[Congressional Record Volume 164, Number 114 (Monday, July 9, 2018)]
[Senate]
[Pages S4836-S4837]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                         Stress Tests for Banks

  Mr. BROWN. Mr. President, earlier this month, the Fed released the 
results of its annual stress test--exercises designed to ensure that 
the largest banks can withstand economic shocks and will not need 
another taxpayer bailout in the event of a crisis. These stress tests 
were not in effect a decade ago before the last crisis and likely would 
have prevented--or made much softer--the economic landing that we had.
  What happened with these annual stress tests that just came out 
illustrates exactly what is wrong with Washington, what is wrong with 
this Congress, and what is wrong with Wall Street.
  The Fed allowed the seven largest banks to redirect $96 billion--that 
is 96 thousand million--that should be used to pay workers, reduce fees 
for consumers, or protect taxpayers from bailouts. Instead, it allowed 
the seven largest banks to plow that money into share buybacks and 
dividends to reward wealthy executives and generally wealthy investors. 
Two banks, Goldman Sachs and Morgan Stanley, had capital below the 
required amounts. That is right. Those banks failed the test, but they 
got passing grades anyway. The Fed called them up, let them haggle over 
the test results, and allowed them to proceed with buybacks and 
dividends that drained their required capital.
  In what classroom in America would a teacher grade a paper and 
preliminarily give it an F and then negotiate with the student over 
test results and then say, OK, you passed? But the stakes in this case 
are a lot higher than one midterm exam. We are talking about the 
biggest banks in the country. We are talking about whether they send 
money to the wealthiest investors or, instead, have enough skin in the 
game to protect taxpayers.
  So why are these buybacks such a problem? Share buybacks and 
dividends juice stock prices but do little to increase long-term growth 
in companies and do very little to reward the workers who make a 
company's success possible.
  During the last crisis, we saw big banks send money out the door with 
buybacks and dividends just months before they imploded and cost 
taxpayers billions. Watchdogs in the Bush administration had the tools 
to intervene sooner but, instead, courted Wall Street at the expense of 
the rest of the country. Some of those regulators today were in the 
Treasury Department, in the Bush White House, and the Fed in those days 
and didn't see the crisis coming. They turned their backs and said: It 
is OK to allow these dividends and allow these stock buybacks.
  Back to this year, the seven largest banks in the country increased 
their 2018 stock dividends paid to investors by 24 percent compared to 
last year. The banks that the Fed allowed to increase their stock 
buybacks increased their repurchases by a stunning 63 percent. What 
teller, what salesperson, what branch bank manager in Lorain, OH, 
Mansfield, OH, or Miamisburg, OH, got a raise like that in the last 
year?
  My colleagues don't think much about this, but the average teller in 
America makes $12.50 an hour. Bank executives are making $5 million, 
$10 million, and $20 million, and they get big raises on top of that. 
They get stock buybacks, juicing their compensation as their 
stockholdings go up and up. Yet the average teller makes $12.50 an 
hour.
  Wells Fargo doubled its buybacks--an increase of more than 100 
percent. The money spent on stock buybacks alone is 314 times more than 
what it would cost the bank to boost employee wages to $15 an hour. 
Remember that the average teller makes $12.50 an hour in this country.
  Wells CEO Tim Sloan got a 36-percent raise last year, even in the 
wake of scandal after scandal. I found the ads you see all over the 
place, watching a Cleveland Indians game on TV, sitting in my living 
room in Cleveland. I have seen these ads in Washington. I have seen 
them all over--how Wells Fargo is going to learn from its past 
mistakes. They were once the greatest company, they failed, and now 
they will be a great company again. But they gave their CEO--who 
clearly has had some serious issues at that bank--a 36-percent raise.
  Again, tellers make $12.50 an hour. Wall Street banks are rewarding 
themselves rather than workers and, in the process, draining the 
capital that should be their safeguard against taxpayer bailouts.
  I hear my colleagues on both sides of the aisle say: We will never 
allow a bailout again.
  We are doing things that will set us up to do that because we are 
moving away from the reforms we made. The problem is getting worse. The 
Fed wants to make the tests even easier next year, weakening the key 
constraints that caused Goldman Sachs and Morgan Stanley to fail this 
year, or would have caused them to fail if they hadn't talked their way 
out of it. It is quite a student who can talk their teacher out of it.
  Federal Reserve Vice Chair Randal Quarles has also floated giving 
more leeway to banks to comment on the tests before they are 
administered. I like Vice Chairman Quarles. I did not vote to confirm 
him. I like him. I respect him. I sat across the table from

[[Page S4837]]

him for 2 or 3 hours, probably total, over his time there. I assume I 
will get to know him better as we talk on these issues. But he was in 
the Bush administration as the crisis built and built, when the economy 
was about to implode. He said things were rosy. We are trusting him. He 
is the Vice Chair for Supervision. We are entrusting him and others at 
the Fed to say that it is OK to give leeway to bankers to comment on 
the tests before they are administered. It is like helping students 
write the exam. We wouldn't do it anywhere else, but we do it with 
banks who risk our economy with their instability.
  They are even considering dropping the qualitative portion of the 
stress test altogether. That is the part of the test that examines 
banks' risk management processes, data systems, and the fitness of its 
very well-paid board of directors. I am not sure of the precise number, 
but boards of directors in the seven largest banks, I believe, all make 
at least $200,000 a year. I know they average significantly more than 
that--for part-time jobs. They are important jobs. They also have other 
jobs--most of them--but jobs where they so often seem to turn their 
heads at all of these problems.
  Banks such as Deutsche Bank, Santander, HSBC, RBS--all foreign-owned 
banks--and Citigroup, an American bank, have all failed on qualitative 
grounds before. But rather than taking that as evidence that these 
banks need to shape up, they are considering scrapping this critical 
part of the exam. The Dodd-Frank rollback bill that this Congress just 
passed will also make things worse next year.
  Right now the Fed is considering how to replace existing stress tests 
for banks with between $100 billion and $250 billion in assets to make 
them easier on the banks and less frequent--easier on the banks and 
less frequent. Rather than having annual company-run stress tests for 
the largest banks--those with more than $250 billion in assets--the 
tests now, because of the new law that bank lobbyists and President 
Trump wanted, will only be required to be periodic. They used to be 
annual. Now we are saying periodic. Who interprets ``periodic''? A 
bunch of Fed regulators that have already shown to be too close to bank 
interests.
  All of this test curving comes alongside the weakening of other 
financial protections: dismantling the Consumer Financial Protection 
Bureau, undermining the Volcker rule, weakening the Community 
Reinvestment Act--as if there is no discrimination in this country 
anymore--and loosening rules around bank capital.
  Imagine if the people in this town listened as much to workers as 
they did to Wall Street bankers. But money talks in this town. 
Lobbyists talk, representing money. Wall Street talks, representing 
money. Executives talk, representing money.
  We have very profitable banks--banks that taxpayers bailed out. 
Congress in the last year gave these banks huge tax cuts. Congress 
passed a deregulation bill that these banks demanded. We saw an article 
in the paper recently that Wall Street is retooling its whole lobbyist 
network in Washington because they didn't get quite enough on the 
banking deregulation bill. They thought it did a lot for community 
banks and midsized banks but not enough for the big guys. So they are 
retooling. I am not making this up. They are retooling their operations 
so they can do better. You have a Vice Chair for Supervision who 
clearly favors Wall Street in the rules that he has already suggested.
  Boy, it is good to be a bank. It is great to be a banker in America. 
It is great to be a banker in 2018. It is great to be a banker in 
Trump's America.
  I yield the floor.
  Mr. ENZI. Mr. President, I rise today to express my opposition to the 
nomination of Mark Bennett to be a circuit judge for the Ninth Circuit 
Court of Appeals.
  Mr. Bennett has had a long legal career and has served as the 
attorney general of Hawaii. My concerns lie not in his resume, but in 
his public history of opposing constitutionally protected freedoms 
essential to our way of life.
  I have been and always will be a defender of the right of people to 
keep and bear arms. Wyoming is a State full of law-abiding gun owners 
who grow up learning to respect firearms and how to use them 
responsibly. Folks use them for a variety of purposes, everything from 
self-defense to hunting to work.
  As Hawaii's attorney general, Mr. Bennet joined four other State 
attorneys general in an amicus curie brief on behalf of the District of 
Columbia in the Supreme Court case District of Columbia v. Heller. The 
brief argued that the Second Amendment protects no individual right to 
bear arms. This position worries me that he would not uphold Supreme 
Court precedent on the Second Amendment.
  At a time when so many critical issues are being litigated in our 
courts, I cannot vote to confirm a nominee with a background of 
opposing fundamental constitutional rights. Therefore, I must oppose 
the nomination of Mr. Bennett.
  Thank you. The PRESIDING OFFICER. The Senator from North Carolina.

  Mr. TILLIS. Mr. President, I ask unanimous consent that 
notwithstanding the provisions of rule XXII, all postcloture time on 
the Bennett nomination be considered expired at 2:15 p.m. tomorrow and 
the Senate immediately vote on the nomination; that if confirmed, the 
motion to reconsider be considered made and laid upon the table and the 
President be immediately notified of the Senate's action.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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