>> this meeting comes to order and this chair is authorized to call recess at any time. this is called two days after the 4th anniversary of the dodd-frank wall street reform and consumer protection act and we will examine its impact on the capital market and the economy. and i recognize myself for four and a half minutes for an opening statement. dodd-frank has been based upon a false premise that deregulation or lack of regulation led us into the crisis. however, in the decade leading up to the crisis, studies have shown that the regulatory burden on the financial industry increased. there were few industries that were more highly regulated. the list could go on. we here a lot about wall street greed and i could not agree more. i am curious at what point was there not greed on wall street. i am wondering how that could be the determining factor. i do know affordable housing goals of fannie and freddie on stero steroids helped mandate financial institutions into loaning money to people to buy homes that could not afford to keep them. my democratic colleagues said let's roll the dice on housing and they did and the economy employi imp imploded. dodd-frank has been the wrong remedy. adding complexity to the situation. frequently in washington, i say frequently with regret, it is the rule as opposed to the exception. laws are evaluated by their advertised benefits. not their actual benefits or cost. we were told dodd-frank would quote lift the economy quote into big success, end bailouts and increase stability for investment and entrepreneurship. we have learned we are in the slowest, weakest recovery in the history of the nation. tens of millions of our countrymen now unemployed. negative economic growth in the last quarter. business start-ups at a 20 year low. 1-7 dependented upon food stamps. increasing entrepreneurship? i don't think so. ending too big to fail? we have had this debate before. we had it yesterday, today and tomorrow. dodd-frank codified too big to fail into law. and it is showing four years later the big banks are bigger and the smaller banks are fewer. financial stability is now defined by the unelected and unaccountable bureaucrats. i don't know if the larger financial institutions whether one it say we have achieved financial stability. but it comes at an incredible cost. it is harder for low and moderate income americans to buy a home. thanks to dodd-frank there are fewer community banks serving the needs of small businesses and family. thanks to dodd-frank mainstreet businesses and farmers faced higher cost in managing their risk and producing their products which is impacting every single american at their kitchen table. thanks to dodd-frank's vocal rule the capital markets are less liquid than they were before making it hard for companies to raise capital and harms individual's saving for retirement and children's education. services like free czech -- checking -- are being curtailed or eliminated. it is one of the reasons the house financial means committee has moved regulatory bills. a number have passed with bipartisan support. none of which have been taken up by the senate. by the time it is over, the house financial service committee would have created a sin of omission housing finance reform and working alongside our friends who are developing a bankruptcy alternative to the ordererly liquidation authority. and we will address dodd-frank's sin of codifying too big to fail and taxpayer back bailout funds. i yield to the ranking member for the opening statement. >> i would like to welcome all of today's witnesses and i, too, want to acknowledge and welcome the former chairman and veteran of the committee, mr. barny frank. [ applause ] >> i am so pleased he has agreeed to be the democratic leader today. barny, i have had your picture hanging over me for a year and i have concluded just seeing barny frank without hearing him is no barny frank at all. i am pleased we will all be able to hear you today and i hope to hear you remind my republican colleagues about just how close to the brink we came in 2008 and about why congress and the president responded forcefully with your namestake act -- the dodd-frank wall street reform and consumer protection act i am hoping that you will help with the con tlikt inflicted an americans and they are still suffering today. $13 trillion in economic growth, $16 trillion in household health, foreclosers and devastating unemployment. this gave oversight to wall street and gave regulators to tools to end too big to fail, taxpayer bailouts and eliminated loopholes and most importantly it restored responsibility and accou accountability to our financial system giving americans confidence in a system that works for and protects them. chairman frank, i am proud to worked with you on this important legislation and i am more proud of the law's remarkable progress in just four short years. the consumer financial protection bureau is up and running and returning $4.6 billion to consumers. the vocal rule has been finalized that is limiting banks to transfer and make money. thanks to authorities given to the exchange commission, one of wall street top cop, in civil penalties has been recovered from bad actors since 2011. before they were evident and before the ink was dried on president obama's pen, the president released them on on a campaign to weaken and repeal and pressure regulators to return us to the time before the crime. they incorrectly blame the financial crisis on government efforts to house the poor and disadvantage despite the fact that that is not what sarted the crisis. poor corporate government and risk management allowed it to flouri flourish. they misunderstand the cure. they have pushed to cut, and constant implementation orderer. they are tried to render dodd-frank toothless and trying to return the situation to the deregulation that caused the crisisment. may make hyperbolic claims about the affects and these are as old as time. and the same things can be heard from the ontarpponents of the 1 security act. though, they are the loudest critics, republicans have never offered an alternative. no alternative to protect consumers. no way to wind down large complex banks and no capacity to pass reforms of fanny may and freddy mac. i continue to hear one. mr. chairman, the four year anniversary of the dodd-frank is an important milestone. we should look back and see how far we have come and where we need to go. i look forward to correcting the record and getting facts straight about his historic law and its contribution to our renews vibrancy of the nation. i welcome the witness testimony and yield back the balance of my time. >> the chair lady from west virginia is recognized for a minute and a half. >> thank you. this past monday marked the forth anniversary of dodd-frank and 400 new rules of which 298 have been finalized and 24% are yet proposed. i think we see this legislation is having impact on the businesses, community lenders and consumers. for the past three years, i have had numerous hearing highlighting the challenges facing community lenders and small businesses. one of my fears during the drafting of dodd-frank was that it would limit the ability for community lenders to taylor to the client's need. later this afternoon i will share several accounts where they cannot offer tailored loans because of the nknenew regulati. lenders need stability to taylor their product. removing this is detrimental to rural communities like i represent in washingtest virgin. i will continue to work with the chairman, and i yield back. >> chair now recognizes the gen gentlelady from new york. >> welcome to chairman frank. we miss you and it is great to see you. this legislation bears your name and was the most sweeping overhaul of financial regulation since the great depression. when the investment company act of 1940 was passed it was called at the time and i quote the most intrusive financial legislation known to man or beast. that is now the cornerstone of the large and thriving u.s. mutual fund industry. it is important to remember the post-depression financial form took a long time the implement. the security act was important in 1933 but it wasn't adopted until 1948. 15 years after the '33 act was performed. it requires flexibility on the part of the regulators, industry and congress. i look forward to our witnesses today and will respond by saying when president obama took office we were shedding 7200 jobs a month and we have the dow being the highest and the stock market doing great. we are moving in the right direction. >> the chair now recognizes the chair from texas. chairman of the housing and subcommittee for one minute. >> the dodd-frank was the most far reaching reform legislation since the great depression. if you took the security exchange act of 1933, the security exchange act of '34, and every amendment you tacked on since then you would still need 600 pages to have the same amount as the dodd-frank act. 398 are rule-making requirements. just in the first 225 rules, 24 million man hours for per to comply. these means we have institutions that are now hiring more compliance officers than loan officers and it is hurting smaller businesses all across the country. it was said that the macroloans have declined every year since dodd-frank. $170 billion down to $130 billion. we had a banker say he is hiring more compliance officers than anything else. >> time is up. we recognize the gentlemen from new york. >> it is with great pleasure i welcome back chairman frank. very new individuals that serve on this committee will experience the great honor of having their picture hung on the room here. and this speaks volumes of the leadership you had on us. many have forgotten how far we have come. you led when the country needed strong leadership and our most prized financial institutions were collapsing. we can say we are made great accomplishments in safe guarding and preventing the risky behaviors of the past. four years later, more americans are returning to work, confidence and trust is returning to the financial institutions and market and our banks and credit markets are lending again but doing it more carefully this time. there is no bill that is a perfect bill, dodd-frank has given us the foundation to build upon to make sure there is strength and transparency in the market so americans can yield the american dream. >> the chair now recognizes the gentlemen from wisconsin, mr. duffy, for one minute. >> thank you, mr. chairman and witnesses for being here today. it was widely believed the financial chris crisis resulted from lack of regulation. but today all these regulations do is provide less choice to consumer and give them more dangers. all this bill has done is make it harded for small banks and credit unions to serve the people. take the consumer protection financial bureau. you don't protect consumers by taking away and limiting products like they are doing. it pulls consumer through the data collection and that is not acceptable. the dodd-frank act hasn't made the consumer safer. as we celebrate the birthday i think the american people realize there is not such to celebrate. >> the chair now recognizes the jim from connecticut for two minutes. >> i welcome the panel, chairman and my former friend barny frankfran frank. i read the papers closely and carefully and what is interesting to me and this opportunity on the 4th anniversa anniversary what interesting about the 80 passenger report was the dog that didn't bark. if you don't have something nasa to say don't say it at all. they are related to two titles of the bill. it makes no mention of the billions that have been returned to badly abused consumers and mow mention that we are stopping the selling of toxing mortgages to american family. no mention of the meaningful regulations of the market that was at the center of the meltdown of 2008. and of course there is no mention in the 80 pages or opening statements from the friends on the other side about the fact that the financial markets are thriving and the banks are profitable. these are facts that belie the predictions we have had from the other side. none of us know whether we have put in place the tools to address the failure of an important institution. some think we have, some think we haven't. this is an important question and i think one that is worth bipartisan consideration and debate. the chair recognizes the gentlemen from indiana. >> thank you for calling this hearing and thank the witnesses for being with us. as we will hear, dodd-frank has failed to end bailouts and lift the economy. dodd-frank puts regulators ahead of taxpayers and consumers. no one believes the economy is safe from bubbles and bailouts. four years of dodd-frank left lending more expensive and loans harded to come by for consume. one perfect example of blocked laws is the transparency act that requires them to declare new restrictions on lending in a slightly more transparent way. today i am looking forward to real world relenders, not regulators, to explain how this is impacting real people. >> we will turn to our witnesses. first we welcome dale wilson, chairman, president and ceo of the first state bank of san diego, texas. anthony karfang, a firm that counsels business on treasurey management strategy, and i welcome back chairman frank. i have not had an opportunity to shake your hand and we will remedy that after the hearing. i welcome him back because number one i want to met the ranking member called him as the democratic witness and i have a vested interest to make show you are treated well as i have plan to be one one day. but not one day soon. next is thomas dees. his testimony today is on behalf of the coalition for derivatives in users. the last guest is a president scholar at the american enterprise institute who has held a variety of positions with the fdic and private and public sector institutions. # green, yellow, red lighting system with green go, yellow mean wrap it up and red is stop. we have not improved the oddoh system so you will need to bring the mike close to you. mr. wilson, you are recognized for a summary of your testimony. >> thank you, chairman, ranking members -- >> pull it a little closer >> i am dale wilson. the ceo of first state bank san diego. a rural bank serving a small texas town. i appreciate the opportunity to be here to present the views of the texas bankers association on the umpacts of the dodd-frank act. let me start by thanking my own congressman who serves on this committee. we had a pleasure ho hosting the congressman at my bank and we appreciate his service to our community. during the last decade the regulatory burden for community banks has multiplied ten-fold. dodd-frank alone as added nearly 14,000 pages of proposed and final regulations. managing this tsunami of regulations is a significant challenge for a bank of any size but for a small bank with only 17 employees it is overwhelming. today it isn't unusual to hear from bankers ready to sell to larger banks because of the regulatory burden becoming too much to manage. since the passage of dodd-frank there are 80 fewer texas banks. these banks didn't fail. texas has one of the healthiest economies in the country. we call it the texas miracle. these are community bankers. i have talked to some of them personal that could not maintain profitability with regulatory cost increasing between 50-200 percent. these were good banks that for decades have been contributing to the growth and vitality of their tabes but ability to serve the community is being undermined by excessive regulation and government micromanagement. the cost of the regulatory burden are being felt by small town barrowers and businesses that no longer have access to credit. when a small town loses its only bank it loses its life blood. it is difficult to improve schools, hospitals and other infrastructure projects. i know it wasn't the intent of congress when it passed dodd-frank to harm community banks but that is the awful reality. make no mistake. the true cost is felt by my community. i used to make loans that averaged $50,000 and made them to borrows that didn't qualify for second market loans. i am not the only bank in south texas to exit the mortgage business. other banks in my county have stopped and community banks in adjacent counties. this is occurring in texas and across the country. the real victims here are the working class and middle class prospective homeowners. banks want to make safe, profitable mortgage loans. denying mortgage loans to borrowers otherwise considered credit worthy goes against every sound business instinct a banker has. he support hr 273 and hr 241. they would exempt the mortgages held on the bank sheet from the ability to pay requirements and exempt creditors with less than $10 million. no bank is going to hold a loan it doesn't believe the borrower has to ability to repay. in conclusion, i ask this committee to look at the unintended consequences of the dodd-frank and make changes so community banks can go back to meeting the needs of local community businesses. unless changes are made, compliance cost continues to drive massive conciliatory within the banks and limit the mainstream growth. >> mr. carty you are recognized. >> good morning. >> if you could pull the microphone even closer >> i am a partner with treasurery strategy. we consult with health care organization, higher ed. we have been doing this for 30 years and appreciate the opportunity to be here today. we would like the to let the committee know we support improving the system and the dodd-frank legislation. as we sit here four years later and we are beginning to see the impact of the regulation, the verdict isn't good. the regulations is created an atmosphere of fear, uncertainty and doubt. the delayed implementation is creating uncertainty on part of america's businesses and financial institutions. the inconsistency and the vague language like know your customer is important and whatever the lack definition are creating uncertainty that is a drag on the economy. let me point out two things at a conceptual level. institutions are man dated to fund themselves with longer libelties and they are being instructed to investigate in short term instruments because they can be turned over. well you can not do both. in terms of too big to fail, we think organizations shouldn't be too big to fail, but showing they are important, you are telling the depauser they are too big to fail. we are seeing some of the impacts. what is the verdict? let's list through the items in the act to see how we have done. we want time prove the safety and soundness of the financial system. the u.s. capital markets are the most robust and deepest markets in the world. they equal about 9% of gross domestic product. the european number is 21%. that 9% and 12% and we are moving in the wrong direction and hundreds of billions have been sidelines on u.s. balance sheets as a precaution against the uncertainty of the regulation. if we were to reach the 21% level of the european capital market that would sideline a million dollars. transparency. yes, some activities are more drabs transparent but the risk is the real key. risks can only be transformed and shifted. taking them off the balance sheet we are making the risk less transparticipaent and too image. too big to fail. before the passage or since the passage, the gdp is up 14% and bang assets up 25%. the banks are getting bigger. eliminate bank bailouts or taxpayer bailouts is an object. the federal reserve bank was 1 trillion to 4.2 billion since the enactment of dodd-frank. this is a huge mount of risk and it is invested on longer term assets and it is funded by overnight bank reserves. what we have here is the next taxpayer bailout in the making. finally, dodd-frank wants to eliminate abusive practices. we are elinatenateing lim natur eliminating a lot of practices. big banks are no longer dealing with community banks because of no your customer concerns. we would recommend that to remedy the situation we eliminate f-sock which is a regulator comprised of regulators. eliminate ambiguity in the terminology and carve out for protection for the 99.9% of american businesses and ins institutions that had nothing to do with this. two years ago i testified and asked when a business calls a bank for financial service will anyone be there to answer the phone? yes, the compliance officer, not the loan officer. that is no way to run the best economy in the world. thank you very much. >> chairman, frank, welcome home. you are recognized for your testimony. >> thank you, mr. chairman. i apologize my written form isn't in the way it should be. any element of surprise isn't a problem here. i don't think any of the members of the committee will be surprised by i say. i want to start with the too big to fail question. the issue, it is an interesting one because as i said and what i did write, i was surprised how bipartisan the committee's report was. in saying the problem starts with ronald reagan in 1984. the committee report says this began with ronald reagan in illinois and then it was continued by bill clinton with alan greenspan taking the lead but most of the blame is put on george w. bush saying it became a problem with sterns. while i recognize that is a bipartisan thing for a republican committee to do, putting major blame on those presidents, i think their need to respond there shows that was a problem that had to be dealt with. i was struck by your bipartisan effort to embrace tim geithner but you got it wrong. you misunderstood him. he had we have a too big to fail problem but what he sees is the opposite. tim geithner's point was we did too good a job in preventing bailout. i urge people to read the book he has with conversations with rare larry summers. everybody understands there are institutions that are too big to fail. everybody also understands when i move my hand you hear the shutters closing. he said given the size of banks, and everyone understand that, but the question is how do you deal with that as long as they are that size and he believes there is going to be the need for federal taxpayer intervention and we did too of a job to shutdown that. the other argument i think it is -- well, why do we need do too big to fail? we maybe being a financial important institution and every institution that has been threatened with being name reacted violently. how come you haven't heard the businesses hate the idea of being designated. they think it is a curse. you are nig ignoring the businesses and that is a marxist way to look at it. the other argument on too big to fail is that even though the law says the feds shouldn't give money to institution and the secular treasury shouldn't give them money to pay their debt they will violate the law. i heard polit pressure will force they treasurey and the president and to violate federal law to keep them in business. the federal law says you may have to pay some of their debts, but you put them out of business on the receivership and you get the money back secondly. i was very struck by the frankly schizophrenic approach that the majority is taking on subprime loans and loans to poor people. i was astonished. i am astonished a lot now i am out of business. there is criticism that fewer loans are being made to low income people. yeah! i thought that was what everyone wanted to do. too many loans were being made to those people. and when you blame the dodd-frank wall street reform and consumer protection act i would like to say community banks didn't make bad loans and they are subject to the community investment act. and i would say i look forward to congratulating you on the 4th anniversary. the bill passed a bill on fannie and freddie we are about to see the 4th year of your party being in control of the house and not doing about the problem you say is serious. >> you are now recognized for your testimony, mr. dees. >> good morning. i am vice president of fmc corporation and a past chairman of corporate treasures. we are members of the end users representing thousands of companies across the coaptry that employ derivatives to manage data risk. let me thank the chairman, ranking member and the members of the committee for doing so much to protect end users from the burdens of unnecessary r regulati regulation. when it comes to the needs of mainstream businesses, the members of this community have worked together to get it done. you supported hr 643 championed by grim and peters and the treasure unit bill hr 677 which moore and stiles have done so much to move forward. we are hoping that bill, modified, will soon come to the house floor. as you oversee the impleme implementation of the dodd-frank act i want to say end users were not and are not engaging in the trading activity that was evident in 2008. we are offsetting risks. not creating new ones. we support the transparency the dodd-frank act seeks to achieve. we believe it is sound and policy and consistent with the l law. however, at this point, four years after passage of the act, there is several areas where the regulatory uncertainty remaining compels end users to continue to a peal for legislative relief. i would like to invite your attention to two. margining of derivatives first. the chemical industry was founded 83 years ago. why went to the market in 1931, it was the largest pool of capital there to grow our business. today using derivatives we have an additional and larger market that is the cheapest way to edge risks of foreign exchange rate movements, changes in interest rate and global energy. our banks didn't require fmc to post cash margin to secure the value of derivatives to do so with funds we would divert into our business. the proposed funds would mandate markets from the end users are out of sync and also with the european leaders as well. it will negate the benefits of the end user clearing exception that congress included in the text of the dodd-frank act. we believe end users and their swap dealers should be free to negotiate marginal plans instead of having imposing mandatory requirements. the coalition recognizes the efforts to provide relief on centralized treasurey units. but it doesn't work for end users. they have used techniques to reduce derivatives with banks but the internal units they use are set to be financial instituti institutions subject to clearing even though they are acting on behalf of those eligible for leaf from the burden. end users are concerned about the web of the conflicting rules from the united states and foreign regulators that will determine if we can continue to manage business risks through der der deriv. the end user exemptions we thought would apply are still uncertainty confronting us with the arb triage and the competitive burdens that could limit growth and sustain and grow jobs. thank you for your attention. >> you are now recognized for your testimony and you will have to bring the microphone closer. >> thank you for inviting me. i am a resident scholar at the american enterprise but testimony represents my personal views. the idea of dodd-frank was to to remove the too large to fail and the government needed to protect investors from law. after four years of implementation dodd-frank has reg lor tory data on bank funding show that in the years prior to the crisis, the largest banks didn't enjoy a subsidy on their funding cost. instead their average cost of funding was higher than the cost statistically significant in any year. post dodd-frank, 2012, 2013, and 2014 the largest banks have lower cost compared to the smaller banks. each year the subsidy estimate is highly significant. the passions of dodd-frank hasn't eliminated too big to fail but coinsides with the large bank susidies that didn't exist before the crisis. it isn't hard to understand why investors might believe in too big to fail. the government demonstrated it would not let the largest institutions fail and dodd-frank hasn't diffuseed the expectations. they are subject to enhance regulations by the board of governors and must meet risk-based capital, file annual resolution plans and pass the board of governors annual stress test. they are so intrusive it isn't a stretch to say the largest institutions are being run by the federal reserve board. they monitor the largest institution and after dodd-frank it has the power to require a large number of changes. if changs are needed to keep from failure. the fed will be partially responsible. given changes, why wouldn't an irrational investor include the institutions are too big to fail? dodd-frank eliminated the governor letting the large institutions fail. they must file blue prints for a speedy reorganization for chapter 11 bankruptcy. the board of governor and the fdic has to a prove the plans. if in their judgment the plans don't facilitate a bankruptcy they have the right to say. these plans are nothing of the sort. the key to pre-package bankruptcy is creditor acceptance of the debt restructuring plans. but creditors don't approve the plans and are not obligated to follow the plans should they enter bankruptcy. if title one doesn't do the job, dodd-frank has title two. it is supposed to remove the risk that the failure of a large institution will cause financial instability without government guarantees or bailouts. but title two doesn't do this. using the fdic strategy, it will make tranquility by ensuring all of the subsidaries. in other words, title two will fully protect investors who would have lost everything in an fdic bank resolution and bankruptcy. title two reduces bankruptcy risk by extended a larger government guarantee and bailing out investors who don't take loss in the bankruptcy. they will have to use their judgment to decide how large the government bailout must be to maintain stability. if the resolution doesn't cover the bailout cost the largest institutions will be assessed to recover expensivexpensives. but the dodd-frank requirement to repay the cost without the use of taxpayer funds is less binding. what if they had used title two in the last crisis? they earned a lot of the interest in the reserves. there is nothing in dodd-frank to prevent them from using thus channel. surely a less transparent taxpayer bailout but still a bill bailout. >> mr. wilson, i am glad you are here. i care about the banks you run. your voice is important but not a solitary voice because rarely does a week go by that i don't hear about the plight of community banker from a community. i heard from a banker in el paso texas that said with respect to the burden quote we will see community banks to decline because we cannot afford the high cost of federal regulations and they are not risk of credit risk or a gunman coming in. my number one risk is federal regulatory requirements. and another said these are handicapphan handhand capping capping being able to meet the needs. small business men and farmer trying to get by in the difficult times are being hurt. i heard from a banker in temple, texas. we are work to make your small loan area consolidated chat. it was a straight forward process for many years but this is no longer the case and many creditors are going to other places to get a loan that comes without the hassle of bank compliance. i could go on and on and on. one banker used the word strangled. is dodd-frank in your opinion strangling community banks? >> yes, sir. there is lots of challenges to us. we have 17 employees. it is retraining staff, retraining systems, and any time there is resign reg lor tory changes it hurts us. >> there are roughly 800 community banks post dodd-frank than pre-dodd-frank and now they have a smaller market share. have you seen this study? >> i have heard those statistics, yes. >> it wasn't advertised that dodd-frank would lift the plight of low and medium income family and i think it has hurt them. an analysis for credit cost for those people pre-and post dodd-frank. credit cards are over 2% points greater on residential mortgages. we know studies were implemented and one third of blacks and hispanics will not be able to get a mortgage due to dti. i am waiting to see the outrage on the other side of the aisle. only half of today's will meet qm. 76% of banks offered free checking before dodd-frank and now only 39% and that continues to drop. there has been a 21% surge in checking fees post-dodd-frank. mr. wilson, back to you. you bank a lot of low and moderate income people. is dodd-frank hurting now and moderate income people? >> yes, sir. in our market that was the main niche we had in the housing side. our census tracks our low to moderate income for our community and those that donot have access to that -- do not -- credit from us it is hurting them. >> i yield to the ranking member. >> thank you very much, mr. chairman. to barny frank, who worked so hard to bring about protection for consumers and who spent time paying attention to community banks, i resent mr. wilson's testimony here today that talks about qm without him understanding, your bank, you can keep all of your loans in portf portf portfolio and you have protection under safe harbor. so just talk about what you have to be assistance to small and community banks, mr. frank. ... restrict sub prime lending abuses, and the bush administration preempted it. and then i was working with democrats. we were trying to put legislation through to rectify legislate sub prime homes and the republican leaders said shut it down. of the day that this committee with democrats in control again to run -- wrigley let sub prime loans it was over the objections of several members here who said that sub prime but walls were good and "wall street journal" i objected and said, look, these are good loans 80 percent of them are paying on time which did not seem to me to be a good statistic. in fact, people on the conservative side were generally pushing these loans until the crisis hit. then they needed an alternative victim, a villain to blame for the crisis. so they retroactively became opposed to these kind of loans they were blaming us. again, i think this is great inconsistency between saying that the community reinvestment act cost the public by forcing people to make these loans to poor, minority people and now complaining that we have regulated and somewhat restricted those loans. to the community banks, let me say this, i would be in favor of saying people who kept alone employed before view should not have these problems. i, on the other hand, think what is important @booktv this is the one criticism i have of the regulators -- i believe britain's -- risk prevention is the best way to go about this because it leaves the decision in the hands of the market. you cannot get away from the responsibility. you cannot get away from this. you can shift it. and this goes also, i would say, to the question of regulation but there was some regulation before the crisis started, but it was not regulating to father was not regulation for two important things to of financial derivatives @booktv i agree with much of what he said about the end user. nothing irresponsible and speculative activity in derivatives to the cftc was legislatively prevented from dealing with. the biggest problem was the model for a lot of longs in the mortgage area shifted from the kind that mr. wilson makes and keeps an portfolio to those that are made and then securitized. securitization, i think, is a great example, mr. anthony carfang said, not getting rid of risk of passing it off. one of the things i wanted to do was require that people securitized loans, the securitized has to have a 5% risk retention. that has weakened somewhat in the senate. i would prefer a situation in which there was risk retention of securitization taking place and now 35 and then you could be much easier with people keeping things in portfolio. again, i emphasize, mr. wilson's bank and the community banks have always been covered by the community reinvestment act. it is inconsistent to talk about what a good job they did and blamed the community reinvestment act for messing things up. as a small bank, we did come as the analysis to reduce the premiums, and we did exempt them from being examined by the cfpd, and there were other areas. showing compliance with the volker rule of the forms of compensation there was a suggestion that they be specifically exempted from those since the do not apply. i think that would be a good way to not weaken of regulation and ease the compliance. apparently some banks feel they have to spend money to show they are not violating the volker rule or having this kind of stock-based compensation. i think for banks and the level to be exempt from those rules would ease the problems. and, you know, look, those need further correction. those are two small ones that i would be for. >> the chair now recognizes the gentle lady from west virginia, chair of the financial institutions subcommittee. >> thank you, mr. chairman panetta want to think the witness of the testimony. i would like to ask mr. chairman , for unanimous consent to enter into the record a very detailed description of community banker in my district with ten very specific examples on how the new atr / cute animals have had a negative impact. >> without objection. >> i almost said yes. [laughter] la. >> the value of community bankers. a liberal state. i think it is also important to distinguish that by a community bank which is similar to fdic description forces community bank loans 40% of small-business loans are issued by u.s. banks. 50 percent of residential mortgage lending, 43 of farmland lending, and 34 percent of commercial real estate appraiser that is significant, particularly in the areas where you do your business and where i live. and so when you say that you have got an out of the mortgage business, is the reason for that -- even if you can hold them on portfolio as a rule to constricted, that you are finding that the queue in box is something you cannot lindane, are you worried about examiner oversight in this area? specifically why would you get out of that business in terms of the dodd-frank regulations? >> thank you. the mortgages we originate were all balloon-type mortgages. and so that was really discouraged. in my 35 years of banking i have never sold the mortgage. we originate those for our customers and keep them in the bank. so the qualified mortgage, if you look at the debt to income -- >> right. >> we use a 50% debt to income. so the bulk of those people we serve in our market would not have met the -- i believe it is 43% debt to income limitations in the qm rules. >> i guess in europe prior practice of issuing mortgages under those parameters would you say that the customers you have been serving would be in a low to moderate -- he said $50,000 was your average mortgage obviously that is on the lower end of the scale. how else would these folks ever be able to purchase a home that they could call their own? >> many of them i would encourage to go try to get a permanent fixed-rate mortgage for the life of their mortgage. nobleman's would be in the best interest. but those that, because their credit scores were not high enough, some other reason, we were able to help them. i will confess that we do not have any problems in our real estate mortgage. the ones that we underwrite and keep, but they just did nd not t for some reason. they may have been small business owners that have schedules c tax returns instead of w-2. >> let me ask another question on another line that you -- when you talk about community banks and the construction on the numbers and the different mergers and acquisitions, what kind of effect do you think that will have general america? obviously your business model is relationship banking, and the bigger and larger institutions, as they grow, move away from that model for obvious reasons. how would you express that concern? >> so in our particular instance, we have no branches. we are in san diego. we have a board of directors that lives in that area. it we have a president of the bank. we have senior vice president speed is of wrenching environment if we were to sell to a medibank you would have tellers and maybe someone to open a new account. all of those positions would be eliminated. >> let me ask you this speech he did not really address this in your statement. something had mentioned in my opening statement, there are still many, many rules and regulations that are yet to be written. what kind of inside you think that has on moving forward? >> the regulatory burden of dodd-frank has been significant. i think just a week or two ago it was reported that, you know, j.p. morgan was laying off thousands of people but hiring thousands of compliance staff. something like 7,000. compliance staff, you know, that is to meet the regulatory burdens of dodd-frank. in terms of community banks, there is lot of evidence, a study that came out that i cited in testimony in march that showed that the study has -- >> i think i have run out of time here. thank you. >> the time of the gentle lady has expired. the chair now recognizes the gentle lady from new york. >> chairman frank, we seem to hear a lot from the other side of the aisle on this committee about how dodd-frank resolution authority for large financial institutions somehow enshrines bailouts because the fdic would use money borrowed from treasury to facilitate a line down -- wind down if you needed it. i remember that when the financial reform bill was in this committee it was the democrats on the committee that wanted to avoid the need for the fdic to borrow from treasury by creating an up front row of -- revolution fund paid through assessments on financial institutions rather than taxpayers. but i also remember that it was the other side of the aisle who demanded that the upfront resolution from to be removed because they claimed it was, you guessed it, bailout fund. now, i'd like you to go back to the financial bailouts of 2008 and 2009 and tell us if there was any such action that we did back then that we could do now under the new rules of dodd-frank? dodd-frank actually said that there is no legal authority to use public money to keep a failing entity in business. the law actually forbids it, and it repeals the power that the federal reserve had to extend von's to any financial institution as which happened with the bailouts with aig. would you go back to this because it is something we hear over and over again, how dodd-frank resolution authority protect taxpayer dollars. >> thank you. i would like to say, to respond to a comment that was said, to the extent that we were responsible for j.p. morgan chase beefing up its compliance staff i am not embarrassed. frankly, if they had done that earlier they would have saved themselves i don't know how many -- in the teens of billions of dollars for noncompliance. i think they have done a good job, but they were not over complying by any means in a number of areas. the gentlewoman from new york is absolutely right. we did have a find but there has been a fundamental difference between the two parties on whether or not we should assess a large tonnage of institutions, not community banks, $50 billion or more. when we were in conference on this bill in 2010 and our position was with the cbo said was going to cost $20 billion over ten years, we should get that from the large financial institutions, those 50 billion over which would have included everybody. that republicans objected in the senate. the senate republicans who were going to vote for the bill objected, senators brown, snow, and collins, and made us take that out because it would not have given the senate the 60 votes they need and instead put it on the taxpayers. in fact, we have this history where the republicans objected to an assessment of a large financial agitations and said to us, the taxpayers. similarly here the federal reserve could not do aig under this law. now, aid is true, well, they can set up a broadly applicable facility, but under this law -- and i think mr. sherman had a role in this, they had to guarantee -- guarantee it is a solvent institution with a high percentage of probability. we have specifically prevented the fed from doing what they did with aig. the argument as i understand is that even though the law says -- the other difference is no money -- we do all recognize going back to ronald right to of ronald reagan that some institutions are so large you cannot let them not pay their debts without having reverberations. the question is what do you do about it? on the lawn now in place the effort to deal with that cannot happen until they have been put into receivership. they have done away. so large institutions. and then any money that is spent beyond what is available from the owners has to come back from an assessment. the secretary of the treasury is mandated, not authorized, mandated to recover. the argument is command i have heard this from people, in a political crisis like that of financial crisis like that there would be overwhelming pressure on the secretary of the treasury to ignore federal law and use public money indefinitely to keep an institution in business. i don't know in what universe people have been living if they think -- i think there would be enormous political pressure not to do anything at all. i cannot think of any efforts that would now be legal under our bill. >> the time of the gentle lady has expired. the chair now recognizes the gentleman from new jersey. >> i think the chairman for a very timely hearing, and so i guess this can only be former chairman franken but the reference of secretary geithner is booked in with one breath. reminded me of groucho marx's statement which was, from the moment i picked up the book until i put it down i was convulsed with laughter. someday i will read the book. so let me go first. it may be of will go to the congressman. was it your intention that the fslic designate a nonbank lament that it would be regulated as a perpetuity? >> as a matter of fact -- >> thanks. did not think it wise. is there a problem with the way that the fed is handling that right now? i look and see and hear testimony -- >> may i it -- >> no. >> there was a premise in your question which i did not agree you repeatedly to the reputed to be agreeing to repeated back to my am skeptical of that designated nonbanking. the center as soon as i agreed. i have been very skeptical. >> great. appreciate that. >> i sent a comment to that effect. i sent a comment to the fsoc to that effect. >> i appreciate that. in your testimony you pointed out that fsoc makes it nearly impossible for companies to know what steps to take to avoid the designation. that makes no sense for them not to be able to make that clear. i agree with you. can you then just jump off of what the congressman just stated i guess you would agree that they should not be making these designations and as long as they are they are inadequately telling us how they will not be in perpetuity? >> i completely agree. i thought there was some intention that the designation should be reviewed annually anyway. the designations themselves to not explain why the institution, with the specific characteristics that make it are and what they would have to do to become a designated. the process is really broken. >> i guess we have agreement on a point. also, i did catch your one comment, congressman, earlier that said there are, you mentioned, some areas that need to be changed in dodd-frank and other areas that need further correction. the senate recently unanimously passed one, which is the car and six to ensure that that can appropriately to my word, not theirs to regulate nonbank. i assume then that you agree with that unanimous change? >> i am not familiar with the bill. i don't have to read them all these days. >> okay. it was -- okay. >> i can say, if i might, this whole conversation the three of us have had starts from the standpoint that being designated is an unpleasant thing and that institutions should be empowered to resisted, which i think a undercuts the point that being named is a great benefit and being in that category is something that helps you. they all fight it so hard. >> and so we only have a limited time package. >> the problem with that reasoning is, if you truly are a systemically important firm and are going to get the bailout, then you have a big benefit by not having any regulations because you will be paramount in the end anyway. you would fight, you would fight even so that if you are systemically important you are cynically important and in the end the government is got to bail you out. your best bet is to diffuse regulation anyway. they would fight like crazy, even if that too big to fail is a benefit. >> and i think that is an important point. let's give a hypothetical. sunday in the future when a mega bank does go down, and it will happen again, part of the cost of that whole process, the resolution process will be borne by home, the rest of them. >> if it goes through title to is. >> in the institution of 50 billion more. >> okay. if now we have designated nonbanks, including potentially for asset managers. so these asset managers will now be ones that could be or would be bearing some of the brunt of the bailout. now, asset managers do not have a lot of capital. so where will the bill of actually be paid for? will it be paid for by the retired widow who has funds in the asset manager? the retired but will be paying for the reckless conduct. is that correct? >> yes. asset management coverage, you have to get someone from somewhere. >> was that your intention, congressman? let me restate the question. was that your contention that retired widows and designated entities would be the ones who would bear the brunt if they were part of the -- >> it was a serious question you would not ask you with no time left. i will wait for someone else- that question so i can answer. >> the time of its elements has expired. >> a very serious question and a very serious problem. >> the chair now recognizes the gentleman from new york. >> thank you, mr. chairman, chairman frank you have seen here today and here that we continue to hear that the dodd-frank act is having a negative impact on the economy. yet the stock market is reaching all-time highs, job creation is on the rebound, and access to capital for small businesses is the best we have seen in four years. now that you are in the real world out there, do you think that main street is buying this rhetoric that it is not in line with the reality? >> i think main street is not -- and as you know as chair of the small business committee while we were writing the bill and a member of this committee -- you had a very significant input command a think we tried hard to deal with it. by the way, the arguments the republicans gave at the time, there was a bill we worked on the treasury asked us to do to encourage lending to small community banks to small business, and the republicans opposed it. they said, the problem is not the banks to lend but small businesses don't want to borrow because the economy is so bad. a consistently argued that the problem is on the borrower and and not the lender and. if i could really use your time to respond to the last second question i got. the problem is when we broke the law talking about who would have to assess, we took into account the different levels of financial activity and, in fact, asset managers are not exempt from contributing at all but by formula they would contribute a much smaller share of what they have. in fact, i do not think they should be included. that does not contribute, but they're is a formula that would minimize their contribution. i would say, and i was proud to represent fidelity and putnam and other institutions. but if they had to make a contribution along with all the others they would not have to go after old widows or even young widows. there are ways they can do that out of the very considerable profits than make. to go back -- even on community banks we also increase to the deposit limit to 250,000. and in our bill in the house we indefinitely extended transaction accounts guarantees. again, many small banks said to us, well, we want to do business with small businesses. the need to keep more than 250 around for transactions permit we said yes. unfortunately, it was later terminated in the new congress. i do agree, and i think sometimes it is the lawyer's fault. i have talked to some people because sometimes i do not recall provisions in the bill other than the mortgage one, and i understand that affected small banks. one of the things i found was some lawyers were persuading community banks they have to go to great efforts to show their work and plan to. that is where i agreed. we ought to make it clear that if you do not do those things you are exempt from them. in some cases people have overlord to try to prove that. we tried very hard to be respectful of the community banks, and i was pleased and the independence community bankers said they thought that that was okay. >> thank you. you mentioned on -- the uncertainty facing the financial sector due to delays in rulemaking. would you agree that the federal regulators should expedite dodd-frank implementation to bring certainty to the industry? >> ma'am, i am absolutely in favor of certainty. if there can be an expedited process to all of this or a date certain at which this incident we have a time where we know what the rebels are and can operate, that would be a very correct thing. >> yes. >> thank you. thank you, mr. chairman. >> the gentle lady yells back. the chair now recognizes the chairman from texas. >> thank you, mr. chairman. in your testimony you said that for years after the passage of dodd-frank there is no evidence that it has ended too big to fail and it probably reinforced investors' expectations that the largest financial institutions actually benefit from government safety that get protection not available to smaller institutions. can you tell me what advantages you see those institutions have over smaller institutions? >> i think that the perception that the government is so closely watching them and they are subject to much, much tighter regulation and supervision gives investors the impression that there will be protected by the government. the federal reserve who is interested lee involved in their operations is responsible for not letting them fail, and they're is a system set up were interested regulation has replaced market discipline you usually see in banking markets. a cost of funds for these institutions, the largest institutions is now much less than the cost of funding. it is more than 25 basis points. twenty-two was the smallest. thirty-two was the biggest. they're is a definite cost to funding advantage to being a large bank. >> mr. frank mentioned several times that he felt like that the larger financial institutions actually did not benefit from dodd-frank, it was onerous on him -- them. i wanted to get mentioned some quotes from people who run some of these financial institutions. for example, goldman would be one of the biggest beneficiaries of this reform. the ceo of chase said the market share may increase due to a bigger boat. and so several of the ceo's here have said that dodd-frank, for example, wells fargo said that i don't think dog got it right or -- dodd-frank got it right or solve the issue. we have gone through all these gymnastics of doing this, but, in fact, the bigger financial institutions have gotten bigger and we have seen -- >> well, first -- >> i'm not done with the question. we have seen consolidation of smaller institutions. community banks have seen a number of consolidations. if we continue without making changes to dodd-frank, do you think that is the direction we will continue to go, larger financial institutions with that advantage get larger at the expense in many cases of the smaller institutions? >> yes, i think very definitely that the changes in dodd-frank will change the -- will increase the consolidation in the industry and tend to make assets and deposits be concentrated at the largest institutions. there are a number of features, not just the concentration. dodd-frank at that big impact on subchapter s banks which almost all are. it does not allow you to pay dividends if you get below a capitol threshold, and this is the means by which you get money out of a subchapter s. so they cannot pay their owners dividends. it stopped the trust's, eliminated trusts, which was a major source of funding for the smallest banks. that think that it has shut down and the large deposits if you are a large corporate or municipal you will go to the largest bank where you think things will be protected in a type to resolution. i think there is lot that tilts the system over the long run toward the larger banks. >> mr. wilson, sometimes when you are competing for deposits in their marketplace, particularly if it is a large deposit, do you find it difficult to compete with some of the larger financial institutions that can on, say, your cd rates are money-market rates? >> we have challenges in that, but we are in a market that is pretty much a wash in deposits right now. part of the wheels of the activity in our area. >> but would your cost -- you said you have 17 employees. what your costs when you add additional compliance costs, is it putting pressure on your margins and what you can pay on deposits and what your loan rates are? >> yes, sir. our margins have squeezed considerably over the last four years. >> with that, mr. chairman, i will yield back with the gentleman yields back. the chair recognizes the gentleman from california, mr. mr. sherman. >> they cue, mr. chairman. set the record straight. 50 billion we are talking about was originally 10 billion in the bill. some of us had to fight very hard to raise that. the original approach was that they get the bailout and the median size of institutions are among those paying for it even though they never could have gotten the bailout. the problem that we have is 2-fold, and these problems continue. first, the existence of entities that are too big to fail. second, the credit rating agencies. as to the existence of entities that are too big to fail, we are told that their current law prohibits using taxpayer money to bail them out. i was here in 2008. the law prohibited using taxpayer money to bail them out. we passed a new law. and one would suspect -- in fact , the markets are convinced that is exactly what will happen again and that is why there was testimony that these giant institutions in jury 22 basis points benefit. i have submitted into the record of previous hearings that it is closer to 80 basis points a benefit. and as was pointed out, the sweet spot is to be one but not to be classified. so if the markets believe that you are so big that he will take down the whole economy they will loan you money at a lower rate, knowing that congress acted in 2008 and would probably act the same way again. the solution to it too big to fail is not to have institutions that can take down the entire economy. mr. chairman, i mean the current chairman who has just left the room, the republican report that we are here having a hearing on identifies that there are only two legislative answers that have been put forward to deal with this. one is a bill that would require additional capital to be held by those that are enjoying this subsidy. then there is my bill and the bill of bernie sanders to say too big to fail is too big to exist. since the purpose of this hearing is to focus on solving problems that have not been solved, the biggest problem is we may be asked to bailout institutions again. there are only two legislative proposals to deal with the problem identified in the republican report. i did not know if the current chairman can speak for the permanent chairman of the committee, but i've would look forward to asking him why we cannot markup the only two legislative proposals identified in the republican report to deal with the problem that we are talking about here. .. >> i am an addict yet for the bank keeping the mortgage and its portfolio and those rules should not apply to the bank. that is 100% risk retention. >> i think that is a different issue. do you have an opinion? sir? >> the risk retention is very important and that is very appropriate. >> mr. chairman, while i was addressing you when you weren't here, that is why i will use my last half minute to ask you a question, and that is since the republican report said that we have a huge problem, the report indicates that they have two legislative proposals to deal from that problem, is there any chance that instead of just talking about how bad some prior bill is that we could actually consider the only two legislative proposals identified in your report and mark them up. >> perhaps the gentleman, the chairman says we won't mark up before this congress is over. the chair now recognizes the gentleman from oklahoma, chairman of the agriculture committee. and i thank you, mr. chairman. i would like to move over to the object of title vii and the derivatives market. you are testimony is more than a little familiar for me. as chairman of the committee, my committee and i have held 17 oversight markups and the testimony over the greater oversight of the implementation process is being treated like large wall street banks is something that this committee and the act committee has heard dozens of times from dozens of witnesses and that is why every issue you raised in your testimony we address in my legislation to reauthorize hr 30 their 14 the consumer relief that which passed the house last month with a large bipartisan majority. and you are correct, sir, that the users did not create a financial crisis of 2008 and should not be regulated like they were. they should be putting resources into research and development of the programs to develop businesses and should not be required to part with these valuable resources. the house is past the business risk mitigation and price stabilization act with large majorities, 141 both lester the senate is the other body that has not acted on the villain so i included the in the cftc reauthorization act. so can you tell us, can you quantify the cost that they would incur and possible job losses if this protection is not enacted to law and if they have to post these transactions? could you expand on that for a moment? >> thank you for that question, sir. they are also members of the business roundtable, which is itself of a member for the coalition of users, and we surveyed the other nonbusiness and nonfinancial members of the business roundtable and found that on average for those other nonbusiness members that it would be $269 million that would need to be set aside for meeting these margin accounts and that was only assuming a 3% initial margin without allowing for any variation margin. and so that would be a direct subtraction of fun that we would otherwise use to invest in capital clement to expand our business and our inventory to support higher sales and research and development to innovate new products and ultimately we hope to grow our employment. >> it seems therefore it would be an important thing to help the economy. mr. chairman, if i could know just a moment on this fourth anniversary of dodd-frank, like a number of members in this room having been a part of the legislative action committee across the floor in the conference committee, time tends to modify our memories about how things are done. but as i remember it the derivatives section of what would be the dodd-frank act started as a bipartisan piece of legislation and support from both sides of the aisle as i remember we had input from the minority in that time the political minority and i remember this from all sides of the room. when we got to the conference, the decision was made by the conference committee chairman to set this aside and take out senator dodd's product. and so from that point on as my memory goes, it was not too much of a bipartisan process and i would like to note all my colleagues that somehow the very strong tradition of bipartisanship that we began dodd-frank with whatever the end result was and i think in a fashion that was appropriate for what we are trying to accomplish. but by the end i don't remember the minority having that much and friends. i yield to the chairman. >> the gentleman's memory is quite vivid, notwithstanding the fact that i recall being there for about 24 hours, but yet the gentleman's memory is correct. >> a bill only reflects how it is put together. >> the chair now recognizes the gentleman from new york, the ranking member of the subcommittee. >> thank you, mr. chairman. i do want to see whether or not there is anything that we can agree upon. so i will ask mr. wilson first, do you agree that it was bad behavior by some financial institutions that created the problem that we had with reference to the financial crisis? been that there was no bad behavior on my part. >> i said some financial institutions. >> plants and 10 financial institutions and nonfinancial institutions that something that got us into this. >> yes, sir. >> i am asking the same question to the gentleman. >> there were a number of contributors in institutions. >> someone did something wrong. i mean, we didn't have this cover, a lot of people did something wrong to cause the crash. >> absolutely. >> sir, yes, there were financial institutions engaging in risky activities and those risks blew up in 2008. >> yes. there were lots of guilty parties and regulation was very the park, the regulators missed all kinds of warning signs and the consumers all over the country that took out loans trying to profit by the low rates and flipping houses and they were taken advantage of or they were facilitated by the financial institutions. but it was not just the financial institutions across the problem. >> let me go back. so what i'm hearing and what i've heard from a lot of my colleagues from the other side of the aisle, basically what they want to do is get rid of dodd-frank. if i listen to what they are saying they are basically saying that the cause of the problem and the problems that we have now are dodd-frank. dodd-frank did not exist when the problem was caused. it is as a result of the problem. and so now i don't know whether individuals have tried to get rid of dodd-frank altogether, but is there anything in dodd-frank do you agree with, mr. wilson? >> yes, sir. >> sir? >> sure. >> yes, sir. >> i think that the goals of dodd-frank and the problems that arise from that our are admirable goals. >> would you tell us the problems and how you derived the that they came into existence and what it'd do to help save the economy throughout the day? >> there were two areas that the chairman mentioned, including some increased regulation in a bipartisan way and there were two innovations in the problem was not so much that we deregulated as a society and there were two of them. one was the financial derivative and i noted what he had said and i agree with him and there was risky speculative activity and secondly, what happened was people found a way to get rid of it. and they say if you don't get rid of them you shovel it off. so in those two areas congress enacted legislation that says stay away from derivatives. and so we did have this and they said that they wouldn't do it and many of my conservative colleagues said that we should stay away from regulating subprime. but the problem was with securitization people were making loans in the incentive became making this and too big to fail, if we get to this, then we don't want the institutions to fail. by stopping these irresponsible loans and making people stand behind the financial derivatives, you hope to make it unlikely that people will fail. but they had sold it to those with no idea how much they had talked about. >> the chair now recognizes the gentleman from the subcommittee. >> thank you, mr. chairman. we would appreciate the opportunity to all of the good folks to be here today listening to the concerns. it is interesting as someone who is involved in the banking industry and has been on both sides of the table and then we see the regulatory onslaught that has come as a result of the dodd-frank bill, it is mind boggling to see the effect of what is happening. when i talk to bankers come in the first thing they talk about is the amount of regulation that is running out of washington. and sir, you talk about fear and uncertainty and ambiguity and i hear that every time. i just got done with one a minute ago and another group of them here with so much uncertainty that causes them to not want to go out and invest in the local community and the business people themselves have this same standpoint of not being able to not wanting to risk their hard-earned blood and sweat and tears business by expanding pennebaker tummy before, i said how are things going and he said last week i had three people come in who i had approved for loans for the businesses and all came in and said they push themselves away and said no, we are going to wait. we are concerned about the economy and concerned about this regulatory environment coming out here. and i'll easily the president's health care law is a big goblin and also comes down to the accessibility of funds and the cost of those funds and the uncertainty that causes within our economy. and so you talk about this and basically my view is the banks are not the problem although they have been roped in as a close solution and you talked about less flexibility and less ability to serve the unique needs of the communities and i would like you to expound on that a little bit based on the standpoint of what goes on with a community bank and how do you fill the unique needs. >> we are in a market that is 85% hispanic and mortgage loans that we would originate or somewhat created, you might say, they were not high risk mortgages and we have very little losses in those portfolios and we were able to uniquely tailor that to make that customers need be mad. and i might say during the lifetime of that loan we were very flexible if a crisis happened of working with those customers. >> one of the things that has happened is someone who comes from the heart of the country. you see that there's another bank that is sold has sold out to a competitor or a neighbor or a larger in the two shin. he does have alluded to the cost of compliance. it's not that it's a bad economy, the economy has stagnated, but at some point there is not a particular rule, but it is a cumulation effect at some are it's the straw that may break the camel's back and you see this consolidation going on. and in "the wall street journal" there was an article about banks getting close to the 50 billion-dollar mark with regards to being designated a part of this. and so i want to say that it's not the size that the size complexity and the risk that the bank is taking and we have all of these rules and regulations are taken. so i was kind of curious as you have a lot of expertise, what do you think about the situation that we need to do something about this to be able to protect some of the midsize banks as well. >> one of the things in this sphere, it is an organization that essentially creates double jeopardy for everyone in the sense that they have been when they believe another regulator has failed. and therefore it creates another level of uncertainty, if you will. so that creates a lot of concerns on the part of financial institutions and business borrowers, they are concerned about whether their bank will be fully compliant or fully able to make loans when the businesses need them. >> they talked about this in particular, the stock went down and there's another bank that is approaching this mark to 7.1% for this year, not because of anything they have done, but because of their status and that is an unintended consequence that can't be allowed to continue. >> the time for the dolmen has expired. we now recognize ranking member. >> did you miss us? [laughter] >> oh, no. [laughter] >> i don't blame you. i'm not under oath. okay. so seeing this again, this is another one of those show until hearings with no purpose to it and i'm actually kind of tired of them. although i love you all. this seems to be going nowhere and it's going nowhere and you have already made a proposal and i would hold these at 100%. sign me up. that is easy. but we don't want to talk about that. we want to talk about how bad dodd-frank is in the things we can come to an agreement on to fix some of the things we can all fix and that's not a problem. but instead we light candles at the altar is outside the ideologue think tanks and that's what we have to do area we can't talk about too big to fail. many of us think that we did a pretty good job at it, but for one, i think that if we can do more, let's do it. what is the problem. so i can get the idea supported or even looked at unless we repeal dodd-frank. to an end or ge3 and so how are we going to get to an end or get this addressed if we say we hate this and we love that and here is my speaking points from my campaign fannie and freddie. does anyone realize that the u.s. government has made money on fannie and freddie? you know that? >> yes, sir. >> you know that? i know that you know that. what about you remap. >> no, sir, it's all i can do to keep up with the regulators. >> a lot of those derivatives are part of it. so those derivatives are costing you money. >> we are making money and we are costing homeowners more than they should be charged so that we can use it as a piggy bank, yet we can't have an honest discussion of how to fix it and instead we have an ideologically-based committee sitting on the floor and i've never seen a major bells bills on the floor for as long as this proposal because they can't get past. and that is just one of them. we can't do it with immigration, we can't do it because we are lighting candles at the idea of her. help me find a way to get to these points. can you talk to some of your friends over there. i love them all but i'm from massachusetts and could you get them to listen to us on some of the things? >> i'm excited that we have consensus on addressing the needs of community bankers. >> the independent community bank is actually supported it. many thought was a brilliant idea and it wasn't my idea, but i simply put it into legislation. and i guess i don't really have any questions or truth is that i already know some of the things need to be done and i'm happy to work with any of you and anyone else who actually want to address some of the problems in a bipartisan way. but i have to be honest that i'm getting tired of these regular hearings that we have with political points over and over and dodd-frank has done a very good job of containing the crisis that we have and cannot be improved upon? well, of course it can. you'll be the first one to tell you that he didn't get everything that he wanted. 5% retention, i think it should be higher. but there are others who would like to change some of these as well. it is not just throwing it out and pretending that we did something terrible. and sarah have no questions, but the truth is that i can only talk about this so much. >> paterno recognizes the gentleman from south carolina, mr. mulvaney. >> thank you, mr. chairman. let's see if we can't find something that we can actually accomplish. i was struck by the chairman's opening comments and the stories that we heard from his bankers in texas and the story that mr. wilson told about compliance cost going up as a result of dodd-frank and i'm reminded of a story that i heard when i was in charleston, south carolina, within the more community bank who had been there through the second examination and he asked them how you find this new environment. in the bankers said it is killing us and we have 18 employees and we had to hire three people last year just to fill out paperwork. and so he said that the response was outrageous and the response was this link look of nonrecognition and he said i don't understand. because you have work to create three jobs. and if you have a complete misunderstanding of how you create wealth and jobs, then maybe that part of it is a success for you. and i think the gentleman talked about these stories, he said they're going to hire 3000 more compliance officers this year on top of 7000 compliance officers last year yet total employment at jpmorgan would go down by 5000 people. so we are moving away from this concept of a productive financial sector into a compliant financial sector. and i'm fearful that that may be part of the long-term the of this particular piece of legislation. but if we go to his point about things that maybe we can agree upon, i am encouraged by his comment and by the comment that perhaps community banks should be exempt and i think that maybe that is a move in the right direction and let's see if we can build upon that and maybe agree that this arbitrary flesh is a bad idea. i was surprised because i wasn't here at the time, but that number was originally 10 million, which means we were actually contemplating a financial institution to be treated the same as 1 trillion which is just absurd. i will start reviewing go down. >> i want to start is whether or not he thinks it would be better to replace the 50 billion-dollar threshold with something that actually looks at the complexity of the business that the actual business model and what the financial institutions are engaging in. >> i will ask you the same questions afterwards. >> there are two aspects to it. on a positive note on this, title i should have been used to direct the fdic in their regular bank resolution process to be required to split up large banks rather than to sell them to another large bank in a bank resolution and that is how we got the too big to fail banks and dodd-frank didn't do that. so they would have to modify the fdic act so that do not have to do that so the whole notion handles this well under the existing rule and that's how we got the big banks. but if you fix that, many of the regional banks, they don't really pose a risk. but if they fail and they go through this, they're just going to sell them to another bank and pretty soon you have a 100 billion-dollar bank. and so the resolution process built up a too big to fail industria and that's what they should have asked. they should've addressed that flaw. it's all about bankruptcy proceeding and everything else they never recognize a resolution process that was in place in the regular practice is broken when it comes to this and it doesn't have to be. >> there is this 50 billion-dollar arbitrary number. it doesn't come from anywhere and there's no science that came up with this. but the problem with having this and turning it over to this is that there is nothing that constrains it. so if you turn it over to the complexity and interconnectedness and whatever else you want to hear about, the f-stock could sit there and say oh, yes, we looked at this and 50 billion was at stake. and so i apologize as i did intend to ask the same question. >> i think you may have misunderstood. the notion that it was once 10 million, nobody ever thought about this before. >> it is just the scrutiny that we have. >> it was not about regulation. >> the chair now recognizes the gentleman this area. >> thank you and welcome back just going along with that line of questioning, senator warren of massachusetts has advocated reinstating glass-steagall in order to address the issue of too big to fail. what are your thoughts and should we go back and address this? i thought that we did not have enough of the new regulation, but i think the thing that i talked about is the invention of the financial derivative with insurance not regulated in the way that it should

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