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ROUNDTABLE ON REGULATORY ISSUES

ROUNDTABLE

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM AND 

OVERSIGHT

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

WASHINGTON, DC, MARCH 17, 2005

Serial No. 108–7

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

RIC KELLER, Florida 

TED POE, Texas 

MICHAEL SODREL, Indiana 

JEFF FORTENBERRY, Nebraska 

MICHAEL FITZPATRICK, Pennsylvania 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

DANIEL LIPINSKI, Illinois 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

JOHN BARROW, Georgia 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Deputy Chief of Staff/Policy Director 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT 

W. TODD AKIN, Missouri Chairman 

MICHAEL SODREL, Indiana 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

SUE KELLY, New York 

STEVE KING, Iowa 

TED POE, Texas 

MADELEINE BORDALLO, Guam 

ENI F. H. FALEOMAVAEGA, American 

Samoa 

DONNA CHRISTENSEN, Virgin Islands 

ED CASE, Hawaii 

LINDA SA ́ NCHEZ, California 

GWEN MOORE, Wisconsin

JOE HARTZ, Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small Business 

Administration ..................................................................................................... 3

Stalknecht, Mr. Paul, President and CEO, Air Conditioning Contractors of 

America ................................................................................................................. 4

Collins, Mr. Francis, President, Advanced Digital Solutions, Computing Technology Industry Association ................................................................................ 5

Clayton, Mr. Ken, Chief Legislative Counsel, American Bankers Association .. 8

Crowe, Mr. David, Senior Staff Vice President, Federal Regulatory & Housing 

Policy Area, National Association of Home Builders ........................................ 12

Green, Mr. Rob, Vice President, Federal Affairs, National Restaurant Association ........................................................................................................................ 13

Hearne, Mr. Michael, President, Lafayette Federal Credit Union, Credit 

Union National Association ................................................................................. 15

Parrish, Mr. Don, Senior Director, Regulatory Relations, American Farm 

Bureau ................................................................................................................... 16

Strock, Mr. John, Policy Manager, Associated Builders and Contractors .......... 16

Purser, Mr. Craig, Vice President, National Beer Wholesalers Association ....... 17

APPENDIX

Opening statements: 

Akin, Hon. W. Todd .......................................................................................... 18

Prepared statements: 

Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small Business 

Administration .............................................................................................. 19

Stalknecht, Mr. Paul, President and CEO, Air Conditioning Contractors 

of America ...................................................................................................... 21

Collins, Mr. Francis, President, Advanced Digital Solutions, Computing 

Technology Industry Association ................................................................. 26

Clayton, Mr. Ken, Chief Legislative Counsel, American Bankers Association ................................................................................................................. 30

Crowe, Mr. David, Senior Staff Vice President, Federal Regulatory & 

Housing Policy Area, National Association of Home Builders .................. 35

Green, Mr. Rob, Vice President, Federal Affairs, National Restaurant 

Association ..................................................................................................... 49

Hearne, Mr. Michael, President, Lafayette Federal Credit Union, Credit 

Union National Association .......................................................................... 53

Parrish, Mr. Don, Senior Director, Regulatory Relations, American Farm 

Bureau ........................................................................................................... 59

Strock, Mr. John, Policy Manager, Associated Builders and Contractors ... 67

Purser, Mr. Craig, Vice President, National Beer Wholesalers Association ................................................................................................................. 72

Attachments 

Frisby, Mr. Bradford, Associate General Counsel, National Mining Association ............................................................................................................ 76

(III) 

(1)

ROUNDTABLE ON REGULATORY ISSUES 

Tuesday, March 17, 2005

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM AND

OVERSIGHT, 

COMMITTEE ON SMALL BUSINESS

Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:07 p.m. in Room 

2360, Rayburn House Office Building, Hon. W. Todd Akin [chairman of the Subcommittee] presiding. 

Present: Representatives Akin, Kelly and Poe.

Chairman AKIN. I do not have a gavel, but let us bring the meeting to order here.

Ms. VELAZQUEZ. He is ready to go.

Chairman AKIN. Let me just say though usually what we do is 

we have witnesses come in, and everybody speaks a certain amount 

of time; not quite as many witnesses as we have here. 

The purpose of this meeting is really to help us set priorities particularly for this year, but for the next two years, and so what I 

was thinking about instead of having it be quite so formal is everybody go around and make opening statements and that sort of stuff 

would be rather to try to have a more free-flowing just like a regular business meeting. 

The thing that we are trying to understand is particularly in 

terms of regulatory burden on small business. Where are those 

problems coming from? If you were made king for a day and you 

got one wish or whatever it is where would you go? I think those 

are the kinds of directions we want to go. 

Let me at least do my opening statement. I do not want to disappoint the staff certainly. 

Ladies and gentlemen, I would like to call this meeting to order. 

Welcome, everybody, and thank you for your participation today. I 

was recently honored to be selected Chairman of the Regulatory 

Reform and Oversight Subcommittee of the House Committee on 

Small Business. 

I look forward to working with all of you, especially our distinguished Ranking Member from Guam, Congressman Bordallo—

Ms. VELAZQUEZ. No, no, no. Congresswoman.

2

Chairman AKIN. Congresswoman.

Ms. VELAZQUEZ. Practice.

Chairman AKIN. All right. Thank you. 

—as we address the immense regulatory burden affecting small 

businesses. Too often efforts to reform and reign in overreaching 

regulations have met with resistance from the government bureaucracy even when it is in the hands of a small business-friendly 

Administration. 

This is my first official action as Chairman of this Subcommittee. 

I hope to take from this event and develop some priorities that we 

will focus on for the 109th Congress. 

In a time when our economy relies so greatly on small business 

to keep our country moving, we cannot afford to stifle that progress 

by continuing to add cost and regulations to disadvantage these 

businesses. Half of our national workforce is employed by small 

businesses. Two-thirds to three-quarters of new jobs are created by 

small business. 

Now it is time. We must do everything in our power to limit the 

reach of regulations and lower the cost of regulations to small business. 

I look forward to the testimony of all our participants. I ask that 

you hold your—we are not going to do the hold opening statements. 

We are just going to have a free-for-all here. I think that covers 

the beginning. 

Ranking Member?

Ms. VELAZQUEZ. Well, thank you very much. Congresswoman 

Bordallo from Guam is the Ranking on this Subcommittee, and she 

is in Guam today. Anyway, I am here. I am the Ranking Member 

from the Small Business Committee. 

I just want to tell you that this might be the only Committee 

where things try to get done because we truly believe that there 

is no Republican nor Democratic approach to deal with that issues 

that are important to small businesses. 

We all say that small businesses are the job creators in our economy, and if we want to get this economy back on track we have 

to create and help the government to create a climate that is conducive for you to do what you do best. 

One issue that is important to me and to the Democratic Members of the Small Business Committee is to see how can we reduce 

regulation and paperwork to the extent that yesterday I held a 

roundtable with small business groups from across the country to 

deal with the issue of the proposed regulation on the size standards 

and what impact it is going to have on small businesses. 

The economic impact that the proposed changes to RESPA, for 

example, will have on small businesses in the real estate industry, 

that is another issue that I have been dealing with. 

Examining how the proposed Do Not Fax rule will impact small 

firms and the new requirements of Sarbanes-Oxley, many of which 

impose regulatory burdens on smaller companies and are creating 

barriers to capital markets for these small firms. 

3

We want to do what is right on behalf of small businesses, and 

the best way to do it is by listening. One thing that I asked yesterday to everyone who was represented or sitting down around the 

table was if there is one thing that you know in terms of regulation 

that will help your industry, your company, what may that be? I 

know about the only way we could reduce regulation is by starting 

here in Congress. 

Welcome, all, and thank you very much for being here today.

Chairman AKIN. Thank you. 

Just before we get started I do want to recognize the Honorable 

Tom Sullivan, who has been kind enough to join us and I think 

probably about one of the best friends small business could have. 

Tom works hard at trying to review the kinds of rules and regulations that are written by various agencies, federal agencies, and 

to try to see that those things are not oppressive or unnecessarily 

burdensome. 

We appreciate the consistent advocacy that you provide, Tom. If 

you would like to make a statement or two you can, or we will just 

get started.

Mr. SULLIVAN. Sure. 

STATEMENT OF THE HONORABLE THOMAS SULLIVAN, U.S. 

SMALL BUSINESS ADMINISTRATION

Mr. SULLIVAN. Thank you, Mr. Chairman and Ranking Member. 

I guess I will just let the cat out of the bag about what my office’s secret is. Our secret is working with the Small Business Committee. I think it is something that certainly the Chair and the 

Ranking Member know and all the staff know, but not many other 

folks really know that. 

At the Office of Advocacy at the Small Business Administration 

we have a team of economists who try to measure all of your impact on the economy and then push it out to policymakers so they 

have greater sensitivity to how their policies affect small business. 

We also have a team of lawyers, and the lawyers enforce a law 

called the Regulatory Flexibility Act. Basically this law requires 

that every federal agency consider their impact on small business 

before they regulate. I mean, that is really the stress point of the 

Regulatory Flexibility Act. 

Now, we use any method available to convince agencies to follow 

that law. One of those methods is when they maybe are straying 

from the path a little bit we work very closely with this Committee 

and, believe it or not, they tend to get back on the path pretty 

quickly when the Chairman of the full Committee and the Chairmen of the Subcommittees and the Ranking Member all join together to say we will not tolerate unfairness in how regulatory 

agencies treat small business. 

That stick for our office has been very, very effective. There is 

absolutely a shoulder-to-shoulder fighting that goes on cooperatively to make sure that regulatory agencies listen to all of you. 

Mr. Chairman, if I were king for a day and had that one wish 

in the regulatory world it would be that uniformly agencies not 

4

only listen to all of you before they make regulations that affect 

you, but actually act on your recommendations. That would be my 

one wish. It is also ironically my job, so we will make sure to try 

to make that wish come true as best we can. 

It is a pleasure to be here, and I too am going to learn from the 

different business organizations so that you all can help my office 

prioritize for the coming year and the coming years ahead. 

Thank you, Mr. Chairman. 

[The Honorable Sullivan’s statement may be found in the appendix.]

Chairman AKIN. Thank you very much. 

Okay. I think we are just going to jump in. I was happy with 

your question as an opening question. I just want to know if you 

had one thing or even one area of red tape and regulations as troublesome, let us talk about that. 

The next thing I am going to ask so you know kind of where I 

am going also would be my background in engineering. I came out 

of the business world and slid down the totem pole of life all the 

way into politics. 

The one thing we used to talk about is the old 80/20 rule. I have 

to believe that red tape, probably like many things, follows that; 

that 80 percent of the nasty red tape may come from a particular 

source, so I am going to be asking sort of categorically where problems come from as well. 

If anybody wants to jump in, you are just welcome to start with 

your pet excessive red tape. No problem with red tape?

Mr. STALKNECHT. Since I am over on this side of the table maybe 

I will jump in first. 

STATEMENT OF PAUL STALKNECHT, AIR CONDITIONING 

CONTRACTORS OF AMERICA

Mr. STALKNECHT. I am Paul Stalknecht. I am president and CEO 

of the Air Conditioning Contractors of America. We have roughly 

about 5,000 members nationwide, almost all of which are in small 

business. 

Two issues that we really have—I am going to take two. The first 

one is to thank Chairman Akin for being a co-sponsor of a bill to 

accelerate the depreciation rules for HVACR equipment. We appreciate your support of that. That would be my one wish. 

My second wish would be that many of our members are concerned about the issues that we discuss here today, but being parochial we have one issue. Refrigerants are an integral part of our 

industry and heavily regulated by the EPA. The Clean Air Act 

amendment signed into law in 1990 created additional regulations 

for the handling and recycling of refrigerants containing chlorine, 

commonly known as CFCs, and hydrofluorocarbons, HCFCs. They 

are under currently 608 of the regulations. 

The Clean Air Act contains a strong enforcement system for violators of those rules. Fines can be up to $27,000 a day. Unfortunately, EPA has not actively enforced the Section 608 recovery 

rules. 

5

The bad actors in the industry are not recovering and recycling 

ozone depleting refrigerants, and they are unfairly competing 

against good contractors who are doing so. Some significant loopholes exist involving the unintentional and inadvertent leak of refrigerants and the sale of some of the refrigerants. 

What we are asking for is actually we support the regulations, 

but we would ask for the EPA to strongly enforce its existing regulations and put all small contractors in the HVACR industry on a 

level playing field. 

[Mr. Stalknecht’s statement may be found in the appendix.]

Chairman AKIN. Okay. What was the first thing that you mentioned before that? I am sorry.

Mr. STALKNECHT. It was a bill that you co-sponsored. It was regarding the accelerated depreciation of HVACR equipment.

Chairman AKIN. Right.

Mr. STALKNECHT. Right now you can depreciate over a 39 year 

lifespan. The equipment will only last 15 or 20 years. We are asking to accelerate that up to about 15.

Chairman AKIN. Others? Yes. Just to bring you up to speed, this 

is a little bit more informal structure. We are trying to find out 

where are some problems with red tape, and because of the time 

schedule of votes coming up soon instead of introducing each witness we are just basically letting people go and talk. 

Yes? 

STATEMENT OF FRANCIS COLLINS, ADVANCED DIGITAL SOLUTIONS, COMPUTING TECHNOLOGY INDUSTRY ASSOCIATION

Mr. COLLINS. My name is Francis Collins, first of all. I am with 

Advanced Digital Solutions. We are a local small computer reseller.

Chairman AKIN. If you could pull the mike closer to yourself that 

would probably help too. Thank you.

Mr. COLLINS. Again, I am Francis Collins. I am with Advanced 

Digital Solutions. We are a small systems integrator, a computer 

reseller in Fairfax, Virginia. 

My concern primarily is not so much what we face nowadays, but 

what we see coming down the pike specifically related to computer 

recycling. Right now we are looking at a hodgepodge of rules and 

regulations being enacted by the states that are going to create a 

tremendous burden on us, the small companies. 

Most people think of computer sales and the issues related. If 

you look at IBM and Dell, the large companies, they still only represent probably about 40 or 50 percent of the total system sales in 

the country. 

The majority of the sales are from countries such as ourselves, 

and we are very concerned that the computer recycling rules as 

they are presently popping up piecemeal from state-to-state are 

6

going to create a tremendous burden for us because we are small 

here, but we do sell into Florida. We sell into California. We sell 

into Texas. 

I would like to see some action relative to specifically any rules 

that are enacted that specifically looks at the majority of the computer manufacturers in the country who are small business based 

as opposed to the large resellers like Dell and that earnings are 

specifically taken into account. 

[Mr. Collin’s statement may be found in the appendix.]

Chairman AKIN. I do not even know what computer recycling is. 

When I recycle, I throw it in the garbage.

Mr. COLLINS. There you go. Right now you are talking probably 

40 to 50 percent of the recycled waste nowadays is technology related, so it is all CFC related. It is plastics-based. It leaks mercury. 

It leaks lead. It leaks arsenic, et cetera. 

There is a move afoot for the manufacturers to start footing the recycling bill, so if you buy a new computer there is a $50 fee 

tacked onto the new computer that allows the manufacturer to recoup the cost of recycling that computer so it does not go into a 

landfill. 

The idea is to try to get some encouragement somewhere so they 

do not get thrown away, so when your monitor is dead you do not 

put it out for the trash man.

Chairman AKIN. Are you advocating that we should put like a 

cost on computers so that when they are recycled—like a recycled 

tire kind of thing?

Mr. COLLINS. Yes. What specifically looks like is going to be coming down the pike is that if I sell a monitor I am responsible for 

recycling the old one.

Chairman AKIN. And you are advocating that we should have 

laws that do that?

Mr. COLLINS. I am advocating that if there are laws that are enacted we are not looking at how they affect Dell, IBM, HP, but you 

look at how they affect Advanced Digital Solutions and the other 

40 percent of the computer resellers who are selling these. 

Dell, HP, they could absorb those regulations. It would put us 

out of that business.

Ms. KELLY. Can you sell recycled computer parts reclaimable 

with the new parts?

Mr. COLLINS. I guess that is the question. It is apparently not 

enough reclaiming that it has become an industry that is profitable. There is enough waste out there right now that if there were 

money to be made doing that it would not be a problem. You would 

have companies knocking on your door.

Ms. KELLY. Kind of like batteries?

7

Mr. COLLINS. It is like batteries. I do not know what the economics of that industry are, but the reality is that you do not have anybody coming knocking on your door saying hey, do you have an old 

monitor that you want to give me so I can recycle it? 

The business has not developed, which to me implies that there 

is no economic incentive to do it or no profit motive to do it, so it 

really becomes a cost burden to somebody, whether it is the taxpayer, whether it is the manufacturer, whether it is the folks like 

me who are putting them out in the field. 

At some point I agree wholly that from an environmental standpoint it needs to be addressed. Who is bearing the burden of that 

cost? We are really just looking at the small business community. 

There are needs, and the expense of the regulatory burden is addressed when this subject comes up. 

I am not sure that it is within this Committee that that legislation would fall, but if it is environmental and if there are going to 

be regulations at some point it is going to cause us probably either 

significant expense or probably to get out of the business just with 

some of the things we have seen coming out of the states.

Chairman AKIN. Okay.

Ms. KELLY. Can I ask another question?

Chairman AKIN. Go ahead.

Mr. COLLINS. Sure you can.

Ms. KELLY. My concern is that [inaudible] I believe, and if we 

can work [inaudible].

Mr. COLLINS. Absolutely.

Ms. KELLY. [Inaudible].

Mr. COLLINS. Are you talking in the context of—

Ms. KELLY. [Inaudible.]

Mr. COLLINS. In other words, if I am going to be a collector of 

old computer parts and a recycler of the elements contained within, 

that is a business. I am the person who is selling the new computer 

who has now potentially got a regulatory burden to see what is 

going to happen to the old computer. 

If there is an avenue established where I could easily turn that 

over to a recycler, and if it incurs an additional $20 per computer 

cost to the consumer, like I said, somebody has to pay for that 

somewhere along the line. 

There are plenty of statistics both environmentally in terms of 

the volume of waste that is being generated, as well as the volumes 

and values of the recyclable elements within that. Right now there 

is a whole industry where that stuff is just shipped overseas, and 

you end up with all these poisons leaching into, you know, the 

backyards of poor countries. 

8

What we could see happening is there are going to be a lot of regulations coming up with this because it is a big problem in the environmental space, and I do not deny that at all. It is going to become a problem for us. The larger companies—

Chairman AKIN. I think the purpose of what we are doing here 

is to just take a look in a very general perspective, so let us save 

the solution of this—

Mr. COLLINS. Okay.

Chairman AKIN. —to more specific kinds of meetings. 

Other topics? Yes, Ken? Go ahead. 

STATEMENT OF KEN CLAYTON, AMERICAN BANKERS 

ASSOCIATION

Mr. CLAYTON. Thank you, Mr. Chairman. Mr. Chairman, my 

name is Ken Clayton, and I work for the American Bankers Association. 

I think Mrs. Velazquez and Mrs. Kelly are very familiar with 

some of our issues, but maybe to give you a sense of what our institutions face and how that then translates to them as small businesses and to those that they serve, the small businesses they lend 

to, since 1990 801 new regulations have been issued for banks by 

bank regulators, and that does not count other things that come 

out of the SEC, that come out of accounting regulators, that come 

out of FTC and other agencies that have some kind of jurisdiction 

over our industry. That has a significant consequence on small 

businesses. 

I would note to you we meant to bring today we have a 600 page 

summary of regulations for our institutions in terms of how they 

can learn to work with the regulatory burden they have to work 

under. We are a heavily regulated industry. 

Now, how does that translate into—

Chairman AKIN. Who issues those regulations?

Mr. CLAYTON. Well, there is a group of five major bank and credit union regulators, as well as others, so the Fed, the FDIC, the 

OCC, the OTS, and there are others. We are heavily regulated as 

the case might be. 

I guess we are trying to point out two things here. One is that 

if you looked at the 9,000 or so banks that are out there this year, 

out there now, approximately 8,000 of them are small businesses. 

They are under $500 million in assets. Three thousand of those actually are 25 or fewer employees. They have a significant burden 

on them when you think about it not just in training them the first 

time, but when we have staff turnover we have to train them 

again. 

Those institutions, some of the things they do, are clearly in 

terms of trying to protect safety and soundness. They try to protect 

consumer protection laws. They likewise also try to perform government services. We help fight money laundering. We help disVerDate 0ct 09 2002 15:00 Aug 24, 2005 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\HEARINGS\21284.TXT MIKE
9

cover terrorist financing. We help the IRS try to kind of deal with 

tax evasion issues, so we do a lot of things on behalf of the government that unfortunately the cost of such regulation gets passed on 

to consumers. 

Let me just leave you with two big numbers to think about.

Chairman AKIN. Ken, are you the state banks?

Mr. CLAYTON. No. Both. We are talking about the whole thing.

Chairman AKIN. Federal and state?

Mr. CLAYTON. Federal and state.

Chairman AKIN. Okay.

Mr. CLAYTON. Although I would note that a lot of regulation 

comes out of the federal government and that the states then supplement that, so it is not just—banks are highly regulated, and I 

think the Financial Services Committee Members can actually kind 

of probably fill you in more than you would want to know on some 

of that. 

As a practical matter we looked at some of the numbers here. It 

turns out that some research done in 1990 by some surveys we did 

along with the Federal Reserve is that the total cost of bank compliance at that time was somewhere between $27 billion and $42 

billion per year. That is a lot of money in any case. 

When you start though thinking about how it translates into real 

dollars being lent to real companies and the small businesses that 

your Committee has jurisdiction over, if you were to be able to cut 

20 percent of that regulation and turn it back into capital the way 

things with leveraging we could probably provide probably close to 

$55 to $83 billion in additional funding. That is real jobs for real 

people in real communities. 

Now, you asked if there were a couple of areas that we would 

focus on. Again, Mrs. Velazquez and Mrs. Kelly are very familiar 

with this, but we talked a little bit about the Sarbanes-Oxley Act 

and some of its unintended consequences. 

As a practical effect, accounting firms are now charging our community banks two to three times what they were charging last 

year, not necessarily because they pose a higher risk, but because 

they have responsibilities under the Sarbanes-Oxley Act that then 

translate into higher costs to the businesses they serve. 

So we would ask you to kind of focus in on some of those unintended consequences and recognize that, while still recognizing 

that there is a value in the law and not trying to undercut that 

law, but recognizing that different institutions get treated disproportionately, and I think small businesses are the ones that get 

the kind of raw end of that deal. 

The second thing is dealing with the Bank Secrecy Act regulation, which deals with money laundering and financing and issues 

like that. It has a significant interest in our ability to do business. 

It costs a lot of money. Mrs. Kelly is smiling because she knows 

10

there is a lot of interest on the Committee in various places at the 

Treasury Department and otherwise on this issue. 

It costs a lot of money to comply with. Banks, if they do it wrong, 

are subject to potentially millions and millions of dollars in penalties, so it has a real impact in terms of cost to the institutions 

and cost of their human and capital resources. 

On the other hand, it also affects our ability to serve businesses. 

I will give you an example. Grocery stores, convenience stores, gas 

stations that provide check cashing services to low income people 

that may be living from month to month that may not be part of 

the traditional banking system. If they are bringing a paycheck that is around $1,000, if they 

bring it in they have to be considered money services businesses 

regulated by the Treasury and subject to all the money laundering 

rules. If they do not do it right, the potential is that the bank that 

that company, the convenience stores or the gas station, whoever 

does business with them, can be subject to liability and penalties 

in the $1 million range for the failure of that company to do it 

right. 

What is happening is that our institutions are going to have to 

stop doing business with those companies because they cannot deal 

with the infrastructure. Yes, there is I guess a minute risk that 

there is a chance of somebody trying to funnel money into the 

banking system for illegal reasons, but as a practical matter these 

are real businesses, traditional, legitimate and are trying to be 

helpful to their communities but will be denied banking services as 

a result of somebody’s unintended consequences. 

I will just leave that with you. 

[Mr. Clayton’s statement may be found in the appendix.]

Chairman AKIN. Thank you. So the source of that regulation is 

very specialized, and it is a whole series of Committees?

Mr. CLAYTON. Well, it is mostly the House Financial Services 

Committee and the Senate Banking Committee. 

I will tell you when I look at our laws—I had a compilation of 

laws—it is 1,500 pages. That does not count the regs that come out 

of that too. We are heavily regulated, but the impact is significant 

not just to us, but to the people we serve because we cannot make 

the loans. 

Again, for every dollar we get to save we can lend $7 out. That 

is where you get these big numbers of billions and billions of dollars that can be lent to small businesses that can employ more people in their communities. 

All we ask in addition to some specifics is that Congress, wherever you are sitting, be mindful of the impact, some of these unintended consequences. While there may be something that needs to 

be addressed that is a problem, recognize that there are consequences to the solution that may be more costly than the problem 

itself.

Mr. SULLIVAN. Mr. Chairman, actually I would like to point out 

to many of the folks who are around the table who are all affected 

really by unintended consequences of the Sarbanes-Oxley law. 

11

There is a little glimmer of hope in that the SEC Commissioner 

has in fact established a Small Business Advisory Task Force or 

team and so right now as far as striking when the iron is hot 

please try to familiarize yourself with that advisory group and get 

in your parochial issues so that they are on the table or on the 

radar screen. 

You see certainly the leadership in Congresswoman Kelly, Congresswoman Velazquez and Congressman Akin. Once that advisory 

committee starts chugging along it is certainly appropriate for the 

Financial Services and Small Business Committee to simply ask 

them how is their work going and how are they addressing some 

of these unintended consequences. 

It really is I think up to all of us to exploit that good news to 

the extent possible so that SEC has a full acknowledgement of the 

unintended consequences coming out of that task force.

Ms. VELAZQUEZ. I would like to ask you if given the fact that 

these small banks not only are small businesses, but also are providing services not only to low income communities, but small companies, firms, given that there is a role for the Office of Advocacy 

to work with them and this task force and be a bridge.

Mr. SULLIVAN. Yes. Actually, we have a secret insider over at the 

American Bankers Association. James Ballantine is a great friend 

of our office. Ken, we work with him a great deal and really want 

to thank the Bankers Association and, I mean, all of the folks who 

are here. 

You all keeping my office busy is what makes us effective. They 

actually were fantastic to point out an ill-conceived proposal by Department of Treasury about a year and a half ago, and because of 

their activism on—I am going to screw up the name. I apologize. 

It was the non-resident alien interest reporting proposal. 

Did I get it right, Craig? Something like that. 

Because of the Bankers’ activism, we were able to convince 

Treasury to withdraw it, so we will continue to do that, Congresswoman.

Ms. KELLY. Mr. Sullivan, what are some of the government agencies you’ve been working with?

Mr. SULLIVAN. The answer to the Congresswoman about which 

agencies we have established good relationships with. SEC actually, the Securities and Exchange Commission, we have seen some 

good progress. 

The OCC we have not established the same level of relationships 

that we should, so one of the priorities that I am going to take back 

is perhaps we should try to establish some better relationships 

there. 

Thank you for that comment.

Mr. CLAYTON. We would be glad to help you.

Mr. SULLIVAN. Thanks.

12

Chairman AKIN. Thank you, Ken. 

Let us move on. Mr. Crowe? 

STATEMENT OF DAVID CROWE, FEDERAL REGULATORY & 

HOUSING POLICY AREA, NATIONAL ASSOCIATION OF HOME 

BUILDERS

Mr. CROWE. Thank you, Congressman. My name is David Crowe. 

I am with the National Association of Home Builders. I hold the 

title of Senior Staff Vice President for Regulatory Issues, so this is 

a very appropriate chance to address three Members of Congress, 

as well as the SBA Advocacy Office. 

I submitted suggestions for six different issues. I certainly will 

not go through every one of those. I will say that they run the 

gamut of federal agencies, so you have your pick of lots of places 

to dwell on with the home builders, which is a very concentrated 

small business industry. 

Four out of five of our members build fewer than 25 homes a 

year. We are an industry of very small companies. There are a few 

obviously very large national companies, but the bulk of the industry is small businesses run by usually a proprietor and maybe even 

that person’s spouse or some other close relative and so these businesses are very affected by the sorts of things you are hearing 

about. 

We appreciate your giving us the opportunity to talk to you 

today. I will raise one issue that I think probably if I had to pick 

one, if I was forced on one, and I will stick with that admonition, 

is EPA. 

E.P.A. is charged with the job of making sure that the waters of 

the United States are clean, a laudable goal, a reasonable thing to 

do, but they have approached the home building industry like it is 

a factory with a pipe coming out of the end of it and so they are 

dealing with the home building industry in an entirely inappropriate way to stop runoff from construction sites, which is the industry’s contribution to pollution if you will, dirt in the water. That 

is what we do. 

As a consequence of this overregulation of the industry and attempt to stop water runoff, they are citing our members for paperwork violations, which is also a very onerous task to begin with. 

The agency requires constant reporting, daily inspections, plus they 

are compounded by various levels of government taking on effectively the same operation. 

E.P.A. has actually assigned this authority to 45 of the states. 

Five have decided and the District has decided not to do it, but 45 

states said we will take on that responsibility, but EPA has not 

stepped back completely from enforcement so we still get the double or even triple whammies because local governments will also 

step in. 

Our industry is not saying we should not do our job in making 

sure that the runoff is protected and contained. What we are concerned with is that the agency is looking at this as a paperwork 

issue and not as a viable environmental issue. 

13

I also have wonderful examples at Fish and Wildlife, at HUD 

and at Rural Housing Service, but I will let you read our submitted 

testimony for that. 

[Mr. Crowe’s statement may be found in the appendix.]

Chairman AKIN. David, I think what I am hearing you say is we 

sort of stepped out of the realm of common sense, and they are just 

basically handpicking you with a lot of bureaucracy as opposed to 

have we done anything to the environment or has there really been 

any serious problem with runoff. That is not it. The serious problem is you have not filled out the paper the right way, right?

Mr. CROWE. No. You said it exactly right, Congressman.

Chairman AKIN. If you had to pick one agency, EPA is tough?

Mr. CROWE. It is very tough.

Chairman AKIN. Worse than IRS?

Mr. CROWE. Yes, actually. In our industry’s case, I would say 

that we hear many more complaints about EPA and Fish and Wildlife than we do about IRS.

Chairman AKIN. In some other forums I have had I asked people 

what would be the thing that is the biggest source of red tape, and 

what I heard is that EPA probably generates more—I mean the 

IRS generates more for businesses in general, so it is interesting 

to hear you say that. 

Any questions on Home Builders? 

[No response.]

Chairman AKIN. Go ahead, Rob. 

STATEMENT OF ROB GREEN, FEDERAL AFFAIRS, NATIONAL 

RESTAURANT ASSOCIATION

Mr. GREEN. Thank you, Mr. Chairman. I will be brief. I know 

you have a series of votes coming up. Rob Green, National Restaurant Association.

Chairman AKIN. Rob, I do not mean to pick on you or anything. 

They have called us for a vote here pretty quick, so we are going 

to have to scoot right along.

Mr. GREEN. Yes. I will make it as short as I can.

Chairman AKIN. Yes.

Mr. GREEN. Restaurants. You all know our industry. We are big 

chains, and we are independents. Seven out of 10 have fewer than 

20 employees. 

The ADA has posed some issues for the restaurant industry. The 

Department of Justice puts out what is known as the Americans 

14

With Disabilities Accessibility Guidelines, which instructs businesses how to comply with the ADA. Our members want to comply 

with the ADA and we advise all of our members to be in compliance with ADA. 

There is a new rulemaking out from the DOJ which will substantially redo the requirements for certain businesses under the ADA, 

and in particular for restaurants it will impact parking spaces, employee work areas such as kitchens and even dining rooms, and it 

will involve for small businesses potentially huge reconstruction/remodeling costs. 

We are currently trying to work with DOJ. We are submitting 

comments. It is not only the restaurant industry that is concerned. 

There are a number of other organizations and companies that are 

very, very concerned that these new guidelines reflect the fact that 

small businesses—it is challenging with the resources they have. 

They are in current compliance with the ADA, but the new 

guidelines might put them out of compliance, and it is a very significant cost. 

Another ADA issue is frivolous lawsuits. In certain parts of the 

country there are some unscrupulous lawyers that go look for restaurants that are not in total compliance or apparently not in compliance or there is question about compliance with ADA and file 

lawsuits to try to get some relief for their client. In many cases 

these are indeed frivolous. 

Because of the unique nature of the restaurant industry, our 

members are very small. They are doing the best they can. We are 

asking for just a limited period of time if there is a lawsuit to understand what the lawsuit is about and to mitigate the problem if 

appropriate. 

We are currently in discussions with the disability community, 

with other folks on the Hill, to try to come up with a solution that 

would not infringe upon the rights of the disabled, but would eliminate these types of drive-by lawsuits. 

Last, but not least, the SBA size standards. Congresswoman 

Velazquez did have a roundtable yesterday. The SBA did have a 

proposal, which has since been withdrawn last year, but there is 

a new notice, an advance notice of proposed rulemaking, on the 

table to try to streamline and simplify the current number of size 

standards to a smaller number. 

The restaurant industry is just concerned that the last proposal 

did disproportionately impact the industry. It would have taken a 

lot of restaurants out of the classification of small business. 

Issues that we are concerned about are the part-time nature of 

our workforce. The average employee works about 24 hours per 

week compared to 33 hours for a typical industry, and many of our 

employees are seasonal. Some restaurants are only open six 

months out of the year, and in the summertime restaurants employ 

seven percent more employees than in the wintertime. Any proposal from SBA should recognize that. 

It also takes a lot more employees for a restaurant to earn an 

equal amount of revenue for another business. One employee in the 

restaurant industry generates $38,000 worth of revenue. 

If you look at other industries, even convenience stores, one employee generates $210,000 worth of revenue, so we are a lot more 

15

labor intensive so the size standard issue is one we are watching 

very closely. 

Thank you. 

[Mr. Green’s statement may be found in the appendix.]

Chairman AKIN. Thank you very much.

Mr. SULLIVAN. Mr. Chairman, Rob was being really polite about 

the frivolous lawsuits. The lawsuits that he is talking about are extortion. Make no bone about it. 

Congressman Foley has had a bill before the House in the past. 

It is worth looking at anew. It is the worst type of lawsuit abuse.

Chairman AKIN. Thank you. 

We have got just a few more minutes. We have to catch the train 

to get on over to do our voting. I am trying to think. How many 

more people would like to kick in on this meeting?

Mr. HEARNE. I will take less than one minute.

Chairman AKIN. Okay. Less than a minute. Two? I do not mind 

if we want to try and do it in three minutes. We probably can do 

it in three minutes. 

Okay. Let us just go real fast. 

STATEMENT OF MICHAEL HEARNE, LAFAYETTE FEDERAL 

CREDIT UNION, CREDIT UNION NATIONAL ASSOCIATION

Mr. HEARNE. My name is Mike Hearne. I am president and chief 

executive officer of Lafayette Federal Credit Union in Kensington, 

Maryland. 

We recently started a small business lending program and for 

the record have submitted some detailed comments, but I just 

wanted to let you know that most of the things that I have complaints about as far as regulations are addressed in the Credit 

Union Regulatory Improvement Act, which should be crossing your 

desk again this spring. 

Primarily though what we are looking at is the arbitrary nature 

of the limits on business lending to credit unions. I think access to 

capital is always one of the big issues facing small businesses. We 

are right now currently limited to 12.25 percent, 12.25 percent of 

our assets, which in effect means that a $500 million credit union 

is only half as competent at making business loans as a $1 billion 

credit union, which just is not the case. 

There is a point where you are too small to really run a program. 

You do not have the investment capacity. My credit union, for instance, happens to be SBA’s credit union and USAID’s. My board 

members are all MBAs, finance folks, accountants. They know exactly what they are getting themselves into. 

We have 50 years’ worth of small business lending experience on 

staff, and I think it is just arbitrary that we can make half as 

many loans as say a $600 million firefighters federal credit union. 

I would like to certainly see that addressed. There are different 

ways to regulate the safety and soundness of business—

16

Chairman AKIN. Are those in your comments, your written testimony?

Mr. HEARNE. Yes.

Chairman AKIN. Good. Thanks. We better scoot to—

Mr. HEARNE. Okay. Our last thing is please fund the SBA fully. 

They are a big help to the industry and small business. 

[Mr. Hearne’s statement may be found in the appendix.]

Mr. CLAYTON. Mr. Chairman, we would welcome the opportunity 

to participate in that discussion. I will leave it at that.

Chairman AKIN. I was thinking you might, yes. 

STATEMENT OF DON PARRISH, REGULATORY RELATIONS, 

AMERICAN FARM BUREAU

Mr. PARRISH. Don Parrish from the American Farm Bureau Federation. We represent farmers and ranchers, the quintessential 

small business. 

Most of the issues that we focus on and where we are running 

up against problems is the issues in dealing with land use and 

water. Obviously that is the EPA in terms of water quality regulations and how far you can extend the jurisdictional reach of the 

Clean Water Act. 

I mean, we have ditches and uplands being called waters of the 

U.S. and farmers being regulated as to what they can do next to 

them. That is a real concern for us because being able to maintain 

our operations so that we can be productive and competitive in 

world markets is hugely important. 

I am going to leave it at that. Waters of the U.S., endangered 

species with Fish and Wildlife Service, all of those. I mean, 80 percent of the endangered species in this country are on private lands, 

and if you manage endangered species you manage private lands. 

That is a huge and costly burden for individual farmers. 

[Mr. Parrish’s statement may be found in the appendix.] 

STATEMENT OF JOHN STROCK, ASSOCIATED BUILDERS AND 

CONTRACTORS

Mr. STROCK. I will be quick because I know Craig wants to get 

in here as well. I am John Strock. I represent Associated Builders 

and Contractors. 

The issue I want to bring up quickly is OSHA’s misguided direction as far as new and proposed regulations. They seem to be focusing far too much on small regulations that are not killing people 

every day, and it takes away attention from falls and caughtbetweens and the big four fatality causing incidents in construction. We would like to see that addressed. 

We have addressed it several times through the Advisory Committee on Construction Safety and Health, and that is just an issue 

that we would like to see addressed if you guys can help. 

17

[Mr. Strock’s statement may be found in the appendix.]

Chairman AKIN. You will have to make it quick.

Mr. PURSER. Thank you.

Chairman AKIN. We have to leave for votes. 

STATEMENT OF CRAIG PURSER, NATIONAL BEER 

WHOLESALERS ASSOCIATION

Mr. PURSER. Craig Purser. I am with the National Beer Wholesalers Association. 

Lots of regulatory concerns. We are creatures of regulation to a 

certain extent, but a non-regulatory issue that is the number one 

issue for my members is permanent repeal of the death tax. 

If I leave you with one message I would be practicing advocacy 

malpractice if I did not make that my number one issue. These 

folks have waited long. They are family owned and operated businesses. They are privately held, and they need some permanent relief in order to plan for the future. 

Thank you very much. 

[Mr. Purser’s statement may be found in the appendix.]

Chairman AKIN. That was brief. If you would like to make any 

other additional comments maybe you could take the comments for 

us.

The REPORTER. Absolutely.

Chairman AKIN. We are going to have to shoot over and vote or 

we will have a little black mark for not getting our votes in. 

Thank you all. The hearing will be closed, but you will be able 

to make comments up here if you would like. Thank you. 

[Whereupon, at 2:48 p.m. the Subcommittee was adjourned.]

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