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WHO’S IN YOUR WALLET? DODD-FRANK’S 

IMPACT ON FAMILIES, COMMUNITIES, 

AND SMALL BUSINESSES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 19, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–146 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

RANDY NEUGEBAUER, Texas, Chairman 

MICHAEL G. FITZPATRICK, Pennsylvania, 

Vice Chairman 

PETER T. KING, New York 

MICHELE BACHMANN, Minnesota 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEPHEN LEE FINCHER, Tennessee 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

STEPHEN F. LYNCH, Massachusetts 

MAXINE WATERS, California 

JOE BACA, California 

BRAD MILLER, North Carolina 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 19, 2012 ..................................................................................................... 1 

Appendix: 

July 19, 2012 ..................................................................................................... 49 

WITNESSES 

THURSDAY, JULY 19, 2012 

Del Rio, Deyanira, Chair, Board of Directors, Lower East Side People’s Federal Credit Union ................................................................................................. 19 

Flores, Michael, Chief Executive Officer, Bretton Woods, Inc. ............................ 8 

Johnson, Garrick ‘‘Gary,’’ President, American Flooring Installers, LLC, on 

behalf of the Ohio Hispanic Chamber of Commerce ......................................... 15 

Min, David K., Assistant Professor of Law, University of California Irvine 

School of Law ........................................................................................................ 17 

Purcell, Jim R., Chairman and Chief Executive Officer, The State National 

Bank of Big Spring, Texas ................................................................................... 10 

Sharp, Jess, Managing Director, Center for Capital Markets Competitiveness, 

U.S. Chamber of Commerce, on behalf of the U.S. Chamber of Commerce 

and the Coalition for Derivatives End-Users ..................................................... 13 

Smith, Gregory W., Chief Operating Officer and General Counsel, the Colorado Public Employees’ Retirement Association (CoPERA) ............................. 22 

Smith, Lynette, President and Chief Executive Officer, Washington Gas Light 

Federal Credit Union, on behalf of the National Association of Federal 

Credit Unions (NAFCU) ...................................................................................... 11 

APPENDIX 

Prepared statements: 

Del Rio, Deyanira ............................................................................................. 50 

Flores, Michael ................................................................................................. 55 

Johnson, Garrick ‘‘Gary’’ .................................................................................. 59 

Min, David K. ................................................................................................... 64 

Purcell, Jim R. .................................................................................................. 78 

Sharp, Jess ........................................................................................................ 84 

Smith, Gregory W. ............................................................................................ 90 

Smith, Lynette .................................................................................................. 100 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capuano, Hon. Michael: 

Forbes article entitled, ‘‘What’s In Your Wallet? If It’s a Capital One 

Card, You May Be Due a Refund,’’ dated July 18, 2012 ........................... 133 

Article from The Wall Street Journal entitled, ‘‘Financial Crisis Amnesia,’’ dated March 1, 2012 ............................................................................. 135 

Neugebauer, Hon. Randy: 

Letter from Bill Cheney, President & CEO of the Credit Union National 

Association (CUNA), dated July 19, 2012 ................................................... 138 

(1) 

WHO’S IN YOUR WALLET? 

DODD-FRANK’S IMPACT ON 

FAMILIES, COMMUNITIES, 

AND SMALL BUSINESSES 

Thursday, July 19, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:03 a.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Fitzpatrick, 

Pearce, Posey, Renacci, Canseco, Fincher; Capuano, Baca, Miller of 

North Carolina, and Carney. 

Ex officio present: Representative Frank. 

Also present: Representative Green. 

Chairman NEUGEBAUER. The Subcommittee on Oversight and Investigations will come to order. Today’s hearing is entitled, ‘‘Who’s 

in Your Wallet? Dodd-Frank’s Impact on Families, Communities, 

and Small Businesses.’’ I want to thank our witnesses for being 

here today, particularly Mr. Purcell, who is from the 19th Congressional District of Texas. 

Thank you for being here this morning. 

There are a lot of different ways that the government can get in 

your pocket, and I think most people think about taxes as the primary way because basically the government gets to determine how 

much of your hard-earned money you get to keep. But what I think 

a lot of people underestimate is the cost of other ways that the government does that through regulations. 

I think one of the things that this Congress has been trying to 

focus on for a number of months now is jobs in this country. We 

still have a number of Americans who are out of work and we are 

looking for ways to help get those people back to work. 

For example, in my State of Texas, about 98 percent of the employers in Texas are small businesses. I will tell you, in the 19th 

Congressional District, that is probably a higher number, because 

we just have a bunch of really hard-working small business people, 

many multi-generational businesses that have worked hard to 

build those businesses up. We don’t have a big Toyota plant in the 

19th Congressional District. But these small businesses are a 

major job creator for us. 

2 

And so what small businesses rely on is access to capital, and obviously our community banks have been the primary provider of 

that capital. When you look at the small business loans in this 

country, most of those loans are under $100,000. And while that is 

not a small amount of money, for many banks that would be a relatively small loan. 

But to those businesses it is a very important loan, and so we 

want to make sure that as we move forward, we are not part of 

the problem of inhibiting the financial communities, particularly 

our community banks, from providing important lending opportunities, but also serving the customers. I was talking to someone the 

other day, and in many of the smaller communities across my district, with the consolidation that has happened in the agricultural 

business, there is a smaller number of farmers farming a lot more 

acres. And so a lot of those communities that used to be a lot larger 

because there were more farm families are smaller now. And in 

many cases, the small community bank is one of the last large corporate citizens in those communities, and is important not only as 

a provider of capital but for other financial services for those individuals. 

What I am hoping to accomplish with this hearing today is that 

I think there has been a lot of focus on Wall Street, but what we 

really know is that Main Street is where ultimately all of the cost 

and burden of regulation tends to fall. We don’t think about the 

fact that we raise the cost of the asphalt in the parking lot at the 

supermarket if we begin to tinker with some of these markets, or 

that the cost of buying or financing a car, the cost of your groceries, 

the commodities, and the availability of certain banking services 

where in many cases those used to be provided free now are at a 

cost. 

And so, there are costs to that. What I would hope to accomplish 

with this hearing today is to begin to identify some of these costs 

because I think on both sides of the aisle, we want to make sure 

that if we want to have regulation, we need to understand the consequences of that regulation. But also, we have had a lot of discussions about the cost and the benefit. You can make a car really, 

really, really safe, but if it costs $100,000 to make a car really, 

really safe, then how many people can afford the car? 

So I look forward to our discussion and our panel. I think we 

have a great panel today, and I want to thank you again for being 

here. 

And with that, I will now yield to the ranking member of the 

subcommittee, Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

And again, I want to thank the witnesses for being here as well. 

I know that some of you had to travel a long distance and I appreciate your efforts. 

I look forward to this hearing and the other hearings that are 

scheduled this week, as well. Again, Dodd-Frank—I don’t think 

anyone would suggest that Dodd-Frank was a perfect bill, certainly 

not by my measure, but perfection is really never the measure of 

anything. If it was, none of us would be elected, except of course 

for Randy—he might be, but the rest of us wouldn’t be. 

3 

And so therefore, we have to look for the cost-benefit analysis, as 

was said. But at the same time, costs are easy to measure. How 

much does it cost to hire a new person to do regulation? And that 

is a fair and important thing to look at. 

Benefits, on the other hand, are a little bit more difficult to 

measure. What are the benefits not just to the individual institution but also the economy as a whole? That is almost impossible 

to measure. 

And I fear that some people are suffering under a little problem 

of amnesia. Secretary Geithner wrote a nice little article in The 

Wall Street Journal a couple of months ago that talked about the 

amnesia of people who forget how we got to where we are, what 

inspired Dodd-Frank. It didn’t just come out of nowhere; it came 

out of a response to an economic crisis that was caused by a massive unregulated banking industry. 

And I don’t mean the regular banks like we all think of banks, 

but people who were totally unregulated in competition with regulated banks. They, as far as I am concerned, were more at fault 

than the regulated banks and they are now subject to some regulation. 

They took excessive risk. They had no-document loans—just giving out loans to people with no documentation whatsoever. Totally 

unacceptable. Predatory lending. Credit default swaps squared, and 

tripled, and all kinds of things which I have actually not yet met 

a human being who really understands. 

Off-balance sheet investments that nobody could find. Cozy relationships with regulators. Cozy relationships with credit rating 

agencies. 

All of that led us to the second worst recession in American history. Let’s not forget, we lost $19 trillion of household wealth—$19 

trillion. It wasn’t a small little bump, it was a big one: 9 million 

jobs lost, 10 million homes in foreclosure. 

It required some sort of a reaction and Dodd-Frank was an attempt to do that. I don’t think anyone would suggest that we have 

it perfect nor that anyone could get it perfect on the first draft. 

And let’s not forget that most of Dodd-Frank has not been implemented yet. It has not been implemented because of the normal 

course of time it takes to implement any new law and because of 

the attempts to cut back. As we are expanding the requirement responsibilities of the SEC, we are also—not we, but some people are 

proposing to cut their budget by 12 percent. 

Also, massively increasing and expanding the responsibilities of 

the CFTC, and suggesting to cut their budget by over 40 percent. 

That is ridiculous. Of course you can’t get things done when you 

are facing those situations. 

Seventy-five years ago, this country faced the worst economic 

problem that we have ever had and immediately thereafter, in the 

middle of it, a lot of people cried, ‘‘Oh, my God. These regulations 

are going to kill everything,’’ before most of them were implemented, by the way. And when they were implemented through the 

SEC and the other regulations that happened for 75 years we had 

the most stable economic environment in the history of mankind. 

We had the greatest expansion of economic wealth in the history 

of mankind. 

4 

And then we got into this thing: all regulation is evil; all regulation is terrible. Let me be very clear: No one in their right mind 

wants or supports excessive, overly burdensome regulation. No one 

that I know of would advocate for that, including me. 

However, no one in their right mind should forget what we just 

went through and therefore argue that nothing should have happened. No one in their right mind should say that we should have 

too little regulation. 

It is always an attempt to find a balance, and that is what I hope 

these hearings come up with is an attempt to yes, costs, but also 

some benefits—try to figure out what we have right, what we have 

wrong, and try to keep the good without throwing out the bad. 

And with that, Mr. Chairman, I yield back. And thank you very 

much for having this hearing. 

Chairman NEUGEBAUER. Yes. I thank the gentleman. 

And now the vice chairman of the subcommittee, Mr. Fitzpatrick, 

is recognized for 2 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

We are here today to examine how Dodd-Frank affects our constituents. Our constituents are everyday people who don’t work on 

Wall Street, and who don’t deal in complicated financial products 

or sit at trading desks of investment banks. 

The law may have been designed to rein in Wall Street and regulate wealthier financiers, but the fact of the matter is that this 

2,300-page bill reaches into the pockets of just about every American. A lot of people may be surprised to learn that Dodd-Frank 

rules govern commodities and could cause prices to rise in everything from airline tickets to a six-pack of beer. 

There are also the effects of increased regulations on small financial institutions. Access to credit and even the ability to maintain 

a simple checking account could be jeopardized. Higher fees, increased costs, and reduced services are all naturally occurring byproducts of increased regulation, and these costs are not going to 

be borne simply by the customers of financial institutions but they 

are going to be felt across the economy because this bill crosses into 

so many areas of American life. 

We should all expect a well-regulated financial system that is 

free of fraud and abuse and includes robust consumer protections. 

The 2008 crisis was an event that exposed flaws in our markets 

and should absolutely have led to policy changes. However, as happens so often in Washington, this opportunity to work together on 

needed reform resulted in a bill rife with unintended consequences. 

So I look forward to today’s hearing, and continuing to work with 

all of our colleagues on financial reform that does more good than 

harm. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the ranking member of the full Financial Services Committee, Mr. Frank, is recognized for 3 minutes. 

Mr. FRANK. Thank you, Mr. Chairman. I am struck by what 

seems to me to be a nice irony in the title, ‘‘Who’s in Your Wallet?’’ 

Borrowing—given the looseness of intellectual property constraints 

here—from Capital One’s slogan, ‘‘What’s in Your Wallet?’’ And we 

learned from one of the agencies that many on the panel wish 

5 

never existed, the Consumer Financial Protection Bureau (CFPB), 

that what was in the wallet of many consumers were the hands of 

Capital One. So references to who is in whose wallet and for what 

purpose are very relevant to today’s hearing. 

The CFPB, in coordination with the OCC, just fined Capital One, 

which agreed to have—the fact that it had violated basic consumer 

rules. So yes, there are all kinds of people in the wallet. 

I see the testimony here from the U.S. Chamber of Commerce. 

Deja vu. In 2006, I was the chairman-in-waiting of this committee 

and in December, I was asked to come to a session of the U.S. 

Chamber of Commerce in which the point was—this is 2006—we 

are overregulating the financial industry. And we were told that we 

had to cut back, that if we did not cut back on Sarbanes-Oxley, the 

likelihood of IPOs ever being issued in America would be substantially diminished. And of course, they could not have been more 

wrong. 

One of the things we were told at the time by the Chamber and 

others was we should emulate the light touch regulation of the 

British Financial Services Authority, the people who have done, by 

their own admission, a fairly poor job of of not regulating when 

they should have regulated. 

I look here and I see complaints that we are overregulating mortgages, and there is a complaint from some of the people, I think, 

in the credit unions and elsewhere that we are being too tough in 

requiring payment standards for people who are taking out mortgages. I confess that I am surprised to hear that complaint. Given 

the unfortunate role that was played by laxity in mortgage standards in helping to bring this crisis about, I am surprised by that. 

I have also heard—I haven’t seen it yet here—some complaints 

that the bill’s requirement that those who securitize mortgages retain some of the risk is retarding mortgages. In fact, it is not in 

effect yet and it is not retroactive so it clearly cannot be blamed 

for retarding anything. But this resistance to tightening up mortgage standards is just odd to me, given what happened. 

And then, from the Chamber we also have complaints about the 

overregulation of derivatives, as if there never was an AIG, as if 

the problems that recently surfaced with JPMorgan Chase and others hadn’t existed. 

We have done some refinements and I will do some more, but 

this wholesale rejection of regulation of the financial industry, I 

would have to say to my friends at the Chamber, going back to 

2006, they remind me of the Bourbon, when the Restoration came 

in the 19th Century in France, and people said, they have forgotten 

nothing because they learned nothing. The notion that people 

would be repeating the argument in 2006 is really quite startling 

to me. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Texas, Mr. Canseco, is recognized 

for 2 minutes. 

Mr. CANSECO. Thank you, Mr. Chairman. 

Mr. Chairman, before I came to Congress last year, I spent most 

of my life in the private sector in banking, in real estate, and in 

law. One thing that continues to amaze me is the complete disVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
6 

connect between what goes on in Washington and the realities on 

the ground in our economy. 

Two years ago, we were given a lot of promises about DoddFrank, but the one that sticks out the most is the one that this bill 

would ‘‘bring greater economic security to families and businesses 

across the country.’’ All it takes is a 5-minute conversation with a 

community banker, a small businessman, or a credit-worthy family 

who can’t get a loan to comprehend just how badly this promise 

has been broken. 

The authors of Dodd-Frank told us that they had crafted reforms 

that were absolutely necessary, but when you pile hundreds of new 

rules on top of existing rules and give greater authority to the 

same regulators that missed the last crisis, calling it ‘‘reform,’’ suffice it to say that is a little ambitious. 

Mr. Chairman, the more we hear about Dodd-Frank the less 

there is to like, and I look forward to our committee’s continued examination of this bill during today’s hearing, and I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from California, Mr. Baca, is recognized 

for 2 minutes. 

Mr. BACA. Thank you very much, Chairman Neugebauer, and 

Ranking Member Capuano, for calling this hearing. 

And I also want to thank the witnesses for being here this morning. Thank you all. 

It has been almost 2 years since the passage of the Dodd-Frank 

legislation, yet we have not had an opportunity to implement all 

aspects of the Frank-Dodd legislation. So as we begin to look at it, 

it seems like from the other side of the aisle they want less regulations, but we have to keep in mind that the regulations are good 

because we have to protect the consumer and the stockholders, 

such as what happened with JPMorgan in that area. If we don’t 

have these regulations, then what is going to happen? 

It is important that we continue to protect them, to assure that 

the consumer is protected, and the stockholders are protected in 

the area. And I think having the regulations are very important. 

And while our economy has not yet fully recovered from the financial crisis that got us in this mess, I am proud that we now 

have the tools to prevent another crisis. That means having the 

tools to have the oversight and making sure that we have the enforcement. We have not done a lot of the enforcement that needs 

to be done. 

And it is easy to say, let’s not have these regulations. Well, look 

at what happened with the Supreme Court making the decision on 

independent expenditures that can be given out. Now, you have all 

kinds of independent expenditures that are going on, and everybody says, ‘‘I wish we could regulate them.’’ 

We need regulations. Regulations are important to a lot of us. 

And again, when the situation was made about buying a car, or 

not having access to credit, we want to make sure that the individuals who are getting credit are able to pay for whatever they are 

borrowing to, as well, because that is taxpayer money that is being 

used, and we have to protect taxpayer money. 

Instead, Congress needs to work together and—we need to all 

work together in trying to get our fiscal house in order, to comVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
7 

promise by making spending cuts, find new resources of revenue to 

support our economy. With that in mind, I hope that we can strike 

a tune instead of focusing on partisan talking points, and that 

seems like what you have heard on both sides here. 

Over reform, we need to stop the abuse and work together on 

trying to find solutions to make sure that we protect the American 

consumer and so they have more confidence in us. 

With that, I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New Mexico, Mr. Pearce, is recognized for 2 minutes. 

Mr. PEARCE. Thank you, Mr. Chairman. 

I am listening with interest to our friends on the other side of 

the aisle. I think my objection to what is occurring in Dodd-Frank 

is that regulators were sitting in the room with MF Global as they 

were making the decisions and no one said a word. Then, with 

JPMorgan, 57 regulators were in that building. 

I think if we were to tighten up the regulations that were in 

place, and then if we need more that would be fine. But what I am 

hearing now in New Mexico is that the safety and soundness interviews are no longer preeminent. They have been replaced by the 

compliance reviews, and they are telling me if they make a clerical 

error, they could face a $50,000 fine for a clerical error on something in New Mexico. 

Nobody in New Mexico caused the problem on Wall Street, and 

yet they are getting stuck with this regulation which causes—just 

this past weekend, I was visiting a small cabinetmaker in Grants, 

New Mexico. Grants is just decimated. Their economy is in horrible 

shape, and yet this guy—whose family started this little cabinet 

shop, his father did—couldn’t get a $50,000 loan. He has plenty of 

equity, and he has never been late on payments, but he couldn’t 

get a $50,000 loan to just kind of get him through these rough periods. So they are sitting there hiring fewer people, and laying people 

off. 

We hear that across New Mexico and I will guarantee that none 

of the problems on Wall Street originated there, but when it came 

time to regulate, we regulated the Main Street small banks and we 

let, say, Fannie Mae and Freddie Mac go completely unregulated. 

And so those are my objections. I agree with the friends on the 

other side of the aisle that we should be sitting here discussing it, 

but let’s hold the regulators accountable that are in the room allowing things to go on before we start laying on new regulations to 

people who weren’t even involved in the problems. 

I yield back my time. I thank the chairman for giving me the opportunity to speak. 

Chairman NEUGEBAUER. I thank the gentleman. 

I ask unanimous consent to make a letter from the Credit Union 

National Association a part of the record today. Without objection, 

it is so ordered. 

We will now turn to our panel: Mr. Michael Flores, chief executive officer for Bretton Woods, Incorporated; Mr. Jim Purcell, chief 

executive officer, the State National Bank of Big Spring, Texas; Ms. 

Lynette Smith, president and chief executive officer, Washington 

Gas Light Federal Credit Union; Mr. Jess Sharp, managing direcVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
8 

tor, Center for Capital Markets Competitiveness, U.S. Chamber of 

Commerce, on behalf of the Chamber and also the Coalition for Derivatives End-Users; Mr. Garrick ‘‘Gary’’ Johnson, president, American Flooring Installers, LLC, on behalf of the Ohio Hispanic 

Chamber of Commerce; Mr. David Min, assistant professor of law 

at the University of California Irvine School of Law; Ms. Deyanira 

Del Rio, chair of the board of directors, Lower East Side People’s 

Federal Credit Union; and Mr. Gregory Smith, chief operating officer and general counsel, Colorado Public Employees’ Retirement 

Association. 

Without objection, your written statements will be made a part 

of the record, and you will be each recognized for 5 minutes to summarize your testimony. 

Mr. Flores, you are recognized for 5 minutes. 

STATEMENT OF MICHAEL FLORES, CHIEF EXECUTIVE 

OFFICER, BRETTON WOODS, INC. 

Mr. FLORES. Thank you, Mr. Chairman. 

And good morning, members of the committee. 

My firm provides consulting and research services to commercial 

banks, credit unions, and alternative financial services providers. I 

have more than 30 years of experience in banking and consulting 

and have published several articles and studies on the financial 

services industry, including issues addressing overdrafts, shortterm credit alternatives, and general purpose reloadable prepaid 

and payroll cards. 

Because this hearing is about the consequences of Dodd-Frank on 

communities, small businesses, and individuals, I am here to describe both my analysis of the issue as well as to relate comments 

from my clients about their assessment. 

In general, while there is a need to address the causes of the financial meltdown in 2008, there are aspects of Dodd-Frank that 

are having a disproportionate and negative impact on financial 

services providers that played no role in the financial crisis. Small 

businesses and the 60-plus million low- to moderate-income consumers are particularly impacted. 

Contrary to making financial services more available, affordable, 

and consumer friendly, the increased restrictions and compliance 

costs are reducing services to small businesses and consumers, 

which ultimately has a negative impact on the economic well-being 

of the communities they serve. Additionally, many of the 6,700 

community banks and 7,000 credit unions are burdened with legacy 

operating costs and dated technologies that inhibit their ability to 

profitably serve their customers. Local small businesses and LMI 

consumers—low- to moderate-income consumers—suffer as a result. 

Resources that could be used to update technologies and create 

more efficient operations are now allocated to regulatory and compliance purposes. Both transaction accounts and credit options are 

impacted. Our own studies indicate that it is unprofitable for most 

banks and credit unions to individually underwrite loans under 

$5,000. 

The traditional options of overdrafts, credit card advances, and 

home equity loans are less viable today because of the poor econVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
9 

omy and regulations. With the reduction of overdraft and interchange fees, many banks have eliminated free checking accounts. 

The reduction of interchange fees has actually resulted in what I 

would term a wealth transfer from consumers to merchants. 

I contacted several of my clients to solicit their feedback on these 

issues. I have listed their quotes in my written testimony but will 

summarize the thoughts here. 

The consensus of the responses include, and it has been mentioned here by the Members: a substantial increase in compliance 

costs for banks and credit unions; increased fees for small businesses and consumers; decreased products and services; an increase in the number of underbanked, and now the new term ‘‘debanked’’ individuals; and a decrease in the number of branches in 

low- to moderate-income markets as banks attempt to reduce expenses. 

Other more specific comments include, ‘‘Of the almost 400 

rulemakings required by the law, only a quarter have been finalized, while 36 percent have not even been proposed.’’ A significant 

decline in traditional wholesale purchasers of residential mortgages 

from mortgage bankers and brokers reduces access to mortgage 

credit, particularly for those without an established relationship 

with a bank.’’ 

Something very specific but mentioned several times was that 

the requirement to get new appraisals and updated credit reports 

on renewals and existing loans creates extra costs to the consumer. 

This requirement is regardless of the market or strength of the customer. 

People talked about Section 1071 of Dodd-Frank having a 

chilling effect on small business lending. There are others that deal 

with unaffiliated network routing requirements on government 

benefits on prepaid cards as well as now the requirement to get 

State money transmitter licenses for prepaid card program managers. The remittance rule is going to drive up costs and reduce 

competition for consumer remittances to foreign countries. 

And of course, the limited functionality of prepaid cards from 

large issuers—those banks over $10 billion in assets. As a matter 

of fact, Congressman Frank, in a letter to Fed Chairman Bernanke 

dated February of this year, states that the Board’s decision to condition the reloadable prepaid card exemption from interchange fee 

restrictions on the card being the only means of access to the underlying funds associated with the card might inadvertently result 

in consumers not having access to useful features and services. 

Dodd-Frank has layered significantly more regulations over existing regulations to the point of making the traditional business 

model for community banks and credit unions almost unworkable. 

At the same time it is creating roadblocks to innovators such as alternative financial services providers who are working diligently to 

address the underbanked segment of our society. 

In essence, some provisions of Dodd-Frank are solutions looking 

for problems—problems that do not exist for the majority of financial institutions in this country. 

Thank you, and I look forward to answering your questions. 

[The prepared statement of Mr. Flores can be found on page 55 

of the appendix.] 

10 

Chairman NEUGEBAUER. Thank you, Mr. Flores. 

Mr. Purcell, you are recognized for 5 minutes. Thank you. 

STATEMENT OF JIM R. PURCELL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, THE STATE NATIONAL BANK OF BIG 

SPRING, TEXAS 

Mr. PURCELL. Thank you, Chairman Neugebauer, Ranking Member Capuano, and members of the subcommittee. I am Jim Purcell, 

CEO of the State National Bank in Big Spring, Texas. 

In order for you to understand a little bit about me, I was raised 

on a ranch in eastern New Mexico. I was about 20 miles from the 

town of San Jon, and for those who do not know where San Jon, 

New Mexico is, it is a bastion of 300 or 400 people and it is right 

between—or was when I was there—‘‘Rest Stop’’ and ‘‘Resume 

Speed.’’ So, it was not a very large place. 

When I started the first grade, my teacher had some things to 

teach us, and one of the first things was, what do you do when you 

come to a railroad crossing? You stop, look, and listen. 

I would humbly urge you to do the same with regard to this bank 

regulation, and more particular, to the Dodd-Frank Act. Currently 

this Act, and inclusion of the CFPB, has and will have implications 

on community banks across America, much more than what was 

stated when it was passed and much more than I could have 

dreamed would affect us. 

In quoting Senator Dodd, ‘‘Community banks which were not responsible for the crisis will pay lower premiums for deposit insurance and continue to work with their existing regulators. And in 

a nation with more than 6,000 banks, the bulk of the bill’s new regulations apply only to a few dozen of the largest ones.’’ 

Jennifer Kelly, Senior Deputy Comptroller for Mid-Size and Community Bank Supervision of the OCC stated, ‘‘Regardless of how 

well community banks adapt to Dodd-Frank Act reforms in the 

near to medium term, these new requirements will raise costs.’’ 

The President’s Executive Order of January 18, 2011, urged independent agencies to propose a regulation only upon a reasoned determination that its benefits justify its cost. When the stated goals 

by both the proponents and opponents of Dodd-Frank disclosed that 

community banks weren’t the problem and shouldn’t be affected, 

we should have a clear starting point to undo the harm and consequences of this legislation. 

State National Bank is over 100 years old. We have survived 

droughts, depressions, and recessions, and our motto after the 

1930s bank holiday was ‘‘time-tried and panic-tested.’’ We have had 

examples of time-tried and panic-tested recently in the last 4 or 5 

years. 

We have had customers who went out of business in the 1950s 

drought, and then came back in the 1970s and paid their obligations. We have had customers who sold all of their collateral and 

paid what they could on their notes in the mid-1980s during the 

Texas bad days and they are continuing to make payments with no 

collateral, never missing a payment for 24 years. 

We have relied on our handshake for over 100 years. That is a 

commitment of trust and loyalty and commitment both to our customers and from our customers. 

11 

In the past, we have wired money to Europe, to a stranded foreign exchange student or to a retiree whose purse was stolen. We 

didn’t know the exchange rate in Spain or France. We didn’t know 

the fee that was being charged upon receipt. But we did know our 

customer needed help and we provided that. 

This month, we had a customer who had a family problem and 

a need in Mexico. We could not wire him the money because we 

did not know the exchange rate or the fees which we would be 

charged if we abided by the proposed rule. 

Our bank, through the years, has made consumer real estate 

loans to purchase and occupy the home in which they would live. 

We never sold the loans; we serviced the loans. We didn’t charge 

any application fees, origination fees, or any other type of fee. 

They were typically 5-year balloon notes, which under the proposal would not be allowed. We would have the customer put up 

20 percent, and we would put up 80 percent. 

If a customer paid his own taxes and insurance, if he paid as 

agreed, we would renew the loan, keeping the payment schedule 

the same. That is how it was then; that is not how it will be under 

the proposals. 

Now, our customers have a dilemma: Where do we turn? Loyalty, 

service, our bank knowing our character, simple solution for simple 

needs will be the sacrifices. 

They will end up getting toll-free numbers, and application fees. 

They will get to speak to more people with one problem than what 

we even employ at our bank. 

And then the next question comes, do we move all of our business to that megabank? Our bank’s compliance costs continue to increase with the CFPB. We are starting with 40 years worth of regulation and adding to that. 

But who pays the price? When you disregard the needs of the 

community and the customer to make everyone the same, who suffers? The customer pays the price of additional compliance or the 

product will be sacrificed. 

I would like to ask you to do the same thing that my first grade 

teacher, Ms. Olen, said: Stop, look, and listen. If we continue to disregard reality and stack regulation upon regulation with no 

thought of the consequences, we will not be able to cross the proverbial track to serve our customers. 

I thank you for the time, and I hope that this makes a difference. 

[The prepared statement of Mr. Purcell can be found on page 78 

of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Purcell. 

Ms. Smith, you are recognized for 5 minutes. 

STATEMENT OF LYNETTE SMITH, PRESIDENT AND CHIEF EXECUTIVE OFFICER, WASHINGTON GAS LIGHT FEDERAL 

CREDIT UNION, ON BEHALF OF THE NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS (NAFCU) 

Ms. LYNETTE SMITH. Good morning, Chairman Neugebauer, 

Ranking Member Capuano, and members of the subcommittee. My 

name is Lynette Smith and I am testifying on behalf of NAFCU. 

I serve as the president and CEO of Washington Gas Light Federal Credit Union in Springfield, Virginia. We have 8,000 members 

12 

and we are $87 million in assets. Thank you for the opportunity 

to testify here today about the impact the Dodd-Frank Act has had 

on credit unions. 

Credit unions were not the cause of the financial crisis. Still, 

they are significantly impacted by Dodd-Frank, such as being subject to the rulemaking authority of the new CFPB. 

We are very concerned that efforts in Dodd-Frank to reign in bad 

actors and greed on Wall Street will inevitably have a negative impact on credit unions, especially when it comes to regulatory and 

compliance burdens. One of the biggest impacts Dodd-Frank has 

had on credit unions comes from the debit interchange price cap. 

Market forces have already seen some credit unions begin to have 

higher debit card costs and declining interchange revenue. 

Many of the regulations flowing out of Dodd-Frank are well-intended. However, for credit unions, they are often a solution in 

search of a problem. 

I cannot overemphasize how burdensome and expensive DoddFrank-related compliance costs will be for credit unions. We can 

only hope Congress will urge regulators to do more robust cost-benefit analysis of potential regulations and look for areas to streamline. More importantly, we hope that they will follow up once the 

regulations are in place and make changes if these costs are too 

high. 

Washington Gas Light has a staff of 17. My employees and I already spend countless hours trying to comply with the never-ending changes to laws and regulations. 

My credit union is healthy, growing, and we have very good loan 

demand. Still, rather than looking to hire a new loan officer, the 

growing compliance burden means that I must first look to hire a 

compliance officer. While we still try to make the loans to our 

members’ needs, the staff time dedicated to compliance means that 

members have to wait longer for their loans. 

Under the Dodd-Frank Act, the Financial Stability Oversight 

Council has a duty to facilitate regulatory coordination. We hope 

that you will take this duty seriously, for it is not any single regulation but an accumulation of regulations from numerous regulators operating independently of each other that magnifies the 

regulatory burden credit unions face today. 

Attached to my written testimony is a letter NAFCU sent to 

Treasury Secretary Geithner last month on this issue. The CFPB 

remittance rule is nearly 800 pages and only exempts those making 

fewer than 25 transfers per year. 

A NAFCU survey found that nearly 84 percent of those credit 

unions that provide remittances make more than 25 transfers a 

year and a majority of those barely break even or will have to operate at a loss. The new compliance costs for this rule may force 

many of the credit unions and financial institutions to eliminate 

this service. 

The CFPB recently released its semi-annual regulatory agenda, 

which outlines 27 different areas where potential rulemaking may 

occur in the future. It will be very challenging for my staff because 

we are limited in resources. I am not sure how I will keep up. 

In conclusion, while credit unions were not the problem, the 

Dodd-Frank Act impacts credit unions in many ways and it is inVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
13 

creasing their regulatory burden. Congress must continue vigorous 

oversight and look for ways to act on regulatory relief. Regulators, 

on the other hand, must also accept responsibility for this regard 

and the newly created FSOC should make regulatory coordination 

part of its focus. 

Thank you for your time, and for the opportunity to testify here 

before you today. I will welcome any questions you may have. 

[The prepared statement of Ms. Smith can be found on page 100 

of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Mr. Sharp, you are recognized for 5 minutes. 

STATEMENT OF JESS SHARP, MANAGING DIRECTOR, CENTER 

FOR CAPITAL MARKETS COMPETITIVENESS, U.S. CHAMBER 

OF COMMERCE, ON BEHALF OF THE U.S. CHAMBER OF COMMERCE AND THE COALITION FOR DERIVATIVES END-USERS 

Mr. SHARP. Chairman Neugebauer, Ranking Member Capuano, 

and members of the subcommittee, it is a pleasure to be here with 

you this morning. 

My name is Jess Sharp. I am the managing director of the U.S. 

Chamber’s Capital Market Center, and I am here today representing more than 300 end-user companies and dozens of trade 

associations that have been active in the Coalition for Derivatives 

End-Users. The Coalition represents companies across the economy 

in manufacturing, agriculture, energy, and other sectors all united 

in one respect: They use derivatives to manage risk, not to create 

it. 

Throughout the legislative and regulatory processes of the DoddFrank Act, the Coalition has advocated for strong regulation that 

brings transparency and stability to the derivatives market while 

avoiding needless costs on end users. 

So how do end users use derivatives and why is that relevant to 

consumers? Many auto manufacturers, for example, use derivatives 

to manage commodity, foreign exchange, and interest rate risk resulting from the design, manufacture, sales, and financing of vehicles. The price of commodities used in production, such as aluminum and copper, fluctuate with the market, so companies can 

use derivatives to lock in prices and long-term supply arrangements sometime years in advance of delivery. 

On the revenue side, manufacturers that export their products 

need to hedge currency exposure that arises from production costs 

being in U.S. dollars and revenue in pesos, or Canadian dollars, or 

Euros, and they can use derivatives like foreign exchanges swaps 

to do that. 

Auto manufacturers and other big equipment manufacturers—for 

instance, in the construction or agriculture world—also finance the 

sale of their products. Derivatives enable these companies to match 

the interest rate characteristics of the funding available from the 

capital markets to put together their loan portfolios with the financing needs of their customers. 

The energy company members of the Coalition also rely on derivatives heavily because of the nature of the business of energy 

production and transmission. For example, in the case of electricity, which must be produced and consumed simultaneously, canVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
14 

not be stored, and has huge exposure to fuel markets in coal, natural gas, and uranium, those physical energy markets are volatile 

and unpredictable, but hedging with derivatives allows energy companies to lock in prices and provide thousands of customers with 

electricity and natural gas at a low fixed price. 

So these are just a few examples of the ways in which end users 

use derivatives, and I want to talk quickly just about the impact 

of Dodd-Frank and sort of where we are today. As I said at the top, 

the Coalition has been supportive of increased transparency in the 

OTC market and we are fully supportive of the overall move toward clearing and exchange trading. That is not something with 

which we have argued. 

However, we do remain concerned that a few regulations that 

were never intended by Congress to affect Main Street companies 

will make derivatives either more expensive or altogether unavailable for end users. 

Now, the good news is we have seen very, very strong bipartisan 

support for measures that would shield Main Street businesses 

from this kind of regulatory overreach. This committee has been a 

very good ally for end users. 

And I would like to thank you for your hard work in passing two 

bills in particular through the House that have addressed some of 

these unintended consequences, or would if enacted. The first, H.R. 

2682, which this committee approved unanimously and the full 

House approved 370 to 24, creates an exemption for margin requirements for nonfinancial businesses. 

Imposing unnecessary margin requirements on these nonfinancial end users would divert working capital away from productive business use. And again, despite clear evidence that Congress 

did not intend for regulators to impose margin requirements on end 

users, the prudential banking regulators have proposed to do so, 

and this would be a huge capital drain from the economy and could 

be a jobs issue, as well. 

And I would point out that this week, Chairman Bernanke did 

address this issue in testimony and said that he would be supportive of the legislation that has passed the House. 

A survey by the Coalition, just to put a fine point on the impact 

here, found that imposing a 3 percent margin requirement on OTC 

derivatives could cause the loss of 100,000 to 120,000 jobs and reduce capital spending by up to $6.7 billion, and that is just extrapolated to the S&P 500. So the passage of H.R. 2682 in particular 

will help shield Main Street businesses from these huge cash calls 

that they are very concerned about, which could be a reality if 

these regulations are finalized as is. 

The second bill, H.R. 2779, which this committee also approved 

unanimously and passed the full House 357 to 36, prevents internal interaffiliate trades from being subject to regulatory burdens 

that were intended to market-facing swaps and will ensure that 

companies are not forced to abandon hedging through central risk 

mitigation centers. These centralized risk mitigation centers generate economic savings by allowing U.S. companies to manage commercial risk more efficiently and secure better pricing for derivatives transactions. And this savings can be either passed on to conVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
15 

sumers or they can use that savings to grow their businesses and 

create jobs. 

The overwhelming bipartisan and collegial process that led to the 

passage of these two bills in the House demonstrates that these 

two bills provide noncontroversial approaches to helping grow businesses and improve the economy through end-user companies. So, 

we are hopeful that the Senate will take up and pass these bills 

quickly. 

Ensuring that congressional intent is followed is paramount 

here, and if legislation is not enacted to clarify the statute’s intent, 

end users could use the critical management tools, and that is bad 

for Main Street businesses, it is bad for their customers, and it is 

bad for the economy. 

Thank you. I am happy to respond to your questions. 

[The prepared statement of Mr. Sharp can be found on page 84 

of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Sharp. 

Mr. Johnson, you are recognized for 5 minutes. 

STATEMENT OF GARRICK ‘‘GARY’’ JOHNSON, PRESIDENT, 

AMERICAN FLOORING INSTALLERS, LLC, ON BEHALF OF 

THE OHIO HISPANIC CHAMBER OF COMMERCE 

Mr. JOHNSON. Good morning, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee. My name is 

Gary Johnson, and I am the owner, president, and CEO of a small 

but fast-growing construction business in Toledo, Ohio. It is called 

American Flooring Installers. 

I am testifying today on behalf of the Ohio Hispanic Chamber of 

Commerce, where I am currently the chairman. The primary objective of our Chamber is to promote the development and continued 

growth of Hispanic businesses in the Ohio community. It is a pleasure to appear before you today. 

In my testimony this morning, I want to tell you a little bit about 

my company and also provide you with a personal account of some 

of the ways in which I am using financial products and services to 

run and grow my business. I know that I am here to talk about 

the effects of regulation, but I hope to tell you about how my business works, and how I use financial products, to help you consider 

proposals for new regulations. 

My company currently has 23 full-time employees and we had gross revenues in 2011 of approximately $1.8 million. I am looking 

forward to hiring additional workers and we are on track to double 

our revenues again this year. One part of meeting that goal is the 

financial products and services that we and our customers use. 

A healthy financial sector is important for business of all sizes, 

especially businesses like mine. In the business community, many 

of us are concerned about the new financial sector law enacted by 

Congress, which is indirectly hurting small businesses through 

tighter lending practices and new increased fees and routine financial services for businesses and consumer banking customers. 

Among the subjects that always seem to come up when I talk to 

other Chamber members is the challenge of cash flow. Many of us 

believe that the challenge is exacerbated by the law enacted by 

Congress in response to the financial crisis. 

16 

While less regulation in some areas has contributed to the necessity for government to act, overregulation has made it extremely 

hard to obtain the necessary funding needed to grow many small 

businesses. We are concerned that overregulation is making it 

harder for banks to make credit card loans to us and harder for our 

customers to use payment cards. 

These cards are essential for cash flow on both the expense and 

revenue side of small business. Other options, such as lines of credit, either take too long to obtain or simply are not available. When 

I accept credit cards from my customers, I get paid faster, and the 

time-value of money means I get paid more, relatively speaking. 

One tool that I am increasingly using to enhance my cash flow 

involves the acceptance of payment cards using a device attached 

to a mobile phone. This device allows me to accept the credit care 

and debit payments while I am face-to-face with a customer. 

If I am out on a jobsite using this device, I know whether or not 

I am going to get my money within the next 3 days. If the payment 

is declined, I know about it right then and there, and I can address 

that with my customer. If authorization goes through, then I know 

I can put that money back to work within 3 days. I accept anywhere between $2,500 to $10,000 per month on cards 

and it would be great if more of my customers paid me this way 

instead of sending a check. Again, accepting payment cards enables 

me to get paid typically within a few days. 

This is light years faster than the invoice system I otherwise use 

that typically results in me receiving a payment from a customer 

by check, which takes as long as 60 to 90 days. Also, with payment 

cards, small businesses do not need to worry about bounced checks. 

Even though I pay a fee to accept card payments, I prefer them 

as a payment method because I get access to funds almost immediately. That allows me to put the money back to work in my business in near real time. When I receive payment from my customers 

more quickly, I can put the money to work quickly in my growing 

business. 

If you consider what I pay to accept payment cards as opposed 

to the cost of me essentially floating a loan to a customer for 60 

to 90 days, when I could be putting the cash back to work in my 

business, it is a no-brainer. I have learned not from a book but 

from my business and about the time value of money. I want to 

keep going back to that because knowing time value of money is 

one of the keys to successfully growing your business. 

The situation I just described hits me in two ways. Even if I was 

not growing business during the 60-to 90-day period, I have to wait 

to have the invoices paid by check. I have to pay the employees 

who work for the job out of the other funds. I lose the use of the 

money and the money that I am owed. I cannot even earn interest 

on it. As I said, I am basically extending a loan. 

When I am growing my business, the impact is even worse. In 

my view, if laws and regulations make it harder for banks to make 

payment cards available to my customers or make it harder for 

companies to develop innovative products like the mobile phone device, that hurts my business. 

Of course, like all small businesses, I want to pay less for almost 

everything that I use in my business. However, if the State of Ohio 

17 

limited what it could charge to install a wood floor in a government 

building—I do a lot of work for the State of Ohio—to some percentage of my costs, I guarantee you that I would do best to recover 

my costs across the rest of my lines of business. 

If the limit was too much, I would stop doing that line of business, but no matter what, I would try to grow other areas of my 

business as opposed to devoting resources to that area of business. 

Let me be clear: I do support having some rules of the road as 

long as I know what those rules are and they make it easier, or 

I should say better, for both my customers and I to do business. 

Of course, it would not be fair if the rules were drawn up in favor— 

and I certainly do not want someone dictating basic choices or business decisions. 

I think in many cases, we swing back and forth too far in both 

directions. I am a small business. I can’t always see it coming and 

I can’t always duck. 

Not only are extremes bad but there is not—I am sorry, but 

there is the not knowing that is coming. So I just want to say, if 

Dodd-Frank or any other legislation like it does not have any 

things that I have just talked about, I would likely oppose it or 

whatever parts of it affect or hurt my business. 

While I am here, I also want to talk about how my business uses 

credit cards for purchasing so that I can consider— 

Chairman NEUGEBAUER. Mr. Johnson, if you can kind of wrap up 

there— 

Mr. JOHNSON. Oh, sure. 

In my experience, any regulation that increases costs to businesses regardless of the industry will ultimately be borne by the 

business customers and from higher prices. It is difficult for me to 

characterize exactly how the financial sector law is enacted in Congress because I am not a banker. Other witnesses are better suited 

to speak to these issues. 

What I can say is in the wake of a financial crisis, it is crucial 

that Congress and regulators not react so strongly that good parts 

of banking that we rely on—the parts that are not involved in the 

financial crisis—cease to be viable and healthy. When small business is healthy, the economy is healthy. 

And I will be more than happy to answer any questions. 

[The prepared statement of Mr. Johnson can be found on page 

59 of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Johnson. 

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

STATEMENT OF DAVID K. MIN, ASSISTANT PROFESSOR OF 

LAW, UNIVERSITY OF CALIFORNIA IRVINE SCHOOL OF LAW 

Mr. MIN. Chairman Neugebauer, Ranking Member Capuano, and 

members of the subcommittee, my name is David Min and I am an 

assistant professor at the University of California Irvine School of 

Law where I teach and research in the area of banking law and 

financial regulation. I thank you for the opportunity to testify here 

today on the topic of the impacts of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 2010, as I believe this is 

an issue that has been fraught with confusion. 

18 

I would like to make three main points in my testimony today: 

First, the negative impacts of Dodd-Frank have been greatly exaggerated. The fact is that Dodd-Frank has not had much of an impact to date because most of it has not yet been implemented, 

thanks in large part to a very successful campaign by Wall Street 

lobbyists who have spent a record $302 million in 2010 alone to 

delay and undermine the implementation of this law. 

As of July 2, 2012, less than 30 percent of the rules mandated 

by Dodd-Frank have been issued in their final form, with most of 

these issued only in the last few months. It is thus difficult to understand the claim that Dodd-Frank has resulted in large regulatory costs, given that it has mostly not yet taken effect. 

Second, most of the negative effects being blamed on Dodd-Frank 

are actually highly speculative and often misplaced. Because of the 

severe delays in implementing Dodd-Frank, we do not yet have 

much of a reasonable basis to know what Dodd-Frank will look 

like, let alone what the impact of those rules might be. 

Thus, almost all the claims being made about the regulatory burdens created by Dodd-Frank have been based on unfounded and 

often wildly incorrect speculation. For example, many critics of 

Dodd-Frank have claimed that its proposed regulation of derivatives would dramatically increase the compliance cost for end users 

who currently utilize these derivatives for hedging, such as farmers, energy companies, and airlines, thus increasing the cost of our 

food, energy, and travel. 

This argument has been proven both baseless and wrong. The 

Commodity Futures Trading Commission, the regulatory agency responsible for promulgating Dodd-Frank’s derivatives regulations, 

did not even release its first set of final rules on this issue until 

last week, and these rules specifically crafted a broad exemption 

for this type of end user, rendering this criticism largely moot. 

Similarly, while there has been much grumbling about the compliance costs that Dodd-Frank will create for small banks, it is not 

clear that Dodd-Frank actually will lead to increased compliance 

costs for these lenders. The primary evidence cited so far that 

Dodd-Frank will lead to these compliance costs is its length, which 

some have cited as being 2,300 pages, but which is actually 848 

pages long—still a long bill. 

In fact, the vast majority of Dodd-Frank has targeted non-bank 

activities, such as securitization, derivatives trading, prop trading, 

or the activities of banks with over $50 billion in assets. The fact 

is that if you are not a megabank, and if you are not running a 

hedge fund, and you are not dealing in products like derivatives or 

other exotic products, the overwhelming majority of Dodd-Frank 

simply doesn’t apply to you. 

Indeed, Dodd-Frank may actually reduce compliance costs for 

some small banks since it consolidates a number of regulatory rulemaking responsibilities which previously had been scattered among 

the Federal Reserve, the Office of the Comptroller of the Currency, 

the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Federal Trade Commission, among others, into 

one central body, the CFPB. 

There has also been a great deal of confusion about the negative 

impacts caused by Dodd-Frank and conflation between the negative 

19 

impacts caused by the financial crisis. Most of the burdens on 

small businesses and consumers being blamed on Dodd-Frank, including many of the ones you have heard here today, are actually 

the result of the financial instability that led to the enactment of 

Dodd-Frank in the first place. 

For example, many have blamed Dodd-Frank for leading to tightened underwriting standards and a lack of credit availability in the 

marketplace. In fact, the lack of liquidity in credit markets was 

clearly caused by the financial crisis and predates even the passage 

of Dodd-Frank let alone the implementation of rules that might 

have impacted liquidity, such as the Qualified Mortgage (QM) 

standard, which has not even been implemented yet. 

My third point is that in considering the impacts of Dodd-Frank 

on families, communities, and small businesses, it would be irresponsible for us here today to focus merely on the negative impacts. 

We must also consider the many positive impacts that this law 

may have. 

Dodd-Frank was passed with the aim of increasing financial stability, improving investor confidence, and enhancing consumer protection, and it has been well-documented that these goals have 

enormous benefits for families, communities, and small businesses. 

Now, many of us have forgotten recent history. I know 4 years 

is a long time in Congress, but the recent financial crisis in 2008, 

as Representative Capuano mentioned, caused enormous losses— 

$19 trillion in lost household wealth. While many critics have focused on the 848-page length of Dodd-Frank, it should be noted 

that if this law prevents a similar financial crisis from occurring 

it would actually save American households approximately $22.4 

billion per page. 

To conclude, the actual impacts of Dodd-Frank have unfortunately been far too minimal so far thanks to a successful lobbying 

campaign led by Wall Street to delay Dodd-Frank’s implementation. The impacts of Dodd-Frank, once it has been fully implemented, are likely to be significant and positive insofar as it will 

reduce the likelihood of another major financial crisis, restore the 

shaken confidence of investors who have lost faith in American capital markets, and prohibit predatory lending practices. 

I urge the members of this subcommittee to make all efforts to 

help facilitate the robust and prompt implementation of this law. 

I thank you again for giving me the opportunity to testify, and I 

look forward to your questions. 

[The prepared statement of Professor Min can be found on page 

64 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Ms. Deyanira? 

STATEMENT OF DEYANIRA DEL RIO, CHAIR, BOARD OF DIRECTORS, LOWER EAST SIDE PEOPLE’S FEDERAL CREDIT UNION 

Ms. DEL RIO. Good morning, Chairman Neugebauer, Ranking 

Member Capuano, and members of the subcommittee, and thank 

you also for the opportunity to testify today at this hearing. My 

name is Deyanira Del Rio and I am the board chair of the Lower 

East Side People’s Federal Credit Union in New York City. We are 

a small, not-for-profit community development financial institution 

20 

that has $33 million in assets and serves 6,000 members in New 

York City. 

We serve low-income New Yorkers Citywide, but we have a particular focus on two of New York City’s poorest neighborhoods, including Central Harlem and parts of the Lower East Side. And I 

will just say that while we are close to Wall Street geographically, 

we are very far philosophically and in terms of our members. 

I am pleased to comment on the Dodd-Frank Act and the Consumer Financial Protection Bureau from the perspective of our 

small financial institution and the communities we serve. So I have 

four main points and I will try to do them speedily. 

First, I want to say that from our point of view, the Dodd-Frank 

Act and the other financial reforms of recent years have not 

harmed our credit union in any way in terms of our ability to provide low-cost loans and services to our members. If anything, our 

credit union has improved in performance and profitability in recent years: our lending has increased; we have flexible but responsible underwriting standards that we don’t think will be curtailed 

by any of the regulation; we have 95 percent of our members’ deposits in our credit union reinvested back into our neighborhoods 

in the form of affordable housing, small business, and consumer 

loans; and we continue to provide free checking accounts to all of 

our members who maintain at least $25 in our credit union. 

We see more and more members coming to us, leaving the banks, 

which are becoming increasingly unfriendly, particularly to lowerincome customers. We also have not experienced any decrease that 

is noticeable in our revenue as a result of the credit card and overdraft reforms of recent years, although I will say that it is primarily because we didn’t engage in the types of deceptive practices 

that were curbed and addressed in the CARD Act nor did we ever 

become reliant on these high overdraft fees that a lot of banks and 

even credit unions turned into their profit centers. We have never 

offered those kinds of products and have chosen instead to offer 

traditional overdraft lines of credit and other responsible services 

to our members. 

I will note that also, I think as others have said, that DoddFrank does make important accommodations for small institutions 

like ours. So, for example, as an institution with less than $10 billion in assets, we will be supervised for compliance with consumer 

financial protection laws by our existing regulator, the National 

Credit Union Administration. And further, the CFPB is required, 

as we know, to assess the impact of its rulemaking on financial institutions and small businesses like ours. 

My second point is that to the extent our credit union is facing 

challenges, they overwhelmingly result from the financial crisis 

and the ongoing economic downturn and not from excessive regulation, and I can’t stress this enough. Our credit union, also like 

many other credit unions, had no part in causing the crisis, but we 

are certainly feeling the effects and the costs through continued unemployment, the depressed interest rate environment that we are 

operating in, and the ongoing foreclosure crisis. 

These are the threats to our institution over the long term and 

certainly to our members and our community’s well-being. Lack of 

21 

financial regulation we see as actually causing the stresses that 

our institution now has to work around. 

My third point is that in response to the crisis, strong prudential 

regulation and consumer protections are needed to prevent future 

crises and to ensure fairness and opportunity for low-income people 

and communities. The repercussions of the economic crisis are 

going to be felt in low-income communities like ours for many years 

to come. 

I will give you one grim statistic, which is that the median net 

worth of American families fell by almost 40 percent between 2007 

and 2009. These are losses that will take families years or possibly 

generations to recover. 

In addition to lost wealth, we are concerned that a growing number of our members and Americans generally are now contending 

with damaged credit histories as a result of abusive lending practices, the foreclosure crisis, job losses, and just the overall economic 

downturn, and this is particularly distressing for us because damaged credit histories not only impede people’s access to fairly priced 

loans and credit, but increasingly they are being used outside of 

the credit sphere and can block people’s opportunities for affordable 

housing, for jobs—increasingly employers are denying people jobs 

based on having damaged credit—and many other economic opportunities that people will be denied access to because of this damaged credit, often through no fault of their own. 

So Congress enacted the Dodd-Frank Act in the wake of undeniable regulatory failure and abusive lending practices. It includes 

such provisions as a requirement that lenders consider borrowers’ 

ability to repay loans. We think this is a fundamental tenet of responsible lending that was lost in the years leading up to the 

crash, and we support these and other common-sense regulations 

which we think all responsible lenders should embrace. 

And my last point is that we believe the Consumer Financial 

Protection Bureau has a vital role to play in regulating and leveling the playing field for both depository and non-bank financial 

institutions. Our credit union welcomed the creation of the CFPB 

as the first Federal agency tasked specifically with protecting consumers in the financial services marketplace, something that we 

certainly could have used in the years leading up to the crash when 

neighborhoods like ours and across the country were flooded with 

high-cost, destabilizing forms of credit that ultimately caused havoc 

for the economy as well as for neighborhoods. 

This regulatory failure—the fact that the seven regulatory agencies didn’t catch or prevent the crisis—is particularly distressing to 

us because many of the problems we are facing could have been 

avoided had regulators paid meaningful attention to the harms 

that reckless lending was causing on families and communities. 

And in fact, this overemphasis on what ostensibly is safety and 

soundness, which is certainly important—and we are examined, 

like all depository institutions, for safety and soundness—but by focusing on that to the expense of consumer protection, regulators 

ironically failed to detect the broad systemic risk that was being 

caused by predatory lending practices which were, after all, lucrative in the short term. 

22 

So we think that the agency has a really important role to play 

in identifying future problems— 

Chairman NEUGEBAUER. Ms. Del Rio, I am going to need you to 

wrap your testimony up. 

Ms. DEL RIO. Yes. Okay. So my last point is that I want to say 

that we at the Lower East Side People’s Federal Credit Union and 

credit union allies of ours have met with CFPB Director Richard 

Cordray at field hearings and regional meetings and weighed in on 

comment letters like many others here. We have so far—I want to 

note, we have been impressed by the approach and the thoughtfulness of the CFPB toward its rulemaking, and rather than coming 

in and issuing decrees, they have actually been exceptional in the 

way that they have solicited feedback from small businesses and financial institutions as well as Americans, consumers who are being 

affected by the practice. 

We appreciate that and we think that their efforts to promote 

transparency and accountability are going to bring benefits to institutions like ours and our communities that are going to far outweigh any marginal or short-term costs of regulatory compliance. 

So thank you, and I look forward to answering your questions. 

[The prepared statement of Ms. Del Rio can be found on page 50 

of the appendix.] 

Chairman NEUGEBAUER. Mr. Smith, you are recognized for 5 

minutes. 

STATEMENT OF GREGORY W. SMITH, CHIEF OPERATING OFFICER AND GENERAL COUNSEL, THE COLORADO PUBLIC EMPLOYEES’ RETIREMENT ASSOCIATION (CoPERA) 

Mr. GREGORY SMITH. Thank you, Chairman Neugebauer, Ranking Member Capuano, and members of the subcommittee. Good 

morning. I am Greg Smith, the chief operating officer and general 

counsel of the Colorado Public Employees’ Retirement Association 

(CoPERA). I am pleased to appear before you today on behalf of 

CoPERA. 

With over $39 billion in assets under management, CoPERA is 

responsible for the retirement security of over 480,000 employees 

and retirees of State and local government in Colorado. Our members include teachers, snow plow drivers, and prison guards—regular people, hard-working people, people who support small businesses across the State of Colorado and who use local banks 

throughout the State of Colorado. 

Colorado provides over $3.3 billion in annual benefit payments to 

over 95,000 beneficiaries of the Public Employees’ Retirement Association. Ninety percent of these payments are made to beneficiaries 

living in the State of Colorado. Using commonly recognized economic impact measures, such as output, value-added, and labor income, and employment, these payments in Colorado represent $4.3 

billion in output, $1.87 billion in value-add, and $1.1 billion in 

labor income, and over 23,000 jobs in the State of Colorado. 

The annual benefit payments made by Colorado PERA to our 

beneficiaries represent approximately 3.3 percent of total wage income in the State of Colorado. In the rural counties of Colorado, 

this percentage is far greater. 

23 

In some of our counties, PERA benefits payments represent over 

25 percent of total payroll in that county. This infusion of income 

into the local economies in Colorado creates a critical and stable 

source of income that fuels Main Streets and businesses throughout the State of Colorado. 

As an owner of many of the Nation’s large and small public corporations, our fund is strongly aligned with corporate America. We 

have every interest in its long-term success and in its profitability. 

As a result, we believe in good corporate governance, and good corporate governance practices are essential to maximize and protect 

long-term shareowner value and interests. 

It is well-established that a key cause of the financial crisis was 

a failure in corporate governance. Our members have paid a deep 

price for that failure. Not only did they suffer billions of dollars in 

investment losses, but many also lost confidence in the integrity of 

our markets and in the effectiveness of board oversight of corporate 

management. 

In the lead-up to the financial crisis, boards of directors failed to 

adequately understand, monitor, and oversee enterprise risk and 

corporate strategy. And far too many boards structured and approved executive compensation programs that motivated excessive 

risk-taking and yielded outsized rewards for short-term results. 

As the costly fallout of such poor board oversight became clear, 

investors were left with few effective tools to hold directors accountable. Congress responded in the Dodd-Frank Act by providing 

investors with some of the tools needed to improve market-based 

oversight of corporate boards. 

Those corporate governance reforms, some of which have yet to 

be fully implemented, have already begun to improve investor oversight of boards. Those key corporate governance provisions of DoddFrank, the benefits of which are described in more detail in my testimony, include the following: shareowner advisory vote on compensation; independent compensation committees; clawback of erroneously awarded compensation; enhanced disclosure of incentivebased compensation arrangements; and shareowner proxy access. 

To date, only the first of these five important corporate governance reforms, the advisory vote on executive compensation, has 

been fully implemented as intended. That reform alone has proven 

highly successful in opening up dialogue between boards and 

shareowners on executive pay concerns and has also had an impact 

on eliminating poor pay practices at many companies—practices 

that were unrelated, and in some cases inconsistent with the company’s long-term performance. 

The other four corporate governance reforms described in my testimony await rulemaking by the Securities and Exchange Commission and, in some cases, the stock exchanges. These provisions are 

integral in improving oversight and meaningful accountability of 

corporate directors. Thus, CoPERA respectfully requests that the 

subcommittee actively support the prompt and effective implementation of these provisions and support providing the SEC with the 

resources they need to effectively write and enforce the related 

rules while at the same time continuing to perform their core responsibilities as the only agency in the Federal Government whose 

24 

mission includes protecting investors and policing the capital markets. 

Thank you, Mr. Chairman, for inviting me to participate at this 

hearing, and I look forward to your questions. 

[The prepared statement of Mr. Smith can be found on page 90 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

I thank the panel for those opening statements, and we will now 

go to the question-and-answer period. Each Member will be recognized for 5 minutes, and the Chair now recognizes himself for 5 

minutes. 

Mr. Purcell, one of the things that I hear, and you alluded to in 

your testimony from small community bankers, particularly who 

have been used to making what I, when I was in the banking business, would call portfolio mortgage loans. These are loans that 

sometimes are $25,000, $30,000, $40,000 for houses in the community or outside of town. And a number of those banks have quit 

making those loans because of some of the requirements of new 

regulations. 

There are two things I want you to elaborate on. First, who is 

going to make those loans? Because those loans normally aren’t 

securitized and so their only source of funding for those loans in 

the past has been our community banks. And so how are the citizens, the families in these little small communities, how are they 

going to buy a house? 

Mr. PURCELL. Mr. Chairman, I appreciate the opportunity to 

speak here, and that is a dilemma in our area. We are a rural area. 

We have made loans since the inception of the bank 100 years ago 

throughout the community and we filled a need that was not being 

met in that no one was interested in making a loan 10 miles from 

a town of 400 people, we will say, for O’Donnell, Texas, that was 

only on the small acreage. 

We have done 5-year balloon notes. Under the new proposed regulation, the 5-year balloon notes will be high-priced. We don’t 

charge fees. 

I have had 14 or 15 community banks in our area—our area is 

within 200 miles; there are not a lot of people there—that are getting out of the mortgage lending because of the cost. I am not certain where those will go, where they will have to go to family. 

But the real problem is that if you can’t provide that each one 

of those customers, they have family, they have friends, and so, 

‘‘The bank won’t take care of me, you know? I have put my money 

down. I have always paid my obligations as agreed. Where do I 

go?’’ 

So it is a dilemma. If you want to go to the farm credit system, 

the Federal Land Bank or some of those, they require 80 acres of 

land to be there. You can’t sell a $25,000 mortgage loan in the secondary market for whatever price you pay. 

Chairman NEUGEBAUER. Yes. I think you heard Mr. Min say that 

all of the claims by small financial institutions that Dodd-Frank is 

going to have an impact on them are not true. Mr. Purcell, are 

these community bankers dreaming this stuff up? 

Mr. PURCELL. Our customers are not dreaming it up, and they 

are worried. 

25 

I understand that there was a calamity here. Unfortunately, for 

our part of the world in the 1970s and 1980s, we had a calamity 

there. I didn’t get these bald spots from banking in good times; I 

got them from bad times. 

We did learn some lessons—and I concur that the customer 

needs to be able to afford it, but if the payments are structured to 

what they would be paying in rent, they have a chance to build equity in their home. They have a chance to have homeownership. 

But at times, we kind of outsmart ourselves, and we try to make 

people fit in a certain category, and that is one of the unique things 

about our community is that in our particular bank, a customer 

goes to whichever officer they want. I have more $500 loans than 

I do $3 million loans of my customers. It is ones that I started with 

25 years ago, and we continue to try to meet their needs. 

They have something to lose. If you have skin in the game, your 

commitment to paying is much, much better. The bank realizes it, 

and the customer realizes it. 

So we are unique, I guess, in the whole scope of things. I don’t 

understand all there is about Wall Street, but we are not driving 

for Wall Street in Big Spring, Texas. 

Chairman NEUGEBAUER. Of course, one of the things that I hear 

from a lot of the smaller community banks, and maybe even some 

of the regional banks, is that the scale and the cost of compliance 

of all of these new regulations obviously impacts their ability to deliver some of those services. And so, we hear people talking about 

how we are going to see more consolidation in the banking industry, and one of the things that I have heard is that there was a 

call to break up the big banks because they were too big, but it almost looks like we are forcing a consolidation in the banking industry that basically just kind of going the other direction. Would you 

agree with that? 

Mr. PURCELL. It is amazing that both— 

Chairman NEUGEBAUER. Let Mr. Flores— 

Mr. PURCELL. Okay. 

Chairman NEUGEBAUER. —take that question, thank you. 

Mr. PURCELL. I am sorry. 

Mr. FLORES. Yes, I would agree with it. I have a colleague who 

teaches commercial lending in most of the graduate schools of 

banking around the country, and that is one of the key concerns 

that they are raising is community bankers, particularly those that 

are in markets that are low-growth or no-growth, they have had 

business model issues before this crisis. This has just basically exacerbated that. 

And so with the thin margins they were operating under before, 

with the additional cost and loss of fee income, they are looking to 

sell. And you are right. Who is going to buy them? It is obviously 

the bigger banks, and so the default position is that the too-big-tofail banks will get bigger. 

Chairman NEUGEBAUER. I thank the gentleman, and I think my 

time is up. 

Mr. Capuano is now recognized for 5 minutes. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Mr. Flores, I can’t help myself. You do realize that your company 

is named after a place where one of the most—not devastating— 

26 

broad-based regulations in history came out of. Bretton Woods is 

a beautiful place but— 

Mr. FLORES. It is. 

Mr. CAPUANO. —but Bretton Woods resulted in a lot of things 

that—I was actually hoping Dr. Paul would be here today; that 

would be interesting. 

Mr. Purcell, Ms. Smith, and Ms. Del Rio, I hope that you will 

take some comfort in a little fact of my life. I have all of my family’s personal, business, and campaign funds in small banks. I don’t 

have any—not one penny that I have control over is in a large 

bank. Not for any reason. I just prefer small banks. I like knowing 

my bankers and all that other stuff. 

So I will just tell you that. Hopefully, you will take some comfort 

before I go in a different direction. 

[laughter]. 

Mr. Purcell, stop, look, and listen. I totally agree. I actually 

haven’t disagreed with anything I have heard here this morning of 

significant nature—minor little points, but nothing major. And I 

agree with everything you said. Stop, look, and listen is 100 percent right. 

But Dodd-Frank is now 2 years old. We are stopping, looking, 

and trying to listen. It doesn’t mean we will get it all right, but 

stop, look, and listen doesn’t mean don’t cross the street; it means 

be cautious, be careful, keep an eye on what is going on, and then 

cross the street. And I would like to think that is what we are trying to do. 

Ms. Smith, on the remittance item, to be perfectly honest, today 

is the first day I have heard about that issue and the 25 per year. 

It is an interesting issue and I wish it had been brought to my attention. 

I am under the impression at the moment that that aspect of this 

regulation has not been finalized, and I intend to leave this hearing 

and go look into it. I don’t know whether I agree with you or not. 

I would just say that is exactly what this stop, look, and listen 

is all about. It is 2 years later. We still haven’t implemented that 

aspect and, again, I am not informed enough to agree or disagree, 

but it is an interesting point, a good point, one that is worthy of 

pursuit. And I assume you know that is not finalized yet. 

Ms. LYNETTE SMITH. Thank you very much. I appreciate you 

looking into that. 

That is catastrophic. We do, on average, three international 

wires a month. If you multiply that times 12, that is 36. I might 

get to a point where I cannot even offer— 

Mr. CAPUANO. No, I understand. I am not arguing with the point 

at all. I am saying it is a good point worthy of consideration and— 

Ms. LYNETTE SMITH. Thank you. 

Mr. CAPUANO. —I will look into it, and I wish I had been informed of it as we were going forward. 

I guess my bottom line here is that a lot of the concerns I have 

heard about Dodd-Frank from not just today’s panel, but going forward, are fears of what might happen. Some of them are very legitimate and some of them I share—but the way to deal with the 

fear is not to not do it; the way to deal with the fear is to try to 

get it right before the mistake is made, or even after the fact. 

27 

Things happen after you do something that you did wrong. Everybody on this panel has made a mistake in your life, and when 

you do, you correct it. You don’t just throw the whole thing out; you 

correct it. 

So that is hopefully what we are trying to do. Regulations are 

not meant for the good players. No regulation is ever meant for the 

good players. They are only meant to say, ‘‘There is the line. Bad 

players can’t cross here.’’ 

I use it all the time. One regulation we have is: Don’t kill anybody. That is a regulation, guys. It doesn’t mean anybody is going 

to go out and kill somebody; it just means that if you do, there are 

consequences. All regulations are simply drawing the line saying, 

here is where we are. 

I guess, Mr. Johnson, I just want to ask you a—and I appreciate 

you being here. I realize you are not a banker; I am not going to 

ask any technical banking questions. But if— 

Mr. JOHNSON. I certainly appreciate that. 

Mr. CAPUANO. That is okay. I am only like half a step ahead of 

you—don’t worry—and maybe even less than that. 

But if you had a company—and again, you are a member of an 

association, you are a businessman—I presume you have never 

misled or deceived any of your customers? 

Mr. JOHNSON. I try very hard not to do that. 

Mr. CAPUANO. Again, not mistakes, but you have never intentionally—never deceived them into thinking that something you 

were providing was free, did you? 

Mr. JOHNSON. No, I haven’t. 

Mr. CAPUANO. You have never deceived them into telling them 

that they were eligible for something for which they are not eligible? 

Mr. JOHNSON. No, I haven’t. 

Mr. CAPUANO. So you would think that any business that engages in intentional misleading of customers is doing something 

wrong and bad for the economy, bad for America. Would you agree 

with that statement? 

Mr. JOHNSON. I would agree with that statement. 

Mr. CAPUANO. Then, you must support what the CFPB did yesterday, which is to enforce Capital One, because that is exactly 

what they were doing. Now, I don’t know whether Capital One is 

a good, bad, or indifferent company, but they were clearly engaged 

in misleading customers—2 million customers—and they were 

slapped for it. Now, that doesn’t mean they should be put out of 

business; it means they were slapped. They are going to have to 

refund $140 million hopefully to somebody who will need new flooring in your area. 

Mr. JOHNSON. And I don’t know enough about— 

Mr. CAPUANO. I know. 

Mr. JOHNSON. —Capital One, but what I can tell you from my 

vantage point as a business person is that I have seen the effect 

simply because lines of credit have been snatched away from me 

and I had to resort to credit cards to keep my business afloat and 

it was the result of the regulations. 

Mr. CAPUANO. But according to your testimony, you are not sure 

that it is a result of regulation, and Mr. Min has testified—not just 

28 

about you, obviously, personally—but about most loss of credit in 

this country was not the result of regulation, it was the result of 

an economic downturn, that the banks, even when they were infused with capital against the advice of some of my colleagues— 

they have tons of money, they still refuse to loan it. To my knowledge, there is no way for the Federal Government to force them to 

loan it. 

Mr. Purcell, are you aware of anything that we can do to force 

you to make a loan? 

Mr. PURCELL. No. But I sure wish you would convince our customers of the uncertainty, so they will start borrowing again. 

Mr. CAPUANO. I agree with you. I totally agree. 

Mr. JOHNSON. So, Mr. Capuano, I can— 

Mr. CAPUANO. So, Mr. Johnson, the lack of credit has nothing to 

do with— 

Mr. JOHNSON. But I can tell you that what happened from the 

collateral standpoint, when the banks would give me financing 

based on certain pieces of collateral that I had, the regulations took 

that away and they were unable— 

Mr. CAPUANO. Which regulations did that? 

Mr. JOHNSON. I don’t know. You tell me. 

Mr. CAPUANO. That is the problem, Mr. Johnson. 

And here is the problem as stated by—oh, I had it here somewhere; who knows where it is—here it is—by the Independent 

Community Bankers of America president, he said it is more fear 

than fact. I am interested in facts. I need to know facts. I need to 

know specific regulations that are either proposed or finalized that 

don’t work. And when that happens, I have done it repeatedly to 

advocate to stop them or to change them, and I will do it tomorrow. 

All of us will, on both sides of the aisle. 

But to simply say that all regulation has caused me problems is 

not helpful, especially if you can’t point out to me a specific regulation that has done it and— 

Mr. JOHNSON. I hope my testimony did not say that, because I 

really don’t believe that. I just believe that you need to take a look 

at it and say, okay, how can we get cash flow back into the hands 

of small business people, because it is our lifeblood. 

Mr. CAPUANO. There is no disagreement with that. That is exactly what we are trying to do. 

All I am trying to do is point out that—I am way over time; I 

apologize, Mr. Chairman. 

All I am trying to do is point out that we are trying to get it 

right, and that not all regulation is inherently bad. Some regulations are necessary and it is important for all of us to work together to try to get it right. 

With that, Mr. Chairman, I appreciate your indulgence. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the vice chairman of the subcommittee, Mr. Fitzpatrick, 

is recognized for 5 minutes. 

Mr. FITZPATRICK. I thank the chairman, and I would also like to 

thank all the members of the panel for your testimony and your 

participation in the hearing. You are performing a great service for 

our country and I think that no matter where each of us stand or 

fall on the issue of the legislation, I think we can agree that what 

29 

we are doing here today, which is oversight, is incredibly important 

for the industry, for our customers, and for our constituents. It is 

appropriate, especially for bills that are new bills that exceed thousands of pages in length, and also in connection with regulations 

that are yet to be written. 

And so, Mr. Purcell, I agree, as Mr. Capuano agrees, stop, look, 

and listen. We can do that now with regard to regulations and we 

are interested in hearing from you how these regulations that you 

know about, as well as the regulations that are threatened or yet 

to be written, how that impacts your small banks, your institutions, and our constituents. 

Mr. Flores, according to your testimony you said Dodd-Frank has 

increased fees to small businesses and consumers. What effect do 

these increased fees and reduced services have on consumers? Can 

you develop that a little bit for us? 

Mr. FLORES. It is not a direct relationship because of increased 

compliance costs. And you are right, a lot of the provisions have not 

been implemented, but people are preparing and so they are hiring 

compliance people, or they are re-tasking existing employees to 

compliance, or they are outsourcing aspects of compliance. 

But with the—let’s say the Durbin Amendment, with the reduction of interchange fees, that has required—a lot of banks have 

eliminated free checking. Therefore, with the new checking products that are out there, the cost to have a checking product has 

gone up, and this primarily impacts low- to moderate-income consumers because if they don’t maintain a $1,500 daily balance, they 

are going to get a service charge. 

So it is the indirect impacts—the loss of fee income and the increase of operating expenses that banks are looking for new avenues of revenue production, be it fees or they have very little control on interest margins and so the only thing they can look at are 

fees. And they are being passed on to consumers and small businesses. 

Mr. FITZPATRICK. Mr. Purcell, when you were describing your 

bank and the type of mortgages you grant and the way that you 

grant them, it sounds a lot like the small bank back home in Bucks 

County, Pennsylvania, that my wife and I use for our own family. 

I think you said for most of the loans, you require 20 percent down, 

and the bank provides 80 percent; you don’t sell the mortgages, you 

actually keep them and service them. Is that a fair assessment of 

the way that your bank operates? 

Mr. PURCELL. That is correct. We have never sold a mortgage. 

And I will say that in the times of distress over the last 7 years, 

there was kind of the end of good times and it has been tough 

times since then, I might also add we have not foreclosed on any 

home mortgage. But we do work with the customer. 

Mr. FITZPATRICK. So you know what a qualified borrower looks 

like. You don’t need a 1,000-page regulation to describe that for 

you? 

Mr. PURCELL. I don’t. The problem on the balloon payment, 

though, is that—on the 5-year balloon payment, you have to be 

able to show that customer can continue to make the payments. If 

you went out to 10 years or 15 years—by the way, we have no deposits committed in our institution for that, and that is what the 

30 

savings and loans got in trouble for in the 1980s was extending 

loans further than what their deposits were. That is the reason for 

the 5-year balloon payment. 

Mr. FITZPATRICK. I was intrigued by something that you said in 

your testimony about the cost of compliance on big banks versus 

the Main Street, the community banks like yours, that most of us 

think of when we think about the banking industry. You said, in 

fact, big banks—the very banks at the center of the problems that 

spurred the enactment of Dodd-Frank—are among the new law’s 

greatest beneficiaries precisely because they can much more easily 

shoulder Dodd-Frank’s compliance burdens. 

Can you describe for us how it is they have benefitted—how the 

big banks have actually benefitted from the law and how the law 

has actually negatively impacted your ability to continue to service 

your customers? 

Mr. PURCELL. I know there are Members on both sides of the 

aisle who want what is best for our country. I want what is best 

for it. I want what is good for our borrowers, too, and our community. 

But when you enact legislation, and you have a large megabank 

that has a consumer department that is probably 100 times or 

greater than our total employees are, when you talk with your regulators and you talk about their compliance—how they go, they 

have two paths. They have a path for the compliance officer who 

studies—or who handles compliance on the deposit side, and now 

they have a path for the ones on the lending side. 

If it is so complicated that someone who examines compliance 

issues every day, they have to split it up in two different directions; 

we are a small bank. And all this time of what everyone has said 

they wanted, the things that we wanted to avoid—we don’t want 

too-big-to-fail; we want people to have risk and responsibilities for 

their actions—the large megabanks have continued to increase in 

size at the expense of small banks. 

Mr. FITZPATRICK. Thank you, sir. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the ranking member of the full Financial Services Committee, Mr. Frank, is recognized for 5 minutes. 

Mr. FRANK. Mr. Johnson, I wanted to pursue something that you 

said which, like Mr. Capuano, I was surprised to hear. You said 

one of the problems is that the banks you deal with are now rejecting collateral had previously given them or have somehow changed 

their attitude. Would you describe that to me? 

Mr. JOHNSON. Sure. There were times when banks would turn 

around and look at your credit rating, they would look at your 

character and things like that, and they had done business with 

you historically before. They would take your receivables and other 

things like that and they would go ahead and loan you money. 

Now what is happening is they are sitting there saying, hey, you 

know what, we can’t do that anymore— 

Mr. FRANK. Let me say that there is nothing in the statute that 

compelled them—other than—I assume you are not talking about 

a residential mortgage? 

Mr. JOHNSON. No. 

31 

Mr. FRANK. Okay. We do have a problem, and some of us have 

expressed this frustration that some of the examiners have been 

overreacting, and I think the problem is it is in the culture. In the 

history of the world, no examiner was ever reprimanded for a loan 

that should have been made and wasn’t made; they get reprimanded for the loans that were made that shouldn’t have been, 

and that is a constant problem. 

But there was nothing in the statute, I am sure, that in any way 

requires a bank to change its pattern with regard to what you just 

said. 

Now, let me just ask Mr. Sharp, you mentioned two pieces of legislation that this committee has approved. Are there other changes 

you want to see with regard to derivatives or do you want to make 

sure that those become law? Is that— 

Mr. SHARP. Those are the absolute highest priorities. 

Mr. FRANK. All right. Then, we are in agreement there. 

With regard to the nonfinancial aspects of it—the non-end-user, 

the JPMorgan Chase and others, do you have changes you want to 

see with derivatives in the non-end-user area where we were talking about financial institution or financial institution? 

Mr. SHARP. No. Again, the Coalition doesn’t have national members or— 

Mr. FRANK. I appreciate that. And so, because as I said, and I 

appreciate—there always are some things that nobody can anticipate on every issue. We did think the regulators were sure—I am 

hoping that those are unnecessary but I have a principle of legislation: Redundancy is a lot better than uncertainty, particularly for 

lawyers, because we are the belt-and-suspenders group, so we 

never mind that. 

Mr. Purcell, on the question you mentioned, your lawsuit, and 

you say you have brought the lawsuit against the CFPB on the 

grounds that it is an independent agency, not susceptible to checks 

and balances—that is the CFPB. It doesn’t go through the regular 

appropriations process—the Director is appointed by the President 

but not otherwise controlled. 

Why didn’t you sue to get the Comptroller of the Currency 

thrown out, because everything in your lawsuit of which you complain about the CFPB applies even more strongly to the Comptroller of the Currency? In fact, the CFPB does—Congress can restrict its money. 

The Comptroller of the Currency has a totally independent 

source. He or she is appointed by the President and that is it. What 

about the CFPB’s structure is different in this sense from the 

Comptroller of the Currency, or you just don’t like consumer protection? 

Mr. PURCELL. I appreciate you being aware of the lawsuit that 

we filed. However, I am going to leave that up to the attorneys because— 

Mr. FRANK. You mentioned it in your testimony. 

Mr. PURCELL. I understand, but it says that I will answer questions about the other part of it. But— 

Mr. FRANK. All right. If you don’t want to answer, okay. I am 

sorry, Mr. Purcell. I only have 5 minutes, and if you don’t want to 

answer it, don’t answer it. 

32 

I have to say—and I would ask people to look at this—the argument aimed at the CFPB, they legally are on all fours, as lawyers 

say, with the CFPB. 

Let me just ask you though, Mr. Purcell, with regard to mortgages—and let me ask—is it Ms. Smith, from the credit union, because some of the criticisms were there: Do you think we should 

have passed any laws to change the rules regarding the granting 

of mortgages when we looked at what happened up through 2008? 

And if so, for instance, did NAFCU submit to us any proposals 

for what we should have done with regard to mortgages, Ms. 

Smith? 

Ms. LYNETTE SMITH. Yes, we do. We do support the TILA and 

RESPA forms. We think that they are— 

Mr. FRANK. Okay. I appreciate that. What about the substantive 

mortgages? That is, should we have changed the law with regard 

to the ability to do mortgages with 2 years and 28 years interest, 

and no prepayment allowed, or should we have said, as we do, that 

there has to be some showing, Mr. Purcell mentioned skin in the 

game—that you shouldn’t give mortgages to people who can’t afford 

it? 

Would you in 2009 have recommended to us, or did you, Ms. 

Smith—obviously it wasn’t your job, Mr. Purcell, as an organization—any substantive changes in mortgage law? 

Ms. LYNETTE SMITH. I believe there are substantive changes that 

need to me made and I can give that to you at a later— 

Mr. FRANK. Did the NAFCU ever tell us what they were? I don’t 

remember. Do be honest, I think— 

Ms. LYNETTE SMITH. No. Honestly, I— 

Mr. FRANK. Okay. I am very skeptical of this. People come before 

us now because they don’t like the regulations that are out, then 

say, ‘‘We are not saying there shouldn’t be any regulation.’’ Except, 

many of you did say there shouldn’t be any regulation by not saying anything. People who did not tell us in 2009, ‘‘Yes, you are 

right. There were mortgage abuses. Here is the way to correct 

them,’’ but were perfectly content to let the situation go forward, 

I am a little skeptical when you now say, okay, yes, there was a 

need for things, but you should have done it differently. 

So if I am wrong that if, in fact, in the prior years you had submitted some things I would be—I will correct myself. 

Ms. LYNETTE SMITH. Okay. 

Mr. FRANK. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Ohio, Mr. Renacci, is recognized for 

5 minutes. 

Mr. RENACCI. Thank you, Mr. Chairman. 

And I want to thank all the witnesses for being here. 

Mr. Min, in your testimony you say—and, of course, this was in 

regard to the negative aspects of conclusions on Dodd-Frank—‘‘Because of the severe delays in implementing Dodd-Frank it is impossible’’—you use the word impossible—to know what the actual impacts of Dodd-Frank will be.’’ Would you also agree that from a 

positive standpoint, it would be impossible to determine what the 

impacts of Dodd-Frank would be? 

33 

Mr. MIN. I do agree. That is why I don’t attempt to quantify 

what the numbers might be. I think we have some recent evidence, 

of course, with the financial crisis of 2008, of what the status quo 

looks like, but whether Dodd-Frank is a perfect answer to that— 

Mr. RENACCI. Right. So it is a definitely impossible. 

Have you ever operated a small business, or a bank, or a small 

bank or credit union? 

Mr. MIN. No, sir. 

Mr. RENACCI. Okay. But you are a professor. If I came to your 

office before your semester started and I threw 2,300 pages in front 

of you and said you now had to teach based on those 2,300 pages, 

that would bring some uncertainty to you, wouldn’t it? 

Mr. MIN. Actually it depends—it is 848 pages, and if I had to 

teach it tomorrow, of course that would be a problem; but if you 

told me that I needed to teach it in the spring, I think that would 

probably be doable. 

Mr. RENACCI. But you would have to get some resources; you 

would have to understand what is in it; you would have to spend 

some time and energy to determine— 

Mr. MIN. Of course. I would have to read it. The first thing I 

would do is look at the table of contents and see what provisions 

I wanted to teach, what seemed applicable to banking law versus, 

say, securities law or other areas— 

Mr. RENACCI. Well, no. What I am talking about on how you 

teach and how you interact and how you move forward, so it is 

really how you would move forward, and that is what I am trying 

to get at. There would be some certainty, you would have to spend 

some resources. 

Mr. MIN. Of course. 

Mr. RENACCI. Okay. 

Ms. Smith, you talked about regulations and which—give me 

some idea of which yet-to-be-implemented regulations you anticipate will have the most profound effect on you, your customer base, 

and the community you serve. 

Ms. LYNETTE SMITH. I am really concerned about the interchange 

price cap. Also, just the overwhelming compliance burdens in the 

new rules, it is hard for me, running an $87 million credit union, 

to keep up with all of the compliance, if that answers your question. That is what I have sleepless nights about. 

Mr. RENACCI. So you are concerned with the 2,300 pages and 

what is in it, and— 

Ms. LYNETTE SMITH. Yes. 

Mr. RENACCI. —compliance, and you have already had to spend 

some money, I am sure, to prepare for the compliance on it. 

Ms. LYNETTE SMITH. Absolutely. I am going to have to hire a fulltime compliance officer at this point. 

Mr. RENACCI. Do you fear that some of these costs will have to 

be—that you will have to increase fees for services? 

Ms. LYNETTE SMITH. Yes, they could down the road. Credit 

unions have always been the lender of last resort, and if I could 

just share with you for a minute, when I have members come into 

my office and I know they have no other place to go, I can provide 

them with a loan within an hour. I want to continue to do that. 

And they walk away and the next day they are bringing me cucumVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
34 

bers from their garden. That is the grassroots that credit unions 

do. That is what we are in business for. 

Mr. RENACCI. Mr. Johnson, welcome. I want to welcome a fellow 

Ohioan here to Washington. You talked a little bit about credit 

cards and debit cards and the value to your business and how you 

were able to get your cash in 3 days versus 90 days. 

You also talked about the cost of it, and you compared it to the 

cost of if you were putting in a wood floor. Can you explain a little 

bit of what you were trying to get at there? 

Mr. JOHNSON. Sure. If I were able to get the money in 3 days, 

I can take that money and turn it around and do 5 jobs as opposed 

to having to wait for 60 to 90 days to get that money, so by being 

able to accept credit cards for payment, I am assured that I am getting the money. I don’t have to worry about getting a check, and 

if the check bounces, I have to take out another loan to pay the 

bounce fee from the banks. 

So it is very, very good for me to be able to get that money and 

turn it around. If there is a cost to it, I get that, but I can still 

make a lot more money by getting it and turning it back into the 

business as opposed to having to wait for 90 days. 

Mr. RENACCI. So you weren’t really concerned about the cost at 

the time; you are more concerned about getting the cash in? 

Mr. JOHNSON. Absolutely. Cash flow is the lifeblood of my— 

Mr. RENACCI. I was a small business owner. I understand wholeheartedly. 

Ms. Del Rio, before my time runs out, you heard what Ms. Smith 

said about some of her concerns. You acted like there were no concerns. You have some compliance costs that you have to prepare 

for, and you are going to have to pass those costs on to someone. 

Ms. DEL RIO. We comply with a wide array of consumer protections and regulations. To us, Dodd-Frank is not going to be something that is going to be a weighty new regulation for us; we are 

going to incorporate it into our practices. 

We don’t, at the moment, anticipate having to raise fees for our 

services. It is something that we are—we do everything we can. We 

are a low-income credit union and 82 percent of our members are 

low-income in New York City. So we— 

Mr. RENACCI. So even though you are going to have to prepare 

for 2,300 more pages, you don’t see any more costs and no concern 

about passing that on to— 

Ms. DEL RIO. No. Actually, as my colleague said, the majority of 

those pages don’t apply to us. 

If you are a responsible lender, the majority of those new checks 

and balances aren’t going to change your practices. There will be 

some new disclosures, and reporting, and proving that you are in 

compliance, but that is much different than having to revamp your 

entire business model. 

Mr. RENACCI. Ms. Smith, quickly, I see you just— 

Ms. LYNETTE SMITH. Yes. I just wanted to say, the $30 million credit union may not have all the services that an $80-plus million 

credit union does. We are trying to compete with the big banks. So 

we are going to—our infrastructure, our array of services are going 

to be more than a smaller, low-income credit union. And— 

Ms. DEL RIO. Can I address that? 

35 

Mr. RENACCI. I am running out of time— 

Ms. DEL RIO. Okay. 

Mr. RENACCI. —so I am going to yield back to the chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Miller is recognized for 5 minutes. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. 

When I hear of the complaints about compliance costs with consumer protections in financial transactions, it sounds like what is 

happening is the consumer is walking in and the loan officer or 

whomever pulls out a legal pad or pulls up their computer screen 

and says, ‘‘Okay, you want to be the party to the first part or you 

want to be the party to the second part?’’ and then drafts something from scratch and has to have 2,300 pages of statute or regulations in their head or by their desk that they can consult, and 

that is pretty seriously different from my own experience in practicing law for 20 years. 

There was something called forms, which made life a lot easier. 

They were published. They were kind of vetted that they were 

legal. They were often developed by trade associations. 

Almost every real estate form, every form used for residential 

real estate transactions, were forms that had been developed and 

approved by the Bar Association and by the REALTORS®, and it 

not only was a lot less work for me—I didn’t think I was really 

cheating—it was a lot less work for me. I think every lawyer used 

them. They saved a lot of money for the client and you ended up 

with better forms, with better legal documents that complied with 

the law. 

Ms. Del Rio, how does it work? Do you really generate all of the 

forms from scratch for your credit unions or does someone develop 

forms that comply with the law that you can use? 

Ms. DEL RIO. It is a variation. It is a mix. We have third-party 

vendors, for example, that process our credit cards, and they do a 

lot of the regulation, the compliance work for us. There are times 

where we have to update a disclosure form to comply with the new 

regulations. 

We welcome these regulations, and we want to be a transparent 

institution. This is our mission. So for us, that is not a cost. 

And I just want to make a small point, which is that we are a 

full-service institution, so we have checking, savings, business lending, online banking. We have everything that the—all of the consumer financial services and products that a bank and other credit 

unions do. 

We have grown to this. We prioritize where and how we offset 

our costs, where we raise money to be able to grow and expand our 

services. 

And because we never became dependent on these high fees that 

a lot of other institutions did, we are not now scrambling to try to 

figure out where to make it up. I remember just even in the credit 

union world, there were consultants, regulators, examiners even, 

encouraging us to find more ways to charge members fees, and we 

have chosen not to do that and that is why we generate most of 

our income off of loan interest. 

We want to make our income in a way that is responsible, that 

is actually generating activity in our community. So we did a lot 

36 

of small business lending, including from businesses that are sent 

to us by our local banks. 

Mr. MILLER OF NORTH CAROLINA. One complaint I did hear from 

lenders that wanted to do the right thing—honest lenders—was 

that one of the reasons the disclosures were so unreadable and so 

big was that their lawyers advised them or they understood that 

the safest thing to do was to set out disclosures verbatim from the 

statute. It was safer than trying to summarize them or put them 

in plain English. 

And they specifically cited the example of TILA and RESPA of 

being similar but not quite the same, and what they would do was 

set out both statutes verbatim in the disclosures. And so, when the 

CFPB approved a form that was plain English which included both, 

it seemed to be a great service to everybody. 

Ms. Del Rio, has that been the case at your credit union? 

Ms. DEL RIO. As far as I know, the new form is not— 

Mr. MILLER OF NORTH CAROLINA. And, Ms. Smith, you said you 

were okay with that— 

Ms. LYNETTE SMITH. Yes. I am okay. I— 

Mr. MILLER OF NORTH CAROLINA. You favor that. 

Ms. LYNETTE SMITH. Yes. I do favor that. As a matter of fact, I 

was at the CFPB last year before that form was— 

Mr. MILLER OF NORTH CAROLINA. Okay. I do have limited time 

so— 

Ms. LYNETTE SMITH. —generated. So yes. 

Mr. MILLER OF NORTH CAROLINA. Mr. Purcell, have you not figured out that you really don’t have to write every consumer credit 

contract at your bank, that there are forms that you can use? 

Mr. PURCELL. We do, and every time the law changes, we get to 

increase our fees for those forms and changes. But yes, we do. 

Mr. MILLER OF NORTH CAROLINA. Your national trade associations don’t provide you forms that comply with the law? There 

aren’t publishers who will develop forms that comply with the law? 

Mr. PURCELL. There are major vendors that do provide that but 

they do charge maintenance fees and they do charge when you 

have to have major modifications in it. So— 

Mr. MILLER OF NORTH CAROLINA. Okay. 

Mr. Min, I know that you are now a professor, so presumably you 

have no idea what goes on in the real world, but do you have any 

understanding of how this really works? Are there standard forms? 

Mr. MIN. —it should be from the trade association, as I think 

Ms. Del Rio stated. I would be surprised if the law was as onerous—in practice if it was as onerous as has been claimed. 

Mr. MILLER OF NORTH CAROLINA. Okay. 

One last—there are 14 titles to Dodd-Frank. Mr. Flores, Ms. 

Smith, Mr. Sharp—well, not you, Mr. Sharp—but you, Mr. Purcell, 

how many of those titles apply to your business? 

Mr. FLORES. To my business, none, but to my clients’ business, 

several, depending if they are alternative financial services, or community banks, or credit unions, and the size, if they are under $50 

billion or over $50 billion in assets. 

Mr. MILLER OF NORTH CAROLINA. Mr. Purcell? 

Mr. PURCELL. You have your Fair Credit Reporting Act, which is 

one example. But you also have your different types of lending. You 

37 

have multiple titles within the Dodd-Frank. You have the CFPB 

that is wrapping its arms around things that covered us before, but 

they are changing some of the definitions to include things that 

weren’t, so I could not tell you at this moment exactly which ones 

do or which ones don’t. 

Mr. MILLER OF NORTH CAROLINA. Ms. Smith? 

Ms. LYNETTE SMITH. Okay. Thank you. There are several, and I 

can give you that in writing at a later date. Thank you. 

Mr. MILLER OF NORTH CAROLINA. All right. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New Mexico, Mr. Pearce, is recognized for 5 minutes. 

Mr. PEARCE. Thank you, Mr. Chairman. 

It is nice to hear each one of you testify. I especially appreciate 

Mr. Purcell. I can identify with that lingo you speak there; it 

sounds like where I grew up. If you know where San Jon is, you 

know where every place in New Mexico is—now that is getting 

small. 

Mr. Johnson, I really appreciate your testimony. We need to be 

hearing from the people who have built businesses and are out 

there just trying to make it work. I was a small business man and 

I appreciate that. 

I am going to bypass the desire to ask you what you thought 

about the President’s comment that if you built a small business, 

you didn’t really do that. Again, I built a small business from 2 to 

around 50 people, and so I have this—we struggled all the way 

along and I can hear the struggle that you have and ours. 

Mr. Smith, I am interested, what assumption of rate of return do 

you have to make the distributions out of your pension fund? 

Mr. GREGORY SMITH. Representative Pearce, our current assumption is 8 percent; our 25-year return is 8.9 percent; our 30-year return is— 

Mr. PEARCE. What did you make in the last—what have you 

made in the last quarter? 

Mr. GREGORY SMITH. I don’t know; in the last quarter, about 4 

percent— 

Mr. PEARCE. About 4 percent. 

Mr. GREGORY SMITH. In the last 3 years, it— 

Mr. PEARCE. How much shorter do your—in other words, your 

assumptions are at 8 percent. Let me just— 

Mr. GREGORY SMITH. We got a 1.9 percent compared to our 8 percent, if that is what you are trying to get to. 

Mr. PEARCE. Yes. So yesterday, CalPERS announced that they 

had a 1 percent rate of return; their assumption is 7.5 percent, and 

it is looking like maybe they are $800 billion short if they figured 

at a 3.8 percent, so the calculation for a 1 point rate of return is 

probably in the trillions—just for California. 

So these pension funds that make these assumptions and then 

pay out very large retirement bonuses or retirements are really 

putting the long-term future of the pension fund at jeopardy. 

I was interested in your comments, Mr. Smith, on executive compensation. Your shareholders would be the pension beneficiaries. 

Do you allow them to vote on your compensation? 

38 

Mr. GREGORY SMITH. Our board of directors is directly elected by 

our membership and our board of— 

Mr. PEARCE. So you allow them to vote like you are asking— 

Mr. GREGORY SMITH. —corporation is. 

Mr. PEARCE. Do you allow them to vote, Mr. Smith, on your compensation the way that you are requesting in your testimony that 

corporations would allow? 

Mr. GREGORY SMITH. I would challenge whether that is a comparison, sir, but no, they do not vote on my compensation. 

Mr. PEARCE. Okay. What do you make? What is your salary? 

Mr. GREGORY SMITH. About $300,000 a year. 

Mr. PEARCE. And they don’t get to vote on that. That is very interesting. 

Ms. Del Rio, do you keep track of people who don’t make—they 

are not able to service the loans? Do you all track that? Your customers who can’t service the loans? 

Ms. DEL RIO. Of course. Sure. You mean people who fall behind 

on our loans—on their loans— 

Mr. PEARCE. And so if someone defaults on a loan, and they come 

back in for a loan, you have a record of that? 

Ms. DEL RIO. Yes. We try to restructure people when they fall 

behind so that we don’t have to get to the point of— 

Mr. PEARCE. But you are not just not knowledgeable if they have 

defaulted on a loan? 

Ms. DEL RIO. Oh, no. 

Mr. PEARCE. And so, I find your testimony where you are critical 

of those who do track and do make available credit histories, you 

are very critical of those who allow credit histories to go about, and 

yet you all track a credit history. Your testimony— 

Ms. DEL RIO. Oh, sorry. Maybe I wasn’t clear. So first, in terms 

of the credit, we do look at credit history of people but we also look 

at many other things. A lot of our borrowers— 

Mr. PEARCE. I understand, but there are people— 

Ms. DEL RIO. —have no credit history and so we look at other— 

Mr. PEARCE. Thank you. 

Ms. DEL RIO. —things. 

Mr. PEARCE. Thanks. 

Ms. DEL RIO. I am sorry. My critique in my testimony was not 

about even lenders using credit history, although there are some 

questions there. It was about employers and others outside of the 

credit system using that to judge character and whether someone 

would make a good employee, and— 

Mr. PEARCE. Okay. 

If I could follow up, Mr. Sharp, do you know on the U.S. Chamber how many employers ask about credit history before they hire? 

Because in New Mexico, people are dying for employees. They are 

saying, ‘‘Please, send us the employees. All they would have to do 

is show up for work and pass a drug screen. We need employees 

badly.’’ And I have never heard one employer in New Mexico ask 

for a credit history. 

Anyway, it is just curiosity. 

Mr. Min, have you ever downloaded content off the Web? 

39 

Yes, of course, you have. So you might have an opinion about Net 

neutrality regulations, those who would regulate those who are 

downloading? 

Mr. MIN. I actually don’t. I don’t think I have enough information about— 

Mr. PEARCE. You don’t have an opinion about that? 

Mr. MIN. I don’t actually know enough about the issues, and outside of my issue area, so— 

Mr. PEARCE. Okay. There are people who would like to limit your 

ability to download information, films, whatever. 

Mr. MIN. Okay. 

Mr. PEARCE. Now, I suspect that they don’t have one shred of 

empirical evidence; they just understand that they are opposed to 

the government coming out and regulating, so when I see that you 

talk about regulation being highly speculative, it would be highly 

speculative that people want to say, ‘‘You can’t stop me from 

downloading content. It is a free society. It is free.’’ They won’t 

have one shred of empirical evidence. 

Mr. MIN. Sure. I think— 

Mr. PEARCE. You would declare that to be highly speculative and 

I am finding that to be a deep flaw in your testimony. 

I yield back, Mr. Chairman. Thank you very much. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. Carney is now recognized for 5 minutes. 

Mr. CARNEY. Thank you, Mr. Chairman, and Mr. Ranking Member, for holding this hearing. 

And thank you to all the folks who have come to share your experience and expertise with us. I have been sitting—I am usually 

the lowest man on the totem pole so I get to ask my questions last, 

and I hear a lot of the back-and-forth and the testimony, and it has 

been very interesting today. 

I liked, Mr. Purcell, your comparison to standing on the corner 

crossing the railroad tracks and the guidance to stop, look, and listen. My experience—I am new here—in the last year-and-a-half is 

that we do a lot of stopping and listening and we don’t cross many 

streets. And I think with respect to the Dodd-Frank regulatory reform legislation, the Congress responded to a devastating crisis and 

crossed the street, and we are here today to explore how crossing 

that street has affected small businesses and families. 

The hearing is entitled, ‘‘Who’s in Your Wallet? Dodd-Frank’s Impact on Families, Communities, and Small Businesses,’’ which suggests to me that somehow the regulations are having an impact on 

individuals while it is a small business wallet. We forget, I think, 

the impact on our wallets, our bank accounts, our home equities, 

our retirement funds, that the financial crisis had on all of us. I 

think Professor Min said $19 trillion of lost wealth across our country. 

We had Fed Chairman Bernanke in yesterday testifying and telling us that the recovery is slowing down, that there are still millions of people out of work. He didn’t have to tell me that. I talk 

to those people every day. 

I didn’t hear any of you say that financial regulatory reform 

wasn’t necessary, but that it is having some unintended negative 

consequences on each of you. And I think the purpose of our hearVerDate Nov 24 2008 18:00 Mar 20, 2013 Jkt 076117 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 K:\DOCS\76117.TXT TERRI
40 

ing today is to identify some of those unintended consequences or 

intended consequences that are having a negative effect on our 

economy. 

It is in all of our interest—Democrats, Republicans—I think it 

has been said a couple of times that we have a strong economy, 

that we have a financial system that we have confidence in, that 

is strong. 

So I would like to just ask you, I hear all the time about how 

it is not so much the regulation—one regulation or another—it is 

the accumulation of regulations and the duplication. 

Could somebody—I see Mr. Purcell shaking his head. Could you 

address that? And tell us how you think we can change something 

to address that problem? 

Mr. PURCELL. I do not doubt the intent of the Act. I do not disagree that there should not be regulation. The stop, look, and listen 

is let’s think about some of the things that are enacted—and I am 

speaking in regulation in general, as you spoke of. 

It doesn’t make a lot of sense to me. We just replaced our ATM 

about a month ago. Our drive-up ATM didn’t have Braille on it. 

And I don’t know which is worse—someone driving in who can’t see 

to use the Braille or not having the Braille on the drive-in. And I 

am not being critical, I am just saying that is part of trying to 

make regulations and what we pass effective. 

Mr. CARNEY. So is the point that maybe we go too far with small 

things and it is the accumulation of those small things— 

Mr. PURCELL. I believe it is. I think it is. Everyone has a good 

idea, they have good intentions, but when we start adding it up, 

and we start with 40 years worth of regulations, and we say we 

are going to— 

Mr. CARNEY. So maybe we need a process to clean out the underbrush, so to speak— 

Mr. PURCELL. Yes. 

Mr. CARNEY. —and to eliminate some of the things? We have 

done that a—we have one bill, actually, that is coming through to 

do that. 

Mr. Flores, did you have—it seemed like you had a response 

there? 

Mr. FLORES. I did. It is rationalizing regulations. A lot of my clients would say, ‘‘We are being painted with a broad brush’’— 

Mr. CARNEY. Right. 

Mr. FLORES. —when they weren’t responsible for the financial 

meltdown. 

As a matter of fact, when you look at re-engineering a process, 

it is the 80–20 rule. Look at the things that are really creating a 

bottleneck and it creates an 80 percent efficiency, if you will. 

A lot of people who wrote mortgages—the liar loans, the no-docs, 

the no income verification—they wouldn’t have done that if they 

held them in portfolio. They only did that because they were unable to buy the secondary market buying of primarily Fannie— 

Mr. CARNEY. So the legislation addressed that to a certain extent 

by requiring banks to have some skin in the game, as I heard 

somebody say earlier, correct? 

Mr. FLORES. And I have no problem—if you are selling in the 

secondary market and if you are servicing a loan because you can 

41 

know who the customer is and deal with that, then retaining 5 percent to me is not a problem. I know a lot of people disagree with 

that. 

Mr. CARNEY. My time is running out. 

But let me just say to all of you, if you have specifics, if you could 

send them to us so that we could try to address that directly? 

I just want to reiterate or revisit the question that Mr. Frank 

asked with respect to Mr. Sharp on the derivative. So we have 

passed these two pieces of legislation overwhelmingly in the House 

addressing some of the concerns that your clients have, but you 

said there is nothing else. Are there any next steps there, just to 

reiterate? 

Mr. SHARP. I wouldn’t say there is nothing else, it is just that 

these two bills are absolutely the highest priority for this group. 

They would help the largest number of members of this Coalition, 

so— 

Mr. CARNEY. Great. Thanks very much. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman, and now the 

gentleman from Texas, Mr. Canseco, is recognized for 5 minutes. 

Mr. CANSECO. Thank you, Mr. Chairman. 

And thank you all, panel members, for coming here today. I 

think it has been a good discussion. 

I am sometimes very concerned about what happens when we 

talk about Dodd-Frank, and when we talk about the 2008 economic 

crash that happened, and the solutions, and the languishing economy, it sort of seems to me that what we are doing is stepping on 

the brake of an automobile at the same time that we are pressing 

on the accelerator, not realizing that what we are doing is very 

counterproductive. 

Professor Min, let me—I am sure you are familiar with Sarbanes-Oxley, being an academician in the banking area, and Section 404(b) compliance has resulted in costing 20 times more in reality than the original estimates. You seem to argue in your testimony that we shouldn’t worry because we haven’t seen the full effects of Dodd-Frank, but doesn’t the experience that we have had 

with Sarbanes-Oxley suggest this is exactly the time to be concerned? 

Mr. MIN. So you are asking, essentially, looking back at SOX 404 

and the higher costs, I am not sure about the 20-times figure you 

just cited, whether we should use that as a basis to estimate our— 

assume that regulation might cost more than evidence gives us belief to do. Is that the question you are asking? 

Mr. CANSECO. I am asking you if you are not just projecting 

wrong and not realizing that sometimes these over-regulations that 

seem to paint everyone, as Mr. Flores says, with one broad brush 

are very costly and counterproductive. 

But let me go on to this other thing, because I have limited time 

here. 

Mr. Purcell, we hear a lot of talk in Washington about how we 

need government bureaucrats to protect American citizens from 

their own judgment. This was a large part of the argument behind 

the creation of the CFPB. 

42 

And I was in community banking for quite a number of years in 

Texas, just a little bit south of where you are, and—that was before 

I came to Congress—so I understand that if you are not taking care 

of your customers, you are going to be put out of business pretty 

quickly. So can you explain to us from a community banker’s perspective why consumer protections, safety and soundness, and 

doing the right thing all go hand-in-hand and why the creation of 

the CFPB could disrupt that and actually hurt consumers and families? 

Mr. PURCELL. I am not certain that I could answer that in the 

2 minutes that is allotted with your time, sir, but I will tell you 

that many times, we get carried away. The pendulum swings, and 

times get good and times get bad, and we overreact, generally, in 

both scenarios. 

But we cannot remove the culpability of the person who causes 

the problem. For instance, overdraft protection; there has been all 

kinds of news about that. 

The question I would have is, who has the checkbook? Who has 

the deposit slip? And who issues the checks? 

And I find it somewhat ironic that the Federal Reserve will 

charge you $300 for being overdrawn 20 minutes during the daytime, but $25 for someone who is overdrawn 2 weeks. It is unfair. 

We compare different things, but the person who wrote the check 

is the one who should be responsible for making that deposit. 

For the person who borrowed money at a greater amount— 

maybe 102 percent of the value of his home—there is a price to 

pay. For the person who loaned at the 102 percent of that had 

somewhat of greed in their heart too, they should be the ones who 

stand the loss. When we let the losses fall around the necks of the 

ones who create it and we try to let that take place rather than 

coming up with a regulation to prove that we are going to prevent 

any future effort—or problem and catastrophe. 

Maybe it is skepticism, maybe it is cynicism in my heart, but I 

am pretty sure that Dodd-Frank will not prevent another catastrophe as long as civilization moves. 

Mr. CANSECO. Let me move on to another vein, because I have 

a couple of seconds left. Recently in a speech, the President remarked that if you own a business, you didn’t build that; somebody 

else made that happen. 

I am sure you deal with plenty of small businesses in West 

Texas. In your experience, who built those businesses? 

Mr. PURCELL. The individual did. And if you doubt it, you should 

come to Texas, and you are from Texas, so you know the independent nature that our business people have. 

Mr. CANSECO. Thank you very much. 

I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now another great gentleman from Texas, Mr. Green, is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. Actually, we have about 

four Texans in the House currently, and I would like to welcome 

Mr. Purcell to the committee. 

I have met with the small bankers in Texas—a good many of 

them; not all of them—and small bankers from other places as 

43 

well, and they all echo the same concerns, and it has been said 

enough for me to want to find some means by which we can ease 

some of the consternation. 

I am not sure what the solution is, but I would like to, if I may, 

ask you, do you in your mind, sir, make a distinction between the 

$10 billion demarcation that we have and a community bank? Because many of the bankers that I meet with are not at the $10 billion mark; they are considerably smaller. Do you make a distinction in your mind? 

Mr. PURCELL. I do. I don’t know if it is a magic $10 billion; I don’t know if it is $2 billion; I don’t know if it is $50 billion. But 

there is definitely a difference for someone who has to—if they 

make a loan, they get to drive by that business and be proud of 

it. The bad side of it is is if you made that bad loan, you still have 

to drive by that property every day and decide that it was not a 

good deal and remember that. 

So it is so foreign. I don’t understand all the default swaps and 

the things that happen on Wall Street. I am even confused by the 

definition of what a bank is, or how they can come into the FDIC 

without paying pass premiums, and now they are automatically a 

bank, because by my definition of a bank it doesn’t include a lot 

of those on Wall Street, sir. 

Mr. GREEN. Are you considerably smaller than $10 billion? 

Mr. PURCELL. We are less than $300 million. 

Mr. GREEN. Less than $300 billion? 

Mr. PURCELL. Less than $300 million. That— 

Mr. GREEN. $300 million. 

Mr. PURCELL. I know zeroes in Washington kind of get confused, 

sir, but— 

Mr. GREEN. It is my hearing. 

Mr. PURCELL. —we are a lot less. 

Mr. GREEN. It is my hearing. Some things don’t function as well 

as they used to. But, $300 million. 

And are most of the community banks that you refer to, are they less than let’s say $500 million or—are they less than $1 billion, 

most of the community banks that you are referring to? 

Mr. PURCELL. By my definition, a true community bank would probably be less than $1 billion. There are some successful banks 

in our area that are $2 billion that really do serve their communities. 

Mr. GREEN. And when you are smaller than $1 billion, do you— 

tell me, how are your departments organized? Do you have many 

departments or do you have people who multi-task? Now believe 

me, I have heard the answer, but I want it for the record now. 

Mr. PURCELL. It doesn’t snow very often in Big Spring, but we 

multi-task. I sweep the porch off— 

Mr. GREEN. How many employees? 

Mr. PURCELL. We have about 40 employees, and we have a lending department, and then we have customer service and operations 

departments. Now, there are some cross-issues there because you 

have to wear many hats at the same time. 

So if a customer comes into the bank and they want to borrow 

money, they choose who they want to go to. We do not assign them. 

We don’t say, if you are doing consumer credit you need to go to 

44 

this gentleman, or you need to go to this lady, or you need to fill 

out an application and we will run your credit check, and we will 

get back with you in a week. We don’t do it that way. We try to 

answer immediately. 

Mr. GREEN. And would you say that most community banks with assets under $1 billion, that they do a lot of what we call multitasking, that they don’t have departments set aside for compliance 

adherence? 

Mr. PURCELL. That is correct. 

Mr. GREEN. I am asking this because it seems that as I talk to 

the bankers in Texas—and I talk to a good many—in their minds, 

they have a distinction between a $10 billion small bank and what 

they call a community bank. And that is where I am trying to find 

some means by which we can address some of these concerns. 

I don’t know that we can go to a third tier. Right now, we have 

a two-tiered system. But small community banks, they seem to 

have a different role. 

I am picking up that they seem to serve a clientele that is much 

more intimately known to them. The way that they do business has 

a lot to do with tradition. And I am trying in my mind to find a 

way to resolve some of these issues for the small community banks. 

Mr. PURCELL. I don’t know if I can help you with that, but I do 

know that if our customer does not do well and survive, our bank 

does not do well and survive. 

Mr. GREEN. If I may, Mr. Chairman, I want to ask one more 

question. What percentage of your loans do you maintain in-house, 

maintain on your portfolio? 

Mr. PURCELL. One hundred percent of the loans, unless it is too 

large of credit, and we would participate that out with other community banks in the area that understand the risk involved and 

know that type of credit. But our customer is serviced there; he 

does not go anywhere else. If he has a problem, he comes to us. 

If we have a problem, we go to him too, though. 

Mr. GREEN. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Fincher is recognized for 5 minutes. 

Mr. FINCHER. Thank you, Mr. Chairman. 

And I thank the witnesses for taking the time to be with us 

today. It is good testimony. 

Mr. Purcell, I am from West Tennessee, a lot of farms, agribusiness is big, as in Texas. There is a severe drought right now 

that we are facing. We have been farmers for 7 generations, with 

ups and downs many, many times. 

I want to just use a hypothetical and some real-time situations 

as well. Years ago we had some bad times, and I can remember my 

father going to the bank—our local community bank—and saying, 

‘‘We have had a bad crop, a bad season, so I want to pay the interest on my notes.’’ We had been doing business at the bank forever 

and ever. And my father and the banker were able to work out a 

solution to go forward and work down the road and end up paying 

the bank off in full. 

Today, with what is happening with the drought situation in the 

country and all the farmers who are going to be short this year, 

do you still have that same authority and the flexibility to sit down 

45 

with that customer and work out a solution or are we standing in 

the way? 

Mr. PURCELL. We have the ability to do it, but I don’t know that 

we could sustain it for very long with the regulatory climate, because everything needs to be loss-free. The reason you pay interest, 

that is the price for taking the risk. 

But yes, we would attempt to do that. We would talk about the 

capacity. If you make a crop next year—the way we would actually 

structure it is that we would try to set up your carry-over over a 

3-to 4-year period but you couldn’t stub your toe 3 years in a row 

and— 

Mr. FINCHER. Right. 

Mr. PURCELL. —and come out okay. 

Mr. FINCHER. Right. 

Mr. PURCELL. So yes, we do try to do that. 

One of the problems that may be ongoing is the Basel III, which 

we haven’t even discussed, but your mark-to-market accounting on 

small loans, what is a drought-ridden agriculture loan in West Tennessee worth when he can’t pay this year? What is the market 

value of that and who would buy it? 

We can stop credit really fast if we have to go to mark-to-market. 

It is like, a guy comes in and he wants to borrow some money; he 

just inherited the land and he is going to use it for collateral, and 

we tell him to mark-to-market and he is okay. He is 150 percent 

collateralized. 

And next year real estate values go down, and we mark it to 

market, we say, ‘‘We can’t loan you the money because your value 

has gone down.’’ And he says, ‘‘But I haven’t had a loss.’’ 

Mr. FINCHER. Right. 

Mr. PURCELL. So it is complicated. 

Mr. FINCHER. And again, to Mr. Frank’s comments a few minutes 

ago, the ranking member, about the—some of you not giving suggestions on the rules and what you wanted to see changed and all. 

The unfortunate part of what I hear when I am out in the district 

is that most of you were doing it right. You weren’t doing things 

wrong. 

So you were cooperating and working in the system as it was, 

and as you said a few minutes ago, we will—if the—if time goes 

on and the country exists, and it will, then we will have problems 

in the future. And us getting in the way most of the time—the unintended consequences usually will mess things up, we won’t fix 

them. 

To Ms. Del Rio, you talked about how successful you have been. 

Five years ago, you would charge the same rate or the same charge 

for doing business as you charge today? Nothing has changed? 

Ms. DEL RIO. You mean in terms of the cost of our services? Yes, 

more or less. There might be some small modifications here and 

there, but more or less, we are the same. 

Mr. FINCHER. So the charges would be the same? 

Ms. DEL RIO. In terms of what we charge our members? 

Mr. FINCHER. Right. 

Ms. DEL RIO. Interest rates obviously have changed, so those 

would have been adjusted in accordance with prime rates and so 

forth, but in terms of fees, we have not raised fees. 

46 

Mr. FINCHER. Did your credit union take TARP money? 

Ms. DEL RIO. Credit unions didn’t take TARP money. 

Mr. FINCHER. Any special government funding? 

Ms. DEL RIO. Yes. Actually, in my testimony I talk about one of 

the actual regulatory tools that our credit union—that low-income 

credit unions that are certified as community development financial institutions by the Treasury Department in 2010 were able to 

apply for— 

Mr. FINCHER. Why did you apply and need money if you were 

doing things so well? 

Ms. DEL RIO. First, let me tell you what we received, if I may. 

This was actual money that was returned by the banks and was 

made available to community development financial institutions 

serving the most distressed neighborhoods. 

And what it was was a loan—a secondary capital loan—and it 

was to strengthen our bottom line, our net worth, so that we could 

expand lending. So we specifically took that money so that we 

could increase small business and other lending in our neighborhoods which were the most affected by the economic crisis. 

Mr. FINCHER. And you paid the loan back? 

Ms. DEL RIO. It is over a length of 8 years, I believe, so we are 

in the process. We are only in our second year. 

Mr. FINCHER. Okay. 

And, Mr. Min, to wrap up, in your testimony I heard you say 

‘‘unclear, uncertain’’ as we roll out, as we go forward. Dodd-Frank 

was enacted July 21, 2010—728 days ago. What happens—and I 

am a freshman Member of Congress, but I am afraid that we may 

be sitting here 3 years from now saying, what if it is unclear, it 

is uncertain, we need more stability because it is so big. 

And Mr. Frank, again, said, well, a lot of times the regulators, 

they don’t get blamed if they—someone doesn’t make a loan, but 

if they make a bad loan they do, so they are overprotective of what 

is happening in the private sector. We are not recovering. If you 

saw the jobs numbers this morning—the jobless claim numbers this 

morning—this is not getting any better. 

And this is just a monster. We are afraid. Absolutely, reforms 

after 2008, but to this magnitude? It just has to stop somewhere. 

So with that, Mr. Chairman, I yield back. I am out of time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And I thank the panel. I think we have had a great discussion 

today, and I think we have really been talking about the people 

that we need to be talking about: the consumers of financial products. Those are actually the people who are most affected by this. 

I think we had some good dialogue, and I think one of the things 

that I feel encouraged about is there seems to be a bipartisan feeling that there are some areas that we need to take a look at. I look 

forward to working with my colleagues to do that. 

I yield to the gentleman. 

Mr. CAPUANO. Mr. Chairman, I ask unanimous consent to place 

2 news articles in the record: one from The Wall Street Journal entitled, ‘‘Financial Crisis Amnesia,’’ by Secretary Geithner; and another one from Forbes Magazine entitled, ‘‘What’s in Your Wallet?’’ 

by Mickey Meece. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

47 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. 

And with that, this hearing is adjourned. 

[Whereupon, at 12:22 p.m., the hearing was adjourned.] 

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A P P E N D I X 

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