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

Clock to show you how much time is remaining. All members and witnesses need to be especially mindful of the fiveminute clock. At 30 seconds remaining ill , gently tap the gavel to remind members their time has expired. To simplify the speaking order process, the commission has decided to order ourselves alphabetically. With that, welcome to this virtual hearing convened by the congressional oversight commission, pursuant to section 4020 of title 4, subtitle of the cares act, the Commission Must conduct oversight of the 500 billion authorized for the Exchange Stabilization fund. As part of our oversight work, the commission has decided to hold this hearing today which will examine the main Street Lending facilities. The Federal Reserve established the main Street Programs to support lending to small and mediumsized businesses, and nonprofit organizations that were sound before the covid pandemic. The program operates through five facilities which we will learn more about this morning. The program is being a minister by the Federal Reserve bank of boston. Todays hearing will have two panels. President eric rosengren, Federal Reserve bank of boston will testify during the first panel. In the second panel, will include industry participants. In the absence of a chair, the commissioners agreed to have one minute of opening remarks. I will not recognize myself for an opening statement. Our commission is pleased to convene this hearing of the main street Street Lending program. This is a timely and important discussion. I also, my fellow commissioners. Together, we worked in a bipartisan, bicameral way to release three reports and organize this inaugural hearing. Id 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 want to thank our chief clerk, amber, and thank you for the u. S. Senate for these facilities today. Findings from todays hearings will be reflected in our next report. The main Street Lending program term sheet was released on april 9, and finally became operational on july 6. Leading to its implementation, the program generated Significant Interest and engagement, however, in the months since the program has been available, 95 million of the 600 billion allocated has been loaned to eligible businesses. Toope we will find answers explain why took three mustard stand of the program and what, if anything, needs to be altered to alter the program to expand the universe of eligible borrowers. I want to recognize the commissioner for one minute. Mr. Ramamurti thank you. Thank you to each of the witnesses appearing today. For month ago, Congress Gave the Treasury Department half 1 trillion to stabilize the economy. The treasury pledged 75 billion to a main Street Lending program for small and Midsize Companies. After taking three month to set up the program, the fed has been operating it for a month. In that time, it has supported only 18 loans for total of 104 million. The 6000. 017 of billion dollar lending capacity that 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. The 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 businesses have to shot have to shut their doors. Thank you, mr. Chairman. Mr. Hill thank you, commissioner. I recognize congressman shalala for one minute. Ms. Shalala thank you. Good morning. I would like to thank our witnesses for being here today. I represent floridas 27th congressional 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 others going bankrupt. Issouth florida, our economy heavily reliant on tourism. Actually, we are reliant on crowds. Unlike businesses that can rely on Capital Markets for funding, small and midsize businesses are more susceptible being permanently shut down. Recognizing this, we approve 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 the main street loans, what has been accomplished to date is simply not enough. We all agree that these businesses need help to survive the crisis, and im here today to understand why the money has not been deployed, and what the impact has been on workers. I yield back. Mr. Hill thank you, congresswoman. I now recognize senator toomey for one minute. Sen. Toomey thank you very much, mr. Chairman, and i want to thank all of the witnesses in participating in this sharing 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 one 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 we are in a different place than the first we had these programs in march. We intend that, at least i did go intended to provide liquidity so businesses could survive what we hoped would be a very brief, but a severe downturn. Now we have the process of excess capacity in industries that could persist for some time. Thats 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 here and is a participant in the federal open market committee, the monetary making arm of the united states. As ceo, he leads the boston feds work, which includes Economic Research and analysis, supervision and Community Economic Development Activities and a wide range of payments, technology, and finance initiatives. Ms. Lauren anderson serves as a Senior Vice President and associate of general counsel of the Bank Policy Institute. In this role, she oversees the advocacy across a range of domestic issues. She brings with her over a decade of experience in Financial Regulation and resolution oversight. Most recently serving as a Senior Advisor at the bank of england, and before, joined the bank of england served as special advisor to the deputy advisor at our fdic. Mr. Tom bohn serves 90,000 investors, executives, lenders , and advisors to the growing middle markets of companies. Prior to joining a. C. G. In december, 2019, mr. Bohn served as c. E. O. Of the north american veterinary community, where he saw unprecedented growth. Mr. Vince foster serves as executive chairman of the main Street Capital corporation, a position hes held since november of 2018. Mr. Foster previously served as main streets c. E. O. From 2007 until november of 2018 and served as main streets president from 2012 to 2015. He also has been a member of the management teams Investment Committee since its formation. Main Street Capital offers Capital Solutions for lower , middle market companies. Mills. And our final witness, gwen mills. Secretary treasure of unite here. Ms. Mills has been working with unite here for 20 years. She served as 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. He will testify and we will move into two rounds of fiveminute questioning. Immediately following the questioning, i will recognize the second panel of witnesses for their testimony, and then we will move into that questioning. Each of the witnesses full, written testimony will be made part of the official hearing record. President rosengren, welcome, and you are now recognized for five minutes. Thank you for the opportunity to speak about the main Street Lending program, which the boston fed administers for the Federal Reserve system. 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 helps helps small and mediumsize businesses and nonprofits that suffered. 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. Standardize credit instruments, this program purchases interests and loans that are by nature, the agreements often with complex or specific terms and conditions. Portal open for registration on the 15th of june, 509 institutions have registered, and their assets represent over 14 trillion, about 50 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 forprofit or businesses, and two fornonprofits 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. I will 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. We opened for purchases on july 6, and the numbers are consistent with the gradual pace of initial activity, more recently expanding. The 54 loans submitted represent 29 distinct lenders. The largest number of loans are by institutions in the 10 billion to 50 billion range. , but but relatively small banks have participated. There has been limited participation in banks with over 50 million in assets. The modest numbers seem to be given way to more uptick as participants and banks become more familiar with the program. Quickly scaling up a program to chase participant patients 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 more rapidly. Credit interruptions harm individuals and in administering the program, we will do all in our power and purview to support the nonprofits and workers that make up our nations economy. Thank you for the opportunity to provide this overview. I would be happy to address any questions. Mr. Hill thank you, mr. President , for your testimony. And i will recognize myself and five minutes of questions. First, let me say i was pleased to see the c. F. O. Confidence University Duke recently showing the business believes that they are doing better than maybe they thought they would at this stage of business reopening, and that Market Access is improving. They are concerned mostly about the demand for their products. I was encouraged yesterday that 1. 8 million jobs were created in me that the Unemployment Rate fell to 10 . We still have a long way to go, and we will 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 sense that tax revenues, particularly sales tax revenues, were actually over trend and set a record. They were 4 over forecast and our sales tax were 16 over forecast and 15 over 2019. So, clearly the economy is reopening, and and 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. Rosengren,ed, mr. About the affiliation rules when i looked at the main street term sheet. I am concerned about two things. One, it took three must to get the program up and running, and i would like you to address that first. Secondly, it appears to me in this middle market the rules that the Federal Reserve have adopted in the main Street Program, really are a significant barrier to more entrepreneurial, middle sized companies i dont have access to ppp and we dont have access to the Public Markets. Adopted the do fed s. B. A. 7a type limitations on affiliation rules. Can you handle those two for me , please . Mr. Rosengren certainly. First, why dont i address the question 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 of days, depending on the security. So it is relatively easy to put the purchase a large number of securities, and whole the 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 other requirements. So in order to design this program, we first had an initial term sheet. There were very substantial revisions to the term sheet. Again, we came out with another term sheet, which was again revised, and each of those times when we revised the term sheet, we were expanding the ability of the businesses to access facility. So, the types of changes that were made included lowering the loan size, changing the repayment terms and lowering the fed participation amount. Theal term she 40 final term sheet for the forprofit businesses started on june 8. On june 15, we had the registration, and on july 6, we had loan participation intake. I would highlight as part of this process 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 then, check and make sure the programming worked as expected, and met all the security needs of this program. So that does take some time. It did take time to start up. And i think they give you some idea of the complexity of the program and why it took so long. Mr. Hill thank you for that. Key thing is, if we want to change the program, you dont anticipate taking another three months to have a different main street term sheet if that was necessary . Mr. Rosengren it would depend on what the main street term sheets were. If the term she doesnt effect the underlying legal documents, it is much easier to implement. There are changes that have been made as we have had changes in the term sheet. That is true for the nonprofit term sheet as well, depending on the nature of what the changes were would 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 interest in the program will likely pick up if, the pandemic and the economy worse in. But if you look at the data, main street companies are already getting crushed. The latest middle Market Indicator and 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 u. S. Chamber of commerce middlemarket business index showed the same thing. Furloughsoffs and and widespread revenue declines. 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. Wereas an example, there 109 million in loans committed or settled, as of last tuesday, and two days later, we now have 29 loans and 108 million. So there is a pickup up in volume. It is particularly and communities and midsized gangs. Night, that is 635 million. Early stagesis the of this program. The reason is that banks and borrowers have to negotiate the terms. They had to know with the term sheet was and understand characteristics of the program and how the portal worked. It takes time for the banks and borrowers to get familiar with the program, and to start pledging those loans to the facility. So in the first couple of ways, the banks had not completed that process, and the borrowers had not completed that process and there was not that much volume. 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 you are 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 in what these loan agreements look like. Mr. Ramamurti in the interest of time ill move on. Even 535e that million, which you said is in the pipeline right now, which is still a tiny fraction of the total lending capacities that was created for this am practice. 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 companies, even Distressed Companies arent looking for loans. Just this week, the fed released a survey of Loan Officers finding in Second Quarter demand of loans from all Companies Went down. Similarly, the most recent National Federation of independent business surveys of Small Businesses found only 3 of Business Owners reported that all of their borrowing needs were not satisfied. In the testimony submitted today the Bank Policy Institute, which , represents some of the biggest have seen,e country a lack of demand for main street loans from their clients. Clients. So mr. Rosengren, if the main Street Program can only offer loans and its clear that most Midsized Companies are not even though companies are not looking for loans right now even though theyre already struggling badly, how is this Program Going to stop widespread business closures . Mr. Rosengren if you have a business that have had no problem from the pandemic and have a pristine Balance Sheet, you are probably going to get better financing than the main Street Program provides. If you are a business deeply troubled, and is in danger of closing eminently, this program is not going to solve the problem because debt does not solve that kind of 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 after the pandemic , and subsides would be able to be a viable business as well. Fite are businesses that those characteristics. We are seeing some of those businesses actually coming to the facility. I am expecting over time, we will see more pickup. 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 i 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 they are 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. Congress helps Small Businesses through ppp. Congress helped Large Companies that are big enough to issue bonds by reducing the cost of borrowing. But the only thing the government has offered all of these companies in between is the main Street Program, and it is just not working. These Midsize Companies employ over 45 Million People. I dont think continuing to tweak this program 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 the gentleman yields back. 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, have been very hard hit by the virus in my district in particular. Only 109 been noted, 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 that bharat raised. But whether it is designed in a way, which is another way of getting at that. In particular, some suggested the terms of the program, such as the leverage ratio requirements and the loans priorities and security able toents, are provide to a broad range of small and midsized businesses. Can you respond to that . Mr. Rosengren yeah. So this program is designed as a cash flow program. It is designed for a business that expects to be able to pay off the debt and we 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 it is a debt program and debt may not help them in that situation. In terms of the underwriting standards, the standard follows industry practice. So it depends upon which of the facility parts you either [indiscernible] a dip below that, and so i think this Program Actually closely mirrors kinds of coverage that maybe banks themselves are expecting when they are looking for a loan. So its a combination of an underwriting standard. There are underwriting standards in this program. Basically a debt and the fact that the bank will 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 that has 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 . Mr. Rosengren so loans have to be paid back. We are asking banks to voluntarily participate in the program, and we are asking banks to be sure that when they underwrite the loan, it is a loan that is to a business that is heather credit disruptive, but that over time, you expected 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 disrupted. That isnt attractive from this am practice. From the perspective of the bank, they may not be willing to do that loan otherwise. Let me give you an example. A Movie Theater. If youre a Movie Theater located in miami youve been , and closed in the spring, you opened up temporarily and now you may have to be closed again because of the risks have either imposed at the state level, or people dont be in Movie Theater at the time of a pandemic. The bank may be uncertain about one that loan would be paying because they do not know how long the pandemic will occur. They do not know when there will be a vaccine or a treatment. Providing they are 95 of the loan to the Federal Reserve, they might be willing to provide support for 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 testimony that of the fed once a banks to lend to borrowers that do not meet the current underwriting standards, which are 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 by as disincentivizing banks to loosen their underwriting standards. Has the fed considered this issue . Mr. Rosengren yeah. We have spent quite a bit of time thinking about the supervisor issues related to these loans. The pandemic, like other natural disasters, like 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 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 making a decision such as a main street loan where the borrower has been disrupted. The other regulators have agreed to this and 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. Thats what we have to do in other 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, you know, 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 that we made Unemployment Benefits so much more generous than they ever been in the history of the country. We know that was inevitable that in a severe, hopefully brief recession, there 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. You dont have principal and interest the first year. No payment of principal the 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 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 on the 5 they keep. The Fee Structure, which if it is 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 . How does that Fee Structure workout . Mr. Rosengren its on the a 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. Its the cost of 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 more oriented towards lowering their anndards because there is 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 of the blocks with 20 of your credit risk and fees covers a lot of risk . Mr. Rosengren there are others that provide loans on the market other than banks. For program is designed depository organizations. In part, we want to be able to get this facility up and running quickly. In part, we have to make sure that b. S. A. , know your customer 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 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. And yet, there are only 150 banks or so listed on the feds website as far as registered lenders. I cite that because in the emergency environment, we were able to stand up to the ppp program and 5400 banks swung into action in a patriotic way and in seven days, began distributing 520 billion and ppp loans. Llion granted, the underwriting was very different. The mission was very different. I got that. 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. It is a cash flow lending exercise based on a predepreciation and implied leverage. 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. Dashed of the economy . Would you comment on that . Mr. Rosengren i think these loans already are going to be risky. Doing lending in the middle of a pandemic, particularly if it is a sector of the economy where social distancing is difficult, retail havehotels, all been badly affected by the pandemic. Some of those as we have seen, there have been large bankruptcies of retailers. These loans are not without risk. I fully expect some of the loans we are going to do over time will have a loss. That is why we have a treasury backstop. I think this program has taken on a fair bit of risk. I think over time as the portfolio grows, we are going to have some significant losses. Hopefully that does not occur. Hopefully everyone is able to pay back the loan. Well, economy does not do it is 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. When you do look at the terms, companies at the margin are certainly middlemarket companies that could not access the Public Markets are many not eligible for ppp, many would qualify. I think the affiliation rules make that more difficult. I think the very traditional lending profile contained in this term sheet also could be a detriment to companies. Let me give you an example. This was talk about with secretary mnuchin and chairman powell at our meeting a few weeks ago. Goodne who does not have a do notdha in 2019, they 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 have room to lend. They could not meet the standards. Both jay powell and Steve Mnuchin 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. Mr. Hill there are a lot of firms that do not have cash flow in 2019. They are absolutely a small middlemarket type company. I know the main street term sheet is currently a cash flow. I am asking, is there current discussion underway to expand a different facility that would be more of an assetbased loan rather than a cash flow loan . Mr. Rosengren i know there are discussions about alice it about assetbased financing, especially in commercial real estate. There have been ongoing discussions about this. There is no term sheet that is imminent. Mr. Rosengren thank you for that. Also, start up companies. 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 every night . Mr. Rosengren startups need equity more than debt. I think frequently, a true start up is going to find other types of financing vehicles more attractive. This is more of a program for established this messes that have experienced a disruption of cash flow. Mr. Hill let me yield to my friend for five minutes. Mr. Ramamurti the fed announced changes to the program. That announcement described basic features of the program like the maximum loan amount and the rates and terms of loans. A few weeks later, the fed announced major changes to the program. Upy of those changes lined exactly with white members of the oil and gas industry requested. Shortly before the changes were announced, President Trump publicly promised oil and Gas Companies would be taking care of. Shortly after the changes were announced, the Energy Secretary went on tv and bragged how he and secretary mnuchin had succeeded in getting the fed to make changes the oil and gas industry wanted. When asked by reporters, the spokesperson for the fed denied the fed had made any adjustments out of consideration for the oil and gas industry. The fed said the april changes reflected the more than 2000 Public Comments the fed had received by the initial design of the program. As the regional fed president responsible for the program, you stand by the earlier statement that certain adjustments were not made specifically to help oil and Gas Companies . Mr. Rosengren i do. This is a broadbased program. It has been a broadbased program from the start. 13 facilities require broadbased kind of terms. It is not targeted at specific firms or 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 in april. According to reuters in mid april, one of the key changes the energy and Secretary Energy secretaries are pushing for less to help the oil and gas industry. 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 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 difficulty getting financing. Fortunately, the pandemic subsided, at least for a couple months, and as a result many of those large borrowers that thought they 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. Here is another change. The first version of the main Street Program required companies to say in writing 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. 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 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. I reviewed the Public Comments and there wasnt a single one that requested this change. Only the oil and gas lobby had requested it. 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 not how the fed is supposed to operate. The fed is not supposed to be changing the rules of the programs so the president s Favor Companies can get access to billions of dollars in public money. It is illegal for the fed to structure these programs to help Companies Avoid bankruptcy. I urge this commission to investigate this issue including by investigating all communications on this topic between the fed and energy echo terry, the treasury secretary in 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. I am interested in why it is not smaller. Commentators have speculated the minimum loan amount of charter 50,000 is too large and precludes participation by many small and midsized businesses. I am aware the fed has reduced the amount from one million to 250,000, which may still be too high. The American Bankers Association at the Marketplace Lending Association have separately suggested that 50,000 may be a more appropriate amount. Has the fed conducted studies on whether the shoe hundred 50,000 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 ppp program was designed to target that segment of the industry. The ppp program is much more attractive to a Small Business because it has the ability to be a grant. This program is designed for businesses that did not qualify for the ppp program. If you look at the actual loans that are in our portal, the loans that are actually in the portal is one to 5 million. That is the type of loan we are seeing is, dental companies, construction companies, design companies, retailers. These are businesses that frequently are going to have a one to 5 million loan and it is not surprising that is what we are seeing. We have seen some loans that are much bigger. We have seen some that are much smaller. That so far is where we have seen the bulk of the activity. Ms. Shalala so you are not considering going below 230,000 . Mr. Rosengren i think there are other programs better designed. Ae real question is whether cash flow Lending Program such as main street is appropriate for very Small Businesses and whether there might be better targeted tools that can adjust that. Well more debt help that business or write it push it towards bankruptcy and closure . We want to make sure we provide debt to businesses that can use it and pay it back. We do not want businesses to have so much debt they are not 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 the requirements are too rigorous and will preclude participation by many of the nonprofits. For example, the minimum loan size is 250,000, which may be too large for smaller organizations. Atrors are required to have least 60 of 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 . I am very familiar with nonprofits. Be 60 requirement seems to to me will block many nonprofits. I appreciate hearing about any analysis the fed has done regarding the nonprofit interest element interest eligibility in the program. Have you considered changing any of the eligibility requirements . 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 inks. Of banks. Any banks do not lend to nonprofits because it is a different nature. Many of the large nonprofits probably goes to debt markets. That is true for many hospitals as well. This is a market that has not been extensively tapped by many banks. It is a new market for many banks. There is an opportunity for more nonprofits to be able to access Bank Financing through this program. We did makes in the vacant adjustments in the term sheet. When we were thinking about the adjustments we made between the first and second term sheet, we spent an extensive amount of outreach understanding outreach and how rating agencies underwrote these loans. These criteria broadly match what many of the banks told us the criteria was they used. Between the first and second term sheet, we did relax it in response to the comment it was 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. I would highlight now that the legal bank loans dont get made quickly so now the legal documents are up and running, now 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, this will be about the time that if the bank is going to do a nonprofit loan, that well probably be up and running by the time they complete the agreement with the borrower. Mr. Hill thank you, mr. Rosengren. The gentlewomans time has expired. Senator toomey. Senator 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. Senator toomey is there any program the terms of which is suitable to the oil and gas sector . Mr. Rosengren no. Senator toomey thank you. I want to underscore the point that congressman hill raise, which is some real challenges with the affiliation role. Firms that when we were drafting this legislation, we did not think would be automatically excluded. From financing. I also want to underscore his point about considering assetbased facilities. Therek you are well aware are some real challenges in the commercial Securities Market right now. In particular the hotel subset sector is experiencing some real difficulties. Because they generally do not qualify for the criteria, there is no access to this. Irrespective of the ability of the borrower. I would encourage you to if there is an appropriate value that may that is a criteria that we ought to consider. You have any thoughts on whether we ought to stand up a facility designed . It would be designed for the broad category of real estate and other categories more suitable for Asset Based Lending then for a constraint . Mr. Rosengren yeah. It would differ than what we have for main street. So it would be a different facility. Most that type of lending has a longer maturity than five years. These are fiveyear loans with a balloon payment at the end of five years. Thats probably not appropriate for, for example, 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 s. B. A. 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 worse if the pandemic gets worse. Senator toomey so i want to go back to that. On page 11 of your testimony you believe should the pandemic and the economic circumstances worsen, we might very well see greater interest in the main Street Lending am practice Lending Programs, and i understand leading to greater demand on the corporate borrower side, but can you address why you believe 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 there are many borers who could take two or three month of disruptive cash flow. If it was only two or three month, those may be bankable loans right now. They might be able to get a rate plus 300 basis points. Some of those loans that might have been attractive to get direct financing from the banks to their standard banks parlor relationship may no longer be possible and the bank may only be willing to do it if the Federal Reserve takes a 95 stake that is pot of the main Street Program. I agree with you that risk aversion by banks may increase if the pandemic its worse. Mr. Hill let me thank dr. Rosengren for his testimony today. We appreciate the written testimony. Let us turn to our second panel. We are going to hear from miss anderson with the bank was the institute first. Your recognized for five minutes. Commission, myhe name is learn anderson. Im Senior Vice President of the associate general counsel of the Bank Policy Institute. I thank you for being a witness. Publica nonprofit policy research and advocacy representing the nations leading banks. Our members have been employing ailey ii million americans, nearly 72 of loans and half of the Small Business fonts. Api appreciates the efforts to date and by congress, treasury and the Federal Reserve to tackle the covid crisis and provide relief to household and businesses. Main street requires Credit Underwriting decisions on a heterogeneous set of bank bars, which is not something the Federal Reserve has done before. With the expansion of main street to nonprofit organizations which is different across different sectors, the Federal Reserve ventured even further into uncharted territory. Api working with member banks have been gauged in commenting on the ensuring race management to ensure funds. An engaging in an iterative process to try to improve the end result. We are pleased the Program Began excepting registration in june and officially became operation on july 6. Lenders continue to lend. Y member banks while the limited numbers of loans and thus far have been consent to some, it must be assessed and of the context of the commercial ecosystem. For many Small Businesses, main street may not be the right fit given the complexity of the program and the requirements. Member banks help to provide up to 1. 6 million ppp loans totaling over 188 billion to help Small Businesses meet payroll needs. Larger carpets retain access to Capital Markets, which remain active with the support of numerous Federal Reserve programs. Investmentgrade debt and corporate debt have been issued at corporate levels with u. S. Companies raising over 1 trillion year date. Third, over the course of march and april, small and Large Businesses drew down on existing credit lines. And april 1,ary 12 bank loans increased by approximately 700 billion. As the lack of demand for main street lines indicates businesses are finding credit through other channels. A second reason why there is limited demand for main street, Effective Program not only requires our estimate certain eligible to cry to satisfy underwriting standards. It is not surprising they are finding Credit Solutions through trauma through Traditional Market channels. Program may become more useful as a become more constrained and if this were to occur, and street may provide the solution. So far, Balance Sheets are robust in weathering the crisis. If congress, the treasury or the Federal Reserve provides for the relief to small and midsize businesses experiencing acute stress due to the pandemic, including less creditworthy borrowers who would not currently pass underwriting standards, the design of the program would need to be modified. At the moment, the program is not designed to provide loans to less than worthy borrowers. If banks were to provide loans to borrowers who could not meet standards, the government would need to provide credit Risk Protection that would allow main street loans to consider risk. I thank you for the opportunity to be a witness for the commission. Thank you. Mr. Hill appreciate your testimony. We now turn to mr. Bond. We were recognized for five minutes. You are recognized refinements. Thank you. Thank you for the invitation to speak today. Appreciate the gravity and responsibility before you. Admire your willingness and expect your commitment to ensure the relief programs enacted through coronavirus aid and Economic Security act are both accessible and effective. Im here this morning to provide testimony from the perspective of middlemarket borrowers to answer the question you all are asking of who the main Street Lending program is helping. I have no answer to offer you. We could not find someone through our membership who has received a loan for it. I would like to share some comments from our members who completed a survey administered in recent days. I will not read all of them. We approached 15 lenders, not one was interested. At cash it is news to me it is new to me. Please send guidelines. We are excited about the program and had two companies that would be perfect for the program. The banks will not do it. There are plenty more comments that address the challenges faced by borrowers and lenders. Im happy to provide the condition for reporting purposes. , i comeeo and president before you today as the leader of an association that represents a vitally important segment of the economy. 1954, the 15,000 occupies 250 million companies. Hosted more than 1100 live events annually. A staff of nearly 30 people based out of chicago or now all over the country and oversee operations in 60 chapters. When the Paycheck Protection Program was announced, a grant would have served as 800,000 lifeline for my chicago team and Staff Members dispersed traffic country. We were ineligible. We made more than 600,000 in salary cuts. Forecasted to continue through december and beyond should every and beyond. Every conversation with our members finds them in the same condition. They managed cash flow and worked to retain employees and not lose institutional knowledge. When ppp was closed to us like many other associations, we looked at the main Street Lending program shared a loan would allow us to invest in Digital Enhancements to our infrastructure that would ensure we would continue to delivery the necessary tools for business development. We found another closed door as did our members. We thought the mainstream Lending Program would be accessible to organizations and companies excluded from the ppp. It has not been accessed by many. You talked about the Goldman Sachs estimating some 45 million americans or 40 of the private sector are employed by Companies Eligible for msl p. Very few had purchased a loan. Chairman powell recognized the challenges with the small and mediumsized businesses for which it is intended. It is New Territory for the Federal Reserve and very complex because businesses are in broad and heterogeneous class of borrowers. Mainstreamges of the Lending Program are two fold and equate to awareness and access. Our recent survey found 22 of respondents unaware of msl be. Msl p. 81 were unable to apply. When asked about what changes could be made to help, they suggested the overhaul of the following items. Removal of the adherence to the affiliate definition. We talked about the base test, which excludes Many Companies. Dividendson restrictions for one year after loan payoff. Employee compensations for one year. Decreasing the minimum loan size. Andting a greater awareness accessibility should result in a groundswell of applicants. The effects should help Companies Maintain operations and preserve Health Care Insurance for millions of americans in this increasingly unpredictable economy. We stand to support you in any way you need and hope to answer any questions you have today. Thank you. From mr. We will hear foster. You are recognized for five minutes. Ok. Can you hear me . Mr. Hill we can. Members of the commission, thank you for inviting me today to testify on this day of the Federal Reserves main Street Lending program. Im the executive chairman of main Street Capital. Main Street Capital is an active member of the alliance in washington. We provide financing to lower middlemarket u. S. Businesses. We have investments in 68 lower middlemarket businesses. Average ownership is 36 . These businesses, each have roughly 200 employees. The main Street Lending program, while enacted to assist businesses weather the economic storm is not responsive to the needs as currently structured. The principal structural problems are number one, requiring lenders to undertake full Credit Underwriting for small to midsize borrowers seeking 3. 5 , 46 times loans results in a risk to reward mismatch. Two, requiring 15 is a nonmarket and very on risk provision, requiring the loans to be refinanced after two years. Number three, prohibiting subtraction will support and isaiah should and requiring in debt isto existing problematic in that Lowes Companies will have that most companies will have outstanding debt. Number four, testing the maximum number of employees, utilizing the affiliation rules contained in the Small Business administration applicable to 7day loans without the exceptions included in the triple p program reduces the number of Companies Eligible for the Lending Program should lending facilities as structured rn attracted to the bars. Less restricted financing is less likely to be available. They remain unavailable. With respect to the less creditworthy borrowers. The following structural changes would make the program more attractive to lenders and borrowers to advance congress objectives. The loan should be subject to preexisting contractual organization. The loan should have a term of seven years to allow them to mature after the maturity date. Begin until the end of year four. Number three, the multiples of one in 19 adjusted should be six times in the priority facility. Seven and a half times respectively. There should be elected assetbased criteria such as a Debt Service Coverage ratio instead of using silly leveraged multiindustries. Experience nonbank lenders should be permitted to participate somewhere to the triple p program. The lung should have an Interest Rate plus 400 rather than threat basis points. The affiliation rules should not limit an affiliated group to a single main street facility or a facility size limitation. Number six, one of our lenders, a highly respected and conservative regional bank, has elected not to participate in the Lending Program. Instead, they confirm their primary regulator had no issues with the Bank Utilizing one and two year deferral of interest utilized by the program and the bank regular Lending Program. This will provide certain borrowers the liquidity they need. It may be helpful to coordinate with the appropriate regulators as to whether this type of action might encourage other banks to modify Lending Programs to assist affected borrowers. Thank you for the opportunity to speak today. You, mr. Posture mr. Foster. Thank you, members of the commission. I am secretarytreasurer of the hollister of the hospitality industry. Recommendations i make are supported by the aflcio representing 55 National Unions and 12 million workers. Our members work primarily in hotels, casinos and airline industry. All sectors heavily dependent on travel and tourism. Before the cares act became law, 90 of our members were laid off. A majority of our members are women and people of color. Most have lost or will soon lose health care. Hundreds of our members for their families have died from coronavirus. 22 in las vegas alone. 350 have been hospitalized. Story is aur cautionary tale. Heart is a question of requiring employers to retain employment at the condition of federal assistance. The Program Requires only commercially reasonable efforts to maintain employees in spite of clear congressional intent. Treasury and Federal Reserve said they would not enforce that. We know how this ends for working people. We have seen how powerful the programansform into subsidies for Real Estate Investors. We have members who received ppp loans and they have not protected paychecks or health care. One Company Received 34 ppp loans. Hotels in boston, providence and new haven were shut down in march. It is unclear when they will reopen. In providence, they cut off medical benefits. They reveal how a powerful industry changed a Program Designed to keep workers on payroll to one that can keep hotel owners current on their mortgages. Of, hotels demand a bailout 86 billion using the main Street Program. This commission reported the feds have considered establishing an Asset Based Lending facility we fear would do that. Who would benefit most from a hotel bailout . Lobbyists want you to believe it would be momandpop hotels. The largest beneficiaries are significant are investors. 11 borrowers had a combined 30 billion in loan balances for third of the total outstanding. Four private equity firms. The rest were developers or billionaire investors. Beach belong to the miami to a hotel in miami beach. Now they have stopped health care for hundreds of laidoff employees despite subsidies provided by the tax credit. Lobbyists claim if the fed does not rescue borrowers, hotels will default and workers will not have jobs to come back to. That is not our experience. This is not the first time hotel our notice got themselves hotel owners got themselves in trouble. Defaults and foreclosures did not lead to closed hotels. Hotel owners were used for seeing absentee owners come and go. Of mortgages mature within two years. Before the industry is projected to recover. Should the fed refinanced the entire lending market . There is a second critical lesson here, which relates to the main Street Program. There is no question the credit market is extremely important in crisis. The real mission should be to protect jobs of american workers. The focus on markets and not on jobs means our members, most of whom are brown and black, are thrown off payroll while their employers are predominately white and can ride out the crisis. It is no longer acceptable for the fed to stand by and watch as fall off a fiscal cliff. Millions of workers are right behind us on the precipice. What if credit turns were loosened . So long as there were airtight requirements, not recommendations, but requirements that would keep workers on payroll. Done if ppp could have it was not hijacked by the Real Estate Industry. Fed and treasury must learn from ppp. Please do not bailout Real Estate Investors while they push workers off the cliff. Thank you for this opportunity. I welcome your questions. Mr. Hill thank you, miss mills. We will now have a round of questioning and i recognize myself for five minutes. With ms. Anderson. We were talking about your view of the banks taking up of the these loans. What modifications may be made toward less than credit worthy borrowers. As i said in my earlier questioning, 5000 banks jumped on the opportunity to help in the ppp environment under the cares act. We have very few banks engaging here. What is the Bank Policy Institute doing to promote banks participating in the main Street Program . Thank you for your question. In terms of member banks, the vast majority of our banks are participating in the program. I cannot speak for all banks across the country, but when you think about the complexity of the program, it is difficult not just for small borrowers but also for smaller lenders. The program is set up as a participation and setting up the infrastructure to 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. Do you agree with the test of mr. Hill you agree to the testimony on the panel that it is possible to make a credit worthy alone that is not based on the senior nature of the term sheet . If one were to have sufficient collateral coverage and a 125 Service Coverage ratio but a jr. Lien, wouldnt that be considered a credit worthy loan as well . A number of our members have said they would be interested possibly in lending at a jr. Facility. Something that is collateralized. I think it would be up to the fed and treasury to decide what their Risk Appetite would be in such a structure and structure the terms appropriately so it may not be 1. 2 but something similar. I do think angst would be interested i do think banks would be interested. Mr. Hill do you think the fed and treasury are not setting the risk parameters appropriately in their existing mainstream term sheets . Muchhey too strict or too like a Senior Bank Loan and not a step towards a slightly distressed solvent, temporarily distressed borrower . I think the Eligibility Criteria that the fed and treasury established for the program they set out to design as president rosengren said in terms of a liquidity program. There is a key element even if you reduced the stringency of the terms, you still have the underwriting element. In this environment, underwriting on todays information will be difficult for many borrowers in that distressed space. I am not sure that actually loosening the criteria is necessarily the right answer. Also in terms of what president rogan. Said, president rosengren said, if Companies Need equity, a Federal Reserve Lending Program is not the right solution to that. Mr. Hill mr. Bond, lets talk about the affiliation rules. You heard my conversation with dr. Rosengren shared the fed here in the main street facility has adopted the Small Business administration seven a lending affiliation limitations. Nonhis middle market of super Small Businesses and 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. Bond thank you. What we are seeing and what is evident in the survey we had is that these businesses were originally excluded from the ppp. There was hope initially that in the late the lending provision that there would be opportunities them to utilize benefits and lending from main street in order to not only keep jobs but also invest in some of the changes they need to do as people start to pipit based on the ache to pipit based on the economy. Whether that is setting up plexiglass and rearranging buildings and whether or not that is related to simply doing business in a much different way. We have heard from them that their inability to access them has had a Significant Impact on their business fee. Mr. Hill thank you for that. We will have another round. My time has expired. Thank you, mr. Chairman. Thank you for your testimony today. You noted in your testimony that hundreds of your Union Members and family have died from covid. I want to extend my condolences to them and to you. This is a powerful reminder that this is first and foremost a Health Crisis and that frontline workers are bearing the brunt of it. You represent a lot of people andwork in hospitality tourism. Waitstaff, you mentioned a majority of workers are women. Who are the first people who suffer file layoffs or furloughs yet suffer from layoffs or furloughs . Across the board, it is frontline workers first, our members, who are laid off. Our experience is that white middle management is able to keep their job. When they are furloughed, it is not just lost income. They are losing access to health care, retirement contributions and other benefits . Absolutely. Among the hundreds of thousands of travel and Tourism Industry workers represent, are you aware of a single job that has binge saved that has been saved to the main Street Program . Saved by the main Street Program . No. Is the Mainstream Program is designed, do you think it will help workers in the future . No. As i said in my testimony, not without binding requirements that employees be rehired. Even if a lot of Companies End up getting loans for the program, you do not think the benefits will float through to workers. Not without binding requirements. 45 Million People work at companies that are eligible for the main Street Program. If the goal was to help those millions of workers, you think the fed can make tweaks to those programs do you think Congress Needs to come up with a brandnew approach . I do not think tweaks will work. I think congress does need to come up with a new approach. Lets talk about that a little bit. What kind of new approach do you think would be helpful to your workers . In your experience and experience of your members, does providing Financial Support to businesses without enforceable requirements that is is use those aid that businesses use those aids to support those workers . Without requirements, support does not help workers. Of the 500 billion Congress Gave to the treasury any the cares act in a march, there is currently more than 200 billion sitting unused and uncommitted. If you were to use that money to develop a program that would be most helpful to your members, what would you do with that . The two things that matter are health care and wages. Wewould Fund Payments so could continue health care and give direct support to workers. Thank you. One final question about this. The Treasury Department reach out to your union as it was designing the Funding Program that was extensive that was ostensibly that was extensively about helping workers . I think it is time we start listening to working people when we design these programs that are supposed to be about helping workers. Thank you, mr. Chairman. Mr. Hill thank you. Lala isswoman sha recognized. Ms. Shalala that me followup with this let me followup with this bill since i represent a district that has a huge number of workers that work in the Tourism Industry, particularly in the hotel which you mentioned. Whether theate over term commercially reasonable was better than reasonable. It sounds to me from what you said that either one does not me that these programs keep people employed, or even furlough workers keeping their health care so they can get on unemployment, and keep their health care. I take it that wed have to requirementin that 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. Ms. Mills yes. Thank you, congresswoman, for your question. I mean, our great concern about the main Street Lending program is the Hotel Industry is seeking changes so they can use the program to pay their mortgages. Like there is a 975 million loan to the fountain bleu in miami beach in your district. As i mentioned, they stopped paying health care for hundreds of our laidoff members. We believe its a violation of our contract. It would be wrong for taxpayers to fund a year or two worth of not aof debt payments, million a year, while laid off workers lose their Health Insurance and rely on the Public Hospital system. Finetuning absolutely requirements would be necessary. I really appreciate your question today because one of fountain bleu workers died this morning of covid in the hospital with light in the hospital without life insurance. Ms. Shalala i heard that. And i am so sorry. I want to point out that those workers are also taxpayers. We are talking about their money being used for the mortgage payments. So, you dont see anything in the Mainstream Program that could be significantly improved, unless it was totally restructured in terms of helping workers in this country . Ms. Mills thats right. It would need to be restructured with requirements of the bat for bringing workers back as soon as any assistance was issued. Yes. Ms. Shalala thank you very much. Let me ask ms. Anderson a question. The main Street Lending program employ their own underwriting standards to loan applications. Does that mean that banks are making loans under the program that they would have made anyway after the fed program . And if so, is the main Street Lending Program Providing any benefit to borrowers at all . Ms. Anderson thank you for your question. Areerms of the loans that being made, i think they are quite specific in terms of the circumstances because youre absolutely right. A borrower who can meet a banks basic underwriting standards is typically finding out there was a product that is more suited to them, given their credit needs. For example, may be a term loan is not what they need and they need something more like a Flexible Working capital facility. So our banks are actually many times finding Better Solutions for these borrowers when they inquire about the program. Thatrms of the live cases look like they might go through, one example is a travel company that basically came to one of aanks as a new lender new borrower, im sorry the bank , and would be comfortable possibly lending the 5 . In normal circumstances, 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 get finances to these borrowers, that is one where they think it makes sense to use main street because the government is there ready and waiting, so they dont have to go through a syndication process. Whether there are lots of borrowers in those specific circumstances, i think is questionable. Ms. Shalala one more quick question. Many of the small to midsized businesses that were able to get by in the first few months, they used the ppp program, and now, they are 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 requests . Ms. Anderson i would not say huge. Something that is interesting is that the vast majority, probably over 70 of new borrower inquiries that our banks are getting are actually borrowers who think main street is a ppp program. Loaney think it is a Forgiveness Program or a Grant Program. Once they hear the details, then they realize is actually not for them. So they are looking for something that is equivalent to a pppstipe to a ppptype structure. Mr. Hill thank you. Nk you, michelle alae thank you michelle lala. Your time has expired. Now we turn to senator toomey for five minutes. Senator toomey thank you, mr. Chairman. I just want to go back and review very briefly a little bit of the history about how these programs came together. Because we debated the extent to which we should have mandates to retain a work force and how best to do that. And for Small Businesses, we found that it might be possible for businesses, even businesses that are essentially closed, have no business, it might be possible to maintain a payroll, if we paid for it. If we had the taxpayers pay for it. So that is what the ppp program was designed to duke harry take a finite period of time and have the taxpayer pick up the tab for the payroll. And to a very significant degree, i think it has 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 , wertunities, maximize jobs are all celebrating record low unemployment, record high Job Opportunities for everybody in america, most especially africanamerican community, hispanic community, people who have historically had higher rates of unemployment, we are seeing tremendous gains. This was all great. But the idea that we would require companies to borrow money for the purpose of maintaining a payroll for people who they didnt have work for because the business was closed. That didnt seem to make sense, which is why we may unappointed benefits more generous. We did direct payments of 1200 to everyone. To offset the lost income that was there. Let me try to illustrate this another way with a question. Maybe mr. Bohn or mr. Foster would want to take a shot at this. Has is losing money probably massively, as apps and sales as a lapse in that was under way, and hopefully in the process of 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 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, i will 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 ask quickly as possible. What we are hearing and seeing from middlemarket 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 companies. So to use the example of a. C. G. As an organization, there is a lot we have to do and dont have the finances to be able to wellequipped and this new virtual environment. We are seeing that time and time again, whether it is for our restaurants with how they handle how they prepare for orders, utilize technology. So there are opportunities but at the end of the day its a moot point because there is such a large number of them not able to access the program overall. Senator toomey mr. Foster, do you have a comment . Mr. Foster i think the main thing right now is to type of business that you illustrated is to keep the business the businesses in survival mode. Can you hear me . Great. And you need to let the Business Owner do what is necessary with the capital to keep the business alive. Certainly, payroll is apart of a, but frequently, they are behind on lease payments, and they can lose their facility. Stretched they have their suppliers. You just have to leave it up to the Business Owner because they really need they are really in survival mode. Senator toomey let me ask a question from ms. Anderson. My understanding is the federal Bank Supervisors have made it clear that they will treat the main Street Lending loans in a manner consistent with their supervisory approach to other commercial and industrial loan. So here is my question. If they were to change that, and they worded take say, less restrictive view in their supervisor capacity, and would bank behavior be likely to change, ors bank behavior or is bank behavior so driven by the existing set of internal rules that they would be unlikely 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 it is appropriate to have supervisory forbearance. A transmission of risk from the corporate sector to the banking in the bestally not interest of anyone. Banksrtainly, if you have going make riskier loans right now, it might be ok for 12 months, but the credit problem will still be there. Just down the road. Are think banks basically 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 have a second round of questioning this panel. And while yield myself 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. It it is upon shop in which necessitates borrowers are compelled to hock assets, worth two or three times the amount of the loan, we are opposed and we think most businesspeople will be as well. We see no reason why the government should be engaged in a careful pawn brokering nickeling niggling over security, haggling over interest, and competing with other lenders. Lenders. That was written back in 1933 as Reconstruction Finance Corporation and the fed struggled how to get credit to the american marketplace in a very tough economic recession of the 1930s. I think were dealing with that issue now. In this middleMarket Segment, in this middle Market Segment were 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 to ppp. In ppp, uses the same set Program Rules with relaxation for companies with an sbic investment, hospitality franchises, etc. You dont even have that in main street. In ppp, if you had two commonly owned businesses that had 200 employees each a they each had, you know, say 20 million into preexisting debt, they could easily access of 2 million of ofple he of ppp for total 20. They needed to have the requisite cost structure to do that. Switch over to main street, two companies under common control, 7,000 employees each, each with 20 million in 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 employeeom an perspective, you got 14,000 employees that have access in total to a 50 million loan. Had 400n ppp, you employees that had access up to 20. It is really poorly designed, and at doesnt make any sense for these kind of companies to have to run the really complicated, and really severe 7 a regulations that are really focused on making sure companies with more than 500 employees dont have a access to a 7a loan. Mr. Hill thats helpful. I appreciate that. Ms. Mills, turn to you. First, echo my comments of our fellow commissioners about the condolences. So many of our families across the country have really suffered in this pandemic. We have to remember when we are doing our oversight work, the first and foremost, this is a Public Health crisis that has led to an extraordinary economic crisis. And so, i appreciate her, she made in the care you have for all of your members and your advocacy today. And i also agree with senator toomey that the main Street Program is not the solution to all challenges in this pandemic either. And that is why the unemployment compensation, the direct payments to our families, the forbearance and mortgage rental payments, the payment for leave, the payment for testing, 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 of these Work Together to minimize the impact on our families, and help them get through the pandemic, and also help get our economy back to full capacity. ,n looking at your testimony though, 74 of cmbs, or less than 20 million. In my district, Asian American hotel owners are the classic, Small Business entrepreneurs. 50 ofderstand it, over hotel rooms are owned by these kinds of classic, Small Business entrepreneurs across the country. And they are worried about getting october property tax payments in arkansas. I know one of their concerns. Because they want to bring their stuff back. They want to bring their staff back amends or it they want to bring their staff back commiserate with the economy reopening. It is mostly peoples retirement accounts. And so, they are all benefited by trying to get capital and of the industry, and get people hired back and reopen. So, im empathetic to your testimony. I thank you for being here very much and for your comments, but i think the main Street Programs mission is to try to get our Hotel Hospitality opened , and i hope we can find a structure that does that. Let me yield back. Turn to my friend, mr. Ramamurti for five minutes. Mr. Ramamurti thank you, mr. Chairman. Mr. Bohn, thank you for your testimony. I want to ask you the same type of questions i asked ms. Mills earlier. You come at this from a different perspective. You run a midsized company. Your organization represents a lot of such companies. 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 correct. Mr. Ramamurti its in your testimony that the Program Needs to be changed. Can you describe the kinds of ideas you have in mind for that . Mr. Bohn we list a couple of ideas and there that start with the removal of the exclusion. Reducing the evida requirements to make it more appealing to a broader class, particularly in the lower middle market, and we talk specifically about the loan size, and bringing the loan size down even 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 restrictions on shareholder payouts and executive compensation. Is that right . Mr. Bohn correct. Mr. Ramamurti i agree with you on the diagnosis here which is that the main Street Program hasnt really helped anybody so far very much. And it is also unlikely to help a lot more companies without significant changes. But im concerned about the proposed solution that your 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 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. So i guess my question is, why should the American People be willing to give billions of dollars to potentially Failing Companies i can use that money to pay shareholders and executives, while firing workers . Mr. Bohn i think when we talk about things like whether or not the company was at a higher risk prior, if you consider a large middle, whichwer are often times familyowned businesses, it can be a misleading indicator because a expensese costs and roll through salaries and other types of things. At the end it is not something , significant. We see this a lot of times when purchases and acquisitions are made where there is a lot of debate and discussion over what is published through their regular financials. I think when we are looking at that, we tend to eliminate the opportunity for companies, particularly familyowned companies in that lowermiddlemarket who at the end of the day, their margins are very, very small. They have been successful for years. They 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, comes directly from some of our members why they are not interested. What their particular reason for being interested. I cant go to that intent. I will say that if there is anything that limits their ability to eventually settle the company upon paying the loan or to derive the benefits they have built for building a company over time, i think that is going to the lowly 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 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 its 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 stepped out of more loans are not going to solve this crisis. Struggling small and Midsized Companies cant take on more debt right now. So the only tool in the feds belt is the wrong this program one. 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. It is time for congress to step back in so we can actually save small and midsized businesses, and when it does, it needs to for workers,tance and not hand money to executives and trust them to take care of workers. Thank you, mr. Chairman. Mr. Hill the gentleman yields back. We turn to congresswoman shalala for five minutes. Mischa layla ms. Shalala thank you very much. One of the problems with the loan program seems to be including this program, which clearly has flaws in it. Is that loans protect the health care of executives, but not of workers. Nothing that we have done, Unemployment Insurance to support workers, protects their health care. Unless these hotels, for example, furlough people and keep their health care. So fundamentally, what the fed has done will protect the health care of a lot of executives, but not there is nothing that we have done particularly in the Unemployment Insurance system that protects the Workers Health care. I think that was one of your points. Ms. Mills yes. Thank you. That is correct. That the extension of the wages that the congressman mentioned has been appreciated, although it is now ending. That is problematic. But there has not been an extension of health. So even in a case where we have some health care negotiated, Companies Like the fountain bleu are not abiding by that. So, that is absolutely correct. Ms. Shalala three of the five facilities require that main 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. Credit come inor at this point basically has to be negotiated with those existing lenders. Many of whom are not bank lenders. Complex then becomes a process in terms of an intercredit agreement. I know that has certainly put off some borrowers in terms of trying to go through that process when they may not receive the consent from the other lenders, who may just not have the same incentives as the originating bank. So it is a problem, and it is complex. Ms. Shalala thank you. I have a question for mr. Bohn. Inr written testimony 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. You have some specific recommendations in that regard . Mr. Bohn thank you, congresswoman shalala. As im sitting here in orlando, florida, thank you for representing our great state here on the commission and in general. So yes, i think that one of the things we heard back from our survey was that there was, unlike the ppp, where there was significant awareness about the various provisions and tenets of it, there was a lot more ambiguity and misunderstanding. Some of that related to how long it has taken for the program to come together. Some of that because there was a little bit of misunderstanding , thinking it would be different than ppp because it was loans and not carve out. 501cs are an affiliated group. I think there is an opportunity here regardless where the changes are made to make sure that the program is much more clearly communicated on a wider basis. We are certainly willing and able to help with that in any way we can. Ms. Shalala do you have a specific recommendation on the loan size and deleverage test . Thehe loan size and leverage test . Mr. Bohn i have a specific recommendation on the loan size that it should come down to closer to 50,000. Heres what makes me say that. There are a number of smaller familyowned businesses in the middle market i have spoken to recently right here in orlando who have said, look, we do not need 250,000. But we do need 50,000 or 75,000 in order to prepare what we think is going to be a longer haul to deal with the fallout from covid. Whether thats Safety Equipment or how we run our operation, but 250,000 is too large of a haul for them. Not wanting to get out over their skis financially. Yes this specific recommendation , on that. Yes, maam. Ms. Shalala thank you. I yield back. Mr. Hill thank you, congresswoman. In now, we will yield and now, we will yield to senator toomey for five minutes. Senator toomey thank you very much, mr. Chairman. This has been a very, very helpful and informative. I really appreciated testimony of all of the participants. Is way premature to come to the conclusion this is all a failure. I think there are definitely some improvements we ought to look at. And there might be in new versions of main Street Programs we ought to template. We talked about affiliation rules which need to be changed. There may be terms that ought to be modified. I am interested in something that would be more acidbased, rather than incomebased, but lets keep in mind, took a long time to get this up and running. That was always going to be the case because of the nature of the complexity of doing this kind of lending. There has been a recent acceleration in use. If acceleration continues, we may see significant pickup. Mr. Bohn makes the argument that there is a highlevel of unawareness or low level of awareness about this. There was a lot we could do to remedy that. Which could result in more participation. Finally, this leads to my question. You know, i would argue that the Corporate Bond programs, which are not the ones were here to talk about today facilities that , but set up the Corporate Bond buying programs are enormously factssful, despite the that the feds purchase very, very bonds. It was the standing about the program, the existence of the program, that allow the private market to operate, and operate actually at an alltime record volume, after having been frozen. Thats a remarkable Success Story despite the fact that there was not a lot of history. They gets me to my question. Maybe i shouldve acid at the any of you might have a thought on this, but how shall we best determine objectively the extent to which credit needs are being met on not being met . I have heard anecdotally from Pennsylvania Companies in pennsylvania banks that when this pandemic resulted in a shut down, there was a massive draw down on existing credit lines. People piled up as much liquidity as they possibly could. After little time passed, they started to fade out some of those balances. But you know, we see bankruptcy filings. At that point, it is too late. What should we be looking at on a daytoday basis . What metric shall we use to determine how significant the unmet credit demands are in this space. Ms. Anderson, maybe you could leave it off . Ms. Anderson i think you make a by and larged that credit amounts for Many Companies are being met. Lent overon plus was the course of three months. Since then, we have seen 200 billion in that lendings best be repaid. I think you are right. Businesses are paying down some of that liquidity. Banks, the our demand for credit has lessened. They are not getting millions of inquiries from their customers, new or existing. I think that really says something. They are trying to see who needs credit or other solutions. Temporary is a liquidity credit need, and the banks are providing that. That is the solvency need, is not something that banks provide to companies. Senator, i think one simple way to figure out if there are unmet credit needs is to ask the banks how many main street loans have been requested by borrowers that the banks have rejected . If can capture the data you can capture that data, you gain get a really good idea because im aware probably 100. It is not the banks fault. We have a Restaurant Group in programand the bank says i cannot take anymore restaurant exposure in my portfolio. They not approaching it differently or relaxing underwriting standards. Data,dont capture that you cannot spread it out. Data isere a way that being collected systematically so we can access that, or does not exist in a centralized place . Work with our members to get you Additional Data on that. Our members who are active in the program, they are receiving 5000 inquiries for the main street loan program. In upwards of three quarters of those actually dont understand the program and think it is a Grant Program. Ofis really not a highlevel inquiries even. Thanks very much. My time has expired. I want to thank our witnesses again, both panels, excellent discussion. I want to thank our commissioners for their participation and for their thoughtful questions. On behalf of the commission, in addition to thanking the witnesses, lets take the staff as well for their preparation lets think the staff as well for their preparation for putting this together. This meeting is adjourned. This week, cspans the contenders looks at the lives of 14 men who ran for the presidency and lost would change political history. Watch the contenders this week at 8 00 p. M. Eastern on cspan. Starting tonight, 1844, president ial candidate henry clay. The perjury case against President Trumps former National Security advisor Michael Flynn will be reheard by the full u. S. Court of appeals for the d. C. Circuit judge tuesday. The panel of 10 judges will decide whether a Federal District court judge must dismiss the charges against Michael Flynn as recommended by the justice department. Here the case live, tuesday at 9 00 at 9 30 eastern on cspan, or cspan. Org, or listen live with the freeseas can radio app. We take you live now to the white house where President Trump is about to hold a News Conference with reporters. Advocating for resources in trying to push a pro help agenda based on science. Host the number of reported coronavirus cases in this ,ountry past the 5 million mark doubling of u. S. Cases since the end of june. The last million happening in just the last 17 days. Your reaction to that milestone . Guest the challenge is that a lot of this is preventable. We are not paying attention to what we know works. We look at other nations in the world, they have not been able to get their hands around it they have been able to get their hands around it, and we have not. Host how do we keep from doubling it by fall or sooner . Guest wear our mask, wash, keep your distance, doing lots of testing, and good Contact Tracing. That is the way you get your hands around this epidemic. Every nation in the world has done this effectively has follow that formula. Host you talk about other nations in the world. We hit the 5 million milestone. India is second in the world in terms of most infections at 3 million, well behind the united states. Do we have more infections in this country because we do more testing in this country . Testing identifies people who are infected, but you are infected because you are infected. You are infected because this is a disease you passed persontoperson, and we have more infections, not necessarily because we do more testing. We are not doing as much testing per capita as other nations. Host how she would be doing our testing and would changes would you make in the system if you were in charge of it . Work if i could make this , we would have a robust testing , which would allow anyone who wants a test, get a test, but most and poorly, the results would come back within 24 hours so you could do robust Contact Tracing. To that inform people stayathome state from others. The only way you can do this is by a robust testing system. Host what you want to see in the next Coronavirus Response legislation . Guest boy, we have to put a lot more money on the table and start putting dollars in the help state and local so they dont start laying off people. Many of the people chasing this to get laid off because the states are running out of money. I want to see us more rapidly increase our testing capacity. We only do that with more resources. By the way, informed, coordinated, National Leadership is essential to make that happen. Host in terms of the money, are we talking 3 trillion, 1 trillion . We have heard all of those tossed around in recent weeks as these negotiations have gone on. Guest the amount of money on the hill right now is closer to 3 trillion than the 1 trillion number, but the fact is, we need to get more money out there. We are talking to the executive director of the the american Public Health association, talking to him a day after the u. S. Case count soared past 5 million in the country. If you want to join a conversation this morning, the phone lines are open. It is 202 7488000 if you live in the eastern or central time zones. If you live in the mountain or pacific time zones. And then a special line set aside for medical professionals, 202 7488002. We would love to have you join us as well in this conversation. As people are calling in this morning, you talk about folks chasing the virus. Can you tell me about what that means . Are we talking Contact Tracing . If so, how much of that is going on and states around the country . Contain a virus like this, you identify people who are infected, you talk with them, and you of course give them the health care they need if they need health care. Then what you do would you find out who they have been in contact with. Then you advise those people on their best medical option. And you do that until you contain the disease. Someone who was been exposed, either if they are not symptomatic, needs to quarantine themselves, meaning staying home for a couple of weeks. If they are sick, they need to be isolated and they may need medical care. That is a process that has been going on a few hundred years. It works. It is not rocket science. But it has been a real challenge for our nation to adopt. Host we have seen the pushback onthe past week and months facial coverings in face mask. How much pushback to your folks get when it comes to Contact Tracing . How will your people to say, here is the list of people who i have been in contact recently, here is everyone i have talked to face to face . Guest we made wearing a mask cool. You know . First becausehat they work. Contact tracing is difficult. If you call me on the phone and i dont know who you are and you say, where were you yesterday and who were you with . Im probably not going to tell you. There is an art to doing that. There really is an art to doing that, and the real challenge is getting people to understand by the way, that there are state and local Health Departments that it been doing that for years for tuberculosis so we know how to do that, but we dont have enough people well trained to basically build that confidence to a group of people who can pick up the phone and call you and me talk with you and get you to share that information. Host explained that art. If you are making that call right now, how would you do that . Guest i would say, look, im dr. Benjamin from the health department, and you were exposed to someone who had covid19. Ist we would like you to do if you have any of these following symptoms, we think you need to talk to your doctor, and we also want you to work with us to see if we can identify anyone else you have been around who may be exposed so you can help them from getting sickens from getting sick and save their lives. I know you may not want to share that information with me, but i assure you this information will be confidential, and we wont share with anyone outside covid health authorities. You will not be arrested. You will not be hunted down or put out of the country. We want you to help us help other people. If you dont want to give me their names, ok. Here is who you call he call your friends, or the people you have been around in here is my number. You can have them call me. Host how much of a response do you get to that . Do you generally get most people working with you when you put that in that position of being a helper in this process . I have 5050 echo guest not done this for many years. But personally. As a very do that, junior person, it works. I contain that people i talk with, you use that kind, it works. Georges benjamin here to answer your questions as a u. S. Case count soars past 5 million in the country. Nancy is in altoona, pennsylvania up first this morning for you our with dr. Benjamin. Caller good morning. My question is, we have we were behind in our area, i believe for the testing. Ok . They did wrap it up from just one place with the doctors order that you could go to a medic express without the doctors order. What hasseems like happened when the testing are tracing wascontact that there really. Asnt much happening there was somebody that lives and it took two weeks to get that answer. When i call the department of health, they said they did not have enough Contact Tracing people. So we are all talk and not forgh action to be strict putting these things in place. Says,d to do what the cdc and what is happening as we are talking about it, we are not strict on the laws what do they call it . They are not laws for mass. We do not they are not laws for masks. It is all talk and it is not happening and we are rising because we are not doing what we are saying. As far as the masks when people say things like, you should wear a mask unless you have some kind of a health issue that prevents pres. Trump thank you very much. I thought i would start by talking about some mailin revealed,t just was half a million incorrect absentee ballot applications were sent out all across the including toinia, many dead people. This was an unprecedented mailing flub that heightened concerns about the integrity of expanding mailin voting, and mailin voting efforts is a