Important this is the one criticism i have of the regulators. I believe Risk Retention is the best way to go about this. It leaves the decision in the hands of the market. You cant get away from the responsibility you cant get away from this. You can shift it. This goes also, i would say, to the question about regulation. There was some regulation before the crisis started. But it wasnt regulating there wasnt regulation for two important things, Financial Derivatives. I agree about the end user. I appreciate his noting that there was irresponsible speculative activity in derivatives which the cftc was length there were prevented from dealing with. The model for loans shifted from the kind that mr. Wilson makes and keeps in portfolio to those made and then secure advertised. Passing the risk off. I want to do in the bill was to require that if people are going to secure a loan, they have to have a 5 Risk Retention. That was weakened in the senate. I would prefer a situation which there was Risk Retention if securing took place and no then you could be easier if people kept things in portfolio. Again, emphasize, mr. Wilsons bank and the Community Banks have always been covered by the Community Reinvestment act. Its inconsistent to talk about what a good job they did and blame the act fors ming things up. As for small banks, yes, we did reduce premiums and we did exempt them from being examined by the cfpb. There are other areas. Show compliance with the forms of xen tags. Dan made a suggestion they be specifically exempted from those since they dont apply. That would be a good way to not weaken the regulation and ease the compliance. Some banks feel they have to spend money to show they are not viet lating the rules or having this kind of stockbased compensation. I think for banks below a certain level to simply be exempt from the rules since they never use them would ease the problem. Those need further correction. Those are two small ones that i would be for. Chair recognizes the gentlelady. Thank you, mr. Chairman. I want to thank the witnesses for their testimony. I would like to ask mr. Chairman for unanimous consent to enter into the record a very detailed description from a Community Banker in my district with ten very specific examples on how the new atr qm rules have had a negative impact on West Virginia consumers. I almost said yes. Mr. Wilson, were kind of singing from the same hymn book here in terms of the value of Community Bankers. I live in a rural state which is served by Community Banks. I think its important to distinguish that by a Community Bank, which is similar to fdics description, reports that Community Banks loan 48 of Small Business loans are issued by u. S. Banks, 15 of Residential Mortgage lend, 43. 8 of farmland lending and 34 of commercial real estate. So thats very significant, particularly in the areas where you do your business and where i live. When you say that you have gotten out of the mortgage busine business, is the reason for that even if you can hold them on portfolio, are the rules too con stickive . Is it that you are finding that the qm box is something you cant lend in . Are you worried about examiner oversight in this area . Specifically, why would you get out of that business in terms of the doddfrank regulations . Thank you. The mortgages we originate were all balloontype mortgages. So that was really discouraged. In my 35 years of banking, i have never sold a mortgage. So we originate those for our customers. And we keep them in the bank. The qualified mortgage, if you look at those like the debt to income right. We use 50 debt to income. So the bulk of those people we served in our market would not have met the i believe its 43 debt to income limitations in the qm rules. I guess in your prior practice of issuing mortgages under those parameters, would you say the customers you have been serving would be in the low to moderate 50,000 was your average mortgage. Obviously, thats 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, na balloons, would be in their best interest. But those that because their Credit Scores werent high enough or 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 under write and keep. But they just didnt fit, for some reason. They may have been Small Businessowners that had schedule c tax returns instead of w2. Let me ask another question on another line that you when you talk about Community Banks and the constriction on the numbers and the different mergers and acquisitions. What kind of affect do you think that will have in Rural America . Obviously, your Business Model is relationship banking. The bigger and larger institutions as they grow move away from that model for obvious reasons. How would you express that concern . In our particular instance, we have no branchs. We are in san diego. We have a board of directors that lives in that area. We have a president of the bank. We have Senior Vice President s. In. Branching environment if we were to sell to a megabank, would you have tellers and maybe shun someone to open a new account. All of those positions would be eliminated. Mr. Theres still many rules and regulations to be written concerning doddfrank. What kind of impact does that have on moving forward . The Regulatory Burden of doddfrank has been significant. I think just a week or two ago it was reported that jp morgan was laying off thousands of people but hiring thousands of compliance staff. Something like 7,000. Compliance staff, you know, thats to meet the Regulatory Burdens of doddfrank. In terms of Community Banks, theres a lot of evidence theres a study that came out that i cited in testimony in march that showed that this study has i think ive run out of time here. Thank you. Time has expired. The chair recognizes miss maloney. Chairman frank, we seem to hear a lot from the other side of the aisle on this committee about how doddfranks Resolution Authority for large Financial Institutions somehow enshrines bailouts. Because the fdic would use money borrowed from treasury to facilitate a wind down if you need eed it. It was the democrats on the committee that wanted to avoid the need for the fdic to borrow from treasury by creating an upfront Resolution Fund paid through assessment 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 Fund be removed because they claimed it was, you guessed it a bailout fund. I would like to you 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 doddfrank. Doddfrank 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 funds to any Financial Institution which happened with the bailouts with aig. Would you go back to this point . Because this is a point we hear over and over again, how doddfrank Resolution Authority protects taxpayers dollars. I would like to say preliminary to respond to a comment on something before, to the extent that we were responsible for Jp Morgan Chase beefing up its compliance staff, i am not embarrassed. Frankly, if they had done that earlier, they would have saved themselves i dont know how many in the teens of billions of dollars for noncompliance. I admire jamie dieamond. They were not overcomplying before. The gentle woman from new york is right. We did have a fund theres been a difference between the two parties on whether or not we should assess large Financial Institutions, not Community Banks. 50 billion and more. In fact, when we were in conference on this bill in 2010 and our position was with the senate that when the cbo said it was going to cost 20 billion over a tenyear period that we should get that from the large Financial Institutions, those of 50 billion and over. That would have included everybody whether they were the republicans objected in the senate. There werent that many republicans voting for it. 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 wouldnt have given the senate 60 votes they need it and put it on the taxpayers. We have this history where the republicans objected to an assessment on the large Financial Institutions and do it for the taxpayers. Similar here, the Federal Reserve could not do aig under this law. It is true people say, they could set up a broadly applicable facility. But under this law i think mr. Sherman had a role in this they have to guarantee that its a solvent institution with a very High Percentage of probability. We have specifically prevented the fed from doing what they did with aig. The argument as i understand it is even though the law says the other difference is no money can we do all recognize going back to ronald reagan, that some institutions are so large that you cant just let them not pay their debts without having a reverberation. So the question is what do you do about it . Under the law now in place, that effort to deal with that cant happen until they have been put into receivership. Then any money that is spent beyond what was available from the owners has to come back from an assessment. The secretary of treasury is mandated, not authorized, mandated to recover it. The argument is ive heard this from people. In a political cry session, a financial crisis there would be political pressure on the secretary of the pressurery to use public money to keep an institution in business. I dont know in what universe people have been living if they think i think there would be political pressure not to do anything at all. I cannot think of any of these past efforts that would now be legal under our bill. Thank you. The chair now recognizes the gentleman from new jersey, mr. Garrett, chairman of the Capital Market subcommittee. I thank the chairman for a timely hearing. So i guess it can only be frormr chairman frank of put reference to all of that in one breath. It reminded me of groucho marx was from the moment i picked up the book i was con vulsed with laughter. Maybe i will go to the congressman. Was it your intention to they designate when they do designate a nonbank fee that would be regulated that way into perpetuity . No. I didnt think it was. Is there a problem with the way that the fed is handling that right now . I look and see in your testimony may i there was a premise to which i did not agree. On the i am very skeptical of designated nonbanking insty institutions that way. You assume that i agree they should do that ive been skeptical of doing that. Great. Appreciate that. I send a comment to that effect. I appreciate that. In your testimony, you pointed out that fsoc makes it nearly impossible to know what steps they can take to avoid the december igs nation as a siffi. That makes no sense for them to not be i agree with you. Then can you just jump off of what the congressman stated and i guess you would agree that they should not make these designations as well and that they are inadequately telling us how they will not be into perpetuity. I completely agree. I thought there was some intention that the designation should beannually. Since they dont explain what makes it that and what they would do to become undesignated, the prose is broken. We have agreement on that point. I did catch your one comment, congressman, that said that you mentioned some areas that needed to be changed in doddfrank. I think you said there are other areas that also need further correction. The senate recently aunanimously passed one which is the collins fix to ensure the fed can appropriately, my words not theirs, regulate nonbank siffis. I assume you agree with that change . Im not familiar with the bill. I dont have to read them all these days. Okay. Can i say, this whole conversation the three of us have had starts in the standpoint that being designated that way is an unpleasant thing and institutions should be empowered to resist it which under cuts the point that its a benefit and income that category is something that helps you. So we only have limited time. Do you want to go to that point . The problem with that republicaning is if you have a sis systemically important firm and you will get the bailout, then you have a benefit by not having any of the regulations because you will be bailed out in the end. You would fight. Would you fight even so that if you are important, you are important in the end. The government has to bail you out. Your best bet is to diffuse any regulation. That the would fight like crazy even if the even if the too big to fail is important. Some day in the future when a megabank does go down, part of the cost of that whole process, the resolution process will be borne by whom . Not just siffis, any institution 50 billion or more. Now we designated these nonbank siffis, including potentially for Asset Managers. The Asset Managers will now be one that could be would be baring some of the brunt of the bailout. Asset managers do not have a lot of capital. Where will the bailout actually be paid for . Wont it be paid for by the retired widow who has funds in the asset manager . The retired widow will pay for the reckless conduct, is that corre correct . They would get the money from somewhere. Fees would go up. It would rekoop somewhere. Was that your intention . Let me restate the question. Is that your intention that retired widows would be the ones who would bear the brunt if they were part of the resolution . It was a serious question, you wouldnt ask it with no time left. I will ask for somebody else to ask me that so i can answer it. Its a very serious question and a very serious problem. The chair now recognizes the gentle lady from new york miss velazquez. Chairman frank, we continue to hear that the doddfrank act is having a negative impact on the economy. Yet the stock market is reaching alltime highs, job creation is on the rebound and access to capital for Small Businesses is the best it has been in four years. Now that you are in the real world out there, do you think that main street is buying this rhetoric that its not in line with the reality . I think main street is not, 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 significant input. We tried very hard to deal with that. By the way, the argument the weapons gave at the time, there was a bill we worked on, the treasury asked us to do to encourage lending to from Community Banks to Small Businesses. The republicans opposed it and they said the problem is not that the banks wont lend, its that Small Businesses dont want to borrow because the economy is so bad. They argued that the problem was on the borrow end not the lender end. If i could briefly just use your time to respond to the lastminute question or lastsecond question that i got before. The fact is when we wrote the law talking about who would have to assess, we took into account the Different Levels of financial activity. In fact, Asset Managers are not exempt from contributing at all but by formula they would contribute a smaller share of what they have. I dont think they should be included. That doesnt determine they dont contribute. But theres a formula that would minimize their contribution. I would say and i was proud to represent fidelity and other institutions. If they had to make a contribution, they would not have to go after widows. There were ways that they could do that out of the very considerable profits they made. To go back on Community Banks, we also increased the deposit limit to 250,000. In our bill in the house, we indefinitely extended transaction account guarantees. Again, many small banks said, we want to do business with Small Businesses but they need to keep more than 250,000 for their transactions. We said yes, unfortunately it was later terminated in the new congress. I do agree that i think frankly its the lawyers fault. Ive talked to people. I did not recall many provisions in the bill other than the mortgage one i understand that. That affected Smaller Banks. One of the things i found was some lawyers were persuading Com