broad support and was signed into law by the president last week. we passed in the senate this committee's bipartisan sanctions bill for the federal reserve board of governors received four votes and we helped to secure the passage of that 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. whose recent $2 billion-plus trading loss has been in the news. 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, here in this committee, jpmorgan 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 from t.a.r.p. bailouts, 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. regrettably 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. the act's full implementation will help protect americans from the excessive risk and poor consumer protections that played leading roles in bringing about the financial crisis. 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. although more work remains ahead. 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 2.4%. as part of our broader effort to strengthen the economy, 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 drif tough is, stronger financial consumer protection, and new measures to promote transparency and market integrity. substantial progress has been made since the dodd-frank act was enacted. regulators have finalized all rules related to the core elements of reform. treasury's implementation responsibilities include the secretary's role as chair of the financial stability oversight council. excellent progress has been made setting up each of these entities. treasury is also charged with coordinating the rule making. we are working with the regulatory agencies towards a final rule that effectively prohibits proprietary trading and limits sponsorship of hedge funds and private equity funds. the lessons learned from recent failures in risk management at

jpmorgan chase 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. among other things, 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. ultimately, the true test of reform is not whether it prevents firms from taking risks or making mistakes. it is whether our financial regulatory system is tough enough and designed well enough to prevent those mistakes from harming the economy or costing taxpayers money. we all have an interest in that outcome. our ability to achieve it depends on authority and resources to enforce tougher capital, leverage and liquidity requirements on banks and the largest most complex bank companies. it depends on implementing the framework of protections on drif tough drif -- 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 into the law is allowed to undermine the impact of the tough safe guards we need. 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 american workers or taxpayers, be left unprotected from consequences of future financial instability. >> thank you.

>> thank you mr. chairman, senator shelby and members of the committee. 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 capital standards to a sound financial system. 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 from unexpected sources whether those be 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 borne by shareholders of the bank and not by taxpayers either directly through bailout or indirectly through a major effect on an economy. resulting from a bank's failure. 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 annual capital reviews, anticipated systemic risk surcharges these regulations will form a complimentary set of requirements for the largest institutions. while capital is central to good financial regulation there is more than a hammer in the regulatory tool box which includes noncapital roles, market discipline and supervised re-oversight. we continue work on rules notably enhanced standards for larger institutions required bisections 165 and 166 of the dodd-frank act, and the voca rule. the latter includes multiple agencies which have finished reviewing the 19,000 comment letters and are considering phone shall -- potential 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

application of these standards to firms of different sizes and complexity. 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 firms in a core dance with the joint rule adopted by the two agencies last year. 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 supervisory exercises since its establishment in 2010 and is extending activities to coordinate other supervisory processes 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 of national banks and federal savings associations 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 publication of a set of proposals to implement basil-3. 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, liquidity, risk management and governance. it will take time to achieve these objectives and we must remain vigilant in maintaining. my testimony provides considerable detail about these efforts.

i want to use the remainder of my time to provide an overview of what the occ is doing in response to the jpmc losses reported in may. we are the primary regulator of the national bank where the activity leading to its losses occurred. and we are responsible for the prudential supervision of the bank. since early april the occ has been meeting with bank management to discuss the chief investment office positions, risk management and controls. as the positions deteriorated discussions turned to corrective actions and steps necessary to mitigate and reduce the risks of the banks' positions. we in the federal reserve are conducting reviews in the bank and are sharing information with the fdic and other regulators. we are also undertaking a two pronged review. of our supervisory activities. the first component focuses on evaluating the adequacy of risk.

risk controls at the bank informed by their application to the positions at issue. the second component evaluates the lessons learned from this episode that could enhance the risk management processes at this and other banks. consistent with our supervisory policy of heightened expectations we are demanding that the bank adhere to the highest risk management standards. we are not limiting to particular transactions at issue. we are assessing throughout the bank. we are using these events to broadly evaluate the effectiveness of the bank's risk management of cio function and identify ways to improve our supervision. if corrective action is warranted we will pursue appropriate informal or formal remedial measures. jpmc's national bank has approximately $1.8 trillion in

assets and $101 billion in tier one common capital. given that scale the loss by jpmc effects its earnings but does not present a solvency issue. those levels are sufficient to absorb this loss. it is also worth noting that the events do not threaten the broader financial system and the banks' efforts to manage its positions is not creating an unusual risk of contagion. there has been much discussion about whether these activities would be permissible under the proposed rule. while it is premature to reach any conclusion before review is complete this episode will help our thinking on the issues. i appreciate the opportunity to appear before the committee.

before closing i want to stress my commitment to insuring that the occ continues to enhance supervision. i look forward to updating you throughout my tenure on how we are achieving strong, effective, fair and balanced supervision of national banks and federal thrifts. thank you. thank you. >> thank you chairman johnson, ranking member shelby and members of the committee for the opportunity to testify today on the fdic's efforts to enhance bank supervision and reduce systemic risk. the most important new fdic authorities under the dodd-frank act are those that provide for the orderly resolution of systemically important financial institutions. since passage of the dodd-frank act the fdic has taken a number of steps to carry out its new responsibilities. first the fdic established a new office of complexed financial institutions to carry out three core functions, to monitor risk within and across these large complex firms from the

standpoint of resolutions and risk to the deposit insurance fund, to conduct resolution planning and respond to crisis and coordinate with regulators overseas regarding significant challen challenges associated with cross border resolution. for the past year and a half this office has been developing internal resolution plans in order to be ready to resolve a failing financial company. the fdic has also completed the basic rule making necessary to carry out its systemic resolution responsibilities. in july of last year approved a final rule implementing the orderly liquidation authority. last september the fdic authority adopted a rule requiring bank companies with

total consolidated assets of $50 billion or more as well as certain nonbank financial companies that may designate as systemic to submit plans to regulators. these are the so-called living wills. with the joint rule final the fdic and federal reserve has started the process of engaging with individual companies on the preparation of their resolution plans. the first plans for companies with nonbank assets over $250 billion are due in july. section 210 of the dodd-frank act also requires the fdic to coordinate to the maximum extent possible with appropriate foreign regulatory authorities in the event of a resolution of a covered financial company with cross border operations. also u.s. has foreign operations in dozens of countries around the world those are concentrated

in a small number of key foreign jurisdictions particularly in united kingdom. our initial work with foreign authorities has been encouraging. in particular the u.s. financial regulatory agencies that made substantial progress with authorities in the u.k. in addition to provisions relevant to systemic risk the dodd-frank has other provisions with direct effect on community banks. for example, the dodd-frank act, it made changes to the fdic's deposit insurance program which was implemented soon after enactment. which generally works to the benefit of community institutions. the first of these was the rule to implement the provision to increase the insurance coverage limit to $250,000. the fdic also implemented the dodd-frank act requirement to redefine the base use for assessments from deposits to assets. when this was implemented

aggregate premiums paid by institutions with less than $10 billion in assets declined by approximately 33%. many community bankers have expressed concern about the dodd-frank act rules and other regulatory actions that would impact their ability to compete in financial markets. in response the fdic's undertaking a series of initiatives related to the future of community banks. we are holding a series of round tables with groups of community bankers in each of the fdic's six regions around the country. the division of research is undertaking a comprehensive review of the evolution of community banking in the united states over the past 25 years. additionally i have asked the fdic's division of risk

management supervision and division of depositor and consumer protection to review the examination process for risk management and compliance supervision as well as to review how to promulgate and see if we can improve our processes and communications in ways that benefit community banks. mr. chairman, that concludes my oral statement. i would be glad to respond to questions. thank you. director please proceed. >> thank you for the opportunity to testify today as part of this panel of my colleagues. as the director of the consumer financial protection bureau i am committed to being accountable to you for how we carry out the laws congress enacted and we are always happy to have a chance to discuss our work with you. this is the 18th time that the bureau has testified before the house or the senate. i am pleased to be here again today. my testimony will focus on the areas in the letter you specified you wanted me to testify in this hearing.