the problem here is that this statute goes too far, the appropriate result in this case and is to invalidate the statute, give the minnesota legislature another chance to and an ordinary statute continued to have an apparel man. thank you. the case is submitted. >> and good morning and welcome

to the heritage foundation in the auditorium. you can join us on our website on all of these occasions, people are also joining us on the c-span network. please to a courtesy check that our mobile devices have been silent or turned off, if you are joining us online you are welcome to send russian or comments -- questions or comments in at any time by emailing. >> leading our discussion is dr. , in our institute for freedom. dr. marshall studies and writes about her financial markets, onetary policy, also focuses the current difficulties in of theinancial companies today detail problem.

teachingfinanced and in ouronomics, center for data analysis. behold holds a doctorate degree in financial economics from the university of new orleans. join me in welcoming dr. michelle. and joining me here today i am going to do a short version, joining me from the far left -- my far left is my colleague david who is a senior fellow and economic policy here at heritage. paul who is a group executive vice president of congressional relations ba -- the icbicy , director ofklein

regulation and markets. thank you all for coming. we are talking about of the senate bill that is moving probably this week, so we have really good timing. brilliantly planned, not lock. lock -- not luck. i am going to do a highlight of the bill, a couple of minor things in the bill, then we will get our discussion going off of that. one of the main things in the senate bill is what is called a ,ommunity bank leverage ratio we will call it a community bank leverage ratio in deference to the senate. this measure would provide -- for banks that are under $10 million in total assets maybe.

i will get to that in a second. the bill stipulates that those regulators will put the actual ratio together, but it doesn't specify that it has to be tangible equity in total assets, and it has to be somewhere between 8% and 10%, so there is some regulatory discretion there, but it is a little bit predefined. however, if a bank meets of this ratio, and bank that is under 10 billion in assets make this ratio and they determined that their risk profile is not ok, then they do not qualify for relief. on things like derivative exposures, training of assets and liabilities as well as other factors. that is one of the main components. another is what we commonly call mjeasurehold --this

would provide relief from section 165, it raises the billion, but250 not really. andaises the threshold still allows any potential standard to apply to a banking company with a 100 billion in assets. that is to give the federal the authority to tailor regulations to any company below $100 billion. we are kind of moving the ratio but kind of not. that is how i am taking this. because they are really not hard and fast moving the ratio. another major component is the ability to repay your qms standard. if a bank with less than $10 agrees to holdts

a mortgage on their books, that is a potentially large one and from estimates that we have done, it probably impacts about 25% of the mortgage market. an lot of community banks don't hold, but a lot of them do. it looks like around a quarter of the market. stress relief, stress test relief. i need stress relief, as you can see. would test relief decrease the mandatory scenarios that have to be supported and it would change the frequency of company run stress tests to banks for over 52 billion from annual to periodic. jerome powell testified that yes, they would still be doing i don't think anyone knows exactly what periodic means, but it is not annual.

the exemption would be for banks less than $10 billion in assets and trading assets and liabilities of that do not exceed 5% of total assets. it is not a blanket exemption, but it is pretty wide-ranging. all of those are the ones i consider to be the main com ponents. most commercial banks, by far, the number of around 5000 and we are only talking about a number above that in the hundreds. is something better than nothing, i think. that is kind of the way i look at this, anyway. then there are a bunch of provisions that overlap with things we are passing out, choice act or separate bills. some of the minor ones, really

,uickly, short and call reports there is another provision tt provides regulatory parity and extends the blue sky law .reemption all stock exchanges instead of just the new york stock exchange is, there is a reciprocal deposit bill which i will talk about in another segment of what we are going to do here, which would ensure that reciprocal deposits could no longer be defined as brokered deposits if does not exceed the lesser of 10 billion or 20% of liabilities. it includes general obligation municipals as well as certain municipal revenue bonds, and

2-b high-quality liquid , and it would change the bank examiner frequency for a few bags. put them on an 18 month cycle, this would raise the threshold to about $3 billion which would roughly cover about 400 banks or so. that is a quick overview of what in my minor and major categories, and i also have, if you did not see on the way in, on your way out there is an issue brief with a handy everyand it lists almost one of the components that are in there and does a comparison to some of the stuff in the house. segment.hat next isould like to do

ask aaron what are some of the things that you particularly like or do not like in the bill? me here,you for having i think it is fantastic that you have assembled a group of people to have a discussion on this ill before the senate floor that you outlined very well. there is a lot of stuff in this. and on aig deal bill, broader level, i would say it covers a lot more than just targeted relief for community banks as some of its supporters kind of put it under. manyt does a lot less than of its opponents say it does. the truth somewheren between. three things list i like and three things i don't in this legislation. i want to start with something i like, which is that this is how a bill is supposed to happen as we learned in school.

and this process is very different from the processes that unfortunately dominated what little legislation has gone through, which is kind of closed-door leadership meetings where the cake is big and it is put forward. the process we went through here , the chairman of the committee and the lead ranking member put out a wall of ideas together, held a multiple public hearings, there was a negotiation, when two of them could not reach an agreement, that is fine. subsequent to that, moderate democrats could reach an agreement. one could debate the wisdom of democrats splintering and not having a united front, the other hand, this is politics. correspondingly, the package has more than the votes necessary to it moveda filibuster, out of committee after a very lengthy markup with over 40

amendments debated. that is great. have open conversation, have a robust dialogue. one of the biggest mistakes in the process, in my opinion, was when republicans while for 400 amendments and offer zero. minute mark up, not because everybody wasn't there, but when you have a committee markup, the chair says where is the amendment? and if nobody brings the amendment, there is a strategy to just not debate. democrats put forward alternatives to parts of the bill they did not like, there is the bill, there is debate, there is a vote. this is the process and it is nice to be back to bipartisanship and to have the open process. .1 --hought that was point one. take a giant step back.

banks fail because of a lack of capital. banks can also fail, particularly investment banks -- we use the term bank a bit too loosely. because of lack of liquidity or perceived lack of liquidity. whether a bank is solvent or not at a time of crisis is hard to know. being a problem, the regulators said they will have a liquidity coverage ratios and wire banks to hold high-quality liquid assets. something very funny happened, i don't know if you caught it. the problem is not having enough liquidity, the solution became high-quality liquid assets. having an asset of high-quality and having a liquid assets are not necessarily the same ring. but in regulators minds particularly with the international rule, the two became synonymous.

in the corporate debt and government security space, they have a fair amount of overlap. that relationship breaks in a municipal debt. if you own a small county water system, you can have a very high quality assets but it is very infrequently traded. on the other hand, of the top six municipal debt traded last year, three were puerto rican. it is not a high-quality, but it is highly liquid. happening were the regulators that brought this -- there is no international comparison, we will just kind of ignore it. that is a problem, because corporate data got treated, now you preference one asset class over another. in addition, and then subsequently the federal reserve appreciated that there are high-quality liquid community assets or put a different way,

useful assets of high-quality that, in times of crisis, probably could be sold, whether that requires a decent haircut or selling or not, as long as the haircut doesn't change during the crisis. and the federal reserve moved a little bit, the other bank regulators did not, there was a lot of uncertainty. i am generally skeptical when congress weighs in at this level to say this asset class qualifies at this level. when you get into the substance is the right move, is this a very high haircut, ironically, if you go back in time and we -- the statetest, might york revenue bonds not have. congress is wise to put municipalities on parity the corporate debt here. the third thing i like is section 401 which raises the congressional.

understandet back to why $50 billion should be changed, you have to understand what the logic was when we put that number in. you have to go back to a 20 mindset, a very different mindset. when the concept was being structured that there be a set of banks subject to enhanced credential standards, stronger regulation, the concept of the was that we were concerned that would beginning the government -- these banks would be too big to fail. policymakers were concerned that markets would interpret that if you were a citibank, the government stood behind you. what is one way to get around this argument? let's set the line so low that it's clear that if one of these small banks fails, the government would not step in and provide extraordinary existence.

so the market would not really know where this line was. and that was the dominant rationale for setting a $50 billion limit. a decade later, a couple of things are clear. one is that the concerns about moral hazard are no longer as a valid and may have been overstated at the time. research has shown there is no benefit to this being over 50 is no rush among financial institutions to go over the $50 billion threshold in the market, it is time to re-examine that. the number was rdred, it does not grow with inflation or assets or the economy, so it strength over time. time.inks over as dr. norbert said, there is a a bankll, if they see engaged in risky activities,

they can still apply in his credential standards. it is not a complete walk away. that doesn't necessarily mean i think it is exactly right as written, reasonable people could argue whether to 50 is the right line or whether to have a hard line at all. at 249, the it is fed could decided not to provide candidates, all of the southern has your systemic risk profile really changed? three things i don't like. one, there should be something in here for consumers. we have seen multiple major scandals within the financial services industry. exposeddata breach has not just problems thereby within the underlying economics of writable reporting. one out of four people have an error on their credit report, there are many errant claims, not all of them pay their debts. try getting your credit report fixed.

there is no legal requirement that there be any accuracy in your credit report, beyond which, the system and the economics with an credit reporting do not favor fixing it. there should be something in there to address this. there should be something in here to address some of the problems uncovered in the wells fargo thing. other major deregulation bills have included new consumer ideas , community development financial institutions act was tosed to help provide access low income communities. we could use more access to new businesses, more access to credit for new businesses. coupled with that, it would be nice if this were the end. one of the things i like about this bill is that it accepts the and tries to frank modify it. i do not feel an acceptance that a modified framework is enough to put this issue to bed and move on.

cannot possibly be relitigating the response to the last financial crisis, we have to put in place a new framework and see how it goes. acting director mulvaney last aeek call this -- . without getting overly complex, the current bank regulation has to binding constraint. i like them both. will

an and now the other 30. you are having government picking winners and losers within an activity that will cluster that activity within those institutions. clustering is a systemically important activity and increases systemic risk. that is not because of the bill. there are two logical places to go to fix that. one is eliminate it and keep the simple leverage simple. that is my preference. if policymakers want to kick it up to ratio, kick it out for everyone. worst at the end of the of both outcomes.

the last problem i have with the bill is removal of the for about 4000 financialnstitions to report data that has been reported for on racial information on home mortgaging. it is a horrible thing to say, but it is true. there is still racism in society. there is still redlining of which the federal government bears a lot of fault for racialng rasul -- discrimination and lending, but so does the private market. theecting data is one of most powerful twill's we have. i would hope people in the free we have.uld -- tools i would hope the people in the free market would let the data speak. this bill exempts 80% of banks for reporting things that they have reported on for years.

by leaving us with data reported by the big banks, we will draw some of the wrong conclusions. by saying one of the reasons i am a big supporter of america small bank network, which should be a comparative advantage for our economy, is that it allows banks to give credit to people who don't fit this giant credit commoditized .ucket that we have moved into small banks and other community forcan make these loans and whatever reason if you don't fit the big box that is because there is something wrong on your credit report, but we will provide you credit. that is fantastic. at provides a new value of opportunity. that should work sympathetically with also providing information about folks. i would guess that is one of the

best tools to combat discrimination in lending. i wish that would be changed in this bill. those are my thoughts. thank you for having me. speaking of small banks, glad to be here. i am very excited about the bill eating on the senate floor this week. the best thing about this bill is that it is a bill that can pass the senate and passed with 60 plus votes. bills thatn very few attract this kind of bipartisan support. banks inthe geordie of this country are community banks there are 5700 banks in the country right now -- commercial banks. if you shave off the top 15 to 20 banks, the largest ones being in the trillions of dollars, most communities are served by a community bank. this bill is targeted at those banks. the vast majority of provisions are targeted at

community banks. from the beginning, we are not looking at regulatory relief for the sake of changing some regulation. there is a broader purpose for this legislation. the purpose is not tweaking a few regulations or changing the asset threshold on very complex regulations. is key point of this bill economic growth. whathave seen with dodd frank apply to very heavy hand of regulations across the board for banks that are trillion dollar banks and banks that are $50 million banks. bill is attempting to right size the regulations are community banks around the -- do whatt do that they do best and that is land in local markets. since dodd frank past, we've had many banks drop out because it

was too complex and too many rules. a lot of the rules that are changing the mortgage lending space to keep the community banks in mortgage lending. doing 50 or 100 mortgages a year as a community bank and you have to do tens of thousands of dollars of new regulations, you will reassess and maybe drop out of that business, which defeats the ,hole purpose of dodd frank which was to rein in the largest blanks and control systemic risk . if you have more small community banks leaving the marketplace and scaling up, then you are left with a handful of banks and you have greater systemic risk. one of the things i like about this bill is reducing the regulations on community banks so they can stay viable in the marketplace and extend credit which is really the lifeblood of many communities. there are thousands of counties

around the country where the only bank is a community bank. i like that bill for that reason, not because we want to tweak regulations. it is really about economic growth and being able to serve more consumers. i want to correct one thing very the bill is only addressing new hum reporting. da the statute -- hum reporting. more to theed 20 legislation. what it is doing is all the existing reporting on mortgages is there. there will not be any new dissemination. what it is addressing his new data that would have to be whatcted in addition to

dodd frank put in an cfpb put on top of that. it was overkill on view data reporting. banks don't want to spend their entire day collecting and reporting data that turns around and is used against them if they or has something inaccurate in their mortgage documentations, then they are attacked for that. we don't need all this new reporting data. even with the new exemption here, 97% of all mortgages will be covered by the reporting. we are not too concerned about that. what we really are concerned about is keeping community banks -- small blanks in the arketplace so you don't have concentration of just a handful of banks doing mortgages as we have seen. i will stop there and we can talk further about other provisions. >> thank you, paul. along the same spirit but a

little switch up, one of the things we are hearing in the background is there is room to do capital market changes. that is why my colleague, david burton is with us. david? they've asked me about things that should be in the bill but aren't in the bill. i have identified some items, all of which would improve regulatory to raise capital. seven of them have passed the basis and bipartisan in some cases unanimously. there are two others. let me just quickly run through the nine items that should be included in this bill, and really shouldn't be a controversial and should be up to achieve bipartisan consensus.

the congressmen introduce legislation related to accredited investors, hr 1585 past the house november 1. set it would do would be to the monetary threshold for determining who is and is not an investor at the current regulatory levels but by statute and then broaden it in two respects. would be registered representatives, people working for brokerage firms, would be able to invest in private with also giving the sec authority it already has to broaden the definition of an accredited investor. the safe harbor

provided by the sec back in 1982 that if you meet the tasks set forth in regulation d, you will not have to file registration and go public. filing a registration statement costs crafty $1.5 million -- roughly $1.5 million. at this point, i believe the latest data shows regulation d shows $1.5 trillion is raised in this country. it is larger than the public market. it is the most important way to raise capital. there is what i would consider a drafting area in the bill that should get fixed. a broker under securities laws lynchmaryland -- merrill

to allow the individuals that work for them can invest in placements.nts -- almost every broker would meet the institutional requirements under regulation d anyway. the next is the small business at, whichquisitions , hrhe business broker bill 477. it passed the house in december by a close margin, 426-zero. what this bill would do would say business brokers who basically serve as intermediaries when a dry to aer solves -- dissolves new buyer. it does not have to register as a broker-deal and be subject to the same brokerage deals as merrill lynch. it has very broad support.

it passed the house this congress and last congress. the senate has never taken it up. it is time the senate did. the next is improving access to capital act. hr 2864 passed the house in september by a vote of 403-3. that bill allows registered companies -- public companies to use regulation a plus. mistake and a prohibited that for no good reason. the regulatory disclosure requirements for public companies are much more stringent in their requirements. there is nothing lost if you whichthe public companies have to provide a great deal of information to use regulation a to do a raise. with onlyy it passed three dissenting votes.

the small business capital formation enhancement act, hr 1312, again another very controversial bill that passed in may 17 was06-0 a good government bill. part -- was required a meeting to make regulations to the sec on how they can include the regulatory environment. every year, most of the commissioners come to it. they go away for the next 364 days and do nothing. and say howme back important small business capital formation is. it has been going on for 35 years. every once in a while they something, but it is fairly rare.

the bill is relatively straightforward. it requires the sec to actually respond to any recommendation made by the small business forum to 15h is 10 recommendations, and explain their views with respect to the recommendation and what they intend to do about the problem identified. next is the helping angels lead at. for those of you are familiar with the entrepreneurial culture and particularly the west coast and other places. they often hold these forums where angel investors, people who are credit investors can invest in startups and they come and there might be 50 to 100 in the room. they come in and make a pitch and then they move on.

they cycle through. under most east coast interpretations, that would be generalization, yet it goes on. but the act is set up a series of criteria allowing angel groups and not for profit like universities and so forth to sod these events and forums startup entrepreneurs can make their pitch to potential investors in this environment theout going against general solicitation rules. it is something that i think can be useful and important. it was introduced, hr 79, passed the house in january 2017. the senate has done nothing on it it was a bipartisan piece of

legislation. another piece of legislation that passed the house by a vote of 419-0 is the public offerings act. it is hr 3903. it extends the jobs act relating to testing the waters and to emerging growth companies, which very naturey by its expires after five years because you can only be one for five years to all issuers. it would basically allow people to test the waters, meaning and offering with potential investors without making an offer to get a sense of what they could actually sell securities for and make confidential filings with the sec before they do the public offering. again, that passed for 19-0.

is something it the senate should take up because it would make it much easier for entrepreneurs to raise capital and accurately price offerings. two other bills that in my judgment deserve serious consideration is the micro hr 22ng safe harbor act, 01. it passed the house in november by a significant margin, but it unanimously. basicallybill does is an extremely small offering and entirely to substantive pre-existing toationship, you don't have register and become a public

company and spend the 1.5 million on lawyers. the original legislation c.ically said it is a, b, or the legislation passed by the house was all. it passed in its current formation. you have to be under $500,000 and have fewer than 35 purchasers, and have a substantial pre-existing picks -- relationship with all of the purchasers. that legislation deserves serious consideration by the senate. the last is a piece of that has been reported out of the house services committee but not adopted by the entire house.

this was put out just after thanksgiving. what it would do would be to extend for five years the emerging growth company exemption from the internal .ontrols regime that is an extraordinarily expensive aspect to being a public company and in the small from context really is just a waste of money to the enrichment of the accounting profession. that is it. there are a lot of things that the senate could do and have extremely broad bipartisan report -- support and remove the thelatory -- improve regulatory environment for small startup companies seeking to raise capital or go public, and the senate really should take these things up. you, david. for perspective, there is a delicate balance right now with

the senate -- i guess we would call it bipartisan agreement. everything that everybody i know of has been talking about is that if there is something with overwhelming support, that is the sort of thing they could add to the bill. that is why it is very important , especially on the things david is talking about. these are things that are passed the house unanimously. much open to doing things that are not controversial because of that. this bill probably is going to pass, and it is going to be amended in some way to read those are some of the things that could be in there. before we talk about that process, i will get my wish list in for changes really fast. that and the provision was discussing her we see this differently, which is fine. my view is that if you are going

to have liquidity coverage ratio, it is about liquid assets, as in cash. if you look at the liquidity coverage ratio it is about cash in and out. therefore, while aaron is correct that some of these things might be fine in a crisis, we don't know that. we do know that about cash and probably treasury securities and nothing else. in my view, if we are talking about cash and just cash, we should stop there. i think they got it right the first time. that is a little different, but my view on that one. the second one i would like to see changed is on policy is the reciprocal deposit division. , if you're going to have limited exception for reciprocal deposits is not being brokered, if it is very limited i could get on board or at least be neutral on how that plays out if it is very limited. i do not think it is edited enough right now.

itch -- limited enough right now. there should be other third-party type arrangements like custodial's. most importantly, i think the percentages should be dropped. as it is written, it is 20% of total liabilities. i don't see any reason why it should be that high. i would be comfortable with something like 10% or 5%. all of these numbers are arbitrary, but it should be limited and the more limited the better. last one, and, paul, i would like to get your opinion on this one. the community leverage ratio. there is a lot of regulatory discretion. in my view, it would be better to pair some of that back. , i thinkf doing that should garner a good deal of support is to adopt or amend a proposal from 2015.

what you would end up with is essentially a four-point task. instead of having it the weight we have it now, where the bank could meet the asset threshold and meet the leverage ratio and is not qualified for regulatory .elief instead, what you have is if a bank meets the leverage ratio and asset requirements, has zero ,rading assets or liabilities no positions in derivatives other than interest rates and forward exchange derivatives, derivativeo minimize exposure, maybe 8 million because that is the one that was .sed in previous margin rules i am flexible on that. if you meet that four-point test, then you are out. then you qualify. if not, then the regular can still have discretion on a risk profile, but then there is a that four-part test

virtually all traditional communy b would easily without any other lack of clarity from the regulators. that is my wish list. is a lot of change that could be done to the bill. being at a think tank, we are talking policy, but you also have to consider really the most important thing this week with the bill on the floor is politics. with 60 votesng is a delicate balance. many of the bills that were introduced since dodd frank to address dodd frank from republicans to democrats is here is a bill that has been carefully crafted and balanced to get 60 plus votes to have 13 democrat supporting the bill so you get a filibuster proof

majority. there is all kinds of great changes that could be made to the bill. i hope some of them can be included in the final passage, things like internal controls and very expensive for banks. double hard on them. bank regulators are in the banks making sure the books are accurate, it and you have a lot of coming in again with the accounting firms and certifying the same thing. it is very expensive. that all said, we have to look at both the politics of this policy, andand the you have to have the right mix. one thing i will say on the macro level -- this is the first rollback and reassessment of dodd frank rules. if this doesn't get traction in th senate and pass in the senate, i think we will be in

the desert a long time wandering around saying why didn't we take something that was very good and get 60 votes, and if this passes in a bipartisan way, it will open negotiations to do more in the future. >> so that is exactly my concern. this should be the deal. the threshold shouldn't continually be raised. we can't keep continually going back at it. there is no law that is ever permanent or you keep changing the tax code. we keep saying we are going a make the tax cuts permanent. there is no such thing. >> the tax code process has been an unmitigated debacle and that is what the process in this bill was better. gimmicks indget what they are doing in the baking space.

bank regulation and letting politics dominate in bank regulation leads to policy errors that tend to make us all were soft. that is why i am nervous about this custodial thing. the politically stable solution seems to just carve out these three because they are the ones who care about this most if you do it for everybody, then you are benefiting big banks. if you do it for no one, you aren't addressing the core issue. the government is picking winners and losers and could make the whole system were soft. with regard to these -- worse off. nervous about the philosophy of knocking out risk based capital. i kind of like both. we may find more common ground is a regulatorapproach that allows banks to innovate, te risks, and fail. with 6000 banks in america. if you're in a city that had 6000 restaurants and you can

back in a year and all 6000 restaurants were still there, that is not the mark of a healthy economy. situationbe in a where banks are businesses. they come up with new ideas and test new ideas and challenge and fail. the period in american history with the longest that we've ever gone without a bank failure was 2003 2006. that was not a. of health in the bank and -- period of health in the thinking -- banking business. i am equally nervous with bank regulators who believe it is their job that nobody should fail under their watch. >> i want to talk about risk-based capital. we cannot do that right now. i am encouraged to hear you say that. i agree.

you are exactly right. we don't want to let tanks fail, and it is a terrible mistake. , lete we get to some q&a me just go down and see if anybody has any tughts on how this process might unfold in the coming weeks -- whether we will look at some kind of conference or cause a conference -- amendment. >> i will jump in there. it has been pointed out a lot of these bills originated in the house and passed with wide margin. a lot of what is included in the senate bill 2155 and we have companion bills passed out of the house whether it is the financial services committee or passing the full house. there is a lot of opportunity to have the house quickly take up the senate bill -- maybe some modifications, maybe not.

the best news issue have a bill that we have not seen in a long time, particularly on complex regulatory relief measures that can attract 60 votes in the senate. the vote will be much stronger. this bill is for community banks and credit unions. community banks are in every congressional district around the country and has great support. passouse wants to something as well but has always been stymied by the senate in that 60-vote threshold. the if the house takes just senate passed bill and passes that, we will be in much better shape than getting nothing at all in rolling back dodd frank. i am agnostic on how the whole thing will proceed. i can say with some degree of confidence that for at least the last two congresses, the way capital markets happen is the house passes on a bipartisan basis and the senate has an

amendment in the conference committee. form here, io would hope we have a repeat of that process, where these noncontroversial or broadly supported bills are included as part of a final legislation reported out of the conference committee. unclear orlittle bit what this process will be on the floor. there is a lot of talk of including new provisions in the so-called managers package that could be some of the capital market things out of the house. resonatesax issue broadly, and if congress is only going to have one crack over two years to handle financial services, it would be a shame if the thing that probably directly impacted more consumers than any it,r area and let's face

congress response to scandals and we didn't get dodd frank because congress sat around thinking about an optical -- optimal new structure. we got it because the blue themselves up. .ongress response to scandal there will be something on credit reporting agency, i would hope. if the house passes something different and insists on a full conference, i don't know. of of the hallmarks transparency and legislative processes is a conference by dodd frank. there was an open conference and it was televised live on c-span. i can't recall another bill that i have worked on in my 15 years in washington that had an open door conference. the conference committee between the house and senate meets wants to vote upon the deal they agreed to. twice and open the conference and then close it. this was one in which you could stay up until 3:00 in the morning watching members cast live votes on complex issues in

front of the cameras. i think transparency is important in financial regulation. it is complicated and it is not easy. part of our job is to explain it for people to make up their mind. be ahere continues to transparent process in this bill going forward. >> i second that hope. my gut feeling is that it is not , but it is not going that way. we will find out, i guess. the be some this week. plannedconcludes our segment of it we can open up and we have some time tdo some question and answers if anybody in the audience wants to ask. please have a microphone and state the name and affiliation. >> steve perkins, an angel investor. i believe paul is right that we have to consider political reality in this bill. one of the things the democrats will fight against is

eliminating the cfpb. there has to be something like going to vote not for this, in my opinion. and has been suggested to eliminate it completely. what house can there be? there have to be provisions that will address consumer concerns like equifax. i am one of those who lost my information in the data breach. i am concerned about that. i am wondering how can that kind issue be built into this bill? >> that is a very good point. there has always been consumer laws and protections in the financial services sector. they used to be largely housed at the federal reserve. after dodd frank, they were agency, thehole new cfpb. you could debate the structure of the cfpb and how it should be structured should have a single direct.

what we have abdicated for suits. frank is to have -- since dodd frank is to have the regulatory commission. it is not just one individual that has tremendous authority. that could be structured much better. there is no elimination of the cfpb in here. as a matter of fact, there are rules and regulations that the post theput in financial crisis that are actually hurting and harming consumers. lendingd about mortgage . many of our community bankers have gotten out of the mortgage lending is this. they do small items in some cases. rules and regulations coming out unqualified mortgage and ability to repay is really hurting the consumer. i think this bill does a little bit to refocus on helping the consumer. as i said at the beginning, we

are not doing this bill or pushing this to reduce regulations on banks. that is nice and a great thing. but the macro point of this bill is to have greater economic growth, greater flow of credit, particularly in those communities. we serve 85% of all agriculture loans done by community banks. nearly 60% of all small business loans are done by community banks. we only represent 20% of the industry assets. if you compare to the $2 trillion largest wall street international banks, we are a small segment of the banking overall, butll -- these rules are about helping the consumer. reality, oneical of the deals cut in this legislation was not to directly address the cfpb. there's almost nothing in this legislation that directly

addresses them in terms of funding. one of my criticisms is going to be something in the appropriations bill that guts the cfpb's independent funding. that will not be enacted into law because of the threat of a democratic filibuster. we are not putting aside and moving on the questions. the office othe comptrolr of the currency was created a national bank charter in which many of the community banks operate. it was established by what of the great republican presidents in american history, abraham lincoln. it has a single agency director. we seem to -- i have not seen many debate about whether we should have a comptroller over the conservancy or whether there should be aboard or not. board or not. we have moved on from that. with regard to the qualified mortgages which to get touched

on in this point within this rules.his is a subset of let me be very clear on a couple of different things on this. number one, the cfpb had a very challenging task to write the qualified mortgage will within dodd frank. it was given to the bureau in part because other regulars, including the federal reserve, at authority on subprime mortgages and they were really messed up. messed up. it was a complex will and a tight deadline. they met the deadline. they were the only financial regulator to put out all the rules by the statutory deadline, which is office in -- often an unrealistic deadline. when they put out the qualified mortgage, the role was widely supported right industry and consumer groups at the time. critics of biggest the rule were barney frank, who mortgage the qualified

will was the exemption that swallowed the rule. i am a little more in line with congressman frank. i am more concerned about mortgages that fail to meet and meet theo be -- original terms that was made. i am wearing about people who were given mortgages because maybe they had a good individual case as to why they couldn't meet the ability to repay wall. rule.nnot forg -- there were a bunch of mortgages created that blew up. some commonsense regulation on what types of mortgages you can have is something i am comfort with -- comfortable with your going back to 2003 and 2004 would be a huge mistake in my opinion. ballpark with you

on that one. one of the reason they got the ball time -- done on time is that they punted. they are not going to change that right now. they want to see how -- thinks can blow up quick. they are not going to do any major change to the cfpb in this piece. aaron is right. one of the things we have pointed out is one of the main was a of the cfpb transfer of roughly 20 federal consumer statutes to the new agency. from our standpoint, we didn't need a government agency for that. something like that seems like a moderate compromise to me. that is a nonstarter right now for sure. happen just not going to . any major changes are not going to happen. thomas from capstone.

as this bill moves forward, do have any changes for d?ntroversial land happens't think it legislatively this year. beyond that, we will see. the last big bipartisan banking bill was the emergency economic stabilization act of 2008, better known by section 11 of a lot lot which was the troubled asset relief program. it got 74 votes in the united states senate. i doubt it will get 74 boats. -- votes. -- by the way, of

the 25 who opposed, it was split relatively evenly between the parties. what i deduced was that during a time of great crisis, democrats and republicans came together and did something tremendously unpopular but economically necessary in stabilizing the economy. that created the fallout from that and it was a toxic political environment and the to the crisisnse in banking was that they get caught on big bipartisan numbers either on regulation or deregulation. where the big d regulatory bills passed at the end of the day. regulatoryig responses were big bipartisan bills. what happened during the financial crisis was different. if fractured our country in a way that we are still dealing with the framework from.

tget a dodd tried bipartisan deal extremely diligently in dodd frank. not happen. we can debate why not. i don't think anyone can debate his personal effort in making it happen. he got three republicans. it wasn't completely partisan but a small number. maybe this means bipartisanship is back in banking. i would say the next area that a bipartisan consensus ought to tackle is outdated secrecy act and anti-money laundering law. if you want to look at inefficient regulation that is retarding economic growth and hurting consumers, particularly low income consumers and getting an account, is the amount of money small banks are paying on an ongoing basis marginal rate scrutinizing all the aaron klein's and filing tremendous amounts of paperwork on anti-money laundering. -- $50 million threshold

has been in place since 2009. the currency transaction report is an index since 1970. at the time, you could buy not only one new brand-new cadillac in cash and not trigger this report are today, there's not a single new car you can buy in cash and not trigger a currency transaction report. >> banking issues never eased to be very partisan. the banking committee house financial service committee would pass on a very wide bipartisan margin. i think this bill has the potential to be a strong bipartisan vote. our position is that if you are against this bill, you are against community thanks and credit unions and the communities they serve. the overwhelming balance of this bill is focused on the community banks and the ability to serve their customers. it does not do anyone any good if you want to help consumers and you are putting the businesses out of business that

serve those consumers and provide credit in their communities. i am expecting a very strong bipartisan boat on this. -- vote on this. if you vote against s 2155 it is a vote against community banks. >> any other questions? only questions, james. >> this will be in a form of a question. abraham lincoln is not our motto for economic policy, just to get that out there. >> high tariffs are back in vogue. >> i have a question. and talked about

bipartisanship in financial legislation. arp was an example in a good sense. the problem was not over -- it was not a model for good policymaking. be wheremodel would most of the hardware was demonstrated with it -- was it done administratively. by the time it passed, the regulators did their job and rolled back the rules. can you comment on that or anyone else on the panel? >> i used to work in the bipartisan policy center. agree with your thesis. bipartisan doesn't mean right policy. there are plenty of mistakes

that are bipartisan, and there are plenty of times in which the two parties reaching an agreement means politics trying over good policy. over good policy. that is something important to keep. i do think it is worth noting that this looks like it is going to have more of a bipartisan consensus than the other legislation since tarp. out on thisrow this point. this is going to happen. something is very likely to pass, and it is going to be bipartisan. as far as what we know right now, does anybody think there is anything terrible in this bill? i view this is kind of the goldilocks bill. notelpingall street,

it is doing major reforms. it attracts bipartisan support in the senate, which if anyone who has watched the senate this congress, there is not 60 votes on a lot of things in the senate. that supports our communities, and it is going to attract enough bipartisan votes to get to the president and signed into law. as i mentioned in the beginning, this is the first bipartisan test case of what can be done on dodd frank. if this doesn't pass, there will not be an appetite to bring up any of these good reforms going forward. it is going to be tabled, and it will be a long time to forget to other thanking relief. if this passes, i think it will create an environment of goodwill -- bipartisan goodwill that the things have brought up at this conference to be

addressed in a bipartisan way as well. regulations are attracting bipartisan attention of what could be fixed or altered. this is really the first important bipartisan test case on financial reform. >> what is sure terrible piece? >> i listed my top three problems. too. have mine, talk t >> if you come and tell me 30 years later there was a financl crisis and i can pinpoint, what was it? i would probably say 402. , it is the thing where the government would be providing favorable treatment to only three of the entities that do

this that would concentrate that activity, and there definition of that activity could include things super save. one would be greek debt that would qualify. of the things we have seen is that folks are able to use supersafe one day becomes super risky. a crisis occurs because something that looked save turned out not to be. a crisis never occurs because something everybody knew was risky turns out not to of worked out. i am very concerned about this idea that this is the first bite of the apple that we will keep k nawing away and we will hit the core. it concerns me. it concerns me we are missing an opportunity -- at nightt lay awake worrying that congress is going to do you regulate too much. this is the heritage foundation.

[laughter] regulatorsabout the we have doing that. do we have any other questions? john. then reciprocal deposits. i'm not sure why they deserve favorable treatment. we have depot surance limits for a reason. i am not sure why cr deserves all this extra and if it. .- benefit the numbers will move going from 50 to 100 is no risk. with.on't have a problem -- 250, i don't have a problem with. the securities law and things

that david brings up sound very reasonable, it would be nice if they got some of those things in their. it is a goldilocks law, and there is a good chance of something happening. more power to them doing their job. >> my whole thing on reciprocals -- i agree. my optimal would not to do this. i think if they are going to do it, it should be more limited. john? john, the competitive enterprise institute. i will phrase this in the form of a question. i had to ask something or ask or point out something as to what darren said. the office of the comptroller of the currency, is that removable by the president? the distinction made by the court which you have cabinet officers and single head through a very bipartisan commission removed for cause. it is very rare that you have

something can't that can't be removed by the president. what is removed and what is the standard for removal there? and not aconost lawyer. i know the powers of the buru were modeled on the comptroller of the currency. the treasuryof department, although he or she functions in a historically independent manner. i have actually -- one of my jobs when i was in the treasury department was to shepherd this executive order through. one of the boxes i had to look engraving and printing, comptroller of the currency and different folks. being a good bureaucrat, i called the comptroller of the currency and said i have a box that i have to fill in your you are an independent agency. -- to fill in.

you are an independent agency. right in your box and i will pass it along. he calls me back in a couple of weeks and said we have determined that the executive order of the president does not apply to us. i said, what do you mean? it applies to the executive branch of government. saw the three branches of government and i don't believe you are part of the judiciary, and i note you not -- are not part of the legislative. they said, well, we are independent. and i'm aderstand good bureaucrat. can i write something in the box. i have to write something in my box. can i write the office of the comptroller does not believe this executive order applies to himself? and theyo, yes. and said that was weird and that is what i will write. i sent it on, and that was the

last i heard. the idea of having an independent entity within the federal reserve which is also an independent entity, things are getting kind of weird here. is there a fourth branch of government? i don't know. there is a philosophical debate for all of that to decide. what we have had for the comptroller of the currency seems to have worked and been stable. what is -- it's basis is escapes my mind. removal on she is the president, is there any cause orson not for malfeasance? i think we have a lot of things in this country that may not have been written into the

statute but our common conceptions that have made our system work more functionally. this current administration, those common perceptions are being questioned to their core in ways in which the president has acted. they are just different. i am not trying to make a partisan position, but i'm trying to say the president is taken things that used to be taken for granted, like you have to is a sure taxes, and turn those things on their head. i think our society will shake out one way or another on that. >> the comptroller hasn't always been without controversy. now something brewing in whether the comptroller will approve things. one thing i would jump in and say it is congress has to do their job of reviewing regulations as well. a lot of these independent agencies can get carried away in

implementing regulations. for example, i mentioned earlier that dodd frank in a few new data reporting requirements and the cfpb took it and went this far with it and put in all kinds of new regulations. congress should come back, and you have the congressional review act. theyas a vote on where looked at a scene fpb rule -- a cfpb rule. you do have the different branches of government, and you should not have wildly anypendent agencies of kind, whether it is the fdic or occ or the fed. congress has to be part of that as a check and balance. on the c-spany networks, the u.s. house returns at 10:00 a.m. for morning hours speeches in new houston for bills dealing with financial regulations. whistleblower protections and

clearance protections period c-span2 at 8:00 a.m., the american israel public affairs committee annual committee continues with remarks from israeli prime minister benjamin netanyahu. the senate takes up a bill that eases dodd frank financial regulations. on c-span3, director of national intelligence along with the director of the defense intelligence agency testify on national security threats. coming up in an hour, vermont coty whip for house democrats discusses what government might do on guns and other issues. at 8:30 a.m., senior political reporter on role calls annual list of the richest members of congress. 938 -- 9:30 a.m., congressman tom reed, a member of the