Jeb Hensarling

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I claim the time in opposition to the amendment.

Mr. HENSARLING. Will the gentleman yield?

Mr. HENSARLING. Mr. Chairman, I yield 2 minutes to the gentleman from Michigan (Mr. Huizenga), the author of the FORM Act.

Mr. HENSARLING. Mr. Chairman, I do rise in opposition to the amendment. The gentleman has clearly stated he doesn't like the underlying bill, so his amendment simply guts the underlying bill and allows the Fed to opt out of the underlying bill. I have listened carefully to the gentleman's interest and what he recited about the Taylor rule, but again I would encourage him to read the bill because he would then know, as I suspect that he does, that the Federal Reserve under the FORM Act is not mandated to follow the Taylor rule. It is simply a comparison. So, if the Taylor rule is as bad as the gentleman claims it will be, then the FORM Act will reveal that to all the world. All the world will know this. However, I think if we study economic history carefully, what we will discover is that, when the Fed used a more predictable, rules-based monetary policy to where investors and businesses actually had some idea of what interest rates would be, the economy would flourish, as it did during the great moderation. So again, the FORM Act allows the Fed to use any monetary policy it wishes, to change the policy, to deviate from the policy, but it has to communicate that to the rest. That is essentially what the FORM Act says. It is about communication. It doesn't tell them how to conduct the policy. It does tell them how to communicate the policy to the American people, who deserve to know this from the single most important economic agency of government today.

Mr. HENSARLING. Mr. Chairman, the ranking member for the last 13 minutes has let us know that the President and his bureaucratic appointees don't want any more transparency and accountability. I don't particularly find a news flash in that. I have the greatest amount of respect for Chair Yellen. I both like and respect her. I have never encountered a bureaucrat who didn't want more money, more power, less transparency, and less accountability. She is no different. The Dodd-Frank Act has vastly expanded the powers of the Federal Reserve. Mr. Chairman, for all intents and purposes, they have the ability to actually come in and de facto manage any large financial institution in America. The government has that power. It is a frightening power that has been given by Dodd-Frank, and transparency and accountability is demanded. In addition, we have a Federal Reserve taking monetary policy and tools to a place it has never been before. At a bare minimum, it owes the people's elected Representatives, the Congress, some transparency on why it is doing what it is doing. I would, yet again, encourage all Members to actually read the bill before they claim to know what is in the bill. The Federal Reserve maintains its monetary policy independence, as it should. But it must explain to the rest of us what that is and why they choose to deviate from it if they believe economic circumstances warrant. Again, if they want to base monetary policy on the Taylor rule, so be it. If they want to base it on a rousing game of rock, paper, and scissors, so be it. The American people demand answers because this economy is still underperforming. It is not working for working people. This has to change. We have had the largest economic monetary policy stimulus in our Nation's history, but yet it does not work for working people, and the poor continue to follow behind. All this bill by the gentleman of Michigan does is bring about needed transparency and accountability to the most powerful economic agency in government today. It is demanded by the vast increases in power by the Dodd-Frank Act. The American people deserve answers. We should enact it. I encourage all Members to vote for H.R. 3189, the FORM Act. I yield back the balance of my time.

Mr. HENSARLING. Mr. Chairman, may I inquire as to how much time is remaining on both sides?

Mr. HENSARLING. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from New Jersey (Mr. Garrett), the chairman of our Capital Markets and Government Sponsored Enterprises Subcommittee.

Mr. HENSARLING. Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from Indiana (Mr. Messer).

Mr. HENSARLING. Mr. Chairman, I yield myself 10 seconds to, once again, encourage my colleagues to actually read the bill. The Taylor rule is not mandated for the Federal Reserve. But had the Federal Reserve followed the Taylor rule in the first place, we would not have had a financial crisis because the real estate bubble would not have been inflated by the Fed keeping money too loose, too long. I yield 2 minutes to the gentleman from Wisconsin (Mr. Duffy), the chairman of our Oversight and Investigations Subcommittee.

Mr. HENSARLING. Mr. Chairman, I yield such time as he may consume to the gentleman from Michigan (Mr. Huizenga), the author of the FORM Act and chairman of the Monetary Policy and Trade Subcommittee of the Financial Services Committee.

Mr. HENSARLING. I yield the gentleman from Wisconsin 30 seconds.

Mr. HENSARLING. I yield to the gentleman, the author of the FORM Act.

Mr. HENSARLING. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I rise in strong support of H.R. 3189, the FORM Act, to reform the Federal Reserve. It is sponsored by the gentleman from Michigan (Mr. Huizenga). To paraphrase an old automobile advertising campaign, Mr. Chairman, this is not your father's Fed. Since the financial crisis, the Federal Reserve has morphed into a government institution whose unconventional activities and vastly expanded powers would hardly be recognized by those who drafted the original act. Regrettably, commensurate transparency and accountability have not followed. Since the financial meltdown of 2008, the Fed has carried out unprecedented rounds of asset purchases, known as quantitative easing; and its balance sheet has swollen to almost $5 trillion, equal to one- fourth of the U.S. economy and almost five times its pre-crisis level. We have had almost 7 years of near-zero interest rates, and the Fed's so-called forward guidance provides almost no guidance to investors on when rates might finally be normalized. This ongoing uncertainty is a significant cause of businesses hoarding cash and postponing capital investments and community banks conserving capital and reducing lending. Adding to the economic uncertainty, the Dodd-Frank Act granted the Fed sweeping new regulatory powers to directly intervene in the operations of large financial institutions. This is totally separate and apart from its monetary policy responsibilities, Mr. Chairman. The Fed now stands at the center of Dodd-Frank's codification of too big to fail. With respect to these firms, the Fed is authorized to impose heightened prudential standards, including capital and liquidity requirements, risk management requirements, resolution planning, credit exposure report requirements, and concentration limits. The Fed is even authorized on a vague, faint finding that if a financial institution poses a grave threat to financial stability, to actually break up the firm. In other words, Mr. Chairman, the Fed can now literally occupy the boardrooms of the largest financial institutions in America and influence how they deploy capital. The Fed's monetary policy must be made clear and credible, and its regulatory activities must comport with the rule of law and bear public scrutiny. To accomplish this, the Fed Oversight Reform and Modernization Act, again, the FORM Act, authored by Congressman Huizenga, should be enacted into law. Reform accountability and transparency, on the one hand, and independence in the conduct of monetary policy, on the other, are not mutually exclusive concepts. The main reforms of the FORM Act are as follows: Number one, on monetary policy, the Fed must publish and explain with specificity the strategy it is following. The FORM Act allows the Fed to chose any monetary policy, strategy, or rule it prefers, and it has the power to amend or depart from that rule whenever the Fed decides economic circumstances so warrant. Whether the Fed chooses to conduct monetary policy based upon the Taylor rule developed by Stanford Economist John Taylor or whether they choose to conduct monetary policy based on a rousing game of rock- paper-scissors or any other rule or method, the Fed will retain the unfettered discretion to do that. The FORM Act simply requires the Fed to report and explain its rule and its deviations from the standard benchmark to the rest of us. Economic history clearly shows that, when the Fed employs a more predictable, rules-based monetary policy, more positive economic results will occur. Some have opined that such a provision will compromise the Fed's monetary policy independence. It does not. The Fed again will retain unfettered discretion in the exercise of monetary policy. Given that members of the Fed Board of Governors enjoy 14-year terms, second only to lifetime judicial appointments, and the Fed's budget is independent of congressional appropriations, it is almost inconceivable that Congress could impose upon the Fed's monetary policy independence. On regulatory policy, as distinct from monetary policy, the format compels the Fed to conduct cost-benefit analysis for all its regulations. This is also known as common sense. Under Dodd-Frank, the Fed is directed to publish upwards of 60 new regulations, some in conjunction with other agencies, but a cost- benefit analysis is not required. The Fed's failure to carry out these studies results in excessive regulatory burdens on our small banks and businesses, which harms the economy. Furthermore, under the FORM Act, the Fed will be required to issue formal regulations after providing for notice and comment for Dodd- Frank stress test scenarios and disclose resubmitted stress tests. The Fed's authority to use stress tests to direct operations of financial institutions it deems systemically important puts government bureaucrats in a position of essentially dictating business models and operational objectives of private businesses. Yet, the Fed's implementation of stress testing is marked by a lack of transparency and a total disregard for the rule of law. Given the secrecy surrounding the stress test, it is difficult for Congress and the public to assess either the effectiveness of the Fed's regulatory oversight or the integrity of their findings. Again, under Dodd-Frank, vast powers have been expanded of the Fed. The Fed is not using a transparent monetary policy. Because of this, greater transparency, greater accountability is necessary. Otherwise, we may soon awake to discover that our central bankers have morphed into our central planners. Mr. Chairman, I reserve the balance of my time.

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I yield 5 minutes to the gentleman from New Hampshire (Mr. Guinta), the author of H.R. 1737, a real champion for due process and auto buyers.

Mr. HENSARLING. Mr. Chairman, I yield 2 minutes to the gentleman from New Jersey (Mr. Garrett), chairman of the Capital Markets and Government Sponsored Enterprises Subcommittee of our committee.

Mr. HENSARLING. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I rise today in support of H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act. It is an important, bipartisan bill cosponsored by 166 Members of the House, including 65 Democratic Members. It was approved by the Financial Services Committee that I chair with strong bipartisan support, including more than half of the committee's Democratic members who voted. If Congress means what it says when we write a law, then the CFPB cannot be allowed to willfully ignore the law. Without this bill, the CFPB would have done a blatant end run around the Dodd-Frank Act as well as the Administrative Procedure Act. I would like to thank Representative Guinta of New Hampshire and Representative Perlmutter of Colorado for their leadership in providing the CFPB with an opportunity to live up to its claim of transparency and accountability. I want to thank the gentleman from Texas (Mr. Williams) as well for his outstanding work on this bill. The CFPB's flawed bulletin on indirect auto lending attempts to regulate compensation paid to auto dealers despite the fact that auto dealers were specifically exempted in the Dodd-Frank Act from CFPB rulemaking. By using this bulletin, the Bureau went far beyond merely clarifying existing law and instead, in trying to make new policy through this guidance, did this without using the normal rulemaking process and without public input. This is an affront, Mr. Chairman, to due process. This is an affront to the rule of law and to basic fairness. Furthermore, the CFPB has not been transparent in revealing the methodology it used to determine whether fair lending violations existed in the auto finance market. It took a year of constant pressure from Members of Congress and 13 different letters from 90 Democrat and Republican Members to get the CFPB to finally provide documentation regarding its disparate impacts. In the white paper ultimately provided by the CFPB, they admitted that their own proxy methodology for determining racial disparities is flawed and overestimates the number of African Americans by perhaps as much as 20 percent. Outside statisticians at the well-respected Charles River Associates found the figure could be off by as much as 41 percent. According to a series of three articles published this past September in the American Banker, internal agency documents show the CFPB was aware that their disparate impact methodology significantly overstates racial impact. In other words, Mr. Chairman, they knowingly used junk science and may have no evidence of unintentional discrimination based on the disparate impact theory. In those same internal memos, the American Banker newspaper also found that unaccountable CFPB bureaucrats chose to disregard the explicit exemption of auto dealers that Democrats, when they had a supermajority in both the Senate and the House and controlled the White House, put into Dodd-Frank. They chose to disregard the formal rulemaking requirement set out by the Administrative Procedure Act and instead used high-profile enforcement actions against large auto lenders to pressure them to lower the caps they set on dealer reserve. Now, not only does this call into question the CFPB's attempts to police the fairness of auto loans, its preferred outcomes will obviously increase costs for consumers. As was noted earlier, the CFPB has pressured finance companies to lower the caps they set on dealer reserve or eliminate this discretion altogether. However, under this pricing model, The Wall Street Journal recently revealed that interest payments for some consumers could increase by as much as $580 over the life of the loan. This shows the dire need for the CFPB to follow a transparent process when issuing any subsequent auto finance guidance. That is what H.R. 1737 will ensure. The bill is a simple bill. It requires the Bureau to, number one, provide notice and an opportunity for public comment. Number two, it says the CFPB must make any studies, data, or analysis used in writing the bulletin public. Number three, it must consult with other relevant regulators. Four, it must study the impact of the guidance on consumers as well as women-owned businesses, minority-owned businesses, and small businesses. To those who claim this bill somehow undermines the CFPB'S antidiscrimination efforts, let me quote from the views the Democrat members stated in our report: H.R. 1737 does not alter the CFPB's examination or enforcement activity pursuant to ECOA. That is simply a red herring. Mr. Chairman, I urge all my colleagues to support H.R. 1737. Mr. Chairman, I reserve the balance of my time.

Mr. HENSARLING. Mr. Chairman, I yield myself 10 seconds just to say that the exact same group the gentleman quoted, the National Association of Minority Auto Dealers, says in their letter: ``This legislation does nothing to alter the Consumer Financial Protection Bureau's authority to enforce, or lenders' obligations under the Equal Credit Opportunity Act.'' Again, that is a red herring. I yield 1\1/2\ minutes to the gentleman from Indiana (Mr. Messer).

Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from Indiana (Mr. Stutzman).

Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from Texas (Mr. Hinojosa), my Democratic colleague.

Mr. HENSARLING. Mr. Chairman, may I inquire as to how much time is remaining on both sides.

Mr. HENSARLING. Mr. Chairman, I yield 2 minutes to the gentleman from Pennsylvania (Mr. Kelly).

Mr. HENSARLING. Mr. Chairman, I yield 3 minutes to the gentleman from Georgia (Mr. David Scott), my Democratic colleague.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from Arkansas (Mr. Hill).

Mr. HENSARLING. I yield the gentleman from Maine an additional 10 seconds.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina (Mr. Pittenger).