    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                            DODD-FRANK TURNS 15:
                       LESSONS LEARNED AND THE ROAD AHEAD

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

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   ----------

                                 JULY 15, 2025

                                   ----------

                               Serial No. 119-33

           Printed for the use of the Committee on Financial Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                 www.govinfo.gov

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    60-992 PDF                  WASHINGTON : 2026

    -----------------------------------------------------------------------------------
                    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

                             C  O  N  T  E  N  T  S

                                  ----------

                             Tuesday, July 15, 2025

                                                                       Page

                               OPENING STATEMENTS

    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     1
    Hon. Maxine Waters, Ranking Member of the Committee on Financial
      Services, a U.S. Representative from California................     2
    Hon. Bill Huizenga, Vice Chairman of the Committee on Financial
      Services, a U.S. Representative from Michigan..................     4

                                   WITNESSES

    Hon. Ken Bentsen, President and Chief Executive Officer,
      Securities Industry and Financial Markets Association..........     4
        Prepared Statement...........................................     7
    Mrs. Lindsey Johnson, President and Chief Executive Officer,
      Consumer Bankers Association...................................    23
        Prepared Statement...........................................    25
    Mr. Tom Quaadman, Chief of Government Affairs and Public Policy,
      Investment Company Institute...................................    50
        Prepared Statement...........................................    52
    Dr. Paul Kupiec, Senior Fellow, American Enterprise Institute....    68
        Prepared Statement...........................................    70
    Mr. Dennis Kelleher, Co-Founder, President, and Chief Executive
      Officer, Better Markets........................................   121
        Prepared Statement...........................................   123

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Bill Huizenga:
        2024 GAO report..............................................   204
        GAO Highlights...............................................   341
    Hon. John Rose:
        Independent Community Bankers of America (ICBA)..............   342
    Hon. Sean Casten:
        Wall Street Journal, ``Want to Trade Amazon on Crypto
          Exchange? The Price Might Be Off by 300 Percent.''.........   343
    Hon. Troy Downing:
        National Association of Manufacturers (NAM)..................   347
    Hon. Mike Flood and Hon. Young Kim:
        Letter to Mr. French Hill and Maxine Waters from Brett Palmer   354
    Hon Andrew Garbarino:
        Statement for the record from the U.S. Chamber of Commerce...   356
    Hon. Marlin Stutzman:
        Defense Credit Union Council (DCUC)..........................   372
        DCUC Bill Positions and Recommendations......................   374

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses for the record from Mrs. Lindsey Johnson
        Representative French Hill...................................   381
        Representative Scott Fitzgerald..............................  0382
        Representative Maxine Waters.................................   385
    Written responses to questions for the record from Mr. Tom
      Quaadman
        Representative Ann Wagner....................................   387
        Representative Zachary Nunn..................................   388
    Written responses for the record from Mr. Dennis Kelleher
        Representative Maxine Waters.................................   390
    Written responses to questions for the record from Mr. Paul
      Kupiec
        Representative Maxine Waters.................................   395

                                  LEGISLATION

    H.R.----, the Small Lenders Exempt from New Data and Excessive
      Reporting (LENDER) Act.........................................   396
    H.R.654, the Taking Account of Bureaucrats' Spending (TABS) Act
      of 2025........................................................   401
    H.R.3445, the Consumer Financial Protection Commission Act.......   421
    H.R.2885, the Bank Loan Privacy Act..............................   437
    H.R.2513, the CFPB-IG Reform Act of 2025.........................   439
    H.R.2183, the CFPB Dual Mandate and Economic Analysis Act........   445
    H.R.2331, the Transparency in CFPB Cost-Benefit Analysis Act.....   449
    H.R.3446, the FDIC Board Accountability Act......................   454
    H.R.1606, the Making the CFPB Accountable to Small Businesses Act
      of 2025........................................................   457
    H.R.1652, the Rectifying UDAAP Act...............................   460
    H.R.1653, the Civil Investigative Demand Reform Act of 2025......   469
    H.R.----, the Business of Insurance Regulatory Reform Act of 2025   474
    H.R.3213, the Restoring Court Authority Over Litigation Act of
      2025...........................................................   477
    H.R.----, the Credit Access and Inclusion Act....................   489
    H.R.3682, the Financial Stability Oversight Council Improvement
      Act of 2025....................................................   493
    H.R.----, the Small Dollar Loan Certainty Act....................   495
    H.R.3141, the CFPB Budget Integrity Act..........................   502
    H.R.----, the American Access to Banking Act.....................   504
    H.R.----, a bill to require the Federal financial institutions
      regulatory agencies to jointly review the cumulative impact of
      regulations issued by such agencies, and for other purposes....   512
    H.R.----, a bill to amend the Federal Reserve Act to specify
      additional responsibilities of the member of the Board of
      Governors of the Federal Reserve System who was appointed as
      the member with experience working in or supervising community
      banks, and for other purposes..................................   515
    H.R.----, a bill to amend the Consumer Financial Protection Act
      of 2010 to require the attestation of certain information as
      part of the consumer complaint submission process, and for
      other purposes.................................................   518
    H.R.----, a bill to amend the Consumer Financial Protection Act
      of 2010 to provide procedures for guidance issued by the Bureau
      of Consumer Financial Protection, and for other purposes.......   522
    H.R.----, a bill to amend the Consumer Financial Protection Act
      of 2010 to direct civil penalties to victims and transfer
      excess funds to the Treasury, and for other purposes...........   528
    H.R.----, a bill to amend the Consumer Financial Protection Act
      of 2010 to eliminate the market monitoring functions of the
      Bureau of Consumer Financial Protection, and for other purposes   530
    H.R.----, a bill to amend the Consumer Financial Protection Act
      of 2010 to revise the structure and maximum amounts of civil
      monetary penalties, and to provide incentives for the self-
      reporting of violations........................................   532
    H.R.----, a bill to amend the Financial Stability Act of 2010 to
      authorize appropriations for the Office of Financial Research
      and the Financial Stability Oversight Council, and for other
      purposes.......................................................   535
    H.R.----, a bill to amend the Fair Credit Reporting Act to
      require resellers of information contained in consumer reports
      to follow reasonable procedures to assure maximum possible
      accuracy of such information before transmitting such
      information, and for other purposes............................   538
    H.R.----, a bill to amend the civil liability requirements under
      the Fair Credit Reporting Act to include requirements relating
      to class actions, and for other purposes.......................   540
    H.R.----, a bill to require the Secretary of the Treasury to
      submit a report that contains a list of unused authorities in
      the Dodd-Frank Wall Street Reform and Consumer Protection Act
      and in the amendments made by such Act, and for other purposes.   544
    H.R.----, a bill to repeal unused authority of the Securities and
      Exchange Commission related to restricting certain mandatory
      pre-dispute arbitration, and for other purposes................   546
    H.R.3484, the Business Owners Protection Act of 2025.............   548
    H.R.----, a bill to remove certain authority of the Securities
      and Exchange Commission over other matters related to fiduciary
      duties, and for other purposes.................................   551
    H.R.----, a bill to repeal the disclosure requirement applicable
      to payments by resource extraction issuers, and for other
      purposes.......................................................   553
    H.R.----, a bill to repeal certain unused authority of the
      Securities and Exchange Commission related to standards of
      conduct........................................................   555
    H.R.----, a bill to amend the Securities Exchange Act of 1934 to
      repeal certain disclosure requirements related to conflict
      minerals.......................................................   556
    H.R.3959, the Protecting Private Job Creators Act................   558
    H.R.2478, the Financial Exploitation Prevention Act of 2025......   562

                              DODD-FRANK TURNS 15:
                       LESSONS LEARNED AND THE ROAD AHEAD

                                  ----------

                             Tuesday, July 15, 2025

                         U.S. House of Representatives,
                               Committee on Financial Services,
                                                       Washington, D.C.

        The committee met, pursuant to notice, at 10:16 a.m., in
    room 2128, Rayburn House Office Building, Hon. French Hill
    [chairman of the committee] presiding.
        Present: Representatives Hill, Lucas, Huizenga, Wagner,
    Barr, Williams of Texas, Davidson, Rose, Steil, Timmons,
    Stutzman, Norman, Meuser, Kim, Garbarino, Fitzgerald, Flood,
    McClain, Downing, Haridopolos, Moore, Waters, Velazquez,
    Sherman, Meeks, Scott, Lynch, Green, Himes, Foster, Beatty,
    Vargas, Gottheimer, Gonzalez, Casten, Pressley, Tlaib, Torres,
    Garcia, Pettersen, Bynum, and Liccardo.
        Chairman Hill. The Committee on Financial Services will
    come to order.
        Without objection, the chair is authorized to declare a
    recess at any time.
        Today's hearing is entitled, ``Dodd-Frank Turns 15: Lessons
    Learned and the Road Ahead.''
        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. FRENCH HILL, CHAIRMAN OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                                ARKANSAS

        Good morning. Today's hearing is focused on reviewing Dodd-
    Frank's real-world impact and its unintended consequences over
    the past 15 years. Our colleagues across the aisle often
    criticize today's banking system, but rarely do they
    acknowledge that it is a direct result of the policies they
    enacted after the 2008 financial crisis along party lines.
    Dodd-Frank was sold to the American people as a sweeping fix to
    prevent another crisis, yet over time, it has become clear that
    this approach has not delivered as promised for main street.
    Instead, history shows that it punished community financial
    institutions through its one-size-fits-all mandates, shifted
    activity outside the regulated banking system, created new and
    unaccountable agencies like the Consumer Financial Protection
    Bureau (CFPB), and prioritized duplicative compliance and
    regulatory issues and, most importantly, regulation by
    enforcement over actual consumer protection. These smaller
    institutions did not cause the crisis, but they have been
    forced to navigate new compliance burdens and divert resources
    away from serving their communities and toward satisfying
    Washington bureaucrats. The law created new agencies like the
    CFPB, which has operated with unprecedented autonomy and
    minimal accountability to Congress or the American people.
        For 15 years, we have lived under the shadow of Dodd-Frank.
    This law did not just reshape banking, it rewrote the rules for
    our capital markets. It handed the Securities and Exchange
    Commission (SEC) sweeping new powers that have led to
    regulatory overreach, costly disclosure mandates, and mission
    creep into areas like corporate governance and executive
    compensation: areas historically governed by State law and
    protected by the business judgment rule. For 15 years, these
    policies have burdened the U.S. public companies while giving
    foreign competitors a leg up. Even worse, foreign private
    issuers were exempted from many of the most burdensome Dodd-
    Frank disclosure requirements.
        We all know that healthy competition and innovation drive
    economic growth, creating more opportunities and better
    financial services for all Americans. Instead of burdening
    institutions with excessive red tape, we should be empowering
    them to serve families, small businesses, and local
    communities. That includes small and mid-sized companies trying
    to raise capital or grow through public market access.
    Unfortunately, the complexity and cost imposed by Dodd-Frank
    have helped fuel the long-term decline in U.S. initial public
    offerings, discouraging companies from going public altogether.
    As we examine the last 15 years, I hope we can do so with clear
    eyes.
        It is also time to take a hard look at the rules that never
    made sense in the first place, rules that sit on the shelf and
    create needless uncertainty for market participants, just
    waiting for some new unelected bureaucrat to dust them off and
    put them to work. That is not how our system should work. We
    must work together to craft thoughtful, bipartisan reforms that
    restore balance, foster growth, and protect consumers. I look
    forward to a robust and productive discussion today. I am
    grateful to our panel for being with us, and I am hopeful that
    we can chart a better path forward for all Americans through
    financial oversight and through reform of Dodd-Frank. I yield
    back.
        I now recognize the distinguished ranking member of the
    committee, Ms. Waters, for 5 minutes for an opening statement.

     OPENING STATMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                               CALIFORNIA

        Ms. Waters. Thank you very much, Mr. Chairman. Good
    morning, everyone. Before I discuss today's hearing topic, we
    just got news that inflation has jumped to 2.7 percent as
    Trump's tariffs have started to take effect. This is another
    reason Trump's reckless tariffs and attacks on the Fed's
    independence are so dangerous, and consumers and small
    businesses will pay the price. It is striking that with this
    hearing, we are marking the 15th anniversary of the Dodd-Frank
    Act, a legislation enacted in the aftermath of the 2008
    financial crisis, which unfolded under a Republicans' watch
    with President George W. Bush's Administration. Yet, the same
    week, Republicans in Congress are repeating the same mistakes
    that triggered the crisis in the first place. It is as if they
    have learned nothing from the painful lessons of 2008: the wave
    of foreclosures, the millions of jobs lost, and the devastation
    of countless families watching their entire life savings vanish
    in a blink of an eye.
        Unfortunately, over the past 15 years, Republicans spent
    more time trying to undo Dodd-Frank than they have spent time
    trying to protect consumers and investors. They have done more
    to fight for interests of the same Wall Street CEOs whose
    reckless actions destabilize our economy than fighting for the
    main street and working-class Americans who power our economy.
    There is no clearer example of this than what we are witnessing
    just this week.
        Republicans are pushing two particularly dangerous bills
    that will unleash risky cryptocurrency into our mainstream
    financial system without proper guardrails to protect
    hardworking Americans. If that sounds familiar, it is because
    it is.
        The rise of complex, poorly regulated financial instruments
    was precisely what sparked the 2008 crisis, but these crypto
    bills do not just risk another economic meltdown. They are also
    riddled with loopholes that President Trump that gave him the
    green light to continue his crypto scheme that so far has
    netted him $1.2 billion. Yes, he owns crypto companies now. He
    owns crypto companies. Melania owns crypto companies. His sons
    own bitcoin companies. They are mining bitcoin coins right now.
    It is appalling that this Republican-led Congress can sit idly
    by and enable this blatant scheme and cash grab, especially
    after just voting so hard to hand Trump and his insiders a
    massive tax giveaway. This is more of the same taking from
    hard-working Americans to further enrich billionaires and
    crypto insiders. That is why I have joined with Ranking Member
    Lynch in leading Democrats in Anti-Crypto Corruption Week where
    we are outlining the true economic costs of these dangerous
    bills.
        Deregulating crypto and enable a con by the most corrupt
    President in the history are not the only ways that Republicans
    are setting the stage for another 2008-style crisis. They are
    also working with the Trump regime to gut a core pillar of
    Dodd-Frank, the Consumer Financial Protection Bureau. This is
    incredibly dangerous. The Consumer Bureau was created to ensure
    a Federal watchdog that monitors Big Banks to protect consumers
    from the abusive practices and holds institutions accountable
    for ripping off consumers, but now, Trump and the Republicans
    are making good on their promise to delete the Agency. From
    slashing CFPB's budget in half, to firing dedicated staff, or
    halting lawsuits that would return stolen money to victims from
    them. They are dragging us back to the dark days before Dodd-
    Frank when consumers had no one looking out for them in the
    financial marketplace. Committee Democrats are committed to
    defending the Dodd-Frank Act from Republicans' 15-year campaign
    to repeal the law.
        We will also continue fighting against reckless
    deregulation that favors mega banks and Big Tech over community
    banks and credit unions that put our taxpayers at risk. We will
    still see what happens when Republicans allow Wall Street, Big
    Tech, Big Crypto to police itself. Spoiler alert, it will not
    end pretty for our constituents, and with that, I yield back.
        Chairman Hill. The gentlewoman yields back. I now recognize
    the vice chair of our full committee, Mr. Huizenga, for 1
    minute for an opening statement.

     OPENING STATEMENT OF HON. BILL HUIZENGA, VICE CHAIRMAN OF THE
      COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
                                MICHIGAN

        Mr. Huizenga. Thank you, Mr. Chairman. On the 4th of July,
    President Trump and congressional Republicans delivered on a
    promise to pass legislation that helps all Americans. There is
    a stark difference between the One Big Beautiful Bill and the
    Dodd-Frank Act. The One Big Beautiful Bill will increase
    economic opportunities for those who need it most. It will
    strengthen our economy by slashing red tape and will make
    lasting reforms to the financial system. Dodd-Frank empowered
    Big Government bureaucrats and agencies like the Securities and
    Exchange Commission with sweeping unchecked authority. It
    allowed agencies to promote woke ideology and Environmental,
    Social, and Governance (ESG) mandates while straying from their
    core mission. Now by reining in the reach and the footprint of
    organizations like the CFPB, Republicans and President Trump
    will end regulation by enforcement. We will end burdensome
    regulations that harm every one of our constituents. In the
    Financial Services, Republicans will promote innovation and
    consumer choice that has been stifled under Democrat
    leadership. So I say I was not here for the passage of Dodd-
    Frank, but I have been living with the echo effects of it since
    2011. With that, Mr. Chairman, I yield back.
        Chairman Hill. The gentleman yields back. Today we welcome
    the testimony of our all-star panel: the Hon. Ken Bentsen,
    President and CEO of the Securities Industry and Financial
    Markets Association, a former Member of Congress from Texas and
    a member of this committee; Mrs. Lindsey Johnson, President and
    CEO of the Consumer Bankers Association; Mr. Tom Quaadman,
    Chief of Government Affairs and Public Policy in the Investment
    Company Institute; Dr. Paul Kupiec, Senior Fellow at the
    American Enterprise Institute; and Dennis Kelleher, Co-Founder,
    President, and CEO of Better Markets. We thank each of you for
    taking time to be with us today. Each of you will be recognized
    for 5 minutes to give an oral presentation of your testimony,
    and without objection, your written statements will be made
    part of the record.
        The Honorable Ken Bentsen, you are now recognized for 5
    minutes for your oral remarks.

        STATEMENT OF KEN BENTSEN, PRESIDENT AND CHIEF EXECUTIVE
     OFFICER, SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION

        Mr. Bentsen. Chairman Hill, Ranking Member Waters, and
    distinguished members of the committee, thank you for the
    opportunity to testify today. My name is Ken Bentsen. I am
    President and CEO of the Securities Industry and Financial
    Markets Association (SIFMA).
        U.S. securities markets are the deepest and most liquid in
    the world. They are also the envy of the world. In the U.S., 75
    percent of commercial activity is financed through our capital
    markets, significantly more than any other developed economies.
    In fact, I just spent the last week in Europe meeting with U.K.
    and EU financial regulatory officials, where both jurisdictions
    have prioritized development of their capital markets to spur
    investment and economic growth like that we have here at home.
    Vibrant and healthy capital markets allow companies to invest
    in plant and equipment, spurring job creation and economic
    growth, and American workers prepare for their retirement
    directly and through investment vehicles such as 401(k)
    accounts, providing investment capital that fuels our economy.
        Again, if you look around the world, virtually every other
    nation looks at the U.S. as a model for our robust capital
    markets and investment system. Therefore, it is critical for
    policymakers to tailor regulatory policies to ensure
    transparency, investment protection, and mitigate legitimate
    market risk without unnecessarily disrupting or constraining
    these critical markets. Further, Congress has an important role
    to play beyond simply enacting the laws. It is important for
    Congress to periodically review previously enacted statutes to
    determine effectiveness, adherence to legislative intent, and
    impact on the market. So, I commend the committee for holding
    this hearing.
        Beyond question, our markets and related participants are
    among the most regulated sectors in the U.S. economy, but not
    without cost. The post-2008 financial crisis regulatory and
    supervisory reforms, culminated in the Dodd-Frank Act, were the
    most expansive financial regulatory action since the 1930s. The
    act, comprised of 16 titles and approximately 400 rulemakings,
    significantly expanded the number and breadth and intensity of
    regulatory and supervisory requirements with which the U.S.
    financial sector is subject. I brought my table copy with me.
    These changes have significantly reduced the probability that a
    major banking organization would fail during an extreme shock
    while also reducing the potential contagion and cost if such a
    failure were to occur. In particular, large banking
    organizations have more and higher-quality capital today than
    pre-crisis, which provides them with larger buffers against
    failure if they experience unexpected losses.
        Though many of the Dodd-Frank reforms have made the U.S.
    financial system more resilient and less prone to shocks, we
    believe that appropriate, tailored regulation should balance
    the dual goals of enhancing financial stability and investor
    protection while supporting the flow of investment capital to
    end users. The financial sector can continue to be well
    regulated, well capitalized, and resilient even with
    recalibration of certainly unnecessarily burdensome
    regulations. If banking organizations were permitted to unlock
    more of their capital and liquidity, additional lending and
    financing to consumers and businesses would provide for greater
    levels of economic expansion.
        SIFMA has expressed deep concern about the Basel III
    Endgame proposal that was issued in 2023 by banking regulators
    not only because it would significantly increase aggregate U.S.
    bank capitals beyond their current historically robust levels,
    but because it inappropriately targets banking organizations
    and capital markets activities for some of the largest
    increase. These impacts are, in turn, greatly exacerbated by
    overlaps between these frameworks and the Federal Reserve's
    stress testing regime. This is not only about the ability of
    banks to lend. Large bank broker-dealers comprise a significant
    market share of our Nation's securities and derivatives markets
    and, when combined with foreign banking operations, comprise
    about 90 percent of the market, so the knock-on effect is quite
    extreme.
        It is also not just about large banks. Nonbank affiliated
    and regional broker-dealers and asset managers, all subject to
    robust rules and oversight by Federal market regulators, have
    been subject to enhanced regulatory and compliance burden. The
    cost of compliance has increased. According to one study, by
    over $50 billion annually. Many of our smaller broker-dealer
    members have reported the need to merge due to increased
    compliance costs. Over the last 15 years, the number of
    registered broker-dealers in the United States has declined by
    30 percent. Some regulators have interpreted certain provisions
    of the Dodd-Frank Act as a license to establish new rules
    outside the original intent of the statute, notwithstanding the
    lack of any obvious market failure.
        The U.S. financial system is significantly stronger and
    more resilient than it was before Dodd-Frank was passed in
    2010. That is a good thing. However, SIFMA believes that it is
    now appropriate to evaluate whether certain components of the
    regulatory framework developed under the mandates of Dodd-Frank
    are excessively conservative and impose costs on the U.S.
    economy or financial markets and on main street that outweigh
    their benefits.
        We appreciate the committee's interest in exploring these
    important questions on this 15th anniversary of Dodd-Frank. I
    yield back.

        [The prepared statement of Mr. Bentsen follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. The gentleman yields back. Mrs. Johnson, you
    are now recognized for 5 minutes for your oral presentation.

        STATEMENT OF MRS. LINDSEY JOHNSON, PRESIDENT AND CHIEF
            EXECUTIVE OFFICER, CONSUMER BANKERS ASSOCIATION

        Mrs. Johnson. Thank you, Chairman Hill, Ranking Member
    Waters, and members of the committee. I appreciate the
    opportunity to testify on behalf of the Consumer Bankers
    Association about the lessons learned from the Dodd-Frank Act.
        My name is Lindsey Johnson. I am President and CEO of
    Consumer Bankers Association (CBA), the only national trade
    association focused exclusively on retail banking. CBA and our
    members work to promote sound policy to enable consumers
    individualize approaches to finance their own American dreams.
    CBA member institutions account for nearly 2 million employees
    across the country, extended roughly $3.4 trillion in consumer
    loans, and provided nearly $173 billion in small business loans
    last year alone. The vast majority of our members are more than
    $10 billion in assets, making them subject to CFPB's
    supervision and enforcement.
        The Dodd-Frank Act was enacted to address vulnerabilities
    in the U.S. financial system exposed in the 2008 financial
    crisis. Dodd-Frank raised capital requirements for banks,
    established mortgage underwriting requirements, heightened
    oversight of systemically important institutions, and
    consolidated Federal consumer protection authority into a
    brand-new Federal regulator, the CFPB. It is important for
    Congress to continually review statutes to ensure that they are
    meeting their intended purpose, to know any unintended
    consequences, such as unnecessarily increasing costs for
    businesses or consumers, and to understand how markets have
    evolved and where certain standards may no longer be
    appropriate. While this is true for all titles of the Dodd-
    Frank Act, my comments will focus on Title X of Dodd-Frank: the
    creation of the CFPB.
        American consumers deserve a credible, durable CFPB that
    executes on its statutory mission, heeds the bounds of its
    statutory authority, and addresses true market failures and
    consumer harms. Unfortunately, the political shifts at the
    Bureau have been seismic from administration to administration.
    To some degree, Bureau policy will inevitably reflect
    differences in political philosophies. However, numerous
    actions by the Bureau's prior leadership have raised important
    questions about whether it prioritized politics over people. We
    expand on these and other issues in great detail in my written
    testimony, and we are working with the Bureau's current
    leadership to address many of the most egregious concerns. This
    committee has a critical role to play to make more permanent
    reforms that can reboot the Bureau into a credible, durable,
    and more stable regulator. In my written testimony, I address
    three key issues where Congress should focus its review of the
    Bureau: first, ensuring the Agency follows the law; second,
    addressing true impacts of regulation on consumers; and third,
    focusing on fact-based policies and on true consumer harm.
        The most direct action Congress could take is to clarify in
    its statute the Bureau's vague and largely undefined Unfair,
    Deceptive, or Abusive Acts or Practices (UDAAP) authority. The
    Bureau has in the past regularly expanded its authorities or
    illegally interpreted the statutory provisions to meet its own
    objectives. There are even examples where the Bureau sought
    civil monetary penalties retroactively for previously undefined
    violations. Now, even after 15 years, the CFPB still has not
    clearly explained what abusive acts and practices are and how
    they are distinct from unfair and deceptive acts.
    Unfortunately, this has placed all entities that the Bureau
    regulates at risk of inadvertent noncompliance, stymieing
    lending and innovation for consumers. It is imperative for
    Congress to pass Congressman Barr's Rectifying UDAAP Act to
    provide the needed clarity and definitions of CFPB's UDAAP
    authority so regulated entities know what is and is not
    permitted and how they can comply.
        Second, the Bureau must consider the true impact of its
    actions on both consumers and regulated entities. To date, the
    Bureau is not required to perform a rigorous cost-benefit
    analysis to ensure the actions it is taking outweigh both the
    financial costs and the cost to consumers. The transparency in
    CFPB Cost-Benefit Analysis Act would eliminate this concern.
    The Bureau also needs to take into account the cumulative
    impact on the numerous oversight agencies for banks.
    Legislation to review the impact of overlapping regulations and
    impacts on consumer access and overall economic activity would
    greatly benefit consumers without diminishing the supervision
    and examination of banks.
        Lastly, it is critical for the CFPB to be facts and data
    driven in its regulatory focus. The Bureau's Complaint
    Database, a tool that could provide important data beneficial
    to both consumers and regulated entities to help resolve
    problems early, is structurally flawed. The tool should be
    improved as duplicative, frivolous, and fraudulent complaints
    currently plague the system. Draft legislation released by this
    committee on the Bureau's Complaint Data base would
    significantly improve that process.
        Thank you again, Chairman Hill, for the opportunity to
    testify. We stand ready to work with you and the committee to
    achieve thoughtful and effective change to ensure the Bureau is
    a strong and durable consumer protection regulator. I look
    forward to answering any questions you may have.

        [The prepared statement of Mrs. Johnson follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. The gentlewoman yields back. Mr. Quaadman,
    you are recognized for 5 minutes for your oral remarks.

    STATEMENT OF MR. TOM QUAADMAN, CHIEF OF GOVERNMENT AFFAIRS AND
              PUBLIC POLICY, INVESTMENT COMPANY INSTITUTE

        Mr. Quaadman. Chairman Hill, Ranking Member Waters, members
    of the committee, thank you for holding this hearing and for
    your leadership on keeping America's financial markets the
    global gold standard.
        Prior to the financial crisis, many raised concerns that
    the U.S. financial regulatory architecture was out of date.
    Indeed, issues such as blind spots and lack of coordination
    hampered the ability of regulators and policymakers to address
    the crisis. Congress, through the passage of the Dodd-Frank
    Act, sought to respond to the crisis but ignored many of those
    issues. Instead, the Dodd-Frank Act added floors onto an old
    house that was built on a rickety foundation. Dodd-Frank, in
    certain areas, sought to eliminate risk, but really, you cannot
    eliminate risk. You can only transfer it elsewhere. Dodd-Frank
    also did not allow regulators the flexibility to meet future
    market developments and investor needs.
        Dodd-Frank did get some things right. Transparency around
    the derivatives markets actually addressed a critical part of
    the financial crisis. The creation of Financial Stability
    Oversight Council (FSOC), which is a codification and expansion
    of the President's Working Group, was an important step forward
    in coordinating regulators. However, Congress largely delegated
    to agencies to flesh out the details of the bill. In some
    cases, regulators naturally sought to fill the void of
    ambiguity and expand their powers. Some examples include FSOC's
    attempt to designate nonbank financial institutions through
    systemic risk regulation was a mismatch in attempting to apply
    bank-like regulations on a business model which were not banks.
    Similarly, on money market fund reforms, FSOC sought to subvert
    a majority of the SEC commissioner's judgment in the path
    forward. The Commodity Futures Trading Commission (CFTC)
    created a duplicative regulatory regime on community pool
    operators without investor benefit. The Volcker Rule, which is
    a prohibition on proprietary trading by banks, in its
    implementation, the regulators actually included regulated
    funds. Even though it is not part of Dodd-Frank but does exert
    influence on Dodd-Frank policies, the Financial Stability
    Board, which is largely made up of central banks and finance
    ministers, directs pressure on policymakers in other areas.
        These issues can be fixed. The FSOC Improvement Act, which
    was introduced by Congressmen Foster and Huizenga, would
    actually have an activities-based approach to systemic risk
    regulation. We would be happy to collaborate with the committee
    on clarifying language, both on community pool operators and
    the Volcker Rule. Furthermore, we believe that this committee
    and Congress should exact oversight over the activities of
    American regulators within the Financial Stability Board and
    should also make sure that there is a Team USA approach, while
    also broadening representation of other agencies within
    discussions at the Financial Stability Board (FSB).
    Furthermore, this committee and Congress should also ensure
    that we are addressing the needs of the market for today and
    tomorrow as well as where investors are going.
        We believe it is important for Congress to pass the GROWTH
    Act, which was introduced by Congresswoman Van Duyne and
    Sewell, to remove a punitive tax on investors. We believe it is
    long past time to mandate e-delivery for investors, and we
    think it is very important for legislation introduced by
    Congressmen Huizenga and Sherman to move forward with this
    commonsense approach. Furthermore, there needs to be
    modernization of closed-end funds. We think it is important
    with legislation that was introduced by Congresswoman Wagner
    and Congressman Meeks that will allow for access of private
    capital in highly regulated funds, as well as ending activist
    campaigns.
        Lastly, the Investment Company Institute (ICI), after a 3-
    year effort, issued a report earlier this year reimagining the
    1940 Act with 19 different recommendations for how the 1940 Act
    can be modernized. The 1940 Act has not been reviewed by
    Congress in 30 years. We think that is an important step
    forward, and I want to submit this for the record. We look
    forward to working with you all on these issues, and I am happy
    to take any questions you may have.

        [The prepared statement of Mr. Quaadman follows:]
       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. Thank you, sir. Dr. Kupiec, you are
    recognized for 5 minutes for your oral remarks.

         STATEMENT OF DR. PAUL KUPIEC, SENIOR FELLOW, AMERICAN
                          ENTERPRISE INSTITUTE

        Dr. Kupiec. Thank you, Mr. Chairman, Chairman Hill, Ranking
    Member Waters, and distinguished members of the committee.
    Thank you for convening today's hearing and for inviting me to
    testify. I am a Senior Fellow at the American Enterprise
    Institute, but this testimony represents my personal views and
    research.
        As the Dodd-Frank Act work as the authors intended, the
    goals in the Act's preamble include financial stability,
    improved accountability and transparency, and an end to too big
    to fail to protect the American taxpayer by ending bailouts,
    but in March 2023, the Federal Government was forced to take
    emergency measures to bail out the banking system. The crisis
    occurred when depositors withdrew their funds wholesale after
    recognizing that large, unrealized interest rate losses had
    effectively rendered their banks insolvent. The crisis was
    averted when the Treasury instituted a blanket deposit
    insurance guarantee for failed banks and funded a $25 billion
    first-loss backstop for a Federal Reserve emergency lending
    program needed to bail out the banking system. The Fed's term
    funding program provided banks with emergency liquidity. It
    made nearly 10,000 loans on bank collateral that had very large
    market value discounts as a consequence of increased interest
    rates.
        The program loaned banks the full par value of their
    collateral for periods up to a year and, by some estimates,
    lent banks about $20 billion more than the market value of the
    collateral they pledged, and all at favorable rates. The
    decision to insure all depositors in the failed banks created
    very large insurance fund losses compared to the losses under a
    Federal Deposit Insurance Corporation (FDIC) lease cost
    receivership. Federal bank regulators failed in their oversight
    responsibility but still made the large banks, banks that bore
    no responsibility for the poor management at the failed
    institutions, pay for the large insurance fund losses.
        Dodd-Frank orderly liquidation authority gave authorities
    the power to take SVB's bank holding company into an FDIC
    receivership, liquidate its assets, and use the proceeds to
    reduce the Silicon Valley Bank (SVB) insurance fund losses, and
    yet, it was not invoked. It is possible that authorities did
    not invoke Orderly Liquidation Authority (OLA) because OLA
    funding was precluded by the congressional debt ceiling, which
    was also a problem for FDIC failed bank receiverships. The
    receivership's funding needs exceeded the balance in the
    Deposit Insurance Fund because the congressional debt ceiling
    was binding, the FDIC could not borrow from the Treasury. The
    receiverships were forced to borrow from the Fed Reserve
    discount window and pay a penalty interest rate 70 basis points
    over Treasury borrowing rates on hundreds of billions of
    dollars in loans. These additional insurance fund losses were
    just passed on to the large banks through special differential
    item functioning (DIF) assessments without much, if any, public
    discussion. So much for improved accountability.
        The large, unrealized interest rate losses that caused the
    March 23 crisis could have been detected as losses grew
    throughout 2022, as I show conclusively in my written
    testimony. The FSOC and its Federal banking regulator members
    could have used their extensive prompt corrective action powers
    to proactively impose remediation measures, yet they did not.
    Indeed, the past 15 years have demonstrated that the FSOC has
    little ability to detect and mitigate actual systemic risks. On
    several occasions, the FSOC completely missed actual sources of
    systemic risk, and on others, they falsely identified firms and
    activities as a systemic risk. The most recent example is the
    so-called Brown Industries Crusade launched to advance a
    political agenda rather than to address any demonstrable
    financial sector risk. The political nature of the FSOC's
    activities raises the cost of financial intermediation as FSOC
    policies change each time a new party assumes executive power.
        The Dodd-Frank regulations also impacted financial
    intermediations, particularly for large, complex financial
    institutions. To be fair, changes in intermediation patterns
    also reflect changes in Federal Reserve monetary policy and the
    outpaced growth in Treasury debt. The largest banks increased
    their use of deposit funding while reducing their use of
    subordinated debt, Federal funds borrowing, and Federal home
    loan bank advances. These changes replaced active monitoring by
    lenders with skin in the game with regulatory monitors. The
    largest banks' share of investments to loans to businesses and
    consumers also declined as they substituted liquid Federal
    Government guaranteed securities and Federal Reserve interest-
    bearing deposits. Smaller banks not subject to Dodd-Frank
    enhanced supervision did not make these adjustments.
        By many objective measures, the complex provisions and
    regulations in the Dodd-Frank Act did not work as their authors
    intended. I look forward to your comments and thank you.

        [The prepared statement of Dr. Kupiec follows:]
       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. The gentleman yields back. Mr. Kelleher, you
    are now recognized for 5 minutes for your oral presentation.

     STATEMENT OF MR. DENNIS KELLEHER, CO-FOUNDER, PRESIDENT, AND
                CHIEF EXECUTIVE OFFICER, BETTER MARKETS

        Mr. Kelleher. Good morning, Chairman Hill, Ranking Member
    Waters, and the members of the committee. Thank you for holding
    this important hearing and for the invitation to Better Markets
    to testify.
        While the focus today is the Dodd-Frank Wall Street Reform
    law, that law cannot be properly discussed or understood
    without reviewing the devastating financial crash that started
    in 2008 that made the law so necessary. That was the worst
    financial crash since the Great Crash of 1929, and it caused
    the worst economy since the Great Depression of the 1930s,
    which is why it was called the Great Recession. The damage
    caused by that crash ruined the lives of tens of millions of
    Americans, crushed small businesses and community banks,
    grievously damaged our economy and financial system, ballooned
    the country's debt, and undermined the pillars of our
    democracy, which depends upon an economy delivering rising
    living standards and broad-based prosperity.
        Just a few facts to illustrate the horrific scope of the
    damage caused to Americans from that crash. Thirteen months
    after the September 15 bankruptcy of Lehman Brothers, the U6
    unemployment rate reached 17.2 percent, throwing more than 27
    million Americans out of work. Sixteen million foreclosure
    filings happened during the Great Recession, causing millions
    of families to lose their homes. Forty-plus percent of homes in
    the United States were underwater, meaning their mortgages were
    higher than the value of their homes for years after the Lehman
    bankruptcy. Ten years passed before the unemployment rate in
    the United States return to pre-2008 crash levels, and after 8
    years after the Lehman bankruptcy, 90 percent of the American
    people were poorer at the end of 2016 than they were in 2007 by
    17 to 34 percent.
        It is also critical to remember that the 2008 crash was an
    avoidable, man-made financial crash and disaster that did not
    have to happen. It only happened because too many elected
    officials, policymakers, regulators, and others who should have
    known better listened to the financial industry's siren song of
    deregulation, which, as in the Greek myth, inevitably resulted
    in a catastrophic crash. That deregulation and crash resulted
    from too many believing the financial industry's claims that
    its interests overlap with the public interest, and that the
    industry is primarily focused on economic growth, job growth,
    credit supply, helping community banks, small businesses, and
    disadvantaged groups. The industry continues to trumpet these
    issues. Indeed, it is the chorus for the siren song of
    deregulation. Those claims, however, are usually smoke screens
    behind which they hide their profit and bonus-maximizing
    motives. That is fine for the private sector and that is fine
    for private companies, but that is not the public interest.
        The overriding lesson that should be learned and guide the
    road ahead is to reject that misleading but appealing
    deregulation song that the industry is singing again. It will
    lead to an even more horrific result, in part because the
    country simply does not have the fiscal or monetary capacity to
    properly respond to another financial and economic crash. The
    truth is that the threat from too-big-to-fail, too-big-to-
    manage, too-big-to-jail, and too-big-to-regulate financial
    institutions remains alive, well, and getting much worse due to
    the deregulation juggernaut unleashed by the Trump
    Administration. That was proved by the failure and bailouts of
    the three much smaller banks in 2023, which resulted from the
    deregulation in the first Trump Administration and cost the
    country more than $40 billion in direct bailouts and more than
    $300 billion in all-in costs. Yet the largest of those banks
    only had a little more than $200 billion in assets. In
    contrast, JPMorgan Chase alone has $3.64 trillion in assets,
    and the 15 largest banks in the United States have a combined
    $14 trillion in assets. There is no chance these much larger,
    much bigger, too-big-to-fail financial institutions can be
    resolved without destabilizing contagion and gigantic bailouts.
        Now, because everybody knows that, even if many will not
    admit it, regulators have tried to varying degrees over the
    years to increase the resilience of these financial
    institutions in the event of the inevitable stressful
    situations that will threaten their viability. Engaging in
    massive deregulation that significantly reduces the resilience
    of these gigantic financial institutions, knowing that they
    cannot be resolved, virtually guarantees the next crash will be
    much worse than the 2008 crash and could well cause a second
    Great Depression. That is the bad news. The good news is it is
    not inevitable. It can be prevented. Indeed, we know how to
    prevent it because we did it for more than 70 years. From the
    major laws and regulations imposed on the financial industry
    during the Great Depression of the 1930s until about September
    2008, the U.S. did not suffer from a major financial crash.
    Importantly, and finally, at the same time during those decades
    when the financial industry was under the most robust
    regulation in the history of the world, the U.S. economy grew
    at historic rates and generated broad-based wealth creation.
    That proves that a strong, regulated financial industry is not
    only compatible with but necessary to achieve above-trend
    growth, stability, and broad-based wealth creation. Thank you.

        [The prepared statement of Mr. Kelleher follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill. The gentleman yields back. We will now turn
    to member questions. I recognize myself for 5 minutes for
    questions.
        First, let me say that in looking at the inflation report
    this morning, the core Consumer Price Index (CPI) prices rose
    by less than expected for 5 months in a row, and on a
    cumulative basis, inflation, both headline and core, are
    trending close to the Fed's target of 2 percent; so, I think we
    continue to get inflation headed in the right direction in
    looking at today's report.
        Dodd-Frank, back in 2008, 2009, 2010, during those debates,
    I was a bank CEO during that time of a community bank, and so I
    know very much what it was like before Dodd-Frank and post
    Dodd-Frank as a private citizen working in a private financial
    environment. Everyone knows the best efforts by Congress was to
    try to prevent another financial crisis, but since its passage,
    the regulatory framework has grown significantly more complex.
    For example, the Code of Federal Regulations that relates to
    commercial banking has expanded by 3,000 pages. Dr. Kupiec,
    based on your experience, has Dodd-Frank's complex regulatory
    framework provided meaningful improvements to safety and
    soundness, or has it created so much complexity and associated
    costs that it is unclear for both consumers, business, and the
    community banking environment to figure out what the benefits
    actually were? How do you parse that?
        Dr. Kupiec. The regulations have gotten entirely complex
    and out of hand, and they do not work, as is evidenced by the
    March 2023 crisis. I do not understand this notion that there
    was no crisis for 70 years. I think there was a savings and
    loan (S&L) crisis and a banking crisis in the 1990s, and before
    Dodd-Frank, we had a lot of financial crises over the years,
    well before Dodd-Frank, but the regulations have gotten very
    complex and they do not actually address the risks in the
    banking system.
        As I lay out in my written testimony in tables, very
    comprehensive tables, the rules that they have created now do
    not even address interest rate risk, which is a basic risk, and
    the regulatory rules do not address that. While the regulatory
    ratios suggest that the banking system is solidly capitalized,
    once you take into account the fact that banks, which were
    loaded up with Treasury securities and other things, had huge,
    unrealized interest rate losses on their books, these complex
    regulations just do not tell you what the real truth of the
    matter is, and I will stop there.
        Chairman Hill. Yes, I appreciate that perspective. I mean,
    when you look at Silicon Valley, which Mr. Kelleher noted in
    his views, I do not view Dodd-Frank having helped or hurt
    there. I mean, I think you had a gap in regulatory oversight by
    the San Francisco Federal Reserve that was embarrassing, and
    the State regulator in Sacramento and terrible management who
    are not paying attention to the most basic banking rules. I do
    not think you can point at any law change that caused the
    terrible outcome there. I really do not. We will debate that
    off the dais. The regulatory bodies created by Dodd-Frank,
    including CFPB and FSOC, have created an estimated, that I have
    read, according to American Bankers Association, some $38
    billion in additional annual pre-tax costs for banks with
    smaller institutions bearing a disproportionate share of that
    burden. Mrs. Johnson, do you believe that this expanded
    bureaucracy has improved financial oversight, or has it
    resulted in so much excessive red tape, stifled economic growth
    that it has ended up restricting credit, and you have bank
    credit committees more focused on the next week's compliance
    meeting than lending money to their customers? What do you say
    on that?
        Mrs. Johnson. I can say any time that you have banks who
    are spending more time and more money on compliance and
    understanding the compliance that is necessary for multiple
    different agencies, that is really problematic. On the
    supervision side, at least from a bank perspective, you have
    consumer protection from the Bureau, but we often hear from
    banks who have different but three examiners in their
    institutions at the same time asking for similar information.
    It is just an incredible burden on these institutions, and it
    really does take their attention away from things that they
    should be doing, which is lending in their communities.
        Chairman Hill. Thank you. Mr. Bentsen, I am going to turn
    to you on the capital market side of Dodd-Frank, and you can
    respond to me in writing. I want to just ask you, the small
    institutions did not create the financial crisis, but Dodd-
    Frank imposed this big one-size-fits-all burden. Does that not
    hurt our capital market system?
        Mr. Bentsen. It certainly created some dysfunction within
    the system, so you are right. We have seen mergers amongst the
    smaller broker-dealers----
        Chairman Hill. If you would expand that in writing,
    Congressman, and thanks for being here today.
        Chairman Hill. I yield back, and we turn to the
    distinguished ranking member of the full committee, Ms. Waters,
    for her questions for 5 minutes.
        Ms. Waters. Mr. Kelleher, thank you for your testimony and
    reminding this committee of what a disaster and how costly the
    financial crisis really was. After the housing crash, where we
    saw mortgage brokers pedal no doc loans and other predatory
    products, why is it so important for Congress to create the
    Consumer Financial Protection Bureau. That way consumers of all
    stripes--students, seniors, servicemembers, and more--had a
    Federal cop on the beat fighting for them to make sure that
    mega banks or payday lenders or other bad actors were not
    ripping them off. Now, I understand you served for 4 years in
    the Air Force. Is that correct?
        Mr. Kelleher. Yes.
        Ms. Waters. Thank you for your service to our country.
    Trump's CFPB has claimed that they are going to prioritize
    protecting servicemembers and veterans, but I want your take on
    their actions. For example, Trump's CFPB proposed slashing
    staffing levels from 1,700 to 200 and proposed reducing CFPB's
    Office of Servicemember Affairs to just one employee, except
    the one employee they chose had already decided to retire,
    which would leave the office unstaffed. That office, which we
    required to be set up in Dodd-Frank, has been well respected
    across the political spectrum, with people like Holly Petraeus
    running the office before. How is it that the CFPB is supposed
    to protect servicemembers, veterans, and their families if they
    have no staff in the office?
        Mr. Kelleher. Anybody who claims that the CFPB currently
    manages protecting servicemembers, veterans, and their families
    is lying. You cannot do it with one person. You need a full
    staff and let me just give you a few statistics. The median
    loss from fraud from January 2015 to October 2019 to civilians,
    $658; to active-duty members, $775; retired military and
    veterans, $950. Servicemembers, veterans, and their families
    are being disproportionately targeted by financial scams and
    financial predators, and they need a strong cop on the beat,
    and they need the Office of Servicemember Affairs at the CFPB
    to be properly regulated.
        Since 2011, the CFPB has received more than 400,000
    complaints from servicemembers, and it has been responsible for
    recovering approximately $363 million in restitution for
    military and their families. One person is not doing that. Ten
    people are not doing that. We need a CFPB that is funded,
    staffed, independent, and an effective cop on the beat not just
    for servicemembers, veterans, and their families, but for all
    Americans who are getting ripped off too often, which is why
    the CFPB was the most successful financial consumer protection
    agency in the history of the country, returning $21 billion,
    with a ``B,'' billion dollars, to more than 200 Americans.
        Ms. Waters. Thank you very much. Another lie told by the
    President of the United States of America about how he cares
    about veterans and how he is going to help veterans. Let me
    tell you something. All of this talk about deregulation, about
    being consumed by regulation, it is because the rich, the big,
    and the powerful do not want oversight. They do not want us to
    have legislation that will make them accountable. Let me just
    tell you something. When we take a look at what is going on
    right now, the President, take a look at what he is doing with
    crypto. The President of the United States is engaged in a
    crypto con of massive proportion. In just 6 months, he has
    entered into the following crypto ventures. The President of
    the United States owns a $TRUMP meme coin, Trump digital
    trading coins; non-fungible tokens (NFTs); World Liberty
    Financial, his crypto company that is launching the stablecoin
    USDi; American Bitcoin, a bitcoin-mining corporation founded by
    Eric and Donald Trump, Jr.; and Social Truth Bitcoin Exchange-
    Traded Fund (ETF) and Crypto Blue Exchange-Traded Fund ETF; and
    even Melania owns crypto.
        I want to tell you, as we sit here and listen to those who
    have been trying to destroy CFPB, I was here and I knew what
    was happening. We had no protection for consumers, and with
    Dodd-Frank, we were able to come up with ways that we could
    have consumers call in, have someone investigate their problem,
    help consumers who were being ripped off. I want to tell you
    the big boys will keep ripping us off as long as we let them,
    and I tell you we are going to be dealing with this all week. I
    am absolutely outraged by the way that they have tried to kill
    the Consumer Financial Protection Bureau. I am outraged with
    the crypto ownership----
        Chairman Hill. The gentlewoman's time has expired. The
    gentleman from Michigan, the vice chair of the full committee,
    Mr. Huizenga, is recognized for 5 minutes.
        Mr. Huizenga. Thank you, Mr. Chairman. I am going to jump
    right in. Mr. Bentsen, I will start with you. Over the years,
    you have seen multiple iterations of the Financial Stability
    Oversight Council, FSOC. In the early years, post the great
    financial crisis, FSOC was given broad reaching authorities to
    designate nonbanks as systemically important financial
    institutions, or SIFIs. Under President Trump's first
    Administration, the FSOC moved to an activities-based
    approach--this was in 2019--which I believe was appropriate,
    especially in response to the post-MetLife debacle that had
    gone on. Four years later, 2023, under President Biden, the
    FSOC snapped right back to using an analytic framework for
    identifying and dealing with systemic risk, and as you can
    guess, Secretary Bessent, who is now the FSOC Chair, might have
    a very different view on how FSOC will operate under his
    leadership.
        As you are familiar, Mr. Foster and I have once again
    introduced the FSOC Improvement Act. The bill would revise the
    flawed risk assessment framework and designation guidance
    governing the SIFI designation process for nonbank financial
    institutions. Here is the question: After 15 years, is it time
    for Congress to make these improvements? Are there enough data
    and use cases to show that how FSOC determines designations is
    not working or has not been working and has not worked in the
    past, and did they make the financial system safer and sounder,
    which is what we would all like to see?
        Mr. Bentsen. Thank you, Congressman. We support the bill
    that Mr. Foster and you have introduced. We have supported it
    in other iterations through previous Congresses, so yes, I
    think the time is overdue. Short of that, we would hope that
    the FSOC would revert back to, I think, the 2018 activity-based
    process that you noted, and the problem here is the way it was
    constructed, it is trying to impose a bank-like regulatory
    structure over asset managers. We have had now 15 years to
    think about this. We have had 15 years of experience in the
    marketplace and----
        Mr. Huizenga. There is data there to----
        Mr. Bentsen. Yes. I think we know that activity space is a
    better approach, so we commend you all for the legislation.
        Mr. Huizenga. Mr. Quaadman, do you mind commenting on this?
        Mr. Quaadman. Yes, we would agree. I mean, ping-pong
    guidance is not a way to allow businesses to plan for the
    future. We do expect that the Trump Administration will move
    back to an activities-based approach, where, really, we do need
    to have legislation that is going to settle this once and for
    all and allow businesses the certainty to move forward.
        Mr. Huizenga. So, clarity is what you are looking for?
        Mr. Quaadman. Exactly. Clarity and----
        Mr. Huizenga. Not in this week's clarity, Mr. Chairman, and
    the work that we have done, but clarity on this particular
    issue. Okay. I am going to stick with you, Mr. Quaadman,
    because I want to talk about conflict minerals. I know you have
    something that you have worked on, I have worked on. That is an
    issue that has been nearly a decade. I first started working on
    this with Congresswoman Gwen Moore, and it is Section 1502. I
    believe it was a failure then. I believe it is a failure now.
    Under the rule required by Dodd-Frank Act, public companies are
    required to scour their supply chain for tin, tantalum, and
    tungsten, and gold linked to militia groups in the Democratic
    Republic of Congo (DRC) and the surrounding Great Lakes Region.
    However, there was a report in 2024. This is one page of the
    140 pages, I believe, or 120 pages of that 2024 Government
    Accountability Office (GAO) report, which I would like to
    submit to the record, Mr. Chairman.
        Chairman Hill. Without objection.

        [The information referred to can be found in appendix.]

        Mr. Huizenga. While that report concluded that the SEC's
    rule under Section 1502 of the Dodd-Frank Act has not actually
    reduced violence in the Congo and in the region, and, in fact,
    there is a small chart that I will point out to everybody, it
    has actually expanded. It has expanded, and, in fact, Secretary
    Rubio and the Trump Administration had to intervene in the area
    in the last couple of weeks. Here is a quote from the report:
    ``The GAO found no empirical evidence that the rule has
    decreased the occurrence or level of violence in the Eastern
    DRC.'' Here is the question: Section 1502 should absolutely be
    repealed, in my opinion, but what have we learned about some of
    the other Dodd-Frank rules that may have been very well
    intentioned, but, frankly, have not hit the mark?
        Mr. Quaadman. Yes. This is based on my previous experience,
    but I think if you look at conflict minerals, there are a lot
    of difficulties there as you referenced. Even The New York
    Times and Washington Post have had front-page stories of how
    that provision actually made things on the ground even worse.
    We also have the disclosure was kicked out by the D.C. Circuit
    Court of Appeals. Yet, companies still have to do all the
    collection around it, which actually then means that investors
    have to bear the cost of that. I think it is a good example of
    where you can have well-intentioned disclosures that do not hit
    the mark and do not provide investors with useful information.
    We should really take a very strong look at whether or not they
    should even be in place. I also believe, too, of conflict
    minerals, what the Trump Administration is trying to do there
    as well as access to critical materials is important for
    American national security.
        Chairman Hill. The gentleman's time has expired.
        Mr. Huizenga. I yield back.
        Chairman Hill. The gentleman yields back. The gentlewoman
    from New York is recognized, the ranking member of our Small
    Business Committee.
        Ms. Velazquez. Thank you, Mr. Chairman, and good morning,
    everyone. Thank you for being here. If we are going to talk
    about Dodd-Frank 15 years later, we need to also look at the
    whole picture, including the industry and Republicans' attempt
    to weaken the original protections. Mr. Kelleher, can you
    explain the changes made to the Dodd-Frank Act by the passage
    of S. 2155 a few years ago and how those changes, particularly
    with regard to bank capital, left our financial system more
    vulnerable?
        Mr. Kelleher. Yes. Thank you for the question, and I want
    to start by agreeing with the chairman that it was miserable
    management that primarily drove those banks into high-risk
    activities and ended up resulting in their failures. Those were
    avoidable. Also, management ran those banks into the ground,
    and their boards failed to supervise them, and the regulators,
    frankly, did not do their job either. There was plenty of blame
    to go around, and there has been no accountability even now.
    Unfortunately, there was an attempt to pass legislation, as you
    know, to claw back executive compensation under those
    circumstances that never saw the light of day but 2155
    essentially eliminated, either de facto or by requirement, the
    prudential regulations on banks with less than $250 billion in
    assets.
         Better Markets filed comment letters at the time that
    talked about 2155, and then when it was passed and went to the
    regulatory agencies, particularly the banking agencies, we said
    in letters, in writing, commenting on the proposed rules at the
    time that if you implement this law the way you are going to do
    it, you are going to have banks engage in higher-risk
    activities, and they are going to ultimately fail, and there
    are going to be bailouts.
        Ms. Velasquez. So----
        Mr. Kelleher. That is exactly what happened. It was
    predictable, foreseeable, and that is what happened.
        Ms. Velazquez. It is not entirely accurate to say that
    Dodd-Frank has not worked. Is it not a more accurate statement
    to say that changes made post-Dodd-Frank have weakened original
    protections and cost vulnerabilities in our financial system?
        Mr. Kelleher. Yes, and it is not only true for 2155. As I
    detailed in my written testimony, the primary reason that Dodd-
    Frank did not work is because of the war that the industry and
    its allies engaged in to attack and undermine Dodd-Frank at
    every step of the way in the regulatory process. When they did
    not win in the regulatory process, they ran to court and sued
    to try and win in the judicial arena what they could not win in
    the regulatory arena or the legislative arena. This law would
    have worked. It had the authority and the power to do the job.
    As I detailed in my written testimony, it was not allowed to do
    the job, and that is why it has not been successful.
        Ms. Velazquez. Like this hearing right now. Since 2011, the
    CFPB has secured more than $21 billion of relief for more than
    205 million consumers. Unlike other financial regulators,
    Congress provided it with an independent funding mechanism.
    Yet, this has not stopped the Trump Administration and
    congressional Republicans from trying to destroy the Bureau
    from within, including as part of the One Big Ugly Bill, which
    slashed the Bureau's operating funding nearly in half. Can you
    explain the potential harm facing not just consumers, but the
    broader financial system by slashing the Bureau's funding by
    such a large amount?
        Mr. Kelleher. I think the Consumer Financial Protection
    Bureau has proved almost on a daily basis its importance to
    main street Americans who are getting ripped off and
    discriminated against as a routine matter. Look at the cases
    that the CFPB has brought over the 14 years that it existed.
    These are against giant financial institutions that have
    settled cases for hundreds of millions of dollars. They are not
    doing that because they are generous. They are doing that
    because they broke the law, and the highest-priced, the best
    lawyers in America are representing these premier financial
    institutions, and they are settling their legal violations.
    That is why the CFPB is needed. They need an effective cop on
    the beat, and you can only have an effective cop on the beat if
    you fund them. You cannot send cops into an inner-city, high-
    crime area with no bullets, guns, or cars, or flat tires, and
    that is what you are doing on the consumer protection beat here
    by crippling the Agency.
        Ms. Velazquez. I rest my case, Mr. Chairman. I yield back.
        Chairman Hill. The gentlewoman yields back. The gentleman
    from Oklahoma, the Chair of our Monetary Policy Task Force, Mr.
    Lucas, you are recognized for 5 minutes.
        Mr. Lucas. Thank you, Mr. Chairman. I, too, was one of the
    limited members of this committee who served on the Dodd-Frank
    conference committee, and I remember our efforts to get a
    legislative agreement that appropriately addressed the economic
    turmoil our country was facing. Unfortunately, Dodd-Frank
    ultimately resulted in dramatic regulatory overreach that I
    could not support, and we are still dealing with the
    consequences of the bill 15 years later. Many of the changes
    made during the time continue to damage our competitiveness and
    limit our economic growth. They do not account for the credit
    needs of farmers, ranchers, and main street businesses.
        Starting with you, Dr. Kupiec. In our country, we have
    assigned the Fed to deal with monetary policy and prudential
    matters. We have also had this dual role, but after the passage
    of Dodd-Frank, their prudential functions expanded
    dramatically, and they have begun policing behavior they had no
    authority to do. As Chairman of the Task Force on this issue, I
    have a concern that I continue to raise that the broadening of
    authority of the Fed's regulatory and supervisory roles
    ultimately politicizes the institution and threatens monetary
    independence. Doctor, do you think mission creep from the
    regulatory side of the Fed complicates their role as our
    central bank?
        Dr. Kupiec. Yes, clearly. Clearly, and the climate change
    brought that to the fore in the last administration; the remit
    that the Fed should regulate climate change risks in banks and
    things like that. I think now they have abandoned that in the
    newest administration is another example of the ping-ponging of
    the FSOC and the executive role about designating things that
    really are not systemic risk as systemic risks.
        Mr. Lucas. Anyone who thinks that this was a negotiated
    bill, this was a slam dunk. I remember the opening day of the
    conference committee when the chairman of the conference, our
    Financial Services Committee Chairman, Barney Frank, announced
    that we would not be using the House draft, which represented a
    compromised effort in this committee, and we picked up the
    Senate document. That is when we knew the fix was on as members
    of this body.
        Mr. Bentsen, as you know, Dodd-Frank altered the risk
    retention rules on securitized assets. In your view what is the
    effect on the cost of and the access to credit if this tool is
    cost prohibitive for lenders?
        Mr. Bentsen. Thank you, Mr. Lucas. Part of the problem with
    the changes in the risk retention rules was that there are so
    many different parts of Dodd-Frank that overlap and, in
    particular, the capital rules, and, in particular, we think
    about the stress test regime and the component of that, the
    global market shock. None of that has ever been adjusted to
    take into consideration the risk retention rules that were put
    into effect; so, we have a, I do not want to call it a double
    count. We have double counts elsewhere, but in effect, we are
    scoring things according to the pre-legislative rules, so it
    compounds the impact of the capital rules. That affects the
    price on securitization.
        Mr. Lucan. Continuing with you, Mr. Bentsen, we have a new
    vice chairman for supervision at the Fed, and I believe Vice
    Chair Bowman is perfectly suited for the role. What should Vice
    Chair Bowman look at in a Basel re-proposal to address the
    concerns raised by market participants after the last proposal?
    How should Vice Chairman Bowman approach the Fundamental Review
    of the Trading Book in a Basel re-proposal?
        Mr. Bentsen. There are a number of issues that the Fed and
    Vice Chair Bowman should take a look at with respect to the
    Fundamental Review of the Trading Book, some issues that are
    inconsistent with other participants in the Basel framework in
    Europe and the U.K., but also how the Fed staff initially gold
    plated the proposal that would raise capital above already
    historic levels. Most importantly, and I think Vice Chair
    Bowman has said that she intends to do this as she has a
    conference next week that the Fed is hosting, is, again, to
    think about the interaction of all these rules. If the Fed
    agreed with us, and who is to say that they should or they
    should not? If they agreed with us and took all the suggestions
    that we put forth, they would still have an exorbitant increase
    in risk-weighting capital requirements on things like
    securitization. The reason for that is because of the
    interaction with the stress test regime, and that is a double
    count, and we have had a lot of discussions with them about
    this to sort of look at that.
        Frankly, I think the Fed themselves were shocked with how
    their original proposal came out. Hopefully, now they will take
    that into consideration because this does have knock-on effect,
    not just the mortgages, but small business lending, equipment
    financing, things that are done through the securitization
    market.
        Mr. Lucas. Mr. Chairman, we can do better than the status
    quo we have now.
        Chairman Hill. The gentleman's time has expired. The
    gentleman from California, Mr. Sherman, the Ranking Member of
    our Capital Markets Subcommittee, you are recognized for 5
    minutes.
        Mr. Sherman. Thank you. I enjoyed the exchange between Dr.
    Kupiec and our chair. The chair points out that Silicon Valley
    Bank was terrible management, as if that was a lightning
    strike. No. We have a system that says you buy long-term bonds.
    If they go up, you sell them, the bank recognizes an immediate
    profit, and the board of directors gets a huge bonus, and if
    they go down, you can hide that loss. Ninty-nine times out of
    100, you will get away with it. So, bad management is from bad
    rules, and I have been in this committee for a long time saying
    we have to mark-to-market long-term debt held by banks.
        The chair also says that we should allow State regulation
    to provide for corporations. That is a race to the bottom, and,
    again, we have bad management because of bad incentives. A
    State legislature in a small State, they are focused on getting
    revenue for their State, not upon providing good corporate
    management and oversight for corporations that may have a
    little impact on their State; so, we need to deal with long-
    term debt on bank balance sheets. We need the Federal law to
    provide the rules for national corporations.
        Finally, we have a system which does not give investors the
    information they need. A hundred years ago, when our accounting
    systems were designed or the financial statements were
    designed, the vast majority of the value of a company was in
    its physical assets shown on its balance sheet. Today, the most
    valuable thing is intangibles, particularly the workforce. Yet
    again and again, we do not require the disclosure of turnover
    rates, training expenditures, or anything else relevant to the
    workforce. For several years now, I have been pushing for us to
    disclose the China risk because what is the good of knowing
    last year's earnings per share if you cannot even get
    management to tell you how they would be affected by a
    breakdown in the U.S.-China relationship?
        Today, we are focused on Dodd-Frank, and it brings the
    post-traumatic stress disorder (PTSD) of the 2008 crisis when
    this committee said never again. History does not repeat
    itself, but it rhymes. We have an echo of 2008 in Crypto Week.
    Now, this is also tax evaders' month and drug dealer
    facilitations year. Both bills rejected an amendment that I
    proposed here and to Rules Committee saying no bailouts for
    anyone in the crypto ecosystem. Those amendments were rejected,
    and the crypto world is looking forward to telling its
    investors they are as bailout eligible as Bank of America, but
    what caused the 2008 collapse? It was the subprime and liars'
    loans. What is a liars' loan? You agree to pay 1 percent more
    on your mortgage, and the lender says, well, just tell us what
    your income is, and you do not have to give us a W-2. You do
    not have to give us a tax return. So, the financial system back
    in 2008 strained to provide financial services to those who
    turned to their mortgage broker and said I really make a lot. I
    am just lying to the Internal Revenue Service (IRS) or my ex-
    spouse. Well, history rhymes.
        This week we are going to deal with stablecoin. What is
    stablecoin? It is a money market fund that pays zero interest,
    a worse deal for consumers, just like the liars' loan is where
    you pay more on your mortgage, but what does the stablecoin
    offer? It offers hidden money so that you can defraud the IRS,
    your ex-spouse, engage in drug trafficking, et cetera. History
    does not repeat itself, it rhymes, and here we are back again
    trying to have our financial system meet the needs of those who
    want to cheat on their taxes, engage in illegal activity, et
    cetera.
        Mr. Bentsen, your letter to the SEC talks about the
    separation of functions with vertical integration, where a
    single platform can act simultaneously as the issuer, broker,
    and exchange, and custodian. Can you explain what the risks are
    of allowing that integrated structure in the crypto world?
        Chairman Hill. The gentleman's time has expired. If Mr.
    Bentsen, you would respond to the member in writing, please.
        Chairman Hill. The gentlewoman from Missouri, Mrs. Wagner,
    who is the Chair of our Capital Markets Subcommittee, is
    recognized for 5 minutes.
        Mrs. Wagner. I thank you, Mr. Chairman. I thank our
    witnesses for being here today. Under former Chairman Gensler,
    the SEC repeatedly overstepped its statutory boundaries,
    invoking authorities under Dodd-Frank in ways that neither
    align with the law's intent nor advance the Commission's
    threefold mission: to protect investors; to maintain fair,
    orderly, and efficient markets; and to facilitate capital
    formation. In fact, Gensler's regulatory agenda undermined
    these goals.
        Under President Biden, everyday Americans in Missouri's 2nd
    Congressional District were told they would have fewer choices,
    increased costs, and less clarity on who they could ask for
    financial advice. In June 2024, the Fifth Circuit unanimously
    vacated the SEC private fund advisor rule, which would have
    imposed significant requirements on private fund advisors and
    made broad changes to how private funds operate. The SEC
    claimed the authority to propose this rule through Section 913
    of Dodd-Frank, which is focused on the fiduciary duty of
    broker-dealers and investment advisors who are providing advice
    to retail customers. In this decision, again, an unanimous
    decision, the court rightly held that Section 913 of Dodd-Frank
    has nothing to do with private funds, and the SEC should not
    rely on this section of the statute to regulate private fund
    advisors and investors.
        Mr. Quaadman, how does the Fifth Circuit's ruling on
    private funds rule redefine the scope of the SEC's authority
    under Dodd-Frank, and what are the potential implications for
    future financial regulations?
        Mr. Quaadman. Thank you for that question, Mrs. Wagner. It
    is very important, and you have to remember, too, we are also
    living in a West Virginia verses Environmental Protection
    Agency (EPA) world now.
        Mrs. Wagner. Yes.
        Mr. Quaadman. The Agency itself cannot move forward without
    clear direction by Congress. I would also say, too, I think
    some of the legislation that this committee is considering in
    terms of unused authorities really needs to be looked at very
    closely. The predictive analytics rule is another one which is
    very misguided.
        Mrs. Wagner. I am moving to that next.
        Mr. Quaadman. There we go. I will let you ask the question
    then.
        Mrs. Wagner. In a similar way to the Commission's private
    funds rules, former Chairman Gensler's predictive data
    analytics proposals disregarded the limitations of Dodd-Frank
    Section 913 again. Section 913 primarily focused on retail
    customers and personalized investment advice about securities.
    However, the proposal stretched his authority to cover broad
    investor interactions and technologies like predictive data
    analytics and, which Congress never intended, and that is the
    heart of the matter here. Let me move to Mr. Bentsen. With
    legislative action, Mr. Bentsen, what action should Congress
    pursue to clarify the precise limits of this authority and
    prevent future instances of regulatory overreach?
        Mr. Bentsen. First of all, we agree with the court's
    decision with respect to the private funds. We were not a party
    to the suit, but we did file an amicus brief in support of the
    suit. Frankly, and in the case of the predictive data
    analytics, which we thought was not a very well-thought-out
    rule, and we are glad it has now been withdrawn. We actually
    think it was also unnecessary because, frankly, whatever
    concerns there might have been are already covered under Reg
    Best Interest----
        Mrs. Wagner. Correct.
        Mr. Bentsen [continuing]. and so, there is not really a
    need for that. Section 913, and I was around, too, 15 years
    ago, Section 913 was highly negotiated between the House and
    the Senate, between then Chairman Frank and the Chairman of the
    Senate Securities Subcommittee, Senator Johnson, and Congress'
    intent was very, very narrow and very clear, to the point that
    you are making.
        Mrs. Wagner. It has been abused, certainly abused by the
    SEC during Democrat leadership that we have seen over and over
    again.
        Mr. Bentsen. I mean, the courts have kind of reeled it in,
    and so----
        Mrs. Wagner. Yes, but that costs money.
        Mr. Bentsen. Right.
        Mrs. Wagner. It gets trickled down to my Missouri retail
    investors, everyday investors. It is so infuriating to me that
    we have been litigating this for 15 years, Mr. Chairman. Let me
    move on.
        While the SEC was rightly challenged for exceeding its
    authority during the Biden Administration, litigation
    contributes to a climate of uncertainty for investors and
    market participants across the country and costs. Businesses,
    particularly those in innovative sectors like fintech, become
    hesitant to invest in new technology or business models if the
    rules of the road are constantly in flux. Mr. Quaadman, to what
    extent did SEC's overreach and the court battles trigger,
    ultimately stifle, capital formation by creating an
    unpredictable operative environment? I am about out of time.
    You may have to respond in writing, but this is important.
        Mr. Quaadman. Number one, there is a chilling effect.
    Number two, and I will respond in writing about
    interconnectedness of rules, which is not considered either.
        Chairman Hill. The gentlewoman's time has expired.
        Mrs. Wagner. Thank you. I yield back.
        Chairman Hill. Thank you very much. We now recognize the
    distinguished Ranking Member on our House Foreign Affairs
    Committee, Mr. Meeks from New York, for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman. I want to thank you for
    holding one of the most consequential pieces of Financial
    Services legislation. I was in Congress back during the height
    of the financial crisis when Lehman Brothers failed, when major
    insurers were about to go under, when then President Bush had
    Secretary Paulson running to the House floor. I will never
    forget, he ran and met me in the Democratic room on the floor
    trying to get votes, saying that if we did not do something
    immediately, our entire financial system would fail. They did
    not have all the votes that they needed on the Republican side
    to get it done, so they desperately needed Democratic votes.
        One of the things that we talked about at that time was
    there was one voice because I remember during that time, people
    were losing their homes, their credit gone, they are out, they
    are homeless, they are trying to find some, still could not get
    rent. The idea or the thought was everybody had some kind of
    coverage, except one group. It was called the consumers. I
    surely wish there was a panel here that some of the consumers
    would be here to testify, also, who benefited for the last 15
    years from having a Consumer Financial Protection Bureau.
        Now, I am all for looking to see what we can do to improve,
    but one of the things that I think that we have not seen since
    2008, we had a once-in-a-century pandemic that did not lead to
    contagion of the financial variety, the regional bank failures
    of 2023. What did not happen, that did not spiral because of
    Dodd-Frank, the reforms in it? Higher capital requirements,
    stress testing, and the Volcker Rule. It worked as intended,
    even with the failed management, what you said. Those practices
    that were put in place because of Dodd-Frank helped save more
    consumers who would have been victimized.
        Now, I am really concerned, and I look at ways that we can
    try to fix a bill because sometimes bills change and move
    forward. One of the things that I was in favor of, and I think
    that we could look at, and I think, Mrs. Johnson, you talk
    about this, is how to get the politics out of this. Now, I was
    in favor and still am, and I believe you are, Mrs. Johnson, in
    having a bipartisan commission, and I think that the CBA has
    been talking about that so that we are not from administration
    to administration and things changing. I think that is
    something that we should be talking about here. I think that is
    really important, and I think you agree, Mrs. Johnson, that
    there is a need. You recognize the need for a CFPB. Is that not
    correct? Please say ``yes'' so that is on the record.
        Mrs. Johnson. Yes.
        Mr. Meeks. My first question is under President Trump and
    Republican leadership, they wanted to zero out the Bureau, an
    effort that was slightly mitigated by the Senate's
    parliamentarian, but what the administration tried to do was to
    cut the Bureau staff by 90 percent in just 24 hours. Now, do
    you think that reflects a regulatory approach that is grounded
    in facts and data, or is that just trying to get rid of an
    agency? Yes, Mrs. Johnson?
        Mrs. Johnson. I think what Congress ultimately did was a
    policy decision--I am sorry--a budget decision, not a policy
    decision.
        Mr. Meeks. I am just saying, zeroing out, that was not
    done. Let me just go because I am running out of time. I wanted
    to ask Mr. Kelleher, do you believe that the CFPB is being
    deliberately weakened under the guise of regulatory reform, and
    who stands to benefit from that if that is the case?
        Mr. Kelleher. There is no question that the CFPB is being
    weakened, if not killed, for the purpose of benefiting the
    financial industry and making sure there is not an effective
    cop on the consumer beat standing up for main street Americans,
    and having the power, authority, and funding to help them when
    they are getting ripped off.
        Mr. Meeks. So, we would go back to where we were before,
    where there would be no one there for the consumer. It was
    named the Consumer Financial Protection Bureau to protect the
    consumer who has never had a voice before this Congress before.
        Chairman Hill. I thank the gentleman. The gentleman yields
    back. The gentleman from Kentucky, Mr. Barr, the Chair of our
    Financial Institutions Subcommittee, is now recognized for 5
    minutes.
        Mr. Barr. Thank you, Mr. Chairman. Let me start just where
    my friend from New York left off. I was encouraged to hear my
    good friend from New York embrace the idea of a bipartisan
    commission. We have that bill in our package of reforms, and I
    would invite the gentleman, my good friend, to look at that, to
    co-sponsor. I would love to work with you on a bipartisan
    commission reform. Also, the gentleman expresses concern about
    our One Big Beautiful Bill, which reduces the funding formula
    for the Bureau. I would encourage the gentleman and all my
    friends on the other side of the aisle to look at co-sponsoring
    my legislation that would allow them and us to reclaim the
    power of the purse over the Agency, the TABS Act, the Taking
    Account of Bureaucrats' Spending Act, which would restore
    Congress' bipartisan and meaningful oversight over the Bureau
    so that we would control the appropriation. So, I think the
    gentleman's line of questioning is timely because it gives us
    an opportunity in the Congress, on a bipartisan basis, to
    reclaim our oversight functions over the Bureau.
        Mrs. Johnson, let us talk about CFPB reform. Would you
    explain how my legislation, the Taking Account of Bureaucrats'
    Spending Act, which would subject the Bureau to congressional
    appropriations, would enhance accountability and limit
    bureaucratic overreach?
        Mrs. Johnson. I think that for far too long, the CFPB has
    not been accountable. We have not had a commission. We have not
    had consensus or dissenting views welcomed at the Bureau. It
    has been by one director, and oftentimes they have got kind of
    ruling by fiat, so Congress has not had the authority and the
    visibility into the Bureau. I think that they will be more
    responsive if there is an ability for you all to control the
    purse strings.
        Mr. Barr. I appreciate your testimony endorsing my
    legislation to put some guardrails and definition around the
    abusiveness prong of Unfair or Deceptive Acts or Practices
    (UDAP). Why is that important?
        Mrs. Johnson. Look, Congress did create an exceptional
    standard for UDAP with the CFPB, unlike the Federal Trade
    Commission (FTC), unlike some of the other prudential
    regulators. For far too long it has been undefined, and
    entities that are regulated by the CFPB do not have the clarity
    needed to understand what constitutes as an abusive act or
    practice and how that differs from, say, deceptive or unfair
    acts and practices. In addition to that, the CFPB has at times
    gone far beyond and really interpreted UDAP into things that it
    never was intended for. Oftentimes, it actually decides 1 day
    that something is illegal or that it is a UDAP violation when
    it was perfectly legal and acceptable and actually done by the
    entire industry the day before, then it applies, retroactively,
    penalties to different institutions. This is wrong.
        Mr. Barr. Yes, and it is wrong. It denies Americans due
    process, and it is why the Bureau has such a black eye. It can
    be reformed into a much more professional Agency, and that is
    also why we need to stop these roving fishing expeditions,
    these civil investigative demands with no statutory violation
    or regulatory violation even alleged, just a fishing expedition
    with no due process. We need to reform that process as well.
        Mr. Bentsen, as you pointed out, Dodd-Frank ushered in over
    400 new regulations and granted regulators like the SEC broad
    discretionary authority. Nearly 15 years later, many of these
    powers remain unused, yet their mere existence creates
    regulatory uncertainty. For example, Section 921(a) allows the
    SEC to ban mandatory arbitration clauses and securities
    contracts without any additional action from Congress. Congress
    has already weighed in on this issue. In 2017 we overturned the
    Bureau's mandatory arbitration rule, not just on procedural
    grounds, but because the evidence showed arbitration delivers
    better outcomes for consumers than costly, drawn-out class
    action lawsuits. That was a clear bipartisan message.
    Regulators should not restrict arbitration based on ideological
    or political agendas, and that is why I introduced the Business
    Owners Protection Act to repeal these unused powers, to provide
    legal clarity, and enhance transparency and accountability at
    the SEC. Mr. Bentsen, how do these dormant but broad
    discretionary powers contribute to uncertainty and risk in the
    capital markets?
        Mr. Bentsen. Certainly, with respect to things like pre-
    dispute arbitration agreements, which is the mainstay in the
    securities world, and then to your point, is very investor
    friendly, very cost efficient, and much more cost efficient
    than court litigation. It is a little bit like a sword of
    Damocles hanging over you. So, we would agree with you that we
    are not sure why Congress felt the need to give the SEC the
    authority in this instance, and so, we would agree with
    repealing that.
        Mr. Barr. There are a lot of dormant, unused authorities.
    It has been 15 years, and the SEC or other regulators empowered
    by Dodd-Frank have not acted, and Congress has sent a message
    to the contrary. We need to repeal those unused and dormant
    authorities. I yield back.
        Chairman Hill. The gentleman yields back. The gentleman
    from Massachusetts, Mr. Lynch, the Ranking Member of our
    Digital Assets, Financial Technology, and Artificial
    Intelligence (AI) Subcommittee, recognized for 5 minutes.
        Mr. Lynch. Thank you, Mr. Chairman. I want to thank all the
    witnesses for your willingness to come before the committee
    today. Mr. Bentsen, good to see you again, sir. Welcome. I want
    to associate myself with the remarks of the gentleman from
    California, Mr. Sherman, earlier today----we have somebody's
    phone going off here.
        --especially with respect to Mr. Sherman's comparison to
    2008 and the conditions that existed then and today, where we
    have Crypto Week and some of the suggestions and bills that
    have come forward. Back then, in 2008, we had some very complex
    and novel innovations. We had collateralized debt obligations.
    We had credit default swaps. We had all these complex
    derivatives that were the wonder of the day, and the financial
    services industry came to us, and I think convinced a lot of
    members--not me, but a lot of members--to support that whole
    regime, and we saw how it blew up. Today, we have crypto, and
    even though it does not have any legal use case as yet, there
    is a lot of hype and there is a lot of support for it. It has
    only accelerated since President Trump became a crypto issuer,
    and his family has gotten into the business as well.
        I am just concerned because I am seeing the same regulatory
    forbearance that I saw back in 2008 happen today. The SEC,
    under Trump, they came in and said, we are going to rescind the
    guidance that we used to give banks about crypto. Mr. Kelleher,
    as you pointed out earlier, we have some massive banks. Back in
    2008, JP Morgan was $2 trillion. Now they are $3.4 trillion,
    Now Trump's SEC is saying to the Big Banks, all the Big Banks,
    and there are at least 5 of them over $1 trillion, 6 of them
    over $1 trillion, close to $2 trillion, he is saying, go ahead
    and get involved with a very volatile and speculative asset.
    What I worry about? I worry about the American taxpayer being
    on the arm on this one.
        Back in 2008, I voted against it twice, but we had a huge
    bailout, over $700 billion. I had constituents in my district
    that did not even have bank accounts, and they took their
    taxpayer money to bail out the people who caused the problem. I
    see that happening again. This is not going to end well. This
    is not going to end well. Crypto is still an immature
    technology, an immature architecture. It is not there yet. It
    has got huge gaps, huge problems, and yet we are rushing in,
    and it is not going to end well and there is going to be a
    bailout required. Mr. Sherman and I both had amendments during
    the debate over some of these bills to say, okay, okay, if you
    want to take risks for the banks and others, do it on your own
    dime. Hold the American taxpayer harmless. Take all of that
    risk, but you are not getting a bailout. Every single
    Republican member voted against that. Every single Republican
    member said, no. No, the taxpayer is going to stay on the hook.
    That is what worries me. If the banks were taking the risks on
    their own, but they are insured. They are insured. They are
    just too big to fail.
        Mr. Kelleher, what do you think the consequences are going
    to be when there is a disaster on crypto and a bunch of these
    meme coins or crypto assets go to zero, and there is a bunch of
    people that were led to believe by Congress that it was a safe
    bet, and they were led to believe by the banks that it was a
    safe bet, and then they are scrambling to recover their life
    savings? How is that going to go?
        Mr. Kelleher. It is the worst of all worlds because you are
    adding massive deregulation of financial institutions that are
    already too big to fail, and if they fail, they are going to
    get massive bailouts. So, on top of that deregulation, you are
    pouring the gasoline of the crypto industry, which, by the way,
    and we have a lot of materials on our website about this, are
    not even supported by the American people. They come up here
    and they claim they are supported by voters. We put out a
    Substack yesterday showing that is a false claim. So, crypto
    plus deregulation equals disaster and bailouts.
        Chairman Hill. The gentleman's time has expired.
        Mr. Lynch. I yield back, Mr. Chairman. Thank you.
        Chairman Hill. The gentleman yields back. The gentleman
    from Texas, Mr. Williams, the Chairman of our Small Business
    Committee, is recognized for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
    all of you for being here today. The biggest issue I hear from
    lenders in my district from the great State of Texas is the
    CFPB's 1071 small business lending rule. I have introduced
    legislation, H.R. 976, the 1071 Repeal to Protect Small
    Business Lending Act. My bill will repeal the unnecessary and
    burdensome rule, protecting lenders from endless compliance
    costs and protects the small businesses who rely on credit to
    expand operations and meet the needs of their customers.
        Now, the CFPB's small business lending rule mandates that
    financial institutions collect and report sensitive personal
    data about small businesses loan applicants. The implementation
    of 1071 is a direct threat to relationship banking and pushes
    lenders toward a standardized one-size-fits-all loan process.
    These mandates subject smaller institutions to endless hours of
    compliance and paperwork and will decrease the amount of loans
    to small businesses that support their local economies. Mrs.
    Johnson, can you elaborate on how Section 1071 of Dodd-Frank
    has created unnecessary regulatory burdens for all financial
    institutions, and how will this negatively affect the
    relationship-based lending model for smaller community
    financial institutions that we have all had for years?
        Mrs. Johnson. It is a really important question because
    banks really want to be able to provide the lending in their
    communities to the small businesses that fuel the overall
    economy. The requirements under Dodd-Frank were really for 13
    data points to be collected. It took the CFPB a very long time
    to do that because even that is going to be an extraordinary
    effort for all banks, not just small banks, for large banks;
    so, I can only imagine how difficult this compliance burden
    will be for community banks.
        The CFPB went far beyond that, and 80-plus data fields
    would be required under the CFPB's final rule. It was almost
    impossible for a lot of banks to actually collect that data and
    to do it in a way that was not going to be used against them.
    That was the other concern. I heard multiple times many lenders
    say they may have to stop small business lending altogether, so
    it was going to be a hamper on the overall economy as well.
        Mr. Williams of Texas. When that happens, the economy gets
    smaller, not larger. Another major issue with Dodd-Frank that I
    hear about when I am back home in North Texas is how complexity
    and cost of making a mortgage loan is simply too much for
    smaller community banks that do fewer than 20 per year. So,
    this means handing off essential business relationships to
    another financial institution which may not have much
    flexibility or willingness to work with borrowers, especially
    in rural areas where this happens where the loan may be
    unconventional. Doctor, can you expand on how overreach of
    Dodd-Frank has been a driving force in small financial
    institutions exiting the mortgage business altogether and
    killing and hurting small businesses and individuals?
        Dr. Kupiec. The ability-to-repay rules are complicated.
    There are a lot of rules related to originating and holding
    mortgages that have been instituted after the Dodd-Frank Act.
    They were designed to protect consumers, but they raise a lot
    of costs for banks. There are studies that show community banks
    have faced very large compliance costs. There are some cutouts
    for the rules for very small institutions that make just a few
    loans, but even there, it favors larger shops that can have big
    compliance staff that can do these sort of things. So, it
    really does put community banks at a disadvantage for making
    these kind of loans.
        Mr. Williams of Texas. As we always say, community banks
    hire more compliance officers now than loan officers, and that
    affects main street Americans.
        Dr. Kupiec. One thing that might be interesting is the
    effect of AI on the regulatory community. I mean, if you really
    think about so many things in the FSOC and other things are
    backward looking, and if AI can digest all the connections and
    past data, then maybe we can shrink the financial regulator
    staff and still do the same job we are doing. I mean, it is
    kind of interesting to think about that when people talk about
    the CFPB and cutting staff. Has anybody thought about where we
    are going to go and can AI actually do a lot of what the staff
    currently do? I mean, if you think about what they do, they are
    not particularly prescient about looking forward and
    identifying risks. They are looking always backward at data,
    and we feed in all kinds of data, so just a thought.
        Mr. Williams of Texas. I have limited time. What specific
    policies from Dodd-Frank would cause a decrease in competition
    in the banking industry, to you, Doctor, and what can Congress
    do to reverse the course and allow financial institutions of
    all sizes to compete and avoid consolidation?
        Dr. Kupiec. There has been a trend in small bank
    consolidation for decades now. Dodd-Frank adds complex rules
    that do not make it any easier to be a community banker. I
    mean, I think right-sizing a lot of these rules would be
    helpful.
        Chairman Hill. The gentleman's time has expired.
        Mr. Williams of Texas. I yield back.
        Chairman Hill. The gentleman yields back. The gentleman
    from Illinois, Mr. Foster, the Ranking Member of our Financial
    Institutions Subcommittee, is now recognized for 5 minutes.
        Mr. Foster. Thank you, Mr. Chair, and to our witnesses. You
    may not recognize it, this here, it is a pin for the 110th
    Congress. I entered Congress in March 2008, and this is the pin
    I received and so, Lehman Brothers fell in October. I was up
    there in front as a junior member of the committee in the first
    row there, so I was just maybe 6 or 8 feet away when we had the
    famous hearing with eight failed banks coming up telling us
    that we had to, like, write them a great big check, or they
    were all going to be in trouble. That sort of was my initiation
    into this thing.
        On the 15th anniversary, I think we should think deeply
    about fundamental issues. One of them is, why do we have
    financial services at all? It has three basic functions. One of
    them is to allocate capital. There are three basic functions--
    allocate capital, to do so efficiently, and to control risk--
    and at the time, our system had failed dramatically at all
    three of those. The housing bubble was probably the biggest
    misallocation of capital in human history because people were
    able to hide the true risk of non-repayment of these mortgages.
        The efficiency? In the run-up to the financial collapse,
    the lion's share of corporate profits was in financial
    services, and that tells you right there that we were not
    running an official financial system, and that is very related
    to many of the abusive practices. None of you have mentioned
    the CARD Act or the credit card reforms that were just doing
    unbelievable things to consumers just to gouge them for money,
    people in vulnerable positions, and then its third function of
    controlling risks that is I think enough is said about that,
    and I think it is very significant.
        In the dog days of trying to deal with this first, to the
    emergency bailout that we had to vote for, then the stimulus of
    the economy, and then the Dodd-Frank rules of the road that we,
    I think, did our best to implement. I always tell myself that
    my goal was to die before we had another financial crisis and
    we have come pretty close to that. What happened a couple of
    years ago? Okay. It was a crisis, but it was minuscule on the
    scale of what happened in 2008. So, the discussion we have been
    having in the 15 years since then, there are two big buckets.
    The first one, to my mind, is systemic risk and with bank
    leverage at the very heart of that, and then the second thing
    has to do with consumer protection, and that has to do very
    much with the discussion of the maldistribution of wealth in
    our society, and the politics gets mixed up there. I would like
    to just talk about systemic risk.
        The battle we cannot lose is bank capital on that. That was
    the thing. When I discovered as a junior member that the giant
    investment banks like Lehman were levered 30 to 1, that cannot
    be the right number. What is the right number? No, in fact,
    that was the right number, and the fact that anyone thought
    that was okay was just mind-boggling to me. In the 15 years
    since, when bank CEOs come into my office, 9 times out of 10,
    they have a complicated argument about why they want to lever
    up, okay? It takes a while to analyze these arguments, but we
    have to really understand the fundamental role of good bank
    capital requirements.
        If you look at the comparison that gets made, we had a long
    discussion about the Basel III Endgame on this. Compared to
    Europe, we had higher bank capital requirements, and that
    should have crushed us, right? No, and, in fact, the U.S.
    banking system went from being on its back at the end of the
    financial crisis and source of ridicule to the rest of the
    world to the dominant financial enterprises in the world. So,
    we have done pretty damn well with really high, strong capital
    requirements. That is the battle we cannot lose.
        The other one has to do with technology. I think it was Ben
    Bernanke that referred to the American International Group
    (AIG) as a well-run, traditional insurance company with a hedge
    fund grafted onto it that was playing in all these new
    derivative games and providing credit default products to all
    the European banks, and in such an interconnected way that if
    AIG went under. The European banks would be in violation of
    their capital requirements and have a huge contraction in
    Europe and around the world. So, these things, these are really
    the heart of this. The FSOC Improvement Act, which you talked
    about here, I believe that I have been working on this for
    years, and an activity-based approach is the right one. The
    arguments that I hear against it that are hardest for me to get
    my arms around are we have to be sure that this cannot be an
    excuse to drag out the process for a long time. So, with that
    one thing----
        Chairman Hill. The gentleman's time has expired----
        Mr. Foster. Thanks much.
        Chairman Hill [continuing]. and I would encourage the panel
    to follow up on Dr. Foster's request for information.
        Chairman Hill. The gentleman from Ohio, Mr. Davidson, the
    Chair of our Subcommittee on National Security, is recognized
    for 5 minutes.
        Mr. Davidson. Thank you, Chairman, for doing this hearing.
    Thank you for our witnesses for being here today and the work
    you have done to prepare for it and, frankly, the work you have
    done in many ways in the private sector and think tanks and
    whatnot to contribute to the discussion today.
        Dodd-Frank was sold as a fix to the 2008 financial crisis,
    but honestly, it has been pretty bad for markets. It has
    probably been worst of all for student loans. The Federal
    Government took over student loans as part of that process as
    well, and that should indicate how bad this bill has been. It
    has gone about as badly as the student lending takeover has
    gone. It has choked off investor access, stifled capital
    formation, buried small banks under compliance costs that only
    the Wall Street giants can afford. Worst of all, it has created
    more bureaucracy, often in the name of helping consumers like
    the CFPB. One of the biggest ways consumers are being exploited
    is their data is being harvested, monetized, and exploited in
    all kinds of ways. CFPB has done nothing to modernize privacy
    and data protection, and when you look at Dodd-Frank
    regulations that have pushed regulators to hike capital and
    liquidity rules, mandate stress tests that have choked off
    capital to small businesses, it has really had a big negative
    impact in our economy.
        Let us focus first on Basel III Endgame. Mr. Bentsen, Dodd-
    Frank was supposed to tailor regulations to the actual risks of
    each bank. So, how can anyone justify Basel III's one-size-
    fits-all capital standards?
        Mr. Bentsen. Thank you, Congressman. So, Basel III Endgame,
    the Fundamental Review of the Trading Book, is supposed to be
    the last component of the enhanced capital rules under Title I
    of Dodd-Frank. The problem with the proposal that is put forth
    is that we already are at historically high levels of capital.
    Dr. Foster was sort of talking about that, where we were and
    where we are today. The way that rule, as originally proposed,
    would increase the total aggregate amount of capital for the
    largest institutions beyond their already historical levels. To
    your point about the impact on business financing and lending
    is it would directly impact the Trading Book and raise capital
    in exorbitant amounts, which would definitely have a knock-on
    effect to small business lending and a negative consequence.
    So, it really needs to be reworked.
        Mr. Davidson. Yes, thank you for that. We tried with S.
    2155 to do some tailoring, but often, the regulators have
    really pushed a different approach and used chokepoint tactics
    in other ways to really limit capital formation in the private
    sector, certainly limit it for small businesses and disfavored
    industries or disfavored individuals.
        Another troubling development is the Fed's payment on
    interest. Prior to the 2008 financial crisis, just prior to
    that, they changed the rules, and before, when banks wanted to
    earn interest on their reserve requirements, they had to manage
    their own book. They had to buy Treasuries or whatever to earn
    a return, but they had to hold that capital in reserve. Now the
    Federal Reserve is paying interest not just on the required
    reserves, but on excess reserves. When interest rates were 50
    basis points, there was not a massive motivation to hold excess
    capital there, but when interest is over 4 percent, they are
    making 440 basis points, more than double what a normal rate
    for a management fee is for a hedge fund. They are not
    deploying their capital. Concurrent with Dodd-Frank and this
    change in interest rates, you have seen a massive growth in
    nonbank lenders.
        Dr. Kupiec, could you explain the implications of that,
    where the capital is held with the excess reserve requirements?
    The Central Bank, in a way, is providing a disincentive. Why
    would banks want to loan at 6 percent to small businesses when
    they can get 440 for doing nothing?
        Dr. Kupiec. The Fed, as you point out, changed its
    operating procedures in 2008, in the fall of 2008. Paying
    interest on reserves was a way when the Fed did their
    quantitative easing and bought all these securities, to keep
    the banks from lending it out and causing inflation. So,
    interest on reserves has become a key part of the way the
    Federal Reserve does monetary policy. As you mentioned,
    unfortunately, now it requires the Fed to pay banks billions of
    dollars in interest on their reserves every year, and it causes
    the Fed huge losses, but they are kind of locked into that
    right now.
        Mr. Davidson. Yes, they are over $100 billion per year
    right now, and when you look at it, big businesses have access
    to the bond market. Small businesses are being denied loans,
    and that is why you see the growth in nonbank lenders. We
    really need to relook this, and I applaud the chairman for
    creating a task force to look at it. Thank you, and I yield
    back.
        Chairman Hill. The gentleman's time has expired. The
    gentleman from California, Mr. Vargas, who is our Ranking
    Member on the Monetary Policy Task Force, is recognized for 5
    minutes.
        Mr. Vargas. Thank you very much, Mr. Chairman and Ranking
    Member, and also for all the witnesses here today.
        Two things around here seem to be assured. One, my friends
    on the opposite side of the aisle, Republicans, always say they
    are deficit fighters. They are not going to raise the deficit,
    and they are not going to increase the debt. That is what they
    always say, and then, of course, they increase the deficit, and
    they increase the debt. It is exactly what they do, and then
    they walk away as if they did not do it. It is like when you
    watch the sports, it is a late hit in football and then they
    walk away like, I did not do it. Yes, you did. Everyone saw it.
    It is on video, baby. Everybody saw what you did, and that is
    one of the things that is always assured here.
        The second thing that is always assured is they cry for
    deregulation. We want to deregulate, we have to deregulate, and
    then they come up with some crazy financial instruments that do
    not work well. There is a collapse, and they do the same thing.
    They walk away once again, like, no, no late hit here, I did
    not do that, and they forget all about it. We saw that in 2008
    with the financial collapse. We just saw it again with their
    big, ugly bill, and, unfortunately, I think we are going to see
    it with crypto here. Mr. Kelleher, could you comment on that?
        Mr. Kelleher. No, you are right. It is a huge problem
    because they are not just walking away. There is zero
    accountability, and the problem with zero accountability is you
    create moral hazard, and you actually incentivize people to
    take bigger risks because they do not bear the downside. It is
    the problem with too big to fail. Everybody rails about Federal
    bureaucrats, bureaucrats, bureaucrats, but in 2008, they ran in
    here with their hands out looking for money from those
    bureaucrats. In 2023, they did not run to Wall Street saying
    help us save the banks. They came to the Federal regulators,
    the bureaucrats that are getting bashed all the time, who
    cannot do anything right until they wanted to ladle out the
    bailouts for their misconduct and for their high-risk
    activities. They took the bonuses. They are happy to get the
    bonuses in good times, then they are shifting the cost of
    bailouts to the American people. They did it in 2008, they did
    it in 2003, and that is going to happen again in the future
    with the deregulation supercharged by unregulated crypto.
        Mr. Vargas. I agree, and it is going to happen once again
    as it always does, walk away and say we did not do it. Now, Mr.
    Bentsen, I do not want to pick on you, but I do want to quote
    you. In your written testimony, you argue that ``Many of the
    policies required by Dodd-Frank promoted in the aftermath of
    the financial crisis have made the U.S. financial system
    stronger and more resilient today than it was in 2010.'' Now, I
    heard the parade of horribles by the chairman at the beginning
    how horrible Dodd-Frank was, and you did not seem to parade
    that horrible here. Could you explain yourself?
        Mr. Bentsen. I think it was me.
        Mr. Vargas. Mr. Bentsen, you are the one that I quoted.
        Mr. Bentsen. I should note that I first met the Congressman
    when I testified before a joint committee of the Senate and the
    Assembly in California, and he was Chair of the California
    Senate Banking Committee, and I think it was whether or not
    California should adopt its own Dodd-Frank Act. My testimony
    was short. The answer was no. There are certain things, for
    sure, that we think that Dodd-Frank did to provide more
    resiliency to the system, addressed areas in the swaps market,
    at capital levels of quality.
        Mr. Vargas. Was it a good idea or a bad idea?
        Mr. Bentsen. But----
        Mr. Vargas. No, no, no, no, no, no. I am not going to
    ``but'' here. Was it a good idea? I have limited time, was it a
    good idea or a bad idea, Dodd-Frank?
        Mr. Bentsen. There were some parts that were good ideas,
    and there were some parts that were not good ideas.
        Mr. Vargas. Okay. Mr. Kelleher, is it a good idea or a bad
    idea? Yes?
        Mr. Kelleher. Dodd-Frank?
        Mr. Vargas. Yes.
        Mr. Kelleher. Dodd-Frank was absolutely essential at the
    time, and the interesting thing is Dodd-Frank was actually
    bipartisan legislation. It was a partisan vote, but Dodd-Frank,
    as you all know, from the 20 days of the conference, many,
    many, many Republican provisions are throughout Dodd-Frank, as
    does friend Ken Bentsen know.
        Mr. Vargas. Of course, but they forget like they always
    forget and walk away. The other thing I find interesting, we
    had a bunch of bankers one time, and I asked the same thing of
    the bankers. You know what the bankers said? It was generally a
    good idea. There are some things that we thought were good.
    There are some things they did not like, but now we have the
    parade of horribles like it is the worst thing in the world.
    Now, the worst thing in the world is when the American people
    have to bail out the damn banks because these rich guys make
    all this money, and these guys allow it to happen, and then
    they simply put the cost on all of the consumers, all the
    United States' taxpayers, and you let the fat cats get away
    with it. That is the problem. With that, I yield back.
        Chairman Hill. The gentleman yields back. The gentleman
    from Tennessee, Mr. Rose, is recognized for 5 minutes.
        Mr. Rose. Thank you, Chairman Hill and Ranking Member
    Waters, for holding this hearing, and thank you to our
    witnesses for taking time out of your schedules to be with us.
        Mrs. Johnson, small businesses are incredibly important to
    Tennessee's economy. They make up the majority of all companies
    in the State and are considered the backbone of the economy.
    These businesses not only create jobs but also foster
    innovation and contribute significantly to the local
    communities. Section 1071 of the Dodd-Frank Act requires
    lenders to compile, maintain, and report information regarding
    loan applications made by certain businesses. Unfortunately, I
    understand that implementation of these requirements based on a
    rulemaking under the Biden-era leadership of the CFPB can be an
    enormous undertaking. The compliance burdens could result in
    some lenders choosing to terminate their small business lending
    programs altogether due to compliance costs.
        I would like to touch on Chairman Hill's H.R. 941, the
    Small Lender Act. This bill would reduce the definition of a
    small business for purposes of 1071 reporting from $5 million
    to $1 million. Can you discuss how this bill would better focus
    the scope of 1071 reporting and how it would also ultimately
    benefit small businesses that are seeking access to hire more
    employees and expand their operations?
        Mrs. Johnson. Absolutely. Small businesses, as you know,
    are the backbone of the economy. They hire the vast majority of
    employees throughout the country, and banks want to lend to
    them, and so, it was extremely problematic. CBA represents
    institutions $10 billion and above for the most part. I can
    tell you from some of the very largest institutions, some of
    the largest small business lenders in the country, that this
    was a compliance nightmare and a cost nightmare. So, for
    smaller institutions, it was going to be even more burdensome.
    I think the stretching of the requirement under Dodd-Frank from
    13 data fields to 80-plus data fields was exorbitant and so, I
    think that the bill that Chairman Hill has introduced, the
    Small Lender Act, is very, very needed to reduce the reporting
    requirement from $5 million in annual revenues to $1 million in
    annual revenues that will better capture small businesses this
    bill is intended to capture.
        Mr. Rose. Thank you, and, Mrs. Johnson, as you may know,
    one of my bills, H.R. 2885, the Bank Loan Privacy Act, which
    has been attached to today's hearing, I was proud to introduce
    this legislation, which would require the CFPB, before
    modifying or deleting any personal information collected under
    Section 1071, to engage in a formal rulemaking process with
    advance notice and public comment. Specifically, the rule would
    need to include a description of the intended modifications or
    deletions and an explanation for how these changes serve a
    legitimate privacy interest. In your view, would this
    legislation help ensure greater transparency and accountability
    in how the CFPB handles sensitive personal data under Section
    1071?
        Mrs. Johnson. It is extremely important. The data fields
    that are required under 1071 are personal-identifiable
    information; so, anything that they are doing in terms of
    collecting this information or changing or deleting that
    information, it should go through a notice and public comment
    period. Banks will want to provide feedback and input and make
    sure that it is done correctly.
        Mr. Rose. Mr. Chairman, I ask unanimous consent to have a
    letter from the Independent Community Bankers of America
    supporting the Bank Loan Privacy Act inserted into the record.
        Chairman Hill. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Rose. Mr. Bentsen, in your prepared testimony, you
    noted that large banking organizations are subject to up to 19
    separate capital requirements and five separate liquidity
    requirements. Can you discuss the negative effects on the U.S.
    banking system of so many duplicative capital and liquidity
    requirements?
        Mr. Bentsen. Probably the most consequential impact is the
    interrelation and the lack of coordination of these different
    requirements. I have talked about the stress test and how it
    does not comport well, for instance, with the Basel III
    Endgame. When you have these many different items, not only do
    you drive up compliance requirements and compliance costs, but
    you also have to look and see how all of these capital and
    liquidity rules interact together. Again, as I mentioned, next
    week, the Federal Reserve is holding a conference which is
    looking at all of the capital and liquidity reforms that have
    been implemented since the great financial crisis. This is a
    good start for prudential regulators to sort of think about how
    do all of these rules stack up together.
        Mr. Rose. Thank you, and with the remaining moments, I will
    just tell a story. This morning, at a breakfast, I was eating a
    cinnamon roll, Mr. Chairman. It had a little-on it with some
    icing, and it tumbled off and down the front of my suit. It hit
    my shirt, my suit jacket, and my suit pants. That is the way I
    feel about Dodd-Frank at this point: a lot of unintended
    consequences, and they are not good. I yield back.
        Chairman Hill. The gentleman yields back. I hope you
    changed clothes. We now turn to the gentlewoman from Ohio, Mrs.
    Beatty, who is the Ranking Member of our Subcommittee for
    National Security. You are recognized for 5 minutes.
        Mrs. Beatty. Thank you, Mr. Chairman and Ranking Member,
    and thank you to all of our witnesses today. Certainly, as you
    have witnessed and you have heard, we are here because Dodd-
    Frank turns 15. We are here to take a closer look at the last
    15 years of Dodd-Frank, and I would like to walk you through
    some of the benefits we have seen since the law has been
    enacted.
        Certainly, we will recall and know, before Dodd-Frank,
    predatory mortgage lending was rampant, consumers were
    vulnerable to unfair and abusive practices with no recourse,
    and financial institutions were subject to a disjointed
    regulatory and supervisory framework that created dangerous
    gaps in oversight and accountability. We also know, as my
    colleague, Mr. Vargas, pointed out, what happened in 2008 and
    what happened with the banks and where people came and the
    crises that we were in. Certainly, as we have witnessed from
    you, we all have a different view. I have never thought of it
    as a cinnamon roll and how it bounced off and what it did to a
    suit. I am not even sure that I got it, but that is another
    view that my colleague has presented. Certainly, I have a
    different view of what it has done, especially in the areas
    that you work, what it has done for financial stability, what
    it has done for accountability, what it has done for protecting
    our consumers. I think it is also worth noting that since Dodd-
    Frank, we have not had any wide scale to the magnitude of 2008
    financial crisis. Certainly, we have had some, but the law has
    worked, in my opinion.
        Mr. Kelleher, in the last several months, we have,
    unfortunately, seen that many Federal agencies have chosen to
    over comply with the administration's executive orders around
    diversity, equity, and inclusion. Let me kind of take you back
    again through history and remind you of Section 342 in the
    Dodd-Frank Act, which we are so fortunate that Congresswoman
    Maxine Waters played a lead role in Dodd-Frank and creating
    Section 342, which was the establishment of the Office of
    Minority and Women Inclusion, or as we refer to as OMWI, at our
    financial agencies, which is charged with promoting diversity
    and inclusion within the agencies that they are regulated
    entities. Mr. Kelleher, what impact will these attacks on
    diversity, equity, and inclusion have on policymakers' ability
    to address the racial wealth gap and ensure that there are
    truly equal opportunities to get ahead for all Americans?
        Mr. Kelleher. I think everybody recognizes, certainly in
    the private sector, the value and importance of diversity,
    multiple voices, and people with different experiences at the
    table, and that is certainly true at the financial regulatory
    agencies and the financial institutions that they oversee. We
    can see that by the identification and addressing of the
    predatory targeting of certain communities--communities of
    color, low-income communities, and others--and those
    communities are not visible often at the financial regulators
    when the people at the financial regulators do not have any
    visibility or experience in those communities.
        The OMWI offices have been critical junction points in
    making sure that those issues are maintained a priority both
    within the agencies and within the regulated entities that
    those agencies are focused on. The more people are aware of the
    breadth of our communities, the people, and their experiences,
    the more that the rules can actually be tailored appropriately.
    The racial wealth gap was not talked about, was not visible for
    many years. It was not visible because people who are actually
    on the wrong end of the racial wealth gap were not represented
    in the regulatory agencies and even in policymaking, more
    broadly. The identification of that and addressing that through
    various regulations and laws has been critical, but diversity
    is what has driven that.
        Mrs. Beatty. Thank you. My time is almost up but let me
    just thank you for that and also say, although the Dodd-Frank
    made some great progress, there is no doubt that this country
    still faces persistent disparities in access to safe and
    affordable credit. Mr. Bentsen, we have had the opportunity
    with SIFMA to work together. Have you seen in financial
    literacy, in your work, the difference it makes when you are
    more inclusive?
        Mr. Bentsen. First of all, Congresswoman, I want to thank
    you and Congresswoman Kim for the work that you all do on
    financial literacy--that is very important--and for your
    engagement with the SIFMA Foundation. Absolutely, the
    foundation has seen the spinoff of increased financial literacy
    impact on students----
        Chairman Hill. The gentlewoman's time has expired.
        Mr. Bentsen. We will answer for the record.
        Mrs. Beatty. Thank you so much. I yield back.
        Chairman Hill. I commend you both on the financial literacy
    partnership. We now recognize the gentleman from South
    Carolina, Mr. Timmons. You are recognized for 5 minutes.
        Mr. Timmons. Thank you, Mr. Chairman. I want to thank all
    the witnesses for joining us today to examine where 15 years of
    Dodd-Frank has gotten us. I want to begin by addressing the
    CFPB and the unchecked regulatory power that its past director
    wielded to impose his personal worldviews on the Agency. The
    constant pendulum swings in leadership direction between
    administrations, combined with inconsistent rulemaking, have
    made it challenging for well-intentioned businesses to operate
    and thrive under its oversight. As I have mentioned before,
    just hours before Director Chopra was removed from his
    position, the CFPB sent out a wave of civil investigative
    demands to businesses across the country at 5:30 on a Friday
    evening. I think we all know that no CFPB employee is working
    at 5:30 on a Friday. These actions were not based on legitimate
    grounds. Rather, they appear to be a final attempt by the
    former director to make a statement, sowing confusion and panic
    on his way out the door.
        Mrs. Johnson, given the notion that the CFPB cannot be
    fully dismantled and that we cannot return to pre-2010 status
    quo, where do you see Congress stepping in to ensure the Bureau
    stays focused on its core mission and does not allow a rogue
    director in the future to expand its authority beyond that
    purpose?
        Mrs. Johnson. Thank you for the question. I think it is
    going to be essential for us to take the opportunity and see
    what works and what does not work, and I think we have seen
    over the last 15 years that CFPB, even as, I think, it is by
    some bipartisan recognition, has been political. It has been
    driven by polling at times. To your point, they rushed things
    out the door even after an election, like the overdraft rule,
    which was significant. The biggest thing we can do is better
    define our UDAP authority so that companies, banks in
    particular, have certainty about how to comply and what it
    means to comply.
        I think the second thing would be creating a rigorous cost-
    benefit analysis for the CFPB. They do not take into account
    the true cost to consumers when they are issuing different
    rules, whether it is credit cards, which are the number one way
    to access the financial system, or whether it is overdraft,
    where you have people on the margins who really rely on this
    product. Again, these are really critical lifelines for a lot
    of consumers, and I think those would be two very significant
    steps. There are a number of other things that we recommend in
    our testimony, too.
        Mr. Timmons. It was about a year ago when Director Chopra
    was here, and I told him that given the potential outcome of
    the November election, it would be, and my colleagues across
    the aisle, best interest for us to implement some reforms so we
    can stop the pendulum from swinging back and forth. Obviously,
    that wish was not heeded, so we now have an opportunity to
    address this going forward. To that point, are there specific
    regulatory tools or enforcement powers that CFPB should be
    leveraging more aggressively to deter repeat offenders and
    large-scale scam operations?
        Mrs. Johnson. On the fraud and scam situation? Yes,
    absolutely. I mean, CBA, and actually, you all have been a
    phenomenal lead in heeding consumers' plea for help on being
    scammed out of their own money. For far too long, it has often
    been finger pointing from the CFPB when they actually have as
    one of their six core missions to help educate consumers so
    that the consumer can make informed financial decisions. You
    all are taking a leadership role in this. You have co-sponsored
    the GUARD Act, which will direct a more whole-of-government
    approach that will provide the resources necessary to law
    enforcement to be more engaged on this front. Banks spend
    billions of dollars and millions of man hours to help protect
    consumers from being scammed out of their own money, but these
    things are often originating outside the banking system. They
    are from telecom and social media, from State actors. We need a
    whole-of-government approach. I really commend you and your
    colleagues for taking a lead here.
        Mr. Timmons. Thank you for that. I think we have an
    opportunity for some bipartisanship to get the CFPB back to its
    core mission and to not regulate by enforcement, and to create
    predictable standards that businesses and banks can then meet.
    I think that if we can create the predictability and seek out
    the bad actors without tying everyone else up with endless
    attorney fees and compliance costs, that is the path forward.
    My goal is for America to lead in all sectors of financial
    innovation by creating an environment where consumers have full
    control over their own financial data. For this to work,
    customers should be able to share their information seamlessly
    and securely with the applications of their choice, empowering
    them to access a wider range of financial services tailored to
    their needs. This requires a balanced approach that promotes
    innovation while ensuring strong privacy protections and
    cybersecurity standards. I think that we have an opportunity,
    this Congress, the next Congress, over the next 3-4 years to
    bring balance to something that we are not going to get rid of.
    I look forward to working with my colleagues across the aisle
    in that endeavor, and with that, Mr. Chairman, I yield back.
        Chairman Hill. The gentleman yields back. The chair
    recognizes the gentleman from Illinois, Mr. Casten, the vice
    ranking member of the full committee, for 5 minutes.
        Mr. Casten. Thank you, Mr. Chair. I would submit to you
    that there is only one lesson to be learned from every
    financial crisis. It is always the same lesson, and we have
    never learned it. The lesson is that if you have something on
    your balance sheet that is risky and you would like to sell it,
    it is in your interest to have deep liquid markets of
    unsophisticated off-takers. That was the S&L crisis, and it was
    certainly the housing crisis. I mean, the housing crisis,
    right, we had risk in subprime mortgages. We offloaded those by
    bundling them into mortgage-backed securities. That got risky,
    so we offloaded those into credit default swaps, and then we
    figured out that if we could put those on over-the-counter
    markets, we could get less transparency, less regulation, and
    it was all good until it was not, and then it took everything
    down with it.
        Now, if we had learned that lesson, we would not be voting
    on all this crypto crap this week, but we have not learned that
    lesson. I want to just understand because specifically in Dodd-
    Frank, there was this effort to create joint SEC-CFTC
    jurisdiction for some things that had run away from the
    supervision of SEC markets into less disclosure-intensive CFTC
    markets. Specifically, if you had a derivative tied to a
    security, it had to be inside the SEC. Mr. Bentsen, I want to
    just get some clarifying questions from you. If Microsoft were
    to custody their own stock and then issue a token that tracked
    that stock without granting ownership or redemption rights,
    would that be a derivative?
        Mr. Bentsen. Oh, you are asking prospectively. You are not
    asking with respect to Dodd-Frank, right?
        Mr. Casten. I am saying right now under current law, would
    that be a derivative if they issued their stock as a token
    without granting ownership or redemption rights out of
    Treasury?
        Mr. Bentsen. Yes, I think that is----
        Mr. Casten. Okay. That is not just if it is Microsoft,
    right, but if an investment company did that out of stocks that
    they controlled, that would also be a derivative?
        Mr. Bentsen. Again, you would have to look, but if you are
    not transferring all the rights of ownership that you would
    have----
        Mr. Casten. Okay. So----Mr. Bentsen--with the individual
    equity, then it would be----
        Mr. Casten. Okay, I agree, and for the record, I think we
    both agree with Hester Peirce, the Republican SEC----
        Mr. Bentsen. That actually goes beyond Dodd-Frank back to
    the Commodity Futures Modernization Act.
        Mr. Casten. Yes, because Hester Peirce has just said that
    tokenized shares do not offer ownership of the underlying
    asset. Then in that case, it is a security-based swap and
    should not be traded at retail. That matters because in the
    CLARITY Act that is coming through this week, Section 202
    specifically says that if you tokenize a security and raise $50
    million or less, all of a sudden you can get out of SEC
    jurisdiction.
        I would like unanimous consent to enter into the record an
    article in today's Wall Street Journal, ``Want to Trade Amazon
    on Crypto Exchange? The Price Might Be Off by 300 Percent.''

        [The information referred to can be found in the appendix.]

        Mr. Casten. It says that the tokens of Amazon today are
    trading at as much of a 300 percent premium over the stock
    price. That does not suggest an efficient market. I have one
    example on Jupiter, where it is over 100 times above the stock
    price.
        So I guess, Mr. Kelleher, if we have the SEC commissioner
    saying this should not really be sold at retail, we seem to
    have agreement on this committee that is a derivative that
    should be subject to the SEC. Yet, we are going to vote this
    week to say let us not have the SEC regulate these tokenized
    securities, which are, according to today's Wall Street
    Journal, massively inefficient. Is that a good idea? Should we
    be concerned about that, or have we, in fact, learned nothing
    from Dodd-Frank?
        Mr. Kelleher. Everybody should be concerned about that. I
    mean, it has been said repeatedly that we have the most liquid,
    best capital markets in the world, that are the envy of the
    world, but that is only true because they are well regulated
    and well policed. That causes the faith and trust of investors
    worldwide to put their money into our markets. It is not
    preordained or predestined for us to always have the best
    markets in the world. When you pass laws that have ambiguities,
    carveouts, and loopholes that evade the most fundamental parts
    of our securities laws that make them well regulated and well
    policed, then you are not only opening loopholes for companies
    and financial predators and illegal and bad conduct that
    creates consumer risk as well as financial stability risk, you
    would literally endanger the entire capital formation
    allocation system and the status of our capital market.
        Mr. Casten. I mean, it strikes me, like, if I was going to
    raise money today, I would raise a little bit of smart money on
    functioning equity markets and then I would lever it up with
    dumb money on the token, right? I mean, it seems like a smart
    thing to do. Look, I am about out of time, but just because you
    raised the police, you are reminding me that I remember when
    Gary Gensler first came into his job, he came to my office and
    talked about what he wanted to do on crypto regulation. I said
    you have two problems. Your advantage is that the Wild West
    needs a sheriff. Your disadvantage is that everybody in the
    Wild West likes to shoot the sheriff, and my Republican
    colleagues' commitment to defunding the white-collar police has
    been noted.
        Chairman Hill. The gentleman's time has expired. The
    gentleman from Montana, Mr. Downing, you are recognized for 5
    minutes.
        Mr. Downing. Thank you, Mr. Chair. First, I would like to
    submit this letter from the National Association of
    Manufacturers to the record.
        Chairman Hill. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Downing. Thank you, Mr. Chair, and thank you for the
    witnesses. There is this saying that just because you are not
    interested in politics does not mean politics is not going to
    be interested in you. The first time I ever came to DC, I was
    basically issuing Regulation D exemptions, securities, and had
    an investment bank group, a broker-dealer, and this thing
    called Dodd-Frank was coming down the pipe. That is the first
    time I ever climbed in an airplane and flew to DC to make sure
    people understood how that affected me, my business, my
    investors. I think that in reaction to the crisis at the time
    the pendulum swung. I think it swung a little too far and
    picked up a little too much baggage, and I think there is an
    opportunity to right-size that, and I think there is a need to
    right-size it.
        I am going to start off. I have heard from many of the
    banks and credit unions in my district across Montana just how
    harmful Dodd-Frank has been. One bank plainly told me that the
    creation of the CFPB has been the most negative and costly
    provisions of Dodd-Frank. Another small bank told me they have
    gone from one compliance officer before Dodd-Frank to four
    today, drastically increasing costs. I have heard similar
    stories on Rule 1071, specifically. In 2008, Montana had 64
    State-chartered community banks, 64. Today there are 33.
        I am going to start with Dr. Kupiec. Hopefully, I said that
    right. I am going to apologize. Is it fair to describe Dodd-
    Frank as irresponsibly pushing bank regulations into a one-
    size-fits-all model where the balance sheets of all banks look
    the same?
        Dr. Kupiec. It is not exactly one-size-fits-all. The
    largest banks are subject to different rules than the smaller
    banks. I think the crux of it all, though, is the regulations
    that have been put in place are very complex, very expensive,
    and they do not do what they were supposed to do. They do not
    work as advertised, and I think taking the time to right-size
    some of these regulations would be a good thing.
        Mr. Downing. Do you believe that this hurts smaller players
    and innovators the most who specialize in their local
    communities?
        Dr. Kupiec. Small banks have been consolidating for
    decades, but it is certainly the compliance cost. If you have a
    small bank, you cannot spread the compliance costs across a big
    business like you can if you are Jamie Dimon and JPMorgan.
        Mr. Downing. Thank you. I am going to move to Rule 1071.
    Mrs. Johnson, do you think the consequences of the CFPB's 1071
    final rule will be especially pronounced in rural communities
    who already struggle with limited lending capacity?
        Mrs. Johnson. I do, yes.
        Mr. Downing. Thank you. I am going to switch quickly to
    mortgage lending. A bank in Montana recently told me Dodd-
    Frank's mortgage lending rules have made mortgage lending far
    more burdensome for the lender and more confusing for the
    borrower. In fact, the bank told me Dodd-Frank's regulatory
    requirements have caused many rural banks to get out of the
    mortgage lending business entirely. I am going to go back to
    Dr. Kupiec. Do you think Dodd-Frank's qualified mortgage rule
    has been successful in reducing systemic risk in the mortgage
    sector?
        Dr. Kupiec. The rule and the ability to repay rules are
    complicated, and they certainly impose a lot of compliance
    costs on banks. Again, small banks do not have the staff, and
    so it has caused a lot of small banks to get out of the
    business. It is kind of the inflation we have had in housing
    prices recently, the higher mortgage rates. The Qualified
    Residential Mortgage (QRM) rules, they are being stretched to
    allow higher debt-to-income ratios and things like that, and
    the Government-Sponsored Enterprises (GSEs) are funding loans
    with higher debt-to-income ratios. So, we are letting the risk
    of underwriting buildup to accommodate lending, and so, in
    essence, the rules, in some sense, are not doing what they were
    designed to do: protect people from taking out loans they
    cannot afford. Now, given the housing price inflation and the
    high mortgage rates, policymakers are pushed to allow more
    people to qualify for loans. There is a tradeoff there.
        Mr. Downing. Thank you. In my remaining time, I would like
    to highlight another issue I am very passionate about, which is
    eliminating the Federal Insurance Office, which was established
    by Dodd-Frank to monitor all aspects of insurance. The Federal
    Insurance Office, I believe, should be eliminated. The
    McCarran-Ferguson Act of 1945 makes clear that States have sole
    regulatory authority over the insurance industry, and the Biden
    Administration has weaponized the Federal Insurance Office,
    pursuing politicized data calls on climate rather than looking
    for ways to make the insurance sector operate more efficiently.
        Chairman Hill. The gentleman's time has expired.
        Mr. Downing. I yield, Mr. Chair. Thank you.
        Chairman Hill. The gentlewoman from Michigan, Ms. Tlaib,
    you are recognized for 5 minutes.
        Ms. Tlaib. Yes. Thank you, Mr. Chairman. I hope I can ask
    all of you a simple question. In 2008, do you believe shadow
    banks that took on short-term liabilities played a huge role in
    the financial crisis? I will start with you, Mr. Bentsen.
        Mr. Bentsen. I am not sure exactly how you want to define
    shadow banking.
        Ms. Tlaib. Yes or no?
        Mr. Bentsen. There was no question that there were
    liquidity problems that have been addressed.
        Ms. Tlaib. People acting like banks that are not banks,
    yes. How about you, Mrs. Johnson?
        Mrs. Johnson. Yes, outside the regulated system.
        Ms. Tlaib. Yes.
        Mr. Quaadman. A housing crisis that morphed its way
    throughout the economy.
        Ms. Tlaib. Yes. I was talking about shadow banks. Folks
    that acted like a bank, took on short-term liabilities was one
    of the main causes of the 2008 financial crisis. It is okay,
    Doc. You do not have to answer.
        Dr. Kupiec. I do not----
        Ms. Tlaib. It is okay. Hey, it is still happening. It is
    going to happen, and Dodd-Frank did not come from, like, thin
    air, but----
        Dr. Kupiec. There were a lot of mortgages----
        Mr. Kelleher. There is no question----
        Ms. Tlaib. That is right.
        Mr. Kelleher [continuing]. by any objective observer----
        Ms. Tlaib. That is right.
        Mr. Kelleher [continuing]. that non-regulated shadow banks
    contributed significantly.
        Ms. Tlaib. I would appreciate you three be honest.
        Mr. Kelleher. Unregulated Lehman Brothers----
        Ms. Tlaib. That is right.
        Mr. Kelleher [continuing]. AIG, Bear Stearns.
        Ms. Tlaib. Yes.
        Mr. Kelleher. You could go down a long list of non-
    regulated shadow banks----
        Ms. Tlaib. That is right.
        Mr. Kelleher [continuing]. that drove the crash.
        Ms. Tlaib. I know even those like Lehman Brothers or money
    market mutual funds that had the collateralized short-term debt
    experienced devastating runs. We know this. So, we have now
    nonbanks performing bank-like functions but without the
    regulation and oversight of the traditional banking sector.
    That is something that I want my colleagues to understand was
    happening. You can disagree certain things that CFPB is doing,
    hopefully factually based, but to say that it was not needed
    because of this, to me, is being dishonest with the American
    people.
        Mr. Kelleher, would you say, like, stablecoin issuers right
    now act essentially like banks?
        Mr. Kelleher. Stablecoins are nothing but money market
    funds in disguise, for all intents and purposes, with high-run
    risk, and the way they are currently being talked about will
    have almost no regulation to protect the American people.
        Ms. Tlaib. That is right. Mr. Kelleher, without deposit
    insurance, are these stablecoin users subject to runs like we
    saw occur in shadow banks in 2008?
        Mr. Kelleher. I do not think there is any question you are
    going to see runs, failures, and bailouts.
        Ms. Tlaib. I want to be clear, so my colleagues know this
    is coming. In 2008, we saw the collateralized short-term
    liabilities held by nonbanks helping bring down the financial
    system, and now we are working to dramatically expand a whole
    new type of shadow banking in our country right now. Mr.
    Kelleher, do you agree that part of what made 2008 financial
    crisis so damaging was the linkages between the traditional
    banking sector and the shadow banking sector in the real
    economy?
        Mr. Kelleher. The interconnection between the shadow banks
    and the banks with transmissions of risk, and those
    transmissions of risk over time, created the circumstances,
    together, that systemically significant institutions, whether
    they were banks or nonbanks, ultimately failed. Now we are
    going to overlay, as you say, an entirely new shadow banking
    system called crypto, call it stablecoins----
        Ms. Tlaib. That is right.
        Mr. Kelleher [continuing]. call it whatever you want, and
    they are not going to regulate them, so they, too, are going to
    be underregulated.
        Ms. Tlaib. That is right. I do not even know who comes up
    with the names, Mr. Dennis Kelleher, but the GENIUS Act
    recreates and amplifies the same kind of linkages. For example,
    the act would allow banks to issue their own stablecoins,
    linking traditional financial sector to the volatile crypto
    industry. Perhaps most troubling about the GENIUS Act, it
    undermines the separation between commerce and banking.
    Walmart, Amazon, Meta, and all these are exploring the use of
    this right now. What sorts of risk are we talking about? Again,
    pretend our moms are watching us. Like, explain it because I
    need them to understand what my colleagues' lack of action or
    enabling right now is going to cause real impact on their
    lives.
        Mr. Kelleher. The biggest risk is that people are going to
    conclude, based on what is likely to pass, that these new
    financial instruments, that have no legitimate social purpose,
    are properly regulated by the Federal Government, and that is
    the biggest fraud on the public out there.
        Ms. Tlaib. I tell people Amazon and Facebook could do
    shadow banking that could spill over to commercial financial
    sectors. Yes or no?
        Mr. Kelleher. You are going to be legitimizing a new
    financial product that is highly volatile, littered with
    conflicts of interest and almost no regulation, but there will
    be a claim of regulation and legitimacy, and that is going to
    drive the marketing, and that is going to cause massive losses
    to main street----
        Ms. Tlaib. I got to get this in, Mr. Kelleher. Guess who is
    going to bail them out? Guess who is going to bail them out
    again? It is exactly what is going to happen. I just want to be
    on record saying I told you so. I am going to be here to say
    that.
        Chairman Hill. The gentlewoman yields back. The gentleman
    from South Carolina, Mr. Norman, you are recognized for 5
    minutes.
        Mr. Norman. Thank you, Mr. Chairman. Since Dodd-Frank, the
    credit unions faced a dramatic increase in regulations, not
    knowing what the cost would be other than it was more cost. How
    can we in Congress balance the need for financial safeguards
    and protection with providing targeted relief for credit
    unions, particularly in the form of regulatory tailoring,
    exemptions, and the repeal of certain provisions, and make sure
    that this does not happen again because it created a world of
    problems and we are feeling the effects now? I guess, Mr.
    Bentsen, we can start and go down.
        Mr. Bentsen. Congressman, we do not represent credit
    unions, so I cannot really opine on the question. Sorry.
        Mrs. Johnson. We represent mostly banks but a few credit
    unions in there. It is a duplicative regulatory environment
    that many institutions live under, especially if you have CFPB
    regulation in addition to your prudential regulation. You have
    multiple examiners. Other Members of Congress have mentioned
    more compliance officers at times and other functions of the
    bank, which just simply does not make--so, I think coordinating
    and just trying to reduce the duplication where you can is one
    very meaningful step.
        Mr. Quaadman. Mr. Norman, ICI represents mutual funds and
    other regulated funds with the SEC. As I mentioned in my
    opening remarks and also with our testimony, there are
    duplicative regulatory requirements which are confusing and
    also where regulators are going beyond where Congress had
    mandated them to go. So, that creates problems not only for
    those funds, but even for those investors who want to deploy
    their money into those funds as well.
        Dr. Kupiec. I think many credit unions are sort of in the
    same position as community banks in terms of having to bear the
    cost of the regulations, but actually my written testimony
    shows that the credit union share of lending has actually grown
    relative to the banks over the last few years. So, they have
    actually done better than the banking system as a whole, a
    couple of percentage points difference. So, they have not had
    it as bad as the regular banks, I do not think.
        Mr. Kelleher. If you look at the facts, credit unions and
    community banks as well as the economy were crushed by the
    crash. Long before Dodd-Frank got enacted or got implemented,
    community banks and credit unions and small business across the
    country were failing at massive rates because of the Great
    Recession that was caused by the crash. The damage done to
    those institutions from the crash far exceeded any even claimed
    damage by Dodd-Frank, and so the real issue is people are going
    to pay one way or the other. They are either going to pay for
    regulation and compliance costs to prevent the crash, or they
    are going to pay 10 times, 20 times, 100 times more to clean up
    a crash because they were not properly regulated. There is no
    choice in the world where there are no costs. The question is,
    when are the costs incurred and who is going to pay them?
        Mr. Norman. Yes, but there is a question of one size does
    not fit all. I am in the real estate business. Let us talk
    about banks. A lot of them got out of the mortgage servicing
    and had to rely on other banks. I have the closing statements
    where the costs went up the minute Dodd-Frank took effect, and
    I guess to avoid duplicating that again, what lessons have we
    learned from that on the servicing side?
        Dr. Kupiec. The mortgage service business, there are some
    capital regulations that make them unfavorable for banks to do
    that business. A lot of it has consolidated and moved out.
    There are lots of government lawsuits against banks for
    underwriting subprime mortgages back under the Obama
    Administration where they went after lots of banks for the
    Financial Institutions Reform, Recovery, and Enforcement Act of
    1989 (FIRREA), and they paid huge fines for supposedly creating
    bad subprime mortgages, and most of them were settled without
    going to court. The banking system paid a lot, and the banking
    system, by and large, has shied away from the mortgage business
    for reasons of regulation, for reasons of getting sued, for
    things like that. It is not just the Dodd-Frank effect, but
    also there are other things that have gone on since the crisis
    that have made the banking system a bit shy about the mortgage
    business.
        Mr. Kelleher. They, of course, paid those massive fines
    because of fraud and illegal behavior, not because they were
    generous and not because they were not represented by the best
    lawyers in America.
        Mr. Norman. Yes, but you had a lot of frivolous suits too
    that were charged, and that was not right. It is driving up the
    cost today. I thank each one of you for being here.
        Mr. Stutzman [presiding]. The gentleman's time has expired.
    The chair recognizes the gentleman from Connecticut, Mr. Himes.
    He is now recognized for 5 minutes.
        Mr. Himes. Thank you, Mr. Chairman. Thank you to our
    witnesses. It has been a trip down memory lane to reflect this
    way on Dodd-Frank. I was actually in the very bottom row, a
    freshmen, when it was written, and it is interesting to see the
    very different opinions that are offered by our witnesses
    today. My own view, for what it is worth, is we were promised
    when it became law by many in the industry that this was going
    to obliterate the American strategic advantage of our deep
    capital markets. To be fair, on the left, people said this is
    the apocalypse in waiting and it is all going to happen again 2
    years from now. None of that turned out to be true. Our capital
    markets and our banking system are, in fact, the envy of the
    world, as Mr. Bentsen says, and with a few exceptions and
    including, by the way, the mother of all stress tests in the
    form of the pandemic, our system has held up remarkably well.
        I guess I am intrigued. Dr. Kupiec highlights the Silicon
    Valley Bank disaster. I am not sure I agree with him that is
    evidence that Dodd-Frank is a failure, but I want to use my
    remaining 4 minutes to do something that I think is actually
    kind of useful, which is Dodd-Frank, of course, emerged because
    too few people saw the mortgage crisis coming. I certainly did
    not see Silicon Valley Bank crisis coming. My question to all
    five of you, and I think you have each got about 25 seconds to
    answer this. I am going to start with you, Mr. Kelleher,
    answering to the question. At the end of 2025, 6 months from
    now, there is a systemically threatening event. Let us think of
    the magnitude of Silicon Valley Bank, just for argument sake.
    That event originated how and in which market? Mr. Kelleher?
        Mr. Kelleher. Nobody knows, and we do not know because we
    put blinders on. We have defanged FSOC. We have gotten rid of
    25 percent of the personnel at the FDIC. You could go agency by
    agency, and what you are doing is essentially disarming the
    frontline financial stability cops at the regulatory agencies.
    They are not just putting their head in the sand. They are
    leaving the field, and that is going to cause us to be
    surprised again like we were in 2008. AIG, everybody ran around
    going, ``What is AIG?''
        Mr. Himes. Okay. Mr. Kelleher, your answer is that we are
    gutting the regulatory apparatus, I think. Is that a fair
    characterization, Dr. Kupiec?
        Dr. Kupiec. Yes, Silicon Valley Bank was a systemic problem
    because there were thousands of banks that had huge, unrealized
    interest rate losses on their books and could fail too. If you
    look at my written testimony, you will see that.
        Mr. Himes. I understand. I am looking for the answer to the
    question of when it happens again 6 months from now, why did it
    happen.
        Dr. Kupiec. I do not know.
        Mr. Himes. Okay. Fair enough. I do not either. None of us
    do. Mr. Quaadman?
        Mr. Quaadman. Mr. Himes, thank you for that exercise. I
    would actually say if you looked at Dodd-Frank, the Office of
    Financial Research is supposed to be the early warning system
    for the Financial Stability Oversight Council. I would say if
    you looked at any of the hiccups that have happened in the
    system since 2010, the Office of Financial Research (OFR) has
    not performed that function. So, I think that actually makes
    the argument for why it should be brought under the
    appropriations process for congressional oversight.
        Mr. Himes. That does not sound like the source of a
    systemically threatening event. You do not want to opine on
    that?
        Mr. Quaadman. Excuse me?
        Mr. Himes. I was looking for the answer to the question----
        Mr. Quaadman. No, I know, but Dodd-Frank put in place a
    mechanism for that warning to happen, and that warning system
    has not worked.
        Mr. Himes. Okay. Okay. Mrs. Johnson?
        Mrs. Johnson. Look, I do not think anybody knows. If we
    did, we all would be millionaires at this point. That is what
    we are constantly watching for. I can say that the consumer
    health right now is still very strong, that banks are
    incredibly well capitalized. I would say that there is an
    opportunity for something to happen outside of the banking
    system, and I just want to make this point because I have not
    had the chance to orally say this yet. The problem with so much
    regulation is that you do continually push consumers,
    especially consumers on the margin where the risk is highest,
    outside of the banking system. That is one thing that I think
    we all just need to be cognizant of. Banks are going to fail;
    nonbanks are going to fail over time. We want to make sure that
    there is an orderly process for that. We are a free market.
    That is going to happen, and I think that is something that
    will play out, but we absolutely want to be cognizant of
    pushing lending outside of the banking system.
        Mr. Himes. Okay, got it. Thank you. Mr. Kelleher?
        Mr. Kelleher. Hopefully, we are not graded whether we are
    right or wrong, and hopefully nothing happens. My sense would
    be if something happens that has a systemic-like effect, it is
    going to be some sort of extraneous event, whether it is
    geopolitical or pandemic-like, hopefully not another pandemic,
    but something along those lines.
        Mr. Himes. I am intrigued, and I got 25 seconds, that
    nobody said private credit. That is a market that has grown
    substantially. Nobody said crypto. We are talking a lot about
    that. Nobody said swap margins, which I was promised would
    bring down the system. Anybody want to use 10 seconds to
    elaborate?
        Mr. Kelleher. Let us worry about the Treasury markets. I
    mean, there are a lot of things to worry about, and that is why
    the rules are supposed to be in place to cover them all, to
    have discretion, to be able to identify emerging risks, and
    that is what has been shut down.
        Mr. Himes. Okay. Thank you. I very much appreciate it.
    Thank you to our witnesses. I yield back.
        Mr. Stutzman. The chair recognizes the gentleman from
    Pennsylvania, Mr. Meuser, who is also the Chair of the
    Subcommittee on Oversight and Investigations. He is now
    recognized for 5 minutes.
        Mr. Meuser. Thank you, Mr. Chairman. Thank you all to our
    witnesses, a robust conversation and important. Barely a day
    passes, particularly being on this committee, where we do not
    hear from banks, large and small, about the compliance burdens
    that they are forced to navigate, and they do stem from Dodd-
    Frank. It is a common subject. Dodd-Frank created the FSOC, the
    CFPB, entities that operate with really little accountability
    really by design, leaving banks unsure on how to comply, not
    bright green lines, very subjective ideological lines. So,
    consumer fraud and scams are surging, yet the very agencies
    tasked with protecting consumers seem more focused on writing
    new rules and literally engaged in drive-by random
    investigations. That is why we are trying to roll back some
    unnecessary regulations and why this is critical, so; financial
    institutions can focus on customers, providing capital and
    growing the economy.
        Mrs. Johnson, Dodd-Frank promised stronger consumer
    protection, but banks consistently raise concerns about rising
    fraud and scams and heavy compliance. Fifteen years later, has
    the law improved consumer safety or bank performance?
        Mrs. Johnson. I think, overall, the banking system is very
    resilient. I think they are very conservative in terms of
    making sure that they can lend to consumers and that consumers
    are able to repay. I think, more generally, one of the concerns
    that we have is the complexity and the redundancy of so much
    regulation into things that oftentimes are not really where the
    risk is. SVB was brought up earlier, and I think that those
    were pretty obvious errors of omission from the management on
    that case. We want to make sure that bank regulators are
    focused on where real risk exists, like interest rate and
    credit risk and then also outside of the banking system, where
    more lending is going because of all the regulatory burden and
    costs that banks have, including smaller banks, pushing lending
    out of the banking system. So just having a much more wholesome
    view.
        Mr. Meuser. Thanks. You brought up before you would like to
    see things based upon facts and data driven, your term, and
    your three pillars. Follow the law, that is one that should be
    a given, right? Review impacts, real impacts, and respond to
    those properly, as you do in business, as you do in life, and
    focus on real consumer fraud, and that just does not seem to be
    happening. In your view what is the biggest factor driving the
    rise in scams that we see today?
        Mrs. Johnson. This is an area where we have called on the
    CFPB to fulfill its statutory mission and one of its core
    principles to educate consumers. Look, I mean, with the
    proliferation of technology and digital banking and social
    media and text messaging, consumers are being bombarded with
    opportunities to fall victim to handing their own money.
    Oftentimes, it is through a Facebook link that says there is a
    designer puppy and click here and pay me, and suddenly you have
    paid someone who is a complete fraudster. It is very, very
    difficult for a consumer to determine whether or not that
    person on the other end is a scammer.
        Banks have spent, and I said this earlier today, billions
    every single year. It has been millions of man hours. We have a
    fraud committee within CBA that is extremely robust. I can tell
    you details of how much banks do to combat fraud and scams, but
    we need the government to step in and to recognize that often
    this is State sponsored, that this is originating outside of
    the banking system. We need telecom to step in. We need law
    enforcement to also step up. We appreciate Congressman Nunn and
    Congressman Gottheimer and others who have co-sponsored the
    GUARD Act. We think that is a really meaningful step forward.
        Mr. Meuser. All right. Good. Thanks. That was a big
    difference what Mr. Kelleher brought up a little while ago,
    appropriately regulated. That is a big, big difference from
    excessively regulated, and seeing that only 19 percent of small
    businesses say they have adequate access to capital. I think we
    can really go from good to great, and that should be a goal.
        Dr. Kupiec, really quick--I am short of time--the Council
    of U.S. Financial Regulators relies heavily on the Office of
    Financial Research for data analysis. What agencies like FSOC
    depend on their own internal research shops? Does that risk not
    create an echo chamber?
        Dr. Kupiec. I am sorry. I did not hear the last bit. I
    mean, you are out of time----
        Mr. Meuser. All right. Does that create an echo chamber? I
    am out of time, so maybe we could talk about it later. Thank
    you very much. I yield back, Mr. Chairman.
        Mr. Stutzman. Thank you. The gentleman yields back. If the
    witnesses also would be willing to submit the answer in writing
    to the committee, that would be fine.
        Dr. Kupiec. I will submit it.
        Mr. Stutzman. Okay, we will submit it for the record. We
    can follow up.
        Mr. Stuzman. The chair recognizes the gentleman from
    California, Mr. Liccardo, who is recognized for 5 minutes.
        Mr. Liccardo. Thank you, Mr. Chair. Mr. Kelleher, I
    certainly understood from your testimony, and we have all
    understood over the last several months, that the Consumer
    Financial Protection Bureau has been gutted: its budget, its
    staff, et cetera, in the last several months, and specifically,
    some very important functions of that Agency appear to have
    severed. Specifically, the consumer complaint database that
    millions of Americans have relied upon is being dismantled. Who
    is going to step into that role to receive and act upon the
    complaints of millions of Americans who feel that they have
    been defrauded or scammed?
        Mr. Kelleher. Yes. When it is shut down, it is gone. There
    is not going to be any substitute or location for that.
        Mr. Liccardo. Many rules have been rescinded and repealed,
    for example, the excessive overdraft fees rule. Who is going to
    protect consumers against excessive overdraft fees?
        Mr. Kelleher. There will be no institution with the power
    and authority to be able to do that.
        Mr. Liccardo. The credit card late fees rule, who will
    protect consumers against exorbitant credit card late fees?
        Mr. Kelleher. Main street Americans getting ripped off by
    credit card companies are going to be left on their own to fend
    for themselves.
        Mr. Liccardo. The data broker rule was also rescinded. What
    about those many Americans who feel concerned about their
    privacy and abusive practices of data brokers?
        Mr. Kelleher. Yes. Americans, just hardworking main street
    Americans who are subject to abuse by data brokers selling
    their private information and spreading it around and causing
    identity theft and other fraud and illegal conduct. They are
    going to be on their own, once again having to fight against
    these huge financial institutions on their own.
        Mr. Liccardo. I understand that the agencies indicate they
    will no longer prioritize enforcement or supervision of fair
    lending laws. In fact, I think we saw a really extraordinary
    situation in which the CFPB essentially attempted to pull back
    on a settlement and a Federal judge stepped in and refused to
    allow them to do that in Illinois. Is that right?
        Mr. Kelleher. He not only did that, but if you read his
    opinion, he excoriated the current leadership of the CFPB for
    trying to go back years to undo the settlement of an anti-
    discrimination law in a way that was quite shocking to even the
    Federal judge. So, we will see where that goes on appeal.
    Better Markets participated as an amicus in that case.
        Mr. Liccardo. For Americans who are not savvy enough or
    perhaps wealthy enough to have access to attorneys and they
    suffer from discriminatory lending or redlining, what options
    they have with the CFPB stepping back?
        Mr. Kelleher. This is why the CFPB was created, is that
    main street Americans do not have the time or the money to be
    going after huge financial institutions or financial predators
    who are prowling, frankly, the wallets and pocketbooks of main
    street Americans, from their credit cards to their checking
    accounts to their savings accounts, whether it is
    discrimination or other unfair and deceptive acts, and we saw
    that gap. This is not a theoretical problem. We saw it before
    2008 and how consumers were abused. We also saw the systemic
    implications of it because the predatory subprime lending on
    the individual basis, where individual people getting mortgages
    were getting ripped off, that was bad, but it also got rolled
    up into becoming a systemic crisis. So, the purpose of consumer
    protection is, yes, to protect main street Americans and their
    wallets and pocketbooks. It is also to protect the systemic
    risk of failures and bailouts. All of that is gone. We created
    the CFPB for that purpose. It did really a shockingly good job
    in a very short period of time.
        Mr. Liccardo. I think it is important that as we think
    about the Consumer Financial Protection Bureau, this is,
    ultimately, an acronym that gets lost in the American public
    because there are so many agencies in the Federal Government.
    So many seem to have so little impact on our daily lives, but
    it is important for us to understand exactly what this
    particular Agency does. Undoubtedly, there have been cases of
    bureaucratic overreach, regulatory overreach. I have never
    known a regulatory agency that was not guilty of that, but
    there is a lot at stake here. Specifically, as I am thinking
    about the Civil Penalty Fund and $3.3 billion have been
    returned to Americans who have been scammed in various ways,
    what agency is going to step in?
        Mr. Kelleher. I have a chart in my written testimony that
    shows by State how much money every State has received from the
    Civil Penalty Fund, and everything from $35 million to Arkansas
    to $46 million to Connecticut. I mean, the CFPB protects
    everybody and benefits everybody in all 50 States, and every
    single congressional district here has received money. Their
    people, their citizens, their voters have received money from
    the CFPB when they were ripped off.
        Mr. Liccardo. Thank you, Mr. Kelleher. I yield.
        Mr. Stutzman. The gentleman yields back. The chair
    recognizes the gentlewoman from California, Mrs. Kim. You are
    now recognized for 5 minutes.
        Mrs. Kim. Thank you, Chairman and Ranking Member, for
    hosting this hearing today, and I want to thank all of our
    witnesses for joining us. Fifteen years later, it has really
    become self-evident that Dodd-Frank has only hurt consumers,
    small businesses, and the community financial institutions that
    it was supposed to protect. Regulatory costs have only
    increased since the passage of Dodd-Frank Act in 2010, and
    although financial institutions below $10 billion in assets are
    exempt from CFPB examination, they still face very high
    compliance costs. It is our credit unions and community banks
    who suffer the most as they do not have the resources to bear
    the burden of this regulatory scrutiny the same way that large
    commercial banks may be able to do. That is why they are hurt
    the most. Unfortunately, the result of all this has been
    consolidation among banks and credit unions over the last 15
    years, and there have been few to no community financial
    institutions to replace those losses.
        Let me talk about the real impact that it had in Orange
    County, where I represent. We have seen this firsthand with
    only one new bank and zero credit union formed in 2021. Since
    2015, we have seen zero new credit unions from all across
    California. This would not be the case without the
    overburdening regulatory policies that were implemented in the
    Dodd-Frank legislation. I am going to ask this question to you,
    Mrs. Johnson. As we see the retail banking services pull back
    from our community, can you talk about the consequences for
    consumers and small businesses?
        Mrs. Johnson. Sure, and thank you for the question. Look,
    there has undoubtedly been an impact. I mean, there is around a
    40-percent reduction in the overall number of banks. We still
    have a highly competitive marketplace because you have still
    got around 4,500 banks and 4,400 credit unions, but it is
    extremely problematic when you do not have new players who want
    to come into this marketplace because they know that they can
    compete and do it efficiently and effectively. I think that
    there is a concern among otherwise budding entrepreneurs to
    come into the banking system, so we want to reduce that effect.
        Mrs. Kim. Thank you. My view is that rather than promoting
    policies like those in Dodd-Frank that hurt consumers, we need
    to be promoting policies that put consumer first, which is why
    I introduced a couple of my bills, and I want to talk about
    that right now. The first is Credit Access and Inclusion Act,
    and the second one is Small Dollar Loan Certainty Act. I
    believe this will do just that in promoting the small
    businesses and our consumers. The Credit Access and Inclusion
    Act would responsibly expand the credit access for millions of
    Americans with limited or nonexistent credit history. I really
    want to thank my committee Chairman Hill for noticing that
    draft, and I hope that we can move forward with this bill with
    strong bipartisan support in the near future. The Small Dollar
    Loan Certainty Act would codify the prudential banking
    regulators' small-dollar lending guidance into law. Mrs.
    Johnson, can you explain why it is important for Congress to
    provide this type of statutory certainty for small-dollar
    lending policies rather than relying on the guidance alone?
        Mrs. Johnson. Absolutely, and we want to thank you for that
    bill because millions and millions of Americans actually live
    paycheck-to-paycheck. They want options for short-term
    liquidity loans, and a number of banks have actually been
    successful in coming back into this market, but that was after
    a period of time of a lot of regulatory uncertainty. There have
    been significant pendulum swings within the regulatory
    agencies, and there are multiple agencies involved, including
    the CFPB. So, them issuing guidance in 2020 was helpful to
    encourage banks to come back in so we have some clarity, but
    legislation is needed so we do not have that pendulum swing and
    the banks understand the rules of the road.
        Mrs. Kim. Just to be clear, even though President Trump's
    regulators created the small-dollar guidance, it was maintained
    by President Biden's prudential regulators as well, right?
        Mrs. Johnson. Yes. Yes.
        Mrs. Kim. I want to shift gear very quickly and focus on
    one of the regulatory institutions created in Dodd-Frank; that
    is the FSOC. I have become really increasingly concerned that
    it is no longer fulfilling its mission of promoting financial
    stability in coordination with primary regulators. Mr.
    Quaadman, would you agree that the Council has really strayed
    away from its original mission?
        Mr. Quaadman. Yes. With FSOC, the primary regulator really
    needs to be in the lead on that, and I will be happy to give
    more a detailed answer in writing if you like.
        Mrs. Kim. Thank you.
        Mr. Stutzman. The gentlelady's time has expired. The chair
    recognizes the gentlewoman from Massachusetts. Ms. Pressley is
    now recognized for 5 minutes.
        Ms. Pressley. Thank you to our witnesses for joining us
    today. In 2008, families across this country lost everything
    during the Great Recession. It was an economic catastrophe.
    Millions of people lost homes, lost jobs, and lost hard-earned
    savings. Now, the majority of Gen Z, who will see this hearing
    later, were just babies 17 years ago, so I cannot fault them
    that. They are completely unaware of the foreclosures and the
    pink slips, but I know my Republican colleagues and I certainly
    do remember. Republicans remember the heartache and pain that
    our country went through. It is estimated there were more than
    5,000 suicides as a result of the financial crisis. Two
    thousand and eight was an avoidable economic crisis, a direct
    result of greed, reckless speculation, and weak regulation.
    That is why Dodd-Frank was essential. I do want to acknowledge
    good work of our very own Massachusetts Congressman, Barney
    Frank, in drafting of this seminal piece of legislation. It
    created basic guardrails, stronger capital requirements so
    banks could not gamble with our livelihood. The CFPB, the only
    Agency dedicated solely to protecting consumers, regular stress
    tests for banks so we would never be caught off guard again,
    Just 10 years later, in 2018, while 65 percent of families
    still had not financially recovered from a crash, Republicans
    rolled back key parts of Dodd-Frank.
         They sent a clear message to their constituents: Wall
    Street profits margins matter more than your recovery and well-
    being. Now they are at it again by dismantling the CFPB. Just
    look at how Townstone, a mortgage lender, would repeatedly
    disparage black neighborhoods in Chicago with racist comments.
    The CFPB rightly held them accountable for discrimination in
    housing in a case that was settled last November. When the
    Trump Administration tried to reverse CFPB's win, a Federal
    judge denied that outrageous request, affirming the critical
    role of the CFPB in stopping racial discrimination in mortgage
    lending. This is just one example of how Republicans
    dismantling the CFPB has real-world consequences, like letting
    mortgage lenders off the hook for illegal redlining.
        To all of our witnesses, loud and proud, yes or no, do you
    support mortgage lenders getting away with breaking the law and
    discriminating against black people? Yes, just for the record.
        Mr. Bentsen. I do not.
        Mr. Quaadman. We do not represent mortgage lenders, but
    personally, I do not.
        Dr. Kupiec. This is not my area of expertise.
        Mrs. Johnson. No.
        Ms. Pressley. The colleague requested----
        Dr. Kupiec. Yes, I do not want them to discriminate against
    anybody.
        Ms. Pressley. Sir, I had a colleague across the aisle a
    moment ago who said that it is just a matter of following the
    rule of law, basic law, so this is not even a controversial
    thing. Racial discrimination is illegal.
        Dr. Kupiec. I am----
        Ms. Pressley. This is not a trick question. Really quick,
    loud and proud----
        Dr. Kupiec. I think people should follow the law.
        Ms. Pressley [continuing]. yes or no?
        Dr. Kupiec. I think people should follow the law.
        Ms. Pressley. Okay. I will take that as a no.
        Mr. Kelleher. I agree.
        Ms. Pressley. All right, good. Since its creation in Dodd-
    Frank, the CFPB has returned $21 billion to more than 205
    million consumers who were exploited by predatory lenders and
    Big Banks, but today, Trump has fired nearly 90 percent of CFPB
    staff, and the Agency, under his administration, has withdrawn
    over 60 guidance documents, dropped enforcement cases, and
    brought the Agency to a halt, leaving hardworking Americans
    vulnerable to exploitation. To all my witnesses, yes or no, do
    you agree with the CFPB returning $21 billion to 205 million
    victims of deceptive and predatory financial practices? Yes or
    no.
        Mr. Bentsen. We do not engage with the CFPB, so I cannot
    really comment because I do not have the background in the case
    that you are citing; so, I apologize.
        Mrs. Johnson. When a company breaks the law and consumers
    are harmed, they should have redress, but I have to say the
    CFPB's use of penalties has got to have some parameters. I can
    tell you firsthand that there are multiple times when they go
    after salacious headlines and outlandish sums of money when the
    company either did not break the law or they claimed a UDAAP
    violation on something that was completely----
        Ms. Pressley. Okay. I will take that as a no. I am
    reclaiming my time because I got to get everyone else on the
    record here. Okay. Yes or no, do you agree with the CFPB
    returning $21 billion to 205 million victims of deceptive and
    predatory financial practices?
        Mr. Quaadman. ICI's members are not regulated by the CFPB.
        Mr. Kelleher. Not my area. No comment. My only disagreement
    is it should have been higher.
        Ms. Pressley. All right. Thank you. If we as Members of
    Congress forget the visceral harm that families across the
    country suffered from in 2008, then we risk rolling back the
    very regulations and funding the very agencies that could
    prevent the next financial crash. Thank you, and I yield back.
        Mr. Stutzman. The gentlelady yields back. The chair
    recognizes the gentleman from Nebraska, Mr. Flood, who is also
    the Chair of the Subcommittee on Housing and Insurance. He is
    now recognized for 5 minutes.
        Mr. Flood. Thank you, Mr. Chairman. Before this hearing, I
    reached out to some Nebraska bankers to get their take on what
    the biggest takeaways from the Dodd-Frank law have been from
    their perspective. One significant change that has been the
    consolidation that has taken place post-Dodd-Frank. In 2009,
    there were 225 commercial banks in Nebraska according to the
    FDIC. In 2024, there are just 142. That is a 36-percent
    decrease over the last 15 years. My first question is for Mrs.
    Johnson and Dr. Kupiec. Can each of you please describe how
    Dodd-Frank has driven bank consolidation over the last 15
    years, particularly in States with lots of community banks like
    Nebraska?
        Mrs. Johnson. I think, unfortunately, your experience in
    Nebraska is fairly consistent with what has happened
    nationwide, and FDIC data paints a pretty stark picture. There
    has been about a 40-percent reduction. Look, CBA represents
    institutions $10 billion and above. Most of those institutions
    are going to have the wherewithal to absorb a lot of these
    costs. Community banks cannot, but I can tell you a $10 billion
    institution to a $500 billion institution, the costs only
    increase and it becomes more and more difficult to be at those
    different thresholds. The last thing I will say is, you do see
    banks staying at arbitrary thresholds, say, right below $10
    billion or right below $100 billion. That is not what you want
    to see in a free market.
        Dr. Kupiec. Yes, I agree. There are thresholds that apply
    in the rules and make it more expensive to grow, but for small
    banks, compliance costs mean you have to grow to a certain
    scale to absorb those, and the fact that there is no entry
    means it is not a healthy market. In a healthy market, you have
    entry and you have exit. When you have no entry, it is not a
    healthy market.
        Mr. Flood. I appreciate those answers. One of the things I
    want to stress is I am talking about towns with 1,200 people.
    When the bank closes, the cheerleaders do not get the check for
    $150, the football team does not get a pizza party, the post-
    prom does not happen, the community support dries up, and
    access to capital for people that farm within 5 miles is more
    difficult, and sometimes they end up with a bank that does not
    have that personal relationship with them and they will not
    work with them. So, there are real-world consequences to losing
    these banks.
        To dig into the second theme that came up when I reached
    out to local bankers, I would like to read a quote from Zac
    Karpf, president of the Platte Valley Bank in Scottsbluff,
    Nebraska. He writes, ``When Dodd-Frank was passed, we embarked
    on a soul-searching journey of whether to stay involved in
    mortgage lending or not. Many of our competitors, most in rural
    or underbanked areas, did not stay as involved in mortgage due
    to the regulatory cost burden. While we decided to stay
    involved, the cost associated with Dodd-Frank compliance
    contributed to doubling of costs that have outpaced any
    increase in interest or fee income. Our compliance department
    is more than triple the size that it was in terms of when Dodd-
    Frank was passed. Especially since community banks had
    virtually zero participation in the root causes of the
    financial crisis, these additional costs have been directly
    unfair to entities that were not responsible and reduced the
    availability of credit to borrowers, specifically in rural
    areas.''
        Basically, I heard the same variation of what Mr. Karpf
    said from about four other bankers: either Dodd-Frank drove
    their bank out of the mortgage origination business, or they
    chose to stay in and are paying more for compliance as a result
    just to provide that service to their customers. So, let me be
    clear. In the aftermath of the financial crisis, we did need
    reforms to combat some of the abuses and practices that led to
    mortgages being issued to borrowers that had no business
    receiving them, but the end result seems to be that smaller
    banks are loath to participate in the mortgage business at all.
    Dr. Kupiec, is this problem where small banks are leaving the
    mortgage business something you have encountered in your
    research?
        Dr. Kupiec. Yes. There are surveys that say exactly what
    you are finding.
        Mr. Flood. Secondly, to you again, we saw some tailoring in
    the 2018 law, S. 2155, in the Economic Growth, Regulatory
    Relief and Consumer Protection Act. Do you feel that this
    committee could explore any further changes to statute to help
    keep community banks in the mortgage origination business, and
    if so, what would you have us focused on?
        Dr. Kupiec. I do not view myself as an expert on all the
    mortgage rules, so I would prefer not to offer comments there.
        Mr. Flood. Very fair. All right. With that, I do ask
    unanimous consent to enter a letter to Mr. French Hill and
    Maxine Waters from Brett Palmer, President of the Small
    Business Investor Alliance into the record.
        Mr. Stutzman. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Flood. I yield back.
        Mr. Stutzman. The gentleman's time has expired. The chair
    recognizes the gentlewoman from Texas. Ms. Garcia is now
    recognized for 5 minutes.
        Ms. Garcia. Thank you, Mr. Chair, and thank you to all the
    witnesses here today. As you can see, we are nearing the end,
    and while I have some time to say something about the
    witnesses, I want to especially welcome my friend and colleague
    from Houston, Congressman Bentsen. I still remember, Ken,
    campaigning for you back when we both had less gray hair. I
    color it and you do not, but it is good to see you, and my best
    to Tamra.
        I remember the 2008 financial crisis. Americans lost their
    retirement nests eggs, their jobs, and their homes. In numbers,
    nearly 10 million Americans lost their homes. Nearly 9 million
    people lost their jobs. By 2012, 46.5 million Americans were
    living in poverty, and it should not surprise anyone in the
    room that communities of color were the most impacted. That is
    why Dodd-Frank exists, to prevent another devastating crisis
    and to provide guardrails and protections. Today, we are not
    here to celebrate its successes. We are instead mourning its
    dismantling as the current administration continues to undo the
    work in progress accomplished through Dodd-Frank, but we cannot
    rest on our laurels. We must also demand answers and fight to
    protect the historic law that protects our financial system and
    consumers.
        Mr. Kelleher, what can be done with the Trump
    Administration's CFPB or supervision actions concerning
    penalties or fines against payday lenders and other high-cost
    lenders to protect consumers against multiple non-sufficient
    funds and overdraft fees on affordable loans?
        Mr. Kelleher. If the CFPB was in business doing its job as
    required by the law, it would properly regulate payday lenders,
    and it attempted to do so during the Obama Administration where
    payday lenders were required to actually determine--this is
    what the rule proposed--actually required payday lenders to
    determine that the person they were knowingly giving the loan
    to could repay the loan. It is shocking that you would need a
    rule that would tell a financial institution that it should see
    whether or not the person it is giving money to, a loan to, can
    repay it but they had to do that for payday lenders because the
    money that is made by the payday lenders is getting people into
    a debt cycle, giving money to people that they know they cannot
    repay it. So, the loan has to keep getting rolled over, more
    fees, more money, higher interest rates, over and over getting
    locked into a debt trap. Those rules actually were proposed and
    finalized by the CFPB to prevent that from happening, and,
    unfortunately, those rules are no longer applicable, and the
    CFPB is out of business, so there is nobody to enforce those
    rules or even enact those rules.
        Ms. Garcia. Tragically, that is something that is a big
    issue in my district. It is a 77-percent Latino district in
    Houston, and it is especially an issue for us because the
    people are struggling, particularly today, just to get gas,
    groceries, and food on the table, and they are desperate. If
    they cannot make it, they are working paycheck-to-paycheck, the
    payday lender may be the one to say, here, we will help you.
    You are right, they are probably going to end up paying back 5
    to 10 times of what they originally borrowed, which is why
    those protections are necessary. In fact, a lot of them end up
    in situations where they have to rely on Buy Now, Pay Later
    practices to even make ends meet. So, how can we have greater
    predictions against payday lenders?
        Mr. Kelleher. At this point, Congress is going to have to
    either enact statutes, or somebody is going to have to get the
    CFPB back into business, and that does not look like it is
    going to happen. One of the more important things that can help
    is to prevent crashes to be properly regulated. One of the
    charts that I have in my written testimony shows the
    unemployment rate took 10 years after the financial crash to
    return to pre-crash levels. When you look at the economic
    wreckage caused by that crash, many people are still suffering
    today. Frankly, that crash caused the United States a lost
    generation of Americans. People coming out of college did not
    get jobs. People who wanted to retire lost their nest eggs.
    People who wanted to advance in their careers; they did not get
    it. Twenty-seven million Americans were out of work in October
    2009, 13 months after the crash of Lehman Brothers. That had
    ripple effects, literally, through today, to them, their
    children, their homes, their hopes, and their dreams. So,
    preventing those crashes by proper regulation and enforcement
    of the rules can do more to help everybody get on the economic
    ladder, stay on the economic ladder, and so that we can have an
    economy where the financial system supports it in this broad-
    based wealth creation. That is what we need, not deregulation.
        Ms. Garcia. I agree with you. Director Chopra came to my
    district to talk to our seniors because they had been
    particularly preyed on, not only by payday lenders, but
    telemarketers online phishing emails. I wanted to ask you more
    questions about that particularly for seniors, but I have run
    out of time, so I am going to submit the questions for your
    answer in writing.
        Mr. Kelleher. Sure. Thank you.
        Ms. Garcia. Thank you. I yield back.
        Mr. Stutzman. The gentlelady yields back. The chair now
    recognizes the gentleman from Wisconsin, Mr. Steil, who is also
    the Chair of the Subcommittee on Digital Assets, Financial
    Technology, and Artificial Intelligence. He is now recognized
    for 5 minutes.
        Mr. Steil. Thank you very much, Mr. Chairman. Thanks for
    holding today's hearing, to full Chair Hill.
        I want to start with you if I can, Dr. Kupiec. Let us go
    back a decade. In 2014, you wrote an op-ed in the Wall Street
    Journal back when I was in the private sector, a couple of
    years after Dodd-Frank was enacted. One of the concerns you
    raised was that FSOC, the Council's systemic risk designation
    authority was broad and prone to abuse, and you said, ``The
    Council's designation power makes a mockery of property rights
    in due process.'' Ten years later, a decade later, we got some
    empirical data. Would you say that your prediction was
    accurate?
        Dr. Kupiec. I would. Systemic risk is never even defined in
    the Dodd-Frank Act. Yet, you are supposed to detect it and pass
    rules and regulations to stop systemic risk, something that has
    never even been defined in the act.
        Mr. Steil. What should Congress do to reform that area?
        Dr. Kupiec. I would make the FSOC just an advisory body. I
    would take away their designation authority, and they should
    report to Congress, and Congress should legislate if they want
    to expand regulation.
        Mr. Steil. Let me build on this by going to you if I can,
    Mr. Bentsen, on the same topic. FSOC famously designated two
    nonbanks as systemically important. One ultimately challenged
    that in court successfully. SIFMA has argued that the
    designations are inappropriate for nonbanks. Can you provide
    color as to why do you believe that to be the case?
        Mr. Bentsen. Yes. The problem is that the designation would
    create bank-like regulation of a designated entity, and
    particularly for asset managers who are regulated by the
    Securities and Exchange Commission. They are not----
        Mr. Steil. Was that a better way to regulate it through the
    SEC?
        Mr. Bentsen. A better way to look at it is to look at
    activities and not regulate entities that are nonbank entities,
    like a bank. So, I think both what the previous Trump
    Administration did in terms of focusing on activities and the
    legislation that Mr. Huizenga and Mr. Foster are pursuing are a
    better approach.
        Mr. Steil. Mr. Quaadman, do you agree with that assessment?
        Mr. Quaadman. Yes, I agree because you want to have the
    primary regulator in charge. You want to have an activities-
    based approach, and the FSOC Improvement Act is the best way to
    get there rather than having this ping-pong guidance between
    administrations.
        Mr. Steil. Not only is there a ping-pong guidance, but you
    also view there to be a potential overlap between the actions
    and expertise of the regulators and the actions of FSOC.
        Mr. Quaadman. Yes.
        Mr. Steil. A better way to divide those responsibilities?
        Mr. Quaadman. One example to raise as well, even though it
    was not a designation example was where you had a majority of
    commissioners with the SEC wanting to go down a particular path
    of money market funds and the FSOC did an end-run around that.
    So, we want to make sure, through legislation like that, that
    there are very clear lines of authority and who is in charge.
        Mr. Steil. I think the more we have clear lines of who is
    in charge, the more efficient the markets are going to operate.
    Speaking of ambiguity, I am going to shift here slightly with
    you, Mrs. Johnson, if I can. CFPB, under Director Chopra, he
    had an opportunity to pursue rulemaking through a normal
    rulemaking process, but often, we saw then Director Chopra
    issue guidance, press releases, blog posts, in some cases,
    often, in my opinion, with inflammatory language. In theory,
    those types of things could be nonbinding, but in practice,
    that was not really the case because a lot of entities viewed
    themselves as potentially at risk of actions by the CFPB. Could
    you just comment very briefly as to how that would impact banks
    but, ultimately, their customers?
        Mrs. Johnson. Yes. Look, I mean, I think issuing guidance
    on something that should have been a rule in the first place
    creates a ton of uncertainty in the marketplace. There were
    examples, including a Buy Now, Pay Later advisory opinion that
    the CFPB had issued where it would not even apply to banks, but
    we came out against it because we said, you should have written
    a rule. It was substantive change. If I can just expand for one
    second because it will allow me to respond to some things that
    Mr. Kelleher has said a few times earlier about the complaint
    database and the credit card late fee and the 20 billion civil
    penalties that have been paid out.
        Facts matter. Facts matter when you are writing rules. We
    could talk about the complaint database being structurally
    flawed. We actually think it could be beneficial for consumers.
    If the CFPB had wanted to rely on facts and even leaned on the
    complaint database to do so, it would have known that credit
    cards are very minimal in terms of the complaints from
    consumers. It would have focused instead on things like fraud
    and scams that are happening. When it talks about issues like
    credit card late fees, it completely paints an obscure and
    opposite picture of what the market reality is.
        Mr. Steil. Ultimately, to the detriment, often, of
    consumers because the focus of the CFPB was not on the fraud
    and scams that people were victims of. Seeing the time, Mr.
    Chairman, I yield back.
        Mr. Stutzman. The gentleman yields back. The chair
    recognizes the gentleman from Texas. Mr. Green is now
    recognized for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I thank the witnesses
    for appearing. I especially thank Congressman Bentsen for being
    here today. Have not seen you in a while. Good to see you.
        Mr. Kelleher, permit me to start with you, if I may, and,
    as you know, the CFPB was charged with assisting with military
    lending. In fact, we passed a Military Lending Act here in
    Congress. You cannot have an interest rate of more than 36
    percent on military loans. Before that, it was all over the
    place. Mr. Kelleher, given the current situation with the CFPB,
    will our military people start to suffer and find themselves
    back where they were paying higher interest rates? Of course,
    they are not the persons who make the most money while they
    serve. They do have a salary, but it is probably just enough to
    get by on. Your thoughts, please.
        Mr. Kelleher. Look, it is pretty despicable. I commented on
    this earlier. Servicemembers, veterans, and their families are
    disproportionately targeted by financial scams and financial
    predators, and the data bears this out. The median loss for
    fraud is $658 for civilians; it is $775 for active-duty
    military; and it is $950 for military retirees and veterans.
    They are being targeted disproportionately, and their losses
    are disproportionately high, and that is why military
    servicemembers and their families actually had more than
    400,000 complaints filed with the CFPB since it was created in
    2011. The CFPB, to its credit, returned approximately $363
    million in restitution for military-connected families.
        So, not only the military. They are enforcing the Military
    Lending Act. They are enforcing the consumer protection laws
    against groups that are targeted, be they the elderly, as
    referred to earlier, or the military, who have other things,
    too. I served in the Air Force. You have a lot going on. You
    are being moved around. You are under a lot of pressure. You
    have a crazy job. Nowadays, we are still deployed all over the
    world. They are coming and they are going. Their families are
    at home sometimes, and they are somewhere else. They need and
    deserve the protection and this CFPB cut the Office of
    Servicemember Services to one person, and that person retired.
    That should be unacceptable to every American. That should just
    not be allowed in this country, and yet, that is what is
    happening, and not a peep--not a peep--from far too many people
    in the Congress to say, no, that is wrong, do not do it.
        Mr. Green. Where will they take their complaints now? Where
    would they take their complaints now? They have these
    complaints. Where will they take them without a CFPB?
        Mr. Kelleher. There are a variety of consumer protection,
    the Better Business Bureau, but they do not have an empowered,
    funded consumer protection agency or advocate anywhere. The
    Department of Defense and the different services have a variety
    of services that they try to provide, but they are fragmented,
    and by the way, they actually have other really important jobs
    to do, like protecting the country. So, we created the CFPB and
    the Office of Servicemembers, so that there would be one place
    where everybody knew they could go, and they did know because
    they went there. We know based on the complaints, and we know
    based on the recoveries and the actions of the CFPB to stand up
    for the military, that it worked. It was very effective.
        Frankly, I think if you look at the cases the CFPB brought
    for the military, the servicemembers, and their families being
    ripped off, nobody will disagree with a single one of those
    cases. In fact, they might actually agree with me that the
    problem with the amount of money returned by the CFPB was too
    low. Too low when you look at the egregious, outrageous conduct
    that is happening out there, and it is happening today. No cop
    on the beat. No place to go. They are on your own. You have to
    worry about doing your duty. You have to worry about your
    family back home while you are somewhere else. You have to
    worry about the bank and the credit card and the bills and the
    kids, and you have to do it on your own. That is wrong.
        Mr. Green. Just quickly, if you can. You talked about the
    recovery from the financial crisis. Which ethnic group or race
    in this country had the most difficult time recovering?
        Mr. Kelleher. All the objective statistics prove that
    communities of color across the country and low-end communities
    actually disproportionately suffered and took a
    disproportionately long time to recover. As I said, many of
    those communities have not recovered. They are still suffering
    today from the financial setback that they suffered in the wake
    of the financial crisis. Those are the real victims. That is
    who we should be worrying about, not financial institutions
    complaining about costs that they do not actually bother
    providing the data and analysis for.
        Mr. Green. Thank you, Mr. Chairman. I yield back.
        Mr. Stutzman. The gentleman's time has expired. The chair
    recognizes the gentleman from New York. Mr. Garbarino is now
    recognized for 5 minutes.
        Mr. Garbarino. Thank you, Mr. Chairman. Thank you to all
    the witnesses for being here today.
        Our financial systems benefit from firms offering a variety
    of products and services to the American businesses and
    consumers. Dodd-Frank and all of its rules and requirements
    have negatively impacted U.S. banks and have been stifling
    foreign banks' abilities to operate and invest in the United
    States. These limitations have real ramifications for lending
    and capital markets that drive economic growth. Currently,
    regulators do not account for foreign banks' unique ring fence
    structure and lower categorized risk profiles. In fact, rules
    like Basel are just blindly applied. Consequently, foreign
    banks are shrinking or outright leaving the U.S. markets and at
    a time that we want them to support consumers, businesses, and
    markets like U.S. Treasury market. Mr. Bentsen, what steps can
    Congress or the agencies take so that foreign banks are better
    able to invest in the U.S. and contribute to our economy?
        Mr. Bentsen. Thank you, Congressman. First of all, I agree
    with your analysis that foreign banking operations add a
    tremendous amount of capacity to U.S. capital markets. That
    capacity has been constrained because of various capital and
    liquidity rules coming out of Dodd-Frank and other reforms that
    came out. Some of that was tailored as a result of the S. 2155,
    but we still see that the Financial Banking Organizations
    (FBOs) are capital constrained from adding capacity to the U.S.
    capital markets, and they often are very large players, along
    with the U.S. firms in that area. So, it would be helpful,
    starting with the regulators, I think, to think about more
    tailoring, which they have the authority to do under 2155 and
    think about the contribution that those banks provide to our
    market system.
        Mr. Garbarino. If they do, it will probably be quicker than
    if we have to act.
        Mr. Bentsen. Yes.
        Mr. Garbarino. Thank you. I would like to focus now on the
    U.S.-based institutions. A recent report on broker-dealer
    activity from SEC revealed that the amount of money handled by
    broker-dealers has grown from $4.6 trillion in 2010 to
    approximately $6.4 trillion in 2024. That is around a 36-
    percent increase in assets since the enactment of Dodd-Frank.
    At the same time, the number of broker-dealers has declined
    from more than 4,700 to less than 3,400, a 30-percent decrease
    over the same pyramid. Mr. Bentsen, how has Dodd-Frank
    contributed to this wave of industry consolidation?
        Mr. Bentsen. Firms report to us, particularly smaller
    broker-dealer firms report that their compliance costs have
    grown exponentially, and so, it is harder for a smaller firm to
    absorb that cost compared to a larger firm. So, we see a number
    of firms merging, and I think that is part of the reason that
    we see the decline in the number of broker-dealers over the
    last 15 years, and we see other firms who get out of the
    business completely. They go in and just become a registered
    investment advisor if they are primarily in the retail space.
    So we are definitely seeing a knock-on effect.
        Mr. Garbarino. That was going to be my follow up point, if
    you did not hit it, but the fixed costs are pushing smaller
    people out of business. What can we do or what can the SEC do
    to encourage industry diversification and competition in the
    way the Dodd-Frank----
        Mr. Bentsen. I think that the SEC and along with the
    Financial Industry Regulatory Authority (FINRA) need to think
    about looking at their rule book. FINRA has recently put out
    FINRA Forward, which they are looking at are there changes in
    their rule book that could help, particularly smaller firms,
    with their compliance costs.
        Mr. Garbarino. I appreciate that answer. Thank you.
    Switching gears for my remaining time. In 2010, Dodd-Frank's
    enactment provided regulators with a comprehensive and wide
    range of authorities to regulate our financial markets.
    However, there are several rulemaking authorities in Dodd-Frank
    that continue to remain unused even 15 years after its
    enactment. Dr. Kupiec, how does the continued non-exercise of
    these powers contribute to the legal uncertainty for both
    investors and industry?
        Dr. Kupiec. I think this is a question more appropriate for
    SEC than the banking regulators.
        Mr. Garbarino. Okay. All right. Not a problem. All right.
    Mr. Bentsen, Section 913(g) of Dodd-Frank grants the Securities
    and Exchange Commission authority to establish a fiduciary duty
    for broker-dealers when providing personalized investment
    advice to retail customers, aligning their standard of conduct
    with that of investment advisors. However, this authority is
    also unused. If the SEC exercises authority under 913(g) and
    subjected brokers-dealers to a fiduciary standard, how could
    this disrupt capital markets?
        Mr. Bentsen. 913 was, as I mentioned earlier to one of your
    colleagues, was a highly negotiated part of Dodd-Frank, and it
    was really designed to provide a uniform standard or an equal
    standard of care between brokers and advisors operating under
    two different standards: the 1934 Act and the 1940 Fiduciary
    Act. Congress actually got this right in how they did it, and
    then the SEC, through multiple SECs, got it right with Reg Best
    Interest. I think reading it broader, and the courts found this
    was the case, reading it too broad was not what Congress
    intended.
        Mr. Stutzman. The gentleman's time has expired.
        Mr. Garbarino. I would appreciate unanimous consent----
        Mr. Stutzman. Without objection.
        Mr. Garbarino [continuing]. to enter a statement for the
    record from the U.S. Chamber of Commerce.
        Mr. Stutzman. Without objection.

        [The information referred to can be found in the appendix.]

        Mr. Garbarino. Thank you.
        Mr. Stutzman. The gentleman from New York, Mr. Torres, is
    now recognized for 5 minutes.
        Mr. Torres. Thank you, Mr. Chair. My comments are going to
    be focused on housing. Since the 1980s, the home price-to-
    income ratio has nearly doubled. In the 1980s, the median home
    price was 3.5 times the median household income. Today, the
    median home price is 6 times the median household income. In
    the past half century, America has been witnessing the death of
    affordable homeownership. First-time homebuyers have
    historically made up 38 percent of overall homebuyers. In 2024,
    that number fell dramatically to just 24 percent, the lowest
    level ever recorded. The housing crisis is both a market
    failure and a regulatory failure, and it is a regulatory
    failure not only at the level of excessive zoning restrictions,
    but also at the level of excessive lending restrictions.
        Abundance has become a ubiquitous term in our political
    discourse, but housing abundance requires financial abundance.
    Since the financial crisis, financing for first-time
    homeownership has not been abundant and affordable. It has
    become scarce and expensive. Before the financial crisis, the
    average credit score for approved loans was 710 to 720. After
    the financial crisis, the average credit score for approved
    loans was 760. The 50-point shift in the average approved Fair
    Isaac Corporation (FICO) credit score has meant the
    catastrophic loss of homeownership access for 10 million to 20
    million prime borrowers. So, we are in a country where there
    are fewer people who own homes because of an artificially
    restricted pool of potential homebuyers. There were fewer homes
    to own because of an artificially restricted supply of housing,
    and homeownership itself has been delayed by a decade. In 1991,
    when I was only 3, the median age of a first-time homebuyer was
    28 years. Today, that number has risen to 38 years, the oldest
    median age ever recorded for first-time homeownership. I am
    among the millions of young Americans who have lived through
    the death of the American dream of affordable homeownership.
        So, here is the question. When it comes to housing finance,
    did the U.S. get the regulatory balance right in the wake of
    the financial crisis, or did we swing the pendulum too far in
    restricting the supply of credit for first-time homeownership?
    That is an open question for anyone.
        Dr. Kupiec. I think the evidence from the American
    Enterprise Institute's (AEI's) Housing Center shows that the
    loan underwriting characteristics have been loosened to try to
    allow people to buy mortgages with a higher mortgage rate and
    the higher prices. In fact, underwriting standards have even
    slipped. I think the Federal Housing Administration (FHA) and
    the GSEs take now loans with 50-percent debt-to-income ratio,
    which, historically, is a really high ratio. So, things have
    actually moved toward less restriction on some of the lending,
    but the housing prices and the mortgage rates have just blown
    past that, and so, you are really at one of these quagmires. It
    gets really risky to make people loans, when the debt-to-income
    ratios get that high. Their ability to repay is not there and
    that is kind of the situation we are in. The regulations have
    been stretched to try to allow people to buy homes, but the
    house prices and the mortgage rates just make it unaffordable.
        Mr. Kelleher. I am not a housing expert, but you have put
    your finger on a really important issue that is complex and has
    many reasons. One of the reasons it is never discussed is the
    way capital is allocated in this country and to whom, right? If
    you look at the Big Banks, only about 40 cents of every dollar
    of deposits actually goes to lending. If you look at community
    banks, 75 cents of every dollar goes to lending. Why is that?
    Too often kind of high margin wealth extraction, financialized
    activities return the biggest profits and therefore bonuses as
    the banks get bigger. They use their balance sheet for all
    sorts of things having nothing to do with lending, and that is
    how you end up with 40 cents on a dollar of deposits going to
    lending at the Big banks, 75 cents at community banks because,
    as a number of your colleagues mentioned earlier, that is what
    they are into. They are into building their communities,
    whether it is small businesses or mortgages, and we need to
    think hard about the incentive structure that has our biggest
    banks putting a minority of their deposits into actual lending.
    It hurts the wealth gap. It hurts the racial wealth gap. It
    hurts the housing gap. Across the board, it impacts the
    problems that we are all trying to think about and address.
        Mr. Bentsen. I would just say there are multiple factors.
    There are some Dodd-Frank factors, things like Reg AB2, that
    came out of Dodd-Frank that has affected the Residential
    Mortgage-Backed Securities (RMBS) market. Pretty much the vast
    majority of loans now are either conforming loans or government
    guaranteed loans, so, our private market has gone away. That is
    number one but there are other factors as well, as you pointed
    out, so it is a much more holistic problem that needs to be
    addressed.
        Mr. Torres. Thank you.
        Mr. Stutzman. The gentleman's time has expired. I now
    recognize myself for 5 minutes. I would like to submit for the
    record a letter from the Defense Credit Union Council.

        [The information referred to can be found in the appendix.]

        Mr. Stutzman. Two decades ago, there were over 8,500 FDIC
    insured banks in the United States. Today, that number is just
    4,000. Many of the banks we have lost are small community
    banks, which play a vital role in my district in northeast
    Indiana. Though there are several reasons for this decline, I
    believe Dodd-Frank's one-size-fits-all regulatory approach for
    banks is a key contributor. Mrs. Johnson, can you explain how
    Dodd-Frank's compliance burdens have contributed to
    consolidation in the banking sector, and what are the long-term
    consequences for communities if we continue down this path?
        Mrs. Johnson. I think it is an incredibly important
    question, and anytime that we are talking about regulation, I
    think it is really important that we start with the outcome.
    What is the outcome that we want to see? We have the most
    competitive banking system in the world. It is diverse. Even to
    Mr. Kelleher's earlier points, you want banks who are out in
    the capital markets. You want them trading. You want them
    lending. There are a variety of things that all the banks do
    and they compete on. You are right, we have seen around a 40
    percent reduction in the number of banks, and I think that
    consolidation is largely--not only, but largely--driven because
    of the regulatory burden. The problem with that is that you
    have less competition in for consumers' business, right?
        The other piece of this is that it pushes lending outside
    of the banking system. You want banks competing with nonbanks.
    You want banks competing on every single product line. So, we
    just talked about mortgage. This pendulum has swung, and the
    majority of mortgage lending at different periods of time is
    now outside of the banking system entirely. You want banks in
    that business competing for those consumers. Same thing is
    happening for personal loans where the majority of loans are
    actually out of the banking system, auto lending. The list goes
    on and on. I do not think anybody argues against regulation and
    wanting safety and soundness in consumer protection, but there
    is always a cost, and we have to start weighing the costs and
    if it actually outweighs the benefits.
        Mr. Stutzman. Thank you. As we have heard today, the result
    of Dodd-Frank was an entirely new regulatory regime with broad
    powers, expansive mandates, and little accountability to the
    American people. Under the Biden Administration, we saw this
    regime in a full display. Whether it was Director Chopra
    weaponizing the CFPB to pursue policies that would have
    destroyed the overdraft protections many of my constituents
    rely on, or Vice Chair Barr's efforts to impose the harmful
    Basel III Endgame capital requirements on banks. We have seen
    how far out of bounds agencies can venture because of Dodd-
    Frank. Dr. Kupiec, do you think the current Dodd-Frank
    regulatory regime is accountable to the American people and is
    this expansive regulatory regime watering down congressional
    authority?
        Dr. Kupiec. I do not exactly know how it could be
    accountable to the American people. Does it serve the American
    people well? Parts of it work well, lots of it are too
    complicated, and lots of it, I think, could be revised and
    serve the people better. I will leave it at that. We are
    certainly not at a perfect regulatory balance.
        Mr. Stutzman. What about the relationship with Congress?
        Dr. Kupiec. Oh, I think Congress has delegated too much
    authority to things like the FSOC to make designations, and I
    think those kind of powers belong in the legislature, and you
    guys should debate it and decide who gets regulated and who
    does not and the regulators should not decide on their own.
    They should advise you who they think, who you should be
    talking about, but I would not give them powers if it were my
    choice.
        Mr. Stutzman. Thank you. Here in Washington, we have far
    too many agencies that seem to be more interested in expanding
    their own power than actually serving the public. Americans
    across the country, and certainly in my district, are fed up
    with this, as we just discussed a little bit. A prime example
    of this is the Office of Financial Research, which was created
    by Dodd-Frank to aid in data collection. The problem is that,
    prior to Dodd-Frank, Federal regulators already had an
    extensive ability to collect data. The Federal Reserve Board
    alone employs over 400 Ph.D. economists. In addition, each of
    its regional banks can conduct its own localized research, not
    to mention the extensive data collected by our other financial
    regulators. Mr. Bentsen, can you elaborate on how OFR has
    failed to add significant value beyond what existing agencies
    already provide, and how do you think this reflects the broader
    problem of regulatory sprawl under Dodd-Frank?
        Mr. Bentsen. Thank you, Congressman. OFR does collect a lot
    of data. You are right. Other agencies collect data. Congress
    has talked about this before, of looking to see can there be
    some coordination or streamlining of financial data collection,
    and in addition, protection of that data, I would add as well,
    because we know the government is susceptible to cyber risk,
    just as the industry is. On top of that, I mean, OFR, on the
    one hand, does play an important role. They collect data for
    the Secured Overnight Financing Rate (SOFR) reference rate.
    That is very important. On the other hand, they have had
    situations of mission creep. So, I do think it is appropriate
    for Congress to take a look at that.
        Mr. Stutzman. All right. Thank you. My time has expired.
        I would like to thank all of the witnesses for their
    testimony today.
        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 response. Witnesses, please respond no later than August
    20 of 2025.

        [The information referred to can be found in the appendix.]

        Mr. Stutzman. This hearing is adjourned.

        [Whereupon, at 1:46 p.m., the committee was adjourned.]

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