[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

                         CONSUMERS AND THE FTC



                               BEFORE THE

                        AND CONSUMER PROTECTION

                                 OF THE

                        HOUSE OF REPRESENTATIVES


                             FIRST SESSION


                              JULY 8, 2009


                           Serial No. 111-57

      Printed for the use of the Committee on Energy and Commerce



74-090                    WASHINGTON : 2012
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                 HENRY A. WAXMAN, California, Chairman

JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
BARON P. HILL, Indiana
DORIS O. MATSUI, California
JERRY McNERNEY, California

        Subcommittee on Commerce, Trade, and Consumer Protection

                        BOBBY L. RUSH, Illinois
JAN SCHAKOWSKY, Illinois             CLIFF STEARNS, Florida
    Vice Chair                            Ranking Member
JOHN SARBANES, Maryland              RALPH M. HALL, Texas
BETTY SUTTON, Ohio                   DENNIS HASTERT, Illinois
FRANK PALLONE, New Jersey            ED WHITFIELD, Kentucky
BART GORDON, Tennessee               CHARLES W. ``CHIP'' PICKERING, 
BART STUPAK, Michigan                    Mississippi
GENE GREEN, Texas                    GEORGE RADANOVICH, California
CHARLES A. GONZALEZ, Texas           JOSEPH R. PITTS, Pennsylvania
ANTHONY D. WEINER, New York          MARY BONO MACK, California
JIM MATHESON, Utah                   LEE TERRY, Nebraska
G.K. BUTTERFIELD, North Carolina     MIKE ROGERS, Michigan
JOHN BARROW, Georgia                 SUE WILKINS MYRICK, North Carolina
DORIS O. MATSUI, California          MICHAEL C. BURGESS, Texas
JOHN D. DINGELL, Michigan (ex 

                             C O N T E N T S

Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     1
    Prepared statement...........................................     4
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................    11
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    12
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................    13
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    14
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................    16
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    17
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    18
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    19
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    20
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................    21
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................    22
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................    23
Hon. Steve Scalise, a Representative in Congress from the State 
  of Louisiana, opening statement................................    24
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    25


Michael Barr, Assistant Secretary for Financial Institutions, 
  Department of the Treasury.....................................    26
    Prepared statement...........................................    30
    Answers to submitted questions...............................   189
Jon Leibowitz, Chairman, Federal Trade Commission................    47
    Prepared statement...........................................    50
    Answers to submitted questions...............................   202
Gail Hillebrand, Senior Attorney and Manager, Financial Services 
  Campaign, Consumers Union......................................    80
    Prepared statement...........................................    83
    Answers to submitted questions...............................   257
Stephen Calkins, Esq., Associate Vice President for Academic 
  Personnel and Professor of Law, Wayne State University.........   107
    Prepared statement...........................................   108
    Answers to submitted questions...............................   261
Prentiss Cox, Associate Clinical Professor of Law, University of 
  Minnesota......................................................   120
    Prepared statement...........................................   122
    Answers to submitted questions...............................   267
Rachel E. Barkow, Professor of Law, New York University School of 
  Law............................................................   137
    Prepared statement...........................................   139
    Answers to submitted questions...............................   270
Chris Stinebert, President and CEO, American Financial Services 
  Association....................................................   154
    Prepared statement...........................................   156

                           Submitted Material

Statement of J. Thomas Rosch, Federal Trade Commission...........   177

                         CONSUMERS AND THE FTC


                        WEDNESDAY, JULY 8, 2009

              House of Representatives,    
           Subcommittee on Commerce, Trade,
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Bobby L. 
Rush [Chairman of the Subcommittee] presiding.
    Members present: Representatives Rush, Schakowsky, 
Sarbanes, Sutton, Green, Gonzalez, Butterfield, Barrow, Matsui, 
Castor, Space, DeGette, Dingell, Waxman (ex officio), 
Radanovich, Stearns, Whitfield, Pitts, Terry, Gingrey, Scalise 
and Barton (ex officio).
    Staff present: Anna Laitin, Professional Staff; Will Casey, 
Special Assistant; Michelle Ash, Chief Counsel; Timothy 
Robinson, Counsel; Marc Groman, Counsel; Stephanie Bazell, 
Intern; Caren Auchman, Communications Associate; Bruce Wolp, 
Senior Adviser; Phil Barnett, Staff Director; Jeff Wease, 
Deputy Information Officer; Earley Green, Chief Clerk; Brian 
McCullough, Senior Professional Staff; Shannon Weinberg, 
Counsel; Will Carty, Professional Staff; and Sam Costello, 
Legislative Assistant.


    Mr. Rush. The Subcommittee on Commerce, Trade and Consumer 
Protection will now come to order.
    The purpose of today's hearing is to hear witnesses on the 
subject of the proposed Consumer Financial Protection Agency, 
implications for consumers and the FTC. I certainly want to 
welcome all the witnesses, Mr. Barr and Chairman Leibowitz. The 
Chair recognizes himself for 5 minutes for the purposes of an 
opening statement.
    I would like to thank all my colleagues and all the 
witnesses who diligently worked to prepare testimony over the 
Fourth of July holiday so that today's hearing would be as 
meaningful as possible as we commence our examination of the 
Administration's proposal to create a new Consumer Financial 
Protection Agency. My view on the matter is fairly 
straightforward. I believe that the FTC should remain intact as 
it is currently constituted and that this committee and 
subcommittee should continue to oversee and authorize the FTC.
    The Commission, which was established in 1914 during our 
Nation's Progressive Era, was designed to be a regulatory 
agency with disinterested expertise to ensure compensation and 
to promote free enterprise. That mission and those prescient 
concerns are as vital today as they were almost a century ago. 
The Commission operates best as a lone eagle. From high above, 
the agency can survey the marketplace and swoop down on 
predators that deceive unsuspecting and misinformed consumers. 
The higher and farther away that the FTC is from other agencies 
and the entities that it regulates, the better it is at 
spotting unfair commercial and trading practices and at 
isolating those practices that cast the longest shadows. 
Similarly, by staying at a distance, the agency can keep would-
be credit captors at bay while staying on course to achieve its 
critical mission of protecting consumers.
    Looking at all reliable indicators, the commission has 
performed commendably for a small and scrappy staff and 
abridged powers, working alone with a five-person bipartisan 
commission, possibly 1,100 dedicated employees spread out 
across three bureaus: Bureau of Competition, Consumer 
Protection and Economics. Although its expertise is deep and 
broad, the FTC's statutory tools under the FTC Act consist of 
an antiquated and cumbersome of rulemaking under the Magnuson-
Moss Act paired with anemic litigation authority. These two may 
be successful at landing glancing blows but they fail to pack a 
full punch of detergents that businesses will respect and 
consumers deserve. Currently at the FTC's disposal are its 
expertise and its agency crafted instruments of research, 
policy and study development, consumer compliant and education, 
competition, legal analysis and economics. While the FTC does 
well, it has done without power relative to its sister 
agencies, and what it hasn't done particularly well is in the 
process of being fixed.
    Just a few weeks ago, our subcommittee worked intently to 
mark up H.R. 2309, the Credit and Debt Protection Act, which 
directs the FTC to adopt rules using APA rulemaking authority 
that would address rampant unfair and deceptive practices in 
the area of payday lending, automobile financing, mortgage and 
foreclosure rescue and debt settlement. Our subcommittee's 
objective in passing H.R. 2309 was to confer more authority 
upon the FTC and to equip it with sufficient resources so that 
it could adopt rules faster in the areas of credit and debt 
through APA rulemaking procedures and bring enforcement action 
through the threat of civil penalties. Our committee had worked 
devotedly in the past more than a few times with members from 
the Financial Service Committee to bolster the FTC's 
shortcomings, hold out the FTC's best practices for banking 
agencies to emulate and protecting consumers and to improve the 
ability of bank regulatory agencies to protect consumers by 
ensuring unfair and deceptive rules under the FTC Act. I have 
witnessed the respective chairs of the Committees on Energy and 
Commerce and Financial Services jointly introduce H.R. 3525 to 
tackle some of these challenges.
    Further, I offered a further amendment to H.R. 3526, which 
was introduced by the chair of the Financial Services Committee 
in the 110th Congress to require that a GAO report 
investigating federal banking and credit union regulations and 
the perpetuation of unfair and deceptive acts and practices by 
depository institutions. Importantly, this push and pull 
between our respective committees has pressured providers of 
financial services and products including banks and depository 
institutions to balance the allure of profits and determination 
of safety and soundness against the needs of consumers. This 
collaborative working relationship between committees has 
produced good and sustainable consumer protection bills to 
safeguard consumers of financial services and of consumer 
credit products and is a vital example of the independent 
agencies that would be affected by the Administration's 
proposal as it will allow each of them to maintain their 
independence and respective biases and expertise when 
addressing serious problems that cut across sectors and affect 
market supplies and consumers.
    I want to thank the witnesses for being here today, for 
taking the time out from their busy schedules to participate in 
this hearing. With that, I yield back the balance of my time.
    [The prepared statement of Mr. Rush follows:]

    Mr. Rush. The Chair now recognizes the gentleman from 
California, the ranking member, Mr. Radanovich for 5 minutes 
for the purposes of an opening statement.


    Mr. Radanovich. Thank you, Mr. Chairman, good morning. I 
appreciate your calling today's hearing on this important 
    Whenever something goes wrong in this country, Washington 
proposes a solution regardless of whether the situation calls 
for one. However well-intentioned our actions, they rarely work 
out because they are often undertaken as a knee-jerk response. 
We have seen many unintended consequence of rush to legislation 
in recent history, for example, the Sarbanes-Oxley Act. At 
best, we have seen marginal improvements in the markets 
diverting billions of dollars toward new compliance costs to 
the detriment of many small- and medium-sized businesses. In 
another example, last Congress we enacted a law in response to 
lead paint on toys. The paint violated an existing standard but 
what was a compliance problem rather than a deficient standard 
problem led to numerous costly new mandates that put many 
small- and medium-sized businesses out of business because the 
cost was too high without any corresponding increase in safety.
    This is not to say that weaknesses in our financial system 
don't exist; they obviously and clearly do. The failure of so 
many financial institutions and the ongoing problem of 
foreclosures on mortgages some borrowers never should have 
taken out are evidence of that, and if the bailout of banks and 
financial firms really were necessary to save the financial 
system, something clearly needs to be done to address the 
systematic risk.
    Additionally, fraud and deception by both lenders and 
borrowers in the mortgage market ran rampant. The FBI reported 
an increase in fraud by more than 400 percent since 2005. Few 
people question anything was wrong in the market until home 
prices started plummeting and borrowers began defaulting. If 
uniformity in the enforcement of existing laws can address 
these problems, I would support that. Apart from the lack of 
systemic risk regulation to prevent future financial collapses 
required in the taxpayer bailout, I am still trying to 
understand what holes exist in the FTC's consumer protection 
authority and to what extent the government contributed to the 
crisis with its intervention in housing policy. I am far from 
convinced that the market problems require the creation of a 
new federal regulator as contemplated by the Administration's 
    Fannie Mae and Freddie Mac are under government control in 
part because they did exactly what Congress and the government 
wanted: extend home ownership to as many people as possible 
under the watch of the federal regulators. Fannie and Freddie 
along with the federal housing agencies and programs were 
encouraged to extend credit, and when they did, their 
shareholders played the price for failing. To accomplish the 
policy goal of extending home ownership to as many people as 
possible, changes in lending standards had to occur. The 
lowering of lending standards meant more borrowers qualified 
for loans they couldn't afford. My point is that laws on the 
books didn't stop people from taking out risky mortgages, 
either in spite of or because of rapidly increasing home 
prices, nor has it stopped regulators and law enforcement from 
prosecuting those who we now know committed fraud and broke the 
    While many experts believe that the banking regulators 
performed their duties inadequately, I will leave that to the 
Financial Services Committee to decide. But with regard to the 
FTC, it seems to me that we are throwing out the baby with the 
bathwater by stripping the authority over consumer protection 
for financial products and services from the one agency that 
has performed well. If we agree we need legislation, we should 
take the approach of legislating with a scalpel rather than 
with a bulldozer.
    With that said, I have two primary concerns with this 
proposal. First, it creates a new federal entity with an 
enormous scope of authority. The proposal grants sweeping 
authority to a new agency over financial products that would 
cover every sector of the economy. As I understand it, the 
draft legislation would touch everyone from a certified public 
accountant to a realtor and subject them to a new tax to fund 
the agency.
    Second, I am concerned about transferring functions from 
the FTC to a new agency without any evidence that it is 
necessary or that it will be as effective as a regulator as the 
FTC is. By removing the FTC's authority, we could lose the 
FTC's unique expertise in balancing consumer protection and 
    Finally, the legislation contains several new broad 
authorities for the FTC regarding rulemaking authority and 
civil penalty authority. I have previously disagreed with these 
and do not need to repeat them at this time. However, I do have 
some questions of the witnesses regarding these provisions and 
I will ask them when they are appropriate.
    I want to welcome the members to the panel as well and 
yield back, Mr. Chairman.
    Mr. Rush. The Chair thanks the gentleman. The chairman of 
the full committee is recognized for purposes of opening 
statement for 5 minutes.


    Mr. Waxman. Thank you very much. I want to thank you, Mr. 
Chairman, for holding this important hearing.
    Last year, as chairman of the House Oversight Committee, I 
held several hearings examining the causes of the financial 
crisis. Those hearings revealed a government regulatory 
structure that was unwilling and unable to meet the 
complexities of the modern economy. We found regulatory 
agencies that had fully abdicated their authority over banks 
and had done little or nothing to curb abusive practices like 
predatory lending. The prevailing attitude was that the market 
always knew best. Federal regulators became enablers rather 
than enforcers.
    The Obama Administration has developed an ambitious plan to 
address these failures and to strengthen accountability and 
oversight in the financial sector. Today's hearing will take a 
close look at one piece of that plan, the proposal to create a 
single agency responsible for protecting consumers of financial 
products. A new approach is clearly warranted. The banking 
agencies have shown themselves to be unwilling to put the 
interests of consumers ahead of the profit interests of the 
banks they regulate and the structure and division of 
responsibilities among these agencies has led to a regulatory 
race to the bottom. The Federal Trade Commission has taken 
steps to protect consumers but its jurisdiction is limited and 
it has been hampered by a slow and burdensome rulemaking 
    I am pleased that this subcommittee is holding today's 
hearing and examining the Administration's proposal carefully. 
There are two areas of which attention and focus from this 
committee are particularly needed. First, the new agency must 
be structured to avoid the failures of the past. It only makes 
sense to create a new agency if that new agency will become a 
strong, authoritative voice for consumers. And second, we must 
ensure that the Federal Trade Commission is strengthened, not 
weakened, by any changes. Unlike the banking agencies, FTC has 
consumer protection as its core mission.
    In recent months, FTC has taken great strides to protect 
consumers of financial products, bringing enforcement actions 
against fraudulent debt settlement companies and writing new 
rules governing mortgages. The Administration's proposal would 
give most of the FTC's authority over financial practices and 
some of FTC's authority over privacy to the new agency. At the 
same time, the Administration proposes improving FTC's 
rulemaking authority and enforcement capabilities. It is not 
clear what impact these proposals would have on FTC or its 
ability to perform its consumer protection mission. As we build 
a new structure for protecting consumers of financial products, 
it is our responsibility to ensure that we do not weaken the 
agency currently responsible for consumer protections in this 
and many other areas.
    Once again, I thank Chairman Rush for holding this hearing. 
I welcome our witnesses to the committee and look forward to 
their testimony.
    Mr. Rush. The Chair thanks the chairman of the full 
committee, and now the Chair recognizes the gentleman from 
Florida, Mr. Stearns, for 2 minutes for the purposes of opening 


    Mr. Stearns. Good morning, and thank you, Mr. Chairman.
    This is a very important hearing. It is important for us as 
members of this subcommittee, and Mr. Chairman, in terms of our 
jurisdiction and what the implications are for jurisdiction in 
the future. The Administration's newly proposed CFPA, or the 
Consumer Financial Protection Agency, is relevant. It is an 
idea that a lot of us have mixed reactions. It has implications 
for our subcommittee. Although this is only one component of 
the Administration's broad-reaching financial regulatory reform 
proposal, it certainly is an important part of that overall 
program and it needs detailed examination.
    We must carefully consider the long-term effects that this 
will have on the Federal Trade Commission, the consumers it is 
charged with protecting and on industry. Currently, the Federal 
Trade Commission has broad authority to protect consumers from 
unfair and deceptive practices in the credit and debt areas, 
and the FTC has notably been an effective and reliable agency 
in terms of consumer protection. We have seen it in this 
subcommittee. However, this new agency, the CFPA, proposal 
strips the Federal Trade Commission of virtually all of its 
consumer protection authorities pertaining to financial 
practices and even some of its privacy protection authority. 
So, Mr. Chairman, I think that has to be a concern.
    The proposal compensates for this shifting of authority by 
granting the Federal Trade Commission streamlined 
Administrative Procedures Act, APA, rulemaking authority and 
the ability to seek civil penalties against unfair and 
deceptive practices. But this is a term of which there is no 
clear definition as well as making it unlawful to ``aid and 
abet'' in deceptive acts. So due to the shifting of power and 
the potential economic consequences of businesses, we must 
ensure that effective stakeholders have a voice at the table 
but ultimately we need to be sure that the CFPA, the new 
agency, will be an agency designed to do what is in the best 
interests of the consumers and not what is in the best interest 
of the bureaucrats who run it.
    One other concern I would have, Mr. Chairman, with the APA 
is it has 180 days for consideration. Is this sufficient time 
under the Magnuson-Moss Act rulemaking requirements included a 
public hearing and so, Mr. Chairman, perhaps as this bill moves 
along we might want to include some kind of public hearing as 
well as this 180 days of consideration.
    With that, I yield back the balance of my time.
    Mr. Rush. The Chair thanks the gentleman. The Chair now 
recognizes the gentleman from Michigan, the chairman emeritus 
of the full committee, my friend, Mr. John Dingell, for 5 
minutes for opening statement.


    Mr. Dingell. Mr. Chairman, I thank you, and I commend you 
for this hearing. It is a very important one. It follows on a 
series of events which began with a raid on this committee by 
other committees and by the banking industry and by repeal of 
Glass-Steagall, which removed all the penalties and 
prohibitions against many of the illegal activities which 
brought us to the current lowest state in which we find 
ourselves financially and economically. At the Treasury 
Department, there was an office still in being called the 
Controller of the Currency, who pushed to totally deregulate 
banks and to unlearn the lessons which we learned during the 
Depression and to permit the abuses which the Pecora Commission 
found to be a problem, things which brought about the 1929 
crash, and lo and behold, the failure to learn those lessons or 
to preserve the protections which the Congress and the 
President in the 1930s put into place led to the economic 
collapse which occurred in the United States in the last 
calendar year and this calendar year.
    So the questions that we will be concerned with are going 
to be, are consumers protected, is the Federal Trade Commission 
able to continue doing the work that it does to protect 
consumers, and this committee is going to concern ourselves 
this morning with these issues and means by which to ensure 
improved consumer protections continue to exist with regard to 
financial products and services and to see to it that the 
Federal Trade Commission is able to carry out the 
responsibilities which in a rather contemptible fashion were 
disregarded by the SEC and also by the Controller of the 
    Now, we need to know if our concerns here and the pause 
which it gives us occurs in part because of a transfer of 
existing authority from the Federal Trade Commission to a newly 
minted Consumer Financial Protection Agency, an agency whose 
behavior we don't know but an agency which is going to probably 
be composed of many of the goodhearted people who have brought 
us to this curious and unfortunate state of events. I will be 
truthful: I have significant concerns about these plans and I 
will be intending to engage today's witnesses in a frankly 
discussion about their merits. The Administration, which has no 
fault in the events of the deregulation and the collapse of the 
American economy last year, envisions consolidating all 
consumer protection functions related to financial products 
including rulemaking, supervision, examination and enforcement 
under the aegis of the new CFPA, which would receive sole 
rulemaking enforcement authority over consumer financial 
protection statutes such as the Truth in Lending Act. At first 
glance, this strikes me as a dejure and possible unwarranted 
reassignment of FTC's consumer protection authorities in the 
financial services area. I will be looking to see whether this 
is so and whether in fact is a good thing or can be justified 
by the Administration.
    While a comparatively small agency, it is to be observed 
that FTC has some superb work in protecting consumers, and in 
this the country would benefit not from a diminished mandate to 
that agency but rather to additional statutory authority, 
personnel and funding. Consequently, I have more than a modest 
degree of skepticism regarding the Administration's proposal. 
In brief, I wish for our witnesses to elucidate upon several 
matters associated with the CFPA proposal.
    First, if CFPA were mandated under law, what authorities 
would be left to FTC and why would that occur. Second, what 
latitude would FTC have in enforcing consumer protection 
statutes as they relate to financial services, and what 
consumer protection statutes would be denigrated or dissipated 
under this proposal. Third, how would one characterize the 
level of interagency cooperation in the drafting of the 
Administration's proposal. Financially, if CFPA receives its 
proposed mandate, what will become of this committee's 
jurisdiction over consumer protection as designated under rule 
10 of the House of Representatives? I will welcome the 
witnesses' responses to these and other questions in order to 
properly establish an adequate record for additional action by 
the Congress if such is deemed necessary.
    I would ask at this time that I have unanimous consent to 
keep the record open to submit a list of questions to the 
witnesses today and to have those responses and the questions 
inserted into the record.
    I want to commend you, Mr. Chairman, for your courtesy and 
foresight in this hearing. I would conclude by a personal note 
in welcoming Dr. Stephen Calkins, associate vice president for 
academic personnel and professor of law at Wayne State 
University in my home State of Michigan. His testimony has been 
invaluable to my understanding of this matter and I look 
forward to his participation in the continuing debate on 
consumer financial protection, and I note, Mr. Chairman, that 
my wife is a member of the Board of Governors of that great 
institution, which gives me a particularly warm feeling about 
it, and again, Mr. Chairman, I urge you and my colleagues to be 
most diligent, most cautious, most careful and most dutifully 
suspicious of the events that we inquire into today. Thank you.
    Mr. Rush. The Chair thanks the chairman emeritus. The Chair 
wants to put before the committee the UC request, and hearing 
no objection, so ordered, the UC request by the chairman 
emeritus. And the Chair also wants to take a moment of personal 
privilege to celebrate the chairman emeritus's birthday and to 
wish him a happy birthday, so we want you to know that we all 
wish you a very happy birthday and many, many more.
    Mr. Dingell. Mr. Chairman, I thank you for your kind 
observations. At 83, a fellow is a little more careful about 
celebrating his birthdays. The good news is, I am celebrating 
my 83rd birthday. The bad news is that I am 83. I thank you, 
Mr. Chairman, for your courtesy and I thank my friends for 
their kindness and their courtesy.
    Mr. Rush. Thank you. The Chair now recognizes the gentleman 
from Kentucky, Mr. Whitfield, for 2 minutes for opening 
statement. Excuse me. I didn't see Mr. Barton there. He just 
walked in? OK. Mr. Barton is recognized.
    Mr. Barton. Well, you can go to Mr. Whitfield. He was here 
before me. I am fine with going to Ed and then come back to me 
after the next----
    Mr. Rush. You all worked that out then. OK. Mr. Whitfield.


    Mr. Whitfield. We are all very polite today so thank you 
very much.
    Mr. Chairman, I want to thank you also for holding yet 
another important hearing examining the ongoing financial 
crisis and ways we can help our constituents get through these 
difficult times and mitigate future problems. Secretary 
Geithner said that this new Consumer Financial Protection 
Agency would have only one mission, and that is, to protect 
consumers. It is also my understanding that this proposal would 
eliminate the consumers protections at the FDIC, the Federal 
Reserve Board, the Controller of the Currency, and the impact 
on the FTC, perhaps we should explore expanding the authority 
of the FTC.
    Another problem that concerns me about the proposed 
legislation is that there is no federal preemption of any State 
law that is more stringent than the federal law, and anyone 
that has gone through a mortgage process and when they hand you 
the 45 pages of documents, you are going to find yourself 
getting more documents if you have these conflicting State laws 
on these consumer issues, and I think that is a real concern as 
    But the problem that I have most of it, how much will this 
cost? Every day we pick up another article in a newspaper, 
growing national debt may be next economic crisis. Unless we 
demonstrate a strong commitment to fiscal sustainability in the 
longer term, we will have neither financial stability nor 
healthy economic growth. Interest payments on the debt alone 
last year were $452 billion. This year it is expected to be 
$470 billion, the largest federal spending category after 
Medicare, Medicaid, Social Security and defense. Another 
article today, economist declares train wreck because out-of-
control federal budget deficits. The economist talks about the 
real question is, how much damage will greater indebtedness do 
to economic growth and government's credit worthiness. Those 
things may transcend what limited additional protection 
consumers get from this legislation. So I think we need to move 
cautiously, find out how much costs are we talking about here 
and what will the benefits be. Thank you, Mr. Chairman.
    Mr. Rush. The Chair thanks the gentleman. The Chair now 
recognizes the vice chair of the subcommittee, my friend from 
Illinois, Congresswoman Schakowsky, for 2 minutes.


    Ms. Schakowsky. Thank you very much, Mr. Chairman.
    I just came from a roundtable on women's financial 
literacy, clearly an important issue, but what we have found is 
how daunting the environment has been for anyone who even is 
pretty literate in financial issues. We have seen the 
systematic production and marketing and sales of countless 
financial products including mortgages that were extremely 
risky, even downright dangerous for borrowers, and often it was 
pretty hard to figure out what was what. For years bank and 
non-bank lenders operated with too little oversight by 
government regulators, and when regulation was taking place 
there was little focus on whether the financial products and 
services sold were safe for consumers.
    The Federal Trade Commission, and I am so glad its chairman 
is here today, is essentially the only agency with a mandate to 
prioritize consumer safety and protect Americans from unfair or 
deceptive practices, and I commend Chairman Leibowitz for his 
renewed commitment to consumers' rights in the areas of credit 
and debt. However, as has been mentioned, the FTC's 
jurisdiction is limited to non-bank activities. The agency has 
been hampered for decades by cumbersome rulemaking authority 
and in recent years its actions were limited by the previous 
Administration's general contempt for oversight of the private 
    Overall, current regulations aren't sufficient and they 
aren't working. We can't maintain a system which neglects 
consumer protection for the bulk of the financial service 
industry. Americans deserve access to honest information that 
will help them make educated decisions on mortgages, credit 
cards and bank accounts. Dangerous financial products should be 
kept off the markets and advertisers must be held accountable 
for their claims. We have to move forward with these goals, and 
I look forward to hearing today's testimony on how a consumer 
financial protection agency might achieve them.
    Thank you, and I yield back.
    Mr. Rush. The Chair thanks the gentlelady. The Chair now 
recognizes the ranking member for the full committee, the 
humble and honorable Mr. Barton from Texas, for 5 minutes.


    Mr. Barton. Well, thank you, Mr. Chairman. Before I give my 
opening statement, let me amplify what you said about the 
chairman emeritus, Mr. Dingell. Some people get 1 year of 
experience and that is it. In his case, you could say that 
would be 1 year 83 times. But in Mr. Dingell's case, each year 
he adds it to the base where it compounds and amplifies by 
orders of magnitude. I think you can honestly say that our 
friend and chairman emeritus is the most influential Member of 
Congress in our lifetime and it is such a privilege to have him 
on our committee and it is really fun when he is on my side. It 
is not so much when he is not on my side, but even then I learn 
from him. So the heartiest congratulations from the minority to 
a true gentleman of the House, the conveyor and the protector 
of institutional viability for this body. We wish you many, 
many more.
    With regards to this hearing, Mr. Chairman, I would bring 
the members' attention to today's Wall Street editorial op-ed 
piece about the particular agency. It is entitled, ``Let us 
treat borrowers like adults.'' It calls into question whether 
there needs to be a super consumer financial products 
protection agency which the legislation we are looking at today 
would empower. We accept the intention as being honorable but 
people like myself have extremely strong reservations about the 
implementation of such an agency. What would the legislation 
actually accomplish that some federal agency isn't already 
attempting to do? We would like to know what is gone so wrong 
with our existing protection agencies that we deem it necessary 
to create another brand-new agency.
    I am a bit taken back by the breadth of the proposed 
coverage. This legislation, of course, relates a great deal to 
banking and other financial institutions over which this 
committee unfortunately has no jurisdiction, at least not now. 
One never knows about the future. But it reaches beyond that. 
It could reach accountants, auditors, gift cards, all other 
types of institutions and entrepreneurial activities. It 
doesn't fall strictly within our jurisdiction because it 
applies to banks but it is still of concern. There seems to me 
to be an exception that swallows the preemption rule. According 
to the proposal, if I understand it correctly, State consumer 
laws of general application and those State laws enacted 
pursuant to federal law intended to, and I quote, ``exceed or 
supplement federal law'' will now apply to any national bank. 
The Harvard professor who is credited with inspiring this all-
inclusive consumer financial protection agency described the 
need for it in her article, ``Unsafe at any Rate.'' Professor 
Warren wrote that we need this agency in order to reverse 
industry practices that make it difficult for consumers to 
understand what they are getting in a financial product world, 
for example, 30 pages of contract terms for a simple credit 
card or 50 lines of convoluted and excessive text to explain 
all required disclosures. I understand that. I just cosigned 
for my stepdaughter's new condo in Austin, Texas, and it took 
an hour of signing various documents, some of which were 
documents I signed certifying that I just signed the previous 
document. So I understand the need for simplicity and the need 
for perhaps a review of some of the existing documents that we 
are asked to sign but I am not sure that this agency gets 
    This bill would assume that businesses and their customers 
are eager to pay more for such protection, maybe even a lot 
more, because there are no limits on the burdens to either. 
There are all kinds of reports this new agency could mandate, 
regular and special requests, but there are no limits to how 
often the agency could require those reports, and there is no 
mandate to consider the burden placed on the businesses to 
produce these reports. The preemption provisions really convey 
no preemption at all. In one paragraph, the proposal mandates 
all State laws are preempted but only to the extent that they 
conflict. In the next, the legislation permits a State law to 
supersede federal law if the new agency determines the State 
law is more protective. That seems to be almost in direct 
opposition to the prior paragraph. What if a company is 
compliant with the federal law, but while the agency hasn't yet 
determined whether a state law is more protective, the attorney 
general believes it is and brings action against the business 
for a violation, is that company liable for its violations of 
State law without any notice? This would seem to exacerbate the 
decisions but rather by making certain that the products 
themselves don't become the source of the trouble.
    I see my time is about to expire, Mr. Chairman. I have 
another page and a half of written commentary. Simply put me 
down as extremely doubtful about the positive impact of this 
legislation. I think we would be better served on this 
committee and your subcommittee to go in and reform existing 
authority, clarify the differences between existing regulatory 
agencies, and if there is something that has really fallen 
through the cracks, try to figure out one of the existing 
agencies like the FTC and see if we couldn't give them explicit 
authority in that area that needs reinforcing.
    With that, Mr. Chairman, I yield back.
    Mr. Rush. The gentleman from Texas, Mr. Green, for 2 
minutes for opening statement.


    Mr. Green. Mr. Chairman, thank you for holding this timely 
hearing to examine the Administration's proposal to create a 
new agency that would consolidate and be responsible for 
consumer protection with regard to financial products and 
services. After the events of last year, there should be no 
doubt that Congress needs to act to further protect consumers 
with regard to financial regulation.
    This subcommittee has already taken steps to address this 
by moving forward legislation, H.R. 2309, the Consumer Credit 
and Debt Protection Act, to give the Federal Trade Commission 
additional powers to better address consumer credit and debt 
issues. It was widely agreed in the hearings that the 
legislation with the added authority H.R. 2309 would provide 
the FTC, it should take a broader and more effective role in 
consumer financial protection.
    With regard to the new tools this proposal would give the 
FTC, the Administration has addressed many of the problems that 
have hamstrung the Commission from taking steps to implement 
additional financial consumer protections equally with regard 
to the FTC rulemaking process. Magnuson-Moss procedures are 
lengthy and cumbersome and can prevent the FTC from taking 
action on widespread problems in a timely and efficient manner, 
so I strongly support the provision in the Administration 
proposal to grant the Commission authority to conduct 
rulemaking under the Administrative Procedures Act. The 
proposal also follows 2309 granting the FTC authority to seek 
civil penalties for any violations of section 5 of the FTC Act 
which would provide a great deterrent to would-be actors.
    The portions of the proposal I am less certain about, 
however, would move nearly all the FTC's consumer protection 
authority for financial practices to the newly created Consumer 
Financial Protection Agency. I do not disagree that additional 
law enforcement is a good thing for the consumers. My main 
concern is, we are adding a new enforcement regime that is 
siphoning off authority from our Nation's primary consumer 
protection agency when that agency is more than capable of 
doing the job given the necessary tools and funding. Many of 
the consumer protection functions the new agency would be 
responsible for would be moved from other agencies and 
departments that do not have consumer protection as their 
primary function. However, this is not the case with the FTC.
    I look forward to hearing from our witnesses on why the 
Administration believes the FTC should not continue these 
roles, and again, Mr. Chairman, I thank you for the timeliness 
of the hearing. I look forward to exploring with regard to this 
bill and look forward to the best paths to protect consumers.
    Mr. Rush. The Chair thanks the gentleman. Mr. Pitts is 
recognized for 2 minutes for the purposes of opening statement.


    Mr. Pitts. Thank you, Mr. Chairman. Thank you for holding 
this important hearing on the Administration's proposal to 
create a new agency responsible for consumer protection.
    I think we all agree that we need strong consumer 
protection measures. The recent housing and credit crisis our 
country has faced makes this abundantly clear. We must do this 
prudently, though, avoiding the mistakes of the past. It seems, 
however, the proposal we have before us creates yet another 
divided system of regulation, making room for gaps in 
oversight. We saw the effects of divided regulation at Fannie 
Mae and Freddie Mac where two regulators meant less regulation, 
not more.
    The proposed new agency would also have the authority to 
set prices rather than allowing costs to be determined by 
consumers in the marketplace. Everything from ATM fees, check 
overdraft fees and late payment fees for credit cards would 
fall under the purview of this new agency. Instead of adding 
layers of bureaucracy to financial regulation and intervening 
in the marketplace, things we have tried in the past, we should 
work to bring transparency and consumer choice to our markets.
    Consumer financial protection is a worthy goal. 
Unfortunately, increasing the layers of bureaucracy in the 
financial industry has not protected consumers in the past and 
I see no reason why it will this time around. Again, we all 
desire effective and efficient enforcement of consumer 
protection laws. It is my hope that this committee moves 
forward in a wise and careful manner with increased 
transparency and consumer choice as their primary goals.
    I look forward to hearing from our distinguished witnesses. 
Thank you, and I yield back.
    Mr. Rush. The Chair now recognizes the gentleman from 
Texas, Mr. Gonzalez, for 2 minutes for the purposes of opening 
    Mr. Gonzalez. I will waive opening.
    Mr. Rush. The Chair now recognizes the gentlelady from 
California, Ms. Matsui, for 2 minutes.


    Mrs. Matsui. Thank you, Mr. Chairman, and thank you for 
calling today's hearing. I applaud your leadership in 
addressing this important issue. I would also like to thank the 
witnesses for joining us today.
    In today's economic recession, many families in home 
district of Sacramento are struggling to make ends meet. I have 
heard countless stories of people struggling to keep their 
homes, their jobs and their way of life. California and in 
particular my constituents in Sacramento have been greatly 
impacted by the economic crisis. Many of my constituents were 
and continue to be victims of predatory home loan lending, 
unfair credit card practices, payday loans and other forms of 
unscrupulous business practices.
    Just recently, the President signed into law credit card 
reform legislation to regulate unfair credit card practices. 
The ink is hardly dry. The companies are already trying to find 
ways to arbitrarily raise credit card interest rates and fees 
on consumers. Struggling homeowners are also seeking assistance 
to keep their homes but continue to be tricked into contacting 
scam artists who just so happen to be the same crowd that 
initially steered homeowners into subprime loans. This is also 
occurring as job losses mount, foreclosures continue to rise 
and Americans are increasingly turning to other forms of credit 
to make ends meet. It is clear that consumers are not being 
properly protected from unfair and deceptive financial 
practices. When is enough enough?
    The President's proposal to create a new financial consumer 
protection agency could be the answer that American consumers 
are seeking but it must be done in a thoughtful way to ensure 
consumers are protected from fraudulent activity. We must make 
sure any new agency has real authority and just as much bite as 
it has bark. Consumers need to feel protected and have 
confidence in our financial system. Right now it is clear that 
they do not.
    I thank you, Mr. Chairman, for holding this important 
hearing today and I look forward to working with you and the 
committee on this issue moving forward. I yield back the 
balance of my time.
    Mr. Rush. The Chair thanks the gentlelady. The Chair now 
recognizes the gentleman from Nebraska, Mr. Terry, for 2 
    Mr. Terry. Thank you, Mr. Chairman. I will try to be quick.
    I think the fundamental premise of this bill is that the 
FTC, the entity in charge of protecting consumers, has 
evidently been an abysmal failure. I don't agree with that 
premise. I think the issue should be, how do we make sure that 
the FTC is properly empowered to protect consumers and that 
should be what we are working for as opposed to stripping away 
whatever jurisdiction they have over protecting consumers and 
creating some monolithic new government agency in replace of 
what already exists.
    So I am very skeptical of this process or this bill and I 
look forward to hearing from our witnesses so we can determine 
if FTC is capable of doing what they have been doing and 
whether or not this bill is even necessary. So I yield back.
    Mr. Rush. The Chair recognizes the gentlelady from Ohio, 
Ms. Sutton, for 2 minutes.


    Ms. Sutton. Thank you, Chairman Rush, and thank you for 
holding today's very important hearing on the newly proposed 
Consumer Financial Protection Agency.
    As Elizabeth Warren aptly stated in describing the need for 
an agency like this, ``It is impossible to buy a toaster that 
has a one in five chance of bursting into flames and burning 
down your house but it is possible to refinance an existing 
home with a mortgage that has the same one in five chance of 
putting the family out on the street, and the mortgage won't 
even carry a disclosure of that fact to the homeowner.'' 
Unfortunately, many people in my district who were preyed upon 
by so many unscrupulous companies, people know this all too 
    The well-known and tragic case of one of my constituents, 
Addie Polk, is a shocking example of a financial product that 
not only caused someone to almost be homeless but caused 
someone to attempt to take their own life. At the age of 86, 
Ms. Polk was given a new 30-year mortgage on a house she 
already owned and for an amount greater than the value of her 
house. Let me say that again. At the age of 86, Ms. Polk was 
given a new 30-year mortgage on a house she already owned and 
for an amount greater than the value of her house. Less than 4 
years later, Ms. Polk, probably of no surprise to the person 
who sold the mortgage to her, began to have trouble making her 
payments and her house fell into foreclosure. Feeling trapped 
and without options, Ms. Polk shot herself rather than lose the 
house she lived in for 40 years. No one ever should be in Ms. 
Polk's position. Now is our chance in honor of Ms. Polk and 
countless other Americans who have found themselves the 
unfortunate owners of financial products with indecipherable 
terms, smoke-and-mirror-like provisions and gotcha fees to 
truly support strong consumer protection.
    I look forward to hearing from the panel about how we make 
sure we provide the needed protection, and I yield back.
    Mr. Rush. The Chair thanks the gentlelady. The Chair now 
recognizes the gentleman from Georgia, Dr. Gingrey, for 2 
    Mr. Gingrey. Mr. Chairman, I thank you, and I thank you for 
calling the hearing and welcome back Jon Leibowitz and 
Honorable Barr, the assistant secretary of financial 
    I associate my remarks really with what the gentleman from 
Nebraska on our side just said, Mr. Terry. Here we are creating 
a whole new federal government bureaucracy when we have one 
already that is doing a heck of a job as it certainly seems to 
me and I think most members on this panel. So the question 
becomes, you know, why, to use a medical expression, throw the 
baby out with the bathwater if the FTC is doing the right and 
proper job and the right and proper oversight and all of a 
sudden we come in and spend more federal dollars, as the 
gentleman from Kentucky was talking about earlier, by creating 
a whole new federal bureaucracy. So again, I am happy to hear 
from the witnesses and maybe they can explain that. Hopefully 
they will explain that.
    But I think this is something that we need to look at very, 
very carefully as we just continue to create one more or 
consider creating one more government bureaucracy at a time 
when we are running billions of dollars of deficit year after 
year after year. And with that, Mr. Chairman, I will yield 
    Mr. Rush. The Chair recognizes the gentlelady from Florida, 
Ms. Castor, for 2 minutes.


    Ms. Castor. Thank you, Chairman Rush, for calling this 
critically important hearing on the Obama Administration's 
proposal for a Consumer Financial Protection Agency.
    Last Congress, in the wake of widespread concerns about 
toxic lead in paint on children's toys and other toxic consumer 
products, this subcommittee originated legislation to 
reorganize and strength the Consumer Product Safety Commission, 
and last year as the economy plunged, there were some analogous 
terms being used to describe some of the mortgage and 
investment products. We heard about toxic assets, poisoning 
banks balance sheets and toxic mortgage products, leaving 
millions of our neighbors facing foreclosure.
    Predatory lenders wreaked havoc on my community and the 
subsequent significant decline in property values has affected 
millions of folks in my home State, and unfortunately consumers 
could not count on State oversight of these mortgage brokers. 
In my home State, they just turned a blind eye and I recommend 
the Miami Herald expose that documented how many convicted 
felons entered into the subprime mortgage loan marketing 
    So this financial crisis has taught us that in order to 
maintain a healthy economy, effective regulation must focus on 
protecting consumers from abusive, deceptive and unfair lending 
practices. The FTC has the enforcement authority to go after 
only non-depository lending institutions that deal unfairly 
with their borrowers but the abuses that led to the financial 
crisis spread deep into the banking system. So in light of the 
need for more-effective regulation of all lending institutions, 
depository and non-depository, the Obama Administration has 
rightly proposed a reorganization, and I think all of us can 
agree that regulation of financial institutions must be 
improved to better protect consumers. However, we must be aware 
not only of the impact of granting authority to a new Consumer 
Financial Protection Agency but also the consequences to 
consumers of the changes that have been proposed to the FTC. 
The Administration's proposal would reshape the FTC by shifting 
authority over consumer credit but also by streamlining its 
rulemaking process and allowing it to assess civil penalties on 
bad actors.
    So I look forward to your testimony on what this new FTC 
might look like and how its ability to achieve its mandate of 
consumer protection will be affected. I yield back.
    Mr. Rush. The Chair now recognizes the gentleman from 
Louisiana, Mr. Scalise, for 2 minutes.


    Mr. Scalise. Thank you, Mr. Chairman. I want to thank you 
and the ranking member for having this hearing.
    The Administration is proposing yet another new federal 
agency with vague, sweeping authority. We all know there have 
been bad actors in our financial system that took advantage of 
consumers and contributed to the current economic crisis. 
Unfortunately, many of the problems that brought on today's 
financial crisis are not even being addressed in this bill. The 
proposed legislation does not address the real bad actors in 
our financial systems, Fannie Mae and Freddie Mac and other 
institutions that engaged in subprime lending and relaxing 
their standards to encourage more people to take out loans they 
could not afford. Those warning signs were brought before 
Congress for years and yet many of the same people in this 
Administration and in the leadership in this Congress are the 
same people who opposed the very reforms that would have 
prevented this financial crisis from happening in the first 
    This proposed new agency represents yet another step in the 
federal government trying to run all aspects of our lives. The 
government is running banks and car companies with disastrous 
results. The so-called stimulus bill, which spent $787 billion 
of money we don't have, is now being recognized even by this 
Administration as a failure that didn't create any jobs that 
were promised. There are even some in this Administration 
floating the reckless idea of yet another massive spending bill 
since the last one didn't work. Scores of experts predict that 
this Administration's cap-and-trade energy tax will cost us 
millions of jobs while increasing electricity rates on all 
American families. We are debating a bill that proposes a 
government takeover of health care, which has been tried and 
failed in other countries to the point that sick people with 
the means in those countries come here to get their health care 
because government-run health care leads to rationing 
everywhere it has been tried. Now we have this bill to create a 
consumer czar. Enough is enough. Let us fix the problems that 
exist and make reforms to federal agencies that are causing 
these problems rather than adding yet another layer of 
government bureaucracy that simply covers up the root causes of 
the problem while punishing those who play by the rules.
    I look forward to hearing the comments from today's panel 
and would like to hear how the Administration's plan impacts 
the FTC. In his testimony, Chairman Leibowitz speaks to the 
successes the FTC has had in protecting consumers in financial 
matters, which begs the question why we need a new agency with 
all these sweeping new powers and spends more money that we 
don't have. I yield back.
    Mr. Rush. The Chair now recognizes the gentlelady from 
Colorado, Ms. DeGette.
    Ms. DeGette. I will waive opening.
    Mr. Rush. The Chair thanks the gentlelady. The Chair 
recognizes the gentleman from Ohio, Mr. Space, for 2 minutes.
    Mr. Space. I will waive.
    Mr. Rush. The Chair thanks the gentleman. The Chair 
recognizes now the gentleman from North Carolina, Mr. 
Butterfield, for 2 minutes.


    Mr. Butterfield. Thank you, Chairman Rush, for holding this 
very important hearing and I especially want to thank the 
witnesses for their testimony today.
    Mr. Chairman, I hope this hearing will provide an 
opportunity for the subcommittee to address some concerns that 
we have about the proposed agency, particularly the loss of 
jurisdiction on the part of the Federal Trade Commission. Now, 
my colleagues are right, Mr. Chairman, there are many actors to 
blame for the current state of our economy. Unscrupulous 
subprime mortgage lenders and speculators and the like have all 
contributed to the financial meltdown. Of deep concern and 
rightfully so is the regulatory patchwork of federal agencies 
charged with regulating all aspects of financial institutions. 
For example, depository institutions such as banks and credit 
unions are overseen by many different agencies. Conversely, all 
non-depository institutions are overseen by one agency, and 
that is the FTC. The FTC has done a good job, and I think we 
can agree all on that, at regulating these players and I am 
concerned that reducing FTC oversight as part of the creation 
of the Consumer Financial Protection Agency may do more harm 
than good. While I am pleased that the Administration's 
proposal seeks to strengthen the FTC's rulemaking and 
enforcement abilities in areas unrelated to financial products, 
I believe that it is extremely important that the FTC maintain 
strong non-depository institution oversight.
    The Administration's proposed agency would seek to achieve 
four important objectives aimed at bolstering consumer 
confidence in financial institutions and transactions, and 
these objectives include ensuring consumer education and 
understanding of these financial products, better protecting 
consumers from unfair and deceptive practices and 
discrimination, ensuring consumer financial services operate 
fairly, making certain that underserved communities like my 
district have increased access to financial services. These are 
excellent objectives and I strongly support the goals of the 
proposed agencies but I want to be certain that the creation of 
a new regulatory agency will not place undue and unnecessary 
strains and burdens on existing federal regulatory framework 
that may still be capable of meeting those same goals and 
    And so, Mr. Chairman, this hearing today is vitally 
important. I look forward to hearing the testimony of the 
witnesses and I thank you for the time.
    Mr. Rush. The Chair thanks the gentleman. The Chair sees no 
other members who have opening statements.
    Now it is my pleasure to introduce panel one. This is a 
two-panel hearing, and panel one consists of the Hon. Michael 
Barr, who is the assistant secretary for financial institutions 
at the Department of Treasury. We want to welcome Mr. Barr back 
to this committee once again. And also joining him at the 
witness table is one who is very familiar to this subcommittee, 
the Hon. Jon Leibowitz, who is the chairman of the Federal 
Trade Commission, and Chairman Leibowitz, we certainly welcome 
you back again to this subcommittee. It is the practice of this 
subcommittee to swear in the witnesses, so I would like each of 
you to stand and raise your right hand.
    [Witnesses sworn.]
    Mr. Rush. Let the record reflect that the witnesses have 
answered in the affirmative. Now we want to recognize beginning 
with Mr. Barr the witnesses for an opening statement. You have 
5 minutes or thereabouts for your opening statement.


                   TESTIMONY OF MICHAEL BARR

    Mr. Barr. Thank you, Mr. Chairman, and thank you, Ranking 
Member Radanovich for providing me with this opportunity to 
testify about President Obama's proposal to establish a new 
strong financial regulatory agency charged with just one job: 
looking out for consumers across the financial services 
    As Secretary Geithner has said, protecting consumers is 
important in its own right, and also central to safeguarding 
our financial system as a whole. We must restore honesty and 
integrity to our financial system. That is why President Obama 
personally feels so strongly about creating this new Consumer 
Financial Protection Agency.
    I understand the committee's concerns that have been 
expressed today with respect to boundary issues, jurisdictional 
issues and the role of the FTC. I think as we work together on 
those issues, it is important to keep in mind the central goal 
we all share: having one agency for one marketplace with one 
mission, protecting consumers. The new agency will have the 
authority and the resources it needs to set consistently high 
standards for banks and non-bank financial providers alike, to 
put an end to regulatory arbitrage, to put an end to 
unregulated corners of our financial system that inevitably 
weaken standards across the board. This agency will be 
accountable for its mission yet independent. It will have a 
wide range of tools to promote transparency, simplicity and 
fairness. It will act in a balanced manner, considering costs 
as well as benefits, in a way that products consumers from 
abuse while ensuring their access to innovative, responsible 
financial services. It will be able to reduce regulatory burden 
while helping consumers, for example, by creating one simple 
mortgage disclosure form for all consumers to use. It will not 
set prices for any service.
    The federal government has failed to date in its most basic 
regulatory responsibility, utterly failed to protect consumers. 
The deep financial crisis that we are still in, let me 
emphasize, that we are still in today, revealed the alarming 
failure of our existing regime to protect responsible consumers 
and to keep the playing field level for responsible providers. 
Instead of leadership and accountability, we have had a 
fragmented system of regulation designed for failure. Bank and 
non-bank financial service providers compete vigorously in the 
same consumer markets but are subject to two different and 
uncoordinated federal regimes, one based on examination and 
supervision, the other on after-the-fact investigation and 
    Less-responsible actors are willing to gamble that the FTC 
and the States lack the resources to detect and investigate 
them. This puts enormous pressure too on banks, thrifts and 
credit unions to lower their standards to compete and on their 
regulators to let them, and no financial provider should be 
forced to choose between keeping market share and treating 
consumers fairly. This is precisely what happened in the 
mortgage market. Independent mortgage companies peddled risky 
mortgages in misleading ways to borrowers who could not handle 
them. To compete, banks and thrifts and their affiliates 
relaxed their standards on underwriting and sales and their 
regulators were slow to act. The consequences for homeowners 
were devastating and our economy is still paying the price.
    Fragmented regulation facilitated abusive credit cards. 
Tricks and traps enabled banks to advertise selectively low 
annual percentage rates to grab market share and boost income. 
Other banks could not compete if they offered fair credit cards 
through transparent pricing and consumers ended up with 
retroactive rate hikes and unfair terms. The list goes on and 
on. Credit unions and community banks with straightforward 
credit products struggled to compete with less-scrupulous 
providers who appeared to offer a good deal and then pulled a 
switch on the consumer.
    Our federal agencies do not currently have the mission, 
structures and authority suited to effective consumer 
protection in consumer financial markets. The FTC has no 
jurisdiction over banks and it does not have supervisory and 
examination authority to detect and prevent problems before 
they spread throughout the market.
    Mr. Chairman, I see that I will be significantly over my 
time. Could I take several additional minutes?
    Mr. Rush. Yes, you are so approved.
    Mr. Barr. Thank you.
    Mr. Rush. You are on the ``thereabouts'' part of your 
    Mr. Barr. Thank you.
    Bank regulators have supervisory powers over banks but 
their primary mission is to ensure that banks are safe and 
sound and not to protect consumer. Consumer protection 
supervision is never going to share the front seat with safety 
and soundness. Tinkering with the consumer protection mandates 
or authorities of our existing agencies cannot solve these 
structural problems. We need a structural solution. We need one 
agency for one marketplace with one mission: to protect 
consumers of financial products and services and the authority 
to achieve that mission. That is the agency we are proposing to 
    The CFPA will have the sole mission of protecting 
consumers. It will write rules, supervise institutions, examine 
them and lead enforcement efforts for the whole marketplace. 
The implications for our proposal for consumer protection and 
competition are enormous. The proposal will bring higher and 
more consistent standards, stronger, faster responses to 
problems, the end of regulatory arbitrage, a level playing 
field for all providers, and more-efficient regulation. Our 
proposal gives the agency the power to strengthen mortgage 
regulation across all lenders and brokers. It can strengthen 
disclosure, make it easier for consumers to choose simple 
products, prevent lenders from paying yield spread premiums 
that pay brokers more if they deliver loans with higher rates 
than consumers qualify for. The agency would implement credit 
card protections and update these protections as markets 
change, and it would set high national standards for licensing, 
bonding, monitoring of all non-bank financial service 
    Let me say the FTC is a good agency. The chairman and I are 
good friends. Our legislation does not affect the jurisdiction 
of the FTC over the vast array of non-financial markets and 
actually strengthens its ability to police those markets. To 
increase the FTC's ability to protect consumers, we propose 
that the FTC be able to adopt rules to prohibit unfair or 
deceptive acts or practices with standard notice and common 
rulemaking, to obtain civil penalties when companies act in an 
unfair or deceptive way and to pursue those who substantially 
aid and abet providers that commit unfair or deceptive 
    The Administration also supports increased resources for 
the FTC so that consumers can be better protected across all 
markets. As for financial markets, the FTC would continue to 
have authority under the FTC Act to pursue financial fraud 
without delay including on foreclosure rescue and loan 
modification scams. The FTC will retain authority for writing 
rules under the Telemarketing Sales Act and concurrent 
responsibility for enforcing them over financial products and 
services, and the FTC would retain primary authority in the 
area of data security for non-bank entities. In addition, the 
FTC would have backstop authority to enforce the same consumer 
credit statutes that it can enforce today. Under that 
authority, the FTC, or frankly, a bank regulator, could if it 
becomes aware of a possible law violation refer to the new 
agency, and if the new agency doesn't act, take action itself. 
That same referral requirement will apply to the bank 
regulators, and it is designed to ensure a consistent federal 
approach to interpreting and enforcing our consumer protection 
    Finally, let me just say this. It is time to put consumer 
protection responsibility in an agency with a focused mission 
and comprehensive jurisdiction over all financial services 
providers, banks and non-banks alike. It is time for a level 
playing field for all financial services providers. It is time 
for an agency that consumers and their elected representatives 
can hold fully accountable and responsible for consumer 
protection in all financial sectors, and it is also long past 
time for a stronger FTC. The President's legislation fulfills 
these needs.
    Thank you for this opportunity to discuss the proposal, the 
additional time you have graciously given me, and I will be 
happy to answer any questions at the conclusion of our opening 
    [The prepared statement of Mr. Barr follows:]

    Mr. Terry. Mr. Chairman, I would like to make a unanimous 
consent request that the gentleman from the FTC have 9 minutes.
    Mr. Rush. The chairman of the FTC will take whatever time 
he may consume.


    Mr. Leibowitz. Thank you so much, Mr. Chairman.
    Chairman Rush, Ranking Member Radanovich, Vice Chair 
Schakowsky, members of the subcommittee, I appreciate the 
opportunity to be here to discuss consumer protection 
regulatory reform including President Obama's far-reaching 
proposal to enhance consumer protection through the creation of 
a new Consumer Financial Protection Agency, the CFPA.
    As all of us in this room know and as many of you on the 
panel articulated and as Mr. Barr also effectively articulated, 
the need for reform has become as painfully clear as the 
distress the consumers are now experiencing in these difficult 
economic times from a failure of regulation. All of us on the 
Commission support the President's goal of elevating consumer 
protection, although some of us have different views as to the 
best means to that end.
    For my part, this initiative, which enhances the resources 
and authority for the FTC and which creates the CFPA, is 
clearly preferable to the status quo. In any case, the 
Commission will continue to vigorously protect consumers of 
financial services while this proposal is under discussion and 
while the CFPA if it is enacted is ramping up. Beyond that, we 
look forward to working collaboratively with the new agency.
    In the last 5 years, we have brought more than 100 
financial consumer protection cases and have recovered nearly 
half a billion dollars in the last decade for consumers. Since 
I last testified before this subcommittee in late March, we 
have continued aggressively pursuing financial predators, 
bringing 14 new cases in this area. In fact, today we are 
announcing distribution of an additional $8 million in consumer 
redress checks to Americans who were deceived by deceptive 
mortgage origination fees, and on June 1st, using the new APA 
rulemaking authority that you gave us in the omnibus 
appropriations bill, we began a rulemaking addressing mortgage 
modification and foreclosure rescue scams which have become, as 
all of you know, all too common recently, and also addressing 
the entire mortgage lifecycle, advertising, origination, 
appraisals and servicing. Simply put, this work will help 
ensure that consumers aren't ripped off by bogus mortgages or 
false advertising.
    Mr. Chairman, President Obama emphasized the importance of 
giving the FTC tools and increased resources, the ones that we 
need to stop practices that harm consumers and violate the law. 
First, the proposal grows our agency, giving us the staff that 
we need to do the job that you all want us to do. Currently we 
have just over 1,100 FTEs. That is down from about the 1,800 
FTEs we had in the late 1970s and early 1980s, despite a 
considerable growth in the U.S. population, and in our own 
responsibilities including enforcing canned spam, Do Not Call, 
COPPA, the Children's Online Privacy Protection Act, Gramm-
Leach-Bliley and other statutes. Second, the proposal provides 
the FTC with APA notice and comment rulemaking which is used by 
virtually every other agency in the federal government. It 
would strengthen the Commission's ability to address widespread 
problems more quickly. Third, the proposal authorizes the FTC 
to obtain civil penalties for violations of section 5 of the 
FTC Act. This new power we believe would help deter would-be 
violations and help protect consumers more effectively. I think 
something like 47 State attorneys general have fining 
authority. And by the way, fining authority was originally 
proposed by Casper Weinberger when he was chairman of the 
Federal Trade Commission under President Nixon in the early 
1970s. Finally, the proposal authorizes the FTC to go after 
those who aid and abet others who violate the law.
    We would also urge Congress as you consider this 
legislation to give both the FTC and the CFPA the ability to 
bring civil penalty actions on our own, which would put both of 
us on equal footing with other consumer protection agencies 
like the SEC and the CFTC and not make us as we do currently 
have to wait for the Justice Department to clear our going 
    Now, we expect that as with any bold and complex new 
initiative clarifications will be worked out as the legislative 
process moves forward, but from my perspective, the President's 
goal of streamlining the overall system for protecting 
consumers from financial abuse is more than commendable, and 
eliminating the balkanization of consumer protection oversight 
over non-banks and banks, as Mr. Barr has alluded to, is 
laudable and very, very critical.
    We do have some concerns, however, about the draft 
legislation or the legislation as it was initially drafted, 
although I am optimistic that we can work these out as the 
legislative process moves forward. So for example, the proposal 
states that the FTC would have backstop authority but the draft 
legislation imposes a review period that could require us to 
wait 120 days before filing certain cases. We also believe it 
would be helpful to make definitions of the proposal's terms 
such as credit and financial activity clearer, and let me tell 
you why with an example. So suppose the FTC finds a 
telemarketer making illegal robo calls to millions of consumers 
on the Do Not Call Registry urging them to purchase something 
like advanced fee credit cards which are, I wouldn't say per se 
illegal but almost always, let us say often illegal, and 
suppose that a payment processor participated in the fraud. It 
is critical that we be able to bring action against all of the 
malefactors expeditiously but it is unclear under this draft 
whether we would have the jurisdiction over the telemarketer 
offering the financial products or the payment processor, and 
if so, whether the 120-day waiting period would come into play. 
Now, we have made much progress with Treasury on several of 
these boundary issues and we are continuing to make progress 
but getting this right and allowing us to put an immediate halt 
to harmful practices is crucially important.
    Having said that, with this committee involving in writing 
any legislation, I am confident that this very, very important 
initiative will be considered, discussed, clarified and refined 
with all open issues resolved in favor of American consumers. 
We understand, of course, that under this proposal rulemaking 
authority and primary enforcement responsibility for financial 
products and services would go to the new agency but we will 
continue to aggressively enforce these laws as a cop on the 
beat where necessary as well as each and every other consumer 
protection law within our jurisdiction. We look forward to 
working with the Administration and Congress to reach a plan 
that best protects American consumers, and I thank you for your 
    [The prepared statement of Mr. Leibowitz follows:]

    Mr. Rush. The 
Chair thanks the gentleman, the chairman of the FTC, and the 
Chair now recognizes himself for 5 minutes for the purposes of 
questioning the witnesses.
    With the continuation of the financial crisis, we see more 
and more scam artists preying on desperate consumers seeking to 
reduce their debts and to keep their homes out of foreclosure 
or from selling their homes at a loss, and I am concerned about 
this proposal in that this new agency would not do enough in 
the short term because we all know that it takes some time for 
a new agency to rev up, to get going and get running. Another 
option that the Administration might have considered is 
proposing that the FTC take on this essential role. By 
increasing its staff and authority, it is conceivable that FTC 
could be taking on these issues within weeks or months rather 
than years. Mr. Barr, did the Administration consider other 
options other than creating a new agency?
    Mr. Barr. Yes, Mr. Rush. Let me just say, Mr. Chairman, 
that with respect to the transition issues, our view is that 
the FTC should act aggressively as it is doing now under the 
chairman's leadership to continue to enforce the law, be a cop 
on the beat, be quite aggressive in this area, and we are at 
the same time that we are pushing to create the new agency 
pushing on all the existing agencies working closely with them 
to do everything we can under existing authority. So I don't 
think there is any sense that anybody thinks we should slow 
down, rather, quite the opposite.
    With respect to other options, the Administration 
considered a wide range of options with respect to consumer 
protection, and our basic view was that the existing system was 
fundamentally broken and we needed a quite large, significant 
change to create one agency whose sole job was protecting 
consumers across the financial services marketplace. I think 
that the chairman is deeply aware of the ways in which 
consumers have been abused and neglected for quite a long time 
and the existing structure is just inadequate to meet the 
needs. So our strong view, the President's personally strong 
view was that we needed a new financial agency with that core 
mission that was strong and could achieve the goals that I 
think the chairman articulated so eloquently in the opening 
    Mr. Rush. Chairman Leibowitz, during this interregnum 
between this bill becoming law and this new creation actually 
taking place, that is going to put a lot more pressure on the 
FTC. Do you have the requisite resources and personnel? How 
will the FTC function during this interregnum?
    Mr. Leibowitz. I would say that during the sort of 
interregnum period if the legislation is enacted, we are going 
to work very closely with the new agency. I think the period 
for transfer is somewhere between 6 and 24 months, depending on 
how quickly they are ready to ramp up. We are going to continue 
to bring cases, and I think that was always the notion. I do 
think that going forward, you know, we could use more 
resources, and we talked about this before in hearings, and I 
do think that even after the agency is created, assuming it is, 
that it would be useful for us to have concurrent enforcement 
authority so that if we are going after--you know, the bad guys 
don't always act in silos, as Mr. Barr knows, as all of you 
know. You know, sometimes they are violating the Do Not Call 
rule and they are violating reg Z or reg E which would go over 
to the new agency, and so I think it is important going forward 
that when there is ongoing consumer harm that we are able to 
sort of jump over the kind of legislative, the new legislative 
fence to help consumers and not have to wait potentially 120 
days. I think we are working through a lot of these issues, 
making a lot of progress between our staffs and ourselves.
    Mr. Rush. The Chair sees that his time is up. The Chair now 
recognizes the ranking member for 5 minutes.
    Mr. Radanovich. Thanks, Mr. Chairman, and welcome, 
gentlemen, to the panel. I am pleased to see you here today.
    Mr. Leibowitz, welcome back to the committee. I know you 
have been here a number of times already and probably will be 
more in the future. I have to think you are doing a bit of a 
dance because you stand to lose some jurisdiction in the FTC, 
and it seems to me that you are getting, at least under the 
proposal, getting more money and authority to do less, and I 
want to know what your reaction to that statement is, given the 
fact that the FTC has dual jurisdiction, and that is, two 
missions to ensure competition but also consumer protection.
    Mr. Leibowitz. Well, Mr. Radanovich, let me just start by 
saying I hope that familiarity is not breeding contempt here.
    Mr. Radanovich. Not at all.
    Mr. Leibowitz. Look, you know, if you read through our 
written testimony, you can sort of see it is a complex matrix 
within the Commission about what we support and what we don't. 
I do think from our perspective if you create this--from my 
perspective, if you create this new agency and you also give us 
more resources and authority, from the perspective of consumers 
they will be getting a better deal because we will be able--we 
will continue to have a backstop authority with respect to 
financial matters and we are going to be able to concentrate 
and just do more for consumers. As you know, because we have 
talked about this, we spent a lot of time leveraging----
    Mr. Radanovich. But if I may, you are losing jurisdiction.
    Mr. Leibowitz. We would be losing jurisdiction and----
    Mr. Radanovich. How does that loss of jurisdiction deal 
with your two missions of ensuring competition and providing 
consumer protection?
    Mr. Leibowitz. Well, I would say on the competition side, 
we wouldn't be losing jurisdiction. We would still retain that 
jurisdiction. On the consumer protection side, we would be 
losing jurisdiction to this new agency but this new agency 
would be another cop on the beat protecting consumers, and 
then--and we would also be losing personnel, and we have 
already lost a few personnel, I would say, to the new agency...
    Mr. Radanovich. But it does seem to me like you are getting 
more money and authority to do less.
    Mr. Leibowitz. Well, we will do more. I mean, we really 
will. It is not a question from our perspective of moving to a 
government--I mean, our guys work extremely hard. They have 
been commended by OPM for always scoring high on sort of 
effectiveness and quality of work, and we will just do more in 
the areas where we have--while retaining backup authority, if 
the proposal goes through, we will do more in the other areas 
of consumer protection and there is plenty to do.
    Mr. Radanovich. Thank you.
    Mr. Barr, welcome to the subcommittee. You know, in Russia 
during the height of communism, it was often talked about the 
fact that there was not a lot of food on the shelves, and when 
you go into stores you might be able to get a loaf of bread, 
but if you wanted sourdough, you probably had to have the 
standard loaf, if you wanted rolls, you got a loaf of bread, if 
you wanted something else, you got a loaf of bread. Tell me 
how--explain to me how you are not doing the same thing in the 
credit markets in the name of consumer protection.
    Mr. Barr. Thank you very much for that terrific question. I 
was smiling as you were describing the example because I spent 
some time in Poland had the same experience where you go to the 
store and there is nothing there and you can actually literally 
go hungry. This agency has nothing to do with that, literally 
nothing to do with that. The new agency----
    Mr. Radanovich. Tell me how you are not doing that though 
in the credit markets, because that is a question I would like 
    Mr. Barr. The new agency is in no way pursuing that kind of 
command and control model. It is in no way pursuing price 
setting. It is in no way saying you can't offer certain kinds 
of products. The new agency under the legislation----
    Mr. Radanovich. And I understand the reason for looking at 
this because we have all experienced this financial crisis but 
doesn't this end up providing consumers with less choice and 
driving up the cost of credit for consumers?
    Mr. Barr. With respect, sir, our strong view is that it 
does not. It continues to provide for financial innovation. 
Consumers can get access to whatever products and services 
providers want to offer. Our basic approach is to improve 
disclosure, reduce regulatory burden, for example, by merging 
authorities so you can have one simple mortgage form at the 
time of disclosure, improve----
    Mr. Radanovich. But weren't there existing authorities that 
have and could and should deal with the current crisis that we 
are in? Doesn't the added restrictions and regulations that you 
are going to be putting on the credit industry will drive up 
the cost of credit to consumers?
    Mr. Barr. I think that the better judgment, sir, again, 
with respect, is that the current system we have had, the 
status quo on consumer protection was a dismal failure and I 
think we have evidence all around us of that, and our view was, 
both for banks and for non-banks, for consumers and for 
households, the system failed. If you talk to, and I am sure 
you do, the community bankers in your community who had to 
compete against unregulated providers who were sucked into 
offering products----
    Mr. Radanovich. Actually competing against large banks for 
TARP money, but--thank you very much, Mr. Chairman. I yield 
    Mr. Rush. The Chair now recognizes the gentlelady from 
Illinois, the vice chair, Ms. Schakowsky.
    Ms. Schakowsky. Thank you. Mr. Barr, could you describe how 
we potentially would have been in a different situation today 
had this agency been in existence as the current problems 
started to unroll?
    Mr. Barr. Yes. I think we would have been in, could have 
been in a fundamentally different situation if we had an agency 
that could set the rules of the road for everybody to follow, 
if we had an agency that could say to mortgage brokers, you 
can't get paid more for offering riskier, higher-priced, more 
confusing products than a basic product, if we had a rule that 
said mortgage brokers, you have a duty of care, you have to do 
best execution for a mortgage so you can't offer the mortgage 
that is the best deal for the broker, you are supposed to offer 
a mortgage that is the best deal for the consumer, if we had a 
duty that said mortgage brokers have to have some skin in the 
game, they need to be paid over time, securitization trusts 
have to have skin in the same so that you don't have a system 
where all the bad mortgages are made up front and eventually 
sold to the investor at the other end with nobody in the chain 
having responsibility, nobody having any of their own capital 
at risk. So we could have had fundamental change. We could have 
had a fundamentally different situation in which consumers were 
protected at the front end and the financial system was 
protected all the way through.
    Ms. Schakowsky. And you are saying without any change in 
legislation beyond the creation of this agency, that you would 
have the authorities then under the bill, which I haven't read 
thoroughly yet, you would be able to have done all those 
    Mr. Barr. Yes. This agency would be granted the authority 
to do all the things that I just described.
    Ms. Schakowsky. Did you want to comment on that, Mr. 
    Mr. Leibowitz. Well, I would just say that one of the 
things that is critical here is APA rulemaking authority, and 
of course, under the new proposal, they will be able to do it 
for non-bank- as well bank-related financial instruments and 
mortgages. And so in the omnibus you gave us, for which we are 
very grateful, APA rulemaking for non-bank mortgages and we are 
going to look at that and we are going to do, I think, a very, 
very good rule, and Mr. Rush, you have legislation that would 
expand our jurisdiction a little bit more but it only goes--it 
is only within the context of non-bank-issued financial 
instruments. So 20 years ago we did a lot of matters relating 
to credit cards and all the credit cards are now, virtually 
every credit card is now issued by a bank. We have no 
jurisdiction there. So I think that is a critical advantage 
from the consumer's perspective of what this new agency might 
    Ms. Schakowsky. And let me just say that while I absolutely 
in theory think pulling it all together in one place is a good 
idea, but, you know, we have seen in the startup of the 
Department of Homeland Security lots of difficulties in pulling 
it all together and making it all happen. The creation of a 
director of national intelligence, certainly in that case many 
of us on the Intelligence Committee see a large bureaucracy 
itself developing, and have some problems with the coordination 
that was actually supposed to happen. How can we be assured 
that this will achieve its goals, achieve it in a timely way 
and not just be another bureaucracy?
    Mr. Barr. Thank you very much. Again, I think that our view 
is, the agencies that have the authority now should 
aggressively use those authorities. Those authorities are 
inadequate to the task. The basic structure of the system was a 
dismal failure. We need to do this. We need to take this 
action. The legislation has tight timelines for transition. 
Treasury has responsibility to make sure that transition 
happens effectively. You can come see me, you can come see 
Secretary Geithner. We are responsible for making sure. You can 
hold us accountable.
    Mr. Rush. The Chair recognizes Mr. Stearns from Florida.
    Mr. Stearns. Thank you, Mr. Chairman. Mr. Chairman, we have 
had a lot of hearings on privacy here in this committee, and 
when I was chairman of the committee we had many hearings on 
privacy, and I think my concern is that if we transfer some of 
the Federal Trade Commission's privacy work to this new CFPA, 
particularly in light of all the expertise that you have, and 
you have been the leading federal agency in the area of 
consumer privacy for all these years, and including financial 
privacy as well as identity theft, information security. So 
with that in mind, what do you feel about this transfer?
    Mr. Leibowitz. Well, I guess I would make a couple points, 
and this committee and you have been leaders in privacy-related 
issues. You know, we will be transferring over a lot of laws. 
We hope to keep sort of a backstop authority that is 
concurrent, and of course, this is the beginning of the 
legislative process. It is not the end and, you know, I see a 
lot of agreement on many things within this committee on ways 
to go forward. The way we read the legislation, it was unclear 
whether issues like data security, privacy would stay with us. 
I think Mr. Barr has represented today, the better reading of 
the proposed statute or the reading of the way the proposed 
statute will move forward is that we will keep issues like 
that, and I think that is very, very important.
    Mr. Stearns. So identity theft, you would still keep?
    Mr. Leibowitz. I think we would keep identity theft.
    Mr. Stearns. And financial privacy?
    Mr. Leibowitz. Financial privacy, I think mostly moves over 
to the new agency. I mean, again, I think that is to some 
extent up to you. I think we would keep the safeguards rule 
under Gramm-Leach-Bliley but a lot of this has to be worked 
through of course during the transition period. We will keep on 
doing this and again we will have backstop authority. And I 
should probably turn this over to Mr. Barr, who is one of the 
true architects of the plan.
    Mr. Stearns. But what you are saying today is that some of 
this is still up for negotiation?
    Mr. Leibowitz. Yes. These boundary issues, that you have 
raised the same concerns that we saw when we got the 
legislation at the end of last week but it seems that it is 
being resolved on many of these boundary issues in favor of 
retaining jurisdiction by the existing Commission, and I assume 
that, you know, as this legislation moves forward, that is what 
this committee would be most interested in, but let me turn it 
over to Mr. Barr.
    Mr. Barr. Just to add to that, the chairman is correct that 
with respect to data security issues, identity issues, 
safeguard red flags, all that would stay at the FTC and the 
parallel authority for that at the bank agencies but the front-
end privacy notices that have to do with disclosure would fit 
in the new disclosure regime of the new Consumer Financial 
Protection Agency.
    Mr. Stearns. So let us say Internet privacy, consumer 
privacy, would that remain with Federal Trade Commission?
    Mr. Barr. Again, with respect to the disclosure aspect on 
the financial side, the disclosure would be unified with the 
disclosure regime at the new financial agency. All the data 
security, identity theft and related issues would remain at the 
FTC and the parallel authorities with respect to banks.
    Mr. Leibowitz. But if you are thinking about core issues 
like spam, spyware, behavioral marketing, we keep all of those. 
You know, there might be some issues about whether we are going 
after a malefactor or a group of malefactors and one of them is 
on the other side of the core new agency's fence, you know, 
right now there's 120-day waiting period, which we are a little 
concerned about from the perspective of consumers, but going 
back to your original point, a variety of issues including sort 
of the core privacy issues we do we will be keeping and 
retaining jurisdiction.
    Mr. Stearns. Well, I think, Mr. Barr, what you should 
realize with all that expertise in the Federal Trade Commission 
we are starting a new federal agency here. You know, I would 
think that as many have pointed out on this side, we are 
worried about a new federal agency, particularly when you have 
an agency that already has the expertise. I think the bill says 
that the cost of development of this new agency is such sums as 
are necessary. Is there any more definitized information you 
can give on what the cost would be for this new federal agency?
    Mr. Barr. I don't at this time have an overall cost 
estimate for the agency or size estimate for the agency. It is 
something we are working on. We will work with the appropriate 
committees on it and with OMB and CBO. We anticipate that the 
agency will be pulling in staff and resources from the existing 
agencies and additionally having new resources required. I 
would be happy to continue to work with you on that question.
    Mr. Stearns. Can you talk about the resources the agencies 
will need besides--I mean, have you identified any of the 
    Mr. Barr. We have begun the process of identifying the 
number of individuals and the other resources the agency would 
need but we are not at a place now where I could give you even 
a reasonable estimate of what additional measures beyond the 
transfer authorities would be required. It is something we are 
working quite hard on.
    Mr. Stearns. I will just close. Mr. Chairman, you might 
think as a subcommittee chair since a lot of the expertise for 
this is already in the Federal Trade Commission and this is a 
new agency, you might--and particularly in your jurisdiction 
here, I think we have to move carefully as Mr. Dingell out, 
developing a brand-new agency. They don't know how much they 
are going to spend, they don't know what resources they are 
going to need, and also they are going to be taking on 
expertise for areas they know nothing about that the Federal 
Trade Commission has years on, so I just wonder, you as the 
chairman, you might want to be very careful and cautious about 
endorsing this new agency without, you know, some more hearings 
on it and try to get more of the stakeholders here, perhaps 
more than we have on the witness list here, to try and get into 
the discussion here. So I thank you, Mr. Chairman.
    Mr. Rush. The Chair thanks the gentleman. The Chair 
observes that there is a vote going on on the floor. There are 
three votes. It is the desire of the chairman that we should 
delay the committee hearing until after the votes are concluded 
and then return. I am not sure what the witnesses' time 
commitments are but it would be very important if you return I 
would say within 15 minutes after the last vote. Then the 
subcommittee will reconvene.
    Mr. Rush. The subcommittee will reconvene. The Chair 
recognizes the fact that there might be members of the 
subcommittee who did not have an opportunity to ask questions 
of our witnesses before we recessed. However, I am very 
cognizant of the witnesses' time and will take this time to go 
into a second round of questions, and if there are members who 
come in who have not asked questions in the first round, then 
the chair will prolong their questioning to 7 minutes.
    So with that, the Chair recognizes himself for 2 minutes of 
additional questions.
    In its White Paper describing the proposed regulatory 
reforms, the Department of Treasury stated clearly that, and I 
quote, ``The FTC shall retain authority for dealing with fraud 
in the financial marketplace.'' Despite this assurance, the 
proposed language appears to weaken FTC's authority in this 
area. FTC will retain the authority to enforce against unfair 
and deceptive acts and practices using the FTC Act. However, 
the FCC could not add any statutory claims such as the Truth in 
Lending Act or the Equal Credit Opportunity Act to a complaint 
without first referring the case to the new agency and waiting 
120 days for that agency to decide if it wants to take the 
case. Chairman Leibowitz, let me ask you, how will this change 
impact the FTC's ability to consume financial problems? Could 
the FTC consume one part of a case while the other is under 
consideration or would you expect that it would simply not 
bother with additional claims? Will the FTC's cases be weakened 
if they only rely on FTC Act claims?
    Mr. Leibowitz. Well, I think, Mr. Chairman, that is an 
great question, and keeping in mind that we are at the 
beginning of the legislative process, not near the end of the 
legislative process, those are questions that this committee 
will want to think through as the legislation proceeds forward. 
Last week we brought a bunch of cases which we called Operation 
Short Change, and it was about scams that were hitting people 
in economic distress, and a lot of those were basically fraud 
claims under the FTC Act, but one of them involved the 
Electronic Funds Transfer Act, I think it is reg E. Now, reg E 
would go to the new agency, and so this would sort of invoke 
two parts of your question or two components of your question, 
one of which is, would we have to wait 120 days to bring this 
case while there is ongoing harm, and then the second issue is 
really, what is the nature of our backup authority, and I want 
to say, Mr. Barr and I have been working through this with our 
staffs and very, very productively. You know, I worked on the 
Hill for 13 years and I never wrote a piece for legislation for 
my bosses then that didn't change as it went forward. And so 
but I think these are precisely the questions that we worry 
about at the FTC. We want to make sure, and I know Mr. Barr 
does too, that this legislation is as effective as it can be 
for the consumers that all of us represent, and so I think it 
is important that you----
    Mr. Rush. Well, it seems that the consumers would benefit 
more if the FTC didn't have to solely rely on the so-called 
backdrop authority. Do you agree with that?
    Mr. Leibowitz. Well, again, I mean, from my perspective, 
and I will turn the mic over to Mr. Barr in a second but from 
our perspective, if the backup authority is weak, and, you 
know, we have backup authority involving the SEC and the CFTC 
which we use very rarely, only when we need it. But here, a 
couple of points. One is, as the transition is happening, if 
this legislation is created, you and certainly even after very 
good lawyers are transferred and attorneys and jurisdiction, 
you know, it is going to take a while for this agency, and Mr. 
Barr knows better than anyone, to ramp up, and I like--I 
believe that they are going to want us involved using our 
backup authority, probably more earlier than later. Now, we 
understand that they will have primary jurisdiction but I think 
it is very important that the backup authority be robust so 
that we can sort of help out and also so that when we have 
these cases that involve malefactors that don't fit into the 
old or new silos that we can effectively go forward and stop 
ongoing harm involving consumers.
    Mr. Rush. I have just one question. Earlier you stated that 
you had lost some personnel. Were the individuals transferred 
to Treasury?
    Mr. Leibowitz. We have one or two people who have gone 
    Mr. Rush. And what is the purpose of them going over to 
Treasury? Are they on loan to Treasury or are they reassigned 
to Treasury?
    Mr. Leibowitz. Oh, I think they are on detail.
    Mr. Rush. What is the purpose of them being on detail to 
Treasury? What are they doing over there?
    Mr. Leibowitz. I think they are--well, I will turn that 
over to Mr. Barr. But I do know that the one person I know who 
is on detail to Treasury is a fabulous attorney and really 
cares about consumer protection.
    Mr. Rush. All right. Well, why don't you turn it over to 
Mr. Barr and let him answer the question. Thank you. Mr. Barr, 
would you begin your answer with that last question and then 
you can respond to the other question.
    Mr. Barr. Sure, and then I would be happy to address the 
broader points. We have on our staff a terrific attorney from 
the FTC who has come over on detail and is going to be a 
permanent employee of the Treasury Department working on 
consumer issues. With respect to the broader sets of questions, 
I would just say first and foremost the chairman and I have 
been working closely together and are committed to working 
closely together on these sets of issues. On financial fraud, 
it is clear from the President's proposal that it would not in 
any way diminish the FTC's ability to take on financial fraud 
cases as it is stated in the white paper and in the 
legislation. The FTC would retain its authority and its duty to 
bring financial fraud causes without delay.
    With respect to coordination, there are many issues that 
the agencies will want to coordinate on. The 120-day measure is 
not like the existing authorities that the FTC uses where it is 
the primary entity doing enforcement. This is a proposal that 
kicks in if the FTC is doing its work and finds a problem, it 
can let the new agency know, the consumer agency know about it. 
It doesn't have to wait as the FTC does today, it doesn't wait 
until it has gone through its investigation, gone through the 
whole charging process and gotten it all ready and then refer 
it to the Justice Department. It is totally unlike that. This a 
chance for the FTC to let the new agency know about a problem 
that it sees that has come to its attention. So it is a 
fundamentally different mechanism. We are committed to being 
sure that that in no way delays any financial fraud cases.
    And with respect to the transition issues again, the FTC 
and the bank agencies will have large transition issues. We are 
committed to working those through and, as I mentioned to 
Representative Schakowsky, Treasury is responsible for ensuring 
that transition happens smoothly and you can hold us 
accountable for that.
    Mr. Rush. With that, my time is concluded. Now Mr. 
Radanovich is recognized.
    Mr. Radanovich. Thanks, Mr. Chairman, and welcome back.
    Mr. Leibowitz, uncertainty is one of the key factors behind 
the perpetuation of our current economic crisis, and granting a 
new and unknown regulatory agency with this broad scope of 
power places a dangerous--could place a dangerous level of 
uncertainty into the financial markets. Do you think that it 
might be better to have an experienced regular such as the FTC 
with a long and trusted history of working with business at the 
helm with these new powers?
    Mr. Leibowitz. Well, as you know, I am very fond of the 
Federal Trade Commission as you are. I would say this. You 
know, as you know, I testified here a few months ago that we 
thought we could do the consumer protection mission involving 
predatory financial instruments. The proposal that has been 
developed, though, is one that is broader than that. It has 
bank examiner components. It has compliance components. So 
those are not things in our core competency. You know, again, 
we are a creature of Congress. We are an independent agency, 
and so we will do whatever you tell us we are going to do, and 
then beyond that, I just want to come back to my initial point, 
which is, based on what we have seen in this marketplace and 
the restrictions that we have operated under, I do think that 
if these issues are worked through, and I believe they will be, 
I do think that having this new agency and the FTC both going 
after unfairness, deception, fraud is considerably preferable 
to the status automobile accident.
    Mr. Radanovich. We agree on that. I think the issue is, how 
you go about it. I will say, though, that meeting with the 
bankers in my district back home, they are afraid of this, and 
I think the uncertainty question is a legitimate question, and 
if it does bring the specter of increased regulatory management 
over the industry, not that something has to be done in order 
to correct the mistakes of the last year, but, you know, what 
is it going to do to the industry's willingness to get out 
there and unfreeze liquidity like we are all wanting?
    Mr. Barr. If I could just add to Chairman Leibowitz's 
comment on that, I think that a key new factor is, this agency 
would have all the supervisory and examination authority it 
needs, not just with respect to banks but also with respect to 
non-bank competitors of those banks, so I understand that many 
banks are worried about the scope of the new Consumer Financial 
Protection Agency. I appreciate those concerns. I think the 
additional upside for them is that the non-bank competitors 
will have the same high standard that they need to meet, the 
same level playing field, the same consistent rules. So they 
don't have to worry. A community bank and a credit union 
doesn't have to----
    Mr. Radanovich. Something tells me that you are just 
broadening the uncertainty to include the entire financial 
markets, you are not----
    Mr. Barr. No, I think what we are able to do, sir, with 
    Mr. Radanovich. It seems to me the uncertainty is being 
broadened, not--that doesn't answer the question about 
uncertainty and the banks are afraid of this kind of 
    Mr. Barr. I think what we are able to do is create a high, 
consistent, clear standard. We are able to reduce regulatory 
burden in many cases, for example, combining the TEAL and RESPA 
forms that drive everybody crazy and don't help consumers. We 
need a single, uniform, simple standard for disclosure that 
    Mr. Radanovich. I suggest that you need to convince the 
banks because they are the ones that are expressing the real 
concern. If I may, though, Mr. Barr, I do have a second 
question, and that is that President Obama has stated that a 
streamlined system will provide better oversight and will be 
less costly for regulated institutions but the preemption 
statutes in the bill create a floor rather than a ceiling for 
State regulation. Doesn't that mean we are looking at 51 
different versions of this thing by giving the preemption 
statutes to the States and does that not conflict with 
President Obama's statement that we are looking at a 
streamlined system?
    Mr. Barr. Well, as you know, the States have long played an 
important role in consumer protection. I think one of the 
upsides of living in our country is that we have independent 
States that----
    Mr. Radanovich. But they have not had preemptive status in 
this situation before.
    Mr. Barr. They have not been able to apply State laws in 
some context to national banks, but they certainly have been 
very active in the consumer area across lots of different 
products and services in the past.
    Mr. Radanovich. Do you think that could lead to 51 
different versions of this----
    Mr. Barr. I think we are much more likely to see a high 
standard at the national level. I think it is very rare if you 
set a good, high standard at the national level you are going 
to find it very rare for States to go off in their own way, but 
sometimes States are right. Sometimes States protect consumers 
in innovative ways, and our view is, we shouldn't block the 
States' ability to do what the States think in their judgment 
is right.
    Mr. Radanovich. All right. Thank you, Mr. Chairman.
    Mr. Rush. The Chair recognizes Dr. Gingrey for 7 minutes 
for the purposes of questions.
    Mr. Gingrey. Mr. Chairman, thank you for your generosity of 
time. I am sorry I missed the first round, and I appreciate you 
letting me ask some questions. And I did want to ask Secretary 
Barr, in your testimony you indicated that we need only one 
agency charged with protecting consumers for financial products 
and services. As one of the principal architects of the 
Administration's plan and the proposed Consumer Financial 
Protection Agency, you lay out very broad and sweeping changes 
that will fundamentally change a number of government agencies 
of course including the FTC. However, while this is still in 
the early stages, there are some concerns held by members 
including me that an overly broad new regulatory agency will 
have the same effect of hitting a nail with a sledgehammer, and 
these efforts under the guise of uniformity I feel that there 
may be some different standards set for industries within this 
proposed agency. For example, I have heard some suggestion that 
small banks should be exempt from some or all of the rules 
written by the proposed agency and the drafted legislation 
contains exempted authority based on asset size. Is it the 
Administration's play to apply different consumer protections 
depending on whether a customer transacts with a small or a 
large bank, and furthermore, if you intend to carve out smaller 
institutions, what are the types of rules they would be 
exempted from and what is the policy reason for carving out 
these institutions?
    Mr. Barr. Thank you very much for that set of questions. I 
do think that our proposal does involve sweeping change, a 
sweeping change that in our judgment is essential to protect 
consumers. Our old system was fundamentally broken and we do 
need fundamental reform.
    With respect to smaller institutions, we don't expect to 
see, would not expect that small banks and big banks would have 
different rules of disclosure, but you may see differences in, 
say, how much examination or supervision there would be. In the 
bigger institutions as we do today on site there are examiners 
on site year round. You wouldn't want that for a small bank. So 
you may see differences like that but not differences in the 
basic standards affecting consumers. Those would be uniform 
across the board. So if you walk into a bank or you walk into a 
credit union, you walk into a big bank or you go to your 
independent mortgage broker or you go to an independent 
mortgage company, you get the same simple mortgage disclosure 
so consumers can understand what they are getting.
    Mr. Gingrey. Chairman Leibowitz, as you outlined in your 
testimony, there will be a number of changes to the FTC as a 
result of the Consumer Financial Protection Agency it that 
becomes law. Many responsibilities will be pulled from the 
current jurisdiction of the FTC and to be given to this new 
agency. With all of these proposed changes, what then will be 
the role of the FTC in this new landscape and how much of that 
new role will be duplicative of this proposed agency? You guys 
have been doing a good job, you know, we are appreciative of 
    Mr. Leibowitz. And we appreciate, you know, and are 
heartened by what you said about our agency. I do think we do a 
good job and we have terrific attorneys who really care about 
enforcing the mission of the agency and good commissioners who 
are also committed. You know, we will still have all of our 
competition, right, our antitrust authority. We will continue 
to do all the other things we do, whether it is fraud or 
privacy outside of the financial context or, you know, 
advertising and marketing practices, and then we will continue 
to stay involved here, I think especially during the transition 
period and hopefully beyond with concurrent jurisdiction. You 
know, look, there are, as we know in this room, as you guys 
know better than anybody else, there are a lot of bad actors 
out there who are, you know, trying to rip off American 
consumers and so, you know, by growing the federal ability to 
go after these malefactors, you know, that can only help even 
the playing field. What we do at the FTC and I think we do it 
really well but it's a sort of triage, right? You know, we look 
at different cases, potential cases as we are going through an 
investigation and we say which one can we best leverage, which 
are the ones that, you know, are the greatest harm to the 
greatest number of people, which are the ones that might make 
better, change bad case law, for example, and we are always 
making decisions based on sort of the lack of resources that we 
have. We just try to do the best job we can.
    Mr. Gingrey. Well, let me reclaim my time just for a 
second. I did want to ask you one other question. We don't 
disagree with the need for oversight, but it seems to me that 
in this current financial crisis that we are in and all of 
these bad loans and toxic assets and all of that, that the 
oversight got really heavy after the horse had already left the 
barn and so that is kind of a concern, and there is always the 
concern that the oversight becomes too much, so restrictive 
after the fact that these institutions, particularly your small 
banks and lending institutions, can't function, and I certainly 
see this across my district in privately held banks, smaller 
banks that the oversight should have been steady and consistent 
and it always should be but yet, you know, when some 
catastrophe occurs because somebody was not minding the store, 
then all of a sudden the oversight comes down on these 
institutions to the point that all of a sudden they go out of 
business, it hurts the local community. But let me just ask you 
in the little bit of time I have got left, you mentioned to us 
what the FTC would be able to continue to do. What percentage 
of what you currently do is that? Does that represent 50 
percent of your current responsibilities, 25 percent? Are you 
losing more than 50 percent of what you currently are charged 
    Mr. Leibowitz. No, no, no. You know, I think it would be 
more like in terms of--if I think it through in terms of 
resources, I will get back to you with a response but I would 
say it is more like 5 to 10 percent of what we do, and of 
course, it has been an area, as you know, that we have been 
concentrating on more and more because it is very important to 
American consumers, many of whom are suffering from--almost of 
whom are suffering from some----
    Mr. Gingrey. Well, I would appreciate it if you would get 
back to me.
    Mr. Chairman, thank you for your patience and generosity, 
and thank the witnesses.
    Mr. Rush. Again, the Chair thanks the witnesses for the use 
of their time. You were very generous to us with your time and 
we want you to know that you have really contributed 
significantly to this process and we are better off because you 
testified today and helped us move along on this new proposal. 
So we will be in touch with you in the future, and the Chair 
wants you to know that we will give members 72 hours to ask 
questions in writing, and if you will respond to them in a 
reasonable amount of time, the Chair will really appreciate it, 
so thank you so very much.
    The Chair now calls the second panel. The Chair welcomes 
the second panel to this hearing. The Chair apologizes for the 
inconveniences that you might have had to endure while we were 
on the floor voting, and the Chair is very respectful and 
appreciative of the fact that you have come from far and wide 
to be here to testify.
    I want to introduce our witnesses, and I will begin my 
left. Ms. Gail Hillebrand is the senior attorney and manager 
for the Financial Services Campaign for the Consumers Union. 
Sitting next to her is Mr. Stephen Calkins, Esquire. He is 
associate vice president for academic personnel and a professor 
of law at Wayne State University. Next to him is Mr. Prentiss 
Cox, who is an associate clinical professor of law at the 
University of Minnesota, and sitting to Mr. Cox is Ms. Rachel 
E. Barkow, and Ms. Barkow is a professor of law at New York 
University School of Law. And last but not least, the gentleman 
with the smile next to her is Mr. Chris Stinebert. Mr. 
Stinebert is the president and CEO of American Financial 
Services Association. Again, we want to thank you and welcome 
you to this committee hearing.
    It is the practice of this committee that we swear in the 
witnesses, so would you please rise and raise your right hand?
    [Witnesses sworn.]
    Mr. Rush. Let the record reflect that all the witnesses 
responded in the affirmative.
    Now it is my privilege to recognize you for 5 minutes for 
an opening statement, so Ms. Hillebrand, we will start with 



    Ms. Hillebrand. Thank you, Chairman Rush, Ranking Member 
Radanovich and members of the committee, you know Consumers 
Union as the nonprofit publisher of Consumer Reports but our 
mission is to inform, protect and empower consumers, and that 
is the role in which I appear before you today. My written 
testimony was joined by six national consumer organizations.
    Consumer groups want and consumers in the United States 
need a strong consumer financial protection agency, a robust 
Federal Trade Commission and a strong role for States in 
consumer protection in financial services. We believe that 
those goals are entirely consistent with one another. The goal 
is a better financial services marketplace and better 
government in financial services oversight. We have to face it, 
the current system doesn't work. It is not delivering products 
or encouraging products that are understandable to consumers 
who use them or that meet the reasonable expectations created 
in the sales process. Instead we have gotcha banking. We have 
multiple regulators by type of providers, even when those 
providers are competing directly for the very same consumer. We 
have long delays for regulatory action and we don't have much 
of open public enforcement except by the FTC. And finally, we 
have abusive features in products that are squeezing their way 
through the holes in the existing law and the existing 
regulatory scheme.
    I believe the job of government is to serve the people. We 
are not here to talk about more government, we are here to talk 
about better government in financial services oversight. Today 
our system isn't designed to do the job. It is spread out over 
six or more agencies with a hodgepodge of rules and statutes, 
and how much enforcement a provider receives depends in part on 
who its regulator is. That is just not a system designed to 
match the realities of today's market. We want to give the 
federal government a different and new job in the financial 
services marketplace, and that is to promote a fair as well as 
an efficient financial services market to watch for the market 
to prevent harms as they start to develop.
    I come from the great State of California, where the option 
ARM and some of the other products that have gone so terribly 
sideways were pioneered, and you can only wonder if someone had 
been watching those markets more closely whether that would 
have spread around the country.
    The mandate of the CFPA is the right mandate. It is to 
promote transparency, simplicity, fairness with accountability 
and access, and note I say ``promote.'' It is a different job 
from what the federal government has had before, and with the 
CFPA we have the opportunity for an agency who has an 
obligation to get information, to learn about the market, to 
watch that market and then to make a conscious decision about 
what needs to be regulated and what doesn't and which 
regulatory tools to use and then to apply those tools evenly no 
matter who is providing the product. With the CFPA, we could 
get one agency to watch over the market, faster-acting 
responses, one agency that is responsible to you and to me when 
things gone wrong, and one place for your constituents to go 
instead of the alphabet soup they have now of trying to figure 
out who to complain to and who to get relief from.
    The CFPA model is one federal rulemaker but multiple 
enforcers, and that brings me to the incredibly important 
continuing role of the FTC. I would like to disclose, Mr. 
Chairman, I was once a summer law intern at the Bureau of 
Competition at the FTC, longer ago than could possibly be 
relevant for today, but I want to disclose that. The FTC keeps 
its enforcement authority. It keeps its section 5 authority 
with a simple, regardless of the topic, financial services or 
not, with a simple consultation that can be at the staff-to-
staff level. It keeps its authority with respect to all the 
statutes it now has with that referral process, and I think it 
is very important to note that is a refer and wait process but 
they are not waiting for a yes or no. If the CFPA does not take 
on a case the FTC thinks needs to be brought, it can still 
bring that case. The CFPA cannot say no. We have made a 
recommendation to you in the written testimony that the statute 
should allow the CFPA to waive that notice or to shorten it by 
individual case by type or category of case and by agency so 
that they can work these things out where there is commonly, 
for example, the telemarketer case with the EFTA claim. And we 
also are recommending to you that the FTC be given the 
authority to be a secondary regulator with respect to enforcing 
the CFPA rules, not writing them but enforcing them.
    The FTC does lose jurisdiction to write unfair and 
deceptive acts and practices rules in financial services but 
that has not been a role they have been able to use widely in 
the last couple decades since the credit practice rule which 
went into effect in the 1980s. They keep all of their 
enforcement, and of course, it will be made stronger with the 
aiding and abetting enforcement. We believe this is the only 
way to put all the competing products under the same set of 
rules. I have some examples but I will hold them for the Q&A 
because I am conscious of your time, and I do want to say that 
I think it is very important what the FTC does right now in the 
recession. It is very important what the FTC will continue to 
do after the transfer of authority in those cases where there 
is overlapping enforcement and it will be extremely important 
what the FTC does with its additional authority.
    There are a lot of things the FTC can do right now to help 
consumers who are suffering from the recession including 
cleaning up the problem with credit-reporting errors, the work 
it is now beginning to do under the new authority you gave it 
in mortgage modification and foreclosure, debt collection and 
debt settlement. All those things will remain extremely 
important. I would be happy to take questions. Thank you.
    [The prepared statement of Ms. Hillebrand follows:]

    Mr. Rush. Thank you very much.
    Mr. Calkins, you are recognized for 5 minutes.


    Mr. Calkins. Thank you. Chairman Rush, Ranking Member 
Radanovich, members of the subcommittee, thank you for inviting 
me here to testify about this important matter.
    The proposed legislation would effect sweeping changes in 
the Federal Trade Commission. The key to the bill is in the 
definitions and they are written extremely broadly. Applying 
those definitions and working your way through the bill, you 
find that the bill would transfer out of the Federal Trade 
Commission much of the work that the Federal Trade Commission 
now does, giving those responsibilities to the new agency and 
giving it the exclusive authority to prescribe role and issue 
guidance with respect to much of what the Bureau of Consumer 
Protection does.
    If you take the FTC's most recent annual report for 2009 
and turn to consumer protection and start reading what they 
have done, subprime credit, mortgage servicing, foreclosure 
rescue, fair lending, mortgage advertising, debt collection, 
payday lending, Operation Clean Sweep, Operation Telephony, the 
Sumtasia marketing case, payment systems, the Naovi case, 
Nationwide Connections case, global marketing case and so on 
and so forth, prepaid phone calls, on matter after matter after 
matter of what they have been doing, I read the bill as saying 
that all of that would be transferred to the new agency. In 
short, we would have major change. Indeed, if you read the bill 
carefully you would find that even some of the antitrust 
responsibility of the Commission would be transferred. I assume 
that is a mistake but that is how it is currently written.
    Now, why have this sweeping change in what the Federal 
Trade Commission does? It might make sense if the Federal Trade 
Commission was a bad agency that was doing bad work, but as you 
all have spoken so eloquently this morning, the Federal Trade 
Commission is a good agency that has been doing good work. It 
has a unique bipartisan structure. It combines consumer 
protection and competition to bring the best from both 
perspectives to bear on problems and it has been doing 
important work for consumers including in the world of credit 
for a very, very long time. Transferring responsibility from 
the Federal Trade Commission to another agency obviously 
creates some pretty significant risks, and my recommendation to 
you is to proceed with great caution, to weigh those risks to 
decide whether they are really worth running and certainly if 
they are to work very hard to try to minimize those risks 
because the bill as written would make major changes and you 
need to be very careful to make sure that all of this makes 
    Thanks very much, and I am happy to answer questions when 
the time comes.
    [The prepared statement of Mr. Calkins follows:]

    Mr. Rush. Thank you.
    Mr. Cox, you are recognized for 5 minutes.

                   TESTIMONY OF PRENTISS COX

    Mr. Cox. Thank you, Mr. Chairman and Ranking Member 
    Abuses of consumer finance products were a disaster for 
millions of consumers before anyone recognized them because we 
had a financial crisis, a disaster. We heard previous testimony 
about someone committing suicide. I have sat with people whose 
families committed suicide after I worked with them who had 
heart attacks from the stress. Millions of people experienced 
    Our federal regulatory system did not respond to this. It 
was dominated completely by the thinking and needs of the 
lenders and sellers and not by what was happening on the 
ground. It is often said that no one could have seen this. The 
people who were working with the victims of subprime lending 
and were talking to people who reflected the experience of 
those people as well as the others who were subject to the 
abuses of consumer finance products absolutely knew what was 
going on and were screaming at the top of our lungs. No one was 
listening. It was predictable and it was preventable.
    The Consumer Financial Protection Agency as proposed offers 
the first hope in generations, certainly in my adult lifetime 
working on these issues, for an agency with sufficient power 
and focus on consumer protection issues to seriously address 
these problems. It gets it right in terms of its model. It sets 
up a unified rulemaking process. It is not about whether the 
FTC was good or bad. It is about the fragmentation of authority 
and the lack of perspective and a unified rulemaker. It gets it 
right and setting the floor and allowing innovation where 
innovation should occur, which is in the state regulatory 
system, and it couples that with an open enforcement system. It 
allows the enforcement of those clear, unified rules to occur 
in multiple places, and there are two reasons you want that. 
The first is that you compare the proper enforcement agency 
with the problem at hand. If you have got a problem that just 
occurs in Indiana, the Indiana attorney general is the right 
place to do it. It simply won't get taken care of if you allow 
a federal agency. Conversely, if the Indiana attorney general 
turns up a problem that appears to be nationwide, that can 
highlight the need for the agency. Secondly, agencies like the 
FTC and state attorneys general often will bring violations of 
rules ancillary--which is what Chairman Leibowitz was saying--
ancillary to other investigations because these things don't 
come up in little neat silos. So an open public enforcement 
model, which is what this bill has, by allowing the Federal 
Trade Commission and other federal agencies to enforce the 
rules and state attorneys general to enforce the rules enhances 
    I will make two quick comments, one about the details of 
the enforcement mechanisms and the other about the rulemaking 
investigative authority. The open enforcement mechanisms in the 
bill are excellent; however, I agree completely with Chairman 
Leibowitz that the 120 days' restriction on the FTC is way too 
cumbersome. It needs to be streamlined and made more efficient. 
Secondly, and this is, I think, a very important point in the 
bill as currently constructed--the FTC is given the authority 
to enforce extant federal consumer credit laws but not the 
regulations passed by the CFPA. The CFPA regulations over time 
will become much more important than the extant consumer credit 
regulations. It is really critical that the FTC get the 
authority to enforce the regulations that are passed by the 
    There is also a consulting power in there, a requirement, 
and that is correct and I hope that on an informal basis the 
agency takes account of the fact that the FTC, which enforces 
UDAP, unfair and deceptive acts and practices laws, gains a 
particular type of experience and understanding that is vital 
to setting those rules.
    Secondly, state AGs have authority but mechanisms for 
remedies need to be clarified because right now the section 
1055 powers--it is unclear whether those are bootstrapped into 
the AG enforcement.
    Finally, in its rulemaking authority, the new CFPA 
desperately needs detailed and express and clear investigatory 
powers. Otherwise the data that is brought to bear in what the 
rules are will be data held by the industry that the CFPA 
simply doesn't have access to, so it is critical that the CFPA 
have that investigative power so that they can get the rules 
right the first time.
    I really appreciate the opportunity to be at this historic 
hearing and wish the Congress great luck in making this project 
    [The prepared statement of Mr. Cox follows:]

    Mr. Rush. Thank you very much.
    Ms. Barkow.


    Ms. Barkow. Thank you, Mr. Chairman, Ranking Member 
Radanovich and members of the subcommittee. Thank you for 
inviting me to testify before you today. I am honored to have 
the opportunity to discuss this piece of legislation.
    The linchpin of the Consumer Financial Protection Agency 
Act is of course the agency it creates, so whether this Act 
will succeed or fail in its mission to protect consumers will 
depend entirely on whether the agency it creates will succeed 
or fail. I therefore analyzed the structure and powers of the 
proposed CFPA to determine if it has been designed in the most 
effective way to achieve its stated statutory mission. I take 
no position on the merits of that mission or whether there is a 
need for a new agency to regulate this field. Rather, my focus 
is on whether the CFPA has been designed as effectively as it 
can be to achieve that mission. In that regard, I would like to 
make six brief suggestions and observations about the design of 
the CFPA and this legislation.
    My first recommendation and the most important is to add a 
provision to this Act that would limit the CFPA board's 
membership to no more than three members of the same political 
party. Unlike virtually all other legislation that governs 
multi-member independent regulatory agencies including the FTC, 
the SEC and the Consumer Products Safety Commission, the CFPA 
Act as it is currently written does not require political 
balance among the agency's membership. There is a wealth of 
empirical studies that are demonstrating that a group comprised 
solely of ideologically like-minded people tends towards 
extreme decision making. Without a provision in the CFPA Act 
requiring partisan balance, the CFPA is likely to change 
positions from one extreme to another with each new 
presidential administration. This is unhealthy for the 
regulation of any market and certainly the consumer financial 
products market. A political balance requirement can serve as a 
stabilizing force. In addition, a political balance requirement 
can lead to dissenting opinions, which is valuable for alerting 
Congress and the public if the agency goes in an extreme 
direction one way or the other.
    Second, I suggest amending the Act's requirement that the 
CFPA consult with all federal banking agencies and any other 
relevant agency before passing rules to make sure those rules 
will be consistent with the prudential market or systemic 
objectives of the agencies being consulted. Because this 
consultation requirement sweeps so broadly covering every 
conceivable agency regulating-related field and anything of any 
importance to those agencies, this process is likely to 
dramatically delay the promulgation of CFPA rules. This is 
precisely the kind of requirement that aids industry 
participants in tying of agency rules for years. So unless 
Congress is of the view that the delay in legal uncertainty is 
outweighed by the benefits of this provision, I suggest making 
clear that consultation is at the discretion of the CFPA and 
not subject to judicial review.
    Third, I advise modifying the statute of limitations 
provision in the Act to begin running from the time the CFPA 
discovers a violation, not from the time a violation has 
occurred. Because violations by sophisticated business 
interests are not discovered for years in many cases, this 
provision is--as it is currently written--might hamper the CFPA 
in its enforcement efforts.
    Fourth, I recommend including a limitation on the ability 
of CFPA board members to practice before the CFPA for a period 
of time after their service on the board is expired. This kind 
of restriction would limit the negative effects that are often 
caused by having a revolving door between agencies and the 
industries that they regulate.
    Fifth, I just would like to highlight a protection in the 
Act that I think is going to be critical to achieving the Act's 
law enforcement objectives, and that is section 1042 of the Act 
which allows the state attorneys general to enforce provisions. 
The state AGs have demonstrated in many areas that they can be 
effective law enforcement partners, and I think this is 
particularly true in the area of consumer protection where 
agency capture is a significant risk.
    Finally, I would like to alert the subcommittee's attention 
to the fact that it is unclear from this Act as it is currently 
written whether the CFPA will be subject to Presidential 
directives and oversight including review by the Office of 
Information and Regulatory Affairs, known as OIRA. There is 
language in the Act that suggests this is actually going to be 
an executive agency and will be subject to this kind of 
oversight. Congress may intend for the CFPA to be part of the 
President's oversight process but if not, the Act would need to 
be rewritten to make clear that the CFPA is an independent 
regulatory agency for purposes of OIRA review. I take no 
position on whether or not the agency should be subject to this 
type of review but because it is a fundamental question, I note 
for you that it is currently unclear in the legislation.
    Thank you again for allowing me to testify and share my 
thoughts on this proposed legislation, and I would be happy to 
answer questions when we are all done speaking.
    [The prepared statement of Ms. Barkow follows:]

    Mr. Rush. Mr. Stinebert.


    Mr. Stinebert. Thank you, Mr. Chairman, and thank you for 
this opportunity to speak with you today. I am very glad to 
hear that this is kind of a first step and hopefully which will 
be a long process because as many have expressed here today, 
there are certainly some concerns about this issue and we hope 
that there will continue to be somewhat of a cautious approach 
as we go forward.
    The American Financial Services Association has been around 
for almost 100 years and we represent about 30 percent of all 
consumer credit in the United States with members in the 
mortgage, credit card, auto and personal installment loans. 
First and foremost, AFSA supports strong financial consumer 
protection regulation. Just because we have concerns going 
forward about the current agency does not mean that the 
industry and that the association is not committed to strong 
consumer protection regulation regarding financial services. We 
believe that consistent enforcement of existing consumer 
protections laws by government regulators would have greatly 
lessened the harmful impact that the current crisis has on 
consumers and certainly our economy. Many AFSA members are 
regulated primarily at the State level and subject to a 
patchwork of requirements. We firmly believe that consumer 
protection should be uniform in every State. Therefore, AFSA 
supports strong national consumer protection standards that 
allow the members to meet their consumer protection obligation 
in an efficient and cost-effective manner.
    In addition, strong national consumer protection standards 
will provide a benefit to consumers only to the extent that 
they are consistent with sound potential regulation. Consumer 
protections that threaten the safety and soundness of financial 
service providers offer really no protection at all. We believe 
consumers will be better served by a regulatory structure where 
prudential and consumer protection regulations are housed 
within a single regulator. Congress tried to separate these two 
intertwining functions with the GSEs. When it became apparent 
that this situation was unavoidable, Congress brought the two 
regulatory functions back under a single regulator and for good 
reason. We urge Congress to support regulatory structure that 
does not separate safety and soundness from consumer 
    The authority proposed to be vested in the new agency is 
breathtaking in both its scope and its effect. It would cover 
many entities and persons who have little or no involvement in 
the activities leading to the current economic crisis. Without 
any demonstrated need, many unsuspecting persons will be swept 
into a web of scrutiny and reporting requirements that yield 
little in the way of consumer protection but much in the way of 
increased cost for consumers. Attorneys, accountants, consumer 
reporting agencies, auto dealers, title companies among others 
will find themselves subject to review with no evidence that 
they behaved unfairly. Financial service providers will find it 
increasingly difficult to plan for risk as virtually any 
practice or product other than prescribed standard plain 
vanilla products could be labeled as unfair or abusive. 
Innovation will be discouraged.
    Given the vast scope of the proposed agency's authority, 
its funding needs are also staggering. The proposal seeks to 
fund the CFPA by assessing fees on persons and entities it 
regulates while including many that would not expect to be 
covered currently. There is no doubt that any assessment on 
financial service products will be passed on eventually to 
consumers. That direct unavoidable result will be an increase 
in the cost and availability of credit.
    Most AFSA members are regulated by the FTC, which has a 
proven record of enhancing consumer protection. It has 
addressed the economic crisis in two ways, first by using the 
enforcement authority to pursue bad actors in the financial 
services industry, and second, by setting federal policy 
through guidance and public comment. Numerous examples are 
listed in our written testimony.
    But in conclusion, AFSA believes that the FTC has done an 
excellent job in enforcing consumer protection law and is best 
suited to continue that role going forward. We believe the 
Administration's goal can be achieved with adjustments to the 
current regulatory structure and the result will be more 
efficient, less costly and certainly more effective. To that 
end, we have two specific suggestions. One, make current and 
future consumer protection rules apply to all financial 
services providers. Congress should ensure that all federal 
consumer protection laws and regulations apply with equal force 
to all providers of financial services with respect to similar 
cases of products and services. These laws should include 
strong national standards that preempt State laws and permit 
all Americans to enjoy a consistent level of service and access 
with respect to financial products and services. We have heard 
again and again today as you have 50 different States that can 
meet or exceed the current laws that this is not 
simplification. We are just going to wind up with 51, as you 
stated, Mr. Chairman, different rules that these people are 
going to have to follow.
    And number two, pursue a regulatory structure that does not 
separate financial products and services from the viability of 
the companies that offer them. All prudential agencies should 
work together to coordinate consumer protection regulation for 
financial products and services with the goal that regulations 
be preemptive, consistent and uniform. If we don't have that, 
we are not going to make any headway. Thank you for your time.
    [The prepared statement of Mr. Stinebert follows:]

    Mr. Rush. The Chair thanks the witnesses and the Chair now 
recognizes himself for 5 minutes for questioning.
    According to the Administration's proposal, the States will 
be able to enforce the statutes and rules being transferred to 
the new agency right away. In contrast, the FTC will be 
required to provide the CFPA with notice of a proposed action 
and has been stated earlier wait 120 days for the CFPA to 
determine if it would take the case before it takes any action. 
This applies to the very rules and laws currently enforced by 
the FTC.
    Mr. Calkins, in your testimony you suggest that this 4-
month delay will prevent the FTC from ever investigating or 
taking action in these areas. Can you explain and expound upon 
that, please?
    Mr. Calkins. When I read the bill, I sat and tried to think 
about what life would be like under the new legislation and the 
120-day rule, what would the FTC do, and as I thought about it 
and I read the bill, I read where the bill says ``all consumer 
financial protection functions of the Federal Trade Commission 
are transferred to the other agency.'' So who at the FTC is 
going to be doing the work to find that there is a violation 
that they wish to use the 120-day rule to develop. Maybe the 
FTC will go out and develop new resources to do this. Does that 
make sense? And I don't think that makes sense because the 
whole point of the bill, it appears, is to transfer a large 
part of what the FTC does to this new agency. Let us talk about 
the 120-day rules. Well, we have experience with the FTC and 
the Department of Justice where the FTC can ask the Justice 
Department to bring a civil penalty action for it, 45 days 
there. The reality is that the FTC, although I am not sure they 
would admit it, goes out of its way to avoid using that 
authority. It is a lot more effective and efficient for the 
Commission to go directly to court, bring an action, take 
action against a wrongdoer, stop a fraud, stop some harm, get 
relief and so they use the authority they can use by 
themselves, and time and again they don't go to the Department 
of Justice. I think that 120-day authority will be very rarely 
used in the new world. It is really there in case we have a new 
agency that is so opposed to enforcing these rules than an FTC 
might come along and try to develop some sort of alternative 
world as a backstop, but I think that the world that I see 
would have the FTC using this authority very, very rarely and I 
just do not think that is the vision contemplated by the bill 
as written.
    Mr. Rush. Does any other witness want to chime in here? I 
am hearing skepticism on the part of the other witnesses. Ms. 
Barkow, are you skeptical of this backdrop rule?
    Ms. Barkow. It does seem like 120 days would be the 
equivalent of a lifetime in this kind of an industry where you 
are talking about the----
    Mr. Rush. Well, if it was 60 days, would that make a real 
    Ms. Barkow. Well, that I leave to the FTC to decide but the 
fact that they are worried about the 120 days I think speaks 
volumes about the fact that it is probably going to be a 
significant issue.
    Mr. Rush. Does anyone else want to chime in here on this?
    Mr. Stinebert. Well, I think if you look at some of the 
discussion that occurred earlier and they were talking about 
the number of days, but perhaps more importantly look at the 
actual structure. If they have taken so many of the personnel, 
the team has been taken from the FTC and is now part of the new 
agency and yet they are supposed to maintain the backstop or 
the backup in these areas, but the team is gone, and as Mr. 
Calkins suggested, all they can do is go out and rehire new 
experts that are supposed to be the backup. It doesn't sound 
like a very good system to me.
    Mr. Rush. Ms. Hillebrand?
    Ms. Hillebrand. Yes. Thank you, Mr. Chairman. Under the one 
rule writing many enforcers model, we want it to be as easy as 
possible for the FTC to bring the cases in its existing 
jurisdiction as well as to enforce the CFPA rules. If the 
Commission recommends a shorter time period, we would want you 
to look at that very seriously. We think a waiver process also 
could help here. The Commission and the CFPA could agree that 
for this kind of case we don't need to know in advance and for 
these other cases we need a shorter period.
    Mr. Rush. The Chair's time is concluded. The Chair 
recognizes the ranking member, Mr. Radanovich.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Calkins, the proposed legislation defines a covered 
entity to include those who provide tax planning, financial and 
other related advisory services or provide educational courses 
and instruction materials to consumers. PBS often runs such 
programming on TV for their audiences as do financial cable 
stations and radio stations. Would these entities be covered 
persons under the proposed legislation, in your opinion?
    Mr. Calkins. Certainly there is a risk that they would be 
covered persons. Certainly the Commission would have to think 
about whether it was required to transfer responsibility for 
all those and then, very important, even if they are not 
covered entities today, the new agency has authority to define 
for itself additional activities that it would have 
jurisdiction over, and so even if the FTC didn't have to 
transfer authority today, they might have to transfer authority 
a year from now when the definitions got changed.
    Mr. Radanovich. Thank you, Mr. Calkins. I want you to 
comment on a prior statement about the FTC's bipartisanship in 
the way it conducts its activities and how that is good. Can 
you elaborate on that and how the lack of bipartisanship might 
hinder the CFPA's ability to effectively carry out what is now 
the FTC's mission?
    Mr. Calkins. Well, the FTC I think has over the years 
developed credibility with Congress, with the States, with 
international observers because it operates in a bipartisan 
way. The commissioners try to work by consensus. They try to 
take the actions that make the most sense. When somebody wants 
to go out on a limb and be really wild and crazy to the left or 
the right, there is someone from the other side to pull them 
back in. As noted before, Ms. Barkow, when you have people 
going too far, dissents can be filed, and it succeeds in 
developing a shared understanding of the sensible way to 
proceed and then as presidents come and go there exists some 
continuity and that continuity I think adds credibility to the 
agency's operations and really has made it into a more 
effective agency.
    Mr. Radanovich. All right. Thank you.
    Ms. Barkow, would you care to respond to that question as 
    Ms. Barkow. I agree completely, and I think that the whole 
idea of an independent regulatory agency which I think is part 
of the goal in this legislation is to have that kind of 
consensus generating form of norms that transcend any 
particular presidential administration so that you don't have 
the instability that comes with every new presidential 
administration means sweeping changes one way or the other. You 
have a stabilizing force in an agency that has membership from 
both parties. I think it has proven to be effective in other 
context and it is hard to understand why you would have a 
multi-member agency here that doesn't have that mix of 
political views on it. I mean, why not just then have a single-
member board.
    Mr. Radanovich. Thank you very much.
    Mr. Stinebert, I want to ask you about uncertainty in the 
financial markets, this massive shift of responsibility and the 
creation of a new agency on consumer protection, your bird's 
eye view on the industry, how it would react to something like 
this and the level of uncertainty that it might bring into the 
markets where uncertainty is--we are trying to do everything to 
avoid uncertainty. Would you comment on that, please?
    Mr. Stinebert. Well, some might argue that this is the 
perfect time to do something like this. I think it is 
absolutely the worst time. We are finally starting to see some 
stability in the financial markets. We are starting to see some 
recovery. We are starting to see investors come back into the 
marketplace, which eventually investors have to buy these loans 
out there. In Europe and the United States, we are starting to 
see movement back in there. This does introduce a whole level 
of uncertainty back into the whole arena because people are now 
going to stand back and wait and see what goes on, whether 
there is additional liability requirements and regulations on 
these entities. So yes, I do agree that is going to bring a new 
level of uncertainty into the marketplace at the worst possible 
time for that.
    Mr. Radanovich. Can you describe a scenario where the 
duplicative regulatory authorities allowed by this Act's weak 
preemption provision might actually prevent consumers from 
access to valuable financial services? This is the State 
preemption issue where you would have 51 different----
    Mr. Stinebert. Right now it is set up as basically a floor 
or a standard that States will have the ability to exceed. 
Someone will make a judgment whether what the State is trying 
to do is meeting or exceeding. I am assuming that would be the 
new agency. But if a determination is made by them that it 
exceeds it, of course anything that they would do to exceed 
would be permitted. So I think you have seen it in many other 
instances. I will give you the most recent, the new SAFE Act. 
That was the licensing for residential mortgage originators. 
You basically have out there in the implementation of that law 
50 different standards that everyone is trying to meet and each 
of them, many of them exceeding the federal guidelines. So 
people that are regulated at the State level will have to 
register in multiple States as originators are going to have to 
follow very, very many different laws.
    Mr. Radanovich. Thank you very much. Thank you, Mr. 
    Mr. Rush. The Chair now recognizes the gentleman from 
Massachusetts, Mr. Sarbanes--Maryland. I am sorry.
    Mr. Sarbanes. We are trying to get to Massachusetts. We 
have one Republican left. Thank you, Mr. Chairman. I appreciate 
the hearing.
    Mr. Stinebert, you said this is absolutely the wrong time. 
What would be a good time?
    Mr. Stinebert. Well, I think when you go back, and there is 
plenty of history to point fingers at what was the cause of the 
subprime mortgage crisis and currently economic crisis but I 
don't think you would get anybody that would predict that 
whatever is done here today or by Congress that you can control 
every bubble that is going to occur in the future. Most 
economists would agree that yes, this bubble is a housing 
bubble, before it was a tech bubble, before that it was a 
savings and loan bubble. You cannot have government totally 
controlling financial markets unless they can totally control 
potential bubbles, unless you totally stymie innovation and all 
you have is a plain vanilla standard product out there, and I 
don't think that is good for the very consumers that we are 
trying to protect here.
    Mr. Sarbanes. Yes, I agree with that. I mean, I don't think 
you can have government totally controlling every single 
financial dimension in the market. I don't think you can do 
that. I don't think this tries to do that. I think what this 
tries to do is provide some oversight and direction and rules 
of the road so that people stop driving off the road, not only 
because in the view of Alan Greenspan that causes the drivers 
to crash and hurt themselves but because they run over hundreds 
of thousands of innocent bystanders in the process.
    Let me switch back to a discussion from a few minutes ago 
because I think it is very relevant. As attractive as the new 
agency may be to some, and I am partial to it as it is being 
described, we still have to get from here to there, and I worry 
a lot because even if we had in place now the regulatory 
structure that we thought was necessary, it would have to be in 
overdrive, I would argue, to be on the lookout against 
predatory action that is lurking out there. But certainly in a 
transitional phase, predators have a lot of opportunities to 
make mischief, and I think the discussion about the 120 days 
kind of points to some of this anxiety, but I would like anyone 
who would care to, I would like to hear you respond to the idea 
of some kind of a special initiative or taskforce or 
consciousness that during this transition we need to be paying 
attention to, maybe it is a limited set of activities or 
potential mischief but there has got to be a special focus on 
that so that we don't make the transition, say now we have got 
a good regulatory structure in place, but in the meantime while 
that happened, a lot more people got hurt, and I say this 
because there is a lot of money that is flowing right now, 
taxpayer money, into the financial infrastructure of the 
country and many of the same players that took advantage of 
people over the last few years are thinking creatively of ways 
to take advantage of them again by accessing some of these 
dollars. So speak to that issue of how we can not be caught 
napping during the transition. We can start with you, Ms. 
    Ms. Hillebrand. Thank you. I believe you are asking exactly 
the right question. There will be a danger period during the 
transition. There are a couple of things, and I don't have the 
whole answer. One is the work that the FTC does right now and 
continues to do up to that date of the transfer of rulemaking 
so it will be incredibly important. It could be up to 2 years 
after enactment. If these two titles are enacted together, the 
FTC will get its rulemaking improvements right away and can get 
some of these rules that have been kind of backlogged because 
of the limitations on its power moving into place. That will 
help certainly to put that policing into place. We do need to 
be paying attention to the new problems that will be 
developing. One that worries me in particular is a new form of 
zombie debt. You know, that is a debt where no one has got the 
paperwork, someone just has a list saying you owe this money, 
that might come out of some of these mortgage unsuccessful 
modifications or post kind of mortgage dispositions. So there 
are new issues, a lot of old issues. The more we can get the 
FTC to do now before the transfer, I think the better shape it 
will be in, but we will have to watch for that, yes.
    And the other thing is, there is not going to be enough 
enforcement resources. Moving people from where they are over 
from all the different agencies is not going to give us enough 
enforcement staff to do the whole job for the country. The FTC 
worked very hard. They said they had 100 cases over 5 years. If 
you talk to any State AG in the country, they will tell you, 
100 cases, we could bring that in my State tomorrow. There is 
more need than the number of people that are currently in place 
to do consumer protection enforcement financial services at the 
federal level.
    Mr. Sarbanes. Yes, sir.
    Mr. Cox. I think you need to break your question, which is 
a great question, in two parts. One part is more scam-like 
activities, and I think this Congress effectively delegated the 
FTC, charged to go over foreclosure rescue scams where a lot of 
mortgage brokers were moving in and loan modification scams and 
that kind of thing. That kind of activity the existing 
authority clearly is sufficient to regulate and the additional 
authorities recently give them help. You break that from more 
traditional and large-scale sale of products such as mortgages, 
et cetera, and I think in that area the credit markets are so 
beaten down that I think that this agency would be up and 
running effectively to get ahead of the new products that would 
    Mr. Sarbanes. OK. That is helpful. Thank you very much.
    Mr. Rush. The Chair will extend to the members additional 
time for one additional question, and the Chair would recognize 
himself for one additional question.
    I want to get back to this area of concurrent enforcement, 
and, you know, are there any risks or downsides to consumers or 
industry with this whole idea of concurrent enforcement between 
two agencies? Can you predict or look into a crystal ball and 
tell us what you see in terms of downsides or harm to the 
industry or to consumers regarding this whole area of 
concurrent enforcement? Anybody want to jump in? Mr. Stinebert?
    Mr. Stinebert. Well, I will give it a try and go first. One 
of the whole things that I think the agency being proposed is 
supposed to do is have single-source responsibility. Then you 
take enforcement and you break that among current enforcement 
agencies and then you have a new agency that is supposed to 
share some type of dual enforcement. It doesn't sound practical 
to me. We think that enforcement should continue to stay with 
the existing agencies. Now, to your question, Congressman, 
about the timing and you mentioned the speed limit and the 
people watching the people going down the road, I think that--I 
don't think anybody would deny that the regulations or the 
speed limits were in place but up until several years ago that 
perhaps the regulations were in place but the enforcement and 
the oversight was not. But I think if you look today in all of 
these agencies whether it be the FTC or the other agencies in 
Washington, I think everybody has their radar guns out and are 
certainly looking at consumer protection issues as well as 
credit and lending issues in general. I don't think there has 
ever been a focus in this area like there is today, and so to 
that respect, I think that going back to your question, Mr. 
Chairman, I think that it is very important, I think most 
important, that there be continued responsibility between 
safety and soundness and the viability of those companies and 
consumer protection, and I think it is unwise to separate those 
two entirely. We have gone through a good example with the GSEs 
of trying to do that and finding out why that doesn't work, and 
it would be very simple if that agency that is just concerned 
about consumer protection can make everything so safe that is 
not really good for the companies offering those products or 
for the consumers themselves. There is always going to be risk 
in this industry. That defines what it is. And I don't think 
you an eliminate that entirely.
    Mr. Rush. Ms. Barkow.
    Ms. Barkow. I think it is a really good question and I 
would say that I think it is not so much of a risk as long as 
the rules of the game as clear, so as long as you have the one 
agency that is setting the rules and what it is that companies 
have to do, the fact that there would be multiple enforcers of 
those rules is less disconcerting because you have clear 
standards and everyone would know what they are and you would 
have essentially this kind of more cops on the beat analogy and 
so that is why you could have state AGs helping out, you could 
have the FTC helping out. You would just be getting more 
manpower. But the rules would be clear. So really the success 
of it would depend upon what kind of rules end of being 
produced from this process, and I guess I would just state, 
that is why it works to have, for example, all the States can 
police Medicare fraud, for example, and it is not a risk 
because everybody knows what they are looking for and so it 
would just be really important for the agency that is created 
to have clear rules, and if they see an enforcement action that 
looks like it is not really in the spirit of those rules, the 
act as it is written, for example, if the state AG brings it, 
the CFPA could intervene and they could step into that action 
and make clear that that is a bad interpretation of their rule 
or it is a bad enforcement action. So I think it is oK to have 
multiple law enforcers and in fact probably necessary because 
there just aren't enough resources for all the fraud that is 
out there.
    Mr. Rush. Ms. Hillebrand.
    Ms. Hillebrand. Thank you, Mr. Chairman. I had to think for 
a moment about your question to remember that there already are 
six concurrent enforcing authorities. It is just that the 
banking agencies haven't used that open public enforcement 
model to bring cases with the vigor and approach that the FTC 
has used. So we already do have concurrent enforcement and the 
downside has been that many of the agencies other than the FTC 
that have enforcement authorities also have other obligations 
that tie them very close to the industry that they regulate. At 
least with the concurrent enforcement authority with the CFPA 
and the FTC, we won't have that problem and I think that is a 
good step forward.
    Mr. Rush. Mr. Calkins.
    Mr. Calkins. Mr. Chairman, I think that concurrent 
enforcement authority could work if done carefully but I worry 
that there is too much attention to the FTC as an enforcer. I 
prepared for this over the weekend when the Web site was down 
so I was reduced to the documents that I happened already to 
own. I owned a 2004 annual report that happened to be in my 
files. I opened it up to consumer protection where the FTC has 
a good list of the range of activities in which the agency 
engages and that is part of what makes it a success. Consumer 
protection policy, one, research and reports; two, hearings and 
workshops; three, advocacy; four, amicus briefs; five, consumer 
and business education and outreach. The FTC is not just a cop 
on the beat. It is an agency that has economists, that does 
competition, that does consumer protection and uses a whole 
range of tools to develop expertise, to identify problems and 
to craft solutions, and if a huge part of what the FTC does as 
a matter of subject matter is transferred out and if the new 
agency has the exclusive authority to give guidance in this 
way, then we have lost a very great deal of what the FTC does 
and I think that the consumers would be the worse for it.
    Mr. Rush. Mr. Cox.
    Mr. Cox. Chairman Rush, I think ultimately the industry 
will make two arguments about he concurrent authority and the 
problems with it. The first is, it is too much enforcement, but 
as Ms. Hillebrand said, and as someone who spent years making 
priority lists, your list is way longer than you will ever get 
to and the problem with this bubble bursting was not too much 
enforcement. The second problem which is more subtle or real is 
an inconsistency in enforcement policy, and Ms. Barkow 
appropriately says that this rulemaking authority, if it is 
clear, if the rules are clear enough, certainly will solve the 
problem, and I would further say that the CFPA is given the 
sufficient authority to make sure the is happening in a uniform 
    But there is a second response to the inconsistency, which 
is unlike rulemaking where I agree you want a unified 
rulemaker, when it comes to enforcement, this is where 
regulatory competition actually works because you are competing 
to be a better enforcer as opposed to competing for a race to 
the bottom so that people will charter with you, which was a 
serious problem in creating this situation. And when you 
compete to do better, you are aware that if you don't do it and 
somebody else enforces your rule in a situation that you might 
get embarrassed, Madoff, SEC, you know, that when you have 
competitive enforcement you have a market that essentially 
forces public entities to be aware of that. That actually 
works, and when it comes to UDAP authority, I just want to say, 
it is so important. The state attorneys general, and I am 
patting myself on the back here because I was part of a small 
group who did this. We were the only ones out there screaming 
about and bringing these cases. The FTC was saying it is great 
because they were going after different actors but did one case 
where we got half a billion dollars back to people with 
subprime mortgages followed by another case where there was 
$300 million and I thought that was too little and I had left 
by then. I mean, this was a problem that if you were on the 
ground you saw it. I mean, it was visceral. These people were 
utterly out of control. The State AGs were able to enforce it 
because they had a different enforcement agenda. They were 
sitting at a different place. Regulatory competition works in 
terms of an open enforcement model.
    Mr. Rush. The Chair now recognizes Mr. Radanovich for one 
    Mr. Radanovich. Thanks, Mr. Chairman. I appreciate 
everybody's testimony but Mr. Cox, what I thought I heard was 
that we need multiple agencies having to do the same job to 
make sure that the people are doing their job, and that to me a 
recipe for wasted spending. But I do want to ask you a question 
about, I believe it was Ms. Sutton who was here earlier talked 
about a situation where an 84-year-old woman who owned her 
place free and clear was duped into a 30-year mortgage. I would 
like to know whether or not there was family involved putting 
her up to that and that happened for reasons that wouldn't have 
anything to do this with this current financial crisis. I 
happen to represent Stanislaus County in California. It is the 
epicenter of mortgages, the number one county in the Nation 
where mortgage defaults and foreclosures have happened. So I 
have a great appreciation for what is happening here. And you 
would hear tales about, one in particular, non-English-speaking 
people that were talked into a home that all they needed to do 
was come in and sign the papers. Once they got there, they were 
jammed with points and fees that they knew absolutely nothing 
about and were put into an uncomfortable situation, signed the 
mortgage papers, later lost the house. So I am curious to know 
after we have spent in reaction to this financial crisis 
anywhere between $800 billion to $1.5 trillion dollars to 
stimulate the economy. We get a rise in the unemployment rate 
that was supposed to drop with all that spending. I am a little 
leery of broad, sweeping reactions to the problems that we are 
in. So how does something like--and I would offer that to you, 
Mr. Cox, Mr. Stinebert or anybody else that wants to respond to 
this thing. How would that help the person--I am not sure about 
the Sutton case, and I want to know whether the family put her 
up to that, that poor, unfortunate, elderly person up to that 
situation. But my situation in Modesto, California, where the 
non-English-speaking person was jammed into that loan and a 
shyster put points on there and then they quickly sold the 
mortgage to somebody else and this guy was washing his hands 
and he was out of there. How does this broad, sweeping change 
that you are talking about prevent something like that from 
happening and at what cost any more so than what is currently 
on the books to prevent?
    Mr. Cox. Thank you, Ranking Member Radanovich. I will 
respond to that by also responding to Mr. Stinebert's earlier 
comment, that we all agree that the regulation that was there 
was an enforcement problem. We don't all agree on that, and 
here is--the problem had two parts to it if you want to break 
it into its grossest problem. The first part was the type of 
products that were being sold. They were simply way too high 
risk, way too complex and way too aggressively sold for average 
consumers to work through all the problems and understand all 
the costs and consequences and the context of these mortgages. 
For instance, held up at the time as the great financial 
innovation, the payment option ARM, it was sold so aggressively 
on its benefits but its risks were not clear to the average 
consumer, to my aunt. You know, it was the kind of thing I 
could have sold her on if I was an evil person without 
informing her of the risks. So there is a product regulation 
problem that existed here. The Fed, if you read the Fed's 
papers during this time and you put them right next to the 
industry's papers, you could change the titles and you couldn't 
tell the difference. There was one type of thinking. That needs 
to change.
    The second problem was a fraud problem. The fraud problem 
got so far out of control, I have never seen anything like it. 
You know, if you were talking to the people and you saw this 
going on, if you talked to the ex-workers in these agencies, et 
cetera, in these companies that were selling these things, 
fraud was so rampant in this industry that, you know, that was 
almost a separate problem from the product regulation problem, 
and so we also had a lack of enforcement, particularly at the 
federal level, you know, on fraud but we fundamentally had a 
product regulation problem. I hope that responds.
    Mr. Radanovich. Mr. Stinebert.
    Mr. Stinebert. Commenting back to Mr. Cox's earlier 
discussion about whether we should have multiple regulators is 
a good thing, I ask you, if you are a business and you have 
multiple regulators, two and three regulators, is competition 
really good if you are the regulated entity and the costs that 
are involved in that. I mean, so the FTC is in your office one 
week and having your staff gather everything else and the next 
week, you know, another regulator is in there. I can see where 
there might be some contention where that is good but you won't 
have businesses, anyone that operates a business, small profit 
or a large business having multiple regulators and enforcers 
coming into your offices is necessarily a good thing because--
and all of those costs are eventually passed on to consumers. 
These do not happen in vacuums. So, yes, there are protections 
I think that need to be in place and you are absolutely right 
about that, but I do think you can overdo a process to. We want 
to have a process that protects consumers but is efficient for 
everyone involved, that it is efficient for the safety and 
soundness and the viability of the companies that are being 
regulated as well as good for the consumers that are buying 
their products, and I think that that is an important thing.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Rush. The Chair recognizes the chairman emeritus, Mr. 
    Mr. Dingell. Chairman, I thank you for your courtesy.
    This question is to Gail Hillebrand and to Professor 
Calkins. What authority will remain in the FTC to protect the 
consumers after the Administration's plan has been adopted if 
it is adopted in its current form?
    Ms. Hillebrand. Thank you, Chairman Emeritus. The FTC 
retains all of its authority to bring section 5 enforcement 
subject only to a staff level of consultation, coordination and 
    Mr. Dingell. But we would lose that authority?
    Ms. Hillebrand. The FTC retains that authority. I am going 
to give you a list of things it retains. It retains its section 
5 authority. It retains its authority to bring cases under the 
statutes and rules for the enumerated consumer statutes. That 
is our alphabet soup: ECOA, EFTA, reg Z and so on. It retains--
well, those are the big things that it retains. It also retains 
its pure fraud authority. I mean, there are financial services 
and then there are people who tell lies who say sign up with me 
and give me your Social Security number and your checking 
account number and you will never see me again. It retains that 
authority. Those folks are not selling financial services, they 
are selling lies, and it retains that authority, and we have 
recommended that it also be given the same kind of backstop 
authority that it now has currently and would have under this 
proposal for the existing consumer statutes with respect to 
enforcement of the CFPA rules. That is not yet in the proposal.
    Mr. Dingell. Now, what would it lose? What would FTC lose? 
What consumer protection jurisdiction would it lose?
    Ms. Hillebrand. Yes. The FTC would lose the jurisdiction 
that has been important but difficult for it to use which is 
its authority to develop unfair and deceptive acts and 
practices rules in the financial services area. I am sure you 
are aware the last time that authority was used was in the 
credit practices rule, which came into effect in the mid-1980s.
    Mr. Dingell. OK. Now, why should that be taken away from 
    Ms. Hillebrand. If we were looking at just the FTC, there 
would be no reason to take it away, but the problem is, we 
    Mr. Dingell. There is no reason to take it away?
    Ms. Hillebrand. No, I am not quite finished.
    Mr. Dingell. Let us just go a wee bit further and explain 
to me why we should give it some of those goodhearted folks who 
led the fight for the repeat of Glass-Steagall who deregulated 
banking and financial services and who left us this glorious 
mess which we now have in the form of probably the biggest 
depression that this country has had since 1929. Now, why 
should we do that?
    Ms. Hillebrand. We need to give the authority to an agency 
that can make one set of rules that applies to the bank 
provider and the non-bank provider. If the FTC----
    Mr. Dingell. I have no objection to taking care of the bank 
regulatory agencies. Let them create them and let them do their 
thing. But why wouldn't we want the honest men and women at FTC 
looking over their shoulder and why wouldn't we want them 
looking over the shoulder of those goodhearted banks and 
financial folks and MBAs up in New York that created this mess? 
Now, help me. Why wouldn't we want that?
    Ms. Hillebrand. We definitely want oversight. We want 
someone who can look over no matter what kind of----
    Mr. Dingell. Do you like the idea of having the FTC sort of 
keep an eye on those people?
    Ms. Hillebrand. We like the idea of having an agency that 
can look at everybody, not just the non-bank providers, keep an 
eye, and we think the best way to----
    Mr. Dingell. And what about all the goodhearted banks that 
are going to be engaging in all kinds of things? They are going 
to be engaging in real estate, they are going to be engaging in 
issuing of bonds and securities. They are going to be engaged 
in all kinds of wonderful activities on derivatives which are 
really gambling devices. So why shouldn't the FTC retain its 
continuing and ancient jurisdiction over keeping honest men 
honest and maybe occasionally catching a rascal? Now, why 
should we take that away from FTC?
    Ms. Hillebrand. Mr. Chairman Emeritus, I respectfully 
    Mr. Dingell. You represent consumers. Why shouldn't we just 
leave FTC as it is and let these other folk go about their 
nefarious business under the kind of weak-minded regulation 
that the Treasury has traditionally given to these 
    Ms. Hillebrand. We are absolutely in favor of----
    Mr. Dingell. I will give you a good reason for that. You 
are speaking here for the consumers, and I am trying to figure 
out do you really understand the consumers' needs or are you 
engaged in perhaps disregarding the consumers because these 
other folks have done a better job of telling you what a 
wonderful job they are going to do after they have brought 
about not one but two depressions?
    Ms. Hillebrand. I am looking at it from the point of view 
of the ordinary person who is trying to get a mortgage, and 
they want to know--I mean, the consumer doesn't think it is----
    Mr. Dingell. No, no, you are giving me a wonderful answer 
but it is to the wrong question. Answer my question, please.
    Ms. Hillebrand. The answer is, we think----
    Mr. Dingell. Why should we not keep FTC in its traditional 
jurisdiction of protecting consumers? When I was a boy, 
Roosevelt tried to give FTC jurisdiction over the stock market, 
and you can't imagine the outrage that this generated in New 
York because they were scared to death of the Federal Trade 
Commission, which is under the jurisdiction of the committee. 
We keep them honest. And we find that as soon as the FTC got 
away from this committee, they all of a sudden became a wholly 
owned subsidiary of the securities industry and the banking 
industry. Now, why should we sanctify that by stripping the 
consumers of the one remaining protection which they have, the 
FTC, in favor of giving it to a congregation of folks well 
known to be influenced by some of the worst scoundrels in our 
    Ms. Hillebrand. Are you ready for my answer? We believe 
that we need to put it in one place so that the non-banks 
aren't saying oh, don't regulate us the banks can still do 
that. The banks are saying oh, don't regulate us because the 
other guy can still do it.
    Mr. Dingell. We don't mind having this agency that would be 
created by the Administration's proposal do that. What we want 
is to have the FTC there so as to sort of watch over these 
people and let them know that there are honest men and women 
watching them so that the rascality is diminished and the 
consumers are protected. What is wrong with that?
    Ms. Hillebrand. I think we have the same goal and perhaps a 
different with respect about how to get there.
    Mr. Dingell. So then are you telling me that you like the 
idea of having the FTC continue its jurisdiction while these 
other goodhearted folk go about their nefarious business?
    Ms. Hillebrand. We have endorsed full retention of FTC 
enforcement authority but we think----
    Mr. Dingell. We have talked about what FTC is going to lose 
and you are apparently advocating the losing of it. I am not of 
a view that maybe we want FTC to lose that jurisdiction and 
maybe we want FTC to be around to sort of provide a minor 
dampening of the rascality which is going to continue to occur 
in the financial services industry. Now, what is your objection 
to that?
    Ms. Hillebrand. We believe that you need----
    Mr. Dingell. Dear friend, in just a few words, what is your 
    Ms. Hillebrand. Put the rulemaking in one place so that it 
is very clear whose job it is, and then you can hold them 
    Mr. Dingell. They arranged that one-stop shopping when they 
moved this whole thing across the hall, and since then the 
whole financial services industry of the United States has had 
to be bailed out to the amount of $700 billion, which was 
congregated by Mr. Paulson, who came from that industry, and 
which has done nothing but enriched the same rascals that had 
caused trouble, and it has not only enriched those rascals but 
it has given us something new to think about, and that is, it 
has seen to it that they have had the funds to pay the same 
scoundrels who made the mess enormous bonuses amounting to as 
much as $165 million in one instance. Obviously, this is the 
product of one-stop shopping which I suspect you were telling 
me you support or maybe you want to tell me now you don't 
    Ms. Hillebrand. We are trying to end the ability to shop 
for your regulator by having one entity write the rules no 
matter what kind of charter and what kind of provider. That is 
our position.
    Mr. Dingell. Well, I have to say, I think somebody else 
wrote your statement but I thank you for your presence, and Mr. 
Chairman, I thank you for your courage and ability to bring 
this event about. Thank you.
    Mr. Rush. The Chair thanks the chairman emeritus. The Chair 
thanks the witnesses. This hearing now stands adjourned. But 
before we adjourn, I wanted to let you know how grateful we are 
for you to extend your time with us and spend your time with 
    By unanimous consent, I request that members submit all 
questions to be sent to the witnesses for the record within 
seven calendar days and that witnesses will respond promptly to 
the questions that are submitted to them. Thank you so very 
much, and safe travel.
    [Whereupon, at 2:15 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]