[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                   WHO'S IN YOUR WALLET? DODD-FRANK'S

                    IMPACT ON FAMILIES, COMMUNITIES,

                          AND SMALL BUSINESSES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 19, 2012

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-146



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

           James H. Clinger, Staff Director and Chief Counsel
              Subcommittee on Oversight and Investigations

                   RANDY NEUGEBAUER, Texas, Chairman

MICHAEL G. FITZPATRICK,              MICHAEL E. CAPUANO, Massachusetts, 
    Pennsylvania, Vice Chairman          Ranking Member
PETER T. KING, New York              STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota          MAXINE WATERS, California
STEVAN PEARCE, New Mexico            JOE BACA, California
BILL POSEY, Florida                  BRAD MILLER, North Carolina
NAN A. S. HAYWORTH, New York         KEITH ELLISON, Minnesota
JAMES B. RENACCI, Ohio               JAMES A. HIMES, Connecticut
FRANCISCO ``QUICO'' CANSECO, Texas   JOHN C. CARNEY, Jr., Delaware
STEPHEN LEE FINCHER, Tennessee


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 19, 2012................................................     1
Appendix:
    July 19, 2012................................................    49

                               WITNESSES
                        Thursday, July 19, 2012

Del Rio, Deyanira, Chair, Board of Directors, Lower East Side 
  People's Federal Credit Union..................................    19
Flores, Michael, Chief Executive Officer, Bretton Woods, Inc.....     8
Johnson, Garrick ``Gary,'' President, American Flooring 
  Installers, LLC, on behalf of the Ohio Hispanic Chamber of 
  Commerce.......................................................    15
Min, David K., Assistant Professor of Law, University of 
  California Irvine School of Law................................    17
Purcell, Jim R., Chairman and Chief Executive Officer, The State 
  National Bank of Big Spring, Texas.............................    10
Sharp, Jess, Managing Director, Center for Capital Markets 
  Competitiveness, U.S. Chamber of Commerce, on behalf of the 
  U.S. Chamber of Commerce and the Coalition for Derivatives End-
  Users..........................................................    13
Smith, Gregory W., Chief Operating Officer and General Counsel, 
  the Colorado Public Employees' Retirement Association (CoPERA).    22
Smith, Lynette, President and Chief Executive Officer, Washington 
  Gas Light Federal Credit Union, on behalf of the National 
  Association of Federal Credit Unions (NAFCU)...................    11

                                APPENDIX

Prepared statements:
    Del Rio, Deyanira............................................    50
    Flores, Michael..............................................    55
    Johnson, Garrick ``Gary''....................................    59
    Min, David K.................................................    64
    Purcell, Jim R...............................................    78
    Sharp, Jess..................................................    84
    Smith, Gregory W.............................................    90
    Smith, Lynette...............................................   100

              Additional Material Submitted for the Record

Capuano, Hon. Michael:
    Forbes article entitled, ``What's In Your Wallet? If It's a 
      Capital One Card, You May Be Due a Refund,'' dated July 18, 
      2012.......................................................   133
    Article from The Wall Street Journal entitled, ``Financial 
      Crisis Amnesia,'' dated March 1, 2012......................   135
Neugebauer, Hon. Randy:
    Letter from Bill Cheney, President & CEO of the Credit Union 
      National Association (CUNA), dated July 19, 2012...........   138


                         WHO'S IN YOUR WALLET?

                         DODD-FRANK'S IMPACT ON

                         FAMILIES, COMMUNITIES,


                          AND SMALL BUSINESSES

                              ----------                              


                        Thursday, July 19, 2012

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Randy Neugebauer 
[chairman of the subcommittee] presiding.
    Members present: Representatives Neugebauer, Fitzpatrick, 
Pearce, Posey, Renacci, Canseco, Fincher; Capuano, Baca, Miller 
of North Carolina, and Carney.
    Ex officio present: Representative Frank.
    Also present: Representative Green.
    Chairman Neugebauer. The Subcommittee on Oversight and 
Investigations will come to order. Today's hearing is entitled, 
``Who's in Your Wallet? Dodd-Frank's Impact on Families, 
Communities, and Small Businesses.'' I want to thank our 
witnesses for being here today, particularly Mr. Purcell, who 
is from the 19th Congressional District of Texas.
    Thank you for being here this morning.
    There are a lot of different ways that the government can 
get in your pocket, and I think most people think about taxes 
as the primary way because basically the government gets to 
determine how much of your hard-earned money you get to keep. 
But what I think a lot of people underestimate is the cost of 
other ways that the government does that through regulations.
    I think one of the things that this Congress has been 
trying to focus on for a number of months now is jobs in this 
country. We still have a number of Americans who are out of 
work and we are looking for ways to help get those people back 
to work.
    For example, in my State of Texas, about 98 percent of the 
employers in Texas are small businesses. I will tell you, in 
the 19th Congressional District, that is probably a higher 
number, because we just have a bunch of really hard-working 
small business people, many multi-generational businesses that 
have worked hard to build those businesses up. We don't have a 
big Toyota plant in the 19th Congressional District. But these 
small businesses are a major job creator for us.
    And so what small businesses rely on is access to capital, 
and obviously our community banks have been the primary 
provider of that capital. When you look at the small business 
loans in this country, most of those loans are under $100,000. 
And while that is not a small amount of money, for many banks 
that would be a relatively small loan.
    But to those businesses it is a very important loan, and so 
we want to make sure that as we move forward, we are not part 
of the problem of inhibiting the financial communities, 
particularly our community banks, from providing important 
lending opportunities, but also serving the customers. I was 
talking to someone the other day, and in many of the smaller 
communities across my district, with the consolidation that has 
happened in the agricultural business, there is a smaller 
number of farmers farming a lot more acres. And so a lot of 
those communities that used to be a lot larger because there 
were more farm families are smaller now. And in many cases, the 
small community bank is one of the last large corporate 
citizens in those communities, and is important not only as a 
provider of capital but for other financial services for those 
individuals.
    What I am hoping to accomplish with this hearing today is 
that I think there has been a lot of focus on Wall Street, but 
what we really know is that Main Street is where ultimately all 
of the cost and burden of regulation tends to fall. We don't 
think about the fact that we raise the cost of the asphalt in 
the parking lot at the supermarket if we begin to tinker with 
some of these markets, or that the cost of buying or financing 
a car, the cost of your groceries, the commodities, and the 
availability of certain banking services where in many cases 
those used to be provided free now are at a cost.
    And so, there are costs to that. What I would hope to 
accomplish with this hearing today is to begin to identify some 
of these costs because I think on both sides of the aisle, we 
want to make sure that if we want to have regulation, we need 
to understand the consequences of that regulation. But also, we 
have had a lot of discussions about the cost and the benefit. 
You can make a car really, really, really safe, but if it costs 
$100,000 to make a car really, really safe, then how many 
people can afford the car?
    So I look forward to our discussion and our panel. I think 
we have a great panel today, and I want to thank you again for 
being here.
    And with that, I will now yield to the ranking member of 
the subcommittee, Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    And again, I want to thank the witnesses for being here as 
well. I know that some of you had to travel a long distance and 
I appreciate your efforts.
    I look forward to this hearing and the other hearings that 
are scheduled this week, as well. Again, Dodd-Frank--I don't 
think anyone would suggest that Dodd-Frank was a perfect bill, 
certainly not by my measure, but perfection is really never the 
measure of anything. If it was, none of us would be elected, 
except of course for Randy--he might be, but the rest of us 
wouldn't be.
    And so therefore, we have to look for the cost-benefit 
analysis, as was said. But at the same time, costs are easy to 
measure. How much does it cost to hire a new person to do 
regulation? And that is a fair and important thing to look at.
    Benefits, on the other hand, are a little bit more 
difficult to measure. What are the benefits not just to the 
individual institution but also the economy as a whole? That is 
almost impossible to measure.
    And I fear that some people are suffering under a little 
problem of amnesia. Secretary Geithner wrote a nice little 
article in The Wall Street Journal a couple of months ago that 
talked about the amnesia of people who forget how we got to 
where we are, what inspired Dodd-Frank. It didn't just come out 
of nowhere; it came out of a response to an economic crisis 
that was caused by a massive unregulated banking industry.
    And I don't mean the regular banks like we all think of 
banks, but people who were totally unregulated in competition 
with regulated banks. They, as far as I am concerned, were more 
at fault than the regulated banks and they are now subject to 
some regulation.
    They took excessive risk. They had no-document loans--just 
giving out loans to people with no documentation whatsoever. 
Totally unacceptable. Predatory lending. Credit default swaps 
squared, and tripled, and all kinds of things which I have 
actually not yet met a human being who really understands.
    Off-balance sheet investments that nobody could find. Cozy 
relationships with regulators. Cozy relationships with credit 
rating agencies.
    All of that led us to the second worst recession in 
American history. Let's not forget, we lost $19 trillion of 
household wealth--$19 trillion. It wasn't a small little bump, 
it was a big one: 9 million jobs lost, 10 million homes in 
foreclosure.
    It required some sort of a reaction and Dodd-Frank was an 
attempt to do that. I don't think anyone would suggest that we 
have it perfect nor that anyone could get it perfect on the 
first draft.
    And let's not forget that most of Dodd-Frank has not been 
implemented yet. It has not been implemented because of the 
normal course of time it takes to implement any new law and 
because of the attempts to cut back. As we are expanding the 
requirement responsibilities of the SEC, we are also--not we, 
but some people are proposing to cut their budget by 12 
percent.
    Also, massively increasing and expanding the 
responsibilities of the CFTC, and suggesting to cut their 
budget by over 40 percent. That is ridiculous. Of course you 
can't get things done when you are facing those situations.
    Seventy-five years ago, this country faced the worst 
economic problem that we have ever had and immediately 
thereafter, in the middle of it, a lot of people cried, ``Oh, 
my God. These regulations are going to kill everything,'' 
before most of them were implemented, by the way. And when they 
were implemented through the SEC and the other regulations that 
happened for 75 years we had the most stable economic 
environment in the history of mankind. We had the greatest 
expansion of economic wealth in the history of mankind.
    And then we got into this thing: all regulation is evil; 
all regulation is terrible. Let me be very clear: No one in 
their right mind wants or supports excessive, overly burdensome 
regulation. No one that I know of would advocate for that, 
including me.
    However, no one in their right mind should forget what we 
just went through and therefore argue that nothing should have 
happened. No one in their right mind should say that we should 
have too little regulation.
    It is always an attempt to find a balance, and that is what 
I hope these hearings come up with is an attempt to yes, costs, 
but also some benefits--try to figure out what we have right, 
what we have wrong, and try to keep the good without throwing 
out the bad.
    And with that, Mr. Chairman, I yield back. And thank you 
very much for having this hearing.
    Chairman Neugebauer. Yes. I thank the gentleman.
    And now the vice chairman of the subcommittee, Mr. 
Fitzpatrick, is recognized for 2 minutes.
    Mr. Fitzpatrick. Thank you, Mr. Chairman.
    We are here today to examine how Dodd-Frank affects our 
constituents. Our constituents are everyday people who don't 
work on Wall Street, and who don't deal in complicated 
financial products or sit at trading desks of investment banks.
    The law may have been designed to rein in Wall Street and 
regulate wealthier financiers, but the fact of the matter is 
that this 2,300-page bill reaches into the pockets of just 
about every American. A lot of people may be surprised to learn 
that Dodd-Frank rules govern commodities and could cause prices 
to rise in everything from airline tickets to a six-pack of 
beer.
    There are also the effects of increased regulations on 
small financial institutions. Access to credit and even the 
ability to maintain a simple checking account could be 
jeopardized. Higher fees, increased costs, and reduced services 
are all naturally occurring byproducts of increased regulation, 
and these costs are not going to be borne simply by the 
customers of financial institutions but they are going to be 
felt across the economy because this bill crosses into so many 
areas of American life.
    We should all expect a well-regulated financial system that 
is free of fraud and abuse and includes robust consumer 
protections. The 2008 crisis was an event that exposed flaws in 
our markets and should absolutely have led to policy changes. 
However, as happens so often in Washington, this opportunity to 
work together on needed reform resulted in a bill rife with 
unintended consequences.
    So I look forward to today's hearing, and continuing to 
work with all of our colleagues on financial reform that does 
more good than harm.
    I yield back.
    Chairman Neugebauer. I thank the gentleman.
    And now the ranking member of the full Financial Services 
Committee, Mr. Frank, is recognized for 3 minutes.
    Mr. Frank. Thank you, Mr. Chairman. I am struck by what 
seems to me to be a nice irony in the title, ``Who's in Your 
Wallet?'' Borrowing--given the looseness of intellectual 
property constraints here--from Capital One's slogan, ``What's 
in Your Wallet?'' And we learned from one of the agencies that 
many on the panel wish never existed, the Consumer Financial 
Protection Bureau (CFPB), that what was in the wallet of many 
consumers were the hands of Capital One. So references to who 
is in whose wallet and for what purpose are very relevant to 
today's hearing.
    The CFPB, in coordination with the OCC, just fined Capital 
One, which agreed to have--the fact that it had violated basic 
consumer rules. So yes, there are all kinds of people in the 
wallet.
    I see the testimony here from the U.S. Chamber of Commerce. 
Deja vu. In 2006, I was the chairman-in-waiting of this 
committee and in December, I was asked to come to a session of 
the U.S. Chamber of Commerce in which the point was--this is 
2006--we are overregulating the financial industry. And we were 
told that we had to cut back, that if we did not cut back on 
Sarbanes-Oxley, the likelihood of IPOs ever being issued in 
America would be substantially diminished. And of course, they 
could not have been more wrong.
    One of the things we were told at the time by the Chamber 
and others was we should emulate the light touch regulation of 
the British Financial Services Authority, the people who have 
done, by their own admission, a fairly poor job of of not 
regulating when they should have regulated.
    I look here and I see complaints that we are overregulating 
mortgages, and there is a complaint from some of the people, I 
think, in the credit unions and elsewhere that we are being too 
tough in requiring payment standards for people who are taking 
out mortgages. I confess that I am surprised to hear that 
complaint. Given the unfortunate role that was played by laxity 
in mortgage standards in helping to bring this crisis about, I 
am surprised by that.
    I have also heard--I haven't seen it yet here--some 
complaints that the bill's requirement that those who 
securitize mortgages retain some of the risk is retarding 
mortgages. In fact, it is not in effect yet and it is not 
retroactive so it clearly cannot be blamed for retarding 
anything. But this resistance to tightening up mortgage 
standards is just odd to me, given what happened.
    And then, from the Chamber we also have complaints about 
the overregulation of derivatives, as if there never was an 
AIG, as if the problems that recently surfaced with JPMorgan 
Chase and others hadn't existed.
    We have done some refinements and I will do some more, but 
this wholesale rejection of regulation of the financial 
industry, I would have to say to my friends at the Chamber, 
going back to 2006, they remind me of the Bourbon, when the 
Restoration came in the 19th Century in France, and people 
said, they have forgotten nothing because they learned nothing. 
The notion that people would be repeating the argument in 2006 
is really quite startling to me.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from Texas, Mr. Canseco, is 
recognized for 2 minutes.
    Mr. Canseco. Thank you, Mr. Chairman.
    Mr. Chairman, before I came to Congress last year, I spent 
most of my life in the private sector in banking, in real 
estate, and in law. One thing that continues to amaze me is the 
complete disconnect between what goes on in Washington and the 
realities on the ground in our economy.
    Two years ago, we were given a lot of promises about Dodd-
Frank, but the one that sticks out the most is the one that 
this bill would ``bring greater economic security to families 
and businesses across the country.'' All it takes is a 5-minute 
conversation with a community banker, a small businessman, or a 
credit-worthy family who can't get a loan to comprehend just 
how badly this promise has been broken.
    The authors of Dodd-Frank told us that they had crafted 
reforms that were absolutely necessary, but when you pile 
hundreds of new rules on top of existing rules and give greater 
authority to the same regulators that missed the last crisis, 
calling it ``reform,'' suffice it to say that is a little 
ambitious.
    Mr. Chairman, the more we hear about Dodd-Frank the less 
there is to like, and I look forward to our committee's 
continued examination of this bill during today's hearing, and 
I yield back.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from California, Mr. Baca, is 
recognized for 2 minutes.
    Mr. Baca. Thank you very much, Chairman Neugebauer, and 
Ranking Member Capuano, for calling this hearing.
    And I also want to thank the witnesses for being here this 
morning. Thank you all.
    It has been almost 2 years since the passage of the Dodd-
Frank legislation, yet we have not had an opportunity to 
implement all aspects of the Frank-Dodd legislation. So as we 
begin to look at it, it seems like from the other side of the 
aisle they want less regulations, but we have to keep in mind 
that the regulations are good because we have to protect the 
consumer and the stockholders, such as what happened with 
JPMorgan in that area. If we don't have these regulations, then 
what is going to happen?
    It is important that we continue to protect them, to assure 
that the consumer is protected, and the stockholders are 
protected in the area. And I think having the regulations are 
very important.
    And while our economy has not yet fully recovered from the 
financial crisis that got us in this mess, I am proud that we 
now have the tools to prevent another crisis. That means having 
the tools to have the oversight and making sure that we have 
the enforcement. We have not done a lot of the enforcement that 
needs to be done.
    And it is easy to say, let's not have these regulations. 
Well, look at what happened with the Supreme Court making the 
decision on independent expenditures that can be given out. 
Now, you have all kinds of independent expenditures that are 
going on, and everybody says, ``I wish we could regulate 
them.''
    We need regulations. Regulations are important to a lot of 
us.
    And again, when the situation was made about buying a car, 
or not having access to credit, we want to make sure that the 
individuals who are getting credit are able to pay for whatever 
they are borrowing to, as well, because that is taxpayer money 
that is being used, and we have to protect taxpayer money.
    Instead, Congress needs to work together and--we need to 
all work together in trying to get our fiscal house in order, 
to compromise by making spending cuts, find new resources of 
revenue to support our economy. With that in mind, I hope that 
we can strike a tune instead of focusing on partisan talking 
points, and that seems like what you have heard on both sides 
here.
    Over reform, we need to stop the abuse and work together on 
trying to find solutions to make sure that we protect the 
American consumer and so they have more confidence in us.
    With that, I yield back the balance of my time.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from New Mexico, Mr. Pearce, is 
recognized for 2 minutes.
    Mr. Pearce. Thank you, Mr. Chairman.
    I am listening with interest to our friends on the other 
side of the aisle. I think my objection to what is occurring in 
Dodd-Frank is that regulators were sitting in the room with MF 
Global as they were making the decisions and no one said a 
word. Then, with JPMorgan, 57 regulators were in that building.
    I think if we were to tighten up the regulations that were 
in place, and then if we need more that would be fine. But what 
I am hearing now in New Mexico is that the safety and soundness 
interviews are no longer preeminent. They have been replaced by 
the compliance reviews, and they are telling me if they make a 
clerical error, they could face a $50,000 fine for a clerical 
error on something in New Mexico.
    Nobody in New Mexico caused the problem on Wall Street, and 
yet they are getting stuck with this regulation which causes--
just this past weekend, I was visiting a small cabinetmaker in 
Grants, New Mexico. Grants is just decimated. Their economy is 
in horrible shape, and yet this guy--whose family started this 
little cabinet shop, his father did--couldn't get a $50,000 
loan. He has plenty of equity, and he has never been late on 
payments, but he couldn't get a $50,000 loan to just kind of 
get him through these rough periods. So they are sitting there 
hiring fewer people, and laying people off.
    We hear that across New Mexico and I will guarantee that 
none of the problems on Wall Street originated there, but when 
it came time to regulate, we regulated the Main Street small 
banks and we let, say, Fannie Mae and Freddie Mac go completely 
unregulated. And so those are my objections. I agree with the 
friends on the other side of the aisle that we should be 
sitting here discussing it, but let's hold the regulators 
accountable that are in the room allowing things to go on 
before we start laying on new regulations to people who weren't 
even involved in the problems.
    I yield back my time. I thank the chairman for giving me 
the opportunity to speak.
    Chairman Neugebauer. I thank the gentleman.
    I ask unanimous consent to make a letter from the Credit 
Union National Association a part of the record today. Without 
objection, it is so ordered.
    We will now turn to our panel: Mr. Michael Flores, chief 
executive officer for Bretton Woods, Incorporated; Mr. Jim 
Purcell, chief executive officer, the State National Bank of 
Big Spring, Texas; Ms. Lynette Smith, president and chief 
executive officer, Washington Gas Light Federal Credit Union; 
Mr. Jess Sharp, managing director, Center for Capital Markets 
Competitiveness, U.S. Chamber of Commerce, on behalf of the 
Chamber and also the Coalition for Derivatives End-Users; Mr. 
Garrick ``Gary'' Johnson, president, American Flooring 
Installers, LLC, on behalf of the Ohio Hispanic Chamber of 
Commerce; Mr. David Min, assistant professor of law at the 
University of California Irvine School of Law; Ms. Deyanira Del 
Rio, chair of the board of directors, Lower East Side People's 
Federal Credit Union; and Mr. Gregory Smith, chief operating 
officer and general counsel, Colorado Public Employees' 
Retirement Association.
    Without objection, your written statements will be made a 
part of the record, and you will be each recognized for 5 
minutes to summarize your testimony.
    Mr. Flores, you are recognized for 5 minutes.

 STATEMENT OF MICHAEL FLORES, CHIEF EXECUTIVE OFFICER, BRETTON 
                          WOODS, INC.

    Mr. Flores. Thank you, Mr. Chairman.
    And good morning, members of the committee.
    My firm provides consulting and research services to 
commercial banks, credit unions, and alternative financial 
services providers. I have more than 30 years of experience in 
banking and consulting and have published several articles and 
studies on the financial services industry, including issues 
addressing overdrafts, short-term credit alternatives, and 
general purpose reloadable prepaid and payroll cards.
    Because this hearing is about the consequences of Dodd-
Frank on communities, small businesses, and individuals, I am 
here to describe both my analysis of the issue as well as to 
relate comments from my clients about their assessment.
    In general, while there is a need to address the causes of 
the financial meltdown in 2008, there are aspects of Dodd-Frank 
that are having a disproportionate and negative impact on 
financial services providers that played no role in the 
financial crisis. Small businesses and the 60-plus million low- 
to moderate-income consumers are particularly impacted.
    Contrary to making financial services more available, 
affordable, and consumer friendly, the increased restrictions 
and compliance costs are reducing services to small businesses 
and consumers, which ultimately has a negative impact on the 
economic well-being of the communities they serve. 
Additionally, many of the 6,700 community banks and 7,000 
credit unions are burdened with legacy operating costs and 
dated technologies that inhibit their ability to profitably 
serve their customers. Local small businesses and LMI 
consumers--low- to moderate-income consumers--suffer as a 
result.
    Resources that could be used to update technologies and 
create more efficient operations are now allocated to 
regulatory and compliance purposes. Both transaction accounts 
and credit options are impacted. Our own studies indicate that 
it is unprofitable for most banks and credit unions to 
individually underwrite loans under $5,000.
    The traditional options of overdrafts, credit card 
advances, and home equity loans are less viable today because 
of the poor economy and regulations. With the reduction of 
overdraft and interchange fees, many banks have eliminated free 
checking accounts. The reduction of interchange fees has 
actually resulted in what I would term a wealth transfer from 
consumers to merchants.
    I contacted several of my clients to solicit their feedback 
on these issues. I have listed their quotes in my written 
testimony but will summarize the thoughts here.
    The consensus of the responses include, and it has been 
mentioned here by the Members: a substantial increase in 
compliance costs for banks and credit unions; increased fees 
for small businesses and consumers; decreased products and 
services; an increase in the number of underbanked, and now the 
new term ``de-banked'' individuals; and a decrease in the 
number of branches in low- to moderate-income markets as banks 
attempt to reduce expenses.
    Other more specific comments include, ``Of the almost 400 
rulemakings required by the law, only a quarter have been 
finalized, while 36 percent have not even been proposed.'' A 
significant decline in traditional wholesale purchasers of 
residential mortgages from mortgage bankers and brokers reduces 
access to mortgage credit, particularly for those without an 
established relationship with a bank.''
    Something very specific but mentioned several times was 
that the requirement to get new appraisals and updated credit 
reports on renewals and existing loans creates extra costs to 
the consumer. This requirement is regardless of the market or 
strength of the customer.
    People talked about Section 1071 of Dodd-Frank having a 
chilling effect on small business lending. There are others 
that deal with unaffiliated network routing requirements on 
government benefits on prepaid cards as well as now the 
requirement to get State money transmitter licenses for prepaid 
card program managers. The remittance rule is going to drive up 
costs and reduce competition for consumer remittances to 
foreign countries.
    And of course, the limited functionality of prepaid cards 
from large issuers--those banks over $10 billion in assets. As 
a matter of fact, Congressman Frank, in a letter to Fed 
Chairman Bernanke dated February of this year, states that the 
Board's decision to condition the reloadable prepaid card 
exemption from interchange fee restrictions on the card being 
the only means of access to the underlying funds associated 
with the card might inadvertently result in consumers not 
having access to useful features and services.
    Dodd-Frank has layered significantly more regulations over 
existing regulations to the point of making the traditional 
business model for community banks and credit unions almost 
unworkable. At the same time it is creating roadblocks to 
innovators such as alternative financial services providers who 
are working diligently to address the underbanked segment of 
our society.
    In essence, some provisions of Dodd-Frank are solutions 
looking for problems--problems that do not exist for the 
majority of financial institutions in this country.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Flores can be found on page 
55 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Flores.
    Mr. Purcell, you are recognized for 5 minutes. Thank you.

   STATEMENT OF JIM R. PURCELL, CHAIRMAN AND CHIEF EXECUTIVE 
     OFFICER, THE STATE NATIONAL BANK OF BIG SPRING, TEXAS

    Mr. Purcell. Thank you, Chairman Neugebauer, Ranking Member 
Capuano, and members of the subcommittee. I am Jim Purcell, CEO 
of the State National Bank in Big Spring, Texas.
    In order for you to understand a little bit about me, I was 
raised on a ranch in eastern New Mexico. I was about 20 miles 
from the town of San Jon, and for those who do not know where 
San Jon, New Mexico is, it is a bastion of 300 or 400 people 
and it is right between--or was when I was there--``Rest Stop'' 
and ``Resume Speed.'' So, it was not a very large place.
    When I started the first grade, my teacher had some things 
to teach us, and one of the first things was, what do you do 
when you come to a railroad crossing? You stop, look, and 
listen.
    I would humbly urge you to do the same with regard to this 
bank regulation, and more particular, to the Dodd-Frank Act. 
Currently this Act, and inclusion of the CFPB, has and will 
have implications on community banks across America, much more 
than what was stated when it was passed and much more than I 
could have dreamed would affect us.
    In quoting Senator Dodd, ``Community banks which were not 
responsible for the crisis will pay lower premiums for deposit 
insurance and continue to work with their existing regulators. 
And in a nation with more than 6,000 banks, the bulk of the 
bill's new regulations apply only to a few dozen of the largest 
ones.''
    Jennifer Kelly, Senior Deputy Comptroller for Mid-Size and 
Community Bank Supervision of the OCC stated, ``Regardless of 
how well community banks adapt to Dodd-Frank Act reforms in the 
near to medium term, these new requirements will raise costs.''
    The President's Executive Order of January 18, 2011, urged 
independent agencies to propose a regulation only upon a 
reasoned determination that its benefits justify its cost. When 
the stated goals by both the proponents and opponents of Dodd-
Frank disclosed that community banks weren't the problem and 
shouldn't be affected, we should have a clear starting point to 
undo the harm and consequences of this legislation.
    State National Bank is over 100 years old. We have survived 
droughts, depressions, and recessions, and our motto after the 
1930s bank holiday was ``time-tried and panic-tested.'' We have 
had examples of time-tried and panic-tested recently in the 
last 4 or 5 years.
    We have had customers who went out of business in the 1950s 
drought, and then came back in the 1970s and paid their 
obligations. We have had customers who sold all of their 
collateral and paid what they could on their notes in the mid-
1980s during the Texas bad days and they are continuing to make 
payments with no collateral, never missing a payment for 24 
years.
    We have relied on our handshake for over 100 years. That is 
a commitment of trust and loyalty and commitment both to our 
customers and from our customers.
    In the past, we have wired money to Europe, to a stranded 
foreign exchange student or to a retiree whose purse was 
stolen. We didn't know the exchange rate in Spain or France. We 
didn't know the fee that was being charged upon receipt. But we 
did know our customer needed help and we provided that.
    This month, we had a customer who had a family problem and 
a need in Mexico. We could not wire him the money because we 
did not know the exchange rate or the fees which we would be 
charged if we abided by the proposed rule.
    Our bank, through the years, has made consumer real estate 
loans to purchase and occupy the home in which they would live. 
We never sold the loans; we serviced the loans. We didn't 
charge any application fees, origination fees, or any other 
type of fee.
    They were typically 5-year balloon notes, which under the 
proposal would not be allowed. We would have the customer put 
up 20 percent, and we would put up 80 percent.
    If a customer paid his own taxes and insurance, if he paid 
as agreed, we would renew the loan, keeping the payment 
schedule the same. That is how it was then; that is not how it 
will be under the proposals.
    Now, our customers have a dilemma: Where do we turn? 
Loyalty, service, our bank knowing our character, simple 
solution for simple needs will be the sacrifices.
    They will end up getting toll-free numbers, and application 
fees. They will get to speak to more people with one problem 
than what we even employ at our bank.
    And then the next question comes, do we move all of our 
business to that megabank? Our bank's compliance costs continue 
to increase with the CFPB. We are starting with 40 years worth 
of regulation and adding to that.
    But who pays the price? When you disregard the needs of the 
community and the customer to make everyone the same, who 
suffers? The customer pays the price of additional compliance 
or the product will be sacrificed.
    I would like to ask you to do the same thing that my first 
grade teacher, Ms. Olen, said: Stop, look, and listen. If we 
continue to disregard reality and stack regulation upon 
regulation with no thought of the consequences, we will not be 
able to cross the proverbial track to serve our customers.
    I thank you for the time, and I hope that this makes a 
difference.
    [The prepared statement of Mr. Purcell can be found on page 
78 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Purcell.
    Ms. Smith, you are recognized for 5 minutes.

   STATEMENT OF LYNETTE SMITH, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, WASHINGTON GAS LIGHT FEDERAL CREDIT UNION, ON BEHALF 
  OF THE NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS (NAFCU)

    Ms. Lynette Smith. Good morning, Chairman Neugebauer, 
Ranking Member Capuano, and members of the subcommittee. My 
name is Lynette Smith and I am testifying on behalf of NAFCU.
    I serve as the president and CEO of Washington Gas Light 
Federal Credit Union in Springfield, Virginia. We have 8,000 
members and we are $87 million in assets. Thank you for the 
opportunity to testify here today about the impact the Dodd-
Frank Act has had on credit unions.
    Credit unions were not the cause of the financial crisis. 
Still, they are significantly impacted by Dodd-Frank, such as 
being subject to the rulemaking authority of the new CFPB.
    We are very concerned that efforts in Dodd-Frank to reign 
in bad actors and greed on Wall Street will inevitably have a 
negative impact on credit unions, especially when it comes to 
regulatory and compliance burdens. One of the biggest impacts 
Dodd-Frank has had on credit unions comes from the debit 
interchange price cap. Market forces have already seen some 
credit unions begin to have higher debit card costs and 
declining interchange revenue.
    Many of the regulations flowing out of Dodd-Frank are well-
intended. However, for credit unions, they are often a solution 
in search of a problem.
    I cannot overemphasize how burdensome and expensive Dodd-
Frank-related compliance costs will be for credit unions. We 
can only hope Congress will urge regulators to do more robust 
cost-benefit analysis of potential regulations and look for 
areas to streamline. More importantly, we hope that they will 
follow up once the regulations are in place and make changes if 
these costs are too high.
    Washington Gas Light has a staff of 17. My employees and I 
already spend countless hours trying to comply with the never-
ending changes to laws and regulations.
    My credit union is healthy, growing, and we have very good 
loan demand. Still, rather than looking to hire a new loan 
officer, the growing compliance burden means that I must first 
look to hire a compliance officer. While we still try to make 
the loans to our members' needs, the staff time dedicated to 
compliance means that members have to wait longer for their 
loans.
    Under the Dodd-Frank Act, the Financial Stability Oversight 
Council has a duty to facilitate regulatory coordination. We 
hope that you will take this duty seriously, for it is not any 
single regulation but an accumulation of regulations from 
numerous regulators operating independently of each other that 
magnifies the regulatory burden credit unions face today.
    Attached to my written testimony is a letter NAFCU sent to 
Treasury Secretary Geithner last month on this issue. The CFPB 
remittance rule is nearly 800 pages and only exempts those 
making fewer than 25 transfers per year.
    A NAFCU survey found that nearly 84 percent of those credit 
unions that provide remittances make more than 25 transfers a 
year and a majority of those barely break even or will have to 
operate at a loss. The new compliance costs for this rule may 
force many of the credit unions and financial institutions to 
eliminate this service.
    The CFPB recently released its semi-annual regulatory 
agenda, which outlines 27 different areas where potential 
rulemaking may occur in the future. It will be very challenging 
for my staff because we are limited in resources. I am not sure 
how I will keep up.
    In conclusion, while credit unions were not the problem, 
the Dodd-Frank Act impacts credit unions in many ways and it is 
increasing their regulatory burden. Congress must continue 
vigorous oversight and look for ways to act on regulatory 
relief. Regulators, on the other hand, must also accept 
responsibility for this regard and the newly created FSOC 
should make regulatory coordination part of its focus.
    Thank you for your time, and for the opportunity to testify 
here before you today. I will welcome any questions you may 
have.
    [The prepared statement of Ms. Smith can be found on page 
100 of the appendix.]
    Chairman Neugebauer. Thank you.
    Mr. Sharp, you are recognized for 5 minutes.

STATEMENT OF JESS SHARP, MANAGING DIRECTOR, CENTER FOR CAPITAL 
MARKETS COMPETITIVENESS, U.S. CHAMBER OF COMMERCE, ON BEHALF OF 
THE U.S. CHAMBER OF COMMERCE AND THE COALITION FOR DERIVATIVES 
                           END-USERS

    Mr. Sharp. Chairman Neugebauer, Ranking Member Capuano, and 
members of the subcommittee, it is a pleasure to be here with 
you this morning.
    My name is Jess Sharp. I am the managing director of the 
U.S. Chamber's Capital Market Center, and I am here today 
representing more than 300 end-user companies and dozens of 
trade associations that have been active in the Coalition for 
Derivatives End-Users. The Coalition represents companies 
across the economy in manufacturing, agriculture, energy, and 
other sectors all united in one respect: They use derivatives 
to manage risk, not to create it.
    Throughout the legislative and regulatory processes of the 
Dodd-Frank Act, the Coalition has advocated for strong 
regulation that brings transparency and stability to the 
derivatives market while avoiding needless costs on end users.
    So how do end users use derivatives and why is that 
relevant to consumers? Many auto manufacturers, for example, 
use derivatives to manage commodity, foreign exchange, and 
interest rate risk resulting from the design, manufacture, 
sales, and financing of vehicles. The price of commodities used 
in production, such as aluminum and copper, fluctuate with the 
market, so companies can use derivatives to lock in prices and 
long-term supply arrangements sometime years in advance of 
delivery.
    On the revenue side, manufacturers that export their 
products need to hedge currency exposure that arises from 
production costs being in U.S. dollars and revenue in pesos, or 
Canadian dollars, or Euros, and they can use derivatives like 
foreign exchanges swaps to do that.
    Auto manufacturers and other big equipment manufacturers--
for instance, in the construction or agriculture world--also 
finance the sale of their products. Derivatives enable these 
companies to match the interest rate characteristics of the 
funding available from the capital markets to put together 
their loan portfolios with the financing needs of their 
customers.
    The energy company members of the Coalition also rely on 
derivatives heavily because of the nature of the business of 
energy production and transmission. For example, in the case of 
electricity, which must be produced and consumed 
simultaneously, cannot be stored, and has huge exposure to fuel 
markets in coal, natural gas, and uranium, those physical 
energy markets are volatile and unpredictable, but hedging with 
derivatives allows energy companies to lock in prices and 
provide thousands of customers with electricity and natural gas 
at a low fixed price.
    So these are just a few examples of the ways in which end 
users use derivatives, and I want to talk quickly just about 
the impact of Dodd-Frank and sort of where we are today. As I 
said at the top, the Coalition has been supportive of increased 
transparency in the OTC market and we are fully supportive of 
the overall move toward clearing and exchange trading. That is 
not something with which we have argued.
    However, we do remain concerned that a few regulations that 
were never intended by Congress to affect Main Street companies 
will make derivatives either more expensive or altogether 
unavailable for end users.
    Now, the good news is we have seen very, very strong 
bipartisan support for measures that would shield Main Street 
businesses from this kind of regulatory overreach. This 
committee has been a very good ally for end users.
    And I would like to thank you for your hard work in passing 
two bills in particular through the House that have addressed 
some of these unintended consequences, or would if enacted. The 
first, H.R. 2682, which this committee approved unanimously and 
the full House approved 370 to 24, creates an exemption for 
margin requirements for nonfinancial businesses.
    Imposing unnecessary margin requirements on these 
nonfinancial end users would divert working capital away from 
productive business use. And again, despite clear evidence that 
Congress did not intend for regulators to impose margin 
requirements on end users, the prudential banking regulators 
have proposed to do so, and this would be a huge capital drain 
from the economy and could be a jobs issue, as well.
    And I would point out that this week, Chairman Bernanke did 
address this issue in testimony and said that he would be 
supportive of the legislation that has passed the House.
    A survey by the Coalition, just to put a fine point on the 
impact here, found that imposing a 3 percent margin requirement 
on OTC derivatives could cause the loss of 100,000 to 120,000 
jobs and reduce capital spending by up to $6.7 billion, and 
that is just extrapolated to the S&P 500. So the passage of 
H.R. 2682 in particular will help shield Main Street businesses 
from these huge cash calls that they are very concerned about, 
which could be a reality if these regulations are finalized as 
is.
    The second bill, H.R. 2779, which this committee also 
approved unanimously and passed the full House 357 to 36, 
prevents internal interaffiliate trades from being subject to 
regulatory burdens that were intended to market-facing swaps 
and will ensure that companies are not forced to abandon 
hedging through central risk mitigation centers. These 
centralized risk mitigation centers generate economic savings 
by allowing U.S. companies to manage commercial risk more 
efficiently and secure better pricing for derivatives 
transactions. And this savings can be either passed on to 
consumers or they can use that savings to grow their businesses 
and create jobs.
    The overwhelming bipartisan and collegial process that led 
to the passage of these two bills in the House demonstrates 
that these two bills provide noncontroversial approaches to 
helping grow businesses and improve the economy through end-
user companies. So, we are hopeful that the Senate will take up 
and pass these bills quickly.
    Ensuring that congressional intent is followed is paramount 
here, and if legislation is not enacted to clarify the 
statute's intent, end users could use the critical management 
tools, and that is bad for Main Street businesses, it is bad 
for their customers, and it is bad for the economy.
    Thank you. I am happy to respond to your questions.
    [The prepared statement of Mr. Sharp can be found on page 
84 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Sharp.
    Mr. Johnson, you are recognized for 5 minutes.

  STATEMENT OF GARRICK ``GARY'' JOHNSON, PRESIDENT, AMERICAN 
   FLOORING INSTALLERS, LLC, ON BEHALF OF THE OHIO HISPANIC 
                      CHAMBER OF COMMERCE

    Mr. Johnson. Good morning, Chairman Neugebauer, Ranking 
Member Capuano, and members of the subcommittee. My name is 
Gary Johnson, and I am the owner, president, and CEO of a small 
but fast-growing construction business in Toledo, Ohio. It is 
called American Flooring Installers.
    I am testifying today on behalf of the Ohio Hispanic 
Chamber of Commerce, where I am currently the chairman. The 
primary objective of our Chamber is to promote the development 
and continued growth of Hispanic businesses in the Ohio 
community. It is a pleasure to appear before you today.
    In my testimony this morning, I want to tell you a little 
bit about my company and also provide you with a personal 
account of some of the ways in which I am using financial 
products and services to run and grow my business. I know that 
I am here to talk about the effects of regulation, but I hope 
to tell you about how my business works, and how I use 
financial products, to help you consider proposals for new 
regulations.
    My company currently has 23 full-time employees and we had 
gross revenues in 2011 of approximately $1.8 million. I am 
looking forward to hiring additional workers and we are on 
track to double our revenues again this year. One part of 
meeting that goal is the financial products and services that 
we and our customers use.
    A healthy financial sector is important for business of all 
sizes, especially businesses like mine. In the business 
community, many of us are concerned about the new financial 
sector law enacted by Congress, which is indirectly hurting 
small businesses through tighter lending practices and new 
increased fees and routine financial services for businesses 
and consumer banking customers.
    Among the subjects that always seem to come up when I talk 
to other Chamber members is the challenge of cash flow. Many of 
us believe that the challenge is exacerbated by the law enacted 
by Congress in response to the financial crisis.
    While less regulation in some areas has contributed to the 
necessity for government to act, overregulation has made it 
extremely hard to obtain the necessary funding needed to grow 
many small businesses. We are concerned that overregulation is 
making it harder for banks to make credit card loans to us and 
harder for our customers to use payment cards.
    These cards are essential for cash flow on both the expense 
and revenue side of small business. Other options, such as 
lines of credit, either take too long to obtain or simply are 
not available. When I accept credit cards from my customers, I 
get paid faster, and the time-value of money means I get paid 
more, relatively speaking.
    One tool that I am increasingly using to enhance my cash 
flow involves the acceptance of payment cards using a device 
attached to a mobile phone. This device allows me to accept the 
credit care and debit payments while I am face-to-face with a 
customer.
    If I am out on a jobsite using this device, I know whether 
or not I am going to get my money within the next 3 days. If 
the payment is declined, I know about it right then and there, 
and I can address that with my customer. If authorization goes 
through, then I know I can put that money back to work within 3 
days.
    I accept anywhere between $2,500 to $10,000 per month on 
cards and it would be great if more of my customers paid me 
this way instead of sending a check. Again, accepting payment 
cards enables me to get paid typically within a few days.
    This is light years faster than the invoice system I 
otherwise use that typically results in me receiving a payment 
from a customer by check, which takes as long as 60 to 90 days. 
Also, with payment cards, small businesses do not need to worry 
about bounced checks.
    Even though I pay a fee to accept card payments, I prefer 
them as a payment method because I get access to funds almost 
immediately. That allows me to put the money back to work in my 
business in near real time. When I receive payment from my 
customers more quickly, I can put the money to work quickly in 
my growing business.
    If you consider what I pay to accept payment cards as 
opposed to the cost of me essentially floating a loan to a 
customer for 60 to 90 days, when I could be putting the cash 
back to work in my business, it is a no-brainer. I have learned 
not from a book but from my business and about the time value 
of money. I want to keep going back to that because knowing 
time value of money is one of the keys to successfully growing 
your business.
    The situation I just described hits me in two ways. Even if 
I was not growing business during the 60-to 90-day period, I 
have to wait to have the invoices paid by check. I have to pay 
the employees who work for the job out of the other funds. I 
lose the use of the money and the money that I am owed. I 
cannot even earn interest on it. As I said, I am basically 
extending a loan.
    When I am growing my business, the impact is even worse. In 
my view, if laws and regulations make it harder for banks to 
make payment cards available to my customers or make it harder 
for companies to develop innovative products like the mobile 
phone device, that hurts my business.
    Of course, like all small businesses, I want to pay less 
for almost everything that I use in my business. However, if 
the State of Ohio limited what it could charge to install a 
wood floor in a government building--I do a lot of work for the 
State of Ohio--to some percentage of my costs, I guarantee you 
that I would do best to recover my costs across the rest of my 
lines of business.
    If the limit was too much, I would stop doing that line of 
business, but no matter what, I would try to grow other areas 
of my business as opposed to devoting resources to that area of 
business.
    Let me be clear: I do support having some rules of the road 
as long as I know what those rules are and they make it easier, 
or I should say better, for both my customers and I to do 
business. Of course, it would not be fair if the rules were 
drawn up in favor--and I certainly do not want someone 
dictating basic choices or business decisions.
    I think in many cases, we swing back and forth too far in 
both directions. I am a small business. I can't always see it 
coming and I can't always duck.
    Not only are extremes bad but there is not--I am sorry, but 
there is the not knowing that is coming. So I just want to say, 
if Dodd-Frank or any other legislation like it does not have 
any things that I have just talked about, I would likely oppose 
it or whatever parts of it affect or hurt my business.
    While I am here, I also want to talk about how my business 
uses credit cards for purchasing so that I can consider--
    Chairman Neugebauer. Mr. Johnson, if you can kind of wrap 
up there--
    Mr. Johnson. Oh, sure.
    In my experience, any regulation that increases costs to 
businesses regardless of the industry will ultimately be borne 
by the business customers and from higher prices. It is 
difficult for me to characterize exactly how the financial 
sector law is enacted in Congress because I am not a banker. 
Other witnesses are better suited to speak to these issues.
    What I can say is in the wake of a financial crisis, it is 
crucial that Congress and regulators not react so strongly that 
good parts of banking that we rely on--the parts that are not 
involved in the financial crisis--cease to be viable and 
healthy. When small business is healthy, the economy is 
healthy.
    And I will be more than happy to answer any questions.
    [The prepared statement of Mr. Johnson can be found on page 
59 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Johnson.
    And now, Mr. Min, you are recognized for 5 minutes.

    STATEMENT OF DAVID K. MIN, ASSISTANT PROFESSOR OF LAW, 
         UNIVERSITY OF CALIFORNIA IRVINE SCHOOL OF LAW

    Mr. Min. Chairman Neugebauer, Ranking Member Capuano, and 
members of the subcommittee, my name is David Min and I am an 
assistant professor at the University of California Irvine 
School of Law where I teach and research in the area of banking 
law and financial regulation. I thank you for the opportunity 
to testify here today on the topic of the impacts of the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, 
as I believe this is an issue that has been fraught with 
confusion.
    I would like to make three main points in my testimony 
today: First, the negative impacts of Dodd-Frank have been 
greatly exaggerated. The fact is that Dodd-Frank has not had 
much of an impact to date because most of it has not yet been 
implemented, thanks in large part to a very successful campaign 
by Wall Street lobbyists who have spent a record $302 million 
in 2010 alone to delay and undermine the implementation of this 
law.
    As of July 2, 2012, less than 30 percent of the rules 
mandated by Dodd-Frank have been issued in their final form, 
with most of these issued only in the last few months. It is 
thus difficult to understand the claim that Dodd-Frank has 
resulted in large regulatory costs, given that it has mostly 
not yet taken effect.
    Second, most of the negative effects being blamed on Dodd-
Frank are actually highly speculative and often misplaced. 
Because of the severe delays in implementing Dodd-Frank, we do 
not yet have much of a reasonable basis to know what Dodd-Frank 
will look like, let alone what the impact of those rules might 
be.
    Thus, almost all the claims being made about the regulatory 
burdens created by Dodd-Frank have been based on unfounded and 
often wildly incorrect speculation. For example, many critics 
of Dodd-Frank have claimed that its proposed regulation of 
derivatives would dramatically increase the compliance cost for 
end users who currently utilize these derivatives for hedging, 
such as farmers, energy companies, and airlines, thus 
increasing the cost of our food, energy, and travel.
    This argument has been proven both baseless and wrong. The 
Commodity Futures Trading Commission, the regulatory agency 
responsible for promulgating Dodd-Frank's derivatives 
regulations, did not even release its first set of final rules 
on this issue until last week, and these rules specifically 
crafted a broad exemption for this type of end user, rendering 
this criticism largely moot.
    Similarly, while there has been much grumbling about the 
compliance costs that Dodd-Frank will create for small banks, 
it is not clear that Dodd-Frank actually will lead to increased 
compliance costs for these lenders. The primary evidence cited 
so far that Dodd-Frank will lead to these compliance costs is 
its length, which some have cited as being 2,300 pages, but 
which is actually 848 pages long--still a long bill.
    In fact, the vast majority of Dodd-Frank has targeted non-
bank activities, such as securitization, derivatives trading, 
prop trading, or the activities of banks with over $50 billion 
in assets. The fact is that if you are not a megabank, and if 
you are not running a hedge fund, and you are not dealing in 
products like derivatives or other exotic products, the 
overwhelming majority of Dodd-Frank simply doesn't apply to 
you.
    Indeed, Dodd-Frank may actually reduce compliance costs for 
some small banks since it consolidates a number of regulatory 
rulemaking responsibilities which previously had been scattered 
among the Federal Reserve, the Office of the Comptroller of the 
Currency, the Office of Thrift Supervision, the Federal Deposit 
Insurance Corporation, and the Federal Trade Commission, among 
others, into one central body, the CFPB.
    There has also been a great deal of confusion about the 
negative impacts caused by Dodd-Frank and conflation between 
the negative impacts caused by the financial crisis. Most of 
the burdens on small businesses and consumers being blamed on 
Dodd-Frank, including many of the ones you have heard here 
today, are actually the result of the financial instability 
that led to the enactment of Dodd-Frank in the first place.
    For example, many have blamed Dodd-Frank for leading to 
tightened underwriting standards and a lack of credit 
availability in the marketplace. In fact, the lack of liquidity 
in credit markets was clearly caused by the financial crisis 
and predates even the passage of Dodd-Frank let alone the 
implementation of rules that might have impacted liquidity, 
such as the Qualified Mortgage (QM) standard, which has not 
even been implemented yet.
    My third point is that in considering the impacts of Dodd-
Frank on families, communities, and small businesses, it would 
be irresponsible for us here today to focus merely on the 
negative impacts. We must also consider the many positive 
impacts that this law may have.
    Dodd-Frank was passed with the aim of increasing financial 
stability, improving investor confidence, and enhancing 
consumer protection, and it has been well-documented that these 
goals have enormous benefits for families, communities, and 
small businesses.
    Now, many of us have forgotten recent history. I know 4 
years is a long time in Congress, but the recent financial 
crisis in 2008, as Representative Capuano mentioned, caused 
enormous losses--$19 trillion in lost household wealth. While 
many critics have focused on the 848-page length of Dodd-Frank, 
it should be noted that if this law prevents a similar 
financial crisis from occurring it would actually save American 
households approximately $22.4 billion per page.
    To conclude, the actual impacts of Dodd-Frank have 
unfortunately been far too minimal so far thanks to a 
successful lobbying campaign led by Wall Street to delay Dodd-
Frank's implementation. The impacts of Dodd-Frank, once it has 
been fully implemented, are likely to be significant and 
positive insofar as it will reduce the likelihood of another 
major financial crisis, restore the shaken confidence of 
investors who have lost faith in American capital markets, and 
prohibit predatory lending practices.
    I urge the members of this subcommittee to make all efforts 
to help facilitate the robust and prompt implementation of this 
law. I thank you again for giving me the opportunity to 
testify, and I look forward to your questions.
    [The prepared statement of Professor Min can be found on 
page 64 of the appendix.]
    Chairman Neugebauer. Thank you.
    Ms. Deyanira?

STATEMENT OF DEYANIRA DEL RIO, CHAIR, BOARD OF DIRECTORS, LOWER 
            EAST SIDE PEOPLE'S FEDERAL CREDIT UNION

    Ms. Del Rio. Good morning, Chairman Neugebauer, Ranking 
Member Capuano, and members of the subcommittee, and thank you 
also for the opportunity to testify today at this hearing. My 
name is Deyanira Del Rio and I am the board chair of the Lower 
East Side People's Federal Credit Union in New York City. We 
are a small, not-for-profit community development financial 
institution that has $33 million in assets and serves 6,000 
members in New York City.
    We serve low-income New Yorkers Citywide, but we have a 
particular focus on two of New York City's poorest 
neighborhoods, including Central Harlem and parts of the Lower 
East Side. And I will just say that while we are close to Wall 
Street geographically, we are very far philosophically and in 
terms of our members.
    I am pleased to comment on the Dodd-Frank Act and the 
Consumer Financial Protection Bureau from the perspective of 
our small financial institution and the communities we serve. 
So I have four main points and I will try to do them speedily.
    First, I want to say that from our point of view, the Dodd-
Frank Act and the other financial reforms of recent years have 
not harmed our credit union in any way in terms of our ability 
to provide low-cost loans and services to our members. If 
anything, our credit union has improved in performance and 
profitability in recent years: our lending has increased; we 
have flexible but responsible underwriting standards that we 
don't think will be curtailed by any of the regulation; we have 
95 percent of our members' deposits in our credit union 
reinvested back into our neighborhoods in the form of 
affordable housing, small business, and consumer loans; and we 
continue to provide free checking accounts to all of our 
members who maintain at least $25 in our credit union.
    We see more and more members coming to us, leaving the 
banks, which are becoming increasingly unfriendly, particularly 
to lower-income customers. We also have not experienced any 
decrease that is noticeable in our revenue as a result of the 
credit card and overdraft reforms of recent years, although I 
will say that it is primarily because we didn't engage in the 
types of deceptive practices that were curbed and addressed in 
the CARD Act nor did we ever become reliant on these high 
overdraft fees that a lot of banks and even credit unions 
turned into their profit centers. We have never offered those 
kinds of products and have chosen instead to offer traditional 
overdraft lines of credit and other responsible services to our 
members.
    I will note that also, I think as others have said, that 
Dodd-Frank does make important accommodations for small 
institutions like ours. So, for example, as an institution with 
less than $10 billion in assets, we will be supervised for 
compliance with consumer financial protection laws by our 
existing regulator, the National Credit Union Administration. 
And further, the CFPB is required, as we know, to assess the 
impact of its rulemaking on financial institutions and small 
businesses like ours.
    My second point is that to the extent our credit union is 
facing challenges, they overwhelmingly result from the 
financial crisis and the ongoing economic downturn and not from 
excessive regulation, and I can't stress this enough. Our 
credit union, also like many other credit unions, had no part 
in causing the crisis, but we are certainly feeling the effects 
and the costs through continued unemployment, the depressed 
interest rate environment that we are operating in, and the 
ongoing foreclosure crisis.
    These are the threats to our institution over the long term 
and certainly to our members and our community's well-being. 
Lack of financial regulation we see as actually causing the 
stresses that our institution now has to work around.
    My third point is that in response to the crisis, strong 
prudential regulation and consumer protections are needed to 
prevent future crises and to ensure fairness and opportunity 
for low-income people and communities. The repercussions of the 
economic crisis are going to be felt in low-income communities 
like ours for many years to come.
    I will give you one grim statistic, which is that the 
median net worth of American families fell by almost 40 percent 
between 2007 and 2009. These are losses that will take families 
years or possibly generations to recover.
    In addition to lost wealth, we are concerned that a growing 
number of our members and Americans generally are now 
contending with damaged credit histories as a result of abusive 
lending practices, the foreclosure crisis, job losses, and just 
the overall economic downturn, and this is particularly 
distressing for us because damaged credit histories not only 
impede people's access to fairly priced loans and credit, but 
increasingly they are being used outside of the credit sphere 
and can block people's opportunities for affordable housing, 
for jobs--increasingly employers are denying people jobs based 
on having damaged credit--and many other economic opportunities 
that people will be denied access to because of this damaged 
credit, often through no fault of their own.
    So Congress enacted the Dodd-Frank Act in the wake of 
undeniable regulatory failure and abusive lending practices. It 
includes such provisions as a requirement that lenders consider 
borrowers' ability to repay loans. We think this is a 
fundamental tenet of responsible lending that was lost in the 
years leading up to the crash, and we support these and other 
common-sense regulations which we think all responsible lenders 
should embrace.
    And my last point is that we believe the Consumer Financial 
Protection Bureau has a vital role to play in regulating and 
leveling the playing field for both depository and non-bank 
financial institutions. Our credit union welcomed the creation 
of the CFPB as the first Federal agency tasked specifically 
with protecting consumers in the financial services 
marketplace, something that we certainly could have used in the 
years leading up to the crash when neighborhoods like ours and 
across the country were flooded with high-cost, destabilizing 
forms of credit that ultimately caused havoc for the economy as 
well as for neighborhoods.
    This regulatory failure--the fact that the seven regulatory 
agencies didn't catch or prevent the crisis--is particularly 
distressing to us because many of the problems we are facing 
could have been avoided had regulators paid meaningful 
attention to the harms that reckless lending was causing on 
families and communities. And in fact, this overemphasis on 
what ostensibly is safety and soundness, which is certainly 
important--and we are examined, like all depository 
institutions, for safety and soundness--but by focusing on that 
to the expense of consumer protection, regulators ironically 
failed to detect the broad systemic risk that was being caused 
by predatory lending practices which were, after all, lucrative 
in the short term.
    So we think that the agency has a really important role to 
play in identifying future problems--
    Chairman Neugebauer. Ms. Del Rio, I am going to need you to 
wrap your testimony up.
    Ms. Del Rio. Yes. Okay. So my last point is that I want to 
say that we at the Lower East Side People's Federal Credit 
Union and credit union allies of ours have met with CFPB 
Director Richard Cordray at field hearings and regional 
meetings and weighed in on comment letters like many others 
here. We have so far--I want to note, we have been impressed by 
the approach and the thoughtfulness of the CFPB toward its 
rulemaking, and rather than coming in and issuing decrees, they 
have actually been exceptional in the way that they have 
solicited feedback from small businesses and financial 
institutions as well as Americans, consumers who are being 
affected by the practice.
    We appreciate that and we think that their efforts to 
promote transparency and accountability are going to bring 
benefits to institutions like ours and our communities that are 
going to far outweigh any marginal or short-term costs of 
regulatory compliance.
    So thank you, and I look forward to answering your 
questions.
    [The prepared statement of Ms. Del Rio can be found on page 
50 of the appendix.]
    Chairman Neugebauer. Mr. Smith, you are recognized for 5 
minutes.

  STATEMENT OF GREGORY W. SMITH, CHIEF OPERATING OFFICER AND 
  GENERAL COUNSEL, THE COLORADO PUBLIC EMPLOYEES' RETIREMENT 
                      ASSOCIATION (CoPERA)

    Mr. Gregory Smith. Thank you, Chairman Neugebauer, Ranking 
Member Capuano, and members of the subcommittee. Good morning. 
I am Greg Smith, the chief operating officer and general 
counsel of the Colorado Public Employees' Retirement 
Association (CoPERA). I am pleased to appear before you today 
on behalf of CoPERA.
    With over $39 billion in assets under management, CoPERA is 
responsible for the retirement security of over 480,000 
employees and retirees of State and local government in 
Colorado. Our members include teachers, snow plow drivers, and 
prison guards--regular people, hard-working people, people who 
support small businesses across the State of Colorado and who 
use local banks throughout the State of Colorado.
    Colorado provides over $3.3 billion in annual benefit 
payments to over 95,000 beneficiaries of the Public Employees' 
Retirement Association. Ninety percent of these payments are 
made to beneficiaries living in the State of Colorado. Using 
commonly recognized economic impact measures, such as output, 
value-added, and labor income, and employment, these payments 
in Colorado represent $4.3 billion in output, $1.87 billion in 
value-add, and $1.1 billion in labor income, and over 23,000 
jobs in the State of Colorado.
    The annual benefit payments made by Colorado PERA to our 
beneficiaries represent approximately 3.3 percent of total wage 
income in the State of Colorado. In the rural counties of 
Colorado, this percentage is far greater.
    In some of our counties, PERA benefits payments represent 
over 25 percent of total payroll in that county. This infusion 
of income into the local economies in Colorado creates a 
critical and stable source of income that fuels Main Streets 
and businesses throughout the State of Colorado.
    As an owner of many of the Nation's large and small public 
corporations, our fund is strongly aligned with corporate 
America. We have every interest in its long-term success and in 
its profitability. As a result, we believe in good corporate 
governance, and good corporate governance practices are 
essential to maximize and protect long-term shareowner value 
and interests.
    It is well-established that a key cause of the financial 
crisis was a failure in corporate governance. Our members have 
paid a deep price for that failure. Not only did they suffer 
billions of dollars in investment losses, but many also lost 
confidence in the integrity of our markets and in the 
effectiveness of board oversight of corporate management.
    In the lead-up to the financial crisis, boards of directors 
failed to adequately understand, monitor, and oversee 
enterprise risk and corporate strategy. And far too many boards 
structured and approved executive compensation programs that 
motivated excessive risk-taking and yielded outsized rewards 
for short-term results.
    As the costly fallout of such poor board oversight became 
clear, investors were left with few effective tools to hold 
directors accountable. Congress responded in the Dodd-Frank Act 
by providing investors with some of the tools needed to improve 
market-based oversight of corporate boards.
    Those corporate governance reforms, some of which have yet 
to be fully implemented, have already begun to improve investor 
oversight of boards. Those key corporate governance provisions 
of Dodd-Frank, the benefits of which are described in more 
detail in my testimony, include the following: shareowner 
advisory vote on compensation; independent compensation 
committees; clawback of erroneously awarded compensation; 
enhanced disclosure of incentive-based compensation 
arrangements; and shareowner proxy access.
    To date, only the first of these five important corporate 
governance reforms, the advisory vote on executive 
compensation, has been fully implemented as intended. That 
reform alone has proven highly successful in opening up 
dialogue between boards and shareowners on executive pay 
concerns and has also had an impact on eliminating poor pay 
practices at many companies--practices that were unrelated, and 
in some cases inconsistent with the company's long-term 
performance.
    The other four corporate governance reforms described in my 
testimony await rulemaking by the Securities and Exchange 
Commission and, in some cases, the stock exchanges. These 
provisions are integral in improving oversight and meaningful 
accountability of corporate directors. Thus, CoPERA 
respectfully requests that the subcommittee actively support 
the prompt and effective implementation of these provisions and 
support providing the SEC with the resources they need to 
effectively write and enforce the related rules while at the 
same time continuing to perform their core responsibilities as 
the only agency in the Federal Government whose mission 
includes protecting investors and policing the capital markets.
    Thank you, Mr. Chairman, for inviting me to participate at 
this hearing, and I look forward to your questions.
    [The prepared statement of Mr. Smith can be found on page 
90 of the appendix.]
    Chairman Neugebauer. I thank the gentleman.
    I thank the panel for those opening statements, and we will 
now go to the question-and-answer period. Each Member will be 
recognized for 5 minutes, and the Chair now recognizes himself 
for 5 minutes.
    Mr. Purcell, one of the things that I hear, and you alluded 
to in your testimony from small community bankers, particularly 
who have been used to making what I, when I was in the banking 
business, would call portfolio mortgage loans. These are loans 
that sometimes are $25,000, $30,000, $40,000 for houses in the 
community or outside of town. And a number of those banks have 
quit making those loans because of some of the requirements of 
new regulations.
    There are two things I want you to elaborate on. First, who 
is going to make those loans? Because those loans normally 
aren't securitized and so their only source of funding for 
those loans in the past has been our community banks. And so 
how are the citizens, the families in these little small 
communities, how are they going to buy a house?
    Mr. Purcell. Mr. Chairman, I appreciate the opportunity to 
speak here, and that is a dilemma in our area. We are a rural 
area. We have made loans since the inception of the bank 100 
years ago throughout the community and we filled a need that 
was not being met in that no one was interested in making a 
loan 10 miles from a town of 400 people, we will say, for 
O'Donnell, Texas, that was only on the small acreage.
    We have done 5-year balloon notes. Under the new proposed 
regulation, the 5-year balloon notes will be high-priced. We 
don't charge fees.
    I have had 14 or 15 community banks in our area--our area 
is within 200 miles; there are not a lot of people there--that 
are getting out of the mortgage lending because of the cost. I 
am not certain where those will go, where they will have to go 
to family.
    But the real problem is that if you can't provide that each 
one of those customers, they have family, they have friends, 
and so, ``The bank won't take care of me, you know? I have put 
my money down. I have always paid my obligations as agreed. 
Where do I go?''
    So it is a dilemma. If you want to go to the farm credit 
system, the Federal Land Bank or some of those, they require 80 
acres of land to be there. You can't sell a $25,000 mortgage 
loan in the secondary market for whatever price you pay.
    Chairman Neugebauer. Yes. I think you heard Mr. Min say 
that all of the claims by small financial institutions that 
Dodd-Frank is going to have an impact on them are not true. Mr. 
Purcell, are these community bankers dreaming this stuff up?
    Mr. Purcell. Our customers are not dreaming it up, and they 
are worried.
    I understand that there was a calamity here. Unfortunately, 
for our part of the world in the 1970s and 1980s, we had a 
calamity there. I didn't get these bald spots from banking in 
good times; I got them from bad times.
    We did learn some lessons--and I concur that the customer 
needs to be able to afford it, but if the payments are 
structured to what they would be paying in rent, they have a 
chance to build equity in their home. They have a chance to 
have homeownership.
    But at times, we kind of outsmart ourselves, and we try to 
make people fit in a certain category, and that is one of the 
unique things about our community is that in our particular 
bank, a customer goes to whichever officer they want. I have 
more $500 loans than I do $3 million loans of my customers. It 
is ones that I started with 25 years ago, and we continue to 
try to meet their needs.
    They have something to lose. If you have skin in the game, 
your commitment to paying is much, much better. The bank 
realizes it, and the customer realizes it.
    So we are unique, I guess, in the whole scope of things. I 
don't understand all there is about Wall Street, but we are not 
driving for Wall Street in Big Spring, Texas.
    Chairman Neugebauer. Of course, one of the things that I 
hear from a lot of the smaller community banks, and maybe even 
some of the regional banks, is that the scale and the cost of 
compliance of all of these new regulations obviously impacts 
their ability to deliver some of those services. And so, we 
hear people talking about how we are going to see more 
consolidation in the banking industry, and one of the things 
that I have heard is that there was a call to break up the big 
banks because they were too big, but it almost looks like we 
are forcing a consolidation in the banking industry that 
basically just kind of going the other direction. Would you 
agree with that?
    Mr. Purcell. It is amazing that both--
    Chairman Neugebauer. Let Mr. Flores--
    Mr. Purcell. Okay.
    Chairman Neugebauer. --take that question, thank you.
    Mr. Purcell. I am sorry.
    Mr. Flores. Yes, I would agree with it. I have a colleague 
who teaches commercial lending in most of the graduate schools 
of banking around the country, and that is one of the key 
concerns that they are raising is community bankers, 
particularly those that are in markets that are low-growth or 
no-growth, they have had business model issues before this 
crisis. This has just basically exacerbated that.
    And so with the thin margins they were operating under 
before, with the additional cost and loss of fee income, they 
are looking to sell. And you are right. Who is going to buy 
them? It is obviously the bigger banks, and so the default 
position is that the too-big-to-fail banks will get bigger.
    Chairman Neugebauer. I thank the gentleman, and I think my 
time is up.
    Mr. Capuano is now recognized for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman.
    Mr. Flores, I can't help myself. You do realize that your 
company is named after a place where one of the most--not 
devastating--broad-based regulations in history came out of. 
Bretton Woods is a beautiful place but--
    Mr. Flores. It is.
    Mr. Capuano. --but Bretton Woods resulted in a lot of 
things that--I was actually hoping Dr. Paul would be here 
today; that would be interesting.
    Mr. Purcell, Ms. Smith, and Ms. Del Rio, I hope that you 
will take some comfort in a little fact of my life. I have all 
of my family's personal, business, and campaign funds in small 
banks. I don't have any--not one penny that I have control over 
is in a large bank. Not for any reason. I just prefer small 
banks. I like knowing my bankers and all that other stuff.
    So I will just tell you that. Hopefully, you will take some 
comfort before I go in a different direction.
    [laughter].
    Mr. Purcell, stop, look, and listen. I totally agree. I 
actually haven't disagreed with anything I have heard here this 
morning of significant nature--minor little points, but nothing 
major. And I agree with everything you said. Stop, look, and 
listen is 100 percent right.
    But Dodd-Frank is now 2 years old. We are stopping, 
looking, and trying to listen. It doesn't mean we will get it 
all right, but stop, look, and listen doesn't mean don't cross 
the street; it means be cautious, be careful, keep an eye on 
what is going on, and then cross the street. And I would like 
to think that is what we are trying to do.
    Ms. Smith, on the remittance item, to be perfectly honest, 
today is the first day I have heard about that issue and the 25 
per year. It is an interesting issue and I wish it had been 
brought to my attention.
    I am under the impression at the moment that that aspect of 
this regulation has not been finalized, and I intend to leave 
this hearing and go look into it. I don't know whether I agree 
with you or not.
    I would just say that is exactly what this stop, look, and 
listen is all about. It is 2 years later. We still haven't 
implemented that aspect and, again, I am not informed enough to 
agree or disagree, but it is an interesting point, a good 
point, one that is worthy of pursuit. And I assume you know 
that is not finalized yet.
    Ms. Lynette Smith. Thank you very much. I appreciate you 
looking into that.
    That is catastrophic. We do, on average, three 
international wires a month. If you multiply that times 12, 
that is 36. I might get to a point where I cannot even offer--
    Mr. Capuano. No, I understand. I am not arguing with the 
point at all. I am saying it is a good point worthy of 
consideration and--
    Ms. Lynette Smith. Thank you.
    Mr. Capuano. --I will look into it, and I wish I had been 
informed of it as we were going forward.
    I guess my bottom line here is that a lot of the concerns I 
have heard about Dodd-Frank from not just today's panel, but 
going forward, are fears of what might happen. Some of them are 
very legitimate and some of them I share--but the way to deal 
with the fear is not to not do it; the way to deal with the 
fear is to try to get it right before the mistake is made, or 
even after the fact.
    Things happen after you do something that you did wrong. 
Everybody on this panel has made a mistake in your life, and 
when you do, you correct it. You don't just throw the whole 
thing out; you correct it.
    So that is hopefully what we are trying to do. Regulations 
are not meant for the good players. No regulation is ever meant 
for the good players. They are only meant to say, ``There is 
the line. Bad players can't cross here.''
    I use it all the time. One regulation we have is: Don't 
kill anybody. That is a regulation, guys. It doesn't mean 
anybody is going to go out and kill somebody; it just means 
that if you do, there are consequences. All regulations are 
simply drawing the line saying, here is where we are.
    I guess, Mr. Johnson, I just want to ask you a--and I 
appreciate you being here. I realize you are not a banker; I am 
not going to ask any technical banking questions. But if--
    Mr. Johnson. I certainly appreciate that.
    Mr. Capuano. That is okay. I am only like half a step ahead 
of you--don't worry--and maybe even less than that.
    But if you had a company--and again, you are a member of an 
association, you are a businessman--I presume you have never 
misled or deceived any of your customers?
    Mr. Johnson. I try very hard not to do that.
    Mr. Capuano. Again, not mistakes, but you have never 
intentionally--never deceived them into thinking that something 
you were providing was free, did you?
    Mr. Johnson. No, I haven't.
    Mr. Capuano. You have never deceived them into telling them 
that they were eligible for something for which they are not 
eligible?
    Mr. Johnson. No, I haven't.
    Mr. Capuano. So you would think that any business that 
engages in intentional misleading of customers is doing 
something wrong and bad for the economy, bad for America. Would 
you agree with that statement?
    Mr. Johnson. I would agree with that statement.
    Mr. Capuano. Then, you must support what the CFPB did 
yesterday, which is to enforce Capital One, because that is 
exactly what they were doing. Now, I don't know whether Capital 
One is a good, bad, or indifferent company, but they were 
clearly engaged in misleading customers--2 million customers--
and they were slapped for it. Now, that doesn't mean they 
should be put out of business; it means they were slapped. They 
are going to have to refund $140 million hopefully to somebody 
who will need new flooring in your area.
    Mr. Johnson. And I don't know enough about--
    Mr. Capuano. I know.
    Mr. Johnson. --Capital One, but what I can tell you from my 
vantage point as a business person is that I have seen the 
effect simply because lines of credit have been snatched away 
from me and I had to resort to credit cards to keep my business 
afloat and it was the result of the regulations.
    Mr. Capuano. But according to your testimony, you are not 
sure that it is a result of regulation, and Mr. Min has 
testified--not just about you, obviously, personally--but about 
most loss of credit in this country was not the result of 
regulation, it was the result of an economic downturn, that the 
banks, even when they were infused with capital against the 
advice of some of my colleagues--they have tons of money, they 
still refuse to loan it. To my knowledge, there is no way for 
the Federal Government to force them to loan it.
    Mr. Purcell, are you aware of anything that we can do to 
force you to make a loan?
    Mr. Purcell. No. But I sure wish you would convince our 
customers of the uncertainty, so they will start borrowing 
again.
    Mr. Capuano. I agree with you. I totally agree.
    Mr. Johnson. So, Mr. Capuano, I can--
    Mr. Capuano. So, Mr. Johnson, the lack of credit has 
nothing to do with--
    Mr. Johnson. But I can tell you that what happened from the 
collateral standpoint, when the banks would give me financing 
based on certain pieces of collateral that I had, the 
regulations took that away and they were unable--
    Mr. Capuano. Which regulations did that?
    Mr. Johnson. I don't know. You tell me.
    Mr. Capuano. That is the problem, Mr. Johnson.
    And here is the problem as stated by--oh, I had it here 
somewhere; who knows where it is--here it is--by the 
Independent Community Bankers of America president, he said it 
is more fear than fact. I am interested in facts. I need to 
know facts. I need to know specific regulations that are either 
proposed or finalized that don't work. And when that happens, I 
have done it repeatedly to advocate to stop them or to change 
them, and I will do it tomorrow. All of us will, on both sides 
of the aisle.
    But to simply say that all regulation has caused me 
problems is not helpful, especially if you can't point out to 
me a specific regulation that has done it and--
    Mr. Johnson. I hope my testimony did not say that, because 
I really don't believe that. I just believe that you need to 
take a look at it and say, okay, how can we get cash flow back 
into the hands of small business people, because it is our 
lifeblood.
    Mr. Capuano. There is no disagreement with that. That is 
exactly what we are trying to do.
    All I am trying to do is point out that--I am way over 
time; I apologize, Mr. Chairman.
    All I am trying to do is point out that we are trying to 
get it right, and that not all regulation is inherently bad. 
Some regulations are necessary and it is important for all of 
us to work together to try to get it right.
    With that, Mr. Chairman, I appreciate your indulgence.
    Chairman Neugebauer. I thank the gentleman.
    And now the vice chairman of the subcommittee, Mr. 
Fitzpatrick, is recognized for 5 minutes.
    Mr. Fitzpatrick. I thank the chairman, and I would also 
like to thank all the members of the panel for your testimony 
and your participation in the hearing. You are performing a 
great service for our country and I think that no matter where 
each of us stand or fall on the issue of the legislation, I 
think we can agree that what we are doing here today, which is 
oversight, is incredibly important for the industry, for our 
customers, and for our constituents. It is appropriate, 
especially for bills that are new bills that exceed thousands 
of pages in length, and also in connection with regulations 
that are yet to be written.
    And so, Mr. Purcell, I agree, as Mr. Capuano agrees, stop, 
look, and listen. We can do that now with regard to regulations 
and we are interested in hearing from you how these regulations 
that you know about, as well as the regulations that are 
threatened or yet to be written, how that impacts your small 
banks, your institutions, and our constituents.
    Mr. Flores, according to your testimony you said Dodd-Frank 
has increased fees to small businesses and consumers. What 
effect do these increased fees and reduced services have on 
consumers? Can you develop that a little bit for us?
    Mr. Flores. It is not a direct relationship because of 
increased compliance costs. And you are right, a lot of the 
provisions have not been implemented, but people are preparing 
and so they are hiring compliance people, or they are re-
tasking existing employees to compliance, or they are 
outsourcing aspects of compliance.
    But with the--let's say the Durbin Amendment, with the 
reduction of interchange fees, that has required--a lot of 
banks have eliminated free checking. Therefore, with the new 
checking products that are out there, the cost to have a 
checking product has gone up, and this primarily impacts low- 
to moderate-income consumers because if they don't maintain a 
$1,500 daily balance, they are going to get a service charge.
    So it is the indirect impacts--the loss of fee income and 
the increase of operating expenses that banks are looking for 
new avenues of revenue production, be it fees or they have very 
little control on interest margins and so the only thing they 
can look at are fees. And they are being passed on to consumers 
and small businesses.
    Mr. Fitzpatrick. Mr. Purcell, when you were describing your 
bank and the type of mortgages you grant and the way that you 
grant them, it sounds a lot like the small bank back home in 
Bucks County, Pennsylvania, that my wife and I use for our own 
family. I think you said for most of the loans, you require 20 
percent down, and the bank provides 80 percent; you don't sell 
the mortgages, you actually keep them and service them. Is that 
a fair assessment of the way that your bank operates?
    Mr. Purcell. That is correct. We have never sold a 
mortgage. And I will say that in the times of distress over the 
last 7 years, there was kind of the end of good times and it 
has been tough times since then, I might also add we have not 
foreclosed on any home mortgage. But we do work with the 
customer.
    Mr. Fitzpatrick. So you know what a qualified borrower 
looks like. You don't need a 1,000-page regulation to describe 
that for you?
    Mr. Purcell. I don't. The problem on the balloon payment, 
though, is that--on the 5-year balloon payment, you have to be 
able to show that customer can continue to make the payments. 
If you went out to 10 years or 15 years--by the way, we have no 
deposits committed in our institution for that, and that is 
what the savings and loans got in trouble for in the 1980s was 
extending loans further than what their deposits were. That is 
the reason for the 5-year balloon payment.
    Mr. Fitzpatrick. I was intrigued by something that you said 
in your testimony about the cost of compliance on big banks 
versus the Main Street, the community banks like yours, that 
most of us think of when we think about the banking industry. 
You said, in fact, big banks--the very banks at the center of 
the problems that spurred the enactment of Dodd-Frank--are 
among the new law's greatest beneficiaries precisely because 
they can much more easily shoulder Dodd-Frank's compliance 
burdens.
    Can you describe for us how it is they have benefitted--how 
the big banks have actually benefitted from the law and how the 
law has actually negatively impacted your ability to continue 
to service your customers?
    Mr. Purcell. I know there are Members on both sides of the 
aisle who want what is best for our country. I want what is 
best for it. I want what is good for our borrowers, too, and 
our community.
    But when you enact legislation, and you have a large 
megabank that has a consumer department that is probably 100 
times or greater than our total employees are, when you talk 
with your regulators and you talk about their compliance--how 
they go, they have two paths. They have a path for the 
compliance officer who studies--or who handles compliance on 
the deposit side, and now they have a path for the ones on the 
lending side.
    If it is so complicated that someone who examines 
compliance issues every day, they have to split it up in two 
different directions; we are a small bank. And all this time of 
what everyone has said they wanted, the things that we wanted 
to avoid--we don't want too-big-to-fail; we want people to have 
risk and responsibilities for their actions--the large 
megabanks have continued to increase in size at the expense of 
small banks.
    Mr. Fitzpatrick. Thank you, sir.
    Chairman Neugebauer. I thank the gentleman.
    And now the ranking member of the full Financial Services 
Committee, Mr. Frank, is recognized for 5 minutes.
    Mr. Frank. Mr. Johnson, I wanted to pursue something that 
you said which, like Mr. Capuano, I was surprised to hear. You 
said one of the problems is that the banks you deal with are 
now rejecting collateral had previously given them or have 
somehow changed their attitude. Would you describe that to me?
    Mr. Johnson. Sure. There were times when banks would turn 
around and look at your credit rating, they would look at your 
character and things like that, and they had done business with 
you historically before. They would take your receivables and 
other things like that and they would go ahead and loan you 
money.
    Now what is happening is they are sitting there saying, 
hey, you know what, we can't do that anymore--
    Mr. Frank. Let me say that there is nothing in the statute 
that compelled them--other than--I assume you are not talking 
about a residential mortgage?
    Mr. Johnson. No.
    Mr. Frank. Okay. We do have a problem, and some of us have 
expressed this frustration that some of the examiners have been 
overreacting, and I think the problem is it is in the culture. 
In the history of the world, no examiner was ever reprimanded 
for a loan that should have been made and wasn't made; they get 
reprimanded for the loans that were made that shouldn't have 
been, and that is a constant problem.
    But there was nothing in the statute, I am sure, that in 
any way requires a bank to change its pattern with regard to 
what you just said.
    Now, let me just ask Mr. Sharp, you mentioned two pieces of 
legislation that this committee has approved. Are there other 
changes you want to see with regard to derivatives or do you 
want to make sure that those become law? Is that--
    Mr. Sharp. Those are the absolute highest priorities.
    Mr. Frank. All right. Then, we are in agreement there.
    With regard to the nonfinancial aspects of it--the non-end-
user, the JPMorgan Chase and others, do you have changes you 
want to see with derivatives in the non-end-user area where we 
were talking about financial institution or financial 
institution?
    Mr. Sharp. No. Again, the Coalition doesn't have national 
members or--
    Mr. Frank. I appreciate that. And so, because as I said, 
and I appreciate--there always are some things that nobody can 
anticipate on every issue. We did think the regulators were 
sure--I am hoping that those are unnecessary but I have a 
principle of legislation: Redundancy is a lot better than 
uncertainty, particularly for lawyers, because we are the belt-
and-suspenders group, so we never mind that.
    Mr. Purcell, on the question you mentioned, your lawsuit, 
and you say you have brought the lawsuit against the CFPB on 
the grounds that it is an independent agency, not susceptible 
to checks and balances--that is the CFPB. It doesn't go through 
the regular appropriations process--the Director is appointed 
by the President but not otherwise controlled.
    Why didn't you sue to get the Comptroller of the Currency 
thrown out, because everything in your lawsuit of which you 
complain about the CFPB applies even more strongly to the 
Comptroller of the Currency? In fact, the CFPB does--Congress 
can restrict its money.
    The Comptroller of the Currency has a totally independent 
source. He or she is appointed by the President and that is it. 
What about the CFPB's structure is different in this sense from 
the Comptroller of the Currency, or you just don't like 
consumer protection?
    Mr. Purcell. I appreciate you being aware of the lawsuit 
that we filed. However, I am going to leave that up to the 
attorneys because--
    Mr. Frank. You mentioned it in your testimony.
    Mr. Purcell. I understand, but it says that I will answer 
questions about the other part of it. But--
    Mr. Frank. All right. If you don't want to answer, okay. I 
am sorry, Mr. Purcell. I only have 5 minutes, and if you don't 
want to answer it, don't answer it.
    I have to say--and I would ask people to look at this--the 
argument aimed at the CFPB, they legally are on all fours, as 
lawyers say, with the CFPB.
    Let me just ask you though, Mr. Purcell, with regard to 
mortgages--and let me ask--is it Ms. Smith, from the credit 
union, because some of the criticisms were there: Do you think 
we should have passed any laws to change the rules regarding 
the granting of mortgages when we looked at what happened up 
through 2008?
    And if so, for instance, did NAFCU submit to us any 
proposals for what we should have done with regard to 
mortgages, Ms. Smith?
    Ms. Lynette Smith. Yes, we do. We do support the TILA and 
RESPA forms. We think that they are--
    Mr. Frank. Okay. I appreciate that. What about the 
substantive mortgages? That is, should we have changed the law 
with regard to the ability to do mortgages with 2 years and 28 
years interest, and no prepayment allowed, or should we have 
said, as we do, that there has to be some showing, Mr. Purcell 
mentioned skin in the game--that you shouldn't give mortgages 
to people who can't afford it?
    Would you in 2009 have recommended to us, or did you, Ms. 
Smith--obviously it wasn't your job, Mr. Purcell, as an 
organization--any substantive changes in mortgage law?
    Ms. Lynette Smith. I believe there are substantive changes 
that need to me made and I can give that to you at a later--
    Mr. Frank. Did the NAFCU ever tell us what they were? I 
don't remember. Do be honest, I think--
    Ms. Lynette Smith. No. Honestly, I--
    Mr. Frank. Okay. I am very skeptical of this. People come 
before us now because they don't like the regulations that are 
out, then say, ``We are not saying there shouldn't be any 
regulation.'' Except, many of you did say there shouldn't be 
any regulation by not saying anything. People who did not tell 
us in 2009, ``Yes, you are right. There were mortgage abuses. 
Here is the way to correct them,'' but were perfectly content 
to let the situation go forward, I am a little skeptical when 
you now say, okay, yes, there was a need for things, but you 
should have done it differently.
    So if I am wrong that if, in fact, in the prior years you 
had submitted some things I would be--I will correct myself.
    Ms. Lynette Smith. Okay.
    Mr. Frank. Thank you, Mr. Chairman.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from Ohio, Mr. Renacci, is recognized 
for 5 minutes.
    Mr. Renacci. Thank you, Mr. Chairman.
    And I want to thank all the witnesses for being here.
    Mr. Min, in your testimony you say--and, of course, this 
was in regard to the negative aspects of conclusions on Dodd-
Frank--``Because of the severe delays in implementing Dodd-
Frank it is impossible''--you use the word impossible--to know 
what the actual impacts of Dodd-Frank will be.'' Would you also 
agree that from a positive standpoint, it would be impossible 
to determine what the impacts of Dodd-Frank would be?
    Mr. Min. I do agree. That is why I don't attempt to 
quantify what the numbers might be. I think we have some recent 
evidence, of course, with the financial crisis of 2008, of what 
the status quo looks like, but whether Dodd-Frank is a perfect 
answer to that--
    Mr. Renacci. Right. So it is a definitely impossible.
    Have you ever operated a small business, or a bank, or a 
small bank or credit union?
    Mr. Min. No, sir.
    Mr. Renacci. Okay. But you are a professor. If I came to 
your office before your semester started and I threw 2,300 
pages in front of you and said you now had to teach based on 
those 2,300 pages, that would bring some uncertainty to you, 
wouldn't it?
    Mr. Min. Actually it depends--it is 848 pages, and if I had 
to teach it tomorrow, of course that would be a problem; but if 
you told me that I needed to teach it in the spring, I think 
that would probably be doable.
    Mr. Renacci. But you would have to get some resources; you 
would have to understand what is in it; you would have to spend 
some time and energy to determine--
    Mr. Min. Of course. I would have to read it. The first 
thing I would do is look at the table of contents and see what 
provisions I wanted to teach, what seemed applicable to banking 
law versus, say, securities law or other areas--
    Mr. Renacci. Well, no. What I am talking about on how you 
teach and how you interact and how you move forward, so it is 
really how you would move forward, and that is what I am trying 
to get at. There would be some certainty, you would have to 
spend some resources.
    Mr. Min. Of course.
    Mr. Renacci. Okay.
    Ms. Smith, you talked about regulations and which--give me 
some idea of which yet-to-be-implemented regulations you 
anticipate will have the most profound effect on you, your 
customer base, and the community you serve.
    Ms. Lynette Smith. I am really concerned about the 
interchange price cap. Also, just the overwhelming compliance 
burdens in the new rules, it is hard for me, running an $87 
million credit union, to keep up with all of the compliance, if 
that answers your question. That is what I have sleepless 
nights about.
    Mr. Renacci. So you are concerned with the 2,300 pages and 
what is in it, and--
    Ms. Lynette Smith. Yes.
    Mr. Renacci. --compliance, and you have already had to 
spend some money, I am sure, to prepare for the compliance on 
it.
    Ms. Lynette Smith. Absolutely. I am going to have to hire a 
full-time compliance officer at this point.
    Mr. Renacci. Do you fear that some of these costs will have 
to be--that you will have to increase fees for services?
    Ms. Lynette Smith. Yes, they could down the road. Credit 
unions have always been the lender of last resort, and if I 
could just share with you for a minute, when I have members 
come into my office and I know they have no other place to go, 
I can provide them with a loan within an hour. I want to 
continue to do that. And they walk away and the next day they 
are bringing me cucumbers from their garden. That is the 
grassroots that credit unions do. That is what we are in 
business for.
    Mr. Renacci. Mr. Johnson, welcome. I want to welcome a 
fellow Ohioan here to Washington. You talked a little bit about 
credit cards and debit cards and the value to your business and 
how you were able to get your cash in 3 days versus 90 days.
    You also talked about the cost of it, and you compared it 
to the cost of if you were putting in a wood floor. Can you 
explain a little bit of what you were trying to get at there?
    Mr. Johnson. Sure. If I were able to get the money in 3 
days, I can take that money and turn it around and do 5 jobs as 
opposed to having to wait for 60 to 90 days to get that money, 
so by being able to accept credit cards for payment, I am 
assured that I am getting the money. I don't have to worry 
about getting a check, and if the check bounces, I have to take 
out another loan to pay the bounce fee from the banks.
    So it is very, very good for me to be able to get that 
money and turn it around. If there is a cost to it, I get that, 
but I can still make a lot more money by getting it and turning 
it back into the business as opposed to having to wait for 90 
days.
    Mr. Renacci. So you weren't really concerned about the cost 
at the time; you are more concerned about getting the cash in?
    Mr. Johnson. Absolutely. Cash flow is the lifeblood of my--
    Mr. Renacci. I was a small business owner. I understand 
wholeheartedly.
    Ms. Del Rio, before my time runs out, you heard what Ms. 
Smith said about some of her concerns. You acted like there 
were no concerns. You have some compliance costs that you have 
to prepare for, and you are going to have to pass those costs 
on to someone.
    Ms. Del Rio. We comply with a wide array of consumer 
protections and regulations. To us, Dodd-Frank is not going to 
be something that is going to be a weighty new regulation for 
us; we are going to incorporate it into our practices.
    We don't, at the moment, anticipate having to raise fees 
for our services. It is something that we are--we do everything 
we can. We are a low-income credit union and 82 percent of our 
members are low-income in New York City. So we--
    Mr. Renacci. So even though you are going to have to 
prepare for 2,300 more pages, you don't see any more costs and 
no concern about passing that on to--
    Ms. Del Rio. No. Actually, as my colleague said, the 
majority of those pages don't apply to us.
    If you are a responsible lender, the majority of those new 
checks and balances aren't going to change your practices. 
There will be some new disclosures, and reporting, and proving 
that you are in compliance, but that is much different than 
having to revamp your entire business model.
    Mr. Renacci. Ms. Smith, quickly, I see you just--
    Ms. Lynette Smith. Yes. I just wanted to say, the $30 
million credit union may not have all the services that an $80-
plus million credit union does. We are trying to compete with 
the big banks. So we are going to--our infrastructure, our 
array of services are going to be more than a smaller, low-
income credit union. And--
    Ms. Del Rio. Can I address that?
    Mr. Renacci. I am running out of time--
    Ms. Del Rio. Okay.
    Mr. Renacci. --so I am going to yield back to the chairman.
    Chairman Neugebauer. I thank the gentleman.
    And now, Mr. Miller is recognized for 5 minutes.
    Mr. Miller of North Carolina. Thank you, Mr. Chairman.
    When I hear of the complaints about compliance costs with 
consumer protections in financial transactions, it sounds like 
what is happening is the consumer is walking in and the loan 
officer or whomever pulls out a legal pad or pulls up their 
computer screen and says, ``Okay, you want to be the party to 
the first part or you want to be the party to the second 
part?'' and then drafts something from scratch and has to have 
2,300 pages of statute or regulations in their head or by their 
desk that they can consult, and that is pretty seriously 
different from my own experience in practicing law for 20 
years.
    There was something called forms, which made life a lot 
easier. They were published. They were kind of vetted that they 
were legal. They were often developed by trade associations.
    Almost every real estate form, every form used for 
residential real estate transactions, were forms that had been 
developed and approved by the Bar Association and by the 
REALTORS, and it not only was a lot less work for me--I didn't 
think I was really cheating--it was a lot less work for me. I 
think every lawyer used them. They saved a lot of money for the 
client and you ended up with better forms, with better legal 
documents that complied with the law.
    Ms. Del Rio, how does it work? Do you really generate all 
of the forms from scratch for your credit unions or does 
someone develop forms that comply with the law that you can 
use?
    Ms. Del Rio. It is a variation. It is a mix. We have third-
party vendors, for example, that process our credit cards, and 
they do a lot of the regulation, the compliance work for us. 
There are times where we have to update a disclosure form to 
comply with the new regulations.
    We welcome these regulations, and we want to be a 
transparent institution. This is our mission. So for us, that 
is not a cost.
    And I just want to make a small point, which is that we are 
a full-service institution, so we have checking, savings, 
business lending, online banking. We have everything that the--
all of the consumer financial services and products that a bank 
and other credit unions do.
    We have grown to this. We prioritize where and how we 
offset our costs, where we raise money to be able to grow and 
expand our services.
    And because we never became dependent on these high fees 
that a lot of other institutions did, we are not now scrambling 
to try to figure out where to make it up. I remember just even 
in the credit union world, there were consultants, regulators, 
examiners even, encouraging us to find more ways to charge 
members fees, and we have chosen not to do that and that is why 
we generate most of our income off of loan interest.
    We want to make our income in a way that is responsible, 
that is actually generating activity in our community. So we 
did a lot of small business lending, including from businesses 
that are sent to us by our local banks.
    Mr. Miller of North Carolina. One complaint I did hear from 
lenders that wanted to do the right thing--honest lenders--was 
that one of the reasons the disclosures were so unreadable and 
so big was that their lawyers advised them or they understood 
that the safest thing to do was to set out disclosures verbatim 
from the statute. It was safer than trying to summarize them or 
put them in plain English.
    And they specifically cited the example of TILA and RESPA 
of being similar but not quite the same, and what they would do 
was set out both statutes verbatim in the disclosures. And so, 
when the CFPB approved a form that was plain English which 
included both, it seemed to be a great service to everybody.
    Ms. Del Rio, has that been the case at your credit union?
    Ms. Del Rio. As far as I know, the new form is not--
    Mr. Miller of North Carolina. And, Ms. Smith, you said you 
were okay with that--
    Ms. Lynette Smith. Yes. I am okay. I--
    Mr. Miller of North Carolina. You favor that.
    Ms. Lynette Smith. Yes. I do favor that. As a matter of 
fact, I was at the CFPB last year before that form was--
    Mr. Miller of North Carolina. Okay. I do have limited time 
so--
    Ms. Lynette Smith. --generated. So yes.
    Mr. Miller of North Carolina. Mr. Purcell, have you not 
figured out that you really don't have to write every consumer 
credit contract at your bank, that there are forms that you can 
use?
    Mr. Purcell. We do, and every time the law changes, we get 
to increase our fees for those forms and changes. But yes, we 
do.
    Mr. Miller of North Carolina. Your national trade 
associations don't provide you forms that comply with the law? 
There aren't publishers who will develop forms that comply with 
the law?
    Mr. Purcell. There are major vendors that do provide that 
but they do charge maintenance fees and they do charge when you 
have to have major modifications in it. So--
    Mr. Miller of North Carolina. Okay.
    Mr. Min, I know that you are now a professor, so presumably 
you have no idea what goes on in the real world, but do you 
have any understanding of how this really works? Are there 
standard forms?
    Mr. Min. --it should be from the trade association, as I 
think Ms. Del Rio stated. I would be surprised if the law was 
as onerous--in practice if it was as onerous as has been 
claimed.
    Mr. Miller of North Carolina. Okay.
    One last--there are 14 titles to Dodd-Frank. Mr. Flores, 
Ms. Smith, Mr. Sharp--well, not you, Mr. Sharp--but you, Mr. 
Purcell, how many of those titles apply to your business?
    Mr. Flores. To my business, none, but to my clients' 
business, several, depending if they are alternative financial 
services, or community banks, or credit unions, and the size, 
if they are under $50 billion or over $50 billion in assets.
    Mr. Miller of North Carolina. Mr. Purcell?
    Mr. Purcell. You have your Fair Credit Reporting Act, which 
is one example. But you also have your different types of 
lending. You have multiple titles within the Dodd-Frank. You 
have the CFPB that is wrapping its arms around things that 
covered us before, but they are changing some of the 
definitions to include things that weren't, so I could not tell 
you at this moment exactly which ones do or which ones don't.
    Mr. Miller of North Carolina. Ms. Smith?
    Ms. Lynette Smith. Okay. Thank you. There are several, and 
I can give you that in writing at a later date. Thank you.
    Mr. Miller of North Carolina. All right. Thank you.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from New Mexico, Mr. Pearce, is 
recognized for 5 minutes.
    Mr. Pearce. Thank you, Mr. Chairman.
    It is nice to hear each one of you testify. I especially 
appreciate Mr. Purcell. I can identify with that lingo you 
speak there; it sounds like where I grew up. If you know where 
San Jon is, you know where every place in New Mexico is--now 
that is getting small.
    Mr. Johnson, I really appreciate your testimony. We need to 
be hearing from the people who have built businesses and are 
out there just trying to make it work. I was a small business 
man and I appreciate that.
    I am going to bypass the desire to ask you what you thought 
about the President's comment that if you built a small 
business, you didn't really do that. Again, I built a small 
business from 2 to around 50 people, and so I have this--we 
struggled all the way along and I can hear the struggle that 
you have and ours.
    Mr. Smith, I am interested, what assumption of rate of 
return do you have to make the distributions out of your 
pension fund?
    Mr. Gregory Smith. Representative Pearce, our current 
assumption is 8 percent; our 25-year return is 8.9 percent; our 
30-year return is--
    Mr. Pearce. What did you make in the last--what have you 
made in the last quarter?
    Mr. Gregory Smith. I don't know; in the last quarter, about 
4 percent--
    Mr. Pearce. About 4 percent.
    Mr. Gregory Smith. In the last 3 years, it--
    Mr. Pearce. How much shorter do your--in other words, your 
assumptions are at 8 percent. Let me just--
    Mr. Gregory Smith. We got a 1.9 percent compared to our 8 
percent, if that is what you are trying to get to.
    Mr. Pearce. Yes. So yesterday, CalPERS announced that they 
had a 1 percent rate of return; their assumption is 7.5 
percent, and it is looking like maybe they are $800 billion 
short if they figured at a 3.8 percent, so the calculation for 
a 1 point rate of return is probably in the trillions--just for 
California.
    So these pension funds that make these assumptions and then 
pay out very large retirement bonuses or retirements are really 
putting the long-term future of the pension fund at jeopardy.
    I was interested in your comments, Mr. Smith, on executive 
compensation. Your shareholders would be the pension 
beneficiaries. Do you allow them to vote on your compensation?
    Mr. Gregory Smith. Our board of directors is directly 
elected by our membership and our board of--
    Mr. Pearce. So you allow them to vote like you are asking--
    Mr. Gregory Smith. --corporation is.
    Mr. Pearce. Do you allow them to vote, Mr. Smith, on your 
compensation the way that you are requesting in your testimony 
that corporations would allow?
    Mr. Gregory Smith. I would challenge whether that is a 
comparison, sir, but no, they do not vote on my compensation.
    Mr. Pearce. Okay. What do you make? What is your salary?
    Mr. Gregory Smith. About $300,000 a year.
    Mr. Pearce. And they don't get to vote on that. That is 
very interesting.
    Ms. Del Rio, do you keep track of people who don't make--
they are not able to service the loans? Do you all track that? 
Your customers who can't service the loans?
    Ms. Del Rio. Of course. Sure. You mean people who fall 
behind on our loans--on their loans--
    Mr. Pearce. And so if someone defaults on a loan, and they 
come back in for a loan, you have a record of that?
    Ms. Del Rio. Yes. We try to restructure people when they 
fall behind so that we don't have to get to the point of--
    Mr. Pearce. But you are not just not knowledgeable if they 
have defaulted on a loan?
    Ms. Del Rio. Oh, no.
    Mr. Pearce. And so, I find your testimony where you are 
critical of those who do track and do make available credit 
histories, you are very critical of those who allow credit 
histories to go about, and yet you all track a credit history. 
Your testimony--
    Ms. Del Rio. Oh, sorry. Maybe I wasn't clear. So first, in 
terms of the credit, we do look at credit history of people but 
we also look at many other things. A lot of our borrowers--
    Mr. Pearce. I understand, but there are people--
    Ms. Del Rio. --have no credit history and so we look at 
other--
    Mr. Pearce. Thank you.
    Ms. Del Rio. --things.
    Mr. Pearce. Thanks.
    Ms. Del Rio. I am sorry. My critique in my testimony was 
not about even lenders using credit history, although there are 
some questions there. It was about employers and others outside 
of the credit system using that to judge character and whether 
someone would make a good employee, and--
    Mr. Pearce. Okay.
    If I could follow up, Mr. Sharp, do you know on the U.S. 
Chamber how many employers ask about credit history before they 
hire? Because in New Mexico, people are dying for employees. 
They are saying, ``Please, send us the employees. All they 
would have to do is show up for work and pass a drug screen. We 
need employees badly.'' And I have never heard one employer in 
New Mexico ask for a credit history.
    Anyway, it is just curiosity.
    Mr. Min, have you ever downloaded content off the Web?
    Yes, of course, you have. So you might have an opinion 
about Net neutrality regulations, those who would regulate 
those who are downloading?
    Mr. Min. I actually don't. I don't think I have enough 
information about--
    Mr. Pearce. You don't have an opinion about that?
    Mr. Min. I don't actually know enough about the issues, and 
outside of my issue area, so--
    Mr. Pearce. Okay. There are people who would like to limit 
your ability to download information, films, whatever.
    Mr. Min. Okay.
    Mr. Pearce. Now, I suspect that they don't have one shred 
of empirical evidence; they just understand that they are 
opposed to the government coming out and regulating, so when I 
see that you talk about regulation being highly speculative, it 
would be highly speculative that people want to say, ``You 
can't stop me from downloading content. It is a free society. 
It is free.'' They won't have one shred of empirical evidence.
    Mr. Min. Sure. I think--
    Mr. Pearce. You would declare that to be highly speculative 
and I am finding that to be a deep flaw in your testimony.
    I yield back, Mr. Chairman. Thank you very much.
    Chairman Neugebauer. I thank the gentleman.
    Mr. Carney is now recognized for 5 minutes.
    Mr. Carney. Thank you, Mr. Chairman, and Mr. Ranking 
Member, for holding this hearing.
    And thank you to all the folks who have come to share your 
experience and expertise with us. I have been sitting--I am 
usually the lowest man on the totem pole so I get to ask my 
questions last, and I hear a lot of the back-and-forth and the 
testimony, and it has been very interesting today.
    I liked, Mr. Purcell, your comparison to standing on the 
corner crossing the railroad tracks and the guidance to stop, 
look, and listen. My experience--I am new here--in the last 
year-and-a-half is that we do a lot of stopping and listening 
and we don't cross many streets. And I think with respect to 
the Dodd-Frank regulatory reform legislation, the Congress 
responded to a devastating crisis and crossed the street, and 
we are here today to explore how crossing that street has 
affected small businesses and families.
    The hearing is entitled, ``Who's in Your Wallet? Dodd-
Frank's Impact on Families, Communities, and Small 
Businesses,'' which suggests to me that somehow the regulations 
are having an impact on individuals while it is a small 
business wallet. We forget, I think, the impact on our wallets, 
our bank accounts, our home equities, our retirement funds, 
that the financial crisis had on all of us. I think Professor 
Min said $19 trillion of lost wealth across our country.
    We had Fed Chairman Bernanke in yesterday testifying and 
telling us that the recovery is slowing down, that there are 
still millions of people out of work. He didn't have to tell me 
that. I talk to those people every day.
    I didn't hear any of you say that financial regulatory 
reform wasn't necessary, but that it is having some unintended 
negative consequences on each of you. And I think the purpose 
of our hearing today is to identify some of those unintended 
consequences or intended consequences that are having a 
negative effect on our economy.
    It is in all of our interest--Democrats, Republicans--I 
think it has been said a couple of times that we have a strong 
economy, that we have a financial system that we have 
confidence in, that is strong.
    So I would like to just ask you, I hear all the time about 
how it is not so much the regulation--one regulation or 
another--it is the accumulation of regulations and the 
duplication.
    Could somebody--I see Mr. Purcell shaking his head. Could 
you address that? And tell us how you think we can change 
something to address that problem?
    Mr. Purcell. I do not doubt the intent of the Act. I do not 
disagree that there should not be regulation. The stop, look, 
and listen is let's think about some of the things that are 
enacted--and I am speaking in regulation in general, as you 
spoke of.
    It doesn't make a lot of sense to me. We just replaced our 
ATM about a month ago. Our drive-up ATM didn't have Braille on 
it. And I don't know which is worse--someone driving in who 
can't see to use the Braille or not having the Braille on the 
drive-in. And I am not being critical, I am just saying that is 
part of trying to make regulations and what we pass effective.
    Mr. Carney. So is the point that maybe we go too far with 
small things and it is the accumulation of those small things--
    Mr. Purcell. I believe it is. I think it is. Everyone has a 
good idea, they have good intentions, but when we start adding 
it up, and we start with 40 years worth of regulations, and we 
say we are going to--
    Mr. Carney. So maybe we need a process to clean out the 
underbrush, so to speak--
    Mr. Purcell. Yes.
    Mr. Carney. --and to eliminate some of the things? We have 
done that a--we have one bill, actually, that is coming through 
to do that.
    Mr. Flores, did you have--it seemed like you had a response 
there?
    Mr. Flores. I did. It is rationalizing regulations. A lot 
of my clients would say, ``We are being painted with a broad 
brush''--
    Mr. Carney. Right.
    Mr. Flores. --when they weren't responsible for the 
financial meltdown.
    As a matter of fact, when you look at re-engineering a 
process, it is the 80-20 rule. Look at the things that are 
really creating a bottleneck and it creates an 80 percent 
efficiency, if you will.
    A lot of people who wrote mortgages--the liar loans, the 
no-docs, the no income verification--they wouldn't have done 
that if they held them in portfolio. They only did that because 
they were unable to buy the secondary market buying of 
primarily Fannie--
    Mr. Carney. So the legislation addressed that to a certain 
extent by requiring banks to have some skin in the game, as I 
heard somebody say earlier, correct?
    Mr. Flores. And I have no problem--if you are selling in 
the secondary market and if you are servicing a loan because 
you can know who the customer is and deal with that, then 
retaining 5 percent to me is not a problem. I know a lot of 
people disagree with that.
    Mr. Carney. My time is running out.
    But let me just say to all of you, if you have specifics, 
if you could send them to us so that we could try to address 
that directly?
    I just want to reiterate or revisit the question that Mr. 
Frank asked with respect to Mr. Sharp on the derivative. So we 
have passed these two pieces of legislation overwhelmingly in 
the House addressing some of the concerns that your clients 
have, but you said there is nothing else. Are there any next 
steps there, just to reiterate?
    Mr. Sharp. I wouldn't say there is nothing else, it is just 
that these two bills are absolutely the highest priority for 
this group. They would help the largest number of members of 
this Coalition, so--
    Mr. Carney. Great. Thanks very much.
    Thank you, Mr. Chairman.
    Chairman Neugebauer. I thank the gentleman, and now the 
gentleman from Texas, Mr. Canseco, is recognized for 5 minutes.
    Mr. Canseco. Thank you, Mr. Chairman.
    And thank you all, panel members, for coming here today. I 
think it has been a good discussion.
    I am sometimes very concerned about what happens when we 
talk about Dodd-Frank, and when we talk about the 2008 economic 
crash that happened, and the solutions, and the languishing 
economy, it sort of seems to me that what we are doing is 
stepping on the brake of an automobile at the same time that we 
are pressing on the accelerator, not realizing that what we are 
doing is very counterproductive.
    Professor Min, let me--I am sure you are familiar with 
Sarbanes-Oxley, being an academician in the banking area, and 
Section 404(b) compliance has resulted in costing 20 times more 
in reality than the original estimates. You seem to argue in 
your testimony that we shouldn't worry because we haven't seen 
the full effects of Dodd-Frank, but doesn't the experience that 
we have had with Sarbanes-Oxley suggest this is exactly the 
time to be concerned?
    Mr. Min. So you are asking, essentially, looking back at 
SOX 404 and the higher costs, I am not sure about the 20-times 
figure you just cited, whether we should use that as a basis to 
estimate our--assume that regulation might cost more than 
evidence gives us belief to do. Is that the question you are 
asking?
    Mr. Canseco. I am asking you if you are not just projecting 
wrong and not realizing that sometimes these over-regulations 
that seem to paint everyone, as Mr. Flores says, with one broad 
brush are very costly and counterproductive.
    But let me go on to this other thing, because I have 
limited time here.
    Mr. Purcell, we hear a lot of talk in Washington about how 
we need government bureaucrats to protect American citizens 
from their own judgment. This was a large part of the argument 
behind the creation of the CFPB.
    And I was in community banking for quite a number of years 
in Texas, just a little bit south of where you are, and--that 
was before I came to Congress--so I understand that if you are 
not taking care of your customers, you are going to be put out 
of business pretty quickly. So can you explain to us from a 
community banker's perspective why consumer protections, safety 
and soundness, and doing the right thing all go hand-in-hand 
and why the creation of the CFPB could disrupt that and 
actually hurt consumers and families?
    Mr. Purcell. I am not certain that I could answer that in 
the 2 minutes that is allotted with your time, sir, but I will 
tell you that many times, we get carried away. The pendulum 
swings, and times get good and times get bad, and we overreact, 
generally, in both scenarios.
    But we cannot remove the culpability of the person who 
causes the problem. For instance, overdraft protection; there 
has been all kinds of news about that.
    The question I would have is, who has the checkbook? Who 
has the deposit slip? And who issues the checks?
    And I find it somewhat ironic that the Federal Reserve will 
charge you $300 for being overdrawn 20 minutes during the 
daytime, but $25 for someone who is overdrawn 2 weeks. It is 
unfair. We compare different things, but the person who wrote 
the check is the one who should be responsible for making that 
deposit.
    For the person who borrowed money at a greater amount--
maybe 102 percent of the value of his home--there is a price to 
pay. For the person who loaned at the 102 percent of that had 
somewhat of greed in their heart too, they should be the ones 
who stand the loss. When we let the losses fall around the 
necks of the ones who create it and we try to let that take 
place rather than coming up with a regulation to prove that we 
are going to prevent any future effort--or problem and 
catastrophe.
    Maybe it is skepticism, maybe it is cynicism in my heart, 
but I am pretty sure that Dodd-Frank will not prevent another 
catastrophe as long as civilization moves.
    Mr. Canseco. Let me move on to another vein, because I have 
a couple of seconds left. Recently in a speech, the President 
remarked that if you own a business, you didn't build that; 
somebody else made that happen.
    I am sure you deal with plenty of small businesses in West 
Texas. In your experience, who built those businesses?
    Mr. Purcell. The individual did. And if you doubt it, you 
should come to Texas, and you are from Texas, so you know the 
independent nature that our business people have.
    Mr. Canseco. Thank you very much.
    I yield back the balance of my time.
    Chairman Neugebauer. I thank the gentleman.
    And now another great gentleman from Texas, Mr. Green, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Actually, we have about 
four Texans in the House currently, and I would like to welcome 
Mr. Purcell to the committee.
    I have met with the small bankers in Texas--a good many of 
them; not all of them--and small bankers from other places as 
well, and they all echo the same concerns, and it has been said 
enough for me to want to find some means by which we can ease 
some of the consternation.
    I am not sure what the solution is, but I would like to, if 
I may, ask you, do you in your mind, sir, make a distinction 
between the $10 billion demarcation that we have and a 
community bank? Because many of the bankers that I meet with 
are not at the $10 billion mark; they are considerably smaller. 
Do you make a distinction in your mind?
    Mr. Purcell. I do. I don't know if it is a magic $10 
billion; I don't know if it is $2 billion; I don't know if it 
is $50 billion. But there is definitely a difference for 
someone who has to--if they make a loan, they get to drive by 
that business and be proud of it. The bad side of it is is if 
you made that bad loan, you still have to drive by that 
property every day and decide that it was not a good deal and 
remember that.
    So it is so foreign. I don't understand all the default 
swaps and the things that happen on Wall Street. I am even 
confused by the definition of what a bank is, or how they can 
come into the FDIC without paying pass premiums, and now they 
are automatically a bank, because by my definition of a bank it 
doesn't include a lot of those on Wall Street, sir.
    Mr. Green. Are you considerably smaller than $10 billion?
    Mr. Purcell. We are less than $300 million.
    Mr. Green. Less than $300 billion?
    Mr. Purcell. Less than $300 million. That--
    Mr. Green. $300 million.
    Mr. Purcell. I know zeroes in Washington kind of get 
confused, sir, but--
    Mr. Green. It is my hearing.
    Mr. Purcell. --we are a lot less.
    Mr. Green. It is my hearing. Some things don't function as 
well as they used to. But, $300 million.
    And are most of the community banks that you refer to, are 
they less than let's say $500 million or--are they less than $1 
billion, most of the community banks that you are referring to?
    Mr. Purcell. By my definition, a true community bank would 
probably be less than $1 billion. There are some successful 
banks in our area that are $2 billion that really do serve 
their communities.
    Mr. Green. And when you are smaller than $1 billion, do 
you--tell me, how are your departments organized? Do you have 
many departments or do you have people who multi-task? Now 
believe me, I have heard the answer, but I want it for the 
record now.
    Mr. Purcell. It doesn't snow very often in Big Spring, but 
we multi-task. I sweep the porch off--
    Mr. Green. How many employees?
    Mr. Purcell. We have about 40 employees, and we have a 
lending department, and then we have customer service and 
operations departments. Now, there are some cross-issues there 
because you have to wear many hats at the same time.
    So if a customer comes into the bank and they want to 
borrow money, they choose who they want to go to. We do not 
assign them. We don't say, if you are doing consumer credit you 
need to go to this gentleman, or you need to go to this lady, 
or you need to fill out an application and we will run your 
credit check, and we will get back with you in a week. We don't 
do it that way. We try to answer immediately.
    Mr. Green. And would you say that most community banks with 
assets under $1 billion, that they do a lot of what we call 
multitasking, that they don't have departments set aside for 
compliance adherence?
    Mr. Purcell. That is correct.
    Mr. Green. I am asking this because it seems that as I talk 
to the bankers in Texas--and I talk to a good many--in their 
minds, they have a distinction between a $10 billion small bank 
and what they call a community bank. And that is where I am 
trying to find some means by which we can address some of these 
concerns.
    I don't know that we can go to a third tier. Right now, we 
have a two-tiered system. But small community banks, they seem 
to have a different role.
    I am picking up that they seem to serve a clientele that is 
much more intimately known to them. The way that they do 
business has a lot to do with tradition. And I am trying in my 
mind to find a way to resolve some of these issues for the 
small community banks.
    Mr. Purcell. I don't know if I can help you with that, but 
I do know that if our customer does not do well and survive, 
our bank does not do well and survive.
    Mr. Green. If I may, Mr. Chairman, I want to ask one more 
question. What percentage of your loans do you maintain in-
house, maintain on your portfolio?
    Mr. Purcell. One hundred percent of the loans, unless it is 
too large of credit, and we would participate that out with 
other community banks in the area that understand the risk 
involved and know that type of credit. But our customer is 
serviced there; he does not go anywhere else. If he has a 
problem, he comes to us. If we have a problem, we go to him 
too, though.
    Mr. Green. Thank you, Mr. Chairman.
    Chairman Neugebauer. I thank the gentleman.
    And now, Mr. Fincher is recognized for 5 minutes.
    Mr. Fincher. Thank you, Mr. Chairman.
    And I thank the witnesses for taking the time to be with us 
today. It is good testimony.
    Mr. Purcell, I am from West Tennessee, a lot of farms, 
agribusiness is big, as in Texas. There is a severe drought 
right now that we are facing. We have been farmers for 7 
generations, with ups and downs many, many times.
    I want to just use a hypothetical and some real-time 
situations as well. Years ago we had some bad times, and I can 
remember my father going to the bank--our local community 
bank--and saying, ``We have had a bad crop, a bad season, so I 
want to pay the interest on my notes.'' We had been doing 
business at the bank forever and ever. And my father and the 
banker were able to work out a solution to go forward and work 
down the road and end up paying the bank off in full.
    Today, with what is happening with the drought situation in 
the country and all the farmers who are going to be short this 
year, do you still have that same authority and the flexibility 
to sit down with that customer and work out a solution or are 
we standing in the way?
    Mr. Purcell. We have the ability to do it, but I don't know 
that we could sustain it for very long with the regulatory 
climate, because everything needs to be loss-free. The reason 
you pay interest, that is the price for taking the risk.
    But yes, we would attempt to do that. We would talk about 
the capacity. If you make a crop next year--the way we would 
actually structure it is that we would try to set up your 
carry-over over a 3-to 4-year period but you couldn't stub your 
toe 3 years in a row and--
    Mr. Fincher. Right.
    Mr. Purcell. --and come out okay.
    Mr. Fincher. Right.
    Mr. Purcell. So yes, we do try to do that.
    One of the problems that may be ongoing is the Basel III, 
which we haven't even discussed, but your mark-to-market 
accounting on small loans, what is a drought-ridden agriculture 
loan in West Tennessee worth when he can't pay this year? What 
is the market value of that and who would buy it?
    We can stop credit really fast if we have to go to mark-to-
market. It is like, a guy comes in and he wants to borrow some 
money; he just inherited the land and he is going to use it for 
collateral, and we tell him to mark-to-market and he is okay. 
He is 150 percent collateralized.
    And next year real estate values go down, and we mark it to 
market, we say, ``We can't loan you the money because your 
value has gone down.'' And he says, ``But I haven't had a 
loss.''
    Mr. Fincher. Right.
    Mr. Purcell. So it is complicated.
    Mr. Fincher. And again, to Mr. Frank's comments a few 
minutes ago, the ranking member, about the--some of you not 
giving suggestions on the rules and what you wanted to see 
changed and all. The unfortunate part of what I hear when I am 
out in the district is that most of you were doing it right. 
You weren't doing things wrong.
    So you were cooperating and working in the system as it 
was, and as you said a few minutes ago, we will--if the--if 
time goes on and the country exists, and it will, then we will 
have problems in the future. And us getting in the way most of 
the time--the unintended consequences usually will mess things 
up, we won't fix them.
    To Ms. Del Rio, you talked about how successful you have 
been. Five years ago, you would charge the same rate or the 
same charge for doing business as you charge today? Nothing has 
changed?
    Ms. Del Rio. You mean in terms of the cost of our services? 
Yes, more or less. There might be some small modifications here 
and there, but more or less, we are the same.
    Mr. Fincher. So the charges would be the same?
    Ms. Del Rio. In terms of what we charge our members?
    Mr. Fincher. Right.
    Ms. Del Rio. Interest rates obviously have changed, so 
those would have been adjusted in accordance with prime rates 
and so forth, but in terms of fees, we have not raised fees.
    Mr. Fincher. Did your credit union take TARP money?
    Ms. Del Rio. Credit unions didn't take TARP money.
    Mr. Fincher. Any special government funding?
    Ms. Del Rio. Yes. Actually, in my testimony I talk about 
one of the actual regulatory tools that our credit union--that 
low-income credit unions that are certified as community 
development financial institutions by the Treasury Department 
in 2010 were able to apply for--
    Mr. Fincher. Why did you apply and need money if you were 
doing things so well?
    Ms. Del Rio. First, let me tell you what we received, if I 
may. This was actual money that was returned by the banks and 
was made available to community development financial 
institutions serving the most distressed neighborhoods.
    And what it was was a loan--a secondary capital loan--and 
it was to strengthen our bottom line, our net worth, so that we 
could expand lending. So we specifically took that money so 
that we could increase small business and other lending in our 
neighborhoods which were the most affected by the economic 
crisis.
    Mr. Fincher. And you paid the loan back?
    Ms. Del Rio. It is over a length of 8 years, I believe, so 
we are in the process. We are only in our second year.
    Mr. Fincher. Okay.
    And, Mr. Min, to wrap up, in your testimony I heard you say 
``unclear, uncertain'' as we roll out, as we go forward. Dodd-
Frank was enacted July 21, 2010--728 days ago. What happens--
and I am a freshman Member of Congress, but I am afraid that we 
may be sitting here 3 years from now saying, what if it is 
unclear, it is uncertain, we need more stability because it is 
so big.
    And Mr. Frank, again, said, well, a lot of times the 
regulators, they don't get blamed if they--someone doesn't make 
a loan, but if they make a bad loan they do, so they are 
overprotective of what is happening in the private sector. We 
are not recovering. If you saw the jobs numbers this morning--
the jobless claim numbers this morning--this is not getting any 
better.
    And this is just a monster. We are afraid. Absolutely, 
reforms after 2008, but to this magnitude? It just has to stop 
somewhere.
    So with that, Mr. Chairman, I yield back. I am out of time.
    Chairman Neugebauer. I thank the gentleman.
    And I thank the panel. I think we have had a great 
discussion today, and I think we have really been talking about 
the people that we need to be talking about: the consumers of 
financial products. Those are actually the people who are most 
affected by this.
    I think we had some good dialogue, and I think one of the 
things that I feel encouraged about is there seems to be a 
bipartisan feeling that there are some areas that we need to 
take a look at. I look forward to working with my colleagues to 
do that.
    I yield to the gentleman.
    Mr. Capuano. Mr. Chairman, I ask unanimous consent to place 
2 news articles in the record: one from The Wall Street Journal 
entitled, ``Financial Crisis Amnesia,'' by Secretary Geithner; 
and another one from Forbes Magazine entitled, ``What's in Your 
Wallet?'' by Mickey Meece.
    Chairman Neugebauer. Without objection, it is so ordered.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for Members to submit written questions to these 
witnesses and to place their responses in the record.
    And with that, this hearing is adjourned.
    [Whereupon, at 12:22 p.m., the hearing was adjourned.]


                            A P P E N D I X


                             July 19, 2012

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