mr. date as you know the georgia makes have been hit very hard for failures most the banks would not be directly supervised by the cftc but what still have to comply with cfpb rules and regulations. recently a banker gave me a ten page document of forms that had to be paid out if somebody was trying to purchase a home, and madame chair, i would like to ask unanimous consent that these be submitted for the record. >> without objection to the islamic they must be selling houses to first graders with all the different things that have to be given to the purchaser. i know the cfpb is committed to producing paper work for the bar was however it is to reduce the paperwork of the cfpb must be mindful not to increase regulatory burdens on community banks and credit unions. the cfpb must make sure that

both consumers and businesses to get the benefits of streamline disclosures. finally, i have serious concerns that the cfpb will use its unchecked authority to create a back door plain vanilla product. cfpb must not steer the borrowers for the certain products if a person is responsible enough to buy a house committee must be responsible be enough to decide what mortgage market works best for them and not the one that the government tells them is best for them. with that madame chair, i yield back. >> thank you. i would like to recognize mr. space for the purpose of making an opening statement. >> thank you very much, mr. chairman. let me just say how important this hearing is because of the timeliness of it. i was one of the co-sponsors that created the cfpb through the dodd-frank bill and was very proud to do so. i think what we have to do is

ask what is in the benefit of two things. the consumer and our financial institutions. the cfpb is designed at this time to do both. but most importantly right now i think we have to look at the plight the consumer is in. we started this about two years ago, and the plight of the consumer is in a worse situation today than even then. we have staggering unemployment and joblessness in my state of georgia's 10.2%. and in many parts of my district is 15 to 16%. and you combine that with the loss of mortgages never have we needed a more significant time than to offer the consumer what the cfpb has to offer to give them the education that is needed and to give them the protective armor that the need as they battle fees to twin

hurricanes hitting them simultaneously loss of joblessness, loss of their homes in the midst of this use of credit to resolve their predatory is willing to to get advantage of this double with me that the consumer is in bad as the old saying goes while we are arguing rome is burning to the consumers often look at us up here, treating back and forth, back-and-forth. we have the cfpb. it is in place. it is an excellent foundation. is it perfect? what is perfect? it is certainly the best vehicle to go about what we need to do at this time to to the essentials good of providing our consumers with the information and the protections that the need to be able to deal in this will wind of economic downturn

that they find themselves in. thank you. >> thank you pittard i would like to recognize mr. luetkemeyer for the purpose of making an opening statement. >> thank you madam share. i appreciate you holding this hearing today because it's important that congress examine the [inaudible] every -- cfpb given that there is little or no oversight of the agency. authority is given to the cfpb are too rot. cfpb in my judgment changing the way the private sector offers financial products to consumers and remain unconvinced it will do so in a way that charlie benefits the american people. before the july 21st transfer date come cfpb examiners were collecting information purpose of putting in examinations. they've already undertaken major rulemakings that will no doubt change the way the private sector operates. we understand the regulations are meant to protect consumers. however in the past few years we have seen numerous examples of overly burdensome regulation and will continue to hurt consumers. in some ways we seem to be missing the goal of the consumer

protection, and doing so, our compromising safety and soundness in the financial institutions. people in the financial service industry are very apprehensive about the cfpb. from the rules already proposed and those in the areas of those yet to be promulgated, it gives us all cause for great concern. i thank mr. date for participating today and appreciate he is requested feedback from the private sector. i would encourage the bureau to engage in the industry and consumer groups to encourage all points are taken into account. thank you madame cherry and i yield back the balance of my time to the estimate of like to recognize mr. crounse aco for a minute and half for the purpose of making an opening statement. >> thank you madam share. the 2,300 page dodd-frank legislation created the consumer financial protection bureau. an incredibly powerful agency giving sweeping power to carry out its well intended but vaguely defined mission of consumer protection. like many other members of the

financial service committee by of serious concerns with the cfpb. nonetheless it is low wall of the land. as members of congress we have a duty to ensure that this new agency is operating correctly and appropriately. the cfpb reached a milestone earlier this year when on july july 21st it stood up and officially acquired consumer protection rules and authority from seven other agencies. given the vast mandate and power of the cfpb, the decisions it makes will have an enormous impact on our nation's financial institutions and the consumers that they have served as well as our economy, and i look forward hearing from mr. date, and i thank madam chair for holding this important hearing and i yield back. 64. that concludes our opening statement so i would like to introduce the witness for the purpose of doing a five minute opening statement. the special lead advisor to the secretary of treasury for the consumer financial protection

bureau. welcome, mr. date. >> thank you, chairman capito. >> put close to you. i know how fast you talk so i want to make sure to get it all. >> thank you, chairman, ranking member maloney, chairman baucus, a ranking member frank and members of the subcommittee for inviting me today. i am eager to testify about the consumer financial protection bureau. my name again is speed and i serve as the special with pfizer to the secretary of the treasury for the consumer financial protection bureau, where our mission is to help the consumer financial markets work by making rules more effective, but consistently and fairly and forcing those rules and by in powering the consumers to take more control over their economic lives. before the dodd-frank act, the responsibility for administering and enforcing the various federal consumer financial laws was scattered across seven different federal agencies. but not one of those agencies was solely focused on the consumer financial protection.

the cfpb is the first agency whose mission is making sure that consumer financial markets work for american families. in our first 100 days we've been hard work to promote the financial market where consumers know what they are getting into. where the firms follow the rules and where specific populations are protected and in powered. the bureau is creating more transparent financial markets starting with mortgages and student loans. with our "know before you owe" initiative we are creating a single shorter more useful disclosure form to replace the two overlapping documents that the congress asked us to combine. our work in this area will not only reduce or did referred in the bill will also meet the cost and the risk of the loan more clear and will allow consumers to comparison shop for the best loan. before we began the regulatory process, we displayed those provide forums on our web site, and we invite comments from the public from the industry participants and from market experts. we have conducted five rounds of

testing and we have received more than 22,000 comments to date. just last week we announced another "know before you owe" initiatives this time on student loans. we partnered with the department of education to develop a draft one-page financially sheet that would improve the way they communicate and improved payment for students. the bureau is also working to create a market where firms follow rules. one thing made clear in dodd-frank is that the bureau is to make the mortgage markets work for all consumers in respect of the charter that the business happens to fall under. to this end we recently released the supervision examination manual and the examination procedures for the mortgage servicing. both of those documents are meant to provide direction to the examiners and how to determine to the providers of financial products and services are following the law, and we consider both to be evolving document and we welcome the feedback over the coming months we will release more guidance

like these that explain examination procedures for different products and the lines of business. we've also been hard at work building at the bureau to protect and in power specific groups of consumers. dodd-frank critics the bureau to create offices and positions focused on the needs of service members, seniors and students. our office of service member affairs headed by holly petraeus has been traveling around the country hearing from service members and advocates about the unique challenges that the face. with that on the ground in formation, mrs. petraeus has already brought attention to important issues like aggressive marketing by the for-profit colleges to the personnel to riches also were the attention to those under water but not delinquent on their mortgages and then they've received military orders to move. we recently brought on skip humphrey to head the office of older americans. that office will help seniors navigate financial challenges by educating them about their options in areas like long-term savings and planning for retirement and long-term care.

the bureau will work with senior groups, financial institutions, law enforcement offices and other federal and state agencies to identify and prevent scams targeting seniors. we also recently named a corporate loan ombudsmen. the bureau will work with the department of education to receive and review and attempt to resolve complaints of the borders of private student loans. in july the cfpb and the department of education will provide the report on the private student loan complaints to congress. at the same time, we are also working to fill other important positions like that of the office minority of inclusion. finally, and perhaps most importantly, the cfpb will tackle our mission knowing that we are singularly accountable for it. consumer protection and financial services is a hard job. and by enacting dodd-frank conagra's recognized if you do not make someone singularly responsible for a hard job and should not expect that it's done well. you can count on us to make sure

the consumer financial markets actually work for families, for the honest firms that serve them and for the economy as a whole. thank you again for this opportunity and i look forward to your questions. >> thank you. we will start the question portion, and i will begin with of the first question. you mentioned just at the end of your statement about your agency being singularly responsible for the consumer protection. and in the dodd-frank bill, it actually says section 1064 requires that the provincial regulators feel that authority to the c -- cfpb but in fact talking anecdotally with you and others it seems to me that the provincial regulators have still held on to the consumer protection staff and responsibilities. so are you really singularly responsible or is it still spread out over the seven provincial regulators and what are you doing to make sure that those silos that mrs. warren

talked about consistently are still not erected and serve as barriers? >> in very important ways that authority has been consolidated from the agencies and the cfpb. so, for a simple, we have rulemaking authority across the federal consumer financial law that transfer to us on july 21st. but you point of a very important point and one that informs our efforts which is that our supervisory authority extends only to those depositories, so the banks, thrifts, credit unions with more than $10 billion of assets so that translates into about 100 of the largest banks and credit unions there are 15,000 depositories in the country, and sophos supervision authority with respect to those everyone else, not the biggest 100 remains with the provincial regulators. that is important for us and at least two ways. one is to make sure as any like-minded person what i think to make sure that we are coordinated with the other

regulators and to me that is just common sense and good hygiene. but also, it means that we lack to my mind the critical feedback between the community bank supervision and the policy apparatus. so we have to make sure as we have been doing to date that we get out in the field, and we talk to community banks and credit unions about issues that they are seeing on the ground. >> let me follow up here, because we were just in walsall wisconsin. we've been in georgia. i live in west virginia, and as you know there was a great concern among the small financial institutions. you have already said that you are going to have -- i think if i'm interpreting correctly you have the rulemaking authority over the institutions but you don't have the supervisory role, and so the cars out doesn't really exist, and i think that there is a lot of tanks out there even though, you know, i realize that you have been out talking with them there's still a lot of access to whether what kind of role of the cfpb is

going to be fleeing over the institutions we know are not the ones that are doing this of prime loans are the ones who are helping the leedy down the street by a car for her family etc., etc., and there is a lot. and these institutions are hiring new compliance officers because they are not sure where they are going to fall on this spectrum of authority including your agency. so what would you say to that? >> well with is certainly true that community bankers are not subject to a different set of rules as the rest of the marketplace, but my experience community bankers are not looking for a special handled or special treatment. what community bankers are looking for is everybody to play by the same rules. so in other words, if i run a small bank and i am in the business of providing auto finance, it doesn't feel particularly fair oftentimes that someone who is a finance company, not a depository come is not subject to supervision on the same laws devine subject to supervision on. to my mind, that is a fair

complaint. and one of the duties to my mind of -- >> i think the concern, if i could cause to believe because i have a minute left, the concern, and i share this concern, is the smaller institutions are face-to-face with the consumer every single day. they know their family, they know their background, they and other businesses, they are able to make some on the face of it kind call and complex ability. they are concerned enough flexibility because it could be a one size fits all financial product, consumer initial product that will exclude them from being able to offer that to their customer but at the same time, i think what they are also worried about is their margins are so thin if they have to hire two or three compliance officers to make sure they are complying with a lot of the things that they comply with any way, that takes money out of their ability to launch a small business to make a car loan, student loan, with ever flown they might be

making. if this is the concern that you're hearing especially in the downturn of the economy, higher unemployment, the jobs being created are in an even sit in the study the bureau of labor statistics the increasing financial regulation will spur employment growth of the financial examiners and compliance officers by 3.1 -- excuse me, let me get my glasses year, 31% over the next ten years. that is -- and i think that is what is happening in wisconsin and in charleston west virginia and that is the source of concern that my time is up and i am going to ask the ranking member for five minutes of questions. thank you. >> thank you. mr. date, do you think that there is anyone out there in the consumer finance world that has studied the regulatory structure of the last decade and thinks that works, let's keep doing

that? >> well, congresswoman, i know a great many people within the business. i have yet to find the person that says yes what we were doing over the last decade seems to work with stick with that status quo to any reasonable person around this business is unattainable. >> and then why do you think there is still such resistance to the creation of a bureau which is so clearly needed, and everyone says they want to protect consumers but we have a bureau that is doing just that as the prime responsibility and focus. why is there still such resistance, do you think? >> my sense is because talk is cheap, and when it is, when it comes time that the bureau as we do all the time talk about how good is that we are focused on making the regulation more efficient and more effective, how in the case of the mortgage disclosure forms we are trying to make things cheaper to comply with and simple for the management teams at the same time it's more effective for consumers when we talk about all of that, well, sometimes people

are a little bit skeptical because they have heard things that sound kind of like that before. and for me, i view it this way. in some level with you don't believe what we say, look at what we do because that which we've done in the first 100 days is in the spirit of reducing the burden and making things better. >> so you have been reducing the burden and making the financial markets work better in the economy improved in addition to helping our consumers. i really would like to ask the question of whose side do you think the opponents of the cfpb arana? we know from your testimony and reports that wholley petraeus jump right in defending service members serving overseas for being evicted, for closed. whose side are they on when they say they don't want the cfpb or such an outstanding and ticket to help our men and women in the services or whose side do you think they are wrong when they are not supporting the work of

the bureau to protect seniors? i must say that i was very pleased to see the report of the business community for your efforts on the student loan. so, whose side are they on when they are objecting and fighting what you are obviously doing to help our seniors and members of the military, and now our students? >> welcome congressman, i wouldn't speculate on anything like that. all i know is that the congress has given us a set of much ready to make the market better and make sure that somebody is on the side of american families in this important market place. we have the tools to be able to do that. we have a team we have assembled that is smart because we are dealing with tough problems and energetic because we work very hard. that has that's because it takes guts to stand up for ordinary people, and it has sacrificed where they come and work hard for the public. >> well, i've been told i cannot place into the record editorials

in support of the cfpb at this hearing. so i hope many of my colleagues on the panel will join me on the floor for a special order to night where we can read editorials and support -- >> you can ask for unanimous consent i don't recall -- and the chairman, i don't know. >> i was told you couldn't put them in. >> what's put into the record a statement from the consumer federation of america that outlines all of the areas that there is oversight of the cfpb. >> without objection. >> mr. date, in your own finances, would you want to put the financial management and the protection of your assets and your finances and the committee to decide how to handle your finances or would you like to have one person like mr. cordray

who is in charge and accountable to have to respond to congress, the president and consumers in the country, would you put your finances -- i don't think of the members of the panel would. can you comment on that? >> - a bank regulator for 102 days. as most of my career has been spent in the private sector investing shareholders' money and my money over time and i will confess i typically look for management teams headed by a person who knows there on the hook so that you know who to credit and who to blame so the you know who to help or who to try to influence. somebody has to be on the hook for hard jobs. that's always been my perspective. >> my time is expired. thank you for your 102 days of service. >> i would say in terms of the mortgage for my welcome 82 page, i mean the one page or two page mortgage form having just refinanced our house that would be great but we know that with

the other 50 pages they are still going to be there, and i think that in order -- i am not being critical so much just the way that you are stating it that one page on top of the 50 pages that you are still going to have to -- >> whose time is this coming out of? >> i took 30 seconds because i was modeled after you. [laughter] >> i take exception to that. i always ask unanimous consent -- >> by unanimous consent i will -- previous -- post unanimous consent i will recognize the chairman of the full committee mr. bachus for five minute. >> thank you. congressman gutierez said he hoped you would get approved by the senate but you hadn't even been nominated. i guess he was talking out richard cordray. was that -- i didn't know -- >> yes. >> okay. all right. you know, you were the number

two person at the agency. was there any -- to you know why you were not nominated? >> well, mr. chairman, i did not presume to had opinions about something that is solely in the discretion of the president of the united states. >> let me ask you this. the commission form, you see any advantages to bipartisan commission as opposed to a single director? >> my perspective on governance of the bureau is that it seemed to me very much as an outsider the time that congress did liberated and debated various governments mechanisms petraeus means by which to provide accountability and leadership for the bureau and it's important test and came to a conclusion, and my job as the special lead advisor to the secretary is to take that structure and make it work and to make it work in every dimension and that is what i am

doing. >> could you do that under the commission form? >> as i mentioned to the congresswoman a moment ago, it's been my experience, and again, i've mostly been on the private sector side of this business. if you want something hard then you really should have someone similarly accountable for it. but again that is my experience. i would not presume to tell congress what to do. >> the term abusive that is a new term and the consumer protection as far as financial products how would you define that? if it is unfair, if it is not unfair if it is deceptive according to you, could still be abusive and could you give me some examples? >> gandy we did the advantage that we have is that the congress set out the definition of the statute it seems to me to be one that makes sense and one

that over time we would be able to evaluate and against actual fact patterns that we see in the marketplace. one of our commitments at the bureau is to make sure that which we do is evidence based and participatory and transparent and the evidence of that means nothing if we prejudge facts before we actually see them. but i look forward to -- >> are you going to issue legislation let's say that you go in and you start an enforcement action. will there be at least a regulation or a guideline that someone will have violated before they are found to have committed use vv to reduce? >> the statute provides contours' for the term of usage among our other responsibilities which -- >> said the statute defines abusive? >> the statute is defined abusive. >> tuna with that definition is? >> sure. there are two prongs

essentially. one has to do with -- i will paraphrase, these are my words and not those in the statute. materially interfering with the consumer's ability to understand something. by the way, that goes back to what i was saying earlier about the substantive transparency. the market works of consumers and providers -- >> if they don't understand it can be abusive just because they didn't understand it? >> the words i think relate to a provider materially interfering with the consumer is a levy to understand. and it is one prong. but there is a level of detail in the statute. >> what is the author? >> the other prong which itself is about -- again, these are my phrasing of the words but you will recall that it talks about on reasonably taking advantage of the consumers' lack of understanding and the various problems within the definition. it's quite detailed there's a lot of words there and hopefully i've given some credit to them

in my paraphrasing. >> you keep getting that term if the consumer doesn't understand would with a financial institution be liable if the consumer simply didn't understand the agreement if it was not unfair or deceptive? >> what i think the experience of the past painful few years is that it is in the financial institutions and trust to have consumers to understand what they are getting into. when we look to the explosion in the most troubling credit performance and mortgages in the u.s., it is quite a disproportionately those structures that realistically consumers at the time, not in retrospect but even at a time probably had difficulty truly -- >> we understand that, but would you turn it on a case by case basis or would you have some regulation -- >> the gentleman's time is

expired. questions, mr. frank, for five minutes to read >> thank you for being clear that the gentleman from new york was able to put that stuff into the record to read i said before thought was interesting that we were having an oversight hearing to support the lack of oversight and i misspoke. this is the second oversight hearing we've had this week to denounce the lack of oversight because it was a field hearing and i look forward to many more hearings in which we denounce the lack of oversight where we are overseeing this agency. lamb also struck again by the fact that two of my colleagues ever were to the comptroller of the currency. an individual appointee, independent of any other object in self finance. it is apparently only when consumers are the beneficiary of the independence that it upset some of my colleagues. i shall also have procedurally this hearing comes two days to leave. it should have been halloween because we have had conjured up a series of spooks and ghosts

and goblins and on existing creatures. my colleague from georgia said well this is going to be back door way for them to do the plain vanilla product. in fact the ability of this agency to order the financial institutions to produce a so-called "plan of an old product" was proposed by the obama administration and explicitly protected. there was no such power and the was a conscious decision by this committee. ..

>> you have to give them notice of any future rate increase. now, the notice of a future raise increase does no good if you don't have option so i stress again that is essentially our motto. as to abusive, let me say to the gentleman from alabama, no, the fact that the consumer couldn't understand it is not in itself a reason to be abusive. an abusive came forward, and a gentleman from texas and i had a colloquy about that, and it's undefined term, and we defined abusive. there are thing that is could be neither unfair nor deceptive to be abusive, and it is not that 9 consumer didn't understand it, but there were two categories. first of all, not quite deceptive, but framed in a way that's hard for the consumer to understand that it was not the consumer's fault, and that's why it's said materially interferes with the ability of the consumer to understand the term.

secondly, it says that you should not take unreasonable advantage of lack of understanding. case by case? yes. there are mortgage products that are suitable for some people that are not suitable for an 89-year-old woman who has never had her own experience in economic affairs. there are things that are reasonable for some people and not for others, and we make that distinction elsewhere. we're about to pass legislation today that says you can offer things to "qualified investors," but you can't offer them to unqualified investors. what makes you a qualified investor? apparently that you have a million dollars. that's less than a guarantee of wisdom that what people seem to think, but this distinction and producted offered by different rules depending on penalty -- personality is already in law. let many ask a couple quick

questions. you already moved in the bureau to deal with the congressional problem of a split between the real estate settlement procedure act and truth in lending. talk briefly about what you did there and what the reaction was in the lending community. >> sure. again, the disclosure forms associated with the truth in lending act and settlement procedures act are actually quite similar in their content, but confusingly similar, but separate requirements to date before dodd-frank. we have the mandate by the congress, and i'm glad to have that man date to figure out how to combine that into a single document, one that therefore will not be confusingly similar and less confusing. mortgages are a -- >> what's the process -- where are you in that process? >> we have taken what i believe to be a fairly unique approach in terms of really developing before proposing a rule by getting feedback on it.

>> what's the feedback so far? >> in general, hopeful. >> my time's up. i'll hold to the time. the gentleman from georgia mentioned the long firms. you're in the process of consolidating two different forels, and my feedback from the lending community they are really quite happy with it. thank you. >> your time expired. >> thank you, madam chairwoman, and thank you mr. date thank you for being here. they took responsibility for the secure licensing act including determining whether state laws are consistent with safe. in this capacity, i understand the cfpb was asked to provide views on whether state enactment of transitional licensing would be acceptable. such a proposal allows regulators to hire and put to work well qualified experienced register loan originators by depository institutions or out

of state lenders while they complete any education and testing formalities. this is a very important issue for many state regulated lenders, and i understand there's a legal opinion from a major law firm finding it within the state's authority to enact state licensing provisions. when does the cfpb expect to provide views on this important issue in >> thank you, congress. this is not the first time i've heard of the issue. it has been voiced in the number of different forms as we reached out across the marketplace. it's an issue that actually touches on a lot of the things that really are core to the structure of the bureau, so the competitiveness on an even playing field between depositories and non-depositories and frankly, the mobility or lack thereof, a talent from one institution to the other, the efficiency of the front lines sales staff because complicated products have to be

explained and sold by someone. they are very important issues in a very important market that appear to be decision functional for some period of time. we'll take seriously the issues that have been raised, and i know that the team is aware of it. >> okay. thank you. you've stated many times that the cfpb make decisions based on data. we know data can be ma nip plaited in favor of a point of view. what quality control measures are you putting in place to ensure that the data collected is done so objectively and the decisions made based off that data are also done in an objective manner? >> great question because it's not just to the commitment to be able to use fact-based analytics to inform policy, but the process by which you hard wire that into the decision making of the bureau. we've approached it both through structural means and through process means. by structural i mean there's a

single person who is the associate director for research, markets, and regulations at the bureau whose job it is to integrate the points of view generated by empirical research, by market based pragmatism, understanding how money is made in the marketplace and what constraints exist, and by technical, legal regulatory expertise. a single person is responsible for that. that integrated appointment of view that should be aired is core to the structure of what we are doing, and there's government processes by which internally before the various, i think, right minded administrative procedures that we have to undertake to publish a rule, even before those kick in within the bureau, we have decision making processes that will refine presumably over time to make sure what we're doing is sensible, fact based, pragmatic, and effective. >> okay. in your testimony earlier, you said that the bureau has actually in your written

testimony that the bureau has a unique opportunity to streamline and simplify rule, and you also, of course, indicated you released manuals and guides already. my question is, and i heard this already, that there's a lot of duplication. what are your -- you know, duplication of efforts by other organizations. how is the cfpb going to make sure that we eliminate these duplication of efforts which are going to hamper banks, you know, and financial institutions when there's multiple people asking for similar information? >> i would like to take credit for consolidating a lot of it was, but it really was the congress consolidating this effort by moving the authority for the administration of some 18 federal consumer financial laws into a single place from seven different places, and -- >> so what are you going to do to make sure those other organizations don't continue to ask for similar things or, you know, be talking about similar

issues that you're going to be talking about? >> both the statute and common sense, i suppose, dictate that are exam reports, for example, are available to the prudential supervisors. there's no reason why sister agencies should not be able to see what it is that we work on an conclude in the course of our exams, and so that prevents the need for somehow redoing work or seeing data that otherwise did. >> are you going to pull back that authority at some point in time? >> i doesn't understand. >> what if they are asking for duplicative information? are you going to be the single authority that says here's the information, and here's where you get it from? >> i personally have never been shy about my perspectives on such things, but they are independent agencies. >> yes -- gentleman's time expired. >> thank you. >> thank you very much. i want to yield the first 30 seconds to the congressman so we

can continue to line of questioning. >> briefly, i appreciate what the gentleman said because he's telling you to defend your turf, and i think that's, you know, reasonable. the one thing i just want to say, and this is bipartisan, the gentleman from ohio began the question with reference to the federal safe thing. to give credit, that was a proposal that the chairman of the full committee mr. baucus, so that's a duty as a result of a good idea of mr. baucus. in his absence, i want that clear, that was his idea that we were pleased to incorporate. >> thank you. i thank the gentleman. i want to read a quote that is from the president of the american banker's association. "unsound and unscientific is dangerous." it's from 1933 about nonother than the federal deposit

insurance and the banks railed against it in 1933, but today, i think you'll hard pressed to find anyone who thinking that insuring deposits is somehow unsound and dangerous. i think the fact is that the cfpb will not do ning dangerous, unscientific, or unsound either. hopefully you won't have to wait 70 or 80 years because none of us will be here. hopefully it's not that long before they see -- well, maybe you have that hope, but i would like to just ask you so simplified forms, valuable guidance of customers that can understand what they are buying and repaying. can you tell us a little bit about that in terms of a mortgage? >> sure. >> what's different? >> absolutely. so if you were -- i think it's useful to reground this in terms

of the credit bubble and ensuing crisis. >> okay. >> during the credit bubble, some of the fastest growing products were those products that were the most difficult to understand, so, for example, auction arms, negatively advertising, interest only loans, you know, other products where in order to evaluate the risk and cost of the product, you have to have a relatively sophisticated understanding of rate spreads and rate movements, some perspective of the forward curve. i've known bond traders who are difficulty with those concept, and as a result, we should not be surprised that a number of people who got into these loans did not fully appreciate the risk of what they were looking at and credit performance on those loans, bad for up vesters and terrible for borrowers has been terrible, really remarkably awful, so nobody wins if

products are structuredded and communicated in a way that they don't understand. >> my friends on the other side of the aisle say they love consumers and are -- say there's more paperwork created, and that's going to stop consumers from getting a mortgage. >> i think the opposite is true. there is a point at which more information, more tiny little mice 10-font type on sheet after sheet of paper not only doesn't provide any affirmative good in understanding, but it destroys whatever understanding otherwise would have been there. >> how about reverse mortgages because, you know, we have this growing population of the baby boomers; right? i'm one of them, and it's growing and will continue by millions and millions of people, reverse mortgage. are you going to look at those? >> we are. it's a product that on its face actually is quite ingenious thing. the demographics look quite positive. there might be a real productive use for the product, and it's

growth overtime. it's also something that is obviously definitionally the most relevant for a potentially vulnerable population and one we are charged with, and we have the duty to perform a study and publish it with mortgages. >> so we'll learn because reverse mortgages sound great, but if you have to pay the taxes, and you have to fix the leaky roof and don't understand the conditions, a reverse mortgage could put you on the street without a stream of income, so you'll look at that both from because of your requirement that you look at senior citizens and protect them in a special capacity and in terms of mortgages in a general capacity? >> absolutely. >> well, i think that i'm looking forward to those study, and making sure the public has a broad understanding of those studies so that they can be better protected, and i thank you very much for your testimony today. >> thank you. >> thank you. >> thank you, madam chair.

mr. date, in your testimony this morning, you were talking about basically, you know, supervising authority for over 10 billion and rule making authority for everybody else, basically correct? >> rule making authority across the marketplace, banks, non-banks. >> right, right. that area i'd like to discuss just a second here. with regard to mortgage loan originator rules issued by the fed last year and timized in april, that -- finalized in april, that issue was transferred to you, the cfpb, and basically the rule's intended to protect boar roars from unfair lending practices arising from compensation practices. many financial institutions feel the rule's unclear and confusing leading to complaints, problems, and my question is because of these concern, are you in the process of clarifying the rule at all? >> i mean, i absolutely

appreciate the purpose for the rule which is that, you know, in the long of the day, you should expect problems if front line sales staff are insented to sell products in a way that is affirmatively not in the consumers' best interest. i understand the purpose of the rule, and i also know that it's knew and there's a significant amount of friction associated with implementing it. we have the -- we also have the ability, and i think the obligation, to revisit pieces of loan originating compensation in terms of our work to be done to create an anchor point how it is how the rules are working. we have no particular pride of authorship over something. if something's not working 2k-rb >> are you going to revisit the rule? looking at it now to see if there's a way to clarify it to be sure everyone's in compliance with it and it's doing the job it's supposed to do which is protect the consumer in a way

that enables the folks to comply with it and it's done correctly? >> as a general manner, that's true of what we do, and with respect to this specific example the answer is clearly yes. >> with the time frame on getting that done? >> i have to look at the specifics deadline that's set out in the statute, if there is one, and how it fits into the overall work plan, but it's on that agenda. there's no question about it. >> okay, two weeks, two months, two years? >> certainly between two weeks and two years. [laughter] >> okay. okay, you must work for the government. >> i've never heard that before actually, so thank you. [laughter] >> very good, thank you. with regards to, you know, gentleman from georgia held up a stack of papers and had to do with home mortgage loans. i know one of the concerns that a lot of origin nateers and home mortgage loans have is the home mortgage disclosure act. it is a very dumb --

cumbersome rule to deal with, the fdic when they supervise it are arbitrary in the way they look at the discrepancies in those things, and i'm wondering if that's a rule you're looking at as well? >> there are modifications to the disclosure regime that are required under the statute that has to be prom mull gaited under regulation, and for your other question, congressman, creates a logical point to see whether or not the overall kind of reporting regimen makes sense. it is a source of data that is astonishingly important, and it's otherwise not -- >> i'm not talking about the data itself. i'm talking about the way it's interpreted by the fdic and how they supervise. 23 you have one loan and 27 things to be checked off with this one loan, and if you miss one, the whole loan is noncompliant rather than 1/27 of

a problem, and one loan or ten loans out of 100 with 10% problems, it's four tenths of a problem. i'm curious if you're streamlining that because again in assessing the situations with my local financial institutions, the last guy said he has to hire five people for compliance now when he hires four people to do work in the bank. five compliance to four people he hires. that's where we are headed. if you can streamline that, that's wonderful. to me, that should be your charge to find ways to do things easier and simpier and protect all parties involvedded. i yield back. thank you. >> thank you. >> thank you, madam chair. i confess that when i first heard of this hearing, i was troubled, but i want to thank the chair for convening the

hearing because i think the more we learn about what the consumer financial protection bureau is doing, the more the american people understand why it was created and why it's so important to have such an agency so the more hearings we have about this agency, i think the better off we are, especially when we have outstanding witnesses to come and talk about what they are doing, so i'm going to presume that my colleagues are listening to the fact that well over 60% of the american people think this is an important agency to have, that

despite the fact that the senate has said it's not going to confirm anybody to head the agency, you all obviously are listening to the fact that the agency is important because there's been little effort to try to repeal the creation of the consumer financial protection bureau, even though you second guessed it to death, so the more of these kinds of discussions we have, maybe the better off we are, so i thank you for being here. one of the big advantages of arguments of benefits of having such an agency was this big

differential between players and the industry that were regulated already and had some authority -- had somebody overseeing at least pretending to oversee the consumer protection part of their imperative, and those players in the industry that were not regulated. talk to us a little bit, mr. date, if you would, about how the agency approached trying to equalize the regulatory standards for those who were previously unregulated and those who were previously regulated. >> well, thank you, congressman. it gets to one of the core advantages of the consumer financial protection bureau's structure which is that when we have a director, we will have

supervisory authority over both depositories and non-depositories. an example why it's important which is some level to why we are here to begin with which is the mortgage credit bubble and the crisis and things that proved to be so problematic from the point of view of consumers understanding what they were getting into and the point of view of performance of those loans. most of those products were not originated and held by depositories. they were not originated by bank, thrift, or credit union employees by a bank, thrift, or credit union's balance sheet, but were originated by non-banks or funded in the capital markets by wall street or the gse's which are also non-banks, so if one wants to be serious minded about a level playing field in fixing the problems of the past, we have to take, in my view, a

uniform view of both depositories and non-depositories, and that's the great advantage. >> and i would say to my colleagues of all of the hand ringing about the existence of this agency that you sometimes share that you sometimes share in the political arena, the comments i get from my community banks and the previously regulated entities believe that this is a tremendous important benefit to have somebody overseeing entities out there, the players who were doing just terrible things in the marketplace that the regulated entities were not allowed to do because they were regulated, so i'll yield back. >> time expired. >> thank you, madam chair.

thank you, mr. date, for being here today. you know, i have the opportunity to representative texas spanning from san antonio to el paso, and there's a large number of community banks throughout the district and i hear the same thing that there's a lot of uncertainty with regards to the regulatory land scape, and begin the number of rules and regulations mandated by dodd-frank, those things are foremost in their mind, and now the cfpb undertook rule writings like the definition of larger participant and the effort here to consolidate several mortgage disclosure forms. has the cfpb made any effort to lay out a game plan, if you will, that will allow financial institutions to know what they can expect and should expect in the way of forms and rules and regulations in the foreseeable

future in >> thank you for the question which i think is a good one because having a sense of what is coming is very important to planning and planning is very important to the judicious exercise of managements bandwidth in any institutions, big and small. as a practical matter, we have tried to communicate with financial institutions across the country in the best way we know how which is to get out there and spend time with associations of community bankers across the country and overtime, so it is literally true that myself and my predecessor has met with the community bank associations of every state in the union, and what i do is try to make clear in meetings like those is the rule making agenda for the bureau over the near term, which i define as that period of time, you know, between two weeks from now and two years from now, is going to be principally driven by what is mandated by dodd-frank. dodd-frank involves, to my mind,

a lot of quite sensible reforms of a market place that did not appear to work particularly well, and to do those things well, it's going to take, from a rule making point of view, the bulk of our energy and good efforts. >> so there is a map out there for them, is that what you're saying? >> yes, that map hopefully has been provided to us by the congress. >> okay. well, let me -- in that vain, have the -- are the policies that you're generating, do they take into account the regulatory costs that financial institutions could incur and that if they incur them, that they will pass on to the consumers? are they factored in in your rule making and regulatory actions? >> yes, congressman. regulatory compliance cost is a real cost irrespective if it's passed on to consumers or not. it's still a cost, and as a result because we are obliged by statute and common sense to

consider both the benefittings and the burdens associated with rules, we'll absolutely consider regulatory burden. >> so the cfpb assumed supervisory and examination authority over large depository institutions with $10 billion or more in assets. for those less than $10 billion in assets, prudential regulators obtain supervisory authority, however, section 1026c of the dodd-frank act authorizes the cfpb to include examiners on a basis when they examine an constitution with less than $10 billion in assets. regulatory costs fall harder on community banks, especially smaller community banks. the prospect of the cfpb also participating in an examination could lead to increased regulatory costs, and has the

cfpb taken steps to outline how it plans to use its authority pursuant to sexes 1025 # -- section 1025c? >> well, that provision, to me, seems like a sensible way, one of several sensible ways, to ensure the overall regulatory approach to the sector is coordinated, but i'll broaden out the notion of regulatory cost and compliance cost because it is broader than merely ride along activity. in the following way -- we are very aware that compliance burdens are disproportionally fixed in nature, in other words, they are more like a fixed cost than a variable cost, and as a result, the arrhythmia tick suggests they burden smaller constitutions. it is difficult to argument with the math of that proposition. now, the good news of that is that meaning all 6 our efforts which are multifaceted to make regulatory burden streamlined that's better for institutions

and consumers, that therefore benefits smaller institutions, not bigger ones for the same dynamic. i'm pleased by that, and i think we're on the right track. >> thank you for your candor, mr. date. i yield back my time. >> thank you. >> thank you, madam chair, and i sympathize with you because i spent a good part of friday and saturday filling out refinancing paper forms yet too, and i'm not done yet. with that being said, thank you for being in front of us today and bringing your point of view. just a couple questions. being that the senate has not basically brought up the nomination of the agency's director, has that implemented you in any way, or has that been able to give you certainly the authority at this appointment to go forward on what the direction of the agency is doing?

>> this is a good news bad news answer i'm afraid, congresswoman. the good news from our point of view is that we have important work to do today. we are literally, today, we have the authority for rule makes and supervision authority to transfer it over from the existing federal regulators on july 21st, and that is an important set of work to both fix that which has been done poorly in the past and make sure that we operate in a sure footed way moving forward. the bad news part is that there are tens of thousands of nondepository consumer financial product firms out there that are supposed to be within the supervisory authority of the bureau, bro not today, absent the director, so the, you know, i'm pleased by where we are, but obviously, there's a great deal more we could be doing. >> so basically it's a like a

stalling technique so you can't get up to running and doing the job that you actually need to do? >> my concern would be that -- and this is not just a concern i've had within this position, but one i've observed of the industry over the course of time is that there is no great right minded reason why some firms, namely community banks, credit unions, thrifts, should be subject to impractice terms compliance burdens than others that are in the same business. it doesn't make sense, it's bad for consumers and the tucks of the market. >> can the lady yield for two seconds? >> certainly. >> five seconds. i compliment you for raising this issue. it's one secretary geithner raises in his public statements with the need to confirm and get the cfpb running, and what he points out is that a vast array of nonbank financial institutions that are outside

the scope of consumer protection, which was exactly the same mistake that left us so vulnerable to the financial crisis we went through. as we know, banks and institutions are regulated, but there's a whole other area of non-bank institutions that are very large such as aig, that are unregulated, and this stops that regulation, so your point is a very important one, and i complement you for raising it. i yield back. >> thank you. i take back my time. i guess the second question would be how do you envision congress, especially the way we seem to be in gridlock with everything over here, being involved in supporting the cfpb going forward as we go forward for our consumers? >> well, in two principle ways, but i mean, i view the role of what it is that we're doing now, the rule of oversight, as being

quite key to any institution functioning well. that is part of the reason why i'm happy something like this -- probably the eighth and mrs. petraeus is testifying on the senate side tomorrow, so that's the ninth hearing we would have participated in, which i am glad for that opportunity. the second is we are in a retail enterprise here, and so understanding issues on the ground confronted by community badges on the one hand and on the other hand consumer will help us what we do, and members of congress have a lens into those issues over time, and we'd like to hear about them. >> going back to the question i had asked you, and you had mentioned the thousands of people out there that are going to needed to their job. are these new hires or these coming from the difference agencies coming into the new agency? >> at the cfpb today? we have something like 700, a little bit more than 700 people.

we were privileged to have something like 1300 applications of people from the transfers of the bureau, made something like 350 offers from those 1300 applications. we have the clarity of the mission and the importance of what we are doing and the early team we assembled to really get some astone iring talent -- astonishing talent. >> unemployment does that. >> i think we are the beneficiaries of the fact that the mission is clear and very important. >> i yield back the balance of my time. >> thank you. mr. piers. >> thank you. we, on pace -- for your telling about the following of the rules and make a comment about the worse financial crisis, talked about the explosion in lending, and talked about the failure of the regulatory system. as you assessed that, those

failures, did you ever factor in the calculations or the changes in the lending standards that prohibited institutions from calculating previous payment history? in other words, that was one of the things that caused bad loans, so did you calculate con cements like that? -- concepts like that? >> in my experience, credit underwriting has been quite different across different credits, and to the extent that mortgage has suffered dispore new york citially in this -- disproportionally in this current crisis, it is precisely because credit underwriting was divorced from past common sense practices. >> i asked if you studied it. i mean, have you analyzed it and assessed it?

yes or no? have you analyzed the effect of telling lenders they could not calculate previous payment history? >> what was the prohibition on not using -- >> i think if you look at the new york federal reserve maybe they made comments 245 declared the sub prime loans to be racially oriented, manufactured data. have you looked at that new york federal reserve issue? >> congress mapp, i'm reasonable familiar how credit scores are generated, and i'm -- >> i'm asking about the new york federal reserve. did you look at that? >> i don't think i recognize -- >> we'll get a copy to you. have you looked at plebs of congress urging institutions that they could not discriminate on loans? have you looked at that? >> i'm sure i would not have devoted bureau resources to individual members

indefinitely. >> on page five you talk about the bureau's central responsibility is to identify, address outdated undually burdensome regulations. do you have an example of an undually burdensome regulation that y'all actually tossed out? >> sure. as i discussed earlier, we are now developing the harmization and streamlining of two very important disclosure forms used throughout the multitrillion mortgage business. >> when you talk about protecting the consumer, you talk about constantly in your presentation the written presentation, the need for better information. do you have a little quiz or something that you're going to give to consumers to be sure they read the stuff you provide to them? in other words, the consumer may have some ability, maybe they didn't or they are totally innocent in the process that's

on the page four of the run up of the debt, but maybe consumers have something to do with that. are you going to have a measure to see they're no longer maying their part in drying to get access to credit that maybe they shouldn't get access to? >> well, let me answer that in two ways, both core to the what the mandate is. number one, is that we, in our dealing with consumers and what we hear from them and what we hear from bankers on the front line of selling products is that consumers across america, by and large, are and want to be exbl for their -- they wanted to be treated like grownups, but in order to hold people accountable in hopes they make good decisions over time, you have to be sure the right information is put before them. >> i understand that, but stlai the respondent to take a look at

it. in your discussions nationwide, all the comments you got from the bankers, community bankers, what have they told you about section 1071? >> across the board, anyone who has, in my experience, anyone who spent time trying to understand the availability, access, pricing, finds the data in small business credit across the united states deeply distressing. >> are you going to implement some of those -- are you going to address the concerns because in a meeting just yesterday with bankers, they still said that this is a reason they are alarmed by and find no useful function in. are you listening to those or just got the comments? >> i'll follow the instructions of the united states congress which is to implement section 1071 in a productive way. >> thank you, madam chair, i yield back. >> thank you. mr. miller, five minutes. >> thank you, madam chair.

mr. date, i've been in the last couple days, a critic of the announced debit card fees, and that would probably be more politically pop popular position than my real position which is that i don't want to be approving every fee that a bank charges. i don't want you to be, the cfpb, be approving any fee that the bank charges. i don't get the sense from you that you want to do that either, but what i would like is for consumers to have the benefit of normal, healthy competition to figure out what they are getting, shop around, and that the normal forces of competition gives them the best deal available, and if they want to pay a fee, but nothing else, that's okay, but the way that these fees were announced, and then retracted shows that's not happening in consumer banking. the numbers are snatched out of the air. one bank said $5, another said $3. they both said they were just

kidding, and that's not the way pricing works in other areas of the economy where there is normal, healthy competition. some of the members on the other side who talked about, who suggested that cfpb's rule might be a threat to safety and soundness to banks suggested healthy competition is not working because you don't have the power to require banks to offer anything if there's a product or a cfpb requirement would make a line of business unprofitable. they don't have to do it, but what they are saying is they need to be able to make money off consumer banks to make up for losses somewhere else, and that's the pretty remarkable suggestion that the big banks they are facing massive liability from selling mortgage backed securities where it's a smaller bank, a community bank, many are dirt lenders facing

losses from commercial real estate that they should be able to make up that with consumer, with their consumer practices, and other lines of business, other industries can't do that with there's normal competition. you don't see companies with several lines of business losing money and just rising prices in another because they take the business down the street, and that's obviously not happening in consumer banking. mr. date, do you think there's normal competition, normal, health competition in consumer banking? do you think consumers really do understand currently that they can compare in an understandable way what services and fees are that different banks are offering so they can compare and shop as you said earlier with standardized plain english disclosures helping them, and is that something you're working on? >> thank you, congressman.

we're absolutely working across the bureau, across the various policy tools for the goal of substantive transparency which is markets, as you point out, work better if consumers and providers are actually talking about the same transaction, and to the extent that that is made opaque unnecessarily by virtue of regulation that exists, we can make it better. we are oriented towards that goal. i'll say in important parts of the market place, things are better today than they were just a few years ago. >> so low bar? >> i -- i grew up for the most part around the credit card business, for example. the credit card business of today is a dramatically more transparent business than it was in 2008, dramatically, and i think that's fundamentally good for franchises in the business, for issuers, for banks, and absolutely for consumers as well. there are improvements. >> how difficult or easy is it

for consumers to move from one bank to another if they decide they are unhappy with their bank and think they can get a better deal somewhere else. is that something you're looking at? >> we would examine the fact base associated with in general deposit practices, like is it clear how one opens, maintains, and closes an account over time as part of the usual supervisory activities. obviously, it will differ across products. my sense is money market accounts and the core dda product, itself, has historically behaved differently from that point of view. my sense is they'll behave differently going forward, but no reason we really can't understand the facts on the ground. >> okay. i yield back. >> thank you. bl. duffy. >> thank you, madam chair. one of my concerns as i said in the hearings is the back and

forth in regard to what we, on this side of the aisle, have done to reform the cfpb. i 4 a bill, i don't know if you're aware of it, it was the consumer financial protection safety and soundness act of 2011, and one of the components of that bill that passed the house that is now one of the many stacked up in the senate was that we would move the cfpb from a director to a commission, and the commission was the original language in the democrats' bill that passed last year, and i hear a number of comments about how now we want to defang the cfpb when awl we're trying to do is make it work bet e and that's one of the frustrating things, as i sit here. i think we should have a real conversation about what we are trying to do. are we trying to defang it? are we trying to make it work better? i don't know if some across the aisle believe that this is the one law written perfectly, and

we can't have any reform that can improve it, but that's the impression i get as i listen to the conversation, and i come from a district with a lot of small banks and credit unions. is it fair to say that the work of the cfpb will have an impact on the small banks and credit unions? >> yes. >> okay. >> yes, i think things will be better. >> it will impact on them; right? >> a better impact, yes. >> great. can you give me examples of what my banks and my credit unions did to help cause the financial crisis? >> the congressman gets to exactly the right point, i think. >> what did they do? >> precisely. the community bank, for example -- >> what did my community banks do? what did credit unions do? >> they entered the crisis with

exposure as all community banks do to real estate lending, and by virtue of the inflation of a real estate bubble, principally by non-depositories due to lack of underwriting standards over time. when that bubble burst, disportionally it impacted community banks of which wisconsin has many. >> is it their fault that they were following these standards? they were following lending standards; correct? >> exactly. >> were they bad actors 1234 >> congress mapp, the notion of being able to extend the same set of practical rules across non-depositories 1 the point. >> let me ask you this. do you recall what the original name of the dodd-frank bill was? >> i would not have occasion to recall that. >> it was called the pal street reform act. >> i have no particular reason to be surprised by that. >> do you think a better name would be the main street reform act? >> i'm not in the habit of naming legislation,

congressman. >> okay. as i hear you testify, you've talked about how it's great that for your management background you have a one person director. i wonder if you think that the u.s. government would work with the congress or senate and we have a one person director that manages of the control of the country? is that your philosophy as well. >> no sensible person would say that. >> happy to hear that. as i look what happens, the cfpb has an incredible amount of power, and 1200 employees, 329 million dollar budget, and as i look around, i say, well, who is been elected to run the agency? who's been nominated to run the agency? who's been confirmed to run the agency? that's the concern. when we talk oversight, we look at the hearings, and they are

great, and there's not been a nomination or election or confirmation. we don't have budgetary control necessarily over the cfpb, and as i analyze the impact that this agency is going to have on my consumer, on my small businesses, on my small bank, and on my credit unions, when they really had nothing to do with the financial crisis, that gives me great concern. i think the original intent was to look at what went wrong on wall street? what went wrong with the big financial institutions? in essence, you're going after every financial institution, every small bank, every credit union, and for me, that gives me pause. i don't think we grow our economy. i don't think -- i think he was talking about gun stick ups 1 what he said. i can tell you what, my financial institutions, my banks

didn't do gun stick ups. they -- >> will the gentleman yield? >> my time is up. i yell back to the chairwoman. >> i ask unanimous consent to that i respond to the statement of there's no oversight of the cfpb, but there's tremendous oversight of the cfpb. mr. meeks five minute for questions. >> thank you. i was just listening to the colloquy also, but i do believe that richard was, in fact, nominated by the president, and we're just waiting for the republican senate to stop filibustering in that nomination, so we'll have a person in place there. let me just say this. i'm pleased to know that you mention in your testimony that a well functioning market is one with a buyer and seller that

doesn't over extend the deal, and they can make comparisons of products. markets function on the availability of information and transparency, and we see obstructions to the information flow markets are disrupted. that is why bringing transparency into the marketing and sale of mortgages and consumer loans, i believe, is absolutely fundamental. i strongly support what you're doing in simplifying mortgages close to reforms because if you look at my district in south queens, we have the highest foreclosure rates in new york city, and that's partly because we have the greatest number of fraudulent mortgages that were sold in america. countless things were duped into taking out mortgages that left them destitute and homeless, and a vibrant consumer protection agency is necessary, i believe, to protect all americans from predatory behavior. as indicated, a number number of my colleagues on the other side of the aisle complained the cfpb is not subject to congressional

appropriations process. two points on that. it was the result of a republican nomination that senator caucus that put the cfpb and the federal reserve, and thus not subject to annual appropriations process, but more importantly, we see the republican obstruction in funding the fcc as well as the cftc culting the budgets of o those agencies to below precrisis, prebernie madoff levels. why create an agency to ens hains transparency to the whims of anti-consumer crew saiders 124 that's not to say that on the line of what my colleague talked about before. we have many laws. most citizens don't break the law, but they still have the law that they abide by also, so i agree. the small banks but they don't

have negative involvement in this, and you have to abolish the police and most of the individuals in the city abide by the law, but you still have police there, 10 the functioning that you have is tremendously important in making sure consumers are protected and have choices and, in fact, you know, one of the things that i think that you're doing and stories i've read that are egregious over the last two days 1 about predatory lending targeted towards active military servicemen and women. describe some of what you learned about this, and what specifically, i think it's mrs. person petraeus and the bureau are ensuring folks in uniform and their families are protected from this behavior. >> it's one that i'm glad she's leading the efforts in. we are going to simultaneously make sure that we understand the special circumstances and particular difficulties that our service members have today in

financial services, do what we can to make sure that our men and women in uniform are equipped to be able to understand the financial ramifications of what it is they are getting into, and that we are attentive to those who would break the law in order to take advantage of precisely those men and women who dawn the uniform to serve the country. we take is very seriously, and i think mrs. petraeus already, in shining a bright light on these issues, that inch both our -- inform our efforts and more broadly make an impact in the marketplace. >> you talked about a financial aid shopping sheet. what complications to, you know, officially functioning market or consumer initiative you see in the student loan market if you will in the little time i have left. >> student lending is a big market and for any individual family or student borrowing money, it's a big, big decision, but those decisions are made unnecessarily complicated by the fact that individual schools

tend to use their own terminology to describe exactly the same things so in cases like that, it's difficult for a student or the family to get a handle of what they are getting into and how to compare how various schools stack up. >> that's shows various choices, and the last thing wanted to talk to is checking transparency. tell me about what you see that is easy for voters for constituents to move with their feet if they have to. >> well, in the tda or that is to say in checking thes broadly speaks, it functions like other consumer services. they should be in the products that they understand they want. that's how a market works, and if we do our jobs right, that'll happen. >> the gentleman's time expired. thank you. >> thank you, madam chair. thank you, mr. date, for testifying today, and i have to tell you, i appreciate the fact that you have a lot of zeal.

you come with a perspective that's almost completely private sector m i think we need more of that, but i am a little cautious because i've heard you say several times in your testimony things like common sense. this is just common sense or the bureau's going to be making things more efficient and more effective, and this is my first year here at the congress, but it's my 17th year in the government, and one of the things i've learned early on was unfortunately, it's something we need to change, but it checks common sense at the door, and if you think a bureaucracy will make things more efficient and effective, you should probably will medicated and just accept the fact that more government often is the problem, not the answer, so just want to put that out. it's only be 100 days, and i'd love to have the conversation three years from now, and i think you'll have a different

perspective, but you're being honest from where you sit now, and i respect that. i want to go back because you mentioned before how someone has to be on the hook, and in the private sector where you come from, you're right. someone's on the hook. if you screw up, you don't doe what you are supposed to do, you get fired. if you screw up badly enough, nobody else will hire you. that's not how it works in the government. the accountability is one of the biggest issues we have. it's one of the reasons i ran for cock because no one's -- i ran for congress because no one is held accountable. it's almost absurd. you were asked the question by my colleague, mr. duffy, what exactly did the smaller banks and credit unions, what did they do to exacerbate the financial

melt down for lack of better terms? you anxioused how they were -- you anxioused -- answered how they were affected by it. yes, did they contribute or play a major role in the melt down? >> no. >> okay, okay, hold on, yes or no question. thank you. they didn't. that's why i think when i speak to my community bankers and my credit unions they say we had nothing to do with the melt down. we played by the rules, and now we're hiring more compliance officers. i know the intent, and i think -- i don't think there's anyone in the panel. i don't think there's anyone involved in dodd-frank or in the new bureau that doesn't have the noblest of intentions. i believe that in my heart and soul so it's not the intent i'm worried about. what i'm worried about is we're talking about stream lining and efficiencies and you're already hiring more compliance and already paying more administrative fees knowing they had nothing to do with it, so do

you understand at least the frame of mind they feel they are being punished for something they had nothing to do with, but yet they are told by bureaucrats whether you like it or not, now you're a bureaucrat, that don't worry, we'll make it all better. that's a problem, and i keep hearing about fraud and predatory lending. two different things. have you personally, and has the bureau analyzed the defaulted mortgages, how much of that was, in fact, fraud? how much of that never, ever should have taken place had the rules we already had on the books been enforced? i think we have a big lack of enforcement. ..

>> so on that note, taking a military perspective if i have a unit that is not working as efficiently and effectively, do wife grow more bodies and resources at it or do i fix what i have first, get that to operate correctly and then worry about expanding it? that to me is common sense. >> we are building a bureau that is different in kind and dramatically different and we are dead serious about doing it right. >> the gentleman's time is

expired. >> thank you madame chair and mr. date for coming up today. i am interested in your answer to the question about the community banks and the fact they were not responsible me before the financial crisis but how they might benefit from your actions, because i haven't heard the answer yet. >> let me talk about it in two ways. one is near term and one is longer term. the near term debts to the fact that compliance costs are real costs and they tend, not always the they tend to be fixed costs. in other words if you are a 100 million-dollar institution or 100 billion-dollar institution that doesn't scale the size. what that means is that compliance costs are disproportionately tough to read to the extent we can streamline regulations as we are doing right now on the mortgage disclosure forms as we're ticking off the effort to target and review existing legislation, too, will that benefit

disproportionately benefit community banks? >> and you think you can have some impact there with that review? >> absolutely. >> are you getting much feedback? i saw in your prepared remarks that you've got a survey out if he will have you been getting much feedback? >> we have a fair amount of feedback and we will do primary work because not every regulatory burden is the same. some things cost real money and our institutions functions and some do not and we want to make sure we target the right things. you're own money that's what we do and what we are doing. >> i think will be good for all of our community banks. i am also interested you mentioned earlier on your role in regulating mortgage servicers if there is a release that he called on october 15th that talks about that. there are problems in the servicing and our offices here that every day in terms of the

timing documentation i get is a complete disaster. what i'm interested in is what dtc your role? fight seen the press release what are the standards you're going to apply for accuracy and timeliness, and then you mentioned at the end appropriate enforcement. what does that mean in the context of the servicers? >> mortgage servicing is one of these things that is simultaneously a market in terms of the risk to consumers. but also it is one that in the pre-dodd-frank regulatory regime tended to attract not as much supervisory attention as it otherwise should have had and it's not my words it is the gao pointed this out earlier in the year as mortgage servicing wasn't viewed as the safety and soundness concerns, not a significant one and as a result it didn't attract the same supervisory attention that has turned out to be a real problem when the regulators reviewed 14 institutions in the report they published in april of this year 14 of 14 had a serious

deficiency which is not a great batting average. we have today as of july 21st we have today supervisory authority over most of the largest mortgage servicers in the country with respect to existing federal consumer financial laws which means we will take quite seriously the supervisory authority that we have to make sure that the laws followed and that those deficiencies it remedied and consumers are not -- >> we run into this all the time of the consumer's not having a single point of contact while the documents are in bad shape which by the way as a whole other problem and issue and may be subject for an oversight hearing in terms of mirrors and everything like that it's a disaster out there. what is your -- what is your role in that documentation side if you see any or if you have any? >> there are structural problems in mortgage servicing so

flexible the servicing compensation works it's difficult for the server servers to actually get paid for dealing with delinquent loans in the right way and a thoughtful way and a nuanced way and as a result there has been systematic under investment and the people and processes and technology and we're living with the results now. but the fact of the matter is even if the compensation structures are not ideal, you still have to follow wall, and that is what we can get -- >> what does all say and lastly in the 30 seconds what are the appropriate enforcement actions that you can take? >> we have an entire range of potential remedies. we have the front end the sort of ability to participate in an interagency process that we are doing right now to try to develop sensible right minded practical national mortgage service standards. the existing patchwork set of regulations in this area has not done anyone any great service so if we can come to a conclusion

on some of the sensible national mortgage standards but would go along way. >> thank you. >> mr. mccotter for five minutes. >> one of the questions that has been repeatedly asked and i think you touch upon it in your opening statement when you referred to here it is on page four, regulatory arbitrage which i believe you mean to say businesses, financial entities look for the least regulated area to try to set up shop, is that correct? >> that is the gist of it, yes. >> cannot be corollary related to the community banks and credit unions of bureaucratic arbitrage where the government looks for areas that are less regulated so that they can expand their power and influence. >> in my experience the more problematic aspect to the issue

you are raising is that everybody knows where the community banks are. everybody knows the address. you know how many there are you know how to find them and who runs them and as a result there much easier to regulate in the standards than the non-depositories and that's what we have an advantage in fixing. god love you. the second question is people back home have difficulty in relating to the concept that government creates bigger broker cease to streamline government. you said you hired some 700 employees. the reason for which to me and i think the reason the existence of the agencies look forward is so that you can centralize the authority making within the new consumer bureau, right? this efp. you can centralize the host of duplicative authorities that

have spread out through the years with in one central place. >> that's right. >> centralization of authority. >> consolidation, but yes. >> consolidation. it's different without a distinction. to me the question then is what happened to all the other people that were doing this? in the federal bureaucracy. where did they go? since you consolidated the operations and authority where do they go >> we get something like 1300 applications, potential transferees from existing provincial regulators. >> all the people whose authorities to have consolidated from their broker seized now work for thus efp? >> to the contrary we have made 300, treen to 50 officers among the 1300 applicants because we are building the bureau. >> where will they go? >> i personally don't know them

all, congressman. >> where will the positions go? what happens to the positions? there is authority that you have consolidated in a new bureaucracy. what happens to the old bureaucracy? >> i wouldn't be in the position to be able to -- >> but you know that you consolidated their authority. what happens to the positions that are currently tasked with implementing that authority in the federal bureaucracy? >> those people -- >> the positions. >> i'm sorry, congressman. i would not have line of sight into the internal staffing decisions of comfortable the fdic. >> how can you say that you consolidated the authority of the continue to do the same job and the same position despite the fact this bureau bureaucracy has been created? >> i mean it in the quite literal sense. >> so why. how can you say that you consolidated with the authority within this bureaucracy if you cannot tell me whether the

positions that are currently giving them have been eliminated or have had new tasks assigned to them otherwise you just added a new bureaucracy on top of people continuing to operate as the old bureaucracy. >> , cao dodd-frank i think is relatively explicit about this there are authorities to at minister and enumerate this of walls that transferred over to the bureau on a date certain that has happened. >> or all of those positions now again or all of those positions now coming into the new bureaucracy? and if not, what happens? >> as i said, cumbersome and, i don't have visibility nor white. >> so you don't know whether you consolidated the authority because there may still be positions within the existing bureaucracy that are doing these. >> , -- >> see you don't know. >> i'm quite confident of the

authority transferred to us by the bureau. >> so what happens to the position if they are sitting there with people and then spending the taxpayers' money with no specific direction at all and no plan for their subsequent phase out or in elimination in the time of the massive deficits and debt to try to save the taxpayers' money, you don't know if that is happening or was that not envisioned by the foresight of the drafters? >> i know that i am executing the most disciplined it possible for us. >> that's what i'm asking you. you may be doing the best you can but it doesn't mean it's good enough. >> the gentleman's time has expired. mr. greene. >> thank you for allowing me to be a part of the hearing. as you well know. i would like to thank you for appearing to do. i'd also like to compliment you on getting your office of older americans and the office for service members of to speed. it's important that we serve these two communities.

to this end, a brief bit of information which will give you some indication as to why i have some concern about the question or perhaps the statement that i will make. in my congressional district, we have about that now when four languages. hinglish, spanish, vietnamese and chinese. by the way, that is for american citizens. every person voting is an american citizen. and this is small so it is all pursuant to the law. but with reference to our older americans senior citizens who in the twilight of life many of whom do not understand english as well as you and i are you preparing to have your material printed in other languages so that they may be not only informed but have an opportunity to benefit from much of what you

do? >> it's a great question, congressman, and we are trying to address access and that we in a couple of different ways. one is to test overtime if you could develop in both english and in other languages you get different results or not because for example if it makes just as much sense to develop in english and then translate after the fact that is one thing. but you may -- i don't know, you may in some cases if you could even of english and spanish at the same time you might get slightly different looking things and test that over time if there is no difference we will defend it in english. the other element foe is we have multilingual capabilities and our consumer response center today. literally 150 different language capabilities which is important that is the nature of america. >> thank you. i submit this diversity. i can get makes us a better country. now, moving to another area. it has been my opinion that where we have a few facts we

have much speculation. there is a lot of speculation about the appeals process for some of our financial entities given that you don't have your permanent director in place. they are concerned that appeals may be our retreat with their findings may be our pachauri and capricious. i've met with some of the small bankers and i have not had any to say that they want a process that will always allow them to prevail. they tell me that they want a fair process so that they can get a fair hearing and that so they can have some confidence in the finding. to this end, what are we doing to not only have it but to make sure they understand it and that there is a desire to be there so that they will have this speculation that can create adverse opinions? >> i absolutely agree, congressman, with the notion

that speculation about what we might do or might not do doesn't do anybody any good. our supervisory process is not meant to sneak up on anybody. we want to be clear what our expectations are not just to the field examiners the institution as well and that's why we took in importance to the couple weeks ago publishing our supervision examination manual. it is -- it's become the guidepost by which the financial institutions can expect to respond to does it contain within information about the appeals process when there is a desire to challenge a decision made by the agency? >> already in overtime we will supplement a number of published guidelines about what appeals process cheese and administrative procedures will apply to that set of issues which i think are important. we obviously have had the benefit of being able to look what other federal agencies have done to construct something that is fair minded. >> to final comments.

one, i do meet with small bankers and they are existing consternation in this appeals process. i don't find that to be unusual when the people are having to deal with the unknown, so if we can make as much known to them as quickly as possible i think it would be of great benefit to all of us and the final comment is with reference to the original name of the dodd-frank act i would see some intelligence indicating that it was the wall street reform and consumer protection act so it has always contained the notion that there would be consumer protection as a part of the act. thank you madame chair. >> thank you, madame chair, and i apologize for having to step out to get prepared for another hearing with this committee a

little later on this afternoon. i was able to be here for about the first hour or so and i appreciate your time again here in front of us. i know you've covered a lot of ground and a lot of territory but i don't think that this has been talked about much. i feel i need to learn a little more about it and hope that this is enlightening to the community as well but i know that the cfpb has stated that it has some plans to finalize the ability to pay the rule early next year and that its regarding a regulation for lenders what they are going to be able to do and i have a background in real estate and developing and am very concerned about how we got ourselves into this with some of those practices before, but it's requiring more potentially required and a lender to do a, quote, quote, good faith investigation as to the ability to pay for a loan which seems

slightly redundant to me. i want to know why people would be making loans that wouldn't have an ability to pay but i think it is a part of our problem and i understand that there are two alternatives regarding the caulkett mortgages and i'm wondering if you could expand on that a little bit regarding the safe harbor as well as i believe it is a rebuttable presumption with those would be and why we wouldn't go with the safe harbor standards of that everybody knows what the rules are clearly in accompli by those -- can play by those. >> when i get the profit setting of where we are to describe a little bit about what is this qualified mortgage thing any way and then see if there are substantive points around it. >> we have to go quickly about three minutes to respond you will be astonished at how fast i can talk. we will start with why would people be making loans where the borrower doesn't of the ability to pay any way? like oral brandt the credit card

business. believe me linder this in those businesses tend to care whether the borrower can pay you back it is an important part of the lending process. as we saw in the mortgage credit, during the credit bubble because risk and return tend to be dillinger given the fragmentation of the markets are not mortgages, you know, you ended up with a originators not necessarily having the same stake in the outcome and as a result became less important in terms of how you actually got paid on the front end as whether or not the borrower had the ability to repaid on the road. dodd-frank appropriately in my mind takes the approach to say there should be good faith investigation into the ability to repay, but that alone as your question points out would not necessarily provide concrete guidance to the marketplace on such an important topic and as a result we are moving quickly to as quickly and as carefully as we can to be able to provide some guidance about the so-called qualified mortgage which would be something that the definition needs the ability

to repay the requirement. process wise the federal reserve board proposed a definition for the qualified mortgage we inherited on july 1st the proposal we are right now evaluating the fairly extensive comments associated with it with an eye towards providing a final rule to the marketplace and clarity early next calendar year that's actually substantially ahead of the deadline set out in dodd-frank. the reason why this is the top of our agenda and the alacrity which we are pursuing it is that it number one is a gigantic we important concept and it is important in that it provides a kind of foundational a lament for other elements of the mortgage reform that are pursued by of regencies so their retention and mortgage definition in part on the call

of a mortgage so that is. >> i had a chance with chairwoman capito to be in wisconsin earlier this week and talked a little bit about this when i was going through getting my realistic license 20 years ago i would stop people brown not yellow, white, not black, the green and the agreement because they simply do or do not have an ability to repay and it's my desire to make sure those rules you're implementing are based on that and that it then provides the guidance, because we got the outside of the down side believe when we saw people taking on mortgages. oftentimes voluntarily. that they didn't fully understand what that meant and we had no ability to sort of control themselves. >> i am of that generation. we want it all.

forestalled gracia and the master suite. thank you mr. chairman. >> mr. manzullo for five minutes. >> thank you. i find it quite frightening that you made the statement that there are tens of thousands of products to be examined to see whether or not the should be regulated. i practiced law for 22 years before i came here, closed over a thousand real estate transactions, commercial, agriculture, residential. we made up hour own closing statements at that time that given enough information so people can understand when they came along in the mid 70's we had to sit there and pretend that the closing took place three days before because the requirements for so stupid that said we should have to adjourn

the closing and come back three days later because the consumer has a right to vichy the mortgage. now we have the community banks who did absolutely nothing to bring about this crisis, bearing the brunt of the regulation and i disagree with your statement that says on page four the regulatory system prior to dodd-frank failed to protect consumers from harmful practices industry can tick lending market. number one, fannie mae and freddie mac could have said their own underwriting standards not only to the loans that they collateralized but also with a lot on the open market, the sub primes the two presidents said they should buy up because they want to have more housing going out. the second thing is the fed has always had the authority as for chairman bernanke in the summer

of 2009 to set underwriting standards and governor documents of the institutions over which the fed has had the authority. but you know what they did? on till october 1st 2009 did the fed come out with the outlandish regulation that you had to have written proof of your earnings. come on. now we have another year dhaka see coming along blaming the smaller institutions putting more regulations upon them when in fact was the federal government itself that could have stopped this knowing full well people are buying homes when they could not even make the first mortgage payment on it. i -- know people are not going to read documents. when i used to close the real-estate transaction, it was maybe this many papers. the mortgage was two pages, the note was one page, and now it's

this many pages. people don't read all that stuff the lending agent or the person who closes the loan has the documents that essentially says if you don't sign this stuff you don't get your new house. now we are going to have more and more and more disclosures. this doesn't work, mr. date. go ahead and trying to set up a new bureau to do the job the federal government could have done adequately before question is you're going to redo respa is that correct? tell me yes or no. >> we are streamlining. >> now there are a according to the testimony several years ago when we fought respa like crazy because it really is not that clear, it tries to add things to with its more confusing for the consumer. there were eight people at hud that worked on respa.

>> can you find out for me? i want you to make an inquiry and get back to the committee on the 70's and find out if anybody had the work on the disclosures consumer product safety board, i'm sorry, consumer financial protection bureau they're still doing the same thing at hudna on respa? >> and across the bureau quite concerned about the continued ability to make sure we have absolutely the best people -- >> will the gentleman yield? >> no, i won't yield. my question is according to your testimony, you are going to be streamlining whatever it is and looking over this document that's been beaten to death over the past years that continues to the size and scope and makes it even more difficult for the

consumers to read. i want to know if the people at hud who have been working on it for years on the same respa for monday you know that to be a fact? >> we have a team across -- >> to the still have hafed working on respa? >> , -- >> if you don't know you can see you don't know. >> i've been a regulator for 102 days. i don't know the specifics. >> if you don't know just say you don't know. that's okay. >> of course i don't know. i'm sorry. >> could you find out for us if they are still doing that work? >> i'm confident our stuff will find a way to make sure that you have the oversight that you need. >> the gentleman's time is expired. >> does that mean that you're going to get back the information? >> i am entirely happy to provide you with the information that you need with respect to the respa administration which i think is an important topic in the consumer finance broadly. we take quite seriously that job and i am heartened to hear your

enthusiasm. >> thank you. i asked the ranking member because i had one additional question i wanted to ask if she wouldn't mind if i ask unanimous consent those the would get another two minutes for questioning and without objection i think she said to go ahead. i wanted to go to the bank of america interchange debit card 5-dollar a month issue because we are several members talking about the concern about what it's doing to the consumers. were they made of the change they were making to their debit card changes previous to the announcement that they made, is that correct? >> you don't mind i would like to steer clear of talking about specific conversations with the entities but i can say that we routinely are talking to institutions within our supervisory universe across the range of the consumer finance issues. >> but transparencies what we

are looking for here this has been the big complaint the transparency in the previous subprimal and my assumption would be bank of america came to the cfpb in the disclosure and examination to say that this was their intent and i guess my follow-up question would be that if it went for word then it was judged by the cfpb cannot be deceptive and unfair and abusive because of was revealed and transparent; is that a safe assumption? >> i think it is broadly true that in a productive for the relationship that bank management teams, the financial institution management teams have off the field felt for about what is happening in the business, plans for the business with their regulators at least in part to have this sense of whether or not something feels like it is within the conference of the law. >> let's take a different step. let's say that it was assessed

without revealing to the customer or to you that would be judged as abusive, unfair and deceptive. >> there are specific disclosure requirements with respect to the pricing changes on the counts but there is an existing law and regulation. >> i'm really not getting an answer on yes. maybe we can talk about this outside of the scope of the committee hearing, but i'm curious to know if this has caught a lot of attention, shall we say come and rightly so, to see what the interplay of the bureau and this type of financial move would have been and should be and would be going forward. so i will ask the ranking member, and i will do a little rap up. >> in response to your question and bank of america's own statement the send out the said

they listened to their customers, and they were repealing this. what happened is many customers were voting with their feet and going to other institutions that were not charging this additional fee. so in a sense the open and transparent market brought more competition into the area and bank of america said they listened to their customers and they were withdrawing it. i would like to respond to my good friend who was asking you about regulation, and i want to compliment you for beginning a targeted review of all regulations that you inherited from seven different agencies that had consumer protection in them but it wasn't their first goal, the other duties of the consumer protection became a secondary thought were third or what was that even thought about at all and that is why we need

one agency which is focused on helping consumers and i would state that when you help consumers you help the overall economy coming to help the financial institutions. following upon his request for information, i would like you to bring back to this committee and i would like a copy of it as well was the chair leedy the regulations that you are seeing a duplication that aren't necessary that are no longer needed so that we are saving money for institutions. i want to document how much money we are saving for institutions by erasing unnecessary regulation, and you have come out with "know before you owe" which has received a mountain of applause for taking the complicated documents that no one reads. the fine print is so small no one can hardly even see it and making it understandable so that the consumers can understand the

risk, so they can understand the cost so they can make choices appropriate for them. madame chair, i would request additional minutes to respond what i feel was an unfair attack on cfpb. and i think it's important for the public knowledge and important for this hearing so i would request an additional two minutes to respond. >> since no one -- >> take another two. >> absolutely. this is an important hearing. it's important to our economy and our consumers, and i would like to point out that many people today made the allegation that there was no oversight of a consumer financial protection bureau. that is not true. there is more oversight on and this facility on this bureau than all of the other federal regulators. first of all it is accountable

to the president, to the congress and to the judiciary. the director is appointed by the president and can be removed by the president for any cost that is appropriate. the director testified before congress and in newly they are required to. the aegean to the car and you will gao audits and reports to congress on consumer complaints and financial literacy again required in the law. enforcement measures can be appealed they can be appealed to the united states agency of appeals and the subject to judicial review. they have an incredible oversight which i think is no other regulator has it. other regulators have unprecedented veto over cfpb rules even after they finalize the regulation any member agency of the financial stability oversight council that object to

the regulation can petition to get it removed. so other agencies can overrule the actions. no other regulator has that oversight and there is mandatory rulemaking consultation with regulators and small businesses and information sharing on bank supervision. any study they do on a financial institution that institution has access to that study and they also have a cap budget, the handicapped budget. other regulators do not to read like all bank regulators, the cfpb budget is not subject to the appropriations process. this is the standard operating procedure but it is tied to the percentage of the federal reserve but so their budget is capped and i would say that there is oversight and that was misinformation that the information that has come out today is the extraordinary help

businesses petraeus is giving to help the service men and women keep their work the combs defending afghanistan and iraq that there is a new senior area to help the seniors that are incredibly abused by predatory practices and even the business community is coming out in applause of the student loan know before you sign these contracts. how are you going to repay it? these are positive steps forward that help our young people and our seniors and members of the surface and they are part of the solution, not the problem. they didn't create the financial crisis. and then i'd argue that if the had been in place, we might have prevented the financial crisis. i think for the hard work you're doing and i appreciate your testimony today and hard work.

i yield back. >> i'd also like to thank you mr. date for george informed testimony today. obviously you know your stuff so to stay and i want to thank mrs. petraeus for joining us today and for what she's doing to benefit the forces and i do think that you targeted in our legislation targeted to be extremely -- >> all i applaud the statement but may i be recognized for two seconds on holly petraeus? we agree everyone says congress doesn't agree we agree on the work they're doing to protect the men and women in the service and i request a hearing on what we are doing in this particular area, stories of what this agency has done to protect the homes of the men and women in the military. this is something that is worth exploring more.

maybe there's more support we should give her and her efforts >> that is an excellent suggestion. let me just ask a quick question because we've heard a lot about this and i mentioned i think the very beginning that i and refinancing and a lot of people across america are refinancing and still finding this when you come in and try to read through it. so i found out what is the actual length of face respa it's longer than it should be. fops met for a clarification of the folks that go in and you told me that when you were in my office the the final regulation will not be finalized on least two years and after goes to the comment programs etc and forum gets voted on is that pretty much essentially what -- >> among other things. we have to propose though regulation they are all quite

like-minded procedural -- -- a couple of years of the few or refinancing a couple years away you might have in front of this you can see your earliest we are still going to have all of this and i think that's what mr. manzullo was referring to because he's not saying i'm not reading at, finding things and not sure what he finds. that is an issue of something as precious and valuable. i would like to say in response to my colleague's assertion that one regulator can come in and say and decision by the cfpd needs to be overturned. if a threshold to overturn as of ending of the entire financial system of the united states is

one of the issues and also in order for that to be overturned, it is a two-thirds vote by that body which is a pretty hard for and it's very difficult but we had a common sense reform to that because we liked the concept of keen over to overturn her decision. let's make it a reasonable bar, a ha vara but a reasonable bar and we should look at it and be the first 102 days. maybe that is not going to get through the senate but it's in the initio recuring as cfpb grows and matures into a longer serving bureau. but essentially i'm going to bring it down here because we dragged mr. cfpb threw a couple of hours i'm sure he's ready to go home. i appreciate you coming into the dialogue that you and our office

has with this committee and a look for to seeing you in the future. thank you very much. >> thank you. [inaudible conversations] the head of the transportation security of the fenestration said today that federal

and safety the head of the transportation security of ministration talks about testing a new program aimed at getting travelers through airport security more quickly. the senate homeland committee hearing chaired by senator joe lieberman is two hours. >> good morning. the hearing will come to order. senator lieberman, the chairman has been unavoidably delayed.

he will be joining shortly but he has asked me to proceed to convene the hearing to my statement and he suggested that i give a very lengthy opening statement in order to allow him to proceed with his nevertheless we will proceed as normal. bye targeting our airplanes, al qaeda succeeded in killing nearly 3,000 a decade ago. aviation's que ready is critical to the homeland security. we americans have demonstrated a willingness to endure and enhanced security measures at airports if the measures appeared to be reasonable and

related to risk. a travelers become frustrated when security measures inconvenience them apparently without cause or when they appear to be focused on those who pose little or no threat. next month it will be ten years since the eshoo bomber failed to take on his flight from paris bound for miami yet we still take your shoes off and in 2006 british and american intelligence thwarted -- in liquid bottles. we still can't carry on av regular size to the toothpaste onto an airplane. the christmas day bomber had explosives in his underwear and media reports indicate that terrorists have shown interest

in having an explosive devices surgically implanted in their bodies. these threats have led to more intrusive pat-down searches and one wonders what more will be required of airline passengers in the future. we have seen tsa putting the very young and very old through and in some cases unnecessary screenings. at the same time of troubles many americans to learn a young man was able to fly across the country without a doubt that the government id and with an expiring boarding pass that wasn't even issued in his name. if we get extra screening to individuals who appear to pose no threat yet others who should gross suspicion can get past

checkpoints without being questioned, our systems are still not as finally calibrated as the need to be. since the june hearing the administration has implemented a risk analysis to improve the screening process of change. this effort should provide a more effective and efficient use of the government's limited screenings resources. i am encouraged for example that the new risk-based approach is designed to permit tsa to learn more about travelers through information they choose to provide. >> some of the changes will result in our most common airport screening, plants. secretary napolitano said that frequent fliers who often to a

known traveler program will often people to keep their shoes on and their laptops and their bags. tsa to its credit and administrator pistole service credit for them also has changed the screening procedures for children under 12 rediker amundsen's decision that was overdue. nevertheless, questions remain hosam security procedures in fact americans privacy and whether or not the procedures are as effective as they should be. in august, tsa began installing new software, passenger machining screens. using a generic out lines, automated target recognition that could pose a potential

threat. i first saw this lousy piece of technology in amsterdam in 2010 and by repeatedly raised this issue with the administrator pistole and secretary napolitano this technology was implemented at skiffle airport. in the wake of the christmas day bomber being able to go through with his explosives undetected i would parenthetically notes that i assumed this was some cutting edge technology that has been developed in germany. i asked where it had been developed and found out so clearly there are opportunities m. roane country to take advantage of new technology. i urge the consideration of this software which travelers

privacy, eliminates the need for a separate graner. relies less on human judgment and eliminates the inconsistency of associated with human reviewers and very pleased that tsa is rolling out if testing its technology. while the atr technology is currently being used with the so-called milledge millo pittard dave which we you regulate i would no other advanced imaging technology were ati screening machines radiation have continued to resolve concerns. this is an issue that i serve not for my colleagues. most of us travel every single week.

i also hear about it from passengers who are concerned devotee exposure. let me underscore my appreciation of the fact that no single screening technology can ensure our safety. there is no magic bullet. there is no perfect system, and that's why a leered system of security is so essentials involving watch lists, involving intelligence, involving all of the tools at our disposal. the fact is if we face a determined, in of a foe and no

machine can substitute for good intelligence will treat screeners and an observant public. the process has received both attention and sometimes anchor from the traveling public. it became clear last year that that part suggests terrorists are investigating that is why senator lieberman and i intend to introduce an air cargo security bill later this year. our success in the risk-based screening of maritime cargo should provide a road map for the risk based king affair cargo and that is what i would like our legislation is intended to do. and of course, just in the past 24 hours, we have learned of

caps in the security related to certain catering operations in the airport in atlanta. those are very serious concerns because obviously the of direct access to materials that are put on their plans, and i'm sure that is an issue that we will be talking about this morning. our government's priority is to the public will accept a certain level of intrusion and inconvenience at our airports as long as we are convinced that it is. they are safer, more effective and that minimize privacy and

help concern. at this point i would usually say thank you mr. chairman but in this case i would be thinking myself. we are going to move to our first witness today. we are very pleased to have with us the honorable john pistole. he is the administrator of the securities known as tsa within the department of homeland security. mr. pistole, we welcome you back to the committee. i commend you for your hard work and being open to our suggestions and recommendations of the public as you seek to protect the travelling public please proceed with your testimony. >> thank you, senator collins and on behalf of the committee for your support as our risk-based security initiative

in terms of how we try to work to provide the most effective security in the most efficient way to read the last appeared before the committee are plans to deploy aspects were still being formulated and we've begun implementing several aspects and testing other aspects and ports around the country with a goal of providing the most effective security in the most effective way and we must make sure every step strengthens the security and intelligence informs us of terrorists ongoing interest sent packing aviation and does no good because most provide little risk the goal is to focus on those the present the greatest risk anecdotally we still find for on to five guns and checkpoints every day.

yesterday we saw the six including one that german lieberman's airport in brusquely a loaded gun with seven rounds and a checked bag trying to get through. our success is through the imaging technology as you noted because they give the best opportunity to find the calculus such as we saw in 2009 and have successfully detected items as small as a client or small individual piece of gum that is wrapped it is not perfect as you note and we continue to work closely with manufacturers to improve its ability began noting it does give us the best available opportunity from the technology perspective of detecting the christmas a-bombs. as part of the risk-based security initiative we've deployed them a paycheck. the passenger prescreening initiative with a small population in the u.s. airports

placing more focus on the prescreening individuals a volunteer information about themselves prior to flying because we know more about them tsa project travelers may move through more swiftly through the standing screen process and be able to digest your items such as the issues, their belt and a light jacket along with keeping a laptop in a briefcase and aerosol gel in their carry-on bag. of course we will always incorporate random and security measures throughout the airport at no point is a traveler guaranteed expedited screening. initial feedback for the tsa has $40,000 going for the expedited the process a far. the first partner airlines the american delta successfully demonstrated the required technical capabilities and we are working with other airlines, another airport to expand the program as they become operational we ready and as more and more people find out through

customs border protection usually successful program so the effort on the right into the base we also have in the improving screening system which helps positively verify the employment status of airline pilots. under this program being tested a seven airports currently, tens of thousands of airline are in this screening. again all were very positive feedback. we also understand the behavior detection initiatives and followed by the boston global airport and the detroit airport. in this new initiative the legal analysis techniques are used by special officers to determine if the traveler should be referred for additional screening. this is an additional interaction d. it enables officers to confirm or dispel suspicious behavior and anomalies. the preliminary right now from boston as an increase detesting high risk passengers additional data is required to understand

that history and statistically significant and measure against the return on investment. in august we implemented as you noted a screening procedure for churn tallman 12 am dollar putative lot of them go through the truces recognizing intelligence pose low risk to aviation security although they can be used by those who might want to cause harm. these changes give off there's more options to results that may occur during the screening process and the results from this nationwide enhancement to show a sharp reduction although not elimination of the need for fiscal pat-down and families responded favorably to these changes. combined with the paycheck and include screenings and weisel was free of resources to focus on the high risk travelers and in essence risk based securities helpless strengthen soc securities by reducing the of the stock in which a terrorist might be waiting.

identifying additional groups as part of the high risk security initiative and i look forward to answering as these programs if progress. innovation, partnership and commitment to the pursuit of excellence these are the watch list words of mohamed atta. >> guest: think you members of the committee for appearing before you today. i want to ask your questions. >> thanks very much, mr. pistole. as we have seen over the years, terrorists continue to look for aviation security procedures, and that's why i was particularly disturbed. in the lands of georgia or the lack airline catering security procedures identify the two investigative reports and

undercover video and specifically press reports indicate the video catering employees taking a back for a security check points which would allow explosives or weapons to be concealed among the food and those cards that were in the staging area before they were deemed loaded onto the plane. my question to you is what this tsa done in response to this report. have we identified jet another vulnerability or cheaply this is >> thank you, senator. clearly this is something that we take seriously and it is a concern under the umbrella of the inside threats. those who have some type of

special access evo through their work or employment or the background. allow them access in the way the general public does not have is something that we focus on. we set standards for catering companies and airports around the country that they have to meet these standards. we inspected the those. such as a report like this there is some type of preach or vulnerability identified. we moved frequently so in this instance this was brought to our attention in the last month we finished to work with the airport, yep also to assess what vulnerabilities. there may be we've continued upon that in terms of the investigation as to what actually happened and that is ongoing. the problem is we don't have all the facts as to what may have happened and what of their vulnerabilities may need to be addressed but we are moving forward in concert with the catering company and the

airport. >> can you explain to the committee what kind of vetting of the tsa does. airport and others who have access to good, =to -- >> there is a series of background checks and fairly robust system in place to assess whether anybody who wants access to either the area of the airport or even the vendors to work in the area of soil make sure they are not only terrorist watch list since the first step obviously. a criminal background check is then on and we do vetting that his recurrent for all those that have additional access to the sterile area. we work with the companies and

their forceful 150 around the country to determine from the risk mitigation perspective do they see any vulnerability in their employees and then based on what the u.s. government knows and the background check from the u.s. intelligence community are those who may pose a problem. the challenge becomes really frankly for the clean skins those who have no criminal the crowd and haven't, but a terrorist watch list in any way and so that is the challenge presented and we also include random and unpredictable security checks for the catering for example and the employees so random surprise checks if you will on a on predictable basis. it's clearly something that we focused on.

i would like to now switched to the issue of the cargo security and the final time that i have left now that our chairman, the true truman has joined us and as you may recall that a hearing that we held that in november of last year i asked you the question that if our government had not received the intelligence about explosives hidden in the air cargo shipped from yemen with our current security system had detected those packaged bombs and you replied in new york ( opinion. we have not. can you tell what has gone on since that time so that we have better screening and this for

cargo. we are always going to need intelligence information. that is absolutely critical and it's part of the earlier approach to security but it does worry me that for the intelligence these explosives would have made it to their destination most likely. >> thank you, senator. a great deal has been foreign governments, former currier carriers and the international aviation organization. i'm going to rely in the customs organization and the union. all of the coax a working together and as you recall to work with the authorities but they that intelligence can lie immediately issued the director to the amendment that put the grounds of them in coming out of is the first step what we've done i believe very

collaborative please work with the industry's to the farber dramatic standpoint. we can issue regulations day in and day out. if it doesn't put a halt to the financial supply chain when i issued the security of directives for the benefit we've worked to a list published standards well beyond much more rigorous than ours that just as a risk mitigation from a business perspective in addition to the government's perspective and as you know when under% of all cargo coming up from overseas is not screened all high risk cargo and the other portions that as we did fight and work closely with customs border protection the offense

targeting system to say there are categories of known shippers and shipments for those in the unknown category we need to apply additional scrutiny and have applied before it comes to the u.s. so that's what we are working through with the carriers around the world freckly and others 21 countries that are accounting for all of the cargo. we are working with countries on the national security programs. we've already a recognized a little handful of those. that's good to hear. gao has been critical that there are still problems with the screaming palletized. i want to turn the hearing back over to the chairman, but tallish german that that the tsa

is still capturing for to four times as would the screener say and he mentioned that just yesterday that total was six and one of them was end the international airport. i think that is a very good reminder to us that there still is the need for screening. convene at 9:30 and i was thinking who's the chairman. it's been a pleasure to work with senator collins here together, so who is in the majority and minority and before that all that would change in this session would be the title as we had so i appreciate her

holding the gavel and bringing the hearing to order and i agree with what she just said. there are a lot of people taking their kids off going through the lines to say what is this, for what? when you tell us and the american people on an average of the 45 weapons or their ports around the country it will remind you that would carry a weapon in a checked bag so long as it is declared and checked but these are people who were boarding the plane with of the weapon in their luxury four-door five every day, so things for which you and your folks are doing. the rule of the committee is first to arrive it goes first and i think the chair ought to apply that rule himself so i'm just going to call on this

matter paul and then i will come after him. specs before. does the tsa examined flight manifest? >> so you know when people come through you've already look at who's slicing that, yes it's under our secure flight program, so there are specific searches then targeted toward someone you've looked at flight manifested determined they may need extra scrutiny? >> it is the whole basis of knowing who's coming to the u.s. flying from the u.s. comes with start every day with an intelligence briefing that looks out 72 hours and a chance to say selectees on letcher friends list but clearly the no-fly a want to fly but wonky be a afraid to fly so i was thinking more of people have been two yen

in three times and somalia toys and are not on their watch list you might not spend more time with them. that is occurring all so. >> i would be glad to go in to the more detail and a closed setting senator in terms of the mortgages we do with the intelligence community. >> i would like to know that it is occurring in general terms. if you fly from is from london to lagarde and then from chicago to you go back to any screening or are you relying on what happened in islamabad? >> you go through additional screening. >> you get out of the secure area you have an international flight and come through the screening. >> if you're talking about transiting from one to the other, yes, clearly enabling legislation allows us to do every partner here in the u.s., and with regard to setting up a frequent traveler program, you say there's a couple of points we're doing it right now. >> i at the end was the plan for expanding that program. we are working closely with the

airlines and the airports i've met with and talked to two ceos last week interested so right now we're doing it with american dhaka and in the area airports, so the goal is to add quickly weakened a bit of a more efficient way expanded up with of the airline's and other airports and so clearly there will be more airports added in the next several months but more so as we get into 2012. >> national airport it's not of those, isn't it? there are people going for, say the pilot is going through a separate nine now. >> - the basic security initiative apart from the passengers we have pilots who are the most trusted persons on there and were doing that at seven airports but as i mentioned we've had over

possibly 80,000 pilots have come through on this expedite screening process. estimates and be on an airport by your part basis that's what works? >> it is, simply because the check point configuration leave out and is there in the area for the dedicated line or the emergency exit or something like that we can configure but it's in close association with the five associations, and ata that no taxpayer concern i would add. >> of think it's long overdue and smaller or weaker we keep the text of what we are today this year and that involves more of making pretty and targeting folks who are more risk to us than anything we can do to have less pat tonnes of the six-year-old girls in fact i don't think there's any reason why we should be doing that. we need to get to the point. when an adult goes through and

it mentions a images word can they request to go back to it again. >> our policy that is why we changed in -- >> a changes with children, too. >> 99% of as are not terrorists. you'll get a lot of the bank and give us a little more dignity when we travel, just let us go through the screen air again and maybe people don't want to have a pat-down. >> we are made to feel cormels and we don't want to fly on a criminal when you get out of the plan. >> the downsize is it slows down a line and then people if they want to keep moving -- >> i'm not sure it's fundamentally they give him a truce to give a pat down or walk back through but i think what happens is when you ask any question you are sort of treat it like you're guilty of a crime and roughly and it's like to anything as to the questions and

we will not be more invasive to read that's the what you get some time says you go through the air in march but we need to continue to do what we worked to isolate and who could attack us and make it easier on those who are not going to attack which is recognizably and 99.9% of us are not terrorists so we need to figure out how to get them to an expedited fashion and the most dignified way to respect that's what this security initiative is designed to do. >> thanks, senator paul. thank you, director mohamed atta for all of the great work that you are doing. i'm struck by the examples of the 45 weapons of the sees the alliance and to the extent to were able to without to prison security to regularly announced a public that generally speaking what you are finding is because

there is a level of and not be patient, let by we would ask them to go through this is for their own security. i know you mentioned in your statement a whole imaging has to find the maker debt and somebody's back pockets. i know from having talked to you there have been occasional you found things concealed on a person which would not show up in a metallic scanner that could be very dangerous to the other people on the plane so i don't know if you want to respond at all to that. >> i appreciate mr. chairman. it is a good reminder. we posed the some things are the web site and we have an active blog people interact with now. one of the keys is not providing

too much in details of the terrorist can go to floor on what are its capabilities and not clearly the fact we are getting 45 guns everyday they are not focused on the security protocols. >> as you know the independent news reporting organization conjuncture with public broadcasting published investigative report on backscatter machines. one of the had become acceptable to use in airports but the article summarizes health concerns raised by experts over the past 15 years about these machines and i want to give you an opportunity because i know this has been in the news the last 24 hours. if you choose to respond to these concerns at this time. >> thank you mr. herman.

i did see the article yesterday and it contains a lot of information. i'm not sure all of it is accurate from the standpoint of all the different perspectives. clearly it is an issue we have looked at and continue to look at with safety and health officials to ensure that these backscatter machines are has absolutely safe as can be and all of the independent studies we have had done indicate that they are well below the minimum dosage recommended. i take senator collins recommendation to the heart to have dhs to independent study and we will take that into that because of the lingering concerns and those who have concern about any additional exposure of course the scientific study that we have seen indicate that it's the same amount of radiation as three minutes of flight of elevation

just naturally occurring radiation. it's 11,000 of the time of flexible a chest x-ray. that being said, i am concerned that there is a perception that they are not as safe as it could be and since we are given the different technology there would be no better way that does not have that same perspective. i take that back and we will conduct another independent study to address that. >> thank you. let me ask about another matter that's been in the news and i assure you know over the weekend during the winter storm there was a nightmare series of events that bradley airport prieta to make a long story short, i and others have been asking questions of jetblue, brad the airport and the reality was a lot of planes couldn't land where they were heading, they were running at a fool the vehicle fuel and being diverted

to airports like bradley which became very crowded and they always the gates were full. they were making judgments about keeping the runways open and the worst case as you know ensure passengers stayed seven hours, no water, no food, bathrooms not working, a nightmare. finally they were able to get a bus to go out to take the passengers off and they to come may be subject to considerable fines as a result of all of that. that's not been directly tsa's ury of responsibility but i did want to ask whether you might have contingency plans were showed for dealing with an unexpected in part of passengers and maintaining security at an airport when flights are unexpected lee diverted from another airport to that airport.

>> thank you, chairman. we do within the tsa have plans obviously with a little more heads up if there is a hurricane, something like that. we have a national deployment force we could move individuals on an extra wide basis within hours to an affected area that may need additional security regimen even for the passengers or the pilots and the crew and the workers and things we have the capability and we use that in hurricane irene but if something was started going back to katrina say yes we do have that. >> that may preface an answer to my next question it happened that one of the diverted flights was an international flight, and it raised an interesting question i want to asked customs and border patrol about whether if the passengers on the international flight were forced

to stay on the plan so long that was just humanly impossible and the to be taken off the plane and brought in to bradlee which has a sizable contingents of tsa personnel whether there is any way that tsa and cdp can work together in those unusual circumstances to process passengers more quickly so they are not forced to stay on the plan for an enormous amount of time simply because they happen to be on an international flight >> brenau there are some provisions. i don't know the details so i would have to look at that and get back to you and the committee. for in a simple a situation the travelers are trying to get out of the country they've already been processed. it's a matter of being reprocessed because their flight is not going to depart there are some options but they're limited

so there isn't a good presence there. >> it is an international airport to all of the international rivals originate from countries with cbp preclearance stations so there's not -- to make it may be a rare circumstance and the other hand we've had extreme weather lately so i would just ask -- >> i will follow on that and see what the options may be. >> thanks. my time is up. senator akaka. >> thank you mr. chairman for holding this hearing on the aviation security. mr. chairman because it is located 2500 miles from the mainland we have unique transformation needs. residents and our many visitors rely heavily on air

transportation when traveling between islands and also to the mainland or even a broad. also protecting the public is our primary goal, we must insure that the security procedures and technologies safeguard privacy rights and are not so burdensome that they discourage their travel. i applaud the federal and please who have worked tirelessly to secure route commercial aviation systems since september 11, to those under one. as we approach the busy holiday travel season i hope this hearing will allow us to review whether the work force has the tools they need to meet today in the security challenges. administrator pistole, your testimony mentioned that tsa is

in the first phase of the expedited passenger screening pilot. i and a stand the honolulu airport are being considered for the second phase of the pilot. if people take frequent short flights they could benefit from the expedited security procedures. my question is how are the decisions being made about which additional airports and airlines will be selected for the second phase of the pilot, and when will those selections be announced? thank you, senator akaka and for your support of federal employees. clearly the goal is to move out as a quickly and efficiently as

possible. there are a number of variables we are working through and those include things such as the airline capability. they are information technology systems. because the way that these expedited traveler works is that we take information that is on the bar code of the boarding pass which is the airline's produced and it shows it in a bar code as the person of a known and trusted traveler if you will. several airlines are going to mergers right now and so their systems -- they are waiting until the systems are merged and supposed to have a disparate systems that don't talk and then try to merge those into new ones so those will be after the first of the year. that is one criteria is the airline ready, cable and all that. the second is the airports themselves and the configuration of the checkpoint is the key

aspect. one of the goals is to have a dedicated leni for the known and trusted frequent travelers such as in global entry were these elite tears and others we will look at them the road so they can go to the ticket of leave and be identified through that bar code on the boarding pass and then we can have a separate screamingly and where they keep a jacket on and they built and shoes and laptop and briefcase, liquids and aerosols shells in their checked baggage or carry-on bag, and again, keeping it random and unpredictable is part of that. so directly answer the question there's a number of airports and airlines we are working with to try to get to that point. so i want to manage expectations as best i can to see that there's been no decision made. i'm waiting on a presentation for that second round if he will. i will say that i met with the

ceo of major airlines going through the week before last and they are committed to doing it in the first quarter of 2012 so we will use one of the largest airports in the country as the basis for that airline, that merged airline probably in the february, march time frame so as soon as we get additional information i will get back with you on that.