[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                    BANKING INNOVATION OR REGULATORY
                      EVASION? EXPLORING TRENDS IN
                     FINANCIAL INSTITUTION CHARTERS

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

                            VIRTUAL HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON CONSUMER PROTECTION
                       AND FINANCIAL INSTITUTIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 15, 2021

                               __________

       Printed for the use of the Committee on Financial Services
       
      

                           Serial No. 117-16
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
44-664 PDF                  WASHINGTON : 2021                     
          
--------------------------------------------------------------------------------------
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
     Subcommittee on Consumer Protection and Financial Institutions

                   ED PERLMUTTER, Colorado, Chairman

GREGORY W. MEEKS, New York           BLAINE LUETKEMEYER, Missouri, 
DAVID SCOTT, Georgia                     Ranking Member
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             BILL POSEY, Florida
AL GREEN, Texas                      ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JUAN VARGAS, California              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   TED BUDD, North Carolina
MICHAEL SAN NICOLAS, Guam            DAVID KUSTOFF, Tennessee, Vice 
SEAN CASTEN, Illinois                    Ranking Member
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
RITCHIE TORRES, New York             WILLIAM TIMMONS, South Carolina
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 15, 2021...............................................     1
Appendix:
    April 15, 2021...............................................    47

                               WITNESSES
                        Thursday, April 15, 2021

Brooks, Brian P., former Acting Comptroller of the Currency, 
  Office of the Comptroller of the Currency (OCC)................    13
Carrillo, Raul, Deputy Director, LPE Project, and Associate 
  Research Scholar, Yale Law School..............................     6
Gerding, Erik F., Professor of Law, and Wolf-Nichol Fellow, 
  University of Colorado Law School..............................     8
Johnson, Kristin, Asa Griggs Candler Professor of Law, Emory 
  University School of Law.......................................    10
Pacheco, Carlos, CEO, Premier Members Credit Union, on behalf of 
  the National Association of Federally-Insured Credit Unions 
  (NAFCU)........................................................    11

                                APPENDIX

Prepared statements:
    Brooks, Brian P..............................................    48
    Carrillo, Raul...............................................    67
    Gerding, Erik F..............................................    93
    Johnson, Kristin.............................................   122
    Pacheco, Carlos..............................................   153

              Additional Material Submitted for the Record

Perlmutter, Hon. Ed:
    Written statement of the American Bankers Association (ABA)..   165
    Written statement of the American Financial Services 
      Association (AFSA).........................................   173
    Written statement of the Bank Policy Institute (BPI).........   175
    Written statement of the Consumer Bankers Association (CBA)..   179
    Written statement of the Financial Technology Association 
      (FTA)......................................................   181
    Written statement of the Independent Community Bankers of 
      America (ICBA).............................................   184
    Written statement of the National Association of Industrial 
      Bankers (NAIB), the Utah Bankers Association, and the 
      Nevada Bankers Association.................................   188
    Written statement of VaultLink...............................   194
McHenry, Hon. Patrick:
    Written statement of the Bank Policy Institute (BPI).........   175
    Written statement of the Consumer Bankers Association (CBA)..   179
    Written statement of the Credit Union National Association 
      (CUNA).....................................................   195
    Written statement of the Independent Community Bankers of 
      America (ICBA).............................................   184
    Written statement of the National Association of Industrial 
      Bankers (NAIB), the Utah Bankers Association, and the 
      Nevada Bankers Association.................................   188

 
                    BANKING INNOVATION OR REGULATORY
                      EVASION? EXPLORING TRENDS IN
                     FINANCIAL INSTITUTION CHARTERS

                              ----------                              


                        Thursday, April 15, 2021

             U.S. House of Representatives,
                Subcommittee on Consumer Protection
                        and Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:06 a.m., 
via Webex, Hon. Ed Perlmutter [chairman of the subcommittee] 
presiding.
    Members present: Representatives Perlmutter, Meeks, Scott, 
Velazquez, Sherman, Green, Foster, Vargas, Lawson, San Nicolas, 
Casten, Pressley, Torres; Luetkemeyer, Lucas, Posey, Barr, 
Williams of Texas, Loudermilk, Budd, Kustoff, Rose, and 
Timmons.
    Ex officio present: Representatives Waters and McHenry.
    Also present: Representative Garcia of Illinois
    Chairman Perlmutter. Good morning, everyone. The 
Subcommittee on Consumer Protection and Financial Institutions 
will come to order. Without objection, the Chair is authorized 
to declare a recess of the subcommittee at any time. Also, 
without objection, members of the full Financial Services 
Committee who are not members of this subcommittee are 
authorized to participate in today's hearing.
    As a reminder, I ask all Members to keep themselves muted 
when they are not being recognized by the Chair, to minimize 
disturbances while Members are asking questions of our 
witnesses.
    The staff has been instructed not to mute Members except 
where a Member is not being recognized by the Chair, and there 
is inadvertent background noise. Members are reminded that all 
House rules relating to order and decorum apply to this remote 
hearing. If Members wish to be recognized during the hearing, 
please identify yourself by name to facilitate recognition by 
the Chair.
    Members are also reminded that they may participate in only 
one remote proceeding at a time. If you are participating 
today, please keep your camera on, and if you choose to attend 
a different remote proceeding, please turn your camera off.
    We are in a very busy time, but we have a subject that I 
think is particularly important and really goes to the heart of 
our subcommittee's business.
    Today's hearing is entitled, ``Banking Innovation or 
Regulatory Evasion? Exploring Trends in Financial Institution 
Charters.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    In 1863, President Lincoln signed the National Currency Act 
into law, taking the first step in establishing the national 
banking system. One of the primary goals of the National 
Currency Act and the subsequent National Bank Act was the 
standardization of currency to protect consumers against 
uncertainty in the valuation of bank notes, rampant 
counterfeiting, and fraud. In his 1864 address to Congress, 
President Lincoln said the fact that the government and the 
people will derive great benefit from this change in the 
banking systems of the country can hardly be questioned. A 
national system will create a reliable and permanent influence 
in support of the national credit and protect people against 
losses in the use of paper money.
    At the heart of our banking system, there is a promise of 
consumer protection and benefit to the people. President 
Lincoln knew our national banking system needed to be reliable, 
stable, honest, consistent across all States, and effective. 
Over the last 150 years, the banking system has changed a great 
deal, but its core mission to serve the people by taking 
deposits, offering credit, and facilitating and intermediating 
transactions, remains principally the same.
    In recent years, a variety of non-bank and Fintech 
companies have sought to engage in the business of banking or 
in activities very similar to banking. Few of these companies 
have sought traditional banking charters either because they 
are wary of the additional regulation and supervision that 
comes with being a bank or because the structure of their 
business does not fit squarely within a traditional charter. 
Many of the unconventional charters do not come with the same 
level of regulation and supervision that traditional charters 
require.
    Despite the innovations of the last 10 years, many of the 
questions we will be discussing today are not new. Industrial 
loan companies (ILCs) have been around since 1910, and the 
debate over the separation of banking and commerce predates 
even the National Currency Act. In recent years, the Office of 
the Comptroller of the Currency (OCC) has granted Fintech 
companies banking charters, but the debate about what 
constitutes the business of banking and what makes banks 
special is a much older conversation.
    We do not want to slow innovation, but it is the Congress' 
duty to ensure that change comes at the benefit of, and not to 
the detriment of, the people. As the economy continues to 
reopen from the pandemic, it is important that our financial 
system remains stable and strong and that consumers are treated 
fairly and honestly. Most banks and credit unions have been a 
source of strength in the pandemic, in part because of the 
stringent capital, liquidity, and other regulatory requirements 
we place on these financial institutions.
    I look forward to the discussion today. I want to 
compliment the panel on their very thorough written testimony, 
and I will be very interested to see how well all of you can 
stick to 5 minutes, based on your written materials. But we are 
going to be dealing with financial stability risks, consumer 
protection issues, market fairness questions, and the potential 
benefits of non-traditional banking charters.
    Additionally, I would like to ask both the committee 
members and the witnesses today to consider how we can 
encourage innovation alongside strong consumer protections, 
adversity, and inclusion in our banking system. With that, I 
will yield back, and I would like to now recognize the ranking 
member of the subcommittee, Mr. Luetkemeyer, for 4 minutes for 
his opening statement.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, for having this 
hearing on this important topic.
    And thank you to our witnesses today. I look forward to 
your testimony.
    As many of you know, before coming to Congress I was 
involved in the banking business both as a banker and as a 
regulator for many, many years. While it may surprise you to 
know I was not around during the Great Depression, I have seen 
a lot of changes within the banking industry during my 40 years 
as a regulator and a banker. And, Mr. Chairman, you don't need 
to be laughing at that. You are not much younger than I am.
    I remember the Savings and Loan crisis of the 1980s. I 
remember when people thought the innovation of credit and debit 
cards would completely eliminate checks. I also remember when 
the Community Reinvestment Act (CRA) was signed into law, and, 
like everyone at this hearing, I remember the crash of 2008. 
Throughout the years, banking has been fluid. It has changed 
with the times, adapted to become more capitalized, and adapted 
to serve more Americans.
    We are having this hearing today because the banking system 
is changing once again. In the last decade we have seen a rise 
in technology or Fintech companies that have truly pushed the 
innovation of the banking industry from mobile payments to 
algorithmic lending, and much more. As these entities have 
grown significantly in the last decade and become more 
permanent in our banking system, they have begun to seek out 
chartering options that are consistent with the growth of their 
companies. The OCC has been extremely active in this space and 
sought to provide a chartering option for Fintechs through a 
special purpose national bank charter for Fintechs. However, 
that decision has been tied up in the courts in recent years. 
The OCC has also discussed the idea of a national charter for 
payment companies and separately has approved anchorage for a 
national trust charter, making it the first digital asset bank.
    We should examine the pros and cons of the OCC's actions, 
but we should also examine the role of State banking regulators 
and regulation charting of Fintechs. Is the current State 
regulatory regime adequate and is it necessary for the program 
to get involved?
    Another pathway explored by numerous entities to enter the 
banking system is the industrial loan company (ILC) charter. 
While ILC's are regulated on a Federal level by the FDIC and 
supervised by State regulators, the parent company is not 
considered a bank holding company by the Bank Holding Company 
Act. This is a critical difference between bank holding 
companies that are supervised by the Federal Reserve and are 
restricted by law in activities closely related to banking. The 
separation of banking and commerce has been a key staple of our 
dual banking system, and the rise of the ILC approvals and 
applications does raise questions of banking and commerce 
separation safety and soundness, and privacy, questions which I 
look forward to asking today.
    However, before Congress acts rashly to eliminate any 
chartering options, it is critical to look at the entire 
ecosystem of chartering in the banking industry. For example, 
since 2010, there have been only 43 de novo banks. In that same 
period of time, the number of FDIC-insured depositories has 
decreased by roughly 2,000 institutions; that is almost 4 banks 
per week.
    In addition, the innovation of Fintech companies has 
largely increased access to credit and lowered the number of 
unbanked and underbanked people in our society. The current 
bank-Fintech partnership model has proven extremely successful 
not only in providing more services and access to businesses 
and consumers, but also significant consumer protections and 
oversight to the regulation and supervision of banks. Congress 
should examine all of these issues when taking action affecting 
the charters of institutions.
    I have always said that if you want to be a bank, you need 
to be regulated like a bank. If you believe this can be 
accomplished while providing a regulatory and chartering 
framework that allows Fintech companies to continue to thrive 
in the banking industry, while protecting the status of banks 
as the bedrock of our financial system, so be it. I look 
forward to raising these questions today. And with that, Mr. 
Chairman, I yield back. Thank you so much for the hearing.
    Chairman Perlmutter. I thank the gentleman.
    The Chair now recognizes the Chair of the full Financial 
Services Committee, the gentlewoman from California, Chairwoman 
Waters, for the balance of our 5 minutes, which I think is 
about a minute and 23 seconds.
    Chairwoman Waters. Thank you very much, Chairman 
Perlmutter, for holding this very important hearing.
    The pandemic has accelerated the way people use technology 
to bank, obtain a loan, and make payments. At the same time, 
State regulators, community banks, credit unions, and consumer 
advocates have raised alarms about how new entities, including 
Big Tech firms, are receiving unconventional charters and 
offering banking products and services while evading 
regulations with which most banks, including community banks, 
comply.
    Additionally, the OCC has overstepped its authority, 
pretending that laws signed by Abraham Lincoln were intended to 
create charters for Fintech or cryptocurrency. I look forward 
to hearing from our panel on how Congress can promote 
responsible innovation that does not lead to a regulatory race 
to the bottom, where consumers get hurt and the safety and 
soundness of our financial system is once again in peril.
    I yield back the balance of my time, and I thank you very 
much.
    Chairman Perlmutter. Thank you. The gentlelady yields back.
    Now, I would like to recognize the ranking member of the 
Full Committee, the gentleman from North Carolina, Mr. McHenry, 
for the balance of his 5 minutes.
    Mr. McHenry. Thank you, Mr. Chairman.
    And, Mr. Brooks, I want to personally thank you for your 
leadership at the OCC and for testifying today. I wish you the 
best in your future endeavors.
    It is clear that my colleagues on the other side of the 
aisle want to relive old debates here in the committee, and 
this is certainly an old debate. In framing this discussion, I 
will have to go back to my talking points in my notes from 
2005, 2006, and 2007. I have used this quote before, but to 
quote Talleyrand in speaking about the Bourbon dynasty, ``They 
had learned nothing and forgotten nothing.'' It is all the same 
here, yet consumers and businesses have preferences and 
continue to evolve.
    The private sector is innovating in new ways to meet the 
needs of all of our consumers, and we should be encouraging our 
regulators to seek regulatory requirements that fit these 
advancements, not hinder them. Republicans support promoting an 
up-to-date regulatory framework that sets clear rules of the 
road for all participants. We want, and will continue to work 
for, the most inclusive financial system possible. And I yield 
back.
    Chairman Perlmutter. The gentleman yields back, and that is 
the first time I have heard about Talleyrand in 11 or 12 years, 
so thank you very much, Mr. McHenry.
    I am now pleased to welcome each of our witnesses, and to 
introduce the panel. And I will let you all know that there are 
three Coloradans on this panel, which makes it a particularly 
outstanding group to testify before the committee.
    First, we have Raul Carrillo, who is the deputy director of 
the LPE Project, and an associate research scholar at Yale Law 
School. Mr. Carrillo's work focuses on the legal foundations of 
money, banking, and finance as a legal technology and mode of 
governance. Prior to joining the LPE Project, Mr. Carrillo was 
policy counsel at the Demand Progress Education Fund and a 
fellow at the Americans for Financial Reform Education Fund.
    Second, we have Erik Gerding, who is a law professor and a 
Wolf-Nichol Scholar at the University of Colorado Law School. 
Professor Gerding's research interests include banking law, the 
regulation of financial products and institutions, payment 
systems, and corporate governance. He has written extensively 
on the interaction between asset price bubbles and financial 
regulation. Professor Gerding previously taught at the 
University of New Mexico School of Law, and he has practiced 
law in New York and Washington.
    Our third panelist is Kristin Johnson, who is the Asa 
Griggs Candler Professor of Law at Emory University School of 
Law. Ms. Johnson's recent work includes a focus on emerging 
technologies such as distributed digital ledger technologies, 
which have enabled the creation of digital assets and 
intermediaries. Prior to her work at Emory University School of 
Law, Ms. Johnson served as the McGlinchey Stafford Professor of 
Law and Associate Dean for Faculty Research at Tulane 
University Law School.
    Our fourth panelist is Carlos Pacheco, who is the CEO of 
Premier Members Credit Union in Colorado, testifying on behalf 
of the National Association of Federally-Insured Credit Unions 
(NAFCU). Mr. Pacheco has been CEO of Premier Members Credit 
Union since 2011, and he also serves as the board director for 
the Denver Boulder Better Business Bureau, and the cabinet 
campaign chair for the Foothills United Way.
    Finally, we have former Comptroller of the Currency Brian 
Brooks, a native Coloradan from Pueblo, Colorado. Mr. Brooks 
served as Acting Comptroller of the OCC from May 29, 2020, to 
January 14, 2021, after serving as Senior Deputy Comptroller 
and Chief Operating Officer at the OCC, where he oversaw bank 
supervision, systemic risk identification support, innovation, 
and other issues. Prior to his work at the OCC, Mr. Brooks 
served as chief legal officer of Coinbase Global, a 
cryptocurrency exchange.
    Oh, and I should say to the two panelists not from 
Colorado, we would be happy and honored if you chose to come to 
Colorado.
    Witnesses are reminded that your oral testimony will be 
limited to 5 minutes. You should be able to see a timer on your 
screen that will indicate how much time you have left and a 
chime will go off at the end of your time. I would ask you to 
be mindful of the timer and quickly wrap up your testimony if 
you hear the chime so we can be respectful of both the 
witnesses' and the committee members' time. And without 
objection, your written statements will be made a part of the 
record.
    Once the witnesses finish their testimony, each Member will 
have 5 minutes to ask questions.
    We will begin with Mr. Carrillo. You are now recognized for 
5 minutes to give an oral presentation of your testimony.

 STATEMENT OF RAUL CARRILLO, DEPUTY DIRECTOR, LPE PROJECT, AND 
          ASSOCIATE RESEARCH SCHOLAR, YALE LAW SCHOOL

    Mr. Carrillo. Thank you, Chairman Perlmutter, for the 
invitation. And thank you to Chairwoman Waters, Ranking Member 
McHenry, Ranking Member Luetkemeyer, and all of the members of 
the subcommittee. I offer my testimony as an associate research 
scholar at Yale Law School, but most of my principles here were 
created or developed by me as an attorney fighting and building 
on behalf of low-income and no-income clients in New York City, 
along with a group called New Economy Project.
    I echo my remarks to the Financial Technology Task Force 
last September and humbly request that everyone consider the 
deeper impacts of Fintech on democracy. There is now a need for 
serious stewardship. The pandemic response and the actions by 
regulators have cast into relief the fundamental ways in which 
governments shape money and markets. There is no taking 
politics out of tech because there is no taking the law out of 
tech or vice versa. Like physical tools, humans create and use 
legal tools with certain ideas for their use in mind.
    This morning, I have the luxury of presenting alongside 
Professor Johnson, and Professor Gerding, and I will thus defer 
to them on many issues or otherwise point to my written 
testimony. I would like to focus on one underemphasized 
dimension of Fintech here today, and that is privacy and 
security. I hope to stress that the mass perpetual preemptive 
and predictive surveillance that is perpetuated by both the 
Government and private technology companies, often very much in 
partnership, including Fintech companies, should be of deep 
concern to everyone, regardless of party affiliation.
    Civil rights and civil liberties including our fundamental 
freedoms under the Fourth Amendment, the First Amendment, and 
general law, warrants the parliament and the commoners won 
against the tyranny of King George. Certain invasive products 
and partnerships should not be allowed in our system regardless 
of whether they are considered to be arbitrage or not by 
regulators. Treating innovation as an unqualified good does not 
lead us to equitable, sustainable, cooperative innovation that 
allows us to truly prosper together.
    As Vanderbilt Law Professor Morgan Ricks has stressed, and 
President Lincoln might agree, money is infrastructure. As 
scholars like Christine Dezan and Lev Menand stress, money is 
also part of our constitutional order, and regulation flows 
from Congress' authority over the public purse.
    On the corporate side, surveillance has now become the 
business model of Fintechs and many other companies. Congress 
should shift the burden of privacy protection away from 
consumers by establishing a short list of permissible purposes 
for data collection and banning all others. This is envisioned 
by Senator Brown's Data Act of 2020. This is especially 
important because the government currently deputizes financial 
institutions as anti-money laundering (AML) cops on the beat.
    In 1992, Congress required the filing of suspicious 
activity reports (SARs), relevant to any possible violation of 
the law. This has incentivized unburdened firms who must act as 
cops on the beat and send data, often automatically, to 
government ``fusion centers.'' At these ``fusion centers,'' 
which serve as data platforms for local and Federal law 
enforcement, Peter Thiel's Palantir aggregates information and 
shares it more widely with law enforcement around the world.
    Unfortunately, there is a hole in Fourth Amendment 
doctrine. The court has claimed that we cannot have an 
expectation of privacy in anything shared with a business. This 
means, as the crypto community will tell you, that there is no 
privacy in finance. Our infrastructure has no place for privacy 
within it. This impinges not only on our Fourth Amendment 
rights, but on our First Amendment values of freedom of 
association and freedom of speech, especially for certain 
vulnerable communities.
    In this context, it is deeply troubling to me that Fintech 
promotes financial inclusion via increasingly invasive 
biometric data. Moreover, an app or a bank account is not the 
answer to every problem. As Berkeley Law Professor Abbye 
Atkinson has recently stressed in concert with community 
advocates, credit is not a structural cure for poverty. It has 
downsides. People need better wages and better benefits.
    Just as importantly, we should not consign everyday folks, 
including necessarily ourselves, to unnecessary and dangerous 
invasions of their privacy, our privacy, in order to 
participate in the payment system. We deserve to be one in the 
crowd. SARs have not made us safer. It is true that money 
laundering often occurs without notice. The most notorious 
example is HSBC's actions in laundering money for the Sinaloa 
cartel in Mexico.
    Between 2010 and 2012, 18 financial institutions have 
received deferred prosecution agreements. At least four of them 
have broken the same AML law again and simply received another 
fine. BuzzFeed news and the International Consortium of 
Investigative Journalists recently released thousands of FinCEN 
files showing that the system does not work by its own logic, 
and again, does not make us safer.
    I see the evolution of digital cash as a middle ground 
between privacy technology like crypto and folks who want the 
banking system to spy on all of us. I join Morgan Ricks, Lev 
Menand, John Crawford, Mehrsa Baradaran, Bob Hawkins, Holly 
Marova, and many others in advocating for public bank accounts 
at the Federal level. And I also join the activists fighting 
for this on the State and local level. Just as importantly, 
though, we need cash wallets that replicate the true privacy 
that a closed container for our cash has created.
    The lead technologist on this and the best work is coming 
from Rohan Grey who is privacy lead at the International 
Telecommunications Union--
    Chairman Perlmutter. Mr. Carrillo?
    Mr. Carrillo. --and is very important for future security. 
Thank you.
    [The prepared statement of Mr. Carrillo can be found on 
page 67 of the appendix.]
    Chairman Perlmutter. The gentleman's time has expired. 
Thank you, sir.
    Professor Gerding, you are now recognized for 5 minutes to 
give an oral presentation of your testimony.

STATEMENT OF ERIK F. GERDING, PROFESSOR OF LAW, AND WOLF-NICHOL 
           FELLOW, UNIVERSITY OF COLORADO LAW SCHOOL

    Mr. Gerding. Thank you, Chairman Perlmutter, Ranking Member 
Luetkemeyer, Chairwoman Waters, Ranking Member McHenry, and 
members of the subcommittee for inviting me to testify today. 
My name is Erik Gerding. I am a law professor at the University 
of Colorado, where my research focuses on banking and 
securities laws. I will focus my testimony today on three 
things: first, the FDIC decision to reopen applications for 
deposit insurance for industrial loan companies; second, the 
OCC's radical new Fintech charter; and third, and more broadly, 
why banking law separates banking from commerce and commercial 
firms from banking.
    That last issue came to a head in 2005 when Walmart applied 
to the FDIC for deposit insurance for a new ILC that Walmart 
was seeking to charter. Walmart's applications set off a 
political and legal firestorm. This firestorm is now 
threatening to re-erupt now that the FDIC and the OCC are 
reopening Pandora's Box through charters that would confer the 
powers and privileges of banks on non-banks. It is important 
that this committee look not just at initial applicants for 
charters because it is hard to see how the FDIC or OCC would 
come up with legally defensible distinctions that would keep 
out bigger companies like Amazon, Apple, Google, and Walmart 
from one or both of these non-bank bank charters.
    But why do we separate banking from commerce? What is the 
harm in endowing banks with the powers and privileges of 
banking? The concerns are not just progressive but also deeply 
conservative concerns. We should worry about commercial firms 
using bank charters to undercut rivals without charters. We 
should worry about conglomerates in retail and tech using the 
powers and privileges of banks to entrench market-dominant 
positions. We should worry about small retailers and small 
startup tech firms not being able to compete with well-
resourced and politically connected firms that have the powers 
of a government charter behind them.
    We should worry equally about banking conglomerates 
competing unfairly in non-bank markets. We should also worry 
about whether small banks and credit unions can face distorted 
competition. Most troubling, we should worry about a banking 
system that could quickly devolve into being dominated by the 
three bigs: Big Wall Street; Big Tech; and Big Retail. We 
should, in short, worry about the core reasons that we separate 
commerce and banking: to prevent concentrations of economic and 
political power; to prevent distortions in commercial markets 
that allow unfair government-subsidized competition; and to 
prevent distortions in banking markets that could leave banking 
markets destabilized and without the smallest community banks 
and credit unions. Non-bank charters could thus undermine one 
of the core missions they are purported to serve: offering 
greater access to financial services for underserved 
communities. There are better ways to serve that goal.
    I will turn quickly to the FDIC charter, because one thing 
I want the committee to understand is that it is important that 
ILC's are not subject to consolidated supervision by the 
Federal Reserve. Consolidated supervision is the cornerstone 
that allows bank regulators to ensure that large financial 
conglomerates, or large commercial conglomerates, are not 
playing games with subsidies that come with deposit insurance 
or the other powers and privileges of banking. Consolidated 
supervision is a world away from the ordinary supervision that 
the FDIC and the OCC apply to individual firms and 
institutions. That critical distinction is something that the 
committee must remember.
    I would urge the committee to reverse the power grab by the 
OCC, and foreclose and preclude the OCC from issuing any new 
charters to institutions that do not accept deposits. I would 
also urge the committee to close the ILC loophole and pursue 
other options for greater access to banking by underserved 
communities.
    [The prepared statement of Professor Gerding can be found 
on page 93 of the appendix.]
    Chairman Perlmutter. Thank you, Professor, and the chime 
didn't go off, so you hit it right on 5 minutes. And obviously, 
the testimony of all of our panelists--they are dealing with 
the purpose of the banking system, the history of the banking 
system, and the future of the banking system. So, this is a 
very comprehensive and complex subject that we all have, and I 
would recommend to the committee that they really look deeply 
into the materials that have been provided.
    Professor Johnson, you are now recognized for 5 minutes to 
give an oral presentation of your testimony.

 STATEMENT OF KRISTIN JOHNSON, ASA GRIGGS CANDLER PROFESSOR OF 
              LAW, EMORY UNIVERSITY SCHOOL OF LAW

    Ms. Johnson. Thank you so much. Good morning, Chairwoman 
Waters, Chairman Perlmutter, Ranking Member Luetkemeyer, and 
members of the committee and the subcommittee. Thank you for 
inviting me to this hearing examining banking innovation and 
regulatory evasion, and trends in financial institution 
charters.
    As the Chair mentioned, I am the Asa Griggs Candler 
Professor of Law at Emory University Law School where I teach 
courses on corporations securities law, emerging technologies, 
and financial markets, including the mouthful distributed 
digital ledger technologies, which we commonly describe as 
blockchain technologies, as well as the assemblage of 
technologies commonly described as artificial intelligence.
    I previously served as the McGlinchey Stafford Professor of 
Law and Associate Dean of Faculty Research at Tulane 
University. That was also noted, but I also served as director 
of the program on financial market stability at the Center for 
Law and the Economy. And if I may, I am a reformed capital 
markets and mergers acquisitions lawyer and served as in-house 
counsel and an analyst at two of the largest investment banks 
in global financial markets. My research promotes transparent, 
inclusive, responsible innovation, and focuses on the core 
values of financial markets regulation: promoting consumer 
protection maintaining fair and orderly markets; and ensuring 
the safety and soundness of financial markets.
    Over the last decade, a growing number of digital startups 
have launched bids to lure business away from the financial 
services industry. Increasingly, large technology platforms 
engaged in essentially commercial activities, as well as social 
media platforms, seek opportunities to conduct bank-like 
activities. Amazon, Google, and Facebook, among others, have 
launched a dizzying array of consumer credit and financial 
services.
    To echo Mr. Carrillo, and also my colleague, Professor 
Gerding, these firms comprise a small subset of a burgeoning 
spectrum of businesses integrating complex technologies and 
financial services armed with vast quantities of data and 
sophisticated algorithms that would be supervised and 
unsupervised machine learning platforms. These are algorithms 
inspired also by the creation and potential of blockchain-based 
technologies. These Fintech firms have revived long-standing 
debates regarding the architectural design, regulatory 
framework, and role of the financial services industry.
    This important hearing explores the nature of relationships 
among banking and non-banking financial institutions as well as 
the promise and peril or perils of extending special purpose 
non-bank charters to non-depository Fintech firms that do not 
engage in certain activities quintessentially understood as 
core banking functions as well as commercial firms seeking to 
obtain licenses to operate as industrial banks. As this 
committee discussed previously in a hearing in the fall, where 
Mr. Raul Castillo, who is here, and Professor Wilmart 
testified, the National Bank Act clearly limits the scope of 
the OCC's authority to issue Fintech charters to non-depository 
institutions.
    To quote others who have written extensively and researched 
the history of banking regulation and the canons of statutory 
interpretation, ``non-depository national bank'' is an 
oxymoron. I am happy to say more, citing the National Bank Act, 
in particular Section 24, the OCC's authority to extend 
charters. But I believe much of that is covered in the written 
testimony provided by witnesses today.
    Coupled with the movement by the OCC to expand charters, 
the industrial loan companies chartering question has emerged 
as an essential issue in today's hearing as well as in 
conversations and debates. Finally, this hearing, as the Chair 
has noted, covers a scope of financial technology firms and 
capture States that are issuing or distributing licenses for 
blockchain-based financial institutions or institutions 
custodying financial assets known as crypto assets also, so 
bank licenses to those entities as well.
    In my remaining time, I want to point out just the 
following issue that is of tremendous concern. These entities 
are operating with the promise of inclusion, but this promise 
is often inaccurate, misleading, and in some instances, a 
misrepresentation. Where the promise of inclusion attaches to 
vulnerable unbanked and underbanked populations, consumers who 
are, in many instances, families in fragile financial 
circumstances, it is critical for us to carefully examine the 
truths behind the promises that have been made, and install 
guard rails which would ensure that any entity operating in the 
banking space is subject to sufficient regulatory oversight.
    For families with fragile financial circumstances, as Mr. 
Carrillo pointed out, credit may serve as a lifeline, enabling 
consumers to meet short-term debt obligations and to pay for 
education, transportation, housing, medicine, child care, and 
even food. Without access to credit on fair and reasonable 
terms, it can be extraordinarily expensive to be poor.
    I would also point out the surveillance questions and 
highlight that COVID-19 has amplified these concerns. In the 
remaining time, I just encourage the committee to support the 
limitation on banking charters and ILC licenses.
    [The prepared statement of Professor Johnson can be found 
on page 122 of the appendix.]
    Chairman Perlmutter. Thank you, Professor.
    Mr. Pacheco, you are now recognized for 5 minutes to give 
an oral presentation of your testimony. Thank you.

STATEMENT OF CARLOS PACHECO, CEO, PREMIER MEMBERS CREDIT UNION, 
  ON BEHALF OF THE NATIONAL ASSOCIATION OF FEDERALLY-INSURED 
                     CREDIT UNIONS (NAFCU)

    Mr. Pacheco. Good morning, Chairman Perlmutter, Ranking 
Member Luetkemeyer, and members of the subcommittee. My name is 
Carlos Pacheco. I am the CEO of Premier Members Credit Union 
headquartered in Boulder, Colorado. I am pleased to be joining 
you today on behalf of NAFCU to share our views on the trends 
in financial institution charters.
    The nation's approximately 5,000 federally-insured credit 
unions serve a different purpose and have a fundamentally 
different structure than other types of financial institutions. 
As not-for-profits existing solely to provide financial 
services to our members, we are pleased to be on the front 
lines working with our members to help them survive the 
economic uncertainty from the pandemic.
    The growth of financial technology in recent years offers 
new opportunities for the delivery of financial services. The 
use of Fintech can have a positive effect on credit union 
membership. Many credit unions embrace innovations and 
technology in order to improve member relationships and NAFCU 
believes that this is important for regulators like the 
National Credit Union Association (NCUA) to ensure that credit 
unions have the proper authority in this space under their 
charters.
    However, the growth of Fintech also presents threats and 
challenges as new entities emerge in an environment that can be 
underregulated or undersupervised. As such, when Fintechs 
compete with regulated financial institutions, they must do so 
on a level playing field. While many Fintechs are still subject 
to various consumer protection and other laws, they are not 
examined, nor do they face the same oversight as other players 
in the financial services marketplace, creating cracks in the 
system that could pose risks to both consumers and the 
financial system.
    For example, underregulation of Fintech companies can place 
a greater burden on credit unions' efforts to protect deposit 
accounts. As a primary financial institution for our members, 
we are often the preferred party for resolving issues involving 
unauthorized transactions even when they occur on other 
platforms. While credit union consumer complaint processes are 
overseen by regulators, there is no comparable oversight for 
Fintech companies that facilitate payment transactions, even in 
instances where they share responsibility for resolving errors 
under Reg E. A minimally staffed call center may be all it 
takes to steer financial Fintech users to the credit union if 
there is a problem, and that alone can create competitive 
imbalance.
    There has been a recent trend in which Fintech companies 
are enjoying liberalization of banking charter rules to either 
acquire or become banks. Recent developments with both the 
OCC's new chartering options and the FDIC's chartering and 
approval of deposit insurance for a new wave of industrial loan 
companies also present problems. In each case, a non-bank 
company can potentially evade regulation under the Bank Holding 
Company Act (BHCA) either because of a statutory loophole 
unique to ILCs, or because the entity is seeking a limited-
purpose charter and will not accept deposits.
    Lack of BHCA coverage raises concerns regarding the quality 
and extent of supervision for these specialized banking 
entities. In certain cases, specialized limited-purpose bank 
charters may allow a Fintech to operate with national banking 
privileges, but without the same prudential safeguards that 
apply to traditional banks and credit unions. While some may 
characterize these chartering initiatives as innovative, they 
invite the potential for underregulation of novel risks and 
could create an uneven playing field.
    Depending on the scale or risk of activities, which might 
involve facilitating cryptocurrency transactions, lack of 
consolidated supervision by the Federal Reserve could create 
additional financial stability risks. To address these 
concerns, NAFCU supports steps such as imposing a moratorium on 
new ILC charter approvals by the FDIC and closing the Bank 
Holding Company Act loophole for existing ILCs. It is also 
important that existing charters, such as those for credit 
unions, are kept up-to-date to meet member needs. Congress 
should also ensure that the data security and privacy 
requirements for financial institutions in the Gramm-Leach-
Bliley Act, including supervision for compliance, apply to all 
who are handling consumer financial transactions.
    Regulators also have an important role to play. For 
example, the Consumer Financial Protection Bureau (CFPB) should 
use its ``larger participants'' authority to regulate and 
supervise technology firms and Fintech companies that enter 
into the financial services marketplace. New chartering ideas 
should also be subject to the notice and comment rulemaking 
process. Congress should also consider creating a Federal 
Financial Institutions Examination Council (FFIEC) subcommittee 
on emerging technology to monitor the risks posed by Fintech 
companies and develop a joint approach for facilitating 
innovation and identifying regulatory gaps between new and 
existing charter options.
    In conclusion, credit unions look forward to continuing to 
experience growth in the technology space as a way for us to 
better serve our members. However, as technology companies 
expand and new charters emerge to compete in the financial 
services marketplace, it is important that they compete on a 
level playing field of regulation and supervision. Finally, it 
is important that Congress ensures that laws are modernized to 
allow credit unions to keep up and compete with technological 
advances. I thank you for the opportunity to appear before you 
today, and I welcome any questions you may have.
    [The prepared statement of Mr. Pacheco can be found on page 
153 of the appendix. ]
    Chairman Perlmutter. Thank you, Mr. Pacheco. Is it snowing 
in Colorado?
    Mr. Pacheco. Not at this hour, but maybe in the next hour.
    Chairman Perlmutter. Okay. Thank you.
    Mr. Brooks, you are now recognized for 5 minutes for your 
oral testimony.

STATEMENT OF BRIAN P. BROOKS, FORMER ACTING COMPTROLLER OF THE 
   CURRENCY, OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)

    Mr. Brooks. Chairwoman Waters, Ranking Member McHenry, my 
fellow Coloradan, Chairman Perlmutter, and Ranking Member 
Luetkemeyer, thank you so much for the opportunity to speak 
today. I will say at the outset, I am the only representative 
of southern Colorado here, so we can have that conversation 
afterwards.
    Let me just say we are fortunate to live in a moment of 
extraordinary innovation that I believe can actually expand 
access to credit, provide consumers greater economic 
opportunity, and provide a more just and robust economy. As 
policymakers and participants in this evolution of the 
financial services industry, we have a responsibility to 
encourage responsible innovation while maintaining necessary 
safeguards to ensure that our system operates in the safest, 
soundest, and fairest way possible.
    Now, while my testimony goes into greater detail regarding 
what is driving the changes in our financial system and the 
implications for chartering innovative financial companies, I 
want to highlight a few thoughts in these remarks.
    First, the rise of non-bank financial services providers, 
and in particular Fintechs, is the result of market forces that 
include the dramatic reduction of banks and branches, as has 
been noted already, which is felt most in rural and urban, low- 
and moderate-income communities. And at the same time as 
consolidation, regulatory forces made certain consumer lending 
less attractive for traditional banks, and that business 
migrated toward non-bank providers such as payday lenders. It 
is against that backdrop that we think that innovative 
technology emerged, allowing Fintech companies to develop 
solutions that provide consumers better alternatives to 
traditional banks on the one hand, and strip mall financiers 
like payday lenders on the other. The new products provide more 
convenience, greater accessibility, and are often tailored more 
closely to consumers' personal needs and situations. Fintechs 
also emerged to provide back-office solutions such as payments 
processing that operate more efficiently than comparable 
systems in the legacy of banks.
    As a result, many products, services, and activities that 
were once exclusive to banks now occur outside of the banking 
system. Where once that activity was watched closely by bank 
regulators, today much of it goes on outside their view. The 
questions that this hearing asks are whether those companies, 
which undeniably are providing banking products and services 
that historically were provided by banks, should have an equal 
means to compete with incumbent banks as chartered institutions 
and whether providing a path for these service providers to 
become banks can be done in a safe, sound, and fair manner.
    Based on my experience and analysis, it is both necessary 
and advantageous to support a dual banking system of State and 
Federal banks in which companies with novel and unique business 
models, powered by ever-improving technology, can compete with 
incumbents on a level playing field. By providing a path and 
allowing choice for innovators to become part of the chartered 
banking system, the system avoids stagnation, evolves to better 
meet consumer preferences, and to address business and 
community needs.
    That view previously enjoyed bipartisan champions, because 
it is a safe and sound and thoughtful position that puts the 
good of the nation first, and recognizes that the failure to 
encourage responsible innovation and to welcome new 
participants into the banking system, stifles the system, 
making it both anachronistic and concentrated in the hands of 
legacy large institutions, which have been criticized on a 
bipartisan basis as well. After all, Fintechs have not emerged 
because the status quo had satisfactorily met all the needs of 
the economy or all the needs of consumers.
    I am optimistic about the progress being made to overcome 
bias and irrational fears toward innovative ways of meeting 
consumers' financial needs, including progress made in 
transforming cryptocurrencies and blockchain applications from 
exotic concepts to more mainstream financial and economic 
tools. I am proud to have been involved in chartering the first 
true Fintech company, Varo Bank, which has helped clarify 
national bank regulations as they relate to digital assets and 
stable coins. These actions have expanded services to 
consumers, they have allowed existing banks to explore how 
emerging technologies can be incorporated into their strategies 
of serving their customers, and they have helped provide a 
meaningful counterweight to the concentrated power of the 
largest banks in our system.
    Still, more rigorous [inaudible] needs to be done on other 
important issues, particularly the appropriate measure of a 
sustainably profitable Fintech's contribution and obligation to 
its community whether it becomes a chartered bank or not. While 
depositories, for example, are subject to the Community 
Reinvestment Act (CRA) and its important civil rights 
provisions, Congress did not apply the CRA to non-depository 
financial services providers. Policymakers thinking about 
chartering these non-depositories should explore alternatives 
to the CRA that consider other advantages that federally-
chartered or State-licensed non-depository financial companies 
enjoy, and what obligation that may entail to meet the 
important economic justice and civil rights spirit of the CRA.
    Recognizing that the economic inequities of the nation 
require the removal of barriers in addition to reinvestment, I 
founded Project REACH at the OCC in July 2020 to explore ways 
that technology innovators, banks, and civil rights leaders can 
work together to solve the structural issues behind race 
disparities, including the fact that large numbers of 
minorities lack usable credit scores and have more difficulty 
than others in saving for a house down payment. Fintech has 
something to say about all of these things, and if we believe 
that an unregulated Fintech poses challenges, we should welcome 
them into the regular system. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Brooks can be found on page 
48 of the appendix.]
    Chairman Perlmutter. Thank you, Mr. Brooks.
    And thank you to all of our panelists.
    I now recognize myself for 5 minutes for questions. I 
guess, obviously, just looking at the written materials that 
you all provided and coupled with your testimony, we really are 
dealing with the length and breadth of the financial services 
system, the banking system, its purpose, its history, and its 
future. And maybe we need to have a couple of follow-on 
hearings after this because each of us is going to come at this 
with our life experience.
    I am coming at it as a bankruptcy lawyer of 25 years, who 
saw a lot of cycles where businesses failed and banks failed, 
in Colorado and Texas. Mr. Williams, we saw pretty much every 
single savings and loan fail. But then we saw things grow and 
expand again, and we saw another cycle. And so I disagree with 
Mr. McHenry that, gee whiz, we are doing this all over again. 
It is because the system grows and shrinks, and it gets 
excesses and not, and we have to just determine how, as a 
policy matter--and I don't think this breaks along any party 
lines as to whether you're conservative about the system or you 
want to see it expand and take on some additional risk. All of 
us need to chart the path we want to see our banking system 
follow over the next 10 to 15 years. And I think that is the 
purpose of today's hearing, and as we go forward.
    One of the big questions on industrial loan companies 
(ILCs) is about the separation of banking and commerce. And in 
2005-2006, Walmart and Home Depot unsuccessfully pursued ILC 
charters. There was a great deal of scrutiny from lawmakers in 
the public about large retail corporations offering banking 
services and what it could mean for market fairness and 
financial stability. Last December, the FDIC published a rule 
on ILCs, clarifying that the parent company of the industrial 
bank must serve as a source of strength for the industrial 
bank.
    Professor Gerding, how well-suited is the FDIC, or any 
other regulator, to assess the strength of a commercial 
company, and do you have concerns about the continued blending 
of commerce and banking?
    Mr. Gerding. Thank you, Chairman Perlmutter. I have grave 
concerns about the ability of the FDIC to supervise ILCs and 
their parents. This goes back to what I said at the end of my 
remarks. The FDIC does not have the authority to conduct 
consolidated supervision over not just the ILC and its parent, 
but all other entities within the corporate group. And that 
lack of consolidated supervisory power does not allow the FDIC 
to see potential gains that conglomerates are playing with FDIC 
subsidized financing. It also does not allow the FDIC to see 
the buildup of risks within the conglomerate. And this became a 
problem when in the financial crisis when we saw the parents of 
several ILCs require billions of dollars of government 
assistance; Goldman Sachs, CIT, Merrill Lynch, Morgan Stanley, 
GE Capital, and GMAC all had ILCs. All of those parents did not 
serve as a source of strength for their ILCs, and then, by 
contrast, actually required billions of dollars of government 
intervention. So, I don't think that the source-of-strength 
argument gives us much comfort.
    Chairman Perlmutter. Thank you.
    Professor Johnson, I would like to ask you a question. In 
2019, the State of Wyoming enacted a series of laws related to 
cryptocurrency, including one authorizing the chartering of 
special purpose depository institutions (SPDIs). Last year, 
Wyoming approved the first SPDI charters for Kraken Bank and 
Ivani Bank, two cryptocurrency custodial firms planning to 
offer services.
    It seems many cryptocurrency companies are eager for a 
legal framework in which to operate. Do you believe bank 
charters are the appropriate framework for these firms?
    Ms. Johnson. Thanks so much for the question, Mr. Chairman. 
I would echo Professor Gerding's comments and amplify them. 
During the financial crisis of 2008, we not only saw these 
challenges that were endogenous with respect to regulated 
firms, but exogenous challenges as well that triggered systemic 
risks that created losses across financial markets. I would 
encourage a very careful evaluation of any extension of 
charters to cryptocurrency-based firms because of the 
endogenous and exogenous shocks that could create systemic 
risks and destabilize financial markets.
    Chairman Perlmutter. Thank you, Professor.
    My time has expired. I now recognize the ranking member of 
the subcommittee, the gentleman from Missouri, Mr. Luetkemeyer, 
for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and just as a 
comment, the title of this hearing is, ``Banking Innovation or 
Regulatory Evasion? Exploring Trends in Financial Institution 
Charters,'' and yet we have no representation from the banks 
here today. We have several bank think-tank guys and professors 
and whatever, but we have nobody representing any of the 
associations or any of the banks themselves. I am kind of 
wondering about that. But anyway, it is always nice to have 
somebody from the real world.
    Chairman Perlmutter. If the gentleman would yield for one 
second, I think that is why we we may have to have a couple 
more hearings on this.
    Mr. Luetkemeyer. Okay. That would be great. We look forward 
to having a real-world aspect on this as well, besides the 
theoretical part of this.
    Mr. Brooks, I want to start with you. Again, I appreciate 
your service to our country as a Comptroller. I think you did a 
fantastic job and I look forward to continuing to work with you 
on the private sector side here.
    In your testimony, you discussed how the scope of a bank 
charter can adjust to accommodate the safe and sound delivery 
of traditional banking products and services by companies that 
are not charters banks today. Do you think there is a way to 
provide a level playing field for traditional depositories and 
non-banks that are providing the same services and products 
without requiring the non-banks to get a full national bank 
charter and follow all the rules and regulations?
    Mr. Brooks. Let me just say, Mr. Luetkemeyer, first of all, 
I very much appreciated your engagement. During my time at the 
OCC, we have had some of these conversations privately, and let 
me just expand on that and answer your question. I think the 
answer is that we have seen on a fairly secular basis over the 
last 10 years an unbundling of financial services that used to 
be delivered together, and people want them delivered 
differently today. So the question really isn't, do we need to 
create some new frameworks, the question is, if you have 
activities that have always been conducted by banks and are 
clearly permissible to banks and are part of the core of 
banking services, then the question is, why do they stop being 
banks when they choose to only offer some financial services?
    The way I think about the level-playing-field question is 
if Bank of America offers a payment-processing service that is 
subject to an examination module that the OCC has for payment 
processors, and if Square is also providing a payment-
processing service, it ought to be allowed to elect to be 
subject to the very same supervision.
    I think the red herring in the discussion often is the idea 
that somehow it is not a level playing field because Square 
wouldn't also be subject to deposit regulation or any of a 
suite of other regulations. But what I think of when I think of 
that issue is, when I was a kid growing up in Pueblo, Colorado, 
I had my bank account at a small thrift in Pueblo called 
American Federal Savings. American Federal Savings was a bank. 
They were regulated by the Office of Thrift Supervision (OTS), 
but somehow they weren't subject to commodities and derivatives 
regulation like JPMorgan was, not because there was an unlevel 
playing field, but because American Federal Savings didn't 
offer commodities and derivatives. So for what they did, they 
were subject to the very same rules and regulations as the 
analogous services provided at JPMorgan, but there were some 
things they elected not to provide, so they weren't subject to 
those things, and that is not an unlevel playing field.
    My belief is that anything that is a banking service can be 
accommodated inside of one of the several existing bank 
charters without the need for radical innovation. To me, that 
is common sense.
    Mr. Luetkemeyer. Okay. Dr. Gerding made a comment here a 
minute ago with regards to the separation of banks from 
commerce. In his written testimony, he says that preventing 
consolidation of credit, the concentration of economic power, 
and the concentration of political power--and to me, this is 
why we had this situation for 60 years, and we have slowly 
gotten away from it. And to me, this is where you get the 
question on the ILCs, do we want to allow another commercial 
entity to own a banking entity, financial services entity, and 
let them creep into, from the commercial side of this, the 
banking sector? [Inaudible] to address that? Give me your 
thoughts on that?
    Mr. Brooks. Yes. This is another place where I apologize. 
Were you asking me, Representative Luetkemeyer, or were you 
asking Professor Gerding?
    Mr. Luetkemeyer. Mr. Brooks, yes. I cornered Mr. Gerding 
because it really, I think, encapsulizes the concerns that some 
of the folks like myself have, that for 60 years, we kept the 
banking and commercial stuff apart, and now we are allowing it 
to get mingled together, and every day it gets mingled more and 
more. And I think the ILC question is one that really 
solidifies this question of, do you allow the commercial folks 
to get into the banking or not?
    Mr. Brooks. Yes. What I have always said about that is it 
is a very different question to ask, should Walmart be able to 
get an ILC, versus should a firm or Brex, which are lending 
companies, be able to get an ILC charter? I don't think the 
Walmart question is presented. I am not personally comfortable 
with that, and I think throwing the babies out with the 
bathwater on that might be a mistake.
    Mr. Luetkemeyer. Okay. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman Perlmutter. Thank you. The gentleman's time has 
expired.
    And I would say to Mr. Brooks, it is a good thing you don't 
have an account at American Federal, because it is one of the 
many savings and loans that failed back in the late 1980s and 
early 1990s.
    Mr. Brooks. Very true.
    Chairman Perlmutter. I now turn to the former chairman of 
our subcommittee, Mr. Meeks from New York, for 5 minutes.
    Mr. Meeks. I want to thank you, Mr. Chairman, and Ranking 
Member Luetkemeyer, for having this very important and critical 
hearing. Just listening to the testimony of the witnesses and 
some of the early questions from both you and Mr. Luetkemeyer 
is really important. And I understand, also, that there is a 
debate as to whether the National Bank Act requires nationally 
chartered institutions to take deposits. I know the courts will 
decide that, but look, I go back and forth myself, because one 
of the things that I know is that sometimes what we did 20, 30, 
or 40 years ago because of technology or because of changes, we 
have to look at it again and figure out, how do we do certain 
things that push us forward?
    And I get the questions, and I want to make sure that we 
still have regulatory authority so that people don't run away 
with, in an unprotected way with--because of technology, but I 
also want to make sure that access to capital is available to 
many small businesses like the small businesses in my 
community. I talk to many minority-owned small businesses, et 
cetera, and they tell me that the number-one issue that they 
have is access to capital.
    I have seen the banking industry consolidate over the last 
20 years while technology is now allowing for new entrants in 
the financial services area. And there are serious concerns 
that the Big Tech companies could enter the financial system by 
the ILC regime, concerns that I definitely share with banks and 
consumer groups alike. And then, if the large non-financial 
companies can receive ILC charters, these companies could 
potentially receive all of the banking privileges without 
having to answer to the same prudential standards as 
traditional banks including, for example, Minority Depository 
Institutions (MDIs) and Community Development Financial 
Institutions (CDFIs).
    I also have the anti-trust concerns when it comes to the 
prospect of large, non-financial companies entering the system 
through ILC regimes. I will start with Mr. Gerding, and then 
maybe Mr. Pacheco can jump in also. Given that the FDIC is 
beginning to accept applications for new ILCs for deposit 
insurance, can you speak to whether and how such entrants would 
have a competitive advantage over, for example, credit unions 
or minority banks?
    Mr. Gerding. They have an advantage in several ways. On the 
one hand, they would get the benefits of FDIC deposit 
insurance, which would allow them a cheaper cost of financing, 
which they could then spread to other parts of their corporate 
conglomerate. That kind of gain with FDIC insurance would allow 
them to undercut commercial rivals. It would also allow them to 
enter into a banking realm with all of the powers and 
privileges of banking, then undercut credit, and small credit 
unions, and small community banks. And again, they would not be 
subject, as you said, Representative Meeks, to the same level 
of prudential regulation and that same all-important 
consolidated supervision that traditional banks are subject to.
    Mr. Meeks. Thank you.
    I am going to come to you, Mr. Pacheco, but let me go to 
Mr. Brooks really quickly to ask, how do you counter that, what 
Mr. Gerding just said?
    Mr. Brooks. The issue I see, Congressman Meeks, is the idea 
that I think all of us here on the panel today are concerned 
about the level of concentrated power that the biggest banks 
have. And so, I am a believer that new entrants, whether they 
are Fintechs or other kinds of companies, as long as they meet 
the statutory requirements, are a counterbalance to that. So 
again, one of the points of Project REACH was to find ways of 
bringing technology companies into the solution for, why isn't 
there more capital available in inner-city neighborhoods, and 
why have banks pulled more branches out of inner-city 
neighborhoods than out of rich suburbs? Somebody has to fill 
that void. It hasn't been the big banks, so it needs to be 
somebody. And to me, the safest way to do that is not to allow 
Fintechs to do it on a completely unsupervised and unregulated 
basis; it is to bring them into the fold subject to 
supervision. That is sort of the common-sense solution.
    Mr. Meeks. Let me allow Mr. Pacheco to jump in there,
    Mr. Pacheco. I appreciate that. Thank you for the question, 
Congressman. I would say that I agree with some of the 
testimony from Professor Gerding and Mr. Brooks. My one 
deviation from that is that organizations like credit unions my 
size, a small organization with just a billion and a half in 
assets, is out there going into those communities that might 
have been left behind by other institutions. We are out there 
building relationships in places like Pueblo and other parts of 
Colorado.
    Mr. Meeks. I am out of time.
    Thank you, Mr. Chairman.
    Chairman Perlmutter. Thank you, Mr. Meeks.
    The Chair recognizes the gentleman from Kentucky, Mr. Barr, 
for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman. And as my friend, Mr. 
Meeks, focused on urban banking deserts, let me ask a few 
questions about rural banking deserts, and in particular, the 
decline in de novo charters. Since the financial crisis, de 
novo formation has slowed significantly. There were 181 
charters granted in 2007, but between 2010 and 2019, fewer than 
10 new banks, on average, opened per year. More than half of 
the counties in the United States saw net declines in the 
number of bank branches between 2012 and 2017. These declines 
in bank branches disproportionately hit rural communities.
    The negative financial impacts on rural counties of bank 
branch closures are perpetuated by continuing difficulties due 
to burdensome regulations and other roadblocks of de novo 
community bank formation. These trends leave residents of rural 
counties without access to much-needed financial services and 
also have negative downstream impacts on those communities. I 
am trying to remedy that by introducing today the Promoting 
Access to Capital in Underbanked Communities Act, which would 
encourage formation of new banks in locations where bank 
branches are scarce. It would give de novo banks more time to 
meet capital requirements and ease other regulatory burdens on 
new community financial institutions.
    Mr. Brooks, I share Mr. Luetkemeyer's appraisal of your 
service at the OCC; I also enjoyed working with you. Can you 
tell us what some of the biggest roadblocks are to de novo bank 
formation?
    Mr. Brooks. Thank you, Congressman Barr. I very much have 
appreciated our relationship and your mentorship and guidance, 
so thanks for the opportunity. I would just begin by saying 
that as in many things, process in government is everything. 
And so, when I first arrived at the OCC and looked at the bank 
chartering process, the process flow involved, doing that 
involved something like 58 steps. I am making that number up. 
It was a huge number of steps where multiple committees had to 
review charter applications more than one time and that was 
just one of the three agencies that charter banks. So I think 
part of the problem is that we have to streamline the process 
by making clear how one gets a de novo charter and making clear 
what the timeline expectations are for getting those things 
approved even just inside of the charter agencies of the OCC.
    The second thing I would say to this committee is we have 
an incredibly complicated process where three different 
agencies have full discretion over whether to approve or not 
approve banks, because once you have a national bank charter 
approved at the FDIC, you still need deposit insurance 
approval, and nowadays the Federal Reserve is exercising 
extraordinary oversight over whether something that has been 
approved by those two agencies should be allowed to become a 
FIN member. That is why it took Varo Bank nearly 3 years from 
initial approach to charter grant, and we can't have the kind 
of system we had in the 1980s and 1990s if we are going to take 
3 years to charter every bank.
    So I share your concern that finding ways to shortcut that 
process, not in the sense of shortcutting important substantive 
requirements, but shortcutting bureaucratic red tape, which 
takes an enormous amount of time for a good purpose is really 
important.
    The other thing I would tell you is in rural communities, 
Fintechs are the main source of credit, in certain respects. If 
you want to get a mortgage in Versailles, Kentucky, you are not 
going to get it at a local branch. What you are going to do is 
find it on LendingTree, and that is why it is more important 
that those companies be encouraged and regulated, so that they 
can deliver those services more effectively in places where 
banks don't have branches.
    Mr. Barr. That is good feedback. I will note a recent study 
from the FDIC which found that citizens in rural communities 
are more likely than people in urban or suburban areas to visit 
bank branches. Obviously, you mentioned some online 
opportunities. Of course, rural broadband is a challenge for 
mobile banking. I have introduced bills to combat both of these 
issues, but the problems have been exacerbated by the pandemic. 
Is there anything else we can do to increase access to the 
banking system for rural populations?
    Mr. Brooks. I would say, Congressman, that consistent with 
the bill that you are introducing today, we need to have a 
concept kind of like a CRA-type of concept, where if you are 
serving an underbanked community, there needs to be a fast 
track to approval. And I think you and I have talked before 
about the fact that there are rural communities in Kentucky and 
Mississippi and other parts of the south where the nearest bank 
branch is 75 miles away. So the only way you are going to allow 
those local community leaders to form new branches, is if there 
is a fast-track option. And we should see that as community 
reinvestment--
    Mr. Barr. Really quickly, Mr. Brooks, in my final few 
seconds, can you address Professor Johnson's analysis that a 
non-depository national bank is an oxymoron?
    Mr. Brooks. In the National Bank Act, deposit taking is a 
power of a bank, not a requirement. It is a requirement in the 
Bank Holding Company Act, but it is a power, not a requirement 
in the National Bank Act.
    Mr. Barr. My time has expired. I appreciate the answers, 
and I yield back.
    Chairman Perlmutter. I thank the gentleman for his 
questions.
    I now recognize the gentleman from California, Mr. Sherman, 
for 5 minutes.
    Mr. Sherman. Thank you. I would like to first talk about 
the industrial loan company loophole to what has been in this 
country--can I be heard?
    Chairman Perlmutter. You are live and loud.
    Mr. Sherman. Live and loud. Thank you.
    I would like to first look at the industrial loan company 
loophole to what has been a prohibition in this country of 
mixing industry and commerce on the one hand, and financial 
services on the other. Now, a couple of decades ago, we did 
allow different types of financial services companies to be 
under one roof. An insurance company can also own a bank or 
vice versa.
    But, Mr. Carrillo, last month it was reported that Walmart 
had hired a Goldman Sachs head of consumer banking and 
announced a partnership with Reddit Capital, trying to expand 
into financial services. Walmart and other major retailers 
have, at various times, sought State-issued industrial loan 
company charters. Just as the Trump Administration was on its 
way out the door in December of last year, the FDIC adopted 
rules that paved the way for non-banks to own ILC-chartered 
banks, and here is the key part, without being subject to the 
same regulatory oversight requirements that are applied to 
traditional bank holding companies.
    Do you see inconsistencies in these regulatory 
requirements, and is it a good idea for us to copy a system 
that has done tremendous damage to Japan of having groups of 
companies that are in both industry and commerce on the one 
hand, and financial services on the other?
    Mr. Carrillo. Thank you for your question, Congressman 
Sherman. I believe that the Japanese example does provide some 
lessons. They call Rakuten, ``Japan's Amazon,'' and it has 
integrated into financial services in a way that it will never 
be untwisted at this point. I do want to highlight one 
dimension regarding the ILC issue that Professor Gerding and 
Professor Johnson did not hit on, although I believe they both 
point to it, at least in the general way, in their testimony as 
well. It is that a lot of these companies that will come 
through this loophole will be subject to different data 
collection requirements. They will not be subject to Regulation 
Y or the regulations of the BHCA in the same way, and they 
won't even provide the limited privacy protections that current 
banks do to their customers.
    So, in many ways, this is replicating the problems of the 
past, as Ranking Member McHenry said, in the sense that we are 
creating things that look like deposits, act like deposits, 
walk like deposits, and talk like deposits, but we don't treat 
them like deposits. And in the other sense, this is totally new 
and [inaudible]
    Mr. Sherman. And following up on that, we have a few very 
small, old ILCs out there, but if Amazon exploits this, they 
are going to be enormous; they don't do anything small. And the 
question then would be, would they be subject to the Financial 
Stability Oversight Council (FSOC) if they were of systemic 
importance to our financial system?
    Mr. Carrillo. Yes. There are all of these giant macro 
questions, which I believe Professor Gerding outlined quite 
well. And the issue, to me, is certainly one of power even 
behind that. And, Congressman Sherman, the issue is that 
entities like Amazon and Facebook and Walmart, which launched 
the Fintech, as you said, and has hired people from outfits 
that don't respect privacy to come in under the cloak of 
providing access to credit or financial inclusion even, but to 
do so in a way that fundamentally depends upon mass 
surveillance and a violation of our constitutional rights 
consistently.
    There are other ways to do this in which we respect 
privacy. There are other ways even for private sector companies 
to do this, let alone the government itself, and we are not 
addressing those ways. I would be really interested to hear 
what, for instance, former acting Comptroller Brooks has to say 
about the Fourth Amendment, and again, the necessary violation 
of privacy that is the business model of these companies 
[inaudible].
    Mr. Sherman. I do want to go on to one other issue, and 
Professor Gerding, I am probably going to ask you to respond 
for the record. But we see that the State of Wyoming is moving 
toward cryptocurrencies and the OCC has granted preliminary 
approval to the Anchorage Trust Company to become a national 
trust bank, and Anchorage, of course, claims to be a 
cryptocurrency asset custodian. I have looked at Bitcoin and 
wondered whether there was a big enough market among terrorists 
and drug dealers, and it didn't seem to be enough. And then, I 
realized, when the IRS Commissioner testified to one trillion 
dollars every year of unreported taxes, chiefly from the 
wealthy that--and I made up a little advertising sign that may 
help Anchorage: ``Bitcoin, it is not just for terrorists 
anymore; it is for tax evaders, too.'' That is the market for 
Bitcoin. I yield back.
    Chairman Perlmutter. The gentleman yields back.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. I think one 
of the greatest exports America has are the products and 
services that our entrepreneurs and businesses bring to the 
marketplace and share with the world. I do not want to run the 
risk of losing our position as the world leader in innovation. 
That being said, I do not think we should have to, or quite 
frankly need to, add additional risk into the financial system 
to help foster the business-friendly regulatory environment 
that we meet.
    Mr. Brooks, I also want to add thank you for your service 
to our country, and I also would address my first question to 
you: How would eliminating access to chartering options like an 
ILC impact Fintech companies from innovating and creating new 
products and services, and do you believe that these companies 
would just move to other jurisdictions outside of the U.S. that 
provide a more modernized regulatory system?
    Mr. Brooks. Congressman, I really appreciate that question, 
and I guess I would answer in two different ways. Before we 
talk about offshoring technology, which is a real risk, let's 
just talk about the actual companies that are actually applying 
for ILC charters today. They are not Walmart. They are not 
Google. They are financial companies. They are a firm, which is 
a point-of-sale lending company that is one of the largest 
companies in that space today and all they do is make loans. 
That is their entire business. They would like to be an ILC.
    So, you have two choices in that world. That company can 
come into the ILC world and be supervised by a State regulator 
and by the FDIC or not. Okay? And the question is, which is a 
riskier scenario? Letting them in the system so they can be 
supervised, and remember that the federally-supervised entities 
fail at about half the rate of non-federally supervised 
entities, or we can keep them out of the system. Today, I would 
argue that it is riskier.
    Now, if the U.S. adopts the anti-tech posture, and I think 
one of the comments made earlier is that we can't take the 
politics out of tech, what you already see is significant 
aspects of tech moving offshore primarily to Asia, but even to 
markets with somewhat more unified financial regulation like 
the U.K.
    Comments have been made about cryptocurrency. Obviously, I 
disagree that the market for Bitcoin is terrorists and tax 
evaders; we could have that conversation separately. But the 
position we have taken in this country thus far about 
blockchain and its opportunities has been a position that has 
led many exchanges to leave the United States.
    Now, there is optimism, because of the Coinbase IPO 
yesterday, that the U.S. markets are very welcoming of that 
business, but increasingly that activity is going to the U.K., 
the EU, and Singapore. And those are countries that still have 
an idea that perhaps responsible innovation with an appropriate 
amount of risk oversight is a good thing, not a bad thing. So I 
think we need to think carefully about that.
    Mr. Williams of Texas. I appreciate that answer. My office 
has been contacted by a variety of stakeholders talking about 
the importance of the True Lender Rule. The fact that it is 
being discussed as something that could be invalidated with the 
Congressional Review Act has already caused some market 
participants to get nervous as they are working to provide 
services to banks with which they have partnered. I think that 
when some of my Democratic colleagues try to simplify the rule 
down to saying it is just a rent-a-charter scheme, it missed 
the intention of the rule.
    So, Mr. Brooks, again, can you talk to us about how the 
True Lender Rules assist the OCC in protecting the safety and 
stability of our nationally chartered banks?
    Mr. Brooks. Congressman that is a great question. And there 
were two motivations behind the True Lender Rule and its 
companion rule, the Valid When Made Rule. The first idea was 
that when the Madden decision came down in the Second Circuit 
Court of Appeals, lending to low- and moderate-income people 
living in New York and Connecticut, the States subject to that 
rule, fell by 64 percent. Let me just say that again. When you 
don't have the Valid When Made Rule, the people who get hurt 
are poor people. And the point of the rule was to reinstate 
access to credit for those low- and moderate-income Americans, 
our brothers and sisters, who were cut off from credit when 
banks weren't allowed to sell loans in the secondary market. 
That was the first reason.
    The second thing we did in that rule is make very clear 
that rent-a-charter schemes of the past, which were all about 
the idea that nobody was accountable for those loans, not the 
bank and not the Fintech marketing partner, those were over. 
What we said in our rule was that in the True Lender regime, if 
the bank is the True Lender on the loan, it will be responsible 
for all disclosure, all anti-discrimination rules, all consumer 
protections. We eliminated rent-a-charter in that rule. So, it 
is a nice talking point to say that somehow this incentivizes 
rent-a-charter, but in fact, the text of the rule solves rent-
a-charter and staff and career--supervisors at the agency 
worked very hard to make sure that was the case.
    Mr. Williams of Texas. Thank you for that.
    And, Mr. Chairman, I yield back.
    Chairman Perlmutter. Thank you, Mr. Williams.
    Another gentleman from Texas, Mr. Green, is recognized for 
5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I greatly appreciate 
the opportunity to be heard, and I greatly appreciate you 
having this hearing; it is very valuable to me. Let me start 
with Coinbase and their predicate for where I would like to 
ultimately start. Coinbase made its market debut on Wednesday, 
and its reference price was $250. It ended up closing at 
$328.28. The value of the company is at $85.7 billion. For 
those, I am sure you know, but some may not know that Coinbase 
is a business that allows its clients, its customers, to buy 
and sell digital currency.
    I mention this, because it is just a matter of coincidence 
I suppose, and I don't want to demean anybody but Mr. Bernie 
Madoff--and he passed yesterday. Mr. Bernie Madoff, for those 
who may have forgotten, was the father of a $20 billion Ponzi 
scheme. A lot of people have consternation about digital 
currency, cryptocurrency, because they are concerned that it 
might end up being a Ponzi scheme. This is a fear that people 
have, people who don't understand maybe, but some who do 
understand are very much concerned.
    But my concern is this. When Mr. Madoff made off with this 
money, persons who, generally speaking, could care less about 
what Congress does as long as Congress kind of stays out of 
their business, made their way to Congress and they wanted 
Congress to help. They thought we should have regulated to the 
extent that this fraud should not have occurred. And I think 
that a lot of our concern and consternation with cryptocurrency 
emanates from people who saw what happened and still are 
concerned about what may happen.
    So, here is my first question, and I would like to direct 
this question to Mr. Brooks. Is cryptocurrency an asset class 
or is it a substitute for currency? How do you see it? And can 
you just give me a quick answer? Maybe 10, 15 seconds, because 
I have another question for you.
    Mr. Brooks. Sure. Congressman Green, I really appreciate 
the question. I separate crypto into two worlds: Bitcoin and 
everything else. Bitcoin, I think of as an asset class. It is 
an anti-inflationary asset class that some people believe is a 
counterweight to inflationary monetary policy by governments. 
All of the other cryptocurrencies that exist out there are 
designed to create networks. They are essentially inducements 
to create internets on which various values can be exchanged. I 
am happy to talk more about that, but it is an internet 
protocol that has nothing to do with Ponzi schemes. And tell me 
how much time you want; I can give you more information on 
that.
    Mr. Green. I appreciate what you have said thus far, but 
let me move forward. The American dollar is backed by the full 
faith and credit of the United States of America. That is a 
fair statement I think. Cryptocurrencies seem to be backed by 
the people who hold cryptocurrency. Is that a fair statement?
    Mr. Brooks. I don't think so, actually. I think I probably 
disagree with both of those statements.
    Mr. Green. Explain, please?
    Mr. Brooks. Okay. So, what is backed by the full faith and 
credit of the United States is U.S. debt. A dollar bill is not 
U.S. debt. A dollar bill is just a unit of exchange which you 
use to buy things. If you look at what has happened in monetary 
policy over the last 12 months, the U.S. has increased the M2 
money supply by 40 percent, which inherently devalues the 
amount of the purchasing power of the dollar. You saw that in 
the inflation reports that were in this morning's newspapers. 
So, that is an example of the dollar not being backed by the 
full faith and credit; it is backed by American monetary policy 
at any given moment. So. there is that.
    Mr. Green. What about the cryptocurrency, if you would, 
please?
    Mr. Brooks. Right. So cryptocurrency, and again, put 
Bitcoin aside for just a moment. What cryptocurrency is about 
is the belief that a particular network will gain adoption. So 
when you buy an Ethereum token, an Eth token, that is like 
saying, I believe this network, which is a smart contract 
protocol for building financial applications, basically apps 
like on your cell phone, is going to have value. So if you 
think Google stock has value, because you think internet 
traffic is going to go up and Google is a tracking stock for 
the internet, buying Eth tokens is like believing that the 
Ethereum protocol will become the default protocol for 
financial applications. That is what it is backed by, adoption 
rates of that protocol.
    Mr. Green. But if it is backed by the belief, and I do 
concur with this, is there the possibility of believers at some 
point no longer believing they can take it to zero?
    Mr. Brooks. Sure. Just as believers, in general, can say, 
that was the past, and this is the future, so I am dumping my 
General Motors stock. That can happen, too.
    Mr. Green. Thank you very much. My time has expired.
    Mr. Carrillo. Representative Green, may I clarify a point 
of law?
    Mr. Green. Well, the chairman would have to allow you to do 
so. My time is--
    Chairman Perlmutter. Without objection, you have 30 
seconds.
    Mr. Carrillo. Thank you. Former Acting Comptroller Brooks 
said that the U.S. dollar is not government debt. That is 
incorrect. It is an issue of the U.S. Federal Reserve. It is 
classified as a liability on its balance sheet. It comes from 
an instrumentality of Congress, although it is not considered 
under the debt ceiling to be treated the same way as a U.S. 
Treasury. It is very much a debt of the United States 
Government. It is money we owe to ourselves. It is our main 
payment tool constitutionally and administratively. Thank you.
    Chairman Perlmutter. I thank the gentleman.
    Next, we have the gentleman from Georgia, Mr. Loudermilk, 
for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And, Mr. Brooks, before I get in my questions I just want 
to know if you needed a moment or a few seconds to respond to 
the previous gentleman?
    Mr. Brooks. Yes. I guess all I would say on that is that 
dollars are created by government credit operations, and so the 
underlying thing that is an obligation is the credit, it is the 
buying and selling of government debt. But the dollar that you 
have in your pocket, and any of us old enough to remember the 
1970s knows this, is only as valuable as American monetary 
policy. I remember in 1980 when interest rates were 13 percent 
and it cost 21 percent to take out a mortgage. Your dollar 
wasn't very valuable then and nobody guaranteed its value.
    Mr. Loudermilk. Okay. I appreciate the clarification of 
that. In fact, recently I was at a restaurant and the waitress 
had just taken cash, and she handed me a bill, and she said can 
you tell me if this is legal? It was a silver certificate. I 
said, I'll tell you what, I will give you a bill of equal 
value, and I will take it.
    So, I do want to follow up on the questions of Mr. Williams 
regarding Fintech and True Lender. Bank partnerships have 
continued to grow and the question of which entity is the True 
Lender is the subject of numerous court cases. And it has been 
resolved on a case-by-case basis in a lot of instances. Some 
courts have developed complicated multi-factor tests to 
determine who is the True Lender, but that causes significant 
confusion and uncertainty in lending markets.
    So, Mr. Brooks, could you discuss why the OCC's True Lender 
Rule is important to give clarity and certainty to the lending 
markets?
    Mr. Brooks. Congressman, it is a great question, and it is 
all about how important you think clarity is. The philosophy I 
have, which I articulated at the OCC many times, was to quote 
Justice Brandeis' famous statement when he said, ``Sometimes, 
it is more important that a question be settled than it be 
settled right.'' And so, my belief is that lending contracts, 
in a big global economy like the American economy, need a rule.
    You could pick a different rule, but our point was to say 
someone needs to be responsible, there needs to be a clear 
bright-line test when a consumer takes out a loan as to whom he 
or she is taking the loan out from. And our belief was, we will 
have a two-sentence rule. The bank is the lender if its name is 
on the note, or the bank is the lender if it has funded the 
note on the date of origination, period, and we will take 
enforcement action against any bank who is the True Lender who 
violates the law. It's hard to see how that is not a good 
thing.
    Mr. Loudermilk. Right. And some on the other side, as you 
have heard over and over again today, have alluded that the 
True Lender Rule will allow predatory lenders to engage in 
rent-a-charter schemes, and that is a concern of even some 
State-level bank examiners or directors. Can you explain how 
that rule does not allow for that?
    Mr. Brooks. The first thing is, we need to sort of take the 
adjectives and adverbs out of this discussion and start 
defining some terms. So when people call a loan a, ``predatory 
loan,'' the question is, what do they mean by that? And what 
they generally mean is it was a loan that was originated at an 
interest rate that exceeds the borrower's home State's usury 
cap.
    So if that is what you mean by predatory lending, Congress 
and the Supreme Court, between 1978 and 1980, made it clear 
that banks, both national banks and State banks, have the 
ability to export their home State's interest rate to other 
States. And why was that important as a policy matter? Because 
again, in the late 1970s, the market rate of money was in the 
high double digits and the State usury cap in some States was 
in the single digits, meaning that if you lived in that State 
and you didn't have interest rate exportation, you literally 
couldn't borrow money. That is not a good thing in the market 
cycle, right?
    And I think the argument is when Congress decided that 
banks can export their interest rate, they decreed that was not 
predatory lending. So the question is, why does it become 
predatory lending when a loan that was legal when made is sold 
to somebody else?
    The analogy I give is, if you are renting an apartment and 
you have a lease that says you have to pay $500 a month, and 
then the building owner sells it to a different owner and your 
lease is still $500 a month, what has changed? Did that rent 
suddenly become unaffordable? Did it suddenly become usurious? 
No. You live in the same apartment and you contracted to pay 
that amount. And in the 1970s and 1980s, we all recognized it 
was a good thing.
    In my testimony, I talk about what a bipartisan consensus 
that was to allow rate exportation. All True Lender does is 
make those markets work better, provide clarity, reduce 
litigation, and make credit more available. Remember, in the 2 
States that [inaudible] rule for 5 years, credit to low- and 
moderate-income people fell by 64 percent. That can't be what 
we want.
    Mr. Loudermilk. Access to credit is really what the issue 
is, especially in a recovering economy when people are trying 
to get back into the workforce or become an entrepreneur and 
start a new business. And as you know, bank-Fintech 
partnerships have resulted in tremendous expansion of the 
availability of credit, not just for those who have good 
credit, but also for those with a limited credit history. Can 
you explain why adding more uncertainty in the lending markets 
will reduce access to credit for consumers and businesses?
    Mr. Brooks. I would ask the chairman--
    Chairman Perlmutter. The gentleman's question--look, I gave 
30 seconds last time, so you have another 30 seconds. Sorry.
    Mr. Brooks. Thank you, Mr. Chairman.
    I would just quickly say that if a bank can't engage in 
Fintech and other partnerships to sell loans in the secondary 
market, the bank's ability to provide credit is limited by the 
size of its own balance sheet, because it can't sell that loan 
and then use the proceeds to make the next loan. When a bank is 
limited by the size of its own balance sheet, not surprisingly, 
it is going to focus on the safest and most profitable loans, 
which means loans to the richest people and the people with the 
best credit scores. So, the first people who get hurt when 
credit starts getting rationed are poor people.
    Again, the Federal Reserve has done multiple studies 
showing that more credit equals less poverty, and my philosophy 
is that making credit markets work for everybody ought to be 
our highest priority.
    Mr. Loudermilk. Well said.
    And I yield back the remaining time I no longer have.
    Chairman Perlmutter. The gentleman's time has expired, and 
if we get a chance, maybe we will do a lightning round for 
everybody after this. But we are basically dealing with the 
whole banking system and a number of different issues related 
to it.
    I now recognize the gentleman from Illinois, Dr. Foster, 
for 5 minutes.
    Mr. Foster. I would like to ask a couple of questions about 
what is going on in Wyoming, which seems to be a State that has 
more Senators than they have actual people. But in 2019, the 
State of Wyoming enacted a series of laws related to 
cryptocurrency, including one authorizing the charter of 
special purpose depository institutions (SPDIs). And in 
September, Wyoming approved the first SPDI application for 
Kraken Bank, which is a digital asset company based in 
Cheyenne. The bank plans to offer services such as digital 
asset custody, demand deposit accounts, and wire transfer 
services, and, at this time, it seems that Kraken is not 
seeking deposit insurance from the FDIC. Instead, the bank has 
promised that it will maintain 100 reserves of deposits in fiat 
currency and in liquid assets.
    Now, the rules of the Wyoming Banking Division define 
liquid assets to include investment-grade corporate debt, 
investment-grade U.S. State and municipal securities, and other 
investment-grade Federal or State Government agency securities. 
So, under stressful events, some of these instruments would 
make that arrangement inherently unstable, such as when you 
have an interest rate swing and Treasury bond prices would 
fall, or corporate credit risk might increase, causing capital 
losses.
    Ms. Johnson, do you have concerns that this model of 
capitalization may not be robust enough to withstand periods of 
economic stress?
    Ms. Johnson. Thank you so much, Representative, for the 
question. I do have strong concerns, and I would like to sort 
of situate this conversation in reference to the 2008 financial 
crisis. At the moment, it may not be the case that Kraken is 
soliciting Federal deposit insurance, however, should Kraken or 
other--as was referenced earlier with Coinbase--cryptocurrency 
exchanges or platforms operating in this space, and experience 
significant solvency crises, we should not assume that they 
would not be eligible for some type of relief.
    I would point in this moment to the Fed's discount window 
being made available to AIG, and in the moment that the Fed's 
discount window was being made available to AIG, to an earlier 
point in conversation, I was leaving a position as associate 
general counsel at JPMorgan Chase. It was within weeks of us 
acquiring another bank, now defunct, but which had a long 
history, Bear Stearns. And I would like to just underscore that 
there is more than sufficient evidence in the cryptocurrency 
space already that exchanges not only experience solvency 
crises, but they are subject to cyberattacks that have left 
them unable to satisfy customer deposits. They have also been 
subject to any number of scams and misconduct, more broadly.
    Mr. Foster. Thank you. And I would like to also talk a 
little bit about their capitalization. The Wyoming SPDI capital 
guidance states that a prospective SPDI should consider one-
and-a-quarter to one-and-three-quarter percent of proposed 
asset under management or assets on, or assets under custody or 
$10 million, whichever is greater, as an appropriate minimum 
requirement for chartering. However, these requirements will be 
developed on a case-by-case basis. The banks, under supervision 
of a Federal banking agency, are required to maintain basic 
minimum capital requirements that translate to a percentage of 
assets. And furthermore, traditional banks have other key 
protections such as deposit insurance or access to a lender of 
last resort.
    Professor Gerding, since the SPDIs do not have deposit 
insurance or a lender of last resort, would you consider SPDIs 
to be adequately capitalized under the Wyoming Banking 
Division's general formula?
    Mr. Gerding. It is very difficult to say, Representative 
Foster, because of that critical phrase that you mentioned in 
your remarks: ``a case-by-case basis.'' It is hard to know 
whether the way in which Wyoming regulators will actually look 
at applicants for these charters in a consistent way, and in a 
way that actually makes sure that they are well-capitalized. 
And I worry that a lot of these decisions are going to be made 
on a case-by-case basis and in a very non-transparent way.
    Mr. Foster. Okay. That is actually a valuable thing to keep 
our eyes on, so I appreciate that.
    Just a quick question, one big issue with crypto generally, 
Fintech generally, is the whole business of, Know Your Customer 
(KYC), and the ability for customers to basically prove who 
they are online. And there are proposals that are being made, 
and actually done in some States, that consumers will have 
access to so-called digital drivers' licenses to prove who they 
are online. Do you have any comments on how that may make the 
whole, Know-Your-Customer/Anti-Money Laundering (KYC/AML) 
situation improved no matter what charter you adopt?
    Chairman Perlmutter. The gentleman's question will require 
a long time to answer, and I would ask that either we do it in 
the lightning round, or you submit it in writing, and the 
panelists can answer your question in writing for the record.
    Mr. Foster. I appreciate that, Mr. Chairman. I yield back.
    Chairman Perlmutter. The gentleman's time has expired. 
Thank you.
    The gentleman from Tennessee, Mr. Kustoff, is recognized 
for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman. Thank you for holding 
today's hearing, and I do want to thank the witnesses for 
appearing, as well.
    Mr. Pacheco, if I can, to you, obviously, the last 12 to 13 
months have created a lot of new normals, a lot of new habits. 
Can you talk about, from your customers' perspective, what you 
have seen in terms of changing of preference and maybe changing 
of habits accelerated by the pandemic?
    Mr. Pacheco. Sure. Thank you for the question, Congressman. 
The last 12 to 14 months have been very disruptive. It has been 
disruptive for in-lobby transactions and traffic, and we have 
had to shift to other avenues and sources and solutions, and 
that includes things like mobile banking, online banking, 
desktop banking, certainly a higher utilization of telephone 
banking, and, in a last-resort perspective, utilizing drive-
thru banking. So, it has been very disruptive.
    And in each of those cases, we have used solutions that we 
have partnered with other companies on. Our mobile banking 
platform would be a great example. I think that some of the 
current things we are doing relative to technology innovation 
to be able to drive that, and then also including mobile 
deposits on that platform. And so, the partnerships that we 
have had have been a welcome benefit to our membership during 
the pandemic.
    Mr. Kustoff. Thank you, Mr. Pacheco.
    Mr. Brooks, I do want to echo other people who thanked you 
for your prior service to the government. I appreciate your 
opening statement. I also appreciate your written statement. 
Can you talk about, kind of following up on Mr. Pacheco, the 
change in the way customers now operate in this environment and 
what does it say about the future of the financial industry?
    Mr. Brooks. Congressman, that is a great question, and I 
appreciate Mr. Pacheco's comments as well. I think one of the 
reasons it is great to have a credit union representative on 
this panel is that it shows that in order to meet the credit 
needs of Americans, particularly in a post-pandemic sort of 
contactless environment, it is going to take all-hands-on-deck. 
So the answer clearly is not that the biggest banks alone can 
solve all of our credit problems. Indeed, Jamie Dimon just said 
in his annual investor letter last week that the role and 
relevance of banks in the economy is the smallest it has been 
at any time in the last number of decades, because customers 
preferences have changed.
    I think Congressman Barr has it right, that there is a real 
urban-rural divide on this, but most people in the United 
States have elected not to visit bank branches. I'll just ask 
any of you, when was the last time you went into a branch for a 
significant transaction? And the pandemic has accelerated that 
kind of thing, so you have a combination of how many people 
want to do things from home, like we are doing this hearing 
today. Many people don't want to interact with other people 
that they don't know in day-to-day interactions, and a 
significant amount of capital has fled the banking system for 
other applications. This is why Fintech valuations are now 
higher than bank valuations on a revenue multiple basis over 
the last five-year period.
    And so, in that world where capital has left banking and 
consumer preferences have shifted to other kinds of platforms, 
the policy question is, how do we make sure the system is still 
safe and sound, and consumer protections are respected? That is 
the question. There is no one answer. It is not going to be to 
keep all Fintechs out of banking; that is not going to be the 
answer. It is not going to be to say crypto must be banned 
because it is a source of terrorism financing now that it is a 
two-and-a-half trillion dollar market.
    What it is going to be is an all-hands-on-deck attempt to 
make sure that we regulate similar activities similarly, 
regardless of whether that activity takes place on a legacy 
bank platform, a Fintech platform, a crypto platform, or 
whatever. If you are doing payments, you should be subject to 
payments regulation. If you are engaging in credit, you should 
be subject to the fair lending laws, and it shouldn't matter 
whether you are a legacy depository or something else. Consumer 
preferences change and the system you all regulate has to 
evolve with that.
    Mr. Kustoff. Thank you. You mentioned Congressman Barr, and 
I want to follow up on his line of questioning and also the 
comments that you made in your written statement, at least 
about the de novo banks and the lack thereof over the last 
``X'' number of years and the closure of bank branches.
    In my district, I represent part of Memphis, but also a 
fairly rural part of Tennessee. I travel across the district 
quite a bit, and what I hear is that we have a lack of rural 
broadband. And as we talk about the continued emergence of 
Fintech, how do we mesh that together? How can the Fintechs 
fill the void of some of these closures, and yet our 
communities not have broadband?
    Mr. Brooks. Congressman that is the all-hands-on-deck 
point. We need a combination of, it needs to be easier to 
charter new banks and it needs to be easier for Fintechs to 
fill voids. We need all of that.
    Mr. Kustoff. Thank you very much.
    My time is up, and I yield back. Thank you very much.
    Chairman Perlmutter. Thank you, Mr. Kustoff.
    The gentleman from Florida, Mr. Lawson, is recognized for 5 
minutes,
    Mr. Lawson. Thank you, Mr. Chairman. I would like to 
welcome everybody to the committee. There has been a very good 
discussion today. Now, I will probably, if I have time, go back 
to Mr. Brooks, and the reason why I said that is because I have 
a lot of students in my district, and they are much younger and 
they don't want to go in the banks. But some of the other 
citizens around my age still want to go in these branch banks 
and sit down and talk to somebody. I really need to get this 
message across, so I hope I can come back to you.
    I noticed that Professor Gerding, in his earlier testimony, 
stated that he wrote in the separation between banking and 
commerce proposed risk for financial stability, and consumer 
protection are threatened to distort a financial market by 
allowing commercial firms that can obtain banking power and 
privilege to compete unfairly with the firms that cannot. And 
secondly, distort banking markets by allowing non-banks to 
offer banking services without facing the same degree of 
supervision and regulation as banks which, in turn, would 
create incentives for banks to take more risks, lobby for 
deregulation. Can you please explain those three points for me, 
sir?
    Mr. Gerding. Thank you. Let me explain the last piece 
first. When you undermine the bank charter, when you allow 
competitors to unfairly compete with banks without being 
subject to the same set of regulations, and you give all of the 
powers and privileges of a bank to a non-bank, that has an 
effect on bank behavior as well. And it is just core banking 
economics. When you undermine the bank charter and allow unfair 
competition, banks are going to respond by taking more risk, 
and that is partially what we have seen in the last 20 years, 
and a big part of what we saw in the global financial crisis. 
So, that is the effect on the banking sector.
    The commercial sector, by allowing non-banks to get powers 
and privileges of banks including exemptions from a whole host 
of State laws, which Mr. Brooks has not really mentioned, you 
are allowing the firms that have charters to basically undercut 
their rivals in commercial markets. And by allowing commercial 
firms and non-banks to have access to things like Federal 
Reserve emergency loans and the Federal Reserve payment systems 
without being subject to the same set of regulations and the 
same duties of banks and functions of banks, you are basically 
distorting commercial markets, non-banking markets.
    Mr. Lawson. That is incredible.
    Mr. Brooks, before my time runs out, you talk about the 
change in marketing the way individuals like to do banking and 
really don't, sir--where, when people aged 50 to 60 and above, 
I don't know whether you address those groups, but maybe they 
are coming along as much as the younger people, because I 
noticed in a lot of where we have a lot of students and stuff 
in my area, maybe 50,000 or 60,000 of them, it is a whole 
different story in terms of how they go into banks in the 
future. And so, I don't know whether you have time to comment 
on that, and looking at the trends, but I better stop right now 
before my time runs out and give you a chance to respond.
    Mr. Brooks. Absolutely. Congressman Lawson, I really 
appreciate the question. I would make a couple of comments. 
First of all, there are clearly generational changes and 
preferences. I am the youngest person I know who still writes 
checks. Nobody does that anymore. My kids aren't aware of what 
a check is. So, there is a little bit of that where people just 
like doing things on their phones.
    But there is also something that is more fundamental going 
on here, which is that banks, as part of a business model 
division, have retreated from areas that they used to serve 
better than they do today. So, for example, more consumer 
lending happens outside of banks than inside of banks. That 
would have been shocking 25 years ago, but today the percentage 
of consumer funds being delivered is being done on Fintech and 
other non-bank platforms not supervised by the OCC or any other 
Federal regulator.
    So, why is that? It is because the cost involved in a big 
bank underwriting somebody for a $5,000 personal loan to 
replace their hot water heater isn't worth the input cost, and 
so they have abandoned that. And what I find interesting about 
the discussion is they seem to believe the legacy banks are 
somehow the only legitimate source of financing, and yet the 
market tells us otherwise. They are not serving the needs of 
sort of average Americans the way that they used to, and so 
Fintechs and others have come in to fill the gap.
    My belief is that activity ought to be supervised. It ought 
to be safe and sound the way that other things are, and we 
shouldn't fetishize what the word, ``bank,'' has historically 
conjured up. It is not what the statute says. It is not the way 
it has always been, and [inaudible] in the market.
    Mr. Lawson. I yield back, Mr. Chairman.
    Chairman Perlmutter. Thank you, Mr. Lawson.
    Now, we will go to Mr. Rose from Tennessee for 5 minutes.
    Mr. Rose. Good morning, and thank you, Chairman Perlmutter 
and Ranking Member Luetkemeyer, for holding this hearing today.
    Mr. Brooks, welcome back to the committee, and thank you to 
all of our witnesses for being here with us today. As we 
discuss financial institution charters, I think it is important 
that we avoid revisiting outdated regulations and instead look 
to the future. Technology and innovation have increased access 
to financial services for many Americans, and it is important 
that we provide clear rules of the road to allow for continued 
growth in this space. A large portion of my district in middle 
Tennessee is rural. In addition to having to travel farther 
distances to obtain banking services, rural communities have 
seen increased costs in accessing financial services, in part 
due to branch closures.
    As of the third quarter of 2020, there were 13,000 fewer 
banks in rural communities than in the 1980s, and although our 
community banks are doing their absolute best to serve our 
communities, rural areas continue to face the long-term effects 
of these closings. Mr. Brooks, could you discuss how Fintechs 
could step in to try and fill those gaps in rural communities?
    Mr. Brooks. Yes, absolutely. Congressman, first of all, I 
will just say, and no offense to the chairman, that although I 
am from Colorado, I did spend my first 5 years living just 
outside of Paris, Tennessee. So these issues actually sort of 
resonate with me in a personal way. And I would also say that 
Fintech is not the solution for every problem under the sun, 
but it is a solution as part of an all-hands-on-deck approach.
    The thing about Fintechs is that Fintechs are able to bring 
capital sources that are outside of your community into your 
community. And historically, the way that a rural area would be 
served is you would have a local community bank that would have 
a couple of branches, its deposits would all have been sourced 
from the local community, and then those deposits would be 
reinvested into loans to borrowers, whether they were 
agricultural loans to farmers or small-business loans to the 
mom-and-pop cafe on Main Street.
    The problem with that is, as America has disinvested from 
rural communities over the last 30 years on kind of a long-term 
basis, that kind of capital, even if you had a bank branch, is 
probably not sufficient to serve the credit needs of places 
like your district. So, one of the advantages that Fintech 
offers, and I would argue actually over the long term one of 
the advantages that crypto offers, is that it unlocks sources 
of capital that are far, far away from your communities, and it 
is able to deliver them over the internet to any creditworthy 
person who happens to live in middle Tennessee. I guess, my 
main point is that there may not be enough capital there to 
justify a de novo bank, and yet, there may be creditworthy 
people who need to access capital sourced elsewhere.
    Mr. Rose. During your time at the OCC, you focused on 
increasing access to charters for Fintechs. Could you describe 
the barriers to entry for new firms looking to get into 
payments or lending?
    Mr. Brooks. Yes. If you put aside the bank charter, and you 
wanted to start a payments company--let's say you wanted to 
start Stripe today. The first thing you have to do is you have 
to go and obtain 50 money transmitter licenses in all 50 
States, and that takes a lot of time, and it is incredibly 
expensive. The legal compliance costs that are different from 
State to State become very difficult because some States 
mandate things that are literally prohibited in another State. 
And so, finding a way to do that is extremely difficult.
    Generally speaking, and I guess I do want to speak for a 
moment to the State law preemption point that was raised a 
moment ago just so that I can say that I spoke to it. Back in 
the early days of the Republic, when there was a debate about 
whether the Federal Government should assume the State's 
revolutionary war debts or whether we should have the First 
Bank of the United States, we had this discussion, and the 
reason that Alexander Hamilton won that debate as opposed to 
the Jeffersonians is because of a belief that if we are going 
to have a big economy, big enough to compete with the powers of 
Europe, or in these days, the powers of Asia, we don't have the 
luxury of suffocating our businesses, our big businesses 
anyway, with different State-by-State regulations.
    That is why in the 1970s, Congress enacted rate 
exportation, because of a belief that you don't want Illinois 
to be able to kill commerce because it--and I am just making up 
Illinois--has a different view of interest rates or banking 
charters or anything else compared to Indiana, right? That 
doesn't make sense. We are a big, unified nation and as 
companies grow and operate on an interState basis, the idea of 
getting 50 State charters to operate your payment company 
doesn't really make a ton of sense. I don't think Hamilton 
would think it made a ton of sense.
    Mr. Rose. In the few moments that I have left, if you will, 
I will ask this question. In your testimony, you emphasized how 
there has been a lack of new bank charters in 10 years. Can you 
explain the benefits of increasing the number of charters, 
whether for traditional or online banks?
    Mr. Brooks. Sure. Most Americans still feel most 
comfortable opening up their account in a bank branch. There 
are certain transactions for which they need to talk to a 
banker. It is not fair to see how we have lost the [inaudible].
    Mr. Rose. Thank you.
    Mr. Chairman, I yield back.
    Chairman Perlmutter. Thank you very much.
    We will now go to the gentleman from Illinois, Mr. Casten, 
for 5 minutes, so he can defend his State.
    [laughter]
    Mr. Casten. Thank you, Mr. Chairman. This has really been a 
great hearing. I think you undersold it when you said we are 
trying to learn about the whole banking industry. We are also 
trying to learn about monetary theory. It is hard to do all 
this in 5 minutes.
    I want to just start with sort of two statements that I 
think we all agree with on this panel. Number one, there has 
been a tremendous amount of good and necessary and 
entrepreneurial innovation in the Fintech space, which is 
fantastic, so let's make sure we don't squelch that. Number 
two, there isn't a company in the world that comes before us 
and says, I would like to have more regulation.
    And I mention that because particularly with some of the 
emerging Fintech players, we hear all the time, when they come 
before us, what they are not. ``I am not an ETF.'' ``I am not a 
bank.'' ``I am not a credit rating agency.'' ``I am not a 
credit card company.'' We very rarely hear them say what they 
are, because for them to say what they are would be for them to 
implicitly say, ``Therefore, I would like to be regulated under 
the following structure.'' And I think the value of this 
hearing is getting some clarity on what they actually are.
    Ms. Johnson, I have two kind of big questions for you, and 
I preface that by saying I am probably going to cut you off 
before you finish the first one, and I apologize in advance for 
that. But in your remarks, you said that the OCC and the FDIC 
created steps to allow firms to engage in banking activities 
while being subject to less regulation and supervision, and 
that the OCC lacks the authority to charter non-depository 
national banks.
    Now, if we think just about sort of the distinction between 
those Fintech firms that are doing one small thing as Mr. 
Brooks mentioned, maybe a payment processing firm, and those in 
the Big Tech space that are doing this whole array of consumer 
credit, financial transaction services, setting aside the 
current legal authority, who do you think should regulate 
those, and how would you think about that and in a minute or 
so, so I can get to my next question?
    Ms. Johnson. Representative Casten, I think that is a great 
question. I think the first point is the one you made. What 
exactly is being regulated? I think we must pin the firms down, 
and at the very least, require them to describe the regulatory 
regime they believe they should be subject to based on their 
activities. Otherwise, they engage in regulatory arbitrage, 
which is the purpose of this hearing. You can evade tax. You 
can invade securities law if you arbitrage your activities in a 
manner that avoids the application of regulation to your point.
    Mr. Casten. Thank you, and if you have more thoughts, I 
would love to follow up with you, because that is sort at the 
core of all of these conversations.
    The second question gets into, and I said at the start that 
we are having conversations that are really almost about 
monetary theory right now. I think there is a lot of the 
underlying logic for what Bitcoin is; they are old hard-money, 
gold-bug kind of arguments and we don't need to get into all 
that right now. But we have a financial regulatory structure 
that is designed to ensure that there is sufficient liquidity 
in the market and in your bank so that when you go to withdraw 
something, the cash is there. If you deposit tulip bulbs in 
your bank, the bank doesn't loan out 80 of your tulip bulbs, 
they make sure it is all there, in a safe deposit box.
    But as we have had things like this recent situation in 
this bank in Anchorage that is essentially a crypto company, 
how should we be thinking about what the role of the regulator 
is to ensure that holding increasingly volatile assets on a 
balance sheet doesn't compromise the liquidity of the system, 
particularly as the volume of those assets grows?
    Ms. Johnson. Representative, I think this is a great 
question, and I think we only have to look at the movement in 
the price of Bitcoin from the moment that COVID-19 was declared 
a global pandemic to today and watch the movement and the value 
of that single asset in an asset class to identify an example 
of the problem you just described. If we are allowing banks to 
hold and count or calculate reserves based on this asset class, 
I think we really have to fundamentally revisit, interrogate, 
and clearly understand how we set those valuations and the 
rules and regulations that apply to this new asset class. I say 
that as a student, as a teacher, and as a former practitioner 
engaged in the development of credit derivatives, which--credit 
default swaps specifically were at the heart of the most recent 
financial crisis. And part and parcel of the problem there was 
a misunderstanding, a fundamental misunderstanding of the 
potential liability that this new class of assets could create.
    Mr. Casten. Thank you. And I would love to follow up on 
that as well.
    Mr. Carrillo, with the few seconds I have left here, did 
you have any follow-up thoughts on that?
    Mr. Carrillo. Yes. I would just like to note that this is 
all an environment for volatility and instability, as Professor 
Johnson said. We keep hearing about going back to the good old 
days of the 1980s, but that is when banking was especially wild 
to me and it hurt marginalized communities specifically.
    Mr. Casten. Thank you.
    And I yield back.
    Chairman Perlmutter. The gentleman's time has expired. Mr. 
Budd from North Carolina is recognized for 5 minutes.
    Mr. Budd. I thank the Chair.
    Mr. Brooks, today we are seeing a lot of innovative 
products in the form of digital assets, decentralized finance, 
which could be revolutionary for the banking system. We had 
Coinbase's direct listing yesterday, so it is obvious that this 
technology isn't going away and we are now at the crossroads of 
embracing this technology or falling behind other countries. 
One of my great concerns is that we get surpassed by other 
countries that are more willing to engage on this.
    So, Mr. Brooks, my question is, do you see a world where we 
can have an intersection of legacy banking, what we know of as 
banking, and also DeFi by allowing banks to use blockchain 
protocols and use that to eliminate inefficiencies and offer 
better products and services to consumers?
    Mr. Brooks. Congressman, thank you for the question, and 
also thank you for all of your engagement during my time at the 
OCC. I have always loved these conversations, and I have 
learned a lot from them.
    Let me start with the legacy bank part of things. One of 
the reasons that the OCC started focusing on crypto-regulatory 
issues is because of the fact that two or three of the largest 
banks in the United States were already exposed to various 
crypto activities to the tune of billions of dollars.
    For example, at the time that I walked into the OCC, 
JPMorgan had deposits exceeding a billion dollars backing a 
stablecoin project, but there was no Federal guidance on how 
stablecoins ought to be thought about. State Street was doing 
likewise for another stablecoin project, and there were smaller 
banks, Silvergate and Cross River and some others, that were 
providing other kinds of support services for crypto assets.
    So, it is very clear that there is a lot of interest from 
traditional companies in crypto. And you see that from the fact 
that Intercontinental Exchange has started its own crypto 
exchange, that Goldman Sachs is now restarting their crypto 
desk, and that Fidelity has created a digital asset custodian. 
And Anchorage, another bank that, by the way, doesn't have 
these assets on their balance sheet, they are a custody bank 
that holds those assets for third parties, that is a fee-for-
service business, not an asset-heavy business. But the point of 
all of those things is to say that banks have traditionally 
provided the role of safeguarding and safekeeping their clients 
assets and crypto is another asset that has come along in the 
last 10 years and has now achieved scale. So, clearly, the 
legacy institutions have a role to play.
    In terms of technologies like DeFi and payments in the form 
of stablecoins and other kinds of things, these are the kinds 
of technologies that bring internet technology to finance the 
way that the original internet brought those decentralization 
benefits to information sharing first and to regular commerce 
second.
    I think one of the biggest misunderstandings about crypto, 
which I think is really important to understand, is that we are 
building a second internet here. The whole point of crypto 
tokens having value is to induce people to provide computing 
power to maintain a decentralized network that otherwise would 
be maintained by Google and Facebook. And the way to induce 
regular people to connect computers to maintain those ledgers 
is to let them take a native token that has value on it, so 
that is why we have a decentralized ledger. It is not built for 
terrorism financing; it is built to allow us to have a truly 
decentralized internet. That is what it is all about.
    And so, if you believe that American soft power in the 
world has a lot to do with the fact that we control the 
Internet Corporation for Assigned Names and Numbers (ICANN) and 
the internet protocol, I would think you would feel similarly 
about the use of these internet protocols in in financial 
services. DeFi is one example of where having open source 
software that is allocating credit versus having a credit 
officer sitting in an office--these are ways of making sure 
that there is not some renegade employee who is discriminating 
or taking risks because the algorithm is visible for everybody 
to see and can be changed by other people on the network. To 
me, that is a more optimistic view of the future than a future 
that holds onto the idea of individual bank credit officers 
allocating capital in our society.
    Mr. Budd. You are giving some examples of promoting very 
forward-thinking structures and policies rather than revisiting 
outdated regulations, which I don't think benefits consumers. 
But in order to maintain the supremacy of U.S. financial 
markets, we have to work on modernizing charters and finding 
ways to increase competition innovation. Many modern financial 
services providers and Fintech companies today face the choice 
of either relying on regulated partners or seeking existing 
charter options that limit technology development.
    You have other governments like Singapore, the U.K., and 
the EU which provide modernized regulatory options on top of 
traditional banking charters, which allows for more innovation. 
So, what are some of the ways that that we can navigate this 
system and promote innovation?
    Mr. Brooks. That is a great question. One obvious example 
is to ask the question, why in the United States do we only 
allow banks, but not other financial systems or companies, to 
access the payment system? In the U.K., and in other places 
that have open banking and e-money licenses, any payment 
company can access the payment rails. In the U.S., though, we 
fetishize and protect incumbent banks. That is a complete 
disadvantage.
    Mr. Budd. Thank you, and I yield back.
    Chairman Perlmutter. Thank you, Mr. Budd, and I would just 
remind everybody that 10, 12 years ago, everybody was relying 
on our Federal Reserve and our banking system to help kind of 
correct the global banking system.
    Mr. Torres, who is the newest member of our committee, was 
looking forward to this primer on the banking system and 
currency, and I don't think he has been disappointed. I now 
yield to the gentleman from New York, Mr. Torres, for 5 
minutes.
    Mr. Torres. Thank you, Mr. Chairman. It has certainly been 
a primer. I am new to these issues. Obviously, one of the 
issues before us is the separation of banking and commerce. 
Blurring the line between banking and commerce, as ILCs do, 
raises concerns about systemic risk, moral hazard, and market 
concentration. And my question is, have we seen any or all of 
these concerns borne out by the experience of other countries 
that allow for the intermingling of banking and commerce? What 
lessons can we learned from the experience of those countries? 
And anyone who knows the answer can feel free to answer, to 
weigh in.
    Mr. Carrillo. I am happy to speak to that issue, 
Congressman Torres. I would say that a good example of the sort 
of thing of the dangerous conglomeration that can occur when we 
have loopholes in the broader depository infrastructure, or 
allow things to exist like stablecoins that act like deposits 
but are not regulated like deposits, is to be found in China, 
where the company Tencent has been brought further into the 
system, but in a particular way that is not particularly good 
for users or the people of China, especially when it comes to 
privacy and surveillance.
    Of course, this is generally touted as being efficient, but 
intermingling, in Tencent's case, the social media platform 
with banking has led to, again, an unprecedented amount of 
power that we have perhaps not seen in human history because of 
the way the data collection and surveillance works now. Wedding 
that further to our monetary infrastructure here does not bode 
well. Thanks.
    Mr. Gerding. I could add to that, Representative Torres, 
that in banking in both Japan and South Korea, there is an 
intermingling of banking and commerce. The problem there in 
both of those countries is that that intermingling has served 
to entrench financial and business conglomerates in both of 
those countries. So if we want our economies to have that high 
degree of concentration that we have in Korea and Japan, then 
we would need to start to think about eroding the wall between 
commerce and banking.
    Ms. Johnson. I would just add to that, Representative 
Torres, if I may, that we should also be really mindful, 
specifically not just about the theoretical issues here, but 
the practical prudential regulatory oversight that Professor 
Gerding raised earlier.
    I also think is it imperative to think about who is 
participating in which actions. This committee, and all of 
Congress, in fact, has been thoughtful about the implications 
of certain large technology firms and their continued 
consolidation and growth in the industry. I would like to 
underscore a point that my colleague on the panel, Mr. 
Carrillo, pointed out, which is not solely a matter of the 
prudential regulation that we were talking about in the moment, 
the separation of commerce and banking, but also the specific 
consumer protection concerns that will impact citizens in every 
one of your districts without fail and without exclusion.
    Rural, urban, big city, small town, all across the nation, 
these companies monetize and commodify data about citizens, and 
we are now thinking about giving them access to data regarding 
the financial transactions of all citizens. And this is in a 
moment when we are unsure about what exact data protections 
exist for consumer financial data. This is an impending and 
continuing conversation, and I don't want to take all of your 
time. I just want to underscore that consumer financial data 
protection, alongside the broader prudential regulatory issues, 
I believe, should be important to everyone without respect to 
partisanship.
    Mr. Torres. I know that much of the regulation of these 
bank-like entities happens at the State level, but a case could 
be made that as a general rule, it is much better to have 
uniformity in the law than to have a cacophony of widely varied 
State laws. So it seems sensible to have a Federal framework 
for regulating Fintechs and cryptocurrencies and blockchain. 
What is the argument against uniformity of the law?
    Mr. Gerding. I could address that, if you would like.
    Mr. Torres. Sure.
    Mr. Gerding. I think there is an interest in uniformity, 
and Mr. Brooks mentioned money transmission statutes. It is 
difficult for payment systems or payment companies to comply 
with 50 different payment statutes in 50 different States. The 
better way to do that is to have Congress act to create or 
promote uniformity in statutes, not to have the OCC do that in 
a backdoor manner and basically preempt State laws with a four-
page policy document that created a radical Fintech charter.
    Mr. Torres. Well, the District Court agrees with you. Thank 
you.
    Chairman Perlmutter. The gentleman's time has expired.
    The gentleman from Minnesota, Mr. Emmer, is now recognized 
for 5 minutes.
    Mr. Emmer. Thank you, Chairman Perlmutter, and Ranking 
Member Luetkemeyer. I appreciate that you are hosting what is a 
very important hearing in which we have been able to examine 
our unique dual banking system through a nonpartisan 
[inaudible].
    As financial innovation advances, it is important that we 
work to provide appropriate and considerate regulatory avenues 
for Fintech companies and financial institutions to best serve 
their customers. As we know, access to financial services 
greatly impacts the American consumer in terms of financial 
literacy, fair prices for financial services, and convenience. 
Competitive Fintech companies that offer these affordable 
services to anyone with a cell phone should not be held back 
from deploying their services to any and every American, which 
is why I appreciate the testimony we have heard today. In 
support as policymakers, we must keep this focus at the 
forefront of our attention. It is my hope that the FinTech Task 
Force will be renewed for the 117th Congress, and I look 
forward to carrying out these policy issues further on that 
task force.
    With that, Mr. Brooks, it is great to see you again. Thank 
you for all of your work over the past couple of years at the 
OCC, as the Comptroller of the Currency. You demonstrated a 
strong commitment to creating a regulatory environment that 
encourages innovation and growth in this Fintech space and you 
have been a leader in providing the industry with the clarity 
that is so necessary to make sure they can innovate 
confidently.
    Mr. Brooks, during your tenure at the OCC, the agency 
issued interpretive letters clarifying that national banks 
could offer services such as custody for digital assets that 
they historically offer for traditional assets, and that 
national banks could participate in independent node-
verification networks to facilitate payments. Why do you 
believe these issues require clarification, and what impact do 
you believe these new technologies will have on the banking 
system?
    Mr. Brooks. Congressman, first of all, your partnership and 
guidance on these issues dating back long before I came to the 
OCC has been one of the joys of my life. I really appreciate 
all of the dialogue that we have had over the years about all 
of these issues. I would answer in two basic ways. First of 
all, it became clear a year ago, a year and a half ago, that 
crypto assets had grown to a scale that bank customers--I hear 
there is some background noise, so maybe we could mute our 
phones just so you can all hear me.
    Chairman Perlmutter. Somebody, I think Mr. Emmer, maybe, 
you need to mute.
    Mr. Emmer. Okay.
    Mr. Brooks. Great. So the point is that crypto is now a 
two-plus trillion dollar asset class, and the customers who own 
crypto assets are the same people who are also depositors and 
checking account customers and mortgage borrowers, et cetera, 
of banks. And so, it was no longer possible for us to ignore 
the fact that the assets that were growing in size and scale on 
the crypto side were lacking a safe place to be custodied or a 
safe place to be exchanged for value the way that all other 
assets can transact on a bank. So, the first reason that we 
launched down the path was the recognition that the market had 
grown and that banks traditionally provide a safe custody 
location and safe transaction rails for people engaged in those 
things.
    But as we thought more deeply about that over time, what 
also became clear, and this comes back to my point about how we 
sort of tend to fetishize legacy banks over other people who 
are performing the same services in a different way--it became 
clear at a certain point that one of the things that 
blockchains are, is they are payment networks. They are a set 
of technologies for transmitting value from person A to person 
B.
    As I said, in the United States, unlike in our global 
competitor countries, we only allow banks, as defined, to 
connect to the government payment system at the Federal Reserve 
or to connect to the automated clearinghouse, which is 
essentially the bank cartel that runs its own payment system. 
We don't allow other companies.
    And at the OCC, our basic view was, well, wait a minute. 
There is nothing magic about Fedwire. There is nothing magic 
about ACH. The point is, banks have a statutory power to 
process payments. That is the paying checks power in 12 U.S.C. 
Sec. 24.
    And so if a new technology has arisen, which is an open 
blockchain platform for transmitting payments, there is no 
reason banks shouldn't be allowed to take advantage of the 
faster, more secure, and more certain environment of blockchain 
if they can also connect to Fedwire or SWIFT or ACH. That is 
the point of what innovation is always about.
    And by the way, the OCC has always used interpretive 
letters to clarify the way that existing bank powers can be 
conducted on new technology platforms. Think back to the 1960s, 
when the Comptroller at the time issued an interpretive letter 
which said that banks can engage in data processing. No one 
thought Congress had to act at that time, but the point is that 
computers had been invented, and now a new internet of finance 
called blockchain has been invented, and the OCC will always 
lead and help bank technology.
    Mr. Emmer. Thank you. My time has expired. Thank you, Mr. 
Chairman.
    Chairman Perlmutter. Thank you, Mr. Emmer.
    The gentleman from Illinois, Mr. Garcia, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Chairman Perlmutter, and 
Ranking Member Luetkemeyer, for convening this hearing. And 
thanks to all of our witnesses today for shedding light on a 
complicated, but important topic.
    I represent a working-class, largely immigrant district, 
and my district in Illinois needs the same things as any other 
district. We need investment in our neighborhoods and 
institutions. We need opportunities for growth, and all too 
often, these things are out of reach for communities like mine. 
Unfortunately, that is not new. But every time a company wants 
to get out of regulations, they say that they are going to 
change, they say that they are going to help if they can just 
sell a certain type of product or market in a certain way. That 
is not new either.
    What I am worried about is that the business model of many 
companies we are discussing today is either take advantage of 
consumers or take advantage of regulated competitors. Since my 
colleagues mentioned the True Lender Rule, I want to clarify 
that I introduced the resolution to repeal the rule for that 
very reason. The Rule undermines the ability of States like 
mine and more than a dozen others to protect consumers from 
predatory lending, but I turned back.
    Mr. Gerding, let's say a retail company like Walmart or 
Amazon offered financial services through an ILC. All of a 
sudden, they know a lot about you. They know how much money you 
have or whether you can pay your credit card bill. They know 
what you buy. So, should consumers worry about this kind of 
blending of commercial and financial companies, and would these 
companies have a competitive advantage over other businesses 
that don't have this kind of data about their customers?
    Mr. Gerding. Absolutely. Representative Garcia, they should 
be worried. One of the things that the other panelists have 
mentioned earlier is that you have to worry not only about 
financial stability, but data privacy. And a lot of the Big 
Tech and Big Retail companies already have enormous amounts of 
information about consumers. Being able to combine that with 
payment services, banking services, and financial information 
about customers would exacerbate those problems.
    I should note that there is one way of dealing with that. 
The Gramm-Leach-Bliley Act, one of the bright spots of that Act 
was introducing privacy regulation. But privacy rules under 
Gramm-Leach-Bliley only apply to financial institutions. So if 
large conglomerates are going to be entering into the banking 
space and being given bank charters, I think we need to start 
thinking about expanding and applying the Gramm-Leach-Bliley 
privacy provisions to a whole host of larger institutions and 
larger conglomerates.
    Mr. Garcia of Illinois. Thank you, sir.
    Mr. Carrillo, in your testimony you discussed how companies 
and laws that claim to expand financial access for underserved 
communities can end up preying on those communities. Can you 
tell us about the risks of allowing new Fintech companies to 
offer unregulated services, and how can Congress promote 
economic inclusion without leaving our constituents vulnerable 
to exploitation?
    Mr. Carrillo. Thank you very much, Representative Garcia. I 
want to zoom out and say that to your point in this war between 
the neo-Hamiltonians and the neo-Jeffersonians was lost as the 
actual people who currently use the U.S. financial system. And 
people do not need to be included. If they are included in a 
predatory structure, they do not need to be given access to 
credit if what they are given access to is something that 
actually hurts. The way that, for instance, the former Acting 
Comptroller talks about credit, you would think that it had no 
downside, and he still has not addressed the privacy issues nor 
have any of the Republican members of this panel, despite the 
fact that they go to our very constitutional protections, which 
should be important to everyone in this room. I would 
appreciate it if we did not look at this debate with one eye. 
Thank you.
    Mr. Garcia of Illinois. Thank you, sir.
    Mr. Chairman, I yield back.
    Ms. Johnson. Representative, may I just add one tiny line 
to what Professor Gerding just offered regarding privacy 
protections in the Gramm-Leach-Bliley Act? The Dodd-Frank Act 
also contains, in Section 1033, an opportunity area for this 
Congress to act and to protect consumer financial data. I 
really think that your commentary is accurate. The 
marginalized, hard-working, low-income or no-income, struggling 
middle-class families in many of the districts represented by 
the members of this committee would be most vulnerable if some 
of the conglomerates existing in Big Tech gain access to 
additional information. In fact, they will form surveillance 
capitalism and that will most affect Black and Brown 
individuals, just to be blunt and honest.
    Mr. Garcia of Illinois. Thank you for chiming in, Professor 
Johnson.
    Thank you. I yield back, Mr. Chairman.
    Chairman Perlmutter. Thank you, Mr. Garcia.
    I think you are the last member to be here and to want to 
ask questions. We have gone on for 2\1/2\ hours now, so I want 
to bring this to a close. This has been very interesting, and 
to the ranking member's point, I think we are just really 
beginning to get some idea of this subject and the need for 
innovation, as Mr. Brooks has talked about, so that people who 
use the services and businesses don't skirt around the edges of 
the system where there is no regulation whatsoever, but also 
the detriments, whether it is privacy or some kind of abusive 
approaches that a company may take to an individual or to a 
business.
    There is nothing new under the sun. It might happen faster 
or something might happen in a different way, but we need to 
make sure that we have prudential regulations that allow for 
businesses and individuals to transact things without being 
harmed. And so I think, Mr. Ranking Member, I am going to try 
to convince the committee that we have another couple of 
hearings on this subject.
    And I would like to thank our panelists here. Your 
testimony, both your oral testimony and your written testimony, 
is outstanding. I wish Mr. Torres was here, because if you read 
all of those papers that you have all written, you will learn 
just about everything there is about the banking system from 
Hamilton and Jefferson to today.
    Without objection, I would like to enter statements into 
the record from the following organizations: the American 
Bankers Association; the American Financial Services 
Association; the Bank Policy Institute; the Consumer Bankers 
Association; the Independent Community Bankers of America; and 
the National Association of Industrial Bankers.
    I am surprised that nobody mentioned Glass-Steagall in the 
commerce and banking kind of context today, but obviously, as 
we came through the Depression, we wanted to make sure that we 
didn't mix commerce and banking. I want to thank all of the 
witnesses for their testimony and for sharing their time, their 
talent, and their expertise with this subcommittee. Your 
testimony today will help advance the work of our subcommittee 
and of the U.S. House of Representatives.
    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.
    Thank you all very much for your testimony. To the 
Coloradans, it was good to have you here, but to those of you 
not from Colorado, we are very happy that you participated as 
well. And with that, this hearing is adjourned.
    [Whereupon, at 12:27 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             April 15, 2021

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