June 10, 2020

Cardin Opening Statement During Small Business Committee Hearing on Implementation of COVID-19 Small Business Relief

As Prepared for Delivery

WASHINGTON — U.S. Senate Committee on Small Business & Entrepreneurship Ranking Member Ben Cardin (D-Md.) today delivered an opening statement during a committee hearing on the implementation of the small business provisions in the CARES Act.

Cardin’s statement, as prepared for delivery, follows:

Thank you, Mr. Chairman, for convening this hearing. 

This is the committee’s first opportunity to question the two members of President Trump’s Cabinet responsible for implementing the small business provisions of the CARES Act.  Administrator Carranza and Secretary Mnuchin, thank you for joining us this morning.

When the economic cost of the COVID-19 pandemic became clear, we in Congress, and on this committee especially, recognized that we had to take special effort to support America’s 30 million small businesses.

I was proud to be part of the bipartisan Small Business Task Force that negotiated and wrote the small business provisions of the CARES Act along with you, Mr. Chairman, as well as Senators Shaheen and Collins.

Together, we created three economic relief programs for small businesses: the Paycheck Protection Program, a new grant program under the Economic Injury Disaster Loan program, and a debt relief program, which covers the principal and interest payments on new and existing SBA 7(a), 504 and Microloans for 6 months.

Over the past two months, the largest of those programs, PPP, has provided 4.5 million loans worth more than $510 billion.

When we initially created the 8-weeklong PPP in March, we thought that our economy would be performing at a more normal level than it is today, so an 8-week period for small businesses to spend their loans seemed reasonable.

As communities begin the process of reopening, it is now clear that many small businesses will not be up-and-running at the end of their 8-week period, which for many will be during this month.

I was proud to see the Senate act responsibly last week, passing bipartisan legislation that gives businesses with existing and new PPP loans the discretion to use those funds over a 24-week period, rather than an 8-week period.

Mr. Chairman, PPP is working for many employers – and the May monthly jobs report released by the Labor Department last Friday is proof. 

Of the 2.5 million jobs added back to the American economy last month, more than 1.4 million were jobs at employers in the food services industry—many of which secured loans through the program.

However, representative of the depths of the economic challenge facing this country, the National Bureau of Economic Research announced this week that the U.S. economy is in a recession and the unemployment rate remains at a historic high of 13.3 percent, a level not seen since the Great Depression.  For minorities, the unemployment rate is even higher.

While the PPP’s success is a laudable accomplishment, there have been challenges in the program that have come into sharper focus given the massive protests our nation has witnessed over the past two weeks.

The protests sparked by the death of George Floyd have raised awareness of the disparate public health and economic consequences of the COVID-19 pandemic on communities of color—Black Americans in particular.

Civil rights is still unfinished business in America.  More than 50 years ago, the Kerner Commission created by President Lyndon Johnson warned of the negative consequences of continued inequality.

The commission wrote in its report that America was headed toward “two societies, one black, and one white— separate and unequal.”

Mr. Chairman, it is no question that our country has made strides in the decades since the Kerner Commission released its report.  But there remains an economic divide between Black and white America.  

In 1968, a typical middle class Black family had less than a tenth of the wealth of the typical middle class white family. It’s the same today and this inequality exists at every level of educational attainment.  A 2018 report found that, “there are no actions that Black Americans can take unilaterally that will have much of an effect on reducing the racial wealth gap.”

For Black small business owners and other underserved entrepreneurs, the wealth gap is exacerbated by disparities in small business lending.

Minority business owners are 2 to 3 times more likely to be denied loans than nonminority business owners and are more likely to receive less funding and pay higher interest rates on the loans they do receive.

Mr. Chairman, it was with this inequality in mind that Senator Shaheen and I drafted language in the CARES Act instructing SBA and the Treasury to issue guidance to financial institutions participating in the PPP to prioritize loans from underserved small businesses.

We wanted to prevent history from repeating itself, because we knew that during the 2008 financial crisis, small business lending to minority-owned businesses fell dramatically and, for Black-owned small businesses, never fully recovered.

Secretary Mnuchin and Administrator Carranza, these well-documented disparities are why I was so disappointed to read the SBA IG’s recent “flash report,” which was prepared at the request of Senators Schumer, Brown, and myself. 

The report found that SBA’s implementation of PPP “did not fully align” with the Congressional intent of the CARES Act, because SBA did not provide guidance on prioritizing underserved and rural markets. 

Further, the report found that SBA has failed to collect demographic information for small businesses seeking PPP loans. 

While I appreciate that SBA is collecting demographic information on loan forgiveness forms and has set aside an additional $10 billion in PPP funding for Community Development Financial Institutions (CDFIs), it is important that SBA follow the Inspector General’s call to provide guidance to lenders to prioritize underserved markets.

Underserved markets often do not have access to traditional banking institutions.  That is why the SBA’s existing Economic Injury Disaster Loan and Grant Programs are so important. 

I remain discouraged that these programs — which have great potential to help small businesses seeking to adapt to the new reality of the post-COVID economy — have reached fewer small businesses than we had hoped.  

EIDL serves a particular role for businesses: it can be used for working capital needs, and it may be more desirable for the smallest businesses that do not have many employees.

The program is especially important for minority-owned and other underserved small businesses, which are less likely to have more than one employee and have fewer employees on average.

Unfortunately, the Administration has not administered EIDL in a manner that makes it a reliable resource for small businesses.

The Administration has put in place requirements and limitations without notifying borrowers, such as the decision to cap loans at $150,000, even though the statute allows them to go as high as $2 million.

In May, the Administration also made the decision to stop taking applications from non-farm small businesses—meaning restaurants, retailers, and other mom-and-pop establishments have not had access to EIDL since mid-April.  Small businesses are relying on you to make EIDL more accessible.

The Administration must become more transparent.

In the months since passage of the CARES Act, Congress has been pushing for additional data on who is receiving this aid and I appreciate that the Chairman joins me in this effort. 

How can we know which businesses still need help if we do not know which businesses have received help?

Senators Coons, Shaheen, and I are pursuing legislation to help those most in need to receive additional PPP funding, but we need data to ensure this assistance is as effective as possible.

We must act with a sense of urgency and provide this help as soon as possible.

Finally, we must do more to ensure that underserved small businesses have the tools and resources they need to adjust to the long-term economic effects of COVID-19. 

I was proud to work with Senator Booker to release a plan outlining steps Congress can take to provide greater help for small businesses in underserved communities with regard to start-up and operating capital, as well as technical training and mentorship.

The aim of our plan is to ensure that when we make it through this pandemic and when we have the next economic downturn, we have the institutions, programs, and knowledge in place to support underserved small businesses in a timely way.

Mr. Chairman, I am under no illusions about the tall task ahead of the Senate as we work to finally rid our nation of systemic inequality.

But before we can begin to make further progress, we must work as hard as we can to secure the progress we have already made, which is at risk due to COVID-19.

Last week, Connie Evans of the Association for Enterprise Opportunity told our committee that the economic consequences of COVID-19 “are projected to erase decades of minority enterprise growth in underserved markets.”

We cannot allow that to happen. 

I look forward to this hearing and to learning more from Secretary Mnuchin and Administrator Carranza about what the Trump Administration is doing to ensure that minority-owned and other underserved businesses are not left behind during this crisis.

And I look forward to continuing the tradition of this Committee by working in a bipartisan manner to provide solutions for our nation’s small businesses.

Thank you, Mr. Chairman.

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