U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

79–433 2013

STATE OF THE SMALL-BUSINESS ECONOMY 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

FEBRUARY 13, 2013 

Small Business Committee Document Number 113–002 

Available via the GPO Website: www.fdsys.gov 

SBREP-219 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

BLAINE LUETKEMER, Missouri 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JAIME HERRERA BEUTLER, Washington 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

DAVID SCHWEIKERT, Arizona 

KERRY BENTIVOLIO, Michigan 

CHRIS COLLINS, New York 

TOM RICE, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

YVETTE CLARKE, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRAD SCHNEIDER, Illinois 

RON BARBER, Arizona 

ANN McLANE KUSTER, New Hampshire 

PATRICK MURPHY, Florida 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

SBREP-219 with DISTILLER

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

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

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

WITNESSES 

Randall Kroszner, Ph.D., Norman R. Bobins Professor of Economics, University of Chicago Booth School of Business, Chicago, Illinois .............................. 3 

Ms. Maria C. Coyne, Executive Vice President, Consumer/Small Business, 

Key Bank, Cleveland, Ohio, on behalf of the Financial Services Roundtable 

and the Consumer Bankers Association ............................................................ 6 

Mr. Sean Falk, Owner/President, WolFTEAM LLC/Nachogang LLC, Cedar 

Park, Texas on behalf of the International Franchise Association .................. 7 

Ms. Margot Dorfman, Chief Executive Officer, US Women’s Chamber of Commerce, Washington, DC ....................................................................................... 9 

APPENDIX 

Prepared Statements: 

Randall Kroszner, Ph.D., Norman R. Bobins Professor of Economics, University of Chicago Booth School of Business, Chicago, Illinois ................. 30 

Ms. Maria C. Coyne, Executive Vice President, Consumer/Small Business, 

Key Bank, Cleveland, Ohio, on behalf of the Financial Services Roundtable and the Consumer Bankers Association ............................................ 38 

Mr. Sean Falk, Owner/President, WolFTEAM LLC/Nachogang LLC, 

Cedar Park, Texas on behalf of the International Franchise Association ................................................................................................................. 59 

Ms. Margot Dorfman, Chief Executive Officer, US Women’s Chamber 

of Commerce, Washington, DC .................................................................... 62 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

Hon. Grace Meng .............................................................................................. 68 

B. Dan Berger, Executive Vice President, Government Affairs, National 

Association of Federal Credit Unions. Letter for the Record .................... 69 

Testimony of The Association for Enterprise Opportunity (AEO) ................ 71 

SBREP-219 with DISTILLER

SBREP-219 with DISTILLER

(1) 

STATE OF THE SMALL-BUSINESS ECONOMY 

Wednesday, February 13, 2013 

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, Chabot, Luetkemeyer 

Mulvaney, Tipton, Hanna, Huelskamp, Schweikert, Collins, Rice, 

Vela ́zquez, Chu, Hahn, Payne, Meng, Barber, and Kuster. 

Chairman GRAVES. We will go ahead and call this meeting to 

order. 

I want to welcome once again our new members of the Committee and those visitors to the Small Business Committee. 

As we kick this off, for the last 2 years we have usually started 

our work with the Small Business Committee by listening to experts provide views on the economy and the challenges that lie 

ahead. We are going to do the same this year with a distinguished 

panel of witnesses whose testimony is going to help us better understand the current environment and how real small businesses 

are coping in an economy that remains in a stubborn recovery. 

With the economy contracting by 0.1 percent in the fourth quarter of 2012 and the unemployment rate increasing to 7.9 percent 

in January, there is serious concern about whether the country is 

on the right track. Our economy is large and very complex, with 

many factors influencing its trajectory. As we examine these factors, we must take a hard look at the policies coming out of Washington to determine what we can do differently or what we can do 

better. 

One thing we know is that small businesses will be the leaders 

of a strong recovery. Yet, time and time again, the policies proposed by the current administration fail to take into account this 

important segment of the economy. In fact, last night I think the 

President only mentioned small business twice in his remarks. 

When small businesses do poorly, the economy suffers. According 

to the National Federation of Independent Business, small-business 

owners continue to be pessimistic about the future. These concerns 

have kept them from borrowing, hiring, and expanding. Business 

owners lack confidence in their future because of the uncertainty 

over taxes, the burden of unnecessary regulations, and the cost and 

compliance demands of healthcare, and low consumer spending. In 

fact, consumer spending, which accounts for 70 percent of overall 

economic activity, grew only 0.2 percent in December, which is a 

very discouraging sign for small businesses who are looking to expand. 

SBREP-219 with DISTILLER

2 

I look forward to the hearing. I look forward to listening to our 

witnesses. We will certainly benefit from their perspective on the 

state of the economy and how small businesses are faring. 

I appreciate all of you coming out. I know that some of you have 

come a good distance, and we very much appreciate that. 

With that, I will turn it over to Ranking Member Vela ́zquez for 

her opening statement. 

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

And I, too, want to welcome the new members on our side, Mr. 

Payne from New Jersey and Ms. Kuster from New Hampshire. 

As members of this Committee are aware, the success of our 

overall economic recovery hinges on how small businesses fare. 

While few will argue our economy is where it needs to be, it is also 

hard to ignore the important strides that have been made to date. 

Since 2009, GDP growth has expanded at a moderate 3.2 percent, suggesting the economy is making gradual improvement. 

Likewise, although the employment situation remains challenging, 

we have seen 35 consecutive months of positive job growth and 

more than 2 million jobs created last year alone. Still, the pace of 

this growth is far from sufficient. For those who lost their livelihood in the recession or young people entering the job market, 

there remain too many applicants for too few opportunities. 

As is always the case, the gains exhibited by the broader economy are closely linked to trends in the small-business sector. Recent survey data found small-business owners’ optimism regarding 

the next 6 months’ growth by 5 points in January. 

Another encouraging sign has been the easing of the small-business credit markets, ensuring a flow of capital to small firms looking to expand their operations. According to the most recent Federal Reserve senior loan officer survey, most banks are loosening 

credit standards for small-business and commercial loans. Moreover, February data finds that 73 percent of small firms report 

being able to obtain the financing they need, the highest level in 

4 years. Affordable credit will remain key to growth in this sector. 

If, as we often say, small businesses are the backbone of the economy, affordable capital is the lifeblood. 

Beyond the need for affordable financing, small companies also 

need additional customers in order to expand and take on more 

workers. Small businesses certainly have concerns about changes 

to the regulatory environment. However, a recent analysis by the 

Federal Reserve suggests that the biggest obstacle to small-business job creation may actually be the lack of consumer spending. 

In that regard, measures that generate consumer spending, such 

as payroll tax cuts, may offer a better path forward for boosting 

small-business growth and hiring. Indeed, the recent Federal Reserve letter calls into question whether regulatory uncertainty is 

truly impeding employment gains. 

It goes without saying that our economy has not achieved the 

level of growth all of us on both sides of the aisle want to see. 

Americans understandably expect more. However, it is also important to remember the dire state of the economy in 2009. After 4 

tough years, we are beginning to see glimmers of hope on the horizon, and our Nation’s small businesses are leading the way. 

SBREP-219 with DISTILLER

3 

I look forward to hearing from our witnesses as to how this Committee can be more helpful in fostering an environment that helps 

small businesses succeed, grow, and create the jobs Americans so 

desperately need. 

And, with that, I thank you, all the witnesses, for being here 

today. 

I yield back. 

Chairman GRAVES. Thank you all again. To explain the process— 

first of all, we are probably going to have a series of votes sometime during the hearing, probably in about 30 minutes, in which 

case we will recess for a short period of time. We are going to try 

to get through as much testimony as we can. 

You each have 5 minutes, and the lights will turn yellow when 

you have 1 minute left. If you go over, it is not a problem. We are 

not going to kick you out of here for that. If you have something 

to say, we would encourage you to say it. 

So, with that, we will start with our first witness here today, 

which is Professor Randall Kroszner, who is the Norman R. Bobins 

Professor of Economics at the University of Chicago Booth School 

of Business. Prior to joining the faculty at the University of Chicago, Professor Kroszner served as a Governor of the Federal Reserve System from 2006 to 2009. 

Professor Kroszner, thank you for being here. Welcome to the 

Committee, and we look forward to hearing from you. 

STATEMENTS OF RANDALL S. KROSZNER, NORMAN R. BOBINS 

PROFESSOR OF ECONOMICS, BOOTH SCHOOL OF BUSINESS, 

UNIVERSITY OF CHICAGO, CHICAGO, ILLINOIS; MARIA C. 

COYNE, EXECUTIVE VICE PRESIDENT, KEYBANK, CLEVELAND, OHIO, ON BEHALF OF THE FINANCIAL SERVICES 

ROUNDTABLE AND THE CONSUMER BANKERS ASSOCIATION; 

SEAN FALK, PRESIDENT AND OWNER, WOLFTEA, LLC AND 

NACHOGANG, LLC, CEDAR PARK, TEXAS, ON BEHALF OF THE 

INTERNATIONAL FRANCHISE ASSOCIATION; AND MARGOT 

DORFMAN, CHIEF EXECUTIVE OFFICER, U.S. WOMEN’S 

CHAMBER OF COMMERCE, WASHINGTON, D.C. 

STATEMENT OF RANDALL S. KROSZNER 

Mr. KROSZNER. Thank you very much. I am delighted to be back 

now as a professor rather than as a Governor of the Federal Reserve. But I am delighted to be back here before you again. 

Chairman Graves, Ranking Member Vela ́zquez, and members of 

the Committee, thank you very much for asking me to testify on 

the state of the overall economy and the economic outlook. I will 

touch briefly on a few of the aspects of our economy and economic 

challenges in my remarks, but certainly I will look forward to your 

questions on a wide variety of issues. 

I will be focusing primarily on the general economic outlook and 

leave it to my colleagues to talk more specifically about some of the 

issues facing small businesses, but I will touch on a few of those 

issues. 

The way that I characterize the U.S. economy for roughly the 

last year or so and, unfortunately, I think, going forward is we are 

in a sideways slide—that is, that we are unlikely to see a strong 

SBREP-219 with DISTILLER

4 

breakout in growth. I also think we are very unlikely to see a double-dip type of recession. 

Now, of course, shocks can come along. There are a lot of unexpected factors that can happen, whether it is in Europe, whether 

it is a cybersecurity attack, whether there can be some sort of natural tragedy. So, obviously, those factors are ones that I can’t take 

directly into account. But I think if we were to go along without 

major shocks, we will continue in this sort of sideways slide. 

What I mean by that is that we have been having job growth, 

private-sector job growth, at a modest level, which has kept the unemployment rate roughly constant, moving down slightly. Roughly 

a year ago, it was slightly above 8 percent. Today, it is just slightly 

below 8 percent. So hardly any progress, despite job growth of more 

than 150,000, 180,000 jobs per month, because the population is 

gradually growing, the labor force is gradually growing, so it is just 

basically keeping us treading water. That is why I kind of characterized things as a sideways slide. 

Now, some people have become concerned because the GDP report from the last quarter suggested a very mild contraction. I 

think there were a number of one-time factors having to do with 

the timing of some government expenditures that were very strong 

in the third quarter, very weak in the fourth quarter, and Hurricane Sandy that led to a slight contraction. I think going forward 

we are likely to see a continuation of the kind of growth that we 

have been seeing, which has been around 2 percent, maybe in the 

low to mid 2’s, but sort of around 2 percent or so going forward. 

Fortunately, the rate of inflation continues to be subdued. Since 

mid-2009, inflation, as measured by the Personal Consumption Expenditures Index, has averaged about 2 percent per year and was 

just 1.7 percent in 2012. So certainly we have to be mindful of 

swings in prices of commodities, energy, food stuffs. Obviously, I 

am from the Midwest, so we have seen a lot of challenges because 

of the drought that we have been facing out there. But the overall 

pace of inflation has been quite moderate. 

If you look at surveys of consumers, surveys of professional forecasters, as well always market-based measures, there is no expectation of a significant increase in inflation. It seems to be at roughly the same level that it has been, or expected to be at roughly the 

same level that it has been. And I think that is fortunate that we 

don’t see that, but obviously we always want to be mindful of a potential for that to change as the economy evolves. 

So what I really would like to see is the U.S. achieve a more robust, noninflationary recovery, and I believe that we can. In my 

formal written remarks, I have more details on the state of the 

economy, and feel free to ask questions about that, but I just wanted to mention a few factors that I think are very important. 

When we look at surveys both of small businesses and of large 

businesses, the things that keep coming up on top of the agenda 

for them, their concerns that are holding them back, are Federal 

Government policies, the Federal budget, the cost of health care. 

This seems to come up over and over again—the Duke/CFO Magazine survey; the NFIB, the National Federation of Independent 

Businesses. These keep coming up. 

SBREP-219 with DISTILLER

5 

One of my colleagues, Steve Davis, has looked at a measure and 

developed a measure of economic policy uncertainty. Looking at 

how much that has gone up since the crisis, particularly focused on 

these issues of Federal Government policies, Federal budget, and 

the cost of health care, he estimates that GDP growth may have 

been reduced by up to 2.3 percent, investment by up to 14 percent, 

and employment, up to 2.3 million jobs. So this is sort of a concrete 

illustration of how uncertainty about the policies that are before 

Congress and the administration can slow economic growth. 

Going forward, I think it is crucial for the Congress and the administration to understand that policy uncertainty is taking its toll 

on the economy. So clear or clean resolutions of uncertainty on fiscal policy and regulatory policies undoubtedly would help to spur 

a recovery, but it is also important that they be resolved in ways 

that are pro-growth. So it is not just the resolution, but it is how 

they are resolved. 

Just to quickly tick off three areas, I think the tax system should 

be seen as not simply a mechanism for raising revenue but also for 

something that can provide more incentives for growth. A recent 

study that I cite in my written testimony suggests a consistent and 

large adverse effect of corporate taxes on both investment and entrepreneurship. And so I think we need to think very carefully 

about that, when thinking about corporate tax reform. 

I think, second, on government expenditures, it is very important 

to think about how we can sustain economic growth. A lot of government expenditures, like in Japan—where they have been doing 

this now for 2 decades, where their debt-to-GDP ratio has gone 

from 70 percent to 250 percent. They have had anemic growth because they have not focused on growth-oriented spending, just simply spending in and of itself. 

Finally, when coming to resolve uncertainty with respect to regulation, thinking about the role of cost-benefit analysis, ensuring 

that the costs and benefits are weighed in thinking about regulatory implementation, is very important. 

Thank you very much. 

Chairman GRAVES. Thank you, Dr. Kroszner. 

I think we are going to go ahead and recess now. We only have 

two votes, so we will run over and vote and then turn around and 

come back. I am going to guess we will be gone about 25 minutes. 

I apologize for the delay. I had hoped we would get through a little bit farther, but Nydia and I don’t get to make the schedule, unfortunately. 

So, with that, we will recess and be right back. 

[Recess.] 

Chairman GRAVES. We will call the hearing back to order. 

Our next witness is Maria Coyne, who is the executive vice president for consumer and small-business lending at KeyBank. 

KeyBank is headquartered in Cleveland, Ohio, and has 1,088 

branches throughout 14 States. Maria joined KeyBank in 2001 

after serving as a small-business strategist for the Greater Cleveland Growth Association. 

Maria is testifying on behalf of the Financial Services Roundtable and the Consumer Bankers Association. 

Welcome to the Committee. 

SBREP-219 with DISTILLER

6 

STATEMENT OF MARIA C. COYNE 

Ms. COYNE. Chairman Graves, Ranking Member Vela ́zquez, 

members of the Committee, I am honored to be here today speaking with you about small business, a matter that is near and dear 

to my heart. 

And as you pointed out, I am here today representing not just 

KeyBank but also testifying on behalf of the Financial Services 

Roundtable and the Consumer Bankers Association. Collectively, 

the Roundtable and the CBA represent many of the Nation’s leaders in small-business lending. 

First and foremost, KeyBank and the entire financial services industry are committed to small-business lending, as it is a core component of our overall business and small businesses are the cornerstone of the U.S. economy. Banks are a crucial partner to businesses, and we are stepping up our lending so small business can 

do what they do best: invest in communities. At KeyBank, we are 

committed to making loans in the communities we serve. 

As our country continues to recover from the economic crisis of 

a few years ago, there are a number of factors that will have a direct impact on small businesses and small-business lending in 

2013. These challenges threaten the long-term health of the economy of the U.S. and must be resolved quickly in order to provide 

a stable path forward for consumers, businesses, and lenders. We 

urge Congress and the administration to address these challenges 

as soon as possible. 

The industry is consistently hearing from their small-business 

clients that general economic conditions make them less inclined to 

take on additional debt. Also, a key issue is consumers’ lack of confidence, resulting in lower sales, particularly on the smaller end. 

A secondary problem is the diminished credit profiles of many 

small businesses due to the current economic environment. Collateral value has declined, and with limited collateral, small businesses that are otherwise creditworthy have had to rely increasingly on loans backed by the SBA to get the funding that they 

need. 

So how do we improve small-business lending? KeyBank, the 

Roundtable, and CBA have supported and will continue to support 

the various efforts of this Committee and Congress to expand 

small-business lending and to stimulate economic development. As 

a result, many small-business lenders have instituted aggressive 

measures to ensure no stone is unturned when finding ways to 

make more quality loans. 

In 2011, KeyBank, along with 12 other banks, made a commitment to increase small-business lending by $20 billion over 3 years. 

In September of 2012, the SBA announced that the banks are more 

than halfway to meeting that commitment—well ahead of the 3- 

year deadline. Additionally, in May of 2012, the SBA named 

KeyBank the top SBA Large 7(a) Lender of the Year. We are proud 

to have earned SBA’s highest recognition. 

SBA programs, in general, posted the second-largest dollar volume ever in fiscal year 2012. However, despite the positive results 

SBA programs have produced the last several years, changes are 

needed to ensure the continued success of SBA’s programs. For inSBREP-219 with DISTILLER

7 

stance, streamlining the application process for the 7(a) and 504 

program would reduce response times and paperwork. 

So what does 2013 look like for small-business lending? It is a 

myth that banks are holding back the economy by refusing to loan 

to small and large businesses. In fact, overall domestic loans increased 5 percent by the end of 2011, reaching $2.1 trillion by the 

end of the second quarter of 2012. 

However, today’s economic environment remains a challenge for 

many small businesses. We expect small-business loan demand to 

remain stable at a relatively low level in 2013, with flat to slightly 

better results from 2012. 

The National Federation of Independent Businesses has consistently reported that the overwhelming majority of small-business 

owners report their financial needs are met and they are not interested in borrowing. As lenders, we, too, have seen no significant 

signs of improvement, as the creditworthy businesses have routinely reported that they are willing to sit on the sidelines until the 

economic environment settles. 

Accordingly, we look at SBA and other government-guaranteed 

programs as important levers in generating loan volume. We expect 

SBA 7(a) volume to be elevated over 2012 production, and we also 

expect the SBA 504 program to continue to play an important role 

in the business real estate market. 

In conclusion, KeyBank, the Roundtable, and CBA support the 

Committee’s efforts to review areas where it can support small 

businesses as well as other alternative avenues to help create business opportunities through innovative policy solutions that will 

help create a foundation to build a strong and prosperous economy. 

While the efforts to increase small-business lending by Key and the 

industry overall have produced a variety of positive outcomes, we 

know more work has to be done to make sure capital reaches entrepreneurs and small-business owners who need it. 

This concludes my testimony, and thank you for listening. 

Chairman GRAVES. Our next witness is Sean Falk, who is the 

owner of Wolftea, LLC and Nachogang, LLC. Sean owns 12 franchise businesses with brands such as the Great American Cookie 

Company, Pretzelmaker, Mrs. Fields Cookies, and Salsarita’s Fresh 

Cantina. Sean is testifying on behalf of the International Franchise 

Association. Sean is also a former member of the U.S. Marine 

Corps who served in the gulf war and in Bosnia. 

Sean, thank you for being here. Nobody told you that we enjoy 

samples on the Committee? 

STATEMENT OF SEAN FALK 

Mr. FALK. I thought about it. 

Chairman Graves, Ranking Member Vela ́zquez, and members of 

the Committee, thank you for your invitation to testify at today’s 

hearing. I am honored to speak with you regarding the current 

state of small business in America. I believe my role as a smallbusiness owner gives me a unique perspective that is not heard 

often enough in Washington. 

So my name is Sean Falk. I am a Marine Corps veteran, and I 

own and operate 12 franchise locations. I am a proud participant 

in a diverse franchise community which supports nearly 18 million 

SBREP-219 with DISTILLER

8 

jobs. You may recognize some of my businesses as Salsarita’s Fresh 

Cantina, Great American Cookies, Mrs. Fields Cookies, and 

Pretzelmaker. 

I bought my first franchise in 1998, and through 2008 I was 

averaging a little over one location per year that I would be opening. My business could grow even faster and create more jobs if 

Washington took more meaningful steps to address the tax and 

spending issues and regulatory uncertainty. 

Government plays an important role in my business decisions. As 

a business owner, I can’t make future business plans when Congress passes and extends regulations for only 1 year at a time. The 

moving target created by short-term fixes makes it extremely difficult for me to evaluate investments and business opportunities 

and hampers my efforts to expand and execute a long-term business plan. 

Small-business owners across the country also need to consider 

historically low profit margins, commodity and fuel prices, unemployment insurance rates, exchange rates, and a host of other factors. For me, raising prices is not an option, forcing me to scramble 

to keep up with new threats to my bottom line. 

Prior to 2008, securing financing to open my franchise locations 

was relatively easy, given my good standing with the banks. However, in 2008 when the financial markets started to go south, so did 

my ability to access capital. Banks began restricting lending and 

raised loan standards at a time when I was still growing. Unfortunately, from 2008 to 2011, my business did not grow and I opened 

no new stores. 

In 2011, I felt a change in the economic tide. Banks were reaching out to me again offering capital. The caveat was that the loans 

must be guaranteed by the Small Business Administration. But the 

application and approval process for an SBA loan took over 6 

months, and I was forced to push back the opening of my stores. 

I finally opened up two new locations in April and May of 2012. 

Implementation of the Affordable Care Act has also presented an 

enormous challenge. Navigating the constant changes, waivers, extensions, regulations, and clarifications of an already-cumbersome 

law diverts my focus from developing my business and creating 

new jobs. Also, there are very few government resources to help 

guide small businesses through this process. 

Currently, I employ 43 full-time equivalent employees. If my 

business grows and I create more jobs, I will also drastically increase my costs due to the employer mandate. This has an undeniable impact on my bottom line and is making me reconsider opening new locations. Also, I may be forced to manage my employees’ 

hours to less than 30 hours per week. 

With these challenges and changes, I fear that it may be a struggle just to keep the doors open on some of my 12 locations. Of 

course I would relish the opportunity to grow my business, but the 

recent burdens placed on small business and the uncertain economic climate have given me reason for pause. 

The state of the small-business economy is extremely fragile. I 

hope policymakers will consider focusing their energies on address 

the burdens we face in a business-friendly manner. It is time to adSBREP-219 with DISTILLER

9 

dress these fundamental challenges facing our economy that are 

keeping small-business owners and entrepreneurs on the sidelines. 

Thank you for this opportunity, and I look forward to answering 

any questions the Committee may have. 

Chairman GRAVES. Ms. Vela ́zquez? 

Ms. VELA ́ ZQUEZ. Mr. Chairman, it is my pleasure to introduce 

Ms. Margot Dorfman. 

Ms. Dorfman is the founder and CEO of the U.S. Women’s 

Chamber of Commerce. The Women’s Chamber of Commerce represents 500,000 members, three-quarters of whom are small-business owners and Federal contractors. Through her leadership, this 

organization has championed opportunities to increase women’s 

business, career and leadership advancement. 

Additionally, Ms. Dorfman has extensive background in business, 

including over 10 years in executive positions with General Mills 

and other Fortune 500 firms. 

Welcome. 

STATEMENT OF MARGOT DORFMAN 

Ms. DORFMAN. Thank you. 

Chairman Graves, Ranking Member Vela ́zquez, and members of 

the Committee, thank you for the opportunity to speak today on behalf of the U.S. Women’s Chamber of Commerce and our 500,000 

members, three-quarters of whom are American small-business 

owners and Federal contractors. 

In preparation for today’s hearing, we surveyed our members. We 

see that small businesses are anxious to get forward movement and 

they are looking for opportunities, resources, connections, and a 

positive business environment. While business budgets are tight 

and access to capital is in the top three needs of our small businesses, access to contracts and affordable benefits are clearly the 

most requested when our members are asked how we can help 

them reach to the next level. 

On the Hill, the budget obstacles you face impacts our members. 

According to one member, budget uncertainty on the part of our clients in the Federal, State, and municipal sectors is a big issue. 

Many of them cannot move forward to get their projects going because they do not know what is going to happen with agency budgets. 

Even so, there are a number of things you can do today to help 

small businesses grow, prosper, and fuel our economy. Help small 

businesses secure affordable access to capital, not just for the larger small businesses and the gazelles; help access to capital get 

down to mainstream businesses, including women-owned, veteranowned, startups, and rural businesses. 

For example, women own nearly one-third of all businesses in 

the United States, but we are still receiving only 12 to 13 percent 

of the SBA-backed loans. One member states, ‘‘Access to capital is 

very difficult in this lending environment. I am finding that unless 

you are established and have assets on hand, banks will not loan 

you money.’’ And another member says, ‘‘Lending is now taking 

place outside of the box with private lenders and investors for 

small businesses. This is a risky situation because they usually ask 

to take controlling interest in your company.’’ 

SBREP-219 with DISTILLER

10 

You have it within your power to compel the SBA to significantly 

increase their commitments to helping all small firms access the 

capital they need to grow their businesses and fuel the growth of 

our economy. Help small businesses secure affordable business benefits so that we can compete for quality workers and support our 

own families. 

We still need access to affordable health care and related insurance products and business insurance, disability insurance, but 

also affordable workplace retirement programs. Many industry barriers exist, and big-business privileges enable large businesses to 

access these important and necessary benefits far more affordably 

than the tight-budgeted small businesses. 

Help small businesses secure access to Federal contracts. While 

the SBA claims small businesses are receiving nearly 23 percent of 

all Federal contracts, their efforts need to be stronger to assure our 

fair share of contracts is really being awarded to small businesses. 

The Small Business Administration Office of Inspector General reports that there is still a large number of big businesses included 

in those statistics, as well as large businesses that establish passthrough companies to funnel Federal expenditures through smallbusiness programs. 

The Inspector General’s October 2012 report on the most serious 

management and performance challenges states that ‘‘previous OIG 

audits and other governmental studies have shown widespread 

misreporting by procuring agencies since many contract awards 

that were reportedly awarded to small firms were actually being 

performed by larger companies.’’ One member who is pursuing a 

$50 million job at Camp Pendleton stated, ‘‘When I looked at the 

list of attendees at the pre-walk, I was astonished to see the names 

of five large primes that in no way qualify as small businesses.’’ 

The OIG goes on to say, ‘‘The SBA needs to ensure the contracting personnel are adequately trained on small-business procurement and are reviewing this data prior to awarding contracts.’’ 

I would add the SBA should be undertaking significant training 

of government contracting personnel relative to all small-business 

programs. Most important to my constituents at the U.S. Women’s 

Chamber of Commerce is the training and use of the WomenOwned Small Business and Economically Disadvantaged WomenOwned Small Business set-aside program. 

Many of our women-owned small businesses report that contracting officers remain unaware, untrained, and unmotivated to 

make use of the program that was put into place to end the more 

than a decade of shortfalls and the paltry 5 percent goal for contracting for women-owned firms. Another member shared, ‘‘I have 

to express my extreme frustration with access to contracts. The 

WOSB targeted set-aside is one of the most complicated set-asides 

to procure. Very few agencies are using this program.’’ 

And, finally, I implore you to help the health of the economy by 

avoiding undue fiscal austerity and fiscal calamity that will impact 

the growth of small businesses through reduced Federal spending, 

Federal layoffs that will drive down consumer spending, and cuts 

in important programs that add revenues to our economy. 

Thank you. 

SBREP-219 with DISTILLER

11 

Chairman GRAVES. I appreciate everyone’s testimony, and we are 

going to start our questions off with Mr. Collins. 

Mr. COLLINS. Oh, thank you, Chairman. 

I want to thank the witnesses for coming. Your stories are compelling. 

Mr. Falk, thank you for sharing your entrepreneurial story. And 

many congratulations on your success. 

Let me go back to myself for a second. With the exception of my 

time as Erie County executive, I have spent my entire career as a 

small-business owner. So, like you, I do understand the obstacles, 

the hurdles that are facing small companies and people that are, 

like yourself, trying to grow. 

The competing interests of putting a first-rate product or service 

to customers, managing employees, raising capital, and maintaining a solid balance sheet are a balancing act. Every day, nearly 28 

million small-business employers employ 60 million people in this 

country; it is half of the private-sector workforce. I can assure you, 

I will work with my colleagues to make sure that we do what we 

can to make sure small business has a voice here. 

My specific questions may be twofold. You touched on the Affordable Care Act, Obamacare. I have heard and I have met with other 

franchise owners that they are actually right now cutting the hours 

of many of their workers from 40 hours to 29 hours as a 

workaround to the penalties. And, if so, that is going to be having 

a negative impact on families in this country. They may now have 

to get a second job, where currently they have a full-time job. 

I would like you to share with us if you have heard the same or 

if you are looking at that same issue in cutting hours. 

Secondly, if there were one, two, or three things we could do here 

to change, a regulation or otherwise, do you have a top one, two, 

or three? I would appreciate your comments. 

Mr. FALK. I assume the one or two that you are talking about 

is in reference to the Affordable Care Act, or just any regulation 

in general? 

Mr. COLLINS. No. Any of them. 

Mr. FALK. Okay. 

In regards to the managing the hours, I have full-time employees 

that will remain full-time employees even after the implementation 

of the ACA. However, there are many businesses that are trying 

to manage those hours. I don’t know if it is necessarily with the 

people who are truly full-time and always have been full-time, but 

it is definitely some people who are working 31, 33 hours a week. 

They are going to manage those to get down to 29 to avoid a fulltime classification for that employee. Forever, a full-time employee 

has always been considered 40 hours, but now we have to look at 

it in a much different way. 

So, yes, I will manage that aspect, but I really won’t cut my fulltime employees down to 30 hours just to avoid that. 

But specifically with the ACA and regulations, if we could change 

the 30-hour requirement so that a full-time employee is a different 

amount of hours, that would be more helpful for us. 

And then also raising the 50 full-time equivalents. I don’t understand how that impacts small businesses. That is not a small business. I have 12 locations; they employ 6 to 10 people at each locaSBREP-219 with DISTILLER

12 

tion. I am still very small compared to some big employers. So if 

that number could be raised, it would be significant for me. 

Mr. COLLINS. Thank you for sharing that, because that is some 

of the workarounds I think we could at least propose. So I appreciate those comments. 

Mr. FALK. Absolutely. 

Chairman GRAVES. Nydia? 

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

Dr. Kroszner, last month, the Wells Fargo Small Business Index 

jumped 20 points from the previous quarter. Key drivers of this include greater optimism about revenues, capital spending, and jobs. 

Given this, do you believe that 2013 will be a better year for 

small businesses than 2012? 

Mr. KROSZNER. Well, I think we are starting to see some optimism in certain areas, but we are also seeing some challenges both 

in surveys of small businesses and in the economy more generally. 

So I think, as I had described in my testimony, the number of 

surveys of both large and small business have suggested that they 

may be reducing their capital spending for the next year. There 

was a survey that was just reported in the Wall Street Journal earlier this week and also from the Duke and CFO Magazine survey 

that suggests there will be some reduction of capital spending relative to last year. 

Hopefully, with resolution of uncertainty about some of the policies that are before the Members of Congress today, we may be 

able to—— 

Ms. VELA ́ ZQUEZ. Isn’t that more directly linked to the lack of demand than consumers walking through their doors? 

Mr. KROSZNER. Well, certainly, one of the concerns is the impact 

of all this uncertainty on consumer demand and the consumers’ 

willingness to buy. Unfortunately, there is, as economists call it, a 

simultaneity. When there is a lot of uncertainty hanging over people’s heads, consumers are a little bit less willing to buy, firms are 

less willing to hire and invest, and it makes it more difficult to 

have the general takeoff. 

Ms. VELA ́ ZQUEZ. Okay. Thank you. 

In the most recent Federal Reserve senior loan officer survey, it 

is clear that the credit standard for all firms, including small businesses, have been easing, while demand for loans has been increasing. What do you attribute this positive development in the smallbusiness lending markets to? 

Mr. KROSZNER. So I think there are a variety of factors, but I 

think some of it has been the policies that the Federal Reserve has 

pursued to try to provide sufficient liquidity for the markets and 

confidence that we will not get into a deflation situation, as Japan 

had gotten into. Taking out that tail risk of deflation I think has 

been important in instilling some confidence in the financial sector. 

I think we have also had some reduction in some of the uncertainties related to Europe, or at least temporarily we have, and I 

think that has been helpful. 

Ms. VELA ́ ZQUEZ. Thank you. 

Ms. Coyne, since the Small Business Jobs Act of 2010 increased 

the maximum SBA loan size to $5 million, the percentage of smallSBREP-219 with DISTILLER

13 

er loans, defined as those $150,000 or less, has declined from 17 

percent of total lending dollars in 2009 to just 9 percent in 2012. 

What can we do to reverse this trend and prevent a gap in funding for these new and emerging businesses that need smaller 

amounts of capital? 

You know, in previous recessions, what we saw, it was that people who were laid off, they went on, they got capital, it was much 

easier to access capital, they opened up startup businesses. This 

time around, we are having trouble in terms of business formation. 

But as you can see, when the SBA and the Federal Government 

step in and guarantee those loans and increase the cap, financial 

institutions lend. But you lend and you make those big loans because they are more profitable than those less profitable lower 

amount of dollars, $150,000. 

Ms. COYNE. Yes. 

Ms. VELA ́ ZQUEZ. When you look at the portfolio of the 7(a) loans, 

the demand is not for the big loans, the $5 million loans. The demand is for those smaller loans. What can you the, financial institutions do, to address this gap? 

Ms. COYNE. I think that is an excellent question, and I think 

that the SBA program is particularly useful for those startup companies that you referenced. 

In my written testimony, I had referred to a client of ours in 

Cleveland, Laticia Ortiz, who a little less than 2 years opened Tortilla La Bamba with a $15,000 SBA loan. She is doing great. We 

are talking with her now on potentially—she has outgrown the 

7,000 square feet that she is in. We are talking with her about a 

504 loan to buy a building. 

I think we have to take advantage of—use the full range of the 

spectrum of what is available to us in the SBA. 

I can name instances of coffee shops in Tacoma and lots of other 

client transactions that we have done that are across the whole 

size gamut. 

I agree, we have to be active with the small, with the medium, 

and with the large-sized loans and continue to support SBA. I 

think it is a wonderful tool, especially for startups and especially 

for companies that have collateral values that have declined or 

they have had other impairment through the recession. 

Ms. VELA ́ ZQUEZ. Do you know the problem I have with the financial institutions lending to small businesses? That even when the 

Federal Government steps in and guarantees those loans to 90 percent, you are going to go and make the big loans, but then there 

is a gap. 

Ms. Dorfman, in 2009, the American Recovery and Reinvestment 

Act increased the SBA guarantee on loans to 90 percent as an incentive for private lenders to increase small-business lending. 

While the outcome was a temporary spike in SBA activity, since 

the incentive ended last year lending has returned to the lackluster 

levels of 2009. 

Do you think the money used to incentivize private lenders 

would be better spent on an SBA direct lending program? 

Ms. DORFMAN. I would say absolutely yes. We have seen the 

banks for years now cherry-pick the businesses that they feel that 

they can make the most money on. 

SBREP-219 with DISTILLER

14 

And I personally in my former years was a recipient of an SBA 

loan, but I was declined from many a bank because we were looking for $75,000. And the banker told me pointblank, If it was a $10 

million loan you were going after, we could work with you. At the 

time, it was an 80 percent guarantee, and they said no way. We 

had double collateral sitting there. We had to go to an alternative 

lender. That continues today. It is still the cherry-picking. 

I believe there was a hearing a few years back and the focus was, 

the key issue was the cost to doing the loans. So if we go to the 

student loan way of doing things, have the loan done by the SBA, 

get it set up, and then sell off the paper, then those costs for the 

banks won’t be there and we can actually see the levels of lending 

that are needed at the smaller levels to be satisfied. 

Thank you. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. I yield back. 

Chairman GRAVES. Mr. Chabot, do you have something to submit? 

Mr. CHABOT. Yes. Mr. Chairman, I would ask for unanimous consent to speak out of order. 

Chairman GRAVES. Sure. 

Mr. CHABOT. Thank you. I have a meeting out in the hallway, 

and I just wanted to enter into the record a letter from the credit 

union industry relative to capital access. 

Chairman GRAVES. Absolutely. Without objection—— 

Mr. CHABOT. Thank you. 

Chairman GRAVES. We will put that letter in the record. 

Mr. Tipton? 

Mr. TIPTON. Thank you, Mr. Chairman. 

I would like to thank the panel for taking the time to be able to 

testify here today. 

Dr. Kroszner, I guess I would like to start with you. I am a 

small-businessman. That has been my real life. And when I was 

listening to your testimony, you had noted that there is probably 

not going to be a double-dip, no dramatic growth, a sideways slide 

that you describe. 

Would it be a fair characterization that you are pretty much 

couching this as that it is not as horrible as it was but it is really 

not getting any better? 

Mr. KROSZNER. We have seen very little progress in the unemployment rate. As I mentioned, we have spent roughly a year right 

around 8 percent. I think gradually we will be moving down. But 

I just don’t see the impetus for growth coming. 

As I mentioned, a number of the surveys of both large and small 

business have said, because of uncertainties and concerns about 

costs and regulation, they are very concerned about increasing capital spending this year. I think that makes it a difficult environment to think we are really going to get much of a takeoff. 

Mr. TIPTON. So we even probably really agree. You know, when 

we are talking about 7.9 percent unemployment, we all know it is 

really much higher. You know, in my district, my two largest communities, the real unemployment, those that are underemployed, 

those who have simply given up, we have our two largest communities right now, as we boast of jobs created in the State of the 

SBREP-219 with DISTILLER

15 

Union last night, we are sitting at almost 20 percent unemployment. We haven’t been able to get this going. 

And it resonated with me when you were talking about what 

Japan was going through in terms of spending in relation to GDP. 

It is absolutely essential that this Nation start to truly address getting this fiscal house in order. It is not spending not one more cent, 

but reducing what we are spending in Washington, D.C. 

Mr. KROSZNER. I think it is also very important to think about 

what the spending is on. In Japan, there was, as I mentioned, a 

very large increase in spending, often under the guise of stimulus, 

but it didn’t really help to generate increases in GDP—the classic 

bridges to nowhere. 

I think government spending can be helpful when it is focused 

on areas where there are bottlenecks, where there are high productivity benefits of that spending. But one has to do a very careful 

analysis, and I think in many cases that is not the case. And I 

think just saying we need to spend more is not an appropriate response. We need to spend smartly and spend how we can increase 

growth in the U.S. economy. 

Japan is a great example where a lot of spending has not helped 

increase GDP. 

Mr. TIPTON. I will tell you, one thing that I would like to explore 

a little bit, you made the comment that the rate of inflation is still 

low. But in terms of core inflation rate, we do not include food 

prices, we do not include energy prices. We have just seen a spike 

in fuel costs again in this country, which is increasing the cost of 

being able to deliver pretzel dough coming in, which is not factored 

into real inflation. 

Are these some of the hidden mine traps that this economy is 

really facing that is really stunting growth? 

Mr. KROSZNER. Well, the numbers that I quoted were the Personal Consumption Expenditure Index, so that included all prices, 

including energy, foodstuffs, and such. If you just look at the core 

prices that were most recently reported in the GDP report, it is actually a bit lower. It is 1.5 percent, rather than 1.7, or an average 

of around 2 percent for the full headline number. 

I think we do have to be mindful of inflation pressures and that 

they could come at some point in time. Right now, if we look at 

both market-based and survey-based measures, we don’t seem to 

see them there, but we need to be ever vigilant on that. 

Mr. TIPTON. Thank you. 

Ms. Coyne, I would like to visit with you just a little bit in terms 

of access to capital. Key is a pretty big bank, but we have a lot of 

small community banks that are out there, as well, that can certainly lend themselves to being able to loan to small businesses, 

startups as well, in addition to the SBA. 

When we talking about Dodd-Frank, and now probably of more 

concern to me even is Basel III coming through, and the capital requirements that are going to be imposed on all of the banks, be it 

the big guys and the little guys as well, how constrictive is that in 

terms of banks’ ability to be able to make loans? 

Ms. COYNE. Well, thank you for your question. I would add a couple things. 

SBREP-219 with DISTILLER

16 

First of all, even big banks are focused on serving small business. 

You know, we have just added 225 bankers who do nothing but 

transactions of $150,000 and less. They are housed in our businessintensive branches. So even big is very responsive to the community. 

I think my concern around Basel III has not so much to do with 

the capital levels at my bank, which are very solid, but more so 

what it would do to borrowers who use home equity as collateral. 

Because the rules around Basel capital will require you to hold 

more capital if there is a greater than 80 percent loan to value. So 

that could, in fact, have a negative impact on any borrower who 

uses—it could make that capital more expensive. 

So there are a lot of nuances to Basel III that, you know, have 

us a little bit have a watchful eye. And I think as an industry, we 

are in business to lend money, and we definitely want to support 

the communities that we do business in. 

Mr. TIPTON. Thank you. 

I see my time has expired. I yield back, Mr. Chairman. 

Chairman GRAVES. Ms. Kuster? 

Ms. KUSTER. Thank you very much. Thank you, Mr. Chairman 

and Ranking Member Vela ́zquez. It is nice to be a part of the Small 

Business Committee. So, welcome. 

I just had a quick question. Mr. Falk and Ms. Dorfman also mentioned the issue of health care. I have also spent 25 years in the 

small-business world. 

And I am just wondering, Mr. Falk, when you talked about the 

burden of health insurance regulation, I am curious, as a smallbusiness owner, how do you insure your employees? And what is 

the impact of illness or disability either of the employees or members of their family on your business? 

Mr. FALK. My full-time employees have access to health care 

from me. I supplement a plan for them to insure themselves and 

sometimes their family if they need it. 

Ms. KUSTER. And the employees that are working 6 hours a day, 

5 days a week? 

Mr. FALK. Well, in reality, I don’t have a lot of those. We have 

a very part-time staff. We have a lot of 16-year-olds to 21-year-olds. 

They are really not using this as a career. Usually my managers 

and assistant managers are kind of career people, so that is maybe 

two people per location. Everybody else is kind of a transition employee. They give me 3 to 12 months. They are really not looking 

for health care. They are either on their parents’ plan or, you 

know, they are just starting out in the business world, maybe going 

through college or looking for a better opportunity. 

Ms. KUSTER. Thank you. 

And just one more. Ms. Dorfman, with your membership—and I 

was in a woman-owned business, so I am just interested in that 

question for you, about your experience on how employees get their 

health care and what the impact of illness, both for the employee 

and the family, is on the business. 

Ms. DORFMAN. Right. Currently, our members try to provide benefits for their employees because that is the only way that they can 

be competitive in the marketplace, in Federal contracting. So this 

is something they really want to do. 

SBREP-219 with DISTILLER

17 

In the past, we have heard from them that their cost of the premiums have been skyrocketing. And so we are hopeful, with the 

new act, that we will be able to mitigate some of those costs and 

bring that down. Now, it is too soon to say because not everything 

is up and running and probably there are some changes going on 

that the dust still hasn’t settled on. 

I would like to point out that that is not the only affordable benefit that my members want. They also want to provide retirement 

plans. And there is nothing out there that a small business can access. 

We tried to leverage our scale and put together a multiple-employer plan for our members and their employees, and the Department of Labor came out with a letter last year that virtually we 

had to close it down before we even got it off the ground. And what 

we were able to do with it was provide a way to get in without 

spending a lot of money, where we aggregated the cost. So if you 

are looking at a Lockheed Martin or a Boeing, they have a lot of 

people, they have lower costs. Well, you have the scale of the 

Chamber, you can do the same thing. 

So those are the types of things. We need to go beyond just 

health care, but the retirement, especially for women business owners because they live longer, they need to support themselves, their 

families, their employees, and their employees’ families. 

Ms. KUSTER. Thank you. Thank you very much. That is my experience, as well, was the skyrocketing cost of health care in a smallbusiness environment. 

Thank you. I yield back the balance of my time. 

Chairman GRAVES. Mr. Luetkemeyer? 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Just for Ms. Coyne—that is an interesting name for a banker, by 

the way. 

Ms. COYNE. I have heard that before. 

Mr. LUETKEMEYER. I have a banking background, and they call 

my daughter, who is Nicole, ‘‘Little Nickel,’’ so I understand where 

you are going there. 

Just kind of curious, you talked about, you know, as the top lender with SBA, what is the average size of the loans that you are 

making? Do you know offhand? 

Ms. COYNE. I don’t. I do know, though, that, you know, something—in 2012, 43 percent of the loans that we made were actually 

under $50,000. But I can’t give you an average size off the top of 

my head. 

Mr. LUETKEMEYER. Okay. So 43 percent of all your commercial 

loans, or is that just SBA loans? 

Ms. COYNE. In our small-business space. 

Mr. LUETKEMEYER. Okay. What percentage of your commercial 

portfolio are SBA loans? Just roughly. 

Ms. COYNE. Twenty percent, roughly. 

Mr. LUETKEMEYER. Okay. 

Ms. COYNE. Yeah. 

Mr. LUETKEMEYER. Is that an average across the industry? 

Ms. COYNE. I think we have been very committed to the SBA 

program. So those that are active in the program, I would say, at 

SBREP-219 with DISTILLER

18 

this point, of where we are in the economic cycle, that is probably 

pretty typical for the industry. 

Mr. LUETKEMEYER. Okay. And you indicated that some changes 

needed to be made, and the other thing you mentioned was streamlining the process. Are there other things that you would suggest 

to the Committee here? Because this is the Committee that actually oversees of the SBA, and if you have ideas, we would certainly 

like to hear them. 

Ms. COYNE. We do. CBA and the Roundtable has a pretty exhaustive list that we would love to share with you after the—— 

Mr. LUETKEMEYER. An exhaustive list. 

Ms. COYNE. Well, they are mainly around improving the application process—— 

Mr. LUETKEMEYER. Very good. 

Ms. COYNE.—and then around more transparency around the 

SOP—— 

Mr. LUETKEMEYER. Okay. 

Ms. COYNE.—and, you know, allowing us to be more helpful and 

getting more public opinion around the SOP and more kind of regularity in when those changes are made. 

Mr. LUETKEMEYER. Okay. You indicated that some of your customers are having some difficulty in expanding. They are concerned 

about the economy and actually willing to sit on the sidelines until 

the economy gets better. 

Is that a general statement that can go across the board, or is 

that just isolated instances? Or how do you feel your business customers and the climate they anticipate is out there? 

Ms. COYNE. I would say that is something that the whole industry has seen over the last, say, 2 to 3 years, that the most creditworthy borrowers are the ones that are sitting on the sidelines 

waiting until they see more stability in the economy. They are 

holding back on that next investment, hiring that next person, buying that next piece of equipment until they feel that things have 

settled more. 

Mr. LUETKEMEYER. The biggest problem in the stability and uncertainty, is that regulatory problems? 

Ms. COYNE. Regulatory problems, tax uncertainty, all of the 

things that have been mentioned earlier—health care. All of those 

things I think are weighing on the minds of business owners. 

Ms. VELA ́ ZQUEZ. Mr. Luetkemeyer, I have, if you are interested, 

the answer to your question about the loan size for KeyBank. 

Mr. LUETKEMEYER. I am giving up my time here, but that is fine. 

Go ahead. 

Ms. VELA ́ ZQUEZ. The trend shows that it continues every year to 

make larger and larger loans. 

Mr. LUETKEMEYER. Well, reclaiming my time, I think that the 

size and inflation and types of businesses out there, microbusinesses, mom-and-pop shops, are very difficult to get started 

anymore. So you are looking at bigger loans because it takes a bigger business to cash flow, to spread your costs over. I mean, it just 

makes sense. 

Ms. Dorfman, you made a comment a while ago, you had four 

things that were problems for getting businesses going: access to 

SBREP-219 with DISTILLER

19 

capital, affordable business benefits, access to Federal contracts, 

and the government needs to spend more money. 

With regards to the access to Federal contracts, are there barriers now for women-owned businesses that are not there for any 

other businesses? 

Ms. DORFMAN. There are. The government has never met the 5 

percent goal for doing business with women-owned firms. Since 

1994, there has been a goal set. And so the challenge is that—— 

Mr. LEUTKEMEYER. And what is the reason for that? Are there 

not enough people applying, or—— 

Ms. DORFMAN. Oh, no, we have—— 

Mr. LEUTKEMEYER.—they are just being turned down, or they are 

not qualified individuals to be given contracts to, or is there another barrier there? 

Ms. DORFMAN. The barriers include trying to get the access to 

the contracts. Typically, in the past, women-owned firms have had 

to compete against the large corporations. Now, with the womanowned small business set-aside program that has been implemented, while that has helped, there are a lot of flaws that still 

remain that need to be changed. 

And I can continue, if you want, with the different flaws. 

Mr. LUETKEMEYER. Well, that is a whole other issue we could get 

into. I have one real quick question with regard to Dr. Kroszner 

here. 

Cost-benefit analysis, in your testimony you said it is very important and needs to be understood better, and there seems to be a 

lack of the administration to be willing to go down that road. Do 

you want to elaborate for just a few seconds here? I am out of time 

though. 

Mr. KROSZNER. I think this is a very, very important issue, and 

I think it should be a high-priority issue. 

As I mentioned, Executive orders from Ronald Reagan through 

President Obama have talked about the importance of cost-benefit 

analysis. And I think having that as a priority, making sure that 

when regulatory changes occur that Members of Congress think 

about including cost-benefit analyses, or requesting cost-benefit 

analyses, I think would be very helpful. 

Mr. LUETKEMEYER. Very good. Thank you. 

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

Chairman GRAVES. Mr. Payne? 

Mr. PAYNE. Thank you, Mr. Chairman. 

Let me see. Ms. Dorfman, I apologize if you have already elaborated on this, but something that was concerning to me is you say 

about 90 percent of small businesses have fewer than 20 employees, which means they are not subject to the mandate in the Affordable Care Act. 

However, these businesses are eligible to receive tax credits towards the purchase of health insurance. Given those realities, do 

you believe that the concerns regarding its impacts on small business are overblown? 

Ms. DORFMAN. I do believe that to be true. We had connected 

with our members during the healthcare debate, and what we 

found was many of them were paying mortgage payments for each 

person, monthly mortgage payments for each person that they had. 

SBREP-219 with DISTILLER

20 

And they said, you know, with the mandate, the cost of that fee 

would be a lot less than what they are paying currently. 

One member recently cited that they have five employees and 

they are paying $42,000 annually for health care, so that is—— 

Mr. PAYNE. Okay. Thank you. 

Mr. Falk, you know, many people have limited access to capital, 

and in our continued economic trend of uncertainty many venture 

capital firms are hesitant to invest in startups. Should Congress 

consider any tax policies? 

Mr. FALK. I am sorry. Repeat your question? 

Mr. PAYNE. You know, because a lot of companies have limits to 

access to capital and there is uncertainty in the economy, many 

venture capital firms are hesitant to invest in startup firms. 

Should Congress consider any tax policies, such as some sort of 

investment tax credit, to encourage firms to invest in new enterprises? 

Mr. FALK. You know, in my case, I don’t think that the answer 

is to change things with venture capitalists. I think that the traditional, conventional loan process is still the best way for me to go. 

So if we can make either the SBA process or some of the regulations on the bank less, so that they can maybe take into account 

relationship and prior history of payment of loans rather than just 

a calculation from the government standpoint of what qualifies and 

collateral and assets, that would make my life a lot easier. 

I used to be able to go in on a Tuesday and apply for a loan. It 

would take me 20 minutes to describe my business prospect. And 

they would call me back on Thursday with the money. And now it 

takes me 6 months through an SBA process to get the money. And 

all along, all those times, I either paid my loans on time or aggressively in advance. But now, after 2011, they don’t take the relationship into play anymore, and that hurts me. And I understand that 

that is not always the best way to lend money, but it worked for 

me, and now I suffer because of it. 

Mr. PAYNE. And why do you think that is? 

Mr. FALK. I think it is because of the regulations that have now 

fallen down on the banks on what they need to put in reserve to 

back that loan. So the banks see a big expense. When they have 

to move money in reserve, more money than they used to have to, 

they have to put money in reserve to back that loan, and they do 

not get to experience the income until the loan is paid off. 

Ms. VELA ́ ZQUEZ. Would the gentleman yield, Mr. Payne? 

Mr. PAYNE. I will yield. 

Ms. VELA ́ ZQUEZ. Thank you. 

Ms. Coyne, what is the average length of time for an SBA loan 

guarantee? 

Ms. COYNE. From application to booking? 

Ms. VELA ́ ZQUEZ. Yes. 

Ms. COYNE. You know, at KeyBank we have SBA specialists in 

each one of our markets, so we try and expedite that process. And 

it will depend on if there is real estate involved or not. If there is 

not real estate involved, we can get it underwritten and closed in 

a couple of weeks. If you have to wait for an appraisal, then you 

have to go through that. 

SBREP-219 with DISTILLER

21 

Ms. VELA ́ ZQUEZ. The reason I am asking is because when I hear 

a statement that it takes 6 months for an SBA-guaranteed loan, it 

really worries me. So we have to do something about it. 

What would be the average length of time for processing such a 

loan? 

Ms. COYNE. The average is between 30 and 60 days. 

Ms. VELA ́ ZQUEZ. Okay. Thank you. 

Mr. PAYNE. Thank you. 

Chairman GRAVES. Mr. Hanna? 

Mr. HANNA. The general impression I get here is some people 

like the way things are, some people would like things to be better. 

But, just generally, is it everybody’s feelings that somehow the government should be a bigger backstop? 

I mean, my understanding of what banks used to do and still do 

is become a filtering place for good loans, bad loans, marginal 

loans, and that SBA—the marginal risks that the SBA took was related to that somehow. But people need to realize that the government can’t simply be the backstop for everything that banks used 

to do. 

I am interested in how you feel about it, especially—my sister is 

a WBA, and I respect the position you are in. But do you think 

there is a point at which the WBA relationship is less necessary? 

Or apparently you think it is more necessary, ma’am? 

Ms. DORFMAN. I am sorry. I wasn’t sure of the question. 

Mr. HANNA. Well, it is essentially a way to advance womenowned businesses that presumably wouldn’t have that same advantage any other way. 

Ms. DORFMAN. You mean the women-owned small business program for access to Federal contracting? 

Mr. HANNA. All of that. 

Ms. DORFMAN. There has been inherent discrimination. Federal 

contracting is one; access to capital. I can tell you, I still have 

members who come to me and say, can you believe I wanted to 

take out a business loan and they want my husband’s signature? 

It still goes on today. So there are inherent challenges. 

We would love everything to be equitable. We are not asking for 

a leg up above the other, but we need a level playing field so that 

we can grow. Women own one-third of all businesses in the United 

States. If we can help women-owned firms grow, we can turn the 

economy around. And that is my goal. 

Mr. HANNA. Sir? Do the franchises—your story is an interesting 

one. I give you a lot of credit. 

Mr. FALK. Well, Mr. Hanna, I would actually prefer the government to get out of the way a little bit more. When I had my relationships with the bank, they based it on the relationship. 

Mr. HANNA. And your worth, your ability to work, produce, be 

successful—— 

Mr. FALK. That is correct. 

Mr. HANNA.—was somehow relevant, right? 

Mr. FALK. That is correct. 

Mr. HANNA. So it was a backstop that somebody could look at 

and say, this guy is a reasonable loan. 

Mr. FALK. A local bank decision backstop, not a government one. 

And so they knew from my history that I had a good business 

SBREP-219 with DISTILLER

22 

model, that I was a great operator, and that they were able to lend 

me money and I would pay it back on time. 

Mr. HANNA. So let me just ask kind of an obscure thing. Do you 

think that the government is in the business of—or creates businesses that might not otherwise be created and, by definition, are 

much, much more likely to fail? 

Mr. FALK. I don’t know that to be true, sir, no. 

Mr. HANNA. Uh-huh. Kind of my opinion, just by the way. 

So thank you. I am good. 

Mr. FALK. Sure. 

Chairman GRAVES. Ms. Chu? 

Ms. CHU. Yes, I would like to ask questions that pertain to how 

well our current government programs are working for small business. 

And, first, Ms. Dorfman, if I can ask you about the women-owned 

small business set-aside. Of course it is aimed at expanding Federal contracting opportunities for women-owned businesses, but 

you reported that many of the U.S. Women’s Chamber of Commerce’s women-owned businesses say that many of the contracting 

officers are unaware, untrained, and unmotivated to make use the 

program. 

You were starting to talk about some of the flaws in the program. So could you talk about what is the flaw in the program and 

what could we do to change it? 

Ms. DORFMAN. Sure. 

The first one, as you mentioned, is the contracting officers are 

not using the program as they should be. The program itself has 

a—one of the technical things is they actually have to certify the 

self-certified women-owned firms, and it rests on their backs or 

their shoulders. If there is a problem with that contract, ultimately 

if it is challenged, then they are the ones that are responsible. So 

we would love to see some legislation that would take that off their 

shoulders and put it back into the SBA’s lap. 

The other thing is the ones that claim that they don’t know 

about the program, I know that there are a lot of folks that may 

not have been trained. Early on, the training was, I would say, 

weak. There wasn’t a lot of training out there just because they 

didn’t have the funding to get the training out there. So there could 

be more to be done. Right now they put it on the Web site and say, 

go to that. We know that it is complex and the contracting officers 

will need to ask questions about it. So that is one key area. 

Another thing is, when we talk about leveling the playing field, 

components in some of the other programs that are not in this are 

the sole-source and also the Mentor-Protege Program. 

And then, overall, if we want to really help small businesses 

grow, which will help the economy grow, is we need to raise the 

goals to a level that resonates with the actual demographics of our 

community and of the country. And so, okay, you are not going to 

give us a 30 percent goal, I know that, but raise the women-owned 

small-business goal to 10 percent and raise small business overall 

to 35 percent. 

The other thing is contracts for small businesses overall. There 

are a lot of exclusions going overseas. If there is a contract that is 

fulfilled overseas, those contracts are not held to the goaling. And 

SBREP-219 with DISTILLER

23 

we are losing billions of dollars in lost opportunities for small businesses. 

So there is quite a number of things that can be done to 

strengthen this. 

And then the NAICS codes, we know they are going to be looking 

at them. But the NAICS codes as they are, a number of the agencies can’t use the program because the NAICS codes aren’t inclusive of what they buy. 

So, thank you. 

Ms. CHU. And also you said that there are problems with making 

sure that small businesses get their share overall, and not just 

women-owned businesses, but overall small businesses get their 

share of the Federal contracts. And yet we have programs like the 

Office of Small and Disadvantaged Business Utilization and procurement center representatives who are supposed to enforce this. 

So what—— 

Ms. DORFMAN. And the issue there is, the small-business offices, 

they are wonderful, they do what they can, but they are only as 

good as the Secretary’s commitment to doing business with small 

businesses. So that is their piece. 

When you look at the PCRs, the procurement center representatives, I heard that we are down to something like 20 or 25 people 

leaving and such. And at the height I think we had 150. Those are 

the people who make sure that the contracts coming down, if it can 

be set aside to a small business, it will be. We need to hire a lot 

more of those to make sure that we are getting our fair share. 

Ms. CHU. Thank you. 

And, Ms. Coyne, has your bank participated in the SBA’s 504 

loan refinancing program? 

Ms. COYNE. We have. And we were big fans. 

Ms. CHU. Do you feel it was beneficial to small business? 

Ms. COYNE. Extremely beneficial. 

Ms. CHU. Because it has expired as of last September. And it was 

created under the Small Business Jobs Act. Would you like to see 

this program reauthorized or made permanent? 

Ms. COYNE. We certainly would. We would love some legislative 

help on that. 

Ms. CHU. And why is that? 

Ms. COYNE. Well, there were many instances where we were able 

to help borrowers, you know, in many ways consolidate some of 

their debt and add additional financing and really grow their businesses, really add jobs, really be able to take their firm to the next 

level. We have lots of examples of businesses that would not be 

where they are today were it not for that program. 

Ms. CHU. Thank you. 

I yield back. 

Chairman GRAVES. Mr. Mulvaney? 

Mr. MULVANEY. Thank you very much, Mr. Chairman. 

Very briefly, Mrs. Dorfman, I think I heard your testimony just 

a few minutes ago. I urge you to consider the possibility that when 

one of your members is asked by a lender for her husband’s signature on a loan that that is not automatically a sign of discrimination. I can assure you that my wife has been asked to sign several 

loans, and I have never considered it to be a sign of discrimination 

SBREP-219 with DISTILLER

24 

against me. It is probably just because we have marital assets 

being offered as security for that loan. 

You work for an excellent organization, one that I have had before my panel last year several times. And I do believe there is discrimination, especially in things like the construction industry, towards women-owned businesses. But I encourage you to find a better example than simply cosigning a note or cosigning a guarantee 

because, as any banker will tell you, especially in States where 

there are marital assets or joint assets, it is not at all unusual for 

the man and the wife to be on the note together. 

But that is not what I want to talk about. I want to talk to Mr. 

Falk. 

Mr. Falk, thank you for coming in today. I have eaten at several 

of your restaurants. I was a little disappointed that my chairman 

mispronounced the restaurant that I used to own and operate, 

Salsarita’s Fresh Cantina. 

Thanks a lot, Mr. Chairman. 

And, yes, we do need to get samples so clearly the folks can understand how to pronounce the name. 

Mr. FALK. Absolutely. 

Mr. MULVANEY. I am going to do something different this year. 

I have spent the last 2 years trying to draw attention to exactly 

what you all are here to talk about today, which is the impact of 

our Federal Government on, specifically, small-business owners. 

And the very cynical position that I have arrived at right now is 

that not nearly enough people in this town care. People on this 

Committee care, people in both parties on this Committee care 

about you as small-business owners, but, generally speaking, this 

town doesn’t care about you. And I know that because my party 

just ran a national campaign and tried to draw attention to the 

plight of small-business owners and job creators and we got killed. 

So I am going to do it differently this year. I am not going to talk 

about your bottom line, Mr. Falk. I am not going to talk your ability to grow, your return on assets, because, quite frankly, people 

don’t care. We just passed a tax law here that supposedly was 

against just rich people but grabbed people in your particular circumstance. 

Again, people don’t care about that. What do they care about? 

What do I care about? I care about your workers. I care about the 

folks who work for you. And I want you to tell me what it means 

at your business. My guess is you probably hire the same sort of 

folks I did. You hire a mishmash of young people who were maybe 

going to community college, maybe a single mom, maybe a guy who 

is supporting a family, younger folks. 

And tell me what it means to them when you are dealing now 

with the Affordable Care Act, you have to cut back on their hours 

or have to look at possibly restricting the growth of your permanent employees. 

Mr. FALK. Well, I agree with you wholeheartedly that it is not 

about taxing me as a business owner; it is about me employing 

more people and those people earning money and having payroll 

taxes that go to the Federal Government and also having money 

that gets back into the economy to buy more things and create the 

demand that would raise all of our boats at the same time. 

SBREP-219 with DISTILLER

25 

So when we look at some of the regulations that are coming 

down, specifically the ACA, you are absolutely correct that, as I 

mentioned earlier, we will start managing those hours of those people that are close to that 30-hour threshold. And they will have to 

get two jobs now instead of one, and we will have to coordinate 

schedules when they are at one job or the other. And they still 

won’t have health care. 

And so it just creates a difficult situation for us as employers, not 

being able to hire someone that is committed to our organization 

and wants to make us get better and help us all do better in the 

workplace and in the business environment. But now they have 

troubles as a family, trying to work two jobs, still not making a 

good wage. 

Because, quite frankly, as I mentioned, I pay my full-time employees much more than the minimum wage, but my brand-new 16- 

year-olds to 23-year-olds that are only going to be there 6 months 

or so, they do make the minimum wage. And because they are not 

committed and don’t have an interest in my business because they 

are only working 15 hours a week or 30 hours a week, now they 

will work two minimum-wage jobs instead of having the opportunity to grow with me, become assistant manager, become a keyholder or a shift leader, whatever it is, and make more money with 

me alone and possibly get health care eventually. 

Mr. MULVANEY. I think it a great point. I am thinking back to 

the folks who worked at my restaurant when I ran it. And, you 

know, there is a 25-year-old mother of two who comes to you and 

says, My kid needs braces, can I get a couple more hours for the 

next couple of weeks? The answer is going to be no. 

Mr. FALK. Absolutely. 

Mr. MULVANEY. The answer is going to be no. Go someplace else 

if you want to take care of your family. Take on another job. Take 

on another burden. And then try—you are absolutely right—try 

and mesh this work schedule with that work schedule, with the 

schedule to pick up the kids. We have unintended consequence on 

top of unintended consequence. 

And I am done talking about the impact on small business because not enough people care. And they are going to start talking 

for the next 2 years about the impact on real workers, because it 

is hurting them just as badly. 

Thank you, Mr. Chairman. 

Chairman GRAVES. Mr. Rice? 

Mr. RICE. Thank you very much for being here today. 

Thank you for allowing me to serve on the Committee. It is an 

honor to be here. 

I appreciate you all taking your time to come here and educate 

us. 

I come from a background of local government, county commissioner, and recognized early on that if our county was going to attract jobs, that we had to be competitive. And looking at this on 

a national scale, I am concerned that the United States had better 

start taking that attitude as a country. And maybe then we will 

stop hemorrhaging some of the American jobs that we have been 

hemorrhaging. 

Mrs.—I can’t—Coyne? Mrs. Coyne? 

SBREP-219 with DISTILLER

26 

Ms. COYNE. Yes. 

Mr. RICE. I can’t read with my glasses on, and I can’t see far 

away with my glasses off. 

What would you say is the primary source of capital for a small 

business? 

Ms. COYNE. I would say it depends on what stage they are in in 

their lifecycle. 

Mr. RICE. Just beginning. 

Ms. COYNE. Just beginning, most small businesses are actually 

started out of personal savings, borrowing from friends, family, taking a partner, credit cards, home equity. Typically, that is how 

most people start a small business. 

Mr. RICE. At what point do they get to the banks? 

Ms. COYNE. Once they have about 2 years of financial statements 

and they have had good counseling on keeping good records. 

They should have a relationship with a banker from the start, I 

would contend. Even if they aren’t ready to borrow from a bank, 

I think it is really important that they get the advice of a banker 

on how you get ready to borrow from a bank. 

Mr. RICE. Would you say it is easier today to get access to capital 

through a bank than it was 2 years ago? 

Ms. COYNE. I would say that, you know, we have plenty of capital to lend, and I think we are not—you know, many of my peers 

in the industry feel the same way, that we are in business to lend 

money. So I think that, yes, there is probably much greater—in 

fact, it is pretty competitive right now in the small-business lending. 

Mr. RICE. So you don’t think Dodd-Frank has slowed your lending down at all, made it harder for you to loan? 

Ms. COYNE. I think that Dodd-Frank has added more regulatory 

burden to the organization as a whole. And how any bank looks at 

how they allocate resources has been impacted by Dodd-Frank because we certainly have lots of folks, you know, worrying about 

compliance and making sure that we are—— 

Mr. RICE. And you don’t think that affects your lending practices 

at all? 

Ms. COYNE. Not explicitly. 

Mr. RICE. Okay. All right. 

What about the regulatory structure as a whole, Mr. Kroszner? 

Let’s talk about the corporate tax structure. Do you think our corporate tax structure is competitive worldwide? 

Mr. KROSZNER. Unfortunately, I have to say no. We have very 

high corporate taxes relative to most of the major countries around 

the world, and we have an extremely complex tax system. 

Mr. RICE. All right. 

And, Mr. Falk, what do you think about our regulatory structure 

as a whole and the hoops we make small business jump through? 

Do you think that makes us more or less competitive worldwide? 

Mr. FALK. I think it makes us less more competitive—much more 

less competitive. 

And here is the reason. Every time I talk to a franchise owner, 

I am heavily involved in multi-unit franchising and seeing multiunit owners, and I see a lot of different franchisors. The vast majority of the deals that they are signing today are international. 

SBREP-219 with DISTILLER

27 

They always come up and say, We just signed a 30-store deal in 

Abu Dhabi or in Aruba or Brazil. They are never saying, We just 

signed 15 or 20 in Tennessee or Kentucky or Michigan. Those just 

don’t happen. 

And I think it is because our, in the United States, our business 

model has continued to erode. In the late 1990s and early 2000s, 

we could pretty much guarantee maybe a 15 to 20 percent profit 

that fell to the bottom line. Today we are in the single digits of 5 

to 8 percent, something like that. And anything can upset that cart 

to where we are not making any money whatsoever. 

Mr. RICE. Is it getting better or worse, do you think? 

Mr. FALK. It is getting worse. 

Mr. RICE. Uh-huh. 

Mr. FALK. Like Dr. Kroszner said, when we look at the cost of 

inflation, we are really not taking into account fuel costs and the 

cost of food. I used to buy a bag of dough for my pretzels in 2000, 

let’s say, for about 8 bucks. It is $24 now. 

And so our margins continue to be eroded by fuel costs, unemployment insurance, the cost of commodities, minimum-wage increases, all those things. So our profit margin is down. So we are 

trying to make a decision on whether we want to open up any locations whatsoever. 

Mr. RICE. Okay. 

And one last question. You know, we went through an argument 

about whether we were going to extend the payroll tax cut last 

year for 3 months or 9 months, and we have just extended the debt 

ceiling for 3 months and all these things. Do you all plan on anything longer than a 3-month time horizon? 

Mr. FALK. I would love to; however, I cannot. And that is what 

makes it so difficult, is trying to understand for me to try to make 

a long-term business plan and make a decision about whether I 

should open a business. My return on investment is typically 3 to 

7 years. And if I can’t figure out if I am going to get a return on 

investment because the regulations are so short-term, then I am 

not going to open up anything right now until I know what the regulations are going to be. 

Mr. RICE. All right. So last question, and I know my time is up. 

Do you see the United States Government as a benefit to your business or a hindrance to your business, something you have to overcome? 

Mr. FALK. Absolutely a hindrance, unfortunately. 

Mr. RICE. Thank you. 

Chairman GRAVES. Mr. Huelskamp? 

Mr. HUELSKAMP. Thank you, Mr. Chairman. It is a pleasure to 

be on the Committee with you this year and to be here today and 

to hear from some very interesting testimony. 

I have a few questions. I want to follow up first with Ms. Coyne 

on—there were some Dodd-Frank questions, as well. 

Do you have a guesstimate in your bank of how many folks are 

engaged in compliance efforts, regulatory stuff, out of your total 

workforce? 

Ms. COYNE. I couldn’t give you a percentage off the top of my 

head, but I can definitely assuredly tell you that the ranks have 

grown, and the number of folks we have in compliance and risk 

SBREP-219 with DISTILLER

28 

management overall have probably doubled over the last, you 

know, 3 to 5 years. 

The other thing I would add about Dodd-Frank is there are still 

some unknowns which may ultimately impact lending in the smallbusiness area because the rules haven’t yet been defined on how 

we are going have to collect certain information and so forth. So 

it may be too soon, actually, to say how some of this is going to 

play out. But there certainly have been lots of resources devoted to 

compliance. 

Mr. HUELSKAMP. Doubled in the last 3 to 5 years. 

Ms. COYNE. Yes. 

Mr. HUELSKAMP. And if I understand, I think your bank, combined employees, probably employ more folks than every bank and 

credit union and other financial service company in my entire congressional district. It is very big. How many employees do you all 

have? 

Ms. COYNE. Fifteen thousand people. 

Mr. HUELSKAMP. Fifteen thousand. 

Ms. COYNE. Yep. 

Mr. HUELSKAMP. And when you were testifying earlier about the 

impact of Dodd-Frank and how that was impacting your ability to 

continue to loan money to small businesses, it was a different story 

than I was hearing from my small banks and my community 

banks. 

Ms. COYNE. Yes. 

Mr. HUELSKAMP. Credit unions, just an enormous effort of compliance. And I haven’t heard about doubling, but in terms of that 

effort, just making it extremely difficult. 

In many cases, the established customers not able to continue, 

like Mr. Falk indicated—practices that had been working, they are 

current on their loans and coming in—and are unable to continue 

that. Even though the banker would like to do that, the examiner 

says, Too bad. And so, yeah, there is a lot of capital to loan, thanks 

to the Federal Reserve, but the ability to get it out the front door 

seems extremely limited. So I appreciate that. 

But, Dr. Kroszner, a follow-up on the Federal Reserve. And we 

have seen an enormous increase in the money supply since 2008. 

Didn’t see any information in your testimony. What do you expect 

will happen with that? Because I am particularly troubled by that. 

This is an unprecedented increase, and we still have a—well, the 

economy went backwards last quarter. I wonder if you could shed 

some light on that. 

Mr. KROSZNER. Sure. I would be delighted to. 

So the size of Federal Reserve’s balance sheet has grown dramatically, more than tripling, and it is likely to grow even further 

as they continue to buy more assets. 

Now, that has led to a large increase in the amount of reserves 

that are on banks’ balance sheets. And KeyCorp and many others 

have a lot of excess reserves that they are, I would assume, hoping 

to lend out and at some point will be lending out. But fortunately 

that has not led to a very large increase in the money supply or 

inflation because people are—both individuals holding a bit more 

cash and firms holding a lot of the excess reserves. 

SBREP-219 with DISTILLER

29 

The key question is going to be, will the Federal Reserve be able 

to make sure that, in the transition, that these excess reserves 

don’t turn into very high money growth and high inflation down 

the line? 

Right now we are not seeing evidence of that. The inflation rate 

has been quite tame over the last few years, despite the very large 

growth in the reserves and the balance sheet of the Federal Reserve. The expectations of where inflation is likely to go—both individual-consumer-based surveys, professional forecasters, and market-based, have not suggested high inflation is expected. But I 

think it is very important to keep a laser focus on that to make 

sure we don’t get into a high-inflation environment. 

Mr. HUELSKAMP. And I appreciate that. And hopefully, as was indicated, the measures don’t capture everything in the inflation 

rate. But, you know, this is really unprecedented. Monetary policy 

like we have with actually no economic result, or very little, coming 

out at the same time is so unprecedented. 

One other thing with Mr. Falk. I appreciate your being here as 

a real-life owner of a small business. 

The Federal Reserve Bank of San Francisco put out a study in 

the last few days, I think it was, that said concerns over taxes, regulations, and the President’s healthcare plan were not having a 

measurable impact on hiring. Would you agree with that study 

coming out of the Federal Reserve of San Francisco? 

Mr. FALK. I think that can be answered in a couple different 

ways. It does not impact me hiring currently from my locations. I 

have a minimum staffing requirement. I mean, I can’t reduce my 

staff. However, it does impact me in making a decision to open up 

new locations, therefore affecting hiring in the long term. 

Like I said, every location I open, on average, employees 8 to 10 

people. I have four agreements, open franchise agreements, that I 

would open tomorrow if I had access to capital and if I didn’t have 

the decision process of how these regulations are affecting me and 

whether I even want to open them in the first place. And so if could 

open those 4, I could employ 50 more people immediately. 

Mr. HUELSKAMP. Okay. Thank you. 

I yield back. 

Chairman GRAVES. With that, I would like to again thank all of 

our witnesses for being here today to discuss the current state of 

the economy and access to capital. And I look forward to using your 

testimony to help guide us in the coming year when we work on 

legislation. 

Ms. Dorfman is no stranger to this committee, but I will take 

issue with one thing you said, and that is that women live longer 

than men. I think we should have equal access to longevity. 

Having said that, I would ask unanimous consent that all Members have 5 legislative days to submit statements and supporting 

materials for the record. 

Without objection, that is so ordered. 

And, with that, the hearing is adjourned. 

[Whereupon, at 3:11 p.m., the committee was adjourned.] 

SBREP-219 with DISTILLER

30 

A P P E N D I X 

SBREP-219 with DISTILLER


Insert offset folio 31 here 79433.001
31 

SBREP-219 with DISTILLER


Insert offset folio 32 here 79433.002
32 

SBREP-219 with DISTILLER


Insert offset folio 33 here 79433.003
33 

SBREP-219 with DISTILLER


Insert offset folio 34 here 79433.004
34 

SBREP-219 with DISTILLER


Insert offset folio 35 here 79433.005
35 

SBREP-219 with DISTILLER


Insert offset folio 36 here 79433.006
36 

SBREP-219 with DISTILLER


Insert offset folio 37 here 79433.007
37 

SBREP-219 with DISTILLER


Insert offset folio 38 here 79433.008
38 

SBREP-219 with DISTILLER


Insert offset folio 39 here 79433.009
39 

SBREP-219 with DISTILLER


Insert offset folio 40 here 79433.010
40 

SBREP-219 with DISTILLER


Insert offset folio 41 here 79433.011
41 

SBREP-219 with DISTILLER


Insert offset folio 42 here 79433.012
42 

SBREP-219 with DISTILLER


Insert offset folio 43 here 79433.013
43 

SBREP-219 with DISTILLER


Insert offset folio 44 here 79433.014
44 

SBREP-219 with DISTILLER


Insert offset folio 45 here 79433.015
45 

SBREP-219 with DISTILLER


Insert offset folio 46 here 79433.016
46 

SBREP-219 with DISTILLER


Insert offset folio 47 here 79433.017
47 

SBREP-219 with DISTILLER


Insert offset folio 48 here 79433.018
48 

SBREP-219 with DISTILLER


Insert offset folio 49 here 79433.019
49 

SBREP-219 with DISTILLER


Insert offset folio 50 here 79433.020
50 

SBREP-219 with DISTILLER


Insert offset folio 51 here 79433.021
51 

SBREP-219 with DISTILLER


Insert offset folio 52 here 79433.022
52 

SBREP-219 with DISTILLER


Insert offset folio 53 here 79433.023
53 

SBREP-219 with DISTILLER


Insert offset folio 54 here 79433.024
54 

SBREP-219 with DISTILLER


Insert offset folio 55 here 79433.025
55 

SBREP-219 with DISTILLER


Insert offset folio 56 here 79433.026
56 

SBREP-219 with DISTILLER


Insert offset folio 57 here 79433.027
57 

SBREP-219 with DISTILLER


Insert offset folio 58 here 79433.028
58 

SBREP-219 with DISTILLER


Insert offset folio 59 here 79433.029
59 

SBREP-219 with DISTILLER


Insert offset folio 60 here 79433.030
60 

SBREP-219 with DISTILLER


Insert offset folio 61 here 79433.031
61 

SBREP-219 with DISTILLER


Insert offset folio 62 here 79433.032
62 

SBREP-219 with DISTILLER


Insert offset folio 63 here 79433.033
63 

SBREP-219 with DISTILLER


Insert offset folio 64 here 79433.034
64 

SBREP-219 with DISTILLER


Insert offset folio 65 here 79433.035
65 

SBREP-219 with DISTILLER


Insert offset folio 66 here 79433.036
66 

SBREP-219 with DISTILLER


Insert offset folio 67 here 79433.037
67 

SBREP-219 with DISTILLER


Insert offset folio 68 here 79433.038
68 

STATEMENT OF CONGRESSWOMAN GRACE MENG

Chairman Graves, Ranking Member Vela ́zques, and my esteemed colleagues, I am honored to be here today and I welcome 

the opportunity to be a member of this important committee. We 

have been entrusted with a critical mission, and that is to create 

the conditions in which our economy can thrive. I look forward to 

working with each one of you in a bipartisan manner to achieve 

our goals. 

And to those that are here before us to testify at today’s hearing, 

good afternoon and thank you being here. 

As a daughter of small business owners, I know that 

Small businesses are the engines that drive our economy. From 

family-owned restaurants to high-tech startups, entrepreneurs and 

small-business owners are chief components to our communities 

and to our economy. They are responsible for creating 65% of net 

new jobs in the past 17 years, paying 43% of the US private payroll, and representating 99.7% of all employer firms. 

One of the most important and bipartisan efforts Congress has 

is providing small business owners with the confidence they need 

to succeed. Confidence that capital will be readily available, confidence that interest rates remain low and steady, and confidence 

that their voice will be heard at this hearing and many more. 

Undergoing the worst economic disaster since the Grat Depression is a tremendous obstacle to overcome. Despite this immense 

challenge, we are slowly but surely revitalizing our economy. At 

this juncture it is more vital now than ever that we as Americans 

understand, every dollar a small business owner makes does not go 

to a multimillion dollar pension for a CEO, but goes to a much 

needed soccer jersey and cleats, it goes to the home renovation for 

an expanding family, and it goes to one of our nation’s most effective employers. 

Not only do I support small businesses in my day to day personal 

life, but I will commit myself in Congress to supporting initiatives 

that encourage growth and stability for small business owners. 

I look forward to your testimony and thank you for your time. 

SBREP-219 with DISTILLER

69 

SBREP-219 with DISTILLER


Insert offset folio 70 here 79433.039
70 

SBREP-219 with DISTILLER


Insert offset folio 71 here 79433.040
71 

SBREP-219 with DISTILLER


Insert offset folio 72 here 79433.041
72 

SBREP-219 with DISTILLER


Insert offset folio 73 here 79433.042
73 

SBREP-219 with DISTILLER


Insert offset folio 74 here 79433.043
74 

SBREP-219 with DISTILLER


Insert offset folio 75 here 79433.044
75 

SBREP-219 with DISTILLER


Insert offset folio 76 here 79433.045
76 

SBREP-219 with DISTILLER


Insert offset folio 77 here 79433.046
77 

Æ 

SBREP-219 with DISTILLER


Insert offset folio 78 here 79433.047