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67–364 2011

ACCESS TO CAPITAL: CAN SMALL BUSINESSES 

ACCESS THE CREDIT NECESSARY TO GROW 

AND CREATE JOBS? 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 1, 2011 

Small Business Committee Document Number 112-018 

Available via the GPO Website: http://www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Sam Graves ..................................................................................................... 1 

Hon. Nydia M. Vela ́zquez ........................................................................................ 2 

WITNESSES 

Mr. William Hall, CFE, CEO, William G. Hall & Co., Fort Worth, TX .............. 3 

Ms. Lynn Ozer, Executive Vice President, Susquehanna Bank, Pottstown, 

PA .......................................................................................................................... 12

Mr. Robert Kottler, Executive Vice President, Director of Retail and Small 

Business Banking, IBERIABANK, Lafayette, LA ............................................. 31 

Dr. Dennis Jacobe, Chief Economist, Gallup, Washington, DC ........................... 24 

APPENDIX 

Prepared Statements: 

Mr. William Hall, CFE, CEO, William G. Hall & Co., Fort Worth, TX ....... 6 

Ms. Lynn Ozer, Executive Vice President, Susquehanna Bank, Pottstown, 

PA ................................................................................................................... 15 

Mr. Robert Kottler, Executive Vice President, Director of Retail and 

Small Business Banking, IBERIABANK, Lafayette, LA ........................... 34 

Dr. Dennis Jacobe, Chief Economist, Gallup, Washington, D.C ................... 26 

Statements for the Record: 

Hon. Scott Tipton .............................................................................................. 66 

International Franchise Association ............................................................... 67 

Credit Union National Association ................................................................. 71 

Associated Builders and Contractors .............................................................. 73 


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(1) 

HEARING: ACCESS TO CAPITAL: CAN SMALL 

BUSINESSES ACCESS THE CREDIT NECESSARY TO GROW AND CREATE JOBS? 

WEDNESDAY, JUNE 1, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building. Hon. Sam Graves (chairman 

of the Committee) presiding. 

Present: Representatives Graves, Bartlett, Herrera Beutler, Coffman, Mulvaney, Ellmers, Landry, West, Tipton, Vela ́zquez, Chu, 

Cicilline, Peters, Owens, Altmire, Clarke. 

Chairman GRAVES. I call this hearing to order. I want to thank 

all of our witnesses for being here today. We look forward to hearing your testimony. I apologize for being a little bit late as we had 

a vote called. 

As America works to recover from this recession, which has obviously been a terrible blow to a lot of folks, we are going to be relying on the nation’s small businesses to help lead the way. 

For small businesses to expand and create jobs, they need adequate financing. However, small businesses are telling us that access to capital remains a hurdle in the current economy, despite 

rallies on Wall Street and government efforts to loosen credit. On 

the other side of the equation lenders say that they have capital 

available but businesses are not as credit worthy as they were just 

a few years ago. Banks claim that today’s borrowers have lower 

credit scores and lower collateral value due to the depressed real 

estate values. If we want our nation’s entrepreneurs to grow their 

businesses and create jobs, we need to bridge the gap between 

lenders and small business borrowers. 

We have called this hearing today to examine the challenges that 

both small businesses and banks are facing when deciding to expand or to lend money. In addition, we are going to examine alternative kinds of financing for small businesses and other avenues 

available for businesses to get the capital that they need. 

Again, I am very pleased to have several distinguished witnesses 

here today to provide members of this committee with insight 

about the importance of capital for small businesses and the impediments leading to the bank or leading to lending that banks are 

experiencing today. I think this is going to be a very good hearing. 

It is a very timely hearing, obviously. And with that, I am going 

to yield to the ranking member for her opening statement and then 

we will get started. 


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Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Job creation is understandably a top priority for all Americans 

right now. New data out just this morning suggests the economy 

added only 38,000 jobs in the month of May. This new number 

shows large firms cut their workforces this month. We could clearly 

use some of the small businesses’ job creating power right now. 

In order for small firms to play their traditional job creating role, 

several factors must be in place. Perhaps the most important ingredient is the availability of capital. If small businesses are truly the 

backbone of the economy, then the flow of capital is the lifeline. Although challenges remain, there has been progress in this area. 

Small business loan approvals in the first quarter of this fiscal year 

are up 15 percent over last year. Fewer small firms are falling behind or defaulting on loans, suggesting they are in better shape to 

take on additional debt and hopefully expand. 

Lending through the Small Business Administration is always 

critical for entrepreneurs seeking affordable capital. However, during economic downswings when credit is tied elsewhere, the SBA’s 

role becomes more important. 

Several provisions this Committee crafted in the Recovery Act 

temporarily boosted SBA-backed lending. Raising guarantees on 

this, SBA 7(a) loans gave banks greater incentive to make small 

business loans. Other provisions made the loans more affordable 

for borrowers. As of now, those steps have demonstrated the most 

quantifiable proven results. Other recent policy actions have yet to 

exhibit the same level of success. 

Examining the amount of SBA lending is only one metric. For 

these loans to ignite real job growth, the agency must concentrate 

on the right kind of small businesses, namely start-ups with the 

highest potential for job creation. On average, it costs nearly 

$75,000 to launch a new enterprise, a tough proposition under even 

the best circumstances. Unfortunately, these small start-ups are 

not seeing their fair share of SBA loans. During the first half of 

fiscal year 2011, less than one-quarter of SBA loans’ dollars went 

to start-ups. 

It is my hope that today’s discussion will generate new ideas 

about how Congress, the SBA, and the lending community can expand all small firms’ financing options, but especially for those at 

the earliest stage of the business cycle. As the Committee moves 

forward, we should examine the full spectrum of capital options for 

small firms. Some businesses will do fine through conventional 

loans, while other entrepreneurs can meet their capital needs with 

microfinancing. For start-ups, a debt bay solution may not make 

sense at all. Investment capital might be a better fit. What works 

for a small manufacturer in Ohio, may not be appropriate for a 

family farm in Tennessee, to say nothing of a technology start-up 

in lower Manhattan. 

On that note, I would like to thank our witnesses for taking time 

out of your busy schedule to be here with us. Their diverse views 

and experiences will be valuable to the Committee as we consider 

how best to meet entrepreneurs’ capital options and needs. 

I yield back, Mr. Chairman. 

Chairman GRAVES. Thank you, ranking member. 


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If any other Committee member has an opening statement, I 

would ask that you submit it for the record. 

I would like to explain the lights to you real quick. Each of you 

have five minutes and the lights will be green. When you get down 

to a minute it will turn yellow and then it will go red. We will be 

a little lenient on that but please try to stay within the five-minute 

mark. 

STATEMENTS OF WILLIAM HALL, CEO, WILLIAM G. HALL & 

CO., ON BEHALF OF THE INTERNATIONAL FRANCHISE ASSOCIATION; LYNN OZER, EXECUTIVE VICE PRESIDENT, SUSQUEHANNA BANK, ON BEHALF OF THE NATIONAL ASSOCIATION OF GOVERNMENT GUARANTEED LENDERS; DENNIS 

JACOBE, CHIEF ECONOMIST, GALLUP; ROBERT KOTTLER, 

EXECUTIVE VICE PRESIDENT, DIRECTOR OF RETAIL AND 

SMALL BUSINESS BANKING, IBERIABANK, TESTIFYING ON 

BEHALF OF THE CONSUMER BANKERS ASSOCIATION 

Chairman GRAVES. Our first witness today is William Hall, who 

is the chief executive officer at William G. Hall and Company. Mr. 

Hall is a Dairy Queen franchisee with five locations in Texas. Mr. 

Hall also serves on the board of directors for the International 

Franchise Association and chairs their Credit Access Committee. 

We appreciate you being here today. Obviously, you came a long 

way, and I look forward to your testimony. 

STATEMENT OF WILLIAM HALL 

Mr. HALL. Thank you, Chairman Graves. And I want to thank 

you, as well as Ranking Member Vela ́zquez and the rest of the 

Committee. Thanks for having me here. Five minutes, it is hard for 

me to say hello but I am going to do my best here. 

As you said, I am a Dairy Queen franchisee in Fort Worth, 

Texas, and I am a member of the International Franchise Association Board of Directors. 

I want to talk about the important role in the U.S. economy franchising holds. As Ms. Vela ́zquez mentioned, small business startups are an important part of our economy and franchising meets 

that need but with a little bit of a lifeline for the first people and 

first role in the business because they do have a system of training 

and it allows someone to start a business without being in business 

totally by themselves. 

The franchising world grew at a faster pace than the non-franchising world up to 2008 when we had the financial meltdown. 

Since then recovery has been very slow, markets have been frozen, 

very difficult to obtain any sort of financing. We greatly appreciate 

the work you guys did on the Small Business Jobs Act. Those SBA 

provisions have been a lifeline for franchising. It is something that 

we really do appreciate. But currently, other than SBA, there is 

very little lending out there for the entrepreneurs in the franchising world. 

To survive, the franchising community—we cut back. We lived 

with what we had. We did not add new jobs. We did not remodel 

where we needed to because we were caught in a situation where 

we just could not borrow any money. And that was pretty much 

across the board. That is small to large. It impacts all sectors. We 


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delayed the new store acquisitions. Franchise wars were not a 

problem because they could not put new people into their units because they could not get the initial financing. People would pay the 

franchise fee but they could not get the initial financing to get 

going. 

We think that small business creates six out of 10 jobs in the 

country, and if we do not have access to credit then we are not creating the jobs that we need. We think there is a 20 percent shortfall in lending to franchise this year and the SBA has been critical 

in filling the need but we are still going to be 20 percent short. And 

that means there are a lot of jobs not going to be created that could 

be if we had normal access to credit. 

Franchising is all about small business. Franchising sometimes 

gets confused because people talk about McDonald’s, even Dairy 

Queen as being large companies. I started from nothing, had nothing, and most of the people I know in the franchising business 

started with one unit and grew from that. We are resilient as a 

group. We are diverse as a group. In the franchising industry, 19 

percent of the franchises are owned by minorities whereas in the 

nonfranchise sector there is 13 percent owned by minorities. So we 

have a great program for veterans that come back home. Over 400 

franchisors have put in a program to give a discounted start-up opportunity for veterans. We feel like that has been a fantastic program and well received and a great opportunity for our veterans 

coming back. 

As I said, in the franchising world, you are in business for yourself but not by yourself. And that is a tremendous benefit, which 

does, in fact, put us into a position where we could be a good borrower for these lenders that want to make loans, which they need 

to make loans to be successful. So we thought how could we solve 

this problem without any other help from anyone? And we decided 

as a group to get together from the franchising world and reach out 

to the lenders to try to show them what we had to offer because 

we knew they needed to make loans. 

So as a franchise loan, we think it is a better loan than a nonfranchise loan because you do have the system in place. There is 

training. There is support. The franchisor does underwriting before 

you go to the lender so there is some safety there. 

So what we did is put together a credit summit to bring together 

all the parties. I do not want to take the Committee’s time to go 

through it and I do not have the time, but I would ask the chairman if we could perhaps introduce this piece into the record which 

does describe the credit conference we had and brought together 

lenders and franchise folks to try to come up with a solution, a private sector solution to the problem. 

As we go forward, we need help in this regard. We need to help 

our lender friends to be able to loan money to us. We are going to 

do our part. We are good loans. We are not trying to look for a bad 

loan. We are trying to put a proven loan that can be made and paid 

back. But we do need help because those markets are closed to us 

right now. 

Without the SBA lending right now, we would be a lot less people employed in the U.S. And with their help and your help to 

them, I know there will be a lot more jobs available. We are not 


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looking for a bailout. We just need access to credit so we can grow 

our businesses and to provide more jobs. 

And I want to thank everyone for having us here. I will be happy 

to answer any questions. Thank you. 

[The statement of Mr. Hall follows:] 


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Chairman GRAVES. Thank you, Mr. Hall. 

Our next witness I would like to introduce is Lynn Ozer. Ms. 

Ozer is the executive vice president of small business and SBA 

lending at Susquehanna Bank located in Pottstown, Pennsylvania. 

Ms. Ozer is representing the National Association of Government 

Guaranteed Lenders where she has served on the board of directors 

since 1988. Thanks for coming and I look forward to hearing what 

you have to say. 

STATEMENT OF LYNN OZER 

Ms. OZER. Thank you, Chairman Graves, Ranking Minority 

Member Vela ́zquez, and all the members of the Committee. 

As Chairman Graves mentioned, I am the executive vice president of Susquehanna Bank where I manage SBA and all government guaranteed lending throughout our banks for state footprint. 

Susquehanna Bank is a Pennsylvania state chartered bank with 

approximately $14 billion in assets and operates throughout 223 

branches in the mid-Atlantic states. Susquehanna is active in both 

SBA 7(a) and 504 programs, currently holds a portfolio of approximately $300 million in government guaranteed loans. 

I am also here representing more than 700 members of the National Association of Government Guaranteed Lenders (NAGGL). 

For the past 23 years, I have served on their board of directors, 

and for many of those years I have served on their executive committee and as chair of the Technical Issues Committee. NAGGL’s 

lender members are responsible for approximately 80 percent of the 

annual 7(a) volume, as well as most of the lender portions of the 

SBA 504 loans. 

Thank you for inviting me to testify and for holding this hearing 

on the important issue of small businesses availability—ability to 

access capital. In the interest of time, I will submit my full written 

testimony for the record and provide just a brief summary. 

I want to begin by publicly thanking the International Franchise 

Association (IFA) for taking a leading role, driving the discussion 

on the direct correlation between access to credit, job creation, and 

economic development. Because of the exemplary efforts, both 

NAGGL and IFA today, we have a 7(a) loan program that is much 

better able to meet the capital needs of America’s small business. 

And it is important to note that the IFA work on this issue did 

not end with the passage of the Small Business Jobs Act. Approximately a year ago, while we were working on credit access issue 

on different tracts, NAGGL and IFA began a dialogue that we have 

continued. Through those encounters we came to realize that there 

is a significant overlap in the issues affecting both organizations’ 

memberships and to note that each group has much to learn from 

each other. So IFA and NAGGL have forged a partnership intended 

to increase the availability of capital to franchise small businesses. 

A highlight of IFA’s ongoing efforts to address the credit issue 

was the credit summit that IFA organized and delivered in April. 

Bill Hall, chair of IFA’s Credit Committee, has briefly described 

some of the things that IFA is doing, but because neither he nor 

IFA will tout the organization’s work to bring attention to this important issue and IFA’s continuing commitment to this effort, I 

want to do that for him and them. 


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I also want to specifically mention the exemplary leadership 

shown by IFA’s CEO, Steve Caldeira, who has worked tirelessly to 

highlight the important role that access to credit plays in creating 

jobs and increasing economic output. The most important message 

that I can bring to the Committee today is to reiterate what you 

already know. SBA loans are critical to keeping the small business 

segment of the economy, the biggest job creating segment, healthy. 

We are seeing signs of economic recovery, but for a variety of 

reasons accessing capital continues to be difficult for small businesses. Lenders want to be able to provide this necessary capital, 

but they are experiencing a perfect storm of circumstances that together serve to stifle the conventional small business lending activities. 

So how are banks meeting the credit needs of their small business customers? Many lenders are increasingly turning to SBA 

loan programs, and in particular to the SBA 7(a) Loan Program. 

Having a healthy 7(a) program is essential to keeping credit 

flowing because SBA is the single largest provider of long-term capital to U.S. small businesses. Its loan guaranteed account for well 

over 40 percent of all long-term small business loans made in 

America. From the lenders’ viewpoint, a key benefit to the 7(a) program is that it takes less capital to support an SBA loan than it 

does a conventional loan. From the small business viewpoint, the 

SBA guarantee allows increased access to capital, particularly to 

the kind of financing that appropriately matches the loan term to 

the life of the loan assets being financed. That is, finances longterm assets with long-term loans. 

According to the federal statistics, a typical 7(a) loan has an average original maturity of 12 years, while conventional small business loans typically have an original maturity of three years or less 

with a significant majority of those loans having maturities of one 

year or less. Longer maturities allow small businesses to access 

capital that would not be available to them if repayment were required in substantially shorter periods. The importance of SBA 

lending to small business clearly demonstrates by recent demand 

for the program. 

According to SBA, in the last two years the 7(a) and 504 guarantees enable private sector lenders to provide approximately $42 billion in loans to small business. However, the success of the 7(a) 

program this year is causing a new problem. Based on the loan approvals to date, it appears highly likely that the program demand 

will exceed the $17.5 billion program level ceiling set by congressional appropriators. This means that it is likely that the 7(a) program will have to shut down sometime late this summer unless the 

Congress acts to raise the program level. In order to avert this potential program suspension, NAGGL, on behalf of its members, is 

requesting that Congress act now to increase this year’s program 

level for SBA’s business loan programs to $19 billion. This increase 

will not affect the budget because sufficient appropriations are already available to support the increase to the program level ceiling. 

We know small businesses lead the way to creating new jobs, and 

we know that having a vibrant small business segment in our economy is vital to continuing the fragile economic recovery that we are 

seeing. We also know that keeping SBA’s 7(a) and 504 loan proVerDate Mar 15 2010 02:13 Aug 06, 2011 Jkt 067364 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A364.XXX A364

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grams available to meet the capital needs of tens of thousands of 

credit worthy small businesses that now have nowhere else to turn 

is equally vital. 

Do I still have time left? 

Chairman GRAVES. You are over. 

Ms. OZER. All right. Sorry. That wraps it up and I will be available to answer any questions. 

Chairman GRAVES. You will have more opportunity when we get 

to questions. 

Ms. OZER. Okay. 

[The statement of Ms. Ozer follows:] 


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Chairman GRAVES. I will now turn to Ranking Member 

Vela ́zquez to introduce our next witness. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. And it is my pleasure to welcome and introduce Dr. Dennis Jacobe. He is the chief 

economist at Gallup. In this role he leads Gallup’s efforts to understand consumer public opinion and the economy more broadly. He 

has designed many of Gallup’s special financial indexes, including 

the small business index and investor and retirement optimism 

index. Dr. Jacobe is currently focused on the application of behavioral economics to the overall idea of financial well-being. Welcome. 

STATEMENT OF DENNIS JACOBE 

Dr. JACOBE. Thank you, Ranking Member Vela ́zquez and Chairman Graves. 

I am pleased to be here today. As you mentioned, I am Gallup’s 

chief economist. The comments today are my own, not necessarily 

those of Gallup. 

We at Gallup are concerned about the economy and I will summarize my statement very quickly. But we interview 1,000 Americans every night and we have done so since the beginning of January 2008. And we ask them various questions about the economy 

and then we look at those results and report on them on a weekly 

and monthly basis. And what our numbers show us is what you 

saw on some of the economic data today, and that is the economy 

is softening. We have seen it for quite a while. We think by asking 

Americans about how they feel about the economy, that we get 

some insight into where it is headed. And so although the economic 

data you are seeing today lags a little bit, we think our numbers 

are being confirmed by what is happening now, and that is we are 

certainly in a soft patch, potentially in a stagnation or a stagflation 

situation. 

Some of the numbers that we get show that consumer spending 

simply has not been increasing and at the same time we are seeing 

unemployment at very high levels. The number will come out Friday. I am not sure what that will be but Gallup measures its own 

unemployment rate. Our number for May is 9.2 percent. That is 

not seasonally adjusted as an unemployment rate, but when we 

look at what we call underemployment, that is the people who are 

unemployed or people who are working part-time looking for work, 

the number goes up to 19.2 percent. And we think people underestimate what the effects are on society and the economy of having 

one in five Americans unemployed or underemployed. 

In addition to this sort of daily monitoring, we do something we 

call the Wells Fargo Gallup Small Business Index. And what we do 

in that is we survey small business owners across the country and 

ask them a variety of questions to try and measure the small business operating environment. I have inserted a chart in my testimony, but basically what happened is early this year, as consumer 

confidence was up, so was small business confidence. And it was 

recovering from the last year and a half when it was low. In our 

latest measure in April, small business confidence went down. We 

think that does not portend well, but fits with our other measures 

in terms of the economy overall. 


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In terms of our credit availability, as part of that index we measure and ask small business owners what they feel the credit is 

available to them as small business owners. In my testimony I include a chart that shows that about 30 percent of small business 

owners say that it is difficult or very difficult to get credit right 

now. Now, that number may seem small but it is about three times 

what the difficulty of getting credit was rated by small business 

owners prior to the recession. In terms of getting—whether credit 

is easy to get, we have about 20 percent who say it is easy to get. 

Obviously, those that are stronger financially than the rest, but 

that number is down from over 50 percent prior to the recession. 

So there is a slight improvement in credit availability for small 

businesses as has been mentioned by a lot of people, but it is far 

down from pre-recession levels. 

There are a couple of different things that I think are very important having to do with job creation of small businesses. I will 

not go through that discussion in detail except to say that we find 

that about 40 percent of small businesses tell us that they are hiring less people than they need. We think that if we can turn that 

around and actually get them just to hire what they need, not necessarily to grow, there could be really an explosion in terms of job 

creation that is unexpected by most economists. The question is 

how to do that effectively. 

Three areas that I mention that are not mentioned often, I think, 

one has to do with education. I would be glad to discuss that but 

I think there needs to be some tie-in to education from our polling 

with small businesses. The housing and real estate area, which you 

have heard more bad news about this week, which is another area 

that is very important to small businesses, and then finally, some 

of the energy problems. 

I will be glad to answer any questions. 

[The statement of Dr. Jacobe follows:] 


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Chairman GRAVES. Thank you. Next I am going to turn to Representative Landry for introduction of our final witness. 

Mr. LANDRY. Thank you, Chairman Graves and Ranking Member 

Vela ́zquez. I would like to introduce Mr. Bob Kottler to you all. 

Though he is based up here in D.C., Mr. Kottler is a Tulane grad. 

I think Mr. Richmond—Cedric is not here—is our other—Tulane 

grad on the Committee. 

A former executive at Louisiana’s own IBERIABANK and is currently the executive vice president near my hometown at 

IBERIABANK in Lafayette, Louisiana. And this may make him a 

certified Cajun. He may be able to understand me if any of you all 

have problems. 

Mr. Kottler has capitalized on his banking and finance expertise 

and has devoted much of his career to working on what makes 

small businesses work. In his current role at IBERIABANK, Mr. 

Kottler is responsible for the retail segment, including retail operations, credit cards, sales, retail training, and small business. Before joining IBERIABANK, he was the executive vice president for 

small business banking at Capital One, covering Texas, Louisiana, 

Maryland, Virginia, D.C., New York, New Jersey, and Connecticut. 

I do not know how you connect Texas and Louisiana to the east 

coast, but. 

His team worked in tandem with Capital One’s national small 

business credit card team. Mr. Kottler also headed Capital One’s 

branch real estate division in the Texas area and served as IBERIA’s chief sales support officer before IBERIA and Capital One’s 

merger. Mr. Kottler started his involvement with the Consumer 

Bankers Association in 1995 as a member of CBA’s Small Business 

Committee. He has been extremely active over the last 16 years in 

roles such as chair of the Membership Committee and member of 

the Board of Directors for 10 years. In total, Mr. Kottler has nearly 

20 years of practical experience in providing small business access 

to capital and credit. 

Mr. Kottler, thank you for your service to our communities in 

Louisiana and throughout the other states, and I am proud to have 

you testify before us all today. 

Chairman GRAVES. Thanks, Mr. Kottler. I think Mr. Landry used 

up all your time. 

Mr. KOTTLER. I think so. I should say that was a hard one to follow. I yield. 

Chairman GRAVES. Go ahead. 

STATEMENT OF ROBERT KOTTLER 

Mr. KOTTLER. Good afternoon, Chairman Graves and Ranking 

Member Vela ́zquez, and members of the Committee. I am excited 

to be here today. 

As Congressman Landry said, I am Bob Kottler and I am responsible for retail and small business banking at IBERIABANK. And 

also a member of the Consumer Bankers Association Board of Directors. CBA has been the recognized voice of retail banking, including small business lending for the nation’s capital for 90 years. 

In my positions at IBERIA and CBA and 21 years experience in 

small business lending, I understand the challenges we face, especially getting through the current economic environment. Over the 


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past few years high unemployment has resulted in less consumer 

spending, and consumer spending is critical to boost sales of small 

businesses and make them healthy. The decline in sales and the 

weak economic conditions have led to weaker than normal and inconsistent demand for small business loans. In fact, a recent FIB 

study found that poor sales and uncertainty continue to be greater 

problems for small business owners than access to credit. 

In addition to the decline in sales, another factor that has diminished the demand for lending is value of home equity. And as many 

of you know, home equity is traditionally a strong form of collateral 

that many business owners use to secure their business loans. 

A December study by the Federal Reserve Bank of Cleveland 

found the decline in home values has constrained the ability of 

small business owners to obtain the credit they need to finance 

their business. It is also important to understand how the decline 

in sales and home values has affected small business lending. 

When banks underwrite loans, we look at two things—cash flow, 

both historical and projected, as well as the collateral securing the 

loan. The decline in these two criteria over the economic cycle have 

been significant factors behind the reduction in lending and make 

it clear why lending has been so difficult. But we do see it improving. 

CBA members report increases in demand for small business 

loans. In addition, the Commerce Department denounced an increase in consumer spending for the tenth straight month, which 

we think is a positive sign that we are turning the corner. 

So what is CBA doing to improve lending? Many banks have instituted aggressive Second Look programs where the banks will 

take a look at a loan that might have been declined and see if there 

is a way to improve it and are looking to find ways to make more 

quality loans through that process. A number of banks have also 

announced new lending programs and commitments to small business, and many CBA members have established enhanced training 

and incentives through the branches, which is often the primary 

place our customers come to ask for loans and also specifically improving use of SBA programs. 

CBA supported and will continue to support the efforts of the 

Committee and Congress to expand small business lending and economic development. We believe SBA program improvements, including 7(a) and 504 and express are important, and also the Small 

Business Lending Fund and other enhancements and all of those 

things are getting us—taking us in the right direction to make 

more loans. 

This spring, CBA joined with the International Finance Association to sponsor a small business lending summit here in Washington, D.C. And through that summit and the dialogue that we 

have had with IFA, we have looked for ways to improve lending. 

As a result, CBA’s Small Business Committee is now working to 

develop a template that franchises can use to prepare their potential franchisees to secure the financing they need. This template 

will provide the bank information about the franchise and hopefully will help us successfully underwrite the loan. 

One final point I wanted to stress is the importance of communications between borrowers and lenders, even before a request is 


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made. The better prepared and knowledgeable a borrower is about 

the process and the more that a lender knows about the borrower, 

the more successful the outcome. Small businesses and lenders 

alike need to work harder to bridge that divide and better understand one another. And that is one of the things that we have been 

working on with the IFA. 

In closing, we are just starting to see signs of growth in our economy but we think we have a ways to go. Any successful small business needs to have sufficient demands and goods in order to have 

strong cash flows to prosper. And we think as the unemployment 

rate falls, demand will increase which will continue to improve 

small business lending and small business growth. And CBA looks 

forward to working with this Committee and small businesses to 

strengthen our nation’s economy. So thank you for the opportunity 

to testify and I will be available for questions. Thank you. 

[The statement of Mr. Kottler follows:] 


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Chairman GRAVES. Thank you, Mr. Kottler. 

I am going to pass my line of questions to the end of the hearing 

because I have a lot. But I am going to turn to our first member, 

Mr. West, for questions. Five minutes. 

Mr. WEST. Thank you, Mr. Chairman. Also, Ranking Member 

Vela ́zquez. And thank you, panel, for taking the time to be here 

with us. 

We just had a very interesting morning. We went over and met 

with President Obama and one of the interesting topics we brought 

up is what we are discussing here today as far as lending. And especially the regulatory burdens that we place upon our small businesses. One of the things that the president said was that these 

are independent regulators dealing with small businesses and they 

really—the government does not have any effect upon them. 

So what I would like to know is, is that really the case? Or have 

you seen an increase of government regulators coming down that 

are restraining or restricting the lending practices for our small 

banks? Because that is a very important relationship we have to 

our small businesses. So I will defer to our bankers first and then, 

of course, Mr. Hall. 

Ms. OZER. What we found is that the FDIC regulators are inconsistently applying regulations throughout the banking community. 

That is what has been reported to the trade association. 

Mr. KOTTLER. I think the banks that are members of CBA have 

not seen a lot of regulatory impact. We are always concerned about 

it but I ultimately think that it is really improvement of the economy that is really keeping more loans from being made. And that 

is really the primary influence. 

Mr. HALL. Well, from our—by the way, Mr. Landry, I am from 

Texas. No problem understanding you. 

Mr. West, I think the issue is, from a franchise perspective, we 

are hearing that our borrowers are being inconsistently treated in 

some ways or that the bankers are being inconsistently treated. At 

least that is what the bankers are telling us. I have some banking 

interest myself and I do know it is very difficult for the individual 

banks to know what to do. They are sort of just like we are in our 

business. It is very difficult times for the small banks. And so I 

do—we hear on the franchising side that there are significant restrictions on credit based on the inconsistency of the regulators. 

And I am not—I do not know enough about it. I am not trying to 

pick on FDIC or anybody else. We are just trying to find a solution 

to the problem. 

Mr. WEST. Can you all give examples of these inconsistencies? 

Just one or two maybe. 

Mr. HALL. I can tell you what I heard but I do not want to— 

these are the bankers. I will defer to the bankers. Unless they do 

not answer and then I will tell you. 

Mr. WEST. Hot potato. 

Mr. HALL. Okay. You know, what we hear is that the SBA 

loans—and again, I know we had Mr. Grumberger, who is the vice 

chairman of the FDIC, speak at our credit conference. He clearly 

said we are trying to help you in this effort but we hear what is 

happening is that it is not getting filtered down to the local examiners and that what is happening is that at the local examination 


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level they are looking at SBA loans as being some risk—more risky 

because they are guaranteed. And therefore, are substandard. And 

so they are getting pushed over into a more restrictive line within 

the individual banks. We think franchise loans are good loans but 

because they are SBA loans there is apparently some bias against 

that. Again, I am not—I am only answering because you asked me 

the question. So. 

Ms. OZER. Well, this is the same information that we have heard 

as well. And some banks on the government guaranteed loans are 

asked for higher reserves than others on the same guaranteed 

versus unguaranteed portion. So it has been handled inconsistently. And then just exactly what Mr. Hall was saying as far as 

the classification of the loan and the risk rating, and then that naturally affects how much capital has to be reserved for those loans. 

Mr. WEST. Absolutely. Well, thank you. 

And Mr. Jacobe, one question. In your estimation, what are the 

two economic policy silver bullets that would enhance access to capital for our small businesses and help us to sustain a growth environment? 

Dr. JACOBE. I wish there were silver bullets, but two things that 

would really help. I think one is stabilizing the housing and real 

estate markets. I think that as you hear from the bankers in terms 

of how small business loans are made, and I have worked with 

bankers for 25 years and they tell me the same thing. And that is 

a lack of collateral. A lot of that is related to the housing situation. 

The second thing has to do with education. When we did our polling prior to the recession and prior to the financial crisis, one of 

the things we found was that small businesses had problems finding people who were skilled and had the skills they needed so that 

they could grow. That remains a problem. And when we have 

polled recently, among the other problems they still cannot find the 

skilled people they need and talented people they need in those 

areas that are growing. So those are the two things I would focus 

on. 

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

Chairman GRAVES. Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Dr. Jacobe, in your testimony you discussed that while credit 

conditions have improved for small businesses, they are still considerably tighter than they were in 2006–2007. And I know that 

you mentioned three factors, one of them the housing and real estate markets. But do you see, based on the surveys that you take 

every night, any conditions that are improving so that we could be 

to a point where we were five years ago? 

Dr. JACOBE. Well, actually, until about January of this year we 

started to see a lot of things improving. And I thought we actually 

were going to build some economic momentum. And that has been 

sort of dashed in the last couple of months. 

I think that we could build surprising economic momentum and 

we could really get back there if we can unleash this kind of pentup demand in the small business sector and just do a few things 

basically nationally that we could really recover very much more 

quickly than people think. 


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Ms. VELA ́ ZQUEZ. Can you imagine where we would be today if we 

were not infused capital in terms of helping prevent the capital collapse—the capital markets from collapsing? 

Dr. JACOBE. That is really interesting. Last night I was watching 

Too Big to Fail. And during the period of time when all those 

events took place, I was polling nightly not only national consumers but also banking customers. And I could identify very well 

with some of the feelings that are portrayed in that show. It is 

really hard for people to go back and imagine what conditions were 

at that time. But at that stage I was among the group of people 

who would support almost anything because we were really afraid 

that things were going back to the stages of the 1930s. Now, I 

know a lot of people do not agree with that anymore but that is 

where we fell. 

Ms. VELA ́ ZQUEZ. And it is interesting that you note that the 

small business index had increased 40 points between July 2010 

and January 2011. What do you attribute this increase to? And do 

you think that the federal stimulus played any role? 

Dr. JACOBE. Well, I certainly think—and people disagree about 

how effective the federal stimulus was and all of those kind of 

things. But we really did see the economy start to recover from a 

really bad point about a year ago. And our numbers and consumer 

optimism and everything really did start to pick up late last year 

into early this year. I think it was a combination of things having 

to do with a lot of uncertainties being removed in the economy and 

people were much more optimistic. 

Ms. VELA ́ ZQUEZ. And you just made a comment that the economy 

is softening. And given the numbers that we heard in terms of job 

creation, adding only 38,000, and that could have an impact on 

capital availability or credit availability for small businesses. Up to 

this point, last year we passed the Small Business Lending Fund 

under the Department of the Treasury and it is supposed to provide capital to the banks so that they could lend to small businesses. Up to this point, only 626 financial institutions have applied for the Treasury’s SBL. And none have been approved yet. So 

do you see this initiative having a major impact on small businesses’ ability to secure capital? 

Dr. JACOBE. I do not think that anybody really expected to have 

a huge impact from that program. At least the people I talked to, 

particularly out in the banking business, that that was really going 

to turn things around. And so I am not really surprised by the result. There are a bunch of issues around that program that just 

make it difficult for small banks to take advantage of it. And I am 

not sure that it will help in what I see as softening that is coming. 

Ms. VELA ́ ZQUEZ. When we were debating the legislation that created the Small Business Lending Fund, one of the concerns that I 

raised was the fact that in the language there was no requirements 

to the banks to lend. If you take that money, if you access that 

money, it should go to small businesses. So in light that we did not 

have—we do not have that requirement, would you—what do you 

think will have—the impact it will have on small business access? 

Dr. JACOBE. I am not really optimistic that the program will 

have a major impact. It is a little uncomfortable for me because I 

think conditions are bad enough that we ought to do anything we 


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can. So anything that provides hope in this kind of area I am for. 

But, you know, in terms of expectations, I would not have great expectations. 

Ms. VELA ́ ZQUEZ. I will have questions for the other witnesses but 

I will do it in the second round. Thank you, Mr. Chairman. 

Chairman GRAVES. Ms. Herrera Beutler. 

Ms. HERRERA BEUTLER. Thank you, Mr. Chairman. And my 

questions are going to be a little bit more directed to you as well. 

I really found it interesting in the survey you provided us when 

40 percent of our small businesses are not hiring as much as they 

could—and we are not talking about—it is difficult to create new 

businesses. Right? In my state legislature I hear a lot, let us get 

new capital and expand. And I kept thinking we need to protect 

the business owners who are currently—those small guys who are 

struggling right now should be our immediate focus. That is the 

quickest way to get job growth in our country. 

I have 13, 14 percent unemployment. I have had double-digit unemployment for three years now in my biggest counties, and it is 

because we are primarily a small business-based economy. And I 

was looking through these answers that they gave you. Seventynine percent said they were worried revenues or sales would not 

be able to justify the new employees. Right? So nobody is going to 

buy what they are selling so it is not worth it to expand. Worried 

about cash flow or ability to make payroll. I can tell you I have had 

a lot of small business owners who have not taken a paycheck in 

several years to keep their employees employed. Hard to find qualified employees, which alludes to your education component. 

And then worried about the potential cost of health care. That 

is something we have not talked about at all here and we had a 

panel on it a couple of months ago. The only thing that I was surprised I did not see on here is with regard to the regulatory environment. And maybe health care fits under that. But this is really 

much more—I mean, this is much more big picture. It is not this 

regulation or that regulation. Is that not something that even registered with this part? Or is that—or am I—or was it cloaked in 

the answers for these questions? 

Dr. JACOBE. I think it is overcome by the other answers. It is sort 

of under there somewhere. And when we have had larger sample 

sizes it does show up but it is a much smaller percentage. 

Ms. HERRERA BEUTLER. That gets that specific. It is a regulation. 

Okay. 

Dr. JACOBE. Yeah. 

Ms. HERRERA BEUTLER. So going back to the certainty and the 

confidence issue, you know, you had three suggestions or solutions. 

Each one of them could take us a significant amount of time. You 

know, how do we stabilize the housing values? And education is obviously more of a state responsibility but there are federal workforce programs that we could align perhaps. And then energy. And 

I know we are working on gas prices here. You know, get more supply out there and hopefully we can drive down the costs. In getting 

to these three, where would you suggest we start? 

Dr. JACOBE. I think that the most important thing that could be 

done, and I know this is not the view of a lot of people, is that we 

need to do something about housing. I think that housing has efVerDate Mar 15 2010 02:13 Aug 06, 2011 Jkt 067364 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 E:\HR\OC\A364.XXX A364

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fects across the country that are underestimated. It has had a 

major impact on small business. On the collateral small business 

has, the ability to end, the wealth of the American people. And in 

terms of going forward, we have a broken housing finance system. 

I used to be a housing economist many years ago. And if you go 

back in history as to how housing was really stimulated, that has 

a tremendous impact on communities and on growth of small businesses, and then on a country. So I know that is not a topic that 

is being generally discussed but I think that is really—we are not 

going to get this economy going to potential without housing. If we 

get housing going, I think the growth is going to be a lot faster 

than most people think. 

Ms. HERRERA BEUTLER. Thank you. And I yield back. 

Chairman GRAVES. Ms. Chu. 

Ms. CHU. Mr. Kottler, you talked about the decline in lending 

having more to do with drops in cash flow and home collateral values over the years. And that increased capital requirements and 

regulatory uncertainty have made it difficult to lend. But I wanted 

to look at the underwriting standards. What are the current underwriting standards for applicants seeking loans for their small businesses? And have they changed over the last three years? 

Mr. KOTTLER. You know, I think that as the economy worsened, 

there is no question that banks became—banks were worried about 

the uncertainty and certainly spent a lot more time asking questions of borrowers and making sure that we would make loans that 

could be repaid so we did not replicate the problems that caused 

some of this in the first place. 

I think we really look at three things when we underwrite a 

loan. First is the cash flow of the business, both how the business 

has done historically and then the projected cash flow. So what 

kind of contracts do they have? What kind of opportunities do they 

have? And I think one of the difficulties has been that obviously 

as the economy has been tough over the last couple of years, the 

historic cash flow of our businesses do not look as good as they did 

in the years before the downturn. So that certainly goes into the 

underwriting. 

The second piece is the secondary source of repayment or the collateral of the borrower. And that is where housing has come in. 

Commercial real estate appraisals come in. And clearly we have all 

been very cognizant of making sure that appraisals are right. And 

that they represent the true value of the property. 

And then the third is generally, especially in small business, the 

personal guarantees of the business. And we will look to the owner 

of that business to make sure that they are strong and can also 

support the business through any issues it would have. So I do not 

know that it is as much that the underwriting has changed more 

than being very cautious to make sure to go through each of those 

steps and in a lot of cases the borrower does not look as strong as 

they did in the years before the downturn. 

Ms. CHU. Are there any barriers though in the process that could 

keep a business owner from securing a loan even though they actually might be a good candidate for the loan? 

Mr. KOTTLER. You know, I am not aware of any. I mean, I think 

that, you know, banks are in the business of lending money. It is 


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what we do. And I think that we all want to make loans. I can tell 

you in my business, if it grows, that is what we want it to do. So 

I think the real issue is just getting the economy on track, getting 

the jobless rate down, removing any other uncertainties that would 

cause small businesses from expanding. I think if those things happen, then I think we will begin to make loans. I will also tell you 

that our lending is up considerably from the bottom, but we are 

still not all the way back to where we were as an industry and as 

an association or members from the top. 

Ms. CHU. I looked with interest at this program by the Consumer 

Bankers Association of which you are a member of the board of directors, the Second Look program. 

Mr. KOTTLER. Yes. 

Ms. CHU. So what would trigger a second look at a good candidate for a loan? 

Mr. KOTTLER. I think that, you know, oftentimes loans will get 

declined by an underwriting. And so what we did is when that happens we put—many of our member banks put processes in place to 

have a supervisor or their manager or another underwriter take a 

look at those loans to see if there is another question we could ask, 

more information we could get, additional collateral that would 

make a bank comfortable. But something to try to take a look to 

see how we can make loans. And our members have seen anywhere 

from—we polled our small business committee—anywhere from 

three to 20 percent lift in the approval rates of those loans. So it 

has actually worked—it has been something that has been successful in helping small businesses for our industry. 

Ms. CHU. Ms. Ozer, you look like you have something to say on 

this. 

Ms. OZER. What I was going to add is the Second Look program 

is just something that a lot—that we do at Susquehanna and other 

banks that participate heavily with the Small Business Administration. We do a second look see if we can utilize the Small Business Administration’s guarantee on these loans that do not meet 

our credit criteria on a conventional basis. The credit criteria of our 

bank, in particular, and I believe I am speaking for most banks, 

has—the credit box itself has tightened due to regulations and 

losses and so forth. But what that means is that the businesses 

that no longer qualify for conventional lending fall off their plate 

and land on mine as the director of government guaranteed lending. So that is why we have been doing more loans because we do 

look at the same exact criteria that Mr. Kottler was speaking about 

but with the enhancement of the government guarantee, we are 

able to make more loans to small businesses by utilizing that. And 

that is why the vitality of that program is so important. 

Ms. CHU. Thank you. I yield back. 

Chairman GRAVES. Mr. Mulvaney. 

Mr. MULVANEY. Thank you, Mr. Chairman. 

Briefly, I think one thing we heard earlier bears repeating. I was 

as surprised as Colonel West was when we met with the president 

this morning and were told by him from his own mouth that he 

had very little direct control over the regulatory environment. And 

Ms. Ozer, you mentioned that one of the hurdles that you had been 


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facing in your business dealt with the FDIC. So I ask you, ma’am, 

who oversees the FDIC? Is it Treasury? 

Ms. OZER. I think it is an independent agency. 

Chairman GRAVES. They are under Treasury. 

Ms. OZER. It is under Treasury. 

Mr. MULVANEY. I believe it is under Treasury, which would be 

Mr. Geitner, who is a presidential appointment. We actually have 

a meeting with Mr. Geitner in a few minutes so I am going to ask 

him directly about his role over the regulatory environment. I was 

very surprised to hear that. 

But let us come to the issue at hand. And I have a question for 

Mr. Kottler. You heard Mr. Hall talk about the role that franchising plays. I have been a franchisor. I have been a franchisee. 

And he is absolutely right. There is a tremendous pent-up demand 

in our industry. 

Traditionally, our industry has been sort of a stabilizer. It has 

been countercyclical. When business got bad and people got laid off, 

they would turn to franchising as a way to start their own businesses. We saw that in our own business. The demand for our restaurants went up dramatically but the ability of people actually to 

open them fell to zero because no one could get financing. 

Mr. Kottler, let me ask you this. You talked about what is preventing you folks from lending, and I heard all the things that I 

would ordinarily expect, which is our cash flow and your collateral. 

It makes perfect sense to me. But my question is this. Is there anything that we can do or perhaps undo as a government to help you 

lend money? And I will give you the example that I take from another industry, which is the real estate industry which is having 

a great deal of difficulty refinancing right now. And it is in large 

part because of regulation. That there is a rule in place now that 

says if you refinance a real estate loan, even though it is perfectly 

healthy and performing, if you refinance it automatically goes into 

a troubled asset category. And to me that shows some opportunity 

for us to fix things. 

So I put it to you, Mr. Kottler, what can we do or undo to help 

you lend money to folks like Mr. Hall? 

Mr. KOTTLER. You know, I think one of the things is be supportive of the SBA programs. A lot of our banks use them. And the 

increases that were done and the amount to lend and some of the 

other things that were done there have been pretty important and 

banks have used that pretty aggressively through this economic environment to make loans. 

I think that is the primary thing other than just the more global 

economic things that I just think we have to continue to work on. 

And that will take care of a lot of it in the process. 

Mr. MULVANEY. Mr. Hall makes an excellent point and you 

talked about the fact in your testimony that if there was no SBA, 

if there were no SBA lending out there we would have almost none 

in our industry. Have you ever done an SBA loan? 

Mr. HALL. No, sir. I have not. 

Mr. MULVANEY. Has anybody—well, I know Ms. Ozer has. Ms. 

Ozer, could you tell us the difference in terms of the paperwork involved behind getting an SBA loan and a traditional loan? Maybe 

Mr. Kottler could help on that as well because it is not apples to 


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apples. It is much more difficult to get an SBA loan than it is an 

ordinary free market loan. 

Ms. OZER. The amount of credit information that is required 

from the borrower, the basic credit information is the same. In 

order to do your due diligence and the underwriting process that 

the congresswoman had asked about before, we need the same 

amount of financial information. However, when you are applying 

for an SBA loan, there are rules and regulations, standard operating procedures that have to be followed. So if you decide to borrow money from a bank who has expertise in that area, there 

should not be a huge amount of difference for the individual borrower. But you do need to have a lender that has experience in 

that because there is credit underwriting on the bank level and 

then there is credit underwriting that has to be done on behalf of 

the Small Business Administration. So there is basically two times 

the amount of work. You can use the same credit underwriting but 

you do have forms and applications that need to be done, eligibility 

checklists that need to be done, tracking of use of proceeds. And 

there is more of an administrative burden on the bank to do an 

SBA loan. But the borrower themselves should not really be experiencing more problems. 

Mr. MULVANEY. I had the great pleasure of having an SBA loan 

one time. It was a great experience, do not get me wrong, but if 

it was between going the SBA route and the conventional route, 

the conventional route was always preferable. 

Yes, sir, Mr. Hall. 

Mr. HALL. Well, I would add that while I have not had an SBA 

loan, it looks like I am going to be going after one. And that is— 

I will just give you the real world perspective on that. In the past, 

you know, if I am putting a unit in or put a restaurant in, I am 

typically putting a lot of capital in there already in addition to the 

loan. And in times past I may not have had to guarantee the loan 

personally. In fact, I would not do it unless I absolutely had to. In 

today’s environment, every bank is making me guarantee that loan 

personally. So now faced with the fact that I probably cannot get 

the loan at the commercial bank, I am now saying, okay, well I 

have got to go through SBA. If I want to expand my Dairy Queens, 

which I am currently looking at right now, I am probably going to 

expand my Dairy Queens to refurbish them through an SBA program because that is really the only route I can take. 

Now, am I excited about, one, the paperwork, and two, personally 

guaranteeing it with everything I have when I am putting a lot of 

capital into it? No, I am not, but I do not really have a choice if 

I want to renovate my units. So that is the response about the 

SBA. 

Mr. MULVANEY. Thank you, Mr. Hall. Thank you, Mr. Chairman. 

Chairman GRAVES. Mr. Peters. 

Mr. PETERS. Thank you, Mr. Chairman. 

I want to talk a little bit about—bank to the bankers’ situation 

with making loans. And I know how the deals have changed but 

there seem to be two issues with the banking industry that I found 

in talking to my community bankers, credit unions, and others. Is 

that certainly the deals that are coming to you are different. Cash 

flow is different and collateral is different. But in terms of some of 


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the questions we have been getting from some of the other panelists as well with the FDIC involvement is that oftentimes the FDIC 

will go into a community bank, for example, is what I am hearing, 

and I would like you to respond, is that they will go into a community bank and say, basically looking at your portfolio and seeing 

your collateral that you have backing up your portfolio, real estate, 

for example, has dropped so your collateral has dropped. As a result of that you need to have increased reserves which seems to be 

a prudent thing to do, is to increase reserves as your collateral has 

dropped. But that, of course, limits your ability to lend because you 

either have to bring in private capital, which is a difficult thing to 

do in a tough economy. A lot of small banks do not look like a great 

investment to people, particularly in my area, or you have got to 

actually call in loans or reduce your ability to lend. 

So the question to the two folks from the banking industry, to 

what extent is the fact that you are having trouble finding credit 

worthy borrowers? And to what extent is it the fact that just because your own portfolios have dropped, the collateral has dropped 

in value and you simply do not have the capital to lend? What is 

that balance? 

Mr. KOTTLER. You know, I can tell you from our experience at 

IBERIABANK, we have been very well capitalized and had very 

good lending performance through the cycle. So I will tell you that 

one of the reasons that I came to IBERIA was to do more small 

business lending. That was something the bank management and 

the bank wanted to do. And as a result, I do not think—my experience is, at least at our bank, that that has been an issue. The issue 

is really—— 

Mr. PETERS. More broadly than your bank? Is it an issue? 

Mr. KOTTLER. You know, it is interesting. I have attended some 

different forums over the last few years and some of the smaller 

banks have certainly raised that issue. But I will tell you from my 

experience at—our bank has $10 billion and my experience at a 

larger bank, I do not think it was. 

Ms. OZER. My experience with our bank is similar in that we 

have been capitalized and have been able to lend through the crisis. We do have issues with loan loss reserves. And on a conventional basis, they are looking more closely because of regulations 

and the types of collateral that they are able to use. The equity values have decreased but we have available to us, the way to make 

loans, is to utilize the government guarantee. And we have been 

able to do that and to conserve capital because that is one of the 

major things that that program allows us to do. The credit worthiness of the borrowers, you know, at the present time the people 

that you are looking at now that come in to borrow money, their 

expenses are lean and mean and most of them have a top-line problem and not a bottom-line problem because of the consumer spending. 

And those are the things, you know, that makes the banks nervous and, you know, we use the government guarantee to do that. 

On a conventional basis, a lot of banks are requiring borrowers to 

pay off their credit lines that they have utilized all the way and 

they do not have availability on it. And then with an SBA guarantee, we can give them 10 years to repay that loan as opposed to 


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the banks requiring only a two, three, four year loan. So by applying a guarantee to it, we increase the working capital available to 

those borrowers to keep them in business. 

Mr. PETERS. Let me jump in though with your use of the SBA 

which is an important part for you, is that there is some discussion 

on the fees that are assessed on SBA loans. Traditionally, those 

fees have covered all the costs of the program. However, now it is 

being subsidized. And I know the administration and others have 

concerns about the subsidy of the fees. All of the fees can be relatively high for a small business right now. What impact do you 

think it would have if we are in a position that we do not subsidize 

those fees and actually have to raise those fees? Are you concerned? Maybe that is to all the panelists. Are you concerned about 

having to face even higher SBA fees? 

Ms. OZER. On a personal basis, I mean, the borrowers have that 

concern but this also touches on what Mr. Hall was saying. You 

know, when you utilize an SBA guaranteed loan, it is because credit is not available elsewhere. So these small businesses are either 

fighting to stay in business or they want to fight to start business. 

And the fees can be financed and amortized over the life of the loan 

which is generally a longer period of time than they would get on 

a conventional basis. So as a lender, yes, it is concerning. As a borrower, I am sure that it is concerning as well, except for that if you 

are in a situation where it is the most reasonable way to continue 

in business or start in business, then we are going to continue to 

do it. 

Mr. HALL. You know, I have a financial background, a CPA, 

which I started eight years doing that and I have been an entrepreneur since then. Unfortunately, the question I would ask the 

bank now is not about the fees but what is the payment. It is a 

situation where you need the credit. You need to finance something. You are going to pay a higher fee and be willing to pay a 

higher fee than you ever thought you would. It is the same as the 

example I gave on the personal guarantee. There was a time I said 

I would never personally guarantee a note again. Well, I am eating 

those words today because to get a loan, to expand or even survive, 

I am going to have to guarantee it personally and put on the table 

everything I have worked for all my whole life. But I have to do 

that to grow. 

Mr. PETERS. Thank you, Mr. Chairman. I yield back. 

Chairman GRAVES. I am going to jump in here real quick because 

we are going to have a series of votes here coming up here after 

a bit. I do not know when they are. 

But I do have a question for you, Mr. Hall. You mentioned earlier, and I have heard this, too, about a possible bias out there 

against franchises making it harder for franchisees. In fact, I have 

friends who are trying to get loans for start-ups that are new franchises. And they get that impression that there is a bias against 

or that it is much tougher. Can you expand on that a little bit? And 

I would be very curious to hear what the others have to say in the 

banking community. 

Mr. HALL. Well, you know, I think historically people have had 

a negative thought about the restaurant industry and about startups just in general because, you know, the SBA program is not 


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about giving away money to loans that will not pay back. I mean, 

it is a program where you really have to pay the money back and 

there has to be a plan in place. 

So I think there probably has been traditionally a bias against 

some of the franchises. But I think we are turning that around, 

partially with the work the IFA is doing with these other organizations. Because to us it is about—we look at it as the glass is half 

full, rather than half empty. We are not putting the blame on you 

guys. This is our responsibility. We have got to operate. We have 

got to grow. And the way we are doing that is working together as 

a group with some other people that need to make loans. And the 

things that we are doing are like the underwriting issue that was 

brought up earlier. We accept some of that responsibility. We probably were not given the right information to these folks because we 

did not know what to do. 

So through the leadership of Steve Caldeira and the IFA, we are 

creating this environment where we are showing our members, 

both franchisors and franchisees, how to make that loan application and the things that the bank needs to be successful. So hopefully, we are going to overcome that bias that I think has been out 

there. But I certainly know that it has been there but our effort 

in the future is going to try to overcome that. 

I do not know if that answers your question. 

Chairman GRAVES. Any other thoughts? Anybody? 

Mr. KOTTLER. I will add that I think that start-up loans are the 

most difficult loans to finance. They oftentimes have the least equity going in. They are oftentimes people who may or may not have 

been in that business and want to do something new. So I think 

the issue is less of a bias and more of just they are harder to do. 

So I think one of the things that we have talked about with IFA 

is our CBA’s Small Business Committee has put together a template with a series of questions for the franchise. How successful 

your franchise has been and a whole series of questions. And we 

are hoping as an industry that by starting that communication that 

we will have more success with start-ups because I do think they 

are the most difficult things to do. 

Chairman GRAVES. Let me back that up with a question. And I 

would be very curious to hear from everybody. When it comes to 

start-ups and, this is the age-old question. If you are not wealthy, 

you are very limited when it comes to your personal guarantee. But 

you are trying to do a start-up and you have a good business plan. 

Is there anything that can be done to make that process a little bit 

easier? Because those are the people that I worry about more than 

anything else. We have got some great ideas out there in many 

cases but if that individual is not wealthy, they do not have the 

personal backing or that personal guarantee, the equity, out there. 

So what can be—is there anything that can be done? And I will 

just run right down the line and I will start with you, Mr. Hall. 

Mr. HALL. Well, you know, traditionally what has happened is 

those initial entrepreneurial-type efforts have been financed by 

friends, family, other outside people. They beg, borrow, and steal. 

Whatever they have to do to get—probably the wrong words—but 

they do whatever they have to do to get started. And I think that 

is sort of what has happened. So I think also in the franchise inVerDate Mar 15 2010 02:13 Aug 06, 2011 Jkt 067364 PO 00000 Frm 00060 Fmt 6633 Sfmt 6602 E:\HR\OC\A364.XXX A364

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dustry, as well, we have a lot of people coming into that that their 

initial capital is coming from what we call angel investors, which 

is somebody that has a personal relationship with them. Very difficult to get any institutional-type investor to get involved in any 

kind of these small business-type loans that we are talking about. 

But as a rule, I think that initial capital comes from just the effort from the individual. Very seldom in my history of being in 

business have I seen a start-up like that be able to go in and find 

a place other than through some foundation or something, get the 

start-up monies. So my personal experience is normally they have 

to take the first step to get into business, which is one reason we 

love the franchise business because they are not taking that first 

step totally by themselves. They can accumulate some of this 

money, they can get in business with support from someone else to 

help them be successful going forward and to grow. 

Chairman GRAVES. Senator. 

Ms. OZER. I agree totally with what Mr. Hall was saying. When 

you look at, as I have for years, projections and business plans to 

begin with, we see lots of people that we suggest they go back to 

the Small Business Development center. So they go to the SBA offices, SCORE offices and so forth, to work on their business plans. 

But the initial equity when you talk about that, that is the most 

difficult part. The hardest loan is the start-up capital. They go to 

friends and family and angel investors, but we will not do 100 percent financing. And what we find, a lot of times what I see is that 

these people have accessed money from credit cards. And a lot of 

times we see that that is how they start their businesses. And then 

if they do have this wonderful idea they come to us where they 

have already proven some top-line success and they have credit 

card debt. And that is one of the beauties of SBA lending. We can 

refinance credit card debt over a longer period of time because they 

have already proven that they can prove it on a small basis. And 

that is how they get it. 

But the initial capitalization, if you do not have it, you have to 

get a gift letter from your friends and family. You have to get investors. If you could sell the bank on your idea then maybe you can 

sell it to somebody else and bring on partners and so forth because 

they do have to have some percentage of monies to do that. 

I have information here on the percentage of start-up loans that 

were done by the SBA if you are interested in hearing that. 

Chairman GRAVES. Very much. 

Ms. VELA ́ ZQUEZ. Mr. Chairman, will you yield? 

Chairman GRAVES. Yes. 

Ms. VELA ́ ZQUEZ. I do, too, by the way. And that is my frustration. 

Because when we passed the Jobs Creation bill, it was with the 

purpose of helping provide capital, affordable capital to those who 

were not able to get it through conventional financial institutions. 

And what we have seen is that the federal government and SBA 

is guilty as charged because what we are seeing is a concentration 

on big loans. Those—we increase the loans from two to five million, 

and the percentage of smaller loans defined as those less than 

150,000 has declined through SBA guarantee loans from 17 percent 

to eight percent. 


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So the problem with this recession compared to other recessions 

is that people lost their jobs and they started up businesses. They 

created businesses. This time around, because credit standard has 

tightened and SBA has not helped because basically those guarantee lenders are concentrated on making the big loans. Debt financing does not create jobs. Start-ups—— 

Ms. OZER. With all due respect, the 7(a) start-up volume is up 

6.3 percent in numbers and 38.8 percent in dollars in 2011 yearto-date versus 2010 year-to-date. There is 29 percent of the number 

of loans to start-ups which is defined as businesses open for two 

years or less. There were 10,474 loans made to start-ups so far this 

year versus 9,856 last year. And the start-up dollars are 3.255 billion year-to-date versus 2.346 billion last year. 

Ms. VELA ́ ZQUEZ. It is up higher from SBA. 

Ms. OZER. But the information—the thing that I have seen just 

in my bank is there has been a lot of start-ups because there are 

a lot of people out of work. 

Ms. VELA ́ ZQUEZ. And I bring you back—— 

Ms. OZER. And some of these people that are out of work actually 

do have money as a start-up to start their businesses because they 

have either been laid off with a package or they are older, more 

successful people that have lost their jobs and they can do capitalization. So we are doing them. And as far as the small loans falling 

off, a lot of people are using the SBA express loans less but they 

are using the larger loans more. But we need those larger loans because as companies grow, like Mr. Hall is saying, people that have 

five and six, they need—they get above the two million. They have 

to renovate their stores. They need five million. So in my shop, we 

make loans the whole gamut. 

Chairman GRAVES. I want to go back to my original question and 

that is I am talking about people who are doing start-ups that do 

not have the equity out there for the personal guarantee. 

I would be very interested in hearing what you have to say, Mr. 

Kottler, about that. Or what can we do? What can be done to help 

those individuals out? I mean, we hear a lot about those people 

that have that money or have something to back them up. But I 

am talking about those people that do not. What can we do in your 

experience? Or what can be done in your experience? 

Mr. KOTTLER. You know, I think it is an ongoing process, so I 

do not think there is one silver bullet that gets it. I think it is a 

combination of them finding personal funds or friends and family 

to get started. Coming into the bank and working on business 

plans and beginning a discussion. I think one of the most interesting things to me is that customers who come in and have discussions about what they are thinking about with their banker and 

get to know them long before they actually come in for the loan request have—that helps a lot. And I think then just making sure 

that we have programs with SCORE and SPDCs to help out. 

In a bank that I worked for in the past, we actually worked with 

the Kauffman Foundation to do first-time business owner training, 

somewhat similar to some of the first buyer homeowner training. 

And that was very successful. The people that graduated from 

those programs were more successful in their business than other 

start ups. So I think there are a whole bunch of different things 


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that we just need to put together to make it work as opposed to 

one big thing. 

Chairman GRAVES. Dr. Jacobe, do you have anything to add? 

Dr. JACOBE. Well, we have done some surveys asking small business owners from their experience starting what did they do right 

and what did they do wrong. One of the things they highlighted 

was not starting with enough capital. They tried to get in and they 

did not have enough capital to make it. And I think in this environment, some availability of at least some kind of minimum level of 

capital is even more necessary because they are not going to have 

immediate success. And so you do not want a lot of people going 

out there and trying in this environment without some kind of capital foundation. 

Chairman GRAVES. Who is next? 

Mr. OWENS. Thank you, Mr. Chairman. 

Ms. Ozer, you testified before that the issue is really a demand 

issue or a top-line issue. So for businesses, they do not have adequate demand really to support a pro forma that allows them to 

come to a bank and secure a loan and that that is inhibiting their 

ability from a financial perspective to come in and be successful in 

the loan process because they need to grow the top line in order 

to be successful to have the ability to repay the loan. Is that a fair 

summary of where you think many businesses are at? 

Ms. OZER. Yes. I am not sure that we are communicating on the 

same–I am saying that existing businesses right now, not startups. 

Mr. OWENS. Right. Correct. 

Ms. OZER. I am not talking about pro formas. I am saying that 

what we are seeing is that the bottom line is profitable but some 

of them have been experiencing downward trends in the top line 

so that in order for us to make a loan, we need to see year-to-year 

that either the bleeding has stopped and they can still pay or that 

it is, you know, back to increasing again. 

Mr. OWENS. Okay, but that obviously puts them in a position 

where there is not as much demand for bank loans. If they are not 

having growth in the top line, they clearly do not need a line of 

credit, for instance, or to increase their line of credit because they 

are not buying additional raw materials or additional product for 

resale. 

Ms. OZER. Well, they are still funding their receivables and 

sometimes they need to have short-term capital so that they can 

fund their daily activities. If they are not a cash business, even the 

level of business that they are doing, they still need short-term 

credit lines in order to operate on their regular cash cycle. 

Mr. OWENS. But they are not increasing the level of their borrowing, I am assuming. 

Ms. OZER. Well, it all depends. I mean, a lot of them have, you 

know, they still need to maintain it. And some of those businesses—— 

Mr. OWENS. I did not say maintain. I said increase. They are not 

increasing their borrowing because they do not have additional 

sales or additional product that they are purchasing. 

Ms. OZER. But they need to grow. 


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Mr. OWENS. Mr. Kottler, Mr. Hall, do you want to comment on 

that? 

Mr. HALL. Yes, sir. Let me just put it in a Dairy Queen perspective. Five Dairy Queens. And my sales are not going up dramatically, but I am about to have to borrow money to renovate those 

facilities to maintain my existing business or else—you can be in 

business and not keep up with the competition and you are just 

slowly going out of business. So I would not—I would say to you, 

certainly in my personal case I am going to borrow money without 

the expectation of greater sales. I hope I get them and I hope I am 

able to get a higher bottom line, but at the end of the day I am 

probably going to have a lesser bottom line but I am still going to 

be in business. And I think there is a lot of that going on that 

maybe does not make much sense to you but if you think about it 

I have got my base. And if my base goes away, then where do I 

get my money? So I am willing to accept less profit to grow, but 

what I am also doing is growing jobs, keeping people employed, and 

keeping my system in place. 

Mr. OWENS. Would it be fair to characterize what you are doing 

as more in the form of a capital loan as opposed to a working capital loan? 

Mr. HALL. Well, in my business it is just I have to make enough 

to make payroll. And so when I have to borrow that money to do 

the construction, certainly, that would be a capital loan. But I am 

telling you, in a business environment right now the margins are 

so thin that you just literally—there is no big cushion. We do not 

have a big pile of money sitting in a bank waiting. We are going, 

figuring out how to get where we need to be. 

But I just wanted to respond to your point about the idea of 

there will be a situation. You cannot always look at this and say 

I am going to get this much return, certainly in a small business 

environment. Because partly it is about the family. Partly it is 

about keeping these people employed and keeping our business 

going. 

Mr. OWENS. And obviously, some of this would be cured by increased sales. 

Mr. HALL. That would be right. Love to have it. Love to have it. 

More Blizzards is good for me. 

Mr. OWENS. I also want to go back to something that Mr. Jacobe 

said before and that was you focused on housing. If we solve the 

housing problem that that would do a number of beneficial things, 

including presumably increasing available collateral for loans. 

What is the solution there? I am curious as to the bankers we have 

on the panel. Do they have a substantial amount of foreclosed properties that they are holding on their balance sheets or is that not 

an issue for your banks? 

Mr. KOTTLER. For my bank it is not but certainly for a number 

of our member banks who are some of the largest banks in the 

country, they certainly have been working through those issues. 

But I think from the standpoint of housing value, we talk about 

start-ups and other kinds of small businesses. And once a borrower 

gets beyond personal credit cards and personal savings, the place 

that they oftentimes go to next is to pledge their house. 

Mr. OWENS. Right. 


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Mr. KOTTLER. Either as a personal loan or a business loan to 

fund their business. And so as home equity values have gone down, 

especially in certain parts of the country more than others, it has 

taken away that source of collateral which has made it more difficult. 

Mr. OWENS. Mr. Jacobe, what is the solution? 

Dr. JACOBE. Well, I wish I knew. The real solution is to get a bottom in housing and a bottom in values so that everybody can start 

improving from that point on. And you know, the danger now, if 

you have seen the latest reports, is that everybody is fearing the 

double-dip in housing, another step down. And that has the same 

kind of repercussion throughout the economy. 

You know, I think that traditionally Americans have valued 

homeownership. Some people seem to be moving away from that 

but I think the nation needs to value homeownership and do whatever it can to stabilize housing and get people buying again in a 

secure environment. If you are going out to buy a house today, leverage works reverse, works against you. And so if the price of the 

house you are going to buy goes down by five percent, you can lose 

your downpayment. The point is you have got to stabilize that to 

get things going. And I think people underestimate how important 

housing is to the future of the economy. 

Mr. OWENS. Thank you. And I yield back. 

Chairman GRAVES. Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

There has been discussion about some of the banking regulators, 

and in my community some of the smaller community banks were 

particularly hard hit and their concern was that they felt that 

there was an overreaction to some degree, that they were paying 

for the sins of the big banks during the financial crisis. For example, their capital reserve had a 20 percent increase early on in this 

crisis. And their market niche seemed to be commercial real estate, 

which was particularly hard hit. I wonder if you could comment in 

terms of small business access to capital related to community 

banks. In your view, was there an overreaction by the regulators? 

Anybody. 

Ms. OZER. Well, we are a little bit larger than a community bank having $14 billion in assets, but our commercial real estate division 

was the most hard hit in our bank. So as far as an overreaction 

is concerned, the perception is that the amount of capital that you 

have on reserve now is going to be looked at. If they say it is best 

to be at 10 percent, then you really need to have 13 percent or 15 

percent. So as such, I do not think that they have over—well, are 

you saying the regulators overreacted? 

Mr. COFFMAN. Regulators to the community banks. 

Ms. OZER. I do not know the answer to that. I just do not know 

if they overreacted, but they reacted appropriately in some cases. 

Mr. COFFMAN. From a borrower perspective, you know, most of 

the borrowers I know think there was an overreaction, especially 

at the smaller bank level because that was the most given response 

as to why they could not get the same credit that they had had in 

the past. You know, we are facing increased regulation and that— 

so from a borrower’s perspective there certainly is a perception out 

there. And, you know, just as a general comment, I mean, and the 


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regulators, in good times it seems to me they ought to be a little 

more conservative and trying to get you to put stuff back. And then 

in bad times it seems like they ought to be trying to help the good 

borrowers get through the tough times. Because we are talking 

about people that have had a long history of performance and because of really something they really did not have much control 

over, are having to struggle. 

Now, unfortunately, I think the community banks are in exactly 

the same position. So that again gets back to the RFA program 

where we are trying to match these two people. We kind of both 

have been in the same position. See if we cannot get together and 

get some supply meeting the demand situation. 

I have had a number of community bankers inform me that even 

if they had performing loans in commercial real estate, that those 

loans were downgraded. And they should have been just, you know, 

a watch put on them but not downgraded. That would cause them 

to pull money available for lending into their capital reserve. Anybody else comment on this? 

Just one last related question and that is in terms of job creation, which is the subject of today’s conference, access to capital 

is very important. But what in your—the majority—I was a small 

business owner. I had a corporation. And the majority of small 

businesses are structured as corporations. In terms of job creation 

what would be the impact of increasing the income tax rate on job 

creation knowing that corporations, essentially that is the tax rate 

that you pay? Would anybody like to comment on that? Please. 

Mr. HALL. I am a sucker. I am a sucker for this. 

You know, as a small business owner, you know, as you know, 

as you have already articulated, most of the money flows through 

from our businesses to our personal income tax return. And I do 

not—you know, there is nobody going to tell you we want more 

taxes. I will tell you right now though, I am not afraid to pay what 

is fair and what needs to be paid. But on the other hand, you 

know, we have been hit with the alternative minimum tax, as a lot 

of people have been hit by that over a period of time as it just 

creeped up. People that their business income is flowing through 

to their personal tax return and they are not getting any deductions and it is difficult. I know it sounds like a lot of money but 

I am telling you in today’s environment, if you are trying to survive 

and capitalize your business out of your personal situation, which 

is what all small businesses people do, there are some issues as a 

taxpayer. I do not want to have to pay more taxes. I am willing 

to pay my fair share and I want to pay my fair share, but I also 

have to survive. 

And I will tell you, if you start taxing, and unfortunately, I am 

afraid the situation with health care, you are going to lose jobs. 

You do not realize it but you are. In the real world you are going 

to lose jobs. It has to happen because there is no other—we are 

squeezed so tight right now that there is no place for it to go. 

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

Chairman GRAVES. Ms. Clarke. 

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

Ranking Member Vela ́zquez. And I would like to thank our panel 

for their insightful testimony today. 


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We all understand only when all of our nation’s small businesses 

are active participants in a robust recovery that adds jobs will our 

nation fully recover from the recent economic downturn. I also understand that allowing the regulatory environment to return to one 

that allowed for the financial collapse in the first place is irresponsible at best. 

Today’s testimony, especially that of Mr. Jacobe and Mr. Kottler, 

illustrate the difficult task facing our nation with the lack of consumer spending highlighted as the top concern of small businesses—excuse me, small business owners—with regards to hiring. 

This fact itself feeds back into the anemic consumer spending. The 

fact that private lenders are not lending even to those who would 

otherwise be deemed creditworthy has led to the issue that Ms. 

Ozer pointed out regarding the 7(a) program approaching its ceiling 

later this year. 

So my question is this. Given that there is a need and also recognizing that returning to lax regulatory environment that caused 

our current problem would be unwise, what else is needed to 

incentivize private lenders to free up the capital that would allow 

small businesses to expand and hire, which in turn would turn 

around the weak consumer spending and get our economy back on 

track? 

Dr. JACOBE. That is a really tough question. I think there are a 

lot of things that could be done that would encourage local lenders 

to hold more loans. Everybody who has tried to figure that out has 

had some difficulty in terms of how to do that effectively. And you 

have tried with various kinds of programs. You know, the big thing 

is to try to get consumers spending again. And that is a larger 

issue. Once that happens, then everything turns positive. If in the 

interim you can figure out a way to get lenders to hold more loans 

themselves instead of the government programs but get more loans 

in some kind of incentive way, that would help also. 

Ms. CLARKE. Yes, Ms. Ozer. 

Ms. OZER. I think that, you know, utilizing the government programs is helping us to do that but even at that level I agree with 

Mr. Jacobe in the fact that the consumer confidence and the consumer spending is all hand-in-hand and that is all tied up with 

more jobs, more disposable income, and so forth. So if we can continue to try to get the money out there to businesses that hire people, then the outlook will go on. But it is a very difficult situation. 

And I tend to agree with him that until the home level, the values 

in their homes come back and they have confidence that they are 

not going to lose their homes, that is their priority, is where they 

live and that they have jobs and money to put on the table, when 

that comes back. I think that the banks are doing everything they 

can with the tools that they have to get money out there to small 

businesses. I know that in our bank, you know, someone else asked 

about the foreclosure rate. If the people are paying on the loans, 

we are working with them and not foreclosing even though they 

have been downgraded because the regulators are forcing us to 

downgrade because the LTVs are not there. But if the loans are 

being paid, they are still in the bank. So, you know, the banks are 

trying to work with the people that they have lent money to to 


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keep the businesses going, to keep people employed, to keep people 

spending money. It is just a cycle. 

Ms. CLARKE. Okay. Mr. Kottler, did you want to—you are at 

Capital One. You have got to have the answer. What is in your 

wallet? 

Mr. KOTTLER. I am not there anymore. But you know, it is interesting when you watch borrowers. So in a robust economy you see 

borrowers coming in and they want working capital lines of credit 

to hire new people to fund new contracts. They want to purchase 

new equipment which then leads to more people to run that equipment to more jobs. Coming out of the bottom of this recession what 

we saw was we started to see loan demand go up but it was for 

things like I want to buy the building that I am in because I have 

been leasing it and now it is worthless and I can get a good deal 

on it. I want to, you know, I want to buy my competitor who is 

weakened and I can do that. And those things—those kind of loan 

requests do not necessarily create jobs. So as we get more consumer spending and we get more economic growth, then we will 

start to see those kind of loans from established businesses be the 

kind of loans that say we are willing to commit and expand. And 

that is not—we have seen less of that up to this point. 

Ms. CLARKE. Do you want to add anything at all, sir? Yes. 

Mr. HALL. No, ma’am. 

Ms. CLARKE. Okay. Well, I yield back the balance of my time. 

Thank you again. 

Chairman GRAVES. I want to thank all of you for participating 

today. And this Committee is about job creation and helping small 

businesses. And we are going to do everything we can to try to 

make sure we do what we can to provide access to capital for those 

small businesses, particularly the ranking member and I are very 

committed to helping those start-ups as best we can. 

But again, I want to thank all of you for being here, and I would 

ask unanimous consent that all members have five legislative days 

to submit statements and supporting materials for the record. 

Without objection, it is so ordered. And with that, the hearing is 

adjourned. Thank you all very much for coming in. 

[Whereupon, at 2:46 p.m., the committee was adjourned.] 


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CERTIFICATE OF NOTARY PUBLIC 

DISTRICT OF COLUMBIA 

I, Stephen K. Garland, notary public in and for the District of 

Columbia, do hereby certify that the foregoing PROCEEDING was 

duly recorded and thereafter reduced to print under my direction; 

that the witnesses were sworn to tell the truth under penalty of 

perjury; that said transcript is a true record of the testimony given 

by witnesses; that I am neither counsel for, related to, nor employed by any of the parties to the action in which this proceeding 

was called; and, furthermore, that I am not a relative or employee 

of any attorney or counsel employed by the parties hereto, nor financially or otherwise interested in the outcome of this action. 

Notary Public, in and for the District of Columbia 

My Commission Expires: May 31, 2014 


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