[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
CLIMATE RISK: ARE FINANCIAL REGULATORS
POLITICALLY INDEPENDENT?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND MONETARY POLICY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
JULY 18, 2023
__________
Printed for the use of the Committee on Financial Services
Serial No. 118-41
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-869 PDF WASHINGTON : 2024
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HOUSE COMMITTEE ON FINANCIAL SERVICES
PATRICK McHENRY, North Carolina, Chairman
FRANK D. LUCAS, Oklahoma MAXINE WATERS, California, Ranking
PETE SESSIONS, Texas Member
BILL POSEY, Florida NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri BRAD SHERMAN, California
BILL HUIZENGA, Michigan GREGORY W. MEEKS, New York
ANN WAGNER, Missouri DAVID SCOTT, Georgia
ANDY BARR, Kentucky STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas AL GREEN, Texas
FRENCH HILL, Arkansas, Vice EMANUEL CLEAVER, Missouri
Chairman JIM A. HIMES, Connecticut
TOM EMMER, Minnesota BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
ANDREW GARBARINO, New York SYLVIA GARCIA, Texas
YOUNG KIM, California NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee
Matt Hoffmann, Staff Director
Subcommittee on Financial Institutions and Monetary Policy
ANDY BARR, Kentucky, Chairman
BILL POSEY, Florida BILL FOSTER, Illinois, Ranking
BLAINE LUETKEMEYER, Missouri Member
ROGER WILLIAMS, Texas NYDIA M. VELAZQUEZ, New York
BARRY LOUDERMILK, Georgia, Vice BRAD SHERMAN, California
Chairman GREGORY W. MEEKS, New York
JOHN ROSE, Tennessee DAVID SCOTT, Georgia
WILLIAM TIMMONS, South Carolina AL GREEN, Texas
RALPH NORMAN, South Carolina JOYCE BEATTY, Ohio
SCOTT FITZGERALD, Wisconsin JUAN VARGAS, California
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee
C O N T E N T S
----------
Page
Hearing held on:
July 18, 2023................................................ 1
Appendix:
July 18, 2023................................................ 39
WITNESSES
Tuesday, July 18, 2023
Benatar, Hon. Sarah, Treasurer, Coconino County, Arizona......... 9
Coleman, Greg, Senior Deputy Comptroller for Large Bank
Supervision, Office of the Comptroller of the Currency (OCC)... 4
Eberley, Doreen R., Director, Division of Risk Management
Supervision, Federal Deposit Insurance Corporation (FDIC)...... 6
Gibson, Michael S., Director, Supervision and Regulation, Board
of Governors of the Federal Reserve System (Fed)............... 6
Jones, Rendell L., Deputy Executive Director, National Credit
Union Administration (NCUA).................................... 8
APPENDIX
Prepared statements:
Benatar, Hon. Sarah.......................................... 40
Coleman, Greg................................................ 43
Eberley, Doreen R............................................ 50
Gibson, Michael S............................................ 59
Jones, Rendell L............................................. 65
Additional Material Submitted for the Record
Barr, Hon. Andy:
Written statement of the Independent Community Bankers of
America (ICBA)............................................. 70
Waters, Hon. Maxine:
Letter from Americans for Financial Reform................... 72
Better Markets Fact Sheet: Politics Aside, Banking
Regulators' Risk Analysis Must Include the Many Well-Known
Climate-Related Financial Risks, dated July 17, 2023....... 75
Pleiades Strategy report, ``Right-Wing Attacks on the Freedom
to Invest Responsibly Falter in Legislatures,'' by Connor
Gibson and Frances Sawyer.................................. 80
Written statement of the State of Washington Department of
Financial Institutions..................................... 126
Benatar, Hon. Sarah:
Written responses to questions for the record from
Representative Waters...................................... 129
Eberley, Doreen R.:
Written responses to questions for the record from
Representative Barr........................................ 131
Written responses to questions for the record from
Representative Waters...................................... 140
Gibson, Michael S.:
Written responses to questions for the record from
Representative Barr........................................ 142
Written responses to questions for the record from
Representative Fitzgerald.................................. 152
Written responses to questions for the record from
Representative Waters...................................... 154
Jones, Rendell L.:
Written responses to questions for the record from
Representative Barr........................................ 155
Written responses to questions for the record from
Representative Fitzgerald.................................. 158
Written responses to questions for the record from
Representative Waters...................................... 155
CLIMATE RISK: ARE FINANCIAL
REGULATORS POLITICALLY INDEPENDENT?
----------
Tuesday, July 18, 2023
U.S. House of Representatives
Subcommittee on Financial Institutions
and Monetary Policy,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:08 a.m., in
room 2220, Rayburn House Office Building, Hon. Andy Barr
[chairman of the subcommittee] presiding.
Members present: Representatives Barr, Posey, Luetkemeyer,
Williams of Texas, Loudermilk, Rose, Timmons, Norman,
Fitzgerald, Kim, De La Cruz, Ogles; Foster, Sherman, Green,
Beatty, Vargas, Casten, and Pressley.
Ex officio present: Representative Waters.
Also present: Representative Huizenga.
Chairman Barr. The Subcommittee on Financial Institutions
and Monetary Policy will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Today's hearing is entitled, ``Climate Risk: Are Financial
Regulators Politically Independent?''
I now recognize myself for 4 minutes to give an opening
statement.
The Federal regulators represented here today have recently
coordinated to promulgate principles for managing climate-
related financial risks. The guidance and information requested
by the regulators aligns with a 2021 Executive Order, efforts
promoted by the Financial Stability Oversight Council (FSOC),
and recommendations from various international global
governance organizations. The Federal Reserve is extending
furthest with a mandatory supervisory climate scenario analysis
and formal collaboration with Treasury's Office of Financial
Research on Climate Data and Analysis, which the Board of
Governors never voted to approve. FSOC Chair Yellen has
repeatedly identified climate change as an existential crisis
and has called climate change, ``an emerging and increasing
threat to financial stability.''
Following the Administration's posture on climate-related
financial risk, regulators have begun inserting climate
policies into bank regulation and supervision. There is little
transparency about regulators' climate efforts and what occurs
in Administration-led climate working groups or international
global governance organizations. Four bills have been attached
to this hearing to address this lack of transparency and
regulatory capture. There is also a lack of transparency about
funding of some of the climate-related efforts of the
international organizations, including the tangled web of
financing associated with the Network for Greening of the
Financial System (NGFS). There is nothing wrong with regulators
wanting to learn more about data methods and analysis or asking
questions of banks about what they are doing. No one believes
that financial institutions should ignore not-fully-understood
risks. But we and the regulators know that institutions are
already analyzing climate-related financial risks, and many
large institutions have public-facing information available
describing how they are monitoring and managing this risk. Yet
somehow, after an Executive Order was issued and FSOC made
pronouncements, the regulators found a sudden need for a
coordinated public-facing campaign of guiding principles for
climate risks that research says are manageable.
Regulators are saying that their efforts are intended to
help banks manage risks that are not yet fully understood even
by the regulators, with the underlying premise that somehow the
prudential regulators know better than the private sector. That
seems odd, given that the Fed says that they must exercise
humility about spotting risks, and they couldn't even help
institutions manage interest rate risks. The Fed's Vice Chair
for Supervision promises, as he did with Silicon Valley Bank's
failure, to write a public-facing report of his personal
assessment of what his climate scenario analysis reveals, using
data that Congress will not be able to see to corroborate his
findings.
At best, existing climate-related financial risk analysis
can show long-run directionality of financial and economic
effects of alarming climate futures. But to think that existing
analyses can accurately predict near-term effects of projected
climate changes 5, 10, or even 100 years out is misleading and
false advertising. Climate models are typically unwieldy
mongrels characterized by cascading uncertainties as they mix
and match inputs and outputs from economic, climate, ocean,
temperature, and other modules to produce questionable numbers
with highly-questionable predictive content.
There are so many degrees of freedom available to climate
analysts that, like cooking soup with a cabinet full of spices,
you can get whatever flavor of results that you would like. As
Nobel Prize-winning economist, Lars Peter Hansen, counsels to
regulators and central banks, ``Their credibility will be
further enhanced by avoiding the temptation to exaggerate our
understanding of climate change.'' On climate policy driven by
Biden Administration directives, regulators are choosing
politicized policymaking, putting their independence at risk
and giving in to the temptation to exaggerate our understanding
of climate change.
The Chair now recognizes the ranking member of the
subcommittee, the gentleman from Illinois, Mr. Foster, for 4
minutes for an opening statement.
Mr. Foster. Thank you, Chairman Barr, thank you to our
witnesses for being here today, and thank you to our regulators
for appropriately and thoughtfully responding to the changing
risk profiles of our financial systems. As our world changes,
it is important that participants in our financial system
remain well-apprised of new and emerging risks, and it is
important that our regulators help them stay well-postured for
those risks. History tells us that systemic financial risks do
not come from politically-driven overreaction to emerging risk,
but rather from regulatory capture, properly defined, which is
the use of the political power by economic incumbents, who use
their political power to restrict the ability of regulators to
respond to new and real financial threats that powerful
incumbents may find inconvenient to acknowledge.
We saw that most recently in the financial collapse of
2007, which was preceded by more than 20 years of the Great
Moderation, a period lasting from about 1984 to 2008, a period
of low volatility and continuously-rising asset prices,
including home prices that rose faster than GDP, but also a
banking system and a middle class that became leveraged beyond
all reason, and an economy completely dependent on
continuously-rising asset and real estate prices, which was
obviously unsustainable from first principles, just as it is
scientifically unsustainable to continue putting greenhouse
gases into our atmosphere without suffering severe economic
consequences.
However, in 2007, as well as many times in our history, the
political power of economic incumbents encouraged or forced
regulators to keep their heads in the sand. So instead of
appropriately responding to what was then euphemistically
called the subprime crisis, at the tip of a much larger iceberg
of systemic risk, in 2008 the Bush Treasury Department put out
the Blueprint for a Modernized Financial Regulatory Structure,
which, incredibly, proposed even further deregulation of an
already-shaky financial system.
The threat of political influence on our financial
regulators is real, and climate change does pose systemic risk
to our nation's financial system. The destruction waged by
stronger hurricanes and tornadoes, more-intense floods and
droughts, sea-level rise, and wildfires threatens businesses,
banks, and credit unions across our country. And when a large
swath of a region's businesses or homeowners face major losses
all at once from one of these catastrophic weather systems,
financial institutions that issue loans or insurance to them,
in turn, must swallow large losses. And to maintain system-wide
stability, the regulators must ensure that banks are able to
weather these literal and figurative storms.
Similarly, on the investment level, in order to effectively
manage their own risk, shareholders must have access to
information regarding a company's exposure to climate-related
risks. We cannot allow Americans to lose their retirement
savings because acknowledging the realities of climate change
has been overshadowed by partisan politics. The Federal
financial regulators, including the SEC, have recently
promulgated regulations to address system-wide and investor-
level risks, and I applaud them for doing so.
My Republican colleagues seem to have called this hearing
to promote the idea that regulations represent a lack of
political independence by the agencies, and that they are
responding to Democratic pressure to raise the alarm about the
impacts of climate change. However, the true danger lies in the
other direction, in a politically-driven underreaction, and
these rules simply recognize the reality of climate risk to our
financial system.
If hearings like this one end up pressuring regulators to
bury their heads in the sand and ignore climate risks, it would
create a grave economic distortion and risk unnecessary failure
of our financial institutions and the harm to ordinary
Americans that inevitably follows. So, I applaud FSOC and the
SEC for following the science and considering the financial
risk posed by climate change in spite of the political
pressure. And I look forward to hearing from our witnesses
today how we can further increase transparency and mitigation
surrounding financial institutions' climate risk.
Chairman Barr. The gentleman's time has expired. The Chair
now recognizes the gentleman from Michigan, Mr. Huizenga, who
is also the Chair of our Subcommittee on Oversight and
Investigations, and the leader of the Environmental, Social,
and Governance Working Group, for 1 minute.
Mr. Huizenga. Thank you, Chairman Barr. I appreciate you
allowing me to participate in this hearing. Well-intentioned
but misguided government mandates are nothing new in
Washington. However, the radical shift by this Administration
to pound environmental, social, and governance (ESG) policies
into every facet of our society outside of the legislative
process has reached a critical breaking point. As banking
regulators continue to push for the disclosure of climate-
related information which they have little or no experience
with, small businesses, as well as low- and middle-income
families across the country continue to be crushed by soaring
costs stemming from President Biden's failed economic agenda.
Instead of feeding their obsession to become climate
policymakers, often picking winners and losers, regulators
should focus on sound banking policy that won't impede
America's drive for energy independence and increased economic
opportunity for all. Republicans won't idly stand by and allow
banking regulators on their own to channel credit to
politically-desirable sectors, bypassing Congress.
So thank you, Mr. Chairman, for allowing me to join your
subcommittee, and I look forward to hearing from the witnesses.
Chairman Barr. The gentleman yields back. The gentlelady
from California is not here, so we will move on to witness
testimony.
Today, we welcome the testimony of Mr. Greg Coleman, the
Senior Deputy Comptroller for Large Bank Supervision at the
Office of the Comptroller of the Currency; Ms. Doreen Eberley,
the Director of the Division of Risk Management Supervision at
the Federal Deposit Insurance Corporation; Dr. Michael S.
Gibson, the Director of Supervision and Regulation at the Board
of Governors of the Federal Reserve System; Mr. Rendell L.
Jones, the Deputy Executive Director of the National Credit
Union Administration; and the Honorable Sarah Benatar, the
Treasurer of Coconino County, Arizona--welcome to Washington.
Thank you all for being here.
Each of you will be recognized for 5 minutes to give an
oral presentation of your testimony, and without objection,
each of your written statements will be made a part of the
record.
Mr. Coleman, you are now recognized for 5 minutes to give
your oral remarks.
STATEMENT OF GREG COLEMAN, SENIOR DEPUTY COMPTROLLER FOR LARGE
BANK SUPERVISION, OFFICE OF THE COMPTROLLER OF THE CURRENCY
(OCC)
Mr. Coleman. Chairman Barr, Ranking Member Foster, and
members of the subcommittee, thank you for the opportunity to
appear today to discuss the Office of the Comptroller of the
Currency's (OCC's) activities around climate-related financial
risk. The OCC is an independent bureau of the Department of the
Treasury, and its mission is to ensure that national banks and
Federal savings associations operate in a safe and sound
manner, provide fair access to financial services, treat
customers fairly, and comply with applicable laws and
regulations.
Consistent with that mission, one of the OCC's current
priorities is acting on climate risk due to the increased
frequency, severity, and volatility of weather events which
affect the value of financial assets, borrowers'
creditworthiness, and the associated risk banks may take onto
their balance sheets. Our focus for this priority is on the
largest banks. I would like to stress that the OCC does not and
will not tell bankers what customers or legal businesses they
may or may not bank. Rather, we are committed to staying
focused on banks' risk management of climate-related financial
risks. This focus is firmly rooted in our mandate to ensure
that national banks and Federal savings associations operate in
a safe and sound manner.
The OCC has approached climate-related financial risk the
same way the agency approaches any emerging risk area: by
working with our regulated institutions to determine if they
have appropriate processes and procedures in place to address
the risk. In December 2021, the OCC issued for public comment
draft principles designed to support the identification and
management of climate-related financial risks at OCC-regulated
institutions with more than $100 billion in total assets.
Limiting the scope of the guidance to large banks, which have
already begun to monitor this emerging risk, is intentional
because their exposure to climate-related financial risk may be
material.
The draft principles describe general considerations
relating to bank governance policies, procedures, and limits,
strategic planning, risk management, data, and other areas.
They provide considerations for how climate-related financial
risk can be addressed in the traditional risk categories,
including credit, liquidity, operational risk, and others. The
agency has invited feedback on all aspects of the draft
principles, and we are continuing to work and continuing to
consider the comments received. We are working with our
interagency colleagues to determine the next steps in this
area.
On their own initiative, large banks have begun
incorporating climate-related financial risks in their risk
management frameworks and policies. To understand their
climate-related financial risk management programs, the OCC
began reviewing this information in 2022. My testimony
describes our initial observations from these reviews. In
general, the large banks we supervise are in varying stages of
developing processes to measure and monitor their potential
exposures to physical and transition climate-related financial
risks.
I stress that community banks are not the focus of our
climate-related financial risk efforts. Based on decades of
experience in their local communities, community bankers are
very familiar with the impacts of weather events upon their
customers and businesses. Further, these banks have long
managed the risks that localized weather events present. The
OCC does not intend our efforts aimed at the large banks to
trickle down to community banks. However, Acting Comptroller
Hsu has suggested that mid-sized and community bankers be
mindful of these risks and give thought to how they can
continue to manage them appropriately.
To ensure that the OCC is aware of the climate-related
financial risk management efforts of other Federal Government
and international bodies, the agency is a member of the
Financial Stability Oversight Council's Climate-related
Financial Risk Committee. We also participate in the Basel
Committee on Banking Supervision Task Force on Climate-Related
Financial Risks, and the Network of central banks and
supervisors in the Network for Greening the Financial System.
Our efforts with these international bodies allow the OCC to
ensure awareness of and facilitate information sharing with our
fellow regulators.
In closing, the OCC is committed to assessing climate-
related financial risks at banks with over $100 billion in
consolidated assets from a risk management perspective. This
approach is consistent with how the agency responds to emerging
risks to the banking industry and to ensure that national banks
and Federal savings associations continue to remain safe and
sound, provide fair access to credit, and treat customers
fairly.
Thank you, and I will be happy to answer your questions.
[The prepared statement of Senior Deputy Comptroller
Coleman can be found on page 43 of the appendix.]
Chairman Barr. Thank you for your testimony, Mr. Coleman.
Ms. Eberley, you are now recognized for 5 minutes to give
your oral remarks.
STATEMENT OF DOREEN R. EBERLEY, DIRECTOR, DIVISION OF RISK
MANAGEMENT SUPERVISION, FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC)
Ms. Eberley. Thank you. Chairman Barr, Ranking Member
Foster [Audio malfunction in the hearing room.] and Members of
Congress--apologies--on the issues outlined in my testimony. I
look forward to answering your questions.
[Due to audio difficulties in the hearing room, Director
Eberley's oral testimony is missing. Please see her written
statement as indicated below.]
[The prepared statement of Director Eberley can be found on
page 50 of the appendix.]
Chairman Barr. The gentlelady yields back.
The Chair now recognizes Dr. Gibson for his oral remarks.
STATEMENT OF MICHAEL S. GIBSON, DIRECTOR, SUPERVISION AND
REGULATION, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
(FED)
Mr. Gibson. Chairman Barr, Ranking Member Foster, and
members of the subcommittee, thank you for the opportunity to
discuss the Federal Reserve's supervisory work related to the
financial risks of climate change.
The Federal Reserve's responsibilities with respect to
climate change are important but narrow. These responsibilities
are tightly linked to our responsibilities for bank supervision
and financial stability. Because climate change could pose
challenges for the financial system, it is important that we
better understand these risks. Our primary focus is to evaluate
whether banks operate in a safe and sound manner and manage all
material risks, including climate-related financial risks.
Before proceeding, it is important to emphasize two general
points about our supervisory approach. First, the Federal
Reserve recognizes that decisions about policies to address
climate change itself should be made by the elected branches of
government. As Chair Powell stated earlier this year, the
Federal Reserve is not a climate policymaker.
Second, it is not the Federal Reserve's policy to
discourage banks from offering accounts or services to any
class or type of law-abiding business, and this is not a part
of our work in looking into climate-related financial risk.
Our supervisory work related to the financial risks from
climate change is based on our core responsibility to ensure
that banks understand and appropriately manage all material
risks, including any related to climate change. Weaknesses in
how banks identify, measure, monitor, and control climate-
related financial risks could adversely affect a bank's safety
and soundness. To fulfill this supervisory responsibility, the
Federal Reserve is working to better understand the potential
implications of climate change for supervised banks.
I will now briefly discuss two near-term supervisory
priorities for the Federal Reserve related to the financial
risks of climate change: issuing interagency guidance for large
banks; and conducting a pilot climate scenario analysis
exercise.
Last December, the Federal Reserve asked for public comment
on draft guidance providing a high-level framework for the safe
and sound management of exposure to climate-related financial
risks for large banks. The guidance would apply only to banks
with over $100 billion in total consolidated assets. The
proposed guidance contains high-level principles and describes
how climate-related financial risks can be addressed in
specific prudential risk areas. We intend to coordinate with
the OCC and the FDIC in issuing any final guidance to promote
consistency across the supervision of large financial
institutions.
Climate scenario analysis, in which the resilience of
financial institutions is reviewed under different climate
scenarios, is an emerging risk management and supervisory tool
used to evaluate climate-related financial risks. The pilot
climate scenario analysis launched in January was designed with
two objectives: to learn about large banking organizations'
climate risk management practices and challenges; and to
enhance the ability of both large banking organizations and
supervisors to identify, measure, monitor, and manage climate-
related financial risks.
I should emphasize that we view climate scenario analyses
as distinct and separate from the Federal Reserve's supervisory
stress test. The Federal Reserve's stress test is designed to
assess whether large banking organizations have enough capital
to continue lending to households and businesses during a
severe recession and financial market shock. The pilot climate
scenario analysis exercise, on the other hand, is exploratory
in nature and does not have consequences for bank capital or
supervisory implications.
As I mentioned earlier, the Federal Reserve's role with
respect to climate change is important but narrow. The Federal
Reserve has a duty to understand risks to the safety and
soundness of the banks it oversees and to the financial system,
including the financial risks from climate change. Thank you. I
look forward to your questions.
[The prepared statement of Director Gibson can be found on
page 59 of the appendix.]
Chairman Barr. Thank you.
Mr. Jones, you are now recognized for 5 minutes.
STATEMENT OF RENDELL L. JONES, DEPUTY EXECUTIVE DIRECTOR,
NATIONAL CREDIT UNION ADMINISTRATION (NCUA)
Mr. Jones. Good morning, Chairman Barr, Ranking Member
Foster, and members of the subcommittee. Thank you for inviting
the National Credit Union Administration (NCUA) to discuss the
agency's activities regarding climate-related financial risk.
My name is Rendell Jones, and I am the deputy executive
director for NCUA. As a regulator and insurer, the NCUA is
responsible for examining and supervising for credit union
resilience against all material risks. The agency believes that
credit unions are best-positioned to assess various risks,
including climate-related financial risks and opportunities
within their specific fields of membership.
In my testimony, I will summarize a recent voluntary
request for information. In late April, at a public meeting of
the NCUA board, the NCUA issued a Request for Information (RFI)
seeking input from stakeholders and subject matter experts to
strengthen the agency's ability to identify and understand
credit unions' current and future climate-related financial
risks. The NCUA's goal in issuing the RFI is twofold: first,
the agency seeks to improve its understanding of climate-
related financial risks, how credit unions view them, and how
it can best support the industry in mitigating them; and
second, the agency aims to better understand the products and
services credit unions can offer to leverage opportunities
presented by any related transitions and key economic sectors.
In the NCUA's RFI, the agency requested voluntary feedback
and included 38 questions for the public's consideration. It
solicited input on a variety of topics, including climate-
related physical and transition risks that are affecting or may
affect the industry in the future, potential adjustments to
operations, governance, and business strategies to mitigate
those risks and methods, metrics and tools for identifying and
measuring those risks, and climate-related business
opportunities, including the support needed to expand products
and services, and any barriers that credit unions might face.
The comment period closed on June 26th, and the agency received
44 responses from individual credit unions, credit union trade
associations, and other interested parties. Insights derived
from the responses provided by stakeholders will be essential
in shaping any future efforts in this area.
As noted in the RFI, NCUA does not plan to use the
information collected in the examination and supervision of
individual credit unions. Any new requirements for credit
unions associated with climate-related financial risks would
require changes to existing examination and supervision
procedures and approval by the NCUA board. The credit union
system remains well-capitalized, stable, and well-positioned to
handle various economic possibilities. The NCUA continues to
monitor for any material risks, including climate-related
financial risks, to credit union performance and the health and
stability of the National Credit Union Share Insurance Fund.
Thank you for the invitation to testify before you today,
and I look forward to answering any questions you may have.
[The prepared statement of Mr. Jones can be found on page
65 of the appendix.]
Chairman Barr. Thank you.
Ms. Benatar, you are now recognized for 5 minutes.
STATEMENT OF THE HONORABLE SARAH BENATAR, TREASURER, COCONINO
COUNTY, ARIZONA
Ms. Benatar. Thank you, Mr. Chairman, Mr. Ranking Member,
and distinguished members of the House Financial Services
Committee. My name is Sarah Benatar, and I serve as the
Treasurer of Coconino County in Arizona, the second-largest
county by area in the country. In addition to this, I am
president of both the Arizona Association of Counties and the
National Association of Hispanic County Officials. As
Treasurer, I serve as the bank and chief investment officer for
the entire county, responsible for the safekeeping of public
dollars on deposit with us from county departments to all
special districts, such as schools and fire districts.
My fellow county government officials across the country
spend days and nights worrying about potential risks that would
cost taxpayers money and could jeopardize our ability to pay
for the hardworking first responders, road crews, and other
public servants in our communities. In managing public funds,
it is important to always put the safety of public dollars
first, followed by addressing liquidity needs, and finally,
working towards a positive rate of return. In short, safety
first, then liquidity, and then, yield. This necessarily
includes considering all forms of risk, including climate
risks. These priorities ensure that we are the best stewards of
public funds.
Unfortunately, we are seeing a national trend that
jeopardizes our top priority to ensure the safety of taxpayer
dollars. Across the country, legislation is being introduced
that will reduce the universe of banks with whom our Treasury
can do business, what we can invest in, and what policies we
can adopt to evaluate risks associated with public fund
management. Many of these proposals claim to want to de-
politicize financial regulations, but instead embed new
political tests that protect special interests from market
competition.
Furthermore, when the rubber meets the road in implementing
these bills, they raise costs to our taxpayers. Every
jurisdiction needs a servicing bank. The free-market request
for proposal (RFP) process is vital to ensuring the protection
of taxpayer dollars, but it only works if there are sufficient
bidders for a free market to exist. Responses to government
RFPs are already limited due to collateralization and asset
requirements, with only a handful of banks even servicing
governments. Simply put, an anti-ESG legislation will push
numerous bidders out of the process entirely. At best, local
governments will be left with one option to select from and
would suffer from higher costs. At worst, we would receive no
bids, leaving us without a servicing bank, and changing local
government as we know it.
How will I pay my firefighters who are on multiweek
assignments if I can't do direct deposit because we don't have
a bank? This reduction in size of the market for public banking
services is a reality, not a hypothetical, for local
governments and States where anti-ESG legislation has passed.
In addition to servicing bank needs, treasurers are
responsible for the investment of public funds. The foremost
objectivity in government investing is the safety of principal,
which means mitigating and evaluating risks of investment
decisions in both the short term and long term. As a prudent
fiduciary, I believe that climate risks are part of that
analysis of safety that must be considered to honor my duty of
care and duty of loyalty. Over the last year alone, my county
has faced numerous wildland fires, flooding events, tornadoes,
record snowfalls, and now, record heat levels. When determining
whether to invest in a corporate bond, I should have the
ability to evaluate the risk of an investment by asking
questions like, is a major distribution center of this company
in a disaster area?
Safety of public funds is about evaluating risks with all
the tools in our toolbox. It is up to us as prudent local
investment officers to decide which tools we want to use. These
concerns are shared by local officials across the country,
regardless of party. We want what is best for our communities,
and we want to keep taxpayer money safe. We want free markets
so that we can get the best value. We want the ability to make
choices ourselves as to whom we do business with, and how we
invest our public dollars. There is no better illustration of
this than the bipartisanship between the county treasurers in
Arizona who have stood together to oppose legislation that will
jeopardize our ability to be good stewards of public dollars.
I urge you to listen to the dedicated public servants who
are elected by communities within your districts, to the
associations of businesses who have spoken out against these
measures, and to the average citizens who just want their
taxpayer dollars protected. Thank you for your consideration.
[The prepared statement of Ms. Benatar can be found on page
40 of the appendix.]
Chairman Barr. Thank you, and we will now turn to Member
questions. The Chair now recognizes himself for 5 minutes for
questioning.
Mr. Gibson, your testimony, you quoted Chair Powell as
saying that, ``The Federal Reserve is not a climate
policymaker.'' You also said that it is not and never has been
the Federal Reserve's policy to discourage banks from offering
accounts or services to any class or type of law-abiding
business, and that was not part of your work.
Mr. Coleman, in your testimony, you said that the OCC does
not and will not tell bankers what customers or legal
businesses they may or may not bank.
And Ms. Eberley, in your testimony, you pointed out that
the FDIC will not be involved in determining with which firms
or sectors financial institutions should do business. These
types of credit allocation decisions are the responsibility of
financial institutions.
What this hearing is going to be about, though, is why
Members of Congress, and market participants, and banks, and
their customers are skeptical of these assurances, because, Mr.
Gibson, when you say this climate scenario analysis exercise
that the Fed is undertaking will not have consequences for bank
capital or supervisory implications, what we say is, not yet--
at least, not yet.
We want to know where this is going, so to that end, we
want to talk to Dr. Gibson first about what the Fed is doing as
part of the NGFS--let me just start with Mr. Coleman, actually.
Mr. Coleman, can you tell me about what the OCC knows about
funding at the Network for Greening the Financial System,
including who funds work on climate analysis? And in your
answer, can you specifically address this group called the
International Network for Sustainable Financial Policy
Insights, Research, and Exchange (INSPIRE?)
Mr. Coleman. Thank you for the question. I am not aware of
the funding structure for these organizations. The OCC
participates in these organizations, along with several other
international and domestic regulatory bodies, in order for us
to share information and learn from them on a variety of
emerging risk issues.
Chairman Barr. And Dr. Gibson, can you answer the same
question about what the Fed knows about NGFS funding, and about
the involvement of INSPIRE or the pass-through funding
organization, the ClimateWorks Foundation?
Mr. Gibson. Yes. I also don't know anything about the
funding of the NGFS. We do participate in their meetings and in
their working groups.
Chairman Barr. If there is involvement of ClimateWorks in
funding NGFS, climate models, data scenario analysis, and the
like, would the Fed have concerns about politics creeping into
ClimateWorks, given that the current senior adviser to
President Biden for clean energy innovation and implementation
had for years been an influential member of the board of
ClimateWorks, which, at least in 2021, held more than $430
million in assets to distribute for environmental activist
grantmaking?
Mr. Gibson. We participate in these international groups in
order to learn from our foreign counterparts and participate in
the discussions around international standards, but that is the
extent of it.
Chairman Barr. To Mr. Coleman, Ms. Eberley, and Dr. Gibson,
how many meetings have there been between officials and
employees of your agencies and the NGFS since January of 2021?
Mr. Coleman. I do not have an answer to the specific number
of meetings.
Ms. Eberley. I don't know the number either.
Mr. Gibson. I don't know this exact number. We do
participate in their meetings.
Chairman Barr. How many people are you dedicating to
traveling to these meetings with NGFS?
Mr. Coleman. I don't think we have anyone dedicated just to
the NGFS, and most of the meetings are virtual.
Chairman Barr. Can any of you describe, besides just
discussing and listening, what other work you are doing with
this international body, NGFS, and where can we find an
accounting of that work?
Mr. Coleman. The NGFS publishes on their website their work
plan and all their work products, so I think everyone has
access to the work that they are doing.
Chairman Barr. Are there NGFS workstream papers or models?
In my remaining time, let me just get to the point. Members of
Congress and the American people are very concerned about the
extraterritorial reach of--I mean, you all can't even answer
these questions--this opaque, mysterious international body
that apparently is influencing the agencies that are regulating
our banks. So not only is there an opacity with what with what
is going on here, we have this international body that is
potentially impacting decision-making. And what we are worried
about is where this is going, to have an international body
influencing regulators to pressure financial institutions,
maybe not now, but eventually, to force them into credit
allocation decisions that are entirely inappropriate.
With that, my time has expired, and I will recognize the
ranking member of the full Financial Services Committee, Ms.
Waters from California, for 5 minutes.
Ms. Waters. Thank you very much. Treasurer Benatar, while
House Republicans are focusing on Federal regulators of banks
and credit unions, Democrats thought it was important to have
additional local government perspectives on what anti-ESG
attacks mean to the banking relationships. I understand that
earlier this year, you led a letter, signed by Democrat and
Republican county treasurers in your State, opposing anti-ESG
legislation that would have limited the ability of certain
banks and others to do business in the State of Arizona. What
would the impacts of this legislation be on your accounting and
on your work as a county treasurer? Have you heard similar
concerns from other local or State treasurers in other parts of
the county?
Ms. Benatar. We have heard from other States that have
passed these anti-ESG legislations, that it has increased
costs, and it has also reduced the number of companies with
whom you can do business. My role as president of the National
Association of Hispanic County Officials has allowed me to
connect with my colleagues across the country, and studies also
have come out that are saying the same exact thing.
For example, if you look at Texas, it is going to result in
billions of dollars, and right now they are paying an
additional $300 million to $500 million just to do bonds in in
their State. If you look at Florida, Florida has a higher
rating than California, yet they are paying higher interest
rates due to anti-ESG legislations that are passing. So, that
was a concern of ours in Arizona because we are very limited in
who we can do business with right now, and reducing the number
of financial institutions that we can work with will have dire
consequences within our communities and will cost our taxpayers
money.
Ms. Waters. Can you give us some insight on what has been
alluded to here today about pressure that has been placed on
banks and our financial institutions from these foreign
entities worldwide, et cetera? What do you know about that?
Ms. Benatar. I have a fiduciary duty, and I have a duty of
loyalty to the residents of my county. And for me, the most
important thing is the public safety of our dollars, not just
for today, but for generations to come. I have to look at best
practices, and that includes things like climate risk analysis,
in my decision-making. That includes looking at regulations.
That includes being able to find the information, so I am
analyzing the risks to the best of my ability, and this is also
noted by nonpartisan organizations for government financial
managers across the country.
I need to be able to easily access that information,
including climate risks, when I am evaluating my investment
decisions, but also my cash flow analysis. So, although I may
not necessarily know the information about the national groups,
I do know that there are best practices out there that I do
need to follow in the work that I do.
Ms. Waters. You have alluded to your fiduciary
responsibility, and in alluding to that, what you are saying is
you must take into consideration all of the possible risks, et
cetera, as you make decisions. Do you have any further comments
about fiduciary responsibility, because that is very, very key
when we are dealing with our financial institutions, our banks,
et cetera.
Ms. Benatar. Thank you. No, that is the number-one priority
of mine, and it is the number-one priority of government
officials across the country. And for us in local government,
safety will always come first, then liquidity, then yield, and
for me, climate analysis and climate risk is real.
In my community, we have been facing fires and flooding for
well over 10 years. Without using and including climate
analysis in my day-to-day work, I would not have the cash flow
available to be able to free up the money, not just from my
fire district for our fire, but for the 20-, 30-, and 40-year
flooding events we will now be having. And that also means my
investment portfolio management, I need to make sure I am
considering that as well. So for me, safety will always come
first because taxpayer money is at stake.
Ms. Waters. I thank you for the very profound information.
As you know, I am from California, and we have had fires that
are unprecedented in the State of California. So, I hope that
you Arizona, California, and other States that are experiencing
these kinds of devastating natural causes will have the kind of
information that you need to help people understand exactly
what is going on with climate risk.
Chairman Barr. The gentlelady's time has expired. The
gentleman from Florida, Mr. Posey, is now recognized.
Mr. Posey. Thank you very much, Mr. Chairman, and I thank
all the witnesses for your testimony and for taking the time to
appear before us this morning.
At the Financial Stability Oversight Council hearing before
the Senate Banking Committee just about a year ago, Senator
Toomey asked Secretary Yellen if there had been a single
failure of a financial institution as a result of a severe
weather event. She acknowledged that she wasn't aware of such a
failure. Can any of you identify an example where a flood,
hurricane, or wildfire has resulted in a financial
institution's failure? I guess I will ask each of you to
answer. I will start with Ms. Benatar.
Ms. Benatar. I will personally say that in terms of
financial institutions, I do not have any knowledge, but I do
want to point out that for----
Mr. Posey. You have answered my question. Thank you.
Mr. Jones?
Mr. Jones. Yes. There were two credit unions that failed as
a result of the impact of Hurricane Katrina, one causing a loss
to the Share Insurance Fund of about $500,000.
Mr. Posey. Okay. Mr. Gibson?
Mr. Gibson. I am not aware of any bank failures that can be
attributed directly to climate change.
Mr. Posey. Ms. Eberley?
Ms. Eberley. The same answer. No failures attributed to
climate change or weather events.
Mr. Coleman. The same answer. I am not familiar with any
bank failures related to weather events.
Mr. Posey. Experts tell us there are two kinds of climate-
related risk: natural risks that I just asked you each about;
and the risk to financial positions for transitioning away from
things like fossil fuels to other energy sources. Can you
please give a clear, concise example of a credible material and
imminent financial risk of climate change that warrants the
government opposing a climate risk management discipline on
financial institutions at the expense of climate scenario
analysis at this time? And I will start with you, Mr. Coleman.
Mr. Coleman. Thank you for the question. I would start with
a physical risk. For example, you could have an institution
that relies upon the collateral value of some type of property.
That property that was impacted by a climate-related financial
risk could impact the value of that collateral. That could also
impact the ability for that property to cash flow, which could
then impact the value of that asset to the institution.
Mr. Posey. Thank you. Ms. Eberley?
Ms. Eberley. Institutions have relied on insurance to
mitigate the risks of weather events, and institutions are now
experiencing and their borrowers are experiencing increasing
costs of insurance, and that affects how institutions
underwrite loans to make sure borrowers can continue to repay
in the future and also rely on the value of the collateral
pledged, if any, so that has been one impact. And then,
insurers pulling out of States has generally contributed to the
increase in costs where insurers don't want to take the risk
because of the increasing severity or frequency of weather
events.
Mr. Posey. Thank you. Very good. Mr. Gibson?
Mr. Gibson. Another category of climate risk is transition
risks. Those are risks from changes in market sentiment, or
consumer preferences, or policy technology that are driven by
climate change. For example, if a borrower has a concentration
in a particular technology that becomes obsolete because of
changes due to climate change and new technologies, that can be
a risk to a bank's creditworthiness.
Mr. Posey. Okay. Mr. Jones?
Mr. Jones. What I would add is that I agree with Ms.
Eberley's comment regarding insurers pulling out of certain
States and making the costs of owning a home much more
expensive, and credit unions have reported to us that they are
seeing that. The other thing I would add is we have also seen
not just on the risk side, but on the opportunity side, credit
unions being very resilient and responding to the needs of
their membership by designing certain consumer loan products,
specifically targeting green energy products and the like. So,
we have seen the business opportunity side of that as well.
Mr. Posey. Thank you very much. Treasurer Benatar?
Ms. Benatar. On a local level, it impacts our budgets. It
will result in significant increases to our expenditures, which
means that we need to make sure cash is available without
actually selling bonds at a loss or investment positions at a
loss to free up the money, which ultimately results in
increases to our taxpayers.
Mr. Posey. Thank you all very much. Mr. Chairman, my time
is about to expire, so I yield back.
Chairman Barr. The gentleman yields back. The gentleman
from Illinois, Dr. Foster, is now recognized.
Mr. Foster. Thank you. I guess I will start with Dr.
Gibson. Looking internationally at banking regulation, are we
considered laggards or leaders or somewhere in the mainstream
on responding to climate change?
Mr. Gibson. I would say we are with our international
counterparts and other supervisors and central banks in
identifying climate change as an emerging risk to banks and to
financial stability, and we are all learning from each other, I
would say.
Mr. Foster. Okay. Thank you. And as you participate in
forums that are funded, for example, by the financial services
industry and so on, do you spend a lot of time looking at the
details of who is funding the different forums, or do you look
at the quality of the ideas presented in those forums?
Mr. Gibson. I think we spend the most attention in the
international forums on the content of, what can we learn from
others? We do pay attention to who funds different forums, and
we have ethics rules around things like that.
Mr. Foster. Climate change is only one of the future risks
that we have to look at. There are obvious examples like
artificial intelligence. If I was worried about a credit union
that provides financial services to actors and Hollywood
screenwriters, I might be very worried about my financial
health in the coming years due to artificial intelligence, or
just these life-extension therapies such that it is very likely
that many more Americans are going to be outliving their
financial savings, their life savings on things like these
technological threats coming out. Is there a general risk
framework where you prioritize the different future risks, or
do you handle these on a sort of one-off basis? I will try Mr.
Coleman and then----
Mr. Coleman. Thank you for that question. At the OCC, we
are focused on the safety and soundness of the institutions we
supervise, dating back to 2014 when the OCC implemented or
heightened standards regulation, which addresses risk
management frameworks for the largest, most complex banks that
we supervise. That lays out our expectations for any type of
emerging risks, whether they are internal or external, that
could impact the risk profile of the institutions. We also work
with our National Risk Committee to better understand the
emerging risks that our examiners are seeing in the field and
how we need to address those. If you refer to our most recent
Semiannual Risk Perspective, you will see we have been focused
on a variety of risks, including liquidity, compliance, and
operational credit risk. So, we take a holistic approach
looking at these and apply an approach to ensure that we are
taking a risk-based assessment of these risks and how they
could impact the institutions we supervise.
Mr. Foster. You also have to consider exogenous risks that
don't come from management practices inside the financial name
to the banking industry, but also things like pandemics; there
is a long list of things that could really disrupt it. Is there
an ongoing process that says, here is our list of tail risks
that we are worried about, and here is our current evaluation
of how we should prioritize them? What is there? Is there a
general procedure here, or is this sort of, you handle them
individually?
Mr. Coleman. Yes, there is. That is part of our National
Risk Committee process, and we publicize the findings of that
National Risk Committee twice a year in our Semiannual Risk
Perspective.
Mr. Foster. Do you rank the risks that you are worried
about coming up on us?
Mr. Coleman. In the most-recent Semiannual Risk
Perspective, the top four risks that we identified were
liquidity, compliance, operational risk, and credit risk to the
largest institutions.
Mr. Foster. Okay. But I was referring to the sort of
exogenous risks of things that can come get you, or is your
view that most of the real risks that you are facing are self-
generated by the banking system?
Mr. Coleman. No. We consider risks from the outside, for
example, cybersecurity risks, the impacts of digital
technology, and also climate-related financial risks are
included in that Semiannual Risk Perspective.
Mr. Foster. Okay. I guess you have probably cost me another
late night reading your latest report, but thank you for that.
I was wondering, is the anti-ESG legislation, is that something
where that is happening internationally, or is that sort of a
peculiarity of the United States? Is anyone familiar with any
other country doing this?
Ms. Benatar. I am not. As far as I know, it is just here in
the United States.
Mr. Foster. Okay. That would be interesting, and if anyone
has more details on that, that would be interesting. Thank you,
and my time is nearly up, so I yield back.
Chairman Barr. The gentleman yields back. The gentleman
from Missouri, Mr. Luetkemeyer, who is also the Chair of our
National Security Subcommittee, is now recognized for 5
minutes.
Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Gibson,
Chairman Powell has often said that the Fed will not be a
climate policymaker. A little while ago, the chairman was
talking about the NGFS, and it has in their statement of
purpose the explicit purpose of mobilizing mainstream financial
support to transition towards sustainable economy, which
includes directing capital to green and low carbon investments.
Is the Fed committed to promoting green energy, as the NGFS
mission states, or is it committed to not promoting green
energy, as Chairman Powell claims?
Mr. Gibson. We do participate in the NGFS and the other
international groups, but we make policy based on our own
domestic mandates and in the best interests of the United
States. So, I agree with Chairman Powell----
Mr. Luetkemeyer. What do you think is in the best interest
of the Fed to stop its involvement if you are not going to
support their mission?
Mr. Gibson. Our main benefit of participating in
organizations like that is to learn from other----
Mr. Luetkemeyer. That is a really good answer, sir. If you
are going to be a participant, you are either going to be with
them or against them. Sit there for information, you can go
read the position papers to get that. Chairman Powell and the
Fed need to either get involved with that agency or get out of
it.
Mr. Gibson. The standards that are agreed to by
international organizations like that----
Mr. Luetkemeyer. Then again, we shouldn't be listening to
standards for international organizations. We are the United
States of America. We are the largest economy in the world, the
best banking system in the world. We don't need to have
somebody else telling us how to do our job. I just can't
believe that this is where we are headed.
I also find it troubling that supposedly, independent bank
regulators are now trying to insert partisan climate policies
under the guise of helping financial institutions understand
and guard against climate-related financial risks. Under the
Obama Administration, FDIC Chairman Gruenberg was the godfather
and creator of Operation Choke Point. He led and directed the
FDIC work hand-in-hand with the Obama Administration,
pressuring banks to cut off or reduce financial services to
businesses that liberal progressives and President Obama didn't
like. We found out about it, and we stopped it. To me, this
seems like a disguised version of Operation Choke Point where
regulators are again picking and choosing what industries have
access to bank services and credit.
Ms. Eberley, how is this not a different way of achieving
the goal Mr. Gruenberg and President Obama set out with
Operation Choke Point?
Ms. Eberley. First, I would note that Operation Choke Point
was a Department of Justice initiative, and our Office of
Inspector General indicated that----
Mr. Luetkemeyer. Ma'am, I have been in the middle of
Operation Choke Point for 4 or 5 years. I have gotten a copy of
an email from Mr. Gruenberg talking about this, so don't go
there.
Ms. Eberley. Okay.
Mr. Luetkemeyer. Now, can you answer my question or not?
Ms. Eberley. I will answer your question. I will tell you
that our policy is clear, and it hasn't changed, that
institutions that can properly manage customer relationships
and effectively mitigate risks are neither prohibited nor
discouraged from providing services to any category of
customers or individual customers operating in compliance with
applicable law. And we have processes in place to provide
transparency and accountability around our policy, and we are
focused on encouraging financial institutions to consider
climate-related financial risks in a manner that allows them to
prudently meet the financial needs of their communities.
Mr. Luetkemeyer. Thanks for that. You can send me your
written statement there if you are going to read something you
was written down.
Dr. Gibson, by its own admission, the Fed has said climate-
related financial risks are not fully understood, measured, or
modeled. Why should the American people be comfortable with the
Fed putting forward the idea that you can now monitor and help
banks manage climate-related financial risks when you could not
even effectively monitor and help banks manage the basics, like
interest rate risks?
Mr. Gibson. Our supervisory mission is to ensure that banks
are operating in a safe and sound manner and managing all their
material risks. And so for us, that definitely includes the
traditional banking risks, as well as the emerging risks,
climate-related financial risks.
Mr. Luetkemeyer. It is interesting that you are talking
about managing all your risks. A while back, we had an asteroid
that almost hit the earth--that came close to our atmosphere. I
suppose you probably weren't managing that risk. We had a
volcano that exploded last week, so at 40,000 feet in the air,
it is going to affect us somehow, some way. I don't know if you
all are measuring that risk or not, but volcanoes do go off as
well. You have smoke from a fire up in Canada that is affecting
how people are doing business and living in this country right
now. Are you guys managing any of that risk as well? Those are
all definite risks that are here today. Did you foresee those
things? Were you managing those risks? Anybody?
[No response.]
Mr. Luetkemeyer. No? So, we have a risk here that we think
we have. I have an article here on this from the Manhattan
Institute that states the plain, obvious fact that climate
change is an important challenge, but climate change poses no
measurable risk to the financial system, not individual banks,
but to the system. The emperor has no clothes, and with that,
my time is up, but I think----
Chairman Barr. The gentleman's time has expired.
The gentleman from California, Mr. Sherman, is now
recognized.
Mr. Sherman. I am concerned that a number of our States,
for political reasons, are cutting themselves off from major
financial institutions. They will end up earning less money on
their deposits and paying higher fees and costs when they issue
bonds. I agree with Mr. Luetkemeyer. We cannot see a return to
Operation Choke Point, and I am concerned that bank regulators
talk about reputational risk. Reputational risk should be
factored in only when the bank is providing services to someone
who is doing something illegal. But if we decide that there is
a reputational risk to a bank, for having a bank account, for a
customer who is very unpopular, then every time we have a
Democratic Administration, a gun manufacturer won't be able to
get a checking account, and every time we have a Republican
Administration, Planned Parenthood won't be able to get a
checking account.
With all due respect to the fine witnesses who are here, we
don't want to give you that kind of political power, nor should
we. If you want to make gun manufacturers illegal or Planned
Parenthood illegal, the way to do it in democracies is to pass
along Congress, not prevent them from having a bank account. We
have a policy in this committee that we will mark up
legislation only after we have had a hearing on that
legislation. There are a number of bills that are listed as
part of this hearing that really don't have much to do with the
topic of the hearing, and that seems to be a possible loophole
or a runaround of the rules of the committee.
And I do want to agree with Ms. Eberley's comments on
Operation Choke Point. Would it make sense for us to be
concerned about a bank's prudential risk, Ms. Eberley, if they
lent all their money to the Quebec Fire Insurance Company or to
other similarly-situated fire insurance companies as fire risks
are going up?
Ms. Eberley. Any kind of concentration risk that an
institution has is something that an institution has to manage.
We have longstanding instructions that are public on our
website as part of our manual of examination policies.
Mr. Sherman. And if you are concentrated in something that
is less risky, is that less of a risk than being concentrated
in something that is increasingly risky?
Ms. Eberley. It would be. You have to take into account the
range of risks that could manifest from having a concentration
in any kind of business line.
Mr. Sherman. And we just went through a process by which
banks ignored the fact that interest rates could, and probably
would go up. It felt good to say that inflation is transitory
and interest rates aren't going to go up, but there was a real
possibility that they would. Thank God, our blindness on that
was not fatal. We now have climate risk. We shouldn't blind
ourselves to the warming planet any more than we blinded
ourselves to inflation and interests going up.
Dr. Gibson, do we expect that those things that are
affected by rising temperatures will become more risky?
Mr. Gibson. I think we are concerned that climate-related
financial risks are an emerging risk that we don't know enough
about, so we need to learn more in order to be able to answer
questions like there----
Mr. Sherman. And I would point out that we also ought to be
looking at the China risk. There is a significant possibility
of a rupture in that trading relationship, and many of the
borrowers are very dependent on the China distribution chain.
So, this may be the only--this month at least--topic of our
committee. This is, I think, our 412th hearing that has
something to do with ESG just this month, but I hope you are
looking at other risks as well, excluding the China risk, and I
yield back.
Chairman Barr. The gentleman's time has expired. The Chair
now recognizes himself for 5 minutes for the purpose of asking
questions.
Dr. Gibson, I would like to kind of continue on with some
of the questioning that Mr. Barr and Mr. Luetkemeyer did
regarding the pilot climate scenario analysis that happened
earlier this year. Specifically, the exercise instructions make
repeated references to the Board's involvement throughout the
process. In fact, the instructions say that the Board designed
the pilot CSA exercise, the Board will engage with
participants, and the Board anticipates publishing insights.
All this to say that the pilot CSA instructions seem to
indicate that the plan actually originated with and has the
support of the Board. So, my first question is, did the Federal
Reserve Board vote in support of conducting the pilot CSA?
Mr. Gibson. The full Board of Governors did not vote on the
climate scenario analysis because it is purely an exploratory
exercise.
Chairman Barr. So, there was no vote. You said the full
Board did not. Are you saying there was no vote at all?
Mr. Gibson. I am saying that the Board didn't vote on the
climate scenario analysis exercise because it was a purely
exploratory, because of its exploratory nature.
Chairman Barr. Okay. So the short answer is, no, the Board
did not vote?
Mr. Gibson. No, the Board did not vote.
Chairman Barr. Okay. Which Board members have been working
on the CSA exercise?
Mr. Gibson. The exercise is being conducted by the Federal
Reserve's staff under the direction of Vice Chair for
Supervision Barr, and he keeps the other Board Members informed
about the progress of what we are doing in supervision.
Chairman Barr. So, you are saying that other than Vice
Chair Barr, no one on the Board has been engaged in working
with the CSA?
Mr. Gibson. The other Governors have been informed about
it, but the actual work has been done by the staff.
Chairman Barr. Why would the instructions then say that the
Board designed the pilot CSA exercise, the Board will engage
with participants, and the Board anticipates publishing
insights? What you are drawing is a scenario that the Board was
separate from all of this, but yet the instructions tend to
indicate the opposite.
Mr. Gibson. I would have to look at the instructions, but I
think they are using the word, ``Board,'' as a shorthand for,
``Board of Governors of the Federal Reserve System,'' meaning
the entire agency.
Chairman Barr. Okay. I would appreciate it if you could
look into that, because I think that is a question that needs
further exploration, as the instructions indicate that this is
originating from the Board, but what I am hearing from you is,
that isn't the case, so I think we need to get to the bottom of
it. I will move on to another question then, the pilot CSA
promotes scenarios using models from the Network for Greening
the Financial System. So, where does the funding for these
models come from?
Mr. Gibson. The pilot climate scenario analysis exercise
uses a range of scenarios. It does use some of the scenarios
that were developed by the NGFS as an input. Those are common
scenarios that are used by banks in their own internal risk
management, and when we were designing the scenarios for the
pilot climate scenario analysis, it was easiest to use
scenarios with which banks were already familiar.
Chairman Barr. Are you getting to the funding aspect? The
question was the funding of the scenarios and models.
Mr. Gibson. I don't know anything about the funding, but
the NGFS publishes the scenarios on their website, so the banks
use them from the website.
Chairman Barr. Okay. You don't know where the funding for
this comes from? Does the Board formally endorse these models
and scenarios produced by the NGFS?
Mr. Gibson. The scenarios are just intended to capture a
plausible range of future outcomes. They are not a forecast or
a prediction.
Chairman Barr. Okay. I know you all have been really
prepared, but I think you all are skirting around these
questions. Does the Board formally endorse the models and
scenarios produced by the NGFS, or is that something you are
considering?
Mr. Gibson. I don't think we have endorsed them, but we are
using them as part of our pilot climate scenario analysis.
Chairman Barr. Okay. I see my time is running short, so in
the interest of giving others the chance to come in, I will
submit the rest of my questions for the record, and I yield
back.
And the Chair recognizes the gentleman from Texas, Mr.
Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witnesses
for appearing, and I would like to assure the witnesses that
you are doing the right thing. I don't want you to have any
consternation or reservation about your fiduciary duty and
about how you are carrying it out. Here is some intelligence
that I think will provide us a better view of what is
happening.
More than 80 percent of U.S. investors said that companies
need to more openly communicate the risk around ESG-related
factors. Seventy-three percent said they are more likely to
invest in a company that shares with investors its plans to
effectively manage these factors, that people want to know what
is going on, and they want to know what is going on with these
investors because in Houston, we had a flood of biblical
proportions, over a trillion gallons of water. We currently
have raging wildfires that could rival even what Dante created
in his mind. We have insurance companies that are leaving
Florida and California, major companies, because of climate-
related issues.
You have a fiduciary responsibility. You have a legally-
required obligation to do what you can to make sure investors
are aware of what they are investing in. I believe this, and I
believe you believe this. But if you agree with me that you
have this fiduciary responsibility, would you kindly extend a
hand into the air? If you believe you have a fiduciary
responsibility, please extend a hand into the air?
[Hand raised.]
Mr. Green. Only one person has a fiduciary responsibility,
so the rest of you are not fiduciaries. You don't have a
responsibility to make sure that you provide proper
intelligence to people who are investors?
Mr. Gibson. I would say our mandate relates to supervision
of banks and making sure that banks are adequately managing the
risks, including climate-related financial risks.
Mr. Green. Does that makes you a fiduciary?
Mr. Gibson. I am not sure what you are asking.
Mr. Green. Let me ask this----
Mr. Gibson. People are responsible for ensuring safety and
soundness----
Mr. Green. Okay. Let's replace it with, ``responsible.'' If
you believe you are responsible for providing investors good
information about climate material risk associated with it,
would you raise your hand, please?
Mr. Jones. Congressman, I just wanted to explain why I am
not raising my hand.
Mr. Green. Please do.
Mr. Jones. It is because credit unions are nonprofit
cooperatives, not private companies that have stock investors
in their life, so that is the reason I am not raising my hand.
Mr. Green. Do you believe you have a----
Mr. Jones. But I would say I have a fiduciary
responsibility to the Share Insurance Fund in the credit union
system to ensure that they are resilient and operate in a safe
and sound manner.
Mr. Green. And in doing that, your investors, as it were,
the people who are depositors----
Mr. Jones. The members of the credit union, yes.
Mr. Green. ----are protected?
Mr. Jones. Yes.
Mr. Gibson. I would say we have a responsibility to ensure
that banks are adequately measuring and managing their risks,
including climate-related financial risks. We definitely have
that responsibility.
Mr. Green. Okay. I don't know how that differs from what I
have been asking you, but let's go on, please.
Ms. Eberley. I would say we don't have responsibilities
around banks' financial disclosures, and the question about
disclosures to investors, presumably shareholders, was how----
Mr. Green. Not to invest necessarily, but to those over
whom you have the supervisory authority, we have to make sure
that they are considering the climate issues that are material.
Ms. Eberley. It is our responsibility to make sure that
banks are considering the risks that they face and that they
are managing those risks properly, yes.
Mr. Green. Yes. So as to those banks, you have a
responsibility?
Mr. Coleman. Yes, we have a responsibility to ensure the
safety and soundness of the institutions we supervise and that
they are properly identifying any emerging risks. It is the
banks who have initially identified these emerging risks dating
back several years, and we are using that information to better
understand how those risks could impact the financial stability
of those institutions.
Mr. Green. Okay. Do you believe that you have a
responsibility to understand and communicate the material risk
associated with climate change as it relates to your various
areas of endeavor? Do you believe you have that responsibility?
Ms. Eberley. I would say it just slightly differently, that
we have a responsibility to make sure that banks are
understanding the risks that they are facing and that they are
managing.
Mr. Green. Okay. Do you believe that those that you
regulate have the responsibility to understand the risk with
which they have to deal?
Ms. Eberley. Yes, sir.
Mr. Jones. Yes.
Mr. Green. Okay. If you believe this, raise your hand.
[Hands raised.]
Mr. Green. I want to capture this picture. Thank you.
Chairman Barr. The gentleman's time has expired. The
remaining witnesses can respond for the record.
The gentleman from Tennessee, Mr. Rose, is now recognized
for 5 minutes.
Mr. Rose. Thank you, and I want to thank Chairman Barr and
thank our witnesses for being here to participate in this
hearing today.
Mr. Gibson, one of the justifications Vice Chair Barr has
given for increasing capital requirements on U.S. banks is
because the Federal Reserve is implementing Basel III. Mr.
Gibson, do you attend and represent the Federal Reserve in any
Basel meetings and negotiations?
Mr. Gibson. Yes, I do.
Mr. Rose. And, Mr. Gibson, is your position, or that of
Vice Chair Barr, that you take when you go to negotiate on
behalf of the U.S. at Basel agreed to by a vote of the Federal
Reserve Board?
Mr. Gibson. Standards that are discussed in Basel aren't
binding on the Federal Reserve, so the Board votes on
regulations that it proposes under its domestic mandates.
Mr. Rose. Thank you. Mr. Gibson, has Congress recognized
the Basel Committee as an international organization that
should have standing to dictate regulatory rules that can have
major impacts on the U.S. economy?
Mr. Gibson. I don't know about Congress, but we don't
implement standards that come from the Basel Committee just
because they are agreed to in Basel. We would go through a
domestic rulemaking process following our domestic procedures.
Mr. Rose. I am just concerned that what is actually
happening is that Vice Chair Barr, with a select few staff, can
go to the Basel Committee and negotiate major initiatives that
have significant impacts on the U.S. economy, and then come
back and use that as a rationale to adjust capital
requirements.
Mr. Gibson, New England, New York, and Pennsylvania have
all seen greenhouse emissions rise following the closure of
nuclear power facilities. As a member of the Network for
Greening the Financial System, does the Fed believe that
cutting nuclear power increases or decreases the risk in the
financial sector?
Mr. Gibson. I don't know that we have a view on that
particular question. Our responsibilities with respect to
climate-related financial risks are narrow, but important.
Mr. Rose. Okay. On June 21, 2018, climate activist, Greta
Thunberg tweeted that, ``A top climate scientist is warning
that climate change will wipe out all of humanity unless we
stop using fossil fuels over the next 5 years.''
Ms. Benatar, it has been 5 years since that pronouncement.
Yes or no, has climate change wiped out all of humanity?
Ms. Benatar. I have a duty to my constituents, and in my
community, we have seen record floods, record fires----
Mr. Rose. But I think it is safe to say that we are all
still here, absent the normal tragedies that happen to humanity
and humankind, so the pronouncement obviously was over the top
and not true. And whether or not human activity is affecting
the climate remains an area of active interest and something
that we should continue to be vigilant and aware of. But we
also know the history of the world, or at least we can surmise
from the data that we have, and we have seen the entire planet
melt off and be without ice. We have seen it virtually frozen
over. All of that happened in a time when human activity wasn't
occurring. And so, one of the hallmarks of the development of
human civilization and this humankind is that we have managed
to adapt to the changes. So, while we ought to be careful about
what we do, I think going all the way back to the
pronouncements of Malthus a few centuries back, we ought to be
mindful that sometimes we don't have the proper perspective,
and I am just curious what your reflection on that question
was?
Mr. Jones, what would you say has been NCUA's experience
with credit unions that are Community Development Financial
Institutions (CDFIs) grant recipients over the last 12 months,
and has NCUA received feedback about the application and
certification process?
Mr. Jones. We have received feedback. I would like to say
that the CDFI process is run by the Department of the Treasury.
We do understand that some credit unions have had some
difficulty, and the chairman has engaged directly with the
Department of the Treasury on that because we have an interest
in ensuring that credit unions have access to CDFI funds and
remain available to help their members.
Mr. Rose. Thank you. I appreciate that. I yield back.
Chairman Barr. The gentleman's time has expired. The
gentlewoman from Ohio, Mrs. Beatty, is now recognized for 5
minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking
Member, and thank you to the witnesses for your patience here
with us today as we explore this.
My first question will go to you, Treasurer Benatar. Like
many of my colleagues, I represent a great deal of banks, and
insurance companies, and other financial institutions that
certainly, as you know, provide financial services to consumers
across the country. It is my opinion that these institutions
are already taking climate-related financial risks. By your own
words, as experts, you have said, in relationship to climate-
related risks, that they are extreme, they are emerging, they
are rising risks that could put our institutions at issue, we
are still evaluating the situation, most people must learn to
understand, and it is trending nationally.
So with that, to me, it makes good business sense to take
these factors into consideration because these institutions
also have been very vocal in their opposition to State-level
Republican-led bills that limit the use of climate-related
factors in their business. Can you discuss for me why financial
firms want to consider these risks and why it is good for the
bottom line?
Ms. Benatar. Thank you for the question. For us, it is
about our taxpayers. It is about our constituents. We all
represent our constituents back home, and at the end of the
day, if we are not including those climate risks, if these
financial institutions are not including this in their analysis
of whether they even want to loan money to my fire district, do
they want to risk lending money to a government entity if there
are fires and flooding happening in our community, knowing that
costs will go up without understanding what I am doing as a
fiduciary to address those issues? That is something that I am
being asked by our financial institutions when we talk about
credit lines, for example, but I should also be asking the same
thing when I am looking at whom I do business with, but I
should be managing it.
Prior to me being treasurer, we had seen flooding and fires
that did take lives in my community, and destroy houses. We
were not prepared for that. We had to sell at a loss, and I
don't want to do that again.
Mrs. Beatty. Mr. Jones, can you discuss the impact it would
have if climate-related multibillion-dollar risks are ignored,
how would it affect lending or credit unions in business?
Mr. Jones. Sure. In our preliminary research, we determined
that roughly a third of credit unions and Minority Depository
Institutions (MDIs) are located in communities that are at
relatively high or very high risk from natural disasters.
Mrs. Beatty. That was going to be my next question, to talk
about MDIs.
Mr. Jones. Let me get ahead of you.
Mrs. Beatty. No, that is great.
Mr. Jones. And it is particularly, like I said, profound
with Minority Depository Institutions. Because of that, in our
agency's view, credit unions really know their communities
well, but our interest is in learning about it. So, I think
that credit unions really have to pay attention to these risks
and any other risks that could be material.
Mrs. Beatty. Okay. That gives me a different direction I
want to go in, and you can thank Mr. Jones, Mr. Gibson, for
your next question. Mr. Gibson, research shows us that the
impact of physical and transition risks are uneven across
locations, income, race, and age. This is due to geographic
reasons as well as regions' ability to adapt to these risks.
The natural progression of this thought process is that efforts
to adapt to climate change and take these risks into
consideration would also have an effect on existing inequality.
What are your thoughts on this, and how is the Fed taking these
inequality implications under consideration?
Mr. Gibson. Our supervisory perspective is really around
ensuring that banks are measuring and managing all of their
material risks, including the climate-related financial risks
that you asked about. It certainly could have broader effects
on things like inequality, but, really, what we are looking at
now is how banks are developing their capacity to really
measure and understand these risks. So we see firms investing
in data and models. To better understand the factors that you
are asking about, I think we all still have a lot to learn
about what the impacts will be.
Mrs. Beatty. Thank you, Mr. Chairman. My time is almost up,
so I yield back.
Chairman Barr. The gentlelady yields back. The gentleman
from Texas, Mr. Williams, is now recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Mr. Chairman. The Federal
Reserve has established a pilot climate scenario analysis
exercise--that is a lot of words for a guy from Texas--which
requires the six largest banks to manage climate-related
financial risks. This requirement is extremely out-of-touch and
increases burdens on financial institutions. And the Vice Chair
for Supervision, Mr. Michael Barr, has taken the lead on this
initiative without a vote from the Board and claims that the
exercise will support the Board's responsibilities, but climate
regulation is not a part of these responsibilities. This is a
slippery slope and shows that the priorities of the Federal
Reserve are shifting towards greenwashing our financial system,
which is ignoring true risks like debt limit impasses and
unsustainable Federal spending, leading to a higher national
debt.
So, Mr. Gibson, a few months ago when Chairman Powell was
testifying before this committee, he said that the Federal
Reserve is not and will not be a climate regulator. Do you
believe that the Federal Reserve should be or should not be a
climate regulator, and is this climate scenario analysis part
of the Fed's holistic review for increasing capital
requirements?
Mr. Gibson. I agree with Chair Powell that the Federal
Reserve is not a climate policymaker and the pilot climate
scenario analysis exercise won't have any implications for
banks capital, so it is different from the holistic capital
review.
Mr. Williams of Texas. Good. Now, the FDIC, the Federal
Reserve, and the OCC have all issued their own draft principles
for climate-related financial risk. These are all policies that
should not be decided by independent regulators. These
principles are taken straight out of the Biden Administration's
hands in an attempt to promote policies by banking regulations.
Regulators cannot be truly independent if they regulate from
the Biden playbook.
One such principle posed by the Fed suggests that a bank's
board of directors should consider tying compensation policies
to risks associated with climate change, and that decisions,
like compensation, should be made solely by the board of
directors and should not be influenced by any outside parties.
Financial regulators have an obligation to stay truly
independent of the political arena by not getting involved.
Mr. Coleman, you are jeopardizing the OCC's credibility by
becoming proxies for the Biden Administration's radical climate
groups. So, is the OCC following the direction of an Executive
Order, the FSOC, or other interest groups to insert climate-
based policies into bank regulations, and do the OCC principles
ask bank boards to consider tying compensation to climate
change measures?
Mr. Coleman. Thank you for the question. The OCC is focused
on the safety and soundness of the institutions we supervise.
We are not focused on social or environmental issues. We are
simply focused on ensuring that these climate-related financial
risks are identified, properly managed, properly monitored, and
properly controlled. We issued the principles with the idea of
providing feedback based upon information we have received from
the institutions that we supervise, dating back as early as
2019, with them raising issues with us about how they should
manage those risks and how they should properly identify those
risks consistent with our expectations for a risk management
framework.
Mr. Williams of Texas. My last question here briefly is,
financial regulators should not be in the business of picking
winners and losers. We see that with this Administration
constantly, but, unfortunately, now they are. Now, these
actions are being made under the disguise of transitioning away
from reliable energy like oil and gas, and channeling credit
towards green energies. So by following the lead of
international agencies and pressuring financial institutions to
adopt climate-related policies, regulators are fixing the
market and abandon all-of-the-above approach. U.S. energy needs
cannot be met solely by renewables, and regulators should not
be in the practice of giving one energy sector an advantage
over the other. Remember, I am from Texas.
So, Mr. Gibson, has the Federal Reserve been facing
pressure to channel credit away from certain energy sectors and
moving it towards green sectors?
Mr. Gibson. It is not the Federal Reserve's policy to
discourage banking organizations from offering accounts or
services to any class or type of law-abiding business.
Mr. Williams of Texas. Okay. If you just stay with what you
are designed to do, small business guys like me can survive. I
hope you do. I yield back my time.
Chairman Barr. The gentleman yields back, and now the
gentleman from Illinois, Mr. Casten, is recognized for 5
minutes.
Mr. Casten. Thank you, Mr. Chairman. I want to start this
with a little bit of history to set us up for the vast majority
of human history on this planet. Atmospheric CO2 was pretty
stable at about 260 parts per million. It started going up
during the Industrial Revolution, took about 200 years, until I
was born in 1971, after the Industrial Revolution started, by
which point it had gone up about 80 parts per million, and was
then at 320. In the 51 years I have been on this planet, it has
gone up by another 100 parts per million because of all the
fossil fuel burned. Fifty percent of all the CO2 we have ever
emitted as a species has been since I graduated from college in
1993.
Do you all agree that anthropogenic combustion of carbon is
the primary cause of global warming? Yes or no? Does anybody
disagree with that?
[No response.]
Mr. Casten. Okay. I am happy to have the silence because
last Wednesday, one of my Republican colleagues on the
subcommittee said in a hearing, I know a comment was made about
belief in anthropogenic global warming or climate change, or
whatever you want to say it is, ``I don't think the science is
settled.'' This is obscene. If you had a Member of Congress who
said, I don't believe in the laws of gravity, we would go out
of our way out of love and respect for them and their family to
keep them away from the Speaker's balcony. And yet, in today's
Republican caucus, denying the laws of physics puts you on a
path to leadership.
Let me now shift to areas under U.S. jurisdiction. In
October of 2021, the Financial Stability Oversight Council's
report on climate-related financial risk, which you were all
members of, with the exception of Ms. Benatar, for the first
time identified climate change as an emerging threat to U.S.
financial stability. Do all of you believe that the physical
and transition risks from climate change can threaten financial
stability? Yes?
[Nonverbal response.]
Mr. Casten. Nods across-the-board. I say that because we
are here with people criticizing you for doing too much. I
think there is a fair criticism that you are not doing enough.
Dr. Gibson, I have talked to some of your colleagues. We
are seeing huge movements of capital from the insurance
industry, with parts of Florida, parts of California, and parts
of Louisiana no longer being insured. If we are only going to
limit our examination of financial risk to the banking sector
or to the six big banks, we are staying blind too long to the
larger disruptions in our economy. And I think we need to do
much more than we are doing to make sure that we protect folks,
but that is a longer conversation than we have time for here.
Treasurer Benatar, you are trusted to safely and prudently
manage the public's money. Do you have a responsibility to
evaluate all risks?
Ms. Benatar. Absolutely. I have to evaluate all risks, and
I just want to say that right now in Arizona, we are seeing the
heat.
Mr. Casten. No doubt.
Ms. Benatar. No doubt.
Mr. Casten. And are the anti-ESG bills that are being
passed restricting your choice?
Ms. Benatar. Absolutely.
Mr. Casten. You mentioned in your testimony some of the
costs of these bills: $6.7 billion in Indiana; $3.6 billion in
Kansas; and $70 million in Kentucky. Who is bearing the brunt
of these costs?
Ms. Benatar. Our taxpayers. Your constituents.
Mr. Casten. And the firefighters, and the policemen, and
the pension holders, and everybody who depends----
Ms. Benatar. Absolutely, in our taxing districts.
Mr. Casten. Now, you are the Minority witness, And I say
that with love and respect. There are folks from very
Republican areas who completely agree with you. In Kentucky,
the board chair of the Kentucky County Employees Retirement
Fund System said the anti-ESG law is inconsistent with its
fiduciary responsibilities with respect to the investment of
assets or other duties imposed by law.
In Indiana, an official from the Indiana Chamber of
Commerce, not a lefty woke organization, said, ``We believe the
anti-ESG bills are anti-free market and anti-free enterprise.''
Is anybody listening? My God.
In Texas, the executive director of the Texas County &
District Retirement System said, ``We have concerns that the
anti-ESG bill could impair our ability to maximize our returns
and have a financial impact for our employers.'' This is real-
stuff fiduciary. Thank you, Madam Ranking Member.
Now look, all of us on this side of the dais have the
privilege of writing laws. We get to debate laws. We get to
argue about what should be in those laws. It is a tremendous
responsibility. It is a tremendous duty. I still pinch myself
every day that I get to do this. That power does not extend to
the laws of physics. It does not extend to the laws of
capitalism and free market economics. We have the ability to
ignore them. We have the ability to write a law that says, ``Go
to the Speaker's balcony and jump.'' We have the ability to
write a law that says, ``Let's destroy free markets, let's make
the U.S. no longer attractive to innovators and entrepreneurs
that make us the envy of the free world.''
Let's stop all that by ignoring the laws of economics, by
opposing free markets. Just because we have that power doesn't
mean that it is our obligation to use it. I have been saying
this all ESG month. I really hope that it someday once again
becomes bipartisan to support competitive markets and the laws
of physics. I yield back.
Chairman Barr. The gentleman yields back. The gentleman
from Wisconsin, Mr. Fitzgerald, is recognized for 5 minutes.
Mr. Fitzgerald. Thank you, Mr. Chairman. On September 29,
2022, the Fed established the pilot climate scenario analysis
exercise to measure and manage climate-related financial risks.
However, the covered institutions already measure relevant
financial risks and do not need the enhancement and help
promised by the Fed. I am not an accountant, but I had a
roommate in college who was studying to be an accountant, and I
just remember the Basic Principles of Accounting, which was a
book about this thick. It was very principled. There are
certain things you do when it comes to accounting and certain
things you don't. There are certain things you consider and
other things that you would never consider.
And my colleague who just spoke kind of reminded me that
when it comes to ESG, or as he framed it, ``ESG month,'' there
should be some variance in there. And I have always thought,
not only as a State legislator, but now as a Member of
Congress, that there are certain things we can do voluntarily
if we want to move forward, if we have questions about the
environment, or social governance that are important, I think
that should be factored in, but it shouldn't change the basic
principles of the way the boardroom works. And I think that is
why not only in this committee, but in other committees that I
serve on, the focus on ESG is because we don't know what the
impact would be if we kind of change the rules of where we are
at on many of these things.
The Fed has stated that increased capital requirements form
the holistic capital review and the Basel III Endgame
requirements will be implemented in the long-term.
Mr. Gibson, does the perceived long-term implementation of
increased capital requirements contemplate the potential to
turn climate scenarios into regular climate stress testing?
Mr. Gibson. That is not part of the current work plan, no.
Mr. Fitzgerald. And have there been any discussions about
increasing capital requirements on banks over the next several
years, and then doing so again under the climate stress testing
regime?
Mr. Gibson. No. The climate scenario analysis exercise
doesn't have any implications for capital requirements.
Mr. Fitzgerald. Right. And in January 2023, in a Federal
Reserve Research paper entitled, ``What are Large Global Banks
Doing About Climate Change,'' the authors wrote, ``Our paper is
closely related to a report by InfluenceMap 2022.''
InfluenceMap is a London-based think tank devoted to the
mission to, ``hold the corporate and finance sectors
accountable for climate performance.''
It is just a completely separate agenda from what anybody
should be considering when it comes to finance. And in attempts
to use name-and-shame tactics, and the way it is funded by
several entities, including the ClimateWorks Foundation, which,
in turn, is funded by several entities, including Bloomberg
Philanthropies, the Chan Zuckerberg Initiative, and the High
Tide Foundation, amongst others, there is an agenda there.
There is absolutely an agenda, and if we don't look at this
clearly, I think we are all going to fall for this game of
propaganda and a movement away from what I said earlier, the
basic foundation of accounting principles.
Mr. Gibson, is the Federal Reserve following the lead of
outside international think tanks, and advocates, and activists
of climate policy change in efforts to try and pressure or push
financial institutions toward climate policy directions right
now?
Mr. Gibson. No.
Mr. Fitzgerald. And the final thing I will just say,
because I am going to run out of time, is there is absolutely a
pressure. I have spoken to CFOs and CEOs, and sometimes they
are even unaware of how their own corporations have responded
to this. I remember there was a dinner I attended at which I
asked the CEO, tell me what you think about ESG, and he said,
oh, it is not something we are involved in. It is not something
that we talk about at any of our corporate meetings. But the
fact of the matter is, 2 days later, I had a staff person come
to me and say, look at their website. Their website had a full
two pages on ESG. So, it really raised a question in my mind,
are some of the corporate leaders even aware of what is going
on within their own companies? And I think the answer to that
is, no. I yield back.
Chairman Barr. The gentleman's time has expired. The
gentlewoman from Massachusetts, Ms. Pressley, is now
recognized.
Ms. Pressley. Thank you. And thank you to our witnesses for
joining us today.
From the scorching heat in the South to the historic
flooding in the Northeast, including in the Commonwealth of
Massachusetts, which I represent, it is clear that time is
really running out to avoid the worst effects of climate
change. Four of our witnesses here today represent Federal
agencies who sit on FSOC. The report that you put out 2 years
ago stated that, ``Climate-related financial risks will become
more acute if not addressed promptly.''
While it is certainly encouraging to see your agencies take
the risk of climate change seriously, 2 years later, it is very
discouraging--and that is probably the understatement of the
year--that Republicans in Congress on this very committee are
obstructing efforts to prevent and mitigate devastating harm to
working families and to our economy. As my grandmother used to
say, denial is not just a river in Egypt.
Mr. Coleman, the OCC's mandate focuses on the safety and
soundness of the financial system. When it comes to climate
change, if a bank has weaknesses in its risk management system,
obviously this could adversely affect not only a bank's safety
and soundness, but also the overall financial system. So, yes
or no, in light of this, do you agree that the OCC has the
authority and is, in fact, obligated to address those risks?
Mr. Coleman. The OCC is obligated to address climate-
related financial risk just as we are with any emerging risks.
Ms. Pressley. So, yes or no?
Mr. Coleman. Yes.
Ms. Pressley. Thank you. This past weekend, we saw heavy
rain and flash flooding in my district, the Massachusetts 7th,
and just last week, flooding in the region in Vermont caused
the OCC to allow financial institutions to close. As climate
change continues to cause more and more physical damage to our
communities, we see more financial institutions close in
frontline communities for the very same reasons. However, the
people who are the most hurt by these closures are low-income,
working-class families, especially when it occurs at a time
when they may need financial services the most.
Mr. Coleman, what steps is the OCC taking to ensure that
financial institutions can continue to serve their communities
through growing climate-related financial risks, like the flash
flooding that my constituents experienced last week?
Mr. Coleman. Thank you for the question. Our focus at the
OCC is on the largest, most-complex banks, with over $100
billion in assets, and how they are addressing climate-related
financial risks. In terms of community banks, we believe that
these community banks have operated for decades in their
communities. They are very familiar with the impact of weather-
related events on their communities, on their businesses, and
on their local clientele. We think they have the best knowledge
of how to meet the needs of those communities. In addition to
that, our Acting Comptroller has made an effort to get out and
meet with community bankers to make certain they are aware of
our efforts and make certain they are aware of what we are
doing as it relates to climate-related financial risk.
Ms. Pressley. Thank you. I request unanimous consent to
enter into the record a recent working paper from the European
Central Bank entitled, ``The Impact of Global Warming on
Inflation.''
Chairman Barr. Without objection, it is so ordered.
Ms. Pressley. This paper found that climate change poses
risks to price stability and will result in higher inflation,
including hiking up the cost of food.
Director Gibson, this strikes right at the essence of the
Fed's mandate. What steps is the Fed taking to better
understand the implications of climate change to price
stability and the financial system as a whole?
Mr. Gibson. My area is supervision, so I can really only
speak to that. I would say the Fed conducts research on a range
of topics, including inflation, in other parts of the Fed.
Ms. Pressley. Regulators must not delay action on climate
change. Climate risks are growing by the day. Working families
bear the brunt of this damage and we really do need concrete
action now to avoid further catastrophe. Thank you, and I yield
back.
Chairman Barr. The gentlelady yields back. The gentleman
from South Carolina, Mr. Timmons, is now recognized for 5
minutes.
Mr. Timmons. Thank you, Mr. Chairman. I think it is
important to highlight how we got here and why these hearings
on ESG are necessary. Woke ideology used to be an abstract idea
on Northeastern liberal arts campuses, but now it is top of
mind, and it has seeped into many of our government
institutions and almost every corner of our society.
The Biden Administration's woke policies have become their
top priorities, committing billions of dollars to climate
justice, and now corporations feel beholden to the woke mob.
Just ask Bud Light what happens when you give in to the loudest
voices. As the saying goes, ``Go woke, go broke.'' Their recent
campaign has resulted in a 28-percent drop in sales, relegating
their status as the number-one beer in America for nearly 2
decades down to number two, and it is in a free fall. Costco
just removed them from their shelves. Perhaps the silent
majority isn't so silent, at least regarding spending their
hard-earned money.
Continuing on our committee's theme of ESG this month,
today's hearing is about how woke ideology foot soldiers now
staff our bank regulators and how the Biden Administration is
using these foot soldiers to push our financial institutions
into promoting woke climate policies. When it comes to woke
policies, what this Administration can't legislate, they will
regulate.
Mr. Gibson, does the Fed believe that it should follow the
lead of the European Central Bank in tying monetary policy,
collateral policies, and asset purchase policies to
consideration of climate change to help promote green financing
and the channeling of credit from some sectors to others?
Mr. Gibson. Those aren't things that the Federal Reserve
has been doing, no.
Mr. Timmons. Do you think it is something that should
happen or that could happen?
Mr. Gibson. My area is supervision. You are asking
questions about monetary policy, so I don't have any knowledge
about whether that is something that the Federal Reserve is
doing.
Mr. Timmons. It is not going well for Europe. I hope we
don't start it here. By its own admission, the Fed could not
even effectively monitor and help banks manage interest rate
risks. Why should we be comfortable with the Fed putting
forward the idea that it can now monitor and help banks manage
climate-related financial risks that, again, by its own
admission, the Fed identifies, as not fully understood,
measured, or modeled?
Mr. Gibson, do you agree that it should focus on its main
mission and not go into these other areas?
Mr. Gibson. With respect to supervision, our mission is to
ensure that banks operate in a safe and sound manner and manage
all their material risks, including climate-related financial
risks.
Mr. Timmons. Federal Reserve Chairman Powell has said that
the Fed has narrow but important responsibilities to use the
oversight of banks to ensure they manage the balance sheet risk
created by climate change. For each of you, does your agency
also believe that they have only narrow responsibilities to
provide oversight of banks to ensure they manage risks and
nothing more? Mr. Gibson, I know where the Fed stands.
Mr. Coleman, I will start with you.
Mr. Coleman. At the OCC, our mandate is to ensure the
safety and soundness of the institutions we supervise and
ensure that they are managing all of those risks, including any
emerging risks. That is very consistent with the frameworks
that we have laid out, including our heightened standards
expectations, and the banks have identified and we have
identified that climate risk and climate-related financial risk
is an emerging risk to the institutions.
Mr. Timmons. Do you believe that is a narrow
responsibility, or do you think that it is broad? Do you think
it should supersede fiduciary obligations to their customers
and to their shareholders?
Mr. Coleman. We are not in the business of telling banks
whom they can or cannot bank. Our focus is on the safety and
soundness of the institutions we supervise.
Mr. Timmons. I wish the Biden Administration would agree
with you.
Ms. Eberley, what are your thoughts?
Ms. Eberley. My thoughts are consistent with my colleagues.
Our focus is on the safety and soundness of financial
institutions and how they manage the risks that are presented
in the areas where they are operating and the customers that
they are serving.
Mr. Timmons. And you would agree that a return on a
shareholder's investment is the fiduciary obligation of
whatever entity we are referencing, and that should be first
and foremost?
Ms. Eberley. That is not within our area of responsibility.
We are focused on safety and soundness.
Mr. Timmons. Mr. Rendell, what are your thoughts?
Mr. Jones. The NCUA is focused on the safety and soundness
of federally-insured credit unions and the National Credit
Union Share Insurance Fund.
Mr. Timmons. Thank you. Mr. Chairman, I yield back.
Chairman Barr. The gentleman yields back. The gentleman
from Tennessee, Mr. Ogles, is now recognized.
Mr. Ogles. Thank you, Mr. Chairman, and to the panelists,
we are almost there, and we appreciate you being here.
Dr. Gibson, the Fed has considered the notion of double
materiality in micro/macro prudential supervision. The idea is
that supervisory authorities should consider both the risks
that the banks face from climate change, such as more losses if
there are more floods, but also the impact of actions by the
banks on climate change, such as making loans to some where the
activity of the borrower allegedly makes climate change worse.
For example, if a bank provides loan to certain sectors deemed
to be high greenhouse gas emitters, then supervisors should
take that into account and consider actions to channel credit
and other financial services toward greener activities.
My question is, will the Fed be introducing double
materiality into its supervisory framework, and if so, how
should or how will double materiality be defined?
Mr. Gibson. Our perspective is single materiality, not
double materiality.
Mr. Ogles. Have there been instances where green global
warming types of factors have channeled credit away from one
business sector and towards others?
Mr. Gibson. It is not the Federal Reserve's policy to
discourage banking organizations from dealing with any law-
abiding business, so banks make their own decisions about which
customers to deal with.
Mr. Ogles. What about guidance from the Fed? Is there any
guidance that would suggest that that is something that is on
the horizon or could be on the horizon?
Mr. Gibson. We have guidance around safety and soundness
and making sure that banks are managing all of the material
risks, and we have proposed guidance on climate-related
financial risks.
Mr. Ogles. But think about the wildfires in Canada and
obviously, there are some who would point to global warming as
the cause, but when you look at the news reports, they are not
confident. Some of the fires may have been caused by lightning,
but some of it may have been arson. Some of it may have been
accidental. My concern is when we are kind of lumping into and
defining global warming and other kind of ESG climate-type of
jargon, we are ignoring the fact that lightning has been
occurring for a while, and that wildfires have been occurring
for a while, and that in areas where we are seeing some of that
kind of devastation, we are building in areas that are already
high-risk, right? So, it is not that the climate has changed
more; it is that perhaps we are not managing the fires or the
forests appropriately. So, I caution all the agencies,
respectively, to not try to wordsmith or try to achieve an
outcome based off of, quite frankly, natural phenomena that
have been occurring.
The Fed is asking financial institutions to prepare for
possible future climate scenarios where there could be growing
financial risk related to climate change. Would you agree a
more relevant recent invisible risk would be delayed payments
from the Treasury securities arising from a cyber-attack or
other adversities? It would be easy to set up a scenario to
analyze where there are, for whatever reasons, delayed payments
as a potential risk to the financial sector. Has the Federal
Reserve Board asked financial institutions to perform such
scenarios?
Mr. Gibson. Scenarios around delayed payments?
Mr. Ogles. Sure. Say there is some sort of cyber-attack,
what other scenarios might you give guidance that you would
want to see in addition to climate risks?
Mr. Gibson. We expect banks to be managing all the material
risks, including cyber risk. We are doing a pilot climate
scenario analysis focused specifically on climate-related
financial risks, but we are also doing work in other areas,
like cyber risk, to ensure that banks are managing those risks
too. Yes, sir.
Mr. Ogles. One of my concerns that I have had with, quite
frankly, many of the alphabet agencies, is we have seen, under
this Administration's agenda, that it has permeated the
business community. It has been forced upon them, and I would
argue that the Fed has been culpable in that agenda. Mr.
Chairman, I am out of time, but I want to thank the panelists
for being here. We are almost done. And again, Mr. Chairman, I
yield back.
Chairman Barr. The gentleman yields back. The gentleman
from South Carolina, Mr. Norman, is recognized for 5 minutes.
Mr. Norman. Thank you, Mr. Chairman. And I want to thank
each of the panelists. I know forest fires have come up.
Ms. Benatar, you mentioned, and I think one of my
colleagues also mentioned the problem we have with forest
fires, particularly in California. If you talk to any of the
forest management team, what do they say the number-one calls,
outside of lightning and outside of intentionally setting
fires, the number-one cause is?
Ms. Benatar. I see them daily, and they say it is arson.
Mr. Norman. Okay, arson, but what is another?
Ms. Benatar. For firefighters, we do lightning and arson,
and that has been one of the primary causes of fires. And for
us, it is growing significantly due to not addressing
deforestation issues and not actually doing mitigation control
to help stop fires from expanding in our communities.
Mr. Norman. The number-one issue that they have, and we
have a lot of natural areas and Federal lands in South
Carolina, but you mentioned the activists. The thatch is 2 and
3 feet that they will not let you take up, which is a tinder
box for an arsonist. My question at one of the hearings was, do
you believe trees have lives? In other words, they are
beginning and ending because the activists I talk with will not
let you cut it, thin the forest to let the sunlight in, let the
air in. They just don't believe in that.
And for the regulators to cap insurance companies because
they can't insure, it is ludicrous. You all are in the
regulatory industry. If you had to advise your banks on the
risk, where would climate change rank? Mr. Ogles mentioned
cybersecurity default. How would you rank climate change as a
risk to the banks?
Mr. Coleman. Thank you for that question. We don't
specifically rank the risk, but as noted in our Semiannual Risk
Perspective, we do highlight what we believe to be the most
significant risks facing the institutions today. We highlighted
four of those risks, including operational, compliance, credit,
and liquidity, and within those risks, we highlighted specific
things that could impact those risks.
Mr. Norman. But how would you? If you had to just say your
safety and soundness is your goal to monitor, when you gave
them a synopsis of all the risks that the banks face, where
would climate change rank, in your opinion?
Mr. Coleman. I believe that is dependent upon the
institution, and it is up the institution to define how
climate-related financial risk could impact their financial
stability.
Mr. Norman. Okay. So, you have no opinion on, should they
put that as a top priority, or a cyberattack, or a liquidity
default? That doesn't come into play when you advise a bank on
what could get them out of the safety and soundness realm,
because I will tell you, according to Pew Research Center
polling this year, climate change ranks 17th out of 21st on
national issues with the average public. When you hear some of
the ludicrous things that are being said--Al Gore is saying
that the ocean is boiling. He has worked himself into a frenzy.
I will tell you that what is bizarre now in this country is
you have an Administration that is best friends with and
cozying up to China, which is, I think, building coal plants
every week. The CO2 emissions aren't too good. With the issues
there, it baffles me that why they are pushing this so much.
Second, I will say one of the things the Financial Services
Committee, and I have talked to the chairman, I think needs to
do is break down the dollars that are spent. Who is that going
to? If you can affect a flood, if man can affect the wind, if
man can affect a hurricane, where are these dollars? Break it
on down like I do when I have a real estate project. Where is
this money going? Would that help you all in evaluating risk to
see what your return on your investment is?
[No response.]
Mr. Norman. Okay. I am getting blank stares, but I think
that would give you some idea. When you find out who is doing
what, when you find out where the money is going, I think it
will tell you a whole lot. And for these who put this risk
above everything, not only it is a disservice to the
shareholders, but it is a disservice to this country. I yield
back.
Chairman Barr. The gentleman yields back. The gentlewoman
from California, Mrs. Kim, is recognized for 5 minutes.
Mrs. Kim. Thank you, Chairman Barr. I represent a district
in Southern California that is very prone to wildfires because
of the bad land management policies from Sacramento, droughts,
and the impact of climate change. So, I share the concern of
climate change, and I welcome opportunities to work together
without raising costs for American firms and punishing small
businesses with onerous climate disclosure requirements. We
understand the Fed is now undertaking the climate scenario
analysis exercise involving a mandate to six banks supervised
by the Fed. Is the Fed thinking about expanding the pilot
program beyond the six banks?
Mr. Gibson. The pilot climate scenario analysis that we are
doing this year only includes the six banks, and it will be
finished around the end of the year, and then it will be
concluded.
Mrs. Kim. Yes. Vice Chair Barr has indicated that the
findings of the climate scenario analysis will be made public
through a report. Does the Fed have plans to incorporate some
of what you are learning from the climate scenario analysis
into the mandatory stress test using climate risk modeling?
Mr. Gibson. The supervisory stress test that we do that
feeds into banks' capital requirements is separate and distinct
from the pilot climate scenario analysis exercise. Those are
different things, and they don't feed into each other.
Mrs. Kim. I want to reiterate that we should be careful to
not venture out into additional mandates without first ensuring
that our field supervisors are taking care of the bread-and-
butter issue like interest and operational risk. Silicon Valley
Bank's failure is a clear case study of the negative outcomes
because of the lack of focus on the supervisory framework.
Mr. Gibson, how involved were you and other Fed staff in
conducting this holistic review of the capital with Vice Chair
Barr?
Mr. Gibson. A number of Fed staff worked on projects and
briefings for Vice Chair Barr as he was conducting his holistic
capital review.
Mrs. Kim. Who are?
Mr. Gibson. Many of us.
Mrs. Kim. When the holistic review was first announced in
2022, it seemed that this review would be conducted by the Fed
Board, but given the speech from last week, it seems to only be
reflective of Vice Chair Barr's view. That is why I wanted to
know how involved the rest of the Board was in undertaking that
review, and do you foresee including climate risk as part of
the holistic review process?
Mr. Gibson. The holistic capital review was Vice Chair
Barr's review, and it doesn't include the pilot climate
scenario analysis that we are talking about here today.
Mrs. Kim. Mr. Jones, let me move on to talk about some
other issue. The National Credit Union Association's request
for comment on climate-related financial risk, based on
recommendations made by the Financial Stability Oversight
Council or the interagency climate working group that the NCUA
participates in, that is led by Treasury or another Executive
Branch agency. Is that right?
Mr. Jones. The NCUA Board did issue a request for
information in April of this year.
Mrs. Kim. The NCUA's request for comment on climate-related
financial risk asked whether the NCUA should modify its
examination procedures and supervisory posture in relation to
the risk, including modifying CAMELS ratings. Could you explain
what modifications to CAMELS ratings the NCUA has in mind, and
if it wants to modify supervision and examination procedures to
promote environmental regulations?
Mr. Jones. The NCUA Board has not spoken to any changes. We
asked about 38 questions in the request for information in
order to solicit stakeholder feedback on their perspective and
what opportunities may exist for credit unions, but nothing
particular has been developed. It is really to openly solicit
feedback.
Mrs. Kim. Okay. You are continuing to have the
conversation, and did you ask a follow-up question?
Mr. Jones. There were a variety of questions that were
posed really to try to better understand the physical risks and
transition risks along with the business opportunities. The
comment period closed on the 26th of June. We have 44
respondents, and we have staff who are going through that right
now.
Mrs. Kim. Thank you. I yield back.
Chairman Barr. The gentlelady yields back, and I would like
to thank our witnesses for their testimony today. It has been
very informative, and the testimony we have heard certainly, I
am sorry to say, perpetuates concerns that regulators focused
on climate-related financial risk will, in fact, politicize
credit allocation, assurances notwithstanding.
And, Dr. Gibson, your testimony was very professionally
delivered, and I appreciate your service, but if climate
scenario analysis is distinct from the capital framework, why
are we doing it? We want to know where this is going. And your
assurance that your increased focus on climate-related
financial risk will not discourage lending by banks to legal
businesses certainly looks to us, some of us, like a
distinction without a difference, because when a regulator
comes in and says, we are really focused on climate-related
financial risk, that sends a message: Don't lend to carbon-
intensive industries. That is what we are concerned about, and
to the extent it is not happening now, where is this going? We
are going to continue to ask these questions going forward, and
we urge you to heed the admonishment of the Chairman of the
Federal Reserve.
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.
This hearing is now adjourned.
[Whereupon, at 12:13 p.m., the hearing was adjourned.]
A P P E N D I X
July 18, 2023
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