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REGULATORY BURDENS: THE IMPACT OF DODD– 

FRANK ON COMMUNITY BANKING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, 

JOB CREATION AND REGULATORY AFFAIRS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JULY 18, 2013 

Serial No. 113–47 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

VACANCY 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION AND REGULATORY AFFAIRS

JIM JORDAN, Ohio, Chairman 

JOHN DUNCAN, Tennessee 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

DOC HASTINGS, Washington 

CYNTHIA LUMMIS, Wyoming 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY BENTIVOLIO, Michigan 

RON DESANTIS Florida 

MATTHEW A. CARTWRIGHT, Pennsylvania, 

Ranking Minority Member 

TAMMY DUCKWORTH, Illinois 

GERALD E. CONNOLLY, Virginia 

MARK POCAN, Wisconsin 

DANNY K. DAVIS, Illinois 

STEVEN A. HORSFORD, Nevada 

(III) 

C O N T E N T S 

Page 

Hearing held on June 18, 2013 ............................................................................... 1 

WITNESSES 

Mr. Eddie Creamer, President and CEO, Prosperity Bank, ST. Augustine, 

Florida 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Mr. Hester Peirce, Senior Research Fellow, Mercatus Center, George Mason 

University 

Oral Statement ................................................................................................. 19 

Written Statement ............................................................................................ 21 

Hon. R. Bradley Miller, Former Member of Congress, Senior Fellow, Center 

for American Progress 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 30 

Tanya Marsh, Assistant Professor of Law, Wake forest University School 

of Law 

Oral Statement ................................................................................................. 33 

Written Statement ............................................................................................ 35 

APPENDIX 

A Letter to Rep. Jordan from Bill Cheney, Credit Union National Assoc., 

submitted for the record by Rep. DeSantis ........................................................ 66 

(1) 

REGULATORY BURDENS: THE IMPACT OF 

DODD–FRANK ON COMMUNITY BANKING 

Thursday, July 18, 2013 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION, AND REGULATORY AFFAIRS

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Washington, D.C. 

The subcommittee met, pursuant to call, at 2:44 p.m., in Room 

2154, Rayburn House Office Building, Hon. Jim Jordan [chairman 

of the subcommittee] presiding. 

Present: Representatives Jordan, DeSantis, Duncan, McHenry, 

Lummis, Collins, Cartwright, Cummings, and Duckworth. 

Staff Present: Brian Daner, Majority Counsel; Michael R. Kiko, 

Majority Staff Assistant; Emily Martin, Majority Counsel; Jedd 

Bellman, Minority Counsel; Jaron Bourke, Minority Director of Administration; Jennifer Hoffman, Minority Communications Director; Elisa LaNier, Minority Director of Operations; and Brian 

Quinn, Minority Counsel. 

Mr. JORDAN. The subcommittee will come to order. We are going 

to get started. 

I know Congressman—the ranking member, Congressman Cartwright is on his way. And as I think the witnesses know, we have 

some other hearings going on. 

But I will now recognize the vice chair of the committee, Mr. 

DeSantis, for an opening statement. 

Mr. DESANTIS. Thanks, Mr. Chairman. 

Thank you to the witnesses for coming today and appreciate your 

flexibility. Obviously, we have a hearing downstairs that is taking 

quite a while. 

Millions of Americans are out of work, millions are unemployed, 

and millions have given up looking for a job. A top priority of this 

Congress should be to remove barriers to job creation so Americans 

can get back to work, and small businesses are the key to this goal. 

They provide half of all employment in the United States and 42 

percent of all payroll spending. Most importantly, small businesses 

are the leader in creating new jobs. 

If small businesses are the engine of job creation, then community banks are the engine of small business because community 

banks are the leaders in making small business loans. At the end 

of 2010, community banks held $160 billion in small business loans 

on their books, representing almost half of all outstanding small 

business loans. In other words, $1 out of every $2 loaned to a small 

business comes from a community bank. 

2 

Community banks, characterized by local ownership, local control, and local decision-making, are best positioned to evaluate the 

precise business environment in a local community. Furthermore, 

community banks’ ability to offer highly customized financial services ensures that each small business receive products that are tailored to fit that business’ individual needs. 

Congress has an obligation to support and promote the business 

model that community banks have used so successfully. Unfortunately, the regulatory regime imposed by the traditional banking 

regulators, as well as the Dodd-Frank Act, needlessly raise community banks’ costs of doing business. There will be only one consequence from this regulatory burden, a reduction in community 

banks’ ability to serve their communities. 

Fewer services will be offered, fewer loans will be made, and 

those loans that are made will come at higher prices. Fewer small 

businesses will get off the ground. Less Americans will have a good 

job. 

This regulation is not necessary. It seeks to solve a problem that 

doesn’t exist. Just 2 weeks ago, the Comptroller of the Currency, 

one of three primary banking regulators in the U.S., emphatically 

stated, ‘‘Community banks and thrifts had nothing to do with 

bringing on the financial crisis.’’ Yet community banks all across 

the country are feeling the brunt of the Federal leviathan. 

This demonstrates a truism that is not unique to banking. Big, 

burdensome government typically gives big business a competitive 

advantage over existing and would-be small businesses. As J.P. 

Morgan CEO Jamie Dimon explained, increased regulatory burdens 

make it easier for large firms to gain market share because they 

create substantial barriers to entry for smaller competitors. 

The sad thing is that much of the regulatory burden faced by 

community banks does not serve a compelling purpose but is simply an exercise in rote compliance. If the official position of this administration is that community banks were in no way responsible 

for the financial crisis, then why are we subjecting them to such 

onerous regulation? 

The fundamental goal of this hearing is to understand just how 

burdensome Federal banking regulations have become on our community banks and, in turn, how that affects our small businesses. 

I thank our witnesses with their individual expertise, and I 

thank them for being here. In particular, I would like to thank one 

of my constituents, Eddie Creamer from St. Augustine, Florida—he 

is a community banker in my district—to offer his personal experience as a community bank leader. 

Mr. Chairman, thank you for having this hearing, and I yield 

back the balance of my time. 

Mr. JORDAN. I thank the gentleman for his statement, for his 

hard work in Congress, and specifically for helping us put this 

hearing together. 

I now recognize the ranking member, the gentleman from Pennsylvania, Mr. Cartwright. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

And thank you, Mr. DeSantis, for that fine opening statement as 

well. 

3 

Thanks to the witnesses for showing up today on this chilly day 

in Washington, D.C. 

[Laughter.] 

Mr. CARTWRIGHT. I represent northeastern Pennsylvania, a place 

where people rely on community banks for their banking needs. In 

fact, in one out of five counties in America, community banks are 

the exclusive source of credit. Individuals, homeowners, small business people, and farmers need community banks to be open for 

business in their communities. 

So protecting the sustained viability of community banks is important for the quality of life in small towns and rural counties all 

across this Nation. But a long-term trend of consolidation in the 

banking industry threatens the continued existence of community 

banks. According to the FDIC, the decline in the number of banks 

with assets less than $100 million was large enough to account for 

all of the net decline in total banking charters between 1984 and 

2011. 

At the same time, banks with assets over $10 billion have expanded their share of industry assets from 27 percent in 1984 to 

80 percent in 2011. In fact, just 90 banks now control $11 trillion 

in assets in this country. 

We are still recovering from our national experience with the big 

banks that fail. The hearing today probes the extent to which the 

Wall Street Reform and Consumer Protection Act of 2010, also 

known as the Dodd-Frank Act, has contributed to this 30-year 

trend in bank consolidation. 

I hope today’s hearing is not just another attempt by those opposed to reforming Wall Street and protecting consumers from 

predatory banking practices. Unfortunately, some of the folks 

across the aisle from me have devoted considerable effort to stymie 

the law’s new protections. Until just days ago, Republicans in the 

Senate refused to consider President Obama’s nominee to head the 

Consumer Financial Protection Board until the Dodd-Frank Act 

was amended to their liking. 

Members on this committee spent a week of hearings interrogating Elizabeth Warren, formerly the appointed head of the 

CFPB, who was trying to stand up the new agency. I wish that effort could have been spent interrogating the people who caused the 

financial crisis, rather than the public servants who were trying to 

prevent the next one from occurring. 

What is clear from looking at the Dodd-Frank Act and its implementation so far is the real awareness by the law’s authors and 

regulators of the dangers of banks that get too big and the importance of protecting small-sized community banks. In example after 

example, we have seen evidence that requirements imposed by the 

law specifically exempt small community banks, and the costs of 

new regulations are largely borne by the large banks. That is as 

it should be and I think was the intention of the law’s authors. 

Fortunately, today we have with us former Congressman Brad 

Miller, who was our participant in drafting of the bill. If the intention to protect small community banks has not been fulfilled, I 

want to hear about that. That is the purpose of congressional oversight. 

4 

But if the purpose of this hearing is to impede implementation 

of new consumer protections and to address the causes of the financial crisis, I strongly reject that. I look forward to hearing from the 

witnesses today, and again, I thank the chairman and Congressman DeSantis for being here today. 

Thank you. 

Mr. DESANTIS. [Presiding] Thank the gentleman. 

And the gentlemen from Tennessee like to make an opening 

statement? 

Mr. DUNCAN. Well, very briefly, Mr. Chairman, thank you for requesting this hearing. I think this is a very important topic. 

And I will tell you that just a few weeks ago, there was a column 

in the Washington Times, which said that it has been 3 years since 

the House and Senate passed the Dodd-Frank financial reform legislation. So far, the effects are not what Washington promised. 

More than 200 smaller banks have failed in the wake of DoddFrank. And it says, and he said, we have learned once again that 

whenever Washington announces new regulations, hold onto your 

wallets. 

And very similar to that, I have a column by Louise Bennetts 

from the Cato Institute, an article that appeared in the American 

Banker. And she said this, ‘‘The Dodd-Frank Act, sold to the public 

as the tamer of the Wall Street titans, may well end up having a 

disproportionate impact on smaller institutions, thanks to the costs 

of capital implications? of being not too big to fail and the advent 

of the Consumer Financial Protection Bureau.’’ 

And that is the problem. When you overregulate something, it 

hurts the little guys first, then the medium size, and it ends up 

helping the big giants. And I can tell you, I have no problems with 

the regulators being very strict, very tough on the big giants. But 

that is not the way this law is working, and I have had many 

bankers in my district in east Tennessee complain about this and 

tell about how expensive it has been for them already. 

And it is only going to get worse if we don’t do something about 

it. So I thank you for calling this very important hearing. 

Mr. DESANTIS. Thank you. 

And the committee received a letter from the Credit Union National Association, explaining how credit unions are similarly burdened by onerous regulations in Dodd-Frank. Like community 

banks, credit unions were similarly blameless for the financial crisis of 2008. 

And with unanimous consent, we will enter this letter that they 

sent to the committee into the record. 

Members may have 7 days to submit opening statements for the 

record. 

We will now recognize our panel. Mr. Eddie Creamer is president 

and CEO of Prosperity Bank of St. Augustine, Florida. Professor 

Tanya Marsh is assistant professor of law at Wake Forest University School of Law. The Honorable Bradley Miller is a former Member of Congress and senior fellow at the Center for American 

Progress. And Ms. Hester Peirce is senior research fellow at the 

Mercatus Center at George Mason University. 

5 

Pursuant to committee rules, all witnesses will be sworn in before they testify. Please stand. Please rise and raise your right 

hand. 

[Witnesses sworn.] 

Mr. DESANTIS. Let the record reflect that the witnesses answered 

in the affirmative. 

Now you will each be recognized for 5 minutes. I know some of 

you prepared statements. You feel free to read from that or provide 

whatever information you would like to provide. 

So, Mr. Creamer, you are up. 

WITNESS STATEMENTS 

STATEMENT OF EDDIE CREAMER 

Mr. CREAMER. Thank you, Vice Chairman DeSantis and Ranking 

Member Cartwright, Ms. Duckworth, and Mr. Duncan. 

I appreciate this opportunity to speak to you today. It’s both an 

honor and a privilege for me to talk to you on behalf of my 160 employees about the sometime damaging, but always overwhelming 

and ever-changing regulatory environment that a community bank 

faces. 

As my written testimony states, I’ve been a community banker 

in Florida for over 31 years. And while I understand that all banks 

must be regulated and the consumer must be protected, I also understand that these regulations must be clear, concise, uniformly 

applied to banks so they can reach their—or meet their intended 

purpose. 

I also understand that the vast difference between community 

banks and very large banks, that a one-size-fits-all regulatory approach is impractical and, frankly, does not work. There is certainly more complexity and systemic risk in a $2 trillion bank than 

there is my $748 million bank in northeast Florida. 

Today’s Wall Street Journal headline reporting that one our 

country’s largest banks will likely agree to a record fine for manipulating the electricity market is the best example I could give you 

of this difference today. While I do not understand how a bank 

could manipulate the electricity market, nor do I think I want to 

understand that, I do understand the crystal clear difference when 

contrasted to what a community bank does and the purpose it 

serves. 

Over my 31-year career, I’ve experienced law after law, regulation after regulation, rule after rule—FIRREA, Gramm-Leach-Bliley, Truth-in-Lending, Truth-in-Savings, Fair Lending, Know Your 

Customer, and now Dodd-Frank. Dodd-Frank, by the way, which by 

some reports almost 63 percent is yet to be written. So I can’t judge 

the impact of that. 

All of these regulations, while well intended, had the stated purpose to protect, defend, amend, enforce, or simplify something. 

There are thousands and thousands of pages that a community 

banker must understand and attempt to comply with, and rarely, 

if ever, are existing regulations amended, repealed, or modernized 

in consideration of the new regulations. 

These laws and regulations and rules are often and inconsistently—or often inconsistently interpreted and implied—applied 

6 

from exam to exam and examiner to examiner and, frankly, from 

agency to agency. This has created regulatory fatigue in our bank 

and among our employees, and the cost of compliance with these 

regulations skyrocketing for us. 

You have seen in the written testimony here and you already 

know that community banks play a vital role in our economy. To 

continue to play this vital role, it is important that community 

banks have clear, concise, uniformly applied regulations commensurate to their business model and their inherent risk. 

If not, I am confident there will be fewer community banks. And 

if there are fewer community banks, there will be fewer choices for 

the consumer and fewer products. Fewer choices, fewer products 

mean higher cost for the consumer. 

Again, I’m deeply grateful for this opportunity to talk to you 

about my industry and my profession, of which I’m deeply passionate, and I welcome the opportunity to address your questions. 

Thank you. 

[Prepared statement of Mr. Creamer follows:] 

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Mr. DESANTIS. Thank you for that statement. 

And the chair will now recognize Ms. Peirce for her opening 

statement. 

STATEMENT OF HESTER PEIRCE 

Ms. PEIRCE. Sorry. It’s an honor to be here today. I appreciate 

the opportunity. 

One of the wonderful things about our financial system is its diversity, its flexibility, and the competition that it affords. And this 

is good for consumers because it allows consumers of all different 

types to find something that works for them. 

Unfortunately, the regulatory system that we’re putting in place 

is not consistent with that competitiveness, flexibility, and diversity. Instead, it prefers large banks over small. It imposes regulatory costs that disproportionately burden the small banks, and its 

consumer protection model is one that works much better for large 

banks than it does for small. 

A lot of people say Dodd-Frank is not about community banks. 

It’s about big financial institutions. And they’re right. It’s about a 

partnership between big financial institutions and the Government. 

This manifests itself most directly in the designation of systemically important financial institutions under Dodd-Frank. And 

while it’s true that as a designated institution, you are subject to 

many more regulations, but what is also true is that the Government has made a statement that they stand behind those institutions that they think they’re too important to fail. 

And so, when times of trouble come, when there’s a liquidity crisis, customers of these institutions and also creditors are going to 

know that it’s the large banks—that the Government has the back 

of the large banks. And that’s a real advantage for large banks. 

But there are also more subtle—more subtle disadvantages for 

the smaller entities, and that comes in the form of regulatory burden. The financial industry was, as we just heard, quite regulated 

before Dodd-Frank. But Dodd-Frank came along with almost 1,000 

pages of legislative text. And then add to that 11,000 pages and 

counting of proposals and final rules and guidance. 

For a large bank with an army of in-house lawyers, outside experts to assist them in figuring out how to comply and how to comply efficiently, it’s a burden, but it’s not the type of burden that it 

is for a community bank. For a community bank that has to hire 

a new compliance person or pay high-priced outside consultants to 

help it understand what applies to them, it could be the difference 

between a profitable year and not a profitable year. 

But more important I think than the monetary cost is the distraction. If you think of your average community banker who got 

to where she is because she loved the community she serves and 

she wanted to figure out how to help small businesses in that community grow, how to help families buy homes, she didn’t want to 

spend her time thinking about regulation. But now the cloud of uncertainty, of regulatory uncertainty is what’s keeping her up at 

night, and that’s not good for the consumers that she wants to 

serve. 

And then, as far as consumer protection goes, the Dodd-Frank 

model of consumer protection is one in which the regulators in 

20 

Washington will figure out what works best for consumers all 

across the Nation. And that means designing plain vanilla products 

that will work for every consumer in every circumstance. And that 

works pretty well for large banks, which have a mechanistic approach to lending. 

But for a community bank, which prides itself on getting to know 

its customers and its communities and tailoring products to them, 

it doesn’t work so well. And so, this could end up leading community banks into areas that they’re not—into new business lines that 

they’re not comfortable with, into new products, and into more aggressive ways to fund themselves and more aggressive product 

lines. 

So what can we do about this? Well, first, we can find out more. 

We can find out what the good, the bad, and the indifferent parts 

of Dodd-Frank are for community banks, which the Mercatus Center, where I work, is now trying to do that. We’re conducting an 

online survey of small bankers, and we hope to present the information that we get from that to policymakers so that they can figure out which parts are truly the worst. 

And the second thing that we can do is now we have 3 years of 

objective hindsight with which we can look at Dodd-Frank and say, 

okay, what’s working and what’s not? What do we need to fix? 

What do we need to throw out? 

And then we can look at designing better exemptions for small 

entities. And these exemptions can’t be ones that are conditioned 

on very complicated criteria because then that, too, becomes a regulatory burden for the small banks. 

And then we can ask the regulators, ask the financial regulators 

to do economic analysis. This is something that they don’t traditionally do, but it’s not too much to ask them to look through an 

economic lens, figure out what the problem they’re trying to solve 

is, look at the alternatives, and look at the costs and benefits of 

those alternatives. 

Thank you very much, and I’d be happy to answer any questions. 

[Prepared statement of Ms. Peirce follows:] 

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Mr. DESANTIS. Appreciate that statement. 

Mr. Miller, thank you for joining us. You are up for 5 minutes. 

STATEMENT OF HON. R. BRADLEY MILLER 

Mr. MILLER. Thank you, Mr. Chairman. 

I’m Brad Miller. I’ve served for a decade as a Member of the 

House and left at the beginning of the year. I’m now of counsel to 

the law firm of Grais & Ellsworth and a senior fellow at the Center 

for American Progress. 

The consolidation of the banking industry has largely reduced 

the role of community banks to a niche in the economy, but it is 

an important niche, as almost everyone who has spoken has noted. 

Community banks still hold a majority of deposits in rural and 

small town America. One out of five rural and micropolitan counties—that’s small towns—the only physical banking offices are 

those of community banks. 

Community banks are locally owned and controlled. They gather 

deposits locally, and they make lending decisions locally. As of 

2011, 46 percent of the banking industry’s small loans to farms and 

businesses were by community banks, and community banks just 

had 14 percent of banking assets. 

Congress and regulators should recognize real differences between community banks and too big to fail institutions. Avoid needless compliance costs because compliance costs are largely a fixed 

cost rather than a variable cost. Avoid giving large institutions an 

unfair competitive advantage. Allowing examination of smaller 

banks for CFPB compliance by existing safety and soundness regulators, rather than having too disruptive regulations, is a sensible 

recognition the differences between community banks and bigger 

banks. I got some grief at the time from some of my usual allies 

on financial reform for leading that compromise. But I thought 

then, and I still think, that different compliance examination rules 

made sense. 

Similarly, the CFPB created a sensible, limited exception from 

the qualified mortgage, or QM, rule for portfolio mortgages by community banks and credit unions with less than $2 billion in assets 

that make fewer than 500 first lien mortgages a year. The DoddFrank Act was the most significant set of financial reforms since 

the New Deal, and the financial crisis was the most significant financial crisis since the Great Depression. 

A GAO study last fall concluded that some provisions will help 

community banks, such as supervision by the CFPB of nonbank 

lenders that competed unfairly with responsible community banks 

in the past and changes in the calculation of deposit insurance premiums. 

Other visions inevitably will result in some compliance costs for 

community banks, the GAO found. But how much will depend upon 

the implementing regulations. So this is all kind of a guess in what 

compliance costs may be. 

Regulators should certainly make sensible exceptions, like 

CFPB’s exemption from the QM rule for some portfolio mortgages 

by community banks. But other provisions really should apply 

equally to all lenders. Community bank lending may be more relationship based than lending by bigger banks, but no one walks into 

29 

a community bank with a legal pad or a laptop and says, ‘‘I need 

a loan. Do you want to be the party of the first part, or do you 

want me to be the party of the first part?’’ 

They all use standard forms. They use the same forms for all of 

their lending. No lender’s standard form should include predatory, 

equity-stripping provisions. Community banks were generally not 

guilty of some of the worst abuses of the last decade, and community banks remain more constrained by reputational concerns than 

are the biggest banks. 

But community banks are not incapable of bad conduct. In the 

movie, ‘‘It’s a Wonderful Life,’’ George Bailey was a community 

banker, but so was Mr. Potter. I know that I’ve just made a reference that no one under the age of 30 caught. 

[Laughter.] 

Mr. MILLER. Which is—which means 97 percent of congressional 

staffers. 

There is litigation pending now against a New York community 

bank for mortgages that the banks made to homeowners with lots 

of equity but problem credit. The mortgages had an interest rate 

that adjusted to almost 10 percent. 

If a mortgager—if a homeowner was late with a payment, the 

rate went to 18 percent and stayed at 18 percent until the homeowner got completely current. Almost half of the 5,000 mortgages, 

5,000 homeowners who got those mortgages are losing their home. 

If Congress is serious about helping community banks compete, 

there are a lot of things Congress can do. Congress can limit ATM 

charges that are unrelated to the cost of transactions. There is a 

Bank of America cash machine just two blocks from here on Pennsylvania Avenue. Good luck with finding one for Prosperity Bank. 

Most important, Congress should end the implicit subsidy of too 

big to fail banks. The ICBA has joined in the chorus calling for 

ending too big to fail because of the unfair competitive advantage 

it gives too big to fail banks over community banks, and Congress 

should pay attention. 

Again, Mr. Chairman, thank you for this opportunity to testify. 

[Prepared statement of Mr. Miller follows:] 

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Mr. DESANTIS. Thank you for your attendance. 

And Ms. Marsh, thank you for attending as well, and you are up 

for 5 minutes. 

STATEMENT OF TANYA MARSH 

Ms. MARSH. Thank you, Chairman, members of the subcommittee. 

I appreciate you convening this hearing today and for inviting 

me to testify. 

My name is Tanya Marsh. I’m an associate professor at the 

Wake Forest University School of Law in Winston-Salem, North 

Carolina, and I’m an adjunct scholar with the American Enterprise 

Institute. 

In May, I coauthored a research paper for AEI, entitled ‘‘The Impact of Dodd-Frank on Community Banks.’’ A copy of that paper is 

included in my written testimony, but I just wanted to highlight a 

couple of key points from it for you today. 

The purpose of Dodd-Frank, as everyone has noted, is to prevent 

another financial crisis by enhancing consumer protection and ending the era of too big to fail. But the regulatory burden imposed 

by Dodd-Frank on community banks I believe undermines both 

goals, and ultimately, it will harm both consumers and the economy by first forcing community banks to consolidate or go out of 

business, furthering the concentration of assets in too big to fail institutions, and, second, encouraging standardization of financial 

products, which potentially will leave millions of vulnerable borrowers without meaningful access to credit or banking services. 

The American system of banking regulation is really a system of 

regulation by accretion. And what I mean by that is it’s a result 

of about 200 years of very well-meaning legislative responses to financial and banking crises. But the net effect of all of these policies 

is a one-size-fits-all system that is fundamentally flawed. 

My key message today is I think we need to take a step back and 

rethink our regulatory approach to banking in general, to target 

our resources on the real risks to the American consumer and the 

American economy, rather than doubling down on a regulatory approach that represents more of a historical accident than a deliberate policy choice. 

It’s a simple fact that a depository institution with $165 million 

in assets, the median American bank, poses different risks to consumers and the economy than a $2 trillion bank. And I think we 

should take a more tailored approach to regulating them both. 

We need to remember that financial services sector is not a free 

market. It’s a highly regulated market. Therefore, our policy 

choices can have a substantial impact on the ability of institutions 

to compete within that market. Although few would argue, and no 

one is arguing here today, that community banks caused the financial crisis, 7 of the 16 titles of Dodd-Frank are expected to impact 

community banks in some way. 

Hundreds of regulations are anticipated to be promulgated. Most 

of these rules are very complex, and the stakes for understanding 

and following them are high. It is not an insignificant cost to have 

an expert read the new regulations as they’re proposed and determine whether or not they are applicable, let alone implement them. 

34 

As the Federal Reserve determined in 1998, a small bank is less 

able to absorb this regulatory burden than a large bank. So by imposing unnecessary regulation on smaller institutions, we are 

awarding the larger banks a further competitive advantage. 

A recurring theme in Dodd-Frank, particularly with respect to 

the Consumer Financial Protection Bureau, is that the standardization of financial products and forms will protect consumers. But 

this focus on standardization fails to recognize the challenges posed 

by—posed by borrowers who lack the deep credit history or documentation necessary for the model-based lending that’s used by the 

larger banks. 

The self-employed, seasonal workers, farmers, people 

transitioning to work are particularly at risk, I believe, by increased standardization. Financial activities that are fundamental 

to the average American are only really worth the time of a 

megabank if they involve a completely standardized product and if 

the borrower is a completely standardized borrower. You either fit 

in the box, or you don’t. 

And as a result, millions of Americans are left out of the box altogether. According to the FDIC, one in four American households 

is unbanked or underbanked. These households interact with 

nonbank financial service providers who have been largely unregulated prior to Dodd-Frank, and they typically bear far higher costs 

than those households that are fully served by banks. 

So if regulators push the entire banking industry in lockstep toward standardization, many small businesses and individuals that 

are currently served by community banks may be denied credit and 

swell the ranks of the unbanked or underbanked. In addition, because of their higher operating costs relative to larger banks, if 

community banks become forced through standardization into just 

small versions of large financial institutions, they will be at a severe competitive disadvantage. 

So, as a result, credit and banking services will be eliminated or 

become more expensive for millions of American consumers, especially those living in rural communities and small businesses. 

For these reasons, I ask the subcommittee to consider taking an 

overall fresh look at the Federal regulation of banks to determine 

how to more appropriately regulate both community banks and 

large financial institutions. 

Thank you again for the opportunity to testify today. 

[Prepared statement of Ms. Marsh follows:] 

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Mr. DESANTIS. Well, thank you for your statement and for your 

attendance. 

And the chair will recognize himself for the first 5 minutes of 

questions. You know, it is interesting. I saw an estimate about once 

all the Dodd-Frank rules are implemented, that compliance economy wide is going to be about 24 million man-hours. And by way 

of comparison, 20 million man-hours was sufficient to build the 

Panama Canal. 

So this is a huge diversion of energy into compliance. And I think 

today we want to figure out is all this compliance necessarily a 

good thing, particularly for institutions who are not too big to fail 

and did not cause the financial crisis. 

Mr. Creamer, do you have unlimited resources at your bank? 

Mr. CREAMER. No, sir. I do not. 

Mr. DESANTIS. So as you face more burdens from the regulatory 

apparatus, do you basically have to just diverted existing resources 

into meeting that compliance, the compliance requirements? 

Mr. CREAMER. We diverted existing resources. In addition to 

that, over the past 4 years in a very difficult economy when, as a 

small business, a bank or any other business had to watch every 

cost, every paper clip, every piece of paper to make sure that we 

retained the core profitability that we needed to survive, those limited resources were strained even further as we moved away from 

customer-facing personnel to compliance and audit-related personnel. 

In fact, coming out of the recession now, I went into the recession 

with 260 employees. I came out of the recession with 165 employees. I now have more compliance staff than I do small business 

lenders. 

Mr. DESANTIS. And does that have—I would imagine that would 

have an effect on how broad you can lend throughout the community, given those numbers? 

Mr. CREAMER. It has a negative effect. Obviously, I mean, first 

of all, during the recession, there was not a lot of demand for new 

loans. But there was a lot of demand from existing customers for 

help with existing loans. 

As we have seen in northeast Florida now, the economy is beginning to recover, and there is a demand for new loans. But resources 

are still limited. And so, having the compliance and audit staff and 

the costs we spend in addition to that for training and three outside firms we employ for compliance review, it will cost us in excess 

of $750,000 this year just for compliance. That’s resources that I 

cannot devote back into production people, calling officers, and that 

sort of thing. 

Mr. DESANTIS. Now just as an experienced community banker, 

does your bank or any community bank that you have seen pose 

a systemic risk to the national or world economy? 

Mr. CREAMER. I don’t believe we pose a systemic risk to the national or world economy. In fact, I’m not sure we pose a systemic 

risk to St. Augustine and Palatka, frankly. We perform a very important function in those markets, but I do not believe the economy 

would stop functioning if we ceased to exist. 

Mr. DESANTIS. Now I guess one of the—and Mr. Miller suggested, hey, well, you can cap some fees or do this. Now you and 

47 

I talked in the district about some of the purported consumer protection regulations that come out, and you serve a lot of low-income 

people. And you told me the issue you are having with some of the 

folks who have this overdraft protection and how you are basically, 

in response to the regulation that is supposed to be pro-consumer, 

they are now actually going to probably have less choices. 

Can you explain that? 

Mr. CREAMER. Well, we are a—we are a business like most other 

businesses. We are a for-profit business. In fact, our regulators 

want to make sure we are a for-profit business because, obviously, 

one of the ways we build capital, which is very important, is 

through our net profit. 

When our profit is strained or our costs are increased, we have 

to pass that on, to some extent, to the consumer. We can only cut 

costs so much within our organization. And I think, more specifically, what you and I talked about was in relation to the overdraft 

protections, we are—we serve a very blue collar market. In fact, to 

a large extent, we serve what I call a ‘‘no collar’’ market—a lot of 

contractors, a lot of people who are working for a living. 

There is a misconception about banks and overdrafts. Customers 

who use overdrafts are normally not customers that are being 

abused by the financial institution. They are using those because 

they are making a conscious choice. Because it’s 2 days before payday, and I’m a schoolteacher. I work for the city, and I have to pay 

my rent or I have to buy my groceries. That’s a fact of life in our 

economy. 

I have two choices. I can write a check that I know my bank is 

going to pay, which has very little stigma to me, and I will cover 

that check later. Or I can go to the payday lender, which has a 

huge stigma and a large cost to the consumer. 

So in many cases what is represented as being terribly problematic is more so serving a demand for that individual customer that 

is making a choice. 

Mr. DESANTIS. And as a result of some of the new rules, you basically are going to be in a situation where they are going to have 

less options in that respect? 

Mr. CREAMER. They already have significantly less options. 

Mr. DESANTIS. Okay. Ms. Peirce, you kind of hit on this. But 

with the advantages that some of the heavy regulatory burden provides to some of the large banks, obviously, they can comply with 

this much easier. They have huge staffs, all this. 

Are there funding costs? And you said there is an implicit taxpayer guarantee here. So does that reflect itself in them having 

lower funding costs than small and medium-sized competitors? 

Ms. PEIRCE. I think it does. Now they don’t always compete in 

the same capital markets, the small banks and the bigger banks. 

But I will say that especially during a time of crisis, we’re going 

to see that funding gap really spread. And so, that’s when it really 

matters, when you really—you need to have liquidity to survive. 

It’s going to really matter, and the bigger institutions will have a 

hands-down advantage then. 

So I do believe they have a funding advantage now, but it’s even 

more critical in times of crisis. 

Mr. DESANTIS. Great. Thank you. 

48 

My time has expired, and I will recognize the gentlewoman from 

Illinois. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. 

Thank you to all the witnesses for being here. 

I am deeply concerned about the well-being about community 

banks. I feel that they are absolutely critical to the success and 

economic well-being of our communities. They provide close to half 

of the small business loans, at least in my district, and I think that 

may be nationwide. And they also provide something around 16 to 

20 percent range of residential mortgages, mortgage lending. 

Community banks operate on a very different business model 

than the large banks, and I think it is really critical that we ensure 

that any financial regulations that we put into place respect those 

differences and don’t put our community banks at a disadvantage. 

The last thing I want is more consolidation in the market and 

for the big—too big to fail banks to get even bigger. The housing 

market in Illinois was particularly hard hit, and as it recovers, I 

want to make sure that we are not harming the ability of families 

in my State to achieve the American dream of buying a home. 

The CFPB has requested public comments on the proposal to adjust the qualified mortgage rules for the community banks. Could 

each of you provide me with your thoughts on the impact of this 

proposed adjustment to the qualified mortgage rule will have on 

residential mortgages—residential mortgage lending, particularly 

for community banks? 

Mr. CREAMER. Yes, ma’am. And thank you. 

I can speak from my standpoint. I’m not comfortable with the 

CFPB defining a qualified mortgage. I think that’s the purview of 

the bank and its underwriting practices and the customer individually at the time. 

As an example, the definition now, as I understand it, is if a 

mortgage loan is made in excess of a 90 percent loan to value, it 

may not be a qualified mortgage, and the borrower could have a 

rebuttable presumption to put the loan back if there is a default. 

Unfortunately, in our market, that will have the effect of eliminating a huge segment of needed mortgage loans. I know a number 

of people, and I will speak for my son and my daughter-in-law, who 

are both college graduates, who are both gainfully employed, who 

are both renting an apartment. And at some point, they’ll want to 

buy a home. And in our market, to buy an affordable home, it 

would probably be $175,000, and there will be closing costs in that. 

For them to put 20 percent down on that home would probably 

be somewhere around $40,000. Well, not only do they not have 

$40,000 saved, they haven’t sold a home and made $40,000. Most 

Americans have a hard time saving $40,000. 

And even though they would fully qualify for the loan, they 

would be prohibited from getting the loan because of the down payment requirement, even though the monthly payment at today’s interest rates would be less than their rent payment. 

Ms. DUCKWORTH. Great point. 

Ms. Peirce? 

Ms. PEIRCE. Yes, I mean, I just want to echo what Mr. Creamer 

said in the sense that it should be the bank’s responsibility to figure out what sound underwriting is for a loan. It’s very difficult 

49 

to—I think the CFPB has a very difficult task to try to set underwriting requirements for all the loans across the country, and 

that’s really what they’re trying to do in the qualified mortgage 

rulemaking. 

And there are exceptions, but the exceptions, from my understanding, aren’t broad enough to cover some of the normal lending 

practices of community banks. 

Ms. DUCKWORTH. Congressman Miller? 

Mr. MILLER. I understood your question about QRM rather than 

QM. 

Ms. DUCKWORTH. Okay. 

Mr. MILLER. One of the criticisms that we heard of what went 

wrong before the financial crisis, leading up to the financial crisis, 

was that the origination of mortgages was an originate to distribute, and the originator, which were often not community banks, 

were often mortgage companies with essentially no assets, sold 

those immediately to Wall Street, which immediately put them in 

a pool and sold mortgage-backed securities based upon them. 

And so, the phrase we used, we heard so much at the time was 

‘‘skin in the game.’’ That if the originator had some skin in the 

game, they would, in fact, apply underwriting standards. But if 

they could get somebody to buy 100 percent of the risk, they didn’t 

care. 

So the object of qualified—but then the idea was they had to 

keep at least 5 percent. But we heard from a lot of the financial 

industry that if we did that, it really would constrict liquidity, and 

there should be some kind of obviously safe mortgages that should 

not be subject to that 5 percent retained risk, skin in the game requirement. 

Now I have thought that the QRM rules do go too far. I don’t 

think that they need—we need to go back to Ozzie and Harriet 

loans of the 1960s. I don’t think we need to have 20 percent prime, 

you know, all the rest. But I do think that as an exception to the 

risk retention rules, the QRM, a QRM exception does make sense, 

and leaving it entirely to the banks just puts us back where we 

were in the middle part of the last decade. 

Ms. DUCKWORTH. I am out of time, Mr. Chairman. 

Mr. DESANTIS. Ms. Marsh, if you weigh in on that, give you —— 

Ms. MARSH. If I could just briefly? I think that the qualified 

mortgage rule is a great example of the standardization issue that 

I mentioned in my testimony. So when I was doing research for my 

paper, I talked to a community banker in the upper Midwest, 

where the economy is very reliant on timber and mining, seasonal 

activity. So most people don’t have any cash flow during the winter 

months. 

He structures residential mortgages so they only have to make 

payments for 9 out of the 12 months because that matches their 

income stream. Under the qualified mortgage rules, he can’t do 

that. 

That’s not the kind of activity that we’re trying to clamp down 

on. We’re trying to align underwriting risk with skin in the game, 

as Congressman Miller mentioned. And I think exempting loans 

that are held in portfolio can accomplish that. 

Mr. DESANTIS. Thank you. 

50 

The chair now recognizes the gentleman from Tennessee. 

Mr. MILLER. Loans held in portfolio are 100 percent skin the 

game. 

Ms. MARSH. Right. 

Mr. MILLER. Okay. 

Mr. DUNCAN. Well, thank you, Mr. Chairman. 

The staff asked, I didn’t know what the up-to-date statistics 

were. So I asked the staff a few minutes ago what was the average 

size of a typical bank in this country, and they tell me the median 

size, bank size is $165 million, that 80 percent of the 7,100 banks 

have less than $1 billion. The average size of the 10 largest banks 

is $717 billion, and so there is quite a discrepancy between the 

very largest. 

And I started this hearing saying that I don’t have any objection 

to going to these trillion dollar banks or these mega-billion dollar 

banks because they can handle it. But the problem is, is that this 

is—as those quotes I gave, this is most harmful to the little banks. 

In fact, this one article says, thanks to Dodd-Frank, community 

banks are too small to survive. We talked about too big to fail, too 

small to survive is what we are looking at in the over 200 that has 

run out of business since we started Dodd-Frank. 

And Ms. Peirce, I was under the impression—you know, I remember—every Member gets a thing called the Congress Daily at 

their door each morning. And I remember 2 or 3 years ago, there 

was a cartoon in there, and it showed these banks with huge bags 

full of money, and the banker saying, ‘‘Lend, lend’’—I mean, excuse 

me, and it showed the President, President Obama, saying, ‘‘Lend, 

lend, lend.’’ And then it showed the regulators pulling back, saying, 

‘‘No, no, no.’’ 

And I was under the impression that the banking industry, even 

before Dodd-Frank, was one of the more heavily regulated industries in this—or businesses in this country. Is that correct? 

I mean, before you had the 2,300-page Dodd-Frank law and the 

hundreds of new rules and regulations, you already had all kinds 

of rules and regulations and red tape for these banks anyway? 

Ms. PEIRCE. That’s correct. And unfortunately, some of those 

rules directed bankers to instead of using their own skills in figuring out whether to loan and when, it tried to direct them when 

to loan and tried to make decisions for them, just as you mentioned. 

Mr. DUNCAN. Mr. Creamer, did you start your bank? Or were you 

in at the first? 

Mr. CREAMER. No, sir. I did not. 

Mr. DUNCAN. What size was it when you first got involved? 

Mr. CREAMER. When I joined Prosperity Bank in—16 years ago, 

the bank was about $75 million in assets. 

Mr. DUNCAN. Seventy-five million? 

Mr. CREAMER. Yes, sir. 

Mr. DUNCAN. How—what do you think would be the effect on a bank much smaller than yours? Let us say a $100 million or a $200 

million bank? 

Mr. CREAMER. Of a regulation—of the current regulations? 

Mr. DUNCAN. Yes, of the Dodd-Frank law. 

Mr. CREAMER. Catastrophic. 

51 

Mr. DUNCAN. Catastrophic? 

Mr. CREAMER. Yes, because resources are resources. Banks operate on net interest margin and non-interest income. Both of those 

are a function of asset size. The larger the bank, especially in a 

community bank that gets over $500 million, and there’s been a lot 

of conversation that if you’re not over $500 million, you probably 

can’t afford to operate in the regulatory scheme. But economies of 

scale build in, and you have some efficiencies at that point to afford 

compliance staff and, at some point, outside legal help. 

If you’re below that level, with net interest margins compressed, 

as they are today, and non-interest income being regulated down 

as hard as it is today, it’s going to be extremely difficult for those 

banks to, one, I would say, survive. And I don’t mean survive from 

a failure standpoint. I mean without having to merge out. And two, 

to be profitable to return any modicum of return to the shareholders. 

Mr. DUNCAN. Ms. Marsh, do you think that this law is going to 

continue this trend of forcing smaller banks either out of business 

or forced to merge with bigger banks? 

Ms. MARSH. Absolutely. It already has, actually. 

I think Ms. Peirce and I have both conducted or are conducting 

research to try and quantify what the regulatory burden actually 

costs banks and to see what actually happens as a result. It’s very 

difficult to figure that out, especially since many of the rules are 

still being created. 

But there’s all kinds of anecdotal evidence that small banks are 

merging, and if you listen to the testimony and the public statements of the leaders of some of those banks, they’re doing it because, as Mr. Creamer mentioned, a smaller bank simply can’t absorb the costs. And they have to bind together to survive collectively. 

Mr. DUNCAN. Well, I just think it is very sad that a law that was 

aimed at a few big giants on Wall Street is ending up hurting the 

little guys and the medium-sized guys most of all. 

Thank you very much, Mr. Chairman. 

Mr. DESANTIS. Thank you. 

And the chair will now recognize the ranking member of the full 

committee, Mr. Cummings. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

And I want to thank all of you for being here. 

And to Congressman Miller, it was good to see you back. I always respected your work in so many areas, but particularly in this 

area. 

Many of the provisions under the Dodd-Frank Act are geared towards the larger, too big to fail institutions. However, there are 

many examples where community banks receive positive treatment 

under new regulatory requirements implementing the Dodd-Frank 

Act. For example, the Dodd-Frank Act raised the Federal deposit 

insurance coverage on consumer bank accounts to $250,000 while 

shifting the cost to larger institutions to better reflect their industry market share. 

Community banks have benefited by a significant drop in Federal deposit insurance premiums paid by the institutions with less 

than $10 billion. And it was recently announced that there will be 

52 

a refund of $5.8 billion in deposit insurance fund prepayments from 

the last 3 years. 

Now, Congressman Miller, by reforming the deposit insurance assessments, do you think that the regulators have it right, have the 

right balance in terms of assessments charged to large banks 

versus the small banks? 

Mr. MILLER. Mr. Cummings, I think we did that. We don’t want 

to give the regulators credit for that. 

Mr. CUMMINGS. Okay. All right. Well, we will take credit. 

Mr. MILLER. I know that Mr. Creamer, in his written testimony 

at least, did speak of the burden of deposit insurance, the assessments, the premiums. But the adjustment of those was something 

that truly does help. The GAO study pointed it out as something 

that would truly help community banks. 

The fact that community banks were having to compete with 

nonbank lenders that were not playing by any rules at all was unfair to community banks, took away business. That is something 

else that helps community banks. 

And the GAO study said, as for the rest, it’s certainly true that 

we’ve passed the most significant financial reform package since 

the New Deal because we had the most significant financial crisis 

since the Great Depression. So, of course, there will be some compliance cost. 

But until the implementing regulations come down, we can’t 

know what they will be. So all of what we’ve heard about how 

crushing they will be is—is speculation because we don’t know because most of them have not come down. 

The CFPB, at least in their rulemaking to this point, has taken 

to heart the suggestions of small banks. They have a trade association, an Independent Community Bankers Association, ICBA, that 

has been very involved in the rulemaking. The reformers like Center for Responsible Lending, CRL, is working closely with ICBA 

and trying to be reasonable and compromise. 

So, as I said in my prepared—as I said both in my oral statement 

and my written statement, I very much encourage the regulators 

to look closely at the concerns raised by community bankers to see 

what is not a necessary cost of compliance, as we did in Congress 

with having a different examination regime for the CFPB for small 

banks, and try to make sense of this. 

Not needlessly drive up compliance costs, but also recognize 

where the rules do need to be the same. 

Mr. CUMMINGS. Okay. The Dodd-Frank provides the CFPB with 

supervisory authority over nonbank financial institutions in a capacity new to that industry. Congressman Miller, in your testimony 

today, you have stated, and I quote, ‘‘A GAO study last fall concluded that some provisions will help community banks, such as 

the supervision by the CFPB of certain nonbank lenders that competed unfairly with responsible community banks in the past.’’ 

Would you comment on that, please? 

Mr. MILLER. Certainly. There were some—like the New York 

community bank I spoke about in my testimony, my prepared testimony, there are some bad actors. But generally, the community 

banks were not—were not guilty of the worst practices. 

53 

Some of the worst practices were by mortgage companies that 

were not depository institutions at all, did not have a charter from 

anybody. They were almost completely unregulated. 

I’ve heard Ben Bernanke say in sort of defense of the Fed—because they had rulemaking authority they never used under 

HOEPA, Home Ownership and Equity Protection Act, passed in 

1994—that the mortgage market, mortgage practices went to hell 

in a very short period of time in a pretty dark part of the market, 

where they did not really see what was going on. 

You certainly had lenders like Ameriquest that weren’t—weren’t 

depository institutions at all. You also had really a gray line between brokers and an originator that all you really needed to be— 

needed to do to become a mortgage company was to get a warehouse line of credit and to have a relationship with a Wall Street 

investment bank that would buy the mortgages as soon as you 

made them. 

And those folks were competing with Mr. Creamer. And when 

you make them play by the same rules that Mr. Creamer plays by, 

that his bank plays by, it’s going to help him a lot. 

Mr. DESANTIS. Thank the gentleman. 

And the chair now recognizes the gentleman from Georgia, Mr. 

Collins. 

[Pause.] 

Mr. COLLINS. May as well go for it. You made a comment earlier. 

You made a statement. Micropolitan? What was your —— 

Mr. MILLER. Micropolitan. It’s a Census Bureau term. It just 

means small towns. 

Mr. COLLINS. Well, I have another term for it. It’s called home. 

And —— 

Mr. MILLER. It was called my district, too. Yes. 

Mr. COLLINS. Exactly. So we understand that. And I think it sort 

of sets the stage for my questions and just really where I am at 

as well because I like your analogy. And by the way, it is a traditional favorite at our house of the Baileys and the Potters, and we 

understand that. 

Mr. MILLER. You’re raising your children right. 

Mr. COLLINS. Exactly right. But I think there is an issue of the 

market taking care of the Potters of the world, and there is an 

issue with the Baileys, and neither one were exactly models of 

bookkeeping, okay, in that movie. 

[Laughter.] 

Mr. COLLINS. But what I see here and what I want to talk about, 

Mr. Creamer, as I see you here today, and I sense as we were talking about this, I just sense a frustration not in necessarily your 

voice, but in your eyes. That you are just, see, you look a lot like 

the bankers that I talk to in northeast Georgia. 

One of the stories that I have, and it may be similar in your area 

of north Florida, was we had a community bank, a little threebranch community bank, great little lender. Came in with all the 

regulations. They came in with—their auditors came in to their 

home office. 

Their home office had 10 employees. They brought in about 14 

auditors and got mad because they didn’t have a place to work out 

54 

of. This is the kind of things that I think folks just don’t understand. 

Mr. Creamer, are you seeing this sort of thing as you talk to 

other bankers? I would like just to hear. I have read your statement, and I am sensing that. But I also want to hear from you 

again. 

Mr. CREAMER. Well, I’d like to apologize first for speaking with 

my eyes and not my voice because —— 

Mr. COLLINS. But I think this happens. 

Mr. CREAMER. There is a large level of frustration. And I had 

breakfast with my vice chairman last week, and he told me I was 

becoming cynical and I needed to guard against that. So I am 

guarding against that. 

Mr. COLLINS. Well, you came to the wrong city for that. 

[Laughter.] 

Mr. CREAMER. Yes. Well, you know, I would first like to say I 

was remiss in not thanking the Members for speaking very complimentary about community banks and even the testimony here 

and saying a number of times that we did not cause the financial 

crisis. Because, frankly, if you’ve been on the business end of 8 

safety and soundness exams over the last 6 years like I have, you 

would believe that you were the sole cause of the crisis. 

It is comforting that the FDIC is going to give back some of the 

premiums. However, in the State of Florida, there is about 200 

community banks, plus or minus. Seventy-five of those were put 

under consent or cease and desist orders over the past 4 years. 

Of those 75 cease and desist orders, 63 read exactly the same, 

and they all impose 8 percent and 12 percent capital ratios, which 

are above the regulatory standards. If you have one of those consent orders, you do not get a refund of that premium. So it is not 

very helpful in that. 

From the examination story, in our bank, it’s more like 30 to 35 

examiners. It is a 6- to 8-week process. That is new in the last 4 

years, and it’s—I mean, it’s something we have to do because we’re 

an insured institution. But it is difficult at best. 

Mr. COLLINS. And one other thing that I want to emphasize in 

the little bit of time I have left here is Georgia has had a large 

issue with that problem as well, failed banks and failed specifically 

community banks, for a number of reasons, some good and some 

bad. But one of the issues that I am having trouble as we get 

around just some issues that my banks are bringing to me was not 

being able to get into the markets that are de novo standard, that 

coming out in 2008 were well capitalized or limited. 

If they were established after 2008, that standard coming in 

where they can’t reach out in the markets in a different way. Can 

you explain to me, and Mr. Creamer or others want to jump in, explain the change in the de novo status that is meant for newer 

community banks trying to come in and fill the gap where some 

have been mentioned? 

And also has there been an effect of this standard maybe cutting 

back the access to residential mortgage markets in areas that preventing healthy community banks from entering into those markets? Is that something that would you speak to or someone else 

would speak to? 

55 

Mr. CREAMER. I’m not sure I can speak to the de novo situation 

because we’re not a de novo. 

Mr. COLLINS. Not de novo, yes. 

Mr. CREAMER. And I can’t imagine anybody would want to start 

a bank today anyway. 

Mr. COLLINS. Well, we have had a couple, and I have one bank 

in particular that was starting to get into a new market, had hired 

consultants, went through the paperwork, and went through everything else. The consultants then went to another job because of the 

length of time it was taking to get this up. So they finally just put 

it on hold, and it stopped the market. 

And it was just, again, we are in an area which is a little bit different. So anybody else want to take a stab it, Congressman and 

others? I mean, because it seems like we are limiting our environment here, and that is the one thing we really don’t want to do, 

as long as the standards are properly and appropriately applied. 

Mr. MILLER. I’m not familiar with any—like Mr. Creamer, I’m 

really hearing for the first time about a discussion about newly 

chartered banks. I think there’s probably true there are not a 

whole lot. 

Now there has been a study of the 200 or 300 community banks 

that failed during the financial crisis. I think it was the GAO. It 

may have been the FDIC. But in fact, most of those were fairly 

newly chartered banks, and they were fairly newly chartered banks 

that were chartered specifically to get involved in what they called 

at the time the real estate boom, now we call the real estate bubble. 

And that doesn’t even take into account—it’s like 70 or 80 percent of the failed banks were newly chartered banks that their 

business model was largely dirt lending, either acquisition development in construction loans, a form of commercial lending, or mortgages. And those were the ones that they got into trouble. 

And then, in addition to that, there were a fair number of investors who bought community banks specifically to get in on the real 

estate boom, now we call the bubble, and a lot of those got into 

trouble as well. 

But it’s probably pretty hard to raise capital right now in part 

because the economy is still kind of bad. 

Mr. COLLINS. And especially in those that exist. And Mr. Chair, 

I know my time is out. 

But I think one of this is the thing that they are actors. And as 

you—and I do like the analogy to a point of the Bailey and Potter 

issue. But we can’t continue to regulate the Potters of the world at 

the expense of the Baileys of the world, and I think that is the 

problem that I am seeing right now, and it is the concern that I 

have. 

Mr. Chairman, I yield back. 

Mr. DESANTIS. Thank the gentleman from Georgia. 

Now we don’t have anyone from the other side. Obviously, if they 

come, they will be recognized. But seeing the lack of Members on 

that side, the chair will now recognize the gentlelady from Wyoming. 

Ms. LUMMIS. Thank you, Mr. Chairman. 

56 

Kind of following in on this theme, I, too—I’m from Wyoming, 

the smallest population in the Nation. There really are no big 

banks in Wyoming, none. We are completely reliant on community 

banks, and so the thought that we would all have to drive to Denver or Salt Lake to bank for an entire State is absurd. 

Professor Marsh, I want to ask you, does too big to fail give systemically important institutions an advantage that community 

banks can’t get? 

Ms. MARSH. Well, to clarify, what do you mean by ‘‘too big to 

fail?’’ So, do you mean systemically —— 

Ms. LUMMIS. Systemically —— 

Ms. MARSH.—significant designation? 

Ms. LUMMIS. Yes. 

Ms. MARSH. That hasn’t really been my focus of my research, but 

there are a number of people who would argue that that’s true. 

I think it is true that that designation means that many people 

in the marketplace consider that the Government, even though 

Dodd-Frank repeatedly says we’re not bailing anyone out, the marketplace doesn’t believe it. And the marketplace is giving a premium to the larger banks at the expense of the smaller banks. 

So —— 

Ms. LUMMIS. Why doesn’t the marketplace believe it? 

Ms. MARSH. I think because if you allow an institution to remain 

that large, if we found it difficult to imagine a world where they 

all cascaded in failure 5 years ago, and they’ve only gotten bigger 

since then, how can we imagine a world where the Government 

would allow them to all cascade in failure this time? 

Ms. LUMMIS. Mr. Creamer, why didn’t your bank—why doesn’t 

your bank believe it? 

Mr. CREAMER. Because it’s been the practice that too big to fail, 

whether you are a financial institution or an automobile manufacturer, it has just been a practice that you’ve been bailed out. The 

moral hazard has been created. And as a financial person, we fully 

understand that a $2.3 trillion financial institution that can manipulate the electricity market cannot be allowed to fail. 

Ms. LUMMIS. So how is this going to affect the needs of customers 

in States like mine and communities like Mr. Collins’ in northern 

Georgia, very rural areas? What are we going to do? 

Mr. CREAMER. Well, as Mr. Miller said earlier, and he’s accurate 

on residential loans that all the forms are basically the same, not 

so on small business loans where the forms can be different. But 

the difference then is the customers are not all the same. And in 

a community bank, it’s about the story of the customer. 

It’s about the need of the customer, what the customer is trying 

to accomplish, and how can the community bank help that customer accomplish what they’re trying to accomplish. Because if 

we’re successful in helping a small business owner accomplish what 

they want to accomplish, then they hire more people. 

More people potentially bank with us. More people then potentially borrow for their homes and their cars, which makes our community stronger, and it makes our bank stronger, and it’s just a 

good thing. 

57 

Ms. LUMMIS. So how many Fortune 500 companies do you think 

are incorporated in Wyoming, have their home offices in Wyoming? 

What would you guess? Anybody? 

Mr. CREAMER. None? 

Ms. LUMMIS. You got it. So with places like Wyoming or any of 

these districts that are really comprised of small towns, what is the 

future for the borrower, for the small business person, the small 

business person? 

Mr. CREAMER. The future should be a strong, viable community 

banking system. 

Ms. LUMMIS. How do we get it back? 

Mr. CREAMER. We have to relieve the overwhelming regulatory 

burden off of the community banks, and we have to allow community banks to be able to effectively compete in the niches they compete in. 

Ms. LUMMIS. Professor Marsh, and you can answer that as well, 

but in addition, would you answer this question? Will the regulations coming out of Dodd-Frank make smaller banks more or less 

able to compete with larger banking institutions? 

Ms. MARSH. Well, I’ll answer both questions at once, if I may? 

Ms. LUMMIS. That would be great. 

Ms. MARSH. Because I think that, as I’ve said before and others 

have said, the issue is not to look at Dodd-Frank in a vacuum because no bank can look at Dodd-Frank in a vacuum. It’s regulation 

by accretion. So it’s on top of decades and decades and decades of 

regulations that the banks have to deal with. 

And so, that’s our problem, right? That we just react to crises 

and add new laws. And what we need to do is take a step back and 

fundamentally re-imagine what is the appropriate way to regulate 

a bank that is located in rural Wyoming and most of its business 

is farm lending. 

Ms. LUMMIS. And the community banks, did they create this crisis that Dodd-Frank was built to address? 

Ms. MARSH. I do not think so. 

Ms. LUMMIS. I yield back, Mr. Chairman. 

Mr. DESANTIS. Thank you for that. 

I am going to go ahead and do a second round. We may have— 

I know there are some Democratic Members coming. I did see, just 

on kind of some of the news that I know Mr. Cartwright is down 

there for an IRS hearing. So it should give him a chance to come 

back up here. 

In terms of just the cause of the financial crisis, and I know you 

got to it a little bit in your report, but there was a narrative developed that it was Wall Street decided, you know, they got greedy 

and they tanked the whole economy. 

And I have no problem with criticism directed at Wall Street, but 

it seems to me that really overlooks the extent to which Government policy created incentives that created the environment to 

where you would have that. So is that something that you would 

agree with just in your research? 

Ms. MARSH. I very deliberately stayed away from researching 

that. 

[Laughter.] 

58 

Ms. MARSH. Well, I mean, I am much more interested in what 

the impact is because from the perspective of what I was trying to 

write about, I don’t care what caused the financial crisis. I care 

what’s going to cause the next financial crisis and what’s going to 

cause problems for small businesses and farmers and rural communities. 

Rural communities, I think, are the most vulnerable to this increased pressure on the small banks. And you didn’t hear about a 

lot of problems in rural communities in the lead-up to the financial 

crisis. 

Mr. DESANTIS. Sure. Ms. Peirce, do you have anything on that? 

Because it just seems to me that—and I wasn’t in Congress during 

this. This is my first term. But it seems to me that people here are 

quick to try to say, oh, it was this, but not very quick to do a little 

self-examination in terms of bad policies that have created—that 

have helped create some of these problems. 

Ms. PEIRCE. Yes, I mean, I think that institutions will take advantage of bad policies to work for their own advantage. And unfortunately, the Government has set up a regulatory regime that really takes away consequences for poor decisions made by people in 

the private sector. 

And so, what we need to do and what we should have done instead of doing what Dodd-Frank did, we should have put more responsibility on the people who actually make bad decisions to pay 

for them. And I think community bankers will pay for their bad decisions because they’re going to go out of business if they make a 

lot of bad lending decisions. 

But these bigger banks, we let them stay in business even 

though they continue to make very bad decisions. So, yes, there’s 

definitely a role of Government policy. 

Mr. DESANTIS. So shifting the risk from taxpayers to shareholders, basically, do you think that would be good policy? 

Ms. PEIRCE. It would be good policy. And making creditors responsible, too, because they should be monitoring the institutions 

to which they lend. 

Mr. DESANTIS. When I walk around here, I will get people bringing me these leaflets or whatever, and every week for sure, but 

sometimes even every day, someone will come up and GlassSteagall, Glass-Steagall. Do you, Mr. Miller or Ms. Peirce, anyone, 

that repeal of Glass-Steagall, it is kind of a simplistic narrative 

that Glass-Steagall is repealed and then, lo and behold, the economy cratered. 

What role do you think that that had in the financial crisis? 

Mr. MILLER. I think the deregulation generally in the ’80s and 

’90s played a very large role. The separation of commercial investment banking or the ending of that separation at least had the role 

of making the institutions very large and very complex and, therefore, too big to fail. 

The problem with too big to fail, the reason that it’s a problem 

for community banks is that there is an assumption in the market, 

which I think Ms Peirce talked about generally, or someone talked 

about the assumption. The assumption is that they will not be allowed to fail. So if you lend them money, you’re going to get paid 

back one way or the other. 

59 

If they can’t pay you back, then the taxpayers will, one way or 

the other, pay you back. So you’re going to get paid back. And 

that’s worth something. 

There have been various estimates. Bloomberg, I think, estimated that it’s a quarter to a half a percent advantage. The rating 

agencies point to that to give better credit rating—credit ratings to 

big banks, the assumption that they would not be allowed to fail. 

They’re almost impossible to underwrite. They’re too big to fail, 

too big to manage, too big for the market to discipline, too bit to 

underwrite. And so, they’re getting at least a half a point less when 

they borrow money than Mr. Creamer’s bank does. 

ICBA is now very much on the issue of too big to fail, and their 

issue is that they get money more cheaply. There is a GAO study 

coming on it, I think, shortly, if it hasn’t already come out, but on 

too big to fail. And that is an unfair competitive advantage for Mr. 

Creamer and every other community bank. 

Mr. DESANTIS. Do you want to weigh in, Ms. Peirce? 

Ms. PEIRCE. Yes, with respect to Glass-Steagall, I don’t think 

that—I mean, I think it’s a nice rallying cry. But I don’t think that 

that’s going to solve the problem to put Glass-Steagall back —— 

Mr. DESANTIS. Because Lehman Brothers was pretty much a 

pure investment bank. Correct? 

Ms. PEIRCE. Right. 

Mr. DESANTIS. Now in terms of ending too big to fail, some have 

said, hey, let us just set kind of some arbitrary caps on capital requirements or size. I have concerns about whether Members of 

Congress have the competence to decide those things. So in terms 

of ending too big to fail, what would be your policy prescriptions 

in that respect? 

Ms. PEIRCE. Well, if we could trade capital requirements for all 

the other regulations, then we could pare back a lot of the other 

regulations that, as Professor Marsh said, have accreted over time. 

Unfortunately, I think if we do increase capital requirements, it’s 

not going to be at the expense of other requirements. 

And also we put in risk-based capital requirements, which don’t 

work as well as a simple leverage ratio. I mean, community banks 

tend to be more heavily capitalized than the larger banks. And so, 

I think we need to think creatively about perhaps even increasing 

the liability for shareholders so that if your bank fails, you end up 

having to kick in some more money. That will make you pay a little 

more attention. 

Mr. DESANTIS. Ms. Marsh? 

Ms. MARSH. I don’t know that it’s going to be a magic bullet for 

anything, but if we’re trying to limit the size of these institutions, 

I think it makes more sense to separate depository institutions 

from investment banks than it does to put a cap on, an artificial 

cap that you said. I mean, none of us are really in a position to 

determine what is too big to fail. 

It makes more sense to split them up functionally as GlassSteagall did than to set an arbitrary cap. 

Mr. DESANTIS. Yes, I mean, I think some of us—look, I mean, if 

you are a big bank, and you are not getting special policies that 

give you competitive advantage, and if you are bearing the risk, I 

60 

think a lot of us are concerned when you have a system of 

privatized gains and socialized losses. 

Obviously, there is a moral hazard issue, and there is just an unfairness issue because no one is going to care outside of our community if your bank fails. You are not going to get bailed out, obviously. But when one of the big banks, then they would get a disparate treatment. So that is just a problem with our policy. 

The gentlewoman from Wyoming, do you have any other questions? Because if you do, I can recognize you to give maybe Mr. 

Cartwright some time. And then, otherwise, I will just probably the 

gavel the hearing to a close. 

Ms. LUMMIS. I do have additional questions, Mr. Chairman. 

Mr. DESANTIS. Okay. The chair recognizes the gentlewoman from 

Wyoming for 5 minutes. 

Ms. LUMMIS. Thank you very much. 

Could I ask any of you to comment on the proposed Basel III regulations? 

Ms. PEIRCE. Well, I mean, I would just say that, first of all, having our regulations decided by central bankers across the world 

and imposing one uniform standard doesn’t seem like the wisest 

approach to me. 

But second of all, the focus on risk-based capital, which Basel III 

embodies, is I think a very dangerous approach because it homogenizes the banking sector further, and it forces people to try to 

gain—I mean, it’s an invitation to arbitrage, and that’s what happened —— 

Ms. LUMMIS. Isn’t it true that banking is more concentrated in 

Europe than it is in the United States? 

Ms. PEIRCE. It is. We have a more—we have a much more competitive landscape than Europe does. 

Ms. LUMMIS. So, Basel III, Mr. Creamer, would do what to American banking? 

Mr. CREAMER. Well, to go back very briefly to what Mr. DeSantis 

had said about regulation incenting some things, first of all, riskbased capital regulation incented residential mortgage loans because they were risk-weighted lower, and it required lower capital 

requirements. In many cases, there’s more inherent risk in a residential mortgage loan than there is in an owner-occupied commercial real estate loan to an operating business. 

In addition to that, Fannie Mae and Freddie Mac put explicit 

Government guarantees. Now they were implicit at the time, but 

we all know they’re explicit. So when you have an incentive to capital and you have explicit guarantees by the Government in a product, you’ll probably create a price bubble. 

Basel III doesn’t really address that. Basel III still risk-weights 

residential mortgage loans at 50 percent. So there’s still an encouragement to make residential mortgage loans. It still risk-weights 

small business loans at 100 percent. 

Right now, each quarter my bank files a call report. That call report is about 78 pages. All call reports—all banks file call reports. 

The call report instructions are 626 pages for that 78 pages. 

This is a mailer we received last week from a very reputable brokerage firm with a breakdown of Basel III as it relates to community banks. Basel III doesn’t simplify that. It makes it more comVerDate Aug 31 2005 08:52 Aug 13, 2013 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\DOCS\82337.TXT APRIL
61 

plicated for our staff to calculate. And while they say they have 

simplified the definition of leverage capital, I’d simply refer to one 

section of this, which is about 16 lines of the deductions from what 

is qualified as regulatory capital. 

And I am a banker and an accountant by trade, and I don’t recognize the acronyms that are in here, and these are the ones that 

supposedly apply to me. 

Ms. LUMMIS. I hear a lot about Basel III from the banks in my 

communities, and they are expressing true alarm over them. 

Another question for anyone on the panel who wishes to address 

it. The Consumer Protection Financial Bureau has only completed 

about a third, a little more than a third of its regulations thus far, 

and they were supposed to have them all completed at this time. 

So given that, and the fact that the interpretations of those regulations was really given to the regulators, so how is a bank supposed 

to determine what services you can provide based on rules that 

haven’t been written or rules that haven’t been interpreted? 

Mr. CREAMER. Well, I think Ms. Marsh said it—Professor Marsh 

said it very well a while ago. It is an accretion of regulation. We 

already have consumer protection regulations. We have the Federal 

Reserve alphabet regulations, Regulation A through YY. 

Equal Credit Opportunity, Home Mortgage Disclosure, Electronic 

Funds Transfer, Privacy of Consumer Information, Fair Credit Reporting, Truth in Lending, Unfair Deceptive Acts or Practices, 

Community Reinvestment, on and on and on. These laws are very 

effective. And yes, as Mr. Miller said, there are bad actors. 

As a community banker who has been doing this for 31 years, I 

expect bad actors to be dealt with. But it’s difficult to deal with the 

entire industry because of one or two bad actors, and that makes 

this more difficult. 

I have heard that the Consumer Financial Protection Bureau is 

going to make it easier for consumers. Well, these regulations are 

Government-promulgated as well, and I’ll simply point out to you 

that under Fair Lending, in Regulation Z, this is a residential 

mortgage application that a consumer that comes into any bank 

has to fill out and understand. 

Now the easiest way to take care—to take advantage of a consumer is something like this. Now I shudder to think what the unwritten regulations that are coming down the pike will do to this 

and what that will do to my customer, who is normally a plumber 

or electrician or a carpenter who is buying their first home, who 

has no chance of understanding what this is. 

Ms. LUMMIS. Mr. Chairman, would you indulge one other of the 

respondents to weigh in on that? 

Mr. DESANTIS. Sure. 

Ms. LUMMIS. Anyone wish to? 

Mr. MILLER. Ms. Lummis, I have heard differently. I’ve heard 

that CFPB is doing a better job of hitting their deadlines than any 

of the other agencies, which may be a low standard, but I think 

—— Ms. LUMMIS. That is a low standard, I would suggest. 

Mr. MILLER.—they are actually getting their regs in on time. And 

they’ve also shown a willingness that Congress rarely shows of adjusting their regulations after they’ve adopted them. 

62 

Just within the last—either last week or even earlier this week, 

they just issued a lot of little changes to the QM rules, the qualified mortgage rules, based upon concerns that were raised. Congress tends to enact some big act and then not touch it for a generation. 

And when the inevitable little things that aren’t working exactly 

the way Congress thought they would work come forward, instead 

of just fixing that, usually the people who’ve been opposed to the 

bill now point to that as evidence that it should never have been 

passed, and the people who supported the bill are unwilling to 

admit any error. 

So CFPB is actually showing some reasonableness and flexibility 

and a willingness to listen. And some of what they’re doing is designed to make forms more readable, more understandable. The 

Truth in Lending Act and RESPA, TILA and RESPA, the Real Estate Settlement Practices Act, required really almost identical disclosures, but not quite identical. 

And one thing I’ve heard from—when I was in Congress, one of 

the things I heard from my community bankers and my credit 

unions was that their lawyers told them that they were afraid to 

try to take statutory language, which was legalese, and turn it into 

plain English for fear they might get it wrong. And so, with TILA 

and RESPA, what they would do is set out in the statutory language, which no one could read. 

And with TILA and RESPA, they set out all of TILA and then 

all of RESPA. So CFPB has issued a form that is both disclosures, 

TILA and RESPA, on one form that is plain English. That is clearly better for consumers. I assume that Mr. Creamer prefers it as 

well. 

And so, I think there is some hope with CFPB, if part of their 

mission is to make finance understandable, that they will actually 

turn unreadable forms into something that can be understood by 

a normal human being. 

Ms. LUMMIS. I hope so, too, Mr. Miller. Everything I hear so far 

from my community banks and their borrowers, their customers, is 

to the contrary. 

Mr. MILLER. The baseline against which we’re working was complete inability to understand anything. 

Ms. LUMMIS. Thank you. 

I yield back. Thank you, Mr. Chairman, for your indulgence. 

Mr. DESANTIS. Thank you. 

Well, we really appreciate the witnesses here. I think you all did 

a great job. I think what we were trying to establish here is when 

Government takes on, Congress implements, passes these big bills 

designed to deal with certain issues, that oftentimes we can create 

new problems and disadvantage smaller institutions vis-a-vis competing with larger institutions or even just make life more difficult 

for smaller institutions. 

So I think we were able to demonstrate that. I think that from 

what I heard from the comments on the other side, I don’t think 

that many of these folks, who probably supported Dodd-Frank, 

want to see community banks harmed. And so, there may be some 

opportunity to get some bipartisan relief from some of the onerous 

regulations. 

63 

We talked a little bit towards the end about CFPB, and I think 

that may be something for another day. But I think that that is 

going to be something that is very concerning to me because if you 

look at the way CFPB is structured, it is essentially immune from 

any type of congressional oversight. We don’t have any way to affect their budget or conduct meaningful oversight. 

And really, the President is limited in removing the head of that 

agency or the head of the board, and the courts are limited in their 

review of that. So, to me, that is problematic. 

Madison in Federalist 51 said, ‘‘If men were angels, no government would be necessary. If angels were to govern men, neither internal nor external constraints would be necessary.’’ The way the 

CFPB is structured we better hope that he was wrong about that 

and that these folks are angels because, otherwise, I fear that there 

will be some unintended consequences, or maybe even intended 

down the—but that is something for another day. 

At this time, I want to thank again the witnesses for their time, 

and this hearing is adjourned. 

[Whereupon, at 4:08 p.m., the subcommittee was adjourned.] 

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