ratio. some people have said 8% and do away with the complexity that exists because many of the schemes that layout risk really don't work so well. i wonder if that would be a better solution to basel iii, much stronger ratio and less complexity with all of these rules that so many people are having difficulty understanding. >> i guess i would say and i know you are not making the observation i am about to respond to that you heard as well that the idea that if you somehow don't like basel iii or think more should be done that we should not be for basel iii which is an enormous advancements in improving the quantity and quality of capital and those pieces of the are actually not all that complicated. making sure the equity that is held is real equity that can be lost absorbing and getting it up

to 7% level effectively rather than as low as 2% which was 3 crisis. those are pretty straightforward. whether more should be done, for some of the largest institutions, we think the systemic risk you do, and actually think it is pretty straight forward. with the collins amendment, a standardized floor. and not model driven but standardized raise rates, but my hope would be substantial merit in this, having a much simpler floor and above that for the biggest institutions, that is where you have a model for and supplemental capital. not displacing the simple one

but supplemental. >> senator reid. >> thank you very much. chairman gensler, you have a roundtable on the future of its stops -- swaps. because of the rulemaking process, that is not completed and many people are moving away to avoid uncertainty into the futures market. can you tell us what risks might be posed by that and how you are going to respond to finalizing these rules and you educated your budget issue is probably a critical factor in that again. >> what we're seeing in the derivative market place, the future marketplace has been regulated for 7 or 8 decades and transparency and risk reduction in clearing. the marketplace develop and 30 years ago, always between 80% and 90%, in the sense of the

outstanding derivatives. it dictated we bring transparency and the regulated market, there has been some relabeling, shifting as we say. the good news is the future or a swap, you have transparency. after the transaction, futures before the transaction occurs, we have central clearing to lower the risks and ensure access. and in the swap market place around swap execution facilities and the block roll, we also in the futures world have to ensure we don't lose something that was once swapped, moves over, calls itself futures and some of the exchanges lowered the transparency. we wouldn't want to see that happen. whether it is called a future or a swap or better shape than we

were before 2008, thank you for asking about resources. we desperately need more resources when congress is grappling with budget deficits. >> this is a related question because it is an international market and hugh and chairman gensler are working on border swaps and in order to coordinate with international regulators so that there's a consistent rule that goes back -- it would be great if there was our columns rule across the board. uniformity helps sometimes. can you comment on what you are doing with respect to coronation efforts with respect to border swaps? >> absolutely, thank you, senator read. it is a tremendously important issue, perhaps more important than any other because this market is truly a global marketplace unlike other markets

that we regulate which only have certain cross border aspects. the majority of what goes on in this marketplace does cross national lines. we have worked closely not only with the standard multinational bodies like the international organization security commission, but we are working actively, the cftc and the sec with regulators around the globe who are in the process of writing the same rules. they are in somewhat different stages, some are still at the legislative stage, some are just entering the rule writing stage but we all acknowledge the importance of making sure the business can take place across national boundaries and that we remove unnecessary barricades. we want no incompatibility or conflict but we want to look at ways the we can make our rules more confidence. we are both looking at techniques such as what we call substituted compliance where you

can have an entity registered in the united states, and obligations complying with its own country laws. we think this will ease the burden and we are looking at this carefully. >> any comments? >> we are in better shape than we were two years ago, and the european union has a lot, canada and japan, four very significant jurisdictions between which we probably had 85% or 90% of the worldwide swaps market place. we are ahead of them in the rule writing stage but with some developments last week even europe got there rules through. of very important process through the european parliament. so i think we are starting to align better. >> let me make a final comment. my time is expiring. one of the dodd-frank initiatives was to take bilateral derivative trades and

make them, put them on clearing platforms so they are multilateral. that helps the also engenders the possibility of systemic risk from a large concentration. that means the collateral rules, all the rules have to be -- i just want to leave that thought with you, that is something that should be of concern to you, these central clearing platforms are so rounded with capital, collateral, lack of leverage, they posed systemic risks. i think you understand that. >> we do and we take it seriously and consult actively with the federal reserve and international regulators as well. senator crapo. >> thank you. i want to get into the issue of economic analysis. i know you are all aware the president has issued two executive orders requiring

agencies to conduct economic analysis in the office of management and budget issued directives and guidance how to implement that but ironically independent agencies such as yours are not subject to those requirements, those executive orders. i know that each of your agency's has said that you are going to follow the spirit of those orders but in december of 2011 the gao found that in the rulemaking under dodd-frank the agencies were not following the guidance put out by omb and in its december report of this year it found the occ and sec were getting their but remaining agencies still year later were not following the key guidance in the o m b that the 0 m b put out for economic analysis. e a of frankly i think was quite critical about that as well as the fact that it found some

coordination among the agencies but the court nation was very informal nature and almost none of the coordination looks at the cumulative burden of all the new rules, regulations and requirements of my first question to ask is can i have your commitment that each of your agency's will act on g a o's recommendation to incorporate omb guidance on cost-benefit analysis in to your proposed and final rules and interpretive guidance? i would not necessarily go through and ask each of you for an answer but there was any agency here who would not commit to comply with the recommendation could you speak of? >> i confess to not being familiar with the december 2012 recommendations. certainly we do economic analysis on a rule by rule basis and more generally.

to that we are committed. i don't know that we are committed to everything that might be in there and i don't want to leave you with that impression so i prefer to get back to you after the hearing. >> i have the record here. i am sure you can get a copy of it and what the gao is saying is these 0 m b guidance implementing the president's executive order on this issue and each of the agency sells the gao they're doing what you said to me, doing economic analysis. dungee ao is saying you are not doing economic analysis the way that the omb directed that it be done according to the guidance. so the request is that you commit, that you will follow the gao recommendation, simply comply with the 0 m b guidance. i am going to take that as an agreement that you will do that. >> i didn't want to leave it.

>> maybe not. >> i want to make sure, that we didn't leave you with anything but the best impressions. we have the general counsel and chief economist issuing guidance to the staff on rulemaking to ensure that our final rules do what you are saying. the g a o report is looking at some proposals that came before so we had to address what the recommendations were and proposals before that. we are in a circumstance where statute has explicitly language about cost-benefit considerations and that language is a little different from other agencies so we look to section 15 of the commodity exchange act for our guidance on cost-benefit. but i believe and understand our guidance that staff is consistent with the omb recognizing we have to comply with the statutes that we have.

>> i don't think the statute stops you from meeting the omb guidance. as i understand the gao looked at 66 rulemaking which happened to the agencies last year, that is a pretty significant amount of the rulemaking is that were there. let me get this in another way. can each of you commit to provide a description of specific steps your agency is taking to understand and quantify the anticipated cumulative of fact of the dodd-frank rules? >> we are using data that is available and where the quantification possibilities are is absolutely. >> all right. i see my time is up. i have some other issues to get into with you but i appreciate this and i want to conclude by a

statement. i think g a o's report was clear that the kind of economic analysis we need is not happening and that is why i am raising this. explain you have other regimes or statutory mandates. the issue here is getting proper economic analysis as we implement these rules. i think g a o's report is pretty damning in terms of the results they found on the 66 rules that they identify. >> senator menendez. >> thank you for your testimony. i wanted to discuss foreclosure review process that i held a hearing on in the housing subcommittee and let me start by saying i realize you were not the controller when the foreclosure review program was designed but as a follow-on to that period of time, you are

never the last task with what i consider a mess and basically what was done here, we replace the process with $8.5 billion settlement that won't determine which borrowers were wrong or knocked and despite having legal rights to sue the bank's most borrowers don't have financial means to litigate their cases if they feel the conversation was inadequate. so considering this point isn't it unfair to not review the files of those turning in packages if they still want a review? would you consider mailing each borrower a check with the option to return at check in favor of a full review of their pile and as part of the answer, the third part of it, how is it fair to tell a borrower who had for

example $10,000 in improper fees, that they are going to get $1,000 because that is the amount all borrowers in the improper field category are going to get? i have been at this over a year and i am concerned about how we are coming to the conclusion. give me some insight. >> thank you. i share your concerns about the entire process, its ability to meet its original stated objective. what happens here is the complexity of the review process was much larger than what was anticipated in the beginning. it consumed considerable amount of time with very little in terms of results and our concern was having almost $2 billion being spent as of november of this year without being able to

issue the first checks that the process was flawed and equitable result was to estimate an appropriate amount of settlements to make it equitable distribution as possible taking into account the level of harm and the borrower characteristics. the settlement isn't perfect but we believe it is the best possible outcome under the circumstances. >> the specific question that i asked you, is it possible for those who want to review their files to get a review if they're willing to forgo at least the check? >> that is not an element of the settlement that we reached. >> the bottom line is they will be foreclosed. >> part of the settlement, this was the impetus for having the

$5.7 billion worth of assistance for foreclosure relief as part of the settlement. we made it clear those funds should be prioritized and directed towards those individuals with the greatest risk of foreclosure. we want people to stay in their homes. >> we want people to stay in their homes too. what recourse do they have here a rather than pursuing their own litigation? >> the way the settlement is structured, we try to allocate to the most grievous situation is -- >> you won't know that without a review of their files. >> we have done an analysis of the level of harm in the total population, we think we have a fair estimate of overall who

would be harmed but we do recognize you stated certain individuals may not get full week compensated for financial harm. >> look forward to reviewing that with you. secretary miller, president called for something senator boxer and i have promoted, offered the responsible homeowners refinancing act, said it is past time to do. can you tell the committee the value to individuals as well as to the economy of permitting refinancing at this time? >> thank you for that question. the population of homeowners who today are under water on their mortgages is 20% of all homeowners who have not been able to refinance in a low-interest rate environment, a missed opportunity. to reach homeowners who are more benefit for a high-interest loan they may hold.

we very much support any assistance to reach that population. we have a program that is reaching homeowners whose mortgages happen to be held guaranteed by the g s es, we have seen very good take up in the refinancing assistance for providing underwater loan holders in that population but another group of homeowners to not have mortgage held that the gsts that have not been able to take advantage of this. we think it will be good for homeowners and good for the mortgage market and the economy. >> senator coburn. >> i'm glad to be on this committee. i have one question and i will submit the rest of my question to the record. this is for mr. cordray. mentioned financial literacy that needs to be approved. i wonder if you are aware how many financial literacy programs congress has running right now.

>> i can tell you by law the vice chair of financial literacy education commission, we are coordinating with other agencies, 15 or 20 other agencies and does feel to me that one of the issues has been a piecemeal approach to this problem and we have given financial -- i would like to work with the congress and our fellow agencies as we do what i mentioned and state and local officials when i was county treasurer and state treasurer in ohio we got the legislature to change the law that every high school student in ohio has to have personal education before they can graduate. that is something we used to do through home economics curriculum and the like and i have seen mathematics textbooks where a lot of the questions asked were put in terms of

household budgeting and the types of financial issues, farming and other communities. i think that is something we have lost, something that has weakened our society and something we need to focus on but i would agree with you there's a very scattered disparate approach right now and it has not been optimal. >> pretty ironic the federal government is teaching americans about financial literacy. there are 56 different federal government programs for financial literacy. what i would hope you do in your position is really analyze this and make a recommendation for congress after looking at the g a o report and tell us to get rid of or get one, but not 56 sets of administrators, offices, rules and complications and requirements that have to be fulfilled by people to actually implement financial literacy. >> i appreciate the comment and i will be glad to follow up with

you and work and think about this. as we coordinate with one another that helps minimize some of the problems. we worked with the fdic on the money smart curriculum which is a terrific curriculum. we don't need to reinvent the world. we're working on a new module for seniors who face some specific issues. i am sure your office hears about from quite a bit but i would be happy to work with you and i agree with you on the thrust of your question. >> my only point is if we start another one, or another two or three and don't change those we are throwing money out the door. >> i would agree with that. >> senator brown. >> thank you. i would like to talk to you for a moment, three or four years ago in 2009, limiting the size or interconnectedness of financial institutions was more a provocative idea that a

proposal made you said that in the context that there wasn't -- were not particularly well developed ideas out there. since we talked, this legislation to limit the non deposit liabilities of any single institution relative to domestic gdp, i worked with senator better on that proposal and we are considering more bipartisan support. tell me how you -- you're thinking has evolved, your more recent statement seems like you're thinking has evolved from 2009 and why that is. >> absolutely right, senator brown. my observation back in 2009 was people would say something like break up the bank's, but there wasn't a plan that allowed people to make a judgment as to whether it would address the problems of too big to fail and others in the crisis and costs

associated with it would be. since then a lot of people generated a lot of plans. they falling to three categories. the first category is a variant on things we already do. strengthen the barriers between depository institutions and other parts of bank holding companies, make sure that some activities are not taking place in the banks, make sure there's enough capital in the rest of the holding company even if if they get into trouble independently, don't just think in terms of protecting them, that is a big part of the european proposals like a victors' proposal. as i say to a considerable extent the u.s. has already gone down that road and dodd-frank strengthen those provisions. the second set of proposals is

what i characterize as a functional split so saying there are certain functions that cannot be done within a bank holding company, glass-steagall was that approach which separated investment banking from commercial banking. there are proposals out like this and some of them would allow some of them would allow underwriting and not marketmaking. others might say nothing at all other than commercial banking, and the issues are kind of on both sides. on the one hand we have to ask if we did that, would it actually address the problem that led to the crisis as senator johnson was indicating in introductory remarks, a failure of bear stearns, a broker dealer, not a bunch of relationships with i b is that precipitated the crisis and the second issue is what would be

lost. are there valuable roles to play when for example and underwriter also makes market and securities which it underwrites and most people would conclude that there are. the third example is embodied in your legislation and other proposals which focuses on the point i tried to make at the close of my introductory remarks, what i think of as another set of issues of large amounts of short-term, non deposit, runable funding and i think here and speaking personally now my view is that is the problem we need to address. your legislation takes one approach to addressing it which is to try to cap the amount that any individual firm can have and thereby try to contain the risk of the amplification -- there

are -- restricting the amounts based on different kinds of duration risk and more than a certain amount, of there are even broader ideas, such as placing uniform margins on any kind of security lending no matter who participates. from my point of view, the importance of what you have done is draw attention to that issue of short-term on deposit runable funding and that is the one i think we should be debating in the context of too big to fail and the context of our financial system more generally. >> if i could just stick a couple quick comments, one is we have seen the evolution you are thinking and the way you explain it, when senator kaufman and i introduce that amendment on the floor in 2010 it had bipartisan support but fell short, we have

seen from columnists like george will in the wall street journal op-ed column, and number of others across the spectrum including colleagues, more concerned than i am on this and this body come around looking at this favorably so we have seen a lot of momentum and i appreciate your thinking and second by want to bring up quickly, mr. chairman and i will not end with a question, last week i received the fed response regarding imposition of basel iii, with 42 of our colleagues last year, senator johnston and crapo sent a letter to the fed on the insurance issue at you and other fed officials stated several times you believe the proposed rule adequately accommodate the business of insurance, we respectfully disagree. won't ask for response.

>> senator heller, welcome to the committee. >> it will be a pleasure to serve with you. thanks for making me part of this team and i thank those who have testified today, a lot to learn. there are two messages. this takes a team to solve these problems and i have a lot to learn, a lot to concentrate my comments today on consolidation. we have had massive consolidation in the banking industry in nevada. 9 come from a state with the highest unemployment, foreclosures, highest bankruptcy and the health of the banking industry reflects the health of the state in its current position from 30,000 feet level looking down at this, only have 14 community banks, and credit

unions left in nevada. and concentrated in large banks. and 30% are not banked or underbank which is the highest percentage in the country. our housing as you mentioned, underwater mortgages are 20% nationwide, 80% in nevada and we are in a tough situation here and a certain about consolidation. my question i feel lot of the right notes and appreciate that, but what is this consolidation? how does this help to get the loans? if small banks, can't remember which one was, 50% of small loans to businesses, to home mortgages, car loans come from these community banks, with loss of community banks, let me make

one more point before i raise the question and that is the banking association feels in nevada that if you have deposits of less than $1 billion you are probably going away. less than $1 billion. gee you agree with that statement? how does it help nevada to have this lack of financial opportunity to consolidate in this manner? >> mr. gruenberg. >> the final point at you made in terms of meeting a certain number of deposits to be viable in the banking system. this is one of the issues we did look at, looking at the experience of community banks over the last 25 years and we try to look closely at that particular issue because there is a lot of talk about that.

what it is worth based on the data that we analyze, we cannot find a lot economies once you get over $30omies of scale once you get over $300 million in assets. so the notion that a community bank has to be at least $1 billion in assets, for example, in order to be viable in the banking market, at least wasn't proved out by the analysis we did. and you raise new important points in regard to nevada's particular situation. you know, nationally nevada had rapid expansion in commercial real estate. that's what i think drove a lot of developments there. hopefully you've worked through the worst of that. that was not typical of the rest of the country. so i think that's fair to say nevada was particularly impacted there.

it is fair to say they are deserving of particular attention going forward. there's a particular role community banks play in credit availability. it is important because the particular niche for small banks as you know is small business lending which tends to be labor-intensive and highly customized. sort of lending at large institutions, interested in standardized products to offer in volume, necessarily interested in providing so the community banks really have a critical role in fulfilling that niche in the financial system. >> community bank supervisor at the state and federal level for over 25 years and i saw

firsthand the importance of community banks and their ability to help dig out of severe recession so i share your concern and commitment to community banks. as supervisors we can play a role in whether it is rulemaking more the manner in which we supervise and examine these banks to eliminate unnecessary burden, something we are committed to doing where we have 1600 institutions and the supervisory process for smaller banks when examiners talk to ceos and lending officers and ability to share best practices and help improve the performance of community banks. >> mr. chairman, thank you. senator warren. >> thank you very much, it is good to be here, thank you for appearing, it is harder than it

looks. appreciate your being here. i want to supervise big banks when they break the law including the mortgage foreclosure but others as well. we all understand why settlements are important, trials are expensive, we dedicate huge resources to them but we also understand that if a party is unwilling to go to trial because they're too timid or lack resources the consequences, they have a lot less leverage. there have been some landmark settlements but we face special issues with big financial institutions, and drag in billions in profits and turnaround and settle, paying out of those profits but i am in scented to follow the law. also the case any time there's a

settlement and not a trial it means we didn't have those days and days of testimony about what those financial institutions have been up to. the question i really want to ask is about how tough you are, how much leverage you have been these settlements and what i would like to know is tell me little about the last few times you have taken the biggest financial institutions on wall street all the way to trial. [applause] >> anybody? chairman curry. >> to offer my perspective as a bank supervisor, we primarily view the tools the we have as mechanisms for correcting deficiencies. the primary motive for our enforcement action is to identify the problem and demand

a solution to it. >> you set a price for that. i want to move this along effectively. what i am asking is when did you last take -- i know you haven't been there forever. a large financial institution, a wall street bank to trial. >> the institutions i supervise, we actually had a fair number of consent orders. we do not have to bring people to trial. >> i appreciate you say you don't have to bring them to trial. my question is when did you bring them to trial? >> we have not had to do it as a practical matter to achieve our supervisory goal. >> walter? >> thank you. among our remedies, penalties, the penalties we can get are limited and we have asked for additional authority, when we

look at these issues and we truly believe we have a very vigorous enforcement program, we look at the distinction between what we could get if we go to trial and what we could get if we don't. >> that is what everybody does. the question i am asking is can you identify when you last took the wall street banks to file? >> i will have to get back to you with specific information but we do litigate and we do have settlements that are rejected by the commission or not put forward. >> we have multiple people here. anyone else want to tell me about the last time you took a wall street bank to trial? i just want to note on this, there are district attorneys and u.s. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin ground and taking them to trial in order to make an example as

they put it. i am concerned that too big to fail has become too big for trial. that just seems wrong for me. if i can i will go quickly to chairman johnson, one more question i would like to ask and that is a question about why large banks are trading below value. we understand book value, what the assets are listed for, what the liabilities are, and most big corporations trade well above book value. but many of the wall street banks right now are trading below book value and 0 -- i can think of two reasons that should be so. one would be because nobody believed the bank's books are honest, the second would be no one believes the banks are manageable, they're too complex

either for their own institutions for the regulators to manage them. what reassurance can we give that these large wall street banks trading for local value in fact are adequately transparent or adequately managed? >> there is another reason, investor skepticism whether a firm is going to make a return on equity in excess of what the investor regards as the value of the individual parts. i think what you would hear analysts say is in the wake of the crisis there have been issues on just that point surrounding first what the regulatory environment is going to be, how much capital is required, what activities are restricted, 2, for some time

there have been questions about the franchise value of some of these institutions. the crisis showed that some of the synergies weren't not very synergistic at all, in fact there really wasn't potential on a sustainable basis to make a lot of money. part of it is probably just the environment of economic uncertainty. i think that in some cases, seen some effort to get rid of large amounts of assets at some of the large institutions it is indirectly in response to this point. some of them have concluded that they are not in a position to have a viable, manageable, profitable franchise if they have all of the entities they had before. and in the process of reducing their balance sheets. the other thing i would note is

you are absolutely right about the difference, the difference actually is the economy has been improving and some of the firm's have built up their capital. you have seen that difference narrowing in a number of cases as they seem to have a better position in view of the market from which to proceed in a more feasible fashion. >> i apologize for going over. >> thank you, mr. chairman, i appreciate your comments. i did want to talk about that issue. for the u.s. housing market to continue on its path to recovery consumers, lenders and investors need clarity regarding the boundaries of mortgage lending in the recent action see to finalize rules implementing the ability to repay provisions of dodd-frank with an important

step toward certainty and access and now that they have successfully finalize the work, qualified mortgage definition, i urge you to work quickly to finalize the definition in a way that insurers, responsible borrowers have ongoing access to sustainable mortgages that for decades have been the cornerstone of a stable, strong u.s. housing market and earlier this week we saw data showing home loans that would be exempt from the ability to repay requirements and proposed risk retention standards even with 10% down payment requirement make up less than half of the market in 2010 and importantly it should be noted these loans went into default. now that it is finalized can you assure me that your agencies will work diligently to complete q r m rule in a manner consistent with the legislative

intent? mr. curry, tarullo, heller, anything to add to that? >> e q r m risk retention rulemaking process is an important one with q m in place, looking forward to adopt appropriate regulation as quickly as possible. >> as quickly as possible defined as when? >> we expect to wrap up most of the dodd-frank rulemaking this year. >> i would hope that would be sooner than the end of the year. >> the sooner the better. >> the q m coming out doesn't allow us to go and finish. most of the other issues, the latest processes work at a staff level people go through various issues and they try to work them through or present them to the

commissioners or governors for resolution. most of that process has already proceeded. there are a couple things that have to be considered, it is having q m final which lets us go to completion. >> under secretary miller, at the request -- o f r has been studying the asset management industry and the study is intended to help to determine what risk if any this industry poses to the u.s. financial system and whether any such risks are best addressed through asset managers, obviously systemically important financial institutions. can you talk about the transparency of the process and will the results of the analysis be made public and interested parties be provided the opportunity to comment on the

results? >> there are responsibilities to designate non-bank financial institutions. in april of 2011 we published criteria for how that activity would proceed. at the time we said asset managers are large financial institutions but they appeared different from those other financial institutions and we took that off of the table to do additional work so they have been doing that work and working with the market participants and members of the outside to complete that. i expect if there is a plan to go forward with designation on asset manager or activity, there would have to be further publication of the criteria for doing that and terms on which that would be considered so we have been clear that we would be transparent and public about that. >> we took off of the table. what did you mean by that?

>> we set it aside from criteria that were established at the time for non-bank financial institutions to say we wanted to study the asset management industry further to learn more about activities and risks. >> will they provide the public the opportunity to comment on any metrics and thresholds relating to potential asset management companies as nonbanks, specifically important financial institutions prior if you went to the point of prior to any designation of such companies. >> i can speak for all the members, what they would want to do but that would be a reasonable course in that direction. >> thank you, mr. chairman. >> thank you, i want to start by saying how excited it is to bring in a member of the senate banking committee with my colleagues and look forward to

working with you all and want to thank you, chairman johnson and ranking member crapo, my good friend, for allowing me to be part of this. in west virginia we have a lot of community banks that are released a bland done a good job and caught up in this whole banking change and regulations. with that being said i know there have been some things that have helped by dodd-frank, but most committee banks believe it has been very onerous. federal restored--federal reserve board governor gave a speech in favor of community banks that one size fits all, regulatory environment makes it difficult for community banks and i ring compliance experts can put an enormous burden on small banks and went on to say hiring one additional employee would reduce return assets by 23 basis points and for many small banks, 13% of banks with assets

less than $50 million, they did not cause this problem that we got into in 2008 but they were lumped in with all the bad actors and bad practices and what we are saying is if i look across this and being branded to the committee, you pretty much every aspect of regulation. how are you dealing with that? anybody can start. >> congress gave us the authority to exempt what congress said was small financial institutions. anything less than $10 billion from the central clearing requirement we went through rulemaking -- >> 15,000 institutions, we don't oversee the backs but we did our share of the community -- >> anything i can say is you could but to comply with the massive amount of paperwork regulation and the people they would have to hire to do that when they were not at fault,

they are saying this across the board. >> we just exempted them from the one provision congress gave us. >> anybody else feel like exempting them? senator? >> i would be happy to mention on the mortgage rules we just completed a qualified mortgage rule, mortgage servicing rules are the most significant substantive rules, we were convinced as you say and i said many times that the smaller community banks and credit unions could not do the kind of thing that caused the crisis so we should take account of that to protect their lending model as we regulate to prevent the crisis from happening again. on the servicing rules we exempted smaller servicers from having to comply with big chunks of that rule in consultation with people and qualified mortgage will we get a proposal that would allow smaller banks that cheap loans in portfolios to be deemed qualified mortgages

and that is quite important and been well received and looking to finalize that proposal. >> since my time is short, maybe people haven't -- glass-steagall was put in place in 1933 to prevent exactly what happened to us. it was in place for approximately 66 years until it was repealed. up until the 70s it worked pretty well. we start seeing changes and chipping away new rules and took power away from glass-steagall and repealed in 1999 and the collapse of 2008. the volcker rule doesn't do what glass-steagall does but why have those protections and if it works so well for so many years why do you not believe in something we should return to or look at? >> let me take a shot at that. you put your finger on the timeframe, what had been up quite safe, stable, not

particularly innovative financial system began to change. one of the big reasons it began to change was commercial banks were facing increasing competition on both the asset and liability sides of their demand sheet, their balance sheet. on the one hand, this is a good development, the growth of -- >> where's competition coming from? >> growth of capital markets, public capital markets allowing more and more corporations to issue public debt, issue bonds so they didn't rely on bank lending, bank bar wing that they used to and on the other side growth of savings vehicles like money-market funds which provide higher returns than an insured deposit of one of those institutions so the banks felt themselves squeezed on both sides by what in some respects were very good developments which is to say more options for

people. >> so we change the rule for risky ventures. >> in some cases it was risky ventures, there definitely was a deregulatory movement in bank regulation beginning about the mid 70s for an extended period of time and what i say is if i had to identify a collective mistake that the country is a whole, it was not in trying to preserve a set of rules and structures which were being demoted by everything going on in the unregulated sector. the mistake was in not substituting a new more robust set of structures and measures that take account of the intertwining of conventional lending. that process of pulling away old regulation but not putting in place new modernized responsive

regulation leftist vulnerable. [talking over each other] [inaudible conversations] >> i want to thank the ranking member and you for service on this committee and working in issues of consequence and everyone on the committee, we want to start with questions to chairman walter if i might. investor protection is one of the most significant issues contemplated by dodd-frank including direction to the sec to examine standards of care for broker-dealers and investment advisers, investor advice. the sec released a study on the subject, recommending rulemaking authority to implement uniform fiduciary standards. it has been two years since the study was released, at the sec drafting a public request for

information. do you anticipate the sec will move forward on this issue and when? >> i expect that is referenced in the testimony to go out in the near future in the next month or two, with respect to the substance of the issue speaking only for myself on would love to move forward on this issue as soon as possible. opinions vary a great deal, it the cost that imposes. my own personal view is that it is the right thing to do and we should proceed and we should go on and at the same time take a hard look and more support for this commission and different rules that are applicable to two different professions and investment advisory, where they

should be harmonized and the differences in the regulatory structure is. >> i appreciate your position on this issue, i would encourage the priority, there is a priority of ventures. i don't speak to the chairman and ranking member, maybe we can push it. >> i appreciate that. >> the job act that was signed ten months ago, a few of those provisions were effective immediately, the sec is blown by most statutory deadlines for rulemaking yet to be proposed. the sec put out one proposed rule on general solicitation in august, it closed in october.

since then there has not been much talk about finalizing the rule or the rest of the rulemaking requested by that act. i am troubled by rumors i have heard suggesting that implementation of that portion of the bill, regulation a-plus may not be a priority for the fcc. i appreciate you have a lot on your plate. i understand that from rulemaking but we need the sec to make progress so small businesses this law was intended to benefit can better access capital markets. can you outline the time line for jobs back implementation including -- including when you anticipate draft rules to the commission's? >> the rulemaking priority start with dodd-frank and the jobs act and beyond that we see what else we can accomplish at the same time. we are looking closely particularly at how to proceed with the general solicitation

provision of the law which received interesting comment, divided comment and make a discussion with it to proceed with lifting the ban and general solicitation in a stark way or whether to accompany it where the protections by various commentaries including unanimously by investor advisory committee with respect to its suggestions as to how to implement with additional investing protections. that is actively at the top of our plate right now. following closely behind that, we are working in the next few months of putting together a crowd funding proposal. i will salvo we very much regret not meeting the statutory deadline, we have learned a lot by meeting with people from this country and abroad who have engage actively in crowd funding in this sphere and that will aluminate our proposal and make it the best proposal that it can

be. >> the job act was said by some to be the most important jobs bill we have done in a while as far as creating jobs. i can tell you in my state of montana which is incredibly rural, folks are hungry to get going and we are holding the process up. i know you are pushing a lot of different directions and very busy but i would certainly hope that once again we can get some things out very quickly because i don't think we get the full benefit of the act until we do. and since i am the last questioner i can keep going. i have more questions but i want to say thank you all for what you do and just because i didn't ask you a question doesn't mean i don't still love you. thank you. >> thank you all for your testimony and for being with us today. i appreciate your hard work