Jeb Hensarling

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, I yield myself 30 seconds. I point out to my friends on the other side of the aisle, there are over 20 different capital levels that are already applied to our banking organizations, including the Total Loss-Absorbing Capital, the TLAC. I would also point out, if my friends are so concerned about capital levels, maybe they should have supported the Financial CHOICE Act, which is a tradeoff between greater levels of capital and Washington micromanagement of our financial institutions. Last but not least, Chairman Powell of the Federal Reserve appeared before our committee just this morning to say safety and soundness considerations allow the Fed to, for all intents and purposes, impose any capital level they want to on our banking institutions, thus undercutting all the arguments we have heard from the other side of the aisle. Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina (Mr. Pittenger), the vice chairman of the Financial Services Subcommittee on Terrorism and Illicit Finance.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio (Mr. Davidson), a very thoughtful member of the Financial Services Committee.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentlewoman from New York (Ms. Tenney), a hardworking member of the Financial Services Committee.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from Indiana (Mr. Hollingsworth), who is a member of the Financial Services Committee.

Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have remaining?

Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, for the perhaps two dozen people who are watching us on C-SPAN at the moment, I think it is important to add a little bit of clarity to what we are debating here. What we are debating is: What is the proper capital level for a federally insured financial institution? We know that if that capital level is set too low, then perhaps the financial institution could fail. If it is set too high, then they will not have the capital to help fund the American Dream--car loans, home loans, and small business loans. So we have heard a lot about a very simple bill that helps clarify one of perhaps two dozen different capital levels that are already applicable to our banking institutions, the total loss-absorbing capacity, the supplementary leverage ratio, the enhanced supplementary leverage ratio, the liquidity coverage ratio, the G-SIB surcharge, and the list goes on and on and on. We are talking, about, Mr. Speaker, one capital level, the operational capital--operational risk capital. So, number one, there are a multitude of different capital levels and liquidity levels that are already applied to our financial institutions. What we are saying is, if we are measuring operational risk, we should focus on current risks. Then, if in doubt, Mr. Speaker, I always recommend that Members actually read the bills that are being debated. It is an always helpful exercise. If you would actually read the bill, you would discover in section 1 of the bill, Mr. Luetkemeyer's bill says that operational risk capital is based primarily on the risks posed by a banking organizations' current activities and business. If you look at subparagraph (3) of paragraph (a), it says: `` . . . which is not solely based on a banking organization's historic losses.'' So it is not prohibited to look at historic facts, but, primarily, we must be focused on the current operational risk. As I used earlier in the debate the analogy of who would want their life insurance premiums based on the fact that in an earlier point in their life they were a skydiver or a scuba diver and now today they are facing life as an accountant? Those are different risk profiles. If you build a home 4 feet below sea level, yet you sell that home, I doubt you want your flood insurance premiums based on the home that you already sold. It makes no sense. As I also said earlier in this debate, when it comes to proper levels of capital, as Federal Reserve Chair Jerome Powell stated earlier today before our committee, safety and soundness considerations trump all. The regulators have the power to adjust the capital levels. Now, this friend on the other side of the aisle talks about, oh, my God, this is a huge risk to the economy. It is $22 million. Now, that is real money. But, Mr. Speaker, we all know that is not even a rounding error here; $22 million over the 10-year budget window is approximately a $2 million risk. And from the Congressional Budget Office report, they say that it is a small, small chance that the FDIC would incur additional costs. So this is not creating more risk to the system. What we are trying to do is calibrate the appropriate risk. If we are going to measure operational risk as opposed to the other 20-some odd capital levels, then we ought to be focused on current risk, because if we are not, Mr. Speaker, hardworking Americans are losing current credit opportunities in order to pay for past operational risk. That is not right, that is not fair, and that is not smart. We ought to ensure that we have the proper capital level not only to make sure that we have a safe and sound financial system but to make sure that we are capitalizing the American Dream for our constituents. My constituents in the Fifth District of Texas, who live in places like Mineola and Forney, who are desperately trying to fund their American Dream and put that down payment on a first house, we have got to make sure that they are able to. So many Americans are living paycheck to paycheck. They need these credit opportunities, Mr. Speaker. Let's calibrate one capital ratio properly. Let's add a little common sense, and let's not allow the good people in Basel, Switzerland--as good as they may be--de facto impose what is an irrational capital system on our banking system as we are trying to help our small businesses and our families. So, Mr. Speaker, I encourage all Members to support H.R. 4296, a strong bipartisan bill to help credit opportunities for all families. Mr. Speaker, I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, again, there are roughly two dozen different capital and liquidity levels that are applied to our banks. We are talking about, one, operational capital, and whether or not operational risk capital ought to be based on current risk. Now, I know my friend on the other side of the aisle always likes to wave the Wells Fargo flag. Wells Fargo needs to be held accountable. There needs to be justice for all who have been wronged. There have been roughly $142 million now paid in restitution. There have been over $200 million in fines paid. The board of Wells Fargo has been replaced. The CEO was fired, and the Federal Reserve capped their growth, all under existing authorities. But under this motion to recommit, potentially, other financial institutions could be included. It is not the financial institution that counts, at the end of the day. It is capital that could be used to fund car loans. It is capital that could be used to fund homes. It is capital that could be used to fund the next Apple or the next Amazon. Instead, that capital would be put onto the sidelines. Again, we are talking about operational risk capital only and should it be calibrated for current risk or past risk. That is a completely different issue from ensuring that customers of Wells Fargo, who clearly have been wronged, receive justice and that Wells Fargo has been held accountable. Again, I would point out this might not have happened if the CFPB under the previous administration had been doing their business. They should have caught this. But they didn't. Instead, it was the LA Times and the Los Angeles city attorney. The CFPB was asleep at the wheel under the previous administration. So, again, there is existing authority. But if the regulators and then-Director Cordray had been doing their job, this wouldn't have happened. The evidence was there and it was simply overlooked. We see way too many instances of that, Mr. Chair. Again, we want to properly calibrate one capital level, operational risk capital. That is what the bill of the gentleman from Missouri does. We should not be confused about the jihad against banks, because banks, ultimately, are still funding the American Dream. You punish our constituents, you punish small businesses every time you needlessly take away capital that can fund their American dreams. I urge a ``no'' vote on the motion to recommit. I urge an ``aye'' vote on Mr. Luetkemeyer's bill. I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.

Mr. HENSARLING

Mr. HENSARLING. Madam Speaker, I yield 5 minutes to the gentleman from Arkansas (Mr. Hill), the majority whip of the committee and the sponsor of the legislation.

Mr. HENSARLING. Madam Speaker, I yield 4 minutes to the gentleman from Wisconsin (Mr. Duffy), the chairman of the Subcommittee on Housing and Insurance and the sponsor of title 2 of the Protection of Source Code in this bill.

Mr. HENSARLING. Madam Speaker, I yield an additional 30 seconds to the gentleman from Wisconsin.

Mr. HENSARLING. Mr. Speaker, I reserve a point of order on the gentleman's motion.

Mr. HENSARLING. Madam Speaker, I yield myself such time as I may consume. Madam Speaker, I rise today in strong support of H.R. 3978, which is a package of five strongly bipartisan bills, yet again, from the Financial Services Committee of the House. As standalone bills, all were favorably reported, again, with strong bipartisan support of at least three-quarters of the committee. The title provision of this package is the TRID Improvement Act by Congressman French Hill. This bill amends CFPB's complex TILA/RESPA integrated disclosure, known as the TRID rule, in order to simplify the closing documents consumers get when they close a mortgage. It does this by allowing for the calculation of the discounted rate that title insurance companies provide to consumers when they purchase a lender's and owner's title insurance policy simultaneously. This makes it more accurate, Madam Speaker. Title II is the Protection of Source Code Act introduced by Representatives Sean Duffy and David Scott, a Republican and a Democrat. This provision ensures that the Securities and Exchange Commission cannot require financial services firms to disclose algorithmic trading source code without first obtaining a subpoena. Source code is among a firm's most sensitive information, and this bipartisan provision balances privacy and due process concerns while preserving the SEC's ability to obtain such information when necessary. The third title is the Fostering Innovation Act which was introduced by Representatives Sinema and Hollingsworth to provide relief to small and emerging businesses by extending the popular onramp exemption of the JOBS Act for emerging growth companies in a more tailored manner. In short, it provides emerging growth companies more time to reach a size when they reasonably can be expected to financially sustain the legal, accounting, and compliance costs associated with the full Sarbanes-Oxley section 404(b) compliance. Fourth, Madam Speaker, is the National Securities Exchange Regulatory Parity Act which was introduced by Mr. Royce and which will ensure further clarity and competition among national security exchanges by modernizing the blue sky exemption in the Securities Act. Modernizing this provision will ensure all national security exchanges operate on a level regulatory playing field and help protect retail investors from arbitrary acts by State regulators that may bar investors in one State from buying stock freely available to investors in every other State. The final title of this bill is a provision introduced by Congressman Stivers to allow mortgage loan originators who work as loan officers in banks and credit unions to transition to a new job at a nonmortgage company without losing the ability to originate loans. Without this bill, the transition process can take weeks or months depending on the State. Each of these measures, Madam Speaker, will cut through layers of red tape and help level the playing field making regulations smarter, fairer, clearer, and more efficient, thus ensuring that there are more competitively priced credit opportunities, more credit opportunities for consumers, and that investors have greater investment opportunities in competitive markets. They will provide commonsense regulatory relief. They are practical, they are bipartisan, and they are needed. Madam Speaker, I encourage all of my colleagues to support the measure, and I reserve the balance of my time.

Mr. HENSARLING. Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and submit extraneous material on the bill under consideration.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 736, I call up the bill (H.R. 3299) to amend the Revised Statutes, the Home Owners' Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act to require the rate of interest on certain loans remain unchanged after transfer of the loan, and for other purposes, and ask for its immediate consideration in the House.

Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days to revise and extend their remarks and to submit extraneous material on the bill under consideration.

Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may consume. I rise today in strong support of H.R. 3299, the Protecting Consumers' Access to Credit Act of 2017, a most important goal of this Chamber. H.R. 3299 is an important bill that is cosponsored by a bipartisan group of Members of the House and was approved by the House Financial Services Committee with a very strong bipartisan vote of 42- 17. I would like to start out by thanking my colleague, the gentleman from North Carolina (Mr. McHenry), the vice chairman of the committee, for introducing this legislation and leading our congressional efforts to help create a regulatory framework which will encourage the growth of financial technology and expand much-needed access to credit for American small businesses and consumers. H.R. 3299 is a legislative response to the 2015 Second Circuit Court of Appeals decision in Madden v. Midland Funding, which clearly appears to have not not considered the valid-when-made legal doctrine, which is a nearly 200-year-old principle of usury law in our Republic. Again, Mr. Speaker, 200 years of settled common law upended in one court case. In the decision, the court held that, while the National Bank Act allowed a federally chartered bank to charge interest under the laws of its home State on loans it makes nationwide, nonbanks that bought those loans could not continue to collect that interest because nonbanks are generally subject to the limits of the borrower's State. The Second Circuit decision has caused considerable uncertainty and risk for many types of bank lending programs, including bank model marketplace lending where national banks originate loans and then transfer them to nonbank third parties. Being able to offer consistent terms nationwide is vital to scaling the marketplace lending business, which, in turn, allows lenders to access cheaper investment capital and then pass the savings on to the borrowers who may be looking to buy their first home, start a business, send a kid to college. H.R. 3299, again, is a commonsense bill that simply codifies the 200- year-old valid-when-made legal doctrine, which would preserve the lawful interest rate on a loan originated by a bank even if the loan is sold, assigned, or transferred to a nonbank third party. This fundamental concept is the backbone of how fintech companies partner with banks. Without it, consumers are faced with higher costs and less availability of credit, particularly those consumers with less access to traditional lending sources. Mr. Speaker, don't take my word for it. According to a recent Columbia/Stanford University study, borrowers with credit scores under 625 have seen their credit cut in half, cut in half thanks to this decision. Again, Mr. Speaker, borrowers with less than stellar credit scores have seen their credit cut in half in the territory comprising the Second Circuit. We simply cannot allow this to happen. Now, Mr. Speaker, thanks to President Trump and Congress passing the Tax Cuts and Jobs Act, we are beginning to see this economy start to take off. We are finally seeing wages begin to grow after 8 years of failed economic policy, but so much work remains to be done for working American families. We have heard, on our Financial Services Committee, Mr. Speaker, from so many of these families who are trying to make ends meet, and it is just vital that they be able to access credit. Americans like Alan from New Hampshire, who recently had trouble finding credit through traditional banks and credit unions due to the regulatory load. As he explained: ``But for my local dealer's efforts on my behalf, there is no doubt I would not be driving my current car. And this was a desperate situation, as I am the sole income earner for my family. My wife is ill, and we have two young children in school. After my old vehicle broke down, I needed to find reliable replacement transportation so I could get to work and continue to provide for my family.'' Mr. Speaker, we should not let the Second Circuit prevent Alan from getting that car loan he desperately needs in order to get to work as the sole provider for his family. A small-business owner from Utah named Maxine applied for a loan for her 37-year-old established business so she could update and purchase equipment to support a contract that would have led to the creation of 50 additional jobs. She explained: ``Three banks informed us that our rating, according to new bank regulations imposed by Dodd-Frank, disqualified us from loan consideration.'' Fifty jobs, poof, gone, Mr. Speaker. So is not Dodd-Frank bad enough? Now we are going to add this Second Circuit opinion to deny credit, which, for lower credit score individuals, has cut credit opportunity in half? I don't think so. I don't think so. It is not up for the unelected to make such decisions. We cannot continue to allow, Mr. Speaker, Washington red tape and the Second Circuit to cut off credit opportunities for hardworking Americans. As the bill says: ``We must preserve and protect consumers' access to credit.'' I urge every Member to support this very important bipartisan bill. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield 5 minutes to the gentleman from North Carolina (Mr. McHenry), vice chairman of the committee and sponsor of the legislation.

Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say to the gentleman who says this is a majority bill, I would also point out it is supported by Congressman Meeks, Democrat from New York; Congressman Clay, Democrat from Missouri; Congressman Scott, Democrat from Georgia; Congressman Cleaver, Democrat from Missouri; Congresswoman Moore, Democrat from Wisconsin; Congressman Perlmutter, Democrat from Colorado; Congresswoman Sinema, Democrat from Arizona, and the list goes on. Mr. Speaker, I yield 4 minutes to the gentleman from Pennsylvania (Mr. Rothfus), the vice chairman of our Subcommittee on Financial Institutions and Consumer Credit.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from North Carolina (Mr. Pittenger), the vice chairman of the Terrorism and Illicit Finance Subcommittee.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from Colorado (Mr. Tipton), vice chairman of the Subcommittee on Oversight and Investigations.

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from Minnesota (Mr. Emmer), a hardworking member of the Financial Services Committee.

Mr. HENSARLING. Mr. Speaker, I yield myself 2 minutes. Mr. Speaker, number one, just for the Record, it is Mr. Rothfus from Pennsylvania and Mr. Pittenger from North Carolina. Since we serve with these colleagues, it would be nice to learn their names. Mr. Speaker, what the ranking member is proposing is to take away credit opportunities for those who need it the most. The greatest credit program is a competitive marketplace. And, unfortunately, the policy that she is advocating, this Second Circuit court case, has cut credit opportunities in half. That means people are paying more. In many respects, this is a more usurious result than what the ranking member is otherwise claiming will happen without the Second Circuit decision. Again, I alluded to it in my opening statement, but we have the definitive academic study. We don't have to guess at this, Mr. Speaker. They studied those with lower credit scores in the Second Circuit. And what did they find out? I will quote from the study. The results presented in figure 3 indicate that the FICO increase was caused by a decline--a decline--in lending to lower quality borrowers. Thank you, Second Circuit. The pattern is most obvious for the lowest quality borrowers, those with FICO scores below 625. The growth rate for these borrowers in Connecticut and New York was a negative 52 percent. Mr. Speaker, that means they had their credit opportunities cut in half. So exactly what the ranking member says that she wants to do to help these people, she is hurting these people; taking away their opportunities to buy a home or taking away their opportunities to buy a car when they may be the sole breadwinner for their family; taking away opportunities, perhaps, to send somebody to college.

Mr. HENSARLING. Mr. Speaker, I yield myself an additional 30 seconds. And then this so-called radical bill of the gentleman from North Carolina, I would note it is a Democrat bill in the Senate. The exact companion bill is carried by a Democrat Senator, Senator Warner from Virginia. It is a Democrat bill. It is bipartisan. It is supported by at least nine Members of the ranking member's party that sit with her in our hearings. Clearly, they heard something she didn't hear. Again, Mr. Speaker, it is important to note that what the Second Circuit has done is change settled law that has been settled law for over 200 years; that will completely not only cut credit opportunities in the Second Circuit, but cut credit opportunities all over America. We cannot allow that to happen. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say: Apparently, Mr. Meeks is abusing these consumers, as is Mr. Clay, as is Mr. Scott, as is Mr. Cleaver, as is Ms. Moore, as is Mr. Perlmutter, as is Ms. Sinema, as is Mr. Heck, and as is Mr. Gottheimer, all Democrats on the House Financial Services Committee that actually support this legislation. Mr. Speaker, I yield 2 minutes to the gentleman from Michigan (Mr. Trott), a member of the Financial Services Committee.