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

                       OVERSIGHT OF PRUDENTIAL REGULATORS
    =======================================================================

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                DECEMBER 2, 2025

                                   __________

                               Serial No. 119-45

           Printed for the use of the Committee on Financial Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                  __________

                  U.S. GOVERNMENT PUBLISHING OFFICE
    63-434 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, December 2, 2025
                               OPENING STATEMENTS

                                                                       Page
    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

                                   STATEMENTS

    Hon. Andy Barr, Chairman of the Subcommittee on Financial
      Institutions, a U.S. Representative from Kentucky..............     4
    Hon. Bill Foster, Ranking Member of the Subcommittee on Financial
      Institutions, a U.S. Representative from Illinois..............     4

                                   WITNESSES

    Hon. Michelle Bowman, Vice Chair for Supervision, Board of
      Governors of the Federal Reserve System........................     5
        Prepared Statement...........................................     8
    Hon. Jonathan Gould, Comptroller, Office of the Comptroller of
      the Currency...................................................    17
        Prepared Statement...........................................    19
    Hon. Kyle Hauptman, Chairman, National Credit Union
      Administration.................................................    23
        Prepared Statement...........................................    25
    Hon. Travis Hill, Acting Chairman, Federal Deposit Insurance
      Corporation....................................................    34
        Prepared Statement...........................................    36

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Brad Sherman:
        Jack Newsham and Julia Hornstein: A Fundraising Memo for
          Palmer Luckey's New Crypto Bank Says the Quiet Part Out
          Loud.......................................................   110
    Hon. Bill Huizenga:
        Joint Trade Statement........................................   114
    Hon. Nikema Williams:
        Letter to FDIC opposing staff layoffs........................   118

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to question for the record from Hon. Jonathan
      Gould..........................................................   124
    Written responses to question for the record from Hon. Kyle
      Hauptman.......................................................   154
    Written responses to question for the record from Hon. Hon.
      Travis Hill....................................................   172

                                  LEGISLATION

    H.R. ------, the Tailoring and Indexing Enhanced Regulations
      (TIER) Act.....................................................   221
    H.R. ------, the American Financial Institution Regulatory
      Sovereignty and Transparency (American FIRST) Act..............   230
    H.R. ------, the Regulatory Efficiency, Verification,
      Itemization, and Enhanced Workflow (REVIEW) Act................   250
    H.R. ------, the Rural Depositories Revitalization Study Act.....   255
    H.R. ------, the New Bank Application Numbers Knowledge (New
      BANK) Act......................................................   258
    H.R. ------, the Merger Agreement Approvals Clarity and
      Predictability Act.............................................   263
    H.R. ------, the Merger Process Review Act.......................   267
    H.R. 4936, the Taskforce for Recognizing and Averting Payment
      Scams (TRAPS) Act..............................................   271

                       OVERSIGHT OF PRUDENTIAL REGULATORS

                                  ----------

                           Tuesday, December 2, 2025

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

        The committee met, pursuant to notice, at 10:11 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, Loudermilk, Davidson, Rose, Steil,
    Timmons, Stutzman, Meuser, Kim, Garbarino, Flood, Lawler, De La
    Cruz, Downing, Moore, Waters, Sherman, Meeks, Scott, Lynch,
    Green, Cleaver, Foster, Beatty, Vargas, Gottheimer, Gonzalez,
    Casten, Tlaib, Torres, Garcia, Williams of Georgia, Fields,
    Bynum, and Liccardo.
        Chairman Hill of Arkansas. The Committee on Financial
    Services will come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        The hearing is entitled, ``Oversight of the Prudential
    Regulators.''
        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. I want to welcome our witnesses and thank
    them for joining us today. Today's hearing is an opportunity
    for the committee to discuss the recent work of our prudential
    regulators and to highlight the strong alignment between their
    current approach under the Trump Administration and our agenda
    here in the committee to make community banks, all depository
    institutions of all sizes, great again. Our shared objective is
    to ensure that regulatory policy supports the needs of the
    banks and credit unions that serve the hardworking Americans
    across this country. The supervisory and regulatory
    developments, rulemakings, and activities of the prudential
    regulators that we will highlight in today's hearing underscore
    that shared vision.
        Together we can reduce the duplicative or untailored
    burdens on financial institutions of all sizes to ensure that
    they can continue to thrive in an increasingly competitive
    market. This hearing is about enhancing clear, tailored rules
    of the road, fostering competition, and ultimately serving the
    best interests of consumers and businesses. Committee
    Republicans have been working alongside the Trump
    Administration from day one to ensure that community banks
    remain viable, competitive, and able to serve the needs of our
    local communities. To achieve our mutual goals, it is crucial
    that prudential regulators remain focused on their core mission
    to safeguard the fundamental stability, safety, and soundness
    of our financial institutions rather than on trendy
    distractions that prioritize progressive climate agendas or
    diversity, equity, and inclusion (DEI) initiatives. That is why
    our committee's legislative and oversight agenda and the Trump
    Administration are collaborating in leading the charge to shift
    our regulatory approach and return prudential supervision to
    this core mission.
        We saw what happened with the failure of Silicon Valley
    Bank when supervisors failed to keep their focus on the
    obvious, in-plain-sight material financial risks. This hearing
    will also emphasize the important reversal of costly, ill-
    conceived Biden-era regulations and guidance, which would drive
    up costs and drive access for services down for American
    homebuyers and small businesses, most notably the original
    Basel III Endgame proposal. I am proud of the work that the
    committee has done to advance legislation to provide clarity
    for the digital assets marketplace, streamline supervision,
    increase access to capital and deposit funding, ensure a fair
    supervisory appeals process, and establish a timely merger
    review process, among many others. It is critical that we
    continue this momentum toward transparent regulatory certainty
    and broader market competition. Clear, consistent rules reduce
    compliance costs for banks and credit unions. When these
    institutions can navigate regulations without ambiguity, they
    can allocate their resources more effectively, making loans
    cheaper and investing in customer service, technology, and
    innovation that benefits our entire economy.
        This committee has held numerous hearings throughout the
    119th Congress to learn about how the actions of the regulators
    are affecting community banks and credit unions and their
    ability to serve our customers. We have heard time after time
    about the positive developments occurring at your agencies, as
    well as further ideas about rightsizing the supervisory and
    regulatory environment. As in the past, this Congress must find
    modern ways to enact effective and clear guidelines and
    expectations to enable financial institutions to operate in an
    increasingly diverse and dynamic financial system. I look
    forward to your testimony today, and I yield back the balance
    of my time.
        I now with pleasure recognize the ranking member of the
    committee, Ms. Waters, for a 4-minute opening statement.

    OPENING STATEMENT 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. Thank you to
    our witnesses for being here today.
        During the Thanksgiving break, a lot of us heard the same
    thing from our constituents: buying the groceries for
    Thanksgiving dinner was much, much more expensive this year. On
    top of that, Trump's weakening economy is squeezing families so
    much that many are concerned that they will need to pull back
    on holiday spending. After all, did Trump not say that the
    children only need two dolls, and that the two dolls might cost
    more? With economic policies like these, Donald Trump is ``The
    Grinch Who Stole Christmas,'' but Democrats are not the only
    ones raising alarms. Republican representative, Marjorie Taylor
    Greene, who until recently was a die-hard Trump supporter,
    acknowledged that under the Trump Administration the cost of
    living has become unbearably high. Corporate interests are
    prioritized over the needs of the working class. Small
    businesses are hurting, and the American Dream is slipping out
    of reach. We were all promised lower costs on day one of
    Trump's term. Instead, his administration is dismantling the
    very institutions that keep costs low and the economy stable,
    including by undermining the independence of the Federal
    Reserve and forcing independent agencies to serve his personal
    interests. Americans were promised a reduction in credit card
    interest payments. Instead, Trump and the Republicans are
    unlawfully shutting down the Consumer Financial Protection
    Bureau, the only Federal Agency focused on making sure that Big
    Banks and other financial institutions treat Americans fairly.
        As if that were not enough, Russell Vought, who has told
    private audiences of his plan to illegally end the Consumer
    Financial Protection Bureau (CFPB), announced last month that
    CFPB examiners will be forced to recite a so-called humility
    pledge, essentially forcing them to bow down to Big Banks
    before daring to carry out their jobs to examine them. While I
    am happy that our committee is following the law to finally
    have what should be a semiannual hearing with the Federal
    Reserve (Fed) vice chair of supervision, I remind Chairman Hill
    that it has been 18 months since the CFPB director last
    testified before this committee, a delay which is wholly
    unacceptable.
        I am concerned that our bank and regulators have been
    anything but independent, prioritizing Trump's deregulatory
    policies that will leave our banking system vulnerable to
    another Silicon Valley Bank-type failure, if not worse, but it
    is not just handouts to mega banks. The Trump family has spent
    more time putting money into their own pockets than working for
    the American people. In fact, Trump and his family have
    received nearly $2 billion in cash, gifts, and crypto profits
    while our regulators work on crypto rules that could legitimize
    this corruption. We all know the adage that silence is
    complicity, and I am deeply disappointed by the ways in which
    my colleagues on the other side of the aisle have remained
    silent and enabled this President's policy.
        I hope each of our banking regulators were here today
    assert your independence and help us navigate out of this mess
    before it is too late. I yield back.
        Chairman Hill of Arkansas. The gentlewoman yields back. I
    recognize the chair of our Subcommittee on Financial
    Institutions, Mr. Barr of Kentucky, for a 1-minute opening
    statement.

     STATEMENT OF HON. ANDY BARR, CHAIRMAN OF THE SUBCOMMITTEE ON
      FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE FROM KENTUCKY

        Mr. Barr. Thank you to our witnesses today. It is
    encouraging to see new leadership at prudential regulatory
    agencies committed to reevaluating needless burdens on our
    financial institutions. For years, Congress and our financial
    regulators have set regulatory thresholds intended to align
    oversight with actual risks to financial stability, but because
    these thresholds are often static, they inevitably sweep in
    more institutions as the economy grows, capturing firms that
    were never intended to be treated like the largest, most
    complex banks. That is why I have introduced legislation, the
    Transition Improvement by Estimating Risk (TIER) Act of 2025,
    to index these thresholds to nominal Gross Domestic Product
    (GDP), preserving rigorous requirements where they belong,
    while preventing regulatory bracket creep that divert resources
    away from communities, small businesses, and farmers.
        Additionally, as you finalize the Basel III Endgame, it is
    critical to ensure U.S. capital standards are risk based,
    evidence driven, and supportive of credit availability. Gold
    plating international standards and massively hiking capital
    requirements would restrict lending, reduce market liquidity,
    and weaken, not strengthen, our financial system. I urge
    prudential regulators to work with Congress toward a framework
    that is transparent, analytically sound, and aligned with the
    realities of a growing economy. I yield back.
        Chairman Hill of Arkansas. The gentleman yields back. I
    recognize the ranking member of our Subcommittee on Financial
    Institutions, Dr. Foster of Illinois, for a 1-minute opening
    statement.

         STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE
     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                             FROM ILLINOIS

        Mr. Foster. Thank you, Chair Hill and Ranking Member
    Waters. The panel before us today has the important
    responsibility of supervising our banking system, not only for
    known risks, but also emerging risks that threaten the
    stability of the American financial system. As the ranking
    member of the Financial Institutions Subcommittee, but also as
    a member who joined Congress in March 2008 on the eve of the
    financial crisis, I understand the damage that not only old
    risks, like excessive risk taking and hitting leverage, can
    cause, but also modern, innovative, yet untested financial
    products can have if they are allowed to operate unchecked.
    Your agencies will have to adapt to a rapidly changing
    financial system and ensure that stability and innovation go
    hand in hand.
        Innovative financial products and digital assets, private
    credit, third-party technology firms, and developments like
    generative AI will quickly change how financial institutions
    and their customers behave and how they manage risk. We have
    already seen that in the 2023 banking crisis, the collapse of
    the financial technology (fintech), Synapse, and recently, the
    failure of critical infrastructure in my district that
    disrupted the commodities market. So, I look forward to this
    important discussion of modern prudential regulation and look
    forward to hearing how your agencies plan to adapt to these
    changes in the financial system. Thank you. I yield back.
        Chairman Hill of Arkansas. The gentleman yields back.
    Today, we welcome the testimony of Hon. Michelle Bowman, vice
    chairman for supervision for the Board of Governors of the
    Federal Reserve System; Hon. Jonathan Gould, comptroller of the
    currency; Hon. Kyle Hauptman, chairman of the National Credit
    Union Administration; and Hon. Travis Hill, acting chairman of
    the Federal Deposit Insurance Corporation. We thank each of you
    for joining us today. Each of you will be recognized for 5
    minutes to give an oral presentation of your testimony.
        Without objection, your written statements will be made
    part of the record.
        Vice Chair Bowman, you are now recognized for 5 minutes.

    STATEMENT OF HON. MICHELLE BOWMAN, VICE CHAIR FOR SUPERVISION,
            BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

        Ms. Bowman. Chairman Hill, Ranking Member Waters, and other
    members of the committee, thank you for the opportunity to
    testify on the Federal Reserve's supervisory and regulatory
    activities. I will focus on the current state of the banking
    sector and progress on my priorities as the vice chair for
    supervision.
        The banking system remains sound and resilient. Banks
    continue to report strong capital ratios and significant
    liquidity buffers, which position them well to support economic
    growth. We are seeing continued growth in bank lending, a
    decline in non-performing loans across most categories, and
    strong profitability. Notably, though, nonbank financial
    institutions continue to increase their share of the total
    lending market, providing strong competition to regulated banks
    without facing the same prudential standards. To compete
    effectively with nonbanks on both payments and lending, the Fed
    is encouraging banks to innovate to improve their products and
    services. We are working together with the other regulators to
    develop regulations for stablecoin issuers, as required by the
    GENIUS Act. We also need to provide clarity on digital assets
    to ensure that the banking system is well placed to support
    these activities.
        The Fed is working to tailor our regulatory and supervisory
    framework to accurately reflect the risk that different banks
    pose to the financial system, particularly community banks. We
    cannot continue to push policies designed for the largest banks
    down to the smaller, less risky and less complex banks. I
    support congressional efforts to reduce burden on community
    banks, including increasing static and outdated statutory
    thresholds that have not been updated for years. I also support
    improvements to the anti-money laundering (AML) framework that
    will assist law enforcement while minimizing unnecessary
    regulatory burden.
        The Fed is taking action to support community banks.
    Together with the Federal Deposit Insurance Corporation (FDIC)
    and the Office of the Comptroller of the Currency (OCC), we
    recently proposed changes to the community bank leverage ratio
    to provide greater flexibility while preserving strong capital
    and safety and soundness. We also released new capital options
    for mutual banks. We are exploring streamlining the merger and
    acquisition and de novo chartering application processes for
    smaller banks and updating the Board's merger analysis to
    accurately reflect and analyze competition among small banks.
    We are also in the process of modernizing and simplifying the
    Fed's regulation of large banks. The Board recently released a
    proposal to enhance public accountability and to ensure robust
    outcomes of our stress tests. The proposal includes disclosing
    stress test models, the design framework, and the 2026
    scenarios. It ensures that future significant changes will
    benefit from public input.
        The Agency has recently finalized changes to the enhanced
    supplementary leverage ratio (eSLR) proposal for U.S. Global
    Systemically Important Banks (G-SIBs), which helps ensure that
    leveraged capital requirements serve as a backstop to risk-
    based capital requirements as it was originally intended. The
    Board is working on a proposal with the OCC and the FDIC to
    implement the 2017 Basel agreement. This will reduce
    uncertainty and provide clarity on capital requirements. We are
    considering each of the elements rather than reverse
    engineering changes to achieve predetermined outcomes. As a
    part of this proposal, we are considering approaches to
    differentiate mortgage risks that will benefit the banking
    system as a whole.
        The Fed is also working to refine the G-SIBs' surcharge
    framework. The surcharge must be calibrated to avoid impairing
    the banking sector's ability to support the broader economy.
    Effective supervision must focus on factors that affect the
    bank's financial condition, including material risks to bank
    operations and the stability of the broader financial system,
    not immaterial issues that distract from core safety and
    soundness. This requires a risk-focused, tailored approach to
    supervision and regulation. The Fed is considering a regulation
    to clarify standards for enforcement actions based on unsafe
    and unsound practices, matters requiring attention, and other
    supervisory findings. Focusing our resources on material issues
    that historically have correlated to bank failures will create
    a more effective oversight system.
        The capital adequacy, asset quality, management, earnings,
    liquidity, and sensitivity (CAMELS) framework is also under
    review, as is the bank examiner training program. Establishing
    clear metrics for CAMELS components ensures transparency and
    objectivity in our examinations, and enhancing examiner
    training will improve our supervision. In addition, the Board
    recently finalized revisions to the large bank rating system
    that addresses the mismatch between ratings and overall firm
    conditions. Further, the Board removed reputational risk from
    our supervision, and we are considering a regulation to prevent
    supervisory influence from leading banks to debank a customer
    due to their constitutionally protected political or religious
    beliefs or a business engaged in legal activities. Banks must
    remain free to make their own risk-based decisions to serve
    individuals and lawful businesses without interference.
        Thank you again for the opportunity to appear before you
    today. The Fed is in the pre-Federal Open Market Committee
    (FOMC) blackout period, so I will not be able to discuss
    monetary policy during today's hearing. With that in mind, I
    look forward to your questions. Thank you.

        [The prepared statement of Ms. Bowman follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill of Arkansas. I thank the vice chairman.
    Comptroller Gould, you are now recognized for 5 minutes for
    your oral remarks.

     STATEMENT OF HON. JONATHAN GOULD, COMPTROLLER, OFFICE OF THE
                      COMPTROLLER OF THE CURRENCY

        Mr. Gould. Chairman Hill, Ranking Member Waters, and
    members of the committee, thank you for the opportunity to
    appear before you. It is an honor to discuss the Office of the
    Comptroller of the Currency's work implementing the President's
    economic agenda by ensuring that America's Federal banking
    system is safe and sound and remains the world's most trusted,
    dynamic, and resilient.
        Over 160 years ago, President Lincoln had a vision for a
    Federal banking system to serve this country and its economic
    ideals, and he empowered the OCC to oversee that system. Today,
    the OCC supervises more than 1,000 institutions that hold $6.7
    trillion in assets, or roughly two-thirds of all U.S.
    commercial banking assets, and the GENIUS Act now extends our
    remit to certain payment stablecoin issuers.
        In the years since the 2008 financial crisis, Washington
    too often sought to eliminate rather than manage risks,
    resulting in a less relevant and diverse banking system.
    Unelected bureaucrats discouraged prudent risk taking, stifled
    innovation, and drove credit out of reach for small businesses
    and communities. Far from ending too big to fail, the Dodd-
    Frank Act created the moat that supercharged the growth of the
    very largest banks and introduced too small to succeed. I
    intend to restore balance, reset our risk tolerance, focus
    supervision on material financial risks, and free banks to
    lend, invest, innovate, and grow responsibly. Community banks,
    in particular, will benefit from a better tailored,
    proportional framework that meets their specific needs.
        We are ending the weaponization of finance. No American
    should be denied access to banking products and services
    because of political or religious beliefs or lawful business
    activity. We are currently implementing the President's
    executive order on guaranteeing fair banking for all Americans
    by reviewing the activities of the largest national banks and
    investigating complaints of alleged debanking. We have already
    proposed the rule to eliminate reputation risk from
    supervision, and we are intent on ensuring banks provide access
    to products and services based on objective, risk-based
    criteria, not politics or ideology.
        The OCC support functions have degraded over the last 4
    years, posing a risk to our ability to execute our statutory
    mission. Outward signs of this decline include the hiring of a
    fraudulent chief financial technology officer in 2022 and an
    email data breach that took nearly 2 years to identify and
    halt. Upon arriving at the Agency in mid-July, it became clear
    that these two issues were symptomatic of others, and fixing
    Agency operations became a top priority for me. To that end, we
    are working to ensure accountability for these failures and to
    recruit qualified and competent individuals. Supervision must
    be clear, credible, and consequential. We are cutting away
    procedural clutter and returning to risk-based supervision
    rooted in law, with an emphasis on examiner judgment, not
    arbitrary checklists. Examiners will focus on issues that
    materially affect banks' safety and soundness. We are also
    codifying reforms to the matters requiring attention process,
    clarifying enforcement standards, and ensuring supervisory
    tools are used proportionately and predictably.
        The OCC is working with our interagency partners to re-
    propose the Basel III capital rulemaking and improve capital
    standards. We are evaluating opportunities to improve the
    Community Reinvestment Act framework, including developing a
    simplified strategic plan to ease compliance for community
    banks. We are also advancing the Bank Secrecy Act (BSA)/AML
    modernization and targeted burden relief for community
    institutions. These actions will make our regulatory
    architecture simpler, stronger, and more accountable.
        Innovation has driven American finance from the telegraph
    to the blockchain. The GENIUS Act represents Congress' effort
    to integrate payment stablecoins safely into our regulated
    banking and financial system. The OCC is drafting rules that
    balance innovation with prudence. Beyond payment stablecoins,
    we continue to clarify new ways for banks to conduct the very
    old business of banking and adopt new technologies, like AI, to
    ensure these opportunities are available to all OCC-supervised
    banks, rather than a privileged few. We are modernizing OCC
    operations through technology, data, and AI, delivering more
    efficient supervision and lower assessment fees to create cost
    savings that flow back to banks, their customers, communities,
    and businesses.
        The Federal banking system must remain dynamic,
    competitive, and fair. By providing a path for banks to embrace
    new technologies in a safe and sound manner, ending politicized
    debanking, and modernizing supervision, we are ensuring the
    long-term relevance of the Federal banking system. We are
    restoring the OCC's historic balancing of prudence and
    progress. This is what Lincoln envisioned: a Federal banking
    system that serves every American, supports a thriving economy,
    and stands ready to meet modern challenges. Thank you.

        [The prepared statement of Mr. Gould follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill of Arkansas. Thank you, sir. Chairman
    Hauptman, you are recognized for 5 minutes for your oral
    remarks.

      STATEMENT OF HON. KYLE HAUPTMAN, CHAIRMAN, NATIONAL CREDIT
                          UNION ADMINSTRATION

        Mr. Hauptman. Thank you. Chairman Hill, Ranking Member
    Waters, and members of the committee, thank you for the
    invitation to discuss the operations, programs, and initiatives
    of the National Credit Union Administration. I am grateful to
    President Trump for selecting me as the 13th Chair of National
    Credit Union Administration (NCUA). NCUA's mission is to enable
    access to financial services by facilitating safe, sound, and
    resilient credit unions.
        The 4,300 credit unions in America serve over 143 million
    Americans with over $2 trillion in deposits. Federal credit
    unions serve in all 50 States, and 45 States have State-
    chartered credit unions, not to mention Guam, Puerto Rico, and
    U.S. Virgin Islands. The credit union movement was a grassroots
    effort to expand financial services and provide low-cost credit
    to groups and communities that were otherwise excluded from the
    financial system. The origins of the movement are driving the
    foundational difference between cooperative credit unions and
    banks.
        Credit unions are owned by their member owners, and like
    all cooperatives in America, most of which are not credit
    unions, they do not have shareholders. Credit unions can only
    serve their members, other credit unions, and credit union
    organizations. By law, the types of financial services they
    offer face certain limits. The law caps the interest rate
    credit unions can charge at 18 percent. It is quite a bit lower
    than banks are allowed to charge. It limits the number of
    business loans and restricts their investment authority. Just
    as credit unions are unique among financial service providers
    as cooperatives, NCUA is a little bit distinct from our fellow
    regulators in that we are both the regulator and insurer for
    most credit unions. When acting as a regulator, the NCUA is
    charged with regulating, chartering, and supervising federally
    chartered credit unions. When acting as an insurer, we are
    charged with managing and protecting the Share Insurance Fund.
        Both State and federally chartered credit unions are
    eligible for insurance from NCUA. In other words, for credit
    unions, NCUA is the OCC, FDIC, and the Fed all rolled into one,
    because in addition to being a regulator and insurer, we are
    also a source of emergency liquidity through the Central
    Liquidity Facility. The Central Liquidity Facility (CLF)
    provides member credit unions with a source of loans to meet
    their liquidity needs. NCUA must meet its statutory obligations
    with the awareness that over regulation can stifle innovation
    and growth in a way that could threaten the viability of the
    credit union system. Our regulatory activities must be fair and
    transparent. For example, we must avoid the perception and the
    reality of regulation through enforcement. I am proud that it
    is NCUA policy against no regulation by enforcement. Defined in
    very simple terms, in America, the sequence of events is write
    rule, then enforce.
        It is worth noting that as an insurer, NCUA's incentives
    are aligned with the success of the credit unions we regulate.
    While the Agency is not regulated by enforcement as a matter of
    practice or policy, we are proud to have an official public
    policy. It is on our website. It flows through the examiner
    manual, and it merely extends the same protections that our
    civil servants have under civil service law to the institutions
    that we regulate.
        To right-size our approach to safety and soundness, the
    NCUA is doing several things to capitalize on the opportunities
    created by the Trump Administration to foster innovation. As a
    first priority, NCUA is reviewing its regulations to remove any
    that are obsolete, overly prescriptive, or unduly burdensome.
    We have a new strategic plan that guides our priorities through
    2030, and a couple of months ago, we invited credit unions to
    share their ideas on how to strengthen the system or highlight
    future issues and tell us what they would change about our
    strategic plan. We are using that feedback to ground our
    planning for Main Street priorities. Our plan will focus on
    safety and soundness, protecting the fund, and creating space
    for credit unions to innovate responsibly, especially in
    leveraging artificial intelligence and digital assets.
        My written testimony discusses the current state of the
    credit union system and provides an overview of the state of
    the Agency. It also details the work we are doing to empower
    credit unions and foster innovation. Thank you, Mr. Chairman. I
    look forward to the committee's questions.

        [The prepared statement of Mr. Hauptman follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill of Arkansas. The gentleman yields back.
    Acting Chair Hill, you are recognized for your 5 minutes of
    oral remarks.

    STATEMENT OF HON. TRAVIS HILL, ACTING CHAIRMAN, FEDERAL DEPOSIT
                         INSURANCE CORPORATION

        Mr. Hill. Chairman Hill, Ranking Member Waters, and members
    of the committee, thank you for the opportunity to testify
    today. I appreciate the opportunity to report on the FDIC's
    recent work to improve our regulatory and supervisory approach
    across a number of areas, while continuing to fulfill our core
    mission of insuring deposits, promoting the safety and
    soundness of banks, and resolving failed institutions.
        Over the past 10 months, the FDIC has made significant
    progress in several areas, including reforming supervision so
    it is less process driven and more focused on core financial
    risks, engaging in a thoughtful review of our regulations,
    guidance, and manuals, reevaluating numerous aspects of our
    resolution and receivership management functions, and promoting
    the prudent adoption of innovative technologies in the
    financial services sector. My written statement provides
    greater detail in each of these areas, but I would like to
    briefly touch on each of them.
        Regarding supervision, the FDIC is actively implementing
    changes to our supervisory process to reorient our focus more
    toward material financial risks and to improve other aspects of
    our supervisory framework. Among other things, we have issued a
    proposed rule, along with the OCC, that would define certain
    key terms related to supervisory criticisms, are working with
    Federal and State regulators on reforms to the CAMELS rating
    system, issued a proposal to establish an independent Office of
    Supervisory Appeals to adjudicate appeals of material
    supervisory determinations, and modified our continuous
    examination program, including by raising the threshold from
    $10 billion to $30 billion in assets, among other changes
    detailed in my written statement.
        The FDIC has also been engaging in a thoughtful review of
    our regulations, guidance, and manuals, and we have already
    taken several significant steps. With respect to capital rules,
    we finalized a rule to modify the enhanced supplementary
    leverage ratio to help ensure that it serves as a backstop to
    risk-based capital requirements rather than as a frequently
    binding constraint, proposed targeted amendments to the
    community bank leverage ratio to expand eligibility and
    encourage more community banks to opt in, and are working with
    the Federal Reserve and OCC to modernize risk-based capital
    requirements, which includes implementation of the 2017 Basel
    agreement.
        We have also finalized a rule to raise and index 37
    regulatory asset thresholds, and we continue to evaluate other
    thresholds within our regulations to be included in one or more
    future proposals. We rescinded our 2024 statement of policy on
    bank mergers and continue to work on additional improvements to
    the merger review process and analytical framework, and we
    issued a proposed rule to significantly enhance the speed and
    clarity of the approval process for new branch openings, which
    we expect to finalize later this month. With respect to bank
    resolution, the FDIC has, among other things, modified our
    approach to resolution planning for insured depository
    institutions based on lessons learned from the 2023 bank
    failures, conducted dozens of outreach meetings with banks in
    their capacity as potential failed bank acquirers as we seek to
    improve the bidding process and remove potential obstacles to
    lower cost bids, and implemented a number of internal
    operational improvements.
        Throughout the course of the year, the FDIC has also taken
    a more open-minded approach with respect to banks that offer
    products and services related to digital assets, while
    maintaining our expectation that such activities are conducted
    in a safe and sound manner. Specifically, we rescinded the
    Biden-era prior notification requirement for digital asset
    activities, which served as a significant barrier to banks'
    participation in these activities, withdrew from several
    interagency joint statements, including one that suggested that
    use of public-distributed ledger systems was likely
    inconsistent with safe and sound banking practices, publicly
    released hundreds of pages of supervisory correspondence to
    provide transparency regarding the prior administration's
    misguided approach to digital assets, and have begun work to
    implement the GENIUS Act. In addition, we are also considering
    the recommendations included in the report issued in July by
    the President's Working Group on Digital Asset Markets, and we
    are currently developing guidance to provide additional clarity
    with respect to the regulatory status of tokenized deposits.
        In closing, the FDIC will continue to work to drive
    economic growth and access to capital, while fulfilling our
    critical role in promoting a safe, sound, and resilient banking
    system. Thank you again for the opportunity to testify today,
    and I look forward to your questions.

        [The prepared statement of Mr. Hill follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Hill of Arkansas. I thank each of the panelists
    today. We will now turn to member questions, and I recognize
    myself for 5 minutes for questioning.
        When President Trump in his first term signed S. 2155 into
    law, there was broad, at that time, bipartisan recognition from
    Congress that the Federal banking supervisors needed to tailor
    their rules based on an institution's size, complexity, and
    risk profile. I want to applaud each of you and your work in
    your agencies for your continuing effort to return to this
    standard, which was regrettably rejected by many of the
    supervisory leaders in the Biden Administration.
        Vice Chairman Bowman, the committee recently sent a letter
    to the regulators to support what you are doing, using your
    existing statutory authorities to further tailor the
    application of enhanced prudential standards for Category 2, 3,
    and 4 banks, as well as to index regulatory thresholds for
    those categories. Is this something that you expect and your
    colleagues to undertake, and what are you thinking about as in
    terms of sequencing that and the timing?
        Ms. Bowman. Thank you, Chairman Hill of Arkansas. That is a
    very important issue, and I think over the years, I have
    strongly supported the concept of tailoring regulation to the
    size, complexity, and risk of the institutions. I do plan to
    review our tailoring framework and our approach to ensure that
    it has the intended effect that Congress intended in S. 2155,
    and we are evaluating indexing the thresholds as we are
    considering broadly our work on the regulatory framework.
        Chairman Hill of Arkansas. Well in the past, Reg YY, which
    outlines the capital planning thresholds, I think the last time
    President Trump was in office, the agencies agreed to do it
    periodically, that they would review that indexing. Do you
    think Congress should set that, that it be done automatically
    with inflation? We seem to spend a lot of time here debating
    that, and should it just not be regularly reviewed by statutory
    agreement and indexed maybe in accordance with inflation? Would
    that be better you think?
        Ms. Bowman. I think that indexing is a critical part of the
    regulatory framework. We have seen an incredible growth in the
    money supply as well as the assets of the banks over the last
    few years. In fact, during coronavirus disease (COVID), there
    was an exponential growth in the size of financial depository
    institutions. So, it would be helpful to have a regular cadence
    for reviewing those thresholds, and I think it is appropriate
    that we do so now.
        Chairman Hill of Arkansas. Thank you. Acting Chairman Hill,
    we talk a lot in here about exam appeals and the opportunity
    for a management team and their board of directors to appeal an
    exam finding if they thought it was done in an unfair manner in
    some manner. It goes back to my ancient days at Treasury. By
    the way, Hamilton was a great Secretary but in 1994, the Riegle
    Act promised this as a part of regulatory reform. I mean,
    really, an independent process just was inconsistently applied,
    I would say. Mr. Scott, my friend from Georgia, and I have a
    bill called the Fair Audits and Inspections for Regulators'
    (FAIR) Exams Act that we believe would give teeth to that
    Riegle promise back in 1994. I know you have taken steps to
    revamp the supervisory process, but do you think this should be
    clearly outlined in statute by the FAIR Exams Act?
        Mr. Hill. I think additional clarity from a statutory
    perspective would be very helpful, so would strongly encourage
    Congress to continue to look at that.
        Chairman Hill of Arkansas. Thank you. We had a hearing just
    a few weeks ago on deposit insurance, and we appreciate you and
    your staff's work with the committee extensively on the topic
    of deposit insurance, which is of keen interest to the ranking
    member and myself. I would like to ask a few questions about
    your views on the FDIC's reserve ratio for the depositors
    insurance fund (DIF). It is a pretty straightforward formula
    that you have a statutory responsibility for. What is the
    requirement, the minimum reserve ratio?
        Mr. Hill. The reserve ratio is defined as the net worth of
    the Deposit Insurance Fund divided by insured deposits, and the
    minimum ratio set by statute is 1.35 percent.
        Chairman Hill of Arkansas. So, let us say we raise the
    deposit insurance coverage amounts 100 times to what it is now,
    meaning the denominator goes way up. Normally, for the FDIC to
    meet its statutory minimum, would it not need to raise
    assessments as well?
        Mr. Hill. If no other changes are made and the denominator
    goes up, then that is correct. In order to achieve the same
    reserve ratio, the revenue coming into the DIF would have to
    increase.
        Chairman Hill of Arkansas. Yes, and if they do not collect
    the revenue to meet the reserve ratio minimum, that could put
    the DIF at some risk. Do you agree or disagree with that?
        Mr. Hill. I think that is a complicated question and happy
    to go into some of the considerations. I know the time is short
    here.
        Chairman Hill of Arkansas. We will continue the discussion.
    Thank you and thank the panel. I now call on the ranking
    member, Ms. Waters of California, to be recognized for 5
    minutes for questions.
        Ms. Waters. Thank you very much, Mr. Chairman. Federal
    banking regulators are prohibited from owning a bank as long as
    they serve in a capacity where they are regulating banks. This
    is to ensure that there is no conflict of interest, making sure
    they are not in a position to make decisions as a regulator
    where they favor their own business interests and profit making
    instead of what makes good sense that is in the public's
    interest. Is that a sensible prohibition, Acting Chair Hill?
        Mr. Hill. Yes, Congresswoman.
        Ms. Waters. Vice Chair Bowman, Section 10 of the Federal
    Reserve Act states, ``No member of the Board of Governors of
    the Federal Reserve system shall be an officer or director of
    any bank, banking institution, trust company or Federal Reserve
    bank, or hold stock in any bank, banking institution, or trust
    company.'' Since the Federal regulates banks, does this
    prohibition make sense to you to ensure there are no conflicts
    of interest?
        Ms. Bowman. Yes, it does, Congresswoman.
        Ms. Waters. These commonsense conflict of interest laws are
    good policy. Unfortunately, the President inserted himself in
    what used to be an independent regulatory process. The White
    House must now review and approve all rules put forward by your
    agencies, and the White House reviews your budget. Given this
    new dynamic, should the President be prohibited from owning any
    business where he has a role in regulating them as long as he
    is in office, whether it is a crypto business, a bank, or
    anything else, Vice Chair Bowman?
        Ms. Bowman. I do not have anything for you on that.
        Ms. Waters. Acting Chair Hill, what do you think?
        Mr. Hill. I will echo the comments of my colleague, Vice
    Chair Bowman.
        Ms. Waters. Well, now, everybody, we are talking about the
    central bank of the United States of America, supposedly
    independent. Well, I think this represents a massive conflict
    of interest and that Congress should act to ensure we have
    rules set and enforced by those who will not be personally
    enriched by their public work. We should start by enacting my
    bill, the Stop TRUMP in Crypto Act, to ensure that Trump and
    his family as well as future Presidents cannot commit crypto
    corruption.
        Vice Chair Bowman, I appreciated your brief conversation
    last week and learning you support diversity, equity, and
    inclusion. In the past, you have remarked indicating that
    support to minority depository institutions--that is MDIs--
    women-owned depository institutions, and community development
    financial institutions is ``an important part of the Federal
    Reserve's mission to provide a safe, sound, and accessible
    banking system that protects consumers.'' So accordingly, do
    you support the Trump Administration's efforts to get rid of
    the Community Development Financial Institution (CDFI) fund?
    What would that mean for these CDFI banks that provide access
    to credit in rural communities that the Feds oversees? By the
    way, I understand you get a list of words you cannot use when
    you are dealing with this direction of the President. What do
    you think about this?
        Ms. Bowman. We definitely recognize the important role that
    CDFIs play in their unique role in expanding access to capital
    and to financial services. The Federal Reserve continues to
    have a program that supports CDFIs from a technical
    perspective, which is called Partnership for Progress, and
    these are important investments that the Federal Reserve
    continues to make.
        Ms. Waters. I want to thank all of you for being here
    today, and I know that I am asking you some questions that puts
    you in a very difficult situation at a time when the President
    of the United States does not recognize you as an independent
    agency. This is the central bank of the United States of
    America under control somewhat now by the President of the
    United States, who owns cryptocurrency and his family, and he
    is trying to influence and is influencing the rules of the
    game, and so I am just outraged by it. I am absolutely outraged
    that a time in the history of the United States of America,
    with other countries looking at us, that we are in a position
    where we do not have an independent central bank, that the
    President of the United States is in a direct conflict of
    interest and is brazen about it, who is raising all of the
    money that he can possibly raise at the time that he is the
    President of the United States. Thank you for being here and my
    question to you is almost unfair because there is nothing you
    can do about it, but somebody has got to do something about it.
    I yield back the balance of my time.
        Chairman Hill of Arkansas. The chairman----
        Mr. Green. Mr. Chairman?
        Chairman Hill of Arkansas. Just a moment. The gentlewoman
    yields back, and we now call on the gentleman from Oklahoma,
    the chair of our Task Force on Monetary Policy and the Treasury
    Market Structure, Mr. Lucas, for 5 minutes.
        Mr. Lucas. Thank you, Mr. Chairman, and thank you to our
    witnesses for being here today. I want to first applaud you all
    for addressing the eSLR so that it serves as a backstop to
    risk-based requirements rather than a binding constraint on
    intermediaries. As chairman of the Task Force on Treasury
    Market Resilience, I am keenly interested in making sure our
    capital framework does not disincentivize participation in the
    Treasury market.
        I will start with Vice Chairman Bowman, then Comptroller
    Gould, and Acting Chair Hill. You have adjusted the eSLR. Would
    you consider adjusting other leverage ratios as well?
        Ms. Bowman. Congressman, at this time, we are widely
    reviewing all of our authorities and certainly are vested in
    the success of the Treasury market, including the
    intermediation by our largest banks, which is why we have
    finalized the eSLR proposal. So, absolutely, we would be happy
    to look at anything that you might like us to consider broadly.
        Mr. Lucas. Comptroller?
        Mr. Gould. Two points, Congressman. One, as you probably
    know, we are in the process of adjusting, or at least proposing
    to adjust, the community bank leverage ratio. More generally, I
    share your concerns of the impact of overly complex capital
    regulation that we have seen following 2010, in particular how
    it has, in many cases, caused banks to pull back from their
    historic role of market intermediation. I have also seen
    firsthand, too, in March and April 2020, again, the cost of
    complexity associated with, again, overwrought capital
    regulation and the ability of that overwrought capital
    regulation to actually impede crisis management when there is
    an issue, again, as we saw in April and March 2020.
        Mr. Lucas. Acting Chair Hill?
        Mr. Hill. All I would add is just to say, as you note, the
    final rule on the eSLR was intended to remove disincentives for
    institutions to provide Treasury market intermediation and
    other low-risk types of activities. We have a proposal out to
    modify the community bank leverage ratio, and we will continue
    to re-evaluate other pieces of the capital framework.
        Mr. Lucas. On that same topic, the government shutdown,
    quantitative tightening, and a reluctance to use the Fed's
    standing repo facility have raised concerns about reduced
    liquidity in the Treasury market. Vice Chair Bowman, as you
    finalize the Basel Endgame proposal, how will you keep in mind
    the implications of the capital requirements on Treasury market
    liquidity and functioning, given the Fed's report that the
    banking system is well capitalized? Do you expect to increase
    capital levels?
        Ms. Bowman. I think we are currently in the process of
    reviewing the capital framework by looking at all four of the
    pillars of capital, including SLR, which we have just finalized
    and addressed. As my colleagues mentioned, we jointly proposed
    the CBLR, which is designed to help community banks. The other
    pillars that we are working on and reviewing is stress testing,
    which we have introduced a few proposals on this year. The G-
    SIB surcharge will be a part of that as well as the Basel III
    proposal that we are currently engaged in working on. It is
    critically important that all of the work that we are doing
    does not result in impairing the ability of the banks and the
    economy to support the Treasury market and its functioning. So,
    we are certainly attuned to any risks that might be presented
    by the calibration of those proposals.
        Mr. Lucas. Acting Chair Hill, last quarter, the Deposit
    Insurance Fund reserve ratio increased 4 basis points to 1.4
    percent. Is that correct?
        Mr. Hill. Yes, that is correct.
        Mr. Lucas. I understand you cannot predict to an extreme
    degree, but would you expect the reserve ratio to decline if
    Congress were to increase deposit insurance for non-interest-
    bearing transaction accounts over a 10-year framework?
        Mr. Hill. The way the phase-in period works in the Hagerty-
    Alsobrooks bill in the Senate, there is a lot of uncertainty
    around any predictions that we would make but based on the
    projections that our staff put together, which, again, are
    subject to considerable uncertainty, the expectation would be
    that the reserve ratio would grow more slowly over that 10-year
    period rather than decline. Again, I want to emphasize that
    there is a lot of uncertainty around those projections.
        Mr. Lucas. One final thought, Chair Hill. I continue to
    hear frustration from small banks in Oklahoma that during the
    bank failures of March 2023, the FDIC stepped in to backstop
    depositors, but the same action was not taken to a bank in
    Lindsay, Oklahoma the very next year. The difference in the
    FDIC's actions was because the banks that failed in 2023 were
    too big to fail while the bank in Lindsay was too small to
    succeed.
        Chairman Hill of Arkansas. The gentleman's time has
    expired.
        Mr. Lucas. Thank you, Mr. Chairman.
        Chairman Hill of Arkansas. The gentleman from California,
    Mr. Sherman, the ranking member of our Capital Markets
    Subcommittee, is recognized for 5 minutes.
        Mr. Sherman. I want to start by associating myself with the
    ranking member's comments. The actuality of corruption was well
    explained.
        I want to point out here that, so far, we have seen Silicon
    Valley Bank go down because it was not forced to mark to market
    its securities which had declined in value, and bank regulators
    had to have this attitude that those bonds were worth what you
    paid for them, which was more than you could sell them for.
    Bank regulators have not solved this problem. We will wait for
    another Silicon Valley Bank and another disaster and see how we
    react to that one.
        Operation Chokepoint is something that I think has been
    rejected by some of us on both sides of the aisle. It is one
    thing for a private individual to decide if they want to
    boycott this or that entity, and the Supreme Court seems to
    think that even corporations have First Amendment Rights but
    when the government presses a bank not to provide transactions
    accounts to a legal business because that business is in coal
    or payday lending or is Planned Parenthood, that is when
    government is going way too far. Can I hear from each of the
    regulators that you are not telling the banks you regulate or
    the credit unions you regulate that they will be disfavored
    because they provide transactions accounts to businesses that
    are unpopular on the left, the right, or somewhere else? Let me
    just go down the list. Ms. Bowman, can you assure us there is
    no chokepoint going on here?
        Ms. Bowman. It is very important that all Americans have
    access to financial services, especially if they are engaged in
    legal activities, and if they are engaged in disfavored
    activities, that should not disqualify them from banking
    services. So, we are very cautious and reviewing our actions
    over the past few years to ensure that we were not engaged in
    those activities.
        Mr. Sherman. If any of the other regulators disagree with
    that, let me know. Let me go on to the next question, which is
    for the credit unions, and that is, we have these credit union
    board members serving as volunteers. I raised the issue with
    your predecessor and got on the issue of why not allow them to
    get reimbursed for the childcare costs that they incur to
    attend board meetings. In July 2024, I was told, in light of my
    question, you are going to consider the issue. How long is it
    going to take you to decide that board members can get
    reimbursed for childcare?
        Mr. Hauptman. Congressman, I want to credit you for
    pressing that issue. You are correct, it is relatively
    uncontroversial. It is not an issue at banks or most for-
    profits because you can just pay the board members. As you
    said, they are volunteers, and it is a relatively small dollar
    thing, reimbursement----
        Mr. Sherman. I hope that you move forward in weeks----
        Mr. Hauptman. Yes.
        Mr. Sherman [continuing]. instead of years on that, but I
    have to go on to the next question.
        I will ask unanimous consent to put into the record an
    article from the Business Insider, August 8, 2025.
        Chairman Hill of Arkansas. Without objection.

        [The information referred to can be found in the appendix
    on page 110.]

        Mr. Sherman. This article states that Mr. Palmer Luckey, in
    a fundraising memo to investors, claimed that his bank charter
    would be approved on a speedy timeline because of his political
    network and the bank's close ties to regulators. Now, this is
    an interesting situation, because if the memo was lying, that
    is securities fraud. You cannot go to prospective investors and
    say we are going to be successful if you are making it up. On
    the other hand, if he was telling the truth, that is much worse
    because it means that because he is part of what is described
    in the article as a million-dollar program to give money to
    Republicans, he was going to get his bank charter approved much
    more quickly by the OCC.
        So, I will ask Mr. Gould. Since I assume he did not use
    political connections to get his bank charter approved more
    quickly, have you begun a securities fraud or have you talked
    to the SEC about securities fraud when a man raises money for
    his bank by claiming that you are a corrupt organization?
        Mr. Gould. Well, I am not familiar with all the allegations
    made in that article, but I can assure you that the OCC treats
    any applicant or a potential applicant----
        Mr. Sherman. So, if somebody said they were going to get
    favorable treatment and put it in their offering memorandum,
    would that be securities fraud that you would care about?
        Mr. Gould. Again, Congressman, I am not responsible for the
    securities laws, and I am not familiar with that----
        Mr. Sherman. I would hope that you mail a letter to the
    SEC, and I will get you the article, which will be part of the
    record.
        Chairman Hill of Arkansas. The gentleman yields back. The
    chair recognizes the gentlewoman from Missouri, the chair of
    our Capital Market Subcommittee. Mrs. Wagner, you are
    recognized for 5 minutes.
        Mrs. Wagner. Thank you, Mr. Chairman. Throughout my time in
    Congress, one of my top priorities has been to protect our most
    vulnerable from financial exploitation and fraud. As part of my
    work as chairman of the Capital Markets Subcommittee, I have
    been very proud to champion the Financial Exploitation
    Prevention Act, which would provide a powerful tool to protect
    senior investors and ensure that their retirement accounts are
    safe when they need them the most.
        Vice Chair Bowman, you have spoken often on the issue of
    fraud and, in particular, check fraud, which has grown
    substantially over the past several years. In 2022, financial
    institutions filed 680,000 suspicious activity reports, or
    SARs, related to check fraud, an increase of over 700 percent
    from just a decade earlier. While check use has decreased in
    recent years, around three-quarters of retirement-age
    individuals still use them regularly. You highlighted that
    while check fraud has been a well-known problem for several
    years, regulators have been slow--slow--to address the harm
    that it does to banks, especially community banks, as well as
    consumers and businesses that are oftentimes its victims. What
    actions do you think regulators themselves can take to address
    check fraud, and what areas, if any, would require
    congressional action?
        Ms. Bowman. Well, thank you for addressing that very
    important issue. As a former community banker, I recognize that
    every time I speak with community bankers, this is one of the
    top issues that they continue to bring up year after year. So,
    one of the first actions that I took as the vice chair for
    supervision was to move forward with my colleagues in an
    interagency request for information to the public about check
    fraud and payments fraud more generally. So, we are in the
    process of reviewing those comments. We have formed a working
    group, and our intention is to expand that to other areas of
    the administration so that all of those that may have some sort
    of authority over the activities that are a part of reviewing
    check fraud or fraudulent activity can come together to
    understand how we can take better action and to mitigate the
    circumstances.
        Mrs. Wagner. Well, I thank you for that, and I hope that
    you will keep my office and myself in the loop when it comes to
    regulatory actions----
        Ms. Bowman. Mm-hmm.
        Mrs. Wagner [continuing]. and then also any kind of
    congressional action that we can take. It is a big, big
    problem, and one that I am very focused on.
        Ms. Bowman. I look forward to working with you on that.
        Mrs. Wagner. Thank you. Earlier in this Congress, in
    response to the previous administration's burdensome proposal
    on the Basel III Endgame, I sent a bipartisan letter
    highlighting concerns with the proposal's treatment of
    securitized assets. Specifically, the Biden Administration went
    much too far in its changes to what is known as the p-factor,
    which would have led U.S. banks to require double or even
    triple the capital set asides that were required of banks in
    Europe and other jurisdictions, even when U.S. banks would have
    dealt with the exact same assets. Thankfully, the Trump
    Administration is reworking its Basel III Endgame proposal to
    shore up the international competitiveness of American banks
    and free up capital to provide credit to homebuyers, small
    businesses, farmers that would otherwise have been locked up
    under President Biden's proposal.
        Vice Chair Bowman, what is the Fed doing to ensure that
    this and other changes that add unnecessary red tape do not
    make it into any new Basel III Endgame proposal?
        Ms. Bowman. Well, I would love to address that question.
    Obviously, I have provided a lot of public statements about the
    previous efforts on the Basel rule.
        Mrs. Wagner. Yes, you have.
        Ms. Bowman. We currently are working together with my
    interagency colleagues to move forward with a Basel proposal
    that works from a risk-focused perspective, from the bottom up,
    to create a rule that would be more consistent with the Basel
    2017 agreement so that we are not going beyond the scope of
    that agreement, unless it is to the benefit of the U.S.
    institutions.
        Mrs. Wagner. Well, I hope you pay particular attention to
    this p-factor. I am very, very concerned at what the Biden
    Administration did in going way too far in that regard.
        Acting Chair Hill, the FDIC under your leadership has done
    great work to ensure its regulations, including the asset
    thresholds that are used to determine supervision requirements.
    They are tailored to fit the many different financial
    institutions under its purview. I have several questions in
    this regard, but I am over my time, so I am going to submit
    them to you, and I look forward to your response. Mr. Chair, I
    yield back.
        Chairman Hill of Arkansas. I thank the gentlewoman. Please
    answer those questions as you have time and instruction.
        Chairman Hill of Arkansas. I now call on the gentleman from
    New York, the ranking member of our House Foreign Affairs
    Committee. Mr. Meeks, you are recognized for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman. I actually just want to
    state that I think that the ranking member's questions were
    fair, not unfair. They were very fair and important because
    anytime a person is the President United of the States of
    America, he is not a king, and an independent agency should be
    able to look at it and then make sure that things are fair. So,
    I think it was very important, those questions, not unfair,
    Madam Ranking Member, very fair and very important.
        Let me turn my attention to Vice Chair Bowman because I
    appreciate your outlining your plan to help community banks
    succeed and grow, and you described community banks in the past
    as ``the foundation of our financial system.'' You have
    explained the unique value that community banks bring to the
    financial system, their proximity to their customers and their
    understanding of local credit needs, and why they fill gaps
    that our larger institutions often overlook. These institutions
    support rural areas, urban neighborhoods, and small towns that
    keep families and small business connected to loans and basic
    financial services. That kind of access in underserved
    communities is critical for economic stability, you know, to
    try to create jobs and other things in local communities. Is
    that not correct?
        Ms. Bowman. That is absolutely correct, and as a former
    community banker, I can attest that they do that on a daily
    basis, every minute of every day.
        Mr. Meeks. Now, we also have institutions that are designed
    specifically for undeserved communities, our CDFIs and MDIs,
    and they often step in when traditional lenders do not, so,
    again, I want to follow up on one of the questions that Ranking
    Member Waters asked. Would you agree that these institutions
    play a critical role in the banking ecosystem?
        Ms. Bowman. Yes, we recognize the value of CDFIs and the
    unique role that they play in providing financial services to
    underserved areas.
        Mr. Meeks. So, with CDFIs and MDIs, you have spoken about
    improving the de novo chartering application process for
    community banks. Is there any reason to think that MDIs would
    be excluded from the improvements you are considering?
        Ms. Bowman. Of course, they would be included because they
    are depository institutions, and they are eligible for all of
    the programs that the Federal Reserve provides.
        Mr. Meeks. Thank you for that. Mr. Gould, you said in your
    testimony that the OCC has taken steps to curb what you
    describe as debanking on the basis of politics or ideology, and
    you have suggested that prior administrations targeted
    politically disfavored industries. Now, hopefully we are going
    to avoid any double standards here. Can you identify any
    industries that the current administration has taken actions
    against that might raise the same concerns?
        Mr. Gould. Congressman, thank you for the question. The
    current administration, or at least the OCC, is focused on
    making sure that discrimination on the basis of politics or
    religion, of any politics or any religion, has no place in the
    Federal banking system. So, no, I cannot identify any current
    examples.
        Mr. Meeks. You cannot identify. Well, that is very
    interesting to me. That has not been my impression when I look
    at some of the activities of the current administration going
    against some of its political individuals. That seems that
    would be the opposite direction of this current administration.
    Does the OCC have any safeguards in place to ensure that the
    current administration does not apply regulatory pressure to
    industries it disfavors because we have seen this
    administration being very out with those that it disfavors. It
    never shies away from saying exactly that. So, do you have
    anything in place?
        Mr. Gould. As we have seen under both President Obama and
    President Biden's Administrations, examiners use reputation
    risk at times.
        Mr. Meeks. I am talking about this administration. What is
    in place for this administration?
        Mr. Gould. Congressman, both the OCC and the FDIC proposed
    a rule eliminating reputation risk.
        Mr. Meeks. Have you conducted any internal review to ensure
    consistency?
        Mr. Gould. Well, Congressman, we have looked at the past
    actions of the OCC, particularly around Operation Chokepoint
    2.0, and we disclosed correspondence between the OCC and banks
    around crypto activities in redacted form. So, yes, we have
    conducted an investigation into our own activities
    historically.
        Chairman Hill of Arkansas. The gentleman's time has
    expired. The gentleman from Kentucky, Mr. Barr, the chair of
    our Financial Institutions Subcommittee, you are recognized for
    5 minutes.
        Mr. Barr. Thank you, Mr. Chairman. The Dodd-Frank Act
    established a number of regulatory requirements for community
    banks with $10 billion or more in assets. In the 15 years since
    its passage, the economy has grown, meaning that banks must
    also grow to compete and stay competitive against their largest
    peers, but the thresholds on community banks have remained the
    same. That is why I am drafting legislation that indexes
    certain regulatory thresholds for community banks to nominal
    GDP.
        I often hear from community banks that the costs of
    complying with these regulatory requirements impede them from
    growing past the $10 billion threshold, leaving them unable to
    compete and grow, which threatens the survival of the community
    bank ecosystem altogether. Specifically, the Durbin Amendment
    is the most costly and burdensome requirement that these
    smaller banks face.
        Vice Chair Bowman, does the current $10 billion threshold
    disincentivize community banks from growing, and what does this
    mean for the competitiveness of the community banking sector?
        Ms. Bowman. In my experience of working with community
    banks that are approaching the $10 billion threshold, it
    certainly does disincentivize their growth. It gives them few
    options to be able to address the additional supervisory
    requirements that are imposed at that threshold level.
        Mr. Barr. That is my experience as well talking to kind of
    larger community banks in Kentucky who are approaching that $10
    billion threshold, growing organically and in a healthy and
    safe and sound manner, but then are, because of the Durbin
    Amendment and some of these other regulatory triggers at $10
    billion, they want to grow, but they have to rapidly expand
    their balance sheet and increase their presence in new markets
    and activities and new business lines to account for the
    additional interchange costs that they would face over $10
    billion. I would think that this would raise financial and
    reputational risk. Vice Chair Bowman, is this counter to
    regulator safety and soundness mandate, and would indexing the
    Durbin Amendment and some of these other requirements and these
    other thresholds allow banks to grow in a more organic and safe
    way?
        Ms. Bowman. Indexing, as a general concept, is an important
    improvement that could be applied to especially the community
    banking space, but I think it also could be helpful for other
    sizes of smaller institutions as well.
        Mr. Barr. Well, thank you for that. Last Congress, many of
    my colleagues and I worked tirelessly to bring to light
    concerns with the Basel III Endgame proposal, including
    traveling to Switzerland to speak to the Basel Committee, where
    they agreed with Members of Congress, a bipartisan delegation,
    that the U.S. proposal from your predecessor, Vice Chair
    Bowman, proposed gold-plating requirements on American
    financial institutions compared to their global peers.
    Fortunately, that proposal was never finalized, and the Fed,
    OCC, and FDIC plan to reintroduce a rulemaking in 2026. To all
    of the bank regulators here--Vice Chair Bowman, Comptroller
    Gould, and Acting Chair Hill--will you commit to undertaking a
    holistic review of the capital stack to account for double
    counting and other duplicative capital regulations on U.S.
    firms? We can just go down the line.
        Ms. Bowman. Absolutely. We are doing that now.
        Mr. Barr. Mr. Gould?
        Mr. Gould. Yes.
        Mr. Hill. Yes.
        Mr. Barr. Thank you. To all of you again, are the agencies
    planning to issue a proposal that predetermines a ``capital-
    neutral outcome,'' even if some risks continue to be over
    capitalized?
        Ms. Bowman. We are not, and we do not have a preconceived
    notion about where we will land with our capital requirements
    based on this review, with this comprehensive review of capital
    that we are undertaking now. We are looking at it from a risk-
    based approach by each factor and category of risk.
        Mr. Barr. Well, let me just reclaim my time because I am
    running out. My view to all of the regulators here on this
    issue of capital neutrality is that an America First banking
    regulatory agenda should not seek to just achieve international
    regulatory harmonization for harmonization sake. Instead, it
    should seek to advantage American economic competitiveness. Of
    course, safety and soundness, of course, making sure our banks
    are well capitalized, but we should not just simply be looking
    for international harmonization in the implementation of Basel
    III. We should be focused on economic growth as we balance
    economic and financial stability as well.
        Final question to Comptroller Gould. We are seeing a
    massive increase in energy demand because of AI data centers
    and the race for AI. This scenario implies significant stress
    on the U.S. power grid that will require major investments in
    generation, transmission, and grid infrastructure. I want to
    talk to you about removing reputational risk from your
    regulatory oversight agenda. Does that mean you are going to be
    able to greenlight bank lending to the sources of the most
    reliable and affordable energy, including coal, coal mining
    operators, and utilities interested in investing in coal?
        Chairman Hill of Arkansas. The gentleman's time has
    expired, and we ask the comptroller to respond to the gentleman
    in writing, please.
        Mr. Barr. Thank you.
        Chairman Hill of Arkansas. The gentleman from Georgia is
    now recognized. Mr. Scott, you are recognized for 5 minutes.
        Mr. Scott. Thank you very much, Chairman, and Vice Chair
    Bowman, welcome, but I am concerned about the versatility of
    our financial system here, and what we are dealing with is not
    just one pattern. I want to give you an opportunity to explain,
    for example, how the Fed is approaching tailoring these reforms
    and its impact on the different business models? You have
    lenders, you have banks, you have credit unions, and we have to
    be very exact and very careful when you come and legicate the
    leader of the world's financial system, and that is what we are
    doing here. Specifically, I am interested in whether the task
    of updating or indexing thresholds for financial institutions
    who currently fall just below the Category 1 status is still on
    the table.
        So, my first question to you is this. Do you not see a risk
    in the 2019 thresholds pulling additional financial
    institutions into categories that do not necessarily reflect
    their actual risks of those profiles?
        Ms. Bowman. Yes, I think it is important that we are
    reflecting the actual risk of an institution, including its
    size and its complexity, the complexity of its business model,
    when we are thinking about how we should apply regulatory and
    supervisory requirements to each of those unique institutions.
        Mr. Scott. In addition to some of your supervisory
    predecessors, a broad section of members on this very committee
    believes that indexing various asset-based thresholds, for
    example, for Category 2, 3, and 4 banks, to minimal GDP does
    present some risk. Tell us about what you feel about these
    risks.
        Ms. Bowman. I think we are currently in the process of
    reviewing our entire regulatory framework and trying to
    determine whether or not the categories that we have
    established continue to be fit for purpose and that they are
    appropriate for the banks that are currently supervised within
    those categories.
        Mr. Scott. Yes.
        Ms. Bowman. It is important that we understand the
    challenges that they face, but also the business services and
    risks that they present to the economy and the support that
    they provide to economic growth. So, these are all things that
    are important for our review, especially of the capital
    program.
        Mr. Scott. Well, I follow some of your comments and let me
    ask you this. When you say, as you have said, you used the word
    ``modernization,'' are you proposing a more risk sensitivity,
    or are you simply weakening oversight for some banks and not
    others? Would not a period of high inflation with real
    stagnant, real growth not push these thresholds up faster?
    Explain the complexity.
        Ms. Bowman. Well, thank you for the opportunity to clarify
    the work that I am doing at the Federal Reserve Board.
        Mr. Scott. Yes.
        Ms. Bowman. As we discuss the opportunity to modernize our
    supervisory and regulatory framework, it allows us to look
    backward at the last 15 years as we have created regulations in
    response to our responsibilities under Dodd-Frank. It is
    important that we are looking at whether or not all of them are
    successful and whether they are fit for purpose. As a part of
    that, what we understand and the experience that we have in
    implementation is that there is a lot of overlap, there is a
    lot of duplication, and there are a lot of conflicting
    regulatory requirements. Those are things that we are trying to
    address in our modernization.
        Mr. Scott. Well, let me ask you this final, while I have a
    few seconds. Have you modeled how quickly, like, for example,
    Category 2 and 3 thresholds, would rise in high-inflation
    scenarios, and could a bank in today's Category 2 or 3 jump out
    of enhanced prudential requirements within just a few years,
    without reducing a profile at all?
        Ms. Bowman. These are exactly the kinds of scenarios that
    we are considering as we are thinking more broadly and
    comprehensively about whether or not our current capital
    framework and our delineation of those categories continue to
    be appropriate.
        Mr. Scott. Well, I look forward to working with you. I am
    very interested in this.
        Ms. Bowman. I look forward to working with you, too. Thank
    you.
        Chairman Hill of Arkansas. Thank you very much, Mr. Scott.
    The gentleman from Georgia yields back in order for me to call
    on another gentleman from Georgia. Mr. Loudermilk, you are
    recognized for 5 minutes.
        Mr. Loudermilk. Well, thank you, Mr. Chairman, and thank
    you for this hearing and everybody here. This is incredibly
    important, especially since a lot of the discussion these days
    is about affordability. I asked a large gathering of businesses
    of all sizes and different types of businesses in the Atlanta
    area recently, what is the largest impact or the largest cost
    that generally is passed on to your customer, and without
    exception, they all said government regulation. That is the
    number one cost, especially regulations that are not applicable
    to their business or their business model, but yet still
    mandated, and compliance and reporting is required by
    government. Another area, though, is outdated regulations, and
    that is one area that I have been working on.
        Acting Chair Hill, I know that you devoted a portion of
    your testimony to reform proposals related to the Bank Secrecy
    Act and, specifically, to allow institutions to reallocate
    resources away from lower-value reporting to higher reporting.
    I have been working on this, especially with the Bank Secrecy
    Act, and adjusting the financial reporting threshold. In fact,
    my bill is entitled The Financial Reporting Threshold
    Modernization Act, which would increase the currency
    transaction report from the grossly outdated $10,000 number to
    a $30,000 threshold, but index that to inflation going forward.
    Is an idea like this one that aligns with your goal to
    alleviate the reporting burden on financial institutions of all
    sizes?
        Mr. Hill. Sure. Thank you for the question, Congressman.
    So, as those thresholds have not been changed for many years,
    and the number of reports that are filed by financial
    institutions are extremely large, so I think taking a taking a
    close look at this makes a lot of sense. Those regulations are
    under the purview of the Treasury Department, so would defer to
    them on the specifics, but I think this makes a lot of sense,
    is something to look at.
        Mr. Loudermilk. My bill in its current form would increase
    the currency transaction report (CTR) from $10,000 to $30,000,
    then index to inflation. However, would you think it would be
    feasible to immediately index the CTR to inflation now, which,
    if it had been adjusted periodically, would be at $87,000 or
    around there. Do you think that is feasible instead of
    gradually increasing it?
        Mr. Hill. Again, on the specifics, I would defer to the
    Treasury Department, but I think as a general matter, indexing
    thresholds is something that makes a lot of sense.
        Mr. Loudermilk. I will just throw this out to anybody on
    the panel, the same question, but also, I think there is
    concern among law enforcement that this could hinder their
    enforcement activity. However, at the same time, we keep
    hearing that looking for someone doing something wrong is like
    looking for a needle in a haystack, but yet we keep increasing
    the size of the haystack. My suggestion is to decrease it. Do
    you feel that raising the threshold would actually help or
    interfere with law enforcement? Anybody have a thought on that?
        [No response.]
        Mr. Loudermilk. Okay. I will move on then. Chairman
    Hauptman, it is good to see you again, had a great conversation
    last week. I know that this is something that we talked about,
    the modernization of the Bank Secrecy Act. What are you hearing
    from credit unions around the country when it comes to
    compliance costs to prepare CTRs and SARs? Do you think that
    there is a case to be made for increasing thresholds and
    indexing them to inflation?
        Mr. Hauptman. I can definitely tell you that the least
    enjoyed part of running a small institution is complying with
    BSA and AML in general. When you ask why a small institution
    merged with another or sold out to another, it is frequently
    the very first thing that you hear, and these are patriotic
    Americans who want to fight crime just as much as anybody else,
    but that burden is significant.
        Mr. Loudermilk. Okay. Thank you, and in light of the amount
    of time I have remaining, I do not think it is adequate time to
    go into the next set of questions, so I will submit those for
    the record and yield back.
        Chairman Hill of Arkansas. The gentleman from Georgia
    yields back. The gentleman from Massachusetts, Mr. Lynch, who
    is our ranking member on the Subcommittee for Digital Assets,
    Financial Technology, and Artificial Intelligence, you are
    recognized for 5 minutes.
        Mr. Lynch. Thank you, Mr. Chairman, and to the ranking
    member. I want to thank all the witnesses for your willingness
    to work with the committee and help us with our work.
        Supervisor Bowman, I read a transcript of your remarks in
    Madrid at the International Banking Conference that was hosted
    by Santander, and a couple things just jumped right out at me.
    I got to admit they sounded a little bit crazy, so I want to
    make sure you actually said these. You told at the conference
    that it is critically important that traditional banks can
    engage fully in competing with nonbank financial institutions
    when it comes to cryptocurrencies. Is that correct?
        Ms. Bowman. I do not believe I specifically said
    cryptocurrencies.
        Mr. Lynch. Oh no, this said cryptocurrencies, yes. Multiple
    times on crypto. That is not in question.
        Ms. Bowman. Then I misspoke because the work before us is
    on digital assets, that the Congress has directed us to provide
    a pathway and a framework for banks to be able to engage or for
    engagement in digital assets.
        Mr. Lynch. Yes, but here you said, and I have the
    transcript here, you said, ``You thought it was critically
    important that banks, traditional banks, compete with nonbank
    financial institutions when it comes to cryptocurrencies.''
    That is what you told the people in Europe and in Madrid, and
    it sounds crazy because you are a prudential regulator. You are
    supposed to be protecting depositors. You are supposed to be
    making sure there is safety and soundness, that there are
    sufficient capital reserves. You just mentioned Dodd-Frank. I
    am dumbfounded to hear that, and I just want to clarify, is
    that the Trump Administration policy now that traditional banks
    should be into crypto?
        Ms. Bowman. I want to just go back to what I said earlier.
    It was not my intention to say crypto. It was that we are
    engaged in working with banks to ensure that if they choose to
    engage with digital assets, that is something that----
        [Cross talking.]
        Mr. Lynch. Well, is crypto not a form of digital asset,
    though? I mean, it is on this committee.
        Ms. Bowman. Not as you defined it under the GENIUS Act. So,
    when we are talking about things like stablecoins, that is what
    I meant to refer to, if I misspoke.
        Mr. Lynch. These are speculative assets, though. They are
    speculative assets.
        Ms. Bowman. That we have been directed to engage----
        Mr. Lynch. Right. Right.
        Ms. Bowman [continuing]. in regulatory promulgation by
    Congress.
        Mr. Lynch. They are speculative assets, and you, again, are
    a prudential regulator that is supposed to try to take the risk
    out of the system, not inject it into the system. See, there
    are a couple of times in our history where we have had
    regulators encourage banks to engage in speculative activity.
    One was when we had 9,000 banks fail back in the early 1930s.
    The second time, and I think you might have been up here on the
    Hill, in 2008, when we allowed banks to speculate in the
    subprime mortgage market and some very exotic derivatives.
        Ms. Bowman. Actually, I was living in London at that time.
    I was not on the Hill, not engaged in----
        Mr. Lynch. Okay. Well, I was here. I was here. So, but
    anyway, those are two examples of when we allowed banks to
    speculate, and it was a total disaster. You know, I got to be
    fair with you, I think that is a crazy idea. Remember, we are
    bailing them out. We are bailing them out. We do not want banks
    to take unreasonable risks. We want to have customers and
    depositors have confidence in our banking system. So, I am just
    hoping that you are not embracing that policy.
        Ms. Bowman. My view is that community banks, other banks,
    should be able to engage in stablecoins and other digital
    assets as Congress provides authority to do so, and that as we
    are required to, we are able to provide guardrails or
    regulations that allow for appropriate safety and soundness
    activities to be engaged in oversight.
        Mr. Lynch. Just square the circle with me, though. You
    know, we have an asset that has extreme price volatility, and
    you are inviting banks to engage in that. How does that make
    the bank safer by injecting digital assets into their mix? How
    do you even quantify what the reserve level should be when you
    have an asset that is inside that bank, multiple banks, right,
    and this stuff could blow up. Like I say, it dumbfounds me that
    we have a prudential regulator that is suggesting such a thing.
        Ms. Bowman. Well, the GENIUS Act requires us to promulgate
    regulations to allow for these types of activities.
        Chairman Hill of Arkansas. The gentleman's time has
    expired. The vice chairwoman will respond more fully to the
    gentleman's question in writing.
        Chairman Hill of Arkansas. The chair now recognizes the
    gentlewoman from South Texas. Ms. De La Cruz, you are
    recognized for 5 minutes.
        Ms. De La Cruz. Thank you, Chairman Hill, for holding this
    important hearing today, and thank you to the witnesses for
    being with us.
        I represent a rural community and largely Hispanic
    community in deep South Texas, so our community and our
    regional banks are very important to understanding the needs of
    South Texans. That being said, Acting Chairman Hill and
    Comptroller Gould, you both have an important but difficult
    task of trying to right the ship at the FDIC and OCC,
    respectively, after the Biden Administration spent years
    directing our prudential regulators to focus on things outside
    your core mission.
        As you know, the culture of the FDIC and OCC impact the
    work your examiners do and, in turn, impacts the ability of our
    community bankers to serve their clients and constituents.
    There is often a discussion solely around the number of
    examiners you employ, but as I am sure you would agree,
    ensuring that we have experienced examiners is very important.
    In your new roles, can you share how you plan to address the
    young and often inexperienced bank examiners that you may have
    and I will start with Acting Chairman Hill. Is this an issue
    that you have seen since arriving to the FDIC?
        Mr. Hill. Sure. Thank you for the question. That is
    absolutely something that we are very focused on. The retention
    of experienced examiners is something that the Agency has been
    focused on for a number of years. We are considering and
    putting in place a number of options to ensure that we are
    doing everything we can to retain experienced examiners.
        Ms. De La Cruz. Give me an example of some of those
    options.
        Mr. Hill. Sure. So, we have one item that we are going to
    include in our budget for next year that is going to create a
    new grade level for examiners that reach a certain level of
    experience, and so----
        Ms. De La Cruz. For those watching television right now,
    what does a grade level mean?
        Mr. Hill. So, essentially, it would mean they would
    graduate to a higher level of pay, and it would accrue to their
    sort of retirement, et cetera. So, we have other things
    similarly when it comes to retention payments and things like
    that, essentially, to ensure that examiners, as they achieve a
    level of experience, we want those individuals to stay with the
    Agency because they are people that know the institutions they
    supervise, know the local conditions, et cetera.
        Ms. De La Cruz. Sounds like we have some work to do right
    there, right? Comptroller Gould, would you agree that this is
    an issue at the OCC as well?
        Mr. Gould. Well, thank you very much for that,
    Congresswoman. I generally think we have very talented
    examiners across the board. We created, just in the 4 months I
    have been there, created a community bank supervision
    portfolio, again dedicated to the needs of community banks. I
    have already been on two community bank exams, including one
    down in Texas. I have not been as far south as your district
    but look forward to getting there, but twice down to the Fort
    Worth-Dallas area. I do think examiner training is very
    important, and we want to make sure we have the resources and
    are training kind of the next generation of examiners,
    particularly around kind of new and innovative technologies
    that some of the banks may be choosing to engage in going
    forward.
        Ms. De La Cruz. Wonderful. It sounds like we need some work
    there in the FDIC and possibly even the OCC but making sure
    that we have experienced examiners is very important,
    especially when it comes to our community and our regional
    banks. I have a minute of time here, so, I am going to go on to
    the next question.
        Vice Chairwoman Bowman, last year you called on the Federal
    Reserve Board to tackle and identify issues that were exposed
    during the bank stress test in the spring of 2023, including
    updating the discount window, and you have spoken a little bit
    about that. I have a piece of legislation bringing the discount
    window into the 21st Century Act. Could you share a quick
    update on the reforms the Board is still considering to
    updating when it comes to the discount window's operation and
    technology?
        Ms. Bowman. Thank you for the opportunity to discuss the
    important tool of the discount window. It is certainly
    something we learned a lot about, its functionality, during the
    Silicon Valley Bank experience and failure. One thing that we
    have recognized, and we are engaging with our Federal Home Loan
    Bank (FHLB) System colleagues is to recognize the importance of
    being able to quickly move collateral from the FHLB system into
    the discount window system. So, we are doing a lot of work to
    modernize our capabilities and our operations in that space,
    among many other issues and areas, but I think that is probably
    the most critical.
        Ms. De La Cruz. Thank you so much. I yield back.
        Mr. Huizenga [presiding]. The gentlelady's time has
    expired. With that, the gentleman from Texas, Mr. Green, who is
    the ranking member on the Subcommittee on Oversight and
    Investigations, you are recognized for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I thank the ranking
    member as well. I thank the witnesses for appearing today.
        I must say that I associate myself with the comments of the
    ranking member. What she said took more than intellect. There
    are many people with the intellect to say what she said, but
    only a few with the courage, the courage to say what she said.
    It was one of, I think, the finest moments that I have seen
    since I have been on this committee, and I would like to salute
    her and associate myself with her comments.
        As you know, there is a war for currency supremacy, and
    this war exists because the U.S. dollar is the reserve currency
    of choice for the world. It is the global reserve currency. As
    such, its importance cannot be underestimated. Permit me, Madam
    Vice Chair Bowman, to ask you, could you kindly explain as
    tersely as possible the importance of the role of the dollar as
    a global currency of reserve to our economy?
        Ms. Bowman. I agree with you, and I am sure all of us in
    this room agree with you about the importance of the supremacy
    of the dollar as a global world currency. Dollar policy is
    within the remit of the Treasury Department, so other than the
    work that we do with U.S. Treasuries and those auctions, that
    is the remit of Treasury.
        Mr. Green. Why is it so important? We often say that it is
    important, but we do not get to the nuances associated with the
    statement. Why is it so important?
        Ms. Bowman. When the dollar is the reserve currency, that
    means other countries need and use and want the dollar as a
    part of their economic activities and that is critical to the
    future of the United States of America and our ability to
    continue to maintain our current role and status in the world.
        Mr. Green. How important is it as it relates to imposing
    sanctions on countries that are doing things that are harmful
    to our economy?
        Ms. Bowman. I would love to talk to you about sanctions,
    but that is way outside my remit, so I would refer you to the
    Department of the Treasury on sanctions and sanctions
    enforcement.
        Mr. Green. Well, permit me to ask you this. First, a
    predicate: experts have warned that the combination of Trump's
    chaotic tariffs and attacks on the Federal Reserve monetary
    policy independence undermine the U.S. dollar's role as a
    global reserve currency. If you agreed with this statement, I
    am not saying you do, but if you did, would you have the
    courage to tell the President that he is harming our dollar as
    a reserve currency? Would you have the courage to do that?
        Ms. Bowman. I agree with you. It is critically important
    for the Central Bank to remain independent, but I do not have
    anything for you on the other topics.
        Mr. Green. The reason I ask is because this issue of
    courage became prominent in my mind when I saw the responses
    that you were giving to the questions that the ranking member
    posed and I have seen the members of the Cabinet as they sit
    around the room with the President, and how they all take great
    pride and pleasure in telling him how great he is. I think
    there will have to be someone or few among you who will have
    the courage to say to this President, you are making a mistake.
    If he does not hear persons who have that kind of courage, our
    economy is going to suffer as it is suffering. Someone has to
    have that kind of courage. Let me ask you, Mr. Gould, do you
    have that kind of courage?
        Mr. Gould. Thank you for the question, Congressman. I
    believe the President selected me and the Senate confirmed me
    for this role because I was the best person for the job. I
    believe I would be doing disservice to him and to the American
    public if I, at any opportunity, fail to give my best advice,
    and I will always do so. Thank you.
        Mr. Green. I am honored that you would say so. Thank you,
    and I would hope that others of you would adopt that language.
    The President cannot harm you. Stand up. I yield back.
        Mr. Huizenga. The gentleman's time has expired. With that,
    the gentleman from Tennessee, Mr. Rose, is now recognized for 5
    minutes.
        Mr. Rose. Thank you, Chairman, and I appreciate Chairman
    Hill and Ranking Member Waters for holding this important
    hearing and thank you to our witnesses for being with us today.
        Chairman Hill, have you had an opportunity to read Treasury
    Secretary Bessent and Senator Bill Hagerty's Wall Street
    Journal op-ed from October 30 titled, ``How to Make Mainstreet
    Banks Great Again?''
        Mr. Hill. I did read it.
        Mr. Rose. The authors, as you know, argue that the current
    regulatory framework and the perceived government guarantee for
    the largest banks have created a ``too small to succeed''
    environment for community and regional institutions, and they
    call for raising the FDIC insurance limit to level the playing
    field. Do you agree with their assessment of this competitive
    imbalance, and do you agree with their proposed solution?
        Mr. Hill. I think there are many challenges that the
    smallest banks face today. Among those challenges include
    things like the cost of compliance and the cost of technology.
    So, we are taking a number of steps through our existing
    authorities to try to ensure that we have a regulatory
    framework in which the smallest banks can succeed. When it
    comes to deposit insurance reform, I think it is a worthwhile
    conversation to be having. We have avoided taking any formal
    positions on any specific piece of legislation, but I would
    note that the number of insured deposits in the system as a
    proportion of overall deposits has come down pretty
    significantly. So, I think it makes sense for Congress to be
    evaluating the potential for deposit insurance expansion.
        Mr. Rose. Thank you. Comptroller Gould, I often hear from
    community banks in Tennessee and across the country that their
    treatment varies depending on which OCC program or office
    supervises them. In recent months, the OCC has issued several
    bulletins aimed at community banks, such as Bulletin 2025-24
    and 2025-29, which seek to reduce unnecessary supervisory
    burdens and refocus exams on material financial risks. Both
    bulletins explicitly define a community bank as a financial
    institution with less than $30 billion in assets, and state
    that banks meeting that definition are covered by the
    aforementioned bulletins. For bulletins labeled as applying to
    community banks, can you confirm that those bulletins apply
    consistently to all community banks under OCC supervision that
    meet your definition, regardless of whether they are overseen
    through the community, mid-size, large, or specialty
    supervision programs?
        Mr. Gould. Our goal would be to apply those bulletins
    consistently to all banks engaged in a community bank business
    model. Now, there are some banks, they may be small in asset
    size, but, nevertheless, are engaged in activities that are not
    consistent with a traditional community bank business model.
    For example, significant payments activities where we would
    treat them a little differently. Again, we would revert back to
    our historic risk-based supervisory approach.
        Mr. Rose. Thank you. I appreciate that insight, and I would
    just, I guess, reaffirm that it is so important that these
    banks get consistent guidance and that it does not appear that
    the examiner or the program or the region of the country that
    they are in is in some way affecting the supervision that they
    are getting in the way that their examinations proceed.
        Chairman Hill, looking back on the bank failures from 2023,
    it is clear that once a deposit run begins, supervisors have
    very few tools to stop it. What tools does the FDIC believe it
    would need, either operationally or through expanded authority,
    to allow an individual bank to fail while still shoring up
    confidence in the broader system?
        Mr. Hill. Sure. So, I fully agree that our tools are fairly
    limited. The primary tool that was used in 2023 was invoking
    the systemic risk exception, which under the current statute
    limits us to, essentially, protecting creditors and depositors
    of the institution that failed. I think there could be some
    merit in allowing regulators to have the authority to provide a
    time-limited deposit or other debt guarantee across the system.
    I think if Congress were to do that, we would want it to be
    time-limited with guardrails in place. Currently there is a
    process where the Congress can do that through fast-track
    procedures, and I think what 2023 demonstrated was those fast-
    track procedures are still way too slow for the speed at which
    bank runs can spread.
        Mr. Rose. Thank you. My time has expired. I yield back, Mr.
    Chairman.
        Mr. Huizenga. The gentleman's time has expired. The
    gentleman from Missouri, the ranking member for the
    Subcommittee on Housing and Insurance, Mr. Cleaver, is
    recognized for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman. I want to associate
    myself with the comments issued earlier by the ranking member,
    Ms. Waters.
        Mr. Gould, your memo to us had me to read it several times
    because one part of it just leaped from the pages into my mind,
    and it is recorded on page 1 and 2, first two paragraphs on
    page 2, when you said that no American should be denied access
    to banking products and services because of political or
    religious beliefs. I am curious about whether or not we have
    any evidence that there has been political discrimination in
    banking, and if there is, if you could help me understand it.
        Mr. Gould. Well, thank you for the question, Congressman. I
    think it should be an uncontroversial statement saying that we
    should not condone any discrimination in any form.
        Mr. Cleaver. I apologize. I apologize. I will ask it
    another way.
        Mr. Gould. Okay.
        Mr. Cleaver. Does political discrimination exist in the
    American banking system, and if so, if you would give me an
    example, it would be helpful.
        Mr. Gould. Congressman, thank you again for the question.
    As I noted also in my opening statement, we are in the process
    of looking at the activities over the last few years of the
    largest national banks. It is premature for me to comment on
    the results yet of that review, but I will, of course, upon its
    completion, inform this committee and the public of what we
    find.
        Mr. Cleaver. So, do you believe that there has been
    political discrimination, discrimination on a potential
    customer/applicant? I just want to know. This is not a hostile
    question.
        Mr. Gould. Again, Congressman, as I just stated, we are in
    the process of reviewing the activities of the largest national
    banks where there have been allegations of political debanking,
    and I look forward to sharing the results of that review, when
    it is complete, with you all.
        Mr. Cleaver. Mm-hmm. So, I mean, debanking is actually
    preventing someone from receiving banking privileges. Okay, I
    will move to another one because it is really something I am
    concerned about, and that is religious banking. In your
    statement, you mentioned that, and I agree with you, that
    religious beliefs should not be included in or practiced by
    banks. I have done a little on this issue already. I have
    actually written several papers on religious discrimination.
    So, I do not know how religion can enter into the banking
    system and there is discrimination. Can you help me?
        Mr. Gould. Yes, sir. So, again, I am aware of allegations
    of a number of religious organizations, charitable
    organizations that have alleged debanking over the course of
    the last years, and we have been sifting through our own OCC
    complaints as well as working with third parties and other
    government agencies to sift through complaints of religious
    discrimination. That is, again, also something that we will be
    reviewing and sharing our results with this committee when we
    complete that review.
        Mr. Cleaver. So, we have no evidence that has occurred.
        Mr. Gould. Sir, I would not go so far as to say that. I
    would just say that there are a number of allegations of
    religious debanking that have occurred and been made to the OCC
    as well as to other government agencies. It would be premature,
    while the review is still ongoing, for me to conclude as to
    whether or not they actually happened until, again, I have
    completed the review.
        Mr. Cleaver. Well, I applaud you for the investigation
    because, I mean, one of the things that the President did early
    on was to eliminate departments in various agencies who had the
    responsibility for looking for exclusion and discrimination.
    Thank you, Mr. Chairman. I yield back.
        Mr. Huizenga. The gentleman's time has expired, and I will
    be recognizing myself now, and, Acting Chairman Hill, let me
    start with you.
        In 2024, after substantiated allegations against former
    FDIC Chairman Marty Gruenberg, an independent report concluded
    that there was a lack of accountability, fear of retaliation,
    insufficient prioritization of workplace culture, and an abuse
    of power dynamics at the FDIC. We did hearings on that. In
    addition, a staff report released by this committee last
    Congress noted that the next FDIC chairman will need to ``undo
    years of damage to morale and culture at the Agency.'' You have
    been on the job in an acting capacity for the past year. What
    steps have you taken, even in that acting capacity, to ensure
    that the FDIC makes good on the recommendations made both by
    this committee, but, just as importantly, maybe even more
    importantly, the Cleary report?
        Mr. Hill. Sure. Well, thank you for the question, and let
    me start by saying that harassment, other forms of misconduct
    have no place at the FDIC or any other workplace, and fixing
    the culture at the FDIC has been a key priority throughout this
    year and appreciate all the work and oversight that you and
    your team has done.
        Mr. Huizenga. Are the employees receptive to it? I mean, it
    was bad.
        Mr. Hill. Yes.
        Mr. Huizenga. Both sides recognized that it was bad.
        Mr. Hill. Fully agree. I think there is widespread
    commitment at the Agency to turn the page on the problems of
    the past. There has been significant turnover in leadership at
    the Agency. We have an entirely new board. About half of direct
    reports to the chair have turned over this year. We have
    replaced a large number of managers across the Agency. We have
    prioritized accountability, which I think was really the key
    root cause of the problems----
        Mr. Huizenga. Yes.
        Mr. Hill [continuing]. which is that there were many cases
    where either people did not report things because they did not
    have confidence in the process, or they did report things and
    people were paid off with settlements and the wrongdoers did
    not have accountability. So, we have taken a number of steps to
    set up new offices, new processes in place to ensure that when
    there are allegations, that there is a process, that there are
    independent investigations, and that there is discipline
    appropriate for the misconduct.
        Mr. Huizenga. Glad to hear that, and you do not strike me
    as the type of person who is going to scream at their employees
    as they are coming in about trivial things. So, I have a few
    head nods behind on that, so I appreciate that.
        Switching topics but staying with you. I know a little
    earlier you had talked about the failed bank resolution
    framework as a worthwhile conversation to have. Two weeks ago,
    the committee held a hearing on proposals that would make
    changes to the deposit insurance framework. While the issue is
    far from settled, I think it is important that we do not
    dismiss how interconnected the debate between deposit
    insurances with bank resolution and bank failure scenarios. It
    makes sense to have a wide range of institutions lined up to
    bid on the failed banks, increasing the proceeds received by
    the FDIC for its sale, and then lowering the potential costs of
    the Deposit Insurance Fund. This is something you and I
    discussed in 2023 during the banking turmoil, and I know this
    is something FDIC has been looking at. You are not commenting
    on any particular legislation. I happen to have particular
    legislation on that. I saw Mr. Gould's head pop up on that
    because you are going to be a part of that as well, but you had
    noted that the FDIC has developed a seller financing program
    for nonbank bidders to increase competition by including
    private equity firms and other nonbank entities. Do you believe
    this would ultimately reduce the cost to the DIF, to the
    Deposit Insurance Fund?
        Mr. Hill. Absolutely. That is the goal. We are taking a
    number of steps to try to improve the bidding process to
    facilitate more and better and lower cost bids and try to bring
    more capital into the bidding process. The ultimate objective
    of all of it is to, A, reduce the cost to the DIF, and B,
    increase the likelihood of stabilizing transaction options in
    the event of large failures.
        Mr. Huizenga. Right. So, my bill, The Enhancing Bank
    Resolution Participation Act directs the FDIC and OCC to
    jointly study the feasibility and utility of shelf charters,
    meaning pre-approved, ready-to-go entities that are a capital-
    raising vehicle to bid on failed banks and on modifications
    that could be pursued to modify the bidder qualification. In
    the last 30 seconds here, do we need to address the bank
    resolution framework at the same time as the FDIC network, Mr.
    Gould?
        Mr. Gould. Thank you for the question. You know, I do
    share, I think, many of the concerns that the acting chairman
    has stated publicly around the resolution execution
    capabilities that were on display, or their lack thereof, in
    the March 2023 timeframe. So, certainly, I support both, A,
    more robust public disclosure around what occurred during that
    timeframe so that, B, Congress can then inform itself----
        Mr. Huizenga. Yes.
        Mr. Gould [continuing]. as to whether it needs to act from
    a statutory standpoint.
        Mr. Huizenga. Right. My time has expired. I do, without
    objection, would like to submit this letter from a joint trade
    statement for the record regarding our hearing today.
        Hearing none, so moved.

        [The information referred to can be found in the appendix
    on page 114.]

        Mr. Huizenga. With that, my time has expired, but we are
    going to take a brief pause here as a committee. The minority
    is aware of this as well and we are going to pause briefly
    while we adjust the witness' microphones and we will return
    shortly. So, with that we take this pause.
        [Pause.]
        Mr. Davidson [presiding]. I am prepared to resume. The
    gentleman from Illinois, Mr. Foster, who is the ranking member
    of the Subcommittee on Financial Institutions, is now
    recognized for 5 minutes.
        Mr. Foster. Thank you, Mr. Chair. Let us see. I will start
    with Chair Bowman. I just want to thank you and your fellow
    Board members for the series of conferences that you have held
    in recent months. I was pleased to be able to attend two of
    them, one on the future of community banking and another on the
    future of payments, and it was really great to be able to sit
    there and actually talk to the boots on the ground in these
    very important and emerging and traditional industries. I urge
    my colleagues, actually, if they get a chance to attend those
    and to try to do everything you can to encourage member
    attendance of those, and, frankly, I learned a lot.
        Now, one issue that actually came up repeatedly in both of
    the conferences was the issues of fraud costs and the costs of
    preventing fraud. Comptroller Gould, the OCC, FDIC, and Board
    of Governors recently issued a request for information on
    potential actions to address payments fraud. You know, I
    regularly hear about this from community bankers in my district
    all around Illinois about the challenges that they face with
    payments, largely identity theft, and then check fraud, in
    large part, check washing. The comment period closed in mid-
    September for this, and I know that bankers are anxiously
    looking forward to the next steps.
        So, Comptroller Gould, do you have any initial takeaways
    from the RFI that you can share, and what can we expect in
    terms of next steps from your Agency, and when might we see
    them taken?
        Mr. Gould. Thank you very much for that question,
    Congressman. In the 4 months I have been on the job, that is
    certainly an issue, fraud, that has risen to the top of my kind
    of to do list. It was not something that I was hearing nonstop
    5 years ago when I last worked at the Agency. Back then, it was
    cannabis banking when we met with the community bankers, but
    now it is fraud, and I appreciate the seriousness of the issue.
    I think a lot of the things that we can do are probably steps
    that we have to take across the Federal banking agencies and
    even beyond.
        Speaking just for the OCC, one thing that I have heard
    repeatedly from smaller banks is concerns around check fraud
    where the very largest banks, which happen to be national
    banks, are seemingly or allegedly very slow in refunding money
    owed to small banks. So, we have been, to date, facilitating
    those complaints and making sure that the very largest national
    banks are responding in a timely fashion. That is something I
    would like to look into further.
        In terms, more generally of the request for information
    (RFI), again, I think that is something we need to work with
    across our three Federal banking agencies and possibly beyond
    but I think it is something that, certainly from the OCC's
    perspective, we understand is extremely important, given the
    volume and how it is impacting particularly smaller banks in a
    disproportionate manner.
        Mr. Foster. Do any other witnesses have comments on the
    whole issue of and you know, a huge part of this is online
    payments fraud, but a big part of that is identity theft, and
    the tool at hand is your cellphone and the digital driver's
    licenses. If you are able to present online a Real ID-compliant
    digital driver's license which is in the technologies in
    everyone's cellphone, you can pretty reliably prove that you
    are who you say you are, even in an online transaction. You
    know, that stops the hackers in their tracks, at least for
    fraud that scales and so, I urge you to keep pushing on both of
    those. The check washing is a huge problem and the responses of
    banks, and also, I would just raise our game in electronic
    online identity verification. That could be a huge cost
    savings. One thing I heard about at that conference was just
    the huge amount of costs that banks incur for trying to make
    sure that online transactions are valid.
        Another thing that came out was a lot of discussion in the
    payments conference of the implementation of the GENIUS Act.
    One thing that came up, actually, with the small community
    banks a lot was the worry that interest-paying stablecoins
    would have the potential of pulling deposits out of
    particularly small community banks; that there are some
    estimates that say that interest-bearing stablecoins could
    cause more than $6 trillion of deposits to leave the banking
    system, and particularly the small banks that are often the
    only source of business investment in small towns.
        I was just wondering even though we had a nominal
    prohibition of paying interest on what got voted out of this
    committee, it took the crypto industry about 2 days to figure
    out how to effectively pay interest on this. Is this something
    that you think you are going to need congressional action on to
    prevent this from happening? Anyone wants to take a bite of
    that? Do we need legislation?
        [No response.]
        Mr. Foster. If you could answer for the record, yes, how
    serious do you see this problem because I just heard about,
    uniformly, that the small community bankers that were present
    at that conference were terrified and angry about the threat.
    This is, essentially, the reemergence of narrow banking that
    the Federal Reserve has traditionally objected to for----
        Mr. Davidson. The gentleman's time has expired.
        Mr. Foster. Thank you.
        Mr. Davidson. I now recognize myself for 5 minutes. I want
    to say thanks for you all being here today. Thanks for your
    preparation and for your testimony today, but in this
    committee, we have been hammering home a simple truth:
    America's financial institution and our system thrives when
    regulators stick to safety and soundness, not targeting
    political rivals or picking winners or losers in the
    marketplace, weaponizing the laws and, frankly, the lack of
    laws in our government.
        Under the Biden Administration, we saw Operation Chokepoint
    2.0 resurrected from the Obama Administration where Chokepoint
    1.0 was. We saw it in full swing. Regulators were weaponizing
    ``reputational risks'' to bully banks and to debanking
    political rivals, crypto innovators, stablecoin pioneers, and
    everyday folks just trying to build a future. It was not about
    risk. It was about control but here is the good news. The Trump
    Administration is slamming the door shut on that nonsense, and
    many of you are in place to do that, to just follow the law and
    apply even-handed regulations, so thank you. We have withdrawn
    poison pill guidance and banned reputational risk from exams,
    and we are ready to unleash American leadership in our
    financial sector, including our digital asset sector. So today,
    I want to lock in the progress and make sure there is no
    Chokepoint 3.0 or anything like that underway.
        Vice Chairwoman Bowman, how is the Federal Reserve turning
    the page on Chokepoint and approaching bank participation in
    all markets, particularly digital assets?
        Ms. Bowman. Well, as you mentioned, all of us are engaged
    in implementing the President's executive order on debanking
    and taking actions as a result of the directives that were
    contained within that executive order. What we have done
    specifically at the Federal Reserve is that we have eliminated
    reputational risk within our examination context and within our
    supervisory function, whether that is in guidance or in
    regulation. We have rescinded and edited out the word
    ``reputational risk,'' so it no longer is a part of the
    vernacular at the Federal Reserve and within our supervisory
    context.
        We are also conducting an audit of supervisory and banking
    activity so that we understand whether we have met those
    expectations and that we can do so going forward. We are also
    reviewing the past activities at both the Board and at the
    Reserve Banks to identify actions that would be inconsistent
    with the executive order. We are also contemplating moving
    forward with a proposal that is similar to what the OCC and the
    FDIC have put forward to ensure that this is a durable change,
    and a proposal, an notice of proposed rulemaking (NPR), on
    eliminating reputational risk from the banking----
        Mr. Davidson. Yes, thank you. The Federal Reserve recently
    talked about a change to master accounts, potentially making
    them more accessible and more concrete set of rules. How would
    that work?
        Ms. Bowman. We are currently exploring the options that we
    have within our regular framework for master account
    consideration, and it is something that could be potentially
    available as we are currently reviewing how that could be
    effective in a limited construct.
        Mr. Davidson. All right and then last, you mentioned that
    you are following the President's executive order, but one of
    the other executive orders that you put out with respect to
    digital assets is no development of a central bank digital
    currency. Obviously, at some point, portions of the Federal
    Reserve have been engaged in that. Is the Federal Reserve still
    engaged in developing central bank digital currency?
        Ms. Bowman. There are parts of the Federal Reserve that
    continue to be engaged in activities related to global
    activities on central bank digital currency within the
    construct of the Bank for International Settlements and our
    participation in some of their work on innovation.
        Mr. Davidson. Does the Fed consider themselves subject to
    the President's executive order banning central bank digital
    currency?
        Ms. Bowman. We believe that there is no authority that
    Congress would have to provide the authority for the Federal
    Reserve, specifically, to engage in creation of a central bank
    digital currency.
        Mr. Davidson. Thank you. Comptroller Gould, under President
    Trump's fair access rule, banks cannot deny services to an
    entire lawful industry. Has the OCC seen any evidence since
    January 2025 of national banks continuing to debank crypto
    firms?
        Mr. Gould. We are still in the process of going through the
    complaint data that we have received in accordance with the
    President's EO. I mean, I am aware of some anecdotal examples--
    --
        Mr. Davidson. Right. We will look for the report, and you
    have kind of answered an adjacent question there, but I will
    just also add that, and you have alluded to cannabis banking,
    marijuana banking but I would love to submit a question for the
    record there to see where the state of play is. Are banks still
    blocking customers who are engaged in lawful marijuana
    activities because nearly every State, whether you like it or
    not, has made some form of marijuana lawful in those States,
    and we have not synced up at the Federal level, so I would love
    to catch up on how we are doing that.
        My time has expired, and I now recognize the gentlewoman
    from Ohio, Mrs. Beatty, who is also the ranking member on the
    Subcommittee for National Security.
        Mrs. Beatty. Thank you, Mr. Chairman and to our ranking
    member, and, more importantly, thank you for being here today.
    A lot of tough questions that you have had today because we are
    in tough times. Let me start with following up on something
    that my colleague on the other side, Ann Wagner, alluded to in
    talking about some 682,000 cases of check fraud.
        As we know, fraud and scams are robbing American families
    of their hardworking savings. It is the number one concern that
    I am hearing from banks and credit unions in my 3rd
    Congressional District and this summer, I was really pleased to
    see that the FDIC, the Fed, and OCC issued a request for
    comments to address the payment and check fraud. So, we also
    know that Congresswoman Maxine Waters last Congress introduced
    House Bill 9303, Protecting Consumers from Scams Act. So, my
    question to you, and I will start with you, Ms. Bowman, and
    quickly work down to you, Mr. Hill, what are your top-line
    takeaways from the comments submitted, and what target areas
    are you looking to prioritize? So, are there any target areas,
    yes or no, and if so, give me at least one, and then we can----
        Ms. Bowman. Yes, this is a critically important issue, and
    I think some of the most important areas that we should be
    focusing on are account openings.
        Mrs. Beatty. Thank you.
        Mr. Gould. Excuse me. One area for us to focus on, again,
    is the relationship between the largest national banks and
    payment processing and check refund returns and the community
    banks.
        Mr. Hauptman. I will say that Congress passed the GENIUS
    Act, and one positive of blockchains, especially public
    blockchains, is they eliminate some of these issues that can
    happen with other forms of payment. If you are asking about
    check fraud, obviously it has been around since we have had
    checks, and I am aware that the harm is not just those who are
    defrauded. It is the regular credit union member who is saying,
    ``Why cannot you cash my check? Can you just give me the money?
    It is a certified check. Why do you not give it to me?'' It is
    not their fault nor their credit union's fault, why that is the
    case, why there is a delay. So, we try to circulate on our
    website every new fraud that there is, from romance scams to
    check fraud.
        Mrs. Beatty. Mr. Hill.
        Mr. Hill. Thank you, Congresswoman. I fully agree this is a
    big and growing problem. We are working very closely with our
    peer agencies as part of a working group. I fully agree with
    the comments from Vice Chair Bowman and Comptroller Gould. We
    are continuing to work through the comments and happy to follow
    up with more takeaways.
        Mrs. Beatty. I am glad you said, ``follow up,'' because I
    would like you to stay in contact. This is very important, I am
    sure, to all of us, but in my district I am being held
    accountable for what am I doing, and you are right, it is an
    age-old thing, but it appears to be more prevalent now that we
    are seeing this. So, I would like to have some contact. I have
    my legal counsel and financial person, Sierra, here, and so
    this is something you are going to hear over and over from me.
        Let me quickly go to the next question, and for you, Acting
    Chairman Hill and Chairman Bowman and Comptroller Gould, I
    would like to start with some questions on cybersecurity--we
    have addressed that a lot today--and the risk posed by third-
    party service providers and other technology solutions. As we
    know, cyber adversaries not only target financial institutions,
    but also Federal regulatory agencies. What are the steps you
    are taking to enhance the cybersecurity of your Agency and
    effectively notify financial institutions when there is a
    breach of confidence and sensitive information that regulators
    collect from financial institutions?
        [No response.]
        Mrs. Beatty. Okay. Do you want me to pick somebody. Mr.
    Hill. Okay.
        Mr. Gould. I will be happy to start----
        Mrs. Beatty. Please.
        Mr. Gould [continuing]. since I certainly raised the issue,
    and, unfortunately, the OCC was the victim----
        Mrs. Beatty. Right.
        Mr. Gould [continuing]. of a data breach that went on for
    almost 2 years. When we learned of the breach back in February,
    we engaged extensively with the banks that we supervised to let
    them know what we were doing, how we were addressing it, what
    information was exposed. I will say that, in addition to
    bringing on board multiple kind of forensic technical experts
    to analyze the issue and to make recommendations to ensure that
    the risk of this happening again is dramatically decreased, I
    actually turned our own examiners on our Agency to examine us
    as they would a bank to ensure that we had actually made the
    changes that the third party had recommended, the forensic
    consultants had recommended.
        Mrs. Beatty. Unfortunately, my time is up, so you all
    agree? Can he be the spokesperson for you all, and if it is a
    ``no,'' you can then get back to me. Okay. It looks like you
    have some friends. They nodded. I yield back.
        Mr. Davidson. I thank the gentlewoman. I now recognize the
    gentleman from South Carolina, Mr. Timmons, for 5 minutes.
        Mr. Timmons. Thank you, Mr. Chairman, and thank you to our
    distinguished witnesses for being here today. I want to begin
    by commending each of you for your efforts to maintain
    stability in our financial system in a way that protects
    consumers, reverses harmful one-size-fits-all policies, and
    provides much-needed clarity to our community banks and credit
    unions. This hearing is critically important as we work to
    ensure that our regulatory framework remains effective,
    transparent, and responsive to the needs of the institutions
    and communities it is intended to serve.
        Vice Chair Bowman, I would like to begin with you. The
    Federal Reserve's recent finalization of revisions to the large
    financial institution's ratings framework is viewed by many as
    a commonsense and long-overdue improvement. Ensuring that banks
    are not judged solely on their single lowest component score
    will create a more accurate and balanced assessment of
    institutional health. Could you speak to the Federal Reserve's
    plans to implement this reform and how we should expect it to
    be faithfully and consistently implemented by examiners?
        Ms. Bowman. Thank you for allowing me to provide some
    additional information and context to our large bank financial
    rating system. So, when the system was initially introduced in
    2019, it allowed for a single deficiency. There are three
    categories that it consists of--governance and controls,
    capital, and liquidity--and the initial framework allowed for a
    deficiency in one of those categories, not requiring it to be
    as a financial matter, but any of those categories could
    determine a bank to be not well managed. As we know and as we
    saw in Silicon Valley Bank's failure, banks fail for a number
    of reasons that are highly predictable and always related to
    their financial condition. So, it is important that we are not
    artificially judging an institution to not be well managed if
    we are not reviewing their financial health as a part of that
    determination.
        Mr. Timmons. Thank you for that. Turning now to the need
    for greater regulatory tailoring, I want to thank you both,
    Vice Chair Bowman, and you, Chair Hill, for supporting efforts
    to refine our regulatory regime and for advancing the policies
    that this committee and our colleagues in the Senate have
    worked on throughout the year. I consistently hear from banks
    and credit unions in my district that an overly burdensome
    regulatory framework forces them to divert time and resources
    away from serving their communities. At the same time, I
    recognize that limited resources pose challenges, not only for
    financial institutions, but also for the agencies charged with
    supervising them. Reforming standing policies, such as the
    community bank leverage ratio, along with implementing
    initiatives like my SMART Act will strengthen our financial
    system and allow institutions of all sizes to better support
    their customers.
        Chair Hill, as we consider these efforts, how does your
    Agency plan to improve the consistency and clarity of the
    supervisory process, and would legislation such as the
    Supervisory Modifications for Appropriate Risk-based Testing
    (SMART) Act and the Tailored Regulatory Updates for Supervisory
    Testing (TRUST) Act help conserve Agency resources in a way
    that ultimately enhances the quality of supervision?
        Mr. Hill. Thank you, Congressman, for the question. So, we
    are engaged in taking a close look at many aspects of our
    supervisory process. Trying to promote more consistency and
    clarity across the board are key goals that are informing many
    of the activities that we have underway. The proposed rule we
    issued with the OCC that would define unsafe or unsound
    practice and matters requiring attention is partly intended to
    achieve more consistency across exam teams. Our supervisory
    appeals process that we have proposed is also intended to
    promote more consistency, among other things. With respect to
    the legislation, I am certainly happy to work with you and your
    office on providing feedback to anything that would be helpful.
        Mr. Timmons. Sure. Thank you for that. Finally, I want to
    turn to digital assets, your Agency's plans for implementing
    GENIUS, and the broader conversation around future market
    structure legislation. In August, I hosted roundtables in my
    district with stakeholders from across the financial sector. A
    consistent theme was the future of crypto legislation and how
    traditional financial institutions are preparing to participate
    in this evolving market. These legislative efforts have the
    potential to reshape our financial system and reduce
    unnecessary intermediaries. As this work moves forward, it is
    essential that our financial institutions remain informed and
    fully equipped to adapt so that they are not left behind. Chair
    Hauptman, you and I discussed GENIUS implementation a few
    months ago, and I would appreciate an update on the NCUA's
    preparedness. I would also welcome your thoughts on how we can
    more effectively educate credit unions in South Carolina about
    the work underway in Washington.
        Mr. Hauptman. Well, Congress has given us a deadline, I
    believe, of July 18 next year, and it is my intention to work
    with my fellow regulators to meet that deadline. Obviously,
    that is going to be proposed rules and then final rules. We are
    sitting here on December 2 and do not have either one of those
    yet, so, obviously, between now and July, it is supposed to
    happen. My guess is the first thing you will see is, I believe,
    the first rulemaking you mentioned, which is how to apply to be
    an issuer, which for credit unions would be credit union
    service organizations because they do not have subsidiaries.
        Mr. Timmons. Thank you for that. I am out of time. With
    that, I yield back. Thanks.
        Mr. Davidson. I thank the gentleman. The gentleman from
    California, Mr. Vargas, who is also the ranking member of the
    Task Force on Monetary Policy, is now recognized for 5 minutes.
        Mr. Vargas. Thank you very much, Mr. Chairman. I want to
    thank the chairman and also the ranking member, and in
    particular, the ranking member. I think what she said today was
    not only true, but courageous. It is sad, but I do think we are
    living through a pretty shameful moment in our history, and I
    think that is how history is going to see it. I think a lot of
    the people that are here today, 10 years from now, are going to
    see themselves as Liz Cheneys and Adam Kinzingers, but they
    were not. They were not. They allowed all this corruption to go
    on, and it is sad.
        I have been in politics for a long time. I got elected back
    in 1993, and it is interesting. In a hearing like this normally
    what happens is, as politicians, we make a statement, and our
    statement is pretty political, as mine just was. Then normally,
    we go to the professionals, and the professionals give us
    information that is very important for us to make decisions but
    it is seldom the case that the professionals use the jargon of
    politicians, and that is been the case most of the time that I
    have been here, with the exception of today. I was very
    interested because some of the jargon that was used today,
    ``unelected bureaucrats''--by the way, that is called
    professionals--``unelected bureaucrats,'' ``the weaponization
    of finance.'' All of this jargon is jargon that is used by
    politicians that should not be used by professionals, and we
    saw that today, and I think that is disappointing.
        Anyway, I wanted to say that because I do see a sliding
    right now of professionalism in the government, and I think it
    is sad, and also intellectualism, frankly. I mean, I see today
    we are trying to figure out if what we are doing at sea right
    now is legal or not. You know, it is the equivalent of
    bayoneting the wounded when you have survivors on a ship and
    you hit them again. I mean, clearly war crimes, and this is
    what happens when we de-professionalize the government and
    those that are supposed to carry out the laws. So, anyway, I
    was disappointed in some of the jargon here today, and I will
    leave it at that.
        Now, I do want to turn to climate change. Now, I think
    climate change is something that is interesting because I have
    been around, again, a long time and it used to be that no one
    believes in it. Now, a lot of people do. So, I would ask you
    guys, how many of you believe in climate change? I will start
    with you, Mr. Hill, because you are closest to me.
        Mr. Hill. Yes, sir, I do.
        Mr. Vargas. You do. Why do we not go down the line?
        Mr. Hauptman. The climate is changing. That is correct,
    sir.
        Mr. Vargas. Okay. It is changing. Okay. I will not go into
    the human aspect, but you do think the climate is changing,
    yes?
        Mr. Hauptman. Our view on climate change and natural
    disasters, which are a risk to financial institutions, is that
    the local communities are best served to do it. Nobody in
    Florida or Puerto Rico needs me to tell them they have
    hurricanes.
        Mr. Vargas. That is right. Sir?
        Mr. Gould. Whether you call it global warming or climate
    changing, yes, I understand the climate is changing.
        Mr. Vargas. Okay. Vice Chair?
        Ms. Bowman. I think climate change is an important policy
    question, and natural disasters and events happen all the time.
    I am from Kansas, so I am particularly familiar with things
    like tornadoes and floods.
        Mr. Vargas. Yet, you guys are pulling back from that
    information. It seems like you are not participating like
    before. Are there no financial risks then? You are the
    prudential regulators. You do not see risks here in climate
    change? Well, I am from California, two fires. It is
    interesting people never talk about Kansas or places where they
    get hail because some of the largest damage that you see in
    insurance is actually hail, and you are going to see more and
    more of that because of climate change, and I think it is going
    to affect the mid-part of the country significantly. I think it
    is a real risk. I think most of humanity thinks it is a real
    risk, except for us today. Would anyone like to comment on
    that? Mr. Gould, go ahead, sir.
        Ms. Bowman. May I?
        Mr. Vargas. Yes.
        Ms. Bowman. May I?
        Mr. Vargas. Yes, yes, please do.
        Ms. Bowman. So, I think it is not that these events are not
    risks. It is that they are not more important risks than other
    risks that banks face, and we believe that banks have been
    facing these risks. Obviously, I am a community banker from a
    mostly rural and agricultural bank, where farmers are the most
    optimistic people on the planet who have to mitigate and manage
    to what the weather gives them every year. So, they have been
    managing for these risks for the entirety of the banking
    system, and it is not that they are not important risks. It is
    that they are not more important than other material risks.
        Mr. Vargas. Okay. Okay. We could disagree on how important
    it is, but just, last, I would like to say I hope you do not
    slide into this unprofessional jargon. Keep it tight, as they
    say when I used to play football. Do not slide off and start to
    speak like politicians. Thanks again. With that, I yield back.
        Mr. Davidson. I thank the gentleman. The gentleman from
    Pennsylvania, Mr. Meuser, who is also the chairman of the
    Oversight and Investigations Subcommittee, is now recognized
    for 5 minutes.
        Mr. Meuser. Thank you, Mr. Chairman, and certainly thank
    you to all of you. This is very important and worthwhile, so it
    is appreciated. Comptroller Gould, Vice Chair Bowman, Chair
    Hill, and Chair Hauptman, thank you.
        First on Basel III Endgame, we need capital rules that
    strengthen safety and soundness without limiting access to
    capital for large and small businesses. Second, this
    committee's debanking report validates our concerns. Last
    Congress, Biden regulators pressured, many banks were coerced
    to comply, and lawful Americans lost access to banking
    services.
        Mr. Chairman, I ask unanimous consent to enter into the
    record the majority staff debanking report entitled,
    ``Operation Chokepoint 2.0: Biden's Debanking of Digital
    Assets.''
        Mr. Davidson. Without objection.

        [The information referred to was not submitted prior to
    printing.]

        Mr. Meuser. So, I appreciate Comptroller Gould, Vice Chair
    Bowman, and Acting Chair Hill's early action regarding
    debanking by eliminating reputational risk, which our
    colleague, Representative Barr's bill, the Financial Integrity
    and Regulation Management (FIRM) Act, has codified. In order to
    achieve fair access to banking, the private sector has a role
    to play as well, of course. Third, financial fraud and scams
    are rampant, and this committee is committed to a government,
    private sector, and a whole-of-society effort to protect
    consumers, seniors, veterans, young people, small businesses,
    everyone out there, and that is a top priority for my
    Subcommittee on Oversight and Investigations.
        So, Vice Chair Bowman, I would like to start with you,
    please. You have been very clear on Basel III Endgame, very
    refreshing, as a matter of fact, that it can have real benefits
    if calibrated properly for bank lending, especially for
    community and regional banks. In your view, how can rightsizing
    and capital requirements that primarily affect larger banks
    help support small business and agricultural lending?
        Ms. Bowman. If we are speaking specifically about Basel
    III, it is important to understand that the approach that we
    are taking limits the application of Basel III and the required
    participants to the largest banks. So, those requirements would
    not apply to the smallest banks unless they chose to opt in to
    that framework.
        Mr. Meuser. Okay. Let me ask you this then. Do you plan to
    examine the Tier 1 leverage requirements, the G-SIB surcharge,
    the Comprehensive Capital Analysis And Review (CCAR)
    requirements as part of your effort to rightsize capital?
        Ms. Bowman. So, we are looking at all the capital
    frameworks and the capital pillars in a comprehensive way. We
    have already worked to address the community bank leverage
    ratio by setting it at the statutory floor that Congress
    provided us. I think there are a number of different categories
    that we are looking at. We will have a G-SIB surcharge
    proposal. We already introduced the SLR, and the other is the
    stress testing in addition to Basel III. We are making progress
    on all of these different capital pillars, and I would
    definitely tell you that we are not reverse engineering an
    outcome.
        Mr. Meuser. Right.
        Ms. Bowman. We are looking to do risk assessments that
    would allow for us to set these calibrations according to risk.
        Mr. Meuser. Okay. Thank you and to be clear the Basel III
    would have greatly destabilized, if you will, our banking
    community and not helped community banks nor helped larger
    banks.
        Ms. Bowman. In its previous proposal's iteration, yes, I
    agree.
        Mr. Meuser. All right. Comptroller Gould, the banking
    report this committee issued yesterday detailed how Biden
    regulators pressured banks to debank crypto, energy, firearm
    companies, as well as politically disfavored groups,
    resurrecting Operation Choke Point that started under Obama.
    What recommendations do you have for private entities to ensure
    they have eliminated any internal systems or policies
    implemented to comply with the Biden-era regulatory pressure?
        Mr. Gould. Thank you for the question, Congressman. As I
    noted before, we are still in the process of reviewing
    complaints and conducting our review. I would say, in general,
    though, that overreliance on negative news searches, which is,
    I think, sometimes a feature of reputation risk, could, again,
    in an over-reliance situation, be problematic, as well as
    categorical prohibitions on performing or providing financial
    services and products to lawful business activities.
        Mr. Meuser. Okay. Thank you. Chair Hill, the FDIC under
    previous Chair Gruenberg issued pause letters, asking banks to
    cease all activity with crypto companies. What changes have you
    initiated and have planned for the FDIC to prevent regulatory
    abuse in the future?
        Mr. Hill. Well, thank you, Congressman. So, first and
    foremost, we undid the policies of the past few years. So, we
    rescinded the guidance that required prior approval. We now
    treat digital asset activities just like any other novel
    activity where banks are expected to manage the safety and
    soundness risk but, otherwise, have no prohibitions to serving
    those industries. I think promoting durability of our policies
    is something that is always a consideration, and so we are
    considering a number of steps to try to ensure that these types
    of things will not happen in the future.
        Mr. Meuser. Thank you. My time has expired. I yield back,
    Mr. Chairman.
        Chairman Hill of Arkansas [presiding]. The gentleman's time
    has expired. It is now my pleasure to recognize the gentleman
    from Illinois. Mr. Casten, you are recognized for 5 minutes.
        Mr. Casten. Thank you, Mr. Chair, and thank you for the
    quick bit of exercise from the ranking member. Thank you all
    for coming.
        In 2023, former Vice Chair Barr said that the 2023 bank
    failures caused a reassessment of the viability of uninsured
    deposits as a funding source across the banking system. In
    2024, the Financial Stability Oversight Council (FSOC) raised
    further concerns about some banks' reliance on uninsured
    deposits, and it could make them more vulnerable to runs.
    Acting Chair Hill, I think you had raised this concern in your
    Senate confirmation hearings, and if I am getting this right,
    you had specifically said that the FDIC does not even have the
    data necessary on the number of uninsured deposits above and
    below the various thresholds other than the $250,000 limit.
    Without getting into details, I am curious, in your time in
    this role, have you directed the FDIC to start trying to get
    that data?
        Mr. Hill. So, I have long believed that more granular
    deposit data would be useful for a number of purposes----
        Mr. Casten. I would love to get into the what you are
    doing.
        Mr. Hill. Sure.
        Mr. Casten. I am just curious if you have initiated any
    process there or not.
        Mr. Hill. So, I would say there have been conversations. I
    have raised this at the Federal Financial Institutions
    Examination Council (FFIEC). That is where most reporting is
    done through.
        Mr. Casten. Okay.
        Mr. Hill. I would say, at this stage, I know there are
    institutions that are collecting data, but we have not taken
    any steps----
        Mr. Casten. Okay. So, still important, but have not done it
    yet. So, the New York Fed recently issued a paper saying that
    they are noticing deposits are flightier right now, and
    specifically in response to interest rate changes, finding that
    there are run risks, particularly when rates go up. The Wall
    Street Journal reported recently that wealth management clients
    are more likely to pull deposits out and chase higher yield
    when interest rates are rising. So, Vice Chair Bowman, I guess
    what I am wondering is the Fed doing anything to monitor what
    happens if those risks run out of the traditionally regulated
    financial system, to private banks, to other alternative
    investment vehicles? Are you doing any enhanced reviews of
    where that deposit flight might go?
        Ms. Bowman. To the extent that we are aware of that, as a
    part of our work on financial stability, we monitor as much as
    we can according to the data that we have, and we are able to
    see the transit of funding throughout the system. I am not sure
    that we have specific data about whether it is going from the
    financial institutions into any particular entities. We do not
    collect data that would tell us that. We would be able to
    determine if funds have left the financial system, though,
    through call report data.
        Mr. Casten. Yes and I guess I do not mean leaving the
    financial system, but we have the surge of private banking----
        Ms. Bowman. Right.
        Mr. Casten [continuing]. all sorts of different types of
    things that are deposit-ey----
        Ms. Bowman. Mm-hmm.
        Mr. Casten [continuing]. but not within where the FDIC or
    others would have oversight and my concern is that if we got a
    lot of dollars that are in some other part of the system and we
    are not monitoring it, that is a risk at some point.
        I am particularly concerned about how this all affects
    stablecoins. As Mr. Foster noted, there was a Treasury
    Department report in April: stablecoin adoption could result in
    over $6 trillion in deposit outflows. There are a number of
    other reports that have said that. I guess, Acting Chair Hill,
    do you all have good data on how stablecoins may affect deposit
    outflows? Have you started looking at that question?
        Mr. Hill. That is certainly something that we are paying a
    lot of attention to. I do not think anybody knows what type of
    impact deposit flows into stablecoins could have on the system.
    I know there are estimates out there. I think those are
    basically just guesses.
        Mr. Casten. Well, let me ask a more specific question then
    because I think this may answer whether or not there is likely
    to be deposit flows. There was language that the Senate added
    to the GENIUS Act that I think creates a huge problem for your
    Agency. It says that ``The claims of a customer with respect to
    payment stablecoins shall have priority over the claims of any
    other person, other than the claims of another customer with
    respect to payment stablecoins.'' So, if there is a bank run
    and you have customers of stablecoins with deposits in a bank
    that are not insured, that language would suggest that they
    have a senior claim. Have you made any effort to interpret that
    language? How are you going to deal with the conflict if we get
    in a situation like we got to in 2023 when Circle's deposits
    were sitting there in uninsured accounts and there was a run?
    Should a stablecoin depositor assume that you are going to
    place that customer in a senior position to insured depositors?
        Mr. Hill. I would have to go back and look at the statute
    to make sure I am correctly understanding it, but my
    understanding is that language is applicable if the stablecoin
    issuer fails, not if a bank fails. From our perspective, we
    would still have our normal authorities, our normal priority in
    the case of a bank failure. That is just the provisions that
    would apply to a bankruptcy proceeding if a stablecoin issuer
    fails.
        Mr. Casten. Okay. We could use some clarity, particularly,
    as the chair, ranking member had noted, there is some shadiness
    as far as who is making these deposits----
        Chairman Hill of Arkansas. I thank the gentleman.
        Mr. Casten. I yield back.
        Chairman Hill of Arkansas. Your time has expired. The
    gentleman from Texas, the chairman of the House Small Business
    Committee, Mr. Williams, you are recognized for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and good to
    see all of you today. Thank you for being here.
        The previous Basel III Endgame proposal would have
    substantially raised capital requirements for an already well-
    capitalized banking industry. One of my main concerns with the
    previous proposal was the negative effects these requirements
    would have on small business lending. Under the provisions in
    the proposal, credit would have become more expensive and
    harder for Main Street businesses to secure. As you continue
    your work on the Basel III Endgame proposal, I urge you to
    ensure the revised framework avoids imposing unnecessary
    burdens to restrict Main Street America. So, Vice Chairman
    Bowman, could you elaborate on how the Fed will ensure any
    changes to the capital levels will not disrupt the flow of
    capital to Main Street businesses?
        Ms. Bowman. Thank you for that question and the opportunity
    to clarify the work that we are doing around Basel III. I think
    it is very important as we are working toward reviewing the
    capital framework that we are not disincentivizing providing
    lending or other types of activities to those businesses that
    make our economy run. The purpose of the work that we are doing
    is to ensure that the banking system can support the economy in
    a way that allows the United States to continue to be the
    economic powerhouse that we are.
        Mr. Williams of Texas. Okay. Thank you. Chairman Hill and
    members of the committee, myself included, sent a letter to the
    Fed, OCC, and FDIC, urging you to take a closer look at how
    enhanced prudential standards are being applied across Category
    2, 3, and 4 banks, and to update static thresholds so that
    supervision reflects the actual risk rather than outdated asset
    lines and these enhanced prudential standards (EPS) thresholds
    were set in 2019 and have not been increased since then, even
    though the Agency said they would evaluate them regularly
    through notice and comment. Not indexing these thresholds has
    created an artificial constraint on banking activity that hurts
    the economy across the country and in districts like mine back
    in Texas. So, will each of you, the Fed, the OCC, and the FDIC,
    commit to working on an interagency basis to index these EPS
    thresholds? When could that happen, do you think?
        Ms. Bowman. Yes, we will commit to reviewing our thresholds
    and indexing them.
        Mr. Gould. Enhanced prudential standards are the purview of
    the Fed as they apply at the bank holding company level, but we
    are doing similar things at the national bank subsidiary level
    as well.
        Mr. Hill. Likewise, happy to commit to reevaluating and
    indexing thresholds where appropriate.
        Mr. Williams of Texas. Okay. All right. Thank you. This
    committee has held several hearings examining the concerning
    trend of consolidation in the banking sector. The Federal
    regulators' response to March 2023 failures muddied the waters
    on statutory functions such as the least-cost resolution
    mandate. Acting Chair Hill, how can Congress enhance the FDIC's
    resolution process, such as by providing greater flexibility,
    to the least-cost mandate in order to promote greater
    transparency and competition?
        Mr. Hill. Thank you for the question, Congressman. I think
    allowing additional flexibility under the least cost would be
    useful in certain circumstances. There are a variety of
    possible situations where the FDIC may have two resolution
    options that are very similar in cost, but there are
    significant benefits to one or the other. Today, there is
    essentially no discretion, and so it needs to be a mechanical
    choice to choose the least-cost resolution option. I think
    Congress would still want to ensure that there was discipline
    around any flexibility to ensure that costs still remained a
    primary consideration, but I do think there are situations
    where having at least a little bit of additional flexibility
    would be useful.
        Mr. Williams of Texas. I have limited time, but one more
    question, Chairman. How might a stricter set of conditions to
    weigh the national deposit cap for the acquisition of a failing
    or failed bank help reverse the trend of consolidation in the
    banking sector?
        Mr. Hill. Certainly, a lot of considerations there, but as
    I am sure you are aware, today, there is an exception to the
    caps in the event of a failed bank acquisition. I know there is
    legislation in place that would potentially allow some more
    flexibility in those types of situations. Again, I think from
    my perspective, at a broader, more holistic level, I think
    having a little bit of additional flexibility around the least
    cost would be useful.
        Mr. Williams of Texas. Well, again, thank you all for being
    here. I appreciate the testimony, and I yield back my time.
        Chairman Hill of Arkansas. The gentleman yields back. The
    gentleman from New York, Mr. Torres, you are recognized for 5
    minutes.
        Mr. Torres. Thank you, Mr. Chair. I have a question about
    the intersection of the financial system and AI. Private
    credit, banking, insurance, and AI CapEx are becoming
    increasingly interconnected. The AI sector is experiencing the
    largest capital boom since the railroads of the late 19th
    century, and AI CapEx has become a disproportionate driver of
    both economic growth and equity market performance. To what
    extent do you view the entanglement of private credit, banking,
    insurance, and multi-trillion-dollar AI CapEx as a potential
    source of systemic risk? I will start with the Fed.
        Ms. Bowman. Well, thank you. As the entity responsible for
    financial stability in the financial sector, it is a very
    important question that you have just raised, and it is
    something that we have been watching very closely to seeing how
    the AI industry and its investment have been evolving. We have
    seen an increase in asset levels and their valuations over
    time, and it is something that we continue to watch, and we are
    definitely paying close attention.
        Mr. Torres. So, is that a yes? Do you view it as a
    potential source of systemic risk, or----
        Ms. Bowman. Well, it is certainly one of the risks that we
    are looking at.
        Mr. Torres. I have a question about the independence of
    regulatory agencies, and I will start with the Fed. Do you see
    your regulatory Agency as independent of the President or as a
    creature of the President?
        Ms. Bowman. The Federal Reserve is an independent,
    apolitical Agency, and as long as we continue to be transparent
    in the work that we do and we are accountable to Congress and
    the public, I think that should continue.
        Mr. Torres. What about the FDIC?
        Mr. Hill. The FDIC is defined by statute as an independent
    regulatory Agency, but we have also always tried to coordinate
    our activities with other agencies throughout the government.
    So, that is something we continue----
        Mr. Torres. But independent. Okay. NCUA?
        Mr. Hauptman. The statute says that NCUA is an independent
    Agency within the executive branch. One way you could describe
    our independence is that we are obviously not on budget. The
    shutdown did not affect us. We are not funded via
    appropriations. That is one degree right there of independence,
    but, again, I concur with my colleagues, we have always
    coordinated with the White House, and they have been a big help
    this time.
        Mr. Torres. Comptroller, during your testimony, you spoke
    of your opposition to ``the weaponization of finance,'' which
    is a sentiment I share. You know, we have seen President Trump
    publicly order the Attorney General to prosecute political
    adversaries. If the President were to order you to weaponize
    finance against those same political adversaries, what would
    you tell him? Would you tell him, no, Mr. President, the OCC
    has an absolute policy against the weaponization of finance?
        Mr. Gould. Congressman, thanks for the question. I am not
    going to engage in hypotheticals. What the President has told
    me through an executive order----
        Mr. Torres. Do you have an absolute policy against the
    weaponization of finance?
        Mr. Gould. Excuse me?
        Mr. Torres. Do you have an absolute policy against the
    weaponization of finance?
        Mr. Gould. There is a Presidential executive order that
    says that banks should not discriminate on the basis of
    politics, religion, or being engaged in a lawful business
    activity.
        Mr. Torres. Capital requirements. If capital requirements
    were at zero percent, there would be no safety and soundness.
    If capital requirements were at 100 percent, there would be no
    capital formation and so, the object of public policy is to
    find the best balance between the two, to find the Goldilocks
    level of capital requirements. Like, what is that Goldilocks
    level, and how do you determine that level empirically, and I
    feel I have not heard a satisfactory answer to that question
    from either side of the debate. You know, your predecessor
    insists that the system is undercapitalized. You seem to
    believe it is sufficiently capitalized. Like, what is the
    objective empirical standard against which those competing
    pronouncements are being made?
        Ms. Bowman. The statutes direct a definition for different
    sizes of banks as well capitalized, so that is one measure that
    we can use. We can also look back at the capitalization of the
    banking system prior to the great financial crisis and the odds
    and determine that clearly was not the right level of capital
    in the system. So, the work that was done as a result of Dodd-
    Frank clearly improved the levels of capital and liquidity
    within the banking system. It more than doubled the levels of
    capital, and liquidity is very strong.
        Mr. Torres. Is there a specific number?
        Ms. Bowman. I do not know that we know a specific number,
    but we are working to achieve a review of our capital
    requirements in a way that allows us to assess the risk that
    certain activities present to the financial system or the
    banking system.
        Mr. Torres. I want to quickly ask about there has been
    public reporting that the Federal Reserve is planning to cut
    supervision and regulation division by 30 percent. As you know,
    the story of Silicon Valley Bank (SVB) was partly a story of
    supervisory failure. If my constituents were to ask me,
    Congressman, why on earth is the Federal Reserve cutting
    supervision by 30 percent following the supervisory failures
    surrounding SVB, what should I tell them?
        Ms. Bowman. Well, Congressman, that is an excellent
    question, and I really appreciate the opportunity to clarify
    that. So, when we are talking about reorganizing, we are
    talking about the staff at the Board. Before the financial
    crisis, we had about 200-ish employees at the Board. None of
    them are actual supervisors. They coordinate the activities of
    those supervisors that are resident within our 12 Reserve
    banks. We are not talking about what we are doing with those
    supervisors, so they are completely separate.
        Chairman Hill of Arkansas. The gentleman's time has
    expired.
        Mr. Torres. Thank you, Mr. Chair.
        Ms. Bowman. I would love to provide you with more detailed
    information on our reorganization. Thank you.
        Chairman Hill of Arkansas. The gentlewoman from California,
    the chair of our Subcommittee on Asia Pacific in the House
    Foreign Affairs Committee, Mrs. Kim, you are recognized for 5
    minutes.
        Mrs. Kim. Thank you, Chairman and ranking member, Maxine
    Waters. Thank you so much for hosting today's hearing, and I
    want to thank all of our witnesses for joining us today. Good
    to see you.
        Community banks across California have relied upon the
    community bank leverage ratio to lower their regulatory burden
    and invest more capital in the communities around them. As you
    know, I recently introduced the Community Bank Leverage
    Improvement and Flexibility for Transparency (LIFT) Act that
    would review and reform the components of the leverage ratio
    and lower the bands of the ratio and it is for that reason I
    was really pleased to see the recent announcement from the
    Federal Reserve regarding a proposal to lower the community
    bank leverage ratio (CBLR) from 9 percent down to 8 percent.
    So, I want to ask you, Vice Chairwoman Bowman, at the current
    threshold of 9 percent, how does the CBLR framework's
    regulatory burden compare to the generally applicable risk-
    based framework?
        Ms. Bowman. So, at 9 percent, it is about the same, double
    the regular or the well-capitalized requirement within the
    statutory requirements. By using the 8 percent that was allowed
    in the 2155 and the creation of the CBLR, we continue to be
    around the level of double the well-capitalized level.
        Mrs. Kim. Thank you. I look forward to continuing to work
    together on the Community Bank LIFT Act and create the
    regulatory flexibility that community banks need to better
    serve our communities, but I want to shift away from the
    community banks and focus on the U.S. operations on foreign
    banks. So, continuing on our conversation with you, Vice Chair
    Bowman, as you work on amending the regulatory and supervisory
    process for U.S. banks, I want to ensure that you are also
    applying those changes to the U.S. operations of foreign banks
    as well. So, can I get your commitment to the principles of
    national treatment and level playing field as you contemplate
    the changes to the regulatory process and supervision of
    foreign banks in the United States?
        Ms. Bowman. It is absolutely appropriate for us to ensure
    that there is a playing field for foreign banks in their
    participation in the U.S. economy, and in economic activity and
    serving customers in the United States. This is certainly
    something that we will continue to keep in mind as we are
    reviewing our capital framework and the regulatory framework
    more broadly.
        Mrs. Kim. Thank you. As you know, while those banks are
    headquartered internationally, they employ tens of thousands of
    Americans and have been essential to financing the U.S.
    economy. So, thank you for keeping that in mind as you
    contemplate those changes.
        In Southern California where I represent, we are blessed
    not only to have strong community banking organizations, but
    also great credit unions as well. Having said that, I am
    concerned about the tools that are available to smaller credit
    unions in the event of a liquidity crisis. So I want to ask the
    next question to Chairman Hauptman. Right now, some associate
    credit unions lack access to the Central Liquidity Facility,
    CLF. What are some of the barriers that credit unions face in
    accessing that CLF, and how can we ensure that more credit
    unions have access to CLF?
        Mr. Hauptman. Yes. I appreciate you bringing that up,
    Congresswoman. Liquidity is obviously crucial for every
    financial institution. We examine for it. It is the ``L'' in
    CAMELS, and a liquidity crisis, if you could see it coming, it
    would not be called a crisis. The vast majority of credit
    unions, over 3,000, are below $250 million in assets, all
    right? For the small ones, the median number of employees is
    one. How do you get there? Because there are a lot that have
    zero, like church credit unions, where their employees are
    employees at a church.
        For a period of time there, Congress allowed the corporate
    credit unions to serve as an agent when there is liquidity
    crisis. That authorization has lapsed. We have done everything
    we can to make applying for a central liquidity facility,
    making it easier to find on our website. It is only 12 pages.
    We promote how easy it is to do it. That said, the reality is
    most of the small credit unions do not have access to it. They
    have not gotten around to it for a variety of reasons, and for
    a period of time, they were allowed to use their corporate
    credit union as an agent in a liquidity crisis.
        Mrs. Kim. Thank you. I would like to put in the last
    question. In the communities I represent, there are digital
    banks along with community banks and credit unions and the ones
    providing fair and affordable financial services to small
    businesses and working families. So, I want to ask you,
    Comptroller Gould, as you evaluate changes in supervisory and
    capital expectations, will the changes also apply to banks with
    the same asset threshold that focuses on novel, tech-driven
    businesses?
        Chairman Hill of Arkansas. If I could ask the comptroller
    to respond in writing to the gentlewoman from California.
        Mrs. Kim. I have time. Thank you very much.
        Chairman Hill of Arkansas. You are overtime, I am sorry to
    say.
        The gentlewoman yields back. The gentlewoman from Texas,
    Ms. Garcia, you are recognized for 5 minutes.
        Ms. Garcia. Thank you, Mr. Chairman, and thank you for all
    the witnesses for joining us today. I am glad we got to sneak
    this hearing in before the end of the year. For a second there,
    I was worried we would go through the whole year without
    hearing from our regulators, so welcome.
        In summary, this committee has not yet had the opportunity
    to hear from the acting director of the Consumer Financial
    Protection Bureau--CFPB--despite the statutory mandated
    semiannual report to Congress. So, since I cannot ask Director
    Vought, I will ask Vice Chair Bowman, in the absence of the
    CFPB, do you know if anyone, anyone at all, is supervising and
    examining the largest banks in the Nation for compliance with
    Federal consumer protection laws?
        Ms. Bowman. Well, thank you for that question. I, too,
    value the importance of consumer compliance regulation and
    enforcement and supervision. I oversaw that capability at the
    Federal Reserve for the first 6 years that I was on the Board.
    We do have a responsibility at the Federal Reserve for----
        Ms. Garcia. Okay. The question is, do you know of anyone
    that is actually doing it.
        Ms. Bowman. We are. At the Federal Reserve, we have
    responsibilities for a narrow set of consumer compliance
    regulations for all sizes of institutions that are State member
    banks.
        Ms. Garcia. Are you aware of anyone else that has taken on
    the role of doing this?
        Ms. Bowman. I believe that the other regulators have the
    responsibility in that narrow context as well.
        Ms. Garcia. So, Mr. Gould, is that true?
        Mr. Gould. Thank you for the question, Congresswoman. The
    OCC's approach to consumer protection has not changed, but as
    you know, under the Dodd-Frank Act and specifically Title X,
    the Consumer Financial Protection Act, the CFPB has certain
    exclusive authorities, such as supervision authority, for banks
    with more than $10 billion in assets.
        Ms. Garcia. So, but the question was, do you know if anyone
    that is actually doing the work of supervising and examining
    the largest banks.
        Mr. Gould. Again, Congresswoman, the OCC's approach to
    consumer protection has not changed, so we continue to have
    enforcement authority, but we do not have supervision authority
    because Congress stripped us of having----
        [Cross talking.]
        Mr. Gould [continuing]. supervision authority in Dodd-
    Frank.
        Ms. Garcia. Mr. Hauptman?
        Mr. Hauptman. Just to make sure I get this right, do you
    mind repeating what you are asking?
        Ms. Garcia. I will repeat the question.
        Me. Hauptman. Yes.
        Ms. Garcia. Since I cannot ask Director Vought, in the
    absence of the CFPB, do you know if anyone is supervising and
    examining the largest banks in the Nation for compliance with
    Federal consumer protection laws? In response, Ms. Bowman said
    that they had some supervisory review, and that all the others
    do, which is why I am asking each one of you now.
        Mr. Hauptman. I got you. Yes, I would have it right the
    first time, but I am glad you repeated that. Less than half of
    1 percent of credit unions are over the $10 billion threshold.
    Out of 4,300, I believe there are about 20 that the CFPB was
    onsite. So, all things considered, what the CFPB does or does
    not do is less of an issue for credit unions just given their
    size, but we are continuing to enforce the law----
        Ms. Garcia. So then your answer is no.
        Mr. Hauptman. You mean, are we examining that----
        Ms. Garcia. So, you are not looking at it because it is way
    above the threshold that credit unions----
        Mr. Hauptman. My point is that less than half of 1 percent
    of credit unions were examined by the CFPB in the first place.
    I am just trying to get my hands around the scale of the issue
    here, but we are certainly enforcing----
        Ms. Garcia. It is all right. Then I will now move on. Mr.
    Hill?
        Mr. Hauptman [continuing]. every consumer law.
        Mr. Hill. Similar to my colleagues, we do have authority
    over certain consumer protection laws for the largest
    institutions that we supervise, and so we continue to fulfill
    those statutory obligations.
        Ms. Garcia. But you are not aware if anyone else has taken
    the role that CFPB specifically had.
        Mr. Hill. That is correct.
        Ms. Garcia. All right. So, then I will move on. Earlier
    this year, the Agencies' and the President jointly issued a
    proposal to rescind the Community Reinvestment Act, the CRA.
    Because of ongoing legal challenges, the agencies are applying
    the 1995 regulations to the banks today. It is now 2025. Thirty
    years have passed, and with it came innovations and changes to
    the banking industry. Acting Chair Hill, do you think that the
    1995 regulations are well suited to take into account modern
    online and mobile banking?
        Mr. Hill. I think there are a number of reasons why the
    1995 rule has challenges with it. We currently have issued a
    proposal to----
        Ms. Garcia. So, your answer is no?
        Mr. Hill. I think modernizing CRA is something that is
    worth considering doing. I voted against the 2023 rule and
    thought it had a lot of flaws, and so I think----
        Ms. Garcia. So, do you have any plans now to do that among
    your cohorts here?
        Mr. Hill. We have a proposal that is currently pending. We
    are reviewing the comments to that proposal, and so I think it
    is premature to say what our next step is, but I think
    reverting back to the 1995 rule is a better option than the
    2023 rule that had been put in place that has never actually
    gone into effect.
        Ms. Garcia. Okay. I see my time is up. Mr. Chairman, I may
    submit my last question for the record and ask all the
    witnesses to respond.
        Chairman Hill of Arkansas. Sure. I am sure they will. I
    thank the gentlewoman.
        Chairman Hill from Arkansas. Now it is my pleasure to
    recognize the gentleman from Wisconsin, Mr. Steil, who serves
    as the chairman of the Digital Assets, Financial Technology,
    and Artificial Intelligence Subcommittee, for 5 minutes.
        Mr. Steil. Thank you very much, Mr. Chairman, and for
    holding today's very important oversight hearing.
        I want to start with you, if I can, Ms. Bowman. You were
    asked by my colleague from New York about your supervisory
    reform plans. You ran out of time to be able to comment on
    that. Could you just briefly provide a little insight into what
    your reform plans are?
        Ms. Bowman. Absolutely. Thank you for the opportunity to
    clarify that. So, at the time of the financial crisis, we had
    around 200-ish employees at the Board. That grew by 76 percent
    up until the current state today, where we had 500 authorized
    positions. Obviously, the addition of all of those supervisors
    did not help us with our focus on ensuring that banks' safety
    and soundness has been secured, as we saw by the failure of
    Silicon Valley Bank and some of the other banks that failed
    around that time. The way that we ensure that we are providing
    safety and soundness is to focus on financial risks. So, the
    work that we are doing now to reorganize our division will
    allow us to better align our work with those risks that lead to
    banks' failures.
        Mr. Steil. I appreciate it. So, it is better alignment and
    resourcing people on to the risks that we face. Let me shift
    gears completely but stay with you, if I can, Ms. Bowman. As
    you likely know, the Basel Committee applies a punitively high-
    risk weight for digital assets. Out of this committee, we
    passed the GENIUS Act, passing it, though I want to come over
    to how we are doing on the regulatory side in a minute but the
    chair of the Basel Committee recently said that a ``different
    approach would be needed to address the mismatch between
    current Basel capital treatment and the reality we see in the
    crypto industry.'' Bank of England declined to use this. Can
    you comment on how you are going to work within this Basel
    framework or whether or not you view it as unnecessarily
    punitive as well?
        Ms. Bowman. Well, I can confirm that I believe that the
    risk weights that were initially assigned prior to my joining
    the Basel Committee and the Governors and Heads of Supervision
    (GHOS) rule is that, that was an over-calibration of the risk.
    So, my hope is that there will be a recalibration of it at some
    point, or we will not join in on adopting that framework.
        Mr. Steil. I appreciate your comments. I am going to come
    to you, if I can, Mr. Hauptman. We passed the GENIUS Act, the
    first regulatory bill of substance in the crypto space. We had
    a huge opportunity with CLARITY in front of us. You have a big
    role on the regulatory side. Can you give us an update as to
    where we are at on the regulations moving forward in the GENIUS
    Act, briefly?
        Mr. Hauptman. Yes. I think stablecoins are an absolute game
    changer. This country, as advanced as we are with the biggest
    internet companies in the world, our payment system is very
    creaky. There are countries we give foreign aid to that you can
    settle 24 hours a day, 7 days a week.
        Mr. Steil. So, the faster we get this done, the better we
    are going to be. Where are we on the regulatory?
        Mr. Hauptman. Yes. You gave us a deadline of July 18. I and
    my fellow regulators are committed to doing that. My guess is
    the first rulemaking you will see will be the one on how to
    apply to be an issuer, but your constituents to benefit by
    having 7-day-a-week payment, which as you know, is difficult in
    this country.
        Mr. Steil. But are you committed----
        Mr. Hauptman. Yes.
        Mr. Steil. I am just coming to the time.
        Mr. Hauptman. Yes.
        Mr. Steil. I am fully with you on GENIUS----
        Mr. Hauptman. Yes.
        Mr. Steil [continuing]. why we did it here.
        Mr. Hauptman. Yes, sir.
        Mr. Steil. I just want to make sure that we get these
    regs----
        Mr. Hauptman. Fully committed, yes.
        Mr. Steil [continuing]. done on time. You are fully
    committed, and you believe you are in a position to deliver on
    that commitment?
        Mr. Hauptman. Yes. I think myself and fellow regulators,
    and I want to give credit to Secretary Bessent for making sure
    that Treasury is helping to convene that. I think we are on
    track.
        Mr. Steil. Thank you. I think that is just really
    important. We have seen instances across years in this
    committee where sometimes rules and bills are passed. We do not
    see the regulations come out on time. I appreciate your
    commitment to delivering on that.
        I want to stay with you for a second. We have done a lot of
    work here, looking back at Chokepoint 2.0, and, in particular,
    how the broader crypto digital asset space was being governed
    by enforcement actions, incredibly unproductive mechanism to do
    that. I think we have a huge opportunity here to move forward
    CLARITY to prevent the type of abuse we saw with Chairman
    Gensler and with other regulators in the broader Biden
    Administration. How important is CLARITY being done to help
    guide you and those on your staff to be able to follow
    congressional intent, rather than engage in enforcement actions
    to drive forward policy?
        Mr. Hauptman. Regulation by enforcement, in my opinion, is
    unethical. There is not one person in this room that would
    tolerate it in any other part of our life. There has to be a
    speed limit first and then a speeding ticket after that. I am
    proud that it is actual NCUA policy. A future board can change
    it if they want to, but they would have to explain why they
    pulled down our regulation by enforcement policy, simply
    defined as no enforcement ever sets policy and the same
    protections that are----
        Mr. Steil. Will the Clarity Act help you on that?
        Mr. Hauptman. I do not want to comment on that, but you
    should not have any enforcement that ever sets policy.
        Mr. Steil. Very good. I appreciate all of you being here.
    Mr. Chairman, I yield back.
        Chairman Hill of Arkansas. The gentleman yields back. The
    gentleman from California, Mr. Liccardo, you are recognized for
    5 minutes.
        Mr. Liccardo. Thank you, Chairman. Vice Chair Bowman, I
    understand that Governor Waller recently previewed that Federal
    Reserve is exploring the creation through rulemaking of a new,
    what he called a skinny master account for eligible fintech
    institutions to be able to access the Fed's payment rails, and
    the target was to do so by the end of 2026. We have heard
    similar suggestions from Undersecretary Liang of Treasury. I
    think we have seen from Acting Comptroller Hsu suggesting that
    it should be up to Congress, at least it is not going to be in
    his regulatory role. My question for you, do you support
    expanded access to payment rails for nonbank institutions?
        Ms. Bowman. We have currently a construct for the approval
    of different varieties of institutions with different risk
    categories. The third category does apply to non-depository
    institutions, and there are certain parameters around that
    decision framework. So, whether I agree with it or not, it is
    policy of the Federal Reserve that is part of our master
    account application review framework.
        Mr. Liccardo. Okay. As you know, there is a concern for
    many fintech companies about access to the FedNow rail, and
    their ability to do so without having to essentially contract
    with or partner or with a bank. At this point, you are saying
    the Federal Reserve is moving forward, and you are supportive
    of regulations to make that happen?
        Ms. Bowman. What I am saying is I support exploring that
    opportunity, but we do have a framework that is currently in
    place that does allow for access for institutions that are not
    depository institutions to be considered for an application
    now.
        Mr. Liccardo. Okay. Given what you have said, do you
    believe it is important for Congress to offer any clarification
    through statute to ensure there is a clear path or do you
    believe this is something that can be handled entirely within
    the Fed's regulatory ambit?
        Ms. Bowman. I am not familiar enough with the authorities
    to understand whether or not we would need specific additional
    authorities to do that. So, I am sorry, I cannot comment on
    that.
        Mr. Liccardo. Okay. If I can shift a little bit to
    stablecoin. I think both for you and for Chair Hill, I
    supported the GENIUS Act. I was proud to be an original co-
    sponsor of the House version that both Chair Hill and Chair
    Steil had authored, and I think it is important to set clear
    regulatory guardrails for stablecoin. I understand you all have
    roles to write and enforce regulations that will integrate
    stablecoin into banking in a way that is consistent with a
    sensible regulatory framework that prioritizes safety and
    soundness of depository institutions that you regulate.
        Under the current GENIUS Act, it ensures the stablecoin
    issuers will have reserves in safe assets. It lists what those
    assets are, their deposits, their treasuries, the demand
    currency, et cetera, and the notion is that the valuations will
    not fluctuate much, and I assume you support having relatively
    safe assets serving that role and reserves. Is that fair, I
    guess, starting with Vice Chair Bowman?
        Ms. Bowman. I think it would be helpful for me to
    understand what you mean by reserves. Are you meaning
    stablecoin reserves or could you clarify that for me, please?
        Mr. Liccardo. That is right, stablecoin reserves, yes.
        Ms. Bowman. So, I think Congress has given a range of
    options for stablecoin issuers to use as potential reserves.
    So, yes, it would be important that they are stable, auditable,
    and immediately accessible for whatever regulatory framework
    that we would create.
        Mr. Liccardo. Okay. Given the time, I will just move
    quickly here. Given our shared goals of safety and soundness
    for financial institutions, would it make any sense to allow
    stablecoin to be backed by commodities--either Vice Chair
    Bowman or Chair Hill--that is for reserve to be commodities?
        Mr. Hill. I mean, my recollection is the GENIUS Act is
    fairly prescriptive in what qualifies as eligible reserves, and
    to my recollection, I do not believe there are commodities that
    would qualify.
        Mr. Liccardo. I agree with you. I guess the question is,
    would it be sensible to expand it in that way.
        Ms. Bowman. I think that is a decision for Congress to
    decide.
        Mr. Liccardo. Does it seem consistent with safety and
    soundness concerns that you obviously have in your everyday
    regulation?
        Mr. Hill. Yes. I mean, I think it would be a different
    model. I mean, Congress set up a model where stablecoins are
    backed by super safe reserves. One could imagine different
    models where potentially there were different types of
    reserves, but then you might have other mitigating factors as
    part of the regulatory framework.
        Mr. Liccardo. Would you not be concerned about runs? I
    understand I am out of time.
        Mr. Downing [presiding]. The gentleman's time has expired.
    I now yield myself 5 minutes.
        First of all, I want to thank you all for being here. It is
    refreshing to have regulators in place that once again care
    about legitimate safety and soundness issues rather than
    advancing political agendas. So, I appreciate that.
        I represent one of the most rural congressional districts.
    I have some very large counties that have less than 500 people
    in them. Actually, we have more cows than people in my
    district, and it is our community financial institutions that
    make sure that my constituents, particularly in cow country,
    have access to banking services. So, I am going to just go down
    the line on this one. This question is for each of you. What is
    the biggest regulatory barrier you see facing rural financial
    institutions, and what is your Agency doing to address it? I
    will start with Vice Chair Bowman.
        Ms. Bowman. Thank you. Being from a rural community very
    similar to yours where we have more cattle and likely deer than
    people, I think it is very important in having been a community
    banker in that community. The importance of rightsizing the
    regulatory burden is absolutely critical for smaller
    institutions to be able to continue to serve their communities.
        Mr. Downing. Thank you. Mr. Gould?
        Mr. Gould. I agree with that. I think it is the
    overregulation and oversupervision. One of the things that was
    occurring at the OCC too frequently when I took over in mid-
    July and what had occurred over the last 4 years was a
    situation in which we were not actually engaged in risk-based
    supervision. So, we were subjecting smaller banks to
    prescriptive requirements coming out of DC, which made no sense
    based on their business model.
        Mr. Downing. Thank you. Mr. Hauptman?
        Mr. Hauptman. I am from a remote area as well. It was 26
    miles to get to a McDonald's, so I hear you on that, and our
    local community institutions served an invaluable role that
    none of the big banks would. I would say BSA and AML are the
    things I hear over and over again. Every retiring executive who
    leaves it says, what are you not going to miss? They are going
    to miss a lot of things about running credit union. The thing
    they are not going to miss, you hear it over and over, BSA and
    AML. They say it is not the time I spend on it; it is the time
    I waste on it. That is one area where I think we could work
    together.
        Mr. Downing. Thank you. Mr. Hill?
        Mr. Hill. Yes, I would echo all the comments from my
    colleagues. I would say the two things that I hear most
    frequently from the smallest institutions are the cost of
    compliance and the cost of technology adoption, and we are
    taking a number of steps to try to make progress in those
    areas. On the compliance side, that includes things like
    reforms we are making to supervision. We recently just
    finalized a rule that would raise and index several dozen
    thresholds, almost all of which apply to community banks. I
    fully agree with the comments on BSA and AML, and we are
    heavily engaged with conversation with the Treasury Department
    and others on reforms to that process.
        Mr. Downing. Thank you. Thank you all. Shifting gears here,
    the Financial Services Committee released a staff report
    yesterday on the Biden Administration's efforts to debank
    digital assets. This question is for anyone who wants to
    answer, but what lessons is your Agency taking from this
    report, and how are those lessons shaping the Agencies' broader
    approach to digital asset policy, including implementation of
    the GENIUS Act? Any takers? Mr. Gould?
        Mr. Gould. I think one takeaway for me, at least, is that
    if the activity is legally permissible, which the GENIUS Act
    just made payment stablecoins legally permissible, as well as,
    for example, the custody of digital assets, that is legally
    permissible. I think it is really incumbent upon the
    supervisors--so us, OCC--to work with the banks that want to
    engage in these legally permissible activities and ensure that
    they can do so in a safe and sound manner; that is, not put all
    the burden on the banks to come up with how to do it in a safe
    and sound manner.
        That is what we saw over the last 4 years, and that was,
    essentially, the death knell for those activities that, again,
    were legally permissible and some banks wanted to engage in but
    if the regulators will not work with them to find a path to do
    it in a safe and sound manner, there is no way they can do it.
        Mr. Downing. Right. Thank you. Anyone else? Mr. Hauptman?
        Mr. Hauptman. I will just add that under the prior
    administration, I have been at NCUA for 5 years. I was
    confirmed 5 years ago today. I am proud that working with my
    Democratic chair at the time, under Biden Administration, NCUA
    was the only regulator that I am aware of that not only was not
    hostile to digital assets that caused some of the debanking,
    but we put out positive guidance, two pieces, which is two more
    than anybody else put out during that time, and credit unions
    saw the other result of the debanking. They got an enormous
    amount of attention and deposit flow from digital assets firms.
    Why? Because they were afraid of being debanked by the banks,
    which is where they had their money. I just want to add that.
        Mr. Downing. Thank you. Any follow up?
        [No response.]
        Mr. Downing. Well, my time has expired. I want to thank you
    all for your comments there. So, now the gentlewoman from
    Michigan, Ms. Tlaib, is now recognized for 5 minutes.
        Ms. Tlaib. Thank you so much, Chairman. As you probably,
    all of you--I do not know--in October, the FDIC and OCC and Fed
    withdrew their interagency principles for managing climate-
    related financial risk. Are you all aware of that?
        Ms. Bowman. Yes.
        Mr. Hill. Yes.
        Mr. Gould. Yes.
        Ms. Tlaib. Okay. Nodding. The associated framework required
    banks with over $100 billion in assets to consider climate-
    related financial risks and business strategy, risk management,
    and strategic planning. The Agencies claim that the principles
    are unnecessary because the Agencies' existing safety and
    soundness standards are adequate, but climate-related financial
    risk is unique. We all know that. The scale of potential
    impacts, I have seen it all alone in my own district, the
    complexity of the climate system, the existence of multiple
    positive feedback loops, the long-time horizons on which
    climate change operates are all singular.
        Vice Chair Bowman, can you explain how existing safety and
    soundness standards will adequately capture the unique features
    of climate risk? Take the potential impact of climate systems,
    multiple tipping points, for example, whose precise thresholds
    are uncertain. You know, you just cannot really predict this,
    and which may lead to runaway changes that cannot be reversed.
        Ms. Bowman. Well, it is important to note that banks are
    not climate scientists and they do not make predictions about
    what the climate will hold, but they do and have for since the
    dawn of time, or as long as banks have existed, understood how
    to manage risks from the environment and from natural
    disasters. I am from Kansas, a neighbor to your State. We
    frequently experience natural disasters and also agriculture is
    a common business service that is provided for lending from
    banks.
        Ms. Tlaib. I mean, some of them----
        Ms. Bowman. They know how to manage these risks, and in the
    aggregate, climate does not present a more material risk across
    the board than any other risk that banks face and they know how
    to manage these risks, so it does not make sense.
        Ms. Tlaib. What do you take with the Federal memo? In the
    memo it actually says that the principles may be ``distracting
    firms from the management and material financial risks.'' This
    implies that climate-related financial risks are not material.
    I mean, Vice Chair, do you believe climate-related risks are
    not material?
        Ms. Bowman. I would not say that they are not material.
    What I would say is that they are not more important than other
    risks that banks face, and banks regularly manage their risks.
        Ms. Tlaib. But dozens of billion-dollar climate disasters
    each year, correct?
        Ms. Bowman. I do not know.
        Ms. Tlaib. No. It is dozens of billion-dollar climate
    disasters happening each year, which destroy property and wipe
    out assets are no interest to investors?
        Ms. Bowman. Well, it certainly is not that there is no
    interest. It is just that the risk that is posed by these
    events is not more material than other risks that banks face.
        Ms. Tlaib. So, 10 years ago, former Bank of England
    Governor, Mark Carney, gave a speech titled--it is a very good
    speech, I recommend you all--``Breaking the Tragedy of the
    Horizon.'' In that speech, Carney noted a unique challenge for
    regulators. He said that the impacts of climate change will be
    most devastating in the future. Action to minimize those
    impacts is required right now, and Carney said, ``One climate
    change becomes a defining issue for financial stability, and it
    may already be too late.'' Vice Chair Bowman, do you agree with
    that quote above?
        Ms. Bowman. I do not agree with that quote, no. I think it
    overestimates the risk of climate.
        Ms. Tlaib. Then would you determine if climate change poses
    a threat to financial stability or to the banking system? So,
    climate risk is no risk to the financial system.
        Ms. Bowman. That is clearly not what I have said in this
    conversation, clearly.
        Ms. Tlaib. So, you do not believe in what Carney is saying.
        Ms. Bowman. I do not agree with what Carney says, no.
        Ms. Tlaib. But you believe that climate risk is a
    financial----
        Ms. Bowman. He is currently a politician in Canada, so it
    is hard to get by some of----
        Ms. Tlaib. I know, Vice Chair. I think for me, it is the
    threat to financial stability and the fact that we do nothing
    about it right now.
        Ms. Bowman. I would not say we do nothing about it.
        Ms. Tlaib. But we have dozens of billion-dollar climate
    disasters right now.
        Ms. Bowman. But banks do manage the risks that are posed by
    climate events.
        Ms. Tlaib. No, I think they are just waiting for us to bail
    them out each time. Earlier this year, Chair Powell testified
    at the Senate Banking Committee hearing that due to climate
    change, ``If you fast forward to 10, 15 years, there will be
    regions of the country where you cannot get a mortgage, okay?
    There will not be ATMs, or banks will not have branches or
    anything like that.'' Vice Chair, do you believe the Fed need
    to wait for such impacts before taking action, because I think
    in some places, some people cannot even get insurance right
    now.
        Ms. Bowman. The Federal Reserve is not an insurance
    regulator. The States are the regulators for the insurance
    industry.
        Ms. Tlaib. So, the Fed will bail out the States.
        Ms. Bowman. So, those risks and that policy are the
    determination of the State commissioners, and they are
    overseeing them.
        Ms. Tlaib. So, we are going to wait until all this happens.
    We do not really want to consider it.
        Ms. Bowman. It is not the Fed's remit.
        Ms. Tlaib. I know. Okay. All right. Thank you.
        Mr. Downing. The gentlewoman's time has expired. The
    gentleman from Indiana, Mr. Stutzman, is now recognized for 5
    minutes.
        Mr. Stutzman. Thank you, Mr. Chairman, and I appreciate you
    all for being here. I am going to limit my time just because I
    want Mr. Garbarino to have time here knowing that we have a
    stop here. So, I want to jump right in it to Chairman Hill.
    Does the FDIC currently have the data necessary to accurately
    target and effectively implement any of the current deposit
    insurance reform proposals?
        Mr. Hill. I would quickly make a couple of points, and I
    would first say, we do not have granular deposit data that
    would inform us on how many deposits are above or below certain
    thresholds above the $250,000 limit. That being said, I think
    under any circumstance, even if we had perfect data, any
    projections we would make would still have uncertainty because
    what we would not know is to what extent deposits would
    potentially move either from interest bearing accounts to non-
    interest bearing from banks that potentially have access to the
    expanded coverage from those that do not. So, I think there is
    going to be uncertainty no matter what.
        Mr. Stutzman. Let me jump in here real quick, and you can
    maybe even finish that thought but when you appeared before the
    Senate Banking Committee, you shared your views with Senator
    Alsobrooks that raising deposit insurance coverage would not
    significantly increase assessment costs for banks, despite also
    saying that necessary data was not there and unnecessary
    depositor behavior could shift things. Can you share how you
    came to the conclusion that banks' assessments would not rise?
        Mr. Hill. Sure. The position that I have taken is it is
    possible that we might not need to raise assessments based on
    the way that the Hagerty-Alsobrooks bill is structured. The way
    that they do it is they would have the increase in deposits
    phased into the reserve ratio over a 10-year period, and so I
    think when we think about the costs, there are a couple of
    elements to it. One is the mechanical piece, which is what is
    the technical impact on the reserve ratio? Based on the
    projections that we have, which, again, are subject to
    significant uncertainty due to data limitations and also just
    potential behavioral changes that could occur, but the
    projections we have suggest that it might be the case that the
    reserve ratio would grow more slowly rather than decline.
        Then there is the other piece of it, which is the more
    fundamental piece, which is to what extent does this increase
    the exposure of the deposit insurance fund over the long-term,
    and I think that is also something where there are
    considerations on both sides of it. The FDIC is not a typical
    insurance company in the sense that when banks fail, we rarely
    pay insured deposits. Usually, we resolve failed banks by
    essentially selling the failed institution to the highest
    bidder and insured deposits, in particular, non-interest-
    bearing insured deposits tend to have a lot of value to
    potential acquirers. So, increasing the amount of insured non-
    interest-bearing transaction accounts could increase the value
    of those failed institutions, which potentially could bring
    cost down.
        The flip side to that is, effectively, you are increasing
    the cost of liquidation. So, if you do not have an acquirer,
    the sort of tail risk of the maximum amount the FDIC might pay
    will go up, so those are a couple of the main considerations,
    but, again, I think it is going to be a complicated thing to
    project out but I think there is at least some justification to
    not raising assessments if the reserve ratio did not decline.
        Mr. Stutzman. Okay. Thank you. I am going to yield back the
    balance of my time.
        Mr. Downing. The gentleman yields. Just for situational
    awareness, we are going to recognize the gentlewoman from
    Georgia and then Mr. Garbarino from New York, and then we are
    going to adjourn. So, now the gentlewoman from Georgia, Ms.
    Williams, is recognized for 5 minutes.
        Ms. Williams of Georgia. Thank you and thank you Chairman
    Hill and Ranking Member Waters for holding this hearing.
        You all, I represent Atlanta, which has one of the largest
    racial wealth gaps in the country, and I was proud of our
    regulators' commitment to fostering inclusive economic growth
    and resilience, not only in Atlanta, but in communities across
    our Nation during the previous administration. Regrettably, the
    strides that we have made are now in jeopardy. Last year when
    we met with our prudential regulators, many of my Democratic
    colleagues reiterated one thing: implementing a Project 2025
    agenda in the financial service space means risking our
    economy, favoring billionaires, and advancing priorities that
    will systemically hurt millions of Americans in the middle
    class or worse. Basically, it is exactly what you guys said, we
    should not be weaponizing our financial systems.
        Fast forward, and our current President has so far acted in
    line with those same exact Project 2025 recommendations:
    eliminating key agencies or virtually eliminating key agencies
    or drastically reducing things like the CFPB and the Minority
    Business Development Agency. So far, most of the President's
    actions have been devastating to marginalized communities
    across the country, particularly impacting economic mobility.
    Even worse is the President's attempt to undermine and
    influence our prudential regulators who are meant to be
    independent.
        Earlier this year, I joined with my colleagues, Congressman
    Emanuel Cleaver and Congressman David Scott, and sent a letter
    to the FDIC, to you, Mr. Hill, and voiced our concerns over
    DOGE's attempt to fire employees and merge the FDIC with other
    banking regulators. We never heard a response, but since we did
    not hear a response and we have you here before us today, I am
    going to ask you a few of those questions that were in that
    letter.
        Mr. Chairman, I would like to ask for unanimous consent to
    insert the letter that we sent on March 28 for the record.
        Mr. Downing. Without objection.

        [The information referred to can be found in the appendix
    on page 118.]

        Ms. Williams of Georgia. Chair Hill, my district is home to
    FDIC's Atlanta Regional Office. Earlier this Congress, there
    were reports that over 700 workers were fired or forced to
    accept buyouts, while 170 probationary employees were
    terminated without recourse. Can you provide an update on the
    status of those employees that were shuttered from work, and
    can you share how many employees were impacted in the Atlanta
    Regional Office?
        Mr. Hill. Congresswoman, I would have to get back to you on
    specific numbers. It is certainly not true that 700 employees
    were fired. That definitely did not happen. We certainly try to
    respond to all letters that we receive questions, and so if you
    did not get a response, then I want to apologize for that, and
    we will make sure to respond to any questions that you have
    sent us.
        Ms. Williams of Georgia. So, we have submitted all of the
    questions for the record, and I do hope that I get a response,
    and I figured you would not have an answer today, but since you
    have had since March 28, it is unfortunate that I still cannot
    get answers to those questions.
        Mr. Hill, I understand that you are serving as the acting
    chair, serving on the Board with prior FDIC experience, so I
    would imagine that you know a little bit about how important
    the work of FDIC staff and their examiners are. Speaking from
    your experience, what would be the consequences of the FDIC not
    having enough experienced examiners and managers? What would be
    the consequences of not having enough staff to conduct
    oversight, which is a key role in this position?
        Mr. Hill. I certainly agree with that. Having qualified and
    experienced safety and soundness examiners is core to one of
    our primary missions, which is promoting the safety and
    soundness of financial institutions that we supervise, and so
    we very much value the experienced workforce that we have. As I
    mentioned to one of the Congresswomen earlier, we are taking a
    number of steps to try to ensure that we are able to retain our
    experienced examiners.
        Ms. Williams of Georgia. FDIC independence, as you know,
    ensures that banks remain financially strong and continue
    serving the communities that many constituents and minority-
    owned businesses rely on. Some of my colleagues on the other
    side may make it about politics but ensuring that the FDIC has
    the staff capacity to supervise 4,000 community banks seems
    like good policy to me, not just politics. Another issue my
    colleagues and I have concerns with are the reports alleging
    that the administration has looked into ways to influence the
    FDIC behind the scenes, including through unprecedented
    involvement by the White House. With the CFPB being gutted,
    attempts to fire Democratic board members at NCUA and the Fed,
    it is clear that the Trump Administration wants to influence
    our banking regulators with this policy. Mr. Hill, have you
    heard discussions recently with the White House being involved
    with the rulemaking process?
        Mr. Hill. We have a process for issuing our rules. We have
    a board. It goes through our board process. We do coordinate
    with other agencies as appropriate, and that is something we
    continue to do.
        Ms. Williams of Georgia. Mr. Hill, I have many more
    questions in the letter and that have evolved since March 28.
        Mr. Downing. The gentlewoman's time has expired.
        Ms. Williams of Georgia. I will submit them all and I
    really would appreciate a response. Thank you, Mr. Chairman. I
    yield back.
        Mr. Downing. The gentlewoman yields back. The gentleman
    from New York, Mr. Garbarino, is now recognized for 5 minutes.
        Mr. Garbarino. Thank you, Mr. Chairman, and thank you all
    the witnesses for being here today. It is almost over for you
    all. I am going to go quickly.
        Ms. Bowman, your predecessor had a lot of bad ideas and
    proposals that, thankfully, for our economy, those changes were
    not finalized. One of them I want to talk about is the
    mathematical function that determines capital requirements for
    securitization exposures, known as p-factor or penalty factor.
    Your predecessor proposed doubling this surcharge from 50
    percent to 100 percent even though he had no data or analysis
    to support it, and some would say the existing p-factor is
    intentionally highly punitive toward securitization.
        I asked Chairman Powell when he was here about this and
    whether or not they would consider changing it. He was unable
    to give me an answer when he was here back in February. So,
    rather than rubber stamping the Biden-era p-factor rate, will
    you commit to revisiting the p-factor for securitization by
    examining the data, quantitative analysis, and impacts on
    consumers through the cost and availability of credit for U.S.
    households and businesses?
        Ms. Bowman. I can assure you that we are taking a
    completely fresh look at our responsibilities to implement the
    Basel III framework and that we are reviewing all of the
    comments that were received. There were hundreds of comments
    and that we will be reflecting on many of those in that
    proposal, and I would be happy to review the issue that you
    have raised. We want to make sure that there is empirical
    evidence that supports the issues or the calibrations and the
    factors that are included within the capital framework.
        Mr. Garbarino. I appreciate that answer, and I really do
    thank you for your continued work on the Basel re-proposal, and
    I want to switch gears just a little bit, talking about the
    Basel re-proposal. I want to encourage you to look at,
    carefully consider the impact of foreign banking organizations
    and the role they play in the U.S. financial services industry,
    specifically in New York, which I represent, has over, I
    believe, 200,000 employees of foreign banking organizations
    (FBOs). I just want a commitment also that your re-proposal
    will take into account the business models of foreign banks and
    also appropriately align the actual risks, operational and
    otherwise, posed by FBOs.
        Ms. Bowman. I appreciate you raising that issue, and, yes,
    it is definitely something that we are reviewing and
    considering.
        Mr. Garbarino. I appreciate that, and I am going to yield
    really quick, so he can ask a question to my colleague from
    Nebraska, Mr. Flood.
        Mr. Flood. I thank the gentleman from New York for the
    opportunity. I will be brief. On October 7, the OCC and the
    FDIC published a notice of proposed rulemaking where you were
    defining ``unsafe or unsound practice'' under Section 8 of the
    FDIC Act, and, Comptroller Gould, let us start with you. If the
    definition you have jointly proposed were in place in 2022, do
    you feel it would have changed the way examiners would have
    been looking at the Silicon Valley Bank before its demise?
        Mr. Gould. I do. That level of embedded interest rate risk
    on that bank's balance sheet sure seems to me like a material
    financial risk.
        Mr. Flood. Acting Chairman Hill?
        Mr. Hill. I would agree. I think the SVB experience is one
    of the key inputs into the motivation to reorient our focus and
    so the full intent would have been for the focus to have been
    different.
        Mr. Flood. Additionally, as part of the OCC-FDIC proposal,
    matters requiring attention, or MRAs, must be tied to
    circumstances posing material harm to the financial condition
    of the institution or a material risk of loss to the deposit
    insurance fund. Quickly, for both of you. I know you both feel
    strongly that this change will ensure the MRAs remain closely
    tethered to the types of material risks that are the core of
    safety and soundness. How do you ensure this change does not go
    too far in tying the hands of examiners when they see genuine
    material problems within an institution?
        Mr. Gould. Well, again, I think it ties into material
    financial risks, which are the risks that we really cannot
    afford to miss, but, of course, supervisors have other tools
    available, including the ability to still cite banks for actual
    violations of law.
        Mr. Flood. Chairman Hill?
        Mr. Hill. We put a lot of thought into how the definitions
    were worded and how they were described in the preamble of the
    proposal. It is a proposal now. We are receiving comments. We
    look forward to getting the comments back, but we will
    certainly want to make sure we are striking the right balance
    in whatever the final rule is.
        Mr. Flood. Striking the right balance, I think, is
    important here, and with that, I thank the gentleman from New
    York. I yield back to him.
        Mr. Garbarino. I also yield back to the chairman. Thank you
    all.
        Mr. Downing. The gentleman yields. I would like to thank
    all the witnesses for your 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 January
    7, 2026.

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

        Mr. Downing. We have another hearing in this room at 2
    p.m., so we ask everyone to exit promptly after adjournment, so
    we can prepare the room.
        With that, this hearing is adjourned.

        [Whereupon, at 1:36 p.m., the committee was adjourned.]

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