Comptroller of the currency, the Senate BankingCommittee Received a 6month update on the state of Banking Systems, the impact of covid19 and support for Small Business owners in communities of color. This runs an hour and 45 minutes. Today we welcome to this virtually hearing the federal prudential regulators, Federal Reserve vice chairman Randal Quaries, office of the comptroller, brian brooks, chairman of yellen and mcwilliams, chairman of the National Credit administration rodney hood. We will receive testimony from each agency on efforts, activities, objectives and plans since we last testified before the committee. As well as an update on covid19 related actions. Since the passage of the coronavirus a relief and Economic Security act or cares act your agencies have taken many meaningful steps to ameliorate the Economic Impact of the pandemic as you provide conditions that will lead to a forceful recovery. On october 30th the Federal Reserve announced changes to its facility including decreasing minimum loan size and priority loan facilities, 50, 000 to 100, 000 and allowing borrowers to deduct ppp loans less then 2 million for outstanding debt for purposes of the leverage test. Your agencies should continue to carefully review regulatory and supervisory frameworks adjusting where necessary to bolster Financial Institutions ability to support economic recovery. Which by the way has shown positive signs of recovery the last several months. October 20 ninth the United States gdp, record 33 in the Third Quarter as the economy started to reopen. The Unemployment Rate fell to 6. 9 in october. Last spring cbo projected we would be 9. 5 by the end of 2021. Since april around 12 million jobs have been gained meaning we recovered half the jobs lost due to the government enforced shutdowns. Over the last few months i sent several letters to you later is on a number of important issues. On july 30 first i sent a letter to each of the agencies urging the use of discretion to extend relief provided under title 4 of the cares act including extending the Community Bank leverage ratio to december 30 first 2021 a troubled debt restructuring to january 1st, 2022, and the current expected credit watch to january 1st, 2023, while clarifying admin amazing unintended effects of midyear adoption. October 8th i sent a letter, sent the regulatory agencies a letter regarding increasing regulatory business for banks and Credit Unions simply due to their rapid implementation of the Paycheck Protection Program or ppp. As a result of their Critical Role in ppp and the economic recovery many banks and Credit Unions inadvertently experienced Balance Sheet growth which is ultimately expected to decline as borrowers meet the ppps forgiveness terms. The fdic took an important step in issuing an interim final rule to alleviating increased 363 audit and reporting requirements for insured depository institutions that have experienced growth in ppp and participation in the Federal Reserve facilities and other stimulus efforts. It is important that banks and Credit Unions are not disincentive eyes from continuing to play a key role in the economic recovery or participate in future efforts. I urge each of you to continue using your discretion to alleviate the Regulatory Burdens associated with a variety of assetbased regulatory thresholds on Credit Unions who are temporarily experiencing growth from participation in recovery oriented roadmaps. Turning to the lcc. October 19th the senate rejected a congressional review packed of Community Reinvestment issued by the occ. According to the occ the final rule improves Community Reinvestment regulations by clarifying what qualifies first consideration, updated how banks define their assessment areas, evaluating Bank Performance more objectively and making the process more transparent and timelier. The final rule framework will increase support to Small Businesses and small familyowned farms in distressed areas and accommodates banks of all sizes and Business Models. The cra has not been materially modified since 1995 and i commend the occ for taking this important step. As we continue to whether this pandemic i stressed to each of you and your agencies the importance of our Financial Institutions providing access to credit and Financial Services to credit worthy individuals and businesses and legal industries. It is slightly important our countrys Financial Institutions especially the largest not deny credit financing based on political preferences related to firearms, oil, gas or others. It should be based on credit worthiness and should not target specific industries especially as we work to restore our economy to prepandemic strength. This will remain an incredibly important issue for me and i will continue to fight for access to credit and Financial Services for all of our legal industries. I appreciate each of you joining us to share your agency acceptable use and plans and the titles work you and your staff respond to covid19. Senator brown. You are on now. Thanks was the American People sent a clear message in this election the rejected and administration were wall street and corporations run the economy. People want a government that is on their side. The past four years the Trump Administration, financial regulators, on the scale for corporations and their wealthy friends while leaving every one else at the mercy of the supposedly free market, americans watched the president ignore a pandemic, refuse to even try to put in place any plan to bring the virus under control and to reject all our efforts to support families and get our economy running smoothly. Whatever the majority leader may say, whatever damage he and my colleagues of the outgoing president are doing to our democracy with their lives and fabricated attacks on our nonpartisan and hardworking poll workers and elected officials the facts are clear. A decisive majority of the public in a 5 million more people voted for joe biden than donald trump, decisive majority rejected with a have endured over the last four years, voted for new leadership that would restore faith in our government, people are ready to turn the page, ready for leadership that will give them their freedom and their lives back. They are ready to heal and rebuild, the work weve done in the banking and Housing Committee could be a big part of that and make a real tangible difference in peoples lives. Of Committee Members of both parties come together and choose to do so. We have the power in this committee to tackle the issues that matter to peoples lives, their paychecks, housing, transportation and the communities they live in. We can put Small Businesses back on their feet and lift up brown and black communities that were hit by this pandemic, key people in their homes, make homes more affordable, bring down Peoples Energy bills, lead the world in a fight against Climate Change, we can seize every opportunity to create good paying jobs, free people from the stress of debt collectors and the downward spiral of lenders and reorient our economy from wealth to work, to do all that we have to take on wall street power. We know who ships jobs overseas, who jackson drug prices, we know who spends trillions on stock buybacks instead of higher wages, we know about unions. It is are not our neighbors who have a different political sign in their yard or different Bumper Sticker on their car. It is the largest corporations unaccountable to ceos from facebook to wells fargo and their allies in washington, wall street is all too happy for a populist turn against each other as long as it means they get to keep exploiting workers and playing by different set. We had a president trying to convince people to blame their fellow americans who may not look like them or worship like them instead of blaming a system that rewards executive stock portfolios when they lay off workers or cut their pay. Divide to distract was the playbook, from all the ways he and his followers in congress funneling more wealth to the already wealthy and more power to the already powerful but it didnt work. This time last week a record 80 million americans rejected that, the largest vote for any president ial nominee in our nations history. Now we deliver results. Big oil and other corporate polluters spend billions of dollars trying to convince People Climate change is an unsolvable problem instead of a tremendous opportunity. We have to end corporate Business Model that treats workers, especially black and Brown Workers as expendable and a system that perpetuates systemic racism. We have to break up the biggest banks and give that power to everyone else who was denied a voice in our economy. Our Financial System should be a public good. We need to make it work for everyone else and create a better system centered around the dignity of work and hard work pays off or anyone the matter who you are or where you live or what kind of work you do, the work has dignity, everyone can afford housing and transportation and have power over their lives and their own money and work has to have a strong growing middle class, everyone can reach it. We know we have great challenges. We are in a Public Health crisis, and the climate crisis, extraordinary times call for us to aim high rent think bigger to meet this moment to restore peoples faith in our government. I look forward to coming together with senators on both sides of the aisle and the new administration to get to work. Thank you so much. We will proceed to the testimony of our witnesses and have you speak in the order i inoduced you. You may proceed. Thank you, chairm. Thank you Ranking Member brown, members of the country, for the portunity to testify. Last appearance in may folled up period of the emergence of covid19 and measures taken in response, added strain ouncertainty into the financial mart, from riskier or more volatile Asset Classes and the safety of cash. This demanded immedie, extraordinary and concerted public intervention to ensure stabity, restore call and see the nation through aunfolding crisis was the Federal Reserve intervention span a wide range of markets inclung the banks, strethened by a decade of improvement in capital liquidity and Risk Management inuding refinements of recalibration the last tee years, banking organizations became a shelter from financial distre which our goal was to ensureanks could respond to the emergency and community needs. The repo accompanying my testimony lists these action in detail and we extended sevel of them as the covid19 event has continued cluding temporary adjustments to capital and reserve measures and examination activities. Importantly th clarify the impediments to working constructively wh borrowers and other customers in times of strain. Toather with fiscal action these measures help lm a lot. The initial wave of market stress, threcovery has become sooner than expected. This speaks to the countrys tenaty, ingenuity and spirit in responding to the greatest risks. The challenge we face is distinct for minimal and mplex, the surprise that the covid19 event is go replaced by economiconsequences and burdens facing household and business is better understood but no less significant, not evly born. I am confident we will work through them together, support those hardest hit and ensure our economic wounds dont become scars. The Federal Reserve mains committed to using full range of tools to support the economy, strong resilient baing system is an essential element of such rert, the durable recovery demand banks to lend active confront gains and losses honestly, stand on unexpected shocks and help custers rebuild and adapt. Our supervisors ensure t companys banks meet the exting standard. Covid19 related guidance encouraging banks to work with their borrowers,n important step toward this goal. Since then working with our colleagues and oer financial regulatory agencies have taken several others ranging from principles to credit accommodations to a clear statement Community Reinvestment of covid19 related activities, make it easier for bks to participate in emergency Lending Program and the use of flexibility in our ress testing apparatus to understand the effects of the covid19 affect. As our report shows that strength is stilintact. Liquidity and capital remain high and increas over the course of the covid19 event. They have increased reserves setting aside the soces against this tomorrow. Bankare positioned to serve against broader nancial and economic stress. It worth recognizing how things might have been different. The foundation would not exist if not for a decade of work by officials and the banks themselves to make ban stronger and me stable and make banking supervision fairer, more efficient and transparen those values are not contingent on an economic boom, addressing the most pssing regulatory ways. In the last 7 months for the guidance to the recovery. Simon Sebag Montefiore for changed many aspects of the Federal Reserves work and also afrm the values and priorities the remain the same and will continue to guide us in support of the Financial System, the economy in the country long after the covid19 event has passed. Thank you for your time, i look forward to answering your questions. Brian brooks. Thank you, chairman crapo, appreciate the opportunity to update you on work on federal banks operating in a safe zone remaining sources of strength for their communities. I would like to congratulate you and thank you for your leadership as we Work Together and i look forward to working with your successor. The occ has reported orderly function through an extra ordinary time. Fortunately banks and savings associations introduce period with nearly historic high levels of liquidity, asset quality is strong and the economy enjoy the longest expansion on record. As part of the National Response to covid19 Economic Activity was suspended. Regulators collaborated to provide banks flexibility to use that strength to support customers and sustain Economic Activity. My testimony today provide what this action has taken on that front and continue to monitor the effects of shutting down the economy. Banks remain sound but we see potential assets for commercial Residential Real Estate and Small Business and Consumer Lending and hospitality sectors in particular. Banks particularly concentrations of those assets take us a review of the risks and work with customers to the maximum extent possible. The recent semiannual risk perspective highlights credit operational and Compliance Risks in the system which focused supervisory efforts in the months ahead and avoid the need for more extreme loss mitigation tomorrow. We see reasons for cautious optimism about the future based on gdp growth and continued reduction of unemployment and Small Business sentiment and betterthanexpected news about nearterm availability of effective vaccines. The economy faces uncertainty to the length and depth of the pandemic i also want to highlight optimism for the future of banking. During the social and rest following the killing of george for december it became clear the protesters were angry that too Many Americans have been left out for far too long. The occ found a project to convene bankers, civil rights leaders, innovators and businesspeople to promote, fair and equal participation in the economy to eliminate credit for the 45 million americans of no usable credit score to expand Affordable Housing for those who cant afford payment requirements and reinvigorate minority banks that serve often neglected communities which weve kicked off regional efforts including one serving the Greater Los Angeles area very reasonably and access to Capital Events in South Carolina and colorado. Im humbled by momentum among the industry, community and civil rights activists,