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.

what i would add to that is sometimes it's a one-way change. sometimes they might introduce systems changes. so there's an accumulation of review policy. it's hard to quantify, but that's the kind of thing we're looking for. >> but do you think that -- the 90% number, do you think that's an accurate reflection? >> i don't have that information. >> i have heard in my business with bank eres, it's manifested itself in additional resources you have to higher.

particularly as it gets more complex. but, also, diverting their attention away from lending and interacting with their customer base, the impact on staff, though varies with the size of the institution and the activities they're involved in. but it is real based on what we heard from bankers. >> similar to what was said before, some of the changes that were looking at different thresholds, but, also the collaborative paper that we put up is the collaboration by sharing the work together that could help them manage their cause and require the experience that they need. the banking business is going through substantial change. when you overlay technology but also non-bank competition, different products and services and that realization of the change and to be able to off set that with sharing a resource, building expertise, is critical. >> very briefly. >> i would just say it's a case

of a lot of change going on right now. part is regulatory. it's a lot for institutions, especially smaller ones to deal with. it remains to be seen if we will reach a state of equilibrium that allows them to feel like that's something that they can manage going forward. we try to help where we can. a lot of the rules that are complained about right-hand turn within direct authority. there's not much we can do, but we do try where we can. it's creating a small initiative to help them with the planning in with con sulting. so we do what we can. >> yes, senator. my institutions generally tell me that the costs are incured through hiring atigszal staff and also implementing and spending the manual time and efforts in trying to understand the new regulations and implement them and particularly, this difficult, mr

rural areas. where you don't have a large group to choose new -- >> let me just add. i think there are certain things like have been mentioned in terms of forms. >> i guess the comment i'd like to make, mr. chairman, and i don't know how you'd grapple with this. my belief is enhanced standards for larger institutions. they have kind of seeped down into the examiners at the small banks. and i don't know how you grapple with that best practices standard. we'll have to come back and revisit that. mr. chairman, thank you.

it's my wish to follow up on some of your questions and senator brown's questions. i've used up my five mines but i want to thank everybody for being here. thanks for being here and speblding time with us. it's very very helpful.

>> it is a concern. it's one of the reasons we conducted a study to really look at wurn of the underlying reasons fr consolidation and see want we could learn from that. what we saw over the period that you talked about with the decline of institutions from 18,000 down to less than 7,000. 20% of the consolidation that occurred was from failures. so to the extent that we could avoid financial failure, that

will go a long way towards protecting institutions. the other 80%, we considered voluntary. the biggest wave for the voluntary consolidation occurred through other state initiatives in mid to late '90s. >> we'll see some de novo activity again. and i were looking at it that way. >> i don't have a lot of time, so let me -- and i hate to cut you off, but i do have to get to my questions.

j i'm going to follow up on the chairman's comments. raised 17 million dlarsz for investors, but had to spend nearly a million dollars just in application fees. and the attorney said that it was 8-16 inches of application pages in order to get it chartered. i guess the question is if you have to spen a million to open up a bank, how many more participation prices are you going to face? >> institutions do have start-up costs -- >> you understand what i'm

saying. we're talking about the cost of putting together 16 inches of paperwork, lawyers and accountants and everybody else that you have to put together cost them a million dollars. the question is how are you going to open a bank today if you have those kinds of costs. >> that sounds like a large figure. >> let me just go with senator warren's comments about costs and how they're not getting answers from small community banks in his state. i'll tell you, i'm getting answers from the small community banks. i think you tumped on it and that is personnel costs.

where are we going to come up with paying for another compliance officer even though we have no exceptions. i want to ask -- do i have a minute? chairman? will you consider dodd-frank's plop sigss? >> given that the grippa process is looking at rules that are unnecessary, most of the rules have never been itch leapted yet or have taken the fact. soo it is not we feel, appropriate to look at those rules at this time. >> is it fru we won't have another study for 19 years?

if we deent include dod frank? >> it's part of our normal practice. we looked at on an on going basis whether rules are appropriate in terms of still relevant. and we will make changes. >> thank you very much for being here. >> senator? >> thank you, mr. chairman. i think you're getting a theme here that this is not a partisan issue. this is not something that there's a lot of disagreement on this skmit tee about. we're deeply concerned about the status of community-base in this country. i look at this in kind of duodifferent ways. first you've got the obligation to make sure that your rules make sense. to make sure that you're doing the lookback and you're

sensitive to some of the issues like appraisals. thesebacks did not create the problem. it has been allowed new entrance into the market that are competing. what reactions you've had to what you've already heard about the need for accommodation and retreat on some of the regulation.

on the other hand, you said to the extent the law allows. so i'm curious, as you've met with community bankers in your meetings, what are you hearing about dodd-frank that would be impossible for you to fix without legislative action. >> i would imagine they don't he has tat to tell you about it, though. >> i think those things that you've touched on are the important ones in terms of the impajt relative to the institution. it used to be traditional

services in a defined market. >> as they're challenging, we don't want to add additional, unnecessary burden on that challenge. so i think one of the things that would be extraordinarily helpful for me is as you kind of go bark and look is to take a look at what you've already done in response to concerns that have been raised. and then taking a look to where you are concerned with the smaller banks and what the stugszs have and what we need to

do to fix those concerns. none of us here want to preside over a policy. so any information that ewe can get to me about what accommodations you've already plaed and what needs to happen in your judgment, beyond that, to acome date the concern that is you're hearing.

the chairman talked about class benefit and so did mark. >> i want to start by thanking the chair for calling this hearing. i think there is greet opportunity on a bipartisan basis. it requires higher standards for

megabanks, but it has a separate session offering relief. i hope this committee will produce that sort of movemented. let me ask all of our jets in general. what's your burden on the past few years smefblgly in u.s. banking. >> as i mentioned, we did try to do an empirical study in 2012 and the data is just not there to complete the study. i can share some an neck doal information that would suggest that some of dodd-frank's

provisions may be low in the playing field. one of the things we've seen is loan growths compared to industry. last year, we put out the quarterly banking profile. that shows the community bank loans grew year over year at a greater pace in the industry. >> what about my question which was compliant costs. >> i would only add the federal reserve co-sponsors the research department. there have been some papers presented.

i don't know what each study said or did. i wounden want to quote them dprektly. >> i e those kind of studies are really helpful in that we take that nfgsz and it's when we think about the impact of new requirements and as we're implementing them, trying to take them to a burden some sm. i really commend this issue

to all of you: if you increase a hundred percent, city is in a much better position to deal with that. so i really commend that to you asoffly important and certainly my perception talking at communal tu banks every week: for the most part they're dealing with solutions for things they had problems they had nothing to do with that. the burden is far bigger institution naply. >> another theme i hear all of the time from smaller banks is

real concern that dodd-frank is pushing for a very standardized model for products. i they really think that is taking away their whole reason for existence mplt and in that context, the qualified mortgage issue comes up a lot. you hear that from community banks and what's your reaction?

>> we've heard a lot about those concerns. >> thank you, mr. chair. the feedback i get from community banks around costs, the general topic we're discussing? the one is over lapping. auditsll all. >> all its listen to different regulatory institutions. you mentioned the 2012. look at it from thier point of view in terms of how many regulators are coming and in what nuchl beryls. whether there's a way to

coordinate that who set of commit tooes. >> at the same time that we completed the data study, and it should tell you that sfarted with a similar foez yum of community banks that we held in washington followed by out e out reach sessions around. we specifically asked what would be a derj nation for them. we took actions back in 2012 and 2013 on the feedback that we received from institutions and if feedback that we continue to receive. ref e receive.

the information that we ask for before we go in to make the examination process smoother before we go out there. we try to make it before we even show up with examiners ready to hit the ground running and hit the examination process. we didn't get coordination with other regulators, but we do work on that with another local level through our field supervisors as they go through examination planning. >> you've gotten to the type of feedback.

>> another device used for commentary were barked encaged in management. squl banks have had treating going on in the drivel ti markets. these roles become part of an examination process. it just is a burden. and this appropriately applied. the community regulator are small communal banks. all of our examiners are aware of the rules in place. first, there's just the good education of our staff.

second every language examination is trained for a lotover our rules and preglations. third, we have eve offered adherence. and then finally the feedback is, and this was referred to by senateor warter said even when former do chept. >> why is that? >> it's a best practice chlts

and so you really don't leaply have to do it. but we expect you to do it. that system of best practices. >> senator, i can jump in here. absolutely, this whole notion of best practices is something that we have to guard against: mick e make sure you recognize the communication. they're impacting the bank versus those things that are nice to-dos. that's one of the things that we really have to focus on. but one of the keys that's

really at this is explaining the way to why to bank eres. >> thank you, my time is up. >> i would submit for the record a letter that i received from comptroller kerry that contained a number of suggested reforms that i appreciate very much. hearing no objection, i'll submit that to the record. secondly i want to make a brief editorial component e comment, if i would. we had 100, 200 new charters wb the yore. i ha had to find it impossible.

in my view, itsd's very clearly of a 'row interest ratened vierntd. its another been engs neared by the fed. e was shocked to the amount of registration slags. it's impossible to believe that this is not relate ds. having said that the occ has, in my mind quite con instructively suggested zef al significant reforms. i'd like to pursue a subt about that because this is exactly the conversation we should have. what are the specific things we can do to e that will help the

exist tag eing tanglies: as you know, one of the assets is to invest $10 million. is it your sense is it general ri true that banks of $10 billion and len engage in virtually nonor day min mus amounts of the active ti prevented to be procolluded by the vocal goem. >> that's our incorrection. this areas have shown that a lot of the activities moegs community banks can get in, zntd under the proe purr position of the proposed rule.

and so that's where our view is on that. even if institutions were involved, the extent of the activities are significant. welcome to larger institutions. so that realization of looking at institutions around tim and others didn't seem to be the intent of the legislation. that is pretty much the better point. >> and the reality is that these have to spend a fair amount of time and resources. my thought is will could use a soup visor process.

>> speaking for the federal resempb skmunty bapgss do have some activities that are covered by if volaka route. >> woe have the fear of the bankss that we supervise and teenagen. but we have not cake p an agency position. >> would you agree that there's nothing intrinsic about one incremental ability that suddenly gives rise to the activities? >> i would agree with that.

the primary driver is well-imaginaged. but they're proven per formansz: it's a matter of sde serting the resources. >> have you krd this and are you open to this time of form, as welt. >> will also hear proposals about getting back on the car kurt reporting.

that combined with freeng sill ep when sill or reducing the lets of the on sietz presence. there's a trade off there. we can use the reported inform vgs to allow us risks atsds and allow us to sex pandsed. we must ensure that they continue to do that. thoosz visions should reflect that. the good news is dodd-frank does reflect that basic principle. for the others, it almost gives others.

so when members of congress start rolling back in 2 nick of,blanks, i want to make sure that it's really about big, community banks and not about helping their much larger competitors. >> under the occ's definition, what peril sen tang of kmubtybacks have under $10 billion in assets. >>. >> about what per cent are under is e $1 billion in assets. >> that's a good test for me.

so nearly all the banks are going to be under a builton. >> that's correct. >> i know that the f.d.i.c. also defines community banks by examining a few different factors in addition to size. under fdic devil in addition, what peril sen percentage of community banks are you should ant 10 billion$10 billion: >> how many under a billion?

>> sounds like a consent to me. >> there are a lot of bills out there that have been circumvented. and here's an example. under current law, banks with less than $10 billion in assets are completely exempted. >> would that bill benefit any ooft other ten community banks in also sets? i'll take that as a no.

given that the bnks direct li pete with the community banks. wouldn't a bill that raises the don sumger 237b8 protection window fresh holgds to 50 billon dlaurs. >>. i just thrill that six years ago, we suffered through the worse fblg rye sis in jeb rations. >> it is pompblt that our community banks and unions

thrive. but raling back important protections to help the bigger banks just helps put community banks at a greater disadd van fang. the roll backs is covered before their special roll backs that. 's what nee eve been doing before the crisis and after the crisis. we should blt fall for that trick. thank you, mr. chairman. >> mr. chairman, goods morning. thank you all for being back. i was speck lating about the number of times we've had hearing in this room.

i'm not particularly interested in thebacks. i'm interest to people they lend money to.

are they just folks who like to complain and tell me stories that, really, shale thousand dollar they shouldn't worry about. i skt this question in a prooegs hearing. what have you ever heard in one of these hearings that you've taken back and there's been a consequence to what you've heard and said let's solve this problem. >> i'll go ahead and sign off. i have served a blot of time

earlier in your career in your state. so that will change from year to year. some of the more reyent regulatory changes there have been some new requirements for community banks. but, by far the vast majority the most cig nif cant changes are falling on the large ere ear institutions. that's harder to absorb when they are struggling to ash sosh additional compliance activities. or adapt to new rules. one thing i would say, the response that we've had, we do take it very seriously. i know at the federal reserve. i'm confident my counter parts would say the same thing. we looked very carefully at our procedures and the examinations. we review across districts

across-examination offices. are we responding to concerns that we hear? and sometimes we will find yeah we're asking for things that are beyond what we had niche e initially invisions or might be necessary to invest more in training. is that the case in which the applications are applied in a different manner? >> well, so the way our process works is we delegate supervision and responsibility to the reserve banks, which means for, well, fw there's achb exam nation or a supervision of a well-managed institution, the

decisions are made locally. where we have more involvement from washington is where i would think the industry wants to have greater consistency. the issues about if we're restricting capital distributions or some other kind of important factor that might come up dlu the supervisory process. they are being consistent across districts. >> we played the kansas card with me. it always works it's difficult to chastise anybody who is in our state. just a couple of other obama ser vases. my point in this part of the confers is i want these hearings to make a difference. and, in part we need to know what it is legislatively by law. it needs to be changed. but i hope that this is not something that has become a routine in hearing us espouse the challenge we face. one of those challenges, and

it's going to change again, i don't know for whether the good or the bad on august 1st or real estate mortgages so out of 23,000 people, what an amazing development. the only reason they say they don't do it is the nature of the regulations, the uncertainty and the con kwenss if they're not. to live in a community of two or three thousand people, i'm fearful i might not cross the t and dot the eye. that's a pretty damming thing in my view for the future of rural america chlgt credit union, bank piece of legislation. and i'm hoping that in this new congress, it has the opportunity to be heard and this committee and action taken and be considered on this floor.

and i look forward to working with you to see that we get the right framework in place. thank you, mr. chairman. >> i want to first say i agree with the senators and we should help the smallest banks, as i said earlier in ohio state of almost 12 million people. over 80% are very small, over a $00 million in toe at the assets. this is a question for the four of you. sorry, again, to leave you out in this, franks. last fall, i asked you to describe and define community banks and small credit unions. they're going to find the smallest institutions serving local areas with the very syrup business model one banker told us that banking should be boring.

he's been very suckful at growing a small bank into several million dollar communality bank. we debate to smaller institutions. a reminder of a change i had with chairman beryl bernanke. i agree with that sentiment. i want to ensure that any steps taken by you all or by us to provide regulatory relief first and foremost, keep the systems safe. i know your comments play into that. imknow you believe that. it's very important. so this questions for the entire panel. i eel start with this time to yur right to my left. is there a particular size of institution that you believe would benefit the most from regulatory relief. >> what analysis are you doing

on congress's regulatory relief proposals to ensure that the relief is targeted to those institutions that need it most and that those proposals don't threaten savety and soundness or don't strip away consumer protections regardless of the size of the bank. so if you would take that sort of mix of sort of four questions and jstz gives thoughts as specific as you can. >> i'd start with the fact that under the regulatory flexibility act analysis, we've historically deinfined small as 50 million. we had doubled at a rate -- take that back. we had increased several fold in january, 20 sp when the board rose -- raised that definition to 50 million. the board next wooek is going to take um that new definition and potentially prafz ilt as high as a hundred million.

that would provide special analysis. i think that's mainly how we think about a smaller entity in our context. what we try to do is, as i'd kated a scale and target in our regulations that the constitutions have the to tailor processes and to understand the costs and the benefits for what we need to do safety time and space regulations to support that. so we've done a lot of things to try to help along those areas. a big part of it like we've heard about today, a lot of hearing is the exam process itself and the supervision process. significant strides in recent years to tailor our exam process to help reduce the burden on them, to support them.

we're doing a lot of that. we would be mindful of any legislation going forward that did preserve the ability for us to continue to flexibly approach cost benefit approach coast benefitcost benefit analysis. that's our thought process in terms of potential future legislation. >> thank you. >> senator brown, when you look at the community supervises 1400 or 1600 less. i would caution all of us that technology is changing. we have to be careful of certain limits that prescribes what a bank can do.

we try to delve deeper into what activities those institutions are involved in. we had institutions that were very small doing very complicated things that required them to have the requisite system. we're also trying to challenge ourselves but also i think as we contemplate rules around what they do not so much what they're size is. >> who would benefit most and kind of linking it back to causes or failure. for small banks the cost of failure is bad loans and not enough capital to absorb the losses. that's something we have seen over decades. when you think about small banks making the capital is sufficient that's obviously important. in terms of who would benefit one group of small groups. the rural institutions.

i'm very interested to hear what the bankers have to tell us. i think those banks are different from the suburban community banks that might be just under 10 billion and so i'm hoping that we will hear something that might be useful in how we can address their particular needs. >> thank you. looking at the activities by core deposit in a relatively tight geeographic market. in terms of the maybe lessons learned from the crisis that we should keep in mind as we think about regulatory relief, some and i'll draw back a bit from the last crisis as well. there's no substitute for an on site examnation of the

institution.ination of the institution. you can be a small constitution engaged in risky activity. recognizes loss. a lot of institutions at the beginning did not. that prevented them from being able to raise capital. concentrations have to be managed. early supervisory intervention makes a difference. institutions where there were early supervisory recommendations and they heeded it. it's a recipe that creates situation where there's no franchise value and institutions struggle to find investors when they need capital down the road because they haven't created a franchise. those are some of the key lessons we would look at when looking at regulatory relief proposals and looking back to what was the original reason for the rule and do any of these

things still play today. >> thank you. >> thank you, senator brown. 192, 192 dodd frank rule makings done through 2012, 74% contained no cost-benefit analysis. this means that as of 2012 we had no idea how much three-fourths of dodd frank rules would cost to comply with. a assuming this is true, does this concern you? >> it would not be with the way we approach rule making. we consider the cost benefits and alternatives. >> does that concern you?

>> i would add that making rules, we do consider costs and benefits and do impact studies on a number of issues related to rule making. i know that analysis underlies the development of rule. >> is that important? is cost benefit analysis important? >> it is important. with the regulations under dodd frank the docc is responsible for we do economic impact analysis. that's part of our process. it's really embedded in our rule making process. >> is cost ben fitsefit important to the viability of the credit unions? >> yes, sir, that's important. we try to do a good job of articulating those costs. >> mr. franks.

>> beneficial. we do that also. >> you said earlier that it's easy to calculate the cost of regulations but not the benefits. that might be true. i don't know. maybe more work needs to be done. in 2011, the general accounting office found that federal financial regulators both fall short of what could be done. how do you respond to this? do you think that you need to do more? a lot of us think you need to do more. >> if i said it was easy, i would try to qualify that and say it's easier. >> easy or easier? >> easier to identify costs.

we very much value information about costs. when we put rules out for comment the most valuable ones are institutions take place. here is a cost i'm going to have. here is the impact on perhaps my need to change commuter systems to implement what you need to propose. we respond to those and incorporate those in the final rules. i think our capital rules is a good champl where we took the feed back from the banks about the cost of implementation and made adjustments. we recognize that more information on costs is valuable. i hope as we go through the process we'll hear more about it. in any comment period the more specific information we get from the institutions the better. >> a lot of us that advocate cost benefit analysis. i've been pushing that for years. it defies logic not to do it. we're not saying to you loosen

the regulations and don't worry about safety and soundness. we do worry about that. you got to do it but do the whole thing. do it right. i know from being up here 29 years, a will the of those regulations make no sense. they ought to be weighed in the balance. >> i apologize for being late. i was presiding over the senate. i think that's paying your dues. thank you for your time. some reports will suggest you've

seen a doubling or tripling of non nonhf non-bank companies moving into the emergency services business. i wanted to ask why you think this is. >> not a lot of banks have significant mortgaging businesses. it's very small amounts that are doing it and they're keeping it. the mortgage servicing industry has changes in recent years. we are noticing there's some shift away from the larger banking organizations. at this point i don't know that i could add anymore insight into that. >> i would share what's been said also but continuing innovation and speed of delivery and technology is making a big

difference in who provide the services at a more effective cost. that's been a big driverer as well. >> we feel the capital requirements that are causing these to be taken to other sources will cause relationship lending to be dampened. we'd like to see our banks be able to continue to service the mortgages that they produce. many state regulators do regulate the mortgage service companies. i know they are looking at standards for those companies.

>> one question i'd like to ask is was there any study on the assets that the regulations implementing the capital requirements would have on the mortgage servicing business? not the general study on capital requirements. specifically the impact it could vu have on the mortgage servicing business especially small and mid size banks. >> we absolutely looked at it for community institutions in response to the comments we received as part of the capital rule making. there are very few community institutions that are engaged in mortgage services to a level that would have been impacted by the new capital rules. >> i would only add the goal of

the capital rules was to make the capital regime more resilient resilient. going through the comment process looked at various classes of assets those that prove to be less liquid many the financial crisis and when needed more liquid -- lidquidity they tend to perhaps not get what the other assets needed in the final rule. >> we've been aiming at one goal and having a different result. to me it seems like it's a problem for two reasons. one, more community banks, in particular, especially in a state like arkansas and other

states like alabama and tennessee and other states represented here, it's a good business. it's relatively safe assets. two, it's also that for the people we serve the consumers of those banks rather than dealing with a small bank in a place like del county arkansas. my time has expired. i want to thank you for your time. thank you for increasing the number of our candidates we have in washington today. >> thank you. i apologize for being in a closed session for two and a half hours involving iran. i hope the key questions i hoped

to ask have been asked by others. i came to say i thank you for being here and these distinguished witnesses here. to try to cause them to not be such a threat there's no question that's what's happened in the process is our community banks have been tremendously affected. we're losing community banks left and right. the asset base they have to deal with relative to compliance is causing them to be non non-competitive. i look forward to working with you some alleviate some of it that's been placed on them.

i thank you. i look forward tworko working with you. i do have detailed questions that i'll send through qfrs. i look forward to additional hearings. >> thank you. i'm going to follow up on senator moran and others here. small bank have millions and millions of people living in small communities in this country. he was talking about a small bank inability to make a plain vanilla blue chip loan on a piece of real estate because of regulations. do y'all understand that. nobody wants a failing institution or a troubled institution. shouldn't banks have clarity in

what they can do and to make it work? we have banking system because we have a free market economy. going to keep it that way. want to have access to capital want those debts paid back. we understand all that. isn't there some way to regulators to solve some of those problems, at least try to? is it a question of capital? is it a question of management? is a problem over regulation? i don't know. >> they put out a notice of proposed rule making and small bank. the expanded rule definition except about 1700 more

institutions bringing the total to a little over 4,000. the small bank expansion will pick up about 700 additional institutions. we do think that with those proposals it will make it easier for banks in rural communities to comply with the abilities to repay rules. >> some of the issues we're hearing around the appraisal thresholds that may also be helpful for the kind of situation that you're describing. we will continue to work on that as we move through the process. >> the areas you listed, i would say all the above for different reasons. i think the new and amount of regulations have that impact on institutions. to the extent there's relief you need to give them that relief. one of the things we're doing at the occ is doing that assess

assessments of laws and rules that aren't necessary or should be modified. for example, when the ots was combining the occ, we're undertaking a review of all the regulations to make sure they are fair and balanced and consistent. the other part of the management is very critical. with the complexity of the industry industry, making sure they have the right skill set is key. if they can't acquire that that's where our collaboration emphasize a sharing of resources which for some institutions is harder to do. it's important to look for opportunities to manage the coasts, off load the costs and get the expertise you need.

>> i would say one of the challenges we've been in again is a tremendous period of change. one of the additional charges is the sorts of the uncertainty there. what's the legal uncertainty? do we have any precedents on how that will be interpreted? i think it creates challenges for our financial institutions as far as the lending process. we understand that. what we can do about it as regulators is to provide when it's in our authority to do so clarity about how we'll review it. we have published a lot of guidance to try to help understand the new rules and how we'll examine for them. we also do a lot of training and outreach. we're serving in these rural communities to help them understand those areas and to get training and to share best practices.

>> you want to comment? >> i do. while we recognize there's improvements in these areas we would like to see any mortgage loan held in portfolio would qualify under the qm rules. when you've made a loan you're holding in portfolio you've already done the analysis. we would really like that to be something that is initiated. we feel like that would be an improvement in those areas. >> thank you. i want to thank all the witnesses today who will be following up with each of your agency as we begin consideration of regulatory relief here. we want your input. the record will remain open for the next seven days.

thank you very much for your appearance today. the committee is adjourned. thoughts and prayers. it includes her mother and father, her brother and all those who worked with kayla in her all too short life.

she dedicated her life to serving others. not just serving other people but serving those who were in crisis situations who faced dire circumstances and relying on the kindness and generosity of fellow human beings the try to meet their needs. she was a young woman willing to put herself in harms way to try to offer that relief. she saw this as a way to honor the god that she worshipped. i was personally moved by her comments that she saw god in the eyes of people who were dealing with terrible crisis. that's a profound wise statement from such a young woman. i think it does go to the character and generousty tyty tyty generosity and spirit that she

embodied. over the weekend kayla's parents received a private message about her death. the information was shared with the intelligence community. they conducted a review and analysis. they concluded that she had died. the information that they reviewed did not allow them to arrive at a conclusion about her precise cause of death. it does allow them to conclude she had died. >> is there anything information they were able to glean about when she died? it is that's a good question.

>> the intelligence community did not have a specific assessment about the cause of death. there are some things i can share with you about this air strike that i know that isil has referenced. this is something the military officials have referenced as well. the air strike carried out by the jordanian air force on february 6th was against an isil weapons compounds. this was a facility that had been struck on previous occasions. there's no evidence in the target area prior to the

coalition strike taking place. that certainly would call into question the claims made by isil. what is not possible to call into question is that isil regardless of her cause of death is responsible for it. this is the organization that was holding her against her will. that means they are responsible for her safety and her well being. they are responsible for her death. >> live coverage from the house and homeland community starts at 1:00 a.m. eastern.

keep track of the republican led congress. new congress best access on c-span, c-span2 and c-span.org.

hearing will come to order. good morning. i am pleased to convene the senate sub committee on surface transportation and merchant marine infrastructure, safety and security for our second hearing which is entightstled keeping goods moving. today's hearing allows us to explore this issue with a particular focus on infrastructure and maintaining operations at our nation's ports. american's intermodal transportation network is the foundation upon which u.s. businesses along all segments of

the supply chain produce goods and get them to market. at our last hearing it was outlined hour it cost companies through lost sales, increased cost and poor customer service. deep water ports represent a key element of the u.s. transportation network and are vital to our economic growth. in fact, america's sea ports serve as the key connection port for all modes of transportation. our west coast ports alone move 12.5% of u.s. gdp per year. a shut down of america's west coast ports even for a short period of time would have devastating economic consequences. according to a recent report by the national retail federation and the national association of

manufacturers, in the most severe case a 20 day port closure would disrupt 4,500 jobs. i've heard from businesses and consumers in my state expressing grave concerns about service disruptions at west coast ports. just last week my office heard from a omaha base company that manufacturers electric conductors with inputs from asia. this company is seen as import time frame double and cost triple because of current slow downs. if more businesses change in shipping routes is cost prohibitive. whether they export agriculture goods or import retail businesses are being forced to opt for air freight or rerouting

projects to avoid losing market share due to misshipments. port congestion impacts truckers and freight rail as well as the competitiveness of the ports themselves. everyone has a stake in seeing the ongoing negotiations between pma and ilw resolved quickly. members of congress and the administration must pay close attention to these ongoing negotiations and the economic impact of service disruption at our ports. this is important as we face ports on both coasts to be negotiating simultaneously in 2018 which is when the current east coast contract expires. today's panel will represent a wide array of perspectives on the affect of recent disruptions in our nation's supply chain. i'm eager to hear further details on the challenges that

slow down at our nation west coast ports have posed edd to their industries and their consumers. i'm also looking forward hearing about opportunities for congress, state and local government. we need to explore the policy options to support growth and future volumes of freight to keep goods moving. i'd like to invite my colleague senator bloomenthal to make any opening remarks. senator. >> thank you. thank to our witnesses for being here today. not always the most noticed.

one of the most profoundly important to our economy and jobs and our quality of life. we thank you for being here. in the next remainder of this decade the department of transportation estimates that freight will grow at least 10% in volume not to mention the value of that volume to our economy. far from diminishing the importance of moving goods, the topic which brings us here today will only increase dramatically. that estimate is a conservative one. we tend to focus on passengers

as we did on the tragedy last week in new york. it was preventible and avoidable with proper safety procedures. the same is true in moving good, moving freight. safety has to be made number one priority. we're all dependent on freight transportation just as moving people. we all depend on all the modes of transportation, all the types of transit whether roads and bridges, rail, water all working together and all fulfilling their vital functions. i join in the hope that the parties to the west coast ports dispute can find a reasonable mutually agreeable solution as fast as possible.

time is not on our side. the businesses impacted by the slowdown are able to weather this time and the impact, economically. looking beyond this immediate issue are the broader challenges of investing and making sure that we build the infrastructure that is vital to moving goods and people. connecticut has a freight infrastructure in need of that investment. so they can accommodate weights if moving goods and services by rail which is the north american rail network standard.

this includes the weight of the car plus about 110,000 pounds of cargo. if connecticut doesn't upgrade its weight limits then our state could become a freight island. if we're a freight island the rest of america can't reach us moving goods. i'm very much looking parted inging forward to the testimony that we're going to hear today and the initiateive initiatives that it will enable us to take. thank you for being here. >> thank you, senator. welcome to the panel today. i appreciate you taking time out of your schedules to be here at this hearing and provide the senators with more information

on this very important topic. i would like to get right to it. our first witness is mr. norman bay baysack. he's the vice president of international sales of cargo. welcome. >> thank you chairman fisher and members of the committee and subcommittee for invietsteing me to testify. we're able to sell them to the domestic and international mashlgt markets where they have the best value. our farmer and rancher suppliers, hard working employees and the communities where we operate. ports are an integral part of a dependable supply chain. let me outline the beef and pork supply chain i work with each and every day.

cargill procures life stock in our plants located in nebraska kansas texas, iowa pennsylvania, illinois, colorado and california. customers from around the world depend on u.s. beef and pork to sell in super markets, restaurants and processing plants. it must be quickly packaged and shipped in temperature controlled trucks rail cars or containers to ensure product integrity and safety and allow enough shelf life to sell or process once the product arrives. under normal circumstances a container of fresh pork usually arrives with more than 25 days shelf life. the industry is currently experiencing delays of two to three weeks on chilled product due to the congestion in west coast ports.

with this delay our asian customers cannot count on a dependable supply of u.s. beef and pork. they are cancelling others and looking to suppliers in australia and chile and the european union to meet their needs. many of our competitors are facing similar cancellations. needless to say the current situation has created a tremendous amount of uncertainty. today the industry is faced with three choices. first, continue to ship product despite the current uncertainty. this can result in shorter shelf life and increased risk of potential spoilage and complete product loss.

if you take nothing else away from my testimony today, understand that any of these choices result in negative achkt affects to everyone in the chain. farmers, ranchers and plant employees. today about 10% of u.s. beef and 25% of u.s. pork is exported. the export fed ration estimates the global demand will reach 17.6 billion pounds in 2024. that's up 50% for beef and 42% for pork with most of that growth coming from the pacific rim. future growth depends on an effective, efficient and reliable supply. for reference this is enough to

provide 29.2 billion more four ounce servings of beef or pork. we we must look through the lens of global competition. we ignore it at our collective pearl. peril. functioning ports are imperative for labor and operational perspective. when ports don't operate the supply chain backs up causes long term problems for us our industry, our farmer and rancher suppliers, our customers and employees. we ask you to take the steps needed to address the challenges i've outlined today so we can continue helping the world thrive by meeting the needs of

consumers around the globe. i look forward to your questions. thank you. >> thank you. ms. katy farmer. she's the vice president of consumer products at bnsf. welcome. >> thank you. good morning. thank you for the opportunity to be here to discuss bnsf's perspective on the importance of export to our nation's port. it's the movement of shipping containers and trucks by rail. it's growth over the last decade is attributal. it's the movement of 53 mf foot long long containers or trailers.

goods are shipped in 20 or 40-foot long containers. they arrive on a container ship in a port. they are loaded onto trains on dock or trucked a short distance to a dock or intermodal yard where they are sorted and loaded to movement. the containers are owned by the steam ship lines. we balance to mamptch back the empties. last yooer on our railroad we handled post recession record volume levels of freight. we have moved quickly to add capacity and implemented a record $4 billion capital program in 2013 followed by a 5.5 billion dollar program in 2014. we have announced a $6 billion capital budget this year. we have permanently expanded our

network. the san pedro bay complex compromised of los angeles and long beach is the busiest container port in the western hemisphere hemisphere. bnsf transports more than half the international shipments and 75% of these units are loaded on dock. the remaining are handled off dock at the hobart yard in east los angeles. the facility is 24 miles by highway from the ports. bnsf has been working for well over a decade to build a near dock facility only four miles from the ports. our efforts to build this

facility has been challenged for years and permit is currently tied up in the courts. we think this project will create operational efficiencies for the ports. west coast ports are facing challenges due to congestion. growing freight volumes are not the story for west ports. there are several factors that are kribtscontributing to growing congestion. limited infrastructure adjacent to the ports. by far and away the most disruptive aspect has been the reduction in port productivity as a result of the ongoing negotiations between the pma and the ilwu.

carry a minimum of 250 container that are not being processed through the supply chain. this also impacted the return movement of freight westbound for exports. this is causing significant delays and increased cost of our customers. bnsf has taken numerous action to ensure the fluidity of our network. during the 11-day shut down of port operations that occurred in 2002 freight permanently migrated away from the west coast. this is a potential long term consequence from the situation. congress can play a role in keeping goods moving through sound infrastructure policy. my written testimony details bnsf's thoughts in those areas. thank you. i look forward to your questions. >> thank you. next we have dr. walter.

she's the chief economist at moffit. welcome. >> good morning. it's well recognized that international trade is increasingly important to the u.s. economy and that this trade mostly utilizes ocean going vessels particularly container vessels due to the versatility of containers to handle a range of cargo to liquids and gases. ports have an important role in the movement of overseas freight because they are major intermodal exchange ports transferring cargo between ships and rails. they are the embodiment of intermodalism. ocean liners are adapting to

growing trade volume. i would agree that the estimates for trade volume growth are probably low. we should likely see much higher growth rates provided that the infrastructure is there. the ocean liners are responding to this by not only the larger trade volumes but also to rising fuel costs and to stricter environmental impacts. the larger vessels mean more cargo on fewer ships and in fewer ports because the time it takes to load and unload the ships is time that vessels do not earn revenues in giving the costs of these very large ships it's important that they min minimize the time they spent sitting in ports. the ports are adapting to this

change in the global vessel fleet. they are investing in dredging and removing air draft restrictions. they are supplying their terminals so you can stack the containers higher and also by automation. the investments made by the ocean liners and ports are often not matched by the land side i vest investments outside the ports gates. investments outside the ports gates. it's created congestion problems in port gate ways around the world and some parts of the u.s. location where land sight planning and investing is not in line with what's happening on the water side.

the shorter term issues such as the transition of ocean carriers moving away from providing chassises to their customers and allowing the financial sector to step in and lease these has not been very smooth. to some extent this has impacted the effect of the larger vessels on congestion issues. to that we would include the productivity losses that have occurred at the ports during the contract negotiations. from my perspective we see the shorter term issues as masking some of these longer term trends driven by the larger vessels and causing concern about the long term congestion problems that we would expect to see in the u.s.

supply chain. it's likely that foreign ports where intermodal characterizes freight movement will be at the expense of u.s. ports and the u.s. logistics industry. to sum up i believe that failure to cut costs across u.s. ports by which i do not mean not just cutting costs in ways that create competition between u.s. ports but rather cutting costs for the entire port system is required. otherwise u.s. ports will not be the winners in competition with the foreign ports. the spotlight on the inland segment of flow cap on railroad lines in order to improve service to markets close to the port and truck freight ways to improve access to markets further away. to defend our exports and imports we need to focus our attention on the inland segments of the product flow path.

on the railroad lines, the container transfer facilities and trucks we need to start thinking about dedicated freight ways. these types of investments will make u.s. exports more competitive competitive. thank you. >> thank you. next we have mr. john grueling. he's a board member of the coalition for america's gateways and trade corridors. welcome, sir. >> thank you. thank you for this opportunity. today i'm representing both the will county center for economic development and the coalition for america's gateways and trade corridors which is a diverse group of 60 public and private organizations dedicated to increasing federal investment in america's multimodal freight infrastructure. i'm also here as the ceo of the will county center for economic

development. our responsibility today is marketing the largest inland international container port in north america. will county is crossed by six class one railroads, five interstate highways several commercial water ports on our nation's largest inland waerts waterway. last year we processed over three million containers. our first and last mile infrastructure requirements today total $3.6 billion of new investment just in our accounting. that does not include bringing our existing road infrastructure up to state of good repair. our needs extend far beyond roads. increased utilization of freight by rail is resulting in more rail crossing and it's impacting

congress and public safety. we need more grade separation structures and first and last mile interstate connecters to accommodate the freight of the future. the growth of freight has been stated. we believe by 2045 that increase will be 45% putting more pressure oen existn existing and future structure. 95% of the consumers are now outside of the united states. being at the beginning and end of the a major global supply chain, u.s. companyies have to understand and the government need to understand that we need good infrastructure to reach those markets. u.s. government infrastructure and investment is currently less than 2%. our trade partners, our biggest ones are spending two to five times more than that on their infrastructure.

it can't be just one mode that we're focused on when talking about funding infrastructure. we have to look at all modes and we need to make them work better together. rail, truck, air and water are today the key components of the global supply chain. the global situation is getting worse in a lot of respects. we have the opportunity to take advantage of what's going on internationally in the economy. with coalition for america's gateways and trade corridors ask congress to take the following steps in the upcoming surface transportation authorization. first, we would like you to establish a freight program containing dedicated and flexible funding. freight should not compete with other mobility needs. freight movement occupies a special place in our transportation system as the elements supporting commerce competitiveness and that all

important word, jobs. we should have a dedicated funding such as a freight trust fund that's committed to stoking our economic engine by improvinge ing efficiency safety and reliability at which speeds are moved. a competitive grant program. projects of national and regional significance are similar freight specific competitive grant program is needed to prioritize federal funding of projects that meet certain performance criteria to advance economic goals of this country. we can identify important public benefits as well as non-federal support. a $2 billion grant program could leverage many times that amount in prooifts invesprivate investment and infrastructure. public benefit is derived,

public investment must be made. often where modes come together that public assistance is needed to close the funding gaps. examples include highway rail crosses, lodgistics or transfer facilities. border crossing capacity and enhancements. finally, modify the national freight transportation policy to make it multi-modal. create an officer of intermodalism in the u.s. d.o.t.'s secretary office and give freight the attention it needs in this country to keep our economy healthy. thank you. >> thank you very much. we will begin with a first round of questions five minutes. i will start. you talked about competing in a global market and the effect

that has and being with cargo and emphasize that you have with port. can you tell me what percentage of pork in this country goes for exports? >> certainly. pork is much larger than beef about 20 25%. 10% of beef is exported. >> when you're looking at delays at our ports and you see other countries stepping forward and being able to fulfill some of those orders, do you know what share of the market your company has lost and how you see that rippling effect throughout the industry? >> going to cargill share gets to be a bit difficult. if you look at the u.s. pork industry or the u.s. beef

industry, we certainly have been the largest exporter around the globe. as we have dealt with the congestion in the ports, also issues like currency and other forces in play in the market we have seen a substantial increase just in the past year to countries, the eu chile and i think in the last couple of months have seen a substantial decline in our volumes. >> do you think that will be a permanent decline? will we be able to get that market back once these customers are used to having new trading partners? >> i think any time you disappoint a customer it takes time to build trust back. as i referred to in my testimony there's a tremendous amount of potential for both beef and pork exports on the global scale. we have a product that the world

is looking for in values. i certainly believe that growth potential remains but there is no doubt that we've disappointed our customer base primarily japan, korea and in china over the last couple of months. that will take some time to rebuild trust. >> and in disappointing our customer base, what's been the loss in dollars to pork producers and the economy here in this country? >> i don't know that i'd be the best one. i think north american meat institute estimated 40 to 50$50 million per week. i could give you a better example. we have about 15 containers of chilled pork product in route to japan that our customers are asking can you guarantee us that

it will arrive in a useful form with shelf life or not. for me that's about a million dollars i have to decide whether i'm going to put that i'm sure you have to look at the possibilities of a shut down and a shut down that would last for possibly an extended period of time. how does that affect the railroad in planning? and, what impact does that have on your customers and your thousands of employees that you have? >> sure so an example of this

would be this weekend we were notified by the pma that vessel gangs would not be working so the affect that has on our railroad is that in an average week during this period of the year we would be moving somewhere in the neighborhood of 60 trains off of our docks in southern california. that number has been reduced to 30 trains per week. the impact is we cannot move the freight that wants to move off the west coast so we will move a limited amount off the west coast into the interior of the u.s. so we will have to turn freight away at the inland hubs that want to move back to the west coast. in addition to this i talked about our capital expenditures we're now having to store locomotives and equipment, store that across our railroad because we can no longer continue to send this volume out to the

port. when we do that, it sits on the main line and causes ripple affects which impact our customers as well as intermodal customers. so the impact is we cannot move the freight through it and we are not using the valuable resources that we have. so the impact when you see the freight migrate from the east coast to west coast. what impact does that have on a local community? >> absolutely. when we look back at history. during 2002 freight has permanently migrated away from canada to mexico. we know that because of that the local freight is not ending up in those communities. thank you very much. senator bloomenthal. >> thank you madam chair. there seems to be no doubt among

any of our panel members that solving this threatened impasse or crisis on the west coast is necessary to america's near term and long term competitiveness. is that correct? but moving onto the broader issue mr. grueling's excellent testimony about our ongoing failure and it is a kind of slow motion implosion of america's competitiveness. the ongoing failure to spend more than 2% of our gdp on infra infrastructure investment which compared to 8% in china, 9% in india. even mexico 4%. it extends not only to roads and

bridges which are crumbling but also areas of our infrastructure like rail great. just days ago we saw the consequences of a rail grate causing that could have been made safer and could have prevented the deaths and injuries that occurred there. the fact of the matter is there are more than 2,000 crashes every year causing more than 230 deaths it and 700 injuries. not to mention the economic costs of those collisions which are very difficult or impossible to calculate. that's just one example of our failure to invest in

infrastructure. so let me ask you as to the $2 billion that you recommend for investment would it make sense to do it through an infrastructure bank which has been proposed by other members and myself, a very bipartisan proposal that would make available $2 billion but very possibly more. >> i think the concept of a set aside through a public infrastructure bank or public utility bonds along with some other finance mechanisms i think we need to bundle these together. i think anything that costs a lot of money is going to take more than one resource. gas in tax, to california some

of the 99infrastructure problems, a gas tax is something that we should be looking at but i think loan guarantees some of the existing programs, i think both help in meeting this demand that we have and i do believe that multiple solutions are going to be necessary. >> my understanding is both tifia and riff are under utilized in fact billions of dollars have been left on the table, would you agree? >> i would agree with that. i think the time the uncertainty that comes about when there's long tlasdelays in public financing tools. all of a sudden the hot project becomes not so hot a project and

they start looking at other infra infrastructure pieces to accomplish it. expedited review and broadening of the utilization of those funds and making sure we're using it every year would go along to help them. >> and it is in fact a multibillion dollars opportunity that is something that as you well have expressed, it is the transportation growth opportunity, the future. >> that's right. >> do any of you have the any differences with the points that mr. grueling as just made? >> i would say from being a sub perspective, certainly, as you all know we're privately funded

but we certainly have a vested interest in making sure the supply chain runs efficiently so therefore we fully support a federal focus on freight so we think that is a good thing. >> through an infrastructure bank? >> again we don't necessarily want to drive that decision but we certainly want to be part of the conversation. >> thank you. my time has expired. thank you all. >> thank you senator. senator danes. >> thank you madam chair. well, i get to represent the state of montana. our number one thing is agriculture. you have to be able to export. like senator fisher we don't have a lot of ocean front property in montana. i don't think nebraska does either so the supply chain is in

fact fact is important. primarily, through the west coast ports we're very proud of our ranchers and farmers who not only feed america they feed the world now. for ms. farmer i heard concerns certainly from our producers in montana about the back log that we had, i think back log of nearly 3400 cars past due in the region. could you tell us what the current status of the rail back log is in responsibility. i'd be happy to follow-up with specific statistics along the back log buzz what i can tell you on any measurement because of the capital that we've invested, because of the milder winter that we've had, by any metric that we look at we're far improved where we were last year. we're making significant

progress towards delivering the service that your constituents in the state of montana have come to expect from us and we will continue to make progress among those lines. what i would say is concerning to us is one of the ways that agricultural products get to the west coast as we've discussed is through the use of containers. it can move in hopper cars or containers. and what twi can say that as we limit the flow of inbound containers into the country it makes it more difficult to move the product for export. so that's certainly of concern to us. >> what i can guarantee is last summer, our montana producers were not so produced with the rail back log, it was issued going on at the west coast ports. i used to be a supply chain guy myself. i worked at proctor and gamble for 12 years.