[Congressional Record Volume 164, Number 41 (Thursday, March 8, 2018)]
[Senate]
[Pages S1569-S1574]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Economic Growth, Regulatory Relief, and Consumer Protection Bill
Mr. MENENDEZ. Mr. President, I rise to explain my opposition to the
bill that is before the Senate, the banking deregulation bill, S. 2155.
First, I would like to say I am appalled this is how the Senate is
spending its time this week. Three weeks ago, 17 students and teachers
were murdered when a teenager, armed with an AR-15 decorated with
swastikas, opened fire at Stoneman Douglas High School in Florida, but
this week we are not banning the sale of high-capacity magazines that
enable mass shooters to fire 30, 40, or even 100 rounds without
stopping to reload; we are not closing the gun show loophole or
stopping violent people from buying assault weapons online with the
click of a mouse; we are not taking steps to report more cases of
severe mental illness to the National Instant Criminal Background Check
System; we are not even passing President Trump's proposal to raise the
age one can buy an assault weapon to 21 years. Simply put, this week we
are not doing anything to stop the next mass shooting from taking
place.
So what are we doing this week?
Well, this week the Republican majority has brought to the floor
legislation rolling back safeguards we passed after the financial
crisis of 2008--not exactly something the American people have been
clamoring for.
I want to be clear why I oppose this bill as written. It is not that
I don't support measures that provide meaningful relief to small banks,
credit unions, and consumers. I do. It is not that I don't believe in
reexamining regulations and ways to reduce compliance costs. I do. It
is not that I don't agree with efforts to better calibrate the rules of
the road for small banks and credit unions while strengthening
protections for consumers investors and taxpayers. I do. Indeed, I
would support a bill like that, but that is not the bill we have before
us today.
The bill before us today brings back risky mortgage lending practices
that increase the likelihood of foreclosures. It undermines our efforts
to police discriminatory lending practices, and it would allow 25 of
America's 38 biggest banks to escape the safeguards we adopted after
the 2008 financial crisis--a crisis that destroyed more than $12
trillion worth of American wealth, required huge bank bailouts, sent
our economy into a tailspin, and saddled us with the great recession.
Ten years later, it is worth remembering what caused that crisis--
mortgages designed like ticking timebombs for home buyers and for our
economy at large, large financial institutions making risky bets on
those risky mortgages, and regulators who turned a blind eye to these
risks. Borrowers were steered into loans with low interest rates, often
below 4 percent at the start, but once the promotional period ended,
these teaser rates disappeared, higher interest rates kicked in, and
millions of borrowers suddenly saw their mortgage payments go through
the roof--even doubling, in many cases. Between 2004 and 2006, one-
third of all adjustable rate mortgages were designed this way, and at a
time of stagnant wages, millions of families couldn't keep up. That is
why a wave of foreclosures overtook our housing market--displacing
families, decimating home values, and destabilizing neighborhoods. From
2006 to 2014, more than 9.3 million families lost their homes to
foreclosure, sold their homes at a significant loss, or surrendered
their homes to the bank.
For communities of color, the crisis was even worse. African-American
and Latino borrowers were at least twice as likely to receive a higher
cost loan than White applicants, even when controlling for income and
credit scores, and they were nearly 50 percent more likely to face
foreclosure during the crisis.
So what did we do about it? Well, we passed laws to stop lenders from
offering mortgages that were, in many ways, doomed to fail. We said
that from now on banks and mortgage lenders would have to make a
reasonable and good-faith determination that borrowers could pay back
their loans by looking at income, employment, credit history, monthly
expenses, and other metrics. We prohibited banks from using these
teaser rates to determine whether a borrower could repay a loan. We did
the sensible thing, and we required them to make sure that borrowers
could actually afford their payments once the higher interest rates
kicked in.
We also passed reforms to better catch discriminatory lending
practices because we know that, in many cases, the riskiest products
were offered to minority communities. We asked banks to provide data
that they already collected on things like debt-to-income ratios,
credit scores, loan-to-value ratios, interest rates, and loan terms.
This way, we could better identify emerging risks and possible
discriminatory lending practices in our communities. Were all of these
reforms perfect? Of course not. Have they made our mortgage lending
system safer, smarter, and fairer for credit borrowers? Absolutely.
Does that mean we still don't face challenges? No. New Jerseyans know
that. Our State still suffers the highest rate of foreclosure in the
Nation, and many New Jersey neighborhoods still struggle with frequent
foreclosures, abandoned homes, and their painful consequences.
Likewise, discrimination still persists. I was appalled by a report
released in January that showed African-American and Latino families--
even controlling for income, loan amount, and location--continue to be
disproportionately denied conventional mortgages. These practices are
nothing short of modern-day redlining. We see it in Camden, NJ, for
example, where Black applicants are still more than 2\1/2\ times
likelier to be denied than White applicants.
Now, 10 years after the crisis, Congress is poised to turn back the
clock. Under this bill, some banks will once again be able to offer
mortgages with teaser rates of 4 percent that more than double in just
2 years, without ever verifying if a borrower could afford a 9-percent
interest rate, and all they have to do is keep the loans on their
books.
This bill will excuse 85 percent of banks from sharing the data we
need to identify discrimination and ensure all creditworthy borrowers
have a fair shot at the American dream of home ownership. So if this
sounds familiar, that is because it is. History is repeating itself.
Beyond making mortgage lending riskier and less fair, this bill
removes guardrails we put in place for 25 of the 38 largest banks in
the country. These are the banks identified as systemically important
during the crisis--the banks that received $47 billion in bailouts.
Now, I appreciate my colleagues who point out this bill's benefits
for community banks and credit unions--and I mean that. That is a good
thing. But I fear these provisions mask giveaways that will make big
banks bigger and, ultimately, hurt smaller banks struggling to compete.
Under title IV, for example, this bill significantly cuts oversight of
banks with assets between $50 billion and $250 billion.
Have we forgotten so quickly the lessons we learned after the crisis?
Do we not remember how the government had to arrange forced mergers of
Countrywide, with $200 billion in assets, and National City, with $145
billion in assets, because their near-failures worked to spread risk
from Wall Street to Main Street?
Do we really want to weaken these guardrails--the stress tests and
the capital planning requirements to ensure that banks can survive a
crisis, the living wills that ensure they have a feasible way to unwind
if things go badly, and the minimum liquid assets they must hold in the
event they lose access to funding markets?
When taxpayer dollars are on the line, I don't think it is unfair to
ask big banks to be safe and smart. On the contrary, it is unfair to
the American people who will have to bail them out when and if they get
into trouble.
Supporters of this bill are quick to point out that it preserves the
Federal Reserve's authority to take action if they become concerned
about a bank with less than $250 billion in assets. Well, forgive me
for not having confidence in regulators with a long history of doing
too little too late. That is exactly the kind of risk that taxpayers,
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homeowners, and investors can't afford.
As the chairman of the Financial Crisis Inquiry Commission recently
wrote, ``history has shown, time and again, that the failure of
financial firms that are not among the largest mega-banks can pose
systemic risks to financial stability.'' According to the Congressional
Budget Office, these weaker protections make it even more likely that
taxpayers will once again have to bail out banks.
At the end of the day, this bill injects tremendous risk into the
system and undercuts our tools to have our financial cops on the beat
actually work to monitor the risk. So that leaves taxpayers on the hook
if risk then turns into crisis. Rather than protecting families, this
bill is packed full of goodies for large banks and special interests,
because consumers--the families who would suffer the most in another
crisis--don't have a seat at the table.
As a member of the Banking Committee, I worked in good faith to amend
this bill and make it better. I offered an amendment called
Christopher's Law to better protect consumers like the Bryski family in
New Jersey. While mourning the tragic loss of their son Christopher,
the Bryskis were stunned to learn that they would be responsible for
paying an education their son could never use because they had cosigned
his private student loan. I appreciate that my colleagues incorporated
major components of Christopher's Law to protect families that suffer
the tragic loss of a loved one into the manager's package for this
bill.
When you look at the totality of the bill's provisions, the fact
remains that we couldn't get an inch for consumers in exchange for the
miles this bill gives to big banks. Take, for example, my amendment to
enhance protections for military servicemembers who often struggle to
protect their credit while they are serving our country abroad or the
amendment I offered to prevent the rewards of this bill from flowing to
banks that adopt punishing, Wells-Fargo-style sales cultures that put
consumers at risk. These are just some of the pro-consumer, commonsense
amendments that were rejected in the Banking Committee.
Ultimately, I still believe Congress could pass legislation that
provides targeted relief to community banks and credit unions, but not
in exchange for erasing the standards that protect working families and
our economy from systemic risk. So you can bet that I will be working
here on the floor to get those amendments included in full. Senator
Cortez Masto and I will offer an amendment to ensure that banks report
the data we need to police against discriminatory lending practices.
Likewise, I am offering an amendment to require that consumer
reporting agencies like Equifax quickly disclose data breeches and
require a Federal study of how these breeches impact consumers over the
long haul.
Finally, I am proposing an amendment that requires mutual funds to
disclose to their shareholders whether they invest in the gun industry,
because it is downright offensive to be considering a banking bill this
week instead of pressing corporate America to step up in the fight
against gun violence that rips our country apart year after year.
These measures, if adopted, would make a bad bill a bit better, but
as we quickly approach the 10-year anniversary of the government-backed
bailout of Bear Stearns, I cannot, in good conscience, vote to remove
the guardrails we put in place to prevent big banks from playing fast
and loose with our economy in the first place.
The financial crisis and recession stripped trillions of dollars in
wealth from communities all across the country. While banks were bailed
out, families were left reeling with the consequences. From foreclosure
to job losses to hard-hit retirement accounts and falling home values,
the American people bore the brunt of the financial crisis. For years,
Washington protected Wall Street from sensible regulations when we
should have been protecting consumers. Unfortunately, it took the
greatest financial crisis since the Great Depression for us to pass the
Wall Street Reform and Consumer Protection Act for us to make a
fundamental choice to reject a system that took advantage of consumers
and instead stand for a banking system that is more fair, transparent,
and accountable to the American people.
To quote the Spanish philosopher George Santayana, ``those who cannot
remember the past are condemned to repeat it.'' Only in Washington
would anyone think it is a good idea to commemorate the 10-year
anniversary of the financial crisis with a bill that dares big banks to
get bigger and increases risks to taxpayers.
I look forward to the day when this Congress strives to do better by
the working families who lost their homes, their jobs, and their life
savings during the crisis. Hard-working families had to fight their way
back from the recession without bailouts and are counting on us to
fight for them in Washington, and that is what I intend to do.
I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. CRAPO. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CRAPO. Mr. President, I rise again today to speak further on S.
2155, the Economic Growth, Regulatory Relief, and Consumer Protection
Act.
We have had a lot of discussion on the floor about this bill in the
last few days. Anybody who took the opportunity to watch all of that
debate sees that there is a strong bipartisan support for this bill and
a strong debate coming from some quarters trying to say that the bill
creates greater risk in our financial community. I would like to
address exactly what this bill does and then respond to some of those
charges, which I consider to be completely unfounded.
The Economic Growth, Regulatory Relief, and Consumer Protection Act
is aimed at rightsizing regulation for financial institutions--
including community banks and credit unions--making it easier for
consumers to get mortgages and to obtain credit.
I have said a number of times, and I will repeat, back when we were
debating the Dodd-Frank legislation about 10 years ago, it was marketed
to the public as a bill to address excesses and problems on Wall Street
by the big megabanks of our country, but its provisions hit hardest on
Main Street.
As I have said, I actually held a news conference in Boise, ID--in my
home State--on Main Street. I said the crosshairs of this bill and the
bulls-eye are on Main Street, not Wall Street.
What has happened in the last 10 years? The Wall Street banks have
been phenomenally profitable. They have been very successful, and the
smaller banks--the credit unions, the community banks, even the
regional banks--have been hammered.
We are losing credit unions and, more specifically, community banks
across this Nation at an alarming pace, and the reason--the primary
reason--is the phenomenally significant increased regulatory burden
they face.
I have heard colleagues of mine on the floor in the last couple of
days talking about specific community banks and credit unions in their
States that have had so much pressure put on them, so much burden and
financial costs put on them by the excessive regulations that they have
either gone out of business or stopped issuing mortgages, just stopped
doing mortgage business or stopped doing loans of certain types that
are beneficial to our small businesses. So the real victims aren't even
just the community banks and credit unions; they are the people--the
people who want to get a loan in their local communities and who are
entirely worthy of getting a loan to buy a house, but their credit
unions and community banks are no longer in that business or they are
no longer in existence. That is what this bill is addressing.
The bill also increases important consumer protections for veterans,
senior citizens, victims of fraud, and those who fall on tough
financial times. The provisions in this bill will directly address some
of the problems I frequently hear about from financial institutions.
Let me explain in a little more detail just what that is. I have
already discussed some.
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Community banks and credit unions are simple institutions, focused on
relationship lending and have special relationships with the people in
their communities. The bankers and their customers go to church, play
ball, or their kids go to school with each other. They know their
customers, and they are willing to work with them to help them be
successful. They provide credit to traditionally underserved and rural
communities, where it may be harder to access banking products and
services or to get a loan.
Dodd-Frank instituted numerous new mortgage rules and complex capital
requirements on community banks and credit unions that have hindered
consumers' access to mortgage credit and lending more broadly.
I guess I will just insert here, this phenomenon we often see in
Washington of one-size-fits-all or cookie-cutter solutions to a problem
is directly the kind of problem we are seeing here.
Our smaller financial institutions are treated as though they were
large megabanks and as though their business models and their
portfolios contain the same kind of risk as the larger banks. Yet they
don't have the same business models; they don't have the same risk
footprint, but they are forced to go through phenomenally expensive
regulatory burdens for no good reason.
I can't tell you how many of these small bank and credit union folks
have said to me: Our industry did not cause or have any part in the
financial crisis, but we are being asked to pay the price. That is what
this bill deals with.
In July of 2016, the American Action Forum attempted to estimate the
number of paperwork hours and final costs associated with these rules
and regulations that I am talking about. In total, the forum estimated
that the law had imposed more than $36 billion in final rule costs and
73 million paperwork hours as of July 2016. What does that mean? To put
these figures into perspective, the costs are nearly $112 per person or
$310 per household.
Additionally, it would take 36,950 employees--that is 36,950
employees--working full time to complete a single year of the law's
paperwork based on the agency's calculations themselves.
Our bill is focused on providing meaningful relief to our community
banks and credit unions, helping them to prudently lend to consumers,
home buyers, and small businesses--small businesses that we all
acknowledge are the engines of our economy, yet lack credit and lack
access to capital because of these unnecessary rules. That is why the
first part of the name of this bill is ``economic growth.'' This bill
will provide a needed shot in the arm for our economy across this
country.
By responsibly expanding the qualified mortgage safe harbor,
addressing severe appraiser shortages in rural areas, reducing
superfluous HMDA reporting requirements, and exempting certain loans
from escrow requirements, our bill will ease the compliance and
regulatory reporting requirements borne by many of these small
financial institutions and free up scarce resources for their
communities, enabling more individuals to find a home loan or get the
funding to start a business. And this does not increase financial risk.
A number of local credit unions have weighed in on the positive
impact our bill will have on increasing access to affordable mortgage
credit.
Additionally, had our bill's provisions on a rule called TRID--a 3-
day waiting period--had they been in place in 2017, it would have
helped over 1.5 million credit union members at over 3,800 credit
unions throughout the Nation, enabling them to take advantage of a
lower interest rate and to avoid potential delays in the mortgage
origination process. I will tell my colleagues, anybody who has had to
go through the mortgage origination process today knows the paperwork I
am talking about.
Our bill also drastically simplifies the capital regime for certain
highly capitalized community banks compared to the current Basel III
requirements that are more appropriate for larger, sophisticated
financial institutions.
Rebecca Romero Rainey, the former chairman and CEO of Centinel Bank
of Taos and CEO-elect of the Community Bankers of America, made a
commonsense observation. She said:
Under Basel III, community bank capital regulation has
become significantly more punitive and complex. Do we really
need four definitions of regulatory capital, a capital
conservation buffer, and impossibly complex rules governing
capital deductions and adjustments?
Applying the rule to community banks in a one-size-fits-all
manner harms the consumers and businesses we serve.
She added:
I seriously doubt that my grandfather would have founded
Centinel if he had to comply with Basel III and the other new
regulations that exist today.
We want to encourage people to bank in their communities.
Dodd-Frank also dealt with midsized and regional banks, and our bill
does too. Dodd-Frank swept many simple midsized and regional banks into
its enhanced prudential standards, but it was meant for the largest and
most complex institutions. Each new regulation poses a tradeoff between
hiring new employees to help comply with those standards versus
employees to provide customers the products and services they want and
need.
Deron Smithy, executive vice president and treasurer for Regions
Bank, a regional bank based in Alabama, described the implications of
this on his institution, saying, ``We now have more people in our
organization devoted to compliance-related matters than we do for
commercial lending'' and that ``the direct cost, as well as
management's time and attention to meeting these rules, creates a
disproportionate burden on regional banks. Collectively, the
incremental cost of regulatory compliance exceeds $2 billion
annually.'' The $2 billion in costs that Mr. Smithy mentioned were just
the direct costs. Indirect costs include management and other business
units' time being diverted from fully serving their clients.
These are not just empty numbers; behind these numbers are real
economic consequences. That is a fact Mr. Smithy noted in his testimony
before the Banking Committee.
For a company like Regions, that standard being lifted
would likely liberate as much as 10 percent additional
capacity for lending, which--
In his bank's case--
would be $8 billion to $10 billion.
That is capital and access that are not available to
individuals, families, and small businesses in this Nation.
That is one bank.
During another Banking Committee hearing, Robert Hill, CEO of South
State Corporation, a midsized bank, noted that when their institution
crossed the $10 billion threshold, ``South State was impacted by over
$20 million per year, a significant sum for a bank our size. What
impact does that have on our local communities? For us, that equates to
300 jobs. Approximately 10 percent of our branches were closed, and
even more jobs diverted away from lending to regulatory compliance.''
Section 401 of our bill raises the SIFI threshold for applying
enhanced prudential standards from $50 billion to $250 billion--a level
that many, many financial experts have encouraged for years--and the
$10 billion threshold for applying an annual, company-run stress test
to midsized banks while maintaining important safeguards against risks
to the U.S. financial system. This will free up valuable financial and
human resources to help keep more branches open, increase lending to
consumers and small businesses, and lower the cost of borrowing for
consumers.
The bill also deals with housing policy. Our bill provides some
important improvements to HUD programs, making them more effective and
efficient and enabling public housing authorities across the country to
better address the housing needs of their local community.
Our bill enhances HUD's Family Self-Sufficiency Program, which will
enable a greater number of families currently assisted by HUD to obtain
job training, education, childcare, and ultimately achieve financial
independence. Specifically, the bill would broaden the scope of
supportive services that can be offered to these participants,
including home ownership assistance, training in asset management,
obtaining a GED, and education in pursuit of a postsecondary degree or
certification. It would also streamline the administration of the
program, making it easy for local public housing authorities to deliver
it in their communities.
[[Page S1572]]
For the first time ever, our bill will enable many families who live
in privately owned apartments backed by project-based rental assistance
to also participate in the FSS Program.
Our bill would also provide targeted regulatory relief to small
public housing agencies operating in rural communities. While smaller
public housing authorities typically have far fewer staff and resources
than larger urban agencies, they, too, are currently held to many of
the same burdensome regulatory requirements as some of the largest ones
in the country. As a result, this means that more of their time and
money are spent completing paperwork and less are able to be dedicated
to promoting access to affordable housing in these communities.
Our bill would provide tailored regulatory relief that recognizes the
unique challenges faced by smaller public housing authorities in rural
areas. Specifically, it would provide a simpler option for calculating
utilities, simplify environmental review requirements for new
developments, streamline inspection requirements, and make it easier to
coordinate efforts, such as enabling shared waiting lists with
neighboring agencies and enabling neighboring agencies to pool their
resources to develop larger projects.
These changes will set up these small agencies for success and enable
them to direct a greater amount of time, effort, and resources toward
their core mission: promoting access to affordable housing.
The bill is also a consumer protection bill. It ensures that key
consumer protections remain in place and increases protections for
consumers who have fallen on hard financial times or become victims of
fraud.
Following the Equifax data breach, we held two credit bureau
hearings. These hearings demonstrated bipartisan support for some
important measures. The bill provides 1 free year of fraud alerts for
consumers potentially impacted by the Equifax breach or other instances
of fraud. It gives consumers unlimited free credit freezes and
unfreezes during the year. It allows parents to turn on and off credit
reporting for children under 16.
The bill also includes important protections for veterans and senior
citizens. The Department of Veterans Affairs Choice Program provides
veterans non-VA medical care if they can't access care at a VA medical
facility. Unfortunately, the VA Choice Program has been rife with
issues, including delayed payments and misassigned medical bills to
veterans. As a result, veterans have experienced negative credit items
on their reports, which unnecessarily complicates their and their
families' lives.
The largest credit reporting agencies took a step to alleviate this
problem by delaying reporting medical debt on a consumer's credit
report for 180 days, but more can still be done. Our bill goes a step
further by prohibiting medical debt arising from the Choice Program and
other non-VA healthcare providers from being reported to credit-
reporting agencies for 1 year and provides veterans a process to
dispute or remove incorrect information already on their reports.
According to a study conducted by MetLife, seniors lose at least $2.9
billion annually in reported cases of financial exploitation. Despite
the prevalence of senior financial fraud, the National Adult Protective
Services Association estimated that only 1 in 44 cases of financial
abuse is ever reported.
Current bank privacy laws make it difficult for the financial
institutions and their employees to report any potential fraudulent
activity without incurring legal liability, and as a result, few cases
of financial abuse are reported. Our bill would give financial advisers
civil liability protection when reporting suspected financial abuse of
seniors. This will empower and encourage our financial service
representatives to identify warning signs of common scams and help stop
financial fraud targeting our seniors.
Now I wish to turn for just a moment--I have gone over some of the
positive benefits and provisions in this bill. I would like to turn for
a moment to the criticisms, because, if my colleagues have been
listening to the attacks, the attacks are that this is an effort to go
help the big banks in America get richer at the expense of poor people.
This is a very common type of attack on almost any proposal to fix a
regulation in the financial system.
One of the things we have heard is that it gives the regulators too
much flexibility to tailor regulations to the size of the institution
being regulated. This bill carefully balances the need to provide
regulators with the appropriate discretion at the technical level,
while imposing specific directions to ensure appropriate tailoring for
Main Street banks and maintaining core supervisory tools for the
largest banks.
Regulators will still be required to ensure that banks operate in a
safe and sound manner and still retain extensive authorities to do so.
The bill also requires regulators to do more to tailor regulations to
ensure that the level of regulation and scrutiny of banks reflects the
potential risks posed by the institutions--something that folks in my
State would say is just common sense.
In the face of all of this, we have talked to a lot of the regulators
themselves to see what they think of the idea, and they are
consistently saying: Let us have the flexibility to regulate
appropriately, and we will do the job. We will ensure that we have
safety and soundness, and we will ensure that we are not putting undue
regulatory burdens on our financial institutions, particularly the
smallest ones.
Federal Reserve Chairman Jay Powell said:
You know, we really want the most stringent things to be
happening at the systemically important banks--the most
stringent stress tests, in particular--and we want to tailor
or taper, as we go down into less significant, less
systemically important institutions.
Powell added: ``Those banks [below $100 billion] are not systemically
important.
What he meant by that is they don't present systemic risks to the
economy. We should analyze them and regulate them and supervise them in
a more appropriate fashion.
Federal Reserve Vice Chairman for Supervision Randy Quarles has also
noted the importance of tailoring, saying:
One of the important general themes of regulation is
ensuring that the character of the regulation is adapted to
the character of the institution being regulated, what has
become the word ``tailoring.''
I fully support that, and I think that it's not only
appropriate to recognize the different levels of risk, and
types of risk that different institutions in the system pose,
but that it also makes for better and more efficient
regulation, and efficient regulation allows the financial
system to more efficiently support the real economy.
That is what we are talking about here.
So I do think that we should look very carefully . . . at
tailoring capital regulation and other types of regulation to
the particular character of the institutions that are
regulated, and that includes their size, and that includes
other aspects of the character.
Another critique I have heard is that the bill erodes the power of
stress testing as a supervisory tool. In one way or another, many have
stood on this floor and talked about the need to have this kind of
flexibility, and others have stood on this floor and said it creates a
huge threat to our economy.
We have a hearing each year called the Humphrey-Hawkins hearing when
the Chairman of the Federal Reserve comes and testifies to the Senate
and then to the House. This year, the Chairman of the Federal Reserve
came before the Senate. To ensure that people and Members understood
what this bill does, I asked Chairman Jay Powell: If this bill were to
pass, is it accurate that the Federal Reserve would still be required
to conduct a supervisory stress test for any bank with total assets
between $100 billion and $250 billion to ensure that it has enough
capital to weather economic downturns?
He replied: Yes, it is.
I asked: Is it accurate that the bill's change of the threshold from
$50 billion to $250 billion for enhanced prudential standards does not
weaken oversight of the largest, globally systemic banks?
He said: That is correct.
The Dodd-Frank Act established a $50 billion asset threshold to apply
enhanced prudential standards to banks. Applying enhanced standards
broadly to regional banks with simple business models and low-risk
profiles has had significant consequences in the marketplace. Although
there has been much debate about the appropriate
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level for the threshold, there is bipartisan agreement that $50 billion
is too low, including among Federal Reserve Chairman Powell, former
Federal Reserve Bank Chairman Yellen, former Acting Comptroller
Noreika, and former Comptroller Curry.
Current Federal Reserve Chairman Jay Powell said: ``Our view has been
that that combination of raising the threshold and giving us the
ability to go below it in cases where needed gives us the tools that we
need.''
Former Federal Reserve Chair Janet Yellen has said:
We've already said that we would favor some increase, if
Congress sticks with a dollar threshold--that we would
support some increase in the threshold. An approach based on
business model or factors is also a workable approach from
our point of view. Conceivably, some of the enhanced
standards should apply to more firms with lower levels of
assets, and others with higher levels. So I think either type
of approach is something that we could--we could work with
and would be supportive of.
That is the former Chair of the Federal Reserve.
Our bill rightsizes regulations by raising the $50 billion threshold
to $250 billion. Banks with total assets below $100 billion are exempt
immediately from these enhanced standards, while those with between
$100 billion and $250 billion are presumed exempt 18 months after the
bill is enacted unless the Federal Reserve Board determines that they
need to have some additional level of standard applied, and the Federal
Reserve is given full authority to do so. The provision allows the
Federal Reserve to tailor regulations to a bank's business model and
risk profile.
This provision in no way diminishes the effectiveness of prudential
regulations, and it provides the Federal Reserve sufficient regulatory
and supervisory discretion to apply these enhanced standards on any
firm it deems a threat to systemic risk or safety and soundness.
Let me restate that. If you have heard any of the attacks, you have
heard that the Federal Reserve will not be able to adequately regulate
the banks anymore. The past two Chairmen of the Federal Reserve have
said that is not correct, but the bill itself provides that the Federal
Reserve continues to have the authority to apply enhanced standards on
any firm it deems a threat to systemic risk or safety and soundness.
So, again, for those who are attacking the bill, I think their
arguments are unfounded and, frankly, based in an effort to try to
create concern about a risk that does not exist.
This provision also requires the Federal Reserve to apply a periodic
supervisory stress test to banks with between $100 billion and $200
billion in assets, something that is often overlooked by those
commenting on the bill.
I have tried to go over some of the positive aspects of this bill and
explain why its title is Economic Growth, Regulatory Relief, and
Consumer Protection Act and respond to some of the false, unfounded
attacks on this bill.
This bill does not create any increased risk at the level of
supervision for the megabanks, those that were intended to be the
target of Dodd-Frank when it was adopted, but it does provide increased
support for those community banks and credit unions, and those regional
banks and midsized banks that are being so badly hurt and whose
customers are being so deprived of needed and justified access to
credit and capital. That is what this debate is about.
I encourage all of my colleagues to support this legislation as we
move forward and help us bring economic growth, regulatory relief, and
consumer protection to all Americans.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. MARKEY. Mr. President, anyone tuning into the Senate floor this
week is probably very confused right now, and that is because we are
not debating how to address the scourge of gun violence plaguing this
country, just 22 days after the horrific Parkland mass shooting and
following a near-universal call from the American people for Congress
to get serious about guns. They are debating it in the State
legislature in Florida, but we just don't have time in the U.S. Senate
to debate this overarching issue of gun safety in our country.
The American people may be confused because we are not debating the
fate of the 800,000 Dreamers and the uncertainty they still face;
confused because we are not debating our crumbling infrastructure
which, despite repeated calls from this President, we have seen nothing
resembling a credible plan from him to fix our Nation's bridges, roads,
and water systems and provide broadband for rural Americans.
Democrats do have a real plan, and we should be debating that. But
no. Instead, just 3 months after the passage of massive tax giveaways
that handed over more than $1 trillion to the wealthiest Americans and
megacorporations, we are here debating a giveaway to the world's
biggest banks.
We have moved on from tax handouts to the wealthy, to taxpayer-funded
bailouts for Wall Street megabanks. That is not my opinion. The
nonpartisan Congressional Budget Office released their analysis of this
bailout bill and noted that the risk of a financial crisis would go up
under this legislation.
Why in the world is Congress doing anything that increases the risk
of a financial crisis? It has only been 10 years since the great
recession, but Republicans seem to have forgotten about that. Maybe
that is why this week is so confusing--because the backers of this bill
are not talking about the risk to the entire financial system they are
enabling. They have forgotten that and are only talking about the
benefits to community banks.
Yes, there are some benefits. Those of us on the other side of this
legislation are not arguing about that point. You could probably find
consensus among all 100 Senators in this body that there is a
legitimate, targeted relief we can and should provide for those
community banks, but that is far from all this bill does. This
community bank relief is being used to protect the giveaways for some
of the biggest banks in this country.
Anyone listening to the supporters of this legislation would have no
idea that 25 of the 38 largest banks in the United States will have
critical Dodd-Frank rules rolled back for them. Anyone listening would
have no idea that banks with up to $250 billion in assets are being
told the current rules are too tough for them. These banks received $48
billion in taxpayer-funded bailout money. Those banks are not community
banks.
Now, a decade after the financial collapse of 2008, we are saying it
is probably OK. We are pretty sure they have learned their lessons. We
are pretty sure that now the big banks will put the economic security
of the country ahead of their own profits.
So the bottom line: This bill, the Economic Growth, Regulatory
Relief, and Consumer Protection Act, will increase risks to our entire
economy, and the fact that the words ``consumer protection'' are
mentioned last should make clear they are simply an afterthought.
When large institutions fail--whether it is Lehman Brothers, Enron,
AIG--it is everyday working consumers who get hit the hardest and pay
the highest price.
There is the rule on Wall Street: On the way up, the big guys clean
up; on the way down, the little guys get cleaned out. We saw that
during the last financial crisis, when millions of Americans lost their
jobs or their homes, and we are seeing it today, with increasingly
common data breaches that compromise Americans' financial and personal
information.
In recent years, devastating data breaches have become the new
normal. The likes of Target, JPMorgan Chase, Yahoo, eBay, T.J.Maxx,
Home Depot, and Sony are among so many who have become synonymous with
massive data breaches.
Of course, there is Equifax, which is both a credit reporting agency
and a data broker. Equifax's sole mission is using and profiting from
consumers' most personal information, and they failed to protect that
information. More than 145 million Americans' Social Security numbers,
birth dates, addresses, and, in some instances, even driver's license
numbers and credit card numbers were compromised because Equifax failed
to institute even the most basic security protocols. It seems that, for
the American consumer, every year is the year of the data breach, and
they are sick and tired of their information falling into the wrong
hands.
[[Page S1574]]
So as the Senate debates how to ensure financial institutions do not
endanger the American economy the way they did during the financial
crisis, we cannot forget our constituents' calls for new data
protection rules. That is why I have filed my Data Broker
Accountability and Transparency Act as an amendment to this
legislation. I thank Senators Blumenthal, Sanders, and Whitehouse for
joining me.
My colleagues and I--Republican and Democratic alike--were outraged
when we learned about the Equifax hack and how it hurts our
constituents across the country, but what have we accomplished in the
U.S. Senate since then? Nothing, and the threat is only growing.
We have an entire industry whose whole business model is predicated
on profiting on Americans' most sensitive information. They are
collecting it, storing it, selling it, and, in many instances, losing
it in data hacks and breaches. Consumers don't even know who these
companies are. They live in the shadows of our economy. Consumers
rarely have any direct contact or business relationship with a data
broker. Yet they know nearly everything about you. That is not just
Social Security numbers, detailed credit histories, addresses, driver's
license numbers. That is information on what you read, what music you
listen to, your children, and your medical history.
In today's economy, you--the American consumer--are the commodity
that is bought and sold in the open market. Right now, you have no
rights. Data brokers are collecting, using, sharing Americans' personal
information without your knowledge, without your consent.
Right now, American consumers are completely powerless. You can't
say: Stop selling my information to any of these companies. That is
unacceptable.
We need transparency; we need accountability. That is why I urge my
colleagues to support my Data Broker Accountability and Transparency
Act. My amendment would hold data brokers accountable.
First, my amendment allows consumers to access and correct the
information that data brokers hold about them. Americans should be able
to stop the spread of inaccurate information that could damage them
personally and financially.
Second, my amendment provides consumers with the right to stop data
brokers from using, sharing, or selling their personal information for
marketing purposes.
Third, my amendment requires data brokers to implement comprehensive
privacy and data security programs and to provide reasonable notice in
the case of breaches. Equifax should have been required to have robust
security to protect Americans' information. We must stop the next
Equifax.
It has now been 6 months since the public became aware of that
breach, and Congress has yet to enact any major legislation in
response. We are still in the data broker Wild West. American consumers
are still powerless, and the next breach could be around the corner.
Here is the financial services bill that we are taking up. Here is a
bill that is directly related to these banks that we are talking about.
Here is an opportunity for us to begin to figure out a way of
protecting consumers in this data breach area where their financial
records, where their health records, where their families' records
could be compromised.
What is the solution? We are moving through legislation that deals
with the problems the bankers say they have, but we are not dealing
with problems consumers say they have with these financial
institutions. When do we take up that bill? When do we finally say to
the largest companies: What are the protections? What are the
safeguards that are going to be constructed so that people's personal
information is not compromised, so the data brokers aren't able to
create a world in which everyone's information is just part of their
profit-making opportunity?
That is what we should be talking about. Let's have a big debate
here. Let's ensure that each and every one of these issues is dealt
with.
I urge my colleagues to support my amendment because we have to get
to the heart of this Equifax issue. We have to actually deal with the
world as it has changed. If the proponents of this bill say that the
world has changed since the crash in 2008 and 2009, then the world has
also changed with regard to the potential for the compromise of the
information of every American. Let's have that debate, as well, in the
same bill.
I urge that my amendment be put in order, and I urge that the Members
of the Senate support it. It is time for us to give those protections
to consumers, which they are crying out for. No individual consumer is
crying out for this change in the banking bill, but they are crying out
for protections in a system where they have no voice, no way to ensure
that their own family's personal data is not compromised.
I yield back to the Chair.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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