they are auditors and so forth to get the direction of four excellent commissioners and not be a distraction. personal involvement. it is an enforcement matter. >> the buck stops with you. so after this hearing, when farmers from nebraska, what chairman gensler said about getting my money back, he is not participating and i have nothing to offer. he has got good staff in their handling it. but you see from our standpoint we want a person to come before us and answer the hard questions. that is what your job is about.

it feels to me like you are not discharging their responsibilities of the job. >> i feel that i am. i am doing it to the best of my abilities and judgment and it was not the first time when it turns to and enforcement matter that may involve particular individual and in this case 14 years earlier, nine years earlier when the sarbanes oxley work was done. that thursday, said general counsel, what do you recommend here and how do you have me not participate so i am not a distraction to the american public and to important matters, critical matters that we do share on this, ensuring customer funds are protected and the money is accounted for and segregation happens every day and people have confidence in

these markets? >> let me wrap up with this. it seems to be very fundamental. if you have money from customers in this account, you have your own account over here you don't mix the two and you don't appropriate money from customers to do your own risky trading. that seems to be basic. that has been the law since the beginning of time and this is tough. and i don't understand if you are not clarifying for me why you would not be participating in this. >> in terms of a law the law is clear. the commodities and exchange act is clear. there were some exemptions granted in 2005 that yesterday the commission voted to narrow and take back the exemptions granted in 2005 about lending

customer money to other parts of firms or something called repurchase agreements. in october of 2010 we proposed to narrow that, dial that back. the belief that we need to do that, we went through the healthy process of noticing and hearing from the public. >> that is not what happened here. >> i can't comment. >> you are not participating. >> thank you, secretary, let me ask, 60 members of the senate voted to pass the wall street reform act that is well beyond a simple majority. does that include the consumer financial protection bureau? >> it seems to some of us is unprecedented and rather extreme for republicans to refuse to confirm anyone regardless how

qualified they are to lead an agency because they oppose the existence of an agency that is accountable in a dozen different ways under the law. that is meant to help consumers versus large financial institutions. if republicans in the congress continue to oppose even an up or down vote but allowing us to have an up or down vote to confirm a director can you explain what the practical consequences of not having a director means for consumers for middle-class families or this agency? >> absolutely. as you said and as my opening statement says without a confirmed director in this position the consumer financial protection bureau will not have authority to supervise and enforce cherry common sense consumer protections with respect to lenders, mortgage

brokers, mortgage servicers, student loan providers and if you look at what the consumer bureau has done to date, you see the kind of overwhelming importance of their effort. they are trying to make clear mortgage disclosure, clear credit card disclosure, clear disclosure for students who take out loans, trying to help service members and seniors, make sure they get the information they need in a clear form so that they can make essential choices about what consumer-products they want to purchase or not and what variations of those products and we know the absence of all that disclosure was an important element of what caused the financial crisis in 2008 and 2009. from our perspective we are talking about common sense, tangible protections for every day americans of all sorts with

respect with the most important financial judgments they have to make. >> isn't it true for example that community banks and credit unions will be at a disadvantage because they have to live under the regulations but non-bank institutions are certain to others, they cannot be regulated unlike community banks and credit unions unless there's a directive to promulgate regulations? >> the consumer bureau has authority now to do these things with respect to banks. it is only 9 banks that don't have the authority. we don't have the unhappy circumstance of banks being regulated which they should be but all the nonbanks with whom millions and millions of americans engage every day are not being looked after. >> pursuing this line of questioning differently, i have heard a lot of rhetoric about regulations and in wall street causing loss of jobs or slowing economic growth. but can you name a single action

in all of american history that cause the greater loss of american jobs or slowing the growth that we have had in this economy than when we allowed wall street financial institutions to largely due whatever they wanted running up to the financial crisis that culminated in 2008? isn't effect that it was the failure to regulate all street banks and the derivatives market that caused losses of millions of american jobs the last several years? >> we know the financial crisis led to destruction of enormous amounts of jobs and wealth and people to lose their homes. we know an important reason for that was our not having a financial regulatory system that was adequate to the task. that was why the enactment by this congress of dodd-frank was so critical and the implementation work my colleagues to the left are engaged in is a critically important so we make sure we have a system that is stronger

and more resilient and better protect not just the financial system but the well-being and resources of americans across the country. >> finally on a different matter, as the subcommittee chairman on housing i am very concerned that the qualified residential mortgage definition being worked out by -- there are several who are engaged in this -- by regulators is broad enough that it could hurt the housing market especially if you proceed with higher down payments of 20% or more which is where the marketplace has already taken its toll to it expectation that this is what you're going to do. that is a whole universe of very responsible borrowers that will be largely eliminated at the end of the day. for example, that was the universe in which i bought my first home and i have been a very responsible bar were over a

long period of time. why would you seek to eliminate that whole universe of very potentially responsible bar workers by systematically saying 20% or above is the mark? >> i am happy to start on that. that is a narrow definition in a risk retention rule. the basic point of the rule, we believe, requirement in the law is to encourage risk retention and securitization. the question is should there be exemptions or exceptions to the securitization requirement? and the cure and definition is drawn pretty narrowly in order to identify mortgages that is so well underwritten that no risk retention is needed. but then leaving substantial space for other products that do not meet the definition to be provided to the market but to do

so within the risk retention framework that the law requires. it is one of the issues we have to confront. there have been many comments on that issue but it is not intended to define what an acceptable mortgage is. it is intended to the fine and exception from the broader rule. it is one of the things we are grappling with. >> there is a lot of uncertainty surrounding whether your next step is to issue final regulations or another proposed version. can you assuage the concerns of borrowers and lenders by saying your plan to issue a reposal? >> that is a collective decision of people down the table based on the comments. for myself it will depend on how different a proposal we are looking at once we made the serious decisions and response to comments.

if is fundamentally different, like to see more, and the we will have to see that collectively. >> there are many ways in which we look at how to make sure risk is reviewed. i just find the movement towards 20% to me to be one of a series of factors that should be considered but shouldn't be the driving factor and this housing market doesn't need any more body blows if we are going to lead to a recovery. >> senator more and. >> chairman gensler i don't think you can answer this question at this moment. is not necessary for your colleague to join us at the table but maybe the cftc can answer this. the reforms, are far the cftc at the first deck of sensible reform yesterday in regard to the use of segregated accounts altered the investment opportunities for customers in

the segregated accounts and while there does appear to be sensible everything ahead of runabout mf global i don't see that that rule would have changed any of the outcome of what has transpired at mf global and while they may have been doing things with that money is then this rule would affect wheat -- what i read is we have the taking of customers' funds and they are gone. and so i would like to have the cftc explain to me why this change in this full may have been a tool that may have prevented what occurred at [speaking in native tongue] from occurring and no need again to answer that today but if cftc could respond to the committee with that question by appreciate it. and let me ask chairman shapiro a question. senator warner and dark later this week will introduce legislation to generate

additional entrepreneurship in this country's economy. president obama talked about section 404 of sarbanes oxley. we heard how remains one of the most egregious deterrents towards small business men and women accessing capital but i don't know that you or the sec has said anything about the cost benefit analysis of section 404 and its compliance as relate to small forms. >> we share the concern about access to capital for small business. we created a new advisory committee helping us confront small business capital formation issues and looking at all kinds of initiatives including raising the limit on regulation a offering with shareholders at the right number of for a company to have to begin publicly reporting to the sec

whether we should relax general solicitation ban and other -- we have a lot on our place and a lot of initiatives on going. i have personally weighed in on concern about raising the 404 be exemption as high as some bills consider doing that. it is $75 million and covers 60% of all public companies do not have this reporting. to go to $1 billion would concern me because we have understood from investors consistently that the independent auditor's report on internal control is a view of very important investor protection and gives them a lot of confidence. the worst result we could have as they did after enron and the quality and integrity of financial statements. the bigger the company gets the more concern i have about that.

is not clear to us and we are looking at this carefully, that exempting from 404 for these larger companies would in fact save audit costs because controls have to be tested in the audit financial statements anyway so we would be happy to work with you and talk with you in detail about it. but i do have some concerns because four zero fourb is important to their willingness to commit capital. >> it is important have your expertise on this topic. it is timely. entrepreneurship startup companies are great opportunity for the country's economy and i sincerely believe there is an impediment we need to find a right threshold and balance for protection but also to increase the opportunity to access capital. i welcome your more timely answers to those questions. my final question is a broad one

from chairman johnson's question and my take across the table was dodd-frank and i was not on this committee at the time that dodd-frank was passed and signed into law. it may have reduced the risk of failure of financial institutions creating systemic risk and regulators have additional authority to wind down businesses that are failing but i didn't hear anybody indicate that dodd-frank reduces the number of institutions that are too big to fail and would meet the definition that the public and me as a member of the house of representatives thought that dodd-frank was addressing, reducing the number of firms that if they fail would be a systemic risk and what i heard today in your response to the chairman's question was nothing that suggests the concentration of economic power is any less

today or that there are fewer firms whose failure would cause a dramatic consequence to the u.s. economy but nothing wrong with either of those things, we have greater authority to wind down one of those firms in that circumstance and a greater opportunity to prevent any of those institutions from risky behavior that causes them to fail. what am i missing in that discussion that you had in response to the chairman's question? >> i think all those things are true. that is to say the statute decreases the probability that it will fail by making sure they are better protected and better buffered, have stronger standards and engaging in less risky activity and as the chairman noted we have new tools

to deal with failure if and when it does occur in ways that are orderly and don't require the taxpayers's resources to deal with the situation but it also does this with your getting at. makes sure firms are better protected from each other so that the kinds of things that make it less likely for anyone to fail help make sure that other firms the better protected from those circumstances. one key element of that dynamic is a central aspect of this as tarullo pointed out which is capital and there are lots of other ways and other colleagues on the panel to speak to them but it is all of those things. it is reducing likelihood of failure. making sure other firms are protected from failure of a particular firm and dealing with

a firm that failed in a way that is orderly and protected from the taxpayer. >> let me add two things to what secretary wolin said. first, i think it is important that market discipline play a much greater role than it did so a number of the things we are talking about is if the fdic's orderly liquidation authority or enhanced credential standards, disclosures we are doing in the stress test, all of those are means to enhance market discipline as a compliment to basic regulation. the second thing i'm would say, there are two forms of systemic risk we need to be concerned with. one is the one you highlighted which is the number of firms which in and of themselves would cause systemic problems if they were to fail. but second is a set of

activities, correlated activities within the financial system that may be conducted by a broader number of not huge organizations which themselves could create some systemic risk if for example they were shocked to the value of the assets underlying those transactions. that is what m b s was. involved big institutions but evolve a lot of fathers so when you talk about derivatives reform you are talking as much about systemic problems that can arise in an non gigantic firms as well as gigantic ones but i will say to you honestly we need more work and thinking to make sure we are identifying those forms of risk and not just allowing an arbitraged out of one set of institutions. >> when you say market disciplines is that a moral hazard? >> flip side of moral hazard.

>> senator merkley. >> thank you very much, mr. chair. i want to start with a brief discussion, difference between qualified residential mortgage which was an exception to the risk retention role as mr. walsh pointed out and qualified mortgage which was a term used to di fine a mortgage that meets ability to pay standard. get a read of the wider loans. mr. wolin, under the section for the qualified mortgage, ability to pay standards, series of requirements are laid out and those requirements include the mortgage being fully amortized, not being negative amortizing, being verified in, and so forth. and meeting the ratios and

regulation or statute or death to income. it has been underwritten and ability to pay two terms are used in this section one of which refers to a presumption and the other to safe harbor. technically those are two different thing that you produced two different rules based on which direction the rules will go. two different draft rules. do you have a sense which way you are going to go on this? >> i don't. has yet to be determined, the q r m-q m have different services also an interplay relating to one another is also is something that needs to be worked through. in the end, by regulators. we will offer our views in the

case of the q m will we have a coordinating function of the statute providing to us but the regulators in the end will make their judgment. >> qualified mortgage is completely under the section presumption of ability to repay and distinct and different from the risk retention version. i will note that later in that section there is a reference to directly the safe harbor. that was the discussion that was taking place among those of us who were trying to get rid of the water loans that you have a safe harbor. thank you. governor tarullo, i wanted to turn to the surcharge. i believe earlier in the year you call for a surcharge of which we might call an anti bailout equity buffer of as much as 7% which could bring the total amount to 15% for tier one

capital ratio but the fed ultimately adopted 3%, instead of 15% they get to 11% and for most organizations on the scaled bucket structure it would be 1% or 2%. is it fair to say that you lost and are still concerned about that? >> no. what i said in that speech in june was the methodology which we, a fed economist had pursued in trying to calibrate what an appropriate surcharge would be had produced a range of possible surcharges that would have been somewhere between a one.5% and 7%. as you indicate, the basel

agreement was 3%. that would apply to a lot of cities. it is within that range. at did not have time to oppose it but i did want people to see a type of methodology which asks the question, how can we equalize the risk of failure in one of the systemic institutions and the impact it would have on the financial system to that of a medium-sized institution. could under some not implausible assumptions produce an amount of up surcharge greater than we intended to propose? there are other -- this is relevant to my response to senator reid's question earlier. when one thinks which number to choose once you have gotten a range you think it takes several things into consideration. how are you feeling about the

underlying capital system? quality of capital and the like? to what degree are there other regulatory structures which suggest that you need to go higher or lower in that range that you have got, and i think we do take this into consideration, the degree to which we can get agreement from our international counterparts to move in a similar direction. as with basel iii i would have been happier with a little higher number but i do think that the numbers that we got in the international negotiations and in coordination with the fcc and the fdic are well within that range which analytically we think will provide the kind of additional buffer support that is needed. >> thank you. i will close by noting that the

total amount of buffer becomes much less than any business school proposed and this is in the context of expose significant exposure to european banks and some exposure that is not fully understood in terms of credit default swaps and how the dominoes line up in that matter so i applaud your ongoing effort to have this first line of defense be robust and substantial. >> senator corker. >> thank you for calling the hearing and thank you for being here. mr wolin, the consumer financial protection bureau, we have numbers of conversations about it and i talked to the white house several times over the course of the last several months but in fairness even the treasury's proposal regarding the bureau had a board.

the treasury secretary has said we felt there should be a board. i don't know whether you are enjoying being part of a political game that is taking place regarding this but i would just say some basic checks and balancess for this organization would call the logjam taking place on this to be broken up and i am surprised you continue to be part of this political game that is taking place but i do hope at some point in time we will be able to have a meeting of minds and have a simple kind of thing that most people in tennessee and across the country would like to see and that is some accountability. i hope that will happen and you need to answer that. it won't happen this week because everybody is having so much fun with it. in february, came forward with

multiple choice, i am surprised you have not come forward with any solution for the gmcs. you don't need to go forever but explain why you haven't. it is a pretty basic issue that all of us know needs to be dealt with. we look forward to working with you. when we realize you didn't have the appetite for taking it on we offered a bill ourselves. i hope you will look at that but can you tell us why you are not pursuing any type of g s c reform? >> i want to come back to this. we are interested -- refining of the right approach, and looking at folks across the congress and engage in that conversation.

we continue to work on plans. we have engaged -- >> we have a plan? >> it is obviously critical land at some point we will arrange the cord. >> the observation is we are also coming to politics. i am willing to take on the tough issues that need to be dealt with that cause people in our country to be divided taking on tough issues like this and really promoting other political stances like you are and not trying to solve it. it is disappointing and i do hope that very soon somehow that might change. to you mr. gensler. >> can i respond? >> sure. briefly. >> we try to take on lot of complicated -- >> you're not taking and the sc as you said you would.

you have not taken it on. you came out with a multiple choice that makes everybody happy and you did not do what you said you would do. you said you would come forward at the beginning of the year with a real proposal. the year is almost over and you have not done that. >> we have put out some serious ideas and continue to work on proposals and we will work with whoever on the hill wants to work with us. >> mr. gensler, i wasn't going to weigh in on this. i figured others would do it and i have other questions. i just wasn't going to do it. it appears to me, i don't know if you would make the same decision again but the people that care about basel -- the people that care about mf global karen of to the point that you recuse yourself. the enforcement peace will take its own course and i am sure it will be tough.

but it feels to me like you panicked and it was more about a career enhancing situation to avoid accountability. i know i falls short of this but a do try to take on the tough issues and not dodge tough issues. may not be coming back because of that. it appears to me candidly that you took a career enhancing -- is actually not turned out to be the case but a career enhancing position by trying to take yourself out of is that a moment in time -- jon corzine is not the chairman anymore of the company so it seems like now is a great time for you to be involved but i was disappointed with your testimony. i would love to talk to you about it some other time but it doesn't seem to me it makes any sense at all and was done solely to enhance your career. >> i look forward to that and i

feel you have given me good eyes from my two years here but really what happened is as it turned to specific enforcement matter that could involve specific individuals. not just the company but specific individuals, about compliance with the law and various laws and there were some questions coming when i was in the senate testifying on position limits but i reached out to the general counsel and i said i know you are saying it was 14 years ago or nine years ago and so forth but my very participation can be a distraction on the enforcement matter. what else do we do? your very good question the general counsel said enforcement and false bankruptcy involves the very heart of the question where is the money and so forth. i don't thank -- i appreciate what you are saying.

all of us that are in this town there is a balancing of these very hard decisions. i made a judgment on that thursday. it was not for reasons you are saying. still a very challenging topic even not participate in with a challenging topic. >> mr. wolin and mr. tarullo. i know the treasury when walter came out my guess is there were people who thought what in the world especially when it came out and you first opposed volcker internally and not as part of our law. over time i guess you figured out the best way to deal with volcker was to make sure treasuries were exempt from volcker. all other trading and debt will become far less -- and no

liquidity. but you artfully exempted treasury's that would not have any effect on treasury's ability to have liquidity trading instruments that are very important. just wondering if you think that was an appropriate response to volker to say let it apply to everybody else. i wonder if tarullo might respond to what that will do by prowling people out and candidly causing people to more focus on something they know is highly liquid. >> let me start by saying we were in favor of the local rule. i testified with paul volcker. the statute was the creation of this congress. from our perspective we wanted to make sure and industry was keen for us to make sure that we excluded certain things from the provisions. how that gets worked through in

the rulemaking is not for the treasury to participate in. out of deference to governor tarullo not have a hard time imagining this will have a particularly important effect when all is said and done. overall debt markets and liquidity. >> with respect to liquidity for other instruments more generally, i think a lot of this will depend on the concept of trying to adjust metrics and oversight to the relative illiquidity of the markets with particular assets. so for example in the exceptions for underwriting and marketmaking, it will be appropriate to evaluate what a firm does differently if it is making a market in a relatively

less liquid assets which for example to be a bond in a smaller firm, as opposed to making a market in a fortune 500 equity traded on the new york stock exchange. so we will try to minimize the effect upon liquidity in markets by implementing marketmaking and underwriting sections as sensibly as we can take into account of differences in market. i don't know -- will be more than that -- the rule won't take effect for another two years but what five or six or seven years from now how nature of trading in these instruments will have changed. it may well be that a bunch of it migrates from different firms. >> senator had a gun. >> thank you for holding this committee.

you devoted much of your discussion to capital regulation after dodd-frank. i agree this is an issue of utmost importance. european banks currently hold large portfolios and sovereign debt that would satisfy the liquidity coverage ratios under basel iii but they certainly have seen declines in liquidity and value of these assets and it has been reported that the basel committee may -- that can be used to satisfy liquidity requirements. could you discuss this possibility and would you agree that banks are best served by holding a diverse pool of high quality liquid assets such as cash, treasuries and central bank reserves? >> certainly, senator. at the outset, the interests in taking another look at the

liquidity coverage ratio began before the current period of stress on european sovereigns. the federal reserve was one of the entities which asked internationally to take another look at liquidity coverage ratio. and i think to be fair to those who came up with the 0 original proposal it was in large part because we never had quantitative liquidity requirements before either nationally or internationally and so we, the board, thought that it was particularly important before putting any such requirements in place, there be a pretty close look that involved principals's central banks and regulators. one of the precepts for the renewed look was just the point you were making that if you are worried about the liquidity of a firm what you are really asking is how well is the liability and

assets of that firm matched so that in a period of stress it can cover its need over some period of time so that it has a plan for developing a longer run survival. and what i thought was the 2008 period gave us a very good real-life experiment to test what instruments actually do remain liquid even during a period of stress, so that is one of the motivations for the rethink and i think once the international group at the basel looking at the lc are has finished its evaluation next year that you will see some changes in things like what qualifies in assumed run rates to tried to conform requirements more closely to the experience

we actually have. >> let me follow up. people will provide exclusion to establish a require a position for the purpose of the liquidity management. i would expect that the basel committee's definition of liquid assets for liquidity coverage ratio purposes and the trading account exclusion for liquidity management would be closely linked. is that an appropriate expectation? >> i think we want to take the revised liquidity coverage ratio into account in thinking about what is a legitimate liquidity management program. the lc art is only a 30 day window and if you are looking at sound liquidity management for firm, 30 days is important because of the briefing period i mentioned a moment ago. you actually want to make sure that the book is better matched going well out beyond 30 days.

while we take elsie are into account good sound liquidity management will include things other than just the lc are. >> thank you. chairman shapiro. the proposal rule prohibits a banking entity from acquiring the ownership interest or sponsoring a covered fund unless otherwise permitted under the rule. on wanted to ask your help to clarify certain aspects of what constitutes that. with a covered fund definition apply to funds like mutual-fund for u.s. investors? >> it is hard to answer that straight forward but i will try to. we're working closely with our colleagues in the bank regulatory world. at an end of the day this rule is about protecting the safety of the banks as a result of their sponsorship.

we start with statutory provision given by congress which is quite broad and we work to determine where that was overinclusive and underinclusive and came up with what we thought was a tailored definition. comments uncritically important to was in responding so that we come up with a meaningful definition that doesn't create gaps and loopholes but also is not overinclusive. we did propose to include -- they want to speak to the commodity pool and we thought that was an area where there ought to be coverage. we have gotten a lot of push back on those issues so we will be reviewing those comments very carefully. >> i was relieved to see a joint venture between a banking entity and operating company would be permitted under the rule. to my knowledge the term operating company remains undefined and given joint ventures are not the type of

corporate structures that the volcker rule was intended to cover i would expect that definition would be broad. >> just to say that is an example, is that it was overinclusive but we created the missions for joint-venture is that our operating to merge an entity. i understand there are those who didn't make those exclusions broad enough. >> the covered funds that originate investment loans. there were not exempted. >> i think that is something -- i don't have a good answer.

obviously complex and technical but that is why the comments will be valuable to us as well as the impetus from our colleagues who regulate the banks. >> thank you. >> thanks to all the witnesses. like a lot of folks are have a broad concern with the notion of regulations and the general concern is in trying to deal with too big to fail in this way, we will end up encouraging or in sending too big to fail. specifically just as an example wall street journal has reported that the biggest too big to fail banks pay 78 basis points left for their funds than there are rivals. has that sort of factor in the market been examined in terms of the sifi issue designating them

as important in the market and will there be a consequence that some of them actually gain advantage? is that examined in a rigorous way? >> i think you were addressing the. >> i guess i was. your reaction as well as secretary wolin. >> with respect to too big to fail it is not a binary -- there is not a binary exercise. one doesn't know from too big to fail to not too big to fail. and i think what you have heard today is a process in place to try to change in a real way that perception of too big to fail among systemically important institutions in the united

states. that happened for capital standards are was describing earlier. secondly, it happens through making market discipline real for these institutions. when the fdic is able to develop the process of doing a credible liquidation of 40, what you begin to see is as you probably observed, outsiders including ratings agencies saying there's not the level of implicit support that may have impeded u.s. firms in the past any longer and that is behind the downgrades the ratings agencies have done. they said explicitly this is not about the condition of the bank but what we think -- how much we think the government would stand behind them. we absolutely look at market indicators to show us to what degree market discipline is becoming a reality for these firms in the same way that it is a reality for a middle sized

regional bank in the midwest. >> secretary? >> i would add is thought to what governor tarullo said. no one is lining up to be designated as sifi. those who might be designated lining up is quite -- it comes with a set of enhanced prudential standards they have to meet and ties into what the governor was saying with respect to how we think about the ultimate implication, more buffers and more standards and so forth. i don't think being designated sifi is something people see as an advantage to the cost of money or otherwise the more onerous set of requirements. >> thank you. one other comment about a completely separate topic to the

chair of the sec, chairman shapiro, the stanford case has been very important to me because the number of louisiana victims. senator shelby is in a similar situation. a lot of folks are affected. the sec did take action in mid june and i thank you for that. it was very long in coming, going back well before your tenure. the sec finally took positive concrete action. i thank you for that. you have been personally very engaged since then to get sifi to do the right thing to act and had many conversations about it and i also thank you for that. i am sincere about both of those things. having said that, it is dragging on six months after your positive concrete action and so i would just encourage you publicly to the same way i

encourage privately that i think the sec needs to take definite action again before the end of the year. in a positive way. i am afraid that is going to mean suing civic. seems to me that is going to be required based on my information and my conversations. i hope there can be another positive outcome but bottom line i really encourage you in the strongest possible terms to make sure you take the next step definite action before the end of the year. >> i appreciate that and our share your concerns about this and that we not take longer than necessary and try to get some best possible result for the victim and that is what we're working hard on. the commission is engaged as quickly as it possibly can. >> thank you. >> there has been teaming up in

the senate. senator shelby, quick question. >> thank you. sec. chairman schapiro, your tenure as chairman of the sec is marked by a number of major failures. these failures include stanford, failures in court by the settlement decision, rulemaking failures like proxy access rule rejected by the d.c. circuit. there have been operational failures and constitutions center. management failures like general counsel involvement in the bernie madoff case and continued internal control failures identified by the gao, general accounting. as head of the sec do you take responsibility for any of these

failures and does the buck stops with you? what do you say? >> let me start by saying of the gao found there was no material weakness in the internal controls over financial reporting. for the first time in a long time but the agency's issues with respect to that have gone on through many administrations and we cleared both material weaknesses. i am proud of that and the staff. the agency has had some stumbles. i have always taken responsibility for being transparent about them and fixing them going forward. i think your recitation ignores the unbelievable amount of great work that has gone on at the sec in the last three years including a record year in enforcement. more enforcement cases than ever before in the history of the agency. more rulemaking successfully completed for unanimous vote by the commissions and in a very long time. we worked hard to remedy many

issues that have been a longstanding concern for the agency. i take responsibility and testified often about them. i am proud of the agency's record. >> secretary wolin, your opening statement gave the impression to some of us that nonbank lenders are completely unregulated. you know that is not totally true. explain to the american people how these lenders are currently regulated at the state level and by the federal trade commission. >> they are substantially unregulated for consumer protection. depending on the state and what kind of a non-bank national firm it is regulators in states, but i would say that what we have now is no federal regulator who is focused on the non-bank financial sector with respect to consumer protection in a serious way and that leads to an unevenness between banks and

nonbanks. >> are you on behalf of the administration, as senator corker brought up are you interested in talking to the republican leadership about how we can move forward on the consumer protection head and all this? we submitted three recommendations, one of which you brought up dealing with the treasury's initial recommendation that the consumer agency be accountable. are you interested in trying to negotiate with us and let us move forward where we can regulate? >> what we are very interested in is as you know the statute provided a very intricate set of

protections and checks and balances. it has got oversight by this congress and the g a o believers the independent audits reporting requirements. it through the subject of coordination with regulators to my left. it can be overturned by a vote -- a whole set of things that in this end congress determined were the right governance structure is for this entity and we think having done that it is important for the senate to consider the present. >> one last question. just go back to chairman gibbons where -- gensler. you testified at many hearings crafting statutory language. you even said during the agriculture committee markup, staff members in the early morning hours during the conference, the passage of dodd-frank, you testified numerous times against changes

to dodd-frank and have been to europe many times to regulate. according to your written testimony you will be meeting with foreign regulators thursday. chairman gensler, in all candor, don't you think if you spend less time protecting your political and regulatory turf and more time protecting customers and overseeing firms like mf global is less likely that mf global would be where they are today and customers's money would not be missing? >> i think is about protecting the american public. it is what cftc does every day prior to dodd-frank and after dodd-frank. it is about ensuring users and customers get the benefit of these markets to market a price and do what they do well. we are an agency that relies heavily on self-regulatory

organizations. we are 10% larger than we were in the 1990s. >> that doesn't make you better. >> absolutely. we agree on that. we need to be more efficient. technology better. use the collaborative process with other regulators here and around the globe and enter memorandums of understanding having mutual recognition with those international regulators. we are a small regulator that has to leverage off of the self-regulatory organizations and other regulators. i think that hard-working staff at the cftc is there. as chairman i take responsibility for those things that do well and those things that do poorly. i do take responsibility in this job seriously. >> do you believe that the cftc has failed the american people as far as mf global is concerned? >> i am not participating in the matter but let me answer

generally. [talking over each other] >> when our legal system says segregate bonds means segregate bonds and customers need to rely on that every day from every firm. >> people haven't done it they should pay the consequences. >> that is -- [talking over each other] >> that is what our laws say. >> thank you for your testimony and for being with us today. currently the senate will take another significant vote to insure the american consumers including consumers members and other americans have strong consumer protections that they want, need and deserve. i urge my colleagues not to let politics from the needs of american consumers and stop any settlement on which the

nomination is the first director of the consumer financial protection bureau. mr. cordray has an externally well qualified committee to deserve the vote in his nomination. thank you all for your hard work continuing to implement the wall street reform and consumer protection act. this hearing is adjourned. [in that book conversations -- [inaudible conversations] [inaudible conversations] >> on c-span2 the senate confirmation hearing for richard cordray, and live coverage of today's senate session where members are scheduled to vote on

that nomination. >> attorney-general eric holder has come under criticism for the tee of gun smuggling sting operation known as fast and furious. he will have an opportunity to address the criticism and the house did this year committee hearing this morning. you can watch live coverage beginning at 9:30 eastern on c-span2 and our web site, c-span.org. >> first person accounts from servicemen and civilians.

this week's national parks service conference about pearl harbor, a tour of the visitor center and archival footage of the attack and its aftermath sunday on c-span3's american history tv. it's so convenient to listen to c-span anytime, anywhere with the free c-span radio app. you get streaming audio of c-span radio as well as all three c-span networks 24/7. you can also listen to our news programs. c-span, it's available wherever you are. find out more at c-span.org/radio app. >> the senate is scheduled to hold a confirmation vote today for richard cordray who's been nominated to head the newly-created consumer protection bureau. he's the former attorney general of ohio and currently runs the consumer bureau's enforcement division. he testified at his senate

confirmation hear anything september. -- hearing in september. this is an hour and a half. [background sounds] [background sounds] >> on the next panel we will consider the mom nawtion of richard cordray to be the first director of the consumer financial protection bureau. mr. cordray, welcome to the senate banking committee and a warm welcome to your family and friends who are here this afternoon. the cfpb was born out of the

failure of regulators to hold financial companies accountable for complying with consumer protection laws. congress created the cfpb to be a robust and independent agency focused on protecting consumers and military families and older americans from abusive financial products. the cfpb was also created to streamline disclosures so consumers can make the best financial choices for themselves and their families. in fact, one of the cfpb's first projects is to simplify the long-confusing mortgage disclosure forms. the cfpb is an agency that the american public wants. recent bipartisan survey shows that americans strongly support the creation of the cfpb.

the director of the cfpb will play an important role in maintaining the agency's independence -- [inaudible] and transparent consumer financial marketplace and exercising enforcement of consumer protection laws. on july 18 president obama nominated mr. cordray to be the first-ever director of the cfpb. the purpose of today's hearing should be to consider whether mr. cordray is qualified for that job. instead, a vocal minority is playing games with the process and holding mr. cordray's nomination hostage. this political gamesmanship is preventing americans from receiving a consumer protections they deserve and putting community banks and credit

unions at a competitive disadvantage to nonbank financial companies. this vocal minority insists in rehashing the same debate congress had last year when it appointed the cfpb as an accountable yet independent regulator. the fact is that every regulatory agency is structured with different features that make it accountable. each agency has a unique combination that fits its mission and independence. last year congress decided on a structure for the cfpb which borrows some accountability features from other regulators but also includes several new features unique to the consumer agency. the chart on displaylists many of the -- display lists many of

the ways the cfpb is accountable. for example, the financial oversee -- [inaudible] has the power to overturn cfpb regulations. by law the cfpb's budget is kept, and the president has the power to fire the cfpb director. so the misleading claim of no cfpb accountability drummed up by special interests and put forth by a vocal minority should be exposed for what it is; an attempt to destroy the bureau's ability to do its job of protecting american consumers. i would remind my colleagues that in 2008 a bipartisan senate including members on both sides of the aisle sitting here today helped to create the federal housing finance administration, fhfa is also an independent agency headed by a sole director

subject to a gao audit and purposely not subject to the congressional appropriations process. now, let's talk about what the focus of the nomination hearing should be. richard cordray has spent his career in public service of -- [inaudible] he has taken the time to understand and come up with the best, most practical solutions for their problems. mr. cordray supports small businesses and other companies. he has been a member of his local chamber of commerce for 22 years. he believes in leveling the playing field so that small companies can compete fairly and that playing by the rules is

good for business. i ask the unanimous consent to include several letters of endorsement into the hearing record. mr. cordray also believes that people and corporations must be responsible for their own behavior, and if they act responsibly, they should get a fair shake. it is my hope mr. cordray will use his knowledge and experience to help american consumers and to enhance the quality of our consumer financial markets. we have seen many important nominations blocked in this senate and denied an up or down vote on confirmation. the stability of our financial system and of our economy is simply too important to put at risk by political games. it is time to allow the cfpb to

do its job to the fullest extent of its authority with a senate-confirmed director in its place. i now turn to senator shelby. >> thank you, mr. chairman. i don't think it will surprise anyone to hear that we believe that today's hearing is quite premature. we do not believe that the committee should consider any nominee to be the director of the bureau of consumer financial protection until reforms are adopted to make the bureau accountable to the american people. earlier this year, mr. chairman, 43 of my senate colleagues and i sent a letter to president obama expressing our serious concerns about the bureau's lack of accountability. we also proposed three reasonable reforms to the structure of the bureau. we had hoped to work with the majority to address this issue before the president nominated a director. unfortunately, neither the president, nor the majority has made any effort to work with us

to improve the accountability of the bureau. instead, the president has nominated mr. cordray to be the first director. it's regrettable that the president and the majority have chosen to ignore our requests rather than work with us to improve the bureau's accountability. it may be good politics for them, but it is certainly bad policy for the american people. one of our nation's founding principles is that the government should be accountable to the people, yet the majority structured the bureau to grant its director unprecedented authority over the lives of the american people without any real effective checks. all of the bureau's power is concentrate inside the hands of a director. the director determines which rules are enacted and which enforcement actions are brought. the director makes all hiring decisions and decides how the agency spends its resources. because of the expansive jurisdiction of the bureau, every american will be affected

by the director's decisions. the director will single-handedly determine the financial products consumers can buy as well as which consumers have access to credit and which do not. accordingly, the director's decisions will impact whether americans can buy a home, a car or even basic household goods. it's staggering, the amount of control the director will exert over the daily financial choices available to the american people. despite having such broad powers, however, there is no meaningful check on the director's authority. the director cannot be removed except on extremely limited grounds of inefficiency, malfeasance or elective duty. in other words, the director cannot remove for poor policy choices. in addition, bank regulators do not have a meaningful ability to insure that the director's actions do not needlessly undermine the safety and soundness of our banks.

while some claim that the financial stability oversight council could, could overrule the director, this so-called check is simply illusory. the requirements needed for the council to act are so onerous that in practice the council will never be able to exercise this authority. that shouldn't surprise anyone, especially here. it was the way it was designed. for example, the director of the bureau sits on the council and will vote to determine whether or not the council should overturn one of his decisions. it is not hard to guess how the director will vote. as a result, the director will be virtually free of any constraints on his authority during his five-year term. no one person, i believe, should have so much unfettered power over the american people. it blatantly violates the spirit of our democratic system of government. our pursuit of better consumer protections should not require us to compromise our basic constitutional values.

this should be something on which we can all agree. moreover, the principal involved will have real consequences. unless the bureau is reformed, it is only a matter of time before this concentration of power is abused or misused to the detriment of american consumers and the economy. the job figures we've seen over the summer demonstrate how the administration's heavy-handed regulatory agenda is crippling the economy with unnecessary costs and legal uncertainty. that could not be a worse time, i believe, to give an unelected and unaccountable bureaucrat a blank check to impose even more ill-considered rules that could further undermine our weak economy. at a time when our nation's unemployment rate is over 9%, this would be a very dangerous gamble. in closing, the chairman today here has attempted to turn the phrase, i believe, vocal minority, into a pejorative.

over the years, however, senators from both parties -- democrats and republicans -- have agreed upon rules governing this chamber that are designed to protect the rights of minority, be it democrats or republicans. the request made by this particular vocal minority seek only to preserve the system of checks and balances embodied in the constitution. that is not what i would call a radical undertaking. thank you, mr. chairman. >> senator reed. >> well, thank you very much, mr. chairman. and i am someone who believes very strongly that the work of the consumer financial bureau must go forward and should go forward under the direction of mr. cordray. i think to block his appointment simply to express displeasure with the process or the substance of the law is the wrong way entirely. as the chairman pointed out, the federal housing finance administration was created with virtually the same authority or and on a bipartisan basis, supported by most, if not all,

of my colleagues on the other side. there was no discussion of preemption of the constitution or checks and balances or anything else. it was trying to deal with a very serious problem which we are trying to deal with today, and that is protecting consumers, protecting consumers throughout this country. that is the one voice when we think about voices that is seldom heard loudly enough in washington, seldom heard, certainly, in the council of bank regulators. that is one of the great examples of what took place in the decade from 2000 to 2008 or at least those eight years in which consumers were being systematically preyed upon. there was no agency. and as attorney general, i think you were frustrated by your attempts that were preempted by federal banking regulators, that were preempted by many things. we want consumers to have a voice. and, frankly, the notion that

there's this unchecked, unbounded power is simply wrong. all of the rules that the director will enforce are created by congress. we voted on it. sometimes we disagreed, but they're all congressional laws. and, frankly, if it goes beyond what the law is, the courts will very quickly -- as we've demonstrated, and there is a huge number of financial institutions in court today -- to protect their self-interests and to protect the process. and if arbitrary and capricious, the rules will be struck down. but if they are consistent with the laws we passed through a democratic process, then consumers will receive protection. and so i think that this whole debate has been sort of extended much too long. and as a result, consumers are being and potentially will be harmed.

i particularly worked on this issue along with my colleagues from around massachusetts am concerned about military personnel. they will not have the benefit of some of the protections that we put in place because there'll be no one sticking up for them. right now holly petraeus is leading the office, but she can make and does speeches, she can go out and talk to soldiers and sailors, marines and airmen, but until someone stands up with the ability to enforce the rules for their benefit, they'll still be preyed upon, and they are. i think the other thing that we have to recognize, too, is as we go forward we are, i think, trying to insure that we do not replicate the crisis of 2008. that we do not have a financial collapse. much of that was predicated and based upon the predatory behavior of institutions. one of the great aspects, i think, in the terms of the

dodd-frank act is the first time we tried to shine some light on the shadow banking system. fdic regulates the financial institutions. the federal reserve regulates. but for the first time we decided to say let's take across the boards position with respect to the shadow financial system. so i am just, i just have to say something. this notion of let's wait until we get it perfect before we appoint somebody would have delayed, i think, the election of george washington for many decades. so, mr.-- let me just ask, i have very little time. one specific question. you already have authority transferred you from seven agencies in this organization that's being implemented today s that correct? go ahead -- >> mr. chairman? >> yes. >> oh, i'm sorry.

i want to be sensitive to my colleagues. this is opening statement. i wanted to do both, forgive me. [laughter] a man with a mission. let me quickly conclude in 20 seconds. [laughter] i think we've got to move forward. we, essentially, know what this is about. the chairman has pointed it out. this is not -- we're waiting for, i think, the sensible proposals to make reform, but it's hard to do that until you see the agency operate in the field, on the ground. and i hope very quickly we can confirm you, mr. cordray, so we can do that. >> senator corker. >> mr. chairman, as is the norm, i don't have an opening statement. but since i don't, it looks like everybody's going to take a lot of time. i sure would like to have a little leeway with the questions. i certainly welcome the witness, look forward to his testimony and thank him for bringing his impressive family. i don't know how his children continue to smile as we're up

here, but they do a great job. [laughter] thank you. >> senator akaka. >> thank you very much, mr. chairman. i'm pleased to join you in welcoming mr. richard cordray and his family, lovely family, who has been -- and he has been nominated by president obama to serve as the first director of the consumer financial protection bureau. i am confident that he will make the cfpb a strong defender for consumers. this has been needed in our country. he knows the markets and has a demonstrated track record. he has been a fierce advocate for consumers and middle class families as attorney general of

ohio, and then as the head of enforcement at cfpb. we'll count on him to fight against the predatory lending practices that contributed to the economic crisis from which we are still recovering. i look forward to mr. cordray's testimony to hear about his vision for the landmark cfpb and what he hopes to accomplish as its first director. mr. cordray is a highly qualified nominee and an excellent pick to become the first director of consumer protection bureau, and i ask the committee to consider his nomination favorably. thank you very much, mr. chairman. >> thank you. senator brown. >> i have questions that i will submit for the record. >> senator brown.

>> the thank you, mr. chairman. ranking member shelby, thank you. in a moment, i'll have the honor of introducing richard cordray, devoted family man, distinguished lawyer and advocate, public servant. i will hold that until right before he gives his testimony. we shouldn't have to remind our colleagues that just three years ago our economy was on the brink of collapse. millions of americans lost their jobs, hundreds of thousands of people in my state lost their homes, people all over the country lost much of their retirement security, hundreds of banks failed, thousands of businesses have been shuttered. this committee was forced to take extraordinary actions. this was a manmade catastrophe that could have been avoided if we had had a better, as senator reed said, a better regulatory system. but the network of agencies tasked with protecting consumers was full of holes. ohio, for example, was far too slow, local efforts to try to curb rip-off loans were blocked

by federal regulators, earths to convince -- efforts to convince regulators to act were ignored until too late. yet just three years after that near depression, profits of financial firms now make up the same percentage, about 40% of all corporate profits in this country go to financial firms. the profits of financial firms now make up about the same percentage of all corporate profits as they did before the financial crisis. the banks that were too big to fail because of mergers, because of what shook out of those, of these last three years have become even bigger. after decades of coddling wall street, main street still needs our help. americans are struggling to find jobs, their homes are still underwater, their pensions are still being drained. to protect against future wealth-destroying crises, congress created with bipartisan approval the consumer financial protection bureau to help insure that consumer protection is a priority rather than an afterthought. it is an independent agency with

a single director. not all that uncommon in the federal government. its mission is to bring oversight and transparency to checking accounts, to credit cards, to mortgages, to student loans. it's empowered with the tools to insure our financial system, supports job creation by ending the tricks and the traps families of small businesses will keep more of their hard earned money, will be able to build middle class wealth and help businesses thrive. the bureau is subject, as chairman johnson said, is subject to stringent notice, consultation, analysis requirements under dodd-frank, under the administrative procedure act, under the small business regulatory enhancement fairness act and the regulatory flexibility act. the financial stability oversight council, the other banking regulators have unprecedented authority to overturn cfpb's rules. already cfpb is insuring that mortgage contracts are written in ways that consumers can more easily understand. it's earned positive reviews from industry and consumer

groups alike for the substance and the process involved in creating a new model mortgage loan disclosure form, it's helping men and women in uniform as chairman reed -- as senator reed pointed out, preventing them from being targeted by bad actors who profit from financial practices that defraud and deceive those serving the cause of freedom. mr. chairman, i called the senate historian recently and asked him when was the last time, was there a time when the senate actually, when a minority in the senate pledged to block a nominee because that party actually opposed the agency's very existence. when was the last time that a group of senators, 44 as senator shelby points out, signed a letter threatening a filibuster implicitly saying they will not confirm somebody until we get our way, until we change the law, the structure of the agency. never happened before until right now. it's unprecedented. that kind of partisanship is why people are so unhappy with their

government. they see a dysfunctional government that, um, simply can't do this. we already had this debate once about the structure of this agency. amendments were offered that would have watered down the agency's authority, they were considered fairly in committee, on the senate floor, they were rejected by senators from both parties. now is not the time to undermine an agency that a bipartisan majority in congress created. what kind of precedent does this set, demanding and then accusing the majority of not even working with them, demanding we won't confirm somebody as qualified as richard cordray -- nobody questions his qualifications, his background, his qualifications and his performance in office of the various jobs, no one questions that. they only want to block his nomination or anybody else's nomination simply because they don't like the agency. they apparently don't want a consumer agency representing consumers. that's what got us into this.

the minority's -- the result of their actions is to tilt the playing field in addition to what else this has done, to tilt the playing field so that traditional banks right now are regulated while nonbank lenders which bear the lion's share of the responsibility for the recession are left untouched. that's why prominent bankers in this country and many, many, many in ohio are supporting rich cordray and want to get this agency empowered and want to get this agency and the director in place so the agency can do its full panoply of responsibility. and instead right now the agency regulates traditional banks but not nonbank lenders where many of the problems come from this whole meltdown in our economy. the minority's own witness in the subcommittee i chair in financial institutions consumer protections said as much on august 3rd. i hope my colleagues will set aside their fears, their anger, their dislike of this consumer

agency and do their jobs, and their job is to confirm someone who's qualified to head up this agency that was created under the law and is the law in this country. consumers need these protections, the banking industry needs this kind of fair, fair-minded kind of comprehensive way of doing it job. rich cordray's distinguished career as a supreme court clerk for two supreme court justices, attorney, ohio's solicitor general, ohio attorney general, state legislator shows he's the right person at the job at right time for our country. it's time to put the consumer cop on the beat. >> thank you, senator brown. senator hagan. >> thank you, mr. chairman. we all know that the consumer financial protection bureau was a key component of the dodd-frank act, and it's time to put a director in place so that the bureau can fulfill its important mission. appreciate you coming today, and

i certainly do appreciate your family being here with you. for too long americans have fallen victim to financial abuses at the hands of predatory lenders that operate with impunity outside of consumer finance laws and away from the regulatory oversight. payday lenders took advantage of people in north carolina for many years until after considerable legislation and litigation we put a stop to the practice. and i'm optimistic that with the confirmed director in place at the cfpb, we can start to rein in those predatory lenders in parts of the country where they continue to prey on american families outside the regulatory environment. and offices within the bureau have already embarked on important work, and once again it's time to put a director in place to support these offices. the office of service members' affairs, for example, was set up within the bureau to insure that military personnel and their families are educated and empowered to make better

informed decisions regarding financial products, and the office is already doing tremendous work. in may of this year, i held a round table at fort bragg at north carolina with holly petraeus, the director of that office. and mrs. petraeus and i heard directly from the men and women in uniform about the challenges that they face as consumers of financial products and the lengths to which the officers must go to actually protect the troops from financial abuses at the hand of predatory lenders. and i think that a strong director is going to be crucial to insure that the momentum of the office continues and can be translated into meaningful financial protections to our men and women in uniform. and i'm aware that a number of concerns have been raised about the impact that the bureau will have on lending. it will -- i'm going to be particularly interested in how mr. cordray, you intend to

balance the needs of consumer protection with the need for our comuns financial institutions to provide loans to homeowners and to small businesses. and i'm hopeful we can mitigate these concerns and move forward. it's time to put a directer in place so that the bureau can get on with its important work. thank you, mr. chairman. >> senator menendez. >> thank you, mr. chairman. mr. chairman, first of all, i want to thank you for moving forward with this hearing, and i want to thank attorney general cordray for accepting a nomination under very difficult circumstances and for his appearance here today. and i can just tell you, if i had the smile of your son and daughter, i'd win my elections hands down all the time. i'm going to have to learn it because it doesn't come naturally to me, so -- beautiful smiles. however, you know, consumer protection and the director of the consumer financial protection bureau are important topics. but, unfortunately, progress has been fleeting. progress, that is, in holding

wall street accountable and protecting consumers. the consumer financial protection bureau officially opened its doors in july. mr. cordray was nominated days before, but months before, months before my colleagues on the other side of the aisle said that they would be siding with wall street and blocking any nominee. let me repeat that. any nominee from heading the consumer financial protection bureau. not only would they be blocking anyone regardless of qualifications and, i think, we might agree that we have an eminently qualified candidate here who not only receives the approval and support of consumer groups throughout the country, but the regulated industries that, in fact, he would oversee have positive things to say about him as an individual. so not only would they block anyone regardless of qualifications, they demand that

we radically change the structure of this new consumer protection agency months before it had even opened its doors and many more months after this matter was legislatively settled. now, the last time i checked in a democracy when there is an election of the people, they choose their representatives, you have votes in committee and on the floor, and then those votes ultimately lead to passage of legislation signed by the president of the united states. it is the law of the land. unless we want to change the dynamics of what democracy means in this country. in other words, before they even had a chance to objectively evaluate the work and the effort of the consumer financial protection bureau and despite the glowing reviews that many industry members were already giving it, my colleagues said,

no, shut it down before it had even begun its important work. so, mr. chairman, i'm looking forward to this hearing which is in the pursuit of confirming someone for the chairmanship subject to existing law. now, americans may be free and are free to disagree with the law, but they are not free to disobey it. we, in fact, may be free to say we don't like a law that was passed, but that doesn't mean we should block it as the way in which we conduct the course of actions of this country. it seems to me that minority rights are very important, but that does not nullify majority rights. as elected by the people of this country. especially when that majority particularly in passage of this law that is the law of the land was the majority not just of a singular party, but a majority

of both parties. now, a minority has rights, but it does not have the right to nullify the law by virtue of its actions of insisting that it will not approve a chair regardless of that individual's capacity, regardless of that individual's intellect, regardless of that individual's ability. so, mr. chairman, i hope that we'll be able to make some progress so that we can hold wall street accountable. and finally, i have to say i have the greatest respect for my distinguished colleague, the ranking republican on this committee. but i just take a different point of view with him because when we talk about what's happened in this economy, what's happened in this economy is that we had not a free market which i support, but a free-for-all market. and in that free-for-all market were regulators asleep at the switch and other entities were

not in existence to protect the consumer. we ended up with not just a great recession, but on the verge of a new depression. and so we do not want to relive that history so that we can, in fact, protect consumers and insure that our economy can move forward and not run these risks again. the consumer financial protection bureau is an essential part of that, recognized by a majority of both sides of the aisle, and that is why it is the law of the land, and that is why it needs a chairman. thank you, mr. chairman. >> thank you. now for an interjection of our -- introduction of our nominee, senator sherrod brown will introduce richard cordray. senator brown. >> thank you again, mr. chairman. it's my honor to introduce one of the finest public servants i've ever met, richard cordray. rich's mother was a social worker, his father who has been legally blind since birth work with the the developmentally disabled for 43 years. it's clear where rich cordray and his family learned about

public service. as ohio's attorney general, he was a strong voice for ohioans who struggle today stay in their homes and consumers who faced unfair practices by deceptive lenders. he targeted financial institutions including fannie mae that used accounting fraud to undermine investments by pension funds that provided retirement security for teachers and janitors and secretaries. he took on unscrupulous actors, he worked closely with ohio's banks to craft targeted legislation to prevent banks from engaging in predatory lending. he was a treasurer in franklin county, the state's second largest county, the home of the state capital, and he promoted financial literacy efforts in schools and with seniors. throughout his career as law professor, as an attorney in private practice, rich has been a strong voice for his clients and for consumers. top executives of ohio's fortune 500 companies, procter & gamble,

limited brands, forest city, american electric power strongly endorse his nomination. two fine representatives of ohio financial institutions, both of whom are here today, mike van buskirk of the bankers' league are here today in support of rich's confirmation. steve rasmussen, the ceo of nationwide insurance, a fortune 500 company, a national leader in insurance, banking and mortgage products believes rich will embrace the partnerships he's built with the business community as leader of the cfpb. rich has the bipartisan support of former ohio attorneys jenin colluding the current one, former republican u.s. senator mike dewine, that he would win the praise of his former opponent speaks to his integrity and his professionalism. and, mr. chairman, i have letters that i'd like to submit for the record, one signed by mike van buskirk of the ohio bankers' league, one signed by steve rasmussen, the ceo of

nationwide insurance, one signed by our former colleague and national hero, john glenn, all of whom are supporting this fine public servant. and, mr. chairman, if for no other reason we should confirm him, rich cordray was a five-time jeopardy champion. [laughter] and i actually tried out for jeopardy once, and i didn't get through the first round. so not sure what that says, but nonetheless -- [laughter] rich cordray is, i am very proud -- i was very excited about this appointment, i'm very proud to introduce my friend and a terrific public servant in ohio, richard cordray. >> thank you, senator brown. mr. cordray, i look forward to hearing your testimony. will the nominee, please, rise and raise your right hand? do you swear or affirm that the testimony you are about to give is the truth, the whole truth and nothing but the truth so

help you god? >> i do. >> do you agree to appear and testify before any dually constituted committee of the senate? >> >> yes, i do. >> please, be seated. please, be assured that your written statement will be part of the record. please, also note that the members of this committee may submit written questions to you for the record, and you should respond to these questions promptly in order for the committee to vabs your mom -- advance your nomination. mr. cordray, if you'd like, please, introduce your family and friends who are in attendance before beginning your statement. >> thank you, mr. chairman. i'll take you up on that suggestion. i'm glad to have with me today, i feel like i don't need to introduce them at this point. my wife peggy and our twins, danny and holly, who are 12

years old, and they're excited to be here today in part because they missed a day of school, i think. i also would echo senator brown in thanking mike van buskirk, the president of the ohio bankers' league, and the general counsel of the credit union league, thank them for their help and support over the past month and for the work we've done together over many years. i also want to acknowledge that i believe chairman jon leibowitz was here earlier and had to leave, commissioner julie brill of the ftc is here. they have been tremendous partners in helping us set up operation and have forged a collaborative enterprise for us that i think will mark the years ahead. so there are other friends here, but i won't it is a it can committee's patience. i'm grateful for their presence. if it's point front at this time -- appropriate at this point in time, senator, i do have an opening statement. >> yes.

>> okay. i'm honored to be here as nominee to be the director of the consumer financial protection bureau. i appreciate deeply the confidence that the president has shown in me, and i thank professor elizabeth warren for her pain staking and thoughtful work to turn the consumer bureau from an abstract idea into what is now a tangible, vibrant agency. and i'm grateful to the committee members for your courtesy to me and your advice over the past month which i have welcomed and will always welcome. let me briefly discuss how my background and experience may help inform your consideration. as was mentioned, from childhood my parents taught me the value of work that seeks to improve the lives of others. my dad, frank, who is now 93 years old spent his entire career working with children and adults who have developmental disabilities. my mom, ruth, who died of cancer when i was in college was a social worker who founded the first foster grandparent program for the developpal disabled in

ohio. at the same time, she was doing all the things that a mother does to raise three pretty rambunctious boys. over the past 20 years through my work in state and local government, i became deeply engaged in consumer finance issues, and i developed a deep resolve to address these issues that i have found to be so basic to our communities. working with troubled taxpayers, i quickly learned there's no one-size-fits-all solution as you seek to help people who just want to do the right thing, and when necessary, to thwart those who would take advantage of others. on a variety of issues, i sought to find new partners and we, frankly, experimented with new approaches. seeing the struggles people had to make basic financial decisions, a group of people and i pushed our legislature successfully to pass a new law requiring high school students to receive personal finance education before they graduate. we then implemented that law by developing a curriculum and training hundreds of teachers. as we saw the foreclosure crisis

wreaking havoc in many neighborhoods and i saw -- this is in early 2004, 2005 -- i saw subdivisions where a dozen foreclosures would wreck the dreams of every resident in the subdivision, we created a save our homes task force that brought together businesses and banks, nonprofits and government to combine their objectives to assist people who were just frantic not to lose their homes. as state treasurer, i continued to work on financial literacy issues and foreclosure prevention now on a state level. i also noticed we had a neglected low-interest lending program to help small businesses create jobs and to help farmers access available credit in our rural communities. we revived that program, sought to expand it and reached out to community banks to work with them to understand how we could make the program accessible and usable for them. over the time i was treasurer, we pumped hundreds of millions of dollars in low-interest lending into our communities,

especially the smaller towns where community banks are the economic backbone of those commitments. all of this work reenforced for me how imaginative strategies can benefit both businesses and consumers who have many interests in common. immediately before coming to the bureau as chief of enforcement, i served as ohio's attorney general. in that role i worked with law enforcement, police and sheriffs throughout the state, i rented our pension -- represented our pension systems in the courts, and i enforced the state consumer protection laws. my main objectives in particular were to help empower people to make better informed financial decisions for themselves and their families and to stop the scams and frauds that not only cheat consumers, but also undercut law-abiding businesses. at every stage of this work, i believed -- and i believe today -- that law enforcement which is even-handed, fair and reasonable not only protects consumers, but it also supports

what i call the honest businesses in two key ways. first, the businesses that cheat can gain a significant and unfair advantage, and law enforcement protects the honest businesses against the cheaters. second, keeping the marketplace clean is crucial to giving consumers the confidence they need to be encouraged to participate in that market. at the consumer bureau, i've found that congress has given us a broad range of tools to address these issues including research reports, rulemaking, enforcement, market guidance and consumer education. congress also gave us the critical ability to examine both large banks and nonbanks so that participants in the same market would be summit to the same rules and the same burdens and to resolve compliance issues in many instances more quickly and effectively without resorting to litigation. i'm also, i've become convinced we will find many opportunities to streamline regulations and

disclosures. for example, our know before you owe project is already working to combine the mortgage disclosure forms under overlapping mortgage laws in order to make the costs, risks and responsibilities of the home loan clear to consumers, but at the same time reducing the paperwork burden for lenders. that's a true win/win. i believe that we will find that same sweet spot as we review, now, the thicket of regulations that we have inherited from other federal agencies. in closing, chairman johnson, ranking member shelby and members of the committee, i appreciate your consideration. if i were to be confirmed as the first director of the consumer financial protection bureau, i can promise you, you would have one person who is accountable to you for how we carry out the laws that you, the congress, enact, and that i will always be keenly interest inside your thoughts about our work. thank you again, and i appreciate the opportunity to answer any questions you may have. >> thank you. without a director in if place,

cfpb will not be able to exercise its examination and enforcement powers over nonbank financial institutions like private student lenders and credit bureaus. do you agree that this authority is essential to level the playing field between responsible, small community banks and their nonbank competitors? >> i do, senator, mr. chairman. i think it was one of the key principles that was embodied in this new law, and i can tell you i remember a conversation i had with a community banker in ohio. this would have been around 2007 when i was the state treasurer, talking to me about the fact that people were coming in the seeking loans that were not feasible, they were not sustainable loans. and when he would tell the customers that, he would see them go down the street to unlicensed, unregulated, unscrupulous lenders who would make those loans even though

those loans were destined to fail. so our good community banks and credit unions for their pains, because of the imbalance in the market, were losing market share by upholding their standards. and then, of course, it was that imbalance and the mortgage lending that it led to that was so terrible, liars' loans, no document loans, people often falsifying income and occupation that led to the, in part, to the financial crisis. and now the community banks have suffered the second double whammy which is credit has dried up, and it's very difficult for them to maintain their operations. one of the things that we absolutely will not do at the bureau at least under my leadership is to impose further burdens on the community banks and credit unions who, as i said, from working with them and recognizing how we had to overhaul programs to make them accessible to them so they could use them have different constraints, they have different abilities to comply with excessive regulations and that's something that we will not do on my watch.

we can exempt them, we can do two-tier regulation, and we can listen closely to their concerns which i will do. >> when i was home in south dakota this past month, i heard a lot of concerns from small community banks and credit unions about the cfpb adding to the regulatory burden. mr. cordray, can you elaborate if, if you are confirmed, how do you propose to have the cfpb address these concerns? >> mr. chairman, we've heard the same concerns directly, and i will say that i have heard those concerns over and over again from the senators on this committee, those who have taken the time to meet with me. so it is impressed upon me how important this is for us to get this right. i will refer again to my own experience. i've worked close hi with larger banks -- closely with larger banks and community banks, and the easy, convenient way for us to administer that program is pass all the money out through

the large banks. the harder way was to sit down with community banks, understand they need a form that could be pilled the out in 30 minutes or less, we gave them a decision, we promised it within 72 hours turn around time, and we met that standard. and that made it possible for them to work with us. so they are a different character, they thrive on customer relationships, they thrive on their knowledge of the community. if they can have a level playing field to compete, they will do very well. we don't examine those institutions of ten billion in assets or less. we don't enforce the law against them under the new statute. we do have regulatory power but, again, through exemptions, through two-tier regulation and through listening closely to their concerns which is something i did both as treasurer and attorney general, we will be able to take account of those burdens and avoid heaping more difficulties on our community banks. >> as we have discussed, there are a number of mechanisms in

place to make the director accountable. as director, what steps would you take to insure accountability? >> mr. chairman, there are a number of -- it's kind of a mosaic of interlocking pieces in the law that create accountability for the bureau. i can also say that from my own experience the most important thing in any federal independent agent i is to -- agency is to follow the law carefully and closely. that includes as we do rulemaking that we comply with the requirement that we consider costs and burdens carefully before we embark on any rulemaking. it means that we should be attentive to legislative oversight which i have been as a state executive official at the state level and would be here, and it means that we pay close attention to audits. i have found that to be a very useful tool in the offices i've headed. every office i came into had audit findings against it. in each case we cleaned those up. at the cfpb, we will take our

audit obligations seriously, and i find that make sure the internal policies you have are actually live inside practice by the agency, that's something i commit to as well. >> senator shelby. >> chairman, i yield to senator corker. >> thank you, mr. chairman. and thank you, ranking member. i've been on recess and went to 60 events or so and a little bit shocked coming back into thebacking committee which has -- the banking committee which has typically been very nonpartisan to hear the spewing that i've heard from almost everyone on the other side of the dais. i've got to tell you, i'm a little shocked by that and some of the half-truths, mistruths, untruths that have been stated. the fact is, the only two people that i'm aware of on this dais that were directly involved in negotiations to create this consumer agency are sitting on

this side of the dais. that's an absolute fact. the only two people that i'm aware of sitting at this dais today that negotiated day after day after day to create this organization are sitting on this side of the dais. so i'm a little shocked at some of the comments that have been made and, actually, disappointed at the rancor here in this completing. the fact is that what we've talked about, and you and i talked about this in the office is the fact that the only way any of this, the oversight council can challenge something that the head of this agency puts in place is if it threatens the stability of the financial system which is a pretty big hurdle. the chairman of this committee compared this to the sec and the fdic and the fed, all of which are either commissions or boards, therefore, they have people who help the executive in

prudent rulemaking. so i'm stunned at the untriewpts that have been stated today -- untruths that have been stated today and the partisan nature in the which they've been relayed. and i am sorry that you're caught up in all of this. i know that you and i talked in our office about the fact that almost all of this would go away if administration would just sit down and put appropriate checks and balances in place. i talked to mrs. warren about this, um, and i talked with you about this, and i'm wondering how those conversations went between you and the administration. regarding the conversation that we had and the possibility of actually just having some degree of check and balance for this new position that you hope to hold. >> senator, and i appreciated the opportunity to meet with you and hear your concerns firsthand as well as today at the hearing. i did convey the substance of

those conversations back to the administration. i have not sought to inject myself in legislative discussions that may be between the congress and the president. my job at the bureau has been, as you know, chief of enforcement, and our role there is to take the laws that congress has enacted -- whatever they may be -- and can to enforce them to the letter. and that's what we are trying to do. we're trying to do that very carefully. i think the initial inspector general reports on the bureau were good in suggesting that we did, in fact, finding that we did identify all of our required mandates under the law, that we have begun implementing those in a sensible way, and we've communicated rodly to our stakeholders and to other agencies which goes in part to your question about the financial stability oversight council. we are required by law to communicate and consult with our fellow banking agencies. we would be a very poor example of government at work if we did

not take that very seriously. i would hope and expect that concerns that they may have about our work or concerns we may have about their work is are things that we will discuss regularly, that we will work those issues out when we do have disagreements as i'm sure will occur from time to time, and it would never be necessary to invoke some type of superprocess to override our rules. if they talk to us about their legitimate concern that is a rule might threaten the safety and soundness of the banking system, we should take that to heart, think very carefully about what we're doing and work toward a consensus. i think that's what we will do. >> would the agency be, though, not independent if it had a board? would that make it not an independent board? >> i think, senator, that different independent agencies are structured in different ways. the comptroller of the currency has had a single director for 100 years, and congress has blessed that. fhfa has a single director.

other agencies do have a board, it can work both ways. but congress created us and gave us a director, we're trying to implement that law. it's difficult not having a director in place as the chairman mentioned, a level playing field -- >> is the threshold pretty high meaning that unless a rule that you create threatens the stability of the entire financial system, it cannot be challenged. that's a, that's a pretty high threshold, is it not? >> i don't know how to evaluate that in the abstract. i know this provision -- >> well, don't do it in the abstract. i mean, would you agree that unless you create a rule that destabilizes the entire financial system, that that's a pretty big threshold for any of the other regulators to challenge whatever you solely decide against? >> again, it's a standard that doesn't apply to any other agency in government, solely to the consumer bureau.

it is a high hurdle, but not an inappropriate one, i think, because we will be consulting regularly both in the examination function and as they do safety and soundness regulation, we do consumer protection regulation, i think the two are in harmony, and it would make sense for us to go together as we do our work. that would be my intention as director. >> can well, i do hope we continue to work on this. i still do not understand why the administration will not work in some way to solve this, nor why they allowed this to be the lightning rod that it did not have to be when there was support on both sides of the aisle, large support for a consumer protection agency. but let me just move to you for one moment. >> sure. >> first of all, i have had a very pleasant meeting with you and, again, compliment you on your family. one of the things we talked about in the meeting we had in our office was the fact that it's not typical to have sort of a