Executive Session

Floor Speech

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Mr. CRAPO. Mr. President, I would like to give an update to all of our colleagues about where we are on S. 2155.

We continue to be open and ready for amendments on our side. We have a number that we are ready to proceed forward with, and we so far have not received agreement from the other side to move forward. We hope that we can avoid this slowdown and start moving forward by setting votes on amendments as soon as we can, and we will continue to work to try to achieve that.

It is my hope that we will be able to get heavily engaged in and resolve the amendment stage of this legislation soon so that we can continue to move forward expeditiously.

I thank the Chair.
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Mr. CRAPO. Mr. President, I rise again today to speak further on S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act.

We have had a lot of discussion on the floor about this bill in the last few days. Anybody who took the opportunity to watch all of that debate sees that there is a strong bipartisan support for this bill and a strong debate coming from some quarters trying to say that the bill creates greater risk in our financial community. I would like to address exactly what this bill does and then respond to some of those charges, which I consider to be completely unfounded.

The Economic Growth, Regulatory Relief, and Consumer Protection Act is aimed at rightsizing regulation for financial institutions-- including community banks and credit unions--making it easier for consumers to get mortgages and to obtain credit.

I have said a number of times, and I will repeat, back when we were debating the Dodd-Frank legislation about 10 years ago, it was marketed to the public as a bill to address excesses and problems on Wall Street by the big megabanks of our country, but its provisions hit hardest on Main Street.

As I have said, I actually held a news conference in Boise, ID--in my home State--on Main Street. I said the crosshairs of this bill and the bulls-eye are on Main Street, not Wall Street.

What has happened in the last 10 years? The Wall Street banks have been phenomenally profitable. They have been very successful, and the smaller banks--the credit unions, the community banks, even the regional banks--have been hammered.

We are losing credit unions and, more specifically, community banks across this Nation at an alarming pace, and the reason--the primary reason--is the phenomenally significant increased regulatory burden they face.

I have heard colleagues of mine on the floor in the last couple of days talking about specific community banks and credit unions in their States that have had so much pressure put on them, so much burden and financial costs put on them by the excessive regulations that they have either gone out of business or stopped issuing mortgages, just stopped doing mortgage business or stopped doing loans of certain types that are beneficial to our small businesses. So the real victims aren't even just the community banks and credit unions; they are the people--the people who want to get a loan in their local communities and who are entirely worthy of getting a loan to buy a house, but their credit unions and community banks are no longer in that business or they are no longer in existence. That is what this bill is addressing.

The bill also increases important consumer protections for veterans, senior citizens, victims of fraud, and those who fall on tough financial times. The provisions in this bill will directly address some of the problems I frequently hear about from financial institutions. Let me explain in a little more detail just what that is. I have already discussed some.

Community banks and credit unions are simple institutions, focused on relationship lending and have special relationships with the people in their communities. The bankers and their customers go to church, play ball, or their kids go to school with each other. They know their customers, and they are willing to work with them to help them be successful. They provide credit to traditionally underserved and rural communities, where it may be harder to access banking products and services or to get a loan.

Dodd-Frank instituted numerous new mortgage rules and complex capital requirements on community banks and credit unions that have hindered consumers' access to mortgage credit and lending more broadly.

I guess I will just insert here, this phenomenon we often see in Washington of one-size-fits-all or cookie-cutter solutions to a problem is directly the kind of problem we are seeing here.

Our smaller financial institutions are treated as though they were large megabanks and as though their business models and their portfolios contain the same kind of risk as the larger banks. Yet they don't have the same business models; they don't have the same risk footprint, but they are forced to go through phenomenally expensive regulatory burdens for no good reason.

I can't tell you how many of these small bank and credit union folks have said to me: Our industry did not cause or have any part in the financial crisis, but we are being asked to pay the price. That is what this bill deals with.

In July of 2016, the American Action Forum attempted to estimate the number of paperwork hours and final costs associated with these rules and regulations that I am talking about. In total, the forum estimated that the law had imposed more than $36 billion in final rule costs and 73 million paperwork hours as of July 2016. What does that mean? To put these figures into perspective, the costs are nearly $112 per person or $310 per household.

Additionally, it would take 36,950 employees--that is 36,950 employees--working full time to complete a single year of the law's paperwork based on the agency's calculations themselves.

Our bill is focused on providing meaningful relief to our community banks and credit unions, helping them to prudently lend to consumers, home buyers, and small businesses--small businesses that we all acknowledge are the engines of our economy, yet lack credit and lack access to capital because of these unnecessary rules. That is why the first part of the name of this bill is ``economic growth.'' This bill will provide a needed shot in the arm for our economy across this country.

By responsibly expanding the qualified mortgage safe harbor, addressing severe appraiser shortages in rural areas, reducing superfluous HMDA reporting requirements, and exempting certain loans from escrow requirements, our bill will ease the compliance and regulatory reporting requirements borne by many of these small financial institutions and free up scarce resources for their communities, enabling more individuals to find a home loan or get the funding to start a business. And this does not increase financial risk.

A number of local credit unions have weighed in on the positive impact our bill will have on increasing access to affordable mortgage credit.

Additionally, had our bill's provisions on a rule called TRID--a 3- day waiting period--had they been in place in 2017, it would have helped over 1.5 million credit union members at over 3,800 credit unions throughout the Nation, enabling them to take advantage of a lower interest rate and to avoid potential delays in the mortgage origination process. I will tell my colleagues, anybody who has had to go through the mortgage origination process today knows the paperwork I am talking about.

Our bill also drastically simplifies the capital regime for certain highly capitalized community banks compared to the current Basel III requirements that are more appropriate for larger, sophisticated financial institutions.

Rebecca Romero Rainey, the former chairman and CEO of Centinel Bank of Taos and CEO-elect of the Community Bankers of America, made a commonsense observation. She said:

Under Basel III, community bank capital regulation has become significantly more punitive and complex. Do we really need four definitions of regulatory capital, a capital conservation buffer, and impossibly complex rules governing capital deductions and adjustments?

Applying the rule to community banks in a one-size-fits-all manner harms the consumers and businesses we serve.

She added:

I seriously doubt that my grandfather would have founded Centinel if he had to comply with Basel III and the other new regulations that exist today.

We want to encourage people to bank in their communities.

Dodd-Frank also dealt with midsized and regional banks, and our bill does too. Dodd-Frank swept many simple midsized and regional banks into its enhanced prudential standards, but it was meant for the largest and most complex institutions. Each new regulation poses a tradeoff between hiring new employees to help comply with those standards versus employees to provide customers the products and services they want and need.

Deron Smithy, executive vice president and treasurer for Regions Bank, a regional bank based in Alabama, described the implications of this on his institution, saying, ``We now have more people in our organization devoted to compliance-related matters than we do for commercial lending'' and that ``the direct cost, as well as management's time and attention to meeting these rules, creates a disproportionate burden on regional banks. Collectively, the incremental cost of regulatory compliance exceeds $2 billion annually.'' The $2 billion in costs that Mr. Smithy mentioned were just the direct costs. Indirect costs include management and other business units' time being diverted from fully serving their clients.

These are not just empty numbers; behind these numbers are real economic consequences. That is a fact Mr. Smithy noted in his testimony before the Banking Committee.

For a company like Regions, that standard being lifted would likely liberate as much as 10 percent additional capacity for lending, which--

In his bank's case--would be $8 billion to $10 billion.

That is capital and access that are not available to individuals, families, and small businesses in this Nation. That is one bank.

During another Banking Committee hearing, Robert Hill, CEO of South State Corporation, a midsized bank, noted that when their institution crossed the $10 billion threshold, ``South State was impacted by over $20 million per year, a significant sum for a bank our size. What impact does that have on our local communities? For us, that equates to 300 jobs. Approximately 10 percent of our branches were closed, and even more jobs diverted away from lending to regulatory compliance.''

Section 401 of our bill raises the SIFI threshold for applying enhanced prudential standards from $50 billion to $250 billion--a level that many, many financial experts have encouraged for years--and the $10 billion threshold for applying an annual, company-run stress test to midsized banks while maintaining important safeguards against risks to the U.S. financial system. This will free up valuable financial and human resources to help keep more branches open, increase lending to consumers and small businesses, and lower the cost of borrowing for consumers.

The bill also deals with housing policy. Our bill provides some important improvements to HUD programs, making them more effective and efficient and enabling public housing authorities across the country to better address the housing needs of their local community.

Our bill enhances HUD's Family Self-Sufficiency Program, which will enable a greater number of families currently assisted by HUD to obtain job training, education, childcare, and ultimately achieve financial independence. Specifically, the bill would broaden the scope of supportive services that can be offered to these participants, including home ownership assistance, training in asset management, obtaining a GED, and education in pursuit of a postsecondary degree or certification. It would also streamline the administration of the program, making it easy for local public housing authorities to deliver it in their communities.

For the first time ever, our bill will enable many families who live in privately owned apartments backed by project-based rental assistance to also participate in the FSS Program.

Our bill would also provide targeted regulatory relief to small public housing agencies operating in rural communities. While smaller public housing authorities typically have far fewer staff and resources than larger urban agencies, they, too, are currently held to many of the same burdensome regulatory requirements as some of the largest ones in the country. As a result, this means that more of their time and money are spent completing paperwork and less are able to be dedicated to promoting access to affordable housing in these communities.

Our bill would provide tailored regulatory relief that recognizes the unique challenges faced by smaller public housing authorities in rural areas. Specifically, it would provide a simpler option for calculating utilities, simplify environmental review requirements for new developments, streamline inspection requirements, and make it easier to coordinate efforts, such as enabling shared waiting lists with neighboring agencies and enabling neighboring agencies to pool their resources to develop larger projects.

These changes will set up these small agencies for success and enable them to direct a greater amount of time, effort, and resources toward their core mission: promoting access to affordable housing.

The bill is also a consumer protection bill. It ensures that key consumer protections remain in place and increases protections for consumers who have fallen on hard financial times or become victims of fraud.

Following the Equifax data breach, we held two credit bureau hearings. These hearings demonstrated bipartisan support for some important measures. The bill provides 1 free year of fraud alerts for consumers potentially impacted by the Equifax breach or other instances of fraud. It gives consumers unlimited free credit freezes and unfreezes during the year. It allows parents to turn on and off credit reporting for children under 16.

The bill also includes important protections for veterans and senior citizens. The Department of Veterans Affairs Choice Program provides veterans non-VA medical care if they can't access care at a VA medical facility. Unfortunately, the VA Choice Program has been rife with issues, including delayed payments and misassigned medical bills to veterans. As a result, veterans have experienced negative credit items on their reports, which unnecessarily complicates their and their families' lives.

The largest credit reporting agencies took a step to alleviate this problem by delaying reporting medical debt on a consumer's credit report for 180 days, but more can still be done. Our bill goes a step further by prohibiting medical debt arising from the Choice Program and other non-VA healthcare providers from being reported to credit- reporting agencies for 1 year and provides veterans a process to dispute or remove incorrect information already on their reports.

According to a study conducted by MetLife, seniors lose at least $2.9 billion annually in reported cases of financial exploitation. Despite the prevalence of senior financial fraud, the National Adult Protective Services Association estimated that only 1 in 44 cases of financial abuse is ever reported.

Current bank privacy laws make it difficult for the financial institutions and their employees to report any potential fraudulent activity without incurring legal liability, and as a result, few cases of financial abuse are reported. Our bill would give financial advisers civil liability protection when reporting suspected financial abuse of seniors. This will empower and encourage our financial service representatives to identify warning signs of common scams and help stop financial fraud targeting our seniors.

Now I wish to turn for just a moment--I have gone over some of the positive benefits and provisions in this bill. I would like to turn for a moment to the criticisms, because, if my colleagues have been listening to the attacks, the attacks are that this is an effort to go help the big banks in America get richer at the expense of poor people. This is a very common type of attack on almost any proposal to fix a regulation in the financial system.

One of the things we have heard is that it gives the regulators too much flexibility to tailor regulations to the size of the institution being regulated. This bill carefully balances the need to provide regulators with the appropriate discretion at the technical level, while imposing specific directions to ensure appropriate tailoring for Main Street banks and maintaining core supervisory tools for the largest banks.

Regulators will still be required to ensure that banks operate in a safe and sound manner and still retain extensive authorities to do so.

The bill also requires regulators to do more to tailor regulations to ensure that the level of regulation and scrutiny of banks reflects the potential risks posed by the institutions--something that folks in my State would say is just common sense.

In the face of all of this, we have talked to a lot of the regulators themselves to see what they think of the idea, and they are consistently saying: Let us have the flexibility to regulate appropriately, and we will do the job. We will ensure that we have safety and soundness, and we will ensure that we are not putting undue regulatory burdens on our financial institutions, particularly the smallest ones.

Federal Reserve Chairman Jay Powell said:

You know, we really want the most stringent things to be happening at the systemically important banks--the most stringent stress tests, in particular--and we want to tailor or taper, as we go down into less significant, less systemically important institutions.

Powell added: ``Those banks [below $100 billion] are not systemically important.

What he meant by that is they don't present systemic risks to the economy. We should analyze them and regulate them and supervise them in a more appropriate fashion.

Federal Reserve Vice Chairman for Supervision Randy Quarles has also noted the importance of tailoring, saying:

One of the important general themes of regulation is ensuring that the character of the regulation is adapted to the character of the institution being regulated, what has become the word ``tailoring.''

I fully support that, and I think that it's not only appropriate to recognize the different levels of risk, and types of risk that different institutions in the system pose, but that it also makes for better and more efficient regulation, and efficient regulation allows the financial system to more efficiently support the real economy.

That is what we are talking about here.

So I do think that we should look very carefully . . . at tailoring capital regulation and other types of regulation to the particular character of the institutions that are regulated, and that includes their size, and that includes other aspects of the character.

Another critique I have heard is that the bill erodes the power of stress testing as a supervisory tool. In one way or another, many have stood on this floor and talked about the need to have this kind of flexibility, and others have stood on this floor and said it creates a huge threat to our economy.

We have a hearing each year called the Humphrey-Hawkins hearing when the Chairman of the Federal Reserve comes and testifies to the Senate and then to the House. This year, the Chairman of the Federal Reserve came before the Senate. To ensure that people and Members understood what this bill does, I asked Chairman Jay Powell: If this bill were to pass, is it accurate that the Federal Reserve would still be required to conduct a supervisory stress test for any bank with total assets between $100 billion and $250 billion to ensure that it has enough capital to weather economic downturns?

He replied: Yes, it is.

I asked: Is it accurate that the bill's change of the threshold from $50 billion to $250 billion for enhanced prudential standards does not weaken oversight of the largest, globally systemic banks?

He said: That is correct.

The Dodd-Frank Act established a $50 billion asset threshold to apply enhanced prudential standards to banks. Applying enhanced standards broadly to regional banks with simple business models and low-risk profiles has had significant consequences in the marketplace. Although there has been much debate about the appropriate level for the threshold, there is bipartisan agreement that $50 billion is too low, including among Federal Reserve Chairman Powell, former Federal Reserve Bank Chairman Yellen, former Acting Comptroller Noreika, and former Comptroller Curry.

Current Federal Reserve Chairman Jay Powell said: ``Our view has been that that combination of raising the threshold and giving us the ability to go below it in cases where needed gives us the tools that we need.''

Former Federal Reserve Chair Janet Yellen has said:

We've already said that we would favor some increase, if Congress sticks with a dollar threshold--that we would support some increase in the threshold. An approach based on business model or factors is also a workable approach from our point of view. Conceivably, some of the enhanced standards should apply to more firms with lower levels of assets, and others with higher levels. So I think either type of approach is something that we could--we could work with and would be supportive of.

That is the former Chair of the Federal Reserve.

Our bill rightsizes regulations by raising the $50 billion threshold to $250 billion. Banks with total assets below $100 billion are exempt immediately from these enhanced standards, while those with between $100 billion and $250 billion are presumed exempt 18 months after the bill is enacted unless the Federal Reserve Board determines that they need to have some additional level of standard applied, and the Federal Reserve is given full authority to do so. The provision allows the Federal Reserve to tailor regulations to a bank's business model and risk profile.

This provision in no way diminishes the effectiveness of prudential regulations, and it provides the Federal Reserve sufficient regulatory and supervisory discretion to apply these enhanced standards on any firm it deems a threat to systemic risk or safety and soundness.

Let me restate that. If you have heard any of the attacks, you have heard that the Federal Reserve will not be able to adequately regulate the banks anymore. The past two Chairmen of the Federal Reserve have said that is not correct, but the bill itself provides that the Federal Reserve continues to have the authority to apply enhanced standards on any firm it deems a threat to systemic risk or safety and soundness.

So, again, for those who are attacking the bill, I think their arguments are unfounded and, frankly, based in an effort to try to create concern about a risk that does not exist.

This provision also requires the Federal Reserve to apply a periodic supervisory stress test to banks with between $100 billion and $200 billion in assets, something that is often overlooked by those commenting on the bill.

I have tried to go over some of the positive aspects of this bill and explain why its title is Economic Growth, Regulatory Relief, and Consumer Protection Act and respond to some of the false, unfounded attacks on this bill.

This bill does not create any increased risk at the level of supervision for the megabanks, those that were intended to be the target of Dodd-Frank when it was adopted, but it does provide increased support for those community banks and credit unions, and those regional banks and midsized banks that are being so badly hurt and whose customers are being so deprived of needed and justified access to credit and capital. That is what this debate is about.

I encourage all of my colleagues to support this legislation as we move forward and help us bring economic growth, regulatory relief, and consumer protection to all Americans.

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