Federal Reserve, FDIC officials testify on financial regulation in Senate hearing

[0:00] politics. President Trump reinforced that principle through his executive order on debanking. [0:07] No law, no lawful business in Anderson, South Carolina or anywhere in America should be [0:12] denied access to banking services because of shifting political winds or subjective considerations [0:19] like reputation risk. I appreciate your efforts to refocus bank regulation on core financial [0:28] risks to keep our financial system safe, but also make sure that families and small businesses [0:34] can still have access to credit. Over the past several years, rules that did not make our banking [0:39] system safer have been piling up. They did not make Americans safer. This over-regulation did have [0:47] one effect. It made it harder for banks and credit unions to serve their customers. And when those [0:53] institutions struggle, families struggle, small businesses struggle, and first-time homebuyers [0:59] struggle. Strong safeguards and economic growth are not opposites. In fact, when our economy [1:06] is growing and Americans are working, saving, and investing, our financial system becomes stronger, [1:12] not weaker. That is why getting the balance right actually matters a lot. One important step is making [1:22] sure capital rules reflect real-world risk without unnecessarily holding back lending. I appreciate [1:29] your agency's work to rethink Biden-era proposals like Basel III Endgame that would have significantly [1:37] increased capital requirements to the detriment of our economy. We must ensure that rules designed in [1:43] Washington do not make it harder for small businesses in Spartanburg, South Carolina or across the country [1:49] to grow. Vice Chairman Bowen, I was encouraged by your comments last week about helping banks return to [1:57] mortgage lending. Thank God. That aligns with our work, our work, on the Road to Housing Act, which is focused on [2:07] reducing red tape and increasing housing supply so more Americans can achieve the American dream [2:12] of home ownership. We also need rules that keep up with the times. When the regulatory thresholds are [2:19] frozen in place for years, they do not reflect the size of today's economy. As our economy grows, [2:27] our regulatory framework should be modernized with it in a way that maintains safety while encouraging [2:33] opportunity. I appreciate that the banking regulators have a renewed focus on tailoring to ensure their [2:39] policies are designed to fit the unique nature of each institution. I sent a letter to the banking [2:47] agencies yesterday in support of updating the prudential bank regulatory tailoring categories based on [2:53] nominal GDP. I look forward to seeing a proposal sometime soon. I also want to commend the agencies for recent efforts [3:01] to focus supervision on material financial risks and enhance the independence and efficiency of the appeals [3:08] process. This enables financial institutions to serve their customers effectively while maintaining safety [3:15] and soundness. Having a robust process for appealing supervisory determinations is necessary to provide regulated [3:22] institutions with due process and transparency. Finally, I look forward to your agency's continued progress [3:30] implementing the Genius Act. Bringing digital assets and stable coins into clear regulated frameworks [3:39] strengthens consumer protection and ensures innovation here at home in the United States and not [3:46] overseas. At the end of the day, the decisions made by this committee and by our banking regulators [3:52] have real consequences. They affect whether a family can qualify for a mortgage, whether a small business can [4:00] expand, whether communities in Bamberg County, South Carolina, and across the country have access to the capital [4:06] they need to grow. Our responsibility is to ensure we have a banking system that is safe, resilient, and focused [4:13] on real financial risk while still supporting economic opportunity. That is the balance we are working to achieve. [4:20] I look forward to today's hearing. [4:26] Thank you, Mr. Chairman. So, President Trump has had more than a year to keep his number one campaign promise to lower costs for [4:34] American families, and boy has he failed. Costs are going up across the board. Prices are up for groceries, utilities, [4:42] utilities, health care, and the National Association of Home Builders says that, thanks to Trump's chaotic tariffs, [4:48] it costs $11,000 more to build every new house in America. [4:55] Meanwhile, job growth has slowed to a crawl and 83,000 people working in manufacturing lost their jobs last year. [5:04] Ordinary Americans are squeezed hard, but boy, it is a good time to be a Wall Street CEO. [5:12] Last year, the CEOs of the six largest banks together earned more than a quarter of a billion dollars in compensation. [5:21] Those banks paid out more than $140 billion in dividends and buybacks to wealthy shareholders. It is a record. [5:31] The rich are getting richer, and everyone else struggles. In the Trump economy, it's Wall Street first, and American families last. [5:40] Now, we've seen this story before. We know how it ends. In the great financial crash of 2008, 10 million families lost their homes. [5:49] The unemployment rate skyrocketed to 10%, and nearly $20 trillion in savings and retirement plans evaporated. [5:59] Washington helped cause that crash by eliminating common sense guardrails that kept banks safe and focused on serving communities. [6:10] When the crash hit, Washington bent over backwards to funnel trillions of dollars to bail out Wall Street. [6:17] Wall Street executives who deserved handcuffs were instead rewarded with golden parachutes. [6:24] It was brutal capitalism for families on Main Street, socialism for billionaires on Wall Street. [6:32] The memories of a family being thrown out of its home because of a predatory mortgage, or of a 70-year-old grandmother coming out of retirement to work at Walmart because her pension vanished, did not fade. [6:46] But Wall Street lobbyists and piles of campaign cash have worked hard to erase them. [6:53] Now they have their champion in the White House, and he has assembled a team of Wall Street first regulators. [7:00] Take the Federal Reserve Vice Chair for Supervision, Michelle Bowman. [7:04] President Trump appointed her to the Fed during his first term. [7:08] She helped deregulate Silicon Valley Bank and other large banks. [7:12] And a few years later, those same banks failed. [7:16] The second, third, and fourth largest bank failures in U.S. history. [7:21] And was Ms. Bowman held accountable? [7:23] Nope. [7:24] President Trump gave her a promotion. [7:26] Now she and Trump's other regulators are implementing Wall Street's wish list. [7:32] And at the top of the list, weakening capital rules, including stress testing. [7:38] Banks love debt. [7:40] They want to make their bets using other people's money, so depositors and taxpayers are left holding the bag if things blow up. [7:48] Capital rules require banks to fund loans and investments with some of their own money, so that they have skin in the game in those decisions. [7:59] Strong capital cushions help the economy by reducing the likelihood of financial crashes and taxpayer bailouts. [8:07] Now, mega banks are drawing down their capital cushions through higher payouts to wealthy executives and shareholders, increasing their risks. [8:18] Regulators have also rubber-stamped mergers, allowed banks to engage in dangerous crypto activities, [8:26] rescinded a key rule designed to drive investment in low-income communities, [8:31] eviscerated fair lending standards, and taken financial cops off the beat, each cutting staff by 15 to 30 percent. [8:43] The bank regulators have also terminated enforcement actions against JPMorgan, Wells Fargo, Citigroup, and Goldman Sachs, [8:51] while failing to identify new law-breaking on Wall Street. [8:56] Either Wall Street bankers have suddenly stopped breaking the law, or Trump enforcers are keeping their eyes deliberately closed. [9:06] I'm betting on closed eyes. [9:09] Warning lights in our overall economy are flashing red. [9:13] President Trump is bringing the next great financial crisis closer into view, [9:20] yet his regulators seem determined to serve only Donald Trump and his billionaire buddies. [9:27] Thank you, Mr. Chairman. [9:28] Thanks, Senator Warren. [9:30] Today we'll hear from Vice Chairwoman Bowman, Chairman Hill, Comptroller Gould, and Chairman Hopman. [9:37] For our semi-annual update from the Prudential Regulators, Vice Chairman, you are now recognized. [9:43] Thank you, Chairman Scott, Ranking Member Bowman, Warren, and members of the committee. [9:49] Thank you for the opportunity to testify on the Federal Reserve's supervisory and regulatory activities. [9:55] I'll focus on the current state of the banking sector and progress on my priorities as the Vice Chair for Supervision. [10:01] The banking system remains sound and resilient. [10:05] Banks continue to report strong capital ratios and significant liquidity buffers, [10:10] which position them well to support economic growth. [10:13] We are seeing continued growth in bank lending, a decline in non-performing loans across many categories, [10:19] and strong profitability. [10:21] Non-bank financial institutions continue to increase their share of the total lending market, [10:26] creating strong competition for regulated banks without facing the same prudential standards. [10:32] To compete effectively with non-banks on both payments and lending, [10:35] the Federal Reserve is encouraging banks to innovate to improve their products and services. [10:40] We're working with the banking regulators to develop regulations that include capital and liquidity [10:45] for stablecoin issuers as required by the Genius Act. [10:48] We also need to provide clarity on digital assets to ensure the banking system is well-placed to support these activities. [10:56] The Fed is working to tailor our regulatory and supervisory framework to accurately reflect the risk [11:01] that different banks pose to the financial system, particularly for community banks. [11:06] We cannot continue to push policies and supervisory expectations designed for the largest banks down to smaller, [11:13] less risky, and less complex banks. [11:16] I support Congress's efforts to reduce burden on community banks, [11:20] including increasing static and outdated statutory thresholds that have not been updated for years. [11:26] The Fed is taking actions to support community banks. [11:30] Together with the FDIC and OCC, we recently proposed changes to the community bank leverage ratio [11:36] to provide greater flexibility while preserving strong capital and safety and soundness. [11:41] And we released new capital options for mutual banks. [11:44] We are exploring streamlining the merger and acquisition and de novo chartering application processes for smaller banks [11:51] and updating the board's merger analysis to accurately reflect and analyze competition. [11:56] We are also modernizing and simplifying the Fed's regulation of large banks. [12:02] The board released its proposal last October to enhance public accountability and ensure robust outcomes of our stress test. [12:10] The proposal includes disclosing stress test models, the design framework, and the 2026 scenarios. [12:17] It ensures that future significant changes will benefit from public input prior to implementation. [12:24] The agencies also finalized changes to the enhanced SLR proposal for USGSIPs, [12:29] which helps ensure that leverage ratio requirements serve as a backstop to risk-based capital requirements as originally intended. [12:37] The board is working on a proposal with the OCC and the FDIC to implement the 2017 Basel Agreement. [12:44] This will reduce uncertainty and provide clarity on capital requirements. [12:49] We are considering each of the elements rather than reverse engineering changes to achieve predetermined outcomes. [12:56] As a part of this proposal, we are considering approaches to differentiate mortgage risks that will benefit the entire banking system. [13:04] The Fed is also working to refine the G-SIB surcharge framework in coordination with broader capital framework reform efforts. [13:11] The surcharge must be calibrated to avoid impairing the banking sector's ability to support the broader economy. [13:18] Effective supervision must focus on factors that affect a bank's financial condition, [13:24] including material risks to bank operations and to the stability of the broader financial system, [13:30] not material issues that distract from core safety and soundness. [13:34] This requires a risk-focused, tailored approach. [13:38] Let me be clear. Those core material risks include non-financial risks where they pose threats to safety and soundness. [13:46] Strong risk management, whether in credit, liquidity, cybersecurity, or operations, remains essential, [13:52] and we will continue to examine for those risks. [13:55] Focusing our resources on material issues that historically have correlated to bank failures will create a more effective oversight system. [14:05] The CAMELS framework is also under review, as is the Bank Examiner Training Program. [14:10] Establishing clear metrics for CAMELS components ensures transparency and objectivity in our examinations, [14:17] and enhancing examiner training will improve our supervision. [14:21] The Board launched an independent third-party review of the 2023 bank failures. [14:27] This review will objectively examine why our supervision fell short, [14:32] and deliver accountable findings to further strengthen our supervisory practices. [14:37] We have also ended the practice of using reputational risk in our supervisory programs, [14:43] and we have proposed a regulation to prevent supervisory influence from leading banks to debank a customer [14:49] due to their constitutionally protected political or religious beliefs or a business engaged in legal but disfavored activities. [14:57] Banks must be free to make their own risk-based decisions to serve individuals and lawful businesses without interference. [15:05] Thank you again for the opportunity to appear before you today, and I look forward to your questions. [15:10] Thank you. Chairman Hill. [15:11] Chairman Scott, Ranking Member Warren, and members of the committee, [15:16] thank you for the opportunity to testify today. [15:18] I appreciate the opportunity to report on the FDIC's work to improve our regulatory and supervisory approach across a number of areas, [15:26] while continuing to fulfill our core mission of ensuring deposits, promoting the safety and soundness of banks, and resolving failed institutions. [15:34] Over the past year, the FDIC has made significant progress in several areas, including reforming supervision so it is less process-driven and more focused on core financial risks, [15:45] engaging in a thoughtful review of our regulations, guidance, and manuals, [15:49] re-evaluating numerous aspects of our resolution and receivership management functions, [15:55] and promoting the prudent adoption of innovative technologies in the financial services sector. [16:00] My written statement provides greater detail in each of these areas, but I would like to briefly touch on each of them. [16:07] Regarding supervision, the FDIC is actively implementing changes to our supervisory process to reorient our focus more toward financial risks [16:16] and to improve other aspects of our supervisory framework. [16:19] Among other things, we are reviewing comments received in response to our proposed rule issued with the OCC [16:26] FDIC that would define certain key terms related to supervisory criticisms, [16:30] initiated a process to review outstanding supervisory criticisms to close out those that do not align with the new approach to supervision, [16:38] are working with federal and state regulators on reforms to the CAMELS rating system, [16:44] and issued guidelines to establish an independent Office of Supervisory Appeals to adjudicate appeals of material supervisory determinations, [16:53] which we are currently in the process of standing up. [16:55] The FDIC has also been engaging in a thoughtful review of our regulations, guidance, and manuals, [17:00] and we have been making a number of improvements. [17:02] With respect to capital rules, we finalized a rule to modify the enhanced supplementary leverage ratio [17:08] to help ensure that it serves as a backstop to risk-based capital requirements rather than as a frequently binding constraint. [17:15] Our reviewing comments in response to our proposal to amend the community bank leverage ratio [17:21] to expand eligibility and encourage more community banks to opt in and are working with the Federal Reserve and OCC [17:28] to modernize risk-based capital requirements, which includes implementation of the 2017 Basel Agreement [17:34] in which we expect to issue in the coming weeks. [17:36] We have also finalized a rule to raise and index 37 regulatory asset thresholds, [17:41] and we continue to evaluate other thresholds within our regulations to be included in one or more future proposals. [17:48] We rescinded our 2024 statement of policy on bank mergers and continue to work on additional improvements [17:54] to the merger review process and analytical framework, [17:57] and we issued a final rule to significantly enhance the speed and clarity of the approval process for new branch openings. [18:04] With respect to bank resolution, among other things, we have modified our approach to resolution planning [18:11] for large insured depository institutions based on lessons learned from the 2023 bank failures [18:16] and expect to propose further changes as part of a future NPR. [18:22] We have also conducted dozens of outreach meetings with banks in their capacity as potential failed bank acquirers [18:30] as we seek to improve the bidding process and remove potential obstacles to lower cost bids, [18:35] and we have implemented a number of internal operational improvements, [18:39] including updating templates for contractual agreements which were released publicly [18:44] and on which we invited public feedback. [18:46] The FDSE has also taken a more open-minded approach with respect to banks that offer products and services [18:52] related to digital assets while maintaining our expectation that such activities are conducted in a safe and sound manner. [19:00] Specifically, we rescinded the Biden-era prior notification requirement for digital asset activities, [19:06] which served as a significant barrier to banks' participation in these activities, [19:10] withdrew from several interagency joint statements, [19:13] including one that suggested that use of public distributed ledger systems [19:17] was likely inconsistent with safe and sound banking practices, [19:21] and are actively working to implement the requirements of the Genius Act. [19:25] We issued an initial proposal to establish an application process for stablecoin issuers in December, [19:31] and expect to issue a more comprehensive proposal to implement other aspects of the law in the coming weeks. [19:37] Finally, improving workforce culture at the FDSE continues to be a top priority. [19:42] We have implemented a number of reforms to ensure that those who engage in misconduct are held accountable, [19:47] and will continue to work to ensure that the FDSE is a place where employees are proud to work. [19:52] In closing, the FDSE will continue to work to drive economic growth and access to capital, [19:57] while fulfilling our critical role in promoting a safe, sound, and resilient banking system. [20:02] Thank you for the opportunity to testify today, and I look forward to your questions. [20:06] Thank you. Chairman Gould. [20:09] Chairman Scott, Ranking Member Warren, and members of the committee, [20:12] thank you for the opportunity to appear before you. [20:15] It is an honor to discuss the OCC's work implementing the President's economic agenda [20:19] by ensuring that America's federal banking system is safe and sound, [20:23] and remains the world's most trusted, dynamic, and resilient. [20:27] Over 160 years ago, President Lincoln had a vision for a federal banking system to serve this country and its economic ideals, [20:35] and he empowered the OCC to oversee that system. [20:38] Today, the OCC supervises more than 1,000 institutions that hold $17.9 trillion in assets, [20:44] two-thirds of all U.S. commercial banking assets, and have more than $90 trillion in assets under administration. [20:50] In the years since the 2008 financial crisis, Washington too often sought to eliminate rather than manage risks, [20:57] resulting in a less relevant and diverse banking system. [21:01] Unelected bureaucrats discouraged prudent risk-taking, stifled innovation, and drove credit out of reach for small businesses and communities. [21:10] The Dodd-Frank Act, far from ending Too Big to Fail, created a moat around the very largest banks and introduced Too Small to Succeed. [21:19] Community banks with less than $1 billion in total assets have since seen their numbers cut in half. [21:25] They will benefit, perhaps the most, from a tailored framework that reflects a more rational risk tolerance. [21:32] No American should be denied access to banking products and services because of political or religious beliefs or lawful business activity. [21:41] We are implementing President Trump's executive order on guaranteeing fair banking for all Americans by, among other things, [21:47] reviewing the activities of the largest national banks and investigating complaints of alleged debanking. [21:53] We have also proposed a rule to eliminate reputation risk from supervision, a tool too often used to debank politically disfavored individuals or groups. [22:03] We are intent on ensuring banks provide access to banking products and services based on an individualized objective risk-based criteria, not politics or ideology. [22:13] The OCC's support functions have degraded in recent years, posing a risk to our ability to execute our statutory mission. [22:20] Outward signs of this decline include the hiring of a fraudulent Chief Financial Technology Officer in 2022 and an email data breach that took nearly two years to identify and halt. [22:32] These issues were the tip of the iceberg and fixing agency operations is the top priority for me. [22:37] To that end, we are working to ensure accountability for these failures and to recruit qualified and competent individuals. [22:44] The OCC is strengthening its supervision by returning to a risk-based approach rooted in law with an emphasis on examiner judgment, not arbitrary checklists. [22:54] Examiners will focus on issues that materially affect bank safety and soundness. [22:59] We are also codifying reforms to the matters requiring attention process, clarifying enforcement standards, and ensuring supervisory tools are used proportionately and predictably. [23:10] The OCC is working with our interagency partners to re-propose the Basel III capital rulemaking and evaluating opportunities to improve the Community Reinvestment Act framework. [23:20] These efforts share a common principle. Regulation should safeguard the system, not smother it. [23:26] We are also advancing BSA AML modernization and targeted burden relief for community institutions. [23:32] Taken together, these actions will make our regulatory architecture simpler, stronger, and more accountable. [23:39] Innovation has driven American finance from the telegraph to the blockchain. [23:44] The Genius Act is this Congress's effort to advance American innovation through payment stablecoins, and we look forward to comments on our proposal to implement it. [23:54] We also welcome applicants for bank charters. Their renewed interest is a return to the norm and a sign of a healthy banking system. [24:03] We will continue to evaluate applications on a case-by-case basis and in an even-handed fashion consistent with the statutory factors and our high supervisory standards. [24:14] We will also work with OCC supervised banks to clarify new ways for banks to conduct the very old business of banking and embrace new technologies like AI, ensuring these opportunities are available to all banks that wish to take advantage of them rather than a privileged few. [24:32] And we will draw inspiration from their examples as we modernize our own operations and activities through similar innovations. [24:41] The federal banking system must remain dynamic, competitive, and fair. [24:45] By providing a path for banks to embrace new technologies in a safe and sound manner, ending politicized debanking, and modernizing supervision, [24:54] we are ensuring the long-term relevance of the federal banking system. [24:58] And we are restoring the OCC's historic balancing of prudence and progress. [25:03] This is what Lincoln envisioned. [25:05] A federal banking system that serves all Americans, drives our thriving economic union, and stands ready to meet modern challenges. [25:13] Thank you. [25:14] Thank you. Chairman Huttman. [25:15] Chairman Scott. [25:18] Thank you. Member Warren. [25:19] Members of the committee. [25:20] Thank you for the invitation to discuss the National Credit Union Administration. [25:23] Last January, I was honored to be selected by the President to serve as the 13th Chair of NCUA. [25:28] I'd also like to thank SEC Chairman Atkins for my recent appointment to the Public Company Accounting Oversight Board. [25:34] I intend to continue to serve as the NCUA Chair until my successor at NCUA is confirmed by the Senate. [25:40] NCUA is here to enable access to financial services by facilitating safe, sound, and resilient credit unions. [25:45] The 4,300 credit unions in America have about $2 trillion in assets and serve more than half of adults in America. [25:53] Federal credit unions serve Americans in all 50 states. [25:55] 45 states have state charters. [25:57] Overall, the system is safe and sound, healthy levels of capital, and moderate growth. [26:01] At NCUA, one of our priorities is making sure that our own activities are fair and transparent. [26:06] I'm pleased to say that this past October, the NCUA codified our policy of no regulation by enforcement. [26:13] Now, to be clear, NCUA had a good track record regarding regulation by enforcement, so this shouldn't be viewed as a response to any particular NCUA actions. [26:21] After all, it is counterproductive for a deposit insurer to engage in regulation by enforcement against the same people that we insure. [26:30] This new policy states that enforcement action should never set policy, that enforcements don't take the place of rulemaking or guidance, [26:38] that fines and press releases aren't how the public is supposed to find out what is or what isn't a violation. [26:45] Thus, NCUA's new policy is just basic American fairness, and it's how most people think our government should operate. [26:51] For example, every senator on this committee expects that in America or any free society, [26:56] the sequence of events is supposed to be first set speed limits, then give out speeding tickets. [27:03] But with financial regulation, that has not always been the case. [27:06] We've all witnessed regulators behave in ways clearly designed to boost their annual enforcement totals. [27:11] I have personally witnessed Americans ask agencies what the rules are, and the regulator responds, [27:17] you'll have to see what enforcements we take. [27:20] That, to put it mildly, should never happen. [27:24] So I'm proud that we at Little NCUA are doing our part via our publicly available policy statement, [27:30] one that is purposely difficult to reverse in the future. [27:33] Beyond that, we're right-sizing our agency to focus on safety and soundness in a few different ways. [27:37] We're capitalizing on opportunities created by this administration to foster innovation. [27:43] As a first priority this past December, NCUA launched the Deregulation Project, [27:48] a long-term initiative aimed at meticulously reviewing and revising regulations to remove any that are obsolete, duplicative, [27:56] intended actually as guidance, or just unduly burdensome. [28:00] It's a spring cleaning of sorts. [28:02] It's something that's necessary at any monopoly government agency, [28:07] where the pile of regulations and paperwork grows ever higher with little regard for cost. [28:12] One thing I've learned in this line of work is that the only people who think compliance is easy are those that don't have to do it. [28:22] NCUA currently has 21 notices for proposed rulemaking available for comment. [28:26] Four more are closed. [28:28] Regarding the Genius Act, our proposed rule on the application process for stablecoin issuers is already public, [28:34] and the next rule on issuer standards is in process. [28:39] Credit unions should be well poised to benefit from this long overdue update to America's outdated payment ecosystem. [28:47] Beyond the consumer benefits, stablecoins are a golden opportunity to stimulate demand for U.S. Treasuries, [28:52] to keep borrowing costs manageable, and to retain the U.S. dollar's status as the global reserve currency. [28:59] We, as Americans, may have gotten so used to the dollar's global dominance that we don't all notice what an advantage we have. [29:06] But just ask the British what it's like when it's gone. [29:11] The Genius Act and dollar-denominated stablecoins are a way of striking back against those in Beijing or Moscow [29:17] who continually push for the U.S. dollar to be less important, less ubiquitous, and less useful. [29:22] Because I'm pleased to be working with my colleagues here at this table to do our part of that important effort. [29:29] My written testimony discusses the current state of credit union system and provides an overview of the state of the agency, [29:34] including our restructuring. [29:37] It also details the work we're doing to empower credit unions and foster innovation. [29:41] Thank you, Chairman Scott. I look forward to your questions. [29:43] Thank you very much. [29:46] We'll start our questions this morning with Senator Kennedy. [29:49] Thank you, Mr. Chairman, for that courtesy. [29:54] Madam Vice Chair, credit should be given when it is due. [30:06] I remember, well, three or four years ago, Chairman Powell and others were giving a report on the economy. [30:22] Inflation was 9 percent. [30:25] It was gutting the American people like a fish. [30:31] Stevie Wonder could have seen it coming. [30:40] President Biden asked, and Congress consented, I didn't, that we start spending money like it had the value of Louisiana ditch water. [30:56] Had President Biden, have we discovered life on Mars when President Biden was president? [31:07] It would have sent it money, medium. [31:10] And I remember the Federal Reserve represented by Chairman Powell sitting here and we're talking about what to do about it. [31:19] And he explained his plans. [31:22] And in so many words, I said, not going to work. [31:25] I've read the white papers. [31:29] You can get inflation down, but we're going to have to have we're going to have to suffer unemployment of seven, eight, nine percent. [31:38] It didn't happen, did it? [31:46] We have a soft landing. [31:47] And the Federal Reserve was in part responsible in the best sense of the word for that. [32:02] And we don't applaud that enough. [32:05] And we can debate whether the chairman and the vice chairman and others should raise or lower interest rates [32:12] and what we should do about quantitative easing and how many how many economists can dance on the head of the pen. [32:19] But it's a fact we have a soft landing. [32:21] Thank God for it. [32:22] Now, inflation is not down what we want, but two point seven percent is a hell of a lot better than nine percent [32:31] without having to suffer seven, eight, nine, ten, ten percent unemployment and the human misery that goes with it. [32:41] So the Fed did something right. [32:42] On the other hand, what in God's name was the Fed and some of your other agencies thinking [32:56] when you allowed banks to debank customers for reputational risk. [33:04] Are you kidding me? [33:09] Why did you allow that to happen? [33:13] Because you didn't like their politics or you didn't like the products they made. [33:25] I mean, do you think it would be fair? [33:27] Senator Warren's not here, so I hesitate to talk about it. [33:32] Senator Warren was a distinguished professor at Harvard University. [33:36] Some people don't like Harvard. Some people don't like their politics. [33:42] How could you possibly allow a bank to have the option? [33:51] I'm not saying they did it, but to debank someone like Senator Warren. [33:56] I'm using her as a hypothetical example because you didn't like her politics. [34:01] And you can say the same thing about gun manufacturers and oil and gas and anybody you don't like. [34:09] And you let the banks do it. What in God's name were you all thinking? [34:15] Madam Vice Chair. [34:18] Senator, I appreciate your concerns and I share them. [34:21] I was not the vice chair at the time the decisions were made. [34:23] I know that. [34:24] But your institution went along with it. [34:26] The banks proposed it and your institution sucked it up like a Hoover Deluxe. [34:31] In my view, debanking is never an appropriate activity. [34:35] Every American in this country should have access to financial services. [34:40] And they should not be limited from access to those services based on their political, religious beliefs, [34:48] or their engagement in a particular business that may be disfavored but is legally alive. [34:54] Let me tell you folks, this isn't over yet. [34:56] Thank you, Mr. Chair. [34:57] Senator Blunt, Rochester. [35:01] Thank you, Chairman Scott and Ranking Member Warren and to the witnesses as well. [35:11] Chair Hauptman, I'm going to start with you before I turn it over to Vice Chair Bowman. [35:19] I have a bipartisan bill with Senator Hagerty, the Credit Union Board Modernization Act. [35:27] It simply updates board meeting requirements for well-rated, established credit unions. [35:34] And it currently has 58 co-sponsors in the Senate and passed the House last year by voice vote. [35:41] Do you think this is a good idea? [35:46] Your mic, I think the microphone is. [35:48] Oh, yeah. [35:49] We're going to, obviously Congress said that years ago that every 30 days they have to have a formal board meeting. [35:56] And it's somewhat unique. [35:57] Now at NCUA, listen, we're going to do whatever Congress says. [36:00] They do find it odd that Congress has NCUA enforce a rule that they have a formal meeting every 30 days to say that this entity cannot function unless they have a formal meeting every 30 days. [36:14] And they have Congress tells NCUA to enforce that. [36:16] You know who else doesn't have a formal meeting every 30 days? [36:19] Congress or NCUA. [36:20] So they find it a little odd that, you know, they say, oh, we have to meet every 30 days. [36:26] Congress told us that. [36:27] When did they say that? [36:28] Was it during their eight week recess? [36:29] Is that when they told us? [36:30] So they find it a little odd for well-meaning ones that it's not something subject to others. [36:34] But again, we're going to do what Congress says. [36:36] I know this is one of our credit union's top priorities. [36:39] And so since they do a lot for our communities as well as our small businesses, I'm glad to see it has a lot of bipartisan support. [36:47] And we hope to see it pass here in the Senate as well. [36:50] Vice Chair Bowman, I want to turn to the Federal Reserve's exploration of the so-called skinny payment accounts. [36:57] I support payment innovation, but access to the Federal Reserve's core infrastructure is not a small privilege. [37:04] So I want to understand the risks before expanding access. [37:09] The Fed's payment systems also refer to as payment rails, including Fed ACH, Fedwire and FedNow move trillions of dollars and underpin payroll and business transactions nationwide. [37:24] Do you agree that if a bad actor were granted direct access to those systems that could increase risks related to fraud, illicit finance or operational disruption? [37:37] I think that's an accurate statement. Yes. [37:41] And since those systems operate at scale and speed, problems can spread quickly when something goes wrong. Correct? [37:50] Yes. Today, most non-bank payment firms access those rails through regulated banks, which create checkpoints, including anti-money laundering controls and supervisory oversight. [38:04] If a non-bank were granted direct access, that checkpoint would be removed. [38:10] Would you agree that increases the importance of the firm's own risk controls? [38:16] Yes. It's very important that any any firm that has access to the payment system has those controls in place. [38:23] And traditionally, direct access through what's called master account, a master account has been limited to insured, prudentially supervised banks. [38:31] The Fed has discussed limited or so-called skinny accounts that would provide access without full master account privileges. [38:39] We know that. So it's direct access increases the speed and scale of harm when something goes wrong. [38:46] Why would it make sense to grant that access under lighter guardrails than those imposed by on banks? [38:54] Senator, we have a very thorough structure in place that allows us to consider applications for access to master accounts. [39:02] This particular access that you're speaking about, the skinny master account, is contained within an RFI that we have recently issued. [39:11] Governor Waller is responsible for this area within the Federal Reserve Board. [39:17] We've issued a request for information with a proposal that would allow for feedback that we would take very seriously as we're considering whether or not to create this account or how to access it or give access to it. [39:31] If the Fed were to grant this access and later determine that the firm posed risks, does the Fed have clear authority to immediately suspend or terminate that access? [39:41] We would need to ensure that we do have that access, and yes, I believe that we do. [39:46] So you believe we do, but we just need to clarify that you do actually have the authority? [39:51] I think it would be helpful if it's not already clear, and I don't want to speak out of turn. [39:57] We would need to look into that and understand exactly what that would be. [40:01] I know in the four seconds, three that I have left, I just want to say, two, one. [40:06] I just want to say how serious this is and how we look forward to following up with you to make sure that that authority exists, and I yield back. [40:13] Thank you, ma'am. [40:14] I share your concerns. [40:15] Senator Rounds. [40:16] Thank you, Mr. Chairman. [40:18] First, thanks to all of you for appearing before us today. [40:22] Vice Chair Bowman, each of your respective agencies has taken steps to remove reputational risk as a component of federal supervision and examination to prevent law-abiding businesses from being debanked for purposes other than financial standing. [40:42] My question for you is, as current chair of the Federal Financial Institutions Examination Council, how do you make certain that frontline examiners are carrying out the regulatory policies and guidance established in Washington when evaluating financial institutions on a case-by-case basis? [41:02] And then I'm going to just say, Chair Hill, I'm asking you to do the same question as well, so go ahead, please. [41:09] Thank you, Senator Rounds. [41:10] It's very important that each prudential regulator understand exactly the direction that's provided to their examiners when they're on the ground in implementing these regulations and imposing or grading against the guidances. [41:25] So I would make that the responsibility of each one of us here at the table as prudential regulators. [41:32] I would also say that we need to ensure and we're working to ensure that our examination programs, the examiner training programs that are offered within the FFIEC structure are up-to-date and clear with directives that need to be contained within the curriculum that our examiners use when they're grading against these activities within our financial institutions. [41:54] Have you got a way to get feedback from the institutions themselves as to whether or not that advice is being followed by the examiners? [42:01] Senator, I speak to financial institutions on a regular basis. [42:05] There is a very clear feedback loop that I've created with our regulated institutions and state member banks. [42:12] So yes, when there are concerns, oftentimes I do hear them. [42:16] Chairman Hill, same question. [42:17] Thank you for the question, Senator. [42:20] And I would echo a lot of the comments from Vice Chair Bowman. [42:23] Ensuring that our examiners understand changes in our approach and that it's being applied consistently across the country is a big area of focus. [42:34] And so there are a number of things that we're doing. [42:36] We did issue specific instructions to examiners a couple months ago describing the new approach to supervision. [42:44] We are working on FAQs that we plan to release to the examination workforce soon that will be updated on a continual basis. [42:52] We have started to roll out training for examiners. [42:55] There's a lot more that needs to be done from a training perspective. [42:59] All of this is going to be an iterative process as we continue to make changes to our supervisory approach, as we roll out, for example, changes to CAMELS, as we finalize our rule on unsafe and unsound practices. [43:10] I also have been traveling to a number of our regional and field offices and talking to examiners directly. [43:16] So I think there are a lot of steps in the process, but ensuring that examiners understand the new approach and that it's being applied consistently is critical for the reforms that we're putting in place. [43:28] I think there's one other part of that, and that's a feedback loop. [43:31] Do you have a feedback loop, not from the examiners, but from the institutions themselves? [43:36] Do you have a chance to get out and meet these folks? [43:38] Yeah, similar to Vice Chair Bowman, do meet on a regular basis with financial institutions, have regular meetings with state banking associations and things of that nature. [43:49] So do hear a lot of feedback from institutions as well. [43:53] Thank you. [43:55] Governor Bowman, Vice Chair Bowman, when can we expect the new proposal for the Basel III endgame? [44:06] We're working together with the OCC and the FDIC to ensure that we can introduce that proposal before the end of March. [44:13] That's good. It's been a long time in coming. [44:16] It has been, but I think we've been working at record speed since we all became the heads of our regulated agencies. [44:23] You've been able to arrive at a consensus? [44:26] Yes. [44:28] Thank you. [44:30] Also, Vice Chair Bowman, Treasury yields serve as the benchmark for mortgages and many other forms of credit. [44:37] Thoughtful adjustments to leverage requirements, including the Tier 1 leverage ratio, could increase banks' capacity to hold treasuries and deposits, [44:46] improve market liquidity, and help ease upward pressure on interest rates, particularly during periods of stress. [44:53] My question for you, you've previously indicated that you are open to considering further leverage ratio changes once the ESLR proposal is finalized. [45:02] Do you remain open to additional targeted adjustments, including to the Tier 1 leverage ratio? [45:09] Is that a question for me? [45:12] Yes. [45:13] Yes, Senator. We're open to considering all suggestions and reviewing many aspects or all aspects. [45:20] Including the Tier 1 leverage ratio? [45:22] It's not something that we have yet looked at, but it is something that we would certainly be willing to consider reviewing. [45:28] Thank you. [45:29] Thank you, Mr. Chairman. [45:31] Absolutely. [45:33] Thank you, Member Warren. [45:34] Thank you very much, Mr. Chairman. [45:36] So, last month, the Wall Street Journal reported on its story about ties between Donald Trump and the top spy in the United Arab Emirates, [45:45] who is the President's brother and the country's national security advisor. [45:50] He is actually called Spy Shake. [45:53] A few days before Trump was sworn into office, this spy spent half a billion dollars to secretly acquire a 49% stake in Trump's crypto company. [46:05] So, what does the UAE's top spy get for his half billion dollars? [46:11] Well, the Trump administration agreed to sell the UAE our most sensitive AI chips. [46:17] Our own national security experts say the UAE and the Spy Shake's companies may be a conduit for funneling high-tech to China, [46:28] technology that strengthens China militarily. [46:32] Now, right now, Trump's crypto company, World Liberty, has a bank charter application pending with the OCC, an agency that the President controls. [46:45] Controller Gould, you run the OCC. [46:48] Did World Liberty disclose in its application that the Spy Shake's company was a principal shareholder in the proposed bank? [46:57] Senator, thank you for the question. I'm not going to discuss the specifics of any application. [47:02] Are you telling us you won't tell whether or not they disclosed it? Do you acknowledge that it is supposed to be disclosed? [47:12] Principal shareholders? [47:13] Senator, unlike the last four years of the Biden administration, under President Trump's leadership, we are actually doing what we say we'll do. [47:21] Well, let's see if you're doing what you say you will do. Like all applicants for a bank charter, the OCC regulations require world liberty to disclose all principal shareholders, [47:34] which are persons with at least a 10% direct or indirect stake in the proposed bank. [47:40] Those insiders must file a biographical and financial report with the agency. [47:46] Failure to do so would be grounds for dismissal of the application. [47:51] Evidently, you have not dismissed the application, so I assume the disclosure was made. [47:57] Will you show Chairman Scott and me an unredacted application so that we can see that for ourselves and see that you are, in fact, following the law? [48:09] Senator, the only thing to which I will commit is following our established procedures, which are outlined in the regulations that you provided, as well as the 131 pages of the comptroller's licensing manual. [48:18] We have oversight here. I would like to see, in camera, it is non-public, I would like to see that, along with Chairman Scott, [48:28] I would like to see that application just to ascertain that the appropriate disclosures have been made. Will you commit to doing that? [48:35] Senator, I will be happy to entertain your request and discuss with my team and make sure that we're doing and affording you the same privileges that we have afforded past administrations. [48:44] I don't know that anyone's ever had to ask that before because I don't think any president has ever had a pending bank application before. [48:53] Now, President Trump's crypto company is now at the center of perhaps the most disgraceful presidential corruption scandal in U.S. history. [49:03] An American president who sells out our national security to make money for himself, and if you grant world liberty a bank charter, you will be a party to that. [49:13] So, Controller Gould, given the clear national security risks posed by UAE ownership of a U.S. bank, President Trump's huge financial conflicts that we've just talked about, [49:26] and your own conflict, given that you serve as the pleasure of that same president, will you deny or at least delay review of world liberties application? [49:39] Senator, consistent with my statutory obligations, we will process that application as we process all applications. [49:46] And I would note that the only political pressure I have felt from any part of the United States government, Senator, is from you. [49:53] Well, it is pressure to follow the law. If you follow the law, you will reject the president's application. [50:01] As soon as you approve that application, and we all know you're going to approve it, you go from being a cheerleader for President Trump to an accomplice in his corruption. [50:12] Now, let me see if I can just get to one other problem, and that is not just doing Trump's bidding, but also doing Wall Street's bidding. [50:20] We know, Vice Chair Bowman, that reducing capital cushions at mega banks increases the likelihood of crashes and taxpayer bailouts. [50:31] I did some research. Turns out that your rulemaking would reduce required capital at the largest banks by more than $200 billion, or 23% for the big bank companies. [50:44] I will submit a question for the record so that I don't go over, but this is entirely contrary to your own comments that you would not put our nation at risk. [50:55] You are doing so. [50:56] Senator Moreno. [50:57] Thank you, Mr. Chairman. [51:00] Mr. Gould, does Citibank present a national security threat to the United States of America? [51:05] Senator, I won't comment on individual banks, but I'm not aware of any of our banks presenting, quote, a national security threat. [51:14] But nor am I an expert in national security. [51:16] We, of course, work with colleagues across the government in assessing those types of things. [51:20] But they do have 5% ownership from the UAE. [51:23] Sir, I don't know the exact ownership, but if you say so, I'm sure that's correct. [51:27] Okay. [51:28] Just wanted to clarify that. [51:29] Shifting gears real quick, maybe ask the four of you really quickly, starting with you, Mr. Hill, going down the line. [51:36] Have you seen massive deposit flight from our banks? [51:39] No, sir. [51:41] No, sir. [51:44] I have not. [51:45] No, sir. [51:46] Credit unions? [51:47] No, no. [51:48] Okay. [51:49] And the Genius Act passed in August. [51:50] And have the fact that some institutions offering rewards on stable coins, does that pose an existential threat to the banking system? [52:01] Sir Hill? [52:03] I know this is a pending debate before Congress, so won't wade into that debate. [52:08] But community banks and large banks alike continue to serve their customers and their communities well. [52:13] So you're not feeling an existential threat to the system now? [52:16] Well, again, I don't want to wade into the legislative debate, but banks continue to be performing quite well. [52:24] Okay. [52:25] Ms. Bowman? [52:28] I agree with my colleague, Chairman Hill. [52:31] Okay. [52:32] Mr. Bowman? [52:33] Senator, I know there have been a range of studies purporting to show a range of outcomes around deposit flight. [52:40] I, for one, cannot predict what would happen. [52:43] But what I can, I think, say with some certainty is that any significant deposit flight or material deposit flight would not go unnoticed, certainly by me, by you and others, elected officials of this committee. [52:56] And if there were to be significant deposit flight, I believe that I and other federal banking agency regulators would take steps, since that would rise to and implicate safety and soundness concerns for the banking system. [53:09] Thank you. [53:11] Mr. Bowman? [53:12] As of now, there's nothing significant happening with deposit flight, I'll say that, and that stable coins, as a general matter, anything that disincentivizes holding and using dollar stable coins would run counter to Congress's interests. [53:25] The more people who use dollar stable coins, the lower borrowing rates are for everyone, because they're supposed to be. [53:31] That's what Congress wanted. [53:32] They're supposed to be dollar buying machines. [53:35] So as a general matter, anything that disincentivizes people to hold stable coins would be negative for Congress's purposes there. [53:43] Okay. Thank you so much. [53:44] Mr. Gould, if I could ask you, maybe from the prior line of questionings, have you seen any evidence that any of my Democrat colleagues tried to influence the debanking of law abiding systems? [53:54] During the Biden administration? [53:59] Thank you for the question, sir. [54:02] We are still going through our process of investigating the debanking activities or alleged debanking activities of the largest national banks. [54:11] It's certainly the case, I think, thanks to the good work of Chairman Hill and his disclosures around some of the instructions that the Biden era FDIC was giving to banks that they were using reputation risk to inappropriately lean on the banks. [54:30] We, of course, are taking steps by eliminating the use of reputation risk to prevent that from occurring in the future. [54:36] And I guess any of the three of you can answer if you want in order. [54:40] JPMorgan Chase last week admitted that it cut off 50 Trump family bank accounts because, quote, it needed to distance itself from President Trump and his conservative political views. [54:51] Is that is that what the law requires banks to do is feel the political winds and debank people? [55:04] Well, without without speaking about a specific bank, I'm not aware of a law that requires that. [55:09] So so your your job, just to be clear in the last 45 seconds here, your job at the OCC, your job at the Federal Reserve, your job at the FDIC is to follow the law agnostic of political views, correct? [55:22] Yes, sir. [55:23] And when political views are injected through bullying and through staffs that jump from Congress, a senator's office into a regulator and back and forth, that is the kind of undue political influence that we do not want. [55:37] Is that correct? [55:38] That is correct. And we're trying to insulate our our our banking system from that type of activity. [55:48] And in the Federal Reserve, no more important to make certain that the Federal Reserve is an independent body free of political influence, correct? [55:55] Yes. [55:57] We should be apolitical in our views and the way that we implement our financial regulations. [56:02] Just real quickly, FDIC. [56:04] Fully agree as well. [56:05] Thank you. [56:06] Thank you, Mr. Chairman. [56:07] Yes, sir. Thank you. [56:08] Senator Reid. [56:09] Well, thank you very much, Mr. Chairman. [56:10] Thank you to the witnesses for appearing today. [56:13] Mr. Gould, a condition of giving mortgages of getting a mortgage to a bank typically requires the homeowners set up an escrow account and pre-fund that account with a year's worth of insurance and property taxes. [56:27] And laws in at least a dozen states, including Rhode Island, my state require banks to pay consumers interest on these balances. [56:35] And this is real money for my consumers. [56:38] But the OCC has proposed to exempt the biggest national banks, all national banks literally from these state laws. [56:47] And that would impose, I think, a cost on many consumers. [56:54] It would save money for the banks. [56:55] But will you conduct analysis of the impact on consumers in terms of the course they must pay? [57:03] It's in the line of affordability. [57:06] Well, Senator, thank you very much for the question. [57:10] As you know, one of the reasons for the OCC's existence per then-Treasurer Secretary Salmon Chase and President Lincoln is to establish nationwide markets. [57:20] And the hallmark of the OCC is federal preemption. [57:24] Of course, that is not just a prerogative of national banks, but thanks to legislation passed in 1997 by Congress, it also extends to state banks. [57:32] And so our focus is ensuring the general principle that states do not have the ability to regulate national banks. [57:42] That is inconsistent with the whole reason for the OCC, inconsistent with decades and decades and decades of Supreme Court opinion. [57:50] And that is why we weighed in that manner, sir. [57:53] And it should come as no surprise to anyone that that is the OCC's views. [57:57] It has long been the OCC's views on that specific issue and beyond, sir. [58:01] My question is, have you estimated the cost to consumers? [58:05] Because one of the goals, I heard a lot about this Tuesday night, was to save Americans from unnecessary costs. [58:14] And you are imposing a cost on them. [58:18] Well, sir, the analysis, I think, is not that simple because I think it also impacts the availability of mortgages in those areas, including in your home state. [58:30] So the level and degree of state interference in creating nationwide mortgage markets will actually interfere with the availability and the cost of mortgages going forward. [58:43] So we are very intent on ensuring that there is a nationwide mortgage market. [58:46] Interesting, because the law has been on the books in Rhode Island for 50 years. [58:52] And it is absurd to claim it will affect access to mortgage credit. [58:57] Mortgages are cheaper in Rhode Island than they are nationwide. [59:01] According to the bankrate.com, current mortgage rates in Rhode Island are 5.79% for a 30-year fixed rate. [59:08] And the national average is 6.56%. [59:11] So the Rhode Island law has no impact. [59:14] In fact, it has presumably a positive impact on mortgage rates. [59:19] So that is not, I think, an appropriate response. [59:22] Let me turn to both Ms. Bowman, Chair Bowman, and Mr. Gould. [59:29] I think you both agree that regulators must penalize banks when they violate the law and that these violations occur constantly. [59:40] That is what is surprising, because in the last several months, the Fed has lifted 12 consent degrees against globally systemic important banks. [59:54] This includes foreign domestic banks that have facilitated mass tax evasion, accounts with Iran, etc. [1:00:02] And then, Consumer Gold, since your confirmation, the OC has lifted two actions against systemically important banks and three actions against crypto-focused banks. [1:00:12] I don't find it plausible that suddenly these banks have become models of acceptability, etc. [1:00:20] It seems as if you are just weakening the enforcement powers. [1:00:25] Madam Bowman? [1:00:26] Well, Senator Reid, thank you for that question. [1:00:29] It's important to understand that these enforcement actions and any MRAs have been in place for a number of years, [1:00:35] and that we've been working diligently with those institutions to help them understand what condition, under what condition, [1:00:42] we would consider lifting any enforcement action or MRA. [1:00:49] And so, if we have lifted any particular actions, it's because over a long period of time, [1:00:56] those institutions have acted in a way that allowed us to understand that they have mitigated those circumstances. [1:01:02] We've verified that with their internal audit, and that has resulted in lifting particular actions. [1:01:08] Well, one consent order was imposed in 2024. [1:01:13] That's 18 months ago. [1:01:15] And that seems to be a rapid time for most of these large financial institutions to suddenly do the right thing. [1:01:22] Well, I appreciate that, and I'd like to look into that a little bit more. [1:01:25] Thank you. [1:01:26] Thank you very much. [1:01:27] Thank you. [1:01:28] Thank you, Mr. Chairman. [1:01:29] You're welcome. [1:01:30] Just to follow up on Senator Moreno's question as it relates to deposit growth or decline after the implementation of the Genius Act, [1:01:37] and my great staff did some research pretty quickly to recognize the fact that the fourth quarter, [1:01:45] we saw deposits increase even after the implementation in August. [1:01:50] And the expectation over a 12-month period from the bankers themselves is that there will be further increases in deposits. [1:01:59] So the fear of deposit flight does not seem to be realized whatsoever. [1:02:04] So that really, from my perspective, is good news because what Kyle made a really good point that, in fact, everything that encourages more dollar use is not only good for the economy, [1:02:17] it's good for our reserve currency status, and the world is something we should all lean into. [1:02:23] So I think that's really important. [1:02:25] I'd also like to note that Chairwoman Bowman has done a really good job, and I'm excited, frankly, about the opportunity to see a reproposal on Basel endgame by the end of March, [1:02:38] which feels very, very soon, and I am thankful that the four of you all have been working together in a collaborative fashion to bring to us and, frankly, to the market new information. [1:02:50] Because capital has been increasing for the last several years, and we've always heard over and over again, [1:02:56] we have about what we need, but then it goes up some more. [1:02:59] And then we have about what we need, and then it goes up some more. [1:03:01] And so my hope is that we'll have a real strong Basel III endgame proposal, [1:03:07] and that the market will celebrate it. [1:03:09] I know that I will celebrate any changes in the right direction from my perspective, so that's great news. [1:03:14] I think we must ensure that capital requirements do not prevent families from accessing the credit they need to buy a home, [1:03:20] as we all are very aware of the fact that the average age for a first-time home buyer is at 40 years old, [1:03:26] and that is devastating to so many Americans. [1:03:30] For so many of us, the American dream we see in our future as we are growing up is home ownership. [1:03:39] Home ownership is the equity position that we really want in America, and everything we can do to make that available and accessible for those who are credit worthy, [1:03:47] I think we're heading in the right direction. [1:03:49] And so we have worked on this committee in a bipartisan fashion on the road to housing legislation that passed through this committee unanimously and through the Senate unanimously. [1:04:00] The road to housing is meant to expand housing supply, but to help spur demand at the same time. [1:04:06] Can you elaborate, Chairwoman, on any efforts that you see? [1:04:10] You talked about making it easier for community banks to get back into the mortgage business. [1:04:15] I'd love to hear you elaborate on that topic a little bit more. [1:04:18] Thank you, Senator Scott. [1:04:20] As you know, my initial banking experience was as a community banker in my family's over 120-year-old community bank. [1:04:28] So one of our core businesses was real estate lending for consumers. [1:04:32] And as a result of the Dodd-Frank regulations and the CFPB regulations that were also put in place, [1:04:39] it became very difficult for us to change the way that we did real estate lending [1:04:45] to ensure that we were in compliance. [1:04:47] I heard, as I was the bank commissioner in Kansas, similar stories across the country from other bank commissioners as well, [1:04:54] that many community banks had exited that business. [1:04:57] And it is certainly devastating for consumers in those areas to not have a relationship with their lender. [1:05:06] So we were very focused, as we were thinking about the Basel approach, [1:05:11] in ways that we could right-size and recalibrate the approach for residential mortgage lending [1:05:17] so that we could encourage the banks to get back into the mortgage business [1:05:21] since it had nearly, you know, significantly shifted to the non-bank mortgage origination space. [1:05:29] So I gave a speech about that last week. [1:05:31] Yes. [1:05:32] I think that's what you're referring to. [1:05:33] Indeed. [1:05:34] I think there are other areas that need to be addressed as well. [1:05:36] And I think they're part of, as I mentioned in that speech, [1:05:38] CFPB regulations that put onerous requirements and large fines on banks [1:05:45] for making mistakes in mortgage applications and things like that. [1:05:48] So I think it's important that we think about this in a more broad manner [1:05:52] and holistically as we approach thinking about banks getting back into the mortgage space. [1:05:57] I appreciate that. [1:05:58] I'd like to hold all senators, including myself, to a five-minute threshold [1:06:03] so that we can make sure everybody gets the opportunity to ask questions. [1:06:06] So I'll ask a question anyways. [1:06:10] So something like a public hypocrisy. [1:06:17] You both, Chairwoman and Chairman Hill, you both have done a really good job on the indexing issue [1:06:25] that I'm very interested in as we think about systemic risk. [1:06:28] I hope that we recognize that as our institutions get larger, [1:06:32] that systemic risk should be indexed to reflect reality in our economy. [1:06:36] Can I count on both of you to continue your work on the indexing conversation? [1:06:41] Absolutely. [1:06:42] Senator, we are engaging very deeply in this space [1:06:47] and appreciated your comments about nominal GDP as the benchmark for indexing. [1:06:53] And we will be hopefully proposing some changes to the asset thresholds [1:06:57] and other areas where we can tailor the way that we approach regulation and apply it. [1:07:03] I now have to offer all the members an extra six seconds to make up for my 33. [1:07:08] Thank you. Senator Van Hollen. [1:07:11] Thank you. Thank you, Mr. Chairman. [1:07:13] Mr. Gould, you serve at the pleasure of the president, right? [1:07:18] And as Senator Warren mentioned just a few weeks ago, the Trump family crypto company, [1:07:27] World Liberty Financial, applied to you, the OCC, for a national trust bank charter. [1:07:34] Now, such a charter would help the company expand its digital asset business, right? [1:07:41] Let me ask you this. [1:07:49] Is there any precedent that you know of where a business, a company, [1:07:57] in which the president of the United States or members of his family had an interest in, [1:08:02] was applying to the OCC for approval of any kind of application? [1:08:08] Sir, I have not looked, but I will say that our licensing process, including our chartering process, [1:08:15] is designed and administered by superb professionals. [1:08:19] Mr. Gould, it was a very simple question. [1:08:22] You don't know of any precedent where the president of the United States had an interest. [1:08:25] I have not looked, sir. [1:08:26] I have not looked, sir. [1:08:27] We've looked. We couldn't find any. That's why I wanted to ask you. [1:08:30] And isn't it true that if you were to deny this application, the president could fire you? [1:08:37] Senator, if you're suggesting that the president would do anything inappropriate or illegal, then I reject that. [1:08:43] Oh, I am suggesting that, actually, because I want to talk about this company. [1:08:48] And I'm not going to ask you about the review process you will go through. [1:08:52] But I do want to ask you if you're familiar with some of the facts behind World Liberty Financial, [1:08:59] because it has been at the center of one of the most corrupt schemes that we've witnessed during this administration. [1:09:05] Here's what we know about World Liberty. [1:09:08] Four days before Donald Trump's inauguration, the brother of the leader of the UAE, [1:09:13] the brother is known as Sheikh Tahun, who's also a critical player within the UAE royal family, [1:09:19] made a $500 million investment into World Liberty. [1:09:23] Were you aware of that fact? [1:09:24] Senator, again, I have not read all the newspaper allegations, [1:09:30] but we process applications in a fair and even manner. [1:09:34] I just want to know if you're aware of that fact. [1:09:37] I guess the answer is you're not. [1:09:40] Senator, again, I would be happy to explain to you how the licensing process at the OCC works. [1:09:46] What I'm going to try to get at is whether or not if a company like World Liberty Financial has a corrupt origin, [1:09:56] whether that factors into your decision making. [1:09:59] Let me let me just ask you this question, [1:10:01] because after that $500 million investment four days before the inauguration, [1:10:07] President's son, Eric Trump, went to the UAE. [1:10:10] And at that time, one of Sheikh Tahun's companies made a $2 billion investment into World Liberty Financial, [1:10:19] which dramatically boosted the value of the Trump family business. [1:10:23] Were you aware of that fact? [1:10:24] Senator, again, like this committee, the OCC is returning to regular order. [1:10:30] And so the procedures by which and the diligence we do associated with any application for a charter is laid out and set forth in our 131 page Comptroller's licensing manual. [1:10:41] Let me just make this point, Mr. Gould. [1:10:43] Let's make this point. [1:10:44] The president came in and fired the heads of our participants in many commissions because he disagreed with them. [1:10:52] So we know what the president will do or is likely to do. [1:10:57] And I do think it's important that people understand the sort of corrupt origins of this, [1:11:01] because what happened was that after Eric Trump went to the UAE and Sheikh Tahun's company pumped $2 billion more into the Trump family crypto business, [1:11:14] President Trump went to the UAE. [1:11:15] It was one of his very first overseas stops. [1:11:18] And just before he did, he lifted the restrictions the United States has on the transfer of very high-end AI chips technology [1:11:26] that had been in place with respect to the UAE. [1:11:29] Restrictions that have been put in place because of bipartisan concern that the company that is run by Sheikh Tahun G42 would divert that technology to China. [1:11:44] I'm not going to ask you again because it sounds like you're not aware of all of this, although it's been very well documented. [1:11:53] So my question to you is, as you look at this whole scheme where it's clear that the president of the United States relaxed restrictions on the transfer of high-end technology to this UAE company, [1:12:07] right after a different UAE company run by the Sheikh Tahun invested $2 billion into world financial. [1:12:18] Does any of that, does any of that background play and factor into your decisions that you'll face? [1:12:23] Senator, so the background and factors that we considered are detailed at length in the 131-page Comptroller's Licensing Manual, [1:12:32] which I would suggest that you all read because I know you're concerned about this issue. [1:12:36] Thank you. [1:12:38] Thank you. [1:12:39] Next will be Senator Tillis, but before he goes, we're going to take a 20-second recess, so to speak, to set up a podium. [1:12:51] Let us knock it out. [1:12:56] I've always wanted to see how tall Travis was, so this is an opportunity for me to figure that out right now. [1:13:01] He is actually taller than I thought he was. [1:13:03] Senator Tillis, the floor is yours. [1:13:04] And just a parliamentary inquiry before I start using my time. [1:13:12] Yes, sir. [1:13:13] What's the purpose of the podium? [1:13:14] He has a bad back. [1:13:15] Got it. [1:13:17] I'm sure everybody was asking. [1:13:18] I just needed to know. [1:13:19] Thank you, Travis. [1:13:20] Appreciate the understanding. [1:13:21] Yeah. [1:13:23] I think we should have a stand-up desk down there, to be honest with you. [1:13:27] You all have to sit for so long. [1:13:28] I tried to cover it up, but it didn't work. [1:13:30] No, that will take away the intrigue from the press. [1:13:35] Governor Bowman, how are you doing? [1:13:37] I'm well, thank you. [1:13:39] How are you doing? [1:13:40] I'm doing pretty good. [1:13:41] Actually, I've got some questions that I may submit for the record. [1:13:47] The staff have prepared some good questions, but more of a general question for the regulators here, [1:13:52] the ones who are in play. [1:13:53] What have we learned and how we have applied those lessons to the Silicon Valley Bank? [1:13:58] What I think was an examination failure. [1:14:00] In other words, we had to have done an after action. [1:14:04] We know that there were multiple matters requiring attention and multiple matters requiring immediate attention. [1:14:11] It should have been a dashboard blaring in the C-suite and at the San Francisco Fed. [1:14:18] What have we learned from that and how are we applying things to any of the regulators who want to opine? [1:14:22] Senator, I might start. [1:14:25] Yeah. [1:14:26] If that's all right. [1:14:27] We've recently launched an external review of the Silicon Valley Bank failures using an independent third party so that we can learn from an external, independent review of the activities that were undertaken within our supervisory responsibilities and how we missed the financial vulnerabilities at Silicon Valley Bank that manifested in its failure. [1:14:51] How long ago was that? [1:14:53] The failure was 2023. [1:14:54] Yeah. [1:14:55] I wonder why it's taken so long to get to an external review. [1:14:58] I think I'm the only one that was interested in embarking upon one. [1:15:03] Why would that be? [1:15:04] I mean, it seems like there's so much. [1:15:06] We know the bank activities at SVB were very different, but why wouldn't there have been an interest long before three years later? [1:15:13] I mean, to learn from that, we should be applying the lessons now versus trying to determine them. [1:15:18] Do you agree with that? [1:15:19] I agree with that. [1:15:20] Yeah. [1:15:21] Tell me a little bit about in your position. [1:15:23] Randy Quarles had some great ideas. [1:15:25] We made some progress on some. [1:15:27] We didn't make progress on others. [1:15:28] What's your agenda if we start getting to really pressing on regulatory reform, right-sized regulations in your capacity? [1:15:35] What we're doing at the moment is focusing on material financial risks. [1:15:40] I think that's one big lesson that we learned from the failure of Silicon Valley Bank, that we were distracted by other non-material issues. [1:15:49] And there were actually 40 MRAs that were issued that were not related to financial issues for Silicon Valley Bank. [1:15:56] I think that's a demonstration that we were focused on the wrong things. [1:15:59] So we're refocusing our supervision in a laser focus on material financial risks to ensure that Silicon Valley Bank doesn't occur again. [1:16:07] This is maybe a bit outside of your lanes, but how could that not be looked as an examination and supervisory failure? [1:16:16] And if you agree with that premise, then why haven't we seen any changes in personnel for people who were responsible for that at the Fed? [1:16:26] Well, actually, we have a significant number of people who have left the organization. [1:16:32] Many of them were involved in that supervision. [1:16:35] At the highest levels? [1:16:36] At the highest levels. [1:16:37] Good to know. [1:16:38] If we could get for the record that which is publicly available, that'd be very helpful to me. [1:16:43] I've heard a few exits, but it seemed like a systemic problem there. [1:16:46] When you have systemic problems, you have to systematically go up the chain and eliminate people that I personally think were asleep at the switch. [1:16:55] I guess that last question I have for you has to do with some of the work, the primary drivers of declining bank participation and mortgage origination in servicing markets. [1:17:07] Give me your idea on how we fix that, what the drivers are and how we fix it. [1:17:11] I think the drivers have been, as I mentioned in a speech about a week ago before the ABA Community Banking Conference, the risk weightings that were applied from the Basel agreements on mortgage origination activity as well as mortgage servicing activity. [1:17:26] That pushed a lot of the activity outside of the banking system and to the outside of the regulatory perimeter. [1:17:32] So, we are proposing together with the OCC and the FDIC, one part of the Basel, Basel capital requirements. [1:17:39] Yeah. [1:17:40] We'll address those risks and better calibrate them to ensure, one, that we provide appropriate risk weighting for that to ensure that we don't have the excesses that existed during the financial crisis in aughts, but also so that we can encourage banks to get back into that business. [1:17:57] And I'm about to run out of time, so I'll submit other questions for the record, but I am working with the White House and with members on the committee on trying to resolve the final step so that we can get to a market structure or market formation bill for crypto. [1:18:16] And the one thing that I still have not been able to find much analysis on except for that which was commissioned by various stakeholders is to what extent we really do have a deposit migration risk if we don't get this right. [1:18:34] So, we may also submit some questions for the record for appropriate people to just to point me to a definitive resource. [1:18:39] I'm not one of these guys that sees a risk spread and doesn't try to figure out how to create strategies for dealing with the risk as they've been expressed by community banks and G-SIB. [1:18:50] So, I'll be looking for some help there. [1:18:52] I just need some independent assessment on there for us to be able to move forward. [1:18:57] Thank you. And Travis, I hope you get back gets better. [1:18:59] Senator Cortez, Masto. [1:19:03] Thank you. Thank you, Mr. Chairman. Thank you all, all four of you for being here. [1:19:07] Let me just start by Vice Chair Bowman by saying the mortgage servicing area that you're focused on, I'm very curious about. [1:19:15] As the Attorney General during the financial crisis, it was a failure on not all of you, but your agencies. [1:19:23] It was a failure by Countrywide. It was a failure by the banks. It was a failure all around. [1:19:27] And the people that suffered the most were the American public. [1:19:30] So, whatever you're doing on the servicing side of that, I would be happily working with you to engage to make sure we get it right. [1:19:37] I look forward to your review of the provisions that we've included and that we will publish by the end of March. [1:19:44] And I look forward to discussing that with you. [1:19:46] Thank you. So, let me talk about something that has just come up in the Wall Street Journal. [1:19:50] It recently reported that President Trump is considering requiring banks to collect citizenship information from new and existing customers. [1:19:59] The current know your customer rules do not require financial institutions to specifically gather citizenship status, nor do banks routinely share this information with the federal government. [1:20:11] So, let me start with Chair Hoppin. Let me ask you this question. [1:20:16] How will requiring people to provide a passport or birth certificate to open a bank account, how will that affect their access to a safe and reliable place to store their money? [1:20:30] Regarding citizenship, we are not there yet. I don't believe anybody's contacted me about it, but we're going to follow all the KYC stuff. [1:20:37] I tell you, when it comes to opening accounts, though, there are bigger obstacles out there on KYC. [1:20:45] The AML regime is perhaps something. [1:20:47] That's not my question. My question is right now, if we are requiring, if this is implemented like the Wall Street Journal says the administration is looking at it, [1:20:55] my question to you is how will requiring individuals to provide passports or birth certificates just to open account, [1:21:02] how is that going to impact their ability to now have safe, reliable money in a bank? [1:21:07] Will it impact the banks at all? Will it have an impact at all? Will people still put their money in? That's my question. [1:21:12] Yes, it strikes me as a hypothetical, but we'll certainly deal with anything that comes down the pike, EOs or bills or what have you. [1:21:18] All right. Mr. Gould, Comptroller Gould. [1:21:21] Well, KYC requirements already impose obligations on banks to collect any pieces of any number of... [1:21:27] No, I know that, but not birth certificates, not passports. [1:21:30] Meaning like the I-9? Are you referring to the I-9? [1:21:32] I'm talking about to open a bank account, requiring a birth certificate or a passport and then sharing that information. [1:21:39] And you're asking me any additional burden. It's very simple. [1:21:40] I think the additional burden would be minor. Yes or no, is it going to be burden? [1:21:43] Employers have to collect I-9 information, which includes that information to legally employ folks in this country. [1:21:48] And what if a senior, what if somebody doesn't have that? [1:21:50] What if somebody doesn't have a passport or birth certificate? [1:21:52] They're not going to be able to open a bank account? [1:21:54] Well, Senator, just like with an I-9, I think there are alternatives available. [1:21:58] Banks have demonstrated an ability to find ways to know their customer under an existing framework. [1:22:05] Not if they're mandated to require birth certificates and passports. [1:22:10] Are you telling me if there's a piece of legislation or supervision or requirement by the administration [1:22:15] that banks have now mandated to provide that information, they can get around it? [1:22:20] I'm responding to your question about to what extent it's a burden to collect additional information as part of the KYC process. [1:22:26] Yeah, I understand that. I sure. [1:22:30] Thank you, Senator Cortez-Masto. It was a pleasure to visit with you in your office last week. [1:22:35] Thank you for taking the time. I do want to say that this is a matter for the administration. [1:22:40] I don't think they've yet put something in place to require this and certainly we'll reserve judgment until there's something final for us to comment on. [1:22:50] Okay. Chairman Hill? [1:22:53] Likewise. I think the article made clear that unless or until something is announced by the White House, this is just speculation. [1:22:59] And so, like Vice Chair Bowman, I think we stand ready to implement new procedures if they come out. [1:23:06] But at this point, nothing has been issued. [1:23:08] Are any of you hearing from financial institutions concerns about this policy if it's implemented? [1:23:13] Curious. Has any of the institutions reached out to you and said, oh, I read this in the Wall Street Journal. [1:23:18] I'm concerned about this. Chairman? [1:23:20] No one has reached out to me on it. [1:23:22] No? [1:23:23] I have not heard anything. [1:23:24] I have not heard anything either. [1:23:26] I have not. It's usually other regulatory issues that come up. [1:23:29] Okay. Thank you. [1:23:30] So I want to talk a little bit about cyber risk and IT operational failures. [1:23:35] I am alarmed by the recent stories that more than half of US banks delayed or scaled back a key payment project in the past year due to a deficit in internal expertise. [1:23:45] Since 2023, the top nine banks faced 33 days of unplanned outages. [1:23:50] As disruptive as these outages are, there's a potential more significant risk of a cyber attack by a state actor exploiting vulnerabilities in the outdated system. [1:23:59] Does the analysis by bank examiners include an assessment of cyber vulnerability? [1:24:04] And I would just ask you to say yes or no very quickly because I'm running out of time. [1:24:07] We examine for cyber security and readiness. [1:24:11] Thank you. [1:24:12] So it should. [1:24:13] As do we. [1:24:15] Okay. [1:24:16] Same here. [1:24:17] Thank you. Thank you, Mr. Chairman. [1:24:18] Yes, ma'am. [1:24:19] Senator Britt. [1:24:20] Thank you, Mr. Chairman. [1:24:21] Thank you all for being here. [1:24:22] Certainly appreciate what you're doing to restore accountability and credibility to the agencies that you lead. [1:24:28] I'm going to start with Mr. Hill and Mr. Gold. [1:24:31] I know that your agencies are conducting rulemaking to revise the flawed MRA process. [1:24:38] I obviously wrote a letter and I appreciate your attention to this. [1:24:41] I think when we look back, we've heard a lot today about SVB, what could have happened. [1:24:46] We know there were over 35 outstanding MRAs in that case. [1:24:49] We need to make sure that when we do this that it matters and it's something that people respond to. [1:24:55] So I appreciate your efforts and I wanted to see, do you have any kind of update for me on that? [1:25:00] Sure. [1:25:02] So the comment period closed at the end of December. [1:25:05] We have been working to go through the comments. [1:25:07] We've been engaged with the OCC on moving forward with the final rule. [1:25:12] Meanwhile, we have been doing a lot internally at the FDIC. [1:25:16] We did begin a process to start going through all of our outstanding. [1:25:21] We currently call the matters requiring board attention and other supervisory recommendations. [1:25:25] To begin the process of closing out those that don't align with the new approach. [1:25:31] That's going to be a bit of an iterative process as we move to a final rule. [1:25:36] But that process is underway. [1:25:38] And meanwhile, we are working on starting to roll out training for our examiners to make sure that the full workforce understands the new approach and that it's being applied consistently across the board. [1:25:50] Okay. [1:25:51] Thank you. [1:25:52] Mr. Gold. [1:25:53] A similar approach and status at the OCC. [1:25:54] Okay. [1:25:55] Excellent. [1:25:56] I'm going to stay with you all and I'm going to add Mr. Hoffman as well. [1:25:58] You were all involved in 2155 and the narrowly tailoring that was necessary to allow financial institutions to continue to grow and expand and make sure that we are properly placing regulations. [1:26:15] And not just looking at size as some type of blunt force object, but rather, you know, looking at this and making sure that we're creating an opportunity for growth and thriving. [1:26:26] And I guess my question to you all is that, you know, would you say that a bank, maybe $100 billion bank, you know, you're looking at all the different sizes or we'll just even say a billion dollar bank should be treated differently than a $700 billion bank? [1:26:52] Size is certainly an issue. [1:26:53] But as an insurer, I can tell you, we definitely don't want them to be similar. [1:26:57] As an insurer, you want very different business models. [1:27:00] Excellent. [1:27:01] Yes. [1:27:03] Okay. [1:27:04] Great. [1:27:05] Mr. Hill? [1:27:06] Certainly. [1:27:07] Excellent. [1:27:08] As you know, we continue to see these banks grow and evolve and we want to make sure that we modernize these regulations so that they include, they don't have these static thresholds that we're seeing. [1:27:18] Senator Cruz and I actually just introduced a bill on that to index the $10 billion threshold in the Durbin Amendment so that institutions that were never intended to be subject to that rule are not subject to that rule. [1:27:30] So I hope that we look at these outdated thresholds and we make sure that they make sense in today's current environment. [1:27:36] I think I heard you talk about prudential standards, Chair Scott, and so definitely agree with that as well. [1:27:42] In addition to indexing, risk weights also incredibly important to calibrate. [1:27:48] I hope you're considering all of this with your Basel III rulemaking. [1:27:52] And Vice Chair Bowman, you and I have had conversations about this. [1:27:56] As we continue though to discuss affordability and home ownership, I heard you talking with Senator Tillis about the mortgage rate risk weight. [1:28:06] And so that is something that you all have taken into consideration as you've made this Basel III more palatable and a way that we can actually absorb it. [1:28:17] Yes. [1:28:18] Okay. [1:28:19] Also, have you taken a look at hedging costs for farmers and what that happens with the agriculture community as a result of the previous administration? [1:28:29] We heard a lot about the negative impacts that that would have. [1:28:33] Have you taken that into account? [1:28:34] Senator Britt, I share your concerns about the agriculture community and their feedback on the previous proposals. [1:28:40] And yes, we have taken that feedback into consideration. [1:28:44] Wonderful. [1:28:45] And among other troubling provisions in the last administration's Basel proposal that would have reduced credit capacity around, I think, about $150 billion per year and negatively impacted GDP growth. [1:29:00] Are you all, as you revise this rule, fully considering the broader economic impact, including the price of credit and anything with regards to GDP? [1:29:12] Yes. [1:29:13] You'll see when the proposal is published that we have an extensive economic analysis that's included with the proposal. [1:29:19] Okay. [1:29:20] Everybody. [1:29:22] Yeah. [1:29:23] Thank you. [1:29:25] Appreciate it. [1:29:26] Senator Smith. [1:29:27] Thank you, Mr. Chair, Ranking Member. [1:29:28] Welcome, everybody. [1:29:29] I'd like to start with the Community Reinvestment Act, and I'll direct these questions to you, Vice Chair Bowman. [1:29:35] So the Community Reinvestment Act is a crucial tool for making sure that financial institutions are actually providing credit in communities, especially underserved communities. [1:29:45] It's so that people can afford to buy a house or can have access to credit to buy a house, small business, community development. [1:29:51] And the last time the regulations for the CRA was updated was in, I think, 1995. [1:29:57] And since then, everything is so different than it was in 1995. [1:30:02] I won't go through the whole history of the work that was done to update these regulations. [1:30:08] I think it's fair to say that in Minnesota, most financial institutions, regardless of what kind they were, said, we really do need an update to this. [1:30:18] FDIC, the Fed, and OCC finally, you know, proposed a new rule. [1:30:25] 2023 was a big deal. [1:30:27] Rule goes into effect. [1:30:28] And then the big banks filed a lawsuit challenging the rule in a district, honestly, that was favorable. [1:30:35] And your agencies decided not to defend that new rule. [1:30:38] And so now we have reverted back, as I understand it, to the 1995 regulations. [1:30:44] So, Vice Chair Bowman, can you tell us what is the status of this rescission, proposed rescission of the 2023 rule? [1:30:51] And, like, what do you see happening next here? [1:30:53] Actually, my colleague, Michael Barr, Governor Barr, is responsible for the CRA work at the Federal Reserve. [1:31:03] But I can tell you that we joined, the Federal Reserve joined with the OCC and FDIC in a proposal to rescind that rule and to revert back to the 1995, the existing regulations at the time. [1:31:16] I think my view on this CRA proposal is clear. [1:31:20] It was overly broad and excessively burdensome, especially for community banks. [1:31:25] It would have treated a $2 billion bank in the same way that a $2 trillion bank was required to comply. [1:31:31] So I was not able to support it when it was introduced in the last administration. [1:31:37] But so my question is, like, so what happens now? [1:31:39] So right now we are back to these 30-year-old regulations that predates online banking. [1:31:45] Is that the best that we can do or where do we go from here? [1:31:48] I think there have been a number of efforts to modernize the CRA. [1:31:52] The OCC tried during the Trump administration. [1:31:55] It was rescinded by his successor. [1:31:58] This rule was, as I said, clearly overly broad and violated the law in many areas [1:32:05] and would have created excessive burden for community institutions in particular. [1:32:11] So I think that it's an important aspect. [1:32:14] And serving the community and providing access to financial services is critically important. [1:32:19] But we have to do it in a reasonable and measured way. [1:32:23] Well, Mr. Gold, let me ask you this question. [1:32:26] The OCC has provided some guidance to simplify how banks can use the strategic plan option for their CRA performance evaluations. [1:32:34] And that includes options to make it easier for banks to submit online. [1:32:37] Kind of makes sense. [1:32:38] But at the same time, as far as I know, there's no plan to update the way that the public can provide feedback on these strategic plans. [1:32:45] I think right now it still involves bank posting notice in the back of newspapers. [1:32:49] So, Mr. Gold, could the OCC agree to post draft strategic plans on your website so that the public can review them [1:32:59] and encourage banks to post those draft plans as well online so people can see them? [1:33:04] I'd be happy to explore that with my legal team. [1:33:06] Just to add to the vice chair's points, we now have two successive administrations from different parties that have tried and failed to update, as you say, [1:33:16] the 1995 regulatory framework, which, as you correctly note, is outdated. [1:33:23] But we've got two successive administrations that have tried and failed. [1:33:26] One of the things we are trying to do with the OCC, as you point out, is we are trying through the examination process [1:33:32] and through, for example, introducing kind of creative ideas like a CRA simplified strategic plan [1:33:38] that mesh with the current regulatory framework to find ways to target and make more effective CRA compliance, [1:33:45] particularly for, again, as the vice chairman noted, for community banks. [1:33:48] Well, you know, I'm a strong supporter of community banks and I want to make sure that they aren't overly burdened as well. [1:33:54] I think that I just would, I'm strong, I'd like you to get back to me on this question of whether we can at least make it possible [1:34:01] so that people who want to know what these draft strategic plans are can find them without having to go through a bunch of, [1:34:08] that would be a pretty simple thing to do to modernize how information can be provided. [1:34:12] So I'll follow up with you on that to make sure that we can at least make that a bit of headway. [1:34:17] You know, I, my view is that this Community Reinvestment Act is a really important way to make sure that we address one of the underlying challenges [1:34:25] that a lot of people have, which is they don't have good access to lending. [1:34:28] And so I would ask that we can work to make some headway on this. [1:34:32] Thank you, Mr. Chair. [1:34:34] Senator Hagerty. [1:34:35] Thank you, Mr. Chairman. [1:34:36] I'll start with you, Vice Chair Bowman, on one of my favorite topics. [1:34:40] The BASEL committee, it's headquartered in Europe, as we know, and it's dominated by European regulators. [1:34:46] Uh, the European commissioner commission has former representation on the committee. [1:34:50] The United States does not. [1:34:53] Thinking about what that means? [1:34:54] It means that we allow BASEL standards to be treated as constraints on U.S. regulators. [1:34:57] U.S. regulators. And if we allow that, I think we're effectively outsourcing our regulatory [1:35:01] responsibilities to the Europeans. We're allowing foreign bureaucrats to dictate the rules that [1:35:07] govern American banks, American credit markets, and ultimately the American economy. So Governor [1:35:13] Bowman, I'd like to ask you, as you approach the Basel implementation, what governance is in place [1:35:18] right now to make certain that our financial regulation represents the views of the United [1:35:21] States? That's an excellent question, Senator Haggerty, and I appreciate that you've brought [1:35:26] this up in this environment especially. As you know, the Basel Committee operates as a member-driven [1:35:32] international standard-setting body for banks. It was created in 1930 as a way to manage World [1:35:39] War I reparations, so it's long outlived its original intent. Its legitimacy, in my mind, [1:35:46] depends on transparent governance and balanced institutional representation among its participants [1:35:52] and the participating jurisdictions. Public confidence in global standards is achieved [1:35:57] only when they are established through transparent processes and when no single jurisdiction dominates [1:36:03] how these standards are written and how they're implemented. We have long had growing governance [1:36:08] concerns about the Basel Committee in the last several years especially, but actions have been [1:36:14] taken that are inconsistent with its public charter and its internal organizational rules. We've observed [1:36:20] a growing concentration and reduced rotation of leadership across jurisdictions despite the [1:36:26] committee's own standard of geographic and institutional balance. So these are a number of things that I've [1:36:31] brought to the attention of the Basel leadership and discussions that we have that are ongoing to ensure [1:36:37] that there is representation since the U.S. has the largest number of banks that are active in the global community [1:36:45] and these are the ones that are targeted for oversight by the Basel Committee. [1:36:50] Yeah, indeed. I think American banks should actually be, that the banking rules for our banks should be [1:36:56] constructed here by the American Congress, not outsourced to some bureaucratic committee in Basel. [1:37:01] Turn now to liquidity. If you think about the liquidity requirements in the United States, [1:37:08] they've become increasingly rigid and increasingly overly prescriptive. The assumption of omniscience [1:37:13] is worrisome as it incentivizes banks with a dramatically wide range of institutional risk [1:37:18] to adopt this one-size-fits-all type of framework. I'm concerned that we have forced an outsourcing of what used to be [1:37:24] and should be a thoughtful and bank-specific approach. Our right-sizing of these rules can meaningfully improve [1:37:30] financial stability and expand credit availability to American households. So Governor Bowman, can you explain why this is [1:37:36] important and why you commit to advancing meaningful liquidity reform? [1:37:40] There are a number of reasons that we need to revisit our liquidity rules and that's something [1:37:45] that we are working on currently and we'll be doing that within an inter-agency construct. [1:37:50] We look forward to thinking deeply about the importance of the discount window and other areas of liquidity [1:37:57] that we can enhance and ensure that they're calibrated appropriately. [1:38:02] Got it. Chairman Hill, Comptroller Gould, I presume you also would agree that we need to work on liquidity. [1:38:07] I appreciate that commitment. Yes, sir. I'd like to turn to you now, Comptroller Gould. [1:38:14] My bill, the Genius Act, was signed by President Trump recently. It directs the OCC to play an integral role [1:38:20] in establishing the regulatory and supervisory framework for payment-stable coins. [1:38:24] Do you feel that there are any additional tools that you would need that aren't granted through the Genius Act, [1:38:30] tools that you would need to build and enact the framework? [1:38:32] Sir, we proposed in large measure our piece of the Genius Act implementation yesterday. [1:38:41] We are very excited to have hit that milestone and we look forward to comments on it. [1:38:47] But at this point, I'm not aware that we need additional tools, but of course, we have put out a proposal [1:38:53] and so we welcome feedback from, obviously, the members of this committee that were the authors of the law [1:38:59] and the public at large, too. [1:39:02] So throughout the proposal and comment process, if we feel like we need something else, [1:39:08] we would, of course, alert you all. [1:39:10] One thing I'd want to make sure is that you have the tools, [1:39:15] that your existing authorities are actually sufficient for you to assess any risk to potential shifts [1:39:20] of bank deposits that would take that outside of the banking system. [1:39:23] Yes, sir. [1:39:24] And again, in the proposal, which I would emphasize is just a proposal, [1:39:29] and I'm sure it can be improved and will be improved, [1:39:31] but I believe that we have introduced and proposed measures in there [1:39:35] that would address some of the concerns that we have heard throughout this process. [1:39:40] Got it. [1:39:40] Got it. [1:39:41] If I might just take 30 seconds more, Mr. Chairman. [1:39:44] Sure. [1:39:44] Just one final topic. [1:39:46] And that has to do with the work that's underway to restore de novo bank formation. [1:39:50] I think you know in the previous administration it essentially came to a halt. [1:39:54] And finally, the FDIC data released this week shows that the deposit insurance fund [1:39:58] grew another $3.7 billion in the third quarter. [1:40:00] That brings the reserve ratio even further beyond its statutory minimum. [1:40:04] And as Secretary Besson explained in the hearing room recently, [1:40:07] the case for targeted reform is clear. [1:40:09] I look forward to working with you all to implement a targeted expansion [1:40:13] of deposit insurance coverage for non-interest-bearing transaction accounts. [1:40:17] Senator Kim. [1:40:18] Thank you, Chairman. [1:40:19] Thank you to the four of you for coming on out here today. [1:40:22] Comptroller Gold, I just want to start with you. [1:40:24] You answered a number of questions about Royal Liberty Financial. [1:40:28] You referenced, you know, the review of National Bank Charter Process. [1:40:32] It's a fair process. [1:40:34] A manual about, what, 131 pages that you're citing. [1:40:37] I guess I just wanted to ask here, is there a formal policy at the OCC requiring enhanced [1:40:43] scrutiny when a foreign state official is involved that could very well undermine U.S. [1:40:49] national security priorities? [1:40:51] I just want to hear from you just what is in process and what is formal right now. [1:40:57] Sir, I think in accordance with our existing licensee policies, [1:41:03] we would pursue a risk-based approach around this. [1:41:05] So I would refer you to that. [1:41:06] I'd be happy to look at it and get back to you. [1:41:09] I know you've, I think, sent some recent letters to me on that. [1:41:13] So happy to follow up with you. [1:41:14] I would like to follow up. [1:41:15] Just from my knowledge, does the staff that reviews the National Bank Charter Process, [1:41:21] do they have top-secret security clearance and access to intelligence analysis? [1:41:27] So there are some officials within the OCC who do. [1:41:32] I would be happy to get back to you on where they sit precisely within the agency. [1:41:38] But I would note that the licensing process around charters is a kind of cross-disciplinary exercise [1:41:46] that involves not just individuals within the licensing group or chartering organization [1:41:50] and structure group, he's called, but also individuals from legal and individuals for supervision. [1:41:54] I guess I'm just trying to get a sense of does it interact with the intelligence community? [1:41:58] Like do you yourself hold a top-secret clearance? [1:42:01] I do, yes, sir. [1:42:02] Okay. [1:42:02] Well, if you don't mind, I would want to ask, you know, send you some documents to be able to review [1:42:08] given just the nature of what's here. [1:42:09] So I just ask you now, will you commit, you know, if I flag some documentation about G42 [1:42:16] about their connections that we've seen when it comes to China and technology, [1:42:21] will you commit to reviewing that intelligence? [1:42:25] If it's relevant to the licensing process, yes. [1:42:28] Okay. [1:42:28] Thank you. [1:42:29] Mr. Hill, Chairman Hill, I guess I want to just turn to you here. [1:42:33] We have had conversations about the Bank Secrecy Act, [1:42:36] talked about our mutual support for this. [1:42:39] Does that still stand? [1:42:40] Yes, sir. [1:42:41] And ensuring bank compliance with the BSA is a top supervisory priority for the FDIC. [1:42:47] Is that correct? [1:42:48] Yes. [1:42:48] We also are working hard with the Treasury Department and the other banking agencies [1:42:53] on a number of reforms to the Bank's Secrecy Act program. [1:42:58] But throughout that process, the overall objectives will remain the same. [1:43:04] The FDIC's own IG last year said, released a statement, said, quote, [1:43:09] it's important for the FDIC to ensure that it has examination processes and examiners [1:43:15] with the requisite skills to assess financial crimes and sanctions, risk posed by banks, [1:43:20] third-party affiliations. [1:43:22] Do you agree with that assessment? [1:43:24] Yes. [1:43:24] I guess I just want to ask you, when, you know, we've seen a large number of staffing cuts [1:43:30] at the FDIC, I think upwards of 1,300 employees, do you know how many of those 1,300 employees [1:43:35] terminated at FDIC worked on BSA, AML, supervisory issues? [1:43:40] I don't, but I suspect the number would be very small, but can get back to you on that. [1:43:47] If you can get back to me, because I guess what I'm just trying to figure out here is, [1:43:49] do we have more or less examiners assigned to BSA, AML now compared with a year ago before [1:43:56] the staffing cuts? [1:43:57] Do you know that off the top of your head? [1:43:58] I don't, but I would say just as a general matter, the number of reductions to safety [1:44:04] and soundness examiners, which I would include financial crimes in that broader rubric, was [1:44:10] very small. [1:44:11] That was not an area that we generally targeted for reductions. [1:44:14] Well, look, I want to make sure that we're, and I'm hoping to continue to get your support [1:44:18] to make sure we are staying strong on this, given the amount of challenges and threats [1:44:22] we face. [1:44:23] So will you commit to following up with me on that? [1:44:25] Yes. [1:44:26] Vice Chair Bowman, I just wanted to turn to you. [1:44:29] Two of your colleagues, Chair Powell and Governor Lisa Cook, are facing investigations or litigation. [1:44:35] Are you concerned about the impact that this has on the credibility of the Federal Reserve? [1:44:40] I can't comment on ongoing investigations. [1:44:42] Well, I'm not asking you to comment on the investigations. [1:44:45] I'm just asking you as a current Fed governor to opine on whether or not these investigations [1:44:50] are hurting the credibility of the Federal Reserve, an organization that you're responsible [1:44:54] for overseeing. [1:44:56] I can assure you that I think the independence of the Federal Reserve is of utmost importance, [1:45:00] but along with that independence comes the responsibility for accountability and transparency. [1:45:05] I agree with that. [1:45:06] I think it's important that there's accountability, but you will say, as you just did, the independence [1:45:11] of the Federal Reserve is important, correct? [1:45:13] It's critically important. [1:45:14] Thank you. [1:45:15] And with that, I yield back. [1:45:16] Thank you, sir. [1:45:16] Senator Ricketts. [1:45:17] Thank you very much, and thank you to all of our witnesses for being here today. [1:45:24] In Nebraska, our banking system is built around regional and community banks and credit unions, [1:45:29] not big banks. [1:45:30] And they underwrite equipment purchases for farmers, extend working capital to small manufacturers [1:45:36] and Main Street retailers. [1:45:38] For many Nebraska families, they're the institution that helps them get a mortgage or a home construction [1:45:43] loan or refinancing. [1:45:44] And these institutions know their borrowers. [1:45:49] They're personally connected to them and have a relationship-based model that continues [1:45:55] for the life of the loan. [1:45:57] So escrow questions, hardship requests, refinancing conversations are all handled locally, not at [1:46:02] some distant call center. [1:46:03] And under the current risk-based capital framework applicable to non-advanced banks, mortgage servicing [1:46:12] assets are subject to a 25% aggregate cap in the calculation of core capital. [1:46:17] The dollar-for-dollar capital charge above the 25% cap forces banks that maintain bigger mortgage [1:46:24] operations to incur severe punitive charges or sell-off MSAs, meaning that they could have [1:46:30] to cut existing valuable customer service relationships or turn away new customers in their communities. [1:46:36] Chairman Hill, how much weight should be given to the impact that capital rules may have on the ability [1:46:44] of smaller insured institutions to compete or retain servicing? [1:46:48] Senator, I think it's a major factor. [1:46:52] And as a result, it's something that the banking agencies have been looking very closely at. [1:46:57] Vice Chair Bowman spoke a couple of weeks ago and spoke very eloquently about the importance [1:47:03] of banks being able to provide those functions with their customers, and so that's something [1:47:08] that we plan to include as part of our capital proposals next month. [1:47:13] Great. [1:47:14] Well, thank you very much. [1:47:16] I appreciate that. [1:47:17] And Vice Chair Bowman, thank you for your focus on the thoughtful regulatory tailoring and your [1:47:22] engagement to revisit the Basel III endgame. [1:47:25] You've consistently emphasized that capital standards should be strong, but also appropriately [1:47:29] calibrated to the size and complexity of the institution. [1:47:32] And I know you've talked about this a little bit already, but in the case of community banks, [1:47:38] in the case of a community bank that is well capitalized under the community bank leverage [1:47:41] ratio framework, can the MSA cap be further tailored in a way that remains fully consistent [1:47:46] with safety and soundness? [1:47:49] I think once we have introduced the Basel proposal, we can certainly have a conversation about whether [1:47:54] or not it achieves the desired goal, and we'd be happy, I'm sure all three of us would be [1:47:59] happy to engage in that conversation. [1:48:01] And help me out. [1:48:02] How long do you think that before you get that proposal? [1:48:04] So we'll have it introduced before the end of March. [1:48:07] Right. [1:48:09] Ideally. [1:48:10] Great. [1:48:11] Thank you. [1:48:12] Okay. [1:48:13] Okay. [1:48:14] End of March-ish is what I heard there. [1:48:15] Okay. [1:48:16] Thank you. [1:48:17] Raising the cap for MSA helps ensure that a more orderly and liquid MSA market for all [1:48:22] participants can bring more stability in the single family mortgage marketplace, and that's [1:48:27] obviously one of the goals of our committee here is to be able to do that. [1:48:30] So thank you, Chairman Bowman, Chairman Hill, and Compt-Trevor Gold, I appreciate your engagement [1:48:34] on this issue and look forward to continuing to work with your staff on this. [1:48:39] Chairman Hill, the FDIC oversees the chartering and supervision of industrial loan companies. [1:48:45] At the end of President Trump's first term, the FDIC finalized significant revisions to [1:48:49] the ILC regulatory framework. [1:48:52] Those reforms strengthen parent company oversight and enhance reporting requirements. [1:48:56] Chairman Hill, for banks that have been chartered under those new regulations, would [1:49:00] you assess that those regulations have been serving their intended purpose and improving [1:49:06] the safety and soundness of the ILC sector? [1:49:12] Thanks for the question, Senator. [1:49:14] Historically, ILCs have generally been subject to higher supervisory standards than other IDIs, [1:49:22] and they also have typically been required to enter into agreements with their parent companies [1:49:26] that require the parents to serve as a source of strength. [1:49:31] The 2020 rule codified some of those historical practices from the FDIC, and it's a mechanism [1:49:41] to ensure that ILCs, which are not subject to consolidated supervision at the parent level, [1:49:48] are still operating in a safe and sound manner. [1:49:51] All right. [1:49:53] So you think that the reforms are having their intended effect? [1:49:57] Yes. [1:49:58] Thank you very much, Chairman Hill. [1:50:00] Thank you, Mr. Chairman. [1:50:01] I yield back. [1:50:02] Thank you. [1:50:03] Senator Warnock. [1:50:05] Thank you very much, Chair Scott. [1:50:07] We are one year out from the Trump administration gutting the Consumer Financial Protection Bureau, [1:50:12] the CFPB. [1:50:13] The CFPB is the only federal agency solely dedicated to protecting Americans' wallets and pocketbooks [1:50:21] from scammers and predatory companies and financial services. [1:50:24] But the CFPB is not just a consumer watchdog, it's also responsible for enforcing consumer [1:50:32] protection laws for banks that have more than $10 billion in assets. [1:50:37] This includes the biggest retail banks in the country, including banks that millions of [1:50:42] Americans rely on, like Wells Fargo or Bank of America. [1:50:46] Vice Chair Bowman, yes or no? [1:50:49] Does the Federal Reserve supervise community banks, banks with less than $10 billion in [1:50:57] assets for compliance with federal consumer protection laws? [1:51:00] Yes, Senator. [1:51:01] We do. [1:51:02] Up until last spring, I was responsible for overseeing those activities. [1:51:06] The answer is yes. [1:51:07] I'm very familiar with them, yes. [1:51:09] What about the biggest banks, banks like Wells Fargo or Bank of America, banks with more [1:51:13] than $10 billion? [1:51:14] Yes. [1:51:15] There are certain consumer compliance laws that the prudential regulators are responsible [1:51:19] for enforcing among their institutions. [1:51:22] Do you agree that by law, the CFPB is supposed to supervise these banks and ensure Americans [1:51:28] aren't being ripped off? [1:51:29] It is a shared supervision for some of these laws, but primarily for the CFPB. [1:51:34] But the CFPB plays an important role, right? [1:51:35] It does. [1:51:36] And it's been greatly scaled back under the Trump administration. [1:51:39] In fact, the Trump administration has tried to fire about 1,500 employees from the CFPB, [1:51:47] reducing the headcount by roughly 80 percent. [1:51:49] So I'm very concerned about this assault on the CFPB that, in my view, has resulted in [1:51:57] a kind of lopsided enforcement. [1:52:01] In addition to that, the administration's latest move, it seems to me, is to humiliate [1:52:09] the remaining bank supervisory staff. [1:52:13] In November, CFPB acting director Russell Vogt announced that all CFPB examiners will be [1:52:23] reading a, quote, humility pledge, a humility pledge before every examination. [1:52:33] Chair Hill, yes or no, do FDIC examiners recite a humility pledge before any bank examination? [1:52:46] Yes or no? [1:52:48] Senator. [1:52:49] Yes or no? [1:52:50] We expect our examiners to treat all institutions with professionalism. [1:52:54] Sir, I asked you a simple question. [1:52:56] Yes or no? [1:52:57] Do you recite a humility pledge before every bank examination? [1:53:00] No, Senator. [1:53:01] Thank you. [1:53:02] Comptroller Gould, same question. [1:53:04] Yes or no? [1:53:06] Do OCC examiners recite a humility pledge before they examine a bank? [1:53:13] No. [1:53:14] Thank you. [1:53:15] Vice Chair Bowman, same question for the Fed. [1:53:17] I'm not familiar with the humility pledge that you're referring to, but it's not something [1:53:24] that our examiners are- [1:53:25] Answer, so the answer is no. [1:53:26] Thanks. [1:53:27] And Chairman Hopman, same question for the NCUA. [1:53:33] I'm sorry, sir. [1:53:34] Can you speak into the mic? [1:53:35] Sorry about that. [1:53:36] I'm not aware of anything called a humility pledge. [1:53:37] A humility pledge. [1:53:38] In our documents. [1:53:39] It's news to you. [1:53:41] So keep in mind, this committee has never gotten a chance to question acting direct to vote [1:53:47] on any of these radical changes he's instituted to eliminate key consumer protections. [1:53:52] And to be clear, none of the four of you here today require examiners to recite a, quote, [1:54:00] humility pledge. [1:54:03] You're hearing about that in real time, many of you. [1:54:06] And so it's pretty clear to me that anyone who's watching this is only- [1:54:10] It's pretty clear to anyone who's watching this that this is intended to reduce the dignity, it seems to me, [1:54:15] of the people holding these jobs, people working to protect Americans from abusive practices. [1:54:22] And making matters worse, in January, the CFPB announced all examinations would be virtual, [1:54:27] done entirely over a computer screen. [1:54:29] This does not sound like an administration focused on protecting consumers. [1:54:33] Chair Heal, yes or no, do FDIC exams typically require an in-person component? [1:54:38] Yes or no? [1:54:39] I'm running out of time. [1:54:40] Yes, Senator. [1:54:41] Comptroller Gould, same question. [1:54:42] Do OCC typically exams, do they require an in-person component? [1:54:47] They do, but I would note during the Biden administration with the telework status [1:54:51] that we were not in banks as often as- [1:54:55] During COVID, but you require an in-person component. [1:54:58] Vice Chair Bowman, same question for the Fed. [1:55:00] I think there are- [1:55:02] Yes or no? [1:55:03] There are some that are conducted virtually and some that are done- [1:55:06] Do you require an in-person component? [1:55:08] Not necessarily. [1:55:09] Chair Holtman, same question for the NCUA. [1:55:12] We're a mix, in-person and virtually. [1:55:14] So it's ironic to me in the 10 seconds that I have left, or that the only bank regulator that aims [1:55:21] to supervise a financial institution through virtual examinations is the CFPB. [1:55:26] It's clear to me that Acting Director Vogt is working just to meet the bare minimum of the law, [1:55:31] but certainly is not trying to abide by the spirit of the law. [1:55:35] And in every way that he can, it seems to me he's trying to hobble the efforts of this- [1:55:41] of the CFPB to protect consumers. [1:55:44] Thank you very much for your testimony. [1:55:46] The Acting Chair recognizes herself for five minutes. [1:55:51] Welcome. [1:55:52] Chairman Hill, I'm going to come and visit with you about my questions personally, as opposed [1:56:00] to using this hearing time. [1:56:02] My questions will be related to how you're addressing the toxic work environment that was [1:56:10] present under the previous administration at the FDIC, if we're making progress with regard to [1:56:17] the manner in which employees are being addressed and dealt with. [1:56:23] So thank you for that. [1:56:24] I'll see you when that time rolls around. [1:56:27] So, Vice Chair Bowman, welcome. [1:56:31] As you know, this committee's been wrestling with market structure for digital assets for quite some time. [1:56:38] And I want to focus for a minute on Section 401 of the bill, which lists digital asset-related activities that banks are permitted to engage in. [1:56:53] So, is it necessary that we have explicit authority for banks to engage in digital asset activities and have it in statute? [1:57:05] Is that important, like, for economic opportunities and safety and soundness? [1:57:09] I can tell you that, in my experience at the Federal Reserve, that we had implemented, under the previous Vice Chair, requirements that hindered the ability for banks to engage in these kinds of activities. [1:57:23] We've rescinded those under my leadership. [1:57:26] So, for the duration of that ability, it could be helpful. [1:57:32] But I'd be happy to visit with you about that after I learn more about the draft. [1:57:36] Thank you. [1:57:37] There are three states that authorize deposits in digital assets by banks. [1:57:45] And there will be more if we can get this market structure legislation across the finish line. [1:57:51] So, I'll look forward to those conversations later. [1:57:54] Now, Vice Chair Bowman, I want to turn to a Wall Street Journal report that you disciplined Federal Reserve bank examiners after they engaged in unprofessional conduct. [1:58:07] So, I reviewed your job description, and it says, you're responsible for managing the Division of Supervision and Regulation and its employees. [1:58:21] So, isn't it literally your job to ensure that bank examiners do their job in a professional and fair way under the law? [1:58:31] Yes. [1:58:34] Well, we learned during the last – thank you. [1:58:38] We learned during the last administration that bank examiners have a lot of power, and they wield it. [1:58:44] And they had guidance that stretched their ability to wield power. [1:58:50] So, I'm glad you recognize that not even bank examiners should be above the law. [1:58:58] Now, I want to make some remarks, too, about the Federal Reserve's payment account proposal. [1:59:05] I think Governor Waller has done a really good job balancing innovation with a safe, fast, and inexpensive payment system. [1:59:17] And every time I talk about faster, cheaper, he adds safer, which I fully appreciate. [1:59:24] And now I use all three terms when I talk about it – faster, cheaper, safer. [1:59:29] So, the Bank of England, European Central Bank, and Swiss National Bank, among other countries, have offered payment-only accounts. [1:59:39] They offer them to eligible institutions, and they've done it for years. [1:59:45] So, for the U.S. to remain competitive in the payments space long-term, do we need the same type of structure? [1:59:57] Senator Lomas, that's a great question. [2:00:01] Thank you for asking it. [2:00:02] I would want to defer to Governor Waller and the work that he's doing to address some of the issues that have been raised with the structure for how we consider applications for master accounts. [2:00:14] I think the way that he's working to address this is through the introduction of a potential skinny account. [2:00:20] And we've published in RFI a request for information for a number of different questions that we've raised to ensure that should an account of this nature be offered, [2:00:32] that it consists of the appropriate safeguards and guardrails to allow for it to be a successful endeavor. [2:00:39] Well, and I want to acknowledge that we should do this, and we should do it quickly, because we're in a race with other countries to be the digital asset capital of the world. [2:00:56] And this is instrumental and important to that discussion. [2:01:01] So, I strongly support the Federal Reserve finalizing the payment account proposal, and I hope you do it as soon as possible. [2:01:09] So, I hope my colleagues on this committee will also support that. [2:01:15] Thank you very much. [2:01:16] The chair recognizes Mr. Gallego for five minutes. [2:01:20] Thank you, Madam Chair. [2:01:22] Mr. Gold, when you're considering a bank charter application, do you meet with individuals from the company applying for this charter? [2:01:29] It depends, Senator. [2:01:33] Generally speaking, certainly my OCC colleagues do on a regular basis. [2:01:37] We really couldn't do our jobs unless we actually met with applicants. [2:01:40] Okay. [2:01:41] And who do you meet normally, or who do your colleagues meet with? [2:01:45] Is it the founders, the lawyers, or someone else involved in the bank? [2:01:48] I believe it's a whole host of folks involved, depending upon, again, the needs of the OCC professionals who are processing the application, whether they have questions, et cetera. [2:01:59] Okay. [2:02:00] So, do you conduct background investigations on the company's senior officers, including those at the parent company? [2:02:05] Senator, the procedures that we employ are detailed in our comptroller's licensing manual, which is a public document. [2:02:11] And so, you know, I would refer you to that for the details of exactly the process, the timeframes, the information, and the level of review that we do. [2:02:21] Right. [2:02:22] So, to your knowledge, though, best of your knowledge, do you do background investigation on senior officers at parent companies? [2:02:28] I'm not sure what you mean by background investigations on them. [2:02:32] We certainly look into the management team and their qualifications and capabilities. [2:02:37] All of these. [2:02:38] Okay. [2:02:39] So, let me read you a quote. [2:02:40] And if there's any parents right now on C-SPAN, please maybe put cocomelan on in the meantime. [2:02:47] So, here's the quote. [2:02:49] You can literally sell shit in a can, wrapped in piss, covered in human skin, for a billion dollars, if the story's right, because people will buy it. [2:03:00] I'm not going to question the right and the wrong of all that. [2:03:03] End quote. [2:03:04] Do you know who said that? [2:03:05] Senator, I'm not familiar with that quote. [2:03:08] A gentleman named Chase Hero. [2:03:10] Do you know who that is? [2:03:13] Senator, again, I'm not familiar with the nature of the quote or the context or anything like that. [2:03:18] Do you know who I'm speaking of, who Chase Hero is? [2:03:20] I do not. [2:03:21] Okay. [2:03:22] So, Chase Hero is this gentleman here with a backward cap. [2:03:25] I'm actually probably shouldn't use the word gentleman. [2:03:27] That's an exaggeration. [2:03:29] He is with World Liberty Financial. [2:03:33] He's a co-founder of World Liberty Financial. [2:03:35] This is from their website. [2:03:38] Is this the type of thing you would ask about in a pre-filing meeting or when you conduct interviews with applicants? [2:03:43] Senator, I've heard a lot of outrageous statements made by a lot of people, including from folks on your side of the aisle, on a lot of things, Senator. [2:03:51] I will just tell you that we apply our procedures in a consistent and even-handed fashion, and you're welcome to look at them yourself. [2:03:59] I think, in particular, when there's such inflamed partisan politics being played around applications at the OCC, that it is particularly important that we follow established and longstanding procedures. [2:04:09] I mean, is it really like inflamed partisan when someone says that they are going to engage in basically fraudulent activity, and you're potentially going to be given the bank charter? [2:04:19] I mean, have you had any such meetings with people of this nature or even with this gentleman or any of the regulators you've worked for in the past? [2:04:27] Senator, I'm not going to discuss my personal meetings, but I would note that my calendar has been FOIAed, and you can take a look. [2:04:35] Okay, well, this gentleman seems to be involved with a lot of people that are fairly powerful, especially with a lot of things that will be going forward, going into the future, including Donald Trump, Eric Trump, Donald Trump Jr., Baron Trump. [2:04:49] The name sounds familiar. Let's add Steven Whitcoff, Zach Whitcoff, Alex Whitcoff, a lot of families there. [2:04:57] So I'd really urge you to take a serious look at the people who make up this company and can at least get your commitment to do background checks on all founders of the parent company, including Mr. Hero, if you haven't done it already. [2:05:09] Senator, I will commit to doing what we say in our established procedures and that we should be doing. [2:05:15] Okay, moving on. Mr. Huffman, I'm sorry, if I say that correctly? [2:05:23] It's all good. Huffman is how I say it. [2:05:25] Okay, thank you. Would you agree that data transparency is a cornerstone of effective financial regulation? [2:05:30] Data transparency? [2:05:31] Data transparency. [2:05:32] How are you defining it? [2:05:34] I mean, that's pretty much the definition of transparency and data that, you know, the consumer is allowed to have. And I'm sure some of the stuff that you're particularly have been able to publish. I could give you a further example. [2:05:46] Would you agree that consumers and researchers can see how institutions are generating fee incomes, for example? You know, that's kind of the things that people care about when trying to make decisions. [2:05:56] I think consumers are aware that entities have to have money coming in and out. Are you referring to the money coming in via various things? [2:06:04] Well, it's specifically talking about the NCUA, which has historically required credit unions to report their fee incomes data precisely because it serves the public interest. [2:06:14] But last year, under your direction, NCUA stopped publicly publishing income generated by overdraft insufficient fund fees. Is there a reason why that happened? [2:06:23] It had never been required in 55 years of NCUA. It only existed for one year. So for one year out of 55, that existed for four quarters, quarterly reports to break out the income. [2:06:35] And but what is the logic then why you changed it? So I guess the only it was already there in the larger of total fee income. [2:06:43] There's lots of ways to break that down further. You could break down the same as publicly traded companies. [2:06:48] You could always break down and get more. But it was primarily done for the benefit of political benefit to try to change those fees. [2:06:56] You represent an area that your government's charge for like parking tickets and that kind of thing way higher than anybody does on overdraft, [2:07:04] which is one of the reasons people use overdraft is to pay government fees. [2:07:07] But I used to say, for example, when dealing with, you know, dealing with some of the government, especially local governments in Arizona actually can break down their fees. [2:07:15] They actually have to have it on their annual. My point is the reason somebody might pay a $30 overdraft is to avoid an Arizona fine. [2:07:21] NCUA still collects this data internally. The gentleman's time has expired. [2:07:26] Yeah, the examiner can always see it. [2:07:28] There's a vote open. And have you voted, sir? I haven't. Have you voted? You've not? OK. [2:07:39] Senator also Brooks, have you voted? OK. I'm I'm going to call on you and then we can wrap things up so I can go vote, too. [2:07:49] Thank you very much. Thank you so much. Senator also Brooks is recognized. [2:07:53] I want to circle back to the issue of stable coin rewards. [2:07:58] I think many of us agree that there is a really important role for rewards and incentives to encourage stable coin adoption. [2:08:06] We all agree with that. We support it. We're for that. [2:08:09] We want to encourage innovation. And that's why we've been at the table. I've been at the table all along. [2:08:14] I think this is a really important process. Our concern is offering a bank like product like a bank deposit without any of the protections or regulations that accompany that product and what that could mean for future deposit flight. [2:08:29] First, I want to echo Senator Tillis's comments in requesting an independent analysis on future deposit flight. [2:08:35] But in the interim, I think that we have to take these concerns and concerns of community banks especially seriously. [2:08:42] So we're early. We're also we're early in the Genius Act implementation process. [2:08:46] And so on that note, Mr. Gould, I appreciated your comments on monitoring deposit flight. [2:08:51] But based on your comments, any action that you take to combat possible deposit flight would only be after it is already occurred. [2:09:02] Is that correct? No, that's not correct. [2:09:06] If you look in our proposal, which we released yesterday, we have hardwired a number of things into our proposal that we believe would tend to reduce the probability of deposit flight. [2:09:20] Or should it occur result in some of those deposits? [2:09:24] No, I'm speaking specifically about the analysis. [2:09:26] The analysis that you'd like to conduct would be after the deposit flight had already occurred. [2:09:31] That's correct. [2:09:32] No, I was just noting that if deposit flight were to occur, I think we would notice it. [2:09:37] Okay. [2:09:38] Meaning it wouldn't occur under cover of darkness where no one would see it and fail to react to it. [2:09:42] All right. [2:09:44] Now, Mr. Bowman, I led several of my colleagues in a letter requesting that the National Economic Council Director Kevin Hassett formally retract his suggestion that Federal Reserve staff should be, quote, [2:09:58] disciplined for an independent report which concluded that tariffs are harming American businesses and consumers. [2:10:05] And so I'm very concerned about the President's advisors interfering in the Fed's work in hiding economic data from the American people. [2:10:14] Do you have any reason to dispute the Fed's report concluding that tariff prices increase or that the tariff price increases are being passed down to consumers? [2:10:25] Senator, I appreciate the question. [2:10:28] I would say that I'm not familiar with the report that you're referring to. [2:10:31] But there have been a number of reports that come to different conclusions about many different subjects, including this one. [2:10:39] I would also say that I wouldn't comment on the comments of my colleagues or those of the administration. [2:10:45] Okay. [2:10:46] So you do not dispute the report, the conclusion. [2:10:50] You agree or you disagree with the conclusion? [2:10:52] I'm not familiar with that report. [2:10:53] I haven't read it. [2:10:54] Okay. [2:10:55] Now, I also have, I want to ask a question regarding deposit insurance. [2:11:00] Mr. Hill, it's good to see you again. [2:11:02] And I want to just mention that the last time you were here, we spoke about deposit insurance. [2:11:07] And as you know, I'm partnering with Senator Hagerty on bipartisan legislation to raise the deposit insurance cap for business checking accounts in a narrow, targeted manner to boost confidence among businesses and consumers. [2:11:22] And as we solicit stakeholder feedback, we want to make sure that this is a data driven reform that does not raise premium costs across the banking sector. [2:11:31] When you spoke, you last testified that a targeted expansion of deposit insurance would likely not increase deposit insurance premiums on small banks and that any increased premiums on large banks would be small or immaterial. [2:11:44] Secretary Besson indicated he agreed and so would you just say whether or not you still agree that the, that a limited increase is likely not to raise premium costs. [2:11:56] Um, I, I, I think what I said last time was it is possible that it would not result in increases. [2:12:03] Um, I think there's a few pieces to that to think about, um, the first piece is if, if the FDIC did not make any changes to its assessments, um, an increase in deposit insurance would not have any impact on small banks. [2:12:18] It would have a small impact on large banks, just based on the way that the current assessment formulas work. [2:12:24] Um, but we would also need to think about the potential impact on the reserve ratio. [2:12:29] Um, from a, just a mechanical standpoint, if you increase the amount of insured deposits in the system based on the way that the reserve ratio was currently defined, that would result in a decrease in the reserve ratio. [2:12:42] The small impact is what you is possible, but a small, small impact. [2:12:46] Let me just go. [2:12:47] Cause I have one final thing I'd like to get out echoing concerns from my colleagues. [2:12:51] Um, I just want to be super clear here. [2:12:54] Do any of you and your four agencies believe that financial regulators or banks should be given the responsibility of enforcing immigration law? [2:13:05] And if you do, can you raise your hand? [2:13:07] All right. [2:13:09] I'd like the record to reflect that no hands were raised. [2:13:11] Senator. [2:13:12] Um, no, actually that, that was it. [2:13:15] Thank you so much. [2:13:16] I have any further comments. [2:13:23] Okay. [2:13:25] Thank you. [2:13:26] So, um, for senators who wish to submit questions for the hearing record, those questions are due one week from today, Thursday, March 4th. [2:13:36] Um, and for our witnesses, uh, you have 45 days from that date to submit your responses to the questions you receive for the record. [2:13:46] Uh, I want to thank our witnesses for, um, attending this hearing today, uh, and for bright providing very clear, uh, responses to the questions you received. [2:13:58] We thank you kindly for your service to our country. [2:14:01] And, uh, this committee is now adjourned.