Its. Next, testimony from financial regulators on oversight and other issues including Digital Currency, banking liquidity rules and the impact Climate Change could have on the financial industry. Held by the Senate Banking committee this is an hour and 40 minutes. [inaudible background conversations] this meeting will come to order. Today will receive testimony from the honorable randall orosz, Federal Reserve vice chairman for supervision. The honorable eleanor mcwilliams chairman of the ftse and the honorable rodney hood chairman of the ncua. Welcome to all of you. This hearing provides committee an opportunity to examine the current state of and recent activities related to regulatory and supervisory activities of these agencies. Its been over a year now since the enactment of s 2155 Economic Growth regulatory relief and Consumer Protection act and the work of the agencies to implement most of the laws provision. Your agency should also carefully review the existing supervisory frameworks and make necessary adjustments to appropriately align them with the tailoring rules and requirements. On july 30, 2019 all republican Banking Committee members and i sent a letter to the federal banking regulators urging your agencies to finalize several outstanding positions of s 2155 such as the Community Bank leverage ratio and short form call reports. Further taylor organizations to promote Economic Growth including addressing the current expected credit losses accounting standard and local rule, the interaffiliate interaffiliate margin and madden. Thank you for acting on many of these priorities. I encourage you to continue exploring additional opportunities to tailor these rules. In that july letter as well as october 2018 letter to your agencies several Banking Committee republicans and i urged your agencies to revise the volker rule. Including using your discretion to address current funds overly broad definition. The covered funds provision was left relatively untouched. I encourage agencies to take quick action to address the covered funds issue by revising the definitions overly broad application to Venture Capital other longterm investments and loan creation. Separately in september shortterm borrowing rates spiked as a result of large Corporate Tax payment coming due in 300 billion in treasuries hitting the market. Even in light of Banks Holding surplus of cash at the federate currently around 1. 4 trillion. In light of these events banks could have stepped in to alleviate the volatility in those markets by lending some of the excess cash they hold that the fed so why did they do that . Some suggested that certain aspects of that fed supervision and regulations imposed after the 2008 financial crisis may have exacerbated this problem. Specifically the treatment of cash versus treasuries. Although the fed has taken some steps to address the issue in the short term by buying treasuries and lending funds, its important that the fed reviewed the details of its current regulatory and supervisory regime for potential longterm fixes. Now quickly turning to guidance senators Tillis Purdue rounds kramer and i wrote to the gao in february asking for its legal opinion as to whether three Federal Reserve supervision and regulation letters constituted a rule under the congressional review act. In its october response gao concluded that two of the letters including one providing a new supervision framework for large Financial Institutions in another related to recovery planning our rules under the cra and are required to be submitted to congress for review. During the Banking Committees april hearing on this very issue i urged your agencies to follow the cra and submit all rules to congress. Even if they had not gone through formal notice and comment rulemaking. To continue providing more clarity about the applicability of guidance. I encourage the federal banking regulators to take a more deliberate approach Going Forward and take any necessary steps to rectify informal guidance that has not been submitted to congress. In january 2019 the ncua announced a portion of regulations that would be reviewed as a part of the process through which the agency reexamines all its existing regulations every three years. The Comment Period for that review process has since closed and i look forward to learning more about the regulatory recommendations provided to the ncua and the roadmap fractions Going Forward. Finally, the Banking Committee has been exploring Digital Currencies over the last few congresses. Especially in light of the recent development of the Digital Currency started by facebook. In july i asked Federal Reserve chairman powell about his understanding of and the feds role in the project. Although chairman powell noted that the fed has set up a working group to focus on libra and is in contact with other regulatory agencies he also said there is not any one agency that can stand up and have oversight over this. Given its scope, regulators across the globe continue to evaluate libra if potential impact in the marketplace and consider appropriate necessary regulatory responses. It seems Digital Currencies are inevitable. In the u. S. Needs to lead by providing clear rules of the road. During this hearing i look forward to learning more about the status of addressing the overly broad covered funds definition in the volker rule especially with respect to longterm investments, how the agencies are thinking through the recent turmoil in the repo market and what adjustments might be appropriate for longterm fix. Whether the supervisory framework that applies to banks currently needs to be updated and better reflect the changes made in the tailoring rules and how the agencies are thinking about the labor project Digital Currencies including what the u. S. Regulatory framework into what the u. S. Regulatory framework merits consideration to balance innovation and protect users and privacy. I thank each of you for your willingness to join the committee today to discuss your agencies regulatory and supervisory activities on these important issues. Senator brown. Thank you mr. Chairman. Welcome to the three regulators. I want to start by noting typically when we have financial irregularities testify the currency is also here. Mr. Auden had a conflict today. He is expected to announce changes to the Community Reinvestment act shortly changes to the Civil Rights Community and others are very concerned about. I share those concerns i expect we will have him up before the committee to talk about this proposal and other activities at the occ. We all saw how wall streets financial schemes hurt regular people when they blow up in bankers faces like they did 11 years ago. You all saw the devastation of the crisis whether you are a staffer in the Senate Whether serving at the agency you now lead who weathering the private equity firm after a stint at treasury you had a front row seat, you could argue about or discuss response ability, we can talk about that later. Thats why im concerned about the collective amnesia you all appear to have. As you make changes in bank rules. Devastation in neighborhoods like mine in cleveland, the next time it complicated and bigger spaces, what is sometimes harder to see are the schemes that hurt families and the economy even when they work exactly the way wall street intended them to work, my state is a setting of one of the schemes, 12 years ago before the financial crisis a giant private equity firm bought a Nursing Home Company based in toledo ohio that operated facilities nationwide. Soon the Nursing Home Company was being strangled by debt from loans that laid off hundreds of staff, let its patients suffer under negligent horrifying condition. According to the Washington Post they met there was not enough nurses to respond to patients. The Health Code Violation rose dramatically in pennsylvania, a patient broke her hip and crashed to the floor when a staffer tried to do a twoperson job and move her on her own. Patients face other Living Conditions that no human being should have to endure waiting and soiled clothing in dirty beds with help that would never come in all the while the wall street private equity firm was extracting more and more profits, last year the Nursing Home Company went bankrupt and it did not stop the private equity firm for making huge profit on their investment. That is what happens when leveraged loans and collateralized loan obligation and leverage by design by wall street, wall street extracts the profit out of the company the rest of us workers, patients, family and community paper. Today wall street looks for profit anywhere they can find them in these schemes squeeze money out of every part of the economy. The hospital pennsylvania or it may be in ohio but its also manufactured Home Communities and i have seen some of those are private equity cayman and raise the rent of 50 and people are having to live there at much higher rent than they did not expect to manufactured Home Communities in New Hampshire not just harming families but entire communities. Imagine how bad itll be if these complex Financial Transactions blowup like the sub prime mortgages did in 2008, this is one of so many challenges working families face, we have a report this week that shows half of American Workers are stuck in lowwage jobs. One in four families spend more than half of their income on retina you till the spring think of the tenure economy where growth is declined the last couple of years but think about that half of American Workers are stuck in lowwage jobs and one in four spent half of their income in rent and utilities, if one thing goes bad in their lives they lose their home. 40 of americans are so short on cash they would be forced to borrow money to cover 400. Those of the people the three of you work for, you dont work for the president or wall street or the banks you work in part for the half of the population that cannot come up with 40 that cannot come up with 400. More and more families have debarred to get Student Loan Debt, credit card debt, Student Loan Debt all higher before the cross is. Wall street pulls out more of their paychecks rate if regular americans are struggling in ten years into the recovery when the stock market is booming, what will happen when there is a recession. This cannot be how the Financial System should work, the regulator job is to protect profit from big banks and Big Companies and protect our economy and Financial System in ordinary families that the system is supposed to serve not the other way around. When the president , trump talked about draining the swamp he really meant the train workers in giving wall street free reign as we have seen to happen in the train workers give them free reign to pray on them and bring every last cent out of the poor community. President uses his phony populism, racism, antisemitism, antiimmigrant slander to divide and distract us from the ways he and his cronies have betrayed working families and struggling more than ever. That is not how democracy should function, im worried if you do not stand up for our families so many in our community and economy and our democracy is at risk. Thank you. We will turn to our witnesses and i will ask you to give your remarks. Thank you very much. Chairman crapo and Ranking Member brown, thank you for the opportunity to appear today. My colleagues and i join you on the cusp of a significant milestone which is the full and faithful implementation of congress effort to improve regulation in the form of the Economic Growth regulatory relief and Consumer Protection act, today i will review the steps weve taken and share information on the Banking System and discuss the continuing need to ensure the framework is coherent and effective. The act was an effort to consolidate a decade of work of hifinancial reform in response o the conditions facing the organizations and the customers. It was also rooted in longstanding congressional practice of reviewing the work done in the immediate aftermath of the crisis of addressing any gaps and of ensuring public and private resources go toward the best and most efficient use. The report which is delivered with my testimony today confirms that we have a stable healthy and resilient Banking Center with the quiddity positions, stable Loan Performance and strong loan growth, steady improvements in safety and soundness and areas of focus in the operational resiliency and cyber related risks. The Banking System is substantially better prepared to manage unexpected shot today and before the financial crisis. And now when the waters are calm is the right time to examine the efficiency and effectiveness for protection against future storms. We last years reform, they made a significant down payment on that in less than 18 months after we implemented all the provisions. Earlier this year we completed a cornerstone of legislation tailoring our rules for regional banks and building on the existing work with greater risks and Higher Standards and more scrutiny. We previously relied heavily on the total assets for those risks and for the cost of the Financial System would incur, the simple asset was critical, rough and ready risk sensitive nor complete. Our new rules and play broader set to assess the need for greater supervisor scrutiny and maintain requirements with oversight for the largest and most complex forms. We and our interagency colleagues have also worked on a range of measures to address the issues they think Smaller Banks in particular attention to the Community Bank business model. Our goal through this period of intense bigotry activity has been to faithfully implement congress instruction in those instructions speak to a broader need in central to her ongoing work to ensure our Regulatory Regime is not only simple and efficient and transparent but also coherent and effective. Financial regulation like any area of policy, is a product of history. Each component dates from a particular time and place and designed, debated and enacted for particular set of needs. No rural could ever be truly green. Gaps in areas for improvement will always reveal themselves over time and our responsibility is to address those gaps without creating new ones to understand fully the interaction among regulations to reduce complexity where possible and to ensure our counter rulebook supports the safety, stability and strength of the Financial System. My colleagues and i are paying attention to coherence in a capital regime for a smooth transition. To a sensible treatment of new products and technology and to clear consistent supervisory communication which reflects and reinforces our regulation and law. My written testimony in the supervision report cover each of these areas in greater detail and i appreciate the opportunity to discuss today. Thank you. And i look forward to answering your questions. Thank you very much. Chairman williams. Members of the committee and fellow staff, thank you for the opportunity to testify today. 18 months ago i began serving as a 21st chairman of the ndi c. During this. They have undertaken a great amount of work with a particular emphasis on three of our goals. Strengthening the Banking System that continues to evolve, ensuring fdics can meet the needs of consumers and businesses, and Technology Solutions and encouraging innovation at Community Banks and at the fdic. The fdic has progress in each of these areas and i appreciate the opportunity to share the progress with this committee. The fdic work to strengthen the Banking System i like to begin regarding the current state of the industry. U. S. Banking industry has an extended Economic Growth. In july, this expansion became the longest record in the United States by nearly every metric the Banking Industry is strong and well positioned to begin supporting the United States economy. The state of the Banking System remains strong fdics continuing to monitor changes in work to strengthen the Banking System by modernizing our approach including outdated regulation transparency, enhancing preparedness, assessing new and emerging in creating the workforce of the future. With written statement details the many actions fdic has taken in each of these areas, these efforts are toward a stronger Banking System there are areas in which the need of consumers and businesses must enter must be addressed. We have been working diligently to update our regulation governing which are put in place over 30 years ago. In addition we are working with fellow regulators for Community Reinvestment act and provide clarity seeking to offer loans. Finally, perhaps no issue is more important and more central to the future of banking and frankly the present then innovation. Technology transforming the business of banking and the way they interact with the banks and the way banks do business, regulators cannot play catchup but must be proactive including banks, consumer groups, trade associations and Technology Companies to understand and foster the adoption of technology especially at Community Banks. Since 1933 the fdic has played a role with confidence in the nations Financial System. This Mission Remains as critical today than it was 86 years ago but for to achieve our mission in a financial environment the agency cannot be stagnant. Last listening to the regulators institutions, consumers and other stakeholders. At the outset of this offer i emphasized the need to reverse the trend of having those affected by regulation to have their voices heard. Instead on the home turf. The 26 states in 26 months has been incredibly informative and underscored the importance of perspective in the washington beltway. I look forward to visiting the states in learning more about the issue to consumers and communities across the nation. Thank you again to testify today and i look forward to your questions. Thank you. Ranking member brown and members of the committee, as the 11th chairman of the credit administration, i am honored to appear before you and thank you for the invitation. I have written a detailed statement that you all have for the record but in my brief moment to speak for my opening comments i like to talk about three areas that we have mutual interest, the current state of the Credit Union System, secondly the effort to foster greater Financial Inclusion and cybersecurity. Ladies and gentle men, strong growth trend and Credit Unions are continuing into 2019 roughly 119 million members are a part of the Credit Union System today that accounts for one third of america being part of a credit union. Credit union asset 1. 54 trillion through the end of the Third Quarter of 2019. They have also reported a very strong aggregate network ratio of 11. 39 roughly 400 basis points above the 7 statutory requirement, the credit union shares healthy at this time with roughly assets of 16. 7 billion, well above the 10 million level that the fund was that a decade ago. We also posted a Strong Equity ratio overall year to date results evidently very healthy and solid federal Credit Union System. Now i would like to talk about efforts for greater Financial Inclusion. I deeply believe Financial Inclusion is a civil rights issue of our time. Inclusion is not only broader access to Financial Services but to employment and business opportunities. We have Just Launched the initiative of the final rule just recently for nonviolent criminals to have them from opportunities with Credit Unions, this creates opportunity for these individuals of the economic ladder and opportunities for greater Financial Inclusion and shared prosperity. I agree with you, it is troubling to read in a recent survey that nearly 40 of american households cannot afford to pay for 400 emergency, even more troubling the percentage increase to 60 for families with a disability, this is why i am definitely pleased that this board has approved a shortterm small dollar loan product that serves as a possible alternative to payday loans. These loans that were created through the program would often being coupled with the financial education, financial counseling and coaching. To help these individuals achieve access to broader Financial Services, Rural America must also be included in financial expansion in inclusion, thats why am pleased that ncua has worked to provide guidance to the Agricultural Community to help individuals learn how to work with the business trend and remind them the importance of the guidance. Also we recently provided regulatory leads regarding the commercial Real Estate Appraisal role increasing the appraisal from 250,000 to 1 million in response to some of the Rural Communities not being able to get appraisal done in a timely manner. I would like to focus on cybersecurity, cybersecurity is a highpriority, Cyber Attacks are indeed an acute threat that we must combat and face everyday. I care about this issue so passionately that i have appointed a Senior Advisor to advise me in the industry on how we safeguard our Defense Mechanisms and go through extra effort to protect data. This individual who is spearheading this is providing cybersecurity training to assist our small Credit Unions. Utilizing new tools to better assist examiners so looking at the level of preparation of cybersecurity preparedness in our Credit Unions and working in service that some of the other federal regulators here today. In closing, i would like to inform the committee that we are very grateful and appreciative of the work that you did in passing sanibel 2155, im also pleased to report that ncua has met all the provisions that we change through Credit Unions and the actions we can take unilaterally. If i look for opportunities to work with you on the days ahead i would like to look for opportunities to promote greater Financial Inclusion, economic mobility and shared per spirit he and americas underserved areas. Thank you very much. As i begin my questions, i have a lot, more than we can cover in my five minutes so first of all you should expect to get written questions but be as precise as you can in your responses. The first one is to chairman quarrels and chairman mcwilliams i hope just a yes, sir no answer. I just want to ask if each of you it meant that you will respond and resolve this issue quickly. Yes. Yes. Thank you we got a good start. Chairman Nick Williamson madden you indicated when that came down it hasnt interjected significant uncertainty into the secondary market and raises safety and security concerns how did the proposal address the confusion around the doctrine and safety. Thank you for that. The proposal does not change since the framework we had reformatted. Since 1828 in equal loan when made nothing makes the loan serious. This Congress Gave the National Bank status in 1865 and then in 1980 we got at the fdics the same opportunity to implement that into our statues. We had a long existing guidance implementing exactly that. That madden did not work almost 200 years of regulatory and legal history. We were compelled to provide clarity restating what we had in place since 1980 at the fdics and our proposal does not change anything that we have had since 1980. The concern with madden that they will have implications for the secondary market that will undermine safety instability on the system in the silence of our banks. If banks are unable on the secondary market and have a counter carryover there will be a disruption in the ability into upload the loans ahead of time. And something from the regulatory perspective are concerned. Thank you i appreciate your attention. This summer you stated that ncua board intends to release a proposed rule to allow subordinated debt to be counted as regulatory capital for a broad range of Credit Unions, can you provide the committee with a quick update on your progress. Thank you for the question, this is proven to be a complex issue so were working diligently on the proposal because we want to get it right, i am delighted that credit union today is 11. 39 so we do have a Strong Capital position now and i want to introduce other two for the level of capital but right now we are still studying and making sure we get a proposal right before we get it to stakeholders for,. Thank you and i appreciate your. Finally, we dont have nearly enough time to get into this issue as deeply as id like to but i want to talk about Digital Currency. You are basically the lead at the fed on dealing with other regulators around the globe and working with libra in the Digital Currency issue correct . Yes t20 has given the task of the stable coin issue and its my responsibility. Im very concerned, the libra issue and facebook presents one set of issues one set of issues, but the Digital Currency issue is much broader as i see it in one of the big concerns that i have is the potential for Digital Currency based on technology could ultimately undermine the role of the u. S. Dollar and global markets. Can you share that concern. I think that would be a very longterm concern if you consider the current proposal. Book coins and those that rely on currency to anchor the value to include a heavy weight toward the dollar given the role of the Dollar International it be likely to be the case for some time. But over a long period of time that would be an issue to think about. As other nations were to pursue, wouldnt that give them the ability to basically try to start shifting away from the dollar and the utilization of the currency. If other currency were more useful in the Payment System or useful forms of payment, it would not be in immediate effect over long period of time. My time is up, i have a lot more i want to talk about so both in conversation as well in question so ill get further information on that. This is something we need to take a deep dive on and rapidly. We might have a second round two. Thank you. The private equity firm i mentioned in my Opening Statement is the one that cut staff at Nursing Homes and then documentation of endangering patients is your former employee. You were a partner when this is happening so i have to assume you are aware as you got huge profits from this. A system that allowed them to load up a company of debt and extract Management Fees and cut corners and put patients at risk is a good system . I actually was not involved in that transaction at all so im not willing to speak about the details of the transaction. I do think that its important that we have a system where private equity is bringing benefits to the company and not otherwise. Not otherwise meaning after not bringing benefits they should be not allowed to do it, what you may not otherwise. We should have a system that creates incentive in incentives even though you and i heard your involvement in the bush ministration you did not seem to be too responsible for the economy in those years and now youre saying this, the Carlyle Group benefited financially a great deal in its take over the company in toledo. So i guess i would star, what steps do you take now to rain and risks and make sure Financial Companies are investing in the real economy and creating jobs rather than the financiallys action in making reckless bet that hurt families . Taking a balance of the Financial System is responsibility of the fed and an element of our supervision and examination of firms and i think another element. That does not seem very proactive. I mention private equity because of the biggest users of the leverage loans as you would know which they double in companies that they got for profits, its been six months since they raise concerns and letters and hearings over leverage and you shifted from its not a problem to we need more data. What specific abuse that is not really happening in leverage lending market that you would have to see to crackdown on the risks . We have taken supervisory action and earlier is not that we said its not a problem, we have been trying to draw a distinction from Financial Stability risk from a potential contribution to a downturn of current Underwriting Practices. With respect to the latter, a focus of the last two shared examinations with all the regulators together look at the largest loan that are shared on a number of institutions has focused on leverage lending. The evolution of Underwriting Practices to which we have had a concern and i think differently to most of us here. In the first cycle we indicated which of those had concerns about and then in the second cycle if they were continuing we took supervisory action against firms that were underwriting leverage loans. I guess because of the background of you and other regulators because of your experience prior to these jobs in your general support for wall street, i dont share in the confidence that you will proactively do something about this, i understand if you say its risk to the Financial System instability its one thing. But its obviously more than that. Let me shift to chairman hood. The ncua is an independent do you agree staff without control or influence from the white house . I am an independent observer given. From the white house and is my duty to uphold,. Im committed. I sent you a letter in october because i was concerned about the photo ops with President Trump at the white house and is golf course and i got the letter from your office this past tuesday, can you tell me who you were posing with in the first picture that you sent to us . That picture, its a letter you sent as a peculiar with a response im not sure if the letter is supposed to be a response to my concerns or not. Can you identify the people in the picture. These are speaking engagements, what i sent you was a listing of my activity of the First Six Months of meeting with stakeholders to talk about credit union issues and better inclusions and prosperity. Theres a picture of me with one of the leaders with the fda in my analyst conducted by the Vice President of the United States. But those are pictures showing Stakeholder Engagement but it also provided activity of the summer months where we it was meant to be an opportunity to meet with you to talk about regulatory accomplishments and other issues youd like to discuss. Im not sure you understand what regulator means from your letter back to us from your statements about speaking as a body from the ncua as a body and your other activities with the president. I hope the lesson you take from the is that you are in fact independent from the person who appointed you in the administration and sponsored you and anybody that might have influence on you. Senator kennedy. Thank you, mr. Chairman. Thank you all for being here and thank you for giving so much to her country. I would like to use my first couple of minutes to talk to you about industrial loan combination, its basically banks but not regulated by other banks. They are authorized at the state level. Some of our Largest Companies are starting to use these Industrial Loan Companies to take deposits for example. And i think competition is good, its a moral good. But i worry regulators like the other banks have a bill called eliminating corporate shadow banking act just to make sure these Industrial Loan Companies are on a level Playing Field with everybody else and are properly regulated. Not too hot, not too cold, just right. Can you give me a minute of your thoughts on the. I have not had an opportunity to take a look at it. I know your support, the authority to regulate and frankly to take a look at the iocs will have a couple in existence and they are looking different than the applicant. Congress gave us ample authority to regulate ioc. They are not regulated the same as banks, is that correct. Them in different regulatory structure, we Regulatory Institution that have the same dont think when it same of m money. The ioc has regulated the same as the banks, when Congress Gave authority to approve for ioc, they give it the same standard as it did the bank. Lets talk further about this. I disagree with you on that, i dont think the regulations are the same and i dont understand why everybody is not treated the same. I want to go to chairman corals for the second person as a Community Banks are doing very well in in large part in substantial part is the work of most members of this committee will be passed senate bill 2155. I am still concerned about the large banks. We all remember 2008. From my standpoint in 2008 the leadership of some of our largest banks took their banks to hell and government road shot. They have not been tested, our economy is much better and still healthy but we know some point will have a recession. Had we not passed our jobs and tax cut act, we would be in a recession now. I think as you said you dont know who his women naked and teletype goes out. Do we still have banks that are too big to fail . I think that in response too post crisis body of regulation will have given future regulators in the event of stress of a Large Institution any more options than they had before to resolve the institution or take other actions. Do you think we still have banks that are too big . I think that the way that i look at the question, will regulators and the government in the future when its faced with stress have an option other than providing support for the continued life of the institution, i think those options will exist. Will one become to congress and we appropriate the bucket little money to bail them out . I hope that does not happen. The purpose of the framework is to ensure regulators dont do that but unless i am one of them i wont be able to control their future actions as to what they would ask for. Now if they come up and ask you for that you should be aware that they will have many other options in front of them in the time of the last crisis. Thank you. Chairman hood, if you have a few minutes i would like to get a boat ouboat out. [laughter] think it was determined i understand when you first came to the United States you only have 500 in your pocket. I did. You use that to open a Checking Account and importantly get a secure credit card, you stated with each swipe of the credit card i felt more integrated into the fiber of american society. If banks get cra credit for a secure credit card . To tell you the truth the question the answer is not that simple you have to go through a formula to figure out what qualifies and whatnot with the cra. According to the Government Accountability office bank the offer secure credit cards to establish or build Credit History receive credit under the cra. We have a reallife example of someone benefiting from the cra and you said the secure credit card open up a world of opportunity for you. I would hope you decide how to move forward on potential changes to the cra to strengthen the cra so more americans can benefit from the civil rights law just as you did when he first came to the United States. Let me relay one concern, politico reported that the fdic could give the Smaller Banks choice of opting into the new occ cra framework or continuing to be examined under the current system, that could lead to a situation where banks choose to participate in the model that gives them the best grade and not the one the best measures whether the activity are effectively addressing the needs of their communities. If adopted tina what percentage of regulated banks would have the choice to opt into the occ approach . The proposal is being worked on, one option was for small banks to opt in the regime are keeping the existing regime and the existence would be providing not to have the change the reporting and how they go to the analysis of what qualifies for the cra. Small banks if they decide to opt in would depend the cutoff. You dont know what number because you have not decided. It is not firm. I felt that we want more banks to have less necessity in terms of paperwork but we dont want them to have less necessity or obligation in terms of creating a portal of opportunity under the cra and if most banks would be able to opting, then thats what happens. Arent you simply making a political calculation that protects the interest of the banks charged with regulating who stand to benefit from the cra rule, is an official on determine whether thats a reality. It is not. The reason im willing to consider the act is because is not been revisited since 1995 by the regulators and you gave us the authority to take a look and make sure it serves its purpose. Currently we have challenges for banks that are not accounted for appropriately in the Current Assessment area in the way deposit is taking his everyone gets attributed to a branch and there is a lot of deposit taking place outside of this area and we want to make sure under the reform that those areas where the banks are functioning and Offering Services the lycee age itself is not a reason to review the act or improve and its Something Worthy but you dont want to at the end of the day use the time in which the act has not been reviewed to weaken it. Im concerned that youre trying to have it both ways and not fully endorsing the flawed ocds that allow fdics to choose whar measured under but also for better cra standard and what control has proposed. I hope the end result that im wrong but i will be looking with credible intensity. I look forward to proving you wrong. Im always happening to be proven wrong if its a benefit of consumer. Five years ago you had followups with that senator kennedy raised the regulators adopted a duty ratio to require banks capital that they can draw upon on a crisis and reduce the risk of a taxpayer bellow. In october the Federal Reserve finalize the rules that would reduce the lucrative coverage ratio by 15 for big wall street. Thaas 2155 did not require to reduce the ocr and the Banking Sector has not gone through a cycle where the previous one was in place so added time in which we see a record growth among the banks that are fantastic times in the sector reported a 62 billion profit in the Second Quarter of 2019 of 4. 1 jump in 2018, why is now not the time to show the banks liquidity and not reduce it, we saw what happened in the repo market and i have real concerns instead of taking a moment of strength to strength in the banks youre giving them more room to get in trouble. Do i have time to respond . Yes so for the large wall street banks we did not change their liquidity requirements they remain the same and as 2155 did include specific instructions for tailing under 250 in a mandate that we would tailor for all institutions and the regional banks not the large ones but below that we tailored the liquidity requirements and it goes down to the requirements and firms that pose less risk. The concept of tailoring and the instruction on s2155 was to evaluate the risks that different categories of institution pose ann taylor for each of those categories of institutions. It is not a dramatic reduction in still all those institutions have much more liquidity than before the crisis and i dont think the largest institution still has every bit of coverage under the ocr. I hope we dont have to revisit in the Great Recession and remind you of your comments instead of strengthening we actually weaken them. Thank you mr. Chairman, mr. Hood its great to see somebody from my neck of the woods in North Carolina i want to thank you for the work youve done on Affordable Housing long before you got on your post its a work you did for your community that made me proud to have you the board of governors and youre given back to the great educational institution. Ive a picture with you but id be proud to have another one. Mr. , i want to thank you for the work and progress we are making, it will free up almost 50 billion in capital, a long time coming. Somebody will have to work hard to make a partisan issue that something under democrat republican a ministration in the past. Thank you for that. I want to get to the Community Reinvestment act and an update, the occ has taken the lead and i should also say im looking forward to the work, im trying to get this done with my time. Im talking fast. On the rewrite is the fed going to play a role in the cra rewrite . Along with fdic occ . We have been engaged with occ enough tic . At the governor level. Absolutely. We been actively engaged in the proposal is evolving has benefited from a lot of influence. If you look at that i dont think that has been touched since 1977 is that right . About 30 years. I was young back then so hopefully we can take into account that the internet has come on board Online Banking and other changes in the Banking System that we can modernize to look forward to what you all do. I wanted to ask you question, we have a fairly particular posturing of looking at the clutter and advisory letter, secret memos and faxes to supervise banks. Can you give me an idea of where we go from here . When i took the office of chairman i frankly thought we could do it in a more transparent and accountable manner and quite often look at the regulation and instructions we give to companies, ive been surprised to how many ways we communicate with entities and not always make that a standard for everybody. But if you do a letter here and there and my goal for the staff has been to come through with the regulations and updating and only because the passage of time but technology has changed. Also take a look at it for transparent and uniform and the application of the law, or that weve done things that are oneoff. Theres an opportunity to apply the good sunshine policy and go public on the, and move forward in guidances that are applicable to everybody so they have a fair romance of how to do business. I appreciate the thoughtful and assertive approach and its a model of number of regulatory agencies outside of the baking space that they should take note of because its a way we can take burdens off of businesses and put it back into making houses more affordable and banking more affordable and making the private sector grow. You are testifying at a house yesterday and i believed you asked about the concerns about discriminatory pricing of the system. The private sector makes a commitment in writing to have flat pricing and if the fed is juscan concerned about discriminatory pricing, why has the fed refused to make the same commitment to flat pricing for the fed platform . Why does that make sense . As you know, the Federal Reserve will may take that with standing operation in the Payment System is required by law to recover our cost and i think as the proposal evolves and we continue to develop the system that we have committed to undertake will have a better sense of exactly what will be required to recover all the cost and at that time will be able to evaluate what the pricing will be. Thank you i yield back three seconds. Thank you, senator warner. Thank you, mr. Chairman and great to see the witnesses. I will start with you and pick up on the line of questioning about the cra. I think you have been quoted as saying you feel like the cra is classified into a degree its 1995 i dont agree taken a major look at how we modernize. I am concerned i think other colleagues with the notion that those who see in the fdic would move forward on Regulation Without the feds and i think that would be a huge mistake with the series of the community out and certainly during the House Financial Service community you are asked a question but i dont think i got a full answer about whether you feel like you will be proceeding and participating in the occ modernization effort. I wish he was here where he said he thought the fed was not going to be involved so for the record and for my colleagues, can you clear up whether you intend to have the fed involved in this much needed reform process. This is a continuing effort to look at cra modernization, there is an agreement among the agencies as well as everyone who considers the issue, community groups, banks, i think among me here, the cra and implementation of the Community Reinvestment act can be improved given evolution of the industry and as i said the practice over time. The Federal Reserve is committed to that and has worked together with other agencies as part of the process. The issue thats immediately at hand is when a proposed rulemaking will come out, thats an interim step to any final rule, the altar of the process the occ went forward independently on the fdic the fed with advance notice and we all benefited from the information they received, the fed also has a broad information gathering process of our reserve banks and the proposed rulemaking, whats happening, the fdic had the separate process in all of that has come into the consideration of the notice of rulemaking. It has not been decided yet whether its accepted the rulemaking but all three agencies are working on that. It was done separately by each of the agencies but part of a joint process, i would not talk too much if that is one or two agencies going on the rulemaking because we will Work Together on trying to get to a federal role in my expectation is when we get to the final rule it will be altar agency. Obviously we have occ, fcic and u. S. Nonlaw with a new set of rules and regulations that will cover 80 of the market but not the critical component that you cover, we will not bring that consistency modernization and what i think is a very Important Role the cra place. I will take your answer as yes you guys will be involved in there will not be a hodgepodge of rules, a uniform final answer that will include all regulatory agency. That is a yes as they tried to put as many words as possible in your mouth will be altar . Yes would be one of the words i would say, yes that is the objective that we are aiming to get to a final role altogether and if it happens that the interim stop happens at different speeds i would not draw too much from that. One thing i know, as your chair in the financial stabili stability, i know you have been conducting this indepth analysis and obviously weve seen the numbers grow and we realize this is a national and International Application in terms of involvement with the g20, when do you think that study will be done. We should be making that public shortly. Early in the new year being circulated among the members of the board and the results currently for final signoff. My time has expired although i cannot get away with my colleagues being here and saying theres broad part partisan work been done on this committee on what we call the cash act which deals with aml Beneficial Ownership in attic issues that have been long in need of review and the chair and Ranking Member will take the work that weve done and build upon and my hope is we can move sooner than later on the long overdue piece of reform and regulation. Thank you, mr. Chairman. Senator shelby. Thank you. I propose this question to all of you as regulators. What your Current Assessment of the Overall Health of the u. S. Financial system compared to conditions in 2007 2008. Absolutely. I think its a much healthier Banking System and we have significantly high level of quiddity and have a focus on the ability to address too big to fail question that was not there before and financially it is much stronger. Stronger for the large banks and small banks. Theyve put in a number of capital liquidity rules on these banks and at the capital level is healthier than it was than they were before the crisis. What about the credit union. The Credit Union System is strong and robust and i mentioned that in my remarks, capitals 11. 39 far beyond the 7 requirement and also we have a very strong 16. 7 billion which is far beyond the 10 billion coming out of recession. As regulators, of a Financial Institution to fail and go under that is will capitalized, wellmanaged and wellregulated . With respect, it would be difficult to say and be wellcapitalized. Is important to the health of the situation in the quiddity access being liquid at times. Exactly. Nothing comes to mind. Nothing comes to mind. Theres no substitute for foreign capital and a sense when something is under stress . Is that right. Act capital is key and although a useful factor of framework that we focus on, but we do have the focus on the quiddity and the two together are key. Would you say the Overall Health of our Banking System is good as youve known in the last 20 years . I would go further and say i think my career has a lawsuit for about 35 years as good as its been in the entire time much better. I agree and fortunate to be the chairman. I commend all of you to keep it that way too. How do we maintain simplicity and Financial Regulation considering the scope and complexity has grown so much, how do you balance not . I think all the points that you raised because we have such a resilient and we have the benefit to take time and look at the overall structure and determine where we can make it simpler and more efficient while still maintaining the resilience, one thing we proposed is to take the 24 different majors of a loss absorb into resiliency and to combine them into her stress capital buffer it would be much simpler and retain the same level of resiliency. Do you have, on that. I think its important that were able to maintain the level of liquidity and capital for the market and the stability overall theres always a balance of sees all of how much do you need versus how much you really soon to ensure the economy is able and if the economy is not stable the banks will not be able to be stable. We are constantly monitoring the level of which the banks need to be in terms of capital and liquidity. Chair pro question, if capital liquidity management. I believe that is key to successful bank. I was going to say i agree with her cohort of th company heartily. Its about balance and Liquidity Funds management is key. Ticket for what you do. Thank you, mr. Chairman and thank you all for being here. At the last oversight hearing we talked about the Financial Risks caused by Climate Change and we discussed the prospect of the fed joining the group of 42 central bankers and regulators thinking about working on accounting for the risks related to Climate Change. Do you have any updates on that . Thank you, senator. As we discussed and i mentioned at the last hearing we have been exploring and i wanted us to explore joining the network for the Financial System for variety of reasons under their charter that requires adjustments for us to join as an observer but were continuing to discuss how that can be done and in the meantime we have attended meetings in the class before registering with the ndf s and thats entirely appropriate. Is there a timeframe . They have a meeting, there annual general meeting in april which is when they would be able to address some of the issues if they are able to address them so i think its over in that time. In the meantime, we are engaged with them and involved in attending working groups and et cetera. The regulator issued guidance recommending steps the banks are taking climate risk seriously and encouraged to sign a senior manager the responsibility for Climate Risks and to demonstrate writing how the Firm Risk Management can address climate. Are you asking banks to do anything similar and if yes could you hallucinate and if not why not. We ask banks that are exposed to Severe Weather events which could be generated by Climate Change to account the Roof Management practices and that you know we continue to do a lot of research on the affected Climate Change and financial sectors and how thats likely to be involved in how we learn from that and we incorporate that into her supervisory practices and weve been very engaged i was just in london talking about how theyre looking at the Climate Change regulation. The challenge for both investors and the firm is that it is not yet apples to apples in terms of how the disclosure goes because everyone is puzzling including the fed and the network for the Financial System, as soon as possible for the sake of investors having clarity across the market, we will need common instrument to understand, that has got to come from you because the Companies Firms and investors are trying to figure out how to do it in unique ways which makes it difficult if youre an investor to figure out whos accounting for accurately and one Investment Opportunity to the other. I think its a very good point in the one board that weve done was a process thats begun before i shared the board which is the stability board and then to disclose how they are addressing them if they see them and we are learning from that to take the information and are the best practices in the Common Thread that would be helpful to everyone. You agree we need a common platform. I think that would be useful in at the moment i dont know what the form would be or with the content would be of the platform because as you know this is in pretty early stages even the bank of england are probably the most committed for the most thinkin thinking in bof them are quite early stages as how you would address this and you need something concrete in order to have a platform. Senator cortez musto. Thank you let me start with you, thank you for visiting with me earlier. We know the russian government continues to topper nation within an accurate propaganda to weaken the democracy. And i know the Law Enforcement official announced charges against two russians responsible for what d. O. J. Deemed the Bank Fraud Scheme of the plastic a. Treasury department of foreign asset control announced sanctions against the games with the evil corporation in the two have taken on led by the russians who provides direct assistance to the government malicious Cyber Efforts highlighting the government of cyber criminals for the own malicious purposes. My question is russia does not stop the attacks, should we work with our allies to ban russian Financial Institution from using the swift interbank Payment System. I would say im not given any thought to the question whether it be an appropriate remedy. We do practices at the fed with Financial Institutions and the abuse and we work closely with the department of justice frequently and they arise from or referrals with respect to the Financial System. That is something the issue is something more heavily engaged with and id be happy to talk with you more. I would appreciate that. Just for purposes on the chairman conversation, this is something im interested in, can you talk about what youre doing in the space and what you anticipate when it comes to Digital Currency if anything. That the very early stages, until the recent International Focus there was a general sense among most of the Central Banks of the economy in sweden the Digital Currency were not necessary and were addressing a serious need and it would be something that might be more rapidly adopted and emerging markets for a variety of reasons and maybe the same way they jumped overland on cell phones. But that we would sense the focus unstable coins have given up a process to the issues and theres a lot of issues and some technological and some having to do Monetary Policy and other types of regulatory policy that we would work their International Coordination but up until this summer it was an assessment and i think it was not a high priority for the United States and they shared that. It is something that is obviously heres my concern, i appreciate its in its initial stages but nothing is going to happen. We have to put resources to start behind it and look at it in addressing the. Absolutely. Studies show the homeownership rate in our country and for electing those and africanamericans would be much lower. I understand the fdics considering proposed changes to the Community Reinvestment act. However, proposed changes to the cra closer racial ethnic homeownership gap and is not something that is on your radar as you make the changes. It is on my radar as we look to make the changes. It can do more and it can do a whole lot more for small farms and family farms in indian countries. It is not been updated since 95 and all im asking from folks from openminded and the changes come to give us feedback, if theres something you concerned about not in the proposal let others know that the intent of the proposal is from the stakeholders and their constituents. My personal intent is to strengthen and things that were not existent 95 but the help low communities get enhanced credit under the cra and accounted for appropriately. And the questions, i was a member of the community and it is not with any malice or bad intent that i would like to take a look at the act to make sure the banks and National Banks of 70 of the cra are doing their part in a way and added benefits to this community. Thank you. Thank you, mr. Chairman and i think all of you for your testimony today, i know you and i have a difference of opinion but since i raised in the hearings that weve had with their colleagues i want to say that i fully support the overall decision to move forward on a realtime Payment System under the fed now umbrella. I hope you will move with speed without effort. Thank you. I have some questions related to the issue of rent to bank schemes. I know this was an issue addressed in the house and here in the hearing a little bit. I understand that the occ and fdic proposed the rule to provide clarity on this issue in the wake of the Second Circuit decision in madden versus midland. My view is probably premature to move forward in preample of that role you say the ftc is not aware of any widespread or significant negative effects or credibility markets having occurred at this point as you refer to the madden decision. What i worry about and i know your fellow commissioner marty shared my concern is you have put your foot on the scale in a blunt way which i think will be interpret by some to give the green light by these schemes. You stated in the house yesterday that your only purpose was to address a longstanding address that Congress Gave and when a loan is made in Interest Rates are not at the time of the loan was made that it subsequent events does not make the loans. But my question is this, would it be at the time of the loan if the sole purpose of that loan was to evade the Interest Rates under state laws of the entity licensing state . Its a great question in the position we have taken under the authorities is we basically determine what is the home state for the bank. This is an issue versus two different separate legal doctrines in the proposal of the issue took what we had and put on paper and opened it up for Public Comment and thats all we did, they gave it to the occ in 1865 in the language i quoted from the rates is from the Supreme Court case of 1828. A report this problem has gotten worse because we have a lot of nonbank lenders who are taken advantage of the current system, as ceo for one of those lenders i quoted, he was talking about california law, as you know in california a piece of legislation would limit the amount of interest that can be charged on loans from 2500 to 10000 similar to the recent experience in ohio we expected to continue to serve california consumers via bank sponsors that are not subject to the same proposed state level rate limitations. Clearly telling folks on the Earnings Call they would use the scheme to evade state usury laws. My question why not provide guidance in your rule as to what the test is instead of sending a green light saying go for, thats the way a lot of people interpret. Why not provide standard for what you would believe is not constitute a valid loan and a loan that does violate. And the people said we gave them a green light on legal principle and the framework including congressional framework. But a couple of things states have an opportunity to opt out under 27 of the fdi act, Congress Gave states an opportunity to opt out of the interestrate affordability regime, not an issue for the fdics that theyve addressed. The second thing is we said in the preamble of our rule we will unfavorably upon the rent to be charter as you referenced in the purpose is not to renovate the law and we will not allow banks to break the law. But saying you will look at something unfavorably without specifying what standard you will apply into whether its unfavorable seems to me that it creates a green light. Thats the concern, you dont clarify what the standard may be. I understand someone can bring a case and spend a lot of time digging up the evidence, a rule from all of you would be helpful into clarifying this. I have some questions on the cra also met them for the record. Thank you. Thank you for holding the hearing into you and senator brown and want to think all of you for being here. I will say i am disappointed that mr. Is not here i think its important that we hear from all the regulators and i am no dogfight for him, i voted for all of you guys and him i think it be nice to have mayor is important. So for the last 18 months ive heard from bankers in the industry that things do not change with the farm gate people will be in trouble in the next 18 months or the end of the period and we still see prices that take in the silly trade wars that we will not end up doing anything differently to begin with but thats not your problem. What is a problem for us and you is the fact there are farmers and id say this is a matter fact that is been in families for generations and generations is more than a job and theyre going to go broke and the banks are not going to be able to do much about it. But i do want to pose a question, what can they do about it. When the prices are down in your collateral goes down with the Commodity Prices and if they stay down, is there anything that the bank can do that is so valuable in times where there crisis are as low as they been. Ive been in the business 42 years, they are way lower. Any ideas . By the way rodney does not have to respond because its not in his daily but if he wants to go ahead. Obviously what youre describing is a serious issue and one that we do give a lot of thought to the Federal Reserve in which aveeno i come from the west income from an agricultural family and something i think about personally and we have at the Federal Reserve a long history and a lot of experience with the agriculture economy. In the special problems of that raises for agricultural banks and examiners and specialty focused on those issues, we stand ready to work with banks that are working with borrowers during periods so it is a different response than if we had a bank that had a long agricultural borrower in different history in different industry that might be in the same financial position as a matter of Risk Management in response so we do have a lot of experience with that and as youve identified the situation is as bad as its ever been in a goes on long enough the institution will be required to take what it needs to to recover on the loan but we do not require agricultural banks to do that without any sort of consideration of the circumstances and with experience in how to handle that. I have a couple of things. We do quarterly banking where we collect data from banks on a quarterly basis and we have seen a decline in the Agricultural Sector and some of the act businesses and farmland businesses have gone from depositors to barbers. If we look at what can be done and were instructed to encourage banks to work on the performance but theres an opportunity for us that Congress Gave us and if we intervene to do more and provide more credit for the investments to go to family farms rural area and indian country, there is more we can do for farmers and that has been one of my instructions for proposal. What i am concerned about moving forward the whole liability in the family farm agriculture. As we cut bigger checks and farmers become more dependent on the federal government which i dont think any want to do and we can talk about socialism all we want. It is just not healthy. And you have to deal with the results of poorly thought out trade wars but the fact of the matter is when it comes to losing the farm it to begin. Ive questions i want to give to the record on Affordable Housing because its one of the big experiences we have on the country and its a lot of stuff going on. I would love to get your opinion on what we can do to make Affordable Housing more available acrosstheboard its a big issue in urban and rural areas. Thank you before we wrap up senator brown has asked for another five minutes. I concur with what he said, housing is everything. This is a question for you to, when you consider the chairmans 2155 to deregulate the Federal Reserve he promised to build and not require getting rid of rules for foreign may give unto men under megabanks they lose the rules on bad actors Like Deutsche Bank which is by all indication President Trump atm. , did the bill require you to lose rules for those banks . The fdics has the largest banks including foreign banks and what i have instructed us to look the rules the crossreference and asked 2155 into the extent of the agency to rely on the authority in section 165 in the Federal Reserve to amend those rules did the bill require you. 2155 did not self instruct or require that we make those adjustments on the banking law requires retake National Treatment into account in the frameworks will be the same and they are not identical and some material differences for the two frameworks on the foreign banks. In accordance with the law we have to ensure that we take National Treatment into account. I was surprised by the action especially after he said to a number of us personally, let me ask about my republican colleagues about too big to fa fail, you recently had requirements for living wills in the bank had to submit living wills to be resolved under normal bankruptcy procedures without harming the economy. You believe that every Bank Holding Company and bank of america and j. P. Morgan chase said it can be resolved in ordinary bankruptcy without harming the economy. I think that has to be similar with kennedy earlier which i believe there are many more options for the revolution even though the largest institutions that existed before and the work that has been done has been useful and i think it could be possible, there are complex institutions in the situation in which the issue would arise in the future is difficult to describe precisely and i would not want to say you would always be able to do it but were closer than we were before. Bankruptcy is a mandate as well with bakers 31st, the additional authorities of dodd frank and funds i hope to never use to result in large banks prepared generally bankruptcy would be the route we have engaged in big groups of judges and understanding how it will be done with a large entity. And make giant banks simpler and smaller and they can go through more complicated or special for megabanks. And not be more seen or the biggest banks even bigger before the crisis, your agency has approved another big merger that it creates a bank twice as large as Washington Mutual as it was at that time when it caused the funded history. We need to be cautious in one last statement. I heard the, earlier about the 35 Years Experience in the Banking System which is bigger and stronger and more stable. It certainly more profitable but the more profitable should not be the measure of any of our work in the measure should be the safety of the Financial System with all of that means and as you continue to move towards less regulation to making a stronger and it seems to me your agency is making the market less competitive by weakening rules for the largest banks allowing them to make risky leverage thats requiring them to provide banking and the services and the place where its needed most in weakening getting regulations you claim to make the economy work better for farmers and workers in small banks but your actions pave the way for megabanks and wall street to make it risky, thats banks and those actions train this economy. Thank you, senator brown and i appreciate our witnesses and the attention you brought to these issues as i said i appreciate the work you been doing to affect effectively implementable and also basically frame our regulatory approach in the ways invest and strengthen our economy and opportunity for strong housing and for jobs and benefits and growth in our economy and look forward to the next time we have an opportunity to bring before us. Thank you for being here. [inaudible conversations] [inaudible conversations]