[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                          EXAMINING REGULATORY
                           BURDENS_REGULATOR.
                              PERSPECTIVE

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 23, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-16
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
ROBERT DOLD, Illinois
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                   RANDY NEUGEBAUER, Texas, Chairman

STEVAN PEARCE, New Mexico, Vice      WM. LACY CLAY, Missouri, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL POSEY, Florida                  RUBEN HINOJOSA, Texas
MICHAEL G. FITZPATRICK,              DAVID SCOTT, Georgia
    Pennsylvania                     CAROLYN B. MALONEY, New York
LYNN A. WESTMORELAND, Georgia        NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
MARLIN A. STUTZMAN, Indiana          STEPHEN F. LYNCH, Massachusetts
MICK MULVANEY, South Carolina        MICHAEL E. CAPUANO, Massachusetts
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANDY BARR, Kentucky                  DENNY HECK, Washington
KEITH J. ROTHFUS, Pennsylvania       KYRSTEN SINEMA, Arizona
ROBERT DOLD, Illinois                JUAN VARGAS, California
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
MIA LOVE, Utah
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 23, 2015...............................................     1
Appendix:
    April 23, 2015...............................................    59

                               WITNESSES
                        Thursday, April 23, 2015

Bland, Toney, Senior Deputy Comptroller, Office of the 
  Comptroller of the Currency (OCC)..............................     9
Cooper, Charles G., Banking Commissioner, Texas Department of 
  Banking, on behalf of the Conference of State Bank Supervisors 
  (CSBS).........................................................    14
Eberley, Doreen R., Director, Division of Risk Management 
  Supervision, Federal Deposit Insurance Corporation (FDIC)......     5
Fazio, Larry, Director, Office of Examination and Insurance, 
  National Credit Union Administration (NCUA)....................    10
Hunter, Maryann F., Deputy Director, Division of Banking 
  Supervision and Regulation, Board of Governors of the Federal 
  Reserve System (Fed)...........................................     7
Silberman, David, Associate Director, Research, Markets, and 
  Regulations, Consumer Financial Protection Bureau (CFPB).......    12

                                APPENDIX

Prepared statements:
    Bland, Toney.................................................    60
    Cooper, Charles G............................................    76
    Eberley, Doreen R............................................   104
    Fazio, Larry.................................................   121
    Hunter, Maryann F............................................   148
    Silberman, David.............................................   165

              Additional Material Submitted for the Record

Bland, Toney:
    Written responses to questions for the record submitted by 
      Representatives Hinojosa and Luetkemeyer...................   172
Cooper, Charles G.:
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   178
Eberley, Doreen R.:
    Written responses to questions for the record submitted by 
      Representative Hinojosa....................................   179
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   184
    Written responses to questions for the record submitted by 
      Representative Vargas......................................   186
    Written responses to questions for the record submitted by 
      Representative Pittenger...................................   188
    Written responses to questions for the record submitted by 
      Representative Heck *[Response indicates ``Robert Heck;'' 
      should read ``Denny Heck'']................................   189
Fazio, Larry:
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   190
    Written responses to questions for the record submitted by 
      Representative Vargas......................................   194
Hunter, Maryann F.:
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   196
    Written responses to questions for the record submitted by 
      Representative Hinojosa....................................   198
Silberman, David:
    Written responses to questions for the record submitted by 
      Representatives Royce, Luetkemeyer, and Mulvaney...........   201

 
                          EXAMINING REGULATORY.
                           BURDENS--REGULATOR.
                              PERSPECTIVE

                              ----------                              


                        Thursday, April 23, 2015

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:19 a.m., in 
room HVC-210, Capitol Visitor Center, Hon. Randy Neugebauer 
[chairman of the subcommittee] presiding.
    Members present: Representatives Neugebauer, Pearce, Lucas, 
Posey, Westmoreland, Luetkemeyer, Stutzman, Mulvaney, 
Pittenger, Barr, Rothfus, Dold, Guinta, Tipton, Williams, Love; 
Clay, Hinojosa, Scott, Maloney, Sherman, Lynch, Capuano, Heck, 
Sinema, and Vargas.
    Also present: Representative Duffy.
    Chairman Neugebauer. Good morning. The Subcommittee on 
Financial Institutions and Consumer Credit will come to order. 
Without objection, the Chair is authorized to declare a recess 
of the subcommittee at any time.
    Today's hearing is entitled, ``Examining Regulatory 
Burdens--Regulator Perspective.'' Before I begin, I would like 
to thank each of our witnesses for traveling all the way to 
Washington, D.C., and to the Capitol Visitor Center. Not only 
is it a long way to Washington, D.C., but it is a long way to 
the Visitor Center. So you get double credit for your efforts 
this morning.
    This hearing is starting a little bit earlier than normal 
today, because this was originally scheduled to be a full work 
day, but now is a getaway day. And we are going to have votes--
fortunately, later in the morning than I anticipated--around 
11:40 or 12:00. So that should give us time to, I think, have a 
pretty robust hearing.
    At this time, I would like to recognize myself for 5 
minutes to give an opening statement. Today this subcommittee 
will continue its examination of the regulatory burdens facing 
community financial institutions and the resulting impact on 
the American consumer. The full Financial Services Committee 
has heard an overwhelming amount of testimony highlighting the 
plight of our Main Street financial institutions, institutions 
that are disappearing at an average rate of one every single 
day.
    We have heard from hardworking Americans in communities 
across the country that they are losing their financial 
independence. These consumers face difficulties in obtaining 
mortgage credit and the threat of financial products 
disappearing. Each one of us in this room has an obligation to 
our constituents to take seriously regulatory reform for these 
institutions and the American consumer.
    Unfortunately, some of my colleagues on the other side of 
the aisle and in the upper chamber have suddenly changed course 
in their efforts to work in a bipartisan manner. Curiously, we 
have seen bills that were bipartisan last year that have been 
very difficult to pass this year.
    We have seen Democratic-led bipartisan bills that passed 
out of our committee blocked going to the Floor all in an 
effort to protect the Dodd-Frank Act. As a result, Republicans 
are left without a dancing partner in trying to reverse this 
trend of ``too-small-to-succeed.''
    In my district, and I suspect in many of my colleagues' 
districts, this is not an option. So today I am pleased to 
welcome our witnesses from the Federal and State financial 
regulators. These agency representatives will provide an 
important perspective on the regulatory framework facing our 
community financial institutions. I suspect many of them have 
heard the same stories that members of this subcommittee have 
heard. However, these agencies are in a unique position. They 
have the authority, in most cases, to write rules that can 
begin to change the condition of ``too-small-to-succeed.''
    Some have done a better job than others. Today this 
subcommittee will address two overreaching regulatory issues.
    First, how does the supervision and examination function of 
these agencies impact community financial institutions, and are 
there ways we can improve that process?
    And second, how do these agency rulemakings limit the 
operational activities of community financial institutions? And 
further, how do these regulations impact consumer choices and 
availability of credit?
    Each one of your agencies holds a piece of the regulatory 
burden puzzle that must be explored. For example, community 
banks have undergone significant capital restructuring as a 
result of the Basel capital requirements.
    Credit unions are in the midst of moving to their own new 
capital structure that could result in considerable cost. 
Operation Choke Point has severely fractured any trust in the 
supervision and examination process between financial 
institutions and regulatory agencies.
    Some consumer protection rules have literally caused 
products to disappear, as was the case in bank deposit advance 
products. In total, these regulatory issues continue to drive 
market consolidation and to harm the experience of consumers in 
the financial marketplace.
    In closing, I am reminded of a quote from a recent Harvard 
study about community banks: ``Their competitive advantage is a 
knowledge in the history of their customers and a willingness 
to be flexible.'' I like this quote because it is the very 
definition of banking relationships, particularly in community 
banks and credit unions.
    In my district, the 19th District of Texas, we need 
relationship banking. My constituents want to know their 
banker. Their local banker wants to be flexible and to find 
ways to help his neighbor realize the dream and reach financial 
independence. It is my hope that today we can begin to restore 
some bipartisanship and work together to help our constituents 
on Main Street reach their financial dreams and enable our 
economy to reach its full potential.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Clay, for 2 
minutes.
    Mr. Clay. Thank you, Mr. Chairman. I appreciate you calling 
this hearing. And I certainly appreciate your common-sense 
approach to how we go forward as a subcommittee.
    I welcome today's testimony from our panel of regulators. 
And I view this morning's hearing as an important opportunity 
for regulators to make their case for the work that they are 
already doing in tailoring their regulatory approaches to the 
size, complexity, and risk profiles of our community-based 
financial institutions. In particular, I look forward to a 
better understanding of how the rulemaking process already 
lends itself to agency considerations of cost and benefits, the 
progress of ongoing agency reviews of existing rules that are 
already happening under the Economic Growth and Paperwork 
Reduction Act, the various exemptions that regulators have 
already extended to community banks and small businesses, and 
the value of asset thresholds to regulators in identifying 
opportunities for targeted regulatory relief.
    My hope is that this morning's testimony will form the 
basis of responsible and targeted regulatory relief proposals 
that strike the proper balance between consumer protection and 
safety and soundness, and that calibrate regulatory approaches 
to the actual risks that community-based financial institutions 
pose.
    Mr. Chairman, thank you again, and I yield back the 
remainder of my time.
    Chairman Neugebauer. I thank you.
    Are there any other Members on your side who would like to 
make an opening statement? We still have a little time left.
    Mr. Clay. I don't see any.
    Chairman Neugebauer. Then, I will now introduce our panel. 
First, Ms. Doreen Eberley is the Director of the FDIC's 
Division of Risk Management Supervision. She is responsible for 
FDIC's programs designed to promote financial institution 
safety and soundness and those institutions' adherence to the 
FDIC statutes and regulations. She has had a distinguished 
career at the FDIC, where she has served as Acting Deputy to 
FDIC Chairman Sheila Bair and Acting Chairman Martin Gruenberg.
    Prior to joining the FDIC, she served on the professional 
staff of the U.S. House of Representatives Committee on Banking 
and Financial Services. And also, under the fellowship program 
during the 105th Congress.
    Ms. Eberley holds a B.A. in economics from Cornell 
University and an MBA from Emory.
    Second, Ms. Maryann Hunter is the Deputy Director of the 
Division of Bank Supervision and Regulation at the Board of 
Governors of the Federal Reserve System. She was responsible 
for the Federal Reserve's program for supervision and risk 
management, and oversees the supervision of U.S. banking 
organizations and foreign banking organizations operating in 
the United States.
    Prior to joining the Board of Governors staff, Ms. Hunter 
held a number of high-level positions in the Federal Reserve 
Bank in Kansas City. She started her career at the Federal 
Reserve as an examiner in 1981, and was promoted to Senior Vice 
President and Officer in Charge of Supervision in 2000. She 
holds a B.A. from the Pennsylvania State University and an MPP 
degree from the University of Michigan's Ford School of Public 
Policy.
    Third, Mr. Toney Bland is the Senior Deputy Comptroller for 
Midsize Community Bank Supervision in the Office of the 
Comptroller of the Currency. In this role, Mr. Bland is 
responsible for supervising nearly 1,800 national banks and 
Federal savings associations, as well as 2,000 OCC employees. 
He serves as a member of OCC's Executive Committee, and the 
Committee on Bank Supervision.
    Mr. Bland previously served as Deputy Comptroller for the 
agency's northeastern district, where he was responsible for 
the oversight of more than 300 community banks and Federal 
savings associations, independent national trust companies, and 
independent data service providers.
    Mr. Bland received his bachelor of science degree in 
business administration and economics from Carroll University 
in Wisconsin.
    Fourth, Mr. Larry Fazio serves as director of the Office of 
Examination and Insurance at the National Credit Union 
Administration. In this role, he is responsible for providing 
leadership over the agency's examination and supervision 
program. He has had a long career in supervision and 
examination at the NCUA, having previously served as 
supervision analyst, supervisory examiner, and director of risk 
management. Mr. Fazio graduated from Lewis University with a 
degree in accounting. He is a certified management accountant 
and has a master's degree in organizational management from 
George Washington University.
    Fifth, Mr. David Silberman serves as the Associate Director 
of the Office of Research, Markets, and Regulations at the 
Consumer Financial Protection Bureau. Prior to joining the 
CFPB, Mr. Silberman had a long career at the AFL-CIO where he 
served as deputy general counsel. While there, he helped create 
an organization to provide financial services to union members. 
Mr. Silberman went on to serve as president and CEO of Union 
Privilege, and later as director of the AFL-CIO Task Force in 
Labor Law.
    Prior to joining the CFPB implementation team, Mr. 
Silberman served as general counsel and executive vice 
president of Kessler Financial Services, a privately held 
company focused on creating and supporting credit cards and 
other financial services to membership organizations.
    Mr. Silberman began his career as a law clerk to Justice 
Marshall, and is a member of the law firm Bredhoff & Kaiser.
    And I would now like to turn to a friend from Texas, Mr. 
Williams, to recognize a very special member of the panel 
today.
    Mr. Williams. Thank you, Chairman Neugebauer. This morning 
it is a privilege and an honor to introduce Texas Banking 
Commissioner, and my constituent, Charles Cooper.
    A native Texan, Mr. Cooper holds a BBA degree in finance 
and economics from Baylor University, and is also a graduate of 
the Southwestern Graduate School of Banking at Southern 
Methodist University.
    Charles G. Cooper was appointed Texas Banking Commissioner 
by the Texas Finance Commission on December 1, 2008.
    Mr. Cooper began his career in banking in 1970 with the 
Federal Deposit Insurance Corporation in the Dallas region. His 
career in the banking industry spans over 40 years, and 
includes senior level positions in both the public and private 
sectors.
    As Texas Banking Commissioner, his responsibilities include 
the chartering, regulation, supervision, and examination of 263 
Texas State-chartered banks with aggregate assets of 
approximately $236 billion, in addition to department 
supervisors trust companies, foreign bank agencies and 
branches, prepaid funeral licenses, money services businesses, 
perpetual care cemeteries, and private child support for 
enforcement agencies. He also serves as vice chairman of the 
Conference of State Bank Supervisors.
    The subcommittee looks forward to Mr. Cooper's testimony. I 
want to welcome him here to Washington.
    And I yield back, Mr. Chairman.
    Chairman Neugebauer. I thank the gentleman.
    Each of you will be recognized for 5 minutes to give your 
oral presentations, and without objection, each of your written 
statements will be made a part of the record.
    And we will start with you, Ms. Eberley. You are now 
recognized for 5 minutes.

   DOREEN R. EBERLEY, DIRECTOR, DIVISION OF RISK MANAGEMENT 
   SUPERVISION, FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

    Ms. Eberley. Thank you, Chairman Neugebauer, Ranking Member 
Clay, and members of the subcommittee. I appreciate the 
opportunity to testify on behalf of the FDIC on regulatory 
relief for community banks.
    As the primary Federal regulator for the majority of 
community banks, the FDIC has a particular interest in 
understanding the challenges and opportunities they face.
    Community banks provide traditional relationship-based 
banking services to their communities. While they hold just 13 
percent of all banking assets, community banks account for 
about 45 percent of all of the small loans to businesses and 
farms made by insured institutions. Although 448 community 
banks failed during the recent financial crisis, thousands of 
community banks did not. That is a fact, and that is the vast 
majority.
    Institutions that stuck to their core expertise weathered 
the crisis. The highest failure rates were observed among non-
community banks and among community banks that departed from 
the traditional model and tried to grow rapidly with risky 
assets, often funded by volatile non-core and often non-local 
brokered deposits.
    The FDIC is keenly aware that regulatory requirements can 
have a greater impact on smaller institutions, which operate 
with fewer staff and other resources than their larger 
counterparts. Therefore, the FDIC pays particular attention to 
input community bankers provide regarding regulations, and the 
impact regulations may have on smaller and rural institutions 
that serve areas that otherwise would not have access to 
banking services.
    The FDIC and the other regulators are actively seeking 
input from the industry and the public on ways to reduce 
regulatory burden through the Economic Growth and Regulatory 
Paperwork Reduction Act process, which requires the Federal 
financial regulators to periodically review our regulations to 
identify any that are outdated or otherwise unnecessary. As 
part of this process, the agencies are jointly requesting 
public comment on all areas of our regulations.
    We are also conducting regional outreach meetings involving 
the public, the industry and other interested parties.
    In response to what we heard in the first round of 
comments, the FDIC already has acted on regulatory relief 
suggestions where we could achieve rapid change. In November, 
we issued two financial institution letters, or FILs, 
responding to suggestions we reviewed from bankers. The first 
FIL released questions and answers about the deposit insurance 
application process. Commentors had told us that a 
clarification of the FDIC's existing policies would be helpful.
    The second FIL addressed new procedures that eliminate or 
reduce the need to file applications by institutions wishing to 
conduct permissible activities through certain bank 
subsidiaries organized as limited liability companies, subject 
to some limited documentation standards. This will 
significantly reduce application filings in the years ahead.
    The FDIC also takes a risk-based approach to supervision 
which recognizes that community banks are different and should 
not be treated the same. This approach is clear in how we train 
our examiners and how we conduct our examination processes.
    Every FDIC examiner is initially trained as a community 
bank examiner through a rigorous 4-year program. As a result, 
each examiner gains a thorough understanding of community banks 
before becoming a commissioned examiner.
    The vast majority of examiners in our 83 field offices 
nationwide are community bank examiners.
    Institutions with lower risk profiles, such as most 
community banks, are subject to less supervisory attention than 
those with elevated risk profiles. Well-managed banks engaged 
in traditional non-complex activities receive periodic safety 
and soundness and consumer protection examinations that are 
carried out over a few weeks. In contrast, the very largest 
institutions that FDIC supervises receive continuous safety and 
soundness supervision and ongoing examination carried out 
through targeted reviews during the course of an examination 
cycle.
    The FDIC also considers the size, complexity, and risk 
profile of institutions during the rulemaking and supervisory 
guidance development processes, and on an ongoing basis through 
the feedback we receive from community bankers and other 
stakeholders. Where possible, we scale our regulations and 
policies according to these factors.
    As we strive to minimize regulatory burden on community 
banks, we look for changes that can be made without affecting 
safety and soundness. For example, we believe that the current 
$500 million threshold for the expanded 18 month examination 
period could be raised. In addition, we would support Congress' 
efforts to reduce the privacy notice reporting burden.
    In conclusion, the FDIC will continue to look for ways to 
achieve our fundamental objectives of safety and soundness and 
consumer protection in ways that do not involve needless 
complexity or expense for community banks.
    We look forward to working with the committee in pursuing 
these efforts.
    Thank you.
    [The prepared statement of Director Eberley can be found on 
page 104 of the appendix.]
    Chairman Neugebauer. Thank you.
    Now, Ms. Hunter, you are recognized for 5 minutes.

 STATEMENT OF MARYANN F. HUNTER, DEPUTY DIRECTOR, DIVISION OF 
 BANKING SUPERVISION AND REGULATION, BOARD OF GOVERNORS OF THE 
                  FEDERAL RESERVE SYSTEM (FED)

    Ms. Hunter. Thank you. Chairman Neugebauer, Ranking Member 
Clay, and members of the subcommittee, I appreciate the 
opportunity to testify today on the important topic of 
regulatory relief for community financial institutions.
    As noted in the introduction, I began my career more than 
30 years ago as a community bank examiner and eventually became 
the officer in charge of supervision at the Federal Reserve 
Bank of Kansas City. Thus, I have seen firsthand the need to 
balance effective supervision and regulation to ensure safety 
and soundness, while not subjecting small institutions to 
unnecessary regulatory requirements that could constrain their 
capacity to serve their customers and communities.
    In recent years, the Federal Reserve has taken several 
measures to tailor regulations, policies, and supervisory 
activities to the risks at community banking organizations and 
to make our supervisory program more efficient and less 
burdensome for well-run institutions. For example, we have 
recently completed a review of supervisory guidance for 
community and regional organizations, to make sure that our 
expectations for examiners and bankers are appropriately 
aligned with the current banking practices and risks.
    This review is likely to result in the elimination of some 
guidance that is no longer relevant to current supervisory and 
banking industry practices.
    We continue to build upon our longstanding risk-focused 
approach to supervision, reviewing field procedures, refining 
training programs and developing automated tools for examiners 
to focus examiner attention on higher risk activities, thus 
reducing some of the work at lower-risk, well-managed community 
banks.
    Furthermore, we have developed programs to conduct more 
examination work offsite, such as the loan review, to reduce 
the time that examiners physically spend in the bank.
    The Federal Reserve very recently took action to further 
reduce burden for smaller institutions. The Board issued a 
final rule that expands the applicability of its small bank 
holding company policy statement to institutions with up to a 
billion dollars in assets, provided that they meet certain 
qualitative requirements.
    And it also applies the statement to certain savings and 
loans holding companies, to address their burden.
    This expansion covers approximately 720 savings and loan 
holding companies and bank holding companies.
    Going forward, this means that 89 percent of all bank 
holding companies and 81 percent of all savings and loan 
holding companies will be covered under the policy statement.
    The policy statement facilitates local ownership of small 
community banks and savings associations by allowing their 
holding companies to operate with higher levels of debt than 
would normally be permitted. Holding companies that qualify for 
the policy statement are excluded from consolidated capital 
requirements.
    In a related action, the Board took steps to relieve the 
regulatory reporting burden for the affected institutions by 
eliminating the quarterly and more complex consolidated 
financial reporting requirement, and instead required parent-
only financial statements semiannually.
    In addition to these actions, the Federal Reserve is 
participating with the other Federal banking agencies in a 
review to identify banking regulations that are outdated, 
unnecessary or unduly burdensome, as required by the Economic 
Growth and Regulatory Paperwork Reduction Act of 1996, or, as 
it is also known, the EGRPRA review.
    We are working closely with the OCC and the FDIC to seek 
public comment on regulations, and are jointly holding outreach 
meetings to get feedback directly from bankers and community 
groups about ways to reduce burden related to rules and 
examination practices.
    To date, the meetings held in Los Angeles and Dallas have 
yielded some useful and specific suggestions for consideration.
    The agencies have also recently expanded the scope of 
regulations covered by the review to include those that are 
relatively new. We are committed to listening to bankers' 
concerns and working with the other Federal agencies, as 
appropriate, to consider and assess the impact of potential 
changes identified through the EGRPRA review process.
    Let me conclude by saying that the Federal Reserve is 
committed to taking a balanced supervisory approach that 
fosters safe and sound community banks and fair treatment for 
consumers, and encourages the flow of credit to consumers and 
businesses.
    To achieve that goal, we will continue to work to make sure 
that regulations, policies, and supervisory activities are 
appropriately tailored to the level of risks at these 
institutions.
    Thank you for inviting me to share the Federal Reserve's 
views on the issues affecting community banks. I would be 
pleased to answer any questions you may have.
    [The prepared statement of Deputy Director Hunter can be 
found on page 148 of the appendix.]
    Chairman Neugebauer. Thank you, Ms. Hunter.
    Mr. Bland, you are recognized for 5 minutes.

STATEMENT OF TONEY BLAND, SENIOR DEPUTY COMPTROLLER, OFFICE OF 
             THE COMPTROLLER OF THE CURRENCY (OCC)

    Mr. Bland. Thank you, Chairman Neugebauer, Ranking Member 
Clay, and members of the subcommittee. Thank you for the 
opportunity to appear before you today to discuss the 
challenges facing community banks and Federal savings 
associations and the actions that the OCC is taking to help 
these institutions address regulatory burdens.
    I have been a bank examiner for more than 30 years. And I 
have seen firsthand the vital role that community banks play in 
meeting the credit needs of consumers and small businesses 
across the country.
    At the OCC, we are committed to supervisory practices that 
are fair and reasonable, and to fostering a climate that allows 
for well-managed community banks to grow and thrive.
    We tailor our supervision to each bank's individual 
situation, taking into account the product and services it 
offers as well as its risk profile and management team.
    Given the wide array of institutions we supervise, the OCC 
understands that a one-size-fits-all approach to regulation 
does not work. Therefore, to the extent that a law allows, we 
factor these differences in the rules we write and the guidance 
we issue.
    My written statement provides several examples of the 
common-sense adjustments we have made to recent regulations to 
accommodate community bank concerns.
    Guiding our consideration of every proposal to reduce the 
burden on community banks is the need to ensure that 
fundamental safety and soundness and consumer protection 
safeguards are not compromised. Within this framework, to date 
we have developed three regulatory relief proposals that we 
hope Congress will consider favorably.
    We are also undertaking several efforts to identify and 
mitigate other regulatory burdens through our regulatory review 
process.
    The first proposal we submitted to Congress would exempt 
some 6,000 community banks from the Volcker Rule. As the vast 
majority of banks under $10 billion in asset size do not engage 
in the proprietary trading or covered funds activities that the 
statute sought to prohibit, we do not believe they should have 
to commit the resources to determine if any compliance 
obligations under the rule would apply.
    We do not believe that this burden is justified by the 
nominal risk that these institutions could pose to the 
financial system.
    We are also supporting current law to allow more well-
managed community banks to qualify for a longer, 18-month 
examination cycle. Raising the threshold from $500 million to 
$750 million for banks that would qualify for this treatment 
would cover more than 400 additional community banks.
    We also support providing more flexibility for Federal 
thrifts, so that those thrifts that wish to expand their 
business model and offer a broader range of services to their 
communities may do so without the burden and expense of a 
charter conversion.
    Under our proposal, Federal thrifts could retain their 
current governance structure without unnecessarily limiting the 
evolution of their business plan.
    As a supervisor of both national banks and Federal thrifts, 
we are well-positioned to administer this new framework without 
requiring a costly and time-consuming administrative process.
    I am pleased that members of this subcommittee, including 
Representatives Rothfus, Barr, and Tipton, have introduced 
legislation consistent with some of our proposals to provide 
regulatory relief to community banks.
    I am also hopeful that the ongoing efforts to review 
current regulations to reduce or eliminate burden will bear 
fruit.
    I have participated in the first two public EGRPRA meetings 
in Los Angeles and Dallas, where regulators heard ideas to 
reduce burden from a number of interested stakeholders. The 
agencies are currently evaluating the comments received from 
these meetings and from the public comment process.
    While this process will unfold over a period of time, the 
OCC will not wait until it is completed to implement changes 
where a good case is made for relief or to submit legislative 
ideas identified through this process to Congress.
    Separately, the OCC is in the midst of a comprehensive, 
multi-phase review of our own regulations and those of the 
former Office of Thrift Supervision (OTS) to reduce 
duplication, promote fairness of supervision, and create 
efficiencies for national banks and Federal savings 
associations.
    We are currently reviewing comments received from the first 
phase of our review, focused on corporate activities and 
transactions.
    Finally, we are continually looking for innovative ways to 
reduce burden. Last February, the OCC published a paper that 
focused on possibilities for community banks to collaborate to 
manage regulatory requirements, trim cost, and better serve 
their customers.
    We believe there are opportunities for community banks to 
work together to address the challenges of limited resources 
and acquiring needed expertise.
    In closing, the OCC will continue to carefully assess the 
potential effect that current and future policies and 
regulations may have on community banks. And we will be happy 
to work with the industry and the committee on additional ideas 
or proposed legislative initiatives.
    Again, thank you for the opportunity to appear today. I 
would be happy to respond to questions.
    [The prepared statement of Deputy Comptroller Bland can be 
found on page 60 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Bland.
    Mr. Fazio, you are now recognized for 5 minutes.

 STATEMENT OF LARRY FAZIO, DIRECTOR, OFFICE OF EXAMINATION AND 
     INSURANCE, NATIONAL CREDIT UNION ADMINISTRATION (NCUA)

    Mr. Fazio. Good morning, Chairman Neugebauer, Ranking 
Member Clay, and members of the subcommittee. Thank you for the 
invitation to discuss regulatory relief for credit unions.
    NCUA regulates 6,273 credit unions with $1.1 trillion in 
assets that serve 99.3 million members. More than three-
quarters of these credit unions have less than $100 million in 
assets. And all but 227 have less than $1 billion in assets.
    Therefore, most member-owned, locally-driven credit unions 
could be considered community financial institutions.
    Because credit unions generally have fewer resources 
available to respond to marketplace, technological, legislative 
and regulatory changes, NCUA recognizes and acts continually to 
fine tune our rules to remove any unnecessary burden on credit 
unions.
    In protecting the safety and soundness of credit unions, 
the savings of their members, the share insurance fund, and 
taxpayers, NCUA employs a variety of targeting strategies.
    For example, we will fully exempt small credit unions from 
certain rules. We use graduated requirements as size and 
complexity increase for others. And we incorporate practical 
compliance approaches in agency guidance.
    In short, we strive to balance maintaining prudential 
standards with minimizing regulatory burden. Since 1987, NCUA 
has undertaken a rolling 3-year review of all of our 
regulations, and NCUA is once again voluntarily participating 
in the current EGRPRA review.
    In response to stakeholder comments received during the 
first EGRPRA notice, we have established two internal working 
groups to consider possible changes in the areas of field of 
membership and secondary capital.
    We have also moved swiftly on the supervisory front to 
expedite secondary capital requests from low-income credit 
unions.
    Over the past 3 years, NCUA has taken 15 additional actions 
through the agency's regulatory modernization initiative to cut 
red tape and provide lasting benefits to credit unions.
    This includes easing eight regulations, including 
modernizing the definition of small credit unions to prudently 
exempt thousands of credit unions from several rules, 
streamlining three processes, including facilitating more than 
1,000 new low-income designations and expediting examinations 
at all small credit unions, and issuing four legal opinions 
allowing more flexibility in credit union operations.
    In February, the NCUA Board issued a proposed rule to 
further increase the asset threshold for defining a small 
entity under the Regulatory Flexibility Act to $100 million. If 
finalized as proposed, this change would provide special 
consideration of regulatory relief in future rulemaking for 
three out of four credit unions.
    The NCUA Board is fully committed to continuing to provide 
regulatory relief. NCUA is now working to ease rules on 
secondary capital, member business lending, fixed assets, asset 
securitization, and fields of membership.
    Next week, in fact, the Board will finalize a rule to 
simplify how Federal credit unions add groups to their fields 
of membership.
    Concerning legislation, NCUA appreciates the committee's 
recent efforts to enact laws to provide share insurance 
coverage for lawyers' trust accounts and enable federally-
insured financial institutions to offer prize-linked savings 
accounts.
    Going forward, NCUA would urge Congress to provide 
regulators with flexibility in writing rules. Such flexibility 
would better allow us to scale rules based on size or 
complexity to effectively limit additional regulatory burdens 
on smaller credit unions.
    In this Congress, NCUA supports several targeted bipartisan 
bills. For example, we support H.R. 989 by Congressmen King and 
Sherman to allow healthy, well-managed credit unions to issue 
supplemental capital that would count as net worth, H.R. 1188 
by Congressmen Royce and Meeks to modify the cap on member 
business lending, and H.R. 1422 by Congressmen Royce and 
Hoffman, to provide parity between credit unions and banks on 
the treatment of one- to four-unit, non-owner- occupied 
residential loans by exempting such loans from the member 
business lending cap.
    NCUA also would support legislation to permit all Federal 
credit unions to add underserved areas to their fields of 
membership. Additionally, we request congressional 
consideration of legislation to enable NCUA to examine third-
party vendors, a move that could provide a measure of 
regulatory relief.
    The change could easily save credit unions and NCUA 
valuable time by eliminating the need to mitigate the same 
issue repeatedly at hundreds of credit unions.
    In closing, NCUA remains committed to providing responsible 
regulatory relief. We stand ready to work with Congress on 
related legislative proposals.
    Thank you, and I look forward to your questions.
    [The prepared statement of Director Fazio can be found on 
page 121 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Fazio.
    Mr. Silberman, you are now recognized for 5 minutes.

  STATEMENT OF DAVID SILBERMAN, ASSOCIATE DIRECTOR, RESEARCH, 
MARKETS, AND REGULATIONS, CONSUMER FINANCIAL PROTECTION BUREAU 
                             (CFPB)

    Mr. Silberman. Thank you, Mr. Chairman.
    Chairman Neugebauer, Ranking Member Clay, and members of 
the subcommittee, thank you for the opportunity to testify 
today about the Consumer Financial Protection Bureau's work to 
strengthen our financial system so that it better serves 
consumers, responsible businesses, and our economy as a whole.
    As you know, the Bureau is the Nation's first Federal 
agency whose sole focus is protecting consumers in the 
financial marketplace through fair rules, based on research and 
quantitative analysis, consistent oversight and appropriate 
enforcement with respect to the institutions within our 
jurisdiction, and through broad-based consumer engagement, the 
Bureau is working to restore consumer trust in the financial 
marketplace.
    The Bureau does not supervise community banks or credit 
unions, but our rules of course impact these institutions. The 
division I lead, the Division of Research, Markets and 
Regulations, is responsible for articulating a research-driven, 
evidence-based, and pragmatic perspective on consumer financial 
markets, and developing rules grounded in that perspective to 
ensure that consumer financial markets function in a fair, 
transparent, and competitive manner.
    As such, the Bureau is committed to regulations that are 
carefully calibrated so that as we fulfill our mandate to 
protect consumers, we are mindful of the impact of compliance 
on financial institutions and responsive to those concerns. We 
engage in rigorous evaluation of the effects of proposed 
regulations on both consumers and the covered persons 
throughout our rulemaking process and maintain steady dialogue 
with stakeholders.
    Congress also specifically mandated the agency to undertake 
a regulatory review process. The Dodd-Frank Act requires that 
within 5 years after the effective date of any significant 
rule, the Bureau must assess the rule's effectiveness in 
meeting the purposes and objectives of the Act and the goals 
for the particular rule.
    Beginning in 2011, the Bureau demonstrated an early 
commitment to addressing unnecessary burdens by issuing a 
request for information to help identify priorities for 
streamlining inherited regulations.
    Through that process, we pinpointed a number of areas for 
review. For example, we identified a requirement that certain 
fee disclosures must be posted on automated teller machines as 
a candidate for elimination. The Bureau provided technical 
assistance to Congress on this issue, which took corrective 
action.
    Additionally, the Bureau identified certain requirements 
regarding the delivery of annual privacy notices under the 
Gramm-Leach-Bliley Act as potentially redundant. Last fall, the 
Bureau finalized a rule to allow banks and non-bank financial 
institutions, under certain conditions, to post privacy notices 
online instead of having to mail them to consumers, resulting 
in a potential savings to the industry of $17 million annually.
    The Bureau likewise has been sensitive to regulatory 
burdens in the rules we have adopted. As directed by Congress 
in the Dodd-Frank Act, the Bureau issued a series of mortgage 
rules, the majority of which took effect in January of 2014.
    Those rules were designed to address a variety of practices 
that contributed to the mortgage crisis and ensuing financial 
meltdown. As part of the work to reform the mortgage market, 
the Bureau developed a set of special provisions to provide 
small creditors, mostly community banks and credit unions, 
greater leeway to originate Qualified Mortgages (QMs).
    For example, we provided a 2-year transition period, during 
which balloon loans made by small creditors and held in 
portfolio can generally be treated as QMs regardless of where 
the loans are originated.
    We also provided that after that period, balloon loans 
originated by small creditors that predominantly serve rural or 
underserved areas would be treated as QMs. We then committed to 
a thorough review of whether our definitions of ``rural or 
underserved'' and ``small creditor'' could be better 
calibrated.
    After undertaking considerable analysis, the Bureau 
recently proposed to expand the definition of ``small 
creditor'' by adjusting the origination limit to encourage more 
lending by these small local institutions. We also proposed to 
expand the definition of ``rural area'' to address access to 
credit concerns.
    To further address compliance costs, the Bureau has 
developed a unique regulatory implementation program. For 
example, Congress directed the Bureau to combine the required 
mortgage disclosure forms under the Real Estate Settlement 
Procedures Act (RESPA) and the Truth in Lending Act (TILA).
    Since our integrated disclosure rule was first issued in 
November 2013, the Bureau has engaged directly and intensively 
with financial institutions and vendors, including efforts 
focused on the needs of smaller institutions.
    We expect to continue working with these stakeholders to 
answer questions and evaluate feedback as the integrated 
disclosure rule is implemented.
    In closing, the premise at the heart of our mission is that 
consumers deserve to be treated fairly in the financial 
marketplace. A deep and thorough understanding of the 
marketplace is essential to accomplish the Bureau's mission and 
ensure the stability of the financial system and our economy as 
a whole.
    Thank you for the opportunity to testify. I look forward to 
your questions.
    [The prepared statement of Associate Director Silberman can 
be found on page 165 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Silberman.
    And, Mr. Cooper, you are now recognized for 5 minutes.

  STATEMENT OF CHARLES G. COOPER, BANKING COMMISSIONER, TEXAS 
  DEPARTMENT OF BANKING, ON BEHALF OF THE CONFERENCE OF STATE 
                    BANK SUPERVISORS (CSBS)

    Mr. Cooper. Chairman Neugebauer, Ranking Member Clay, and 
distinguished members of the subcommittee, my name is Charles 
Cooper. I am the commissioner of the Texas Department of 
Banking and also serve as vice chairman of the Conference of 
State Bank Supervisors.
    It is my pleasure to testify here today on behalf of CSBS 
on this most important topic.
    I have more than 45 years in the financial services 
industry, both as a banker and as a State and Federal 
regulator.
    Over these many years, few things have become more evident 
than the value of community banks. They are vital to the 
economy, job creation, and financial stability.
    I have also seen many swings of the regulatory pendulum. 
Extreme swings to either side are wrong. Regulators must 
constantly improve the way we conduct supervision to ensure a 
balanced approach.
    I would like to point out that the sheer volume of 
regulation confounds the best of our banks, and these 
regulations keep on coming. This emphasizes the importance of 
the ongoing EGRPRA review. This process needs to receive the 
priority treatment of everyone.
    Many times, it is not the law or the regulation itself that 
creates the excessive regulatory burden, but the interpretation 
and supervisory techniques utilized. One-size-fits-all 
supervision that has unintended negative consequences should be 
curtailed. Being a bank examiner is a tough job. It requires 
education and experience. It also requires sound judgment.
    I have generally found that field examiners in local 
offices do an extraordinary job. The process begins to break 
down when the decisions are made from afar.
    As State regulators, we have found that community banks 
cannot be defined by simple line drawing based on asset 
thresholds. While asset size is relevant, there are other 
factors such as market area, funding sources, and relationship 
lending. We need a process that utilizes these factors and 
provides flexibility in how they are weighed and considered.
    CSBS commends Congress for passing a law requiring that at 
least one member of the Federal Reserve Board have experience 
as a supervisor of community banks or as a community banker.
    We also support H.R. 1601, which reaffirms the existing 
legal requirement that the FDIC Board include an individual 
with State regulatory experience.
    A seat at the table will not automatically result in a 
right-sized regulatory framework. We must also understand the 
state of community banking. This is why CSBS partnered with the 
Federal Reserve to attract new research on community banking. 
This will help us develop a system of supervision that provides 
for a strong, enduring future for the dual banking system.
    In addition to banks, State regulators regulate other 
financial services industries. Effective supervision of our 
diverse financial system requires effective regulatory tools. 
To help accomplish this, State regulators developed the 
Nationwide Multistate Licensing System Registry, or NMLS.
    CSBS commends the House for unanimously passing H.R. 1480, 
which supports State regulators' expanded use of NMLS as a 
licensing system. We are also working with Congress to enable 
NMLS to process background checks for other non-mortgage 
licensees in the same efficient manner they are processed for 
mortgage providers.
    Today, there are 6,423 banks. As you know, that number 
decreases daily. State bank regulators have chartered and now 
regulate more than 75 percent of these banks. Regardless of the 
charter or agency, we are all in this together. We are stewards 
of the entire financial services ecosystem. We must ensure that 
sound judgment and appropriate flexibility are central to our 
supervisory approach.
    Thank you for the opportunity to testify today, and I look 
forward to your questions.
    [The prepared statement of Commissioner Cooper can be found 
on page 76 of the appendix.]
    Chairman Neugebauer. Thank you, Mr. Cooper.
    I want to give this panel an ``A'' because every one of you 
stayed within your 5-minute time allocation.
    And I want that to be an example for my colleagues. We have 
great participation today, and what I would really like to do 
is get through, at least for every Member to ask a question. So 
if you get to the end of your time and you ask a very long 
question, you are going to have to get that answered in 
writing, because I am going to be fairly efficient about making 
sure everybody stays within the 5-minute timeline.
    I am now going to recognize myself for 5 minutes for 
questions.
    Mr. Bland, first of all, I would like to thank the OCC for 
being one of the first agencies to put forth some legislative 
proposals to help bring some regulatory relief for our 
community financial institutions.
    So, let's talk about your EGRPRA process. Which of the 
Dodd-Frank rules are currently a part of that process that you 
are reviewing?
    Mr. Bland. Chairman Neugebauer, when we initially started 
the EGRPRA process, Dodd-Frank wasn't part of the review. This 
month we have agreed, going forward, that those rules that have 
been implemented will be subject to the future EGRPRA hearings 
and the comment periods.
    Chairman Neugebauer. Can you give an example of maybe one 
of those that you might be looking at?
    Mr. Bland. I look at the stress test process we put in for 
institutions. That is one that will be subject to review.
    Chairman Neugebauer. I am glad to hear that because I think 
that is an important part of it. And I hope your other 
colleagues will be doing the same.
    Mr. Fazio, the NCUA's risk-based capital rule has been one 
of the most commented-upon proposals in the agency's history. 
You are wrapping up, I guess, what is the second window of the 
proposed rule. One of the NCUA Board members has questioned the 
rule's legality.
    Do you have confidence that the NCUA is getting this move 
to risk-based capital structure right?
    Mr. Fazio. I do, Mr. Chairman. We spent a lot of time with 
the second proposal, looking at comments we received on the 
first proposal, doing additional research, and consultation 
with various parties.
    In addition to looking at the policy matters, the risk 
weights and so forth, we spent a lot of extra time and research 
on the legal matters as well.
    Our general counsel, as well as some independent external 
counsels that we used, are confident that what we are proposing 
is within the NCUA's Board's authority to propose.
    Chairman Neugebauer. One of the concerns that I have heard 
about the new capital system is it requires under a new capital 
structure, and particularly, I am concerned about the capital 
cushions and a practice where credit unions were required to 
hold more than regulatory mandates would go up dramatically.
    Can you address the amount of new capital that may be 
required in the practice of capital cushions?
    Mr. Fazio. The concept of a capital cushion is not really a 
direct function of the rule itself. It is a choice that credit 
unions make when they are seeking to hold a cushion, if you 
will, or a buffer above what the minimum that is required by 
the regulation specifies.
    We have done a great deal of analysis on levels of capital 
credit unions would have to hold to be in compliance, but I 
would first point out that three-quarters of all credit unions 
are exempt under this second proposal from this rule. So it 
only affects credit unions that are over $100 million in 
assets, which is one quarter or one out of every four credit 
unions, about 1,400 institutions.
    Of those, only 29 would see a decline in their capital 
levels below well-capitalized. For those 29 credit unions, if 
they were to solve their capital deficiency through just adding 
capital to the numerator of that equation, it would be roughly 
$53 million in extra capital.
    So it is a relatively modest impact on those credit unions 
and their operations. Those 29 credit unions, for context, hold 
$13 billion in assets. So it is a relatively modest impact 
currently.
    But it is effective in picking up outliers, making sure 
that credit unions that have too much risk relative to their 
capital levels to absorb that risk are identified properly and 
incentivized to hold appropriate capital levels.
    Chairman Neugebauer. Thank you.
    Mr. Cooper, it is my understanding that the States have 
considerable authority to regulate and to enforce the law when 
it comes to short-term, small-dollar, credit or payday loans.
    Can you describe the authority that States have to regulate 
these products?
    Mr. Cooper. Mr. Chairman, first of all the banking 
department does not directly regulate this industry. One of our 
sister agencies does.
    But generally speaking, the State authority obviously is 
predicated on State law and it is--one of the things it is 
directed to do is to make sure that they are operating legally, 
legally licensed, operating within their license, and also that 
disclosure to the customer is most important.
    Chairman Neugebauer. Just quickly, Mr. Silberman, you have 
both research and regulations. Can you identify a State that 
lacks sufficient authority to regulate these products?
    Mr. Silberman. I see time is up, Mr. Chairman. Do you want 
me to answer?
    Chairman Neugebauer. Yes, quickly.
    Mr. Silberman. We have not thought about a State that 
doesn't have authority. Many of the States that have State 
regulators have talked to us about problems they have with 
respect to Internet payday lending and lending that is done 
through tribal entities that are outside their jurisdiction. So 
there are some gaps in States' ability to regulate.
    But beyond that, our mission is to enforce Federal law, 
consumer protection law, which establishes a floor for 
consumers throughout the United States.
    Chairman Neugebauer. I thank the gentleman. And I now 
recognize the ranking member, Mr. Clay from Missouri, for 5 
minutes.
    Mr. Clay. Thank you, Mr. Chairman.
    This is a panel-wide question: All of you identified 
ongoing internal and external reviews of existing rules. How 
can smaller regulated entities engage regulators in expressing 
their specific concerns about particular rules, supervisory 
policies or enforcement action? What are the access points for 
smaller regulated entities seeking to inform your agency's 
policies, such as, do your agencies have liaisons and ombudsmen 
that specifically address the concerns of smaller entities?
    Let's start with Ms. Eberley.
    Ms. Eberley. We do have an ombudsman, but to the EGRPRA 
process, we have established a Web page on the Federal 
Financial Institutions Examination Council (FFIEC) Web site 
that hosts all of the information about the EGRPRA process.
    So each of the Federal Register notices seeking comment on 
rules is there. Institutions can submit a comment through the 
Web site. Institutions can watch the public meetings in a live 
Web cast. And it is just all there.
    And we encourage institutions to take a look at that and 
actively participate. We do find it most helpful when 
institutions give us specific information about how rules are 
impacting them.
    Mr. Clay. Thank you.
    Ms. Hunter?
    Ms. Hunter. I would only add that we do take the EGRPRA 
process very seriously. Any institution, really, any one in the 
public can comment on rules and regulations through that 
process.
    I would also encourage bankers to attend the sessions. We 
have one coming up in May in Boston, on May 4th. And all of the 
information about registering for those sessions is on the Web 
site that Ms. Eberley referenced.
    Mr. Clay. Thank you.
    Mr. Bland?
    Mr. Bland. Ranking Member Clay, in addition to EGRPRA, I 
would talk about a few other things.
    Through our examiners, we have dedicated examiners for each 
institution. And so, in addition to the exam process, they are 
available to institutions throughout the year to be available 
to field questions. Supporting that examiner are a number of 
subject matter experts that we make available to bankers to 
help them work through these issues and concerns.
    We have a very robust outreach program where we bring 
together bankers to talk about issues of concern and guidance. 
We put out periodic issuances to them explaining the 
information that is most useful to them.
    In addition, we also have a mutual advisory committee that 
meets regularly so we can discuss their concerns. We also have 
a minority depository advisory committee where we get to hear 
issues and concerns of minority bankers as well.
    We issue quarterly guidance or rules that have come out 
along with quick simple explanations to community banks as 
well.
    Mr. Clay. Thank you.
    Mr. Fazio?
    Mr. Fazio. Thank you. We actually have an office called the 
Office of Small Credit Union Initiatives, that is specifically 
dedicated to reaching out to smaller credit unions. We do 
training. We administer grant programs authorized by Congress.
    And so, there is a particular connection to that office. 
They also do a lot of online training in addition to physical 
town halls. Our chairman and the NCUA Board also hold various 
town hall meetings throughout the year. We do an online call, 
webinar, interactive webinar, with credit unions quarterly as a 
method of outreach.
    And we also attend various other events that are hosted by 
the credit union trades and leagues, that often have special 
aspects of those events dedicated to small institutions.
    And so, we are actively reaching out to small institutions 
to hear what they have to say about the challenges that they 
face.
    Mr. Clay. Thank you.
    Mr. Silberman?
    Mr. Silberman. Thank you. We have a number of vehicles, 
Congressman Clay. We have established a community bankers 
advisory committee and a credit union advisory committee, which 
meet regularly to provide us with advice.
    We have established an Office of Financial Institutions and 
Business Liaison, which is an access point into the Bureau and 
also out from the Bureau.
    Just recently, for example, that office had a conversation 
with a community banker in a committee member's district as a 
follow up to the Director's testimony here.
    We also have regular field hearings most months in which we 
go out into different communities. In each field hearing, there 
is always a community banker or credit union participant. But 
in addition, we make it a point to have a separate meeting with 
community bankers in the city which we are in, and a meeting 
with credit union representatives in the city which we are in, 
so we can hear not just people who come to Washington, but we 
go out to them. These are all ways in which we get input.
    Mr. Clay. Thank you.
    Anything to add, Mr. Cooper?
    Mr. Cooper. In addition, as mentioned, the State regulators 
in CSBS conduct, with the Federal Reserve, an annual community 
bank symposium. This includes town hall meetings with all of 
our banks.
    We put out a survey asking for issues--what are the current 
issues? What are the questions? What do we need to do? And 
these are compiled. Last year, we had over 1,000 banks 
participate in the survey, and the survey is ongoing as we 
speak right now.
    Mr. Clay. Thank you so much. My time--
    Mr. Pearce [presiding]. The gentleman's time has expired.
    The Chair now recognizes himself for 5 minutes.
    Mr. Silberman, you heard the chairman's opening remarks 
about the number of community banks that have closed in the 
last several years. Is that ever a topic of discussion at the 
CFPB? Do you all wonder about that? Do you think it is good or 
bad?
    Mr. Silberman. Absolutely. The Office of Research, which 
reports to me regularly, is studying that. We monitor it. We 
think it is a--obviously, a long-term trend, as I am sure you 
know, that goes back at least to the 1980s or 1990s. And it has 
been continuing, but it is something we would like to--we 
believe deeply in the diversified--
    Mr. Pearce. You haven't looked at the impact of your 
regulations on that?
    Mr. Silberman. I'm sorry--
    Mr. Pearce. Do you ever look at the impact of the 
regulations coming out of your agency on that?
    Mr. Silberman. Yes, certainly, that is something we will be 
carefully looking at as--
    Mr. Pearce. Are you ever critical of the processes that you 
have set up?
    Mr. Silberman. We--I didn't--
    Mr. Pearce. You don't ever find any fault inside the 
agency? It is mostly just this long-term trend you are 
describing?
    Mr. Silberman. No, Congressman, I said that we are 
carefully studying this. It is very early to know the effect of 
the rules. Most of them have been in effect for a little over a 
year.
    Mr. Pearce. It is not very early for the people out there. 
They can tell me almost by the minute. So you never listen to 
those comments? You don't ever take those comments and say, 
``Well, those guys are just stretching it'' or ``They are 
correct?'' I don't know--do you ever evaluate that kind of 
thing?
    Mr. Silberman. We are doing that on a continuous basis.
    Mr. Pearce. Okay. I just didn't get that idea when you said 
it is too early to assess. Because they know the assessment 
very early.
    Ms. Hunter, in your testimony, on page 9, you talk about 
the compliance reviews. When you send your examiners out, do 
they spend the time on compliance or safety and soundness? 
Which gets the greater attention?
    Ms. Hunter. We actually have a dedicated staff for consumer 
compliance examination, so they are specialists who have 
expertise--
    Mr. Pearce. Which gets greater attention? If you are given 
a certain time in the bank, which gets greater attention?
    Ms. Hunter. If we look at the amount of time that they 
spend on the exams, the safety and soundness time on 
examinations would outweigh the--
    Mr. Pearce. Is that what the--
    Ms. Hunter. --time dedicated to--
    Mr. Pearce. -- do you get that confirmation from the banks?
    Ms. Hunter. We--
    Mr. Pearce. Because the banks tell me--the banking industry 
in New Mexico is not that large, so we don't spend a large 
amount of our time. But every time I gather them, they say the 
safety and soundness is this much, and now compliance is this 
much. That is the reason that many of the lenders have gotten 
out of the real estate market.
    They tell me that if they misplace a comma now, they could 
be facing a $10,000 fine or a $50,000 fine. They said it used 
to be that they would take care of it. The examiner would bring 
it to them and say, ``You need to put a comma in here.'' And 
now, they say for a $50,000 fine, that is more than what they 
will make on a $30,000 loan for a house. Do you ever get those 
kind of comments? Or do they just kind of pick at me while I am 
out there and--a friendly audience sort of deal?
    Ms. Hunter. We do get regular feedback about the 
examination process.
    Mr. Pearce. But have you ever heard that exact thing?
    Ms. Hunter. I haven't heard about those comments, but I 
would say--
    Mr. Pearce. I will tell you what--if you give me your home 
phone number, I will put them in touch with you. It is--
    Ms. Hunter. I would welcome having an opportunity to talk 
to anyone who had an issue raised about that.
    Mr. Pearce. I hear it pretty frequently. I will start 
referring them to you since it doesn't seem to be anything that 
maybe has come up.
    You say that something you want to do is encourage the flow 
of credit to consumers. Now, with the number of community banks 
closing--and they regularly tell me that we just can't keep up 
with the regulations--so I would suspect all of you would have 
that as an outcome that you would like to have.
    So, almost the same question that I asked Mr. Silberman, do 
you sit as an agency and say, ``Hey, we are starting to 
restrict the flow of access of capital to the small rural 
markets?'' Is that a concern to you all? Because I guarantee 
it, nobody from New York City is going to come out and make 
loans on trailer houses in the 2nd District of New Mexico. So 
when those small places shut down, they are shut down.
    Ms. Hunter. We are very concerned about flow of credit and 
access to credit in any community or to populations or groups 
who might be underserved. And there is a direct connection 
between the access to financial services with that. That is 
certainly something I have seen in my own experience as a 
community bank examiner.
    So when we hear from bankers--and we do--
    Mr. Pearce. Okay, so--
    Ms. Hunter. --we hear the same things. We hear--
    Mr. Pearce. --let me bring up--I only have 27 seconds left, 
and the chairman is not as forgiving to me as he is to himself, 
so--the CFPB has rules on rural. And they put Deming, New 
Mexico, which has about one person per 10 square miles in the 
same category as New York City. Did you all send communications 
to them saying, ``We are alarmed because you are restricting 
flow out in those rural areas that you have described as urban, 
and they are not really urban?'' Did you all send a 
communication like that?
    Ms. Hunter. To be honest, I don't know 100 percent 
exactly--
    Mr. Pearce. Could you check that out for me?
    Ms. Hunter. --communication. I would be happy to get back 
to you--
    Mr. Pearce. I would like to see a written trail--
    Ms. Hunter. --with information about it.
    Mr. Pearce. --if you are really concerned about that.
    Ms. Hunter. Yes.
    Mr. Pearce. Okay, thanks. The chairman's time has expired.
    And we go next to Mr. Hinojosa from Texas.
    Mr. Hinojosa. Thank you.
    I want to thank both of you for holding this hearing this 
morning. And I would like to thank the distinguished panel 
members for sharing their insights.
    It seems to me that the proper regulation and supervision 
of our banks requires a balancing act to ensure both the 
stability of our financial system and that of banks, like our 
community banks, which did not cause the financial crisis, but 
are unduly burdened by regulation.
    I am going to ask my first question to Toney Bland, as well 
as Doreen Eberley and Maryann Hunter.
    Each of your agencies has expended a lot of time and 
resources in developing targeted regulatory relief for 
community banks. How are asset thresholds helpful or harmful 
in: one, ensuring the safety and soundness of our community 
banks; and two, providing flexibility in the regulatory 
framework so as to not unduly burden community banks?
    Mr. Bland. Representative Hinojosa, the asset thresholds 
are merely an indicator for a cluster of institutions that may 
have similar characteristics. For example, 80 percent of the 
institutions that we supervise are less than $1 billion in 
assets. And so when you look at that grouping of banks, you see 
some characteristics in terms of they are locally owned, 
locally operated. But that is just the beginning. You also have 
to look and see what their market place is like, what is the 
complexity of their operations, what type of staff they have, 
the ability of the staff, the size of the staff, and the 
operations of the institution. Are they pretty much brick and 
mortar, or are they involved in Internet-type activities?
    So, the thresholds are a pointer. Where it gets 
challenging, though, is when that becomes the only reference to 
what a bank can or cannot do just based on size. That is where 
the issue comes in. So we would be wary of rules that would 
limit the flexibility and that would be counter to safety and 
soundness or consumer protection safeguards.
    Mr. Hinojosa. Thank you.
    Ms. Eberley?
    Ms. Eberley. Thank you. I would agree. We use a definition 
for community banks that is focused on the characteristics of 
the institution, so--
    Mr. Hinojosa. Could you speak up a little bit louder, 
please?
    Ms. Eberley. Yes, certainly. We use a definition of 
community banks that is focused on the characteristics of the 
institution, so, similar to what Mr. Bland said. Local 
relationships, core deposit funded, a relatively small 
geographic area so that they are actually dealing with their 
customers face to face. They know their customers.
    For us, that is 94 percent of institutions under $10 
billion meet that definition and have those characteristics. It 
is harder to define that with an asset threshold. It is easier 
with the characteristics of the institution and the way that it 
operates.
    I want to pick up on one thing that Mr. Bland said, which 
is flexibility. Where statutes have bright lines thresholds, it 
makes it a little bit more difficult for us to exercise 
flexibility. One example of that would be with stress testing. 
And so, we don't have a lot of discretion in how we apply the 
rules with the asset thresholds that are set.
    Mr. Hinojosa. Ms. Hunter?
    Ms. Hunter. Yes, I would agree. We also determine a 
definition of community banks. We do have a threshold of $10 
billion. It is really more for the convenience of being able to 
identify the population of banks that fall into a certain group 
and how we manage our examination programs.
    I will say that the vast majority of community banks are 
actually under $1 billion in assets. So in some sense, the $10 
billion threshold is not where our primary focus is.
    I do agree that hard line thresholds do limit flexibility. 
Yet, at the same time, it also can be difficult. Whenever you 
draw a line and say a certain bank fits a certain category or 
doesn't, there is a lot of argument back and forth about who is 
right on the line in going over on the other side. So having a 
clear definition does help a little bit in just adding clarity 
to the group of banks and understanding where that line is 
drawn.
    I would like to add one other comment, and that is, we have 
examiners in each of our 12 Reserve Banks, as the other 
agencies have them local. They understand these banks. And that 
is part of the local knowledge that the examination teams have 
about those institutions, their risks, their business model, 
their strategies, and the strength of their management teams. 
And so we do incorporate that into how we think about, how we 
supervise individual institutions.
    Mr. Hinojosa. My time has expired. I wish I had more time 
to ask some other questions.
    With that, I yield back.
    Chairman Neugebauer. I thank the gentleman.
    And now, the gentleman from Oklahoma, Mr. Lucas, is 
recognized for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman.
    I represent an area that relies heavily on community 
financial institutions, and they are very critical to our 
economic success, both in the district and the State. And I 
have been very focused with them on the regulatory relief that 
I think they desperately and rightly deserve.
    And it seems like in a committee where we may not 
necessarily agree on a whole lot of things, I believe there is 
the potential amongst this group to come up with a way to 
provide some relief to those community banks.
    Now, the key, of course, is how do you achieve a 
definition--a consensus on what a definition would be.
    So I would like to follow on my good colleague from across 
the line in the great State of Texas's logic, and let's 
continue this discussion. Because right now, the way the system 
is working, my community banks are telling me that it is not 
working. I appreciate the flexibility that the Fed and the 
Comptroller and the FDIC have discussed today, but you are 
taking a very small screwdriver and you are making minor 
adjustments in a very complicated set of machinery.
    My constituents believe that relief has to come if, as an 
industry, they are going to survive.
    So, let's go back a little more into this definition 
concept. You have general definitions that have been alluded 
to--anything from $10 billion to a billion dollars; some 
quantitative qualities in some of your definitions. But let's 
talk for a moment. How do we come up with a definition that 
actually provides relief out there? Some of my folks believe it 
should be a dollar amount because they think that just as that 
adjustment can help, so those minor adjustments can hurt.
    I appreciate the point made by Commissioner Cooper about 
the quantitative issues, but let's talk about that. How do we 
come up with a definition that provides some real relief to 
these community banks that we all know exist? How do we define 
those, ladies and gentlemen?
    And I ask my friends at the Comptroller's office and my 
friends at the Fed and my friends at the FDIC your opinion. 
From my perspective, going $10 billion and then giving you 
quantitative adjustments makes sense. But from your 
perspective?
    Mr. Bland. I will start, Representative Lucas.
    Mr. Lucas. Please.
    Mr. Bland. I am out a lot. A big part of my job is talking 
to community bankers about the burdens that they face. This is 
a topic that comes up quite a bit. And it is not as simple as 
what a bank's size is because you also have to consider the 
business model. This is at the essence here, I think, for 
community banks, is what is the right business model, and to 
have the flexibility to exercise what is a good business model.
    And the concern is when asset size is a condition of what 
you can or cannot do, that can have limitations when you are 
looking at innovation in the industry. And so, my point on 
flexibility earlier was that you have to allow for innovation.
    Typically when there is a size, there are also conditions 
on what that size can do. And I think that is what is happening 
in the industry today. We have to be open to the changes that 
are happening in the bank and the non-bank space to allow for 
that innovation and growth to occur.
    Ms. Eberley. I would echo that. And that was the point I 
was trying to make in my last answer, that having a strict 
asset threshold without having any flexibility around that 
makes it difficult. It limits our ability to exercise 
discretion on a risk-based basis, which is how we approach our 
supervision.
    So we look at the risk of an individual institution before 
we start an examination. There is pre-exam planning that looks 
at what is the institution engaged in. The examination 
activities are focused on the activities of the institution, as 
opposed to a one-size-fits-all.
    Mr. Lucas. But it almost appears in the way the rules work 
right now, by the general definitions of all three 
organizations, if your institution is $11 billion, but in every 
other way meets a definition that--whatever that consensus 
might be that it is a community bank, they are still snagged in 
everything. They are trapped.
    My perspective is I believe in giving you the flexibility, 
yes, to do what you need, but when a community bank still gets 
caught--a dollar, a billion dollars, whatever--over the limit, 
then they are snagged. Those are the kind of issues I think 
that we are trying to work our way through.
    Mr. Cooper, for just a moment, the only person quoted 
almost as often in this committee as Phil Gramm is former Fed 
Chairman Volcker. And recently, he came up with a concept about 
how to dramatically redo regulation. Could you expand for a 
moment, from a State regulator's perspective, about this 
concept of dramatically changing how we do our regulatory 
regime?
    Mr. Cooper. Congressman Lucas, first let me say that the 
Volcker proposal is still--we are evaluating it as we speak. We 
had a couple of takeaways we came away with recently.
    We are here talking about what to do about regulatory 
burden, and we don't think that proposal necessarily helps us 
in that regard. Up-ending the system we have creates problems 
in and of itself. It creates a new monolithic regulator, and we 
believe that could possibly move us toward more of one-size-
fits-all rather than less. And also it gives the Federal 
Reserve, whom we do support in bank supervision, quite a bit of 
authority that we feel like may be too much for one individual 
agency.
    Mr. Lucas. Thank you, Mr. Chairman.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from Georgia, Mr. Scott, is 
recognized for 5 minutes.
    Mr. Scott. Thank you very much.
    This is a very interesting hearing, very helpful.
    I want to start off where Mr. Lucas and Mr. Hinojosa left 
off, because I think that is a problem. And you can't really 
solve a problem until you define it. We have community banks. 
We have regional banks. Then we have too-big-to-fail banks.
    In other words, we have these titles, but we don't have the 
definition? You don't define--you can't get your hands around 
the problem if you don't adequately define it. And do you 
define it by size or complexity?
    Now, I think that was a part of the root of the problem 
that we had in Georgia. As many of you know, Georgia led the 
Nation in bank closures. And my good friend from Georgia, Mr. 
Lynn Westmoreland and I, pulled together a big event down in 
Georgia where we brought the Federal Reserve, and I think some 
of you all know about that. We brought in the FDIC, the OCC, 
and all of the bank examiners to find out why in the world--
what happened that my State of Georgia led the Nation in bank 
closings over 4 or 5 years during the mortgage breakdown.
    Are you all familiar with that?
    I want to know what happened there. Lynn and I consistently 
complained that we have not gotten reports on it. So I want to 
know if you all can respond to that now, if you are familiar 
with it perhaps. But your bank regulators were there.
    Now, part of the problem was indeed that our Georgia banks, 
as many banks did, did overleverage in their portfolios in 
terms of real estate and mortgages, as did the whole country, 
as did the whole industry. But something strange happened down 
there. And we discovered that when you all came down there, and 
we had the big hearing.
    Lynn and I together cover about 25 or 26 different 
counties. And in these areas, it is the community banks that 
are the lifeblood of those communities. So unless we define 
community banks, unless we can come up with those reasons, we 
really are not getting our hands around it.
    So I just want to say, do any of you have any comments? Are 
you familiar with that report? What happened? I would like to 
know what the impact was.
    Our banks were saying the bank examiners didn't give them 
time. They weren't aware. They were overregulated. They didn't 
understand the complexity of the rules. So there was some blame 
put at the feet of the FDIC, the Office of the Comptroller of 
the Currency, and the Federal Reserve as to what happened.
    Are you all familiar with what happened in Georgia?
    Ms. Eberley. Yes. I will start. One of the problems with 
the financial institutions in Georgia is that as a group they 
were heavily concentrated in acquisition, development, and 
construction lending. When the real estate market took a turn 
and mortgages and property values dropped dramatically, 
projects that were midstream became difficult to finish because 
there was nobody to buy the finished product. The values had 
dropped. And that kind of concentration and saturation in a 
very tight market of that kind of product in that kind of 
market environment is largely what caused the problem.
    Mr. Scott. All right. I would just like to ask--I know we 
have a representative of the Federal Reserve here and we have a 
representative of the FDIC and we have a representative of the 
Office of the Comptroller of the Currency.
    I am sure both my colleague Lynn Westmoreland and I would 
love to get that report as to what is going on there. As I said 
before, the community banks are the life blood there. They are 
sort of in the middle.
    So Mr. Bland, I want to go back to you. How would you 
define right now, if somebody had to ask you right now, in the 
25 seconds I have left, what is a community bank, what would 
you say?
    Mr. Bland. My first response would be that community banks 
tend to be locally owned and locally operated. But I will go 
back to what I said before about where we stand in this 
industry today and looking forward with the innovation that is 
happening in there. They can also be characterized by the scale 
and the type of products that they offer. But to your point 
about how we would approach it, I think it is important to look 
at our supervisory process. At the OCC, we have a separate 
community bank program that I oversee. And so our primary focus 
for the people who report to me is on community banks.
    We look at those institutions separate and apart from the 
large banks. This also guides our approaches to our policies 
and our procedures. And for each institution, we take a 
customized view of what we need to do there, so we have a 
supervisory strategy that is focused on each individual 
institution.
    Mr. Scott. Thank you very much.
    Mr. Chairman, I would just like to say that it might be 
helpful for the full committee--it was a very good hearing down 
there. If we would ask the OCC, the Federal Reserve, and the 
FDIC if they would get that report in their findings, 
conclusions, and recommendations of what they did in Georgia at 
our hearing, I would appreciate it.
    Chairman Neugebauer. I think that message, hopefully, has 
been delivered today, Mr. Scott.
    Mr. Scott. All right. Thank you.
    Chairman Neugebauer. I now turn to the gentleman from North 
Carolina, Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Mr. Silberman, how is a Consumer Financial Protection 
Bureau funded?
    Mr. Silberman. Under the statute, we receive a percentage 
of the revenue of the Federal Reserve System.
    Mr. Pittenger. Yes, sir. So you are not funded through the 
budget. When you need money, you call the Fed and they send you 
a check. Is that it?
    Mr. Silberman. There is a certain cap. But up to the cap, 
we have a claim on money from the Federal Reserve.
    Mr. Pittenger. Yes, sir. How much is that cap annually?
    Mr. Silberman. I would have to get back to you. I'm sorry. 
That is not my area of expertise.
    Mr. Pittenger. About maybe $600 million--
    Mr. Silberman. I was going to say $500 million, $550 
million but I am not--
    Mr. Pittenger. $650 million--
    Mr. Silberman. But I think we should get back to you. But I 
would--if I had to--it would be $550 million, but I am not sure 
that is right.
    Mr. Pittenger. Okay. Thank you for that. You stated that 
you would like to see reform in the system. You are responsive 
to businesses, you are responsive to banking stress systems 
that are out there with--that do not allow the access of 
capital in the market. Is that correct?
    Mr. Silberman. Our focus is on consumer protection, not on 
safety and soundness. But certainly, those are two sides of the 
same coin.
    Mr. Pittenger. Yes, they are. We passed a bill yesterday 
that would establish an advisory board for small businesses and 
allow that board to have a voice. Now you mention that you do 
go out in the market and you talk to people and you are 
listening. But there is no requirement for the credit unions, 
for you to meet with them or you can voluntarily, if you so 
choose. And of course, there isn't a position to this point on 
the CFPB for the voice of small business and that was the 
interest of this bill yesterday.
    There was a cost that was set up for this board that was 
about $100,000 a year--a pretty nominal amount of money, I 
think, for having the necessary input from this important 
element. We are in an economy right now that is struggling. It 
is going to 2.2 percent. We have 20 million people who are 
underemployed or unemployed. And you now, much needs to be done 
to get us to the desired objective. And certainly, as we have 
all heard today, community banks, smaller banks, and 
institutions of all sizes are important to help us address 
economic growth and the access to capital. Do you think it is a 
viable concern that we have a voice from the business community 
on the CFPB?
    Mr. Silberman. Congressman, the Bureau tries not to comment 
on pending legislation. And so really, all I can say on that is 
that we have been very careful to make sure that we have, as I 
indicated a Community Bank Advisory Committee, a Credit Union 
Advisory Committee, an Office of Financial Institutions and 
Business Liaison. We have a Consumer Advisory Board, which is a 
very diverse--
    Mr. Pittenger. But you don't have one that is specifically 
related to the input of business. Do you believe that this 
amount of $9 million over the course of 10 years is really 
negligible, as it relates to the ability for CFPB to draw down 
$670 billion a year? A sizable amount of money has been spent 
just on your renovation, so far, $200 million for waterfalls 
and glass staircases--more, I am told, than any hotel in Las 
Vegas.
    This is an important element. But just in terms of the 
dollar ratios, do you think this is really just a negligible 
amount of money that really shouldn't be of consideration?
    Mr. Silberman. Congressman, as I said, we try not to 
comment on pending legislation. And certainly, that question 
will be better directed to the folks who are responsible for 
our finances than to me.
    Mr. Pittenger. Thank you for your input on that.
    Ms. Eberley, I have had a number of comments from smaller 
banks in my region and I would just like to read you one very, 
very quickly. Here is one bank with less than $50 million in 
assets and 10 employees. They come in, they want 3 to 4 weeks 
advance to tell us the materials to forward to them. When we 
get started, they are on-site. The daily work that they put in 
is 8 to 10 examiners are there. They take 2 to 3 weeks.
    These are institutions with less than $50 million. They 
said if any corrections are to be done, it takes several weeks 
or months to do this. And they said that they are spending a 
larger and larger amount of their time on compliance, and they 
can't meet the needs of their customers.
    Is that a concern to you?
    Chairman Neugebauer. I am going to ask Ms. Eberley to 
respond to that question in writing because I think it is a 
more complex answer.
    And I will now go to the gentlewoman from New York, Mrs. 
Maloney, for 5 minutes.
    Mrs. Maloney. Thank you, Mr. Chairman, Mr. Ranking Member, 
and all of the participants today.
    Mr. Bland, I would like to ask you about the OCC's 
liquidity rule, and specifically about the treatment of 
municipal bonds in the so-called ``liquidity buffer'' that 
banks hold. As a former member of a city council, I know 
firsthand the importance of municipal bonds. They allow States 
and cities to finance infrastructure, build schools, and pave 
roads. They are incredibly important to city governments.
    Unfortunately, in the liquidity rule, the OCC chose to 
include some corporate bonds in the liquidity buffer, but 
completely excluded municipal bonds. The OCC established 
liquidity metrics for corporate bonds so that if a corporate 
bond meets all the metrics, then it can be included in the 
liquidity buffer. But for some reason, the exact same deal was 
not extended to municipal bonds.
    Now, it is my understanding that the Fed has already 
recognized this inconsistency and is working on a proposal to 
establish liquidity metrics for municipal bonds. But the OCC is 
still refusing to consider giving relief to even the most 
liquid municipal bonds. So my question, Mr. Bland--I would like 
you to consider two identical bonds, same size, same maturity, 
same everything. Both bonds are liquid enough to satisfy all of 
the liquidity metrics in the OCC's rule, but one bond was 
issued by a corporation and one was issued by a local 
government.
    Under the OCC's rule, the corporate bond would be 
considered a high quality liquid asset. But the municipal bond 
wouldn't, even though they have the same exact liquidity. So, 
my question to you, Mr. Bland, is, do you think that is a fair 
outcome?
    Mr. Bland. Representative Maloney, first let me say we 
support institutions having a diversified portfolio of 
investments, including municipal securities. And it is 
important for banks to participate in the investment in 
municipalities for the purpose they serve--the support to local 
and State municipalities.
    The question you raise pertains to the liquidity coverage 
ratio, which our largest institutions are subject to, and not 
our community banks. The rule addresses asset classes, and does 
not look at individual issuances. And so as an asset class, our 
experience and the data we have suggests that when stressed, 
municipal securities do not have the secondary market that 
corporate securities would have. And so the issue is around the 
class of assets, not an individual issuance of any kind, but 
more our experience by looking at this category of type of 
investment.
    Mrs. Maloney. Okay. I would like to ask Mr. Cooper, and I 
notice that Texas signed onto a 43-State investigation that 
wrapped up last week which imposed a $5 million fine on New Day 
Financial, a lender that targets veterans for mortgage loans. 
And the settlement agreement concluded that New Day violated 
MLS rules of conduct by teaching to the SAFE's test.
    They had at least 20 employees take the SAFE Act course on 
behalf of others. This was a complete lie, and including the 
CEO and COO, and lied to investigators about their knowledge of 
these actions, all in connection with New Day providing SAFE 
Act courses in-house to their own employees.
    And I have been warning about this practice of in-house 
SAFE Act courses for years. I have written many organizations 
about how it is a conflict of interest, and others on this 
committee, including Ranking Member Clay, have also warned the 
CSBS about this practice, but CSBS hasn't done anything so far 
about this. And it appears that New Day is allowed to continue 
to provide these SAFE Act courses in-house.
    So Mr. Cooper, my question is, will you commit to having 
CSBS brief me, my staff, and other members of this committee, 
Mr. Clay and others, and anyone who is interested, on this 
investigation? And explain what CSBS is doing in response to 
what is a big scandal?
    Mr. Cooper. Certainly, Congresswoman. We will do that. I 
will tell you that the announcement of the settlement is a 
process that the States went through through the multi-State 
mortgage committee that we have in order to try to deal with 
issues like this. We do think it sends a message. But we will 
certainly look into--
    Mrs. Maloney. Thank you. I have 4 seconds left, and I 
wanted to ask Ms. Hunter the same thing on the liquidity 
metrics. Mr. Bland, if you could get back to me in writing, I 
would appreciate it. I saw in an article today in The Wall 
Street Journal that you are moving on it. Thank you.
    Chairman Neugebauer. I now recognize the gentleman from New 
Hampshire, Mr. Guinta, for 5 minutes.
    Mr. Guinta. Thank you, Mr. Chairman.
    I want to thank the panel for your testimony and your 
willingness to come today. I am going to make a brief 
statement, and then I wanted to ask Ms. Eberley a few 
questions.
    Community financial institutions have testified multiple 
times before our committee that they have not caused or been 
the root cause of the financial crisis, but that they are being 
burdened by regulatory requirements as if it were the case.
    And that is a concern of mine. New Hampshire is a small 
State, 1.3 million people. We have a rather significant 
community of financial institutions, small lending community 
financial institutions in our State. And I have over the course 
of the last several years had the pleasure of meeting and 
spending time with many of them. And I think they do a great 
job, whether they are credit unions or small community banks.
    But after a lot of the discussions that I have had with 
CEOs, presidents, and executive teams of these institutions, I 
am actually very discouraged and remain discouraged by some of 
the things that I have been hearing relative to the regulatory 
burdens. This is the single issue that I hear about from 
institutions in New Hampshire more than any other issue.
    So, I have brought up in previous committee hearings some 
examples of these particular challenges. And I was a little 
surprised to hear Richard Cordray be shocked that these small 
institutions were being burdened. So, he was kind enough to 
have someone in his organization call a specific bank president 
that I had asked them to call, Piscataqua Savings Bank. And I 
will get into the statistics in a minute.
    But Ms. Eberley, I wanted to know from your experience in 
regulating these institutions, would you say that it is more 
difficult for an institution, a small institution, to comply 
with the new regulatory mandates than the larger institutions?
    Ms. Eberley. In general, it costs more. The cost of 
complying with laws for smaller institutions is spread over a 
smaller asset base, so it costs them more.
    Mr. Guinta. So the economies of scale--
    Ms. Eberley. Right.
    Mr. Guinta. --is much easier for a larger institution than 
a smaller institution?
    Ms. Eberley. Yes.
    Do you think that the number of regulatory changes 
negatively affected a community financial institution's ability 
to offer products and services to the consumer?
    Ms. Eberley. I don't think so. I think we are seeing 
community institutions offer a wide variety of products. And I 
would just note that New Hampshire is home to the latest 
application for deposit insurance, approved by the FDIC in 
March.
    Mr. Guinta. How many have there been in the last 5 years in 
our country?
    Ms. Eberley. I can't go back 5 years, I apologize, but we 
had the bank in New Hampshire in March of this year. The prior 
one was an institution in Pennsylvania in 2012. Those are the 
two since--
    Mr. Guinta. So it is less than 5 in the last 5 years?
    Ms. Eberley. --the crisis, the end of the crisis.
    Mr. Guinta. Would it be fair to say it is less than five in 
the last 5 years? New institutions--
    Ms. Eberley. I would have to go back to 2010, I apologize.
    Mr. Guinta. I would submit that I think it is probably less 
than 5 new institutions in the entire United States over the 
last 5 years.
    And that is a concern of mine. I am very proud of the fact 
that we have a new institution in New Hampshire. It is going to 
be a primary bank, a great institution. And I am very proud 
that it is in New Hampshire.
    What I am very concerned about is that there are only a few 
in the entire country. And the entire market is actually 
shrinking.
    That brings me back to your testimony--93 percent of all 
banks in the United States are defined as community banks, and 
your testimony says that they hold just 13 percent of bank 
assets, yet 45 percent of the small loans to businesses come 
from those institutions.
    So it concerns me greatly when I look at Piscataqua Bank in 
Portsmouth, New Hampshire. And let me just read you these 
numbers. Compliance costs, wages and benefits, $772,000 go 
toward compliance costs. Seminars and webinars, $11,915. 
Subscriptions, $38,747. For a total cost for this one bank for 
compliance of $823,278. That is 22.76 percent of their overall 
costs.
    So they have FTEs, about 38. For compliance, they have 
eight.
    That seems rather unfair and unnecessary. Assuming that 
those figures are correct, does that make sense to you, that it 
is unfair and unnecessary.
    Ms. Eberley. I would have to evaluate that.
    Chairman Neugebauer. The time of the gentleman has expired.
    The gentleman from Massachusetts, Mr. Lynch, is recognized.
    Mr. Lynch. Thank you, Mr. Chairman.
    I have listened to the debate here, and it has been very, 
very instructive. We all seem to struggle with this definition 
of community banks that weren't part of the problem during the 
crisis in 2008 and beyond and the banks that needed regulation.
    There is a great article from this past Sunday by Gretchen 
Morgenson, who is a continual source of wisdom on these 
matters. It is entitled, ``Regulatory Relief for Banks That 
Really Fail.''
    And she talks about a proposal by Tom Hoenig, who is a Vice 
Chair over at the FDIC. He has a very simple plan, and it 
addresses the concerns of the gentlemen from New Mexico and 
Oklahoma and Georgia.
    He comes up with four criteria that, really based on the 
complexity of the bank, based on the risky behavior that they 
have, the regulatory framework falls more heavily on those, but 
frees up the regulatory framework for banks that--for local 
community banks that don't engage in risky behavior.
    And, quite simply, I will just tell you what they are. He 
says that banks that hold no trading assets and/or liabilities; 
banks that have no derivatives positions other than plain 
vanilla interest rate swaps or foreign exchange derivatives 
that get traded up front, there is no looming deadline there, 
no leverage; finally, banks whose notional value of all 
derivative exposure is less than $3 billion; and fourth, banks 
whose shareholder equity or net worth is at least 10 percent of 
assets.
    Now, when you apply that criteria to commercial banks, out 
of 6,500 commercial banks in this country, only 400 are covered 
under the regulations, so 6,100 are exempt, basically.
    Or when you look at the complexity of banks, the great 
majority of the banks that we are talking about are traditional 
banks. And so, he also talks about the relief we could offer 
them. He talks about the fact, Ms. Eberley and Ms. Hunter, that 
we could stretch out the examination period for non-risky 
banks, community banks, from every 12 months to every 18 
months, so you are only doing 2 examinations every 3 years, 
instead of 3 examinations.
    He talks about the relief under the Basel capital 
standards. We could exempt a whole lot of our banks from that 
standard.
    He identifies 18 banks with total assets of $10 billion 
that would also qualify. So it is not just small banks, it is 
big banks that don't do risky things, that would be helped by 
his proposal as well.
    He also talks abut the fact that in these simple cases for 
community banks, the FDIC and other regulators could do the 
stress test themselves, rather than requiring our local banks 
to engage in a very costly process.
    And, as far as that 10 percent of net worth to assets, the 
vast majority of our community banks, banks that you oversee, 
are already in compliance. And a bunch of others are right on 
the bubble; they could get into compliance if they chose to do 
so.
    And Tom Hoenig is someone who is concerned with the 
stability of our banks and making sure that banks are sound. 
And so, I have actually asked my staff, and we are in the 
process of putting together legislation that would comply with 
all that.
    Ms. Eberley, what do you think about that? Without the 
benefit of having read his proposal, of course.
    Ms. Eberley. The vice chairman's proposal does suggest a 
risk-based approach to regulation, and that aligns with the 
approach that we already take to risk-based supervision, risk-
based assessments for our deposit insurance pricing, and risk-
based regulation and guidance.
    So I think it is consistent. I think it is a policy call 
for Congress. I think we have already indicated a willingness 
to talk about a simpler capital approach for community banks.
    Mr. Lynch. Great.
    Ms. Eberley. The definition we use of community banks does 
incorporate some institutions over $10 billion, by using--we 
have a different way of applying kind of the risk 
chacterizations--
    Mr. Lynch. Okay. I want to give Ms. Hunter a crack at this 
as well.
    Ms. Hunter?
    Ms. Hunter. I agree with all the comments that Ms. Eberley 
made in terms of the risk-based approach.
    I would add that at the Federal Reserve, we are considering 
how the agencies might be able to do some simplification 
consistent with the Collins Amendment and other sound 
prudential practices, particularly with respect to the capital 
proposals that were put forth. But I haven't studied the whole 
proposal.
    Mr. Lynch. In closing, I just want to say that the 
gentleman from New Mexico pointed this out, as well as the 
gentleman from Oklahoma, that this regulatory burden is causing 
consolidation. It is squeezing--it is forcing banks to merge, 
and putting some of our community banks out of business.
    So we have to figure out a solution here. And I think that, 
with all due respect, Mr. Hoenig's proposal, in trying to 
define where that line is drawn, is one of the best proposals 
that I have seen.
    And I yield back the balance of my time.
    Chairman Neugebauer. I think the gentleman.
    And the gentleman from South Carolina, Mr. Mulvaney, is 
recognized for 5 minutes.
    Mr. Mulvaney. I thank the chairman.
    Mr. Fazio, I will begin with you, very quickly. Up until 
about 2009, you all used to have meetings with the credit 
unions that you oversee, regarding your budget.
    You stopped doing that in 2009. Why?
    Mr. Fazio. Chairman Matz felt that it gave an appearance of 
regulatory capture and that there wasn't anything productive 
that was coming out of the briefing.
    We have a very transparent process related to our budget. 
We post a lot of information on our Web site. We do discuss the 
budget at the open Board meeting when the Board acts on it. 
Credit unions and their representatives are free at any time 
throughout the year to give--
    Mr. Mulvaney. Mr. Fazio, would you agree with me that there 
is a difference between what we are doing here today, face to 
face, and posting something on the Internet?
    Mr. Fazio. Sure.
    Mr. Mulvaney. And this is a much more interactive and 
possibly more productive way to spend time?
    Mr. Fazio. Sure.
    Mr. Mulvaney. And I would hope that folks on both sides of 
the aisle would agree with me that sometimes sitting down and 
having that face-to-face meeting is important. It is sometimes 
uncomfortable, there is no question about that. But we do it. 
And we ask you to come here and do it with us. And I think that 
it is reasonable for us to expect you to do it with the credit 
unions that you oversee.
    Have you all decided whether or not you are going to have a 
budget meeting for 2016 with the credit unions you oversee?
    Mr. Fazio. I am not aware of a Board decision on that 
matter.
    Mr. Mulvaney. When would they make a decision on that, Mr. 
Fazio?
    Mr. Fazio. Sometime this year.
    Mr. Mulvaney. Finally, and this sort of may give you some 
insight as to why I care about this type of thing, it has been 
a year now since I asked for an answer to that specific 
question, as to why they didn't do, not only the meeting, but 
why they didn't provide line-item information in the budget.
    Once you actually produce the budget, you don't give the 
credit unions line item details on your budget, and we asked 
why you did that and whether or not you would provide to 
Congress the line items in your budget. That was on April 8th 
of 2014. So I very much would appreciate a follow up on that, 
sometime soon, maybe just in the next 9 months would be great.
    But waiting a year for that information, sir, when Congress 
asks you for what I think everybody would agree is a reasonable 
request, probably won't be tolerated very much longer.
    So I appreciate your looking into that immediately when you 
get back.
    Mr. Silberman, we will move to you now, very briefly.
    I read your testimony. I also heard you say, when you came 
in today, a couple of different things. And you used really 
good language, language that we would expect you to use and, of 
course, that everybody uses, because it is easy to use 
language, but it is harder to follow up. You say that your 
approach on rules and regulations is tailored and balanced. 
That you are mindful of the impact of compliance on financial 
institutions. You engage in rigorous evaluation of the effects 
of proposed and existing regulations on consumers and financial 
institution, and you maintain a steady dialogue with both 
consumer advocates and industry participants.
    I think later on you talked about an evidence-based process 
that you undertake.
    Again, it is easy to use the words.
    Last month we had some folks testify before this committee. 
Dennis Shaul, who is a CEO of the Community Financial Services 
Association, testified before this committee regarding a recent 
report that you all just put out on what a lot of people refer 
to as payday lending.
    And in that report that you folks created, it estimated 
that roughly 60 percent to 70 percent of small payday lenders 
would go out of business as a result of your rules and 
regulations. That didn't seem to be disputed at that hearing.
    So my question to you, sir, is, what evidence-based process 
did you go through? What balancing did you do? What data do you 
have that says it is in the best interests of consumers to 
drive 70 percent of these players out of the market?
    Mr. Silberman. Thank you for the question, Congressman.
    First, let me begin, the process we have gone through began 
3 years ago with a series of field hearings we have held. We 
have obtained I think the largest data-set of loan level--
    Mr. Mulvaney. Great. Can I have that, please?
    Mr. Silberman. I will have to take that request back. This 
is supervisory data that we have obtained, so it is 
confidential.
    Mr. Mulvaney. Why can't Congress have the same data you all 
are using for making your decisions?
    Mr. Silberman. It is confidential supervisory information, 
but I will have to get back to you on that.
    Mr. Mulvaney. Please do. I have news for you. We get 
confidential briefings all the time. In fact, we have a special 
room downstairs for it. And to the extent the data on that 
rises to the same level as the threat of nuclear intervention 
in Iran, then I can ensure you your data will be safe.
    But please continue.
    Mr. Silberman. Okay. And I believe, Congressman, we have 
actually provided briefings on the data to staff. We have 
published two reports on payday loans, one in 2013 and one in 
2014, based on that data. We have also reviewed all the 
research. We have gone through an extensive process.
    It is not the case that what we have said is that we 
would--we have started a rulemaking process. We have announced 
proposals that we are considering making. We are early in that 
process. But it is not the case that we have said that 
proposal, if it were to become a final rule, would put 60 or 75 
percent of payday lenders out of business. That is a 
misinterpretation of the document that we released.
    Mr. Mulvaney. What is the correct interpretation of that 
document, Mr. Silberman?
    Mr. Silberman. The correct interpretation, Congressman, is 
what we said is that if current--if the business model 
continued as is, and payday lenders continued to do exactly 
what they have been doing, but capped the number of loans they 
give to people at no more than 6 loans per customer per year, 
so that is 90 days of indebtedness, that from that line of 
business, they would lose 60 percent of the revenue, which is 
to say that 60 percent of the revenue they are receiving comes 
from making more than 6 loans to consumers. That is precisely 
the issue we are trying to get at through the proposal.
    Chairman Neugebauer. Thank you, Mr. Silberman.
    Mr. Mulvaney. Thank you, Mr. Chairman, for your 
accommodation of the extra time, but it may be that we need to 
have further investigation into that specific matter. Thank 
you.
    Chairman Neugebauer. The gentleman from Massachusetts, Mr. 
Capuano, is recognized for 5 minutes.
    I will mention that votes have been called. And without 
any--I ask unanimous consent that the Chair will call for a 
recess here shortly, and then we will reconvene right after 
votes.
    And with that, the gentleman from Massachusetts is 
recognized for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman.
    And I want to thank the panel. I also want to thank my 
colleagues. I have to tell you, I came to this meeting not sure 
I was going to stay very long. To be perfectly honest, I 
thought it was going to be the typical bashing of regulators: 
``We hate all regulation.''
    This has been great. This is the kind of hearing I love, 
and I appreciate the chairman calling this, and the ranking 
member and all the panelists. I have learned a lot. I have 
listened a lot. And I have to tell you, I get amazed when I 
agree with pretty much everything that has been said. That is a 
pretty good day--not everything, Mick.
    [laughter]
    But pretty much everything. So I just, really, that is 
where I want to go. I want to associate myself with the 
comments made by all of my colleagues, especially Mrs. Maloney, 
relative to the municipal bonds. The OCC really has to wake up. 
Municipal bonds are the safest investments in the country. And 
if any bank can't invest in them because some regulator says 
that they don't hit some obscene, obscure, ridiculous little 
thing, that is nonsense.
    It is the--there are some municipal bonds that may not meet 
that safety requirement, but there are very few. Particularly, 
it is going to hurt municipal governments. It is going to hurt 
local governments all across this country to tell any bank that 
they can't invest in the safest thing they can. It is 
completely wrong. And I have to tell you, the Fed is kind of 
moving on it. If the OCC doesn't move on it, you are going to 
hear a lot more from us relative to that.
    I don't expect a comment. You guys can look at it all day 
long.
    Mr. Bland. May I make a comment, though?
    Mr. Capuano. You can, but if you come with the answer that 
you are not going to do it, you are going to be wrong. But go 
right ahead.
    Mr. Bland. First of all, we have not prohibited banks from 
investing in municipal securities.
    Mr. Capuano. You haven't prohibited them, but you have 
discouraged them significantly.
    Mr. Bland. In fact, sir, the data hasn't shown that. Banks 
continue to invest--
    Mr. Capuano. Not yet.
    Mr. Bland. --in municipal securities.
    Mr. Capuano. You just did it. And you did it only a couple 
of weeks ago.
    Mr. Bland. And they continue to invest in these 
institutions and support their local communities.
    Mr. Capuano. Well, good. Believe me, I would love to be 
wrong, and that is okay with me.
    I also want to move on to some of the risk issues. My big 
concern when it comes to risk is that some of this stuff is so 
complicated you end up with the result that small banks 
especially can't figure out when they are into a risky 
situation or not.
    And as you come up with these data points as to what is and 
what is not risky, which again I think the discussion has been 
great today, exactly where the line is and where it isn't, I 
think it is really important that you make the calculation of 
risk easy enough for a relatively small community bank to make 
the determination that they are getting into an area that is 
going to require more regulation and more oversight. Or to make 
the decision not to do it.
    In the past, some regulators have told me, ``We are a 
little concerned about people gaming the regulations.'' So 
what? If they game them to not be regulated, that means they 
are not doing risky things, which is a good thing.
    I guess the last thing I want to do is I want to talk about 
the QM rules. I would argue that the best thing you can do for 
a community bank, and actually I think it fits under the 
definition I have heard everybody say, is to encourage 
community banks to actually be involved in the community. You 
are involved in the community when you have risk involved with 
the community, namely holding mortgages, holding loans.
    And I would argue very clearly that as we go on, especially 
to the CFPB, that QM rules and any other rule not only allows 
small community banks to hold local paper, but actually rewards 
them for doing so.
    I want--and I will be honest; I have said it publicly 
before--all of my cash, which isn't much, but whatever I have, 
and all of my mortgages, to the best of my ability, to be in 
local banks because I like the idea that they know where my 
street is. They know where my neighborhood is. They know how 
much a house is valued. Their kids are likely to go to school 
with my kids. And on and on and on.
    But at the same time, if they can't do it, which for all 
intents and purposes they have been pushed out of it, 
especially residential mortgages, they can't be a community 
bank for long. And I would strongly encourage you to not just 
allow something, but to also encourage and reward community 
banks to actually be involved with the community so that we can 
have somebody to donate to the local Little League.
    I don't really have a question, as I said. I didn't really 
come with questions. But what the heck, I had 5 minutes, I 
figured I would use it.
    Chairman Neugebauer. I thank the gentleman.
    And now, we will stand in recess until right after votes. 
And we thank the panel for their indulgence.
    [recess]
    Chairman Neugebauer. The subcommittee will come back to 
order.
    And I now recognize the gentleman from Colorado, Mr. 
Tipton, for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman.
    And thank you, panel, for taking the time to be here. Mr. 
Bland, I certainly appreciate your comments in regard to moving 
that threshold in terms of banks that are in good order, and to 
be able to move that up. I am very proud, with Ranking Member 
Clay, to be able to put forward some legislation to be able to 
achieve that.
    I would actually like to be able to move into some of the 
small bank issues. And Mr. Bland, I might want to be able to 
address this to you first. Every community banker who visits 
our office right now, or testifies before this committee, come 
in and they express concerns about regulations being 
indiscriminately applied through rule, guidance or best 
practice to the entire industry, where in some cases regulation 
is actually intended for larger institutions.
    As a regulator, do you take into account in determining 
what is going to be the appropriate regulation to be able to 
fit the size of a bank?
    Mr. Bland. Representative Tipton, during my discussions 
with bankers, I hear similar issues and concerns that you have 
raised. And from the OCC, we are very cognizant of that and we 
really take an approach that one-size-does-not-fit-all.
    And so the approach we take is to look at the activity and 
whether or not community banks tend to be involved in that. So 
for example, we have issued the heightened standards rule that 
is for our largest institutions. Community banks are not 
subject to that. The supplemented capital rule was not intended 
for community banks as well.
    And so what we take into account when we issue not only 
rules, but also guidance--we clearly state what is applicable 
to a community bank and what is not. And then that also 
translates into our examination processes as well, so that the 
procedures that drive our supervision of community banks are 
focused on community banks.
    Our tailoring starts with our rules and goes through our 
examination process.
    Mr. Tipton. So, trying to be able to tailor regulations, to 
be able to meet--this brings up a point, because I wrote down 
comments.
    Ms. Eberley, you had stated that you are ``keenly aware'' 
of regulations' impacts on small community banks.
    Ms. Hunter, you stated that you ``seek out and are 
listening to feedback on reducing the impacts of regulations 
and policies.''
    Mr. Bland: ``reviewing duplicative review processes.''
    Mr. Silberman: ``mindful and responsive to the impacts of 
regulations on financial institutions.''
    And we can go down the line, but the problem is this: We 
are continuing to see rules and regulations that are literally 
crushing the industry. I come from a small rural community in 
southwest Colorado. I just recently visited a community bank in 
Delta, Colorado, and they said they are about ready to give up, 
that they are no longer doing the banking business. They are 
complying with rules and regulations.
    And the costs are enormous. When we go back to Mr. Guinta's 
comments, the bank in his State--22 percent in terms of the 
costs. So I guess my question is: Is there any collaboration in 
terms of trying to be able to streamline? Because we are 
talking about duplicative regulations. When I listen to the 
comments, I heard you saying the things I would love to be able 
to hear, but are we seeing this actually happen in practice? 
Because our institutions continue to see those costs go up.
    Ms. Eberley, you had cited the stress test. We have Zions 
Bank, which is basically a collection of community banks, but a 
regional bank. Their stress test paperwork last year was 7,000 
pages. This year, it was 12,000 pages. How is that paperwork 
reduction working out?
    Ms. Eberley. The stress tests are one area where we didn't 
have a lot of discretion in the rule-writing process because of 
what was in the statute. And we would welcome more discretion. 
We have been able to use discretion, for example, in the 
enhanced prudential standards and the way we look at resolution 
planning. So we have tailored resolution plans for the smaller 
institutions versus the larger, with more significant 
expectations for the systemically important financial 
institutions.
    But on stress tests, one of the important things I would 
tell you is that when we issued the guidance, we issued it 
jointly. And we put a statement together that we attached to it 
that said it did not apply to institutions under $10 billion. 
And we have continued to do that and put statements of 
applicability on every financial institution letter that we 
issue a rule.
    Mr. Tipton. I appreciate that. And given the concern that 
you have all expressed in terms of the impacts, particularly on 
community banks, do you find it of great concern that 
apparently only 60 percent of the Dodd-Frank rules are written 
and 40 percent are yet to come? Do we continue to see more 
piling on?
    Ms. Hunter, feel free. You look like you--
    Ms. Hunter. While I was looking, we were over time. So that 
is why.
    There are still rules to be written, but the vast majority 
of the rules that are in process really relate to firms over 
$50 billion in assets. So I would not anticipate that they 
would affect community banks in any material way.
    Mr. Tipton. I yield back, Mr. Chairman. Thank you.
    Chairman Neugebauer. The Chair now recognizes the gentleman 
from Washington, Mr. Heck, for 5 minutes.
    Mr. Heck. Thank you very much, Mr. Chairman. Mr. Silberman, 
this is for you. I have been enormously privileged in my life 
to sit on both sides of this table. I am a former chief of 
staff to a governor, and agency directors were direct reports 
to me. So I have had to supervise and monitor the development 
of rules and regulations and their implementation.
    But of course, I sit here now. And I am also a former State 
legislator, so I also know the world of proposing policy that 
then has to be implemented through the promulgation of rules 
and regulations. And I know the world of hearing back from 
people who are affected by those policies and implementing 
rules and regulations.
    And I have come away with kind of a life-long point of view 
that what all of this is about is the very difficult and 
creative tension between clarity and flexibility, which are at 
odds so very often, right? Clarity, which we ask for all the 
time. Just tell us what the rules are, which leads to bright 
lines.
    But at the same time, we all too often hear, where is the 
flexibility? Why can't this be more discrete as it relates to 
our personal circumstances? So you have this ongoing clarity 
versus flexibility tension in your world. And I think they are 
both equally important and valid.
    And by analogy--eventually I am going to get to my 
question, I ensure you--there needs to be this magic balance 
between the inputs on the development of policy, anecdotes, and 
data. They are both valuable. I wouldn't want to try to develop 
policy at this level based purely on anecdotes, but I value 
them because they put a human face and a story to it. Nor would 
I want to be robotically tethered to data.
    As it relates to QM, and you knew I would get to a question 
eventually, we are hearing a lot of anecdotes about how the QM 
rule is impacting financial institutions. And I think it is 
important to listen to those. Again, I don't think it ought to 
exclusively or purely drive our response, but it is important.
    My question, sir, is, where is the best place to go to get 
the data? If there is an implementation issue out here that is 
causing problems, which we are given anecdotal evidence of, 
where is the best place to look at the data to help give 
context to those anecdotes?
    Mr. Silberman. Thank you, Congressman. It is a great 
question. And I think when it comes to QM and the mortgage 
market, there are multiple sources of data to be used in 
addition to, as you said, listening to the real stores and the 
voices. So HMDA is certainly a key source of data which 
provides insight into the number of loans, number of loans by 
size and all that. So we will get information from HMDA.
    The call reports is another source.
    Mr. Heck. What is that?
    Mr. Silberman. The call reports banks and credit unions all 
file is a second source of some data. And as you may know, we 
have been working with the FHFA to create a national mortgage 
database which would enable us, for the first time, to have a 
representative sample of all mortgages de-identified. And that 
will, when it is up and running, provide probably the best 
source of data, but we can't wait for that to be able to make 
calls.
    Mr. Heck. I have another quick question, which I probably 
don't have time for.
    We have tried very hard to provide carve-outs or exemptions 
to smaller institutions, in recognition that some of these 
things might not, again, best suit the purpose of the smaller 
institutions. What we are hearing, however, is that there is 
evolving a pressure toward best practices which comes from, 
``above the larger standards, rules, and regulations.''
    It is hard for me to ferret out exactly the origin of this. 
This is not for you, Mr. Silberman, I apologize; this is for 
Ms. Eberley and Mr. Fazio. Is this pressure, in your opinion, 
coming from examiners, from the consultants?
    I would like a brief--because I have limited time--sense 
of, do you think that there is this kind of amorphous pressure, 
that even though we grant carve-outs, for which we think are 
very valid reasons, nonetheless kind of the cultural milieu and 
context mitigates against the very thing we are trying to 
accomplish in that regard?
    Ms. Eberley, Mr. Fazio--I'm sorry. Pardon me?
    Chairman Neugebauer. Please respond in writing to the 
gentleman because we have some folks who need to catch 
airplanes.
    Mr. Heck. I apologize, Mr. Chairman.
    Chairman Neugebauer. But it is a good question. And the 
witnesses will please respond to it.
    I now recognize the gentleman from Texas, Mr. Williams.
    Mr. Williams. Thank you, Mr. Chairman. And I want to direct 
my questions to Commissioner Cooper and Mr. Silberman.
    My first question is to Commissioner Cooper. In your 
testimony, you spoke about the need for legislation to support 
NMLS' ability to process background checks. Regulatory 
efficiency is important for regulators and regulated entities. 
I personally understand this, being a small business owner.
    Access to credible information is everything. So my 
question, Commissioner, is how will legislation you are working 
on with Congress promote this type of efficiency?
    Mr. Cooper. Thank you, Congressman. First, let me say that 
since 2010, the NMLS that we discussed earlier has been 
processing background checks, and they have been doing it very 
efficiently on the mortgage loan side. What we want to make 
sure of is that the SAFE Act allows us to be able to use this 
same efficiency and use that on our other non-bank industries 
that we regulate, such as in Texas, where we regulate money 
services businesses. It takes approximately 2 weeks to get 
background checks. The NMLS system can do it in 24 hours. So we 
like that efficiency.
    Mr. Williams. Okay. Thank you. And one other quick 
question. What is your definition of a community bank?
    Mr. Cooper. Congressman, if I could, everybody here has 
been talking about what the pieces are for a community bank. 
And I agree with most of it. What I think we have here--for 
instance, the FDIC definition that they use for data brings in 
about 6,000 banks. Chairman Hoenig's definition that was 
mentioned earlier brings in about the same amount less about 
148.
    My point is that we are so close in being able to come up 
with a definition that I would suggest that we would be able to 
get together and come up with these things. And we do have to 
have a--what I call a determinator--somebody who can decide on 
the differences. And that, in my recommendation, would be the 
chartering agency.
    Mr. Williams. Thank you.
    Mr. Silberman, in full disclosure I need to tell you that I 
am two things in this world. I am a car dealer, and I am a 
community bank shareholder. Now, the CFPB issued its guidance 
on indirect lending on March 31, 2013. And I think we need to 
be honest. This guidance was meant to intimidate indirect 
lenders and eliminate payments to car dealers whose customers 
have auto loans with higher interest rates. Would you agree 
with that? Yes or no?
    Simple answer.
    Mr. Silberman. No.
    Mr. Williams. Okay. Now, I know that the CFPB thinks that 
these payments lead to discrimination. And I can understand 
that back in March of 2013, your lawyers were too busy to go 
through the rulemaking process, so they took a shortcut. But 
now, more than 2 years have gone by since you issued the 
guidance. And as far as I can tell, you haven't made any effort 
to do what the law requires.
    Now, if you want to create a rule that businesses have to 
follow--so my real question is this, first of all, what is the 
problem? And why aren't you even trying to do this the right 
way?
    Mr. Silberman. Congressman, thank you for the question. The 
problem that we have been addressing is that indirect auto 
lenders are engaged in practices that are producing 
disparities--
    Mr. Williams. No, you don't know that.
    Mr. Silberman. We have found that through our supervisory 
work, through our investigative work.
    Mr. Williams. All right. Next question, are you afraid that 
your statistics won't look so good by hiding this information?
    Mr. Silberman. I am not sure what information you are 
saying that we were hiding, Congressman--
    Mr. Williams. You are not rulemaking. You are intimidating.
    Mr. Silberman. I respectfully disagree. We are not 
intimidating. We are not rulemaking because we have not made 
any rules. We have simply--what the bulletin simply announces 
is what has been well-established law for a long time in terms 
of the obligations of an indirect auto lender under the Equal 
Credit Opportunity Act.
    We thought it was useful and important for us to put the 
banks that we examine on notice of our understanding of the 
law. And it is well-settled law. So there was not a rule to 
issue because there was no change in law.
    Mr. Williams. Do you worry that the cost of compliance on 
business--small businesses and regulations could cost small 
businesses profits, and even put them out of business? Do you 
worry about that?
    Mr. Silberman. We are required by statute to think about 
that. And we think about the access, the intent--
    Mr. Williams. Are you worried about that? Do you think it 
might put a long-time business out of business, because of the 
cost of meeting these regulations?
    Mr. Silberman. We are always concerned about access to 
credit for small businesses, as well as for consumers.
    Mr. Williams. And what do you say when somebody says they 
are having to hire more compliance officers and loan officers 
in these banks?
    Mr. Silberman. Congressman, I think what we say is that we 
want to understand that. We want to make these rules as easy as 
possible to implement. That we have engaged in an extensive 
effort to try and assist and make it so that they don't need a 
lot of--don't have to lawyer up to implement the rules, and to 
adjust the rules so that we don't have a one-size-fits-all 
approach.
    Mr. Williams. I appreciate your testimony.
    Chairman Neugebauer. The time of the gentleman has expired. 
I thank the gentleman.
    And now the gentleman from Georgia, Mr. Westmoreland, is 
recognized for 5 minutes.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    Yesterday, Congresswoman Maloney and I reintroduced the 
Financial Institutions Examination Fairness and Reform Act. I 
am very excited to be working with Mrs. Maloney as she and I 
have worked together. And she has worked tirelessly to help the 
community banks.
    To me, this bill addresses the major concerns my community 
banks have had with the regulators during the financial crisis. 
The core purpose of this bill is to provide financial 
institutions a way to appeal examination determinations to a 
neutral and independent third party. This independent 
examination review director is tasked with determining whether 
examiners have fairly and accurately applied rules and guidance 
from the regulators.
    All too often, I have heard that banks in my community have 
nowhere to turn when an examiner makes a mistake or is applying 
rules unjustly. I would like for each of the Federal 
supervisors to just give a simple yes-or-no answer: Will you 
support or remain neutral on this bill?
    Just a simple yes or no.
    Ms. Eberley. No, sir.
    Ms. Hunter. Our agency doesn't have a position on it, so I 
am not in a position to say I would support it or not.
    Mr. Bland. Representative Westmoreland, we don't support 
it, no.
    Mr. Fazio. We have concerns with various aspects of the 
examination fairness bill.
    Mr. Westmoreland. Mr. Silberman, do you have anything to 
say? Do you know anything about it?
    Mr. Silberman. No, sir.
    Mr. Westmoreland. All right, good.
    Ms. Eberley, you brought up a point about my colleague from 
Georgia, Mr. Scott and I, who have been working tirelessly on 
the failure of our community banks. You mentioned the 
acquisition development and construction loans. It brings up 
why I think this bill that we have is so important, because it 
talks about nonaccrual, in placing loans in nonaccrual.
    I was in the building business. I was in the development 
business. I was in the real estate business. I know for a fact 
that some of these loans that were current--they had been going 
by and abiding by all the terms of the loan. But they were 
forced to be put into nonaccrual, which took the cash position 
of these banks down.
    Now, what is wrong with a small community bank being able 
to say, ``Look, I know this guy. He has paid his loans. Why 
does it have to go into the nonaccrual status?''
    Ms. Eberley. After the crisis of the late 1980s and early 
1990s, Congress passed a law indicating that the financial 
institution regulators had to require institutions to follow 
generally accepted accounting principles (GAAP). So we don't 
have that flexibility. And then--
    Mr. Westmoreland. And that is why we are trying to change 
the law.
    Ms. Eberley. Right. And--
    Mr. Westmoreland. But you don't want us to change the law?
    Ms. Eberley. We have a couple of problems with the idea of 
an ombudsman that would overturn agency findings without having 
accountability for the supervision of institutions--
    Mr. Westmoreland. So basically, the government agencies 
think you know more about a bank's borrowers than they do? Is 
that correct?
    Ms. Eberley. No, sir. We require institutions to follow 
GAAP.
    Mr. Westmoreland. Okay.
    Ms. Eberley. And if they weren't following GAAP, they would 
essentially have two sets of books.
    Mr. Westmoreland. Okay.
    Ms. Eberley. They would have one set of books where they 
reflected it that way--
    Mr. Westmoreland. Thank you.
    Ms. Eberley. --and one for the regulators.
    Mr. Westmoreland. And I am sorry you all opposed the bill.
    I also wanted to talk about the Economic Growth and 
Regulatory Paperwork Reduction Act. In the past 15 years, there 
have been 801 regulatory rules that have gone in to these 
banks. My concern is that the volume and the complexity of 
these banking regulations is going to put more of our community 
banks out of business. And since Dodd-Frank, my understanding 
is that those rules will not be included in this next review. 
And so it will be, I think 2026, before these Dodd-Frank rules 
will be considered under this rule.
    Can you tell me why Dodd-Frank rules aren't being 
considered in this next review? And can anybody tell me--after 
801 regulations, can you tell me how many have been--because 
this was only up to 2006. How many have been after 2006? And 
what paperwork has been reduced, or what rules have been 
removed?
    Mr. Bland. Representative Westmoreland, I will take the 
first part.
    Mr. Westmoreland. Sure.
    Mr. Bland. The bank regulatory agencies issued a letter 
that indicates that we will include all regulations that have 
been implemented in the EGRPRA process, going forward, starting 
with our next hearing in Boston in May. All regulations also 
will be subject to the public comment period, including the 
Dodd-Frank rules that have been implemented.
    Chairman Neugebauer. The time of the gentleman has expired. 
But I would ask the other witnesses to respond to the 
gentleman's question in writing, as well.
    I will now go to the gentleman from Kentucky, Mr. Barr, for 
5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Ms. Eberley, in February you testified before the Senate 
Banking Committee. And I believe your testimony was to the 
effect that traditional banks were able to weather the 
financial crisis reasonably well, and are continuing to perform 
well. But as has been discussed here today, since 2010, when 
there were about 7,657 banks in the United States; 4 years 
later, by the end of 2014, that number had declined to 6,509 
banks. At the same time, since the enactment of the Dodd-Frank 
Act, banks with less than $10 billion in assets have seen their 
market share decline by 12 percent, double the 6 percent 
decline of the 4 pre-Dodd-Frank years.
    So again, to Ms. Eberley, referencing back to your February 
testimony in front of the Senate Banking Committee, when 
Senator Heller asked whether you thought industry consolidation 
was a concern, your response, I believe, was that most 
consolidation results from a financial crisis, so the way to 
prevent consolidation is to avoid crises through more 
regulation.
    One of the goals of financial reform was to solve this 
problem of too-big-to-fail. And yet what we have seen is an 
avalanche of red tape coming in response to the financial 
crisis and a contraction of banks, a contraction of competition 
and choice, a consolidation of assets, and a concentration in 
fewer banks and bigger banks.
    So my question to you is, do you still maintain that more 
regulation is needed? Or do you recognize that some of the 
avalanche of regulations is actually counterproductive from a 
standpoint of diminishing competition and exacerbating the 
problem of too-big-to-fail?
    Ms. Eberley. I believe in that hearing I was referencing 
our study on consolidation, which showed that about 20 percent 
of the consolidation that had occurred over the last 30 years 
was attributed to two big crises, with failures from the 
crises. And what is in our control is to have good supervision, 
not regulation, but supervision to ensure that banks don't 
fail, so that we have good balanced supervision in good times 
and we don't go too far in bad times. I think that is very 
important.
    Mr. Barr. Fair enough. And I am all for supervision and 
making sure that we don't have a financial collapse. But to 
kind of follow up on Mr. Guinta's line of questioning, where he 
was referencing only five new charters in the last number of 
years, I think Senator Shelby referenced only two de novo bank 
charters have been granted since the financial crisis.
    My question really, following up your testimony in the 
Senate, is, do we really believe that it is a 6-year economic 
cycle that is to blame here? Or can we acknowledge that at 
least some of the reason for the consolidation, some of the 
reason for the lack of new charters is overregulation?
    Ms. Eberley. Certainly, the costs of operating in a 
regulated environment are factored in. But we have seen a 
tremendous amount of money come into community banks in the 
form of investment in that same timeframe, which suggests to me 
that community banks are still viewed as viable by the 
investing community, and that the cost of regulation isn't 
keeping them from coming in.
    Mr. Barr. Let me just share a little anecdotal feedback 
from some of the small community banks in central and eastern 
Kentucky, which I represent. And I think they would be 
disappointed to hear that you all are opposed to basically fair 
exam procedures where you have an independent appeal process.
    Basically, what a lot of these bankers are telling me is 
that they are no longer in the business of lending. They are in 
the business of paperwork and compliance. And for every 
$100,000 that they have to put into compliance, that is a 
million dollars less capital deployed in their communities. So 
I would hope that there would be some sensitivity to that.
    Let me move on since I am running out of time, just really 
quickly to Commissioner Cooper. You mentioned in your written 
testimony that you support granting QM status to loans held in 
portfolio by a community bank. I have a bill called the 
Portfolio Lending and Mortgage Access Act.
    Mr. Silberman, your agency opposes that legislation. 
Director Cordray is on record as opposing the legislation. My 
question to you, Commissioner Cooper, is can you explain your 
thinking and why you disagree with Director Cordray? Why is it 
that, as the top representative of State-based regulators, that 
you believe that portfolio lending encourages an alignment of 
interests between the lender and the borrower that would 
actually prevent some of the practices, the originate to 
distribute practices that led to the financial crisis?
    Mr. Cooper. Congressman Barr, you said it very well. The 
community bank model does align the risk of the entity with the 
benefits of the consumer, and so we believe, CSBS believes and 
State regulators believe that community banks holding mortgages 
in portfolios should be exempt because it also has created a 
problem that we believe by survey that it is declining, and if 
we don't reverse this decline, we will continue to have 
obviously further decline.
    Chairman Neugebauer. I thank the gentleman.
    Mr. Barr. Thank you.
    Chairman Neugebauer. The gentlewoman from Utah, Mrs. Love, 
is recognized for 5 minutes.
    Mrs. Love. Thank you.
    I want to get right into it. Just to be clear, Mr. 
Silberman, do any States lack the authority to implement 
ability to repay and roll over limits for State-licensed payday 
lenders?
    Mr. Silberman. Thank you Congresswoman.
    Mrs. Love. I'm sorry, I can't see you.
    Okay, there you are. Thank you.
    Mr. Silberman. Sorry.
    So, we have been thinking about--our job is to ensure that 
consumers have the rights and protections that they are given 
by Federal law, and that is the question we have been asking 
rather than the question of what States can or cannot do.
    Mrs. Love. We should be asking what States can or cannot 
do. Because if you think about it, Mr. Cooper asked, ``Can you 
describe the authority that States have to regulate these 
products,'' and the answer was, ``We have not thought about the 
States' ability to regulate. We feel like it is our job, 
something like our job to regulate these and try and figure out 
how we are going to protect consumers.'' Is that your 
assessment?
    Mr. Silberman. It is our assessment that it is our job to 
ensure that consumers have the rights that are provided to them 
under Federal law.
    Mrs. Love. Have you identified any States that have failed 
to adequately protect its citizens?
    Mr. Silberman. As I say, our job is to--
    Mrs. Love. Have you identified any States that have 
inadequately protected its citizens when it comes to these?
    Mr. Silberman. As I have indicated Congresswoman, that is 
not the question we were charged to ask, and that is not the 
question we have been asking.
    Mrs. Love. Okay. So from what I can see here, if we already 
have States--by the way, two States have done away with these 
products. And you can't identify or are not willing to identify 
States that have failed to adequately protect citizens. It 
seems to me that the job is pretty much to protect your job if 
you are duplicating or stopping what States are trying to do.
    Mr. Silberman. Our job is to ensure that consumers are not 
subject to unfair, deceptive, or abusive acts or practices, 
that they get the disclosures that Federal law requires, that 
they get the protections that lending--
    Mrs. Love. So your job is to stop States then, when it 
comes to these products? Because seriously, why do you think 
the national solution should be to trump the States? If the 
States are already regulating these products adequately, why do 
you feel like you need to replicate or trump what they are 
already doing?
    I live in a State that does very well. As a matter of fact, 
these products are--we have not had any problems with these 
products. Our citizens love them. They think it is another 
option for them. And so now, here I am, in the House of 
Representatives, which is the branch of government that is 
closest to the people, by the way, and I am having to listen to 
you say, well, our job is to pretty much figure everything out 
for the States. What is the point in having States regulate 
these products?
    Mr. Silberman. So first, to be clear, I did not mean to say 
that--and if I said that, I apologize--our job is to trump the 
States. Our job--Federal law would not trump the States. It 
would establish a floor, which is, in a Federal system, the way 
things work. Just as the States, there is a Truth in Lending 
Act, and the States can add protections on top of that. There 
is a Truth in Savings Act, and the States can add additional 
protections. There is a Fair Credit Reporting Act. That is the 
job that Congress has given us and that we are intent on doing.
    Mrs. Love. Okay.
    It doesn't make any sense to me, if States are doing it, 
and you can't identify a State that is inadequately protecting 
its citizens, it seems to me if you are going to do what States 
are already doing, it is like I am just here to maintain my 
job. I need to do something, so I am going to do something that 
States are already doing. It makes absolutely no sense.
    I just want to--I am going to shift over and just talk to 
Ms. Hunter about the Volcker Rule. As the Volcker Rule is being 
implemented, we are learning more and more about unintended 
consequences with the Rule.
    One that has come up has to do with the non-financial 
companies that own depositories such as ILCS or unitary 
thrifts.
    As the Volcker provision is drafted--if a non-financial 
company owns a depository, the Volcker requirement applies to 
all of their operation, even those that are not engaged in any 
financial services, which means that non-financial companys' 
ability to carry out some basic risk management could be 
seriously impacted or harmed. So, the question that I have is 
do you believe that the intent of the Volcker provision was 
applied to the non-financial affiliates in the industrial 
company that owns a depository?
    Ms. Hunter. I certainly understand the concern that you are 
raising, and the issue is really created in the Dodd Frank Act 
itself. You are correct when you say that it really applies the 
restrictions on proprietary trading and the investments and 
relationships with covered funds under the Volcker Rule. It 
applies to insured depositories and their affiliates.
    Mrs. Love. But do you think that this is one of the 
unintended consequences, because we are impacting industries 
that are not in the financial services, and I just want--if it 
is okay on the record, I would love to have a comment on that 
in terms of a well-thought-out comment as if you believe that 
this was an unintended consequences.
    Chairman Neugebauer. Ms. Hunter, if you would send Mrs. 
Love a written response on that, we would appreciate it.
    Ms. Hunter. We would be happy to provide some information, 
yes.
    Mrs. Love. Thank you.
    Chairman Neugebauer. Thank you.
    And now the gentleman from California, Mr. Sherman, is 
recognized for 5 minutes.
    Mr. Sherman. Thank you.
    Mr. Silberman, my colleagues have heard me talk about the 
new TILA-RESPA forms. You are certainly aware that the real 
estate industry and the real estate closing industry is focused 
on this. One would expect some bumps in the road once these 
rules become effective. Have you have explored the idea of a 
reduction for a few months or a suspension of the penalties for 
the innocent errors that are likely to be made in the first few 
months of operation?
    Mr. Silberman. Thank you, Congressman.
    The TILA-RESPA rules, the ``Know Before You Owe'' rules as 
we think about them, as you know, were issued in November of 
2013. We did provide for a very long implementation period in 
order to ensure that they could be effectively implemented. We 
have been working diligently with the industry to ensure that 
it could get implemented effectively.
    I believe Director Cordray spoke to this issue when he was 
before the full committee last month and has some recent 
correspondence, and I think what he said is that we are focused 
right now on ensuring a successful achievement of the effective 
date, but that we always listen and will continue to listen to 
people's ideas about and around that.
    Mr. Sherman. I hope you will listen to the idea that yes, 
you have an effective date, but it ought to be a soft date when 
it comes to either imposing governmental penalties or opening 
the door to civil lawsuits, because until you take it on a 
shakedown cruise, you don't know which part needs to be fixed.
    Mr. Fazio had this great question about the need for 
supplemental capital that somebody else already asked a similar 
question. So instead, I will talk to you about how NCUA has not 
shown any instance where the lack of enforcement authority over 
credit union service organizations has been a material issue.
    Is it correct that NCUA already has authority via the 
credit unions they regulate to review and dictate enforcement 
with regard to credit union service organizations, which 
insiders call CUSO--I was told to mention that to show that I 
really knew the industry.
    It is my understanding that non-CUSO vendors are already 
subject to reporting and are reviewed through the Federal 
Financial Institutions Examination Council (FFIEC).
    So, with the tight budgets that everyone in government 
faces, do you really need to get involved in this in a new way?
    Mr. Fazio. Thank you for that question, Congressman.
    There are two aspects of that, and I will take the latter 
first. The non-CUSO vendors, third-party vendors that are not a 
credit union service organization, if they do business with 
banks, then they would be subject to oversight by the other 
FFIEC agencies. However, we have several vendors that are large 
that only serve credit unions as clients, and they are not 
CUSOs.
    And so, they are not subject to regulatory oversight. There 
is a blind spot there.
    And we have had--in fact, we have had problems with a few 
of those historically. In terms of CUSOs, in particular, to the 
former part of your question, we have had, in fact, some 
problems with CUSOs.
    We have an indirect authority over CUSOs. We have a 
regulation that requires credit unions that do business with 
CUSOs or that own a CUSO to require certain things 
contractually, like access to books and records that they 
follow generally accepted accounting principles in preparing 
their financial statements and so forth.
    However, it is a very indirect authority in that sense. We 
don't have insight into the full landscape of the credit union 
service organizations, and are limited to their books--and we 
have limits in how we can access and examine them in terms of 
understanding their business models.
    We have seen problems historically in CUSOs, and I would 
say that CUSOs are a great opportunity for especially smaller 
credit unions to collaborate. We support that. The use of CUSOs 
achieves economies of scale and allows small credit unions to 
do things they might not be able to do otherwise, 
independently.
    But it also creates a gap in our ability to understand the 
nature of the risks to those credit unions.
    In some cases, it doesn't--
    Mr. Sherman. I would ask you at least not to duplicate the 
efforts of the Federal Financial Institutions Examination 
Council and--
    Mr. Fazio. And we would have no intention of doing so.
    Mr. Sherman. Okay.
    Mr. Fazio. We cooperate and collaborate with them closely.
    Mr. Sherman. I have 14 seconds left, so I will just point 
out that the gentleman from Florida, Mr. Posey, and I have a 
great bill that perhaps if the FDIC would focus on it, you 
could solve it at your level. You have bank holding companies 
where you would not have an invasion of the assets of the 
insurance company that they might hold. Should there be a 
liquidation, you need to do the same for thrift holding 
companies, because we have a State system of regulating 
insurance companies, and the assets of the insurance company 
need to be there to protect the policyholder, and shouldn't be 
raided by the FDIC for other purposes.
    I will yield back.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from Pennsylvania, Mr. Rothfus, is 
recognized for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    I thank the panel for spending some time with us today and 
I appreciate your patience through the vote break.
    Mr. Bland, I wanted to address a question to you.
    As you know, mutually chartered financial institutions have 
a long history in the United States of serving their local 
communities and promoting Main Street economic growth.
    Their structure grants them flexibility to take a long-term 
outlook rather than focusing on quarterly earnings, but it 
comes with a unique challenge as well. For example, mutual 
banks are constrained in their ability to pursue activities 
that best suit the needs of their communities by restrictions 
set out in the Home Owners Loan Act. The only option is to go 
through the time and expense of converting to a national bank 
charter, which is a particularly burdensome process for smaller 
and mutual institutions, as they must first convert to stock 
form before they can convert their charter.
    To address this issue, Representative Himes from 
Connecticut and I have introduced bipartisan legislation, H.R. 
1660, the Federal Savings Association Charter Flexibility Act, 
which provides all Federal savings associations, including 
mutual banks, with the option of offering a broader range of 
services similar to a national bank without the burdens 
associated with changing charters. This legislation establishes 
a simple election process for an institution to become a newly 
created covered savings association, and it includes important 
safeguards to prevent fire sales of assets and subsidiaries 
during the transition process while also preserving the ability 
of the OCC to enforce the law and prevent evasion.
    I know this issue is near and dear to the Comptroller, so I 
would like to ask you, is the OCC supportive of the reforms in 
H.R. 1660?
    Mr. Bland. Representative Rothfus, as I said in my oral 
remarks and our testimony, we are very appreciative of you and 
others for supporting this bill. And as you indicate, the 
Comptroller is very sensitive and supportive of giving 
flexibility to the thrift industry. The Federal savings--
    Mr. Rothfus. Would you agree that these institutions need 
and deserve more flexibility?
    Mr. Bland. Yes, they do. As originally structured, they 
were primarily limited to the mortgage space in terms of 
providing those services, but there are a lot of other entities 
that are involved in that, but they are still constrained by 
laws that limit the types of loans that they can do. And in 
fact, they have a lot of experience. And they can--consumer and 
commercial loans. But they do have a limit in which they can do 
that, so we are very supportive of providing the ability for 
them to continue their governance as a thrift, but to exercise 
the flexibility that other institutions have in terms of what 
is the right business model.
    Mr. Rothfus. Thank you.
    Ms. Eberley, I wanted to read something that I have 
received from one of my local community banks: ``Two years ago, 
we--the bank--decided to appeal a matter for which an appeal 
process was applicable. When the on-site examiner communicated 
to the regional office that the bank was taking this action, a 
regional officer of the regulator responsible arranged a phone 
call with the bank and its legal counsel.
    ``The regional officer conceded during this call that the 
bank had the right to appeal the matter, but strongly suggested 
that the bank not do so.
    ``He informed us that he had already spoken to the so-
called independent reviewers, and that we would lose that 
appeal.''
    I don't know about you, but I find this story pretty 
troubling in terms of the effectiveness and independence of the 
processes that currently exist for institutions to appeal 
material supervisory determinations. I think it also raises 
some due process issues. Worse still, it is not an isolated 
incident. And it is illustrative of many complaints that the 
committee has heard. So, I would like to get your response. In 
light of this example, wouldn't you agree that reforms to the 
examination process are warranted?
    Ms. Eberley. The situation you describe would not at all be 
consistent with our process. And I would very much appreciate 
having the information to be able to reach out to the 
institution.
    Our process is is that we do encourage institutions to try 
to resolve concerns at the lowest level possible, starting 
with--
    Mr. Rothfus. But if this happened, wouldn't you agree that 
reforms--
    Ms. Eberley. It would be inconsistent with our policies. We 
do have an independent review process that starts with the 
regional office. It next comes to me. I am a 28-year examiner. 
A group that is independent of the oversight of the region 
reviews all of the materials from the institution and from the 
FDIC, our reports of examination. They make a recommendation to 
me, but I make my own decision.
    And if an institution doesn't agree with the decision that 
I make, they may appeal to our supervisory appeals review 
committee, which is an independent organization, headed by an 
independent political appointee.
    Mr. Rothfus. Yes, we would like to follow up with you on 
that.
    Ms. Eberley. I would be happy to.
    Mr. Rothfus. I have also been increasingly concerned about 
consolidation in the community banking and credit union 
industry. As you may know, our recent study by researchers at 
Harvard's Kennedy School of Government found that this sort of 
consolidation is in fact occurring, and that the Dodd-Frank Act 
has accelerated the trend considerably.
    In a hearing before the Senate Banking Committee on 
February 12th, you argued that the lack of a new bank increase 
is due to the economic cycle, versus one of the legislative 
barriers, or even regulatory barriers.
    In light of the Harvard study, do you still stand by those 
remarks?
    Ms. Eberley. I would have to point out a couple of things 
about the Harvard study. Number one, the market share 
definition was based on total assets, and we have spent a lot 
of time talking today about the importance of community banks 
lending in their communities.
    If you actually look at market share of loans, community 
banks' market share declined in the 20 years leading up to the 
crisis, but since the crisis, it has stayed stable and actually 
it has increased about a tenth of a percent. So, a 20-year 
decline has stopped after the crisis.
    Mr. Rothfus. I yield back. Thank you.
    Chairman Neugebauer. I thank the gentleman.
    And now the gentleman from Wisconsin, the chairman of our 
Oversight and Investigations Subcommittee, Mr. Duffy, is 
recognized for 5 minutes.
    Mr. Duffy. Thank you, Mr. Chairman.
    Ms. Eberley, you are part of the senior management of the 
FDIC, is that correct?
    Ms. Eberley. Yes.
    Mr. Duffy. And do you report directly to Chairman 
Gruenberg?
    Ms. Eberley. Yes, I do.
    Mr. Duffy. When Chairman Gruenberg gives you a directive, 
do you follow it?
    Ms. Eberley. Yes, I do.
    Mr. Duffy. In your experience, you have been at the FDIC 
for some time, and part of the senior management team. When 
Chairman Gruenberg gives a directive, does senior management 
follow that directive?
    Ms. Eberley. Yes.
    Mr. Duffy. Okay.
    And so I want to talk to you about the FIL, the Financial 
Institution Letter that came out in January of this year. Did 
you participate in the writing of that?
    Ms. Eberley. Yes, I did.
    Mr. Duffy. The part I think is important is that you have 
encouraged institutions to ``take a risk-based approach in 
assessing individual customers' relationships rather than 
declining to provide banking services to an entire category of 
customers.'' That is very important.
    Were banks stopping business with a whole line of 
customers, in your experience, in the risk-based work you have 
done?
    Ms. Eberley. We have heard a fair amount of anecdotal 
evidence of that. In fact, a group of pawnbrokers represented 
by the National Pawnbrokers Association came in and met with us 
and gave us a spreadsheet of customers who had lost their 
accounts.
    Mr. Duffy. Do you think that the decisions that were made 
by banks had anything to do with the regulation that came from 
the FDIC?
    Ms. Eberley. In that particular case they gave us a list of 
49 institutions, only one of which was supervised by the FDIC, 
and that institution's decision appeared to be a risk-based 
decision based on the reasons that they had provided to the 
customer.
    Mr. Duffy. So based on your work, have you seen any 
evidence that the FDIC has a list of prohibited businesses that 
they send out to banks?
    Ms. Eberley. The FDIC does not have a list of prohibited 
businesses.
    Mr. Duffy. Are their regional directors part of the senior 
management team?
    Ms. Eberley. Yes, they are.
    Mr. Duffy. And they are the ones who also follow the 
directive of Chairman Gruenberg?
    Ms. Eberley. They report to me.
    Mr. Duffy. They report to you?
    Ms. Eberley. Yes.
    Mr. Duffy. So if there is a consent decree, or a memo of 
understanding that is sent out, do you see those?
    Ms. Eberley. It would depend on the level. Much of our 
enforcement action is delegated.
    Mr. Duffy. Okay, do you see those? Not all of them?
    Ms. Eberley. I see some.
    Mr. Duffy. But not all?
    Ms. Eberley. No, not all.
    Mr. Duffy. Would you be surprised to learn that there are 
memos of understanding or consent decrees that go out with 
prohibited products?
    Ms. Eberley. I would be very surprised, and I would want to 
see them.
    Mr. Duffy. There was an investigation that was done by the 
Oversight Subcommittee. We received documents from the FDIC. 
They did a report. I know Chairman Gruenberg has seen it. I am 
sure you probably have seen that report. And the documents are 
referenced, and I have them in my hand.
    I have one while you were the Director of Risk Management, 
these folks report to you, Anthony Lowe from Chicago, 
prohibited acts. And by the way, the definition of ``prohibit'' 
according to dictionary.com is to forbid. Payday lenders. Would 
that surprise you?
    Ms. Eberley. You mentioned consent orders and memoranda of 
understanding. And I am familiar with the information that we 
provided to the committee.
    Mr. Duffy. Are you surprised by this?
    Ms. Eberley. And none of those had any language that said 
that there are no MOUs or consent orders turned over to the 
committee that would have any language that says that. There 
shouldn't be any that would say that.
    Mr. Duffy. I have one from 2013.
    Ms. Eberley. I would want to see the document that you 
have.
    Mr. Duffy. Prohibited businesses.
    Ms. Eberley. Can I see the document?
    Mr. Duffy. Firearm sales.
    Can we take a recess, Mr. Chairman? I will show her the 
documents.
    Well, I can circle back.
    So are you saying that--
    Ms. Eberley. I would like to see the document.
    Mr. Duffy. Okay, but you would be surprised by this?
    Ms. Eberley. I would be very surprised.
    Mr. Duffy. Would this be outside their lane and the 
directive that was given by you and Chairman Gruenberg?
    Ms. Eberley. To include prohibited businesses in a consent 
order or an MOU?
    Mr. Duffy. Yes.
    Ms. Eberley. It would be prohibited.
    Now, there are consent orders where we have told 
institutions they need to exit a line of business because they 
weren't managing it properly.
    Mr. Duffy. But the list that I see looked pretty similar to 
the high-risk list that was issued in 2011.
    Ms. Eberley. No, that would not be consistent with policy.
    Mr. Duffy. Okay.
    Ms. Eberley. So I would need to see what you have.
    Mr. Duffy. So if these are being issued, we have rogue 
individuals operating inside the FDIC, right? Because obviously 
you wouldn't give the directive, and your testimony is that 
Chairman Gruenberg wouldn't give the directive. These are rogue 
folks, right?
    Ms. Eberley. There are no consent orders or MOUs that 
contain that kind of information, to my knowledge.
    Mr. Duffy. And you are certain of this?
    Ms. Eberley. I said to my knowledge, there are none. I 
would like to see the document that you are holding.
    Mr. Duffy. And have you reviewed a lot of--obviously, there 
is an investigation going on.
    Ms. Eberley. Yes, sir.
    Mr. Duffy. And you haven't seen any?
    Ms. Eberley. I have not, sir. I would like to see the 
document that you are reviewing.
    Mr. Duffy. Okay.
    I will provide them after, but these were documents that 
were given to our committee from the FDIC that were referenced 
in the report.
    I guess my time has expired. I yield back.
    Chairman Neugebauer. Without objection, we are going to 
have a quick second round, and I am going to recognize the 
gentleman from Georgia, Mr. Westmoreland, for a quick 5 
minutes.
    Mr. Westmoreland. A quick 5 minutes.
    First of all, I want to thank all of the witnesses for your 
patience in sticking around.
    Ms. Eberley, when you did your report on what was the main 
cause of all the bank failures that we had, did you find that 
the non-accrual was one of the main reasons for some of these 
bank failures, or was there another thing that led to the bank 
failures?
    Ms. Eberley. Our Inspector General has conducted a material 
loss review on most of the failures and they are required by 
statute, as you know, for ones that exceed a certain threshold. 
And they have done a couple of overview reports, and the 
commonalities between the institutions that failed were that 
they had heavy concentrations of credit. They grew rapidly and 
they funded that growth with broker deposits. So those are the 
three characteristics of the institutions that failed.
    Mr. Westmoreland. But being the Director of Risk Management 
at the FDIC, did you do your own study of what may have caused 
these?
    Ms. Eberley. I have certainly participated in the material 
loss review discussions with our Inspector General.
    Mr. Westmoreland. But you didn't find--the non-accrual 
regulation had anything to do with these failures?
    Ms. Eberley. No, sir, non-accrual is an accounting 
determination of whether or not you are recognizing income on a 
cash basis, or I'm sorry, on your accrual basis on your balance 
sheet. If you are still getting paid on a cash basis, there is 
money coming in.
    And so, that wouldn't cause a failure.
    But if it is not accrual because a customer is not paying 
and you are not getting the repayment on the loan, that will 
contribute to a failure, will contribute to problem loans.
    Mr. Westmoreland. Okay.
    So, you don't think the non-accrual aspect of a bank that 
had to put current loans in that category had anything to do 
with it?
    Ms. Eberley. I believe our Inspector General studied that 
and has provided the answer that was requested.
    But I--
    Mr. Westmoreland. Could you just share it with me right 
now?
    Ms. Eberley. I do not, and that was their conclusion as 
well.
    Mr. Westmoreland. Okay.
    Now, you mentioned, and Mr. Bland and Mr Fazio, that you 
were opposed to the bill that Mrs. Maloney and I have dropped. 
How do you make that opposition known?
    Ms. Eberley. I am not sure of the question.
    You asked a question and you had described--
    Mr. Westmoreland. Did you support or not support it?
    Ms. Eberley. Right, and you described the--
    Mr. Westmoreland. And you said no.
    Ms. Eberley. --two provisions, so the ombudsman to 
overturn--
    Mr. Westmoreland. Right.
    Ms. Eberley. --regulatory findings and also the not having 
to put loans on non-accrual.
    Mr. Westmoreland. So you don't think--
    Ms. Eberley. So those are two things that give us great 
concern as a regulator.
    Mr. Westmoreland. I know. But how would you go about making 
your opposition to it known?
    Would you go into Members' offices? Would you send a letter 
out?
    How do you make your opposition known, or do you just 
oppose and don't say anything?
    Ms. Eberley. No, sir, we answer your questions when you 
ask.
    And we will share our concerns. We are happy to try to work 
with you.
    Mr. Westmoreland. No, I know. But do you share that with 
with Members of Congress?
    Do you call them, or go into their office?
    Ms. Eberley. I do not personally, no.
    Mr. Westmoreland. Does anybody who works for you do that?
    Ms. Eberley. No.
    Mr. Bland. Representative Westmoreland, we have had a lot 
of discussions with Members of Congress and their staffs around 
this legislation with respect to the timeframes for exams, the 
ombudsman and our concerns about the non-accrual language. And 
so we would engage Members of Congress in this discussion--
    Mr. Westmoreland. So would you consider that a lobbying 
effort?
    Mr. Bland. No, we consider it being responsive to the 
question, like you asked today of whether or not we support it, 
and we express our concerns about what we think might be the 
unintended consequences of the law.
    So we engage in that discussion.
    Mr. Westmoreland. I appreciate you looking at unintended 
consequences, because the Administration has certainly caused a 
bunch of them.
    Mr. Fazio, how about you, how do you get your concerns out?
    Mr. Fazio. Similar to what Mr. Bland indicated, we have 
conversations with committee staff or your staff members. And 
in fact, oftentimes the staff reaches out to us for our input 
to try to identify unintended consequences or issues that the 
bill would create.
    Mr. Westmoreland. Okay.
    I am assuming that you don't agree with everything that 
comes out of Congress, and we certainly don't agree with all of 
your regulations, so I think it will be a fair fight.
    But again, thank you all for your patience, and I yield 
back.
    Chairman Neugebauer. I thank the gentleman, and I know the 
panel will be glad to hear that will be the last questioner.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Thanks for the excellent hearing.
    And thanks to all the panelists and thanks for your 
patience as--this is going to be the last round of questioning.
    I do want to just follow up a little bit, Ms. Eberley, with 
the comments and the feedback I am getting from these community 
banks supervised by the FDIC. And one of the common themes in 
addition to the compliance costs and the intrusiveness of some 
of the exams in terms of taking personnel off of the actual 
business of banking, which is lending, is the idea among 
particularly small, non-systemically important institutions in 
rural Kentucky that there is a trickle-down effect.
    There is a trickle-down effect with these regulations, 
where regulations that were maybe originally intended for 
large, systemically important financial institutions are being 
applied to smaller banks, often in the form of the examination 
process, where examiners are coming into the small bank, 
identifying those regulations as best practices, even 
regulations that specifically don't apply to the smaller 
institution, and yet because these are ``best practices,'' 
these small institutions with small compliance staffs are 
nonetheless being asked to comply with the larger standards.
    Can you comment on that?
    Ms. Eberley. Certainly. That would not be consistent with 
our policy.
    Mr. Barr. I know that has been your testimony all day 
today. It is not consistent with your policy. I heard that with 
respect to Congressman Rothfus' example as well. It is not 
consistent. And yet, we are hearing from our regulated 
constituent banks that it is in fact happening.
    Ms. Eberley. I would ask you to ask them to contact me.
    Mr. Barr. Okay. And I have heard that response as well.
    Just forgive me for my frustration, and I am sorry I appear 
frustrated, but here is the problem. What they tell me is they 
don't want to be identified. They don't want to be identified 
because they feel it is intimidating.
    And so when I say I am disappointed that you all don't want 
maybe even a version of the Westmoreland bill, which is a fair 
exam reform bill that would provide for independent review of 
your exams, the reason why that is necessary is because our 
institutions don't want to be identified because they fear 
retaliation, because there is not an independent review of your 
exams.
    So, do you have any sympathy for that concern, that if we 
do identify our banks to you, these banks who have concerns, 
that you will take a retaliatory approach?
    And there is no legitimate objective appeal. It is just a 
rubber stamp affirmation of the previous review by your 
examiner.
    Ms. Eberley. Examination findings have been overturned 
where they are incorrect. We absolutely do that in the appeals 
process.
    Mr. Barr. How often is that?
    Ms. Eberley. It is not frequent. There are not a lot of 
appeals that come forward in the formal process. Issues are 
generally resolved at the lowest level.
    Mr. Barr. Let me--
    Ms. Eberley. But we really--
    Mr. Barr. Okay.
    Ms. Eberley. --guard against the idea of the trickle-down 
with statements of applicability on all of our financial 
institution letters as to whether they are applicable to banks 
under a billion dollars. There is a review process for every 
report of examination to make sure it is consistent with our 
policy, so if that is happening, it is very troubling to me, 
and I really would want to talk to the institutions. It would 
be very helpful.
    Mr. Barr. We will continue to work on that.
    And I want to give the regulators--the OCC, the Fed, and 
FDIC--some credit because I heard in your testimony that you 
were interested in a longer examination cycle for highly-rated 
community banks.
    I have that provision in legislation I have introduced 
called the American Jobs and Community Revitalization Act. The 
proposal that I have would take it up to a billion dollars, so 
banks under a billion dollars in assets that are highly rated 
could move to that 18-month exam cycle.
    So, I appreciate the recognition that might be appropriate 
in the good area of agreement between those of us who want to 
see regulatory relief and the regulators, and I would encourage 
you to continue to take that position.
    Just really quickly, with the time remaining, let me turn 
to Mr. Silberman in indirect auto lending guidance. Was the 
Bureau's objective to change the behavior of many of these auto 
lenders?
    Mr. Silberman. No sir, the Bureau's objective was to allow 
the indirect auto lenders--I'm sorry, could you repeat the 
question?
    Mr. Barr. Yes, the question is, was the Bureau's objective 
in the guidance in the bulletin to change the behavior of auto 
lenders?
    Mr. Silberman. If we are talking about indirect auto 
lenders, the Bureau's objectives--
    Mr. Barr. Not dealers, lenders within your jurisdiction.
    Mr. Silberman. Yes. Indirect auto lenders. Right.
    So yes, the Bureau's objective was to let the indirect auto 
lenders know our understanding of the law so that when we came 
in--
    Mr. Barr. Why? Are you doing that so that you can change 
their behavior?
    Mr. Silberman. It depends on what their behavior is, sir.
    Mr. Barr. Okay. So if this is just a restatement of 
existing law--
    Mr. Silberman. Yes.
    Mr. Barr. --you are not trying to change behavior? If you 
are trying to change behavior, you are in violation of the 
Administrative Procedure Act (APA) because you are not doing 
this through notice-and-comment rulemaking. And I would submit 
that you have violated the APA on this, and I would encourage 
you to do a rulemaking on this.
    With that, I have run out of time, but I appreciate the 
chairman's indulgence.
    Chairman Neugebauer. And I am going to now renege a little 
bit. I am going to allow the gentleman from Wisconsin, Mr. 
Duffy, 2 minutes for the final question.
    Mr. Duffy. Ms. Eberley, you have indicated that you have 
reviewed the OGR report. I appreciate that. And I think you 
have seen a number of emails in there that are pretty damning 
to the FDIC, and they are targeting payday lending. One of 
them, from Thomas Dujenski, the regional director from Atlanta, 
as you have indicated, part of the senior team and who answers 
to you and to Chairman Gruenberg. In one of those emails, he 
says, ``I am pleased we are getting the banks out of payday bad 
practices. Another bank is griping, but we are going to be 
doing good things.''
    There are a number of emails in here that are very clear 
that top management at the FDIC is targeting payday lending, 
and some banks and ammunition manufacturers. You have seen that 
report. And then to come in here, when I have now provided you 
the documents that have come from the FDIC, and say, ``I had no 
idea that the FDIC was at a high level targeting payday 
lending; I am surprised by that.'' And I guess, I would like--
if you have seen these emails, and you now have the documents 
in front of you, do you still say this is not a senior 
management issue where we are targeting certain lines of 
industry through the FDIC?
    Ms. Eberley. The question that you had asked me previously 
was whether the FDIC included lists of prohibited customers--
    Mr. Duffy. I am asking you this question.
    Ms. Eberley. --in consent orders and MOUs. Neither of the 
documents that you have given me are FDIC documents. They are 
documents sent from financial institutions to the FDIC.
    Mr. Duffy. My question is--they are from regional 
directors.
    Ms. Eberley. No, they are to regional directors. They are 
letters from financial institutions.
    Mr. Duffy. So in regard to the emails and the exchanges 
that have been made by Mr. Dujenski from Atlanta in regard to 
payday lending, have you seen those?
    Ms. Eberley. Yes, I have.
    Mr. Duffy. And are you surprised by that, or did you give 
him that directive?
    Ms. Eberley. No, I was very surprised by that.
    Mr. Duffy. So what consequence happened to Mr. Dujenski? 
Was he fired?
    Ms. Eberley. Mr. Dujenski--
    Mr. Duffy. He was fired right?
    No? He retired with full benefits and full pay?
    Ms. Eberley. Yes. Mr. Dujenski is retired.
    Mr. Duffy. Mr. Lowe in Chicago, anything--any action taken 
with him?
    Ms. Eberley. If you are referring to the letter that Mr. 
Lowe issued, in response to that we issued a clarification to 
the industry to make sure that our policy was clear not just to 
the industry, but within our organization, and our Inspector 
General is investigating the--
    Mr. Duffy. So Mr. Lowe was unclear on that matter, then.
    Ms. Eberley. --totality of the matter, and I didn't--they 
will make a presentation of that at a Board level, and a 
decision will be made.
    Mr. Duffy. I yield back.
    Chairman Neugebauer. The time of the gentleman has expired.
    I would like to thank our witnesses for their testimony 
today.
    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 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, this hearing is adjourned.
    [Whereupon, at 1:05 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             April 23, 2015
                             
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