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67–803 2011

THE DODD-FRANK ACT: IMPACT ON SMALL 

BUSINESS LENDING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, CAPITAL 

ACCESS AND TAX 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 16, 2011 

Small Business Committee Document Number 112-022 

Available via the GPO Website: www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

Page 

OPENING STATEMENTS 

Walsh, Hon. Joe ....................................................................................................... 1 

Schrader, Hon. Kurt ................................................................................................ 2 

WITNESSES 

Mr. Thomas Boyle, Vice Chairman, State Bank of Countryside, LaGrange, 

IL ........................................................................................................................... 4

Mr. Mark Sekula, Executive Vice President, Chief Lending Officer, RandolphBrooks Federal Credit Union, San Antonio, TX ................................................ 6 

Mr. William Daley, Legislative and Policy Director, Main Street Alliance, 

Washington, DC ................................................................................................... 8 

Mr. Greg Ohlendorf, President and CEO, First Community Bank and Trust, 

Beecher, IL ........................................................................................................... 9 

APPENDIX 

Prepared Statements: 

Mr. Thomas Boyle, Vice Chairman, State Bank of Countryside, LaGrange, IL ..................................................................................................... 25 

Mr. Mark Sekula, Executive Vice President, Chief Lending Officer, Randolph-Brooks Federal Credit Union, San Antonio, TX .............................. 35 

Mr. William Daley, Legislative and Policy Director, Main Street Alliance, 

Washington, DC ............................................................................................ 48 

Mr. Greg Ohlendorf, President and CEO, First Community Bank and 

Trust, Beecher, IL ......................................................................................... 52 

Statements for the Record: 

Mr. Peter J. Haleas, Chairman, Bridgeview Bank Group ............................ 60 

National Association of Small Business Investment Companies ................. 62 


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THE DODD-FRANK ACT: IMPACT ON SMALL 

BUSINESS LENDING 

THURSDAY, JUNE 16, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, SUBCOMMITTEE ON ECONOMIC GROWTH, TAX AND CAPITAL ACCESS, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Joe Walsh (chairman 

of the subcommittee) presiding. 

Present: Representatives Walsh, Chabot, Coffman, Mulvaney, 

Schrader, Clarke, Cicilline, and Peters. 

Chairman WALSH. Good morning. I call this hearing to order. 

Welcome. 

I would like to start today’s hearing by thanking everyone for attending. Specifically, I would like to thank our distinguished panel 

of witnesses for taking time out of their busy schedules to participate in what I believe to be a critical issue facing lenders as they 

work towards providing capital for our nation’s small businesses. 

On Wednesday, June 8, in response to a question from JP Morgan Chase CEO Jamie Diamond at the Bankers Conference in Atlanta, Federal Reserve Chairman Ben Bernanke stated that there 

has never been a study that examined the impact of the new financial regulatory structure on economic growth. For many of us in the 

room today and on this Subcommittee, this statement is very troubling. As we work to grow our economy and create jobs, it is critical 

that in everything we do we consider how policies made in Washington will impact small business owners that are struggling to 

make their businesses successful. 

Regulations always require a careful balancing act, and here we 

have two very important concerns to worry about. First, we must 

make sure that the users of financial products are protected. Small 

business owners and consumers take advantage of a wide variety 

of financial products to fund their business. For business owners to 

succeed, they need to have faith that their financing options will 

continue to be available when they need them and that their 

money is secure. Customers also need financial products to purchase the goods and services that sustain small business. 

On the other hand is the burden of regulation and compliance 

costs associated with oversight. A regulation that chokes off all economic activity is not meeting its purpose. If banks stop lending or 

cut back dramatically in response to regulators, the regulation 

itself must be reconsidered. While there is always going to be risk 


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in the financial sector, we need to make sure to manage that risk 

responsibly so that banks are secure and small businesses have 

confidence that they can obtain the credit necessary to sustain or 

grow their business. We cannot afford a system where banks are 

afraid to take risks on small businesses for fear of regulatory reprisal. 

Today we will discuss the new financial regulatory structure that 

was created by the Dodd-Frank Act. This new law responded to the 

perceived weakness in the former regulatory regime that left many 

lines of business without supervision, allowing systemic risk to develop. We know that the Dodd-Frank Act is over 2,300 pages. Within these pages are requirements for 243 new rulemaking actions 

and 60 studies. According to GAO, it will cost a billion dollars just 

to implement this new law. It will drain 27 billion job-creating 

funds from the economy over 10 years and require hiring more 

than 2,600 new, full-time government employees. 

What we do not know, however, is the overall economic impact 

of this law and what it will do to small business job creation in this 

country. To help us grasp the impact of the new law we have a distinguished panel of witnesses who are on the ground dealing with 

the impact of this new law every day and working to prepare for 

the new rules coming down the pike. I am extremely interested to 

hear what these witnesses have to say about how they are dealing 

with this law and how it is impacting their small business lending. 

With that, I happily yield to Ranking Member Schrader for his 

opening statement. 

Mr. SCHRADER. Thank you, Mr. Chairman. 

Less than three years ago our financial system was thrown into 

disarray with Lehman Brothers filing the largest bankruptcy in 

American history. In years since, our private and public sectors 

have taken unprecedented steps to pull us back from the brink and 

return our economy to a stable path. In the process we have 

learned a great deal about what caused the crisis and it appears 

that for decades I think, as we all know, regulators allowed an 

overabundance of high risk credit to grow unchecked. And in short, 

our entire financial system was flawed and the reprised regulatory 

framework definitely being called for and enacted in the DoddFrank bill. 

While the legislation itself was directed primarily at the financial 

services industry, we are concerned about its impact and ramifications for all small businesses. It is imperative that as the statute 

is translated into meaningful regulations that we carefully consider 

how these changes might affect our small banks, our small credit 

unions, and the small business community in general. Community 

banks and credit unions comprise over 90 percent of our banking 

industry and significant efforts were made in the Dodd-Frank bill 

to mitigate the adverse effects this new regulation might have on 

them. 

Indeed, I hope that in many respects small banks will benefit 

from the new law, with lower premiums for FDIC insurance, revised capital requirements, more freedom to open branches across 

state lines, community banks should see hopefully some reduced 

operating costs. You will correct me, of course, if that is not being 

achieved at this stage. 


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Nonetheless, small financial institutions will have their business 

models, I think, profoundly changed as a result of these regulations. We are hearing pushback already. We hear the higher compliance costs that are imposed on small firms that do not have the 

large capacity that bigger firms do to deal with those compliance 

costs. It is also undeniable that small lenders bear less responsibility, I think, for this financial crisis and should not bear the 

brunt of all these new regulations, so we want to make sure we get 

it right. 

The new regulations created by the Consumer Financial Protection Bureau will be subject to the Regulatory Flexibility Act. This 

new regulator also becomes just the third agency to be subject to 

the Small Business Regulatory Enforcement Fairness Act. We are 

concerned about how it views its mission and how it will impact 

small businesses and small banks and small credit unions. 

Businesses on Main Street also rely on the healthy functioning 

of our financial system. Perhaps no other group has been more affected by the collapse of Wall Street and the big investments banks 

and its trickledown effect to the smaller banks than small businesses on Main Street. We still find small firms at previous hearings struggling to find credit. Medium and larger firms are now 

able to access credit. We have to be careful that these new regulations do not exacerbate the current capital shortage that we already have out there. 

Changes to our laws, I think, are overdue. There is this tendency, however, to overregulate and overrespond to the crisis. I need 

to hear feedback from our distinguished panel to make sure we do 

not go down an overcorrection path. 

Both lenders and borrowers and small businesses have a lot at 

stake with this financial reform. The Dodd-Frank Act is going to 

affect every sector of American economy and I hope that if done 

properly as a result of your feedback and the work we will do to 

continue to improve the Dodd-Frank Act, that it will create more 

jobs and more credit will flow. 

So I also want to thank the witnesses for being here and sharing 

their wisdom with us. I look forward to the hearing, Mr. Chairman. 

Chairman WALSH. Thank you, Mr. Schrader. 

A couple rules. If Committee members have an opening statement prepared, I ask that they be submitted for the record. I would 

like to take a moment to explain the timing lights for you. You will 

each have five minutes to deliver your testimony. The light will 

start out as green. When you have one minute remaining, the light 

will turn yellow. Finally, it will turn red at the end of your five 

minutes. If you go over your five minutes, someone will come in 

and escort you out of the room. I am just kidding. 

I ask that you try to keep it to that time limit but will be as lenient as possible. 


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STATEMENTS OF THOMAS BOYLE, VICE CHAIRMAN, STATE 

BANK OF COUNTRYSIDE; MARK SEKULA, EXECUTIVE VICE 

PRESIDENT, CHIEF LENDING OFFICER, RANDOLPH-BROOKS 

FEDERAL CREDIT UNION; WILLIAM DALEY, LEGISLATION 

AND POLICY DIRECTOR, MAIN STREET ALLIANCE; GREG 

OHLENDORF, PRESIDENT AND CEO, FIRST COMMUNITY 

BANK AND TRUST 

Chairman WALSH. Before we get to the witness introductions this 

morning I would like to first mention that there has been a great 

deal of interest in today’s hearing from people who could not join 

us today as witnesses. So I would like to make sure that the hearing record reflects their views. 

I received a letter from Peter Haleas as chairman of Bridgeview 

Bank Group. Peter is a constituent of mine from Illinois, so I am 

pleased that he wrote to share his view on this important issue. So 

I ask unanimous consent that this letter be made part of the record 

for this hearing. 

Without objection, so ordered. 

[The statement of Mr. Haleas follows on page 60.] 

Chairman WALSH. Our first witness today is Thomas Boyle, vice 

chairman of State Bank of Countryside in Countryside, Illinois. I 

am very pleased to have someone from my home state of Illinois 

here today. Prior to Mr. Boyle’s current role as vice chairman, he 

was the president/CEO of the bank from 1997 to 2009. State Bank 

of Countryside opened in 1975 and operates from six locations, including its main headquarters in Countryside, plus branches in 

Burbank, Darien, Orland Park, Chicago, and Homer Glen, Illinois. 

Mr. Boyle is testifying on behalf of the American Bankers Association where he has served a variety of leadership roles. Tom has 

also served as a director of the Illinois Bankers Association. Mr. 

Boyle, we look forward to your testimony. 

STATEMENT OF THOMAS BOYLE 

Mr. BOYLE. Thank you. Chairman Walsh, Ranking Member 

Schrader, and members of the Subcommittee. My name is Thomas 

Boyle. I am the vice chairman of the State Bank of Countryside in 

Countryside, Illinois, and I thank you for the opportunity to testify 

on behalf of the ABA. 

These are very important issues for thousands of community 

banks that work hard every day to serve small businesses and our 

communities. The health of the banks and the economic strength 

of our communities are closely interwoven. A bank’s presence is a 

symbol of hope and a vote of confidence in the town’s future. As 

a family business, State Bank of Countryside understands the concerns faced by our customers’ personal and business lives, and we 

believe our success is tightly linked to their success. Our motto 

even reflects this, the family-owned bank for families and their 

businesses. 

Banks are working very hard to make credit available in their 

communities. Efforts are made more difficult by hundreds of new 

regulations expected from the Dodd-Frank Act. Although these new 

regulations are inevitable, the sheer quantity will overwhelm many 

community banks who are already facing difficult times due to the 


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economic conditions in many parts of the country. Second guessing 

by bank examiners makes this situation worse yet. 

Let me give you a few examples of how Dodd-Frank will negatively impact small business lending. First, new regulations limit 

access to capital. Capital is the foundation upon which all lending 

is built. Having sufficient capital is crucial to lending and to absorb 

losses when loans are not repaid. In fact, $1 worth of capital supports $10 in loans. 

In the past two years, bank regulators have requested greater 

levels of capital, taking away precious resources that could be used 

for lending. In conversations with fellow community bankers, I 

often hear how regulators are pressing banks to increase capitalto-asset ratios by as much as four to six percentage points above 

the minimum standard. Dodd-Frank limitations on capital sources 

have made access to capital even more difficult. The lack of access 

to capital has caused many banks to become smaller in order to 

maintain specific capital ratios. The result, loans become more expensive and harder to get, relieving the increased regulatory demands for more capital will help banks make loans needed for our 

nation’s recovery. 

Second, Dodd-Frank increases uncertainty for banks in the turn, 

raising credit risk, litigation risks and costs, and leading through 

less hiring or even a reduction in staff. The uncertainty makes 

hedging risks more costly and restricts new business outreach. All 

of this translates into a less willingness to make loans and worse, 

increases the likelihood of a massive consolidation. 

Of particular concern is the additional compliance burden expected from the Bureau of Consumer Financial Protection. This bureaucracy will impose new obligations on community banks that 

have a long history of serving consumers fairly in a very competitive market. The Bureau should focus its energies on supervision 

and examination of nonbank financial providers. This lack of supervision of nonbanks contributed mightily to the financial crisis. We 

urge Congress to ensure that this focus on nonbanks is a priority 

of the Bureau. 

Third, consequences for small businesses and the entire economy 

are severe. Costs are rising, access to capital is limited, and revenue sources have been severely cut. It is difficult to meet the 

needs of local businesses when we are dealing with regulatory overreaction, piles of new laws, and uncertainty about the government’s 

role in the day-to-day business of banking. This will undoubtedly 

lead to a contraction of the banking industry. We must work together to ensure that banks meet the needs of small businesses 

and their communities. 

Thank you for the opportunity to present the views of the ABA. 

And I am happy to answer any questions. 

[The statement of Mr. Boyle follows on page 25.] 

Chairman WALSH. Thank you, Mr. Boyle. 

I would now like to introduce our next witness, Mark Sekula, executive vice president and chief lending officer at Randolph-Brooks 

Federal Credit Union. Mr. Sekula has 25 years of lending experience covering credit cards, mortgage, commercial, indirect lending, 

and collections. Mark and his team currently manage a $200 million commercial portfolio that includes SBA lending. In 2009, RanVerDate Mar 15 2010 03:55 Aug 30, 2011 Jkt 067803 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\B803.XXX B803

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dolph-Brooks was recognized as the SBA Credit Union Lender of 

the Year. Mr. Sekula is testifying on behalf of the National Association of Federal Credit Unions. Welcome. You have five minutes 

to present your testimony. 

STATEMENT OF MARK SEKULA 

Mr. SEKULA. Good morning, Chairman Walsh, Ranking Member 

Schrader, and members of the Subcommittee. My name is Mark 

Sekula, and I am testifying today on behalf of NAFCU. I serve as 

the executive vice president and chief lending officer for RandolphBrooks Federal Credit Union headquartered in Live Oak, Texas. 

NAFCU and the entire credit union community appreciate the 

opportunity to participate in this discussion regarding the DoddFrank’s impact on small business lending. Despite the fact that 

credit unions are already heavily regulated and were not the cause 

of the financial crisis, they are still within the regulatory reach of 

a number of provisions in the Dodd-Frank Act, including all credit 

unions being subject to the regulations and rulemaking of the Consumer Financial Protection Bureau (CFPB). This means that credit 

unions, like mine, are facing a host of new compliance burdens and 

costs. 

As it relates to our business lending, the creation of the CFPB, 

the breadth of its power and the costly regulations it will undoubtedly prescribe will impact how we allocate our resources for our 

membership. For example, Section 1071, which has not received 

much attention, creates a data collection system for small business 

lending, similar to the Home Mortgage Disclosure Act for financial 

institutions. Under Section 1071, every financial institution will 

need to inquire whether the applicant is a small business or 

women- or minority-owned. While well intentioned in its own right, 

it is yet another compliance burden emerging from the DoddFrank. 

Furthermore, given that credit unions serve a defined field of 

membership, individual credit unions’ information in comparison to 

other lenders could be skewed. 

Credit unions are chartered to serve their members. Thus, regulatory data collection that is intended for institutions that can 

serve anyone, should not be imposed on credit unions. 

The financial institution must also maintain a record and report 

it to the CFPB. The information must be made public in accordance 

with the CFPB regulations. These provisions are effective on July 

21, yet implementing regulations will not be issued until after that 

date, leaving financial institutions with no compliance guidance on 

the effective date. While the CFPB has indicated that compliance 

will not be mandatory on July 21, Congress should consider delaying the effective date of this provision until such time as implementing regulations take effect. 

The Dodd-Frank Act also includes a section, Section 1100(G) that 

says the CFPB must evaluate the impact that its actions have on 

small entities. We believe that credit unions meet the definition of 

a small entity. We would urge Congress to ensure that the CFPB 

abides by this congressionally mandated standard and does not try 

to narrow the definition of small entity in the future. The environment around regulatory reform has led regulators to make changes 


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that impact credit unions and may cause them to tighten their 

lending to small business. 

At Randolph-Brooks, our SBA loan volume has diminished in recent years, partly due to the economic downturn but also because 

of the inconsistent nature of SBA examinations. On one hand the 

SBA encourages granting small loans to qualifying businesses, yet 

on the other, the agency states that a lender’s status with the SBA 

can be rescinded if these higher risk loans default. The SBA provides a lender portal and a lender score from the SBA’s credit risk 

assessment model. Our score is derived by averaging other lenders, 

mostly large 7A loans with our small SBA express loans. 

The blending of all lenders with varying portfolios to arrive at a 

score dilutes the true picture as one cannot compare a small SBA, 

unsecured working capital line of credit with a large SBA loan secured with commercial real estate. The two loans should not have 

the same evaluation process. If this does not change, it may eventually drive all small loans from the lenders’ portfolios. 

In addition to the SBA’s scoring problem, practices by other regulators have had an impact as well. Last year the National Credit 

Union Administration (NCUA), issued a rule to amend the agency’s 

Regulatory Flexibility program known as RegFlex as it relates to 

business lending. The new rule requires a personal guarantee for 

all credit union member business loans (MBLs). Unfortunately, this 

proposal will make credit union MBLs significantly less attractive 

to members. 

NAFCU believes and has told the NCUA that requiring a personal guarantee for all MBLs is unnecessary given the underwriting policies that RegFlex credit unions already have in place. 

Currently, there is a divide between Congress, the administration, 

and other policymakers that wish to spur lending and the regulators that oversee financial institutions. On the one hand, we sit 

in this hearing today discussing ways to encourage small business 

lending. On the other hand, regulators explicitly create barriers to 

new lending by regulation, the exam process, and implicitly warn 

credit unions against making any loans that may be deemed risky. 

Forced to choose between these two conflicting objectives, Randolph-Brooks must, of course, follow the directive of our regulators. 

In short, any congressional goal to promote lending will never be 

successful when the regulators are not on the same page. 

I thank you for the opportunity to appear before you today on behalf of NAFCU and would welcome any questions that you may 

have. 

[The statement of Mr. Sekula followson page 35.] 

Chairman WALSH. Thank you. I would again like to recognize 

Ranking Member Schrader, who is going to introduce our next witness. 

Mr. SCHRADER. Very good. Thank you, Mr. Chairman. 

Bill Daley is a legislative and policy director for Main Street Alliance, a national network of state small business coalitions that 

give, hopefully, small business owners a voice in all this discussion, 

particularly those small businesses that are busy trying to put food 

on the table and create jobs and unable to come to Washington, 

D.C. to testify. 


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Prior to joining Alliance, Mr. Daley worked on the staff of the 

Washington State legislature, numerous state agencies and served 

two years as mayor of Olympia. So you have been in the trenches, 

sir. Thanks for coming, Mr. Daley. I look forward to your testimony. 

STATEMENT OF WILLIAM DALEY 

Chairman WALSH. Congressman Schrader, members of the Committee, thank you very much for the opportunity to testify on behalf of our small business owners. We represent organizations in 

14 states. 

Our members supported the passing of Dodd-Frank, particularly 

some provisions of it were very important to us. Our interest is essentially economic. When the Great Recession hit, small businesses 

were among its major victims. As of late 2009, small business job 

losses are responsible for about two-thirds of the employment decline that occurred as the recession came, and small business bankruptcies nearly doubled in March to March 2008–2009. We are still 

suffering from a significant loss of our customer base held down by 

high unemployment rates and the foreclosure crisis. We do not 

want to go through this again. It is important that this law be implemented and we do not want to see it undermined as the effort 

to make it work goes forward. 

We commented on a couple of specific issues about Dodd-Frank. 

First, whether or not the Act causes a credit crisis. Our small businesses hear a statement like that and they kind of bristle. We do 

have a credit crunch in small businesses. Credit dried up well before Dodd-Frank, and credit dried up because Dodd-Frank was not 

in place. We had a meltdown that could have been mitigated or 

prevented. 

Blaming the act for a crisis-induced credit crunch confuses cause 

and effect. We lost our customer base, and until those customers 

begin to return, there will be a credit crisis for small businesses. 

Second, Dodd-Frank is a source of uncertainty in the economy. 

Surely the implementation of any act of Congress causes some uncertainty and something this big and complex will cause uncertainty. But we think that a period of uncertainty is important to 

go through in order to have certainty in the future about the credit 

that we can obtain. And Dodd-Frank provides protections for that. 

So we are tolerant of a little uncertainty in the short-term to get 

certainty in the long-term. 

Will the Act’s new reserving requirements limit small business 

capital? I think it remains to be seen whether that will be the case, 

although you have heard some concern about that from the testimony so far. The improvements in the requirements to protect 

against risk that are associated, however, with these new reserving 

limits are important. 

Let me parenthetically comment about the availability of capital. 

The financial institutions’ reserves now are at levels even the Wall 

Street Journal calls eye-popping. There was last year 1.2 trillion in 

excess reserves beyond amounts required by law. That increased in 

the first quarter of this year by $225 billion. And the money is sitting in the Fed gaining interest at a .25 interest rate. Putting that 

investment back into the economy would help us tremendously. 


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And then, are new data requirements a benefit to small businesses? Again, I think I have to be real clear about it. Our folks 

do not like paperwork. Thank you for getting rid of the 1099 provision. There is a considerable flexibility in the Act about how the 

rules are imposed with regard to this requirement and we think it 

remains to be seen just how much of the burden will fall on the 

small business, how much will fall on the lending institution. 

And then I want to close by noting some features of the DoddFrank that our members find especially attractive. Swipe fever 

forms are a benefit to our small businesses. They will help save us 

some money. We like the Consumer Protection Bureau. We are all 

financial customers ourselves and our members have been harmed 

by attractive but risky products. 

Dodd-Frank helps restore focus on traditional lending through 

limits on proprietary trading. In short, Dodd-Frank is a good thing 

for small businesses, and we hope that its progress will not be hindered. 

[The statement of Mr. Daley follows on page 48.] 

Chairman WALSH. Thank you, Mr. Daley. 

The final witness that I have the pleasure of introducing is also 

from Illinois, Mr. Greg Ohlendorf. Greg is president and CEO of 

First Community Bank and Trust in Beecher, Illinois. First Community Bank and Trust specializes in small business lending, including commercial real estate. Mr. Ohlendorf is testifying on behalf of the Independent Community Bankers of America where he 

serves as chairman of their Policy Development Committee. 

Mr. Ohlendorf, you have five minutes to present your testimony. 

STATEMENT OF GREG OHLENDORF 

Mr. OHLENDORF. Chairman Walsh, Ranking Member Schrader, 

and members of the Subcommittee. I am Greg Ohlendorf, president 

and CEO of First Community Bank and Trust, a $147 million asset 

community bank in Beecher, Illinois. 

I am pleased to be here today to represent the nearly 5,000 members of the Independent Community Bankers of America. Thank 

you for convening this hearing on the Dodd-Frank Act and its impact on small business lending. 

Community banks are prodigious small business lenders. In his 

recent speech before the ICBA Annual Convention, Federal Reserve 

Chairman Ben Bernanke shared new research that shows while 

overall small business lending contracted during the recent recession, lending by a majority of small community banks, those of less 

than $250 million in assets, actually increased. By contrast, small 

business lending by the largest banks dropped off sharply. The viability of community banks is linked to the success of our small 

business customers and we do not walk away from them when the 

economy tightens. 

Community banks have little in common with Wall Street firms, 

mega banks, or shadow banks. We have a much different risk profile because our business model is built on long-term customer relationships. We cannot succeed without a reputation for fair treatment. We make quality small business loans often passed over by 

the large banks with their statistical models because our personal 

knowledge of the borrower gives us first-hand insight into the true 


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credit quality of a loan. These localized credit decisions made one 

by one by thousands of community bankers will restore our economic strength. 

The Dodd-Frank Act is a generational law and will permanently 

alter the landscape for financial services. It has proven to be a 

mixed outcome for community banks, combining both punitive and 

helpful provisions. Every provider of financial services, including 

every single community bank, will feel the effects of this new law 

to some extent. 

While there are many provisions of the law I could discuss at 

length, I will focus my comments on the new CFPB. Community 

banks are already required to spend significant resources complying with consumer protection rules. This compliance burden is 

a distraction from our small business lending. Every hour I spend 

on compliance is an hour that could be spent with a small business 

customer. CFPB rules should not contribute to this distraction. The 

CFPB should use its authority to grant broad relief to community 

banks where appropriate. ICBA also supports legislation recently 

passed by the Financial Services Committee to reform the CFPB to 

make it more balanced and accountable in its governance and rule 

writing. 

Probably the most frustrating aspect of the current regulatory 

environment is the trend toward oppressive exams. The misplaced 

zeal and arbitrary demands of examiners are having a chilling effect on small business lending. Good loan opportunities are passed 

over for fear of examiner write-downs. I am fortunate in my bank 

to enjoy a cooperative and constructive working relationship with 

my regulator, the Federal Reserve Bank of Chicago. Examiners 

perform a difficult job and the stakes were raised sharply after the 

financial crisis, but I believe many examiners have overreacted to 

the crisis. I have met with hundreds of community bankers from 

every part of the country in recent years and I can tell you there 

is an unmistakable trend toward arbitrary, micromanaged, unreasonably harsh examinations that have the effect of suffocating 

small business lending. 

ICBA supports legislation to bring more consistency to the examination process. Arbitrary loan classifications are a particular 

source of frustration for community bankers. Representative Bill 

Posey’s commonsense Economic Recovery Act, H.R. 1723, would establish conservative, commonsense criteria for determining when a 

loan is performing and provide more consistent classification guidance. This bill would give bankers flexibility to work with struggling but viable small business borrowers and help them maintain 

the capital they need to support their communities. 

The ICBA-backed Communities First Act or CFA, H.R. 1697, introduced by Representative Blaine Luetkemeyer contains many reforms that would improve the regulatory environment and community bank viability to the benefit of our customers and our communities. To cite just a few examples, CFA would raise the threshold 

number of bank shareholders that triggers SEC regulation from 

500 to 2,000. SEC compliance costs are a significant expense for 

listed banks. Another provision would extend the five-year net operating loss carryback provision to free up community bank capital 

now when it is needed most. We are very pleased that CFA has biVerDate Mar 15 2010 03:55 Aug 30, 2011 Jkt 067803 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\B803.XXX B803

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partisan co-sponsorship and look forward to its advancement in the 

House. 

Given the state of the private capital markets for small- and midsized banks which are largely still frozen since the financial crisis, 

ICBA supports the Small Business Lending Fund as an alternative 

source of capital for interested healthy banks structured to 

incentivize increased lending. We hope that the first round of capital will be disbursed soon. 

Thank you again for your commitment to small businesses and 

your interest in the institutions that partner with them. I have outlined some of the more significant regulatory challenges we face in 

the months ahead. 

Thank you for hearing our concerns. We look forward to working 

with you. 

[The statement of Mr. Ohlendorf follows on page 52.] 

Chairman WALSH. Thank you. And thank you all for your testimony. 

Let me begin my series of just a couple of brief questions. And 

this first one will directed toward each member of the panel. Try 

to be brief and specific with your answer. 

Dodd-Frank. An appropriate reaction to the financial crisis? An 

overreaction? Or a reaction that was not strong enough to the financial crisis? How would you answer that? Brief and specific. An 

appropriate reaction, an overreaction, or not a strong enough reaction. Let us start our way here and we will work our way down. 

Mr. OHLENDORF. Dodd-Frank is a mixed bag. There are many 

provisions that are, I think, an overreach and there are some provisions that I think are very helpful, including deposit assessment reform and the assessment base that community banks and other 

banks are able to take advantage of which are going to save us a 

whole lot of money and put the burden more appropriately where 

it needs to be. There are other provisions of Dodd-Frank that 

frankly scare us tremendously. 

The CFPB, while we have a bit of an exemption or a carve out 

in community banks, we are still subject to their rule writing. 

Today what we have to understand is we are already overburdened 

with regulation. We have a significant number of regs that we need 

to comply with today and it seems like just one more is not going 

to change the deck a whole lot. But the piling on and the consistent 

piling on of additional regulation is very, very stunning. 

In the good old days I had a part-time person that did 10 percent 

of their job in the area of compliance and we complied with all the 

rules of the land. Today, we have got six or eight people, all senior 

officers that sit on a compliance committee, attempting to deal with 

these reforms as they come along. And it is punishing and it is very 

difficult for small institutions. 

Chairman WALSH. Mr. Daley, an appropriate reaction? An overreaction? 

Mr. DALEY. Thank you. I think our members would say it is 

largely appropriate. The process in the Congress was fascinating to 

watch for us. And the balance that came through the debate and 

exchange really served the country well we think. There are a couple of areas where we would like to see things stronger. The proprietary trading provisions we thought could be strengthened. We 


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would have liked to see the swipe fee rules applied to credit cards 

as well as debit cards. But overall the work of the Congress seemed 

appropriate. 

I also think it is appropriate for you to continue your work now. 

Congressional oversight of the implementation of this act is important. It is good that you are holding a hearing here and there are 

other hearings because that balance that we think was achieved in 

the Congress needs to be achieved in the implementation of the act. 

Chairman WALSH. Mr. Sekula. 

Mr. SEKULA. NAFCU does not blame Dodd-Frank for the credit 

crunch, but we do believe that it overreaches and is an overreaction 

as all credit unions are under the CFPB’s rulemaking authority. A 

couple of items that we do like, we feel positive about the DoddFrank, of course, as mentioned earlier, the permanent increase in 

the Federal Deposit Insurance from $100,000 to $250,000, and consumers do need protection from predatory lenders. And we understand and we support that view. We are just hopeful that more 

time will be spent on unregulated entities, such as payday lenders 

that should be the focus of the CFPB. 

Chairman WALSH. Mr. Boyle. 

Mr. BOYLE. I feel that it is an overreaction. In our shop of $800 

million bank, we have two full-time compliance officers and we also 

outsource to a third party to make sure we remain in compliance. 

We are anticipating with the uncertainty that the Dodd-Frank bill 

is going to bring that we are actually interviewing additional consulting firms that could cost us anywhere from $75,000 to $125,000 

going forward to make sure we maintain our good standing in the 

compliance arena. So we feel that it is an overreaction. 

Chairman WALSH. Thanks. Mr. Daley, quick question, and I am 

confused. And I apologize for that. 

Briefly describe your members to me because I think if I took you 

by the hand and you and I walked around my district for a day and 

we talked to 50 small businessmen and women, you would hear the 

same refrain. They are scared to death. There is so much uncertainty out there and there is a lot of angst about the additional regulations and the regulatory climate that they believe Dodd-Frank 

is going to lead to. Your members are fine with what is coming? 

Mr. DALEY. May I describe our members? They are small businesses. We have about 10,000 members. Our members are the owners and they own and operate their businesses. I talk to them a lot, 

we are in fairly constant communication. And they come a lot to 

testify to Congress and go to meetings. They are more concerned 

about the long-term return to practices that put them in the bank. 

And when I have these conversations, because I remember, they 

said that is their greatest concern. The problems that were caused 

by these practices as having harmed them, as having destroyed 

their customer base, and the law that is being put in place to prevent that from happening in the future is important. 

Chairman WALSH. Did they feel overregulated before DoddFrank? 

Mr. DALEY. When I talked to them about the operation of their 

businesses, they do not talk to me about regulation. They talk to 

me about what is going on in my community. My community is— 

the quality of life and the quality of the local economy is what is 


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important to them. They do not draw their business from around 

the state or around the country or internationally. They do all their 

business from their community. And their community is in trouble 

now and their business is in trouble as a consequence. So they do 

not talk to me about regulation. They do not talk about taxes. They 

talk about getting investment into the community. Getting jobs 

into the community so that my business can continue to thrive. 

Chairman WALSH. You and I are talking to different folks. That 

is fascinating. It actually is. 

One final quick question. Mr. Ohlendorf, are you getting consistent information from regulators about your portfolio? 

Mr. OHLENDORF. I talk to a lot of bankers around the country 

and we feel like there is some very inconsistent data. I talked to 

a banker on the way to the airport yesterday from one of our neighboring states who was dealing with an appraisal and they had gotten the appraisal, you know, it is supposed to be the be-all, endall. This is the value of the property. And they were concerned 

about some of the assumptions. So they shared some of their 

thoughts on those assumptions with the appraiser or with the examiner. And the examiner came back and said that the bank had 

no business making any changes to the assumptions to the appraisal. Okay, fine. 

A banker 30 minutes from that bank had a set of examiners in 

and had a piece of commercial real estate that was worth, on their 

books, $4 million. It had just been appraised at $4 million and the 

regulators came in and asked that bank to charge that loan down 

to $2 million because the appraisal was not worth anything. 

As a banker, in trying to work in this economy, how am I supposed to take those two stories that are both very current with 

banks that are 30 minutes apart in a neighboring state and gel 

that together to understand what I am supposed to do to help, you 

know, make small business loans. I cannot have arbitrary 50 percent write-downs to my portfolio when the appraisal just indicated 

that the value is what I said it was. And on the other hand, I cannot look at another appraisal and try to, you know, say well, maybe 

some of those assumptions are not accurate and try to massage it 

because they were told they did not have the credentials and the 

expertise. 

Chairman WALSH. Thank you. I now turn to Ranking Member 

Schrader. 

Mr. SCHRADER. Thank you, Mr. Chairman. 

As I listen to the panel, it would appear that the biggest problem 

seems to be the regulators maybe more than Dodd-Frank itself. 

And I hear that same song and verse back at home with my local 

banks and credit unions. You get that inconsistent regulation. 

Question for Mr. Ohlendorf and Mr. Boyle, in particular. In 

Dodd-Frank, they talked about a five percent capital requirement 

holdback that was going to be mandated and maybe even some 

flexibility for mortgage-based loans. But when I talked to some of 

my folks at home they are saying, well, actually, we are getting 

rules that are talking about a 20 percent downpayment and stuff. 

Could you comment on are you hearing that also? That would seem 

to be in contravention to what was put out there. Mr. Ohlendorf 

and then Mr. Boyle. 


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Mr. OHLENDORF. We heard that discussion. We are concerned 

that the horse is out of the barn. Back in the days when I started 

in banking, a 20 percent downpayment may have been traditional 

and you saved up money and you tried to buy your first house. The 

rules somewhere along the line were changed significantly and obviously lower downpayments were allowed, which fueled tremendous boom in the housing industry and a lot of first-time homebuyers were able to buy homes that were not. And we can argue 

the political policy of that for all it is worth for a long time and 

that is not probably what you want to do. 

The problem that we have today is to go backward to that is 

going to have significant additional downward pressure on real estate. There is a lot of real estate out there and if only people with 

20 percent downpayments are eligible to be able to buy a home, it 

is going to be very difficult to take and handle the slack and the 

supply. 

Mr. SCHRADER. Are your regulators mandating that right now? 

Mr. OHLENDORF. We are not seeing it mandated right now but 

we have seen it talked about in a variety of a number of places 

within some of the proposed regulations. You know, a limit at some 

level of a required downpayment may be appropriate. Twenty percent, I believe, and the ICBA believes is too high. 

Mr. SCHRADER. Okay. Mr. Boyle. 

Mr. BOYLE. We also believe that the 20 percent is excessive, but 

we do believe that the borrower should have some skin in the 

game. And maybe the right answer might be 10 percent. But in our 

marketplace, and Greg’s as, well, you know, we are in a relatively 

upscale-type of product and if it is very difficult for someone to 

save $80,000 to $100,000 as a downpayment, so there needs to be 

some adjustment from the 20 percent down to a more manageable 

number to allow younger people to move into communities. 

Mr. SCHRADER. Okay. Yeah, I would hope that would be the case. 

I mean, 20—I had to do that way back when but times have 

changed and I believe we got way too lax. Prior to Dodd-Frank we 

are making lots of mistakes, so some intermediate area and hopefully our Committee and others will talk to FDIC and some of our 

friends, comptroller, to make sure that they get this right. 

I guess, Mr. Daley, it would appear to me that from your testimony you feel that access to credit has been a long-term issue for 

small businessmen and irrespective, I guess, Dodd-Frank came last 

year. And prior to Dodd-Frank, if I look at the graphs, it looked 

like small business credit was inaccessible long before Dodd-Frank 

came into being. Would that be your assessment also? 

Mr. DALEY. The difficulty our members expressed to me about access to credit has to do with the idea that they are reluctant to borrow and lenders are reluctant to lend if their business is not thriving. The key question for them is customers. We need people coming in the door with money in their pocket. And when that happens, it is easier for us to borrow. 

Let me mention one borrowing phenomena for small businesses 

that is important, and that is a lot of small business start-ups are 

financed by equity in their homes. You can see the people will start 

up a small business by borrowing against the equity in their home. 

And the housing crisis, the drop in housing value throughout the 


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company has had an impact on that as well. And I think as you 

evaluate the credit problem for really small businesses, you need 

to think of that as well. 

Mr. SCHRADER. So it is a longstanding, ongoing issue irrespective 

I think of the new regulations. 

Mr. DALEY. It came well before the passage of this bill or the introduction of it even. 

Mr. SCHRADER. I guess I had a question regarding small business 

lending. Small businesses come in all sizes apparently. They are 

not just small-small, you know, under 500 employees under a certain gross retail volume, you fit into a small business category. Get 

I a comment from you, Mr. Sekula and Mr. Boyle on which small 

businesses are now getting credit? Because anecdotally I hear back 

home that for some of my larger small businesses it is okay; for 

some of my smaller small business, not so much. What are you seeing? Do you see that differentiation? Or is lending improving slowly 

but surely for all those businesses? 

Mr. SEKULA. Well, for lending at Randolph-Brooks, our members, 

our small business owners are still able to get loans. We have realized continued growth through our portfolio for the last three years 

in a row. Where we are running into a problem is that, as an SBA 

lender, we have had problems being able to maintain. See, our 

membership is specific. I mean, they are military or Air Force. We 

support the Patriot Express SBA program. And as a result, we are 

the fifth largest Patriot Express lender in the country for a credit 

union. So that is our membership. That is who we are serving. 

They are coming to us for these business express lines of credit 

under $50,000, and we are granting them. I think probably close 

to 75 percent of our portfolio is made up of those type of loans. Our 

average loan size on the SBA size is only $44,000. So those are the 

members who are coming to us that we are trying to serve. 

The problem that we have is that we just completed an SBA 

exam and it was cited as a finding that we needed to improve our 

delinquency rate, our past due rate. If not, we run the risk of losing 

our preferred lender status and access to these funds. Well, as we 

look at the lender portal that the SBA puts out, our numbers, as 

we view it, are great. We think that they are good. So we do not 

know if SBA added this as a finding as the shot across the bow as 

a warning maybe for all financial institutions, but as a result and 

by listing it as a finding I have to address and explain what our 

actions are going to be to make sure that delinquency in those 

losses do not go up, yet we are a well-capitalized organization. Our 

underwriting standards are top-notch. Our performance is great. 

And here we are, we think that we are doing things right. Our 

numbers show that we are doing things right, but yet the SBA is 

now telling us that I have got to put a plan in action to improve 

those numbers, which means then now instead of me focusing on 

these loans that are for the $35,000 to $50,000 range that our 

membership is asking for; now I need to focus on maybe a larger 

7A loan or a 504 loan just so I can make my numbers look better. 

That is not my membership. That is not what they are asking for. 

And so as a result, that is the biggest problem I have. 

Now, in defense of the SBA, we have had a great relationship 

working with them since we have been offering SBA loans. And 


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also in their defense, we just got our write-up, our finding two 

weeks ago. So as a result, I have not had an opportunity to respond 

back to them about my concerns. But since the timing of this hearing was right now, I felt it was important to share it because I feel 

that we are not the only institution experiencing these type of experiences with the SBA. 

Mr. SCHRADER. Thank you. Mr. Boyle. 

Mr. BOYLE. We believe that each individual credit request is 

unique in and of itself. And we are a relationship lender by nature. 

And we always have viewed our business is to make loans. We are 

not profitable unless we make loans. I will admit to the fact that 

over the last two years the underwriting has significantly increased 

and that the scrutiny and the requirements from the businesses, 

the additional information that we request is probably more than 

we have in the past. But it is our goal to continue to make small 

business loans going forward because without it we are not profitable. 

Mr. SCHRADER. I will yield back, Mr. Chairman, and let the others. 

Chairman WALSH. Thank you, Mr. Schrader. 

I now turn to my colleague from Colorado, Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

You know, I want to say, first of all, one of the stunning things 

that is lacking in Dodd-Frank, and I think it is part due to the fact 

that—well, part largely due to the fact that government never 

wants to point the fingers at itself. But if we look at the catalyst 

of the financial crisis it is subprime lending. And who mandated 

subprime lending? Who was the one who came forward with this 

policy that said let us take people that really cannot afford these 

homes and let us put them in these homes. You know, and then, 

of course, we will securitize it and bundle it up and credit rating 

agencies missed it. So therein lies the catalyst of this crisis. And 

it was government. 

And guess what is not included in Dodd-Frank? Fannie Mae, 

Freddie Mac, the very catalysts that drove us into the ditch is nowhere mentioned because the very politicians who wrote it had 

their fingerprints on it. And so I just think it is stunning that we 

have not dealt with that issue that is the basis of really the problem that we have today. 

But let me just ask this question to the three bankers, and that 

is are regulators communicating with each other? Or are you answering duplicative questions from various regulators? 

Mr. Boyle. 

Mr. BOYLE. In our situation we are of a size where most of our 

or all of our examinations are a joint examination between the 

FDIC and the state. And we have not seen a duplication of questions. In Chicago, the FDIC is very well organized and getting the 

requirements ahead of time makes the examination as last burdensome as possible even though it takes four weeks. 

Mr. SEKULA. In regards to the National Credit Union Association, communication with them has been very good in regards to 

some of their expectations coming down and giving us an opportunity to prepare. Whether they coordinate with the SBA on any 


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of their exams or audits, that is information I am not aware of. So 

I am sorry, I am not able to add much more information to that. 

Mr. OHLENDORF. We are federally regulated by the Federal Reserve in the state and we have experienced very little difficulty in 

communication. Where there have been overlaps, we have brought 

it to their attention where they have asked us to do things twice 

and in general sense they have been able to work that out amongst 

themselves. So I do not think it is the nature of them doing duplicative things. I think we have other issues that need to be addressed. 

Mr. COFFMAN. Great. Thank you, Mr. Chairman. I yield back. 

Chairman WALSH. Thank you. I will now turn to my colleague 

from Michigan, Mr. Peters. 

Mr. PETERS. Thank you, Mr. Chairman. 

You know, much of the testimony that we have been hearing 

today has been kind of focused on some of the potential negative 

aspects of Dodd-Frank. And I say potential because most of the bill 

has not gone into effect. And so the criticism that we are hearing 

is speculative in nature at this point. And yet we have already seen 

numerous attempts from the Republican majority to delay, to 

weaken, and even to kill this new bill. Community banks and credit unions certainly did not cause the financial crisis. In fact, in 

many respects I believe that you are among the worst victims of 

the crisis. There have been hundreds of bank failures since the 

2008 financial crisis and each time one of these banks fails, another community lender is not in a position to make critical, small 

business loans. As was mentioned, where most of the small business come from are credit unions and small community banks. 

But now that the worst of the crisis is over, there seems to be 

a tendency to forget what caused it and how it affected Americans 

all across the country who lost their jobs, their homes, and saw 

their retirement savings vanish. I want to work certainly with the 

industry to make sure that this bill is implemented in ways that 

work, but I also believe it is very shortsighted to lose focus of the 

fact that the bill was passed in the face of the worst financial crisis 

in generations that absolutely destroyed our economy. A crisis that 

was caused for a variety of reasons that caused it but it was excessive speculation and risk taking particularly by some of the very 

large, systemically risky institutions that are in our country. And 

so I think that needs to be the focus of what we are looking at for 

reforms. Folks here before us on the panel are not part of those 

large, systemically risky institutions but we need to address that 

so we do not ever have a situation where we are put into a catastrophe like we had. 

So with that kind of premise, Mr. Boyle, I want to direct this 

question to you. When small banks get into trouble now, the FDIC 

will come in and will unwind them through an orderly dissolution 

process. As you know, that did not exist for some of these very 

large institutions. That caused a significant problem for our economy as we were going off the cliff. The Dodd-Frank bill did create 

a new dissolution process for these large, systemically risky institutions. You know, what is your assessment of that? Is that helpful 

to small banks and does it help put smaller banks on the same 

footing that these large institutions will be under? 


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Mr. BOYLE. The Dodd-Frank Act and its treatment of the too big 

to fail concept was probably one of the better aspects of the bill. 

With regards to leveling the playing field, the Chases and Bank of 

Americas are not my competitors. My competitors are my local 

community banks within the metropolitan area of Chicago. So I do 

not think that it leveled the playing field. We each carve out our 

own niche and we do not view the Bank of America as our competitor. 

Mr. PETERS. But now you talked about the too big to fail as probably the best part of the bill. Would you just elaborate on that, 

please? 

Mr. BOYLE. Well, I think the way that they would deal with the 

orderly liquidation or the solving or a problem of too big to fail, you 

know. Having a system in place that does not exist currently. 

Mr. PETERS. Do others share that opinion? 

Mr. OHLENDORF. I think one of the obvious benefits was the 

whole change in the FDIC Act and the assessment base and so on. 

But also one of the other major provisions that we have yet to see 

how it is going to work out is bringing the shadow banks and the 

mortgage brokers and the nonregulated financial institutions into 

the fold. Our consumers do not understand the difference. When 

they hear someone can make them a mortgage loan, they do not 

understand, Congressman, that that person may be or may not be 

from a regulated financial institution. They assume that they may 

be getting a better rate or it looks like a better rate but they are 

not sure we are playing by all the same rules. Their assumption 

is we are all playing by the same rules. And in fact, we are not. 

And if in part of this crisis we can reign that in, find out who those 

folks are and bring them under the same type of regulation that 

we have long been under and have successfully operated under 

those types of rules, I think it is going to make a major change. 

That has yet to be seen. 

Mr. PETERS. Again, a lot of this still has to be implemented going 

forward so we are in the very beginning stages, which is why it 

seems to be premature to try to unwind this because I agree with 

you that we had a system prior to Dodd-Frank that had heavily 

regulated institutions like yourself and everybody at this panel 

here. We had silos of regulation but between those silos there was 

a lot of open area where people would compete. And they were your 

competitors, whether they were paid A lenders or other folks that 

are in that shadowy area that is significant competition to you. 

And they are playing in an unregulated environment and they are 

using tactics that often are predatory on customers. You know, you 

are trying to do what is right for your customers. You are playing 

by all the rules, you believe in having a long-term relation with 

those customers. And yet you have folks out there who have a 

whole different business model and it is disruptive to your ability 

to raise funds, raise capital, investment in small businesses if you 

have got to compete with these shadowy organizations. So DoddFrank is a move forward to try to reign in that practice and those 

unsavory type business practices. And so I look forward to working 

with you so that we can continue to do what is right for the American consumers and the American taxpayers and stand up to some 

of these very large, systemically risky financial institutions as well 


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that caused so much trouble in our economy. So with that I will 

yield back my time. 

Chairman WALSH. Thank you. Now it is my pleasure to hear 

from my colleague from South Carolina, Mr. Mulvaney. 

Mr. MULVANEY. Thank you, Mr. Chairman. 

Gentlemen, I have run a couple of small businesses. I have started three or four of them myself. I have served on this Committee 

now for about six months with the rest of these gentlemen. And I 

have to admit that I have never heard anybody come in and talk 

about the things Mr. Daley has. Mr. Daley, you heard the Chairman say that he might be speaking to people who are different 

than the people you are talking to. Is that at all possible? 

Mr. DALEY. I do not know. How would I assess that? I do talk— 

I actually have a business myself. It is very small. And have in the 

past operated small businesses. I have worked, as was mentioned, 

as a mayor in a small town, small-time mayor actually. Small 

town, Olympia, Washington, where I lived for many years. And 

worked with the businesses community closely as we tried to bring 

back our downtown, revitalize the core of the city. 

I find the values that I experience when I interact with small 

businesses to be close to what I have described here. They are very 

concerned about the quality of their communities. They choose to 

do business with banks like the ones that are—financial institutions like the ones that are represented here because they have a 

relationship to the communities. And they do that when they can 

and appreciate them. 

Mr. MULVANEY. And let us talk about those businesses for a second if we can, because I admit when I came into prep for this meeting, I know who the American Bankers Association is, I know who 

the federal credit unions are, and I know who the community bankers of America are. In fact, all of those organizations are very active in my state of South Carolina. 

I had not been familiar with the Main Street Alliance, but was 

surprised to find out that it is also active in my home state of 

South Carolina through an organization called the South Carolina 

Small Business Chamber of Commerce. And as I was sitting here, 

I just learned that, Mr. Daley, as I was going through the internet 

while you were testifying. I am familiar with this organization, and 

I think it would be of value to those of you who have heard testimony today and to this Subcommittee to recognize who that group 

is in South Carolina, if it is representative, Mr. Daley, of who your 

organizations are. It is an organization that exists only on paper. 

Its core group is a liberal talk show host, a Democrat lobbyist, a 

Democratic political consultant, and a Democrat public relations 

specialist. They supported Obama Care, including the public option. They supported cap-and-trade, and they actually got very active in South Carolina in encouraging the state government to create a new agency to oversee small business. In fact, the quote that 

they had that was much talked about in my state was let us acknowledge that small businesses are a pillar of success in the state 

and are just as deserving of a new state agency to lead them. I 

have never heard of a small business group talk about creating 

new state agencies to oversee them. 


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Actually, in South Carolina they claim to have 5,000 members, 

just as you heard Mr. Daley claim that nationwide they have about 

10,000 members. The only way they get to 5,000 members in the 

state of South Carolina is by using the lists of the South Carolina 

Association of Trial Lawyers and the South Carolina Association of 

Claimants Attorneys. 

I heard Mr. Daley testify earlier today that he actually likes the 

uncertainty that comes with Dodd-Frank, which would surprise me 

none as trial lawyers love uncertainty. Mr. Daley, I used to—before 

I was a small businessperson, I was actually a trial lawyer, so I 

have been down that road as well. The NFIB has spoken out 

against South Carolina Small Business Chamber of Commerce, another organization that I am a little bit familiar with, as have our 

two largest Chambers of Commerce in the state of South Carolina, 

decrying it as nothing more than a front for the trial lawyers in 

our state. It does not surprise me then, sir, that you have come in 

here today to defend Dodd-Frank, and in all fairness, probably just 

reaffirms my position that the bill is a complete travesty to begin 

with and should be repealed in its entirety. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. DALEY. Mr. Chairman, may I for the record point out that 

we do not have an affiliate in South Carolina, and we are not affiliated with the Small Business Chamber of Commerce. 

Mr. MULVANEY. To that point, if I may reclaim my time, Mr. 

Chairman, your website identifies 14 agencies, 14 state agencies 

that make up your base, essentially your affiliate agencies. They 

include the Idaho Main Street Alliance, the Colorado Main Street 

Alliance, the Iowa Main Street Alliance, the Maine Main Street Alliance, something called the Keystone, which I assume is Pennsylvania, and then very clearly on your website, the South Carolina 

Small Business Chamber of Commerce. 

Thank you, Mr. Chairman. I yield back. 

Chairman WALSH. Thank you. I now turn to Ms. Clarke, my colleague from New York. 

Ms. CLARKE. Thank you very much, Mr. Chairman. And thank 

you Ranking Member Schrader. 

I have a statement that I would like to insert for the record, Mr. 

Chairman. 

Chairman WALSH. Yes, without objection. 

Ms. CLARKE. Thank you very much. 

Let me just start by recognizing the support in my district in 

Brooklyn, New York, for the work of community banks and the 

credit unions and acknowledge that as all of America knows, your 

entities were not a part of what took down our economic system. 

And so we want to thank you for your steadfast work and your 

commitment to the growth and development of communities across 

this nation and the businesses they are in. 

Let me ask my question to Mr. DALEY. And let me say that, you 

know, we recognize how much small businesses have suffered during the downturn and that you welcome any of the provisions of 

Dodd-Frank. One of the number one issues that I hear when talking to small business owners and entrepreneurs in my district is 

the lack of access to capital. I think, you know, it is almost a 

mantra at this point. So my question is given that small busiVerDate Mar 15 2010 03:55 Aug 30, 2011 Jkt 067803 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\B803.XXX B803

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nesses, we all recognize as the engines of our economy, and recognize that Dodd-Frank is the law of the land, what else can be done 

to get lenders to free up the over one trillion in reserves that they 

are holding so that small businesses can hire again and power our 

economy toward a full recovery? Or is the business model of lenders so inflexible at this stage that it simply cannot adjust to the 

current regulatory environment. 

[The information follows on page 62.] 

Mr. DALEY. During the meltdown, Congress passed a law allowing the Fed to pay interest on surpluses. They are currently paying 

interest on surpluses that are way in excess of the required financial holdings. And we raised the question as to why? Why is that 

money not being invested back into the economy rather than sitting in the Fed gaining interest? And I hope you will take a look 

at that question. 

There are some other things that might help our customers that 

are related to lending that are not related to the lack of capital. 

And one of them is the foreclosure crisis. It is a tremendous drag 

on the neighborhood economies. And efforts by the government to 

try to get these underwater loans drawn down have not proven 

very successful and have not been very aggressive. And we have a 

continuing drop in the value of housing, a continued lack of construction industry would help us tremendously if that crisis could 

be closed. So two answers. Take a look at why we are sitting on 

all this money for one, and please take a look at that foreclosure 

crisis. 

Ms. CLARKE. Thank you. Do any of you gentlemen want to add 

your perspective to that question? I am trying to figure out, you 

know, what is it? Is it that it is hard to adjust to the current regulatory environment? Or what would you say? Yes. 

Mr. BOYLE. One way for us to increase our lending would be for 

a reduction in the stringent capital requirements put on us by the 

FDIC. We are currently holding nine percent capital. If we could 

get that reduced to just eight and a half percent, we could make 

as much as $10 million in new loans. So the joke around our institution is the accountants are running the bank because everything 

we do is dedicated towards the achievement of the nine percent 

capital ratio. 

Mr. OHLENDORF. One of the other things that I would like to 

mention is in the days gone by we were able to show sources of liquidity to the regulators as lines of credit with our correspondent 

banks, lines of credit with the Federal Home Loan bank, the discount window authorization, our relationships with maybe brokered CD providers. Today the regulators are asking us for on-balance sheet liquidity. They do not trust that we are going to be able 

to draw on those lines because some of those organizations have 

withdrawn lines from banks that show some signs of weakness. So 

instead now I need to hold on my balance sheet levels of liquidity 

that were prior unheard of in dollars and cents. So part of it again 

is going back to what I am being required to hold on my balance 

sheet which looks like substantial loanable funds and I would love 

to loan those funds out. 

Ms. CLARKE. Thank you very much, gentlemen. I yield back, Mr. 

Chairman. 


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Chairman WALSH. Thank you. I have just a couple quick final 

questions. 

Mr. Daley, you state or stated that ‘‘some small curtailment of 

available credit over the long term is favorably outweighed by the 

certainty that sensible requirements to mitigate risk will stabilize 

credit markets over the long term and less the like likelihood of another financial collapse.’’ What data can you point to to show that 

the current regulations are merely sensible and not burdensome 

and that they will prevent another financial crisis? 

Mr. DALEY. I am not going to point that I do not have data that 

would make a prediction like that. And I must be clear that the 

provisions related to reserving in Dodd-Frank are very complex. 

And I believe that there is a legitimate debate about whether they 

need to be uniformly applied or is there some way that different 

institutions with different circumstances should have different applicability of those reserving requirements. But the underlying idea 

of there being those reserving requirements in place and being applied throughout lending institutions is important to the long-term 

stability of credit. And that is what I am trying to express here. 

That having some base requirement there. I do think there is a 

reasonable debate about how exactly to apply those provisions of 

the law. But that there be provisions like that is important to the 

long-term stability of credit. 

Chairman WALSH. Your members are small business owners. Did 

they support the repeal of the 1099 aspect of Obama Care? 

Mr. DALEY. Yes. 

Chairman WALSH. Overwhelmingly? 

Mr. DALEY. There was one sense of hesitation. It was the payfor. The original proposals to pay for the repeal of the 1099 provision undermined aspects of the ACA, or the Affordable Care Act, 

of which they supported passage. 

Chairman WALSH. In describing your membership briefly, this is 

a real short answer, the small business owners, do they feel overregulated and overtaxed? 

Mr. DALEY. To the degree I have had conversations with them 

about these things, they are not—they do not say they are overregulated and they are overtaxed. They are much more concerned 

about what happens to the money that they pay? Where is it invested? They are much more concerned about what impact the general quality of life in their community has on them than anything 

else. 

Chairman WALSH. You and I need to take a day. We will go and 

randomly find 100 small business owners around the country. We 

will ask them that question. Thank you. 

One final question for the three bankers. In essence, you are all 

small businessmen. What, to your estimation, and be brief, is, as 

small businessman, your greatest fear right now for the small business community? 

Mr. OHLENDORF. My greatest fear is where does this regulation 

stop. Every time we have to comply with a new regulation we are 

just having to spend that much more time on the regulation and 

that much less time supporting small business people. We completely understand their need for capital. We completely understand our role in that. We are in business to make loans. We are 


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in business to support our communities. There does not need to be 

a regulation to tell us how to support our communities because if 

we do not do that our communities will not do business with us. 

So it is not complicated in a community bank. We just need to find 

a way to be able to get out from under the burden of oppressive 

regulation. 

Chairman WALSH. Mr. Sekula. 

Mr. SEKULA. The concern definitely is about the overreaching, 

regulation. Right now we are talking about investing and taking 

care of our members, their needs right now. That is all they can 

think of right now. So some of them are not investing and growing 

their business or seeking loans because of the fear and uncertainty, 

but when they come to us we want to make sure that they feel 

comfortable and that we are going to be there to take care of their 

needs, whatever it may be. When we have our regulators, whether 

it be the National Credit Union Association or the SBA hindering 

and preventing us from getting in the way, especially for a wellpositioned financial institution to be able to take care of them, 

what kind of message does that send? 

And that is my biggest fear, is that we think that we have done 

everything right to take care of our business the way we operate 

and our members, and now being possibly restricted from being 

able to get them access. That concerns me because we think we are 

doing everything right but now I am being told you need to be careful. 

Chairman WALSH. Mr. Boyle, your greatest concern for this small 

business community? 

Mr. BOYLE. I have been a banker for 34 years and I started off 

as a regulator and moved into the banking environment. And in 

those 34 years I could not recall a regulation being retracted. Every 

time they put a new layer of regulation on us it costs us money. 

This new regulation for Dodd-Frank, as I mentioned earlier, could 

cost us as much as an extra $150,000 a year. The debit change effect last week where we lost, those are $200,000 a year. That is 

$300,000 in profits I do not know how I am going to make up. And 

if I had those dollars as capital I could make as much as $30 million in new loans. So the leveraging aspect worries me. The overregulation is only going to hamper my ability to become more profitable. 

Chairman WALSH. Thank you. I am done. Mr. Schrader, any follow-up? 

Mr. SCHRADER. No, sir. 

Chairman WALSH. Great. Thanks. Now that the questions are 

complete, I would like to again thank our witnesses for being here 

today to discuss this important issue for small business. We know 

that small businesses will lead any economic recovery and jobs recovery. So today was a step in the right direction towards focusing 

our efforts on determining the impact of the law and resulting regulations on small business. As we move forward with the implementation of this law, I would like to encourage the participants 

here today to keep us informed about the issues discussed. It is important that we know the exact impact of policies for those who are 

working every day to grow business and create jobs. 


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With that I ask unanimous consent that members have five days, 

legislative days, to submit statements and supporting materials for 

the record. Without objection, so ordered. 

The hearing is now adjourned. Thank you. 

[Whereupon, at 11:19 a.m., the Subcommittee hearing was adjourned.] 


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