being fulfilled and it is being fulfilled in large measure because of the failed experiments of european integration. the direction of causation a all wrong on the opposite side. why is there depression levels of unemployment in countries like greece and spain? it wasn't an act of god. it was a direct and predictable consequence of the failed experiment that was doomed to fail that your government elected not to join the euro. if you are such a big believer why was it that year after year the labor government refused to join? you know the answer. the answer was because at least some people in your party including your old friends saw it was coming. the magnitude of the crisis being conflicted can hardly be

overstated here. and the stakes are very high. we could be on the brink of a second phase of depression. if this thing turns into a bank run that sweeps into the mediterranean region it could be 1931 all over again. what happens after that? what happens if i'm right and the germans continue to say no to the kind of federal measures that might possibly staunch the flow of money out to spanish banks? there are other experiments that are failing in europe right now. the experiments of multicultu l multiculturalism which has created immigrant whose are most likely to be the focal point for the back lash that's in the pipeline. the experiment has been more dangerous than any of the eurocrats ever anticipated. and we have yet to see the full

consequences when the laboratory blows up. you can watch the last few minutes of this debate on our video library, cspan.org. live now to capitol hill where there is a committee on the financial regulations. officials from the office of comptroller of currency will testify. the occ oversees j.p., morgan chase's banking. also testifying this morning consumer financial protection bureau director and deputy treasury secretary.

this hearing is called to order. it is also an opportunity to discuss whether bank regulators the implications of the laws. on a bank with j.p. morgan's solid reputation announces that it has lost millions of dollars in a large trade reportedly designed to reduce risk it reminds us that no financial institution is immune or in bad judgment. while the j.p., morgan trading laws does not appear to have caused systemic problems it is a

clear reminder that wall street continues to need better risk management, vigorous oversight. if the rules are broken a yield in enforcement. to repeal or weaken wall street reform and define would take us back to the days before the financial crisis of 2008. wall street reform was a response to the crisis caused by a lack of consumer protection, reckless behavior in the financial sector and regulators who failed to take action in time. we now have an agency solely focused on consumer protection, tough new rules to end negligent and reckless practices and

regulators -- in the process of enhancing and more juditious liquidity. wall street reform also requires regulators to sharpen their focus on their largest and riskiest financial institutions. all the regulators joining us today are members of the financial stability oversight council, a body created to monitor risks facing our financial system. most here all work in the focal world to prohibit proprietary trading with government issued insured deposits and the fdic continues to work diligently to implement the living wills

requirements and establish the liquidation authority for financial institutions. similarly while there is a need for strong regulation of all financial institutions wall street reform recognizes that small community banks should not be treated the same as larger banks. because large complex banks take on the most risk and pose the greatest threat to our economic stability they should be required to pay their fair sh e share. like wise small banks should not have to pay risks taken on by larger competitors and assessments have been lowered

accordingly. i hope to hear from our witnesses today about the steps they are taking with regard to small banks. some have claimed that the wall street reform act was not the right set of solutions to the crisis and that it asks or regulators the activities of the firms they regulate. i disagree. to restorm competence in our financial system after the crisis we need more, not less scrutiny. the wall street reform act has built a stronger oversight framework that closes regulatory gaps and enhances financial stability and better protects consumers, investors and taxpayers.

and so despite a repeated cause to deregulate and defund by those who endure the costly lessons completing the implementation of the act must be and remains a top priority for this committee. i look forward to hearing from the witnesses here today about the progress they have made to complete implementation of the wall street reform as well as the actions they have taken regarding the j.p. morgan trading laws and the potential implications of the laws for supervision and wall street reform going forward. i also want to thank member shelby for all their input and cooperation over the past several months. at a time when most of america

thinks that congress is in a grid lock the committee has been very busy getting things done on the seventh floor. the bipartisan export import bank reauthorization passed with broad support and was signed into law by the president last week. we pass in the committee this bipartisan sanctions bill for the federal reserve board of governors received four votes and help to secure the passage of their confirmation. we passed a bipartisan transportation bill in the senate and the transportation conference committee meetings are currently on going with the house. we passed a 60-day extension of the national flood insurance program and we have commitment from the leadership to bring the banking committee's bipartisan

reauthorization bill to the floor in the coming weeks. in addition there is another important legislative matter helping responsible home owners refinance into lower interest rates at no cost to the taxpayers. we have already had full committee and subcommittee hearings and financial proposals. i would like to take a bipartisan approach similar to other committee past bills of this congress where we work together in a bipartisan vehicle with amendments limited to those related to the underlying bill. i am hopeful that my colleagues will agree to move forward in this matter, as well, so that we can help responsible home owners and help the housing market rebound. with that i turn to senator shelby.

>> thank you mr. chairman and thank you for calling this very, very important hearing and to our panelists today. welcome again. i think we have spent a lot of time together. probably we will spend a lot more in the future right here. today the committee will hear from the financial regulators who supervise our nation's banks. the safety and soundness of our banking system depends on your efforts. it was not long ago that our banking system began to collapse not withstanding the presence of a large and vigorous regulatory structure. i believe it is critical that this committee conduct vigorous oversight to ensure that the regulators do not repeat the mistakes of the past. as the primary regulator of the national banks, the office of the comptroller is responsible for insuring the safety and soundness of our largest banks.

this means that the occ supervises j.p. morgan chase. and because taxpayers basically guarantee j.p. morgan's deposit the american public i believe has a right to know whether these trades threatened or could have threatened the solvency of the bank. in addition this committee i believe has an obligation to determine whether this loss reveals any operational or regulatory weakness that could cause problems in the future. next week jp morgan ceo jamie dimon will appear to explain his bank's actions. today i would like to hear the occ's views of what happened at jp morgan. in particularly i believe the comptroller should give his assessment as whether the trades ever threatened the safety and

soundness of one of our nation's largest banks. banks are in the business of taking risks. and losses are an inescapable part of risk taking. job creation and economic growth depend on banks taking risks. it's the job i believe of regulators to prevent banks from taking risks that expose taxpayers. some people have used jp morgan's loss as an opportunity to argue for a stronger implementation of the rule. no matter where you stand on the vocal rule this argument i believe is a bit premature. most importantly, why is the occ's current authority sufficient to prevent the trades from putting taxpayers at risk if they did. if so did the occ properly use the authority that it has. i look forward to hearing the comptroller's answers to these questions among others.

also with us is the acting chairman of the insurance. we have been told that dodd-frank will prevent future taxpayer bailouts. yet under the fdic's plan for implementing dodd-frank's authority short term creditors would still be bailed out. the lesson we all should learn is that creditors of a failed firm should bear its losses. today i hope acting chairman would reassure this committee that the fdic's resolution authority will not institutionalize government bailouts. regretbly the fdic is not the only regulator that has taken actions that may institutionalize too big to fail.

the financial stability oversight council led by treasury and the federal reserve board have recently used the authority created by dodd-frank to designate several and are preparing to designate a larger group soon. i believe the danger presented is that the market will view it as an implicit guarantee that the federal government, the taxpayers will not allow the designated institution to fail. this was the same problem that arose with fanny and freddy and ultimately has led to about a $200 billion taxpayer bailout and more to come. i would like to hear from the treasury and the federal reserve board as to how the designation process will eliminate rather than create too big to fail companies. we will also hear from the director of the bureau of consumer financial protection, the bureau's regulation and supervision will impact the

safety and soundness of our banking system i believe. unlike other bank regulators the bureau is not required to consider safety and soundness when it writes rules or takes actions against banks. i think this is becoming apparent as the bureaus proposed rule will impose huge costs on banks and create serious confusion about what banks need to do to comply with consumer protection laws. for example, the director of the bureau has authority to declare products to be abusive. however, the bureau has said that it will not write a regulation to clarify what the term abusive means. think about it. the refusal to write a rule stands in stark contrast to the director's statements that the bureau would give banks clear views of the road. the refusal of the bureau a lot

of us believe to issue clear rules means that banks will have higher costs, more exposure to lawsuits and less effective operations, something i don't think congress did. in the end it will be consumers that will pay the price in the form of higher costs, less access to credit, fewer choices and more paperwork from less efficient banks. but this should come as no surprise to the regulators here. after all, it was not our regulators or the banks that paid for the poor regulation and practices that lead or led to the financial crisis. it was the taxpayers and the consumers. >> thank you senator shelby. this morning opening statements will be limited to the chairman and ranking member to allow more time for questions from the committee members. i want to remind my colleagues that the record will be open for

the next seven days for opening statements and any other materials you would like to submit. now i will briefly introduce our witnesses. deputy secretary of the u.s. department of the treasury. currently serving as a member of the board of governors of the federal reserve system. thomas curry is comptroller of the currency. welcome mr. curry to your first hearing before the banking committee since your confirmation as comptroller. marty is the acting chair of the federal department insurance corporation. i thank all of you again for being here today. i would like to ask the witnesses to please keep your remarks to five minutes. your full written statements will be included in the hearing

record. secretary wallen, you may begin your testimony. >> members of the committee, thank you for the opportunity to appear today to discuss implementation of the dodd-frank act. it will help protect americans from the accessive risk and poor consumer protections that played leading roles. that crisis and the recession that accompanied it cost nearly 9 million jobs and brought gdp growth to nearly negative 9%. today our economy has improved substantially. more than 4.3 million private sector jobs have been created over the past 27 months. and since mid 2009 our economy has grown at an annual rate of 2.9%. treasury is focused on

implementing the dodd-frank act. core elements include tougher constraints on risk taking and leverage. a new liquidation authority to resolve large interconnected firms facing failure, comprehensive oversight of derivatives and new measures to promote transparency and market integrity. substantial progress has been made since the dodd-frank act has been enacted. treasury's implementation responsibilities include the secretary's role as chair of the oversight council. excellent progress has been made setting up each entity. treasury is also charged with coordinating the rule making. we are working with the regulatory agencies towards a final rule that prohibits

proprietary trading and limits hedge funds and private equity funds. the lessons learned will be an important input into efforts to design the dodd-frank act reforms including a strong vocal rule. the rule exempts the ability of firms to engage in risk mitigating hedging activities in connection with and related to individual or aggregated positions designed to reduce the specific risks to the banking entity. to that end the final rule should clearly prohibit activity that even if describes as hedging does not reduce the risk related to specific individual or aggregate positions held by a firm. losses at jp morgan raise questions that go beyond the vocal rule, as well. regulators should require that banks senior management and directors put in place effective

models. strengthen reporting structures and establish clear accountability for failures and risk management. regulators should make sure they have a clear understanding of exposure and that banks are held accountable for the systems. the true test of reform is not whether it prevents firms from taking risks or making mistakes. it is whether it is tough enough and designed well enough to prevent those mistakes from harming the economy. we all have an interest in that outcome. our ability to achieve it depends on the authority and resources to require requirements on banks and the largest nonbank financial companies. it depends on implementing the full framework of derivatives for marginal requirements for standardized derivatives to greater transparency and risks

to exposures. it depends on providing other enforcement authorities with the resources to police manipulation, fraud and abuse. it depends on unwinding the broad firm without risk to the taxpayer we experienced in 2008. it depends on making sure no exception built on the law is allowed to undermine the impact. the challenges our economy has continued to experience since the financial crisis in 2008 only increase our commitment to implementing lasting financial reform. recent failures and risk management provide an additional reminder that comprehensive reform must continue to move forward. the administration will continue to resist all efforts to roll back reforms already in place or block progress for those that remain to be implemented. the lessons should not be left

unlearned or unforgotten nor should taxpayers be left unprotected from consequences of future financial instability. >> thank you. >> thank you mr. chairman, senator shelby and members of the mitty. you are all probably familiar with the concept of the law and the instrument but you may know it as the law of the hammer. if you are holding a hammer everything looks like a nail. that concept is supposed to be a warning not to use reflexively a familiar tool in response to every problem but i must confess that the longer i taught and wrote in the area of financial regulation the more convinced i became in the centrality of strong standards. my time at the federal reserve has not changed my mind. on the contrary, a series of events most recently the jp

morgan loss has only reinforced my conclusion. a bank with a strong capital position can absorb losses fraup unexpected sources whether external shocks to the economy, the insolvency of important counter parties or failures of risk management within the firm. strong buffers ensure that losses are born by share holders of the bank and not by taxpayers either directly through bailout or indirectly through a major effect on an economy. so i'm especially pleased that tomorrow afternoon the federal reserve board will be considering a final regulation implementing more rigorous capital requirements as well as proposed rules to increase the quantity and quality of capital held to satisfy regulatory requirements. these regulations are the product of cooperative efforts by the fed, the occ and fdic

over the last few years to achieve strong international capital arrangements and over the last several months to draft joint domestic regulations. along with our stress tests and anticipated systemic risk surcharges these regulations will form a complimentary set of requirements for the largest institutions. while capital is central to good regulation there is more than a hammer in the regulatory tool box which includes noncapital roles and supervisery oversight. we continue work on rules notably enhanced standards for larger institutions. thet latter includes multiple agencies which have finished reviewing the 19,000 comment letters and are considering

modifications of the proposed rule. the enhanced prudential standards present a number of important issues for consideration before final regulations can be implemented including how to tailor the applications to firms of different sizes. as to market discipline one development of note is that the federal reserve and fdic will in the coming months be reviewing the plans to be submitted by large forms in cordance with the joint rule. finally with respect to supervision the federal reserve continues to build a more centralized horizontal and data driven approach to supervision of our largest institutions. the process has run the stress test and other horizontal supervisery exercises since its establishment in 2010 and is extending activities to

coordinate more effectively. thank you for your attention and i will be pleased to answer any questions you might have. >> thank you. comptroller curry, please proceed. >> thank you chairman johnson and ranking member shelby and committee members. thank you for the opportunity to update you on our implementation of the dodd-frank act, impact of supervision and our response to jp morgan chase's losses reported in may. among the many dodd-frank related rule makings underway our rules remove references to credit ratings from occ regulations and a final market risk rule. in addition i will soon approve pucklicati publication. the occ is also reviewing comments received in response to proposals regarding the rule and stress tests required by the

dodd-frank act. these rules when final will make important contributions to the regulation of financial institutions in this country. the dodd-frank act and other reforms have already done much to strengthen our financial framework translating these reforms into improved soundness of our banking system and fair treatment of bank customers requires strong effective supervision which is a theme that flows throughout my testimony and will mark my tenure as comptroller. the occ has begun efforts to heighten expectations for the largest institutions we oversee. this process includes increasing our awareness of risks, facing banks and the banking system insuring the risks are understood and well managed and raising our expectations for management, capital, reserves, risk management and governance. it will take time to achieve