the u.s. troops will help those countries fight a rebel group. the house foreign affairs committee held a hearing yesterday on the issue. florida republican ileana ross late anyone chaired the almost two-hour hearing.

>> the committee will come to order. that was my gavel. we improvised. but before we begin, i'd like to acknowledge the presence of ms. evelyn opoko. evelyn s that you right there? thank you. evelyn, if you could stand a second. thank you. e-in is an lra -- evelyn is an lra survivor who has traveled to washington to witness this important hearing firsthand. [applause] we thank her for coming and for her continued efforts on behalf of children impacted by this horrific conflict. after reck thesing myself and the ranking member, mr. berman, for seven minutes each for our own opening statements, i will recognize the chair of the african global civil rights committee and the chair of the ranking terrorism non-proliferation subcommittee also for three minutes each for

their opening remark marks. the witnesses' prepared statements will be made a part of the record, and members may have five legislative days to insert statements and questions for the record subject to the length limitations in the rules. the chair now recognizes herself for seven minutes. the department of state has included the lord's resistance army, lra, on the terrorism exclusion list since 2001. in 2008 its leader, joseph coney, was designated as a specially-designated global terrorist. fdg. the lra is responsible for one of the longest, most violet yet most underreported conflicts in africa, a conflict which has spread from northern uganda to south sudan, the democratic republic of the congo and central african republic. and threatens costly u.s.

investments in peace and stability in the region. it is a predatory guerrilla force which has perpetrated some of the most deplorable human rights atrocities known to man. the lra makes no attempt to hold territories, but murders, mutilates, tortures, rapes and loots with impunity. they move in small groups with limited communication striking remote villages, slaughtering civilians, abducting women and children to serve as fighters, porters and sex slaves. it has been estimated that more than 80% of the lra is comprised of abducted chirp. children. these children are forced to commit atrocities in front of their families and participate in bizarre indoctrination rituals before being forced to fight. those who manage to escape find it difficult, if not impossible, to return home. but we are not here today to determine whether joseph kony is

evil. we know that he is. we are here because in may 2010 the president signed into law the lord's resistance amount disarmament and northern uganda recovery act with the backing of thousands of committed advocates including from my own district and with over 200 co-sponsors in the house and some 64 in the senate, the act enjoyed overwhelming support. it required the president to develop a comprehensive strategy to deal with the lra and establish that it shall be the policy of the united states to, quote, provide political, economic, military and intelligence support for viable, multilateral efforts to protect civilians, apprehend or eliminate top commanders and disarm and demobilize remaining lra fighters, end quote. the president's strategy was released in november 2010. it sets four strategic objectives. one, increase protection of civilians, apprehension, two, or

removal of kony and the other senior lra commanders; three, promotion of defections from the lra, and the disarmament, demobilization and reintegration of remaining lra combatants. and lastly, provision of humanitarian relief to affected commitments. the strategy emphasized that the u.s. will, quote, work with the national government and regional organizations, end quote, to accomplish these goals. what steps did the u.s. undertake in the last year to achieve the objectives outlined in the strategy? that is what we will be focusing on with our witnesses. further, i would like to ask our distinguished witnesses to summarize for the committee what progress has been achieved toward meeting the strategic objectives before the president's recent announcement that u.s. troops were being deployed to central africa. on october 14th, 2011, the president transmitted a report consistent with the war powers resolution informing the congress that, quote, in

furtherance of the congress' stated policy, i have authorized a small number of combat-equipped u.s. forces to deploy to central africa to provide assistance to regional forces that are working toward the removal of joseph kony from the battlefield be, end quote. he first stated, quote, although the u.s. forces are combat-equipped, they will only be providing information, advice and assistance to partner nation forces, and they will not themselves engage lra forces unless necessary for self-defense, end quote. as the sole house committee of jurisdiction for the lra act and the primary committee of jurisdiction over the war powers act, it is incumbent upon us to insure that this action complies with both the letter and the spirit of the law and, further, u.s. national security interests. pertinent information relateed to this information such as the anticipated cost, the scope, the duration of the deployment was o

hitted from the report to congress. we need clarity on the rules of engagement, the mission parameters and the definition of success as well as how u.s. military presence in central africa furthers u.s. national security interests and the objectives outlined in the president's november 2010 strategy. what is the precise nature of the assistance that will be provided to our partners, and how will these partners be vetted? does the submission of the october 14th report to congress start the clock on reporting an authorization requirement consistent with the war powers resolution? and if not, why? does the administration interpret the lra act as an authorization of the use of force? we intend to address these issues and more throughout the course of the hearing. thank you to assistant secretary, the assistant secretary for attending and the ambassador for making yourselves

available to testify before this important issue today. we thank both of you gentlemen, and i now am pleased to recognize my good friend, mr. berman, the ranking member, for his opening remarks. >> thank you very much, madam chairman. two weeks ago the obama administration announced that it would send about 100 u.s. military advisers to central africa to support regional efforts to defeat the lord's resistance army or lra. following that announcement, many questions were raised about the deployment; why the lra? why now? and what specific role will our forces play on the ground? this timely hearing provides an excellent opportunity to discuss those important issues. as noted in president obama's october 14th letter to the speaker and as reflected in the title of this hearing, it is congress that played a leading role in putting the lra on our foreign policy agenda.

for years the house and senate passed resolutions drawing attention to the lra's reign of terror. and in 2010, as noted, congress passed the lord's resistance early disarmament and northern uganda recovery act. that bipartisan legislation, which president obama signed into law, required the administration to develop a comprehensive strategy for dismantling the lra and protecting civilians throughout the region. we've all heard about the horrors perpetrated by the lra and its deranged leader, joseph kony. mass killing, rape, mutilation of innocent civilians, children forced to kill their neighbors and family members, more than 20,000 children abducted and forced to become soldiers or sex slaves, nearly two million people displaced and tens of thousands murdered. while the lra may not pose a

direct national security threat to the u.s. in narrowly-defined terms, it does threaten the stability of a large swath of central africa, the size of california. this region includes south sudan, the newest nation in the world whose independence efforts the u.s. strongly supported, you uganda, one of america's strongest allies against al-qaeda, the central african republican -- the central african republic and the democratic republic of congo, two countries that face senate challenges policing their territories and who civilians are currently suffering the bankrupt of the lra's atrocities. i believe it is squarely in our national interest to build the capacity of allied forces so that they can fight bad actors on their own and to support our allies when they need assistance

as we expect them to do for usment the u.s. and the international community have long recognized that the lra poses a serious threat to the stability of central africa and have taken a number of steps to stop their barbaric behavior. in 2005 the international criminal court indicted joseph kony and three of his commanders for crimes against humanity. the u.s. placed the lra on the terrorist exclusion list, and joseph kony on the specially-designated global terrorist list. from 2006 to 2008, uganda tried to negotiate a peace agreement with the group only to have kony walk away from the final deal. uganda, southern sudan and the democratic republic of the congo then launched a joint military operation but failed to apprehend kony or stop the lra. i'm very hopeful that the administration's comprehensive

strategy, including the deployment of a modest number of combat-equipped advisers, will finally help turn the tide in the struggle against the lra. while most of the focus has been on the military dimension of this strategy, it's important to remember that civilian-led programs are also an integral part of this effort. these include constant diplomatic engagement with all of the central african countries to maintain strong cooperation, a robust demobilization, disarmament, repatriation, resettlement and reintegration program, effective public awareness campaigns to encourage child soldiers and mid-ranking lra members to abandon the group, and reconstruction assistance for devastated communities. i look forward to hearing from our witnesses about the goals and expectations for the military deployment as well as the details of these critical civilian efforts. thank you, madam chairman. >> thank you, mr. berman, for your owning statement.

i'm leaded to yield three -- i'm pleased to yield three minutes to mr. royce, the chairman of the subcommittee on terrorism, non-proliferation and trade. >> thank you, madam chairman. the lra has been pillaging central africa for a generation now, and under the sadistic joseph kony that group exists for one reason: to kill and to capture and to resupply for the next plunder. there is no other reason for its being, for the lord's resistance army's existence. and this savagery has landed kony and his lra on u.s. terrorism lists. and his targets are children. and 70,000 girls and boys have been abducted. of and i'm, i must say it's good to see evelyn here, and we appreciate her efforts on the behalf of other abducted girls and boys. but one boy told how he was forced to kill eight other children.

the victims were surrounded in a circle, children were forced to take turns bashing them with a bat in a collective kill. now, if this is not a crime against humanity, i don't know what is, and it was orchestrated by kony. and with these horrors in mind, congress passed legislation to counter the lra threat. we pressed the administration to be bold, to develop a plan to help apprehend or remove joseph kony and his top commanders from the battlefield. a broad coalition of young activists were key to passing this legislation. so the administration is now sending small teams, specializing in training foreign units to give information and advice. this is the reason the u.s./africa command was created. this mission which recognizes the need for a light foot print is targeted assistance. this is far from the peace-keeping model that has proven unsuccessful and wasteful elsewhere.

the u.s. has made a big commitment in south sudan. the lra threatens to destabilize this new country. we provided humanitarian relief when lra attacks have forced millions to flee their homes. this deployment seeks to eliminate the root of these problems and, frankly, the need for these commitments. the africans aren't sitting on their hands. the ugandans are fighting with al-qaeda terrorists in somalia, but they'd like some help getting kony. that is a fair deal. sometimes just getting rid of one person does make a big difference. history is full of captivating leaders with bad ideas who do great damage. lie bean charles taylor devastated neighboring she yea raleigh krone. kony's removal won't guarantee peace, but it is the one thing that makes peace possible in that region. we tried this mission once before against kony in late 2008.

let's succeed now at sidelining this terrorist. thank you. i yield back. >> thank you very much, mr. royce. i'm pleased to yield three minutes to mr. payne, the ranking member on the subcommittee on africa global health and human rights. >> thank you, madam chair. thank you very much for calling this very important hearing and, ranking member berman. after years of congressional bipartisan support and resounding support from the american people, the administration has taken action to bring an end to the predatory military group known as the lord's resistance army or the lra. over the last nearly 25 years, the lra has murdered, raped, abducted tens of thousands of innocent men, women and children. in june 2011 alone, the lra reportedly carried out as many as 52 attacks killing 32 civilians and abducting 39 while looting the villages. i was in uganda in the early

'90s when we heard about the lord's resistance army who at that time with the support of bashir from sudan was reaping havoc on the community. there is no doubt that without bold and sustained u.s. action, joseph kony, the brutal leader of the lra and his gang, will increase their attacks on civilians and abduction of children to be soldiers. kony has taken advantage of the growing security vacuum in the lra-affected areas and appears to be regrouping and reorganizing the lra with a large number of senior commanders recently from the central africa republic. in august i traveled with care to eastern congo where i met with women who were raped and sexual violence was used as a weapon of war by joseph kony. i spoke to women there who had been victimized, and some of them lost their children, ages 11 and 12, abducted from their

villagings. i'm looking forward to hear from our witnesses today about the details of deploying the strategy that will be used. i was very pleased that my friend, senator inhofe, recently stated on the senate floor the statement that the lra must be eliminated. and he said that we are not at war with the lra, the troops are specifically prohibited from any kind of combat aside from self-defense. as you know, last year we passed the lra resistance disarmament in northern uganda act, and the bill directs the administration to develop plan. the president announced expressively that the troops will follow the letter of the law. i have gotten in my district alone over 13,000 people who have called or have written saying that we should do something to eliminate this scourge from the face of the

earth. and i strongly support the president's action. we must eliminate this murderer of known people, and we have a right to protect. i urge, um, our government to go after this with all earnest, with training the troops in uganda to do the job. with that, i yield back the balance of my time. >> thank you very much, mr. payne, for that eloquent statement. i will now yield one minute to any members who wish to make opening statements. mr. fortenberry had indicated that he would like to make an opening statement. he's recognized for one minute. >> thank you, madam chair, for convening this important and timely hearing. i believe that it's important for the public to know that we never take lightly the use of military force and personnel around the world. but the u.s. forces are engaged in more than 50 countries around

the world and more than a thousand forces are providing support in more than 20 african countries alone. many americans are rightly concerned about the magnitude of our military presence throughout the world, but i am hopeful that this limited military and technical assistance mission which has been discussed and approved on multiple occasions by the house and senate is critical to both our national security as well as global stability. unfortunately, i fear there is widespread misinformation about the current mission, and even in defense of the lord's redissans army. -- resistance army. this body and good americans watching the hearing right now know that the lord's resistance army has terrorized central africa with impunity for more than 25 years. its leader, joseph kony, is a war criminal guilty of unspeakable -- >> the gentleman's time has expired, thank you. mr. carnahan is recognized for one minute. >> thank you, madam chair and ranking member berman, for holding this hearing.

regarding the u.s. government strategy to end atrocities of the lord's resistance army in central africa. with the administration's recent deployment of 100 military advisers to the region, this hearing is especially timely and helpful. the lra led by joseph kony has terrorized civilian populations in uganda, south sudan, central africa republic and the democratic republic of con duo for over two decades. its tactics have included the employment of child soldiers, sexual violence, widespread killings, abductions and enslavement. the united nations estimates that 385,000 people have been displaced as a result of lra brutality. last congress this body took an important be step in passing the lra disarmament in northern uganda recovery act, reaffirming the u.s. efforts to support regional partners in combating the lra. the department of military

advisers -- the deployment is but one pillar of the comprehensive strategy. i look forward to an update on this broader approach including humanitarian assistance and reintegration of postconflict recovery. madam chair, i yield back. >> thank you very much. very pleased to yield to my friend, ms. burkle. >> thank you, madam chair. in the last decade, the lra has killed thousands of innocent civilians, displaced hundreds of thousands of people and most horrificically, used thousands of abducted chirp to carry out its campaign of terror against the people of uganda and their neighbors in central africa. the president's recent authorization of combat-equipped u.s. forces to deploy in central africa to work with regional partners towards the removal of joseph kony is ostensibly in support of the 2010 strategic objectives. i look forward to hearing the perspectives from our witnesses here this morning on the wisdom and on the effectiveness of the

proposed actions involving u.s. forces in central africa. thank you, madam chairman, i yield back. >> i thank the gentlelady. mr. connolly from virginia is recognized. >> thank you, madam chairman, and thank you for our witnesses today. the lra is a destabilizing presence in africa, and the decision by the president to dispatch 100 military advisers to assist in the effort to address that threat, um, is consistent, it seems to me, with congressional intent in the passage of previous legislation. it is important, and we need to hear in the testimony today, however, exactly what the rules of engagement are going to be and how the united states in a very specific and can targeted way -- and targeted way which i certainly support can be of assistance without being dragged into somebody else's fight in central africa. the president has demonstrated leadership in libya, in the fight against terror im, and i think he's demonstrated leadership here in this limited strategic and targeted

intervention. i yield back. >> thank you, sir. mr. manzullo, the chair of the subcommittee on asia and the pacific, is recognized for one minute. >> thank you, madam chair. for calling this important hearing. the lra is without a doubt a heinous and horrible group that have brutally murdered, tortured and raped hundreds of thousands of people in uganda, in the border regions between the central africa republic, south sudan and the democratic republic of congo. and in their reign of -- ending their reign of terror is, obviously, welcome. our concern is that this mission may be an expansion of u.s. military presence in a role that does not directly bolster the national security of our nation, including the announcement that this was occurring, i believe it came on a friday amp just before -- afternoon just before members were breaking for a week to go back for our district work periods.

um, i have a lot of concerns, a lot of anxious moments about whether or not the number of troops won't grow to 200, 300, even more. but with this in mind and despite having these concerns, i'll try to reserve judgment of this deployment until there's more information regarding the size and the scope of the operation including an exit strategy. thank you. >> i thank the gentleman. and now the chair is pleased to welcome our witnesses. first, i would like to welcome donald yamamoto, he is the principle deputy assistant secretary for african affairs. he previously served as the u.s. ambassador to the federal democratic republic of ethiopia from november 2006 to july of 2009. deputy assistant secretary of state in the bureau of african affairs from 2003 to 2006, and u.s. ambassador to the republic of jabuti from 2000 to 2003. we thank you for being here, mr. ambassador. and then we welcome

mr. alexander vershbow. he is currently the assistant secretary of defense for be international security affairs, isa. prior to his appointment he served as u.s. ambassador to the north atlantic treaty organization from 1998 to 2001. u.s. ambassador to the russian federation from 2001 to 2005 and u.s. ambassador to the republic of korea from 2005 to 2008. i'd like to, kindly, remind our witnesses to keep your oral testimony to no more than five minutes, and without objection the witnesses' written statements will be inserted into the record. we will begin with you, mr. ambassador yamamoto. >> thank you so very much, madam chairwoman. congressman berman and the other members of this committee, thank you so very much for having this hearing today on a very important and very difficult topic. and for the opportunity to brief this committee on the implementation of the ongoing

u.s. strategy to help our regional partners mitigate, eliminate the threat posed by the lord's resistance army. we are deeply grateful for congress' widespread report of the recovery act that was signed last year. the legislation sent a very strong message not only the support of congress, but of the american people. that we will help to protect civilians and bring an end to the lra threat. we also want to express our deep appreciation to the hundreds of thousands of americans who have mobilized and expressed their concern for the communities under siege by the lra and also the people who are here today and those who have the courage to stand up to atrocities of the lra. for two decades the lra has terrorized people across central africa. the lra has filled its ranks with abducting tens of thousands of children. from 2005 to 2006, the lra moved from uganda into the more remote

border regions of central africa republic, the democratic republic of the congo and what is now known as the republic of southern sudan. in that region the lra has continued to commit atrocities. the united nations estimates that over 385,000 are currently displaced in this region as a result of the lra activities. and according to the u.n., there have been over 250 attacks attributed to the lra this year alone. over the recent years, regional militaries have worked together to pursue the lra across a vast area of densely forested and difficult jungle terrain. they've had some success in reducing the lra's numbers and keeping them from regrouping. however, as long as the lra's leader, joseph kony, and other top commanders remain at large, the lra will continue to pose its serious regional threat can which undermines stability and development. as reported to congress in

november 2010, our strategy centers on four areas; the increased protection of civilians, apprehension and removal of joseph kony and his senior lra commanders from the battlefield, the promotion of defections from the lra in support of december armament, demobilization and reintegration of remaining lra fighters, and finally, the provision of continued humanitarian relief to afflicted areas. over the past year, the united states has continued to work with the united nations, the african union and the regional governments to sustain an increased diplomatic and military pressure on the lra. we have provided logistical support, training to the militaries. the united states has a strong interest in supporting our partners in the region to develop their capacity and to address the threats to peace and security posed by the lra. the united states is now deploying u.s. military advisers to improve our support to the regional coalition to increase

the likelihood of successful military operations against the lra, and i will defer to my colleague, ambassador vershbow, in the department of defense to describe the details of those operations. we continue to consult with all the regional leaders, and they have all said, granted their consent for the deployment of these advisers to the field. remember, this is a short-term deployment with specific goals and objectives. we believe the u.s. advisers can provide critical capabilities to help regional forces succeed. we will regularly review and assess whether the advisers' effort is sufficiently to enhance the regional effort to justify continued deployment. our ambassadors and embassy staff will work closely with these advisers and make sure that they're sensitive to civilian protection, consideration and local/regional political dynamics. the state department has also deployed an officer to the reek to help coordinate -- region to

help coordinate all efforts in the field to counter the lra and work with these advisers. the administration is funding projects to help communities in the drc develop protection plans and join an early warning network. this includes setting up high-frequency radios and cell phone towers, the same kind of early warning and basic telecommunication capacity does not yet exist across the border in the c.a.r.. we recognize this gap and hope to work with our partners to help address this. we will continue to work to peacefully disarm and leave the organization ranks and to come home. and currently there are about 12,000 who have done so. over the coming months, we will continue to work with the regional governments to insure that the rank and file fighters and abductees who escape the lra have the necessary support to be reunited with their families and reintegrated into normal society. madam chairwoman, again, we appreciate, and we are grateful to you and the members of both

the house and the senate whose bipartisan support in countering the lra. thank you. >> thank you very much, sir. ambassador vershbow. >> thank you, madam chairman. congressman berman and distinguished members of the committee, i want to thank you all for inviting me today to discuss with you our efforts to assist the central african militaries encountering the lord's resistance army. as has already been mentioned, there are four pillars to the administration's comprehensive strategy to help our regional partners end the threat posed by the lra. the second of these is the apprehension or removal of joseph kony and other top lra commanders from the battlefield. that's the focus of dod's efforts and will be the focus of my remarks this morning. the uganda military in cooperation with other regional militaries has been pursuing the lra for several years, they've reduced the lra's strength significantly. the lra's moved out of northern

uganda completely. it's now operating in small groups across the democratic republic of congo and the central african republic and south sudan. while weakened, lra leader joseph kony and other top commanders remain at large, and they continue to direct the group's members to commit unspeakable atrocities. so consistent with the lra act and with the concept of the regional governments, we have deployed a small number of u.s. military personnel to the lra-affected area to advise and assist the regional forces who are pursuing the lra. the personnel deploying under this mission will travel out to field locations with the regional forces where they will work in an advisory and liaison role. these u.s. personnel, which are primarily u.s. army special forces, will collaborate with the regional militaries engaged in the counter-lra effort to strengthen information sharing,

operational cooperation and overall effectiveness. while the department of defense suspect in in the lead with regard -- isn't in the lead with regard to the other pillars of the president's strategy, our advisers working alongside regional forces will be sensitive to the challenges of civilian protection, and they'll work to insure that protection considerations are incorporated into operational planning by our partners. they'll also seek to encourage defections and to strengthen the relationships and sharing of information between regional militaries and local populations, officials and humanitarian actors. the approach we're undertaking reelects lessons learned -- reflects lessoned learned, and it's designed to fill key capabilities gaps by enhancing region forces' ability to fuse intelligence with operational planning. this approach will deliver maximum operational impact while exposing u.s. forces to minimum risk. although roughly 100 personnel

will ultimately deploy for this mission, we expect that only a portion of the personnel directly advise and assist forces in the field pursuing the lra. most of the u.s. personnel will car carry out logistical and other functions to support the advisers. to be clear, u.s. forces deploying for this mission will not themselves engage lra forces. but given the potential need to defend themselves, they will be equipped for combat. that's why consistent with the war powers resolution, the administration provided a formal report to congress on their deployment. we appreciate the strong congressional interest in and support for this effort, and we are committed to continuing to engage with the congress to keep you informed about the progress of our effort as it moves forward. i would say this is a great example of a joint initiative between the executive and legislative branches. despite the strong bipartisan support, we know there are still many questions. many of them were posed by you,

madam chairman, and by mr. berman at the outset. i'd like to address several of these questions in the remainder of my remarks. first, regarding the purpose and timing of the deployment, we're providing advisers to the regional forces because joseph kony and the other senior leaders have proven unwilling to end the conflict peacefully and have continued to commit atrocities against innocent civilians. as you know, there was an opportunity for negotiated peace agreement during the talks in 2006, 2008, but they ended when kony refused to sign and conducted new attacks and abductions. so regional governments have had to continue to pursue a military approach to end the lra threat. as for our regional partners, we've provided significant assistance to the region's militaries in recent years training the be 91st -- 391st

batallion of the democratic republic of congo's armed forces, providing equipment to the armed forces of the central african republic and supporting the uganda people's defense force so it can both counter the lra and maintain critical presence in somalia. but we think despite the assistance to date, the ugandan and other militaries would benefit from increased capacity to acquire and process actionable information on the locations of lra leaders and to convert that information quickly into operational plans. the u.s. advisers deploying to the operation have the right skill sets to help address these capability shortfalls, and the specific timing of the deployment was predicated in part upon the availability of the appropriate u.s. forces. >> thank you. maybe we'll get to the rest -- >> okay. i have address measuring success and what are the u.s. national interests. i can either go on --

>> thank you very much. thank you to both of you for excellent testimony. we will begin our question and answer segment now. um, i wanted to ask you if the president's october 14, 2011, report to the congress transmitted consistent with the war powers resolution triggered the reporting and authorization requirements under section 4 of the war powers resolution, and if not, why? and secondly, what is the anticipated scope, duration and cost of this deployment, and from where in the budget will those costs be absorbed, and how does this deployment square with the department of defense's effort to cut $350 billion over the next ten years? and the secretary's suggestion to the house armed services committee that cuts may force dod to pull back from africa.

ambassador vershbow. .. >> i don't know if you may have more on the legal aspects of that. i'm not a lawyer but we can give you a more detailed response for

the record. >> we would appreciate it because we have some of our members, and i come have many questions about the legal analysis of when the war powers act is triggered and what in this operation would constitute that. and your interpretation of it. >> we will do that. >> been on the cost, the scope, the duration and from where these monies would be coming. >> okay. well, first i think that the clinical for this advisory commission is to enhance the capacity of the regional forces so that they can better protect their civilians tracked on joseph kony and in the threat posed by the lra. measuring success in a number of ways. we would be looking to see whether the regional forces are able to successfully apprehend or renewed top lra commands from the battlefield. there'll be a very clear-cut

measure of success. whether we can encourage larger numbers of infections from the lra, whether we can see substantial reduction in lra attacks, and whether we can see a visible, measurable degree of professionalization from the forces engaged in this effort so that they have greater capacity, both to protect their citizens and to conduct counter lra operations. but we have made very clear that this is not an open-ended commitment as part of the decision to deploy our advisors. we have agreed that there would be a review after several months in order to assess whether our advisors are making sufficient progress toward our objectives, continued this deployment is conditional on a number of factors including a sustained commitment and sustained cooperation by the regional governments in addressing the lra threat. so, it is not open-ended. we don't have a specific

timeline that we've adopted it as i said we will be reviewing the state of affairs. >> thank you. i don't know that answer the question, but we will follow up with that. this has been going on, sadly, for so many years. what assurances can you offer that we won't be in this entrenched and expanded protracted conflict, as you point out? >> well, i think that we've already seen a lot of progress by the ugandan and other regional militaries in kentucky this mission and reducing the lra's numbers, inhibiting their efforts. so we think we're building on a fairly strong foundation, but as i said in my remarks we feel the regional forces have been limited by the capacity to acquire a process actionable information, so that getting

them the greater skills in terms of choosing intelligence with operational plans could create a significant improvement in their ability to track the leaders and hopefully take kony and other leaders out of it. >> thank you. i look forward to getting some written response is about the cost, scope, duration, where the funds are coming, and about triggering the war powers act. so if you could provide in writing i would be very grateful. mr. berman is recognized. >> thank you very much, madam chairman. just a few points on the issue raised by the gentleman from illinois, mr. manzullo, regarding briefing. the fact is that the administration, pursuant to congressional law, prepared a strategy which specifically included references to a military objective to remove

joseph kony and his top commanders from the battlefield, and u.s. assistance achieving that. it was a public document, done almost a year ago, and that doesn't even go into any class via private briefings on more specific subjects. so this has been out there for almost a year. secondly, i'd like to ask a few questions. first, the historically tense relationship between uganda and democratic republic of congo, in light of that d.c. ugandan military as the fourth leading operations in drc? or will we have some of our special forces working with the drc's 391st battalion that was trained by africom? >> thank you very much, congressman berman. on the issue of kony militarily,

i think we need to focus the approach as a multifaceted conferences approach not only militarily but it has to be also addressing the problems with the victims who have -- >> i understand that, but -- >> the other is politically, to help militarily, and militarily, economically all of these countries that are victims of kony to courtney much better to go after kony. >> will our forces be working with the democratic republic of congo 391st battalion? >> yes, that's correct. and in that effort we have, state department has trained 391st battalion, they are right now on the border area. the issue of uganda troops in the area come it has to be a coronation between drc in the ugandan troops. the issue of sovereignty is to coordinate the work between those two forces at how they

will corner of kony's forces and how they would eliminate. the issue is, i will give you an example. when we transferred the drc operation, and there was one aspect of having focus on the lra. and their coordination between these two forces. that's something we've been trying to do over the last decade. >> do you envision that our advisors will be deployed at the brigade level, at the platoon level? are they authorized to be deployed with ugandan forces in the field? or is this more of a headquarters deployment? >> thank you. as ambassador yamamoto said, first of all anything we do will

be based on local coordination and consent on the part of the respective government. and while they've all come out and supported this initiative, we take nothing for granted though the continuing consultations to ensure any steps can take to execute will be with her consent. so it's sort within the concept of operation that we deploy forces -- >> my question -- >> possibly at the platoon level, or, and/or at headquarters level. what will be most effective and our partners -- >> there's no artificial constraint on where you might deploy? >> no. but there will be full consultation -- >> i understand, but they could well be deployed at the platoon level in the field. >> that's right. but still in an advisory and assistance row. >> i understand. what will the trainers the

equipped with, our military trainers and advisers? when you say they're going to be combat equipped, that's what triggered the report. >> i'd have to give you a specific answer after thing for the record. they will basically be carrying small arms for their own self protection, and there may be other, communications gear of course. but beyond that i think, we'd like to consult with my colleagues back in the choice have to get more specific answer for the record. >> okay. thank you, madam chair. >> thank you. i would encourage the esteemed ambassador to be a little more resides about the answers to the questions that we are posing. but thank you for getting it for us later. mr. royce, the chairman of subcommittee on terrorism and nonproliferation and trade is recognized for his questions. >> yes. the question i was going to

asked has to do with reality on the ground that the ugandans have been doing some pretty heavy lifting over in somalia. and they've been fighting and dying there, and given that effort i've heard concerns that they might be a little distracted on follow through on this. and, obviously, have a different region. can you tell me your discussions with the ugandans, ambassador, how you read their willingness on this? >> i did meet with the president on separate issues, but on this issue as well we've had very close discussions with the present as will as the others. the president is fighting a multi-front conflict not only lra but also in the amazon and somalia. it does not mean that he has lost or he is distracted because of these two conflicts. he is equally focused on both

areas and both fronts. on the lra, and the violence has been perpetrated against uganda, that steals is very much in the psyche of the ugandan people. we still have 1.8 million who are displaced in the northern part. utah's 66,000 kids who are -- >> we understand that. to the extent we can keep them focused on this this will be part of our task, and then the other question is about the ugandans operating in congolese territory. how are we planning to address this? are you able to dial with the congolese on that issue? >> we spoke with president and we're trying to do processes in which he and president museveni will arrange how these forces will coordinate their forces against the lra. >> what steps are you taking to try to improve intelligence, because that's one of the big failings in the past one of the missing pieces on the location of kony and his commanders?

>> the issue is trying to get the intelligence that each of these countries have and then trying to fuse it together and then to analyze it. that's why the use of military will be very helpful in that effort. >> let me suggest though that that is somewhat limited, their intelligence is somewhat limited. you have the ability to utilize leaflets, radios, nor to try to get defectors to the extent that you can get defectors out of the lra you are going to be, you know, your boots on the ground are going to be able to advise and direct the congolese and ugandans. will u.s. personnel be deployed in that kind of an effort? >> i would suggest it be wise to do so. >> the u.s. forces will be able to help advise and train the indigenous forces in improving their skills in terms of civil affairs, outreach to local communities, encouraging as you

suggested, congressman, that people, you know, provide tips to the forces, early warning. >> we need better intel than we had in 2008 on that mission. and he do that we're going to have to sort of drive the intelligence gathering capacity by getting defectors to come in, and give us the information needed for that mission. the army special forces team's, specializing in training foreign units are going to provide advice and assistance to these units. my expectation would be that you would have at the platoon level, i would imagine the bold would be backing uganda, cordoning the logistics and intelligence and its mutations, would that be correct? >> yes, congressman.

the bold of the over all roughly 100 people would be in uganda but small teams we deploy forward. in partnership with the local forces to sort of help them improve their skills on the frontline. >> and special operations command africa is headed by rear admiral brian, he's a navy seal who previously commanded u.s. forces in the horn so he knows the region well. if he assigned to sort of oversee this operation? i was wondering how that would be engineered? >> i believe that is the case it is the under that direction, just. >> i yield back, madam chair,. >> thank you very much, mr. royce. mr. payne, the ranking member of the africa global health and human rights subcommittee is recognized. >> thank you very much. as i mentioned i was at an idp camp last month, and visited

with people from villages that have been disrupted by the lra, and they were in goma. so we see the destruction that is continuing on. i think a number of people want to know why am i going after the lra and why should we care about uganda. i think we all know that uganda has tremendous number of troops in somalia, had a chance to go to mogadishu several years ago and saw them. as a matter fact i was escorted by the ugandan troops about mogadishu and they were doing an excellent job. i think with somewhat of a responsibility, because the fact that al qaeda is supporting al-shabaab. it was al qaeda that destroyed the uss cole off again and. so it's all connected. we wonder why you have any concern. it's very clear why we got to be there. the fact that kenya now is being

attacked by al qaeda because of them going after somalis. the kenyan embassy was bombed because kenya voted with the united states most of the times in the u.n., all the time, and wasn't passionate was one of the strongest supporters of democracy around the country and they were a target where hundreds and hundreds of kenyans who died because of our relationship. so i think the business is kind of intertwined, and i think when countries are going out to support our causes around the world i think at least we have come at least a reciprocal having 100 u.s. troops trained. folks there. i did want to ask quickly, ambassador yamamoto, what impact will be elections in drc have? how's that going, and will any of this disruption of the lra impact on the election there? spent the elections in the drc

are very, very tight. it's not clear how, where the president -- whether the president kabila to be reelected or the others. the issue comes in, the commitment on the lra operations by the drc and uganda still remains pivotal and we discussed this closely with president kabila and president museveni. >> what about al-bashir, president bashir in sudan? as you know, bashir supported the lra in its formation. that's when al qaeda was in sudan. bashir supported al qaeda, and lra together. is there any, any evidence that bashir government is supporting lra today? >> we have not seen any of intelligence or evidence since

about the middle of 2002 and beyond. we have been, i guess he had very close discussions with the sudanese government on this issue. but we've not seen evidence that there is support. >> and what about the l. a. activity in southern sudan? are they there as this new country is trying to put together its government, are the lra there is in any large numbers, and what have splm been able to do, and will they be a part of the training? >> the lra has operated within sudan. of course, that you wear a 5000 who are displaced, part of them are in southern sudan as well as the ca are in drc. but the forces, lra which is now depleted probably around 150,

200 core fighters, 800 total, accompanying people are either in the ca are, drc area. and what about special advisor to the great lakes region has been suggested, didn't use the words special envoy, but is this in the making and was the prospect of that? >> we've taken it under advisement, very serious advisement, based on your recommendations and from your committee. >> and the fact that we know that there's an expansion of mobile phones and fm radio, will you be using that technology to try to get words out to ask for deflection from lra fighters? >> that's correct serve. uscg has provided cell terrorists and the use of cell phones and right now they're using uhf radio but the self

towers, they're calling an unabridged basis to say whether lra is located. so pat hickey negations and better coordination. >> thank you very much. thank you. >> thank you, mr. payne. mr. duncan of south carolina is recognized. >> thank you, madam chair. back in the spring in march or april, the deputy national security is advisor was talking about libya involvement. and he said this, i think what we're doing is enforcing a resolution that has a very clear set of goals, which is protecting the libyan people, averting a humanitarian crisis and setting up a no-fly zone. that involves kinetic military action, particularly on the front end. but again the nature of our commitment is that we're not getting into an open ended war and land invasion in libya. and according to the strap for global intelligence, since 2008 the u.s. has held efforts to capture lra commanders where the

u.s. has spent $497 million strengthening the ugandan army. presently the lra is estimated to have somewhere between 200, 400 fighters which lacks the numbers i think, or the weapons from what i understand for sophisticated insurgency. so as we delve into this i have to ask myself, and ask you guys today, before deciding to deploy approximately 100 u.s. military personnel, did the administration receive a request from uganda, drc, cra, the african union to provide this assistance? and i'll ask ambassador vershb vershbow. >> well, this is been a continuing effort as you just said, congressman. we've been working in partnership with the regional states and they have i think welcome the assistance and i think they are indicating that additional support would be needed.

we looked at the expense from 2008 when we did provide advisors to uganda at the request. >> did they specifically asked for boots on the ground, american personal? >> they understood as we have judged that they lack this critical capability fusing intelligence with operational plans that abandoning handicap to finishing the job. that they have made substantial progress in the grading lra but they're still out there, still committing atrocities. so i think the indicated they would welcome this kind of hands-on training. >> so that's what we're doing, training mainly? no predator drones? could you define kinetic military action? i'm struggling with that term. what does that mean? >> i understand the term kinetic to mean the use of actual lethal force to carry speak to so do we use kinetic military action in libya which was legal forced? >> at the front end of the

operation we his considerable kinetic force to take out the air defenses of libya as part of the first week or two weeks of operation. then most of the kinetic activity was carried out by our partners and nato allies who conducted the lion share of the airstrikes in the civil protection mission. we did continue when necessary to support the suppression of enemy. and we did on occasion use armed predators for specific targets, that no other ally had the capability to hit. >> in this action in uganda did we garner tangible financial or military support from other countries such as the u.k. and france like we did in libya or are we there a loan? >> there has been assistance. i would defer to my college you may know. >> is this a nato action? >> this is a u.s. initiative speed we have very careful coordination with french and cra

and uganda. but yes, that's true in a sense we're providing the bulk of in military training commits a. the others are doing the other part of military assistance, rehabilitation and reconciliation. >> how long to reach is that u.s. forces to be in there? and we have some sort of timetable at all? >> we don't have a specific timetable. we are talking i think months, but i wouldn't put a number on it at this point but we will review the operation in a few months to see whether it's achieving the desired effects through this enhanced qualitative change and the nature of the training we're providing comic and see whether it's happening effects on the ground in terms of further demoting the lra. >> what you define as success? >> i think we define success first and foremost on the basis of whether kony and other commanders are actually captured, whether we see further fracturing of the lra and more

defections, whether we see a tangible improvement in our partners capacities out in the field to succeed. and that includes not just the kinetic parts of it but in terms of whether they are also more capable of engaging with the local population to develop the climate in which people report on and turning lra sympathizers. >> when we put americans -- i think we need be very clear at what we do. we will need to be very clear when the president comes to congress with the war powers resolution. i'm out of time so i yield back. >> that is a much. mr. carnahan is recognized. >> thank you, madam chair, and thank you to our witnesses for being here today. i want to start with really a general question about how the u.s. is working with the international and regional partners to strengthen

coordination, in particular, what are the strategies, approaches both diplomatically and otherwise that the u.s. government is utilizing to ensure a more effective collaboration among key actors to counter lra efforts? and let me start with ambassador yamamoto. >> in that effort we have not only been talking directly to the president, president museveni, president kabila and others, at that level but also within their command structures, militarily as well as diplomatically to see how we can coordinate better on our efforts, not just militarily but comprehensively against the lra. second thing is we're talking to the african union as was to the donor community to see how we can all bring some of our own specific actions that we have, so for instance, will do the military training program, u.k.,

france, others are doing humanitarian programs. the african union is doing a lot on coordination from other countries. >> and ambassador vershbow? >> well, i would also add that what we're doing in this specific case is a subset of the product efforts that we are making throughout africa to promote professionalization in military, to promote capacity of the african countries to solve their own problems. and part of that is to invite countries to participate in both bilateral and multinational training and exercises, which hopefully would inculcate a greater pattern of cooperation among them. i think this initiative in addition to hopefully achieving the specific goal of taking joseph kony off the battlefield will also encourage greater military cooperation among the four key states involved. that would be for longer terms

to build in the region so we don't have to intervene in the future. >> let me next turn to, i guess a more particular question for these operations. is this, in your opinion, a unique model that is being used in central africa? or is this comparable to some other operations, like in the southern philippines? chairman rohrabacher led a delegation there a few months ago when we got to see a unique operation there were a limited number of u.s. military were advising, not engaging in combat, but trying to be very focused on the terrorist safe havens and training camps there. again, is this a unique model? are you drawing on others, e