mr. gruenberg, mr. occuri and mr. t mr. tarullo, more broadly defined than the qualified mortgage, would it be correct to say that the banking regulators should wait for the cpfb to finish their rules before they move ahead with their risk retention rules? >> senator, the judgments made on that, as a general matter we felt that there was a logic in having the qrm follow the qm. so, we'll have to see. but there is a logic to that. >> mr. curry, do you agree? >> i think that's a necessary component to the entire package of rule making, the qrm and the qm. >> mr. tarullo? >> interagency process, senator. if people want to wait, we will wait, too. >> all right. i encourage you to do that. mr. tarullo, recent events have highlighted the difficulty in managed risks. the current exposure method and there has been quite a bit of concern as to whether that is an accurate method of risk modeling. are you considering other models or are you focused on simply staying with the exposure method? >> in what context, the stress test context

mr. gruenberg, curry, and tarullo, it would seem to me because the mortgage is supposed to be more broadly defined than the qualify mortgage, would it be correct to say that the banking regulators should wait for the cfpb to finish its rules before they move ahead with their risk retention rules? >> i don't know that a formal -- senator, i don't know that a judgment's been made on that. i think as a general matter, we thought there was a logic in having the qrm follow the qm, so we'll have to see, but there is a logic to that. >> mr. curry, do you agree? >> i think that's a necessary component to the entire package of rule making, the qrm and the qm. >> mr. tarullo? >> it's an interagency process, senator, if people want to wait, we will wait too. >> all right, i encourage you to do that. mr. tarullo, recent events have highlighted the difficulty in modeling risk. my understanding is that federal reserve is following or utilizing the current exposure method and that there has been quite a bit of concern about whether that is an accurate method of risk modeling. are you -- are you consideri

mr. gruenberg, i appreciate you coming in and talking today about orderly liquidation. i do think, mr. chairman, i don't know how many people have gone through the fdic-proposed rules on resolution, but the words liquidation are throughout title two. i know senator warner knows that well, and i think we found that it's anything but liquidation and institutions will continue, and, again, i just think it would be great for us to understand that and think about whether there should be a chapter two title too, but let me move on to the issue at hand. i think it's a fool's errand to think regulators are going to be ahead of bankers, especially in these highly complexed organizations, and the notion of having a regulator besides every banker is, again, a fool's errand, and i think we charged y'all with a lot of things we shouldn't have charged you with in the first place, but the real question, to me, i know that, look, jpmorgan lost $2 billion, i think, over a two-year period. they could lose like $80 billion and still be okay, yet we still haven't dealt with the $200 billion that taxpayers

mr. gruenberg, you stated and i think this is within context that the typical path toward the failure of an insured banks starts with bad loans. my understanding according to the fdic website that over the course of 2009 and 2010, there were almost 300 banks that failed. that is a high rate of failure, the highest since the early 1990's. 95% of these failures were banks with assets less than $1 billion. i would ask you, to your knowledge, how many of them failed because of -- because of their proper trading activities? >> to my knowledge, none of them. >> not one? did they fail because they made loans that went bad? >> as a general characterization, i would say yes. >> virtually 100% of the cases? would it be fair to say historical late, including to the present day, the biggest risk of banking is the lending activity inherent to the bangla process? >> yes. >> do you regulate that at all? >> yes, that is a considerable focus of our supervision. >> lots of regulation. concentration, requirements, supervision of the activities and yet, despite that, what a% of the failures of banks in amer

mr. gruenberg, the investment banking portion of jp morgan is underneath the name bank which would be covered by the fdi insurance. is that correct? quick jp morgan is an fdic bank. they have a separate affiliate. >> therefore there are nofdic -- no fdic insurance dollars at risk? >> i believe it was in a branch of the bank itself, not in the investment company itself. >> there are a lot of banks and branches, some of them are covered based on their activities. my question is were the activities taking place part of the umbrella underneath the main bank and the insurance expose? >> they were. >> so insurance would have had to kick in and take care of it. >> if activity did occur in the bank, yes. >> that is the issue raised here. i think it is a serious question. it is why the inquiry is going forward. i think we need to understand -- >> we have a situation with the banking structure now that is to me a real problem. you have these big entities that have this enormous exposure. do you feel they are paying their fair share compared to the rest of the banks that do not do this? >> well, in term

mr. gruenberg has folks there as well. with all the people there i'm wondering, in the april 13, 2012 analysts call, the chief financial officer at jpmorgan said quote we are very comfortable with their position. i would add all these positions are fully transparent to the regulators. they review them and have access at any point in time to get information on a regular and occurring basements. vases. is that a true statement? >> where in the process of reviewing what exactly happened. that is one of the prongs of our review and how that is issued within the chief development office and whether there were appropriate controls in place or not. our understanding is that neither the management of the bank was fully aware of the scope of that assessment and that we were initially relying upon the information that was available to the bank's. >> right, you are all relying on the information available to the bank. >> which is a critical component of risk management in the supervision of these institutions. there needs to be a str

mr. gruenberg, you stated and i think this is within context that the typical path toward the failure of an insured banks starts with bad loans. my understanding according to the fdic website that over the course of 2009 and 2010, there were almost 300 banks that failed. that is a high rate of failure, the highest since the early 1990's. 95% of these failures were banks with assets less than $1 billion. i would ask you, to your knowledge, how many of them failed because of -- because of their proper trading activities? >> to my knowledge, none of them. >> not one? did they fail because they made loans that went bad? >> as a general characterization, i would say yes. >> virtually 100% of the cases? would it be fair to say historical late, including to the present day, the biggest risk of banking is the lending activity inherent to the bangla process? >> yes. >> do you regulate that at all? >> yes, that is a considerable focus of our supervision. >> lots of regulation. concentration, requirements, supervision of the activities and yet, despite that, what a% of the failures of banks in amer