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REGULATORY REFORM: EXAMINING HOW 

NEW REGULATIONS ARE IMPACTING 

FINANCIAL INSTITUTIONS, SMALL 

BUSINESSES, AND CONSUMERS 

FIELD HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

OCTOBER 31, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–79 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Ms.ouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Ms.ouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Ms.ouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

JAMES B. RENACCI, Ohio, Vice Chairman 

EDWARD R. ROYCE, California 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JEB HENSARLING, Texas 

PATRICK T. MCHENRY, North Carolina 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Ms.ouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

MICHAEL G. GRIMM, New York 

STEPHEN LEE FINCHER, Tennessee 

CAROLYN B. MALONEY, New York, 

Ranking Member 

LUIS V. GUTIERREZ, Illinois 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

GREGORY W. MEEKS, New York 

STEPHEN F. LYNCH, Massachusetts 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

October 31, 2011 ............................................................................................... 1 

Appendix: 

October 31, 2011 ............................................................................................... 47 

WITNESSES 

MONDAY, OCTOBER 31, 2011 

Bauer, Kurt R., President/Chief Executive Officer, Wisconsin Manufacturers 

& Commerce ......................................................................................................... 19 

Erickson, Hon. Alan, Mayor of Mosinee, Wisconsin ............................................. 7 

Matthiae, Mark A., President, Crystal Finishing Systems .................................. 17 

Nagel, Todd, President, River Valley Bank ........................................................... 11 

Reinhart, Marty, President, Heritage Bank .......................................................... 9 

Sanchez, Bethany, Director of Community Development, Metropolitan Milwaukee Fair Housing Council ............................................................................. 21 

Wesenberg, Patricia, President and Chief Executive Officer, Central City 

Credit Union ......................................................................................................... 13 

Willer, Mark, Chief Operating Officer, Royal Credit Union ................................ 16 

APPENDIX 

Prepared statements: 

Bauer, Kurt R. .................................................................................................. 48 

Erickson, Hon. Alan ......................................................................................... 50 

Matthiae, Mark A. ............................................................................................ 52 

Nagel, Todd ....................................................................................................... 56 

Reinhart, Marty ................................................................................................ 58 

Sanchez, Bethany ............................................................................................. 62 

Wesenberg, Patricia .......................................................................................... 65 

Willer, Mark ...................................................................................................... 68 

(1) 

REGULATORY REFORM: EXAMINING HOW 

NEW REGULATIONS ARE IMPACTING 

FINANCIAL INSTITUTIONS, SMALL 

BUSINESSES, AND CONSUMERS 

Monday, October 31, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:30 a.m., at the 

Wausau City Hall, 407 Grant Street, Wausau, Wisconsin, Hon. 

Shelley Moore Capito [chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Renacci, Huizenga, 

and Duffy. 

Chairwoman CAPITO. Good morning to everybody. I appreciate 

everybody coming, and I certainly appreciate the opportunity for 

me, Shelley Moore Capito. I’m the Chair of the Subcommittee on 

Financial Institutions and Consumer Credit, which is a subcommittee of the House Financial Services Committee in Washington. 

It’s an honor for me to be here on my very first visit to Wisconsin. So thank you for holding back on the snow. I guess we did 

that on the East Coast. And I would like to thank Congressman 

Duffy for inviting us here today. 

I’m just going to talk a little bit—I have an opening statement. 

I want to tell everybody how it’s going to roll out, because we’re 

doing a hearing very similar to what we would do in Washington. 

As the chairperson, I will make an opening statement. Then, I 

will turn it over to Congressman Duffy, and he’s going to make an 

opening statement; and our other two Members will have a word 

to say as well. 

And then, I’m going to have Congressman Duffy introduce the 

witnesses. All of the witnesses have submitted written testimony 

and I appreciate that. And they will each be recognized for 5 minutes for an oral statement. 

They entrusted me, as the only woman on the congressional 

panel, with the red, green, and yellow button. This is power right 

here. So I’m going to put it here. We’ll try to keep to 5 minutes, 

and the reason we’ll do that is because a lot of times, the most significant portion of our meetings is the question-and-answer section. 

2 

After we have our opening statements, I’ll begin questioning for 

5 minutes and then we’ll go through. We might go through more 

than once or twice, if that’s okay, seeing how time goes. 

So I appreciate everybody being here. And with that, I will begin 

with my opening statement. 

I brought my handy-dandy gavel with me, so I’m ready to roll. 

This field hearing will come to order. 

Again, I want to thank everybody for being here. And I would 

like to thank, in particular, Representative Sean Duffy for inviting 

us, the Financial Institutions and Consumer Credit Subcommittee, 

to his district. 

This is our second field hearing. We actually had a field hearing 

in Georgia, where they have had 64 bank failures, by the way. 

And so now we’re going to find out the unique challenges facing 

Wisconsin financial institutions, credit unions, small businesses, 

housing advocates, and see, really, in general, what we can do in 

Washington to get this economy moving again, to make sure that 

we have the best possible playing field for our country’s economics. 

Representative Duffy also has led the effort in the U.S. House of 

Representatives to bring greater transparency and accountability to 

the Consumer Financial Protection Bureau. He had a bill put forward to ask for appropriate consumer protections, but also ensuring that the Federal Government is not overly involved in our everyday personal financial decisions. 

Today’s hearing builds on several hearings that we have had in 

the subcommittee so far this year. We frequently hear from small 

business owners that they’re having difficulty obtaining loans from 

financial institutions. And many times, the financial institutions 

cite concerns about the difficulties with Federal regulators as a 

large contributor to the difficult lending environment. 

Sometimes, it seems as though everybody from the President on 

down is saying to financial institutions, lend, lend, lend to small 

businesses, because we know small businesses are the job creators. 

And at the same time, the regulators are saying to the financial 

institutions, hold your capital, hold your capital, hold your capital. 

It’s a conflicting message, and it makes it difficult for the qualified small business to be able to expand and grow their business 

and thereby create more jobs in their local communities. 

If we’re going to get our economy going again, we need these financial institutions to make these small business loans. 

We need regulators, financial institutions, and elected officials to 

work together. 

There’s a new concept: We’re going to work together in Washington to address these challenges. 

This is the primary reason why we’re here today. We need common-sense recommendations. And hopefully, we’ll get some of those 

here today. 

Again, I would like to thank Representative Duffy and the people 

of Wausau for hosting the subcommittee. 

And I would like to recognize Mr. Duffy for the purposes of making an opening statement for 5 minutes. 

Mr. DUFFY. I appreciate everyone coming in and participating in 

today’s hearing, specifically Chairwoman Capito, her willingness to 

come all the way to central Wisconsin and participate in what I 

3 

think is a very important conversation about how the rules and 

regulations and the regulators are affecting our small financial institutions, our small banks, and our small credit unions and their 

ability to get dollars out the door to businesses, manufacturers, and 

farmers. 

I also appreciate Representative Bill Huizenga coming in and 

participating with us. He’s from right across the pond in Michigan. 

And then Representative Renacci from Ohio who flew in this morning in the fog. So I appreciate everyone coming in. 

They’re all members of the Financial Services Committee, and 

the Financial Institutions Subcommittee, all freshman colleagues of 

mine, and they have been doing an outstanding job representing 

their districts, but also actively engaging in the conversations that 

we have in our committee. 

If you look at what has happened over the course of the last several years with regard to the financial crisis, I think many of us 

would look back to 2008 and say we—we need to look at what happened and how do we reform the rules and regulations to make 

sure that it doesn’t happen again. 

Whenever you have a crisis, whenever you have an issue like 

that that in your economy, you want to take a hard look and implement changes to make sure it doesn’t happen again. 

And so that process started after the crisis. But instead of using 

a scalpel to look at the problems that we faced in our regulations, 

we got a sledgehammer, which came down by way of Dodd-Frank, 

a 2,000-page bill that implemented a number of rules and regulations. There are actually 400 rulemakings coming out of DoddFrank. 

And some might say that’s great; it’s wonderful that we have all 

those rules in our financial sector. 

One of the problems that we face in our committee is that many 

of the rules that came down from Dodd-Frank, that are in the process of coming down from Dodd-Frank, aren’t specifically focused on 

the bad actors from the financial crisis. 

I think all of us would agree that it was big Wall Street banks 

that helped cause this crisis. It wasn’t our small community banks 

and credit unions in central and northern Wisconsin that caused 

the crisis. 

But the rules, the regulations, and the pressure coming from the 

regulators on our community banks and credit unions has been immense; the ones that had nothing to do with the crisis. 

And that breeds great concern for me because, if we’re going to 

grow our economy, if we’re going to put people back to work in central Wisconsin, we have to make sure that we have our economic 

base growing. 

And what do we have here? We have small businesses, we have 

small manufacturers, we have farmers. If they can’t access dollars, 

if they can’t access capital, they can’t grow. And if they can’t grow, 

they can’t put people back to work. 

So these financial institutions in our community are very important to make sure that the growth in jobs takes place. 

And when you have a crack in that system, it makes it very difficult to put our hard-working families back to work. 

4 

I think today’s hearing is important because so often, we see the 

bullhorn in the hands of Wall Street banks. Today, the bullhorn 

comes to central Wisconsin, where we’re able to come together, and 

I think it’s a great panel that we have today, to talk about the 

issues that we face right here. And we make sure that Washington 

understands that the rules and regulations that they pass have a 

true impact on our community. 

This is our time to come together and share the impact that it 

has. I believe that this is the first time the subcommittee, or the 

committee as a whole, has ever been to central Wisconsin. 

So I’m happy that we’re here and I’m happy that my colleagues 

were willing to join me. 

I know my time is just about up. With that, I would yield back 

to Chairwoman Capito. 

Chairwoman CAPITO. Thank you. 

I would like to welcome Mr. Huizenga from your neighboring 

State of Michigan. 

As I was thinking about the four of us up here, and the four 

States that we represent, we really have a lot of similarities in 

terms of the heartland of the country; a lot of reliance on manufacturing. 

And so we all know that we have had difficulties, certainly, in 

our four States. Everybody has, but we have the same and similar 

difficulties. 

So I want to thank Jim Huizenga for coming in, and I recognize 

him for the purpose of an opening statement. 

Mr. HUIZENGA. Madam Chairwoman, thank you. 

And to my friends Sean and Jim, I know that speaking, probably, 

for all of us, this has been quite a ride the last 10 months as a 

freshman on this committee. 

I hope I don’t shock anybody here, but Washington can operate 

in a bubble. That has been very evident. And it’s field hearings like 

this that help break us out of that bubble and help make sure that 

not only I’m being connected in with west Michigan, when I’m 

going home every weekend, but I get to hear what the people in 

Congressman Duffy’s district think. And, the same thing with Congressman Renacci. 

This is very important to go do this, but I do feel I need to make 

a slight confession here. In central Wisconsin, I’m seeing a lot of 

red out in the audience. MSU quarterback Kirk Cousins is a constituent and went to the same high school I did. I know that might 

cause a bit of a riot, and my apologies to you all, as well as being 

a Lions fan. I know this is tough. 

Hopefully, to try to regain a little credibility in your eyes, I have 

shot a number of grouse up here near Clam Lake Lodge and in 

Sean’s district here. So I have been very pleased to be up here a 

few different times, and you have a great area up here. 

As Sean was saying, I think that’s a concern that I have, as well. 

So often, whether it’s New York or Chicago, you hear sort of the 

buzz that surrounds a lot of these big banks and what’s happening. 

And we know that, so often, the small community banks, the regional mid-sized banks, the credit unions, all get caught up in that 

same regulation. 

5 

And unfortunately, we have a one-size-fits-all kind of prescription. All it takes is visiting Zeeland, Michigan, my hometown, or 

Wausau here, or somewhere else, to know that we’re a little different than New York and Chicago. 

And we like it that way, but we can’t necessarily have the same 

rules apply the exact same way, because we simply don’t have the 

ability to add three more people into a compliance department. 

Why? Simply because we’re adding on 15 telephone books on new, 

the size of new regulation onto things. That, frankly, if they had 

just implemented the rules that were on the books as they were, 

we would have been able to avoid a number of these things. 

So I’m pleased to be here today and I appreciate Chairwoman 

Capito’s willingness to take this subcommittee that I proudly serve 

on. Sean and I sit next to each other on the committee, and we 

compare notes on a lot of different things. 

I’m still trying to catch up to him. I only have five kids; he has 

six. 

But it truly is a pleasure to be here, and I appreciate your willingness to share your experiences so that I can take that back, as 

well as the rest of the members of this committee. 

So thank you very much. I yield back. 

Chairwoman CAPITO. Thank you. 

And I would like to welcome and thank Mr. Renacci. He’s the 

vice chairman of the subcommittee and has a wealth of experience 

in a lot of different areas ranging from small business to financial 

institutions, as well. 

So welcome, Mr. Renacci from Ohio. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I want to also thank all of you for being here today. I want to 

thank Congressman Duffy for having us here, and my colleague 

Congressman Huizenga for being here, too. 

It’s important that we continue to hear, outside of Washington, 

what’s going on. Now, for me, because as a CPA, as a small business owner, as a small town mayor at one point in time, I have created jobs and I understand the problems with financing. 

But what I really never did understand was why Washington put 

so many constraints on the financing for small banks and small 

credit unions and small business owners because that is the lifeblood, as we all know, of small business. 

And it’s been interesting as, also, a board member of a small 

community bank in my community, to see what the Dodd-Frank 

legislation has done to many of the small community banks, whether it comes to the regulations, whether it comes to the appraisals, 

all of those things that are putting constraints on the ability for 

our businesses, our small businesses, to get the credit they need. 

It’s interesting, and I use this all the time, what happens sometimes in government—I know, in somebody’s testimony, as I read 

that, we talked about the blanket effect. You take a blanket and 

throw it over everything. 

And even though we did have people and companies and large 

banks in the industry that caused us problems in 2008, this blanket has been thrown over everyone, and it’s causing constraints 

now that are occurring that are not allowing the capital to flow out 

to the small business owners. 

6 

I was also a small town fireman. And one thing I have used as 

an example many, many times, and sometimes I think Washington 

does this; I always remember the theory that you run into a building—this is before I had the training—and you start dumping 

water on the fire, and that’s the answer; you just dump as much 

water as you can. 

But as a fireman, and anyone who has ever really fought a fire, 

you realize that the more water you dump on it, the more regulations you put on it, sometimes the fire jumps in other places. And 

sometimes it jumps behind you, sometimes it jumps around you, 

and sometimes you can cause a building to actually burn down 

quicker. 

With that in mind, I went to Washington thinking, why do we 

do this. It has been an interesting learning experience for the last 

9 or 10 months because I do believe we need to be cautious on how 

much water we dump on the fire. When you do that, so many other 

things can happen. 

I’m really interested in hearing from the panelists here today 

some of the issues I know they’re running into and some of the 

things that we can do to maybe change some of the direction we 

have in Washington. 

I know the panel here—we have been working very hard, looking 

at a lot of issues with Dodd-Frank. 

And again, there are probably some things that were necessary, 

but clearly, throwing the blanket over everything is not the right 

answer. 

So, again, this is my first visit to central Wisconsin. Although, 

being from Ohio, as we all know, the Buckeyes ended up beating 

Wisconsin this weekend. It was kind of a fluke play. 

But I was also from Pittsburgh originally, and you guys—the 

Packers were able to beat the Steelers in the Super Bowl. So we’re 

back and forth, one on one. 

Maybe this year, the Steelers will get back with the Packers, and 

we’ll see what happens. 

But I do appreciate being here and I look forward to your testimony. 

Thank you so much. 

Chairwoman CAPITO. Thank you. 

We will now get to the testimony of the witnesses. And I’m going 

to ask Mr. Duffy to introduce the witnesses. 

Mr. Duffy? 

Mr. DUFFY. Thank you, Madam Chairwoman. 

We’ll start over here and go around. I do appreciate the panel 

coming in and sharing their testimony. I think it’s a great panel 

that has nice breadth, involving different sectors. 

Let’s start off with Pat Wesenberg. She is the president and CEO 

of Central City Credit Union in Stevens Point. Central City is a 

$179 million credit union serving 22,000 members. Thank you for 

being here, Pat. 

We have Mark Willer, who is the chief operating officer for Royal 

Credit Union in Eau Claire. He’s responsible for deposits and lending that affect 140,000 members. So thank you for coming over this 

morning, Mark. We appreciate that. 

7 

Marty Reinhart, he is the president and CEO of Heritage Bank 

in Spencer. Heritage is a $100 million asset community bank located right here in central Wisconsin. 

And then Todd Nagel, maybe a little bit bigger bank, is at River 

Valley right here in Wausau. They have 18 branches throughout 

central Wisconsin and the UP of Michigan. So thank you all for 

coming in. 

And then, she might have traveled the furthest to get here, Bethany Sanchez, who came up—I think you’re in Milwaukee; is that 

right? 

Ms. SANCHEZ. That’s right. 

Mr. DUFFY. She came up from Milwaukee. She directs the Fair 

Lending Program at the Metropolitan Milwaukee Fair Housing 

Council. That’s a 34-year nonprofit civil rights organization serving 

the State of Wisconsin with offices in Milwaukee, Appleton, and 

Madison. So thanks for making the drive up today. 

And then, we have Kurt Bauer. He is the CEO of Wisconsin 

Manufacturers & Commerce. WMC is Wisconsin’s largest business 

and industry trade association. 

And then we have Al Erickson. He is the Mayor of Mosinee, but 

he also owns various businesses in the area and also serves as 

chairman of the economic development committee for the City, and, 

I think, has a wide range of background and unique perspectives. 

And last but not least, Mark Matthiae is the owner of Crystal 

Finishing Systems in Schofield. He and his wife, Laurie are a true 

story of a couple of folks who lived the American dream, worked 

hard, invested, and grew what started out as a two employee firm 

that began with $6,000, grew it into an $80 million business, employing 400 people right here in central Wisconsin. 

It started in 1993. I had a chance to, a couple of weeks ago, go 

tour the facility, and they’re doing a fantastic job and I think have 

some unique insights into what’s happening here with capital flow. 

So with that, I appreciate the panel coming in. And I turn it back 

over to Chairwoman Capito. 

Chairwoman CAPITO. Thank you. And again, welcome. 

I have a listing here of an order, and you’re not seated in order. 

So I’m going to go by my listing, and I’m going to recognize the 

Honorable Al Erickson, the Mayor of Mosinee, Wisconsin. 

Welcome, Mr. Mayor. 

STATEMENT OF THE HONORABLE ALAN ERICKSON, MAYOR OF 

MOSINEE, WISCONSIN 

Mr. ERICKSON. Thank you, Madam Chairwoman. 

I wear two hats as I sit here before you today. First, I am here 

as a member of the small business world of north central Wisconsin. 

I feel the pain, as others do, of the decreasing revenues and increasing expenses. As the owner of Small Business World Web 

Hosting and Design, I witness the decline in the amount of money 

spent in the area of promotion and—for small business, even 

though these are the times when promotion is essential, businesses 

find paying operational costs as critical. 

8 

As the owner of Little Bull Falls Trolley Company, I have realized a major decline in the use of unique transportation opportunities for weddings and special events. 

As the owner of three commercial buildings which offer lease 

space or retail and/or service business, I, as well as others, are 

faced with the challenge of obtaining and retaining tenants. 

Secondly, I am here with you today as the mayor of the City of 

Mosinee and the chairman of the economic development committee 

for the City. 

We, as a City, have been aggressive in our economic development 

efforts in all commercial and downtown development. Within the 

last 2 years, at least 3 large commercial developments have been 

stalled in the City of Mosinee because they were unable to obtain 

the necessary financing. 

Small businesses have had difficulty obtaining the credit that 

they need to expand, and in some cases, even to continue operating. 

I believe most small business owners are excited about the new 

future but can’t get the loans they need to grow. 

But the economic recovery is pinned to job creation, and job creation is pinned to entrepreneurship and small business. And small 

business owners are having difficulty having the confidence—they 

do have the confidence, I’m sorry, to invest in and grow their businesses over the long haul. 

Many small businesses have been operating at a loss for the last 

couple of years and are unable to get bank loans. They are sitting 

on land and buildings that they own which are next to impossible 

to sell in this economy. 

If they close down part of their operation to save operational 

costs, this also means that they limit production and eliminate 

jobs. 

Banks are pointing to two reasons for the drop in real loans: lack 

of collateral; and renewed sense of risk aversion. 

For lack of collateral, business owners who were once able to borrow against assets—their land, building or equipment—have seen 

their property values diminish along with everyone else. 

As far as risk goes, banks say that regulators are getting in the 

way of them making good loans. For business owners, though, 

those problems are arguable. 

But while banks are closing the windows for small business 

loans, they happily open the back door to any business that wants 

that money in the form of a credit card loan. 

For a small business, credit card terms are generally far worse 

than regular bank loans. Most small businesses rely on lenders to 

provide the capital they need to either open a business or to finance capital improvements. 

Without loans, many small business owners would be unable to 

realize their dreams of opening business, renovating their buildings, or expanding their operations. 

But long-term planning isn’t possible with credit card financing. 

When they need to get together money to keep going and the loan 

isn’t there, there aren’t many options that don’t involve plastic. 

Bankers worry that companies won’t be able to find access to 

capital, which is ironic, given the banks are primarily responsible 

9 

for lending out that capital. Increasingly, bankers worry government regulation will become a major issue for small business. 

I’m not a believer in the blanket approach to management decision-making. Who gets hurt? Those who did it right. Who suffers? 

All those people and the organizations they serve. 

We need to stimulate the system from the bottom up. It’s about 

jobs. We create jobs by investing. 

I believe our economy would be better stimulated if low-interest 

loans are made available for small business. 

I would like to ask why the government hasn’t provided stimulus 

for smaller businesses. Government needs to rethink the concept of 

trickle-down economics. 

Thank you. 

[The prepared statement of Mayor Erickson can be found on page 

50 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. Marty Reinhart, president of the Heritage Bank. Welcome, Mr. Reinhart. 

Mr. REINHART. Thank you. 

STATEMENT OF MARTY REINHART, PRESIDENT, HERITAGE 

BANK 

Mr. REINHART. Thank you, Chairwoman Capito, amd members of 

the subcommittee. I’m Marty Reinhart, president of Heritage Bank, 

a $100 million community bank located in central Wisconsin, 

formed in 1908. So, we have been around for a while. 

I’m pleased to be here today to represent the 200 members of the 

Community Bankers of Wisconsin. 

Thank you for convening this field hearing examining how new 

regulations are impacting the financial institutions and small businesses and consumers in our area. 

Community banks are playing a significant role in the broadbased economic recovery of our Nation because we serve rural, 

small town, and suburban customers and markets that are not 

comprehensively served by larger banks. 

Localized credit decisions made one by one by thousands of community bankers support small businesses, economic growth, and 

job creation. 

While there has been publicity that banks have been unwilling 

to lend, a recent report published by the Community Bankers of 

Wisconsin shows banks with assets less than $10 billion, community banks, have an increase of over 4 percent in commercial and 

industrial loans, as well as small business loans of a million dollars 

or less, year over year. 

And I’m pleased to say that, over the past 21⁄2 years, Heritage 

Bank has increased our RSA loans by over 30 percent. 

I recognize the seriousness of the financial situation that existed 

prior to the passage of the Wall Street Reform Act and the need 

for Congress to take action. 

The community banking industry appreciates the efforts that 

were made to distinguish between the large money center banks 

and smaller community banks. The new system for computing 

FDIC premiums will lower assessments for smaller community 

banks for 98 percent of the institutions throughout the country. 

10 

And allowing community banks to be exempt from examination 

from the Consumer Financial Protection Bureau maintains the current examination and oversight conditions that exist today. 

And finally, making the FDIC insurance coverage of $250,000 

permanent benefits not only the banking industry, but it eases concerns our depositors have about their money being safe. 

Having said this, with regulatory and paperwork requirements, 

both new and old, there continues to be a disproportionate burden 

placed on the banking industry and community banks. 

The uncertainty associated with how new regulations will be 

written and interpreted causes anxiety about the future of our industry and our ability to compete. 

While there are many examples of costs associated with regulations, I would like to highlight some of those associated with a residential mortgage loan. 

The application process has been changed several times within 

the HUD regulations and RESPA requirements. The process for ordering and reviewing appraisals has become more cumbersome and 

involved. 

Extra forms, early disclosures, and having to register and fingertip our mortgage loan officers, adds to the costs associated with 

this type of lending. It creates delays, additional costs, and confusion on the part of the borrower, and a typical mortgage file has 

more than 100 pages by the time the loan is closed. 

While it’s too early to tell how many of the new regulations of 

the Dodd-Frank Wall Street Reform Act will affect community 

banks, one source of concern is the new Consumer Financial Protection Bureau. 

We remain concerned about regulation to which community 

banks will be subject. 

In particular, we are hoping that we will not have to implement 

new rules that will adversely impact the ability of community 

banks to customize products to meet customer needs. 

On behalf of the Community Bankers of Wisconsin, I would like 

to take this opportunity to thank Representative Duffy, Chairwoman Capito, and other members of the subcommittee who support H.R. 1315, the Consumer Financial Protection Safety and 

Soundness Improvement Act, which passed the House. Thank you 

for that. 

While there is recognition that there has been some improvement 

as the number of problem banks has diminished, the current examination environment is hampering lending at the very time that the 

bank credit is needed to sustain economic recovery. 

Community bankers nationwide have reported that bank regulators are often demanding significant capital increases above the 

minimum regulatory levels established for a well-capitalized bank. 

As a result, banks are forced to pass deny sound loan opportunities in order to preserve capital. There has to be a reasonable regulatory balance. 

What is particularly frustrating to us is the field examination 

practices are often not consistent with directives from Washington. 

We understand that examiners have a difficult job, and the 

stakes were raised sharply by the financial crisis, but I believe 

11 

many examiners have overreacted with adverse consequences for 

banks and the economy. 

I understand examiners are not evaluated on the bank’s contributions to support the local economy. They have become overly 

cautious in their analysis of the bank’s condition. And as a result, 

an examiner’s incentive is to err on the side of writing down loans 

or demanding additional capital. 

Finally, I would like to advocate for an important piece of legislation that would help to relieve community banks of certain burdensome regulations they face, both in examination and compliance, 

and help community banks serve customers. 

The Communities First Act would improve the regulatory environment and community bank viability to the benefit of their customers and communities, and has gained support of 34 State community banking associations. 

There’s no question that the current regulatory and examination 

environment is an impediment to the flow of credit that will create 

jobs and advance the economic recovery. 

I appreciate the opportunity to testify today. Thank you. 

[The prepared statement of Mr. Reinhart can be found on page 

58 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness will be Mr. Todd Nagel, president of the River 

Valley Bank. 

Welcome, Mr. Nagel. 

STATEMENT OF TODD NAGEL, PRESIDENT, RIVER VALLEY 

BANK 

Mr. NAGEL. Thank you, Chairwoman Capito, and members of the 

subcommittee. My name is Todd Nagel, and I am president of River 

Valley Bank. We’re a $957 million asset bank based here in 

Wausau, Wisconsin. 

Thank you for taking the time to bring the House Financial Services Committee to your district. 

Wisconsin is home to 270 banks which employ 30,000 people. 

Wisconsin banks are performing better than their peers and have 

the fourth greatest loan-to-deposit ratio in the Nation. 

Wisconsin banks help young people buy their first cars, we help 

newlyweds take the first step toward the dream of owning their 

own home, we help entrepreneurs turn ideas into small businesses. 

We live among our customers, employees, and shareholders, and 

we are always available during good times and bad, because we 

recognize the value that banks play in the community. 

That important service to our neighbors is imperiled, however, by 

the excessive government regulation coming from Washington. 

The amount, intensity and uncertainty of new Federal regulations, chiefly the Dodd-Frank Act, have forced banks to allocate an 

enormous amount of time and resources to compliance, and away 

from our primary mission of serving our customers. 

Wisconsin banks are not Wall Street investment firms, despite 

the fact that the media and others generically refer to all financial 

firms as banks. 

In Wisconsin, you can’t call yourself a bank unless your deposits 

are insured by the Federal Deposit Insurance Corporation. TradiVerDate Nov 24 2008 16:07 May 21, 2012 Jkt 072620 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\72620.TXT TERRIE
12 

tional banks are insured depositories and lenders; investment 

banks are the Wall Street traders. 

Some may argue that this is splitting hairs when we point out 

the difference. We disagree. 

We must continue pointing out the difference between traditional 

banks and Wall Street investment firms because the distinction 

continuation is lost on some in Washington. 

Federal laws meant to regulate Wall Street ought to not adversely impact Main Street, but that is precisely what is happening. 

Uncertainty about what expensive new regulation will come out 

of the growing Federal bureaucracy hampers our ability to lend, 

which, in turn, stifles job growth in our communities. 

I would like to give some examples of the effect on regulatory 

burden. This economy needs capital investment, as everyone has 

said here today, by small businesses to create jobs. 

Today, banks are required to maintain the highest liquidity and 

capital ratios in the history of banking. That money is just sitting 

there. What does that mean? In our case, it relates to capital. It 

restricts $20 million to $40 million of capital investment into loans. 

It is capital that is just sitting there due to the higher ratios. 

We want to make more loans. We need incentive to lend, not 

fear. We can’t save more money in the form of capital and take 

more risk in the form of loans. The math simply does not work. 

Regarding lending decisions, today, unfortunately, we are not 

making lending decisions on the financial performance or character 

of borrowers. Rather, we are only giving loans that will make the 

regulators happy in order to not be criticized in our next field 

exam. When a loan is criticized, we have to reserve additional capital expense for each loan. 

Appraisal requirements, which you referred to: Our institution 

has $780 million in loans; $575 million of those loans are to small 

businesses; most of them are secured by commercial real estate. 

The problem: We keep terms and balloons short on these loans 

to match-fund the obligation of the market conditions. That is pretty simple banking. What this means is, re-evaluate the loan at the 

time of the balloon or renewal. Now, we are required to get a new 

appraisal, which costs the customer money. 

When the real estate value is less, which is most of the time, an 

examiner, a field examiner, will criticize the loan, effectively paralyzing the borrower, which forces us to start liquidation on a substandard loan, even if it is performing. In other words, they’re 

making their payments. 

A quick example is, we have a $100,000 appraisal on a piece of 

commercial real estate. We lent them $80,000. We get a new appraisal that comes in at $70,000. They’re making their payments, 

and now we have a criticized loan. That makes no sense. 

Consumer home mortgages: Today, we get penalized by regulators for helping homeowners stay in their homes. If we try to extend the term, lower the rate, we now have a criticized or substandard loan, which means we must reserve more loan dollars for 

the loan. 

13 

Regulators would rather us liquidate the loan and get the toxic 

asset off of our books. We want to help people stay in their homes 

and stop criticizing restructured loans. 

Due to new residential home mortgage reform, again, that Marty 

referred to, banks must send out 20 to 30 documents for a new 

mortgage application within 3 days of applying. 

If the customer changes their mind and they want to borrow 

more money, which we like to do, we have to redisclose those documents. At closing, you will have an additional 20 to 30 documents. 

This regulation was supposed to protect the consumer and create 

a more transparent process. Sixty documents is not transparency; 

it’s regulatory burden. 

Some quick solutions: Create a one-page truth-in-lending disclosure that shows the fees the customer will pay, the interest rate 

on the loan, and how much profit the bank makes. Then, at the 

closing, have them sign a note and a mortgage. Three documents. 

What can you do? Capital: For banks that grow their loan portfolios, incent them to have a lower cap ratio. If they’re taking the 

risk and they’re out there investing in America, let them lower 

their capital ratios. 

Regarding liquidity: Incent banks to deploy their liquidity into 

the asset loan growth. 

Appraisal requirements: Simply stop requiring new evaluations 

on performing loans. 

Troubled debt restructure: Use this already-established structure 

to incent banks to help borrowers who are experiencing financial 

stress. Instead of making this a criticized category, make it a good 

category, a thank-you-for-helping-your-neighbors category. 

Restrict the category to 10 percent of asset size and put a 24 

limit on construction. 

Again, thank you for allowing me the opportunity to speak today, 

and thank you for coming to central Wisconsin. 

[The prepared statement of Mr. Nagel can be found on page 56 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Ms. Pat Wesenberg, president and chief executive officer, Central City Credit Union. Welcome. 

STATEMENT OF PATRICIA WESENBERG, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, CENTRAL CITY CREDIT UNION 

Ms. WESENBERG. Thank you. 

Chairwoman Capito and members of the subcommittee, thank 

you very much for the opportunity to testify at today’s hearing. 

As was stated before, I am the chief executive officer at Central 

City Credit Union, which is a $179 million credit union, and we 

serve 22,000 members in the central Wisconsin area. 

I am also a member of the board of directors of the Credit Union 

National Association. 

As you know, credit unions did not cause the financial crisis, but 

we have been affected by it. In the wake of the financial crisis, 

credit unions face what might best be described as a crisis of creeping complexity related to regulatory burden. 

It is not necessarily any one single regulation that is overly burdensome; but rather, the totality of all regulations, the frequency 

14 

with which the regulations change, and sometimes varying application of the regulation by field examiners, which conflicts with or expands upon the original intent of the regulation. 

The barrage of regulations creates an unnecessary burden without any measure of the effectiveness of these changes. They are 

costly, both in time and personnel, to implement. And they are confusing to our membership. 

We would prefer to spend our resources on promoting our mission of financial literacy and the development of new products to 

serve the needs of our members within our local communities. 

However, the recent increase in regulatory burden has forced us 

to hire a full-time compliance person, just to stay on top of all the 

changes. 

In addition to that, my vice president of lending has dedicated 

about one-third of her time to all of the changes that impact the 

lending staff. This is valuable time that could be spent trying to 

develop products that would help serve our membership better during these extremely difficult times. 

The financial cost to Central City Credit Union doesn’t end with 

increased staffing costs. There are also costs to update all of our 

software to make sure our forms are in compliance. 

For a large financial institution, the compliance costs, even if 

large, are just a very small slice of their total costs. For smaller 

institutions, like my credit union, they represent a huge increase 

in relative costs. 

While I realize the basis of the changes is to help the consumer 

be better informed, today our biggest regulatory obstacles involve 

keeping up with ongoing and piecemeal changes to the various consumer protection regulations. 

If regulations continue to come from so many directions, I don’t 

see how we will be able to keep up. 

As an example of the frequency in which the regulatory requirements change, in January of 2010, financial institutions were required to completely amend and overhaul the RESPA Good Faith 

Estimate and comply with new disclosure requirements regarding 

the Department of Housing and Urban Development, HUD, settlement statements. 

This took a tremendous amount of staff time to retrain mortgage 

lending and compliance personnel to adapt our systems and staff 

to these regulatory changes. 

On the heels of our completed implementation throughout the 

spring of 2010, HUD issued a series of frequently-asked questions 

documents, some 50-plus pages in each version with yet additional 

instructions and clarifications as to how these particular forms 

were to be completed. 

And now, not even 2 years later, these forms are yet again being 

completely revised and amended, with new regulations being written to implement these changes. 

There are costs associated with any change in regulation, even 

if the intent is to reduce regulatory burden. 

Updating and changing documents on a continual basis is hitting 

the budget hard, especially for smaller financial institutions, not to 

mention the time spent by staff to try to meet deadlines, take additional time to explain the new forms to our members, and the addiVerDate Nov 24 2008 16:07 May 21, 2012 Jkt 072620 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\72620.TXT TERRIE
15 

tional time and resources that are required for training and education. 

While the new Consumer Financial Protection Bureau seems to 

be approaching its job with a watchful eye towards minimizing regulations and has sought ongoing input from credit unions on its 

work, concerns remain. 

The CFPB rules may not necessarily change how credit unions 

operate; but if we are not careful, they could result in increased 

costs associated with changing processes, documentation, and 

training to comply with new rules. 

That is why credit unions, through our national trade association, have been working closely with the CFPB staff during this 

transition period, and we have encouraged them to establish an office of regulatory burden monitoring. We are pleased that they 

have established an office of community banks and credit unions. 

The CFPB was designed to regulate instead of, and not in addition to, the Federal Reserve Board and other regulators. 

With respect to the 19 consumer protection laws that it now implements under the Dodd-Frank Act, credit unions are concerned 

with how the CFPB and the NCUA will coordinate regarding the 

implementation of consumer financial protection laws. 

There are also concerns about whether credit unions will be subjected to burdensome data collection requirements, and how 

NCUA’s own office of consumer protection fits into the consumer 

protection regulatory regime. 

CUNA has urged the NCUA to take several steps to improve the 

regulatory process and relieve credit unions’ regulatory burden. 

And I would ask that a copy of the letter that CUNA sent to 

NCUA Chairman Deborah Matz be inserted into the record. 

Chairwoman CAPITO. Without objection, it is so ordered. 

Ms. WESENBERG. Thank you. 

Among other recommendations, we have called on the NCUA to 

impose a moratorium on new regulations for at least the next 6 

months. 

We have also called on the agency to reinstate the Regulatory 

Flexibility Program, which provides well-managed and well-capitalized credit unions an exemption from certain regulations which are 

not statutorily required. 

We believe that there is considerable merit to these recommendations because there are no new material systemic problems within 

the credit union system. 

And current safety and soundness concerns with a natural person and corporate credit persons are being well-managed. 

Madam Chairwoman, thank you very much for coming to Wisconsin and holding this hearing. 

Credit unions remain committed to serving their members. The 

ever-increasing regulatory burdens we have make it very difficult. 

We appreciate the attention you’re giving to this issue and look 

forward to working with you to solve the problem. 

[The prepared statement of Ms. Wesenberg can be found on page 

65 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. Mark Willer, who is chief operating officer of the Royal Credit Union. Welcome. 

16 

STATEMENT OF MARK WILLER, CHIEF OPERATING OFFICER, 

ROYAL CREDIT UNION 

Mr. WILLER. Thank you. 

Welcome to all of you. Thank you, Representative Duffy, for coordinating this subcommittee. 

I welcome all the Representatives from our neighboring States. 

It’s great to have you here. We would welcome you back in January, when it’s a little colder, as well. 

But I appreciate the opportunity to testify before the subcommittee. 

Royal Credit Union is a community-based credit union serving 

140,000 consumers in 18 counties in Wisconsin, in west central 

Wisconsin, and 12 counties in eastern Minnesota. 

Our members, as well as their financial services needs, are diverse. 

In our statement of commitment developed by our board of directors and management team, we state, ‘‘As a member-owned, notfor-profit financial cooperative, RCU is committed to our members. 

We will uphold our fundamental responsibility to actively serve 

people within our field of membership and in the communities in 

which we live. We will continue to deliver a wide range of products 

and services to the diverse economic needs and social make-up of 

our members and potential members.’’ 

RCU’s strategic plan includes efforts that encourage our members to become financially self-sufficient and successful. We will 

continue to place a high importance on consumer education and financial thrift. 

RCU strives to offer services designed to improve the economic 

and social well-being of all members from all socio-economic backgrounds and to return financial value to all those who participate 

in our member-owned financial cooperative. 

The current regulatory environment creates a significant challenge to achieve the statement of commitment. 

As a result of the ongoing economic crisis, Congress has enacted 

legislation that has created a significant burden on the financial 

services marketplace. The well-intentioned legislation has had significant unintended consequences that confuse and financially 

harm the very consumers it’s intended to protect. 

The regulatory pendulum has swung so far that the financial institutions are faced with eliminating services or charging for them 

to offset the cost and increased regulatory burden of providing 

them. 

Many of the new regulations are intended to address abuses in 

the financial marketplace or prevent unethical financial practices 

that harm consumers. 

For example, the new rules that are being developed on a consumer’s ability to repay mortgage loans and debit interchange provisions in the Dodd-Frank Act were advocated to correct problems 

that some may have engaged in. 

Yet, I would challenge any member of this subcommittee to find 

a single local community credit union or community bank that has 

been accused of such practices. To the contrary, we are seen as the 

trusted local financial services provider. 

17 

Unfortunately, new regulations do not consider this. As a result, 

costs to provide services have increased. Unfortunately, these costs 

are passed on to our members. 

Costs include training and education for credit union personnel, 

forms or form revisions to reflect rule changes, brochures, software 

programming costs, and compliance and auditing expenses, just to 

name a few. 

The consumers are confused. 

Mr. Reinhart pointed out the number of pages now required for 

a mortgage loan. I assure you, consumers have a hard time wading 

through a one- or two-page application, let alone 30 pages’ worth 

of disclosures. 

I can provide a sample real estate file, as well, to show the difference between an auto loan and an example of a mortgage loan; 

it is significantly different. 

The cost of regulatory burdens to credit unions has been enormous. At RCU, we have an executive vice president who oversees 

our compliance function. 

As a result of the increase in regulations and rule changes, we 

recently hired a full-time compliance specialist. This is in addition 

to an internal manager that we have and two internal auditors. 

Additionally, RCU hires multiple third-party providers to ensure 

compliance with any and all regulatory requirements. These are 

real costs that ultimately are passed on to the consumer. 

As we are coming out of the financial crisis, we have a new government agency to deal with: The Consumer Financial Protection 

Bureau. 

Like many of my colleagues in the credit union system, I’m 

afraid the CFPB will only add a layer of regulation, not replace a 

layer of regulation, as it was intended to do. 

We understand that the intentions are to protect the consumer. 

Unfortunately, history has shown that regulations, rules, and bureaucracies reach beyond their original intentions. 

We hope Congress will exercise prudent oversight of the CFPB, 

especially in the early days of its operations. 

Thank you for the opportunity to provide this testimony. 

[The prepared statement of Mr. Willer can be found on page 68 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness will be Mr. Mark Matthiae, president of Crystal Finishing Systems. 

Did I say your last name correctly? 

Mr. MATTHIAE. It’s ‘‘Matthiae.’’ 

Chairwoman CAPITO. ‘‘Matthiae.’’ I made it French, I think. Welcome. 

Mr. MATTHIAE. It’s actually German. 

Chairwoman CAPITO. German. 

Mr. MATTHIAE. Yes. 

STATEMENT OF MARK A. MATTHIAE, PRESIDENT, CRYSTAL 

FINISHING SYSTEMS 

Mr. MATTHIAE. Good morning. I would like to thank Chairwoman 

Capito and the members of the subcommittee for the invitation and 

for allowing me to speak to you this morning. 

18 

My wife and I have lived the American dream, starting small 

businesses, creating jobs, supporting our family and community, 

and building our dream home. 

So I’m giving you our perspective not only on small business and 

banking, but also as homeowners. 

We have enjoyed the success with the help of our local banking 

system, the SBA, Wisconsin Business Development Corporation, 

McDEVCO Corporation, and a great customer base. 

Our core business is aluminum extrusion, painting, powder coating, and fabrication, along with distribution of our customers’ products. 

Our current business employs 430 full-time employees, with an annual payroll over $13 million. 

Our company annually pays, in real estate taxes, our share of payroll taxes, fuel tax, over $2.2 million before our company makes 

one dime of profit. 

I feel this is important, as a perception of the public today is that 

businesses and business owners do not pay their fair share of 

taxes. 

If we are fortunate to have profits, these profits result in additional tax contributions, as well. 

During the past 3 years, we have employed as many as 468 fulltime staff and as low as 305 due to the severe economic conditions. 

We have gone from a business that banks were competing to do 

business with to a company that struggled to keep enough financing to keep our business running. 

The large banks simply look at either your market segment, your 

ratios after current appraisals and past history; experience or track 

record mean nothing. 

I have seen a true shift in the current banking climate that has 

American homeowners and small business owners worried about 

even renewing a loan, let alone seeking new money for updates or 

expansion. 

In today’s competitive business climate, locally, nationwide, and 

worldwide, without constant upgrades to equipment, infrastructure, 

and facilities, it is nearly impossible to grow a business, create 

jobs, or simply remodel your home. 

We have spent countless hours on renewals, thousands of dollars 

in fees, appraisals, just because we are looked at being equal to 

that risky short-term investment return greed of Wall Street when 

all we want to do is run a business with good long-term business 

plans. 

But the pressure on the banks currently today to simply look at 

the bottom-line ratios along with deflated appraisals on real estate, 

equipment, and property, both small businesses and homeowners 

are losing their equity. 

This loss of equity is a direct result of a lack of consumer confidence and a lack of consumer demand, resulting in more economic 

pressure on businesses and workers alike. 

As a homeowner, you fear to do a home loan, only to find out not 

only do you not qualify for more money against the equity you 

thought you had in your home, you may find out your loan is 

undercollateralized and the bank may actually ask you to write a 

check to pay the loan down further. 

19 

By forcing banks into the situation of analyzing loans not on the 

merit of the project or the past relationship of the customer, you 

are ultimately compounding the already depressed housing market 

and the commercial real estate market alike. 

If banks are no longer able to do the right thing with their customers and negotiate payment terms, etc., without having to be 

punished, our economy will not recover anytime soon. 

If this same climate existed when Laurie and I started our business, there would be no Crystal Finishing, there would be no 430 

jobs today, no $13 million payroll, and no tax contribution of $2.2 

million annually from our company, before profits. 

I again would like to thank you for allowing me the time to share 

our experience with you. 

[The prepared statement of Mr. Matthiae can be found on page 

52 of the appendix.] 

Chairwoman CAPITO. Thank you very much. 

Our next witness is Mr. Kurt Bauer, who is president of the Wisconsin Manufacturers & Commerce. 

Welcome, Mr. Bauer. 

STATEMENT OF KURT R. BAUER, PRESIDENT/CHIEF EXECUTIVE OFFICER, WISCONSIN MANUFACTURERS & COMMERCE 

Mr. BAUER. Thank you. 

Chairwoman Capito and members of the subcommittee, I very 

much appreciate you coming to Wisconsin, although I could have 

gone without knowing that two of the Members were Ohio State 

and Michigan State fans, respectively. It was a tough 2 weekends 

in my household. 

I am Kurt Bauer, president/CEO of Wisconsin Manufacturers & 

Commerce. We’re the largest business trade association in the 

State. We represent about 3,500 businesses from all sectors of the 

economy. 

The vast majority of our members, however, are small businesses, under 50 employees; and about 53 percent of our members 

are in the manufacturing sector, which is Wisconsin’s largest business sector. 

In preparing my remarks for today, I went back and I looked at 

the surveys that we do of our membership and also of our chamber 

of commerce partners to see whether or not credit availability was 

an issue that was raised. And the answer was ‘‘no.’’ 

There are a lot of things that they’re concerned about, but credit 

availability has not been a major one. 

I also went and looked at the U.S. Chamber of Commerce. They 

do a small business survey on a quarterly basis. Credit availability 

was not mentioned. 

And then also, we have a partnership with the National Association of Manufacturers, and they do a survey quarterly, as well, 

with IndustryWeek. 

Their most recent one did show that 6.1 percent of their more 

than 300 small business respondents said that credit availability 

was a challenge. 

So you can see that it’s not a major issue that’s bubbling up to 

the surface to our membership via our surveys; but having said 

that, we are certainly aware that credit availability is a concern. 

20 

We hear anecdotal stories. We had a phone call to the office last 

week on the topic. And it’s something that we’re certainly concerned about. 

I should have mentioned that I spent 18 years in the banking 

business prior to coming to WMC. So I’m very much familiar with 

Dodd-Frank and how massive that piece of legislation is. 

Forgive me. I don’t remember exactly how large Glass-Steagall 

was, but I often like to try and compare the two, because GlassSteagall was another landmark piece of banking legislation that 

was passed in reaction to a crisis; and I believe that was around 

30 pages, or certainly nowhere near the 2,300 pages of Dodd-Frank. 

Mr. DUFFY. It was 78 pages, I believe. 

Mr. BAUER. Seventy-eight pages, okay. Very good. 

So we’re aware that there are concerns. And we’re monitoring it 

very closely because, like the other panelists have said, credit is, 

without a doubt, the lifeblood of our economy. 

And without having partnerships with financial institutions, particularly our small member businesses, we would not be able to be 

successful. I think that was very well pointed out by Mr. Matthiae. 

I think it’s also important to point out here that it’s not just 

Dodd-Frank. New regulations certainly are a problem, but you 

have to also look at the examination environment, and that has 

been expressed by the bankers and credit union panelists. 

But you are seeing a lot of regulation by fiat, by examiners in 

the field, and of course, by the regulatory agencies themselves with 

the reinterpretations of rules. 

And I imagine that they’re reacting to a lot of the pressure that 

they feel for supposedly having allowed the financial crisis to occur, 

which I don’t think is a fair criticism on their part because I think 

that there are a lot of different factors that caused the financial crisis. And there’s a lot of blame that can be pointed in a number of 

different directions. 

But from our perspective at WMC, I think we’re seeing a bit of 

an overreaction, which has been compounded by overregulation. 

And I’m afraid to say, also, that scenario of overreaction, overregulation is not unique to the banking sector. 

We’re seeing that, as well, in some of the other areas that we 

monitor at the WMC such as environmental protection, OSHA regulations, health care reform, etc. 

So from our perspective, we have a broader view, and DoddFrank is certainly something that very much concerns us, but I 

think it’s all part of this deluge of regulation coming from Washington. 

And I guess my final comment would be that, when I talk to my 

members, it’s pretty clear that they believe that Washington is the 

biggest drag on economic recovery, more so than anything else that 

they face. 

Thank you. 

[The prepared statement of Mr. Bauer can be found on page 48 

of the appendix.] 

Chairwoman CAPITO. Thank you very much. 

Our final panelist is Bethany Sanchez, director of community development, Metropolitan Milwaukee Fair Housing Council. 

Welcome. 

21 

STATEMENT OF BETHANY SANCHEZ, DIRECTOR OF COMMUNITY DEVELOPMENT, METROPOLITAN MILWAUKEE FAIR 

HOUSING COUNCIL 

Ms. SANCHEZ. Thank you, Madam Chairwoman, and members of 

the subcommittee. I appreciate your invitation to come here today 

to provide my perspective on these important issues. 

Let me share with you the basis for my perspective. 

I have worked in the housing and economic development field for 

almost 35 years. In addition to my 10 years at the Fair Housing 

Council, I’m on the board of the Urban Economic Development Association of Wisconsin, and I’m the current chair of the board of the 

National Community Reinvestment Coalition. 

The Fair Housing Council works to eliminate discrimination and 

increase housing choice in Wisconsin. My work on this issue is important to the Fair Housing Council because increased housing 

choice and healthy communities depend on access to reasonablypriced home and small business loan products. 

All of the organizations I’m affiliated with work in partnership 

with small, medium-sized, and large banks, credit unions, and 

other financial institutions. We collaborate on projects and policy 

work that will help create and sustain healthy neighborhoods and 

strong, stable communities across the State and the country. 

To answer the credit needs question, yes, there’s an unmet demand for small business loans and home loans in the communities 

that we serve. 

Small business owners and those who work with them have often 

shared their frustration with me over their lack of access to credit 

and capital. 

And just this past Friday, the need for small business loans was 

again highlighted at a community development forum I attended at 

the Marquette Law School. 

There’s also a big demand for home mortgages and for home repair loans. But the financial crisis and the uncertainty it created 

has resulted in loans not being made, even to well-qualified borrowers. 

Regulations can and will help address this need. Federal regulations already in place, like the Community Reinvestment Act, encourage depository institutions to make home loans and small business loans to all sectors of the community, including the low- and 

moderate-income areas that we work to assist. 

CRA does not, as some people insist, force banks to make bad 

loans. On the contrary, it requires safe and sound loans. 

Our experience in Milwaukee and, indeed, the experience of organizations across the country has shown that CRA provides underserved communities with a mechanism that encourages institutions 

to work with us to do a better job of meeting the community needs 

and to make a profit along the way. 

In addition to CRA regulations, Dodd-Frank will also be important to our economy, providing safeguards to borrowers in the 

mortgage market and ensuring that large institutions looking to acquire another bank will need to evaluate not only the bank’s 

records in CRA assessment areas but whether the acquisition 

would be a significant benefit across the country. 

22 

A month ago, and in testimony at the Federal Reserve, Chris 

Cole, who is a senior vice president of the Independent Community 

Bankers of America, noted the importance of Dodd-Frank’s requirements to consider the extent to which a proposed acquisition results in greater or more concentrated risks to the stability of the 

United States banking or financial system. 

In Milwaukee, we know firsthand the impact of creating too-bigto-fail institutions and allowing them to engage in overly risky 

business practices. 

In Milwaukee County, since 2008, on average, over 500 homes 

per month have gone into foreclosure. Within the City’s limits, we 

still have over 2,000 vacant foreclosed homes, and another 6,200 in 

the foreclosure process. 

And the foreclosure crisis has affected, as you know, the entire 

economy, creating more job loss. 

Had Dodd-Frank been in place, the damage could have been contained. Dodd-Frank’s provisions are aimed not only at ending toobig-to-fail, but are also designed to level the playing field between 

the mega banks and the rest of the industry, our colleagues around 

the room today, and to provide a way to warn of the systemic risk 

before toxic financial products and those activities threaten the 

economy. 

It was crafted as a response to consumer advocates like me and 

my colleagues at NCRC, as well as small businesses and community bankers who had been asking Congress to modernize and 

strengthen financial regulations to ensure that mortgage brokers 

and independent mortgage companies could not continue the practices that started this subprime mortgage crisis. 

In tacit acknowledgment that small banks did not cause the crisis, most of the provisions of Dodd-Frank apply only to a few dozen 

of the country’s largest banks, those with more than $50 billion in 

assets. 

And Dodd-Frank allows community banks to pay lower premiums for deposit insurance and to continue to work with their existing regulators. 

In some respects, no one likes regulations, even me. Complying 

with regulations and doing reports is not my idea of a good time. 

My work days are often spent writing reports to our various private and public funding sources, detailing the outcomes of our 

work, which takes away from the time spent actually doing the 

work that I’m funded to do. 

But regulations and reporting provide accountability, accountability that in this case is a necessary framework for our large, 

complicated, and interconnected economy. 

The Dodd-Frank law is long and complicated, but please give it 

a little time. Don’t throw out the baby with the bathwater. Ninety 

percent of it is yet to be implemented. 

I would support the position articulated at the Fed hearing by 

Chris Cole with the ICBA when he said, ‘‘ICBA strongly recommends that the regulators impose a moratorium on all acquisitions and mergers involving financial institutions with over $100 

billion in assets, including Capital One’s acquisition of ING Direct. 

This moratorium should continue until the banking agencies have 

finalized all the rules under Dodd-Frank.’’ 

23 

He went on, and that’s in the testimony. 

Dodd-Frank’s provisions have been characterized by some as generating job-killing uncertainty. But as Christopher Dodd recently 

wrote in the Washington Post, ‘‘In fact, it was the uncertainty inherent in a nontransparent and reckless financial system that 

made Dodd-Frank necessary in the first place.’’ 

Dodd went on to say, ‘‘The truth is that the catastrophe was 

years in the making caused by regulatory negligence and Wall 

Street gambling. We can’t expect to rebuild our prosperity overnight, but we can’t rebuild it at all if we let false political talking 

points undermine our efforts to restore confidence in our financial 

system.’’ I agree. 

Dodd-Frank was created in response to immense gaps in our 

modern financial system which allowed profits and greed to supersede the prudent extension of credit and the systems that support 

that activity. 

Wisconsin residents and the rest of the country need the opportunities and safeguards generated by CRA and Dodd-Frank. Rather 

than pushing new legislation that would weaken Dodd-Frank before it’s even fully implemented, please concentrate your efforts on 

helping the CFPB staff to understand the areas of concern and assist them as they write rules that can truly help everyone. 

I look forward to working with you on that. Thank you very 

much. 

[The prepared statement of Ms. Sanchez can be found on page 

62 of the appendix.] 

Chairwoman CAPITO. Thank you. 

I would like to thank all the witnesses, and now we’re going to 

proceed to the question portion of the hearing. And I get to be the 

first one to ask the questions. 

I’m going to start with a comment, but I’m going to put myself 

on the clock, because I don’t want to go past my 5 minutes of questions. 

In partial response to Ms. Sanchez’s 5 minutes of testimony, in 

terms of, was regulation needed? Absolutely. I think we agree on 

that. 

But I think what you heard is the great disconnect. The disconnect of what Congressman Duffy alluded to in his opening statements of what was happening on Wall Street and what has been 

happening on Main Street and the frustrations of the regulatory 

burden that we have now pushed, not just to Wall Street because 

of the lack of transparency and accountability, but how it’s bleeding 

out into our smaller institutions that don’t have the capacity and 

don’t, quite frankly, probably need the capacity to fulfill a lot of the 

demands of a large regulatory environment. 

So I think that’s the balance that we are trying to reach. 

We are having a hearing next week on CFPB in our subcommittee—actually, it’s this week, on Wednesday. And we’ll be 

delving into some of the questions that Ms. Sanchez brought up in 

her testimony. 

I would like to, on my first question, Mayor, you mentioned why 

has government not helped small businesses in terms of being able 

to get financing. And we need to stimulate from the bottom up. 

24 

I would say that there was a small business lending program, I 

don’t know if any of your financial institutions have—did you all, 

banks, apply for that. 

It was supposed to last for a year, but because the regulations 

only got going 9 months into the year, only 3 months of lending. 

It was only $4 billion, which it could have been $30 billion. But of 

that, a lot of the banks that availed themselves of the small business lending fund used the Federal dollars to pay back the Federal 

TARP dollars that they owed to get out from under the TARP program. 

So there’s a big disconnect here, did it ever really reach Main 

Street, and I think the answer is no, it didn’t. 

And that’s a frustration for us, as policymakers, that policies are 

going forward without legislative approval that really are not meeting the challenges. 

What would be a good way for us to stimulate small business 

lending? 

We have heard a lot about forms and all those kinds of frustrations. Is it more leeway on—in terms of performing loans? We’ve 

heard a lot about that in committee. Do you have any suggestions 

on that? 

Mr. ERICKSON. That’s an excellent question. 

I wish I had more suggestions. But I look at it from situations 

I’ve been involved with from the—I’m also on the board of directors 

of McDEVCO, and, of course, working with our small business in 

our community and other areas. 

But it seems like so many of the programs that are aimed to 

small business are aimed to small businesses who—they say, how 

many jobs are you going to create from it? If you’re going to get 

this money, how many jobs are you going to create? If you can’t 

demonstrate that you’re going to create a number of jobs, then it’s 

very difficult to get help. 

Chairwoman CAPITO. Right. 

Mr. ERICKSON. And I would like to say that we forget that, when 

we talk a lot of small business, we have a lot of operations out 

there, mom-and-pop operations. 

Again, just for an example, a good friend of mine has a florist 

business, and he’s really struggling right now. He has 40 years in. 

He’s wondering if he’s going to lose everything he’s worked for for 

40 years. 

There’s no help for the mom-and-pop small business-type operations. I just use that for an example because I’m saying—they say, 

what kind of jobs do they create? 

If it wasn’t for the thousands and thousands of independent florists that are all over the country, we wouldn’t have the floral distribution, we wouldn’t the big business we have with—that’s worldwide as far as buying those products. It all starts down with the 

small business. 

Chairwoman CAPITO. Right. Right. 

Mr. ERICKSON. They create a lot of jobs, but their help—they 

can’t demonstrate and say, I’m going to be able to be trained or create a hundred new jobs. No, they’re not going to be able to do that. 

Chairwoman CAPITO. In terms of how can we help that person, 

it’s creating a good solid economic environment where we’re growVerDate Nov 24 2008 16:07 May 21, 2012 Jkt 072620 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\72620.TXT TERRIE
25 

ing jobs so more people are buying flowers. And they have the confidence that if they extend $100 to a floral arrangement for a wedding or whatever, that they’re going to be able to pay for that and 

they’re not going to—people are hunkered down now in their own 

personal spending habits, and several of you have alluded to the 

lack of confidence. 

Let me ask you, Mr. Matthiae. I tried to make your name 

French. 

You mentioned the SBA. I think, in your statement, you mentioned that you have recently gotten an SBA loan. Is that correct? 

Or have you been funded— 

Mr. MATTHIAE. We have actually used the SBA over the years to 

help get us going and we have used—USDA has been our most recent. 

Chairwoman CAPITO. Rural development? 

Mr. MATTHIAE. Yes. 

Chairwoman CAPITO. And has that process been easier? Are you 

still using the same financial institutions, or do you use different 

ones for— 

Mr. MATTHIAE. We still use some of the same institutions. 

Chairwoman CAPITO. So we’re talking—you mentioned a lack of 

consumer confidence, a lack of demand. Part of it is this feeling of 

the regulatory burden. Part of it is this feeling of inability to make 

new acquisitions. 

As an employer, do you feel hunkered down into your business? 

Are you just sort of in survival mode? Do you feel any confidence 

coming back? How are your long-term and short-term projections? 

Mr. MATTHIAE. Short-term, if you would have asked a year ago— 

how long have you been with WMC, Kurt? 

Mr. BAUER. Seven months. 

Mr. MATTHIAE. Seven months. 

I think, if his survey would have been a year ago, there would 

have been a great deal of frustration over access to capital. 

What businesses have done is we have gotten very lean. We have 

actually cut spending. We have had to pull back in a lot of areas, 

and a lot of businesses have stabilized. 

And the businesses that did not address the rapid pullback in 

the economy probably didn’t make it. 

Chairwoman CAPITO. Right. 

Mr. MATTHIAE. Our business did. We have just enjoyed the best 

year we have ever had as far as growth. The future looks great. 

We’re buying equipment, we’re building buildings, and we’re working kind of like we were in 2008 and 2007 and prior. 

I think the biggest concern out there right now is really the ratios. And what I think is—it’s almost a double standard. You take 

out a 20-year loan and you anticipate paying it off in 20 years. 

Nothing’s for sale. It’s no different than a stock, everything is fine. 

But then a third of the way through, they—because the economy 

falls, they do this appraisal out of the blue, and you lose all of your 

equity. That’s what’s causing the hardships. 

And, I think Todd did a very good job of pointing out the fact 

that businesses can get in big trouble, homeowners can get in big 

trouble, because they need this ratio, 70, 80 percent. 

Chairwoman CAPITO. Right. 

26 

Mr. MATTHIAE. If you had 20 percent down, but the real estate 

fell by 25 percent, you haven’t even caught up to that yet on a normal payment. So you have done nothing but what you have signed 

a contract to do. And now, the rug is kind of getting pulled out on 

a lot of businesses and a lot of homeowners. 

And it’s not right. Somewhere, it should be illegal, I think. 

At the end of the day, I thought the contract was that you made 

your payments, and if you make your obligations, that should be 

it. 

Chairwoman CAPITO. Right. 

Mr. MATTHIAE. And the negotiation was about interest rates. If 

the rate went up, that’s a chance you took in short-term. It 

shouldn’t be about, geez, did I buy the right piece of property and 

is it going to be worth that same amount all the way through when 

I—that is what I think is driving a lot of the frustration for the 

banks on the lending side and I think for tboth the businesses and 

homeowners alike. 

Access to the capital is there. There is no question it’s out there. 

But you really have to work to get it. 

Chairwoman CAPITO. Right. 

Mr. MATTHIAE. And it’s the time lag. There are times, like this 

year, we purchased four major pieces of equipment. We didn’t have 

time to get—if we would have had to finance it and we couldn’t pay 

cash in some areas, it never would have happened. And we 

wouldn’t—we hired people and we put people to work on those, on 

that equipment, but we didn’t have 6 months to get a loan approved or 90 days. 

In years past, once you had your line of credit, you had your operating—within a week to 2 weeks, it was approved, you’re going, 

you’re ordering that equipment, you’re moving. You can’t—business 

needs to move fast. 

Chairwoman CAPITO. Right. 

Mr. MATTHIAE. It cannot be moving at the speed of government. 

It has to actually function in a real-time format. 

Chairwoman CAPITO. Thank you. 

My 5 minutes is up, but I will make a comment. When you said, 

when you saw the downturn coming and you saw the difficult 

times, one of the first things you did, and businesses across the 

country did, was cut spending. 

Sound familiar? 

That’s what we’re trying to do in Washington. It’s very difficult, 

as you know. 

But—and then you said, the next thing you said, was the cutting 

the spending and then led to your growth. This is a big debate 

we’re having in Washington right now. And I’m glad to hear you 

sort of reinforce that concept. Certainly for me, it’s very helpful. 

So with that, I’ll go to Mr. Duffy for 5 minutes for questions. 

Mr. DUFFY. Many of you may know we had a jobs fair here in 

central Wisconsin last week, and it was well-attended. We had 

about 100 businesses that came that were looking to hire and we 

had about 1,200 folks who were looking for a job, folks who had lost 

their jobs the week before, some had been out of work for a month, 

some for years. 

27 

But one of the continual things I heard from the employers was 

the quality of workers in central Wisconsin who were coming 

through looking for the opportunity to get back to work. 

And there was, I think, a great area of improvement, once the 

economy turns around, for a great workforce that we have here. 

Ms. Sanchez, I thought of that as I heard your testimony. I’m not 

as familiar with your organization down in Milwaukee, but the 

folks that you represent, are those the higher-income, wealthier 

folks of the Milwaukee community? 

Ms. SANCHEZ. For the most part, no. We actually don’t have any 

income requirements for people we serve, but the bulk of the people 

who come to us for assistance are low- and moderate-income folks. 

And my work on fair lending and CRA work is directed at lowand moderate-income communities. 

Mr. DUFFY. Okay. I want to make sure I have an understanding, 

as well, because if you look at some of the rules and regulations 

that came out, specifically, say, in Dodd-Frank—and I’ll ask this to 

our banker/credit union panel here: Have the interchange changes 

that have taken place with debit cards and the new rules and regulations, have they helped you continue to give free checking and 

free debit cards to your customers? Or has it made it more difficult 

to provide free checking and free debit cards? Anyone on the panel 

can take that. 

Mr. NAGEL. Absolutely not. It has made it more difficult. 

The regulatory burden—I would disagree with Ms. Sanchez’s 

comments completely. The regulatory burden from Dodd-Frank 

has—it did create a new job at our bank, but now we have six people focusing on regulatory burden. 

And it has certainly diminished our revenue 10 to 15 percent on 

interchange alone, just the interchange, which was one piece of 

that legislation. 

Mr. REINHART. I know, in the bill, there was kind of a carve-out 

that said community banks weren’t going to be impacted by the 

interchange, but the fact of the matter is, markets work the way 

markets work. We’re all concerned that, ultimately, that’s going to 

have an impact on us, and it will. 

Have we made any changes to pass on those costs to our consumers at this point? Not yet. But whether or not it will have an 

impact, it certainly has a bottom-line impact on our operation. 

And at a time when we’re trying to comply with all the regulations and having to spend resources, both financial and with employees to comply, we’re looking for every opportunity to try to continue to be a viable organization. Certainly, that is something we’ll 

have to think about. 

Mr. DUFFY. Would you all agree with that? 

MULTIPLE SPEAKERS. Yes. Yes. 

Mr. DUFFY. Oftentimes, folks in our communities are struggling 

to pay their bills and is it—I have to imagine it would be tougher 

for them to start to have to pay extra bank fees for their checking 

accounts or for the use of their debit card, especially in these difficult times. Would you not agree? 

Ms. WESENBERG. I would certainly agree. And I would say our 

membership is mostly low to moderate income, as well. 

28 

And, even if you’re talking the $5 a month that Bank of America 

is talking about—or is implementing, for some of our members, 

that is what pushes them over the edge. 

I think there are many unintended consequences when these regulations occur. People don’t understand that the opposite side of 

the Dodd-Frank Act, or the interchange piece, is that credit unions 

and banks, we have to absorb all the losses. The merchants don’t 

really have that piece of it. 

And so, part of these fees that people are talking about is to recoup some of those costs. 

Mr. DUFFY. I think you guys talked about the increase in the application size for home loans. Is that a fact? Have they increased 

recently? 

Mr. WILLER. Yes. We have actually had two or three people retire indirectly as a result of the rest of the changes. It just has become so burdensome, so complicated, the training is never-ending, 

the changes are never-ending. 

Again, the intent is to help the consumer. And what has happened is it has created a lot of confusion. 

Mr. Reinhart pointed out the number of pages, and I just have 

a hard time imagining anybody being able to wade through all that 

information and come to any conclusion as to whether or not they 

have the best deal available. 

Mr. DUFFY. I’m a big fan of transparency. I want to make sure 

that customers who have come into the bank know the products 

which they’re going to get and they understand the cost and what 

the arrangement is. 

And one of my concerns is, when you make the process so much 

more complex, you add that much more paperwork to it, I don’t see 

that our customers are going to want to wade through more paperwork and that they’re going to understand more what the arrangement is and what the deal is. 

I think simplifying it, condensing it so they can understand it, 

would be beneficial. 

You get your credit card statements where they’re going to 

change the rules on you, where you have four pages of small type, 

I don’t know who reads through that. 

And if you have a better understanding of what the arrangement 

is with your credit card, I bet most people might throw it away. 

Simplifying, streamlining the process, I think, would help consumers, instead of stacking up more documents on them, because 

they’re not going to go through it. 

Do you guys disagree with my assessment? 

Mr. WILLER. Just as an example, this is the paperwork for an 

auto loan. So as you can see, there are probably 5 to 10 pages 

there. That’s probably too much, to be honest with you. 

I think Mr. Nagel hit it right on the head: Three pieces of paper, 

and that can contain all the necessary disclosures. 

Mr. DUFFY. I have a lot more questions, and I think we’re going 

to be able to go through our panel a few times, but I’ll yield back. 

My 5 minutes are up, and we’ll have a chance to come back. 

Chairwoman CAPITO. All right. Mr. Huizenga, for 5 minutes for 

questions. 

Mr. HUIZENGA. Thank you, Madam Chairwoman. 

29 

I appreciate all of you coming and giving this testimony. And it 

is similar testimony to what I’ve been hearing as I’ve been going 

around the 2nd District in Michigan, which is about a 250-mile 

stretch of Lake Michigan shoreline; really a pretty unique mix of 

manufacturing, and a number of tier 1 and tier 2 automotive suppliers, office furniture, largest three office furniture makers are in 

the district; everything from tool and die and extrusion and metal 

forming. It’s also very heavily agriculture and food production, and 

then it’s also tourism. 

So we have seen a lot of different effects on that. But I’m struck 

by the similar themes that I’m hearing about lack of certainty, especially, as we’re talking about credit availability and what businesses are doing or not doing as they’re trying to make those decisions. 

And I think it was Ms. Wesenberg who was talking about the 

piecemeal consumer protections that were being put in place. 

My background is in real estate developing. My family is involved in construction. I own a sand and gravel company with 

three employees, third generation. My Dad and my uncle had started a ready-mix concrete company, which at one time had about 18 

employees, and it’s down significantly, as you can imagine, construction in Michigan. 

And I’m struck by that exact same point. The thing I wrote 

down, as I was starting to hear some of this testimony, is that 

more documents don’t necessarily equal more transparency. 

It’s sort of that old concept of hiding in plain sight. Right? How 

do you confuse somebody? Flood them with all this information 

that you just kind of go, whatever, I’m not sure. 

And I think Ms. Sanchez, getting to sort of what Congressman 

Duffy was talking about, are we really serving constituents, really 

serving customers, by doing what we’ve been doing? 

That’s one of my main concerns with Dodd-Frank. And I would 

like to hear your point again, because I know, when I was going 

through my real estate licensing 20 years ago, I was taught that 

people aren’t brown, people aren’t white, people aren’t yellow; 

they’re green. 

People are green, and they can either afford things or they can’t 

afford things. And that, I think, would be very healthy if we 

could—I can’t remember who exactly, maybe Mr. Nagel, was making the comment that we’re not making decisions based on people’s 

ability to pay and those kinds of things. We’re looking at what’s 

going to please the regulator. 

So I don’t know if you care to address that at all. 

Ms. SANCHEZ. Thank you for giving me the opportunity, because 

I think there—I do have a fair amount of agreement with a number 

of the points made by the other witnesses, including this issue of 

regulation and—not regulation, well, some on regulation, but the 

disclosures in particular. 

Yes, I don’t think a stack of papers is helpful in helping anybody 

except for maybe a lawyer. And, generally, lawyers that I’ve talked 

to even say, I don’t read that at my closing, why would I expect 

anybody else to have read it. 

So no, I don’t think that long disclosures are effective. I do think 

that short disclosures, if they’re structured right, can be much 

30 

more effective in helping people to understand what they’re getting 

into. 

Mr. HUIZENGA. But I you thought I heard you say, also, sort of, 

let Dodd-Frank play out here a little bit, give it some time, and 

we’ll see where we’re at. That’s my concern. I’m not sure that we 

have that ability or that time. 

Ms. SANCHEZ. As has been noted, there is a lot in Dodd-Frank. 

And the protection that Dodd-Frank gives to borrowers is the part 

that I’m concerned about and the part that I support. 

When there are regulations that are duplicative or that don’t 

make any sense for our small businesses and for our small bankers 

and credit unions, then yes, let’s take a look at those. And that’s 

what I said at the end. Let’s figure out how to make it work. 

But don’t repeal Dodd-Frank, because we need the protections 

that are in Dodd-Frank. We need the playing field to be level. We 

need a more overall look at our financial system in terms of toobig-to fail and other kinds of issues that it raises. 

Mr. HUIZENGA. That has been the interesting part, having come 

in there at the implementation side of it. I wasn’t there for the creation of it, but I’m there living with the after-effects of it. 

And the stunning part to me has been it is treated like holy writ 

on high that neither a jot nor a tittle can be changed in this bill, 

especially by the former chairman whose name happens to be attached to it, or on the Senate side, as well. 

So you see, I think any discussion of trying to hit some of those 

reasonable accommodations is treated in a very hostile manner. 

I think that’s my goal, personally, and I think that is the goal 

of my colleagues here, as well, but I appreciate that input. 

So thank you. I think my time is up. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

And next, we’ll go to Mr. Renacci for 5 minutes for questions. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

Ms. Sanchez, you made the comment, ‘‘Most of the provisions of 

Dodd-Frank apply to only a few dozen of the country’s large banks, 

those with only $50 billion in assets.’’ 

Would any of the witnesses here agree to that? 

Mr. NAGEL. No. 

Mr. RENACCI. That’s what I thought. 

‘‘Most’’ is, I guess, a unique word to use there. 

I think one of the problems with Dodd-Frank is the blanket effect. And you also made the comment, ‘‘Had Dodd-Frank been in 

place, the damage could have been contained.’’ 

There are some who say that if the regulations that were in place 

in 2008 were followed, the damage could have been contained. 

Would you agree with any of that? 

Ms. SANCHEZ. I think that if the Fed had the ability to regulate 

the banks more effectively, if they had the ability, under unfair and 

deceptive practices, to do a better job of regulating banks and mortgage companies that were abusing the system and abusing borrowers, but the overall structure of how Dodd-Frank regulates the 

mortgage system, if that had been in place, I think it would have 

gone a long way. 

31 

Mr. RENACCI. Would you possibly agree that if we would have 

taken the things that didn’t work and tried to fix those, and left 

some of the other stuff alone for now, that might have been the 

better approach, versus throwing the blanket over everything? 

Ms. SANCHEZ. I haven’t read all 2,000 pages of the Act, so I’m 

probably not qualified to answer that. 

Mr. RENACCI. Okay. But you did say that you were hoping that 

it would stay intact, without reading the whole 2,000 pages. So 

that’s a— 

Ms. SANCHEZ. I hope that the aspects of the bill that help the 

borrowers that we serve, and keep things fair for borrowers across 

the country, including small businesses, and encourage small business lending, remain in place. 

Mr. RENACCI. And again, I think that’s a good point. There might 

be some pieces in there. The problem is we wrote a 2,000-plus page 

bill that is affecting credit unions and small banks and community 

banks in so many ways that maybe we should have taken a look 

at what didn’t work and fixed that first but— 

Mr. Bauer, you mentioned that Washington is the biggest drag 

on the economic development. I think that was one of the things 

you closed on. Can you give me some specific examples? 

Mr. BAUER. Yes, I would be happy to. 

If you would look at—and this is directly from the membership 

surveys that we have done and the feedback that we got back, not 

only from our specific surveys but also the surveys that I read 

from, conducted by the U.S. Chamber at the National Association 

of Manufacturers. 

But I mentioned EPA, National Labor Relations Board, of course, 

Dodd-Frank, and health care reform. 

On EPA Industrial Boiler MACT Rule, and in particular in this 

area, in central Wisconsin, which is a heavily papermaking area, 

that rule alone could cost thousands of jobs in Wisconsin because 

it disproportionately impacts papermaking in that process. 

There are other regulations that are being implemented that 

we’re very concerned about. 

And to the point on EPA, it disproportionately affects us because 

we’re coal-dependent in Wisconsin, very similar, probably, then, to 

the chairwoman’s home State of West Virginia. We tend to get our 

coal from Wyoming, however. But 70 percent of the energy that we 

use in Wisconsin for industrial use is coal. 

Because the EPA regulations have really gone after fossil fuels, 

and coal in particular, it has a disproportionate effect on us. 

We say, at WMC, that there are two major threats to manufacturing in Wisconsin, which, again, is our largest business sector, an 

important sector, because it creates jobs not only in factories but 

in other sectors of the economy. 

Workforce, making sure that we have that quality workforce that 

Congressman Duffy talked about; and then energy because, as energy costs go up, it makes us less competitive, not only here in the 

United States, but certainly to our competitors internationally. 

Mr. RENACCI. Thank you. 

Mr. Matthiae, you indicated that your business is booming today, 

but credit was an obstacle. Can you give me some ideas of how 

you’re capitalizing your new purchases and your growth? 

32 

Is it through cash flow? Is it because—or are you still able to borrow money? 

Mr. MATTHIAE. With the USDA’s help, we were able to get financed. We were able to convert leases that we had actually had 

equipment that was worth something. So we were able to actually 

draw a value out of that. 

We were able to—first of all, we, again, cut our costs, and we got 

ourselves profitable again. 

And it all starts with not necessarily the bottom line, but also, 

we got very aggressive in sales. And we expanded our markets. We 

really—I guess I am a believer that if you’re going to wait for something to happen to you, it’s not going to happen. And so we decided 

that maybe we should make it happen, and we hired additional 

sales staff and really got aggressive. We had a 39 percent growth 

this year, which is, for a company our size, a lot of growth. 

Future, we are regulated, certainly, with what the ratios are, and 

where we should be. All businesses should have to follow good business practices. Consumers should have to do the same thing, keep 

the house in order. 

When you’re a fast-growing, high-capital business like we are, 

there’s never enough cash and there’s never enough time. 

So at the end of the day, I encourage you to support the USDA, 

the SBA. They are good programs. They don’t cost money. They 

help lending institutions borrow where traditional rates may not 

happen and traditional borrowing may not happen. 

Some of our loans were actually held up because the USDA was 

out of money. The loans were approved but the USDA was underfunded at that point. 

But yes, we are getting enough funding to operate today. 

Mr. RENACCI. But it’s through current cash and the USDA? 

Mr. MATTHIAE. Correct. 

Mr. RENACCI. In the past, did you use the small—whether it’s a 

small bank, small community banks? Were those dollars available 

to you in the past? Are they available to you today? 

Mr. MATTHIAE. Not in the same form, no. 

Our traditional banking, we have not been able to do that today. 

Mr. RENACCI. All right. Thank you. That’s— 

Mr. MATTHIAE. We needed the help of the USDA. 

Mr. RENACCI. Thank you. 

I see my time is up. I have other questions, but I’ll wait until 

the next round. 

Chairwoman CAPITO. Okay. I’m going to start over again here 

and ask a question of the credit union and community bankers. 

We have heard Dodd-Frank—how large it is and the regulatory 

structure that’s just now beginning, because it hasn’t even been 

fully implemented. And there are a lot of carve-outs in there. I 

think the four of you, your institutions, are supposed to be carved 

out. 

I just want to re-emphasize, because we are going to be having 

this hearing with the CFPB on Wednesday, that your feeling is 

that you’re not, in reality, exempted, because it—could somebody 

speak to that issue one more time for me, please? 

Mr. NAGEL. I think I can. 

33 

Most banks and credit unions, for that matter, borrow from larger banks. So I think that’s the largest myth out there, that we need 

larger banks or correspondent banks to do our relationships. 

So as it relates to interchange, the $10 billion bank, or whatever 

the limit is, they issue our debit cards and credit cards. That’s 

where our interchange comes from. 

What happens—it’s the spin-off effect of this legislation that’s 

happening. And we’re already feeling it across our revenue streams 

in many different areas. 

I agree with Representative Renacci, though. If regulators did 

have the power to stop this crisis—all the regulations that were in 

place, had they been followed, we wouldn’t be in this situation. 

Chairwoman CAPITO. Mr. Nagel, let me ask you, when we had 

our field hearing in—no, Mr. Reinhart, I want to ask you this question. 

When we had our field hearing in Georgia, when you talked 

about the re-appraisals of the properties and we—this is what has 

sunk their 64 banks. This is the commercial real estate issue. 

And there was a frustration from the community bankers that, 

and I alluded to this in my opening statement, on the one hand, 

there’s a pressure to lend. But the regulators—and you all talked 

about this—come in and tighten down. 

And you mentioned you could make loans but only if they’re the 

ones that make the examiner’s report look favorable. 

Is this a change of behavior from the last 2 or 3 years? Obviously, you think it’s an unfavorable change. How can we make that 

connection? 

Because we did have the regulators at that hearing to hear what 

our community bankers and those in Georgia were saying. 

That’s a big disconnect, I think. Do you have a comment on that? 

First of all, is it a change? You have been in banking for— 

Mr. REINHART. Thirty-five years. 

Chairwoman CAPITO. —35 years. 

Mr. REINHART. Yes, it has been a big change. 

And we can all appreciate the fact that we have been through a 

very, very difficult period of time. 

One of the changes that’s happening is, because of the pressure 

that has been put on the regulators, the FDIC, etc., we’re getting 

examination teams from all over the country. They’re coming in 

from Iowa or Kentucky or wherever. They don’t have the same perspective of having worked with you over the years and knowing the 

management team and knowing what your strengths and weaknesses are, so you have to kind of go through that whole educational process as part of it. 

The other thing is that, because of the concerns about capital and 

liquidity that was mentioned, we have to be overly sensitive about 

how our loans portfolio is going to be viewed; are they going to be 

classified, not classified, because that has a big impact on our reserve requirements. 

And so, whereas in the past, a lot of the credit decisions were 

based on historical performance, character, collateral, not that we 

weren’t looking at cash flow and capacity and—and all of the five 

‘‘Cs.’’ 

34 

But it seems like there’s been more and more pressure put on, 

as was pointed out, getting updated appraisals. And if those appraisals come in poorly, how are you going to deal with it? Is the 

loan going to be classified, not classified? If it is, you have to have 

more reserve requirements. 

And cash flow requirements have become much more complicated 

than they were in the past, and you need to look at more factors. 

When we’re trying to determine what kind of provisions for loan 

losses that we have to make, we have to go through a much more 

involved calculation today than we used to. And it has become so 

difficult. 

So, whereas the examiners are erring on the side of being conservative, some banks feel like they have to do the same thing for 

fear of the next examination and how you’re going to be viewed. 

Chairwoman CAPITO. Do you have this phenomenon—one of the 

bankers in Georgia mentioned that he sits down with the review 

team, and the report is verbalized to him. And then the report 

comes out, I don’t know, a month later, the written report, and it 

doesn’t even look like the same; it doesn’t look like the same review 

because of what is written. They have to cover themselves so much 

more. 

Is that an area where you have seen any differences, or not really? 

Mr. REINHART. Yes. Certainly, from my perspective, and having 

talked to people, there’s definitely a disconnect. 

You really don’t know exactly what’s going to be in that document when it shows up 2 or 3 months later. 

Chairwoman CAPITO. Even after you’ve had the verbal review? 

Mr. REINHART. Correct. 

Chairwoman CAPITO. Let me ask Ms. Sanchez one quick question, because my time’s up. 

Does your organization—have you acquired any of the Neighborhood Stabilization money? 

Ms. SANCHEZ. No. 

Chairwoman CAPITO. No? 

Ms. SANCHEZ. We work with the City on their NSP programs, 

and try and get the word out on the programs as they’re working 

on it, but we don’t get— 

Chairwoman CAPITO. Okay. But you mentioned— 

Ms. SANCHEZ. We don’t get NSP money directly. 

Chairwoman CAPITO. You didn’t get NSP money. 

You mentioned in your statement that there were 2,000 vacant 

homes in Milwaukee? 

Ms. SANCHEZ. Right. 

Chairwoman CAPITO. That had been foreclosed on? 

Ms. SANCHEZ. Yes. 

Chairwoman CAPITO. Is the City using that Neighborhood Stabilization? 

Ms. SANCHEZ. It is. 

Chairwoman CAPITO. To do what with the properties? 

Ms. SANCHEZ. To— 

Chairwoman CAPITO. Rehab and resell? 

Ms. SANCHEZ. Right. Exactly. 

Chairwoman CAPITO. Is that meeting with success, or— 

35 

Ms. SANCHEZ. Limited success. It’s not enough and it’s not fast 

enough. My understanding is this is sort of a low bar, but compared to NSP programs around the country, we’re quite successful. 

Chairwoman CAPITO. It’s a little discouraging, just because 

there’s billions and billions of dollars in there. 

And in the Dodd-Frank Act, there was another, I think, billion 

dollars that was put into that program. I was wondering how successful it was being. 

I will go to Mr. Duffy for more questions. 

Mr. DUFFY. You have all—I think we were talking about the traditional analysis you do on your loans, whether it was historical 

performance, collateral, character, there’s a whole bunch of different factors you would look at. 

What I keep hearing is those traditional factors, based on your 

relationship with the individual, that has been thrown out, and 

you’re managing your loans for the file. So when the regulators 

come in, the file looks appropriate. 

Is that the case? Or are you still able to go with some of these 

traditional analyses? Anyone on the panel? 

Ms. WESENBERG. I would have to agree with your comments. I 

think we certainly know the businesses that we’ve dealt with for 

a long time that have the character. 

We do try to back into it and make it look good on paper, so to 

speak. But sometimes you can’t because of property values declining. It could be a good performing loan, but because of that, you 

can’t renew. And that is because of the examiners. 

If we had an option on those loans, we would most likely renew 

because we have a good relationship, we know that borrower, but 

it puts us in a position not to. 

Mr. DUFFY. But to be clear, the performing loan is—there’s no 

default? 

Ms. WESENBERG. Correct. It means they’re making their payments. 

Mr. DUFFY. They’re making their payments every month, but because of changing valuations and pressure from regulators, you’ll 

pull those loans? In essence, is that what’s happening? 

Ms. WESENBERG. Yes. 

Mr. DUFFY. I just wanted to make sure I was clear on that. 

Before I come back over to the right, I want to talk to you about 

the CFPB because we passed a bill in the House that’s waiting in 

the Senate. And it was going to streamline the CFPB, and make 

it more accountable. 

One of my concerns with that bill was that, basically, to have 

FSOC review rules that came from the CFPB, you almost had to 

have a complaint that the rule from the CFPB was going to create 

systemic risk to the economy as a whole. 

And one of my concerns about that was—I don’t know how any 

of the four of you go to FSOC and make the claim that the way 

this rule impacts you and your credit union or your bank is going 

to create systemic risk to the economy as a whole. 

Maybe you guys are more compelling than I think you are, but 

now, if you’re Bank of America, if you’re U.S. Bank, if you’re Wells 

Fargo, those bigger banks are able to go in and make that arguVerDate Nov 24 2008 16:07 May 21, 2012 Jkt 072620 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\72620.TXT TERRIE
36 

ment. They have a far larger claim that the rules that impact them 

can affect the economy. 

Am I wrong in that assessment? Do you think you can go in 

there and make those claims and change rules that come from the 

CFPB the way the law has been currently written? 

Because if I’m wrong on that, I want you to tell me. 

I think that what’s important is we want to make sure that we 

give a voice to our small financial institutions to have push-back 

on rules that impact them. Because if they impact you, they impact 

our community as a whole. 

And I think we see the connection between lending, expansion, 

and jobs. 

One of my concerns was with what Mr. Matthiae indicated, and 

I have heard this before: Folks who have been in business for a 

while will say, if I had to start my business today, I wouldn’t be 

able to do it. 

I will use Ron Wanek as a example. He started Ashley Furniture, 

he says in 1971. He knew how to make furniture, and he knew how 

to sell it. He started his business in a little shop and grew it into 

a billion dollar business. 

He said, ‘‘If I had to do it today, I’d never be able to do it because 

of all the mandates and regulation and the red tape.’’ 

And to hear you say that as well is disturbing. What has 

changed, do you think, between 1993 and today that makes it so 

much more difficult for folks with an idea to pursue that dream 

and invest and work hard? 

Mr. MATTHIAE. My original business plan was, they have parts, 

I’m going to paint them. That was the plan. 

I had 3 weeks to get the financing, find a building, get the equipment, and I had a whole lot of cash. Not. 

That wouldn’t happen today, pure and simple. 

Is that how every business would start? Heck, no. I wouldn’t recommend that for anybody, by the way. 

But at the end of the day, that’s why I’m here today. It’s not for 

myself, it’s not for—my company is fine now. We are actually a better company, I think, than we were 3 years ago. 

But when you go to start a business, there are very few business 

plans that are going to show a profit in that first couple of years, 

no matter how good that business is. 

If you present that to a bank or any—you lay it out, and it’s already a classified loan, and you haven’t even—the ink isn’t dry. So 

you’re already in a classified segment. 

The amount of cash you need down would be so high that those 

loans are just—you can ask the banks that question, but I don’t 

think any of them would touch me today if—other than the bank 

that I went to, which happens to be across the table, and in the 

back of the room, actually. 

They knew that I was a hard worker and that I knew what I was 

doing. And at the end of the day, that meant something. I don’t 

know of a form that you can fill out that says, okay, this guy knows 

what he’s doing. There has to be that heartbeat there. And there’s 

no wiggle room anymore, with all these forms you’re creating. 

With all the restrictions, it’s difficult. Business was much simpler 

back then, as well. 

37 

Today, we have a very good relationship with our local DNR, but 

the DNR and the EPA aren’t on the same page. 

So you can be totally compliant with the DNR, and the EPA can 

come in and shut you down because you’re not. We have specialists 

in just that part of regulation. 

It’s unfortunate that you feel that you’re complying and then you 

potentially could not be because another agency says you’re not. 

But it’s those types of issues that are stopping small businesses 

from either starting or—I feel for the florist who is struggling. 

They’re not going to be able to create any jobs. They’ve been a twoperson company or a business forever, and they’re happy and they 

were successful. And for whatever reason, things are happening to 

them. Who does help those people? 

It’s not right. And it’s certainly going to do—when you hear that 

businesses are—and homeowners are making their payments but, 

again, it comes down to these appraisers that are—that the market 

is flooded with foreclosed properties. 

Obviously, you could never replace these facilities or buildings or 

homes for what they’re getting sold for. In some cases, the higher 

the value, the worse it is. 

So, at the end of the day, let banks be banks and judge people. 

And somewhere there should be a—if you’re going to do a rating, 

that should count for something. Somewhere, that experience, 

that—whether it’s a college education, something substantial with 

your past business experience. 

I graduated from high school, by the way, and then I got a ton 

of education form the school of hard knocks. I have paid for many 

Harvard educations by several mistakes. And so, I have one of the 

most expensive educations you can get. I have made more mistakes 

than most people, but you learn from your mistakes and you go forward. 

At the end of the day, let banks judge people and give that some 

credit. It still should be a solid loan. 

And I agree, this Wall Street mentality, the quick strike, make 

the quick buck and get out of it, small business isn’t like that. 

Homeowners aren’t like that. They want to live in a home. This is 

their home they want to buy. 

A business is—this is my—I want to sell these flowers. But they 

need to keep on selling flowers. If they’re making their payments 

and, just because an appraiser says their property is worth less 

than what they may or may not owe, that was a solid loan in 2007. 

Today it’s junk? And you’ve made payments for 5 years? It makes 

no sense. 

Mr. DUFFY. Just quickly, are you a billionaire? 

Mr. MATTHIAE. I’m not a billionaire, but I am a millionaire, yes. 

Mr. DUFFY. Are you a corporate jet owner? 

Mr. MATTHIAE. No. 

Mr. DUFFY. Are you involved in big oil? 

Mr. MATTHIAE. I do have a jet ski. 

Mr. DUFFY. And you just—you guys just hired 30 new people; is 

that right? Or roughly 30? 

Mr. MATTHIAE. We have hired, since the first of the year, about 

120. 

38 

Mr. DUFFY. 120. So let me just—I’m going off in a little different 

area. 

If we could just raise your taxes a little more, would that help 

you create more jobs in central Wisconsin? If we just got a little 

more money out of your pocket into the Federal coffers, could you 

do a better job of putting more people to work? 

Mr. MATTHIAE. If you would do a better job of spending that 

money. 

I think, at the end of the day, I don’t have a problem paying 

taxes. I have been at both ends of the spectrum. If I’m paying 

taxes, that means I’m successful. 

However, there is a limit. And when—when cash is—you need to 

keep building a balance sheet. How do you build a balance sheet 

when you pay 30, 40 percent in taxes? 

You have your depreciation. You have all these tax items going 

on. Yet, at the end of the day, you could tax-smart yourself right 

out of business, according to Ms. Wesenberg there. 

You could make your payments, but you could have your accountants write your business down so far that you’re going to be 

out of ratio and guess what, you’re out. 

Mr. DUFFY. What you’re telling me, and I want to make sure 

that I’m clear on this, is as a constituent and as a job creator, you 

would say that you could create more jobs if we tax you more? 

Mr. MATTHIAE. Oh, no. No. 

Mr. DUFFY. I just want to be clear. I want to help you create 

jobs. And if we could really do that by raising your taxes, I would. 

Mr. MATTHIAE. The deal was if you did a better job of spending 

money that I pay in, then it would be a good investment. 

You guys are not going to spend your way out of this. You need 

to cut the programs. You need to cut spending. You need to get 

your own house in order. 

And to keep taking us further in debt isn’t the answer. I’m working very hard to get out of debt. I’m working very hard to get my 

balance sheet in order. And I work every day at that, and I think 

most people sitting here do that. 

So it’s unfortunate that our country, which is—I never served in 

the military, but I think if I ever served in the military, I would 

be pretty upset with where things are going today. 

The freedoms are being eaten up every time we make a new law. 

And these laws are made for—there’s consequences. 

In business, any business, when you make a change, you have 

to follow that change through the whole process. Because what 

started out very good, with good intentions, doesn’t turn out so 

good always. And I think the same thing is true with the regulations and with laws. 

Mr. DUFFY. I yield back. 

Chairwoman CAPITO. Thank you. 

Mr. Huizenga? 

Mr. HUIZENGA. I appreciate that. I’m going to have to use that 

line, ‘‘jet ski owner.’’ 

It is interesting. As you were talking, I was reflecting back on 

my own family business. How my family got involved in ready-mix 

concrete was because when my dad and my uncle were digging 

39 

basements and building roads for people, they finally looked 

around and said, we don’t have enough concrete coming in. 

And, as you said, it’s not a way to start a business, but I think 

that’s exactly how most businesses start. They see that need and 

they go to fill it. 

That’s a concern I have, as well, is now, with the parameters 

that have been placed on there, all—and many times, for good intentions, we have just created these choke points that people can’t 

get beyond. 

I appreciate my colleague from Wisconsin here with his line of 

questioning about the CFPB. And that’s something that we get to 

pursue. I sit on the subcommittee, and we get to pursue that on 

Wednesday. 

Right, Madam Chairwoman? 

Chairwoman CAPITO. Right. 

Mr. HUIZENGA. He’s probably too modest to tell you that was his 

bill that was trying to introduce some modicum of reasonableness 

into this whole process. 

And all of us on that committee were pretty much vilified as we 

were trying to protect the small banks and the credit unions here 

in central Wisconsin, and I was trying to do it in west Michigan, 

I know Jim was trying to do it in Ohio. 

That is the kind of attitude that I think is getting in the way of 

trying to find new solutions as we’re moving forward on this. And 

so that gives that sort of, that holy writ from on high sort of aura 

around this piece of legislation. 

We just have to be honest with ourselves, and that’s why I appreciate that conversation. 

And Mr. Bauer, right? Kurt, right? You had talked a little bit— 

this is a point that we all need to know about. Boiler MACT—M– 

A–C–T—Maximum Achievable Control Technology. 

There were two pieces of legislation, one dealing with boilers, the 

other one dealing with cement plants. I happen to know a little bit 

about that one, and you’re right. 

I also have a constituent who owns a company that makes those 

boilers. And under the regulation that has been proposed, not quite 

implemented yet, but proposed by the EPA, in the case of cement 

plants, we would shut down 20 percent of all the cement plants in 

the United States. 

Forty-six percent of all cement is created in China. Guess where 

it’s going to be coming in from? And they have a little bit less concern about what they’re putting into the environment than what 

we do. 

Exact same thing with the boilers. Last week, when I was back 

in the district on our district work period, I sat down with this 

owner from Hines Corporation—H–I–N–E–S—not the ketchup people. 

But he was telling me he has a number of contracts, potential 

contracts, for these boilers and that they’re frozen; that lack of certainty has caused these people who are wanting and needing to buy 

a new boiler from him to not do so, because even if they bought 

that brand new boiler, which would almost double their efficiency, 

it still would not come in compliance with what the proposed rules 

were from the EPA. 

40 

And in the area of the cement, the EPA was proposing regulations that were 5 times more stringent than the European Union— 

5 times more stringent than the European Union. And it parallels 

that with the boiler. 

So that is the kind of thing that I’m very concerned about. I believe it was you who said, it’s not just Dodd-Frank; it’s overregulation on a lot of different areas. 

I am just wondering if you can maybe expand on that uncertainty element and how that may be affecting the business owners? 

And, Mayor, if you have any businesses in your area that are 

dealing with some of those things? 

Mr. BAUER. I’ll just make a comment, and then I’ll yield to the 

mayor, because I’ve already had a chance to talk a little bit about 

this. 

You look at the stimulus package that we passed, I think that 

was in 2009, almost a trillion dollars and a lot of consternation on 

whether or not that was effective. 

It was supposed to prevent us from going over 8 percent on unemployment, and we’re somewhere north of 9 percent. We’re a little 

bit better here in Wisconsin. 

But I think that a lot of the Federal spending has been undermined by the compression layer of regulation coming down from 

Washington. It absorbs the benefit and negates the impact on the 

economy. 

So I think, if there’s a message that I can deliver, whether it’s 

Dodd-Frank, whether it’s EPA, whether it’s some of the things that 

we’re seeing from the Department of Labor with OSHA regulations 

and what we’re seeing with health care reform and the uncertainty 

that creates for small businesses in particular, try and create certainty because— 

Mr. HUIZENGA. I’m sorry. I have to interrupt, though. 

So you’re not in favor of small children becoming asthmatic? 

Mr. BAUER. No. No. 

Mr. HUIZENGA. Or elderly people dying? 

Mr. BAUER. I think the— 

Mr. HUIZENGA. Or workers being injured on the job? 

Mr. BAUER. No, we’re not in favor of that. 

Mr. HUIZENGA. I just wanted to clarify that. 

Mr. BAUER. But the OSHA regulations, in particular, considering 

you ended with that, is analogous, I think, to what’s going on in 

banking because you have the rules and then you have the examiners who go on site and they have tremendous leeway. 

And what we’re hearing is is that they go on site, they give the 

factory or the work site a clean bill of health, and then they come 

back the next day and say, I was told that I have to write you up 

on something. 

It creates more and more uncertainty and frustration. And I do 

think that is just another example of the problem that we’re talking about here today. 

Mr. ERICKSON. Just to expand a little bit, too, Madam Chairwoman, when we’re talking about how do we stimulate small business, how do we get things going there, I think—and I said it’s a 

tough question. And it really is. But I just wanted to expand on 

41 

that a little bit, as it relates directly to what we’re referring to 

here. 

It’s not—I don’t know if it’s stimulus money coming down here 

as much, or how it can be done for small business. We’re talking 

about the mom-and-pop organizations that are 20-year loans. 

The big issue is, it can be stimulus money, but it has to come 

from a different direction. 

Most small businesses—and I’m talking, again, the 20 and smaller. Once they develop and they start to grow, they’re—and I did the 

same thing. You look at concentration. 

I mentioned before that I do have some commercial buildings. 

And I told my son this, who is working into the business, you have 

to have some stability. Your stability becomes the properties. 

That’s the only way you can stabilize your business. 

You build the equity in those properties, and then you look at it 

saying, I need working capital. If I don’t have money here, I can 

go borrow against that. And now it’s really difficult to do that. 

It also means retirement for so many of the small businesses. 

That’s what they work for and that’s what they build. And they put 

all their energies and efforts into real property. And all of a sudden, this real property isn’t worth anything anymore. 

Now, you’re looking and saying, how do I maintain, how can I 

keep operating? You go to the bank and they say, it doesn’t matter 

if you are over 800 in your credit rating; we can’t give you any 

money. 

Why? Because you don’t have that equity in your property anymore. Why don’t they have equity in their property anymore? Because it has been devalued. 

And it’s frustrating. I look at my son coming into the business. 

It’s frustrating as heck for him because I always told him, too, 

sweat equity. You put everything in. 

A lot of the buildings we purchased needed—they were projects, 

not that it wasn’t a good investment on our side from the standpoint of building stability. But, we looked at, then, also building equity, because the more we put into it, the more they’re worth. 

Now, they’re twice the building that they ever were, but they’re 

worth half as much. And so a lot of sweat, but not much equity. 

And so now we’re looking at it, and we’re looking at growing, 

with him being young. At my age, I’m not looking at a lot of growth 

anymore. But—gray hair. 

But we’re looking at the—what’s in it for him, and I’m saying— 

he’s saying, we should do this, Dad, we should move forward here, 

and I agree with you 100 percent. And I say, okay, where are we 

going to get the dollars to do it, because you’re absolutely right, 

that’s where we have to go. 

But if you go talk to the bankers that we’re working with all 

along—and my banker is apologetic all the time. He says, jeez, I 

know your credit rating is awesome; I know you have everything 

going for you and you have always done everything right; but, 

there’s no money in your building anymore. No. You have already 

borrowed what you can. 

That’s where the stimulus needs to come in, because I still believe that it’s those small businesses that create all the jobs. That’s 

where they come from. 

42 

Mr. HUIZENGA. My time has expired. 

Chairwoman CAPITO. All right. 

Mr. Renacci? 

Mr. RENACCI. Thank you, Mayor; and I would agree with you. 

What is interesting about stimulus from Washington is, when it 

goes up, it never comes back down in the same amount. 

The best stimulus is what Mr. Matthiae talked about. When you 

cut costs, you can get your costs down to where you can stimulate 

your own business by using your own dollars. 

Mr. Matthiae, I also appreciate your comments. At age 24, I bor- rowed $265,000 with $10,000 in the bank and just the background 

experience that the bankers believed in me that I was able to start 

my own business, too. 

The concern I have now, and I’m going to look over on this side, 

is I’m concerned about those who have started their business and— 

and I know there are some examples in my district, where people 

started their business, they’re profitable, they’re making the dollars 

they need to make, they’re making maybe even the same amount 

of money they made 3 or 4 years ago. But their building value went 

down in one example, from $5.5 million down to $4 million, and 

their notes are being called. 

And now, all of a sudden, even though they’re making the same 

dollars and they’re the same stable company, just because their 

building value went down, their business is somewhat in trouble 

because they can’t refinance. 

Can you tell me some examples, not specifics, but how many 

times you’re starting to see that in the banking industry? And even 

in the—either of the bankers, is that something that’s happening 

here, too, and you’re seeing that often? 

Mr. NAGEL. I would say that’s what I was alluding to earlier, and 

what Mark was alluding to earlier is we’re seeing equipment hold 

its values; but as it relates to real estate, an example I use it that 

it is devalued 30 percent. 

If we don’t have collateral to shore up that loan and the bank 

examiner walks in, they’ll require us to downgrade the credit or 

create a—make it substandard, which we’ll have to go from a 1 percent reserve on a million dollar loan to a 15 percent reserve. So the 

expense to the bank is quite large. 

We’ll be ‘‘forced’’, is the word I use, to go to the customer and 

ask them for more collateral, which they don’t have, which then 

creates a default, which then creates a piece of property on the 

market that’s already devalued that, once the bank has it, now it 

gets devalued to 50 percent. 

So it just—the downward spiral is going to continue every time 

the renewal comes up because real estate values are continuing to 

go down. 

The same thing is happening in the residential market. That’s 

why there are 2,000 foreclosed homes that no one’s buying in Milwaukee, because they’re not worth anything. 

Mr. RENACCI. So how many customers are you seeing this occur 

to? Five percent, 10 percent? I’m talking about good solid businesses. Their model hasn’t changed, their economics haven’t 

changed. The only thing changed is some of their assets have been 

devalued through foreclosures of other properties. 

43 

Mr. NAGEL. Yes. Almost all of our small business customers are 

seeing their commercial real estate devalued. All of them. 

We had a conversation with a customer last year who’s performing, everything is excellent with it, and we had to ask them 

for more collateral. 

They went and called another bank and the bank told them the 

same thing. So it’s happening daily. I don’t know the exact percentage, but I think anyone who is attached to commercial real estate 

is seeing them going down, even on brand new buildings. 

We’re seeing it in—another example is, Friday we had a residential appraisal that, because of market comparables, came in 25 percent less than the cost to build, than the actual cost to build. So 

we can’t give them that loan unless they come up with the extra 

dollars, according to the regulation. 

Mr. RENACCI. Right. It’s the regulators. It’s the appraisals. 

Mr. NAGEL. Right. 

Mr. RENACCI. And that’s what I keep trying to get at. 

So I think of the person who has started that business, and now 

has been in business for 20 years, they are coming to you and saying—or you’re going to them and saying, we need you to put more 

capital in? 

Mr. NAGEL. Right. The simple solution is to let us lend on cash 

flow. If the customer cash flows and the debt coverage ratio is adequate, let us lend; don’t criticize the loan. That’s the solution. 

Mr. REINHART. Just a couple of comments on the subject. 

Number one, the commercial real estate appraisers are coming 

under a lot of pressure as well, because they’ve been criticized because of the fact that when these properties become distressed, 

they go down in value. 

So I think that there’s a chilling effect with them, as well; that 

they have a tendency to appraise these properties for less than 

they did in the past, for their own protection so that they can be 

safe. 

Separate from the fact of whether or not you’re going to be able 

to continue to work with a company, as was pointed out, the ability 

to fund expansions and help businesses grow, because of those collateral values, is a very limiting factor. 

You may be able to continue to work with a company to help 

them through these difficult times, difficult times meaning because 

their real estate is worth less, but your ability to significantly loan 

more money to them to help with the expansion is impacted. 

Mr. RENACCI. In my district, there was a business that appraised 

for $2.7 million, had a million dollars’ worth of debt on it, and a 

$100,000 line of credit. When the $100,000 line of credit came due, 

the bank didn’t have the cash to pay the $100,000 line of credit. 

That business today is in foreclosure and is being sold at probably 

$200,000 to $300,000, even though the bank had $1.3 or $4 million 

worth of debt on it. 

So again, the process that we’re talking about is hurting—and 

this business was making money. It’s sad that we’re seeing that. 

That’s why my concerns are that it’s affecting those business owners today. 

I see I’ve run out of time. Thank you. 

Chairwoman CAPITO. Thank you. 

44 

I have no further questions. Mr. Duffy wants to make a closing 

comment and then I’ll close up. 

Mr. DUFFY. Again, I appreciate the subcommittee coming and 

hearing everyone’s views here today, to take the insight and information back to Washington. 

I appreciate the panel coming in and sharing your views. I know 

sometimes it’s not always easy to come in and tell us what you 

think and do it publicly. We appreciate that. 

And I guess I would just leave all of you with a message that 

I do think, especially in the House, there is a movement afoot to 

say, let’s try to do things better. 

It’s not—no one’s saying let’s get rid of Dodd-Frank, let’s not 

have any regulations. That’s not what we’re saying. But we can do 

it more effectively. We can streamline it. We can make it easier for 

our businesses to expand and grow and create jobs, easier for our 

banks and credit unions to get capital out and still be safe and 

sound. 

And I guess my pitch to all of you would be, if you have any 

ideas, if you have any information, don’t be afraid to share it. I 

think the best ideas do not come from Washington. I guarantee you 

that. They come from right here. 

And so, if you’re willing to share those ideas with us, you have 

a Committee and a House with open ears, and we’ll take those 

ideas and implement the best ones. 

I appreciate you coming in today. Hopefully, this is just the starting point of many more conversations that we can have to hopefully 

make government work better. 

Thank you all for coming in. And I thank the chairwoman and 

my colleagues for joining us today, as well. 

Chairwoman CAPITO. Thank you. 

I would like to thank you, again, Mr. Duffy, for inviting us here. 

This has been, I think, very interesting and illuminating. 

And I hope that you feel that it was worth your time. It certainly 

was worth our time to come and listen and hear. 

I’m certain that we would hear very similar things in all—and 

I have been hearing that in my district. 

And please take heart that there’s a lot of cynicism around Members of Congress. What are we down to now? A 9 percent approval 

rating? 

And a lot of is, I think, a view that we don’t listen and that we 

don’t take back what we hear, that this is just window dressing. 

And I want to assure those in the audience and those who have 

taken time out of their valuable business days, that we are listening and we are going to take this back. 

I just leaned over to Mr. Huizenga and I said, ‘‘What do you do 

about the appraisal issue?’’ That is obviously a resounding theme 

here. 

And so, we’re already starting to think what kinds of built-in 

mechanisms we can put in to help with that. 

The Chair notes that some Members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. 

45 

And with that, this hearing is adjourned. Thank you. 

[Whereupon, at 12:45 p.m., the hearing was adjourned.] 

(47) 

A P P E N D I X 

October 31, 2011 

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