[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
                     H.R. 3505--FINANCIAL SERVICES
                     REGULATORY RELIEF ACT OF 2005

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
               FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 18, 2005

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-59



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          HAROLD E. FORD, Jr., Tennessee
    Carolina                         RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
VITO FOSSELLA, New York              STEVE ISRAEL, New York
GARY G. MILLER, California           CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio              JOE BACA, California
MARK R. KENNEDY, Minnesota           JIM MATHESON, Utah
TOM FEENEY, Florida                  STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida           ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   AL GREEN, Texas
KATHERINE HARRIS, Florida            EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona                  MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas               
TOM PRICE, Georgia                   BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK, 
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina

                 Robert U. Foster, III, Staff Director
       Subcommittee on Financial Institutions and Consumer Credit

                   SPENCER BACHUS, Alabama, Chairman

WALTER B. JONES, Jr., North          BERNARD SANDERS, Vermont
    Carolina, Vice Chairman          CAROLYN B. MALONEY, New York
RICHARD H. BAKER, Louisiana          MELVIN L. WATT, North Carolina
MICHAEL N. CASTLE, Delaware          GARY L. ACKERMAN, New York
EDWARD R. ROYCE, California          BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
SUE W. KELLY, New York               LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      DENNIS MOORE, Kansas
PAUL E. GILLMOR, Ohio                PAUL E. KANJORSKI, Pennsylvania
JIM RYUN, Kansas                     MAXINE WATERS, California
STEVEN C. LaTOURETTE, Ohio           DARLENE HOOLEY, Oregon
JUDY BIGGERT, Illinois               JULIA CARSON, Indiana
VITO FOSSELLA, New York              HAROLD E. FORD, Jr., Tennessee
GARY G. MILLER, California           RUBEN HINOJOSA, Texas
PATRICK J. TIBERI, Ohio              JOSEPH CROWLEY, New York
TOM FEENEY, Florida                  STEVE ISRAEL, New York
JEB HENSARLING, Texas                CAROLYN McCARTHY, New York
SCOTT GARRETT, New Jersey            JOE BACA, California
GINNY BROWN-WAITE, Florida           AL GREEN, Texas
J. GRESHAM BARRETT, South Carolina   GWEN MOORE, Wisconsin
RICK RENZI, Arizona                  WM. LACY CLAY, Missouri
STEVAN PEARCE, New Mexico            JIM MATHESON, Utah
RANDY NEUGEBAUER, Texas              BARNEY FRANK, Massachusetts
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
MICHAEL G. OXLEY, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    October 18, 2005.............................................     1
Appendix:
    October 18, 2005.............................................    39

                               WITNESSES
                       Tuesday, October 18, 2005

Beal, Bradley W., President/CEO, Nevada Federal Credit Union, 
  Representing National Association of Federal Credit Unions.....     9
Buell, Phillip R., President/CEO, Superior Federal Credit Union, 
  Lima, Ohio, Representing Credit Union National Association.....    13
Hart, Norma Alexander, President, National Bankers Association...    11
Hayes, David, Chairman, Independent Community Bankers of America.    15
Rock, Bradley E., Chairman, President and CEO, Bank of Smithtown 
  (New York), Representing American Bankers Association..........    10

                                APPENDIX

Prepared statements:
    Bachus, Hon. Spencer.........................................    40
    Carson, Hon. Julia...........................................    42
    Gillmor, Hon. Paul E.........................................    43
    Ney, Hon. Robert W...........................................    44
    Beal, Bradley W..............................................    45
    Buell, Phillip R.............................................    64
    Hart, Norma Alexander........................................    89
    Hayes, David.................................................    92
    Rock, Bradley E..............................................   120


                     H.R. 3505--FINANCIAL SERVICES
                     REGULATORY RELIEF ACT OF 2005

                              ----------                              


                       Tuesday, October 18, 2005

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10 a.m., in Room 
2128, Rayburn House Office Building, Hon. Spencer Bachus 
[chairman of the subcommittee] Presiding.
    Present: Representatives Bachus, Castle, Royce, Lucas, 
Kelly, Gillmor, Ryun, Oxley (ex officio), Biggert, Feeney, 
Hensarling, Brown-Waite, Pearce, Neugebauer, Maloney, Moore of 
Kansas, Kanjorski, Frank (ex officio), Hooley, Carson, Ford, 
Israel, Baca, Green, Moore of Wisconsin, Clay and Matheson.
    Also present: Representative Ney.
    Chairman Bachus. Good morning. The Subcommittee on 
Financial Institutions and Consumer Credit is meeting today to 
focus on H.R. 3505, the Financial Services Regulatory Relief 
Act of 2005, which was authored by Congressman Hensarling and 
Congressman Moore in July. H.R. 3505 seeks to reduce the 
Regulatory Board on Insured Depository Institutions to benefit 
consumers and the economy by lowering costs and improving 
productivity. This legislation follows three earlier hearings, 
or this legislative hearing follows three earlier hearings on 
regulatory relief where we have on many occasions heard from 
financial institutions for the need for Congress to eliminate 
unnecessary regulations.
    Last month we received recommendations on H.R. 3505 from 
regulators. Today we will hear from representatives of the 
financial services industry, including our panelists today, 
Nevada Federal Credit Union President and CEO Bradley Beal, on 
behalf of the National Association of Federal Credit Unions; 
Bank of Smithtown Chairman, President and CEO Brad E. Rock, on 
behalf of the American Bankers Association, and Congressman 
Israel is going to introduce him. We also have on behalf of the 
National Banking Association--I am sorry, National Bankers 
Association President Norma Alexander Hart; and then Superior 
Federal Credit Union of Lima, Ohio, CEO Phillip Buell, on 
behalf of the Credit Union National Association; and 
Independent Community Bankers of America Chairman David Hayes.
    I look forward to hearing from today's witnesses and thank 
them for taking time from their busy schedule to join us.
    Under Chairman Oxley's leadership this committee has been 
dedicated to freeing depository institutions from unduly 
burdensome regulations so that they can be more effective to 
meeting the credit needs of their communities. During the 108th 
Congress the committee produced a comprehensive regulatory 
relief bill that passed the House by a margin of 392 to 25. 
That was actually H.R. 1375. Unfortunately, the Senate took no 
action.
    H.R. 3505 draws from and supplements the provisions of last 
year's bill. Additionally it includes provisions from 
legislation sponsored by Mr. Ryun of Kansas, H.R. 2061, the 
Community Banks Serving Their Communities First Act; and 
legislation sponsored by Mr. Royce and Mr. Kanjorski, Mr. Royce 
of California and Mr. Kanjorski of Pennsylvania, H.R. 2317, the 
Credit Union Regulatory Improvements Act, CURIA. I applaud the 
goals of these bills which would allow banks and credit unions 
to devote more resources to the business of lending to 
consumers and less to the bureaucratic maze of compliance with 
outdated and unnecessary regulations.
    Let me close by commending Congressman Hensarling, 
Congressman Moore, Chairman Oxley, Ranking Member Frank and 
Ranking Member Sanders, Mr. Ryun, Mr. Royce, Mr. Kanjorski, and 
all other members of the committee who have worked tirelessly 
on this important piece of legislation. I look forward to 
working with them and the rest of the members of this committee 
as we move toward a markup and floor consideration in the 
coming weeks.
    [The prepared statement of Hon. Spencer Bachus can be found 
on page 40 in the appendix.]
    Chairman Bachus. At this time I am pleased to recognize the 
ranking member of the full committee Mr. Frank for an opening 
statement.
    Mr. Frank. Thank you, Mr. Chairman. I am glad we are going 
ahead with this, and I think as someone who believes there is 
an important role for regulation in achieving important goals, 
that an essential part of regulation is getting regulation 
right. And overregulating and regulating badly undercuts the 
notion of the proper balance between a private and public 
sector operation.
    For example, one of the things we will be doing is reducing 
some of the requirements of the Bank Secrecy Act. Instinctively 
people get nervous about that. They are afraid of being open to 
charges that we are somehow weakening our defenses. In fact, 
when the enforcement agencies are flooded with a lot of paper 
that really has nothing to do with abuses, that is what weakens 
law enforcement.
    Gresham's law says that the bad drives out the good in 
currency. With regard to this sort of law enforcement, there is 
a modification of Gresham's law: The good can cover up the bad. 
The amount of paper that people have to wade through almost 
literally diminishes their ability to focus on those things 
that they should be finding. It is hard enough to find these 
particular needles when people are trying to cover them up; we 
should not be pouring more hay on, and that is what we do when 
we require excessive information.
    So I want to reassure all my colleagues that this has been 
carefully worked out. And I congratulate the Department of 
Treasury, FINCEN, and the American Bankers Association. A 
number of people here did a very good job of getting together 
and understanding the goal, figuring out how better to 
accomplish it. So this is a bill that serves the purposes of 
sensible regulation, and it serves as what I think ought to be 
the goal of this committee, which is providing an atmosphere in 
which the private sector, particularly those in the financial 
industry, can do the essential job that it has to do of 
providing the capital and the liquidity for the economy and at 
the same time protecting those legitimate public interests 
which have to be protected, but in a rational way.
    And then finally I would note this is one more example of 
the ability of this committee. I think it is important to 
stress this. We often talk about how bipartisan we are. I think 
it is important for this committee and every other arm of the 
Congress to be both bipartisan and partisan sometimes in the 
same week. That is, there are legitimate differences between 
the parties. There are legitimate issues that we ought to have 
debate about. What this committee shows, I think, is that you 
can have those debates on those issues which divide us without 
that poisoning the atmosphere, so that when we come together on 
things like this where there are really technical issues and 
not ideological ones that we ought to be able to work together, 
we are able to do that. And, Mr. Chairman, I would say to the 
chairman of the subcommittee that you deserve a great deal of 
the credit for creating that kind of atmosphere.
    So I look forward to our not just having this hearing, but 
marking up a bill and, I would hope, passing this as soon as 
possible. Certainly there is no reason why we shouldn't be 
passing it here before the end of the year. And as to the 
Senate, we will see what happens. But the sooner we send them 
something, the likelier we are to see some positive action.
    Thank you, Mr. Chairman
    Chairman Bachus. Thank you, Mr. Frank. And I very much 
appreciate those remarks and appreciate working with you on 
this legislation.
    I now recognize one of the sponsors of this legislation, 
the principal sponsor along with Mr. Moore, Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman. And first let me 
again thank you for your leadership in doggedly pursuing this 
issue. Even though he is not here, I want to thank Chairman 
Oxley for his leadership as well, and to follow up on the 
ranking member's comments in creating a place in Congress where 
one can truly work in a bipartisan fashion. I want to thank 
Ranking Member Frank for his contributions to this. And as a 
former student of economics, I especially appreciate anybody 
who can properly cite Gresham's law. So that impresses me as 
well.
    I want to thank Mr. Moore, my colleague from Kansas, for 
his contributions and working closely together with him on this 
bipartisan piece of legislation and my colleague Mr. Ryun of 
Kansas for his leadership in the Communities First Act, a 
number of provisions which were included in this act, as you 
well know, Mr. Chairman, and as you have cited.
    Clearly the time for some regulatory relief is upon us. We 
all know that many regulations, although well intended, have 
costs associated with them. Many of these costs end up being 
imposed ultimately upon consumers. Many regulations are 
duplicative. Many have unintended consequences. Sometimes I 
think we excel at unintended consequences in Congress. Some 
outlive their purposes, and some never achieve their purposes 
in the first place.
    At the end of the day, these excessive regulations can make 
credit less affordable and less accessible to people in our 
society who need it the most. They can prevent somebody from 
buying their first home, buying an automobile they need to 
commute to work, or maybe even capitalizing a small business 
and creating new jobs. They can also hurt consumers in another 
way, and that is they can drive out competition. They create 
fewer choices for the consumer in the financial services 
marketplace.
    We have heard testimony earlier that in the last decade 
community banks, which I think are vital to the economic 
lifeblood of rural America, have contracted from roughly 13,000 
to roughly 8,000. One of the reasons this is happening is 
because of a disproportionate regulatory burden. As we know, 
our banks have had to contend with approximately 850 new 
regulations since 1989. They cannot keep up with this 
particular burden.
    If we want to help the economic development of rural 
America, if we want to help our inner cities, if we want to 
help our consumers, we do have to have some regulatory relief. 
I believe that H.R. 3505 goes a long way in achieving that. It 
makes great strides. It doesn't include every provision I would 
like, but I think we have done a good job in achieving 
significant consensus within this committee, and I think that 
we strike a good balance on a number of issues, and that we 
will hopefully at the end of the day see this actually become 
the law of the land.
    Thank you, Mr. Chairman, and I yield back.
    Chairman Bachus. Thank you, Mr. Hensarling.
    Mrs. Maloney.
    Mrs. Maloney. Thank you, Chairman Bachus and Ranking Member 
Frank. And I welcome all of the witnesses, particularly Mr. 
Rock from the great State of New York. We are glad you are 
here, and we look forward to hearing all of your testimony.
    As a Representative from New York, the financial center of 
the United States, I am particularly concerned about the 
burdens that regulations and reporting requirements impose on 
our financial institutions, particularly those that are not 
megainstitutions, but are midsize and smaller. And I know that 
the vast majority of my colleagues feel the same way. That is 
why we have come forward with basically a bipartisan consensus 
on this bill. We had it last year when we passed reg relief 
overwhelmingly. It died in the Senate. But this bill before us 
is an improved version and addresses areas of special concern 
to me.
    I applaud the leadership of Congressman Frank in working 
out an agreement for the ILCs, and I must say that wherever I 
go in my district, smaller institutions tell me how hard and 
costly it is to comply with the requirements of the BSA Act to 
file the CTRs, the SARs. They say the burden, the paperwork, is 
just overwhelming, and it is particularly hard on smaller 
institutions where the costs of compliance are a much higher 
proportion of their resources. And this bill includes a new 
section that addresses these concerns. It is not perfect, but 
it is a step in the right direction.
    And I look forward to continuing to work with Chairman 
Bachus, FINCEN, and others to further refine the exemption 
process that we require in a new section 701 that FINCEN and 
law enforcement finds viable and that will help in their 
oversight, too. I think that this is a critical part of the 
bill.
    Also, this bill contains the Credit Union Regulatory 
Improvement Act, which I have supported in several Congresses, 
and these provisions offer relief to credit unions. And I hope 
that we will be able to move forward in this bill and finally 
pass the remaining portions of CURIA, especially the reforms to 
the prompt corrective action system and the conversion 
provisions. I believe that these additional reforms will bring 
valuable certainty to the credit union sector of the market.
    So I thank everyone for coming, and I look forward to your 
testimony and hopefully passage of the bill.
    Thank you. I yield back
    Chairman Bachus. Thank you.
    I am told that no other members of the--Mr. Chairman. 
Chairman Oxley. I am sorry.
    Mr. Oxley. Thank you, Mr. Chairman. I want to thank you for 
holding this hearing on H.R. 3505. I sneaked in on you, Mr. 
Chairman. Your peripheral vision is not what it used to be.
    Chairman Bachus. I knew you were here. They just didn't 
tell me you wanted to speak.
    Mr. Oxley. I want to thank you for holding this hearing on 
the Financial Services Reg Relief Act of 2005 and look forward 
to hearing from the financial services industry trade groups 
with their views on H.R. 3505 and how this bill provides much-
needed relief from outdated, unnecessary regulations.
    The case for giving banks, credit unions, and other 
financial institutions regulatory relief has never been 
stronger. This Congress we have held three hearings on this 
important subject. The FDIC has testified that since 1989, 
Federal regulators have issued over 800 separate regulations 
affecting financial institutions, requiring significant 
adjustments to existing systems and other costly steps to 
ensure compliance. And while no one is suggesting that these 
regulations are not well intentioned, the sheer volume of 
mandates emanating from Washington makes it incumbent upon 
those of us in the Congress to find ways to ease regulatory 
burdens where we can so that the financial services industry 
can focus more of their finite resources on serving customers 
rather than contending with bureaucratic red tape.
    This year the legislation has been introduced by two well-
respected members of our committee, Mr. Hensarling and Mr. 
Moore, which builds on the provisions in the regulatory relief 
bill that won overwhelming approval in the House last year, but 
was never taken up in the Senate. H.R. 3505 includes virtually 
all of the provisions of last Congress's reg relief bill, a new 
title that addresses Bank Secrecy Act issues, and over 20 new 
provisions. And I want to thank both the gentleman from Kansas 
and the gentleman from Texas for their leadership on this 
issue.
    I want to thank the witnesses for appearing here today, 
particularly Phil Buell from Lima, who represents the--who is 
president/CEO of Superior Federal Credit Union in Lima, Ohio, 
in the Fourth Congressional District. Other than the fact that 
he went to 2 MAC schools that were not Miami, he is a fine, 
upstanding citizen and a good representative of the credit 
union industry. I look forward to their comments on the bill.
    We can achieve regulatory relief for deposit institutions 
so they can better serve their customers and their communities. 
And, Mr. Chairman, let me again salute your leadership on this 
issue. This is now a time to punch it across the goal line, and 
I think if we--I suspect we will get a good, strong bipartisan 
vote in the committee when we mark this legislation up, and 
then also on the floor, to get a good head of steam over in the 
other body. I know that Senator Crapo, among others, has 
expressed an interest, and we have already had a hearing, which 
is progress certainly on that side of Capitol, and we are 
hopeful that this session of the Congress we can come to 
fruition and get this bill passed and signed by the President.
    The pressures are enormous on the financial institutions. 
We have asked them to do an awful lot with the PATRIOT Act, 
with the Bank Secrecy Act, all of those regulations, the 800 
and some regulations coming down from above. It is clearly a 
time for regulatory relief. And again, now is the time to get 
it done. And I yield back
    Chairman Bachus. I thank the Chairman.
    And my eyesight is not as good as my leadership, I guess, 
right? But I had an opening statement, and I went on and on 
about your leadership. And Mr. Frank also complimented you.
    At this time we will hear from Mr. Moore who obviously with 
Mr. Hensarling, as we have all heard, introduced this 
legislation and played a key role in it.
    Mr. Moore of Kansas. I would like to thank my friend 
Chairman Bachus for sponsoring the hearing today, convening 
this hearing. I would also like to thank Chairman Oxley for his 
leadership in this area. You have been very strong, and I 
really appreciate that. And, Chairman Bachus, thanks for 
scheduling today's hearing on regulatory relief legislation, 
H.R. 3505, which was introduced by Congressman Hensarling and 
myself and cosponsored by 32 members of this committee on both 
sides of the aisle. And that is one of the gratifying things to 
me about this committee is the bipartisanship which we on many, 
many occasions are able to achieve that sometimes other 
committees in Congress don't get, and I really, really 
appreciate that. The Financial Services Committee has a strong 
record of bipartisanship, and I am glad it has extended to this 
bill. Regulatory relief should not be about Republicans or 
Democrats. It should be about doing the right thing for the 
lenders in our communities who have played such an important 
role in expanding home ownership and for creating opportunities 
for businesses and consumers.
    Small lenders in our communities particularly feel the 
burden of unnecessary regulations. Whenever Congress or the 
regulatory agencies impose a new burden on industry, small 
institutions must devote a large percentage of their staffs' 
time to review the new law or regulation, determine if and how 
it will affect them. Compliance with new laws and regulations, 
while sometimes necessary, nearly always takes a large amount 
of time that businesses cannot devote to serving their 
customers and our constituents.
    Strong regulation of our country's financial system is 
absolutely essential, but Congress and the financial regulators 
have a responsibility to strike the right balance in this area, 
and 3550 is an important step in the right direction, I 
believe.
    Since coming to Congress, and particularly over the last 
few months, I have heard from many depository institutions in 
my district and throughout Kansas, and I have tried to address 
in 3505 some of the concerns that I have heard. While assets 
for State-chartered banks in Kansas have reached an all-time 
high of $27 billion, our communities' banks are also struggling 
to comply with both old and new reg burdens, including some 
created under the Bank Secrecy Act.
    3505 seeks to provide relief from some of these new burdens 
to our financial institutions in a way that preserves our 
ability to track terrorist financing and build upon our success 
in freezing the funds of terrorists. Representative Hensarling 
and I and the bill's bipartisan cosponsors agree that waging a 
strong war on terror and providing some reg relief to our 
financial institutions are not incompatible goals.
    Additionally, 3505 provides two new sections of reg relief 
for our credit unions that were not included in the previous 
version of this measure, 1375. This subcommittee and the full 
committee both passed the reg relief bill by voice vote during 
the 108th Congress, and the House passed it 1 year ago by a 
wide margin, 392 to 25.
    I look forward to continuing the broad bipartisan 
cooperation on this legislation that we have enjoyed in the 
past. Again, thank you, Chairman Bachus, and I look forward to 
hearing from the witnesses.
    Chairman Bachus. Thank you.
    At this time are there any other opening statements that 
members would like to make?
    Without objection, the gentleman from Ohio, Mr. Ney, will 
be permitted to participate in today's hearing. Although he is 
not a member of the subcommittee, he is chairman of the housing 
subcommittee, and we welcome you.
    Mr. Ney. Thank you, Mr. Chairman. I don't--I would just 
like permission to enter my statement for the record without 
reading it, with one amended part; that Mr. Oxley is a great 
Ohio leader.
    [The prepared statement of Hon. Robert W. Ney can be found 
on page 44 in the appendix.]
    Chairman Bachus. And without objection, opening statements 
of all members will be introduced in the record. And I know Mr. 
Baca and other members have opening statements that they wish 
to submit.
    I would like to introduce our panel now. Mr. Brad Beal is 
president/CEO of the Nevada Federal Credit Union, which is the 
largest credit union in the State of Nevada with 82,000 
members. He, prior to that, was at other credit unions, both in 
Nevada and Utah. And, Ms. Biggert, he is a native of Illinois 
and is proud of that fact and graduated summa cum laude from 
Bradley University in Peoria, Illinois. He is also a certified 
public accountant and a member of the American Institute of 
Certified Public Accountants.
    Our next panelist, Mr. Israel, I am going to recognize you 
for an introduction of.
    Mr. Israel. Thank you, Mr. Chairman. Thank you for giving 
me the privilege of introducing Brad Rock, who has been a key 
advisor and a good friend on Long Island. And I should say, Mr. 
Chairman, parenthetically that one of the sponsors of this 
resolution, Mr. Moore, happened to have been on Long Island 
last weekend, visited Smithtown as guests of my wife and 
myself.
    Mr. Rock has served as chairman of the board, president and 
chief executive officer of the Bank of Smithtown and its public 
holding company, Smithtown Bankcorp, for the past 16 years. The 
Bank of Smithtown is a 96-year-old community bank on Long 
Island with assets of approximately $750 million. He currently 
serves as chairman of the ABA Government Relations Council. He 
has previously testified before the House Financial 
Institutions Subcommittee, the Senate Banking Committee, and he 
is also a former president of the Independent Bankers 
Association of New York State.
    And, Mr. Chairman, I know we all have constituents like Mr. 
Rock who are so tenacious, so persistent, and so diligent, they 
don't even take yes for an answer. They just keep asking and 
asking. And I am pleased to introduce Mr. Rock.
    Chairman Bachus. It is my pleasure to introduce Norma 
Alexander Hart. Ms. Hart has been the president of the National 
Bankers Association since 1997. And actually you were first 
with the National Banking Association back in the early 1980s, 
before she left to work at United National Bank in Washington, 
D.C., which was a minority-owned bank which later merged with 
Madison National Bank, and she served as a marketing officer 
and rose to the position of assistant vice president. She 
received her B.A. from the University of the District of 
Columbia. She resides in Washington, D.C., with her husband, 
attorney Tom Hart, and you all have three children. And you 
don't have a plane to catch after this hearing? And we welcome 
you. She has an extensive resume. And we welcome you and look 
forward to your testimony. I think this is the first time you 
have testified before this committee; is that correct? That is 
correct. So we welcome you, Ms. Hart.
    Mr. Phillip Buell is our next panelist, who is representing 
CUNA, Credit Union National Association. Chairman Oxley has 
previously introduced Mr. Buell. We welcome you. It seems like 
we always have an Ohio representative on our panel, and we 
welcome you.
    Our last panelist is David Hayes. David, you have testified 
before the committee on four or five previous occasions as a 
representative of the independent community banks, and we 
welcome you back before the hearing.
    He is president/CEO of Security Bank of Dyersburg, 
Tennessee. As we have said before, he is very active in serving 
as chairman of the board back in Dyersburg of the United Way 
and the Heart Association and various other civic boards. And 
we appreciate your testimony. He is wearing a Tennessee Vols 
tie, not realizing that I represent the University of Alabama, 
and that this weekend the University of Tennessee and the 
University of Alabama meet in Tuscaloosa. And it is probably 
good that he has got that tie on this week instead of next 
week. But, no, we have joked about that.
    So we welcome all our panelists this morning. And at this 
time, without objection--we have already done that. At this 
time I am going to recognize Mr. Beal for your opening 
statement.

  STATEMENT OF BRADLEY W. BEAL, PRESIDENT/CEO, NEVADA FEDERAL 
  CREDIT UNION, REPRESENTING NATIONAL ASSOCIATION OF FEDERAL 
                         CREDIT UNIONS

    Mr. Beal. Thank you, Mr. Chairman. And good morning, Mr. 
Chairman, Ranking Member Sanders and members of the 
subcommittee. My name is Brad Beal, and I am the president and 
CEO of Nevada Federal Credit Union, which is located in Las 
Vegas, Nevada. I am here today on behalf of the National 
Association of Federal Credit Unions to express our views on 
H.R. 3505. As with all credit unions, Nevada Federal is a not-
for-profit financial cooperative governed by a volunteer board 
of directors who are elected by our member-owners.
    I am pleased to report to you today that America's credit 
unions are vibrant and healthy and that membership in credit 
unions continues to grow, now serving over 87 million 
Americans. At the same time, according to data obtained from 
the Federal Reserve, credit unions have the same market share 
today in terms of financial assets as they did back in 1980, 
that being 1.4 percent, and as a consequence provide little 
competitive threat to other financial institutions.
    NAFCU would like to thank Representatives Hensarling and 
Moore for their leadership in introducing H.R. 3505. We support 
the credit union provisions included in title 3 of that bill. 
We believe these provisions are a positive step in addressing 
many of the regulatory burdens and restrictions on Federal 
credit unions.
    The facts confirm that credit unions are more heavily 
regulated than other consumer financial services providers. 
Furthermore, NAFCU is pleased to see the efforts of title 7 to 
help reduce the Bank Secrecy Act compliance burden on many 
financial institutions.
    While we believe H.R. 3505 is a solid bill as introduced, 
we believe that it can be made stronger by including much-
needed additional provisions from the Credit Union Regulatory 
Improvements Act, also known as CURIA. I would like to thank 
Congressmen Royce and Kanjorski for taking the lead in 
introducing this vital legislation that has received bipartisan 
support of about 100 cosponsors.
    NAFCU urges the subcommittee to add language to H.R. 3505 
to modernize credit union capital requirements by redefining 
the net worth ratio to include risk assets as proposed by the 
NCUA and included in Title I of the CURIA bill. This would 
result in a new, more appropriate measurement to determine the 
relative risk of a credit union's balance sheet and also 
improve the safety and soundness of credit unions and our Share 
Insurance Fund. I would like to point out that the current 
capital system treats a 1 year unsecured $10,000 loan the same 
as a 30-year mortgage that is on its last year of repayment. 
This simply does not make sense.
    We are moving from a model where one size fits all to a 
model that considers the degree of risk in each credit union's 
balance sheet. This proposal advocates a reduction in the 
standard net worth or leverage ratio requirements for credit 
unions to a level comparable to, but still greater than, what 
is required of FDIC-insured institutions. Further strength is 
gained because this proposal advocates a system involving 
complementary leverage and risk-based standards working in 
tandem.
    NAFCU also asks the subcommittee to refine the Member 
Business Loan cap established as part of the Credit Union 
Membership Access Act back in 1998, replacing the current 
formula with a flat rate of 20 percent of the total assets of a 
credit union. We support revising the definition of a member 
business loan by giving NCUA authority to exclude loans of 
100,000 or less from counting against the cap. There is a lot 
of rhetoric about this issue out there, but I note that a 2001 
Treasury Department study entitled Credit Union Member Business 
Lending concluded that, quote, credit unions' business lending 
currently has no effect on the viability and profitability of 
other insured depository institutions, close quote.
    In conclusion, the state of the credit union community is 
strong, and the safety and soundness of credit unions is 
unquestionable. Nevertheless, there is a clear need to ease the 
regulatory burden on credit unions as we move forward in the 
21st century financial services marketplace. NAFCU supports 
H.R. 3505, but believes it can be made even stronger by adding 
amendments to modernize credit union capital requirements and 
refine the arbitrary credit union member business lending cap. 
We look forward to working with you on these important matters, 
and we would welcome your comments or questions.
    Thank you, Mr. Chairman.
    Chairman Bachus. Thank you, Mr. Beal.
    [The prepared statement of Bradley W. Beal can be found on 
page 45 in the appendix.]
    Chairman Bachus. And all panelists, your written statements 
will be made a part of the record, and of course we are--you 
are just giving a 5-minute opening statement. And appreciate, 
Mr. Beal.
    Mr. Rock, you are recognized.

  STATEMENT OF BRADLEY E. ROCK, CHAIRMAN, PRESIDENT, AND CEO, 
  BANK OF SMITHTOWN (NEW YORK), REPRESENTING AMERICAN BANKERS 
                          ASSOCIATION

    Mr. Rock. Thank you, Mr. Chairman.
    I am chairman, president, and CEO of Bank of Smithtown, an 
$800 million community bank located in Smithtown, New York, 
founded in 1910. I am also the vice chairman of the American 
Bankers Association.
    Competitive inequities and the cost of unnecessary 
regulation is a serious long-term problem that continues to 
erode the ability of banks to serve our customers and support 
the economic growth of our communities. We applaud the efforts 
of the committee to reduce the regulatory burden on banks and 
to restore balance to the regulatory process.
    I have included a list of recommended actions with my 
written testimony, each one of which would provide much-needed 
regulatory relief to my bank and others like mine, but today 
there are three especially timely issues that I would like to 
emphasize.
    First, ABA believes that the current CTR standards have 
outlived their utility in detecting criminal activity. 
Maintaining the CTR threshold at the current level generates 
too many reports with immaterial activity and wastes banker and 
law enforcement time. This time could be better spent on 
suspicious activity report detection and investigation. The 
solution is to eliminate the CTR requirements for seasoned 
customers with transaction accounts. At a recent hearing before 
this committee, Financial Crimes Enforcement Network Director 
William Fox and other chief regulators supported this idea. The 
time has come to enact this reform.
    Second, I understand that there may be efforts to 
incorporate provisions of H.R. 2317, the Credit Union 
Regulatory Improvements Act, with the regulatory relief 
legislation pending before this committee. We urge the 
committee to reject H.R. 2317 and not incorporate its 
provisions into a larger regulatory relief package. H.R. 2317 
would greatly expand credit union commercial lending authority 
while at the same time undercut the regulation of capital 
levels at federally insured credit unions. These changes would 
fuel even more rapid expansion of a segment of the credit union 
industry that openly flaunts its congressionally mandated 
mission to serve people of modest means.
    Today more than 100 credit unions surpass $1 billion in 
assets and use their tax exemption to compete head to head with 
taxpaying banks. These conglomerate credit unions are much 
larger than the typical community banks in their local market, 
which have an average asset size of approximately $100 million. 
The current tax-exempt status of these diversified conglomerate 
credit unions and lack of equivalent regulation has created 
huge competitive inequities in the local marketplace and 
represents an ever-increasing abuse of the credit union tax 
subsidies. H.R. 2317 would exacerbate these competitive 
inequities as well as raise safety and soundness concerns.
    Third, Wal-Mart's recent application for an industrial loan 
corporation charter and Federal deposit insurance has triggered 
renewed interest in commercially owned ILCs. ABA has long taken 
the position that commercial firms should not own banks or 
savings institutions because of the potential of conflicts of 
interest, particularly in the credit-granting process, and 
because of the potential for an unhealthy concentration of 
economic power.
    The ILC charter remains an open avenue for commercial 
firms, even those large firms that are not primarily financial 
in nature, to provide retail and corporate banking services. 
Therefore, ABA supports language in the regulatory relief bill 
to deny new commercially owned ILCs de novo branching authority 
and look forward to working with the committee on the broader 
issue of commercially owned ILCs. Thank you, Mr. Chairman.
    Chairman Bachus. Thank you, Mr. Rock.
    [The prepared statement of Bradley E. Rock can be found on 
page 120 in the appendix.]
    Chairman Bachus. Ms. Hart.

STATEMENT OF NORMA ALEXANDER HART, PRESIDENT, NATIONAL BANKERS 
                          ASSOCIATION

    Ms. Hart. Thank you, Chairman Bachus.
    Good morning, Chairman Bachus, Ranking Member Sanders, and 
other distinguished members of the Subcommittee on Financial 
Institutions and Consumer Credit. My name is Norma Alexander 
Hart. I am president of the National Bankers Association. It is 
my pleasure to provide comments on behalf of the Association 
regarding H.R. 3505, the Financial Services Regulatory Relief 
Act of 2005, pending Congress.
    For nearly 80 years the NBA has served as the trade 
association advocating for minority- and women-owned financial 
institutions. Moreover, the NBA and its 50 member banks and 30 
associate members has worked with the Federal Government to 
develop policies, regulations, and laws that recognize the 
importance of preserving and fostering minority-owned and -
controlled banking institutions.
    Regulatory relief has been around for years. First let me 
commend the committee for its hard work on this issue. We have 
been supporting this effort for a number of years on the Hill. 
The NBA is pleased to support the overall thrust of the 
regulatory relief bill. There are many regulations that need to 
be updated or in some cases eliminated to make the banking 
industry more competitive and available to the American public, 
to many lower-income Americans that are still unbanked, and we 
hope that this bill will make it easier for financial 
institutions to offer services to this important segment of our 
population.
    The purpose of the act is to update regs and to lift the 
regulatory burden on banks. The regulations imposed by the 
regulators often disproportionately burden the minority- and 
women-owned banks. Efforts should be made to streamline 
compliance of regulations that are intrusive and costly to 
banks with deposits of 3 million or less; for example, 
Sarbanes-Oxley internal controls, IT compliance, Bank Secrecy 
Act, privacy issues, and PATRIOT Act reporting. Each of the 
above regulations impose a high cost of compliance. These costs 
impose a severe burden on small, minority-owned institutions.
    Three, de novo banks. Specifically we note our concern 
about the provisions of the act that open the financial 
services industry to enterprises and industries that would use 
banking and mortgage lending as an ancillary service to their 
primary business. The NBA does not believe financial services 
should be provided as a commodity at over-the-counter stores or 
fast-food restaurants. Consumers should not go mortgage 
shopping at the same time they go food shopping. This will 
undermine the safety and soundness of the banking industry in 
America.
    The NBA is concerned about nontraditional ownership of 
financial institutions. Regulators must take a fresh look at 
this issue. The act should impose separation between the retail 
and banking services. Restrictions on locations and cross-
marketing efforts should be imposed. If retail chains are 
invited into the banking industry, they should be available to 
offer only limited services, and their roll-out should be 
staggered. The committee should not open the doors too widely.
    Four, preservation of minority banks by section 308 of 
FIRREA. Pursuant to sections 301 and 308 of the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989, 
FIRREA, Congress has mandated that the FDIC and the OTS conduct 
activities that recognize and preserve the special and unique 
status of minority-owned financial institutions.
    Over the years this legislation has lost much of its 
relevance and impact. As a result, the number of minority- and 
women-owned banks is decreasing. This regulation should expand 
to include other regulatory bodies, and the regulators should 
be instructed to undertake deliberate efforts to foster the 
number and competitiveness of minority institutions. 
Additionally, regulators should provide minority banks the 
first opportunity to acquire troubled institutions or other 
banks or savings institutions that are being divested.
    Conclusion. The NBA suggests that this historic legislation 
be modified to ensure the continued vitality of minority- and 
women-owned banks in America. We look forward to working with 
the subcommittee and its staff to accomplish this goal.
    We thank you for this opportunity to testify, and I am 
available for questions and comments from the distinguished 
panel. Thank you.
    Chairman Bachus. Thank you, Ms. Hart.
    [The prepared statement of Norma Alexander Hart can be 
found on page 89 in the appendix.]
    Chairman Bachus. And now we will hear from Mr. Buell.

STATEMENT OF PHILLIP R. BUELL, PRESIDENT/CEO, SUPERIOR FEDERAL 
 CREDIT UNION, LIMA, OHIO, REPRESENTING CREDIT UNION NATIONAL 
                          ASSOCIATION

    Mr. Buell. Thank you, Mr. Chairman.
    Chairman Bachus, members of the subcommittee, on behalf of 
the Credit Union National Association, I appreciate this 
opportunity to express the Association's views on H.R. 3505, 
the financial services regulatory relief act. This bill can be 
an important step to help alleviate the regulatory burden under 
which all financial institutions operate today. Instead of 
responding to the ABA's misinformation campaign, we will devote 
our remarks to ways in which we can better serve our members 
and America's consumers. I am Phil Buell, president and CEO of 
Superior Federal Credit Union in Lima, Ohio.
    According to the U.S. Treasury, credit unions are clearly 
distinguishable from other depository institutions in their 
structure and operational characteristics and have more limited 
powers than national banks and Federal savings associations. 
Given the limited time available, I will devote my statements 
to describing a few exceptionally important items for credit 
unions. Many of these are addressed in the recently introduced 
H.R. 2317, the Credit Union Regulatory Improvements Act, or 
CURIA, while some are incorporated in H.R. 3505.
    As part of our mission, credit unions are devoted to 
providing affordable services to all of our members, including 
those of modest means. One provision that this committee and 
the House have already passed would better enable us to meet 
that goal. I am referring to H.R. 749, legislation to permit 
credit unions to provide broader check-cashing and remittance 
services.
    Accomplishing our mission can also be greatly enhanced by 
revisiting two major components of the 1998-passed Credit Union 
Membership Access Act. With 7 years of experience, we have 
learned that what was thought to be good policy has actually 
new problems that need to be resolved to assure that credit 
unions can continue to meet their mission.
    The first of these issues is the current cap on member 
business lending. There was no safety and soundness to impose 
these limits, as the historical record is clear that such loans 
are even safer than other types of credit union loans. In fact, 
public policy argues strongly in favor of eliminating or 
increasing the limits from the current 12.25 percent to the 20 
percent suggested in CURIA.
    Small business is the backbone of our economy and 
responsible for the vast majority of new jobs in America, Yet 
recent SBA and Federal Reserve Bank of Atlanta studies reveal 
that small businesses are having greater difficulty in getting 
loans in areas where bank consolidation has taken hold. The 
1998-passed law severely restricts small business access to 
credit and impedes economic growth in America. This is 
especially important today as we all try to help to rebuild the 
devastated Gulf Coast where many have lost their jobs and need 
even more access to capital.
    Although few credit unions are currently bumping up against 
the cap, in a few years this is likely to change. For example, 
my credit union just started its full-service business lending 
program this year and has currently lent out 5.5 percent of our 
assets. We project we will hit the 12.25 percent cap within the 
next 24 months.
    The situation is even tougher for small credit unions. 
Investing in expertise needed to run a member business lending 
operation is a very expensive proposition. With a 12.25 percent 
cap, they cannot make up the cost needed to run such an 
operation.
    Furthermore, the NCUA should be given the authority to 
increase the current $50,000 threshold as proposed in CURIA to 
$100,000. This would be especially helpful to small credit 
unions as they would then be able to provide the smallest of 
these loans without the expense of setting up a formal program.
    Another critical issue addressed in CURIA is the prompt 
corrective action regulations governing credit unions. Credit 
unions have higher statutory capital requirements than banks, 
but credit unions' cooperative structure creates a systemic 
incentive against excessive risk taking, so they may actually 
require less capital to meet potential losses than do other 
depository institutions. And because of their conservative 
management style, credit unions generally seek to be always 
pacified as well rather than adequately capitalized. To do that 
they must maintain a significant cushion above the 7 percent 
level. For example, my credit union consistently maintains 
capital levels between 11 and 12 percent. Such high capital 
levels prevent us from providing our members with the best 
possible service.
    CUNA believes that the best way to reform PCA would be to 
transform the system into one that is much more explicitly 
based on risk measurement as outlined in CURIA. It would place 
more and greater emphasis on ensuring there is adequate net 
worth in relation to the risk a particular credit union 
undertakes. At the same time, CUNA believes credit union PCAs 
should incorporate a meaningful leverage requirement comparable 
to that in effect for other federally insured institutions.
    CUNA strongly supports CURIA's new rigorous safety and 
soundness regulatory framework for credit unions, which is 
anchored by meaningful net worth requirements which are 
comparable to or stronger than bank PCA. And credit unions 
agree that any credit union with net worth ratios well below 
those required to be adequately capitalized should be subject 
to prompt and stringent corrective action. There is no desire 
to shield such credit unions from PCA. They are indeed the 
appropriate targets of PCA.
    Because of the cooperative funding structure of the 
National Credit Union Share Insurance Fund, credit unions are 
keenly aware that it is they who pay when a credit union fails. 
Reforming PCA along these lines would preserve and strengthen a 
fund that would more closely tie a credit union's net worth 
requirements to its exposure to risk. It would also free up 
more capital for making loans to members and putting more 
resources back into our economy.
    Finally, we thank you, Chairman Bachus and others, for 
introducing and moving H.R. 1042 to address the pending issue 
before FASB that would cause undue hardship to credit unions by 
forcing them to change from the pooling method of accounting 
and for including it in H.R. 3550.
    In summary, Mr. Chairman, we strongly urge the subcommittee 
to act on this very important issue this year and to make sure 
that CURIA is a part of any congressional action to provide 
financial institutions regulatory relief. CURIA is our future. 
Without CURIA, millions of Americans will be deprived of a 
credit union able to respond to their needs. Thank you, Mr. 
Chairman
    Chairman Bachus. I thank you.
    [The prepared statement of Phillip R. Buell can be found on 
page 64 in the appendix.]
    Chairman Bachus. Mr. Hayes.

   STATEMENT OF DAVID HAYES, CHAIRMAN, INDEPENDENT COMMUNITY 
                       BANKERS OF AMERICA

    Mr. Hayes. Mr. Chairman and members of the subcommittee, 
again, my name is David Hayes, and I am chairman of the 
Independent Community Bankers of America and the chief 
executive officer and president of Security Bank, a $135 
million community bank located in Dyersburg, Tennessee, 85 
miles north of Memphis in rural west Tennessee.
    I am pleased to testify on H.R. 3505, the Financial 
Services Regulatory Relief Act of 2005, introduced by 
Representatives Jeb Hensarling and Dennis Moore.
    ICBA representatives have testified many times before this 
committee. Reducing regulatory burden remains a top concern and 
focus of community banks. We strongly endorse the Hensarling-
Moore initiative. It demonstrates their understanding of 
benefits of regulatory burden relief for communities that they 
represent.
    ICBA especially appreciates the fact that the bill includes 
five provisions from Representative Jim Ryun's Communities 
First Act, H.R. 2061, that are of particular interest to 
community banks. By lifting the yoke of regulatory burden from 
our banks, the Communities First Act would allow community 
banks to focus our resources on serving our communities and 
customers more fully.
    CFA has gained tremendous bipartisan support in the House 
with 75 sponsors and was introduced in the Senate as S. 1568 
with three sponsors. A total of 44 State banking associations 
have endorsed CFA. H.R. 3505's CFA provisions would direct the 
agency to streamline call reports, permit communities banks to 
file short form call reports, expand the eligibility for the 
18-month exam cycle to banks with up to 1 billion in assets, 
expand the eligibility of bank holding companies for simplified 
reporting to 1 billion in assets, and exempt banks from having 
to send out annual privacy notices if they do not generally 
share information and have not changed their policies.
    We urge the committee to consider adding the following 
provisions to H.R. 3505. Require Federal regulatory agencies to 
consider the effect of regulations on community banks, relax 
the Truth in Lending Act 3-day right of rescission in certain 
cases to give consumers quicker access to their funds. Update 
limits on loans to officers and directors to account for 
inflation. Update the limits on management interlocks to make 
it easier for community banks to attract qualified directors.
    H.R. 3505 also includes the ICBA-backed Gillmor-Frank 
language to limit the branching authority of industrial loan 
companies acquired or formed by commercial firms. The fact that 
Wal-Mart, the Nation's largest and most aggressive retailer, 
has applied for what is an essentially a State banking charter 
highlights the urgency of this issue. This language would 
prohibit predominantly commercial firms from buying or 
establishing an ILC and using the new branching authority to 
establish a nationwide branching network.
    A recent GAO report found that the IOC parent companies are 
not adequately regulated and posed increased risk to the 
deposit insurance fund. Even though the FDIC examines and 
supervises ILCs, it is said it has less extensive authority to 
supervise ILC holding companies than the consolidated 
supervisors of bank and thrift holding companies. It continues 
that ILCs may pose more risk of loss to the bank insurance fund 
than any another insured depository institutions operating in a 
holding company. GAO has called on Congress to close this 
regulatory gap.
    In our testimony earlier this year, we emphasized that 
unlike the Communities First Act, the credit union bill, H.R. 
2317, goes far beyond regulatory relief. The credit union bill 
is a powers enhancement proposal. While the Communities First 
Act includes no powers, no new powers, for anyone, ICBA 
strongly opposes new powers for credit unions so long as they 
have an unfair tax and regulatory advantage over community 
banks.
    There is one area where we believe credit unions very much 
need regulatory relief. Earlier this year the NCUA attempted to 
undermine two Texas credit unions' ability to convert to a 
mutual thrift charter. ICBA strongly supports Representative 
McHenry's bill, H.R. 3206, that would eliminate NCUA's ability 
to micromanage the conversion process.
    We also urge the Congress to act quickly on legislation to 
provide relief to communities and community banks affected by 
the hurricanes along the Gulf Coast. I have highlighted that 
legislation in my written statement.
    ICBA very much appreciates this opportunity to again 
testify on the importance of regulatory relief to provide 
bankers with more time and energy to grow their hometowns. 
Thank you, Mr. Chairman.
    Chairman Bachus. Thank you, Mr. Hayes.
    [The prepared statement of David Hayes can be found on page 
92 in the appendix.]
    Chairman Bachus. And I thank all our witnesses today for 
their testimony.
    Mr. Israel and I, before the hearing were talking about 
that these reg relief hearings kind of are like Ground Hog Day 
because we have had so many of them. But I will say that the 
statements today sort of disprove that because we did hear some 
sort of new and more forceful testimony. I was actually glad 
that the ABA--ABA testimony sometimes is dry and sometimes 
mundane, and I notice today it was very exciting and upbeat.
    Mr. Rock. Thank you, Mr. Chairman.
    Chairman Bachus. So that was quite different from 
sometimes. It obviously took positions on issues. So I don't 
know that I would say I commend you for that, but obviously I 
will just note that.
    I want to say that this effort, which I think is a very 
good bill--I think it is a wonderful bill that we have before 
us. As Mr. Hayes went down some of the people that have 
endorsed the bill, and I want to recognize John Butler, who is 
at my side, for his contributions along with Peter Barrett, who 
is behind me here; Emily Pfeiffer, who Mr. Castle has trained 
well and has worked very hard on this legislation, as well as 
Joe Pinder on our side. And I am sure that Chairman Frank 
would--I know that Ken Swab has worked very hard on the 
legislation. I would like to recognize you, Ken, and I know 
that your staff has worked very closely with our staff, and I 
think it has been a model of how we would work.
    There has been--I will say that some of your suggestions 
even today I think are good suggestions. Some of what you have 
suggested we will address in this bill, some of the things that 
there is a building consensus that we need to address. We work 
with the regulators and law enforcement.
    One thing that I am very optimistic on in working with and 
talking with Members of the Senate and Mr. Hensarling and Mr. 
Moore is our CTR provision, which I think is coming together 
very well. And I think we will have some probably minor tweaks 
to frequency and portability, and once we address those, we 
will--and I think maybe the major thing that we are going to 
revise is this thing about portability, which I think is 
problematic.
    Chairman Bachus. I think we will come out with actually a 
better provision after the manager's amendment that will build 
a real consensus with our colleagues in the Senate and law 
enforcement. And I will continue to work with the ABA and with 
the other associations as we do that.
    And at this time I am going to yield the balance of my time 
to Ms. Biggert, who has worked very hard on this issue. She is 
actually going to chair the hearing in my absence. And I think 
it is very appropriate that she do this. She is a very 
knowledgeable member of our committee. And I would have asked 
Mr. Ryan or Mr. Hensarling or someone else to chair the 
hearing, but because many other members have provisions in the 
bill, I think it is appropriate that Ms. Biggert chair the 
committee--either she or Mr. Lucas--so at this time I recognize 
her.
    Well, I will let you stay there.
    Mrs. Biggert. [Presiding.] Thank you, Mr. Chairman.
    First of all, I would like to welcome all of the panelists 
and thank you for your testimony.
    Ms. Hart, you highlight your concern about the large retail 
operations entering the banking business. Could you expand a 
little bit on your concerns?
    Ms. Hart. Well, there has been some concern about companies 
such as Wal-Mart--not that we are against them because they are 
putting banks in their stores--but since our banks are so 
small, we are concerned, you know, we don't want to lose any 
banks, so that is our concern. Competition would be pretty 
strong.
    Mrs. Biggert. Are you aware that there is language, 
including that which has been authored by Representative 
Gillmor and Ranking Member Frank, that sets an 85 percent 
threshold of an institution's revenues must be generated from 
financial interests?
    Ms. Hart. Yes.
    Mrs. Biggert. Would that alleviate your concerns?
    Ms. Hart. We would like to see it happen. We are just not 
sure at this time. I need to see a little more regarding it. I 
have met with some of the people from Wal-Mart and they assure 
us that they want to work with some of our banks.
    Mrs. Biggert. Thank you.
    Mr. Hayes, you talked about this too, and I think you have 
got in your testimony quite a bit of materials about Wal-Mart. 
Could you address that issue?
    Mr. Hayes. Yes, ma'am.
    We certainly think the Gillmor-Frank amendment is a start. 
I think if Wal-Mart or any other commercial entity had to 
operate under the supervisory rules of the Federal Reserve and 
the Bank Holding Company Act, I think that puts the same muster 
in the operation that we have for community banks. You know, 
I've seen what a Wal-Mart does to communities. I have seen the 
empty stores. I have seen Joe's Hardware Store go out of 
business. I have seen a local retailer have to go to Wal-Mart 
to purchase the soft drinks to sell in their store. They are a 
monopoly. They control the market.
    And I think that credit and investment issues in our 
communities, if we don't wrap that tight, we will live to 
regret the day that they have that authority to control the 
credit needs of the consumers in our markets. I am very 
passionate about it. I live in a small community. We have a 
Wal-Mart. I go there. I don't like to go there, but 
unfortunately it has run out those core mom-and-pop entities 
that we all know have built this great country. We have got to 
put the teeth into law to control that movement into this 
business segment.
    Mrs. Biggert. Do you think that that 85 percent threshold 
would have any effect on what they could do?
    Mr. Hayes. Oh, there are always some things that will have 
some effect, but I am very passionate that we have got to take 
this all the way to the wall.
    Mrs. Biggert. Thank you.
    Mr. Rock, would you care to comment on that?
    Mr. Rock. Well, we support the proposal that is currently 
in the bill that would prevent commercially owned ILCs from de 
novo interstate branching. We support that proposal.
    Mrs. Biggert. But how about this; would you support the 85 
threshold, or would that not happen at all?
    Mr. Rock. I think the 85 threshold is something that would 
probably work.
    Mrs. Biggert. Okay.
    Mr. Buell, do you have any comment on that?
    Mr. Buell. Actually, no comment on that.
    Mrs. Biggert. How about Mr. Beal?
    Mr. Beal. We share the concerns about Wal-Mart unduly 
commanding a large segment of the market.
    Mrs. Biggert. Thank you.
    With that I will yield back the time.
    Chairman Bachus. [Presiding.] Thank you.
    At this time I recognize Ms. Maloney.
    Mrs. Maloney. I would really like to follow up on Ms. 
Biggert's questioning. And I think she raised some important 
points. The GAO report released earlier this year also suggests 
that ILCs may need more Federal oversight regulation than is 
presently in H.R. 3505. And I would like to ask Mr. Hayes and 
Mr. Rock or Ms. Hart or anyone else, what specific dangers do 
you see from the ILCs, and what other safeguards would you like 
to put in the bill if you think there should be more 
restrictions put in? Anyone?
    Mr. Hayes. I will start. You know, Wal-Mart's application 
to form an ILC is focused in their application to provide 
payment services. You know, I can set up a whiteboard in this 
room and explain to you how that ultimately would control the 
delivery of financial services to our consumers. I think the 
expansion that we feel will come--and you can go back to 
history and see how that organization has expanded--I think 
putting them under the regulatory authority of somebody like 
the Federal Reserve makes a big statement. It says you have to 
play by the rules.
    And you know, we operate today as a financial institution 
under Federal Reserve rules and regulations. And I really feel 
strongly that any entity that is going to be in the financial 
services arena, especially an ILC, needs that, that oversight 
at that level, not just the FDIC, but a Federal Reserve 
oversight that looks beyond just one little segment.
    Mrs. Maloney. Anyone else wish to comment?
    Mr. Rock. Yes. ABA has always opposed the mixing of banking 
and commerce. That is our principal concern. We feel that the 
mixing of banking and commerce would create risks in the 
credit-granting process. And we also think that it would create 
a very risky concentration of economic power. And the economies 
that have gone down the road of mixing banking and commerce 
have struggled with it. So that is our principal concern there.
    Mrs. Maloney. Thank you.
    Mr. Rock, there was a great deal of discussion in this 
panel from the members and from the panelists, and also from 
people you meet just walking down the street, about the burden 
of the CTRs and the SARs and the PATRIOT Act. This is a very 
serious issue because we want to crack down on money laundering 
and terrorist financing.
    But could you just expand more what the burden is, why 
relieving that burden will not hinder FinCen and other FBI 
units and so forth that are cracking down on money laundering 
and terrorism?
    Mr. Rock. Absolutely, Congresswoman. And we think it is 
important. We want banks to play our role in trying to track 
down and eliminate the bad guys. We want to play that role. But 
I think what we have to keep in mind is that the CTR 
requirements that are currently in place were enacted 35 years 
ago. And since that time, we have had other provisions enacted; 
for example, the SAR requirements which were enacted about 10 
years ago. And under the PATRIOT Act, we now have a 314(a) 
inquiry process. We think that those subsequent enactments are 
a more efficient way for law enforcement to prevent the types 
of illegal activity that they are looking to prevent than the 
old CTR process.
    I mean, for example, under the 314(a) inquiry process under 
the PATRIOT Act which was recently enacted, if law enforcement 
wants to find out all of the deposits at a bank of 10,000 and 
over that were made in the last 3 years, they serve something 
on the bank that looks essentially like a subpoena and they ask 
for all of the records. So they don't have to go back to those 
CTRs that were filed.
    In my bank, we file about 80 CTRs per week. And we 
calculate, by our estimation, that about 80 percent of those 80 
per week--which is essentially 4 out of 5--have nothing to do 
with potentially criminal activity, and they are not being 
looked at by law enforcement. So we think that there is a lot 
of time and effort being wasted by bankers and by law 
enforcement in generating all of those reports when there are 
subsequent enactments that we think do the job in a more 
efficient way.
    Mrs. Maloney. Thank you.
    And I would like to ask Mr. Beal, some banks have argued 
today and otherwise that large credit unions should not enjoy a 
tax advantage because they do not meet the criteria of the 
Credit Union Membership Access Act.
    And would you like to respond to really, literally, some of 
the testimony today? I would say that I have represented many 
poor neighborhoods where the only banking services that were 
available were credit unions for the community. So I am a big 
supporter of credit unions, but I think that is a legitimate 
concern that was raised, and I would like to hear your 
response.
    Mr. Beal. Yes, ma'am. And we are happy to comment on that. 
The tax exemption for credit unions runs to the structure of 
the credit union, not the size. Credit unions are not-for-
profit, member-owned cooperatives. They are owned by their 
depositors. They are mutuals. And that is what makes them tax 
exempt. It is not the fact that they are big or little. Credit 
unions have a good record of reaching out to the communities 
that they serve, particularly the underserved communities.
    Since 2000, credit unions nationwide have adopted about 
1,200--actually, a little over 1,200 designated underserved 
areas, and placed branches in those areas to reach out and 
serve these underserved communities.
    So the tax exemption is based on the ownership structure by 
the members and the not-for-profit status of the credit union. 
And credit unions are doing a good job of reaching out to the 
underserved, big and small alike.
    Mrs. Maloney. Thank you. My time has expired.
    Mrs. Biggert. [Presiding.] The gentlelady yields back.
    The gentleman from Texas, Mr. Hensarling, is recognized for 
10 minutes.
    Mr. Hensarling. Thank you, Madam Chair.
    Mr. Hayes, let me allow myself to welcome you once again. 
As a Texan, we are always happy to welcome Tenneseeans.
    Mr. Hayes. Thank you, sir.
    Mr. Hensarling. We appreciate the loan of Crocket to 
Houston, but given what your Vols did to my Aggies in the last 
Cotton Bowl, be very leery of wearing out your welcome.
    On Page 8 of your testimony you state: However, it is 
important to recognize it is far easier for most community 
banks to file CTRs rather than implement an exemption process.
    So your organization doesn't seem to share some other 
organizations' enthusiasm for the seasoned customer exception. 
Can you give me a little detail on why you feel your community 
bankers will have some trouble?
    Mr. Hayes. I think it gets down to the issue of defining in 
simple terms, so you don't end up in a Monday morning 
quarterbacking; you know, we should have done this. So, you 
know, if you look at the complexity of regulation that we 
face--and certainly in the consumer and the CTR filings, you 
know, we work through lists. But the reality is they are 
somewhat nebulous. And so every time you are faced with filing, 
you have to look and determine, you know, am I making the right 
decision?
    So, you know, I think the complexity of what we have to 
deal with is the burden. And sometimes with limited staff--I 
mean, I have 50 people devoted to our banking operation out of 
70. I am telling you, a lot of times they end up on my desk 
with our exemption book and saying, ``Do we or don't we?'' And 
quite honestly we do, so we don't get hammered.
    Mr. Hensarling. So is it a fair assessment to say, using 
the phrase ``defensive filings'' that you feel that this 
exemption will not diminish the number of defensive filings to 
any significance among community bankers? Is that your 
position?
    Mr. Hayes. My position is that, but I think the solution is 
to raise the limit, raise the dollar limit. That way we are not 
dealing with as many of the situations that have to be there. 
We want to do our job. We are on the front line. We recognize 
that. But we have got to make this process work. And we think 
simplification of raising the limit is the easiest solution.
    Mr. Hensarling. Mr. Rock, welcome once again to our 
committee. In your testimony, I think you say that CTRs have 
been rendered virtually obsolete.
    Would you answer the same question on the seasoned customer 
exemption and your feelings on raising the threshold in the CTR 
filings?
    Mr. Rock. Let me say, first of all--and I haven't had the 
benefit, Congressman, of reading ICBA's written testimony for 
today yet, but I am familiar with the positions they have taken 
in the past. And I do think that what I have heard Mr. Hayes 
say in the past, and ICBA, is that the present exemption system 
that exists is so cumbersome that many banks do not take 
advantages of it. And I agree with that wholeheartedly. I think 
that is a little different from what we're talking about with 
this seasoned customer proposal. So let me make that 
distinction, first of all.
    Secondly, in terms of saying that they are obsolete, as I 
said in response to Congresswoman Maloney's question, we have 
many more efficient ways today for law enforcement to collect 
that information, and for us to give them the information, that 
didn't exist 35 years ago.
    That 314(a) inquiry process--and the last time I looked, it 
had been used 684 times by law enforcement so far this year--
that 314(a) inquiry process is much more specific and much more 
efficient. And that is why we think that filing those reams of 
paper--and there were more than 13 million of those reports 
last year--we think that that is what has become obsolete.
    Mr. Hensarling. Mr. Rock, I think you are aware of the 
portability issue within the CTR context. There is still 
somewhat of an ongoing debate about its propriety. Could you 
speak to what burden it would be if we didn't employ 
portability language?
    Mr. Rock. Well, I think, quite simply, each time that 
someone changed banks, we would have to do it all over again. 
We would have another 1-year waiting period. And I think that 
that would substantially impact upon the number of CTRs that we 
would reduce. Now, by how many, honestly I can't say to you 
because we haven't lived under that regime yet. But I think 
that it could--the exception could engulf the rule, and we 
could--the new rule--and we could substantially reduce the 
number of CTRs that we were eliminating by the process.
    I understand the concerns of the committee, and we would 
welcome trying to work with you on better defining that 
portability issue.
    Mr. Hensarling. I see my time has expired so I yield back.
    Mrs. Biggert. Thank you. The gentleman from Pennsylvania, 
Mr. Kanjorski, is recognized for 5 minutes.
    Mr. Kanjorski. I will pass for the time, Madam Chairman.
    Mrs. Biggert. The gentleman from Tennessee, Mr. Ford, is 
recognized.
    Mr. Ford. Thank you, Madam Chair. I didn't get a chance to 
welcome fellow Tennessean President Hayes who leads the ICBA 
effectively. Thank you, sir, for being here. Thank you for your 
comments.
    Ms. Hart, it is a pleasure to see you as well and see the 
National Bankers Association represented here this morning. I 
didn't know if on any of the questions--I saw you were looking 
at some of your notes--if you wanted to answer or provide any 
insight or additions to what might have been said to the last 
two questions. I know Mr. Hensarling didn't direct it to you; 
it looked like you might have been jotting something down.
    To Mr. Hayes, you spoke eloquently and you answered Jeb's 
question, Congressman Hensarling's question well. You talk a 
little about bit--we talk a little about how this bill will 
help institutions be more responsive in the case of a terrorist 
attack or a natural disaster. A lot of that we can kind of 
guess. But we have seen in recent weeks, last 2 weeks, some of 
your members from the area from along the Gulf Coast complain 
about some of the challenges they are facing.
    In addition to what is discussed and contemplated in this 
bill, what more could be done or should we be doing to help 
alleviate some of the burden that your members--and I would 
direct it also to Mr. Rock who is very passionate in his 
responses, if he wouldn't mind sharing with us as well, some of 
his members who may see us do things outside this bill to be 
helpful.
    Mr. Hayes. Congressman Ford, thank you. We have early on 
been passionate about the needs on the Gulf Coast. You know, we 
have family; we have grown up there; and we have friends there. 
And you know, when you are faced with a disaster of the 
complexity that has been there, there are many things. And we 
have been very definitive in putting forth a list that is very 
long, of specific things. And rather than going through that in 
detail----
    Mr. Ford. I have seen some of them. You have given me some 
of the two or three bills, things outside of the things in this 
bill, that could be helpful quickly as we try to consider 
things on this committee.
    Mr. Hayes. I think, you know, I would rather respond in 
writing back to you, Congressman Ford, on that because I would 
want to prioritize them. And I can do that in the next day for 
you. But I would say to you that action is first and foremost. 
We have got to do some things to help take away the paperwork 
burden.
    I am sitting here thinking about friends there that really 
don't have computers to do the kind of things that they need to 
do in order to assist the people. And so we have got to figure 
out a way to say, okay, that is fine. If you don't dot the "I" 
and cross the "T", you know--if somebody comes into my bank 
with a FEMA check, they may not have IDs. I need some 
protection. I want to help those people. I am passionate about 
helping those people.
    So I think we really are at a point where it is action. And 
specifically, you know, there are some things there that I 
would just like to write back to you today and tell you 
specifically.
    Mr. Ford. Yes. I know Ms. Biggert has a similar concern. We 
have read some of the problems that the SBAs have processing 
things and how lengthy the applications are.
    I know my time is up but, Mr. Rock and Ms. Hart, what 
you've heard from your members along the same lines and what, 
outside of what we are doing now, can we help to expedite the 
facility?
    Mr. Rock. I would say the single continuing thing that 
comes to my mind from my discussion with my friends from 
Louisiana and Mississippi would be issues relating to 
indemnification for people cashing checks, taking risks that 
might be otherwise extraordinary but in this environment are 
necessary. You know, folks that come in with handwritten checks 
that have no printing on them but purport to be Government 
checks and they don't really look like what we are used to 
seeing as Government checks. Those folks have no 
identification. And yet they are very, very needy. They need 
their money now. They need it to eat. And they need it for 
other important reasons.
    And we have had a lot of bankers like Guy Williams in 
Louisiana who has gotten some notoriety, people who have stuck 
their neck out a little bit. But I would hate to see those 
things come back to haunt them from the few that are less than 
on the up and up. So that is the issue that comes to my mind, 
Congressman Ford, indemnification issues for people cashing 
checks for folks in dire circumstances.
    Mr. Ford. Mrs. Hart?
    Ms. Hart. We have three banks in the Louisiana area that 
are very burdened right now and had to leave, and some were 
operating in Baton Rouge, Appaloosas. They are having a rough 
time. So we really need some assistance with all of the things, 
the trials and tribulations that they are going through right 
now.
    Mr. Ford. Madam Chair, thank you for the liberty with the 
time.
    Mrs. Biggert. Thank you. The gentleman still has 22 
seconds.
    Mr. Ford. We can't count where I am from. We keep losing 
football games. I am glad Hensarling said something nice about 
us. But I am always delighted to see David Hayes. I wasn't 
present when you were introduced.
    Mr. Hayes. Thank you for being here.
    Mrs. Biggert. Thank you.
    The gentleman from New Mexico, Mr. Pearce, is recognized 
for 5 minutes.
    Mr. Pearce. Thank you, Madam Chair.
    Ms. Hart, in your testimony you talk about potential for 
some of the provisions in the regulatory relief to help serve 
the underserved, the low income. Short description of what you 
think that--how that might occur.
    Ms. Hart. We have many banks that are in neighborhoods 
where they need the assistance to help their customers.
    Mr. Pearce. And the rate relief has provisions in it that 
allows that to occur?
    Ms. Hart. Yes. Also, with other banks coming in right 
across the street that may offer better services, that would 
worsen the effects of what they are going through.
    Mr. Pearce. Forty-seven percent of my district is Hispanic, 
and they generally have below 50 percent utilization of the 
banking institutions. So you also mentioned that you thought 
the ILC should be limited, but if that were allowed, the 
staggered rollout should occur. How would you view a staggered 
rollout as being effective?
    Ms. Hart. Well, I need to get more materials to you. But I 
just know that with those type of businesses there our banks 
would suffer because they wouldn't be, you know, allowed to 
still continue what they do generally.
    Mr. Pearce. Mr. Beal, Ms. Maloney had asked--Congresswoman 
Maloney had asked a question. And your answer, I think I missed 
one piece of that, and if you wouldn't mind giving an answer to 
her question. You said that the tax provision is based on 
structure, not size. But her question dealt with membership, 
the broadening of membership.
    Would you try to answer that question with respect to 
membership of credit unions?
    Mr. Beal. Yes, Congressman. I apologize if that answer----
    Mr. Pearce. Okay, Mr. Beal.
    Yes, I was looking at the other person. I have got my notes 
correct.
    Mr. Beal. I have forgotten the question.
    Mr. Pearce. Just about membership.
    Mr. Beal. Oh, broadening the field of membership. The field 
of membership rules have been broadened somewhat over the 
years; there is no question about that. Credit unions remain 
limited in who they can serve. They are limited either to a 
specific employer or group of employers or a well-defined local 
community.
    So even though there has been perhaps some broadening over 
the years, they are still very limited. We are not open to the 
general public, to anybody in the whole word.
    Mr. Pearce. And the credit unions do, like Mrs. Maloney 
said, serve a very valuable part of our constituency. There are 
communities of 2- or 3,000 people who don't have it, so I do 
appreciate your presence in the communities.
    Mr. Buell. Congressman Pearce, could I add to that as well? 
I agree with that. We are a community-based credit union there 
in Lima, Ohio, and we do have a fixed--as far as geographical 
area that we can serve. At the same time, we do try to do a 
very good job in terms of focusing on low to moderate income.
    One of the things that was in this bill that was very 
advantageous to us was to allow us to cash checks and 
remittance services to individuals without them becoming 
members just because they are in our area. We do have several 
individuals who are on banks, so we can actually serve them.
    At the same time, we maintain three branches within 
underserved communities, within the Lima area, and we have 
actually applied for an application and been approved, where we 
can go to another rural location that is an underserved 
community as well, so we can provide housing.
    Mr. Pearce. You understand that Mrs. Maloney's point was 
well taken, that there are many who argue that when you begin 
to broaden membership, then it begins to really negate the 
argument for the tax provisions. And I just want to make sure 
that we address that.
    Mr. Rock, you have I think drawn a conclusion that I share, 
that the economies that makes banking and commerce generally 
having difficulty. Would you give me your definition of 
commerce?
    Mr. Rock. Well, I think that the efforts that have been 
made in some other legislation, which are proposed here, which 
say that if more than a certain percentage of your revenues 
come from nonfinancial activities, I think that that is 
probably a good way to go about defining what is financial and 
what is commercial.
    And I think that was the 85 percent rule as I proposed 
before; I think that is probably a workable rule.
    Mr. Pearce. Actually, I was looking for a broader 
definition, not in banking terms of commerce, but that is okay.
    Mr. Rock--sorry, Mr. Hayes--you communicated deeply I think 
your feelings about Wal-Mart. And I understand that we have got 
small communities where the same thing has happened, but I also 
have small communities where the people are saying that my 
purchasing power now is going 20 percent further, and that is 
the value of competition.
    If we try to extend that one step--and I don't think you 
and I are very far apart on the ILC's--but in looking at the 
arguments, if we extend that concept of competition as being 
the question, how would you perceive that the ILCs are in 
danger, if you look purely from a competitive standpoint? You 
have Mr. Rock's evaluation that mixing commerce and banking has 
been bad for economies. But your approach seemed to be from a 
competitive standpoint and what they have done in the 
communities. Can you give us just a little bit of an input 
there?
    Mr. Hayes. My position is Wal-Mart should not be in the 
banking business.
    Mr. Pearce. I understand, but you don't like them in the 
communities and you don't like what they have done in the 
communities, but yet they have extended purchasing power which 
has allowed our economy to stay growing pretty strongly.
    Mr. Hayes. No question. And I have stated that it is an 
economic issue in our community that provides services and 
products, primarily products that may not have been available 
in rural markets if you go back to the early days.
    But I think when you get to size, size can put you in a 
mode of control. And I think that the issue I see is the 
control that sets in one company--over 25 percent of the retail 
business in this country is controlled by one entity--has 
pluses but it has a lot of minuses. I like to play the game on 
a level playing field. And I think that if you looked what that 
kind of company can bring--and a scenario would be if you have 
our checking account services, we will give you 3 percent off 
your purchases in Wal-Mart--somebody is paying for that. And I 
think that is the undue competitive pressure of mixing that 
banking and commerce, is that you can deliver that.
    I don't mind competing. I don't mind competing with 
anybody. I just like that the odds are level and we can suit up 
and play the game hard.
    Mrs. Biggert. Gentleman's time has expired. Gentleman from 
California, Mr. Baca.
    Mr. Baca. Thank you, Madam Chair.
    My question is for Mr. Beal. Mr. Beal, providing relief for 
the recent hurricane has been the top priority for Congress and 
will be for some time. Which of the credit union provisions in 
the regulatory relief bill, if passed swiftly and signed into 
law, would make it easier for victims, both credit unions and 
members, to get back on their feet?
    Mr. Beal. Sure. Thank you, Congressman. I think one of the 
provisions certainly would be the remittances and check 
cashing. I know in our community in Las Vegas, we even have 
folks from Katrina who relocated out there. And they may or may 
not be a member right now, but if we can help them with check 
cashing or remittance, wire their money back home or off to 
relatives, I think that would be quite a relief for us and 
certainly for the credit unions in Louisiana and the Gulf Coast 
area that would help them as well.
    Mr. Baca. Mr. Buell?
    Mr. Buell. I agree with that. One item, first of all and 
foremost, is help them do basic financial services. The one 
nice thing within the regulatory relief bill was also exempting 
the faith-based loans from the business cap. So, again, helping 
rebuild churches, help rebuilding other faith-based 
organizations in those areas, credit unions can hopefully step 
up and help in those areas as well.
    Mr. Baca. Thank you very much. I think that is why it is 
very important that we do take up this legislation and provide 
services--and this would be swift--and signed into law and be 
able to provide that kind of assistance.
    My next question is for Mr. Beal. In your testimony you 
made reference to a study issued by the Small Business 
Administration that details the decline of small business 
credit availability. One of the concerns that I have is 
minority-owned businesses only comprise about 15.1 percent of 
all businesses. And we know that throughout our Nation they are 
basically growing in each one of our communities, and an empire 
is made up of basically small businesses.
    Can you explain why credit unions are uniquely positioned 
to fill the gap in services to small business owners lacking 
access to capital and how the provisions of CURA to raise the 
current 12.25 cap to 20 percent and the loan size from 50- to 
100,000 would help credit unions better serve the members who 
are small business owners?
    Mr. Buell. Be very happy to answer that question. We at 
Superior, this past year we started up our full service member 
business lending program. Before we just did 1- to 4-family and 
rental properties type things. But since we actually brought a 
commercial individual on board, we have had just great success 
with our members. They have been asking for these types of 
loans.
    And when we talk about large loans, our average size is 
about $100,000. And I am concerned right now when I see that, 
as we mentioned in our testimony, we are at 5.5 percent 
already. And we project if we keep seeing the same member 
demand that we see right now, we will be at 12-1/4 percent cap 
in the next 12 months.
    Banks in our area, have some good banks and good--great 
community banks. But when you take a look at the $100,000 
dollar loan, the $50,000 loan, and the $75,000 loan, the local 
institutions might be wanting to say, yes, we will do that. It 
might be 2 or 3 weeks before we get back to them because of the 
size of the loan. We can step in right away and help fill that 
gap and provide that type of capital.
    We are helping the small business owner; we are helping the 
landscaper, the guy opening the flower shop. We are actually 
financing an Amish fertilizer truck. These are different types 
of loans small business is looking for that we are willing to 
step in and help make. There is a demand out there. We just 
didn't grow that quickly over 6 months by making risky loans. 
We have made very good, nice, secure loans. There is a strong 
demand out there. We are going to need some relief.
    Mr. Baca. So the availability to provide small business 
loans would be a lot better and can be provided to the credit 
unions because you have direct access to individuals--and in 
the growth and population.
    Ms. Hart, you mentioned in the other case, in the banking 
industry, you are very much concerned that there is lack of 
services or that we need to address to make sure that the 
banking industry continues to provide assistance to minorities 
and women. So apparently--is the banking industry having a 
problem in reaching out to minority businesses or not, or do 
they need to work in that area to make sure they ensure that a 
certain percentage also goes to minorities and/or women?
    Ms. Hart. Yes. Businesses need to support minority-owned 
businesses as well as banks.
    Mr. Baca. Why isn't the banking industry reaching out like 
the credit unions are reaching out to small businesses within 
the communities?
    Ms. Hart. We are reaching out, sir. We just have not gotten 
a strong enough defense and help in that area.
    Mr. Baca. Thank you. Mr. Hart, in your testimony--and I 
want to stand corrected--it seems like you are not open to 
competition at the very beginning of your statement. Is that 
true or not? Or do you believe in open competition? Mr. Hart? 
Mr. Rock, I am sorry.
    Mr. Rock. I am sorry, Congressman. I thought you were 
addressing Mrs. Hart.
    Mr. Baca. No, I meant you. It seemed like in your statement 
you weren't open to open competition. At least that is what I 
thought I heard.
    Mr. Rock. No. I think quite the contrary. We welcome 
competition. I don't know whether you are addressing the ILC 
issue or credit union issue, but with regard to ILCs what I 
said is we are not afraid of competition. We are afraid of the 
consequences of the mixing of commerce and banking. That is 
what we are afraid of.
    With regard to credit unions, we are not worried about 
competition at all. We want to compete on an even playing 
field. The credit union next door to my bank is over $2 
billion. They are more than double the size of my bank. They 
can do business with everybody that I do business with, and 
they offer every single product. Their, quote, ``local 
community'' is over 2.8 million people, and yet they pay no 
taxes. And we pay taxes. They are not tested on CRA, whether 
they lend to minorities and small businesses, but we are. That 
is not equal competition. I welcome equal competition and 
suggest that they should convert to being a mutual financial 
institution.
    Mr. Baca. But they are providing a service which is good.
    Mr. Hayes, I know that my time has expired, but you touched 
on something that is very important to a lot of us that we have 
looked at, and that is when you mentioned Wal-Mart. What 
provisions would you suggest need to be done when you look at 
the competitiveness and what they are doing right now that 
needs to be regulated?
    Are there any suggestions or provisions that you have or 
recommendations as you look at Wal-Mart versus any other 
institution?
    Mr. Hayes. I think there is a--you are speaking of them 
getting into the ILC?
    Mr. Baca. Yes.
    Mr. Hayes. I think falling under the Bank Holding Company 
Act and having to comply with the Federal Reserve oversight, if 
such charter were granted to them. I think that is where the 
rubber meets the road because, you know, they are so large that 
you can carve it out and you are not going to really 
effectively look at it. It has to be the total impact and what 
are the items that are going forth in their company that are 
across those lines between the retail side and the other. And 
we are not afraid of competition, absolutely not. We just want 
it fair. And the regulations have to be there.
    And I would like to respond on the credit union items just 
a second. I am not afraid of competition. I am not afraid of 
competition. And I will tell you, we serve our communities. We 
serve our customers. And they have my phone number and I am out 
there. I am doing those things. So it is not an issue of 
service. It is not an issue of service. It is an issue of 
fairness.
    Mr. Baca. Good. We all need to do that. Thank you.
    Mrs. Biggert. The gentleman's time has expired. The 
gentleman from Texas, Mr. Neugebauer.
    Mr. Neugebauer. Thank you, Madam Chair. I want to go back 
to the regulatory relief portion of our discussion here. There 
has been a lot of discussion, as I have traveled around 
community banks, about CTR and SAR provisions in this bill and 
because it is, quite frankly, creating a lot of paperwork and a 
lot of issues for our community banks.
    And I guess I would like for some discussion or response, 
say, to have we gone far enough in this bill or should we have 
done more? So I will just kind of go down the line there. Mr. 
Beal?
    Mr. Beal. Thank you, Congressman. For our credit union, it 
is a burden as well, although maybe not to the extent of some 
of the community banks. We file about 40 to 50 CTRs every 
month. Since we are mostly a consumer organization, we don't 
encounter perhaps the volume of transactions or at least the 
size of the transactions that others do. But we do need some 
relief there, and it does consume a substantial part of our 
resources and assets due to that.
    Particularly the area we struggle most is with the 
structuring issues where we need to try to detect where 
aggregate deposits exceed the threshold amount. And that is 
going to require some further programming, some further changes 
on our side.
    And so I would also echo the comments of some of the other 
panelists, that a lot of these things are submitted, perhaps it 
is a disservice to law enforcement as well because they can't 
really deal with the volume that they are getting.
    Mr. Rock. I think that the proposals that have been put 
forth in connection with this bill would go a long way toward 
reducing those needless piles of paperwork. I think that the 
item that is not currently in the bill, but there is kind of a 
place for it, would deal with the seasoned customer. If you 
have had a seasoned customer for more than a year in a 
transaction that counted those, you would not have to file 
CTRs. I think that would go a long way to eliminating the piles 
of paperwork.
    I think the other provision that is in the bill which has 
to do with stopping the reports of SARs necessarily to the 
board of directors, I think that is a micro-managing type of 
report that is meaningless to my board, and I think that that 
provision in the bill would also go a long way towards starting 
to cut down on some of the meaningless paperwork.
    Ms. Hart. I applaud this bill, and we would like to work 
closer with Congress to find a niche for the minority banks so 
they wouldn't be burdened as much as they are.
    Mr. Buell. The CTRs who do not file $174 million on the 
average member account size is about $4,800, so we do not have 
to file very many of them. At the same time, we do concur in 
streamlining the process and actually having the regulation to 
do what it is intended to do, which is to catch the bad guy 
versus making other Americans having to be subjected to this.
    Mr. Hayes. First, I think that we need to raise the limit. 
Secondly, let me respond, then, on the SAR issue. It is 
frustrating to file a SAR and, you know, get a call back that 
says that is not large enough for us to take our time. So I 
think you sit there and you say I am doing what is right; I am 
doing what is required of me as a banker and as an American, 
and yet I reported something, and it is not big enough.
    It is not big enough. I lost money maybe. It is not big 
enough.
    So, you know, I think we have to understand that bankers 
every day are on the line, eyeball to eyeball with their 
customers, and filing this paperwork that really in some cases 
gets no results. It just tears your heart out to say, how can I 
motivate my people to keep doing this? And so I think raising 
the limit up to where it is inflation adjusted, that is a great 
start for all of us. But I think because so many are filed, and 
the dollar amount may not be big enough, is a demoralizing 
thing for somebody who is on the front line.
    Mr. Neugebauer. Mr. Rock, have you heard an examiner say 
you are not filing enough SARs and you are not filing enough 
CTR reports? Do you ever experience that?
    Mr. Rock. I have not personally, Congressman, but I have 
had it reported to me by many of our constituent bankers that 
they have told them that that is the problem. They say you are 
not filing enough, and I say I didn't know there was a quota 
system in any reg. And they say there isn't a quota system. I 
said, well, I don't understand. It is just not enough for a 
bank your size. We want to see more.
    I think it is those types of discussions in the field with 
examiners that have resulted in the so-called defensive 
filings. People have kind of shrugged and said, well, if they 
want more, I will give them more.
    And I am concerned not only about the time and effort and 
wasted banker time and money, but I am concerned about the 
broader issue about what that does for our law enforcement 
efforts. I think that it drowns the law enforcement people in 
piles of paper and, in fact, is counterproductive for law 
enforcement purposes.
    Mr. Neugebauer. I see my time has expired. Thank you, Madam 
Chairlady.
    Mrs. Biggert. Thank you. The gentleman from Pennsylvania, 
Mr. Kanjorski.
    Mr. Kanjorski. Thank you, Madam Chair. I apologize for 
getting here late, but I love to enjoy the food fight. I thus 
appreciate some of the comments. I am certainly not mocking or 
making fun of Mr. Hayes.
    Mr. Hayes you said you want to compete on an even playing 
field, but yet you do not want to compete with a credit union, 
and then you defined why they differ. We, however, are here 
trying to provide easier access to activities by banks, credit 
unions, and every financial service institution.
    I also noticed you really did turn white with the mention 
of ILCs and the United States and Wal-Mart's application for 
one.
    I think there are challenges out there. If I had my 
druthers, we would go back to the drawing board and have only 
one type of financial institution in the country. Then we would 
have a very different marketplace--but we all know that is not 
the case. We have all these institutions built for different 
reasons and at different times stimulated for different 
purposes.
    I actually think I have two things I am interested in. One, 
I have always been interested in economic developments. And 
some of the questions here mentioned how can we facilitate the 
small businessman--faster response, need for money. Sometimes 
very larger institutions really aren't interested. It is not 
their fault. It is just they have other fish to kill. And on 
the other hand, we have this big 800-pound gorilla out there 
that is saying let me into the game.
    And if they get a license, it will be maybe not letting 
them into the game, maybe at the end of the game for a lot of 
you fellows, community bankers, independent bankers that I am 
interested in. So I am not sure your artillery isn't directed 
at the wrong front, if you will.
    You probably have differences. All of us in Congress have 
been trying to work out that common, fair, playing field, 
taking into consideration all the nuances and structures of the 
institutions. But a very fundamental question is going to be 
made in the next several months or years. And certainly some of 
my colleagues are getting extreme pressure.
    I want to be frank. Up until this point, to appeal to you, 
Mr. Rock, I have been hard core. I really believe there should 
be a separation of banking and commerce. When I sat on the 
conference committee for the Gramm-Leach-Bliley Act and we 
almost got the nose under the tent--myself and several other 
colleagues were vicious in our fight. And I tend to remain that 
way, although I say that, hey, if intrafinancial service 
providers are going to start throwing Molotov cocktails and 
internal attacks, the best way for us to solve that problem is 
to say, you really want open competition? Absolute, open 
competition in every stretch of the imagination? Qualify the 
ILCs from Wal-Mart, tear down the wall between banking and 
commerce, and let you guys all go at it. Unfortunately, we will 
pick most of you up as casualties. And it is sort of unfair for 
you to say we want to compete on an even playing field. Well, 
you know, you really don't. You really don't. Nor can you.
    Let me recall something for many of my colleagues that are 
here for a limited period of time. In the 1991 Congress, a 
famous Senator, who chaired a committee of equal jurisdiction 
in the Senate, and the President of the United States sent us 
some indications that they wanted to institute a 10-1/2 percent 
interest rate on credit cards. I don't know if all of you were 
in banking in 1991, but the banking industry in 1991 was 
probably in a negative position in equity. They were the next 
savings and loan crisis of even much larger proportions. And 
the appeal of putting a cap on credit card charges certainly 
appealed to this side of the aisle's constituents. But it would 
have stripped the capacity to build the equity of banks. And 
rather than doing the political thing, we did the rational 
thing. We said, let's see if we can't--not to have a government 
program for rescue or disaster and then a rescue occur for 
banks--let's see how they can work it out. And they did. Quite 
frankly, we reconstituted the equity of banks in this country 
for a period of time of 2 or 3 years and allowed them to be 
more competitive even in the credit card field, which is good.
    That is what Congress is all about, to give an opportunity 
for someone to breathe before they have to get up and run.
    And I would just like you all--I am not going to really ask 
any question, unless you have something you can tell me what 
you can do for economic development. But you know, rather than 
this intrafinancial service industry food fight that we tend to 
have on a periodic basis, why don't we all think about what we 
can do for all of the institutions to make them serve better, 
be more competitive, make more money, and maintain the wall 
between commerce and banking? Because quite frankly, you use 
all your energies fighting each other. Our solution is open it 
up to total competition. Let the ILCs in.
    And I can tell you, my prediction is Wal-Mart will eat you 
all alive. They will eat the credit unions alive, the community 
banks alive; they will eat even the big banks alive. Nobody 
could withstand that type of 25 percent retail. It is mind-
boggling. Of course, nobody in America that works for a living 
will have any pensions; they won't have any health care; and 
they will be making minimum wages. But, hell, that is what we 
want anyway, isn't it?
    I want to ask you--I don't want to put you on the spot--but 
if you can see anything that we can do in this Regulatory 
Relief Act to make it more attractive and simpler and easier to 
help stimulate particularly the middle and small business 
communities, with whatever institutions. Certainly I have been 
very instrumental in encouraging credit unions to fill that 
void out there, but if there are other things we can do, let us 
know.
    I do certainly encourage--I have been a big supporter and 
we will bring that government-sponsored enterprise bill. I 
think that is very important, to have the Federal bank system 
interact with the banking community and make funds readily 
available that can be used for these purposes, but I would be 
interested in it.
    If you have any ideas, certainly let me know and let the 
committee know what we can do. We are going to be marking up 
these bills in the next couple of weeks. Maybe we can do 
something constructive.
    Mrs. Biggert. The gentleman's time has expired, but I knew 
that there would be somebody who would come along to stir the 
pot, but thank you for your comments.
    The gentlelady from Wisconsin, Ms. Moore.
    Ms. Moore of Wisconsin. Well thank you, Madam Chair. I 
guess I would like to associate myself with the comments of Mr. 
Kanjorski to a certain extent. You know, I was sitting here 
listening very carefully to the questions and some of the 
responses of the distinguished panel. And I find that we are 
really, as Members of Congress, on the horns of a dilemma. I 
certainly--and I guess I am making a statement more than a 
question--I am sympathetic to the banking industry about the, 
what, depends on whose numbers you believe, $42 billion a year 
that it costs to regulate, to be regulated. But at the other 
end of that dilemma really are terrorists funding. The sex 
trade, we have heard testimony in the subcommittee about the 
sex trade yielding as much or more than all the military 
budgets in the world. We hear your concern about the CTRs and 
about getting some regulatory relief around so-called seasoned 
customers. And we hear about the banks not being responsive to 
smaller businesses and minority- and women-owned businesses.
    We hear the credit unions who serve a particular 
constituency. I started a credit union from scratch myself. I 
love credit unions. And I appreciate that it is a movement more 
than anything else, because they do, as you have indicated in 
your testimony, Mr. Buell, have a real mission. These are 
member owned, democratically operated, not-for-profit 
organizations, and have volunteer boards of directors. But yet 
you would ask us for more powers to raise the cap on the amount 
of business loans that you can provide, and to have the 
capacity to examine third-party vendors. You want a separation 
of banking and commerce. But at the same time, you want to sort 
of blur the lines between this member-owned business and 
getting out there into the marketplace.
    I guess if I were to ask a question of any of you all, the 
first question I would ask is, when we look at trying to, you 
know--so this is the horn of a dilemma, because I do think that 
things like this, for example, the sex trade proceeds. I mean 
criminals seek so-called seasoned customers, or they develop--
if we were to believe any of the old crime boss movies, that 
legitimate businesses are established to launder money through 
it.
    So I guess I am asking for you to point to us what 
provisions in this Regulatory Relief Act are too onerous and 
what do you see as a streamlined way. Just point to us what 
provisions in H.R. 3505 are going to accomplish both the 
purposes of giving you some relief as well as sort of putting a 
kibosh on laundering money.
    And I would ask, Mr. Buell, about the credit union, about 
that dilemma. How can you have it both ways? How can you be a 
membership organization that meets the needs of your members 
and yet seek authority to really put capital out in the more 
commercial world? Thank you.
    Mr. Buell. I would be happy--it is directed to me. I would 
be happy to answer the question. You know, I think at 
Superior--I speak on behalf of us--we are a member-driven 
organization. I have members that are low income, and the 
service that they are looking for us is to cash a check on a 
weekly basis and not charge them a fee, and we do that. I have 
members who want used car loans so they can go to work, and we 
happily do that for them. We have members looking to buy their 
first home. And we do a very good job of that as one of the 
leaders in our community, as far as doing that.
    When we talk about expansive or little broader powers, the 
one thing we are seeing right now, again, is that void with the 
small business loan. Is that a riskier loan? It is not. 
Actually, for us it is a much safer loan. Of the ones we have 
done already right now, we have absolutely zero delinquency 
with these loans. But there is a void out there. We are trying 
to fill it.
    No matter how a member comes to me, whether it be for a 
small business loan, whether it is for their first child's 
savings account, my job is to help facilitate it. I think 
sometimes I am the intermediary between a saver and a borrower, 
and as a cooperative they are coming together to pool their 
resources. And my job is to help facilitate that, and that is 
why I need additional regulations to give us more help in doing 
that.
    Mr. Rock. I appreciate your desire to balance the need for 
catching the bad guys, finding money launderers, with also 
wanting to reduce needless regulation. That is what we want, 
too. I think, for example, we have a lady in my bank who has 
been in her job for more than 30 years. She is the one who 
works on identifying so-called suspicious activity and then 
filing the SARs.
    If her and her staff, if they are spending most of their 
time filing the CTRs from 35 years ago and just filing these 
huge amounts of paper, that prevents her from spending as much 
time on the SARs, which is really identifying truly suspicious 
activity--a much more limited number of reports, fewer pieces 
of paper, but more meaningful pieces of paper.
    We are not suggesting changing those SAR requirements at 
all. I think that is the more effective area for both bankers 
and law enforcement people to spend their time.
    Mrs. Biggert. Gentlelady's time has expired.
    Ms. Moore of Wisconsin. Madam Chair, thank you for your 
indulgence on the time. I had one follow-up question for Mr. 
Buell, but, Ms. Biggert, your indulgence is required.
    The other part of my question--thank you so much, Madam 
Chair. The other part of my question to you was, you know, you 
seem to agree with everyone on the panel that we need to 
separate commerce from banking. You don't agree with that?
    I did really appreciate your sort of delineating the 
services that you provide to members because indeed I think 
that is the mission of the credit union to do that. But once a 
member wants a loan for--you know, not working-out-of-her-home 
type mom thing--I just want to buy a computer so that I can 
work out of my home during maternity leave and catch up with my 
e-mails, why then don't we send those same customers to a bank?
    You know, once they are in a position where they actually 
want to be a housing developer, want to build a community, 
apartment building for low-income housing, why do you see that 
as your mission?
    Mr. Buell. Well, first of all, I would like to clarify. On 
the ILCs, we really do not have a position. As far as we do 
understand the concerns, we think, you know, no one has the 
right to dictate that, you know, the business practices of that 
with the ILCs. On the other side of what she was talking about, 
you know, the small business loans, there does there come a 
time where it matures and it gets handed off to a larger 
organization. And there are going to be times that is going on 
happen. I mean, we are going to help someone get started, and 
they are going to want to do a land development loan. And they 
are going to want--you know, in my case, my average loan size 
is $100,000. They are going to want $3 million. We have a good 
relationship with our local bankers. They send us some 
business, and we call them up with someone we trust and say, 
here is what this individual is wanting to do. They are wanting 
to improve their community. You know, if we can help facilitate 
that, my job is to help the members. Sometimes I am the best 
deal. Sometimes I am not. But whatever case that is, it is our 
job to advise them, educate them, and to help them to do what 
they need to do right there at home.
    Mr. Moore. Thank you.
    Mrs. Biggert. [presiding.] The gentlelady's time has 
expired.
    The gentlewoman from Indiana is recognized for 5 minutes
    Ms. Carson. Well, thank you very much Ms. Chairman, and I 
apologize for being late. I had two committees at the same 
time, transportation, entertaining information from Wynton 
Marsalis and the Governor, et cetera, from New Orleans and 
Mississippi, and I apologize for being late getting here.
    We have been hearing in the past subcommittee hearings, the 
Federal Reserve Board estimates that the banking industry 
spends about $36 billion to comply with regulatory requirements 
at both the Federal and the State levels. I certainly don't 
want to impose that kind of cost on the financial industry. And 
while many regulations are in place to ensure consumer safety 
and enforce compliance with versus consumer protection 
statutes, some do prevent banks from effectively serving the 
public and drive up the cost of doing business. I have a bank 
around the corner from me where I live who stopped taking 
Federal checks on deposits from people who have no accounts at 
the banks. They feel like they are losing millions and millions 
a year by cashing those checks. Smart as the banking industry 
is, I am surprised you haven't come up with a solution or a 
system whereby you can still serve the public in that way. Some 
people are afraid to have bank accounts. I guess they think 
back to the 1930s where people lost all their money in banking 
institutions. Notwithstanding, our job as a committee is to 
make sure that we find a balance between protecting the 
American people and their financial endeavors and protecting 
the industry and providing regulations to ensure effectiveness. 
So these hearings have been a great help to me in terms of 
trying to understand the banking industry has, in fact, come a 
long way. You have eliminated a lot of your bias that you had.
    Historically, it seems that you do a better job in weeding 
out all of that, but what I would like to know is, what does 
the financial industry, how do you respond to community 
investment? That is what is required by financial institutions. 
How do you respond to community reinvestment, and how do you 
explain trying to get rid of it? That is my question. You are 
trying to eliminate community reinvestment with resources. How 
do you explain that and still be accountable to the customers 
which you serve? I don't make myself clear, do I? I have got a 
bad cold. I apologize, but try to work with it anyway. Okay?
    Mr. Hayes. I lost my voice over the weekend, so I can 
appreciate the struggle of doing this. I have been a community 
banker now for 15 years. I moved from a large metropolitan city 
to a community of 19,000 which has offices in a community of 
less than 2,500, less than 4,000 and less than 500. It is my 
responsibility to have the job that I have to ensure that my 
community and the people in that community grow, that they have 
a job. I spend an enormous amount of my time working trying to 
bring jobs to our community. I spend time working with schools 
to ensure that there is a connection between the education 
system and the private sector so that our young people will 
have an opportunity. I tell our young people every time, don't 
do drugs, study, because it is, in fact, what you study and how 
you apply yourself is how you will be successful in this 
country. We spend an awful lot of money in our bank putting 
money into our community for those things--education, jobs and 
people. People come to us and say, we are doing this. Can you 
furnish us money to do that? We do the right thing. Sometimes 
it is tough to sit and document that you do the right thing. I 
mean, we are people. We want all of our citizens to have 
success. So the Community Reinvestment Act is sometimes a 
documentation of, did we do the right thing.
    And I can tell you sitting here, or wherever I go, I do the 
right thing for people in my community. And my community, you 
know, my average loan is less than this gentleman's. My average 
loan is $25,000. I finance used cars. I finance computers. I do 
those things. I am a community banker.
    Ms. Carson. Well thank you very much. I appreciate that. I 
have had a lot of town hall meetings dealing with financial 
literacy. As a matter of fact, Alan Greenspan was one of my 
principal speakers at one of them. I don't know whether I think 
you should do it, but probably so. Educate the community on 
financial literacy encouraging young people to invest even if 
it is just $5 a week.
    Mr. Hayes. Congressman Ford and I have had many 
conversations about financial literacy, and you may not like my 
response. But you know, when a nation is running a deficit, it 
is tough to communicate to somebody you have to live within the 
means which they are afforded, and so we have to--Congress and 
those people that are on the line talking with these people 
have to say, you have got to concentrate on improving yourself 
through education and working hard, and we are there for you.
    I mean, I am passionate about this. And I can assure you, I 
wish as a young person I had had somebody there to help educate 
me. And I am willing to do whatever it takes. You know, if the 
Lord's willing and I am going to be here a few more years, you 
know, my passion when I don't have to come testify is to be out 
there helping young people understand the importance of 
education, not doing drugs, and understanding a dollar is 
dollar, and you have got to work for it.
    Mrs. Biggert. The gentlelady's time has expired.
    Ms. Carson. Thank you, Madam chairman
    Mrs. Biggert. The gentlewoman from New York is recognized 
for 5 minutes. Mrs. Kelly
    Mrs. Kelly. Thank you, Madam Chairman. I apologize for 
being late. But I am very interested in what this panel has 
done. I have read testimony. I am very interested in what this 
is all about. I have a question about a bill that Mr. Royce and 
I have introduced that I would like to ask you your opinion on. 
We have introduced H.R. 1952. It would create a treasury 
certification system for foreign governments that will give our 
banks and their customers access to the best idea of what the 
U.S. Government knows about what other countries are doing 
without imposing a new bureaucratic structure on the private 
sector. I would really like your input on whether or not you 
think such a system would be helpful to you in dealing with 
foreign banks and foreign entities and foreigners themselves. 
And let's start with anyone of you who is willing. You are all 
looking at me. This may be something that you are aware of. It 
may not be.
    But Mr. Beal, you are on this end, so I am going to ask you 
if you have got any comment on that.
    Mr. Beal. Certainly. And thank you very much. It sounds 
like an interesting idea. I confess I wasn't previously aware 
of it. We would be happy to take a look at it and study it a 
little further and get up to speed on it, but it does sound 
intriguing and interesting. And it may prove helpful to us 
because we have encountered some difficulties in outbound 
remittances particularly to Mexico and points south. So that 
could be helpful to us from that perspective.
    Mrs. Kelly. Good, that is what we are hoping, is that 
perhaps that might help reduce the regulatory angst that goes 
on about all the CTRs and SARs and so on. And so Mr. Rock.
    Mr. Rock. Thank you, Congresswoman. I am not familiar with 
the terms of H.R. 1952, but I do think that, as Mr. Beal said, 
it is an intriguing idea to me. I think that perhaps some sort 
of certification process could be helpful to everyone on all 
sides, and we would like to work with you in trying to explore 
those pockets on whether or not it can be helpful.
    Mrs. Kelly. Thank you.
    Ms. Hart.
    Ms. Hart. Thank you Congresswoman. I would like to see your 
bill also. Thank you for the opportunity. But for the most 
part, our banks don't have a lot of foreign activity. But I 
would like to see your bill.
    Mrs. Kelly. Wonderful.
    Mr. Buell.
    Mr. Buell. As Ms. Hart, as well I have not seen the bill, 
and we do not have a lot of foreign activity or any actual 
foreign activity with the foreign banks.
    Mrs. Kelly. All right.
    Mr. Hayes. It is an intriguing idea. I must admit I don't 
have any knowledge of the bill. But having spent 9 days in 
China visiting with the banking authorities over there, you 
know, I think it is important for all of us to understand, you 
know, the impact that the foreign countries and their companies 
have on the business that we do. So it is something that we 
need to ratchet up and look at and deal with that, and we will 
respond to you ma'am.
    Mrs. Kelly. I appreciate that. Clearly, our emphasis is to 
try to help U.S. banks and anyone doing business with foreign 
entities establish some kind of a pattern so that you can go 
fearlessly about the business of doing business. And I would be 
very interested in any comments you have. I thank you very 
much. Madam Chairman, I yield back the balance of my time.
    Mrs. Biggert. Thank you. And with that, I would like to 
thank this wonderful panel for being here. Your expertise has 
been very helpful to us and as we move forward with this 
legislation and the markup. With that, the Chair notes that 
some members may have additional questions--I think we really 
got through an awful lot of questions today--but for this 
panel, which they may submit in writing. Without objection, the 
hearing record will remain open for 30 days for members to 
submit written questions to these witnesses and to place their 
responses in the record.
    With that, the hearing is adjourned.
    [Whereupon, at 12:13 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                            October 18, 2005

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