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Hearing of the House Small Business Committee: Creating Opportunities for Small Businesses in an Economic Recovery


Location: Washington D.C.

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REP. STEVE CHABOT (R-OH): Thank you, Madame Chairwoman. And thank you for holding this important hearing this morning. And I want to thank the panel for the testimony that they'll be giving us here shortly.

All of us are aware of the recent turmoil and continuing volatility of the financial markets. These problems also touch America's small businesses. Availability of credit is reduced, thereby dampening the capacity of small businesses to create needed jobs.

Yet it is not just the availability of credit that bothers America's small business owners. They are also ordinary men and women with the same concerns about the value of their homes, the safety of their investments, and outlook for the future of their children that every American has in these uncertain times.

Given the current situation in the American economy, policies must be developed that help unleash the power, flexibility and vitality of the America's small business owners. Those policies require reductions in the federal deficit, lowering taxes, and making health care more affordable for our small business owners.

Recent actions by the federal government have increased its borrowing and debt ceiling. The federal government then is competing for debt capital with all businesses, including small businesses.

I suspect that the witnesses before us today probably cannot compete in the credit markets with the single most credit-worthy borrower the world economy has ever known, the United States government. Thus, to borrow money, the small businesses represented here and the 25 million small businesses across the country will have to pay higher interest rates to attract the credit they need to operate and expand their businesses.

We can reduce this hidden and insidious tax on America's business owners by reducing the federal deficit and eliminating unnecessary and wasteful spending. In addition to the hidden tax associated with higher interest costs, some of America's small businesses also face the prospect of paying higher taxes under some of the proposals discussed in this year's presidential campaign. Increasing the cost of credit and increasing taxes that small business owners must pay is a double whammy that these individuals and the American economy can ill afford.

If we raise the cost of operating their businesses, America's small business owners will limit hiring and investment. In turn, this would reduce economic growth and inhibit recovery from the current turmoil in the economy.

Any stimulus package that Congress considers must not raise taxes on the most productive part of the American economy, our small business owners. In fact, the stimulus package should reduce taxes on small businesses so they have more money to spend in the manner they best see fit rather than relying on how government bureaucrats think money should flow into the economy.

There's no doubt that all American businesses have made cutbacks in spending, including providing health care to their workers. This has been a longstanding problem for America's small businesses that has been exacerbated by the recent volatility of the financial markets.

Congress must find ways to make the provision of health care more affordable to America's small businesses. One such possibility would be to include the enactment of association health plans in any stimulus package. Such plans have met with bipartisan support, including my own, and also that of the chairwoman.

No one can deny that recent weeks and months are placing a strain on the finances of all Americans, including America's small businesses. Increasing the size of government, expanding the deficit and raising taxes simply is the wrong prescription for what ails America.

Congress must exercise its power wisely by reducing the deficit, lowering taxes, and improving the ability of small businesses to provide health care to their workers.

Before closing, I'd like to thank the witnesses, particularly Tom Franke from my district in Cincinnati, for taking the time out of their busy schedule and their hectic times in these uncertain times in running their businesses to come here to Washington and provide their views to this committee. I know we all look forward to hearing it.

And with that, I yield back the balance of my time, Madame Chair.

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REP. STEVE CHABOT (R-OH): Thank you, Madame Chairwoman.

And it's my pleasure to introduce Thomas Franke, executive vice president and chairman of the board of Riemeier Lumber in Cincinnati, Ohio.

Riemeier Lumber is a fourth-generation building materials company founded in 1925 by Harry D. Riemeier and his son Harold to service the furniture and wagon industries. At the end of Prohibition, Riemeier grew by selling soft wood to distilleries and whiskey warehouses. During World War II, the company supplied lumber and plywood to the war effort and struggled with the challenges of price controls and scarce resources.

Post-World War II expansion and the homebuilding boom led Riemeier to supply lumber to the homebuilding industry. Other family members joined the company as it expanded. Riemeier weathered volatility in the housing market over the years, and the business continued to grow. However, the housing downturn of the past two years, coupled with difficult economic conditions, caused the company to begin layoffs, including people who had worked for Riemeier for 20 or 30 years.

Although Riemeier sales were still strong, its bank would not allow the company to borrow against millions of dollars in receivables. Efforts to find investors or sell the property were unsuccessful. Last week, the company held an auction and closed.

I want to thank Mr. Riemeier (sic) for coming to Washington to tell his story of his family's small business and to help us understand what we can do for similar companies that are struggling and need access to credit in these difficult times.

Mr. Riemeier (sic), welcome.

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REP. CHABOT: Thank you very much, Madame Chair.

Mr. Wilson, again with you if I can. Relative to the $700 billion -- which then went up to $850 billion bailout or rescue plan, or whatever terminology one wants to use, there's apparently been a number of businesses, and banks in particular, that are thinking about or trying to use a fairly significant portion of that money to purchase other institutions. What are your thoughts about that and how helpful is that and how does that affect banks like your own?

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REP. CHABOT: Okay, thank you very much. Ms. Dorfman, I'll turn to you next, if I can.

I think it's fair to say, from your statement, that the bailout, or, again, rescue plan, you had some real concerns about it and how it was structured and everything else. And of course it happened; now it's already done, so I won't ask you how you would have structured it, but now that it is the law, are there changes, modifications -- because Congress can always change things. How would you suggest that we modify this over the next upcoming months or year to make it more useful for small business folks?

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REP. CHABOT: Thank you.

Mr. Bradbury, you started in your testimony -- and I quote -- "In talking to the bank, the feeling I get is that at the lower levels they do not have a clear direction of what they can or cannot do in regards to loan approvals." Could you go into that in a little detail, what you meant by that?

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REP. CHABOT: Thank you.

And, Mr. Franke, just a couple of questions. One, where do you all go from here? Do you have any kind of plans at this point? And how many employees were there that lost their jobs over this period of time?

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REP. CHABOT: And how many other small businesses did you use as suppliers? And I assume that this will have an impact on them as well?

MR. FRANKE: Numerous, yes. They're independent wholesale people left in town and some larger ones, but, yes, we used almost everybody that was involved in the building material supply.

REP. CHABOT: Thank you very much.

MR. WILSON: Congressman Chabot?


MR. WILSON: May I follow up on that question?


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REP. CHABOT: Oh, if I did, I apologize. Well, which one of you gentlemen -- I meant you, but I've got my next question for Mr. Wilson. Mr. Brown, sorry about that. We can't see your names down there. We spent loads of money on this new room and we can't see your names. (Laughter.)

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REP. CHABOT: Thank you.

And then, this time I did aim the question to you, Mr. Wilson, if I could.

Did you have a comment?


REP. CHABOT: Mr. Bradbury.

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REP. CHABOT: And finally, Mr. Wilson, could you comment -- you're familiar with the mark-to-market accounting changes that were made some time ago. Could you comment on the impact that that had on this whole financial mess that we've seen recently?

And there have been some changes suggested and I think that are in the process of being implemented. But could you comment on that whole process and how that has affected the banks and how your books will look and why you can or can't lend because of that?

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REP. CHABOT: Thank you.

And that was one of the things which contributed to this credit crunch where banks weren't able to loan, which put us in this terrible position. Is that correct?

MR. WILSON: That is correct.

REP. CHABOT: Thank you very much.

I yield back, Madame Chair.

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REP. CHABOT: Yeah, just one final comment.

Madame Chair, I'd like to, again, thank you for holding the hearing. And I want to thank all the witnesses for their testimony. I think it's been very helpful, very informative for the committee.

And I want to especially, again, thank Mr. Franke. And you know, we have had a lot of witnesses from Cincinnati. And generally, they have happy endings. And unfortunately, this is one that's very sad -- especially for those employees whose jobs had to be eliminated. I'm sure for your family to have been in existence for 125 years -- so obviously, it was a very significant change in the environment that you operated in that has resulted in this.

And so our condolences. And we certainly hope that your family does as well as possible and your employees, to the extent that you can help them, as well. But we thought this was a story that needed to be told in these very tough economic times. So thank you for sharing it with us.

I yield back.

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