Transcripts For CSPAN Congressional Oversight Commission On Lending During COVID-19 Pandemic 20240712

Commission has decided to order ourselves alphabetically. With that welcome to this virtual hearing convened by the Congressional Oversight Commission pursuant to section 4020 of title 4, subtitle of the cares act, the Commission Must conduct oversight of the 500 billion authorized for the Exchange Stabilization fund. As part of our oversight work, the commission has decided to hold this hearing today which will exam examine the main Street Lending facilities. The Federal Reserve established the main Street Programs to support small and immediate you yumsized business answer Nonprofit Organization that is were in found sentence condition before the onset of the covid19 pandemic. The program operates through five facilities which we will learn more about this morning. The programs being administered by the Federal Reserve bank of boston todays hearing will have two panels. President eric rosengry. N, Federal Reserve bank of boston will testify during the first panel. Second panel will include industry participants. They will have one minute of opening remarks. I now recognize myself for an statement. Our commissions pleased to mainne this hearing of the street Street Program. I also commend my fellow commissioners. Ogether we worked in a bipartisan, bicameral way to release three reports and organize this inaugural hearing. Like to thank our personal staffs for their diligence in this area, absence of a n chair, and on behalf of all officers, i want to thank our clerk, amber, and thank you for the u. S. Senate for these facilities today. Findings from todays hearings be reflected in our next report. The main Street Lending Program Released on april 9 and finally became operational on july 6. To the implementation, the program generated Significant Interest and engagement. Since then the months rograms been available, 95 million of the 600 billion allocated has been london to loaned to has been eligib eligible businesses. If anything, needs to be alter the program to he wielvis verse of 25 years after jibl borrowers. I want to recognize the commissioner for one minute. Rama murr ti thank you. Lending a main Street Program and after taking three fed has been month. Ng it for about a it has 18 loans for 15 million dollars. Tens of thousands of businesses have permanently lost and millions have their jobs. The program has been a failure. Why it was failed and how to fix it quickly before their jobs ns lose and more businesses have to shot their doors. You. Thank you, commissioner. Shalala ze congressman for ofive minutes. Ms. Shalala thank you. Good morning. Id like that our witnesses for today. Ere i represent floridas 27th istrict which includes most of miamidade county. Coronavirus is out of control in my district. Raging community spread. Financialt, we have a disaster with 50 laying off bankrupt. D many going our economy is heavily reliant on tourively. Reliant on grounds. Unlike big businesses that can rely on Capital Markets for and midsized businesses are more susceptible permanently shut down. We approved funding in the cares support up to 600 billion in lending to these businesses. Florida while some businesses have benefited from he main street loans, what has been accomplished to date is simply not enough. We all survive s need help to the crisis and im here today to understand why the money has not and what the impact has been on workers. Back. D french french thank you mr. French thank you, congresswoman. Recognize senator toomey for one minute. Enator toomey thank you, mr. Chairman. I want to thank all the witnesses in participating in this sharing today. Think the Big Questions of why ing about is certainly relatively few borrowers have participated in this program, to have a ars not tremendous amount of demand. Whether understand through this program, banks are that to originate loans they would not otherwise engage knneedand at some point we to have a discussion that we are the different place than first we had these programs in march. Intended, at least i, to that e liquidities businesses could survive what would be a brief, although we downturn. Be a severe now we have the process of excess capacity in industries persist for some time. Thats a new and different challenge. I look forward to exploring all again, want to thank the witnesses for joining us. Mr. Hill thank you, senator toomey. Commissioners statements will be added to the hearing record. Were fortunate today to have five witnesses appearing and time. Iate their rosengren is here and s a participant in the federal open market committee, the monetary making arm of the united states. Leads the boston feds work which includes Economic Research supervision and Community Economic development wide range of a payments, technologies and initiatives. Ms. Lauren anderson serves as Senior Vice President and eneral counsel of the Bank Policy Institute. In this role she oversees the range of cross a domestic issues. Of brings over a decade experience in regulation versite serving as Senior Advisor at the bank of england joined the bank of england served at our fdic. Bohn serves 90,000 investors, executives, lenders growing ors to the middle markets of companies. Prior to joining a. C. G. In bohn served 9, mr. As c. E. O. Of the north american he rinary community where saw unprecedented growth. Mr. Vince foster serves as of the main irman Street Capital corporation, a osition hes held since november of 2018. Mr. Foster previously served as c. E. O. From 2007 until november of 2018 and erved as main streets president from 2012 to 2015. Been a manager of the Investment Team since the formation. Ain Street Capital offers Capital Solutions for lower middle Market Companies. Gwen r final witness, mills. Secretary treasure of unite here. With lls has been working unite here for 20 years. She served as political director was 2015 to 2017 and elected secretary treasurer in 2017. Members, has 300,000 largely serving the travel and tourism industry. President w proceed to rosengrens testimony. Ell testify and well move into two rounds of fiveminute questioning. Immediately following the questioning, ill recognize the of witnesses for their testimony and then well move into that questioning. Witnesses full, written testimony will be made part of the official hearing record. Rosengren, we can welcome and youre recognized for five minutes. Rosengren thank you for the opportunity to speak main Street Lending program which the boston fed rebeisters for the federal serve reserve system. And stimony has charts details that i hope will be usef useful to you. Tragic loss of life, the pandemic poses an to our ented shock economy. Many entities impacted by the relies on banks for loans. Street Program Helps nonprofits that suffered. And those that have cash flow pandemic andto the given the uncertain outlook may have difficulty obtaining credit. Provide a bridge as loans have no interest or principal and nts in the first years no principal payments until year three. The standardized credit instruments, this Program Purchases interests and loans nature the agreements often with complex or terms and conditions. Since we opened for registration of june, 519 institutions registered and assets their represent over 15 trillion, banking assets in the united states. Main street relies on lenders to keep skin loans and in the game by banks retaining 5 of the loan. To meet the d lenders underwriting standards terms and grams conditions and be able to make certifications and commitments, including those required by the act. The Program Includes three loan forprofit r businesses and two for nonprofits that have been yet live. That are not nonprofits and their lenders can onetheless use the published terms and documents to begin discussing program loans. Early results. As of tuesday, over 530 million active in loans are the portal. 54 loans. Value s with a combined of 109 million have our ommitment for purchase or have settled. We opened for purchases on july 6, and the numbers are the gradual pace of initial activity, more expanding. The 54 loans submitted represent 29 distinct lenders. Largest number of loans are by institutions in the 10 range. To 50 billion a relatively small and elatively small banks have participated. There have been limited participation in banks with over assets. Ion in the modest numbers seem to be as n way to more uptick banks become more familiar with the program. To kly scaling up a Program Purchase participations in loans in a iverse borrowers decentralized market that lacks inherently ion is difficult and a significant achievement. Eventual size of the program pandemic. Nt on the should conditions worsen, i expa expand i expect it expand rapidly. All in our power and purview to support the workers that make up our nations economy. Thank you for opportunity to overview. Is d be happy to address any questions. Mr. Hill thank you, mr. President , for your testimony. For ll recognize myself five minutes of questions. Me say i was pleased to see the c. F. O. Confidence from Duke University recently showing that business elieves that theyre doing better than maybe they thought they would at this stage of Business Reopening and that is improving. Mostly about ned demand of their products. That encouraged yesterday 1. 8 million jobs created and the Unemployment Rate fell to 10 . Way to go ve a long and we will be talking about that today as we still have over eager to go ople back to work. And then in my home state of arkansas, we had a very positive week in the since that tax revenues, particularly sales tax actually were overtrend and over trend and set a record. 4 over forecast and our sales tax were 16 over 15 over 2019. So clearly the economy is and as senator toomey says, we have to keep that in mind as we think through these facilities and what their best structure should be to accelerate that and get in thisple back to work country. Mr. Rosengren, affiliation rules when i look at the main street term sheet. Three months to get the program up and running and id like you to address that first. Secondly, it appears to me rules middle market the that the Federal Reserve have adopted in the main street a significant are arrier to more entrepreneurial middlesized companies that p. P. E. Access to p. P. P. Wonder why they adopted the s. B. A. 7a type limitations on affiliation rules. Those two for me please . Rosengren certainly. Why dont i address the question you raised in your Opening Statement and having this took so about why it long for this facility to get set up. This facility is very different some of the other traditional kinds of facilities operate ral banks during a time of crisis. So most of our facilities through markets. Market securities, you can urchase them very easily through the market. Hey clear usually in a couple days, depending on the security. So its relatively easy to purchase a large number of securities and hold those time. Ties over this facility is a facility we didnt have during the financial to get nd really tries to a different segment of the opulation which is those businesses that are bigger than he p. P. P. Program was designed for and smaller than what the corporate facilities are designed for. Are inherently difficult because they are an agreement between a bank and a borrowers. Take borrower. They take longer for the banks o negotiate with the borrower and this facility has a variety of complex elements, including the requirements of the cares and the other requirements. Program,to design this we first had an initial term sheet. Th there was very substantial revisions to the term sheet. We came out with another term was again revised and each of those times when we sheet we were expanding the availability of more businesses to access the facility. Changes that f were made included lowering the oan size, changing the repayment terms and lowering the amount. Icipation the final term sheet for the forprofit businesses started on june 8. On june 15 we had the we stration and on july 6 had loan participation intake. I would highlight as part of its a highly automated process. We have to do programming, so we documents to be in order. We needed the final term sheet to be completed. Needed to be that the andramming work as expected the security needs. So that does take some time. Start up. E time to and i think that gives you some idea of the complexity of the so long. Nd why it took in terms of the mr. Hill thank you for that. Think the key thing if we want to change the program, you dont anticipating taking another months to have a different that treet term sheet if was necessary . Mr. Rosengren it would depend main street term sheets were. Doesnt change the legal easier. S, it would be thats true for the nonprofit term sheet as well depending on what the terms were would determine how long it would take us to get set up. Thank you, mr. Chairman. President , you agreed that the a n Street Program is off to slow start but your testimony is interest in the program will ikely pick up if, quote, the pandemic and the economy worsen. But if you look at the data, companies are already getting crushed. The latest middle market independe indicator and executives of mid sized companies shows that in the Second Quarter these ompanies experienced to the the largest decline in employment in the surveys history. Hey also had the biggest dropoff in the surveys history. Middle ber of Commerce Market business index show the same thing. Mattive layoffs and furloughs widespread revenue declines. How much worse do things have to get before companies are main street the Lending Program . Rosengren we have seen significant significant pickup portal. In the just as an example. Loanswere 109 million in committed or settled as of last later we d two days now have 29 loans and 108 million. A pick up in volume. Ts in communities and mid sized banks. Night, thats 635 million. I think this is early stages of this program. They had to know what the terms were. To understand what the character stshgs of the program works. How the portal they had to get familiar with the program and start pledging those loans to the facility. First couple weeks, the banks have not completed borrowers s and the had not completed the process and there was not that much volume. An increase seeing in volume over time that i expect will continue. So one of the challenges of with bank loans as opposed to securities is it doesnt happen quickly. To large firms about a renegotiation of a line of redit, it can frequently take many, many months before they get the negotiation completed. So one of the advantages of the is that youre able to tailor it to the need of the and the bank. There are conditions that a Different Bank may put on that same kind of loan and there are across bothferences banks and borrowers and what like. Loan agreements look mr. Rama murr ti in the time ill move on. 535 million in the pipeline of the tiny fraction total lending capacities that was created for this am practice. Said in my opening remarks, i think this program has been a failure and the basic reason for is that the companies, companies arent looking for loans. The fed released a survey of officers finding in Second Quarter demand of loans from all Companies Went down. The most recent of business ration found 3 of Business Owners borrowering needs were not satisfied. In the testimony they submitted oday, the Bank Policy Institute, which represents some of the biggest banks in the country, have seen a, quote, main street d for loans from their clients. Main Street Program can only offer loans and its clear that most mid sized companies are not looking for loans right theyre already struggling badly, how is this stop widespread closures . Rosengren if you have a business that have a pristine youll sheet, then probably get a better rate than Street Program provides. If you are going to close, debt doesnt solve the problem. Equity does. For a ogram was designed business that had a disruption of shortterm credit, that was prior to the crisis and after the pandemic ubsides would be able to be a viable business as well. There are businesses that fit those characteristics. Were seeing some of those actually coming to the facility. I am expecting over time we will up. More pick again, we are seeing some significant activity by some of Community Banks and midsized banks. Particularly those located in like florida, texas, and places that have been badly mpacted by the pandemic recently. Ti i think the issue is the fed is trying to doesnt roblem that exist and theyre capable of solving a problem that does exist. Can provide loans and more loans is not an answer and this giant hole. Congress helped Small Businesses through p. P. P. Congress helped Large Companies big enough to issue onds by reducing the cost of borrowing. The only thing they offered in between is the main street just not d its working and they employ over 45 people and i dont think continuing to treat this program is going to, would. I think Congress Needs to act to direct support to mid sized firms and for that money to come with real strings money benefits working people. Thank you, mr. Speaker. Mr. Hill thank you. Is resswoman shalala recognized for five minutes. Ms. Shalala let me follow up a little on that. Like the sectors Hospitality Industry has been hit hard by the coronavirus in district and in particular. Noted only 109 million of the 600 billion has been injected into the economy. I want to know whether there is flaw, not the gn of that bharat raised. In particular, some suggested of the program such as the leverage ratio requirements and he loans priorities than a quirements mid range of small and sized businesses. Can you respond to that . Yeah. Sengren so its designed as a cash flow program. Its designed for a business the debtcts to pay off and pay off the debt with the cash flow from its normal business operations. Fits for many businesses. It doesnt fit for all businesses. Or the smallest type of businesses, i agree that the p. P. P. Program is much better them. M for its more of a Grant Program than it is a debt program and debt may not help them in that situation. In terms of the underwriting the standard follows industry practice. The pending upon which of either parts you [indiscernible] to have a debt below that and so i think closely ram actually mirrors kinds of coverage that aybe banks themselves are expecting when theyre looking [indiscernible] so its a combination of an underwriting standard. Underwriting standards in this program. Debt to ally a and the fact that the bank will stake. 5 ms. Shalala the Federal Reserve recently reported that banks their tually taking credit standards due to the uncertain Economic Outlook hats resulted from the pandemic. The fed allows banks to use these tighter credit standards determining whether or not the bank alone under the main Street Lending program. Out e goal is to get money to needy borrowers, doesnt the olicy of using the banks of using the tighter credit standards undermine that goal . Rosengren so loans have to be paid back. Banks to ng voluntarily participate in the program and were asking banks they underwrite the loan its the loan thats to a business thats had their disrupted but that over time you expect it to be a thriving business. Qualify all t businesses. It qualifies a particular kind of business thats appropriate program. So business has been disrupted. Likely to be that isnt attractive from this am practice. The perspective of the bank they are not willing to do that loan otherwise. Specific e you a example. A Movie Theater. If youre a Movie Theater located in miami and youve been in the spring, you opened up temporarily and now you may ave to be closed again because of the reics haves either level or he state time of a pandemic. The bank may be quite uncertain when that loan would actually be paying because they pandemicw how long the will look. They dont know when they will treatment. Ine or 95 ecause theyre providing of the loan to the Federal Reserve, they might be willing for that support Movie Theater because the bulk of the risk is being taken by the Federal Reserve. This is a Lending Program. It is focused on getting most of these loans paid. Hats a requirement of the [indiscernible] shalala someone suggested in written testimony, if banks lend to banks that dont current banks underwriting standards which has tightened because of the the fed uncertainty, must modify the design of the rogram to provide credit risk protection. In making this observation, she cites the negative treatment of loans by as banks to loosen their underwriting standards. This e fed considered issue . Mr. Rosengren yeah. At the supervisory terms. Disasters, atural like a hurricane that hit miami, make n use guidance to clear we want to have a little those loans iven because of the crisis that occurred. The same thing has been done for pandemic. So we asked our Bank Examiners to work with Bank Management in in which making a decision such as a main street loan where the borrower has been disrupted. The other regulators have agreed the same d following general guidelines. So i think in the end, the loan the same e classification standards that a does. Rd loan but the regulators now are little bit oans a differently and asking the banks borrowers. H their thats what we have to do in other crises. Hill thank you. The gentlewomans time has expired. Toomey. Senator toomey thank you for testifying today. Let me start by pointing out, can now, government money never be a replacement for an economy. Of weve spent many hundreds billions of dollars covering for very s of payroll small companies. This program was never designed the tab for the ayroll of the american workforce. What it was designed to do, as i emergencys to provide liquidity in the hopes it would keep Viable Companies alive so have a place ould to go back to are the reason that we made unemployment more generous h than they ever been in the country. F the who knew it was inevitable in a ery, very severe, hopefully brief rescission, they would unavoidably be people laid off had no work to do because in ome cases their companies were closed, forbidden from working. What id like to understand, and this as come up and maybe is just another way to think about this, but to what extent loans thatk that the have been made so far through that rogram are loans would not have been made in the absence of the program . In other words, in this is designed in such a way the only loans that would take place ere loans that would happen anyway, especially given the underwriting requirements on the required their participation . Mr. Rosengren these loans have different characteristic than the normal bank loan. Principal and interest the first year. A disruptive for cash flow but the ability of the orrower over time to make payments. When we talked to some of the banks that have been making the loans, they have told us that loans that more than likely they would not have made in the absence of this program. Is because theres a great deal of uncertainty right now. Shalala oman highlighted the uncertainty and survey of terms of lending that cited. The uncertainty is very, very high right now. Where t is a situation banks become more reluctant to lend because they dont know what the condition of the borrowers will be. I do think that this plays an Important Role in reducing the if the pandemic is worse in the fall, at least some saying, thists are program will probably be more extensively used. With your y agree observation that a 133 facility oes not solve a pandemic problem. Its primarily a Public Health problem. But we can certainly mitigate that Public Health problem by trying to help those usinesses that have been disruptive but were very good businesses prior to the pandemic and will be very good businesses after the pandemic. Senator toomey just a technical question about the fee a little because its confusing the way it appears on the term sheets. A loan and 95 es f it is taken by the fed, the Fee Structure that the bank they have the y et interest on the 5 they keep. The Fee Structure, which its 100 basis points, which i think the term lated in sheet, does the bank keep 100 asis points on the 5 that it keeps . And the balance goes to the how does that Fee Structure work out . Mr. Rosengren its on the a lot. Its for the banks to program. Te in the senator toomey so the banks start off with 20 of their in fee income, is that correct . Mr. Rosengren thats correct. The cost of doing the underwriting of the loan. Senator toomey thats extremely unusual, right . So that would appear on the urface to be an inducement, an encouragement, an incentive to take more risk. Ut the banks are institutionally not more oriented in lowering their because there is an of ide outsized source revenue. Were there be other lending institutions that might be more by their nature to be able and willing to take more they risk because recognize 20 of your credit of and fees covers a lot risk . There are others that provides loans than banks. Designed for depository organizations. N part, we want to get this facility up and running quickly. In part, we have to make sure b. S. A. , know your customer conditions are met. Has ats why this program been primarily operated through the banking system. Well, i see im out of time but i want to follow p on the possibility this kind of risk return structure might be even better suited for other institutions. Thats not to say that banks shouldnt participate but maybe should broaden the universe of institutions that are to. Itted mr. Hill thank you, senator. Were going to do a second round now with dr. Rosengren and ill with five minutes. As i start my second round, ill ask unanimous consent to put two letters in the record. Dated m senator crapo july 31 with comments about the main Street Lending facility. Also a letter dated august 4 senators loveler, cornyn, main and tillis on the street. Not hearing any objection, those will be included in the record. Rosengren, you talked to t you limited depository institutions to get up and running quickly. Only 150 banks or so listed on the feds website as registered lenders. I cite that because in the emergency environment, right at end of march and april, we were able to stand up the p. P. P. Cares act and 5,400 banks swung into action in patriotic way and in seven distributing 520 billion and making p. P. P. Loans. The underwriting was very different. The mission was very different. That. I am concerned about the reluctance of banks to participate in the program. And yet has 86 banks only two banks headquartered in my state that are local banks have agreed to participate. So i really hope as we have this more g today well talk about that. Et me turn and talk about the term sheet. It has implied leverage. In other words, it looks like a Traditional Bank loan. Where is the higher risk component that was contemplated cares act section that encouraged help for particularly sectors of the economy, could you commend on rosengren . Mr. Rosengren i think these loans already are going to be risky. In the middle of a pandemic, particularly if its a where of the economy social distancing is difficult, hotels, retail have ll been badly affected by the andemic and there are large bankruptcies. I fully expect some of the loans well do over time will have a loss. We have a hy streshry treasury backstop. Program has taken on a bit of risk. I think over time, as the grows, well will some significant losses. Hopefully that doesnt occur. Is able to erybody pay back the loan completely. But if the economy doesnt do ell, particularly if the pandemic worsens, its quite possible we will experience losses. Ant this program did focus on trying o get loans to fairly risky borrowers. Mr. Hill i thank you for that. When you do look at the terms, i really are i agree, companies at the margin are middle Market Companies that couldnt access he markets or not eligible for p. P. P. , many would qualify here. I think the affiliation rules more difficult. I think the very traditional lending profile thats contained term sheet also could be a detriment to companies. An example. You and this was talked about with chairman mnuchin and powell at our meeting of a few is someone d that good in 2019. Ave they certainly dont have it in 2020. Of the year in 2019 they had very good collateral evaluation. They had a low loan to cost potentially. Hey had a low loan to valpo tensionally. They had room to lend but they meant the standards. They said they were looking at a dependent or assetbased loan. Can you tell us what the status is . Hat look mr. Rosengren so the main treet program is a cash flow program. Assette assetbased financing hill they are absolutely a small middle market type company main street term flow. Currently a cash is there current discussion under way to have a different would reet facility that be more of an assetbased loan loan . Than a cash flow mr. Rosengren i know there are financebased out financing, especially in commercial real estate, so there discussions oing about this. But there is no term sheet imminent. Mr. Hill thank you for that. Also, startup companies. Startup ple in the space have a disproportionate amount of costs. Startups and g at what they might need in the main arena . Mr. Rosengren many times tartups need equity more than they need debt so i think frequently a true startup is types of ind other financing vehicles more attractive. This is more of a program for businesses that have experienced the disruption of cash flow. R. Hill thank you, mr. President. Let me yield to my friend for five minutes. Mr. Ramamurti the fed announced program. O the many of those changes lined up exactly what members of the oil and gas industry had requested. Did not appear to be a coincidence. Shortly before the changes were President Trump publicly promised that oil and Gas Companies would be taken of. Shortly after the changes were announced, the Energy Secretary he on tv and bragged how and secretary mnuchin had succeeded in getting the fed to make changes that the oil and wanted. Stry but when asked by reporters, the spokesperson for the fed denied the fed had made any adjustments out of consideration for the oil and gas industry. Fed said that the april changes reflected the more than 2,000 Public Comments that received by the initial design of the program. O president rosengren, as the regional fed president responsible for the main Street Program, do you stand by the statement that certain adjustments were not made specifically to help Oil Companies . Mr. Rosengren i do. This is a broadbased program. Its been a broadbased program start. E require lities broadbased kind of terms so specific argeted at firms or industries. 133 facilities are not vailable for that kind of lending. Mr. Ramamurti thank you. I want to focus specifically on the changes that were made to the facility in april. At one of them. According to reuters in mid april, one of the key energies and nergy secretary treasury secretary were pushing for to help the oil and gas ndustry was increasing the maximum loan amount to at least 200 million. A couple weeks later when the announced the changes to the main Street Program, it had gone million. Ctly 200 president rosengren, out of the more than 2,000 Public Comments that were submitted to the fed main Street Program, are you aware of a single one that requested increasing the maximum amount to 200 million . Mr. Rosengren we got many banks and om both businesses that if the loan amount was larger, that it would more attractive facility for them. Remember, a lot of this discussion was occurring in april. Nd the Economic Conditions and the pandemic conditions were very different at that time. Nd there was a lot of concern that some fairly Large Businesses th businesses would have difficult financing. Fortunately, the pandemic ubsided, at least for a couple months, and as a result many of those large borrowers that thought would need the financing least to date have not actually accessed the program. Mr. Ramamurti in the interest want to move on. Look, i reviewed each and every one of those 2,000plus comments there wasnt a single one that requested specifically 200 million maximum loan amount. Making that le request were the Energy Secretary and the treasury meetings with the oil and gas industry. Heres another change. The first version of the main required gram companies to say in writing that they needed the loan, quote, due circumstances presented by the covid19 pandemic. Advocates for the oil and gas to eliminate d that requirement, presumably because many oil and gas firms struggling before covid and couldnt satisfy the requirement. The fed nal version eliminated that requirement. You dent rosengren, are aware of a single one outside the oil and gas industry that equested that the fed remove this important requirement . Mr. Rosengren in the discussions i have been involved in, we do not discuss specific industries. Provide a how we can broad base financing scheme. R. Ramamurti i appreciate that. I reviewed the Public Comments and there wasnt a single one that requested this change. Gas lobby l and requested this. I want to ask one more time. Despite evidence that president gas wanted oil and companies to get federal relief, that the Energy Secretary and the treasury secretary pushed for specific changes to accommodate the oil and gas industry and that the fed made and gas hat the oil industry requested but no other is stry or group requested, it still your position that the fed did not make certain changes o accommodate the oil and gas industry . Mr. Rosengren its my position that the focus has been a roadbased Lending Program not focused on any particular industry. Mr. Ramamurti look. Again, my focus is on that ically the changes were made, not the overall scope of the program. The evidence here is strong and deeply concerning. Thats not how the fed is supposed to operate. Not supposed to be changing rules of the program so the president s Favorite Companies can get access to of dollars in public money. Its illegal for the fed to Lending Programs to help these Companies Avoid bankruptcies. Ask the commission request all communications on this topic between the fed and Energy Secretary, the treasury and any , representatives of the oil and gas industry. Thank you, mr. Chairman. Hill i thank you. The gentleman yields back. Congresswoman shalala is for five minutes. Ms. Shalala thank you. My colleague is appropriately the loan is as big as it is. Im actually interested in why isnt smaller. Commentators have speculated the minimum loan amount of 250,000 too large for many small and mid sized businesses. Am aware the fed reduced the million to 250,000 which may be too high. The American Bankers Association the Marketplace Lending Association have separately suggested that 50,000 may be a amount. Ropriate has the fed conducted studies on hether the 250,000 loan minimum excludes parts of the market that this program is help . Ed to what changes can be made to make he program more broadly acceptable . And accessible . Mr. Rosengren for many of those businesses, the p. P. P. Program was designed to target that segment of the industry. P. P. P. Program is much more attractive to a Small Business because it has the ability to be a grant. Program is really designed for businesses that idnt qualify for the p. P. P. Program and nonetheless, might have a need for credit. O if you look at the actual loans that are in our portal, the loans that are actually in portal is 1 million to 5 million. That is the type of loan that seeing is dental companies, Construction Design companies, retailers. These are businesses that have a ly are going to 1 million to 5 million loan and its not surprising thats actually seeing. Now, we have seen loans that are much bigger. That are muchoans smaller. I will say so far where we have activity. Ulk of the s. Shalala so you are not considering going below 250,000 . Mr. Rosengren i think there are better designed. The question is whether a cash flow Lending Program, such as for street, is appropriate a very Small Businesses and whether there might be targeted can address that. In particular, will more debt help that Small Business or push it towards bankruptcy and closure . So we want to make sure we provide debt to businesses that use it and actually pay it back. We dont want businesses to have so much debt to survive. E able ms. Shalala thank you. Et me talk about the Nonprofit Organizations. A few weeks ago, you expanded the main Street Lending program Nonprofit Organizations. Althrow these facilities lthough these facilities are not yet live. I think the requirements are too will not help nonprofits that will survive the pandemic. Size is um loan 250,000 which may be smaller for many organizations. Also required they have at least 60 of their by nondonation revenue which can be very hard nonprofits to achieve. Can you talk about why the way . Am was designed this im very familiar with onprofits and i that 60 requirement seems to be will nonprofits. I would appreciate hearing about ny analysis the fed has done regarding the nonprofit interest eligibility in the program. Have you considered changing any of the eligibility requirements . Expect the do you launched . Be mr. Rosengren when the first term sheet came out we got extensive comments from a wide nonprofits and a wide variety of banks. Actually learnnd to nonprofi onprofits, university of wisconsin, which you used to be associated with, goes to debt rather than relying on bank markets. Thats true for many hospitals as well. Is a market that has not been extensively tapped by many banks and i think its a for many banks. I think there is an opportunity or nonprofits to be able to access Bank Financing through this program. We did make significant adjustments in the term sheet. We were thinking about the term sheet and the adjustments we made between the first and sheet, we spent an extensive amount of outreach nderstanding how banks underwrote these loans and how underwrote these loans. This broadly matched what many the criteria they used and between the first and second term sheet we did relax to the comment it was being too restrictive. In terms of when this facility be up, we just got the legal documents up. Is now finished. We are in the process of doing the programming now. Take us g to probably another several weeks before running. Nd i would highlight now that the legal bank loans dont get made quickly so now the legal up and running, now the term sheet is widely available, banks can start the with nonprofits so that when that facility is able to , they are quickly submit it to the facility and get it funded. Lags in e of the long making these kind of agreements, the time thatbout if the bank is going to do a nonprofit loan that well be up and running by the time they complete the agreement with the borrower. Hill thank you, mr. Rosengren. The gentlewomans time has expired. Senator toomey. Thanks, mr. Y chairman. Dr. Rosengren, id like to have clarity on this. Just answer this if you would. Is there any main Street Lending thats available only to the oil and gas sector . No. Rosengren senator toomey is there any program the terms of which is uitable to the oil and gas seconder . Sector . Mr. Rosengren no. Senator toomey thank you. Want to underscore the point that congressman hill raised hich is some real challenges with the affiliation rule. When we were drafting this legislation, we did not hink would be automatically excluded from financing. Also want to underscore his point about considering assetbased facilities. Think youre very well aware, there are some real challenges commercial sector, the ts experiencing some real difficulties and because they enerally dont qualify for the criteria, theres no access to this. If the problems are exacerbated payments, you ke know, irrespective of the ability of the borrower to do i would like to encourage you, as i have encouraged mnuchin and chairman powell to consider whether there assetbased an category, if there is an appropriate loan to value that thats a criteria that we have to consider, do you any thoughts on whether we should stand up facilities designed it would be designed generally for the broad category of real and other hink, categories that already more uitable for an assetbased lending than they are for a constraint . Rosengren yeah. It would differ than what we street. Main so it would be a different facility. Most that type of lending has a than five years. These are fiveyear loans with a balloon payment at the end of years. Thats probably not appropriate retail or ample, commercial real estate, such as hotels. So the nature of that program quite different. I know there are theres work about how thinking assetbased can be addressed, including through the s. B. A. Think there are a number of proposals being considered. Aware there are many concerns in the commercial Real Estate Industry and those oncerns will get worse if the pandemic gets worse. Senator toomey so i want to go back to that. Page11 of your testimony you believe should the pandemic and he economic circumstances worsen, we might very well see greater interest in the main practice g am Lending Programs, and i greater d leading to demand on the corporate borrower side, but can you address why be believe that wouldnt offset by greater reluctance on the part of banks to take on the exposure in that scenario in worsens. Environment dr. Rosengren if it was only two or three months those may be bankable loans right now and they might be able to get a rate thats better with plus 300 basis points f we go through another three months so in one years time they have experienced six months of badly disrupted cash flow, some of those loans that might have been atrective to get direct financing from the bapping with their standard relationship may no longer be possible and the bank may only be willing to do it if the Federal Reserve takes the 95 stake that is part of this main Street Program. I agree with you that risk aversion by banks may increase if the pandemic gets worse, there already is very substantial uncertainty, but many borrowers that cant get access from their banks will look to the main Street Program to provide that type of financing. Senator toomey thank you very much. Thank you, mr. Chairman. Mr. Hill the gentleman yields back. Thank you, mr. Toomey. Now well hear from miss anderson. First let me thank dr. Rosengren for his testimony. We very much appreciate your written testimony and the interaction with our commissioners. Now let us turn to our second panel, we are going to hear from ms. Anderson with the Bank Policy Institute first. Miss anderson, youre is recognized for five minutes. Ms. Anderson thank you. Members of the commission. My name is lauren anderson, Senior Vice President associate General Council for the Bank Policy Institute. I thank you for the opportunity to be a witness at todays hearing regarding the main Street Lending program. It is a nonpartisan Public Policy research and Advocacy Group representing the nations leading banks. Our members employ nearly two million americans, 72 of all loans, and nearly half of the nations Small Business loans. We strongly support the efforts to date as well as ongoing efforts by congress, treasury, and the Federal Reserve to tackle the covid crisis and provide much needed relief to households and businesses. At the outset it is worth noting how unique the main Street Program is. It is not the loan forgiveness or Grant Program like the p. P. P. It does not Market Liquidity Program for Investment Grade borrowers. Main street requires Credit Underwriting decision on that of individual nonbinding borrowers. Which is challenging and something the Federal Reserve has never done. With the expansion of pain street to Nonprofit Organizations which itself is very different across different sectors, the Federal Reserve vent tured further into uncharted territory. Working with commercial lending experts from our member banks has been actively engaged in commenting on the Program Since the initial terms were published in early april after subsequent iterations. The focus of our comments has largely been on ensuring the terms of the program are consistent with market prackcies answer ensuring prudent risk management. We commend the Federal Reserve on seeking Public Comment on the terms of the program and engaging in the process to improve the end result. We are very pleased that the Program Began accepting lender registration in june and officially became operational on july 6. Since then, vendors continue to register and loans all be it a small amount are being made. Many banks have registered and are in the process of reviewing borrower inquiries. While the limited number of loans made thus far has been a concern to some, it must be assessed in the context of a larger commercial credit ecosystem. First, for many Small Businesses main street may not be the right fit given the complex it of the program and the compliance requirements. However, member banks help provide over 1. 6 million p. P. P. Loans totaling over 188 billion to help Small Businesses meet payroll needs. Second, larger corporates retain sack sess to Capital Markets which remain exextremely active. Investment grades that incorporate that has been issued at record levels with u. S. Companies raising over 1 trillion year to date. Third, perhaps most significantly, over the course of march and april, both small and Large Businesses drew down on existing credit lines. Between february 12 and april 1, bank loans increased by approximately 700 billion. Thats a lack of demand for main street loans likely indicates many other eligible businesses are finding credit through other market challenges. The second reason why there is limited demand for main street, the fact that the program not only requires borrowers to meet Eligibility Criteria but also to satisfy Bank Underwriting standards. If a borrower can meet Bank Underwriting standards it is not surprising they are finding Credit Solutions through Traditional Market channel. Where the main Street Program may become more useful is if banks become constrained and cannot lend the full amount needed by a creditworthy borrower. If this were to occur, main street may provide the solution. But so far Bank Balance Sheets are robust and weathering the crisis. If, however, congress the, treasury, or Federal Reserve desires to provide further relief to small and mitt size the businesses experiencing acute stress due to the pandemic, including less creditworthy borrowers who would not curm pass bank underrighting underwriting standards, it would need to be modified. It is not designed to provide loans to less than creditworthy borrowers. If banks are to provide loans to borrowers who cant meet current standards, the government would need to provide down side credit protection that would allow main street loans to be considered lower risk. I thank you for the opportunity to be a witness for the commission and i look forward to answering your questions. Thank you very much. Mr. Hill thank you, ms. Anderson, appreciate your testimony. Well turn to mr. Bohn, you are recognized for five minutes. Mr. Bohn thank you. Good morning. Thank you for the invitation to speak today. Congressman little, commissioner ram ma murty, senator toomey, congresswoman shalala, i appreciate the gravity and responsibilities before you. Admire your willingness and respect the commitment to ensure federal relief programs are both accessible and effective. Im here this morning to provide testimony from the perspective of middle market borrowers. To help answer the question that youall are asking of, who the main Street Lending program is helping. Regrettably i have no answer to offer you. We request neither borrow for the program or find someone in our membership who has received a loan through it. To help illustrate the current obstacle to curt loans through mslp, i would like to share comments from our members who completed a survey administered in recent days. I wont read all of them. These are their words not mine. The program is moving too slowly. Whereas covid19 dramatically and quickly caused an impact. We actively so listed an mlsp loan for a minority business general prize, a Company Whose performance is only 10 to 15 lower during the pandemic than beforehand. We approached 15 lenders. Not one was interested. The mslp applies to the lower middle market, it is news to me. If it does, please send guidelines. We are excited about the program initially and had two companies that would be permanent for the program. But the banks wont do it. We have plenty more comments that address the challenges faced by both borrowers and lenders which im happy to provide the commission for its review and reporting purposes. As the c. E. O. And president of the association for can corporate growth, i come before you today as an employer and a leader of an association that represents a vitally important segment of the economy which employs some 45 million americans prior to the pandemic. Founded in 1954, the 15,000 members operated approximately 200,000 middle Market Companies. As a Networking Organization which hosted more than 1,100 live events annually, the company like many others were devastated by he could he vifment i lead a staff of nearly 30 people based out of chicago, now all over the country, as well as oversee operations in 60 chapters primarily in north america. When the Paycheck Protection Program was announced, it would have served as an 800,000 life line for my chicago team and Staff Members disbursed throughout the country. As a 501c6 we were ineligible. Consequently we made more than of00,000 in salary cuts. Currently forecasted to continue through december and beyond. Since march, every conversation with our members finds them in the same position. With their employees at the forefront of their operations, they manage cash flow, prevent layoffs, and work diligently to retain employees and not lose institutional knowledge. When p. P. P. Was closed to us like many other associations and large percentage of our Member Companies, we looked in ernest at the main Street Lending program. A loan would allow us to invest in the Digital Enhancements to ensure we could deliver to deliver strong member value and necessary tools for Business Development in this new virtual world. There, too, we found another closed door as did our members. Perhaps naively we thought the main Street Lending program would be accessible to organizations and companies excluded from the p. P. P. Suffice to say it hasnt been accessed by many. And your recent report you talked about the Goldman Sacks estimating some 45 million americans, or 40 of the private sector are employed by companies who are eligible for mslp, yet very few had purchased a loan. Further, chairman powell recognized the challenges with the small and medium sized Business Force which mslp is intended. It is New Territory for the Federal Reserve and very complex because businesses are, and i quote, broad and heterogenius class of borrowers with diverse needs. In our opinion, the challenges of the main Street Lending program are twofold and equate to awareness and access. Our recent survey found 22 of the respondants completely unaware of mslp. And as the respondants who want to apply for the loan through the program. 81 were unable. When asked what changes they could help, they suggested the removal or the overhaul of the following items, which some of you talked about today. Emoval of the hearing s. B. A. Affiliate. The base test which excludes Many Companies, particularly familyowned businesses. Distribution restriction force one year after loan payoff. Employee compensation restrictions for one year after loan payoff. Increasing the minimum loan size. Creating a great awareness of the mslp and accessibility should result in a groundswell of applicants. We believe that. The effects should help companies retain jobs and maintain operations, and consequently preserve Health Care Insurance for millions of americans in this increasingly unpredictable company tethered to cofmente we stand to support you in any way you need and hope to answer any questions you may have today. Thank you. Mr. Hill thank you, mr. Bohn. Well hear from mr. Foster, youre recognized for five minutes. Can you hear me . Mr. Hill we can. Mr. Foster great. Members of the commission. Thank you for inviting me today to testify on the state of the Federal Reserves main Street Lending program. Im ben foster, executive chairman of the main Street Capital. Main Street Capital is an active member of the Small Business Investor Alliance in washington. We provide Long Term Debt and equity fansing to u. S. Businesses. We currently have investments in 68 middle market businesses in 26 states. Which our average ownership is 36 . These businesses on average each are vuffly 200 employees. The main Street Lending program, while enacted to assist businesses like our Portfolio Companies weather the economic storm brought on by the pandemic is not responsive to their needs. The principle principle p structured problems are, requiring lenders to take full Credit Underwriting for small riskidsized borrowers is a remarched mismatch. Lenders are better off expending their time and capital underwriting conventional loans. Number two, requiring 15 amortization in year three of the loans is a nonmarket and very onerous provision effectively requiring the loans to be refinanced after two years. Number three, prohibiting crktual subordination in the case of the new Loan Facility and requiring the Loan Facility, priority to exist in debt is problematic in that most companies dont have preexisting senior debt outstanding, the terms of which will have to be renegotiated. Number four, testing the maximum number of employees and revenue utilizing affiliation rules contained in the Small Business Administration Regulations 7a loans without the exceptions included in the triple p program dramatically reduces the number of Companies Eligible in the main Street Lending program. The lending facilities as currently structured are unattractive to those borrowers reasonably creditworthy as less restrictive financing is likely to be veilable. Yet the facilities remain unavailable due to lender reluctance to accept Balance Sheet exposure with respect to less creditworthy borrowers. The following changes will make the program more attractive to both lenders and borrowers to advance congress objectives. Number one, the loan should be unsecured and subject to preexisting contractual subordination and rank junior and priority to other senior debt. The loan should have a term of seven years, sufficient to allow them to mature after the Maturity Dates of preexisting debt. Amortization should not not begin until the end of year four. The multiple much 2019 ajusted should be increase interested four times in the near Loan Facility and six times in the priority facility to six times in southern and halftime respectively. There should also be assetbased criteria such as a percentage of loan to value and or 1. 2 times minimum Debt Service Coverage ratio instead of using solely leveraged multiples for all industries. Number four, experience nonbank lenders should be permitted to participate as eligibility lenders, similar to the p. P. P. Program. The loan should have an Interest Rate of liability plus 400 rather than 300 basis point. And the up front original nation fee should be increased to 200 basis points paid by treasury. Number five, the affiliation rule should not limit an affiliated group to sangle main street facility, or a single letting facility size limitation, more than one group member would access that or another if acy. Finally, number six, one of our lenders, highly respected and conservative regional bank, has elected not to participate in the main Street Lending program. Instead, they confirm that their primary regulator had no issues with the Bank Utilizing the one and two year defrl of interest and principle feature utele oughtlized by the program this. Would help provide certain qualified pandemic affected borrowers the liquidity they need. Accordingly, it may be helpful to coordinate with the appropriate regulators as to whether this type of regulatory action might encourage other banks to similarly modify their Lending Programs to assist affected borrowers. Thank you again for the opportunity to speak to you today. I look forward to your questions. Mr. Hill thank you, mr. Foster. Now ms. Mills, you are recognized for five minutes. Ms. Mills thank you, members of the commission. My name is gwen mills, im treasure secretary of the Hospitality Union unite here. Recommendations i make are supported by the aflcio, representing 55 National Unions and 12 million workers. Our 300,000 members work primarily in hotels, casinos, food service, and airline kate irregular industries. Secretaryors heavily dependent upon trfl and tourism. Before the cares act became law, 90 of our members were laid off. Today 85 remain unemployed. A majority of our members are women and people of color. Many are recent immigrants. Most have lost or will soon lose their health care. Benefits more often after giving up wage increases to secure Family Health care. Hundreds of our members or their families have died from coronavirus. 22 in las vegas alone. Were 350 have been hospitalized. Our industries are the most severely affected in terms of unemployment. I believe our sorry is a cautionary tale for American Workers across the board. At heart is the question of requiring employers to maintain employment as a condition of federal assistance. The main Street Lending Program Requires only commercially reasonable efforts to maintain employees in spite of clear congressional intent. Treasury and the Federal Reserve said they will not enforce even that. We have seen this movie before and we know how it ends for working people. We have seen how powerful lobbyists transform the paycheck protection and payroll support programs into subsidies for Real Estate Investors. We have identified 200 outlets where we have members that received p. P. P. Loans and they havent protected paychecks or health care. One company omni hotels received loans worth 53 million. Omni hotels in boston, and new haven were sut down in march and unclear. And providence the company cut off medical benefits in violation of their agreement of there are many similar stories. They reveal how a powerful industry designed to keep workers on payroll to one that keep hotel owners current on the mortgages. Now hotels demand a bailout of 86 billion loans using the main Street Program. This commission reported that the feds have considered establishing an assetbased Lending Facility that we fear would do just that. Who would benefit most from a hotel bailout . Lobbyists want you to believe it would be mom and pop hotels. The largest are sophisticated Real Estate Investors. Our analysis of loan data finds that the 11 largest borrowers had at least 1 billion each in hotel cmbs. Those 11 had a combined 30 billion in loan balances or about a third of the total outstanding. Forward private equities funds, one a hedge fund billionaire. The rest were developers or billionaire investors. The 12 belong in miami beach whose owner refinanced its debt twice in two years. Borrowing more to cash out millions. Fountain blue has cut off thousands of employees. Lobbyists claim if the fed doesnt rescue the borrowers, hotels will default and workers will not have jobs. That was not our experience. It was the first time the hotels got themselves in trouble using these inflexibility loans. After the financial crisis, there were scores of defaults across the country. The defaults and for closures didnt lead to closed hotels. Hotel workers used to seeing absentee owners come and go understand jobs are driven by occupancy and only ending the pandemic can fix that. Almost half of the hotels mature within two years. Before the industry is projected to recover. Should the fed refinance the entire lending, Real Estate Investors lay off 85 of Hotel Workers and end their health care in a pandemic . There is a second critical lesson which relates to the main Street Program. There is no question that state credit markets is important in a crisis antifed has done that. The real mission should be to protect jobs of American Workers. The exclusive focus on markets and not on jobs means our members, most of whom are brown and black, are thrown off payroll while their employers are predominantly white can tap their credit lines and ride out the crisis. Its not acceptable for the feds to stand by and watch us fall off this cliff. Millions of americans are right behind us. What if the fed take the cares act mandate to heart . What if credit terms were loose loosened, heres the important part, airtight requirements, not incentives, recommendations, but requirement that lee sipents keep workers on payroll. What the p. P. P. Could have done if it hadnt been high jacked by the Real Estate Industry. The fed and treasury must learn from p. P. P. And reform main Street Lending so it contributes to the employment of working americans. Please dont bail out Real Estate Investors while they push workers off the cliff. Thank you for this opportunity. I welcome your questions. Mr. Hill thank you, ms. Mills. Appreciate your testimony today. Well now have a round of questioning. I recognize myself for five minutes. Lets start with ms. Anderson you were talking about your view of the banks taking up of the of these loans. And what modifications might be made for less than creditworthy borrowers. I understood that point. But as i said in my earlier questioning, 5,000 bangs jumped on the opportunity to help in the p. P. P. Environment under the cares act. We have got very few banks that are engaging here. What is the Bank Policy Institute doing to promote banks participating in the main Street Program . Ms. Anderson thank you for your question. In terms of member banks, the vast majority of our members are participating in the program. I cant speak for all banks across the contry, i think when you think about the complex it of the Program Complexity of the program, its difficult not just for small borrowers but lenders. The program is sipt as a participation structure, which typically used in the syndicated loan market. Many Smaller Banks may not actually be active in that space, familiar with it. And there is quite a lot in terms of going through the legal documentation and setting up the infrastructure to actually lend in that manner and comply with the terms of the program. While we certainly have our members participating, it may be more challenging for Smaller Banks. Mr. Hill thank you. Do you agree with the testimony on our panel that its possible to make a very creditworthy loan hats not based on the multiples and the senior nature of the term sheet . In other words, if one were to have sufficient collateral coverage and a 125 bit Service Coverage ratio, but a junior lean, wouldnt that be considered a creditworthy loan as well . Ms. Anderson several of our members have said that they would be interested possibly in lending in a junior facility. Something thats collateralized. I think it would be up to the fed and treasury to decide exactly what their Risk Appetite would be in such a structure. And structure terms appropriately. It may not be 1. 2 but something similar. Yes, i do think banks would be interested if there was a junior facility available. Mr. Hill do you think the fed and treasury are not setting the risk parameters appropriately in their existing main street term sheets . In other words, are they too strict . Are they too much like a traditional Senior Bank Loan with no not even a step in the direction towards a slightly distressed solvent creditworthy, but distressed temporarily distressed borrower . Ms. Anderson i think the Eligibility Criteria that the fed and treasury established probably fit the program that they set out to design. As president rosengren said in terms of the liquidity program. But there is a key element. Even if you reduced some of the stringency of those terms, you still have the underwriting element. In this environment underwriting on todays information will be difficult for many borrowers in that distressed space. Im not sure that actually loosening that criteria is necessarily the right answer. Also in terms of what president rosengren said, if Companies Really need equity, then a Federal Reserve Lending Program is not the right solution for them. Mr. Hill understood. Thank you for your response. Mr. Bohn, lets talk about the affiliation rules. You heard my conversation with dr. Rosengren that the fed here in the main street facility has adopted those Small Business administration 7a lending affiliation limitations. For this middle market of nonsuper Small Businesses and certainly those not eligibility to raise capital in the public markets, are those affiliation rules a serious impediment . Can you give us an example . Mr. Bohn thank you, congressman french. I think what we are seeing and hearing what was evident in the survey we had is that these businesses were originally excluded from the p. P. P. And there was hope initially that in the main Street Lending provision that there would be opportunities for them to utilize benefits and lending from main street in order to not only keep jobs, but also invest in some of the changes that they need to do as people start to pivot, based on the economy and whether that is setting up plexiglas and rearranging their buildings, or whether or not thats related to simply doing business in a much different way. We have heard from them loud and clear that their inability to access them has had a Significant Impact on their business. We first one minute out there and talked mr. Hill thank you for that. Well have another round. My peopletimes expired. Turn to mr. Ramamurti for five minutes. Mr. Ramamurti thank you, mr. Chairman. Thank you, ms. Mills, for your testimony today. You noted in in your written testimony that hundreds of your Union Members and family members have died from covid and many more have been hospitalized. I want to extend my condolences to them and their families and to you. I think its a powerful reminder this is first and foremost a Health Crisis and frontline workers like those you represent are bearing prunt of it. You represent a lot of people who work in hospitality and in tourism as Frontline Service workers. Weight wait staff, cooks, bartenders. You mentioned in your Opening Statement a majority of members are people of color and majority are women. When the companies who employ your members struggle, who are the first people to suffer if they have furloughs . Ms. Anderson thank you for your question. Across did ms. Mills across the board its the frontline workers first. Our members who are laid off. Our experience is the white middle management are able to keep their job. Mr. Ramamurti when they are laid off or furloughed. Its not just lost income. They are losing access to health care, retirement contributions earnings other ben snits . Ms. Mills yes. Benefits . Ms. Mills yes. Mr. Ramamurti among the hundreds of thousands of industry workers you represent, four months into this crisis, are you aware of a single job saved by the main Street Program or a single hours cut or furlough that the program has stopped . Ms. Mills no. Mr. Ramamurti as the main Street Program is currently designed, do you think it will help workers in the future even if more companies participate in it . Ms. Mills no. As i said in my testimony not without binding requirements that employees be rehired from the first day of the aid. Mr. Ramamurti in other words, even if a lot of Companies Get loans through this program, you dont think that the benefits of those loans will float through to workers. Ms. Mills no. Not without binding requirements. Mr. Ramamurti 45 Million People work at companies that are eligible for the main Street Program. If the goal is to help those millions of workers, do you think the fed can just make tweaks to the main Street Program to achieve that . Or do you think Congress Needs to come up with a brand new approach . Ms. Mills in this case i dont think tweets will work. I think congress does need to come up with a new approach. Mr. Ramamurti lets talk about that. In your experience, what kind of new approach do you think would be helpful to your workers . In your experience and experience of your members, does providing Financial Support to businesses help workers without extreys and enforceable requirements that businesses actually use that aid to support workers . Ms. Mills no. Time and again in many different programs without enforceable requirements, support to businesses doesnt help workers. Mr. Ramamurti of the 500 billion that Congress Gave to the treasury in the cares act in march, there is currently more than 200 billion sitting unused and uncommitted. If you were use that money to develop program that would be most helpful to your members, what would you do with it . Ms. Mills the two things that matter are health care and wages. We would fund cobra payments so we could continue health care. Give direct support to workers. Mr. Ramamurti thank you. One final question about this. Did the Treasury Department ever reach out to your union as it was designing this Lending Program that was ostensibly about helping workers . Ms. Mills no. Mr. Ramamurti thank you, ms. Mills. I share your views and frankly i think its time we started to listen to working people not executives and investors and their lobbyists when we design these programs that are supposed to be ultimately about helping workers. Thank you, mr. Chairman. I yield back. Mr. Hill thank you. Congresswoman shalala is recognized for five minutes. Ms. Shalala thank you. Let me talk about this bill since i represent a district that has a huge number of workers that work in the tourism industry, particularly in the hotel, including the fountain bleu which you mentioned. Had a debate over over whether their term commercially reasonable was better than reasonable. But sounds to me from what you said that neither mandates that these programs keep people employed, or even furlough workers keeping their health care so that they can get on unemployment and keep their health care. I take it that wed have to really finetune that touirement in these programs make a difference for the workers that unite represents, but the thousands of workers that work in this industry. Ms. Mills yes. Thank you, congresswoman, for your question. Our great concern about the main Street Lending program is that the Hotel Industry is seeking changes so that they can use the program to pay their mortgages. Like there is a 975 million loan to the fountain bleu in miami beach in your district. As i mentioned the they stopped paying health care for hundreds of our laid off members. We believe its a have i lation of our contract. It would be its a violation of our contract. It would be great to fund a year or two of death payments, not a million a year, while laid off workers lose their Health Insurance and rely on the Public Hospital system. Finetuning absolutely requirements would be necessary. I really appreciate your uestion today because one of fountain bleu workers died this morning in the hospital without life insurance. Ms. Shalala i heard that. I am so sorry. I want at this point out that those workers are also taxpayers. We are talking about their money being used for the mortgage payments. You dont see anything in the main Street Program that could be significantly improved unless it was totally restructured in terms of helping workers in this country. Ms. Mills i think thats right. It would need to be restructured with requirements off the bat for bringing workers back. As soon as any assistance was issued. Yes. Ms. Shalala thank you very much. Let me ask ms. Anderson a question. The main Street Lending program employ their own underwriting standards to loan applications. Does that mean that banks are making loans under the program that they would have made anyway after the fed program . If so, is the main Street Lending Program Providing any benefit to borrowers at all . Ms. Anderson thank you for your question. In terms of the loans that are being made, i think they are quite specific in terms of the circumstances. You are right. Can meet a banks underwriting standards is typically finding out there is a product more suited to them given their credit needs. For example maybe a term loan is not what they need and they need something more like a Flexible Working capital facility. Our banks are many times finding Better Solutions for these borrowers when they inquire about the program. In templets live case that is look like they might go through, one example is a travel company that basically came to one of our banks, and the bank would be comfortable possibly lending the 5 . In normal circumstance they would go out and syndicate that loan to the market. Given the timing that it takes to do that, and the need to actually get finances to these borrowers, thats where they think it makes sense to use main street because the government is there ready and waiting so they dont have to go through a syndication process. Whether there are lots of borrowers in those specific circumstances, i think is uestionable. Ms. Shalala one more quick question. Many of the small to midsized business that is were able to get by in the first few months, they use the p. P. P. Program. Now at the end of their ropes. Goldman sachs reported that more than 80 would be out of p. P. P. Money. If thats the case, where are they turning for funding . Are your banks seeing an upparticular uptick in loan request . Ms. Anderson i wouldnt say huge. Something that is interesting is that the vast majority, probably over 70 of new borrower inquiries that our banks are getting are actually borrowers who think main street is a p. P. P. Program. So they think it is a Loan Forgiveness Program or Grant Program. Once they hear the details, then they realize its not for them. So they are looking for something that is equivalent to a p. P. P. Type structure. Mr. Hill thank you. Your times expired. Now we turn to senator toomey for five minutes. Senator toomey thank you, mr. Chairman. I just want to go back and review very briefly a little bit of the history about how these programs came together. Because we debated the extent to which we should have mandates to retain a work force and how best to do that. And for Small Businesses we found that it might be possible for businesses, even businesses that are essentially closed, have no business, it might be possible to maintain a payroll if we paid for it. If we had the taxpayers pay for it. So thats what the f. P. P. Program was designed to do. Take a finite period of time and have the taxpayer pick up the tab for the payroll. And to a very significant degree i think its worked. It was probably necessary. With the main Street Lending program, the idea was that these would be loans. And while obviously everybody wants to maximize employment we tunities, maximum jobs are all celebrating record low unemployment, record high Job Opportunities for everybody in america, most especially africanamerican community, hispanic community, people who have historically had higher rates of unemployment, we are seeing tremendous gains. This was all great. But the idea that we would require companies to borrow money for the purpose of maintaining a payroll for people who they didnt have work for because the business was closed. That didnt seem to make sense, which is why we made Unemployment Benefits more generous, we did direct payments of 1,200 to everyone. To offset the lost income that was there. Let me try to illustrate this another way with a question. Maybe mr. Bohn or mr. Foster would want to take a shot at this. If a business has is losing oney probably massively as a lapse in sales, has no orders coming in because of this contraction that was under way, and hopefully in the process of getting behind us, and therefore has no work for its workers, if that business goes out and borrows a lot of money to pay those workers anyway, does that make that business more viable . More likely to succeed . More likely to be there at the end of this contraction . To be able to bring workers back . Mr. Foster senator toomey, thank you. If i could ill take a stab at that. What we are talking about here is really two separate things. I think, yes, p. P. P. Was definitely designed to save jobs in the immediate term. Quickly as possible. What we are mr. Bohn are hearing and seeing from milled market organizations, though, is that the lonets if they were able to get them would go to investment in opportunities that would create jobs or bring back jobs within their company. So to use the example of a. C. G. As an organization, there is a lot we have to do and dont have the finances to be able to really exist well equipped in this new virtual environment. We are seeing that time and team again whether its the restaurants how they handle how they prepare for orders, utilize technology. So there are opportunities but at the end of the day its a moot point because there is such a large number of them not able to access the program overall. Senator toomey mr. Foster, do you have a comment . Mr. Foster i think the main thing right now is to type of business that you illustrated is to keep the business businesses in survival mode. Can you hear me . And you need to let the Business Owner do whats necessary with the capital to keep the business alive. Certainly payroll is a part of it. Frequently, they are behind on lease payments. They could lose their facility. Theyve got they have stretched their suppliers. You just have to leave it up to the Business Owner because they really need they are in survival mode. Senator toomey let me ask a question from miss anderson. Ms. Anderson. My understanding is the federal Bank Supervisors have made it clear that they will treat the main Street Lending loans in a manner consistent with their supervisory approach to other commercial and industrial loan. Heres my question. If they were to change that and they were to take say a less restrictive view in their supervisory capacity, would bank behavior be likely to change . Byis bank behavior so driven the existing set of internal rules that they would be unlikely ms. Anderson thank you. Some bank behavior might change, but it may not be actually the behavior that is desirable overall. One thing to be clear we dont think its appropriate to have supervisory forbearance. A transmission of risk from the corporate sector to the Banking Sector is not in the best interest of anyone. Certainly if you have banks go and make riskier loans right now, it might be ok for 12 months, but the credit problem will still be there. Just down the road. I think banks basically are looking at that. Even where supervisory requirements were relaxed somewhat, i think they can see that it is not worthwhile to rack up bad loans on their Balance Sheet. That they will have to basically work out at some point in the future. Mr. Hill thank you, ms. Anderson. Senator too manyy, your time has expired. The gentleman yield back. We have a second round of questioning for this panel. And ill yield myself five minutes to start that. I was looking some these questions were we are faced with today and the fed and treasury are faced with are not new questions. I would like to read a quote. If its a pawnshop in which necessary borrowers are compelled to hock assets, worth two or three times the amount of the loan, we are opposed and we think most businesspeople will be as well. We see no reason why the government should be engaged in a careful pawn brokering enterprise, nickel over security, haggling over interest, and competing with other lenders. That was written back in 1933 as receipt Construction Finance corporation and the fed reConstruction Finance corporation and the fed struggled how to get considered as read to the the american marketplace in a very tough economic recession of the 1930s. I think we are dealing with that issue now. In this middle Market Segment we are talking about today. Mr. Foster, you offered some very good constructive comments on specific loan term changes. Can you also address the affiliation question that i posed earlier . Mr. Foster let me try to do that by giving you an example. Im going to compare and contrast to p. P. P. In p. P. P. Use the same set program afishation rules with relaxation for companies with an sbic investment, hospitality franchises, etc. You dont even have that in main street. In p. P. P. If you had two commonly owned business that is had 200 employees each and they each had say 20 million into preexisting debt, they could each access 10 million of p. P. P. For a total of 20. They needed to have the requisite cost structure to do that. Switch over to main street, two companies under common control, 7,000 employees each, each with 20 million in preexising debt, 14,000 employees, they have to share, if one of them wants to do the new Loan Facility, they have to share 15 million in total assistance under that program. And it really doesnt make any sense from an employee perspective you got 14,000 employees that have access in total to a 15 million loan. Versus on p. P. P. You had 400 employees that had access up to 20. It really is poorly designed. It doesnt make any sense for these companies to have to run through really complicated and really severe 7a regulation that is are really focused on making sure companies with more than 500 employees dont have a access to a 7a loan. Mr. Hill thats helpful. I appreciate that. Ms. Mills, turn to you. First echo my comments of our fellow commissioners about the condolences. So many of our families across the country have really suffered in this pandemic. We have to remember when we are doing our oversight work that first and foremost this is a Public Health crisis thats led to an extraordinary economic crisis. So i appreciate the comments you made and care you have for all of your members and your advocacy today. And also agree with smart toomey that the main Street Program is not the solution to all challenges in this pandemic, either. Thats why we have the unemployment compensation. The direct payments to our families. The forbearance in mortgage and rental payments. The payment for leave. The payment for testing. The flexible Furlough Program in the state so that people can be furloughed, maintain some benefits, and get unemployment compensation. And obviously the aforementioned p. P. P. All these Work Together to minimize the impact on our families and help them get through the pandemic and also help get our economy back to full capacity. In looking at your testimony, though, 74 of cmbs, or less than 20 million. In my district, Asian American hotel owners are the classic Small Business entrepreneurs. As i understand it, over 50 of hotel rooms are owned by these kinds of classic Small Business entrepreneurs across the country. They are worried about getting october property tax payments in arkansas. I know one of their concerns. Because they want to bring their staff back. They want to bring their staff back economies rat with the economy commiserate with the economy reopening. It is mostly peoples retirement accounts. They are benefit trying to get capital into the industry and get people hired back and reopened. Im empathetic to your t i thank you for being here very much and for your comments. I think that the main Street Programs mission is to try to get hotel and hospitality opened. I hope we can find a structure that does that. Let me yield back. Turn to my friend, mr. Ramamurti for five minutes. Mr. Ramamurti thank you, mr. Chairman. Mr. Bohn, thank you for your testimony. I want to ask you the same type of questions i asked ms. Mills earlier. You come at this from a different perspective. You run a midsized company. Your organization represents a lot of such companies. You agree with ms. Mills that this program hasnt been helpful so far. In fact, not a single one of your Member Companies has actually been helped by the main Street Program so far, is that right . Mr. Bohn correct. Mr. Ramamurti its in your testimony that the Program Needs to be changed, can you describe the kinds of ideas you have in mind for that . Mr. Bohn we list a couple of ideas that start with the removal of the exclusion. Reducing the evida requirements to make it more appealing to a broader class, particularly in the lower middle market. We also talk specifically about the loan size and bringing the loan size down further. Those are just some of them we think. Again, this is not only our team internally talking, this is the direct comments we received back in the survey we just did. Mr. Ramamurti you also mentioned eliminating receipt strickses on shareholder payouts and executive compensation s that right . Mr. Bohn correct. Mr. Ramamurti i agree with you on the diagnosis here which is that the main Street Program hasnt helped anybody so far very much. Its also unlikely to help a lot more companies without significant changes. But im concerned about the proposed solution that you are offering. You propose changing the rules so every company can get a loan even if before the crisis they had more debt than earnings. In other words, no matter how much risk there is that the public is going to end up holding the bag at the end of this. At the same time, you propose eliminating restrictions on Companies Spending the loan money on payments to their shareholders and eliminating restrictions on executive pay. My question is why should the American People be willing to give billions of dollars to potentially Failing Companies that can use that money to pay shareholders and executive while firing workers . Mr. Bohn i think when we talk about things like whether or not the company was at a higher risk prior, if you consider a large part of the lower middle market, which are oftentimes family owned businesses, it can be a misleading indicator because a loft costs and expenses roll through. Salaries and other types of things. At the end of the day it is not something significant. We see this a lot of times when purchases and acquisitions are made where there is a lot of debate and discussion over what is accomplished through their regular financial. I think when we are looking at that we tend to eliminate the opportunity for companies, particularly familyowned companies, who are in that lower middle market who at the end of the day their margins, their ebida are small. They have been successful for years. Employ a number of different people. Mr. Ramamurti a followup question on that. The executive compensation restrictions specifically. If a company exists that is not interested in the main Street Program because of the executive compensation restriction, isnt it fair guess to say that the reason that they are not interested is because they want to use some of that moppy to increase executive compensation . Otherwise why is it a deterrent to them . Mr. Bohn again for that particular comment comes directly from some of our members why they are nod interested. What their particular reason for not being interested i cant go to that intent. I will say that if there is anything that limits their ability to eventually settle the company upon paying the loan or derive the benefits they have built for building a company over time, i think that thats going to absolutely preclude them from wanting to utilize the funds that could be available to them. Mr. Ramamurti i think just to sum up quickly i think we have seen a remarkable consensus emerge which is the main Street Program as currently designed is failing. The representative of the Banking Industry told us we arent seeing meaningful demand for loans from their clients. The representative of small and midsized businesses told us the program wouldnt help its members as currently designed. Ms. Mills representing hundreds of thousands of workers told us the main Street Program hasnt helped a single worker and isnt likely to. I dont question the hard work of president rosengren and the fed staff, more loans are not going to solve this crisis. Struggling small and Midsized Companies cant take on more debt right now. The only tool in the feds belt is the wrong one. This program was given 75 billion and months to succeed. It didnt. And it cant. Its time to stop tinkering around the edges with adjustments to loan eligibility and loan terms when the fundamental problem is with the nature of the loans themselves. Its time for congress to step back in so we can actually save small and midsized businesses. Tie thedoes it needs to acyance and not hand money to executives and trust them to take care of workers. Thank you. Mr. Hill the gentleman yields back. We turn to congresswoman shalala for five minutes. Ms. Shalala thank you very much. One of the problems with the loan program seems to be including this program which clearly has flaws in it. Is that loans protect the health care of executives but not of workers. Nothing that we have done, Unemployment Insurance to support workers, protects their health care. Unless these hotels, for example, furlough people and keep their health care. So fundamentally what the fed has done will protect the health care of a lot of executives but not there is nothing that we have done particularly in the Unemployment Insurance system that protects the Workers Health care. I think that was one of your points. Ms. Mills yes. Thank you. That is correct. Hat the extension of the wages that the congressman mentioned has been appreciated, although it is now ending. Thats problematic. But there has not been an extension of health care. Even in a case where we have some health care negotiated, Companies Like the fouptian bleu are not abriding by that abiding by that. Hat is absolutely correct. Ms. Shalala three of the five facilities require that main reet loans be in terms of priority and security of the borrowers. Other loans are debt instruments other than mortgage debt. Are lenders willing to subordinate or dilute their priority and security . What impact does this provision have on the applicants ability to borrow under the main Street Lending program . Ms. Anderson thank you for your question. It this is a true issue in the sense that many Midsized Companies have existing debt structures. Having senior credit come in at this point basically have to be negotiated with those lenders. Many of whom are not bank lenders. That then becomes a complex process in terms of an intercredit agreement. I know that has certainly put off some borrowers in terms of trying to go through that process when they may not receive the consent from the other lenders who may just not have the same incentives as the originating bank. It is a problem. It is complex. Ms. Shalala thank you. Mr. Bohn. Estion for it written testimony in your written testimony you stated that the challenges with the main Street Lending program have a lot to do with whether people actually understand it. Do you have some specific recommendations in that regard . Mr. Bohn thank you, congress canwoman shalala. As im sitting here in orlando, florida, thank you for representing our great state here on the commission and in general. Yes, i think that one of the things we heard back from our survey was that there was, unlike the p. P. P. Where there was significant awareness about the various provisions, there was a lot more ambiguity and misunderstanding. Some of that related to how long it has taken for the program to come together. Some of that because there was a little bit of misunderstanding thinking it would be different than p. P. P. Because it was loans and not carve out. 501cof are an affiliated group. I think there is an opportunity here regardless where the changes are made to make sure that the program is much more clearly communicated on a wider basis. We are certainly willing and able to help with that in any way we can. Ms. Shalala do you have a specific recommendation on the loan size and leverage test . Mr. Bohn i have a specific recommendation on the loan size that it should come down to closer to 50,000. Heres what makes me say that. There are a number of smaller familyowned businesses in the middle market i have spoken to rekently right here in orlando who has said, look, we do not need 250,000. We do need 50,000 or 75,000 in order to prepare what we think is going to be a longer haul to deal with the fallout from covid. Whether thats Safety Equipment or how we run our operation. But 250,000 is too large of a haul for them. Not wanting to get out over their skis financially. Yes this specific recommendation on that. Yes, maam. Ms. Shalala thank you. I yield back. Mr. Hill thank you, congresswoman. Now well yield to senator toomey for five minutes. Senator toomey thank you very much, mr. Chairman. Is has been a very, very helpful and informative. I appreciate the testimony of all of the participants. My own view is its way premature to come to the conclusion this is all a failure. I think there are definitely some improvements we ought to look at. There might be in new versions of main Street Programs we ought to template. We talked about affiliation rules which need to be changed. There may be terms that ought to be modified. I am interested in something in a would be more asset based rather than income based. Lets keep in mind. It took a long time to get this up and running. That was always going to be the case because of the nature of the complexity of doing this kind of lending. There has been a recent acceleration in use. If the acceleration continues, we may see significant pickup. Mr. Bohn makes the argument that there is a high level of unaware ness or low level. There is a lot we could do to remedy that. Which could result in more participation. And then finally, this leads to my question. I would argue that the Corporate Bond programs which are not the ones we are here to talk about today, but the facilities that set up the Corporate Bond buying programs are enormously successful despite the fact that the fed has purchased very, very few bonds. It was the standing up of the program, the existence of the program, that allowed the market to operate, to operate actually at an all time record volume after having been froze frozen. Thats a remarkable Success Story despite the fact that there was not a lot of history. That gets me to my question. Maybe i should have asked this at the beginning. Ms. Anderson, mr. Bonner nirk of you might have thoughts on this but how should we best determine objectively the extent to which credit needs are being met or not being met . I have heard anecdotely from Pennsylvania Companies and pennsylvania banks that when this pandemic resulted in a shutdown, there was a massive drawdown on existing credit lines. People pile up as much liquidity as they possibly could. Then after a little time passed hay started to pay down some of those balances. But you know, we can certainly see bankruptcy filings, at that point its kind of too late. What should we be looking at on a daytoday basis, what metric should we be using to determine how significant the unmet credit demands are in this phase . Ms. Anderson maybe you could lead it off. Ms. Anderson i think you make a good point in that by and large, credit amounts for many credit depends for Many Companies are being met. You saw lending from banks early on in the pandemic, 750 billion plus was lent over the course of three months. Since then we have seen about 200 billion in the lending space be repaid. I think youre right, businesses are, you know, paying down some of that liquidity that took in in the early days of the crisis. In speaking to our banks, the demand for credit has lessened. Theyre not getting millions of inquiries from their customers, new or existing. And i think that really says something. Theyve all been trying to see who needs credit or other solutions. I think it really is a temporary liquidity credit need then the banks by and large are providing that. If its a solvency need thats not something that banks provide to companies. Senator, i think one simple way to figure out if theres unmet credit needs is to ask the banks how many main street loans have been requested by borrowers but the banks have rejected. If you can capture that data you get an idea because im aware of probably 100. And its not the banks fault. We have a Restaurant Group in florida and the bank who signed up for the program said i cant take any more restaurant exposure in my portfolio. Theyre not approaching it differently or relaxing underwriting standards. Restaurant groups are not getting a bank loan. If we dont capture that data. I think thats an interesting point. Ms. Anderson is there a way that that data is being collected systematically so we could access that . Or does that not exist in a centralized place . Its not been ms. Anderson its not being collected system matlycally at this point in time. We could work with our members to get you that information. Our members who are active in the program, theyre receiving between 500 to maybe 2,000 inquiries in to the main street loan program. As i said before, upwards of three quarters of those actually dont understand the program and think its a Grant Program. So its really not a high level of inquiries even. Thanks very much, mr. Chairman. I see my time has expired. Mr. Hill i want to thank our witnesses again, both panels, excellent discussion. I want to thank our commissioners for their participation today and for their thoughtful questions. And on behalf of the commission, in addition to thanking the witnesses, lets thank the staff as well for their preparation in putting the hearing together. This hearing is adjournment is adjourned. [captions Copyright National cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] coming up, House Speaker nancy pelosi and Senate Democratic leader Chuck Schumer sed to give an update on Coronavirus Relief negotiations. Thats expected to start at noon eastern. Well get you there live when the two leaders get under way here on cspan. Very similar set expressed in headlines and reporting of capitol hill publications and other publications on those negotiations which ended last night well into the evening. This is roll call. Show you the report just out from the associated press. Virus aid on brink of collapse. Sides are very far apart. From politico, covid talks going nowhere as deadline nears. They write that negotiations between the white house and Democratic Leaders on a new Coronavirus Relief package were on the brink of failure thursday night. Both sides said after a fruitless threehour meeting, they write the apparent deadline and the highlevel talks shifts the focus back to president donald trump, who warned earlier in the day that he will issue a series of executive orders to address the economic crisis facing millions of americans if no deal can be reached with congress. Friday, Senior Administration Officials Say he could put a stop to all of this. I thought today was the day the president wanted this resolved. Does this executive action look ever more likely . Guest it does look more likely. There is still the unemployment report coming out late they are morning. Were going to find out how bad the jobs picture was last month. So i think there were still a few more news nuggets that could nudge things one way or the other before those time actions are taken and theres still talk that there may be some phone calls today between the negotiators to see whether it makes sense to continue negotiating. You know, at some point, the administration has been talking about walking away, but thats going to be really hard to sustain. Youve got tens of millions of people without these unemployment checks that they had been receiving the 600 bonus checks the democrats wanted to extend the rest of the year. Republicans didnt though that was too generous. And so you have all these little fights that together became a very big fight. When youve got hundreds of billions of dollar and really trillions of dollars in differences, its really hard to negotiate that between four people. Host have they agreed to extending the 600 . Is that still a ticking point . And one of the other key stick what are the other key sticking points in the negotiation . Guest the republicans were willing to go along with a week or two weeks of the 600 but they wanted to recuse the number. The last we heard about the administration offering was a 400 a week bonus. This democrats want a whole host of things that the republicans dont want, including critically the aid to state and local governments. These are this is this is aid for things like firefighters, police officers, maintenance workers and all the rest who potentially could get layoffs or furloughs as state and local governments look at their revenues which have plummeted across the country. And these local governments, unlike the federal government, cant borrow off of money to pay these workers. This is an issue in petty much every state. Its spreading more to republican states that have seen the virus soar in recent weeks or recent months. So you do are republican senators like Susan Collins and bill cassidy of louisiana, who have said hey, we should get these state and local governments 500 billion. And that would tide them over. A lot of the republicans say look, thats not our job. Lets give them some aid for the virus. But lets not replace their lost revenue. This is like a big ideological fight. One of a whole bunch of them that are complicating these negotiations. On the republican side for sweeping Liability Protections for businesses and others, that the democrats say they dont want, that go too far and make it so that Business Owners would be able to force their workers to come back to work in an unsafe environment. So you have these ideological fights and asks that are really complicating what is already potentially one of the biggest, most complicated bills in the history of congress. Host well remind our viewers and listeners, you can read Steven Dennis reporting at bloomberg. Com. The president called for a payroll tax cut is that off the table . Guest thats been taken theyve table almost from the beginning by republicans in the congress. Republicans have not been eager, senators like Chuck Grassley who chairs the finance committee and a particular embrace this idea of a payroll tax cut. You have some rank and file republicans who like the idea. Senators like ted cruz or josh holley have proposed various versions of a payroll tax cut. But you know, payroll tax cuts are very expensive. Its about 100 billion a month if you have a total payroll tax holiday. It takes a while for that to show up in the economy because peoples paychecks, you know, grow 10 or something, that doesnt necessarily solve the huge hit in the economy right now. Thats where the administration and the democrats have both have a point of agreement. They both want to send out another round of stimulus checks, 1,200. So there are these things they agree on. Whats really interesting and sort of is that they theyre not willing to go along with just a few things they agree on. The democrats are very worried that on things like election security, the post office, if they dont get those in this package theyre going to lose. Theyre not going to have those in that package down the line. Host to be clear are the negotiations off for now . There are no additional ones ski alled today or the weekend . Guest they are going to have a phone call what they said last night is that they would talk to each other on the phone about whether to have additional negotiations. So its possible. That they revive negotiations. Try to come up with another avenue out of this. But as of right now, its looking more about both sides going back to their corners for the weekend and youll see more blame game on the sunday talk shows. , st follow all of this steventdennis on twitter. Thanks for being here. Guest any time. Host our opening topic is pandemic relief measure. Quick headline this morning, front page, the washington post. Relief bill meeting failed, next steps uncertain. On the republican line, walter from butler, indiana. Good morning. Caller good morning. Thank you for taking my call. The premise where we start is its a pandemic. Its not a pandemic. People die all the time. Is it a pandemic of cancer . Is a pandemic of abortion . Is it a pan democrat offensive coordinator people drowning in swimming pals. Host it has been determined to be a pandemic be world health organization, by our own centers for Disease Control and prevention. The major Health Organizations in this country have determined that it is indeed a pandemic. Caller when you say the world health organization, these are the people who turned around and said you dent anyway i dont want to get off on a tangent. Host whats your message to congress . Caller stop spending must be you dont have my brotherinlaw sits home with a big smile on his face and makes 1,100 a week to not work. If its a pandemic and you cant work, its like unemployment. Why give people more money in a, quote, pandemic where youre not driving your car, not going to the store, not going on vacation, more than normal unemployment. If everybody is worried about people diering shut the abortion clinics down and we dont have the money and we cant keep just printing money. E Weimar Republic did it and it went up. If the state is foolish enough to take care of. Host to joe sneff maryland, democrats line, your message to congress. Caller good morning. Host good morning. Caller my big message for congress, important message, 328 million americans, 5 will test positive if we test everyone. 5 of those will die. And anyone of the 5 who test positive, 75 will have severe heart problems when they survive. According to a according to the german medical community. If we go to the schools, thats 76 million times. 05,times. 05, gives you 190,000 dead students. So turn that around and tell them bring that flag down at halfmast in my hometown. Do your best my grandmother was in the 1918 flu. I know a lot about flus. Keep everything clean. And thank you. Host augusta, georgia, on the independent line. Caller seeing a lot of people going back an forth, back and forth about the pandemic. It is a pandemic. It is very, very serious. I know a lot of people that are young, after ro american, im after ro american myself, when youre in the severe stage of the coronavirus your body cannot move, period that is serious. My thing for congress is this. Why dont yall guys come together and come to a resolution for health care and well being of our vulnerable citizens . Everybody care about this person and that person, but theyre forgetting about the vulnerability citizens of america like the mentally ill, the senior citizen, the people that cant function for themselves. I see them walking up aened down the street, homeless, at high risk of diing for the coronavirus because they dont ave the assets to get to the facilities or the facilities are turning them dun, turning them away wit