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

Small and mediumsized businesses that were in sound Financial Condition before the virus impact of the economy we will hear from the head of the fed in boston and banking and business leaders. Will come tog order. This is a hybrid hearing meaning some of our commissioners are appearing in person and witnesses will testify remotely. Let me offer a few Video Conferencing reminders. Before you start speaking there will be a slight delay before you are displayed on the screen. Click the mute button until your turn to speak or to ask a question. If there is a technology issue, well move to the next speaker until it is resolved. You should all have one box on your screens labeled clock to show you how much time is remaining. 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 a part of our oversight work, the commission has decided to hold this hearing today which will examine the main Street Lending facilities. The Federal Reserve established the main Street Program to support lending to small and mediumsized business answer Nonprofit Organization that is 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 rosengren, president and chief executive officer of the Federal Reserve bank of boston, will testify during the first panel. And the second panel will include industry participants. In the absence of a chair, the commissioners have agreed to each have one minute of opening remarks. I will now recognize myself for an Opening Statement. Our commissions pleased to convene this hearing of the main street Street Lending program. Thank you to our witnesses for lending your expertise today. I believe this is a timely and important discussion. I also commend my fellow commissioners. Together we have worked in a bipartisan, bicameral way to release three reports and organize this inaugural hearing. I would also like to thank our personal staffs for their diligence in this area, particularly in absence of a chair, and on behalf of all commissioners, i welcome our new chief clerk, amber, and thank you for the u. S. Senate for these facilities today. Leading to the implementation, the program generated Significant Interest and engagement. However, in the months since the programs been available, 95 million of the 600 billion allocated has been loaned to eligible businesses. I hope we will find answers today that will explain why if anything it took three months to stand up the program and what, if anything, needs to be alter the program to expand the universe of eligible borrowers. I yield back. And i now recognize commissioner roma murthy for one minute. Mr. Ramamurti thank you. Thank you to each of the witnesses appearing today. Four months ago, Congress Gave the treasury half 1 trillion. They pledged 75 billion to the Federal Reserves main Street Lending program for small and Midsized Companies. After taking three months, the fed has been operating it for about a month. In that time it has supported 18 loans for 104 million. That is 0. 07 of the lending capacity the fed touted for the program in april. While all of this money has been sitting on the sidelines, tens of thousands of businesses have permanently closed and millions of americans have lost their jobs. By any measure, the main Street Program has been a failure. My goal is why it was failed and how to fix it quickly before more americans lose their jobs and more good businesses have shut their doors. Twothank you, mr. Chairman. Mr. Hill thank you, commissioner. I now recognize congressman shalala for one minute. Ms. Shalala thank you. Good morning. Id like that our witnesses for like to thank our witnesses for being here today. I represent floridas 27th district which includes most of miamidade county. Covid19 is out of control in my district. We have a raging community spread. As a result, we have a financial disaster with 50 of businesses laying off workers and many others going bankrupt. Our economy is heavily reliant on tourism. Actually we are reliant on crowds. Unlike big businesses that can rely on Capital Markets for funding, small and midsized businesses are more susceptible to being permanently shut down. Recognizing this we approved , funding in the cares act in march to support up to 600 billion in lending to these businesses. However, while some florida businesses have benefited from i yield back. Mr. Hill thank you, congresswoman. I now recognize senator toomey for one minute. Sen. Toomey thank you very much, mr. Chairman. I also want to thank all the witnesses in participating in this hearing today. I think the Big Questions of learning about is certainly why relatively few borrowers have participated in this program, why it appears not to have a tremendous amount of demand. I want to understand whether through this program, banks are likely to originate loans that they would not otherwise engage in any way. And at some point we need to have a discussion about the fact that we are in a different place than the first we had these programs in march. We intended, at least i did as one of the negotiators of this to provide liquidities that , businesses could survive what we hoped would be a very brief, although we knew would be a severe downturn. Now we have the process of excess capacity in industries that could persist for some time. That is a new and different challenge. I look forward to exploring all of these and, again, want to thank the witnesses for joining us. Mr. Hill thank you, senator toomey. All commissioners statements will be added to the hearing record. Were fortunate today to have five witnesses appearing and appreciate their time. President rosengren is the president and ceo of the Federal Reserve bank of boston. He is a participant in the federal open market committee, the monetary policymaking arm of the united states. As ceo he leads the boston feds , work which includes Economic Research and analysis, banking supervision and Community Economic development activities, and a wide range of payments, technologies and finance initiatives. Ms. Lauren anderson serves as Senior Vice President and associate general counsel of the Bank Policy Institute. In this role she oversees the bpis advocacy across a range of domestic and international issues. She brings over a decade of experience in Financial Regulation and oversight, serving as Senior Advisor at the bank of england and before joining the bank of england, served at our fdic. Mr. Tom bohn serves as the chief executive officer for corporate growth. It serves 90,000 investors, executives, lenders and advisors to the growing middle markets of companies. Prior to joining acg in december, 2019, mr. Bohn served as ceo of the north American Veterinary Community where he saw unprecedented growth. Mr. Vince foster serves as the executive chairman of the main Street Capital corporation, a position hes held since november of 2018. Mr. Foster previously served as main streets ceo from 2007 until november of 2018 and served as main streets president from 2012 to 2015. He also has been a manager of the Investment Team Management Committee since the formation. Main Street Capital offers Capital Solutions for lower middle Market Companies. And our final witness, ms. Gwen mills, secretary treasure of unite here. Ms. Mills has been working with unite here for 20 years. She served as the political director from 2015 to 2017 and was elected secretary treasurer in 2017. Unite here has 300,000 members, largely serving the travel and Tourism Industry. We will now proceed to president rosengrens testimony. Hell testify and well move into two rounds of fiveminute questioning. Immediately following the questioning, ill recognize the secretary panel of witnesses for their testimony, and then well move into that questioning. Each of the witnesses full, written testimony will be made apart of the official hearing record. President rosengren, welcome and youre recognized for five minutes. Mr. Rosengren rep. Hill, commissioner, senators, thank you for the opportunity to speak about the main Street Lending program which the boston fed administers for the Federal Reserve system. My written testimony contains charts and details that i hope will be useful to you. But i will be brief in this overview. In addition to tragic loss of life, the pandemic poses an unprecedented shock to our economy. Many entities impacted by the pandemic rely on banks for loans. The main Street Program is designed to facilitate lending to small and mediumsized businesses and nonprofits that have suffered disruptions. And those that have cash flow problems due to the pandemic and given the uncertain outlook may have difficulty obtaining credit. It can provide a bridge as loans have no interest or principal payments in the first year and no principal payments until year three. Unlike the standardized credit instruments, this program purchases interests and loans that are by nature the bespoke agreements often with complex borrower specific terms and conditions. Since our portal opened for registration on the 15th of june, 519 institutions have registered, and their assets represent over 15 trillion, about 58 of banking assets in the united states. Main street relies on lenders to underwrite loans and keep skin in the game by banks retaining 5 of the loan. Borrowers need to meet the lenders underwriting standards and the programs terms and conditions, and be able to make certifications and commitments, including those required by the cares act. The Program Includes three loan facilities or forprofit businesses, and two for nonprofits that have been announced that are not yet live. Nonprofits and their lenders can nonetheless use the published terms and documents to begin discussing program loans. Ill describe early results. As of tuesday, over 530 million in loans are active in the portal. 54 loans. 18 loans with a combined value of 109 million have our commitment for purchase or have settled. The 54 loans submitted represent 29 distinct lenders. The largest number of loans are by institutions in the 10 billion to 50 billion range. Relatively Small Community banks have participated. There has been limited participation in banks with over 50 million in assets. But the programs modest initial numbers seem to be given way to more uptick as banks become more familiar with the program. Quickly scaling up a program to purchase participations in loans from diverse borrowers in a decentralized market that lacks standardization is inherently difficult and a significant achievement. The eventual size of the program will be determined by the path of the pandemic and the economy. Should conditions worsen, which we hope does not happen, i expect interest to expand rapidly. We will administer the program. Well do all in our power and purview to support the firms, nonprofits, and workers that make up our nations economy. Thank you for the opportunity to provide this overview. Id be happy to address any questions. Mr. Hill thank you, mr. President , for your testimony. And ill recognize myself for five minutes of questions. First, let me say that i was pleased to see the cfo Confidence Survey from Duke University recently showing that business believes that theyre doing better than maybe they thought they would at this stage of Business Reopening and that Market Access is improving. Theyre concerned mostly about obviously the demand of their products. Also i was encouraged yesterday that 1. 8 million jobs were created and the Unemployment Rate fell to 10 . We still have a long way to go and we are going to be talking about that today as we still have over 10 Million People eager to go back to work. And then in my home state of arkansas, we had a very positive week in the sense that tax revenues, particularly sales tax revenues, were actually over trend and set a record. Our income taxes were 4 over forecast, and our sales tax were 16 over forecast and 15 over 2019. So clearly the economy is reopening and as senator toomey says, we have to keep that in mind as we think through these Federal Reserve facilities and what their best structure should be to accelerate that and get more people back to work in this country. Im concerned, mr. Rosengren, about the affiliation rules when i looked at the main street term sheets. I am concerned about two things. One, it took three months to get the program up and running, and id like you to address that first. And secondly, it appears to me in this middle market that these affiliation rules that the Federal Reserve have adopted in the main Street Program really are a significant barrier to more entrepreneurial middlesized companies that dont have access to ppp and dont have access i wonder why they adopted the sba 7a type limitations on affiliation rules. Can you handle those two for me please . Mr. Rosengren certainly. First, why dont i address the question that you raised in your Opening Statement and having this question about why it took so long for this facility to get set up . This facility is very different than some of the other traditional kinds of facilities that Central Banks operate during a time of crisis. So most of our facilities operate through markets. Market securities, you can purchase them very easily through the market. They clear usually in a couple days, depending on the security. So its relatively easy to quickly purchase a large number of securities and hold those securities over time. This facility is a facility we didnt have during the financial crisis and really tries to get to a different segment of the population which is those businesses that are bigger than the ppp program was designed for and smaller than what the corporate facilities are designed for. Bank loans are inherently difficult because they are an agreement between a bank and a borrower. They take a long time for banks to negotiate with the borrower , and this facility has a variety of complex elements, including the requirements of the cares act and the 13ththree requirements. In order to design this program, we first had an initial term sheet. There was very substantial revisions to the term sheet. We came out with another term sheet that was again revised, and each of those times when we revised the term sheet, we were expanding the availability of more businesses to access the facility. So the types of changes that were made included lowering the loan size, changing the repayment terms and lowering the fed participation amount. The final term sheet for the forprofit businesses started on june 8. I would highlight as part of this process that its a highly automated process. We have to do programming, so we needed the legal documents to be in order. We needed the final term sheet to be completed. And we needed to be able to do the programming and the check and make sure the programming worked as expected and that all needs of this program. So that does take some time. It did take time to start up. And i think that gives you some idea of the complexity of the program and why it took so long. In terms of the mr. Hill thank you for that. I think the key thing is if we want to change the program, you dont anticipate taking another three months to produce a different main street term sheet if that was necessary . Mr. Rosengren it would depend on what the nature of the main street term sheets were. If the term sheet doesnt change the legal documents, it would be easier. Thats true for the nonprofit term sheet as well depending on the nature of what the changes are what determine how long it would take us to get set up. Mr. Ramamurti thank you, mr. Chairman. President rosengren you agreed , that the main Street Program is off to a slow start, but your testimony is that interest in the program will likely pick up if, quote, the pandemic and the economy worsen. But if you look at the data, main street companies are already getting crushed. The latest middle Market Indicator and Economic Survey of executives of Midsized Companies shows that in the second quarter, these companies experienced the largest decline in employment in the surveys history. They also had the biggest dropoff in the surveys history. Other surveys like the chamber of commerce and the middle market business index show the same thing. Massive layoffs and furloughs and widespread revenue declines. My question is how much worse do , things have to get before companies are interested in the main Street Lending program . Mr. Rosengren we have seen significant pickup recently in the portal. Just as an example, there were 109 million loans in committed or settled as of last tuesday , and two days later we now have 29 loans and 189 million. Theres a pick up in volume. It is particularly in the community and midsized banks. We had so much in the portal two days ago. As of last night, thats 635 million. I think this is early stages of this program. And the reason is because banks and borrowers have to negotiate the terms. They had to know what the term sheet was. They had to understand what the characteristics of the program is and how the portal works. It took time for the banks and followers to get familiar with the program and start pledging those loans to the facility. So in the first couple weeks, the banks have not completed that process, and the borrowers had not completed the process, were slowly seeing an increase in volume over time that i expect will continue. So one of the challenges of trying to deal with bank loans as opposed to securities is it doesnt happen quickly. If you talk to large firms about a renegotiation of a line of credit, it can frequently take many, many months before they get the negotiation completed. So one of the advantages of the bank loan is that youre able to tailor it to the need of the borrower and the bank. There are conditions that a Different Bank may put on that same kind of loan and there are a lot of differences across both banks and borrowers and what these loan agreements look like. Mr. Ramamurti in the interest of time, ill move on. I will just note that even 535 million in the pipeline thats a tiny fraction of the total lending capacities that was created for this program. As i said in my opening remarks, i think this program has been a failure and the basic reason for that is that the fed can only offer loans. The data shows that companies, even distressed companies, arent looking for loans. The fed released a survey of Loan Officers finding in second loans frommand for all Companies Went down. Similarly, the most recent National Federation of Business Survey found 3 of Business Owners found their borrowing needs were not satisfied. In the testimony they submitted today, the Bank Policy Institute, which represents some of the biggest banks in the country, have seen a, quote, lack of demand for main Street Program loans from their clients. If the main Street Program can only offer loans and its clear that most small and midsized firms are not looking for loans right now even though theyre already struggling badly, how is this Program Going to stop widespread business closures and job losses . Mr. Rosengren if you have a business that has had no problems from the pandemic and has a pristine Balance Sheet, then youll probably get a better financing than the main Street Program provides. If you are in danger of closing eminently, this program is not going to solve the problem because debt doesnt solve that problem, equity does. This program was designed for a business that had a disruption of shortterm credit, that was in good shape prior to the crisis and who after the pandemic subsides would be able to be a viable business as well. There are businesses that fit those characteristics. Were seeing some of those businesses actually coming to the facility. I am expecting over time we will see more pick up. Again, we are seeing some significant activity by some of the Community Banks and midsized banks. Particularly those located in states like florida, texas, and places that have been badly impacted by the pandemic recently. Mr. Ramamurti i think the issue is the fed is trying to solve a problem that doesnt exist and it is incapable of solving a problem that does exist. By law, the fed can only support loans, and more loans is not the answer for most companies. This is a gigantic hole in our response to the crisis. Congress helped Small Businesses through p. P. P. Congress helped Large Companies that are big enough to issue bonds by reducing the cost of borrowing. The only thing they offered in between is the main Street Program and its just not working. These Midsized Companies employ over 45 Million People and i dont think continuing to treat this program is going to, would. Is going to work. I think Congress Needs to act to provide direct support to midsized firms and for that money to come with real Strings Attached to the money benefits working people. Thank you, mr. Speaker. Mr. Hill thank you. Congresswoman shalala is recognized for five minutes. Ms. Shalala let me follow up a little on that. Particular sectors like the Hospitality Industry has been hit hard by the coronavirus in my district in particular. And as has been noted only 109 million of the 600 billion has been injected into the economy. I want to know whether there is actually a design flaw, not the issue of that bharat raised. Whether it is designed in a way which is another way of getting out that. In particular, some suggested the terms of the program such as the leverage ratio requirements and the loans priorities and security requirements than a bettors designed to protect the government from losses than to provide liquidity for a broad range of small and midsized businesses. Could you respond to that . Mr. Rosengren yes. This program is designed as a cash flow program. Its designed for a business that expects to be able to pay off the debt and pay off the debt with the cash flow from its normal business operations. So that fits for many businesses. It doesnt fit for all businesses. For the smallest type of businesses, i agree that the ppp program is a much Better Program for them. Its more of a Grant Program than a debt program and debt may not help them in that situation. In terms of the underwriting standards, the standard follows industry practice. So depending upon which of the you either have a four or a six. Many expect to have it end up below that. So i think this Program Actually closely mirrors kinds of coverage that maybe banks themselves are expecting when they are looking for a loan to be bankable. So its a combination of an underwriting standard. There are not many underwriting standards in this program. The bank isct that willing to underwrite the loan themselves and take a 5 stake. Ms. Shalala the Federal Reserve recently reported that banks were actually taking their credit standards due to the uncertain Economic Outlook thats resulted from the pandemic. The fed allows banks to use these tighter credit standards in determining whether or not the bank alone under the main Street Lending program. If the goal is to get money out to needy borrowers, doesnt the policy of letting the banks use their tighter credit standards undermine that goal . Rosengren the challenge is this is a Lending Program so loans have to be paid back. Were asking banks to voluntarily participate in the program and were asking banks to be sure when they underwrite the loan it is a loan that is to a business thats had their credit disrupted but that over time you expect it to be a thriving business. So that doesnt qualify all businesses. It qualifies a particular kind of business thats appropriate for this program. So business has been disrupted. It is likely to be solvent. That isnt attractive for this program. From the perspective of the bank, they may not be willing to do that loan otherwise. Let me give you a specific example. A Movie Theater. If you are a Movie Theater located in miami and youve been closed in the spring, you opened up temporarily and now you may have to be closed again because of the restrictions either imposed at the state level or because people dont want to be in a Movie Theater at a time of a pandemic. The bank may be quite uncertain about when that loan would actually be paying because they dont know how long the pandemic will occur. They dont know whether there will be a vaccine or a treatment. So because theyre providing 95 of the loan to the Federal Reserve, they might be willing to provide support to that Movie Theater because the bulk of the risk is being taken by the Federal Reserve. So this is a Lending Program. It is focused on getting most of these loans paid. That is a requirement. Ms. Shalala someone suggested in a written testimony if banks want to lend to banks that dont meet the banks current underwriting standards which has tightened in response to the Economic Uncertainty caused by the pandemic, the fed must modify the design of the program to provide downside credit risk protection. In making this observation, she cites the negative treatment of these loans as disincentivizing banks to loosen their underwriting standards. Has the fed considered this issue . Mr. Rosengren yes. We have spent quite a lot of time looking at the supervisory issues in terms of these laws. The pandemic, like other natural disasters, if there was a hurricane that hit miami, we then use guidance to make clear we want to have a little more leeway given those loans because of the nature of the crisis that occurred. The same thing has been done for this pandemic. So we asked our Bank Examiners to work with Bank Management in the instances in which they are making a decision, such as a main street loan where the borrower has been disrupted. The other regulators have agreed to this and are following the same general guidelines. So i think in the end, the loan has to have the same classification standards that a Standard Loan does. But the regulators now are looking at loans a little bit differently and asking the banks to work with their borrowers. That is what we do during other natural crises. Mr. Hill thank you. The gentlewomans time has expired. Senator toomey. Senator toomey thank you for testifying today. Let me start by pointing out, government money can never be a replacement for an economy. And weve spent many hundreds of billions of dollars covering eight weeks of payroll for very small companies. This program was never designed to pick up the tab for the payroll of the american workforce. What it was designed to do, as i recall, was to provide emergency liquidity in the hopes it would keep Viable Companies alive so that workers would have a place to go back to. Part of the reason why we made Unemployment Benefits so much more generous than they ever been in the history of the country. We knew it was inevitable that in a very, very severe, hopefully brief rescission, they re would unavoidably be people laid off who had no work to do because in some cases their companies were closed, forbidden from working. What id like to understand, and this has come up and maybe this is just another way to think about this, but to what extent do you think that the loans that have been made so far through this program are loans that would not have been made in the absence of the program . In other words, is this designed in such a way the only loans that would take place were loans that would happen anyway, especially given the underwriting requirements on the banks and their required participation . Mr. Rosengren these loans have a different characteristic than the Traditional Bank loan. It is not traditional that you have no payment or principal interest the first or second year. Its designed for a disruptive cash flow but the ability of the borrower over time to make payments. When we talked to some of the banks that have been making the loans, they have told us that these are loans that more than likely they would not have made in the absence of this program. The reason is because theres a great deal of uncertainty right now. Congresswoman shalala highlighted the uncertainty and survey of terms of lending that she cited. The uncertainty is very, very high right now. And that is a situation where banks become more reluctant to lend because they dont know what the condition of the borrowers will be. So i do think that this plays an Important Role in reducing the risk and if the pandemic is worse in the fall, at least some epidemiologists are saying, this program will probably be more extensively used. I completely agree with your observation that a 133 facility does not solve a pandemic problem. Its primarily a Public Health problem. But we can certainly mitigate the cost of that Public Health problem by trying to help those businesses that have been disrupted 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 Structure because its a little confusing the way it appears on the term sheets. When a bank makes a loan and 95 of it is taken by the fed, the Fee Structure that the bank keeps, certainly they have the Net Interest Income they can earn on the 5 they keep. The Fee Structure, if its 100 basis points, which i think is contemplated in the term sheet, does the bank keep 100 basis 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 total loan. Its for the banks to participate in the program. Senator toomey so the banks start off with 20 of their credit exposure in fee income, is that correct . Mr. Rosengren thats correct. But there are costs to doing the underwriting of the loan. Senator toomey thats extremely unusual, right . So that would appear on the surface to be an inducement, an encouragement, an incentive to take more risk. But the banks are institutionally not oriented in lowering their standards because there is an outside outsized source of revenue. Would there be other kinds of lending institutions that might be more inclined by their nature to be able and willing to take more credit risk because they recognize that coming out with 20 of your credit risk and fees covers a lot of risk . Mr. Rosengren there are others that provides loans than banks. This is designed for depository organizations. In part, we want to get this facility up and running quickly. In part, we have to make sure that b. S. A. , know your customer claims of conditions are met. So thats why this program has been primarily operated through the banking system. Senator toomey well, i see im out of time but i want to follow up on the possibility that this kind of risk return structure might be even better suited for other financial institutions. Thats not to say that banks shouldnt participate but maybe we should broaden the universe of institutions that are permitted to. Mr. Hill thank you, senator. Were going to do a second round now with dr. Rosengren and ill start that with five minutes. As i start my second round, ill ask unanimous consent to put two letters in the record. One from senator crapo dated july 31 with comments about the main Street Lending facility. And also a letter dated august 4 from senators loeffler, cornyn, braun, and tillis on the main street. Not hearing any objection, those will be included in the record. Dr. Rosengren, you talked about you limited to depository institutions to get up and running quickly. Yet, there are only 150 banks or so listed on the feds website thus far as registered lenders. I cite that because in the emergency environment, right at the end of march and april, we were able to stand up the p. P. P. Program in the cares act and 5,400 banks swung into action in a patriotic way and in seven days began distributing 520 billion and making p. P. P. Loans. Granted, the underwriting was very different. The mission was very different. I got that. But i am concerned about the reluctance of banks to participate in the program. Arkansas has 86 banks and yet only two banks headquartered in my state that are local banks have agreed to participate. So i really hope as we have this hearing today well talk more about that. Let me turn and talk about the term sheet. As you have noted, it is really a cash flow lending exercise based on a pretax multiple and implied leverage. In other words, it looks like a very Traditional Bank loan. Where is the higher risk component that was contemplated in the cares act section that encouraged help for particularly distressed sectors of the economy . Could you commend on that, dr. Rosengren . Mr. Rosengren i think these loans already are going to be risky. Doing lending in the middle of a pandemic, particularly if its a sector of the economy where social distancing is difficult, so tourism, hotels, retail have all been badly affected by the pandemic and there are large bankruptcies. These loans are not without risk. I fully expect some of the loans well do over time will have a loss. So thats why we have a treasury backstop. I think this program has taken on a bit of risk. I think over time, as the portfolio grows, we will some we will have some significant losses. Hopefully, that doesnt occur. Hopefully, everybody is able to pay back the loan completely. But if the economy doesnt do well, particularly if the pandemic worsens, its quite possible we will experience significant losses. This program did focus on trying to get loans to fairly risky borrowers. Mr. Hill i thank you for that. But when you do look at the terms, i mean, you really are i agree, companies at the margin are certainly middle Market Companies that couldnt access the markets or not eligible for p. P. P. , many would qualify here. But as i noted earlier, i think the affiliation rules make that more difficult. And i think the very traditional lending profile thats contained in this term sheet also could be a detriment to companies. Let me give you an example. And this was talked about with secretary mnuchin and chairman powell at our meeting of a few weeks ago and that is someone in doesnt have good 2019. They certainly dont have it in 2020. At the end of the year in 2019 they had very good collateral evaluation. They had a low loan to cost potentially. They had a low loan to value potentially. They had room to lend but they could not mean the standards. They both said they were interested in looking at a collateral dependent or assetbased loan. Can you tell us what the status of that look is . Mr. Rosengren so the main Street Program is a cash flow program. Assetbased financing mr. Hill but there are a lot of main street flows that do not have cash flow in 2019, but they are absolutely a small middle market type company. So i know the main street term sheet is currently a cash flow. Is there current discussion under way to have a different main street facility that would be more of an assetbased loan rather than a cash flow loan . Mr. Rosengren i know there are discussions about financebased financing, especially in commercial real estate, so there have been ongoing discussions about this. But there is no term sheet thats imminent. Mr. Hill thank you for that. Also, startup companies. Truly people in the Startup Space have a disproportionate amount of costs. Are you looking at startups and what they might need in the main street arena . Mr. Rosengren many times startups need equity more than they need debt so i think frequently a true startup is going to find other types of financing vehicles more attractive. This is more of a program for established businesses that have experienced the disruption of cash flow. Mr. Hill thank you, mr. President. Let me yield to my friend for five minutes. Mr. Ramamurti the fed announced the first version of the main Street Lending program in april. That describe certain features of the program, like the maximum loan amount and maximum terms for loans. A few weeks later, they announced major changes to the program. Many of those changes lined up exactly with what members of the oil and gas industry had requested. That did not appear to be a coincidence. Shortly before the changes were announced, President Trump publicly promised that oil and Gas Companies would be taken care of. Then shortly after the changes were announced, the Energy Secretary went on tv and bragged about how he and secretary mnuchin had succeeded in getting the fed to make changes that the oil and gas industry wanted. But when asked by reporters, the spokesperson for the fed denied that the fed had made any adjustments out of consideration for the oil and gas industry. Instead, the fed said that the april changes reflected the more than 2,000 Public Comments that the fed had received by the about the initial design of the program. So president rosengren, as the regional fed president responsible for the main Street Program, do you stand by the feds earlier statement that certain adjustments were not made specifically to help oil and Gas Companies . Mr. Rosengren i do. This is a broadbased program. Its been a broadbased program from the start. 133 facilities require broadbased kind of terms so its not targeted at specific firms or specific industries. 133 facilities are not available 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. Lets look at one of them. According to reuters in midapril, one of the key changes the Energy Secretary and treasury secretary were pushing for to help the oil and gas industry was increasing the maximum loan amount to at least 200 million. A couple weeks later when the fed announced the changes to the main Street Program, it had gone up to exactly 200 million. President rosengren, out of the more than 2,000 Public Comments that were submitted to the fed on the main Street Program, are you aware of a single one that requested increasing the maximum loan amount to 200 million . Mr. Rosengren we got many comments from both banks and businesses that if the loan amount was larger that it would be a more attractive facility for them. Remember, a lot of this discussion was occurring in march and april. The Economic Conditions and the pandemic conditions were very different at that time. And there was a lot of concern that some fairly Large Businesses would have difficult y getting financing. Fortunately, the pandemic subsided, at least for a couple months, and as a result many of those large borrowers that thought would need the financing at least to date have not actually accessed the program. Mr. Ramamurti in the interest of time i want to move on. Look, i reviewed each and every one of those 2,000plus comments and there wasnt a single one that requested specifically 200 million maximum loan amount. The only people making that request were the Energy Secretary and the treasury secretary after meetings with the oil and gas industry. Heres another change. The first version of the main Street Program required companies to say in writing that they needed the loan, quote, due to the circumstances presented by the covid19 pandemic. Advocates for the oil and gas industry pushed to eliminate that requirement, presumably because many oil and gas firms were struggling before covid and couldnt satisfy the requirement. Again, in the final version the fed eliminated that requirement. President rosengren, are you aware of a single one outside the oil and gas industry that requested that the fed remove this important requirement . Mr. Rosengren in the discussions i have been involved in, we do not discuss specific industries. We discuss how we can provide a broadbased financing scheme. Mr. Ramamurti i appreciate that. Again, i reviewed the Public Comments and there wasnt a single one that requested this change. Only the oil and gas lobby had requested this. I want to ask one more time. Despite evidence that President Trump wanted oil and Gas Companies to get federal relief, that the Energy Secretary and the treasury secretary pushed the fed for specific changes to accommodate the oil and gas industry, and that the fed made changes that the oil and gas industry requested but no other industry or group requested, is it still your position that the fed did not make certain changes to accommodate the oil and gas industry . Mr. Rosengren its my position that the focus has been a broadbased Lending Program not focused on any particular industry. Mr. Ramamurti look. Again, my focus is on specifically the changes that were made, not the overall scope of the program. I think the evidence here is strong and deeply concerning. This is just not how the fed is supposed to operate. The fed is not supposed to be changing rules of the program so the president s Favorite Companies can get access to billions of dollars in public money. In fact, it is illegal for the fed to structure these lending specificto help companies to avoid bankruptcy. I ask the commission request all communications on this topic between the fed and Energy Secretary, the treasury secretary, and any representatives of the oil and gas industry. Thank you, mr. Chairman. Mr. Hill i thank you. The gentleman yields back. Congresswoman shalala is recognized for five minutes. Ms. Shalala thank you. My colleague is appropriately asking why the loan is as big as it is. Im actually interested in why it isnt smaller. Commentators have speculated the minimum loan amount of 250,000 is too large for many small and midsized businesses. I am aware the fed reduced the minimum loan amount down from 1 million to 250,000, which may still be too high. The American Bankers Association and the Marketplace Lending Association have separately suggested that 50,000 may be a more appropriate amount. Has the fed conducted studies on whether the 250,000 loan minimum excludes parts of the market that this program is supposed to help . What changes can be made to make the program more broadly acceptable and accessible . Mr. Rosengren for many of those smaller businesses, the p. P. P. Program was designed to target that segment of the industry. The p. P. P. Program is much more attractive to a Small Business because it has the ability to be a grant. So this program is really designed for businesses that didnt qualify for the p. P. P. Program, and nonetheless might have a need for credit. So if you look at the actual loans that are in our portal, the loans that are actually in the portal is 1 million to 5 million. That is the type of loan that we are seeing. Dental companies, construction companies, design companies, retailers. These are businesses that frequently are going to have a 1 million to 5 million loan and its not surprising thats what were actually seeing. Now, we have seen loans that are much bigger. We have seen loans that are much smaller. But i would say that so far has been where we have seen the bulk of the activity. Ms. Shalala so you are not considering going below 250,000 . Mr. Rosengren i think there are probably other programs better designed. The real question is whether a cash flow Lending Program, such as main street, is appropriate for a very Small Businesses and whether there might be targeted tools that can address that. In particular, will more debt help that Small Business or might push it towards bankruptcy and closure . So we want to make sure we provide debt to businesses that can use it and actually pay it back. We dont want businesses to have so much debt they wont be able to survive. Ms. Shalala thank you. Let me talk about the Nonprofit Organizations. A few weeks ago, you expanded the main Street Lending program to Nonprofit Organizations. Although these facilities are not yet live. I am concerned that the Program Requirements are too rigorous and will preclude participation by many of the nonprofits that need this to survive the pandemic. For example, the minimum loan size is 250,000 which may be too large for many smaller organizations. Borrowers are also required they have at least 60 of their expenses covered by nondonation revenue, which can be very hard for many nonprofits to achieve. Can you talk about why the program was designed this way . Im very familiar with nonprofits and i that 60 requirement seems to be seems to me will block many nonprofits. I would appreciate hearing about any analysis the fed has done regarding the nonprofit interest in eligibility in the program. Have you considered changing any of the eligibility requirements . Lastly, when do you expect the program to be launched . Mr. Rosengren when the first term sheet came out we got extensive comments from a wide variety of nonprofits and a wide variety of banks. Many banks actually dont lend to nonprofits because it is a very different nature. University of wisconsin, which you used to be associated with, probably goes to debt markets rather than relying primarily on bank markets. Thats true for many hospitals as well. So if this is a market that has not been extensively tapped by many banks and i think its a new market for many banks. I think there is an opportunity for more nonprofits to be able to access Bank Financing through this program. We did make significant adjustments in the term sheet. When we were thinking about the term sheet and the adjustments we made between the first and the second term sheet, we spent an extensive amount of outreach understanding how banks underwrote these loans and how raving rating agencies underwrote these loans. This broadly matched what many banks told us the criteria they used and between the first and second term sheet we did relax it in response to the comment it was being too restrictive. In terms of when this facility is going to be up, we just got the legal documents up. The term sheet is now finished. We are in the process of doing the programming now. Its going to probably take us another several weeks before its up and running. But i would highlight now that the legal bank loans dont get made quickly, so now the legal documents are up and running, now that the term sheet is widely available, banks can start the negotiation with nonprofits so that when that facility is available, they are able to quickly submit it to the facility and get it funded. So because of the long lags in making these kind of agreements, i understand this will be about the time that if the bank is going to do a nonprofit loan, that well probably be up and running around the time they complete the agreement with the borrower. Mr. Hill thank you, dr. Rosengren. The gentlewomans time has expired. Senator toomey. Sen. Toomey thanks, mr. Chairman. Dr. Rosengren, id like to have final clarity on this. Just answer this if you would. Is there any main Street Lending program thats available only to the oil and gas sector . Mr. Rosengren no. Sen. Toomey and is there any program the terms of which is suitable only to the oil and gas sector . Mr. Rosengren no. Sen. Toomey thank you. I want to underscore a point that congressman hill raised which is some real challenges with the affiliation rule. I also want to underscore his point about considering assetbased facilities. I think youre very well aware, there are some real challenges in the commercial mortgagebacked Security Market right now, in particular the hotel subset of the commercial mortgagebacked sector is experiencing some real difficulties, and because they generally dont qualify for the bitda criteria, theres no access to this. If the problems are exacerbated to go on and make payments, you know, irrespective of the ability of the borrower to do so, so i would like to encourage you, as i have encouraged secretary mnuchin and chairman powell. To consider whether there shouldnt be an assetbased category, if there is an appropriate loan to value that maybe thats a criteria that we ought to consider, do to consider. Do you have any thoughts on whether we should stand up facilities specifically designed it would be designed generally for the broad category of real estate, i think, and other categories that would be more suitable for an assetbased lending than they are for a n ebitda constraint . Mr. Rosengren yeah. That program would differ than what we have for main street. So it would be a different facility, if it was done through a facility. Most that type of lending has a much longer maturity than five years. These are fiveyear loans with a balloon payment at the end of five years. Thats probably not appropriate for example, for retail or commercial real estate, such as hotels. So the nature of that program would be quite different. I know there are theres work being done thinking about how assetbased can be addressed, including through the sba. So i think there are a number of proposals being considered. I am certainly aware there are many concerns in the commercial Real Estate Industry and those concerns will get even worse if the pandemic gets worse. Sen. Toomey so i want to go back to that. On page 11 of your testimony, you indicated you believe should the pandemic and the economic circumstances worsen, we might very well see greater interest in the main Street Lending programs, and i understand leading to greater demand on the corporate borrower side, but can you address why you believe that that wouldnt be offset by greater reluctance on the part of banks to take on the exposure in that scenario in which the environment worsens . Mr. Rosengren so there are many borrowers who could take two or three months of disruptive cash flow. 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 than libor plus 300 basis points. If 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 attractive to get direct financing from the bank through the standard bankborrower 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. So i agree with you that risk aversion by banks may increase if the pandemic gets worse, and there already is very substantial uncertainty, but many borrowers that cant get access from their banks will be looking to the main Street Program to provide that type of financing. Sen. Toomey thank you very much. Thank you, mr. Chairman. Mr. Hill the gentleman yields back. Thank you, mr. Toomey. And now well hear from miss anderson on our second first let me thank dr. Rosengren for his testimony. We very much appreciate your written testimony and the interaction with our commissioners. And 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 you are recognized for five minutes. Ms. Anderson thank you. Members of the commission, my name is lauren anderson, and i am Senior Vice President and associate general counsel for the Bank Policy Institute. I thank you for the opportunity to be a witness at todays hearing regarding the main Street Lending program. Bpi 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. At the outset it is worth noting how unique the main Street Program is. In relation to emergency Lending Programs established during the pandemic or even in 2008 and 2009. It is not the loan forgiveness or Grant Program like the ppp. It is not a Market Liquidity Program for Investment Grade borrowers. Main street requires Credit Underwriting decisions on a heterogeneous individual nonbinding borrowers. Which is challenging and not something the Federal Reserve has done before. With the expansion of pain street to Nonprofit Organizations which itself is very different across different sectors, the Federal Reserve ventured further into uncharted territory. Bpi 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 practices and ensuring prudent Risk Management to safeguard taxpayer funds. We commend the Federal Reserve on seeking Public Comment on the terms of the program and engaging in an iterative 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 albeit a small amount are being made. Many bpi 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 complexity of the program and the compliance requirements. However bpi member banks help provide over 1. 6 million ppp loans totaling over 188 billion to help Small Businesses meet payroll needs. Second, larger corporates retain access to Capital Markets which remain extremely active with the support of numerous Federal Reserve programs. Andstmentgrade debt corporate debt 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 both 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 certain Eligibility Criteria but also to satisfy Bank Underwriting standards. And 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 Balance Sheet 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, congress, the treasury, or Federal Reserve desires to provide further relief to small and midsized businesses experiencing acute stress due to the pandemic, including less creditworthy borrowers who would not current pass Bank Underwriting standards, it would the design of the program would need to be modified. At the moment the program is not designed to provide loans to less than creditworthy borrowers. If banks are to provide loans to borrowers who cant meet current Bank Underwriting 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 hill, commissioner ramamurti, congresswoman shall lela and senator to me, ialala and senator toomey, appreciate the gravity and responsibilities before you. I 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 you all are asking of, who the main Street Lending program is helping. Regrettably i have no answer to offer you. We can neither borrow from the program or find someone in our membership who has received a loan through it. To help illustrate the current optical securing 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 solicited an mslp loan for a minority Business Enterprise a Company Whose , performance is only 10 to 15 lower during the pandemic than it was 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 perfect 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 ceo and president of the association, 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 covid. 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. 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 ppp was closed to us like many other associations and a large percentage of our Member Companies, we looked in ernest earnest at the main Street Lending program. A loan would allow us to invest in the Digital Enhancements to ensure we could deliver to strong member value and necessary tools for Business Development in this new virtual world. But 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 ppp. Suffice to say it hasnt been accessed by many. In your recent report, you talked about the Goldman Sacks Goldman Sachs 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 heterogeneous 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 respondents completely unaware of mslp. And as the respondents 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. Removal of the hearing sba affiliate. We talked about the ebitda which excludes Many Companies particularly familyowned , businesses. Distribution dividends restrictions for one year after loan payoff. Employee compensation restrictions for one year after loan payoff. Increasing the minimum loan size. Look 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 covid19. 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. And well hear from mr. Foster, youre recognized for five minutes. Mr. Foster ok, can you hear me . Mr. Hill we can. Mr. Foster great. Sorry about that. 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 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 Financing to lower and middle market 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 have roughly 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 as currently structured. The principle structured problems are, number one, requiring lenders to take full Credit Underwriting for small and midsized borrowers. Seeking 3 ebitda is a risk reward 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 contractual subordination in the case of the new Loan Facility and requiring in the case of the priority Loan Facility, the priority to existing 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 that are reasonably creditworthy as less restrictive financing is likely to be available. From conventional sources. 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. Number two, the loan should have a term of seven years, generally sufficient to allow them to mature after the Maturity Dates of preexisting debt. Amortization should not begin until the end of year four. Number three, the multiples of 2019 adjusted ebitda should be increased from four times in the near Loan Facility and six times times respectively. There should be elective acidbase criteria such as loan to value 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 eligible lenders, similar to the ppp program. The loan should have an Interest Rate of libor plus 400 rather than 300 basis point. And the upfront 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 a single main street facility, or a single Lending Facility size limitation, more than one group member would like to access that or another main Street Lending facility. And finally, number six, one of our lenders, a 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 deferral of interest and principle feature utilized by the program in the banks regular Lending 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. And i look forward to your questions. Mr. Hill thank you, mr. Foster. And now ms. Mills, you are recognized for five minutes. Ms. Mills thank you, members of the commission. My name is gwen mills, im secretary treasury of the Hospitality Union unite here. I will focus on our members experiences, the recommendations i make are represented by the supported by the aflcio, representing 55 National Unions and 12 million workers. Our 300,000 members work primarily in hotels, casinos, foodservice, and Airline Catering industries. Sectors heavily dependent upon travel 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 one, 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. Where 350 have been hospitalized. Our industries are the most severely affected in terms of unemployment. So i believe our story is a cautionary tale for American Workers across the board. If we fail to correct course. 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 ppp loans, and they havent protected paychecks or health care. One company, omni hotels, received 34 ppp loans worth 53 million. Meanwhile omni hotels in boston, providence and new haven were shut down in march and unclear. In providence the company cut off medical benefits in violation of their agreement of agreement, and 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. The main Street Program will yield even worse if this mr. Mission drifted below. 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. But the largest beneficiaries 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 to the Fontainebleau Miami beach whose owner refinanced its debt twice in two years, borrowing more to cash out millions. Now fontainebleau has cut off thousands of employees. Provided byidies the Employee Retention tax credit. Lobbyists claim if the fed doesnt rescue the borrowers, hotels will default and workers wont have jobs to come back to. That was not our experience. This isnt the first time hotel owners 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 your Hotel Workers who are used to seeing absentee owners come and go understood 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 Hotel Lending market, while Real Estate Investors lay off 85 of Hotel Workers and end their health care in a pandemic . There is a second critical lesson here which relates to the main Street Program. There is no question that state stabilizing credit markets is important in a crisis, and the fed has done that. The real mission should be to protect the 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 payrolls while their employers , who 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 the fiscal cliff. Millions of americans are right behind us on the precipice. Instead what if program diviners at the fed take the cares act mandate to heart . What if credit terms were loose loosened, heres the important part, airtight requirements, not incentives, not recommendations, but requirement that recipients keep workers on payroll . And it is what the ppp could have done if it hadnt been high jacked by the Real Estate Industry. The fed and treasury must learn from the ppp and reform main Street Lending so it contributes to the employment of working americans. But please dont bail out Real Estate Investors while they push workers off the cliff. Thank you for this opportunity. And 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 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 banks jumped on the opportunity to help in the ppp environment under the cares act. And 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 bpi member banks, the vast majority of our members are participating in the program. I cant speak obviously for all banks across the country, i think when you think about the complexity of the program, its difficult not just for small borrowers but lenders. 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. And do you agree with the testimony on our panel that its possible to make a very creditworthy loan thats not based on the ebitda multiples and the senior nature of the term sheet . In other words, if one were to have sufficient collateral coverage and a 125 Debt Service Coverage ratio, but a junior lien, 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 the 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 the 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 so 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. So even if you reduced some of the stringency of those terms, you still have the underwriting element. And in this environment, underwriting on todays information will be difficult for many borrowers in that distressed space. So im not sure that actually loosening that criteria is necessarily the right answer. But i think 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 eligible to raise capital in the public markets, are those affiliation rules a serious impediment . And 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 ppp, 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 went out there and talked mr. Hill thank you for that. Well have another round. My times 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 your written testimony that hundreds of your unions 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. And i think its a powerful reminder this is first and foremost a Health Crisis and that frontline workers like those you represent are bearing brunt of it. You represent a lot of people who work in hospitality and in tourism as Frontline Service workers. Hotel housekeeping, bellman, wait staff, cooks, bartenders. You mentioned in your Opening Statement a majority of members are people of color and that a majority are women. When the companies who employ your members struggle, who are the first people to suffer if via layoffs and furloughs . Ms. Mills thank you for your question. 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 and to other benefits . Ms. Mills yes. Mr. Ramamurti among the hundreds of thousands of travel and Tourism Industry workers you represent, four months into this crisis, are you aware of a single job that has been saved by the main Street Program or a single hours cut or furlough that the main Street Program has stopped . Ms. Mills no. Mr. Ramamurti and 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 right. 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 so 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 tweaks will work. I think congress does need to come up with a new approach. Mr. Ramamurti lets talk about that a little bit. In your experience, what kind of new approach do you think would be helpful to your workers . In your experience and the experience of your members, does providing Financial Support to businesses help workers without express 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 so 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. So we would fund cobra payments so that we could continue health care. And then give direct support to workers. Mr. Ramamurti thank you. And 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. Look, 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. Ms. Mills thank you. 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 hotels, including the fountain blue which you mentioned. We had a debate over with the fed over whether their term commercially reasonable was better than reasonable. But sounds to me from what you have 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 requirement in these programs to make a difference for the workers that unite represents, but the thousands of workers that work in this industry. 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 fountainbleu in miami beach, in your district. As i mentioned, the fountainbleu stopped paying health care for hundreds of our laid off members. We believe its a violation of our contract. It would be wrong for Taxpayers Fund a year or two of death , not 1 million a year, while laid off workers lose their Health Insurance and rely on the Public Hospital system. Finetuning absolutely requirements would be necessary. And i really appreciate your question today because one of the fountainbleu workers died this morning in the hospital without his medical or life insurance. Ms. Shalala i heard that. I am so sorry. I want to point out 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 Allows banks to 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 . And 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. Because you are absolutely right. A borrower who can meet a banks underwriting standards is typically finding out that there is a product more suited to them given their credit needs. So for example maybe a term loan really is not what they need, and they need something more like a Flexible Working capital facility. Our banks are actually many times finding Better Solutions for these borrowers when they inquire about the program. In terms of the live cases that look like they might go through, one example is a travel company that basically came to one of our banks as a new lender, a new follower and the bank would be , comfortable possibly lending the 5 . In a normal circumstance, they would go out and syndicate that loan to the market. But 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. But you know whether there are , lots of borrowers in those specific circumstances, i think is questionable. 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 used the ppp program. Are now at the end of their ropes. Goldman sachs reported that more than 80 would be out of ppp money. If thats the case, where are they turning for funding . Are your banks seeing an uptick in loan requests . Ms. Anderson i wouldnt say we are seeing a huge uptick in loan requests. 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 ppp program. So they think it is a Loan Forgiveness Program or a Grant Program. And once they hear the details, then they realize it is actually not for them. So they are looking for something that is equivalent to a p. Pptype structure. Mr. Hill thank you. Your times expired. Now we turn to senator toomey for five minutes. Sen. 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 thought 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. That is what the ppp program was designed to do. Take a finite period of time and have the taxpayer just pick up the tab for the payroll. And to a very significant degree, i think its worked. And 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 opportunities, maximum jobs, we 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 and 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 money probably massively as a lapse in sales, has no orders coming in because of this contraction that was under way, and hopefully is 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. Bohn 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, ppp was definitely designed to save jobs in the immediate term. Quickly as possible. What we are hearing and seeing from middle market organizations, though, is that the loans, 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 if you even use the example of acg 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 time 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. Sen. Toomey thank you. Mr. Foster, do you have a comment on this . Mr. Foster i think the main thing right now is to type of business that you illustrated is to keep the 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 know you just have to leave , it up to the Business Owner because they really need they are in survival mode. 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 . Or is bank behavior so driven by the existing set of internal rules that they would be unlikely to . Ms. Anderson thank you. So some bank behavior might change, but it may not be actually the behavior that is desirable overall. I think one thing to be clear is we dont think its appropriate to have supervisory forbearance. A transmission of risk from the corporate sector to the Banking Sector is really 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. And 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 toomey, your time has expired. The gentleman yields back. We now have a second round of questioning for this panel. And ill yield myself five minutes to start that. I was looking some these questions 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 notices that borrowers are compelled to hawk 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 the Reconstruction Finance Corporation and the fed struggled with how to get credit to 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. But can you also address the affiliation question that i posed earlier . Mr. Foster sure, let me try to do that by giving you an example. Im going to compare and contrast with ppp. In ppp, use the same set Program Rules with relaxation for companies with an sbic investment, hospitality , franchises, etc. You dont even have that in main street. So in ppp, if you had two commonly owned business that is businesses that had 200 employees each and they each had say 20 million into preexisting debt, they could each access 10 million of 20 million. Al of 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 preexisting 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 under ppp, you had 400 employees that had access up to 20. It really is poorly designed. It doesnt make any sense for these kind of companies to have to run through really complicated and really severe 7a regulations that are really focused on making sure companies with more than 500 employees dont have a access to a 7a loan. Mr. Hill thank you. Thats helpful. I appreciate that example. 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. And so i appreciate the comments you made and the care you have for all of your members and your advocacy today. I also agree with senator 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 ppp. So all these Work Together to try 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. And in my district, Asian American hotel owners are the classic Small Business entrepreneurs. And 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 is one of their concerns. Because they want to bring their staff back. They want to bring their staff back commiserate with the economy reopening. And also owners of cmbs securities are mostly peoples retirement accounts. They are benefit trying to get capital into the industry and get people hired back and reopened. So i am empathetic to your testimony. I thank you for being here very much and for your comments. But i think that the main Street Programs mission is to try to get our hotel and hospitality opened. I hope we can find a structure that does that. Let me yield back. And turn to my friend, mr. Ramamurti, for five minutes. Mr. Ramamurti thank you, mr. Chairman. Mr. Bohn, thank you for your testimony as well. I want to ask you the same type of questions that 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. But you seem to 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 thats 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 yeah, we list a couple of ideas that start with the removal of the affiliate exclusion. Reducing the ebitda 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 the restrictions on shareholder payouts and on executive compensations, 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 that every company can get a loan even if before the crisis they had a lot more debt than they had 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 just use that money to pay shareholders and executive while firing workers . Mr. Bohn well, i think, commissioner 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, ebitda 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, the ebitda 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 published 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 ebitda 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 a fair guess to say that the reason that they are not interested is because they want to use some of that money 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 not 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 sell 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 otherwise be available to them. Mr. Ramamurti i think just to sum up quickly, i think we have seen a remarkable consensus emerge at this hearing 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 right now from their clients. The representative of small and midsized businesses told us the program wouldnt help his members as currently designed. And 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, but 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 that we can actually save small and midsized businesses. And when it does, it needs to meaningful objectives 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, it 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 that 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. So and even in a case where we have some health care negotiated, Companies Like the fountainbleu are not abiding by that. So that is absolutely correct. Ms. Shalala three of the five facilities require that main street loans being senior 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. This is a true issue in the sense that many Midsized Companies have existing debt structures. And having senior credit come in at this point basically have to be negotiated with those existing lenders, many of whom are not bank lenders. That becomes a complex process. That has certainly put off bond borrowers when they may not receive the consent from the other lenders who may not have the same incentives as the originating banks. It is a problem and it is complex. Thank you. I have a question for mr. Bourne. 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 . You, and as iank am it sitting in orlando, florida, thank you for representing our state on the commission and in general. One of the things we heard back from our survey is that, unlike the ppp where there were significant awareness about the various provisions and tenants of it, there was a lot more ambiguity and misunderstanding, some of that related to how long it is taking for the program to come together. Bit ofas a little misunderstanding thinking it would be different than ppp because it was loans and not carve out affiliated groups, so there is an opportunity here, regardless of where changes are made to make sure the program is more clearly communicated on a wider basis. We are willing and able to help that anyway we can. Do you have a recommendation on the loan size and leverage tests . I have a recommendation on the loan size that it should be coming down to 50,000. Number of smaller familyowned businesses in the middle market had spoken to recently right here in orlando who have said we do not need 250,000, but we need 50,000 or 70,000 in order to repair what we think is going to be a longer whetherdeal with covid, Safety Equipment for how we run our operation, but 250,000 is too large of a fall for them. Dont want to get out over their skis financially so a significant specific recommendation on that. Thank you. I yield back. Thank you, congresswoman and we will yield to senator toomey for five minutes. , mr. Chairman. This has been very informative and i really appreciate all of the participants. My own view is it is premature to come to the conclusion this has all been a failure. There are improvements we ought versions ofg at and main Street Programs we should contemplate. Affiliation rules need to be changed, maybe terms ought to be modified. I am interested in something that is more assetbased than incomebased, but 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 complexity of doing this type of funding. There has been recent acceleration in use. If acceleration continues, we may see pickup. There is ae argument high level of unawareness low level of awareness about this. There is a lot we could do to remedy that which could result in a more participation and finally, this leads to my question. Corporate bondhe programs which are not the ones we are here to talk about today, but the facilities that set up the Corporate Bond buying programs have been enormously successful despite the fact that the fed has purchased very few bonds. The existence of the program allowed to the private market to operate and at an alltime being volume after frozen. That is a remarkable Success Story despite there was not a lot of use. That gets to my question. Any of you might have a thought on this, but how should we best extentne objectively the to which credit needs are being met or not being met . Ive heard anecdotally from Pennsylvania Companies and pennsylvania banks that when this pandemic resulted in a was a massivee drawdown on existing credit lines. People piled up as much liquidity as they possibly could. After a little time passed, they started to fade out some of certainlynces, but we see bankruptcy filings at that point, it is too late. What should we be looking at on a daytoday basis . What metrics should we be using to determine how significant the credit demands are in this space and miss anderson, maybe you could leave it off. Miss anderson i think you make a good point in that by and large, credit demands for Many Companies are being met. We saw a record lending from banks early on in the pandemic so 700 billion plus went over months. Se of three since then, we have seen about 200 billion in the lending space beer or spain repaid so are paying down some of the liquidity they took in during the early days of the crisis. Speaking to our banks, the demand for credit has lessened. They are not getting millions of inquiries from their customers, new or existing, and i think that says something and they are often segmenting their books trying to see who needs credit if iter solutions and really is a liquidity crunch need, the banks are providing that, in large. If it is a solvency need, that is not something banks provide to companies. Senator, i think one simple way to figure out the unmet credit needs is to ask the banks how many main street loans has been requested by borrowers that the banks have rejected . If you capture that data you would get a real good idea because im aware of probably 100, and it is not the banks fault. We have a Restaurant Group in who signed the bank up for the program say i cant take anymore restaurant exposure in my portfolio. They are not approaching it differently, relaxing underwriting standards, they are getting a bank loan and if we dont capture that data interesting point. Is there a way the data is being collected systematically so we could access that, or does that not exist in a centralized place . It is not being collected systematically at this point in time. We could work with our members to get Additional Data on that. Members are active in the between 500 to 2000 inquiries in relation to the main street loans program and as i said before, upwards of three quarters of those actually dont understand the program and think it is a Grant Program so it is really not a high level of inquiries, even. Thanks very much, mr. Chairman. I see my time has expired. To thank our witnesses again, both panels, excellent discussion. I want to thank our commissioners for their participation and thoughtful questions and on behalf of the commission, in addition to thinking the witnesses, lets thank the staff for their preparation putting the hearing together. This hearing is adjourned. [gavel] monday afternoon, a look