630: p.m. eastern on c-span. weekendwsmakers this our guest is congressman jerrold nadler. empty --about pending immigration legislation and the justice department's report about hillary clinton z-mapp emails during the 2016 presidential election. interview sunday at 10:00 a.m. and 6:00 p.m. eastern here on c-span. the comptroller of the currency even update to member of the senate banking committee on review of bank accounts and sales practices following the wells fargo bank account scandal in 2000 teen. he also talked about his agency's role and mission as america's top bank regulator. this is one hour and 40 minutes.

committee will come to order. today we will hear from the comptroller of the coming seasons being sworn in last november, he's been focused on rightsizing regulations and furthering the mission. recently along with four other right leaders issued a proposal to make provisions to the volcker rule and be issued a short-termthe issued ashort-term small dollar lending. it's also been looking at modifying and modernizing how the regulators apply the community reinvestment act. they also identified anti-money laundering laws as a priority and expects a final decision on a bank charter. i look forward to hearing about these initiatives today. in

addition they will need to implement a number of provisions to the bipartisan economic growth legislation president trump signed into law and among the positions they will need to write rules to implement the community bank leverage ratio that exempts the capitalist banks from the international risk based capital requirements and suffer from shortages of the appraisers are requirement that certain development and construction loans not be subject to punitive capital requirements and reduced reporting requirements and extended exam cycles for certain small banks to promulgate regulations to remove the deposits from the dumb nominator of the leverage ratio for certain they and stress testing for the institutions including the exemption of financial companies with less than a

hundred billion in assets with the same duties without going through the charter conversion process for the credit unions, banks and regional banks making it easier for consumers and small businesses to get mortgages and obtain credit. absent the regulatory burden local banks and credit unions will be able to focus more on lending and creating jobs. i look forward to engaging with other asian charged with implementing over the coming months to ensure that interpretations are consistent with the intent of the members of congress who voted for the legislation and what this committee's goal list of promoting economic growth. they

are just starting to be built. together these create conditions that enable growth i look forward to build on this momentum moving forward. >> thank you for joining us today. in the more than seven years since we passed reform it is much stronger than it was at the outset of the great recession and much of that hard-earned progress has been threatened since the agency that is supposed to be a watchdog for the largest thing is. we thought we got rid of the thrift supervision because it was an industry lapdog perhaps it has been reincarnated as the fcc.

the real customers are the ohio families and people across this country to ensure the stability of the financial system and do their jobs and we've heard many times the zip code of zip code my wife and i live in had more foreclosures in the first half of 2007 and i see every day going to and from my house the results of the devastation. in one of the first acts, he reversed the changes meant to prevent them from becoming too close to the banks that oversee and they decided examiners should continue to work out of the bank headquarters. but i

guess the befitting partnership it's not as if they have been suffering lately. they released data showing the industry they increased profits by 13% last year but when you add the up the tax bill into that account, the profits increased 28%. rather than invest in the workers and communities and profits into pushing up the stock price they bought back 67 billion, $67 billion of stock in 2017 2017, an increase of 70% over 2016, they don't seem to have enough. they are the largest banks already making tens of millions of dollars a year with an average of a 22% raise last year and it was 36% last year and the average bank teller in this country makes $26,000 a year,

$26,000, tens of millions. banks should prepare for the tough times ahead and instead they should be guarding us against the next crash. right now they are considering a proposal to weaken protections and give 121 billion-dollar boost to the eighth largest u.s. banks. they want the banks to get back into the business of payday loans, something that has been prohibited since 2002. he's pulled back on the guidance meant to protect the system for reckless corporate lending. and other plans that deeply concerned members of this committee. i think on both sides of the the aisle deeply concerns the committee for the reinvestment act that pushes banks very profitable thanks i might add to serve the

communities to address address generations of exclusion and discrimination and bank lending. i don't know if the controller has read a book called the color of the law that recently came out. i think that it will give you a better historical knowledge of why this matters. that long legacy is part of why we still have a gap today. he hasn't learned the hard lessons of the past to stop the local protections on subprime mortgages and credit card rate hike was simply forgetting what happened ten and 12 years ago. especially people of color can't afford to return to the risky practices the controller is

considering. i look forward to hearing your testimony. >> thank you for being with us today. please make your presentation and we will proceed. i should alert the members we have a vote of 10:therapy that we intend to keep the hearing going by rotating in and out as we need to. >> thank you. for the unnecessary bigotry burton promoting economic opportunity the office of the mission is to ensure the federal system operates in a safe and sound manner and provides fair access, treats their customers fairly and complies with the law and regulation. we can accomplish that mission and rationalize the frame work so that the system can help create jobs and economic opportunities.

my written testimony details the conditions of the federal banking system and my priority is. these include modernizing the community reinvestment act to increase funding investments in financial education where it is needed most and encourage them to meet short-term needs to provide consumers with additional safe, affordable credit choices to be at my priority is include enhancing the bank security in any compliance to provide a more effective means to support law enforcement and comply with statutory regulatory requirements. and to ensure agencies include the alternate in a safe and sound manner and operate effectively and efficiently. today i want to discuss the importance of the quality of the work accomplished since becoming the comptroller i've been struck by the professionalism and their

professionalism and caliber of the agency staff. the agency's 4,000 employees serve by performing the important task of supervising more than 1300 national banks, federal savings associations and branches in the foreign bank while the vast majority are community banks the system also includes the largest globally active banks in the country. successful supervision requires examiners supported by economists come information technology specialists, experts and others but the majority have a relationship with one of the banks we supervise. it is due in large part to the supervision of the provision. it is dedicated to the supervision and distracted by multiple mandates we need a laser focusmade alaser

focus on the bank safety unsoundness and compliance and the agency takes a risk based approach to supervise tailoring its oversight to the risk and business models of each bank and at the same time it bought national perspective provides value in identifying the risk and concerns that similar banks with a broad system risk based approach allows us to adapt to the ever-changing environment and prioritized the resources on the risk with the greatest potential to disrupt the industry and harm its customers. our approach may need over riskless attention compared with more immediate concerns, but also the ability to adapt quickly. with such singular focus for the supervision following the crisis of 2008, the countries banking system was more than the rest of the world because the bankers together recognize losses and work to the

troubled assets more quickly him and than the international counterparts. baby s. faster by allowing the lab. we are in the second-longest period of expansion in history and banks have been part of the success. the capital and liquidity, him and credit and asset quality and risk management is better than any other time in my career. this is a testament to the supervision and sound bank management helps realize the potential of being agents of job growth and economic opportunity. i would congratulate the chairman of this committee on passing the economic growth regulatory relief and consumer protection act commonsense bipartisan reforms to eliminate the unnecessary burdens to continue to safeguard the core elements of safety and soundness

of the system. i'm committed to implement the changes and i will work with my federal regulators on the basis where appropriate. where existing rules may conflict with the economic blowback and the statute provides for the law requires agency rulemaking for implementation, they plan to supervise institutions with the intent of the law including with respect to the amendments to the stress testing requirements and will not enforce that on the bill to eliminate. i rely heavily on the council of the examiners to identify issues and address them effectively before the concerns became serious problems. i thought they understood what we were trying him and him him to achieve and how we work to meet the financial needs of our customers. you can sleep better

knowing that they are on the job and in closing i want to congratulate you and your leadership on the committee and thank you for allowing me to share my perspective. i look forward to your questions. what thank you and i appreciate your kind remarks. my first question is going to be on your horizontal review. for the sales him him him practices at large and midsize banks with significant retail customer sales activities. can you tell me about the findings and what what he found and you found and learned in this review? quite in 2016, they started what we call a horizontal review and its frequent weevil duties among the agencies when we see particular risks that can be contained throughout the industry. we concluded that in the fourth quarter of 2017. it was the primary focus of the

agency over an 18 month period. more than 40 national banks were involved in that and we looked at the new account openings without customer consent which included mortgages, auto, credit cards, checking accounts, savings accounts, money market accounts and then any products that would be joined that might include over overdraft protection. they included a look back over a three-year period that included hundreds and hundreds of millions of new accounts. we send the final letters to the ceos on june 4 and we did follow up to the chairmen and ranking members of congress for the recapitalization is referenced. they did not find the stomach issues with regards to the improper account of things but did find the need for banks to improve policies procedures and controls and i would say the key take away from this is that our

focus on having institutions develop better controls and policies that we did not find the key issues that this was systemic across the industry. with this we issued over 250 mra and they've been closed to put that into context, we currently have 4,000 mra outstanding, so while substantial, it wasn't illustrative of being a large issue. .. or could not be located out of around 300 million accounts that were reviewed.

>> thank you. so the short summary was that 20,000 accounts were identified. out of around 300 million accounts that were reviewed. we actually think the new graders were between 50,600,000,000. okay so five to 600 million reviewed and around 20,000 that were identified and of those 20,000 is at the conclusion that all 20,000 of those were wrongly opened? slightly half of those were >>slightly half of those were opened inappropriately and the other half were using documentation of the banks could not prove that they had opened the account. >> all right thank you and i appreciate the attention that has been given to this issue. my last question will be related to the stress test preview references in your opening

i encourage you in the other banking regulators to provide guidance to financial companies about how as 2155 will be implemented to make sure financial companies with less than $100 billion received the relief the bill intends immediately. can you commit to me that you will work quickly on implementing it generally to provide guidance on stress test for financial companies with total assets of less than $100 billion specifically? >> yes chairman crapo first of all thank you very much. we have made that statement to the financial division and we have made that statement publicly and in regard to the overall implementation we have created a critical path document that i have in my possession were we apartness resources within the agency. we have identified items that can be done within the agency and the ones that

required urgency and there is a process of discussing and creating teams to work on the interagency activity so we fully dedicate the necessary resources to achieve that objective. >> thank you. senator brown. >> thank you mr. chairman. you were asked if you believe discrimination exist and you said because you have never personally observed that you can't say that you have had friends from the inner-city tell you it exists and you believe them. when you're asked if you have ever read about discrimination you said that you did but the writers on the correct half the time and you said you don't read the newspapers. these are unbelievable statements for any adult in america especially one that took an oath of office like you did but let me ask a couple questions. this hiring to the old boys networks network service ahead one for women and minorities ready greater through banking or government?

>> my response that would be a wooden support those kinds of activities. i think there are employment laws that people adhere to them i'm not aware of any old boy network that i've associated within the banking industries i personally -- i would also say to answer your question if there was a network like that i wouldn't support that. >> you couldn't go on to "the news york times" and say this is the good old boys discriminating network but let me give an example. when u.n. secretary mnuchin and the rest can signed a consent order with regulators we know about all the foreclosures that your bank did signed a consent order over for disclosure of misconduct your nine-member board and i could read the names that i won't bother. they were all men. i don't know if you set out to say them all my going to hire men but i've got to think the old voice network that you ended up being part of would have something good. it begs the

question to me that you have never seen discrimination your mind but some friends from the inner-city told me there was discrimination so you believe them even though you only believe half of what you read in the newspaper and then you are saying you never saw the discrimination in hiring even though coincidently all nine of the people on your board were men. i don't know if they were all white men and i don't make assumptions that they were all men. does that not suggest to you that maybe there was an old boys network in hiring and maybe people that look like you and me and schatz and van hollen and to me and rounds that we might have an advantage in hiring because we know people that look like us and that's who usually get tired from banks? did that ever occur to you? first of all i appreciate you do >> recognize that i signed a consent order after i joined the bank and i'm proud to say we diversify the board out under my leadership. i don't think it's

stated in the format as you describe. >> i'm not saying you did it. i'm saying you don't seem to recognize the incrimination because you've never seen discrimination. >> what i said is if we undermine leadership we diversify the board so that would give you an indication of the actions i took. there tools training in laws in place to avoid discrimination. there's lots of evidence of inequity in the world that i would tell you just because i haven't personally experienced the that i'm not saying it's not -- . >> you have said you have never seen it. >> that's not true. it's part of an institution or bank over the course of my career there has been instances among employees. there are investigations and correct div actions. i'm saying i personally never experienced it. ?

i didn't say you personally haven't seen it. but let me correct the record. >> why should generally i read your testimony in the house but let me go into this. fundamentally why should the public trust you to overhaul the investment act a product of the civil rights movement meant to address generations of segregation and exclusion. if you don't seem -- you don't even seem certain discrimination exists. u.n. response congressman capuano and congressman cleveland you did never say yeah discrimination exists. you had to come to the conclusion it exists because the inner-city told should exist so why should we trust you the public the congress and the civil rights community to address generations by overhauling the community reinvestment act the way should be overhauled? >> thank you very much for that

question. if you look at my top three agendas two of those top three are redefining see are a an small ticket landing which goes right to the core of what are descring, the people in america that need the most tow. i'm all about expanding sierra a small ticket landing when we took the bank out of that space that offers a fair alternative to people people ended up with check cashers payday lenders and liquor stores. that's the source where people can get quality lenders of two or three of my core agenda items is focused on the people you're describing. >> i hear you. if you can't just directly say in a congressional hearing discrimination exist we make this promise quick you are arguing that you say yes he recognize it does exist. we'll promise to move forward on the sierra overhaul only if you have the full support of the civil rights community? overhaul can

mean a lot of things. >> they will be at the table discussing. soeople at the table and ignored by others at the table. would you commit to this committee that there is not consensus in the civil rights community you will not move that direction on cra overhaul. that is the most you are going to commit. >> i stand by my answer. >> thank you mr. chairman. i cannot help but observe that ofre are more than a handful senate delegations from various states including pennsylvania and ohio which consist exclusively of middle-aged white males. let me raise a question about a

decision about which you are aware of. loans theyurchase entitled to the federal preemption from the state user laws. this is a big departure from the practice in the precedent that prevailed under the vellum may principle. even the obama administration argued that the madden decision was wrongly decided. the result is the uncertainty on the part of the buyer of a bank asset. a dramatic reduction in credit access for low income people has already occurred. if banks can be confident that they can sell these loans, they are not going to originate them in the first days. columbia professor robert jackson who is now a democratic member of the fcc found that borrowers with credit scores under 625 saw a 52% reduction in credit access after the madden

decision. the circuit base their decision in part on the notion that they allege that the ability to sell these instruments to non-bank buyers the inability to do so banksnot hanker -- hinder operation. my question for you is is it your understanding that the ability to buy and sell loans that banks originate is an important part of how they manage their credit exposure, their business generally, and that it is good for consumers for banks to be able to sell these assets broadly including to non-bank entities? >> i do agree. i also agree that the mad numeral was inaccurate. toks need the ability originate those credits per the national banking act and need the ability to distribute and sell those loans that does create a capacitive -- capacity

in the marketplace. a lot of banks are interested in that product. it expands the choices for consumers. >> are other steps you to be taking in the occ to solve the problems that are being created by this decision? >> we did have to file a brief in this matter. would urge you to continue to pursue that as much as you can. credit lessng available especially to lower income borrowers. the second when i wanted to raise is as you are aware? regulators have used guidance issuance is way to circumvent the administrativerocedures act and impose their will without going through the proper rulemaking. the cfpb did so in a case of the direct auto lending role and congress repealed that when the gao determined that guidance constituted a rulemaking.

they also determined that the leverage lending guidance constituted a rulemaking. my question for you is, i would like for the record for you to assure us that you do believe that a binding rule must go through the ata process. it must go through the rulemaking process and that guidance by a regulator should not constitute a binding rule. >> i do agree that a rule should go to the binding process. occe was one item that the could be accused of using that as a rule. we have done an incredible amount of in-depth training and discussion within the eggs -- agency. i have publicly said that on a number of occasions. to recognize that guidance is guidance and rules are rules. we have taken an aggressive posture. believe clear, if you that it is necessary to have a

binding rule on leverage lending, you would pursue that through the administrative procedures act? >> we would yes. >> i want to correct the record on the ohio delegation. on the democratic side there are five members of the delegation, there are african-american women, white women, and white when -- white men. the delegation as a whole is about the same size. >> thank you. occ mader of 2017 the a significant change in how they -- is significant. it is technical but baffling. before the change of a bank engaged in discriminatory lending practices that activity logically impacted that banks cra rating as intuitive.

now the occ has decided that a banks discriminatory lending practices should not impact the cra score if the discrimination is not related to cra lending. under this new approach, a bank that discriminates as long as it is lending outside of cra lending, could get an excellent cra rating. why? >> the issue in october was it went from a to downgrade to a one downgrade. that was made it was prior to my arrival in the agency. >> you don't know why? >> i don't have the facts. it was prior to my arrival in agency. >> since cra was passed to stop , and a bank is engaged

in discriminatory lending, the occ would want to make sure that that stops? ask definitely. >> when evaluating a banks cra if youance? >> understand what generally happens when we start a cra exam. we review the data. >> let me review the data. unrelated to its cra related activities. >> i apologize i do not have that data in front of me. >> you don't know why this happened? >> it happened prior to my arrival. probably 60 days before my arrival.

>> we are here to talk about cra and you don't know why this happened or what happened? you said it downgraded in terms of the score but it actually says does not penalize a bank. the question becomes, why would we do that if the cra is established for the purpose of preventing discriminatory practices? >> i would be happy to do that but i have focused more on how we can make it more effective. how can we be more inclusive. >> what do you think? >> my own personal viewpoint is that we should never allow any discrimination in any lending activities to occur and if it does it should have an impact on their cra rating. you commit to providing the committee with a summary of the findings from occ sales

practice review? >> there is a long legislative regulatory in case history protecting confidential information for good raisin -- reason. maintaining the privilege and confidentiality of the information also protects the ages prerogative to take additional supervisor and forced action. >> who wrote that? >> i wrote that. view we are in the middle of supervisory action and to enforce -- release that would be inappropriate. things we are hearing is that the wells fargo problem is more right spread them what we thought. i understand that your , thatisory procedures there is a tension here.

i respect that. issueis a significant that if we find out that what happened at wells fargo was actually widespread across the economy, and because of this objective you have to maintaining confidentiality and discretion that american consumers are getting screwed and they don't get to find out about it until 18 months later, that is a problem. what are you going to do about that? can assure you that based upon the data that i have personally reviewed that is not accurate. this was not systemic across the banking industry. that as wee you of go to the supervisory data that employees. >> if there is indication of something more widespread would you provide that information to

the committee? >> i would be happy to come back to the committee and have a discussion. >> thank you mr. chairman. i appreciate the opportunity to visit with you. browncurious when senator had asked some questions regarding cra you mentioned the ability or the need for the availability of some short-term small lending. americans use payday loans to pay for unexpected expenses. it is pretty clear that there is a significant demand for these products. institutions,shed they can offer that are alternatives with more competition than payday lending or in some cases a loan shark.

they will get it from someplace. the banks probably have some additional clarity, can you talk about your focus and your thoughts about how to provide for that market for those small loans on short-term time periods? >> we issued a bulletin about two weeks ago to the financial national banks where indicated to them that we encourage them to participate. there are two market segments that people can get confused by. there is the 45 day or less which is generally regard to -- referred to as payday lending. then there is the 46 days or more which generally has multiple payment terms. what we referred to was the 45 days or longer. banks basically exited that

market and i don't understand. one of my initiatives was to get banks back into that space and do it in a fair and economically viable way for consumers that they have an alternative for financial institutions. many of the financial institutions are looking at products. it does take a while to go through a risk management review. i am confident more banks will enter into that sector and we also provided a lot of clarity for our small community banks that this is something we want them to do. is an unsung part of major banking improvement opportunities. also about adding lending.

yearve had a drought last that significantly impacted our ability to raise crops. this year we will have the same challenges. can you talk about what you are seeing with regard to agricultural lending and the challenges there? potential fore as modifications or improve our ability to lend to these producers during tough times? >> there are two things that are occurring in addition to national disasters, there is an expectation of softening of commodity prices. our examiners in that space are spending a lot of time talking to the banks about their plans with their customers. as you know the volatility in the agriculture market we can

have slow years followed by better years. banks are prepared to work with their clients to get through these difficult periods. >> these banks have to work with their clients. they know them. i would not want the banks to be pressured into not allowing them to do what they do best which is to make appropriate judgment decisions. this sounds like you are on board with that. let me ask you one more thing. do you feel comfortable with regard to the financial institutions that there is a broad understanding of the critical need to protect our assets that are related or directly connected with our cyber links.

an annual basis, we look at the security parameters, we look at the hardware and software and patchwork. we make assessments of that for each individual bank. problems we issue and parties for correction. confident that the banks that we provide oversight to it is a high intention both my management and by boards. the consumer today has become so reliable on their debit card that that would be the thing that would worry me if we were down for a couple of days. people would not buy gas or starbucks coffee. we have become such a card-based industry. there is also a lot of coordination amongst the treasury.ith the

we are meeting tomorrow afternoon about this topic. asked as we try to manage our way through this. >> thank you. >> thank you mr. chairman. thank you for being here today. banks get charters from the government which entitle them to special privileges. in exchange the government expects them to meet the credit needs of communities in which they operate. that is the idea behind the community reinvestment act. you are supportive of the intent of the law but that it needs to be updated. i want to explore a little bit about what that means. last year j.p. morgan chase admitted that its african-american and hispanic borrowers systematically got mortgages with higher rates and fees than comparable white borrowers. according to a new report african-americans make up 47.7%

of the population of washington dc but they received only 2% of j.p. morgan chase is mortgage ands in the city in 2015 2016. our j.p. morgan chase's practices consistent with the cra's intent that banks meet the credit needs of their communities? >> based upon their rating that they have in their cra, i would say they do. and washington dc you are aware they do not have branches. to intent of j.p. morgan is open up a retail banking ranch eyes. that would aid some of the issues you have described. >> you are saying that when they admit that african-american and hispanic borrowers systematically got mortgages with higher rates and fees than comparable white borrowers, that was ok? by your being raided

group as satisfactory or outstanding on every one of their publicly available cra evaluations? -- overall they received a satisfactory rating. >> so you get a satisfactory rating even if you are engaging in that kind of behavior? let's look at another bank. 54% of black families, 45% of material families who try to get a more just -- mortgage from td bank are turned down. that is higher than industry average. rules consistent with the cra? >> i would say from a fair lending perspective, the facts that you are submitting would indicate that they have fair lending issues. unless it turns out that the regulators that report to you seem to think that it is all ok.

td bank has received either a satisfactory or outstanding rating on every one of its publicly available cra examinations in the past 20 years. as look at one more bank. onewest. community groups filed a fair housing complaint against onewest at hud in 2016 citing widespread discrimination against asian black and latino mortgage applicants. 22.4 listing of took out mortgage loans in southern of onewest only 8.4% mortgages went to latinos. apparently avoided putting branches in minority communities. do you think your former banks track record is consistent with the intent of the cra?

i do think so yes. you are looking at an incredibly small population that you based your statistical analysis on. >> if you had one out of 74 branches in southern california, just one was in a majority and minority minority region. charter int banking return for serving the community. evidently the community that onewest wanted to serve was not the latino community, the african-american community, or the asian american community. >> we did not open but one or two branches the entire time. we inherited everyone of those from failed institutions. you are focusing on the lowest of low. them moderate, we

did have more dispersion into those march -- markets. these are the facts that are in the public record. you have one out of 74 branches. i'm running out of time here. what bothers me, is despite obvious attempts to avoid serving communities of color, onewest pass all of its cra exams. the problem i am here is that you say the cra needs to be updated. the manoncerned that who ran onewest, the man who said the banks are his customers . the banks, not the american people. the man who said he never personally observed discrimination. that is not the man to rewrite the cra.

the standards need to be higher. the enforcement is to be more rigorous. show that black and latino borrowers get far less thans to mortgage credit comparable nonminority borrowers yet 98% of banks today are passing their cra exams. if you weaken the cra now, you are only going to push even more struggling families across this country out of the middle class. >> you did not get an opportunity to respond to that last line so do you have anything you left at? >> it won't be me who will do thecra changes it will be communities to which the cra is generally deployed. big supporter of

how we can drive further and deeper into the communities across america. i think my check record stands for itself. >> that was going to be my first question. you get to the communities that do need access, what does the world look like one or two years from now if you are successful with making that a priority? >> when you look at cra today, there are three things we want to solve for. today we do not have a good economic measurement weight that we can compare through different financial institutions and markets. one of the frameworks we have been talking about is using a balance sheet item. second would like to expand what qualifies for cra today. predominantly residential mortgages, we think there are many more community

activities. the third is we do cra exams every three years. it takes us six to 24 months to turn those around. if we could fix the economic side, we can turn those around much faster. into lending back in those communities where we have a big void of banks playing a role in offering credit. do you think that will also play a role in terms of easing the burden on the smaller banks and community banks and possibly getting lending flowing as you're working on the cra? >> i definitely do. the community banks that have been so focused on regulation now will be freed up to serve their communities. >> when you were here for your

confirmation hearing i asked you have any tips there were. we reason i mention that is still have a lot of we are at least getting to a more rational formwork for regional banks. confusionave a lot of about who's regulating what in the financial services industry. you and i may have a difference of opinion on a single regulator. he is doing incredible -- pretty good job. i'm trying to understand that may be an issue that maybe we would be at odds with each other. i'm trying to understand why you would have a fundamental disagreement. >> i do agree with you. we have a good relationship with him. fdic, the fed,

and myself, meet and have a lunch and talk about outstanding issues. we have gotten strong momentum on our ability to work across the agencies. particular, it is probably 45% in banks and 55% and the holding company. >> speaking of the volcker rule in the proposed changes, what do you think those changes are likely to do? >> i think it will bring clarity for the banks in the examiners as we are trying to determine the prior terry trading elliott. i personally commend what the committee and legislators did regarding the law.

have gone toion we accounting methodology. it may not be the best solution but it is one we can all get behind. >> i know we are running low on time. i'm going to submit a couple of questions for the record. one has to do with a discussion on exempting investment adventure capital from the old rule. we will set that as a question for later this week. here.nk you for being getting back to cra is probably -- of the most things important things you will do for the people of alabama. letting counts differently than investment which counts differently than service. everybody tends to agree that we need to be encouraging crediting more types of cra eligible actions. there are concerns that if we start blurring those lines.

what types of actions should count more were differently for cra credit? ,eading investment and service which do you believe are more to fulfill the cra requirements? weif your question is should place an emphasis? ist cra activity single-family and multiple family mortgages. single-family mortgages often get packaged up. a new dollar does not get creative with apple gets sold. we should bring a stop to that. there are some poor areas we should look at. revenue would no longer qualify for cra credit. i'm a believer that a business

has 1.5 million in revenue. we should give that cra credit. i'm also in favor of inner-city america. understand the difference between church and state but in most black and latino communities to churches where people go for financial counseling and job disciplines and help around training. today i think we need to do is isolate community centers associated with churches and give them credit. >> the banking industry has made great advances in reaching consumers outside of their physical branches of a deal made comments that seem to deemphasize the importance of branches. in alabama that's really important. we have so many communities that rock band does not touch. i think a lot of banking is personal in this community. what is your view on the importance of branches and how

assessment area should be calculated? >> i think assessment has constricted spare a. l.a. county was our assessment area but we were also in and an empire ventura riverside in orange county. the investment on the south side we didn't get credit and on the north side we did. you have to look at are we finding assessment areas too narrowly for people to invest in their areas? we need to make sure the institutions are serving their branches and they have the whole issue if you don't have ranches with should they be doing in community development activity? >> well thank you. mr. chairman i want to yield the balance of my time. i will have questions for the record. >> thank you senator johnson.

you said you want the occ to be more responsive and you said to our customers which are the banks how did the american people trust you to protect a financial crisis that cost them their jobs and their homes they retirement their neighborhoods? it you say your customer is the banks of you are there to serve the banks and protect them from another financial crisis. >> senator brown most of those comments were isolated to one i was talking about i want to partner with banks and get them deeper involved in communities across america. what i mean by that is low to moderate-income areas where they want them to be more active on the lower economic scale. we can partner with the banks to help move in that space. we have well defined risk assessment categories that are

set forth and we examine our banks these are done within the examination staff and i have no influence on it. you have to bifurcate between where we want to partner and what is our responsibility as an examiner? >> that's a good answer but in the context in a partnership with the bank as opposed to ed dictatorial perspective on the prior administration you compare decisions by currying to the wrath of khan. that suggests something different than your partnership. i guess i ask you this after the global economy crashed a decade ago and the bank's contribution to that crash they just had a record year, 13% increase in profits in the decade mostly of for-profits every year doubled

digit percentage profits and no growth in these years. it sounds to me like you think the banks had a pretty tough and it's mostly bug you regulation to them. cy first of all the comment had to do with the leveraged lending guidance which we were not supposed to be using guidance as a rule. what occurred there was we were implementing a rule and i want it to be very clear that guidance is not a rule as was referenced earlier in this conversation. regarding the point about deregulation of a bank i am comfortable with the framework of our regulation. i just think there are certain aspects we should look at that are better for consumers and it will be better for the banks and the economy. some of those -- i'm a big believer people should not take money put in the system and take it out but today we are producing 10 billion pieces of paper that don't add value to

the process. we can improve that and fix how to correct and find the bad guy that's the thing i want to focus on. >> the previous comptroller was less concerned. he was more concerned about fixing what led to the 2008 a collapse that he commissioned a study by experts and decided to remove bank examiners from the banks themselves and sent the occ staff back to it occ headquarters. one of your first access comptroller was to reverse that decision which you say was based on your personal experience which included a -- the new york fed decided to move banks in the san francisco fed decided to move them out of the banks after they failed to catch the wells fargo bank account scandal.

what do you know that your predecessors with years of experience didn't know? >> i don't think it was the relevant a sign to that. it was my roughly 35 years in the banking industry. i would be happy to share with you our model at the occ so you understand that. we have three primary groups. we have a community bank abdul and we have a large bank model in a small bank model. the community bank model was done with retail officers where they'd examiners are as silent as offices for the midsized bank is a split. some are on-site and some are - on the on-site bank examiners so you understand we do rotate those examiners every five years and often we do it before the five-year period. we are rotating these people amongst financial institutions across america.

we maintain decentralized and centralized resident experts on various activities on examiner is generally consulting specialists and those people often participate in a centralized environment. we have what would call it deputy comptroller that is assigned to each bank that provides oversight that is not in the banks. it's offside in the process in my experience having onset -- on-site banks they can go to any meeting they want and ride up and down elevators with employees and hasten the ears and eyes by being in that institution to see what's going on but other than one instance that i can remember the last five to seven years.model has worked to our benefit. >> that was a good answer again but i hope you appreciate the suspicion in the skepticism and

the lack of trust that the broad swath of the overwhelming majority of the american people have towards banks and let the financial institutions than what wall street did in this country 10 years ago, what banks like one west did to this country. it was a long article in the columbus dispatch about what your former bank and i'm not holding you responsible but what it did to force foreclosures more than it would have been with a different kind of institution with robo signings and other things. there is a reason the public has the suspicion and the skepticism about the banking sector and the regulators. when this administration looks like a retreat for a wall street executive and when we see the administration and the decisions

they make on regulation ab when we see the regulators that are put in place so many of them come from wall street or come from banks. i would hope you would have an appreciation that when you do things like this and move the regulators into the banks the public thinks they are too close to you the regulators are too close to the banks and i hope you have some appreciation. that musical move onto something else with your occ filings show you purchase shares of the company. you've been and tell us if i'm wrong claimed the right to avoid gains from the sale of the shares meaning he loaded up on financial stocks which are the ones where most interested in before your confirmation and he deferred taxes on your purchases even if that's not illegal and i don't know if there has ever been -- i'm not saying there's

press to get traction but even if it's permissible why is it advisable to buy financial stocks? wouldn't make more sense to tell your broker to stop purchase of financial stocks once you are under consideration for one of the most powerful bank regulating jobs in the country? >> first of all i was in constant communication with the treasury and ethics department through this entire process. no one had at any point in time told me that was improper or illegal. second of all i would tell you all of my proceeds were third-party managed. i had no involvement in any of those decisions. so those decisions were being done entirely without input or involvement of myself and they are constantly rotating in and out of sectors. what i would tell you is i was sworn in and all of that

activity was -- and it took us time to go through the dissolution process but there was no bank stocks under the guidance. >> to rely on people at this white house when the story just came out that one or two of the president's relatives made $80 million in his first year in office and all the stories with all the strong men around the world and discussions of the president making money and all of that. i don't think you should rely on those ethics questions but did it strike you as little weird and that it would send a message to skeptical public that if you get nominated you bide bank stocks after you were nominated? aren't we brought her to think at least it matters what people think about the senate could look like wrongdoing?

i don't question your integrity by your judgment. you buy stocks that did get appointed to a job like this. the white house, didn't occur to you that you have judgment exercise here? >> you may not be aware that i began my nomination process in 2016 and i was sworn in and confirmed in november of 2017. excuse me i have that backwards. so almost 10 months that i was waiting to go through the process so i would agree if this was a 30 or 60-day process but my investment advisers who had sole discretion on these investments were independently making those decisions. >> i'm just flabbergasted. you had to wait eight months and he couldn't direct them to buy stocks. you have made your mind up on

this but i'm flabbergasted that the ethics in this town now because i had to wait eight months am going to buy financial stocks and i'm going to be the regulator. the ethics people at the white house said it was okay. you approved recently ruled to weaken capitol by 121 billion. fdic did not sign onto this change. are you concerned about the risk to financial stability? >> first of all we have a rule that is out for comment and we will expect to get those comments back. you are aware of the economic gap will change the provisions of that because some of the institutions we are looking to figure out what to do with the custody banks. i don't think the way it's currently formatted today will be the way it's implemented the coast it would be double counting. he meant that you approved of that. >> yes but i also want you to be aware that number is the

leverage ratio was the sole determinant. that is actually a backstop to capitol racial and their other ratios. >> mr. samuel woodward you argue it doesn't do damage to do this which i guess you are arguing why would it -- why a should the banks -- is it so the banks can be more profitable? >> the leverage ratio treats all banks equally and by focusing on the leverage ratio if potentially could force banks into a higher risk issue at the expense of low risk issues. >> are you aware that the largest banks are doing well? >> no i'm not. >> the question is with potential trouble ahead the banks are more profitable than ever. this recovery started with the

auto rescue. we have had eight plus years, 90 some months of job growth. job growth admittedly was less in the trump administration than it had been for a number of years prior to that so it doesn't really matter if he gets credit for it that the recovery will end at some point. don't you want the banks to be prepared or for what they weren't prepared for in 2007 and 2008 a relaxing capitol standards, doesn't it speak to that? >> the federal reserve we felt it was $400 million when you take into account the other ratios so i do agree with on the industry to be well-capitalized and we want them to understand their risk in-app high-quality liquidity. >> going back to the whole issue of skepticism and cynicism about you and us and i will throw all

of us into this. the senate and the house and the ceos that make tens of millions of dollars while a bank teller makes 12 or $13 an hour. i sat across from a bank teller who had done it for 30 years and she makes $30,000 a year after 30 years or so. the skepticism people have and the cynicism for bank regulators i just don't think, they have done so well in last few years they have done so well for tax cut and the regulation. we are doing one thing after another that we see you doing and probably the fbi is starting to do one thing after another for the banks asked for. we keep doing things the bank is

asking for particularly since that's because the economic cycles are going to contribute to problems five or 10 years down the road and maybe you and i will be gone by then but it continues to create, to contribute to that. let me ask one more question. you said sierra a proposal will simplify the cra two judge banks raised on one ratio not the test used today. how do you verify that bankers -- the banks are meeting unique credit needs of different communities if you measure sierra a with one specific ratio? >> i think the ratio starts to make a determination at the macro level is the institution dedicating enough of what the you choose it to be for this committee's? there are other factors that will be important in the overall

element including things like where you lending, what time effect to these you are doing. we also are proposing a volcker rule for equity investments because one of the things we see a deficiency in a lot of the cdfi's can't get equity and we want to encourage financial cetaceans to participate in some of that activity. >> thank you. mr. chairman thank you. [inaudible conversations]

[inaudible >> thank you for your patience with us mr. comptroller. we expect another senator to come back and ask questions and they will probably be close to the end of the hearing. comptroller understand some of the national banks are contemplating eliminating their holding companies because they engage in only traditional activities permissible for the bank. for example national banks have holding companies to branch interstate but a lot has changed and that hasn't been the case for some time. while the process for the dissolution of a holding company is fairly straightforward there are some challenges because of certain antiquated provisions in

the national bank act. can you describe those challenges and what the occ and what congress might do to address them. senator crapo we have seen a significant increase in interest of banks that are predominantly doing more banking related activities across america with our current structure requiring multiple compliance multiple psa related activities to the holding company in the ward or excuse me and the bank. a lot of tanks are looking at kimmie consolidate at two goodies in the holding company in the bank and have dissolution to the holding company? it our viewpoint today there are a couple of these that are we feel we have the authority we can do workarounds. i do believe there would be legislative actions that would make that easier if more banks decided to do that. there are two primary ones in as you know the current provisions

don't require a bank to file the fcc documentation around financial data. if they do consolidate into the banks they would not have that information in the hands of the normal practice and procedures. we work with the fcc and we have a memorandum of understanding of how to accomplish that for banks that want to accomplish that. that was one of the significant issues in the other significant issue the way that the bank act requires that the entity wants the issue in shares and incremental amount of new shares would require a photo vault shareholders. ..

>> we have shared with your staff some recommendations. i think it has the potential to be sizable and numbers as others go through the process and recognize the ability for that regulatory burden. >> i think you have said this but with regard to a congress might need to do, it would be helpful to have your suggestions beyond the authority of the agency. >> another question, i was encouraged that the regulators issued a rule. i'm sure you'll receive comments and rules. i imagine you will review them carefully on firms trading i also hope you look for additional opportunities to

simplify the rules by rationalizing reporting in narrowing the scope of covered funds. can you commit to review the comments received and adjust the proposal to adjust legitimate issues raised? >> that is part of our normal process. we expect to get a lot of comments back. this was a five agency notice of proposed rulemaking. that in itself was rule maker. we want to see how you look at that rule. we at least have a solution. regarding the covered funds, one of the provisions is that banks use to invest in various funds and have capitals into the small businesses.

they often have a tough time if they're 100% owned by family. that created a bridge for companies. that has been virtually eliminated. maybe in the long run you can look at it and see if there's a source of capital needed in the market. someday we'd bring it back in. maybe that's what we're referencing in our comments. >> i appreciate the you and the other agencies got together and made some progress with this. i don't want to be misunderstood. i think more can be made. i was hoping to see more out of it the outcome. >> one last thing, i apologize for stepping up because of the votes. i know there are a lot of questions and cra.

i suspected and get your full answers. is there anything you'd like to add with regard to questions he received? >> i have been either a user of cra for over 25 years. i design programs that are specific markets and markets were cra's use. we've created a complex difficult system for financial institutions. often the week before the team comes in they don't also get a good or bad rating. they often find things don't qualify. the ability to bring kick clarity. we can bring clarity to the process which will encourage more institutions to go deeper into the communities and remove restrictions which has caused the siri to be held back.

three things are trying to solve for. to come up with a more objective way to measure success and commitment. i talked about using a balance sheet and use that to come up for -- and then we should expand the products and services that do qualify. we've narrowed that and i think we can expand it to more small business lending and encouraging banks to do more. we'll give banks a read on the front end. so they're not making it an hoping it qualifies. exams are done every three years. that usually takes 6 - 24 months to issue a report. the brink wants to make a new acquisition they're often

challenged by community groups if their compliance. i think we could fix the third part of it. we can encourage banks to see if they are reporting that data. if anybody thinks are trying to bring them down with think it's an opportunity to partner with community groups and banks to make it better. >> appreciate that. >> i haven't been able to vote yet. i will ask you to be brief. to the extent you can keep it up five minutes or less i appreciate it.

>> it's good to see you. clearly the concern that you've seen from my colleagues with respect to the reinvestment act and ensuring there's not discrimination lending. i know your me to prohibit the unfair discriminatory lending. >> not with cra, that is fair lending. there are very exams done. >> and ensuring there's no discrimination your ensuring the banks are compliant with the pair housing act? >> and are they complying with equal opportunity act? >> they are actively looking at that? going back to the siri enforcement, it's my

understanding you've instructed them to consider how they consider bank exams, is that true? >> not to my knowledge. >> i believe we are sending out a bulletin today. there are bulletins we send out where we update procedures. >> we frequently will provide q&a are bulletins as updates. we were hoping we would get it out. >> updates and how the bank examiners and the criteria they will be looking at when they're engaging? >> no for banks over 1 billion there is a point system that is lending let me ask you this.

my understanding is that the bank examiners consider the cra when they are in gauged in these bank exams is that correct? we do specific cra's. what occurs in a cra exam is we do a review first to ensure that we can rely upon the information that the financial institution has given us. doing a't mean they are fair lending exam at the same time as a cra exam. -- here are exam,part of their cra are their data points they look at to ensure there is no discrimination? >> let me be clear.

prior to a cra exam starting, we do a review to determine the accuracy of the data. if there are items that are discovered that would lead our that there is fair lending questions, then we are required by statute to do within 12 months a fair lending examination. we are also frequently doing fair lending examination independent of cra. this, i know the occ supervises about thousand banks correct? of those made fewer than 500 mortgage loans or home equity loans? what less than 5%. >> less than 5% of the volume. congress passed a law that made fewer than 500 mortgage .oans

dataan you ensure that the >> without that data you are not determining that there is the presence of discrimination or not if you don't have all of the information? >> as a point of clarification those banks that will be excluded still have a home don't like that they have to file. >> i recognize that. that's why i oppose that. i think that doesn't give us enough information. to determine whether there is discrimination or not. >> we use that data to determine. >> do you have all of that information? >> it is being enhanced.

no enhancement based on the cfpb criteria. what will occur is that data will come into us for 95% of the volume. 5% will be light. you are you only using light data. >> thank you very much. i have not voted yet so i need you to stay right to your five minutes if you can so i can rep the hearing up. began second vote just and this is a problem with conducting hearings while both are taking. on.ll object from now there is still a ton minute -- five minutes timeframe. >> the horizontal review of sales practices that has been completed for which i understand you have reiterated here today that you are not going to publicly release detailed findings.

morning totter this you along with several of my colleagues on the committee asking for more information. the reality is that you're citing confidential supervisory information is first. the occ has provided public reports on unsafe and unsound namely practices for during the independent foreclosure review after millions of americans were predatoryunfair and foreclosure practices. in that case the occ provided critical information to the public. outlining how those institutions would remediate borrowers. member of theng senate foreign relations committee. this is a classified. haveis an effort not to the ability for the public to understand that the institutions

that they are banking at may very well have had the same beforees as we have seen . when you were in front of this committee for your confirmation refused toyou provide state-by-state information on the number of onewest foreclosures in our states and today is controller you refused provide information about consumers that have been harmed not only by wells fargo but by wells fargo style sales practices. who are you trying to protect? hard american families or big banks? >> i'm trying to protect american consumers. is not an unsafe and unsound manner. and unsoundnsafe manner you may not have been in the room when i gave the totistics but out of five 600 million accounts, we found

20,000 items. >> that is 20,000 too many. this is a regulatory matter. i have publicly said that this is not a systemic issue. ease work through the mr allcleaned his issues up consumers who been harmed will receive restitution. that people should know the institutions that they are banking but if they have these practices whether they were one of the 20,000 hurt or not. unless you know whether an institution with conducting those practices you won't know whether that's an institution i should be banking with. you are doing the consumer universe a huge discredit. you have to -- you appear to be shilling the banks. i could not believe the answers you gave yesterday at the services committee.

are you sitting before this committee telling a hispanic american that there is no discrimination in the society? the there is no discrimination in mortgage lending? >> i did not say that. >> is their discrimination in mortgage lending? >> ice -- i believe that there is. believe that it occurs and america. what i said that i had not personally observed it. but made people -- >> i am happy to see the you are finally coming to the conclusion whether have you -- you have experienced it that there is discrimination. yesterday, issed said that people have told me that there is discrimination and i believe those people. today -- u commit

>> i think there has to be an new look at assessment areas. -- my experience is that assessment areas will also restrict investments. what is an assessment area. we also have institutions this branches.h no is the assessment area for those institutions? >> i will make sure that you that there is discrimination in our society in this regard and that you don't water down what limited protections already exist. welcome.

i will follow up on a couple of questions. one was by senator warren regarding the case it was brought against onewest. for alleged discriminatory practices. a hud still engaged in investigation of the complaint? are you referencing the hud on financial freedom where onewest bank paid a fine? >> i am referencing the case that was brought with respect to the alleged discriminatory lending that was referenced by senator warren earlier. >> i don't know if that is a hide issue. the accusation by community groups was that onewest bank when you look get our fair lending data that we had out of proportions for the community. i don't have it in front of me. i was less than a hundred mortgages that they used to base

that data on. areas butw in certain it's not like you had a statistically relevant population. .hat was not a hud it was filed by a nonprofit organization. to the best my knowledge it is still pending. i have not been questioned in the case. >> the comments you made in the house yesterday generated a lot of understandable concern. cause --ore maryland a case was brought against wells 2000 --nk in 2011 four four pricing dissemination. wells fargo steered minorities into subprime loans, and them less favorable conditions.

case, wells fargo conceded that this had happened and paid a penalty of $7.59 to the city of baltimore. -- $7.5 million to the city of baltimore. i want to get to some of the issues of regulatory capture and we have had an exchange of letters. i believe that senator brown referenced the gao report where they looked into the situation and you are aware of the fact that there was a case where wells fargo alerted a bank to the fact that there was going to be an occ investigation. are you aware that case? >> i think it was an occ employee alerted wells fargo.

since been a recommendation based on outside. groups recommending a separation recommending that occ employees not be embedded in banks because they would treat them too much like customers as opposed to being on the lookout for potential wrongdoing and hold people accountable. my question is you have decided not to pursue that recommendation. did you do any kind of study it would contradict or conflicts with the 2013 finding? earlier that iis want to make sure we have a chance to cover it with you. just so you understand we have three models in the occ.

inommunity banking model midsize bank model a large bank model. on the smaller and we service those banks by regional locations in occ. examiners are not embedded in the banks. in the midsize bank group we have a split where some are in and some are out. in the large group we have them resident on site -- resident on site. here and examined it and based on my background, i looked at the procedures and processes in just so everyone is aware, every five years we rotate. actually it is less than five years. we rotate the examiner in charge. second we have resident experts that are both in the field and in washington that review all of the examination papers and data for accuracy and to make sure

that no one could take data and make inappropriate conclusions. then we have a deputy comptroller that is centralized and has oversight for the financial institution. happen, i felt the controls were in place. the fourth category having resident on-site examiners who have open architect access to anything going on in that bank, they can go to meetings. you can wander around the bank. it provides better risk management. that theree here is may be some benefits. do the benefits outweigh the risks? there are a number of independent analyses. is it too great a risk that you have relevant regulatory capture? >> i am only aware of one time

where that has been an issue. >> i look forward to following up. >> thank you senator. comptroller i appreciate you coming here before us today but also putting up of the .nconveniences we appreciate the work that you are doing and again appreciate the fact that you would come here and to the committee. i look forward to our further work with you. that concludes all of the can -- questions. this meeting is adjourned.

washington journal, live every day with news of policy issues that impact you. coming up sunday morning university of mary washington professor discusses his recent book on the evolution of white house news management in the cable and digital age. talksepublican strategist about the trump presidency at his book on politics. be sure to watch c-span's washington journal. join the discussion.