[Congressional Record (Bound Edition), Volume 161 (2015), Part 9]
[Senate]
[Pages 12114-12116]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         DODD-FRANK REGULATIONS

  Mr. LANKFORD. Mr. President, I come to the floor with a happy 
birthday message today. I come with wishes for a happy birthday for the 
fifth birthday of the Dodd-Frank regulations.
  Where are we as a nation with this wonderful 5-year-old running 
around our Nation right now, pushing out birthday cake across every 
bank and financial institution across the country? Exactly how is that 
going?
  Let me share a couple of things. Everyone in this Nation remembers 
extremely well 2008 and the financial collapse that happened. We 
remember Lehman Brothers closing down and causing panic. We remember 
Fannie and Freddie rules finally reaping the consequences of what the 
Nation assumed would happen at some point from all of these very low 
rates and from encouraging people to buy who can't afford to pay back a 
loan. We knew what would occur. The rise of a conversation, something 
called too big to fail that we had never heard before, suddenly grows 
up, and we move as a nation in 2009 from trying to regulate financial 
institutions to actually running financial institutions. The 
regulations were considered too small, and for institutions that were 
big, it was determined that Big Business means Big Government needs to 
run it.
  I would have to say there is not a lot about the efficiency of 
Washington, DC, that we would look across the fruited plain and say 
this is working so well in Washington, DC, we should run every big 
company as well. In the days of government shutdowns and $18 trillion 
of debt and slow decisionmaking, there is a great need for private 
businesses to be pushed to be able to do things efficiently, to be able 
to manage our economy effectively. Clearly, there is a need for 
regulations, but I would also say that, clearly, the U.S. Government 
should not step into businesses and run them instead of just regulating 
the boundaries.
  This is a free market, but sadly, in 2009, the U.S. Government went 
to running General Motors. We started running individual banks and 
insurance companies. We have to be able to shift out of that and we 
have to be able to find a way in the days ahead for that never to occur 
again.
  I would say multiple things about this. Now, 5 years into Dodd-Frank, 
400 new rules in the process of being promulgated, literally 12,500 
pages of regulations that have now been spun out--12,500 pages of 
regulations--just dealing with 271 rulemakings.
  So here is what we are up against: 271 rulemaking deadlines have 
passed. Of those, 192 of them have been met with finalized rules, and 
rules have been proposed that would meet 46 more. Rules have not yet 
been proposed to meet 33 passed rulemaking requirements. Of the 390 
total rulemaking requirements, 247 of them have been met with finalized 
rules, and rules have been proposed that would meet 60 more. What am I 
trying to say with all of that? There is a lot coming out of this, and 
there is a lot more still to come.
  I would challenge any person in this Chamber and any person across 
America that if you are having to run your business, and if as you 
started to run your business and a government regulator walked in with 
12,500 pages and said, I need someone in your company to know all of 
these regulations, you would not respond with a smile and wish them a 
happy birthday. You would respond with great frustration and say: Why 
are you walking into my company with 12,500 pages of new regulations? 
Now, there are previous regulations this is stacked on top of. They say 
here is an additional stack of 12,500 pages that you need to know and 
follow.
  This is the fruit of the Dodd-Frank regulations. I would say there 
are a lot of things we need to discuss with this bill, but let me just 
highlight a few of those. First, let's get some common agreement. Can 
we all agree the community banks, the smallest banks across America--
most of them in rural communities--did not cause the financial collapse 
in 2008? In fact, they didn't even contribute to the financial collapse 
in 2008. The smallest community banks across the country are vital 
accesses to capital for farmers, small businesses, Main Street folks, 
and folks who just do deposits to their savings and checking accounts. 
These are small community banks. For more than 1,200 U.S. counties, 
with a combined population of 16 million Americans, without those 
community banks, they would be severely limited to any kind of access 
to banking. Big banks tend to focus on the biggest loans and in big 
towns. Small community and traditional banks focus on smaller 
communities. In my State of Oklahoma, a person can go to every small 
town and find a school, a gas station, a church, and a bank, and often 
that bank is a very small community bank. They know everybody in town 
and everybody knows them. But the rules changed for them after Dodd-
Frank, and it wasn't because that bank caused anything.

[[Page 12115]]

  Regardless of the law's merit in any area--and we can have a great 
conversation about a lot of issues with Dodd-Frank--financial reform 
was to contain the systemic risk in the financial sector of very large 
companies, which were called the too big to fail, which I refer to 
often as the ``too big to be free now,'' because the Federal Government 
is stepping in to try to run all of these companies and say: You can't 
have a free market in that area; we are going to have to run you 
instead.
  But these small bank failures are not a threat to the economy. They 
weren't supposed to be a target of Dodd-Frank, but they most certainly 
are. All of these banks now suffer the consequences. A study by the 
Federal Reserve Bank of Minneapolis found that for banks that have less 
than $50 million in assets, hiring two additional personnel reduces 
their profitability by 45 basis points, resulting in one-third of these 
banks becoming unprofitable. Why would I raise that? Because there are 
a whole host of regulators who say just hire one or two additional 
compliance people, and you can keep up with the 12,500 additional pages 
that have been rolled out. These small community banks can't keep up 
with that. The Mercatus Center surveyed 200 banks with less than $10 
billion in assets, and 83 percent found that their regulatory 
compliance costs increased by more than 5 percent, and the median 
number of compliance staff increased from one to two. They all had to 
add additional folks--not additional folks to make more loans, not 
additional folks to greet more customers as they walk in the door, 
additional folks in the back office simply filling out forms and 
turning them in.
  Government figures indicate that the country is losing, on average, 
one community bank or credit union a day now. Alternatively, in the 
last 5 years, regulators have only approved 1 new bank, as opposed to 
an average of 170 banks per year before 2010. Let me run that past my 
colleagues again. We have approved one new bank in the last 5 years 
since Dodd-Frank. People don't want to go into banking. This is having 
the effect we all said it would have; that is, when Dodd-Frank passed, 
the focus on too big to fail would really mean that you are too small 
to succeed; that the smallest banks and communities all across the 
country now cannot keep up with the compliance costs and they will sell 
out to larger and larger banks. Do my colleagues know what Dodd-Frank 
has created? Dodd-Frank has created more megabanks and it is pushing 
more and more smaller banks to sell out.
  Since the end of the first quarter in 2010, Oklahoma--my State--has 
seen 33 community banks disappear through acquisition or merger--33 of 
them. Twenty-nine of those thirty-three community banks that 
disappeared were under $100 million in total assets. When asked, the 
most frequent reason they were selling, they said it was the increasing 
cost of compliance. They could not keep up because they had to have so 
many compliance people.
  In Oklahoma, 24 percent of the State's commercial banks no longer 
offer real estate mortgage loans to their customers because of the 
litigation and regulatory risks they face under the new ability to 
repay and qualified mortgage rules. Let me run that past my colleagues 
again because a lot of people don't realize what is happening. The 
smallest community banks are selling out. They are disappearing. At the 
same time, 24 percent of the banks in my State no longer offer home 
loans. That means in these small towns across America, you can't walk 
into the bank and get a home loan. People have to drive to some other 
town or go to some other place to try to get a home loan now. It is not 
because that bank can't do a home loan--they are a bank, that is what 
they do--it is because of new Dodd-Frank regulations that make them so 
scared to function and operate through the 12,500 pages they have just 
decided they don't have enough staff and enough people. The banker says 
to himself: I sold my neighbor a home, his dad a home, and maybe his 
grandfather a home in this community. I can no longer do a mortgage for 
them. That is absurd.
  I hope no one would say that was the purpose of Dodd-Frank, but I 
will tell you this 5-year-old who is running around, these are the 
consequences. This is happening all across our Nation. These new rules 
continue to push out the possibility of just doing normal, traditional 
banking, including savings accounts, checking accounts, home loans, car 
loans.
  Dodd-Frank, ironically, favors the largest banks over community 
banks. I find that the ultimate irony, based on the way it was sold, 
not to mention the fact that as a banker now, if you have a problem 
with one of the regulators and you want to appeal and say: How are we 
going to actually get through this problem--do my colleagues know whom 
they appeal to now? Literally, a person in the next cubicle from the 
previous person who gave the instructions. There is no place they can 
go. There is no judicial review. There is no opportunity to say this 
regulation that you have given me is onerous or the decision you have 
made based on this regulation is onerous. If you want to disagree, you 
disagree with the person in the next cubicle, and then that same group 
of people will come and inspect your bank next year. And what do my 
colleagues think happens?
  I have to say we are in a bad spot. This is not about big city 
bankers. This is about small towns. This is about small town loans. 
This is about home loans for individuals in rural areas, and these are 
real consequences to a lot of families. So how do we solve this now? 
This is what we have--and we have had for 5 years--and it still 
continues to grow; it still continues to get worse.
  What happens now? Let me just talk about some solutions. No. 1, I 
would say this. We have to deal with one of the big animals in the 
middle of the creation of Dodd-Frank; that is, the Consumer Federal 
Protection Bureau. The CFPB was created to be like a fourth branch of 
government. It is completely autonomous. Its funding comes from the 
Federal Reserve. It does not have to report to Congress, none of the 
staff have to report to Congress or turn anything over. There is no 
requirement for transparency. They only, in a cursory manner, come by 
and visit Congress every quarter or so and do a report, but they are 
not required to turn over everything.
  They have access to every piece of every bit of consumer finance. 
They are reaching in to do car loans, they are reaching into credit 
cards, they are reaching into home loans. They can reach in, in effect, 
and create regulations in any area they choose to with no 
accountability. We have to be able to resolve this--not to mention the 
fact that CFPB is completely redundant to other agencies that already 
existed in this oversight, and this adds yet another layer on every 
bank and on every consumer financial institution. But they are 
unaccountable.
  So let's do a couple basic things. One of the proposals that came out 
from the Appropriations Committee today is to move from there being one 
Director to a five-member board. This Senator would say that is pretty 
reasonable, so that we don't have one person managing all consumer 
finance for the entire country--one person who is completely 
unaccountable.
  Separating them from their appropriations rather than getting their 
appropriations from the Federal Reserve, getting their appropriations 
directly from the normal appropriations process like every other 
agency, including independent agencies--there is no reason to have them 
be isolated and separate.
  Quite frankly, the CFPB is completely redundant to all other areas. 
There is no reason for them to have redundant activities and 
authorities. Those should be cleared as well to make sure that every 
bank, when it is making a decision, can make a decision based on 
knowing whom its regulator is, not thinking ``This regulator is going 
to say one thing, but what is the CFPB going to say when they come in 
next?'' and not having a regulator come in and say ``Well, this is not 
our regulation, but the CFPB has put this regulation down, and so we 
are going to follow their regulations as well.''

[[Page 12116]]

That is absurd. Clear lines of authorities and responsibilities should 
be delineated. We can do that. It shouldn't be hard, and it shouldn't 
even be controversial.
  Secondly, we need to reform Fannie and Freddie. Community banks did 
not cause the problems in 2008; quite frankly, Fannie and Freddie did. 
Community banks have had this major pushdown of 12,500 pages of 
regulations. Guess how much reform has happened at Fannie and Freddie? 
Zero. So the organizations that actually were the problem have gotten 
off scot-free because now they are making money again and everyone is 
looking the other way and saying ``Well, they are doing OK; we will 
leave them alone,'' while the organizations that didn't cause the 
problems face tons of regulations. There are major reforms that need to 
happen with Fannie and Freddie. It is about time this Congress actually 
engaged and stopped saying: You know what, they are in the black. Let's 
leave them alone.
  Do you realize that the government funds 71 percent of new mortgages 
now through the GSEs and the Federal Housing Administration compared to 
32 percent just 10 years ago? Let me repeat that. Ten years ago, the 
Federal taxpayer backed 32 percent of the loans, and now it is 71 
percent.
  Dodd-Frank was supposed to be about trying to get the too-big-to-fail 
issue out of the way and to get the Federal taxpayer out of having to 
back up every loan and every business across America. Instead, it is 
increasing the size of banks and it is increasing the exposure of every 
mortgage in America to the Federal taxpayer. We have to turn that 
around.
  No. 3, Congress has to provide the authority for Federal banking 
regulators to differentiate the applicability of rules and regulations 
to various banks based on the bank's operating model and risk profile. 
If it is a traditional bank, leave it alone; it is a traditional 
community bank.
  In fact, FDIC Commissioner Tom Hoenig had a great plan and a great 
set of ideas that I would bring to this body and say we should 
seriously consider; that is, separate banks not based on their size but 
on their activity. If it is a traditional bank doing traditional 
banking, that would mean a couple of things--first, that it has at 
least 10 percent capitalization, and second would be that it is not 
involved in complicated derivatives. If it is involved in complicated 
derivatives, it is going to have very heavy oversight. If it is not, it 
is a traditional bank and it is well-capitalized. Banking regulations 
have always been about safety and soundness. If this bank is well-
capitalized and not involved in complicated derivatives, why are we 
there every day trying to manage every aspect of it? Allow it to be a 
traditional bank. I don't care how big it grows if it is in traditional 
banking models.
  We literally have banks around the country now that are right at 
about $10 billion in size that are worried they can't get any bigger. 
We literally have businesses saying: I can't grow because if I grow, I 
will spring into a whole new set of regulations, and I can't afford 
more staff to actually do that. This is silly. If it is a traditional 
bank and it is in good safety and soundness, let it do loans. Let the 
bank actually engage with its customers in its community and not have 
to look over its shoulders all the time.
  Chairman Shelby has actually laid out a proposal in the Federal 
Financial Regulatory Improvement Act. It is a great place to start, 
with a lot of small aspects and a lot of commonsense ideas and 
bipartisan ideas that he has been able to stack all together and put 
into one piece. It is a good idea to provide some regulatory relief in 
these areas.
  I think a fair question to ask is, Are we better off financially as a 
nation now than we were 5 years ago? Now that this 5-year-old toddler 
that we call Dodd-Frank is walking around, what has happened? Well, 
there are some banks that are better capitalized. That is a good thing, 
but quite frankly we can increase capital requirements without having 
to go through 12,500 pages of regulations.
  We have made it harder to get a loan unless it is a government loan, 
such as a Small Business Administration loan. We have also literally 
pushed the loan profile out of private institutions and into Fannie and 
Freddie, the FHA, and into the Small Business Administration. Now we 
have record exposure to the Federal taxpayer. We have also made fees to 
the banks higher, as they have been more challenged as to what to do, 
and we have half as many banks now offering free checking as we had 
just 5 years ago. That is a consequence the consumer understands, and 
it is a consequence of Dodd-Frank. We have fewer banks, we have bigger 
banks, and we have a lot more complication. In a day when America needs 
more capital access, we have one bank in 5 years that says: I want to 
join that market.
  Mr. President, I wish I could say ``happy birthday'' to Dodd-Frank, 
but I am not sure this set of financial regulations is making a lot of 
Americans happy right now. It is time we come back and revisit this 
bill.
  With that, I yield back.
  Mr. MERKLEY. Mr. President, 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. INHOFE. 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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