onto the committee and you taught me a lot. but i also know when you're writing down, you have a lot of answers that you want to give. so to me you've been a wonderful teacher to all of us. so if you have something else you want to enter back on, please go ahead. >> there are things that i don't like to talk about, that happens and i did want to get back to this question and i think it's a little inconsistent on this at times. despite the fact that it is part of this, he carries more negatives than positives by far.

they don't want to be designated but they also said the fact that they are closely supervised by the that is one of the most to the community. so the fact that they don't want to be close and supervised by the fed is simply the size alone and there's nothing they can do about it unless you want to break up fidelity. >> thank you for asking. okay, so banks greater than 50 billion don't have a choice. >> that is my time. i'm sorry, did you want to talk over me? we know that. >> believe it or not, the time alongside the gentle lady from new york. >> so why did they not want to be designated. designation and supervision is

what leads them to think this, so why would they not want to be designated. >> again, at the time alongside to the gentle lady from new york area. >> i rather hear discussion between the two of them than the majority of people here on both sides. >> you are recognized. >> i agree with that. here you have to have designation, which is aig and he had no choice and they were silent and the other insurance companies are going to be heightened designation that is not mentioned anywhere and it will be treated like a bank. none of them have specified the amount we agree that it shouldn't be. because they have no clue what will happen to them.

>> the time of the gentle lady has expired. the turnout recognizes the gentleman from california and chairman of the foreign affairs committee. >> thank you, mr. chairman. the markets are global and trying to get an efficient market should be a priority of this committee and in order to meet that goal regulators have to fully understand how europe and asia will implement this and sort of do things in concert here and not end up with incompatible guidance here of our companies and our liquidity of markets. so here is my point. as was outlined in the testimony, the fcc adopted a more mobile and the cftc adoptive guidance that has been subject to changes of interpretation and the resulting lawsuit also. then he stated that i don't

think he was the right decision to change the guidance and that this should allow for substituted compliance in this situation. so my question to both the gentlemen are the businesses that use derivatives need certainty and they need that liquidity and they need those willing counterpart is with which to trade in europe or asia. he blamed the failure to have one joint rule to govern a how does apply outside the united states is harming the ability of users to manage the risk? >> the jurisdictional issues, and the conflict among the regulations, it is harming the ability of u.s. companies to

basically get a handle and time to rest and hedge their risk and frankly get visibility of that risk areas corporate cfos rely on the market to the extent that the signals are muted, the corporate treasurer's are more reluctant to make investment simply because they don't have the economic clarity that they need to move forward. >> thank you, sir. there's uncertainty in several areas from the lack of harmonization between the cftc and the banking regulators have good this uncertainty that we thought was clear in the elbit end-users should be exempted from having to be part of the margin. as i indicated earlier that for the average member of the

roundtable, that was 269 million that represents the diversion for business investments. the other element in the european regulators have been much more clear that they view the derivatives activity by those that are actually was producing and they appear not only to be exempting any users from this margin but from exempting this derivative end-user to retain a higher capital level against that derivative exposure because of the risk reducing nature. >> this aspect to put american companies at a disadvantage. if i could quote the commissioner, if the cftc gives effective clearinghouses strong

and rigorous rules and jurisdictions such as the ep you, we will be able to adopt these decisions very soon. and that means we will treat you as you treat us. i did want to ask the dominant question and it was mentioned that you had discussed and suggested smaller banks from the volcker rule and his memory serves you are not of the opinion that they should be designated and i was going to ask you on other issues that the regulators are pursuing. you find some that were not intended in this view by dodd-frank? >> i don't think as a general rule. i don't think insurance companies should be there. and so it's not 100%.

the assumption would be that they are equating these two kinds of mortgages. i agree with mr. wilson, you keep it in the portfolio and the flipside have to be strong risk retention. >> the time has expired and we know recognize mr. lynch. >> thank you, mr. chairman. i thank the members of the panel. thank you so much again. i did see a good article in "the wall street journal" and a few of the takeaways from it is if the address is how wall street is adapting to the new regulatory regime, talking about the fact that profits are up and banks are cutting ties with subsidiaries that are more risky than also shoring up capital

reserve in the case of this economy and becoming less complex with institutionscome and they go on to say that goldman sachs last week announced 56 billion from the balance sheet during the second quarter and they have proactively signed with dodd-frank. they've cut assets by one third from 2008 crisis and downsize their trading operation in focusing on less risky behavior. including the sale of more than 60 businesses that they have viewed as more risky. and bank of america corporation has shed more than 70 billion since 2010, including those that are more risky and wire that

banks hold a lot of capital against them and it has also limited the hundred 40s at legal entities which is at the recent% reduction. so in part they are doing their job and they are working to reduce risk and also the likelihood that these banks will fail in the first place. i want to ask you and we talked about this earlier with the gentleman. going to the issue of asset management. they have recognized each financial institution differently and it should be reviewed with its unique characteristics being in mind. it is outlined including the amount of leverage that the institution has in the off she balanced exposure of the company

that is already regulated by the primary regulator. that seems to suggest that these asset managers are not the folks we intended to go after on the risk side. so i'm just wondering if you believe that the designation is the appropriate way to address that industry. >> an argument on the republican side that being designated gives you this advantage and yet every institution has vigorously resisted and it clearly means more regulations and the notion that it is a benefit by the response. there is also ownership and the more widely honored as in so

that is a great example of that. >> yes, that is a great example. >> if that is all you do is asset management, i don't think -- i think you don't have enough other things to do and there is no sign of that. so i think that this has shown its value in the sec wouldn't do anything and people will disagree about this. but i think it's a good thing that we move forward. i don't believe that the asset managers have some other form of activity. >> okay. thank you very much, and i yield back. >> chernow yields to the gentleman from pennsylvania. would the gentleman yield a

moment? >> yes, mr. chairman. >> i heard the chairman make the point a couple of different times and i'm not sure if this is a net benefit or a net cost, but again he said we will be among the best beneficiaries of reform and well-made margins may come down due to this, a ig called it a designation that is a good housekeeping seal of approval. so i think that some of the biggest banks are part of this and i yield back to the gentleman. >> thank you, mr. chairman. many are frustrated by the one-size-fits-all and these rules and regulations are not helping businesses grow and create jobs. we are not helping them out of work person get a job.

things are saying that the regulation are stifling their ability to win businesses and families within our community. has your institution or other institutions that you know of talked about the regulatory costs associated and if so, what does this mean for customers? >> as i mentioned, i am very sad that we no longer serve that redman of our community who did not have access to that because of the requirements of dodd-frank. >> the reasons sunday found that small banks are spending more on compliance and that more than 80% and more than 5% of 2010, the statistics like this are why i believe that any regulation should undergo a rigorous cost-benefit analysis about

whether it would actually cost jobs wages. can you quantify what we have used in terms of dollars? >> my information is that we spend about three full-time equivalents dealing with regulatory role our men's. >> is that on an annual basis? >> yes, sir. >> the bulk of that and a big piece of that is my time trying to read the regulations and interpret them and getting training on what they are and some of those are not clear and that conflict with other regulations. >> they could help him or her get a mortgage, grow a business. >> i would much prefer to offer them credit solutions. >> i have also been concerned about the consolidations of yours being in the banking

industry and i spoke with a group of bankers about 20 of them and i asked them a question as to whether they thought that they would be independent or have to merge in every hand went up and we are seeing now with the numbers and so after dodd-frank, many new charters have been granted. are you concerned. >> i think it would be a tragedy. however, i see that happening. i feel that pressure myself trying to keep up with the pace of change in the complexity of these changes. if they are not issues that we have been a part of i hope that

the congress will exempt us from those sorts of regulations. >> on december 11, 2009, wall street the wall street consumer protection act was dropped to the floor and that provided for the creation of a consumer finance protection agency and also provided section 41 of three on the agency that can succeed to all the directors of the authority and says that the commission shall be composed of five members shall be appointed in the senate response about legislation and he waited for that. >> oh, yes, i did vote for that. >> thank you. >> the gentleman yields back in the chair recognizes the

gentleman from georgia. >> thank you, mr. chairman. >> first let me say that we really miss your intellect and your intelligence and wit and your time. never did we need it more than at that moment of crisis and so throughout history there are moments of greatness that shine is the most brilliant and this nation was on the brink of a depression and unemployment was ratcheting up at 12 and 13% and we had a ig failing and we had general motors and the worst economic conditions since the great depression and you are the right person at the right time doing the right job we are great

for that and america is great for that and i do want to say that revokes and alanna are still talking about that wonderful time and hopefully that is one of the highlights of the careers, that certainly wasn't mine. and the genesis of the bill is the essence of the too big to fail. and as has been pointed out the threshold, being at that point of above where we are with the systemic federal regulation. and so should a bank of systemic

importance be based strictly and solely on this asset size? >> at some point i do think that any number is arbitrary and i agree this has been talked about what that and i think that that is a reasonable thing to do and what i think you ought to do is to set a high number including an amount for inclusion with further complications. i was pleased that the chairman self-sufficient to be sufficiently stunned no one wants to read those other comments. but they may never have had the option and it was obvious that they were going to be there and

the fact remains that it's controversial and every single entity over which there would be distraction is not just jpmorgan chase for goldman sachs, being resisted being included to fight it and we have a panel of regulators on that subject and we have asked them. has any institution failed to object and every single one said the institution is much more a burden than that. but i do think that it is reasonable and i believe that complexity could be a risk factor.

.. it was you who insisted that no taxpayer money be used for a bailout. it was you that provided. that is important. i want to of make it clear. who is it under your bill in your estimation that pays for that bail out? >> institutions with more than 50 billion in assets, but they're is a formula so that asset managers will pay.

>> the time of the gentleman has expired. the chair now recognizes the gentleman from virginia, the chairman of one of our -- capital markets. it has been a long hearing. >> thank you, mr. chairman. i want to thank the witnesses for being here. it is interesting that they seem to have developed among some members here really that the cost of some of these regulations and the red tape that has resulted has been testified to by mr. wilson either not real or that if it is real it is not having an impact or significant. in fact, it seems that we are heralding this is a good bill because wall street has set all-time highs. i would suggest that that may be true, but it really does not

properly reflect the overall economy and certainly does not reflect the reality that the folks that i represent are feeling. i represent virginia's fifth district, a rural district with 23 counties and cities to mostly may street america. we have had in the last six years unemployment in parts of our district as high as 20%, north of 20%. there are still localities where we have unemployment almost as high as 10%. our economy is struggling, and we need jobs, and we need the capital. we access the capitol that creates those jobs. and we talk about the recovery and we talk about the full-time jobs that were created. there were not any full-time jobs created. there were part-time jobs created in june, and i think that that is important. working families are paying more for gas, grocery store electricity, health care, and it is costing them more to access credit. and they have fewer choices.

while this bill may be good for wall street, i would suggest to you it is having a much harder impact on folks in the rural communities. community banks are a major part of providing that capital. so i guess my questions -- i have two questions. the first would be dealing with the issue of too big to fail which, of course, is the wall street reform part of the dodd-frank act. it strikes me that sense 1984 there were 18,000 community banks. now there are fewer than 7,000. the chairman indicated that since 2008 we have lost 800. these are important banks to our communities. with that kind of consolidation, it seems to me that that not only hurts access to capital in rural areas but also poses itself systemic risk and i guess

i would ask you, you know, our community banks importance to providing access to capital in our small to of smaller tomorrow , may street communities and by this consolidation, are we by its very nature promoting systemic risk? something that this act is purportedly trying to prevent. >> absolutely. there was an fdic study a year or two ago when i was still there when they looked into the community bank issue. there are especially important in rural areas, small towns, and places where large banks don't want to branch. you need a begin of customer base before large banks are willing to go there and in many instances these are places where large banks do not feel it is competitive to advance. it is bad for the economy. the consolidation is ongoing,

and certainly the regulatory burden -- and i provided testimony to a subcommittee in march on this, the regular estimates are the cost for the regulatory burden associated with implants under the dodd-frank act, and i used some estimates by a federal reserve board governor about how many people it would take for the size bank and multiplied it by the average earnings per bank and it was significant. this is huge, and i think it does force the compliance costs for banks to have to be of a bigger size or they won't survive the cost. >> to you want to comment on that? >> three premises of a sound banking are to make loans to those who have the capacity, collateral, and the character. community banks are best able to judge the character of the borrowers and the local community. in addition the problem is

larger than that because we of moved away from relationship banking to compliance baking today. that takes character of the equation. there were not coloring by the numbers. we are losing a lot of the judgment or flexibility. it really needs to happen to fund the renovation and risk-taking of the most elementary levels. >> thank you. i suspect and know what your answer would become meister was to -- wilson. >> thank you. the time has expired. >> indeed, the time has expired. the chair now recognizes that the common from texas. >> i would like to welcome you back, again, chairman frank. it was an honor to serve in congress under your leader when i was a neophyte. and i must tell you that it is also an honor to serve under the of the hon. maxine waters who led the committee in capable, competent, qualified hands i

believe she is following in the tradition and doing an outstanding job. with reference to of several things, we talk of community banks quite a bit when we talk about community banks in terms of the eight and assistance of the changes necessary to make an effective we use small banks, but when we start to generate legislation, the size becomes large. in fact to know we have had testimony from at least one or two bankers who have indicated that 30, 40, $50 million is a community bank. mr. wilson, we all support what you want and are trying to help you, but what we try to get a definition of a community bank it becomes very difficult when we reach the size of 30, 40, $50 billion, not million,

billion. therein lies the small problem. for today let's deal with some other issues. i would like to offer you, if you would, to come back to the question of a single director as opposed to the commission because i don't think you had an opportunity to finish answer, and this is something we have mitigated here at the committee level quite a bit. >> can i say regard to the kennedy bank problem obviously it is a problem. i don't think that adds to systemic risk. they're is a loss of social function of economic activity. a lot of the losses of community banks have been going to the regional banks. i don't think that is a systemic risk problem. it is a social problem that i would like to look -- work on. the member from pennsylvania made a point. i originally wanted to be a single director the intraparty votes in the house wanted to be a commission.

the senate also wanted a single director. i did not put up that tough of a fight for the house position. people have alluded to this notion that there is something unique about the consumer bureau. it just does not go through congress. neither does the federal deposit insurance corporation. neither does the federal reserve system. neither does the office of the comptroller of the currency. in fact, none of the bank regulators are subject to the appropriation process. i believe what you have got is an anti consumer issue here, not a process issue because when i was here and in the amendment was offered to subject the consumer financial protection bureau to the appropriations process i offered an amendment to do the same for the federal reserve. i would think people worry about can't appease of accountability would think it would be a problem. after all, the consumer bureau gets his money from the federal.

i will tell you, that caused great palpitations at the federal reserve, but, in fact, they were able to count on the fact that the republicans did not want to have a consumer bureau running amok without any congressional appropriations control, but with the much more powerful federal reserve that was fine. the committee voted down my amendment. so i think that undermines will we talk about with limitations. >> accountability. would you address this for just a moment please? this seems to be the notion that they are totally unaccountable, can make rules that cannot be overturned, then they simply have this inordinate amount of power with no restrictions. >> well, in the first place it is one of the most popular things congress has done. and i know the chairman has said the financial reform bill is as damaging as the health care bill. well, my recollection is that the republican congress votes on

a fairly regular basis to repeal the health care bill. paris your bill to repeal the financial confirm -- reform bill. if you have the courage of your convictions, bring it on. the problem is the public is much more supportive of it, particularly the consumer bureau as for accountability, i don't know how many hearings i was summoned to when we were in the minority oversight hearings by this committee in which the topic was the lack of oversight of the consumer financial protection bureau. i never spent some much time and oversight hearings complaining about an absence of oversight. the final point, they do not like it and complained that aid is not subject to appropriations, but no one has pointed to any abuse of practice that i can see, no one has pointed to any unfair intrusion into the business models. >> thank you, mr. chair. >> the time of the gentleman has expired. the chair now recognizes the gentleman from florida, mr. ross. >> thank you, mr. chairman. and i think the panelists for

being here. i think the testimony today and especially that of congressman frank, has illustrated there are lingering problems with the implementation of the dodd-frank act. rules that have yet to be promulgated are creating even greater uncertainty in the environment. rarely talk about a recovery, i can only wonder what it would have been like had there been more certainty in the market for financial institutions. it seems like the affordable care act also known as obamacare and dodd-frank put together have been to behemoth's of legislation that have created serious problems and may not have been totally thought out. in my district, of course, we have community banks. i emphasize with you that they no longer do residential mortgages. credit unions are in the same arena. businesses feel their is a regulatory environment, and when you couple that with the operation chokepoint, of reputation risk and the dlj says

you will will not do business with certain people, it creates a very unhealthy environment for the flow of commerce, and i am reminded that the fastest-growing occupations in this country right now is compliance officer which does nothing to the bottom line of financial institutions and as more egregious harm to the bottom line of our consumers and services back home. just as if a patient will never get -- never get better if not taken up address we have to give some sense of certainty to and over regulatory environment, and i understand there are flaws. i think that even chairman frank testified to that earlier. you speak at length in your testimony on concerns regarding regulation and, in fact, you say that dot afraid to about frank was a trade-off between economic growth and periodic recession. what do you say that? >> financial intermediation is

important. it is one of the most important things that causes economic growth. if you think about it, if you have an economy with a single bank and is kits into trouble, there is no way for savings to be translated into investment in the longer if the bank fails. financial intermediation is the way the economy telex savings and puts it into investment. what dodd-frank does is tell the regulators to -- it empowers them and says there are certain kinds of bad financial mediation that could cause systemic risk. we are not sure what they are. it is up to you. you figure out what you think is bad and go out and regulated. the problem is, the goal is to create financial stability, but financial stability is the absence of a crisis. you can have a very stagnant economy with little growth, and there is financial stability. there is nothing in the law that tells regulators they have to take a trade-off between the growth of facts of stopping financial intermediation and weeding out bad financial

intermediation and many times they don't get it right. some 2005-2008, the federal reserve ran a study for the financial stability border where they looked over and over and over again and securitization and credit risk transfers. in the same people that are regulating banks now, that same group of individuals who looked at securitization of sub prime mortgages, credit derivatives and said, these are great thing for the banking system, good financial intermediation. dahlia coming back and see what we need is to give them more power with no constraint and let them pick out the bad financial intermediation. it did not work last time. >> i appreciate that. and there you are not a health care expert, what your employer and after not only comply with the regulatory environment but health care requirements now under the affordable care act as an employer. would you say that the combination of these two

regulatory beamon's have created a greater burden on your institution? and if so, has it been to the benefit of your employees or customers? >> no, sir. we have always provided health care to our employees. the benefit of the health care act is, since we are small we provide insurance and get a tax credit. this year i am struggling because the irs is telling me one thing. my accountant is telling me another thing about buying on the exchanges. so i have spent considerable time with that issue in the financial institution regulation , a lot of time and effort is not only complaint with what is past but think of 14,000 pages. >> do you think the recovery could be better without the regulatory burden? >> it would free me up to do other things.

>> you think would be qualified to encourage and even stronger and vibrant economy? >> says, sir. >> the chair now recognizes the gentle lady from wisconsin. >> thank you so much, is determined. i am so very glad to see you, chairman frank. just let me say that you have left the ranking member of the position in the hands of ms. waters, and she has set up meetings with us in the library of congress. you know, heads of agencies, journalists. she has not yell that as either. i just -- i read every single word of your testimony. i mean, you know, this is such a boring subject to so many people who may be watching. you certainly make it exciting. i've read every single word, but i noticed you did wax on and on about too big to fail and out

the banks are and there are more of them than there ever were before and they have merged. instead the dow get -- and know what you to clarify this for me -- that night that you have given me as a cautionary note, instead of being distracted by adjust the size of the bank's, we ought to be looking more closely into what is happening in the d.c. court rulings where this cost-benefit analysis to you know, is hampering the cftc operations, the appropriation process starving, regulating risk retention out of statute it with a nose can in the game. we need to learn lessons from history or be doomed to repeat it. i would like you to sort of elaborate on your testimony with regard to that. >> chairman frank, i do not think your microphone is on.

>> i said i was speaking to softly. i was promising not to yell. >> you are certainly free to turn it off, chairman. >> if all i turn off today was a mike-feel it was a pretty good day. i mean, which issued did you want me to address? >> the cost-benefit analysis. >> and i sympathize very much with the uncertainty. i do think -- if you are in a situation where you think things are wrong and you want to correct then there is an inevitable time of uncertainty. the only way to avoid the uncertainty is to perpetuated. i am disappointed that things have taken too long. in particular, i think we have had a problem in the derivatives area. i agree in the knowledge there have been problems in the cuban financial area. it has not done well enough for the end users.

i have one magic one i could have waived would have merged the ftc and cftc. starting a new country, you would have won, but they represent deeply enriched and rooted in economic and social and cultural divisions. and it would be very difficult to do that. sometimes people forget america is a more complex country. one of the reasons we have a multiplicity of bank regulators is we have the dual banking system, state-chartered banks and nationally chartered banks. a proposal to give all the regulation of the bank's to the occ, and the state-chartered banks said, no, we do not want to be in there with the big banks. we want a regulator that pays attention to us. the other problem is this. and one of the best things that happened from my standpoint for regulation going forward was senator reid's getting the senate to say we are not going to allow judges to be

filibustered because you have a very conservative in balanced court in the circuit in d.c. you have a lack of funding and i think the biggest single problem has been the incredible underfunding of the cftc. given the biggest grants authority, derivatives, very complicated. they are wildly underfunded which is why people regret we did not let this cfpdp in that situation. what many of my friends would like to do is throw them with underfunding the way they have the cftc. then you have -- and then you have the financial industry promoting all these comments on the agency and the court requiring a very specific analysis. and then saying, oh, no, that is not good enough. to the cftc put out of greuel in accordance with the bills clear language regulating speculation basically said, if you don't use oil except in your salad or card

please don't go up and buy a whole amount of it which will have an impact on the price the court threw that out and said congress did not mean it. we did. >> reclaiming my time. is this the sneaker risk thing that is happening to us? >> the which? >> with your indulgence -- >> well, it is an indirect -- >> the question. it is an indirect attack from people who don't want to bring it to the floor and try to appeal it. >> the time of the gentle lady has expired. the chair now recognizes the gentleman from illinois. >> thank you, mr. chairman. i think all of you for being here today on the week of this grim anniversary of dodd-frank. good to have you from chicago. illinois is my home area. it is increasingly clear that dodd-frank is doing real damage to our economy and stalling the economic recovery that we want. it spans 2300 pages and imposes 400 mandates, creating vast

bureaucracies but despite this it has not corrected problems arising out of the financial crisis which includes too big to fail and the need for regulatory systems that decrease systemic risk. now, some on the other side of the aisle inclement -- including the obama administration view dodd-frank like i view the ten commandments, demanding our complete devotion. with all respect to frank he did not think that it came down from on high. some parts of dodd-frank can be fixed, especially those relating to community banks, credit unions, and the mortgage industry. after all, the franc has had a disproportionately negative impact on those institutions. these help people access the american dream by extending credit necessary to own homes, start a business, or to preserve a family farm that provide at least 48% of small-business loans and serve 1200 rural counties with otherwise limited

options and then based upon personal relationships and knowledge of the community not just statistical equations. unfortunately dodd-frank too often forces these institutions and to regulatory straitjackets -- jackets that designed for big banks. my constituents demand answers to this problem which is why i am grateful for this panel here today. with that in mind i want to address my first question to mr. mr. wilson and ask about how about frank is impacting your community bank bottom-line? i heard from many financial institutions about the high cost imposed are being faced by the industry. are you concerned these regulations could force your bank to limit the offering of certain financial products to consumers generally and low income consumer specifically and the impact of these regulations as well as subsequent enforcement on the availability and affordability of credit for small businesses and consumers.

>> congressman, our market is low to moderate income people. the community we serve is 65 percent hispanic. the withdrawal of s-offering home mortgages is not good. there are products that we have looked at and chosen not to offer at this time until we figure out the risk. we are little behind the curve on some of the new technologies. so that is the impact of the risks that we try to face each day. >> i want to get back to a few more questions, but i want to remind the committee where it is started from. want to go back to september 25th, 2003, at a hearing here chairman frank you said on record, i do not want fannie and freddie to be just another bank. if they were not going to do more than another bank -- i'm

sorry, if they were not going to do more than another bank would because they have so many advantages that we do not need them. therefore, i do not think i do not want the same kind of focus on safety and soundness that we have at occ end of t.s. i want to roll the dice a little bit more in this situation toward subsidized housing. ..

55% of bankers decreased their mortgage business or completely stop providing higher-priced mortgage loans due to the expense of complying with escrow expenses for higher-priced mortgages. wondering at her bank still does offer an issue mortgages and if so you decrease the number because of regulatory uncertainty? >> yes sir most all of our mortgages would have fallen into the higher-priced mortgage and we do not have the staff capabilities to escrow insurance and taxes. >> again in my last few seconds is thank you so much for being here. we do want to figure this out and ultimately i want to see community banks be revived in our communities again let that i yield back. >> the time of the gentleman has now expired. >> thank you mr. chair. somebody mentioned the incredible cost of dodd-frank to

the system but i just want to start with before dodd-frank in the summer of 2008 to january, february 2009 stock market lost 6000 points and $1.3 billion to $7.8 trillion. home bill used up by 25% across the country, trillions and trillions of dollars, millions of jobs lost. sense dodd-frank the stock market has increased 10,500 points. 10 million jobs have been gained and housing prices have rebounded. now whether there is a direct cost effect i don't know but certainly the economy has improved dramatically since before its passage. now mr. kubiak i'm going to ask a few things because i disagree with your premise that the primary goal of dodd-frank was too big to fail and having sat

on the frontlines of this thing i know we were dealing with credit rating agencies, derivatives, mortgage lenders with their no-docs note down mortgage servicing appraisals, foreclosures leveraged generally across the system disclosures and ponzi schemes hedge funds say on pay executives pumping up their stock prices when it wasn't deserved, credit cards transparency money markets, the security investor protection corporation whistleblowers securitization accounting standards and the cfpb. each of those was an important goal and is found in dodd-frank so you describe it as the primary goal. i disagree with you. that was in. we had a whole range of things we have to address. i want to enter into the record the article that mr. lynch was describing from "the wall street

journal" deleted -- dated july 21st and a bank of america executive said dodd-frank certainly catalyzed substantial amounts of simplification and we are moving well beyond that there are own initiatives. that was what we did. >> without objection. >> thank you sir. mr. frank i would like to now see if any of these things triggered thoughts on your behalf. >> let me tell you since i met with the chairman i am pleased back america recognizes the value of the bank. it wasn't because they were designated sifis. i recognize they believe that they brought stability not to every piece of it that brought stability and among other things that gave them some protection.

i asked him once why they hadn't put investment vehicles on the balance sheet and he said if i do it will be an advantage. we have call, and rules --- should be the main purpose. the main purpose of the bill was to not get to the point where it's too big to fail but not having the irresponsible turbot of practices that caused it. also the representative of pennsylvania had time to spend with us because the distortions of the history of fannie and freddie were pretty rigid. it was true in 2003 i did say we should roll the dice with regard to subsidize housing of which i meant specifically multifamily housing built with federal subsidies. in fact that is done well with fannie and freddie but it's also the case that was 2003. you referred mr. cheney said chairman frank stopped it. cheney aris had things --

problems with things happening in 2003 like things like weapons of mass distraction. it was entirely their decision not to pass any legislation regulating fannie and freddie. i was against it in 2003. by 2005 i switch my position. the gentleman from pennsylvania alluded to an increase in the affordable housing. when george bush pushed up over 50 and 2004 i objected and you can read in hank paulson's book paulson the secretary of the treasures wasn't until 2006 when we are on the verge of taking over and he talked to me and we got fannie and freddie legislation. the republican party was very consistent. from 95 to 2006 they did nothing legislatively about fannie and freddie. >> i would remind the chairman that mr. oxley the chairman said the white house gave him a one finger salute to.

>> in our four years we did put them into conservatorship and since then the republican party has once again taking control of the house and do nothing about fannie and freddie. >> it's not a one finger salute that the time of the gentleman has expired. the chair now recognizes dauman from kentucky mr. barro. >> i appreciate the opportunity to examine the dodd-frank on its fourth anniversary. chairman frank i appreciated your earlier testimony that your intention in crafting the provisions of the law were directed to encourage more risk retention. i have a bill h.r. 2673 and that bill is a portfolio lending bill that would encourage more risk retention on the part of mortgage lenders, small banks like mr. wilson's bank and in fact not only was that bill marked up out of this committee several of my colleagues and the other side of the aisle including mr. perlmutter voted in favor of that. my question to you, would you

support such a proposal to give a safe harbor status to portfolio loans in which the mortgage originator retains there is? >> i would have to look at the specifics. he said it would encourage it. we have to give it to the senate and loosen the risk protection. i would like to have a portfolio allowed to be whatever -- to have stronger risk protection. >> i appreciate your general favorability towards that. mr. was my want to show the slide here. the ranking member literature the fact that you should have no problem originating mortgages now because you are $2 billion below in assets. this is a slide from the consumer financial protection bureau. the slide shows what is required in the chart in order to qualify

for the safe harbor protection. it's not just you have to be 2 billion or below. it slowed features and its balloon payment features and underwriting in points and fees and then there's the portfolio provision. does the slide explain why you another community banks have exited the mortgage loan business? >> the fact that it is so complex on its summary page is part of the problem. we did balloon mortgages and so i would have to go through this. >> let me just cut to the chase. if we had a bileca when i was referring to earlier word you could portfolio your mortgage and retain it in portfolio it would be reentered the mortgage lending business? >> yes sir i would love to be able to serve that. >> can i ask a question about your bill? >> i would love to talk after.

let's talk afterwards. real quick i want to go really quickly to another point and that is the dodd-frank was sold under the premise that if community banks played ball and had a seat at the table they would be protected from its new regulatory regime in particular jurisdiction under the cfpb. and they -- in fact thanks to reporting in the "washington post" we know chairman frank had a strategy in selling dodd-frank and build a protected 20 banks because they would be exempt from supervision by the cfpb. in fact the reporting says that according to mr. frank and communicating with the community bankers said there's going to be a bill and this is mr. frank talking to community bankers according to the "washington post." you will either have to get on the bus or be run over by. don't expect you to support the consumer agency now the cfpb and publica what's it going to take to get you to natural and the

representative said well mr. chairman that's going to take a lot. we don't want to have examination forces from the bureau coming into the banks given all the other regulators that are banks. we only have 20 or 30 in these banks. they jockeyed back-and-forth settling on a standard and this is chairman frank and the community bankers. the cfpb is what they call within the supervision might extend only to banks whose assets received 10 billion according to the "washington post" again chairman frank said i'm not asking you to come out and support this but if you stay silent the community banker lobbyist as i can make that work. i reached across the desk and shook his hand. the "washington post" reported that this deal was one of the most important and what would become known as dodd-frank. mr. wilson given that recounting of a critical deal made to get dodd-frank to the finish line and given the regulatory maze that you have to go through in

order to avoid these regulatory burdens do you believe chairman frank lived up to his end of the bargain in terms of exempting small community banks from a regulatory burdens? >> way or subject to those regulations. we are not subject to examination by another agency but when they make changes to their regulations it changes my whole processes and the changes my training of my staff and so it's very complex. >> the time of the gentleman has expired. the chair now recognizes the chairman for minnesota mr. allison. >> thank you mr. chairman and ranking member. chairman frank out of all the things in the dodd-frank bill is that one piece of the legislation that you are particularly pleased that we were able to get through? >> may have began by responding

to that rogers -- outrageous suggestion. they would not be supervised. there was never any suggestion that they would be exempt from the rules and your question i would say to mr. barr that i've lived up to my deal? >> intersected and mr. fine with him i made the deal would affirm that so no i don't think you and i would be talking about your bill. i wouldn't have my motive properly implant in suggesting i was not good am i word when there's absolutely no basis for it. as far as the bill is concerned to me the most important piece and one of the things i now worry about which is risk retention in mortgage lending. i really play the single biggest -- and innovation and it wasn't regulated because it was new. you had regulation of mortgage lending pretty good up to the 80s because most mortgages were made by banks and by regulators. even if we don't have qm, the fdic will still regulate the

loans that mr. wilson's bank gives and i'm satisfied with that. there's a general need to be feasible but what happened was thanks to money coming in from outside the banking system and the banks were fairly maligned including small banks must the bad stuff happened outside of the banks because all of a sudden money became available. there was liquidity available for depositors. when he went to depositors you got regulated that there was the liquidity from oil companies -- countries and large balances of payment soul whole lot of landing shifted to outside of the banks. at the same time thanks to intellectual property innovation it was now possible to make thousands of loans until them into security and sell them. the ability to take the risk without the taking responsibility for it proliferated and i believe that was the root of the problem the ability to make those loans and i think the federal government force people to make them.

some of the agencies facilitated like fannie and freddie people did it because they could make money and they could make money in a way, i think as far as they were concerned their rich disappear. they just wanted to other places and the people who bought securities. and so that's why i am troubled by a suggestion that there won't be risk retention. the tougher on bones held a portfolio software and loans that will be securitized. that is why you need the flipside to the same claim. i would like them to be softer and easier and is a common theme you are different to the business judgment of the lender or the securitized her. that is numbers to often make loans and if people want to to

stay standby that on the other hand if i want to securitized those loans let me do that as long as they stand behind them with risk retention so that was the single biggest issue it seems to me and i'm a little nervous about what's happening to it. >> mr. wilson do you want to respond? >> i just wanted to plead with former chairman frank to support community banks as in house rule 2673 not to say you won't support that because of something that was said here but to support community banks in the exemption from those mortgages would hold in our portfolio and from escrow requirements to support that concept. >> it will certainly in work for that end and i can negotiate with someone. >> i do have one quick question i want to ask before loose my time. when the things that has happened here is not just the bills that i believe it rode dodd-frank that the lack of

funding for critical agencies that supposed to carry out like a ccn cftc. do you have anything to say about that? >> yes, i'm proud of the fact that we insulated the consumer financial protection bureau from that strangulation by nonappropriation that happened to the cftc. again ms. moore ran out of time, i think they're republicans chairman said this is bad as the health care bill but the reaction of the republican party to the spill has been very different. there has been no bill to my knowledge to repeal the whole of the federal reform bill or a substantial part of it. there are things that the margin some of which i think are good and some that aren't. they do it by funding. >> the time of the gentleman has expired in the chair recognizes the gentleman from north carolina to strip it and share. would you yield a brief moment

to the chairman please? i think it was leo derosier who said you have third base is so screwed up nobody can play it. we will take a little time is committing get right. again we have dealt with dodd-frank's biggest sin of omission and we will send deal with too big to fail and i look forward to having former chairman frank. >> binky mr. chairman and thank you for your testimony. mr. wilson i will say that i certainly empathize with a lot you said today. i served on the board for a decade and in charlotte where i live we have had a number of consolidations. banks such as could not address the continued requirements and obligations costs and compliance issues that is then bad for consumers and bad for the banking system.

mr. carfang i would like to take a look at some of your remarks and get a little bit more insight into what you have provided today. you mentioned the that banks are focusing on the safe segments. those outside the regulatory costs. could you elaborate on that? >> share. banks are afraid of making mistakes in this compartment and so they are looking for the customers. >> mr. carfang can you bring the microphone closer to you please? >> banks are looking for customers to provide stable deposits. overseas companies are finding themselves at a disadvantage to take their deposits. banks are now responsible in addition to know your customer they are now responsible to know your customer's customer and that extension is getting a lot of banks out of the correspondent banking business

some major banks are no longer banking banks like mr. wilson's bank and he then doesn't have access to upstream services to provide to its customers. a simple example electronic benefit cards for welfare payments are very effective and safe and secure in providing benefits get under the know your customer rule as it's being interpreted banks are responsible to do all of the due diligence on the holders of their card which is obviously a possibility and banks are exiting that business. we have retailers exiting the courtesy check cashing business because of fears about anti-money laundering. check cashing in a grocery store or pharmacy. these are some consequences, not necessarily that they have been regulated or illegal that they are falling into a gray area because of some of just the

vocabulary in the rules that continues to be written. >> thank you. other outcomes you mentioned were deposits were being discouraged because of higher fees and lower interest and there was a restriction of credit all but the most well-documented borrowers. can you give us some more follow-up on that as well? >> share. because banks now have to limit the size of their balance sheets some to standard the 50 billion-dollar limit and others were other regulatory reasons, credit in effect has to be rationed. and because banks are afraid of making a bad loan a lot of the judgment has come out of this so we are down to checklist. so do you have all of your w-2s lined up and can you show your brokerage statement for your deposit pay for your mortgage and things like that. all those added costs and complexity and frankly caused banks larger than wilson's banks

to simply scale back to certainly the most creditworthy are well-documented borrowers. >> thank you very much. another implication, you said due to extended her interpretations of the know your customer rule to include your customer's customer exiting -- banks are exiting benefit card segments. these concerns are also resulting in the scaling back of correspondent banking services with within community banks. >> yes and i would like to address the issue of the systemic important designation and the lack of screening about that. in fact the benefit of being designated sifi is lower deposit costs so banks would not be screaming bloody murder about sifi but the nonbanks the insurance companies and the asset managers who don't gather deposits are in fact screaming

bloody murder because the benefit is going not to them at all. >> thank you sir. i yield back. >> the chair recognizes gentleman from connecticut mr. himes. >> thank you chairman i want to thank you for the focus on the question too big to fail. know you we disagree on the relative merits of dodd dodd-frank. i'm a believer that the creation of the cfpb in the fact that american families will be protected from some of the more predatory talks of products at the set them as a step forward and i also think the regulation of the notional value trillions of dollars targeted market is a real victory. but none of us really know mr. chairman the answer to the question of whether we ended too big to fail. none of us really know if there is a funding advantage for those large institutions. i've looked carefully at the statistical analysis offered by mr. kubiak. the statistical significance of this analysis is pretty small

and also mr. kubiak understands the difference between correlation and causality. there are a lot of things that impact the funding costs of banking including the fact that they are in a diversity of businesses. a large bank looks almost nothing like mr. wilson's bank nonetheless nobody really knows whether whether we have ended too big to fail. mr. frank made the point that reasserting glass-steagall probably wouldn't do it. one thing that is for sure is we took a whack at it and title i entitled to. we are not going to know that frankly until his systemic way important issue is on the rose. she lived there who i trust on these batters so she thinks that institution can be resolved if we are not going to know until we see one of these institutions hit the skids so i guess what i really want to do is continue this line of analysis and ask mr. frank and mr. carfang if i had more time i will open it up

but what i'm interested in is we have established tools for regulators to both monitor aggressive tools to change the nature of the businesses of systemically important institutions and a whole set of procedures to resolve those institutions in the case of them running into trouble. that may or may not be adequate. anyone who says they know the answer to that is nothing on the so my question is and i will start with chairman frank and go to mr. carfang, what more could we and should we do to make sure we never see that. >> one of the things we should do is this. the fed chairman said what he thinks happened is that we have another crisis congress who voted to give the money. if that's the theory that then nobody can do anything any bill that is fond of a future congress. my own view is nothing could be

more unlikely and that's the point i would like to start with mr. himes. people say oh it will work if we have a crisis there will be a bailout. i want to know how they think that's going to happen? will the federal reserve ignore the rule pics of the secretary of the treasury violate federal law and give them money? the political pressure would all be peeled away so my view of the best thing we can do one thing is there's a self-fulfilling prophecy. people say the big banks are too big to fail than all these benefits because people believe that they will be bailed out. while they benefit from people saying that. people have a right to say what they want but that is a think in an accurate self-fulfilling prophecy about what will happen. i don't see for -- for see a situation where there will be political pressure and federal government to ignore the law that says you don't get the money and allow them to keep acting. the only other thing you can do

and his question was right we want to keep them from failing. we tried everything we could. the other thing we could do would be to mandate smaller banks but again lehman brothers precipitated a crisis and i don't know what it would take to get everybody 1 dollar smaller than women. >> thank you mr. chairman. >> there's no clear definition of systemically important and if we knew what we were trying to regulate in order to strengthen the economy we would be much better able to do that. the u.s.'s largest economy in the world. no u.s. bank bank branch in the top five largest banks in the world, only three in the top 20. systemically important it is really a function of interconnectedness complexity and things of that nature. i agree with representative frank that some absolute size for a trillion dollars on your own balance sheet yes but if you

are an asset manager or an insurance company where you are not even holding the cash but simply a custodian for other people's cash that is absolutely not only new to chris but chilling because it tells everyone else to behave because you might be designated systemically important and if you are not a deposit taker and take advantage of that subsidy by being designated as systemically important you know you are in a serious competitive disadvantage. >> the chair recognizes the gentleman from delaware mr. carney. >> i want to thank the chairman and ranking member holding the hearing today and all the panelists were bringing your expertise and opinions particularly former chairman frank for notwithstanding the fact that you don't miss us here that you are coming back and we certainly miss you. you were very helpful to me as a junior and freshman member in the last congress and now i feel like you are looking at my

shoulder -- over my shoulder ready to slap me on the side of the head listening to what i'm saying. recently my father passed away in recalling the things he did for me and my family, i recall that he one i got my first home signed the loan, the mortgage for my brother and me. it was a 30-year fixed mortgage because that was the only way that he and i could afford the monthly payments and i know mr. wilson that a lot of first-time homebuyers and people with modest means use the 30-year fixed mortgage to get that first home to be able to build equity. you mention your bank doesn't knew do many of those that you are here on behalf of the texas bankers association. i read through your testimony and a lot of concern about housing finance reform. former chairman frank on a regular basis in my first term

would talk about the unfinished business of gse reform. i've been fortunate enough to merit work with mr. himes and mr. delaney on a bill that we think addresses a lot of the concerns and would preserve the 30-year fixed mortgage h.r. 50/50 five. in the texas bankers on the web site they mentioned reform as a priority and one of the concerns they have is that the compensation paid to the gse's previously announced for what amounts to a full government backing is simply not price correctly and it becomes a barrier of entry for private capital. our bill would do that. we believe it would price that risk appropriately and give us some explicit government guarantee the same terms as the private capital. are the texas bankers concerned about the availability of the

effects of the proposals to reform gses? >> a 30-year fixed-rate is a viable, it's not a product i have offered although i would offer a 20 year amateurization with the five-year plan that yes the access to credit is important to texas bankers. >> that's the primary goal of our piece of legislation to preserve that enjoyment of affordability and we thank that chairman frank you have set a number of times this morning you are concerned about securitization and not being a significant problem. what are your concerns going forward as we look at reform? >> i think it's time to get rid of fannie mae and freddie mac and we would put them into the severe constraints and stop the bleeding and begin to make some money. here is the question. do we want to pursue the option of a 30-year fixed-rate and i am

convinced in talking with banking industry and the real estate and homebuilding association that is not sustainable because no one is going to land or few people are going to make a 30-year fixed-rate loan with no protection against interest rate. there needs to be some protection risk against interest rate risk. >> by the way that's in the testimony of all the people. >> your approach senator crapo senator warner, crapo and johnson and i think frankly that's where we are and the chairman said chairman hensarling we are going to do fannie and freddie but the fact is the bill hasn't gone to the floor. i understand it was the chairman's job to get it through. i know what those are like but we have three or four weeks le left. i think it's pretty pretty clear that bill clinton passed the house because it represents a

viewpoint that is a valid intellectual viewpoint by the minority and more people agree with you mr. delaney mr. carney that you need to have some involvement to protect people against the credit risk on a 30-year fixed-rate mortgage. our prediction is that republicans are going to complete their fourth year in a row of controlling the house and having passed the legislation on the gses i wish that weren't the case. >> my time is up running out but i'd be interested in the panelists view on the various bills before this committee. we have a lot of discussion today about differentiating banks and the chairman has come up with some thoughts. i would like to explore that with several of you. thank you very much mr. chairman. >> the chair wishes to make an announcement that it's the chair's intention to recognize the members that are currently in around. those who may be monitoring this inner offices, tough luck. this has the blessing of the

ranking member. >> and of the former chairman. >> well. always like to have the gentleman's opinion. the chair recognizes gentleman from new mexico mr. pearce. would you deal to the chair for a few moments? i thank the gentleman for yielding. apparently the democratically-controlled senate may be having a little problem with their gse bill and we have a disengaged president on the subject as well. i look forward to him changing his mind perhaps in the last two years of his administration and i thank the gentleman for yielding. >> thank you mr. chairman and at this time i would appreciate if we would post the chart that everyone has in front of them. mr. wilson your testimony outlined most closely with the people in my district because we have a very rural district and a lot of small community banks and they are telling a similar stories. we were told that dodd-frank was

only for the big banks. in other words if there was a bifurcation that would cause thanks to have to go through everything. it's my understanding that you would have to go through it each step of this chart. first of all you have to fit the small creditor qualifications and then look at the load features in the balloon payment features, the underwriting features the points and fees portfolio and the type of compliance presumption on a higher price loan. is that pretty well the regulatory process that you would have to go through to originate a lone? >> yes sir. >> you have 17 employees at the bank. how many employees would it take for you to accomplish all of this don't go over 100. i understand you would not be able to accomplish it with a number of people you have right

now. >> yes, sir. >> so we are led to believe that there are two different kinds of regulators that are going to come in and if you are pickens attention they use one set of values. are you finding that they comment or do they use the same set of values all the way down to the small guys? >> the regulations apply to us and we have always been regulated by the fdic. they and their texas department of banking have done a really good job of regulating us. the problems that are being addressed in dodd-frank a lot of those occurred by nonregulated people in the cfpb i would argue ought to be regulating those folks and leave us with the guys that have always regulated. >> the problems did not originate on main street that we transferred the punishment down to main street and actually left out fannie and freddie to the bigger offenders left him completely out and wall street

itself has more capabilities to perform the regulatory tasks than it does the small banks. that is the reason. you said you lost 80 banks out of the state of texas? that's an amazing number. you consider, let's say in your small town of san diego texas that all along the spectrum there are people with better means than people with lesser means. which group is going to be the most punished by shutting down local community banks? do the people on the low income ladder in san diego understand where as they can go for a long? do they have the wherewithal to go to dallas or houston or new mexico or somewhere like that? >> no sir but their payday lenders there in san diego. but for the smaller. >> what we are going to do is leave a vacuum than people who are not monitored who are not

regulated are going to show up and fill that vacuum. is that the way you agree that? >> unfortunately. >> you said you don't give mortgages because of a high-risk. what risks do you find involving giving mortgage loans? >> the compliance risk and being told what kind of mortgages i can make and then going through and trying to do the qualified mortgage. >> the whole list of things. >> having to escrow tasks -- taxes and insurance. we just aren't tasks for that and never have and are 35 years. >> it will make it harder for people on the lower income spectrum to get loans for houses or trailer houses. you ever find in a competition coming in from wall street for houses in your district? >> no, sir. >> will basically what we are telling rural america if you live in rural you will be up a

creek but we will leave it to that one. mr. chairman i will yield back the balance of my time and we appreciate mr. wilson you are providing service for the low income of the united states. >> the chair recognizes gentlelady from alabama. >> i want to thank in ranking member wonders for bringing this panel and our guests who are here today. i wanted to continue a line of questioning that congressman carney started with respect to sifi the designation for sifis and i wanted to know chairman frank is there some magic to the 50 million or billion number or would you, there are lots of bills that are floating around including one that i signed onto with mr. luke to meyer.

it suggests maybe 100 million, i'm sorry 100 billion capitalization size wise would be preferable and i wanted to know your thoughts. >> i said before you are able to get here i do agree and i was at the meeting at the chicago federal conference when the governor talked about doing th that. i think that's a very good set of ideas and yes i think i should be revisited. i think you find some absolute number and you look at some other factors. you don't want too much uncertainty and what's mr. carfang was talking about but is it a magic number? is 21 the magic number for voting? uis have to pick a number and i will always be somewhat arbitrary. i think we should look at that

$50 billion again although the problem is lehman brothers started the last phase so mr. carfang raised a good question what are we talking about when we say systemically important. it's the degree to which you can't pay your debts that will reverberate throughout the economy and that's a focus of the analysis. >> can you elaborate a little bit? i was here when you were talking about nonbanks being sort of caught in that definition of sifis. your thoughts about asset management companies. >> i sent a comment saying as a general principle i don't think asset managers or insurance companies that just sell insurance as traditionally defined -- to find her system at the important. they don't have the leverage.

ait which is an insurance company that was so good they made more with money literally than they knew what to do with. with aig the federal reserve the bank came to us in september 2008 and said i've just given 85,000,000,002 aig. we couldn't do that again because they weren't solvent and you could not have done that under our current bill for a week later they were telling us we needed so much for tarp and another 85 billion for aig. we said you are he told us that. they said that's an additional 85 billion for aig. they have no idea how much they owed but that's my view on the asset managers insurance. as a general rule no, but there might be activities they engage in that say yes. >> what would you say to the line of conversation and mr. wilson just had with my colleague about rural america not being able to benefit from

dodd-frank? >> what i would say and i will say again i would see a sharp distinction. i would like the main safeguard against bad loans to be risk protection because that leaves the decision in the hands of whoever is making that loan securitized. i would give more leeway for portfolio loans. if you say portfolio loans are subject to some of these rules banks are still going to go's to the primary regulator but if we get loans and portfolio that would be fine. we have a fannie and freddie faith and making the loans to the portfolio you don't have them securitized. the 2005 was convinced that we had to pass legislation to change it. >> the reason i ask is i represent a large swath of rural alabama and i wanted to thank you for your leadership when you're a chairman on manufactured housing is an option for maintaining affordable housing.

i yield back the rest of my time. >> the gentlelady yields back and the chair recognizes the gentleman from georgia mr. westmoreland. >> thank you mr. chairman. dr. kubiak we have heard from financial regulatory agencies that their own cost-benefit analysis as they implement dodd-frank. we have been on the frontlines of this effort because you lead the fdic's office of financial research under chairperson bair. do you feel fdic and domestic and global regulators have objectively -- he reforms and they implement? >> absolutely not. the fdic to the best of my knowledge, and i was polite officer for all economists, never did any cost-benefit

analysis for any rule internally and they were scared to death that it would become a requirement. the federal reserve on basel i never saw any cost-benefit analysis. it came out of the federal reserve nor did i see that came any hour of -- and he became out of the occ. i was the chairman of the basel research task force for the last three years. when the basel put out its cost-benefit analysis on the effect of adopting basel iii. i was on the group that was going to write the paper. the paper assignment came from the chairman of the basel committee right before the icelandic volcano erupted in march of that year in the meeting was canceled. there was no meeting of the group never held through deterrence pay per ride my e-mail box in june. i was not involved in any analysis. i don't know where the analysis came from. i provide a comments which were

critical in the analysis not knowing where it came from and knowing very many holes in the analysis. the comments were ignored and a final draft came to my mailbox to sign off on because they wanted my name on the paper because i have some academic standing as a banking economist and i was chairman of the basel research task force. i refuse to put my name on the paper because i did not know where the analysis came from. it was not supported and it was built off of six or seven different modeling approaches coupled together all over the world with no data or analysis provided by anyone in the group and in fact i declined to put my name on the paper. this subsequently caused me significant difficulties in the fdic. >> dr. kubiak let me ask you who stop you from doing this analysis?

>> there was never meeting to plan how they would even be an analysis of how the basel implementation of basel iii should even be measured. a paper fully drafted appeared in my mailbox for me essentially to agree to. >> would you say that they were trying to inflate the benefits or underestimate the cost? >> absolutely and i can give you specific examples of that. my comments are exactly to that effect. it's interesting that subsequently in the fall when there was a negotiation among the basel committee membership to try to get to figure out where the capital ratio should be chairman bear was trying to get the ratio higher. the fed wanted a lower lenient ratio and chairman baer referred to this basel study as evidence

that it didn't hurt things to raise the ratio. governor trujillo called chairman baer that my critique of the paper asking her how she could use that discussion to strong arm for higher capital when her own banking economist was on the committee signing on to the results. >> thank you very much and i want to read something into the record. the american action form places the price tag for compliance of the dodd-frank act at $21.8 billion and 60.7 million paperwork burden hours the equivalent of 30,000 employees working full time to complete annual paperwork. these burdens are up from 15.4 and $58.3 million last year.

that's an increase of 41% of the cost. and for% increase for the paperwork hours. the federal, the bureau of labor statistics and occupational outlook handbook said employment of financial examiners is projected to grow 27% from 2010 to 2020, faster than the average for all occupations. now it's hard to say that this did not create any burden on our financial. >> the time of the gentleman is expired in the chair recognizes the gentleman from indiana mr. stutzman. >> thank you mr. chairman and thank you to the witnesses for being here today and for sharing with this committee. i would like to first of all say mr. chairman that i know for the hoosiers back home that are having to deal with the rules from dodd-frank and the new

standards that they have to be held to is definitely a burden to them in ways that they have never seen before in mr. chairman i'm sure you remember the young man who was here a couple of months ago that the gentleman from kentucky's mr. barr had invited who was a fifth-generation banker. he shared with this committee how a small bank in central kentucky fifth-generation, he was a fifth-generation, had survived the civil war and survived world war i and world war ii, survived the depression, wars in between, recession but didn't know that this bank would survive dodd-frank. i think that sums it up in a lot of ways in what small banks, community banks, midsize banks are dealing with today and we

are seeing a consolidation in a way that i don't believe should have ever been the intention of money policy passed here in washington. and i know as we look, i heard from others on the other side of the aisle about how washington saved our economy from going over the brink and i will tell you there are a lot of folks in northeastern indiana who felt like they did go over the brink and they still haven't recovered. and the fact that food stamps are at an all-time high today should reflect on the policies that this administration and congress in 2009, 2010 past part-time labor is an all time high. what dodd-frank has done to not only rural america but to urban

america, suburban america has tied the hands remarkably in ways that many people don't even understand. they just know that things are not getting better and when they go to their bank and la grange indiana and all of a sudden they can't get along when before they were able to, paid their bills, always made sure their credit was solid, they are trying to figure out what has happened. and i would like to touch a little bit on the folder rule and what does that do? how do i explain to people back home the effects of the volcker rule and mr. carfang there were study done by oliver weinman this is the impact of the volcker rule will be similar to the financial crisis which disrupted the quiddity and

credit availability. can you describe how the volcker rule, what impact it will have fun the quiddity availability? will be a positive or negative effect? >> the volcker rule will reduce the amount of proprietary training so that the depositors are protected. what you have then is less liquid markets so there is less trading and securities. there will be a wider assets spread so when you go to sell there are fewer buyers. when you go to buy there are fewer sellers and you buy at a higher price. this would be in indiana and the same is true in farming. if there's not a big market in the product. >> to follow up the volcker rule will take effect the same time

the basel iii takes place. what will be the combined impact? can you talk about that a little bit on interest rates? what other effects could we see? >> i have testified to this committee on the topic. we are doing it chemical experiment where we are putting in bain capital and the bull for rule and a number of other things and frankly we don't know what the outcome will be. except that it's a deer in in te headlights on the part of the treasury and small and midsize bankers. >> the time of the gentleman has expired. then the last member to be recognized as the german from ohio mr. stivers and he is recognized now. >> i want to thank the chairman for holding this hearing. i want to thank all the witnesses for bearing with us for what is a long hearing. the first question i have this myth for mr. deas. before i give you a question i want to thank glenn moore for

her leadership. she and i have worked together to try to get that issue fixed. can you tell me what will happen if we don't actually get that bill fix today. [inaudible question] no there are no action letters. there have been some regulatory relief but what happens if we don't actually get that past for end-users like you? >> it will increase, so it increases the uncertainty of the end-user margin exemption to the extent that those transactions would be ineligible for the exemption. the post cash margin would subtract from money we would otherwise invest in our business. >> would you continue to manage your risk in a centralized way that smarter and allows you to offset the risks or would you move to a less active form of

risk management? >> we would have to do that in a different way with uncertain cost or retain the risk ourselves. either way would likely cause an increase in costs. >> and the risk for your business. the next question i have for mr. kubiak. i think it's really important to hit it again. the dodd-frank set the asset level of systemically import institutions at $50 billion. do you know if there's any relevance to the selection of this arbitrary number? is a cross referenced anywhere else? >> there's no scientific basis for 50 billion. >> i think congressman luetkemeyer did a fantastic job about talking about the two banks that are perching $15 billion in what's happened to their stock price and just as

a result of potentially moving closer to that number and even governor trujillo i know ms. sue know ms. sewell references have said 100 billion number would be acceptable to him but isn't there now and acceptance that $50 billion is absolutely too low among almost everybody that's out there? >> 50 billion i think is too low for all the intrusive regulations that come along with it. my recollection and it could be a bit fuzzy is that the 50 billion came out because of the times cit which was a nonbank financial institution decided not to bail out and it was slightly below 50 billion. my recollection is that thai people's hands at the time. they said let's call it 50. i think it's reasonable to think regional banks if you fix the resolution mechanism so they didn't cause bigger banks if they failed you could exclude

regional banks and ones that do primarily commercial banking ours biggest 200 billion right now. i've personally knowing a fair bit about banks wouldn't be shy at all in pushing for some number like that. if it was a regional regular run-of-the-mill commercial bank with not a lot of capital markets i don't think that would be unusual at all. we need to fix the resolution process so that they do get in trouble they failed and they have broken apart and that has to be fixed. >> that was clear in your comments earlier in the original testimony so i appreciate that testimony. essentially every witness here today even chairman frank has agreed to $50 billion is too low of a number and by the way congratulations mr. chairman. it's coming along fine. >> it is grown more than i hoped it would. >> and i know that my other question to all of you is and i

think chairman frank acknowledged earlier while we have to pick some number that's absolutely true but it is the risk that the activities that these institutions engage in that create risks not necessarily the asset size that makes that happen but i understand there has to be some number. does everybody agree that it's really activity that generates risk? ..

for the witnesses to the chair which will be forwarded to the witnesses for their response. without objection all witnesses will have five additional days. the hearing stand adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] to th

megato to discuss the situation in iraq. since they attacked mosul seven weeks ago, let me first review the bidding on why this matters as this committee well knows. isil is al qaeda. it may have changed its name, but tz al qaeda in its doctrine, ambition and increasingly in its threat to u.s. interests. it is worse than al qaeda. should there be in question o about the intense, read what their leader says. it's important to pay attention who to what he says because we can't risk underestimating the reach of this organization.

baghdad in may 2011 the death of osama bin laden and promise to violent response. training camps are named after osama bin laden. in his audio statements, he issues threats against the united states promising a direct confrontation and in his feud, he clearly is seeking to lead the global jihad. they are no longer just a terrorist organization. it's a full blown army seeking to establish a self-governing state through the