minutes. >> dot committee will come to order. today we will hear from the comptroller of the coming seasons being sworn in last november, he's been focused on rightsizing regulations and furthering the mission. recently along with four other right leaders issued a proposal to make provisions to the volcker rule and be issued a short-ter charter.

i look forward to hearing about these initiatives today. in addition they will need to implement a number of provisions to the bipartisan economic growth legislation president trump signed into law growth i k

forward to build on this momentum moving forward. >> thank you for joining us today. israte lending.

and other plans that deeply concerned members of this committee. i think on both sides of th the

aisle deeply concerns the committee for the the risky

practices the controller is considering. i look forward to hearing your t we intend to keep the hearing agencies include in and out as

the alternate in a safe and

sound manner and operate effectively and efficiently. today i want to discuss the importance of the quality of the work accomplished since becoming the comptroller i've been struck by the professionalism and the , federal savings associations and branches in the foreign bank while the vast majority are community banks the system also includes the largest globally active banks in the country. successful supervision requires examiners supported by economists come information technology specialists, experts and others but the majority have a relationship with one of the banks we supervise. it is due in large part to the supervision of the provision.

it is dedicated to the supervision and distracted by multiple mandates we need a laser focumade alaser focus on y unsoundness and compliance and the agency takes a risk based approach to supervise tailoring its oversight to the risk and business models of each bank and at the same time it bought national perspective provides value in identifying the risk and concerns that similar banks with a broad system risk based approach allows us to adapt to the ever-changing environment and prioritized the resources on the risk with the greatest potential to disrupt the industry and harm its customers. our approach may need over riskless attention compared with more immediate concerns, but also the ability to adapt quickly. with such singular focus for the

supervision following the crisis of 2008, the countries banking system was more than the rest of the world because the bankers together recognize losses and work to the troubled assets more quickly than the international counterparts. baby s. faster by allowing the lab. we are in the second-longest period of expansion in history and banks have been part of the success. the capital and liquidity, credit and asset quality and risk management is better than any other time in my career. this is a testament to the supervision and sound bank management helps realize the potential of being agents of job growth and economic opportunity. i would congratulate the chairman of this committee on passing the economic growth regulatory relief and consumer protection act commonsense

bipartisan reforms to eliminate the unnecessary burdens to continue to safeguard the core elements of safety and soundness of the system. i'm committed to implement the changes and i will work with my federal regulators on the basis where appropriate. where existing rules may conflict with the economic blowback and the statute provides for the law requires agency rulemaking for implementation, they plan to supervise institutions with the intent of the law including with respect to the amendments to the stress testing requirements and will not enforce that on the bill to eliminate. i rely heavily on the council of the examiners to identify issues and address them effectively before the concerns became serious problems. i thought they understood what

we were trying to achieve and how we work to meet the financial needs of our customers. you can sleep better knowing that they are on the job and in closing i want to congratulate you and your leadership on the committee and thank you for allowing me to share my perspective. i look forward to your questions. >> thank you and i appreciate your kind remarks. my first question is going to be on your horizontal review. for the sales practices at large and midsize banks with significant retail customer sales activities. can you tell me about the findings and wha what he found d learned in this review? >> in 2016, they started what we call a horizontal review and its frequent weevil duties among the

agencies when we see particular risks that can be contained throughout the industry. we concluded that in the fourth quarter of 2017. it was the primary focus of the agency over an 18 month period. more than 40 national banks were involved in that and we looked at the new account openings without customer consent which included mortgages, auto, credit cards, checking accounts, savings accounts, money market accounts and then any products that would be joined that might include ove overdraft protectio. they included a look back over a three-year period that included hundreds and hundreds of millions of new accounts. we send the final letters to the ceos on june 4 and we did follow up to the chairmen and ranking members of congress for the recapitalization is referenced. they did not find the stomach

issues with regards to the improper account of things but did find the need for banks to improve policies procedures and controls and i would say the key take away from this is that our focus on having institutions develop better controls and policies that we did not find the key issues that this was systemic across the industry. with this we issued over 250 mra and they've been closed to put that into context, we currently have 4,000 mra outstanding, so while substantial, it wasn't illustrative of being a large issue. ..

or could not be located out of around 300 million accounts that were reviewed. >> we actually think the new graders were between 50,600,000,000. >> okay so five to 600 million reviewed and around 20,000 that were identified and of those 20,000 is at the conclusion that all 20,000 of those were wrongly opened? >> slightly half of those were opened inappropriately and the other half were using documentation of the banks could not prove that they had opened the account. >> all right thank you and i appreciate the attention that has been given to this issue.

my last question will be related to the stress test preview references in your opening statement tradition of the stress test for financial companies with total assets between 10,000,000,050,000,000,000 in july. i encourage you in the other banking regulators to provide guidance to financial companies about how as 2155 will be implemented to make sure financial companies with less than $100 billion received the relief the bill intends immediately. can you commit to me that you will work quickly on implementing it generally to provide guidance on stress test for financial companies with total assets of less than $100 billion specifically? >> yes chairman crapo first of all thank you very much. we have made that statement to the financial division and we have made that statement publicly and in regard to the

overall implementation we have created a critical path document that i have in my possession were we apartness resources within the agency. we have identified items that can be done within the agency and the ones that required urgency and there is a process of discussing and creating teams to work on the interagency activity so we fully dedicate the necessary resources to achieve that objective. >> thank you. senator brown. >> thank you mr. chairman. you were asked if you believe discrimination exist and you said because you have never personally observed that you can't say that you have had friends from the inner-city tell you it exists and you believe them. when you're asked if you have ever read about discrimination you said that you did but the writers on the correct half the time and you said you don't read the newspapers. these are unbelievable statements for any adult in america especially one that took an oath of office like you did but let me ask a couple questions. this hiring to the old boys

networks network service ahead one for women and minorities ready greater through banking or government? >> my response that would be a wooden support those kinds of activities. i think there are employment laws that people adhere to them i'm not aware of any old boy network that i've associated within the banking industries i personally -- i would also say to answer your question if there was a network like that i wouldn't support that. >> you couldn't go on to "the news york times" and say this is the good old boys discriminating network but let me give an example. when u.n. secretary mnuchin and the rest can signed a consent order with regulators we know about all the foreclosures that your bank did signed a consent order over for disclosure of misconduct your nine-member board and i could read the names that i won't bother. they were all men.

i don't know if you set out to say them all my going to hire men but i've got to think the old voice network that you ended up being part of would have something good. it begs the question to me that you have never seen discrimination your mind but some friends from the inner-city told me there was discrimination so you believe them even though you only believe half of what you read in the newspaper and then you are saying you never saw the discrimination in hiring even though coincidently all nine of the people on your board were men. i don't know if they were all white men and i don't make assumptions that they were all men. does that not suggest to you that maybe there was an old boys network in hiring and maybe people that look like you and me and schatz and van hollen and to me and rounds that we might have an advantage in hiring because we know people that look like us and that's who usually get tired from banks?

did that ever occur to you? >> first of all i appreciate you do recognize that i signed a consent order after i joined the bank and i'm proud to say we diversify the board out under my leadership. i don't think it's stated in the format as you describe. >> i'm not saying you did it. i'm saying you don't seem to recognize the incrimination because you've never seen discrimination. >> what i said is if we undermine leadership we diversify the board so that would give you an indication of the actions i took. there tools training in laws in place to avoid discrimination. there's lots of evidence of inequity in the world that i would tell you just because i haven't personally experienced the that i'm not saying it's not -- . >> you have said you have never seen it. >> that's not true. it's part of an institution or bank over the course of my career there has been instances among employees.

there are investigations and correct div actions. i'm saying i personally never experienced it. >> i didn't say you personally haven't seen it. >> but let me correct the record. >> why should generally i read your testimony in the house but let me go into this. fundamentally why should the public trust you to overhaul the investment act a product of the civil rights movement meant to address generations of segregation and exclusion. if you don't seem -- you don't even seem certain discrimination exists. u.n. response congressman capuano and congressman cleveland you did never say yeah discrimination exists. you had to come to the conclusion it exists because the inner-city told should exist so why should we trust you the

public the congress and the civil rights community to address generations by overhauling the community reinvestment act the way should be overhauled? >> thank you very much for that question. if you look at my top three agendas two of those top three are redefining see are a an small ticket landing which goes right to the core of what you are describing, the people in america that need the most tow. i'm all about expanding sierra a small ticket landing when we took the bank out of that space that offers a fair alternative to people people ended up with check cashers payday lenders and liquor stores. that's the source where people can get quality lenders of two or three of my core agenda items is focused on the people you're describing. >> i hear you. if you can't just directly say in a congressional hearing discrimination exist we make this promise quick you are

arguing that you say yes he recognize it does exist. we'll promise to move forward on the sierra overhaul only if you have the full support of the civil rights community? overhaul can mean a lot of things. >> they will be at the table discussing it. >> some people are at the table and ignore it. there is not consensus in the civil rights community you will not move that direction on sierra a overhaul. >> will be at the table having discussions with all parties involved. tonight that's the most you're going to commit? >> i stand by my answer. >> okay. >> senator toomey. >> thank you mr. chairman. i can't help but observe there more than a handful of senate delegations from various states including ohio which consists exclusively of middle-aged white males and the voters of those

states are all part of the good old boys network. let me raise a question about a decision i'm sure you are aware of come the second circuit court of appeals ruled that non-bank when they purchase loans and debts that originated by a national bank will no longer be entitled to a federal preemption from the state usury laws. this is a big departure from the practice and the president that has prevailed under the principle. even the obama administration argued that decision was wrongly decided and the result of that of course is uncertainty on the part of a potential buyer of a bank uncertainty as to whether or not the usury laws will apply a dramatic reduction in credit axis to low-income people has already occurred quite predictably. if banks can be confident they can sell these loans they just are going to originate them in

the first place. a democratic member of the fcc found that our oars with credit scores under 625 saw a 52% reduction in credit after the madden decision. the second circuit based their decision in part on the notion that they elect the ability to sell these instruments to non-bank buyers. the inability to do so would not hinder bank operation so my question for you, troll or otting as is it your understanding the ability to buy and sell loans and originate as an important part of how it manages credit exposure of their business generally and it is good for consumers for banks to be able to sell these assets including non-bank entities? >> i do agree. i also do agree the madden ruling was inaccurate. i think national banks need the

ability to originate those credits for the national banking act and to banking act and to be able to distribute and sell those loans and create a marketplace for the originator. a lot of banks are adjusted in that product so it's a choice for consumers. >> are there steps taken at the occ to solve the problems created by this decision? >> i would have to -- i believe we filed a brief. we did file a brief in this matter. >> i would urge you to can pin you to pursue that if he can because it simply making credit less available especially to low-income borrowers. the second i wanted to make as you are aware regulators have used guidance issuance as a way to circumvent the administrative receipt or and impose imposed their will without going through the proper rulemaking. the cfpb did so in the case of

the indirect auto lending rule in congress repealed that when the gao constituted a rulemaking. they determined to leverage lending guidance constituted rulemaking. my question to you is and i would just like for the record for you to assure us that you do believe that a binding rule must go through the apa process, must go through the rulemaking process and guided by a regulator should not constitute a binding rule. >> i do agree that a rule should go to the binding process. i think there was one item that the occ could be accused of using that as a rule. we have done incredible amount of in-depth training and discussion within the agency with our examiners and in this particular guidance i have publicly said that on a number of occasions but i recognize that guidance is guidance and

rules are rules so it's a posture that is not within the agency. >> to be clear if you believe it's necessary to have a binding rule on leverage lending you would pursue that through the administrative procedures act? >> i would, correct. >> thank you mr. chairman. >> i just want to correct the record on the ohio delegation. on the democratic side verified members of the delegation to african-american women won the white and to african-american men. that's about the same as our delegation as a whole about the same size. senator schatz. >> thank you. in october the occ made a significant change in how occ evaluates bank's performance under the community reinvestment act on this change is significant. it's baffling, before the change of the banking agent

discriminatory lending practices that impacted that banksy are a rating. the cra was passed to stop discriminatory lending practices. the occ has said it should not impact the sierra a score at the discrimination is not related to the sierra a lending but a bank that discriminates and engages in illegal activities as long as it's landing outside of the sierra and lending could get an excellent sierra a rating. why? >> i think the issue in october was it was a two downgrade to a one downgrade. >> why? >> i was prior to my arrival in the agency. i'd be happy to look at that and follow up. >> you don't know why? >> it was prior to my arrival in

the agency. >> the cra was stopped -- used to stop redlining correct? at the bank is engaged in discriminatory lending the occ would want to make sure that stops. >> oh definitely. >> why would we ignore evidence of discriminatory lending practices when evaluating a banks cra performance? >> i don't think it would be ignored. if you understand what generally happens when we start to see are a. >> that may read from the document of this principle ensures the sierra a does not penalize for compliance deficiencies or illegal practices unrelated to the sierra a lending activities. >> i apologize, i don't have that data in front of me. i'd be happy to come back on one-on-one or have our staff disgusted. >> you don't know why this happened?

hold on a second. >> i haven't focused on that. >> not six years prior to your arrival. >> probably 60 days before my arrival. >> 60 days? we are here to talk about sierra a india don't know why this happened or to what happened? you said it was downgraded in terms of the score but does not discriminate for illegal practices related to the cra lending at zuccotti. the question becomes why would we do that if the sierra is established for the purpose of preventing discriminatory practices? >> senator schatz i'd be happy to get you that data. i focus more on how can we make sierra a more effective and how can we be more inclusive? >> now the. [inaudible] little bit about this what do you say? >> my personal viewpoint is that we should never allow any discrimination in any lending activity to occur.

>> will you commit to revisiting this decision? >> absolutely. >> will you provide a committee with the conference have been detailed summary of occ sales practice review? >> senator there's a long legislative regulatory history protecting confidential supervisory information. maintaining confidential supervisory information for supervision and the function of the national banking system. maintaining the privileged and confidential information also protects the agents prerogative to take action on that information. >> hold on a second. >> i wrote it in conjunction with my staff. >> at this point in time we are in the middle of supervisor action to release that information would be an upper brick? >> i guess the problem is one of the things we are hearing, wells fargo problem is much more widespread than we initially thought.

there is not compliance a wells fargo and i understand there was supervisory procedures that there is a tension here in terms of maintaining confidentiality and i respect that but there's a pretty significant issue that was if we find out what happened to wells fargo is widespread across the country and because of this objective you have to maintain confidentiality and discretion that american consumers are getting screwed and they don't get to find out about it until 18 months later for two years later. that's a problem so what are you going to do about that part? how are you going to address that tension? >> i assure you based on the data that i personally reviewed that your statement is not accurate. there were isolated cases of it so i can assure you the supervisory data -- .

>> you are able to talk a little bit about this data. if there's an indication that there is something more widespread will you provide that information to the committee? >> i would be happy to come back to the committee and have a discussion. >> should i take that as a yes? >> yes. >> senator rounds. >> thank you mr. chairman. comptroller otting thank you for being here and appreciate the chance to visit with you. earlier when senator brown you mentioned the availability or at least the need for the availability of short-term small dollar lending. millions of americans use small car loans to pay for expenses like car repairs and medical bills and it's pretty clear there's a significant demand for these products and having established institutions actually can provide the market

with alternatives to more competition than simply payday lending or in some cases they are going to a loan shark to get a loan. i'm just curious while the banks probably have some additional clarity can you talk a little bit about your thoughts on how to provide for that market for those small car loans and short-term time. >> senator rounds we issued a bulletin a few weeks ago to the financial national banks where we indicated to them that we encourage them to participate. there are two market segments that people can get confused by. there's a 45 day or less called payday lending that generally has one payment based upon an event occurring and then there is 46 days or more were generally there is a term associated with multiple payments usually.

what we addressed was that 45 days or longer. in 2013 banks basically exited that market and for the life of me i don't understand if you take a tank out of the space that we are creating it critical source of capitol it could end up being worse for consumers and they have less choice. one of my initiatives was to get back into that space and do it in a fair and economically viable way for consumers so they have an alternative. i have personally met with a large bank ceos to encourage them that we would be releasing a bulletin and many of the financial cetaceans are looking at them. takes a while to go through risk management review as they bring these products backup on line but i am confident they will enter this sector. we provide clarity for smaller banks that this is something that we want them to do. >> i think that's probably an unsung part of a major

improvement and opportunity for significant population across-the-board. let me ask about the upper midwest and south dakota weise suffer from commodity prices. we suffered at drought last year credit is critical in this ear once again we will have the same challenges. can you talk about what you are seeing in the observations and reports you have to add lending the challenges they are and what you see is perhaps your modifications and things we can do to perhaps improve our ability to land to the producers during these times? >> there are two things occurring in additional to national disasters. the others' expectations of softening of commodity prices and we get the double whammy of increasing rates. think our examiners were

spending a lot of time talking to the banks about plans for their customers. the volatility in the egg market we have a couple of rough years and followed by solid years that allows farmers to recapitalize. they are prepared to work with their clients. >> the point and i'm glad you make it these banks have to be able to work with their clients. they know them and they have had relationships for generations. because of audit procedures or inappropriate guidance these banks are pressured into not allowing them to do what they assess to make appropriate decisions about credit and what can be challenging cyclical times for egg producers. sounds like you are on board with that. let me ask one last thing on cyber issues. you feel comfortable with regard to the financial institutions

there is a broad understanding of the critical need to protect their assets that are related or direct way connected with cyber links? >> on an annual basis we go in and part of our annual examination would look at the security parameters. we look at the hardware and the software and we look at the patchwork and we make assessments for each individual bank. if we see it deficiencies with we will issue an mri for correction. the recovery platform and program looks like that i would say we are confident that the banks that. provide oversight to those by management however i would say the consumer today has become so reliant on their credit card and carry a lot less cash that would be the thing that would worry me if we were down for a couple of days people couldn't buy gas in the morning or get starbucks coffee stop a lunch or go to the

grocery store because we have become such a card-based industry. the inter-agencies with treasury on cyber related issues and we are meeting tomorrow to noun this topic. is receiving attention but as you know senator rounds we are trying to manage our way through this. >> thank you mr. chairman. thanks to charters from the government which entitled to special privileges in exchange the government expects them to meet the credit needs of the union to which they operate and that's the idea behind the community reinvestment act for the cra. the occ is responsible for parsing outlined you said you were supportive of the intent of the lot that you think it needs to be updated. i'm just wondering about what that means. last year jpmorgan chase admitted african-american and hispanic borrowers systematically got mortgages

with higher rates and fees than comparable white are worse than according to a new report african-americans make up 47.7% of the population of washington d.c.. they received only 2% of jpmorgan chase mortgage loans in the city in 2015 and 2016. are jpmorgan's practices consistent with the cra's intent that banks quote meet the credit needs of their communities? >> based upon their reading that they have in their sierra a from an overall organizational perspective they do. you are where they do not have ranches. they have a specific business line. i think the intent of jpmorgan's open up a retail banking franchise and that would aid some the issues you describe >> this so african-american and

hispanic got higher rates and that's okay? they were rated satisfactory or outstanding and every one of your publicly available sierra a evaluations. >> the issue you describe is an overall organization. >> you get a sense of that rating if you're engaging that type of behavior? and bera multitude of factors that go into that. >> a new report found that 54% of black families, 45% of latino families who try to get a mortgage from td banks are turned down. that's more than three times higher than the industry average our td banks lending practices consistent with the intent of the cra? >> i'm not familiar with td america reinvestment but i would say from old they are lending perspective the fact that you

are submitting would indicate they have their landing issues. >> yeah issues. turns out the regulators who report to you seem to think that it's all -- td bank has received a satisfactory or outstanding rating on every one of its publicly available the cra examinations in the past 20 years. let's take a look at one more bank. one westwood to know you are familiar with because you use to run it. community groups filed a fair housing complaint against one west and hud in 2016 citing widespread discrimination against asian black and latino mortgage applicants while latino borrowers took out 22.4% of mortgage loans in southern california only 8.4% of one west mortgages went to latinos. one west apparently avoided putting branches in minority communities and failed to

maintain to foreclose properties in minority neighborhoods. mr. otting do you think your former banks track record is consistent with the intent of the sierra? >> i do think we were consistent with the intent. i think you are looking at an incredibly small population that you'd base your statistical analysis on and it that was her viewpoint from the beginning. we were not in the mortgage business at the time. >> your bank has one out of 74 branches in southern california, just one in a minority majority neighborhood in the entire region. this is the fundamental question about the sierra a. to get that tank charter and return serving the community but evidently the community that one west wanted to serve was not the latino community the african-american come and tear the asian community. >> we did not open to one or two

branches we inherited every one of those branches from divisions. you are focusing on the lowest. if you look at the that low to moderate we did have more discretion in those markets. >> i'm just looking at the facts that are part of the public record here. >> these are the facts that are in the public record. you have one out of 74 branches. i'm running out of time here. what authors me is the fight avoid serving communities of color. one west has a look at cras so the problem i am facing here is you say the sierra a need to be up dated and i'm concerned the man who ran one west the man who says that banks are his customers, the banks not the american people and the man who said yesterday that he personally never do perceive

discrimination is not the right man to rewrite the community reinvestment act. the sierra a needs to be a lot tougher than it is today. the enforcement needs to be more rigorous. studies show all across this country black and latino borrowers get far less access to mortgage credit than comparable non-minority borrowers and yet 90% of banks today are passing their sierra a. if you weaken the sierra eight now you are only going to push even more struggling families across this country out of the plans. thank you mr. chairman. >> mr. otting didn't get an opportunity to respond so before i ask you some questions you have anything you'd like to add with respect to the prior discussion with senator warren? >> i would say i won't be making

this cre -- cra changes and i have been a big supporter of how we can drive further and deeper into the communities across america and i believe my track record stands with that. so if that was going to my be my nick swisher mini-get-together banks that need access to financing through lenders what does the world look like one year or two years from now if you are successful with making that up priority? >> i think with when you look at the cra today there are three things would like to solve. today we do not have a good economic measurement that we can compare across different financial institutions in different markets. one of the frameworks we have been talking about is using a balance sheet item. whether that's deposits or total capitol assets and the cra at two buddies to come up with the

percentage. second of all would like to expand who qualifies for cra. it's narrowed down to residential and multi-families and we think there many more. the third is reduced cra test every three years and six months to 24 months to turn those around. if he can turn those around much faster and i would say with some of the small lending things that we are proposing we want banks and those lending communities where senator rounds said we have the big void in inner-city america in offering credit. >> incidentally do you think the regulatory reform act that is now the law do you think that will play a role in terms of a burden on the smaller and community banks and get lending flowing as you are working? >> we definitely do.

community banks that have been so focused internally on regulation that will be freed to serve their customers. >> mr. otting when you were here for your confirmation hearing i asked you how many -- there were and i think we got it cleared up. there is only one. the reason i mention that is we still have, we are at least getting to a rational framework for regional banks and smaller community banks but we still have a lot of confusion about just who is regulating blood in the financial services industry. i think you in i may have a different opinion on the regulator for bulger. i think he is doing a good job in regulating and i'm trying to understand may be an issue that will be at odds with each other and trying to understand why you'd have a fundamental

disagreement with falkirk. >> first degree or -- we have a good relationship with randy. the other comment i would make us every week leaders meet. we have an open forum to talk about any outstanding issues so recently we have got strong momentum on our ability to work across agencies. volcker if you look at where the activity is it's probably 45% banks it in 55% of the holding company and its such a criminal element that our examiners are responsible for. >> speaking of the volcker rule and the proposed changes would you think those proposed changes are likely to do in terms of positive -- >> i think it will bring clarity for the banks and clarity for the examiners as we are trying to determine the proprietary training element.

i personally commend what legislators did in involving a $10 billion or less. it may not be the best solution but it's a solution we can all get behind. >> we are running tight on time so i'll just let you know i'm going to submit a couple of questions for the record. one has to do with a discussion on existing investment in venture capitol from the volcker rule. thank you very much for your time. >> senator jones. >> thank you for being here and i'm going to be short because i have to vote. the cra is one of the most important things you'll do for the folks in alabama so in a modern sierra a the action you take is extremely important. lending counts differently than

investment which counts differently from service. we need to encourage credit to more types of sierra eligible actions but a question to you what action should account differently for cra credit? what investment and service do you believe are more important than the cra requirement? >> major question where would we like to see that? senator jones most cra activity today single-family mortgages and multi-family and load them moderate income families. they can be sold amongst institutions so a new incremental dollar is created when a bank will get credit. i think we should bring a stop to that. i think there is a query of

seeing a small business with $1 billion in revenue would no longer qualify for cra credit. i'm a believer that a business has 1.5 million in revenue. we should give that cra credit. i'm also in favor of inner-city america. understand the difference between church and state but in most black and latino communities to churches where people go for financial counseling and job disciplines and help around training. today i think we need to do is isolate community centers associated with churches and give them credit. >> the banking industry has made great advances in reaching consumers outside of their physical branches of a deal made comments that seem to deemphasize the importance of branches. in alabama that's really important. we have so many communities that

rock band does not touch. i think a lot of banking is personal in this community. what is your view on the importance of branches and how assessment area should be calculated? >> i think assessment has constricted spare a. l.a. county was our assessment area but we were also in and an empire ventura riverside in orange county. the investment on the south side we didn't get credit and on the north side we did. you have to look at are we finding assessment areas too narrowly for people to invest in their areas? we need to make sure the institutions are serving their branches and they have the whole issue if you don't have ranches with should they be doing in

community development activity? >> well thank you. mr. chairman i want to yield the balance of my time. i will have questions for the record. >> thank you senator johnson. you said you want the occ to be more responsive and you said to our customers which are the banks how did the american people trust you to protect a financial crisis that cost them their jobs and their homes they retirement their neighborhoods? it you say your customer is the banks of you are there to serve the banks and protect them from another financial crisis. >> senator brown most of those comments were isolated to one i was talking about i want to partner with banks and get them deeper involved in communities across america. what i mean by that is low to moderate-income areas where they want them to be more active on

the lower economic scale. we can partner with the banks to help move in that space. we have well defined risk assessment categories that are set forth and we examine our banks these are done within the examination staff and i have no influence on it. you have to bifurcate between where we want to partner and what is our responsibility as an examiner? >> that's a good answer but in the context in a partnership with the bank as opposed to ed dictatorial perspective on the prior administration you compare decisions by currying to the wrath of khan. that suggests something different than your partnership. i guess i ask you this after the global economy crashed a decade ago and the bank's contribution to that crash they just had a

record year, 13% increase in profits in the decade mostly of for-profits every year doubled digit percentage profits and no growth in these years. it sounds to me like you think the banks had a pretty tough and it's mostly bug you regulation to them. cy first of all the comment had to do with the leveraged lending guidance which we were not supposed to be using guidance as a rule. what occurred there was we were implementing a rule and i want it to be very clear that guidance is not a rule as was referenced earlier in this conversation. regarding the point about deregulation of a bank i am comfortable with the framework of our regulation. i just think there are certain aspects we should look at that are better for consumers and it will be better for the banks and the economy. some of those -- i'm a big

believer people should not take money put in the system and take it out but today we are producing 10 billion pieces of paper that don't add value to the process. we can improve that and fix how to correct and find the bad guy that's the thing i want to focus on. >> the previous comptroller was less concerned. he was more concerned about fixing what led to the 2008 a collapse that he commissioned a study by experts and decided to remove bank examiners from the banks themselves and sent the occ staff back to it occ headquarters. one of your first access comptroller was to reverse that decision which you say was based on your personal experience which included a -- the new york

fed decided to move banks in the san francisco fed decided to move them out of the banks after they failed to catch the wells fargo bank account scandal. what do you know that your predecessors with years of experience didn't know? >> i don't think it was the relevant a sign to that. it was my roughly 35 years in the banking industry. i would be happy to share with you our model at the occ so you understand that. we have three primary groups. we have a community bank abdul and we have a large bank model in a small bank model. the community bank model was done with retail officers where they'd examiners are as silent as offices for the midsized bank is a split. some are on-site and some are - on the on-site bank examiners so you understand we do rotate those examiners every five years

and often we do it before the five-year period. we are rotating these people amongst financial institutions across america. we maintain decentralized and centralized resident experts on various activities on examiner is generally consulting specialists and those people often participate in a centralized environment. we have what would call it deputy comptroller that is assigned to each bank that provides oversight that is not in the banks. it's offside in the process in my experience having onset -- on-site banks they can go to any meeting they want and ride up and down elevators with employees and hasten the ears and eyes by being in that institution to see what's going on but other than one instance that i can remember the last five to seven years.model has

worked to our benefit. >> that was a good answer again but i hope you appreciate the suspicion in the skepticism and the lack of trust that the broad swath of the overwhelming majority of the american people have towards banks and let the financial institutions than what wall street did in this country 10 years ago, what banks like one west did to this country. it was a long article in the columbus dispatch about what your former bank and i'm not holding you responsible but what it did to force foreclosures more than it would have been with a different kind of institution with robo signings and other things. there is a reason the public has the suspicion and the skepticism about the banking sector and the regulators. when this administration looks

like a retreat for a wall street executive and when we see the administration and the decisions they make on regulation ab when we see the regulators that are put in place so many of them come from wall street or come from banks. i would hope you would have an appreciation that when you do things like this and move the regulators into the banks the public thinks they are too close to you the regulators are too close to the banks and i hope you have some appreciation. that musical move onto something else with your occ filings show you purchase shares of the company. you've been and tell us if i'm wrong claimed the right to avoid gains from the sale of the shares meaning he loaded up on financial stocks which are the ones where most interested in

before your confirmation and he deferred taxes on your purchases even if that's not illegal and i don't know if there has ever been -- i'm not saying there's press to get traction but even if it's permissible why is it advisable to buy financial stocks? wouldn't make more sense to tell your broker to stop purchase of financial stocks once you are under consideration for one of the most powerful bank regulating jobs in the country? >> first of all i was in constant communication with the treasury and ethics department through this entire process. no one had at any point in time told me that was improper or illegal. second of all i would tell you all of my proceeds were third-party managed. i had no involvement in any of those decisions. so those decisions were being done entirely without input or

involvement of myself and they are constantly rotating in and out of sectors. what i would tell you is i was sworn in and all of that activity was -- and it took us time to go through the dissolution process but there was no bank stocks under the guidance. >> to rely on people at this white house when the story just came out that one or two of the president's relatives made $80 million in his first year in office and all the stories with all the strong men around the world and discussions of the president making money and all of that. i don't think you should rely on those ethics questions but did it strike you as little weird and that it would send a message to skeptical public that if you get nominated you bide bank stocks after you were nominated?

aren't we brought her to think at least it matters what people think about the senate could look like wrongdoing? i don't question your integrity by your judgment. you buy stocks that did get appointed to a job like this. the white house, didn't occur to you that you have judgment exercise here? >> you may not be aware that i began my nomination process in 2016 and i was sworn in and confirmed in november of 2017. excuse me i have that backwards. so almost 10 months that i was waiting to go through the process so i would agree if this was a 30 or 60-day process but my investment advisers who had sole discretion on these investments were independently making those decisions. >> i'm just flabbergasted.

you had to wait eight months and he couldn't direct them to buy stocks. you have made your mind up on this but i'm flabbergasted that the ethics in this town now because i had to wait eight months am going to buy financial stocks and i'm going to be the regulator. the ethics people at the white house said it was okay. you approved recently ruled to weaken capitol by 121 billion. fdic did not sign onto this change. are you concerned about the risk to financial stability? >> first of all we have a rule that is out for comment and we will expect to get those comments back. you are aware of the economic gap will change the provisions of that because some of the institutions we are looking to figure out what to do with the custody banks. i don't think the way it's

currently formatted today will be the way it's implemented the coast it would be double counting. he meant that you approved of that. >> yes but i also want you to be aware that number is the leverage ratio was the sole determinant. that is actually a backstop to capitol racial and their other ratios. >> mr. samuel woodward you argue it doesn't do damage to do this which i guess you are arguing why would it -- why a should the banks -- is it so the banks can be more profitable? >> the leverage ratio treats all banks equally and by focusing on the leverage ratio if potentially could force banks into a higher risk issue at the expense of low risk issues. >> are you aware that the largest banks are doing well?

>> no i'm not. >> the question is with potential trouble ahead the banks are more profitable than ever. this recovery started with the auto rescue. we have had eight plus years, 90 some months of job growth. job growth admittedly was less in the trump administration than it had been for a number of years prior to that so it doesn't really matter if he gets credit for it that the recovery will end at some point. don't you want the banks to be prepared or for what they weren't prepared for in 2007 and 2008 a relaxing capitol standards, doesn't it speak to that? >> the federal reserve we felt it was $400 million when you take into account the other ratios so i do agree with on the industry to be well-capitalized and we want them to understand their risk in-app high-quality

liquidity. >> going back to the whole issue of skepticism and cynicism about you and us and i will throw all of us into this. the senate and the house and the ceos that make tens of millions of dollars while a bank teller makes 12 or $13 an hour. i sat across from a bank teller who had done it for 30 years and she makes $30,000 a year after 30 years or so. the skepticism people have and the cynicism for bank regulators i just don't think, they have done so well in last few years they have done so well for tax cut and the regulation. we are doing one thing after another that we see you doing

and probably the fbi is starting to do one thing after another for the banks asked for. we keep doing things the bank is asking for particularly since that's because the economic cycles are going to contribute to problems five or 10 years down the road and maybe you and i will be gone by then but it continues to create, to contribute to that. let me ask one more question. you said sierra a proposal will simplify the cra two judge banks raised on one ratio not the test used today. how do you verify that bankers -- the banks are meeting unique credit needs of different communities if you measure sierra a with one specific ratio? >> i think the ratio starts to make a determination at the macro level is the institution

dedicating enough of what the you choose it to be for this committee's? there are other factors that will be important in the overall element including things like where you lending, what time effect to these you are doing. we also are proposing a volcker rule for equity investments because one of the things we see a deficiency in a lot of the cdfi's can't get equity and we want to encourage financial cetaceans to participate in some of that activity. >> thank you. mr. chairman thank you.

[inaudible conversations] [inaudible conversations] >> thank you for your patience with us mr. comptroller. we expect another senator to come back and ask questions and they will probably be close to the end of the hearing. comptroller understand some of the national banks are contemplating eliminating their holding companies because they engage in only traditional activities permissible for the bank. for example national banks have holding companies to branch interstate but a lot has changed and that hasn't been the case

for some time. while the process for the dissolution of a holding company is fairly straightforward there are some challenges because of certain antiquated provisions in the national bank act. can you describe those challenges and what the occ and what congress might do to address them. senator crapo we have seen a significant increase in interest of banks that are predominantly doing more banking related activities across america with our current structure requiring multiple compliance multiple psa related activities to the holding company in the ward or excuse me and the bank. a lot of tanks are looking at kimmie consolidate at two goodies in the holding company in the bank and have dissolution to the holding company? it our viewpoint today there are a couple of these that are we feel we have the authority we can do workarounds. i do believe there would be

legislative actions that would make that easier if more banks decided to do that. there are two primary ones in as you know the current provisions don't require a bank to file the fcc documentation around financial data. if they do consolidate into the banks they would not have that information in the hands of the normal practice and procedures. we work with the fcc and we have a memorandum of understanding of how to accomplish that for banks that want to accomplish that. that was one of the significant issues in the other significant issue the way that the bank act requires that the entity wants the issue in shares and incremental amount of new shares would require a photo vault shareholders. ..

>> we have shared with your staff some recommendations. i think it has the potential to be sizable and numbers as others go through the process and recognize the ability for that regulatory burden. >> i think you have said this but with regard to a congress might need to do, it would be helpful to have your suggestions beyond the authority of the agency. >> another question, i was encouraged that the regulators issued a rule. i'm sure you'll receive comments and rules. i imagine you will review them

carefully on firms trading i also hope you look for additional opportunities to simplify the rules by rationalizing reporting in narrowing the scope of covered funds. can you commit to review the comments received and adjust the proposal to adjust legitimate issues raised? >> that is part of our normal process. we expect to get a lot of comments back. this was a five agency notice of proposed rulemaking. that in itself was rule maker. we want to see how you look at that rule. we at least have a solution. regarding the covered funds, one of the provisions is that banks

use to invest in various funds and have capitals into the small businesses. they often have a tough time if they're 100% owned by family. that created a bridge for companies. that has been virtually eliminated. maybe in the long run you can look at it and see if there's a source of capital needed in the market. someday we'd bring it back in. maybe that's what we're referencing in our comments. >> i appreciate the you and the other agencies got together and made some progress with this. i don't want to be misunderstood. i think more can be made. i was hoping to see more out of it the outcome. >> one last thing, i apologize for stepping up because of the

votes. i know there are a lot of questions and cra. i suspected and get your full answers. is there anything you'd like to add with regard to questions he received? >> i have been either a user of cra for over 25 years. i design programs that are specific markets and markets were cra's use. we've created a complex difficult system for financial institutions. often the week before the team comes in they don't also get a good or bad rating. they often find things don't qualify. the ability to bring kick clarity.

we can bring clarity to the process which will encourage more institutions to go deeper into the communities and remove restrictions which has caused the siri to be held back. three things are trying to solve for. to come up with a more objective way to measure success and commitment. i talked about using a balance sheet and use that to come up for -- and then we should expand the products and services that do qualify. we've narrowed that and i think we can expand it to more small business lending and encouraging banks to do more. we'll give banks a read on the front end. so they're not making it an hoping it qualifies. exams are done every three years.

that usually takes 6 - 24 months to issue a report. the brink wants to make a new acquisition they're often challenged by community groups if their compliance. i think we could fix the third part of it. we can encourage banks to see if they are reporting that data. if anybody thinks are trying to bring them down with think it's an opportunity to partner with community groups and banks to make it better. >> appreciate that. >> i haven't been able to vote yet. i will ask you to be brief. to the extent you can keep it up

five minutes or less i appreciate it. >> it's good to see you. clearly the concern that you've seen from my colleagues with respect to the reinvestment act and ensuring there's not discrimination lending. i know your me to prohibit the unfair discriminatory lending. >> not with cra, that is fair lending. there are very exams done. >> and ensuring there's no discrimination your ensuring the banks are compliant with the pair housing act? >> and are they complying with equal opportunity act?

>> they are actively looking at that? going back to the siri enforcement, it's my understanding you've instructed them to consider how they consider bank exams, is that true? >> not to my knowledge. >> i believe we are sending out a bulletin today. there are bulletins we send out where we update procedures. >> we frequently will provide q&a are bulletins as updates. we were hoping we would get it out. >> updates and how the bank examiners and the criteria they will be looking at when they're engaging?

>> no for banks over 1 billion there is a point system that is lending investment. >> i only have so much time. my understanding is that the bank examiners are considered the cra when they're engaged in these bank exams. >> we do specific series. >> are they looking that there's no discriminatory so we try to ensure the that the financial institution has given us. doesn't mean they're doing a fair lending exam at the same time. >> as part of their cra exam are there any concerns that they look at to ensure that there's

no discrimination whatsoever? nothing in the mortgage lending is that what i'm hearing? that they don't look for that? >> prior to the cra exam expanding we do it a review of the data. if there are items that are discovered that there is fair lending questions the more required by statute to do a fair lending examination. we are frequently doing fairly lending examinations independent of cra. >> so knowing this, how many of the banks, if you know take fewer than 500 mortgage loans or home-equity loans? >> it is less than 5%.

>> and congress passed a law that those that make fewer than 500 mortgage loans on borrower characteristics like points, fees and other indicators. how can you -- let me finish my question. how can you ensure that without that data you're not determining the presence of discrimination if you don't have all the information you need? >> the banks that will be excluded still have a light that they have to file. the enhanced data is what the other institutions will submit. >> i recognize that, that's why i opposed it. my question is without that data how do you ensure that?

>> do you still have access to that data. >> is being enhanced. there is no enhancement. but that data will come into a sport 99% of the volume. >> so your only i haven't voted yet to make the second purchase began. this is a problem with conducting hearings. i will object on the floor for now. >> the review of sales practices

that has been completed for which i understand you have reiterated here today that you're not going to publicly release detailed findings. i sent a letter to you asking for more information. i have to say the reality is you're finding confidential supervisory the occ has provided unsafe ranking practices before after millions they provided critical information to the public's blaming how they failed to outline how those institutions would remediate.

i'm the ranking member in and i understand all about classified. this is an effort not to have the ability for the public to understand the institutions their banking may have the same practices as seen before. when you are in front of the committee for your confirmation you refuse to provide state-by-state information and today is controller, you refuse to those not only harmed by wells fargo's but by those with sales practices. who are you trying to protect? hard-working american families are big banks. >> this is not an unsafe and unsound manner you may not have

been in the room when i gave the statistics, but an estimate of five or 600 accounts we found 20000 items. >> this is a regulatory matter. there are mras open. i have said this is not a systemic issue in the industry. as we work through to clean these issues up all consumers will receive restitution. >> i think people should note the institutions their banking weather there among the 20000 that are hurt or not unless you know that's an institution you should be banking with. you're doing the consumer universe a huge discredit.

i could not believe the answers you gave yesterday at the house of financial services company. are you sitting before this committee telling the hispanic american there is no discrimination when there's no discrimination in mortgage lending? >> can you tell me that there is discrimination in lending. >> i believe there is. >> i believe there is some impact that occurs in america. i said i had not personally observed it but many people. >> but when he said do you believe it didn't give me the answer today. i'm happy this see it that in fact if there is discrimination in the lending field.

>> i said people i care about, love and have friendships have told me there is discrimination. i believe those people. >> we commit to retain those areas with a local geographical focus which helps ensure banks -- >> i think there has to be a new look. i think around branches that we have to protect that banks are participating in. my experiences that they can also restrict investments. we need to think through what is an assessment area. we have institutions that have no branches. i think we have to look at what were gonna call those. >> i will make sure that you understand that there is discrimination in our society in this regard and you do not watered-down but limited protections already exist.

>> senator van hollen. >> welcome, so i'm in a follow up on some questions. one was by senator warren regarding the case that was out against one west for alleged discriminatory practices. to your knowledge is hard engaged investigation of the complaint. >> are you referencing the hud on the financial freedom? >> i am referencing the case that was brought with respect to the alleged discriminatory lending that was referenced by senator warren earlier. >> i don't know if that is a hud issue. one west bank when you looked at effectively a fair lending data,

we had out of proportions for the community. i think it was less the 100 mortgages that they use. it wasn't a statistical relevant. we were low in certain areas but it's not like you had a relevant population in the narrative. >> was the complaint filed in that case and has that issued been resolved? >> is that still pending? >> have you been questioned in that case. >> the comments you made in the house yesterday obviously generated understandable concern. in my state of maryland and baltimore case was brought against wells fargo back in 2011 for pricing discrimination, the

baltimore city alleged that wells fargo steered minorities into loans give them less favorable rates and foreclosed on hundreds of loans creating higher public safety costs. in this case wells fargo conceded that this had happened. and paid the penalty of $7.5 million to the city of baltimore. to have any reason to contest the conclusion there was pricing discrimination? >> i do not. >> i want to get to some regulatory issues. i believe senate around where they looked into the situation. you are aware of the fact that there is a case where wells

fargo alerted a bank to the fact that there would be an occ investigation. >> i think it was an occ employee. >> yes. >> since there was a recommendation based on the 2013 study from outside. groups recommending that occ employees not be embedded in thinks because they would treat them too much like customers as opposed to being on the lookout for potential wrongdoing and hold people accountable. my question, you have decided not to pursue that recommendation, did you do a study that would contradict or conflict with the 2013 finding?

>> i cover this earlier, i want to make sure i have a chance to cover it with you. we have three models in the occ. a community banking model in the large bank model. on the smaller and we service the banks by regional locations. examiners are not embedded in the banks. we have a split where summer in and summer out. we have residents on site at the large banks and that's the category you want. >> when i got here and also based on my background, i looked at procedures and processes. every five years we rotate the examiner in charge of a financial institution.

second, we have resident experts both in the field and in washington that reviewed the examination papers and data for accuracy to make sure knowing can take data and make inappropriate conclusions. we have a deputy comptroller. while it could happen, i thought the controls were in place. the other category having resident on-site examiners who have open architect access to anything going on they can go to credit approval meetings and wander around the bank, i think that provides better risk management. >> i think the issue is there may be some benefits. the question if the benefits out weigh the risk.

they looked at this and said it is too great a risk that you will have regulatory capture. so my question was did you it undertake any independent study. >> i am only aware one time that has been issued. >> thank you senator. i appreciate you coming before us in putting up with the inconveniences caused by us having to shift. we appreciate your work. and the fact that you would come here and report to the committee. that concludes the questions. this hearing is adjourned. >> thank you. [inaudible conversation] [inaudible conversation]

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