[inaudible conversations] [inaudible conversations] Senate Committee on banking, housing, and urban affairs will come to order. Welcome to the witnesses and committee members. We know most americans want the same thing, a safe and affordable place to go home, a good paying job, a strong stable government which they can trust. Our Democratic Institutions are only as strong as a people who are in power. Our economy works best when you have a free and fair democracy in which everyone can live lives with dignity. For too long many of these have felt out of reach working family struggled to pay for groceries to keep yes in a car to keep a roof over their heads in the cost of living and raising kids continues to rise. Democrats are listening and have delivered for the American People. We passed legislation to lower Prescription Drug costs. We help families stay in homes during the height of the pandemic. We made investments in Public Transit in our nations of a structure. For the first time we focus on communities it that governments turned up backs on especially for instance, in my state state government. Now were tackling inflation by taking consolidation of reducing our dependence on foreign oil. We do that while creating good paying manufacturing jobs at home. These jobs making semiconductors, electric vehicles come solar panels are the jobs of the future. These jobs ago two americans because with past the chips act, the inflation reduction act, the bipartisan infrastructure law with strong buy american provisions that senator corker and i worked on. We see results. Our economy recovered. Economic recovery has been strong over the past years Many Americans a built up more in savings. We seen robust job growth. The first time a decade weve seen wage gains. Just last week we begin to see signs of inflation starting to cool. Banks and Credit Unions are doing well thanks to the protections we put in place in doddfrank and because of the support congress and regulators provide during the pandemic. Too many big corporations have taken advantage of market concentration. Jacking up consumer prices, earning higher and higher profits. As my colleague senator reed is pointed out the biggest banks the benefit from higher Interest Rates today are not passing on those benefits to their customers. Again penalizing americans are trying to build up savings. Workers and Small Businesses already struggling under the weight of inflation should not get hit with exorbitant bank fees, should lose a month on a crypto scam, shouldnt have to worry that the savings will disappear overnight. Its a mismanaged make a credit union fails. None of us want a scenario where risky bets on wall street crashed the economy again. Thats why its so important we have financial watchdogs like the four of you empowered to look out for main street in helping more americans hold on to hardearned money in in ae when they need it most. Thanking at credit union regulators are independent agencies that protect consumers, make sure banks and Credit Unions are safe and strong, independence were independence matters. Makes for some more stable Financial System that the center for the entire economy. Our Witnesses Today will have decades of banking and credit union regulatory experience. They spent careers serving the public and protecting consumers making sure banking and Credit Union Systems, making sure a Banking Credit union system works for main street not just for wall street. Thats exactly what they continue to do today. They are modernizing and strengthening important civil rights laws, investments in neighborhoods and community slept in their own can think of the pacific in a close look at overdraft nonsufficient funds at banks and against make sure customers are treated fairly and that these programs dont raise concerns. Thank you for that perfect taking a fresh look at the Bank Approval process so we dont continue this rubberstamp consolidation which has big consequences for local communities. Too often big banks merge and close branches leaving rural towns and urban communities without a bank. They are revisiting Financial Systems safeguards that protect us from risks of big foreign banks making sure Bank Failures dont leave Taxpayers Holding the bag. Its important to remember the super Regional Banks of today are hundreds of billions of dollars larger than the largest banks that failed during the financial crisis. Our financial regulators know we need Strong Capital requirements so banks and Credit Unions can continue to land in investing communities in good times and bad. They are overseeing the formation of new institutions that serve communities that often get left behind. Just last week a new faithbased credit union fdic recently approved the First Mutual Bank in 50 years which will pave the way for more in ohio and across the country. Agencies working together to foster new banks and Credit Unions and support the work of an v. A. s and cdfis in document. The same time our regulars are looking out for fisc on the horizon, the effects of climate change, the ricin cryptor assets, the risk some shouted banks, the constant threat of cyber attacks. There worked with making Credit Union Industry to prepare for climate related risks and bolster cybersecurity protections here scribbles become more sophisticated in geopolitical threats increased. They stepped up to protect depositors and consumers when crypto from smiths lead them into thinking their money is safe, when it isnt. We must a vigilant and empire regulars with the tools to combat these going risk. Data breaches happen too often. Threatening consumer, Customer Data at exposing our Financial System to vulnerability. Thats what we need past the bipartisan improving cybersecurity of Credit Unions act led by senator ossoff and warner. We need make sure banks and credit engines can partner with third parties and with that allow banks to stay competitive without putting consumer money at risk that we cant let Big Tech Companies and risk come risky shadow banks play by different rules because a special dimples. All these things will strengthen our banking and Credit Union System for its core mission serving main street and workers and families. When workers have more power in the economy they find better paying jobs. With a stronger labor market. That helps Credit Unions which added over 5 million new members the past year. It drives down the number of households without a bank account which dropped to record lows in 2021. When government is on the side of working families more americans save money, more americans build wealth, more american start Small Businesses, more americans strengthen our economy. Our financial regulars advance to have answered that call. I will continue to work with them to make sure our banking and Credit Union System works for everyone. Before i conclude on what you think the witnesses again for being here especially congratulate Marty Gruenberg in the nominated by President Biden to be chair of the fdic. Marty is well respected regulator was work to protect consumers, preserve confidence in our Banking System, playedn instrumental role in helping implement many doddfrank reforms with his experience leadership ive no doubt that fdic can continue to address risks in our Financial System and increase access to Affordable Financial Services and ensure banks honor their commitment to communities through the cra. This committee looks for to holding a nomination hearing at the next few two weeks for d of fdic nominees. Senator toomey. Thank you, mr. Chairman. And welcome to our witnesses. Throughout this congress i went about the politicization of the Financial Regulation works en banc regulators are increasingly straying outside the mandates into politically contentious issues. Take Global Warming for instance. Instance. In september the fed announced a quote, Pilot ClimateScenario Analysis exercise, end quote. With respect to the largest u. S. Banks. Were told this is been an exercise of ensuring that banks understand the risks. But the data including the feds own Research Shows there is no physical risk to banks from Severe Weather events. The only other risk is socalled transition risk here we also know that banks are fully capable of pricing risks into the Business Decisions including risk from changing customer preferences over time. So the real risk here is political. My worry is an attempt to somehow quantify this Political Risk would eventually result in regulations designed to allocate capital away from carbon intensive companies. It appears some Bank Regulators are already committed doing just that. For example, the fed, the fdic and the occ have all joined the network for the greening of the Financial System. This is an International Group of financial regulators with the stated aim to come and a quote, mobilized mainstream finance to support the transition toward a sustainable economy, end quote. In other words, their goal is to allocate capital away from carbon emitting industries to those deemed to be sufficiently green. Let me emphasize, the fed, the fdic and the occ have all joined this group. The ncua is also what one t unions and i quote, may need to consider adjustments to their fields of membership as well as the types of loan products that offer, end quote, thats because of Global Warming. So heres a reality. Some unelected financial regulars want to accelerate the transition to a low Carbon Economy by misusing their powers to allocate capital away from Traditional Energy companies. In addressing Global Warming requires really difficult political decisions. It involves tradeoffs and in a Democratic Society these kinds of tradeoffs have to be made by elected and accountable representatives, representatives of the American People who were held accountable through the political process. I supported vice chairman bar nomination despite a number of policy differences i have with him based in part on his commitment to stick to the feds narrow mandate and is at his conflation vice chair barr stressed that the fed and i quote should not be in the business of telling Financial Institutions to lend to a particular sector or not to lend to a particular sector, end quote. I thanked him again for the clarity and i urge him to keep to that commitment and one way we do that is by pulling the fed out of the politically contentious issue of Global Warming. Federal banking regulators have also been preoccupied in some cases with establishing new rules, the need for which have been dubious. For example, last month the fed and fdic proposed potential new requirements concerning the resolvability of Regional Banks. Now this proposal seems to be predicated on the assumption that the only realistic option to resolve a larger Regional Bank would be to sell it to an even larger bank. That its not at all clear that that assumption is warranted or that new requirements are appropriate for Regional Banks for at least two reasons. First, the fed and fdic have been approving Regional Bank resolution plans for nearly a decade. Nowhere do those plans contemplate wholesale acquisition by larger banks. Second, large Regional Banks have more than doubled their loss absorbing capital since the financial crisis, and this dramatically improves the resiliency and dramatically decreases the likelihood that they would need to be resolved. Now, maybe some regulators seem to think that benefits of new regulations always outweigh the costs, but we know that regulation is not without cost. And as regulation increases, financial activities will continue to migrate out of the Banking System as they have been doing in recent years. Now while some of our banking regulators have been distracted, they fail to address real challenges facing the Financial System. Last year the fed and the fdic and the occ committed to providing greater clarity on the involvement of banks and cryptor activities such as providing Custody Services or issuing stablecoins. Well over a year later they still provided no public clarity, and during that same time weve seen several highprofile collapses of Crypto Companies including a very prominent example just last week here i think its very possible that customers harmed by these collapses wouldve been better off if their cryptor assets had been safeguarded by regulated banks that had been providing Custody Services for other kinds of assets for literally hundreds of years. But many banks have been pressured by you, not to provide crypto related services into your agencys provide this clarity which just hasnt been forthcoming. I will note, however, chairman harper seems not to have pursued this Pressure Campaign with Credit Unions. In fact, hes issued guidance for Credit Unions on partner with Crypto Companies or using distributed ledger technologies. The ambivalence of the remaining agencies has helped to push cryptor activities into foreign jurisdictions with weaker or no regulatory regimes. As a general matter seems to me the failure of congress to pass legislation in this space and the failure of regulators to provide clear guidance has created ambiguity that is driven developers and entrepreneurs overseas when regulations are often lacks at best. One other item i i want to highlight before we start. The rest of the discussion. Its the de jure liquid in u. S. Treasury market. In march 2021 the fed committed to modify the supplementary leverage ratio or slr, in part to facilitate bank dealers ability to intermediate in this market. Over 18 months later the fed still has not acted. I understand vice chairman bardsley been in this role for four months and he has recently suggested that potential and in the city slr should be in the context of reviewing all Capital Requirements or understand that. What we really should recognize the significant decline in treasury market liquidity is already occurring and absent an improvement im afraid the fed might one day the site has to intervene by restarting bond purchases which would be quite contrary to its Current Mission of getting inflation under control. What i hope ill hear from our banking regulars today is that they will prioritize these and other real challenges, and not stray beyond their mandates into politically contentious issues or establish a necessary new regulatory burden. Thank you, mr. Chairman. Thank you, senator toomey. I have entered is the format but is it that michael barr took office as vice chair for supervision of the board of governors of the Federal Reserve system july at 20 to 44 year term. It also serves as as a membef the board of governors. Todd harper was sworn in to serve a full term as the Financial Credit UnionAdministration Board chair of july 2020. Martin gruenberg has been the acting chair of the fdic board of directors since february of 22. Hes been confirmed to serve as chair and chairman of the fdic and is the service at the fdc since 2005. Michael hsu became acting comptroller of the currency in may 2021. Mr. Barr if you begin your testimony. Thank you. Thank you very much chairman brown, Ranking Member toomey and other members of the committee. Thank you for the opportunity to testify today on the Federal Reserve supervisor regulatory activities. As vice chair for supervision my priorities to make the Banking System safer and fair. The Bank