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74–976 PDF 2012

DODD-FRANK ACT’S EFFECTS ON 

FINANCIAL SERVICES COMPETITION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 10, 2012 

Serial No. 112–117 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

RICHARD HERTLING, Staff Director and Chief Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

MARK AMODEI, Nevada 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

JULY 10, 2012 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on Intellectual Property, Competition, and the 

Internet ................................................................................................................. 5 

WITNESSES 

Ellis L. Gutshall, President and Chief Executive Officer, Valley Financial 

Corporation 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 9 

Adam J. Levitin, Professor, Georgetown University Law Center 

Oral Testimony ..................................................................................................... 14 

Prepared Statement ............................................................................................. 16 

Alex J. Pollock, Resident Fellow, American Enterprise Institute 

Oral Testimony ..................................................................................................... 23 

Prepared Statement ............................................................................................. 24 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee 

on the Judiciary, and Member, Subcommittee on Intellectual Property, 

Competition, and the Internet ............................................................................ 6 

Material submitted by the Honorable Melvin L. Watt, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Intellectual Property, Competition, and the Internet ............... 41 

(1) 

DODD-FRANK ACT’S EFFECTS ON 

FINANCIAL SERVICES COMPETITION 

TUESDAY, JULY 10, 2012 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 4:07 p.m., in room 

2141, Rayburn Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Coble, Chabot, Watt, Conyers, Jackson Lee, Waters, and Johnson. 

Staff present: (Majority) Holt Lackey, Counsel; Olivia Lee, Clerk; 

and (Minority) Stephanie Moore, Subcommittee Chief Counsel. 

Mr. GOODLATTE. Good afternoon. This hearing of the Subcommittee on Intellectual Property, Competition and the Internet 

will come to order. 

Today’s hearing examines the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, better known as ‘‘Dodd-Frank,’’ and 

its effects on competition in the financial services industry. 

The free flow of capital is the linchpin of our capitalist economy. 

We must be extremely cautious about any attempts by the Federal 

Government to thwart the ability of the private sector to choose 

through the allocation of private sector resources which ideas and 

businesses are meritorious and which should be left on the cutting 

room floor. 

Unfortunately, Dodd-Frank injects government bureaucrats into 

the decision-making process in the flow of capital. This raises unnecessary and artificial hurdles to our economic recovery and distorts competition in the financial services market. 

Even before the 2007-2008 crisis, there was tremendous concentration in some markets related to the housing bubble and the 

toxic securities that brought our economy to the brink of collapse. 

The subprime mortgages at the root of the crisis were repurchased 

and securitized by the government-sponsored duopoly of Fannie 

Mae and Freddie Mac. The mortgage-backed securities that Fannie 

and Freddie created were given AAA ratings by the big three ratings agencies which controlled about 95 percent of the market. 

These securities were then purchased by the largest Wall Street 

banks which have consolidated an ever-larger share of the market 

over the past few decades. Perhaps more competition in all of these 

2 

markets would have encouraged more responsible decision-making 

and helped to avert or limit the crisis. 

However, instead of fostering more market competition, DoddFrank is likely to entrench current market leaders, making it harder for small and innovative banks and financial companies to compete. Dodd-Frank does nothing to decrease the market power held 

by Fannie, Freddie, and it will likely have the unintended effect of 

encouraging consolidation in banking and other financial sectors. 

Dodd-Frank will harm competition in the financial services industry because its regulations fall hardest on small banks and credit 

unions which makes it harder for them to compete with their larger counterparts. 

Regulations always fall harder on small businesses than large. In 

the banking sector, the costs of complying with regulations have 

historically been two and a half times higher as a share of operating expenditures for small banks than for large. If the costs of 

complying with Dodd-Frank are too great, it could drive many local 

community banks out of business or force them to merge with larger competitors. If Dodd-Frank results in community banks and 

credit unions leaving the market, not only will competition suffer, 

but so will the communities and small businesses that these banks 

serve. 

Small and mid-sized banks account for 54 percent of small business lending. America’s small businesses need these loans so they 

can create jobs. The government should be doing everything possible to encourage small businesses to grow and create jobs. At a 

time of sustained unemployment and with the President proposing 

to raise taxes on America’s small businesses, the last thing we 

should do is bury the community banks that finance small businesses beneath a new mountain of regulation. 

The Dodd-Frank Act could also harm competition by designating 

certain banks and non-bank financial institutions as systemically 

important and creating special liquidation procedures for them outside of bankruptcy. These special liquidation procedures treat systemically important companies’ creditors better than the bankruptcy law. As a result, systemically important institutions, already among the biggest companies in America, may receive favorable treatment in the credit markets. This could lead to even more 

concentration. 

The Administration is fond of touting the supposed reinvigoration of antitrust enforcement out of the Department of Justice and 

the Federal Trade Commission, but the Dodd-Frank Act, like the 

Administration’s other signature legislative achievement, The Affordable Care Act, will have the effect of hindering competition in 

one of the most important sectors of our economy. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee, the gentleman from North Carolina, Mr. Watt, for 

a different perspective. 

Mr. WATT. Well, maybe not so. I thought I was in the Financial 

Services Committee here for a little bit. 

I hope the Chairman will forgive me if I say bluntly at the outset 

that I believe this hearing is much ado about nothing. The DoddFrank Wall Street Reform bill, which I often affectionately call as 

a Member of the House ‘‘the Frank-Dodd reform bill,’’ was the culVerDate Aug 31 2005 11:13 Aug 21, 2012 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 H:\WORK\IP\071012\74976.000 HJUD1 PsN: DOUGA
3 

mination of years of efforts to rein in predatory lending and other 

major abuses in the financial services sector, and to reduce the 

prospect that financial institutions get too big to fail and taxpayers 

end up getting stuck with the cost of bailing them out. 

The bill establishes an entity for the first time in the Federal 

Government, the Consumer Financial Protection Bureau, that has 

as its primary purpose protecting consumers of financial products 

and erects a comprehensive regulatory regime designed to reduce 

the incentives that drove many financial institutions to pay much 

more attention to making excessive profits than to protecting the 

interests of their customers, our Nation, or our economy. 

I cosponsored the legislation and, as a Member of the House Financial Services Committee, played a major role in crafting many 

of its provisions, and together with Ranking Member Conyers and 

our colleague, Ms. Waters, served as a conferee on the House-Senate conference that produced the final product. Although I served 

as a conferee representing the Financial Services Committee, I also 

brought to the conference my antitrust and other policy experiences 

from this Committee. 

I believe the Dodd-Frank bill reflects the goals of both competition policy and stabilizing our financial institutions. 

Mr. Chairman, I think my views on how this Committee addresses antitrust concerns are well known. While educating our citizens 

on pending antitrust matters serves a very important public good, 

I generally believe that we should allow the regulators to do their 

jobs, especially when they have access to a wealth of detail that is 

not in the public domain. 

When Congress intervenes to affect the outcome of an antitrust 

investigation, I believe it can place undue pressure on the regulating bodies. But here we are having a hearing on the Dodd-Frank 

Act’s effects on financial services competition, effects that have yet 

to be seen. There are no concrete set of concerns before us. We are 

simply relitigating issues that were carefully studied in crafting the 

Dodd-Frank legislation. 

As for the Act itself, section 6 of the law contains a specific antitrust savings clause designed to ensure that antitrust policy continues to have a place within the regulatory framework. And I 

quote, ‘‘Nothing in this act or any amendment made by this act 

shall be construed to modify, impair, or supersede the operation of 

any of the antitrust laws unless otherwise specified,’’ close quote. 

That is directly from the Dodd-Frank legislation. 

Now, in the past decade, the Supreme Court has issued two decisions that have called into question the role of antitrust policy in 

regulated industries. The Trinko and the Credit Suisse cases have 

been the subject of hearings before this Committee and were not 

overlooked during the construction of the Dodd-Frank Act. In 

Trinko, the Court upheld the effect of a general antitrust savings 

clause, but found no violation of the antitrust laws. In Credit 

Suisse, the Court refused to give effect to a broad, nonspecific savings clause, finding instead that there was an implied antitrust immunity in essence to avoid conflict between incompatible regulatory 

regimes. 

There are those who question the reach of both Trinko and Credit Suisse. Are they limited to the regulated industries involved in 

4 

the facts of each case, telecommunications and securities respectively, or do they apply generally to all regulated industries? 

Whatever the answer to those hypothetical questions, the fact of 

the matter is that many of the regulations that will shape our financial sector moving forward have yet to be issued or implemented. Moreover, the Obama administration adopted the position 

when it inherited a financial industry on the brink of collapse that 

it would increase antitrust enforcement in regulated industries and 

maintain enforcement during the economic crisis and recovery. 

And the Justice Department has conducted four investigations 

into the financial services markets since the rulings in Trinko and 

Credit Suisse, three of which are ongoing into the municipal bonds, 

investment credit, credit derivatives markets, and the London 

Interbank Offered Rate, or LIBOR as it is sometimes called. 

The Department of Justice has also been active in the rulemaking process mandated by Dodd-Frank. 

Now, I am sure that there will be testimony today about how 

Dodd-Frank disadvantages small and community banks and advantages large financial institutions that some believe are, quote, ‘‘too 

big to fail.’’ On this issue, I will simply make two points. 

Number one, small and community banks were disadvantaged 

vis-a`-vis large financial institutions long before there was a DoddFrank bill. In my view, Dodd-Frank significantly leveled the playing field between larger and smaller banks, and it seems to me 

that a major part of the dissatisfaction with Dodd-Frank is that we 

could never absolutely level the playing field, just as we have not 

found it possible over the history of our country to level the playing 

field between the rich and poor in this country. 

Yes, I keep complaining about that, and I don’t begrudge those 

who keep complaining about the disparity between large and small 

financial institutions. Perhaps we can and should do more, but I 

don’t find it a very persuasive argument that we perhaps didn’t 

come up with the perfect solution in Dodd-Frank. I refuse to let the 

perfect be the enemy of the good, and when I do, I should simply 

resign or leave this institution immediately. 

Second, small and community banks got a lot more than they 

gave in the Dodd-Frank bill. The major source of competition that 

small and community banks were facing before the passage of 

Dodd-Frank was competition from unregulated check cashers, payday lenders, and other unregulated entities that operated by no 

rules while small community banks had to abide by regulations. 

Dodd-Frank brought all these unregulated entities under regulation and, in the process, made them operate by the same rules that 

apply to community banks. Most of my community banks praise 

that aspect of Dodd-Frank as fostering, not undercutting, competition and enhancing their ability to survive. 

So while I am happy to hear from the witnesses on this panel 

on their various theories on how things may pan out with, quote, 

‘‘too big to fail,’’ the fact is that I think a more appropriate title 

for this hearing would be, quote, ‘‘too early to tell.’’ 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman for his comments and 

turn now to the Ranking Member of the full Committee, the gentleman from Michigan, Mr. Conyers. 

5 

Mr. CONYERS. Thank you, Chairman Goodlatte. 

I want to associate myself with the remarks of the Ranking 

Member of this Committee, the parts that I understood, because 

this is a very complex subject. 

I probably won’t take the full 5 minutes, but I did want to put 

in a mild reservation about why we are holding this hearing in the 

first place. 

I mean, it seems a little bit uncharacteristic that a bill that was 

passed a couple years ago is now being examined as if it is in full 

force. I don’t think it is yet. But we needed the Wall Street reform 

act because ‘‘too big to fail’’ policies foreclose competition. And I am 

hoping that we will get an examination of how we got into this ‘‘too 

big to fail’’ and where it is going to lead and what it has cost us 

so far since the 2008 debacle. 

Here, Members of the Committee, we have 5,400 banking mergers between the last 15 years and 74 of them were defined as 

mega-mergers. That means that the buyer and the seller each had 

more than $10 billion worth of assets. 

Now, we need to do more to protect consumers and competition, 

and as a friend of the gentleman from Massachusetts, Mr. Frank, 

who was once a Member of the Committee on the Judiciary, I commend and support the Dodd-Frank bill—law. 

I don’t think I am the only person on this Subcommittee that 

feels that it should have gone further and that we have a responsibility, when we analyze this, to determine how that can be responsibly done. Why? Because we need to do more to protect consumers 

and competition in this Wall Street business that goes on. And so 

while the implementation process still goes on around Dodd-Frank, 

it is clear that the legislation is not enough to protect consumers 

and that the global market still remains basically predatory and 

anticompetitive practices rule in the financial industry world. JP 

Morgan Chase lost $2 billion with acknowledged irresponsible bets 

on the derivatives market. The British investigation into Barclays’ 

deliberate inflation of key banking interest rates like the LIBOR 

have triggered revelations that Chase, Citigroup, other American 

firms may have undertaken similar actions. 

And so what I am hoping will happen is that we will now sleep 

more comfortably in our beds at night now that title X of DoddFrank has not developed the horrible results that had been predicted. 

I will put my statement in the record, Mr. Chairman, and I will 

welcome and await the testimony of our distinguished witnesses. 

Thank you. 

[The prepared statement of Mr. Conyers follows:] 

6 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee on 

the Judiciary, and Member, Subcommittee on Intellectual Property, Competition, and the Internet 

The hearing today will allow us to explore the impact that the Dodd-Frank Act 

is having on financial service competition. 

First, we needed the Dodd-Frank Act because too big to fail policies foreclosed 

competition. 

Market concentration in the financial sector limits consumer choice, lowers quality, and raises prices. 

Between 1990 and 2005, more than 5400 banking mergers occurred, including 74 

mega-mergers where both the buyer and seller had more than $10 billion in assets. 

When the Bush-era financial crisis began, the ten largest banks controlled 55% of 

domestic financial assets and 45% of domestic deposits. 

The TARP bailout and related Treasury Department actions occurred precisely because the market was so destabilized by the lack of competition in the financial sector. 

Second, more needs to be done to protect consumers and competition. 

While the law is still in the implementation process, it is clear that the legislation 

was not enough to protect consumers and the global market from remaining predatory and anti-competitive practices of the financial industry. 

JP Morgan Chase lost $2 billion with irresponsible bets on the derivatives market. 

And the British investigation into Barclay’s deliberate inflation of key banking interest rates like the Libor have triggered revelations that Chase, Citigroup, and 

other American firms may have undertaken similar actions. 

We are still seeing the negative impact that big banks are having on the banking 

industry. With incentive structures rewarding short-term risk-taking, Wall Street 

has been in the business of getting bigger and more complex, and taking greater 

risks. 

I will continue to fight for consumers especially those with financial hardships. 

Antitrust laws must remain in place to protect our economic freedoms against monopolization and anticompetitive restraints on trade. We must now refocus and 

bring back into the spotlight the need for change and aid to those who have fallen 

victim during these financially perilous times. 

Mr. GOODLATTE. I thank the gentleman. 

Without objection, all other opening statements will be made a 

part of the record. 

And we are now pleased to turn to our witnesses. We have a very 

distinguished panel of witnesses today, and each of the witnesses’ 

written statements will be entered into the record in its entirety. 

I ask each witness to summarize his testimony in 5 minutes or 

less. To help you stay within that time, there is a timing light on 

your table. When the light switches from green to yellow, you will 

have 1 minute to conclude your testimony. When the light turns 

red, it signals that the witness’ 5 minutes have expired. 

Before I introduce our witnesses, as is the custom of this Committee, I would like to ask them to stand and be sworn. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you very much. Please be seated. 

Our first witness today is Mr. Ellis Gutshall, President and CEO 

of Valley Financial Corporation and Valley Bank. Valley Bank was 

founded in 1995 in my hometown of Roanoke, Virginia, where Mr. 

Gutshall has worked as a banker since 1976. Mr. Gutshall is the 

current chairman of the Virginia Association of Community Banks. 

He is a graduate of Washington and Lee University and of the ABA 

7 

Stonier Graduate School of Banking. I am proud to call him my 

constituent and friend. 

Our second witness is Professor Adam Levitin, a visiting professor at Harvard Law School and a professor at Georgetown University Law Center where he teaches courses in financial regulation. Professor Levitin served as Sspecial Counsel to the Congressional Oversight Panel supervising the Troubled Asset Relief Program. Professor Levitin holds a J.D. from Harvard Law School and 

two Master’s degrees from Columbia University and a Bachelor’s 

degree from Harvard College. 

Our third and final witness is Mr. Alex Pollock, Resident Fellow 

at the American Enterprise Institute. After 35 years in banking, 

Mr. Pollock joined AEI where he focuses on financial policy issues. 

Prior to joining AEI, he served as President and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. Mr. Pollock 

holds Master’s degrees from Princeton University and the University of Chicago and a B.A. from Williams College. 

I welcome all the witnesses and we will begin with you, Mr. 

Gutshall. Welcome. 

TESTIMONY OF ELLIS L. GUTSHALL, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, VALLEY FINANCIAL CORPORATION 

Mr. GUTSHALL. Chairman Goodlatte, Vice Chairman Quayle, 

Ranking Member Watt, and Members of the Subcommittee, my 

name is Ellis Gutshall, President and CEO of Valley Financial Corporation and its wholly-owned subsidiary, Valley Bank. My banks 

is a 17-year-old community bank headquartered in Roanoke, Virginia, and we have invested over $1 billion in our community in the 

form of loans during the 17-year period. Our company has assets 

of approximately $800 million and eight offices serving the Greater 

Roanoke MSA. 

Well, thank you for inviting me to testify on the effects of DoddFrank on financial services competition. 

We all appreciate the importance of regulation that protects the 

safety and soundness of our institutions and protects the interests 

of our customers. We know that there will always be regulations 

that control our business, but the reaction to the financial crisis 

has layered on regulation after regulation that does nothing to improve safety or soundness and only raises the cost of providing 

banking services, both credit and depository-related. 

While community banks pride themselves on being quick to 

adapt to changing environments and determined to meet any challenge head on, there is a tipping point beyond which community 

banks will find it impossible to compete. During the last decade, 

the regulatory burden for community banks has multiplied 10-fold 

with more than 50 new rules in the 2 years before Dodd-Frank. 

Over the last decade, 1,500 community banks have disappeared 

from our communities. 

Without quick and bold action to relieve regulatory burdens, we 

will witness an appalling contraction of the banking industry at a 

pace much faster than we have witnessed over the last decade. 

Holding oversight hearings like this one is critical to ensure that 

banks are allowed to do what they do best, namely, that is to meet 

the financial needs of our communities. 

8 

There are three key points I would like to make today. 

First, the costs to implement new regulations are substantial and 

weigh most heavily on community banks. Make no mistake about 

it. That burden is keenly felt by all banks. However, many small 

banks do not have the resources to manage all the new regulations 

and the changes in existing ones. Besides the real, hard-dollar 

costs, there are important opportunity costs related to products and 

services that either cannot be offered or will be offered only at 

higher cost to our customers. 

For our bank in 2011, we estimate that we spent over $500,000 

in hard-dollar compliance costs. That translates to roughly 7 cents 

per common share to our shareholders. Historically, the cost of regulatory compliance as a share of operating expenses is two and a 

half times greater for small banks than for large banks. And I fear 

that gap may widen even more once Dodd-Frank is fully implemented. 

For the industry as a whole, a very conservative estimate of all 

the hard-dollar compliance costs will be around $50 billion annually, and that is about 12 percent of total operating expenses. 

Secondly, the lost opportunity costs are significant for community 

banks, their communities, and their customers. Excessive regulation saps staff and resources that should have gone to meeting the 

needs of our customers. Even a small reduction in the cost of compliance would free up millions of dollars that could facilitate lending activity and other banking services. If we are forced to become 

more internally focused in an attempt to deal with the avalanche 

of regulations, we will lose the competitive advantage that we have 

created and that has been so well received by our customers. Customer service levels will decline, and it is the customer who will 

be disadvantaged by all of these actions. 

Thirdly, unintended consequences of Dodd-Frank have far-reaching effects on the very ones the legislation was designed to help 

and protect. Congress must be diligent in its oversight of the efforts 

to implement Dodd-Frank and to ensure that rules are adopted 

only if they result in a benefit that clearly outweighs the burden. 

One unintended consequence occurring right now in our industry 

is the effort to find new and additional revenues to offset the rising 

costs of new regulations. Banks are increasing service-related fees 

in an attempt to generate the needed revenues to offset these rising costs. Free checking and no minimum balance products are disappearing from the marketplace, and it is happening at the megabanks and community banks as well. 

There are many other unintended consequences of Dodd-Frank, 

such as a host of mortgage lending rules, a burdensome municipal 

advisor rule, swaps provisions that will hurt my commercial customers, and the largely unknown direction of the Consumer Financial Protection Bureau—what direction that will take. 

In conclusion, the consequences of excessive regulation are real. 

Costs are rising and will continue to rise. With the regulatory overreaction, piles of new laws, and uncertainty about government’s 

role in the day-to-day business of banking, meeting local community needs is proving difficult at best. 

9 

This scenario leads us to a banking industry with far fewer competitors than we have today which may be the largest unintended 

consequence of all from Dodd-Frank. 

I thank you again for allowing me to appear before you today. 

[The prepared statement of Mr. Gutshall follows:] 

Prepared Statement of Ellis L. Gutshall, President and 

Chief Executive Officer, Valley Financial Corporation 

Chairman Goodlatte, Vice Chairman Quayle, Ranking Member Watt, and members of the Subcommittee, my name is Ellis Gutshall, President and CEO of Valley 

Financial Corporation and its wholly-owned subsidiary, Valley Bank. My bank is a 

17-year-old community bank, headquartered in Roanoke, Virginia. The Roanoke Region is the largest metropolitan area in Western Virginia and home to more than 

300,000 residents. Our Company has assets of approximately $800million and eight 

offices serving the Greater Roanoke MSA. I also serve as the 2012 Chairman of the 

Virginia Association of Community Banks and as a Director of the Virginia Bankers 

Association Benefits Corporation. Our Bank is a member of the American Bankers 

Association and the Independent Community Bankers of America, both of which 

represent banks of all sizes and charters and are the voices of the nation’s $13 trillion banking industry and its two million employees. 

To begin with a brief background, in 1993, Dominion Bank, a 100-plus year old institution with over $10 Billion in assets headquartered in Roanoke, merged with 

First Union Corporation. During its heyday, Dominion Bank dominated the banking 

arena in the Roanoke Valley, controlling roughly one-half of the deposits in the marketplace. With the demise of Roanoke’s community bank, the organizers of Valley 

Bank felt that a region as large and important as the Roanoke Region needed to 

have a locally owned and locally managed community bank if it were to continue 

to grow and prosper.Valley Bank opened for business in May of 1995 and in just 

17 years, we have grown to the #4 market share in terms of deposits, surpassing 

even Bank of America, within the Roanoke MSA. I make this point to demonstrate 

just how critically important community banking is to communities all across this 

nation and how community banks such as Valley Bank can effectively compete 

against the much larger mega-banks. During this 17-year period, our share of the 

MSA deposit base has grown to nearly 10% while the leader’s share, the former Dominion Bank which is now Wells Fargo after the merger with Wachovia, has declined to 27%. For decades, community banks have been the backbone of all the 

Main Streets across America, and for the Roanoke Region in particular, Valley 

Bank’s presence has provided a strong catalyst to the economic growth, health, and 

vitality of our community as we have invested over $1 Billion of investment into 

our community in the form of loans during our 17-year history. It is our vision and 

mission to continue this role for many, many years to come. Unfortunately, the cumulative impact of years of new regulations is threatening the very existence of 

community banks. 

We all appreciate the importance of regulation that protects the safety and soundness of our institutions and protects the interests of our customers. We know that 

there will always be regulations that control our business—but the reaction to the 

financial crisis has layered on regulation after regulation that does nothing to improve safety or soundness and only raises the cost of providing banking services, 

both credit and depository related, to our customers. New rules, regulations, guidance and pronouncements flood in to our bank almost daily. With Dodd-Frank alone, 

there are3,894 pages of proposed regulations and 3,633 pages of final regulations 

(as of April 13) and we’re only a quarter of the way through the 400-plus rules that 

must be promulgated. 

While community banks pride themselves on being agile, quick to adapt to changing environments and determined to meet any challenge head on, there is a tipping 

point beyond which community banks will find it impossible to compete. During the 

last decade the regulatory burden for community banks has multiplied tenfold, with 

more than 50 new rules in the two years before Dodd-Frank.Over the last 

decade1,500 community banks have disappeared from communities. Each new law 

or regulation in isolation might be manageable, but wave after wave, one on top of 

another, will certainly over-run many more community banks. 

Without quick and bold action to relieve regulatory burdens we will witness an 

appalling contraction of the banking industry, at a pace much faster than we’ve witnessed over the last decade. 

Congress must be vigilant in overseeing regulatory actions. Ifleft unchecked excessive regulation will surely negatively affect community banks’ 

10 

ability to effectively compete. Holding oversight hearings like this one is critical 

to ensure that banks are allowed to do what they do best—namely, meet the financial needs of their communities. 

There are three key points I would like to make today. 

➢ The costs to implement new regulations weigh most heavily on community 

banks making it difficult to compete with the mega-banks, tax-exempt credit 

unions and nonbank financial firms 

➢ The lost opportunity costs are significant for community banks, their communities and their customers 

➢ Unintended consequences of Dodd-Frank have far-reaching effects on the 

very ones the legislation was designed to help and protect 

I. The Costs to Implement New Regulations are Substantial and Weigh 

Most Heavily on Community Banks Making it Difficult to Compete with 

the Mega-Banks, Tax-Exempt Credit Unions and Nonbank Financial 

Firms 

Make no mistake about it, this burden is keenly felt by all banks, however,many 

small banks do not have the resources to manage all the new regulations and the 

changes in existing ones. Besides the real, hard dollar costs, there are important 

opportunity costs related to the products and services that either cannot be offered 

or will be offered only at higher costs to our customers. For our bank, in 2011, we estimate that we spent over $500,000 in hard dollar 

compliance costs. That translates to roughly 7 cents per common share to our shareholders.This includes salaries attributable to compliance, annual bank-wide compliance training, legal and compliance consulting services, compliance software and 

other IT expenses, printing expenses and privacy mailing costs, and various recordkeeping requirements. And there are other costs that we simply cannot capture. We 

have several dedicated compliance officers just to handle all the legal and paperwork requirements and, in addition, estimate that another one-half of our total staff 

have some compliance obligations they must fulfill. Historically, the cost of regulatory compliance as a share of operating expenses is two-and-a-half times greater 

for small banks than for large banks. I fear that gap may widen even more once 

Dodd-Frank is fully implemented. 

Changes in existing regulations and the new regulatory requirements that will 

flow from Dodd-Frank have necessitated the need for us to add another full-time 

compliance person. That cost, plus many other ancillary costs of these new changes, 

will add another $75,000 to the overall cost. Of course, we are only in the early 

stages of the Dodd-Frank implementation, so we are bracing for additional costs 

that must somehow be borne. All these extra expenses could have been more productive if they were devoted to providing services to our customers. As an $800 Million asset bank, we are better able to spread some of the compliance costs than our smaller brethren. In 2006, at a time when we were approaching 

$500 Million in assets, I made the decision to create an enterprise-wide risk management department that would be responsible for assessing and monitoring risks 

associated with all of the bank’s compliance and non-credit operating units. Looking 

back now, this was one of the most significant things we could have done as we had 

fully developed a risk management department and staff prior to Dodd-Frank. I seriously doubt we would be able to do what we are doing now in terms of compliance 

and training without this enterprise-wide risk management group. However, this 

group has quickly been stretched to their limits. We will not be able to continue our 

high level of compliance expertise without additional staffing and training. The rising costs are just not in-house staffing requirements, but also the high costs of attending conferences and seminars, the many subscriptions to legal and accounting 

services that we feel we have to have just to make sure we do not miss anything, 

IT software up-grades to monitor our activities and the additional regulatory burden 

associated with proving we have complied with the new laws. The regulatory agencies want to see independent third-party confirmation, so besides internal audits, 

banks now have to have outside audits for compliance which is a significant expense 

for smaller banks. For the median-sized bank in this country with $166 million in 

assets and 38 employees, the burden is magnified tremendously. For larger banks, 

Dodd-Frank imposes significant changes that are already driving an entire reevaluation of business lines and models. Together with the new Basel capital and liquidity rules, these added costs likely will total in the hundreds of millions of dollars. 

For the industry, a very conservative estimate of all the hard dollar costs would 

be about $50 billion annually, or about 12 percent of total operating expenses.This 

expense ratio is only surpassed by the salaries & benefits we pay to our employees. 

11 

We at Valley Bank have taken great pride during our 17-year history in the fact 

that our noninterest expense management has placed us in the top performing quartile of our FDIC peer group. In 2011, our personnel expenses were 22% below the 

peer average and our total noninterest expenses were 17% below the peer average. 

At the same time, our employees were managing $5.8 Million in assets per employee 

compared to $4.6 Million for the peer average, a 26% positive variance and a strong 

demonstration of the superior productivity of our staff. Our low overhead framework 

coupled with high productivity ratios have enabled our bank to effectively compete 

head-to-head with the mega-banks in our market and actually take market share 

away while also producing the levels of profitability our shareholders demand.However, new regulations just keep being piled on top of older outdated requirements and we are clearly experiencing expense ratios that are increasing much 

more rapidly than our ability to increase revenues. 

II. The Lost Opportunity Costs Are Significant for Community Banks, 

Their Communities and Their Customers 

The direct out-of-pocket expenses are just part of the story when one realizes the 

significance of the opportunity costs. Instead of teaching staff to reach out to new 

markets, trainers are bringing the employees up to speed on the latest regulations. 

Instead of employee time and focus being used to invest our precious capital to support loans to hardworking people and businesses in our communities, it is being 

spent interacting withconsultants, lawyers, and auditors. Instead of investing our 

time and efforts to develop new products and solutions to meet the ever-changing 

demands and needs of our customers, we are spending our time analyzing changes 

to software to assure compliance with all the new changes. Excessive regulation 

saps staff and resources that should have gone to meeting the needs of our customers. Even a small reduction in the cost of compliance would free up billions of 

dollars that could facilitatelending activity and other banking services. The differentiating factors that set community banks apart from the mega-banks are a) that 

ability to focus our complete attention on our local community and the local customer, and b) to provide local operational support and local decisions. These factors 

are customer-centric and customer driven. If we are forced to become more internally focused in an attempt to deal with the avalanche of regulations, we will lose 

the competitive advantage that we have created and that has been so well received 

by our customer base. Customer service levels will decline and it is the customer 

who will be disadvantaged by these actions. As I mentioned earlier, Valley Bank’s 

presence has provided a strong catalyst to the economic growth, health, and vitality 

of our community as we have invested over $1 Billion of investment into our community in the form of loans during our 17-year history. We would like this to be 

our role for many, many years to come. If banks, especially community banks, find 

themselves so internally-focused on compliance related activities that they cannot 

attend to the job of extending credit,any hopes for a sustained economic recovery 

in this country will fade quite rapidly. 

III. Unintended consequences of Dodd-Frank have far-reaching effects on 

the very ones the legislation was designed to help and protect 

Congress must be vigilant in its oversight of the efforts to implement the DoddFrank Act to ensure that rules are adopted only if they result in a benefit that clearly outweighs the burden. There is an unintended consequence that is occurring right 

now in our marketplace and most likely throughout all of America. In an effort to 

find new and additional revenues to offset the rising costs of new regulations, banks 

of all sizes are reviewing and analyzing their service charges and fees associated 

with both loan and deposit products and services. Due to relatively weak loan demand and compressing net interest margins, the traditional spread income most 

banks, and especially community banks, relied on to support noninterest expense 

growth is not growing. Therefore, banks are increasing service related fees in an attempt to generate the needed revenues to offset these rising costs. Free checking 

and ‘‘no minimum’’ balance products are disappearing from the marketplace, and it 

is not just happening at the mega-banks. Additionally, banks are utilizing their customer profitability systems to a much higher degree to determine which customers 

are profitable and which ones are not. The result will surely be an effort to improve 

profitability throughout the spectrum which will result in either increased fees or 

decreased availabilityof services. In either case, the customer will be paying more 

or choosing not to use the service at all. 

Another unintended consequence we are facing lies in residential mortgage lending. Following the residential mortgage meltdown that essentially obliterated the 

mortgage broker network, banks once again were viewed as a potential resource for 

12 

home buyers and homeowners throughout the country. Banks were quite willing to 

jump in and fill this void and many banks immediately began the process of expanding residential mortgage loan operations. Our bank did exactly that. However, we 

are finding some rules under Dodd-Frank, if done improperly, could literally drive 

banks out of the mortgage business. These new rules on mortgage lending and 

on mortgage originator compensation are particularly problematic provisions. 

One of the changes required in the Dodd-Frank Act is that lenders must show 

that borrowers meet an ‘‘ability to repay’’ test—which can be challenged in court 

for the entire life of the loan, raising the risk of litigation tremendously. It also 

imposes broad risk retention requirements on most loans sold into the secondary 

market. These requirements have the potential to make it much more costly for 

banks to make loans and could have the unintended consequence of denying quality 

loans to creditworthy borrowers. Dodd-Frank does provide that banks can show they 

have met the ability to repay test by making loans that fall into a category known 

as a Qualified Mortgage or QM. The QM is intended to be a category of loans with 

certain low risk features made to borrowers shown to be creditworthy and able to 

meet the payment terms. The Consumer Financial Protection Bureau (CFPB) is 

tasked with finalizing a rule setting forth exactly what will qualify as a QM, but 

a number of concerns have arisen with regard to the approach which the CFPB may 

take. If the QM category is made too narrow by excluding too many loan types or 

by requiring borrowers to meet too high a standard of creditworthiness, then credit 

will contract and potential borrowers will be denied credit for which they would otherwise qualify. 

How these exceptions are defined will dramatically impact the willingness and 

ability of banks to make mortgage loans, and of consumers’ ability to qualify for 

credit. 

The thought of quality institutions being forced from the mortgage market and 

of otherwise creditworthy borrowers being denied credit because of overly broad regulations is chilling—especially at a time when our housing economy has been severely battered and is just beginning to show signs of recovery. 

There are many other issues raised in Dodd-Frank that will affect the competitiveness of banks and that will also negatively affect customers of banking services. 

Below, I describe two of those issues. 

The municipal advisor proposal would limit services to municipalities by 

local community banks. 

Banks offer public sector customers banking services and are regulated closely by 

several government agencies. It is generally believed that Dodd-Frank intended to 

establish a regulatory scheme for unregulated persons providing advice to municipalities with respect to municipal derivatives, guaranteed investment contracts, investment strategies or the issuance of municipal securities. The Securities and Exchange Commission has proposed a very broad definition of ‘‘investment strategies’’ 

that would cover traditional bank products and services such as deposit accounts, 

cash management products and loans to municipalities. This means that community 

banks would have to register as municipal advisors and be subject to a whole new 

layer of regulation on bank products for no meaningful public purpose. 

Such regulation would be duplicative and costly. Consequently, community banks 

would not be able to offer services to municipalities at a price that would be competitive. As a result, many banks may decide not to provide banking services to 

their local municipalities—forcing these local and state entities to look outside of 

their community for the services they need. This proposal flies in the face of the 

President’s initiative to streamline federal oversight and avoid new regulations that 

impede innovation, diminish U.S. competitiveness, and restrain job creation and economic expansion. 

We urge Congress to oversee this implementation and ensure that the rule addresses unregulated parties and that neither Section 975 of Dodd-Frank nor its implementing regulation reaches through to traditional bank products and services. 

The swaps push-out provision would create competitive imbalances between U.S. banks and foreign counterparties. 

Section 716 of Dodd-Frank, will prohibit swap dealers from receiving various 

forms of federal assistance including FDIC insurance and access to the Federal Reserve discount window. This provision will essentially require banks that are swap 

dealers to ‘‘push out’’ many swaps transactions to a nonbank affiliate. We support 

repealing the push-out provision because failing to do so would have a negative impact on bank and bank customer risk management practices and create competitive 

imbalances between U.S. and foreign banks. 

Banks currently have the ability to centralize risk management for each customer 

relationship by conducting a customer’s swaps transactions together with that customer’s other transactions. In other words, banks can assess the credit risk of the 

13 

customer and negotiate loan, swap, collateral and other credit terms as part of a 

complete package. Customers benefit because they can receive more attractive loan 

terms or a higher credit limit if the bank can net and setoff different exposures from 

each of the customer’s transactions. If the push-out provision is not repealed, bank 

customers will face higher costs and reduced credit availability. 

Many customers also prefer to have a bank as a swap counterparty because it enables customers to centralize their own risk management of loans and other forms 

of credit. Customers now have ‘‘one stop shopping’’ for all of their credit needs, including swaps that may offset their credit risk. Swap customers may also prefer to 

have a bank as a counterparty from a credit risk standpoint. If banks have to push 

out some swaps transactions into a separate affiliate, then customers will not be 

able to centralize credit risk management with a bank even if it is their preferred 

swap counterparty. 

The push-out provision would also create competitive imbalances between U.S. 

banks and their foreign counterparties. To date, it does not appear that other countries are considering adopting ‘‘push-out’’ requirements. Therefore, it is likely that 

foreign banks will still be able to offer integrated credit and risk management products in one entity. Customers who still want ‘‘one stop shopping’’ for their credit 

needs—including swaps—may choose to move their business to foreign banks. This 

may not ever affect my community bank in a direct manner, but letting our larger 

banks lose larger US customers to foreign banks concerns me greatly as I hope it 

does you. 

If banks have to create a separate affiliate to conduct swaps transactions, then 

the affiliate also will have to be funded separately and meet separate capital requirements. The capital requirements for the affiliate may be entirely different from 

bank capital requirements if the swap transactions are done through a broker-dealer affiliate. Bank customers would have to sign new credit agreements with the 

bank and its affiliate. Considering all of these costs and complexities, it is likely 

that only large financial institutions would be able to create, fund, and capitalize 

a separate affiliate to conduct swaps activities that need to be ‘‘pushed out’’ of a 

bank. My own bank uses swaps as part of our commercial lending process, so this 

is a critical competitive issue for community banks as well as large banks. 

CONCLUSION

The consequences of excessive regulation are real. Costs are rising and will continue to rise. To offset these rising costs, banks must find new and additional revenue sources, most likely from increased service fees, or cut back the services they 

provide. Both of these actions will adversely affect the customer.With the regulatory 

overreaction, piles of new laws, and uncertainty about government’s role in the dayto-day business of banking, meeting local community needs is proving difficult at 

best. 

My bank’s philosophy—shared by community banks everywhere—has always been 

to treat our customers with respect and to strive to provide the best possible financial solutions to create economic growth and wealth creation. We will continue to 

do this, but with the many new hurdles being placed in our way, our customers’ 

most basic banking needs will inevitably be more costly, more time consuming to 

complete and less beneficial to them as the end result. 

In my view, there will be three scenarios that will evolve for the community banks 

of this country. There will be those community banks that will just be unwilling or 

unable to take on these hurdles and they will move to partner with others in the 

short term. There will be a second group of community banks that will accept the 

challenge but eventually fail to produce the return on investment their shareholders 

demand, and they will ultimately partner up as well. And finally, there will be a 

much smaller group of banks that are able to successfully navigate the regulatory 

landscape and be able to also providethe return on investment that just may ensure 

their independence for the foreseeable future. These scenarios lead us to a banking 

industry with far fewer competitors than we have today, which may be the largest 

unintended consequence of all from Dodd-Frank. 

Thank you for allowing me to appear before you today. 

Mr. GOODLATTE. Thank you, Mr. Gutshall. 

Professor Levitin, welcome. 

14 

TESTIMONY OF ADAM J. LEVITIN, 

GEORGETOWN UNIVERSITY LAW CENTER 

Mr. LEVITIN. Thank you. Good afternoon, Mr. Chairman Goodlatte, Ranking Member Watt, and Members of the Subcommittee. 

Thank you for inviting me to testify at this hearing. 

My name is Adam Levitin. I am a Professor of Law at Georgetown University and Visiting Professor at Harvard Law School. Financial regulation is a major focus of my teaching and scholarship. 

I wish to make two points about the effect of the Dodd-Frank Act 

on competition in the financial services industry. The first point is 

on ‘‘too big to fail,’’ and the second point is on regulatory compliance costs. 

The ‘‘too big to fail’’ problem long predates the Dodd-Frank Act. 

The Dodd-Frank Act is the first step in addressing the ‘‘too big to 

fail’’ problem. The Dodd-Frank Act’s approach to ‘‘too big to fail’’ is 

to identify systemically important financial institutions, or SIFI’s, 

and then subject them to increased regulatory scrutiny and requirements. Critically—and I want to emphasize this point—the 

identification of financial institutions as SIFI’s does not make the 

institution systemically important. It merely recognizes a preexisting reality. 

There are two types of financial institutions that are designated 

as systemically important by the Dodd-Frank Act. First are all 

bank holding companies with over $50 billion in consolidated net 

assets. Second are non-bank financial holding companies designated as systemically important by a two-thirds majority vote of 

the newly created Financial Stability Oversight Council, and that 

vote has to also include the affirmative vote of the Treasury Secretary. To date, the Financial Stability Oversight Council has not 

designated any firms as systemically important. It has only published a final rule detailing how it will make such a determination. 

The Dodd-Frank Act subjects the systemically designated firms, 

non-banks and large bank holding companies, to heightened regulatory requirements. These include risk-based capital requirements, 

the leverage limits, liquidity requirements, overall risk management requirements, the development of risk resolution plans 

known as living wills, credit exposure report requirements, and 

concentration limits. All of this will have the effect of increasing 

regulatory costs on ‘‘too big to fail’’ firms. We don’t know how much 

it is going to increase the costs, but the Federal Reserve Board has 

recently proposed a set of standards that include 100 to 350 basis 

point capital surcharge on these large institutions. 

The goal of the increased regulation of the systemically important financial institutions is two fold. 

First, it aims to ensure that there is better upfront prudential 

regulation of the financial institutions that pose the most risk. 

And second, increased regulation of these systemically important 

institutions may ultimately discourage financial institutions from 

becoming ‘‘too big to fail’’ by counterbalancing the funding benefits 

of being ‘‘too big to fail’’ with increased regulatory costs. If implemented correctly, the Dodd-Frank Act will make it unprofitable to 

be ‘‘too big to fail’’ and investors will demand the ‘‘too big to fail’’ 

firms break themselves up. This is a conceptually sound approach 

that should have the collateral effect of leveling the competitive 

15 

playing field between ‘‘too big to fail’’ firms and smaller financial 

institutions. 

Regarding regulatory costs, there is no doubt that regulatory 

burdens for all banks, large and small, have increased in recent 

years with provisions like the Safe Mortgage Licensing Act that 

predate Dodd-Frank. What is important to emphasize, though, is 

that the Dodd-Frank Act itself imposes very few regulatory burdens specifically on community banks. While the Dodd-Frank Act 

has become the flagship of financial regulatory reform, most of its 

provisions have little or no bearing on small banks. Thirteen of the 

acts 16 titles are unlikely to affect most small financial institutions. 

Of the few provisions that do affect small banks, many have yet 

to go into effect, so they cannot be blamed for small banks’ travails. 

For example, title X of the Dodd-Frank Act created the Consumer 

Financial Protection Bureau. Virtually all of the CFPB’s 

rulemakings in progress could have been undertaken before DoddFrank by Federal bank regulators. The rulemakings are under preexisting powers. Yet, had that occurred, it would have been without 

the CFPB’s required small business impact review under the Small 

Business Regulatory Enforcement Fairness Act, or SBREFA, and 

without the cost-benefit analysis required by the CFPB for rulemaking. 

All in all, then Dodd-Frank is actually creating more protections 

for small financial institutions rather than creating problems for 

them. 

The Dodd-Frank Act, in sum, is likely to help level the playing 

field between large and small financial institutions by imposing 

regulatory costs on ‘‘too big to fail’’ firms that will help offset their 

funding advantage from their implicit government guarantee. The 

creation of the CFPB will level the playing field between banks and 

non-banks, and it will give small financial institutions a voice in 

the regulatory process through SBREFA. 

To be sure, there are general regulatory costs imposed by DoddFrank that are likely to be harder for small financial institutions 

to absorb, but overall, it would seem that the Dodd-Frank Act helps 

level the competitive playing field between large and small financial institutions. 

Thank you. 

[The prepared statement of Mr. Levitin follows:] 

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Mr. GOODLATTE. Thank you, Professor Levitin. 

Mr. Pollock, we are pleased to have your testimony as well. 


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23 

TESTIMONY OF ALEX J. POLLOCK, RESIDENT FELLOW, 

AMERICAN ENTERPRISE INSTITUTE 

Mr. POLLOCK. Thank you, Mr. Chairman and Ranking Member 

Watt, Chairman Conyers, Members of the Subcommittee. 

I believe all major expansions of financial regulation have effects 

on competition, even though they are principally addressed to controlling risk, and in fact, they are often more successful at changing competition than they are at controlling risk. 

For example, after the financial crises of the 1980’s there were 

three major acts of Congress expanding regulation. It was predicted 

at the time that this would ensure we would never again have a 

financial crisis—a poor prediction, needless to say, but arguably 

among their effects was the dominance of Fannie Mae and Freddie 

Mac in the market for mortgages. 

It is my view that similarly the Dodd-Frank Act will not prevent 

another crisis although, of course, proof awaits the unknowable future. However, it is certain and is universally agreed that DoddFrank has and will continue to expand the regulatory burden on 

financial businesses, including community banks. 

The disagreement is about whether this expanded burden is 

worth it. My view is that it is not worth it, and among its effects 

will be competitive disadvantages for smaller banks. As the Chairman said, if complex, expensive regulatory requirements are placed 

on all competitors, the burden will be disproportionately heavier for 

small competitors and large firms will be relatively advantaged. 

Consider in this context the total staff of a median-sized bank, 

which is 37 employees. 

Further, it is not unreasonable to think that Dodd-Frank’s effects 

will impede the ability of small banks to raise capital as has been 

suggested by the Conference of State Bank Examiners. 

Professor Amar Bhide has proposed that we reinstate, ‘‘old-fashioned banking where bankers know their borrowers and have caseby-case local knowledge.’’ I bet that is a proposition we would all 

agree to, but contrast this to top-down regulatory formulas in mortgage lending as a key example, which reduce community banks’ 

natural local advantages. 

Regulation itself is one of the most important procyclical factors 

in credit markets, especially in the down cycle when regulators, reacting to past mistakes, clamp down forcefully. This contracts credit further than the crisis already has, as we have once again experienced. 

Community banks can be very successful managers of residential 

mortgage credit to their own customers in their own towns. A 

healthy, competitive residential mortgage sector, in my opinion, 

should feature mortgage credit risk widely dispersed among knowledgeable local lenders, who also have the ability to share credits 

among themselves. 

But what did the American GSE-centric mortgage system create 

instead? As we all know, a duopoly system of Fannie and Freddie 

with mortgage risk concentrated on the banks of the Potomac. One 

of the most important competitive effects of Dodd-Frank is its wellknown failure to address the duopoly system of Fannie and Freddie 

in any way. 

24 

In the meantime, all actors in the residential mortgage market 

await and debate the QRM, or qualified residential mortgage, 

rules. These rules will determine when mortgage competitors are 

required to retain credit risk in mortgages which are securitized. 

This is the ‘‘skin in the game’’ idea. Now, I think having mortgage 

lenders retain credit risk in the loans they make is an excellent 

idea as long as the risk retention is a voluntary market transaction. The Dodd-Frank idea by contrast is not a voluntary market 

arrangement, but a mandatory and formulaic requirement. 

Now, as has been said by many others, a notable provision of 

Dodd-Frank is the designation of systemically important financial 

institutions, or SIFI’s. As has also been said, SIFI’s will be subject 

to special regulatory requirements and oversight—a burden. But on 

the other hand, with regulators having devoted so much special effort to making them safe, the failure of a SIFI would be the obvious 

failure of the regulators themselves. 

The logical conclusion for a potential creditor, large depositor, or 

counterparty of any kind to draw is that they will be safer with a 

SIFI, all political protestations to the contrary notwithstanding. 

Remember how various government officials tried to claim that 

Fannie and Freddie were not guaranteed by the government. But 

buyers of GSE debt and MBS did not believe such claims and they 

were right. 

So what is the difference between a SIFI and a GSE? In my opinion, not much. Effectively creating more GSE’s will tend to make 

the financial markets more consolidated and concentrated. 

I want to just mention rating agencies, if I may, Mr. Chairman, 

because they are in Dodd-Frank. We are addressing a competitive 

issue, namely, a previous government-sponsored duopoly in the 

credit ratings business. My written testimony recommends a simple amendment to Dodd-Frank regarding the credit rating agency 

provisions which would create a more pro-competitive approach. 

In conclusion, it is my belief that all proposed financial regulations should specifically take account of their effects on competition, just as this hearing is considering. 

Thank you for the opportunity to share these views. 

[The prepared statement of Mr. Pollock follows:] 

Prepared Statement of Alex J. Pollock, Resident Fellow, 

American Enterprise Institute 

Mr. Chairman, Ranking Member Watt, and members of the Subcommittee, thank 

you for the opportunity to be here today. I am Alex Pollock, a resident fellow at the 

American Enterprise Institute, and these are my personal views. Before joining AEI, 

I was the President and CEO of the Federal Home Loan Bank of Chicago for 13 

years, where the customers were about 800 member financial institutions, most of 

them community banks. In all I spent 35 years working in financial services, and 

have extensively studied and written on the problems of financial cycles. 

After every over-optimistic credit expansion comes the ensuing bust. After every 

bust, come legislation and expanded regulation to try to prevent the next crisis from 

happening—but it always happens anyway. For example, after the financial crises 

of the 1980s, we had the Financial Institutions Reform, Recovery and Enforcement 

Act of 1989, the FDIC Improvement Act of 1991, and the very ironically named Federal Housing Enterprises Financial Safety and Soundness Act of 1992. It was predicted at the time that this would ensure we would ‘‘never again’’ have a financial 

crisis—a poor prediction, needless to say, including the fact that Fannie Mae and 

Freddie Mac proved to be the opposite of safe and sound. 

25 

After the corporate accounting scandals of 2001–2002, we had the Sarbanes-Oxley 

Act, which attempted, among other things, to ensure business risks were controlled 

by expanded rules and procedures. They obviously were not. 

After the great housing bubble and the collapse of 2007–2009, we got the DoddFrank Act. It is my view that the greatly increased bureaucracy and regulation 

mandated by this act will not prevent another crisis—to know whether this is correct we have to await the unknowable future. However, it is certain and universally 

agreed that Dodd-Frank has and will continue to significantly expand the regulatory 

burden on financial businesses, including community banks. The disagreement is 

about whether this expanded burden is worth it or not. About this there are of 

course conflicting views—my view is that it is not, especially considering the negative effects on overall competition in financial services. 

I believe the central question posed by this hearing is excellent—indeed we should 

be required to ask and answer about every regulation: what are its effects on competition? 

REGULATORY BURDEN FALLS DISPROPORTIONATELY ON SMALLER COMPETITORS

As a general principle, if complex, expensive regulatory requirements are placed 

on all competitors, the burden will be disproportionately heavier for small competitors and large firms will be relatively advantaged. Large firms already have internal 

bureaucracies accustomed to complicated paperwork, reporting and regulatory relationships, the costs of which they spread over large business volumes. These economies of scale are not available to small competitors. 

Congress recognized this general problem in Dodd-Frank itself, when it reduced 

the burden on small public companies of the notorious bureaucracy of Sarbanes-Oxley’s Section 404. 

As Tom Hoenig (then President of the Federal Reserve Bank of Kansas City and 

now a Director of the FDIC) said, ‘‘Dodd-Frank has raised the cost of financial 

transactions in America and that encourages consolidation because it’s the only way 

you can spread the costs over larger assets.’’ 

The CEO of M&T Bank, a well-managed regional bank, said last year that the 

paperwork of Dodd-Frank had so far required 18 full-time employees—that is before 

implementation of many other regulations now in some stage of development, including whatever the Consumer Financial Protection Bureau mandates, and before 

the arrival of the complicated new risk-based capital requirements. Compare this to 

the total staff of the median bank: 37 employees. 

The complex new risk-based capital requirements, which are being applied to all 

banks, large and small, are an interesting case of the problem. Banking consultant 

Bert Ely concluded that ‘‘the highly granular features of many specific provisions 

in the regulatory capital proposal will mandate a substantial increase in the number 

of both financial and non-financial data items banks will have to collect on individual assets in order to generate the numbers. Data of the type now generally 

found in a bank’s accounting records will not be sufficient. Inadvertent compliance 

errors, when calculating capital ratios, will increase.’’ Ely speculates that these costs 

‘‘could drive [smaller] banks to exit lines of business.’’ 

It is not unreasonable to think that Dodd-Frank’s effects will impede the ability 

of small banks to raise capital. ‘‘Investors are concerned with a smaller bank’s ability to respond to regulatory obligations,’’ wrote the Conference of State Bank Examiners. ‘‘As investors vote with their money on the regulatory burden issue, policymakers should take notice that this is a very real issue with a potentially adverse 

economic impact.’’ 

Fletcher School Professor Amar Bhide has published an intriguing discussion of 

financial reform entitled A Call for Judgment. He points out the economic potency 

of competitive economies in which decentralization gives ‘‘many individuals the autonomy to make subjective judgments,’’ and in which they must live with the results 

of their judgments. ‘‘Specifically,’’ he writes, ‘‘I propose we reinstate old-fashioned 

banking, where bankers know their borrowers’’ and have ‘‘case by case local knowledge.’’ Thus they confront ‘‘the unquantifiable uncertainty that is an important feature even of seemingly routine lending decisions.’’ 

Obviously, he is describing the competitive advantage of well-run community 

banks and recommending a system of decentralized credit decision-making and credit risk bearing. Top-down regulatory formulas, for example in mortgage lending, reduce this advantage, while complex, expensive regulations create relative advantages for large institutions. 

26 

THE EFFECTS OF DODD-FRANK ON MORTGAGE FINANCE

Regulation itself is one of the most important procyclical factors in credit markets—a problem well known to theoreticians of financial regulation. This is especially true in the down cycle, where we still are in housing finance, as the regulatory efflorescence mandated by Dodd-Frank continues. Reflecting each bust, including the most recent one, regulators, afraid of being criticized, seeing the depletion or disappearance of their deposit insurance fund, and reacting to the past mistakes now so apparent in hindsight, clamp down forcefully on banks, including refusing to charter new entrants which would bring unburdened new capital to the 

sector. This contracts credit further than the crisis already has, as we have once 

again experienced, this time in the residential mortgage market. 

Community banks can be very successful managers of residential mortgage credit 

to their own customers in their own towns. A healthy, competitive residential mortgage sector, in my opinion, should feature mortgage credit risk widely dispersed 

among knowledgeable local lenders of the kind Bhide pictures, who also have the 

ability to share credits among themselves. 

What did the American GSE-centric mortgage system create instead? A dupoly 

system of Fannie and Freddie, with mortgage credit risk concentrated on the banks 

of the Potomac, a system once claimed in Congressional testimony and elsewhere 

to be ‘‘the envy of the world.’’ The result was that Fannie and Freddie lost every 

penny of all the profits they had made in the 35 years from 1971 to 2006, plus another $150 billion. They have been transformed in substance from insolvent GSEs 

to government housing banks, but they are still there and more dominant than before in mortgage finance. 

One of the most important competitive effects of Dodd-Frank results from a lack 

of action: its well-known failure to address the concentrated, duopoly system of 

Fannie and Freddie in any way. Thus concentration in the mortgage business and 

mortgage credit risk bearing continues and grows. Indeed, some people are now calling for Fannie and Freddie to be combined into a single mortgage securitizer—to 

turn their conforming mortgage duopoly into a monopoly. I do not favor this proposal. 

In the mean time, all actors in the residential mortgage market, including the 

community banks, are involved in the continuing complex development of two mortgage regulations in particular, arising from the requirement of Dodd-Frank: the 

‘‘QM’’ (Qualified Mortgage) and ‘‘QRM’’ (Qualified Residential Mortgage) rules. By 

establishing top-down formulas and escalating the legal risks to the lender of making mortgage loans, these regulations will certainly increase the burdens and reduce 

the role of local judgment in the mortgage business. 

The QRM rule will determine whether mortgage competitors are required to retain credit risk in mortgages sold into securitizations—the ‘‘skin in the game’’ idea 

(the regulations will exempt loans sold to Fannie and Freddie—another boost to concentrating mortgage risk in them). I think having mortgage lenders retain credit 

risk in the loans they make, when they are paid for so being in the mortgage credit 

business, is an excellent idea—as long as the risk retention is a voluntary, market 

transaction. In fact, for a community bank, bearing credit risk in your own loans 

to your own customers, even if they are being funded by the securitization market, 

is a logical business. It is the basis of the Mortgage Partnership Finance program 

which we invented 15 years ago, when I was at the Chicago Federal Home Loan 

Bank—a program which has had very good credit performance from 1997 to now, 

and which definitely helps community banks compete in the mortgage business. 

The Dodd-Frank idea is not a voluntary market arrangement, but a mandatory 

and formulaic requirement. The better approach would be to facilitate and encourage mortgage credit risk retention by lenders, but not mandate it. 

WHAT’S THE DIFFERENCE BETWEEN A SIFI AND A GSE?

A notable and much-debated provision of Dodd-Frank is the designation of very 

large financial firms as ‘‘SIFIs’’—Systemically Important Financial Institutions. 

What will the competitive effects of this be? 

SIFIs will be subject to special regulatory requirements and oversight—a burden. 

But on the other hand, this will cause them to be perceived as safer. Moreover, they 

will most probably benefit from being designated as of special interest and significance to the whole financial system and to the government. Having devoted so much 

special attention to making them safe, the failure of a SIFI would be the obvious 

failure of the regulators themselves, and a crisis will induce their normal bailout 

strategy. So in my view, becoming designated as a SIFI effectively makes a competitor a GSE—and we know to what lengths the government will go to protect the 

creditors of GSEs. 

27 

The logical conclusion for a potential creditor, large depositor, or counterparty of 

any kind, to draw is that they will be safer with a SIFI—all political protestations 

to the contrary notwithstanding. Remember how various government officials tried 

to claim that Fannie and Freddie were not guaranteed by the government. But buyers of GSE debt and MBS did not believe such claims, and the investors were right 

to believe instead that they were guaranteed by the taxpayers. I believe similar beliefs will apply to SIFIs. 

So what’s the difference between a SIFI and a GSE? Not much. 

That means, as has been pointed out by many observers (and contested by others, 

but incorrectly, in my view) that SIFIs will be even more advantaged in the amount 

and cost of funding and deposits available to them, and will be preferred 

counterparties for financial transactions, compared to smaller competitors. This will 

tend to make the financial markets more consolidated. 

An interesting comparison in this contest is the much more concentrated banking 

system of Canada, which has received a lot of praise over the last few years. Canadian banking is entirely dominated by five big, universal, nationwide banks, all of 

which are certainly SIFIs. Oligopolies are arguably more stable than competitive 

markets. Should we trade our 7,000 banks for such an oligopolistic structure? I 

wouldn’t. 

RATING AGENCIES

A pro-competitive provision of Dodd-Frank, one I firmly support, was to prohibit 

regulatory agencies from making the use of the ratings of credit rating agencies be 

required by regulation. This helps break up what was previously a governmentsponsored duopoly in the credit ratings sector. However, the provision went too far, 

and has now caused a competitive issue for smaller banks. 

Community banks have an advantage in local credit judgments, but a natural disadvantage in credit analysis of nationally-traded securities, as a matter of knowledge and scale. It makes perfect sense to allow them, without requiring them, to 

use credit ratings for their investment and money market portfolios. The Independent Community Bankers of America have proposed allowing use of external 

credit ratings, and I have been told that regulators have privately expressed the desire to gain flexibility in this matter by an amendment of the Dodd-Frank Act. 

The problem is that Dodd-Frank provides (in Section 939A) that regulators must 

‘‘remove any reference to or requirement of reliance of credit ratings.’’ The fix is simple: delete the phrase ’’ reference to or.’’ The provision would then read that regulators must ‘‘remove any requirement of reliance on credit ratings.’’ In other words, 

no requirements allowed, but use could be approved in the appropriate circumstances if proposed by the bank—this would remove an unintended competitive 

disadvantage for smaller banks. 

PROMOTING ENTRY AND COMPETITION

A British Member of Parliament and former banker has recently recommended 

the following principle: ‘‘Regulators must have a specific objective to reduce barriers 

to entry and promote competition.’’ A good idea. Proposed regulations, including 

those arising from Dodd-Frank, should specifically take account of their effects on 

competition among their costs and benefits—just as this hearing is considering. 

Thank you again for the opportunity to share these views. 

Mr. GOODLATTE. Thank you, Mr. Pollock. 

And we will now turn to questions from Members of the Committee, and I will start with a question for you, Mr. Gutshall. 

Does Valley Bank compete in Roanoke with branches of large 

banks covered by titles I and II of the Dodd-Frank Act? 

Mr. GUTSHALL. Yes, we do. 

Mr. GOODLATTE. And to the extent that these ‘‘too big to fail’’ institutions receive a funding advantage, how does that affect your 

ability to compete to offer loans in Roanoke? 

Mr. GUTSHALL. Well, it does make it difficult. The larger banks 

do have better access to funding not only from depositors but from 

other sources. So their cost of funds are less than ours, in most 

28 

cases as much as 50 basis points today, which is a huge hurdle to 

get over. 

We do compete. We compete on price, but we compete on service 

primarily. And we get most of our customers because they want to 

deal with somebody like our bank, somebody who understands 

their business and willing to spend time with them. So we cannot 

compete. I don’t think we will ever be able to compete with the 

Wells Fargos and BB&Ts of the world on pricing and cost, but we 

have to do it on service and that is the way we do it. We have 

taken market share from everybody in the Roanoke MSA. That is 

why we have grown to $800 million. And I think we are a shining 

example of what a community bank can do. 

Mr. GOODLATTE. When a small bank is forced to spend a dollar 

on complying with regulations, is that a dollar the bank is unable 

to use to finance small businesses that could create jobs? 

Mr. GUTSHALL. Now, we see a dollar of compliance cost or any 

other expense as a dollar against the profit, profits that flow to the 

bottom line. We can use those, leverage them up tenfold. Every dollar of capital should produce somewhere around $10 worth of loans 

and investments. So it is a 10 to 1 ratio. 

Mr. GOODLATTE. And a higher percentage of your bottom line is 

going to pay for regulations that diminish that bottom line than a 

larger institution competing with you. Is that generally true? 

Mr. GUTSHALL. Well, I think just from economy of scale concept, 

for us to comply with roughly the same regulations, maybe not to 

the same degree, but we have to do that as well and leverage that 

over $800 million in assets. A BB&T has got $155 billion in assets 

to do the same thing. We cannot afford in-house counsel or accountants on staff to help us with this. We have to go outside. We have 

to pay their fees to advise us on compliance issues. So a lot of that 

what we have to do, we have to go outside to get and it is more 

expensive. 

Mr. GOODLATTE. Now, Professor Levitin says that a lot of these 

Dodd-Frank regulations don’t apply to small banks like yours and 

that a lot of them haven’t taken effect yet. But what impact is the 

concept of best management practices having in terms of bank regulators taking the regulations that they are required by DoddFrank to impose on larger banks and which they may not have to 

impose on a smaller bank, but do they anyway? 

Mr. GUTSHALL. Well, we realize we are exempt from quite a bit 

of Dodd-Frank, and we certainly appreciate that. A lot of these 

things that flow through to the Federal Reserve, to other regulatory agencies, they find their way down to us as well. I mean, it 

is a best practices concept, and if it is deemed best practice, then 

we will see it I think without a doubt. 

Mr. GOODLATTE. Mr. Pollock, are the risks of creating disparities 

in the cost of doing business particularly acute in the banking industry in which large and community banks have to compete not 

only for customers by also for investor dollars? 

Mr. POLLOCK. Mr. Chairman, I think it does include investor dollars, but in particular it is money market funding dollars, large deposits which are not guaranteed by the government, and also all 

businesses in which you are a counterparty in various kinds of 

transactions, be they securities or derivatives transactions. In all 

29 

those, as I said in my testimony, I think the large banks have an 

advantage which will be increased, in my judgment, by the SIFI 

role that has been defined by the Act. 

Mr. GOODLATTE. If the banking industry became more concentrated and oligopolistic, would that harm the typical American 

consumer, and if so, how? 

Mr. POLLOCK. If you look around the world, Mr. Chairman, we 

have an unusual banking system because it still has 7,000 banks 

in it. Most countries have very concentrated, more oligopolistic systems. I hope we don’t move in that way. Big banks have an obvious 

competitive role to play, but I do think there is a special advantage 

in this country from keeping a vibrant, robust community bank sector. 

Mr. GOODLATTE. What if we fail to do that? What is the impact 

on consumers going to be? 

Mr. POLLOCK. I think it takes away a major consumer and business alternative, which is dealing in a local way based on the banker who really knows his customers and knows the local conditions. 

That is very important in maintaining a well functioning and growing entrepreneurial economy. 

Mr. GOODLATTE. Thank you. 

The gentleman from North Carolina, Mr. Watt, is recognized. 

Mr. WATT. Mr. Chairman, I think I will defer to the other Committee Members since they may have someplace to go. I got to stay. 

Mr. GOODLATTE. I will yield next to the gentleman from Michigan, Mr. Conyers, for 5 minutes. 

Mr. CONYERS. Thank you, Chairman Goodlatte, and thank you, 

Ranking Member Watt. 

Gentlemen, this is a very academic discussion of a problem that 

has some other dimensions. For example, can any of you explain 

to us about the amount of loss in the 2008 financial crisis in general? 

Mr. POLLOCK. I will take a try at that, Mr. Chairman. 

Mr. CONYERS. Thanks, Professor Pollock. 

Mr. POLLOCK. Chairman Conyers, I have thought a lot about 

that. I have written a book on financial cycles called ‘‘Boom and 

Bust,’’ which has the advantage of being short, if you ever want to 

look at it. 

Mr. CONYERS. I am more interested than ever. [Laughter.] 

Mr. POLLOCK. Financial cycles are apparent in all of financial 

history. They repeat. They always have multiple occasions. They always arise out of an over-optimistic group-think, you might say. 

In our case, we have the interaction, as is often in a bubble, between asset prices in houses—— 

Mr. CONYERS. How much was lost? 

Mr. POLLOCK. Oh, do you want a dollar number? It is many, 

many hundreds of billions of dollars. 

Mr. CONYERS. It didn’t reach the trillions. 

Mr. POLLOCK. And the losses of Fannie and Freddie alone were 

$250 billion. 

Mr. CONYERS. Right. 

Mr. POLLOCK. So it is bigger than that. 

Mr. CONYERS. And do any of you have something that you can 

tell us about the fact that in many countries around the planet, 

30 

there is action being considered against the biggest banks, including UBS, JP Morgan, Citigroup? I mean, this was a worldwide collapse of our financial system, Professor Levitin, that seemed to 

have taken economists by surprise. But now that we look back on 

it, there is less justification for the surprise. Is that a fair statement? 

Mr. LEVITIN. Well, not being an economist, I can’t speak for it. 

But I think if you look back and place the Dodd-Frank Act into context, we saw a financial crisis, the likes of which certainly have not 

been seen in my lifetime, and you have to go back to the Great Depression to find anything like it. If anything, I think what the 

Dodd-Frank Act does on ‘‘too big to fail’’ is too modest. I think the 

approach is sound conceptually, but it leaves a lot to the regulatory 

implementation. 

You asked about the cost of the crisis. I think it is very important that we be cognizant of—that we compare the costs imposed 

by financial crises with the costs that may be imposed by regulation. And if you are at all risk-averse, I think this is not even a 

close one, that the regulatory costs here are a small insurance premium for making sure that we do have not have an economic collapse. 

Mr. CONYERS. Now, JP Morgan Chase, $2 billion loss, irrespon- sible bets in the derivatives market. You say it was $9 billion. My 

colleague says it was not $2 billion. It was $9 billion. 

Barclays’ deliberate inflation of key banking interest rates like 

LIBOR have triggered revelations that Chase, Citigroup, and others may have undertaken similar actions. Is that too drastic an accusation to be made publicly? 

Mr. LEVITIN. I don’t think so. I think it has been all over the 

newspapers. And I would say with that $9 billion, I think it is $9 

billion and counting. We haven’t seen the end of it unfortunately. 

I think that we are just starting to learn the extent of financial institution malfeasance before and after the financial crisis. 

Mr. CONYERS. Could I get 15 seconds, Mr. Chairman, to ask—— 

Mr. GOODLATTE. Without objection, the gentleman is recognized 

for an additional minute. 

Mr. CONYERS. Mr. Pollock his impressions of this line of discussion? 

Mr. POLLOCK. Adam and I were discussing before the hearing, 

Mr. Chairman, this very interesting situation. One of the most interesting aspects of it is the potential involvement of the regulators 

and the central banks themselves. There are allegations that the 

Bank of England or the government were possibly encouraging or 

even directing the banks to do this. It was said today that the Federal Reserve Bank of New York was aware of this several years 

ago. 

When we discuss any financial crisis, what we find is that it isn’t 

true that regulation protects us. Adam, you and I may disagree on 

this. The regulators and the central banks are part and parcel of 

the problems. Everybody is all mixed together. That is what makes 

them so hard to anticipate and to manage. That is true in this 

LIBOR case as well, apparently. 

Mr. CONYERS. Thank you, Chairman Goodlatte. 

Mr. GOODLATTE. I thank the gentleman. 

31 

The gentleman from Ohio, Mr. Chabot, is recognized for 5 minutes. 

Mr. CHABOT. Thank you, Mr. Chairman. 

Mr. Gutshall, if I could ask you a question. I agree with you that 

our community-based financial service providers, both community 

banks like yours and credit unions for that matter, are absolutely 

essential pillars in the American banking system. It is clear that 

community banks and credit unions are facing an increasing 

amount of regulatory burden in terms of the breadth and pace of 

rulemaking from the CFPB and other regulators. Regulators including all of those that sit on the Financial Stability Oversight 

Council have a responsibility to information-share and coordinate 

with each other in an effort to make the post-Dodd-Frank environment as manageable as possible for those institutions serving Main 

Street. 

You mentioned in your testimony that Valley Bank has invested over $1 billion of investment loans during your 17-year history. 

You also mentioned the significant opportunity costs that come 

from Dodd-Frank compliance. 

My question is if you had had to comply with Dodd-Frank over 

your entire 17-year history, approximately how much do you think 

that Dodd-Frank compliance would have cost you out of that $1 billion? 

Mr. GUTSHALL. That is a very good question and a very tough 

one to answer as well. Typically if we are allocating somewhere 

close to 8 to 10 basis points of our earning assets for compliance 

issues, that would have taken 10 cents off of every dollar. So that 

$1 billion could have shrank to, say, $6 billion or $7 billion— 

$600,000 or $700,000 per year. So it could have cut our lending by 

about 3 or 4 percent. 

Mr. CHABOT. And, Mr. Pollock, let me ask you. The name of your 

book again was ‘‘Boom and Bust’’? 

Mr. POLLOCK. ‘‘Boom and Bust.’’ 

Mr. CHABOT. ‘‘Boom and Bust,’’ okay. You get it on Amazon or 

where is it available? 

Mr. POLLOCK. If I am allowed to say this, you can buy it on Ama- zon for $9.95. [Laughter.] 

Mr. CHABOT. I think you are allowed to say that. 

And like Mr. Conyers, the fact that it was short kind of appealed 

to me as well. But that is what I would like to read. 

And with your knowledge about the financial cycles that we have 

seen over the years repeated again and again—and most of that 

time was, obviously, not during Dodd-Frank’s existence. We now 

have it. Are there things that could have been done that would 

have made sense, that could have dealt with the financial meltdown and other things short of Dodd-Frank or different from DoddFrank? Or do you have an opinion on that? 

Mr. POLLOCK. Yes, Congressman, I do. With regard to mortgages 

in particular, I actually have published a list of 10 things that one 

could have done or should have done. Of course, notable among 

them is dealing with Fannie Mae and Freddie Mac. 

Fannie and Freddie I think played a role which is often not understood, which was allowing large amounts of foreign money to 

drive up the prices in American real estate without taking any 

32 

risk. I think a general principle is if you want to invest your money 

and take the risk, that is fine, but by the government guarantees, 

as I said, denied, but nonetheless real, they allowed large amounts 

of money to come in, drive up real estate prices, drive up risk, but 

not take any risk themselves. Investors have their risk now being 

paid for by ordinary taxpayers as they provide the money to pay 

off Fannie’s and Freddie’s obligations. 

So the biggest thing would have been to deal with them in restructuring the mortgage finance market which was the center of 

the problem in what became in the bubble the insidious interplay 

of rising asset prices and ever-expanding credit. They were major 

factors in that credit expansion. 

Mr. CHABOT. Thank you. My time is rapidly expiring. Just let me 

ask you one more question, if I could, Mr. Pollock. 

The Community Reinvestment Act. Do you have an opinion as to 

the relationship between that and the ultimate financial crisis that 

we found ourselves in in this country? 

Mr. POLLOCK. Anytime one is directed to make loans that look 

riskier to you in order to fulfill a regulation, I believe that is a mistake. Loans ought to be made as objectively as possible to good 

credits in order to create good credit, and the more we have a system like that, the better it will be. 

Mr. CHABOT. Thank you. 

Mr. GOODLATTE. I thank the gentleman. 

The gentlewoman from California, Ms. Waters, is recognized for 

5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

Let me just start off by saying that I agree with Mr. Watt that 

this hearing is quite unnecessary, but we know what is going on. 

As we approach the 2-year anniversary of the passage of the DoddFrank Wall Street Reform and Consumer Protection Act, some of 

my colleagues on the other side of the aisle want to mark this occasion by trying to make the case for repeal of the Act or otherwise 

try to undermine the regulation of an industry that nearly brought 

our economy to its knees in 2008. And I don’t think we need to go 

into what happened during the crisis and what caused the crisis. 

We all know what the subprime meltdown was all about. 

But we put a lot of time and effort into Dodd-Frank and we listened to everybody that had something to say about it. And we 

have a bill that really does attempt to reform the industry. But 

since Dodd-Frank passed, the Republican efforts to undermine 

Dodd-Frank have been extraordinary. They have passed legislation 

to try and defund regulators, repeal the orderly liquidation of authority, repeal risk retention, delay derivatives regulations for 2 

years, repeal liability for credit rating agencies, prohibit CFTC and 

SEC regulation of international swaps, all of this while we are witnessing some other kinds of actions that are taking place that 

should cause us all concern. We should be concerned about MF 

Global. We should be concerned about the Bickwell in London and 

the proprietary trading that we attempt to try and deal with with 

the Volcker Rule. We should be concerned about the LIBOR manipulations, et cetera. 

So here is what I would like to say to the community banks. You 

have a lot of friends in Congress, and we know that Dodd-Frank 

33 

really doesn’t have a lot to do with the fact that you are at some 

disadvantage with the big banks. We understand that. And a lot 

of people, even in Dodd-Frank, as we were going through the conference committee, took actions to try and relate to some of the 

problems of the community banks. 

I just feel really strange about community banks being roped into 

these antics of my friends on the opposite side of the aisle as they 

attempt to dismantle Dodd-Frank piece by piece. And I would suggest to you that if you have not seen the FDIC White Paper entitled ‘‘Impact of Dodd-Frank Act on Community Banks,’’ that you 

ought to read it. You ought to read it because if you read this paper 

and if you are not familiar with a lot of what was done with DoddFrank that is to your advantage, I think that you may change your 

mind about joining with people who have other agendas that may 

not be in the best interest of community banks. 

Let me just ask quickly about some of the white paper that describes the impact of Dodd-Frank on community banks. 

Assessment base. As a result of Dodd-Frank, FDIC assessments 

will now be based on average consolidated assets, less average tangible equity, rather than total domestic deposits. Is this helpful to 

community banks? 

Mr. GUTSHALL. Absolutely. 

Ms. WATERS. That is. 

Secondly, the offset of effect of increased reserve ratio. In addition, Dodd-Frank increased the minimum reserve ratio for the Deposit Insurance Fund from 1.15 percent of estimated insured deposits to 1.35 percent. Is that helpful to community banks? Mr. Pollock, you know everything. What do you have to say? 

Mr. POLLOCK. I try to pretend like I know everything. 

Ms. WATERS. I know. 

Mr. POLLOCK. No, I don’t think that is. That suggests a higher 

deposit insurance premium for community banks, in fact, which is 

an increased expense. 

Ms. WATERS. Okay. Let’s go to increased deposit insurance coverage. Dodd-Frank permanently increased the FDIC’s basic insurance coverage limits to $250,000. This higher coverage level should 

help community banks attract and retain core deposits. Is that 

helpful to you, Mr. Gutshall? 

Mr. GUTSHALL. That is helpful, yes. 

Ms. WATERS. All right. 

And in ‘‘too big to fail,’’ as with the increased deposit insurance 

coverage, the end of ‘‘too big to fail’’ will make it easier for smaller 

institutions to compete with larger institutions. A level playing 

field will help to eliminate the subsidy that ‘‘too big to fail’’ banks 

have enjoyed and encourage market discipline. Do you think that 

is true? Is that a statement that you could agree with, Mr. 

Gutshall? 

Mr. GUTSHALL. Well, I believe that the ‘‘too big to fail’’ has obviously benefitted the larger banks. I mean, a lot of customers feel 

more comfortable with their money in those banks, and I think the 

TAG program that we all participate in, which we hope will be extended, is a huge issue for community banks. 

Ms. WATERS. Well, let me just—— 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

34 

Ms. WATERS. Unanimous consent for at least 30 more seconds. 

Mr. GOODLATTE. Without objection, the gentlewoman is recognized for an additional minute. 

Ms. WATERS. Mr. Pollock, exemption from section 404 of Sarbanes-Oxley. For many years, community banks expressed concerns 

about the auditor attestation requirements in section 404 of Sarbanes-Oxley for publicly traded companies. Dodd-Frank effectively 

exempts public companies with less than $75 million in capitalization from these requirements which cover many publicly traded 

community banks. Is that helpful, Mr. Pollock? 

Mr. POLLOCK. Congresswoman, the exemption from the onerous 

bureaucracy of section 404 for small companies was a pro-competitive provision in Dodd-Frank, which I applaud. 

Ms. WATERS. Which you applaud. Say it loudly so everybody can 

hear you, Mr. Pollock. 

I have a whole list of things here that is identified in this white 

paper that is helpful. 

Let me just say this as I wrap up, that again, you have a lot of 

friends on both sides of the aisle who want to be helpful to community banks. I don’t want you to get caught up in something else 

that is going on here which is not helpful to community banks. I 

believe that what we have done—— 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

Ms. WATERS [continuing]. In Dodd-Frank—we will continue to 

work with community banks because we think you have real value 

in the community. We think people prefer to deal with you. We 

think it is customer-friendly and all of those things. So let’s be 

careful about being, you know, right up here to deal with these 

issues in the way that you are dealing with them because I don’t 

think it helps your cause. It hurts rather than helps. 

I yield back the balance of my time if I have any left. 

Mr. GOODLATTE. The gentlewoman is well aware that she does 

not. 

And the gentleman from Georgia is recognized for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Yes, I myself am also rather disturbed that you, Mr. Gutshall, 

would be here to testify on this issue, Dodd-Frank. You are not a 

bank that is too large to fail, but you are a community bank and 

a darned good one, I would say, one that is a 17-year-old community bank, assets of $800 million. You are the number four in terms 

of market share with respect to deposits in the Roanoke Metropolitan Statistical Area, surpassing even Bank of America within that 

area. So for a 17-year-old bank to do that, I think if we have banks 

that are the backbones of the Main Streets throughout America 

that are as well run as yours, America would be in great shape. 

So I do appreciate you and I appreciate community banks in general. In fact, when I was a practicing lawyer, my accounts were at 

a local community bank. So I am a community bank guy. 

And I don’t understand why the majority, or the folks on the 

other side, would bring a community banker up here to help in the 

effort to get rid of Dodd-Frank which is mostly concerned with 

banks that are ‘‘too big to fail’’. And I know that community banks 

have a lot of regulations that they have to abide by, and there are 

certainly more regulations that have been applied to the ‘‘too big 

35 

to fail’’ entities. And I think they should be the ones up here to talk 

about over-regulated they are in the face of $9 billion losses like 

JP Morgan has admitted to, finally. I think they are the ones who 

should be here sitting in your chair. We should be talking about 

community banks specifically, how we can help them become more 

competitive with these ‘‘too big to fail’’ entities, which it seems like 

that is basically who my colleagues on the other side of the aisle 

are concerned about. So why bring you up here as a sheep in wolf’s 

clothing kind of? We don’t buy that. We really don’t buy that. 

But, look, what impact did the repeal of Glass-Steagall have on 

this ‘‘too big to fail’’ problem that it seems like it is getting even 

larger with a $9 billion loss? It was $2 billion just a few weeks ago 

when it was announced. It was announced, I think, on Friday and 

then on Monday it was a $3 billion loss, and now several weeks, 

it is a $9 billion loss and no end in sight is what I am hearing. 

What impact did the Glass-Steagall repeal have on Wall Street and 

the ‘‘too big to fail’’ phenomenon, Mr. Pollock? 

Mr. POLLOCK. Congressman, with specific reference to the JP 

Morgan trading embarrassment, I think the answer is none as far 

as—— 

Mr. JOHNSON. Well, I am talking about—— 

Mr. POLLOCK [continuing]. Activity could be done—— 

Mr. JOHNSON. I am talking about on Wall Street in general, the 

Wall Street meltdown back in—— 

Mr. POLLOCK. I understand. 

Mr. JOHNSON. Yes. 

Mr. POLLOCK. And with respect to—— 

Mr. JOHNSON [continuing]. Contribute to Freddie Mac and 

Fannie Mae. 

Mr. POLLOCK. Glass-Steagall had little or nothing that I can 

think of to do with Fannie Mae and Freddie Mac. 

Mr. JOHNSON. Did Fannie Mae and Freddie Mac trade in derivatives, by the way? 

Mr. POLLOCK. Yes. They were major users of derivatives and, as 

you know, had a large accounting scandal about derivatives that 

cost the management their jobs. 

Mr. JOHNSON. And we need to regulate that kind of trading especially when it is for the account of the entity itself. Is that not correct? 

Mr. POLLOCK. Well, all of these things are happening inside regulated entities, Congressman. I think overall if you look—— 

Mr. JOHNSON. But not in the community banking sector, though, 

is it? 

Mr. POLLOCK. It certainly isn’t. They have their own and different—— 

Mr. JOHNSON. They do it the old-fashioned way. 

Mr. POLLOCK. Well, if they do it right, it is old-fashioned, and 

that is another thing I applaud. 

And if I could just say so also, Congresswoman, in the couple 

thousand pages of Dodd-Frank, there are only two provisions which 

I fully support. 

Ms. WATERS. Say it real loud. [Laughter.] 

Mr. JOHNSON. You already had your 10 minutes, Congresswoman. [Laughter.] 

36 

But anyway, Professor Levitin—— 

Mr. GOODLATTE. The time of the gentleman has expired. Without 

objection, the gentleman is recognized for 1 additional minute. 

Mr. JOHNSON. Thank you. 

Professor. 

Mr. LEVITIN. Regarding Glass-Steagall? 

Mr. JOHNSON. Yes. 

Mr. LEVITIN. I think there are two effects that are important to 

note. 

First, Glass-Steagall separated investment banking from commercial banking. Putting them back together exposes insured deposits—in other words, the government ultimately—to risk taking 

that banks do in investment banking, and that is a problem. 

Secondarily, and I think—— 

Mr. JOHNSON. Subject to the $250,000 per account. 

Mr. LEVITIN. Yes. 

Mr. JOHNSON. Yes. 

Mr. LEVITIN. Secondarily—and I think often overlooked on this— 

is a political effect that was lost. Glass-Steagall divided the financial services industry. And if you go back 30 years or so, 40 years, 

you would see that the commercial banks and the investment 

banks and the life insurance companies didn’t get along. They 

would fight with each other. They would fight with each other on 

legislation. They would fight about regulations and they would litigate. And this affected the way their lobbying worked because they 

were not presenting a unified lobbying front that if you took a position that was adverse to the commercial banks, the investment 

banks would love you and vice versa. 

What has happened is that they have found that it is easier to 

unite and be a united front, and what that does is it makes it much 

harder, I think, politically for Members of Congress and for regulators to prevent deregulation. What we have seen with the demolishment of Glass-Steagall is really a politically united financial 

services industry, and I think that is a huge impact that really has 

not been noticed. 

Mr. GOODLATTE. The time of gentleman has expired. 

The gentlewoman from Texas, Ms. Jackson Lee, is recognized for 

5 minutes. 

Ms. JACKSON LEE. I thank the Chairman and the Ranking Member for this hearing. 

And I would like to start out, I think as many have started out, 

to indicate to the panelists that I appreciate their testimony and 

I appreciate Mr. Gutshall’s representation of community banks. 

And just for the record, I want to acknowledge the vital role that 

community banks play and the interest and commitment that your 

customers, clients, have. They love their banks. I love my community banks that are in my constituency and work very closely with 

them. And I want to see them as strong—and as I noted by one 

of my colleagues, your record is certainly strong in terms of assets. 

Many others have strong assets. 

And so as we are debating the health care repeal—and you 

would ask the comparison—I always recognized that bills passed 

are not in their most perfect form. And we work through the legislative initiatives to ensure that we do address concerns needing to 

37 

be concerned. I certainly don’t want to see a repeal of the Affordable Care Act. I want to see the bill implemented to save lives. 

Dodd-Frank has the same basis. One might not say saving lives, 

but those who have fell victim to some of the excesses of some of 

our huge, multinational banks might think that they are in fear of 

their lives. They have lost their assets. Small businesses don’t have 

access to resources. Major foreclosures, still an epidemic, if you 

will, in the financial structure where people’s homes are still being 

foreclosed. 

Not having heard your testimony—and I apologize for being delayed in another hearing, but I will be posing a question to you as 

to singularly some item that might be responsive to some of the 

concerns. As you well know, you are a bigger community bank. 

There are certainly a lot smaller ones that many of us work with, 

but we do believe you are enviable to an asset to the financial system. 

So I am first going to go, however, to Dr. Levitin. And tell me, 

as you look at the FSOC and its intent—and I just want to read 

its name into the record because maybe if we heard its name, Financial Stability Oversight Council, that is a good-sounding purpose, at least if you take the words literally. But it has gotten in 

the eye of the storm. The President had to do a response through 

his own presidential authority, which I support. But tell me what 

good can come to Mr. Gutshall with this kind of structure, even 

though it seems to focus on—it seems to have a consumer protection element, of course, but what is your perspective on that? 

Mr. LEVITIN. I want to make sure that we are speaking about the 

same thing: the Financial Stability Oversight Council or the Consumer Financial Protection Bureau? 

Ms. JACKSON LEE. I want to speak about both of them. So let me 

start with the Consumer Protection Bureau first. Thank you. 

Mr. LEVITIN. Sure. 

With the Consumer Financial Protection Bureau, the first good 

thing that can come to community banks is the creation of the 

CFPB levels the regulatory playing field between banks and nonbanks. Non-banks compete in all kinds of consumer finance activities, and before the creation of the CFPB, they were very thinly 

regulated. Now they are subject to examinations just like community banks are, and this means that they are going to have to bear 

the same kind of regulatory costs as community—— 

Ms. JACKSON LEE. Could you pause for a moment? Mr. Gutshall, 

does that help you? 

Mr. GUTSHALL. It does. I think that is a step in the right direction, and they were the ones who should have been looked at at the 

beginning. 

Ms. JACKSON LEE. And those are entities that deal in real estate 

matters and other things or financial products, let me just say, that 

would overlap. 

Mr. GUTSHALL. Most of the overlap—I think where we saw problems was in the mortgage business. The brokerage outfits did push 

the banks, especially community banks, out of the mortgage business. 

Ms. JACKSON LEE. I see common ground. Let me move on to the 

Financial Stability Oversight Council, Professor. 

38 

Thank you, Mr. Gutshall. 

Mr. LEVITIN. The Financial Stability Oversight Council you can 

think of sort of a justice league of regulators, that it is a collection 

of various financial regulators. And I think the real benefit for community banks from having the Financial Stability Oversight Council is that the FSOC is going to designate which institutions it believes are systemically important, and then it is required to impose 

additional regulation on those institutions. 

Ms. JACKSON LEE. So let’s get to the bottom line. Can we find 

common ground for a banking structure of the community banks, 

juxtaposed to ‘‘too big to fail,’’ as compatible with Dodd-Frank? 

Would you find that they can actually find common ground and 

find a positive response to their needs as opposed to a negative response? 

Mr. LEVITIN. I would think that there are numerous provisions 

in Dodd-Frank that would be good for community banks. There is 

some increased regulatory burdens. There is no question about 

that. But there is also a lot of things that help community banks 

by leveling the playing field between either community banks and 

‘‘too big to fail’’ banks or community banks and non-banks. And I 

think those things are really good for—— 

Ms. JACKSON LEE. Is the regulatory scheme one that can be 

ironed out, for lack of a better term? Is it something that we should 

be looking at there critiquing and not undermine the bill but be 

able to respond to it? 

Mr. LEVITIN. I think that if community banks have particular 

provisions in Dodd-Frank that they are concerned about, those provisions should be examined, but concerns about community banks 

are not an excuse for a wholesale repeal of Dodd-Frank. 

Ms. JACKSON LEE. I would just conclude by saying, Mr. Gutshall, 

we look forward to working with you. You have great value. I am 

glad to hear that are some components that work for you. Can we 

not work with the association that represents many community 

banks and look at it as to how we structure some of the review— 

and I have no commitment that anyone would want to review it— 

but some of the review to constructively make sure we have this 

structure in place but respond to your concerns? 

Mr. GUTSHALL. I think we can and I appreciate that. Most community bankers are concerned about the commoditization of banking. And a lot of times when we win customers, it is because we 

are more agile. We offer more options. It is just not plain vanilla 

cookie cutter stuff, and it is very important that community banks 

be allowed to continue to do that not only in the residential mortgage business but also in the business-related credit. 

Ms. JACKSON LEE. Discretion is important in your business. It 

really is. 

Mr. Chairman, I believe that I missed getting Mr. Pollock, but 

I am sure he has absorbed the Q&A that I just engaged in and he 

finds common ground to be able to support Dodd-Frank and sees 

its great value. So I am sorry, Mr. Pollock, I did not get a chance 

to seek any answers from you. [Laughter.] 

But I have already gotten agreement and I am going to yield 

back right now. Thank you. I yield back. 

39 

Mr. GOODLATTE. The time of the gentlewoman has expired, and 

the Ranking Member, the gentleman from North Carolina is recognized. 

Mr. WATT. Thank you, Mr. Chairman, and I thank my colleagues 

for being here for the hearing. 

I guess I better give Mr. Pollock a chance to tell us which two 

provisions in the Dodd-Frank bill—— [Laughter.] 

He considers good. I am just doing cleanup now since I deferred 

to all the other Members till last. So go ahead and let’s put that 

in the record here. 

Mr. POLLOCK. Thank you, Ranking Member Watt. 

One is, as previously discussed, the exemption from SarbanesOxley, another regulatory expansion bill. For small public companies, I think that was a very good idea. I am in support of that. 

The other is not allowing bank regulation to require the use of 

credit ratings by credit rating agencies since credit rating agencies 

were, as I said, a government-sponsored duopoly with Standard & 

Poor’s and Moody’s. However, that second provision actually needs 

a slight amendment which I recommend in my written testimony 

to help—— 

Mr. WATT. I will be sure and take a look at that. And I assume 

we would be taking that up in Financial Services not in Judiciary. 

So I am glad to get those two points into the record. 

I want to publicly agree with Mr. Pollock that we never thought 

that Dodd-Frank would prevent any future financial crises. History, based on the research we were doing, and all of the studies, 

when we were doing Dodd-Frank, indicated that every 27 years or 

so, there is going to be a crisis because you regulate and then you 

deregulate, and the profit motive becomes a lot more salient than 

the regulatory motive. And over time, that is what has happened 

throughout the history of our country. So we are figuring DoddFrank is good for maybe 27 years if we are lucky. So I agree with 

you. 

The final point I want to make is also something that you said. 

You seem to applaud the value of ‘‘know your customer’’ in one of 

your comments. I just wanted to remind you that I was the Chair 

of one of the Subcommittees when we were dealing with ‘‘know 

your customer,’’ and it requires substantial regulations. All of the 

banks were complaining about the regulations that went with 

‘‘know your customer.’’ So the good, old days ain’t as good as they 

seem sometimes. 

So I appreciate all of you being here. I didn’t think much of the 

hearing, as I said in my opening statement, but you know, sometimes even good things come out of bad hearings. 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman for his admission that 

good things come out of the hearings that are scheduled in this 

Committee, and I happen to agree with that. 

And I would like to thank our witnesses for their testimony 

today. 

And without objection, all Members will have 5 legislative days 

to submit to the Chair additional written questions for the witnesses which we will forward and ask the witnesses to respond as 

40 

promptly as they can so that their answers may be made a part 

of the record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

And with that, I again thank the witnesses. 

Mr. WATT. Mr. Chairman, might I ask that we just put into the 

record the study that Ms. Waters was making reference to so that 

we get that preserved in the record? 

Mr. GOODLATTE. Certainly. Without objection, the study will be 

made a part of the record. 

Ms. WATERS. It is entitled ‘‘Impact of the Dodd-Frank Act on 

Community Banks.’’ 

Mr. GOODLATTE. Great. If you will provide a copy of that to Committee staff, we will make sure it is made a part of the record. 

[The information referred to follows:] 

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74976A-1.eps
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74976A-2.eps
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74976A-3.eps
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Mr. GOODLATTE. And I thank the witnesses and declare the hearing adjourned. 

[Whereupon, at 5:32 p.m., the Subcommittee was adjourned.] 

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