taxpayer money be used for a bailout. it was you that provided. that's important. and i want to go back, mr. garret raised this point. i want to make it clear. then who, who has it under your bill in your estimation, pace for the bailout. >> there's a formula so that asset management will pay much less. than a goldman sachs or jp morgan chase. >> time for the gentleman expires. chair recognizes the gentleman from virginia.

>> we thank the witnesses for being here and it seems to have developed among some of the members that the costs of some of these regulations and the red tape that's resulted from these regulations, a lot of that has been testified to by mr. wilson. a lot of it is either not real or either not real or if it is real it's not having an impact or not significant. in fact, it seems that we're heralding that this is a good bill because wall street has hit all-time highs. and i would suggest that may be true but it does not properly reflect the overall economy and the reality that the folks i represent are feeling. and i represent virginia's fifth district, a rural district. 23 counties and cities. mostly main street america. we've had in the last six years unemployment in parts of our district as high as 20%.

north of 20%. there's still localities in our district where we have unemployment almost as high as 10%. our economy is struggling and we need jobs and we need to capital. we had access to capital that creates those jobs and we talk about the recovery. we talk about the fulltime jobs that were created. there weren't any full time jobs created. there were part time jobs created in june and i think that's important so working families are paying more for gas and groceries, electricity, health care and it's costing them more to access credit. and they had fewer choices. so while this bill may be good for wall street, i would suggest to you that it's having a much harder impact on folks in the rural community. place where community banks are a major part of providing that capital. so i guess my questions, i have two questions. first, would be for mr. kupiac

and mr. carfang and mr. wilson. dealing with the issue of too big to fail which of course, is the wall street reform part of the dodd frank act. it strikes me that since 1984, there were 18,000 community banks. now there are fewer than 7,000. the chairman indicated since 2008, we've lost 800 community banks. these are important banks to our communities. and with that kind of consolidation, it seems to me that not only hurts access to capital in rural areas but it also poses itself, a systemic risk. i guess start welcome mr. kubiac, are community banks are they important to providing access to capital in our smaller rural main street communities? and by this consolidation, are we by it's very nature,

promoting systemic risk? two things this act purportedly trying to prevent? >> absolutely. there's been fdic study a year or two ago when i was still there and they looked into the community bank issue and community banks are specially important in rural areas. in small towns and in places where large banks don't want to branch you need a big enough customer base before a large bank is willing to go there and in many casings community banks are the banks that serve as places where large banks don't feel it's competitive to expand. when we lose community banks in those places and we are, it is very bad for the economy. the consolidation is ongoing and certainly, the regulatory burden and i provided testimony to a subcommittee in march on the, of the estimates of the cost of the regulatory burden associated with compliance, under the dodd frank act and i used some estimate business a federal reserve board governor about how many people it would take for

the size bank and then i multiplied it by average earnings per bank and it was significant. it puts a lot of bank in a negative earnings position. the extra compliance cost. this is huge. i think it does banks to have to be of a bigger size or they're not going to survive the costs. >> mr. carfang, do you want to comment and then mr. wilson? >> three premises of banks are to make loans to those who have the capacity and collateral and character. community banks are best able to judge the character of the borrowers in their local community. in addition, though, the problems actually larger than that because we've moved away from relationship banking to compliance banking today and that takes kwarker the out of the equation. coloring by the numbers here and we're losing a lot of the judgment and flexibility that really needs to happen. the innovation and risk taking

at the most elementary levels. >> mr. wilson, i suspect i know what your answer would be. time is expired. >> we recognize mr. green, ranking member of our oversight subcommittee. >> thank you, mr. chairman. i would like to welcome you back, chairman frank. it was an honor to serve in congress under your leadership when i was a neofight and it's an honor to serve under max seen water left the committee in capable, qualified hands and i believe she's following in the tradition and doing an outstanding job. where reference to several things, we talk about community banks quite a bit, mr. frank. and when we talk about community banks in terms of the aid and assistance and changes necessary

to make them effective, we use small banks. but when we start generate legislation, the size becomes very large. in fact we've had testimony from at least one or two bankers who indicated that 30, 40, $50 million is a community bank. mr. wilson, we are all support what you want in trying to help you but when we try to get a deaf e definition of a community bank it becomes very difficult when we reach the size of 30, 40, $50 billion, not million, billion dollars. therein lies the small problem. for today let's deal with some other issues. mr. frank i'd like for you fuld, to come back to the question of a single director as opposed to a commission because i don't think you had an opportunity to finish your answer and this is something we litigated here at the committee level quite a bit. >> thank you. i can say with regard to the

community bang problem obviously it's a problem if i could interject to have them diminish. i don't think it has systemic risk. there's a loss of social function of economic activity. a lot of the losses at community banks have been going to the regional banks, mid sides banks so i don't think that's a systemic risk problem. that's a social problem i'd like to work on. a local service problem. as far as a single director, the member from pennsylvania made a point. i originally wanted to be a single director. the party votes in the house, the wanted it to be a commission and we compromised and went to the senate and the senate wanted a single director and i didn't put up that tough a fight for the house position. that's -- people alluded to other things. and then there's been this notion that something unique about the kwon assumer bureau. it doesn't go through congress. neither does the federal department of insurance corporation. neither does the federal reserve

system. neither does the office of the controller of the currency. in fact, none of the bank regulators are subject to the appropriation's process. and i believe that what you got is an anticonsumer activism issue, not a -- because when i was here and amendment was offered to subject the consumer financial protection bureau to the appropriation's process i offered an amendment to do the same for the federal reserve. i would think people are worried about accountability would think it's a greater problem that the federal rewasn't subject to the appropriation's process and the consumer brewer ro gets their money from the federal reserve and i'll tell you that caused great pal expectations at the federal reserve. but in fact, they were able to count on the fact that the republicans didn't want to have a consumer bureau running amok without any congressional appropriations. but was a much more powerful federal reserve that was fine. so the committee voted down my

amendment when it was in the majority so that underlines what we're talking about these limitations. >> accountability, would you address that for just a moment please, because there seems to be the notion afoot that the cfpd is totally unaccountable. that it can make rules that cannot be overturned. that they simply have this inordinate amount of power with no restrictions. >> in the first place that's one of the most popular things congress has done and i know chairman had said if financial reform bill is damaging the health care bill. my recollection is that this republican congress votes on a fairly regular basis to appeal the health care bill. where is your bill to repeal the financial reform bill? if you have the courage of your convictions let's bring it on. the problem is the public is, in fact, much more supportive of it, particularly of the consumer bureau. and as to accountability, i don't know how many hearings i was summoned to when we were in

the minority oversight hearings by this committee in which the to pick was the lack of oversight of the consumer financial protection bureau. i never spent so much time in oversight hearings complaining about an absence of oversight and the final point, the public don't like it and they complain it's not subject to appropriations but nobody's pointed to do any abusive practice. no one has pointed to any unfair intrusion into the business models. >> thank you, mr. chair. >> time of the gentleman has expired. the chair recognizes the gentleman in florida, mr. ross. >> thank you, mr. chairman. and i thank the panelists for being here. the testimony today and the specially that of congressman frank and has illustrated there's some lingering problems with the implementation of the dodd frank act. even the rules that have yet to be promulgated creating a greater uncertainty in the environment and i wonder what the recovery would have been

like if there were more certainty in the markets. it seems like the affordable care act also known as obama care and dodd frank have created serious problems and may not have been totally thought out. in my district, of course, we have community banks, mr. wilson empathize with you that no longer do residential mortgages. credit unions are in the same arena. businesses feel there's a regulatory environment and when you couple that with operation choke point that's now saying you have a reputational risk and the do jaechlt says you will or will not do business with certain people it created a very unhealthy environment for the flow of commerce and i'm reminded that i think the fastest-growing occupation in the country now is compliance officer which does nothing to the bottom line of our financial institutions and does more egregious harm to the bottom line of our consumers and

citizens back home. as if a patient will not get better if not taken off of bed rest we have to give some sense of certainty to an overregulatory environment. i understand there are some flaws that i think even chairman frank testified to that earlier in questioning from mr. garret. you say that dodd frank was a tradeoff between economic growth and the probability of poo periodic recessions. why do you say that?

this fells the regulators to, it gives them and empowers them to certain bad mediation ngd cause systemic risk. we're not sure what they are. it's up to you. you figure it out what mediation you think is bad and go out and regulate it. the problem is, the goal is to create financial stability. but financial stability is the, sense of a crisis. a crisis, you can have a very stagnant economy with very little growth and there's financial stability. there's nothing in the dodd frank law that temperatures regulators that they have to take a tradeoff between the growth effects of stopping financial intermediation and this weeding out bad financial mediation and many times they don't get what's bad financial intermediation right. in 2005 up to 2008, the federal reserve ran a study for the financial we need more power and

let them pick out the bad intermediation and it didn't work last time so i can't see how it will work next time. >> i no you're not a health care expert and you're an employer and you have to comply with the regulatory environment and you have to comply with health care requirements now under the affordable care act as an employer. would you say that the combination of these two regulatory environments have created a greater burden on your institution? and has it if so, has it been to the benefit of your employees or your customers this year i'm

struggling because the irs is telling me one thing. my accountant is telling me another thing about buying on the exchanges and so i've u spent considerable time with that issue. in the financial institution regulations there's a lot of time and effort. it's not only complying with what is past but just think of 14,000 pages -- >> do you think the recovery could be better without that regulatory burden? >> it would free me up to do other things and make cash available to those that you think would be qualified to use it to encourage a stronger vat economy? >> yes, sir. >> i yield back. >> time of the gentleman is expired. the gentle lady from wris consin. >> thank you very much, mr. chairman. >> i'm so glad to see you chairman frank. let me sar you've left the

ranking member, the position in the hands of ms. waters and she's taught us and set up meetings with us. we've had speakers and heads of agencies, journalists and she's not yelled at us, either. i read every single word of your testimony. this is such a boring subject to so many people who may be watching but you certainly make it exciting every single word and i notice you didn't wax on and on about too big to fail and how big the banks are and all of their more of them than there ever were before and they merged. instead, the nugget and i want you to clarify this for me, the nugget that you have gotten as given me is a cautionary note. instead of being distracted by just the size of the bank that

we ought to be looking more closely into what's happening in the d.c. court rulings where this cost-benefit analysis is hamper them to operate the appropriation's process starving to see the s.e.c. regulate and risk retention out of statutes, no skin in the game and we need to learn lessons from history or be doomed to repeat it. like you to elaborate on your testimony with regard to that. >> i don't think your microphone is on. >> i was speaking too softly. i was promising not to yell. >> you're free to turn it off. >> the before i turn off the mic i'll feel it was a pretty good day. the -- well, which issue did you want me to address?

>> the cost-benefit analysis. >> okay. i similar that's very much with the uncertainty. i do think -- if you're in a situation where you think things are wrong and you want to correct them there's an inevitable period of uncertainty. so the only way to avoid uncertainty is like where the stability argument is to perpetuate it. i am disappointed that things have taken too long, in particular, i think we've had a problem in the derivative area and we acknowledge there have been problems. i had one magic wand i could have waved i would have merged them. >> i understand that. >> 23 you're starting a new country you have one but they represent deeply enriched -- deeply rooted economic and social and cultural divisions and it would be very difficult to do that. sometimes people forget that

america is a more complex country. one of the reasons we have a multiplicity of bank regulators is we have the duel banking system. we have state charted banks. there was a proposal by senator dodd to give all the regulation of the banks to the occ. and the state chartered banks, they said, no, we don't want to be in there with the big banks. we want to stay with the fed because we want to regulator that pays attention to us. and here the problem is this. one of the best things that happened from my standpoint from regulation going forward with senator rooefd getting the senate to say we're not going to allow judges to be filibustered because you're a very conservatism balanced court. and the circuit in d.c. you had a lack of funding and i think the biggest single problem has been the incredible underfunding of the cd fd. the cfdc was given the biggest grant of new authority. derivatives are very complicated

and wieltdly underfunded and that's why people regret that. what many of my friends here would like to do is follow the cfpb with underfunding the way they've done. and then you have the official industry with the comments on the agency and you have the court requiring a very specific analysis and then saying, oh, no, that's not good must have. we had an example. they put out a rule in accordance with the bills clear language, regulating speculation. it basically said if you don't use oil except in your salad and your car don't buy a whole amount of it which will have an impact on price. the courts threw it out and said congress didn't mean it but we did. >> i'm claiming my time. is this the sneaker risk thing that's happening to us? >> which? >> with your indulgence. >> it's an indirect attack.

>> if i could have -- it's an indirect attack for people who don't want to bring it to the floor and try to repeal it because it's too complicated. >> time is expired. the chair recognized the gentleman in illinois. >> i'd like the thank all of you for being here today on the week of -- this grim anniversary of dodd frank. especially in carfang. good to have you from chicago, illinois, my home area. glad you made it all the way out here. it's increasingly clear dodd frank is doing real damage to our economy and installing the economic recovery we all want. it spans 2300 pages and poses 400 government man dates but despite in, it has not corrected the problems arising from the financial crisis including the problem of too big to fail and the need for regulatory system that decreases the systemic financial risk instead of increasing risk. some on the other side of the aisle including the obama administration and most senate democrats view dodd frank like i

view the ten commandments, unchanging and demanding our complete devotion. with all due respect with chairman frank he would agree that dodd frank didn't come from on high nor was it written in stone. thankfully many on both sides of the aisle recognize that some parts can be fixed especially those relating to community banks, credit unions and mortgage industry. dodd frank has had a disproportionately impact on those institutions. these smaller financial institutions help people access the american dream by extending credit necessary to own homes and start a business or to prea family farm. they provide at least 48% of small business loans and serve 1200 rural counties with otherwise limited options and they lend based upon personal relationships and local knowledge of a community and not just statistical equations. they force them into regulatory straight jackets designed for big banks. my constituents, the 14th

district of illinois demand answers to this problem which is why i'm grateful for this panel today. with that in mind i'll address my first can to mr. wilson and ask how dodd frank is impacting your community bank's bottom line. heard from financial institutions how high costs imposed by growing mountain of additional rules, regulations and compliance burdens are being faced by the industry. are you concerned the regulations could force the bank to limit its you have offering of certain financial products to consumers? and what about the impact that the regulations as well as their subsequent enforcement have on the available and affordability of credit for small businesses and consumers? >> congressman, our market is low to moderate income people. the community we serve is 65% hispanic. the withdrawal of us offering home mortgages is not good. there are products that we looked at and chosen that not to

offer at this time until we figure out the risk. we're a little behind the curve on some of the new technologies. that's the impact of the risktion we try to face each day. >> i want to get back to a few more questions with you. but i want to remind this kwom where this all started from. i want to go back to september 25th, 2003. a hearing here at financial services committee hearing. chairman frank you said on the record, i do not want fanny and fred d freddy to be another bang. if they do not do more -- sorry. if they were not going to do more than another bang would be because they have so many advantages then we do not need them. and so therefore, i do not think, i do not want the same kind of focus on safety that we have at occ and ots. i want to roll the dice a little bit more on the situation toward

subsidized housing. in the gsc act congress initially specified affordable housing goals of 30% of mortgage purposes. that goal is continually raised over the years to 42%, 50% and finally, 56%. more than 70% of subprime and all-day mortgages that led to the crisis were backed by freddie and fannie. if you have to point to a root cause of the financial crisis, that is it absolutely that is it. mr. wilson i want to get back to you. 55% of bankers decreased their business due to the expense of complying with the requirements for higher priced mortgages that took effect in 2010. i wonder if your bang still does offer and issue mortgages and if so, have you decreased the number of mortgages you issue because of regulatory uncertainty? >> yes, sir. most all of our mortgages would

have fallen into the higher price mortgage and we did not have the staff capabilities to escrow insurance and taxes. >> again, my last few seconds, thank you very much. all of you for being here. we want to figure this out. we need to clean this up and ultimately i want to see community banks that are vibrant in our communitition again. with that i yield back. >> the time is expired. the chair recognizes the gentleman from colorado. >> thank you, mr. chair. somebody mentioned the incredible cost of dodd frank and i want to start with february of 2009, the stock market lost 6,000 points and $7.8 trillion. home value dropped by 25% across the country. trillion and trillions of dollars and millions of jobs

lost. since dodd frank, stock market has increased 10,500 points. 10 million jobs have been gained. and housing prices have rebounded. no whether there's a direct cause and effect, i don't know. but it certainly the economy has improved dramatically since before its passage. now, mr. kubiac, i'll mention a few things because i disagree with your basic premise that the primary goal of dodd frank was too big to fail. and having sat on the front lines of this thing, i know we were dealing with credit rating agencies, derivatives, mortgage lendsers with their no docs no down mortgage servicing, appraisals. foreclosures, leveraged generally across the system, disclosures, ponzi schemes. hedge funds, swaps, stay on pay, executives base, pumping up

their stock prices when it wasn't deserved. credit cards, transparency, money markets, the security investor, protection corporation, whistle blower, accounting standards and the cfpb. each of those was an important goal and is found in dodd frank. you describe it as the primary goal. i disagree with you. that wasn't. we had a whole range of things we had to address. i want to enter into the record the article that mr. lynch was describing from the "wall street journal" dated july 21st and a bank of america executive said dodd frank certainly cataly catalystized substantial amount of simplification and we're moving well beyond that through our own initiatives. that was what we did. if i could enter it into the record. >> without objection. >> so mr. frank, i'd like to now see if think of these things

triggered thoughts on your behalf and -- >> let me say -- i am pleased that mr. diamond and mr. blank fein recognize the value of the bank. it wasn't because they were glad to be designated. that was never in question with them. i recognize that they believe we brought stability. i don't think every piece but we brought some sta b9 and among other thing it gave them some protection. we had a situation where this was articulated. i asked him once why the hedge was structured investment on their balance sheet and he said if i do it i'll be at a disadvantage, vis-a-vis goldman. and to being the main purpose. the main purpose of the bill was to not get to the point where institutions failed by not having the bad loans and these irresponsible derivative practices that caused it but i'm sorry the representative of pennsylvania had so little time to spend with us because the

distortions of the history with fan fanny and freddy, it's true in 2003, i said to roll the dice with regard to ssubsidized hous. multifamily housing built with federal subsidy. that's done well. but it's also the case that that was 2003. he referred to -- mr. cheney said it was stopped. we were in the minority. the republican party told the house in 1995 through 2006, it was entirely their decision not to pass any legislation regulating fannie and freddie. i was in 2003. by 2005 i switched my position. they alluded to an increase in the affordable housing loan.

when george bush puts it up over 50 in 2004, i objected. and, in fact, as you can read in hank paulson's book, it wasn't until 2006 when we were on the virge of taking over, that he talked to me and we got fanny and freddi legislation. from '95 to 2006 they did nothing legislately about fannie and freddie. >> i remind the chairman,able with that mr. oxly, the chairman, said the white house give him a one-finger salute on dealing with them. >> and in our four years we dud put them into conservatorship and since then the republican party had once again, in control of the house, done nothingbility fannie and freddie. >> i yield back. >> it's not a one-finger salute but the time of the gentleman has expired. the gentleman from kentucky, mr.

barr. i appreciated your earlier testimony that your intention in crafting the mortgage reform provisions of the law were directed to encourage more risk retention. i have a bill, hr 2673 and that bill is a portfolio lending bill that would encourage for risk retention on the part of mortgage lenders, small banks like mr. wilson's bank. and, in fact, not only was that bill marked up out of this committee, several of my colleagues on the other side of the aisle voted in favor of that. and my question to you, would you support such a proposal to give a un15i6 harbor status to portfolio loans in which the mortgage originate ref tapes the risk? >> i'd have to look at the specifics. i'm generally in favor of that but you said you would encourage it. i think we had to get this in the senate and loosen the risk retention. i would like to have portfolio allowed to be whatever it is.

have stronger risk protections. >> i appreciate you're japan inclination toward risk retention and your general favorability towards that. mr. wilson i'm to direct your attention as a small community banker to this slide here. the ranking member earlier alluded to the fact that you should have no problem originating mortgages now your $2 billion or below in assets. this is a slide from the consumer financial protection bureau. this slide shows what it required, the chart, in order to qualify for the safe harbor protection. it's not just that you have to be $2 billion or below. it's loan features, balloon payment features and underwriting and points and fees. then there's the portfolio provision $this slide show why

you have exited this business? >> the fact that it's on the page is the problem. we did balloon mortgages, and so -- i'd have to go through this. >> let me just cut to the chase. if we had a bill like the one that i was referring to earlier where if you could portfolio your mortgage and hold it and retain the risk and hold it in portfolio, would you reen-enter the mortgage loan business? >> yes, sir. i would to be able to that segment. >> can i ask you one question? >> i have limited time and i'd love to talk to you after yards. let's talk afterwards. real quick, i want to go really quickly to another point and that is the dodd frank was sold under the premise that in community banks played ball and had a seat at the table they would be protect from the the new regulatory regime, in particular, jurisdiction under the cfpb and thanks to reporting in "the washington post", we are know chairman frank had a strategy of selling dodd frank as a bill to protect community

banks because they would be exempt from supervision by the cfpb. in fact, the report says that according to mr. frank in communicating with the community bankers said that there's going to be a bill, this is mr. frank talking to the community bankers according to "the washington post", there's going to be a bill and you have to get on the bus or be run over by it. i don't expect you to support the consumer agency. now the cfpb in public but what is it going to take to get you to be neutral? the community banker represent says, well, that's going to take a lot. we don't want to have examination forces from the bureau coming into our banks given all the other regulators in our banks and we only have 20 or 30 employees in these banks and they're being eating alive. they joe i canned back and forth settling on a standard. the cfpa, what they called it then, their supervice would extend to banks whose assets exceed $10 billion.

according to the "washington post", chairman frank said i'm not asking you to come out and support this but will you stay silent? into the community banker lobbyist said, i can make it work. we have a deal and i reach add cross the desk and shook his hand and "the washington post" then reported that this deal was one of the most important made in the 3569 of what would become nine months later the law known as dodd frank mr. wilson, given that recounting of a critical deal made to get dodd frank to the finish line and given the regulatory maze that you have to go through in order to avoid these regulatory burdens, do you believe that chairman frank lived up to his end of the bargain in terms of exempting small community banks from the regulatory burdens? >> we're subject to those regulations. we're not subject to examination by another agency bubba when they make changes to the regulations it changes my whole process and i have to change my

training of my staff and so, it is very complex. >> time of the gentleman has expired. chair now recognized the gentleman from minnesota, mr. ellison. >> thank you mr. chairman and ranking members. chairman frank, of all the things in theed to frank bill is there one piece of particular legislation that we're beginning to get through? >> may i respond to the outrageous suggestion that i broke my word? i lived up to that deal as the gentleman on my right implicitly said. they would not supervise. there was never any suggestion that they would be exempt from the rules and your question i would say to mr., did i live up to the deal, yes, i did and mr. fine with whom i made the deal, will confirm that. i won't have my motives improperly impawned and suggest that i'm not good to my word

when there's absolutely no basis for it. as far as the bill is concerned, to me, the most important piece is one of the things that i now worry about which is risk retention in mortgage lending. i believe that the single biggest cause was and it was an innovation and it wasn't regulated because it was new. you had regulation of mortgage lending pretty good up through the '80s because most mortgages were made by banks and banks are regulated and even if we don't have qm, the occ will still regulate the loans and i'm satisfied with that. if there's a general need to be reasonable. but what happened was thanks to money coming in from outside the banking system and the banks were unfairly maligned to the slower banks. most of the bad stuff happened outside the bank because all of a sudden money became available. liquidity was available. when you went to depositors you

were regulated. a whole lot of lending shifted to outside of the banks. at the same time, thanks to intellectual property innovation it was possible to make thousands of loans bundle them into a security and sell them. so the ability to risk without having the responsibility for it proliferated and i believe that was the root of the problem. the ability to make those loans and i think there's been an inaccurate argument in the federal government forced people to make them. they they didn't force him to make bad loanses then or now. it was some of the agencies facilitated it but on a private people did it, too. people did it because they could make money and make money in a way, i think, they thought they could -- as far as they were concerned the risk disappeared. it didn't. it just went to other places. people bought securities. the people who issues the

credit. social security like aig. so that's why i am troubled by a suggestion that there won't be full risk retention. and i think some of the -- that tougher on loans that are going to be held in portfolio and softer on loans that are going to be securitized. and that's why i see these as flip side to the same coin. i would like them to be softer, easier, defer and in both cases there's a common theme. you're deferring to the business judgment of the lender or securitizer. let mr. wril son make loans if he's willing to stand by it. on the other hand, if i want to securitize those loans let me do that as long as i stand behind them with risk retention. that was the single-biggest issue it seemed to me and i'm a little nervous about what's happening to it. >> yeah. well mr. wilson, you want to respond to that? >> i just wanted to plead with former chairman frank to support community banks as in house rule

2073 to say you won't support that because of something that was said here but to support community banks as in the exemption from the mm wes hold in our portfolio and the spaesc. >> i do have one quick question i ask before i lose my time. one of the things that's happened here is not just the bills that sort of, i believe, erode dodd frank. but the lack of funding for critical agencies it's supposed to carry it out like the s.e.c. and cftc. you have anything to say about that? >> i am proud of the fact that we insulated the consumer protection bureau from that strangulation by nonappropriation that happened to the cftc. again, i think i started to answer but ms. moore ran out of time. i think the republicans chairman

said that it's as bad as the health care bill. but the reaction of the republic party to these bills has been very different. there's been no bill to my knowledge, to repeal the whole of the bill and or even any substantial part of it. there have been some things at the margin testimony some of which i think are good and some that aren't and there's been no attack on the thrust of it and they do it by funding. >> the time of the gentleman is expired and the chair recognizes the gentleman from north carolina. mr. pittenger. would you yield a brief moment. we're going to take time in this committee to get it right and we've already dealt with the gse and we will soon deal with too big to fail and i look forward to having former chairman frank support a number of our community bank regulatory

relieve provisions. i thank the gentleman for yielding. >> thank you, mr. chairman and i thank each of you for your testimony. mr. wilson, i would say to you that certainly, sympathize with a lot of what you said today and i served on a community bank board for a decade and in charlotte, where i live, we've had a number of consolidations. bank that just could not address the continued requirements and obligations, costs compliance issues, and it's been bad for consumers and bad for the banking system. mr. carfang i would like to get a little more insight to what your said. the banks are focusing on those outside of the regulatory cross hairs. can you elaborate on that some? >> sure. banks are afraid of making mistakes in this environment and

so they are looking for the customers that are the -- >> mr. carfang can you put the microphone closer? >> seem and/ory, excuse me. banks are looking for customers to provide stable deposits. companies with seasonal activity are actually finding themselves at a disadvantage in actually funding a bang to take their deposits. banks are not responsible in addition to know your customer, they're not responsible to know your customer's customer. and that extension is getting a lot of banks out of the correspondent banking business so major banks are no longer banking banks like mr. wilson's bank and he, then, doesn't have access to upstream services to provide to his customers. banks, a simple electronic benefit card for welfare payments, are very efficient and effective and safe and secure way of providing benefits. yet, under the know your customer rule as it's being interpreted, banks are responsible to do all of the due

diligence on the molders of their card which is obviously an impossibility and banks are exiting that business. we have retailers exiting the cou courtesy check cash business because of big fears about anti-money laundering. check cashing in a grocery store or pharmacy. these are some consequences, not necessarily that they've been regulated and are illegal, but they are falling into a grey area because of some of the -- just the vocabulary in the rules that continue to be written. >> thank you. other outcomes that you've mentioned were that the deposits were being discouraged because of higher fees and lower interest and this was a restriction of credit to all but the most well-documented borrowers. give us more thought on that as well. >> sure. because banks have to limit the size 06 their balance sheet, stay under the $50 billion limit

and others regulatory reasons, credit and, in fact, has to be rationed. you know, and because banks are afraid of making a bad loan, you know, a lot of the judgment has come out of this so we're down to checklists. so do you have all your w-2's and are they lined up and can you show on your brokerage statement where your do we sit came for you mortgage and things like that? all of those at cause to the complexity and frankly cause banks much lajer than mr. wilson's bank, to simply scale back to simply the most credit worthy or the most well documented borrowers. >> thank you. another implication, you said that due to extended interpretations of the know your customer rule, to include your customer's customer, banks are exiting certain electronic benefit card segments and these concerns also resulting in

scaling back of the correspondent banks services with community banks. >> yes. and you know, i'd like to address the issue of the systemically designation and the lack of screening about that. and the fact that the benefit of being designated is lower deposit costs. so banks would not be screaming bloody murder about sipi but the nonbanks, the insurance companies and the asset managers, who don't gather deposits are in fact, screaming bloody murder because the benefit is going not to them at all. >> thank you, i yield back. >> chair now recognizes the gentleman from connecticut, mr. heinz. >> thank you, mr. chairman. and i really do want to thank you for the focus on the question of too big to fail. i know we disagree over the relative merits of dodd frank. i am a real believer that the creation of the cfpb and the fact that american families will be protected from some of the more predatory and toxic

products that have beset them for a long time is a real step forward. i also think the regulation of the notion of the value of trillion dollar derivative market is a real victory. but none of us really know, mr. chairman, the answer to the question of whether we ended too big to fail. none of us really know if there is, in fact, a funding advantage for those large institutions. i've looked carefully at the statistical analysis offered by mr. kubiac. the statistical significance of his analysis is pretty small and it's also, he understands, of course, the difference between correlation and causality. there's a lot of things that impact the funding costs of banks including the fact that they're in international. diverse businesses. a large money center bank doesn't look anything like mr. wilson's bank but nonetheless, nobody knows if we ended too big to fail. mr. frank made the point that simply reasserting this wouldn't do it. one thing that is for sure is

that we took a whack as it in title 1 and title 2. the right question, i think sb is not did we end too big to fail. we're not going to know that fringely until a systemically important ropes. then we will see. sheila bair, who i happen to trust on these matters, says she thinks that sort of institution can be resolved. we're not going to know until we see one of these institutions hit the skids. so i guess what i really want to do is continue this line, because it's a useful line of analysis and ask mr. frank, if i have more time, i'll open it up. what i'm really interested in is we've established tools for regulators to both monitor, very aggressive tools, to change the nature of the businesses of systemically important institutions and a whole set of procedures to resolve those institutions in the case of them running into trouble. that may or may not be adequate. anyone who says they know the answer to that, of course, is not being honest. so my question is, i'll start

with chairman frank. what more could we and should we do to make sure that we never see a repeat -- >> a central question, one of the things we should do is this. you know, fed chairman said what he thinks will happen if we have another crisis, congress will vote to give them money. no congress can bind a future congress. if that's the theory, nobody can do anything in a bill that stops the future congress. my own view is nothing can be more unlikely given the current political movement. that's the point i would like to start with to mr. himes. people say, oh, it won't work, if we have a crisis, there will be a bailout. how? will the federal reserve ignore the rule they can only lend money to an institution that solvent? will they violate federal law and give people money? i don't understand the scenario. the political pressure would all be the other way. so my view is the best thing we can do, well, one thing is just

there's a self-fulfilling prophecy. people say, oh, the big banks are too big to fail, then they're getting all these benefits because people believe they will be bailed out. well, they benefit from people saying that. people have a right to say what they want. that is an inaccurate self-fulfilling prophecy about what will happen. i do not foresee a situation where there would be pressure on the federal government to ignore the law that says you don't give them money and allow them to keep acting. the only other thing you do is -- we want to keep them from failing. but i -- we tried everything we could. i guess the other thing we'd do would be to mandate smaller banks, but, again, lehman brothers precipitated a crisis. i don't know what it would take to get everybody one dollar smaller than lehman. >> there's no definition of

systemically important. if we knew what we were trying to regulate in order to strengthen the economy, we'd be much better able to do that. you know, the u.s. is the largest economy in the world. no u.s. bank ranks in the top largest, top five largest banks in the world. only three in the top 20. systemically important is really a function of interconnectedness, complexity, and things of that nature. i agree with representative frank that some absolute size, you know, trillion dollars on your own balance sheet, yes. if you're an asset manager or insurance company where you're not even holding the cash, you're simply a custodian for people's cash, that is absolutely, not ludicrous, it's chilling because it tells everyone else, gee, you know, behave because you might be designated systemically important. and if you're not a deposit taker, take advantage of that deposit subsidy by being designated systemically

important, you know, you're at a serious competitive disadvant e disadvantage. >> chair now recognizes the chairman from delaware, mr. carney. >> i want to thank the chairman and ranking member for holding the hearing today and all the panelists for coming, bringing your expertise and opinions, particularly form chairman frank for, notwithstanding, the fact that you don't miss us here, that you're coming back and we certainly miss you. you were very helpful to me as a junior member, freshman member in the last congress. now i feel like you're looking over my shoulder at every thing i say and ready to slap me on the side of the head with your hand extended. recently my father passed away, and recalling all the wonderful things that he did for me and my family, i recall that he, when i got my first home, signed the loan for the morning fmortgage r

and me. it was a 30 year fixed morning because that was that's the only way we could afford the monthly basements. a lot of first-time home buyers and people with modest means use the 30 year fixed mortgage to get the first home and build equity up. you mentioned that your bank doesn't do many of those, but you're here on behalf of the texas bankers association. i read through your testimony a lot of concern in there about housing finance reform. former chairman frank, on a regular basis, in my first term would talk about the unfinished business of gse reform. i've been fortunate enough to work with mr. himes and mr. delaney on a bill we think addresses a lot of the concerns and would preserve the 30 year fixed mortgage. it's hr-5055. in the texas bankers -- on their website, they mentioned gse reform as a priority. and one of the concerns they have is that the compensation

pay to the gses previously now and for what amounts to a full government backing is simply not priced correctly and it becomes a barrier for entry for private capital. our bill would do that, we believe it would price that risk appropriately. it would give an explicit government guarantee, the same terms as the private capital. are the texas bankers concerned about the availability of the 30-year fixed and proposals to reform gses? >> 30-year fixed rate is a viable -- it's not a product i've ever offered, although i would offer a 20 year amortization with a five-year balloon. but, yes, the access to credit is important to texas bankers. >> so that's the primary goal of our piece of legislation, to preserve that instrument of affordability, and we think that we do it -- chairman frank,

you've said a number of times this morning, you're concerned about securitization and that being a significant problem. what are your concerns going forward as we look at reform and particularly reform -- >> i think it's time to get rid of fannie mae and freddie mac. we were the first ones in 2007 to put them into severe constraints and stop the bleeding and gab to make some money. i think there was this question. do we want to preserve the option of a 30-year fixed rate mortgage? and i am convinced by people i've talked to in the banking industry, real estate industry, absent some government involvement, that's not sustainable because nobody is going to land -- very few people are going to make a 30-year fixed rate loan with no protection against interest rate. there needs to be protection not against credit risk, that should no be a -- >> by the way, that's been the testimony of all the people --

>> i think your approach, the approach in the senate, with senator -- >> johnson. >> and johnson. and i think, frankly, that's why we are -- the chairman said, well, we're going to do fannie and freddie. the fact is that bill hasn't gone to the floor. i understand it's a real chairman's job to get it through. i know what those are like. you have about three or four weeks left in the total session of five weeks. i think it's pretty leer that bill couldn't pass the house because it represents a viewpoint that's a valid intellectual viewpoint but that's a minoritminority, more afree with you, mr. delaney, mr. carney, you need to have some involvement to protect people against the credit risk on the 30-year fixed-rate mortgage. the republicans are going to complete their fourth year in a row of controlling the house and having not passed anything in the house on the gses.

>> my time is running out, but i'd be interested on the panelists' view on the bills before the committee. we had a lot of discussion today about differentiating banks by regulations. chairman has come up with some thoughts and i'd like to explore that with several of you. thank you very much, mr. chairman. >> the chair wishes to make an announcement that it is the chair's intention to recognize the members that are currently in the room. those who may be monitoring this in their offices, tough luck. this has the blessing of the ranking member. >> and of the former chairman. >> well, always happy to have the gentle lman's opinion. the chair now recognizes the gentleman from new mexico, mr. pierce. would you yield to the chair for just a brief moment? >> yes. >> i thank the gentleman for yielding. apparently the democratic-controlled senate may be having a little problem with their gse bill. i'd like to note that for the

record. and we have a disengaged president on the subject as well. i look forward to him changing his mind, perhaps, in the last two years of his administration. i thank the gentleman for yielding. >> thank you, mr. chairman. at this time i would appreciate it if we would post the chart that everyone has in front of them. mr. wilson, your testimony aligned most closely with the people if my district because we have a very rural district, a lot of small community banks and they're telling us similar stories. we were told dodd/frank was only for the big banks. in other words, there was this bifurcation that would cause small banks not to have to go through everything. now, it's my understanding that you would have to go through each step of this chart. first of all, the small creditor qualifications, then look at the loan features, then the balloon payment features. the underwriting features, the points and fees, portfolio.

and then the type of compliance presumption, the higher price -- on the higher priced loan. is that pretty well the regulatory process that you would have to go through to originate a loan? >> yes, sir. >> yeah, and so you've got 17 employees at the bank. how many employees would it take for you to accomplish all of this? i mean, don't go over 100 or -- i understand you would not be able to accomplish it with the number of people you have right now. >> yes, sir. >> yeah. and so we're led to believe that there is two different kinds of regulators that are going to come in, and if you're a big institution, they use one set of values. are you finding that, that day actually come in? or do they just enforce the same set of values all the way down to the small guys? >> the regulations apply to us, and the -- we have always been regulated by the fdic, and they

and our texas department of banking, they've done a really food job of regulating us. the problems that are being addressed in dodd/frank, a lot of those occurred by nonregulated people and the cfpb, i would argue, ought to be regulating those folks and leave us with the guys that have always regulated us. >> so the problems did not originate on main street, but we transferred the punishment down to main street and actually left out fannie and freddie to other bigger defenders, left completely out. and wall street, itself, has more capabilities than to perform the regulatory tasks than do the small banks. that's the reason you said you've lost 80 banks out of the state of texas? >> yes, sir. >> that's an amazing number. now, if you consider -- let's say that in your small town of san diego, texas, that there are -- along the spectrum, there's people with better means

and people with lesser means. which group is going to be most punished by shutting down local community banks? do the people on the low end of the income ladder in san diego understand where else they could go for a loan? do they have the capability, the wherewithal to go to dallas, houston, or mexico or somewhere like that? >> no, sir, but there are some payday lenders there in san diego, but for the smaller people -- >> yeah, so what we're going to do is leave a vacuum there and people who are not monitored, who are not regulated are going to show up and fill that vacuum. is that the way you would read it? >> unfortunately. >> and you said that you don't give mortgages -- loans anymore just because of the high risk. what risk do you find involved in givie ining mortgage loans? >> well, there's the compliance risk, and it's the -- being told what kind of mortgages i can make, and then going through and trying to do the qualified mortgage. >> yeah, that whole list of

things. the two sheets. >> having to escrow taxes and insurance. we're just not staffed or equipped for that type. never have in my 35 years. >> and so, again, we're going to make it harder for people in rural areas, especially on the lower income spectrum, to get loans for houses or trailer houses. do you ever find any competition coming in from lawsuit for loan money and houses in your district? >> no, sir. >> yeah, so basically what we're telling rural america with dodd/frank, if you live in the rural part of the country, you're going to be up the creek without the paddle, or there are other descriptions we can use, but we'll probably leave it to that one. mr. chairman, i would yield back the braalance of my time. i appreciate you're providing a service that's desperately important for the low income part of this nation. thank you very much. >> gentleman yields back. chair recognizes gentle lady from alabama. >> thank you, mr. chairman. i want to thank you and ranking member waters for bringing this panel and all of our guests who are here today.

i wanted to continue the line of questioning that congressman carney started with respect to the designation for sipis and wanted to know, chairman frank, is there some magic to the 50 million, i mean, billion number, and would you -- there are lots of bills floating around including one that i'm signed on to. and it -- it suggests maybe 100 million -- i'm sorry, 100 billion capitalization size-wise would be preferable. i wanted to know your thoughts on -- >> well, as i said before you were able to get here -- >> yeah. >> -- i do agree that there's room for that. i was at the meeting at the chicago federal reserve conference when the governor talked about doing that, talked about exempting the smaller banks -- >> sure did. >> -- from volcker and compensation explicitly. i think that's a very food set of ideas.

yes, i think that should be revisited. some -- i think you find some absolute number below what you can't go, then you look at some other factors. you don't want too much uncertainty. i think you run into the problem that was talked about. yeah, i think the -- you said, is it a magic number? no. but you always have to have a number. is 2 magic number for vote? you always have to pick a number and always be somewhat arbitrary. calling it a magic number denigrates the process that's inevitable. yeah, we should look at the $50 billion again. although, again, the problem was, lehman brothers started the last thing. so, we raised a good question about what is it when we say systemically important? it's a degree to which if you can't pay your debts, that's going to reverberate throughout the economy and that's the focus, i think, of the analysis. >> can you e lab rate a little

bit? i was here when you were talking about nonbanks being caught in that definition of sifis. your thoughts about asset management, companies -- >> well, i will, again, repeat what i said. i sent a comment saying as a general principle, i don't think asset managers or insurance companies that just sell insurance, as it's traditionally defined, are systemically important. they don't have this -- they don't have the leverage. their failure isn't going to have that systemic reverberatory effect. on the other hand, you had aig, insurance company in the insurance business was so good, they made more money literally than they knew what to do with. aig, you go about the causes, the federal reserve, mr. bernanke came to us in 2008 and said, i gave $85 billion to aig. he couldn't do that again because they were not solvent. therefore, he couldn't do that under our current bill.

a weak later they told us they needed so much for the t.a.r.p. and $85 billion for aig. they said, no, that's an additional $85 billion for aig. they not only didn't have the money to pay off, they had no idea how much they owed. that's my view on asset managers insurance as a general rule, no, but there might be activities they engage in that say yes. >> what would you say to the line of conversation that mr. wilson just had with my colleague about rural america not being able to benefit from dodd/frank? >> it's not what i would say, it's what i have said, again. i do think -- i would like to see a very sharp distinct in loans. i'd like the main safeguard against bad loans to be risk retention, because that leaves the decision in the hands of whoever is making the loan or securitizing it. and i would give much more leeway for portfolio loans. again, if you say that portfolio loans aren't subject to some of these rules, you're not saying they're unregulated. banks still got to go to their

primary regulator. but i think if people would hold loans in portfolio, that would be fine. when we had the fannie/freddie fight, i was one who said make them keep the loans in the portfolio, don't have them securitized as much. by 2005 i was convinced we had to pass legislation to change it. >> yeah, the reason i ask is i represent a large swath of rural alabama, and wanted to thank you for your leadership when you were chairman on manufactured housing as an option for maintaining affordable housing. and i yield back the rest of my time. >> gentle lady yields back. and the chair would recognize gentleman from georgia. mr. westmoreland. >> thank you, mr. chairman. dr. kubiak, we've heard from financial regulatory agencies that they conduct thorough cost/benefit analysis as they implement dodd/frank. you've been on the front lines

of this effort because you led the fdic's office of financial research under chairperson bair. do you feel the fdic and other domestic and global regulators have objectively measured the cost and benefits of the dodd/frank reforms they implement? >> absolutely -- absolutely not. the fdic, to the best of my knowledge, and i was the line officer for all the economists, never did any cost/benefit analysis for any rule internally. and they were scared to death that it would become a requirement. the federal reserve, i never saw any cost/benefit analysis that came out of the federal reserve, nor did i see any that came out of the occ. i was the chairman of the basal resource task force for the last three years. when the basal committee put out

its cost/benefit analysis on the effects of adopting basel-3. i was on the group that was going to write the paper. it came before the committee before the icelandic volcano erupted in march of that year and the meeting was canceled. there was no meeting of the group ever held. a draft paper arrived in my e-mail box in june. i was not involved in any of the analysis. i don't know where the analysis came from. i provided comments which were very critical of the analysis, not knowing where it came from and knowing very many holes in the analysis. comments were ignored, and a final draft in my e-mail box in august for me to sign off on because they wanted my name on the paper because i have some academic standing as a banking economist. as a well-known banking economist. i was chairman of the basel research task force. i refused to put my name on the

paper because i did not know where the analysis came from. it was not supported. it was built off six, seven digit modeling approaches cobbled together all over the world with no data analysis provided to anybody on the group. and, in fact, and i declined to put my name on the paper. and this subsequently caused me significant difficulties in the fdic. >> dr. kupiec, let me ask you, who stopped you from doing this analysis? >> there was never -- there was never a meeting to plan how there would even be an analysis of how the implementation of basel-3 should even be measured, how it should even be measured. a paper fully drafted appeared in my mailbox in june for me essentially to agree to. i don't work like that. >> so would you say that they were trying to inflate the benefits and underestimate -- >> oh, absolutely, and i could

give you many specific examples of that if you wanted to go into details. and my comments were exactly to that effect. and it's interesting that subsequently in the fall, when there was a negotiation among the basel committee membership to try to get the cap -- to figure out what the capital ratio should be in the final rule, that chairman bair was trying to get the fed to get the ratio higher than they wanted. the fed wanted a lower, more lenient ratio. and chairman bair referred to this basel study as evidence that it didn't hurt things to raise the ratio. and governor and pat parkinson actually called chairman bair and presented my critique of the paper asking her how she could use that discussion to strong arm for higher capital when her own banking economist who's on the economy wouldn't sign on to the result. so i do not think this is done.

we we >> well, thank you very much. the american action forum places the price tag for annual compliance of the dodd/frank act at $21.8 billion and 60.7 million paperwork burden hours. equivalent of 30,370 employees working full time to complete annual paperwork. these burdens are up from 15.4 billion and 58.3 million hours last year. that was an increase of 41% for the cost, and 4% increase for the paperwork hours. the federal -- the bureau of labor statistics and occupational outlook handbook said employment of financial examiners is projected to grow 27% from 2010 to 2020. faster than the average for all occupations. and we can't -- it's hard to say

that this does not create any burden on our financial institutions. >> time of the gentleman has expired. chair now recognizes the gentleman from indiana, mr. substitute stutsman. >> thank you, mr. chairman, and to the witnesses for being here today and for sharing with this committee. i'd like to first of all say, mr. chairman, i know for hoosiers back home who are having to deal with the rules from dodd/frank and the new standards they have to be held to is definitely a burden to them in ways they've never seen before. mr. chairman, i'm sure you remember the young man who was here a couple of months ago that the gentleman from kentucky, mr. barr, had invited who was a fifth-generation banker. shared with this committee how

that a small bank in central kentucky, fifth generation, he was the fifth generation, had survived the civil war, had survived world war i and ii, survived depression, wars in between, recession, but didn't know that this bank would survive dodd/frank. i think that sums it up in a lot of ways in what small banks, community banks, mid-sized banks are dealing with today and that we're seeing a consolidation in a way that i don't believe should have ever been the intention of any policy passed here in washington. and i know that as we look, you know, i heard from others on the other side of the aisle about how, you know, washington saved our meconomy from going over th brink. i tell you, there are a lot of

folks in northeastern indiana who felt like they did go over the brink, that they never were able to recover. they still haven't recovered. and the fact that food stamps are at an all-time high today should reflect on the policies that this administration, that congress in 2009, 2010, passed. part-time labor is at an all-time high. what dodd/frank has done to rural america, urban america, has tied the hands remarkably in ways that many people don't even understand. they just know that things are not getting better. and when they go to their bank in lagrange, indiana, and all of a sudden they can't get a loan when before they were able to, paid their bills, you know, always made sure that their credit was solid. they're trying to figure out what has happened.

and i'd like to touch a little bit on the volcker rule and what does that do? how do i explain to people back home the effects of the volcker rule? and there was a study done by oliver wyman that states the impact of the volcker rule will be similar to the financial crisis which disrupted liquidity and credit availability. could you describe how the volcker rule will have -- what impact it will have on liquidity and credit availability? will it be a positive or a negative impact? >> well, the volcker rule will reduce the amount of proprietary trading done by a bank or actually eliminate proprietary trading or ring fence that so that the depositors are protected.

what you have, then, there is less liquid markets so there's less trading in the securities. there will be a wider bid and ask spread, so when you go to sell, there are fewer buyers and, therefore, you'll sell at a lower price. when you go to buy, there are fewer sellers and you buy at a higher price. this would be in indiana, you know, the same is true in farming. if there's not a big market in the product, the spreads are wider when you buy and sell. >> follow it up on that. the volcker rule will take effect act the same time that basel-3 takes place. what will be the combined i ed impact? can you talk about that a little bit on interest rates? what other effects could we see? >> i've actually testified to this committee on that topic and likened it to an experiment, a chemical experiment, putting in basel-3, putting in bank requirements, putting in the volcker rule, and, you know, a number of other things and, frankly, we don't know what the outcome will be.

except that it's, you know, deer in the head lien lights on the f corporate treasure ers and medi size and small bankers. >> the time of the gentleman has expired. the last member to be recognized is the gentleman from ohio, mr. stivers, and he's recognized now. >> thank you, mr. chairman. i want to thank the chairman for holding this hearing. i want to thank the witness for bearing with us through what is a long hearing. the first question i have is, so, before i give you a question, i want to thank gwen moore for her leadership on the centralized treasury unit. she and i have worked together to try to get that issue fixed. can you tell me what will happen if we don't actually get that bill fixed today? i know there's no action letters. there's been some regulatory relief, but what happened if we actually don't get that passed? for end users like you? >> well, it will increase the --

so it just increases the uncertainty of the end user margin exemption to the extent that then those transactions would be ineligible for the exemption. then companies like my own would have to post cash margin which would subtract from money we'd otherwise invest in our business. >> if you had to do that, would you continue to manage risk in a centralized way that's smarter, or would you probably move to less active form of risk management? >> we would either have to do that in a completely different way, with uncertainty costs, or we would have to retain the risk, ourselves. either way would likely cause an increase in cost. >> and risk for your business. >> and risk. >> thank you. the next question i've got for mr. kupiec, this issue has been beat several times, but i think it's really important to hit it again. so the dodd/frank act set the

asset level of systemically important institutions at $50 billion. do you know if there's any relevance to the selection of this arbitrary number? cross referenced anywhere else? >> no, it's inarbitrary number. there's no scientific basis for $50 billion. >> so, and i think congressman luke myer did a great job of talking about the american banker article yesterday that talked about two banks that are now approaching $50 billion. so, and what's happened to their stock price, what's happened to them just as a result of potentially moving closer to that number. and even governor turillo, i know miss sewell referenced this, said the 100 billion number would be acceptable to him. but isn't there now an acceptance that $50 billion is absolutely too low among almost everybody that's out there? >> $50 billion i think is too low for all the interest and

regulations that only along with it. my recollection, and it could be a bit fuzzy, was $50 billion came out because at the time, cit, which was a nonbank financial institution, they decided not to bail out. and it was slightly below $50 billion. and i think, my recollection is that tied people's hands at the time na time. they can't go. i think it's reasonable to think that regional banks, if you fixed the mechanism so it -- you could exclude regional banks. regional banks that do primarily commercial banking or as big as $200 billion right now, you'd need to leave some growth room. i personally, knowing a fair bit about banks, wouldn't be shy at all and would shoot for some number like that. if it was a regional regular run of the mill commercial bank with not a lot of capital markets, not a lot of risky operations, i don't think that would be unusual at all. i think we need to fix the resolution process so if they do

get in trouble, they fail and they're broken apart and has to be fixed in the fdic act. >> that was clear in your comments earlier and your original testimony. i appreciate that testimony. so essentially every witness here today, even chairman frank, has agreed that $50 billion is too low a number, and by the way, congratulations on the beard, mr. chairman. it's coming along fine. five or ten more years. >> it's grown more than i hoped it would. i know that -- my other question to all of you is, i think chairman frank acknowledged it earlier, while we have to pick some number, that is absolutely true, but it is the risk that these -- the activities that these institutions engage in that create risk, not necessarily the asset size that makes that happen. but i understand there has to be some number. does everybody agree that it's really activity that generates risk? >> not just that, well, activity generates risk, but impact is generated by interconnectedness. >> absolutely. that's why in the --

>> the five standards created for nonbank financial institutions really focuses on interconnectedness. that's what the luke myer bill really focuses on. you're absolutely right. but, you know, my point in the last eight seconds is the regional banks pulled into this are a lot like mr. wilson's bank. they got a little bigger and do exactly what plcmr. wilson's ba does. they serve main street. i yield back my nonexistent time. >> time of the gentleman has expired. i'd like to thank the witnesses for their testimony today. all members will have five legislative days to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses to their response. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. the hearing stands adjourned.

richard rubin is tax policy reporter with bloomberg news. to help us understand the two tax credit bills debated on the floor this week. the first one, sponsored by diane black of tennessee. the headline on your bloomberg piece reads education tax breaks getting $96.5 billion boost from the panel. what are the details here? how would this affect current tax credits? >> sure. what this does is takes four existing tax breaks and consolidates them into one for

college tuition capped, and it's income limited up to, and almost near $200,000 but not all the way there for married couples filing jointly. and the idea really is to make filing simpler. it's one of those things where congress has always wanted to find ways to help people pay for college and help parents pay for college and students pay for college, and so they've repeatedly passed things to help that happen. now you've got these overlapping tax breaks and expiring tax breaks. the goal here really is to clean some of that up and consolidate things into one simpler easier to use break. >> republican lynn jenkins is behind the other tax credit bill dealing with the child tax credit and also the so-called marriage penalty. what's the dollar figure on that and some of the policy details? >> that one's even a little bit bigger, and that one, what's interesting, on the child credit, takes the $1,000 per child credit and indexes it for inflation. right now the $1,000 is what you get for each kid each year on

your taxes. it's a credit, not a deduction. so it's an actual dollar amount that comes off of your tax bill. right now there's what's called a marriage penalty built into it where the amount where you can start losing the benefit if you're a married couple is less than double the amount for a single person. so what this bill does is make that -- it doubles the amount, so it would be $150,000 per married couple and $75,000 for singles and indexes both those thresholds for income and the $1,000 credit for inflation. so as prices rise, as wages rise, the credit will rise with it. >> your article points out the democrats are not quite happy about that child tax credit bill because it phases out and this doesn't apply to lower income. why is that? >> there's expansion for the child credit for lower income families that was originally part of the 2009 stimulus law. that's sjed to expire at the end of 2017 and democrats want to

make sure that gets passed. for them the idea of extending and expanding the child credit for supper middle income families, wheel nile not dealinh the education prags fx-per rati income families is not clear. >> tweeted about the white house view. "house has tax bills on education and child tax credits on the floor. the administration opposes both, fwho but no veto threat on the education bill. "why are they going to let that one slide? >> we'll see if they let it slide. they oppose it because this is part of a larger context on tax where republicans are passing tax cuts without offsets to prevent increase in the budget deficit. the white house and republicans are at odds on this as they've been for years now. we'll see what happens if it passes. the way the republicans have set this up, if both bills pass, they'll combine them and send them over to the senate. neither bill is likely to advance in the senate, anyway, and adding the child credit bill to the education bill means you're taking something that the

president has promised to veto and threatened to veto and combining it with the education bill that he might not veto if it got there on its own. so i think the chances of this in the form it's in now becoming law this year are pretty slim. >> well, how do these two bills fit into the overall plan, the broader proposal by representative camp on tax reform? >> well, what's in here are elements of what camp had in his bill that he released in draft form earlier this year. and what republicans have basically decided is, well, if there's some good things we saw that we wanted to do, let's just vote and do them because the idea of getting everything in that bill, including the tax increases that were in there to offset the tax cuts, is not going to happen. so they basically decided let's pick the most politically popular things, pass them, things that they think make the most sense to do, and then dare the democrats to oppose them. >> and do they figure that by doing this piecemeal approach,

they can pick up some democratic support? >> and they have. some bills on the research credit, on a bunch of charitable deduction bills that they did recently, those measures have gotten some democratic support. now that's certainly not enough to get it to the top of democrats' agenda in the senate or get the president to sign it, but they have been able to show that there is bipartisan support for some of these measures. >> richard rubin, tax policy reporter with bloomberg news. he's at bloomberg.com. also follow more reporting on twitter at richardrubinbc. thanks for the update. house budget committee chair paul ryan unveiled a new set of policies to address poverty and economic mobility. congressman ryan outlined his proposals at an event here in washington earlier today. >> so i would start a pilot program called an opportunity grant. it would consolidate up to 11 federal programs into one stream of funding to participating

states. the idea would be let states try different ways of providing aid then to test the result. in short, more flexibility in exchange for more accountability. my thinking basically is, get rid of these bureaucratic formulas and put the emphasis on results. participation would be voluntary. no state would be forced to join. we would not expand the program until all the evidence was in. the point is, you don't just pass a law and hope for the best. if you've got an idea, let's try it, let's test it. see what works. don't make promise after promise. let success build on success. here's how it would work. each state that wanted to participate would submit a plan to the federal government. that plan would lay out in detail the state's proposed alternative. if everything passed muster, the federal government would give the green light. and the state would get more flexibility. it would get to combine into one funding stream up to 11 different programs. things like food stamps, housing

assistance, childcare, cash welfare. this new simplified stream of funding would become the opportunity grant. and it would be budget neutral. the state would get the same amount of money as they would under current law, not a penny less. in effect, the state would say, give us some space and we can figure this out, and the federal government would say, go to it on four conditions. first, you have to spend this money on people in need. you can't take this money and put it in roads and bridges, no funny business. second, every person who can work should work. third, you got to give people basic choices. thegency can't be the only game in town. people must have at least one other option, whether it's a non-profit, for-profit, or what have you. fourth. you got to test the results. the federal government and the state must agree on a neutral third party to keep track of progress. that's the deal. so if approved, a state could use that money to expand state

programs and partner with local service providers. in other words, families in need would have a choice. there wouldn't just be a federal agency or state agency. instead, they could choose from a list of certified providers. we're talking non-profits like catholic charities. for-profits like america works or community groups that are unique to your neighborhood. these groups would work with people one-on-one. and provide a personalized aid from case management. think of it this way. right now, you've got to go to a bunch of different offices to enroll in a bunch of different programs. each with all their different rules. under the opportunity grant, you could go to one office, and you could work with one person for all of your needs. that person would give you financial assistance and would also act as a personal resource. maybe you're struggling with an addiction. you need counseling. maybe you come from a broken family and you need a network of support. the point is, you would work

together to get you from where you are to where you want to be. >> you can watch all of house budget committee chair paul ryan's remarks on our website, c-span.org. 40 years ago, the watergate scandal led to the only resignation of an american president. american history tv revisits 1974 and the final weeks of the nixon administration. this weekend the house judiciary committee as it rs impeachment of the president and charge of abuse of power. >> what you have here are questions about what the framers had in mind, questions about whether the activities that had been found out by the committee and by the senate watergate committee were, indeed, impee impeachab impeachable, and thirdly, can we prove richard nixon knew about them and even authorized them? >> watergate: 40 years later, sunday night at 8:00 eastern on

american history tv on c-span3. cruise passengers who were the victims of sexual assault testified wednesday at a senate committee hearing examining safety and security regulations for the cruise ship industry. witnesses discussed ways that cruise passenger protection act could be enhanced to better protect passengers and provide them with proper medical care. the senate commerce and transportation committee organized this hour and 20 minute hearing. >> now, for those who came here for different purpose, again, i want to apologize. this was a chance to get out five bills, and if you've been watching the united states senate or congress for that matter, getting the bill out of committee is a triumphant moment. we had to take advantage to get five out. but the point of this hearing is all of you. so i'm going to make, again, make my opening statement --

>> mr. chairman, may i be rec d recorded in favor of these five measu measures? >> of course. as so ordered. all right. i'd like to begin this hearing in the same way i started the hearing i held on the cruise industry last year. by saying that most people who take cruise ship vacations have a good experience. millions of americans -- i'd like to have silence, please -- millions of americans go on cruises every year. most of the time they have a nice trip and return home safely just like the cruise companies promised in their advertisements. but once in a while, things can go terribly wrong. ships catch fire. passengers fall overboard, or get sick. crew members sexually assault passengers. instances like these are unfortunately also a part of the cruise experience. i'm very honored today to welcome four witnesses who will help us understand firsthand the consequences of these instances. we've talked about them in sort

of a larger way, but we have not had the direct testimony of those affected by it and those who represent some who are affected by it. and so that's what this hearing was before, the fact that some senators have left, don't let that bother you. markups are unusual. and that's why they had to come because they're all 13 and then they had to go do something else. you're the point of all of this. i want that to be very, very clear to you. so as i said, i'm very glad to welcome four witnesses who will help us understand firsthand the consequences of these instances, what they had to go through, and i recognize that this is not an easy subject to talk about. let that be said, okay? so that -- it's painful, and however you reflect that pain, the committee understands it, welcomes it, joins you in, you know, the difficulty of coming up here and testifying before a

senate committee. although it's really not that difficult, after all. the cruise industry, i'm happy to say, is not happy that i'm holding this hearing. they're very unhappy. those companies don't like it when congress or the media talk about the risk of taking a cruise vacation. they have repeatedly told this committee in both public hearings and private meetings that cruise ships and trips are safe. that's it, no need to do anything. but the facts tell a different story. it doesn't mean that they're -- as i said, the average person will have a good experience, but you don't judge a steel plant by, you know, 500 workers not being hurt, but 30 workers being very badly hurt. i mean, it's the problems that you have to address. so the facts tell a different story. last year, our committee r released a report that found hundreds of cruise crimes were

not being publicly reported. very basic negligence. we've had several hearings where expert witnesses testified about ongoing safety and security problems like wrecks, fires, crimes, onboard these vessels. we continue to see the same issues continuing to continue. and i'm fed up with it. i'm fed up with them trying to stone wall us. yes, they have lots of money. they have lots of lobbyists. and that's -- we're going to win this one. almost exactly one year ago, carnival's president told this committee that his company's number one priority is, quote, the safety and security of our guests. he explained to us how the cruise lines have every incentive to make sure their customers have a good experience. that sounds nice in a congressional hearing, but it's little comfort to the many people whose vacations or in a

number of cases, lives, have been ruined by the cruise line's failure to deliver on their promises. that is if they got a chance to see what the promises were. which is a problem if and of itself. we'll talk about that. in spite of the evidence that crimes, fires, mechanical failures, drownings, and mishandled medical emergencies occur with disturbing regularity on cruise ships, the industry continues to deny that it has a problem. any problem. just denies it has any problems. it has circled the wagons and reflexively fought all efforts to provide consumers more information about the risks of cruise ship vacations. i don't mind if they talk about the joys and the pleasures, but people have to talk about the risks, too. it's not fair if they don't. they often refer to, you know, new york city does it. they have all kinds of problems. but they don't advertise their problems. yeah, but when you're on a cruise ship, you know, out in the ocean somewhere, there isn't

a hospital next door. there isn't a police station to two to. i mean, you're just on an island all by yourself, and it's a very different feeling than being part of a community which can come to help. so that's where my legislation comes in. last year after witnessing the costa concordia tragedy, the triumph debacle, and learning about the underreported number of crimes on cruise ships, i introduced something called the cruise passenger protection act of 2013. in this bill, i proposed making it easier for consumers to report crimes and make complaints about problems on cruise ships. everything is about making it easier. if you make it hard, a lot of people just won't do it. and unfortunately, when you have an encapsulated environment like a cruise ship trip, you have to be able to report. you just have to be able to do that and do it fairly easily.

so, we make it easier to report. i've also proposed simplifying ticket contracts and publishing more information about crimes and other problems on cruise ships. you know what i'm talking about when i talk about the ticket problem. you have to peel, you know, layers of paper away, you know, you're just signing a ticket. but it's underneath that somewhere that says, oh, by the way, you give up your liability. that is not nice. it's a terrible thing to do to passengers. these aren't crazy ideas that i'm suggesting. they're common sense protections the consumers already have if they travel, freor example, or they travel by rail. but the cruise industry vehemently opposes my bill, even the bill's simplest provisions like reporting crimes against minors. or putting up a website at the department of transportation that consumers can consult while they're making their vacation

plans. so they can see what the problems might be and what the advantages might be so they're making an informed decision. when an industry opposes even the most basic public disclosure about its conduct, it suggests to me, frankly, that it has something to hide. our witnesses today are going to help us understand why it is so important for consumers to have this information. unlike people vacationing on land, cruise ship passengers who are victims of crimes do not have immediate access to law enforcement. well, you say, well, sure, they're out at sea. yeahs but they're out at sea and don't have access to law enforcement. that's pretty basic. and if they suffer a health emergency on a cruise, they could be hundreds of miles away from a health facility that operates at u.s. standards or even below u.s. standards. just something called a hospital. our witnesses are also going to tell us that in spite of the cruise industry's talk about

talking about taking responsibility for cruise passengers, cruise lines sometimes treat their passengers with shocking callousness and disregard. my words are harsh because i'm angry about this. four witnesses are appearing before this committee today, and i thank them. but there are many, many more people, as you all know, who could have shared their experiences. and have with my staff. kent carver, jamie barnett, and countless others have fought for years to help protect others from needless tragedy. i would like to thank everybody who's been willing to step forward and tell us their stories despite, as i indicated, the painful and sometimes tragic circumstances, not just that they happened, but having to recall them verbally and publicly. having accurate statistics about crimes and other instances is important and it's even more important to understand the human cost of the safety and security problems that this industry is not fully acknowledging. this hearing along with other

hearings ainto the cruise industry since i've been chairman are about one thing and it's called accountability. being honest with people. i know the cruise companies think that i am singling them out, as they say, for special scrutiny, but i assure them it is not the case. i have never hesitated to ask companies tough questions when i think their business practices are hurting on so ining consume. that's my job. all of our jobs. we have oversight. that's the main reason we exist as a committee is to have oversight and to try to make things better. this process of asking tough questions is called, in fact, oversight. it's one of the most important jobs the congressional committees have, maybe the most important. when it comes to the cruise industry, we've been doing our job. we have held hearings, we have analyzed the data and we have talked to many different people with experiences in this industry. this oversight has led us to very, clearly, to the conclusion

that we have to act. we need legislation to protect consumers. for anyone in this committee who still hasn't gotten the message, i urge you to listen closely today as these witnesses bravely share their experiences. i thank everybody. one closing statement. to the cruise industry, instead of fighting this process, i encourage you to listen carefully to the testimony today. i ask you to honestly consider whether there are steps that you can take to better protect the health and safety of your passengers. look, this is -- the cruise industry is booming. people love to travel. people love to go on those ships. i don't begrudge that. my own son has done that. i don't begrudge people that. they have the right to do that, but they also have responsibility since they're under our jurisdiction to do it safely and properly. for everyone.

i believe there are steps that they can take and i will continue pushing to make those things happen. i now call upon the distinguished senator from massachusetts, roger wicker. >> thank you, mr. chairman. i think you've made a number of very important and valid points. i also want to thank the witnesses for being here. as you said, mr. chairman, it may be difficult for them to share their experiences, but it's important that they do so. and i appreciate their courage in coming forward and being able to share with us today on some information we need. the chair has built this hearing as a forum to discuss his bill, cruise ship passenger protection act, s-1340. we need to protect passengers from crime. we need to ensure access to medical care while on the high seas. these are important and worthy issues. i would say, i think that it

would be best if we consider this legislation as a standalone bill and not in connection with the coast guard authorization act. i don't know what the chair's approach to this is going to be, but i do not believe the reauthorization act is the appropriate vehicle for a cruise passenger protection bill. and my judgment, we ought to consider cruise ship passenger protection legislation separately from the coast guard authorization act. congress deserves the opportunity to examine how we can strengthen the transparency of crimes on the high seas, and the public deserves a discussion with full congressional attention to making cruising safer for americans and foreign tourists while visiting u.s. ports. there are many areas in which the cruise ship industry is receiving criticism. including the effectiveness of crime prevention.

their response to crime. sexual assault. the report of incidents and tax concerns. i hope that safety standards like those that could have been beneficial in the treatment cou beneficial are a priority in this discussion. there are cruise ships underway with maximum capacities, larger than many of our small towns and cities in america. some cruise ships have more than 6,000 passengers and some 2000 staff with them. and, yet, they only require two medical professionals on board. imagine a small town of that size? my native home in mississippi, where there's some 57800 people living in -- what if we only had two medical professionals in the

home toun? as a matter of fact, in my native city, we have 29. health care professionals. so there is -- that gives me great pause to think that a cruise ship only containing 8,000 souls would have 4,000 on board. we all have a right to hear the stories of the victims. we do not need to pay the entire industry with a broad brush because of a few bad actors. but we should look for ways to

make passenger cruises a safe environment for our american passengers and tourists. i encourage the industry to find a market-driven solution. i now look forward to the testimony of our witnesses. >> thank you, senator. the senator and i come from states with lots of rule places, like my sort of home toun has been 270 people. so you're urban compared to us. lori fishman had a very, very bad smeerns on a cruise in 2006.

she's also an international association board member. i believe she wants to work on that. phil gershin, who was a 15-year-old minor was on that same board and chairman of the victims for crime. amanda button, who i just met outside whose mother suffered a medical emergency on a carnival cruise and likely passed away from lack of medical care. she was stranted for four days. they're easy for me to say, but they're very hard to have gone through and to talk about.

so let's go at it. thank you so much for being here. >> hello, my name is lori dishman. i would like to thank the chairman for inviting me to washington. it is quite an honor and privilege to be here today. senator rock feller, i am a cruise ship rape victim. i have an experience to tell you about. a cruiseline employee raped me during a cruise to mexico. the security guard was would recollecting in a disco on a ship. he approached me and asked me my name and cabin number. i resisted and struggled. he strangled me and rudely raped me. i have ligature marksaround my

neck and i was impacted. there were no police on the trip. i was hesitant to call the police. just three days. i was looking forward to this cruise. i was celebrating my birthday and 30 years of friendship with my best friend, nicole. >> in the evening, i would find myself in the middle of a nightmare. michelle called the desk to report the crime. i tried to tell them what had happened, but they insisted that i prepare a written statement and sign it. they left without securing the

cabin or taking me to the ship imfirm ri. the doctor handed us two black garbage bags and asked us to go back and collect the evidence. we returned to the infirmary with men sill all surrounding us. the ship doctor eventually performed the rape kit. i was returned to my cabin. the mattress seemed naked and dirty to me. it looked like i felt. i could not stop thinking about what had just happened to me

over and over again. i did not know what happens next. i just wanted to close my eyes and go home. i was given three options. to get off the ship in mexico, to stay on the cruise ship and report it to the fbi when we return or fly back to l.a. and report the rape to the f.b.i. i opted to fly back to las angererless once i could getoff the ship. a few days later, the fbi aborted the ship. the crew member denied even going into my cabin. he did not pass the polygraph. but the f.b.i. said it was just the he said, she said case and declined to arrest him. the department of justice declined to prosecute on that same day.

the cruise ship set sail again. two days later, i learned he changed his story. he was confined to his cabin and then a security guard put out his door. imheard a lawyer in miami. why miami? because even though he had lived in sacramento, the crime occurred in international waters. and in the ticket, it says that you need to find an attorney in miami. my attorney foumpbd out many things that surprised and angered me. the security guard was a janitor who the skruz line called a cleaning specialist who was paid $550 a month.

he had no training or experience at all. it included lying, falsification of records, insubordination and anger management. royal caribbean pursuant to court orders saying the cruise line had studied sexual assault back on their ships.

but the cruise line ignored what their experts told them. by it willing the public that crimes are very rare. in 2007, i joined the international cruise victims. today, i am joined with the chairman of icb, board members and friends of icb. in closing, cruise consumers have virtually no rights or protections. i know this firsthand. i know exactly how it feels to have no rights and to be victimized by the cruiseline a second time after their employee assaulted me. provide a clear and accurate statement of our rights