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HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

SEPTEMBER 23, 2009

Serial No. 111–89

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THE SILENT DEPRESSION: HOW ARE MINORITIES

FARING IN THE ECONOMIC DOWNTURN?

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

SEPTEMBER 23, 2009

Serial No. 111–89

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

——— ———

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

——— ———

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on September 23, 2009 ..................................................................... 1

Statement of:

Morial, Marc H., president and CEO, National Urban League; Janet

Murguı ́a, president and CEO, National Council of La Raza; Lisa

Hasegawa, executive director, National Coalition for Asian Pacific

American Community Development; Jacqueline Johnson–Pata, executive director, National Congress of American Indians; and Harry C.

Alford, president and chief executive officer, National Black Chamber

of Commerce .................................................................................................. 141

Alford, Harry C. ......................................................................................... 202

Hasegawa, Lisa .......................................................................................... 164

Johnson–Pata, Jacqueline ........................................................................ 178

Morial, Marc H. ......................................................................................... 141

Murguı ́a, Janet .......................................................................................... 151

Skinner, Raymond A., secretary, Maryland Department of Housing and

Community Development; James H. Carr, chief operating officer, National Community Reinvestment Coalition; and Christian E. Weller,

Ph.D., senior fellow, Center for American Progress Action Fund ............. 40

Carr, James H. .......................................................................................... 54

Skinner, Raymond A. ................................................................................ 40

Weller, Christian E. .................................................................................. 96

Letters, statements, etc., submitted for the record by:

Alford, Harry C., president and chief executive officer, National Black

Chamber of Commerce, prepared statement of .......................................... 204

Carr, James H., chief operating officer, National Community Reinvestment Coalition, prepared statement of ....................................................... 56

Hasegawa, Lisa, executive director, National Coalition for Asian Pacific

American Community Development, prepared statement of .................... 167

Issa, Hon. Darrell E., a Representative in Congress from the State of

California:

Black Chamber of Commerce study ......................................................... 216

Minority report entitled, ‘‘The Role of Government Affordability Affordable Housing Policy’’ ....................................................................... 9

Prepared statement of ............................................................................... 37

Johnson–Pata, Jacqueline, executive director, National Congress of American Indians, prepared statement of ........................................................... 180

Jordan, Hon. Jim, a Representative in Congress from the State of Ohio,

information concerning PLAs ....................................................................... 298

Morial, Marc H., president and CEO, National Urban League, prepared

statement of ................................................................................................... 144

Murguı ́a, Janet, president and CEO, National Council of La Raza, prepared statement of ........................................................................................ 153

Skinner, Raymond A., secretary, Maryland Department of Housing and

Community Development, prepared statement of ...................................... 42

Towns, Chairman Edolphus, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 4

Weller, Christian E., Ph.D., senior fellow, Center for American Progress

Action Fund, prepared statement of ............................................................ 99

(1)

THE SILENT DEPRESSION: HOW ARE MINORITIES FARING IN THE ECONOMIC DOWNTURN?

WEDNESDAY, SEPTEMBER 23, 2009

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 10;03 a.m. in room

2154, Rayburn House Office Building, Hon. Edolphus Towns (chairman of the committee) presiding.

Present: Representatives Towns, Issa, Cummings, Kucinich,

Tierney, Clay, Watson, Lynch, Quigley, Kaptur, Cuellar, Bilbray,

Jordan, Flake, Chaffetz, and Luetkemeyer.

Staff present: Beverly Britton Fraser, counsel; Kwane Drabo, investigator; Jean Gosa, clerk; Velginy Hernandez, press assistant;

Adam Hodge, deputy press secretary; Carla Hultberg, chief clerk;

Marc Johnson, assistant clerk; Phyllis Love, Christopher Sanders,

and Alex Wolf, professional staff members; Mike McCarthy, deputy

staff director; Leah Perry, senior counsel; Jason Powell, counsel

and special policy advisor; Leneal Scott, IT specialist; Shrita

Sterlin, deputy director of communications; Ron Stroman, staff director; Lawrence Brady, minority staff director; John Cuaderes, minority deputy staff director; Rob Borden, minority general counsel;

Jennifer Safavian, minority chief counsel for oversight and investigations; Frederick Hill, minority director of communications; Dan

Blankenburg, minority director of outreach and senior advisor;

Adam Fromm, minority chief clerk and Member liaison; Kurt

Bardella, minority press secretary; Benjamin Cole, minority deputy

press secretary; Kristina Moore, minority senior counsel; and Mark

Marin, minority professional staff member.

Chairman TOWNS. The committee will come to order.

Good morning and I thank all of you for being here.

Our Nation faces the most daunting economic downturn since the

Great Depression. One year ago, many of our Nation’s largest and

oldest banks teetered on the edge of collapse. The value of businesses and personal net worth plummeted as the Stock Market

tumbled. In turn, companies downsized or closed their doors, leaving millions standing in unemployment lines, desperate for work.

Home prices plunged and exotic home loans ballooned, creating

sticker shock for many homeowners. Americans began to lose their

homes to foreclosures at a terrible pace. In response, Congress extended unemployment benefits, created programs to preserve home

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ownership, and passed a massive economic stimulus program to retain and produce jobs.

While our economy is still fragile, there are some signs of improvement. But as our Nation lays down the tracks of economic revitalization, we must be sure that every American has boarded the

train headed toward recovery.

Unfortunately, recent reports indicate that not only are many racial and ethnic groups being left behind, but many never received

a ticket to board the recovery train. And that is the crux of our

problem.

For most racial ethnic minority groups, the great recession is, in

reality, a great depression. People of color were worse off before the

start of our Nation’s economic downturn and have been losing their

jobs and their homes at a faster rate ever since. Disparities in unemployment cut across age and gender lines, particularly among

African Americans and Hispanics. And this is even evident when

education is taken into account.

The national unemployment rate is 9.7 percent. African American unemployment is 15 percent, and Hispanic unemployment is

at 13 percent. In my home State, the unemployment rate for African American residents of New York City rose four times as fast

as the jobless rate for Caucasians between the first quarter of 2008

and the first quarter of 2009.

A similar difference is seen in home foreclosures, which are impacting minority groups at a far higher level than the national average. It appears that African Americans and Hispanics are far

more likely to have higher-priced mortgages.

As indicated in a report by the Center for American Progress,

when borrowing from 14 of the Nation’s top banks, such as Bank

of America and Wells Fargo, in 2006, 17.8 percent of Caucasian

borrowers were given higher-priced mortgages while 30.9 percent of

Hispanics and a shocking 41.5 percent of African Americans received them.

There is evidence that African Americans and Hispanics may

have been targeted for those pricier loans. I was appalled to learn

of affidavits filed by former Wells Fargo employees which indicate

that these loans were routinely called ‘‘loans of mud people’’ or

‘‘ghetto loans.’’ If true, and if this kind of reprehensible practice

was widespread, it indicates the need of congressional reexamination of financial services regulations in general, and the home

mortgage business in particular.

Let me conclude by saying I look forward to hearing testimony

on policy solutions that can ensure that all Americans see real economic recovery. For example, does the road map to equitable recovery include a further extension of unemployment benefits or stricter provisions within the mortgage modification program to ensure

that banks are properly modifying the mortgages of all eligible

homeowners?

Again, I want to thank the witnesses for appearing today and I

look forward to hearing your testimony.

And just before I yield to my ranking member, in addition to receiving the testimony of the witnesses before us today, the committee has received several statements for the record from an array of

experts. These statements are authored by the Economic Policy InVerDate 11-MAY-2000 13:54 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 U:\DOCS\62291.TXT KATIE PsN: KATIE
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stitute, Pugh Charitable Trust, and the Asian American Justice

Center. These organizations represent vital organizations that

stand at the front lines in serving minority communities and examining our Nation’s recession.

Without objection, I enter these written statements into the

record.

[NOTE.—The information referred to may be found at the end of

the hearing.]

Chairman TOWNS. I will now yield to the gentleman from California, Congressman Issa, the ranking member, who has been very,

very involved in all of the issues of this committee.

[The prepared statement of Chairman Edolphus Towns follows:]

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Mr. ISSA. Thank you, Mr. Chairman.

I, too, would like to ask unanimous consent that a document be

placed in the record. It is the minority report entitled, ‘‘The Role

of Government Affordability Affordable Housing Policy.’’

Chairman TOWNS. Without objection.

[The information referred to follows:]

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Mr. ISSA. Thank you, Mr. Chairman.

Mr. Chairman, in preparation for today’s hearing I met with my

staff and many of my staff felt that this was a no-win hearing for

Republicans. And, in fact, if we run away from the crisis that is

before us today, it would be a no-win hearing.

The truth is that Republicans share no small blame for the economic turn down. We were in charge during a time in which policies, some of them predating us, proliferated. We were very much

involved in watching an explosion of home values that led to a lack

of affordability, that led to both government and non-government

entities finding more and more clever solutions to try to make sure

that somebody could still secure a home mortgage even if, in fact,

it bordered on being a Ponzi scheme and certainly depended on a

future gain in order to exit or refinance that property.

But today the hearing is going to go far beyond that. It is going

to go into some of the core problems that have existed for a generation. The 9.7 percent national unemployment rate, as compared to

the 15 percent unemployment rate for African Americans, is not a

new figure. We have failed to deal with the disparity of employment versus unemployment for all of my life.

Today, I believe we need to begin the process of honestly recognizing whether it is home affordability, home foreclosure or, most

importantly, access to real employment, to real jobs, and access for

entrepreneurs in the minority community to get to the American

Dream through access that this committee has authority over, and

that is Federal contracts and the disbursement of funds including

the stimulus.

I believe this is the beginning of an opportunity for the chairman

and the Democratic Members along with the ranking member and

the Republican Members to come to grips with the fact that, until

there are jobs in the inner city that pay well, that in fact are jobs

created by real entrepreneurial activity, by real products and services the American people want, we will not deal with that.

Many leaders in the community, including a former Member of

this body, Jack Kemp, have often said that we also have to come

to grips with the other side of the problem. We have to come to

grips with, in fact, the family structure, and whether the government encourages families to stay together. Families that stay together do better, finish education, go on to have better jobs and

better lives.

Additionally, we have to recognize that education, more than

anything else, is an indicator of employment in our future economy.

In the past, many good jobs were available in the unionized industries of auto, steel, rubber and, even today, when construction

times are good, lesser skilled, lesser educated workers willing to

work hard and acquire skills can often go through internships and

journeyman programs and become highly paid. All of those jobs

and more are beginning to be in our rearview mirror and not before

us.

The jobs of the future depend on an education. Not just a high

school education, and not an education that simply talks about feeling good about your community but, in fact, gaining real, tangible

skills in computer sciences, in math and in those skills that allow

the future jobs to be available to all.

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So, although this is not the Committee on Education and the

Workforce, this is not in fact the Appropriations Committee, we do

have a special role. We have an ability to set policy for government

contracting and government spending that has in fact disadvantaged the small entrepreneurial businesses.

In my home State of California, we have more Hispanics than we

have African Americans. In the home I grew up in Cleveland, we

had more African Americans than we had Hispanics. But one thing

that you see in any inner city in America is, in fact, more small

businesses, more businesses that have limited capital and are less

likely to get government contracts unless the government changes

how they put contracts together, how do they outreach to those

communities and how, in fact, they debundle the large contracts

that generally mean the small and minority businesses are given

only lip service for second or third tier contracts.

We do have that jurisdiction. We do have an obligation to hear

the witnesses today and to take that next step on a bipartisan

basis to make sure that we do not come back a generation from

now talking about unemployment and lack of opportunity when, in

fact, the largest single spender in American is, in fact, the Federal

Government and we have done a poor job.

So, Mr. Chairman, I ask the remainder of my opening statement

be placed in the record and I look forward to us working together

on these important issues.

[The prepared statement of Hon. Darrell E. Issa follows:]

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Chairman TOWNS. Without objection and I thank the gentleman

for his statement.

Any other Members seeking recognition?

We will now turn to our first panel of witnesses. It is committee

policy that all witnesses are sworn in, so Secretary Skinner, Mr.

Carr and Dr. Weller, please stand and raise your right hands.

[Witnesses sworn.]

Chairman TOWNS. You may be seated. Let the record reflect that

they answered in the affirmative. You may now be seated.

Mr. Skinner, we will start with you and then we will just come

right on down the line. And the way it works here is that when

you start out the light is on green. And then, it switches to yellow,

and that means you have 1 minute left. And then it becomes red.

And red, all over the United States, means stop.

Mr. SKINNER. Thank you.

Chairman TOWNS. But let me introduce you first, though.

Mr. Raymond Skinner has served as secretary of the Department

of Housing and Community Development for the State of Maryland

since February 2007 and previously held the same position from

1998 to 2003. As Secretary, Mr. Skinner manages Maryland’s home

ownership, mortgage insurance and small business assistance programs, as well as housing development and community revitalization programs.

Prior to his appointment as secretary, Mr. Skinner was president

and CEO of the Skinner Group, providing consulting services in affordable housing finance and community and economic development. He also previously served as director of the Prince George’s

County Department of Housing and Community Development and

as executive director of the District of Columbia Office of Business

Development.

He comes to us with a tremendous amount of experience.

Let me just introduce the others before we call on you, Mr. Skinner.

Mr. James Carr is the chief operating officer for the National

Community Reinvestment Coalition [NCRC.] It is an association

comprised of 600 local development organizations across the country whose mission is to improve the flow of capital to communities

and stimulate economic growth.

In addition to his current position, Mr. Carr is a visiting professor at Columbia University in New York and has also served as an

international advisor on financial modernization and housing finance to China, Mexico, Turkey and Columbia.

We welcome you, Mr. Carr.

Dr. Christian Weller is a senior fellow at the Center for American Progress as well as an associate professor of Public Policy at

the University of Massachusetts in Boston. Prior to joining the center, he was part of the research staff at the Economic Policy Institute where he remains a research associate.

He has also worked at the Center for European Integration Studies in Germany, and served in the banking sector in Germany, Belgium and Poland. Dr. Weller comes before us today representing

the Center for American Progress Action Fund.

We welcome you, too, as well, Dr. Weller.

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So now, Mr. Skinner, if you move forward with those rules that

we set. Thank you very much. We are delighted to have you.

STATEMENTS OF RAYMOND A. SKINNER, SECRETARY, MARYLAND DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT; JAMES H. CARR, CHIEF OPERATING OFFICER, NATIONAL COMMUNITY REINVESTMENT COALITION; AND

CHRISTIAN E. WELLER, PH.D., SENIOR FELLOW, CENTER

FOR AMERICAN PROGRESS ACTION FUND

STATEMENT OF RAYMOND A. SKINNER

Mr. SKINNER. Thank you, Mr. Chairman, and good morning Mr.

Chairman, Ranking Member Issa and members of the committee.

For the record, my name is Raymond Skinner, secretary of the

Maryland Department of Housing and Community Development. It

is my pleasure to be here this morning representing Governor Martin O’Malley, Lieutenant Governor Anthony Brown and the people

of Maryland.

I am going to focus my testimony this morning on the impact of

foreclosures on minority households and communities in Maryland.

But I hope to have an opportunity to talk about some of the other

issues that you raised in your opening remarks. I have provided my

written testimony for the record.

Today’s topic is of grave concern to Governor O’Malley. No part

of the State of Maryland has been immune from the foreclosure

and subprime lending crisis. But it has hit hardest on the communities that are predominantly African American and Hispanic.

Recent figures from Realty Trac find that Maryland has the 12th

highest rate of foreclosure events in the Nation and the situation

in our State is worsening as a result of the troubled economy.

Foreclosures in Maryland are highly correlated with race. Baltimore City and Prince George’s County, MD’s two majority minority

jurisdictions, account for 26 percent of the State’s population, but

42 percent of the State’s foreclosure events, according to the Realty

Trac data.

As can be seen on the map on page 4 of my written testimony,

74 percent of the most severely impacted hot spots, and we refer

to hot spots as those areas of concentrated foreclosures, 74 percent

of the most severely impacted hot spots, neighborhoods, are, in fact,

in minority communities.

The economic implications of foreclosure are devastating and impact homeowners, lenders, communities and can lead to longer

term social costs. Foreclosures cost Maryland $4 billion in 2007,

with the majority of those costs concentrated in minority communities including $963 million occurring in Prince George’s County

alone.

This crisis was set off by the resetting of the subprime and exotic

loans. But now, the context is really changing. An increasing number of foreclosures are tied to prime loans, which is likely the result

of unemployment and reductions in income. In Maryland, African

American residents accounted for 51 percent of unemployment

claims in 2008, versus being only 30 percent of the population.

Securing access to safe mortgages for minority households is key

because they represent the growth area in the State. Between 2000

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and 2007, white households actually declined in Maryland while

the number of minority households grew substantially.

I am proud to say that our department is working aggressively

on this front to open the door for home ownership but in a safe and

sustainable manner. In 2007, 53 percent of the over 4,000 mortgage

loans that we financed through my department helped minority

households to purchase a home. We dramatically outpaced private

financial institutions which provided, in 2007, just 30 percent of

their mortgages to minority households according to the HMDA

data.

At the same time, we did a better job of keeping households in

their homes. As of March 31, 2009, our single family portfolio delinquency rate was 6.4 percent, which was considerably less than the

remainder of the country which, for that same period, was a little

over 8 percent.

The success of our effort to facilitate greater financial access to

minority households, while at the same time having a lower delinquency rate, underscores that banks and brokers can do a much

better job of providing sustainable access to equal credit.

In June 2007, in response to the mounting foreclosure numbers,

Governor O’Malley created a Homeownership Preservation Task

Force which I co-chaired. The task force gave a number of key recommendations which led to, first of all, legislative reforms that increase the time between default and foreclosure, ban prepayment

penalties on certain loans, required that lenders make assurance

that a borrower can repay a loan, and it enacted greater penalties

for mortgage fraud and made the foreclosure process more transparent and fair.

The Washington Post described the bills that were passed in the

Maryland legislature as one of the most sweeping legislative and

regulatory reforms in the country.

Second, new loan programs to help homeowners who got stuck in

some of the exotic expensive subprime loans, to help them, these

homeowners who got stuck in these loans. We came up with new

lending programs to help them get out of some of those subprime

loans.

Third, we initiated consumer education that included establishment of a Maryland HOPE hotline and a Web site, as well as a

statewide network of housing counseling agencies. We have helped

to structure workshops that have proved effective in bringing distressed homeowners face-to-face with counselors and attorneys and

been able to work out foreclosure modifications on the spot.

Maryland’s efforts are continuing. But today, as the crisis continues, we find ourselves with limited ability and we are seeking some

Federal help in a couple of areas, including more funding for our

counseling agencies and more support for State housing finance

agencies in general, including the ability of GSE’s to purchase our

bonds.

Thank you for the opportunity to testify and I would be happy

to answer questions.

[The prepared statement of Mr. Skinner follows:]

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Chairman TOWNS. Thank you very much.

Mr. Carr.

STATEMENT OF JAMES H. CARR

Mr. CARR. Good morning, Chairman Towns, Ranking Member

Issa and other distinguished members of the committee.

On behalf of the National Community Reinvestment Coalition, I

am honored to speak with you today about the racial dimensions

of the current economic crisis.

Despite talk of a recovery, the U.S. economy remains mired in

the worst economic crisis in more than half a century and even the

most optimistic economists are expecting a jobless recovery. For

most people, a jobless recovery is a meaningless statistic in the real

world where families are struggling to pay their mortgage, buy

food, afford health care, pay the college tuition for their children,

or save to ensure that they can retire in dignity.

Already median income has fallen to the lowest level in more

than 10 years and poverty is growing at an alarming rate. In fact,

a close examination of the fine print of the positive earnings news

of many firms further dampens the enthusiasm for the coming recovery. Recent positive earning reports, for example, for large financial firms reveals that creative accounting, massive Federal

subsidies and one-time asset sales are largely responsible for a lot

of the good news. In fact, at the current pace, the total number of

bank failures this year will likely be the worst year in the industry’s history.

The reason for the disappointing nature of the recovery is that

foreclosures, which was the problem that imploded the financial

and credit markets and the economy, continue to rise. More than

1.5 million families have faced foreclosure this year and at least

another 1.5 million are heading that way. In fact, the Center for

Responsible Lending estimates that as many as 12 million more

foreclosures may occur by the year 2012.

This is not an equal opportunity economic crisis. The current crisis is having a disproportionately negative impact on communities

of color in two ways.

First, communities of color were the disproportionate targets for

the most abusive and reckless predatory loans and, as a result,

they are experiencing much higher levels of concentrated foreclosures.

Second, they are the most negatively impacted by rising unemployment. Unemployment rates for Latinos, African Americans and

Native Indians living on Native reservations, as was stated earlier,

are either close to, or more than twice that for non-Hispanic White

households.

Because African Americans and Latinos have comparatively few

savings, they are poorly positioned to survive long-term unemployment. Potentially millions of African Americans and Latinos could

find themselves falling out of the middle class and into poverty before this crisis is over.

Current wealth disparities are not the result of market forces or

the invisible hand of Adam Smith. Rather, they are the consequence of the very visible hand of discrimination and its legacy.

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The peddling of high cost and irresponsible loans disproportionately to communities of color is only the most recent manifestation

of continuing bias against minorities in the financial markets. Excessive subprime lending in lower income communities was not the

result of pressure placed on financial firms through the Community

Reinvestment Act. It had nothing to do with lenders attempting to

increase homeownership among minority families.

The subprime market collapsed because regulation of that market was woefully inadequate and, in many respects, non-existent.

Almost every institutional actor in the home mortgage finance

process played a role in the collapse, including the brokers, lenders,

appraisers, credit rating agencies and investment banks. Together,

these institutions created a toxic mix that percolated for years until

it boiled over and overwhelmed not just the mortgage markets, but

the entire financial system.

Five specific remedies should be pursued to address this crisis

and I address them in detail in my written testimony.

First, more must be done to stem the foreclosure crisis. The administration’s ‘‘Making Home Affordable Program’’ has a number of

important incentives to encourage intransigent servers to participate. But it lacks sticks. It needs some sticks, such as bankruptcy

reform that would cost the American public nothing but potentially

save millions of households from foreclosure.

Second, we need to restructure the financial system regulation to

focus on the protection of consumers. Protecting consumers’ rights

is the best way to ensure avoiding systemic risk to the system. In

addition, we need to make sure that the Community Reinvestment

Act is expanded so as to ensure that all communities receive access, equal access, to safe, sound products.

Third, communities that have borne a disproportionate impact of

the current crisis should be prioritized for funding. That is not happening currently.

Fifth, the Federal Government must more actively combat discrimination which is the largest barrier to economic mobility.

In conclusion, let me just state that within the next 35 years, minorities will constitute half of the American population. Yet, this

fastest-growing share of the Nation’s population are among the

most least well-housed, have the most limited access to labor and

financial markets, and are disproportionately isolated from quality

education and healthcare, which are key to economic mobility.

Globalization represents a competitive challenge for America in

this century that we have never had before. If America is to continue to be an economic, political and intellectual superpower, it

must move further into the 20th century by eliminating the old

paradigm of discrimination.

All Americans must be prepared for and allowed to compete. Succeeding in a new, globalized, highly competitive world is not just

an option. It is an imperative.

Thank you.

[The prepared statement of Mr. Carr follows:]

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Chairman TOWNS. Thank you very much, Mr. Carr.

Dr. Weller.

STATEMENT OF CHRISTIAN E. WELLER

Mr. WELLER. Well, thank you very much Chairman Towns,

Ranking Member Issa and members of the committee for inviting

me here today to speak to you.

I will make three points in my testimony.

First, minorities have experienced sharper drops in economic security during the recession and those drops occurred from lower

levels of economic security than was the case for Whites.

Second, there are economic structures and not just personal differences that can explain the worst experience minorities have had

in this recession relative to Whites.

Third, public policy can help in many ways to level the playing

field for minorities by pursuing strong and sustained growth in

good jobs, support for wealth creation and greater efficiencies in

key markets such as credit markets.

The economic experience of almost all families during the recession has been dismal. The experience of minorities generally has

been worse than that of Whites. The unemployment rate of Whites

increased by 4.2 percentage points from the end of 2007 through

the middle of 2009. In comparison, the unemployment rate of African Americans and Hispanics rose by more than 6 percentage

points at the same time, 50 percent faster than for Whites.

We also see family incomes and employer benefits disappearing

faster for minorities than for Whites during this recession. Minorities are losing access to good jobs at a faster rate than Whites during the Great Recession.

This faster decline came after minorities were already in a weaker economic position than Whites before the recession occurred. The

unemployment rate for African Americans at the end of 2007, for

instance, was 8.6 percent or more than twice the rate for Whites,

who had an unemployment rate of 4.2 percent at that time. The

unemployment rate of Hispanics at the end of 2007 was also substantially higher than that of Whites, sitting at 5.8 percent.

Incomes and earnings were generally much lower, poverty rates

much higher and health insurance coverage rates lower for minorities than for Whites before the crisis even began.

These compensation-related differences were further exacerbated

by larger differences in household wealth. Minorities, for instance,

have much lower homeownership rates than Whites, before and

during the current crisis. In 2008, the homeownership rate for

Whites was 75 percent compared to 47.4 percent for African Americans and 49.1 percent for Hispanics. This is the lowest level since

2002 for Whites and African Americans and since 2004 for Hispanics. We also just learned that the homeownership rates during

the crisis dropped the fastest for Asian Americans.

We also see large differences in other forms of wealth, most notably in employer-provided retirement plans. African Americans had

a pension coverage rate of 46 percent in 2008, Hispanics had a participation rate of 30 percent, compared to 56 percent for Whites.

Finally, the evidence also indicates that minorities regularly face

obstacles when building wealth. This is especially true for African

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Americans. My colleague, Andrew Jakabovics, just published a

study on the origination of highest-priced mortgages at the Nation’s

largest banks. He finds that 32 percent of African Americans with

incomes above twice their areas median income had higher priced

mortgages in 2006 compared to 29 percent for Hispanics and 11

percent for Whites.

This confirms my own findings that loan applications for minorities are more likely to be denied than those of similarly situated

Whites, and that African Americans paid more for their loans than

similarly situated Whites. Minorities enjoyed less economic security

before the crisis started and their economic security deteriorated

more quickly since the end of 2007.

These differences are unlikely to be fully explained by differences

in other characteristics such as age, education or occupation. In a

new report that we released today from the Center for American

Progress, we find the changes in the unemployment rate for minorities and Whites in smaller sub samples, for instance by education, age and gender, the changes in the unemployment rate are

almost universally larger for minorities than for Whites. These figures do not tell the whole story, but they are indicative of continued structural problems in the labor market.

What are those structural problems? Structural problems can include segmented labor markets whereby minorities are disproportionately represented in occupations and industries that pay less

than occupations and industries where Whites are more prevalent,

and similarly segmented housing markets and transportation.

Structural problems can also include heavy reliance on education

levels and wealth where, again, minorities tend to have larger obstacles than Whites to building wealth and obtaining an education.

The final structural problem is racially biased practices such as

credit steering and discrimination in hiring, housing markets and

other services.

Policymakers thus can pursue three separate policy goals to create a level playing field for minorities with respect to economic security.

First, pursue income opportunities through, for instance, the continuation of the economic stimulus, speeding up some of the ‘‘spend

out’’ of the money, but also the extending of unemployment insurance benefits which stabilize the loss of income among minorities.

Long-term structural policies to help income would mean an inflammation-indexed minimum wage, an improvement to the earned

income tax credit, and labor law reform to make it easier for minorities to join a union. Minorities would particularly benefit from

unionization rates since they tend to benefit larger from unionization rates than Whites.

Wealth building policies. This would make it easier for people to

save money through, for instance, automated retirement savings

plans, progressive tax benefits and lower cost savings options.

And finally, emphasis on market efficiencies to eliminate some of

the practices that we see in terms of credit steering. I think a first

step would be to audit the banks that have received TARP money

for their credit practices to see if credit steering is a persistent

problem. Such an audit could be a condition before banks are allowed to return the TARP money.

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Thank you very much for this opportunity. I am happy to answer

any questions you may have.

[The prepared statement of Mr. Weller follows:]

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Chairman TOWNS. Thank you very much.

Let me thank all of the witnesses for their testimony.

Let me begin with you, Dr. Weller, and then come back to Mr.

Carr.

As we work toward economic recovery, certain minority groups

are being left behind at a shockingly disproportionate level. Why

is this occurring?

Mr. WELLER. Well, I think we are still trying to understand some

of these problems. But, as I said in my testimony, there is a whole

range of what I call structural problems. As Mr. Carr already indicated, discrimination is certainly one part of it. Segmented housing

markets and lack of access to adequate transportation plays a role.

Unequal access to education tends to play a role. There is a whole

host of obstacles for minorities to participate equally in the labor

market and I think we need to take a larger view of this.

Let me give you one example. I think in the past we just simply

crossed our fingers and said like, well, OK, if job growth happens,

good things will come out of it. But if you look at the data from

2001 to 2007, Hispanics, for instance, had stronger job growth

than, for instance, African Americans or Whites. But what happened was those were often very low paid jobs with a lot of insecurity and very low levels of benefits.

So, job growth by itself does not necessarily create a good level

playing field for minorities. We do have to address the unequal access to good jobs and I think that has to happen through structural

policies. For instance, by passing the Employee Free Choice Act to

make it easier for people to join a union.

Chairman TOWNS. Thank you very much, Dr. Weller.

Mr. Carr.

Mr. CARR. Sure. I would agree with all of those statements and

just add that those structural problems go beyond just education.

They also include mobility, and physical mobility. The ability to access areas where employers are hiring.

And when I say that, I talk about the fact that it is important

to recognize how highly segregated African Americans are, and

Latinos as well, and, therefore, isolated from the growth opportunities.

So, it is the structural in terms of the education, the training, the

marginal jobs that they hold which are many of the first eliminated

when the economy turns down. But it is also economic mobility and

it is one of the reasons why purging and breaking the back of discrimination in housing is so important so as to allow individuals

to actually access opportunities for which they are prepared right

now. They simply just cannot live in the neighborhoods of their

choice.

And let me just build on that because one of the things that is

interesting about this foreclosure crisis is it is going to create ripple

effects in terms of lack of access. So, for example, it is unfairly

damaging the credit scores of individuals who were prepared for

home ownership and now have lost their homes because of predatory products. And, as you know, credit scores are now used for everything from getting a home to getting a job. And, in addition,

much of the wealth has been stripped from Black and Latino neighVerDate 11-MAY-2000 13:54 Dec 22, 2010 Jkt 000000 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 U:\DOCS\62291.TXT KATIE PsN: KATIE
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borhoods which now enhances or further erodes their ability to actually move to areas of opportunity.

So, there are multiple repercussions of the current crisis.

Chairman TOWNS. Thank you very much.

Let me just sort of switch to you, Dr. Skinner, I mean Mr. Skinner. I want to call everybody Doctor this morning for some reason.

I guess because the problem is so serious.

To all witnesses, but I will start with you, Mr. Skinner. Are the

current recovery initiatives targeted enough to help the communities that really are affected by this most? Are they targeted

enough?

Mr. SKINNER. Well, the Recovery Act included a host of dollars

going to different programs, including some programs like the extension of unemployment, food stamps and so forth that, I think,

for the most part probably did target a number of minority communities.

On the other hand, more of the jobs-related, the programs that

are related to construction jobs, for example, and transportation

and, in my area, in housing, those, as one of my colleagues indicated, are probably not likely to be the areas where there are a

concentration of minorities where minorities really have access to

those jobs.

So, I think we can probably do a better job in terms of things

like training programs and so forth to make sure that the minority

communities in fact have access to the jobs that will be created

through the recovery program.

Chairman TOWNS. Thank you very much, Secretary Skinner.

I now yield to the ranking member, Congressman Issa.

But before I do that, let me just make an introduction. We have

with us today from the Job Corps Chanika Disney. She is here.

Raise your hand. And, of course, Thomas Ash is also with us and,

of course, Sherrie Jonas is also with us. Thank you for attending,

the Job Corps, and now I yield to my colleague.

Mr. ISSA. Thank you, Mr. Chairman.

Secretary Skinner, the stimulus that was passed out of Congress

here earlier this year, the Recovery Act, is covered under Section

3 for hiring and reporting. Do you feel that it is being strictly adhered to? In other words, could it be doing more to ensure that the

numeric reporting and hiring is being strictly adhered to so that

the stimulus would get into the minority communities and employ

in the minority communities?

Mr. SKINNER. Well, I mean I can only speak for what we are

doing in Maryland.

Mr. ISSA. Just speak to Baltimore. I am happy. [Laughter.]

Mr. SKINNER. In terms of the reporting, you know, we are just

starting to actually get the Recovery Act money out on the street

to hire the workers, for example, in the weatherization program.

We have $60 million in the weatherization program. We have set

up both training programs and programs working with our community colleges to target certain communities in terms of the ability

to identify folks who are unemployed, underemployed, that we can

sort of target into those jobs.

And, I think so far, in terms of what we have done in particular,

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quirements are just kicking in. The first report is due to OMB on

the job creation numbers on October 1st, and we have, in fact, created several hundred jobs at this point, the majority of those, at

least in Maryland, again, and in Baltimore, have been to minority

hires.

Mr. ISSA. Mr. Carr, could you maybe make it a little broader. Nationally, is that an area, a shortfall, that in fact Congress has mandated that all of our spending covered by Section 3, but particularly

the stimulus, disproportionately, or at least proportionately, be targeted and historically that has not been the case. What about this

time?

Mr. CARR. Congressman, to my knowledge the best analysis of

this subject was performed by the Corwin Institute at Ohio State

University that focuses on race and poverty. And they make an excellent review of the bill.

One of the things that they highlight is that when you look proportionally at the types of jobs that are likely to get funded with

the Economic Stimulus Package, and then look at the types of jobs

historically occupied by people of color, you see that there are vast

variations by race ethnicity.

And the point that they make is that, without specific targeting

to specific neighborhoods, to specific communities, you just will not

achieve any significant disproportionate increase in employment

among disaffected minority——

Mr. ISSA. So, if I can followup, what I think I hear you saying

is that even though Section 3 of the HUD act may be in use, ultimately, if the type of money in this or future stimulus is not targeted to those communities of highest unemployment. We can comply, but we are going to comply with jobs that tend not to benefit

those communities.

Mr. CARR. That is right. And what they point out is a host of

support mechanisms also needed in order to create and sustain jobs

and that is job training, basic education, access to jobs and creation

of jobs in the green economy which are sustainable jobs.

So, one of the points that they make is there is a difference between a job that pays you today and a job that pays you in the future. So, the recovery spending could stand a lot more targeting

around jobs of the future, targeted on neighborhoods that are most

disaffected and specifically around communities of color because

there is not any specific targeting in that way that would lead that

money——

Mr. ISSA. Following up one more time before I run out of time.

What I think I hear you saying is, if we do another round of stimulus, we probably would be better off having a year’s worth of training for people who are unemployable for the current jobs as a disproportionate amount of the stimulus.

In other words, spend that year and those dollars getting people

able to take the job the next year, not simply find some ‘‘we piddle

around’’ jobs for them to do for 1 year the way we are right now

at our National Parks, where we have a huge amount of money,

but it is just going to cause people to put hats on for the summer

and then they are back to where they were. Is that a fair assessment?

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Mr. CARR. I would say a more coordinated training program.

Some might last a year, some might last longer, but some might

last a significantly less amount of time to gear up people for more

sustainable jobs.

Mr. ISSA. Dr. Weller, I am going to take issue with one thing. I

just want to understand, from a standpoint of today’s hearing, dramatically increasing unionization in the inner city of hardcore unemployed individuals who lack skills is going to, in fact, benefit

them? Is it not true that, in fact, if you want to create enterprise

zones and bring people into the inner city, you have to attract people by competing favorably and if I heard you, you were simply saying unionization is a panacea?

If that is the case, then auto, steel and rubber would not have,

in fact, left Cleveland, Pittsburgh and the cities where I grew up

where that used to be an alternative but they have gone to the

non-unionized areas of the country and left behind my friends and

classmates unemployed in Ohio.

Mr. WELLER. Well, there is——

Mr. ISSA. I am not disagreeing with your unionization pitch. I am

just saying as to getting jobs to the urban America for

minorities——

Mr. WELLER. There are many examples of good unionized companies. Harley Davidson, Southwest Airlines, Boeing, many of the television stations are unionized companies that do extremely well.

The evidence, though, rather than talking about individual cases,

if you look at the literature from the World Bank and you look at

the economics literature, generally, unionization tends to go along

with higher benefits, better benefits. It also tends to go with

stronger productivity, largely because unions create a channel between employers and employees to talk about professional development and training.

Mr. ISSA. I have to stay on subject, ‘‘The Silent Depression: How

Are Minorities Faring in Economic Downturn?’’ We are trying to

focus on that today. I certainly want to focus on the economic

model, but I just want to know, are you, how would you equate

that to getting, encouraging people to make investments in areas

and job training and new employees that historically they have

not? Is it not true that, in fact, although unionization has its place,

it has not been a panacea for these communities?

Mr. WELLER. Well, generally if you look at the data for minorities

when it comes to unionization it is actually a huge bonus. In particular, Hispanics tend to gain the largest from unionization rates,

specifically with the aspects of training.

If you look at the construction industry, where Hispanic men, for

instance, are disproportionately represented, they tend to have successful training programs, long-term stick training programs. They

have the ways to bring people from unskilled jobs into a career

track in that industry.

Mr. ISSA. Mr. Carr, my time is up, but you look like you want

to answer your view on how we might encourage urbanization,

urban employment in the future.

Mr. CARR. Yes, I think that one of the things that we should be

doing is gearing up much more aggressively for jobs of the future

in a green economy. We have talked a lot about it, but I believe

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we are a long way from having actually identified what those

growth sectors are and thought through how to connect communities, disenfranchised communities, to the job training and the

education that is necessary to promote that.

And many of the most distressed communities in America are the

areas in which some of the most important green investments

should be made. They have been overlooked. They are struggling

with deteriorated infrastructure, Brownfields and other things.

So, I believe a much more coherent policy around green jobs is

essential and specifically focusing on what is the job training and

the technical skills needed to employ individuals as well as, I will

add, to actually own those jobs in the future. Not just to have a

job, to own jobs which would also lead to promoting small business

lending. So, it is not all about bringing companies in. It is about

incubating and building jobs.

Chairman TOWNS. The gentleman’s time has long expired.

[Laughter.]

The gentleman from Texas, Congressman Cuellar.

Mr. CUELLAR. Mr. Chairman, thank you very much for having

this meeting. I certainly want to thank our witnesses for being

here.

I agree, when you look at the numbers, they certainly are a telling story. White unemployment is 8.8 percent, Hispanic unemployment is 13 percent, African American unemployment is 15 percent.

You go with the same numbers. Also, one of the areas that I always

look at is the dropout rate in our schools.

In Texas, if I can use Texas as an example because I used to do

the budget there for both public and higher education, for students

to go in the ninth grade and as soon as they get to the 12th grade

for Anglos or for Whites it was 27 percent dropout rate. For the African Americans, there was a 34 percent dropout rate. And then for

the fastest growing minority in the State of Texas, the Hispanics,

there was a 49 percent dropout rate. So, you have those large numbers who are dropping out.

We are looking at current situations here but if you look at what

is happening in our schools, then we can see that if we do not make

some of those long-term and certainly some of the short-term structural changes, we are not going to get out of this particular situation.

My question is, and I know that the family, parents have a role

in making sure that our kids go out and go get an education and

become productive citizens, and I know the role of the private sector, I am a big supporter of that, but looking at the Federal Government, could you all give me three things that are doable? You

know, keep in mind, let us say that we want to get a good friend

like Mr. Issa on board, something that is doable, because I know

that some of the things are very difficult.

What could we pass here in a bipartisan way that is doable?

Could you all, Mr. Secretary, we will start off with you, could you

give me three things that Congress could do to help address this;

whether it is short term or long term, whether it is structural

changes. Same thing, Mr. Carr and Dr. Weller, or whoever wants

to go first.

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Mr. WELLER. I am not sure whether I can say three things, but

I think one of the education outcomes are intrinsically linked to

housing situations, stability of housing. So, I think focusing on

stopping the foreclosure crisis, the sharp rise that we have seen in

foreclosures, and ultimately maintaining equal access to sustainable housing solutions, I think, is ultimately going to feed into better education outcomes.

That goes back to what Mr. Carr and I have been saying about

leveling the playing field through access to lower cost and sustainable mortgages, for instance. I think those kinds of financial regulations can ultimately feed into a more stable housing situation and

more stable education outcomes.

Mr. CARR. I would say that there are three things. One is, and

I will go back to something that Congressman Issa said when he

started his conversation about education being the primary tool for

upward mobility which I completely agree with. But what I would

say is this issue of concentrated property in segregation is really

important.

The Pugh Charitable Trust just released a study which really

was mind-boggling. It concluded that individuals who live in highconcentrated poverty areas, even if they are middle or upper income, have a 50 percent chance for their children to experience

downward mobility compared to people who are living in areas

with low concentrated poverty. And concentrated poverty was defined as simply 20 percent or more.

They found that between 1985 and 2000, almost half of African

Americans lived in neighborhoods with more than 20 percent concentrated poverty, which predisposes them heavily to downward

mobility. That compares to 1 percent for non-Hispanic White

households.

So, dealing with this issue of residential segregation is really important and it is often missed in conversations on the economy. But

it is absolutely essential. And it costs us nothing except to regulate

fairness in the system.

The other thing I would say is that I completely agree on the

issue of connecting housing policy and education policy and I have

written about it pretty extensively in my testimony. I believe particularly in an area of scarce resources, now is the time to actually

leverage our investments in housing and in education so as to

make sure that when we are spending on those expenditures, including transportation policy, that we are doing so in a way that

gives adequate access to all three of those resources so as to promote economic development. And as I said, in my testimony I have

discussed it at some length.

And the third thing, I would go back to small business development. Most people think of big corporations and Fortune 500’s, but

most Americans do not work for Fortune 500 corporations. So, helping individuals become more entrepreneurial, I think, is one of the

easiest steps to promoting economic vibrancy in distressed communities. And that means opening the doors to finance individuals

who are already qualified, as well as giving additional training and

support to individuals who could be qualified with little additional

help.

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Mr. SKINNER. I agree with my colleagues and just want to add

that I think transportation is also very important in that mix. The

nexus of housing, education, and transportation in terms of access

to better opportunities, community access to jobs, and educational

opportunities all kind of fit together.

Mr. CUELLAR. Thank you. Thank you, Mr. Chairman.

Chairman TOWNS. Thank you very much, gentleman from Texas.

Mr. Luetkemeyer from Missouri.

Mr. LUETKEMEYER. Thank you, Mr. Chairman.

I would like to start with Mr. Carr this morning. You mentioned

the Community Reinvestment Act, I believe, in your testimony.

Otherwise, I think I picked up something like that. I was just kind

of curious. The Community Reinvestment Act has been around for

about 30 years and is supposed to be intended to help folks in disadvantaged areas of their cities and their communities to be able

to have access to credit.

What has been your experience? Has it been working? Does it

need to be tweaked? Is it a total disaster? Is it a monumental success? Where would you classify it and what kind of grade would

you give it and where would we need to go to improve it or do

something different?

Mr. CARR. Sure. Thank you for the question.

I think that law is one of the most critical laws on the books to

ensure fair access to safe and sound credit. And one of the things

that I think is important in this current foreclosure crisis is to recognize that, according to the Federal Reserve Board, only 6 percent

of these high-cost reckless loans that were the center of this foreclosure crisis, 6 percent were attributable to loans that were regulated under CRA. The vast majority, almost 95 percent, were nonCRA regulated. And so I think that speaks volumes about the

power of that law to make sure that lending is done in a safe and

sound way.

What I would say, however, is that a major weakness with the

law is actually not the legislation itself, it is the enforcement of the

law, which was very poorly enforced and, in fact has, going beyond

the poor enforcement, has a lot of loopholes and exceptions and opt

outs and, again, in my testimony I go through those.

So, for example, lots of financial institutions that are covered

under CRA get to choose, almost like they get to choose their regulators, they get to choose which products they actually report under

CRA. This makes no sense at all. So, it allows them to establish

affiliates and do the same kinds of reckless things that Wall Street

firms were doing, and implode not just the credit markets, but destroy the wealth of American communities. So, we need to eliminate those.

We need to bring under control of CRA institutions, the full

range of institutions, bring under control credit unions, bring investment banks, bring all these institutions under, at a minimum

to report what and how they are doing things because one of the

things we have found is that when you shine a light on misbehavior, a lot of that misbehavior ends right there.

So, a big part of expanding CRA is to expand the data that we

are looking at so we can be able to better understand and detect

where disparities are occurring. And so we can eliminate a lot of

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the debates that happen back and forth as to is discrimination occurring, no your statistics say this, ours say that, but you are not

including credit score. Let us eliminate the debate. Let us put good

data in place. Let us regulate those institutions in law and then

let us require that the financial regulatory agencies actually do

their jobs, which is not happening now.

One of the reasons, I was just going to say, the Consumer Financial Protection Agency, one of the reasons we are very strongly supportive of that and supportive of including CRA in that entity, is

so that you will have an agency whose whole focus and mission in

life is to focus on making sure that consumers get products that

help to promote their economic mobility.

It seems that the financial system should be all about promoting

the economic mobility of the American public. But instead, it really

is about, and has been for now increasingly a decade, making profits regardless of what the impact is on the American public. And

those days really must come to an end.

Mr. LUETKEMEYER. OK, my question is going to be, where is the,

you know, your criticism is that it is not being enforced correctly

and where do we need to go to get that more well done? I assume

you said that to the new regulatory agency. Do you want to empower it? Is that, do I understand you correctly?

Mr. CARR. That is right. It is currently under the authority of the

Federal Reserve Board.

Mr. LUETKEMEYER. Right.

Mr. CARR. And, similar to their authority under the Homeowner

Equity and Protection Act, which was enacted in 1994, and the

final regulations were not issued until 2008, it is the same kind of

regulation for the Community Reinvestment Act where it is lax

oversight and not significant review of banks.

For example, 97 percent of all financial institutions get a passing

grade under CRA. But 10 million American households are

unbanked and as many as 40 million are underbanked. So, how can

we have all banks doing such a great job?

We are in the middle of the worst financial, the worst housing

crisis since the Great Depression, yet 97 percent of the banks are

passing their ratings right now. And there are no fair lending or

discrimination cases that have been brought forward by those Federal agencies in the middle of this crisis wherein everyone knows

unfair and deceptive lending in minority communities against persons of color is a major cause of the origins of this crisis.

Mr. LUETKEMEYER. OK, thank you. I can see that I have to ask

shorter questions here.

Chairman TOWNS. We will give you a second round, OK? We will

give you a second round.

Mr. LUETKEMEYER. Thank you, Mr. Chairman.

Chairman TOWNS. The gentleman from Missouri, Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman. Thank you for conducting

this hearing.

Secretary Skinner, as noted in your opening statement, the State

of Maryland reacted to the foreclosure crisis by passing legislation

in 2007 including the Homeownership Preservation Task Force and

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grams, Maryland was recently ranked as having the 12th highest

rate of foreclosure in the Nation.

What is working and not working within Maryland to prevent

foreclosures and at what point are your hands tied in providing assistance to troubled homeowners? Essentially, is there a certain

point where the State can no longer help, but instead aid must

come from the Federal Government or the lending institution

itself?

Mr. SKINNER. Thank you for your question. I think, first of all,

that we in Maryland have really done a terrific job in focusing on

the issue and putting tools in place to help homeowners to stay in

their homes.

We started out by funding a network of housing counseling agencies. We advertised to get people who were behind in their mortgage to come forth and set up a hot line that they could call. And

through that hotline we referred them to this network of housing

counseling agencies to help provide advocacy for them in working

with these services in trying to get their loan modified.

I think that program has been very successful. We have counseled over 12,000 families over the last year and a half or so. We

have actually saved and can document close to 7,000 families from

going into foreclosure.

What is happening now, and certainly we are troubled by what

we see, is the increase in the number of foreclosures in the State,

but we really attribute that more to what is happening in the larger economy as opposed to what was happening originally and that

is the subprime mortgages that were adjusting where the payment

went up and so forth.

But now, people are losing their jobs. People are getting cut back

on overtime, they are losing second jobs and you know that margin

is enough to make them not be able to pay their mortgage. So we

are starting to see that effect. In fact, the mortgage bankers’ data

shows that prime mortgages are now, the majority of the foreclosures have gone from the subprime to prime mortgages. And

again, I think that can be primarily attributed to the unemployment or reduction of income through various sources.

Mr. CLAY. Well, that will take me to my next question for Mr.

Carr and Mr. Weller and each of you can try to answer it.

According to recent reports by the Center for American Progress,

the foreclosure crisis is estimated to affect close to 9 million homeowners over the next 4 years. An additional one in eight mortgages

are currently delinquent or are in the process of foreclosure. That

statistic does not include a number of homes that are in default but

have not reached foreclosure status.

The magnitude of the foreclosure crisis has gone beyond the

realm of the subprime predatory lending market and has affected

homeowners with prime mortgages who have lost jobs and income.

What practical policy measures are needed to establish a floor for

home foreclosures and slow the rate of the crisis? And, are loan

modification programs working?

Dr. Carr, you try to answer as briefly as possible and then we

will get Mr. Weller to also respond.

Dr. CARR. Sure. The loan modification programs are not working

largely because servicers and incentives, financial incentives, are at

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odds with both the investors and the borrowers. And so, despite the

fact that the Making Home Affordable Program has a number of

incentives, those incentives do not begin to rival the financial incentives the servicers have to taking a loan into foreclosure.

Most servicers get a fee based on the outstanding principal, I

mean, based on the total loan volume that they are servicing. So,

for example, one of the things that is not done is forgiving principal

balances. That is one of the major things that would create a sustainable loan but it is done in less than 10 percent of all cases.

I say it is out of step with the interests of the investors because

the loss of severity now in foreclosed loans is more than 60 percent.

The loss is 10 times greater on a loan that goes to foreclosure versus that modified. So we need some sticks.

One of the sticks would be to reform the bankruptcy code, as

least on a temporary basis, to allow consumers to go to Bankruptcy

Court to deal with that problem. That would serve as an incentive

not just for those who actually go, but it would serve as an incentive for servicers to understand that a third party will have an opportunity to modify the loan in a reasonable way if they choose not

to. So, that is one of the quickest things, I think, that could be

done.

Beyond that, I would just say that a nuance problem with this

crisis is that more than 60 percent of the foreclosures now are actually being driven by unemployment and loss of income which

makes modification much more difficult, and that suggests an even

broader role for Federal intervention.

Mr. CLAY. Thank you.

Dr. Weller.

Mr. WELLER. Well, I think clearly that bankruptcy reform is the

first step. I think that is the quickest way of wielding that stick

that Mr. Carr talks about.

But I think we are losing a little sight of the fact that we now

have a credit quality problem and that is largely driven by what

we see in the labor market and that requires us to focus on strong

and good job growth, that means continuing the stimulus, extending unemployment insurance benefits, but then also making sure

that we make sure that the new jobs that are created are good jobs

either through job training programs, through a higher minimum

wage, through earned income tax credits, and through an easier

way to join a union.

Mr. CLAY. Thank you so much.

Mr. Chairman, I yield back.

Chairman TOWNS. Thank you very much.

I now yield to the gentleman from Ohio, Congressman Kucinich.

Mr. KUCINICH. Mr. Chairman, thank you very much for holding

this hearing.

I think it is really important to ask how minorities are faring in

the economic downturn because those of us who represent constituencies of many different races and ethnic groups have seen the pervasive effects of policies on Wall Street. There is a certain amount

of unemployment that is necessary for the proper functioning of the

economy, which has seen the systematic discrimination against

people of color on lending issues, it goes back a few generations.

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And now we are starting to see the effects of economic policies

that, for those who have generally been struggling at the lower end

of the social economic strata, this economy has increased its brutality.

I just want to go back over some territory here, Mr. Chairman.

Many of you will remember, especially those of you who started

in politics many years ago, there was systematic redlining going on,

that all across America there were people who did not get access

to loans. And it was because it was based on color more often than

not. When that was discovered, the Community Reinvestment Act

was brought forward.

Now, when I was mayor of Cleveland, we were one of the first

cities to use the Community Reinvestment Act to force lending institutions to put money back into the communities it got the money

from. Because communities were being strip-mined. People would

put their money in local institutions, and then those local institutions would take their money not only out of their community, but

out of the country. And people would wonder, why could we not get

money to fix up our homes or to fix our businesses? This was going

on.

So, the Community Reinvestment Act passed. But then a few

decades later someone figured out, well, they could increase their

community reinvestment profile with subprime loans. And they

shopped those subprime loans in the black community in Cleveland. And they did it in a way that was extraordinary because

when the subprime loans finally went belly up, you had vast areas

in neighborhoods across my community where people lost their

homes.

Now, let me speak to this for a minute from a personal standpoint. I grew up in a family of seven children. My parents never

owned a home. We were renters. And we kept moving as the family

expanded.

There was a lot of discrimination against big families who were

renters because, if you did not own a home and you rented as a

family group, people would just, they would even have ads in newspapers that said two children only. We had seven. So we kept moving as the family expanded. My parents could not afford a home.

We ended up living in 21 different places by the time I was 17, including a couple of cars.

I understand what that dream of home ownership is about. Because the biggest day in my life came when I was able to have my

own home. I understand what it is like for people who finally say

well, this is the biggest day in our life as a family. We are going

to finally have our home.

And then they find that dream is just pulled out from under

them by somebody who is gaming the system and making a lot of

money on it, and then the people lose their home as a result and

then they are thrown into a rental market where they are paying

more money often for substandard housing.

So, you have a housing crisis as part of the economic crisis. You

have a massive unemployment crisis. Unemployment in the inner

city, I would guess, Mr. Chairman, that we do not even know what

it is, because people stop reporting. I was in my sister Marcia

Fudge’s District for a Labor Day parade and people were calling

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from the street corners, ‘‘Hey, help me get a job.’’ I would venture

to say that in some areas of the inner city the unemployment is

probably over 30 percent.

So, there is talk about a recovery. For whom? Who is recovering?

Wall Street? Jobless recovery? What is a jobless recovery? I want

someone to tell me, what is a jobless recovery? We have at least

15 million Americans out of work. You have massive numbers of

people who are underemployed. And it is hitting the communities

of color the hardest.

So, we need to penetrate the truth of what is going on here and

call it for what it is, a systematic economic discrimination. And if

we do not address it here, we cannot address it for anyone.

Mr. Chairman, we need a massive job program, put all of America back to work, and I am still a believer that a rising tide lifts

all boats. But this tide, at this point, is not coming back.

Mr. CUMMINGS [presiding]. Thank you very much.

Let me just ask this. Dr. Weller, you know, we are in this health

debate right now trying to get health insurance and take care of

the American people. And whenever I go to a meeting where I have

a majority of African Americans and I ask them this question, how

many of you all have attended a funeral or know of someone who

died within the last year who, when you walked out of the funeral,

you said to yourself ‘‘they should not have died, if they had had

health insurance’’ or ‘‘if they had been treated properly they would

still be here.’’ I guarantee you that I have never gotten less than

70 percent of the people to raise their hand. Ever. And I ask that

question all the time.

How important do you see this health insurance, health reform

debate, I mean, this getting health insurance for folk?

It is interesting; just let me throw this out. In the movie ‘‘Sicko,’’

one of the things that they said in that movie that I will never forget, they said if you can leave some people hopeless, helpless and

unhealthy, you do not have to worry about them rising up. And

there will always be a divide between those who have and those

who have not.

And with that, would you answer that question?

Mr. WELLER. Sure. I think health care reform is critically important on many levels. The first one is, if you reform health care,

meaning you make the system more efficient, you increase coverage, you actually reduce the cost increases, you do a number of

things. The first thing you do is you improve economic security because people have to worry less about losing their homes, losing

their limited savings, if there is a health emergency. So that is the

first step.

The second part is it will ultimately help to create more jobs because you make the cost of health care substantially more predictable and that is one of the things that entrepreneurs are looking

at, the predictable costs of business into the future. So, by reining

in the cost increases of health care, I think you are ultimately

going to boost job creation through business creation.

And, ultimately, you free up some resources at the government

level, both at the State and the Federal Government level, because

you are putting the government on the path to fiscal responsibility

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and thereby can focus on other priorities such as wealth creation,

such as education and so on and so forth.

Mr. CUMMINGS. Dr. Carr, when you appeared before the Joint

Economic Committee a month or two ago, you spent some time

talking about foreclosure and this issue of bankruptcy reform. You

are of the opinion that, and it sounds like you still are, that is the

way to go.

Does that really help people? Secretary Skinner and I had a

forum, we have done it twice now, and it seems that we have been

able to help a lot of people, literally hundreds, by bringing them

together with their bankers. But we started running into problems

when people have no job.

I think somebody else, I think it was Dr. Weller, one of you all

said that. And so, when you have the person who has no job and

is just getting unemployment benefits, do you see that as a source

for them? I mean, does that work?

Mr. CARR. That is a really good question. It is a difficult sort of

crisis which we are heading into because, even though the bulk of

these foreclosures now are unemployment, it is worth recognizing

that we have a whole new generation of problematic loans that will

begin to reset next year called Pay Option and Interest Only.

So we are not out of the woods on the old fashioned product driven foreclosure. We are just sort of, in some respects, in the eye of

a hurricane. We are in a new phase, and the old phase is about

to come back with yet a new generation.

Let me go to that question. The reason I say we need more than

bankruptcy is you are correct. Some people will lose their jobs but

they will only lose their jobs for a month or two or three, not everyone will be long-term unemployed.

We need a program that actually provides some type of moratorium as a bridge for people who are temporarily unemployed rather

than having them thrown out of their houses during unemployment. And rather than focus on them being reemployed, they are

focused on what do they do about this foreclosure that is pending.

So we need a bridge, a moratorium for foreclosure.

In other cases, people who are long-term unemployed for whom,

you just cannot help them. Well, we need some type of rental intervention. Because one of the problems with the economy is not just

the foreclosures, it is the loss of the value of the home that comes

as a result of using foreclosure as a trigger for abandonment of

that home.

So, we need to find a way to keep people in their homes so that

we are not having a twofold impact from the foreclosure of destroying home prices further because that is the real heavy hammer on

this economy and on individual wealth.

And then finally, we need a program that is more comprehensive,

that gets those toxic loans out of the bowels of financial institutions. Because that is why they are continuing to fail, despite the

fact that it is estimated that we are standing, the American taxpayers are standing, behind those financial institutions with $23.7

trillion. That is the estimate by the Special TARP Inspector General. And they are still failing.

So, we need a way to pull those toxic assets out and, unfortunately, it cannot be voluntary now. We need a process that literally

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does that so that we can modify those loans in a sustainable way

because we have millions more on the horizon.

Mr. CUMMINGS. Thank you.

Mr. Tierney. I see my time is up.

Mr. TIERNEY. Thank you, Mr. Chairman.

Mr. Carr, just to followup on what you were saying. Do you have

a vision on what that rental program would look like in the instance where you cannot save the foreclosure necessarily, but you

want to find a way to keep people in there as tenants?

Mr. CARR. Yes. Years ago, the Homeowners Loan Corp. in the

Great Depression was established and I think that we need an entity that is very similar to that which would allow, for example,

HUD to potentially take over and manage or have a master servicing contract for renters to allow individuals to remain in those

homes until such time as they can be sold at a reasonable price and

those individuals themselves are ready to relocate and/or to purchase a new home.

But I think that the real key here, I have not thought about the

details of it, but the real key is to avoid that abandonment of that

property.

Mr. TIERNEY. I appreciate that. It is the details that we are always looking for on that.

Mr. Weller, let me ask you a question. I do a lot of work on credit

cards which, I think the evidence shows are pretty much putting

a squeeze on all communities and certainly not the least minority

communities.

On that, I think some of the research that we were looking at

here shows that the average credit card interest rate for low income households and people of color are around 22 percent, which

is a full 10 percent greater than Caucasian families in many instances, at least the high income families. Eighty percent of African

American households have credit cards that are indebted versus

about half, 50 percent, of Caucasian households and the Latino

communities falling right along in that 80 percent area.

So, interest rates are keeping low-income people in this trap. We

did some legislation recently which took care of some of the more

egregious practices of credit card companies in terms of fees being

added and things of that nature. But at that time, several of us

made the argument that unless you do something on capping interest rates you are going nowhere because whatever the banks and

lenders lose on reforming one aspect they are going to make up by

jacking up the interest rates.

Do you have an opinion as to whether or not a good usury rate

would be in order here and that we ought to try to establish it and

enforce it?

Mr. WELLER. Let me talk about consumer credit generally. What

we find when we look at consumer credit generally, for Whites versus minorities, we find that there is credit steering in two ways.

One is geared more toward minorities, who steer more toward the

higher cost products such as credit cards, installment loans and

others, such as pay day lending. And then once they are in that

category, they tend to pay more even in that category than Whites,

so there is a double whammy here.

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I think I am a little bit cautious on the usury side because it is

very hard to legislate and regulate even just one aspect of the cost

of a credit card. So what you end up playing is a game of ‘‘Whacka-Mole’’ where you cannot raise the credit card interest rate, but

then the credit card company will lay on different fees, shorten the

grace periods and other cost items——

Mr. TIERNEY. That end we took care of in the last piece of legislation. All they did was shift the costs over onto the interest rates.

So, I get your drift there. But I think you have to close all the

doors.

Mr. WELLER. Right. Well, one thing we have learned is that the

credit card industry and other financial service providers are extremely innovative when it comes to making a buck off people. So,

I think ultimately what we want to go for is some sort of comprehensive legislation and regulation and I think the Consumer

Safety Product Commission idea is the right way to go because it

is a more flexible tool to regulate credit products and actually create the economic mobility that credit is meant for in that role.

Mr. TIERNEY. Well, I do not want to get into an argument with

you about that. I hear what you are saying and I have talked to

the people that are responsible for that legislation and the administration, and they are missing the boat. No matter what you do in

terms of that type of regulation, they are going to make it all up

on the interest rates unless you do something there.

It looks to me, and you can tell me if I am wrong, it looks to me

that these credit card companies just are not doing any underwriting anymore. The reason they steer them into the credit card thing

is that they have it figured out. I can jack the interest rates up on

you over there and I can then force you, bludgeon you, in Bankruptcy Court because you can no longer get out on that side.

So, I just make that point. I will not belabor much longer than

that. But, if we do not do something there, and we had laws related

to that until 1978.

Mr. WELLER. Well, I think——

Mr. TIERNEY. We go back to the Babylonian ages when we used

to think that this was a bad thing to do, just to let people just keep

jacking up the interest rate all they want and in 1978 it was

knocked down just because it was not similar from State to State.

Mr. WELLER. You can probably do a number of things, in particular on transparency. Just before you start a commission or something like that, you have to say on the credit card statement as a

company, this is how much we charged to a total dollars last

month, or something like that, rolling it all together in one——

Mr. TIERNEY. They make disclosure laws on transparency.

Thank you very much, Mr. Chairman. I yield back.

Mr. CUMMINGS. Ms. Kaptur.

Ms. KAPTUR. Thank you, Mr. Chairman, and thank you for holding this hearing today.

Welcome. I apologize that I was not able to be here for your full

testimony but I have read it and we thank you for your service to

our people.

Let me ask you, what mechanisms or plans have you heard about

or are involved with that would bring justice to the American people in the situation we are facing? That is the big question.

137

The housing market meltdown is really at the heart of our financial crisis. And, as you have indicated, it is going to just continue

to unwind. And the commercial real estate bust has not even hit

yet. That will happen next year.

The megabanks had a plan, a massive plan to exploit the American people and they did it masterfully. They made billions and billions and billions and billions of dollars, a lot of it tucked away in

anonymous hedge funds and offshore accounts. None of those people are being brought to justice right now.

Meanwhile, they did this by raiding home equity through high

risk schemes which, as we know, are very imprudent, very irresponsible and fraudulent in large numbers of cases. They are now

dumping their paper on the American people. The FHA, at Fannie

Mae, and Freddie Mac and, even though they have gotten hundreds and hundreds of billions of dollars in TARP funds from the

people of the United States, they are not doing mortgage workouts.

Only about 15 percent they claim of the millions and millions of

mortgages that are out there, you know, they are biting at the

edges, but they do not really want to resolve it because the Government big basket will be there to absorb their bad paper.

The workouts have been occurring, those that have been, the few

that have been, at a snail’s pace purposefully because these same

institutions can make more money off of delinquencies. And tax

losses, and short sales, and by rigging the auction process, as you

have probably seen in your communities, by taking a home that is

worth $80,000 and then auctioning it off for $10,000 or $20,000 and

then keeping it on their books and booking the losses in the next

tax year.

So, you know, they did some of the worst things. They preyed

upon people’s hopes and many times people without attorneys getting involved in mortgage loans that were fraudulent. So, my big

question is, are you; my problem is I am worried about our country.

I do not see a big enough force out there that is an idea of the magnitude that they came up with to hold them accountable and bring

justice.

So, my question to you really is, are you aware of groups of mayors getting together or aggrieved parties in our country, and bringing forth litigation, aggressive litigation, before judges in several

jurisdictions? Are you aware of civil rights cases being brought to

the Federal court system to rein them in and to bring them to justice? Are you aware of what can be done? Are there ideas that are

cooking out there through our State attorneys general or our State

Departments of Housing and Community Development to rein in

the securitization process?

Are you aware of ideas that are out there bubbling up across our

country to force accountability and restructuring of our banking

system itself in order to bring accountability and to create a system

that is more prudent and more favorable to prudent home lending

in the future?

What I am not hearing from the country, I am not hearing an

idea big enough to offset what they are doing and what they have

done. So I am kind of pushing you a little bit in the questioning.

It is not enough just to say, well, the Federal Government will do

some more affordable housing. I am for that. I keep thinking, is

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there any amendment we can offer to the CRA, the Community Reinvestment Act, where we get dozens of attorneys general, dozens

of Housing and Community Development directors across this

country, dozens of mayors to come together and say, this is what

we need, this is not enough?

We have to bring justice to the system. How do we get that justice? I wish I could say I believe this institution will bring it. I have

my doubts. Maybe I will be surprised.

What is bubbling up out there on the outside that is a sufficient

counterforce to meet the real challenge before us? Are you aware

of anything like that?

Please, Mr. Skinner?

Mr. SKINNER. I will start. We talked about a number of things

today including financial reforms and so forth. Let me just give you

one specific example.

You talked about lawsuits. The city of Baltimore has filed a lawsuit against Wells Fargo, essentially alleging what you might call

reverse redlining. Instead of not doing loans in a certain area, what

is alleged is that Wells Fargo, and not only Wells Fargo but many

of the other lenders, did was really target minority communities for

these bad loans, the subprime, exotic loans.

And the data that the city has come up with, for example, shows

that in 2006 Wells Fargo made high cost loans to 65 percent of its

African American customers versus only 15 percent of its White

customers. And I think you can see examples of that all over the

country.

So, this is kind of, I guess, the first ‘‘shot over the bow,’’ if you

will, in terms of a city actually filing suit against a lender seeking

some recompense in terms of what this has done, the cost to the

city in terms of foreclosures, deteriorated, vacant, boarded up

houses that you see spotted all over the city of Baltimore in Congressman Cummings’ district. We see it all over. So, I think that

is one example of a local government being very aggressive and

going after one of these lenders.

Ms. KAPTUR. So have other local governments joined you in that

suit as affiliated parties?

Mr. SKINNER. Not as far as I know. It is the city of Baltimore

right now.

Ms. KAPTUR. I want to compliment you on that. That is the level

of idea that needs to come forward and, even though justice will

be meted out slowly in the court system, we need the best minds

in the country. We need civil rights lawyers. I am so upset about

the Department of Justice and the lack of civil rights staffing there.

I can tell you in the white collar financial crimes division we

should have over 1,000 agents. We have 140 over there right now.

I tried to get an amendment, an Appropriations bill. I am just

putting this on the record so people know, in order to increase it

to 1,000. We had 1,000 white collar crime prosecutors over there

and agents when we had the savings and loan crisis. Now we have

140 with this level of fraud and abuse and gaming of the system?

That Department of Justice has to wake up. And I am sharing this

because perhaps you will be in audiences where you can help make

this happen.

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But I am very concerned that, I am hoping that the judicial system will be able to help us get justice as we tried to get it through

here, the legislative branch. So, I compliment you on that.

I know in our State, in Cleveland, Judge Boykle has thrown out

several cases because, when individual plaintiffs have come forward, the large banks cannot produce the note, the mortgage note.

And most people are leaving their homes without even understanding that they have legal rights to that, having that note produced,

and that they do not have to leave their houses.

It is hit and miss. There are a few places where this is happening, but systemically it is not happening.

Mr. Chairman, I know my time has expired. But if any of the

other witnesses wish to comment, I would greatly appreciate it.

Mr. CARR. Congresswoman, the challenge you put before us in

that question is extraordinary. And it is hard to know where to

start.

I would start by saying, first of all, much of what you describe,

I think we should recognize that while it was bad behavior on the

part of the financial institutions, they were allowed to do it. We

have a regulatory system that is just allowing them to do it. And

by allowing them to do it, it is actually incenting them to misbehave against the interest of the American public.

To the extent that it is still happening, the first thing I would

say is that we need to enact meaningful regulation of the financial

system now. Today. This afternoon. We really need to do it, because the misbehavior continues. It is not like it is all in the past.

Second of all, it is important to recognize that everything that

those institutions did was not fraud. As bad as it may have been,

if it is legal, it is not fraudulent. And that is one of the problems

with a lot of the laws in that they allow for financial institutions

to exploit, legally exploit, the public.

A third thing is that, to the extent that they did exploit the public illegally, there is insufficient and inadequate data for individuals to partake in legal actions in any significant way. I mean,

bringing a legal suit against a financial institution for discrimination in lending is extremely time consuming and very costly. Where

do non-profit organizations get those resources? We just simply do

not. Unless Congress decides they want to start appropriating them

specifically for that action, which I think would be a very good

idea.

Ms. KAPTUR. You come and see me on that.

Chairman TOWNS [presiding]. Let me say to the gentlewoman,

your time has expired.

I think that what has been pointed out here is that as we look

for reform for the financial system that we need to look at a structure that is going to give us some feedback because, whatever we

do, they find a way to do something different.

And I think we need to look at a structure that gives us information, as a board of some type, because whatever we do, they just

find a way to do whatever they want to do and, of course, it is

legal. And that is the issue that we have to address because we

cannot continue to let this thing move along without being checked

because people are being hurt.

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So, I want to thank the gentlewoman for her comments and I

want to thank you for your statements and we look forward to continuing to work with you on making certain that the money gets

to where it is supposed to go and help the people that it is supposed to be assisting. There is $787 billion out there floating, and

we need to make certain that the money does what it is supposed

to do, and that is our concern.

So, I want to thank you, Dr. Weller, I want to thank you, Mr.

Carr, and Secretary Skinner for your testimony. Thank you so

much.

We will now move to our second panel.

We welcome our distinguished second panel. As with the first

panel, it is committee policy that all witnesses are sworn in. So

would you please stand and raise your right hands as I administer

the oath?

[Witnesses sworn.]

Chairman TOWNS. You may be seated. Let the record reflect that

all of the witnesses answered in the affirmative.

Let me introduce all of the witnesses. We have Ms. Janet

Murguı ́a, president and chief executive officer of the National

Council of La Raza, the largest national Hispanic civil rights and

advocacy organization in the United States of America, which

serves millions of people in education, health care, immigration,

civil rights and economy policies and services.

Of course, prior to joining La Raza as president and CEO in

2005, she served in the White House from 1994 until 2000 as deputy director of legislative affairs and, ultimately, became deputy assistant to the President of the United States, which was Bill Clinton at that time.

We welcome you, Janet.

Mr. Marc Morial is the president and chief executive officer of

the National Urban League, the Nation’s largest and oldest civil

rights group. He is the director of that organization. Prior to becoming President of the National Urban League in 2003, Mr.

Morial previously served for 8 years as the mayor of New Orleans

and was the president of the U.S. Conference of Mayors.

Welcome.

Ms. Jacqueline Johnson-Pata is the executive director of the National Congress of American Indians, the oldest and largest tribal

representative organization which coordinates with other 250 tribal

governments to inform the Federal Government and the public on

policy issues affecting American Indians’ tribal communities.

Prior to joining the NCAI, Ms. Johnson-Pata served as Deputy

Assistant Secretary of Housing and Urban Development in the Office of Native American Programs.

Let me welcome you, Ms. Johnson-Pata.

Ms. Lisa Hasegawa has been the executive director of the National Coalition for Asian Pacific American Community Development, for many years and we are delighted to have her with us as

well. We look forward to your testimony today.

Also on the panel is Mr. Harry Alford. He is the president and

chief executive officer of the National Black Chamber of Commerce,

which was incorporated in Washington, DC, in 1993 and, we are

delighted to have you on the panel today as well.

141

So, what I will do is just go right down the line. I will start with

you, Mr. Mayor, and just come right down the line, I think, just

right down. So we start with you.

Thank you so much.

STATEMENTS OF MARC H. MORIAL, PRESIDENT AND CEO, NATIONAL URBAN LEAGUE; JANET MURGUI ́A, PRESIDENT AND

CEO, NATIONAL COUNCIL OF LA RAZA; LISA HASEGAWA, EXECUTIVE DIRECTOR, NATIONAL COALITION FOR ASIAN PACIFIC AMERICAN COMMUNITY DEVELOPMENT; JACQUELINE

JOHNSON–PATA, EXECUTIVE DIRECTOR, NATIONAL CONGRESS OF AMERICAN INDIANS; AND HARRY C. ALFORD,

PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL

BLACK CHAMBER OF COMMERCE

STATEMENT OF MARK H. MORIAL

Mr. MORIAL. Thank you very much.

Good morning, Mr. Chairman, and I want to thank you and the

committee for the opportunity to testify on behalf of the National

Urban League this morning, to talk to you about the disparate impact that this current economic crisis is having on African Americans and to share with you recommendations on how to address

them.

In the past year, this Nation came face-to-face with a real enemy,

an almost unprecedented economic crisis of the likes the Nation

has not seen in more than half a century. Our economy does have

a certain elasticity built into it that gives many people the room

they need to survive tough times. However, because of decades of

disparities, many African Americans do not have the benefit of that

elasticity.

In plain language, there is no more give to give and many of our

communities across the country are at the breaking point and face

desperate circumstances if we do not take swift and certain action

now.

I do not say this to alarm or inflame. I am just stating a plain

fact based upon experience that includes decades of service delivery

in 100 communities across this Nation and verifiable research.

We see in the faces of the people who come to us for help each

year the pain that this economic crisis has wrought. We hear it in

the voices of the men and women and families who seek jobs that

are just not there. We feel it in the pain of those who come to us

for help keeping a roof over their heads. And this experience is amplified and supported by empirical research.

Our ‘‘State of Black America’’ Report demonstrates that the typical Black family in this Nation possesses less than 10 percent of

the net worth of the average White family. That almost one-third

of all African American families have zero or negative net worth.

And far, far, far fewer African Americans than Whites benefit from

inherited wealth or assets.

This is a snapshot. But what it illustrates is that African Americans, by and large, do not have the economic cushion that protects

many from catastrophe when times get tough and the economy

goes into a freefall.

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We are starting to see some hopeful signs that indicate a turning

around. However, even if this is the case, it does not mean that the

African American community is out of the woods. In fact, we believe, and our research shows, that there is a troubling trend which

must be recognized and reversed.

So, I share with you today the following. Median household income during the 1991 expansion, after the recession in 1991, increased. After the recession of 2001, even though there was an economic recovery, median household income of African Americans declined. So what I want to emphasize is that in the recovery in the

1990’s, median household income increased. In the recovery of this

decade, median household income decreased, declined.

And, the 6-year decline in unemployment for African Americans

during the 1991 expansion, or rather the increase in employment

of African Americans during the 1991 expansion, was six times

greater than that during the post-2001 expansion.

Here is the point. African Americans made great strides in employment in the 1990’s. In the recovery of the last decade, that improvement was, for the most part, nonexistent.

The economic downturn of today has exacerbated those circumstances. So the unemployment rate in August rose to 9.7 percent across the board. For African Americans, it exceeds 15 percent.

Our economists believe that the real unemployment rate, when

you factor in those who are not looking, those who may be working

part-time, those who were recently laid off and not yet looking for

a job, is far higher than that. We could, in the Black community

today, we think face a real unemployment rate of over 20 percent

and in the White community exceeding 10 percent.

In fact, the current recorded unemployment rate for White Americans of 8.9 percent is extremely serious. But it is the same as the

unemployment rate for Black Americans during the so-called recovery of the last several years that preceded this recession.

When I released our Homebuyer Bill of Rights 2 years ago, the

subprime crisis was stripping wealth from our communities and

victimizing our most vulnerable citizens. I am not talking about

deadbeats. We are not talking about people who are trying to get

something for nothing. These were people who did everything they

were asked to do. They work hard, they saved their money, they

bought homes and they were victimized by unscrupulous lenders

who pillaged their hard-earned dollars.

Chairman TOWNS. Mr. Mayor, can you summarize? Your time

has expired.

Mr. MORIAL. Yes. Unfortunately, there are those who, instead of

focusing on solutions, have tried to deflect blame, obfuscate the

truth, and delay fixing the problem by claiming that the Community Reinvestment Act, Fannie Mae and Freddie Mac were somehow solely responsible for the subprime crisis. That is flat out false

and we call it a weapon of mass deception.

Just quickly, recommendations. I urge the Congress to focus on

the upcoming reauthorization of the Workforce Investment Act to

ensure that job training maximizes the opportunity for those who

have been locked out and left out to enter into the new economy

of the future.

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We recommend that the discussions about the green economy

and the alternative energy expansion, that policies and incentives,

be placed in the law so that those jobs do not by-pass urban

communties and inner city America.

We also believe that the CRA, the Community Reinvestment Act,

needs to be strengthened. Its enforcement needs to be taken seriously as a mechanism and as a tool for increasing the flow of capital, private capital, back into urban communities.

I will be happy to share other recommendations with the committee later on or at any time in the future. Thank you.

[The prepared statement of Mr. Morial follows:]

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Chairman TOWNS. Thank you very much, Mr. Mayor.

Janet Murguı ́a, yes.

STATEMENT OF JANET MURGUI ́A

Ms. MURGUI ́A. Thank you. Good morning.

NCLR has been committed to strengthening America by promoting the advancement of Latino families for more than four decades

now and I would like to thank Chairman Towns and the committee

for inviting me to participate in this timely and important hearing.

The number of Americans losing their jobs, homes and financial

safety net is tremendously unsettling. Circumstances for Latino,

Black, Asian and Native American families are even more disheartening. Without a targeted strategy, our communities are in danger

of falling further behind the mainstream.

Since the recession began, more than 1 million Latinos have lost

their jobs. That is the largest increase in unemployment of any

group. And the worst is yet to come. Greater than 400,000 Latino

families are predicted to lose their homes to foreclosure this year

alone. These are staggering figures that call for a bold response.

We urge Congress to provide relief to families and advance strategies that will help communities of color emerge from these tough

economic times. Market forces and voluntary programs alone will

not correct inequality. They will not end discrimination or close the

gaps in service that minorities and underserved communities face.

Instead, we need a targeted strategy that will close racial, wealth,

and income gaps.

Today, I just want to discuss briefly programs that Congress and

the administration have put forth to improve economic conditions

including Hope for Homeowners, TARP, American Recovery and

Reinvestment Act and Making Home Affordable.

Each of these programs has positive elements that could help

communities of color. However, design flaws are preventing our

families from receiving the assistance they need, which I will briefly summarize today. In my written statement, you can find detailed

recommendations to improve these programs.

I will start with the Hope for Homeowners. This program offers

as much as $300 billion in Government guaranteed loans. It was

supposed to help as many as 400,000 families at risk of foreclosure.

Unfortunately, owners’ restrictions and fees have made this program virtually unusable. In fact, only one person has successfully

saved their home from foreclosure through this program. Even with

proposed improvements, Latino families will still face barriers to

accessing this program.

TARP. TARP was established with two key goals: reduce foreclosures and increase lending activity that could have helped the

Latino community. From where we stand, working with thousands

of families every day, TARP has failed these goals. Treasury should

have required TARP recipients to implement a systemic loan modification program and used funds to increase lending to communities. Instead, Treasury relied on voluntary efforts that have proven ineffective.

Later, Congress invested nearly $800 billion in the American Recovery and Reinvestment Act. One of its primary purposes is to assist those most impacted by the recession. NCLR is concerned that

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this act is falling short of achieving this goal. Targeted policies are

necessary to ensure that assistance and jobs reach hard hit communities. However, the final legislation lacked any such targeting.

What we did was ‘‘re-upped’’ the appropriations formula that was

already out there, instead of addressing some of the specific needs

that we knew were being created by this downturn. As a result, the

majority of funds have flowed through existing channels, leaving

out our service providers in underserved communities.

And finally, I will turn to President Obama’s Making Home Affordable Program. While we applaud the comprehensive approach,

processing delays and insufficient enforcement mechanisms keep

this program from being as effective as possible.

For example, the program allows servicers to start foreclosure on

eligible families before their modification application has been processed. Those lucky enough to avoid foreclosure still end up owing

thousands of dollars in legal fees.

However, NCLR-funded foreclosure counselors report that some

families have been foreclosed upon while still waiting on the results of their application. So, we will not be able to get our economy

back on track until we get the hardest hit families in a position to

secure high quality jobs and mortgages. It is that simple.

To this end, I offer just to the following recommendations. Include the needs of Latino families and families of color, workers

and homeowners, in federally funded relief programs. But that will

require intentional strategies to address those communities and not

reliance on the same formulas that do not take into account the

new circumstances that we find ourselves in and the new challenges.

We need support proven community based organizations involved

in recovery and foreclosure prevention efforts. We are in the communities. We are close to these families. We can engage them with

as much credibility as anyone else. Hold Federal programs publicly

accountable for spending and performance.

We have to tie more strings to this. There have to be performance benchmarks on these programs or else there is no accountability.

Finally, restore stability to financial labor markets through consumer protections and investments in our communities.

We look forward to working with all of you toward this goal. We

think that many of these programs were well-intentioned and some

are having some effect. But we can improve these programs and we

definitely need more oversight, more regulation, and more enforcement.

I thank you and I would be happy to answer any questions.

[The prepared statement of Ms. Murguı ́a follows:]

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Chairman TOWNS. Thank you very much.

Ms. Hasegawa.

STATEMENT OF LISA HASEGAWA

Ms. HASEGAWA. Good morning, Mr. Chairman. Thank you to all

of the members of the House Oversight and Government Reform

Committee for inviting me here today. I add my recommendations

and support to my colleagues from NCAI, the National Council of

La Raza and the National Urban League.

In particular, I would like to thank you, Chairman Towns, for

recognizing that communities of color have been disproportionately

impacted by the foreclosure crisis and the economic downturn.

Oftentimes, organizations like National CAPACD, we do play a

unique role, particularly because we serve low-income Asian Americans and Pacific Islanders and Native Hawaiians. Oftentimes,

Asian Americans and Pacific Islanders are considered the model

minority and so, for us, it is a pleasure to be here to really talk

about the disparities that some segments of our population do face.

My name is Lisa Hasegawa and, again, I am the executive director for the National Coalition for Asian Pacific American Community Development. We go by National CAPACD for short, so when

I say National CAPACD, I am talking about my organization.

Again, we are dedicated to meeting the housing and community

economic development needs of low-income Asian Americans and

Pacific Islanders across the country. We have over 100 communitybased organizations in our network. We are in 17 States and,

again, focusing on those that are the most vulnerable in our communities.

We have a network of groups that do job training programs,

housing counseling programs, etc. and what is unique about them

is that they do address the needs of limited English proficient, lowincome and immigrant communities in particular and then also Native Hawaiians in Hawaii.

I just also wanted to make sure that it was understood here

today that what will help African Americans, Latinos and Native

Americans will also help low-income Asian Americans and Pacific

Islanders who have experienced discrimination, who have been targeted by predatory lenders and by subprime lending.

Families are suffering from the worst recession since the Great

Depression. Asian Americans, Native Hawaiians and Pacific Islanders are no exception. The rate of unemployment among Asian

Americans has more than doubled since the fourth quarter of 2007.

We believe that this is because of the high rates of self-employment

in our communities and because of the broader economic recession,

small business owners and those who are self-employed, are particularly hurting.

Although trends in unemployment are unavailable for Asian

American and Pacific Islander subpopulations, the American Community Survey did reveal that many AAPI groups faced high levels

of unemployment before the recession.

According to the 2005 through 2007 American Community Survey data, the rate of unemployment, just as an example, among

Cambodians, Laotian and Hmong communities was around 6 percent, which is higher than the national average, and among

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Samoans, Tongans and some Pacific Islander communities, the rate

of unemployment was even greater at two times the national average. Those are the kinds of stories you do not see when you look

at the data in the aggregate.

Also, many of the Federal programs, I used to work at the White

House Initiative on Asian Americans and Pacific Islanders to really

look at how Federal programs needed to improve to serve particularly the needs of limited English proficient communities, and one

of the things is that a lot of the programs, like the Workforce Investment Act that Mr. Morial mentioned, those programs before oftentimes did not meet the needs of our community because there

was not a lot of support for those who, for example, needed to take

English language classes in order to be able to successfully have a

well-paying job.

The crisis has particularly presented challenges for, again AAPIs

who are self-employed and own small businesses. I wanted to also

mention, we talked a little bit about credit cards. We are hearing

from our member organizations that are working a lot with small

businesses, particularly in California, that many times if you are

a small business owner you purchase inventory based on the

amount of credit that you have. Many of the banks now are decreasing the credit limits in their credit cards up to two-thirds,

which is particularly many small businesses in a bind. So, we have

heard that from our members who work with small businesses.

Similar to what Janet just mentioned from La Raza, we did look

also at the American Recovery and Reinvestment Act and TARP

and have many detailed recommendations in our testimony. So, I

think I am going to just going to basically go to some of our recommendations.

There was an article that just came out from the Associated

Press, on Monday. So, we were trying to pull together this testimony and so it was very timely. It basically stated that home ownership has dropped for Asian Americans in 2008 at a higher rate

than any other ethnic group.

Now, that is not usually a statistic that we see. So, if this is,

again, and in the aggregate, so that to us is just a signal that

things are not so good also in the Asian America and Pacific Islander community, particularly those that are low income.

So, just in terms of my recommendations, I think that capacity

building programs are very important for the vast array of nonprofit groups that have a lot of expertise working in low-income

AAPI communities. Many of the foreclosure and housing counseling

programs that were put out to assist these communities did not

fund the additional support and case management. You had to actually be a housing counseling organization that was certified.

Many AAPI community organizations did not have that certification, were not eligible for the funds, and now are actually turning housing counselors away from their doors because they are

going to have to do all of the translation, all of the outreach, without any resources.

So, my recommendations are in terms of capacity building and

direct funding for community based organizations to mobilize the

expertise that they do have to help with the economic recovery.

Those recommendations are listed here.

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I also have additional recommendations around data, in particular, and holding of the financial institutions and Federal agencies

accountable to what is going on in low-income AAPI communities.

So, thank you very much.

[The prepared statement of Ms. Hasegawa follows:]

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Chairman TOWNS. Thank you very much.

Ms. Johnson-Pata.

STATEMENT OF JACQUELINE JOHNSON–PATA

Ms. JOHNSON-PATA. Thank you. And I would like to join with the

rest of the panel in thanking you, the chairman, and the members

of the committee for including us in this particular hearing.

On behalf of our country’s tribal nations, the National Congress

of American Indians is pleased to offer our recommendations

gleaned from the experience of the Native American communities.

Tribes offer unique innovations that can make significant contributions to the policy debate regarding the economic crisis. The

title of this hearing is particularly relevant to our communities. Depression-like economic conditions have been evident in our Native

American communities for decades and Federal policy responses

have often been ineffective.

Many of our recommendations directly address the fact that reliable data is not available to adequately assess the impact of economic crisis in our communities.

While the national unemployment rate climbs closer to 10 percent, on-reservation unemployment rate in the 2000 census was 22

percent, just 3 percent less than the unemployment rate during the

Great Depression. Put simply, economic crisis in our community is

not an occasional disaster, it is a daily reality.

However, the Bureau of Labor Statistics does not include on-reservation unemployment rates in their monthly reports. Rates well

above 50 percent, in some cases. The absence of this reliable current data is of significant concern to tribal leaders and should be

that of those representing their States.

Tribal governments can serve as significant incubators of economic and job growth. In spite of this potential, tribes were excluded from many job creation provisions in the Recovery Act, including many of the Department of Labor’s initiatives.

Green jobs represent an important new employment opportunity

for disadvantaged communities. Tribal lands are a potentially rich

source of renewable energy. The Department of Energy estimates

that tribal alternative energy could meet 20 percent of this Nation’s energy needs through wind energy and up to 450 percent

through solar energy.

Tribes are positioned to prepare Native people and other rural

residents to participant in the new green economy, but they have

been left out of the Federal efforts.

While the United States faces one of the most significant housing

crises in our Nation’s history, many forget that Indian housing has

been a crisis for generations. Data related to the impact of the economic crisis on Native home ownership is weak, and we recommend that the Federal Government invest in quality data collection.

While there is some evidence of challenges with foreclosures in

Native communities, the real problems our communities face is not

of foreclosures, per se, but access to home ownership opportunities

in the first place, something I think Mr. Carr in the first panel discussed a little about.

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In 1999, there were a total of only 471 home mortgages on Indian lands. That represents only 1.2 percent of the households that

had sufficient income to qualify for a mortgage. And that need for

mortgages on reservations in a persistent problem.

There are challenges in accessing financing on tribal lands. The

2001 Native American Lending Study found that 86 percent of Native communities lacked a single financial institution within their

borders, and 15 percent of Native Americans needed to travel over

100 miles to access a financial institution.

The expansion of the Native CDFI field has helped prepare our

tribal citizens for mortgage lending and opportunities and offered

cutting edge financial education programs that developed financial

skills for the whole community.

Tribal governments have also played a role in regulating lending

practices on tribal lands. Tribal jurisdiction must be protected in

the same way as State government jurisdiction is protecting Federal statutes regarding things like predatory lending.

Economic revitalization in Indian country is closely linked to

business development. Federal strategies to expand access to contracting services for minority owned businesses are particularly

critical in reservation communities. Tribal communities are generally located in rural areas with very limited economic opportunities, and tribal governments have a severely limited tax base.

Tribes cannot impose property taxes on trust land. And an additional income tax on a community dealing with multi-generational

poverty is not feasible.

This means tribal citizens often have greater service needs than

their non-Native counterparts. But their governments have fewer

resources to serve their citizens.

The Federal Government’s Native 8(a) Contracting Program is

one way entrepreneurs in Native communities build Native economies by helping our people secure government contracts. In a 2006

report, the GAO found that the management training programs

were common among Native owned businesses. ADA Contracting

Programs are vital strategies to raise both revenue and business

sophistication in Indian country. The program also demonstrates

Congress’ commitment to promoting tribal self-determination and

self-sufficiency.

In conclusion, we look forward to working with the committee to

ensure that tribes have the same access to the Recovery Act resources and tools as other governments, unemployment data is

available to measure the extent of the crisis and the recovery, and

opportunities to partner with tribes are not missed.

And we look forward to a future where Native people have the

same opportunities for home ownership as other Americans, and

small business opportunities at the heart of our rural and reservation communities and economies that are supported and expanded

through effective Federal investments.

I thank you for the opportunity of testifying today.

[The prepared statement of Ms. Johnson-Pata follows:]

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Chairman TOWNS. Thank you very much, Ms. Johnson-Pata.

Mr. Alford.

STATEMENT OF HARRY C. ALFORD

Mr. ALFORD. Thank you, Mr. Chairman. And thank you, Mr.

Chairman and Ranking Member Issa, distinguished members of

the committee, my distinguished panelists, I am very honored to be

here to discuss a very important part.

Please keep in mind that in terms of housing, you cannot have

a house without a job. And 70 percent of all new jobs are created

by small businesses. So, the National Black Chamber of Commerce

feels its mission is noble.

When we were incorporated in 1993, there were 300,000 Blacked- owned firms doing revenues of $30 billion. Today, I am happy to

say there are over 1 million Blacked-owned firms doing revenue of

over $88 billion. Still, despite that growth in numbers and dollar

volume, in capacity, being able to do the job, being ready, willing

and able, our share of the Federal procurement dollar has been

dropping year by year. That also goes for Hispanic businesses as

well.

Why is that? One big reason. The SBA, when we were incor- porated, had 5,000 employees with a budget of over $900 million.

Today, they have 1,700 employees with a budget of less than $400

million. That is not giving enough emphasis to the development of

small businesses in this country. They are emaciated.

So, we are happy to pick up that void with other associations.

Section 3 of the HUD act, which has been mentioned here, HUD

does not enforce Section 3 of the HUD act. It is being enforced in

the State of Louisiana and in the city of New Orleans because your

Members took it up after Katrina. That is the only place it is being

enforced. There may be an exception here and there, but it is not

being enforced in Maryland, it is not being enforced in Baltimore,

it is not being enforced in any of your districts. That is true.

And if it was enforced, we could have an additional 100,000 jobs

just in the Black community alone. This is a race-neutral program.

It was written in 1968 after the Watts Riot. It was strengthened

in 1992 after the Rodney King Riot by the late Jack Kemp. It is

beautiful. It will hold the test in court, and it is a job creator. No

training programs. Training programs do not work. You send kids

to training programs, and then they do not get jobs. They never get

connected to jobs. There is not a good training program unless

there is a placement strategy.

This here Section 3 is on-the-job training. They come and learn

as they get paid, to drive a nail through some wood, to pick up

trash, to landscape, to day care at a housing facility. It is simple

stuff. But for some reason, we have been avoiding it.

The Federal Highway Program, the DBE Program, was implemented in 1982 by President Reagan, written by the Honorable

Harry Mitchell before that. In the 1980’s, African American and

Hispanic businesses through the Highway Program were doing

about 8 percent of the volume. Today, African Americans do 1.1

percent of Federal Highway Fund volume, Hispanic businesses do

1.6 percent. That is 28 percent of the National population trying

to come up with 2.7 percent of the volume.

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That $27 billion that goes to these State programs is being

abused through corruption. Tony Soprano ‘‘does well’’ but African

Americans and Hispanics do not. And I have volumes. I have documentation that goes back to 1995 on this. I have seen bid rigging

with my own eyes in the State of Indiana. We need to clean it up,

and then be inclusive, according to the Civil Rights Act of 1964,

Title 6.

Also, Executive Order No. 246, which is hiring, which enforces

Title 7, Equal Opportunity in Hiring. The Federal Highways Program does not abide by Executive Order No. 11246. They canceled

the reporting procedures. They do not even take the data.

The Department of Labor is supposed to have their hammer, but

construction unions who do not hire Blacks and Hispanics, and

women want this action and so the Government, back in 1998 and

1999, canceled Executive Order No. 11246, Reporting Procedures,

in defiance of the law. It is illegal.

So, when the stimulus money comes down, double down on trans- portation from $27 billion to $54 billion, we are not going to get

any of that. And the problem with the stimulus plan is that it is

throwing food in the trough, but you have the same pigs at the

trough. We are not in there.

So, maybe from the discretionary side, which is coming later, we

can have some diversity and input and share in the stimulus bill.

It is beautifully written.

Project Labor Agreements. President George Bush canceled, forbade, Project Labor Agreements from Federal projects because

‘‘they discriminate against small business and minorities.’’ So I am

trying to figure out President Barack Obama’s rationale to bring

them back. I want to know the reason for that, other than letting

construction unions, which discriminate against minorities and

women, which cannot qualify under Executive Order No. 11246, to

have exclusivity in Federal projects. Someone who discriminates

should be banned from Federal projects. They should not give them

exclusivity.

Finally, the Waxman-Markey Bill. If that goes into fruition, we

are going to lose 3.6 million jobs, according to a jobs study by CRA.

Of those areas who are going to pay the most, if you take a pin

and put it in Nashville and draw a 700 mile radius around Nashville, you have territory that includes 86 percent of the Black population. Coincidentally, that is the same area that is going to pay

the most for this Waxman-Markey bill. I suggest that we go back

and rewrite a bill that is going to be less painful and have some

benefits.

I was at a panel on Monday and we had people for, neutral and

against the bill. No one could identify reasonable benefits of the energy bill. If we cannot realize reasonable benefits, why do we have

it? I will reserve the housing remarks for question and answer.

Thank you, sir.

[The prepared statement of Mr. Alford follows:]

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Mr. ISSA. Mr. Chairman.

Chairman TOWNS. Yes?

Mr. ISSA. Because it is appropriate to his testimony, I would like

to ask unanimous consent to have the Black Chamber of Commerce

study on the impact of the cap-and-trade bill entered into the

record.

Chairman TOWNS. Without objection. So ordered.

[The information referred to follows:]

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Chairman TOWNS. Let me thank all of you for your testimony.

Let me begin, I guess, with you, Mr. Morial and, of course, Ms.

Murguı ́a.

Many of the top banks issued a high portion of these subprime

loans to Hispanics or African American borrowers. Is this an indication that minorities were targeted recipients of these exotic

loans? I mean, was the program developed to go out and get them?

Mr. MORIAL. It is an excellent question. I think there is ample

evidence that African Americans in many cases were steered into

subprime or high interest loans. The numbers we have looked at

indicate that for the period, I believe, 2005, 2006 and 2007, about

55 percent of all African Americans that took on home loans ended

up with subprime loans.

Now, you have to add to that the data shows that a large number

of those that ended up with subprime loans could have qualified for

prime loans. And that is the issue. That people who could have

qualified were directed or steered by brokers, servicers and banks

into higher-interest subprime loans.

Certainly, there may have been those, in all fairness, who may

have taken on more house than they could afford because the lack

of requirements of income verification allowed that to occur. But,

fundamentally, and this is what is important, the majority of all

subprime loans went to White Americans.

But a disproportionate share of all Blacks who got loans period

ended up with subprime loans. And it is important to paint the picture with accuracy. And I think that information, Mr. Chairman

and Members, should instruct the kind of regulatory reform we

need in this Nation to prevent this from continuing to occur and

to prevent this kind of crisis from occurring in the future.

Ms. MURGUI ́A. I would just add, Mr. Chairman, that, you know,

Latinos are 30 percent more likely to get high cost loans. So the

steering problem is one that we see dramatically effecting the

Latino community in particular.

I think we believe that the foreclosure crisis was driven 2by

harmful loans, mostly made by mortgage finance companies due to

the lax oversight there. And at the end of the day, I think a lack

of common sense regulations is what caused the foreclosure crisis

and where we did have regulations, it was the lack of enforcement.

So, steering is a big problem for us in our community and we need

to address that.

Chairman TOWNS. Yes, yes, right. Let me just add, do you think

the inability to speak the language had anything to do with it?

Ms. MURGUI ́A. Yes, I think having home ownership counselors

who are certified in the communities is one of the most important

ways that we can assure that these individuals are getting accurate information. It is an important area that I think where we

need to see more investment in addition to regulation and oversight, the funding could be directed.

We need to make sure that we are doing more to create that pool

of credible, certified, trusted housing counselors who are in the

community who can break down all of those barriers and be trusted

voices for those individuals seeking to get those loans.

Chairman TOWNS. Ms. Hasegawa.

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Ms. HASEGAWA. Ditto. Also, for Asian Americans, subprime loans

almost tripled between 2004 and 2005. We heard from many companies that sort of started up in California that I think their entire

business model was to target Asian Americans who were perceived

as affluent, having a lot of cash, etc. So there was certainly targeting going on.

They were very culturally and linguistically competent, I have to

say, in terms of the mortgage brokers getting young people to get

out there to get their, what do you call it, their commissions to basically do the loans, particularly in communities that spoke specific

Asian languages, targeting the Vietnamese, the Koreans, the Chinese language speaking communities.

And so, they were isolated from a lot of the mainstream products

and outreach efforts that were conducted only in English. So, absolutely, I think that language was a barrier and we, as a non-profit

organization, and the housing counseling groups, did not have the

resources to be able to combat that on the streets with all of their

media ads and with the unregulated brokers. So, absolutely.

Chairman TOWNS. Yes. Mr. Alford, do you want to comment on

that?

Mr. ALFORD. Yes. Mr. Chairman, they are absolutely correct. But

HUD issued billions of dollars in housing stabilization money last

December and January. It is on the streets by now. So, where are

these counselors that receive these billions of dollars? It was to

fund counseling. It was to address the foreclosure problem. I think

we need a quick audit as to who has that money and what they

are doing with it because in the communities I visit, I cannot find

any counselors.

Mr. MORIAL. Let me just say this, because we do counseling and

we do counseling in 35 communities and we are going to probably

do about 100,000 cases this year. A counselor can only get a result

if a lender is willing to play ball on a modification. A counselor is

an advocate for a homeowner and has to knock on the door of the

lender and say, will you work with this buyer, this purchaser, this

homeowner, to modify a loan.

I think the previous panel indicated that many servicers are reluctant, obstinate and not particularly favorable. And it goes back

to, perhaps, the TARP. That the TARP could have required that

those that received an injection of cash, an injection of cash out of

the TARP, would be required, that it not be voluntary, to work

with homeowners when it comes to the modification of these loans.

Many of these modifications are helping people take a high interest rate and reduce it down, to reduce the payments so that they

are affordable. Certainly, if you do not have a job, you cannot pay

a modified loan. But that was the idea to give so the counselors,

and those of us who do counseling, are working feverishly, aggressively in many communities, but in some cases we cannot achieve

the result because the servicer or the lender is not willing to engage in a modification that the homeowner can afford.

So, what we see now is double mods taking place, an original

modification, and a further modification being needed by the homeowner so that they can stay in the home.

Chairman TOWNS. I think my time has expired so let me just,

well, I think it definitely expired. [Laughter.]

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The gentleman from Arizona, Mr. Flake.

Mr. FLAKE. I thank the chairman and I thank the witnesses.

I was interested in, I seem to detect a theme from all of you that

the programs that we have, that we have implemented over the

past year, are not working very well. What I hear is let us do more

programs. Do some of them differently, perhaps. And I was interested in, Mr. Alford you mentioned that job training programs traditionally have not worked. It is a job that you can train on. Do

you want to elaborate on that a little bit?

Mr. ALFORD. Mr. Congressman, let me give you an example. I

was doing a monitoring for a high school in York, PA and they

wanted to implement or replicate that Section 3 program. So, down

the street there was a grant recipient for a home bill, I believe it

was, which is a HUD program for job training. So, naturally, I

went to them saying we want to place your graduates to do work.

These contractors will hire your graduates from the high school

and get them into the work force. They were livid that I would approach them to try to place some of their students in jobs.

In the end, they did not get their grant renewed. But what we

did was on-the-job training. And a beautiful piece of on-the-job

training is Gulf rebuilding, where Bechtel and Fluor and Turner

Construction and a lot of associations such as ours got together.

We have trained 18,000 people in Louisiana, Texas, Mississippi

and East Alabama. Eighth grade reading level, eighth grade math

level, and drug free. You go through this course with the graduation into one of these companies that are sponsoring it. So, of the

18,000 people we have trained to date, 80 percent are working fulltime now. And I am also proud to say that 70 percent are minorities.

Mr. MORIAL. I want to respond to that because I think it is

very——

Chairman TOWNS. The gentleman from Arizona has the time.

Mr. MORIAL. Yes, but I cannot leave it at a blanket indictment

of job training programs, because we do it and we do place people.

Mr. Alford is right that a good job training program has to have

a placement component to it. But a blanket indictment of job training programs is not fair.

What is fair to say is that some do not work. It is fair to say that

some providers may not do a good job. But there are many job

training programs that work, which are designed to help people access jobs in a variety of sectors. The placement component is very

important.

Mr. FLAKE. Do you have a placement rate that you could inform

us?

Mr. MORIAL. Different programs have different placement rates.

We have some programs with a 50 percent placement rate. It depends on the population. If you are working with people who have

no high school diploma, typically what you are trying to do is help

them get a GED so that they get a sustainable job, not just a job

for a month. We have done those types of work. If you are working

with people who have a high school diploma and they are looking

for some sort of more specified skill in the construction trades, for

example, you may have a higher placement rate.

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Mr. FLAKE. Since I have very limited time here, I wanted to get

to loan modification. It is something that has come up here and it

is coming up again and again and many of us are opposed to it,

and I want to get your perspective on it, the so-called ‘‘cramdown

provisions’’ which are allowing bankruptcy judges to basically modify mortgages.

Could you just say yes or no across the board if you agree with

cramdown? And my concern is that we may address those currently

having problems with modification, and I am not suggesting that

there are no problems out there with modification, but that we will

make it far, far, far more difficult in the future for anybody with

less than stellar credit to be able to get a loan if there is a prospect, prospectively, of a Bankruptcy Judge simply coming in and

modifying a mortgage downward.

Is that in the calculation that anybody is considering there? I

would just like your perspective. We will go to Ms. Murguı ́a, I

guess, on ‘‘cramdown provisions.’’

Ms. MURGUI ́A. Well, we think it is important to have some ability

to modify those loans in the different venues and I think if there

can be a fair assessment in that venue, then we would support it.

I wanted to just——

Mr. FLAKE. Is there a concern, though, moving forward, that if

you have provisions that allow bankruptcy judges to basically rewrite mortgages, that you make it very difficult for anybody with

less than stellar credit to get a loan in the future?

Ms. MURGUI ́A. I think we have to be thoughtful about how we approach it, but I think that the needs are so great right now to have

opportunities for folks to have these issues addressed that we want

to make sure that we can move forward. But we should do so

thoughtfully to ensure that there are no ramifications that we

would not intend to occur.

Could I just briefly, just because you mentioned, Congressman,

that you said we supported, you know, we talked about some of the

problems in the programs and we supported more programs, I just

want to make it clear that what I said today is I want more accountable programs and I want more accountability in the programs that we have.

I am not talking about creating more programs necessarily. But

the Federal Government has a responsibility to ensure that accountability. And what I will tell you that we ought to target

benchmarks and we ought to try to require and report more useful

data for us so that we can have that accountability.

Yes, there was a big rush to respond to this economic downturn.

A lot of things happened very quickly. We are just merely pointing

out that these programs can be improved and I wanted to clarify

that.

Mr. FLAKE. Well, I just, the concern that a lot of us have is we

rarely, if ever, hear any witness say this is a bad program, it

should be eliminated. It is always it should be better funded, it

should be changed, and as an oversight body, at some point it

would be nice to hear, hey, we ought to follow the GAO recommendations and close this program and just not do it anymore.

And we just rarely hear that.

I am sorry, my time is up. Thank you, Mr. Chairman.

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Chairman TOWNS. Time has expired. I recognize the gentleman

from Maryland.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I just

want to just refer to what Mr. Flake just said. I wish Mr. Flake

could have been in my district last Saturday when we had 1,000

people lined up there who were losing their homes.

And so we talk about cramdowns, and I hate that term, but to

have a bankruptcy judge sit, look through everything, determine

what happened, Mr. Morial talked about it a moment ago, with

people who basically were pushed into subprime loans when they

were prime candidates, and then to bring some balance, particularly balance when the banks have been bailed out, they are now

paying back some of the money that they got from us, from the

United States of America, but yet and still homeowners in your district and mine, maybe your district is a lot better off, but in my

district there are a lot of people who are suffering and about to be

thrown out.

And these are not people who are looking for a handout. These

are hard working Americans who paid their taxes when then were

working, gave their blood, their sweat, their tears to this country,

and because of no fault of their own, now they are out of a house.

So, it is easy to sit here in this place with our suits and the nice

air conditioner, whatever, feeling good, but I am talking about

Americans, Americans who have given everything they have. But

now they just need a bridge to be able to stay in a house. I am not

talking about living in some luxury condominium. I am talking

about some of them have been in these houses for 20 years. They

have kids. And they want to stay in those houses.

So, I just get a little bit upset when I hear things like that, as

if it does not matter that these folks have an opportunity, for example, to go before a judge. Judges are sworn, they have the things

that they need, the assistance they need, to analyze all of this and

figure it out.

I just want to go to you, Mr. Morial. You were talking about

these counseling programs with regard to jobs. I think one of the

problem that we find, and I just want you to comment on this,

some of the people that we are trying to train, and I live in the

inner city, you have some hard, some folk did not get a decent education, they, in some instances they went to some of the worst

schools.

I have parts of my district, Mr. Morial and panel, where I go in

one county you go to a public school it looks like a private school.

But in Baltimore City, we have our problems. Then when they get

to the 12th grade, or if they get to the 12th grade, people expect

those kids who came under those conditions to be able to compete

with kids who have had computers ever since they were in Pre-K.

I have high school students who do not have computers today.

So, I am just trying to figure out, how do you all see, and Mr.

Morial I will start with you, this education thing is serious. And

how do we, because I see this as a key to, even after you do the

counseling, first of all, you have to have a candidate to counsel, you

counsel them, then they have to have certain qualifications even

after you counsel them. So, I am just wondering——

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Mr. MORIAL. Let me give you an illustration, Congressman

Cummings. You are absolutely right. We have a job training programs called the Urban Youth Empowerment Program. It was designed with the idea that people who would come to us would be

high school dropouts but they would have seventh or eighth grade

reading levels. And all we have to do is take them to a 12th grade

level.

What we found, when we tested the people on intake, that a majority of them had a fourth grade reading level. And so, they were

19, 20 and 21 years old reading on a fourth grade level and, therefore, you were required to be successful to take them from a fourth

grade reading level to 12th grade for them to get their GED before

they could even qualify for most basic jobs. So——

Mr. CUMMINGS. In how much time? In how much time?

Mr. MORIAL. Well, you know, in probably 6 to 8 months. In many

cases, it is not possible. You might be able to move them from

fourth to eighth grade. So, many of these job training programs are

functioning as education remediation programs for people in urban

communities. They are trying to fix the failures of 30 years of benign neglect in public education.

And we have to recognize that, yes, that is why we seem to be

fighting a losing battle, because the large numbers, if you just look

at 1 million kids dropping out of high school each year and you add

to that population 1 million each year, 1, 2, 3, 4, 5, the large number of people. So, in the economy of today, where jobs require more

skills and more education and more technical ability, many of these

folks are not going to be able to qualify.

That is a structural challenge with the economy of this Nation

that we have to figure out a way to employ. It is the thing that

is sucking jobs overseas. It is the thing that is promoting

outsourcing to India and China and other places. And it is what we

are fighting in urban communities like Baltimore, like Philadelphia, like New York, like Birmingham, like New Orleans, like Dallas, where young people who are high school dropouts come into

these programs but it is difficult to get them to the skill level

where they can qualify for the jobs that the economy was producing

before this depression took place.

Chairman TOWNS. Gentleman, your time has expired, but I am

willing to, if you want to get answers from someone else.

Mr. CUMMINGS. If they will, Mr. Chairman.

Ms. JOHNSON-PATA. I would like to respond to that because one

of the programs that we have in Indian country is called the 477

Program. It is a model that I think that might be replicated someplace else because we are able to get the money from job training

programs in the Department of the Interior and HHS and, rather

than having this agency silos where you have very strategic, narrow focused programs and so then the counselors and job trainers

have to work for them, we are actually able to pool the money together so that at the tribal level they can be more flexible in designing programs that have longer-term sustainable.

So, given where the tribes’ interest in economic growth is, they

can challenge the educational training as well as the technical

training to be able to have a more comprehensive support system

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for the job training, including, you know, any kind of family needs

that need to be taken care of, etc., so our success rate is higher.

It is a very small program that we have been trying to spur more

growth in. But it is probably one of the most successful models that

we have had.

Mr. ALFORD. It is pretty overrated. You know, GED and high

school, you have to complete high school. We have kids working in

Louisiana right now building public housing facilities, making $20

to $30 per hour, and they could not fill out their application. We

had people fill out their applications. But they know how to pick

up some bricks, they know how to pour cement, they know how to

grade a road, they know how to drive nails through wood. That is

a start. They can get educated on the side, because that is what

they should do.

But that is not a job preventer. It is not a job preventer. One

hundred thousand jobs in Section 3, and we should do that in Baltimore, and Federal Highway Program, I would like to sit with you

Congressman and show you how your District is getting exploited

out of jobs through the Federal Highway Program and how we can

go after it and get them employed.

I hung drywall in the seventh grade. It is no big thing.

Chairman TOWNS. The gentleman’s time is expired. I know, we

are getting into it, and I am guilty of that quite often, but we want

to just sort of stick to the rules here——

Mr. CUMMINGS. Thank you, Mr. Chairman.

Chairman TOWNS. Thank you.

I now yield to Mr. Jordan of Ohio.

Mr. JORDAN. Thank you, Mr. Chairman. I yield 30 seconds to my

colleague from Arizona.

Mr. FLAKE. Thank you. I just want to address the issue that Mr.

Cummings brought up and I appreciate his concern here.

I am not saying that we should not renegotiate loans and that

the bank should not. It is in everyone’s interest to renegotiate the

interest downward on some of these loans. But what I am having

concerns about is the ‘‘cramdown provisions’’ that have been proposed which would allow them to reduce the principal amount as

well. And that will very negatively affect those who want to get

loans in the future because, unless you have stellar credit, banks

will be loath to enter into an agreement with you.

So, thank you.

Mr. MORIAL. I did not get an opportunity to——

Chairman TOWNS. No, no. He has the time, so we have to recognize him.

Mr. JORDAN. I thank you, Mr. Chairman. Let me just pick up

where my colleague from Maryland left off with this education. Let

me just ask, I want to do one question for everyone and then I

want to direct a question to Mr. Alford if I could.

Where do you all stand on the issue of school choice? Let me give

you a quick background. I come from Ohio. We did one of the first

scholarship programs in the country in Cleveland, OH in my days

in the General Assembly. Back in 1997 we passed this program. I

can remember the first day, the very first day, mostly minority

families showing up for 2,000 spots, K through second grade. The

scholarship was worth $2,200 at the time and Cleveland public

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schools were spending $7,000 per pupil. We only had 2,000 spots

and thousands of families showed up.

Think about what they were saying. They were saying keep the

extra money, we want that scholarship and the ability to get our

kid in a school we think he or she is going to get the kind of education they deserve, frankly the kind of education they need to

achieve things, as all of you said earlier, and to achieve the American Dream.

So, let me just ask you down the list. Do you support school

choice programs that empower parents, particularly in urban

areas, to give their kids the education that they think is better?

Mr. MORIAL. I do not support publicly financed vouchers, but do

support privately financed scholarships that allow kids to go to private or parochial schools.

Mr. JORDAN. Let me ask you this. Do you support the District of

Columbia option that we have had in Federal law in the past?

Mr. MORIAL. I do not support publicly financed vouchers at all.

Mr. JORDAN. OK. Next one.

Ms. MURGUI ́A. You know, we have strongly supported charter

schools and giving and empowering our parents’ choices in seeking

alternatives in their districts. But, for us, we have not taken a position on——

Mr. JORDAN. And can I ask, just real quick, for those of you who

are against it, and so far it is two for two, why is it wrong to say

the money that was going to spent on this child not be strapped

on the back of that kid and follow that kid to the school his or her

parents think they are going to get the better education? Why is

that wrong?

Mr. MORIAL. Well——

Mr. JORDAN. We are going down the line. I already got your answer.

Ms. HASEGAWA. We actually do not have a position on it either,

but we do work with charter schools.

Ms. JOHNSON-PATA. We do not have a position either because

most of our schools are rural and very remote. There are not

choices.

Mr. ALFORD. We believe a parent has a right to a choice for their

child’s education and there is nothing wrong with that at all, sir.

Mr. JORDAN. All right.

Let me just go to you, Mr. Alford. Let me ask, and somewhat related I guess, is it not true that most minority-owned construction

firms are non-union?

Mr. ALFORD. Ninety-eight percent of Black-owned firms are nonunion, because, one big thing, if they got into the unions, their employees could not get into the union halls because of the color of

their skin.

Mr. JORDAN. Let me just ask you then about your position on

project labor agreements, or what are typically called pre-hire contracts, where they require the owner or the general contractor of

a construction project to sign an agreement with unions representing crafts that will work on the project before the actual work force

for the project is hired.

February 6th of this year, President Obama signed Executive

Order No. 13502, encouraging the use of project labor agreements.

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Tell me your thoughts on this. Do you think this is positive for minority-owned construction firms?

Mr. ALFORD. It will double the rate of unemployment in the African American communities where there are significant Federal jobs

or Federal projects. It will double it. And we spent a lot of time,

my Board and I, spend a lot of time talking to OMB when they

were threatening to do this and made it very clear that go over to

the Department of Labor, look at the Office of Federal Contract

Compliance Programs data on union projects, and you will see that

Blacks, Hispanics and women do not work in them.

They have the data over there. But the Secretary of Labor will

not release the data. But the unions should not even be certified

by the Federal Government because they discriminate.

Mr. JORDAN. Well, let me just ask you what I think is an obvious

question. Why do you think the President signed that order?

Mr. ALFORD. $200 million of campaign contributions, sir.

Mr. JORDAN. All right. Mr. Chairman, I yield back.

Chairman TOWNS. Thank you very much.

I now recognize the gentleman from California, Mr. Bilbray.

Mr. JORDAN. Mr. Chairman, if I could real quick. I have a few

seconds.

I would like to ask for unanimous consent for the comments, this

is the comments by Ranking Member Issa, to be entered into the

record concerning PLAs.

Chairman TOWNS. Without objection, so ordered.

[The information referred to follows:]

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Chairman TOWNS. Mr. Bilbray.

Mr. BILBRAY. Thank you, Mr. Chairman. I would love to go

around, and we talk about the horse before the cart and the back

and forth this issue of why the concern, or the disproportionate impact of downturns on certain segments of our community.

I will tell you, Mr. Chairman, I was a county supervisor of a

county of 3 million, bigger than 20 States in the Union, and it became real obvious as we were trying to do work there that we had

people that would not even bother to fill out the practice application and it was because they could not read the application coming

out of the public school systems.

And all I have to say to the gentleman who says public school,

public school, you look at my family. The two older boys went to

parochial school; myself and my little brother went to public school.

And let me tell you something. When you look at the difference between our two careers, there is no bet in the world that our public

school education in a working class neighborhood matched up

against the parochial school.

Where disadvantage comes from, it comes in many different

forms, and it is not just the color of people’s skins. That background, that educational thing, is a hot one. And this whole disproportionate burden of having to bear bad education gets thrown

on the working class which happens to be a high percentage of people of color. It is just the facts of life.

I founded the Literacy Council in San Diego because I wanted to

get to the root cause of the fact that people were not getting jobs.

So, we have to go back and talk about this. But I just think that

too often we say, let us defend the establishment as we know it and

not be willing to hold them accountable. The fact is that outcome

does matter.

It is just really frustrating for those of us who try to work in the

system to see that these sacred cows refuse to get over and the monopoly of public education has to be held accountable. I think it is

absolutely essential that we have public education. But the outcome matters more than the facilities.

Schools are not teaching institutions. They should be learning institutions. They are not employment opportunities. They are supposed to be education and learning opportunities. And we get all

of that.

Let us just talk about green jobs though. I want to get over this.

We talk a lot about green jobs. The fact is that the working class

community has some real opportunities here. But one of the things

that I have run into is that we talk about the green jobs. Let us

just say solar panels. You want to do solar panels, you want to assemble them. How much of our government regulation stands in

the way?

Now I will give you an example, a high-tech thing, algae fuel,

new green fuel. My scientists at Scripps have developed an alternative that is a true gasoline, not this garbage called ethanol, a

true environmental fuel. But they will not produce it, and cannot

produce it, in California because the government regulation will

not allow them to build the facility to provide the environmental

opportunity. And I think on the tribal systems, we have some opportunity maybe to avoid that.

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But would you like to comment on the government obstructionism to those economic opportunities, especially with the green application?

Mr. ALFORD. To me, sir?

Mr. BILBRAY. Yes.

Mr. ALFORD. Yes. I have two very capable businesses trying to

get into the solar industry and they are finding that most of the

supplies are made in China to begin with. And then, at the Federal

level, Norfolk Naval Station has an RFP out and one of my businesses doing $250 million a year went to try to compete for that

and they told them that the minimum bid capacity would have to

be $1 billion. So, they make it difficult.

And then, all of these projects, the U.S. Chamber’s Web site, part

of their Web site, is Project/No Project where they list all of the potential solar projects and what have you that have been blocked by

local regulation. It is thousands.

So, do we want a green economy or do we not? But it seems like

the very people who say we want one are blocking those businesses

who try.

So, in terms of green jobs, I have yet, I asked Ben Jones what

is a green job and he could not tell me. There are no green jobs.

As of yet.

Mr. BILBRAY. Well, but there is that advantage though. I mean,

the Department of the Interior has 155 plus applications for solar

panels in California.

Mr. ALFORD. Yes, sir.

Mr. BILBRAY. Not permitted one. One of the great advantages

that we have had with the tribal system is that wind generators

have been able to go up because they have been able to avoid the

Federal bureaucracy and the obstructionism and California is a

real culprit on that.

Ms. Johnson-Pata.

Ms. JOHNSON-PATA. Exactly. Mirango is a good example of wind

energy in California. But a couple of things that have been preventing that energy development happening in the other parts of

the country is, one, tribes do not get access to say, kind of, the

same kinds of funds that the States do for development and for expanding development. I have the data in my testimony. You can

look at that.

We need some other things that, economic tools that put us at

par, like depreciation, accelerated depreciation, tax credits that are

available to other investors, to be able to have transferable tax

credits to our investors and our partners. You know, I have a number of things that I could share with you, a list that prevent us

from being at par with the other folks in the arena for alternative

energy development.

Mr. BILBRAY. Mr. Chairman, one of the things that I would like

to investigate is that you have, I guess Rosebud was a good example of an aggressive nation that was trying to work with other nations at developing a resource to be able, one of the big problems

we have this country, we have not built a new refinery in 30 years.

Rosebud’s looking at trying to be aggressive at that cooperative.

We end of having the Federal Government walk in and step on

them in an area that is grossly deficient when it comes to economic

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opportunity. Instead of encouraging, well, we do not trust you with

your own environment.

I really find it absolutely absurd that anybody in the Federal

Government could go to a Native American and tell the Native

American they do not know what the environment is all about. And

I think this is one of those things that we have to talk about.

What are we doing right? But most importantly, what are we

doing wrong that are keeping people from being able to have those

opportunities and be able to read, be able to read a blue print so

that you just do not have to just pour concrete or be able to improve your neighborhood and create the economic opportunity in

your own sovereign territory is something that we ought to be talking about.

Thank you very much, Mr. Chairman.

Chairman TOWNS. Thank you very much.

And I now yield to the gentleman from Utah, Mr. Chaffetz.

Mr. CHAFFETZ. Thank you, Mr. Chairman. And thank you all for

being here. I do appreciate it.

Mr. Alford, my first question is for you. Let us talk a little bit

about cap-and-trade and the burden that is going to be put on

Americans. How do you see that playing out in the United States?

Mr. ALFORD. Well, as I said earlier, sir, we cannot find any identifiable benefit of cap-and-trade, other than Wall Street having a

new toy to abuse. Cap-and-trade was invented by Enron and then

it was pushed down the throats of Europe. And Europe is still complaining about it. They did not lower emissions. They lost a lot of

money.

Cap-and-trade is a scheme, derivatives and defaults and what

have you and Wall Street doing money. We are spending all the

money, losing all the jobs, and they are still doing the same game

they are doing with the TARP.

Mr. CHAFFETZ. And how do you see that, what effect is that going

to have on lower income families across the country?

Mr. ALFORD. It is going to knock us out. I believe the figure is

about $2,000, close to $2,000, per African American family, 60 percent of which only make $50,000 a year. So, another $2,000 and if

they have a job.

And people, proponents on this bill, are saying people in Detroit

and Cleveland, when you lose your jobs, you just move out to Montana and start over. You know, Grapes of Wrath. It is scary. It is

very scary, very ill thought out.

Mr. CHAFFETZ. Mr. Alford, one of my deep concerns is that we

have lost our ability to manufacture in this country, that we are

actually, as a Nation, going to actually have to create things and

build things if we are going to be successful in this global economy.

Specifically to cap-and-trade, and the other factors that are happening, what do you see this doing to the manufacturing base of

this country?

Mr. ALFORD. It is going to export a lot of our manufacturing to

other nations. And let me go back to World War II. We survived

World War II. We survived World War II because we had the manufacturing clout. That is what saved us, to turn our manufacturing

into tank machines and planes and ammunition. We were 19th in

ammunition production on Pearl Harbor Day—19th. And in 2

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years, we were the dominant force because we had the technology,

the industry and the work force.

Mr. CHAFFETZ. Well, what are the impediments today? Why are

we not leading the world in manufacturing today?

Mr. ALFORD. Regulation, basically.

Mr. CHAFFETZ. What is the No. 1 thing, Mr. Alford, that you

would like to see us do to help us stimulate and grow the economy?

To my mind, it is the American entrepreneur, it is the men and

women who are going to create jobs, not government.

Mr. ALFORD. I would like to see us bring the Small Business Administration back. I would like to see us put emphasis on entrepreneurship and small business. That is the creator and that is the

job maker and that ingenuity is what makes America great.

Mr. CHAFFETZ. So how do we put the emphasis upon the entrepreneur? Is it going to be government that is going to do that?

Mr. ALFORD. No. Entrepreneur and government, they do not really go too well together. I think it is pure capitalism, and the need

of being able to be entrepreneurs.

I have my twin sons back here. They are University of Maryland

graduates and they went to all the finest schools and all that, but

they are entrepreneurs. They came out of college and started their

own businesses. Their friends, many of them are laid off now because of downturn. A lot of their friends are tending bar. They are

out thriving and living.

Mr. CHAFFETZ. Well, congratulations to you and to your two sons.

We appreciate it.

I know our time is short. I yield back the balance of my time.

Mr. ISSA. Did the gentleman yield?

Mr. CHAFFETZ. Yes, I would be happy to yield to Mr. Issa.

Mr. ISSA. I thank the gentleman.

I want to followup a little bit on this. When you talk about the

Small Business Administration not doing its job, when I came to

Congress in 2001, the Small Business Administration was not

doing their jobs, Government contracts were bundled, Section 3 of

the HUD act and other set asides and programs were not being enforced.

One, can you give us any goods things that happened in the last

8 years? I am asking, as a Republican, was there any shining light

in the last 8 years? And, since we inherited it from the previous

one and it was broken, and it is clearly broken today minus whatever shining lights you put on it, tell us what we need to do to

change that because I do not want this to be partisan. I want this

to be about what we should do in the future.

Mr. ALFORD. Yes, I think, go back to 1993 and I think the late

Ron Brown really had a handle on it and was steering the Clinton

administration in the right way. Right after his death, it all fell

apart and it kind of went in reverse. They put people over there

who were getting bonuses by putting a cap on their work force. If

they could decrease their work force, they got a big bonus at

Christmas time.

So, it left the field units high and dry for manpower to where our

members and other up and coming entrepreneurs in Seattle and

Denver and places, had no technical assistance any more. There

was no reach out there.

309

I think with the Bush administration, as I reflect back, I believe

his Cabinet had sensitivity. Not necessarily the SBA. I do not think

President Bush, it still kept going down, the revenues for the SBA.

But you look at HUD under Alphonso Jackson, who made records

in procurement for women, Hispanics, African American procurements. He was up to 50 percent of HUD’s procurement going to

8(a) firms and disadvantaged business firms, unheard of at the

Federal level. And the only reason why he did it, he went to his

procurement people and he said I want our procurement to look

like America and I will be checking every 6 months. And if it does

not look like America, you may not have a future. That is all he

had to say. And the outreach was there.

So we started steering everybody to HUD. But he is gone now

and I think HUD has gone back to its old ways.

Chairman TOWNS. The gentleman’s time has expired. Would you

like to request your own time?

Mr. ISSA. I think it is a good time for me to take my time, Mr.

Chairman.

Chairman TOWNS. OK. All right.

Mr. ISSA. Continuing on along that line, I have looked for years

at the laziness in the Federal procurement system. At DOD it is

endemic. It is the same, though, in every large bureaucracy in the

Federal Government. They just cannot help themselves. If they

have a project to build houses on the East Coast and the West

Coast, they will bundle them together and they will throw in

Guam, and the Philippines and 10 other places and they will say,

well, we are just looking for a vendor that can do it. And, of course,

just like that Navy contract, you end up with two companies or

three companies that can bond $1 billion.

This committee does not directly control the Small Business. We

have a committee for that. I hate to say it does not have enough

authority. I wish it was in Energy and Commerce where it really

probably needs to be with an A committee. But we do have specific

authority over how we go to bid. And this committee can do a lot

of reform.

Let me ask you a question. If we are not getting enforcement of

existing laws, what should this committee do? Who should we bring

in? Who should we have before us to find out where the problem

is in the bureaucracy? Because this committee owns the bureaucracy; we own all the oversight over it.

Mr. ALFORD. Yes, I received a call from an intern from Senator

Burton’s office and he was frustrated that he could not get data on

African American procurement and Hispanic procurement at the

Department of Defense. They told him it did not exist, that it was

just one lump minority. I told him that was just a lie.

Cal Jenkins, Deputy Administrator now at the SBA, has been

very astute and proficient in getting that data if he is allowed to

get it. I have locked horns with the former SBA Administrator and

asked for the data for the Gulf Region and he allowed Cal to get

me that data and in 2 days I have every contract by Black contractors, Hispanic contractors, and women contractors for the Gulf rebuilding by NAIC code, all the distinctions.

It is there. The data is there. But if this committee could say,

Defense, we want to see the data on small businesses, African

310

American, Hispanic, Native American, Asian, women and so forth,

and we want it there and we want you to sign to it, that would

expose a lot of opportunities.

And we could go so forth on down the line: Interior, Energy, all

of the other places. If you get the data, you can see the opportunities. And if they know they have to produce the data, then they go

to work.

Mr. ISSA. I am going to go to Ms. Johnson-Pata but I want to ask

just one followup question or make a small comment.

Chairman Towns and I have worked together on a very bipartisan effort to try to take it one step further. We are trying to take

it to where you, the consumer, you the bidder, and all the groups

that oversee the Government, can see it online in real time. We are

trying to get where there is a common flow to where, to be honest,

where we are not looking, every group concerned is looking and

sending it to it.

Ms. JOHNSON-PATA. I agree with Harry Alford about the data.

But the problem is making sure the data is consistent amongst

agencies. That is also a challenge.

Mr. ISSA. Common format. Common format is what you are saying.

Ms. JOHNSON-PATA. Common format and some kind of electronic

portal. I know they are working on one, but it is only for the future.

Mr. ISSA. We call it XBRL here usually, or equivalent.

Ms. JOHNSON-PATA. Right. So, those are some of the issues that

we have. We put together a number of recommendations about

what we think that could help some of the training that is necessary for the SBA and the contract officers, etc. That would be

able to be helpful.

But we have a whole list of recommendations on how to improve

the entire process of government contracting and it is signed on by

a number of other minority groups for those recommendations. But

one of them is really the consistency of data.

Mr. ALFORD. Do I have time?

Mr. ISSA. Please, yes.

Mr. ALFORD. Do we have a law that would prevent contracting

officers from going to work for some of these major prime contractors?

Mr. ISSA. No, unfortunately, the revolving door is one of our challenges on this side of the dais.

Mr. ALFORD. Yes, so the ones you have frustrations with end up

being vice presidents for some of these prime contractors later.

Mr. ISSA. Not at all unusual in DOD and throughout the Government.

Let me ask one final question for all of you. What I am hearing

today, and, Mr. Alford, I am hearing it most loudly from you, but

I very much hear it from everyone, is that we have a problem getting what is already codified in the law, which is opportunity and

investment in our inner cities and in areas of high unemployment

and, in some cases, even rural areas, tribal areas, and so on.

Is it, perhaps, that we have a set of rules in a bureaucracy to

enforce? And then the very people who we need to have these opportunities tend to be small entrepreneurial companies that do not

311

have the leverage, that cannot offer a senior vice presidency to

somebody when they retire?

Is it, perhaps, for this committee to look at something in between, the ability of companies to be formed for the specific purpose of aggregating small business collectives? If that billion dollar

entity, if the government-facilitated companies that were nothing

more than, in fact, destined against the big boys for purposes of

having some percentage, maybe not 100, but 50 or 60 percent, be

to minority, disadvantaged, new companies, women owned companies, is that something that we should look at facilitating in the

law so that we actually have some larger entity when the bureaucracy says we cannot break it down and your people cannot get access to it and your tribes cannot get access to it and, in fact, emerging Hispanic businesses cannot get access to it, am I hearing that

we have an endemic problem over and above what we can solve

from this side of the dais?

Mr. ALFORD. Yes. And that scenario certainly works at the municipal level. But Mayor Stephen Goldsmith of Indianapolis, when

he was mayor, they were doing their $600 million infrastructure

project, he gave the program management fees to S.R. Smoot Construction, a Black-owned firm, with the proviso that he would go

out and get two partners, major partners, and that the subcontracting level would reflect the population of Indianapolis. It was done

on time, he saved the city $100 million, and it had 35 percent minority participation.

Mr. ISSA. And the payroll stayed in the city.

Mr. ALFORD. Yes, sir. Banks, lawyers, everything.

Ms. MURGUI ́A. I would just comment that I think that we need

to be creative in terms of how we are going to respond to these

growing needs. You know, for us in the Latino community, Latinas,

Latina-owned businesses, are the fastest growing segment of the

business community. We have a great need to respond to them in

terms of how we can best address their ability to establish these

businesses and to make sure that they are sustainable.

I would encourage you to look at proven, community-based organizations that can offer that direct support, can offer than guidance, can offer the ability to help navigate through the system and

get them the support that they need and can help be a convener.

For many of those small businesses that are struggling and are

facing the various challenges, but many of those challenges are

common challenges and, if we can use and leverage communitybased organizations to bring those folks together and to engage

them more effectively into how they can have access to this assistance and grow their ability to succeed.

Mr. ISSA. My time has expired. Just quickly, answers, if you have

them.

Ms. HASEGAWA. Just quickly I would say that, you know, the

SBA’s success also depends on the partnership with financial institutions to offer those loans and those products. So, I think that it

also a challenge that we have been facing. So, I think that also

needs to be looked at.

Ms. JOHNSON-PATA. I think there is one thing that prevents what

you are talking about right now is not the incentives up front, because sometimes the contracts go out so quickly, you do not have

312

time to put the partnerships together that take a little bit of time

to steer that. So, it needs to be incentive up front to make that

happen.

I think if you look at something that, you know, the tribal governments, their ability to play that role right now, have been doing

some of that.

Mr. ISSA. Alaskan Native American tribe, for example.

Ms. JOHNSON-PATA. And that is the model that I am aware of,

that, you know, you ask the question of should we allow or encourage those sort of preferential organizations? Ultimately, people

have to bid and win but at least they would exist.

Ms. HASEGAWA. I think that technical assistance from the SBA,

also, would be very helpful because I think a lot of the small business assistance centers are not specifically targeted to particular

communities of colors and for Asian Americans and Pacific Islands.

There are certainly language needs there.

Ms. ISSA. Thank you, Mr. Chairman. You have been very generous with the time and this has been a very productive hearing. I

appreciate your indulgence.

Chairman TOWNS. Thank you very much.

Let me just say that I really appreciate your testimony. It points out that yes, we are sending out $787 billion to the community, but

we have to make certain that money is targeted in a way that is

going to truly make a difference and we have to make certain that

people who have been left out are now in and to be able to do whatever we can do to keep people in their homes. I think that is just

so important.

And, of course, I want to thank you for your work and thank you

for testimony. I look forward to working very closely with you in

the days and months ahead to make certain that we are getting

these resources out to the communities and that it is truly going

to make a difference.

I want to thank you all.

This is the end of the hearing, Mr. Alford.

Mr. ALFORD. I have a thank you for you, sir. I owe you a thank

you. You sent a letter to President Bush after Katrina, suggesting

that the White House work with the National Black Chamber of

Commerce on rebuilding. As a result of that letter, we got $3 billion in contracts, and I thank you.

Chairman TOWNS. Thank you very much. I appreciate your kind

words. And I thank all of you for your testimony.

The committee is adjourned.

[Whereupon, at 1:05 p.m., the committee was adjourned.]

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