Hearing Entitled: Dodd-Frank Turns 15: Lessons Learned and the Road Ahead

Chairman French Hill (R-AR)SPEAKER_16

Committee on Financial Services will come to order. Without objection, the chair is authorized to declare a recess at any time. Today's hearing is entitled, "Dodd-Frank Turns 15: Lessons Learned and the Road Ahead." Without objection, all members will have 5 legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for 4 minutes for an opening statement. Good morning. Today's hearing is focused on reviewing Dodd-Frank's real-world impact and its unintended consequences over the past 15 years. Our colleagues across the aisle often criticize today's banking system, but rarely do they acknowledge that it's a direct result of the policies they enacted after the 2008 financial crisis along party lines. Dodd-Frank was sold to the American people as a sweeping fix to prevent another crisis. Yet over time, it's become clear that this approach has not delivered as promised for Main Street. Instead, history shows that it punished community financial institutions through its one-size-fits-all mandates, shifted activity outside the regulated banking system, created new and unaccountable agencies like the CFPB, and prioritized duplicative compliance and regulatory issues, and most importantly, regulation by enforcement over actual consumer protection. These smaller institutions did not cause the crisis, but they've been forced to navigate new compliance burdens and divert resources away from serving their communities and toward satisfying Washington bureaucrats. The law created new agencies like the CFPB, which has operated with unprecedented autonomy and minimal accountability to Congress or the American people. For 15 years, we've lived under the shadow of Dodd-Frank. This law didn't just reshape banking, it rewrote the rules for our capital markets. It handed the SEC sweeping new powers that have led to regulatory overreach, costly disclosure mandates, and mission creep into areas like corporate governance and executive compensation, areas historically governed by state law and protected by the business judgment rule. For 15 years, these policies have burdened the U.S. public companies while giving foreign competitors a leg up. Even worse, foreign private issuers were exempted from many of the most burdensome Dodd-Frank disclosure requirements. We all know that healthy competition and innovation drive economic growth, creating more opportunities and better financial services for all Americans. Instead of burdening institutions with excessive red tape, we should be empowering them to serve families, small businesses, and local communities. That includes small and mid-sized companies trying to raise capital or grow through public market access. Unfortunately, the complexity and cost imposed by Dodd-Frank have helped fuel the long-term decline in U.S. initial public offerings, discouraging companies from going public altogether. As we examine the last 15 years, I hope we can do so with clear eyes. It's also time to take a hard look at the rules that never made sense in the first place, rules that sit on the shelf and create needless uncertainty for market participants, just waiting for some new unelected bureaucrat to dust them off and put them to work. That's not how our system should work. We must work together to craft thoughtful, bipartisan reforms that restore balance, foster growth, and protect consumers. I look forward to a robust and productive discussion today. I'm grateful to our panel for being with us, and I'm hopeful that we can chart a better path forward for all Americans through financial oversight and through reform of Dodd-Frank. I yield back. I now recognize the distinguished ranking member of the committee, Mrs. Waters, for 5 minutes for an opening statement.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you very much, Mr. Chairman. Good morning, everyone. Before I discuss today's hearing topic, we just got news that inflation has jumped to 2.7% as Trump's tariffs have started to take effect. This is another reason Trump's reckless tariffs and attacks on the Fed's independence are so dangerous, and consumers and small businesses will pay the price. It's striking that with this hearing, we are marking the 15th anniversary of the Dodd-Frank Act, legislation enacted in the aftermath of the 2008 financial crisis, which unfolded under a Republican's watch with President George W. Bush's administration. And yet, the same week, Republicans in Congress are repeating the same mistakes that triggered the crisis in the first place. It's as if they have learned nothing from the painful lessons of 2008: the wave of foreclosures, the millions of jobs lost, and the devastation of countless families watching their entire life savings vanish in a blink of an eye. Unfortunately, over the past 15 years, Republicans spend more time trying to undo Dodd-Frank than they have spent time trying to protect consumers and investors. They've done more to fight for interests of the same Wall Street CEOs whose reckless actions destabilized our economy than fighting for the Main Street and working-class Americans who power our economy. There's no clearer example of this than what we're witnessing just this week. Republicans are pushing two particularly dangerous bills that will unleash frisky cryptocurrency into our mainstream financial system without proper guardrails to protect hardworking Americans. If that sounds familiar, it's because it is. The rise of complex, poorly regulated financial instruments was precisely what sparked the 2008 crisis. But these crypto bills don't just risk another economic meltdown. They're also riddled with loopholes that President Trump— that gave him the green light to continue his crypto scheme that so far has netted him $1.2 billion. Yeah, he owns crypto companies now. He owns crypto companies, Melania owns crypto companies, his sons own Bitcoin companies. They're mining Bitcoin coins right now. It's appalling that this Republican-led Congress can sit idly by and enable this blatant scream scheme and cash grab, especially after just voting so hard to hand Trump and his insiders a massive tax giveaway. This is more of the same, taking from hardworking Americans to further enrich billionaires and crypto insiders. That's why I have joined with Ranking Member Lynch and leading Democrats in Anti-Crypto Corruption Week, where we are outlining the true economic costs of these dangerous bills. Deregulating crypto and enabling a con by the most corrupt president in history aren't the only ways that Republicans are setting the stage for another 2008-style crisis. They're also working with the Trump regime to gut a core pillar of Dodd-Frank, the Consumer Financial Protection Bureau. This is incredibly dangerous. The Consumer Bureau was created to ensure a federal watchdog monitors big banks to protect consumers from the abusive practices and holds institutions accountable for ripping off consumers. But now, Trump and the Republicans are making good on their promise to delete the agency, from slashing CFPB's budget in half to firing dedicated staff or halting lawsuits that would return stolen money to victims from them. They're dragging us back to the dark days before Dodd-Frank, when consumers had no one looking out for them in the financial marketplace. Committee Democrats are committed to defending the Dodd-Frank Act from Republicans' 15-year campaign to repeal the law. We will also continue fighting against reckless deregulation that favors megabanks and Big Tech over community banks and credit unions, that puts our taxpayers at risk. We still We will still see what happens when Republicans allow Wall Street, Big Tech, Big Crypto to police itself. Spoiler alert: It will not end pretty for our constituents. And with that, I yield back.

Chairman French Hill (R-AR)SPEAKER_16

The gentlewoman yields back. I now recognize the vice chair of our full committee, Mr. Huizenga, for 1 minute for an opening statement.

Rep. Bill Huizenga (R-MI)SPEAKER_13

Thank you, Mr. Chairman. On the 4th of July, President Trump and congressional Republicans delivered on a promise to pass legislation that helps all Americans. There's a stark difference between the One Big Beautiful Bill and the Dodd-Frank Act. The One Big Beautiful Bill will increase economic opportunity for those who need it most. It'll strengthen our economy by slashing red tape and will make lasting reforms to the financial system. Dodd-Frank empowered big government bureaucrats and agencies like the Securities and Exchange Commission with sweeping, unchecked authority. It allowed agencies to promote woke ideology and ESG mandates while straying from their core mission. Now, by reining in the reach and the footprint of organizations like the CFPB, Republicans and President Trump will end regulation by enforcement. We will end burdensome regulations that harm every one of our constituents, and the Financial Services Republicans will promote innovation and consumer choice that has been stifled under Democrat leadership. So I always say I wasn't here for the passage of Dodd-Frank, but I've been living with the echo effects of it since 2011. With that, Mr. Chairman, I yield back.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman yields back. Today we welcome the testimony of our all-star panel: the Honorable Ken Bentsen, President and CEO of the Securities Industry and Financial Markets Association, former member of Congress from Texas and a member of this committee; Ms. Lindsey Johnson, President and CEO of the Consumer Bankers Association; Mr. Tom Quaadman, Chief of Government Affairs and Public Policy in the Investment Company Institute; Dr. Paul Kupiec, Senior Fellow at the American Enterprise Institute; and Dennis Kelleher, co-founder, president, and CEO of Better Markets. We thank each of you for taking time to be with us today. Each of you will be recognized for 5 minutes to give an oral presentation of your testimony, and without objection, your written statements will be made part of the record. The Honorable Ken Bentsen, you're now recognized for 5 minutes for your oral remarks.

The Honorable Ken BentsenSPEAKER_22

Chairman Hill, Ranking Member Waters, and distinguished members of the committee, thank you for the opportunity to testify today. My name is Ken Bentsen. I'm president and CEO of SIFMA. U.S. securities markets are the deepest and most liquid in the world. They are also the envy of the world. In the U.S., 75% of commercial activity is financed through our capital markets, significantly more than any other developed economies. In fact, I just spent the last week in Europe meeting with UK and EU financial regulatory officials, where both jurisdictions have prioritized development of their capital markets to spur investment and economic growth like that we have here at home. Vibrant and healthy capital markets allow companies to invest in plant and equipment, spurring job creation and economic growth. And American workers prepare for their retirement directly and through investment vehicles such as 401(k) accounts, providing investment capital that fuels our economy. Again, if you look around the world, virtually every other nation looks to the U.S. as a model for our robust capital markets and investment system. Therefore, it's critical for policymakers to tailor regulatory policies to ensure transparency, investor protection, and mitigate legitimate market risks without unnecessarily disrupting or constraining these critical markets. Further, Congress has an important role to play beyond simply enacting the laws. It is important for Congress to periodically review previously enacted statutes to determine effectiveness, adherence to legislative intent, and impact on the markets, so I commend the committee for holding this hearing. Beyond question, our markets and related participants are among the most regulated sectors in the U.S. economy, but not without cost. The post-2008 financial crisis regulatory and supervisory reforms, culminated in the Dodd-Frank Act, were the most expansive financial regulatory actions since the 1930s. The act comprised 16 titles and approximately 400 rulemakings, significantly expanded the number and breadth and intensity of regulatory and supervisory requirements with which the U.S. financial sector is subject. I brought my tabletop copy with me. These changes have significantly reduced the probability that a major banking organization would fail during an extreme shock while also reducing the potential contagion and cost if such a failure were to occur. In particular, large banking organizations have more and higher-quality capital today than pre-crisis, which provides them with larger buffers against failure if they experience unexpected losses. Though many of the Dodd-Frank reforms have made the U.S. financial system more resilient and less prone to shocks, we believe that appropriate tailored regulation should balance the dual goals of enhancing financial stability and investor protection while supporting the flow of investment capital to end users. The financial sector can continue to be well-regulated, well-capitalized, and resilient even with recalibration of certainly unnecessarily burdensome regulations. If banking organizations were permitted to unlock more of their capital and liquidity, additional lending and financing to consumers and businesses would provide for greater levels of economic expansion. SIFMA has expressed deep concern about the Basel III Endgame proposal that was issued in 2023 by banking regulators, not only because it would significantly increase aggregate U.S. bank capitals beyond their current historically robust levels, but because it inappropriately targets banking organizations' capital markets activities for some of the largest increases. These impacts are, in turn, greatly exacerbated by overlaps between these frameworks and the Federal Reserve's stress-testing regime. This is not only about the ability of banks to lend. Large bank broker-dealers comprise a significant market share of the nation's securities and derivatives markets, and when combined with foreign banking operations, comprise about 90% of the market. So the knock-on effect is quite extreme. It's also not just about large banks. Non-bank-affiliated and regional broker-dealers and asset managers, all subject to robust rules and oversight by federal market regulators, have been subject to enhanced regulatory and compliance burden. The cost of compliance has increased, according to one study, by over $50 billion annually. Many of our smaller broker-dealer members have reported the need to merge due to increased compliance costs. Over the last 15 years, the number of registered broker-dealers in the United States has declined by 30%. Further, some regulators have interpreted certain provisions of the Dodd-Frank Act as a license to establish new rules outside the original intent of the statute, notwithstanding the lack of any obvious market failure. The U.S. financial system is significantly stronger and more resilient than it was before Dodd-Frank was passed in 2010. That's a good thing. However, SIFMA believes that it is now appropriate to evaluate whether certain components of the regulatory framework developed under the mandates of Dodd-Frank are excessively conservative, impose costs on the U.S. economy, our financial markets, and on Main Street that outweigh their benefits. We appreciate the committee's interest in exploring these important questions on this 15th anniversary of Dodd-Frank. I yield back.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman yields back. Ms. Johnson, you are now recognized for 5 minutes for your oral presentation.

Mrs. Lindsey JohnsonSPEAKER_36

Thank you, Chairman Hill, Ranking Member Waters, and members of the committee. I appreciate the opportunity to testify on behalf of the Consumer Bankers Association about the lessons learned from the Dodd-Frank Act. My name is Lindsey Johnson. I'm president and CEO of CBA, the only national trade association focused exclusively on retail banking. CBA and our members work to promote sound policy to enable consumers individualized approaches to finance their own American dreams. CBA member institutions account for nearly 2 million employees across the country, extended roughly $3.4 trillion in consumer loans, and provided nearly $173 billion in small business loans last year alone. The vast majority of our members are more than $10 billion in assets, making them subject to CFPB supervision and enforcement. The Dodd-Frank Act was enacted to address vulnerabilities in the U.S. financial system exposed in the 2008 financial crisis. Dodd-Frank raised capital requirements for banks, established mortgage underwriting requirements, heightened oversight of systemically important institutions, and consolidated federal consumer protection authority into a brand-new federal regulator, the CFPB. It's important for Congress to continually review statutes to ensure that they're meeting their intended purpose, to know any unintended consequences, such as unnecessarily increasing costs for businesses or consumers, and to understand how markets have evolved and where certain standards may no longer be appropriate. While this is true for all titles of the Dodd-Frank Act, my comments will focus on Title X of Dodd-Frank, the creation of the CFPB. American consumers deserve a credible, durable CFPB that executes on its statutory mission, heeds the bounds of its statutory authority, and addresses true market failures and consumer harms. Unfortunately, the political shifts at the Bureau have been seismic from administration to administration. To some degree, Bureau policy will inevitably reflect differences in political philosophies. However, numerous actions by the Bureau's prior leadership have raised important questions about whether it prioritized politics over people. We expand on these and other issues in great detail in my written testimony, and we're working with the Bureau's current leadership to address many of the most egregious concerns. This committee has a critical role to play to make more permanent reforms that can reboot the Bureau into a credible, durable, and more stable regulator. In my written testimony, I address three key issues where Congress should focus its review of the Bureau: first, ensuring the agency follows the law; second, addressing true impacts of regulation on consumers; and third, focusing on fact-based policies and on true consumer harm. The most direct action Congress could take is to clarify in statute the Bureau's vague and largely undefined UDAAP authority. The Bureau has, in the past, regularly expanded its authorities or illegally interpreted the statutory provisions to meet its own objectives. There are even examples where the Bureau sought civil monetary penalties retroactively for previously undefined violations. Now, even after 15 years, the CFPB still hasn't clearly explained what abusive acts and practices are and how they're distinct from unfair and deceptive acts. Unfortunately, this has placed all entities that the Bureau regulates at risk of inadvertent noncompliance, stymieing lending and innovation for consumers. It's imperative for Congress to pass Congressman Barr's Rectifying UDAAP Act to provide the needed clarity and definitions of CFPB's UDAAP authority so regulated entities know what is and is not permitted and how they can comply. Second, the Bureau must consider the true impact of its actions on both consumers and regulated entities. Today, the Bureau is not required to perform a rigorous cost-benefit analysis to ensure the actions it's taking outweigh both the financial costs and the costs to consumers. The Transparency in CFPB Cost-Benefit Analysis Act would eliminate this concern. The Bureau also needs to take into account the cumulative impact on the numerous oversight agencies for banks. Legislation to review the impact of overlapping regulations and impacts on consumer access and overall economic activity would greatly benefit consumers without diminishing the supervision and examination of banks. Lastly, it is critical for the CFPB to be facts- and data-driven in its regulatory focus. The Bureau's complaint database, a tool that could provide important data beneficial to both consumers and regulated entities to help resolve problems early, is structurally flawed. The tool should be improved, as duplicative, frivolous, and fraudulent complaints currently plague the system. Draft legislation released by this committee on the Bureau's complaint database would significantly improve that process. Thank you again, Chairman Hill, for the opportunity to testify. We stand ready to work with you and the committee to achieve thoughtful and effective change to ensure the Bureau is a strong and durable consumer protection regulator. I look forward to answering any questions you may have.

Chairman French Hill (R-AR)SPEAKER_16

The gentlewoman yields back. The gentleman— Mr. Quaadman, you are recognized for 5 minutes for your oral remarks.

Mr Tom QuaadmanSPEAKER_21

Chairman Hill, Ranking Member Waters, members of the committee, thank you for holding this hearing and for your leadership on keeping America's financial markets the global gold gold standard. Prior to the financial crisis, many raised concerns that the U.S. financial regulatory architecture was out of date. Indeed, issues such as blind spots and lack of coordination hampered the ability of regulators and policymakers to address the crisis. Congress, through the passage of the Dodd-Frank Act, sought to the respond to the crisis but ignored many of those issues. Instead, the Dodd-Frank Act added floors onto an old house that was built on a rickety foundation. Dodd-Frank in certain areas sought to eliminate risk, but really you can't eliminate risk; you can only transfer it elsewhere. Dodd-Frank also did not allow regulators the flexibility to meet future market developments and investor needs. Dodd-Frank did get some things right. Transparency around the derivatives markets actually addressed a critical part of the financial crisis. The creation of FSOC, which is a codification and expansion of the President's Working Group, was an important step forward in coordinating regulators. However, Congress largely delegated to agencies to flesh out the details of the bill. In some cases, regulators naturally sought to fill the void of ambiguity and expand their powers. Some examples include FSOC's attempt to designate nonbank financial institutions through systemic risk regulation was a mismatch in applying and attempting to apply bank-like regulations on a business model which were not banks. Similarly, on money market fund reforms, FSOC sought to subvert a majority of the SEC commissioners' judgment in the path forward. The CFTC created a duplicative regulatory regime on commodity pool operators without investor benefit. The Volcker Rule, which is a prohibition on proprietary trading by banks— in its implementation, the regulators actually included regulated funds. Even though it's not part of Dodd-Frank but does exert influence on Dodd-Frank policies, the Financial Stability Board, which is largely made up of central banks and finance ministers, directs pressure on policymakers in other areas. These are These issues can be fixed. The FSOC Improvement Act, which was introduced by Congressmen Foster and Huizenga, would actually have an activities-based approach to systemic risk regulation. We would be happy to collaborate with the committee on clarifying language both on commodity pool operators and the Volcker Rule. And furthermore, we believe that this committee and Congress should exact oversight over the activities of American regulators within the Financial Stability Board and should also make sure that there's a Team USA approach while also broadening representation of other agencies within the discussions at the FSB. Furthermore, this committee and Congress should also ensure that we're addressing the needs of the market for today and tomorrow, as well as where investors are going. We believe it is important for Congress to pass the GROWTH Act, which was introduced by Congresswomen Van Duyne and Sewell, to remove a punitive tax on investors. We believe it is long past time to mandate e-delivery for investors, and we think it is very important for legislation introduced by Congressmen Huizenga and Sherman to move forward with this common-sense approach. Furthermore, there needs to be modernization of closed-end funds. We think it is important with legislation that was introduced by Congresswoman Wagner and Congressman Meeks that will allow for access of private capital in highly regulated funds, as well as ending activist campaigns. Lastly, ICI, after a three-year effort, issued a report earlier this year reimagining the 1940 Act with 19 different recommendations for how the 1940 Act can be modernized. That the 1940 Act has not been reviewed by Congress in 30 years. We think that's an important step forward, and I want to submit this for the record. We look forward to working with you all on these issues, and I'm happy to take any questions you may have.

Chairman French Hill (R-AR)SPEAKER_16

Thank you, sir. Dr. Kupiec, you're recognized for 5 minutes for your oral remarks.

Dr. Paul KupiecSPEAKER_17

Thank you, Mr. Chairman. Chairman Hill, Ranking Member Waters, and distinguished members of the committee, thank you for convening today's hearing and for inviting me to testify. I'm a senior fellow at the American Enterprise Institute, but this testimony represents my personal views and research. Has the Dodd-Frank Act worked as the authors intended? The goals in the act's preamble include financial stability, improved accountability and transparency, an end to too big to fail, to protect the American taxpayer by ending bailouts. But in March of 2023, the federal government was forced to take emergency measures to bail out the banking system. The crisis occurred when depositors withdrew their funds wholesale after recognizing that large unrealized interest rate losses had effectively rendered their banks insolvent. The crisis was averted when the Treasury instituted a blanket deposit insurance guarantee for failed banks and funded a $25 billion first-loss backstop for a Federal Reserve emergency lending program needed to bail out the banking system. The Fed's Term Funding Program provided banks with emergency liquidity. It made nearly 10,000 loans on bank collateral that had very large market value discounts as a consequence of increased interest rates. The program loaned banks the full par value of their collateral for periods up to a year and, by some estimates, lent banks about $20 billion more than the market value of the collateral they pledged, and all at favorable rates. The decision to insure all depositors in the failed banks created very large insurance fund losses compared to the losses under an FDIC least-cost receivership. Federal bank regulators failed in their oversight responsibility, but still made the large banks—banks that bore no responsibility for the poor management at the failed institutions—pay for the large insurance fund losses. Dodd-Frank Orderly Liquidation Authority gave authorities the power to take SVB's bank holding company into an FDIC receivership, liquidate its assets, and use the proceeds to reduce the SVB insurance fund losses, and yet it was not invoked. It's possible that authorities did not invoke OLA because OLA funding was precluded by the congressional debt ceiling, which was also a problem for FDIC failed bank receiverships. The receiverships' funding needs exceeded the balance in the Deposit Insurance Fund. Because the congressional debt ceiling was binding, the FDIC could not borrow from the Treasury. The receiverships were forced to borrow from the Federal Reserve discount window and pay a penalty interest rate 70 basis points over Treasury borrowing rates on hundreds of billions of dollars in loans. These additional insurance fund losses were just passed on to the large banks through special DIF assessments without much, if any, public discussion. So much for improved accountability. The large unrealized interest rate losses that caused the March '23 crisis could have been detected as losses grew throughout 2022, as I show conclusively in my written testimony. The FSOC and its federal banking regulator members could have used their extensive prompt corrective action powers to proactively impose remediation measures, yet they didn't. Indeed, the past 15 years have demonstrated that the FSOC has little ability to detect and mitigate actual systemic risks. On several occasions, the FSOC completely missed actual sources of systemic risk, and on others, they falsely identified firms and activities as a systemic risk. The most recent example is the so-called brown industries crusade launched to advance a political agenda rather than to address any demonstrable financial sector risk. The political nature of the FSOC's activities raise the cost of financial intermediation as FSOC policies change each time a new party assumes executive power. The Dodd-Frank regulations also impacted financial intermediations, particularly for large, complex financial institutions. To be fair, changes in intermediation patterns also reflect changes in Federal Reserve monetary policy and the outpaced growth in Treasury debt. The largest banks increased their use of deposit funding while reducing their use of subordinated debt, federal funds borrowing, and Federal Home Loan Bank advances. These changes replaced active monitoring by lenders with skin in the game with regulatory monitors. The largest banks' share of investments to loans to businesses and consumers also declined as they substituted liquid federal government-guaranteed securities and Federal Reserve interest-bearing deposits. Smaller banks not subject to Dodd-Frank enhanced supervision did not make these adjustments. By many measures, many objective measures, the complex provisions and regulations in the Dodd-Frank Act did not work as their authors intended. I look forward to your comments, and thank you.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman yields back. Mr. Kelleher, you're now recognized for 5 minutes for your oral presentation.

Mr. Dennis KelleherSPEAKER_15

Good morning, Chairman Hill, Ranking Member Waters, and the members of the committee. Thank you for holding this important hearing and for the invitation to Better Markets to testify. While the focus today is the Dodd-Frank Wall Street reform law, that law cannot be properly discussed or understood without reviewing the devastating financial crash that started in 2008 that made the law so necessary. That was the worst financial crash since the Great Crash of 1929, and it caused the worst economy since the Great Depression of the 1930s, which is why it was called the Great Recession. The damage caused by that crash ruined the lives of tens of millions of Americans, crushed small businesses and community banks, grievously damaged our economy and financial system, ballooned the country's debt, and undermined the pillars of our democracy, which depends upon an economy delivering rising living standards and broad-based prosperity. Just a few facts to illustrate the horrific scope of the damage caused to Americans from that crash: 13 months after the September 15th bankruptcy of Lehman Brothers, the U-6 unemployment rate reached 17.2%, throwing more than 27 million Americans out of work. 16 million foreclosure filings happened during the Great Recession, causing millions of families to lose their homes. 40-plus percent of homes in the United States were underwater, meaning their mortgages were higher than the value of their homes, for years after the Lehman bankruptcy. 10 years passed before the unemployment rate in the United States returned to pre-2008 crash levels. And after 8 years after the Lehman bankruptcy, 90% of the American people were poorer at the end of 2016 than they were in 2007 by 17 to 34%. It's also critical to remember that the 2008 crash was an avoidable, man-made financial crash and disaster that didn't have to happen. It only happened because too many elected officials, policymakers, regulators, and others who should have known better listened to the financial industry's siren song of deregulation, which, as in the Greek myth, inevitably resulted in a catastrophic crash. That deregulation and crash resulted from too many believing the financial industry's claims that its interests overlap with the public interest and that the industry is primarily focused on economic growth, job growth, credit supply, helping community banks, small businesses, and disadvantaged groups. The industry continues to trumpet these issues. Indeed, it's the chorus for the siren song of deregulation. Those claims, however, are usually smokescreens behind which they hide their profit- and bonus-maximizing motives. That's fine for the private sector, and that's fine for private companies, but that's not the public interest. The overriding lesson that should be learned and guide the road ahead is to reject that misleading, but appealing, deregulation song that the industry is singing again. It will lead to an even more horrific result, in part because the country simply does not have the fiscal or monetary capacity to properly respond to another financial and economic crash. The truth is that the threat from too-big-to-fail, too-big-to-manage, too-big-to-jail, and too-big-to-regulate financial institutions remains alive, well, and getting much worse due to the deregulation juggernaut unleashed by the Trump administration. That was proved by the failure and bailouts of the three much smaller banks in 2023, which resulted from the deregulation in the first Trump administration and cost the country more than $40 billion in direct bailouts and more than $300 billion in all-in cost. Yet the largest of those banks only had a little more than $200 billion in assets. In contrast, JPMorgan Chase alone has $3.64 trillion in assets, and the 15 largest banks in the United States have a combined $14 trillion in assets. There is no chance these much larger, much bigger, too-big-to-fail financial institutions can be resolved without destabilizing contagion and gigantic bailouts. Now everybody Because everybody knows that, even if many won't admit it, regulators have tried to varying degrees over the years to increase the resilience of these financial institutions in the event of the inevitable stressful situations that will threaten their viability. Engaging in massive deregulation that significantly reduces the resilience of these gigantic financial institutions, knowing that they cannot be resolved, virtually guarantees the next crash will be much worse than the 2008 crash and could well cause a second Great Depression. That's the bad news. The good news is it's not inevitable. It can be prevented. Indeed, we know how to prevent it because we did it for more than 70 years. From the major laws and regulations imposed on the financial industry during the Great Depression of the '30s until about September of '08, the U.S. did not suffer from a major financial crash. Importantly and finally, at the same time during those decades when the financial industry was under the most robust regulation in the history of the world, the U.S. economy grew at historic rates and generated broad-based wealth creation. That proves that a strong, regulated financial industry is not only compatible with, but necessary to achieve, above-trend growth, stability, and broad-based wealth creation. Thank you.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman yields back. We will now turn to member questions. I recognize myself for five minutes for questions. First, let me say that in looking at the inflation report this morning, the core CPI prices rose by less than expected for five months in a row, and on a cumulative basis, inflation, both headline and core, are trending close to the Fed's target of 2%. So, I think we continue to get inflation headed in the in the right direction in looking at today's report. Dodd-Frank, back in 2008, 2009, 2010, during those debates, I was a bank CEO during that time of a community bank. And so, I know very much what it was like before Dodd-Frank and post-Dodd-Frank as a private citizen working in a private financial environment. And of course, Dodd-Frank's argument, and everyone knows the best efforts by Congress was to try to prevent another financial crisis. But since its passage, the regulatory framework has grown significantly more complex. For example, the Code of Federal Regulations that relate to commercial banking has expanded by 3,000 pages. Dr. Kupiec, based on your experience, has Dodd-Frank's complex regulatory framework provided meaningful improvements to safety and soundness, or has it created so much complexity and associated costs that it's unclear for both consumers, business, and the community banking environment to to figure out what the benefits actually were? How do you How do you parse that?

Dr. Paul KupiecSPEAKER_17

The regulations have gotten entirely complex and out of hand, and they don't work, as is evidenced by the March 2023 crisis. I don't understand this notion that there was no crisis for 70 years. I think there was an S&L crisis and a banking crisis in the '90s and before Dodd-Frank. We've had a lot of financial crises over the years, well before Dodd-Frank, but the regulations have gotten very complex, and they don't actually address the risks in the banking system, as I lay out in my written testimony in tables, very comprehensive tables. The rules that they've created now don't even address interest rate risk, which is a basic risk, and the regulatory rules don't address that. And so while the regulatory ratios suggest that the banking system is solidly capitalized, once you take into account the fact that banks which were loaded up with Treasury securities and other things had huge unrealized interest rate losses on their books, these complex regulations just don't tell you what the real truth of the matter is. And

Chairman French Hill (R-AR)SPEAKER_16

I appreciate that perspective.

SPEAKER_UNKNOWN

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Chairman French Hill (R-AR)SPEAKER_16

When you look at Silicon Valley, which Mr. Kupiec—I'm sorry, Mr. Kelleher noted in his views, I don't view Dodd-Frank having helped or hurt there. I think you had a gap in regulatory oversight by the San Francisco Federal Reserve that was embarrassing, and the state regulator in Sacramento, and terrible management who aren't paying attention to the most basic banking rules. I don't think you can point at any law change that caused the terrible outcome there. I really don't. We'll debate that off the dais. The regulatory bodies created by Dodd-Frank, including CFPB and FSOC, have created an estimated that I've read, according to the American Bankers Association, some $38 billion in additional annual pretax costs for banks, with smaller institutions bearing a disproportionate share of that burden. Mrs. Johnson, do you believe that this expanded bureaucracy has improved financial oversight, or has it resulted in so much excessive red tape, stifled economic growth, that it's ended up restricting credit, and you've got bank credit committees more focused on next week's compliance meeting than lending money to their customers? What say you on that?

Mrs. Lindsey JohnsonSPEAKER_36

I can say anytime that you've got banks who are spending more time and more money on compliance and understanding the compliance that's necessary from multiple different agencies, that is really problematic. And on the supervision side, at least from a bank perspective, you have consumer protection from the Bureau, but we often hear from banks who've got three examiners in their institutions at the same time asking for different but similar information. It's just an incredible burden on these institutions, and it really does take their attention away from things that they should be doing, which is lending in their communities.

Chairman French Hill (R-AR)SPEAKER_16

Thank you. Mr. Bentsen, let me turn to you on the capital markets side of Dodd-Frank, and you can respond to me in writing, but I want to just ask you, has the—small institutions didn't create the financial crisis, but Dodd-Frank imposed this big one-size-fits-all burden. Hasn't that hurt our capital markets system?

The Honorable Ken BentsenSPEAKER_22

It certainly created some dysfunction within the system. So you're right, we've seen mergers among smaller broker-dealers. You would

Chairman French Hill (R-AR)SPEAKER_16

expand on that in writing for me, Congressman. And thanks for being here today. I yield back and we turn to the distinguished ranking member of the full committee, Mrs. Waters, for her questions. 5 minutes.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Mr. Kelleher, thank you for your testimony and reminding this committee of what a disaster and how costly the financial crisis really was. And after the housing crash, where we saw mortgage brokers peddle no-doc loans and other predatory products, why is it so important for Congress to create the Consumer Financial Protection Bureau? That way, consumers of all stripes—students, seniors, service members, and more—had a federal cop on the beat fighting for them to make sure that megabanks or payday lenders or other bad actors were not ripping them off. Now, I understand you served for 4 years in the Air Force. Is that correct?

SPEAKER_UNKNOWN

Yes.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you for your service to our country. Trump's CFPB has claimed that they are going to prioritize protecting service members and veterans. But I want your take on their actions. For example, Trump's CFPB proposed slashing staffing levels from 1,700 to 200, and proposed reducing CFPB's Office of Servicemember Affairs to just one employee, except the one employee they chose had already decided to retire, which would leave the office unstaffed. That office, which we required to be set up in Dodd-Frank, has been well respected across political spectrum, with people like Holly Petraeus running the office before. How is it the CFPB is supposed to protect service members, veterans, and their families if they have no staff in the office?

Mr. Dennis KelleherSPEAKER_15

Anybody who claims that the CFPB, as currently managed, is protecting service members, veterans, and their families is lying. You can't do it with one person. You need a full staff. And let me just give you a few statistics. The median loss from fraud from January 2015 to October of 2019: to civilians, $658; to active-duty members, $775; retired military and veterans, $950. Service members, veterans, and their families are being disproportionately targeted by financial scams and financial predators, and they need a strong cop on the beat, and they need the Office of Servicemember Affairs at the CFPB to be properly regulated. Since 2011, the CFPB has received more than 400,000 complaints from service members, and it has been responsible for recovering approximately $363 million in restitution for military and their families. One person isn't doing that. 10 people aren't doing that. We need a CFPB that is funded, staffed, independent, and an effective cop on the beat not just for service members, veterans, and their families, but for all Americans who are getting ripped off too often, which is why the CFPB was the most successful financial consumer protection agency in the history of the country, returning $21 billion—B, billion dollars—to more than 200 Americans.

Ranking Member Maxine Waters (D-CA)SPEAKER_12

Thank you very much. Another lie told by the President of the United States of America about how he cares about veterans and how he's going to help veterans. Let me tell you something. All of this talk about deregulation, about, being consumed by regulation, it is because the rich, the big, and the powerful do not want oversight. They do not want us to have legislation that will make them accountable. Let me just tell you something. When we take a look at what is going on right now, the president—take a look at what he's doing with crypto. The President of the United States is engaged in a crypto con of massive proportions. In just 6 months, he has entered into the following crypto ventures: The President of the United States owns $TRUMP meme coin, Trump Digital Trading Cards NFTs, World Liberty Financial, his crypto company that is launching the stablecoin USD1, American Bitcoin, a Bitcoin mining corporation founded by Eric and Donald Trump Jr., and Social Truth Bitcoin ETF and Crypto Blue ETF. And even Melania owns crypto. And I want to tell you, as we sit here and listen to those who have been trying to destroy, destroy financial CFPB, I was here, and I know what was happening. We had no protection for consumers, and with Dodd-Frank, we were able to come up with ways that we could have consumers call in, have someone investigate their problem, help consumers who were being ripped off. I want to tell you, the big boys will keep ripping us off as long as we let them. And I tell you, we're going to be dealing with this all week. And so I am absolutely outraged by the way that they've tried to kill the Consumer Financial Protection Bureau. I'm outraged with the crypto—

Chairman French Hill (R-AR)SPEAKER_16

The gentleman from Michigan, the vice chair of the full committee, Mr. Huizenga, is recognized for 5 minutes.

Rep. Bill Huizenga (R-MI)SPEAKER_13

Thank you, Mr. Chairman. I'm going to jump right in. Mr. Bentsen, I'll start with you. Over the years, you've seen multiple iterations of the Financial Stability Oversight Council, FSOC. In the early years, post the Great Financial Crisis, FSOC was given broad-reaching authorities to designate non-banks as systemically important financial institutions, or SIFIs. Under President Trump's first administration, the FSOC moved to an activities-based approach. This was in 2019, which I believe was appropriate, especially in response to a the post-MetLife debacle that had gone on. 4 years later, 2023, under President Biden, the FSOC snapped right back to using an analytic framework for identifying and dealing with systemic risk. And as you can guess, Secretary Bessent, who is now the FSOC chair, might have a very different view on how FSOC will operate under his leadership. So, as you're familiar, Mr. Foster and I have once again introduced the FSOC Improvement Act. The bill would revise the flawed risk assessment framework and designation guidance governing the SIFI designation process for non-bank financial institutions. So here is the question: After 15 years, is it time for Congress to make these improvements? Is there enough data and use cases to show that how FSOC determines designations is not working, or hasn't been working and has not worked in the past? And did they make the financial system safer and sounder, which is what we would all like to see?

The Honorable Ken BentsenSPEAKER_22

Thank you, Congressman. We support the bill that Mr. Foster and you have introduced. We've supported it in other iterations through previous Congresses. So, yeah, I think the time is overdue. Short of that, I would hope—we would hope that the FSOC would revert back to the, I think, the 2018 activity-based process that you noted. And, the problem here is the way it was constructed is trying to impose a bank-like regulatory structure over asset managers. We've had now 15 years to think about this. We've had 15 years of experience in the marketplace. And

Rep. Bill Huizenga (R-MI)SPEAKER_13

there's data there to—

The Honorable Ken BentsenSPEAKER_22

Yeah. So I think we know, you know, that activity-based is a better approach. So we commend you all for the legislation.

Rep. Bill Huizenga (R-MI)SPEAKER_13

Mr. Quaadman, do you mind commenting on this?

Mr Tom QuaadmanSPEAKER_21

Yeah, we would agree. Ping-pong guidance is not a way to allow businesses to plan for the future. So we do expect that the Trump administration will move back to an activities-based approach, but really we do need to have legislation that's going to settle this once and for all and allow businesses the certainty to move forward.

Rep. Bill Huizenga (R-MI)SPEAKER_13

And so clarity is what you're looking for?

Mr Tom QuaadmanSPEAKER_21

Exactly. Clarity.

Rep. Bill Huizenga (R-MI)SPEAKER_13

Not in this week's clarity, Mr. Chairman, and the work that we've done, but clarity on this particular issue. Okay. I'm going to stick with you, Mr. Quaadman, because I want to talk about conflict minerals. This is I know you have something that you've worked on, I've worked on. That's an issue that has been nearly a decade. I first started working on this with Congresswoman Gwen Moore, and it's Section 1502. I believe it was a failure then. I believe it's a failure now. Under the rule required by Dodd-Frank Act, public companies are required to scour their supply chain for tin, tantalum, and tungsten and gold linked to militia groups in the DRC and the surrounding Great Lakes region. However, there was a report in 2024—this is one page of the 140 pages, I believe, or 120 pages of the 2024 GAO report, which I would like to submit to the record, Mr. Chairman,

Chairman French Hill (R-AR)SPEAKER_16

without objection.

Rep. Bill Huizenga (R-MI)SPEAKER_13

Well, that report concluded that the SEC's rule under Section 1502 of the Dodd-Frank Act hasn't actually reduced violence in the Congo and in the in the region. In fact, there's a small chart that I will point out to everybody, it's actually expanded. It's expanded, and in fact, Secretary Rubio and the Trump administration had to get, intervene in the area in the last couple of weeks. So here's a here's a quote from the report, "The GAO found no empirical evidence that the rule has decreased the occurrence of or level of violence in the eastern DRC." So here's the question: Section 15— Section 1502 should absolutely be repealed, in my opinion. But what have we learned about some of the other Dodd-Frank rules that may have been very well-intentioned, but frankly, haven't hit the mark?

Mr Tom QuaadmanSPEAKER_21

Yeah, no, I think conflict mineral— this is based on my previous experience, but I think if you look at conflict minerals, there are a lot of difficulties there, as you referenced. Even The New York Times and The Washington Post have had front-page stories of how that provision actually made things on the ground even worse. We also have the disclosure was kicked out by the D.C. Circuit Court of Appeals, yet companies still have to do all the collection around it, which actually then means that investors have to bear the cost of that. So I think it's a good example of where you can have well-intentioned disclosures that don't hit the mark and don't provide investors with useful information. We should really take a very strong look at whether or not they should even be in place. But I also believe, too, conflict minerals, what the Trump administration is trying to do there as well as access to critical materials is important for American national security.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time. I yield back. Gentleman yields back. Gentleman from New York is recognized, the ranking member of our Small Business Committee.

Rep. Nydia Velazquez (D-NY)SPEAKER_34

Thank you, Mr. Chairman, and good morning, everyone. Thank you for being here. If we're going to talk about Dodd-Frank 15 years later, we need to also look at the whole picture, including the industry and Republicans' attempt to weaken the original protections. So, Mr. Kelleher, can you explain the changes made to the Dodd-Frank Act by the passage of S. 2155 a few years ago and how those changes, particularly with regards to bank capital, left our financial system more vulnerable?

Mr. Dennis KelleherSPEAKER_15

Yes, thank you for the question, and I want to start by agreeing with the Chairman that it was miserable management that primarily drove those banks into high-risk activities and ended up resulting in their failures. Those were avoidable also. Management ran those banks into the ground, and their boards failed to supervise them, and the regulators frankly didn't do their job either. There was plenty of blame to go around, and there's been no accountability even now. Unfortunately, there was an attempt to pass legislation, as you know, to claw back executive compensation under those circumstances that never saw the light of day. But 2155 essentially eliminated, either de facto or by requirement, the prudential regulations on banks with less than $250 billion in assets. We said, Better Markets filed comment letters at the time, talked about 2155, and then when it was passed and went to the regulatory agencies, particularly the banking agencies, we said in letters, in writing, commenting on the proposed rules at the time, that if you implement this law the way you're going to do it, you're going to have banks engage in higher-risk activities, and they are going to ultimately fail, and there are going to be bailouts.

Rep. Nydia Velazquez (D-NY)SPEAKER_34

So—

Mr. Dennis KelleherSPEAKER_15

and that's exactly what happened. It was predictable, foreseeable, and that's what happened.

Rep. Nydia Velazquez (D-NY)SPEAKER_34

So it's not entirely accurate to say that Dodd-Frank hasn't worked. Isn't a more accurate statement to say that changes made post-Dodd-Frank has weakened original protections and caused vulnerabilities in our financial system?

Mr. Dennis KelleherSPEAKER_15

Yes, and it's not only true for 2155. As I detailed in my written testimony, the primary reason that Dodd-Frank did not work is because of the war that the industry and its allies engaged in to attack and undermine Dodd-Frank at every step of the way in the regulatory process, and then when they didn't win in the regulatory process, they ran to court and sued to try and win in the judicial arena what they couldn't win in the regulatory arena or the legislative arena. This law would have worked. It had the authority and the power to do the job, as I detailed in my written testimony. It wasn't allowed to do the job, and that's why it hasn't been successful.

Rep. Nydia Velazquez (D-NY)SPEAKER_34

like this hearing right now. Since 2011, the CFPB has secured more than $21 billion of relief for more than 205 million consumers. Unlike other financial regulators, Congress provided it with an independent funding mechanism. Yet this has not stopped the Trump administration and congressional Republicans from trying to destroy the bureau from within, including as part of the one big, ugly bill, which slashed the bureau's operating funding nearly in half. Can you explain the potential harm facing not just consumers, but the broader financial system by slashing the bureau's funding by such a large amount?

Mr. Dennis KelleherSPEAKER_15

I think the Consumer Financial Protection Bureau has proved almost on a daily basis its importance to Main Street Americans who are getting ripped off and discriminated against as a routine matter. Look at the cases that the CFPB has brought over the 14 years that it existed. These are against giant financial institutions that have settled cases for hundreds of millions of dollars. They're not doing that because they're generous. They're doing that because they broke the law, and the highest-priced, the best lawyers in America are representing these premier financial institutions, and they're settling their legal violations. That's why the CFPB is needed. They need an effective cop on the beat, and you can only have an effective cop on the beat if you fund them. You can't send cops into an inner-city, high-crime area with no bullets, guns, or cars with flat tires, and that's what you're doing on the consumer protection beat here by crippling the agency.

Rep. Nydia Velazquez (D-NY)SPEAKER_34

I rest my case, Mr. Chairman. I yield back.

Chairman French Hill (R-AR)SPEAKER_16

Gentlewoman yields back. Gentleman from Oklahoma, the chair of our Monetary Policy Task Force, Mr. Lucas, you're recognized for 5 minutes.

Rep. Frank Lucas (R-OK)SPEAKER_14

Thank you, Mr. Chairman. I, too, was one of the limit numbers of members of this committee who served on the Dodd-Frank Conference Committee, and I remember our efforts to get a legislative agreement that appropriately addressed the economic turmoil our country was facing. Unfortunately, Dodd-Frank ultimately resulted in dramatic regulatory overreach that I could not support, and we are still dealing with the consequences of the bill 15 years later. Many of the changes made during the time continue to damage our competitiveness and limit our economic growth. They don't account for the credit needs of farmers, ranchers, and Main Street businesses. Starting with you, Dr. Kupiec, in our country, we've assigned the Fed to deal with monetary policy and prudential matters. We've also had this dual role, but after the passage of Dodd-Frank, their prudential functions expanded dramatically, and they have begun policing behavior they had no authority to do. As chairman of the task force on this issue, I have a concern that I continue to raise, that the broadening of authority of the Fed's regulatory and supervisory roles ultimately politicizes the institution and threatens monetary independence. Doctor, do you think mission creep from the regulatory side of the Fed complicates their role as our central bank?

Dr. Paul KupiecSPEAKER_17

Yeah, clearly, clearly, and the climate change brought that to the fore in the last administration: the Fed the remit that the Fed should regulate climate change risks in banks and things like that. And I think now they've abandoned that in in the newest administration. This is another another example of the ping-ponging of the FSOC and the executive role there about designating things that really aren't systemic risk as systemic risks.

Rep. Frank Lucas (R-OK)SPEAKER_14

And anyone who thinks that this was a negotiated bill, this was a slam dunk. I remember the opening day of the conference committee when the chairman of the conference, our Financial Services Committee chairman, Barney Frank, announced that we would not be using the House draft, which represented a compromise effort in this committee, and we picked up the Senate document. That's when we knew the fix was on as members of this body. Mr. Bentsen, as you know, Dodd-Frank altered the risk retention rules on securitized assets. In your view, what's the effect on the cost of and the access to credit if this tool is cost prohibitive for lenders?

The Honorable Ken BentsenSPEAKER_22

Thank you, Mr. Lucas. Part of the problem with the changes in the risk retention rules was that there are so many different parts of Dodd-Frank that overlap, and in particular the capital rules. In particular, when we think about the stress test regime and the component of that, the global market shock, none of that has ever been adjusted to take into consideration the risk retention rules that were put into effect. So we have it, I don't want to call it a double count, we have double counts elsewhere, but in effect, we're scoring things according to the pre-legislative rules, so it compounds the impact of the capital rules. That affects the price on securitization.

Rep. Frank Lucas (R-OK)SPEAKER_14

Continue, Mr. Bentsen. We have a new Vice Chairman for Supervision at the Fed, and I believe Vice Chair Bowman is perfectly suited for the role. What should Vice Chair Bowman look at in a Basel reproposal to address the concerns raised by market participants after the last proposal? How should Vice Chairman Bowman approach the fundamental review of the trading book in a Basel reproposal?

The Honorable Ken BentsenSPEAKER_22

So there are a number of issues that the Fed and Vice Chair Bowman should take a look at with respect to the fundamental review of the trading book. Some issues that are inconsistent with other participants in the Basel framework in Europe and the UK, but also how the Fed staff initially gold-plated the proposal that would raise capital above already historic levels. And most importantly, and I think Vice Chair Bowman has said that she intends to do this—she has a conference next week that the Fed is hosting—is, again, to think about the interaction of all these rules. If the Fed agreed with us—and who's to say that they should or they shouldn't—if they agreed with us and took all the suggestions that we put forth, they would still have an exorbitant increase in risk-weighting capital requirements on things like securitization. And the reason for that is because of the interaction with the stress test regime, and that is a double count. And that's an area where the Fed really needs to take—and we've had a lot of discussions with them about this—to sort of look at that. And frankly, I think the Fed themselves were shocked with how their original proposal came out. Hopefully now they'll take that into consideration, because this does have knock-on effect, not just to mortgages, but small business lending, equipment financing, things that are done through the securitization market.

Rep. Frank Lucas (R-OK)SPEAKER_14

Mr. Chairman, we can do better than the status quo we have now.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman's time has expired. The gentleman from California, Mr. Sherman, the ranking member of our Capital Markets Subcommittee, you're recognized for 5 minutes.

Rep. Brad Sherman (D-CA)SPEAKER_29

Thank you. I enjoyed the exchange between Mr. Kupiec and our chair. The chair points out that Silicon Valley Bank was terrible management, as if that was a lightning strike. No, we have a system that says you buy long-term bonds. If they go up, you sell them. The bank recognizes an immediate profit, and the board of directors gets a huge bonus. And if they go down, you can hide that loss, and 99 times out of 100, you'll get away with it. And so bad management is from bad rules, and I've been in this committee for a long time saying we have to mark-to-market long-term debt held by banks. We're also The chair also says that we should allow state regulation to provide for corporations. That is a race to the bottom. And again, we have bad management because of bad incentives. A state legislature in a small state, they're focused on getting revenue for their state, not upon providing good corporate management and oversight for corporations that may have a little impact on their state. So, we should not— we need to deal with long-term debt on bank balance sheets. We need the federal law to provide the rules for national corporations. Finally, we have a system which doesn't give investors the information they need. 100 years ago, when our accounting systems were designed, or the financial statements were designed, the vast majority of the value of a company was in its physical assets shown on its balance sheet. Today, the most valuable thing is intangibles, particularly the workforce. Yet again and again, we don't require the disclosure of turnover rates, training expenditures, or anything else relevant to the workforce. And for several years now, I've been pushing for us to disclose the China risk, because what's the good of knowing last year's earnings per share if you can't even get management to tell you how they'd be affected by a breakdown in the U.S.-China relationship? Today we're focused on Dodd-Frank, and it brings the PTSD of the 2008 crisis, when this committee said never again. History doesn't repeat itself, but it rhymes. We have an echo of 2008 in crypto week. Now, this is also Tax Evaders Month and Drug Dealer Facilitations Year. Both bills rejected an amendment that I proposed here and to Rules Committee saying no bailouts for anyone in the crypto ecosystem. Those amendments were rejected, and the crypto world is looking forward to telling its investors they're as bailout-eligible as Bank of America. But what caused the 2008 collapse? It was the subprime and liars' loans. What's a liar's loan? You agree to pay 1% more on your mortgage, and the lender says, Well, just tell us what your income is, and you don't have to give us a W-2, you don't have to give us a tax return. So the financial system back in 2008 strained to provide financial services to those who turned to their mortgage broker and said, I really make a lot. I'm just lying to the IRS or my ex-spouse. Well, history rhymes. This week we're going to deal with stablecoin. What is stablecoin? It's a money market fund that pays zero interest, a worse deal for consumers just like the liar's loan is where you pay more on your mortgage. But what does the stablecoin offer? It offers hidden money so that you can defraud the IRS, your ex-spouse, engage in drug trafficking, etc. So, history does not repeat itself, it rhymes. And here we are back again, trying to have our financial system meet the needs of those who want to cheat on their taxes, engage in illegal activity, etc. Mr. Bentsen, your letter to the SEC talks about the separation of functions with vertical integration where a single platform can act simultaneously as the issuer, broker, and exchange and custodian. Can you explain what the risks are of allowing that integrated structure in the crypto world?

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time has expired. If, Mr. Bentsen, you would respond to the member in writing, please. The gentlewoman from Missouri, Mrs. Wagner, who's the chair of our Capital Markets Subcommittee, is recognized for 5 minutes.

Rep. Ann Wagner (R-MO)SPEAKER_01

I thank you, Mr. Chairman. Thank our witnesses for being here today. Under former Chairman Gensler, the SEC repeatedly overstepped its statutory boundaries, invoking authorities under Dodd-Frank in ways that neither align with the law's intent nor advance the commission's threefold mission: to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. In fact, Gensler's regulatory agenda undermined these goals. Under President Biden, everyday Americans in Missouri's 2nd Congressional District were told they would have fewer choices, increased costs, and less clarity on who they could ask for financial advice. In June of 2024, the Fifth Circuit unanimously vacated the SEC Private Fund Adviser Rule, which would have imposed significant requirements on private fund advisers and made broad changes to how private funds operate. The SEC claimed the authority to propose this rule through Section 913 of Dodd-Frank, which is focused on the fiduciary duty of broker-dealers and investment advisers who are providing advice to retail customers. In its decision, again, a unanimous decision, the court rightly held that Section 913 of Dodd-Frank has nothing to do with private funds, and the SEC should not rely on this section of the statute to regulate private fund advisers and investors. Mr. Quaadman, how does the Fifth Circuit's ruling on private funds rule redefine the scope of the SEC's authority under Dodd-Frank, and what are the potential implications for future financial regulations?

Mr Tom QuaadmanSPEAKER_21

Thank you for that question, Mrs. Wagner. Mr. Wagner, it's, it's It's very important, and you have to remember, too, we're also living in a West Virginia v. EPA world now. So the agency itself can't move forward without clear direction by Congress. And I would also say, too, I think some of the legislation that this committee is considering in terms of unused authorities really needs to be looked at very closely. The predictive analytics rule is another one which is very misguided.

Rep. Ann Wagner (R-MO)SPEAKER_01

I'm moving to that next.

Mr Tom QuaadmanSPEAKER_21

There we go. I'll let you ask the question then.

Rep. Ann Wagner (R-MO)SPEAKER_01

In a similar way to the commission's private funds rules, former Chairman Gensler, his predictive data analytics proposal disregarded the limitations of Dodd-Frank Section 913 again. Section 913 primarily focused on retail customers and personalized investment advice about securities. However, the proposal stretched this authority to cover broad investor interactions and technologies like predictive data analytics, in which Congress never intended, and that's the heart of the matter here. I would say, let me move to Mr. Bentsen. With legislative action, Mr. Bentsen, what action should Congress pursue to clarify the precise limits of this authority and prevent future instances of regulatory overreach?

The Honorable Ken BentsenSPEAKER_22

So, first of all, we agree with the court's decision with respect to the private funds. We were not a party to the suit, but we did file an amicus brief in support of the suit. And frankly, in the case of the predictive data analytics, which we thought was not a very well-thought-out rule, and we're glad it's now been withdrawn, we actually think it was also unnecessary, because frankly, whatever concerns there might have been are already covered under Reg Best Interest, and so there's not really a need for that. Section 913, and I was around, too, 15 years ago, Section 913 was highly negotiated between the House and the Senate, between then-Chairman Frank and the chairman of the Senate Securities Subcommittee, Senator Johnson. And Congress's intent was very, very narrow and very clear to the point that you're making.

Rep. Ann Wagner (R-MO)SPEAKER_01

that it has been abused, certainly abused by the SEC during Democrat leadership that we have seen over and over again.

The Honorable Ken BentsenSPEAKER_22

I, I mean, the courts have kind of reeled it in. Yes. So

Rep. Ann Wagner (R-MO)SPEAKER_01

that costs money,

The Honorable Ken BentsenSPEAKER_22

right?

Rep. Ann Wagner (R-MO)SPEAKER_01

It gets trickled down to to my Missouri retail investors, everyday investors. It is so infuriating to me that we've been litigating this for 15 years, Mr. Chairman. Let me move on. While the SEC was rightly challenged for exceeding its authority during the Biden administration, litigation contributes to a climate of uncertainty for investors and market participants across the country and costs. Businesses, particularly those in innovative sectors like fintech, become hesitant to invest in new technology or business models if the rules of the road are constantly in flux. Mr. Quaadman, to what extent did SEC's overreach and the court battles it triggered ultimately stifle capital formation by creating an unpredictable, operative environment? I'm about out of time. You may have to respond in writing, but this is important.

Mr Tom QuaadmanSPEAKER_21

Want number one, there's a chilling effect number two, and I'll, I'll respond in writing about interconnectedness of rules, which is not considered

Chairman French Hill (R-AR)SPEAKER_16

either.

Rep. Ann Wagner (R-MO)SPEAKER_01

General response.

Chairman French Hill (R-AR)SPEAKER_16

Thank you very much. We now recognize the distinguished ranking member on our House Foreign Affairs Committee, Mr. Meeks from New York, for 5 minutes.

Rep. Gregory Meeks (D-NY)SPEAKER_02

Thank you, Mr. Chairman. I want to thank you for holding one of the most consequential pieces of financial services legislation. You know, I was in Congress back during the height of the financial crisis when Lehman Brothers failed, when major insurers were about to go under, when President— then-President Bush had Secretary Paulson running to the House floor. I will never forget, he ran and met me in the Democratic room on the floor trying to get votes, saying that if we didn't do something immediately, our entire financial system would fail. They didn't have all the votes that they needed on the Republican side to get it done, so they desperately needed Democratic votes. And one of the things that we talked about at that time was there was one voice, because I remember during that time people losing their homes, their credit gone, they're out, they're homeless, they're trying to find some, still couldn't get rent. And the idea was, the thought was, everybody had some kind of coverage except one group. It was called the consumers. I surely wish there was a panel here that some of the consumers would be here to testify also, who benefited 15— for the last 15 years from having a Consumer Financial Protection Bureau. Now, I'm all for looking to see what we can do to improve, but one of the things that I think that we haven't seen since 2008, we had a once-in-a-century pandemic that did not lead to contagion of the financial variety. The regional bank failures of 2023, you know what didn't happen? They didn't spiral because of Dodd-Frank, the reforms in it,. higher capital requirements, stress testing, and the Volcker Rule. It worked as intended, even with the failed management, with what you said. Those practices that were put in place because of Dodd-Frank helped save more consumers who would have been victimized. Now, I'm really concerned, and I look at ways that we can try to fix a bill because sometimes bills change and move forward. One of the things that I was in favor of and I think that we could look at, and I think, Ms. Johnson, you talk about this, is how to get the politics out of this. Now, I was in favor and still am, and I believe you are, Ms. Johnson, in having a bipartisan commission. And I think that the CBA has talked about that so that we're not from administration to administration and things changing. I think that's something that we should be talking about here. I think that's really important. And I think you agree, Ms. Johnson, that there's a need, you recognize the need for a CFPB. Is that not correct? And please say yes so that it's on the record.

Mrs. Lindsey JohnsonSPEAKER_36

Yes.

Rep. Gregory Meeks (D-NY)SPEAKER_02

Okay. And I think you also understand—well, my question, my first question is, you know, under President Trump and Republican leadership, they wanted to zero out the Bureau, an effort that was slightly mitigated by the Senate parliamentarian. But what the administration tried to do was to cut the Bureau staff by 90% in just 24 hours. Now, do you think that reflects a regulatory approach that is grounded in facts and data, or is that just trying to get rid of an agency? Was this—yes, Ms. Johnson.

Mrs. Lindsey JohnsonSPEAKER_36

So the, the, um, I think what Congress ultimately did was a policy decision, uh, I'm sorry, a budget decision, not a policy decision.

Rep. Gregory Meeks (D-NY)SPEAKER_02

So, I'm just saying zeroing out, that was not done. Let me just go, because I'm running out of time. I want to ask Mr. Kelleher: Do you believe that the CFPB is being deliberately weakened under the guise of regulatory reform? And who stands to benefit from that, if that's the case?

Mr. Dennis KelleherSPEAKER_15

There's no question that the CFPB is being weakened, if not killed, for the purpose of benefiting the financial industry and making sure there is not an effective cop on the consumer beat standing up for Main Street Americans and having the power, authority, and funding to help them when they're getting ripped off.

Rep. Gregory Meeks (D-NY)SPEAKER_02

So we would go back to where we were before, where there would be no one there for the consumer. It was named the Consumer Financial Protection Bureau to protect the consumer, who has never had a voice before this Congress.

Chairman French Hill (R-AR)SPEAKER_16

I thank the gentleman. The gentleman yields back. The gentleman from Kentucky, Mr. Barr, the chair of our Financial Institutions Subcommittee, is now recognized for 5 minutes.

Rep. Andy Barr (R-KY)SPEAKER_30

Thank you, Mr. Chairman. Let me start just where my friend from New York left off. I was encouraged to hear my good friend from New York embrace the idea of a bipartisan commission. We have that bill in our package of reforms, and I would invite the gentleman, my good friend, to look at that to co-sponsor. I'd love to work with you on a bipartisan commission reform. Also, the gentleman expresses concern about our one big beautiful bill, which reduces the funding formula for the bureau. And I would encourage the gentleman and all my friends on the other side of the aisle to look at co-sponsoring my legislation that would allow them and us to reclaim the power of the purse over the agency. The TABS Act, the Taking Account of Bureaucrats' Spending Act, which would restore Congress's bipartisan and meaningful oversight over the bureau so that we would control the appropriations. So, I think the gentleman's line of questioning is timely because it gives us an opportunity in the Congress, on a bipartisan basis, to reclaim our oversight functions over the bureau. Ms. Johnson, let's talk about CFPB reform. Would you explain how my legislation, the Taking Account of Bureaucrats' Spending Act, which would subject the bureau to congressional appropriations, would enhance accountability and limit bureaucratic overreach?

Mrs. Lindsey JohnsonSPEAKER_36

I think that for far too long, the CFPB has not been accountable. We haven't had a commission. We haven't had consensus or dissenting views welcomed at the bureau. It's been by one director, and oftentimes they've got kind of ruling by fiat. So Congress hasn't had the authority and the visibility into the bureau. I think that they will be more responsive if there is an ability for you all to control the purse strings.

Rep. Andy Barr (R-KY)SPEAKER_30

And I appreciate your testimony endorsing my legislation to put some guardrails and definition around the abusiveness prong of UDAAP. Why is that important?

Mrs. Lindsey JohnsonSPEAKER_36

Look, Congress did create an exceptional standard for UDAAP with the CFPB, unlike FTC, unlike some of the other prudential regulators. And for far too long, it has been undefined, and entities that are regulated by the CFPB don't have the clarity needed to understand what constitutes an abusive act or practice, what constitutes and how that differs from, say, deceptive or unfair acts and practices. And then in addition to that, the CFPB has at times gone far beyond and really interpreted UDAAP into things that it never was intended for. Oftentimes, it actually decides one day that something is illegal or that it's a UDAAP violation when it was perfectly legal and acceptable and actually done by the entire industry the day before. Then it applies retroactively penalties to different institutions. Yeah It's just wrong.

Rep. Andy Barr (R-KY)SPEAKER_30

it's wrong. It denies Americans due process. And it's why the Bureau has such a black eye. It can be reformed into a much more professional agency, and that's also why we need to stop these roving fishing expeditions, these civil investigative demands, with no statutory violation or regulatory violation even alleged, just a fishing expedition with no due process. We need to reform that process as well. Mr. Bentsen, as you pointed out, Dodd-Frank ushered in over 400 new regulations and granted regulators like the SEC broad discretionary authority. Nearly 15 years later, many of these powers remain unused, yet their mere existence creates regulatory uncertainty. For example, Section 921(a) allows the SEC to ban mandatory arbitration clauses in securities contracts without any additional action from Congress. Congress has already weighed in on this issue. In 2017, we overturned the Bureau's mandatory arbitration rule, not just on procedural grounds, but because the evidence showed arbitration delivers better outcomes for consumers than costly, drawn-out class action lawsuits. That was a clear bipartisan message: Regulators should not restrict arbitration based on ideological or political agendas. And that's why I introduced the Business Owners Protection Act to repeal these unused powers, to provide legal clarity and enhance transparency and accountability at the SEC. Mr. Bentsen, how do these dormant but broad discretionary powers contribute to uncertainty and risk in the capital markets?

The Honorable Ken BentsenSPEAKER_22

Certainly with respect to things like predispute arbitration agreements, which is a mainstay in the securities world, and to your point, is very investor-friendly, very cost-efficient, and much, much more cost-efficient than court litigation, it is a little bit like a sword of Damocles hanging over you. So, we would agree with you that we're not sure why Congress felt the need to give the SEC the authority in this instance. And so, we would agree with repealing that.

Rep. Andy Barr (R-KY)SPEAKER_30

Well, there's a lot of dormant, unused authorities. If it's been 15 years and the SEC or other regulators empowered by Dodd-Frank have not acted, and Congress has sent a message to the contrary, we need to repeal those unused and dormant authorities. I yield back.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman yields back. The gentleman from Massachusetts, Mr. Lynch, the ranking member of our Digital Assets, Financial Technology, and AI Subcommittee, recognized for 5 minutes.

Rep. Stephen Lynch (D-MA)SPEAKER_10

Thank you, Mr. Chairman. I want to thank all of the witnesses for your willingness to come before the committee today. Mr. Bentsen, good to see you again, sir. Welcome. I want to associate myself with the remarks of the gentleman from California, Mr. Sherman, earlier today. We got somebody's phone going off here. Okay. Especially with respect to Mr. Sherman comparison to 2008 and the conditions that existed then and, and today where we have crypto week and some of the suggestions that— and bills that have come forward. Back then in 2008, we had some very complex and novel innovations. We had, you know, collateralized debt obligations. We had credit default swaps. We had all these complex derivatives that were the wonder of the day. And, and the financial services industry came to us and, and I think convinced a lot of members, not me, but a lot of members to support that whole regime. And we saw how it blew up. Today we have crypto, and even though it doesn't have any legal use case as yet, there's a lot of hype and there's a lot of support for it, and it has only accelerated since President Trump became a crypto issuer. And his family has got into the business as well. So I'm just concerned because I'm seeing the same, the same regulatory forbearance that I saw back in 2008 happen today. The SEC under Trump, they came in and said, We're going to rescind the guidance that we used to give banks about crypto. So, Mr. Kelleher, as you pointed out earlier, we've got some massive banks. You know, back in 2008, JPMorgan was $2 trillion. Now they're $3.4 trillion. So, now Trump's SEC is saying to the big banks, all the big banks, and there's at least five of them over $1 trillion, six of them over $1 trillion, close to $2 trillion. He's saying, Go ahead and get involved with a very volatile and speculative asset. And I just— I just— You know what I worry about? I worry about the American taxpayer being on the on the arm on this one. You know, back in 2008, I voted against it twice, but we had a huge bailout, over $700 billion. I had constituents in my district that didn't even have bank accounts, and they took their taxpayer money to bail out the people who caused the problem. I see that happening again. This is not going to end well. This is not going to end well. Crypto is still an immature technology, an immature architecture. It's not there yet. It's got huge gaps, huge problems. And yet we're rushing in, and it's not going to end well, and there's going to be a bailout required. So Mr. Sherman and I both had amendments during the debate over some of these bills to say, Okay, okay, if you want to be— you want to take risk for the banks and and and others, do it on your own dime. Hold the American taxpayer harmless. Take all that risk, but you're not getting a bailout. Every single Republican member voted against that. Every single Republican member said no. No, the taxpayer is going to stay on the hook. That's what worries me. If the banks were taking the risks on their own, but they're insured. They're insured. They've got, you know, they're just too big to fail. So, Mr. Kelleher, what do you think the consequences are going to be when it's necessary, when when when there's a a disaster on crypto and a bunch of these meme coins or or crypto assets go to zero, and there's a bunch of people that were led to believe by Congress that it was a safe bet, and they were led to believe by the banks that it was a safe bet, and then they're scrambling to recover their life savings. How's that going to go?

Mr. Dennis KelleherSPEAKER_15

It's the worst of all worlds because you're adding massive deregulation of financial institutions that are already too big to fail, and if they fail, they're going to get massive bailouts. And so on top of that deregulation, you're pouring the gasoline of the crypto industry, which by the way— and we've got a lot of materials on our website about this— are not even supported by the American people. They come up here and they claim they're supported by voters. We put out a Substack yesterday showing That's a false claim. So crypto plus deregulation equals disaster and bailouts.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time has expired.

Rep. Stephen Lynch (D-MA)SPEAKER_10

I yield back, Mr. Chairman. Thank you.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman yields back. The gentleman from Texas, Mr. Williams, the chairman of our Small Business Committee, is recognized for 5 minutes.

Rep. Roger Williams (R-TX)SPEAKER_09

Thank you, Mr. Chairman, and thank all of you for being here today. The biggest issue I hear from lenders in my district, from the great state of Texas, is the CFPB's 1071 small business lending rule. I've introduced legislation, H.R. 976, the 1071 Repeal to Protect Small Business Lending Act. And my bill will repeal the unnecessary and burdensome rule, protecting lenders from endless compliance costs and protects the small businesses who rely on credit to expand operations and meet the needs of their customers. Now, the CFPB's small business lending rule mandates that financial institutions collect and report sensitive personal data about small businesses' loan applicants. The implementation of 1071 is a direct threat to relationship banking and pushes lenders towards a standardized, one-size-fits-all loan process. These mandates subject smaller institutions to endless hours of compliance and paperwork and will decrease the amount of loans to small businesses that support their local economies. So, Ms. Johnson, can you elaborate on how Section 1071 of Dodd-Frank has created unnecessary regulatory burdens for all financial institutions, and and how will this negatively affect the relationship-based lending model for smaller community financial institutions that we've all had for years?

Mrs. Lindsey JohnsonSPEAKER_36

Well, it's a really important question, because banks really want to be able to provide the lending in their communities to the small businesses that fuel the overall economy. The requirements under Dodd-Frank were really for 13 data points to be collected. Took the CFPB a very long time to do that, because even that's going to be an extraordinary effort for all banks, not just small banks, for large banks. So I can only imagine how difficult this compliance burden will be for community banks. The CFPB went far beyond that, and 80-plus data fields would be required in the CFPB's final rule. It was almost impossible for a lot of banks to actually collect that data and to do it in a way that wasn't going to be used against them. That was the other concern. And so I heard multiple times many lenders say they may have to stop small business lending altogether, so it was going to be a hamper on the overall economy as well.

Rep. Roger Williams (R-TX)SPEAKER_09

When that happens, the economy gets smaller, not larger. Another major issue with Dodd-Frank that I hear about when I'm back home in North Texas is how complexity and cost of making a mortgage loan is simply too much for smaller community banks that do fewer than 20 per year. So this means handing off essential business relationships to another financial institution, which may not have as much flexibility or willingness to work with borrowers, especially in rural areas where this happens, where the loan may be unconventional. So, Doctor, can you expand on how overreach from Dodd-Frank has been a driving force in small financial institutions exiting the mortgage business altogether and killing, and hurting small businesses and individuals?

Dr. Paul KupiecSPEAKER_17

The ability-to-repay rules are complicated. There's a lot of rules related to originating and holding mortgages that have been instituted after the Dodd-Frank Act. They were, you know, designed to protect consumers, but they raise a lot of costs for banks. There's studies that show community banks have faced very large compliance costs. There are some cutouts for the rules for very small institutions that make just a few loans, but even there, it favors larger shops that can have big compliance staff that can do these sort of things, so it really does put community banks at a disadvantage for making these kind of loans.

Rep. Roger Williams (R-TX)SPEAKER_09

Well, as we always say, community banks hire more compliance officers now than loan officers, and that affects Main Street, America.

Dr. Paul KupiecSPEAKER_17

One thing that might be interesting is the effect of AI on the regulatory community. If you really think about so many things in the FSOC and other things are backward-looking, and if AI can digest all the connections and past data, then maybe maybe we can shrink the financial regulator staffs and still do the same job we're doing. It's kind of interesting to think about that when people talk about the CFPB and cutting staffs and thinking, has anybody thought about where we're going to go, and can AI actually do a lot of what the staffs currently do? If you think about what they do, they're not particularly prescient about looking forward and identifying risks. They're looking always backward at data, and we feed in all kinds of data. So just a thought.

Rep. Roger Williams (R-TX)SPEAKER_09

I've got limited time, so what specific policies from Dodd-Frank have caused a decrease in competition in the banking industry, and to you, Doctor, and what can Congress do to reverse the course and allow financial institutions of all sizes to compete and avoid consolidation?

Dr. Paul KupiecSPEAKER_17

There's been a trend in small bank consolidation for decades now. Dodd-Frank adds complex rules that don't make it any easier to be a community banker. I think rightsizing a lot of these rules would be helpful.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time has expired. Gentleman yields back. Gentleman from Illinois, Mr. Foster, the ranking member of our Financial Institutions Subcommittee, is now recognized for 5 minutes.

Rep. Bill Foster (D-IL)SPEAKER_04

Thank you, Mr. Chair and to our witnesses. You may not recognize it. This here is a pin for the 110th Congress. I entered Congress in March of 2008, and this is the pin I received. And so Lehman Brothers fell in October. I was up there in front as a junior member of the committee in the first row there. So I was just maybe 6 or 8 feet away from the when we had the famous hearing with 8 failed banks coming up telling us that we had to write them a great, big check or they were all going to be in trouble. So that sort of was my initiation into this thing. And on the 15th anniversary, I think we should think deeply about fundamental issues. One of them is why do we have financial services at all? It has three basic functions. One of them is to allocate capital, and at the time of the Well, the three basic functions: to allocate capital, to do so efficiently, and to control risk. And at the time, our system had failed dramatically at all three of those. The housing bubble was probably the biggest misallocation of capital in human history, because people were able to hide the true risk of non-repayment of these mortgages. The efficiency, well, in the run-up to the financial collapse, the lion's share of corporate profits were in financial services, and that tells you right there that we were not running an efficient financial system. And that's very related to many of the abusive practices. None of you have mentioned the CARD Act, the credit card reforms that were just doing unbelievable things to consumers just to gouge them for money, people in vulnerable positions. And then its third function of controlling risk, that's I think enough is said about that. And I think it's very significant. I was in those the dog days of trying to deal with this: first, to the emergency bailout that we had to vote for, then the stimulus of the economy, and then the Dodd-Frank rules of the road that we, I think, did our best to implement. My goal in that, I always tell myself that my goal was to die before we had another financial crisis. And we've come pretty close to that. What happened a couple years ago? Okay, it was a crisis, but it was minuscule on the scale of what happened in 2008. And so the discussion we've been having in the 15 years since then, there are two big buckets. The first one, to my mind, is systemic risk and with bank leverage at the very heart of that. And then there's the second thing has to do with consumer protection, and that has to do very much with the discussion of the maldistribution of wealth in our society. And that the politics gets mixed up there. But I'd like to just talk about systemic risk. The battle we cannot lose is bank capital on that. That was the thing. When I discovered as a member, junior member, that the giant investment banks like Lehman were levered 30 to 1, I just said that can't be the right number. What's the right number? No, in fact, that was the right number. And the fact that anyone thought that was okay was just mind-boggling to me. And so when in the 15 years since, when bank CEOs come into my office, nine times out of 10, they have a complicated argument about why they want to lever up. Okay, and so it takes a while to analyze these arguments, but we have to really understand the fundamental role of good bank capital requirements. And if you look at the comparison that gets made, we had long discussion about the Basel III endgame on this, comparing to Europe, we had higher bank capital requirements, and that should have crushed us, right? No, in fact, the U.S. banking system went from being on its back at the end of the financial crisis and a source of ridicule to the rest of the world to the dominant, financial enterprises in the world. So, we've done pretty damn well with really high, strong capital requirements. That's the battle we can't lose. The other one has to do with technology. If you just look at, I think it was Ben Bernanke that referred to AIG as a well-run, traditional insurance company with a hedge fund grafted onto it that was playing in all these new derivative games and providing credit default products to all the European banks, and in such an interconnected way that if AIG went under, the European banks would be in violation of their capital requirements and have a huge contraction in Europe and around the world. So these things, these are really the heart of this. The FSOC Improvement Act, which talked about here, I believe that I've been working on this for years, and an activity-based approach is the right one. And the arguments that I hear against it that are hardest for me to get my arms around are the We have to be sure that this cannot be an excuse to drag out the process for a long time. So with that one thing, I really

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time has expired, and I encourage the panel to follow up on Dr. Foster request for information. The gentleman from Ohio, Mr. Davidson, the chair of our Subcommittee on National Security, recognized for 5 minutes.

Rep. Warren Davidson (R-OH)SPEAKER_19

Thank you, Chairman, for doing this hearing. Thank you for our witnesses for being here today and the work you've done to prepare it. And frankly, the work you've done in in many ways in the private sector and in think tanks and whatnot to contribute to the discussion today. So, Dodd-Frank was sold as a fix to the 2008 financial crisis, but honestly, it's it's been pretty bad for markets. It's probably been worst of all for student loans. The federal government took over student loans as part of that process as well. And that's that that should indicate how bad this bill has been. It's gone about as badly as the student lending takeover has gone. It's choked off investor access, stifled capital formation, buried small banks under compliance costs that only the Wall Street giants can afford. Worst of all, it's created more bureaucracy, often in the name of helping consumers, like the CFPB. One of the biggest ways consumers are being exploited is their data is being harvested, monetized, and exploited in all kinds of ways. CFPB has done nothing to modernize privacy and data protection. And when you look at Dodd-Frank regulations that have pushed regulators to hike capital and liquidity rules, mandate stress tests that have choked off capital to small businesses, it's really had a big negative impact in our economy. So let's focus first on Basel III endgame. Mr. Bentsen, Dodd-Frank was supposed to tailor regulations to the actual risks of each bank. So how can anyone justify Basel III's one-size-fits-all capital standards?

The Honorable Ken BentsenSPEAKER_22

Thank you, Congressman. So Basel III is supposed to be the last— the Basel III Endgame and Fundamental Review of the Trading Book are supposed to be the last component of the capital and liquidity enhanced capital rules under Title I of Dodd-Frank. The problem with the proposal that's put forth is that we already are at historically high levels of capital. Mr. Foster Dr. Foster was sort of talking about that, where we were and where we are today. The way that rule was originally proposed would increase the total aggregate amount of capital for the largest institutions beyond their already historical levels. And then to your point about the impact on business financing and lending is it would directly impact the trading book and raise capital in exorbitant amounts, which would definitely have a knock-on effect to small business lending and a negative consequence. So it really needs to be reworked.

Rep. Warren Davidson (R-OH)SPEAKER_19

Yeah, thank you for that. We tried with S. 2155 to do some tailoring, but often the regulators have really pushed a different approach and used Chokepoint tactics in other ways to really limit capital formation in the private sector, certainly limit it for small businesses in disfavored industries or disfavored individuals. Another—excuse me—another troubling development is the Fed's payment on interest. So, prior to the '08 financial crisis, just prior to that, they changed the rules. And before, when banks wanted to earn interest on their reserve requirements, they had to manage their own book. They had to buy Treasuries or whatever to earn a return, but they had to hold that capital in reserve. Now, the Federal Reserve is paying interest, not just on the required reserves, but on excess reserves. And when interest rates were 50 basis points, there wasn't a massive motivation to hold excess capital there, but when interest is over 4%, they're making 440 basis points, more than double what a normal rate for a management fee is for a hedge fund. They're not deploying their capital. And concurrent with Dodd-Frank and this change in interest rates, you've seen a massive growth in non-bank lenders. So, Mr. Kupiec, could you explain kind of the implications of that, where the capital is held with the reserve requirements, excess reserve requirements, the central bank, in a way, is providing a disincentive? Why would banks want to loan at 6% to small businesses when they can get 4.40% for doing nothing?

Dr. Paul KupiecSPEAKER_17

Well, the Fed, as you point out, changed its operating procedures in 2008, in the fall of 2008. Paying interest on reserves was a way, when the Fed did their quantitative easing and bought all these securities, to keep the banks from lending it out and causing inflation. So, interest on reserves has become a key part of the way the Federal Reserve does monetary policy, and as you mentioned, unfortunately, now it requires the Fed to pay banks billions of dollars in interest on their reserves every year, and it causes the Fed huge losses. But they're kind of locked into that right now.

Rep. Warren Davidson (R-OH)SPEAKER_19

They're over $100 billion per year right now. And when you look at it, big businesses have access to the bond market. Small businesses are being denied loans. And that's why you see the growth in non-bank lenders. We really need to relook this. And I applaud the chairman for creating a task force to look at it. Thank you. And I yield back.

Chairman French Hill (R-AR)SPEAKER_16

gentleman, time has expired. The gentleman from California, Mr. Vargas, who is our ranking member on the Monetary Policy Task Force, is recognized for 5 minutes.

Rep. Juan Vargas (D-CA)SPEAKER_05

Thank you very much, Mr. Chairman and Ranking Member, and also for all the witnesses here today. Two things around here seem to be assured. One, my friends on the opposite side of the aisle, Republicans, always say they're deficit fighters. They're not going to raise the deficit and they're not going to increase the debt. That's what they always say. And then of course, they increase the deficit and they increase the debt. It's exactly what they do, and then they walk away as if they didn't do it. It's like when you watch the sports, it's a late hit in football and then they walk away like, I didn't do it. Yeah, you did. Everyone saw it. It's on video, baby. Everybody saw what you did. And that's one of the things that's always assured here. The second thing that's always assured is they cry for deregulation. We want to deregulate. We have to deregulate. And then they come up with some some crazy financial instruments that that don't work well, there's a collapse, and they do the same thing. They walk away once again like, No, no late hit here. I didn't do that, and they forget all about it. We saw that in 2008 with the financial collapse. We just saw it again with their big ugly bill. And unfortunately, I think we're going to see it with crypto here. Mr. Kelleher, could you comment on that?

Mr. Dennis KelleherSPEAKER_15

No, you're right. It's a huge problem because they're not just walking away. There's zero accountability, and the problem with zero accountability is you create moral hazard and you actually incentivize people to take bigger risks because they don't bear the downside. It's the problem with too big to fail. Everybody rails about federal bureaucrats, bureaucrats, bureaucrats. But in 2008, they ran in here with their hands out, looking for money from those bureaucrats. 2023, they didn't run to Wall Street saying, Help us save the banks. They came to the federal regulators, the bureaucrats that are getting bashed all the time, who can't do anything right until they want them to ladle out the bailouts for their misconduct and for their high-risk activities. They took the bonuses. They're happy to get the bonuses in good times, then they're shifting the costs through bailouts to the American people. They did it in '08. They did it in 2023, and that's going to happen again in the future with the deregulation supercharged by unregulated crypto.

Rep. Juan Vargas (D-CA)SPEAKER_05

I agree, and it's going to happen once again, as it always does. They're going to walk away and say, We didn't do it. Now, Mr. Bentsen, I don't want to pick on you, but I do want to I do want to quote you. In your written testimony, you argue that, quote, "many of the policies required by Dodd-Frank or promoted in the aftermath of the financial crisis have made the U.S. financial system stronger and more resilient today than it was in 2010," end of quote. Now, I heard the parade of horribles by the chairman at the beginning, how horrible Dodd-Frank was, and you didn't seem to parade that horrible here. Could you, could you explain yourself? Oh, it's—

The Honorable Ken BentsenSPEAKER_22

I think it was me.

Rep. Juan Vargas (D-CA)SPEAKER_05

It's Mr. Bentsen, you're the one that I quoted.

The Honorable Ken BentsenSPEAKER_22

I should note that I first met the the congressman when he was the— I testified before a joint committee of the Senate and the Assembly in California, and he was chair of the of the California Senate Banking Committee on the— and I think it was whether or not California should adopt its own Dodd-Frank Act. My testimony was short. The answer was no. There are certain things for sure that we think that Dodd-Frank did provide more, more resiliency to the system, addressed areas such as in the swaps market, capital, levels of quality,

Rep. Juan Vargas (D-CA)SPEAKER_05

So was it a good idea or a bad idea? But— No, no, no, no, no, no. I'm not going to but here. Was it a good idea? Because I have limited time. Was it a good idea or a bad idea?

The Honorable Ken BentsenSPEAKER_22

There

Mr. Dennis KelleherSPEAKER_15

were some parts that were good ideas and there were some parts that were not good ideas.

Rep. Juan Vargas (D-CA)SPEAKER_05

Okay Kelleher, is it a good idea, a bad idea? Yes,

Mr. Dennis KelleherSPEAKER_15

Dodd-Frank?

Rep. Juan Vargas (D-CA)SPEAKER_05

Yeah.

Mr. Dennis KelleherSPEAKER_15

Dodd-Frank was absolutely essential at the time, and the interesting thing is Dodd-Frank was actually bipartisan legislation. It was a partisan vote, but Dodd-Frank, as you all know from the 20 days of the conference, many, many, many Republican provisions are throughout Dodd-Frank, as does my friend Ken Bentsen know.

Rep. Juan Vargas (D-CA)SPEAKER_05

They forget, like they always forget and walk away. But the other thing I find interesting, we had a bunch of bankers one time, and I asked the same thing of the bankers. You know what the bankers said? It was generally a good idea. You know, there's some things that we thought were good. There's some things they didn't like. But now we have the parade of horribles, like it's the worst thing in the world. Now, the worst thing in the world is when the American people have to bail out the damn banks, because these rich guys make all this money, and these guys allow it to happen. And then they, they simply put the cost on all of the consumers, all the United States taxpayers, and you let the, the fat cats get away with it. And that's the problem. With that, I yield back.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman yields back. Gentleman from Tennessee, Mr. Rose, is recognized for 5 minutes.

Rep. John Rose (R-TN)SPEAKER_18

Thank you, Chairman Hill and Ranking Member Waters, for holding this hearing. And thank you to our witnesses for taking time out of your schedules to be with us. Mrs. Johnson, small businesses are incredibly important to Tennessee's economy. They make up the majority of all companies in the state and are considered the backbone of the economy. These businesses not only create jobs, but also foster innovation and contribute significantly to the local communities. Section 1071 of the Dodd-Frank Act requires lenders to compile, maintain, and report information regarding loan applications made by certain businesses. Unfortunately, I understand that implementation of these requirements, based on a rulemaking under the Biden-era leadership of the CFPB, can be an enormous undertaking. The compliance burdens could result in some lenders choosing to terminate their small business lending programs altogether due to compliance costs. I would like to touch on Chairman Hill H.R. 941, the Small Lender Act. This bill would reduce the definition of a small business for purposes of 1071 reporting from $5 million to $1 million. Can you discuss how this bill would better focus the scope of 1071 reporting and how it would also ultimately benefit small businesses that are seeking access to hire more employees and expand their operations?

Mrs. Lindsey JohnsonSPEAKER_36

Absolutely. Well, small businesses, as you know, are the backbone of the economy. They hire the vast majority of employees throughout the country, and banks want to lend to them. And so it was extremely problematic. CBA represents institutions $10 billion and above, for the most part. I can tell you from some of the very largest institutions that do a significant—some of the largest small business lenders in the country, that this was a compliance nightmare and a cost nightmare. So for smaller institutions, it was going to be even more burdensome. I think the stretching of the requirement under Dodd-Frank from 13 data fields to 80-plus data fields was exorbitant. And so I think that the bill that Chairman Hill has introduced, the Small Lender Act, is very, very needed to reduce the reporting requirement from $5 million in annual revenues to $1 million in annual revenues that will better capture small businesses this bill is intended to capture.

Rep. John Rose (R-TN)SPEAKER_18

And Ms. Johnson, as you may know, one of my bills, H.R. 2885, the Bank Loan Privacy Act, which has been attached to today's hearing. I was proud to introduce this legislation, which would require the CFPB, before modifying or deleting any personal information collected under Section 1071, to engage in a formal rulemaking process with advance notice and public comment. Specifically, the rule would need to include a description of the intended modifications or deletions and an explanation for how these changes serve a legitimate privacy interest. In your view, would this legislation help ensure greater transparency and accountability in how the CFPB handles sensitive personal data under Section 1071?

Mrs. Lindsey JohnsonSPEAKER_36

It's extremely important. The data fields that are required under 1071 are personal identifiable information, so anything that they are doing in terms of collecting this information or changing or deleting that information, it should go through a notice and public comment period. Banks will want to provide feedback and input and make sure that it's done correctly.

Rep. John Rose (R-TN)SPEAKER_18

And Mr. Chairman, I ask unanimous consent to have a letter from the Independent Community Bankers of America supporting the Bank Loan Privacy Act inserted into the record.

Chairman French Hill (R-AR)SPEAKER_16

Without objection.

Rep. John Rose (R-TN)SPEAKER_18

Mr. Bentsen, in your prepared testimony, you had noted that large banking organizations are subject to up to 19 separate capital requirements and five separate liquidity requirements. Can you discuss the negative effects on the US banking system of so many duplicative capital and liquidity requirements?

The Honorable Ken BentsenSPEAKER_22

Probably the most consequential impact is the interrelation and the lack of coordination of these different requirements. Requirements So I've talked about the stress test and how it doesn't comport well, for instance, with the Basel III endgame. So when you have this many different items, not only do you drive up compliance requirements and compliance costs, you have to look and see how all of these capital and liquidity rules interact together. Again, as I mentioned, next week, the Federal Reserve is holding a conference which is looking at all of the capital and liquidity reforms that have been implemented since the Great Financial Crisis. And this is a good start for prudential regulators to sort of think about, how do all of these rules stack up together?

Rep. John Rose (R-TN)SPEAKER_18

Thank you. And with the remaining moments, I'll just I'll just tell a story. This morning at a breakfast, I was eating a cinnamon roll, Mr. Chairman. It had a little nut on it with some icing, and it tumbled off and down the front of my suit. It hit my shirt, my suit jacket, and my suit pants. That's the way I feel about Dodd-Frank at this point. A lot of unintended consequences, and they're not good.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman yields back. I hope you change clothes. We now turn to the gentlewoman from Ohio, Mrs. Beatty, who's the ranking member of our Subcommittee on National Security. You're recognized for 5 minutes.

Rep. Joyce Beatty (D-OH)SPEAKER_00

Thank you, Mr. Chairman and Ranking Member, and thank you to all of our witnesses today. Certainly, as you have witnessed and you have heard, we're here because Dodd-Frank turns 15, and we're here to take a closer look at the last 15 years of Dodd-Frank. And I'd like to walk you through some of the benefits we've seen since the law has been enacted. Certainly, we will recall and know before Dodd-Frank, predatory mortgage lending was rampant. Consumers were vulnerable to unfair and abusive practices with no recourse. And financial institutions were subject to disjointed regulatory and supervisory framework that created dangerous gaps in oversight and accountability. We also know, as my colleague Mr. Vargas pointed out, what happened in 2008 and what happened with the banks and where people came and the crises that were— we were in. And certainly, as we have witnessed from you, we all have a different view. I've never thought of it as a cinnamon roll and a nut and how it bounced off and what it did to his suit. I'm not even sure that I got it, but that is another view that my colleague has presented. And certainly I have a different view of what it has done, especially in the areas that you work: what it's done for financial stability, what it's done for accountability, what it's done for protecting our consumers. I think it's also worth noting that since Dodd-Frank, we haven't had any wide scale to the magnitude of 2008 financial crises. Certainly we've had some, but the law has worked, in my opinion. So, Mr. Kelleher, in the last several months, we have unfortunately seen that many federal agencies have chosen to overcomply with the administration's executive orders around diversity, equity, and inclusion. And let me kind of take you back again through history and remind you of Section 342 in the Dodd-Frank Act, which we are so fortunate that Congresswoman Maxine Waters played a lead role in Dodd-Frank in creating Section 342, which was the establishment of the Office of Minority and Women Inclusion, or as we refer to as OMWI, at our financial agencies, which is charged with promoting diversity and inclusion within the agencies and their regulated entities. Mr. Kelleher, what impact will these attacks on diversity, equity, and inclusion have on policymakers' ability to address the racial wealth gap and ensure that there are truly equal opportunities to get ahead for all Americans?

Mr. Dennis KelleherSPEAKER_15

I think everybody recognizes in the—certainly in the private sector, the value and importance of diversity, multiple voices, and people with different experiences at the table. And that's certainly true at the financial regulatory agencies and the financial institutions that they oversee. And we can see that by the identification and addressing of the predatory targeting of certain communities, communities of color, low-income communities, and others. And those communities are not visible often at the financial regulators when the people at the financial regulators don't have any visibility or experience in those communities. And the OMWI offices have been critical junction points in making sure that those issues are maintained a priority both within the agencies and within the regulation, the regulated entities that those agencies are focused on. And the more people are aware of the breadth of our communities, the people and their experiences, the more that they—rules can actually be tailored appropriately. And that's why, one of the reasons the racial wealth gap wasn't talked about, wasn't visible for many years. And it wasn't visible because people who are actually on the wrong end of the wealth, racial wealth gap weren't represented in the regulatory agencies, and even in policymaking more broadly. And the identification of that and addressing that through various regulations and laws has been critical. But diversity is what has driven that.

Rep. Joyce Beatty (D-OH)SPEAKER_00

Thank you. My time is almost up, but let me just thank you for that and also say, although that Dodd-Frank made some great progress, there's no doubt that this country still faces persistent disparities in access to credit, access to safe and affordable credit. Mr. Bentsen, we've had the opportunity with SIFMA to work together. Have you seen in financial literacy, in your work, the difference it makes when you're more inclusive?

The Honorable Ken BentsenSPEAKER_22

First of all, Congressman, I want to thank you and Congresswoman Kim for the work that you all do on financial literacy. That's very important. And for your engagement with the SIFMA Foundation. Absolutely, the foundation has seen the spin-off of increased financial literacy impact on students.

Chairman French Hill (R-AR)SPEAKER_16

Gentlewoman's time has

The Honorable Ken BentsenSPEAKER_22

expired, and we'll answer for the record.

Rep. Joyce Beatty (D-OH)SPEAKER_00

Thank you so much. I yield back.

Chairman French Hill (R-AR)SPEAKER_16

commend you both on the financial literacy partnership. We now recognize the gentleman from South Carolina. Mr. Timmons, you're recognized for 5 minutes.

Rep. William Timmons (R-SC)SPEAKER_26

Thank you, Mr. Chairman. I want to thank all the witnesses for joining us today to examine where 15 years of Dodd-Frank has gotten us. I want to begin by addressing the CFPB and the unchecked regulatory power that its past director wielded to impose his personal worldviews on the agency. The constant pendulum swings in leadership direction between administrations, combined with inconsistent rulemaking, have made it challenging for well-intentioned businesses to operate and thrive under its oversight. As I've mentioned before, just hours before Director Chopra was removed from his position, the CFPB sent out a wave of civil investigative demands to businesses across the country at 5:30 p.m. on a Friday evening. I think we all know that no CFPB employee is working at 5:30 on a Friday. These actions were not based on legitimate grounds. Rather, they appear to be a final attempt by the former director to make a statement, sowing confusion and panic on his way out the door. Ms. Johnson, given the notion that the CFPB cannot be fully dismantled and that we cannot return to pre-2010 status quo, where do you see Congress stepping in to ensure the bureau stays focused on its core mission and does not allow a rogue director in the future to expand its authority beyond that purpose?

Mrs. Lindsey JohnsonSPEAKER_36

Well, thank you for the question. I think it's going to be essential for us to take the opportunity and see what works and what doesn't work. And I think we've seen over the last 15 years that the CFPB, even as I think it's by some bipartisan recognition, it's been political, it's been driven by polling at times. To your point, they rush things out the door even after an election, like the overdraft rule, which was significant. I think the biggest things we can do is better define our UDAAP authority so that companies, banks in particular, have certainty about how to comply and and what it means to comply. I think the second thing would be creating a rigorous cost-benefit analysis for the CFPB. They don't take into account the true cost to consumers when they're issuing different rules, whether it's credit cards, which are the number one way to access the financial system, or whether it's overdraft, where you've got people on the margins who really rely on this product. It's— again, these are really critical lifelines for a lot of consumers, and I think those would be two very significant steps. There are a number of other things that we recommend in our testimony, too.

Rep. William Timmons (R-SC)SPEAKER_26

It was about a year ago when Director Chopra was here, and I told him that given the potential outcome of the November election, it would be in my colleagues across the aisle's best interests for us to implement some reforms so we can stop the pendulum from swinging back and forth. Obviously, that wish was not heeded, so we now have an opportunity to address this going forward. To that point, are there specific regulatory tools or enforcement powers the CFPB should be leveraging more aggressively to deter repeat offenders and large-scale scam operations?

Mrs. Lindsey JohnsonSPEAKER_36

On the on the fraud and scam situation? Yes, absolutely. CBA and actually you all have been a phenomenal lead in in heeding consumers' plea for help on being scammed out of their own money. And for far too long, it's often been finger-pointing from the CFPB, when they actually have as one of their core, six core missions, to help educate consumers so that the consumer can make informed financial decisions. You all are taking a leadership role in this. You've you've co-sponsored the GUARD Act, which will direct a whole-of-government, a more whole-of-government approach. It'll provide the resources necessary to law enforcement to be more engaged on this front. Banks spend billions of dollars and millions of man-hours to help protect consumers from being scammed out of their own money, but these things are often originating outside the banking system. They're from telecom and social media, from state actors. We need a whole-of-government approach. I really commend you and your colleagues for taking a lead here.

Rep. William Timmons (R-SC)SPEAKER_26

Thank you for that. I think we have an opportunity for some bipartisanship to get the CFPB back to its core mission, and to not regulate by enforcement, and to create predictable standards that businesses and banks can then meet. And I think that if we can create the predictability and seek out the bad actors without tying everyone else up with endless attorneys' fees and compliance costs, that that's the path forward. My goal is for America to lead in all sectors of financial innovation by creating an environment where consumers have full control over their own financial data. And for this to work, customers should be able to share their information seamlessly and securely with the applications of their choice, empowering them to access a wider range of financial services tailored to their needs. This requires a balanced approach that promotes innovation while ensuring strong privacy protections and cybersecurity standards. I think that we have an opportunity this Congress, next Congress, over the next three, four years to to bring balance to something that we're not going to get rid of. So I look forward to working with my colleagues across the aisle in that endeavor. And with that, Mr. Chairman, I yield back.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman yields back. The chair recognizes the gentleman from Illinois, Mr. Casten, the vice ranking member of the full committee. Five minutes.

Rep. Sean Casten (D-IL)SPEAKER_27

Thank you, Mr. Chair. So I would I would submit to you that there is only one lesson to be learned from every financial crisis. It's always the same lesson, and we have never learned it. And the lesson is that if you've got something on your balance sheet that's risky and you'd like to sell it, it is in your interest to have deep, liquid markets of unsophisticated offtakers. That was the S&L crisis, and it was certainly the housing crisis. I mean, the housing crisis, right, we had risk in subprime mortgages. Well, we offloaded those by bundling them into mortgage-backed securities. That got risky, so we offloaded those into credit default swaps, default swaps. And and then we figured out that if we could put those on over-the-counter markets, we could get less transparency, less regulation, and it was all good until it wasn't, and then it took everything down with it. Now, if we had learned that lesson, we wouldn't be voting on all this crypto crap this week, but we haven't learned that lesson. So, I want to just understand because, specifically in Dodd-Frank, there was this effort to create joint SEC-CFTC jurisdiction for some things that had run away from the supervision of SEC markets into less disclosure-intensive CFTC markets. Specifically, like if you had a, a derivative tied to a security, it had to be inside the SEC. So, Mr. Bentsen, I want to just get some clarifying questions from you. If Microsoft were to custody their own stock and then issue a token that tracked that stock without granting ownership or redemption rights, would that be a derivative?

The Honorable Ken BentsenSPEAKER_22

So, you're asking prospectively, you're not asking with respect to Dodd-Frank, right?

Rep. Sean Casten (D-IL)SPEAKER_27

I'm saying right now under current law, would that be a derivative if they issued their stock as a token without granting ownership or redemption rights out of Treasury?

The Honorable Ken BentsenSPEAKER_22

Yes, I think that's right.

Rep. Sean Casten (D-IL)SPEAKER_27

Okay, and that's not just if it's Microsoft, right? If an investment company did that out of stocks that they controlled, that would also be a derivative.

The Honorable Ken BentsenSPEAKER_22

Again, you'd have to look, but if you're not transferring all the rights of ownership that you would have with the individual equity, then it would be like—

Rep. Sean Casten (D-IL)SPEAKER_27

Okay I agree, and for the record, I think we both agree with Hester Peirce, the Republican SEC

The Honorable Ken BentsenSPEAKER_22

And that actually goes beyond Dodd-Frank back to the Commodity Futures Modernization

Rep. Sean Casten (D-IL)SPEAKER_27

Yeah. Because Hester Peirce has just said that tokenized shares don't offer ownership of the underlying asset, then in that case, it's a security-based swap and shouldn't be traded at retail. That matters because in the CLARITY Act that's coming through this week, section 202 specifically says that if you if you tokenize a security and raise $50 million or less, all of a sudden you can get out of SEC jurisdiction. Like unanimous consent to enter into the record an article in today's Wall Street Journal, Want to Trade Amazon on Crypto Exchange? The Price Might Be Off by 300%. Percent, excuse me. It says that the tokens of Amazon today are trading at as much of a 300% premium over the stock price. That does not suggest an efficient market. I've got one example on Jupiter where it's over 100 times above the the stock price. So, so I guess, Mr. Kelleher, if we've got the SEC commissioner saying this shouldn't really be sold at retail, we seem to have agreement on this committee that that that is a derivative that should be subject to the SEC, and yet we are going to vote this week to say let's not have the SEC regulate these tokenized securities, which are, according to today's Wall Street Journal, massively inefficient. Um, is that a good idea? Should we be concerned about that, or have we, in fact, learned nothing from Dodd-Frank?

Mr. Dennis KelleherSPEAKER_15

Everybody should be concerned about that. I mean, it's been said repeatedly that we've got the most liquid best capital markets in the world that are the envy of the world. But that's only true because they are well-regulated and well-policed. That causes the faith and trust of investors worldwide to put their money into our markets. It's not preordained or predestined to always— for us to always have the best markets in the world. And when you pass laws that have ambiguities, carve-outs, and loopholes that evade the most fundamental parts of our securities laws that make them well-regulated and well-policed, then you not only open loopholes for companies and financial predators and illegal and bad conduct that creates consumer risk as well as financial stability risk, you would literally endanger the entire capital formation allocation system and the status of our capital

Rep. Sean Casten (D-IL)SPEAKER_27

market. I mean, it strikes me like if I was gonna raise money today, I would raise smart— a little bit of smart money on functioning equity markets, and then I'd lever it up with done money on the token, right?

SPEAKER_UNKNOWN

I

Rep. Sean Casten (D-IL)SPEAKER_27

It seemed like a smart thing to do. Look, I'm about out of time, but just because you raised the police, you're reminding me that I remember when Gary Gensler first came into his job, he came to my office and talked about what he wanted to do on on crypto regulation. I said, you know, you have two problems. Your advantage is that the Wild West needs a sheriff. Your disadvantage is that everybody in the Wild West likes to shoot the sheriff. And my Republican colleagues' commitment to defunding the white-collar police has been noted.

Chairman French Hill (R-AR)SPEAKER_16

Gentleman's time has expired. The gentleman from Montana, Mr. Downing, you're recognized for 5 minutes.

Rep. Troy Downing (R-MT)SPEAKER_20

Thank you, Mr. Chair. First, I'd like to submit this letter from the National Association of Manufacturers for the record.

Chairman French Hill (R-AR)SPEAKER_16

Without objection.

Rep. Troy Downing (R-MT)SPEAKER_20

Thank you, Mr. Chair, and thank you for the witnesses. There's this saying that just because you're not interested in politics doesn't mean politics isn't going to be interested in you. The first time I ever came to D.C., I was basically issuing Regulation D exemptions, securities, and had an investment banking group, a broker-dealer, and this thing called Dodd-Frank was coming down the pipe, and that's the first time I ever climbed in an airplane and flew to D.C. to make sure people understood how that affected me, my business, my investors. And I think that in reaction to the crisis of the time, that pendulum swung. I think it swung a little too far and picked up a little too much baggage, and I think there's an opportunity to right-size that, and I think there's a need to right-size it. I'm going to start off, I've heard from many of the banks and credit unions in my district across Montana just how harmful Dodd-Frank has been. One bank plainly told me that the creation of the CFPB has been the most negative and costly provisions of Dodd-Frank. Another small bank told me they've gone from one compliance officer before Dodd-Frank to four today, drastically increasing costs. I've heard similar stories on Rule 1071 specifically. And in 2008, Montana had 64 state-chartered community banks, 64. Today, there's 33. I'm going to start with Mr. Kupiec. Hopefully, I said that right. I apologize. Is it fair to describe Dodd-Frank is as irresponsibly pushing bank regulations into a one-size-fits-all model where the balance sheets of all banks look the same?

Dr. Paul KupiecSPEAKER_17

It's not exactly one-size-fits-all. The largest banks are subject to different rules than the smaller banks. I think the crux of it all, though, is the regulations that have been put in place are very complex, very expensive, and they don't do what what they were supposed to do. They don't work as advertised, and I think taking the time to right-size some of these regulations would be a good thing.

Rep. Troy Downing (R-MT)SPEAKER_20

Do you believe that this hurts smaller players and innovators the most who specialize in their local communities?

Dr. Paul KupiecSPEAKER_17

Small banks have been consolidating for decades, but it's certainly the compliance cost if you have a small bank, and you can't spread the compliance costs across a big business like you can if you're Jamie Dimon and JPMorgan.

Rep. Troy Downing (R-MT)SPEAKER_20

Thank you. I'm going to move to Rule 1071. Ms. Johnson, do you think the consequences of the CFPB's 1071 final rule will be especially pronounced in rural communities who already struggle with limited lending capacity?

Mrs. Lindsey JohnsonSPEAKER_36

I do, yes.

Rep. Troy Downing (R-MT)SPEAKER_20

Well, thank you. I'm going to switch quickly to mortgage lending. A bank in Montana recently told me Dodd-Frank's mortgage lending rules have made mortgage lending far more burdensome for the lender and more confusing for the borrower. In fact, the bank told me Dodd-Frank's regulatory requirements have caused many rural banks to get out of the mortgage lending business entirely. So I'm going to go back to Mr. Kupiec. Do you think Dodd-Frank's qualified mortgage rule has been successful in reducing systemic risk in the mortgage sector—excuse me, mortgage sector?

Dr. Paul KupiecSPEAKER_17

The rule and the ability-to-repay rules are complicated, and they certainly impose a lot of compliance costs on banks. And again, small banks don't have the staff. And so it has caused a lot of small banks to get out of the business. It's kind of the inflation we've had in housing prices recently, the higher mortgage rates, the QM the QRM rules, they're being stretched to allow higher debt-to-income ratios and things like that. So, and the GSEs are funding loans with higher debt-to-income ratios. So we're letting the risk of underwriting build up to accommodate lending. And so in essence the rules in some sense aren't doing what they were designed to do: protect people from taking out loans they can't afford. But now, given the housing price inflation and the high mortgage rates, policymakers are pushed to allow more people to qualify for loans, and there's a trade-off there.

Rep. Troy Downing (R-MT)SPEAKER_20

Thank you. I'm going to switch off in my remaining time. I'd like to highlight another issue I'm very passionate about, which is eliminating the Federal Insurance Office, which was established by Dodd-Frank to monitor all aspects of insurance. The Federal Insurance Office, I believe, should be eliminated. The McCarran-Ferguson Act of 1945 makes clear that states have sole regulatory authority over the insurance industry, and the Biden administration has weaponized the Federal Insurance Office pursuing politicized data calls on climate rather than looking for ways to make the insurance sector operate more

Chairman French Hill (R-AR)SPEAKER_16

The gentleman's time has expired.

Rep. Troy Downing (R-MT)SPEAKER_20

I yield, Mr. Chair. Thank you.

Chairman French Hill (R-AR)SPEAKER_16

The gentlewoman from Michigan, Ms. Tlaib, you're recognized for 5 minutes.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

Yeah, thank you, Mr. Chairman. I hope I can ask all of you a simple question. In 2008, do you believe shadow banks that took on short-term liabilities played a huge role in the financial crisis? I'll start with you, Mr. Bentsen.

The Honorable Ken BentsenSPEAKER_22

I'm not sure exactly how you want to define shadow banks. Yes or no? But there was no question that there were liquidity problems

Rep. Rashida Tlaib (D-MI)SPEAKER_37

that had been addressed. Exactly, like banks are not banks. Yes. Yeah. How about you, Ms. Johnson?

Mrs. Lindsey JohnsonSPEAKER_36

Yes, outside the regulated system.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

Yeah.

Mr Tom QuaadmanSPEAKER_21

A housing crisis that morphed its way throughout the economy.

SPEAKER_UNKNOWN

Yeah.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

Well, I was talking about shadow banks, folks that acted like a bank, took on short-term liabilities, was one of the main causes of the 2008 financial crisis. It's okay, Doc, you don't have to answer.

Dr. Paul KupiecSPEAKER_17

I don't—

Rep. Rashida Tlaib (D-MI)SPEAKER_37

It's okay. Hey, it's still happening. It's going to happen. And Dodd-Frank didn't come from, like, thin air.

Mr. Dennis KelleherSPEAKER_15

There's no question by any objective observer that nonregulated shadow banks contributed significantly. Unregulated Lehman Brothers, AIG, Bear Stearns, you could go down a long list of nonregulated shadow banks that drove the crash.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

In several important cases, and I know even those like Lehman Brothers or money market mutual funds that had, I can't say that, collateralized short-term debt experienced devastating runs. We know this. So we have now nonbanks performing bank-like functions, but without the regulation and oversight of the traditional banking sector. That is something that I want my colleagues to understand was happening. You can disagree on certain things that CFPB is doing, hopefully factually based. You can disagree about the whole, but to say that it wasn't needed because of this, to me, is being dishonest with the American people. So, Mr. Kelleher, can you briefly—would you say stablecoin issuers right now act essentially like banks?

Mr. Dennis KelleherSPEAKER_15

Stablecoins are nothing but money market funds in disguise, for all intents and purposes, with high, high run risk. And no, in the way they're currently being talked about, will have almost no regulation to to protect the American people.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

I want— Mr. Kelleher, without deposit insurance, are these stablecoin users subject to runs like we saw occur in shadow banks in 2008?

Mr. Dennis KelleherSPEAKER_15

I don't think there's any question you're going to see runs, failures, and bailouts.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

So I want to be clear so my colleagues know this is coming. 2008, we saw the collateralized short-term liabilities held by non-banks helping bring down the financial system, and now we are working to dramatically expand a whole new type of shadow banking in our country right now. So, Mr. Kelleher, do you agree that part of what made 2008 financial crisis so damaging was the linkages,

Mr. Dennis KelleherSPEAKER_15

the interconnection

Rep. Rashida Tlaib (D-MI)SPEAKER_37

between the traditional banking sector and the shadow banking sector in the real economy,

Mr. Dennis KelleherSPEAKER_15

the interconnection between the shadow banks and the banks with transmissions of risk, and those transmissions of risk over time created the circumstances that together the systemically significant institutions, whether they were banks or non-banks, ultimately failed. And now we're going to overlay, as you say, an entirely new shadow banking system called crypto. Call it stablecoins, call it whatever you want, and they're not going to regulate them. So they too are going to be underregulated.

Rep. Rashida Tlaib (D-MI)SPEAKER_37

That's right. Unfortunately, the GENIUS Act recreates and amplify—well, I don't even know who comes up with the names, Mr. Dennis. I don't—but the GENIUS Act recreates and amplifies the same kind of linkages. For example, the act would allow banks to issue their own stablecoins, linking traditional financial sector to the volatile crypto industry. Perhaps most troubling about the GENIUS Act, it undermines the separation between commerce and banking. Walmart, Amazon, Meta, and all these are exploring the use of this right now. What sorts of risk are we talking about? And again, pretend our moms are watching this. Explain it, because I need them to understand what my colleagues' lack of action or enabling right now is going to cause real impact on their lives.

Mr. Dennis KelleherSPEAKER_15

The biggest risk is that people are going to conclude, based on what is likely to pass, that these financial— new financial instruments that have no legitimate social purpose are properly regulated by the federal government. And that is the biggest fraud on the public out there. You're going to be—

Rep. Rashida Tlaib (D-MI)SPEAKER_37

PayPal, Amazon, and Facebook could do shadow banking that could spill over to commercial financial sectors, yes or no?

Mr. Dennis KelleherSPEAKER_15

You're going to be legitimizing a new financial product that's highly volatile, littered with conflicts of interest and almost no regulation, but there'll be a claim of regulation and legitimacy, and that's going to drive the marketing, and that's going to cause massive losses. And I

Rep. Rashida Tlaib (D-MI)SPEAKER_37

Got to get this in, Mr. Kelleher. Guess who's going to bail them out? Guess who's going to bail them out again? It's exactly what's going to happen. I just want to be on record saying I told you so.

Chairman French Hill (R-AR)SPEAKER_16

I'm

Rep. Rashida Tlaib (D-MI)SPEAKER_37

going to be here to see that.

Chairman French Hill (R-AR)SPEAKER_16

The gentleman from South Carolina, Mr. Norman, you're recognized for 5 minutes.

Rep. Ralph Norman (R-SC)SPEAKER_07

Thank you, Mr. Chairman. You know Since Dodd-Frank, the credit unions faced a dramatic increase in regulations, not knowing what the cost would be other than it was more cost. How can we in Congress balance the need for financial safeguards and protection with providing targeted relief for credit unions, particularly in the form of regulatory tailoring, exemptions, and the repeal of certain provisions, and make sure that this doesn't happen again? Because it created a world of problems, and we're feeling the effects now. And I guess, Mr. Bentsen, we can start and go down.

The Honorable Ken BentsenSPEAKER_22

Congressman, we don't represent credit unions, so I can't really opine on the question.

SPEAKER_UNKNOWN

Sorry.

Mrs. Lindsey JohnsonSPEAKER_36

I think that generally, one of the things—we represent mostly banks, but a few credit unions in there—it is a duplicative regulatory environment that many institutions live under, especially if you've got CFPB regulation in addition to your prudential regulation. You have multiple examiners. Other members of Congress have mentioned more compliance officers at times and other functions of the bank, which just simply doesn't make sense. So I think coordinating and just trying to reduce the duplication where you can is one very meaningful step.

Mr Tom QuaadmanSPEAKER_21

Mr. Norman, ICI represents mutual funds and other regulated funds with the SEC. As I mentioned in my opening remarks and also with our testimony, there are duplicative regulatory requirements which are confusing and also where regulators are going beyond where Congress had mandated them to go. So that creates problems for not only for those funds, but even for those investors who want to deploy their money into those funds as well.

Dr. Paul KupiecSPEAKER_17

I think many credit unions are sort of in the same position as community banks in terms of having to bear the cost of the regulations, but actually my written testimony shows that the credit union share of lending has actually grown relative to the banks over the last few years, so they've actually done better than the than the banking system as a whole. A couple percentage points different, so they haven't had it as bad as the regular banks, I don't think.

Mr. Dennis KelleherSPEAKER_15

If you look at the facts, credit unions and community banks, as well as the economy, was crushed by the crash long before Dodd-Frank got enacted or got implemented. Community banks and credit unions and small business across the country were failing at massive rates because of the Great Recession that was caused by the crash. The damage done to those institutions from the crash far exceeded any even claimed damage by Dodd-Frank. And so the real issue is people are going to pay one way or the other. They're either going to pay for regulation and compliance costs to prevent the crash, or they're going to pay 10 times, 20 times, 100 times more cleaning up a crash because they were not properly regulated. It's not There's no choice in the world where there are no costs. The question is, when are the costs incurred and who's going to pay them?

Rep. Ralph Norman (R-SC)SPEAKER_07

Yeah, but there's a question of one size doesn't fit all. I'm in the real estate business. And, you know, let's talk about banks. A lot of them got out of the mortgage servicing and had to rely on other banks. I've got the closing statements where the costs went up the minute Dodd-Frank took effect. And I guess to avoid duplicating that again, what lessons have we learned from that on the mortgage, on the servicing side?

Dr. Paul KupiecSPEAKER_17

The mortgage service business, there's some capital regulations that make them unfavorable for banks to do that business. A lot of a lot of it's consolidated and moved out, and for there were there were lots of government lawsuits against banks for underwriting subprime mortgages back in under the Obama administration, where they went after lots of banks for FIRREA, and they paid huge fines for supposedly, you know, creating bad subprime mortgages. And most of them were settled without going to court, but the banking system paid a lot, and the banking system, by and large, has has has shied away from the mortgage business for reasons of regulation, for reasons of getting sued, for things like that. So it's not just the Dodd-Frank effect, but there are other other things that have gone on since the crisis that that have made the banking system a bit shy about about the mortgage business.

Mr. Dennis KelleherSPEAKER_15

But they, of course, paid those massive fines because of fraud and illegal behavior, not because they were generous and not because they weren't represented by the best lawyers in America.

Rep. Ralph Norman (R-SC)SPEAKER_07

Yeah, but you had a lot of frivolous suits too that were, were charged and that wasn't right. That's driving up the cost today. Thank each one of you for applying, for being here.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentleman's time has expired. The chair recognizes the gentleman from Connecticut, Mr. Himes. He is now recognized for 5 minutes.

Rep. Jim Himes (D-CT)SPEAKER_11

Thank you, Mr. Chairman. Thank you to our witnesses. It's been a trip down memory lane to reflect this way on Dodd-Frank. I was actually in the very bottom row, a freshman, when it was written, and it's interesting to see the very different opinions that are offered by our witnesses today. My own view, for what it's worth, is we were promised when it became law by many in the industry that this was going to obliterate the American strategic advantage of our deep capital markets. And to be fair, on the left, people said this is the apocalypse in waiting and it's all going to happen again 2 years from now. None of that turned out to be true. Our capital markets and our banking system is in fact the the envy of the world, as Mr. Bentsen says. And with a few exceptions, and including, by the way, the mother of all stress tests in the form of the pandemic, our system has held up remarkably well. So I guess I'm intrigued. Dr. Kupiec highlights the Silicon Valley Bank disaster. I'm not sure I agree with him that that is evidence that Dodd-Frank is a failure, but I want to use my remaining 4 minutes to do something that I think is actually kind of useful, which is Dodd-Frank of course emerged because too few people saw the mortgage crisis coming. I certainly didn't see Silicon Valley Bank crisis coming. So my question to all five of you, and I think you've each got about 25 seconds to answer this, is to answer— I'm going to start with you, Mr. Kelleher— the answer to the question: At the end of 2025, 6 months from now, there is a systemically threatening event, let's think of the magnitude of Silicon Valley Bank just for argument's sake, that event originated how and in which market? Mr. Kelleher.

Mr. Dennis KelleherSPEAKER_15

Nobody knows, and we don't know because we put blinders on. We've defanged FSOC. We've cut rid of 25% of the personnel at the FDIC. You could go agency by agency, and what you're doing is essentially disarming the front-line financial stability cops at the regulatory agencies. They're not just putting their head in the sand, they're leaving the field, and that's going to cause us to be surprised again like we were in '08. AIG, everybody ran around going, What is AIG? Okay, so

Rep. Jim Himes (D-CT)SPEAKER_11

Mr. Kelleher, your answer is that we're gutting the regulatory apparatus, I think. Is that a fair characterization? Dr. Kupiec?

Dr. Paul KupiecSPEAKER_17

Yeah, Silicon Valley Bank was a systemic problem because there were thousands of banks that had huge unrealized interest rate losses on their books and could fail too. If you look at my written testimony—

Rep. Jim Himes (D-CT)SPEAKER_11

I understand. I'm looking for the answer to the question of when it happens again 6 months from now, why did it happen?

Dr. Paul KupiecSPEAKER_17

I don't know.

Rep. Jim Himes (D-CT)SPEAKER_11

Okay, fair enough. I don't either. None of us do. Mr. Quaadman.

Mr Tom QuaadmanSPEAKER_21

Mr. Himes, thank you for that exercise. I would actually say if you look at Dodd-Frank, the Office of Financial Research is supposed to be the early warning system for the Financial Stability Oversight Council. And I would say if you look at any of the hiccups that have happened in the system since 2010, OFR has not performed that function. So I think that actually makes the argument for why it should be brought under the appropriations process for congressional oversight.

Rep. Jim Himes (D-CT)SPEAKER_11

But that doesn't sound like the source of a systemically threatening event. You don't want to opine on that?

Mr Tom QuaadmanSPEAKER_21

Excuse me?

Rep. Jim Himes (D-CT)SPEAKER_11

I was looking for the answer to the question.

Mr Tom QuaadmanSPEAKER_21

No, I know, but Dodd-Frank put in place a mechanism for that warning to happen, and that warning system has not worked.

Rep. Jim Himes (D-CT)SPEAKER_11

Okay, okay.

SPEAKER_UNKNOWN

Um,

Rep. Jim Himes (D-CT)SPEAKER_11

Ms. Johnson,

Mrs. Lindsey JohnsonSPEAKER_36

look, I don't think anybody knows. If we did, we'd all be millionaires at this point. Um, you know, that is what we're constantly watching for. I can say that the consumer health right now is still very strong, that banks are incredibly well capitalized. I would say that there's an opportunity for something to happen outside of the banking system. And the problem with so much regulation— I just want to make this point because I haven't had the chance to orally say this yet— the problem with so much regulation is that you do continually push consumers, especially consumers on the margin where the risk is highest, outside of the banking system. And that's one thing that I think we all just need to be cognizant of. And so, you know, banks are going to fail, non-banks are going to fail over time. We want to make sure that there's orderly process for that. We're a free market. That's going to happen, and I think that that's something that will play out, but we absolutely want to be cognizant of pushing lending outside of the banking system.

Rep. Jim Himes (D-CT)SPEAKER_11

Okay, got it. Thank you. Mr. Kelleher,

The Honorable Ken BentsenSPEAKER_22

Hopefully we're not graded whether we're right or wrong, and hopefully nothing happens. My sense would be if something happens that has a systemic-like effect, it's going to be some sort of extraneous event whether it's geopolitical or pandemic-like, hopefully not another pandemic, but something along those lines.

Rep. Jim Himes (D-CT)SPEAKER_11

I'm intrigued, and I got 25 seconds, that nobody said private credit. That's a market that has grown substantially. Nobody said crypto. We're talking a lot about that. Nobody said swap margins, which I was promised would bring down the system. Anybody want to use 10 seconds to elaborate?

Mr. Dennis KelleherSPEAKER_15

worry about the Treasury markets. I mean, there are a lot of things to worry about, and that's why the rules are supposed to be in place to cover them all, to have discretion to be able to identify emerging risk, and that's what's been shut down.

Rep. Jim Himes (D-CT)SPEAKER_11

Okay, thank you very much. Appreciate it. Thank you to our witnesses. I yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The chair recognizes the gentleman from Pennsylvania, Mr. Meuser, who is also the chair of the Subcommittee on Oversight and Investigations. He is now recognized for 5 minutes.

Rep. Daniel Meuser (R-PA)SPEAKER_31

Thank you, Mr. Chairman. Thank you all to our witnesses. Robust conversation and and important. So, barely a day passes, particularly being on this committee, where we don't hear from banks, large and small, about the compliance burdens that they're forced to navigate. And they do stem from Dodd-Frank. It's a common subject. Dodd-Frank created the FSOC, the CFPB, entities that operate with really little accountability, really by design, leaving banks unsure on how to comply. Not bright green lines, very, very subjective ideological lines. So, consumer fraud and scams are surging, yet the very agencies tasked with protecting consumer consumers seem more focused on writing new rules and literally engaged in drive-by random investigations. That's why we are trying to roll back some unnecessary regulations and why this is critical, and so financial institutions can focus on customers, providing capital, and growing the economy. So, Mrs. Johnson, Dodd-Frank promised stronger consumer protection, but banks consistently raise concerns about rising fraud and scams and heavy compliance. So, 15 years later, has the law improved consumer safety or bank

Mrs. Lindsey JohnsonSPEAKER_36

performance? So I think overall, you know, the banking system is very resilient. I think they are very conservative in terms of making sure that they can lend to consumers and that consumers are able to repay. I think more generally, one of the concerns that we have is the complexity and the redundancy of so much regulation into things that oftentimes are not really where the risk is. SVB was brought up earlier, and I think that those were pretty obvious errors of omission from the management on that case. And so we want to make sure that bank regulators are focused where real risk exists, like interest rate and credit risk, and then also outside of the banking system, right, where more lending is going because of all the regulatory burden that banks and costs that banks have, including smaller banks, pushing lending out to the banking system. So just having a much more wholesome view. Thanks.

Rep. Daniel Meuser (R-PA)SPEAKER_31

And I like when you were— you brought up before you'd like to see things as based upon facts and data-driven, your, your term, and your 3 pillars: follow the law, review— follow the law. That's, that's a, you know, one that should be a given, right? Review impacts, real, real impacts, uh, and, uh, and respond to those properly as you do in business, as you do in life, and focus on real consumer fraud. And that just doesn't seem to be happening. So In your view, what is the biggest factor driving the rise in scams that we see today?

Mrs. Lindsey JohnsonSPEAKER_36

So, one, this is an area where we have called on the CFPB to fulfill its mission, its statutory mission and one of its core principles: to educate consumers. Look, with the proliferation of technology and digital banking and social media and text messaging, consumers are being bombarded with opportunities to fall victim to handing their own money. Oftentimes, it's through a Facebook link that says there's a designer puppy and, Click here, and pay me, and suddenly, you've paid someone who's a complete fraudster. It's very, very difficult for a consumer to determine whether or not that person on the other end is a scammer. Banks have spent—and I said this earlier today—billions every single year. It's been millions of man-hours. We have a fraud committee within CBA that is extremely robust. I can tell you details of how much banks do to combat fraud and scams, but we need the government to step in and to recognize that often this is state-sponsored, that this is originating outside of the banking system. We need telecom to step in. We need law enforcement to also step up. We appreciate Congressman Nunn and Congressman Gottheimer and others who have cosponsored the GUARD Act. We think that that's a really meaningful step forward. All

Rep. Daniel Meuser (R-PA)SPEAKER_31

Right, good. Thanks. There's a big difference, Mr. Kelleher brought up a little while ago, appropriately regulated. That's a big difference from excessively regulated. And seeing that only 19% of small businesses say they have adequate access to capital, I think we can really go from good to great and that should be a goal. So, Mr. Kupiec, real quick, like a short time, the Council of U.S. Financial Regulators relies heavily on the Office of Financial Research for data analysis. When agencies like FSOC depend on their own internal research shops, doesn't that risk creating an echo chamber?

Dr. Paul KupiecSPEAKER_17

I'm sorry, I didn't hear the last bit. All right, I mean, you're out of

Rep. Daniel Meuser (R-PA)SPEAKER_31

time. Create an echo chamber. I, I'm, I'm out of time, so maybe we could talk about it later. Thank you very much. I yield back. Mr. Chairman.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Thank you. The gentleman yields back. The witnesses also would be willing to submit the answer in writing to the committee. That'd be fine. Okay, we'll submit it for the record. We can follow up. The chair recognizes the gentleman from California, Mr. Liccardo, who's recognized for 5 minutes.

Rep. Sam Liccardo (D-CA)SPEAKER_08

Thank you, Mr. Chair. Mr. Kelleher, I certainly understood from your testimony, and we've all understood over the last several months, that the Consumer Financial Protection Bureau has been gutted—its budget, staff, etc., in the last several months. And specifically, some very important functions of that agency appear to have severed. Specifically, the consumer complaint database that millions of Americans have relied upon is being dismantled. Who is going to step into that role to receive and act upon the complaints of millions of Americans who feel that they've been defrauded or scammed?

Mr. Dennis KelleherSPEAKER_15

When it shuts down, it's gone. There isn't going to be any substitute location for that.

Rep. Sam Liccardo (D-CA)SPEAKER_08

Many rules have been rescinded and repealed. For example, the excessive overdraft fees rule. Who is going to protect consumers against excessive overdraft fees?

Mr. Dennis KelleherSPEAKER_15

There's going to be no one. There will be no institution with the power and authority to be able to do that.

Rep. Sam Liccardo (D-CA)SPEAKER_08

And the credit card late fees rule, uh, who will protect consumers against exorbitant credit card late fees?

Mr. Dennis KelleherSPEAKER_15

Main Street Americans getting ripped off by credit card companies, uh, are going to be left on their own to fend for themselves.

Rep. Sam Liccardo (D-CA)SPEAKER_08

And the data broker rule was also rescinded. Uh, what about those many Americans who feel, uh, concerned about their privacy, uh, and abusive practices? Data brokers.

Mr. Dennis KelleherSPEAKER_15

Americans, just hardworking Main Street Americans who are subject to abuse by data brokers selling their private information and spreading it around and causing identity theft and other fraud and illegal conduct, they're going to be on their own once again having to fight against these huge financial institutions on their own.

Rep. Sam Liccardo (D-CA)SPEAKER_08

I understand that the agency has indicated it will no longer prioritize enforcement or supervision of fair lending laws. And in fact, I think we saw a really extraordinary situation in which the CFPB essentially attempted to pull back on a settlement and a federal judge stepped in and refused to allow them to do that in Illinois. Is that right?

Mr. Dennis KelleherSPEAKER_15

He not only did that, but if you read his opinion, he excoriated the leadership, the current leadership of the CFPB, for trying to go back years to undo the settlement of an antidiscrimination law in a way that was quite shocking to even the federal judge. So we'll see where that goes on appeal. We participated, Better Markets participated as an amicus in that case.

Rep. Sam Liccardo (D-CA)SPEAKER_08

So for Americans who aren't savvy enough, or perhaps wealthy enough, to have access to attorneys, and they suffer from discriminatory lending or redlining, what options do they have with the CFPB stepping back?

SPEAKER_UNKNOWN

You

Mr. Dennis KelleherSPEAKER_15

The real problem is, and this is why the CFPB was created, is that Main Street Americans don't have the time or the money to be going after huge financial institutions or financial predators who are prowling, frankly, the wallets and pocketbooks of Main Street Americans, from their credit cards to their checking accounts to their savings accounts to whether it's discrimination or other unfair and deceptive acts, and that's why we— and we saw that gap. This is not a theoretical problem. We saw it before '08 and how consumers were abused. We also saw the systemic implications of it, because the predatory subprime lending on the individual basis, where individual people getting mortgages were getting ripped off, that was bad, but it also got rolled up into becoming a systemic crisis. And so the purpose of consumer protection is, yes, to protect Main Street Americans and their wallets and pocketbooks. It's also to protect systemic risk failures and bailouts. All of that is gone. We created the CFPB for that purpose. It did it did really a shockingly good job in a very short period of time.

Rep. Sam Liccardo (D-CA)SPEAKER_08

I think it's important that, as we think about the Consumer Financial Protection Bureau, this is one of the many ultimately acronyms that gets lost in the American public because there are so many agencies in the federal government. So many seem to have so little impact on our daily lives. But it is important for us to understand exactly what this particular agency does. Undoubtedly, there have been cases of bureaucratic overreach, regulatory overreach. I've never known a regulatory agency that wasn't guilty of that. But there's a lot at stake here, and specifically as I'm thinking about the Civil Penalty Fund, and $3.3 billion have been returned to Americans who have been scammed in various ways.

Mr. Dennis KelleherSPEAKER_15

So, I have a chart in my written testimony that shows, by state, how much money every state has received from the Civil Penalty Fund. And everything from $35 million to Arkansas to $46 million to Connecticut

SPEAKER_UNKNOWN

I

Mr. Dennis KelleherSPEAKER_15

And the CFPB protects everybody and benefits everybody in all 50 states, and every single congressional district here has received money. Their people, their citizens, their voters have received money from the CFPB when they were ripped off.

Rep. Sam Liccardo (D-CA)SPEAKER_08

Thank you, Mr.

SPEAKER_UNKNOWN

Keller. I yield.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentleman yields back. The chair recognizes the gentlewoman from California, Ms. Kim. She's right now recognized for 5 minutes.

Rep. Young Kim (R-CA)SPEAKER_32

Thank you, Chairman and Ranking Member, for hosting this hearing today, and I want to thank all of our witnesses for joining us. 15 years later, it has really become self-evident that Dodd-Frank has only hurt consumers, small businesses, and the community financial institutions that it was supposed to protect. Regulatory costs have only increased since the passage of Dodd-Frank Act in 2010, and although financial institutions below $10 billion in assets are exempt from CFPB examination, they still face very high compliance costs. It is our credit unions and community banks who suffer the most, and as they do not have the resources to bear the burden of this regulatory scrutiny the same way that large commercial banks may be able to do, that's why they are hurt the most. Unfortunately, the result of all this has been consolidation among banks and credit unions over the last 15 years, and there have been few to no community financial institutions to replace those losses. So let me talk about the real impact that it had in Orange County, where I represent. We have seen this firsthand with only one new bank and zero credit union formed in 2021, and since 2015, we have seen zero new credit unions from all across California. This would not be the case without the overburdening regulatory policies that were implemented in the Dodd-Frank legislation. So I'm going to ask this question to you, Ms. Johnson. As we see the retail banking services pull back from our community, can you talk about the consequences for consumers and small businesses?

Mrs. Lindsey JohnsonSPEAKER_36

Sure, and thank you for the question. Look, there's undoubtedly been an impact. I mean, there's around a 40% reduction in the overall number of banks. We still have a highly competitive marketplace because you've still got around 4,500 banks and 4,400 credit unions, but it is extremely problematic when you don't have new players who want to come into this marketplace because they know that they can compete and do it efficiently and effectively. I think that there is a concern among otherwise budding entrepreneurs to come into the banking system, so we want to reduce that effect.

Rep. Young Kim (R-CA)SPEAKER_32

Thank you. My view is that, rather than promoting policies like those in Dodd-Frank that hurt consumers, we need to be promoting policies that put consumer first, which is why I introduced a couple of my bills, and I want to talk about that right now. The first is Credit Access and Inclusion Act, and the second one is Small Dollar Loan Certainty Act. I believe this will do just that in promoting the small businesses and our consumers. The Credit Access and Inclusion Act would responsibly expand the credit access for millions of Americans with limited or nonexistent credit history. So I really want to thank my committee chairman, Hill, for noticing that draft, and I hope that we can move forward with this bill with strong bipartisan support in the near future. And the Small Dollar Loan Certainty Act would codify the prudential banking regulators' small-dollar lending guidance into law. So, Ms. Johnson, can you explain why it is important for Congress to provide this type of statutory certainty for small-dollar lending policies rather than relying on the guidance alone?

Mrs. Lindsey JohnsonSPEAKER_36

Absolutely. Well, and we want to thank you for that, Bill, because millions and millions of Americans actually live paycheck to paycheck. They want options for short-term liquidity loans, and a number of banks have actually been successful in coming back into this market. But that was after a period of time of a lot of regulatory uncertainty. There have been significant pendulum swings within the regulatory agencies, and there's multiple agencies involved, including the CFPB. So them issuing guidance in 2020 was helpful to encourage banks to come back in. So we have some clarity, but legislation is needed so we don't have that pendulum swing and that banks understand the rules of the road.

Rep. Young Kim (R-CA)SPEAKER_32

Just to be clear, even though President Trump's regulators created the small-dollar guidance, it was maintained by President Biden's prudential regulators as well, right?

Mrs. Lindsey JohnsonSPEAKER_36

Yes.

Rep. Young Kim (R-CA)SPEAKER_32

Yeah. So I want to shift gear very quickly and focus on one of the regulatory institutions created in Dodd-Frank, that is the FSOC. I've become really increasingly concerned that it's no longer fulfilling its mission of promoting financial stability in coordination with primary regulators. So Mr. Quaadman, would you agree that the council has really strayed away from its original mission?

Mr Tom QuaadmanSPEAKER_21

Yeah, with FSOC, the primary regulator really needs to be in in the lead on that, and I'll be happy to give a more detailed answer in writing if you like.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentlelady's time has expired. The Chair recognizes the gentlewoman from Massachusetts, Ms. Pressley, now recognized for 5 minutes.

Rep. Ayanna Pressley (D-MA)SPEAKER_33

Thank you to our witnesses for joining us today. In 2008, families across this country lost everything during the Great Recession. It was an economic catastrophe, catastrophe. Millions of people lost homes, lost jobs, and lost hard-earned savings. Now, the majority of Gen Z who will see this hearing later were just babies 17 years ago, so I can't fault them that they are completely unaware of the foreclosures and the pink slips, but I know my Republican colleagues and I certainly do remember. Republicans remember the heartache and pain that our country went through. It is estimated there were more than 5,000 suicides as a result of the financial crisis. 2008 was an avoidable economic crisis, a direct result of greed, reckless speculation, and weak regulation. That's why Dodd-Frank was essential. I do want to acknowledge the good work of our very own Massachusetts Congressman Barney Frank in this drafting of this seminal piece of legislation. It created basic guardrails, stronger capital requirements so banks couldn't gamble with our livelihoods, CFPB, the only agency dedicated solely to protecting consumers, regular stress tests for banks so we would never be caught off guard again. But just 10 years later, in 2018, while 65% of families still hadn't financially recovered from the crash, Republicans rolled back key parts of Dodd-Frank. They sent a clear message to their constituents: Wall Street profit margins matter more than your recovery and well-being. Now, they're at it again by dismantling the CFPB. Just look at how Townstone, a mortgage lender, would repeatedly disparage Black neighborhoods in Chicago with racist comments. The CFPB rightly held them accountable for discrimination in housing in a case that was settled last November. And when the Trump administration tried to reverse CFPB's win, a federal judge denied that outrageous request, affirming the critical role of the CFPB in stopping racial discrimination in mortgage lending. This is just one example of how Republicans dismantling the CFPB has real-world consequences, like letting mortgage lenders off the hook for illegal redlining. To all of our witnesses, loud and proud, yes or no, do you support mortgage lenders getting away with breaking the law and discriminating against Black people? Yes, just for the record,

Mr Tom QuaadmanSPEAKER_21

I do not.

Rep. Ayanna Pressley (D-MA)SPEAKER_33

No,

Mr Tom QuaadmanSPEAKER_21

we don't represent mortgage lenders, but personally I don't.

Dr. Paul KupiecSPEAKER_17

This isn't my

Rep. Ayanna Pressley (D-MA)SPEAKER_33

area. This is not my area. Well, this is— I had a colleague across—

Dr. Paul KupiecSPEAKER_17

I don't want to— I don't want them

Rep. Ayanna Pressley (D-MA)SPEAKER_33

discriminating against anybody. Sir, I had a colleague across the aisle a moment ago who said that it's just a matter of, uh, following, uh, the rule of law, basic law. So this is not even a controversial thing. Racial discrimination is illegal. So this is not— this is not a, you know, a trick question. So really quickly, louder and faster. Yes or no?

Dr. Paul KupiecSPEAKER_17

I think people should follow the law.

Rep. Ayanna Pressley (D-MA)SPEAKER_33

Okay. I'll take that as a no. Yes or no?

Dr. Paul KupiecSPEAKER_17

I agree.

Rep. Ayanna Pressley (D-MA)SPEAKER_33

All right, good. So since its creation in Dodd-Frank, the CFPB has returned $21 billion to more than 205 million consumers who were exploited by predatory lenders and big banks. But today, Trump has fired nearly 90% of CFPB staff, and the agency under his administration has withdrawn over 60 guidance documents, dropped enforcement cases, and brought the agency to a halt, leaving hardworking Americans vulnerable to exploitation. To all my witnesses, yes or no, do you agree with the CFPB returning $21 billion to 205 million victims of deceptive and predatory financial practices? Yes or no?

The Honorable Ken BentsenSPEAKER_22

We don't engage with the CFPB, so I can't really comment, because I don't have a background in the case that you're citing, so I apologize.

Mrs. Lindsey JohnsonSPEAKER_36

When a company breaks the law and consumers are harmed, they should have redress, but I have to say the CFPB's use of penalties has got to have some parameters. I can tell you firsthand that there are multiple times when they go after salacious headlines and outlandish sums of money when the company either didn't break the law or they claimed a UDAAP violation on something that was completely—

Rep. Ayanna Pressley (D-MA)SPEAKER_33

Okay, so I'll take that as a no. Reclaiming my time, because I got to get everyone else on the record here. Okay, yes or no: Do you agree with the CFPB returning $21 billion to 205 million victims of deceptive and predatory financial practices?

Mr Tom QuaadmanSPEAKER_21

ICI's members aren't regulated by the CFPB.

Mr. Dennis KelleherSPEAKER_15

Not my area. No comment. My only disagreement is it should have been higher.

Rep. Ayanna Pressley (D-MA)SPEAKER_33

All right. Thank you. If we as members of Congress forget the visceral harm that families across the country suffered from in 2008, then we risk rolling back the very regulations and defunding the very agencies that could prevent the next financial crash. Thank you. And I yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentlelady yields back. The chair recognizes the gentleman from Nebraska, Mr. Flood, who is also the chair of the Subcommittee on Housing and Insurance. He is now recognized for 5 minutes.

Rep. Mike Flood (R-NE)SPEAKER_03

Thank you, Mr. Chairman. Before this hearing, I reached out to some Nebraska bankers to get their take on what the biggest takeaways from the Dodd-Frank law have been from their perspective. One significant change that has been the consolidation that has taken place post-Dodd-Frank. In 2009, there were 225 commercial banks in Nebraska, according to the FDIC. In 2024, there are just 142. That's a 36% decrease over the last 15 years. My first question is for Ms. Johnson and Dr. Kupiec. Each of you, please describe how Dodd-Frank has driven bank consolidation over the last 15 years, particularly in states with lots of community banks, like Nebraska.

Mrs. Lindsey JohnsonSPEAKER_36

Well, I think unfortunately your experience in Nebraska is fairly consistent with what's happened nationwide, and FDIC data paints a pretty stark picture. There's been about a 40% reduction. Look, CBA represents institutions $10 billion and above. Most of those institutions are going to have the wherewithal to absorb a lot of these costs; community banks cannot. But I can tell you, a $10 billion institution to a $500 billion institution, the costs only increase, and it becomes more and more difficult to be at those different thresholds. The last thing I'll say is you do see banks staying at arbitrary thresholds, say right below $10 billion or right below $100 billion. That is not what you want to see in a free market.

Dr. Paul KupiecSPEAKER_17

Yeah, I agree. Um, there are thresholds that that apply in the rules and, and make it more expensive to grow. But it— for small banks, compliance costs mean you have to grow to a certain scale to absorb those. And, and, and the fact that there's no entry means it's not a healthy market. In a healthy market, you have entry and you have exit. When you have no entry, it's not a healthy market.

Rep. Mike Flood (R-NE)SPEAKER_03

Appreciate those answers. And one of the things I want to stress is I'm talking about towns with 1,200 people. When the bank closes, the cheerleaders don't get the check for $150, the football team doesn't get a pizza party, the post-prom doesn't happen, the community support dries up, and access to capital for people that farm within 5 miles is more difficult. And sometimes they end up with a bank that doesn't have that personal relationship with them and they won't work with them. So there are real-world consequences to losing these banks. To dig into the second theme that came up when I reached out to local bankers, I'd like to read a quote from Zach Karpf, president of the Platte Valley Bank in Scottsbluff, Nebraska. He writes, "When Dodd-Frank was passed, we embarked on a soul-searching journey of whether to stay involved in mortgage lending or not. Many of our competitors, most in rural or underbanked areas, did not stay as involved in mortgage due to the regulatory cost burden. While we decided to stay involved, the costs associated with Dodd-Frank compliance have contributed to doubling of costs that have outpaced any increase in interest or fee income. Our compliance department is more than triple the size that it was in terms of when Dodd-Frank was passed. Especially since community banks had virtually zero participation in the root causes of the financial crisis, these additional costs have been directly unfairly to entities that weren't responsible and reduced the availability of credit to borrowers, specifically in rural areas." Basically, I heard the same variation of what Mr. Karpf said from about four other bankers: Either Dodd-Frank drove their bank out of the mortgage origination business or they chose to stay in and are paying more for compliance as a result, just to provide that service to their customers. So let me be clear. In the aftermath of the financial crisis, we did need reforms to combat some of the abuses and practices that led to mortgages being issued to borrowers that had no business receiving them, but the end result seems to be that smaller banks are loath to participate in the mortgage business at all. Dr. Kupiec, is this problem where small banks are leaving the mortgage business something you have encountered in your research?

Dr. Paul KupiecSPEAKER_17

Yes, there are surveys that, that say exactly what you, you're finding.

Rep. Mike Flood (R-NE)SPEAKER_03

Secondly, to you again, we saw some tailoring in the 2018 law, S. 2155, in the Economic Growth, Regulatory Relief, and Consumer Protection Act. Do you feel that this committee could explore any further changes to statute to help keep community banks in the mortgage origination business? And if so, what would you have us focus on?

Dr. Paul KupiecSPEAKER_17

I don't, I don't view myself as an expert on all the mortgage rules, so I would prefer not to to offer comments there.

Rep. Mike Flood (R-NE)SPEAKER_03

Very fair. All right, with that, I do ask unanimous consent to enter a letter to Mr. French Hill and Maxine Waters from Brett Palmer, president of the Small Business Investor Alliance, into the record.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Without objection.

Rep. Mike Flood (R-NE)SPEAKER_03

I yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Gentleman's time has expired. The chair recognizes the gentlewoman from Texas. Ms. Garcia is now recognized for 5 minutes.

Rep. Sylvia Garcia (D-TX)SPEAKER_35

Thank you, Mr. Chair, and thank you to all the witnesses here today. And as you can see, we're nearing the end. And while I've got some time to say something about the witnesses, I want to especially welcome my friend and colleague from Houston, Congressman Bentsen. I still remember, Ken, campaigning for you back when we both had less gray hair. I color it, you don't. But it's good to see you, and my best to Tamara. I remember the 2008 financial crisis. Americans lost their retirement nest eggs, their jobs, and their homes. In numbers, nearly 10 million Americans lost their homes. Nearly 9 million people lost their jobs. By 2012, 46.5 million Americans were living in poverty, and it should not surprise anyone in the room that communities of color were the most impacted. That's why Dodd-Frank exists— to prevent another devastating crisis and to provide guardrails and protections. But today we're not here to celebrate its successes. We're instead mourning its dismantling as the current administration continues to undo the work and progress accomplished through Dodd-Frank. But we can't rest on our laurels. We must also demand answers and fight to protect the historic law that protects our financial system and consumers. Mr. Kelleher, what can be done if the Trump administration's CFPB eases supervision actions concerning penalties or fines against payday lenders and other high-cost lenders to protect consumers against multiple non-sufficient funds and overdraft fees on affordable loans?

Mr. Dennis KelleherSPEAKER_15

Well, if the CFPB was in business doing its job as required by the law, it would properly regulate payday lenders, and it attempted to do so during the first— during the Obama administration, where payday lenders were required to actually determine— this is what the rule proposed— actually required payday lenders to determine that the person they were giving the loan to could repay the loan. It's shocking that you would need a rule that would tell a financial institution that it should see whether or not the person it's giving money to, a loan to, can repay it, but they had to do that for payday lenders because the money that's made by the payday lenders is getting people into a debt cycle, knowing— giving money to people that they know they can't repay it, so the loan has to keep getting rolled over, more fees, more money, higher interest rates, over and over, getting locked into a debt trap. Those rules actually were proposed and finalized by the CFPB to prevent that from happening. And unfortunately, those rules are no longer applicable, and the CFPB is out of business, so there's nobody to enforce those rules or even enact those rules.

Rep. Sylvia Garcia (D-TX)SPEAKER_35

Well, tragically, that is something that is a big issue in my district. It's a 77% Latino district in Houston, and it is especially an issue for us because there are— people are struggling, particularly today, just to get gas, groceries, and food on the table. And they're desperate. If they can't make ends meet, they're working paycheck to paycheck, the payday lender may be the one to say, Here, we'll help you. And you're right. They're probably going to end up paying back 5 to 10 times of what they originally borrowed, which is why those protections are necessary. In fact, a lot of them end up in situations where they have to rely on buy now, pay later practices to even make ends meet. So how can we have greater protections against payday lenders?

Mr. Dennis KelleherSPEAKER_15

At this point, Congress is going to have to either enact statutes or somebody is going to have to get the CFPB back into business, and that doesn't look like it's going to happen. One of the more important things that can help is to prevent crashes, to be properly regulated. One of the charts that I have in my written testimony shows the unemployment rate took 10 years after the financial crash to return to pre-crash levels. Levels When you look at the economic wreckage caused by that crash, many people still suffering today. Frankly, that crash cost the United States a lost generation of Americans. People coming out of college didn't get jobs. People who wanted to retire lost their nest eggs. People who wanted to advance in their careers, they didn't get 27 million Americans were out of work in October of '09, 13 months after the crash of Lehman Brothers. That had ripple effects literally through today to them, their children, their homes, their hopes, and their dreams. So, preventing those crashes by proper regulation and enforcement of the rules can do more to help everybody get on the economic ladder, stay on the economic ladder, and so that we can have an economy where the financial system supports it and there's broad-based wealth creation. That's what we need, not deregulation.

Rep. Sylvia Garcia (D-TX)SPEAKER_35

Well, I agree with you, and I know Director Chopra came to my district to talk to our seniors, because they get particularly preyed on, not only by payday lenders, but telemarketers, online phishing emails, and I want to ask you more questions about that, particularly for seniors, but I've run out of time, so I'm going to submit the questions for your answer in writing.

Mr. Dennis KelleherSPEAKER_15

Sure. Thank

Rep. Sylvia Garcia (D-TX)SPEAKER_35

you. Thank you. Yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

gentlelady yields back. The chair now recognizes the gentleman from Wisconsin, Mr. Steil, who is also the chair of the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence. He's now recognized for 5 minutes.

Rep. Bryan Steil (R-WI)SPEAKER_24

Thank you very much, Mr. Chairman. Thanks for holding today's hearing to full Chair Hill. I want to start with you, if I can, Mr. Kupiec. In 2014—let's go back a decade—in 2014, you wrote an op-ed in The Wall Street Journal back when I was in the private sector, a couple years after Dodd-Frank was enacted. And you said one of the concerns you raised was that FSOC, the Council's systemic risk designation authority, was broad and prone to abuse. And you said, quote, "The Council's designation power makes a mockery of property rights and due process," end quote. 10 years later, decade later, we got some empirical data. Would you say that your prediction was accurate?

Dr. Paul KupiecSPEAKER_17

I would. Systemic risk is never even defined in the Dodd-Frank Act, yet they're supposed to detect it and pass rules and regulations to stop systemic risk, something that's never even defined in the act.

Rep. Bryan Steil (R-WI)SPEAKER_24

And so what should Congress do to reform, reform that area?

Dr. Paul KupiecSPEAKER_17

I would make the FSOC just an advisory body. I would take away their designation authority, and they should report to Congress, and Congress should legislate if they want to expand regulation.

Rep. Bryan Steil (R-WI)SPEAKER_24

Let me build on this by going to you, if I can, Mr. Bentsen, on the same topic. FSOC famously designated two non-banks as systemically important. One would One ultimately challenged that in court successfully. SIFMA has argued that the designations are inappropriate for non-banks. Can you provide color as to why you believe that to be the case?

The Honorable Ken BentsenSPEAKER_22

The problem is that the designation would create bank-like regulation of a designated entity, and particularly for asset managers who are regulated by the Securities and Exchange Commission, they're not—

Rep. Bryan Steil (R-WI)SPEAKER_24

is that a better way to regulate it? A

The Honorable Ken BentsenSPEAKER_22

better way to look at it is to look at activities and and and and not regulate entities that are non-bank entities like a bank. So, I I think both what the previous Trump administration did in terms of focusing on activities and the legislation that Mr. Huizenga, Mr. Foster are pursuing are a better approach.

Rep. Bryan Steil (R-WI)SPEAKER_24

Mr. Quaadman, do you do you agree with that assessment?

Mr Tom QuaadmanSPEAKER_21

Yeah, I agree, because you want to have the primary regulator in charge, you want to have an activities-based approach, and the FSOC Improvement Act is the best way to get there, rather than having this ping-pong guidance between administrations.

Rep. Bryan Steil (R-WI)SPEAKER_24

So not only is there ping-pong guidance, but do you also view there to be a potential overlap between the actions and expertise of the regulators and the actions of FSOC?

Mr Tom QuaadmanSPEAKER_21

Yeah,

Rep. Bryan Steil (R-WI)SPEAKER_24

better way to divide those responsibilities.

Mr Tom QuaadmanSPEAKER_21

Well, and one example to raise as well, even though it was not a designation example, was where you had a majority of commissioners with the SEC wanting to go down a particular path with money market funds, and the FSOC did an end run around that. So we want to make sure through through legislation like that that there are very clear lines of authority and who's in charge.

Rep. Bryan Steil (R-WI)SPEAKER_24

I think the more we have clear lines of who's in charge, the more efficient the markets are going to operate. Speaking of ambiguity, I'm going to shift gears slightly with you, Ms. Johnson, if I can. CFPB under Director Chopra, he had an opportunity to pursue rulemaking through a normal rulemaking process, but often we saw then-Director Chopra issuing guidance, press releases, blog posts in some case, often, in my opinion, with inflammatory language. And so, in theory, those types of things could be non-binding, but in practice, that wasn't really the case because a lot of entities viewed themselves as potentially at risk of actions by the CFPB. Could you just comment very briefly as to how that would impact banks, but ultimately their customers?

Mrs. Lindsey JohnsonSPEAKER_36

Yeah, look, I mean, I think doing, issuing guidance on something that should have been a rule in the in the first place creates a ton of uncertainty in the marketplace. There were examples, including a buy now pay later advisory opinion that the CFPB had issued, where it wouldn't even apply to banks, but we came out against it because we said you should have written a rule. It was substantive change. If I can just expand for 1 second, because it'll allow me to respond to some things that Mr. Kelleher has said a few times earlier about the complaint database and the credit card late fee and the number and the $20 billion civil penalties that have been paid out. Facts matter. Facts matter when you're writing rules. And one of the things—so we could talk about the complaint database being structurally flawed. We actually think it could be beneficial for consumers. If the CFPB had wanted to rely on facts and even leaned on the the complaint database to to do so, it would have known that credit cards are very very minimal in terms of the complaints from consumers. It would have focused instead on things like fraud and scams that are happening. When it talks about issues like credit card late fees, it completely paints an obscure and opposite picture of what the market reality—

Rep. Bryan Steil (R-WI)SPEAKER_24

and ultimately to the detriment often of consumers, because the focus of the CFPB wasn't on the fraud and scams that people were victims of. Seeing the time, Mr. Chairman, I yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentleman yields back. The chair recognizes the gentleman from Texas, Mr. Green, is now recognized for 5 minutes.

Rep. Al Green (D-TX)SPEAKER_06

Thank you, Mr. Chairman. I thank the witnesses for appearing. I especially thank Congressman Bentsen for being here today. Haven't seen you in a while. Good to see you. Mr. Kelleher, permit me to start with you, if I may. And as you know, the CFPB was charged with assisting with military lending. In fact, we passed a Military Lending Act here in Congress. You can't have an interest rate more than 36% on military loans. Before that, it was all over the place. Mr. Kelleher, given the current situation with the CFPB, will our military people start to suffer and find themselves back where they were, paying higher interest rates? And of course, they are not the persons who make the most money while they serve. They do have a salary, but it's probably just enough to get by on. Your thoughts, please.

Mr. Dennis KelleherSPEAKER_15

Well, look, it's pretty despicable. I commented on this earlier. Servicemembers, veterans, and their families are disproportionately targeted by financial scams and financial predators, and the data bears this out. The median loss for fraud is $658 for civilians, it's $775 for active duty military, and it's $950 for military retirees and veterans. They're being targeted disproportionately and their losses are disproportionately high, and that's why they had— military servicemembers and their families actually had more than 400,000 complaints filed with the CFPB since it was created in 2011. And the CFPB, to its credit, returned approximately $363 million in restitution for military-connected families. And so, not only did the military— are they enforcing the Military Lending Act, they're enforcing the consumer protection laws against groups that are targeted, be they the elderly, as referred to earlier, or the military, who have other things to— I served in the Air Force. You've got a lot going on. You're being moved around. You're under a lot of pressure. You've got a crazy job. Nowadays, we still have them deployed all over the world. They're coming and they're going. Their families are at home sometimes and they're somewhere else. They need and deserve the protection, and this CFPB cut the Office of Servicemember Affairs to one person, and that person retired. That should be unacceptable to every American. That should just not be allowed in this country. And yet that's what's happening, and not a peep, not a peep from far too many people in the Congress to say, No, that's wrong. Don't do it.

Rep. Al Green (D-TX)SPEAKER_06

Where will they take their complaints now? Where will they take their complaints now? They have these complaints. Where will they take them without a

Mr. Dennis KelleherSPEAKER_15

CFPB There are a variety of consumer protection the Better Business Bureau, but they don't have an empowered, funded consumer protection agency or advocate anywhere. The Department of Defense and the different services have a variety of services that they try to provide, but they're fragmented, and by the way, they actually have other really important jobs to do, like protecting the country. And so we created the CFPB and the Office of Servicemembers so that there would be one place where everybody knew they could go. And they did know, because they went there, and we know based on the complaints, and we know based on the recoveries and the actions of the CFPB to stand up for the military, that it worked. It was very effective. Frankly, I think if you look at the cases the CFPB brought for the military, the servicemembers and their families being ripped off, nobody would disagree with a single one of those cases. In fact, they might actually agree with me that the problem with the amount of money returned by the CFPB was too low, too low when you look at the egregious, outrageous conduct that's happening out there and is happening today. No cop on the beat, no place to go. They're on your own. You got to worry about doing your duty, you got to worry about your family back home while you're somewhere else, you got to worry about the bank and the credit card and the bills and the kids, and you got to do it on your own. That's wrong.

Rep. Al Green (D-TX)SPEAKER_06

Just quickly, if you can, you talked about the recovery from the financial crisis. Which ethnic group or race in this country had the most difficult time recovering?

Mr. Dennis KelleherSPEAKER_15

All the objective statistics prove that communities of color across the country and low-income communities actually disproportionately suffered and took a disproportionately long time to recover. And as I said, many of those communities haven't recovered. They are still suffering today from the financial setback that they suffered in the wake of the financial crisis. Those are the real victims. That's who we should be worrying about, not financial institutions complaining about costs that they, that they don't actually bother providing the data and analysis for.

Rep. Al Green (D-TX)SPEAKER_06

Thank you, Mr. Chairman. I yield back.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentleman's time has expired. The chair recognizes the gentleman from New York, Mr. Garbarino, who is now recognized for 5 minutes.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

Thank you, Mr. Chairman. Thank you to all the witnesses for being here today. Our financial systems benefit from firms offering a variety of products and services to American businesses and consumers. Dodd-Frank and all of its rules and requirements have negatively impacted U.S. banks and have been stifling for foreign banks' abilities to operate and invest in the United States. These limitations have real ramifications for lending and the capital markets that drive economic growth. Currently, regulators do not account for foreign banks' unique ring-fence structure and lower categorized risk profiles. In fact, rules like Basel are just blindly applied. Consequently, foreign banks are shrinking or outright leaving the U.S. markets, and at a time that we want them to support consumers, businesses, and markets like the U.S. Treasury market. Mr. Bentsen, what steps can Congress or the agencies take so that foreign banks are better able to invest in the U.S. and contribute to our economy?

The Honorable Ken BentsenSPEAKER_22

Thank you, Congressman. First of all, I agree with your analysis that foreign banking operations add a tremendous amount of capacity to U.S. capital markets. That capacity has been constrained because of various capital and liquidity rules coming out of Dodd-Frank and other reforms that came out. Some of that was tailored as a result of S. 2155, but we still see that the FBOs are capital constrained from adding capacity to the U.S. capital markets, and they are very they often are very large players along with the U.S. firms in that area. So, it would be helpful, starting with the regulators, I think, to think about more tailoring, which they have the authority to do under 2155, and think about the contribution that those banks provide to our market system.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

And if they do, it'll probably be quicker than if we have to act.

The Honorable Ken BentsenSPEAKER_22

Yeah.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

Thank you. I'd like to focus now on the U.S.-based institutions. A recent report on broker-dealer activity from the SEC revealed that the amount of money handled by broker-dealers has grown from $4.6 trillion in 2010 to approximately $6.4 trillion in 2024. That is around a 36% increase in assets since the enactment of Dodd-Frank. At the same time, the number of broker-dealers has declined from more than 4,700 to less than 3,400, a 30% decrease over the same period. Mr. Bentsen, how has Dodd-Frank contributed to this wave of industry consolidation?

The Honorable Ken BentsenSPEAKER_22

Well, firms report to us, particularly smaller broker-dealer firms, report that their compliance costs have grown exponentially, and so it's harder for a smaller firm to absorb that cost compared to a larger firm. So we see a number of firms merging, and I think that's That's part of the reason that we see the decline in the number of broker-dealers over the last 15 years, and we see other firms who get out of the business completely. They go in and just become a registered investment advisor, if they're primarily in the retail space. So, we are definitely seeing a knock-on effect.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

That was going to be my follow-up point, if you didn't hit it, but the fixed costs are pushing smaller people out of business, and so what can we do, or what can the SEC do, to encourage industry diversification and competition in the way to do it?

The Honorable Ken BentsenSPEAKER_22

Well, I think that the SEC, along with FINRA, need to think about looking at their rulebook, and FINRA has recently put out FINRA Forward, which they are looking at—are there changes in their rulebook that could help particularly smaller firms with their with their compliance costs?

Rep. Andrew Garbarino (R-NY)SPEAKER_28

I appreciate that answer. Thank you. Switching gears for my remaining time, in 2010 Dodd-Frank's enactment provided regulators with a comprehensive and wide range of authorities to regulate our financial markets. However, there are several rulemaking authorities in Dodd-Frank that continue to remain unused even 15 years after its enactment. Dr. Kupiec, how does the continued non-exercise of these powers contribute to the legal uncertainty for both investors and industry?

Dr. Paul KupiecSPEAKER_17

I think this is a question more appropriate for SEC than the banking regulators.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

Okay. All right, not a problem. All right, Mr. Bentsen, Section 913(g) of Dodd-Frank grants the Securities and Exchange Commission authority to establish a fiduciary duty for broker-dealers when providing personalized investment advice to retail customers, aligning their standard of conduct with that of investment advisers. However, this authority is also unused. If the SEC exercised its authority under 913(g) and subjected broker-dealers to a fiduciary standard, how could this disrupt capital markets?

The Honorable Ken BentsenSPEAKER_22

913 was, as I mentioned earlier to one of your colleagues, was a highly negotiated part of Dodd-Frank, and it was really designed to provide a uniform standard or an equal standard of care between brokers and advisors operating under two different standards, the '34 Act and the '40 fiduciary act. Congress actually got this right and how they did it, and then the SEC, through multiple SECs, got it right with Reg Best Interest. I think reading it broader—and the courts found this was the case—reading it too broad was not what Congress intended.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

The gentleman's

Rep. Andrew Garbarino (R-NY)SPEAKER_28

time has expired. I just want to ask for unanimous consent to enter a statement for the record from the U.S. Chamber of Commerce.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Without objection.

Rep. Andrew Garbarino (R-NY)SPEAKER_28

Thank you.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

gentleman from New York, Mr. Torres, is now recognized for 5 minutes.

Rep. Ritchie Torres (D-NY)SPEAKER_23

Thank you, Mr. Chair. My comments are going to be focused on housing. Since the 1980s, the home price-to-income ratio has nearly doubled. In the 1980s, the median home price was 3.5 times the median household income. Today, the median home price is six times the median household income. In the past half century, America has been witnessing the death of affordable homeownership. First-time homebuyers have historically made up 38% of overall homebuyers. In 2024, that number fell dramatically to just 24%, the lowest level ever recorded. The housing crisis is both a market failure and a regulatory failure, and it's a regulatory failure not only at the level of excessive zoning restrictions, but also at the level of excessive lending restrictions. Abundance has become a ubiquitous term in our political discourse, but housing abundance requires financial abundance. Since the financial crisis, financing for first-time homeownership has not been abundant and affordable. It's become scarce and expensive. Before the financial crisis, the average credit score for approved loans was 710 to 720. After the financial crisis, the average credit score for approved loans is 760. A 50-point shift in the average approved FICO credit score has meant the catastrophic loss of homeownership access for 10 to 20 million prime borrowers. And so we're in a country where there are fewer people who own homes because of an artificially restricted pool of potential homebuyers, there are fewer homes to own because of an artificially restricted supply of housing, and homeownership itself has been delayed by a decade. In 1991, when I was only three, the median age of a first-time homebuyer was 28 years. Today, that number has risen to 38 years, the oldest median age ever recorded for first-time homeownership. So I'm among the millions of young Americans who have lived through the death of the American Dream of affordable homeownership. And so here's the question: when it comes to housing finance, did the U.S. get the regulatory balance right in the wake of the financial crisis, or did we swing the pendulum too far in restricting the supply of credit for first-time homeownership? And that's an open question for anyone.

Dr. Paul KupiecSPEAKER_17

I think the evidence from the AEI's Housing Center shows that the loan underwriting characteristics have been loosened to try to allow people to buy mortgages with a higher mortgage rate and the higher prices. And so, in fact, underwriting standards have even slipped. I think the FHA and the GSEs take now loans with 50% debt-to-income ratio, which historically is a really high ratio. So, things have actually moved towards less restriction on some of the lending, but the housing prices and the mortgage rates have just blown past that. And so, you're really at one of these quagmires. Do you want to— it gets really risky to make people, you know, loans when the debt-to-income ratios get that high. Their ability to repay isn't there, and that's kind of the situation we're in. And so, the regulations have been stretched to try to allow people to buy homes, but the house prices and the mortgage rates just make it unaffordable.

Mr. Dennis KelleherSPEAKER_15

I'm not a housing expert, but you've put your finger on a really important issue that's complex and has for many reasons, but one of the reasons that's never discussed is the way capital is allocated in this country and to who, right? And if you look at the big banks, only about 40 cents of every dollar of deposits actually goes to lending. If you look at community banks, 75 cents of every dollar goes to lending. Why is that? Because too often, kind of high-margin, wealth extraction, financialized activities return the biggest profits and therefore bonuses as the banks get bigger. They use their balance sheet for all sorts of things having nothing to do with lending. That's how you end up with 40 cents on a dollar of deposits going to lending at the big banks, 75 cents at community banks, because that's what they're— as a number of your colleagues mentioned earlier, that's what they're into. They're into building their communities, whether it's small businesses or mortgages. We need to think hard about the incentive structure that has our biggest banks putting a minority of their deposits into actual lending. It hurts the wealth gap, it hurts the racial wealth gap, it hurts the housing gap. Across the board, it impacts the problems that we're all trying to think about and address. Yeah.

The Honorable Ken BentsenSPEAKER_22

I'd just say there are multiple factors. There are some Dodd-Frank factors, things like Reg AB II that came out of Dodd-Frank that's affected the RMBS market. Pretty much the vast majority of loans now are either conforming loans or government-guaranteed loans. So, our private market has gone away. That's number one. But there are other factors as well, as you pointed out. So it's a much more holistic problem that needs to be addressed.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Thank you. The gentleman's time has expired. I now recognize myself for 5 minutes. I would like to submit for the record a letter from the Defense Credit Union Council. 2 decades ago, there were over 8,500 FDIC-insured banks in the United States. Today, that number is is just 4,000. Many of the banks we have lost are small community banks, which play a vital role in my district in northeast Indiana. Though there are several reasons for this decline, I believe Dodd-Frank's one-size-fits-all regulatory approach for banks is a key contributor. Mrs. Johnson, can you explain how Dodd-Frank's compliance burdens have contributed to consolidation in the banking sector? And what are the long-term consequences for communities if we continue down this path?

Mrs. Lindsey JohnsonSPEAKER_36

Well, I think it's an incredibly important question. Anytime that we're talking about regulation, I think it's really important that we start with the outcome. What is the outcome that we want to see? And we've got the most competitive banking system in the world. It's diverse, and so, to even to Mr. Kelleher earlier points, you want banks who are out in the capital markets, you want them trading, you want them lending. There's a variety of things that all the banks do, and they compete on. You're right. We have seen around a 40% reduction in the number of banks, and I think that that consolidation is largely—not only, but largely—driven because of the regulatory burden. And the problem with that is that you have less competition in for consumers' business, right? The other piece of this is that it pushes lending outside of the banking system. You want banks competing with non-banks. You want banks competing on every single product line. So we just talked about mortgage. Mortgage has—this pendulum has swung, and the majority of mortgage lending at different periods of time is now outside of the banking system entirely. You want banks in that business competing for those consumers. Same thing is happening for personal loans, where the majority of loans are actually outside of the banking system, auto lending, the list goes on and on. And so I don't think anybody argues against regulation and wanting safety and soundness and consumer protection, but there's always a cost, and we've got to start weighing the costs and if it actually outweighs the benefits.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Thank you. As we've heard today, the result of Dodd-Frank was an entirely new regulatory regime with broad powers, expansive mandates, and little accountability to the American people. Under the Biden administration, we saw this regime in full display, whether it was Director Chopra weaponizing the CFPB to pursue policies that would have destroyed the overdraft protections many of my constituents rely on, or Vice Chair Barr's efforts to impose the harmful Basel III Endgame capital requirements on banks. We have seen how far out-of-bounds agencies can venture because of Dodd-Frank. Mr. Kupiec, do you think the current Dodd-Frank regulatory regime is accountable to the American people, and is this expansive regulatory regime watering down congressional authority?

Dr. Paul KupiecSPEAKER_17

I, I don't exactly know how it could be accountable to the American people. Does it serve the American people well? Parts of it work well. Lots of it is too complicated, and lots of it I think could be revised and serve the people better. I'll leave it at that. It's certainly— we're certainly not at a perfect regulatory balance.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

What about the relationship with Congress?

Dr. Paul KupiecSPEAKER_17

Oh, I think Congress has delegated too much authority to things like the FSOC to make designations, and I think that those kind of powers belong in the legislature, and you guys should debate it and decide who gets regulated and who doesn't, and the regulators shouldn't shouldn't decide on their own. They should advise you who they think who who you should be talking about, but I I would not give them powers if it were my choice.

SPEAKER_UNKNOWN

right,

Rep. Marlin Stutzman (R-IN)SPEAKER_25

Thank you. Here in Washington, we have far too many agencies that seem to be more interested in expanding their own power than actually serving the public. Americans across the country, and certainly in my district, are fed up with this, as we just discussed a little bit. A prime example of this is the Office of Financial Research, which was created by Dodd-Frank to aid in data collection. The problem is, is that prior to Dodd-Frank, federal regulators already had an extensive ability to collect data. The Federal Reserve Board alone employs over 400 PhD economists. In addition, each of its regional banks can conduct its own localized research, not to mention the extensive data collected by our other financial regulators. Mr. Bentsen, can you elaborate on how OFR has failed to add significant value beyond what existing agencies already provide? And how do you think this reflects the broader problem of regulatory sprawl under Dodd-Frank?

The Honorable Ken BentsenSPEAKER_22

Thank you, Congressman. So OFR does have— OFR does collect a lot of data. You're right, other agencies collect data. And Congress has talked about this before, of looking to see can there be some coordination or streamlining of financial data collection? In addition, protection of that data, I would add as well, because we know the government is susceptible to cyber risk just as the industry is. But on top of that, OFR does, on the one hand, play an important role. They collect data for the SOFR reference rate. That's very important. On the other hand, they have had situations of mission creep. So I do think it's appropriate for Congress to take a look at that.

Rep. Marlin Stutzman (R-IN)SPEAKER_25

All right. Thank you. My time has expired. I would like to thank all of the witnesses for their testimony today. Without objection, all members will have 5 legislative days to submit additional written questions for the witnesses. To the chair. The questions will be forwarded to the witnesses for their response. Witnesses, please respond no later than August 20th, 2025. This hearing is adjourned.