intimidation. without undue regulation. we'll fight for due process under the law. free of abusive tactics by federal and state agencies, and prosecutorers. we'll fight for everyone's right to speak and even voice con electrover shall opinions. we'll fight to preserve the spirit of enterprise in america which begins with the right to risk, to fail, to try again, to succeed and to be rewarded for your efforts. contrary to what some of our political leaders have said, businesses really do create the jobs. they really do build things. wherever they reside businesses are not the enemy, they're a big part of the solution to the

challenges we face as a nation and as a people. of course, businesses does not -- they don't do it alone. and yes, businesses need the government to protect our security. and to maintain an economic platform of our country. but what business needs most of all -- from all of these government agencies is wise, competent and courageous leadership that knows when to get involved and when not to interfere. a government that is judicious and responsible in the exercise of its extraordinary powers to tax, spend and regulate. today we're hearing a lot of talk about so-called economic populism. it's advocates claim they are standing up for the average citizen. but what they're really standing up for is the unbridaled growth

of the central government and the development of a state run economy. we have economic populism in this country. and i'll tell you what it is. it's 28 million businesses of every conceivable size and endeavor that have sprung to life in every town, city and community in our country. it's millions of businesses that have been invented around the kitchen table or in the garage, or in a college dorm. it's millions of women that already own businesses whose owners are persistently and aggressively laying claim to their share of the american dream. and it's tens of thousands of larger businesses, many of them with global reach that are

providing job services health care and retirement savings for the entire nation. american free enterprise is the economic populism we need and must support, it has built the most successful economy in our history and in the history of the world. and built it from the bottom up. now, look not everyone succeeds, and not all outcomes are equal. but our enterprise system is the envy of the world, it's why people from rich and poor countries are beating a path to our door. we must reject trickle down government and support expanded -- and celebrate the entrepreneurial spirit. and we must make sure that it thrives, not just in business.

but in every field of endeavor in our society. as the chamber pursues a full policy agenda, focused on economic growth and government reform, rest assured that we are reserving a good measure of our fight, of our spirit of our passion for that which must not change. the unique american rights and freedoms that made this country great. and that will carry it forward to a bright future. thank you very much. [ applause ] tomorrow the house is scheduled to take up the senate version of a bill funding

construction of the keystone xl pipeline. watch the debate on c-span. more now from january's heritage foundation forum as ted cruz outlines proposals the gop congress should take up in the 114th congress including a flat tax, repealing the health care law, and addressing border security. >> i don't think i'll say anything else. i don't usually get applause before i speak. it's been a great day, got a chance to pick some of it up online, we got a lot of coverage around the country, good ideas, good discussion but i can't think of anyone i'd rather introduce right now than ted cruz. there are very few people, i know, in any organization, especially in congress who have

the intellectual capability to understand complex problems to actually come up with good solutions, but then to have the courage, the personal fortitude to actually push those ideas through. and to stand up to incredible pressure, the kind of pressure i was talking about this morning, from all the big cronies in washington that want to maintain the status quo, ted cruz has been willing to stand up and say no. i was talking to him on the way in, i said things seem to be going pretty well. he said, it's like the guy who's fallen off the building, every floor he goes by he says so far, so good. i know that feeling the bottom is coming right? i think ted cruz is definitely on his way up, and that's what i hear around the country. thanks for all you've done, the victories you've won. more than anything else, i hear thanks for fighting.

they want someone who stands up for what they believe the values of americans and do what you can. and ted cruz has definitely deng that, as much as anyone i know. and i'm read proud to know him, ted, come share your thoughts. [ applause ] >> well, thank you very much, jim, thank each of you for having me here. thank you for this cold wintery day in washington. these are extraordinary time ss. these are remarkable times. you know, just last week walking down the hallway in the capitol i ran into a janitor carrying a screw drive err, coming

to change the sign on harry reid's door. and i'll tell you, with all great change there's usually foreshadowing. you can get the foreshadowing in the november election come august, september, october. you know, one of the first signs, jim, the democratic senators were nice to us. they were looking ahead to election day, you would be on the elevator what a great time that is, have you lost weight? you're looking sharp like okay, still contemplating losing that chairman's gavel are you? it was an astonishing election in november. but it's important to understand what the election signified.

the election was not an embrace of republicans. the election was not and embrace of one party instead the election in my view was the voter s voters roundly repudiateing the current condition. the obama economy isn't working. we want something different. we want real leadership. republicans have an opportunity an incredible opportunity right now. we have been once again entrusted with leadership in congress. i want to say thank you to heritage action for hosting this event. the core focus of this event you have a majority, what do you

want to do with it. there's a division of thought in this town there are some people in this town who will end tone in gravelly voices, we need to get things done. oddly enough, the people saying that, it doesn't matter what those things are. there are voices who will say, if you stand for anything significant. that has electoral risk. i remember in the last two years people said, no, no, no, no republicans you shouldn't stand and fight on anything, you don't have a majority. we have a majorityimaginemajority. mark my words, there are those

that say you still shouldn't stabbed and fight, you don't have 60. you know what if we had won 60 seats in the senate, you would hear the voices saying, no no no not yet. you don't have 67 votes. i'll tell you this. if you get elected, promising to do nothing, when you're in office, you will do nothing. i'm growing to suggest way different way to get things done, a different way to govern and a different way to win elections. i very much agree with president ronald reagan who said, the republican party is not a fraternal order, it's not simply about palling around with guys in blue sweaters or red sweaters.

it's a movement around a shared set of ideals of liberty, the corn sti tugs, and it matters only in so far as we are standing up and defending the constitutional value ss. what i would encourage my friends, my colleagues in the senate and the house is something very, very simple. let's stand up and lead. let's lead with a big bold positive agenda. that says to the american people you had a referendum. and you rejected the obama agenda, there is a better way. that's our opportunity, i'll tell you for all the republican s in toning we must get things done, if we simply settle into

businesses usual in this town, and keep growing and growing and growing and keep shrinking and shrinking and shrinking the sphere of individual liberty we will demoralize the millions of men and women who came out in november and gave republicans the biggest majority in the house since the 1920s. not only will we not win elections, we'll get walloped, and we'll deserve to get walloped. what i would urge my colleagues to do is very, very simple. it's the advice a lot of us here have kids. every one of us has told our kids, tell the truth and do what you said you would do. that is the advice i would give every one of our colleagues. you know it's striking in the

senate, two years ago i remember joining the other republican freshmen in mitch mcconnell's office. there were three of us. it was lonely. it was really lonely. we had enough for a game of spades. this year, there are 12 republican freshmen. a dozen. nearly a quarter of the republican conference are freshmen, and i'll tell you what i've encouraged every freshman, is that if each of you that just fought and clawed to win an election, if each of you simply stands up every day and says hey, let's do what we said we would do that will have a transformational effect. on the united states senate. if each and every senator in january answers questions the

exact same way we would have answered those questions in october before the election. that will have a transformative effect. in my view, republicans should take this opportunity to lead with a big, bold agenda that focuses on jobs, liberty and security. and let me talk about ten specific agenda items that we should take up and pass. and these are agenda items i laid out before the election. if we want a majority this is what we should do and after the election my view shock of all shocks, is we should do exactly what we said before the election. step number one. embrace a big positive jobs growth and opportunity agenda. now, that means a host of things, it means for example. as we will do this week, finally

finally finally passing the keystone pipeline. but listen jobs are a lot more than keystone. keystone matters, it is an example of partisan politics trumping common sense in this town. but we need a jobs agenda, an energy agenda far broader. we've seen incredible growth in the energy sector in the last several years. last year i introduced the american energy renaissance act, a comprehensive piece of legislation to remove the federal barriers to creating millions of high paying jobs in the private sector in the energy sector. and not just in energy low cost energy is also bringing manufacturing jobs back, bringing steel jobs back, bringing the kind of jobs that built the dignity of the middle

class in america we need to pass legislation making clear that the federal government has no authority to regulate or prohibit tracking. that the states are perfectly poised to make determinations in their own states and there's no need for the feds to stick their nose in the middle of it. we need to remove the arbitrary export bans on liquid natural gas, on crude oil. we need to open up federal lands to exploration to development. president obama loves to drag about the energy exploration during his tenure without noting that virtually all of it has happened on private land and federal land. the federal government has been standing as an impediment as a barrier to developing those resources. number two, we need to do

everything humanly possible to repeal obama care. [ applause ] >> you know, five years ago when obama care was being debated. reasonable minds perhaps put it different over whether this thing might work. today seeing the devastation, seeing the train wreck seeing the millions of americans who have lost their jobs, who have been forced into part time work, who have lost their health care, their doctors today the only reasonable, prudent outcome is to acknowledge this thing isn't working. and we need to repeal it and start over. now, what does that mean? what does that mean with

president obama still in the white house? well, first of all, in my view, congress should take up and using every procedural tool available including reconciliation repeal obama care with 51 votes in the senate now the president is very, very likely to veto that. for the next two years, we're not going to have the votes to override that veto what we then need to do is systematically begin teeing up legislation after legislation addressing the most harmful consequences of obama care providing real relief to the millions of people who are hurting. for example, we need to introduce legislation, take it up and vote on it saying if you like your health insurance plan you can keep your health insurance plan the president repeatedly looked into the tv cameras and made that promise over and over and over again.

we need to codify it for the 6 million people who have had their health insurance plans cancelled because of obama care we need to address the paint federal government has caused to them. and i would note that also puts democrats in an interesting position there are lots of senate democrats who say, i like obama care in the abstract but there are individual problems with it let's start talking about those individual problems. one after the other after the other you decide as a signal democrat if you're in favor of the federal government causing people to lose their health insurance plans or not. you decide if you're a signal democrat. if you're in favor of bailing out giant insurance companies or not, we need to prohibit federal government bailouts to the insurance companies.

one after the other after the other we need to pass these. now, i want to -- two things is going to happen. one the democrats block it either through filibuster in the senate, or through the president vetoing it. or two, they pass it along. if the latter we begin to provide meaningful relief to the people who are hurting and at the former, there is absolute clarity as to where the parties stand and what we stand for but we need to honor those commitments, number three we need to finally secure the border, and stop the president's unconstitutional amnesty. you know it's amazing, right now, the white house is castigating republicans how dare you focus on securing the

border -- literally at the very same time we are seeing terrorists trying to murder free people across the globe. the very same dayst sentcom is hacked by isis. the press secretary is saying, no, no, no don't do anything to secure the border and protect americans. this is a matter of basic common sense. i have to tell you one of the fun things about washington, is listening to senate democrats who live in states far far away from the border explain to those of us who live in states on the border how wonderfully secure the border really is i have a modest suggestion. perhaps we should move the white house down to the rio grande

valley. after all, there can't be more people climbing the white house fence than there are now. you know when you go down to the valley, and in texas we have a nearly 2,000 mile border, what you hear from people who live there, from law enforcement, local elected officials and by the way from republicans and democrats is secure the border and protect our security it's a basis common sense issue and when it comes to amnesty anyone who's concerned about rule of law, separation of powers, anyone who believes in the constitution should be deeply dismayed. by the president's decree that he will simply ignore federal law. when he unilaterally tried to grant amnesty to millions of

voter s voters -- i said voters. what's interesting about the president's approach on this, is it seems like it's always always, always political. before the election, president obama said this election will be a referendum on my policies every one of my policies will be on the ballot. president obama was right. words that have not been said often at the heritage foundation but you better believe if the senate democrats had been re-elected. if harry reid had grown his majority, the president would have gotten up and opined the people have spoken and they have embraced my agenda. instead the president got up and said, the people who didn't vote have spoken. never mind those pesky people that actually showed up and

expressed their views. let me say something about both obama care and amnesty. we brought michael j. fox up here in a delorean and we went back in time to october of 2014 not too long ago. you would see republican candidates all over the country in october of 2014 saying, if you elect us -- if you give us a republican majority what will we do? number one we're going to fight tooth and nail to repeal obama care the number one topic republican candidates raised on the campaign trail. and number two, if you elect us, if you give us a republican majority we're going to stop president obama's illegal and unconstitutional amnesty. that was just over two months ago. and yet now when the topics come

up at times you hear crickets chirping. it ain't complicated. we need to do what we said we would do. [ applause ] >> number four, we need to hold government accountable and reign in judicial activists. one of the most important things this new senate is going to provide i hope and believe is real meaningful oversight of the obama administration. of the abuse of power of the lawlessness lawlessness. of the regulatory abuse. i'm looking forward to what i hope will be republican chairman conducting careful sober serious inquiries into the abuse of power and the millions of people who are hurting because of it.

i am looking forward to seeing the united states senate finally begin doing its job. for six years harry reid has been obama's most important protector. i'm looking forward to seeing serious inquiries into the trampling of religious liberties that have occurred over the last six months. i'm looking forward to seeing finally some real scrutiny to prevent judicial activists from being put on the bench who will impose their own radical agenda. including sadly the judicial activism we have seen in recent months with the courts effectively striking down the marriage laws in 33 states. constitution makes clear, marriage is a question for the states it's not a question for a bunch of elected federal judges who may disagree with the

democratic views of the people who live in the united states of america america. number five, it's time to stop the culture of interruption. i've said a lot of times that the biggest divide we have in this country politically is not between republicans and democrats, it's not between the establishment and the tea party as our friends in the media like to write about. it is instead between career politicians in washington in both parties and the american people people. now, i am hopeful we will see real bold leadership from republicans this year and next but i got to say the lame duck was aptly named. it was not encouraging to see a giant pile of corporate welfare

being the first things republicans rushed to pass through wouldn't it be nice to see our elected officials respond with the same diligence to the taxpayers that they respond to the promises made to lobbyists on k street? this town is fundamentally corrupt. both parties come together and say, let's reauthorize the xm bank. why? it helps a whole bunch of giant corporations, just hurts the little guys. the big guys give us checks, the little guys don't. one of the many many reasons we need to finally, finally, finally pass a term limits amendment to the united states constitution serving in congress should not be a

lifetime job. but what should be lifetime is a ban on members of congress becoming lobbyists and coming back after serving in this job. we need to pass fundamental tax reform making our tax codes simpler, flatter, fairer and i'll tell you the single most important tax code we should abolish the irs. . now, the voices of washington will say tisk, tisk, that is inconsistent with getting things done. i will note some years ago steve forbes did a remarkable job starting to build the foundation for a flat tax.

a simple flat tax that is fair, that every american could fill out his or her taxes on a postcard the last two years have fundamentally changed the dynamics of this debate. as we have seen the weaponization of the irs. as we have seen the obama administration using the irs in a partisan manner to punish its political enemies in my view, there is a powerful populous instinct to take the 110,000 employees at the irs and padlock the building and to put all 110,000 of them down on our southern border. [ applause ] now, i say that somewhat tongue

in cheek, you have to think if you were coming illegally into this country, you travelled hundreds or thousands of miles in the grinding heat, if you swam across the rio grande and the first thing you saw was 110,000 irs agents you'd turn around and go home too. it may well be the case that we won't succeed in abolishing the irs and adopting a flat tax with barack obama in the white house. we may have to wait two years for a republican president to lead that fight. but what we can do in the interim is tee up simplification of the tax code, make the burden easier reduce the burdens,

reduce the power of washington which producing growth which unchains the citizenry and weakens the power of washington, number seven. we need to audit the federal reserve reserve. you know one of the most corrosive things we've seen over the last six years has been an easy money policy. qe-1, qe-2, qe-infinity. and i'm reminded of john edwards speech to americans. john edwards in this respect was right. another sentence rarely said

this. if you go to wall street, if you go to those with wealth and power who will walk the corridors of power in the obama administration, the conventional view is easy money is great. the conventional view is we're not seeing significant inflation but i'll tell you if you go talk to working men, if you go talk to an hispanic laborer like my father was when he came to this country, if you go talk to a single mom who's waiting tables at a diner they've seen the price of milk go up the price of chicken go up the price of ground beef go up. they had seen until recently

the price of gasoline go up. they've seen the price of electricity go up they've seen their health insurance they were promises a $2500 cut instead they've seen it rise over 3,000$3,000. and they've also seen median wages stagnate for some two decades now. if you're a single mom trying to pay the bills and the cost of everything you're spending keeps going up and up and up, and the one thing that doesn't move is your paycheck every two weeks, you're feeling the consequence of washington's easy money policy we need stable consistent strong monetary policy sies. number eight it is long pastime for us to pass a strong balanced

budget amendment. take it up vote on it and pass it what we're doing to our kids and grandkids right now in my view is fundamentally irresponsible. and by the way this is not a particularly conservative view. this is basic common sense. get out of this god forsaken town and go to anywhere in america and talk to real live people. doesn't matter what party, republican, democrat, independent, libertarian. don't bankrupt our kids and grandkids. follow the constitution.

there's that ary a room in this country outside of washington, d.c., where the entire room wouldn't agree with those. it's only in washington that when you say we should stop piling debt higher and higher and higher and higher on our kids that that statement is viewed as radical. extreme extreme. it's only the views of the vast majority of americans, it's only basic common sense. when barack obama became president six years ago, our national debt was just over $10 trillion. today it's $18 trillion. larger than the size of the our entire economy. once and for all all of the republicans who campaigned saying we're going to stop bankrupting our kids and grandkids, let's stand up and follow through and actually do

that. the best way to do that is to put in the constitution, strong protections to prevent congress from continuing to dig this hole deeper and deeper and deeper. [ applause ] >> number nine, we need to repeal common core. we need to get the federal government out of the business of dictating educational standards. that will be the nsa interested in what we're say inging. you know education is far too important for it to be governed by unelected bureaucrats in washington. it should be at the start level or even better at the local level and we need to at the same

time embrace and champion school choice for every child in america. every child has a right to access a quality education regardless of race, regardless of ethnicity, religion, socioeconomic status. in my view, school choice is the civil rights issue of the 21st century. and i have to say the differences on this issue are stark. new york mayor bill de blasio one of the first things he did was go up and try to throw young african-american kids out of schools that we are performing for them in harlem. it's a sad thing to see politicians more interested in pleasing the union bosses who are writing checks to him, than taking care of the kids who desperately want hope and a ray of opportunity for the future 37

it's a sad thing to see the u.s. department of justice coming against young african-american and hispanic kids in louisiana saying, we're going to shut down your opportunity to get access to a better education. we're coming up on martin lujther king day. i could think of nothing that would be a greater legacy for dr. king than for us to embrace across parties, across race, across lines, that we are united in saying every kid has a right to a quality education regardless of who they are. and finally. we've got to deal seriously with the twin threats of isis and a nuclear iran. listen, these are dangerous times.

this past week we've been stunned to see radical islamic terrorists. murdering innocence in paris. our hearts weep for the journalists wrongfully murdered. for the police officers targeted and murdered. for the jewish customers at a grocery store murdered because of who they are. and this is part and parcel of a longer pattern across the globe. in recent months we have seen radical islamic terrorists attacking in sydney canada in israel, hamas terrorists coming in with butcher knives and

murdering israeli-american rabbis in synagogue as they prayed. we've seen isis beheading journalist s journalists. we've seen the taliban murdering school children in pakistan. we've seen boko haram kidnapping little girls and murdering thousands. these are not isolated incidents. these are not challenges for law enforcement. this is a concerted radical dangerous attack that seeks to undermine the very basis of free civilization look at who they're

targeting. journalists, children, police officer s. and they don't discriminate between americans, israelis, parisians. they target the west. and yet you cannot win a war against radical islamic terrorism with an administration that is unwilling to utter the words, radical islamic terrorist. these were not a bunch of ticked off presbyterians. and we will not effectively combat what we're facing until we acknowledge what we are facing. i will note just recently president al assisi gave a

courageous and important speech. he stood up and urged peaceful muslims to stand up against this corruption of their faith that will is urging people to murder in the name of faith. and that starts to lay out. we need allies who will take this on. but i got to say, it is hard to enlist the support of allies. when america ceases being a good ally. how sad was it in the streets of paris as 40 world leaders walked down the street, absent was the united states of america. where was the president? where was the vice president? where was the secretary of state? where was the attorney general

who had been there moments before but chose to get on a plane and fly back home? all of us remember september 11th 2001. i was living here in washington d.c., just south of the pentagon. my wife was working at the white house. i remember her having to pull off her shoes and walk bear foot across memorial bridge because she couldn't get to her car. i remember the putrid stink of the smoldering air around the pentagon. i will say in the immediate aftermath of september 11th nations across the world came and stood with america. the nation of france stood with america america. it was sad and unfortunate that we have not seen that same

leadership from this administration now. and i would note that that lack of seriousness of purpose, that lack of resolve is profoundly dangerous, it's dangerous because it encourages radical islamic terrorists to redouble their efforts and it's dangerous because nations like iran see that weakness. the single gravest threat to our national security is the threat of iran acquiring nuclear weapon capabilities. and this administration seems bound and determined to go down the road of a full hearty deal. indeed, the deputy national security adviser of this add administration describes that an iran nuclear deal would be the obama care of the second term.

those are his words. so that's a comforting commitment. one of the things i hope we see from this new majority in congress is meaningful oversight and leadership to restore america's leadership in the world. i hope we see congress hold this administration accountable and do everything we can so we stand with our friends and allies. and we demonstrate the resolve that is necessary to stand up to those who pose serious threats to the national security of this country. to those who would seek to murder innocent americans. that's what we need from a republican majority. is bold, positive leadership on jobs, on liberty, on security. we need to demonstrate that we

believe the words we said on the campaign trail. we need to demonstrate that we will actually fight for the men and women of america and not simply for the growing power of washington, d.c.. that's what this conference is about, so i want to close the way i started by simply saying to each of you, thank you. thank you for urging this majority to earn the mandate we've been given. god bless you. [ applause ] >> thank you very much senator cruz. very much appreciate that. he has some time for a few questions, but before we move into questions, i want to do a brief housekeeping update. representative jordan will be

here soon. and was actually able to get off his plane earlier, so we're going to have representative jordan come up he's going to give a speech about conservative action in the next congress, in 2015 about and then after him we'll have our freshman members of congress have a panel. so as awesome as senator cruz is, please also stick around and don't everyone follow him out the door. because you're going to learn a lot from these house members about the things you're going to be hearing in 2016 and 2017 because of the actions they take on the house floor this year. questions for senator cruz? yes, ma'am. >> you talked about teeing up legislation, to break down obama care and all these other different things to push something forward. one of our real concerns as a citizen is the leadership that's going to do it. i do not have confidence in our leadership in the house of representatives or the senate. and i'm -- are we going to have

leaders that are going to rise up and do that? and put their mind to it, business is trying to reach a goal. do we have senators in congress that are going to work toward those goals together? >> it is a great question, what i can tell you is, i hope so. you know, i think my -- a lot of people across this country naturally distrust politicians. i think that is a very healthy sense. i think it is easy for those who have been in washington a long time to focus on priorities other than the priorities of the american people. when we were campaigning, obamacare and stopping amnesty were one and two out of the lips of virtually every republican candidate, and the voters acted decisively in that direction.

what i would encourage our leadership to do is follow through on that, and, listen, leadership doesn't care what i or any other member of congress says. the best way to get leadership to actually follow through on those commitments is for you, is for the men and women in this room, for the people who elected us to make clear that we expect elected officials to follow through. i'll tell you, one of the things i've urged 27 million texans who i represent to do is hold all of us accountable, including me. hold us accountable for the promises we made, and that is the way to maximize the likelihood that the majority carries through on the promises we made. i don't know if we will, but you

have my word i will do everything humanly possible to encourage us to do exactly that. >> thank you. >> yes, sir. right here. >> yes, sir. i'm with "the pakistani spectator." first of all, thanks for acknowledging the problem in pakistan by killing innocent children. and my question is since they are killing more muslim than anybody else, and there seem to be fight between iran and soviet, isn't it better to leave them alone and kill each other rather than getting involved with them and making another enemy? and my second question, how unrealistic it is to abolish isis? >> there's a lot of substance there. let's take them one at a time. listen, i agree with you that, for example, when it comes to iraq and isis the notion that america would go in there and demand reconciliation and consensus between sunni and

shiites, who as you know have been vigorously since 632 a.d. is the height of ignorance and hubris. we're not going to do that and it's not our job to bring about peace and tranquility across the globe. it is our job to protect the national security interest of the united states and of our allies. and where it becomes a discreet issue for us is twofold. number one, with regard to isis, they have declared their intention to murder americans and with the land they have seized roughly the size of indiana with the ability to capture potentially billions in oil revenue, they're call taiftively dangerous and we need to act to protect our national security and, secondly with regard to iran if iran were to

acquire nuclear weapons capability, in my view the danger ous dangerous quality taif tiff difference, that the risks are unacceptably high that an iranian regime would use nuclear weapons and the best case scenario it sets off a nuclear arms race throughout the middle east as arab kuptsds throughout the middle east rush to acquire developed nuclear weapons to countbalance iran's and that makes the entire world dangerous and i don't think we should do as the obama administration suggests sometimes, try to produce political harmony and cause those who are battled -- battling to lay down their arms and sing "kumbaya" but i do think we need serious resolve to protect this country. the second question, is it realistic to abolish the irs?

it may not be with president obama in the white house. it's hard to imagine a scenario where he would sign legislation to do that. but one of the great things about our mrilt propolitical process is there are things that today may not be realistic that tomorrow can become realistic with a political movement behind it. i would note if we got in that michael j. fox delorean i made reference to and instead of going back to october 2014 we went back to october 1980 when reagan was running for president at the time, if i told new october of 1980 if reagan gets elected, he is going to pass fundamental tax reform with by the way the democrats with tip o'neill, he's going to cut the top marginal rate from 70% and go all the way down to 28%, the economy is going to grow from what had been four years of stagnation, '79 to '81 averaging

less than 1% growth to by 1984 the economy will grow 7.2% a year booming growth lifting millions out of poity to opportunity. if i would have said that then, the answer would have been that's not realistic at all. if i would have said in october 1980 when the learned observers were saying the soviet union is unstoppable, when the president was saying, we need to accept malaise, if i would have told you that president reagan is going to rebuild our military and put so much pressure on the soviet union that the soviet union will collapse and the berlin wall will be torn to the ground, in october 1980 the answer would have been, that's not realistic at all. come now, how can you say such a thing? so i agree abolishing the irs is major reform. but i don't think it's anywhere near as difficult as what we

were able to accomplish in the 1980s and i also believe if the american people say enough is enough is enough, we can fund our federal government but we don't have to empower bureaucrats over our lives that the impossible becomes possible with the american people behind it. >> i think we have time for one more question. [ applause ] one more question and, sorry, we'll -- right hire, back here. yeah. >> sure. >> garth kept, world net daily. with the current administration releasing u.s. enemies from get mow and trying to put general petraeus in jail is it too provocative to ask which side are we on? >> you know, i would frame it a little differently. which is this administration has a very difficult time differentiating good guys from bad guys.

you know, one of the striking things zhu travel the world is our friends and allies quite consistently will pull you aside aside, defense minister, heads of state, foreign ministers and in hush tones they will say, where is america? what has happened? look, we saw this just yesterday in paris quite literally where is america? for six years we have abandoned our friends and allies. and at the same time and that has been true across the globe by the way, whether it is france whether it is canada, our largest trading partner where this administration has for example blocked the keystone pipeline for years despite the thousands of jobs it would generate both in canada and the

united states, whether it is the united kingdom exemplified by the opening weeks of the administration sending churchill's bust back, or whether it is the shameful treatment of the nation of israel israel, the obama administration has been the most antagonistic administration to the nation of israel in history. consistently this administration has refused to stand by our friends and allies and at the same time when it comes to our enemies, when it comes to the bad guy ss, whether it is thugs like putin who you'll recall the administration began by canceling the anti-ballistic

batteries in poland and the czech republic in an effort to appease putin. we all recall the president's words to mr. medvedev, tell putin i'll have more flexibility after the election. how has that worked out? or whether it is the treatment of iran we're allowing billions of dollars to flow into iran while they continue to build centrifuges and enrich uranium. or whether it is recently the nation of cuba where the president suddenly embraced the castro communist regime that has murdered and tortured its citizen s citizens doing so in a way that caused the castros to celebrate their embrace from the president or whether it is when it comes to radical islamic terrorism

former secretary of state hillary clinton saying, we just need a little bit more empathy. no, we don't need empathy or radical islamic terrorists. we need the resolve to stop them them. the consistent pattern is this administration is unable or unwilling to distinguish between friend and know. and the sad reality right now is our friends do not trust us. and our enemies do not fear us. that is a dangerous state of affairs for the united states and it's a dangerous state of affairs for the world and it needs to change. thank you. >> senator, thank. [ applause ]

up next, on s span 3, community banking regulations, then discussion on u.s. infrastructure challenges and the u.s. supply chain. later a hearing on freight rail. the political landscape has changed with the 114th congress. 43 new republicans and 15 new democrats and 12 new republicans and 1 new democrat, 108 women in congress including the first african-american woman in the house and first woman veteran in the senate. keep track using congressional chronicle on c-span.org. the page has lots of useful information including voting results and statistics about each session of congress. new congress best access on

cspan, cspan2 cspan radio and c-span.org. >> recently the federal reserve and consumer financial protection bureau removed some lending restrictions on small banks. next the senate banking committee looks at community banks and federal regulations. richard shelby of alabama chairs the hearing. next the senate banking the hearing will come to order. this week the committee here on banking begins an examination of potential changes to the current regulatory structure.

today we will focus on regulatory relief for smaller financial institutions. in the near future we will continue this examination by focusing on unnecessary statutory and regulatory impediments across the financial services spectrum. while there are some who continue to argue that current law is beyond reproach, there are many on both sides of the aisle that believe improvements can and should be made. today we will hear from regulators on some of the lessons they've learned and how best to overcome some of the challenges that they've encountered. and although we may not agree on many things i believe that we can all agree that community banks and credit unions play a vital role in our local economies. 629 counties in the united states are served only by one single, single community bank.

6 million u.s. residents defend on small financial institutions for their daily banking needs. these financial institutions use their knowledge of local communities to lend a small businesses which are the engine of job creation in america. a recent survey found that community banks provide 48% of small business loans issued by u.s. banks. 48%. that number is even higher in rural areas where small financial institutions account for 52%, yes 52% of small business and farm loans. these financial institutions are able to forge relationships with local consumers that enable them to develop products tailored to the specific needs of their communities. unfortunately we've heard that innovation tailored for main street has been smothered by unnecessary regulations originally designed for wall street. some of the regulators before us

today have testified in the past that small financial institutions did not, yes, did not cause the financial crisis. nevertheless added regulations have caused hundreds of banks and credit unions to simply stop offering certain products. they're instead forced to spend valuable resources on compliance. a conference of state bank supervisors found that compliance costs have increased for 94% of community banks. i believe it's time to reverse this trend. today we expect to hear recommendations from regulators on ways to provide regulatory relief for smaller financial institutions. past committee hearings on this issue have demonstrated bipartisan understanding that something must be done here. discussion here will build upon these efforts by providing specific recommendations from both regulators and congress to

implement. i believe that we're long overdue for regulatory relief for small financial institutions. and i look forward to the hearing today. i'll now recognize senator brown, our ranking member. >> thank you very much mr. chairman very much. i appreciate that you've invited both federal and state regulators to continue the conversation that why had last fall about regulatory relief for small banks and for credit un unions. they have made changes to benefit the smallest depository institutions and i thank you for those changes. to highlight a few in january the ncua reproposed its risk based capital rule to be responsive to concerns legitimate concerns raised by small credit unions. a few weeks ago cfpb announced changes to its mortgage rules a win for small lenders particularly those that underrural areas and the rural areas, the fit proposed to

eliminate quarterly consolidated reporting financial requirements for certain bank holding companies and savings and loan holding companies under a billion dollars. since our last hearing last fall congress has also acted. we passed the president signed into law bills that were discussed at the september hearing an supported by those who will be before this committee on thursday. these bills included a bill introduced by senators king and warner and tester that doubled the threshold for the small bank holding company policy statement, a bill supported by senators king, jack reed on this committee and senator warren sapper to allow insures for credit union members in a bipartisan bill or authorized by senator more ran and me to permitle institutions to offer prize link savings accounts. all are law. also as a result of congressional action led by senator vitter the president's nominated a community banker to serve on the federal reserve board.

there are also relief proposals i supported that did not cross the finish line last year. i'm pleased that senator morean will reintroduce that act. it had 7 asenate sponsors. this is ready for action. we should move on it. there's no question regulateers in congress have been responsive to the concerns of small institutions. we've acted where legitimate problems have been identified and members and stakeholders have come together to find compromise. i thank the witnesses today for helping in that process. i do not believe though, that ovary bill intended to provide regulatory relief to small institutions is a good idea. some proposals could threaten the safety and soundness of individual institutions. others could remove important consumer protections that all customers deserve no matter the size of the institution -- of the lending -- of the bank.

we must not forget that more than 400 banks with less than a billion dollars in assets failed as a result of the cite cyst. the cost of the deposit insurance fund exceeded $26 billion. lending, of course is inherently risky and we must make sure we don't encourage unsafe practices in our efforts to tailor regulations. we need to establish a process to evaluate the merits of the proposals being suggested today and those we will hear about on thursday. we'll not be successful this congress in providing regulatory relief if we -- if our proposals do not have broad bipartisan agreement and are attached to un unrelated must pass legislation. our prospects are even less likely if we try to pair regulatory relief with attempts to roll back wall street reform. i'm open to solving real problem as affecting community institutions as evidenced by our actions over the last couple of

years. we can find common ground if our goal is to provide meaningful relief to the smallest institutions while not compromising safety and soundness or consumer protections. today's witnesses can help us evaluate programs they've done significant research to better understand the characteristics of community banks and small credit unions. they also understand our panelists also understand why and how small institutions fail. this can help us target regulatory relief to the smallest institutions for example, in ohio 80%, 80% of the community banks in my state are under500 million in total assets. these are the types of institutions that feel the impact of burdensome regulations the most whether providing another report to their regulator or needing to hire another employee for compliance. last, mr. chairman, i look forward to hearing more about the gripper review currently under way. the fed, the occ and fdic are required by law to review these -- to review regulations

and identify those duplicative, outdated or unnecessary the state regulatory agents and cfpb participate in this exercise voluntarily in addition to the three that are required. this review supplements a significant analysis of impacts that the agencies also do while writing a rule. i appreciate that you've already held meetings in los angeles and dallas and planned ahead and hold meetings in boston chicago, washington and rural areas later in the year. i would encourage you to consider a meeting in ohio, as well. this review will be completed next year, any actions we take in congress should complement not complicate the process currently under way by the agencies. mr. chairman i thank you. >> all members opening statements will be made part of the record. i under stand senator tester has another committee hearing. >> i do and i want to thank the chairman and rank members for holding this. in a rural state like montana credit unions and community

banks are the lifeblood for capital of businesses and permanent -- personal families. and i would just like to say this state where personal relationships still matter and wall street did behave badly. some on wall street behaved badly a few years back and i think community banks and credit unions have felt the page of their behavior when they did nothing wrong. i would just ask that this committee and the regulators match the risk with the regulation. that's really where it needs to be and i think if we do that we'll have succeeded in making capital accessible to folks that live in rural america and across this country. >> thank you. our witnesses today are doreen eberley, she's the director of risk management supervision for the federal deposit insurance corporation, marianne hunt ser the deputy director of the division of banking supervision and regulation for the board of governors of the federal reserve system. mr. tony bland is the senior deputy comptroller for midsize and community bank supervision for the office of the

comptroller of the currency. larry fazio is the director of the office of examination and insurance at the national credit union administration and candace franks is the commissioner of the arkansas state bank department. she also serves as chairman of the conference of state bank supervisors. i would like to ask all you -- all your witnesses -- all the witnesses, written testimony be made part of the hearing record and if you could such up your oral testimony by five minutes, it will give us a chance to have a dialogue with you. we'll start with miss eberley. >> thank you. chairman shelby, ranking member brown and members of the committee, i appreciate the opportunity to testify on behalf of the fdic, on regulatory relief for community banks, as the primary federal regulator the fdic has a particular interest in the opportunities they face. they provide traditional relationship based banking

services to their communities. although owe hold only 14% of assets they account for 45% of all of the small loans to businesses and farms made by insured institutions. while more than 400 community banks failed during the recent financial crisis the vast father majority did not. institutions that stuck to their core expertise whether the crisis are now performing well. the highest failure rates were observed among noncommunity banks and those that departed from the traditional model and tried to go rapidly with risky assets often funded by volatile broker depot sits. we are keenly aware of the impact the regulatory requirements can have on smaller institutions which operate with fewer staff and other resources than larger ones. therefore, the fdic pays particular i attention to the impact regulations may have on smaller institutions that serve areas that otherwise would not have access to banking services. the fdic and the other regulators are actively seeking input from the industry and

public on ways to reduce regulatory burden through the economic growth and regulatory paperwork reduction act process which requires the federal financial regulate attorneys review their regulations at least once every ten years to identify any regulations skrout dated, unnecessary or burden burdensome. as part of this, the agencies are jointly requesting public comment on our regulations. we are also conducting rege nalg outreach meetings involves the public, industry and other interested parrotts. in response to what we've heard in the first round of comments the fdic already acted on relief suggestions where we could achieve rapid change. in november, we issued two financial institution letters responding to suggestions we received from bankers. the first financial institution letter released questions and answers about the deposit insurance application process. commenters are told us a clarification of the fdic's existing policies would be helpful. the second addressed new procedure that's eliminate or

reduce the need for applications by institutions wishing to conduct permissible activities through certain subsidiaries subject to some limited documentation standards. this will significantly reduce application filings in the years ahead. the fdic takes a risk based approach which recognizes community banks are different than large banks and should not be treated the same. every fdic examiner is trained as a community bank examiner through a four-year program. each of them gains a thorough understanding. they live and work in the same communities served by the banks they examine ensuring they're knowledgeable and experienced in local issues important though those banks. institutions with lower risk profiles such as most community banks are subject to less supervisory attention than those with elevated risk profiles. for example well managed banks engaged in traditional noncomplex activities received

periodic point and time safety and soundness and consumer protection examinations carry odd out over a few weeks. this contrast the very largest fdi. supervised institutions receive receivecontinuous supervision and ongoing examination carried out through targeted reviews during the course of an examination cycle. the fdic considers the size, complexity and risk profile of institutions during rulemaking and supervisory guidance development processes and ongoing basis through the feedback we receive from community bakers and stakeholders. where possible we scale policies according to these factors. as we strive to minimize the burden we look for changes that can be made without affecting safety and soundness and believe the current $500 million threshhold for the expanded 18-month examination period could be raised. in addition we would support congress' efforts to reduce the privacy notice reporting burden and also think it would be worthwhile to review longstand

statutory regulatory thresholds to see if they should be changed. the fdic will continue to pursue reduction which achieves the fundamental goals of safety and soundness and consumer protection in ways appropriately tailored for community banks. we look forward to working with the committee in bauer suing these efforts. >> i appreciate the opportunity to testify on the important topic of community dangerbanks and reducing regulatory burden. having begun my career more than 30 years ago as a community bank examiner at the federal reserve bake of kansas city eventually becoming the officer in charge at the reserve bank i've seen firsthand how critical it is that we balance effective regulation and supervision to ensure safety and soundness of community banks while also ensuring undue burden does not constrain the capacity of these institutions to lend to the communities they serve. i last testified before this

committee in september of 2014 and at that time i testified that in the wake of the financial crisis the federal reserve has spent the past several years revising our community banks & credit unions refining training program and developing automated tools for examiners to focus their attention on areas of higher risk reducing some of the work at low risk while managed community banks. furthermore we developed programs to conduct more examination work offsite such as the loan review to reduce the time the examiners spend physically in the bank. we also have an initiative under way to use forward looking risk analytics to better identify high risk areas within community and regional banks which would allow examiners to focus their examination final on the areas of highest risk and reduce burden on the low risk

institutions. in january of this year the federal reserve responded to legislation passed by congress in december of 2014 related to the scope of the federal reserve small bank holding company policy statement. specifically the federal reserve board issued an interim final rule and a proposed rule to implement the public law 113-250. effective immediately the interim rule adopted by the board excludes small savings and loan holding companies with less than 5 million in consolidated assets which meets certain requirements from the board's consolidated regulatory capital requirements. thus putting them on par with similarly situated bank holding companies. the federal reserve board also issued a notice of proposed rulemaking that would raise the asset threshold from 500 million to 1 billion for determining applicability of the small holding policy statement. and expanded its scope to include savings and lone holding companies. it facilitates the transfer of

ownership for community banks by allowing holding companies operate with higher levels of debt and that's lower levels of consolidated capital than would otherwise be allowed. additionally the federal reserve board took immediate steps beyond what was required in the legislation to relieve regulatory reporting burden for bank holding companies and savings and loans that have less than a billion in total assets and also meet the requirements of the policy statement. the board has proposed to eliminate financial requirements in the report for those institutions and instead require semi annual parent only financial statements. the federal reserve immediately notified the affected institutions so they would not continue to invest in system changes to report regulatory capital data for only a short period of time. the changes in the threshold for the small holding company policy statement and related reductions in reporting have significantly

reduced consolidated capital requirements and reporting burden for more than 700 small institutions. more than 40% of the institutions that were required to file the 60-beige console the dade report will only file an eight-page report. a second key development since september is the beginning of the interagency review of regulations in accordance with the economic recovery paperwork reduction act or also known as the egripper process. we seek public comment and hold outreach meetings to get feedback from bankers and community groups about ways to reduce burden related to practices. to date the meetings held in los angeles and dallas yielded some useful and specific suggestions for consideration and review. let me conclude by emphasizing we are committed to listens and

considering ideas for reducing burden through the egripper process and want to ensure that our activityies are tailored appropriately and we strive to balance our safety and soundness objectives with the need to reduce unnecessary burden to ensure small institutions can continue to meet credit needs in their local communities. thank you for inviting me to share our views on these matters and look forward to answering any questions you may have. >> mr. bland. >> chairman shelby ranking member brown and members of the committee, thank you for the opportunity to appear before you today to discuss the challenges facing community banks and federal savings associations. and the actions the occ is taking to help these institutions address regulatory burdens. i have been a bank examiner for more than 30 years and seen the vital role community banks play in meeting the credit needs of consumers and small business as cross the nation. at the occ we're committed to supervisory practices in a fair

and reasonable way and fostering a climate that allows banks to grow and like. we tailor our supervision to each situation take into account the products and services it offers as well as its risk profile and management team. given the wide array of institutions we oversee, the occ understands that a one size fits all approach to regulation does not work. therefore, to the extent to allow laws we factor the differences and rules we write and guidance we issue. my written statement provides several examples of the commonsense adjustments we had made to ago eight community bank concerns. guiding our consideration of every proposal to reduce burden on community banks is the need to ensure that fundamental safety and soundness and consumer protection safeguards are not compromised. within this framework to date we have developed three regulatory relief proposals that we hope congress will consider

favorably. we are also undertaking several efforts to identify and mitigate other burdens through a regulatory review process. the first proposal we submitted to congress would exempt some 6,000 community banks from the volcker rule as the vast majority bank under $10 billion in asset do not engage in propriety trading that the statute sought to row anybody bit we don't believe they should commit resources to determine if any compliance obligations of the rule was apply. we do not believe this is justified by the nominal risk that these institutions could pose to the financial system. we also support changing current law to allow more well managed community banks to qualify for a longer 18 months examination cycle. raising the threshold from 500 million to 700 million for banks that would qualify for this treatment would cover an additional 300 community banks.

we also support providing flexibility for federal thrifts so that those thrifts that wish to expand their business model and offer broader range of services to our communities may do so without the burden and expense of a charter conversion. under our proposal federal thrifts could retain current structure without unnecessarily limiting the evolution of their business plan. as a supervisor of both national banks and federal thrifts we are well positioned to administer this new framework without requiring a costly and time consuming administrative process. i'm also hopeful the ongoing efforts to review current regulations to reduce or eliminate burden will bear fruit. i just returned from the second public egripa meeting where they heard ideas from a number of interested stakeholders. the agents is currently evaluating the comments and from the public comment process. while this pro less will unfold

under a period of time they will not wait till it's completed to implement changes or to submit legislative ideas identified through this process to congress. separately the occ is in the midst of a comprehensive multiphase review of our own regulations and those of the former ots to reduce duplication, promote fairness and supervision and create efficiencies for national banks and federal savings. we're receiving comments received on the first fade of our review focusing on corporate activities and applications. finally we are continually looking for enknow have a tiff ways to reduce burden. last month the occ published a paper that focused on possibilities for community banks to clap rate to management regular regulatory requirements and we believe there are opportunities for community banks to work together to address the challenges of limited resources and acquiring the necessary expertise. in closings occ will continue to

squarefully assess the potential affect that current and future policies and regulations may have community banks and we will be happy to work with the industry and the committee on additional ideas or proposed legislation tiff initiatives. again, thank you for the opportunity to appear today. i would be happy to respond to questions. >> thank you. mr. fazio. >> good morning chairman shelby and members of the committee. thank you for the invitation to discuss regulatory relief for credit unions. while we regulate 6,350 credit unions with $1.1 trillion in assets over three-quarters of these have less than $100 million in assets. because these credit unions have fewer resources available to respond to marketplace technological legislative and regulatory changes we've aware of the need to examine our role. as a result, ncua scales the

supervisory texass when it's sensible and within the agency's authority to do so. where regulation is needed to protect the safety and soundness of credit unions the savings of members, and the share insurance fund, this. cua uses a variety of targeting strategies. they include fully exempting small credit unions from rules using graduated requirements as size and complexity increase and incorporating practical compliance approaches into agency guidance. thus we work to balance maintaining standards with regulatory burden. since 1987, ncua has taken a rolling three-year role of our leglations and although not required by law we are voluntary participating in the current egripa review. these reviews conduct analysis with an eye towards streamlining modernizing or even repealing regulations that are not

necessary over the past three years. we have cut red tape. these actions include easing eight regulations including modernizing the definition of a small credit union to prudently exempt thousands of them from complex role, streamlining three processing and facilitating more than 1,000 low income designations and increasing blanket waivers and allowing more flexibility in credit union operations. next week the board will consider a proposal tounder the regulatory flexibility act. if approved, this change would provide transparent consideration of regulatory relief for a greater number of credit unions and future rule makings. going forward, this. yua board chairman debbie matz

considered plans for streamlining the lending role finalized regulatory relief on holding fixed assets and simplify the process for adding some types of associational groups to credit unions. ncua is revising examination process to provide relief through our small credit union examination program we spend less time on average in small well-managed credit unions. ncua has further working to reduce the time spent on site conducting exams and improve consistency in this process. concerning legislation, ncua has lawyer trust accounts and enable federally insured financial institutions to offer link savings account. ncua would advise congress in writing rules to implement new laws such flegsability would allow us to scale rules based on

size and complexity to effectively limit additional regulatory burdens on smaller institutions. ncua supports several targeted regulatory relief bills for credit unions. these bills include legislation to allow healthy and well-managed creditings to supplemental capital permit all federal credit unions to grow, raise the cap on member business lending to support small businesses and except 1 to 4 unit nonowner occupied residential loans from the member business lending cap. finally, parallel to the powers of the fdic occ and federal reserve, ncua asks for the authority to examine and enforce corrective actions where needed at third party vendors. n kr ncua would close a growing gap in their authority to work directly with key infrastructure vin dores like those with a cybersecurity aspect. this would allow us to maintain

necessary information to deal with any problems at the source. in closeing ncua provides committed to streamlining examinations. we also stand ready to work with congress on related legislative proposals. i look forward to your questions. >> mr. franks. >> good morning chairman shelby and distinguished members of the committee. my name is candace franks and i serve as bank commissioner of the arkansas state bank commission. i'm chairman of the conference of state bank supervisors. it is my pleasure to testify today on behalf of csbs. i would like to thank congress and this committee for your focus on community banks. in my 35 years as a state regulator i have seen firsthand the positive local impact of community banks. these banks are critical to providing access to credit and urban as well as rural areas and they are important to building and maintaining consumer

confidence in our financial system. one out of every five u.s. counties has no physical banking offices except those operated by community banks. in my home state of arkansas a very rural says, there are 96 towns that have only one physical banking location. for these small rural towns the community banking system is the banking system. community banks excel at relationship lending making them a vital source of credit for small businesses. in fact community banks play an outsized role in lending to small businesses. holding 46% of loans to small businesses and formarms. regulators must improve the way we conduct supervision to insure a balanced approach this. allows banks to contribute to the stability and resiliency of the economy and strengthens the diversity that exists in the banking system. as state regulators have examined various resources for bank regulation we have found

community banks cannot be defined by simple line drawing based on asset thresholds. while ss ties are relevant there are other factors like market area, funding sources and relationship lend rg3 characteristics i as a bank regulator understand and witness on a daily basis. we immediate a process that identifies the relevant factors and provides flexibility in how those are weighed and considered. this new definitional aproechl sets a foundation for other measures to tailor regulation and supervision to the community bank business modding. for example, providing that application decisions affecting community institutions do not set precedent for other types of institutions or confirming qm statuses on mortgages held in portfolio. while much needs to be done to right size regulation i want to recognize significant steps already taken. the cfpb proposed changes would

give more banks flexibility to make loans to their customers. csbs commends congress for passing a provision requiring at least one member of the federal reserve board have experience either as a supervisor of community banks or are community bank bank bankers. they are an integral part of the system. similarly we ask them to confirm the legal requirement that the fdic includes an individual with state regulatory experience. a seat at the table will not automatically result in a right sized regulatory framework. additionally we must truly understand the state of community banking and the issues they face. this is why csbs partnered with the federal reserve to attract new research on community banking. this research will help us develop a system of supervision that provides for a strong enduring future for the dual banking system. work from the community bank research conference is held by

csbs and the federal reserve has demonstrated there is real value in the relationship lending model used by community banks. one study presented at the 2013 conference found that proximity to a community bank enhances the chance for survival of start-up companies. our hope is this research will inform legislation tiff and regulatory proposals and appropriate supervisory practices and will move us closer to a right-sized regulatory framework. there are significant operational and strategic differences among our nation's banks. these differences reflect the admirable diversity of our financial system, our regulatory approach must also reflect this diversity. thank you for the opportunity to testify today and i look forward to your question. >> thank you. i'll direct my first question to miss eberley. according to the fdic only two day november very banking charters, two have been approved

since 2009. since 1990 we've lost more than 3,000 banks in including 85% of banks with assets under $100 million. equally concerning to a lot of suss that no new banks are being created because of barriers of entry. is the fdic concerned about the lack of new banks and what specific step is your agency taking to address the issue if you are and what legislative solutions might resolve some barriers to entry but keep the safety and soundness of the system intact which we all want to do? >> thank you. i think the issue is one of where we are in the economic cycle versus one of legislative barriers or even regulatory barriers. as i mentioned in the egripa process we were asked to clarify the application process for deposit insurance and we've done

that. our position hasn't changed. it remains the same. we had one application in 2014. that application remains in process. came towards the end of the year. but i think the numbers ofde denovos, it doesn't reflect the interest in community banking. if you look at the dollar amount of capital flowed in the community bank industry since 2008 it's $43 billion so indicates there is investor interest in supporting community banks and belief in the viability of the community bank model and i believe that, you know that's capital that at some point will shift into de n okay. vo bank. >> do you see any legislative proposals or have any of your own? >> no. >> do you like what the regular laces call for now? >> right, so the regulations

that govern applications for desos sit insurance and two piece, the charter as well which we do not grant so would come from the state authority or the office of the comptroller of the currency in the case of a national bank but the guiding principles for us are the statutory factors for deposit insurance and the fdi ago wean we think they're relevant today. >> i understand that the fdic, the federal reserve and the occ are currently undertaking a regulatory review under the economic growth and regulatory paperwork reduction act. this act requires among other things a review of all regulations prescribed by your agencies. but buried in a footnote in the related federal register notice you indicated you will not review certain rules. who decided to exclude regulations from this review and based on what authority? you know, we're not -- you don't need to tell us why they dit. we just want to know who made

the decision. was it plead at the very top? we'll start again with you, miss eberley and then go to the occ. >> i believe that so we work on this through the federal financial institution council with the benefit of our legal advisory group. the regulations excluded are regulations that are new. so recently enacted. and that's the basis as i understand it for excluding them. >> okay. miss hunter. do you have any comment. >> yes that is my understanding as well is the newer regulations require more time to get experience with exactly how they are operating and where the burden might be. so that was really the basis for that. >> mr. bland -- >> chairman shelby, i would just add while the footnote says that, i've attended both the la, los angeles and the dallas one and in the spirit of just hearing from the bankers and other stakeholders we've been open to any and all proposals or

thoughts this i've had and so part of the process is just be as open and hear as candid on regs that are of interest to them. >> who made that decision? was it the chairman of the federal reserve -- >> i am not aware. >> the comptroller of the currency, chairman of the fdic? somebody made the decision. we just want to know who. >> we can find out for you, chairman. >> will you furnish that for the record. >> we will find out who made that decision. >> okay. this leads me to the cost benefit analysis for regulatory review. i'm a believer in empirical analysis when it comes to regulations. if a regulation's cost outweighs its benefit i believe it should be thrown out. does anyone disagree, and, if so, why? in other words, if a regulation's cost, you weigh that, outweighs its benefits should we keep it? mr. bland?

if a regulation's cost outweigh its benefit should it be thrown out? >> well that chairman shelby the issue of cost benefit should be thrown out, you know also when you enact a legislation it needs time to see what the effectiveness is. >> ultimately if you had time to analyze it age if it -- if its cost to the banking system outweigh its benefits to the public you know, should we have it? in other words, it would be weighed in the balance and it would be -- should it be gone? >> chairman shelby in the strictest sense i understand your point but one of the things -- >> disagree? >> no, i was going to make this point. there have safety and soundness. >> absolutely. >> so that has to be weighed in addition to that -- >> absolutely, that would be one of the costs, if the benefit or

benefit to the public benefit versus cost. what about you, miss hunter? what's your thought? >> i would add to mr. bland's comment that the challenges, its easy to measure the costs because they fall to specific stiegs. it's much harder to measure the benefits because they really accrue to a broad population, just things like safety and soundness of the banking system or confidence in the payment system. so that's really the challenge in assessing cost and benefits. i do think that it is worth doing that analysis and i know when we propose rules we look first at what was the benefit that the statute was incontinuing to try to achieve. what was that goal? and then try to fashion rules that minimize the cost of achieving that goal as best we can and, you know, obviously it takes time to understand exactly how it gets implemented in the industry. >> but that's part of the process, is it not, to weigh the cost versus the benefits, that's

part of the -- job as a regulator, is it not. >> it is and it is part of the process we go through when we develop rules responding to statutory -- >> what about the fdic? >> i would add to what miss hunter said the challenges of quantity phiing the benefits of a safe and sound banking environment and lack of failures and lack of economic loss, that's the challenge and it's a difficult thing to quantify when you're going through the cost benefit analysis. >> i don't disagree with you but you would weigh the cost versus the benefits. if the benefits outweigh the costs, keep the regulation. if it doesn't, it ought to fall but that's a big debate we have going because we're talking about overregulating smaller banks and so forth, the cost to them, versus the benefit to the public, i guess. okay. senator brown. >> thank you, mr. chairman.

i thank you all for joining us. the four of you that were at our september 16th hearing the four federal regulators and miss franks, thanks for joining us on this one, miss hunter, question for you. over the weekend a major story broke and u.s. and european media outlets including "60 minutes" about a trove of hsbc account holder data that reveals the hsbc swiss banking arm collaborated in efforts by some of its account holders to engage in tax evasion. i understand european tax officials recovered huge amounts of back taxes from and imposed large pen 'tis on some of these account holders and understand our department of justice and irs received this information in 2010, five years ago, would they normally say that information immediately with the fed? >> well, in response to your

question, i will first say i didn't personally see the piece that was on "60 minutes" but i can say that when we really can't comment on specific investigations. >> that's why i ask you. would you normally -- >> in the process -- in a general sense when there is an investigation yes we do share information when requested with the law enforcement authorities. >> share meaning you give to them. do they give -- do they normally give this information to you? >> it would depend on the case. there would be a dialogue about certainly if they are limited in their ability to share with us they would not do that. but we provide information upon request. we generally may be aware there's an investigation going on. >> okay. i want to ask something -- i take that to mean it's a good chance you have had -- that the fed has had this information for quite some time. i gather investigations of some individual u.s. account holders identified by these leaks have been undertaken by irs. my question is this, hsbc as a

recent history of major u.s. sanctions and money laundering violations. they now face these new charges of facilitating tax evasion, summarize, if you wilkes for the committee what the fed has done with respect to hsbc to pursue these tax evasion allegations, what conclusions you may have reached regarding their responsibility for their activities and what steps you're taking with other federal officials to pursue these matters? >> okay well, first of all, again, i can't really speak to the specific matter that is under investigation but i can tell you that with respect to hsbc, we have three -- we've entered into three normal enforcement actions consent cease and desist orders and those relate to bank secrecy and aml compliance, there is one related to mortgage servicing activities and one related to compliance risk management in general. so we have been obviously

working on issues with the firm related to compliance generally. i will say that in any situation where there's an investigation if we -- if we have evidence or we are provided with evidence ses especially those we would favor certainly moving forward and have further committed to taking any appropriate angst e sanctions or penalties that would have accrued from the outcome of that work. >> these are, as you know, very serious accusations. and, in some cases, more than accusations as we've found. and, this committee, a lot of us will be watching the fed's actions on this. >> we agree. they are very serious accusations. >> question. for the four regulators. each of your agencies must come

ply with the smooth requirements on writing rules. this is a follow up to general shelby's question. he's requiring you to publish rules for public comment review rules for impacts on small businesses, consider less burden some alternatives, reduce paperwork burden. you're also currently undertaking the review process to identify burdens and out dated regulations. the question is this. a couple of questions if you start separately and work your way down. do you think yoir agency adequately takes into acount the cost of your rules? what impact do additional analysis have to itch leapt new rules. might some of these proposals actually stop rule making in its tracks or slow it down so that the burden is too great to move sforward. i'm going to separately begin with you, please. >> we certainly do try to carry out the cost benefit analysis

under our policy on rule makings. we consider the cost, the benefits benefits and alternatives based on available data. we ask a rot of questions during the rule-making process to garner the impact and we're particularly interested in the feedback we get from community banks, about the cost of the regulation or the ways that it would impact the institution. and we make changes based to how long you were here. as to the sect about whether additional requirements would impact that process i think it would any time you add additional requirements, it makes the process of conducting the analysis more difficult and also would open it up to additional legal challenges. and your final question was what kind of impact could that have on the process? >> i think it could certainly slow the process and e and certainly would make it more

cumbersome and limit our flexibility. >> i'm not sure i have much more to add to that very complete response. i do agree that it would add complexity to the process. that's certainly adding extra steps, and those would tend to slow down development of rules. and that can be -- that can be problem le problematic in a sense in some cases, a lack of clarity by the time the law is passed and a rule is developed because they right-hand turn sure exactly how various requirements might be implemented. >> the lcc has a very robust ad factors into appropriateness of a rule. and we also have this process consistent with the o&b guidance which has been asoeszed. and, to your last point, and the only things else to add, the

proposed rules would be impeding developer slowdown to the implementation of rules. >> i would just echo the comments of my colleague and implement it does take into account our rule-making process and try to speak to that in the pre preambles to our roles. we find very useful the comments to receive during the rule-making process in responding to those. that's very helpful in fine tuning and kal bratcalibrating rules. we really tar get the rule and give alternatives to practical alternatives for frames to comply. >> thanks, joe. >> thank you, mr. chairman.

one new rule is for appraisals. at a 2014 conference that market values who respond in rural communities may not have an an objective comparison. while the fed did notepromulgate, you have to acknowledge them. what ideas did you have toe rectify the problem. >>. >> senator, you raise points in particularly those in rural areas on the difficulty in getting appraisers who know the community and are able to do the work that's required has been a real challenge. and so this is actually one area where, through the gripper meetings that we've had in

dallas and in los angeles, we've 5:00 schul le actuallily heard some sgszs more broadly. and the suggestion was to take a look at the ethreshold. right now the threshold was last set in 1994, i bloef. it is an inner agency rule. >> anyone else care to comment

on that, as well? if not, i do have another question. kansas fed president, once again, esther george, were considered well capitalized and that their risks understood, yet, before basal three. now, in spite of that, they must adopt finer rules with buffers. the risk weighted as set has 57 rows and 59 pages of instructions even though no additional caption was required. is that simply too much for most community banks. >> are they necessary? >> yeah, one of the lessons coming out of the crisis was that the industry as a whole needed higher levels of capital and higher quality capital. that's what our inner agency capital rules were designed to

do. i think it's fair to ask if we can make it more simple for community banks. i think that's sm that we're open to continuing to look at. >> there are several legislative proposals to consider as a qualified mortgage, all residential mortgage loans as long as the loan is included in the lender's portfolio. can you explain how this would benefit or impact consumers? >> they certainly feel it would be beneficial to consumers. the local bank knows their customer and might have an inherent interest in ensuring that us banks can repay those loans when i make those loans in the first place.

we think that would be a great benefit to consumers. >> one of the things i've heard similar, north of 90%, i find when i press my bankers to specifically enumerate where those costs come from and document i get not a large specificity. i guess would you, for all of you very briefly because i wanted a follow up would you estimate -- could you give an estimate of how much compliance costs have gone up since dodd-frank for community banks? and is there an enumeration for

top three as you hear these sessions in the country. just going down the line. >> we atechttempted an empirical study. as you noted they're not maintaining the claim of information that you could actually just do the math. we don't keep our books in a way that's going to allow you the data that's necessary. in fact they told us that gathering that da e data would in and of itself be burdensome. the comments that we're receiving, the general themes, have been mentioned previously. looking at the various thresholds and rules and regulations, some of which have been outstanding for decades and whether or not those thresholds are still reasonable based on changes in the industry. that's the number one theme tlout the process.