[Congressional Record Volume 164, Number 48 (Tuesday, March 20, 2018)]
[House]
[Pages H1712-H1718]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ALLEVIATING STRESS TEST BURDENS TO HELP INVESTORS ACT
Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 787, I call
up the bill (H.R. 4566) to amend the Dodd-Frank Wall Street Reform and
Consumer Protection Act to provide relief to nonbanks from certain
stress test requirements under such Act, and ask for its immediate
consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 787, in lieu of
the amendment in the nature of a substitute recommended by the
Committee on Financial Services printed in the bill, an amendment in
the nature of a substitute consisting of the text of Rules Committee
Print 115-65, is adopted, and the bill, as amended, is considered read.
The text of the bill, as amended, is as follows:
H.R. 4566
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Alleviating Stress Test
Burdens to Help Investors Act''.
SEC. 2. STRESS TEST RELIEF FOR NONBANKS.
Section 165(i) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5365(i)) is amended--
(1) in paragraph (1)(B)(ii), by striking ``and nonbank
financial companies''; and
(2) in paragraph (2)--
(A) in subparagraph (A), by striking ``are regulated by a
primary Federal financial regulatory agency'' and inserting:
``whose primary financial regulatory agency is a Federal
banking agency or the Federal Housing Finance Agency'';
(B) in subparagraph (C), by striking ``Each Federal primary
financial regulatory agency'' and inserting ``Each Federal
banking agency and the Federal Housing Finance Agency''; and
(C) by adding at the end the following:
``(D) SEC and cftc.--The Securities and Exchange Commission
and the Commodity Futures Trading Commission may each issue
regulations requiring financial companies with respect to
which they are the primary financial regulatory agency and
that have total consolidated assets of more than
$10,000,000,000 to conduct periodic analyses of the financial
condition, including available liquidity, of such companies
under adverse economic conditions.''.
SEC. 3. RULE OF CONSTRUCTION.
Nothing in this Act shall be construed to limit the
authority of the Financial Stability Oversight Council under
section 120 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5330).
The SPEAKER pro tempore. The bill, as amended, shall be debatable for
1 hour equally divided and controlled by the chair and ranking minority
member of the Committee on Financial Services.
After 1 hour of debate on the bill, as amended, it shall be in order
to consider the further amendment printed in House Report 115-613, as
modified by the order of the House of today, if offered by the Member
designated in the report, which shall be considered read, shall be
separately debatable for the time specified in the report equally
divided and controlled by the proponent and an opponent, and shall not
be subject to a demand for a division of the question.
The gentleman from Texas (Mr. Hensarling) and the gentlewoman from
California (Ms. Maxine Waters) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days to revise and extend their remarks and to
include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise today in support of H.R. 4566, the Alleviating
Stress Test Burdens to Help Investors Act.
Mr. Speaker, I especially want to thank the gentleman from Maine (Mr.
Poliquin), one of the most hardworking, enthusiastic, cheerful members
of the House Financial Services Committee for all the work that he has
done to advance this very strong piece of bipartisan legislation,
which, incidentally, passed the Financial Services Committee again with
another strong bipartisan vote of 47-8.
Now, the financial crisis led to questions, both domestically and
internationally, about how to address financial stability and create a
regulatory framework to mitigate systemic risk, all the while ensuring
robust economic growth.
At the heart of this bill of the gentleman from Maine is a
recognition that our economy can suffer when we get it wrong, when
government attempts to dictate the business models and operational
objectives of so many of our businesses. It is also a recognition that
one-size-fits-all regulations can stifle economic growth and ultimately
harm consumers and harm our constituents.
Current bank-centric standards and assessments to nonbank industries,
such as the asset management industry, have needlessly saddled Main
Street investors with increased costs while they are trying to save for
college or retirement or some other important need, and this is perhaps
no clearer than in this stress testing regime.
As a former SEC chief economist observed in 2016, who said that, in
the current law, ``stress test the big banks; and, oh, you might as
well go ahead and do the asset management companies.'' That is his take
of what the law says.
In other words, asset management firms that, again, our constituents
depend upon for their retirement security or for their financial
planning are now subject to bank regulations simply because they
operate under the financial services umbrella, even though such firms
plainly have legal, structural, and operational characteristics that
make them very, very different from banks.
By the way, none of the asset managers had anything to do with the
financial crisis that brought about the legislation that we are
debating in the first place. For example, unlike banks, asset managers
do not have access to the deposit insurance fund or the Fed's discount
window.
If that is not enough for you, Mr. Speaker, here is more. Asset
managers are legally separated--legally separated from the funds they
manage, meaning that the asset and liabilities of the manager are
distinct from the assets and liabilities of the funds.
On the other hand, the bank business model directly subjects the bank
to the risks and obligations of its assets and liabilities. Again,
applying a one-size-fits-all regulatory structure--in this case, a
bank-centric model--is not only bad for the asset management industry,
but, far more importantly, for our constituents that they serve, who
choose to save and invest.
Registered funds are the investment vehicle choices for millions of
Americans seeking to buy a home, pay for college, plan for financial
security and retirement. Application of unnecessary, ill-suited, bank-
centric stress testing requirements to register funds
[[Page H1713]]
and advisers will undoubtedly increase cost for these funds and
advisers, and, ultimately, this gets passed on to investors without any
corresponding benefits that we can discern.
The recent asset management and insurance report issued by the
Department of Treasury confirms these concerns. The bill of the
gentleman from Maine (Mr. Poliquin) would fix this unequal regulatory
structure by exempting certain nonbank financial institutions that have
not been designated for supervision by the Federal Reserve Board from
the act's stress testing requirement.
Further, in the true spirit of bipartisanship, I want to thank the
gentlewoman from New York (Mrs. Carolyn B. Maloney) for recognizing the
underlying need for this relief and for working with Mr. Poliquin to
offer an amendment during markup that allows the SEC and the CFTC to
issue regulations to require certain financial companies they supervise
to conduct periodic analysis of the financial condition of such
companies under adverse economic conditions.
The approach is common sense. It is not one size fits all. It
recognizes that the primary regulator of nonbank financial companies is
better suited than a bank regulator to determine whether these stress
tests might be useful to address risk. And it recognizes that, as a
general matter, stress testing asset managers is difficult and often
needless.
Mr. Speaker, I urge all of my colleagues to support this great
bipartisan legislation. I believe we have an amendment forthcoming from
the ranking member, which I expect our side of the aisle to support. I
am led to believe that, with the adoption of her amendment, she would
support the underlying bill. I hope that proves to come to fruition, in
which case we can have a very strong bipartisan vote on this bill.
Mr. Speaker, I reserve the balance of my time.
{time} 1430
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise to oppose H.R. 4566, the so-called Alleviating
Stress Test Burdens to Help Investors Act, which would make it harder
for regulators to identify and mitigate hidden systemic risks at
nonbank financial companies before they undermine our economy.
Last Wednesday marked 10 years since global investment bank Bear
Stearns imploded as a result of its failure to manage risk associated
with its highly leveraged balance sheet and exposure to the subprime
mortgage market. American taxpayers were forced to come to the rescue
to prevent the firm's collapse from spreading to other overleveraged
Wall Street institutions.
The demise of Bear Stearns was the canary in the coal mine for the
ensuing financial crisis, which ravaged the United States economy,
destroyed trillions of dollars of wealth, and put millions of Americans
out of their jobs and their homes.
Democrats responded to the 2008 financial crisis by passing the Dodd-
Frank Act, which, among other reforms, required rigorous stress tests
of the Nation's largest financial institutions. The Dodd-Frank Act also
gave the Federal Reserve Board the discretion to quickly intervene and
stress-test firms that could pose financial stability risk.
If regular stress testing had been conducted on firms like Bear
Stearns from 2006 to 2008, it might have revealed major threats to the
economy sooner, giving both the companies and Federal financial
regulators a better chance to take remedial action to avoid a
catastrophic near collapse of the global financial system.
H.R. 4566 would eliminate the Federal Reserve's authority to stress-
test nonbank financial companies, even in situations where the firm's
designation as systemically important is pending before the Financial
Stability Oversight Council, FSOC.
Additionally, the bill would weaken the Dodd-Frank mandate that large
financial companies under the SEC and CFTC's purview conduct internal
stress tests to determine the company's ability to withstand a
recession.
Combined, these rollbacks would allow the Bear Stearns of the world
to take on increasing amounts of risk while regulators are tied up in
lengthy administrative processes.
As former SEC Chair Mary Jo White stated in a December 2014 speech:
``Stress testing is an important tool routinely used by banking
regulators. Implementing this new mandate in asset management, while
relatively novel, will help market participation and the Commission
better understand the potential impact of stress events.''
I agree with Chair White's comments about the importance of stress
testing and think that it simply does not make sound public policy to
eliminate this tool.
Members of the asset management industry have also recognized that
stress testing is critical to effectively managing risk. In a 2015
letter to the SEC, the Asset Management Group of the Securities
Industry and Financial Markets Association, that is SIFMA AMG, whose
members manage more than $30 trillion in assets, wrote: ``Stress
testing is one part of an effective and coherent risk management
process for asset managers, the objective of which is not to test for
solvency or capital adequacy, but to complement other approaches in
assessing investment risk.''
In fact, in a 2015 survey of SIFMA AMG members, nearly two-thirds of
the asset managers surveyed reported that they already stress-test
their funds. It seems imprudent that Congress would repeal a
requirement for large interconnected hedge funds that may have 15-to-1
leverage to periodically determine whether they could withstand a down
economy.
Moreover, given how rapidly failures at large nonbank financial
companies can spread across the highly interconnected financial system,
regulators must be able to quickly identify problems that could
undermine U.S. financial stability. The Federal Reserve should continue
to have the discretionary authority to step in to identify and mitigate
systemic risk at any financial company whose failure could pose a
threat to our economy.
H.R. 4566 appears to ignore that nonbank financial companies like
Bear Stearns, Lehman Brothers, and AIG played a central role in the
financial crisis. When these firms collapsed as a result of their
failure to mitigate their own internal risk, their losses sent
shockwaves throughout the banking system.
Stress testing these kinds of nonbank financial institutions provides
a valuable early warning system for our economy and gives both the
companies and regulators a chance to correct problems before they have
catastrophic effects on our financial stability. That is why I intend
to offer an amendment that, if adopted, would restore the Fed's
discretionary authority to stress test any nonbank, provided that the
test meet certain conditions, including approval by a majority of FSOC
members. It would also allow the Fed to use alternatives to capital, as
appropriate, when stress-testing systemically important nonbanks and
broaden the SEC's and CFTC's authority to require internal testing for
entities under their purview.
This amendment would ensure that large financial institutions, like
investment companies that manage trillions of dollars of hardworking
Americans' retirement savings, can be appropriately evaluated for their
ability to survive in a stressed economy.
While I oppose H.R. 4566 in its current form, I would support an
amended version of the bill that preserves the bill's ability to
identify and mitigate future systemic risk at nonbanks before they lead
to another crisis.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 6 minutes to the gentleman from
Maine (Mr. Poliquin), who is the sponsor of this legislation.
Mr. POLIQUIN. Mr. Speaker, I appreciate the gentleman yielding me the
time, and I thank the chairman for moving this very important piece of
legislation through our committee, the Financial Services
Committee, and onto the floor.
This is a commonsense bill, Mr. Speaker, that I encourage everybody,
Republicans and Democrats, to support, H.R. 4566.
Throughout the great State of Maine and across America, Mr. Speaker,
we have millions and millions of small
[[Page H1714]]
savers and small investors who are planning for their retirement or for
the college education for their kids or their grandkids.
The people of Maine, Mr. Speaker, are the most honest and hardworking
folks you can find anywhere, and every week thousands and thousands of
Maine families are setting aside small parts of their paychecks into an
IRA or a 401(k) plan so they will have enough money for their
retirement, or setting aside small amounts of money for their son or
their daughter to attend a college, a community college, a university,
or a technical school.
Today, Mr. Speaker, almost 55 percent of all American families, about
100 million of our fellow Americans, entrust these savings to mutual
funds and other pension advisers such that they are able to grow and to
provide them with a larger nest egg down the road.
These asset managers, Mr. Speaker, are currently operating under the
uncertainty of whether or not they will be subjected to very costly
and, in many cases, unnecessary stress test regulations which are
designed for large money center banks with very different functions in
our economy.
Mr. Speaker, when a bank takes in deposits from its customers, it is
obligated to return those deposits and, hopefully, with interest. Now,
it is important that those banks have enough reserves to make sure
that, during a recession, they are able to meet those obligations. For
many of these banks, stress testing does make sense.
However, Mr. Speaker, mutual fund and other asset managers perform a
very different function. If one invests for their retirement or their
college savings, their goal is to grow that nest egg, but it is not
guaranteed to be the case by the asset managers who are performing that
job. In effect, Mr. Speaker, these asset managers of mutual funds serve
as an agent for the investor and the small saver, with no liability to
return these savings in full; but, of course, they take the risk for a
better return down the road.
Now, if you do have a huge money center bank with tentacles running
throughout the economy and that bank fails, it could represent a
systemic risk to our economy. But investors in a poorly performing
mutual fund are simply able to switch their account to a better
performing mutual fund house in order for a better return down the road
with no systemic risk to the economy, in part, Mr. Speaker, because the
assets themselves are held at a bank custodian. They are not even held
at the mutual fund company or at the asset management firm.
Now, my bill, Mr. Speaker, H.R. 4566, exempts most nonbank financial
institutions, like mutual funds, from costly stress test requirements.
And this, Mr. Speaker, is so important to our small savers across the
country because, when you have costly, cumbersome, and unnecessary
regulations, they are paid for by the savers in these mutual funds and
by these pension fund investors. And when they are paid out of their
rate of return, their rates of return drop, and, therefore, the value
of their nest eggs drop.
Mr. Speaker, government should be in the job of helping our families
live better lives with more financial security, and H.R. 4566 helps us
do just that by removing one-size-fits-all regulations that fit for
lots of banks but not for the asset management community.
Today, Mr. Speaker, approximately 4 percent of the expenses of asset
managers are for complying with regulations. If we do nothing, that
number is expected to go up to 10 percent of their expenses, just on
compliance, within 5 years. Now, that makes a big difference because
the higher the expenses, the lower the rate of return, the smaller the
nest egg for those who are saving for college or for retirement.
To give support to my point, Mr. Speaker, for the past 10 years,
economists at our own Securities and Exchange Commission and at our own
Treasury have not been able to design a stress test for asset managers
and for thousands and thousands of mutual fund companies across the
country, and that is because it makes no sense to try to do so.
Stress testing as a prudential regulation simply does not fit every
participant in the United States financial services sector. There are
intrinsic differences between banks and asset managers, and my bill,
Mr. Speaker, recognizes that difference and properly exempts most
nonbank financial institutions from stress tests. That, in turn, again,
Mr. Speaker, will lower the cost and increase the rates of return for
Main Street investors across our great State of Maine and across
America.
Mr. Speaker, I thank you very much for the opportunity to address
this very important issue, and I encourage everyone, Republicans and
Democrats, both sides of the aisle, to please vote ``yes'' for H.R.
4566, Alleviating Stress Test Burdens to Help Investors Act.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, first, let me thank my colleagues on the opposite side
of the aisle and my chairman, Mr. Hensarling, for indicating their
acceptance of the amendment.
I think it is extremely important for both sides of the aisle to
appreciate the necessity and the importance of stress testing, and I
think we both do that. The discretion that we afford to the Feds in
this bill, I think, is very important. So this is one of those
instances when both sides can come together and recognize that there
were important indications of what is needed to understand what should
be done to avoid another meltdown in our financial services industries
and our banks.
Again, I don't think there is any need for us to continue to talk
about what we don't like about stress testing, but, rather, we are
coming together to talk about how it is done and why it is important. I
have a great appreciation for that, and I would like to thank my
colleagues for that.
Mr. Speaker, I reserve the balance of my time.
{time} 1445
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
North Carolina (Mr. McHenry), who is the vice chairman of our Financial
Services Committee and the chief deputy majority whip.
Mr. McHENRY. Mr. Speaker, I thank my chairman for yielding time today
on this important bill.
Mr. Speaker, I rise today in support of the Alleviating Stress Test
Burdens to Help Investors Act. It rolls off the tongue to some, maybe
Bruce Poliquin's, the bill's sponsor, but it is an important thing for
us to discuss here today.
Now, hindsight bias is a very dangerous thing. It allows us to
overstate our ability to predict an outcome, and it is something that
lures us into creating a new system that while excellent at solving the
last financial crisis or the last crisis, the last event, it fails to
see the next event coming.
Now, it is not something that just fortune tellers use. It is not
something that just those with an NCAA pool would use to say that all
along they knew UMBC would beat Virginia. It is not just used there.
Here in Washington, it is done by bureaucrats that are susceptible to
these same fallacies.
So in the wake of the financial crisis, policymakers here in
Washington raced to give regulators new tools to help predict future
risks so that such a crisis would never happen again.
One of those tools was stress testing. The idea was to provide a
method to test financial firms to differentiate between solid
institutions that can weather a financial storm and those that would
need help. But this crystal ball has flaws. One of the biggest flaws is
treating all large financial firms the same, a one-size-fits-all
approach, and this includes lumping in nonbank financial firms that
don't use leverage with financial firms--bank firms--that do use
leverage.
Despite this widely understood concept that capital adequacy
standards do not fit neatly into assessing the risks of the asset
management industry, for instance, regulators have instead stuck to
their rigid methodology to try to square the circle, or circle the
square, whatever that phrase is.
Thankfully, Representative Bruce Poliquin has crafted a very solid
bill to address this truth and bring it into reality legislatively. The
stress tests built after the financial crisis do not work for nonbank
financial firms. This is a security show rather than security in fact.
Thus, in a world that constantly throws big and unexpected events our
way, understanding the limitations of
[[Page H1715]]
predicting risk is one of the most important steps we can take to avoid
future harm, and that is what this bill does. I encourage my House
colleagues to vote in support of and in favor of it.
Ms. MAXINE WATERS of California. Mr. Speaker, I reserve the balance
of my time.
Mr. HENSARLING. Mr. Speaker, I am just amazed that anybody from North
Carolina, after being beaten by Texas A&M by 21 points, would make any
allusion to basketball whatsoever. I trust our next speaker will not
make that mistake.
Mr. Speaker, I yield 3 minutes to the gentleman from Missouri (Mr.
Luetkemeyer), who is the chairman of the Financial Services
Subcommittee on Financial Institutions and Consumer Credit.
Mr. LUETKEMEYER. Mr. Speaker, the chairman can be assured that since
my team was one and done, I will skip the bracket discussion here.
Mr. Speaker, I want to start by thanking the gentleman from Maine
(Mr. Poliquin) for his work on this very reasonable legislation.
Stress tests are a good idea that should be standard practice in any
company. What is not a good idea--and, quite frankly, not terribly
helpful in promoting systemic financial stability--is the cryptic and
arbitrary manner in which stress tests are handled today.
Today, the Federal Reserve imposes these stress tests on all
financial firms with more than $10 billion in consolidated assets. This
doesn't apply just to banks, despite the fact that the Fed is a bank
regulator. This requirement to submit information extends to nonbank
financial firms as well.
Mr. Speaker, let me take a moment to walk you through what one of
these stress tests looks like. A financial firm is given cryptic
instructions to run a number of scenarios to test the fortitude of the
institution. That firm then submits tens of thousands of pages to the
Fed. In some cases, that number can climb to more than 100,000 pages at
a cost of millions of dollars.
Mr. Speaker, to give you an idea of what 20,000 pages is, in our
committee hearing, we had a visual aid there with a table about this
size right here in front of me today, about 3 feet tall, and boxes all
around. That is 20,000 pages. Some of these stress tests, Mr. Speaker,
are 100,000 pages, five times that amount, hundreds of thousands--if
not millions--of dollars to do these stress tests; and, quite frankly,
there is very little evidence that the Fed actually reads all the
paperwork. In fact, one day you will probably get a call from the Fed,
and they will tell you whether you passed or not. It is a very
subjective test. There is no real explanation offered if a firm fails.
The message is just to try again and keep trying until you finally pass
the test and guess what the model is. This is not a productive exercise
for anyone.
The truth of the matter is that the Fed has no business conducting
and analyzing stress tests on nonbanks. Those firms have functional
regulators, like the SEC and CFTC, which better understand the business
models and performance of nonbanks and, as such, the risks those firms
pose to the financial stability of the United States. The actual
supervisor of these companies should be the only entity with the
ability to require these sorts of activities, and Mr. Poliquin's bill
allows for that.
Mr. Speaker, this legislation is about promoting thoughtful and
effective legislation. It is about curtailing a one-size-fits-all--as
the chairman mentioned earlier--approach to regulation, something
Members from both sides of the aisle have claimed to support.
Mr. Speaker, I want to again thank the gentleman from Maine for his
leadership on this issue, and I urge support of this legislation.
Ms. MAXINE WATERS of California. Mr. Speaker, I reserve the balance
of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Illinois (Mr. Hultgren), who is the vice chairman of the Financial
Services Subcommittee on Capital Markets, Securities, and Investments.
Mr. HULTGREN. Mr. Speaker, I want to thank my good friend from Maine,
Bruce Poliquin, for sponsoring this bipartisan legislation.
The Alleviating Stress Test Burdens to Help Investors Act amends the
Dodd-Frank Act to make some commonsense changes to stress testing
requirements for asset managers and the investors whom they serve.
Congressman Poliquin has worked very hard to make sure this bill is
bipartisan. In fact, he was able to win the support of two-thirds of
the Democrats on the Financial Services Committee.
I believe this is one of the many bills that Chairman Hensarling has
suggested be part of our negotiations with the Senate on their
regulatory relief package. I agree. Why shouldn't a bill with such
strong bipartisan support at least be part of the conversation?
The idea behind the stress testing for financial institutions under
Dodd-Frank is to make sure that they have enough capital on hand to
cover losses in the case of a market disruption like the one that was
encountered during the financial crisis. However, registered funds have
a very different business model than banks. They do not guarantee any
return to investors or promise that investors will get their principal
back. Furthermore, these funds are not on the adviser's balance sheet.
The idea that an asset manager should hold capital like a bank does
not comport with its business model. Or in the words of Mark Flannery,
a former chief economist of the SEC, there is a false parallel for
stress testing asset managers: ``The parallel to bank stress tests is
really extremely misleading. It is as if Dodd-Frank said `stress test
the big banks, and, oh, you might as well go ahead and do the asset
management companies.' ''
Fortunately, Bruce Poliquin has sponsored commonsense legislation to
provide some regulatory relief in a way that I think Democrats and
Republicans should be able to agree.
The Alleviating Stress Test Burdens to Help Investors Act would
eliminate the bank-like stress testing requirements in Dodd-Frank but
would empower the SEC, the primary Federal regulator of the asset
management industry, to require stress testing as it deems appropriate.
In short, what this bill says is that we should only stress-test
asset managers as their primary regulator determines is in the best
interest of the investors instead of arbitrarily applying bank-like
stress testing requirements as proposed by the Federal Reserve.
It comes as little surprise that the SEC, including under the
leadership of Mary Jo White, seems to agree. The SEC has not been able
to come up with stress testing standards that are consistent and
comparable with those of the Federal Reserve and other banking
regulators, likely because there is no way to account for capital
adequacy in these companies.
Furthermore, this bill does nothing to undermine the significant
regulatory authority to the Financial Stability Oversight Council. The
FSOC would still be able to make recommendations to the SEC for
additional regulation of asset managers.
I am not necessarily endorsing this concept, but I would like to
emphasize this in the hopes that it would encourage even more
Democratic colleagues to join in support of this bill. This bill,
again, is true to its name. It cuts costs that are borne by investors
without subjecting our financial system to any additional risk.
Mr. Speaker, I urge all of my colleagues to join with me in
supporting this bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I continue to reserve
the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Williams), who is the vice chairman of the Financial
Services Subcommittee on Monetary Policy and Trade.
Mr. WILLIAMS. Mr. Speaker, I would like to take the opportunity to
commend my friend and colleague from Maine (Mr. Poliquin) for his
leadership on this important issue. H.R. 4566, the Alleviating Stress
Test Burdens to Help Investors Act, would help nonbanks not currently
under supervision of the Federal Reserve from stress testing
requirements.
In addition to alleviating burdensome requirements, the bill allows
the Securities and Exchange Commission and the Commodity Futures
Trading Commission to issue regulations requiring financial companies
with more than $10 billion in consolidated assets to conduct a periodic
analysis of their
[[Page H1716]]
financial condition, including their liquidity.
This legislation would properly tailor Dodd-Frank's stress test
requirements in a way that is appropriately focused. This bill retains
the SEC's ability to issue stress testing as it believes appropriate.
The bill does not limit the Financial Stability Oversight Council's
authority to request the SEC to adopt suitable requirements for
advisers and funds.
Mr. Speaker, once again, I thank the gentleman from Maine for his
commitment to this important piece of legislation. I encourage all of
my colleagues on both sides of the aisle to support this bill on the
floor.
In God We Trust.
Ms. MAXINE WATERS of California. Mr. Speaker, I continue to reserve
the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Tennessee (Mr. Kustoff), who is a hardworking member of the Financial
Services Committee.
Mr. KUSTOFF of Tennessee. Mr. Speaker, I rise today in support of
H.R. 4566, the Alleviating Stress Test Burdens to Help Investors Act,
which was introduced by my colleague, Representative Poliquin.
Mr. Speaker, millions of Americans rely on registered funds to invest
and save for their future, and they rely on asset management advisers
to assist them in making major financial decisions, such as paying
college tuition, saving for retirement, or buying a home.
However, too often these advisers have their hands tied complying
with burdensome regulations that were not intended for the type of
financial institutions that they serve. Following the enactment of
Dodd-Frank, a framework was created to assess systemic risk posed by
financial institutions, and this framework looked at the risk from a
bank-centric approach.
In addition, Dodd-Frank required all financial companies with total
consolidated assets of more than $10 billion to conduct various annual
stress tests to comply with the law. Now, unfortunately, this broad
definition sweeps in registered investment companies and requires that
these nonbank institutions be held accountable for the same stress
tests as banks.
This particular stress test does not make sense for the asset
management industry and only adds costs that will end up putting the
burden on investors who rely on these funds.
Again, the U.S. asset management industry is critical in promoting
diverse investment and savings opportunities for individuals, for
families, and for businesses. This important legislation would
eliminate unnecessary costs for nonbank financial institutions that
have not been designated as systemically important by removing Dodd-
Frank's bank-centric, mandatory stress test requirement.
As we continue to explore new ways to help families save for their
future or buy a new home, we should remain focused on improving their
ability to invest. I want to thank Representative Poliquin and Chairman
Hensarling for their important work on this legislation, and I urge my
colleagues to vote ``yes'' on this important bill.
{time} 1500
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself the
balance of my time.
Mr. Speaker, I am very pleased about the work that staff has done on
this particular legislation.
I do believe that we all agree that stress tests are important; it is
a matter of who, how, and when.
Someone has likened stress tests to car testing, where, in the
manufacture of new cars, you take them out on the road and you test
them to see if they can withstand what they may be presented with in
the terrain and with the kind of things that you would experience
perhaps on the roughest roads that they test on. When they determine
that there are weaknesses that can be corrected, that is what they do
in order to make sure that this new vehicle that they are testing can
withstand whatever the difficulties are that may be presented to them
when they test a car.
That is what this stress testing is all about. It all about whether
or not, in the event of a downturn in our economy, you have the ability
to withstand the downturn, whether or not you have the ability to not
only withstand what you are presented with in a downturn of the
economy, but how you can fix what you have determined is wrong with
what you are doing.
So I am, again, very pleased that we all agree that stress testing is
extremely important and that we know what your concerns are about hedge
fund and asset managers and all of that. But the discretion that we
give to the Feds, I think, is very important. The fact that all of the
businesses that we are concerned with will be doing their internal
stress testing is extremely important.
So, again, I am very grateful for the acceptance of my amendment, and
I am hopeful that, with this amendment, it demonstrates that, when we
work very hard to reconcile our differences, we can do that.
Mr. Speaker, I would ask that, with this amendment, all of the
Members of the House vote for this legislation, and I yield back the
balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, once again, I want to encourage all of my colleagues to
support H.R. 4566, the legislation from the gentleman from Maine. I
want to commend him once again. He is one of our most hardworking
members on the committee, and he cares passionately about his
constituents in Maine.
I also want to commend him for once again working on a very
bipartisan basis. He has managed to change his bill from its original
concept many times to try to garner more support from the other side of
the aisle.
With the acceptance of the ranking member's amendment, again, I am
hopeful that we will have a very, very strong vote in the House. Again,
this came out of committee with a very strong bipartisan vote of 47-8.
Mr. Speaker, very often we debate regulation. I think that now,
fortunately, we have a 3 percent growth Tax Code which has been passed
by Congress, but, unfortunately, I do not believe we have a 3 percent
growth of finance in the banking system.
That is important. It is important to our constituents who still need
credit to buy that first home, a factory worker who needs to get their
transmission repaired so that they can go to work, some parent trying
to send a kid to college, or people trying to plan for their
retirement.
Too often, I think we have a dichotomy between regulation and
deregulation, when the real dichotomy is between smart regulation and
dumb regulation. It is always incumbent upon us in Congress to look
very carefully at these regulations. Sometimes they look very good on
the chalkboard, but in reality, they don't quite render the results or
benefits that we had hoped for. So we always have to take a look at
what this is doing not just to consumer and investor protection, but
what it is doing to economic growth as well.
I agree with the ranking member. Stress testing is a good concept. It
is one of the reasons why banks and other financial firms typically
stress-test themselves daily, weekly, monthly, annually.
What doesn't make sense, though, is that there be no recognition to
the cost that it imposes, as the gentleman from Missouri, the chairman
of our Financial Institutions and Consumer Credit Subcommittee, was
very articulate in reminding us that these submissions can cost us
millions and millions of dollars. The reports are not measured in
pages; they are measured by the pound. There can be 10- and 20-pound
submissions of paper that we wonder if anybody ever reads.
But what especially doesn't make sense is trying to apply a bank
stress test to a nonbank financial institution, particularly an asset
manager. I know the ranking member was talking a little bit earlier
about using an analogy to auto inspections: It makes no sense to have
the home inspectors inspect your auto; it makes no sense to have the
auto inspectors inspect your home.
The gentleman from Maine is ensuring that whatever stress test is
applied, it is applied properly to the business model that needs to be
tested for its potential stress of our financial system.
So, again, I just want to commend the gentleman from Maine for his
hard work, and I urge all Members to vote in favor of H.R. 4566
because, indeed,
[[Page H1717]]
maybe it is not a catchy title, but it is an accurate title. As we
alleviate stress test burdens, we do help investors.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Hudson). All time for debate on the bill
has expired.
Amendment No. 1, as Modified, Offered by Ms. Maxine Waters of
California
The SPEAKER pro tempore. It is now in order to consider amendment No.
1, as modified, printed in House Report 115-613.
Ms. MAXINE WATERS of California. Mr. Speaker, I have an amendment at
the desk made in order under the rule.
The SPEAKER pro tempore. The Clerk will designate the amendment, as
modified.
The text of the amendment, as modified, is as follows:
Page 1, strike lines 8 and 9 and insert the following:
(1) in paragraph (1)(B)--
(A) by redesignating clauses (ii) through (v) as clauses
(iii) through (vi), respectively;
(B) by inserting after clause (i) the following:
``(ii) may conduct the evaluation required by this
subsection utilizing alternatives to the capital adequacy
test described in subparagraph (A), as the Board may
determine appropriate;'';
(C) in clause (iii), as so redesignated, by inserting
before the semicolon the following: ``, provided that such
tests of any nonbank financial company--
``(I) are requested by a majority vote of the Council;
``(II) are conducted in accordance with the company's
business model, including by utilizing alternatives to the
capital adequacy test described in subparagraph (A), as the
Board may determine appropriate; and
``(III) are not already required by the company's Federal
primary financial regulatory agency''; and
(D) in clause (vi), as so redesignated, by striking
``clause (ii)'' and inserting ``clause (iii)''; and
Page 2, beginning on line 10, strike ``and that have total
consolidated assets of more than $10,000,000,000''.
The SPEAKER pro tempore. Pursuant to House Resolution 787, the
gentlewoman from California (Ms. Maxine Waters) and a Member opposed
each will control 5 minutes.
The Chair recognizes the gentlewoman from California.
Ms. MAXINE WATERS of California. Mr. Speaker, in its current form,
H.R. 4566 eliminates the Fed's discretion to require stress testing on
nonbanks that have not yet been designated as systemically important
and weakens the Dodd-Frank Act's mandate that the SEC and CFTC require
nonbank financial companies under their authority to conduct annual
stress tests. Together, these repeals create a loophole that would
allow large brokerage firms and mega insurance companies to ignore
risks while regulators are tied up in lengthy rulemaking or the FSOC
designation process.
My amendment, if adopted, would restore the Fed's discretionary
authority to stress-test any nonbank financial firm, provided that the
test is requested by a majority vote of the FSOC, is conducted with
consideration of the company's business model, and is not already
required by the company's primary regulator.
My amendment would also allow the Fed to consider alternatives to the
existing capital adequacy test, where appropriate, when conducting
stress tests on nonbanks, including those designated as systemically
important.
One of the key safeguards created by Dodd-Frank is the Fed's ability
to identify and mitigate risks in the financial system before they
undermine the U.S. economy. By preserving the Fed's ability to stress-
test nonbank financial companies on a discretionary basis, my amendment
will give regulators a better chance of preventing the next Bear
Stearns or Lehman Brothers from dragging down our financial system.
Finally, my amendment would broaden the SEC's and CFTC's authority
under the bill by striking the provision that would limit future
company-run stress testing requirements to entities with more than $10
billion in assets. This would ensure that the SEC and CFTC can require
any financial company under their purview to evaluate their own ability
to survive in a stressed economy.
While I oppose H.R. 4566 as currently drafted, with this amendment,
the bill would represent a truly bipartisan effort to strengthen Dodd-
Frank. Mr. Speaker, I would urge my colleagues to vote ``yes'' on my
amendment.
I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent to claim the
time in opposition to the amendment, although I am not opposed.
=========================== NOTE ===========================
March 20, 2018, on page H1717, the following appeared: Mr.
HENSARLING. Mr. Speaker, I unanimous consent to claim the time in
opposition to the amendment, although I am not opposed.
The online version has been corrected to read: Mr. HENSARLING.
Mr. Speaker, I ask unanimous consent to claim the time in
opposition to the amendment, although I am not opposed.
========================= END NOTE =========================
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. SPEAKER pro tempore. The gentleman from Texas is recognized for 5
minutes.
Mr. HENSARLING. Mr. Speaker, I am not thrilled with the amendment,
but in the spirit of compromise and the spirit of bipartisanship, we
have worked with the ranking member and the sponsor of the legislation.
It wouldn't be my preferred approach, but that is often what we do
around here.
I want to thank the ranking member for working with the majority side
in order to advance this, again, as a very strong bipartisan vote in
the House, which I hope and anticipate with the inclusion of this
amendment.
I would point out, Mr. Speaker, again, I am very happy. On the other
side of the Capitol, they have recently advanced a number of kind of
smart regulatory measures and capital formation measures. We look
forward to negotiating with our friends in the Senate. I am hoping that
an overwhelming vote on a bill like H.R. 4566 is one that could be in a
final package before it goes to the President's desk.
Again, I still think that, although we have all compromised a little
something here, I think we all advance our principles. I think it is
something that will help, actually, both financial stability and
investor protection, including protecting their opportunities to have a
better future.
So again, I want to thank the ranking member for working with us, and
I would urge the House to adopt her amendment and adopt H.R. 4566 by
Mr. Poliquin of Maine.
Mr. Speaker, I yield to the gentleman from Maine (Mr. Poliquin).
Mr. POLIQUIN. Mr. Speaker, who says that a terrific Representative
from one of the most urban areas in the country, Los Angeles,
California, cannot get together with a Representative from one of the
most rural parts of America up in the great State of Maine?
I thank Ranking Member Waters for her extension of bipartisanship. I
also thank Chairman Hensarling very much for brokering this. This is
going to be a great day for America, a great day for Maine, and a great
day for California.
Mr. HENSARLING. Mr. Speaker, I yield back the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I thank the gentleman
for those kind words, and I yield back the balance of my time.
The SPEAKER pro tempore. Pursuant to the rule, the previous question
is ordered on the bill, as amended, and on the amendment, as modified,
offered by the gentlewoman from California (Ms. Maxine Waters).
The question is on the amendment, as modified, by the gentlewoman
from California (Ms. Maxine Waters).
The amendment, as modified, was agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The vote was taken by electronic device, and there were--yeas 395,
nays 19, not voting 15, as follows:
[Roll No. 119]
YEAS--395
Abraham
Adams
Aderholt
Aguilar
Allen
Amash
Amodei
Arrington
Babin
Bacon
Banks (IN)
Barr
Barragan
Barton
Bass
Beatty
Bera
Bergman
Beyer
Biggs
Bilirakis
Bishop (GA)
Bishop (MI)
Bishop (UT)
Blackburn
Blum
Blumenauer
Blunt Rochester
Bonamici
Bost
Brady (PA)
Brady (TX)
Brat
Bridenstine
Brooks (AL)
Brooks (IN)
Brown (MD)
Brownley (CA)
Buchanan
Buck
Bucshon
Budd
Burgess
Bustos
Butterfield
Byrne
Calvert
Capuano
[[Page H1718]]
Carbajal
Cardenas
Carson (IN)
Carter (GA)
Carter (TX)
Cartwright
Castor (FL)
Castro (TX)
Chabot
Cheney
Cicilline
Clarke (NY)
Clay
Cleaver
Clyburn
Coffman
Cohen
Cole
Collins (GA)
Collins (NY)
Comer
Comstock
Conaway
Connolly
Cook
Cooper
Correa
Costa
Costello (PA)
Courtney
Cramer
Crawford
Crist
Crowley
Cuellar
Culberson
Curbelo (FL)
Curtis
Davidson
Davis (CA)
Davis, Rodney
DeFazio
DeGette
Delaney
DeLauro
DelBene
Demings
Denham
Dent
DeSantis
DesJarlais
Deutch
Diaz-Balart
Dingell
Doggett
Donovan
Doyle, Michael F.
Duffy
Duncan (SC)
Duncan (TN)
Dunn
Emmer
Engel
Eshoo
Estes (KS)
Esty (CT)
Evans
Farenthold
Faso
Ferguson
Fitzpatrick
Fleischmann
Flores
Fortenberry
Foster
Foxx
Frankel (FL)
Frelinghuysen
Fudge
Gabbard
Gaetz
Gallagher
Gallego
Garamendi
Garrett
Gianforte
Gibbs
Gohmert
Gomez
Gonzalez (TX)
Goodlatte
Gosar
Gottheimer
Gowdy
Granger
Graves (GA)
Graves (LA)
Graves (MO)
Green, Al
Green, Gene
Griffith
Grothman
Guthrie
Hanabusa
Handel
Harper
Harris
Hartzler
Hastings
Heck
Hensarling
Herrera Beutler
Hice, Jody B.
Higgins (LA)
Higgins (NY)
Hill
Himes
Holding
Hollingsworth
Hudson
Huffman
Huizenga
Hultgren
Hunter
Hurd
Issa
Jackson Lee
Jeffries
Jenkins (KS)
Jenkins (WV)
Johnson (LA)
Johnson (OH)
Johnson, Sam
Jordan
Joyce (OH)
Kaptur
Katko
Keating
Kelly (MS)
Kelly (PA)
Kennedy
Kihuen
Kildee
Kilmer
Kind
King (IA)
King (NY)
Kinzinger
Knight
Krishnamoorthi
Kuster (NH)
Kustoff (TN)
Labrador
LaHood
LaMalfa
Lamborn
Lance
Langevin
Larsen (WA)
Larson (CT)
Latta
Lawrence
Lawson (FL)
Levin
Lewis (GA)
Lewis (MN)
Lieu, Ted
LoBiondo
Loebsack
Lofgren
Long
Loudermilk
Love
Lowenthal
Lowey
Lucas
Luetkemeyer
Lujan Grisham, M.
Lujan, Ben Ray
Lynch
MacArthur
Maloney, Carolyn B.
Maloney, Sean
Marchant
Marino
Marshall
Massie
Mast
Matsui
McCarthy
McCaul
McClintock
McCollum
McEachin
McGovern
McHenry
McKinley
McMorris Rodgers
McNerney
Meadows
Meehan
Meeks
Meng
Messer
Mitchell
Moolenaar
Mooney (WV)
Moore
Moulton
Mullin
Murphy (FL)
Nadler
Napolitano
Neal
Newhouse
Noem
Nolan
Norcross
Norman
Nunes
O'Halleran
O'Rourke
Olson
Palazzo
Pallone
Palmer
Panetta
Pascrell
Paulsen
Payne
Pearce
Pelosi
Perlmutter
Perry
Peters
Peterson
Pittenger
Poe (TX)
Poliquin
Polis
Posey
Price (NC)
Quigley
Raskin
Ratcliffe
Reed
Reichert
Renacci
Rice (NY)
Rice (SC)
Richmond
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rohrabacher
Rokita
Rooney, Francis
Rooney, Thomas J.
Ros-Lehtinen
Rosen
Roskam
Ross
Rothfus
Rouzer
Roybal-Allard
Royce (CA)
Ruiz
Ruppersberger
Russell
Rutherford
Ryan (OH)
Sanford
Scalise
Schiff
Schneider
Schrader
Schweikert
Scott (VA)
Scott, Austin
Scott, David
Sensenbrenner
Sessions
Sewell (AL)
Shea-Porter
Sherman
Shimkus
Shuster
Simpson
Sinema
Sires
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Smith (WA)
Smucker
Soto
Stefanik
Stewart
Stivers
Suozzi
Swalwell (CA)
Takano
Taylor
Tenney
Thompson (MS)
Thompson (PA)
Thornberry
Tipton
Titus
Tonko
Torres
Trott
Tsongas
Turner
Upton
Valadao
Vargas
Veasey
Vela
Velazquez
Wagner
Walberg
Walden
Walker
Walorski
Walters, Mimi
Wasserman Schultz
Waters, Maxine
Watson Coleman
Weber (TX)
Webster (FL)
Welch
Wenstrup
Westerman
Williams
Wilson (SC)
Wittman
Womack
Woodall
Yarmuth
Yoder
Yoho
Young (AK)
Young (IA)
Zeldin
NAYS--19
Boyle, Brendan F.
Clark (MA)
DeSaulnier
Ellison
Espaillat
Grijalva
Gutierrez
Jayapal
Johnson (GA)
Khanna
Lee
Pocan
Sanchez
Sarbanes
Schakowsky
Serrano
Speier
Visclosky
Wilson (FL)
NOT VOTING--15
Barletta
Black
Chu, Judy
Cummings
Davis, Danny
Hoyer
Johnson, E. B.
Jones
Kelly (IL)
Lipinski
McSally
Pingree
Rush
Thompson (CA)
Walz
{time} 1543
Messrs. KHANNA, ELLISON, and Ms. LEE changed their vote from ``yea''
to ``nay.''
Mr. CAPUANO, Ms. MATSUI, Messrs. GONZALEZ of Texas, GENE GREEN of
Texas, NORCROSS, Mrs. TORRES, Mses. CLARKE of New York, ROYBAL-ALLARD,
Mr. YARMUTH, Mses. SHEA-PORTER, CASTOR of Florida, Messrs. TONKO,
ENGEL, TAKANO, and GALLEGO changed their vote from ``nay'' to ``yea.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________