[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
REGULATORY OVERREACH: THE PRICE TAG ON
AMERICAN PROSPERITY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
APRIL 29, 2025
__________
Serial No. 119-16
Printed for the use of the Committee on Financial Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-548 PDF WASHINGTON : 2026
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HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
------
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
ANDY BARR, Kentucky, Chairman
BARRY LOUDERMILK, Georgia, BILL FOSTER, Illinois, Ranking
Vice Chairman Member
BILL HUIZENGA, Michigan NYDIA M. VELAZQUEZ, New York
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
JOHN W. ROSE, Tennessee DAVID SCOTT, Georgia
WILLIAM R. TIMMONS IV, South BRAD SHERMAN, California
Carolina AL GREEN, Texas
RALPH NORMAN, South Carolina JUAN VARGAS, California
DANIEL MEUSER, Pennsylvania SEAN CASTEN, Illinois
YOUNG KIM, California STEPHEN F. LYNCH, Massachusetts
BYRON DONALDS, Florida JOYCE BEATTY, Ohio
SCOTT FITZGERALD, Wisconsin CLEO FIELDS, Louisiana
MIKE FLOOD, Nebraska
MONICA DE LA CRUZ, Texas
TIM MOORE, North Carolina
C O N T E N T S
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TUESDAY, APRIL 29, 2025
OPENING STATEMENTS
Page
Hon. Andy Barr, Chairman of the Subcommittee on Financial
Institutions, a U.S. Representative from Kentucky.............. 1
Hon. Bill Foster, Ranking Member of the Subcommittee on Financial
Institutions, a U.S. Representative from Illinois.............. 3
STATEMENTS
Hon. French Hill, Chairman of the Committee on Financial
Services, a U.S. Representative from Arkansas.................. 4
Hon. Maxine Waters, Ranking Member of the Committee on Financial
Services, a U.S. Representative from California................ 5
WITNESSES
Ms. Sarah Flowers, Senior Vice President, Senior Associate
General Counsel, Bank Policy Institute, Washington, D.C........ 6
Prepared Statement........................................... 8
Mr. J. Michael Radcliffe, Chairman and Chief Executive Officer,
Community Financial Services Bank, Benton, KY.................. 18
Prepared Statement........................................... 20
Mrs. Margaret E. Tahyar, Partner, Head of Financial Institutions
Group, Davis Polk & Wardwell LLP, New York, NY................. 30
Prepared Statement........................................... 32
Hon. Graham Steele, Academic Fellow, Rock Center for Corporate
Governance, Stanford Law School, Stanford, CA.................. 42
Prepared Statement........................................... 44
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. John Rose:
April 17th letter regarding support for the Homebuyers
Privacy Protection Act..................................... 104
Hon. Andy Barr:
Consumer data reporting industry (CDIA) letter regarding
concerns about the Homebuyers Privacy Protection Act....... 106
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative
Maxine Waters
Ms. Sarah Flowers............................................ 108
Mr. J. Michael Radcliffe..................................... 109
Hon. Graham Steele........................................... 110
LEGISLATION
H.R. --------, the Taking Account of Institutions with Low
Operation Risk Act of 2025 (TAILOR Act of 2025)................ 111
H.R. 2702, the Financial Integrity and Regulation Management Act
(FIRM Act)..................................................... 117
H.R. --------, the International Regulatory Transparency and
Accountability Act............................................. 123
H.R. --------, the Ensuring U.S. Authority over U.S. Banking
Regulations Act................................................ 127
H.R. --------, the Congressional Banking Regulation Priorities
and Accountability Act of 2025................................. 137
H.R. --------, the Banking Regulator International Reporting Act. 157
H.R. --------, the Guidance Clarity Act of 2025.................. 165
H.R. --------, the FDIC Board Accountability Act................. 169
H.R. --------, the Federal Reserve Financial Accountability and
Transparency Act............................................... 172
H.R. --------, the Banking Regulator Accountability Act.......... 176
H.R. 2808, the Homebuyers Privacy Protection Act................. 188
H.R. 1181, the Protecting Privacy in Purchases Act............... 192
H.R. --------, the CAMELS Rating Modernization Act of 2025....... 197
H.R. --------, the Tailored Regulatory Updates for Supervisory
Testing Act of 2025 (TRUST Act of 2025)........................ 201
H.R. --------, the Supervisory Modifications for Appropriate
Risk-based Testing Act of 2025 (SMART Act of 2025)............. 203
REGULATORY OVERREACH: THE PRICE TAG ON AMERICAN PROSPERITY
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TUESDAY, APRIL 29, 2025
U.S. House of Representatives,
Subcommittee on Financial Institutions,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:06 a.m., in
room 2128, Rayburn House Office Building, Hon. Andy Barr
[Chairman of the Subcommittee] presiding.
Present: Representatives Barr, Loudermilk, Huizenga,
Williams of Texas, Rose, Timmons, Norman, Meuser, Kim, Donalds,
Fitzgerald, Flood, Moore, Hill, Foster, Velazquez, Meeks,
Scott, Sherman, Green, Vargas, Casten, Lynch, Beatty, Fields,
and Waters.
Chairman Barr. The Subcommittee on Financial Institutions
will come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time. This hearing is titled
``Regulatory Overreach: The Price Tag on American Prosperity.
Without objection, all members will have 5 legislative days
within which to submit extraneous materials to the Chair for
inclusion in the record.
I now recognize myself for 4 minutes for an opening
statement.
OPENING STATEMENT OF HON. ANDY BARR, CHAIRMAN OF THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM KENTUCKY
I want to first thank our witnesses for being here today
for the first of many in-depth hearings on the importance of
supporting community financial institutions.
The committee's first hearing of the 119th Congress laid
the foundation for what we aim to accomplish in the Financial
Institutions Subcommittee this Congress.
During that hearing, we heard from regulatory experts and
community bankers who are being crushed by the weight of
burdensome and politically driven regulations from Federal bank
regulators.
Community banks are the lifeblood of our local economies
and serve as critical support for small businesses,
particularly in rural and underserved areas. Unfortunately,
these community banks were swept up in the regulatory overhaul
of Dodd-Frank 15 years ago, despite not contributing to the
financial crisis.
The one-size-fits-all approach to regulation created by
Dodd-Frank ignores the unique business models and size of these
local institutions and impresses unnecessary compliance costs
upon them.
In 2018, Congress acknowledged the need to adjust
regulations on financial institutions that reflect their
associated risk profile and lending strategies. This led to the
passage of the bipartisan Economic Growth Regulatory Relief and
Consumer Protection Act, or S. 2155.
This was a monumental step in recalibrating our Federal
bank regulation framework toward a more dynamic, risk-based
approach that does not impose excessive compliance burdens on
small or less complex financial institutions.
Unfortunately, Democrat-appointed regulatory officials
under the Biden Administration abandoned the bipartisan policy
approach of tailoring in favor of an uniform subjective-based
approach.
We saw this firsthand with the interagency rulemaking on
Basel III endgame, a partisan campaign led by former Vice Chair
of Supervision at the Federal Reserve that moved away from
risk-based tailoring and required small, less complex
institutions to follow the same rules as the largest Global
Systemically Important financial institutions.
Fortunately, due to the overwhelming number of negative
comment letters and pushback from legislators on both sides of
the aisle and both Chambers of Congress, this de facto rollback
of S. 2155's tailoring was not finalized.
Last Congress we advanced several bipartisan bills that
reassert congressional oversight over the kinds of agreements
regulators strike with global governance groups, such as the
Network for the Greening of the Financial System, or the NGFS.
This proved to be successful as our prudential regulators
have since pulled out of the NGFS.
Several bills attached to today's hearing advance
regulatory tailoring and maintain Congress's Article I
authority over these agencies.
I have heard from community bankers across the country
about the inconsistency and lack of clarity in the supervision
and examination of framework being driven by partisan
bureaucrats in Washington.
Rather than our prudential regulators working alongside
supervised institutions to ensure compliance, we have seen a
shift to promoting agendas such as climate-related finance or
the debanking of legally operating businesses--dangerous
deviations from the core mission and purpose of the agencies.
For example, we have seen regulators hand out supervisory
determinations based on novel interpretations of longstanding
laws without providing a meaningful appeals process.
Without any due process, these covered institutions are
constantly held in limbo while they await the next press
release that attacks their legal business strategy.
This hearing will examine how Congress can direct bank
examiners to use objective, risk-based metrics in their
examination process, specifically regarding the CAMELS
framework and the abuse of the management component that has
hindered otherwise compliant firms.
I look forward to hearing from our witnesses about
Congress' role in supporting an objective, risk-based
regulatory and supervisory framework that works for all
Americans, the importance of regulatory tailoring, and the need
to protect the U.S. financial system from overreach by global
governance groups.
I yield back and the Chair now recognizes the Ranking
Member of the subcommittee, Dr. Foster, for 4 minutes for an
opening statement.
OPENING STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM ILLINOIS
Mr. Foster. Thank you, Chairman Barr, and thank you to our
witnesses.
Over the last 100 days, President Trump's policies have
triggered a wave of uncertainty for the financial system and
for Americans in all walks of life. On-again, off-again
tariffs, mass firing of Federal civil servants, and unlawful
attacks on what should be independent agencies, like the
Federal Reserve, have made it impossible for small businesses
to plan, injected volatility into our financial markets, and
weakened the U.S. dollar.
On the campaign trail, President Trump claimed that he
would lower prices for Americans on day 1, with policies like
capping credit card fees at 10 percent and reinstating Glass-
Steagall.
Really? I do not see any of that here today, just chaos.
One-hundred days in, more than 60 percent of the Americans
disapprove of the President's handling of the economy, and
nearly 90 percent expect the new tariffs to increase prices.
Two-thirds of Americans say that they fear a recession, and
banks, large and small, are hearing from the businesses that
they support that these businesses have no idea how they will
survive the chaos, the costs, and the supply chain disruption
from Trump's tariff tantrums.
I support some of the legislation being put forward at this
hearing like the Homebuyers Privacy Protection Act, which will
protect the privacy of mortgage applicants and prevent them
from being bombarded by unwanted solicitations and scams.
Our witnesses bring thoughtful perspectives on banking
supervisory and examination processes, and I am looking forward
to discussing their recommendations with them today and I
believe there are real opportunities, for example, to use
technology to streamline bank supervision.
I was elected to Congress and joined this committee in
March 2008, on the eve of the global financial crisis. On this
committee, we surveyed the wreckage from excessive risk-taking
from large financial firms, predatory mortgage lending
practices, and other market excesses that brought the global
economy to the brink of collapse.
All of this was due to ill-advised financial deregulation.
I would note, interestingly, that, while there are several
Democrat on this subcommittee that were in Congress at that
time--Representatives Lynch, Sherman, Meeks, Scott, Green--zero
Republican members of this subcommittee were. Perhaps that
explains their amnesia.
Following the financial crisis, I was proud to help draft
the Dodd-Frank Wall Street Reform and Consumer Protection Act,
which aimed to correct the mistakes that led to the panic,
pain, and contagion that we saw in 2008.
Following Dodd-Frank, we saw the strongest period of
uninterrupted economic expansion in our country's history, a
period in which the U.S. financial system far outgrew the less
regulated rest of the world, achieving, dare I say, financial
dominance. Now we appear to be throwing that all away.
One important provision created by the Consumer Financial
Protection Bureau, CFPB, that was tasked with regulating things
like mortgages and credit cards whose predatory terms and
hidden fees weakened consumers ahead of the crisis.
The Dodd-Frank Act also established the Financial Stability
Oversight Council, FSOC, and the Office of Financial Research
(OFR), to oversee activities of systemically important
financial institutions.
Each of these agencies, along with our banking and market
regulators, served critical roles for the financial stability
of the United States, yet their missions are under assault.
Tomorrow our committee will consider legislation that would cut
the CFPB's budget by roughly 70 percent, cut the FSOC and OFR
budgets by nearly 90 percent, far below what they require to
carry out their roles established by Congress.
This comes as thousands of Federal employees from around
the Federal Government are being terminated without cause and
without due process, leaving essential roles unstaffed and
financial agencies without the resources they need to function.
This uncertainty caused over the last 100 days, combined
with preexisting geopolitical tensions, cybersecurity threats,
and disruptive technologies, make these financial watchdogs
more important than ever.
So, I urge my colleagues to oppose the administration's
deliberate economic chaos and preserve and strengthen the
Federal agencies that protect America's financial well-being.
Thank you, Mr. Chairman. I yield back.
Chairman Barr. The gentleman yields.
The Chair now recognizes the Chairman of the full
committee, Mr. Hill, for 1 minute.
STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON
FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS
Chairman Hill. Thank you, Chairman.
Today's hearing revisits one of our committee's top
priorities for this Congress, enhancing and growing our
community banks and restoring common sense to financial
regulation.
For 15 years, we have heard testimony in this room about
how Dodd-Frank has hollowed out our banking sector, especially
hurting small and midsized institutions that serve as the
backbone for our local, Main Street economies.
That is why Republicans and Democrats came together in 2018
to pass commonsense, prudential reforms during the first Trump
Administration, S. 2155, including the support, I believe, of
our Ranking Member of this subcommittee.
Now it is time to return to that spirit of bipartisan
practical approach to community financial institution
supervision and regulation.
This hearing is an opportunity to build on the record of
support for ideas like regulatory tailoring and supervisory
modernization--issues that every community banker and credit
union back in our districts are thinking about every day.
I look forward to hearing from our witnesses about the
challenges these institutions face, their thoughts on the bills
we have noticed today, and what is at stake if we fail to act.
I thank the Chair, and I yield back.
Chairman Barr. The gentleman yields.
STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
CALIFORNIA
The Chair now recognizes the Ranking Member of the full
committee, Ms. Waters, for 1 minute.
Ms. Waters. Good morning. Republicans are, once again,
using community banks to advance an agenda for mega banks.
Instead, we should hold a hearing on Trump's coup and theft of
the American Dream.
Unfortunately, Republicans are not using their oversight
power and instead ignoring the Trump regime's reckless and
lawless actions; from firing board members of the National
Credit Union Administration, imposing chaotic tariffs, and
attacking the Community Development Financial Institutions
Fund. All these actions harm community banks, credit unions,
and the consumers and small businesses they serve.
Mr. Chairman, it is no wonder consumer confidence has
dropped to record lows. Americans are worried about higher
prices, fewer jobs, and Trump's coup d'etat.
I yield back the balance of my time.
Chairman Barr. The gentlelady yields.
Today we welcome the testimony of Ms. Sarah Flowers, Senior
Vice President and Senior Associate General Counsel for
regulatory affairs for the Bank Policy Institute, where she
focuses on capital stress testing, mergers and acquisitions,
and other prudential regulatory matters.
Mr. Michael Radcliffe, a fellow Kentuckian--welcome to the
committee--he is Chairman and CEO of Community Financial
Services Bank (CFSB), a $1.3 billion community bank with eight
locations that serves rural western Kentucky. He has been with
the CFSB since 2002, and it is my great pleasure to have him
here with us today in Washington.
Ms. Margaret Tahyar is the head of the Financial
Institutions Group at Davis Polk & Wardwell, where she has been
a partner for 27 years. She has testified before this committee
previously; so, we welcome her back.
Good to see you again.
Mr. Graham Steele, an Academic Fellow with Stanford Law
School's Rock Center for Corporate Governance, he previously
served as Assistant Secretary for Financial Institutions at the
Treasury Department under the previous administration.
We thank you all for your time being here. Each of you will
be recognized for 5 minutes to give an oral presentation of
your testimony.
Without objection, your written statements will be made
part of the record.
Ms. Flowers, you are now recognized for 5 minutes for your
oral remarks.
STATEMENT OF SARAH FLOWERS SENIOR VICE PRESIDENT, SENIOR
ASSOCIATE GENERAL COUNSEL, BANK POLICY INSTITUTE, WASHINGTON,
D.C.
Ms. Flowers. Chairman Barr, Ranking Member Foster, and
honorable members of the subcommittee, thank you for inviting
me to testify. My name is Sarah Flowers, and I am a Senior Vice
President, Senior Associate General Counsel at the Bank Policy
Institute (BPI).
Prior to joining BPI, I spent several years focused on
prudential regulatory policy at a regional bank, and for many
years in private practice, I served bank clients of all sizes.
BPI is a nonpartisan policy research and advocacy
organization, representing the Nation's leading banks. On
behalf of BPI members, we greatly appreciate this committee's
leadership and the opportunity to provide perspective on
regulatory overreach in the banking sector.
In the United States, banks of all sizes play a vital role
in fueling economic growth. By recognizing the value each type
of institution offers and appropriately tailoring regulatory
requirements and supervision, our banking system better
supports the economy.
Secretary Bessent recently noted that, besides better
tailoring of regulation, perhaps the single most important
reform will be to refocus bank supervision on material
financial risks. To support these goals, we offer a few
recommendations.
First, regulations need to reflect economic reality rather
than being frozen in time. There is an urgent need to index
regulatory tailoring thresholds for all banks for economic
growth and inflation.
Regulation that fails to evolve with the macroeconomic
environment constrains growth without offering an offsetting
benefit.
Economic growth and inflation do not increase systemic risk
in the financial system. As the economy expands, various
sectors of the economy grow proportionally. Annually and
automatically adjusting the tailoring category thresholds would
prevent banks from facing more stringent regulations solely due
to natural economic expansion.
Once properly indexed, as new rules are developed, care
must be taken to prescribe less stringent requirements for
firms whose activities and structure present less risk.
Rules designed to address the complex activities of
internationally active banks should not be indiscriminately
applied to smaller banks with less complex structures and
business models.
Second, effective tailoring requires effective supervision.
By enacting a bipartisan tailoring law in 2018, Congress
communicated to the banking agencies that they should take a
holistic approach to regulation.
However, that holistic approach has failed to take hold in
supervision, where examiners treat regional banks and the
largest banks with the same broad brush.
Regional banks routinely report that the agencies use
horizontal reviews to hold them to the same standards as
Global Systemically Important Banks, or G-SIBs, through the
exam process.
These banks are technically exempt from those standards,
but nothing stops an examiner from imposing them by issuing a
matter requiring attention, or MRA, in a nonpublic exam.
A key reform should be the adoption of regulations that
define an unsafe or unsound practice using a financial
materiality standard. This would help ensure that enforcement
actions are grounded in practices that genuinely threaten a
bank's financial integrity.
Finally, the exam ratings framework is broken. In the exam
framework itself, a lack of focus on material financial risk
leads to unwarranted CAMELS ratings downgrades as the ultimate
output of the exam process.
While this framework in theory evaluates six factors, it is
the management rating, or the M, that dominates as a factor in
the composite rating. The management rating is uniquely
subjective. It is not based on any empirical or financial
standard but, rather, serves as a vehicle by which examiners
can find fault with any aspect of a bank's compliance program
or the bank's willingness to accede to examiner mandates.
It is often where inappropriate focus on reputational risk
can manifest. There are severe automatic consequences of an
unsatisfactory management component rating.
Removing or replacing the management component would help
limit the assignment of unsatisfactory CAMELS ratings to
institutions in poor financial condition and better reflect
that a bank should be considered well managed if its management
team is appropriately managing the risks that matter most.
Because the exam process remains confidential, it is not
subject to public scrutiny, and the ratings frameworks
themselves provide no meaningful standard to govern their use--
or misuse.
While the agencies have adopted internal appeals processes,
the appeals involve senior personnel of the same agency
involved in the dispute. This conflicts with fundamental
principles of fairness and due process.
Banks should be expressly permitted to appeal CAMELS exam
findings and ratings to a legitimately neutral authority.
We greatly appreciate this committee's thoughtful approach
to these issues and stand ready to work with you to ensure that
bank regulation and supervision supports financial stability
without imposing undue burdens on institutions.
Thank you for the opportunity to speak today, and I look
forward to any questions.
[The prepared statement of Ms. Flowers follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Barr. Thank you.
Mr. Radcliffe, you are now recognized for 5 minutes.
STATEMENT OF J. MICHAEL RADCLIFFE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, COMMUNITY FINANCIAL SERVICES BANK, BENTON, KY
Mr. Radcliffe. Chairman Barr, Ranking Member Foster, and
distinguished members of the committee, thank you for the
opportunity to speak today on the impact of regulatory burden
and overreach on community banks.
My name is Michael Radcliffe, and I am the CEO of Community
Financial Services Bank, a $1.3 billion institution serving
rural western Kentucky for the past 135 years.
Community banks like ours play a critical role in the
financial system. We provide nearly 60 percent of small
business loans and 80 percent of bank agriculture loans
nationwide.
In many rural areas, we are the sole financial institutions
offering access to credit, creating jobs, and fostering
economic growth.
Despite holding just 13 percent of total banking assets,
our impact is substantial, and we operate with unmatched
efficiency and local focus.
However, the increasing regulatory burden is jeopardizing
our ability to serve these communities. At CFSB, we spend over
$632,000 annually on compliance costs alone. This includes
expenses for personnel, training, reporting, and technology,
all resources that could instead support local families,
farmers, and small businesses.
The CFPB's 1071 rule exemplifies the challenge. While it
aims to promote fair lending, the data-collection requirements
impose significant administrative costs and raise privacy
concerns amongst our borrowers--eroding the trust that defines
community banking.
I am grateful to this committee for passing 976, the 1071
Repeal to Protect Small Business Lending Act, to provide relief
from this harmful rule and statute.
Additionally, regulatory expectations for tier 1 capital
ratios have shifted unofficially, with examiners often
requiring many community banks to maintain levels above 9
percent, far beyond the well-capitalized standard of 6 percent.
These unmandated requirements tie up resources that could
fuel local economies.
Unlike large banks, we cannot easily absorb these costs.
For them, $632,000 is a rounding error. For us, it is a
substantial portion of our budget.
These disparities drive industry consolidation, with
Kentucky's State-chartered banks declining from 109 in 2020 to
98 by 2024. The last new State banking charter was issued in
2009.
Consolidation of this magnitude reduces financial
diversity, weakens rural economies, and ultimately increases
borrowing costs for families and small businesses.
We need more new charters to offset consolidation. I
strongly support Chairman Barr's Promoting New Bank Formation
Act, H.R. 478, which would provide regulatory and capital
flexibility for de novo bank charters, and I thank the
committee for passing this important bill.
To preserve the essential role of community banks, I urge
the committee to consider the following reforms: Scale
regulations to bank size and complexity, ensuring community
banks are not burdened by rules designed for larger, more
complex institutions; provide targeted regulatory relief to
simplify compliance and reporting requirements; encourage
innovation, enabling community banks to adopt technologies that
enhance efficiency; and ensure proportional oversight to
balance financial stability with market diversity.
As I explain in my written statement, a number of bills
before this committee today incorporate these core principles
and would make critical regulatory reforms to strengthen
community banks and the local economies they serve: For
example, Representative Loudermilk's TAILOR Act would require
the agencies to tailor rules and regulations on a bank's risk
profile and business model.
Representative Huizenga's FDIC Board Accountability Act
would designate a board seat for an individual with small
depository institution experience. Fed Governor Miki Bowman has
shown us the value of creating a designated community bank
seat, and I expect that this bill would yield a similar
benefit.
H.R. 2808, sponsored by Representative John Rose and
Ritchie Torres, would protect the privacy of homebuyers, and
curb invasive and annoying trigger leads.
Two bills--the TRUST Act and the SMART Act--would ease exam
burden for more well-managed and well-capitalized community
banks.
I encourage you to advance these bills at the earliest
opportunity.
Community banks are not just financial institutions. We are
lifelines for the communities we serve. Without meaningful
reform, the increasing regulatory burden will extinguish this
vital part of our financial ecosystem, leaving rural America
without access to essential services.
Thank you for your time and attention, and I look forward
to your questions.
[The prepared statement of Mr. Radcliffe follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Barr. Thank you, Mr. Radcliffe.
Mrs. Tahyar, you are now recognized for 5 minutes.
STATEMENT OF MARGARET E. TAHYAR, PARTNER, HEAD OF FINANCIAL
INSTITUTIONS GROUP, DAVIS POLK & WARDWELL LLP, NEW YORK, NY
Mrs. Tahyar. Thank you for inviting me to speak to you here
today. Let me start by giving respect to the art of supervision
and the many dedicated examiners, but I would like to submit to
you that bank supervision needs modernizing reform. There are
two key challenges. One is discretion, and the other is
secrecy.
In recent years, there has been a great deal more
discretion in examination, as examiners have moved away from
core financial risks into qualitative subjective judgments on
governance and management.
More discretion means more accountability is needed,
especially to congressional oversight committees, banks, and
the public.
The culture of secrecy is also a challenge to reform. There
are many unknown unknowns in supervision. Is it effective? Does
it work, in business as usual or in troubled times?
We actually do not know. That is because it is not
transparent. Why is not it more transparent?
I am not suggesting body cams on examiners, but there are
some things that could be done that are relatively easy. One is
to release very old exam reports, 35 years or more, where
nobody who was at the bank or at the agencies is still working.
Another is to release more consistent, anonymized aggregate
data that will allow an examination into whether exams are
consistent and fair across banks, their models, and whether
tailoring works.
Another is to reform the appeals process, which is broken.
As Secretary Bessent recently said, it is more theoretical than
real. In a 13-year period at the FDIC, there were 50 appeals to
over 100,000 exams and I do not think anybody is that perfect.
There were very few wins. Last year, banks were 1 to 17.
Here are other things that we do not know about
supervision. How are examiners trained? There is more
information out there about the training and the exams that
other professions take place--doctors, lawyers, Certified
Public Accountants (CPAs), barbers, manicurists--than you can
find on the training and the examination curriculum of
examination staff.
What are the pass rates? We do not know.
What has been the training on interest rate risk in
governance as examiners have moved into those areas--or in the
case of interest rate risk, maybe not? We do not know. A lot of
unknown unknowns.
How are examiners and their managers held accountable? Very
little public information on how the supervisory staff is
organized and managed.
To be fair to line supervisory staff, we should ask whether
they are well managed. Do they operate in an environment where
they have the tech and the tools and the direction to do what
they need, or are they stuck in this morass of checklists
because of a lack of direction from the top?
There are a lot of good ideas being discussed at the
moment, and I have listed them in my written testimony. This
committee also has a number of bills before it which would
encourage or require many of these reforms.
In my view, the executive branch and the agencies should
not wait for Congress to act but should start their own process
of reform now. I believe the three banking agencies have all
the power they need in their own grounding statutes, with the
authority granted in the Federal Financial Institutions
Examination Council (FFIEC), and in the authority granted to
FSOC.
There are two topics that are not on the agenda for
supervisory reform, but which ought to be. They are examiner
discretion and the assertion of criminality. The agencies
defer, particularly in the Administrative Law Judge (ALJ)
enforcement process, to examiner discretion.
I think it is an open question how much deference should be
given to examiners outside of their core expertise, and I think
that should be reexamined.
The other is the fragile nature of the criminality
assertion. Confidential Supervisory Information (CSI) has
viewed it is criminal to disclose it, and that is based on a
very fragile assertion of property that recent case law has
challenged--and it has always been fragile. I think that should
also be rethought.
In sum, appropriate reforms made by the Federal agencies,
working together for efficiency, transparency, and fairness,
and enhancing the oversight of Congress and its committees,
could really create change for the better.
Thank you very much.
[The prepared statement of Mrs. Tahyar follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Barr. Thank you for your testimony, and before we
move on to your final witness, just a reminder to members and
staff to take your conversations outside of the committee room
so that all members can hear clearly the testimony of our
witnesses. Thank you for your consideration.
Mr. Steele, you are now recognized for 5 minutes for your
oral remarks.
STATEMENT OF HON. GRAHAM STEELE, ACADEMIC FELLOW, ROCK CENTER
FOR CORPORATE GOVERNANCE, STANFORD LAW SCHOOL, STANFORD, CA
Mr. Steel. Good morning, Chairman Barr, Ranking Member
Foster, and members of the subcommittee. Thank you for inviting
me to testify today. My name is Graham Steele, and I am an
Academic Fellow at the Rock Center for Corporate Governance at
Stanford Law School and a fellow at The Roosevelt Institute.
From November 2021 until January 2024, I served as the
Assistant Secretary for Financial Institutions at the Treasury
Department.
So we know that building a more just economy and society
requires a stable financial foundation. Unfortunately, the
Trump Administration's plan is clearly to gut, whether by
legislation, regulatory action, or staff attrition, the
agencies that oversee the financial system and the authorities
these agencies use to rein in financial excesses.
Some of the bills under consideration today would weaken
supervision and regulation for banks of all sizes, unlearning
the lessons of the global financial crisis and the regional
banking stress of 2023.
One proposal addresses the purported threat of so-called
debanking, while still others would impose assorted onerous
reporting requirements on banking agencies and limit their
ability to provide useful guidance to industry and the public.
Finally, several bills would impose limits on U.S.
agencies' ability to participate in nonbinding international
financial policy coordinating bodies.
My written testimony goes into greater depth into the
problems with each of these bills, but I want to right now
offer two observations about the short-sighted, self-defeating
nature of the Trump Administration's actions to date and the
harms of financial deregulation.
The first point is these bills, which are ostensibly about
executive branch accountability, fail to address the most
pressing issue of the day, which is that this administration is
running roughshod over traditional notions of financial agency
independence and respect for the separation of powers.
The President has illegally attempted to remove Democratic
appointees at the National Credit Union Administration (NCUA)
and other agencies. The White House has issued executive orders
attempting to place agencies under the thumb of the White
House's Office of Management and Budget and the Justice
Department.
The Acting Director of the CFPB is violating an order from
a U.S. district court by attempting to all but eliminate the
CFPB, an agency that has returned more than $20 billion to U.S.
consumers.
The Environmental Protection Agency (EPA) and the
Department of Justice (DOJ) have ordered Citibank to freeze the
bank accounts of lawful grant recipients, including community
financial institutions, in order to make investments that will
help communities address the impacts of climate change.
The President has been browbeating the Chair of the Federal
Reserve Board in an attempt to exert partisan political
influence over monetary policy, and the President is attempting
to use the International Emergency Economic Powers Act, or
IEEPA, to impose sweeping and likely illegal tariffs that will
increase costs for the U.S. consumers.
These lawless actions are causing instability in our
financial markets and our society more broadly.
The cure for this instability is not deregulation but
robust economic growth and financial stability coupled with
adherence to democratic values, stable institutions, and the
rule of law.
The second point is that financial deregulation will only
make the problems this administration is creating even worse.
Deregulation will allow financial companies to take
excessive risks, extract wealth from working people and enrich
executives and shareholders through bonuses and payouts.
It will make this financial system less accessible and less
affordable for people looking to start a new business or buy a
home. It will make the financial system more fragile, meaning
people's money will be put at risk, and taxpayers may
eventually be called upon to support failing financial
institutions that have behaved recklessly.
It will undermine banking agencies' ability to prevent or
respond to financial crises, making crises more frequent and
more severe in their impact; and it will be harder for smaller
financial institutions to compete with big banks that benefit
from advantages of size, scale, and implicit government
support.
If the subcommittee is interested in ensuring widespread
prosperity for the American economy, some issues that warrant
your attention and consideration include, first, reforming the
deposit insurance and bank merger review regimes; second,
stopping light-touch charters like Stablecoins, industrial loan
companies, and the movement of Big Tech into financial
services; third, rather than threatening to cut the Community
Development Financial Institution (CDFI) Fund, providing more
resources for CDFIs and Minority Depository Institutions (MDIs)
to invest in urban and rural communities; fourth, help
community financial institutions update their technology
offerings and navigate their relationships with core service
providers and other technology providers; fifth, help community
and regional financial institutions address the increasing risk
of climate change, especially the recent developments in
property insurance markets; and, sixth, conduct robust
oversight of the President's attempts to stretch the bounds of
IEEPA to impose illegal tariffs.
The weakening oversight of the financial system, raising
costs for working people, engaging in erratic protectionist
trade policies, and assaulting the independence of agencies
like the Federal Reserve, will only create financial
instability.
[The prepared statement of Mr. Steele follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Barr. The gentleman's time has expired.
We will now turn to member questions. The Chair now
recognizes himself for 5 minutes for questioning.
Let me start with Mr. Radcliffe.
The general idea behind regulatory tailoring is that
smaller, noncomplex financial institutions, community banks,
should not be subject to the same level of scrutiny as large,
systemically important institutions that engage in riskier
behavior.
Mr. Radcliffe, you run a $1.3 billion community bank in
Kentucky. What kinds of products and services do you offer your
customers, and how do they differ from those offered by larger
banks?
Mr. Radcliffe. Thank you, Mr. Chairman. Pleasure to be
here. We offer many of the same products as the larger banks,
but we are able to tailor them in ways that they cannot.
For example, we offer floor plan financing, where the
borrower is a watercraft, marine dealer, and so we have
tailored it so they do not make payments in the winter when
cash-flow is tight.
Larger banks would probably not be that specific. Being
relationship-driven, we can be much more tailored in our
products and services.
Chairman Barr. In your testimony, you explained how your
firm's liquidity policies were deemed sufficient and acceptable
by regulators until the failure of Silicon Valley Bank 6 months
later when regulators came back and said those same policies
are now insufficient.
What kind of an impact does this approach to regulation
have on a business such as yours?
Mr. Radcliffe. Significant. Our CFO spent at least 6 hours
explaining to one examiner how to balance back to the call
report, the liquidity reports. We probably spent a total of 20
hours of staff time, specifically on liquidity. We had a 15-
minute discussion on asset quality, and a 1-hour discussion on
liquidity.
Chairman Barr. Last Congress, I introduced the Financial
Institution Regulatory Tailoring Enhancement Act, which would
increase the asset threshold from $10 billion from $50 billion
for CFPB supervision, interchange transaction fee regulations,
Volcker Rule, qualified mortgage requirements, leverage and
risk-based capital requirements.
Ms. Flowers and Mrs. Tahyar, would increasing the threshold
on these regulations help mega banks, as the Ranking Member
suggested, or would it increase the stability of our financial
system by providing tailored regulations to community and
midsized banks?
Ms. Flowers. It would not help the mega banks because those
banks would remain subject to all of the rules that you just
mentioned, and those rules, in many instances, are designed for
the largest and most complex banks. If anything, it would
relieve some unnecessary compliance burden on the smaller
institutions.
Chairman Barr. Mrs. Tahyar? When you answer this question,
would providing additional tailoring and relief for those
community, midsize institutions, would that help--would that be
pro-competitive in terms of providing a counterweight to those
G-SIBs?
Mrs. Tahyar. That is exactly right, it would be pro-
competitive, and it would be a counterweight. It would not--
increasing the thresholds would not help the mega banks one
bit, but it would help the midsize and regional banks.
Chairman Barr. I have been told by many community banks in
Kentucky and around the country that are approaching that $10
billion threshold, that is a real impediment to organic growth
and the only way that a larger community bank, pushing that $10
billion threshold, to trip that threshold would be to jump over
that in a major way.
Is that smart banking policy, or is there a problem with
that?
Mrs. Tahyar. The cliff effect is real, and it is a problem
and it actually happens before. Once you hit $7-or $8 billion,
then your examination staff wants you to start to prepare, and
that makes sense.
You cannot go to 10 billion and one cent, because if you
do, you have all the costs of being between 10 and 50, at a
lower level of revenues and a lower base of costs.
I think that tailoring should also include a transition
period as banks move over, and then they can decide do they
want to be organic, or do they want to do it by acquisition?
Chairman Barr. Final question, Mrs. Tahyar. You have very
important testimony about the supervisory examination process
and how it does not work. Can you tell us whether or not bank
exams depend on which examiner you get and why that is a
problem?
Mrs. Tahyar. That is often the case. When you have an
examiner switch out, suddenly you have a lot of changes.
Examiners on the ground, they are not--the extent to which they
are accountable to others is really unclear. So, it is very,
very personality-dependent.
Chairman Barr. I think consistency in exams, regardless of
who the examiner is, is very, very important.
My time has expired. I now recognize the Ranking Member of
the subcommittee, Dr. Foster.
Mr. Foster. Thank you, Chairman Barr. I would like to focus
my questions on how recent administration actions are actually
tilting the playing field against small community banks and in
favor of the financial technologies (fintechs) and the large
banks.
Mr. Steele, one of President Trump's first actions, acting
through Elon Musk and the Department of Government Efficiency
(DOGE) group, was to shutter the CFPB. The CFPB is widely
popular among Americans of all political affiliations.
It has returned more than $20 billion to consumers and
armed servicemembers harmed by abusive practices and illegal
actions by financial firms.
Tomorrow this committee will consider Republican
legislation to cut the CFPB's budget by 70 percent, and there
are plans to cut as much as 90 percent of the CFPB staff.
Now, as you know, the CFPB was the primary consumer
compliance regulator for the biggest banks and Big Tech. While
no one is currently supervising big banks or Big Tech with the
deleting of the CFPB, no one is supervising them for consumer
compliance.
The vast majority of community banks and credit unions with
less than $10 billion of assets continue to be supervised for
consumer compliance by their Federal prudential regulator.
Does not this create an unlevel playing field for community
banks and credit unions?
Mr. Steel. Thank you, Congressman. It is a great question,
and I think this is an important point, which is the CFPB, the
vast majority of what it does--or I guess what it did when it
had sufficient supervisory staff--was to look at nonbanks.
Nonbanks have come into certain areas and captured a lot of
market share in recent years, and they are the dominant
providers of certain kinds of products and services. So, the
CFPB examination and supervision staff spent a lot of time
looking at nonbanks that prior to the 2008 financial crisis had
no--or hardly any--oversight whatsoever for consumer compliance
and consumer harms.
Consumers are vulnerable on one side, and small banks that
are underneath the threshold are subject to examination and
supervision because their primary banking regulator is the one
doing that examination supervision.
So, it is a competitive imbalance, and there is harm to
consumers.
The CFPB had also issued a rule in the prior administration
to oversee tech companies in particular, and Big Tech
companies. That was the biggest part of their focus, which
obviously Elon Musk has his own Big Tech company which wants to
offer financial products and services.
Obviously that has been rolled back by Congress now, but I
do want to hone in on something else that you said in your
opening statement, which was the election was about lowering
costs for consumers and putting money back in their pockets.
The President said he was going to cap credit card interest
rates at 10 percent.
The CFPB has saved consumers over $20 billion. Two rules
that were just recently repealed by Congress--the overdraft
rule and the credit card fee rule--would have saved consumers
$15 billion per year combined.
I know you are going to consider whether you want to cut
the CFPB's budget or not, but the CFPB's annual budget is about
$800 million. For those two rules alone, that is almost a 19
times return on investment from the money that CFPB is spending
by putting money back in consumers' pockets.
Mr. Foster. Thank you, in terms of fintechs, Mr. Radcliffe,
are there areas where you have seen encroachment by fintechs on
any of what used to be your core businesses?
Mr. Radcliffe. Fortunately--of course, I can speak for our
bank's experience. In the payment space, we have seen
encroachment from, of course, the PayPals and Venmos of the
world, but we have sought to partner, through our core provider
and other platforms, to try and compete.
Mr. Foster. Are you concerned that the fintechs will not be
subject to the same consumer compliance regulation that your
bank will be?
Mr. Radcliffe. Oddly enough, we are examined and held
accountable for the fintechs' actions, whenever the exam-----
Mr. Foster. When you partner?
Mr. Radcliffe. Yes.
Mr. Foster. But a freestanding fintech can move into your
area----
Mr. Radcliffe. Right.
Mr. Foster [continuing]. without this sort of--and that is
the unbalanced playing field that I am really concerned about
in terms of--things like mortgages are another area where there
has been a huge intrusion in what used to be the bread and
butter for ordinary banks.
Now, Mr. Steele, back to the CFPB for a moment. How do you
think the CFPB's ability to operate would be affected by a 70
percent budget cut or a 90 percent cut in their staff level?
Instead of expanding oversight into fintechs, is there any
hope that they will be able to do anything with respect to
fintech competition?
Mr. Steel. No. I think the reason the judge ordered the
temporary restraining order that they did in the district court
case was because it is pretty clear. You cut the CFPB by that
much, and it is going to be basically nonfunctional. It is not
going to be able to handle consumer complaints in the way that
it does vigorously. It is not going to do exams and
supervision. It cannot do enforcement.
You basically will not--you will have a shell of a CFPB but
not a meaningful consumer agency.
Chairman Barr. The time has expired.
The gentleman from Arkansas, Mr. Hill, Chairman Hill, is
now recognized for 5 minutes.
Chairman Hill. Thank you, Chairman Barr.
Again, I thank our panel. It is always good to have such a
distinguished panel.
Thank you, Mr. Steele, for your service at the Treasury.
Mr. Radcliffe, we are always grateful to have a
practitioner before us.
In the years following the passage of Dodd-Frank, there has
been significant bipartisan recognition that financial
regulation should be based on an institution's size,
complexity, and business model, and not just be a one-size-
fits-all approach.
That commonsense idea, I think, is what we are about today,
and it is in Chairman Barr's agenda. For example, a well-
capitalized and well-managed institution under a certain size
should be eligible for an extended exam cycle. That is one of
our commonsense reforms.
Another example might be the community bank leverage ratio
which allows well-capitalized banks under $10 billion to opt
for a more simplified capital framework.
Mrs. Tahyar, you have had such a great career in this
arena. You said you toiled in the field. I saw your resume.
Thank you for sharing that.
Would you agree that tailoring regulations for well-managed
institutions already exist in law, and it is just not being
implemented by our supervisors?
Mrs. Tahyar. Yes, I agree, it does exist in the law from
the previous act, but we do not know how it is being
implemented by supervisors in practice because of the culture
of secrecy.
Based on anecdotal evidence, I think it is being
inconsistently implemented.
Chairman Hill. Would you say that there are other types of
regulatory relief, besides that exam cycle idea, that might
be--should be availed to well-managed institutions, say,
institutions rated 1 or 2 on a composite rating and have a
satisfactory Community Reinvestment Act (CRA) rating? What else
would you think should be on that list?
Mrs. Tahyar. I think they should have expedited application
processes. Whether it is a new branch, whether it is an
acquisition, whether it is an activity that requires approval,
I think there should, in general, be a lighter touch in their
examinations and a focus on major financial risks rather than
qualitative judgments.
Chairman Hill. We talked about, and Chairman Barr
referenced it, the idea--and several of you did in your
testimony--about exam appeals on outcomes. This has been an
issue.
Back in 1994, just after I left the Treasury Department, we
passed the Riegle-Neal Act, which institutionalized appeals,
which, in my judgment, have failed to be implemented very
effectively.
In fact, the FDIC Inspector General, back in July 2023
said, ``The appeals process at the FDIC lacked independence,
contained inadequate oversight mechanisms, and presented a
perceived conflict of interest.''
Mrs. Tahyar, I do not think that is unique to the FDIC. We
are trying to get this appeal process right, both for
institutions that go through a normal State or Federal exam
cycle but also for those institutions that have a resident
examiner program.
Can you reflect on the distinctions between those two bank
sizes?
Mrs. Tahyar. Sure. The exam process--the appeals process is
clearly broken. I really like the FAIR Act--I think that is the
right name--which would create an independent review process
through the FFIEC and not have examiners reporting up into the
same hierarchy; so, you do not have this judge, jury, and
prosecutor issue going on.
Many examiners do a great job; so, appeals should be rare
but fair.
Chairman Hill. I think that is right. I hear so frequently,
for State nonmember banks, that their State bank commissioners
are advocating for them to overrule the FDIC in that example.
Is that something you have seen in your legal practice?
Mrs. Tahyar. I have, sir. Yes, I have, and when it happens,
it is very powerful. I will say to that, when I have seen it,
the State Banking Commission is thinking very carefully before
it makes such a statement.
Chairman Hill. Sure, because that puts them at suddenly on
the wrong side of the negotiating table with their Federal
counterpart.
Can you tell the committee, just in the few seconds I have
remaining, why did that appeal process that was in the Riegle-
Neal Act--this is after the banking crisis of 1991; this is
after the savings and loan collapse--why did not that stick?
Why did not that work?
Mrs. Tahyar. I am not sure. I think it basically fell off
the agenda, and there were other priorities. Then it was just
easy to have an informal process that was not independent.
Chairman Hill. Right, thank you. I do not think it is
independent. I do not think it is working, and I yield back,
Mr. Chairman.
Chairman Barr. The gentleman yields.
The gentlewoman from California, Ranking Member Waters, is
now recognized.
Ms. Waters. Thank you very much, Mr. Chairman.
Mr. Steele, you discussed some of this in your testimony,
but I have been troubled by the President's corrupt
cryptocurrency activities while he is supposedly running our
country.
Just this morning, The New York Times came out with a
scathing investigation into Trump's shady crypto dealings.
Apparently, most of his net worth comes from his crypto
activities. Let us discuss some of them.
There was the meme coins Trump and his wife launched right
before he was sworn in. With Trump's meme coin, thousands of
investors lost $2 billion in the first few weeks while Trump's
family and friends racked up at least $350 million.
Trump recently announced the 220 largest holders of his
meme coin would have dinner with him at his members-only golf
club in Virginia and then the top 25 largest holders would
follow dinner with a tour of the White House.
Following this blatant advertisement about how to buy
success, the value of his coin immediately went up 50 percent,
earning him and other insiders $900,000 in trading fees alone
in 2 days.
Trump Media also announced a partnership with crypto.com to
offer new crypto exchange-funded--traded funds, or ETFs. Davis
Polk, who is represented on this panel by Mrs. Tahyar, is the
legal adviser on the deal.
While Trump has attacked a number of firms, he has not
attacked Davis Polk.
Trump's family business, World Liberty Financial, is also
getting into stablecoins. At the same time, he wants to
Congress to pass a law that would let him write the rules of
the road where he would follow his own stablecoin compared to
others, even requiring the government to use his stablecoin in
transactions with America.
Mr. Steele, do you think the President's crypto activities
are appropriate? If so, what impact would there be on community
banks if Congress advances a weak regulatory framework on
stablecoins and crypto market structure for Trump to implement?
Does this not pose a massive conflict of interest?
Mr. Steel. Thank you, Congresswoman. You asked me, do I
think that this is appropriate? I think that the answer is
absolutely not. I think, in any other administration, this
would be a scandal.
You mentioned the dinner that he is having for the largest
holders of his crypto meme coin.
In the first Trump Administration, we used to talk about
the Emoluments Clause and the fact that the President was not
supposed to be taking money from outside sources while he was
the President.
We just do not talk about that anymore, but that is pretty
obviously what is happening here.
I think a second issue that you raised is that he has his
own--he wants to issue his own stablecoin as this committee is
thinking about and Congress is thinking about stablecoin
legislation. I have concerns about that in two respects and
frankly with the broader crypto activities that he is doing.
The first is I do not think that there is a financial
regulator alive who would take a hard look at any of these
businesses being run by the President of the United States, who
is their boss, and if some of these administrative law cases go
the way that they go, he can fire them at will. So, he has
something hanging over the head of these regulators, which is a
massive conflict of interest.
That means that, number 1, there can be risks taken that
regulators will not get out ahead of. There can be consumer and
investor harms that they will not get ahead of that will cost
us--taxpayers, consumers--a great deal. It could undermine
financial stability and lead to a financial crisis.
The second point that you touched on is this is a massively
unlevel playing field. There are other financial institutions,
both in the crypto industry but also community banks, other
well-regulated financial institutions, that have to follow the
law and follow the rules and do not get special dispensations.
They do not get regulatory forbearance, and they are not well
connected enough to have the heads of these agencies on speed
dial.
So, the large well-connected companies get treated one way,
and the smaller institutions get treated a different way, and I
think all of those are highly problematic.
Ms. Waters. Thank you very much.
Do you think this is an issue that Members of Congress on
both sides of the aisle should be focused on? This is so
unusual to see this kind of thing. What do you think?
Mr. Steel. Yes, absolutely. As I said in my testimony, a
number of things deserve greater focus than some of the
issues--the bills here today, and this is one of them.
I think, in past eras, I think there would have been a
bipartisan outcry. I am not sure why there is none now.
Ms. Waters. Thank you so very much.
Mr. Steel. Thank you.
Ms. Waters. I yield back.
Chairman Barr. The gentleman from Michigan, Mr. Huizenga,
is now recognized.
Mr. Huizenga. Thank you, Mr. Chairman.
Mrs. Tahyar, your firm was just singled out by the Ranking
Member. Do you care to address that at all before we get on
with some questions?
Mrs. Tahyar. Thank you very much, Congressman. I am sorry,
but I am not permitted ethically to comment on a current
client; so, I would prefer to stay in silence----
Mr. Huizenga. Okay.
Mrs. Tahyar [continuing]. on that issue, but I thank you.
Mr. Huizenga. That is fine. Unfortunately, that is a tool
that is often used by folks up here. You are contractually
bound to not be able to say anything, but they can say whatever
they want up here and try to smear people.
I do want to try to set something straight here. Last
Congress, I was the Chair of the Oversight and Investigation
Subcommittee. I spent a lot of time looking into the bank
failures of 2020-2023. At the time, there was a rush to
judgment; and apparently with Mr. Steele, there still is a
continuation of singling out 2155 as the culprit here, which we
know frankly is the furthest thing from the truth.
The claim that 2155 and tailoring weakened capital and
liquidity standards is false. We know that in the case of
Silicon Valley Bank, the Fed's--the Fed's--own report says, and
I quote, SVB's capital position was not the primary cause of
its failure, end quote.
The claim that supervisory tailoring weakened banking
oversight is also wrong. The Fed's own review found that
examiners identified issues, such as with interest rate risk
management, but failed to escalate or enforce timely corrective
action on that.
In fact, Barney Frank himself, someone that I would
probably struggle to agree that today is Tuesday with normally,
said, I quote, I can tell you personally that there is no
diminutive--diminution of regulation. In 2018, it did not say
no regulation or weak regulation. It said you would not
regulate a bank at $50 billion in assets the same you would not
regulate a bank at several trillion dollars. But they retain
strong power to regulate, close quote.
These are red herrings and some distractions, so let us
stay focused here, and I want to stay focused on that bank
supervision.
Mrs. Tahyar, in your testimony, you go into detail about
bank supervision, and I appreciate you saying--I wrote this
down--the art of supervision is absolutely correct.
It is interesting, running that Oversight Subcommittee, we
ran into a lot of really, really good people at the FDIC, and
we--and some of those people were very willing to help correct
and point out to us as a committee the problems that were going
on.
My friend, Mr. Barr, and I had released a report on the
toxic workplace at the FDIC, and I would--frankly, I would
contend that, if it was not for the Basel III Endgame, Marty
Gruenberg would have been canned long before his, quote/
unquote, resignation happened, so.
During our investigation, we often found a lot of
disconnect between the Board and examiners in the field, and
that is why I have introduced reforms such as the FDIC Board
Accountability Act.
This bill ensures two changes to the composition of the
board: one, a board member who has State bank supervisory
experience, which is what Chairman Hill was referring to
earlier, and two, secondly, a board member who has demonstrated
working in or supervising depository institutions with having
less than $10 billion in total assets.
Mrs. Tahyar, do you see that as being advantageous, and do
you care to comment on sort of the FDIC?
Mrs. Tahyar. I think those are both excellent ideas. I
think it is very helpful to have somebody with actual banking
experience at the top of the house of any of the agencies.
If I recall correctly, one of those bills would also remove
the CFPB from the Board of the FDIC, and I think that is wise
because that would create room for more--for somebody with
banking experience.
Mr. Huizenga. Okay. In my last minute here, Ms. Flowers,
you talked about management risks in your testimony, and I am
pretty sure it is clear that regulators and examiners did not
effectively use the metric when overseeing SVB and Signature
Banks--unless you disagree with that? No, you are affirming
that.
What would be a better way for examiners to ensure--to
ensure that this type of mismanagement is not missed or,
frankly, even worse, ignored in the future?
Ms. Flowers. I think that what would be really important,
as I mentioned in my testimony, is to refocus the exam
framework on material financial risks. That could include a
standard for what constitutes safety and soundness that is
moored in financial risk. I think with Silicon Valley Bank
(SVB), we saw that they did not lack examiners. They did not
lack examiners with energy and authority and tools but what
they did lack was that focus. So, refocusing them so that they
are not distracted by process-related governance and management
minutiae, I think it would have been better if those examiners
had been focused more on giving directives to management
specifically focused on things like interest rate risk and
liquidity risk rather than----
Chairman Barr. Time of the gentlelady has expired--time of
the gentleman has expired.
The gentlewoman from New York, Ms. Velazquez, is now
recognized.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Steele, once again, today's focus on community banks
centers on the right subject, but the actions taken by
President Trump, his co-President Elon Musk, and the
Republicans tells an entirely different story.
Trump's disastrous economic and tariff policy has thrown
our markets into turmoil and increased the risk of a recession
and you know what? The American people agree with that
assessment: Fifty-five percent of Americans disapprove of the
President's economic plan, and 66 percent are fearful of a
recession.
Moreover, President Trump and those efforts to dismantle
the CFPB guts a regulatory agency Americans largely support.
Is it not right, Mr. Steele, that seeking to shut down the
CFPB, trying to fire nearly 90 percent of its staff, and
significantly reducing its supervision and enforcement work
will continue to cost community banks to face an uneven playing
field against the G-SIB banks, and now with emergence of Big
Tech in our banking system as well?
Mr. Steele. Thank you, Congresswoman and yes. As I was
discussing with the Ranking Member, absolutely. I think a
problem here, number 1, is the unlevel playing field this
creates because, as I said, the CFPB focuses a lot on nonbanks
and the largest banks. With no CFPB to do examinations and
supervision, they cannot spot emerging issues there but the
smaller banks are going to get--potentially get more attention,
not less attention, because that is the only--they will get it
from their bank examiner, the banking agency, and not from the
CFPB. Huge problem.
The last election, as we have talked about already, was
about lowering costs for consumers. Taking the CFPB off the
beat, as I said, $20 billion back in the pockets of consumers
as a result of remediative enforcement actions over the CFPB's
lifetime; $15 billion in the rules alone; millions of consumer
complaints that will not get addressed.
This is hurting the consumer, not----
Ms. Velazquez. Can you explain how the tariffs will hurt
not only consumers, but also small businesses, the community
banks and credit unions that serve them?
Mr. Steele. Absolutely. The concerns over the tariffs are
you are raising the cost of financial products and services on
one hand by eliminating important protections. On the other
hand, the tariffs are going to raise the costs of consumer
goods on the other; so, the consumer is going to get squeezed
from both sides.
That obviously will make it harder for them to make ends
meet. I have concerns about the way that then flows through to
financial institutions as well as consumers having a harder
time paying their bills. They cannot pay their credit card bill
or their mortgage. What does that mean for small institutions?
That really worries me.
Ms. Velazquez. Thank you. The Republicans have also sought
to rescind the CFPB's rule on overdraft fees, which will have
reduced overdraft fees for big banks to five dollars. While
Republicans claim this was done in part to help community
banks, more than 97 percent of banks and nearly all credit
unions were exempted. Is that not true?
Mr. Steele. Absolutely.
Ms. Velazquez. The majority of banks were also exempted
from the CFPB 1071 rule. I just heard a witness making a
statement of as to how section 1071 will impact them negatively
but section 1071 rule only covers financial institutions that
have made 100 commercial loans in 2 consecutive years. Is that
not true?
Mr. Steele. It is.
Ms. Velazquez. When Mr. Chopra, Director Chopra, came
before our committee and made a statement and gave the
assurances to community banks that they heard them, that they
took their concerns into account and that most community banks
would be exempted from the rule. Is that not the truth?
Mr. Steele. It is.
Ms. Velazquez. Okay. Thank you. I yield back.
Chairman Barr. The gentleman from Texas, Mr. Williams, is
now recognized.
Mr. Williams of Texas. Thank you, Mr. Chair.
In recent years, Federal prudential regulators, like the
Federal Reserve, have taken their eyes off the ball and began
expanding their regulatory agenda to include things like
climate-related financial risk. This decision to implement
these practices come from alignment with global organizations
like The Network for Greening the Financial System, which is
headquartered in Paris, France. Under the Trump Administration,
the Federal Reserve has withdrawn from the NGFS, a decision
that I applaud. Under the Biden Administration, regulators
chose to play politics and assert climate in their agenda and
could possibly do so again in the future.
Congress needs to examine the Federal Reserve's role in
these international organizations to make sure that they are
putting the United States' interests above all else, which is
why I am introducing the Federal Reserve Financial
Accountability and Transparency Act, which would require the
Federal Reserve to report on their expenses and research
related to international organizations, like The Network for
Greening the Financial System, the Basel Committee on Banking
Supervision, the Bank for International Settlements.
It is important for Congress and the financial systems to
have transparency into our regulators' interactions with these
organizations and hold them accountable to the American people.
Ms. Flowers, could you elaborate on the lack of
transparency into the prudential regulators' engagements with
international organizations and how do these agreements put our
financial system at risk?
Ms. Flowers. Thank you for the question. I think it is
really important.
We have very little insight into our Federal banking
agencies' participation in committees like the Basel Committee
and other of the international bodies you mentioned. Basel
Committee, for example, does not release minutes. We do not
know what positions are taken by our agencies unless they
voluntarily disclose them. We do not get official reports on
U.S. views and whether they are advancing positions that are
promoting our unique domestic banking system and its structure
in those international bodies.
Our own efforts at BPI via Freedom of Information Act
(FOIA) requests to obtain materials about the Federal Reserve
and the Federal Reserve Bank of New York's deliberations at the
Basel Committee specifically concerning the Basel III Endgame
were summarily and categorically denied. Even though the
Federal Reserve identified hundreds of pages of documents,
their own documents related to those deliberations, they
claimed exemptions and refused to share them. In spite of the
fact that they identified this, they did not provide an
explanation of why sharing those documents with the public
would not increase transparency around that process.
Mr. Williams of Texas. Okay. Thank you.
I want to ask Mrs. Tahyar, could you also quickly touch on
how this lack of transparency puts our financial system at
risk?
Mrs. Tahyar. I think, when horse trading happens and deals
are made in an international forum, I think there is an
enormous amount of moral pressure on those who attend those
forum and are repeat players to come back and impose it here
exactly as had been agreed at the forum. We know, for example,
in earlier Basel accords, that community banks were exempted
out as a result of discussions that happened here.
Basel is very, very different from 1988. It is too complex.
It has become over-engineered, and that is just not something
that our banking sector needs.
Mr. Williams of Texas. When I speak with community leaders
back home in my home State of Texas, one concern has remained
constant over the past 4 years, and that is the crushing weight
of regulatory burdens and one-size-fits-all rules. Under the
Biden Administration, the regulatory agenda prioritized
partisan policies over sound, commonsense financial regulations
with little consideration for the needs of the smallest
institutions. From the 1071 small business loan data collection
rule to restrictions on overdraft services, community banks
have faced mandates that fail to reflect their size, business
model, or risk profile, disproportionately hurting them.
Community banks have struggled for too long under the immense
weight of compliance costs and burdens, and they are backbones
of the economy that help build around them.
Mr. Radcliffe, briefly, on you, how much time, on average,
does a community bank spend on regulatory compliance, and how
does compliance burdens--affected your ability to serve your
community?
Mr. Radcliffe. It is a significant line item on our budget.
I know I served for over a decade as the bank's compliance
officer, and since that time, we have gone from one person in
compliance to five people in compliance. Now it accounts for
about $632,000 a year.
Mr. Williams of Texas. More compliance officers hurt a guy
like me that needs to borrow money.
Mr. Radcliffe. I am sorry?
Mr. Williams of Texas. More compliance officers hurt a guy
like me that wants to borrow money and----
Mr. Radcliffe. Correct.
Mr. Williams of Texas. Briefly, in closing, Mrs. Tahyar, I
want to ask you, can you explain how abandoning regulatory
tailoring increases systematic risk and what changes should
Congress and regulators prioritize to establish a tailored
risk-based framework across the banking system?
Mrs. Tahyar. I am not sure that Congress needs to do
anything, sir, but I do think you need to exercise muscular
oversight on the regulatory agencies so that they implement the
law that you have already put in place.
Mr. Williams. Okay. Thank you.
Mr. Chairman, I yield my time back.
Chairman Barr. The gentleman yields.
The gentleman from California, Mr. Sherman, is now
recognized.
Mr. Sherman. Seems like the regulators are in a pincer
movement. On the one hand, they can adopt regulations that are
precise and exact, and then they get criticized because, well,
it is one size fits all, and they are too complex.
Or they can have regulations that have given them and then
judgments have to be made by individual examiners, and then we
are going to have a rigid appeals process by which we then
second-guess the judgments.
Either we need to have judgments made and sustained, or we
need to have regulations so precise that there are very few
judgment calls.
The majority have focused on Operation Choke Point, and I
very much agree with them. I took a lot of heat from strong
liberals who dreamed of a day when gun sellers and payday
lenders could not get bank accounts. Today, they can have
nightmares about whether Planned Parenthood or ActBlue will get
a bank account. The fact is everybody on both sides of the
political aisle should be able to get basic banking services,
except, as we deal with reputational risk, we should retain the
issues of reputational risk for Iran and for foreign terrorist
organizations.
When regulation is too tough, then loans are not made, and
economic activity suffers. When the regulations are too loose,
we see the bank failures of 2008, which the gentleman from
Illinois points out and no Republican was here to see, but we
got a taste of it, a little taste of it, in 2023. If the
regulations are misconfigured, then we get the economic
impairment of very high regulations and the prudential risks of
very low regulations.
I am concerned about the cuts to the FDIC, some 1200
employees they are planning to layoff. They have already had
500 take the buyout. They have canned 100 probationary
employees.
Mr. Steele, we just do not have any effective auditing of
banks. Could anything go wrong?
Mr. Steele. Thank you, Congressman. It is a great question.
Going back to Congressman Huizenga's points about some of
the issues that had been at the FDIC. The problem that the FDIC
had, particularly going into the spring of 2023, was not that
it had too much staff. It was that it did not have enough staff
in the banks examining them, catching some of the risks. They
had too much attrition. The workforce was too stale, as we saw;
so, they were not able to catch----
Mr. Sherman. I will point out, when you have one of these
chainsaw approaches to an agency, the good people go on
LinkedIn. They have had it and there are a lot of private
sector jobs for the best people at the FDIC.
I will point out that, if we are not going to have
effective auditing, then we just--one way to deal with that is
just to have ridiculously high standards. Then you do not have
to be that clear.
I have a question here about the--the G-SIBs will face a
surcharge that was put in place 10 years ago as a result of the
crisis. The amount of the surcharge is determined by a formula
that includes bank size, complexity, et cetera. The G-SIB
surcharge capital requirements as a percentage of assets have
increased significantly and the way that the Fed calculates the
G-SIB surcharge for U.S. banks is double what the EU does.
Ms. Flowers, how does the United States take a different
approach on G-SIB surcharge, and does that mean less lending
for American businesses?
Ms. Flowers. Sure.
I would say that the United States has a bespoke framework
that they refer to as Method 2, and they replace the
international standards factor for substitutability with a
bespoke factor on short-term wholesale funding. That factor was
originally meant to represent about 20 percent of the overall
score. It has ballooned to at least 40 percent for many banks.
Also, none of the indicators in the G-SIB score are
adjusted, again, as we are talking about tailoring in general,
for economic growth and inflation. Those things grow as the
economy grows.
The Fed promised, in 2015, in its final rule, to revisit
that periodically to make those types of adjustments but has
yet to do so.
Certainly, when the banks are holding more and more and
more capital just because the economy is expanding, that is
going to restrict lending.
Mr. Sherman. Finally, I say we need to mark to market a
held for--especially held for sale securities. I yield back.
Chairman Barr. The gentleman yields.
The gentleman from Georgia, the Vice Chair of the
subcommittee, Mr. Loudermilk, is now recognized.
Mr. Loudermilk. Thank you, Mr. Chair. I thank all of our
witnesses for being here today.
I am actually going to focus my questions around two bills
of mine that have been attached to this hearing, the first
being the Taking Account of Institutions with Low Operational
Risk Act, or TAILOR Act, and the second being Ensuring U.S.
Authority Over U.S. Bank Regulators Act.
Now, the TAILOR Act would require regulators to ensure each
regulation fits the specific profile of the affected
institutions. Ms. Flowers, I would like to start off with you.
As we are speaking about the TAILOR Act, is tailoring
regulation based on business models or operational models a
sound regulatory approach? Why or why not?
Ms. Flowers. Absolutely. Different types of business models
present different risk profiles, and you do not want to take,
for example, a regulation that is designed for a complexly
structured, internationally active bank and apply it to a
regional or community bank that has very different activities.
So absolutely, you reduce unnecessary compliance burden on the
smaller, less complex banks by tailoring the regulations to
their specific business profile.
Mr. Loudermilk. That has been my understanding, which is
why we are coming forward with this, because many of the
smaller banks have undue regulatory burdens that are quite
costly in compliance.
Is regulatory tailoring based on business models feasible
from a regulatory perspective?
Ms. Flowers. It is absolutely feasible. I think that it was
enshrined in 2155, and the banking agencies have made an
effort, including in the 2019 regulations, to set specific
categories for what should apply to banks of different sizes;
and I think what we have moved away from is the indexing of
those categories to inflation and economic growth.
What we have also moved away from--and we saw this with the
Basel III rulemaking--is making sure that we are applying the
actual substantive rules appropriately. With Basel III, under
the Biden Administration, we saw the same rule going to be
applied basically all the way down and that was inappropriate.
It should have been tailored according to the size and
complexity categories in its implementation, and that is what
we hope to see.
Mr. Loudermilk. I would also like to ask you about the
structure of my bill, which has a limited loopback period for
regulatory tailoring of 7 years from the bill's enactment. Do
you think it is important for regulators to look back further
than 7 years when tailoring to capture the whole of post-Dodd-
Frank rulemaking, or is 7 adequate?
Ms. Flowers. That is a good question. I think that it is
not clear to me, off the top of my head, what exactly would
fall within the 7-year window and what would be beyond that,
so--but I am happy to get back to you with more thoughts on
that. I am not sure exactly what is in the window, but it is
possible that there could be regulations outside of that window
that deserve additional attention.
Mr. Loudermilk. Okay. I sure appreciate that.
Mrs. Tahyar, going to focus on the other bill that is being
noticed here today, which is the Ensuring U.S. Authority Over
U.S. Bank Regulators Act. This bill would require regulators to
be more transparent with Congress when engaging with foreign
non-governmental organizations (NGOs). Also regarding
regulators engaging with foreign NGOs, if international
regulatory standards put American financial institutions at a
disadvantage against global competitors, should American
regulators advocate for changing those standards or just go
along with them?
Mrs. Tahyar. They should obviously be advocating for the
U.S. banking sector. In particular, our largest banks play a
major role in international finance and also in our national
security.
Mr. Loudermilk. Okay. Do you think it is important for
American regulators to seek congressional buy-in before
agreeing to any international regulatory standards?
Mrs. Tahyar. Yes, I do.
Mr. Loudermilk. Okay. Thank you for that.
Should Congress have a more direct role in formulating
international bank regulatory requirements like those we spoke
about already today in the Basel capital accords?
Mrs. Tahyar. That is a tricky one. Basel is so technical
and so detailed, I am not sure that Congress wants to do
anything more than give more specific directions, but a day-to-
day role might be difficult.
Mr. Loudermilk. Okay. I think regulators ought to do a
serious postmortem of the failed Basel III Endgame
implementation that was withdrawn about a year ago. In your
opinion, what could they have done better?
Mrs. Tahyar. They could have looked at the data first and
then come up with the rules. They could have avoided gold-
plating the EU standards, and they could have been more
transparent.
Mr. Loudermilk. Okay. Thank you.
With that, Mr. Chairman, I yield back.
Chairman Barr. The gentleman yields.
The gentleman from New York, Mr. Meeks, is recognized.
Mr. Meeks. Thank you, Mr. Chairman.
I am just finding it a little difficult to reconcile the
fact that today this committee is discussing reforms to improve
accountability in bank supervision and strengthen interagency
coordination. Yet, tomorrow, we will be marking up a
reconciliation bill that weakens regulatory agencies and
undermines regulatory certainty.
In the meantime, the President, who routinely threatens to
the independence of the Federal Reserve, abuses the
International Emergency Economic Powers Act to impose erratic
and potential illegal tariffs on U.S. consumers and pressures
banks to scale back hiring practices that have improved
investor returns. So, it seems to me that chaos is reining the
day and has no bounds. Unfortunately, my colleagues on the
other side of the aisle seem unwilling to see the bigger
picture. At least, they do not say so in public but here we
are, attempting to have a serious adult conversation while the
dumpster fire outside this room continues to rage on.
Let me just check with you first, Mr. Steele. The CFPB and
its mission, they enjoyed a broad support among American
consumers regardless of whether they come from red States or
blue States. Would you not say that?
Mr. Steele. Absolutely.
Mr. Meeks. The CFPB also has a strong record of returning
money to harmed consumers and preventing companies from taking
advantage of them. Do you know of any other agency that was put
in to do just that?
Mr. Steele. I cannot think of one.
Mr. Meeks. Could you then elaborate on how efforts to
eliminate the agency conflict with President Trump's campaign
to promise to lower costs to protect everyday Americans?
Mr. Steele. Absolutely. It completely undercuts the
promises that he made on the campaign trail. He is, on the one
hand, reducing consumer protections that are raising the costs
of overdraft fees, credit cards, and who knows what else that
the CFPB has taken off the beat. On the other hand, he is
actively raising consumer prices through the tariffs as well.
So, he is squeezing the consumer from both sides with his trade
policies and then with his consumer financial policies.
Mr. Meeks. I want to talk about--because it is clearly that
those policies have a direct impact on the community banks and
credit unions. Would not you agree with that?
Mr. Steele. I would.
Mr. Meeks. You know what? I found also that President
Trump's executive order regarding the CDFI Fund to be
particularly alarming. While the administration has attempted
to walk back the order, the intent, of course, seems clear. It
aligns with many other actions he has taken to roll back
progress we have made in making this country more equitable for
all, as well as CDFIs have played a crucial and critical role
in supporting the underserved community, both urban and rural.
Simply, MDIs, for example, represent only 2 percent of all U.S.
banks, yet they serve more than 30 percent of Black-owned
businesses.
The President cannot override laws passed by Congress. What
should we be prepared for, moving forward, regarding his
efforts to undermine CDFIs and MDIs more broadly and how can we
work together to empower these institutions rather than
undercut them?
Mr. Steele. Absolutely. I think the members of this
committee have to be vigilant about attempts to undermine the
CDFI Fund and the services it provides to CDFIs and MDIs. The
first Trump Administration proposed eliminating the CDFI Fund,
and so it was a bit shocking but not surprising to see that in
the executive order as an idea. But, as you say, Congressman,
CDFIs serve urban and rural communities in blue States and red
States. I have heard that a lot--I administered the CDFI Fund
when I was at the Treasury Department, and I heard a lot of
vociferous support from States, in the Gulf States, Louisiana,
Arkansas, and so forth, that realize CDFIs provide essential
services.
I would note this--for every dollar the Fund invests in
CDFIs, it can then leverage that for $8 in private sector
investments; so it is incredibly efficient. In 2020, you all
appropriated almost $12 billion to the Fund, which the Fund
then put out----
Mr. Meeks. I want to get in one more question.
Mr. Steele. Yes.
Mr. Meeks. Because I have been leading the charge in
Congress to end tariffs and have authored three different
resolutions terminating the ruination day of Canada, Mexico
with these fake emergencies that are supposedly authorizing
these massive tax increases on the American people. How do you
view the potential economic impact?
Mr. Fitzgerald [presiding]. The gentleman's time has
expired.
I will now recognize the gentleman from North Carolina, Mr.
Moore, for 5 minutes.
Mr. Moore. Thank you, Mr. Chairman.
To our witnesses here, for too long, banks and credit
unions, especially small community institutions, have struggled
under a one-size-fits-all regulatory framework. Regulations, I
would submit, should be tailored to the size, the complexity,
and the risk profile of each institution, not impressed
uniformly across the board.
Today, financial institutions, regardless of their size,
are forced to navigate complex and costly compliance burdens.
Under this system, small businesses and rural communities have
lost access to affordable capital and essential banking
services, which prompts a couple of questions, first for Ms.
Flowers.
What is at stake if we do not return to a tailored, risk-
based regulatory approach?
Ms. Flowers. What is at stake is economic growth. Banks are
fueling economic growth of our country. As I mentioned at the
outset, banks of all sizes play an important role in that. When
you have undue compliance burdens in particular that are
imposed through the supervisory process, even aside from
regulatory tailoring, when requirements are being pushed down
onto smaller banks that are inappropriate for them, you are
increasing the burden without an offsetting benefit.
I think it is important to free those institutions from
supervisory expectations that are unmoored from a legal or
materiality standard and are just based on reviews of what the
biggest, largest peer banks are doing and then pushing those
down onto smaller banks.
Mr. Moore. Supervision must be right size, not dictated by
arbitrary thresholds or rigid frameworks disconnected, I guess
you would say, from actual risk.
Mr. Radcliffe, would further tailoring of regulations for
community-based financial institutions help reverse the trend
of bank closure?
Mr. Radcliffe. I believe it would, and that is sincerely my
hope. That is why I support the TAILOR Act in particular.
Mr. Moore. Thank you.
During the previous administration, Biden regulators
injected political agendas into bank supervision, particularly
by pushing climate-related or digital-asset-related risk
requirements far beyond what safety and soundness concerns
demand. These actions have real-world consequences: less credit
for small businesses, fewer mortgage options for families, and
reduced innovation into the American economy.
Mr. Tahyar, could you speak to how the politicization of
reputational risk has created legal risk for the banks?
Mrs. Tahyar. I think it has created legal risk for those
banks that have either--that have permitted themselves to be
persuaded by the regulators that politically exposed persons or
other disfavored industries should be cutoff. I think it was
said here earlier before. There is a ``sauce for the goose/
sauce for the gander'' issue around these because we have
election cycles. So, today's favored industry could be
tomorrow's disfavored industry. My own view is we should take
political views out of banking.
Mr. Moore. Mrs. Tahyar, let me ask you this: Do you think
there is a credible objective way to measure reputational risk,
or is there--inherently just too subjective to remain part of
the supervisory framework?
Mrs. Tahyar. It is inherently too subjective. It is new.
Let us remember how new it is. It did not exist 20 years ago.
It does not add anything to existing risk. For example, Bank
Secrecy Act, anti-money-laundering, terrorist financing--they
are all already covered. I just think that experience has shown
that it cannot be objectively supervised or managed.
Mr. Moore. At the end of the day, we need a Federal
financial regulatory system that works for the American people,
one that is transparent, accountable, and proportionate.
Mr. Radcliffe, in your experience, what impact would
returning to an 18-month exam cycle for well-managed
institutions, as proposed in The TRUST Act, have on your
operations?
Mr. Radcliffe. It would allow us to devote more resources
to serving our clients versus serving our regulators because,
during exam time, we devote probably at least 10 to 20 staff
for at least 2 to 3 weeks dedicated time to exams.
Mr. Moore. This is a question. I put this one back to you
again, Mr. Radcliffe. If you had to estimate anecdotally what
you all--what, industrywide--what percentage of the cost of
operation are spent to address these new compliance
requirements? Do you have an idea, if you had to spitball that
right now, what that percentage might be?
Mr. Radcliffe. That is really tough to estimate. I know we
spend well over half a million a year now. The actual number is
probably higher than that. I probably underestimated it.
Probably three-quarters of a million.
Mr. Moore. That has significantly increased since the last
administration.
Mr. Radcliffe. Yes.
Mr. Fitzgerald. The gentleman's time has expired.
Mr. Moore. I yield. Thank you.
Mr. Fitzgerald. The gentleman yields back.
The gentleman from Georgia, Mr. Scott, is now recognized
for 5 minutes.
Mr. Scott. Thank you, Chairman.
Mr. Steele, there is now a ripple effect going through the
Georgia economy and due to President Trump's tariffs. Now, we
have to understand, tariffs are taxes. It is a tax. It is an
unfair tax, particularly on our community banks and on our
lower income communities and working families and small
businesses, driving up the costs of essential items like our
food and our--hitting consumers in my district and across this
Nation where it hurts the most: in their wallets.
Let me ask you this, Mr. Steele: Higher prices mean less
disposable income to cover typical expenses, leaving many
struggling families keeping up with their mortgages. Just how
are these tariffs, these taxes--let us call them what they
are--impacting the customer base that is served by community
banks and our credit unions? How so?
Mr. Steele. Thank you, Congressman. As you said, it is
driving up their costs. Households are getting hit by higher
costs when they go to the grocery store, when they want to buy
new goods or services. That means they have less ability to
take out a loan, to make certain kinds of purchases. Obviously,
they could also be impacted if there are layoffs at companies
that are affected by tariffs. That could lead to things like
delinquencies and/or defaults, some people's credit cards and
mortgages--all compounded by the fact we do not have the CFPB
anymore to help protect consumers when they get into financial
trouble. As I said, it sort of gets them from both sides.
Mr. Scott. How can this kind of instability prove
catastrophic for community lenders trying to offer stable
financing to local businesses and consumers?
Mr. Steele. On the commercial side, what I really worry
about is institutions that focus on manufacturers that are
going to get hit by this, by across-the-board tariffs, or the
trade war the President has started with Canada, for example,
if they are part of the supply chain.
I worry about firms that are focused on the agricultural
sector, which we know is going to get hit really hard by this,
as I am sure you know, Congressman. I am worried about a
general pullback in spending in the--spending and investment in
the commercial sector that is then going to, in turn, hurt
community financial institutions.
Mr. Scott. Let me ask you, why is it dangerous to offer
financial and market deregulation as the solution for the
instability that has come from President Trump's tariffs?
Mr. Steele. Well, because we know that better capitalized
and stronger institutions can better serve their communities
when there are economic downturns. If we weaken those rules, if
we weaken institutions at a time when we might be going into a
recession, that is only going to make things worse. It is only
going to perpetuate it.
The reason why I worry about community institutions in this
particular situation especially is large financial
institutions, they can go to their trading desk, and they can
offset lost revenue by going and making money in these volatile
markets. They will make it if it goes up, if it goes down.
I worry about the small institutions that cannot pull back
from their communities. I think of--I used to work over in the
Senate for a Member from Ohio. I think about a small bank in
Mercer County there that served the agriculture and
manufacturing base there. They are going to be in that
community. They are going to be exposed to it. They cannot go
to Wall Street and make profits by trading or something else.
Mr. Scott. What is going to happen if we do not straighten
this out? This is like a train wreck that is happening. We do
not know what is going to happen, the uncertainty of it. How
can you really run a country, an economy, with this kind of
financing, with such a questionable instrument as tariffs on
the world's most powerful economy?
Mr. Steele. Absolutely. As you said, I think this puts a
general cloud of uncertainty that hangs over everything. It
decreases spending----
Mr. Fitzgerald. The gentleman's time has expired.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Fitzgerald. The gentleman yields back.
I now recognize the gentleman from South Carolina, Mr.
Timmons, for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman.
I want to thank the witnesses for being here today.
Last Congress, I consistently opposed the Biden
Administration's proposed rule mandating additional long-term
debt for financial institutions. The previous administration's
one-size-fits-all approach to long-term debt requirements
resulted in a range of unintended consequences which could have
contributed to broader financial instability with potentially
significant ramifications for the American public.
Ms. Flowers, in a recent letter to Federal banking
regulators, Republicans on this committee called for the
withdrawal of the flawed long-term debt rule proposal. In our
letter, we highlighted the rule's lack of appropriate tailoring
and its problematic internal banking organization LTD issuance
and holding requirements. Do you agree that the long-term debt
proposal should be withdrawn?
Ms. Flowers. Yes and I think that proposal is a prime
example of reverse tailoring where a regulatory requirement
that was originally developed for Global Systemically Important
Banks was taken and applied in a more problematic way to
regional banks, including the piece that you mentioned with the
dual issuance requirement. There were many flaws with that
proposal, which we opposed. If we are going to return to
substantive tailoring where not only are we indexing category,
but we are applying the appropriate requirements to each
category, that would be a prime example of doing the opposite.
Mr. Timmons. Thank you for that.
This is the kind of ivory tower academic approach to
policymaking the last administration engaged in, and it lacked
any real-world common sense, and that is why we have a new
administration. That is why we are going in a different
direction. I am going to say I am grateful to President Trump
and the Treasury Secretary for halting any long-term debt
rulemakings that conflict with the regulatory tailoring
approach we are striving to advance.
However, I do remain concerned about the political pendulum
that causes regulatory policy to shift dramatically with each
new administration.
In your view, Ms. Flowers, what steps can Congress take to
ensure that the Biden Administration's long-term debt proposal
is permanently set aside regardless of future changes in who
controls the White House?
Ms. Flowers. As far as permanently setting aside
substantive policy, I agree that it is concerning. We want to
pursue durable reforms that enshrine the appropriate tailoring
of requirements. I think that there is already a law in the
books that is often overlooked when agencies are
inappropriately applying substantive rules to smaller banks
that were not intended. That is the Administrative Procedures
Act.
So, using as, I think, my colleague or my co-witness, Mrs.
Tahyar, suggested, the regulatory muscle or--sorry--the
congressional muscle around oversight of the agencies to making
sure that they comply with the laws that are already on the
books for their rulemakings would be a first step because then
they have to empirically support and do cost-benefit analysis
that is required.
Mr. Timmons. Sure. Thank you for that.
One way I have been thinking about regulatory tailoring is
through a more risk-based approach, focusing oversight on
institutions that present clear concerns rather than burdening
those that are well-managed and well-capitalized. As Chairman
Hill mentioned earlier in the hearing, it is similar to how
health and safety inspections prioritize restaurants with prior
violations or higher risk operations, like those serving raw
seafood. That same principle is reflected in one of the bills
noticed for today's hearing, the SMART Act, which offers
targeted regulatory relief to smaller, well-run financial
institutions.
Mrs. Tahyar, am I correct that, under current regulations,
banks that are well-managed and/or well-capitalized are already
eligible for extended exam cycles? I guess, in other words, the
concept of tailoring for good actors is already part of our
regulatory framework.
Mrs. Tahyar. It is, but it is not--there is not very much
of it, and there ought to be more.
Mr. Timmons. What additional forms of regulatory relief
should we consider for these institutions beyond what is
proposed in the SMART Act?
Mrs. Tahyar. I think that they should have--they should
have expedited processing of applications, particularly what I
will call normal way of business as usual applications, like
branches. They should have expedited applications for
acquisitions. They should not be subject to frivolous letters
that then take it up to Washington. Things should stay
delegated and I think they should genuinely be encouraged in
such a way so that they do not have to have these enormous
compliance and risk-management staffs, particularly if they are
a simple business model.
Mr. Timmons. Sounds like a good plan.
I want to finish with something that is near and dear to my
heart, Mr. Rose's Homebuyers Privacy Protection Act. I am
currently going through the process of purchasing a home, and I
have had to have my credit run twice. Each time I had my credit
run, I received at least 200 to 300 phone calls within 36 to 48
hours. It is absolutely insane. I have gotten text messages. My
phone already has an inordinate number of phone calls because I
give it out to 800,000 constituents, but to then get hundreds
and hundreds of phone calls within 24 to 48 hours after they
run my credit is just unacceptable, and we need to be able to
opt in if people want additional opportunities for----
Mr. Fitzgerald. The gentleman's----
Mr. Timmons. Thank you. I yield back.
Mr. Fitzgerald [continuing]. The gentleman's time has
expired.
I now recognize the gentleman from Texas, Mr. Green, for 5
minutes.
Mr. Green. Thank you, Mr. Chairman.
Mr. Chairman, the great Victor Hugo reminds us that there
is nothing so strong as an idea whose time has come; but I
would say that there is nothing so wrong as a bad idea whose
time has come. For now, some 100 days, we have had to suffer
bad ideas: 100 days in, and the President, with the aid and
comfort of my colleagues across the aisle, have decapitated the
CFPB. It would be more appropriate to call it now the FPB,
Financial Protection Bureau. The financial community will
receive greater protection than the consumers.
I have evidence of this. We find that, on yesterday, The
American Banker published this story. It is styled ``Wells
Fargo exits another consent order. Is asset cap next?''
It goes on to indicate that Wells Fargo took its latest
step out of regulatory purgatory on Monday when the bank said
that a 2018 consent order with the Consumer Financial
Protection Bureau had been terminated. Wells Fargo had agreed
to a 100--pardon me--a $1 billion penalty. That seems to be in
question. There are other banks as well.
One hundred days in, and you did not stop there. You
replaced independent regulators with dependent deregulators.
There is an effort afoot to remove Chair Powell. The only thing
that stands in the way appears to be the stock market.
You did not stop there. You have, within 100 days, made an
effort to turn our democracy into a plutocracy with executive
orders, ruled by executive orders, with DOGE, a department that
is not a department because a President cannot create
departments, with DOGE and a man with a chainsaw cutting into
various agencies that benefit people greatly by removing
personnel that cause the agencies to function efficaciously.
Within 100 days, we have experienced all of these executive
orders that are adverse to the best interests of consumers and
the American people.
Mr. Steele, you mentioned something about the separation of
powers. I am intrigued by what you said because, quite
candidly, I do not think rule by executive orders is what the
Framers of the Constitution intended. Would you elaborate for
just a moment on your commentary, please?
Mr. Steele. Thank you, Congressman. I would be happy too.
Yes. I mean, the way the President is governing out of the
White House, Office of Management and Budget, also the DOGE, as
you mentioned, is trying to override the law by executive fiat
essentially and it is bad for the public. Trying to shut down
the CFPB illegally is bad for consumers but it is also bad for
Congress. You all wrote these laws. You enacted them. You
passed them and this administration is trying to ignore a lot
of these, either through executive orders, saying, ``Ignore the
Equal Credit Opportunity Act,''
``IEEPA says whatever I say it means.'' He is really trying
to seize the power of this body back for himself and say the
law is whatever he says it is.
Mr. Greene. Thank you.
I will be bringing Articles of Impeachment soon because the
President is devolving our democracy into a de facto
dictatorship wherein he would be the de facto dictator. We have
to take a stand. People need to know where you were when
democracy was at risk, when the country that we know was
literally being transformed into a country that we do not want
to know.
I yield back the balance of my time.
Mr. Fitzgerald. The gentleman yields back.
We now recognize the gentleman from Tennessee, Mr. Rose,
for 5 minutes.
Mr. Rose. Thank you.
I want to thank Chairman Barr and Ranking Member Foster for
holding this important hearing and thank you to our witnesses
for taking time from your schedule to be with us today.
Chairman Barr--I just want to start off--I know he is not
in the room--by thanking him for attaching H.R. 2808, the
Homebuyers Privacy Protection Act, to this hearing.
I also want to take this opportunity to publicly thank
Democrat colleague--my Democratic colleague, Congressman
Ritchie Torres, who has been a steadfast advocate for this
important legislation.
The Homebuyers Privacy Protection Act aims to reform the
practice of credit reporting agencies selling the contact
information for mortgage applicants without the consumers'
knowledge or approval. Information that a consumer has recently
applied for a mortgage is often called a trigger lead within
the industry. I have heard numerous horror stories--not
different, really, than my friend,
Mr. Timmons, just recounted--of individuals--of countless
individuals who have received hundreds of calls and text
messages, just as Congressman Timmons described, at all hours
of the day or night as the result of their information being
sold without their approval simply because they applied for a
mortgage, seeking to become a homeowner.
Even members of this committee, as we know, have told me
about their own experiences with this predatory practice. The
Homebuyers Privacy Protection Act would put a stop to these
unwanted calls and text messages and other contacts except in
limited circumstances. The bill had over 90 bipartisan
cosponsors in the House last Congress and passed the U.S.
Senate by unanimous consent. Think about that. Tells me that
there are 100 guys across the--men and women across the way
here who get it.
Mr. Chairman, I ask unanimous consent to enter into the
record an April 17th letter to the Chairs and Ranking Members
of the House Financial Services Committee and the Senate
Committee on Banking, Housing, and Urban Affairs, signed by 17
different organizations in support of the Homebuyers Privacy
Protection Act.
Mr. Fitzgerald. Without objection.
[The information referred to can be found in the appendix.]
Mr. Rose. I think it is important to note that I have
worked closely with our bipartisan Senate partners to carefully
craft the text of this legislation. I also want to highlight
that my office also worked closely with the Financial Services
Committee staff in this Congress on this text prior to its
reintroduction.
It is time for this vital, important piece of legislation
to come to the House floor. Looking at the future of this
legislation is essential that we--that the text of this bill is
not altered in a way that prioritizes the profits of credit
reporting agencies over consumers who simply do not want to be
bombarded with phone calls and text messages. I look forward to
working with my colleagues on the committee and in the House to
ensure this bill's passage--swift passage by the full House.
Staying on the topic of mortgage trigger leads, I am
pleased that Michael Radcliffe is testifying today as I believe
that you will be able to share some valuable insight into the
need for trigger lead reform. Mr. Radcliffe, can you discuss
why mortgage trigger leads can be so detrimental to both
consumers and to their mortgage lenders?
Mr. Radcliffe. Yes. It is very topical because, just last
week, my next-door neighbor sent me the screenshot of a text he
had received. It appeared to be from our bank. It said, ``Click
here to see more information about your mortgage with CFSB.''
He thought it was a scam and a phishing attempt, but it was a
trigger lead.
My wife and I just purchased a home, and we received a
mailbox full of theses mailers and on that, it used our bank's
name. The name of the company did not appear. So, it is
deceptive.
Mr. Rose. It absolutely is and I will give props to
Congressman Timmons here. He is a Member of Congress and a
lawyer and a very smart young man. When you see someone like
that having to struggle to read through all of these messages,
you describe that you are a very knowledgeable financial
services industry professional. I will tell you, from my own
experience with these things, no matter how savvy you are, it
can be difficult to wade through these things. It is happening,
for most people, at one of the highest stress points in their
lives. Most people maybe buy a home once or twice in their
life.
Then, to be inundated with all these offers, I think it is
really oppressive, and I think the American people deserve some
relief here. I see that my time is expiring. Thank you, Mr.
Radcliffe, and I yield back.
Mr. Fitzgerald. The gentleman yields back.
We now recognize the gentlewoman from Ohio, Mrs. Beatty,
for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman and Ranking Member.
Timing is everything, and so, as a follow up to my
colleague, Mr. Rosen, I am one of those individuals who signed
onto this bill. Let me just say I want to make a quick note
about the Homebuyers Privacy Protection Act.
This bill, as you have heard, is about putting consumers
back in control of their personal information. Right now, when
someone applies for a mortgage, their data can be sold without
their knowledge, leading to, certainly, unwanted calls and much
confusion.
This bipartisan bill ends that abusive practice while
preserving legitimate offers of credit and ensures homebuyers
can focus on achieving the dream of home ownership without
confusion and affecting their privacy. I am proud to be a
cosponsor.
Thank you, Mr. Rosen, for talking about this bill.
Let me now go to you, Mr. Radcliffe, speaking about another
bill, my bill, Expanding Opportunities for MDI Act, which
previously passed the House by a unanimous voice vote, would
codify the Treasury Department's Mentor-Protege Program to
encourage partnerships between large banks and community
financial institutions, including MDI--glad I am seeing people
shake their heads. They are aware of this.
I am proud to have an MDI in my district, the Adelphi Bank,
which would benefit from this bill by--codifying this program
would also help community financial institutions across the
country because their increased capacity, improved their
relationship, lending business model, and even become financial
agents to Treasury.
Can you discuss how community banks like yours would
benefit from my bill and help small financial institutions
better serve their constituents in their community?
Mr. Radcliffe. I regret I cannot actually speak to your
bill in specific, as to how our bank would benefit from it, and
we are not a minority depository institution. I would be happy
to circle back offline after I review it.
Mrs. Beatty. Okay. Thank you.
Let me go to you, Mr. Steele. Many of my colleagues on this
committee and on both sides of the aisle have long been strong
advocates of the CDFI Fund, which, as you probably are aware,
President Trump directed to be reduced or eliminated in his
March executive order. CDFIs, as you all know, are vital
institutions at the frontlines of providing financial services
to communities that need it the most, operating in all 50
States and in every congressional district that we have. CDFIs
also deliver financial services and products to rural
communities, veteran populations, military base communities,
minority groups, low-income groups, underserved areas. You get
where I am going with this.
While we are here today to discuss the importance of
community banking and the need to end regulatory overreach, can
you discuss how this disastrous executive order of directing
the elimination of CDFIs would hit the smallest financial
institutions the hardest?
Mr. Steele. Absolutely, Congressman. I would be happy too.
The order itself displayed a shocking ignorance about the
CDFI Fund itself and the CDFI industry, the idea that there is
some profligacy here, and they are doing a lot of nonessential
things. The Fund is focused on serving the certified CDFIs and
MDIs.
CDFI certification is valuable on one hand because it
assures these institutions are really genuinely serving low-and
moderate-income communities and that they are mission driven.
It means they get access to the financial assistance program.
So, they are getting government capital that then can--the
third piece is--be leveraged because CDFI certification and
government investment is a good housekeeping seal of approval
for private capital that these are strong mission driven
lenders; they are doing good work in their communities and
offering responsible financial products and services. So, it is
a way of crowding in this private capital and really reaching
the hardest to reach communities.
It is an incredibly efficient and impactful program, and it
was, again, shocking and disappointing to see them try to go
after it.
Mrs. Beatty. Thank you.
I have a few seconds left. Let me go back to my first
question for everybody, and it can be a yes or no. While, Mr.
Radcliffe, you said you would get on offline, would you all
agree that there is a benefit, like many of our other banks
across the country have done, by having a Mentor-Protege
Program? Would you be open to doing that in your institution?
We can go right down the line. Yes, or no?
Ms. Flowers. I cannot speak on behalf of our member
institutions, but it sounds like a very thoughtful idea for----
Mrs. Beatty. Okay, that is almost yes. Okay.
Mr. Radcliffe. On behalf of our institution, yes. We would
be very----
Mrs. Beatty. Okay.
Mrs. Tahyar. I am at a law firm; so, I am not sure I
understand----
Mrs. Beatty. I get it.
Mrs. Tahyar. It is probably not for me.
Mrs. Beatty. Okay.
Mr. Steele. I would just say really quick, when I was at
Treasury, we were very focused on this particular issue, both
getting----
Mr. Fitzgerald. The gentleman----
Mr. Steele [continuing]. deposits but also----
Mrs. Beatty. I think he is going to tell me my time is up
but----
Mr. Steele [continuing]. and the mentoring program as well.
Mrs. Beatty. Thank you.
Mr. Fitzgerald. The gentlewoman's time has expired. She
yields back.
The gentlewoman from California, Mrs. Kim, is now
recognized for 5 minutes.
Mrs. Kim. Thank you, Representative Fitzgerald, for
yielding.
I want to thank Chairman Barr and Ranking Member Foster for
holding today's hearing.
Thank you, our witnesses, for joining us today.
For the past few years, I have heard firsthand how abusive
mortgage trigger leads can create a painful process for a
prospective homebuyer. I completely agree that we must take
steps to address this issue and provide relief to our
homebuyers.
I am concerned, though, that the Homebuyers Privacy
Protection Act, which is noticed in today's hearing, goes too
far and, as a result, would hurt market competition and
consumer choice. I hope that my friend and colleague from
Tennessee can work with me to craft a revised bill that
strengthens consumer choice, preserves market competition, and
still secures homebuyer privacy.
Let me shift gears now. In Orange County, there has only
been one bank formed since 2021 and in southern California,
only four new banks were formed since 2021. Across California
and the country, we are facing a banking crisis because of
overburdensome regulations.
Today's hearing is the first of many that would result in
legislation that provides banks with regulatory relief and will
jumpstart bank formation.
Fewer banks in our communities results in less competition,
reduced capital formation, and decreased access to banking.
Mr. Radcliffe, let me ask you a question: When a community
loses its banks, what are the wraparound services that are also
lost for that community?
Mr. Radcliffe. When a small rural community loses a bank,
they often are left with only payday lenders or online lenders.
They lose the ability to get a relationship with a lender that
knows their business, who can tailor the lending to their
needs, and they are left with cookie-cutter options.
Mrs. Kim. Yes. Obviously, we are here to provide more
access to banking and make sure that we are taking care of our
community needs. I wholeheartedly agree that these are services
that we cannot afford to lose.
I want to focus now on something Chairman Hill touched on
earlier about a functional appeals process. Let me ask you,
Mrs. Tahyar, can you speak to the lack of data showing that
banks utilize the appeals process and what that low usage may
mean?
Mrs. Tahyar. There are multiple reasons, but I think there
is a fear of retaliation by the examination team. Not all
examination teams retaliate; let me be clear about that, there
is a fear.
There is also a fear that the appeals process might be
stopped because of the threat of an enforcement order, and
there is also just a sense that the process itself is not
independent and is not fair.
I do not think that banks should be appealing every exam
finding. I think appeals should be rare, but they should be
fair.
Mrs. Kim. Thank you. I also want to make sure that we do
not forget about the Basel III Endgame proposal and the
damaging impacts that it would have for consumers and banking
services.
As written, the Basel III proposal would inhibit U.S.
investment by foreign banks. As a result, there would be a
reduction in the products and services that are offered to our
local communities.
The question to you, Ms. Flowers, is, as agencies begin to
look at the Basel III capital framework, would you agree that
they should pay attention to the unique aspects of foreign
banks as they finalize the framework?
Ms. Flowers. Absolutely. They should be looking at the
unique aspects of every category of banks and the unique risk
profiles but also the structures that they use to provide
financial services. There were certainly aspects of the Basel
III proposal that would have unfairly impacted foreign banking
organizations that are providing services in the way that the
operational risk charges were applied to them. That is
something they should definitely reconsider.
Mrs. Kim. Thank you very much. That is all I have for
today, and I want to yield back the balance of my time.
Mr. Fitzgerald. The gentlewoman yields back.
I now recognize the gentleman from California, Mr. Vargas,
for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman. I appreciate
the opportunity, and, again, I want to thank the witnesses
here.
For my colleague, I would say that I think--not I think--I
know that the International Monetary Fund (IMF) and the U.S.
Bureau of Analysis just stated that California now has become
the fourth largest economy in the world, surpassing Japan.
Everybody likes to beat up California, but we are doing all
right.
I have to tell you this. I do have H.R. 2808 in front of
me. It has been spoken of a couple times here. It is sponsored
primarily by Mr. Rose, and I think it is a good bill.
I read the bill. I know the bill, but I ask the question--
Mr. Steele, I ask you--who would enforce it if it was put into
law?
Mr. Steele. If we have no CFPB, I do not see many
enforcement mechanisms for it, so.
Mr. Vargas. Yes, it is kind of interesting. It is a good
bill, but who the hell is going to enforce it? There is nobody
at the CFPB. You have a good bill here. Most people say it is
good. Someone wants to tweak it; that is fine but who the hell
is going to enforce it?
That is the situation. When--Ronald Reagan very famously
said during the second debate in 1980 against Jimmy Carter, he
goes, ``There they go again,'' and there they go again.
Once again, deregulation, we see what happens every time.
Financial institutions take it too far. Once again, they get
reckless. Once again, there is a calamity. Once again,
taxpayers have to bail out the banks.
That is why we passed all these laws. Now, I was not here
when they passed the laws, but they have worked well. It is
interesting; I did not realize that no Republican on this
committee was here at the time. That really is a shocking, one,
but they do have somewhat of amnesia, because I think, here we
go again.
It is just the same thing with the deficit and the debt. If
they pass the bill that they want, their big bill, once again,
the deficit is going to go up, and the debt is going to
increase, and they are going to be shocked--shocked that it
happened.
This is shocking that they are shocked. Of course, they are
not shocked. They know exactly what is going to happen.
The CFPB, Mr. Steele, once again, the return on investment,
over 21, could you comment again on that?
We have commented, but I think it is so important to nail
this point because I think it is such a ridiculous cut that
they are making. This is the one group that really has returned
a lot of money to the public.
Could you comment on that?
Mr. Steele. Absolutely. Over the lifespan so far, at least
according to the CFPB itself, it has returned $20 billion to
consumers. We know that. Massive savings there.
We also know that it deals with consumer complaints. When a
consumer feels like they have been cheated, they file a
complaint at the Bureau. The Bureau turns back to the
institution and says, ``What are you going to do to fix this;
what is the story here?''
They have saved consumers money that way.
We do not really know how much they prevented from
happening that could have been bad, that could put money back
into consumers' pockets, but I did mention those two rules that
would have collectively saved consumers $15 billion a year.
It cost taxpayers--it is coming from the Federal Reserve
system, but it costs $800 million a year; so, a massive return
on investment in proportion to the resources that it needs.
Mr. Vargas. I have to tell you; I think it is exactly when
we need it to be the strongest. I said, there they go again,
and history is going to repeat itself, but one thing that is
unprecedented here, in my opinion, and that is the conflict of
interest that we see today.
It was spoken of a little bit today with the meme coin and
some of the crypto interests that the President and his family
have. This has never been seen before, especially on the scale,
in American Government. It is just shocking.
I guess, since everyone expects it out of this
administration, to me, it is still shocking. It shocks the
conscience that we have this. Who is going to be the cop on the
beat here, Mr. Steele?
Mr. Steele. It is a great question. As I said earlier, I
cannot think of a regulatory agency that is going to want to go
after crypto or stablecoins if the President and his family are
doing it. They are going to be fired. You can bet on that.
I think it is even broader than that. That is the problem
with having Elon Musk come into the government and all his
business interests as well.
Mr. Vargas. Yes.
Mr. Steele. Their agencies could be fired or shuttered.
Mr. Vargas. The conflict of interest----
Mr. Steele. We have laws against this.
Mr. Vargas [continuing]. The conflict of interest is just
incredible. The opportunity for graft is unbelievable. Now, I
hope that does not happen, but I do not see we are going to
police it. With that, again, I am shocked, but I do yield back.
Thank you.
Mr. Fitzgerald. The gentleman yields back.
The Chair now recognizes himself for 5 minutes for
questioning.
CAMELS is the supervisory framework to standardize how
financial institutions, like banks and credit unions, are
assessed by regulators for their safety, soundness, and overall
health.
However, bank examiners place kind of a disproportionate
weight on the, quote/unquote, management component when
determining a bank's CAMELS rating, even though the rating
often reflects subjective impressions rather than a concrete
financial indicator.
Ms. Flowers, how does this overreliance on a subjective
assessment of management lead to misaligned supervisory
actions?
Ms. Flowers. Thank you for that question. I think it is
really important. If you are overly focusing your exam
framework on the minutia of governance and management issues,
which can really run the gamut from IT, vendor management, and
a lot of sort of immaterial risks that are very unlikely to
impact the safety and soundness of a financial institution,
then you are focusing supervisory attention away from the true
risks that they should be focused on, like credit risk,
liquidity risk, interest rate risk, those types of things.
By focusing a lot of attention on the most subjective and
uniquely subjective aspect and component of the CAMELS
framework, you redirect supervisory attention away from
material financial risk.
Mr. Fitzgerald. If you would shift toward a more objective,
kind of transparent criteria, could that improve both the
accuracy of the ratings, and I guess the overall safety of the
banking system?
Ms. Flowers. It would certainly improve the accuracy of the
ratings. The CAMELS framework should be a framework that
assesses the financial condition and integrity of an
institution.
Focusing it away on subjective measures of risk, including
the minutia that allow examiners to engage, at best, in sort of
a management consulting practice and, at worst, in politicizing
risks, takes away from their focus on core issues of safety and
soundness.
Mr. Fitzgerald. In your testimony, you described how the
management component has been used in practice to kind of
measure the level of reputational risk in a bank's lines of
businesses.
Can you describe how this reputational risk has been used
by Federal regulators to debank entire industries really--
sectors, industries--and how the current CAMELS framework and
the management component could be changed--or how could it be
changed to address this?
Ms. Flowers. Reputational risk is sort of a derivative or
ancillary to other risks that supervisors are better equipped
and have tools to address. Reputational risk is very hard to
anticipate. It is very hard to address. As you said, it can be
used inappropriately in political ways because it is unmoored
from any kind of standard in legality.
It can be used to ding a bank for practices that are, in
fact, legal. We have seen this, as folks have been discussing
today, targeting certain industries depending on the political
milieu.
If we take away the ability to focus on risks that are not
tied to financial safety and soundness and refocus our
supervisors on material financial risks, then, inevitably, we
move away from an amorphous concept that is really just
derivative of the risks that are truly important.
Mr. Fitzgerald. Thank you. Over the past decade, we have
seen a steady decline in the number of small banks operating in
the United States. We have talked about this on the committee
many times. A lot of it is the complex and burdensome
regulatory environment from Dodd-Frank, to actions by Biden-era
regulations.
Mr. Radcliffe, can I just ask you really quickly, could you
discuss the consequences that having fewer banks for
communities across this country has had an impact and will have
an impact, I think, on communities?
Mr. Radcliffe. Certainly. In our State alone, we have
dropped below a hundred charters now, for State banks, and we
will end up with some communities that do not have a bank at
all, which is going to limit consumer choice.
I think we will continue to see consolidation due to the
regulatory burden and the barriers to entry.
Mr. Fitzgerald. What we have seen is, when there is a
single financial institution in a community, oftentimes, if
that moves on, closes, it has a direct impact obviously on
commerce and the way small businesses function and operate in
that community. Is that right?
Mr. Radcliffe. Yes. They have to go to other towns to get
banking services, so--and you will end up with a banking
desert, so.
Mr. Fitzgerald. Very good. Thank you so much. I yield back
and now recognize the gentleman from Illinois, Mr. Casten, for
5 minutes.
Mr. Casten. Thank you, Mr. Chair.
Mr. Radcliffe, this is sort of a random question for you
just in your capacity as a CEO. Scale of zero to 10, how
confident are you about the state of the economy a year from
now, with 10 being the best?
Mr. Radcliffe. I am not an economist by any stretch of the
imagination.
Mr. Casten. Oh, I am just saying as a CEO, I am curious.
Would you----
Mr. Radcliffe. But I can speak about our local economy, and
our local economy is doing quite well.
Mr. Casten. Okay. I asked the question because I think all
of you deserve an apology. The topic today is not in the top 50
of the issues that are really stressing the economy right now,
but you have been called in here today because my colleagues
across the aisle can either choose to praise the naked
emperor's clothing or talk about something else, and we got
``something else'' today.
I ask the question to you because Apollo Capital Management
just released a report today saying that CEO confidence has
dropped to 5 on a scale to zero to 10. It was 7 just a hundred
days ago. It is the steepest drop I can see in the numbers.
Goldman Sachs, while we were sitting here, just released a
report saying that the United States will have the highest
inflation rate and the lowest economic growth of any developed
country in the world in 2025.
I would remind you that we had a booming economy that was
the envy of the world--check out the cover The Economist--just
before Donald Trump was elected, of where we were sitting at
that point.
While we were sitting here today, the consumer confidence
report came out. We are down 22 points in consumer confidence
in the last 3 months. Mark Zandi has pointed out that every
time we have fallen by 20 points in 2 months, a recession is
guaranteed.
Those are all the things we could be talking about on the
Financial Services Committee if we gave a damn about the state
of the economy and regulation, but apparently we are not going
to do that.
The heck of it is, we have all been back in our districts,
and we have all been hearing the same stories. I met with a
housing group when I was home who said that they are finding it
harder to finance projects because their investors, many of
whom are international, are saying that they want a 10 percent
additional equity in U.S. investments because of the regulatory
risk in the U.S. economy, that they will not take that much
debt.
I subsequently met with one of the G-SIBs--not Goldman
Sachs, but this is two G-SIBs now--and asked them if they are
seeing the same thing across their portfolio, and they said,
yes, there is a broad increase in concerns in the international
community about being exposed to regulatory risk and went on to
express significant concerns that we are sitting in economy
where people are running away from equities and are running
away from treasuries. That is not supposed to happen.
It is happening because the rest of the world is saying,
``Thanks to Donald Trump, I do not want exposure to the U.S.
economy.''
Ms. Flowers, I do not want to name the other company I met
with because I do not know if they want to be--but two G-SIBs--
a lot of these--these are all members of yours. Can you speak
to what BPI members are saying about the state of the economy
right now and whether you are seeing that broader regulatory
risk as they think about investing in the United States
economy?
Ms. Flowers. I also am not an economist, and I think that
trade policy and international finance are sort of outside of
the remit of our focus. We are focused on the substance of
prudential bank regulatory policy, so----
Mr. Casten. I am not asking to be controversial. I am not
an economist either. When people are running out of equities
and running out of treasuries, is that not a massive, five-
alarm bell that there is a problem in the U.S. economy?
Ms. Flowers. Again, I cannot speak on behalf of my members.
It sounds like you have talked to some of them.
Mr. Casten. Okay. Mr. Steele, you had mentioned in your
opening remarks--and all of these stresses are driven by the
tariffs. This is entirely--it is not a self-inflicted wound. It
is a Trump-inflicted wound--you had mentioned in your testimony
that IEEPA may be illegal. Can you expand on that a little bit?
Mr. Steele. Sure. What I meant was IEEPA does not
explicitly say in the statute the President can impose tariffs
under that particular law. It mentions some tools. It is not
clear tariffs are one of them. That is number one.
Number two, it is supposed to be used in an emergency. That
is when it is supposed to be invoked. It is not clear that a
persistent trade deficit, if it was not an emergency 2 or 3
years ago, why is it suddenly an emergency now?
Mr. Casten. Okay.
Mr. Steele. Just on its face, it seems like a
misapplication of the law and not for its intended purpose,
which was international sanctions in kind of armed conflict.
Mr. Casten. I am sorry to cut you off, but I got 30
seconds.
Mr. Steele. Yes.
Mr. Casten. I have a last, really easy question. How long
does it take for the Earth to rotate on its axis?
Mr. Steele. A year.
Mr. Casten. Not around the sun. Rotate on its axis.
Mr. Steele. I do not know.
Mr. Casten. A year around the sun--how long before when the
sun sets and then the sun comes----
Mr. Steele. A day, there you go, Okay.
Mr. Casten. 24 hours?
Mr. Steele. Yes, 24 hours, Okay.
Mr. Casten. Anybody--any disagreement? Because the House,
the Republicans recently passed a rule that said a day is no
longer 24 hours so that we cannot actually declare this an
emergency. This is not a serious body. It is refusing to
address these problems and changing the definition of a day so
that we cannot even do oversight.
I yield back.
Mr. Norman [presiding]. The gentleman yields back.
The Chair now recognizes myself for 5 minutes for opening
questions. I find it interesting; we are getting criticism on
Donald Trump's tariffs. I guess running deficits from here on
out is the right answer that the Democrats have.
Mr. Steele, I heard your comments on CFPB. That group is
one of the most rogue groups I have ever heard of, dealt with,
banks complained about them continuously, to be able to be
funded and present the Federal budget deficit by just creating
a number is not right. Hopefully we are going to be dealing
with them.
How does one-size-fit-all regulatory system affect banking
services, particularly in the rural areas, that many areas are
underserved right now, but banks cannot go there because of
different things?
Ms. Flowers, I will start with you.
Ms. Flowers. Sure. If you have one-size-fits-all
regulations applied to banks of all sizes and complexity, then
for the less risky banks that are smaller, you are going to
have regulatory burden that does not have an offsetting benefit
to the community in their ability to lend.
Mr. Norman. Mr. Radcliffe?
Mr. Radcliffe. Along those same lines, we devote an
inordinate amount of staff, time, and dollars toward the
regulatory burden, and it limits our ability to offer products
and services.
Mr. Norman. Mrs. Tahyar.
Mrs. Tahyar. Think of two banks. One is 80 percent
uninsured deposits. The other is 80 percent insured deposits.
It makes no sense to regulate them the same.
Mr. Norman. Two different animals, is not it?
Mrs. Tahyar. Two different animals.
Mr. Norman. Mr. Steele?
Mr. Steele. I actually agree that regulators need to focus
more on the risks of particular institutions. My argument would
be they do not tailor enough right now because you have
basically G-SIBs and everyone else. I actually do not disagree
that there could be more tailoring of the rules.
Mr. Norman. Thank you.
How is there a credible framework to measure reputational
risk in you all's opinion? It has been open sores for a lot of
people--or a lot of questions.
Ms. Flowers, I will start with you.
Ms. Flowers. How credible is it? I do not think that
anything that is unmoored from a legal standard from the laws
and from a materiality standard is really credible in terms of
not being objective and being just subject to total discretion.
Mr. Norman. Mr. Radcliffe?
Mr. Radcliffe. It is inherently subjective, and what we
crave in all of the CAMELS components are clear guidance and a
clear rule book by which to play.
Mrs. Tahyar. I think experience has shown that it does not
add anything to real material financial risk, and it just
cannot be objective.
Mr. Norman. Mr. Steele?
Mr. Steele. I think what the public thinks about a
financial institution has got to play a role. Banking is about
trust, the public trust, and people trusting their money is
safe, and so, there has to be a factor here. I get it is harder
than measuring a specifically quantifiable capital requirement
in a ratio like that, but how the public views an institution,
I think, is incredibly important to the banking industry.
Mr. Norman. I want to thank all of you for coming. That is
all the questions I have. Unless anyone else has questions,
this meeting--oh, the gentleman from Massachusetts, Mr. Lynch,
is recognized for 5 minutes.
Mr. Lynch. Thank you, sir. Thank you, Mr. Chairman.
We have one single Federal agency whose sole mission is to
protect American consumers. That is the Consumer Financial
Protection Bureau and less than 2 weeks ago, the Trump
Administration and Elon Musk illegally fired 90 percent of the
employees at that agency.
This included 487 supervisors, leaving about 50 staff to
supervise 36,000 banks, credit unions, mortgage lenders,
student loan servicers, payday lenders, auto finance companies,
debt collectors, money service businesses, and other financial
providers across the country.
Notably, the entire office of the military Servicemember
Affairs unit, which is dedicated to protecting and empowering
military servicemembers, veterans, and their families, was
eliminated.
Not long ago, I had a chance to go down to Fort Hood down
in Texas: 70,000 of our best and brightest down there, all
patriots. If you look outside the base, there is nothing but
auto, car dealers, and payday lenders, and they are all
hovering around that base, those 70,000 young people.
A lot of young families down there, a lot of our young
soldiers, men and women who do not have a lot of
sophistication. They are so young, and they are being exploited
every single day by people that are trying to give them payday
loans that are unconscionably high in interest rates.
Regrettably, those servicemembers and their families are
often targeted by those predatory payday lenders, auto lenders,
and debt collectors.
Now the office charged with protecting them is gone.
To make matters worse, the CFPB previously employed 210
veterans on their own staff, including 3 who served in the
Vietnam war era, and almost all of those have been illegally
fired, by President Trump.
According to the Treasury Union's lawsuit, the first wave
of reductions-in-force notices appeared to target and impact
disabled veterans, and the second wave focused on all veterans
in general.
These are men and women who have dedicated their lives to
serving their country and then chose to continue protecting
American consumers, notably their brothers and sisters in arms,
and it is shameful how little regard this administration is
showing right now for our veterans, when you couple this with
the thousands of layoffs of employees at the Department of
Veterans Affairs (VA) that is happening right now and that is--
and more are scheduled.
Mr. Steele talks about the consequences that eliminating
the CFPB workforce, and especially the military Servicemember
Affairs unit, in terms of these young soldiers that are being
preyed upon by some of these payday lenders and also auto
dealers that are selling them cars, but they have these onerous
and egregious deals to pay back those loans at high interest
rates.
Mr. Steele. Sure. As I mentioned earlier, I used to work
for a Member in the Senate from Ohio, and there is Wright-
Patterson Air Force Base down in Dayton, in the same way Fort
Hood, and it is the same situation there--payday lenders, auto
title lenders all right across the street from the base there,
waiting for there to be some sort of financial stress or strain
on these servicemembers and their families in order to swoop in
and try to give them predatory loans.
It is stressful for the families. It causes distraction. It
reduces force readiness. Some of them might have to leave the
service because they can no longer afford the salary there.
They have to go find a job and do something else. It weakens
our armed services not to have healthy and robust financial
protections for those servicemembers.
Mr. Lynch. Thank you. One more question. The Trump
Administration has just dropped pro-consumer lawsuits and
halted enforcement activity against JPMorgan Chase, Wells
Fargo, Bank of America, for alleged payment scams on the app
Zelle, and another against Capital One for allegedly cheating
millions of consumers out of their interest payments.
Earlier this month, my Republican colleagues passed a
resolution to rescind a CFPB rule to allow them to supervise
Big Tech payment providers. What does that do to the financial
landscape for the average consumer?
Mr. Steele. It basically says there is no protection here.
It tells the companies, all bets are off, there is no--there is
going to be no one enforcing these laws here, and it leaves
consumers at risk.
Mr. Lynch. Thank you, Mr. Chairman. I yield back.
Mr. Norman. The gentleman yields.
The gentleman from Pennsylvania, Mr. Meuser, is now
recognized for 5 minutes.
Mr. Meuser. Thank you, Mr. Chairman. Thank you to our
witnesses.
Mrs. Tahyar, just to come out of the gate, what do you
think of the comment that was just made by Mr. Steele, those
last comment?
Mrs. Tahyar. I am sorry. You have to remind me what he just
said.
Mr. Meuser. Okay. You know what, let me just dive into,
community banks are highly regulated.
Mrs. Tahyar. Right.
Mr. Meuser. They have been highly regulated for a long
time.
Mrs. Tahyar. Right.
Mr. Meuser. They were certainly highly regulated prior to
the last 4 years, under the Biden Administration. Do you feel
that the Biden Administration somehow came in and added
regulations to the community banks that were helpful, and was
the CFPB helpful?
Would community banks, if you asked community banks, a
thousand of them, to rate the CFPB, under the Biden
Administration, on a scale A to F--I know what grade they would
give as I have talked to many. Somewhere in the neighborhood of
a D or a D-minus. What are your thoughts on that, Mrs. Tahyar?
Mrs. Tahyar. Sure. I just remembered, Graham, what you
said. I think our advice to clients is that consumer laws still
exist. The States will be enforcing, and you will get no
argument from me about the protection of the military because I
am an Army mom.
When we get to community banks on the Biden Administration,
to answer your second question, I think a lot of community
banks will tell you that they have not seen the CFPB during the
Biden Administration.
They cannot--they may find it hard to grade because the
CFPB has not been around. Remember, the--they are only seeing
$10 billion and more. When I say community banks here, it is
the larger community banks because the Biden Administration's
CFPB was focusing mostly on nonbanks than on banks.
Mr. Meuser. Mr. Radcliffe, even though perhaps you did not
see a CFPB agent, which is a little surprising, you still had
to abide by what they were out there regulating.
What are your thoughts on the CFPB as it was under the
Biden Administration?
Mr. Radcliffe. Yes, one of our challenges, is that, even
though we are not subject to their direct supervision, we are a
Federal Reserve member bank. We still have to abide by all of
the guidance published by the CFPB, which eats up our
compliance resources.
Mr. Meuser. Ms. Flowers or Mr. Radcliffe, has the CFPB been
helpful in uncovering fraud? What have they actually been
helpful in doing besides what--which is a true story--a CFPB
representative went into a local bank and asked how things were
going, and were they being properly regulated.
They said, ``Well, no, not really, it has been very
burdensome. In fact, we had to add 3 new compliance officers.''
This was a bank about your size and they said, ``Well, that is
wonderful; we are creating jobs.''
Mr. Radcliffe, can you answer that?
Mr. Radcliffe. I am sorry. Go back to the original----
Mr. Meuser. What have they been helpful to you or what
burdens have they created?
Mr. Radcliffe. Each year of my career, the regulatory
burden has gotten greater, and the capital outlay to cover that
burden has gotten greater.
Mr. Meuser. Okay. What about improvements? Have you thought
about what you would like to see in the new CFPB?
Mr. Radcliffe. Less guidance and less burden would be nice.
Mr. Meuser. Maybe less ideological guidance and clearer
lines of regulations?
Mr. Radcliffe. We would like a clear playbook by which to
follow the rules.
Mr. Meuser. Ms. Flowers, what are your thoughts on that?
Ms. Flowers. Sure. I think one of the honorable members
described the CFPB under Director Chopra as rogue. I think that
the volume of guidance, to Mr. Radcliffe's point, that was
issued, that was unmoored from legal and regulatory
requirements themselves, was astronomical--and we applaud the
CFPB review of that guidance to make sure that it is within the
laws and regulations that they are empowered to enforce.
The Federal banking agencies outside the CFPB do continue
to examine banks over $10 billion for compliance with consumer
laws and regulations. There is a cop on the beat, and in most
cases for most banks, more than one because most banks have
more than one Federal regulator as well.
We do believe that there is a role for the CFPB in
regulation of nonbanks that are engaged in traditional banking
activities.
Mr. Meuser. Right. That is certainly the feedback I
receive, that they will have one inspector come in, and they
will state that things are in compliance. The next year, they
would come in, or even sooner than that, and say something
other.
Do you think we are wrong in trying to reform the CFPB?
Based upon my 4 years here and the mess or the problems that
the community banks, in particular, have with it, I think we
are very justified in trying to get things right so they can do
the job that it is intended to do, as well as deliver--help
community banks, not hinder them. Ms. Flowers, yes or no, do
you think that is a good idea?
Ms. Flowers. I do think it is a good idea.
Mr. Meuser. I yield back, Mr. Chairman. Thank you.
Mr. Norman. Okay. I would like to thank all of our
witnesses for the testimony.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses to the
Chair. The questions will be forwarded to the witnesses for
their responses.
Witnesses, please respond no later than June 4, 2025.
[The information referred to can be found in the appendix.]
The hearing is now adjourned.
[Whereupon, at 12:37 p.m., the subcommittee was adjourned.]
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