Jeb Hensarling

Mr. HENSARLING

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

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, I again want to thank the gentleman from New Jersey (Mr. MacArthur), an entrepreneur, someone who brings years and years of experience in capital formation of building a business to help grow jobs and our economy. H.R. 4263, again, is, in part, an expansion of the JOBS Act, something that was signed into law by President Barack Obama. I didn't agree with that particular President on many occasions, but he got this right, and this has been something good for the American economy. But what I fear is that, if we don't go forward, we end up going backwards. And what we hear from our friends on the other side of the aisle is: Let's keep the status quo. But, Mr. Speaker, the status quo is what brought us a 1.6 percent economy. The status quo is what brought paychecks to become stagnant. The status quo ensured that Americans did not recover their savings from the great financial crisis. Now we have the Tax Cuts and Jobs Act, and now we have 3 percent economic growth; now we have the lowest unemployment rate in 17 years; now we have seen the greatest growth in paychecks in almost a decade; now we are seeing 90 percent--90 percent--of wage earners seeing a bigger paycheck, better take-home pay, because of the economic policies of this Republican Congress and of the Trump administration. So the gentleman from New Jersey has brought us, really, in some respects, an important but modest proposition: that we ought to increase the threshold for Reg A+ to $75 million. Again, we don't know where the next Uber is coming from. We don't know where the next Spotify is coming from. We don't know where the next Apple is coming from. But do you know what, Mr. Speaker? We all know they need capital. And this is a valuable alley, chain, path in order to bring capital into our startup businesses. Now, a constant theme we hear from our friends on the other side of the aisle is consumer protection. Do you know what? Back in the 1980s, the Commonwealth of Massachusetts decided to protect their people from this fly-by-night company called Apple, which now is looking at an almost $1 trillion market cap valuation, and had you invested at the IPO, you would have a 45,000 percent rate of return. You could buy a home; your children could buy a home; your great-grandchildren could buy a home. You could achieve your American Dream. But a government decided: No, you are too stupid to make this investment decision on your own. We must protect you. Nothing--nothing--in the bill from the gentleman from New Jersey alters the vast, vast array of consumer protection laws that are already on the books. Nothing in H.R. 4263 prevents the Department of Justice from pursuing criminal prosecutions of fraud. Nothing in the bill impacts the SEC's ability to pursue civil actions for those who engage in fraud, negligent misrepresentations, negligent transactions. Nothing in this bill prevents the SEC from entering into cease and desist orders and imposing civil liabilities for those who violate SEC rules. Investors get to pursue Federal civil actions against those who defraud them, those who make untrue statements. So there are plenty of very important laws that are on our books. What we shouldn't do, though, is protect our hardworking constituents from the ability to make decisions for themselves and participate in these early growth companies that now are only restricted to accredited investors. It is only the wealthiest who get to make these decisions. Well, in the land of the free, maybe a few more should, and maybe we ought to have a few more Apples, a few more Ubers, a few more Spotifys. I want to thank, again, the gentleman from New Jersey (Mr. MacArthur), who has been a great leader in capital formation and job creation on our committee and in this Congress, and I want to urge all Members to adopt H.R. 4263. I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 773, I call up the bill (H.R. 4263) to amend the Securities Act of 1933 with respect to small company capital formation, 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 submit extraneous material on the bill under consideration.

Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in very strong support of H.R. 4263, the Regulation A+ Improvement Act. I want to thank the sponsor of this bipartisan legislation, the gentleman from New Jersey (Mr. MacArthur). He has been a huge leader on all capital formation issues within our committee and in this Congress. He is a real asset. His business acumen is well positioned to help serve us, and his leadership on this bill should be commended. Mr. Speaker, although small companies are at the forefront of technological innovation and job creation, they often face significant obstacles in obtaining funding in our capital markets. These obstacles generally stem from the disproportionately larger burden that securities regulations, written principally for large public companies, instead place on small companies when they seek to go public. In 2012, the Jumpstart Our Business Startups Act, known as JOBS Act, sought to modernize and better tailor some of these regulations, including Reg. A, under our securities law. Reg. A is a longstanding exemption from SEC registration that permits public offerings without formal registration as long as certain conditions are met. Prior to the JOBS Act, a small company seeking to use Reg. A was limited to raising $5 million of securities in a 12-month period. As you can imagine, over time, Mr. Speaker, Reg. A offerings became increasingly rare due to the relatively small offering size that was available and a requirement that Reg. A securities still comply with 50 different State securities law registration and qualification requirements. Title IV of the JOBS Act attempted to address the antiquated Regulation A by directing the SEC to update it, which the SEC did in 2015, under the moniker Reg. A+, by creating two tiers of Regulation A offerings and allowing certain securities to qualify for preemption from State securities law. Under the second tier, the SEC increased the amount companies can offer from $5 million to $50 million. Mr. MacArthur's legislation only pertains to the Tier 2 limit. Since Reg. A+ was implemented in 2015, small businesses have increasingly been able to use this tool to raise much-needed capital to expand their businesses and create new jobs in our economy. According to the SEC Office of Small Business Policy, as of November 2017, 69 completed Reg. A+ offerings had raised a total of $611 million. Unfortunately, the $50 million cap leaves significant opportunity on the table for our startups, opportunity that could be better realized if the limit were increased to $75 million, which the Treasury Department has recommended as a potentially less costly alternative for startups to raise capital. Moreover, increasing the Reg. A+ limit will better position companies that want to use the exemption as an on-ramp to list publicly to bear the corresponding compliance burdens and still invest in jobs and growth. Mr. Speaker, more and more, we have seen IPOs of companies with products that we use every day--Uber, Facebook, Spotify, Snapchat--come after the company is already valued over $1 billion. For everyday investors, this often means missing out on some of the most dynamic growth stages of the company that would provide the highest rate of returns for them and their family, all while the wealthy, accredited investors and venture capital firms can invest early, and they get to rake in the better rates of return. With regulations disproportionately stacked against them, it isn't surprising that small companies so often are choosing to stay private. Many have no other choice. Again, after all, the SEC has estimated that the costs of going public, on average, are $2.5 million in regulatory costs for undergoing an IPO and annual compliance costs averaging $1.5 million thereafter. Those costs stand in stark contrast to the $111,000 the SEC says is the average legal and auditing cost for Reg. A+ offerings. In other words, by utilizing Reg. A+, small businesses can raise significant capital while saving more than $2 million--$2 million that can be invested in jobs and research and other growth opportunities. This is why Reg. A+ is so important: it provides a more cost-effective way to raise equity capital early on in the growth stages of these companies. Additionally, Reg. A offerings enjoy preemption from State securities laws. Mr. Speaker, I hope every Member pays close attention to this. They may not know it. In 1980, when a startup computer company, by the way, called Apple decided to go public, the Commonwealth of Massachusetts decided the stock was too risky and barred its sale to individual investors in the State. Today, Apple's market valuation is almost $1 trillion. It is an American iconic brand and one of the largest companies in the world. And it is, again, potentially going to be the first public company with a trillion-dollar market cap. If you had bought 45 shares of Apple when it was offered at its IPO, by the end of last year you would have over $394,000. That is hardly crumbs, Mr. Speaker. In short, I strongly urge my colleagues to support this legislation. It is a very smart but modest improvement in a popular JOBS Act provision. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I yield 5 minutes to the gentleman from New Jersey (Mr. MacArthur), the sponsor of this legislation and a hardworking member of the Financial Services Committee.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. Huizenga), the chairman of the Capital Markets, Securities, and Investments Subcommittee.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Illinois (Mr. Hultgren), the vice chairman of the Financial Services Subcommittee on Capital Markets, Securities, and Investments.

Mr. HENSARLING

Mr. HENSARLING. Madam Speaker, I ask unanimous consent that the question of adopting amendment No. 1 printed in part B of House Report 115-595 to H.R. 4545 may be subject to postponement as though under clause 8 of rule XX.

Mr. HENSARLING

Mr. HENSARLING. Madam Speaker, pursuant to House Resolution 773, I call up the bill (H.R. 4545) to amend the Federal Financial Institutions Examination Council Act of 1978 to improve the examination of depository institutions, and for other purposes, and ask for its immediate consideration in the House.

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

Mr. HENSARLING. Madam Speaker, I yield myself such time as I may consume. Madam Speaker, I rise today in very strong support of H.R. 4545, the Financial Institutions Examination Fairness and Reform Act. It is a strongly bipartisan bill, having come out of our committee by a vote of 50-10. It is authored by the gentleman from Colorado (Mr. Tipton), who serves as the vice chairman of our Subcommittee on Oversight and Investigations and is, indeed, one of the leaders in the House in bringing regulatory relief to our community financial institutions. I want to thank him for his leadership on this very, very important issue. H.R. 4545 creates transparency and accountability among regulators by improving the timeliness of examinations, while also creating a new more independent examination appeals process. Madam Speaker, this is about, again, transparency. It is about due process. The Office of Independent Examination Review created under this bill will ensure accountability and fairness for financial institutions during their supervisory examinations. It does so by providing the right for these institutions to obtain an independent review of a material supervisory determination contained in a final examination report. The creation of this independent review process is particularly important for our Nation's community banks and credit unions that will now be able to appeal their examination decisions without fear of reprisal from their regulator. By reforming the process for examining financial institutions to ensure it is fair and consistent, Congress will indeed enhance the safety and soundness of the financial system overall while ensuring Main Street businesses can access the liquidity and capital resources they need to grow and create jobs. Again, Madam Speaker, this is why this is so important. Ultimately, this is about ensuring a free flow of credit to Main Street businesses and families. Many of our community financial institutions have felt a very, very heavy hand of burdensome Federal regulations that were intended--or so we were told--for the largest and most complex institutions; and regulators, unfortunately, seem to ignore congressional directive and apply each one of these standards to our smallest institutions. Thus, yesterday, Madam Speaker, we voted on the TAILOR Act, also authored by the gentleman from Colorado, that would also help ensure these regulations are tailored to the size and complexity of the institution. Without having due process and fairness in this exam review, the result has been catastrophic. This regulatory burden, of which this is a part, has been resulting in the closing or merger of one community bank or credit union per day, on average. And again, they are not being lost to natural causes. Our community financial institutions serve as the backbone of our American economy, and we simply cannot afford to lose them. As chairman of the Financial Services Committee, in my sixth year, my colleagues on both sides of the aisle are all too familiar with this problem. I hear from credit unions and community banks every day. I heard from West Community Credit Union in Missouri, who wrote: ``This one-size-fits-all approach is simpleminded and has real consequences. We are beginning to make changes that will negatively impact our ability to continue to serve members in meeting their home equity lending needs.'' In fact, Madam Speaker, we know that a number of banks and credit unions have had to leave mortgage lending because of the regulatory burden. Then there is County-City Credit Union in Wisconsin, who said: ``Small credit unions are dropping every day. Unless we get immediate relief, there won't be any left. That would be tragic for our members and the very fabric of our country. Please help us, and help us right now.'' I have good news. Help is on the way if we can get a good, solid vote this afternoon. The CEO of Commonwealth National Bank in Tennessee wrote: ``The fact remains that there are fewer community banks today than there were several years ago, a trend that will continue until rational changes''--for example, like the ones we are speaking of today, Madam Speaker--``are made that will provide some relief to America's hometown banks.'' Again, we are hearing this plea every single day. So there is good reason why H.R. 4545 was reported by this committee with a strong bipartisan vote, 50-10, including a majority support of the Democrats on the committee. Again, the bill is strongly bipartisan, it is practical, and it is necessary. H.R. 4545 will allow financial institutions, again, to have supervisory determinations reviewed by a newly established independent examination review board. This will allow for uniformity among regulatory agencies, again, while making the overall exam process more fair and more efficient. The bill does not prevent a regulatory agency from conducting examinations or imposing restrictions on financial exams, but, again, it will restore fairness, due process, and accountability for the sake of our community banks and credit unions; and, more importantly, for the sake of those who still have the American Dream of either buying their own home, starting their own business, or sending that first kid to college, it is imperative that we enact H.R. 4545. Madam Speaker, I reserve the balance of my time.

Mr. HENSARLING. Madam Speaker, I yield myself 30 seconds just to say to my friend from Missouri, as he recounts his parade of horribles, that this bill was supported by a majority of Democrats on the committee, including Mr. Crist of Florida, Democrat; Mr. Delaney of Maryland, Democrat; Mr. Foster of Illinois, Democrat; Mr. Gonzalez of Texas, Democrat; Mr. Gottheimer of New Jersey, Democrat; Mr. Heck of Washington, Democrat; and Mr. Himes of Connecticut, Democrat. I think my 30 seconds is winding down, but perhaps I can share the rest of the Democratic Members who supported this excellent piece of legislation. Mr. Speaker, I yield 5 minutes to the gentleman from Colorado (Mr. Tipton), who is back with us again today. He is the vice chairman of the Financial Services Subcommittee on Oversight and Investigations and is the author of H.R. 4545.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Missouri (Mr. Luetkemeyer), the chairman of the Financial Institutions and Consumer Credit Subcommittee.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Pennsylvania (Mr. Rothfus), the vice chairman of the Financial Service Subcommittee on Financial Institutions and Consumer Credit.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from Oklahoma (Mr. Lucas), a senior member of the Financial Services Committee and the former chairman of the House Agriculture Committee.

Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina (Mr. Pittenger), who is the vice chairman of the Financial Services Subcommittee on Terrorism and Illicit Finance.

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

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

Mr. HENSARLING. Mr. Speaker, I yield myself 2 minutes to say that I just find some of the comments of the ranking member curious. I know if she continues this attack on the so-called Wall Street megabanks, I just continue to be so curious why she supports bailing them out? She voted against the Financial CHOICE Act that would have ended bailouts to these megabanks. And so she supports a bailout fund in Dodd-Frank to continue to bail out these banks. Second of all, if she continues to attack them, I guess I am curious also why she supports the Federal Reserve's program to pay interest on excess reserves. She supports taking taxpayer money to pay the so- called Wall Street megabanks not to loan money to Main Street, something that I have opposed as have many other Republicans on this side of the aisle. And then to make matters worse, Mr. Speaker, on this interest on excess reserves, these banks are getting almost 10 to 15 times what our constituents are getting on their savings accounts. In many cases, it is the difference between 0.07 percent, versus 1.5 percent. And so I understand, again, she attacks them, but then I am just curious, why does she find so many ways to support them? So personally, I think in this economy, there is a need for community banks and credit unions. There is a need for regional banks, and there is a need for global banks as well. What we want is accountability. We want less Federal control, and what we want is more private capital. We want to ensure that there are never more taxpayer bailouts. And again, as I said earlier, as this so-called parade of horribles was brought to the attention of the House, why is it that a majority of Democrats on her committee support this legislation? Sixteen of them support the legislation. Mr. Speaker, I reserve the balance of my time.

Mr. HENSARLING. Mr. Speaker, I am very pleased now to yield 3 minutes to the gentleman from Wisconsin (Mr. Duffy), the chairman of the Financial Services Committee Subcommittee on Housing and Insurance.

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

Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, again, this is a very commonsense bill, which is one of the reasons it is strongly bipartisan. I am sorry that the ranking member has not chosen to be part of that bipartisanship, but over half of the committee Democrats on our committee support it. Why? Because they understand that it is part of our American DNA to have due process. When we continue to lose a credit union or a community bank every day in America, on average, with their loss, we are losing home ownership opportunities, opportunities to grow businesses. Because of that regulatory burden, these exams can mean the difference between a credit union being open and not being open. They can mean the difference between a community bank being open or not open. Thus, it means the difference in our constituents getting homes and small business loans and auto loans. This is common sense. It simply says you ought to be able to appeal an exam, have a third party take a look at it. Everybody deserves due process in America, including our community banks and credit unions, so that is why it is so important that we enact H.R. 4545. It came out of our committee with a huge bipartisan vote. Let's make sure credit continues to flow throughout America. Mr. Speaker, I urge all of my colleagues to support H.R. 4545, and I yield back the balance of my time.

Mr. HENSARLING. Mr. Speaker, I rise in opposition to the amendment.

Mr. HENSARLING. Mr. Speaker, again, what we are talking about here is fundamental due process: due process for every American, due process for every institution regardless of its size, regardless of its geography. This is about due process. As Justice Oliver Wendell Holmes wrote: ``Whatever disagreement there may be as to the scope of the phrase `due process of law,' there can be no doubt that it embraces the fundamental conception of a fair trial, with opportunity to be heard.'' He is one of the most famous jurists in all of American history. We are trying to ensure, again, that a bank examiner or a credit union examiner is not tantamount to judge, jury, prosecutor, cop on the beat, and executioner all rolled into one. There is no due process if your only practical appeal is to the person who rendered the judgment in the first place. So, number one, it is important that all Americans, all institutions receive due process, which is perhaps why even over half of the Democrats on the Financial Services Committee chose to support H.R. 4545. The ranking member's amendment would set a threshold here, but her threshold, as she talks about these so-called megabanks, at $10 billion, that is one-half of 1 percent of the size of J.P. Morgan. So, Mr. Speaker, I don't believe in too-big-to-fail banks. I know my friends on the other side of the aisle do. That is why they voted for the bailout fund to support these too-big-to-fail financial institutions with taxpayer funds. I don't believe in too-big-to-fail institutions, but if I did, Mr. Speaker, if I did, it would be limited to maybe eight or nine banks in America. It certainly wouldn't be applicable to any community bank, credit union, or regional bank. We have to remember, regardless of the size of the bank, it is their capital that is helping to capitalize our businesses. I am from Dallas, Texas. One of our major employers is American Airlines. I wish they could do business with First State Bank of Athens, but I suspect they do not. And so sometimes, yes, global banks are necessary to our economy, regional banks are necessary to our economy, community banks and credit unions are necessary to our economy. They are suffering under the sheer weight, load, volume, complexity, and expense of the regulatory burden, which the examination process is part of it. Let's give them due process. Let's give them fairness and ensure that credit can flow to every small business, every household that is worthy in America. Let's reject the ranking member's amendment, and let's support the underlying bill, H.R. 4545. Mr. Speaker, I yield back the balance of my time.