[Congressional Record Volume 164, Number 144 (Tuesday, August 28, 2018)]
[Senate]
[Pages S5978-S5979]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                     Nomination of Richard Clarida

  Mr. President, today we consider the nomination of Dr. Richard 
Clarida for two positions at the Federal Reserve Board of Governors--
Vice Chair for a term of 4 years and a member of the Board for an 
unexpired term of 14 years. That is the way the Fed works. A person is 
on the Board and then serves in some special--supervision or Vice 
Chair. Generally, those titles go along with the appointment.
  The Federal Reserve hasn't had a full Board since August 2013. Why is 
that? President Obama nominated Allan Landon--a small community bank 
owner, I believe, from Hawaii--and Professor Kathryn Dominquez, who 
both stepped up to serve their country. They put a number of their life 
activities on hold in order to serve on the Federal Reserve. Yet the 
chairman of the Banking Committee--not the present chairman, Senator 
Crapo--the former chairman of the Banking Committee simply refused to 
give a hearing on either of them.
  We have seen that on the Export-Import Bank. We saw that on a number 
of Transportation nominations. We saw it on the Federal Reserve. Time 
after time, if Obama nominated someone, the Senate Banking Committee 
and the Senate floor refused to confirm.
  Trump, as President now for only 18, 19 months, will have the ability 
to nominate six of the seven Fed Governors to 14-year terms. Think 
about that. Board members do vital work on monetary policy, and their 
work affects the financial situation of Ohio families. They set rules 
for the Nation's largest banks--the banks that caused the financial 
crisis.
  You can't underestimate the collective amnesia of this body when it 
comes to financial deregulation and the financial amnesia of the 
Banking Committee, which continues to give Wall Street anything it asks 
for--more profits, more deregulation, and more tax cuts.
  As I said, the Board sets rules for the Nation's largest banks--the 
banks that caused the largest financial crises and cost millions of 
jobs and so many families their homes.
  As I have said a number of times, my wife and I live in the Cleveland 
ZIP Code 44105. In 2007, that ZIP Code had more foreclosures than any 
ZIP Code in the United States of America. You still see the residue of 
that and the results of those foreclosures. We know the pain that 
inflicted on millions of families across the country and thousands of 
families within 2 or 3 miles or 4 miles of my house. Yet we barely 
recognize anymore in this body what happened because this body didn't 
do its job, Federal regulators in the Bush administration didn't do 
their jobs, and Wall Street was so greedy.

[[Page S5979]]

  Fast-forward to this year. Board members will decide whether to 
finalize the Fed's proposal to roll back capital and leverage 
requirements. Think about that. That is the collective amnesia. The 
regulators--whether it is the OCC, the Federal Reserve, the FDIC, or 
the Treasury Department--are willing to weaken rules across the board 
that are there to protect the stability of our financial system. Yet it 
is as if we forgot what happened 10 years ago.
  If adopted, the plan that the Fed is considering right now will allow 
the eight largest banks in the country to pour $121 billion into stock 
buybacks and dividends. That is giving executives who already make 
millions of dollars in compensation--it is giving them more. Those are 
funds that could be used to pay workers, cut fees for consumers, and 
protect taxpayers from bailouts. It is never enough for Wall Street. 
Big tax cuts are never enough. More deregulation is never enough. 
Biggest profits ever are never enough. Huge compensation is never 
enough.
  Members of the Fed Board will also vote on a Fed proposal to weaken 
limits on speculative trading. These restrictions, devised by a former 
Fed Chair more than 25 years ago, protect taxpayers by preventing big 
banks from taking risks--big risks--with hard-working families' savings 
accounts. If there is any better example of the collective amnesia of 
politicians and regulators in Washington, DC, it is this. And that is 
compounded by--if you look up the street at 1600 Pennsylvania Avenue, 
the White House looks like a retreat for Wall Street executives. One 
Wall Street executive after another is hired by the White House.
  Governors on the Fed Board will also have a say on the Fed's stress 
test--the yearly exercise designed to prevent a big bank from being 
able to bring down our entire economy.
  Why would we want to do this? Why would we weaken these rules as 
banks are making bigger profits, bank executives are getting greater 
compensation, and when banks got such a huge tax cut? Why would we 
weaken rules so they can have more at the possible expense of the 
stability and strength of the financial system?
  We have already seen the damage this administration's Wall Street-
friendly appointees can do. In July, the Fed allowed the seven largest 
banks to plow $96 billion--any way you calculate it, that is about $14 
billion each; some a little more, some a little less--allowed them to 
plow $96 billion into dividends and buybacks so CEOs can make more 
money. They didn't put it in workers' paychecks.
  Mr. President, do you know what the average teller in this country 
makes? Go into a local branch bank. The average teller makes $12.50 an 
hour. At my 45th high school reunion in Mansfield, OH, I sat across the 
table from a woman who was working for one of the largest banks. She 
worked there for 30 years, and she makes $30,000 a year. But it is 
never enough for the CEOs, never enough for top management.
  At a time when big banks post record profits, they should be building 
capital cushions to protect themselves from tough times. They should be 
giving raises to workers who power these companies. Instead, the Fed 
undermines the lessons from the last crisis and lets the banks drain 
away their rainy-day funds.
  Three banks--Goldman Sachs, Morgan Stanley, and State Street--all had 
capital below the amount required under the stress tests, but do you 
know what happened? The Fed gave them passing grades anyway. What are 
the stress tests for? They are called tests. If you fail a test, you 
should do something to correct it. They patted them on the back: It is 
OK. You tried. You may have not have gotten a passing grade, but we 
will let you go anyway.
  What is the Fed's response, in addition to giving these three banks a 
pass? The Fed wants to make next year's stress test even easier to 
pass. Vice Chair Quarles has suggested that he wants to give bankers 
more leeway to comment on the tests before they take them. So they are 
going to make them easier. They are going to talk to the banks and say: 
How do we write it so it will be easier for you to pass it? Maybe we 
will show you ahead of time what the tests are.
  I don't remember that in eighth grade, junior high, or college, where 
the professor or teacher would say: Sherrod, come up to my desk. I will 
tell you what this test will be, and I will give you advice on how to 
pass it.
  The Fed is considering dropping the qualitative portion of the stress 
test altogether, even though Deutsche Bank, Santander, HSBC, RBS, and 
Citigroup failed on qualitative grounds before.
  Most of those banks I mentioned are foreign banks. Some had real 
problems internationally in the strength and the viability of those 
banks.
  That doesn't even include changes the Fed is working on after 
Congress passed S. 2155 to weaken Dodd-Frank more, making company-run 
stress tests for the largest banks periodic. They used to be annual, 
but now they are periodic. Guess who gets to decide how often periodic 
is. It happens to be the same Wall Street people the President 
appointed to the Fed to decide how often these tests will be.
  So we are making them weaker. We let you pass even if you don't. We 
are going to make them weaker, and then we are going to let the people 
being tested know more about them before the tests run. Then we will 
make them periodic, so they won't take them as often. This is really a 
way to make sure these banks aren't strong enough to make sure they can 
weather a storm.
  Vice Chair Quarles also made it clear that massive foreign banks can 
expect goodies too. The Fed may also weaken the Community Reinvestment 
Act, a law that ensures that low- and moderate-income communities have 
access to credit. It goes on and on.
  While Dr. Clarida is an expert in monetary policy, during his 
nomination hearing, he failed to provide the committee with meaningful 
insight into his views on the important issues that will be considered 
by the Fed. I know that a number of us on both sides asked questions, 
but I couldn't get clear answers during the hearings on leverage, on 
the Community Reinvestment Act, on taxpayer protections for the biggest 
banks, and on diversity and so many other issues that impact the people 
we serve.
  I asked him to respond to these questions in writing. Putting it 
mildly, we were disappointed. He is a distinguished professor. We asked 
him specific questions, but the answers we got were pretty much 
identical to the responses from another Federal Reserve nominee, 
Michelle Bowman. So instead of writing the answers themselves, it is 
clear that the Fed's staff wrote them and gave them to the two of them, 
so they gave identical answers. That doesn't tell us anything about 
what he actually thinks.
  When banks are making record profits, the Fed should be preparing the 
financial system for the next crisis. They should ensure that banks are 
resilient, focus on increasing employment and wages, and combat asset 
bubbles. But over the last 6 months, I have seen the Fed only moving in 
the wrong direction--weakening rules and bowing to special interests. 
Remember I said that the White House looks like a retreat for Wall 
Street executives? They are bowing to those interests and making it 
easier for big banks to cut corners. I have only become more worried 
about whether the Fed can protect taxpayers and homeowners from the 
next crisis.
  We need strong financial watchdogs, not lapdogs. We need individuals 
who have their own ideas on the causes and impacts of the financial 
crisis and who take seriously their role to protect taxpayers and 
homeowners from Wall Street abuse. I am not confident that is the case 
with this nominee.
  The Ohioans I represent need to know how the people nominated serve 
them think about these important issues. We haven't gotten that from 
this nominee. That is why I cannot support and why I plan to vote no on 
Dr. Clarida.
  The PRESIDING OFFICER. The Senator from Missouri.