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EXAMINING REGULATORY 

BURDENS—REGULATOR 

PERSPECTIVE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 23, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–16 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

ROBERT DOLD, Illinois 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

RANDY NEUGEBAUER, Texas, Chairman 

STEVAN PEARCE, New Mexico, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

ROBERT DOLD, Illinois 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

MIA LOVE, Utah 

WM. LACY CLAY, Missouri, Ranking 

Member 

GREGORY W. MEEKS, New York 

RUBE ́ N HINOJOSA, Texas 

DAVID SCOTT, Georgia 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

STEPHEN F. LYNCH, Massachusetts 

MICHAEL E. CAPUANO, Massachusetts 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 23, 2015 ................................................................................................... 1 

Appendix: 

April 23, 2015 ................................................................................................... 59 

WITNESSES 

THURSDAY, APRIL 23, 2015 

Bland, Toney, Senior Deputy Comptroller, Office of the Comptroller of the 

Currency (OCC) .................................................................................................... 9 

Cooper, Charles G., Banking Commissioner, Texas Department of Banking, 

on behalf of the Conference of State Bank Supervisors (CSBS) ...................... 14 

Eberley, Doreen R., Director, Division of Risk Management Supervision, Federal Deposit Insurance Corporation (FDIC) ....................................................... 5 

Fazio, Larry, Director, Office of Examination and Insurance, National Credit 

Union Administration (NCUA) ........................................................................... 10 

Hunter, Maryann F., Deputy Director, Division of Banking Supervision and 

Regulation, Board of Governors of the Federal Reserve System (Fed) ............ 7 

Silberman, David, Associate Director, Research, Markets, and Regulations, 

Consumer Financial Protection Bureau (CFPB) ............................................... 12 

APPENDIX 

Prepared statements: 

Bland, Toney ..................................................................................................... 60 

Cooper, Charles G. ........................................................................................... 76 

Eberley, Doreen R. ........................................................................................... 104 

Fazio, Larry ....................................................................................................... 121 

Hunter, Maryann F. ......................................................................................... 148 

Silberman, David .............................................................................................. 165 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Bland, Toney: 

Written responses to questions for the record submitted by Representatives Hinojosa and Luetkemeyer ................................................................. 172 

Cooper, Charles G.: 

Written responses to questions for the record submitted by Representative Luetkemeyer .......................................................................................... 178 

Eberley, Doreen R.: 

Written responses to questions for the record submitted by Representative Hinojosa .................................................................................................. 179 

Written responses to questions for the record submitted by Representative Luetkemeyer .......................................................................................... 184 

Written responses to questions for the record submitted by Representative Vargas .................................................................................................... 186 

Written responses to questions for the record submitted by Representative Pittenger ................................................................................................. 188 

Written responses to questions for the record submitted by Representative Heck *[Response indicates ‘‘Robert Heck;’’ should read ‘‘Denny 

Heck’’] ............................................................................................................. 189 

Fazio, Larry: 

Written responses to questions for the record submitted by Representative Luetkemeyer .......................................................................................... 190 

Page

VI 

Fazio, Larry—Continued 

Written responses to questions for the record submitted by Representative Vargas .................................................................................................... 194 

Hunter, Maryann F.: 

Written responses to questions for the record submitted by Representative Luetkemeyer .......................................................................................... 196 

Written responses to questions for the record submitted by Representative Hinojosa .................................................................................................. 198 

Silberman, David: 

Written responses to questions for the record submitted by Representatives Royce, Luetkemeyer, and Mulvaney .................................................. 201 

(1) 

EXAMINING REGULATORY 

BURDENS—REGULATOR 

PERSPECTIVE 

Thursday, April 23, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 9:19 a.m., in room 

HVC–210, Capitol Visitor Center, Hon. Randy Neugebauer [chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Pearce, Lucas, 

Posey, Westmoreland, Luetkemeyer, Stutzman, Mulvaney, 

Pittenger, Barr, Rothfus, Dold, Guinta, Tipton, Williams, Love; 

Clay, Hinojosa, Scott, Maloney, Sherman, Lynch, Capuano, Heck, 

Sinema, and Vargas. 

Also present: Representative Duffy. 

Chairman NEUGEBAUER. Good morning. The Subcommittee on 

Financial Institutions and Consumer Credit will come to order. 

Without objection, the Chair is authorized to declare a recess of the 

subcommittee at any time. 

Today’s hearing is entitled, ‘‘Examining Regulatory Burdens— 

Regulator Perspective.’’ Before I begin, I would like to thank each 

of our witnesses for traveling all the way to Washington, D.C., and 

to the Capitol Visitor Center. Not only is it a long way to Washington, D.C., but it is a long way to the Visitor Center. So you get 

double credit for your efforts this morning. 

This hearing is starting a little bit earlier than normal today, because this was originally scheduled to be a full work day, but now 

is a getaway day. And we are going to have votes—fortunately, 

later in the morning than I anticipated—around 11:40 or 12:00. So 

that should give us time to, I think, have a pretty robust hearing. 

At this time, I would like to recognize myself for 5 minutes to 

give an opening statement. Today this subcommittee will continue 

its examination of the regulatory burdens facing community financial institutions and the resulting impact on the American consumer. The full Financial Services Committee has heard an overwhelming amount of testimony highlighting the plight of our Main 

Street financial institutions, institutions that are disappearing at 

an average rate of one every single day. 

We have heard from hardworking Americans in communities 

across the country that they are losing their financial independVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
2 

ence. These consumers face difficulties in obtaining mortgage credit 

and the threat of financial products disappearing. Each one of us 

in this room has an obligation to our constituents to take seriously 

regulatory reform for these institutions and the American consumer. 

Unfortunately, some of my colleagues on the other side of the 

aisle and in the upper chamber have suddenly changed course in 

their efforts to work in a bipartisan manner. Curiously, we have 

seen bills that were bipartisan last year that have been very difficult to pass this year. 

We have seen Democratic-led bipartisan bills that passed out of 

our committee blocked going to the Floor all in an effort to protect 

the Dodd-Frank Act. As a result, Republicans are left without a 

dancing partner in trying to reverse this trend of ‘‘too-small-to-succeed.’’ 

In my district, and I suspect in many of my colleagues’ districts, 

this is not an option. So today I am pleased to welcome our witnesses from the Federal and State financial regulators. These agency representatives will provide an important perspective on the regulatory framework facing our community financial institutions. I 

suspect many of them have heard the same stories that members 

of this subcommittee have heard. However, these agencies are in 

a unique position. They have the authority, in most cases, to write 

rules that can begin to change the condition of ‘‘too-small-to-succeed.’’ 

Some have done a better job than others. Today this subcommittee will address two overreaching regulatory issues. 

First, how does the supervision and examination function of 

these agencies impact community financial institutions, and are 

there ways we can improve that process? 

And second, how do these agency rulemakings limit the operational activities of community financial institutions? And further, 

how do these regulations impact consumer choices and availability 

of credit? 

Each one of your agencies holds a piece of the regulatory burden 

puzzle that must be explored. For example, community banks have 

undergone significant capital restructuring as a result of the Basel 

capital requirements. 

Credit unions are in the midst of moving to their own new capital structure that could result in considerable cost. Operation 

Choke Point has severely fractured any trust in the supervision 

and examination process between financial institutions and regulatory agencies. 

Some consumer protection rules have literally caused products to 

disappear, as was the case in bank deposit advance products. In 

total, these regulatory issues continue to drive market consolidation and to harm the experience of consumers in the financial marketplace. 

In closing, I am reminded of a quote from a recent Harvard study 

about community banks: ‘‘Their competitive advantage is a knowledge in the history of their customers and a willingness to be flexible.’’ I like this quote because it is the very definition of banking 

relationships, particularly in community banks and credit unions. 

3 

In my district, the 19th District of Texas, we need relationship 

banking. My constituents want to know their banker. Their local 

banker wants to be flexible and to find ways to help his neighbor 

realize the dream and reach financial independence. It is my hope 

that today we can begin to restore some bipartisanship and work 

together to help our constituents on Main Street reach their financial dreams and enable our economy to reach its full potential. 

The Chair now recognizes the ranking member of the subcommittee, the gentleman from Missouri, Mr. Clay, for 2 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. I appreciate you calling 

this hearing. And I certainly appreciate your common-sense approach to how we go forward as a subcommittee. 

I welcome today’s testimony from our panel of regulators. And I 

view this morning’s hearing as an important opportunity for regulators to make their case for the work that they are already doing 

in tailoring their regulatory approaches to the size, complexity, and 

risk profiles of our community-based financial institutions. In particular, I look forward to a better understanding of how the rulemaking process already lends itself to agency considerations of cost 

and benefits, the progress of ongoing agency reviews of existing 

rules that are already happening under the Economic Growth and 

Paperwork Reduction Act, the various exemptions that regulators 

have already extended to community banks and small businesses, 

and the value of asset thresholds to regulators in identifying opportunities for targeted regulatory relief. 

My hope is that this morning’s testimony will form the basis of 

responsible and targeted regulatory relief proposals that strike the 

proper balance between consumer protection and safety and soundness, and that calibrate regulatory approaches to the actual risks 

that community-based financial institutions pose. 

Mr. Chairman, thank you again, and I yield back the remainder 

of my time. 

Chairman NEUGEBAUER. I thank you. 

Are there any other Members on your side who would like to 

make an opening statement? We still have a little time left. 

Mr. CLAY. I don’t see any. 

Chairman NEUGEBAUER. Then, I will now introduce our panel. 

First, Ms. Doreen Eberley is the Director of the FDIC’s Division of 

Risk Management Supervision. She is responsible for FDIC’s programs designed to promote financial institution safety and soundness and those institutions’ adherence to the FDIC statutes and 

regulations. She has had a distinguished career at the FDIC, where 

she has served as Acting Deputy to FDIC Chairman Sheila Bair 

and Acting Chairman Martin Gruenberg. 

Prior to joining the FDIC, she served on the professional staff of 

the U.S. House of Representatives Committee on Banking and Financial Services. And also, under the fellowship program during 

the 105th Congress. 

Ms. Eberley holds a B.A. in economics from Cornell University 

and an MBA from Emory. 

Second, Ms. Maryann Hunter is the Deputy Director of the Division of Bank Supervision and Regulation at the Board of Governors 

of the Federal Reserve System. She was responsible for the Federal 

Reserve’s program for supervision and risk management, and overVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
4 

sees the supervision of U.S. banking organizations and foreign 

banking organizations operating in the United States. 

Prior to joining the Board of Governors staff, Ms. Hunter held a 

number of high-level positions in the Federal Reserve Bank in Kansas City. She started her career at the Federal Reserve as an examiner in 1981, and was promoted to Senior Vice President and Officer in Charge of Supervision in 2000. She holds a B.A. from the 

Pennsylvania State University and an MPP degree from the University of Michigan’s Ford School of Public Policy. 

Third, Mr. Toney Bland is the Senior Deputy Comptroller for 

Midsize Community Bank Supervision in the Office of the Comptroller of the Currency. In this role, Mr. Bland is responsible for 

supervising nearly 1,800 national banks and Federal savings associations, as well as 2,000 OCC employees. He serves as a member 

of OCC’s Executive Committee, and the Committee on Bank Supervision. 

Mr. Bland previously served as Deputy Comptroller for the agency’s northeastern district, where he was responsible for the oversight of more than 300 community banks and Federal savings associations, independent national trust companies, and independent 

data service providers. 

Mr. Bland received his bachelor of science degree in business administration and economics from Carroll University in Wisconsin. 

Fourth, Mr. Larry Fazio serves as director of the Office of Examination and Insurance at the National Credit Union Administration. In this role, he is responsible for providing leadership over the 

agency’s examination and supervision program. He has had a long 

career in supervision and examination at the NCUA, having previously served as supervision analyst, supervisory examiner, and 

director of risk management. Mr. Fazio graduated from Lewis University with a degree in accounting. He is a certified management 

accountant and has a master’s degree in organizational management from George Washington University. 

Fifth, Mr. David Silberman serves as the Associate Director of 

the Office of Research, Markets, and Regulations at the Consumer 

Financial Protection Bureau. Prior to joining the CFPB, Mr. Silberman had a long career at the AFL-CIO where he served as deputy 

general counsel. While there, he helped create an organization to 

provide financial services to union members. Mr. Silberman went 

on to serve as president and CEO of Union Privilege, and later as 

director of the AFL-CIO Task Force in Labor Law. 

Prior to joining the CFPB implementation team, Mr. Silberman 

served as general counsel and executive vice president of Kessler 

Financial Services, a privately held company focused on creating 

and supporting credit cards and other financial services to membership organizations. 

Mr. Silberman began his career as a law clerk to Justice Marshall, and is a member of the law firm Bredhoff & Kaiser. 

And I would now like to turn to a friend from Texas, Mr. Williams, to recognize a very special member of the panel today. 

Mr. WILLIAMS. Thank you, Chairman Neugebauer. This morning 

it is a privilege and an honor to introduce Texas Banking Commissioner, and my constituent, Charles Cooper. 

5 

A native Texan, Mr. Cooper holds a BBA degree in finance and 

economics from Baylor University, and is also a graduate of the 

Southwestern Graduate School of Banking at Southern Methodist 

University. 

Charles G. Cooper was appointed Texas Banking Commissioner 

by the Texas Finance Commission on December 1, 2008. 

Mr. Cooper began his career in banking in 1970 with the Federal 

Deposit Insurance Corporation in the Dallas region. His career in 

the banking industry spans over 40 years, and includes senior level 

positions in both the public and private sectors. 

As Texas Banking Commissioner, his responsibilities include the 

chartering, regulation, supervision, and examination of 263 Texas 

State-chartered banks with aggregate assets of approximately $236 

billion, in addition to department supervisors trust companies, foreign bank agencies and branches, prepaid funeral licenses, money 

services businesses, perpetual care cemeteries, and private child 

support for enforcement agencies. He also serves as vice chairman 

of the Conference of State Bank Supervisors. 

The subcommittee looks forward to Mr. Cooper’s testimony. I 

want to welcome him here to Washington. 

And I yield back, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

Each of you will be recognized for 5 minutes to give your oral 

presentations, and without objection, each of your written statements will be made a part of the record. 

And we will start with you, Ms. Eberley. You are now recognized 

for 5 minutes. 

DOREEN R. EBERLEY, DIRECTOR, DIVISION OF RISK MANAGEMENT SUPERVISION, FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) 

Ms. EBERLEY. Thank you, Chairman Neugebauer, Ranking Member Clay, and members of the subcommittee. I appreciate the opportunity to testify on behalf of the FDIC on regulatory relief for 

community banks. 

As the primary Federal regulator for the majority of community 

banks, the FDIC has a particular interest in understanding the 

challenges and opportunities they face. 

Community banks provide traditional relationship-based banking 

services to their communities. While they hold just 13 percent of 

all banking assets, community banks account for about 45 percent 

of all of the small loans to businesses and farms made by insured 

institutions. Although 448 community banks failed during the recent financial crisis, thousands of community banks did not. That 

is a fact, and that is the vast majority. 

Institutions that stuck to their core expertise weathered the crisis. The highest failure rates were observed among non-community 

banks and among community banks that departed from the traditional model and tried to grow rapidly with risky assets, often 

funded by volatile non-core and often non-local brokered deposits. 

The FDIC is keenly aware that regulatory requirements can 

have a greater impact on smaller institutions, which operate with 

fewer staff and other resources than their larger counterparts. 

Therefore, the FDIC pays particular attention to input community 

6 

bankers provide regarding regulations, and the impact regulations 

may have on smaller and rural institutions that serve areas that 

otherwise would not have access to banking services. 

The FDIC and the other regulators are actively seeking input 

from the industry and the public on ways to reduce regulatory burden through the Economic Growth and Regulatory Paperwork Reduction Act process, which requires the Federal financial regulators 

to periodically review our regulations to identify any that are outdated or otherwise unnecessary. As part of this process, the agencies are jointly requesting public comment on all areas of our regulations. 

We are also conducting regional outreach meetings involving the 

public, the industry and other interested parties. 

In response to what we heard in the first round of comments, the 

FDIC already has acted on regulatory relief suggestions where we 

could achieve rapid change. In November, we issued two financial 

institution letters, or FILs, responding to suggestions we reviewed 

from bankers. The first FIL released questions and answers about 

the deposit insurance application process. Commentors had told us 

that a clarification of the FDIC’s existing policies would be helpful. 

The second FIL addressed new procedures that eliminate or reduce the need to file applications by institutions wishing to conduct 

permissible activities through certain bank subsidiaries organized 

as limited liability companies, subject to some limited documentation standards. This will significantly reduce application filings in 

the years ahead. 

The FDIC also takes a risk-based approach to supervision which 

recognizes that community banks are different and should not be 

treated the same. This approach is clear in how we train our examiners and how we conduct our examination processes. 

Every FDIC examiner is initially trained as a community bank 

examiner through a rigorous 4-year program. As a result, each examiner gains a thorough understanding of community banks before 

becoming a commissioned examiner. 

The vast majority of examiners in our 83 field offices nationwide 

are community bank examiners. 

Institutions with lower risk profiles, such as most community 

banks, are subject to less supervisory attention than those with elevated risk profiles. Well-managed banks engaged in traditional 

non-complex activities receive periodic safety and soundness and 

consumer protection examinations that are carried out over a few 

weeks. In contrast, the very largest institutions that FDIC supervises receive continuous safety and soundness supervision and ongoing examination carried out through targeted reviews during the 

course of an examination cycle. 

The FDIC also considers the size, complexity, and risk profile of 

institutions during the rulemaking and supervisory guidance development processes, and on an ongoing basis through the feedback 

we receive from community bankers and other stakeholders. Where 

possible, we scale our regulations and policies according to these 

factors. 

As we strive to minimize regulatory burden on community banks, 

we look for changes that can be made without affecting safety and 

soundness. For example, we believe that the current $500 million 

7 

threshold for the expanded 18 month examination period could be 

raised. In addition, we would support Congress’ efforts to reduce 

the privacy notice reporting burden. 

In conclusion, the FDIC will continue to look for ways to achieve 

our fundamental objectives of safety and soundness and consumer 

protection in ways that do not involve needless complexity or expense for community banks. 

We look forward to working with the committee in pursuing 

these efforts. 

Thank you. 

[The prepared statement of Director Eberley can be found on 

page 104 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Now, Ms. Hunter, you are recognized for 5 minutes. 

STATEMENT OF MARYANN F. HUNTER, DEPUTY DIRECTOR, DIVISION OF BANKING SUPERVISION AND REGULATION, 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

(FED) 

Ms. HUNTER. Thank you. Chairman Neugebauer, Ranking Member Clay, and members of the subcommittee, I appreciate the opportunity to testify today on the important topic of regulatory relief 

for community financial institutions. 

As noted in the introduction, I began my career more than 30 

years ago as a community bank examiner and eventually became 

the officer in charge of supervision at the Federal Reserve Bank of 

Kansas City. Thus, I have seen firsthand the need to balance effective supervision and regulation to ensure safety and soundness, 

while not subjecting small institutions to unnecessary regulatory 

requirements that could constrain their capacity to serve their customers and communities. 

In recent years, the Federal Reserve has taken several measures 

to tailor regulations, policies, and supervisory activities to the risks 

at community banking organizations and to make our supervisory 

program more efficient and less burdensome for well-run institutions. For example, we have recently completed a review of supervisory guidance for community and regional organizations, to make 

sure that our expectations for examiners and bankers are appropriately aligned with the current banking practices and risks. 

This review is likely to result in the elimination of some guidance 

that is no longer relevant to current supervisory and banking industry practices. 

We continue to build upon our longstanding risk-focused approach to supervision, reviewing field procedures, refining training 

programs and developing automated tools for examiners to focus 

examiner attention on higher risk activities, thus reducing some of 

the work at lower-risk, well-managed community banks. 

Furthermore, we have developed programs to conduct more examination work offsite, such as the loan review, to reduce the time 

that examiners physically spend in the bank. 

The Federal Reserve very recently took action to further reduce 

burden for smaller institutions. The Board issued a final rule that 

expands the applicability of its small bank holding company policy 

8 

statement to institutions with up to a billion dollars in assets, provided that they meet certain qualitative requirements. 

And it also applies the statement to certain savings and loans 

holding companies, to address their burden. 

This expansion covers approximately 720 savings and loan holding companies and bank holding companies. 

Going forward, this means that 89 percent of all bank holding 

companies and 81 percent of all savings and loan holding companies will be covered under the policy statement. 

The policy statement facilitates local ownership of small community banks and savings associations by allowing their holding companies to operate with higher levels of debt than would normally 

be permitted. Holding companies that qualify for the policy statement are excluded from consolidated capital requirements. 

In a related action, the Board took steps to relieve the regulatory 

reporting burden for the affected institutions by eliminating the 

quarterly and more complex consolidated financial reporting requirement, and instead required parent-only financial statements 

semiannually. 

In addition to these actions, the Federal Reserve is participating 

with the other Federal banking agencies in a review to identify 

banking regulations that are outdated, unnecessary or unduly burdensome, as required by the Economic Growth and Regulatory Paperwork Reduction Act of 1996, or, as it is also known, the 

EGRPRA review. 

We are working closely with the OCC and the FDIC to seek public comment on regulations, and are jointly holding outreach meetings to get feedback directly from bankers and community groups 

about ways to reduce burden related to rules and examination 

practices. 

To date, the meetings held in Los Angeles and Dallas have yielded some useful and specific suggestions for consideration. 

The agencies have also recently expanded the scope of regulations covered by the review to include those that are relatively 

new. We are committed to listening to bankers’ concerns and working with the other Federal agencies, as appropriate, to consider and 

assess the impact of potential changes identified through the 

EGRPRA review process. 

Let me conclude by saying that the Federal Reserve is committed 

to taking a balanced supervisory approach that fosters safe and 

sound community banks and fair treatment for consumers, and encourages the flow of credit to consumers and businesses. 

To achieve that goal, we will continue to work to make sure that 

regulations, policies, and supervisory activities are appropriately 

tailored to the level of risks at these institutions. 

Thank you for inviting me to share the Federal Reserve’s views 

on the issues affecting community banks. I would be pleased to answer any questions you may have. 

[The prepared statement of Deputy Director Hunter can be found 

on page 148 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Ms. Hunter. 

Mr. Bland, you are recognized for 5 minutes. 

9 

STATEMENT OF TONEY BLAND, SENIOR DEPUTY COMPTROLLER, OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC) 

Mr. BLAND. Thank you, Chairman Neugebauer, Ranking Member 

Clay, and members of the subcommittee. Thank you for the opportunity to appear before you today to discuss the challenges facing 

community banks and Federal savings associations and the actions 

that the OCC is taking to help these institutions address regulatory burdens. 

I have been a bank examiner for more than 30 years. And I have 

seen firsthand the vital role that community banks play in meeting 

the credit needs of consumers and small businesses across the 

country. 

At the OCC, we are committed to supervisory practices that are 

fair and reasonable, and to fostering a climate that allows for wellmanaged community banks to grow and thrive. 

We tailor our supervision to each bank’s individual situation, 

taking into account the product and services it offers as well as its 

risk profile and management team. 

Given the wide array of institutions we supervise, the OCC understands that a one-size-fits-all approach to regulation does not 

work. Therefore, to the extent that a law allows, we factor these 

differences in the rules we write and the guidance we issue. 

My written statement provides several examples of the commonsense adjustments we have made to recent regulations to accommodate community bank concerns. 

Guiding our consideration of every proposal to reduce the burden 

on community banks is the need to ensure that fundamental safety 

and soundness and consumer protection safeguards are not compromised. Within this framework, to date we have developed three 

regulatory relief proposals that we hope Congress will consider favorably. 

We are also undertaking several efforts to identify and mitigate 

other regulatory burdens through our regulatory review process. 

The first proposal we submitted to Congress would exempt some 

6,000 community banks from the Volcker Rule. As the vast majority of banks under $10 billion in asset size do not engage in the 

proprietary trading or covered funds activities that the statute 

sought to prohibit, we do not believe they should have to commit 

the resources to determine if any compliance obligations under the 

rule would apply. 

We do not believe that this burden is justified by the nominal 

risk that these institutions could pose to the financial system. 

We are also supporting current law to allow more well-managed 

community banks to qualify for a longer, 18-month examination 

cycle. Raising the threshold from $500 million to $750 million for 

banks that would qualify for this treatment would cover more than 

400 additional community banks. 

We also support providing more flexibility for Federal thrifts, so 

that those thrifts that wish to expand their business model and 

offer a broader range of services to their communities may do so 

without the burden and expense of a charter conversion. 

10 

Under our proposal, Federal thrifts could retain their current 

governance structure without unnecessarily limiting the evolution 

of their business plan. 

As a supervisor of both national banks and Federal thrifts, we 

are well-positioned to administer this new framework without requiring a costly and time-consuming administrative process. 

I am pleased that members of this subcommittee, including Representatives Rothfus, Barr, and Tipton, have introduced legislation 

consistent with some of our proposals to provide regulatory relief 

to community banks. 

I am also hopeful that the ongoing efforts to review current regulations to reduce or eliminate burden will bear fruit. 

I have participated in the first two public EGRPRA meetings in 

Los Angeles and Dallas, where regulators heard ideas to reduce 

burden from a number of interested stakeholders. The agencies are 

currently evaluating the comments received from these meetings 

and from the public comment process. 

While this process will unfold over a period of time, the OCC will 

not wait until it is completed to implement changes where a good 

case is made for relief or to submit legislative ideas identified 

through this process to Congress. 

Separately, the OCC is in the midst of a comprehensive, multiphase review of our own regulations and those of the former Office 

of Thrift Supervision (OTS) to reduce duplication, promote fairness 

of supervision, and create efficiencies for national banks and Federal savings associations. 

We are currently reviewing comments received from the first 

phase of our review, focused on corporate activities and transactions. 

Finally, we are continually looking for innovative ways to reduce 

burden. Last February, the OCC published a paper that focused on 

possibilities for community banks to collaborate to manage regulatory requirements, trim cost, and better serve their customers. 

We believe there are opportunities for community banks to work 

together to address the challenges of limited resources and acquiring needed expertise. 

In closing, the OCC will continue to carefully assess the potential 

effect that current and future policies and regulations may have on 

community banks. And we will be happy to work with the industry 

and the committee on additional ideas or proposed legislative initiatives. 

Again, thank you for the opportunity to appear today. I would be 

happy to respond to questions. 

[The prepared statement of Deputy Comptroller Bland can be 

found on page 60 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Bland. 

Mr. Fazio, you are now recognized for 5 minutes. 

STATEMENT OF LARRY FAZIO, DIRECTOR, OFFICE OF EXAMINATION AND INSURANCE, NATIONAL CREDIT UNION ADMINISTRATION (NCUA) 

Mr. FAZIO. Good morning, Chairman Neugebauer, Ranking Member Clay, and members of the subcommittee. Thank you for the invitation to discuss regulatory relief for credit unions. 

11 

NCUA regulates 6,273 credit unions with $1.1 trillion in assets 

that serve 99.3 million members. More than three-quarters of these 

credit unions have less than $100 million in assets. And all but 227 

have less than $1 billion in assets. 

Therefore, most member-owned, locally-driven credit unions 

could be considered community financial institutions. 

Because credit unions generally have fewer resources available to 

respond to marketplace, technological, legislative and regulatory 

changes, NCUA recognizes and acts continually to fine tune our 

rules to remove any unnecessary burden on credit unions. 

In protecting the safety and soundness of credit unions, the savings of their members, the share insurance fund, and taxpayers, 

NCUA employs a variety of targeting strategies. 

For example, we will fully exempt small credit unions from certain rules. We use graduated requirements as size and complexity 

increase for others. And we incorporate practical compliance approaches in agency guidance. 

In short, we strive to balance maintaining prudential standards 

with minimizing regulatory burden. Since 1987, NCUA has undertaken a rolling 3-year review of all of our regulations, and NCUA 

is once again voluntarily participating in the current EGRPRA review. 

In response to stakeholder comments received during the first 

EGRPRA notice, we have established two internal working groups 

to consider possible changes in the areas of field of membership 

and secondary capital. 

We have also moved swiftly on the supervisory front to expedite 

secondary capital requests from low-income credit unions. 

Over the past 3 years, NCUA has taken 15 additional actions 

through the agency’s regulatory modernization initiative to cut red 

tape and provide lasting benefits to credit unions. 

This includes easing eight regulations, including modernizing the 

definition of small credit unions to prudently exempt thousands of 

credit unions from several rules, streamlining three processes, including facilitating more than 1,000 new low-income designations 

and expediting examinations at all small credit unions, and issuing 

four legal opinions allowing more flexibility in credit union operations. 

In February, the NCUA Board issued a proposed rule to further 

increase the asset threshold for defining a small entity under the 

Regulatory Flexibility Act to $100 million. If finalized as proposed, 

this change would provide special consideration of regulatory relief 

in future rulemaking for three out of four credit unions. 

The NCUA Board is fully committed to continuing to provide regulatory relief. NCUA is now working to ease rules on secondary 

capital, member business lending, fixed assets, asset securitization, 

and fields of membership. 

Next week, in fact, the Board will finalize a rule to simplify how 

Federal credit unions add groups to their fields of membership. 

Concerning legislation, NCUA appreciates the committee’s recent 

efforts to enact laws to provide share insurance coverage for lawyers’ trust accounts and enable federally-insured financial institutions to offer prize-linked savings accounts. 

12 

Going forward, NCUA would urge Congress to provide regulators 

with flexibility in writing rules. Such flexibility would better allow 

us to scale rules based on size or complexity to effectively limit additional regulatory burdens on smaller credit unions. 

In this Congress, NCUA supports several targeted bipartisan 

bills. For example, we support H.R. 989 by Congressmen King and 

Sherman to allow healthy, well-managed credit unions to issue 

supplemental capital that would count as net worth, H.R. 1188 by 

Congressmen Royce and Meeks to modify the cap on member business lending, and H.R. 1422 by Congressmen Royce and Hoffman, 

to provide parity between credit unions and banks on the treatment of one- to four-unit, non-owner- occupied residential loans by 

exempting such loans from the member business lending cap. 

NCUA also would support legislation to permit all Federal credit 

unions to add underserved areas to their fields of membership. Additionally, we request congressional consideration of legislation to 

enable NCUA to examine third-party vendors, a move that could 

provide a measure of regulatory relief. 

The change could easily save credit unions and NCUA valuable 

time by eliminating the need to mitigate the same issue repeatedly 

at hundreds of credit unions. 

In closing, NCUA remains committed to providing responsible 

regulatory relief. We stand ready to work with Congress on related 

legislative proposals. 

Thank you, and I look forward to your questions. 

[The prepared statement of Director Fazio can be found on page 

121 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Fazio. 

Mr. Silberman, you are now recognized for 5 minutes. 

STATEMENT OF DAVID SILBERMAN, ASSOCIATE DIRECTOR, 

RESEARCH, MARKETS, AND REGULATIONS, CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) 

Mr. SILBERMAN. Thank you, Mr. Chairman. 

Chairman Neugebauer, Ranking Member Clay, and members of 

the subcommittee, thank you for the opportunity to testify today 

about the Consumer Financial Protection Bureau’s work to 

strengthen our financial system so that it better serves consumers, 

responsible businesses, and our economy as a whole. 

As you know, the Bureau is the Nation’s first Federal agency 

whose sole focus is protecting consumers in the financial marketplace through fair rules, based on research and quantitative analysis, consistent oversight and appropriate enforcement with respect 

to the institutions within our jurisdiction, and through broad-based 

consumer engagement, the Bureau is working to restore consumer 

trust in the financial marketplace. 

The Bureau does not supervise community banks or credit 

unions, but our rules of course impact these institutions. The division I lead, the Division of Research, Markets and Regulations, is 

responsible for articulating a research-driven, evidence-based, and 

pragmatic perspective on consumer financial markets, and developing rules grounded in that perspective to ensure that consumer 

financial markets function in a fair, transparent, and competitive 

manner. 

13 

As such, the Bureau is committed to regulations that are carefully calibrated so that as we fulfill our mandate to protect consumers, we are mindful of the impact of compliance on financial institutions and responsive to those concerns. We engage in rigorous 

evaluation of the effects of proposed regulations on both consumers 

and the covered persons throughout our rulemaking process and 

maintain steady dialogue with stakeholders. 

Congress also specifically mandated the agency to undertake a 

regulatory review process. The Dodd-Frank Act requires that within 5 years after the effective date of any significant rule, the Bureau must assess the rule’s effectiveness in meeting the purposes 

and objectives of the Act and the goals for the particular rule. 

Beginning in 2011, the Bureau demonstrated an early commitment to addressing unnecessary burdens by issuing a request for 

information to help identify priorities for streamlining inherited 

regulations. 

Through that process, we pinpointed a number of areas for review. For example, we identified a requirement that certain fee disclosures must be posted on automated teller machines as a candidate for elimination. The Bureau provided technical assistance to 

Congress on this issue, which took corrective action. 

Additionally, the Bureau identified certain requirements regarding the delivery of annual privacy notices under the Gramm-LeachBliley Act as potentially redundant. Last fall, the Bureau finalized 

a rule to allow banks and non-bank financial institutions, under 

certain conditions, to post privacy notices online instead of having 

to mail them to consumers, resulting in a potential savings to the 

industry of $17 million annually. 

The Bureau likewise has been sensitive to regulatory burdens in 

the rules we have adopted. As directed by Congress in the DoddFrank Act, the Bureau issued a series of mortgage rules, the majority of which took effect in January of 2014. 

Those rules were designed to address a variety of practices that 

contributed to the mortgage crisis and ensuing financial meltdown. 

As part of the work to reform the mortgage market, the Bureau developed a set of special provisions to provide small creditors, mostly 

community banks and credit unions, greater leeway to originate 

Qualified Mortgages (QMs). 

For example, we provided a 2-year transition period, during 

which balloon loans made by small creditors and held in portfolio 

can generally be treated as QMs regardless of where the loans are 

originated. 

We also provided that after that period, balloon loans originated 

by small creditors that predominantly serve rural or underserved 

areas would be treated as QMs. We then committed to a thorough 

review of whether our definitions of ‘‘rural or underserved’’ and 

‘‘small creditor’’ could be better calibrated. 

After undertaking considerable analysis, the Bureau recently 

proposed to expand the definition of ‘‘small creditor’’ by adjusting 

the origination limit to encourage more lending by these small local 

institutions. We also proposed to expand the definition of ‘‘rural 

area’’ to address access to credit concerns. 

To further address compliance costs, the Bureau has developed 

a unique regulatory implementation program. For example, ConVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
14 

gress directed the Bureau to combine the required mortgage disclosure forms under the Real Estate Settlement Procedures Act 

(RESPA) and the Truth in Lending Act (TILA). 

Since our integrated disclosure rule was first issued in November 

2013, the Bureau has engaged directly and intensively with financial institutions and vendors, including efforts focused on the needs 

of smaller institutions. 

We expect to continue working with these stakeholders to answer 

questions and evaluate feedback as the integrated disclosure rule 

is implemented. 

In closing, the premise at the heart of our mission is that consumers deserve to be treated fairly in the financial marketplace. A 

deep and thorough understanding of the marketplace is essential 

to accomplish the Bureau’s mission and ensure the stability of the 

financial system and our economy as a whole. 

Thank you for the opportunity to testify. I look forward to your 

questions. 

[The prepared statement of Associate Director Silberman can be 

found on page 165 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Silberman. 

And, Mr. Cooper, you are now recognized for 5 minutes. 

STATEMENT OF CHARLES G. COOPER, BANKING COMMISSIONER, TEXAS DEPARTMENT OF BANKING, ON BEHALF OF 

THE CONFERENCE OF STATE BANK SUPERVISORS (CSBS) 

Mr. COOPER. Chairman Neugebauer, Ranking Member Clay, and 

distinguished members of the subcommittee, my name is Charles 

Cooper. I am the commissioner of the Texas Department of Banking and also serve as vice chairman of the Conference of State 

Bank Supervisors. 

It is my pleasure to testify here today on behalf of CSBS on this 

most important topic. 

I have more than 45 years in the financial services industry, both 

as a banker and as a State and Federal regulator. 

Over these many years, few things have become more evident 

than the value of community banks. They are vital to the economy, 

job creation, and financial stability. 

I have also seen many swings of the regulatory pendulum. Extreme swings to either side are wrong. Regulators must constantly 

improve the way we conduct supervision to ensure a balanced approach. 

I would like to point out that the sheer volume of regulation 

confounds the best of our banks, and these regulations keep on 

coming. This emphasizes the importance of the ongoing EGRPRA 

review. This process needs to receive the priority treatment of everyone. 

Many times, it is not the law or the regulation itself that creates 

the excessive regulatory burden, but the interpretation and supervisory techniques utilized. One-size-fits-all supervision that has unintended negative consequences should be curtailed. Being a bank 

examiner is a tough job. It requires education and experience. It 

also requires sound judgment. 

15 

I have generally found that field examiners in local offices do an 

extraordinary job. The process begins to break down when the decisions are made from afar. 

As State regulators, we have found that community banks cannot 

be defined by simple line drawing based on asset thresholds. While 

asset size is relevant, there are other factors such as market area, 

funding sources, and relationship lending. We need a process that 

utilizes these factors and provides flexibility in how they are 

weighed and considered. 

CSBS commends Congress for passing a law requiring that at 

least one member of the Federal Reserve Board have experience as 

a supervisor of community banks or as a community banker. 

We also support H.R. 1601, which reaffirms the existing legal requirement that the FDIC Board include an individual with State 

regulatory experience. 

A seat at the table will not automatically result in a right-sized 

regulatory framework. We must also understand the state of community banking. This is why CSBS partnered with the Federal Reserve to attract new research on community banking. This will help 

us develop a system of supervision that provides for a strong, enduring future for the dual banking system. 

In addition to banks, State regulators regulate other financial 

services industries. Effective supervision of our diverse financial 

system requires effective regulatory tools. To help accomplish this, 

State regulators developed the Nationwide Multistate Licensing 

System Registry, or NMLS. 

CSBS commends the House for unanimously passing H.R. 1480, 

which supports State regulators’ expanded use of NMLS as a licensing system. We are also working with Congress to enable 

NMLS to process background checks for other non-mortgage licensees in the same efficient manner they are processed for mortgage 

providers. 

Today, there are 6,423 banks. As you know, that number decreases daily. State bank regulators have chartered and now regulate more than 75 percent of these banks. Regardless of the charter 

or agency, we are all in this together. We are stewards of the entire 

financial services ecosystem. We must ensure that sound judgment 

and appropriate flexibility are central to our supervisory approach. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

[The prepared statement of Commissioner Cooper can be found 

on page 76 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Cooper. 

I want to give this panel an ‘‘A’’ because every one of you stayed 

within your 5-minute time allocation. 

And I want that to be an example for my colleagues. We have 

great participation today, and what I would really like to do is get 

through, at least for every Member to ask a question. So if you get 

to the end of your time and you ask a very long question, you are 

going to have to get that answered in writing, because I am going 

to be fairly efficient about making sure everybody stays within the 

5-minute timeline. 

I am now going to recognize myself for 5 minutes for questions. 

16 

Mr. Bland, first of all, I would like to thank the OCC for being 

one of the first agencies to put forth some legislative proposals to 

help bring some regulatory relief for our community financial institutions. 

So, let’s talk about your EGRPRA process. Which of the DoddFrank rules are currently a part of that process that you are reviewing? 

Mr. BLAND. Chairman Neugebauer, when we initially started the 

EGRPRA process, Dodd-Frank wasn’t part of the review. This 

month we have agreed, going forward, that those rules that have 

been implemented will be subject to the future EGRPRA hearings 

and the comment periods. 

Chairman NEUGEBAUER. Can you give an example of maybe one 

of those that you might be looking at? 

Mr. BLAND. I look at the stress test process we put in for institutions. That is one that will be subject to review. 

Chairman NEUGEBAUER. I am glad to hear that because I think 

that is an important part of it. And I hope your other colleagues 

will be doing the same. 

Mr. Fazio, the NCUA’s risk-based capital rule has been one of 

the most commented-upon proposals in the agency’s history. You 

are wrapping up, I guess, what is the second window of the proposed rule. One of the NCUA Board members has questioned the 

rule’s legality. 

Do you have confidence that the NCUA is getting this move to 

risk-based capital structure right? 

Mr. FAZIO. I do, Mr. Chairman. We spent a lot of time with the 

second proposal, looking at comments we received on the first proposal, doing additional research, and consultation with various parties. 

In addition to looking at the policy matters, the risk weights and 

so forth, we spent a lot of extra time and research on the legal matters as well. 

Our general counsel, as well as some independent external counsels that we used, are confident that what we are proposing is 

within the NCUA’s Board’s authority to propose. 

Chairman NEUGEBAUER. One of the concerns that I have heard 

about the new capital system is it requires under a new capital 

structure, and particularly, I am concerned about the capital cushions and a practice where credit unions were required to hold more 

than regulatory mandates would go up dramatically. 

Can you address the amount of new capital that may be required 

in the practice of capital cushions? 

Mr. FAZIO. The concept of a capital cushion is not really a direct 

function of the rule itself. It is a choice that credit unions make 

when they are seeking to hold a cushion, if you will, or a buffer 

above what the minimum that is required by the regulation specifies. 

We have done a great deal of analysis on levels of capital credit 

unions would have to hold to be in compliance, but I would first 

point out that three-quarters of all credit unions are exempt under 

this second proposal from this rule. So it only affects credit unions 

that are over $100 million in assets, which is one quarter or one 

out of every four credit unions, about 1,400 institutions. 

17 

Of those, only 29 would see a decline in their capital levels below 

well-capitalized. For those 29 credit unions, if they were to solve 

their capital deficiency through just adding capital to the numerator of that equation, it would be roughly $53 million in extra capital. 

So it is a relatively modest impact on those credit unions and 

their operations. Those 29 credit unions, for context, hold $13 billion in assets. So it is a relatively modest impact currently. 

But it is effective in picking up outliers, making sure that credit 

unions that have too much risk relative to their capital levels to 

absorb that risk are identified properly and incentivized to hold appropriate capital levels. 

Chairman NEUGEBAUER. Thank you. 

Mr. Cooper, it is my understanding that the States have considerable authority to regulate and to enforce the law when it comes 

to short-term, small-dollar, credit or payday loans. 

Can you describe the authority that States have to regulate these 

products? 

Mr. COOPER. Mr. Chairman, first of all the banking department 

does not directly regulate this industry. One of our sister agencies 

does. 

But generally speaking, the State authority obviously is predicated on State law and it is—one of the things it is directed to do 

is to make sure that they are operating legally, legally licensed, operating within their license, and also that disclosure to the customer is most important. 

Chairman NEUGEBAUER. Just quickly, Mr. Silberman, you have 

both research and regulations. Can you identify a State that lacks 

sufficient authority to regulate these products? 

Mr. SILBERMAN. I see time is up, Mr. Chairman. Do you want me 

to answer? 

Chairman NEUGEBAUER. Yes, quickly. 

Mr. SILBERMAN. We have not thought about a State that doesn’t 

have authority. Many of the States that have State regulators have 

talked to us about problems they have with respect to Internet payday lending and lending that is done through tribal entities that 

are outside their jurisdiction. So there are some gaps in States’ 

ability to regulate. 

But beyond that, our mission is to enforce Federal law, consumer 

protection law, which establishes a floor for consumers throughout 

the United States. 

Chairman NEUGEBAUER. I thank the gentleman. And I now recognize the ranking member, Mr. Clay from Missouri, for 5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. 

This is a panel-wide question: All of you identified ongoing internal and external reviews of existing rules. How can smaller regulated entities engage regulators in expressing their specific concerns about particular rules, supervisory policies or enforcement action? What are the access points for smaller regulated entities 

seeking to inform your agency’s policies, such as, do your agencies 

have liaisons and ombudsmen that specifically address the concerns of smaller entities? 

Let’s start with Ms. Eberley. 

18 

Ms. EBERLEY. We do have an ombudsman, but to the EGRPRA 

process, we have established a Web page on the Federal Financial 

Institutions Examination Council (FFIEC) Web site that hosts all 

of the information about the EGRPRA process. 

So each of the Federal Register notices seeking comment on rules 

is there. Institutions can submit a comment through the Web site. 

Institutions can watch the public meetings in a live Web cast. And 

it is just all there. 

And we encourage institutions to take a look at that and actively 

participate. We do find it most helpful when institutions give us 

specific information about how rules are impacting them. 

Mr. CLAY. Thank you. 

Ms. Hunter? 

Ms. HUNTER. I would only add that we do take the EGRPRA 

process very seriously. Any institution, really, any one in the public 

can comment on rules and regulations through that process. 

I would also encourage bankers to attend the sessions. We have 

one coming up in May in Boston, on May 4th. And all of the information about registering for those sessions is on the Web site that 

Ms. Eberley referenced. 

Mr. CLAY. Thank you. 

Mr. Bland? 

Mr. BLAND. Ranking Member Clay, in addition to EGRPRA, I 

would talk about a few other things. 

Through our examiners, we have dedicated examiners for each 

institution. And so, in addition to the exam process, they are available to institutions throughout the year to be available to field 

questions. Supporting that examiner are a number of subject matter experts that we make available to bankers to help them work 

through these issues and concerns. 

We have a very robust outreach program where we bring together bankers to talk about issues of concern and guidance. We 

put out periodic issuances to them explaining the information that 

is most useful to them. 

In addition, we also have a mutual advisory committee that 

meets regularly so we can discuss their concerns. We also have a 

minority depository advisory committee where we get to hear 

issues and concerns of minority bankers as well. 

We issue quarterly guidance or rules that have come out along 

with quick simple explanations to community banks as well. 

Mr. CLAY. Thank you. 

Mr. Fazio? 

Mr. FAZIO. Thank you. We actually have an office called the Office of Small Credit Union Initiatives, that is specifically dedicated 

to reaching out to smaller credit unions. We do training. We administer grant programs authorized by Congress. 

And so, there is a particular connection to that office. They also 

do a lot of online training in addition to physical town halls. Our 

chairman and the NCUA Board also hold various town hall meetings throughout the year. We do an online call, webinar, interactive 

webinar, with credit unions quarterly as a method of outreach. 

And we also attend various other events that are hosted by the 

credit union trades and leagues, that often have special aspects of 

those events dedicated to small institutions. 

19 

And so, we are actively reaching out to small institutions to hear 

what they have to say about the challenges that they face. 

Mr. CLAY. Thank you. 

Mr. Silberman? 

Mr. SILBERMAN. Thank you. We have a number of vehicles, Congressman Clay. We have established a community bankers advisory committee and a credit union advisory committee, which meet 

regularly to provide us with advice. 

We have established an Office of Financial Institutions and Business Liaison, which is an access point into the Bureau and also out 

from the Bureau. 

Just recently, for example, that office had a conversation with a 

community banker in a committee member’s district as a follow up 

to the Director’s testimony here. 

We also have regular field hearings most months in which we go 

out into different communities. In each field hearing, there is always a community banker or credit union participant. But in addition, we make it a point to have a separate meeting with community bankers in the city which we are in, and a meeting with credit 

union representatives in the city which we are in, so we can hear 

not just people who come to Washington, but we go out to them. 

These are all ways in which we get input. 

Mr. CLAY. Thank you. 

Anything to add, Mr. Cooper? 

Mr. COOPER. In addition, as mentioned, the State regulators in 

CSBS conduct, with the Federal Reserve, an annual community 

bank symposium. This includes town hall meetings with all of our 

banks. 

We put out a survey asking for issues—what are the current 

issues? What are the questions? What do we need to do? And these 

are compiled. Last year, we had over 1,000 banks participate in the 

survey, and the survey is ongoing as we speak right now. 

Mr. CLAY. Thank you so much. My time— 

Mr. PEARCE [presiding]. The gentleman’s time has expired. 

The Chair now recognizes himself for 5 minutes. 

Mr. Silberman, you heard the chairman’s opening remarks about 

the number of community banks that have closed in the last several years. Is that ever a topic of discussion at the CFPB? Do you 

all wonder about that? Do you think it is good or bad? 

Mr. SILBERMAN. Absolutely. The Office of Research, which reports to me regularly, is studying that. We monitor it. We think it 

is a—obviously, a long-term trend, as I am sure you know, that 

goes back at least to the 1980s or 1990s. And it has been continuing, but it is something we would like to—we believe deeply in 

the diversified— 

Mr. PEARCE. You haven’t looked at the impact of your regulations 

on that? 

Mr. SILBERMAN. I’m sorry— 

Mr. PEARCE. Do you ever look at the impact of the regulations 

coming out of your agency on that? 

Mr. SILBERMAN. Yes, certainly, that is something we will be carefully looking at as— 

Mr. PEARCE. Are you ever critical of the processes that you have 

set up? 

20 

Mr. SILBERMAN. We—I didn’t— 

Mr. PEARCE. You don’t ever find any fault inside the agency? It 

is mostly just this long-term trend you are describing? 

Mr. SILBERMAN. No, Congressman, I said that we are carefully 

studying this. It is very early to know the effect of the rules. Most 

of them have been in effect for a little over a year. 

Mr. PEARCE. It is not very early for the people out there. They 

can tell me almost by the minute. So you never listen to those comments? You don’t ever take those comments and say, ‘‘Well, those 

guys are just stretching it’’ or ‘‘They are correct?’’ I don’t know— 

do you ever evaluate that kind of thing? 

Mr. SILBERMAN. We are doing that on a continuous basis. 

Mr. PEARCE. Okay. I just didn’t get that idea when you said it 

is too early to assess. Because they know the assessment very 

early. 

Ms. Hunter, in your testimony, on page 9, you talk about the 

compliance reviews. When you send your examiners out, do they 

spend the time on compliance or safety and soundness? Which gets 

the greater attention? 

Ms. HUNTER. We actually have a dedicated staff for consumer 

compliance examination, so they are specialists who have expertise— 

Mr. PEARCE. Which gets greater attention? If you are given a certain time in the bank, which gets greater attention? 

Ms. HUNTER. If we look at the amount of time that they spend 

on the exams, the safety and soundness time on examinations 

would outweigh the— 

Mr. PEARCE. Is that what the— 

Ms. HUNTER. —time dedicated to— 

Mr. PEARCE. — do you get that confirmation from the banks? 

Ms. HUNTER. We— 

Mr. PEARCE. Because the banks tell me—the banking industry in 

New Mexico is not that large, so we don’t spend a large amount 

of our time. But every time I gather them, they say the safety and 

soundness is this much, and now compliance is this much. That is 

the reason that many of the lenders have gotten out of the real estate market. 

They tell me that if they misplace a comma now, they could be facing a $10,000 fine or a $50,000 fine. They said it used to be that 

they would take care of it. The examiner would bring it to them 

and say, ‘‘You need to put a comma in here.’’ And now, they say 

for a $50,000 fine, that is more than what they will make on a 

$30,000 loan for a house. Do you ever get those kind of comments? 

Or do they just kind of pick at me while I am out there and—a 

friendly audience sort of deal? 

Ms. HUNTER. We do get regular feedback about the examination 

process. 

Mr. PEARCE. But have you ever heard that exact thing? 

Ms. HUNTER. I haven’t heard about those comments, but I would 

say— 

Mr. PEARCE. I will tell you what—if you give me your home 

phone number, I will put them in touch with you. It is— 

Ms. HUNTER. I would welcome having an opportunity to talk to 

anyone who had an issue raised about that. 

21 

Mr. PEARCE. I hear it pretty frequently. I will start referring 

them to you since it doesn’t seem to be anything that maybe has 

come up. 

You say that something you want to do is encourage the flow of 

credit to consumers. Now, with the number of community banks 

closing—and they regularly tell me that we just can’t keep up with 

the regulations—so I would suspect all of you would have that as 

an outcome that you would like to have. 

So, almost the same question that I asked Mr. Silberman, do you 

sit as an agency and say, ‘‘Hey, we are starting to restrict the flow 

of access of capital to the small rural markets?’’ Is that a concern 

to you all? Because I guarantee it, nobody from New York City is 

going to come out and make loans on trailer houses in the 2nd District of New Mexico. So when those small places shut down, they 

are shut down. 

Ms. HUNTER. We are very concerned about flow of credit and access to credit in any community or to populations or groups who 

might be underserved. And there is a direct connection between the 

access to financial services with that. That is certainly something 

I have seen in my own experience as a community bank examiner. 

So when we hear from bankers—and we do— 

Mr. PEARCE. Okay, so— 

Ms. HUNTER. —we hear the same things. We hear— 

Mr. PEARCE. —let me bring up—I only have 27 seconds left, and 

the chairman is not as forgiving to me as he is to himself, so—the 

CFPB has rules on rural. And they put Deming, New Mexico, 

which has about one person per 10 square miles in the same category as New York City. Did you all send communications to them 

saying, ‘‘We are alarmed because you are restricting flow out in 

those rural areas that you have described as urban, and they are 

not really urban?’’ Did you all send a communication like that? 

Ms. HUNTER. To be honest, I don’t know 100 percent exactly— 

Mr. PEARCE. Could you check that out for me? 

Ms. HUNTER. —communication. I would be happy to get back to 

you— 

Mr. PEARCE. I would like to see a written trail— 

Ms. HUNTER. —with information about it. 

Mr. PEARCE. —if you are really concerned about that. 

Ms. HUNTER. Yes. 

Mr. PEARCE. Okay, thanks. The chairman’s time has expired. 

And we go next to Mr. Hinojosa from Texas. 

Mr. HINOJOSA. Thank you. 

I want to thank both of you for holding this hearing this morning. And I would like to thank the distinguished panel members for 

sharing their insights. 

It seems to me that the proper regulation and supervision of our 

banks requires a balancing act to ensure both the stability of our 

financial system and that of banks, like our community banks, 

which did not cause the financial crisis, but are unduly burdened 

by regulation. 

I am going to ask my first question to Toney Bland, as well as 

Doreen Eberley and Maryann Hunter. 

Each of your agencies has expended a lot of time and resources 

in developing targeted regulatory relief for community banks. How 

22 

are asset thresholds helpful or harmful in: one, ensuring the safety 

and soundness of our community banks; and two, providing flexibility in the regulatory framework so as to not unduly burden community banks? 

Mr. BLAND. Representative Hinojosa, the asset thresholds are 

merely an indicator for a cluster of institutions that may have similar characteristics. For example, 80 percent of the institutions that 

we supervise are less than $1 billion in assets. And so when you 

look at that grouping of banks, you see some characteristics in 

terms of they are locally owned, locally operated. But that is just 

the beginning. You also have to look and see what their market 

place is like, what is the complexity of their operations, what type 

of staff they have, the ability of the staff, the size of the staff, and 

the operations of the institution. Are they pretty much brick and 

mortar, or are they involved in Internet-type activities? 

So, the thresholds are a pointer. Where it gets challenging, 

though, is when that becomes the only reference to what a bank 

can or cannot do just based on size. That is where the issue comes 

in. So we would be wary of rules that would limit the flexibility 

and that would be counter to safety and soundness or consumer 

protection safeguards. 

Mr. HINOJOSA. Thank you. 

Ms. Eberley? 

Ms. EBERLEY. Thank you. I would agree. We use a definition for 

community banks that is focused on the characteristics of the institution, so— 

Mr. HINOJOSA. Could you speak up a little bit louder, please? 

Ms. EBERLEY. Yes, certainly. We use a definition of community 

banks that is focused on the characteristics of the institution, so, 

similar to what Mr. Bland said. Local relationships, core deposit 

funded, a relatively small geographic area so that they are actually 

dealing with their customers face to face. They know their customers. 

For us, that is 94 percent of institutions under $10 billion meet 

that definition and have those characteristics. It is harder to define 

that with an asset threshold. It is easier with the characteristics 

of the institution and the way that it operates. 

I want to pick up on one thing that Mr. Bland said, which is 

flexibility. Where statutes have bright lines thresholds, it makes it 

a little bit more difficult for us to exercise flexibility. One example 

of that would be with stress testing. And so, we don’t have a lot 

of discretion in how we apply the rules with the asset thresholds 

that are set. 

Mr. HINOJOSA. Ms. Hunter? 

Ms. HUNTER. Yes, I would agree. We also determine a definition 

of community banks. We do have a threshold of $10 billion. It is 

really more for the convenience of being able to identify the population of banks that fall into a certain group and how we manage 

our examination programs. 

I will say that the vast majority of community banks are actually under $1 billion in assets. So in some sense, the $10 billion threshold is not where our primary focus is. 

I do agree that hard line thresholds do limit flexibility. Yet, at 

the same time, it also can be difficult. Whenever you draw a line 

23 

and say a certain bank fits a certain category or doesn’t, there is 

a lot of argument back and forth about who is right on the line in 

going over on the other side. So having a clear definition does help 

a little bit in just adding clarity to the group of banks and understanding where that line is drawn. 

I would like to add one other comment, and that is, we have examiners in each of our 12 Reserve Banks, as the other agencies 

have them local. They understand these banks. And that is part of 

the local knowledge that the examination teams have about those 

institutions, their risks, their business model, their strategies, and 

the strength of their management teams. And so we do incorporate 

that into how we think about, how we supervise individual institutions. 

Mr. HINOJOSA. My time has expired. I wish I had more time to 

ask some other questions. 

With that, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the gentleman from Oklahoma, Mr. Lucas, is recognized for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. 

I represent an area that relies heavily on community financial 

institutions, and they are very critical to our economic success, 

both in the district and the State. And I have been very focused 

with them on the regulatory relief that I think they desperately 

and rightly deserve. 

And it seems like in a committee where we may not necessarily 

agree on a whole lot of things, I believe there is the potential 

amongst this group to come up with a way to provide some relief 

to those community banks. 

Now, the key, of course, is how do you achieve a definition—a 

consensus on what a definition would be. 

So I would like to follow on my good colleague from across the 

line in the great State of Texas’s logic, and let’s continue this discussion. Because right now, the way the system is working, my 

community banks are telling me that it is not working. I appreciate 

the flexibility that the Fed and the Comptroller and the FDIC have 

discussed today, but you are taking a very small screwdriver and 

you are making minor adjustments in a very complicated set of machinery. 

My constituents believe that relief has to come if, as an industry, 

they are going to survive. 

So, let’s go back a little more into this definition concept. You 

have general definitions that have been alluded to—anything from 

$10 billion to a billion dollars; some quantitative qualities in some 

of your definitions. But let’s talk for a moment. How do we come 

up with a definition that actually provides relief out there? Some 

of my folks believe it should be a dollar amount because they think 

that just as that adjustment can help, so those minor adjustments 

can hurt. 

I appreciate the point made by Commissioner Cooper about the 

quantitative issues, but let’s talk about that. How do we come up 

with a definition that provides some real relief to these community 

banks that we all know exist? How do we define those, ladies and 

gentlemen? 

24 

And I ask my friends at the Comptroller’s office and my friends 

at the Fed and my friends at the FDIC your opinion. From my perspective, going $10 billion and then giving you quantitative adjustments makes sense. But from your perspective? 

Mr. BLAND. I will start, Representative Lucas. 

Mr. LUCAS. Please. 

Mr. BLAND. I am out a lot. A big part of my job is talking to community bankers about the burdens that they face. This is a topic 

that comes up quite a bit. And it is not as simple as what a bank’s 

size is because you also have to consider the business model. This 

is at the essence here, I think, for community banks, is what is the 

right business model, and to have the flexibility to exercise what 

is a good business model. 

And the concern is when asset size is a condition of what you can 

or cannot do, that can have limitations when you are looking at innovation in the industry. And so, my point on flexibility earlier was 

that you have to allow for innovation. 

Typically when there is a size, there are also conditions on what 

that size can do. And I think that is what is happening in the industry today. We have to be open to the changes that are happening in the bank and the non-bank space to allow for that innovation and growth to occur. 

Ms. EBERLEY. I would echo that. And that was the point I was 

trying to make in my last answer, that having a strict asset threshold without having any flexibility around that makes it difficult. It 

limits our ability to exercise discretion on a risk-based basis, which 

is how we approach our supervision. 

So we look at the risk of an individual institution before we start 

an examination. There is pre-exam planning that looks at what is 

the institution engaged in. The examination activities are focused 

on the activities of the institution, as opposed to a one-size-fits-all. 

Mr. LUCAS. But it almost appears in the way the rules work 

right now, by the general definitions of all three organizations, if 

your institution is $11 billion, but in every other way meets a definition that—whatever that consensus might be that it is a community bank, they are still snagged in everything. They are trapped. 

My perspective is I believe in giving you the flexibility, yes, to 

do what you need, but when a community bank still gets caught— 

a dollar, a billion dollars, whatever—over the limit, then they are 

snagged. Those are the kind of issues I think that we are trying 

to work our way through. 

Mr. Cooper, for just a moment, the only person quoted almost as 

often in this committee as Phil Gramm is former Fed Chairman 

Volcker. And recently, he came up with a concept about how to dramatically redo regulation. Could you expand for a moment, from a 

State regulator’s perspective, about this concept of dramatically 

changing how we do our regulatory regime? 

Mr. COOPER. Congressman Lucas, first let me say that the 

Volcker proposal is still—we are evaluating it as we speak. We had 

a couple of takeaways we came away with recently. 

We are here talking about what to do about regulatory burden, 

and we don’t think that proposal necessarily helps us in that regard. Up-ending the system we have creates problems in and of 

itself. It creates a new monolithic regulator, and we believe that 

25 

could possibly move us toward more of one-size-fits-all rather than 

less. And also it gives the Federal Reserve, whom we do support 

in bank supervision, quite a bit of authority that we feel like may 

be too much for one individual agency. 

Mr. LUCAS. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Georgia, Mr. Scott, is recognized 

for 5 minutes. 

Mr. SCOTT. Thank you very much. 

This is a very interesting hearing, very helpful. 

I want to start off where Mr. Lucas and Mr. Hinojosa left off, because I think that is a problem. And you can’t really solve a problem until you define it. We have community banks. We have regional banks. Then we have too-big-to-fail banks. 

In other words, we have these titles, but we don’t have the definition? You don’t define—you can’t get your hands around the problem if you don’t adequately define it. And do you define it by size 

or complexity? 

Now, I think that was a part of the root of the problem that we 

had in Georgia. As many of you know, Georgia led the Nation in 

bank closures. And my good friend from Georgia, Mr. Lynn Westmoreland and I, pulled together a big event down in Georgia where 

we brought the Federal Reserve, and I think some of you all know 

about that. We brought in the FDIC, the OCC, and all of the bank 

examiners to find out why in the world—what happened that my 

State of Georgia led the Nation in bank closings over 4 or 5 years 

during the mortgage breakdown. 

Are you all familiar with that? 

I want to know what happened there. Lynn and I consistently 

complained that we have not gotten reports on it. So I want to 

know if you all can respond to that now, if you are familiar with 

it perhaps. But your bank regulators were there. 

Now, part of the problem was indeed that our Georgia banks, as 

many banks did, did overleverage in their portfolios in terms of 

real estate and mortgages, as did the whole country, as did the 

whole industry. But something strange happened down there. And 

we discovered that when you all came down there, and we had the 

big hearing. 

Lynn and I together cover about 25 or 26 different counties. And 

in these areas, it is the community banks that are the lifeblood of 

those communities. So unless we define community banks, unless 

we can come up with those reasons, we really are not getting our 

hands around it. 

So I just want to say, do any of you have any comments? Are you 

familiar with that report? What happened? I would like to know 

what the impact was. 

Our banks were saying the bank examiners didn’t give them 

time. They weren’t aware. They were overregulated. They didn’t 

understand the complexity of the rules. So there was some blame 

put at the feet of the FDIC, the Office of the Comptroller of the 

Currency, and the Federal Reserve as to what happened. 

Are you all familiar with what happened in Georgia? 

Ms. EBERLEY. Yes. I will start. One of the problems with the financial institutions in Georgia is that as a group they were heavily 

26 

concentrated in acquisition, development, and construction lending. 

When the real estate market took a turn and mortgages and property values dropped dramatically, projects that were midstream became difficult to finish because there was nobody to buy the finished product. The values had dropped. And that kind of concentration and saturation in a very tight market of that kind of product 

in that kind of market environment is largely what caused the 

problem. 

Mr. SCOTT. All right. I would just like to ask—I know we have 

a representative of the Federal Reserve here and we have a representative of the FDIC and we have a representative of the Office 

of the Comptroller of the Currency. 

I am sure both my colleague Lynn Westmoreland and I would 

love to get that report as to what is going on there. As I said before, the community banks are the life blood there. They are sort 

of in the middle. 

So Mr. Bland, I want to go back to you. How would you define 

right now, if somebody had to ask you right now, in the 25 seconds 

I have left, what is a community bank, what would you say? 

Mr. BLAND. My first response would be that community banks 

tend to be locally owned and locally operated. But I will go back 

to what I said before about where we stand in this industry today 

and looking forward with the innovation that is happening in 

there. They can also be characterized by the scale and the type of 

products that they offer. But to your point about how we would approach it, I think it is important to look at our supervisory process. 

At the OCC, we have a separate community bank program that I 

oversee. And so our primary focus for the people who report to me 

is on community banks. 

We look at those institutions separate and apart from the large 

banks. This also guides our approaches to our policies and our procedures. And for each institution, we take a customized view of 

what we need to do there, so we have a supervisory strategy that 

is focused on each individual institution. 

Mr. SCOTT. Thank you very much. 

Mr. Chairman, I would just like to say that it might be helpful 

for the full committee—it was a very good hearing down there. If 

we would ask the OCC, the Federal Reserve, and the FDIC if they 

would get that report in their findings, conclusions, and recommendations of what they did in Georgia at our hearing, I would 

appreciate it. 

Chairman NEUGEBAUER. I think that message, hopefully, has 

been delivered today, Mr. Scott. 

Mr. SCOTT. All right. Thank you. 

Chairman NEUGEBAUER. I now turn to the gentleman from North 

Carolina, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Silberman, how is a Consumer Financial Protection Bureau 

funded? 

Mr. SILBERMAN. Under the statute, we receive a percentage of 

the revenue of the Federal Reserve System. 

Mr. PITTENGER. Yes, sir. So you are not funded through the 

budget. When you need money, you call the Fed and they send you 

a check. Is that it? 

27 

Mr. SILBERMAN. There is a certain cap. But up to the cap, we 

have a claim on money from the Federal Reserve. 

Mr. PITTENGER. Yes, sir. How much is that cap annually? 

Mr. SILBERMAN. I would have to get back to you. I’m sorry. That 

is not my area of expertise. 

Mr. PITTENGER. About maybe $600 million— 

Mr. SILBERMAN. I was going to say $500 million, $550 million but 

I am not— 

Mr. PITTENGER. $650 million— 

Mr. SILBERMAN. But I think we should get back to you. But I 

would—if I had to—it would be $550 million, but I am not sure 

that is right. 

Mr. PITTENGER. Okay. Thank you for that. You stated that you 

would like to see reform in the system. You are responsive to businesses, you are responsive to banking stress systems that are out 

there with—that do not allow the access of capital in the market. 

Is that correct? 

Mr. SILBERMAN. Our focus is on consumer protection, not on safety and soundness. But certainly, those are two sides of the same 

coin. 

Mr. PITTENGER. Yes, they are. We passed a bill yesterday that 

would establish an advisory board for small businesses and allow 

that board to have a voice. Now you mention that you do go out 

in the market and you talk to people and you are listening. But 

there is no requirement for the credit unions, for you to meet with 

them or you can voluntarily, if you so choose. And of course, there 

isn’t a position to this point on the CFPB for the voice of small 

business and that was the interest of this bill yesterday. 

There was a cost that was set up for this board that was about 

$100,000 a year—a pretty nominal amount of money, I think, for 

having the necessary input from this important element. We are in 

an economy right now that is struggling. It is going to 2.2 percent. 

We have 20 million people who are underemployed or unemployed. 

And you now, much needs to be done to get us to the desired objective. And certainly, as we have all heard today, community banks, 

smaller banks, and institutions of all sizes are important to help 

us address economic growth and the access to capital. Do you think 

it is a viable concern that we have a voice from the business community on the CFPB? 

Mr. SILBERMAN. Congressman, the Bureau tries not to comment 

on pending legislation. And so really, all I can say on that is that 

we have been very careful to make sure that we have, as I indicated a Community Bank Advisory Committee, a Credit Union Advisory Committee, an Office of Financial Institutions and Business 

Liaison. We have a Consumer Advisory Board, which is a very diverse— 

Mr. PITTENGER. But you don’t have one that is specifically related to the input of business. Do you believe that this amount of 

$9 million over the course of 10 years is really negligible, as it relates to the ability for CFPB to draw down $670 billion a year? A 

sizable amount of money has been spent just on your renovation, 

so far, $200 million for waterfalls and glass staircases—more, I am 

told, than any hotel in Las Vegas. 

28 

This is an important element. But just in terms of the dollar ratios, do you think this is really just a negligible amount of money 

that really shouldn’t be of consideration? 

Mr. SILBERMAN. Congressman, as I said, we try not to comment 

on pending legislation. And certainly, that question will be better 

directed to the folks who are responsible for our finances than to 

me. 

Mr. PITTENGER. Thank you for your input on that. 

Ms. Eberley, I have had a number of comments from smaller 

banks in my region and I would just like to read you one very, very 

quickly. Here is one bank with less than $50 million in assets and 

10 employees. They come in, they want 3 to 4 weeks advance to 

tell us the materials to forward to them. When we get started, they 

are on-site. The daily work that they put in is 8 to 10 examiners 

are there. They take 2 to 3 weeks. These are institutions with less than $50 million. They said if 

any corrections are to be done, it takes several weeks or months 

to do this. And they said that they are spending a larger and larger 

amount of their time on compliance, and they can’t meet the needs 

of their customers. 

Is that a concern to you? 

Chairman NEUGEBAUER. I am going to ask Ms. Eberley to respond to that question in writing because I think it is a more complex answer. 

And I will now go to the gentlewoman from New York, Mrs. 

Maloney, for 5 minutes. 

Mrs. MALONEY. Thank you, Mr. Chairman, Mr. Ranking Member, and all of the participants today. 

Mr. Bland, I would like to ask you about the OCC’s liquidity 

rule, and specifically about the treatment of municipal bonds in the 

so-called ‘‘liquidity buffer’’ that banks hold. As a former member of 

a city council, I know firsthand the importance of municipal bonds. 

They allow States and cities to finance infrastructure, build 

schools, and pave roads. They are incredibly important to city governments. 

Unfortunately, in the liquidity rule, the OCC chose to include 

some corporate bonds in the liquidity buffer, but completely excluded municipal bonds. The OCC established liquidity metrics for 

corporate bonds so that if a corporate bond meets all the metrics, 

then it can be included in the liquidity buffer. But for some reason, 

the exact same deal was not extended to municipal bonds. 

Now, it is my understanding that the Fed has already recognized 

this inconsistency and is working on a proposal to establish liquidity metrics for municipal bonds. But the OCC is still refusing to 

consider giving relief to even the most liquid municipal bonds. So 

my question, Mr. Bland—I would like you to consider two identical 

bonds, same size, same maturity, same everything. Both bonds are 

liquid enough to satisfy all of the liquidity metrics in the OCC’s 

rule, but one bond was issued by a corporation and one was issued 

by a local government. 

Under the OCC’s rule, the corporate bond would be considered a 

high quality liquid asset. But the municipal bond wouldn’t, even 

though they have the same exact liquidity. So, my question to you, 

Mr. Bland, is, do you think that is a fair outcome? 

29 

Mr. BLAND. Representative Maloney, first let me say we support 

institutions having a diversified portfolio of investments, including 

municipal securities. And it is important for banks to participate 

in the investment in municipalities for the purpose they serve—the 

support to local and State municipalities. 

The question you raise pertains to the liquidity coverage ratio, 

which our largest institutions are subject to, and not our community banks. The rule addresses asset classes, and does not look at 

individual issuances. And so as an asset class, our experience and 

the data we have suggests that when stressed, municipal securities 

do not have the secondary market that corporate securities would 

have. And so the issue is around the class of assets, not an individual issuance of any kind, but more our experience by looking at 

this category of type of investment. 

Mrs. MALONEY. Okay. I would like to ask Mr. Cooper, and I notice that Texas signed onto a 43-State investigation that wrapped 

up last week which imposed a $5 million fine on New Day Financial, a lender that targets veterans for mortgage loans. And the settlement agreement concluded that New Day violated MLS rules of 

conduct by teaching to the SAFE’s test. 

They had at least 20 employees take the SAFE Act course on behalf of others. This was a complete lie, and including the CEO and 

COO, and lied to investigators about their knowledge of these actions, all in connection with New Day providing SAFE Act courses 

in-house to their own employees. 

And I have been warning about this practice of in-house SAFE 

Act courses for years. I have written many organizations about how 

it is a conflict of interest, and others on this committee, including 

Ranking Member Clay, have also warned the CSBS about this 

practice, but CSBS hasn’t done anything so far about this. And it 

appears that New Day is allowed to continue to provide these 

SAFE Act courses in-house. 

So Mr. Cooper, my question is, will you commit to having CSBS 

brief me, my staff, and other members of this committee, Mr. Clay 

and others, and anyone who is interested, on this investigation? 

And explain what CSBS is doing in response to what is a big scandal? 

Mr. COOPER. Certainly, Congresswoman. We will do that. I will 

tell you that the announcement of the settlement is a process that 

the States went through through the multi-State mortgage committee that we have in order to try to deal with issues like this. 

We do think it sends a message. But we will certainly look into— 

Mrs. MALONEY. Thank you. I have 4 seconds left, and I wanted 

to ask Ms. Hunter the same thing on the liquidity metrics. Mr. 

Bland, if you could get back to me in writing, I would appreciate 

it. I saw in an article today in The Wall Street Journal that you 

are moving on it. Thank you. 

Chairman NEUGEBAUER. I now recognize the gentleman from 

New Hampshire, Mr. Guinta, for 5 minutes. 

Mr. GUINTA. Thank you, Mr. Chairman. 

I want to thank the panel for your testimony and your willingness to come today. I am going to make a brief statement, and then 

I wanted to ask Ms. Eberley a few questions. 

30 

Community financial institutions have testified multiple times 

before our committee that they have not caused or been the root 

cause of the financial crisis, but that they are being burdened by 

regulatory requirements as if it were the case. 

And that is a concern of mine. New Hampshire is a small State, 

1.3 million people. We have a rather significant community of financial institutions, small lending community financial institutions 

in our State. And I have over the course of the last several years 

had the pleasure of meeting and spending time with many of them. 

And I think they do a great job, whether they are credit unions or 

small community banks. 

But after a lot of the discussions that I have had with CEOs, 

presidents, and executive teams of these institutions, I am actually 

very discouraged and remain discouraged by some of the things 

that I have been hearing relative to the regulatory burdens. This 

is the single issue that I hear about from institutions in New 

Hampshire more than any other issue. 

So, I have brought up in previous committee hearings some examples of these particular challenges. And I was a little surprised 

to hear Richard Cordray be shocked that these small institutions 

were being burdened. So, he was kind enough to have someone in 

his organization call a specific bank president that I had asked 

them to call, Piscataqua Savings Bank. And I will get into the statistics in a minute. 

But Ms. Eberley, I wanted to know from your experience in regulating these institutions, would you say that it is more difficult for 

an institution, a small institution, to comply with the new regulatory mandates than the larger institutions? 

Ms. EBERLEY. In general, it costs more. The cost of complying 

with laws for smaller institutions is spread over a smaller asset 

base, so it costs them more. 

Mr. GUINTA. So the economies of scale— 

Ms. EBERLEY. Right. 

Mr. GUINTA. —is much easier for a larger institution than a 

smaller institution? 

Ms. EBERLEY. Yes. 

Do you think that the number of regulatory changes negatively 

affected a community financial institution’s ability to offer products 

and services to the consumer? 

Ms. EBERLEY. I don’t think so. I think we are seeing community 

institutions offer a wide variety of products. And I would just note 

that New Hampshire is home to the latest application for deposit 

insurance, approved by the FDIC in March. 

Mr. GUINTA. How many have there been in the last 5 years in 

our country? 

Ms. EBERLEY. I can’t go back 5 years, I apologize, but we had the 

bank in New Hampshire in March of this year. The prior one was 

an institution in Pennsylvania in 2012. Those are the two since— 

Mr. GUINTA. So it is less than 5 in the last 5 years? 

Ms. EBERLEY. —the crisis, the end of the crisis. 

Mr. GUINTA. Would it be fair to say it is less than five in the last 

5 years? New institutions— 

Ms. EBERLEY. I would have to go back to 2010, I apologize. 

31 

Mr. GUINTA. I would submit that I think it is probably less than 

5 new institutions in the entire United States over the last 5 years. 

And that is a concern of mine. I am very proud of the fact that 

we have a new institution in New Hampshire. It is going to be a 

primary bank, a great institution. And I am very proud that it is 

in New Hampshire. 

What I am very concerned about is that there are only a few in 

the entire country. And the entire market is actually shrinking. 

That brings me back to your testimony—93 percent of all banks 

in the United States are defined as community banks, and your 

testimony says that they hold just 13 percent of bank assets, yet 

45 percent of the small loans to businesses come from those institutions. 

So it concerns me greatly when I look at Piscataqua Bank in 

Portsmouth, New Hampshire. And let me just read you these numbers. Compliance costs, wages and benefits, $772,000 go toward 

compliance costs. Seminars and webinars, $11,915. Subscriptions, 

$38,747. For a total cost for this one bank for compliance of 

$823,278. That is 22.76 percent of their overall costs. 

So they have FTEs, about 38. For compliance, they have eight. 

That seems rather unfair and unnecessary. Assuming that those 

figures are correct, does that make sense to you, that it is unfair 

and unnecessary. 

Ms. EBERLEY. I would have to evaluate that. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

The gentleman from Massachusetts, Mr. Lynch, is recognized. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I have listened to the debate here, and it has been very, very instructive. We all seem to struggle with this definition of community 

banks that weren’t part of the problem during the crisis in 2008 

and beyond and the banks that needed regulation. 

There is a great article from this past Sunday by Gretchen 

Morgenson, who is a continual source of wisdom on these matters. 

It is entitled, ‘‘Regulatory Relief for Banks That Really Fail.’’ 

And she talks about a proposal by Tom Hoenig, who is a Vice 

Chair over at the FDIC. He has a very simple plan, and it addresses the concerns of the gentlemen from New Mexico and Oklahoma 

and Georgia. 

He comes up with four criteria that, really based on the complexity of the bank, based on the risky behavior that they have, the 

regulatory framework falls more heavily on those, but frees up the 

regulatory framework for banks that—for local community banks 

that don’t engage in risky behavior. 

And, quite simply, I will just tell you what they are. He says that 

banks that hold no trading assets and/or liabilities; banks that 

have no derivatives positions other than plain vanilla interest rate 

swaps or foreign exchange derivatives that get traded up front, 

there is no looming deadline there, no leverage; finally, banks 

whose notional value of all derivative exposure is less than $3 billion; and fourth, banks whose shareholder equity or net worth is 

at least 10 percent of assets. 

Now, when you apply that criteria to commercial banks, out of 

6,500 commercial banks in this country, only 400 are covered under 

the regulations, so 6,100 are exempt, basically. 

32 

Or when you look at the complexity of banks, the great majority 

of the banks that we are talking about are traditional banks. And 

so, he also talks about the relief we could offer them. He talks 

about the fact, Ms. Eberley and Ms. Hunter, that we could stretch 

out the examination period for non-risky banks, community banks, 

from every 12 months to every 18 months, so you are only doing 

2 examinations every 3 years, instead of 3 examinations. 

He talks about the relief under the Basel capital standards. We 

could exempt a whole lot of our banks from that standard. 

He identifies 18 banks with total assets of $10 billion that would 

also qualify. So it is not just small banks, it is big banks that don’t 

do risky things, that would be helped by his proposal as well. 

He also talks abut the fact that in these simple cases for community banks, the FDIC and other regulators could do the stress test 

themselves, rather than requiring our local banks to engage in a 

very costly process. 

And, as far as that 10 percent of net worth to assets, the vast 

majority of our community banks, banks that you oversee, are already in compliance. And a bunch of others are right on the bubble; 

they could get into compliance if they chose to do so. 

And Tom Hoenig is someone who is concerned with the stability 

of our banks and making sure that banks are sound. And so, I have 

actually asked my staff, and we are in the process of putting together legislation that would comply with all that. 

Ms. Eberley, what do you think about that? Without the benefit 

of having read his proposal, of course. 

Ms. EBERLEY. The vice chairman’s proposal does suggest a riskbased approach to regulation, and that aligns with the approach 

that we already take to risk-based supervision, risk-based assessments for our deposit insurance pricing, and risk-based regulation 

and guidance. 

So I think it is consistent. I think it is a policy call for Congress. 

I think we have already indicated a willingness to talk about a 

simpler capital approach for community banks. 

Mr. LYNCH. Great. 

Ms. EBERLEY. The definition we use of community banks does incorporate some institutions over $10 billion, by using—we have a 

different way of applying kind of the risk chacterizations— 

Mr. LYNCH. Okay. I want to give Ms. Hunter a crack at this as 

well. 

Ms. Hunter? 

Ms. HUNTER. I agree with all the comments that Ms. Eberley 

made in terms of the risk-based approach. 

I would add that at the Federal Reserve, we are considering how 

the agencies might be able to do some simplification consistent 

with the Collins Amendment and other sound prudential practices, 

particularly with respect to the capital proposals that were put 

forth. But I haven’t studied the whole proposal. 

Mr. LYNCH. In closing, I just want to say that the gentleman 

from New Mexico pointed this out, as well as the gentleman from 

Oklahoma, that this regulatory burden is causing consolidation. It 

is squeezing—it is forcing banks to merge, and putting some of our 

community banks out of business. 

33 

So we have to figure out a solution here. And I think that, with 

all due respect, Mr. Hoenig’s proposal, in trying to define where 

that line is drawn, is one of the best proposals that I have seen. 

And I yield back the balance of my time. 

Chairman NEUGEBAUER. I think the gentleman. 

And the gentleman from South Carolina, Mr. Mulvaney, is recognized for 5 minutes. 

Mr. MULVANEY. I thank the chairman. 

Mr. Fazio, I will begin with you, very quickly. Up until about 

2009, you all used to have meetings with the credit unions that you 

oversee, regarding your budget. 

You stopped doing that in 2009. Why? 

Mr. FAZIO. Chairman Matz felt that it gave an appearance of regulatory capture and that there wasn’t anything productive that was 

coming out of the briefing. 

We have a very transparent process related to our budget. We 

post a lot of information on our Web site. We do discuss the budget 

at the open Board meeting when the Board acts on it. Credit 

unions and their representatives are free at any time throughout 

the year to give— 

Mr. MULVANEY. Mr. Fazio, would you agree with me that there 

is a difference between what we are doing here today, face to face, 

and posting something on the Internet? 

Mr. FAZIO. Sure. 

Mr. MULVANEY. And this is a much more interactive and possibly 

more productive way to spend time? 

Mr. FAZIO. Sure. 

Mr. MULVANEY. And I would hope that folks on both sides of the 

aisle would agree with me that sometimes sitting down and having 

that face-to-face meeting is important. It is sometimes uncomfortable, there is no question about that. But we do it. And we ask you 

to come here and do it with us. And I think that it is reasonable 

for us to expect you to do it with the credit unions that you oversee. 

Have you all decided whether or not you are going to have a 

budget meeting for 2016 with the credit unions you oversee? 

Mr. FAZIO. I am not aware of a Board decision on that matter. 

Mr. MULVANEY. When would they make a decision on that, Mr. 

Fazio? 

Mr. FAZIO. Sometime this year. 

Mr. MULVANEY. Finally, and this sort of may give you some insight as to why I care about this type of thing, it has been a year 

now since I asked for an answer to that specific question, as to why 

they didn’t do, not only the meeting, but why they didn’t provide 

line-item information in the budget. 

Once you actually produce the budget, you don’t give the credit 

unions line item details on your budget, and we asked why you did 

that and whether or not you would provide to Congress the line 

items in your budget. That was on April 8th of 2014. So I very 

much would appreciate a follow up on that, sometime soon, maybe 

just in the next 9 months would be great. 

But waiting a year for that information, sir, when Congress asks 

you for what I think everybody would agree is a reasonable request, probably won’t be tolerated very much longer. 

34 

So I appreciate your looking into that immediately when you get 

back. 

Mr. Silberman, we will move to you now, very briefly. 

I read your testimony. I also heard you say, when you came in 

today, a couple of different things. And you used really good language, language that we would expect you to use and, of course, 

that everybody uses, because it is easy to use language, but it is 

harder to follow up. You say that your approach on rules and regulations is tailored and balanced. That you are mindful of the impact 

of compliance on financial institutions. You engage in rigorous evaluation of the effects of proposed and existing regulations on consumers and financial institution, and you maintain a steady dialogue with both consumer advocates and industry participants. 

I think later on you talked about an evidence-based process that 

you undertake. 

Again, it is easy to use the words. 

Last month we had some folks testify before this committee. Dennis Shaul, who is a CEO of the Community Financial Services Association, testified before this committee regarding a recent report 

that you all just put out on what a lot of people refer to as payday 

lending. 

And in that report that you folks created, it estimated that 

roughly 60 percent to 70 percent of small payday lenders would go 

out of business as a result of your rules and regulations. That 

didn’t seem to be disputed at that hearing. 

So my question to you, sir, is, what evidence-based process did 

you go through? What balancing did you do? What data do you 

have that says it is in the best interests of consumers to drive 70 

percent of these players out of the market? 

Mr. SILBERMAN. Thank you for the question, Congressman. 

First, let me begin, the process we have gone through began 3 

years ago with a series of field hearings we have held. We have obtained I think the largest data-set of loan level— 

Mr. MULVANEY. Great. Can I have that, please? 

Mr. SILBERMAN. I will have to take that request back. This is supervisory data that we have obtained, so it is confidential. 

Mr. MULVANEY. Why can’t Congress have the same data you all 

are using for making your decisions? 

Mr. SILBERMAN. It is confidential supervisory information, but I 

will have to get back to you on that. 

Mr. MULVANEY. Please do. I have news for you. We get confidential briefings all the time. In fact, we have a special room downstairs for it. And to the extent the data on that rises to the same 

level as the threat of nuclear intervention in Iran, then I can ensure you your data will be safe. 

But please continue. 

Mr. SILBERMAN. Okay. And I believe, Congressman, we have actually provided briefings on the data to staff. We have published 

two reports on payday loans, one in 2013 and one in 2014, based 

on that data. We have also reviewed all the research. We have gone 

through an extensive process. 

It is not the case that what we have said is that we would—we 

have started a rulemaking process. We have announced proposals 

that we are considering making. We are early in that process. But 

35 

it is not the case that we have said that proposal, if it were to become a final rule, would put 60 or 75 percent of payday lenders out 

of business. That is a misinterpretation of the document that we 

released. 

Mr. MULVANEY. What is the correct interpretation of that document, Mr. Silberman? 

Mr. SILBERMAN. The correct interpretation, Congressman, is 

what we said is that if current—if the business model continued as 

is, and payday lenders continued to do exactly what they have been 

doing, but capped the number of loans they give to people at no 

more than 6 loans per customer per year, so that is 90 days of indebtedness, that from that line of business, they would lose 60 percent of the revenue, which is to say that 60 percent of the revenue 

they are receiving comes from making more than 6 loans to consumers. That is precisely the issue we are trying to get at through 

the proposal. 

Chairman NEUGEBAUER. Thank you, Mr. Silberman. 

Mr. MULVANEY. Thank you, Mr. Chairman, for your accommodation of the extra time, but it may be that we need to have further 

investigation into that specific matter. Thank you. 

Chairman NEUGEBAUER. The gentleman from Massachusetts, 

Mr. Capuano, is recognized for 5 minutes. 

I will mention that votes have been called. And without any—I 

ask unanimous consent that the Chair will call for a recess here 

shortly, and then we will reconvene right after votes. 

And with that, the gentleman from Massachusetts is recognized 

for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

And I want to thank the panel. I also want to thank my colleagues. I have to tell you, I came to this meeting not sure I was 

going to stay very long. To be perfectly honest, I thought it was 

going to be the typical bashing of regulators: ‘‘We hate all regulation.’’ 

This has been great. This is the kind of hearing I love, and I appreciate the chairman calling this, and the ranking member and all 

the panelists. I have learned a lot. I have listened a lot. And I have 

to tell you, I get amazed when I agree with pretty much everything 

that has been said. That is a pretty good day—not everything, 

Mick. 

[laughter] 

But pretty much everything. So I just, really, that is where I 

want to go. I want to associate myself with the comments made by 

all of my colleagues, especially Mrs. Maloney, relative to the municipal bonds. The OCC really has to wake up. Municipal bonds are 

the safest investments in the country. And if any bank can’t invest 

in them because some regulator says that they don’t hit some obscene, obscure, ridiculous little thing, that is nonsense. 

It is the—there are some municipal bonds that may not meet 

that safety requirement, but there are very few. Particularly, it is 

going to hurt municipal governments. It is going to hurt local governments all across this country to tell any bank that they can’t 

invest in the safest thing they can. It is completely wrong. And I 

have to tell you, the Fed is kind of moving on it. If the OCC doesn’t 

36 

move on it, you are going to hear a lot more from us relative to 

that. 

I don’t expect a comment. You guys can look at it all day long. 

Mr. BLAND. May I make a comment, though? 

Mr. CAPUANO. You can, but if you come with the answer that you 

are not going to do it, you are going to be wrong. But go right 

ahead. 

Mr. BLAND. First of all, we have not prohibited banks from investing in municipal securities. 

Mr. CAPUANO. You haven’t prohibited them, but you have discouraged them significantly. 

Mr. BLAND. In fact, sir, the data hasn’t shown that. Banks continue to invest— 

Mr. CAPUANO. Not yet. 

Mr. BLAND. —in municipal securities. 

Mr. CAPUANO. You just did it. And you did it only a couple of 

weeks ago. 

Mr. BLAND. And they continue to invest in these institutions and 

support their local communities. 

Mr. CAPUANO. Well, good. Believe me, I would love to be wrong, 

and that is okay with me. 

I also want to move on to some of the risk issues. My big concern 

when it comes to risk is that some of this stuff is so complicated 

you end up with the result that small banks especially can’t figure 

out when they are into a risky situation or not. 

And as you come up with these data points as to what is and 

what is not risky, which again I think the discussion has been 

great today, exactly where the line is and where it isn’t, I think it 

is really important that you make the calculation of risk easy 

enough for a relatively small community bank to make the determination that they are getting into an area that is going to require 

more regulation and more oversight. Or to make the decision not 

to do it. 

In the past, some regulators have told me, ‘‘We are a little concerned about people gaming the regulations.’’ So what? If they 

game them to not be regulated, that means they are not doing 

risky things, which is a good thing. 

I guess the last thing I want to do is I want to talk about the 

QM rules. I would argue that the best thing you can do for a community bank, and actually I think it fits under the definition I 

have heard everybody say, is to encourage community banks to actually be involved in the community. You are involved in the community when you have risk involved with the community, namely 

holding mortgages, holding loans. 

And I would argue very clearly that as we go on, especially to 

the CFPB, that QM rules and any other rule not only allows small 

community banks to hold local paper, but actually rewards them 

for doing so. 

I want—and I will be honest; I have said it publicly before—all 

of my cash, which isn’t much, but whatever I have, and all of my 

mortgages, to the best of my ability, to be in local banks because 

I like the idea that they know where my street is. They know 

where my neighborhood is. They know how much a house is valVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
37 

ued. Their kids are likely to go to school with my kids. And on and 

on and on. 

But at the same time, if they can’t do it, which for all intents 

and purposes they have been pushed out of it, especially residential 

mortgages, they can’t be a community bank for long. And I would 

strongly encourage you to not just allow something, but to also encourage and reward community banks to actually be involved with 

the community so that we can have somebody to donate to the local 

Little League. 

I don’t really have a question, as I said. I didn’t really come with 

questions. But what the heck, I had 5 minutes, I figured I would 

use it. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, we will stand in recess until right after votes. And we 

thank the panel for their indulgence. 

[recess] 

Chairman NEUGEBAUER. The subcommittee will come back to 

order. 

And I now recognize the gentleman from Colorado, Mr. Tipton, 

for 5 minutes. 

Mr. TIPTON. Thank you, Mr. Chairman. 

And thank you, panel, for taking the time to be here. Mr. Bland, 

I certainly appreciate your comments in regard to moving that 

threshold in terms of banks that are in good order, and to be able 

to move that up. I am very proud, with Ranking Member Clay, to 

be able to put forward some legislation to be able to achieve that. 

I would actually like to be able to move into some of the small 

bank issues. And Mr. Bland, I might want to be able to address 

this to you first. Every community banker who visits our office 

right now, or testifies before this committee, come in and they express concerns about regulations being indiscriminately applied 

through rule, guidance or best practice to the entire industry, 

where in some cases regulation is actually intended for larger institutions. 

As a regulator, do you take into account in determining what is 

going to be the appropriate regulation to be able to fit the size of 

a bank? 

Mr. BLAND. Representative Tipton, during my discussions with 

bankers, I hear similar issues and concerns that you have raised. 

And from the OCC, we are very cognizant of that and we really 

take an approach that one-size-does-not-fit-all. 

And so the approach we take is to look at the activity and whether or not community banks tend to be involved in that. So for example, we have issued the heightened standards rule that is for 

our largest institutions. Community banks are not subject to that. 

The supplemented capital rule was not intended for community 

banks as well. 

And so what we take into account when we issue not only rules, 

but also guidance—we clearly state what is applicable to a community bank and what is not. And then that also translates into our 

examination processes as well, so that the procedures that drive 

our supervision of community banks are focused on community 

banks. 

38 

Our tailoring starts with our rules and goes through our examination process. 

Mr. TIPTON. So, trying to be able to tailor regulations, to be able 

to meet—this brings up a point, because I wrote down comments. 

Ms. Eberley, you had stated that you are ‘‘keenly aware’’ of regulations’ impacts on small community banks. 

Ms. Hunter, you stated that you ‘‘seek out and are listening to 

feedback on reducing the impacts of regulations and policies.’’ 

Mr. Bland: ‘‘reviewing duplicative review processes.’’ 

Mr. Silberman: ‘‘mindful and responsive to the impacts of regulations on financial institutions.’’ 

And we can go down the line, but the problem is this: We are 

continuing to see rules and regulations that are literally crushing 

the industry. I come from a small rural community in southwest 

Colorado. I just recently visited a community bank in Delta, Colorado, and they said they are about ready to give up, that they are 

no longer doing the banking business. They are complying with 

rules and regulations. 

And the costs are enormous. When we go back to Mr. Guinta’s 

comments, the bank in his State—22 percent in terms of the costs. 

So I guess my question is: Is there any collaboration in terms of 

trying to be able to streamline? Because we are talking about duplicative regulations. When I listen to the comments, I heard you 

saying the things I would love to be able to hear, but are we seeing 

this actually happen in practice? Because our institutions continue 

to see those costs go up. 

Ms. Eberley, you had cited the stress test. We have Zions Bank, 

which is basically a collection of community banks, but a regional 

bank. Their stress test paperwork last year was 7,000 pages. This 

year, it was 12,000 pages. How is that paperwork reduction working out? 

Ms. EBERLEY. The stress tests are one area where we didn’t have 

a lot of discretion in the rule-writing process because of what was 

in the statute. And we would welcome more discretion. We have 

been able to use discretion, for example, in the enhanced prudential standards and the way we look at resolution planning. So we 

have tailored resolution plans for the smaller institutions versus 

the larger, with more significant expectations for the systemically 

important financial institutions. 

But on stress tests, one of the important things I would tell you 

is that when we issued the guidance, we issued it jointly. And we 

put a statement together that we attached to it that said it did not 

apply to institutions under $10 billion. And we have continued to 

do that and put statements of applicability on every financial institution letter that we issue a rule. 

Mr. TIPTON. I appreciate that. And given the concern that you 

have all expressed in terms of the impacts, particularly on community banks, do you find it of great concern that apparently only 60 

percent of the Dodd-Frank rules are written and 40 percent are yet 

to come? Do we continue to see more piling on? 

Ms. Hunter, feel free. You look like you— 

Ms. HUNTER. While I was looking, we were over time. So that is 

why. 

39 

There are still rules to be written, but the vast majority of the 

rules that are in process really relate to firms over $50 billion in 

assets. So I would not anticipate that they would affect community 

banks in any material way. 

Mr. TIPTON. I yield back, Mr. Chairman. Thank you. 

Chairman NEUGEBAUER. The Chair now recognizes the gentleman from Washington, Mr. Heck, for 5 minutes. 

Mr. HECK. Thank you very much, Mr. Chairman. Mr. Silberman, 

this is for you. I have been enormously privileged in my life to sit 

on both sides of this table. I am a former chief of staff to a governor, and agency directors were direct reports to me. So I have 

had to supervise and monitor the development of rules and regulations and their implementation. 

But of course, I sit here now. And I am also a former State legislator, so I also know the world of proposing policy that then has 

to be implemented through the promulgation of rules and regulations. And I know the world of hearing back from people who are 

affected by those policies and implementing rules and regulations. 

And I have come away with kind of a life-long point of view that 

what all of this is about is the very difficult and creative tension 

between clarity and flexibility, which are at odds so very often, 

right? Clarity, which we ask for all the time. Just tell us what the 

rules are, which leads to bright lines. 

But at the same time, we all too often hear, where is the flexibility? Why can’t this be more discrete as it relates to our personal 

circumstances? So you have this ongoing clarity versus flexibility 

tension in your world. And I think they are both equally important 

and valid. 

And by analogy—eventually I am going to get to my question, I 

ensure you—there needs to be this magic balance between the inputs on the development of policy, anecdotes, and data. They are 

both valuable. I wouldn’t want to try to develop policy at this level 

based purely on anecdotes, but I value them because they put a 

human face and a story to it. Nor would I want to be robotically 

tethered to data. 

As it relates to QM, and you knew I would get to a question 

eventually, we are hearing a lot of anecdotes about how the QM 

rule is impacting financial institutions. And I think it is important 

to listen to those. Again, I don’t think it ought to exclusively or 

purely drive our response, but it is important. 

My question, sir, is, where is the best place to go to get the data? 

If there is an implementation issue out here that is causing problems, which we are given anecdotal evidence of, where is the best 

place to look at the data to help give context to those anecdotes? 

Mr. SILBERMAN. Thank you, Congressman. It is a great question. 

And I think when it comes to QM and the mortgage market, there 

are multiple sources of data to be used in addition to, as you said, 

listening to the real stores and the voices. So HMDA is certainly 

a key source of data which provides insight into the number of 

loans, number of loans by size and all that. So we will get information from HMDA. 

The call reports is another source. 

Mr. HECK. What is that? 

40 

Mr. SILBERMAN. The call reports banks and credit unions all file 

is a second source of some data. And as you may know, we have 

been working with the FHFA to create a national mortgage database which would enable us, for the first time, to have a representative sample of all mortgages de-identified. And that will, when it 

is up and running, provide probably the best source of data, but we 

can’t wait for that to be able to make calls. 

Mr. HECK. I have another quick question, which I probably don’t 

have time for. 

We have tried very hard to provide carve-outs or exemptions to 

smaller institutions, in recognition that some of these things might 

not, again, best suit the purpose of the smaller institutions. What 

we are hearing, however, is that there is evolving a pressure toward best practices which comes from, ‘‘above the larger standards, 

rules, and regulations.’’ 

It is hard for me to ferret out exactly the origin of this. This is 

not for you, Mr. Silberman, I apologize; this is for Ms. Eberley and 

Mr. Fazio. Is this pressure, in your opinion, coming from examiners, from the consultants? 

I would like a brief—because I have limited time—sense of, do 

you think that there is this kind of amorphous pressure, that even 

though we grant carve-outs, for which we think are very valid reasons, nonetheless kind of the cultural milieu and context mitigates 

against the very thing we are trying to accomplish in that regard? 

Ms. Eberley, Mr. Fazio—I’m sorry. Pardon me? 

Chairman NEUGEBAUER. Please respond in writing to the gentleman because we have some folks who need to catch airplanes. 

Mr. HECK. I apologize, Mr. Chairman. 

Chairman NEUGEBAUER. But it is a good question. And the witnesses will please respond to it. 

I now recognize the gentleman from Texas, Mr. Williams. 

Mr. WILLIAMS. Thank you, Mr. Chairman. And I want to direct 

my questions to Commissioner Cooper and Mr. Silberman. 

My first question is to Commissioner Cooper. In your testimony, 

you spoke about the need for legislation to support NMLS’ ability 

to process background checks. Regulatory efficiency is important 

for regulators and regulated entities. I personally understand this, 

being a small business owner. 

Access to credible information is everything. So my question, 

Commissioner, is how will legislation you are working on with Congress promote this type of efficiency? 

Mr. COOPER. Thank you, Congressman. First, let me say that 

since 2010, the NMLS that we discussed earlier has been processing background checks, and they have been doing it very efficiently on the mortgage loan side. What we want to make sure of 

is that the SAFE Act allows us to be able to use this same efficiency and use that on our other non-bank industries that we regulate, such as in Texas, where we regulate money services businesses. It takes approximately 2 weeks to get background checks. 

The NMLS system can do it in 24 hours. So we like that efficiency. 

Mr. WILLIAMS. Okay. Thank you. And one other quick question. 

What is your definition of a community bank? 

Mr. COOPER. Congressman, if I could, everybody here has been 

talking about what the pieces are for a community bank. And I 

41 

agree with most of it. What I think we have here—for instance, the 

FDIC definition that they use for data brings in about 6,000 banks. 

Chairman Hoenig’s definition that was mentioned earlier brings in 

about the same amount less about 148. 

My point is that we are so close in being able to come up with 

a definition that I would suggest that we would be able to get together and come up with these things. And we do have to have a— 

what I call a determinator—somebody who can decide on the differences. And that, in my recommendation, would be the chartering 

agency. 

Mr. WILLIAMS. Thank you. 

Mr. Silberman, in full disclosure I need to tell you that I am two 

things in this world. I am a car dealer, and I am a community bank 

shareholder. Now, the CFPB issued its guidance on indirect lending on March 31, 2013. And I think we need to be honest. This 

guidance was meant to intimidate indirect lenders and eliminate 

payments to car dealers whose customers have auto loans with 

higher interest rates. Would you agree with that? Yes or no? 

Simple answer. 

Mr. SILBERMAN. No. 

Mr. WILLIAMS. Okay. Now, I know that the CFPB thinks that 

these payments lead to discrimination. And I can understand that 

back in March of 2013, your lawyers were too busy to go through 

the rulemaking process, so they took a shortcut. But now, more 

than 2 years have gone by since you issued the guidance. And as 

far as I can tell, you haven’t made any effort to do what the law 

requires. 

Now, if you want to create a rule that businesses have to follow—so my real question is this, first of all, what is the problem? 

And why aren’t you even trying to do this the right way? 

Mr. SILBERMAN. Congressman, thank you for the question. The 

problem that we have been addressing is that indirect auto lenders 

are engaged in practices that are producing disparities— 

Mr. WILLIAMS. No, you don’t know that. 

Mr. SILBERMAN. We have found that through our supervisory 

work, through our investigative work. 

Mr. WILLIAMS. All right. Next question, are you afraid that your 

statistics won’t look so good by hiding this information? 

Mr. SILBERMAN. I am not sure what information you are saying 

that we were hiding, Congressman— 

Mr. WILLIAMS. You are not rulemaking. You are intimidating. 

Mr. SILBERMAN. I respectfully disagree. We are not intimidating. 

We are not rulemaking because we have not made any rules. We 

have simply—what the bulletin simply announces is what has been 

well-established law for a long time in terms of the obligations of 

an indirect auto lender under the Equal Credit Opportunity Act. 

We thought it was useful and important for us to put the banks 

that we examine on notice of our understanding of the law. And it 

is well-settled law. So there was not a rule to issue because there 

was no change in law. 

Mr. WILLIAMS. Do you worry that the cost of compliance on business—small businesses and regulations could cost small businesses 

profits, and even put them out of business? Do you worry about 

that? 

42 

Mr. SILBERMAN. We are required by statute to think about that. 

And we think about the access, the intent— 

Mr. WILLIAMS. Are you worried about that? Do you think it 

might put a long-time business out of business, because of the cost 

of meeting these regulations? 

Mr. SILBERMAN. We are always concerned about access to credit 

for small businesses, as well as for consumers. 

Mr. WILLIAMS. And what do you say when somebody says they 

are having to hire more compliance officers and loan officers in 

these banks? 

Mr. SILBERMAN. Congressman, I think what we say is that we 

want to understand that. We want to make these rules as easy as 

possible to implement. That we have engaged in an extensive effort 

to try and assist and make it so that they don’t need a lot of—don’t 

have to lawyer up to implement the rules, and to adjust the rules 

so that we don’t have a one-size-fits-all approach. 

Mr. WILLIAMS. I appreciate your testimony. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

I thank the gentleman. 

And now the gentleman from Georgia, Mr. Westmoreland, is recognized for 5 minutes. 

Mr. WESTMORELAND. Thank you, Mr. Chairman. 

Yesterday, Congresswoman Maloney and I reintroduced the Financial Institutions Examination Fairness and Reform Act. I am 

very excited to be working with Mrs. Maloney as she and I have 

worked together. And she has worked tirelessly to help the community banks. 

To me, this bill addresses the major concerns my community 

banks have had with the regulators during the financial crisis. The 

core purpose of this bill is to provide financial institutions a way 

to appeal examination determinations to a neutral and independent third party. This independent examination review director 

is tasked with determining whether examiners have fairly and accurately applied rules and guidance from the regulators. 

All too often, I have heard that banks in my community have nowhere to turn when an examiner makes a mistake or is applying 

rules unjustly. I would like for each of the Federal supervisors to 

just give a simple yes-or-no answer: Will you support or remain 

neutral on this bill? 

Just a simple yes or no. 

Ms. EBERLEY. No, sir. 

Ms. HUNTER. Our agency doesn’t have a position on it, so I am 

not in a position to say I would support it or not. 

Mr. BLAND. Representative Westmoreland, we don’t support it, 

no. 

Mr. FAZIO. We have concerns with various aspects of the examination fairness bill. 

Mr. WESTMORELAND. Mr. Silberman, do you have anything to 

say? Do you know anything about it? 

Mr. SILBERMAN. No, sir. 

Mr. WESTMORELAND. All right, good. 

Ms. Eberley, you brought up a point about my colleague from 

Georgia, Mr. Scott and I, who have been working tirelessly on the 

failure of our community banks. You mentioned the acquisition deVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
43 

velopment and construction loans. It brings up why I think this bill 

that we have is so important, because it talks about nonaccrual, in 

placing loans in nonaccrual. 

I was in the building business. I was in the development business. I was in the real estate business. I know for a fact that some 

of these loans that were current—they had been going by and abiding by all the terms of the loan. But they were forced to be put into 

nonaccrual, which took the cash position of these banks down. 

Now, what is wrong with a small community bank being able to 

say, ‘‘Look, I know this guy. He has paid his loans. Why does it 

have to go into the nonaccrual status?’’ 

Ms. EBERLEY. After the crisis of the late 1980s and early 1990s, 

Congress passed a law indicating that the financial institution regulators had to require institutions to follow generally accepted accounting principles (GAAP). So we don’t have that flexibility. And 

then— 

Mr. WESTMORELAND. And that is why we are trying to change 

the law. 

Ms. EBERLEY. Right. And— 

Mr. WESTMORELAND. But you don’t want us to change the law? 

Ms. EBERLEY. We have a couple of problems with the idea of an 

ombudsman that would overturn agency findings without having 

accountability for the supervision of institutions— 

Mr. WESTMORELAND. So basically, the government agencies think 

you know more about a bank’s borrowers than they do? Is that correct? 

Ms. EBERLEY. No, sir. We require institutions to follow GAAP. 

Mr. WESTMORELAND. Okay. 

Ms. EBERLEY. And if they weren’t following GAAP, they would 

essentially have two sets of books. 

Mr. WESTMORELAND. Okay. 

Ms. EBERLEY. They would have one set of books where they reflected it that way— 

Mr. WESTMORELAND. Thank you. 

Ms. EBERLEY. —and one for the regulators. 

Mr. WESTMORELAND. And I am sorry you all opposed the bill. 

I also wanted to talk about the Economic Growth and Regulatory 

Paperwork Reduction Act. In the past 15 years, there have been 

801 regulatory rules that have gone in to these banks. My concern 

is that the volume and the complexity of these banking regulations 

is going to put more of our community banks out of business. And 

since Dodd-Frank, my understanding is that those rules will not be 

included in this next review. And so it will be, I think 2026, before 

these Dodd-Frank rules will be considered under this rule. 

Can you tell me why Dodd-Frank rules aren’t being considered 

in this next review? And can anybody tell me—after 801 regulations, can you tell me how many have been—because this was only 

up to 2006. How many have been after 2006? And what paperwork 

has been reduced, or what rules have been removed? 

Mr. BLAND. Representative Westmoreland, I will take the first 

part. 

Mr. WESTMORELAND. Sure. 

Mr. BLAND. The bank regulatory agencies issued a letter that indicates that we will include all regulations that have been impleVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
44 

mented in the EGRPRA process, going forward, starting with our 

next hearing in Boston in May. All regulations also will be subject 

to the public comment period, including the Dodd-Frank rules that 

have been implemented. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

But I would ask the other witnesses to respond to the gentleman’s 

question in writing, as well. 

I will now go to the gentleman from Kentucky, Mr. Barr, for 5 

minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

Ms. Eberley, in February you testified before the Senate Banking 

Committee. And I believe your testimony was to the effect that traditional banks were able to weather the financial crisis reasonably 

well, and are continuing to perform well. But as has been discussed 

here today, since 2010, when there were about 7,657 banks in the 

United States; 4 years later, by the end of 2014, that number had 

declined to 6,509 banks. At the same time, since the enactment of 

the Dodd-Frank Act, banks with less than $10 billion in assets 

have seen their market share decline by 12 percent, double the 6 

percent decline of the 4 pre-Dodd-Frank years. 

So again, to Ms. Eberley, referencing back to your February testimony in front of the Senate Banking Committee, when Senator 

Heller asked whether you thought industry consolidation was a 

concern, your response, I believe, was that most consolidation results from a financial crisis, so the way to prevent consolidation is 

to avoid crises through more regulation. 

One of the goals of financial reform was to solve this problem of 

too-big-to-fail. And yet what we have seen is an avalanche of red 

tape coming in response to the financial crisis and a contraction of 

banks, a contraction of competition and choice, a consolidation of 

assets, and a concentration in fewer banks and bigger banks. 

So my question to you is, do you still maintain that more regulation is needed? Or do you recognize that some of the avalanche of 

regulations is actually counterproductive from a standpoint of diminishing competition and exacerbating the problem of too-big-tofail? 

Ms. EBERLEY. I believe in that hearing I was referencing our 

study on consolidation, which showed that about 20 percent of the 

consolidation that had occurred over the last 30 years was attributed to two big crises, with failures from the crises. And what is 

in our control is to have good supervision, not regulation, but supervision to ensure that banks don’t fail, so that we have good balanced supervision in good times and we don’t go too far in bad 

times. I think that is very important. 

Mr. BARR. Fair enough. And I am all for supervision and making 

sure that we don’t have a financial collapse. But to kind of follow 

up on Mr. Guinta’s line of questioning, where he was referencing 

only five new charters in the last number of years, I think Senator 

Shelby referenced only two de novo bank charters have been granted since the financial crisis. 

My question really, following up your testimony in the Senate, is, 

do we really believe that it is a 6-year economic cycle that is to 

blame here? Or can we acknowledge that at least some of the reaVerDate Nov 24 2008 18:11 Dec 04, 2015 Jkt 095060 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 K:\DOCS\95060.TXT TERI
45 

son for the consolidation, some of the reason for the lack of new 

charters is overregulation? 

Ms. EBERLEY. Certainly, the costs of operating in a regulated environment are factored in. But we have seen a tremendous amount 

of money come into community banks in the form of investment in 

that same timeframe, which suggests to me that community banks 

are still viewed as viable by the investing community, and that the 

cost of regulation isn’t keeping them from coming in. 

Mr. BARR. Let me just share a little anecdotal feedback from 

some of the small community banks in central and eastern Kentucky, which I represent. And I think they would be disappointed 

to hear that you all are opposed to basically fair exam procedures 

where you have an independent appeal process. 

Basically, what a lot of these bankers are telling me is that they 

are no longer in the business of lending. They are in the business 

of paperwork and compliance. And for every $100,000 that they 

have to put into compliance, that is a million dollars less capital 

deployed in their communities. So I would hope that there would 

be some sensitivity to that. 

Let me move on since I am running out of time, just really quickly to Commissioner Cooper. You mentioned in your written testimony that you support granting QM status to loans held in portfolio by a community bank. I have a bill called the Portfolio Lending and Mortgage Access Act. 

Mr. Silberman, your agency opposes that legislation. Director 

Cordray is on record as opposing the legislation. My question to 

you, Commissioner Cooper, is can you explain your thinking and 

why you disagree with Director Cordray? Why is it that, as the top 

representative of State-based regulators, that you believe that portfolio lending encourages an alignment of interests between the 

lender and the borrower that would actually prevent some of the 

practices, the originate to distribute practices that led to the financial crisis? 

Mr. COOPER. Congressman Barr, you said it very well. The community bank model does align the risk of the entity with the benefits of the consumer, and so we believe, CSBS believes and State 

regulators believe that community banks holding mortgages in 

portfolios should be exempt because it also has created a problem 

that we believe by survey that it is declining, and if we don’t reverse this decline, we will continue to have obviously further decline. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. BARR. Thank you. 

Chairman NEUGEBAUER. The gentlewoman from Utah, Mrs. 

Love, is recognized for 5 minutes. 

Mrs. LOVE. Thank you. 

I want to get right into it. Just to be clear, Mr. Silberman, do 

any States lack the authority to implement ability to repay and roll 

over limits for State-licensed payday lenders? 

Mr. SILBERMAN. Thank you Congresswoman. 

Mrs. LOVE. I’m sorry, I can’t see you. 

Okay, there you are. Thank you. 

Mr. SILBERMAN. Sorry. 

46 

So, we have been thinking about—our job is to ensure that consumers have the rights and protections that they are given by Federal law, and that is the question we have been asking rather than 

the question of what States can or cannot do. 

Mrs. LOVE. We should be asking what States can or cannot do. 

Because if you think about it, Mr. Cooper asked, ‘‘Can you describe 

the authority that States have to regulate these products,’’ and the 

answer was, ‘‘We have not thought about the States’ ability to regulate. We feel like it is our job, something like our job to regulate 

these and try and figure out how we are going to protect consumers.’’ Is that your assessment? 

Mr. SILBERMAN. It is our assessment that it is our job to ensure 

that consumers have the rights that are provided to them under 

Federal law. 

Mrs. LOVE. Have you identified any States that have failed to 

adequately protect its citizens? 

Mr. SILBERMAN. As I say, our job is to— 

Mrs. LOVE. Have you identified any States that have inadequately protected its citizens when it comes to these? 

Mr. SILBERMAN. As I have indicated Congresswoman, that is not 

the question we were charged to ask, and that is not the question 

we have been asking. 

Mrs. LOVE. Okay. So from what I can see here, if we already 

have States—by the way, two States have done away with these 

products. And you can’t identify or are not willing to identify States 

that have failed to adequately protect citizens. It seems to me that 

the job is pretty much to protect your job if you are duplicating or 

stopping what States are trying to do. 

Mr. SILBERMAN. Our job is to ensure that consumers are not subject to unfair, deceptive, or abusive acts or practices, that they get 

the disclosures that Federal law requires, that they get the protections that lending— 

Mrs. LOVE. So your job is to stop States then, when it comes to 

these products? Because seriously, why do you think the national 

solution should be to trump the States? If the States are already 

regulating these products adequately, why do you feel like you need 

to replicate or trump what they are already doing? 

I live in a State that does very well. As a matter of fact, these 

products are—we have not had any problems with these products. 

Our citizens love them. They think it is another option for them. 

And so now, here I am, in the House of Representatives, which is 

the branch of government that is closest to the people, by the way, 

and I am having to listen to you say, well, our job is to pretty much 

figure everything out for the States. What is the point in having 

States regulate these products? 

Mr. SILBERMAN. So first, to be clear, I did not mean to say that— 

and if I said that, I apologize—our job is to trump the States. Our 

job—Federal law would not trump the States. It would establish a 

floor, which is, in a Federal system, the way things work. Just as 

the States, there is a Truth in Lending Act, and the States can add 

protections on top of that. There is a Truth in Savings Act, and the 

States can add additional protections. There is a Fair Credit Reporting Act. That is the job that Congress has given us and that 

we are intent on doing. 

47 

Mrs. LOVE. Okay. 

It doesn’t make any sense to me, if States are doing it, and you 

can’t identify a State that is inadequately protecting its citizens, it 

seems to me if you are going to do what States are already doing, 

it is like I am just here to maintain my job. I need to do something, 

so I am going to do something that States are already doing. It 

makes absolutely no sense. 

I just want to—I am going to shift over and just talk to Ms. Hunter about the Volcker Rule. As the Volcker Rule is being implemented, we are learning more and more about unintended consequences with the Rule. 

One that has come up has to do with the non-financial companies 

that own depositories such as ILCS or unitary thrifts. 

As the Volcker provision is drafted—if a non-financial company 

owns a depository, the Volcker requirement applies to all of their 

operation, even those that are not engaged in any financial services, which means that non-financial companys’ ability to carry out 

some basic risk management could be seriously impacted or 

harmed. So, the question that I have is do you believe that the intent of the Volcker provision was applied to the non-financial affiliates in the industrial company that owns a depository? 

Ms. HUNTER. I certainly understand the concern that you are 

raising, and the issue is really created in the Dodd Frank Act itself. 

You are correct when you say that it really applies the restrictions 

on proprietary trading and the investments and relationships with 

covered funds under the Volcker Rule. It applies to insured depositories and their affiliates. 

Mrs. LOVE. But do you think that this is one of the unintended 

consequences, because we are impacting industries that are not in 

the financial services, and I just want—if it is okay on the record, 

I would love to have a comment on that in terms of a well-thoughtout comment as if you believe that this was an unintended consequences. 

Chairman NEUGEBAUER. Ms. Hunter, if you would send Mrs. 

Love a written response on that, we would appreciate it. 

Ms. HUNTER. We would be happy to provide some information, 

yes. 

Mrs. LOVE. Thank you. 

Chairman NEUGEBAUER. Thank you. 

And now the gentleman from California, Mr. Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. Thank you. 

Mr. Silberman, my colleagues have heard me talk about the new 

TILA–RESPA forms. You are certainly aware that the real estate 

industry and the real estate closing industry is focused on this. 

One would expect some bumps in the road once these rules become 

effective. Have you have explored the idea of a reduction for a few 

months or a suspension of the penalties for the innocent errors that 

are likely to be made in the first few months of operation? 

Mr. SILBERMAN. Thank you, Congressman. 

The TILA–RESPA rules, the ‘‘Know Before You Owe’’ rules as we 

think about them, as you know, were issued in November of 2013. 

We did provide for a very long implementation period in order to 

ensure that they could be effectively implemented. We have been 

48 

working diligently with the industry to ensure that it could get implemented effectively. 

I believe Director Cordray spoke to this issue when he was before 

the full committee last month and has some recent correspondence, 

and I think what he said is that we are focused right now on ensuring a successful achievement of the effective date, but that we 

always listen and will continue to listen to people’s ideas about and 

around that. 

Mr. SHERMAN. I hope you will listen to the idea that yes, you 

have an effective date, but it ought to be a soft date when it comes 

to either imposing governmental penalties or opening the door to 

civil lawsuits, because until you take it on a shakedown cruise, you 

don’t know which part needs to be fixed. 

Mr. Fazio had this great question about the need for supplemental capital that somebody else already asked a similar question. So instead, I will talk to you about how NCUA has not shown 

any instance where the lack of enforcement authority over credit 

union service organizations has been a material issue. 

Is it correct that NCUA already has authority via the credit 

unions they regulate to review and dictate enforcement with regard 

to credit union service organizations, which insiders call CUSO— 

I was told to mention that to show that I really knew the industry. 

It is my understanding that non-CUSO vendors are already subject to reporting and are reviewed through the Federal Financial 

Institutions Examination Council (FFIEC). 

So, with the tight budgets that everyone in government faces, do 

you really need to get involved in this in a new way? 

Mr. FAZIO. Thank you for that question, Congressman. 

There are two aspects of that, and I will take the latter first. The 

non-CUSO vendors, third-party vendors that are not a credit union 

service organization, if they do business with banks, then they 

would be subject to oversight by the other FFIEC agencies. However, we have several vendors that are large that only serve credit 

unions as clients, and they are not CUSOs. 

And so, they are not subject to regulatory oversight. There is a 

blind spot there. 

And we have had—in fact, we have had problems with a few of 

those historically. In terms of CUSOs, in particular, to the former 

part of your question, we have had, in fact, some problems with 

CUSOs. 

We have an indirect authority over CUSOs. We have a regulation 

that requires credit unions that do business with CUSOs or that 

own a CUSO to require certain things contractually, like access to 

books and records that they follow generally accepted accounting 

principles in preparing their financial statements and so forth. 

However, it is a very indirect authority in that sense. We don’t 

have insight into the full landscape of the credit union service organizations, and are limited to their books—and we have limits in 

how we can access and examine them in terms of understanding 

their business models. 

We have seen problems historically in CUSOs, and I would say 

that CUSOs are a great opportunity for especially smaller credit 

unions to collaborate. We support that. The use of CUSOs achieves 

49 

economies of scale and allows small credit unions to do things they 

might not be able to do otherwise, independently. 

But it also creates a gap in our ability to understand the nature 

of the risks to those credit unions. 

In some cases, it doesn’t— 

Mr. SHERMAN. I would ask you at least not to duplicate the efforts of the Federal Financial Institutions Examination Council 

and— 

Mr. FAZIO. And we would have no intention of doing so. 

Mr. SHERMAN. Okay. 

Mr. FAZIO. We cooperate and collaborate with them closely. 

Mr. SHERMAN. I have 14 seconds left, so I will just point out that 

the gentleman from Florida, Mr. Posey, and I have a great bill that 

perhaps if the FDIC would focus on it, you could solve it at your 

level. You have bank holding companies where you would not have 

an invasion of the assets of the insurance company that they might 

hold. Should there be a liquidation, you need to do the same for 

thrift holding companies, because we have a State system of regulating insurance companies, and the assets of the insurance company need to be there to protect the policyholder, and shouldn’t be 

raided by the FDIC for other purposes. 

I will yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Pennsylvania, Mr. Rothfus, is recognized for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

I thank the panel for spending some time with us today and I 

appreciate your patience through the vote break. 

Mr. Bland, I wanted to address a question to you. 

As you know, mutually chartered financial institutions have a 

long history in the United States of serving their local communities 

and promoting Main Street economic growth. 

Their structure grants them flexibility to take a long-term outlook rather than focusing on quarterly earnings, but it comes with 

a unique challenge as well. For example, mutual banks are constrained in their ability to pursue activities that best suit the needs 

of their communities by restrictions set out in the Home Owners 

Loan Act. The only option is to go through the time and expense 

of converting to a national bank charter, which is a particularly 

burdensome process for smaller and mutual institutions, as they 

must first convert to stock form before they can convert their charter. 

To address this issue, Representative Himes from Connecticut 

and I have introduced bipartisan legislation, H.R. 1660, the Federal Savings Association Charter Flexibility Act, which provides all 

Federal savings associations, including mutual banks, with the option of offering a broader range of services similar to a national 

bank without the burdens associated with changing charters. This 

legislation establishes a simple election process for an institution 

to become a newly created covered savings association, and it includes important safeguards to prevent fire sales of assets and subsidiaries during the transition process while also preserving the 

ability of the OCC to enforce the law and prevent evasion. 

50 

I know this issue is near and dear to the Comptroller, so I would 

like to ask you, is the OCC supportive of the reforms in H.R. 1660? 

Mr. BLAND. Representative Rothfus, as I said in my oral remarks 

and our testimony, we are very appreciative of you and others for 

supporting this bill. And as you indicate, the Comptroller is very 

sensitive and supportive of giving flexibility to the thrift industry. 

The Federal savings— 

Mr. ROTHFUS. Would you agree that these institutions need and 

deserve more flexibility? 

Mr. BLAND. Yes, they do. As originally structured, they were primarily limited to the mortgage space in terms of providing those 

services, but there are a lot of other entities that are involved in 

that, but they are still constrained by laws that limit the types of 

loans that they can do. And in fact, they have a lot of experience. 

And they can—consumer and commercial loans. But they do have 

a limit in which they can do that, so we are very supportive of providing the ability for them to continue their governance as a thrift, 

but to exercise the flexibility that other institutions have in terms 

of what is the right business model. 

Mr. ROTHFUS. Thank you. 

Ms. Eberley, I wanted to read something that I have received 

from one of my local community banks: ‘‘Two years ago, we—the 

bank—decided to appeal a matter for which an appeal process was 

applicable. When the on-site examiner communicated to the regional office that the bank was taking this action, a regional officer 

of the regulator responsible arranged a phone call with the bank 

and its legal counsel. 

‘‘The regional officer conceded during this call that the bank had 

the right to appeal the matter, but strongly suggested that the 

bank not do so. 

‘‘He informed us that he had already spoken to the so-called 

independent reviewers, and that we would lose that appeal.’’ 

I don’t know about you, but I find this story pretty troubling in 

terms of the effectiveness and independence of the processes that 

currently exist for institutions to appeal material supervisory determinations. I think it also raises some due process issues. Worse 

still, it is not an isolated incident. And it is illustrative of many 

complaints that the committee has heard. So, I would like to get 

your response. In light of this example, wouldn’t you agree that reforms to the examination process are warranted? 

Ms. EBERLEY. The situation you describe would not at all be consistent with our process. And I would very much appreciate having 

the information to be able to reach out to the institution. 

Our process is is that we do encourage institutions to try to resolve concerns at the lowest level possible, starting with— 

Mr. ROTHFUS. But if this happened, wouldn’t you agree that reforms— 

Ms. EBERLEY. It would be inconsistent with our policies. We do 

have an independent review process that starts with the regional 

office. It next comes to me. I am a 28-year examiner. A group that 

is independent of the oversight of the region reviews all of the materials from the institution and from the FDIC, our reports of examination. They make a recommendation to me, but I make my 

own decision. 

51 

And if an institution doesn’t agree with the decision that I make, 

they may appeal to our supervisory appeals review committee, 

which is an independent organization, headed by an independent 

political appointee. 

Mr. ROTHFUS. Yes, we would like to follow up with you on that. 

Ms. EBERLEY. I would be happy to. 

Mr. ROTHFUS. I have also been increasingly concerned about consolidation in the community banking and credit union industry. As 

you may know, our recent study by researchers at Harvard’s Kennedy School of Government found that this sort of consolidation is 

in fact occurring, and that the Dodd-Frank Act has accelerated the 

trend considerably. 

In a hearing before the Senate Banking Committee on February 

12th, you argued that the lack of a new bank increase is due to 

the economic cycle, versus one of the legislative barriers, or even 

regulatory barriers. 

In light of the Harvard study, do you still stand by those remarks? 

Ms. EBERLEY. I would have to point out a couple of things about 

the Harvard study. Number one, the market share definition was 

based on total assets, and we have spent a lot of time talking today 

about the importance of community banks lending in their communities. 

If you actually look at market share of loans, community banks’ 

market share declined in the 20 years leading up to the crisis, but 

since the crisis, it has stayed stable and actually it has increased 

about a tenth of a percent. So, a 20-year decline has stopped after 

the crisis. 

Mr. ROTHFUS. I yield back. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Wisconsin, the chairman of our 

Oversight and Investigations Subcommittee, Mr. Duffy, is recognized for 5 minutes. 

Mr. DUFFY. Thank you, Mr. Chairman. 

Ms. Eberley, you are part of the senior management of the FDIC, 

is that correct? 

Ms. EBERLEY. Yes. 

Mr. DUFFY. And do you report directly to Chairman Gruenberg? 

Ms. EBERLEY. Yes, I do. 

Mr. DUFFY. When Chairman Gruenberg gives you a directive, do 

you follow it? 

Ms. EBERLEY. Yes, I do. 

Mr. DUFFY. In your experience, you have been at the FDIC for 

some time, and part of the senior management team. When Chairman Gruenberg gives a directive, does senior management follow 

that directive? 

Ms. EBERLEY. Yes. 

Mr. DUFFY. Okay. 

And so I want to talk to you about the FIL, the Financial Institution Letter that came out in January of this year. Did you participate in the writing of that? 

Ms. EBERLEY. Yes, I did. 

Mr. DUFFY. The part I think is important is that you have encouraged institutions to ‘‘take a risk-based approach in assessing 

52 

individual customers’ relationships rather than declining to provide 

banking services to an entire category of customers.’’ That is very 

important. 

Were banks stopping business with a whole line of customers, in 

your experience, in the risk-based work you have done? 

Ms. EBERLEY. We have heard a fair amount of anecdotal evidence 

of that. In fact, a group of pawnbrokers represented by the National Pawnbrokers Association came in and met with us and gave 

us a spreadsheet of customers who had lost their accounts. 

Mr. DUFFY. Do you think that the decisions that were made by 

banks had anything to do with the regulation that came from the 

FDIC? 

Ms. EBERLEY. In that particular case they gave us a list of 49 

institutions, only one of which was supervised by the FDIC, and 

that institution’s decision appeared to be a risk-based decision 

based on the reasons that they had provided to the customer. 

Mr. DUFFY. So based on your work, have you seen any evidence 

that the FDIC has a list of prohibited businesses that they send 

out to banks? 

Ms. EBERLEY. The FDIC does not have a list of prohibited businesses. 

Mr. DUFFY. Are their regional directors part of the senior management team? 

Ms. EBERLEY. Yes, they are. 

Mr. DUFFY. And they are the ones who also follow the directive 

of Chairman Gruenberg? 

Ms. EBERLEY. They report to me. 

Mr. DUFFY. They report to you? 

Ms. EBERLEY. Yes. 

Mr. DUFFY. So if there is a consent decree, or a memo of understanding that is sent out, do you see those? 

Ms. EBERLEY. It would depend on the level. Much of our enforcement action is delegated. 

Mr. DUFFY. Okay, do you see those? Not all of them? 

Ms. EBERLEY. I see some. 

Mr. DUFFY. But not all? 

Ms. EBERLEY. No, not all. 

Mr. DUFFY. Would you be surprised to learn that there are 

memos of understanding or consent decrees that go out with prohibited products? 

Ms. EBERLEY. I would be very surprised, and I would want to see 

them. 

Mr. DUFFY. There was an investigation that was done by the 

Oversight Subcommittee. We received documents from the FDIC. 

They did a report. I know Chairman Gruenberg has seen it. I am 

sure you probably have seen that report. And the documents are 

referenced, and I have them in my hand. 

I have one while you were the Director of Risk Management, 

these folks report to you, Anthony Lowe from Chicago, prohibited 

acts. And by the way, the definition of ‘‘prohibit’’ according to dictionary.com is to forbid. Payday lenders. Would that surprise you? 

Ms. EBERLEY. You mentioned consent orders and memoranda of 

understanding. And I am familiar with the information that we 

provided to the committee. 

53 

Mr. DUFFY. Are you surprised by this? 

Ms. EBERLEY. And none of those had any language that said that 

there are no MOUs or consent orders turned over to the committee 

that would have any language that says that. There shouldn’t be 

any that would say that. 

Mr. DUFFY. I have one from 2013. 

Ms. EBERLEY. I would want to see the document that you have. 

Mr. DUFFY. Prohibited businesses. 

Ms. EBERLEY. Can I see the document? 

Mr. DUFFY. Firearm sales. 

Can we take a recess, Mr. Chairman? I will show her the documents. 

Well, I can circle back. 

So are you saying that— 

Ms. EBERLEY. I would like to see the document. 

Mr. DUFFY. Okay, but you would be surprised by this? 

Ms. EBERLEY. I would be very surprised. 

Mr. DUFFY. Would this be outside their lane and the directive 

that was given by you and Chairman Gruenberg? 

Ms. EBERLEY. To include prohibited businesses in a consent order 

or an MOU? 

Mr. DUFFY. Yes. 

Ms. EBERLEY. It would be prohibited. 

Now, there are consent orders where we have told institutions 

they need to exit a line of business because they weren’t managing 

it properly. 

Mr. DUFFY. But the list that I see looked pretty similar to the 

high-risk list that was issued in 2011. 

Ms. EBERLEY. No, that would not be consistent with policy. 

Mr. DUFFY. Okay. 

Ms. EBERLEY. So I would need to see what you have. 

Mr. DUFFY. So if these are being issued, we have rogue individuals operating inside the FDIC, right? Because obviously you 

wouldn’t give the directive, and your testimony is that Chairman 

Gruenberg wouldn’t give the directive. These are rogue folks, right? 

Ms. EBERLEY. There are no consent orders or MOUs that contain 

that kind of information, to my knowledge. 

Mr. DUFFY. And you are certain of this? 

Ms. EBERLEY. I said to my knowledge, there are none. I would 

like to see the document that you are holding. 

Mr. DUFFY. And have you reviewed a lot of—obviously, there is 

an investigation going on. 

Ms. EBERLEY. Yes, sir. 

Mr. DUFFY. And you haven’t seen any? 

Ms. EBERLEY. I have not, sir. I would like to see the document 

that you are reviewing. 

Mr. DUFFY. Okay. 

I will provide them after, but these were documents that were 

given to our committee from the FDIC that were referenced in the 

report. 

I guess my time has expired. I yield back. 

Chairman NEUGEBAUER. Without objection, we are going to have 

a quick second round, and I am going to recognize the gentleman 

from Georgia, Mr. Westmoreland, for a quick 5 minutes. 

54 

Mr. WESTMORELAND. A quick 5 minutes. 

First of all, I want to thank all of the witnesses for your patience 

in sticking around. 

Ms. Eberley, when you did your report on what was the main 

cause of all the bank failures that we had, did you find that the 

non-accrual was one of the main reasons for some of these bank 

failures, or was there another thing that led to the bank failures? 

Ms. EBERLEY. Our Inspector General has conducted a material 

loss review on most of the failures and they are required by statute, as you know, for ones that exceed a certain threshold. And 

they have done a couple of overview reports, and the commonalities 

between the institutions that failed were that they had heavy concentrations of credit. They grew rapidly and they funded that 

growth with broker deposits. So those are the three characteristics 

of the institutions that failed. 

Mr. WESTMORELAND. But being the Director of Risk Management 

at the FDIC, did you do your own study of what may have caused 

these? 

Ms. EBERLEY. I have certainly participated in the material loss 

review discussions with our Inspector General. 

Mr. WESTMORELAND. But you didn’t find—the non-accrual regulation had anything to do with these failures? 

Ms. EBERLEY. No, sir, non-accrual is an accounting determination of whether or not you are recognizing income on a cash basis, 

or I’m sorry, on your accrual basis on your balance sheet. If you 

are still getting paid on a cash basis, there is money coming in. 

And so, that wouldn’t cause a failure. 

But if it is not accrual because a customer is not paying and you 

are not getting the repayment on the loan, that will contribute to 

a failure, will contribute to problem loans. 

Mr. WESTMORELAND. Okay. 

So, you don’t think the non-accrual aspect of a bank that had to 

put current loans in that category had anything to do with it? 

Ms. EBERLEY. I believe our Inspector General studied that and 

has provided the answer that was requested. 

But I— 

Mr. WESTMORELAND. Could you just share it with me right now? 

Ms. EBERLEY. I do not, and that was their conclusion as well. 

Mr. WESTMORELAND. Okay. 

Now, you mentioned, and Mr. Bland and Mr Fazio, that you were 

opposed to the bill that Mrs. Maloney and I have dropped. How do 

you make that opposition known? 

Ms. EBERLEY. I am not sure of the question. 

You asked a question and you had described— 

Mr. WESTMORELAND. Did you support or not support it? 

Ms. EBERLEY. Right, and you described the— 

Mr. WESTMORELAND. And you said no. 

Ms. EBERLEY. —two provisions, so the ombudsman to overturn— 

Mr. WESTMORELAND. Right. 

Ms. EBERLEY. —regulatory findings and also the not having to 

put loans on non-accrual. 

Mr. WESTMORELAND. So you don’t think— 

Ms. EBERLEY. So those are two things that give us great concern 

as a regulator. 

55 

Mr. WESTMORELAND. I know. But how would you go about making your opposition to it known? 

Would you go into Members’ offices? Would you send a letter out? 

How do you make your opposition known, or do you just oppose 

and don’t say anything? 

Ms. EBERLEY. No, sir, we answer your questions when you ask. 

And we will share our concerns. We are happy to try to work 

with you. 

Mr. WESTMORELAND. No, I know. But do you share that with 

with Members of Congress? 

Do you call them, or go into their office? 

Ms. EBERLEY. I do not personally, no. 

Mr. WESTMORELAND. Does anybody who works for you do that? 

Ms. EBERLEY. No. 

Mr. BLAND. Representative Westmoreland, we have had a lot of 

discussions with Members of Congress and their staffs around this 

legislation with respect to the timeframes for exams, the ombudsman and our concerns about the non-accrual language. And so we 

would engage Members of Congress in this discussion— 

Mr. WESTMORELAND. So would you consider that a lobbying effort? 

Mr. BLAND. No, we consider it being responsive to the question, 

like you asked today of whether or not we support it, and we express our concerns about what we think might be the unintended 

consequences of the law. 

So we engage in that discussion. 

Mr. WESTMORELAND. I appreciate you looking at unintended consequences, because the Administration has certainly caused a 

bunch of them. 

Mr. Fazio, how about you, how do you get your concerns out? 

Mr. FAZIO. Similar to what Mr. Bland indicated, we have conversations with committee staff or your staff members. And in fact, 

oftentimes the staff reaches out to us for our input to try to identify 

unintended consequences or issues that the bill would create. 

Mr. WESTMORELAND. Okay. 

I am assuming that you don’t agree with everything that comes 

out of Congress, and we certainly don’t agree with all of your regulations, so I think it will be a fair fight. 

But again, thank you all for your patience, and I yield back. 

Chairman NEUGEBAUER. I thank the gentleman, and I know the 

panel will be glad to hear that will be the last questioner. 

The gentleman from Kentucky, Mr. Barr, is recognized for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

Thanks for the excellent hearing. 

And thanks to all the panelists and thanks for your patience as— 

this is going to be the last round of questioning. 

I do want to just follow up a little bit, Ms. Eberley, with the comments and the feedback I am getting from these community banks 

supervised by the FDIC. And one of the common themes in addition to the compliance costs and the intrusiveness of some of the 

exams in terms of taking personnel off of the actual business of 

banking, which is lending, is the idea among particularly small, 

56 

non-systemically important institutions in rural Kentucky that 

there is a trickle-down effect. 

There is a trickle-down effect with these regulations, where regulations that were maybe originally intended for large, systemically 

important financial institutions are being applied to smaller banks, 

often in the form of the examination process, where examiners are 

coming into the small bank, identifying those regulations as best 

practices, even regulations that specifically don’t apply to the 

smaller institution, and yet because these are ‘‘best practices,’’ 

these small institutions with small compliance staffs are nonetheless being asked to comply with the larger standards. 

Can you comment on that? 

Ms. EBERLEY. Certainly. That would not be consistent with our 

policy. 

Mr. BARR. I know that has been your testimony all day today. 

It is not consistent with your policy. I heard that with respect to 

Congressman Rothfus’ example as well. It is not consistent. And 

yet, we are hearing from our regulated constituent banks that it is 

in fact happening. 

Ms. EBERLEY. I would ask you to ask them to contact me. 

Mr. BARR. Okay. And I have heard that response as well. 

Just forgive me for my frustration, and I am sorry I appear frustrated, but here is the problem. What they tell me is they don’t 

want to be identified. They don’t want to be identified because they 

feel it is intimidating. 

And so when I say I am disappointed that you all don’t want 

maybe even a version of the Westmoreland bill, which is a fair 

exam reform bill that would provide for independent review of your 

exams, the reason why that is necessary is because our institutions 

don’t want to be identified because they fear retaliation, because 

there is not an independent review of your exams. 

So, do you have any sympathy for that concern, that if we do 

identify our banks to you, these banks who have concerns, that you 

will take a retaliatory approach? 

And there is no legitimate objective appeal. It is just a rubber 

stamp affirmation of the previous review by your examiner. 

Ms. EBERLEY. Examination findings have been overturned where 

they are incorrect. We absolutely do that in the appeals process. 

Mr. BARR. How often is that? 

Ms. EBERLEY. It is not frequent. There are not a lot of appeals 

that come forward in the formal process. Issues are generally resolved at the lowest level. 

Mr. BARR. Let me— 

Ms. EBERLEY. But we really— 

Mr. BARR. Okay. 

Ms. EBERLEY. —guard against the idea of the trickle-down with 

statements of applicability on all of our financial institution letters 

as to whether they are applicable to banks under a billion dollars. 

There is a review process for every report of examination to make 

sure it is consistent with our policy, so if that is happening, it is 

very troubling to me, and I really would want to talk to the institutions. It would be very helpful. 

Mr. BARR. We will continue to work on that. 

57 

And I want to give the regulators—the OCC, the Fed, and 

FDIC—some credit because I heard in your testimony that you 

were interested in a longer examination cycle for highly-rated community banks. 

I have that provision in legislation I have introduced called the 

American Jobs and Community Revitalization Act. The proposal 

that I have would take it up to a billion dollars, so banks under 

a billion dollars in assets that are highly rated could move to that 

18-month exam cycle. 

So, I appreciate the recognition that might be appropriate in the 

good area of agreement between those of us who want to see regulatory relief and the regulators, and I would encourage you to continue to take that position. 

Just really quickly, with the time remaining, let me turn to Mr. 

Silberman in indirect auto lending guidance. Was the Bureau’s objective to change the behavior of many of these auto lenders? 

Mr. SILBERMAN. No sir, the Bureau’s objective was to allow the 

indirect auto lenders—I’m sorry, could you repeat the question? 

Mr. BARR. Yes, the question is, was the Bureau’s objective in the 

guidance in the bulletin to change the behavior of auto lenders? 

Mr. SILBERMAN. If we are talking about indirect auto lenders, the 

Bureau’s objectives— 

Mr. BARR. Not dealers, lenders within your jurisdiction. 

Mr. SILBERMAN. Yes. Indirect auto lenders. Right. 

So yes, the Bureau’s objective was to let the indirect auto lenders 

know our understanding of the law so that when we came in— 

Mr. BARR. Why? Are you doing that so that you can change their 

behavior? 

Mr. SILBERMAN. It depends on what their behavior is, sir. 

Mr. BARR. Okay. So if this is just a restatement of existing law— 

Mr. SILBERMAN. Yes. 

Mr. BARR. —you are not trying to change behavior? If you are 

trying to change behavior, you are in violation of the Administrative Procedure Act (APA) because you are not doing this through 

notice-and-comment rulemaking. And I would submit that you have 

violated the APA on this, and I would encourage you to do a rulemaking on this. 

With that, I have run out of time, but I appreciate the chairman’s indulgence. 

Chairman NEUGEBAUER. And I am going to now renege a little 

bit. I am going to allow the gentleman from Wisconsin, Mr. Duffy, 

2 minutes for the final question. 

Mr. DUFFY. Ms. Eberley, you have indicated that you have reviewed the OGR report. I appreciate that. And I think you have 

seen a number of emails in there that are pretty damning to the 

FDIC, and they are targeting payday lending. One of them, from 

Thomas Dujenski, the regional director from Atlanta, as you have 

indicated, part of the senior team and who answers to you and to 

Chairman Gruenberg. In one of those emails, he says, ‘‘I am 

pleased we are getting the banks out of payday bad practices. Another bank is griping, but we are going to be doing good things.’’ 

There are a number of emails in here that are very clear that 

top management at the FDIC is targeting payday lending, and 

some banks and ammunition manufacturers. You have seen that 

58 

report. And then to come in here, when I have now provided you 

the documents that have come from the FDIC, and say, ‘‘I had no 

idea that the FDIC was at a high level targeting payday lending; 

I am surprised by that.’’ And I guess, I would like—if you have 

seen these emails, and you now have the documents in front of you, 

do you still say this is not a senior management issue where we 

are targeting certain lines of industry through the FDIC? 

Ms. EBERLEY. The question that you had asked me previously 

was whether the FDIC included lists of prohibited customers— 

Mr. DUFFY. I am asking you this question. 

Ms. EBERLEY. —in consent orders and MOUs. Neither of the documents that you have given me are FDIC documents. They are documents sent from financial institutions to the FDIC. 

Mr. DUFFY. My question is—they are from regional directors. 

Ms. EBERLEY. No, they are to regional directors. They are letters 

from financial institutions. 

Mr. DUFFY. So in regard to the emails and the exchanges that 

have been made by Mr. Dujenski from Atlanta in regard to payday 

lending, have you seen those? 

Ms. EBERLEY. Yes, I have. 

Mr. DUFFY. And are you surprised by that, or did you give him 

that directive? 

Ms. EBERLEY. No, I was very surprised by that. 

Mr. DUFFY. So what consequence happened to Mr. Dujenski? 

Was he fired? 

Ms. EBERLEY. Mr. Dujenski— 

Mr. DUFFY. He was fired right? 

No? He retired with full benefits and full pay? 

Ms. EBERLEY. Yes. Mr. Dujenski is retired. 

Mr. DUFFY. Mr. Lowe in Chicago, anything—any action taken 

with him? 

Ms. EBERLEY. If you are referring to the letter that Mr. Lowe 

issued, in response to that we issued a clarification to the industry 

to make sure that our policy was clear not just to the industry, but 

within our organization, and our Inspector General is investigating 

the— 

Mr. DUFFY. So Mr. Lowe was unclear on that matter, then. 

Ms. EBERLEY. —totality of the matter, and I didn’t—they will 

make a presentation of that at a Board level, and a decision will 

be made. 

Mr. DUFFY. I yield back. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

I would like to thank our witnesses for their testimony today. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And with that, this hearing is adjourned. 

[Whereupon, at 1:05 p.m., the hearing was adjourned.] 

(59) 

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