prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: Coast Guard staffing for the TAP program reflects the organizational structure of its Health, Safety, and Work-Life Directorate, which oversees TAP policy  The Coast Guard’s TAP managers are assigned to 13 installations where Health, Safety, and Work-Life offices are located  One or two TAP managers are assigned to each of the Coast Guard’s nine districts, which often span multiple states and territories, and these TAP managers oversee operations both for the installation where they work and for units stationed throughout the region (see fig  1)  For example, the TAP manager assigned to Coast Guard Base Cleveland oversees TAP implementation both for that installation and for Coast Guard units serving in Coast Guard District 9—a region that encompasses portions of eight states and the Great Lakes area  The program manager in Coast Guard Headquarters manages Coast Guard’s Transition Assistance Program  The Coast Guard protects and defends over 100,000 miles of U S  coastline and inland waterways, and consequently, TAP-eligible Coast Guard servicemembers sometimes work in small, widely dispersed units assigned to remote locations, including on Coast Guard vessels  One aspect of the Coast Guard’s mission—a first responder for maritime search and rescue in United States waters—can require Coast Guard servicemembers to respond to emergency situations at a moment’s notice  The Coast Guard, which is overseen by DHS, not DOD, generally oversees TAP implementation for its servicemembers  Federal law requires DOD and DHS to require eligible servicemembers under their respective command to participate in TAP, with some exceptions  In response to this statutory requirement, DOD has promulgated regulations and developed issuances which require that servicemembers complete the component parts of the TAP program, and that commanding officers ensure that servicemembers under their command complete these parts, with some exceptions  In contrast, according to Coast Guard officials, Coast Guard has not promulgated any regulations to implement TAP  Further, Coast Guard issued its most recent Commandant Instruction in 2003, approximately 8 years prior to TAP redesign in 2011  However, Coast Guard issued policy guidance in 2014 that made some limited updates to the Commandant Instruction  Coast Guard officials also said the Coast Guard plans to issue a new TAP Commandant Instruction in May 2018  Under the redesigned TAP, Coast Guard servicemembers—like their DOD counterparts—begin TAP by attending pre-separation or transition counseling where they are briefed on TAP requirements and available transition resources  Pre-separation or transition counseling can be delivered by TAP managers, uniformed career counselors, or online (see fig  2)  Coast Guard servicemembers are able to participate in TAP either through the Coast Guard or at a DOD installation, if space is available  During or at the end of pre-separation or transition counseling, participants register for and attend TAP courses  The core curriculum includes three required courses—the Department of Labor (DOL) Employment Workshop, unless exempt, and Department of Veterans Affairs (VA) Benefits Briefings I and II—and other courses that focus on aspects such as translating military skills and experiences into credentialing for civilian jobs and preparing a financial plan  Participants may also elect to attend additional 2-day classes either at a Coast Guard or DOD installation or online through the Joint Knowledge Online platform, according to agency officials  These additional 2-day classes include Accessing Higher Education, Career Technical Training, and Entrepreneurship  Federal law requires the Coast Guard to permit servicemembers who elect to take these additional 2-day classes to receive them  Federal law establishes a time frame within which servicemembers with anticipated separation or retirement dates should begin the program  According to federal law, retirees with anticipated separation dates are expected to begin TAP as soon as possible during the 24-month period preceding that date, but not later than 90 days before separation  Similarly, servicemembers with anticipated separation dates who are not retiring are expected to begin as soon as possible during the 12-month period preceding that date, but not later than 90 days before separation  Servicemembers who learn that they will separate or retire from the military fewer than 90 days before their anticipated separation or retirement date are expected to begin TAP as soon as possible within their remaining period of service  As we previously reported, officials from multiple federal agencies collaborate to deliver and assess TAP  The TAP interagency governance structure includes senior officials from DOD, VA, DOL, DHS, the Department of Education, the U S  Office of Personnel Management, and the Small Business Administration (SBA), who participate in TAP Senior Steering Group meetings at least every month and TAP Executive Council meetings each quarter  Further, officials tasked to particular interagency working groups focus on specific elements of TAP (e g , curriculum or performance measures), meet more frequently (typically at least once a month), and generally communicate weekly, according to agency officials  The TAP program manager for the Coast Guard told us that he participates in several of the working groups  One such working group is the performance management working group that oversees the interagency TAP evaluation plan, which includes monitoring performance measures related to TAP requirements, indicators of post-program outcomes, and formal evaluations sponsored by interagency partners  While DOD tracks TAP-specific performance measures, other interagency partners track indicators of how well veterans fare after leaving military service  For example, DOD tracks performance measures prior to servicemembers’ separation, such as TAP participation and credential attainment rates, while other agencies track post-separation indicators, such as unemployment rates among veterans ages 18 to 24  The performance management working group also reviews the formal evaluation efforts led by individual agencies and provides feedback to help shape their efforts in accordance with the TAP Evaluation Plan  The Coast Guard does not have complete or reliable data on participation levels in TAP  According to Coast Guard officials, a major reason why the data are not reliable is that the Coast Guard lacks an up-to-date Commandant Instruction that specifies when to record TAP participation data  Consequently, the data are updated on an ad-hoc basis, according to agency officials, and may not be timely or complete  For example, one TAP manager said she updates the list of TAP participants for her installation only once every few months because of her other duties  According to federal internal control standards, management should use quality information—including current and timely information— to achieve the entity’s objectives and to communicate quality information to external parties  Given the lack of timely and complete data, we determined the Coast Guard’s TAP data were not sufficiently reliable for an analysis of participation in TAP classes  Because it lacks policies and procedures governing reliable data collection, including when data should be entered and by whom, the Coast Guard cannot determine to what extent its servicemembers attend TAP, although federal law mandates that DHS ensure all TAP-eligible servicemembers participate in the program  In addition, the data collection system currently used to track TAP participation is not sufficient to ensure reliable data  For example, according to Coast Guard staff, TAP staff enter TAP participation data into a shared spreadsheet that all TAP managers can edit  Specifically, staff record the names of servicemembers they identify as TAP-eligible and whether these individuals completed required portions of TAP  Coast Guard officials said they are in the process of adopting a new data system, in October 2018, to more reliably track TAP participation and that they expect to fully adopt this system–DOD’s TAP-IT Enterprise System—after a new Commandant Instruction is finalized, in May 2018  In November 2016, DOD launched the new system to collect TAP-related data for servicemembers in the Army, Navy, Air Force, and Marine Corps  In addition to standardizing data collection and improving data completeness and accuracy, the TAP-IT Enterprise System is expected to track information related to the time frames of servicemembers’ participation  According to a senior DOD official, the military services will not be able to use the system to generate unit-level or installation-level reports until October 2018  According to our survey, the most common factor affecting TAP participation, cited at 11 of the 12 Coast Guard installations we surveyed, pertained to servicemembers assigned to geographically remote locations  The next three most commonly cited factors–each cited by 7 of the 12 installations surveyed—relate to the timing of TAP participation: rapid separation from the military, not being sufficiently aware of the need to attend TAP, and starting the transition process too late to attend  (See fig  3 ) Headquarters-based TAP officials identified additional factors that may affect servicemember participation, such as separating from the Coast Guard Reserves or retiring with no plans to work after leaving the military  However, the Coast Guard lacks participation data to verify whether participation rates for these groups are in fact lower than for other Coast Guard servicemembers  Coast Guard installations we surveyed did not indicate that unit commanders or direct supervisors affected participation in TAP’s required courses or additional 2-day classes  However, Coast Guard servicemembers and TAP officials we spoke with said unit commanders or direct supervisors sometimes prevented participation  All three TAP managers we spoke with (of 12 nationwide) told us that while commanders generally allowed servicemembers to register for TAP courses, they occasionally required them to return to their duties before completing the courses  We observed this during a TAP class at a Coast Guard installation we visited when a servicemember’s commander ordered her to return to the unit during TAP training and she missed a briefing she wanted to attend  Two of three TAP managers we interviewed also said commanders sometimes required servicemembers under their command to wait to take TAP classes until close to their separation date because of mission priorities  Two of three TAP managers interviewed said that commanders in the Coast Guard face unique challenges in ensuring TAP participation  They said commanders in all branches of the military must balance competing demands, including their primary mission and the training needs of the personnel they oversee  They said it can be particularly difficult for Coast Guard commanders to juggle these priorities because Coast Guard servicemembers are sometimes assigned to very small units or called to return to duty for emergency situations during scheduled TAP classes  One TAP manager said that a commander in a remote location had collaborated with her to provide a classroom-based TAP class for transitioning Coast Guard servicemembers within the commander’s unit, but rescue efforts occurred during the class which resulted in most of those servicemembers returning to their vessel to respond to the emergency  In addition, all three TAP managers we spoke with said there are limited resources for holding TAP in a classroom setting  Consequently, classroom-based TAP may not be offered frequently in remote locations, making rescheduling difficult  One TAP manager said that her installation typically offers three or four TAP classes a year and because classes are so infrequent, servicemembers are encouraged to start TAP as soon as possible prior to separation  Coast Guard staff we interviewed said that juggling competing priorities affected the Coast Guard’s ability to implement TAP  Both the frontline and headquarters staff who oversee TAP implementation said they oversee at least three other programs in addition to TAP at their installation and throughout their regions, including the Coast Guard’s relocation and spousal employment programs  The Coast Guard relies on online delivery of TAP information and classes for servicemembers who are rapidly separating and assigned to remote and geographically dispersed units, according to our survey results and several Coast Guard staff we interviewed  For example, all 12 installations we surveyed cited servicemembers facing rapid separations as a reason for accessing TAP training online, and 11 cited servicemembers being remotely stationed as a reason  Coast Guard staff also said online TAP was used for servicemembers interested in attending additional 2-day classes  The three TAP managers we interviewed also identified several reasons why installations had to rely on online TAP classes  For example, one manager corroborated our survey results, saying that many Coast Guard servicemembers worked in small units assigned to remote and geographically dispersed locations, making it difficult to convene a sufficient number of transitioning Coast Guard servicemembers to meet minimum class size requirements  In addition, all three managers said they used the online version of TAP for remotely stationed Coast Guard servicemembers because the Coast Guard lacked the resources for them to attend classes in person  Although they preferred that servicemembers participate in live, classroom-based TAP classes, all of the managers acknowledged that the online version of TAP played an integral role in ensuring that more servicemembers could participate in the program  However, two of them noted that while classroom delivery of TAP classes provided an interactive learning environment that allowed participants to ask questions and learn from their peers, online participants generally clicked quickly through the slides and had difficulty understanding the information being presented  Two managers told us that they regularly used the online version to deliver parts of the TAP curriculum  For example, one TAP manager said she required participants to complete the crosswalk of military and civilian occupations class online before attending required classes in person  Two managers noted that additional 2-day classes were available online, and one noted that some servicemembers attended these classes in a classroom setting either on a Coast Guard base or a DOD installation  Finally, all three TAP managers said that many participants in online TAP classes would benefit from participating in a real-time virtual version of TAP led by live facilitators  Two managers told us that having a remote facilitator delivering TAP in real time would give participants more opportunity to ask questions and better understand and absorb class content  Despite these challenges, TAP managers and separating Coast Guard servicemembers we interviewed provided generally positive feedback about the TAP program  All of the 25 Coast Guard servicemembers we spoke with said that the information they received during the courses was useful and they liked the instructors  One Coast Guard servicemember praised the classroom courses for being interactive, and several Coast Guard servicemembers said they wanted the opportunity to retake TAP before or shortly after they separated from the Coast Guard  However, many said the volume of information presented in a short period of time could be overwhelming and was like “trying to drink from a firehose ” The Coast Guard has not set a formal performance goal for TAP participation, according to a Coast Guard official, and as previously discussed, does not have complete, reliable data  Without reliable information, the Coast Guard cannot effectively monitor TAP implementation or measure program performance  DHS is mandated to ensure that all TAP- eligible servicemembers of the Coast Guard participate in TAP before leaving military service  However, without effective monitoring of program participation, the Coast Guard cannot know to what extent its servicemembers receive the required training they need to prepare for civilian life  According to federal internal control standards, management should consider external requirements—such as the laws with which the entity is required to comply—to clearly define objectives in specific and measurable terms  In addition, establishing goals can help agencies define expected performance and articulate results  A Coast Guard official said the Coast Guard’s long-term goal is for full compliance with TAP requirements, but in the interim, the Coast Guard uses DOD’s 85 percent VOW compliance goal as an informal benchmark against which to gauge the Coast Guard’s TAP performance  However, the Coast Guard has not communicated a specific, measurable goal to TAP staff implementing the program, or to Coast Guard commanders who oversee separating and retiring Coast Guard servicemembers, according to a Coast Guard official  Establishing and communicating a formal goal could help the Coast Guard define expected performance  The official also told us that, like DOD, the Coast Guard tracks the elements of TAP mandated under the VOW Act— transition or pre-separation counseling, VA Benefits I and II, and the DOL Employment Workshop  The Coast Guard does not monitor the (1) timeliness of participation in TAP, and (2) access to additional 2-day classes  A Coast Guard official said the Coast Guard does not currently monitor TAP beyond tracking whether separating servicemembers participate in the required courses, and currently lacks the capacity to undertake additional monitoring efforts  However, he said additional monitoring would be possible once the Coast Guard completed the move to the DOD TAP-IT Enterprise data system  According to a Coast Guard official, the Coast Guard does not currently monitor the timeliness of TAP participation although federal law prescribes time frames for servicemembers to begin TAP participation  Generally, separating servicemembers who are not retiring are to begin TAP participation no later than 90 days before their separation date  Without a systematic method for monitoring timeliness, the Coast Guard cannot know whether its servicemembers begin the program on time or account for the timeliness of TAP participation  As a result, the Coast Guard cannot know whether its servicemembers are starting TAP early enough to complete the training they need to adequately prepare for their transition to civilian life  The Coast Guard does not track which of its servicemembers participate in the additional 2-day classes, according to a Coast Guard official we interviewed, even though federal law requires that DHS ensure those who elect to participate are able to receive the training  By not tracking which Coast Guard servicemembers participate in 2-day classes or requiring transition staff to document when servicemembers ask to attend, the Coast Guard cannot determine the extent to which servicemembers who wished to attend these courses were able to do so, as required by law  Coast Guard commanders and TAP managers do not have clearly defined roles and responsibilities in implementing TAP because of the lack of an up-to-date Commandant Instruction, according to TAP staff we interviewed  As previously discussed, the Coast Guard’s last Commandant Instruction on TAP was issued in 2003, approximately 8 years prior to TAP’s redesign  According to federal internal control standards, to achieve the entity’s objectives, management should assign responsibility and delegate authority to key roles throughout the entity  Without an up-to-date Commandant Instruction, TAP managers and commanders may be unclear on who is ultimately responsible for ensuring servicemembers attend TAP  Moreover, two TAP managers also told us that an up-to-date Commandant Instruction might lead some commanders to place higher priority on ensuring TAP participation  Coast Guard officials said the Coast Guard was in the process of revising the TAP Commandant Instruction and anticipated issuing the new instruction in May 2018  The Coast Guard lacks the ability to share data with commanders, limiting its ability to monitor TAP participation and ensure servicemembers attend the program  According to a Coast Guard official, the Coast Guard’s current data collection system also cannot generate installation or unit- level participation rates to share with commanders who oversee transitioning and retiring servicemembers  Federal internal control standards state that management should share quality information throughout an organization to enable personnel to perform key roles, and we have previously reported that by regularly sharing useful performance information with leaders at multiple levels of an organization, agencies can help leaders make informed decisions  Without this information, individual unit commanders or the commanders’ supervisors cannot determine whether Coast Guard servicemembers under their command completed TAP or identify whether there is a need for corrective actions to ensure they do so  As we mention earlier in this report, the Coast Guard plans to adopt DOD’s TAP-IT Enterprise System, which according to officials, could help the Coast Guard ensure eligible servicemembers participate in the program  According to a Coast Guard official, once the system is fully implemented by the Coast Guard, commanders will be required to verify and document whether Coast Guard servicemembers under their command completed TAP, potentially making commanders more vested in the process  We previously reported that a senior DOD official said that the TAP-IT Enterprise System may be able to generate unit- and installation-level reports for the four DOD-led military services by October 2018, and a Coast Guard official said he would work with DOD to identify whether this capability could also extend to the Coast Guard  Once data reliability improves, sharing installation and unit-level TAP performance information with Coast Guard commanders could support monitoring efforts  The performance measures tracked by the TAP interagency working group do not reflect TAP implementation broadly across all five military services, according to a Coast Guard official we interviewed  The Coast Guard does not currently share TAP data it collects with DOD or other members of the interagency performance working group  While the benefits of interagency data sharing cannot be realized without the Coast Guard first improving the quality and completeness of its TAP data, we have identified leading practices for interagency collaboration, including that members of interagency working groups identify and share relevant agency performance data  Moreover, federal internal control standards call for management to communicate quality information to external parties  Because the Coast Guard does not share TAP data, the performance measures tracked by the interagency group do not reflect Coast Guard servicemembers’ experiences and thus do not provide a complete picture of TAP implementation across the five military services  More specifically for the Coast Guard, without such data sharing, future TAP evaluations may not be able to assess the effectiveness of TAP delivery, hindering the Coast Guard’s ability to make program adjustments to better prepare its servicemembers to successfully transition to life after military service  Coast Guard officials said migrating to DOD’s TAP-IT Enterprise System will facilitate information sharing with interagency partners and that improving data completeness and reliability is a top priority for 2018  Given the sacrifices servicemembers have made to serve their country, it is imperative they are afforded every chance to adequately prepare for civilian life before leaving military service  In order to make a successful transition, servicemembers need to be well-positioned to get a job or make an informed decision about whether to pursue additional education or start a small business  As such, the Transition Assistance Program (TAP) serves a critically important function—to give servicemembers the tools and information they need to successfully transition to life outside the military  Federal law requires that the Coast Guard ensure all eligible servicemembers participate in the program, but thousands of Coast Guard servicemembers may have transitioned without the support provided by TAP  Reliably tracking participation has proven to be a challenge for the Coast Guard, in part because it lacks a current Commandant Instruction that defines the roles and responsibilities of staff responsible for implementing TAP and ensuring complete and reliable data are collected  In preparing to issue an updated Commandant Instruction, the Coast Guard has taken a positive step toward addressing the limitations of its current TAP data, and will be better positioned to ensure compliance with VOW Act requirements using reliable data  In addition to collecting reliable data, the Coast Guard could further demonstrate its commitment to meeting TAP requirements by establishing formal performance goals that measure the extent to which Coast Guard servicemembers participate in TAP  By establishing interim performance goals, the agency would be able to show its progress towards achieving full compliance  Moreover, communicating performance goals to unit and installation commanders could enhance accountability and might spur progress toward meeting federal program requirements  By expanding its monitoring efforts beyond tracking participation in TAP’s required classes, the Coast Guard could enhance its ability to ensure other TAP requirements are met and that its servicemembers are able to access additional transition resources  Monitoring the timeliness of participation would help ensure Coast Guard servicemembers have adequate time to complete TAP before leaving the military  Further, by monitoring requests to participate in additional 2-day classes and 2-day class attendance, the Coast Guard would be in a better position to identify whether servicemembers who wish to attend the classes are able to do so, to determine whether more classes are needed, and to communicate this information to the interagency partners responsible for delivering these classes  Commanders can also play a key role in bolstering TAP participation  Having an up-to-date written Commandant Instruction that explicitly describes commanders’ roles and responsibilities could enhance commanders’ ability to ensure TAP’s proper implementation and compliance with VOW Act requirements  Moreover, once data quality improves, providing commanders a mechanism to readily determine whether servicemembers under their command have completed TAP could help them monitor the program to ensure that all TAP-eligible servicemembers receive the resources they need to successfully transition to civilian life  Finally, once more reliable data on Coast Guard servicemember participation are available, sharing this information with interagency partners could improve TAP implementation on a broader scale  Sharing reliable data, such as participation figures for the Coast Guard, would give TAP interagency partners a more complete picture of implementation across all five military services  Sharing such information would also enhance the interagency group’s ability to evaluate how well TAP serves the entire population of servicemembers  Improving the reliability of the Coast Guard’s TAP data will be essential for the benefits of data sharing to be realized  To ensure that all eligible Coast Guard servicemembers are provided the opportunity to complete the Transition Assistance Program (TAP), we recommend the Commandant of the Coast Guard take the following seven actions: Issue an updated Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data by including when and by whom data should be recorded and updated  (Recommendation 1) Establish a formal performance goal with a measurable target for participation rates in VOW Act-mandated portions of TAP  (Recommendation 2) Monitor the extent to which Coast Guard servicemembers participate in TAP within prescribed time frames  (Recommendation 3) Monitor the extent to which Coast Guard servicemembers who elect to participate in additional 2-day classes are afforded the opportunity to attend  (Recommendation 4) Issue an updated Commandant Instruction that defines the roles and responsibilities of the personnel who administer the program and ensure servicemembers’ participation  (Recommendation 5) Once reliable data are available by installation or unit, enable unit commanders and the higher-level commanders to whom they report to access TAP performance information specifically for the units they oversee so that they can monitor compliance with all TAP requirements  (Recommendation 6) Once reliable data are available, share TAP information with DOD and other interagency partners, such as data on participation in required TAP courses and additional 2-day classes  (Recommendation 7) We provided a draft of this report to the Departments of Homeland Security, Defense, Education, Labor, and Veterans Affairs, the Office of Personnel Management, and the Small Business Administration for their review and comment  The formal written response of the Department of Homeland Security (DHS) is reproduced in appendix II  In addition, DHS provided technical comments from Coast Guard officials that we incorporated into the report as appropriate  The other agencies did not provide any comments  In its written comments, DHS agreed with all seven of our recommendations  If you or your staff have any questions about this report, please contact me at (202) 512-7215 or brownbarnesc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  This report examines (1) what is known about the reliability of Transition Assistance Program (TAP) data on participation levels and the factors that affect Coast Guard servicemembers’ participation, and (2) the extent to which the Coast Guard measures TAP performance and monitors key areas of TAP implementation  To address these questions, we surveyed Coast Guard installations with full-time TAP operations; reviewed Coast Guard data on TAP participation for fiscal years 2012 to 2017; visited one Coast Guard installation and interviewed TAP managers from two additional Coast Guard installations selected for diversity in location, among other reasons; and interviewed Coast Guard officials responsible for overseeing TAP implementation for the Coast Guard  We also reviewed relevant federal laws, regulations, policies, documents, and publications  Information in this report is current as of the date GAO received formal agency comments from DHS  Our survey of Coast Guard installations with full-time TAP operations asked about how TAP was being implemented  The survey included questions about the accessibility of TAP components, challenges Coast Guard servicemembers faced in attending the components, and the level of commander support for participation  Our survey targeted front-line TAP managers, who could draw on the expertise of TAP course facilitators, transition counselors, career counselors, and other key TAP staff as necessary  After drafting the survey questions, we pretested them with a TAP manager to ensure (1) the questions were clear and unambiguous, (2) terminology was used correctly, (3) the survey did not place an undue burden on agency officials, (4) the information could feasibly be obtained, and (5) the survey was comprehensive and unbiased  We revised the content and format of the survey based on the feedback we received  We initially sent the survey to TAP managers at all 13 Coast Guard installations at which TAP staff were located  We removed one installation when we later found that the TAP manager position was vacant and revised the total to 12 Coast Guard installations  The survey was accessible online from October 31, 2016, through January 18, 2017, through a secure server that recipients were able to access using unique usernames and passwords  We sent an email announcement to TAP staff at all 13 Coast Guard installations at which TAP staff are located on October 24, 2016  We sent a second email on October 31, 2016 to notify participants the survey was available online, and provided their unique passwords and usernames  We sent two follow-up e-mails (November 14, 2016 and November 28, 2016) to those who had not responded  Finally, we contacted all remaining nonrespondents by telephone starting December 5, 2016  The survey was available online until we reached a 100 percent response rate  To increase our understanding into how TAP was being implemented at installations and supplement our survey findings, we visited one Coast Guard installation and interviewed TAP managers from two additional installations  We selected the installations based on several factors, including the size of the installation, proximity to Department of Defense (DOD) installations, and diverse locations in the United States  (See table 1 ) At Coast Guard Base Elizabeth City in North Carolina, the installation we visited, we interviewed the TAP manager, uniformed career counselors, and senior installation leadership  During our interviews with TAP managers at all three installations, we asked about the extent to which Coast Guard servicemembers participate in TAP’s required and additional 2-day classes, including whether the servicemembers attended classes online or in a classroom setting, challenges to ensuring Coast Guard servicemembers participate in TAP, and the extent to which they monitor Coast Guard servicemembers’ participation in TAP  At Coast Guard Base Elizabeth City, we also interviewed 25 Coast Guard servicemembers (both officers and enlisted personnel) to get their perspective on how well TAP worked and any challenges they had participating  To help guide the interviews with the Coast Guard servicemembers, we asked them to complete a short questionnaire that asked about their experiences with the TAP program  We also interviewed TAP staff at Coast Guard headquarters to learn about TAP policy, monitoring efforts, and performance measures for the service overall  For example, we asked what policies and procedures guide installations’ TAP implementation; what performance measures the Coast Guard uses to monitor TAP; how performance results are reported and shared with different levels of Coast Guard leadership; and to what extent the Coast Guard uses results from TAP participant satisfaction assessments  We also asked whether the Coast Guard plans to shift to DOD’s new TAP-IT Enterprise System and how using the new system could affect its monitoring efforts in the future  In evaluating the Coast Guard’s performance measures, we focused on measures related to servicemembers’ transition experiences before leaving the military  We did not gather information on post-program evaluations and outcomes because they were determined to be outside the scope of this review  We reviewed DHS data on TAP participation for fiscal years 2012 to 2017  To assess the reliability of the Coast Guard’s TAP participation data, we interviewed agency officials knowledgeable about the data  We determined these data were not sufficiently reliable due to limitations with the Coast Guard’s data collection system  Specifically, the system lacks adequate controls to ensure TAP data are complete and accurate  We conducted this performance audit from February 2016 to April 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Meeta Engle (Assistant Director), Amy MacDonald (Analyst-in-Charge), James Bennett, Holly Dye, David Forgosh, Ying Long, Jonathan McMurray, Jean McSween, Andrew Sherrill, Benjamin Sinoff, and Timothy Young, made significant contributions to this report  Also contributing to this report were Susan Aschoff, Jessie Battle, Ramona Burton, Melinda Cordero, Elizabeth Curda, Dawn Hoff, Ben Licht, Serena Lo, Sheila McCoy, Almeta Spencer, Christopher Schmitt, James Whitcomb, and Jill Yost  Transitioning Veterans: DOD Needs to Improve Performance Reporting and Monitoring for the Transition Assistance Program, GAO-18-23  Washington, D C : November, 8, 2017  Transitioning Veterans: Improvements Needed in DOD’s Performance Reporting and Monitoring of the Transition Assistance Program, GAO-18-225T  Washington, D C : November 8, 2017  Department of Defense: Transition Assistance Program (TAP) for Military Personnel, GAO-16-302R  Washington, D C : December 17, 2015  Veterans’ Employment: Need for Further Workshops Should Be Considered before Making Decisions on Their Future, GAO-15-518  Washington, D C : July 16, 2015  Military and Veteran Support: DOD and VA Programs That Address the Effects of Combat and Transition to Civilian Life, GAO-15-24  Washington, D C : November 7, 2014  Veterans Affairs: Better Understanding Needed to Enhance Services to Veterans Readjusting to Civilian Life, GAO-14-676  Washington, D C : September 10, 2014  Transitioning Veterans: Improved Oversight Needed to Enhance Implementation of Transition Assistance Program, GAO-14-144  Washington, D C : March 5, 2014  Military and Veterans’ Benefits: Enhanced Services Could Improve Transition Assistance for Reserves and National Guard, GAO-05-544  Washington, D C : May 20, 2005  Military and Veterans’ Benefits: Observations on the Transition Assistance Program, GAO-02-914T (July 18, 2002) 


Report 2:  Furthermore, as previously discussed, the Secretary of Defense has established an 80-percent mission capability goal for critical aviation assets, including the F-35  Due to current low availability and numerous sustainment issues, the F-35 fleet will be challenged in meeting the goal  In sum, the Navy’s and Marine Corps’ significant readiness challenges have developed over more than a decade of conflict, budget uncertainty, and reductions in force structure  Both services have made encouraging progress identifying the causes of their readiness decline and have begun efforts to arrest and reverse it; however, our prior work shows that fully addressing the persistent readiness challenges will require years of sustained management attention  Our work cited today contains 25 specific recommendations to the Navy and the Marine Corps and an additional 20 recommendations to various other DOD components to assist these services in rebuilding the readiness of their forces and in modernizing for the future  Attention to these recommendations can assist the Navy and the Marine Corps as they seek to rebuild the readiness of their forces  Chairmen Wicker and Sullivan, Ranking Members Hirono and Kaine, and Members of the Subcommittees, this concludes my prepared statement  I would be pleased to respond to any questions you may have at this time  If you or your staff have questions about this testimony, please contact John H  Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Clarine Allen; Steven Banovac; John Bumgarner; Chris Cronin; Benjamin Emmel; Cynthia Grant; Mae Jones; Amie Lesser; Tobin McMurdie; Shahrzad Nikoo; Carol Petersen; Cody Raysinger; Michael Silver; John E  “Jet” Trubey; and Chris Watson  Over the past 4 years, we have issued a number of reports related to Navy and Marine Corps readiness and we used them to develop this statement  Table 1 summarizes the recommendations in these reports  The Department of Defense (DOD) concurred with most of the 45 recommendations and has many actions underway  However, DOD has not fully implemented any of the recommendations to date  For each of the reports, the specific recommendations and any progress made in implementing them are summarized in tables 2 through 16  Report numbers with a C or RC suffix are classified  Report numbers with a SU suffix are sensitive but unclassified  Classified and sensitive but unclassified reports are available to personnel with the proper clearances and need to know, upon request  Navy Readiness: Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet  GAO-19-229  Washington, D C : November 19, 2018  Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future  GAO-19-120T  Washington, D C : October 10, 2018  Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified  GAO-18-678  Washington, D C : September 10, 2018  Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need Clarification  GAO-18-146SU  Washington, D C : April 25, 2018  Military Readiness: Update on DOD’s Progress in Developing a Readiness Rebuilding Plan  GAO-18-441RC  Washington, D C : August 10, 2018  (SECRET) Military Personnel: Collecting Additional Data Could Enhance Pilot Retention Efforts  GAO-18-439  Washington, D C : June 21, 2018  F-35 Joint Strike Fighter: Development Is Nearly Complete, but Deficiencies Found in Testing Need to Be Resolved  GAO-18-321  Washington, D C : June 5, 2018  Warfighter Support: DOD Needs to Share F-35 Operational Lessons Across the Military Services  GAO-18-464R  Washington, D C : April 25, 2018  Military Readiness: Clear Policy and Reliable Data Would Help DOD Better Manage Service Members’ Time Away from Home  GAO-18-253  Washington, D C : April 25, 2018  Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements  GAO-18-113  Washington, D C : April 11, 2018  Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps Needs to Assess Challenges Associated with Operating in the Pacific  GAO-18-79C  Washington, D C : March 28, 2018  (SECRET) Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training  GAO-18-212T  Washington, DC : December 1, 2017  F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency  GAO-18-75  Washington, D C : October 26, 2017  Defense Supply Chain: DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks  GAO-17-768  Washington, D C : September 28, 2017  Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training  GAO-17-789  Washington, D C : September 26, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-809T  Washington, D C : September 19, 2017  Naval Shipyards: Actions Needed to Improve Poor Conditions That Affect Operation  GAO-17-548  Washington, D C : September 12, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-798T  Washington, D C : September 7, 2017  Navy Readiness: Actions Needed to Maintain Viable Surge Sealift and Combat Logistics Fleets GAO-17-503  Washington, D C : August 22, 2017 (reissued on Oct 31, 2017)  Department of Defense: Actions Needed to Address Five Key Mission Challenges  GAO-17-369  Washington, D C : June 13, 2017  Military Readiness: Coastal Riverine Force Challenges  GAO-17-462C  Washington, D C : June 13, 2017  (SECRET) Navy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery Process and Ship Quality  GAO-17-418  Washington, D C : July 13, 2017 Offshore Petroleum Discharge System: The Navy Has Not Mitigated Risk Associated with System Limitations  GAO-17-531C  Washington, D C : June 22, 2017  (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews  GAO-17-413  Washington, D C : May 18, 2017  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-841  Washington, D C : September 7, 2016  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-534C  Washington, D C : June 30, 2016  (SECRET) Defense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations  GAO-16-450  Washington, D C : June 9, 2016  Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness  GAO-16-481RC  Washington, D C : May 25, 2016  (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan  GAO-16-466R  Washington, D C : May 2, 2016  F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System  GAO-16-439  Washington, D C : April 14, 2016  Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports  GAO-15-329  Washington, D C : May 29, 2015  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: Thousands of Coast Guard servicemembers have left the military and transitioned into civilian life, and some of these new veterans may face significant challenges, such as finding and maintaining employment. To help them prepare, federal law mandated that DHS provide separating Coast Guard servicemembers with counseling, employment assistance, and information on veterans' benefits through TAP. GAO was asked to examine TAP implementation. This review analyzes (1) the reliability of TAP data on participation levels for Coast Guard servicemembers and the factors that affect participation, and (2) the Coast Guard's performance measures and monitoring efforts related to TAP. GAO interviewed Coast Guard headquarters staff; surveyed 12 Coast Guard installations that conduct TAP (100 percent response rate); collected and reviewed participation data for reliability; and interviewed TAP managers from three installations selected for size and location, and 25 Coast Guard servicemembers at one location. (For a companion report on TAP implementation for separating and retiring servicemembers in other military services, see GAO-18-23 .) The United States Coast Guard (Coast Guard), which is overseen by the Department of Homeland Security (DHS), lacks complete or reliable data on participation in the Transition Assistance Program (TAP), designed to assist servicemembers returning to civilian life. According to senior Coast Guard officials, a major reason why data are not reliable is the lack of an up-to-date Commandant Instruction that specifies when to record TAP participation data. Consequently, the data are updated on an ad-hoc basis and may not be timely or complete, according to officials. Federal internal control standards call for management to use quality information to achieve the entity's objectives. Until the Coast Guard issues an up-to-date Commandant Instruction that establishes policies and procedures to improve the reliability and completeness of TAP data, it will lack quality information to gauge the extent to which it is meeting TAP participation requirements in the VOW to Hire Heroes Act of 2011. According to GAO's survey of Coast Guard installations, various factors affected participation, such as servicemembers serving at geographically remote locations or separating from the Coast Guard rapidly. TAP officials and Coast Guard servicemembers GAO interviewed said commanders and direct supervisors sometimes pulled servicemembers out of TAP class or postponed participation because of mission priorities. TAP managers also said they rely on delivering TAP online because many Coast Guard servicemembers are stationed remotely. The Coast Guard cannot effectively measure performance to ensure key TAP requirements are met because it lacks reliable data and does not monitor compliance with several TAP requirements. Further, the Coast Guard has not established a formal performance goal against which it can measure progress, although federal internal control standards stipulate that management should consider external requirements—such as the laws with which the entity is required to comply—to clearly define objectives in specific and measurable terms. Establishing a goal could help the Coast Guard define expected performance. In addition, the Coast Guard does not monitor TAP requirements regarding the timeliness of servicemembers' TAP participation or their access to additional 2-day classes. Consequently, it cannot know whether servicemembers are starting TAP early enough to complete the program or those who elected to attend additional 2-day classes were able to do so before separation or retirement, as required by the Act. Finally, the Coast Guard lacks an up-to-date Commandant Instruction that establishes the roles and responsibilities of Coast Guard staff in implementing TAP. Federal internal control standards stipulate that management should assign responsibility and delegate authority to key roles throughout the entity. Issuing an up-to-date Commandant Instruction that defines roles and responsibilities would clarify who is ultimately responsible for ensuring Coast Guard servicemembers attend TAP, thereby facilitating accountability. GAO is making seven recommendations, including that the Coast Guard issue a new Commandant Instruction establishing data collection policies, set TAP performance goals, monitor timeliness and access, and define roles and responsibilities. DHS agreed with all of GAO's recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2: B anks play a critical role in the United States economy, channeling money from savers to borrowers and facilitating productive investment  Among other things, banks provide loans to businesses, help individuals finance purchases of cars and homes, and offer services such as checking and savings accounts, debit cards, and ATMs  In addition to occupying a central role in the American economy, the banking industry is a perennial subject of political interest  While the nature of lawmakers' interest in bank regulation has shifted over time, most bank regulations fall into one of three general categories  First, banks must abide by a variety of safety-and-soundness requirements designed to minimize the risk of their failure and maintain macroeconomic stability  Second, banks must comply with consumer protection rules intended to deter abusive practices and provide consumers with complete information about financial products and services  Third, banks are subject to various reporting , recordkeeping , and anti-money laundering requirements designed to assist law enforcement in investigating criminal activity  The substantive content of these requirements remains the subject of intense debate  However, the division of regulatory authority over banks between the federal government and the states plays a key role in shaping that content  In some cases, federal law displaces (or "preempts") state bank regulations  In other cases, states are permitted to supplement federal regulations with different, sometimes stricter requirements  Because of its substantive implications, federal preemption has recently become a "flashpoint" in debates surrounding bank regulation, with one commentator observing that preemption is "[t]he issue at the center of most disputes between state and federal banking regulators " This report provides an overview of banking preemption  First, the report discusses general principles of federal preemption  Second, the report provides a brief history of the American "dual banking system " Third, the report discusses the Supreme Court's decision in Barnett Bank of Marion County, N A  v  Nelson , where the Court held that federal law preempts state laws that "significantly interfere" with the powers of national banks  Fourth, the report reviews two Supreme Court decisions concerning the extent to which states may exercise "visitorial powers" over national banks  Fifth, the report discusses the Office of the Comptroller of the Currency's (OCC's) preemption rules and provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning the preemption of state consumer protection laws  Finally, the report outlines a number of current issues in banking preemption, including (1) the extent to which non-banks can benefit from federal preemption of state usury laws, (2) the OCC's decision to grant special purpose national bank charters to financial technology (FinTech) companies, and (3) proposals to provide legal protections to banks serving marijuana businesses that comply with state law  The doctrine of federal preemption is grounded in the Supremacy Clause of Article VI of the Constitution, which provides that "the Laws of the United States       shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding " The Supreme Court has explained that "under the Supremacy Clause       any state law, however clearly within a State's acknowledged power, which interferes with or is contrary to federal law, must yield " The Court has identified two general ways in which federal law can preempt state law  Federal law can expressly preempt state law when a federal statute or regulation contains explicit preemptive language—that is, where a clause in the relevant federal statute or regulation explicitly provides that federal law displaces certain categories of state law  The Employee Retirement Income Security Act, for example, contains a preemption clause providing that some of the Act's provisions "shall supersede any and all State laws insofar as they may now or hereafter relate to any [regulated] employee benefit plan " Federal law can also impliedly preempt state law "when Congress' command is       implicitly contained in" the relevant federal law's "structure and purpose " The Supreme Court has identified two subcategories of implied preemption  First, "field preemption" occurs "where [a] scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it " Second, "conflict preemption" occurs where "compliance with both federal and state regulations is a physical impossibility," or where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress " In Crosby v  National Foreign Trade Council , for example, the Court held that a federal law imposing sanctions on Burma impliedly preempted a Massachusetts law that prohibited state entities from doing business with Burma  The Court reached this conclusion after determining that the state statute posed an obstacle to the federal statute's purposes of (1) providing the President with "flexible" authority over sanctions policy, (2) limiting economic pressure against the Burmese government to the specific range reflected in the federal statute, and (3) granting the President the ability to speak for the country "with one voice " Some federal banking laws expressly preempt state law  Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980, for example, expressly grants federally insured state banks the right to charge the highest interest rate allowed by the states in which they are located, even when lending to borrowers in other states with stricter usury laws  Other federal banking laws impliedly preempt state law  Specifically, the Supreme Court has held that the National Bank Act impliedly preempts state laws that "significantly interfere" with the powers of national banks  However, all banking preemption issues are heavily influenced by the regulatory architecture surrounding the banking system  The following section of the report accordingly outlines the development of the American "dual banking system " Disputes over the federal government's role in regulating the financial system have been a feature of American politics since the country's inception  In 1791, Congress approved the creation of the First Bank of the United States over fierce opposition from many of the nation's leaders, including James Madison and Thomas Jefferson  In addition to accepting deposits and making loans to the public, the First Bank acted as the federal government's fiscal agent by collecting tax revenues, securing the government's funds, and paying the government's bills  The First Bank's proponents argued that the Bank would facilitate economic growth by extending credit to private businesses and establishing a uniform national currency in the form of the Bank's notes  By contrast, the First Bank's critics argued that the concentration of financial power in a single federal institution threatened state sovereignty and undermined the operations of state-chartered banks  This debate culminated in a victory for the First Bank's critics when Congress refused to renew the Bank's charter by a single vote in 1811  But disputes over the federal government's role in the banking system did not end with the demise of the First Bank  After the War of 1812 generated significant economic turmoil, Congress chartered the Second Bank of the United States for a twenty-year term in 1816  The Second Bank performed many of the same functions as the First Bank and attracted similar criticism, eventually becoming the target of populist fury led by President Andrew Jackson  In 1832, President Jackson vetoed legislation to extend the Second Bank's charter, leading to its demise in 1836  After the Second Bank's charter expired, bank regulation was wholly entrusted to the states  Inspired by the Jacksonian attack on concentrated economic power, a number of states dispensed with the requirement that banks obtain a charter via a special act of the state legislature  Instead, banks in these states could obtain charters from state banking authorities as long as they met certain general conditions  During this "Free Banking era," the country lacked a uniform national currency and relied instead on notes issued by state banks, which circulated at a discount from their face value that reflected the issuing bank's location and credit quality  In some states, so-called "wildcat banks" in remote areas issued notes back by minimal specie (gold or silver), assuming that noteholders would be unlikely to travel long distances to redeem them  These wildcat banks failed at a far higher rate than their urban rivals  Economic historians continue to debate the merits and drawbacks of the Free Banking era  According to the standard narrative, Free Banking was largely a failure, resulting in a large number of bank failures, financial instability, and inefficiencies that accompanied a heterogeneous currency  However, a number of revisionist scholars have questioned this assessment, arguing that despite the high rate of bank failures during the Free Banking Era, total losses to bank noteholders during the period were in fact relatively small  Whatever its virtues and vices, the Free Banking Era came to an end during the Civil War  After the Treasury Department's efforts to finance the war by borrowing from Northern banks led to a shortage in specie, Congress enacted the National Currency Act in 1863 and the National Bank Act (NBA) in 1864  Under the Acts, banks were offered the opportunity to apply for a national charter from the newly created OCC, creating a "dual banking system" in which both the federal government and the states chartered and regulated banks  As a condition of obtaining a national charter, the Acts required banks to purchase United States government bonds, giving the federal government a new source of revenue to fight the war  Once national banks deposited those bonds with the federal government, they were allowed to issue national banknotes up to 90 percent of the market value of their bonds  These national banknotes functioned as a uniform national currency and gave the federal government significant control over the nation's money supply  The creation of a dual banking system was not intended by the proponents of the NBA, who assumed that all state-chartered banks would convert to national charters  In order to incentivize state-chartered banks to make this switch, Congress enacted a ten percent tax on state banknotes in 1865  But the tax did not accomplish its intended purpose  While the number of state-chartered banks fell significantly after the enactment of the NBA, state banks eventually skirted this tax by issuing paper checks in lieu of banknotes  And in the late 19th century, state banking authorities contributed to this regulatory arbitrage by offering their banks laxer regulations than the OCC  As a result, state-chartered banks have outnumbered national banks since 1895, and the dual banking system has survived to this day  Under the contemporary dual banking system, the OCC serves as the primary regulator of national banks and has broad powers to regulate their organization, examination, and operations  Section 24 of the NBA grants national banks a number of powers, including: (1) "discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt," (2) "receiving deposits," (3) "buying and selling exchange, coin, and bullion," (4) "loaning money on personal security," and (5) "obtaining, issuing, and circulating notes " Section 24 also grants national banks "all such incidental powers as shall be necessary to carry on the business of banking " Federal court and OCC decisions have identified roughly 80 activities that fall within the "incidental powers" of national banks, including the ability to broker annuities charge customers non-interest fees  By contrast, state banking authorities are the primary regulators of state-chartered banks  While state banking laws are by no means uniform, they typically provide state-chartered banks with the power to engage in activities similar to those listed in the NBA and activities that are "incidental to the business of banking " While the OCC and state banking authorities figure prominently in the dual banking system, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) also play important roles in the bank regulatory regime  Congress created the Federal Reserve in 1913 in response to a 1907 banking panic that highlighted the need for a "lender of last resort" to replenish banks' reserves when they experience liquidity shortfalls  Today, the Federal Reserve also conducts the nation's monetary policy, manages certain elements of the country's payment systems, and regulates bank holding companies, financial market utilities, and banks that join the Federal Reserve System (FRS)  The Federal Reserve Act requires all national banks to join the FRS and gives state banks the option of joining  The Federal Reserve accordingly serves as the principal federal regulator of state-chartered banks that become members of the FRS  The FDIC serves as the principal federal regulator of state-chartered banks that do not join the FRS  Congress created the FDIC in 1933 after a wave of bank failures generated a self-reinforcing cycle of "contagion," leading depositors to "run" from other banks and cause additional failures  In order to minimize the risk of these types of bank runs, the FDIC insures deposits at regulated institutions up to certain limits and regulates those institutions to ensure their safety and soundness  Because federal law requires national banks to obtain FDIC insurance and all states impose that same requirement on the banks they charter, the FDIC plays a key role in regulating the banking system  This complex regulatory architecture has resulted in "symbiotic system" with both state regulation of national banks and federal regulation of state banks  In the modern dual banking system, national banks are not wholly immune from generally applicable state laws, and state banks are not wholly immune from generally applicable federal laws  The Supreme Court has explained that "general state laws" concerning "the dealings and contracts of national banks" are valid as long as they do not "expressly conflict" with federal law, "frustrate the purpose for which national banks were created," or impair the ability of national banks to "discharge the duties imposed upon them" by federal law  National banks are accordingly "governed in their daily course of business far more by the laws of the State than of the nation" because their contracts, ability to acquire and transfer property, rights to collect debts, and liability to be sued for debts "are all based on State law " The OCC has attempted to synthesize the relevant case law as establishing a general principle that state regulations of national banks are valid as long as they "do not regulate the manner, content or extent of the activities authorized for national banks under federal law, but rather establish the legal infrastructure around the conduct of that business " Similarly, state-chartered banks are not wholly immune from federal law  Rather, state banks are subject to certain federal consumer protection, tax, and antidiscrimination laws, in addition to a range of Federal Reserve and FDIC regulations  A number of other legal developments have caused the regulatory treatment of national banks and state banks to converge  Beginning in the 1960s, many states passed so-called "wild card" statutes granting their banks the power to engage in any activities permitted for national banks  Statutes extending the powers of the Federal Reserve and the FDIC have also ensured competitive equality in the opposite direction  In 1980, Congress enacted legislation requiring all state-chartered banks—including those that do not join the FRS—to abide by reserve requirements set by the Federal Reserve, eliminating the competitive advantage conferred by lower state-law reserve requirements  Similarly, in 1991, Congress enacted legislation prohibiting FDIC-insured state banks from engaging as a principal in activities that are not permitted for national banks absent permission from the FDIC  Because all states require the banks they charter to obtain FDIC insurance, the legislation "had the ultimate effect of unifying the state and the federal banking systems " Finally, some federal statutes either explicitly or implicitly preempt state laws in ways that eliminate unequal regulatory treatment for national and state banks  In Marquette National Bank of Minneapolis v  First Omaha Services Corporation , the Supreme Court held that the NBA grants national banks the power to "export" the maximum interest rates allowed by their "home" states, even when lending to borrowers in other states with stricter usury laws  In that decision, the Court considered whether a national bank headquartered in Nebraska—which permitted banks to charge credit-card holders up to 18 percent interest per year on certain unpaid balances—could charge its Minnesota customers more than the 12 percent maximum interest allowable under Minnesota law  Specifically, the Court evaluated whether an NBA provision allowing national banks to charge interest rates allowed by the states "where the bank[s] [are] located" applies even when national banks extend credit to customers in other states with stricter usury laws  The Court held that the NBA provision indeed afforded national banks this power, concluding that the national bank was permitted to charge the maximum interest rate allowable under Nebraska law even when lending to Minnesota customers  Two years after the Marquette decision, Congress enacted legislation to extend the same power to federally insured state banks, preempting contrary state law and equalizing the regulatory treatment of national and state banks vis-à-vis "interest rate exportation " While the regulatory treatment of national and state banks has accordingly converged, federal preemption nevertheless confers certain unique benefits on national banks  Under the Supreme Court's decision in Barnett Bank of Marion County, N A  v  Nelson , federal laws that grant national banks the power to engage in specific activities impliedly preempt state laws that "significantly interfere" with the ability of national banks to engage in those activities  In Barnett Bank , the Court held that a federal law granting national banks the authority to sell insurance impliedly preempted a state law that prohibited banks from selling insurance, subject to certain exceptions  In reaching this conclusion, the Court explained that the state law posed an obstacle to the federal statute's purpose of granting national banks the authority to sell insurance "whether or not a State grants       similar approval " The Court inferred this purpose from the principle that "normally Congress would not want States to forbid, or to impair significantly, the exercise of a power that Congress explicitly granted " Lower courts have followed Barnett Bank 's rule that absent indications to the contrary, federal statutes and regulations that grant national banks the power to engage in specific activities preempt state laws that prohibit or "significantly interfere" with those activities  In Wells Fargo Bank of Texas N A  v  James , for example, the Fifth Circuit held that an OCC rule granting national banks the power to "charge [their] customers non-interest charges and fees" preempted a state statute prohibiting banks from charging a fee for cashing checks in certain circumstances  Similarly, in Monroe Retail, Inc  v  RBS Citizens, N A  , the Sixth Circuit held that this rule preempted state law conversion claims brought against a class of national banks based on fees they charged for processing garnishment orders  Specifically, the Sixth Circuit reasoned that under Barnett Bank , "the level of 'interference' that gives rise to preemption under the NBA is not very high," and that the relevant conversion claims "significantly interfere[d]" with national banks' ability to collect fees  Finally, the Ninth Circuit employed similar reasoning in Rose v  Chase Bank USA, N A  , where it held that an NBA provision granting national banks the power to "loan money on personal security" preempted a state statute imposing various disclosure requirements on credit card issuers  In arriving at this conclusion, the Ninth Circuit reasoned that "[w]here       Congress has explicitly granted a power to a national bank without any indication that Congress intended for that power to be subject to local restriction, Congress is presumed to have intended to preempt state laws " Federal courts have also adopted broad interpretations of an NBA provision authorizing national banks to dismiss officers "at pleasure " In Schweikert v  Bank of America , N A  , the Fourth Circuit held that this provision preempted a state law claim for wrongful discharge brought by a former officer of a national bank  Similarly, the Ninth Circuit has held that this provision preempted a claim brought by a former officer of a national bank for breach of an employment agreement, reasoning that "[a]n agreement which attempts to circumvent the complete discretion of a national bank's board of directors to terminate an officer at will is void as against [federal] public policy " Finally, in Wiersum v  U S  Bank, N A  , the Eleventh Circuit relied on Barnett Bank and the Fourth Circuit's reasoning in Schweikert to conclude that this "at pleasure" provision preempted a wrongful-termination claim brought by a former officer of a national bank under a state whistleblower statute  While federal courts have accordingly adopted expansive views of the circumstances in which state laws "significantly interfere" with national banks' powers, they have also recognized certain general limits on the preemptive scope of federal banking statutes and regulations  In Gutierrez v  Wells Fargo Bank, NA , for example, the Ninth Circuit held that federal banking regulations did not preempt a generally applicable state law prohibiting certain types of fraud  The Gutierrez litigation involved a national bank's use of a bookkeeping method known as "high-to-low" posting for debit-card transactions, whereby the bank posted large transactions to customers' accounts before small transactions  In Gutierrez , customers of the bank brought a variety of state law claims based on the theory that the bank adopted high-to-low posting for the sole purpose of maximizing the overdraft fees it could charge customers  In response, the bank argued that OCC regulations preempted the state law claims  The Ninth Circuit held that the OCC regulations preempted some, but not all, of the customers' claims  Specifically, the court held that an OCC regulation authorizing national banks to establish the method of calculating noninterest charges and fees "in [their] discretion" preempted claims premised on the theory that high-to-low posting was an unfair business practice  The court also held an OCC regulation providing that national banks may exercise their deposit-taking powers "without regard to state law limitations concerning       disclosure requirements" preempted the customers' claims that the bank failed to affirmatively disclose its use of high-to-low posting  However, the court held that federal law did not preempt claims that the bank defrauded its customers by making misleading statements about its posting method  Specifically, the court reasoned that these claims survived preemption because they were based on "a non-discriminating state law of general applicability that does not conflict with federal law, frustrate the purposes of the [NBA], or impair the efficiency of national banks to discharge their duties " In reaching this conclusion, the court rejected the argument that federal law preempted the customers' fraud claims because those claims "necessarily touche[d] on" national banks' authority to provide checking accounts  The court rejected this argument on the grounds that such an expansive preemption standard "would swallow all laws " The Ninth Circuit accordingly allowed the customers' fraud claims to proceed because they did not "significantly interfere" with national banks' ability to offer checking accounts  While the implications of Barnett Bank have been fleshed out most thoroughly in the lower federal courts, the Supreme Court has also applied that decision's reasoning in two cases concerning an NBA provision prohibiting states from exercising "visitorial powers" over national banks  In Watters v  Wachovia Bank, N A  , the Court held that this provision—together with an OCC regulation providing that national banks may conduct authorized activities through operating subsidiaries—preempted state licensing, reporting, and visitation requirements for the operating subsidiaries of national banks  Specifically, the Court reasoned that the proper inquiry in analyzing whether state law interferes with federally permitted bank activities "focuse[s] on the exercise of a national bank's powers , not on its corporate structure " The Court accordingly concluded that the operating subsidiaries of national banks should be treated "as equivalent to national banks with respect to powers exercised under federal law " And because "duplicative state examination, supervision, and regulation would significantly burden" national banks' ability to engage in authorized activities, the Court held that those same regulatory burdens also unacceptably interfere with the ability of national bank subsidiaries to engage in those activities  However, as discussed later in this report, Congress has abrogated Watters 's holding that states may not examine or regulate the activities of national bank subsidiaries  While the Court adopted a broad view of preemption in Watters , it cabined the preemptive effect of the relevant NBA provision two years later in Cuomo v  C learing House Association, LLC  In that decision, the Court held that this NBA provision did not preempt an information request that the New York Attorney General (NYAG) sent to several national banks  Specifically, the NYAG had sent letters to several national banks requesting nonpublic information about their lending practices in order to determine whether the banks had violated state fair lending laws  In response, a banking trade group and the OCC argued that the relevant NBA provision—together with an OCC regulation interpreting that provision to mean that "[s]tate officials may not       prosecut[e] enforcement actions" against national banks, "except in limited circumstances authorized by federal law"—preempted the information request  The Supreme Court rejected this interpretation of the NBA's visitorial powers provision, drawing a distinction between (1) "supervision," or "the right to oversee corporate affairs," which qualify as "visitorial powers," and (2) "law enforcement " Because the Court concluded that the NYAG had issued the information requests in his "law enforcement" capacity—as opposed to "acting in the role of sovereign-as-supervisor"—it held that the NBA did not preempt the requests  As the above discussion makes clear, OCC regulations have figured prominently in litigation over the preemptive scope of federal banking law  While some commentators have contended that the NBA's text and legislature history implicitly provides the OCC with the authority to promulgate preemption rules, Congress formally recognized that the OCC has such authority in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal Act)  Specifically, Section 114 of the Riegle-Neal Act provides that "[b]efore issuing any opinion letter or interpretive rule       that concludes that Federal law preempts the application to a national bank of any State law" concerning certain specified subjects, the OCC must give the public notice and an opportunity submit written comments  In the 1990s and early 2000s, the OCC exercised this authority in a number of interpretive letters and legal opinions  In these documents, the OCC took the position that federal law preempted state laws that limited the ability of national banks to: advertise; operate offices within a certain distance from state-chartered bank home offices; operate ATM machines; engage in fiduciary activities; finance automobile purchases; sell annuities; sell repossessed automobiles without an automobile dealer license; and conduct Internet auctions of certificates of deposit  In 2004, the OCC expanded upon these interpretive letters and legal opinions by issuing what one commentator has described as "sweeping" preemption rules  The OCC's 2004 preemption rules articulated a general preemption standard according to which "state laws that obstruct, impair, or condition a national bank's ability to fully exercise" its federally authorized powers "are not applicable to national banks" except "where made applicable by Federal law " This general standard accordingly expanded on Barnett Bank 's "significant interference" test in two ways  First, the OCC's 2004 standard omitted the intensifying phrase "significantly" from the Barnett Bank test  Second, the 2004 standard by its terms required that national banks be able to "fully" exercise their authorized powers—a phrase that does not appear in Barnett Bank   However, despite these facial differences with the Barnett Bank test, the OCC explained that it intended the phrase "obstruct, impair, or condition" to function "as the distillation of the various preemption constructs articulated by the Supreme Court, as recognized in Hines [ v  Davidowitz ] and Barnett Bank , and not as a replacement construct that is in any way inconsistent with those standards " Beyond this general preemption standard, the OCC's 2004 rules concluded that the NBA preempted certain categories of state laws  First, the rules provided that national banks "may make real estate loans       without regard to state law limitations concerning": licensing and registration (except for purposes of service of process); "[t]he ability of a creditor to require or obtain private mortgage insurance, insurance for other collateral, or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices"; loan-to-value ratios; terms of credit; "[t]he aggregate amount of funds that may be loaned upon the security of real estate"; escrow accounts; security property; access to and use of credit reports; disclosure and advertising; processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages; disbursements and repayments; rates of interest on loans; due-on-sale clauses, with certain exceptions; and "[c]ovenants and restrictions that must be contained in a lease to qualify the leasehold as acceptable security for a real estate loan " Second, the rules provided that national banks "may make non-real estate loans without regard to state law limitations concerning" many of the same matters identified in the regulation concerning real estate lending  Finally, the rules provided that national banks "may exercise [their] deposit-taking powers without regard to state law limitations concerning": (1) abandoned and dormant accounts, (2) checking accounts, (3) disclosure requirements, (3) funds availability, (4) savings account orders of withdrawal, (5) state licensing or registration requirements (except for purposes of service of process), and (6) special purpose savings services  The OCC's 2004 rules also identified general categories of state law that the agency interpreted as surviving preemption  Specifically, the rules provided that the NBA does not preempt state laws that are consistent with federal law and involve (1) contracts, (2) torts, (3) criminal law, (4) rights to collect debts, (5) the acquisition and transfer of property, (5) taxation, (6) zoning, and, with respect to real estate lending, (7) certain homestead laws  According to the OCC's 2004 rules, such laws survive preemption so long as they "do not regulate the manner, content or extent of the activities authorized for national banks under federal law " The OCC's 2004 preemption rules proved controversial  In 2008, the United States experienced a financial crisis caused in part by reckless subprime mortgage lending and a collapse in the real estate market  In the wake of the crisis, commentators debated the role that federal preemption of state predatory lending laws played in generating the pre-2008 housing bubble  Some commentators contended that national banks played a significant role in the predatory lending that preceded the crisis, and that federal preemption "effectively gut[ted] states' ability to legislate against predatory lending practices " By contrast, others rejected the contention that preemption played a significant role in causing the crisis, arguing that national banks and their subsidiaries accounted for only a small share of subprime mortgage lending  In 2010, Congress responded to concerns over federal preemption of state consumer protection laws in Section 1044 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)  Section 1044 provides that federal law preempts such laws only if: (A) application of a State consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that State; (B) in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ], the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order of the Comptroller of the Currency on a case-by-case basis, in accordance with applicable law; or (C) the State consumer financial law is preempted by a provision of Federal law other than title 62 of the Revised Statutes  Beyond this general preemption standard, Section 1044 contains a number of other provisions narrowing the OCC's preemption authority  First, Section 1044 provides that courts reviewing OCC preemption determinations should accord those determinations only Skidmore deference, under which courts assess an agency's interpretation of a statute "depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision " Before the enactment of Dodd-Frank, certain courts had afforded OCC preemption determinations a more permissive form of deference known as Chevron deference, according to which courts defer to agency interpretations as long as they are reasonable  Section 1044 accordingly requires that courts take a less deferential posture toward OCC preemption determinations  Second, Section 1044 provides that no OCC preemption determination "shall be interpreted or applied so as to invalidate, or otherwise declare inapplicable to a national bank, the provision of the State consumer financial law, unless substantial evidence, made on the record of the proceeding, supports the specific finding regarding the preemption of such provision in accordance with the legal standard" established by Barnett Bank   This "substantial evidence" standard is often used in cases involving the Administrative Procedure Act, which provides that courts shall hold unlawful an agency's formal rules and other determinations made on the basis of a formal hearing when they are "unsupported by substantial evidence " The Supreme Court has explained that "substantial evidence" entails "more than a mere scintilla" of evidence, and requires "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion " Third, Section 1044 provides that the OCC shall (1) "periodically conduct a review, through public notice and comment, of each determination that a provision of Federal law preempts a State consumer financial law," (2) "conduct such review within the 5-year period after prescribing or otherwise issuing such determination, and at least once during each 5-year period thereafter," and (3) "[a]fter conducting the review of, and inspecting the comments made on, the determination,       publish a notice in the Federal Register announcing the decision to continue or rescind the determination or a proposal to amend the determination " Fourth, Section 1044 provides that the OCC must submit to Congress a report addressing its decision to continue, rescind, or propose an amendment to any preemption determination  Finally, Section 1044 abrogated the Supreme Court's decision in Watters , providing that "State consumer financial laws" apply to the subsidiaries and affiliates of national banks "to the same extent" that they apply "to any person, corporation, or other entity subject to such State law " After Dodd-Frank's enactment, commentators debated the meaning of Section 1044's general preemption standard  As discussed, Section 1044's preemption standard provides that federal law preempts "State consumer financial laws" that "prevent[] or significantly interfere[]" with the powers of national banks "in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ] " Some commentators have argued that this language simply codifies the Barnett Bank standard and was not intended to significantly modify pre-existing law  However, others have argued that Section 1044 was intended to pare back the OCC's 2004 preemption rules, which interpreted the NBA as preempting state laws that "obstruct, impair, or condition" the powers of national banks  According to this latter group of commentators, the OCC's "obstruct, impair, or condition" standard was more expansive than Barnett Bank 's "significant interference" test, meaning that a codification of that test would modify pre-existing law  In 2011, the OCC responded to the enactment of Section 1044 by issuing a notice of proposed rulemaking that reaffirmed its pre-Dodd-Frank preemption decisions while deleting the "obstruct, impair, or condition" language from its preemption rules  While the OCC acknowledged that this language "created ambiguities and misunderstandings regarding the preemption standard that it was intended to convey," it maintained that the specific preemption determinations reflected in its 2004 rules were nevertheless consistent with Barnett Bank   The OCC accordingly proposed reaffirming the specific preemption determinations in its 2004 rules while removing the "obstruct, impair, or condition" standard  The OCC's proposal quickly generated controversy  After the OCC issued the notice, the Treasury Department's General Counsel wrote a letter to the Comptroller of the Currency arguing that the OCC's proposed rule was "inconsistent with the plain language of [Dodd-Frank] and its legislative history " Specifically, the Treasury Department argued that interpreting Section 1044 as making no significant changes to existing preemption law conflicted with "basic canons of statutory construction" and legislative history indicating that the provision was intended to "revise[]" the OCC's preemption standard  Senator Carl Levin also expressed disagreement with the proposed rules in a letter to the Comptroller, arguing that "[i]f [Congress] had wanted to leave the OCC's purported federal preemptive powers unchanged, [it] could have engaged in a very simple exercise—do nothing " Other Senators expressed support for the OCC's proposed rules  Senators Tom Carper and Mark Warner criticized the Treasury Department's letter for "ignor[ing] the clear legislative history indicating that [Section 1044] is intended to codify the Barnett case " In responding to the Treasury Department's argument that Section 1044 was intended to "revise" the OCC's preemption standards, Senators Carper and Warner argued that the OCC's proposed rules would effectuate the contemplated revision by removing the potentially troublesome "obstruct, impair, or condition" language from the agency's 2004 rules  The OCC ultimately agreed with Senators Carper and Warner  In July 2011, the OCC published a final regulation revising its preemption rules  In the final rule, the OCC concluded that "the Dodd-Frank Act does not create a new, stand-alone 'prevents or significantly interferes' preemption standard, but, rather, incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court's Barnett decision " The OCC's 2011 rule also deleted the phrase "obstruct, impair, or condition" from the relevant preemption standard, noting that preemption determinations based "exclusively" on that language "would need to be reexamined to ascertain whether the determination is consistent with the Barnett conflict preemption analysis " However, the rule indicated that the OCC had not identified any preemption determinations that in fact relied "exclusively" on the relevant language  The final rule also noted that all future OCC preemption determinations would be subject to Section 1044's requirement concerning "case-by-case" determinations  Since the enactment of Dodd-Frank, a number of courts have interpreted Section 1044 as codifying the Barnett Bank standard  Some courts have accordingly concluded that Barnett Bank demarcates the boundaries of the OCC's 2011 preemption rules, reasoning that those rules do not preempt any state laws that would survive preemption under the Barnett Bank test  One court has also addressed the appropriate level of judicial deference towards the OCC's 2011 preemption determinations  As discussed, Section 1044 provides that courts "shall" assess OCC preemption determinations "depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision"—a standard commonly known as " Skidmore deference " In 2018, the Ninth Circuit concluded that the OCC's 2011 preemption determinations are "entitled to little, if any, deference" under Skidmore   Specifically, the Ninth Circuit reasoned that because the OCC's 2011 preemption determinations represent the agency's "articulation of its legal analysis" under Barnett Bank (as opposed to being grounded in expert factual findings), those determinations would not warrant significant deference even in the absence of Section 1044  Whether other federal circuit courts will follow the Ninth Circuit in affording minimal deference to the OCC's 2011 preemption rules remains to be seen  As the debates over Section 1044 of Dodd-Frank make clear, a number of banking preemption issues remain the subject of active debate  This final section of the report discusses three additional current issues involving banking preemption and related federalism questions  A number of recent judicial decisions have generated debate over the circumstances in which non-bank financial companies can benefit from banks' ability to "export" the maximum interest rates of their "home" states  As discussed, the Supreme Court has held that national banks may charge any interest rate allowable under the laws of their home states even when lending to borrowers in other states with stricter usury laws  After this decision, Congress extended the power to export maximum interest rates to federally insured state banks  Recently, courts have grappled with whether this exportation power extends to non-bank financial companies and debt collectors that purchase loans originated by federally insured banks  That is, courts have addressed the circumstances in which loans originated by federally insured banks remain subject to the usury laws of the banks' home states even when the loans are (1) made to borrowers in other states with stricter usury laws, and (2) subsequently purchased by non-banks, which do not possess the exportation power when they originate loans themselves  A number of courts have concluded that in certain contexts, a loan that is non-usurious when originated remains non-usurious irrespective of the identity of its subsequent purchasers—a principle that some commentators have labeled the "valid when made" doctrine  However, in 2015, the Second Circuit rejected the application of this rule in Madden v  Midland Funding , holding that non-bank debt collectors that had purchased debt originated by a national bank could not benefit from the bank's exportation power  In Madden , a New York resident brought a putative class action under New York usury law against debt collectors that had purchased her credit card debt from a Delaware-based national bank  In response, the debt collectors argued that federal law preempted the New York usury claims because the credit card debt had been originated by a Delaware-based national bank and was not usurious under Delaware law  The Second Circuit rejected this argument, reasoning that the application of New York usury law to the debt collectors did not "significantly interfere" with the national bank's powers under Barnett Bank   Specifically, the court reasoned that because the debt collectors were not national banks and were not acting "on behalf of" a national bank, the New York usury claims did not interfere with the national bank's power to export the maximum interest rates of its home state  The Second Circuit's decision in Madden has generated significant debate  In an amicus brief supporting the debt collectors' petition for re-hearing before the Second Circuit, industry groups argued that the decision threatened to seriously disrupt lending markets  Specifically, these groups argued that the court's decision would "significantly impair" banks' ability to manage their risk by selling loans in secondary credit markets—a result that would ultimately inhibit their capacity to originate loans  Similarly, in an amicus brief submitted to the Supreme Court, the OCC and the Office of the Solicitor General (OSG) argued that the Second Circuit's decision was "incorrect," reasoning that "[a] national bank's federal right to charge interest up to the rate allowed by [the NBA] would be significantly impaired if [a] national bank's assignee could not continue to charge that rate " In response, the plaintiff in Madden argued that the Second Circuit's decision is unlikely to significantly affect credit markets  Specifically, the Madden plaintiff argued that the court's decision will not disrupt credit markets because non-banks that purchase loans originated by banks retain the right to collect the balances of those loans within applicable state law usury limits  While the Second Circuit ultimately denied the debt collectors' petition for re-hearing and the Supreme Court denied their petition for a writ of certiorari, the Madden decision has attracted congressional interest  The Financial CHOICE Act—comprehensive regulatory reform legislation that passed the House of Representatives in June 2017 but did not become law—would have codified the "valid when made" doctrine and abrogated Madden   A more limited bill directed solely at codifying the "valid when made" doctrine ( H R  3299 ) also passed the House in February 2018 but did not become law  Echoing the arguments made by industry groups, the bill's sponsor contended that the Second Circuit's decision will harm credit markets and impede financial innovation  By contrast, the bill's critics argued that it would facilitate predatory lending by allowing non-banks to evade state usury laws  These proposals have not been re-introduced in the 116th Congress  In a number of cases involving the scope of the exportation doctrine, non-bank financial companies have played a more active role in the origination process than the debt collectors in Madden   Specifically, a number of these cases have involved arrangements in which a non-bank financial company solicits borrowers, directs a partner bank to originate a high-interest loan, and purchases the loan from the bank shortly after origination in order to benefit from the bank's exportation power  Some courts have held that non-banks employing these so-called "rent-a-charter" schemes are not eligible for federal preemption, reasoning that preemption depends on a transaction's economic realities rather than its formal characteristics  Specifically, these courts have concluded that non-banks do not assume their partner banks' exportation power when the economic realities surrounding a transaction indicate that the non-banks are the "true lenders " According to this "true lender" doctrine, non-banks that have established these types of relationships qualify as the "true lenders" when they possess the "predominant economic interest" in the relevant loans when the loans are originated  In these circumstances, some courts have concluded that the non-banks are not entitled to the benefits of federal preemption  Like the Second Circuit's decision in Madden , these "true lender" decisions have attracted Congress's attention  In the 115th Congress, H R  4439 would have abrogated this line of decisions by making clear that a loan's originator is always the "true lender" for purposes of the exportation doctrine  The bill's supporters argued that the "true lender" decisions threaten to undermine partnerships between banks and FinTech companies —a broad category of businesses offering digital financial products that some commentators have hailed for their innovative potential  The bill's opponents, by contrast, contended that the legislation would allow non-banks to circumvent state usury laws and questioned the value of bank-FinTech partnerships designed with that purpose in mind  H R  4439 was referred to the House Committee on Financial Services during the 115th Congress but has not been re-introduced in the 116th Congress  Congress is not alone in considering whether to extend the benefits of federal preemption to FinTech companies  In July 2018, the OCC issued a Policy Statement announcing that it will begin accepting applications for "special purpose national bank charters" (SPNB charters) from FinTech companies that are engaged in "the business of banking" but do not take deposits  In the Policy Statement, the OCC explained that the NBA provides it "broad authority" to grant national bank charters to institutions that engage in the "business of banking"—a category that includes paying checks and lending money  The OCC accordingly concluded that it has the statutory authority to grant national bank charters to FinTech companies that engage in these core banking activities  According to the OCC, SPNB charters will help foster responsible innovation and promote regulatory consistency between FinTech companies and traditional banks  The OCC further explained that it will use its existing chartering standards and procedures to evaluate applications for SPNB charters, and that FinTech companies that receive such charters "will be supervised like similarly situated national banks, including with respect to capital, liquidity, and risk management " While the OCC touted the ability of SPNB charters to "level the playing field with regulated institutions" without explicitly mentioning federal preemption, commentators have observed that preemption represents "the central benefit" offered by such charters  The OCC's decision to accept applications for national bank charters from FinTech companies has generated debate  Critics of the policy have contended that FinTech companies' interest in such charters "is virtually entirely about avoiding state consumer protection laws," and that "[f]ederal chartering should not be a move to eviscerate" such laws  State regulators have also filed lawsuits challenging the OCC's authority to charter non-depository FinTech companies  In the spring of 2017, the Conference of State Bank Supervisors (CSBS) and the New York Department of Financial Services (NYDFS) responded to an early OCC proposal to charter FinTech companies by filing suits in the U S  District Court for the District of Columbia and the U S  District Court for the Southern District of New York, respectively  The CSBS and NYDFS made substantially similar claims, arguing that (1) the NBA does not give the OCC the authority to charter non-depository institutions, (2) the Administrative Procedure Act requires the OCC to follow notice-and-comment rulemaking procedures before issuing SPNBs, (3) the OCC's decision was arbitrary and capricious, and (4) the OCC's decision violated the Tenth Amendment by invading states' sovereign powers  Both district courts dismissed the lawsuits on jurisdictional grounds, reasoning that the organizations failed to identify any imminent injuries to their members and that the case was not ripe for resolution because the OCC had not issued any SPNBs  However, after the OCC issued its Policy Statement in July 2018, both organizations filed new lawsuits that remain pending  Policymakers have also turned their attention to how federal law affects traditional banks' responses to changes in state law—namely, state-level efforts to legalize marijuana  While a number of states have legalized marijuana for medical or recreational use, federal law criminalizes the drug's sale, distribution, and possession, in addition to the aiding and abetting of such activities  Federal law also criminalizes money laundering, making it unlawful to: conduct a financial transaction involving the proceeds of a specified unlawful activity —a category that includes the sale or distribution of marijuana—"knowing that the transaction is designed       to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds       or to avoid a transaction reporting requirement under State or Federal law"; or knowingly engage in a monetary transaction in criminally derived property of a value greater than $10,000 that is derived from specified unlawful activity   Finally, the Bank Secrecy Act (BSA) and associated regulations require that financial institutions report illegal and suspicious activities to the Financial Crimes Enforcement Network (FinCEN) and maintain programs designed to prevent money laundering  Federal banking regulators have broad powers to discipline banks for violations of these laws  The Federal Reserve regularly conducts examinations of member banks that include evaluations of BSA compliance, and the FDIC has the authority to terminate a bank's deposit insurance for violations of law  Because of marijuana's status under federal law, many banks have refused to serve marijuana businesses even when those businesses operate in compliance with state law  While some small banks have offered accounts to marijuana businesses, an estimated 70 percent of marijuana businesses remain unbanked  Because of this inability to access the banking system, many marijuana businesses reportedly operate entirely in cash, raising concerns about tax collection and public safety  These perceived problems have attracted congressional interest  In March 2019, the House Committee on Financial Services approved legislation intended to minimize the legal risks associated with banking the marijuana industry  The proposed bill— H R  1595 , the SAFE Banking Act of 2019—would create a "safe harbor" under which federal banking regulators could not take various adverse actions against depository institutions for serving marijuana businesses that comply with applicable state laws ("cannabis-related legitimate businesses")  The legislation would also provide that for purposes of federal anti-money laundering law, the proceeds from transactions conducted by cannabis-related legitimate businesses shall not qualify as the proceeds of unlawful activity "solely because the transaction[s] [were] conducted by a cannabis-related legitimate business " Finally, H R  1595 would require FinCEN to issue guidance concerning the preparation of suspicious activity reports for cannabis-related legitimate businesses that is "consistent with the purpose and intent" of the bill and "does not significantly inhibit the provision of financial services" to cannabis-related legitimate businesses  Variations on some of the SAFE Banking Act's provisions have been incorporated into broader marijuana-related legislation  The Responsibly Addressing Marijuana Policy Gap Act of 2019 ( S  421 and H R  1119 ) would eliminate federal criminal penalties for persons who engage in various marijuana-related activities in compliance with state law and create a "safe harbor" from adverse regulatory action for depository institutions that serve marijuana businesses  Another Senate bill— S  1028 , the STATES Act—would provide that the Controlled Substances Act's (CSA's) marijuana-related provisions do not apply to persons acting in compliance with state marijuana regulation s, subject to certain exceptions  While the bill does not have the type of "safe harbor" for depository institutions in H R  1595 , S  421 , or H R  1119 , it contains a "Rule of Construction" clarifying that conduct in compliance with the legislation shall not serve as the basis for federal money laundering charges or criminal forfeiture under the CSA 
Report 2:  Furthermore, as previously discussed, the Secretary of Defense has established an 80-percent mission capability goal for critical aviation assets, including the F-35  Due to current low availability and numerous sustainment issues, the F-35 fleet will be challenged in meeting the goal  In sum, the Navy’s and Marine Corps’ significant readiness challenges have developed over more than a decade of conflict, budget uncertainty, and reductions in force structure  Both services have made encouraging progress identifying the causes of their readiness decline and have begun efforts to arrest and reverse it; however, our prior work shows that fully addressing the persistent readiness challenges will require years of sustained management attention  Our work cited today contains 25 specific recommendations to the Navy and the Marine Corps and an additional 20 recommendations to various other DOD components to assist these services in rebuilding the readiness of their forces and in modernizing for the future  Attention to these recommendations can assist the Navy and the Marine Corps as they seek to rebuild the readiness of their forces  Chairmen Wicker and Sullivan, Ranking Members Hirono and Kaine, and Members of the Subcommittees, this concludes my prepared statement  I would be pleased to respond to any questions you may have at this time  If you or your staff have questions about this testimony, please contact John H  Pendleton, Director, Defense Capabilities and Management at (202) 512-3489 or pendletonj@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  GAO staff who made key contributions to this testimony are Suzanne Wren, Assistant Director; Clarine Allen; Steven Banovac; John Bumgarner; Chris Cronin; Benjamin Emmel; Cynthia Grant; Mae Jones; Amie Lesser; Tobin McMurdie; Shahrzad Nikoo; Carol Petersen; Cody Raysinger; Michael Silver; John E  “Jet” Trubey; and Chris Watson  Over the past 4 years, we have issued a number of reports related to Navy and Marine Corps readiness and we used them to develop this statement  Table 1 summarizes the recommendations in these reports  The Department of Defense (DOD) concurred with most of the 45 recommendations and has many actions underway  However, DOD has not fully implemented any of the recommendations to date  For each of the reports, the specific recommendations and any progress made in implementing them are summarized in tables 2 through 16  Report numbers with a C or RC suffix are classified  Report numbers with a SU suffix are sensitive but unclassified  Classified and sensitive but unclassified reports are available to personnel with the proper clearances and need to know, upon request  Navy Readiness: Actions Needed to Address Costly Maintenance Delays Facing the Attack Submarine Fleet  GAO-19-229  Washington, D C : November 19, 2018  Air Force Readiness: Actions Needed to Rebuild Readiness and Prepare for the Future  GAO-19-120T  Washington, D C : October 10, 2018  Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need to Be Clarified  GAO-18-678  Washington, D C : September 10, 2018  Weapon System Sustainment: Selected Air Force and Navy Aircraft Generally Have Not Met Availability Goals, and DOD and Navy Guidance Need Clarification  GAO-18-146SU  Washington, D C : April 25, 2018  Military Readiness: Update on DOD’s Progress in Developing a Readiness Rebuilding Plan  GAO-18-441RC  Washington, D C : August 10, 2018  (SECRET) Military Personnel: Collecting Additional Data Could Enhance Pilot Retention Efforts  GAO-18-439  Washington, D C : June 21, 2018  F-35 Joint Strike Fighter: Development Is Nearly Complete, but Deficiencies Found in Testing Need to Be Resolved  GAO-18-321  Washington, D C : June 5, 2018  Warfighter Support: DOD Needs to Share F-35 Operational Lessons Across the Military Services  GAO-18-464R  Washington, D C : April 25, 2018  Military Readiness: Clear Policy and Reliable Data Would Help DOD Better Manage Service Members’ Time Away from Home  GAO-18-253  Washington, D C : April 25, 2018  Military Personnel: DOD Needs to Reevaluate Fighter Pilot Workforce Requirements  GAO-18-113  Washington, D C : April 11, 2018  Military Aircraft: F-35 Brings Increased Capabilities, but the Marine Corps Needs to Assess Challenges Associated with Operating in the Pacific  GAO-18-79C  Washington, D C : March 28, 2018  (SECRET) Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training  GAO-18-212T  Washington, DC : December 1, 2017  F-35 Aircraft Sustainment: DOD Needs to Address Challenges Affecting Readiness and Cost Transparency  GAO-18-75  Washington, D C : October 26, 2017  Defense Supply Chain: DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks  GAO-17-768  Washington, D C : September 28, 2017  Navy and Marine Corps Training: Further Planning Needed for Amphibious Operations Training  GAO-17-789  Washington, D C : September 26, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-809T  Washington, D C : September 19, 2017  Naval Shipyards: Actions Needed to Improve Poor Conditions That Affect Operation  GAO-17-548  Washington, D C : September 12, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-798T  Washington, D C : September 7, 2017  Navy Readiness: Actions Needed to Maintain Viable Surge Sealift and Combat Logistics Fleets GAO-17-503  Washington, D C : August 22, 2017 (reissued on Oct 31, 2017)  Department of Defense: Actions Needed to Address Five Key Mission Challenges  GAO-17-369  Washington, D C : June 13, 2017  Military Readiness: Coastal Riverine Force Challenges  GAO-17-462C  Washington, D C : June 13, 2017  (SECRET) Navy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery Process and Ship Quality  GAO-17-418  Washington, D C : July 13, 2017 Offshore Petroleum Discharge System: The Navy Has Not Mitigated Risk Associated with System Limitations  GAO-17-531C  Washington, D C : June 22, 2017  (SECRET) Navy Force Structure: Actions Needed to Ensure Proper Size and Composition of Ship Crews  GAO-17-413  Washington, D C : May 18, 2017  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-841  Washington, D C : September 7, 2016  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-534C  Washington, D C : June 30, 2016  (SECRET) Defense Inventory: Further Analysis and Enhanced Metrics Could Improve Service Supply and Depot Operations  GAO-16-450  Washington, D C : June 9, 2016  Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness  GAO-16-481RC  Washington, D C : May 25, 2016  (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan  GAO-16-466R  Washington, D C : May 2, 2016  F-35 Sustainment: DOD Needs a Plan to Address Risks Related to Its Central Logistics System  GAO-16-439  Washington, D C : April 14, 2016  Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports  GAO-15-329  Washington, D C : May 29, 2015  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 

ground_truth: Banks play a critical role in the United States economy, channeling money from savers to borrowers and facilitating productive investment. While the nature of lawmakers' interest in bank regulation has shifted over time, most bank regulations fall into one of three general categories. First, banks must abide by a variety of safety-and-soundness requirements designed to minimize the risk of their failure and maintain macroeconomic stability. Second, banks must comply with consumer protection rules intended to deter abusive practices and provide consumers with complete information about financial products and services. Third, banks are subject to various reporting, recordkeeping, and anti-money laundering requirements designed to assist law enforcement in investigating criminal activity. The substantive content of these requirements remains the subject of intense debate. However, the division of regulatory authority over banks between the federal government and the states plays a key role in shaping that content. In some cases, federal law displaces (or "preempts") state bank regulations. In other cases, states are permitted to supplement federal regulations with different, sometimes stricter requirements. Because of its substantive implications, federal preemption has recently become a flashpoint in debates surrounding bank regulation. In the American "dual banking system," banks can apply for a national charter from the Office of the Comptroller of the Currency (OCC) or a state charter from a state's banking authority. A bank's choice of chartering authority is also a choice of primary regulator, as the OCC serves as the primary regulator of national banks and state regulatory agencies serve as the primary regulators of state-chartered banks. However, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) also play an important role in bank regulation. The Federal Reserve supervises all national banks and state-chartered banks that become members of the Federal Reserve System (FRS), while the FDIC supervises all state banks that do not become members of the FRS. This complex regulatory architecture has resulted in a "symbiotic system" with both federal regulation of state banks and state regulation of national banks. In the modern dual banking system, national banks are often subject to generally applicable state laws, and state banks are subject to both generally applicable federal laws and regulations imposed by their federal regulators. The evolution of this system during the 20th century caused the regulation of national banks and state banks to converge in a number of important ways. However, despite this convergence, federal preemption provides national banks with certain unique advantages. In Barnett Bank of Marion County, N.A. v. Nelson, the Supreme Court held that the National Bank Act (NBA) preempts state laws that "significantly interfere" with the powers of national banks. The Court has also issued two decisions on the preemptive scope of a provision of the NBA limiting states' "visitorial powers" over national banks. Finally, OCC rules have taken a broad view of the preemptive effects of the NBA, limiting the ways in which states can regulate national banks. Courts, regulators, and legislators have recently confronted a number of issues involving banking preemption and related federalism questions. Specifically, Congress has considered legislation that would overturn a line of judicial decisions concerning the circumstances in which non-banks can benefit from federal preemption of state usury laws. The OCC has also announced its intention to grant national bank charters to certain financial technology (FinTech) companies—a decision that is currently being litigated. Finally, Congress has recently turned its attention to the banking industry's response to state efforts to legalize and regulate marijuana.