Volcker Rule Regulatory Harmonization Act

Floor Speech

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Mr. FOSTER. Mr. Speaker, I thank Ranking Member Waters for yielding me the time and for her commitment to thoughtful debate in our caucus to get the best results for the people that we represent.

I thank Congressman Hill for working with me and our staff for months to craft the bipartisan bill that you see on the floor today.

When I first entered Congress, the Great Recession required an emergency response for lawmakers to save the economy from collapse, and then it required a thoughtful response to make sure that we would have an economy that would remain stable and work for everyone.

That is why I worked hard to draft the Dodd-Frank Wall Street Reform and Consumer Protection Act, and I am proud that it has succeeded in creating a more stable and better capitalized financial system so that hardworking families should never have to endure a similar financial crisis. The balance has generally been good between reining in risk and allowing financial services firms to play their necessary role in our economy.

We have to constantly monitor for new risks and ways that regulation may unintentionally reduce liquidity or restrict access to capital. But first and foremost, we need to fight to preserve the substantive pieces that we got right and to build on its success with improvements to the law. That includes the Volcker rule, a crucial aspect of protecting the system. The current arrangement uses a committee of five agencies--the Fed, OCC, FDIC, SEC, and CFTC--to write and update the rule.

During Volcker rulemaking, each regulator on the committee has an effective veto over any proposed policy. I spoke with former regulators who were involved in that rulemaking process and came to understand that the committee decision often formed around the weakest regulatory position, which is not good. The veto of each regulator also applies to interpreted guidance, which makes it very hard for either industry or watchdog groups to get a straight answer on what the details of the Volcker rule actually are.

H.R. 4790 would strengthen Dodd-Frank by making regulatory practices more efficient and clear. The bill, including my amendment, would make the Federal Reserve the sole rulemaking agency for the Volcker rule, identify the regulator primarily responsible for oversight of an institution, and provide relief to community banks who are not going to threaten our economy by setting up a massive proprietary trading desk.

Consolidated rulemaking at the Fed will also streamline the process for updating the Volcker rule to new market conditions that may create new threats. As markets change, we need a single nimble regulator to respond by amending the rule and providing an interpretation for new conditions.

Identifying the single regulator responsible for Volcker oversight of an institution ensures consistent implementation and enforcement. This will be the Fed for a bank holding company, the OCC for a national bank, the FDIC for a federally insured State-chartered bank, the SEC for a broker-dealer, and the CFTC for a swap dealer. Importantly, the FDIC retains its backup examination authority for banks to protect the Deposit Insurance Fund with respect to all insured institutions.

Exempting small community banks will relieve a significant compliance cost that is unnecessary because few of these banks have any interest in proprietary trading. This would also allow the regulators to focus on the largest banks which are the only ones capable of having large trading operations. These large banks hold 82 percent of all deposits and are the potential source of nearly all systemic risk.

The bill limits the exemption to banks with less than $10 billion in assets and less than 5 percent of those assets being in trading assets.

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Mr. FOSTER. Mr. Speaker, this 5 percent limitation means that any well-capitalized small bank that decides to invest in tradeable assets could take 100 percent losses on its trading positions without becoming insolvent and without threatening the Deposit Insurance Fund. So there is no gambling with taxpayer funds involved here.

Mr. Speaker, I urge you to support a stronger Volcker rule by bringing greater efficiency and transparency to the policy formulation and greater consistency to implementation and enforcement.

I thank, again, the ranking member for yielding me the time, and I urge a ``yes'' vote on the final passage of H.R. 4790, the Volcker Rule Regulatory Harmonization Act.

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