[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
FINANCIAL INDUSTRY REGULATION:
THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JUNE 13, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-99
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
31-475 PDF WASHINGTON : 2018
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
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannon McGahn, Staff Director
C O N T E N T S
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Page
Hearing held on:
June 13, 2018................................................ 1
Appendix:
June 13, 2018................................................ 53
WITNESSES
Wednesday, June 13, 2018
Otting, Hon. Joseph, Comptroller, Office of the Comptroller of
the Currency................................................... 4
APPENDIX
Prepared statements:
Otting, Hon. Joseph.......................................... 54
Additional Material Submitted for the Record
Otting, Hon. Joseph:
Written responses to questions for the record submitted by
Representative Beatty...................................... 81
Written responses to questions for the record submitted by
Representative Hultgren.................................... 85
Written responses to questions for the record submitted by
Representative McHenry..................................... 88
FINANCIAL INDUSTRY REGULATION:
THE OFFICE OF THE
COMPTROLLER OF THE CURRENCY
----------
Wednesday, June 13, 2018
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:05 a.m., in
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling
[chairman of the committee] presiding.
Present: Representatives Hensarling, Royce, Lucas, Posey,
Luetkemeyer, Huizenga, Duffy, Stivers, Hultgren, Ross,
Pittenger, Wagner, Barr, Rothfus, Tipton, Williams, Poliquin,
Love, Hill, Emmer, Zeldin, Trott, Loudermilk, Davidson, Budd,
Kustoff, Tenney, Waters, Maloney, Velazquez, Sherman, Meeks,
Capuano, Lynch, Scott, Green, Cleaver, Perlmutter, Foster,
Kildee, Delaney, Sinema, Vargas, Gottheimer, Gonzalez, Crist,
and Kihuen.
Chairman Hensarling. The committee will come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time. And all members will have
5 legislative days within which to submit extraneous materials
to the Chair for inclusion in the record.
The hearing today is entitled, ``Financial Industry
Regulation: The Office of the Comptroller of the Currency.'' I
now recognize myself for 3-1/2 minutes to give an opening
statement.
So today, we will welcome Joseph Otting, the 31st
Comptroller of the Currency, who took his office approximately
7 months ago. We will welcome him for our first appearance
before the committee.
What a difference 17 months make in the life of the Nation,
and what a difference public policy makes. Working together
with the Administration, this Congress has made a huge
difference and perhaps produced the most booming economy in
many people's lives.
Unemployment now is recorded at the lowest in a generation,
tied for the lowest in almost a half a century. Also, African-
American unemployment is the lowest on record, the lowest on
record, and the gap has narrowed. Last month, there were
actually more job openings than there were unemployed. The
first time since recordkeeping began in the year 2000 that that
has occurred. After years and years and years of press reports
that unemployed people are seeking factories, we now have press
reports that factories are struggling to find workers instead.
We have reports of robust wage growth as well, the best
wage growth in 11 years. And in the last wage report, 49 of 50
States had positive wage growth.
The National Federation of Independent Businesses said the
highest number of businesses are increasing worker pay that
they have ever recorded in their survey. The University of
Michigan reports that consumer confidence is at the highest
level in 14 years. And even, even The New York Times has had to
admit, quote, ``The economy is humming.''
Again, this did not happen by accident. It is a result of
the Tax Cuts and Jobs Act and the effort, particularly of the
Administration and our banking regulators, to right-size
regulation, to properly calibrate regulation, to ensure that it
is working for working people, because all regulation,
regardless of its intent, regardless of its purpose, can
ultimately have a cost on access and cost, cost to credit of
hardworking Americans.
And so it is an incredible achievement that once again we
are seeing average 3 percent economic growth. And that is so
important because when one looks at the data, one sees that in
American history the greatest employment, probably almost 80
percent of job gains, of income gains, of poverty reduction
take place in 3 percent growth years. And so how wonderful it
is to have regulators who are committed to growth in our
economy.
And so, again, the greatest boost to our economy is not a
government economic stimulus plan, it is not quantitative
easing, but it is business confidence that comes from good
public policy and smart regulatory efforts.
So I look forward to hearing from our witness. I know that
he has been quite active on a number of fronts, including
fintech charters and Volcker and BSA (Bank Secrecy Act) and AML
(Anti-Money Laundering). I look forward to getting into all of
that and seeing what is it we can do to make sure that 3
percent economic growth continues for all working Americans.
The Chair now recognizes the Ranking Member of the
committee, the gentlelady from California, for 5 minutes for an
opening statement.
Ms. Waters. Thank you, Mr. Chairman.
I am looking forward to hearing Comptroller Otting's
testimony and asking him about his activities at and plans for
the Office of the Comptroller of the Currency (OCC).
Mr. Chairman, I believe that Congress has a responsibility
to ensure that our economy and laws work fairly for everyone.
And yet at a time when banks are posting record profits, the
Trump Administration and its allies in Congress have taken
banking regulation in this country in the wrong direction.
Last month, congressional Republicans pushed through S.
2155. The legislation was championed and signed into law by
Donald Trump, who made an early promise to, quote, ``do a big
number,'' unquote, on Dodd-Frank.
S. 2155 rolled back protections Democrats put in place
following the 2008 financial crisis to strengthen oversight of
Wall Street and ensure that risky activities do not bring down
the economy again.
Since taking office, the Trump Administration has
consistently taken actions that hurt Main Street and benefit
Wall Street. Mick Mulvaney, who was illegally installed, is
Acting Director of the Consumer Financial Protection Bureau
(CFPB) by Trump, is hard at work weakening the agency from the
inside. His latest act of anticonsumer aggression was to fire
all 25 members of the Consumer Bureau's Consumer Advisory Board
and then to insult them on their way out the door.
It is in this context that we have Comptroller Otting here
before us today, testifying here for the first time. The
American public has the right to know if he plans to follow in
the deregulatory and anticonsumer footsteps of this
Administration.
I am particularly interested in hearing his perspectives on
the direction in which he will guide the OCC on three important
issues: The Community Reinvestment Act; the opening of
fraudulent accounts by our Nation's banks; and the regulation
of the fintech industry.
It has been widely reported that the Federal banking
agencies, including the OCC, plan to update their
implementation of the Community Reinvestment Act, that is CRA.
I agree that the CRA could benefit from modernization to
reflect the changing bank landscape which now includes online
banking, which is not solely based on brick and mortar bank
branches, but any modernization process must not be focused on
making CRA exams easier for banks. Ninety-nine percent of banks
already receive a passing grade from regulators on their exams.
Rather, any update to the implementation of the law must be
focused on ensuring that banks are responsibly meeting the
credit needs of their communities.
A recent report by Reveal news found modern day redlining,
the discriminatory practice where minority communities are
denied mortgage loans and have less access to credit across 61
metropolitan areas in our country. That is unacceptable.
So it is absolutely critical that the CRA, which was
designed to combat redlining, is not weakened to let banks off
the hook from their obligations.
I am also very concerned regarding reports that the OCC has
found that more banks open accounts without the consent of
their customers in a review conducted following Wells Fargo's
egregious fraudulent account scandal. I am looking forward to
hearing from Comptroller Otting today on the details of the
OCC's findings on this subject and their plans to prevent such
practices moving forward.
I would also like to hear the Comptroller's views on
fintech and the way their technology is rapidly changing the
banking landscape, and how the OCC is responding as Americans
are banking and accessing credit in new ways in this market. It
is important that we encourage responsible innovation and,
also, that we ensure that fintech companies are providing
credit fairly to all communities.
I yield back the balance of my time.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Missouri, Mr.
Luetkemeyer, Chair of our Financial Institutions Subcommittee
for 1-1/2 minutes.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Comptroller Otting, thank you very much for joining us
today. And I certainly can't tell you how great it is to have
somebody that actually has banking experience running the OCC.
Welcome.
As a former banker and bank examiner, I felt incredible
frustration over the last 8 years. We experienced failed
economic policies that led to the slowest recovery in the
modern era and a regulatory pendulum that swung too far after
the financial crisis. Our financial system needs stability. It
needs rigorous supervision, but it also needs certainty.
Institutions need clear rules of the road.
Despite a recent financial renaissance and changes at the
most senior levels of government, I remain concerned that there
are legacy supervisory issues that need to be addressed. That
is particularly true when we look at the troubling trend of de-
risking, which is still an issue I hear about on a near weekly
basis. I urge you to take steps to ensure that the decisions
you make are clearly communicated to the field, and that OCC
examiners use their positions to promote safety and soundness
in our financial system and not to advance any sort of
political agenda. With your leadership and experience, I am
confident that we will be witness to a more effective and
responsible supervisory regime, one that upholds rule of law
rather than thumbing its nose at it.
My colleagues and I thank you for being here today and for
taking on this responsibility. Look forward to your testimony.
With that, Mr. Chairman, I yield back the balance of my
time.
Chairman Hensarling. The gentleman yields back.
Today we welcome the testimony of the Honorable Joseph M.
Otting, Comptroller of the Currency. Again, this is the first
time that Mr. Otting has appeared before this committee as he
was sworn in, again, as the 31st Comptroller of the Currency on
November 27 of last year. Mr. Otting holds a bachelor of arts
in management from the University of Northern Iowa and is a
graduate from the School of Credit and Financial Management,
which was held at Dartmouth College in New Hampshire.
Mr. Otting brings to the job a wealth of banking
experience. Prior to becoming Comptroller, Mr. Otting was,
again, a long-time executive in the banking industry. He served
as president of CIT Bank and copresident of CIT Group from
August 2015 to December 2015. He also was president, chief
executive officer, and a member of the board of directors of
OneWest Bank.
Without objection, the witness' written statement will be
made part of the record.
Mr. Otting, you are now recognized for 5 minutes to give an
oral presentation of your testimony. And again, welcome to the
committee.
STATEMENT OF JOSEPH OTTING
Mr. Otting. Thank you very much.
Good morning, everybody. Chairman Hensarling, Ranking
Member Waters, and members of the committee, thank you for the
opportunity to share my priorities as Comptroller of the
Currency and my views on reducing unnecessarily regulatory
burden and promoting economic growth.
The Office of the Comptroller of the Currency's mission is
to ensure our Federal banking system operates in a safe and
sound manner, provides fair access, treats their customers
fairly, and complies with applicable laws and regulations. We
accomplish that mission and rationalize our regulatory
framework so that the system creates more jobs and economic
opportunity.
My written testimony details the conditions of the Federal
banking system, risks facing that system, and my priorities.
These priorities include modernizing the Community Reinvestment
Act to increase lending, investment, and financial education to
where it is needed most. And encouraging banks to meet short-
term, small-dollar credit needs to provide consumers with
additional safe, affordable credit choices.
My priorities also include enhancing the Bank Secrecy Act,
and any anti-money laundering compliance so that banks can
provide a more effective means to support law enforcement and
comply with statutory and regulatory requirements more
efficiently. I also support simplifying regulatory capital
requirements, recalibrating the Volcker Rule, and ensuring that
agencies operate effectively and officially.
Today, I also want to discuss the importance and quality of
the work accomplished at the OCC. Since becoming Comptroller, I
have been struck by the professionalism and caliber of the
agency staff. The agency's 4,000 employees serve our Nation by
performing the important task of supervising more than 1,300
national banks, Federal savings associations, and Federal
branches of foreign banks. While the vast majority of
institutions we oversee are small community banks, the system
also includes the largest, most globally active banks in our
country. Successful supervision requires a corps of
professionals supported by lawyers, economists, information
technology specialists, policy experts, and many others.
Few Americans know the OCC, but the majority of them have a
relationship with at least one of the banks we supervise. It is
not an overstatement to say our Nation's banking system is the
most respected in the world due, in large part, to the quality
of the supervision the OCC provides.
The OCC is unique among Federal banking regulators. It is
the sole regulator exclusively dedicated to prudential
supervision. Undistracted by multiple mandates, we have a laser
focus on bank safety, soundness, and compliance. The agency
takes a risk-based approach to supervision, tailoring its
oversight to the risk and business models of each individual
bank. At the same time, its broad national perspective provides
value in identifying the risks and concerns that may face
similar banks or the broader system. Our risk-based approach
allows us to adapt the economic opportunity and continue core
safeguards necessary to protect the safety and soundness of our
financial system and prevent consumer abuse.
I am fully committed to implementing the changes in the law
as quickly as possible. I will work with my fellow regulators
on a collaborative interagency basis where appropriate. Where
existing rules may conflict with the Economic Growth Act, where
the statute provides transition periods or where the law
requires agency rulemaking for implementation, the OCC plans to
supervise institutions consistent with the intent of the law,
including with respect to amendments to these stress testing
requirements and will not enforce requirements on banks that
the bill intends to eliminate.
As a bank executive, I relied heavily on the judgment,
expertise, and counsel of the OCC examiners. They helped me
identify issues and address them effectively before the
concerns turned into serious problems. I felt the OCC examiners
understood what we as bankers were trying to achieve, and we
worked to meet the financial needs of our customers. I slept
better knowing that the OCC supervised my bank, and you can
sleep better knowing that the men and women of the OCC are on
the job overseeing the national banking system.
In closing, I want to congratulate you, Chairman
Hensarling, on your leadership of this committee. And thank you
again for allowing me to share my perspective as Comptroller. I
look forward to answering your questions.
[The prepared statement of Mr. Otting can be found on page
54 of the Appendix.]
Chairman Hensarling. Thank you.
The Chair now yields himself 5 minutes for questions.
So, Mr. Otting, we all know, prior to your tenure, Wells
Fargo ripped off far too many people for far too long a period
of time. The OCC launched a horizontal review of all retail
banks' sales practices after the Wells Fargo scandal. And by
the way, I hope and believe the new Wells Fargo management is
still in the process of cleaning up prior messes.
But the question has occurred, what has happened on this
horizontal review? How extensive was it? There hasn't been a
public report. Some press reports. So my question is, how
extensive has the review been? How long did it take? How many
banks were examined? And what are the takeaways from that? And
what can be presented to the public? And what is still part of
a confidential supervisory matter? If you would please comment
on this.
Mr. Otting. Thank you very much for the question. In 2016,
the OCC launched a horizontal review. We concluded that
examination in the fourth quarter of 2017. More than 40
national banks were involved in the lookback. We looked at the
new account opening activities in the following areas:
Mortgages, auto, credit card, checking, savings, and money
market.
This lookback was a 3-year period that included hundreds of
millions of new accounts each year, which, on a 3-year basis,
probably was somewhere between 500 and 600 million accounts. We
concluded that, as I said, in the fourth quarter.
On June 4, we sent letters to the banks' CEOs wrapping up
the horizontal review. On June 11, we sent letters to the
Chairman and Ranking Members of the House and Senate Banking
Committees to provide you an overview. I am here to report
today that we did not find pervasive or systemic issues in
regards to improper account openings. We did find the needs for
banks to improve their policies, procedures, and controls.
With this, we issued 252 matters requiring attention
(MRAs). And 20 percent of those have been closed, with the
remaining being under supervisory review.
Through this entire process, we found less than 20,000
accounts, out of the hundreds and hundreds of activities of
opening of new accounts, with less than half of that 20,000
being due to unauthorized account openings.
So we feel that this report is conclusive. We feel there
are ways for banks to improve their policies, procedures, and
controls. But at no point in time did we find pervasive or
systemic items associated with this review.
Chairman Hensarling. So, Mr. Otting, how long did the
review take?
Mr. Otting. The review took, roughly, 18 months.
Chairman Hensarling. It took 18 months. And how many
personnel were involved? How would we look upon--how extensive
was this review?
Mr. Otting. I couldn't give you the exact number in the
agency, but it was the number one issue over the last 18 months
that we took most of our examination staff to focus on.
Chairman Hensarling. And did I understand you to say that
there are roughly 500 to 600 million bank accounts within the
Federal banking system?
Mr. Otting. No. Those are the accounts that have been
opened over the last 3 years.
Chairman Hensarling. Just opened over the last 3 years?
Mr. Otting. That is correct.
Chairman Hensarling. And you--out of that universe, this
horizontal review found roughly 20,000 questionable?
Mr. Otting. We found 20,000 accounts that we felt half of
those were due to unauthorized account openings. The point that
I would make here is that, as we have gone in, we didn't find
good, documented policies and procedures associated with the
account openings. And so the core takeaway from this is that
banks are working on these issues through the MRAs. And matters
requiring attention are very consistent in the industry when we
go in and examine and if they are not up to a certain standard,
then we will issue an MRA. And the key takeaway here is that we
are asking banks to improve their policies, procedures, and
controls around account openings.
Chairman Hensarling. Thank you, Mr. Comptroller. As you
well know, on May 24, right before Memorial Day, the President
signed into law the Economic Growth, Regulatory Relief, and
Consumer Protection Act, which was a bipartisan bill in both
the House and the Senate, largely viewed as the most pro-growth
banking bill in a generation since Gramm-Leach-Bliley. But it
does direct the OCC and other Federal regulators to change its
rules undertake rulemakings.
Can you outline the schedule to implement this law?
Mr. Otting. Yes. We have quickly assembled resources within
the OCC, and we are looking at the legislation from three
particular ways. One is what can we quickly implement. The
second bucket is what requires a rule for us to write. And the
third is what will require coordination amongst the Federal
agencies.
And so I would tell you that we are actively on it right
now trying to create critical paths to accomplishment, but it
is receiving the highest priority in the agency.
Chairman Hensarling. That is what I like to hear, Mr.
Comptroller. Otherwise, my time has expired.
The Chair now recognizes the gentlelady from New York, Mrs.
Maloney, Ranking Member of our Capital Market Subcommittee for
5 minutes.
Mrs. Maloney. Thank you, Mr. Chairman.
Comptroller Otting, I would like to ask you about the
horizontal review of banks' sales practices that you conducted
in the wake of the Wells Fargo fake accounts scandal. You said
in your letter that you sent on Monday that this review
included more than 40 banks. And you said that the review
identified a staggering 250 deficiencies that required the OCC
to issue matters requiring attention to the banks on review.
That is an average of over six matters requiring attention per
bank.
So my question is, did you find problems at every one of
the banks included in the review?
Mr. Otting. Ma'am, what I would say to you is, first of
all, I don't view it as staggering, using that word.
Mrs. Maloney. Just answer my question, please. My time is
very limited.
Mr. Otting. I know 250 out of 4,000 MRAs that are currently
active in the industry. When we observed--
Mrs. Maloney. Did you find something in every single bank?
Mr. Otting. I don't have the details of that in front of
me.
Mrs. Maloney. OK. How many of those 40 banks had problems
that you identified?
Mr. Otting. When we issue an MRA, it is an item that we ask
people to take specific action, and we give that to them in
writing.
Mrs. Maloney. OK. So let me follow up on that. If you found
over 250 problems at just 40 banks in your review, doesn't that
suggest that you should expand the review to all banks
supervised by the OCC now that you have identified such
widespread problems?
Mr. Otting. You continue to use the word ``problem.'' And I
would say that we--
Mrs. Maloney. I would say opening up--I would say opening
up bank accounts is a problem. I would say that is a big
problem to consumers.
Mr. Otting. But you are correlating the MRA with opening
accounts and I think that is a false way to look at it.
Mrs. Maloney. Well, your letter indicated that you did in
fact find individual banks that had opened accounts for
customers without their consent. That is what Wells Fargo did.
They opened fake accounts for their customers.
So let me ask you, have you taken any public enforcement
actions as a result of your review of sales practices?
Mr. Otting. We have not taken a public--these are
confidential supervisory activities that we have in place that
we will track adherence with the MRA activities.
Mrs. Maloney. So let me get this straight. Your examiners
found evidence that there were banks that had opened accounts
for customers without their consent, and you decided not to
take any public enforcement actions against them, instead gave
them a warning. I have to say I find that deeply disturbing,
especially in light of the Wells Fargo scandal, but let's move
on.
You said that your agency's going to make a decision soon
about whether to allow financial technology firms to obtain a
special national charter. As you know, the so-called fintech
charter that your predecessor proposed would have allowed
fintech companies to operate with a national charter, without
being subject to the same regulations and supervisory regime
that banks are subjected to. And this was concerning to many of
us on this committee. I was also very concerned about
preempting all the State laws for fintech companies which the
OCC's proposal would do.
If your agency moves forward with a fintech charter, will
fintech companies be subjected to the same supervision and
regulation of banks?
Mr. Otting. They would be subject to the same supervision
of national banks.
Mrs. Maloney. But not Federal banks. It would be--it would
have the same supervision.
Mr. Otting. That is correct.
Mrs. Maloney. All right. Thank you.
I yield back.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Missouri, Mr.
Luetkemeyer, Chairman of our Financial Institutions
Subcommittee.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Mr. Otting, I read both your testimony and the OCC bulletin
on short-term, small-dollar installment loans. Quite frankly, I
am left a little bit puzzled over some of the language you
used, specifically by your mention of applicability of State
laws. I read this to infer that the OCC is retreating from
strong preemption, which would be a major shift in policy.
Can you please clarify your position and the position of
your agency?
Mr. Otting. Yes. We are not retreating from preemption. It
wasn't intended to confer that we would require national banks
to adhere to the interest rates of each individual State, but
the interest rate to which they are headquartered.
Mr. Luetkemeyer. OK. So you are basically saying that you
still have preemption, but you're saying that there are, in
certain instances, State laws that are applicable that would
still be there?
Mr. Otting. Well, no, the State laws are applicable to
interest rates based upon where the banks are headquartered. So
that is the concept. And if we misinterpreted that in either
our bulletin or letter, we would happily provide clarification
to that.
Mr. Luetkemeyer. OK. I was certainly concerned about the
way I read that, but I appreciate your clarification.
OK. With regards to another issue, I sent to you this
morning a letter that outlined my concerns over guidance being
treated by examiners as treating binding obligations on
financial institutions. Essentially, examiners are treating
guidance as rule without subjecting anything to the process
outlined in the congressional review process.
Are you willing to communicate your--to your exam force
that, in the words of Federal Reserve Chairman J. Powell and
Vice Chairman Randy Quarles, rules are rules and guidance is
guidance?
Mr. Otting. Not only would I be willing to do that, I have
done that since I have been at the agency. We have issued memos
within the agency to make sure that all examiners are aware of
that. And so I am fully supportive. The agency issues Q&A and
guidance from time to time internally, and our people clearly
recognize that, as you said, rules are rules and guidance is
guidance.
Mr. Luetkemeyer. One of the concerns is, as you well know,
especially happened at the CPB during Director Cordray's reign,
that we would have guidance and then enforce that and wound up
being your rule of law out of that. And so I think it is
important that if you can do this when you are trying to
explain the guidance is guidance, also have in there something
that would really clarify to the banks that this is guidance,
and if you decide not to adhere to the guidance or to vary from
that, there will be no punitive action taken, because I think
that is a real concern of the financial industry from the
standpoint of how things have been done in the past. So that
would be a great clarification and an added addition to put
with your guidance.
Mr. Otting. Right. We will take that under advisement. I
know you made that recommendation.
Mr. Luetkemeyer. Thank you very much.
Also, Chairman Pearce and I have a piece of legislation
that is getting ready to--that we have been working on here to
modernize BSA/AML, and you have outlined in your testimony a
need for some reforms. Can you elaborate on why you think
modernization of BSA/AML is necessary?
Mr. Otting. Yes, I would. First of all, I would say,
everybody would not want bad money and bad people to take those
items into the banking system, and so we have designed the
system today with BSA/AML which is very labor intensive, very
paper intensive. We produce 10 million pieces of paperwork in
the national banks today, and I am not sure all that effort is
really getting to our ability to catch those bad people. And so
I think that we have made 14 recommendations to FinCEN
(Financial Crimes Enforcement Network).
There is an interagency group of people trying to work to
aleve some of the overregulatory burden on banks. I know you
have some in your bill that we are supportive of. And we think
a collective effort can hopefully allow us to move to a spot
where we can be better at detecting bad activity while
lessening the burden to financial institutions.
Mr. Luetkemeyer. Now, as I have talked to a lot of banks
about this, what their CTRs (currency transaction reports) and
SARs (suscpicious activity reports), they are literally,
literally giving millions and millions of documents to FinCEN.
And it takes thousands, literally thousands of people to
prepare those documents. And so if you think about it a little
bit, it is going to take thousands of people to actually look
at those documents. So it begs the question are they even
looked at? Are they even reviewed?
So if they are spending all this money and all this time in
having all these people do this, there has to be some sort of
benefit from it, and I really don't see that at this point. So
this is one of the reasons we are working on this.
And also, beneficial ownership is a very controversial part
of this. Can you explain a little bit, if you think that there
is a--do you have a plan to change the definition or to give
some sort of delay before implementing--it has been
implemented.
Mr. Otting. On beneficial ownership, I think it has its
merits. I think the issue of having that data readily available
is very problematic for the banking industry, and I think we
are going to have to work through those issues.
Mr. Luetkemeyer. Thank you.
I see my time is up. I yield back. Thank you, Mr. Chairman.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from New York, Mr.
Meeks.
Mr. Meeks. Thank you, Mr. Chairman.
Mr. Comptroller, I am somewhat favorable of fintechs. I
think that they could be some good into--availability into
communities of color, et cetera. And I am glad that the OCC
recently came out with strong language against abusive
charters' schemes there. The sole goal is to evade State law.
And I share your views that bank fintech partnerships--as I
said, there are benefits, but there still seems to be some
legal uncertainty on the difference between legitimate
partnerships and sham relationships.
So what I want to know is what is your opinion on the
difference between the two? And will the OCC come out with
guidance, specific guidance to clearly distinguish between true
partnerships and rent-a-charter schemes? Because to me, if we
don't--the bad can hurt the good and the potential that I think
fintech has. So can you give us an indication of how you see it
and what the OCC's role will be?
Mr. Otting. Yes. Congressman Meeks, I appreciate your
interest in this. I was in your office and we had a chance to
discuss this. I think this is an important part of the
evolution of banking in America today.
I would add a third equation to your point, which is how
vendors are coming in and helping financial institutions to
reach more customers. As a general rule, we have looked--when
you say bad or sham or people ridding the charter, we generally
looked at financial institutions, where they are actually using
their underwriting and putting those loans on their books? We
don't view someone who can channel or referral those
opportunities to the bank as a sham, but we definitely hold the
banks responsible as to evaluate those relationships, make sure
customers are being treated fairly.
I think where most of the activity in the future will be
into where they will use those people as vendors, where they
have a great portal or a great way to reach customers and the
bank has a desire to achieve those customers, and then we will
hold those financial institutions to their vendor standards.
Mr. Meeks. So will you come out with some clear guidance?
That is what I think it needs. If the OCC would come out with
some clear guidance that individuals can understand and see,
and then we would be able to really determine shams from
nonshams. So do you think you will come out with some actual
language?
Mr. Otting. We actually talked about this yesterday at the
agency, there were 20-some people around the room. And it was
an area we spent a lot of dialog. We would be happy to involve
your staff. I think it is something that will be needed. And we
would be happy to come out with some thoughts on what is a true
vendor relationship, what is a true relationship. And we would
welcome you and your staff's input on that.
Mr. Meeks. I look forward to working with that, because I
think that is absolutely key and essential. The potential is
there, but it can easily be destroyed if it goes the wrong way,
and I think guidance will help that.
You also talked about and I am interested in CRA and the
role that fair lending should play in CRA examinations. And as
you know, and I will try to do this real quickly, there are
basically like three thoughts. One interpretation is that fair
lending violations should always impact the CRA rating. Another
one is that fair lending reviews are sometimes relevant to CRA
examinations. And the third, of course, is that CRA
examinations are completely separate and have no difference on
each other.
I know where I am. Where are you?
Mr. Otting. I am probably somewhere in the middle. As you
know, CRA never included fair lending components. It is the
bank serving the community--the entire community in which they
operate, with a general emphasis today on low- to moderate-
income communities. But I don't see how a bank personally who
is not doing fair lending can't have some impact.
Mr. Meeks. Because it is important to note that one of the
founding reasons when CRA was enacted was because of redlining.
Mr. Otting. Right.
Mr. Meeks. And they unfair--cutting out districts and,
therefore, it was not fair lending. So that, to me, should be
very much a part of one CRA ratings. Because if there is
discrimination going on, that is a problem. And CRA is supposed
to be--help to be inclusive therein. Correct?
Mr. Otting. Right.
Mr. Meeks. So I would hope that we look at that very, very,
very closely. Well, I don't think I have time for another
question because there is somebody over there that is going to
bang a gavel on me and you won't have time to answer.
So I yield back.
Chairman Hensarling. The gentleman yields back his 3
seconds.
The Chair now recognizes the gentleman from Michigan, Mr.
Huizenga, the Chairman of our Capital Market Subcommittee.
Mr. Huizenga. Thank you.
Comptroller, we appreciate you being here. I am going to
move quickly because I have a number of things.
Just first and foremost, is increasing liquidity in the
markets important?
Mr. Otting. Absolutely.
Mr. Huizenga. And has the Volcker Rule, as it sits today,
impaired that liquidity, especially in times of stress?
Mr. Otting. I don't think we have been in a time of stress
to be able to test that, to be honest with you.
Mr. Huizenga. But as you look forward to it, this
concentration, is that a possibility there?
Mr. Otting. It could have the potential.
Mr. Huizenga. OK. So to be clear, have important market-
making functions being unacceptably chilling--or chilled by how
the Volcker Rule has been both drafted and implemented?
Mr. Otting. I don't believe so.
Mr. Huizenga. OK. Now, the OCC and other regulators tasked
with the Volcker Rule implementation have proposed some
changes, while still implementing section 619 of the Volcker
Rule. I think you had used the word you support recalibrating
the Volcker Rule. And I am curious, how do these reforms
clarify or streamline or encourage more efficiencies in market
places?
Mr. Otting. So in our notice of proposed rulemaking, which
I am sure you have seen, we had taken the under $10 billion and
fragmented between $1 billion and less and made assumed
compliance. In $1 to $10 billion, we said if there was $25
billion or less, and over $10 billion, we would go to
accounting methodology for that. And what I meant by that is,
is we can look at the accounting methodology to look at
individual trades to see if there was proprietary trading, that
brings great clarity both, I think, to the financial
institutions and the examiners. Because of where we have been,
we haven't been able to issue, I think, good examination
guidelines on how to provide overview to proprietary trading.
Mr. Huizenga. OK. While we are on that, though, under the
current regulatory framework, Volcker-affected entities might
encounter Volcker-related examinations from multiple regulators
such as yourself who have different legal supervision and
enforcement regimes and who might not, frankly, traditionally
regulate them. And this committee has heard instances of
Volcker-affected entities receiving conflicting guidance from
multiple regulators on this. And does a regulatory framework
that results in industry participants not knowing which
regulators to listen to in order to even comply? You are
talking about bringing clarity, but we still have this alphabet
soup of regulators that are out there at times giving
conflicting direction, correct?
Mr. Otting. I think that has been the case. And I think it
was, I would say, a pretty remarkable task in a short period of
time that we were able to bring the five agencies together and
agree on a path forward. And I would hope in the future that
would eliminate the situation that you are describing.
Mr. Huizenga. Well, I think it has to.
Mr. Otting. I would agree.
Mr. Huizenga. Has that been a goal, is to harmonize?
Mr. Otting. Yes.
Mr. Huizenga. How have you been doing that?
Mr. Otting. Well, I think it starts with that we all agree
now what the rules should look like. And we sent that out for
comments, if we can implement that with the provisions of the
Economic Act. I think that will create that harmonization.
Mr. Huizenga. OK. Would the regulatory framework be simpler
if the primary regulator for Volcker-affected entities was
charged with examining the entities' compliance with the
Volcker Rule?
Mr. Otting. It would, but I think the problem you have is
really between the Fed and the OCC. We split evenly those
activities. So I think if you said--
Mr. Huizenga. Are you kindly saying it is a bit of a turf
war?
Mr. Otting. No, it is not a turf war at all.
Mr. Huizenga. OK.
Mr. Otting. It is like where those activities are within
that financial institution. Some entities do it in the bank,
some do it in the holding company, and so it is split evenly.
So if you ask my recommendation, I would suggest that the Fed
and the OCC, where most of that activity is domiciled, could
partner to provide the rules or the feedback.
Mr. Huizenga. So let me pursue this, because this is where
the rubber hits the road. How are you working with the Fed then
to do that?
Mr. Otting. We have an excellent relationship. Randy
Quarles has been an incredible partner since he has been put in
that role.
Mr. Huizenga. And you are meeting regularly?
Mr. Otting. We meet every week, the FDIC (Federal Deposit
Insurance Corporation), Randy Quarles, and myself are on a
conference call, and once a month we meet for lunch. And any
issues amongst the regulatory agencies are discussed. There is
an open forum.
Mr. Huizenga. Well, I want to encourage that. And anything
that we can do to make sure that that happens. Because,
frankly, this committee needs to look at what those next steps
are to make sure that that harmonization is happening. And
whether it is taken care of in-house with yourselves or whether
we need to be involved in that, it will happen. So thank you.
I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the Ranking Member for 5 minutes.
Ms. Waters. Thank you very much.
President Trump supported both the Volcker Rule and
reimposing Glass-Steagall on the campaign trail, but the
Administration has quickly backed away from those positions and
is now pursuing Wall Street's agenda to roll back the Volcker
Rule.
Do you support the Volcker Rule's prohibition on
proprietary trading so that banks that benefit from the Federal
safety net do not gamble with deposits? And additionally, why
did the OCC join with our regulators to propose a major
overhaul to basically undermine the Volcker Rule, making life
easy for very profitable Wall Street banks and opening the door
to risky trading practices?
Mr. Otting. I do support the Volcker Rule. I don't think
our actions open the door to risky trading. I think it brought
clarity to what was defined in the ability to measure and
monitor activities within the banks.
Ms. Waters. When we debated a recent piece of legislation,
I think there was some talk about the community banks and the
fact that community banks were being penalized in some way
because they had to, basically, follow the rules of the bigger
banks as it relates to Volcker.
Do you have some discussion on that? Because my
understanding, of course, is that the community banks were not
involved in the kind of trading that they would have to be
concerned about the Volcker Rule.
Mr. Otting. Yes. So in the notice for proposed rulemaking,
we put out--before the economic act was approved, we assume
compliance for all financial institutions $1 billion or below,
and between $1 billion and $10 billion we excluded those that
had net earnings on trading of $25 million or below. So it was
our viewpoint, we agree with you, I am not aware of any small
community bank that is active in proprietary trading.
Ms. Waters. In addition to that, I would like to get your
take on the fintech. I don't know, since I have been gone,
whether or not some other people have talked about it. We have
met with some of the leaders in the fintech community trying to
understand exactly how they see going forward and what they
understand about the expectations from OCC and Members of
Congress. Have you been--gotten deeply involved with fintech
and what your predecessor was attempting to do prior to
leaving?
Mr. Otting. I have been directly involved. We publicly said
that in July we will make a decision about whether we will
accept applications for fintech.
But if I could just take 10 seconds of your time, the world
has changed dramatically over the last 2 years since
Comptroller Curry went out. Fintechs used to think that they
wanted to be banks, and now, most are realizing, because of the
capital liquidity and commitment to the community they have to
provide, they really don't want to be--most don't want to be
banks anymore, but they want to be providers of services to
banks. And so we see more and more coming in and talking to us
about how they partner with banks to be able to provide portals
and things where they can reach customers.
So while some will still want to be banks, more and more
are moving toward saying, I want to be partner with banks and
offer our services.
Ms. Waters. So this participation with banks that you are
alluding to, how would they see that working?
Mr. Otting. Well, the fintechs have great portals or ways
that they can approach certain communities. Generally, credit
is a big driver of that, that they think they can help banks
reach into communities, and then they will use that to funnel
opportunities to the financial institutions. And generally, the
fintechs didn't have the capital and liquidity to be able to do
that.
And so what you are finding is a lot of small banks don't
have that technology tool. And the analogy I would use, in the
1960's and 1970's, most banks used to do their own data
processing and have their own computers, and now, they
outsource that. And so the interior parts of banks are being
done by large FIS (financial information servicers) and various
others--I think you are going to see the next evolution is
where banks will use various fintechs to help them approach the
marketplace to get customers.
Ms. Waters. Thank you very much. And I yield back the
balance of my time.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Wisconsin, Mr.
Duffy, Chairman of our Housing and Insurance Subcommittee.
Mr. Duffy. Thank you, Mr. Chairman.
And, Mr. Otting, welcome to the Financial Services
Committee. I am back here on the back row if you can't find me;
only one, besides the Chairman, back here on our side.
I want to talk about small-dollar lending. I think this
happens all across America, but especially in rural America,
people come into hard times. And in times of need, if you don't
have a relative to borrow money from or if they don't have a
knee-breaking Vinny down the street, they are in tough shape.
And I know you put out a bulletin encouraging banks to make
responsible short-term, small-dollar loans that are amortized
in equal payments. I commend you for that. And I know that you
recognize this, but 63 percent of Americans don't have enough
in their savings account to cover a $500 emergency expense. So
making sure that Americans have access in times of need is
incredibly important.
There weren't a lot of specifics, though, on your bulletin.
Do you anticipate that you are going to provide guidance in
regard to the bulletin?
Mr. Otting. We do not plan to issue guidance. It was our
intention to signal to financial institutions that we are
supportive of them entering that space. Most of them design
products, and then we will, through our examination process,
determine that what they are doing is fair and safe. So we have
given the latitude of financial institutions to enter that
space with indications that--
Mr. Duffy. If it is not fair and safe, then what happens?
Mr. Otting. Then we would examine that and make a
determination if consumers are--
Mr. Duffy. Doesn't it make sense to give them some
guidance, though? Doesn't it make sense to offer guidance,
instead of saying, listen, we want you to do it, but if you do
it wrong, our jaws are going to clamp around you?
Mr. Otting. Yes, I don't think that would be the case. What
we want to do is for banks to be creative in that case and to
look at ways to serve their community. And I am afraid
personally if we issued some guidance, we may be too
restrictive.
Mr. Duffy. OK. Obviously, people are concerned about--we
are concerned about individuals and families who have low
credit scores, and when they access these small-dollar loans,
their rates are high. But isn't there normally a correlation
between risk and a rate of return?
Mr. Otting. Yes, sir.
Mr. Duffy. And are you going to be able to change what is
happening in the current industry, whether it is current short-
term lenders or the payday lenders, are we going to be able to
change that if we go through credit unions and banks?
Mr. Otting. First of all, just clarification, there are two
product segments in here. There is the up to 45 days and there
is a 46 days and above. But we were addressing the 46 days and
above.
I personally feel that one of the reasons this was a big
initiative of mine is that we forced banks out of that space in
2013. And for the life of me, on a supply and demand basis, if
you take a big segment of supply out, what generally happened
is that consumers got the wrong end of that deal. And by
getting banks back in that space, I think they get fair, more
economically efficient for them pricing on loans and there is
more supply. But more importantly is the banks have to use that
as a stairstep if they perform well on those to report to the
credit agencies that then they can get back into the mainstream
of banking. And that is another one of my clear goals.
Mr. Duffy. And I would agree with that goal. I think it is
important.
I want to switch gears on you in my 1.5 minutes. I have
received more questions recently about an idea that would
transition our post offices into a new banking system. Some
have complained that rural America doesn't have enough banks or
credit unions. I share that concern, but the problem is we have
so many rules and regulations, our small banks and credit
unions can't survive, so they go out of business or they have
to consolidate. And so the regulation and laws that have come
from this town have caused a problem, and so we are now going
to come up with a new solution which is post offices and
banking? Good idea or bad idea?
Mr. Otting. I think it is a creative idea if it increases
the ability for consumers to have access to financial services.
I am supportive of most activities that--
Mr. Duffy. So the government should be involved in lending?
We say, listen--
Mr. Otting. No, I am not saying that. I said it is a
creative idea.
Mr. Duffy. But we are talking about government lending, Mr.
Otting, right? We are talking about the Federal Government is
going to step in and lend through our post offices. You like
that idea?
Mr. Otting. Generally not. But my viewpoint is, I think you
have to increase the supply. If there is--
Mr. Duffy. Is there not enough supply right now?
Mr. Otting. There is not enough supply right now.
Mr. Duffy. And so do you think political lending is a good
thing?
Mr. Otting. Do I think what lending is?
Mr. Duffy. Political lending. That if we make decisions
based on politics and whether it is in housing or in student
loans or in just everyday lending, is that a good thing for the
American economy and the American consumer?
Mr. Otting. I think my own personal viewpoint is, is if we
can educate people about financial services and that they can
go to their phone and they can get a loan, or they can make a
deposit, or they can open up a checking account, that is a
better alternative.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Massachusetts,
Mr. Capuano.
Mr. Capuano. Thank you, Mr. Chairman. And thank you, Mr.
Otting, for being here.
Mr. Otting, I don't know you at all. I just want to ask you
a few questions generally what you believe in.
Do you believe that homeownership is probably the most firm
and sound and most used way for relatively poor or moderately
poor working class people to move into the middle class? Do you
believe that assessment?
Mr. Otting. I do, but I wouldn't say all.
Mr. Capuano. Not all, but it is the best way. You are
talking to one of them who did that. Every bit of middle class
ability I have is because I bought a house 30 years ago and
stayed there.
At the same time, do you believe that discrimination,
either--never mind the legal obvious one, but even
institutional discrimination, do you believe discrimination
exists in America today?
Mr. Otting. I have personally never observed it, but many
of my friends from the inner cities across America will tell me
that it is evident today.
Mr. Capuano. Do you believe that it exists?
Mr. Otting. I believe it--like I said, I have never
personally observed it. People have told me it exists, and so I
trust those people when they tell me that.
Mr. Capuano. So you believe it exists? I understand you
have never--and you are very lucky to have never experienced
it.
Mr. Otting. That is right.
Mr. Capuano. Do you believe that it exists?
Mr. Otting. Here is what I would say: I believe the people
who tell me that it exists.
Mr. Capuano. So discrimination in America exists today?
Mr. Otting. Again, I stand by my answer.
Mr. Capuano. Well, that means you probably don't believe a
lot of things, because you haven't personally experienced
nuclear war either. So does nuclear war exist--I am not going
to get into that. That is a ridiculous answer, but that is OK.
Do you believe that discrimination exists along racial,
ethnic, gender, socioeconomic lines?
Mr. Otting. I, again, have never observed that, but people
who are close to me have said that they have experienced that.
Mr. Capuano. You have never experienced it. Have you ever
read about it?
Mr. Otting. Yes, I have read about it.
Mr. Capuano. Do you believe that the writers are stating a
truth or just using it for political purposes?
Mr. Otting. My experience with writers is they are right
half the time.
Mr. Capuano. So there is no discrimination in America?
Mr. Otting. No, I am not saying that.
Mr. Capuano. What are you saying?
Mr. Otting. I am saying that I have personally never
observed it.
Mr. Capuano. Geez, that is--I don't even know how to
respond to that, if you want the truth. I think you finally got
me.
Mr. Otting. That wasn't my intent.
Mr. Capuano. Well, it was OK. Not too many people can get
me. I just--certain things stun me.
Do you believe, in America today, that economic disparity
exists?
Mr. Otting. I do believe that.
Mr. Capuano. Do you believe it is expanding or do you
believe it is not expanding? The difference between the wealthy
and the poor.
Mr. Otting. I believe that it is not expanding now with
what we are seeing with employment and economic opportunities
in America.
Mr. Capuano. You do not believe that the rich are getting
richer and the poor are getting poorer?
Mr. Otting. I think what I was saying is I believe that
people on the lower economics end of the society are seeing
more economic opportunities with jobs.
Mr. Capuano. That is not my question. I asked very simply,
are the wealthy getting wealthier and the poor getting poorer?
Mr. Otting. I don't have those statistics in front of me,
so I can't answer that question.
Mr. Capuano. I really think you need to get out a little
bit more, Mr. Otting. Again, you can disagree with it. I
understand there are people that disagree with it. That is why
I am trying to assess your beliefs. It is awfully hard to ask
you questions if I don't know what you believe in. I have to go
right back to what I think--
Mr. Otting. --to your office and I will come by and we
can--
Mr. Capuano. No, that is--you are welcome to come by any
time but this is a public hearing, and I figured I would ask
some questions. But I guess I have to just revert to what I
think of the Trump Administration, then, if you refuse to
answer my questions about what you believe. Because I do
believe discrimination exists. I do believe economic disparity
is growing. I didn't blame you. I didn't blame the Trump
Administration, but I believe it exists and I do believe it is
expanding.
Last year, do you agree or disagree with the Wall Street
Journal's assessment that the OCC made it harder--this is a
quote, ``made it harder for banks to be penalized under the
CRA.''
Do you agree or disagree with that statement?
Mr. Otting. I disagree with that statement.
Mr. Capuano. Great. So The Wall Street Journal, the well-
known, pro-business magazine newspaper of the world is wrong in
their assessment about business.
When you were at Hanover, did you ever eat at Lou's?
Mr. Otting. No, I did not.
Mr. Capuano. Do you know where Lou's is?
Mr. Otting. I don't. I ate at the Hanover Inn.
Mr. Capuano. Well, Lou's is right down the street. It is
where working class people--and the Hanover Inn is where the
alumnae, that is where they eat. When you are in school, you
eat at Lou's because you generally don't have enough money to
eat at the Hanover Inn, but I am glad you did.
When you were at the Hanover Inn, did you observe the speed
limit along South Main Street?
Mr. Otting. I did not drive.
Mr. Capuano. It was about 30 miles an hour.
Do you know that there were some people there--I guess I am
going to run out of time and I am going to give it up, because
I have to give you credit, Mr. Otting, you got me. Never having
seen discrimination, you are a very lucky man.
Chairman Hensarling. The time of the gentleman has expired.
The Chair recognizes the gentlelady from Missouri, Mrs.
Wagner, Chair of our Oversight and Investigations Subcommittee.
Mrs. Wagner. Thank you, Chairman Hensarling.
Comptroller Otting, I am over here. I know that the OCC is
working on reevaluating the Community Reinvestment Act as is
the U.S. Treasury Department, so let me start there. In past
remarks, you noted, and I quote, ``community groups don't like
the way CRA is today. The banks don't like the way CRA is
today, the regulators don't like it.''
In addition, Treasury Secretary Mnuchin said at a hearing
just last June, banks--I quote again, ``banks spend billions
and billions and billions of dollars fulfilling their CRA
obligations. I want to make sure it is absolutely going to help
communities and isn't just a check the box to satisfy
regulators.''
Comptroller, what is the OCC's overlying diagnosis of the
problems with the CRA?
Mr. Otting. I think there are three core problems that we
would like to solve for. One is we need a more objective way to
measure a bank's success in CRA. Today, we have a very
subjective points process. I have been putting forth an ability
to look at a balance sheet item that deposits total assets or
tier one capital, add up all the activities that a bank does.
And an example of that, of $100 million of CRA at a billion
dollar bank, they would be at 10 percent. We could apply that
universally across the industry and it would be easy to
understand a bank's commitment to CRA.
Second of all, today, we have a very narrow description of
where people are doing their CRA activities, and it is
predominantly residential mortgages and multifamily and low- to
moderate-income areas. I think we need to expand the definition
of what qualifies. I think we have a cap on $1 million over
revenue for a small loan. In East Los Angeles, if a company is
$1.5 million in revenue and creating 30 jobs, then I think that
should qualify. I also know the difference between State and
church. But in the Black and Latino communities in America,
that is where people go for job counseling, that is where they
go for helping them get ahead. And so the minute a church is
identified with the CRA thing, it is disqualified. I think that
part should be--
Mrs. Wagner. And the third? Because I have other questions.
Mr. Otting. And the third is we have a process where we do
examinations every 3 years; it takes us 6 to 24 months to
complete the exam. If we can fix the first one where we can be
more economic, we can almost perpetually be able to say a bank
is in compliance with their CRA activities.
Mrs. Wagner. Sounds like there are many areas and avenues
of reform and betterment to actually reach these communities
that have occurred since the 1970's.
Mr. Otting. I would agree.
Mrs. Wagner. In your spring 2018 rulemaking agenda, you
provided the date of May 2018 as the anticipated date for an
advance notice of proposed rulemaking, ANPR, for the CRA
reforms, but we still have not seen anything as of today,
Comptroller. When do you expect the OCC to finalize its
recommendations for that ANPR?
Mr. Otting. I get up every day trying to advance that ANPR.
Mrs. Wagner. Timeframe?
Mr. Otting. A lesson learned of coming to Washington, D.C.,
is you put yourself out there a little bit, and I would tell
you I am hopeful now in the next couple weeks that we can get
that out.
Mrs. Wagner. Next couple of weeks. That is great. Well, we
look forward to it also.
Mr. Otting. Thank you very--so does everybody else in
America.
Mrs. Wagner. Does the OCC have plans to issue in
conjunction with other agencies? And what has been the OCC's
involvement with other Federal agencies and financial
regulators to this point?
Mr. Otting. It has been an attempt to be a multiagency
effort. The OCC has been ready since March to issue the ANPR,
and we are hopeful that we can make this a joint agency action.
Mrs. Wagner. Do you anticipate any major differences
between the Treasury report and the OCC's vision for CRA
reform? And if so, what are they and why?
Mr. Otting. I do not. I follow the Treasury closely.
Obviously, Secretary Mnuchin and I teamed up to have a CRA
plan. We worked within the confines of the CRA, and we are both
very energetic about creating more opportunities for banks to
serve low- to moderate-income areas across America.
Mrs. Wagner. What areas for CRA reform can be accomplished
primarily through agency rulemaking and guidance, and what
areas of CRA reform will require congressional legislation, do
you think?
Mr. Otting. A hundred percent can be done through the
agencies.
Mrs. Wagner. Wow. That is fantastic.
Well, as Chairman of the Oversight and Investigation
Committee, I look forward to your report, I look forward to
reforms that perhaps have been decades and decades overdue and
bringing this up to date to make sure that we are taking good
care of our low- and moderate-income communities and giving
them the chance at the American Dream.
I thank you for your hard work on this, Comptroller.
Mr. Chairman, I am about to run out of time, and I yield
back.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Massachusetts,
Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
And thank you, Mr. Comptroller, for helping the committee
with its work.
I want to go back to the Chairman's earlier question, and
also Mrs. Maloney's. In response to the Wells Fargo situation,
where Wells Fargo actually robbed their own customers by
opening up accounts and charging them fees for which they were
not authorized to do so, we had this horizontal review that you
described in your opening remarks, 40 banks. And it is your
estimate, based on that, that there are about 20,000
questionable cases.
I was wondering, of these 40 banks, is it fair to assume
that some of them had strong new account policies?
Mr. Otting. I would say yes.
Mr. Lynch. And some did not, right?
Mr. Otting. That is correct.
And it wasn't that we found violations; it was that there
weren't specific policies that were part of their risk
management process. So I want to just be clear--
Mr. Lynch. Yes, I understand what an MRA is, a matter
requiring attention. I--
Mr. Otting. Right.
Mr. Lynch. --understand that. But here is what I am getting
at: Our goal is to try to hold the bad actors accountable, if
possible. And so you did this whole study, and then you never
named anybody, even though you found 20,000--or, 10,000, I
guess, were without authorization, but 20,000 cases in general.
How do we hold people accountable when you treat the good
guys--and you say there are some people that had strong
policies--the same as the ones that had less so?
It is just, we are trying to hold people accountable. I
think doing the investigation and then not holding people
accountable publicly is creating a moral hazard. We did the
right thing with respect to Wells Fargo, with the fines and all
that, and went after them, but I just think, in that industry,
there is a lot of ``me too''-ism, and you will see activities
in one bank, if they are successful, will be copied by other
banks. And I am not seeing an approach from OCC that would
curtail other banks from following in this type of conduct if
we are not going to hold them responsible.
Mr. Otting. I don't think you can say that the institutions
did not hold the individuals responsible. There were actions
with certain employees. And I think, does that mean that you
announce which employees were being--
Mr. Lynch. I guess what I am saying is hold them publicly
responsible.
Mr. Otting. Yes. So I think I mentioned in my comments that
these were currently under supervisory activities, and we are
following these MRAs.
Mr. Lynch. OK.
Mr. Otting. And so to announce these during that process I
think would be inappropriate.
Mr. Lynch. OK. Fair enough. No, that is a good point.
Let me ask you, there is some talk about amending,
reforming the Bank Secrecy Act, and there is talk specifically
about reducing the amount of information. I am talking about
CTRs, cash transaction reports, and suspicious transaction
reports that go to FinCEN. What do you think about that?
Mr. Otting. I think it should be open for review.
There are nine million CTRs that are produced today from
the national banks, and the viewpoint, the question--it is
$10,000. I think we produce a lot of paper, and I am not sure
it gets to the point where we are catching the right people.
Often, businesses that have been working with banks for a long
period of time get caught structuring at that lower dollar
amount.
Mr. Lynch. Yes.
Mr. Otting. And so there is an estimate that 20 to 25
percent of those are good American citizens with businesses
trying to move money back into the system illegally and they
get caught in that current lower level of CTR.
Mr. Lynch. Yes. Well, I trust you are talking with FinCEN?
Mr. Otting. We are. We have a joint--
Mr. Lynch. We talk to--just so you know, we on the
committee, we have sat with the Financial Crimes Network, and
they expressed a need for the data. It gives them a--if you are
looking for a needle in a haystack, you need the haystack, in
terms of what they look for.
So I am just cautious about doing that. We have a lot of
bipartisan interest in protecting our banks and making sure
that people of nefarious intent do not abuse that for terrorist
purposes or money laundering. And I would just advise you or
caution you to share that caution with us in terms of making it
easier for someone, perhaps, to use the legitimate banking
system for terrorism or money laundering purposes.
Mr. Otting. Yes, Congressman Lynch, I agree with you. I
think there are some things around the edge that we can
improve. But the long term, I think, is how we take a database
of all the transactions and make that available to law
enforcement. And what we are finding when there are some pilots
doing that, the hit rates are much higher and there is less of
that other activity. You may be familiar with some of those.
Mr. Lynch. I am.
Thank you, Mr. Chairman. I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Kentucky, Mr.
Barr, Chairman of our Monetary Policy and Trade Subcommittee.
Mr. Barr. Thank you, Mr. Chairman.
And, Mr. Otting, welcome to the committee. Good to see you
this morning.
Your predecessor began an effort to provide special-purpose
charters to fintech companies, as you know, and my
understanding is that a number of critical policy questions
remain unanswered.
Will you commit to ensure that the public, including
Congress, has an opportunity to weigh in on these critical
questions?
Mr. Otting. We have been on a process to review whether we
would issue a special-purpose charter in July, and that is the
track that we are on at this point in time. I would be happy to
work with your staff or any other Members of Congress that
would like me to come by and have some dialog on that topic.
Mr. Barr. That would be great. I appreciate that. We would
like to know what the OCC is thinking on this topic and what
types of fintech companies might be eligible for such a
charter.
Obviously, there has been much debate and discussion
concerning fintech lenders and the challenges of serving a
national marketplace with a 50-State patchwork of confusing and
conflicting State regulations, and this includes the topic of
the OCC fintech charter. Yet multi-State-focused brick-and-
mortar-based lending offices, which also use financial
technology, seem to have been left out when discussing
solutions and the need to modernize regulations.
These so-called click-to-brick lenders cover a market
segment that online lenders cannot fully serve, especially for
those consumers who have the greatest need for more hands-on
underwriting and servicing. And these consumers include many
hardworking families as well as entrepreneurs and small-
business startups.
So it seems to me that, to the extent that the OCC does
move forward on a national charter, that we would need a
comprehensive approach so that we don't leave out important
market segments that continue to struggle with an antiquated
regulatory model.
How can the OCC or any Federal regulator, for that matter,
address the need for modernization of the nonbank lending
regulatory environment, especially for those delivering their
services across multiple State lines and having to contend with
this patchwork of conflicting and sometimes contradictory
regulations?
Mr. Otting. So, Congressman Barr, regarding nonbank, that
is generally not an area that the OCC is involved in. The
Bureau is involved in that. Those that would want to become a
bank through any kind of charter application would have to go
through capital liquidity and serving their community. So I
think to answer your question, I am not sure I am in a position
to do that.
Mr. Barr. So is it your position that the OCC is not the
appropriate regulator for nondepository institutions? If
Congress, for example, were to offer that opportunity for you
to expand your regulatory jurisdiction, would that be something
that you would say would be outside of the expertise or
capabilities of your agency?
Mr. Otting. I wouldn't say it is outside the expertise. And
I do think, Congressman Barr, that some fintechs will elect not
to have deposit-taking capabilities; they will fund through
another source. And we do think that some of those institutions
have sufficient liquidity and capital to do that.
Mr. Barr. Well, to the extent that there would be a
national charter, whether it would be OCC or the Bureau or
another regulator--
Mr. Otting. Well, the Bureau would not have the authority
to issue a charter.
Mr. Barr. Under current law, correct. Right.
Would it be important in terms of leveling the playing
field with an optional national charter to include not just the
click-to-click but also the so-called click-to-brick? Would
that, in your mind, be an appropriate response to addressing
the national charter concept?
Mr. Otting. That they could apply for a national banking
charter? Yes.
Mr. Barr. And, obviously, the special-purpose fintech
charter has received lukewarm interest because of a number of
factors, including the threat of litigation from States and the
fact that a charter won't offer the ability to raise cost-
effective funding through deposits. But, at the same time, the
special-purpose charter would offer substantial benefits in
preempting these conflicting State laws.
If the OCC does not move forward with a charter, what can
it do to support innovators that make loans over the internet
and either have an interest in becoming a bank or partnering
with a bank?
Mr. Otting. So a number of the State banking agencies have
been in to talk to us, and a lot of them are trying to create
coalitions where they can standardize the State banking laws.
We see that with the MSBs, with a number of States coming
together and standardizing their MSB laws. So if somebody wants
to operate in multiple States, they don't just have one choice,
which is a national banking charter, but they can actually
operate within those States with common laws.
Mr. Barr. Thank you. I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from California, Mr.
Sherman.
Mr. Sherman. Mr. Chairman, I would like to respond just a
little bit to the economic picture you painted in your opening
statement. And I focus on annual statistics. Monthly statistics
just jump up and down.
In terms of jobs, since Dodd-Frank became effective or was
enacted, the first full year was 2011, we have had 7 years of
strong economic growth, and we have created in that 7 years 17
million new jobs, 2 million of them created while Mr. Trump was
in the White House. That is 2 out of 17.
Economic growth last year was 2.3 percent. That is somewhat
lower than the average of the prior 3 years. It is still good
to have some economic growth. We look forward to higher levels
of economic growth.
And, of course, our trade deficit with China last year was
at an all-time high of $375 billion.
We all hope that America is successful, but, in evaluating
a Presidency, a President like President Obama, who inherited a
plane that was careening toward the ground and turned it around
so it is headed up, deserves substantial credit. A President
who inherits a national economy that is on its way up and is
able to continue that increase at perhaps a slightly lower rate
than he inherited does not, thereby, win a Nobel Prize.
I will ask Comptroller Otting: Back when I was young, banks
didn't always just lend to triple-A-rated giant institutions,
they took some risks. They didn't take risks on subprime,
financially engineered, super-default-swaparoo things; they
lent to the small businesses in our community. And they didn't
even get a government guarantee to do it.
And in order to take those risks, they charged prime-plus-
2, prime-plus-3, prime-plus-4 on loans to smaller businesses
because there is always a 1- or 2-percent chance that such a
business goes under.
In more recent times, banks have been able to take enormous
and catastrophic risks on the giant, financially engineered
products, but they tell me that they are constrained in taking
the moderate risk associated with a loan to a local pizzeria
unless they can get it SBA-approved.
How will your auditors react if they see that a bank has 5
or 10 percent of its portfolio lent to small businesses in its
community at rates of prime-plus-3 or prime-plus-4 precisely
because those very businesses have a credit risk that justifies
a prime-plus-4 loan? Can they devote a chunk of their portfolio
to that kind of loan, or is it basically a world in which they
can't take those kinds of risks?
Mr. Otting. As long as it is within their risk tolerance
and their risk statement, then the examiners would not offer
any issues associated with that portfolio.
Mr. Sherman. Within their risk--I have been told by every
small-bank officer that I have talked to that if they had
prime-plus-4 loans your folks would come down on them very,
very hard.
Do you find that banks are able to make non-government-
guaranteed loans, without demanding the owner pledge his or her
house, to small businesses?
Mr. Otting. Well loans are made based upon a primary and
secondary source of repayment, and that is the way the risk
rating is determined. So if a small business has cash-flow that
can cover their obligations plus--
Mr. Sherman. What if the business' economic position was
such that it would be fair to charge them prime-plus-4, even
prime-plus-5? Does that disqualify--that means that there is
some risk with the loan.
Mr. Otting. Pricing is not the factor when we are looking
at the safety and soundness of the loan. It is--
Mr. Sherman. So, basically, you are saying that the loan
has to--
Mr. Otting. There has to be a primary and secondary source
of repayment on the loan.
Mr. Sherman. And if there is a 5-percent risk or a 2-
percent risk that it will not be repaid according to its terms,
what do your people do?
Mr. Otting. You are saying the loss given defaults and the
losses associated with that loan? Is that what you are saying?
Mr. Sherman. I am saying that there is a significant risk
that the loan will not be repaid according to its terms, the 2-
to 5-percent risk that is--
Mr. Otting. Well, I think it would be the level of reserves
that someone has against that particular loan based upon the
expected default and loss factor.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Florida, Mr.
Ross.
Mr. Ross. I thank the Chairman.
When it comes to CRAs--I was just reviewing your testimony
again--you note in your testimony the stakeholders involved are
extremely dissatisfied with both process and results.
What is the underlying problem with CRAs?
I also note that you mention in there about incentivizing
banks to take more interest in their neighborhoods. And as we
move to more and more online banking and less and less branch
banking, my concern is that there are neighborhoods,
communities under the CRA that are going to be overlooked. And
I know you have addressed this.
And so my first question is: What is the problem with the
CRA as we know it today with allowing for this incentive for
banks?
Mr. Otting. Yes. I am not sure I said incentives for
banks--
Mr. Ross. Encourage banks. You used the word ``encourage.''
I am sorry.
Mr. Otting. Yes. So I think today we have a subjective way
that we measure banks' success under CRA. Second of all, we
have a very narrow product that is being deployed to achieve
CRA results. And the third issue is that we have a very complex
examination process every 3 years that is difficult to turn
that around.
Mr. Ross. When do you think the OCC will begin its formal
process for revising the CRA on behalf of national--
Mr. Otting. I arrived on November 27, and on November 28 I
began the process.
Mr. Ross. Thank you. Thank you.
One of the things I also noticed was, you are going through
a rulemaking process that would allow banks to provide short-
term, small-dollar loans, I guess payday loans. Is that what we
are talking about?
Mr. Otting. No, we are not going through a rulemaking. We
issued a bulletin. There are two segments. There is the 0 to 45
days, which is normally defined as a payday loan, where there
is one source of repayment. We issued a bulletin to encourage
banks to get into the market that is 46 days or longer--
Mr. Ross. OK. I appreciate that clarification.
Mr. Otting. Yes, which generally is paid from multiple
paychecks over a period of time. And banks had exited that
business in 2013, and we have encouraged them to go back into
that space.
Mr. Ross. Would that also include overdraft lending?
Mr. Otting. It would not.
Mr. Ross. OK.
With regard to the Bank Secrecy Act and anti-money-
laundering legislation, one of the ways in which you have
phrased the current BSA/AML examination is a ``gotcha'' system,
in which an institution's compliance regime can be deemed
deficient based on a single or isolated incident.
What steps is the OCC going to take to ensure that the BSA
compliance is geared primarily toward deterring illicit
activities and not just assessing fines?
Mr. Otting. Well, first of all, I don't know if you were
here when I made the comment--
Mr. Ross. I was not.
Mr. Otting. --that the OCC led an interagency effort, which
included the Fed and the FDIC. Our staffs and the principals
that got together, and we came up with 14 items that we thought
could improve the current system that banks are using. We
submitted that to FinCEN at the beginning of May.
Last Friday, they came back to us with some edits. We plan
to use that as our control document and create a group of
people that will work on BSA and similar matters. There are
some things that we can do, some things we will need--
Mr. Ross. It is more proactive?
Mr. Otting. That is right. Right.
And I would say our viewpoint is we have a very cumbersome,
paper-oriented process, producing lots of documents that I am
not sure gets to the core of stopping people from using our
banking system inappropriately.
Mr. Ross. Under the current BSA framework, do you believe
that financial institutions are required to collect information
on their customers that are of no use to law enforcement?
Mr. Otting. They are required to comply with the currency
transaction reports. And when they identify suspicious
activity, they are required to complete SARs.
Mr. Ross. Right. But, otherwise, collection of information
other than for that purpose would be inappropriate under the
Bank Secrecy Act.
Mr. Otting. You would have to give me a specific example,
but, yes, as a general rule, I would agree with you.
Mr. Ross. OK.
Is the OCC currently working to improve the type and amount
of information required to be collected and how that
information is communicated to law enforcement or regulators?
Mr. Otting. I think through the initiative with the BSA, I
think we can get there.
One of the key things, I think, is an important element of
stopping bad people is that we make that information available.
I think it is really critically important for us to be able to
have dialog with what is important to law enforcement to be
able to stop an illegal activity.
Mr. Ross. And what protects the privacy of the customer.
Mr. Otting. That is correct.
Mr. Ross. Thank you.
That is all I have. I yield back the balance.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Georgia, Mr.
Scott.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Otting, let's go back. I want to talk to you about the
possibility, first, of the fintech special order. Are you going
to offer it, or are you not?
Mr. Otting. We have not concluded a decision at this point.
Mr. Scott. You are aware that, when your predecessor
offered that, that the Conference of State Banking Supervisors
filed suit against you, against the OCC. What is the
disposition of that?
Mr. Otting. My disposition is that the National Banking Act
gives us the authority to issue that charter.
Mr. Scott. So, legally, where is that suit? Has it been
dismissed?
Mr. Otting. No. The judges in those cases found that there
was not cause at this particular point in time on those
lawsuits because we had not actually entertained any
applications.
Mr. Scott. Well, for the very nature of that suit, and when
you look at it from the standpoint of the fintechs themselves,
unless we can find a way to satisfy some of the concerns that
the State banking regulators--who certainly have first call on
this. Because these fintechs don't call just one State home;
they operate across the Nation in 50 States. So there is a role
for the State banking supervisors. If that is not resolved,
then we are putting the fintech companies in a very untenable
position.
Now, that is one point. The other point is that--you came
by my office, and thank you for that. We had a wonderful visit.
And at that office, I shared with you legislation that my staff
is working on, in conjunction with both the Democratic staff on
this committee and the Republican staff, to come up with a
bipartisan piece of legislation that clearly needs to be put
forward first.
These fintechs are faced with a plethora of regulators. You
have yourself, and you have this problem with the State
supervisors. You also have the FDIC. Some fintechs may even go
for that charter for industrial loan companies. And if they do
that, they fall under a very serious benefit of being able to
compete in a way that puts the smaller banks at a disadvantage
because they won't have to jump through the same hoops to get
that Federal Reserve insurance for their deposits. You have
that. And then you have the CFPB with project catalysts, and
they have offered only one letter of action--of no action over
all their period. And then you have LabCFTC.
My whole point is that it is my hope that you have had a
chance to--as we said, you were going to chat with my staff and
get the idea of the legislation that we are proposing. It is so
important that, as we move to find out how we are going to
regulate this burgeoning industry, that we don't move so
haphazardly that we suffocate the innovation of this industry.
And so did you get a chance to contact my staff and get a
look at it?
Mr. Otting. Yes. Our Office of Innovation staff met with
your staff as a follow up to that meeting.
Mr. Scott. So they have that. So what do you think?
And just as a prelude, the legislation would require
something first before we really get in this, which--we know
all these different agencies are biting at the bit to regulate
this industry. So our legislation will be to set up and require
that these regulatory agencies harmonize and coordinate, make
that a requirement going forward. Because you got so many
wanting to get into them. If not, we are going to be very
destructive to this burgeoning industry.
And I asked you, I said, I hope that you will be with us on
this. So you agree with us, right, for the record, that that is
what we want to do?
Mr. Otting. I don't disagree with you, but it really
depends upon where the fintech decides they want to be
domiciled, in what regulatory agency. If they are going to
operate in a particular State, then most will choose to be
regulated by that State banking group or a multi-State--
Mr. Scott. And that is why another part of the bill will be
to get the fintechs a point of entry.
So I am just saying we have to look at it from the
standpoint of how do we effectively regulate this new,
burgeoning industry.
Chairman Hensarling. The time of the gentleman has expired.
Mr. Otting. I would be happy to come by and have further
dialog with you.
Mr. Scott. All right. Thank you.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Illinois, Mr.
Hultgren.
Mr. Hultgren. Thank you, Chairman.
Thank you, Comptroller Otting. Appreciate you being here.
Mr. Otting. Thank you.
Mr. Hultgren. As you noted in your written testimony, S.
2155 includes a provision requiring the Federal banking
regulators to permit for a short-form call report every other
quarter for institutions with less than $5 billion in assets.
Obviously, Congress would not have called for this change if we
were satisfied with the relief from the call report being
considered via the EGRPRA process.
I sponsored the stand-alone bill in the House with Terri
Sewell and also Andy Barr. So I am very interested in your
plans on implementation of this legislation. What is a
reasonable timeline for banking regulators to propose and
finalize regulations? And I wondered if you have thought at all
about what a short-form call report might include.
Mr. Otting. First of all, earlier in my comments, I said we
have organized a group of people within the agency, a task
force, to focus on the entire bill. We have narrowed things
into what can we do short-term very quick, what are medium-term
that we have to write a rule, and then what will require
interagency.
This is an area that we think we can implement very
quickly--
Mr. Hultgren. Great.
Mr. Otting. --and I can tell you that we have all of our
resources moving fast on this particular issue. I can't give
you an exact timeline, but I would be happy to follow up as we
get further along the path.
Mr. Hultgren. Thanks. That would be great.
I also would ask or would recommend you and those who are
specifically tasked with that to take a closer look at what the
Independent Community Bankers of America has proposed as a
reasonable short-form call report. This includes ``Schedule
RI--Income Statement,'' ``Schedule RI-A--Changes in Equity
Capital,'' and ``Schedule RC--Balance Sheet.''
If I can move a little bit, I wanted to ask briefly and see
if I could ask you to discuss with you the treatment of
centrally clear options as it relates to our risk- and
leverage-based capital rules.
The Treasury Department's October 2017 report on capital
markets notes, and I quote, ``The CEM may be responsible for a
corresponding reduction in banks' ability and willingness to
facilitate access for their market-maker clients, who are the
primary liquidity providers in these markets,'' end quote.
I understand this concern was realized by some market
makers during some of the volatility incurred by the markets
earlier this year. I have talked with dozens of market
participants and many of my friends on the other side of the
aisle, and there seems to be strong agreement that our capital
rules should be tweaked in order to improve liquidly in listed
options markets. Our challenge has been getting the undivided
attention of the banking regulators to address this.
I wondered, would you commit to work with your colleagues
at the Fed and FDIC to address this issue?
Mr. Otting. Yes, I would.
Mr. Hultgren. Great. Thank you.
I also want to thank you for your work to reconsider
aspects of section 619 of the Dodd-Frank Act, the so-called
Volcker Rule. One specific topic I would like to raise with you
is the Volcker Rule's detrimental impact to venture capital
funds and the startup companies that they support.
Before the Volcker Rule, banks provided 7 percent of
dollars invested in venture capital funds and were a reliable
source of funding for smaller venture capital funds, as they
are not as attractive to larger, institutional investors.
I wonder, do you believe that venture capital funds should
fall within the definition of private equity funds, first? And
has the OCC studied how a change to the covered-funds
prohibition that exempts venture capital would permit for more
investment in startup companies and overall economic growth?
Mr. Otting. I do believe it does fall under the current
definition. I personally have sat on two boards of financial
institutions that did those type of equity investments. I did
view it as a legitimate, stable source of proceeds to funds
that invested in small companies across America. And we did put
out in a notice of proposed rulemaking at least for people to
comment on the definition.
Mr. Hultgren. Great. Yes, I would agree that this really is
the backbone, and we want to continue to encourage small
companies to grow but also to go public. It is something that
we talk about all the time here, of really the harm that is
done to mom-and-pop investors by not having more of these
smaller companies grow to become public and choose to become
public.
Also, I am sure as you are probably aware, this change that
I have talked about is recommended by the Treasury Department's
October 2017 report on capital markets.
And, again, thank you. I would just continue to ask that
you and your colleagues at the other financial regulators
prioritize this when considering changes to the Volcker Rule.
Last question, in the last few seconds: The OCC has begun
consideration of a special-purpose charter for fintech
companies. This was a priority of Comptroller Curry. However,
this process seems to have stalled over the last year.
Where is the OCC on the process? And how do you envision a
fintech charter working? Do you believe your views differ from
Comptroller Curry on this?
Mr. Otting. Once I arrived on November 27, I have spent a
significant amount of time internally with a number of the
agencies' people. We have done a lot of work.
We have publicly said that in July we will make a decision
whether we will formally allow applications to come in for a
fintech charter, which we call a special-purpose charter. It is
our expectation that that will require capital liquidity and
serving the community like any bank across America.
Mr. Hultgren. Thanks again. Appreciate your time.
My time has expired. I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Missouri, Mr.
Cleaver, Ranking Member on the Housing and Insurance
Subcommittee.
Mr. Cleaver. Thank you, Mr. Chairman.
Comptroller Otting, here in Congress, we can choose, pretty
much, what we are going to be, and I have chosen to be
respectful. I have to say your earlier response to Mr. Capuano
was stupefying, even jaw-dropping, as it relates to
discrimination.
If you believe polling data, the Washington Post-Harvard
study shows, first of all, that the level of racial animus is
at the highest level today that it has been since 1997.
And it is a little disconcerting to me, because the United
States has never eliminated any of its problems by denying that
it existed. You did not deny that it existed; you said you just
had never seen it.
I was wondering if you were aware of what happened recently
in Charlottesville.
Mr. Otting. I only observed that from what I was able to
see in the news.
Mr. Cleaver. So you wouldn't be in a position to know
whether or not there were people who were wrong or right, or
the supremacist who spoke, who acted. Based on what you saw on
TV, I guess, and read, you don't attribute one side as having
way more than discriminatory feelings. What did you witness?
Mr. Otting. To be honest with you, I don't watch TV. If it
is not on ESPN or CNBC--I am not a TV watcher. I saw what was
across the headlines, but I didn't spend specific time to study
or analyze what took place.
Mr. Cleaver. So you didn't read any of the articles in the
newspaper?
Mr. Otting. I don't read a newspaper.
Mr. Cleaver. This is very difficult for me. One of
questions the I wanted to ask was about the charter and whether
or not you believed that there needed to be something in the
charter about minority inclusion. But there would be no reason
for minority inclusion if there is no exclusion. So I am
assuming that that is not going to be anything you would
address, since you are not aware that it even exists on the
planet.
Mr. Otting. Well, no. I would say I am a big believer in
minority inclusion. I think my track record through my banking
industry--there are many people who would say that Joseph
Otting spent more time in the inner cities of America than most
banking executives across the world.
Mr. Cleaver. Yes, well, that is--yes.
Mr. Otting. But on a particular example like you are
describing, I don't have a personal opinion on that.
Mr. Cleaver. And you don't have a personal opinion on
whether there has been any discrimination in banking?
Mr. Otting. Again, I have not personally observed that.
Mr. Cleaver. Mr. Chairman, I yield back. I can't go any
further.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from California, Mr.
Royce, Chairman of the Foreign Affairs Committee.
Mr. Royce. Thank you, Mr. Chairman.
On May 23, you issued a bulletin encouraging banks to make
responsible short-term installment loans. Are you tracking
whether banks have reentered the market since the bulletin came
out?
Mr. Otting. Congressman Royce, we communicated with banks
shortly after my arrival that this was one of my priorities.
Most banks had shelved any products that they had after
2013. I have personally met with all of the large-bank CEOs and
asked them to take a look at being involved in this. And I
think it will take a period of time.
Most of the regional banks, I think, are reacting quicker,
because they had products that they thought they could bring to
market. It will take a longer period of time for banks to work
through their products and then go through their risk process
before they offer those products into the market.
Mr. Royce. Maybe we could look at what metrics there are to
date in a week or 2, and you could get back to me with some
more specifics on that.
Mr. Otting. Yes. I would be happy to. I think it is going
to take a period of time to--
Mr. Royce. Yes, I understand your argument there. I see
your point.
One area where there has been some confusion based on the
recent bulletin are bank-fintech partnerships, such as
marketplace lending programs. Some have construed a provision
clearly targeted--it looks to me like it is targeted to rent-a-
bank schemes. But they view that as undermining bona fide
partnerships between banks and fintech lenders.
And some have wondered about a clarification on this--I
think there was some in the press--that this is not the
intention of the small-dollar guidance, but I was hoping we
could hear you out today on the OCC's views on these
arrangements.
Mr. Otting. We are supportive of these arrangements with
fintechs, where they are bringing technology to financial
institutions that can do outreach to communities, customers,
prospects. And so we are supportive of that.
We would expect them to go through their normal vendor
management programs to assess the risk associated with those
entities, but we are supportive.
Mr. Royce. OK. OK.
When looking at reform of the Community Reinvestment Act,
you said that you are a big believer that we should stretch it
to more small business, more community development.
The local bankers who I met with last week in southern
California are frustrated that more small-business lending is
not included. The classification of some loans doesn't get a
complete picture of the impact banks are having in their
communities, including, of course, in job creation.
So could small-business loans with a community-development
purpose be classified as a community-development loan? Would
that be an option, where you have that or as a loan under the
general test?
Or maybe, going to some of the remarks you made this
morning, when you talked about we need to develop a metrics-
driven approach to evaluating performance, would adding these
in a way into the standard metrics that you are trying to
develop, would that be a way for the small banks and others to
meet that test?
Mr. Otting. Congressman Royce, I think the measurement
element is different than the qualification element.
Mr. Royce. OK.
Mr. Otting. And it is my belief we should broaden the
category that includes--
Mr. Royce. Broaden the category.
Mr. Otting. Right.
Mr. Royce. All right. And I will yield back then. I
appreciate--
Mr. Otting. You are welcome.
Mr. Royce. --that information.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger.
Mr. Pittenger. Thank you, Mr. Chairman.
And thank you, Mr. Otting, for being with us today and for
your testimony and expert witness.
I would like to ask you, what could be done today by
regulators to encourage banks to offer short-term credit to our
constituents?
Mr. Otting. I am sorry, I missed your--
Mr. Pittenger. What could be done by the regulators to help
encourage banks to offer more short-term credit to our
constituents?
Mr. Otting. I think the guidance that we have been
discussing goes a long way in doing that. I think the next big
chunk of that is to look at the 45-day-and-under that is
currently controlled by the rule that is going to go into place
in the BCFP. And we would like to work toward--can we come up
with a solution in that space that would allow banks to get
back in there and do that in a fair and, I think, economic way
for consumers.
Mr. Pittenger. Could you speak, in addition, some more to
what could be done to help increase greater transparency and
investments in our communities that need it the most?
Mr. Otting. You are talking about low- to moderate-income
communities?
Mr. Pittenger. Yes.
Mr. Otting. What could be done more?
Mr. Pittenger. In terms of just increasing transparency in
this, the investments in these communities.
Mr. Otting. Well, two things that I think are important is
to identify more categories that can qualify by broadening the
products that would receive credit under CRA. And, as I said
earlier, I think there are parts of church activities that
should qualify for CRA. I think in a lot of communities, people
go to their church to get financial counseling.
Mr. Pittenger. I agree.
Mr. Otting. I think, also, our assessment areas, the way
that they are often defined restrict a bank to a particular
area. And I have seen examples where on one side of the street
it qualifies as CRA and the next side of the street it doesn't
qualify for a bank. So I think taking a hard look at how we
narrowly define the assessment areas would broaden banks'
perspective of where they can do their investment and lending
activities.
Mr. Pittenger. I appreciate your clarification on that.
In your testimony, you said, quote, ``Bank regulators, law
enforcement, national security personnel, and bankers must
continually adapt to increasingly sophisticating criminals and
other illicit actors who take advantage of the Nation's banks
and financial system,'' end of quote.
If developments and advancements are critical to success,
then why has the current BSA regime failed to undergo any
significant changes since the 1970's?
Mr. Otting. Why has it not?
Mr. Pittenger. Yes, sir.
Mr. Otting. I think it has. We have added to the process.
And I think, with current technologies today, there are ways
that we can take databases and scan those databases and use
artificial intelligence to be able to go through them that are
better than individuals looking at a currency transaction
report and then filling out a SARs.
If you think about it, if you have one bank in a vertical
and you are providing that SARs, but that bad person goes bank
to bank to bank, we don't tie that all together. And I think
with technology we can start to tie that together and it is not
a paper flow.
Mr. Pittenger. In terms of compliance cost and related
privacy issues that are of concern to many, would you think
that the system would be better served if the government
provided access to those accounts, that data that they are most
concerned about, to banks, financial institutions, in lieu of
the tremendous amount of SAR reporting that is required?
Mr. Otting. It is probably halfway--that would be, I think,
a valuable thing, if we knew what entities or individuals that
are under the microscope that we could help.
But I do think that then you get into some issues along the
lines of--there has been some legislation proposed that hold
the bank harmless in the event that they continue those
relationships with those accounts that they are not unduly
criticized--
Mr. Pittenger. Sure. They need a safe harbor.
Mr. Otting. Yes, as long as they are holding those accounts
open for the benefit of law enforcement.
Mr. Pittenger. Yes, sir.
It seems to me that the process would be better served if
the banks were responding to the concerns of law enforcement,
rather than just providing innumerable numbers, millions, to
the effect of SARs reports. And for responding, instead, to
what they are looking for, we would have, it seems to me, a
much better grasp of the privacy and security and civil liberty
concerns by the public.
Do you have a comment on that?
Mr. Otting. Well, today, we produce all this information.
As I said earlier, there are about 10 million documents--9
million CTRs, a million SARs--that are produced. Generally,
when there is a hit by law enforcement, they do go seek that
additional information out from the banks today. So banks
generally are contacted when there is some event associated
with an individual.
But I think to your point is 97 or 98 percent of the
information that we produce, very rarely do the banks hear back
from law enforcement on the data that they are providing.
Mr. Pittenger. Thank you. My time has expired.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from New York, Ms.
Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Comptroller Otting, when the House considered S. 2155, I
expressed concerns on many aspects of the legislation,
particularly the increase in the SIFI threshold from $50
billion to $250 billion.
One of my concerns is that this new threshold continues to
fail to take into account the actual risk posed by the largest
institutions. Some over this new line continue to pose little
risk to the system, while some below could pose substantial
risk. This has been shown time and again by the Office of
Financial Research under both President Obama and President
Trump.
How do you propose to tailor regulations to a firm's actual
systemic risk on both sides of the new $250 billion threshold
in order to continue to protect our Nation against systemic
risk?
Mr. Otting. I am actually supportive of those new
guidelines that were issued. I do think banks' risk management
is the best it has ever been in the 35 years.
It doesn't mean just because that guideline has been lifted
that banks will not continue to perform some of those
functions, and we will review those in our annual examinations
of those financial institutions.
Ms. Velazquez. So I expect that you regulate banks on both
sides of the $250 billion with equal weight and scrutiny, those
that are above 250 and those that are below. That would include
most of the banks.
Mr. Otting. We use a risk-based system to do the annual
examinations. And so we look at all of those institutions and
understand where we think there is risk, and based upon that,
we provide resources to those supervised institutions.
So, to your point, if we observed significant risks being
imminent or deployed in an institution, we would allocate
resources to that institution appropriately.
Ms. Velazquez. OK.
I understand that leverage lending often serves as an
important financing tool for many businesses across the
country. However, I also believe that banks shouldn't be left
without a regulatory roadmap to guide how such transactions can
be made without compromising the safety and soundness of our
financial system.
Earlier this year, you commented that, and I quote,
``institutions should have the right to do the leverage lending
they want as long as it doesn't impair their safety and
soundness.''
Can you elaborate on that statement and talk about what
steps, if any, the OCC and other Federal banking regulators are
taking to revise the 2013 interagency guidance on leverage
lending, particularly in light of the GAO's (Government
Accountability Office's) determination that the guidance was a
rule for the purposes of the Congressional Review Act?
Mr. Otting. First of all, thank you for allowing me to
clarify my comments.
What was left out of that quote was the lead-up to it,
where I said that banks would have to have the appropriate
level of capital, they would have to have the people to
properly analyze that risk, they would have to have a risk
statement that was approved both by management and the board.
And those were left off before they put the punch line in
there, so to speak, so--
Ms. Velazquez. Was that CNN that reported that?
Mr. Otting. No, it was not.
Ms. Velazquez. Oh, OK. Oh, so, then, you watch CNN.
Mr. Otting. I don't watch CNN.
Ms. Velazquez. So how do you answer? OK.
Mr. Otting. I know the particular--
Ms. Velazquez. All right.
Mr. Otting. --news agency that produced that.
So your second question regarding the OCC's guidance on
leverage lending, I am sorry, I missed the point you wanted me
to address on that.
Ms. Velazquez. Well, the GAO determination, particularly in
light of the GAO's determination that the guidance was a rule
for the purposes of the Congressional Review Act.
Mr. Otting. Yes. We have gone out of our way since that
ruling to educate and make sure that our examiners understand
the difference between rules and guidance. And we have issued
documents within the OCC that clearly spell that out. And as
part of that comment that you were quoting me on, I made that
comment as well.
Ms. Velazquez. So are you going to appeal the guidance?
Mr. Otting. No. We had put that guidance out for comment.
Maybe you are saying are we going to reproduce that guidance
for comment, and at this point we are not.
Ms. Velazquez. I yield back.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from Pennsylvania,
Mr. Rothfus.
Mr. Rothfus. Thank you, Mr. Chairman.
Welcome, Comptroller. I want to thank you for your
continued help and support for our Federal Savings Association
Charter Flexibility legislation.
As you mentioned in your testimony, the reform that
Congressman Himes and I have championed will provide Federal
savings associations with the flexibility to operate with the
same rights and duties as a national bank without having to go
through a costly and time-consuming rechartering process.
This was recently signed into law as part of the bipartisan
financial regulatory reform package.
Why is this specific provision so important?
Mr. Otting. That provision, from my perspective--you may
know that when I went to OneWest Bank we were a thrift, and
part of my mission was to diversify the balance sheet for the
institution. And so we grew our commercial loans and commercial
real estate, and we quickly hit the cap at that point in time.
And so we felt we were servicing the community.
And so our ability, like those particular entities, are
looking to service their communities in a diversified manner,
and often they hit those caps in a relatively quick period of
time.
Mr. Rothfus. So, looking at the impact of this reform, what
do you see happening in a community that has a thrift?
Mr. Otting. I think they will broaden their support of the
communities to which they operate.
Mr. Rothfus. Could you provide an update on the timeline
for implementation?
Mr. Otting. Earlier, I said we have created a bucket of
things we think we can do quickly, things that we need to write
rules on. And the third being, where we have to have
interagency, that falls into the first bucket, that we think we
can move very quickly on that.
Mr. Rothfus. Great. Thank you.
In your testimony, you discussed a number of possible
avenues for reforming our outdated BSA/AML regime. Our
committee has held several hearings on this issue, and I have
had the opportunity to meet with a wide range of financial
institutions and practitioners. It is clear that this system
needs to be modernized to account for the ever-evolving nature
of the threat.
New technologies, like artificial intelligence, show
considerable promise in helping financial institutions and
regulators better combat illicit finance. I am proud that
western Pennsylvania institutions like Carnegie Mellon
University are leading the way in this field.
Could you explain how new technologies, like artificial
intelligence, can help improve our approach to disrupting
illicit finance?
Mr. Otting. Sure. I think the way new technologies are
going to work is that we are going to be able to go through
interbank connectivity between bad-person activity.
Today, if you think about our CTR and other SARs process,
it is generally a vertical within one institution. The bad guys
are smart. They know the rules. They move money in, they move
it amongst the organizations, and then they flush it out the
door. If we can track that interconnection with those proceeds,
I think technology will play a big, important role there.
Mr. Rothfus. Do you think there is anything that regulators
or law enforcement can do to facilitate the continued
development and adoption of these new technologies?
Mr. Otting. I think there has been a lot of discussion
about whether that should be a government or a private
enterprise venture. And I think what you are seeing now is
movement toward that being a private enterprise, and I think
that will accelerate the activity.
Mr. Rothfus. I understand the OCC is continuing to study
ongoing developments in the fintech space. What are some of the
key principles that guide the OCC's approach to ensuring that
we facilitate pro-consumer innovation while protecting the
safety and soundness of the financial system?
Mr. Otting. It is our expectation that a fintech would have
similar capital liquidity requirements to serve their community
as a regular national bank.
Mr. Rothfus. How can we guard against regulatory arbitrage?
Mr. Otting. The way that I think we would guard against
that is that those that want to serve multiple markets either
have a choice, A, being that they go and they find States that
will synchronize their regulation process, or that people will
have to use the national bank.
Mr. Rothfus. In your testimony, you discuss the need to
reexamine assessment areas for the purposes of bank compliance
with the CRA. As you know, the current approach is largely
based on an institution's retail branch footprint.
Mobile banking products are becoming increasingly popular.
How should this development impact the way we evaluate future
CRA compliance?
Mr. Otting. Yes. I would argue, in some regards, the
assessment areas have restricted banks' ability. As an example,
when I ran OneWest Bank, we were in L.A. County; L.A. County
was our assessment area, but we had branches in Inland Empire,
Riverside, and Orange County. But those particular areas were
not part of our assessment area, but we wanted to make
investments in those areas, and we had to satisfy our Los
Angeles needs first.
So I think looking at, more broadly, where are your
customers, which would include mobile banking, and asking
institutions to support those communities where their customers
are, or their employees, I think will be important going
forward.
Mr. Rothfus. I was intrigued with your conversation with
Congresswoman Wagner about any kind of interplay or integration
with faith-based organizations and CRA. Can you go over that a
little bit?
Mr. Otting. Could you ask that question again?
Mr. Rothfus. Whether faith-based organizations--how they
can be integrated or helpful.
Mr. Otting. I have lots of experience with faith-based
organizations across the Nation. My observation is in the Black
and Latino communities. Most of the families go to those church
organizations for their financial counseling, job development--
Mr. Rothfus. My time has expired. I may want to follow up
with you offline on that.
Mr. Otting. I would be happy to do that.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Colorado, Mr.
Tipton.
Mr. Tipton. Thank you, Mr. Chairman.
Comptroller Otting, a pleasure to be able to see you here,
and thanks for appearing before the committee.
One thing that you and I have had the opportunity to be
able to visit about was--and I know you do understand this
well, is the time from your time in the private sector is a
need for certainty in terms of regulation and supervisory
expectations for the banks that are under your supervision. And
if you would, I would like you to be able to take a moment to
speak about some of the controls that are in place to prevent
that uncertainty from entering the examinations process in the
event of a negative economic impact, and what steps your agency
takes to prevent the potential of supervisory retaliation.
Mr. Otting. Yes. We have very well defined controls. We
have, obviously, an examination process that takes place.
Generally outside that direct examination we have resident
experts that also review the data associated with any
examination. Then we have a deputy company comptroller that is
generally involved in that. At any point in time that a bank
would feel that they are not being treated fairly or their
regulations are not being applied appropriately, they have a
formal appeal process. And if they are unsatisfied with that
formal appeal process, they can come through the ombudsman
process, and that person reports directly to me and I meet with
him on a weekly basis and we cover any of the items that have
been brought up.
Mr. Tipton. OK. Thank you for that.
I did want to express, one banker from my home State of
Colorado observed that the regulatory environment of the past,
specifically between the OCC and what we call the Consumer
Protection Bureau, now the BCFP, presented the risk of double
jeopardy, and has concerns that the regulatory agencies didn't
coordinate with each other in terms of examinations.
Would you describe briefly how your conversations with the
Federal Financial Institutions Examination Council informed you
and the examiners' decisionmaking and how they determined that
supervisory action is needed?
Mr. Otting. First of all, I do meet with the FDIC and the
Fed on a weekly basis, and we talk about all kinds of issues
like this. And then I also meet with Acting Director Mulvaney.
And where we have had actions that it has been generally at the
principal level with staff and principal to resolve issues like
that. And I would encourage you if any CEOs or banks that you
are familiar with or interact with that have that issue, that
they can call me directly, and I would be happy to have dialog
and discussion with them on that.
Mr. Tipton. Great. And so you are comfortable that the
agency's ombudsman that handles the appeals process for the
supervisory decisions regularly communicates and coordinates
with the other regulators on the appeals to prevent double
jeopardy?
Mr. Otting. I knew you were going to ask me that question
and there is a formalized structure where they meet frequently
to have dialog about any particular issues as well.
Mr. Tipton. OK.
Mr. Otting. And as I indicated, I meet with OCC Ombudsman
Larry Hattix every week and we talk about any items like this.
Mr. Tipton. OK. And when we are talking a little bit about
the in-house dialog that is going on, and I know that you can
appreciate this from the private sector end of it; from a
business standpoint, when you were in the private sector, would
you have found it agreeable to be able to appeal a material
supervisory determination that you felt was unfairly or
erroneously determined back to the same agency that handed down
the determination in the first place?
Mr. Otting. I think it depends upon the leadership and the
agency. But I would definitely feel comfortable in today's
environment for a CEO to want to do that. And like I said, he
would have the option to call me directly if he felt impaired
by that process.
Mr. Tipton. OK. And I guess just to follow up on that, I
have a piece of legislation called the Examine Fairness Act,
that I think you are probably aware of, to be able to have some
independent examination for an appeal process. Is there a
conflict? And again, I would just like to emphasize that point
from when you were in the private sector, to appeal back, you
may not always be in this position.
Mr. Otting. Yes. I found when I was regulated by the OCC, I
was totally comfortable with that process and always received,
I think, satisfactory results when I appealed a decision of the
EIC up into the agency. I never, at any time, had to go to the
ombudsman because I felt that generally it was fair and
complete, and oftentimes it was my misunderstanding of the
rules or the regulations.
Mr. Tipton. OK. Thank you. I appreciate your comments.
Mr. Chairman, I yield back.
Mr. Hill [presiding]. The gentleman from Colorado yields
back. The gentleman from Maine is recognized.
Mr. Poliquin. Thank you, Mr. Chairman very much.
Thank you Mr. Otting very much for being here. I appreciate
it. I congratulate you on your new position. I am sure it is
stressful, and I want to remind you that Maine is Vacationland
and this is a great place to go and have a summer vacation. I
am sure your family would appreciate going up there and
enjoying our 3,000 miles of coastline, blueberry pie, and
lobster and moose and everything else. So when you want to go
up there, make sure you give us a call, we will set you up.
Mr. Otting. OK. Thank you.
Mr. Poliquin. You are very welcome.
Sir, I represent the rural part of Maine. Now, some people
think that that is unusual, but there are parts of Maine that
are not rural, not much, but there are parts. In the Second
congressional District, we have about 400 small towns. We are a
district of small businesses, small savers for the most part.
And what I am concerned about is identity theft and other types
of cybersecurity.
When you have folks in Maine living their lives and they
have a credit card and a checking account, a savings account,
maybe an IRA, and they are buying some property and casualty
insurance, and it seems like every place they go, Mr. Otting,
they are giving out their personal information. And this is a
real issue, for the families that I represent, if something
happens and there is a breach.
Now, I know that there are financial institutions
throughout that sector of our economy that are regulated by
different agencies. And sometimes you have the same financial
institution that is regulated by the--by multiple agencies,
like you folks at the Comptroller of the Currency or the CFPB
or maybe the Federal Reserve. It is expensive. It is time
consuming for these smaller financial institutions to do that
work and at the same time making sure they are fighting those
that are trying to rip off their personal information.
So do you folks coordinate with other regulators that are
focusing on the same institution such that we can become very
efficient and coordinated and not shore up time and resources
you need to catch bad actors?
Mr. Otting. I would say probably not as good as we should--
Mr. Poliquin. Why not?
Mr. Otting. --would be the right answer. I would say, I
think at the Federal level we have a much better level of
coordination in conjunction with Treasury. There is a lot of
activity. Obviously that when we go out and we do our
examination on an annual basis, part of the normal exam is to
look at the security parameters, look at the hardware, look at
the software, make sure patches are up to speed. And we also do
assessment of the recovery. As you know, somebody might have a
product with us and have a product with a State bank, and the
question that you have there often is coordinating when
entities are not interconnected.
Mr. Poliquin. How do you fix that?
Mr. Otting. I have heard the mention of national standards,
and that is probably the way I think you ultimately get to that
is some kind of national standard.
Mr. Poliquin. Has this been attempted in the past, Mr.
Otting?
Mr. Otting. Not that I am aware of.
Mr. Poliquin. And have you received these sort of inquiries
in the past?
Mr. Otting. I wouldn't say I have received inquiries in the
past. I would say that the Treasury Department is trying to
coordinate an approach amongst the Federal financial agencies
to make sure that there is interconnectivity across the
agencies.
Mr. Poliquin. And is this an ongoing loose, informal
discussion or do you actually have an agenda item that you are
working on to make sure this is addressed?
Mr. Otting. I do not have an agenda item.
Mr. Poliquin. What would it take to get one?
Mr. Otting. Probably knock out CRA, BSA, knock out small-
ticket lending. And I would be happy, once we get the capital
and the Dodd-Frank issue done, to put it in the queue.
Mr. Poliquin. I appreciate very much that forthrightness
and also the interest in working with us on that. Thank you
very much on that, Mr. Otting.
You mentioned earlier today on a different topic that you
are considering a new charter for fintech, and you mentioned
that that decision will be made in July. Are you comfortable
and confident that all the stakeholders have had the time they
need to weigh in on this issue?
Mr. Otting. I think there has been a lot of dialog and
discussion on this particular topic. Am I comfortable at all? I
don't know if I could define the word ``all'' correctly, but I
think a lot is the way I would describe that.
Mr. Poliquin. Are you comfortable enough to make a
decision?
Mr. Otting. Yes, I would be comfortable enough to--and we
haven't made the decision yet, because this is somewhat unique
that if you think about it, if they don't have deposits and we
would be the resolution of a failure of one of those
institutions. So we have had to look at the whole linear
approach to that process. But we have also said that we expect
capital liquidity in serving the community to be part of any
charter.
Mr. Poliquin. Thank you very much, Mr. Otting. I appreciate
very much you being here, sir.
I yield back my time. Thank you.
Mr. Hill. The gentleman from Maine yields back.
The gentleman from Minnesota, Mr. Emmer, is recognized for
5 minutes.
Mr. Emmer. Thank you, Mr. Chair.
Thank you, Mr. Otting, for being here. I don't know if we
crossed paths while you were in Minnesota.
Mr. Otting. I don't believe so.
Mr. Emmer. I think you were on your way out a few years
ago, but 2010 maybe?
Mr. Otting. Yes, that is correct.
Mr. Emmer. Well, you are welcome back any time. Mr.
Poliquin waxes poetic about this mystery land up in the
northwest--east part of our country, but Minnesota is--
Mr. Otting. I have been northern fishing up there.
Mr. Emmer. I just want to ask you a couple of questions in
a couple different areas. One, first, because of your
background in banking in the financial services industry, is it
safe to assume that you are familiar with the concept of de-
risking?
Mr. Otting. Yes.
Mr. Emmer. To what extent does the complexity or
uncertainty surrounding our current Bank Secrecy Act/anti-money
laundering regulatory regime contribute to the practice of de-
risking?
Mr. Otting. I am not sure that that regime necessarily
contributes to it. I think what it does is it identify--helps
identify entities that are conducting those kind of activities.
Mr. Emmer. And then from your experience, where does it go
from there?
Mr. Otting. And then, generally, a financial institution
will evaluate the risk and the controls of a particular entity
and a segment of the industry. And I think where we have had
some problems is the amount of controls that they need, perhaps
the company won't provide those, or they can find another
alternative that doesn't require those controls, or the cost in
the institution to provide oversight is greater than what the
revenue is being generated off of the account.
Mr. Emmer. I am interested in the second one that you
mentioned, which is they find an alternative--
Mr. Otting. That is right.
Mr. Emmer. --that doesn't require those controls. Because,
in fact, when you start doing this de-risking, the people that
we are trying to discover are going to find other ways to deal
with the cash they are trying to move. That is your experience?
Mr. Otting. I would say more frequently they work it out
with their existing financial institution, but there are
exceptions where they will leave that financial institution and
seek alternatives.
Mr. Emmer. How can we coordinate or improve the
coordination between FinCEN, who is writing the BSA
regulations, and the examiners like OCC, like yours, to
streamline the regulatory landscape of our current BSA/AML
structure to ultimately address issues like de-risking and
improve the transparency of certain financial transactions?
Mr. Otting. It is my number two priority behind CRA. And I
will tell you, I have dedicated an enormous amount of time in
the last 5-1/2 months to BSA. I think we are at the table now
with the right issues identified. And I think with the working
group we are creating with FinCEN, the FDIC, the Fed, and the
National Credit Union Association, I think that we will move
that dial over the next 3 to 6 months.
Mr. Emmer. Fantastic. Last, although I might have something
that leads from this, in your opening remarks today, you
mentioned exploring the expanded use of technology as a means
to lessen the reporting burden and improve the efficiency of
our BSA/AML efforts.
How do you see technological innovations like blockchain?
And artifical--you have talked about artificial intelligence a
little bit in your testimony today. And people have asked the
question, but nobody has gone directly at it. Blockchain
technology has some--appears to have major promise in terms of
the transparency and the ability to track where things are
going. And I am just wondering, how do you see a technological
innovation like blockchain technology impacting this space?
Mr. Otting. I agree with you, it does have promise. The
question will be how we use it in applications going forward.
Mr. Emmer. This is--and I guess what I am going to ask, it
is--there is an issue here in Congress, not enough people with
election certificates understand what this is. They seem to be
focused totally on cryptocurrencies every time they talk about
this technology, and that is an issue. But blockchain is a lot
more than cryptocurrencies, which is why folks in your
position, the more that you are learning about it, the more
that you are looking at the potential applications.
Have you done any of that yet or is this part of the group
that you are getting together?
Mr. Otting. It is not part of that initiative. We focused
on 14 items that we thought could improve the efficiency of
financial institutions complying with BSA and AML. We have not
focused on blockchain. I, like most people, am learning more
about this as it evolves. I had not even heard the word
``blockchain'' 6 months ago. And now, it is almost--
Mr. Emmer. Now it is the rage.
Mr. Otting. That is right.
Mr. Emmer. I guess going forward, I would love to be in
touch with you about the group that you put together for the
BSA/AML effort. And then also, as you get up to speed on
blockchain, how it might apply. Thank you very much.
I yield back.
Mr. Hill. The gentleman from Minnesota's time has expired.
The gentleman from Georgia, Mr. Loudermilk, is recognized
for 5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman.
Thank you, Mr. Otting, for being here. As you and I have
discussed before, one of my key issues is cybersecurity and the
protection of data. And I appreciate my colleague from way up
north bringing up the blockchain as we have discussed. I think
it is imperative that we decouple the conversation of
blockchain from cryptocurrency. And it is something that we
need to investigate as a method of secure communications and
data transactions.
But what I would like to focus on as far as cybersecurity
goes, can you briefly explain what are you doing in the OCC and
private sector to ensure that the data that, quite frankly, the
government forces businesses and individuals to pass along and
maintain, what are we doing to ensure the safety and security
of that data?
Mr. Otting. On an annual basis as part of our annual
examination of financial institutions--and generally, these are
the larger because we have some exemption for the smaller
institutions, we actually, as part of that, do an examination
of their data security and their technology. And there is a
formulaic approach to that examination. I would be happy to
have some of our people come over and walk you through that so
you understand it.
But, for the most part, we are checking security
parameters, we are checking hardware, we are checking their
software, their patchwork. All of that activity goes into that
final analysis. And then, if there are obvious actions that
need to take place, mostly they would result in an MRA, where
we would request certain actions associated with that
institution.
Mr. Loudermilk. OK. And I appreciate that.
One of the issues that I think hurts us, ultimately hurts
the American people, is we have a multiplicity of regulations
regarding cybersecurity. There doesn't seem to be a
consistency. Are we doing anything to actually coordinate with
other banking agencies to ensure that we are operating from the
same rule book basically?
Mr. Otting. The Department of Treasury is coordinating
amongst the agencies. In fact, I have a meeting this Friday
afternoon. They have taken on a role to coordinate and lead
amongst the agencies. We have been studying, analyzing,
providing data, and trying to get some more consistency to the
process within the agencies today.
So I would say, I have been here 5 or 6 months and I don't
know if that was going on before I arrived, but I would tell
you it is like full steam ahead at this point.
Mr. Loudermilk. Well, I appreciate that. And one thing to
keep in mind as we move forward, and I would like to continue
our engagement that we have already had with this issue, is one
of the areas of weakness I see is how many points of data we
have within the Federal Government. When you look at the PII of
individuals, do we have that same information in various
different agencies, which means the more instances you have of
the same data, the more likelihood that it is going to be
released? Is there something that we can do to centralize that
to give common access to that?
If I could shift gears real quick in the time we have
remaining and talk about the Bank Secrecy Act for a moment. I
know I have been advocating that since, what, the 1970's is
when we set the $10,000 limit for the currency transaction
report. And if we were to span that out over the course of time
with the rate of inflation, it should be at about $60,000
today, which is something I have been advocating for. But we do
have legislation that brings it to that from $10,000 to
$30,000.
Can you briefly explain why it is so important we modernize
the BSA by increasing these thresholds?
Mr. Otting. Well, the issue is we found 9 million currency
transactions reports on an annual basis out of the U.S. banking
system. Often, what we are finding is real legitimate
businesses that banks have been doing business with for a long
period of time, are tripping the currency structuring filters.
And that structuring then causes us to produce paper that I
think in the end really is unwarranted.
Mr. Loudermilk. More paperwork, red tape as the people know
it, and little of it actually leads to--
Mr. Otting. Right.
Mr. Loudermilk. --actually accomplishing the goal at hand.
So are you comfortable--final, with the 30 seconds I have, do
you think the threshold of $30,000 will provide adequate relief
of the overburdensome paperwork?
Mr. Otting. I think it is a great step in the right
direction.
Mr. Loudermilk. We could go a little further?
Mr. Otting. I think that is a fair place to start.
Mr. Loudermilk. OK. All right. Thank you.
And I yield back the remainder of my time, Mr. Chairman.
Mr. Hill. The gentleman from Georgia yields back the
balance of his time.
The gentleman from Tennessee, Mr. Kustoff, is recognized
for 5 minutes.
Mr. Kustoff. Thank you, Mr. Chairman.
And thank you, Comptroller Otting, for being here this
morning and this afternoon. If I could, I would like to follow
up with some questions asked by Congressman Emmer as it relates
to the BSA/AML reform. I agree with your testimony where you
said that we need to reform the BSA/AML to be more efficient,
while improving the ability of the Federal banking system and
law enforcement to safeguard the Nation's financial system from
criminals.
If you could, could you discuss some of the most burdensome
components that banks face under the current BSA/AML structure?
Mr. Otting. Yes, I think there are three I would say core
things. It is the number of CTRs that need to be filed, which
is around 9 million. It is the SARs which is about 1 million.
And then today, the way we do examinations, we do not have a
risk-based examination process; it is a one size fit all. And
you may have missed it, but I said, if you have a management
team that is highly rated with a very strong compliance
department, a very strong BSA, and a low-risk customer base, we
examine that entity the same as we have a weak management, a
weak compliance, a weak BSA, and a high-risk. And we need to
bring balance, because when these entities are showing we have
good solid programs in place, to put them through all of those
same activities, in my mind, is duplicative.
Mr. Kustoff. As it relates to the SARs, do you have a
recommendation? If you could wave a magic wand, what that level
would be?
Mr. Otting. Well, on the currency transaction report or the
SARs?
Mr. Kustoff. Let's talk about the SARs first.
Mr. Otting. OK. So I think the question that we have with
SARs is there is a million SARs being filed a year, and I think
a lot of the SARs, we have gotten banks to the point where they
are so nervous that they file a SARs on anything just to get--
so no one ever can come back.
I think we need to be able to introduce some flexibility in
there that we are not--if we are only looking at a very small
percentage of the SARs, then having a high standard of 100
percent accuracy is difficult. So there are some estimates that
15 to 20 percent of all SARs being filed, which would be
200,000 SARs, are just being filed because people are saying I
don't want the risk of the regulator coming in and saying I
didn't fill the SARs out. And I just think we need to have a
little bit more flexibility with financial institutions in that
regard.
Mr. Kustoff. Thank you.
I know that there have been a fair number of questions
today about the Community Reinvestment Act, and you have
certainly testified about that. And I do appreciate and applaud
your commitment to updating these policies.
When it comes to reforming CRA, can you address or describe
some of those most pressing needs that you see in terms of
reforming CRA?
Mr. Otting. Yes. First of all, I want financial
institutions to do more in the communities across America that
need it. And I think in some regards, we haven't created the
on-ramp for them to do that. And we have done that by not
allowing certain products and services to be counted as CRA,
and they just fundamentally should. That is number one.
Number two is I think we have to create a measurement
system that, in my mind, allows us to look at financial
institutions and be consistent across the size and complexity
of the system of what is their commitment to the communities to
which they operate.
And then the third is we have to be able to turn exams and
processes around quicker. And if we can standardize the
measurement process, then we can almost have perpetual
observation. I believe in the future people will choose--just
like they do entities that are green or do something specific,
I think people will choose to bank with people that they think
are investing in their communities.
Mr. Kustoff. Well, as it does relate to the exams, that is
probably one of the biggest complaints that I hear from my
financial institutions back in my district. What can you do to
reduce the time that it takes to complete the examination or--
Mr. Otting. I think if we can simplify the measurement
method. And you may have been out of the room but, we are
proposing a framework where you either take deposits tier one
capital or total assets. And then you take all the CRA
activities that someone is doing and you just divide that. So
you have $100 million in CRA activities, you have $1 billion
balance sheet, that says that you have 10 percent of that
activity committed. And we can take a small community bank or a
large JPMorgan and be able to make a determination. That, I
could do in about an hour. Instead, we spend these 120 days
doing the CRA exams that are very complex, very subjective, and
are relative as opposed to absolute in their ability to define
what a company is doing in CRA.
Mr. Kustoff. Thank you very much. And I yield back the
balance of my time.
Chairman Hensarling [presiding]. The time of the gentleman
has expired.
The Chair now recognizes the gentlelady from New York, Ms.
Tenney.
Ms. Tenney. Thank you, Mr. Chairman.
And thank you, Mr. Otting, for being here. We appreciate
your work you are doing. And unfortunately, I get to be last,
so many of my questions have been already asked. But I do want
to just say a little bit about the Community Reinvestment Act
to get into and finish up what my colleague, Mr. Kustoff, was
talking about. And we do appreciate your looking at finding
alternatives and moving banks more in the realm of investing in
their communities and also focusing on, not just on the
residential side, but on the community side.
Can you tell me just a couple of the issues where--
enhancing what your answer was to Mr. Kustoff--where we can--as
you know, we have national and community banks--but where we
can focus some of those banks on reinvestment in our local
communities, especially in my region where agriculture is our
No. 1 industry and dealing with small business development?
Because we actually have--almost 98 percent of our businesses
in our district and our community are small, and how you would
do that from your position as the Comptroller?
Mr. Otting. Well, I think it is often making what people
are doing in the community to be CRA qualified. And as you
know, the CRA plan also extends itself into the agricultural
community. So I think when you think about--I have used
examples where churches are doing things for certain people
that is not religious but it is community building. I think
those should qualify. I think businesses that are above $1
million in revenue, that today are blocked by being qualified,
that we can make those available to CRA. So I think--and then
there are a lot of activities that institutions do around
financial literacy, that I think those should be included and
counted as in the service test as well.
Ms. Tenney. OK. Thank you.
And when it comes to the Bank Secrecy Act and the anti-
money laundering act, I know one of the biggest complaints that
I get, and you have talked about this a little bit, but if you
could just enhance--we have a lot of small and community banks,
and this is a burden, this compliance cost. They don't look--
they look very small on the larger scheme of things, but when
you are dealing with a small bank, you have suggested there are
other ways that we can maybe pool these resources or come up
with a solution to make it more affordable in terms of
compliance.
Can you just elaborate on some of that that you might have
mentioned?
Mr. Otting. Yes. I think there are the short-term things
that we can do to make it less burdensome without reducing our
ability to catch the bad people, and that is probably what we
are working on with the interagency group. And then I think
long term, we have to think through the large banks have their
own infrastructures and they can combine data pools with other
banks. But most of the small banks use actually third-party
servicers. And my thought is, is that third-party servicer can
begin to look at ways that they can help banks look across a
multitude of institutions to help them identify when there are
bad people using a multitude of banks, and then alert those
banks the reverse--alerting those banks that we see irregular
activity amongst your customer base, as opposed to waiting for
a CTR or a SARs to cause that to be identified.
Ms. Tenney. That would be great. Now, in terms of
determining what would be a SAR, do you agree or disagree--I am
curious about your opinion on should we have arbitrary numbers
that determine whether we are investigating or looking into
suspicious activity reports? And what is your opinion on that?
Should it be an arbitrary number or should we look at more,
like, the activity, the other--the frequency--
Mr. Otting. There is a floor on the SARs of $5,000. There
is not a floor for any employee-related activity, and we have
talked within the agency about raising the floor. If a teller
who takes $200, should you really have to fill out a SARs for
that? But above that floor, generally what we are asking people
to do is if there is foreign money coming into an account, and
if all of a sudden somebody opens up an account and money
starts flowing in from one of the countries that we have
concerns about; I am not sure when you say there are good
descriptors of what is expected to be high risk. People look at
that and when you see those kind of activities, that is what
justifies a SAR.
Ms. Tenney. I am just thinking frequency. Sometimes they
might be smaller dollar amounts and maybe suspicious in another
realm, which, again, these are all compliance issues. But I
appreciate your willingness to look in and help our smaller
regional--and especially in New York where we have not too many
New York banks left that are really able to function in this
highly regulated space because we have a very aggressive
regulatory regime coming out of the State.
But I appreciate your work in trying to help us and give us
some relief on the Federal side, because we really are--as we
see the economy getting a little more vibrant, we are
definitely looking to our banks for more loans and lending and
adding jobs. So we appreciate your hard work over there.
Mr. Otting. Thank you very much
Ms. Tenney. Thank you so much. I yield my time.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Arkansas, Mr.
Hill.
Mr. Hill. I thank the Chairman.
As a former community banker for over 2-1/2 decades in my
home State of Arkansas and also a former Treasury official in
the ancient days of the Bush 41 Administration, I want to thank
you for accepting this appointment and serving us as our
Comptroller of the Currency. I want to commend you for your
effectiveness in developing your budget and looking out for,
not only the goals of the agency, but taxpayers, by actually
proposing a reduction in how much money you are able to spend,
yet carry out the mission of the OCC. And I want to commend you
for the ideas you have on CRA reform and regulatory burden,
generally, by tailoring regulatory burden. So thanks for being
with us.
First thing I want to raise is, as you know, I am not a fan
of the rule that has now been promulgated, the so-called CDD
rule that is to enhance the disclosure of information on
beneficial ownership. I think it still has a long way to go. I
think I have made those views clear. I think it is going to be
the most costly rule probably promulgated in the Trump
Administration this year, potentially.
So one thing that I noted that was concerning that FinCEN
issued some relief from was this idea of rollover CDs. So you
come in the bank, you buy a CD, you fill out, Know Your
Customer rule requirements, but then it is on a rolling basis
every 6 months annually. FinCEN granted temporary relief from
having to refill out and reascertain the beneficial ownership.
Would you support that being considered a permanent change
in the rule or permanent waiver, if you will, to that on a
rollover CD that was properly opened?
Mr. Otting. It would seem to be prudent, especially if they
did the documentation on the front end of that.
Mr. Hill. Right. My question assumes absolute appropriate
documentation for the account. Thank you for that.
Something else that you and I have talked about, just
putting our banker hats back on, philosophically, do you agree
that banks, when they set an interest rate for a credit, either
a consumer credit or commercial credit, they are trying to
price that credit for risk, the credit risk embedded in that
transaction, you agree with that?
Mr. Otting. I do.
Mr. Hill. And do you agree that local economic conditions
are a factor, a parameter in which a bank loan committee or
loan officers would take into account in order to set that
pricing? You think that is--would that be generally true? In
other words, local economic conditions are relevant to the
pricing for risk for a loan?
Mr. Otting. They do in the event that it would impair the
source of repayment.
Mr. Hill. Right. Yes, I agree too. And yet I would really
urge you, in your new role as our Comptroller of the Currency,
to look at that in the context of consumer compliance laws on
lending where I don't believe that pricing for risk is really
permitted. And I am talking about geographic risk or a local
industry risk on those sources, where the sources of repayment
really could be compromised. I think there is a lot of demand
by the regulatory agencies that you can only have one loan
price, no matter how big the territory of the bank for a
consumer loan. I would invite you to look at that.
On the Volcker proposal, we have also talked about that
before, and you know my strong feelings about harmonizing the
interpretation of the Volcker act. I was very pleased in 2155,
enacted into law now, that we exempt our community banks from
the vagaries and confusion and complexity and inconsistency of
Volcker for our community banks. And I know you will be
adjusting your Volcker Rule as it proceeds for that new law.
But when I read the Volcker 2.0 proposal summary section by
section, I have to tell you, I found it more complex, less
clear. In fact, it posed over 1,000 different court of
inquiries for more information or questions, meaning that our
regulators are just as confused as they were 8 years ago about
trying to come up with a commonsense definition for Volcker.
Things like the revised definition on the trading account. I
didn't find that more clear. Covered funds, which was the whole
point, really, if you go back to the legislative intent, it
just seemed their proposed rule punted on that and basically
said it is in the too-hard stack that people have and it
couldn't be solved. And then their metrics and reporting and
recordkeeping look more burdensome to institutions subjected to
it.
So we don't have time to discuss it today. I know we will
have a chance to talk about it, but I really urge you as you
review these comments, I don't think you are on the right
track.
And thank you, Mr. Chairman. I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair observes no other Members in the queue, thus we
are prepared to release the witness.
I want to thank the witness for his 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.
I would ask, Mr. Otting, that you please respond promptly
as you are able.
Now this hearing stands adjourned.
[Whereupon, at 12:40 p.m., the committee was adjourned.]
A P P E N D I X
June 13, 2018
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