[Congressional Record Volume 164, Number 35 (Tuesday, February 27, 2018)]
[House]
[Pages H1308-H1317]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
OPERATIONAL RISK CAPITAL REQUIREMENTS FOR BANKING ORGANIZATIONS
Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 747, I call
up the bill (H.R. 4296) to place requirements on operational risk
capital requirements for banking organizations established by an
appropriate Federal banking agency, and ask for its immediate
consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 747, in lieu of
the amendment in the nature of a substitute recommended by the
Committee on Financial Services printed in the bill, an amendment in
the nature of a substitute consisting of the text of Rules Committee
Print 115-60, modified by the amendment printed in part A of House
Report 115-582, is adopted, and the bill, as amended, is considered
read.
The text of the bill, as amended, is as follows:
H.R. 4296
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. OPERATIONAL RISK CAPITAL REQUIREMENTS FOR BANKING
ORGANIZATIONS.
(a) In General.--An appropriate Federal banking agency may
not establish an operational risk capital requirement for
banking organizations, unless such requirement--
(1) is based primarily on the risks posed by a banking
organization's current activities and businesses;
(2) is appropriately sensitive to the risks posed by such
current activities and businesses;
(3) is determined under a forward-looking assessment of
potential losses that may arise out of a banking
organization's current activities, businesses, and exposures,
which is not solely based on a banking organization's
historical losses; and
(4) permits adjustments based on qualifying operational
risk mitigants.
(b) Definitions.--For purposes of this section:
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency''--
(A) has the meaning given such term under section 3 of the
Federal Deposit Insurance Act; and
(B) means the National Credit Union Administration, in the
case of an insured credit union.
(2) Banking organization.--The term ``banking
organization'' means--
(A) an insured depository institution (as defined under
section 3 of the Federal Deposit Insurance Act);
(B) an insured credit union (as defined under section 101
of the Federal Credit Union Act);
(C) a depository institution holding company (as defined
under section 3 of the Federal Deposit Insurance Act);
(D) a company that is treated as a bank holding company for
purposes of section 8 of the International Banking Act; and
(E) a U.S. intermediate holding company established by a
foreign banking organization pursuant to section 252.153 of
title 12, Code of Federal Regulations.
SEC. 2. REDUCTION OF SURPLUS FUNDS OF FEDERAL RESERVE BANKS.
(a) In General.--Section 7(a)(3)(A) of the Federal Reserve
Act (12 U.S.C. 289(a)(3)(A)) is amended by striking
``$7,500,000,000'' and inserting ``$7,468,571,428''.
(b) Effective Date.--Subsection (a) shall take effect on
May 1, 2018.
The SPEAKER pro tempore. The bill, as amended, shall be debatable for
1 hour equally divided and controlled by the chair and ranking minority
member of the Committee on Financial Services.
The gentleman from Texas (Mr. Hensarling) and the gentlewoman from
California (Ms. Maxine Waters) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. HENSARLING. Mr. 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.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. Mr. Speaker, I rise, today, in strong support of H.R.
4296, an important bill authored by Mr. Luetkemeyer, who is a real
leader on our committee. He is the chairman of the Subcommittee on
Financial Institutions and Consumer Credit and has led many bills on
this floor. This particular one addresses the burden that unnecessary
operational capital requirements have imposed on our financial
institutions and then, consequently, on our hardworking families and
small businesses that are seeking credit.
The Basel Committee requires U.S. financial institutions to hold
excessive capital based upon a look-back approach to an organization's
risk, previous earnings, and other provisions that provide no
indication of future risk.
Again, Mr. Speaker, this is about holding operational capital for
past activities.
This methodology employed by the international standard setters has
forced our banks to hold hundreds of billions of dollars in reserve
rather than putting that money to work in the real economy--in loans
and investments--for people to buy cars, to launch small-business
enterprises, or maybe to make a downpayment on that first home.
Again, Mr. Speaker, let me say it so that all can hear. Hundreds of
billions of dollars is currently sitting in banks across the country
not being utilized to fund mortgage loans, car loans, and other day-to-
day financing that American families and individuals demand.
On top of this is the increased cost of compliance that banks have
had to shoulder under Dodd-Frank's onslaught of regulation. Banks like
Coatesville Savings Bank, the only remaining bank in Coatesville,
Pennsylvania, has told us that, now, 25 percent of their annual budget
is nothing but compliance cost, Mr. Speaker. This is detrimental to the
Coatesville, Pennsylvania, community. That is 25 percent. That is a
huge figure, Mr. Speaker, that cannot be used to fund the American
Dream in Coatesville, Pennsylvania.
So, again, Chairman Luetkemeyer brings us a very commonsense reform
and a very necessary reform.
Most agree and recognize the importance of our financial institutions
to hold capital in the event of future crisis or distress. Nobody
denies that, and this legislation does not remove those requirements.
But, Mr. Speaker, requiring banking organizations to look back in the
rearview mirror and hold operational capital against discontinued
activities or products is just not nonsensical, it is crazy. It makes
no sense.
H.R. 4296 simply amends the method of how reserve capital is
calculated by establishing standards based on an organization's current
business activities, making the requirements more accurate and tailored
to a bank's current risk profile. Again, Mr. Speaker, it is just common
sense. That means banks would still retain sufficient reserves to
weather an economic storm, but they would be able to put the billions
of dollars currently sitting on the sidelines to work to help make the
economy grow, to make it healthier.
In short, this method-based approach proposed by H.R. 4296 properly
calibrates operational capital while also ensuring strong, healthy
financial institutions and, thus, a stronger economy for our
constituents.
Again, to be very clear, Mr. Speaker, H.R. 4296, does not prevent
Federal financial regulators from instituting operational risk capital
requirements. It does not eliminate the authority of a regulator to
assess operational risk, nor does it prevent regulators from requiring
that capital be held against riskier activities or businesses. The bill
simply puts forth a thoughtful framework that sets parameters, while
allowing regulators the flexibility needed to ensure that capital
standards are appropriately tailored.
A healthy financial system, Mr. Speaker, will enhance individuals'
financial freedom and will lead to a healthier and better regulatory
system.
H.R. 4296 has garnered strong, bipartisan support in our committee,
passing by a vote of 43-17, again, because it is practical and common
sense.
I again want to thank the gentleman from Missouri (Mr. Luetkemeyer),
who chairs our Financial Institutions and Consumer Credit Subcommittee,
for his leadership on this bill. I urge all of
[[Page H1309]]
my colleagues to join me in supporting this important bipartisan
measure, and I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise in strong opposition to H.R. 4296. This bill is
simply another rollback of rules put in place after the financial
crisis. It would undermine the stability of our country's largest
financial banks by restricting the way regulators set capital
requirements for these institutions.
Before I get into why this bill is problematic, let me take a moment
to clarify what capital is and what it is not.
Some have said that capital is money that is held on the side or in
reserve and cannot be used to lend to borrowers. This couldn't be
further from the truth. Capital is not a reserve. Capital refers to the
terms of the financing a bank receives.
In the most simplistic example, a bank receives funds from customers
making deposits, loans it receives from other institutions, and stock
it has issued to investors. The bank uses all of these sources of
funding to make mortgages and other loans to customers. However, there
are important differences.
Bank debt has terms like regular interest payments that, if it stops
paying, the bank fails.
{time} 1600
However, a bank can stop paying dividends on a stock without it
failing. Banks funded with lots of debt are described as being higher
leveraged and risky because only a small drop in the value of their
mortgages and other assets can cause them to default.
Funding a bank through higher levels of capital makes the bank
stronger, because even if the loans it has made lose value, the bank
can avoid default by temporarily halting payments to their investors or
lowering the value of the stock.
H.R. 4296 would impact something called operational risk capital,
which is the capital used to cover the possibility of losses to the
largest banks caused from their operational failures, such as rogue
traders, fraudulent sales practices, and cyber breaches.
H.R. 4296 would diminish this type of capital, which only about 10
megabanks are required to maintain under an enhanced framework, by
restricting the information that regulators can use to determine the
appropriate balance of safe funding, like bank stock versus debt, that
megabanks should have to address potential operational losses that may
occur.
The bill would direct regulators to primarily consider a megabank's
current activities and not their past behavior when setting the capital
level, thereby enabling the bank to take on more debt.
According to Americans for Financial Reform, a nonpartisan coalition
of more than 200 civil rights, consumer, labor, business, investor,
faith-based, and civic and community groups:
``While current activities are obviously central to operational risk,
and are already treated as such, the recent loss experience of banks is
the best concrete evidence regulators usually have as to the magnitude
of current and future risks. Recent past activities are also vital to
understanding the future exposures of the bank, including potential
legal exposures.''
Thus, this change to how regulators determine the appropriate amount
megabanks should maintain for operational risk is imprudent. A
megabank's past actions are often the best indicators of future
potential risks that it may experience.
Well, memories seem to quickly fade in Congress about the problems
that led to the last financial crisis, so let me list some of the
examples of past megabanks' operational failures by J.P. Morgan's
``London Whale'' trades and Wells Fargo's long list of violations that
have ripped off millions of consumers, including those harmed by their
fraudulent accounts scandal.
Given these examples of past misconduct, the megabanks have
collectively paid more than $160 billion in fines since 2010. It is
absurd to suggest that their past behavior shouldn't be taken into
account when determining how much capital they should hold.
Even the Basel Committee, which several of President Trump's
appointees now serve on, agreed in December, when they finalized Basel
III reforms from where the operational risk capital originates,
writing:
``Banks which have experienced greater operational risk losses
historically are assumed to be more likely to experience operational
risk losses in the future.''
So it makes no sense to have a forward-looking assessment that
deemphasizes a megabank's past failures in setting these capital
requirements. It is almost as if this bill is saying: ``Don't pay any
attention to that. No matter how bad they have been, don't look at
their past performance. We don't want you to look at that, because we
know if you do, you will make a different decision about capital
requirements.''
The nonpartisan Congressional Budget Office estimated that the bill's
changes would cost the Federal Government $22 million. This calculation
was based on the fact that the capital change would not only affect the
bank's probability of failure, but also the magnitude of future losses
to our entire financial stability, which, in turn, affects the overall
U.S. economy.
This is not a bill to help community banks. It has nothing to do with
community banks. Let me repeat that. This is not a bill to help
community banks, so what we wish we would not hear is someone coming up
talking about how it is going to hurt community banks. That is often
used as an excuse. When we are trying to rein in these megabanks, they
always lop in the community banks with it. This has nothing to do with
community banks. This is a bill for the 10 largest banks in this
country.
So the megabanks on Wall Street are hoping Congress will let them
take on riskier debt by directing the regulators to downplay, if not
outright ignore, their recent and extensive operational failures.
Mr. Jamie Dimon, the CEO and chairman of JPMorgan Chase, wrote in his
2016 annual letter to shareholders that:
``Operational risk capital should be significantly modified, if not
eliminated.''
Let's think about it like this: most adult consumers in this country
have a credit score. Banks use those credit scores to determine whether
or not to lend to a consumer and, if so, under what terms.
These credit scores are based on a consumer's what?
A consumer's past payment history, because this information is
considered one of the best indicators of a person's likelihood to
default on future credit obligations.
Now, we all know that credit scores are problematic, but no one,
including me, is proposing to get rid of them, because we can all agree
that past payment information is a good indicator of how someone will
handle credit in the future, but this bill takes that principle and
throws it out the window when it comes to the 10 largest banks in this
country.
Keep in mind, these same banks will continue to use a consumer's
credit score for underwriting and rating of mortgages and other
consumer loans, but the megabanks themselves are asking this Congress
not to judge them on their past behavior, as they judge consumers, and
to let them have a clean slate moving forward. If that isn't a double
standard, Mr. Speaker, I am not sure what is.
Mr. Speaker, bank profits reached an all-time record high in 2016.
Compensation for Wall Street CEOs has shot back up to levels last seen
in 2006, and business lending is up 75 percent since 2010. All this
happened while U.S. banks added more than $700 billion in capital to
absorb potential losses. There is a simple reason for this: healthy
banks lend.
U.S. banks also lent significantly more than their European
counterparts, because our banks boosted their capital levels, while the
European banks did not.
So despite Republicans' ``Chicken Little'' arguments about the dire
consequences of the Dodd-Frank Act and related regulatory reforms, the
data speaks for itself. Banks are making more money than ever and
lending more than ever, but apparently that is not enough.
So I am here again today appealing for Congress to continue to uphold
the commonsense safeguards for consumers, the broader economy, and the
[[Page H1310]]
megabanks. I reject this Wall Street giveaway.
Mr. Speaker, I urge my colleagues to oppose this harmful legislation,
and I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 5 minutes to the gentleman from
Missouri (Mr. Luetkemeyer), the chairman of the Subcommittee on
Financial Institutions and Consumer Credit, and the bill's sponsor.
Mr. LUETKEMEYER. Mr. Speaker, I thank the chairman for his great
leadership and for helping us with this legislation.
Mr. Speaker, I rise today in support of H.R. 4296, legislation that
would set reasonable parameters for Federal financial regulators when
establishing operational risk capital requirements so that banks can
best leverage their capital to grow their local economies.
In the wake of the financial crisis, operational risk capital
requirements were first agreed to at the Basel Committee. That is a
foreign group of folks who get together. We have accepted some of their
advice, unfortunately, and then it was implemented in the United States
by the FDIC, the OCC, and the Federal Reserve.
Like many concepts fashioned at the Basel Committee, the original
intent may have seemed to be a good idea, but the implementation has
brought about confusion and unintended consequences.
The committee, realizing it didn't get it right, has revised its
recommended operational risk standards on more than one occasion in the
last few years. The first was in the fall of 2014, when the committee
found that its original standards were under-calibrated. The second
came in 2016, when the Basel Committee suggested a requirement that
would force banks to look back and hold capital against discounted
activities and products. This is not an appropriate way to determine
capital requirements.
So what does this mean?
It means that today a bank that exited a particular line of business
must still hold the same amount of capital as another bank that is
still engaged in that business. It also means that a bank that spends
money to improve risk management will be saddled with the same capital
standards as a bank that has done nothing to improve its risk
management.
My legislation would instill confidence by instituting clear
guardrails for operational risk capital requirements. This is
particularly important considering that the European regulators have
moved the goalposts on U.S. regulators and financial institutions
several times.
H.R. 4296 will also ensure that the imposition of forward-looking
capital requirements focus on the bank's current activities and
businesses.
Equally important, this bill would incentivize institutions to
mitigate operational risk, creating safer banks and a safer financial
system.
To be clear, this legislation does not prevent Federal financial
regulators from instituting operational risk capital requirements. It
does not eliminate the authority of a regulator to assess operational
risk, nor does it prevent regulators from requiring that capital be
held against riskier activities or businesses.
In other words, it would allow the regulators to continue their
business of regulating, but putting some common sense in the regulation
and allowing the flexibility to be able to use a forward-looking way of
assessing risk rather than being forced to do a look-back-type of risk
analysis.
This bill puts forth a thoughtful framework that sets parameters
while allowing regulators the flexibility needed to ensure that capital
standards are appropriately tailored.
Given my background as both a banker and a regulator, I am often one
of the loudest voices in favor of strong capital standards. At the same
time, those standards need to make sense, Mr. Speaker. They need to
reflect the actual risk posed by the institution to the financial
system.
These standards have a tremendous impact on a bank's capital levels,
and it is important that the regulators get them right so that they
don't hamstring the bank's ability to meet the credit needs of its
local economy and community.
I hope my colleagues will join me in voting in favor of this
commonsense bipartisan legislation.
Mr. Speaker, I again thank the chairman for his support.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield as much time as
she may consume to the gentlewoman from Ohio (Mrs. Beatty), a member of
the Financial Services Committee.
Mrs. BEATTY. Mr. Speaker, I thank our ranking member, Congresswoman
Maxine Waters, for yielding me time and also for her steadfast
leadership in opposing the Financial CHOICE Act and many of the
provisions included in the bill, including the one that we are
considering on the floor today.
Mr. Speaker, this bill flies in the face of the old maxim: Those who
do not remember the past are condemned to repeat it.
This bill would effectively blindfold our regulators when calculating
operational risk capital at our largest institutions--it is worth
repeating again: not our community banks, but our largest
financial institutions--by precluding them from looking at an
institution's historic losses as an indicator of possible future
losses.
Now, earlier, the ranking member injected an example of asking about
our credit scores. I think it is worth elaborating on this, Mr.
Speaker. Imagine if I go to a bank for a mortgage loan and they ask me
for my credit score, and I simply told them they couldn't look at my
past financial behavior in order to decide whether or not they are
going to give me the loan.
So when you talk about good or commonsense regulation, we all know
the answer to that question, Mr. Speaker.
Well, this bill would effectively do just that to our regulators.
Instead of a credit score, which determines creditworthiness,
operational risk determines the risk of loss resulting from inadequate
or failed internal processes, people, and systems.
I would tell our regulators, when determining the appropriate level
of capital a financial institution needs to hold against operational
risk, you cannot look at an institution's past losses, especially if
they got out of that business.
Mr. Speaker, I think this is common sense. I think whether you are a
banker or a regulator, you clearly understand that we need to make sure
that we don't blindfold our regulators.
So I oppose this bill, which would reduce capital in our country's
largest financial institutions and blindfold our regulators' ability to
safeguard the stability of our economy. I urge all of my colleagues to
vote ``no.''
{time} 1615
Mr. HENSARLING. Mr. Speaker, I yield myself 30 seconds.
As I listen to my colleague from Ohio, she uses the complete wrong
analogies. What happens is we don't pay our home insurance premiums on
the home we sold; we pay it on the home we own.
If you lived in a swamp and then you moved to a mountaintop in
Colorado, you pay different insurance premiums; and if you cease to be
a skydiver and you become an accountant, maybe you pay different life
insurance premiums. This has to do with your risk profile today, not
yesterday.
Mr. Speaker, I yield 3 minutes to the gentleman from Ohio (Mr.
Stivers), a member of the Financial Services Committee.
Mr. STIVERS. Mr. Speaker, I rise in support of H.R. 4296, sponsored
by my colleague Blaine Luetkemeyer. This bipartisan bill makes
important corrections in the bank capital requirements for operational
risk. Under the legislation, regulators would continue to be able to
consider the bank's operational risk, but would do so in a forward-
looking manner.
Currently, financial institutions are required to hold risk-based
capital, even for discontinued activities and products. Accounting and
the capital markets often use the concept of pro forma financials,
which means you consider the ongoing operations, or the way that it
would look if it looks like it is today, going forward. This bill would
institute that same approach for regulators to use pro forma
operational risk, so they wouldn't have to continue to charge a capital
charge on operations that have been discontinued.
I think the chairman made a great comment about you don't buy home
insurance on a home you have already sold. My colleague, Mr.
Luetkemeyer,
[[Page H1311]]
during the markup of this bill, talked about how the Basel Committee
has revised this specific capital requirement several times, but it is
still a work in progress. This legislation is just a commonsense change
to make sure that banks are not charged capital charges against things
that they aren't doing anymore.
This approach will free up capital that is needlessly on the
sidelines and put it back in reach of America's job creators. I urge my
colleagues to vote ``yes'' on H.R. 4296.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield 2 minutes to
the gentlewoman from Ohio (Mrs. Beatty). She has raised a question
about the analogies that the chairman made, and those analogies seem to
escape ordinary logic.
Mrs. BEATTY. Mr. Speaker, I thank the ranking member for yielding me
this time.
Maybe I should try to right that wrong analogy that our chairman
thought; but maybe if I take his analogy that it is not based on the
house I sold but it is based on the house I am living in, well, what is
the difference?
If I went to the bank and wanted to put my house up for collateral
but I hadn't paid the payment on it in 4 months and it was getting
ready to be foreclosed on, I think they would want to know that. And
that would be maybe a better analogy on it, because what we are trying
to say to the people who are out there watching and listening to this:
You cannot let our larger banks put us at risk, what we know also
happened in 2008.
So that was the point I was making. So let's say the analogies don't
work so we don't have to go back and forth. Let me just say that I am
voting ``no'' on this because I don't want to blindfold or tie the
hands of the regulators' being able to do their jobs.
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.
Mr. HULTGREN. Mr. Speaker, I also want to thank Chairman Hensarling
for all of his work moving this important regulatory reform through.
I speak today in support of H.R. 4296, to place requirements on
operational risk capital requirements for banking organizations
established by an appropriate Federal banking agency. This bill is one
of many that are being reported by the Financial Services Committee
with bipartisan support.
I want to commend Congressman Luetkemeyer and Congressman Meeks for
working together to get a very strong vote from the Financial Services
Committee. I hope that is something we can accomplish today on the
House floor.
This legislation acknowledges that we can make improvements to the
regulatory framework that has been implemented or is still pending in
response to the financial crisis. My constituents and I are very
pleased to see the economic growth over the last year, but that does
not mean we shouldn't take additional steps to ensure that we have an
efficient regulatory system. For example, the Fed is likely going to
continue tightening rates, and I am not sure Congress will always be
able to provide the progrowth fiscal policy that we have seen as of
late.
One of our other tools for affecting the performance of the economy
is a progrowth but sensible regime that permits for investment, job
creation, and financial security. H.R. 4296 will ensure our banking
regulators institute operational risk capital standards that make sense
for the U.S. financial system.
This legislation ensures that operational risk-based capital
requirements are reflective of the banking organization's current
activities and businesses. This seems logical, but the current approach
is dependent on historical performance and does not provide for
adjustments based on changes made by a banking organization.
So, for example, a banking organization might suffer from a cyber
attack that results in losses for the organization. In fact, cyber
attacks and data breaches are considered to be one of the largest
categories of operational risk. In response, this banking organization
could choose to overhaul its ability to detect and respond to such
operational risk incidents.
Shouldn't our capital framework reflect that work, or should the
banking organization continue to suffer from a punitive framework that
disincentivizes proactively addressing operational risk?
I, for one, am supportive of policies that will encourage investment
by banking organizations to address reputational risk, such as those
that might pose a risk for a data breach. I would encourage all of my
colleagues to vote in support of this bipartisan legislation. I would
encourage our financial sector to proactively address operational
risks, and it will also free up capital to permit for economic growth.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield such time as
she may consume to the gentlewoman from Hawaii (Ms. Gabbard), a member
of the Congressional Progressive Caucus.
Ms. GABBARD. Mr. Speaker, I thank Ranking Member Waters for her
leadership in opposing this bill and standing for the protection of
everyday Americans.
We can't forget that it was only 10 years ago that millions of
hardworking families watched their life savings entirely wiped out.
They lost their homes. They couldn't afford to send their kids to
college. And all of this heartache, this pain, this suffering that they
went through was the direct result of risky predatory lending practices
and too-big-to-fail banks that did not have sufficient capital in place
to support and absorb their financial losses.
It was in the aftermath of this financial disaster in 2008 that
Congress passed protections to prevent this from happening again, but
here we are today where these big banks now believe that we should
simply forget the past mistakes that they made and, instead, only
evaluate their current activities to determine certain capital
requirements. I guarantee you those families that have suffered have
not simply forgotten about what they went through and what they are
still struggling to overcome and recover from.
By ignoring critical indicators of past activities, this bill would
allow big banks, like Wells Fargo, for example, who defrauded the
American people just in the last several months by opening millions of
fake accounts, to get away with a slap on the wrist. And the American
people are set up to take the fall for their actions.
Now, supporters of this bill claim that current capital requirements
stifle lending and hurt our banks and the economy, but the facts say
otherwise. In 2016, bank profits reached an all-time high, and today
business lending is up 75 percent since 2010. Our country's banks added
more than $700 billion in capital to absorb potential losses and
protect Americans and our economy from financial disaster.
Higher capital requirements don't restrict lending. They simply
ensure that big banks that are even bigger today than they were in 2008
can absorb their losses without depending on taxpayers for a bailout.
The American people deserve a financial system that works for them
and their families, not one that bets against them to boost Wall Street
profits. We need to pass legislation that increases these capital
requirements of banks with assets greater than $50 billion and continue
to enact and strengthen reforms that will protect our economy and
American families from another massive collapse. That is why I am
strongly urging our colleagues to reject this dangerous bill and,
instead, work together towards efforts to build a financial system that
serves the American people, not special interests or Wall Street banks.
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
[[Page H1312]]
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. PITTENGER. Mr. Speaker, I thank my good friend and chairman of
the Financial Institutions and Consumer Credit Subcommittee, Mr.
Luetkemeyer, for his active work on this important legislation.
In the aftermath of the financial crisis, the Basel Committee
expanded regulations on operational risk requirements imposed on
financial institutions. Unfortunately, like many of the implemented
regulations, unintended consequences were brought about. The complexity
and nature of the current operational risk capital requirements have
greatly diminished the availability of credit for consumers, resulting
in increased costs and prices for families and small businesses.
To address these concerns, H.R. 4296 limits the burden of operational
risk capital requirements to a bank's current activities and businesses
and permits adjustments to lessen operational risk. This will ensure
that banks are holding increased capital more efficiently and will
expand the credit market to better meet the needs of hardworking
Americans.
Let me be clear: This bill does not eliminate operational risk
capital requirements but, prudently, ensures that requirements are
forward-looking and appropriately tailored to a bank's current
financial risk profile. As a key provision of the CHOICE Act, which
passed the House in June, I want to thank Mr. Luetkemeyer for his
persistence and continual leadership on this important issue.
I urge all of my colleagues to please join us in supporting this
commonsense, bipartisan bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
In addition to the concerns I have raised about this bill, I also
want to mention a change to H.R. 4296 made in the Rules Committee just
last night.
Because H.R. 4296 makes the 10 largest banks more likely to fail, the
nonpartisan Congressional Budget Office determined that there was a
higher likelihood that taxpayer funds would be used to wind down a
megabank. To offset these costs, Republicans have taken funds from the
Federal Reserve's surplus account.
So what is the Fed's capital surplus account? Effectively, it is a
rainy-day fund intended to ensure adequate capital is available to
absorb possible losses. Several stakeholders have raised concerns that,
by reducing the Fed's surplus account, Congress could negatively affect
the Federal Reserve's independence in monetary policy decisionmaking by
rendering it dependent on Treasury for recapitalization in the event
that total Reserve bank capital is depleted.
Put simply, this bill not only makes the 10 largest banks more likely
to fail, but it also makes it more likely that the Federal Reserve will
be unable to address problems in the financial system going forward.
I would like to also mention that, in a letter opposing this bill,
the Center for American Progress highlighted, again, several budgetary
considerations we should keep in mind as we debate this bill. And, of
course, I have either mentioned or alluded to it, but it is important
that we understand that the Center for American Progress is very
concerned, and the CBO also projects, that H.R. 4296 will increase the
deficit due to an increase in expected losses to the Federal Government
stemming from an increase in the likelihood of another financial
crisis.
{time} 1630
The bill would pay for these costs by lowering the Federal Reserve
System's surplus funds, once again treating the Fed like a piggy bank
and shifting privately generated losses to the public.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
New York (Mr. Zeldin), a very hardworking member of the Financial
Services Committee.
Mr. ZELDIN. Mr. Speaker, I thank Chairman Hensarling for all of his
leadership and for recognizing me to be able to rise in strong support
of this bipartisan legislation introduced by my colleagues on the
Financial Services Committee, Congressman Blaine Luetkemeyer and
Congressman Gregory Meeks.
Like so many regulations imposed by the 2010 Dodd-Frank law, the
current set of operational risk capital requirements imposed on
America's financial institutions place a one-size-fits-all solution on
banks, regardless of their capitalization, their various lines of
business, and the customers they serve.
The current standard under Dodd-Frank requires banks to look back and
hold operational risk capital against discontinued business activities
or products. In plain English, this means banks are being forced to
hold capital to hedge against a fictitious risk of a loan or a product
discontinued years ago.
This is not an effective way to determine capital requirements, nor
is it in line with the real risk these standards are meant to protect
consumers from.
This is hurting consumers by making credit less available in the
marketplace, and this especially hurts the small- and medium-size
hometown banks that our communities rely on.
To my constituents on Long Island, and to hardworking American
families across our country, the consequences of these misguided
regulations are more costly loans and less available mortgages. These
are the financial products that help small-business owners expand and
hire or help families buy a new home.
H.R. 4296 reforms operational risk requirements so they can be
focused on a bank's current activities and line of business. This
legislation keeps sound standards in place so that banks must avoid
risky behavior while also freeing up needed capital so that it can be
lent to consumers, not be needlessly held up in a vault to meet a
misguided government mandate.
By ensuring that capital standards are transparent, fair, and based
on real-life economic conditions, this bipartisan solution removes a
troubling roadblock to capital that would otherwise be allocated to
consumers, homeowners, and businesses.
Mr. Speaker, I want to again applaud the bipartisan teamwork of my
colleagues Blaine Luetkemeyer and Gregory Meeks. I also want to thank
Chairman Hensarling for all of his leadership on this important issue
and so many others, and I urge all of my colleagues to vote ``yes'' on
this important bipartisan bill.
Ms. MAXINE WATERS of California. Mr. Speaker, early in my statement,
I warned that there would be someone who would come on the floor and
claim that it was going to hurt community banks, small town banks; and
this bill has nothing to do with community banks or small town banks.
This is about megabanks. This is about SIFIs. This is about the banks
that can cause harm in the whole system. This is about those banks that
we must be concerned about because of the displacement that they can
cause, not only in this country, but internationally.
Mr. Speaker, I just remind you again this has nothing to do with
community banks. This has nothing to do with small town banks. This is
just the big banks that are significantly important banks.
Mr. Speaker, I reserve the balance of my time.
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. DAVIDSON. Mr. Speaker, I rise today to offer my support for H.R.
4296 and for the bipartisan work of our committee, the work our
chairman has helped lead; and I am encouraged that this bill will
establish clear guardrails for operational risk capital requirements
and improve U.S. capital framework as a whole.
This legislation is another example of ensuring regulators work in
the best interest of the U.S. economy rather than abiding by
international standards that hold American businesses back rather than
move them forward.
In fact, the very premise of this legislation reminds me of a song. I
remember when Bill Clinton was running, he
[[Page H1313]]
had a song about: ``Don't stop thinking about tomorrow. Yesterday is
gone; yesterday is gone.'' It is all about the future.
Well, this piece of legislation that is in place today, established
by the Basel Committee in 2006, is thinking about tomorrow, is thinking
about yesterday. What happened in the past is constraining what could
happen in the future.
So banks are reserving against past losses in an era that holds them
from being able to adopt the business plans that maybe even under new
leadership, new board members, and a whole new set of governance
requirements that will get the company moving forward at a better
growth rate. This is better for not just the company, not just the
executives or the board members, but the consumers that would be served
by this market.
Take, for instance, historic losses being reserved against. That
capital is sitting there not actively employed in the market. Even the
Basel Committee saw how ridiculous this rule is; so they updated their
guidance, in 2016, to include historical loss experience as a relevant
indicator instead of as the sole factor.
It is time that we move forward in the best interests of our country
and make rules that help American businesses instead of hold them back.
Mr. Speaker, I urge my colleagues to support this vital legislation.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentlewoman
from New York (Ms. Tenney), a hardworking member of the Financial
Services Committee.
Ms. TENNEY. Mr. Speaker, I thank the chairman for yielding me the
time to speak on this important bill and also for his tremendous and
strong leadership on our committee.
H.R. 4296 would set reasonable standards for regulators that are
based primarily on the risk posed by a banking organization's current
activities and businesses, not on past activities, as you have heard.
Operational risk standards were created and are a product of the
European Basel Committee and have been amended twice, actually, since
that time. But their adaptation still doesn't hit the mark, and that is
why, though the Basel Committee's proposal is well intentioned, this
bill and this proposal will amend that to tailor it to the needs and to
the effectiveness and efficiency of our banks.
The current framework is based on past activity and will hold
operational capital on discontinued products, products that banks don't
even have in their portfolios. This bill will correct those errors by
allowing our U.S.-based financial regulators to tailor the capital
requirements they need based on their unique business model.
H.R. 4296 limits the burden of operational risk capital requirements
to a bank's current activities and businesses, gives the bank the
ability to determine risk under forward-looking assessment, and would
permit adjustment on risk-mitigating factors.
This bill, as you have heard over and over, does not eliminate the
Federal Government's ability to assess operational risk or alter the
regulators' authority to set capital requirements when doing business
on high-risk customers.
Mr. Luetkemeyer's bipartisan legislation would create a commonsense
reform to the Basel standards, and I urge all Members to support it.
I also want to thank Congressman Meeks, a fellow New Yorker, for
cosponsoring this legislation.
Again, I want to thank Mr. Chairman for his great work on our
committee and also Mr. Luetkemeyer for his hard work, his bipartisan
work on this bill, for a person who is a banker, a business person from
a rural area of our country who really understands the need to protect
consumers.
Ms. MAXINE WATERS of California. Mr. Speaker, may I inquire as to how
much time I have remaining?
The SPEAKER pro tempore (Mr. Woodall). The gentlewoman from
California has 9\1/2\ minutes remaining.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself the
balance of my time.
Mr. Speaker, let's put aside the complex terminology we often use
with Financial Services legislation and call this bill what it really
is: a short-sighted giveaway to Wall Street megabanks.
Approximately ten banks we are talking about, the very largest banks
in our Nation, have to abide by operational risk standards under an
enhanced framework. They are required to maintain this additional
capital so when they continue to engage in risky behavior, like opening
millions of fake accounts to drive up profits, they will not
immediately become insolvent, sparking a financial crisis.
And may I just stop here for a moment and say: it is odd that, given
the information that we have discovered about some of our megabanks,
particularly Wells Fargo, that was involved not only in creating fake
accounts, false accounts in their clients' names, but also selling them
basically insurance that they did not need, I am wondering why my
friends on the opposite side of the aisle are not more concerned about
this operational risk that they take.
For example, when we talk about operational risk, include in that the
fines, the fines that we have placed on Wells Fargo and other banks
that have been caught committing fraud on its clients. It seems to me
that this would be taken into consideration, and I don't think they are
going to stop.
We have gone through a crisis. In 2008, we had this meltdown. We had
a recession, almost a depression. We had to bail out all of these
banks, yet we have Members, particularly on the opposite side of the
aisle, who are doing everything that they can to go back to some of the
practices that will cause us to be in the same situation we found
ourselves in in 2008.
So I would just simply say that this attempt to basically say: don't
look at our past, no matter how bad we have been, no matter how many
fines have been placed on them, forget about that. We don't like that.
So in saying that, what they are basically saying is they are going
to create more risk and they are going to put banks in the position of
possibly failing.
So with that, I would just like us not to forget that our current
operational risk capital standards didn't come out of nowhere. They are
still recovering from the 2007 to 2009 financial crisis, which was
largely caused by unsafe practices by large internationally active
megabanks and inadequate regulation that ignored past misconduct and
risky activities.
The crisis stripped wealth from millions of American families and
destroyed the economy. Since we passed the Dodd-Frank Act and the
regulators have implemented standards from the international Basel III
accord, including our operational risk capital rules, we have made
tremendous progress to create a better capitalized and more stable
banking system, and this is bearing results.
Megabanks have experienced record-breaking profits for the past
several years. Now they expect us to believe that these commonsense
rules that take into account their previous behavior was keeping them
from providing more affordable credit to hardworking consumers in
search of the American Dream?
As I mentioned earlier, a bank can still make loans to credit-worthy
consumers while funding those loans with capital instead of debt.
{time} 1645
Operational capital is not cash locked away at night, but, rather, it
is the value of a bank's assets minus its liabilities or debts. A well-
capitalized bank that has adequate sources of funding can accommodate
losses without reducing its lending. In fact, it would be able to lend
in good times and in bad.
We should direct the regulators overseeing megabanks like Wells Fargo
with its years of numerous consumer abuses and JPMorgan Chase with its
London Whale trading scandal not to ignore these past failures and put
our constituents at risk.
My colleagues on the other side of the aisle are rushing through
deregulatory measures to help their friends on Wall Street. But
Congress must not forget that it was hardworking consumers across the
country who paid dearly for Wall Street's faults in the last financial
crisis. So I would urge Members to vote ``no'' on this bill.
I am very pleased that while my colleagues on the opposite side of
the aisle keep talking about this being a bipartisan bill and they
mention Mr. Meeks'
[[Page H1314]]
name from New York, et cetera, we have the support of the Congressional
Progressive Caucus and the Congressional Black Caucus in opposition to
this bill.
Mr. Speaker, I yield back the balance of my time.
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. HOLLINGSWORTH. Mr. Speaker, I am pleased to rise in support of
this legislation because I think it addresses a fundamental flaw in how
we have looked at operational risk capital.
Fundamentally, we want banks to hold capital necessary for the risks
they are taking today and the likely risks that they may incur losses
into the future. By purely looking backwards, we are driving down the
Interstate in the financial system driving by looking in the rearview
mirror only. That is a terrible mistake by only looking at past risks
instead of the risks they have today.
If we want to encourage institutions to become less risky, then we
need to ensure that they can reduce the amount of capital buffer if
they are doing less risky activities. This is basically incentivizing
the right behavior. If we continue to say to institutions: You are
going to be penalized for the past irrespective of what you may be
doing today, irrespective of the less risk you may be taking into the
future, then we are essentially providing them no incentive to become
less risky.
I think the lesson after 2008 is making sure that we allow the free
markets and institutions to act with the right incentives, not the
wrong incentives. We want them to become less risky over time by their
own decisions and by their own elections.
This doesn't change anything about the basic operational risk capital
that they must maintain, except that it says it should match what they
are doing today and the activities that they are going to be engaged on
in the future.
So I do think this is commonsense legislation. I do think this is a
thoughtful response to a genuine problem that I hear about back home in
Indiana frequently. So I continue to support H.R. 4296, and I urge all
of my colleagues to do the same.
Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have
remaining?
The SPEAKER pro tempore. The gentleman from Texas has 5\1/2\ minutes
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.
The SPEAKER pro tempore (Mr. Byrne). All time for debate has expired.
Pursuant to House Resolution 747, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit
Ms. MAXINE WATERS of California. Mr. Speaker, I have a motion to
recommit at the desk.
The SPEAKER pro tempore. Is the gentlewoman opposed to the bill?
Ms. MAXINE WATERS of California. I am opposed to the bill in its
current form.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Ms. Maxine Waters of California moves to recommit the bill
H.R. 4296 to the Committee on Financial Services with
instructions to report the same back to the House forthwith
with the following amendment:
In section 1(b)(2), redesignate subparagraphs (A), (B),
(C), (D), and (E) as clauses (i), (ii), (iii), (iv), and (v),
respectively, and adjust the margins accordingly.
Page 2, line 16, strike ``means--'' and insert the
following: ``--
(A) means--
[[Page H1315]]
Page 3, line 7, strike the period and insert ``; and''.
Page 3, after line 7, insert the following:
(B) does not include a global systemically important bank
holding company or any subsidiary thereof, if the global
systemically important bank holding company or any subsidiary
thereof has engaged in a pattern or practice of unsafe or
unsound banking practices and other violations related to
consumer harm.
(3) Federal consumer financial law.--The term ``Federal
consumer financial law'' has the meaning given that term
under section 1002 of the Consumer Financial Protection Act
of 2010 (12 U.S.C. 5481).
(4) Global systemically important bank holding company.--
(A) In general.--The term ``global systemically important
bank holding company'' means--
(i) a bank holding company that has been identified by the
Board of Governors of the Federal Reserve System as a global
systemically important bank holding company pursuant to
section 217.402 of title 12, Code of Federal Regulations; and
(ii) a global systemically important foreign banking
organization, as defined under section 252.2 of title 12,
Code of Federal Regulations.
(B) Treatment of existing gsibs.--A company or organization
described under clause (i) or (ii) of subparagraph (A) on the
date of the enactment of this Act shall be deemed a global
systemically important bank holding company for purposes of
this Act.
(5) Pattern or practice of unsafe or unsound banking
practices and other violations related to consumer harm.--The
term ``pattern or practice of unsafe or unsound banking
practices and other violations related to consumer harm''
means engaging in all of the following activities, to the
extent each activity was discovered or occurred at least once
in the 10 years preceding the date of the enactment of this
Act:
(A) Having unsafe or unsound practices in the institution's
risk management and oversight of the institution's sales
practices, as evidenced by--
(i) an institution lacking an enterprise-wide sales
practices oversight program that enables the institution to
adequately monitor sales practices to prevent and detect
unsafe or unsound sales practices and mitigate risks that may
result from such unsafe and unsound sales practices; and
(ii) an institution lacking a comprehensive customer
complaint monitoring process that--
(I) enables the institution to assess customer complaint
activity across the institution;
(II) adequately monitors, manages, and reports on customer
complaints; and
(III) analyzes and understands the potential risks posed by
the institution's sales practices.
(B) Engaging in unsafe and unsound sales practices, as
evidenced by the institution--
(i) opening more than one million unauthorized deposit,
credit card, or other accounts;
(ii) performing unauthorized transfers of customer funds;
and
(iii) performing unauthorized credit inquiries for purposes
of the conduct described in clause (i) or (ii).
(C) Lacking adequate oversight of third-party vendors for
purposes of risk-mitigation, to prevent abusive and deceptive
practices in the vendor's provision of consumer products or
services.
(D) Having deficient policies and procedures for sharing
customers' personal identifiable information with third-party
vendors for litigation purposes that led to inadvertent
disclosure of such information to unintended parties.
(E) Violating Federal consumer financial laws with respect
to mortgage loans, including charges of hidden fees and
unauthorized or improper disclosures tied to home mortgage
loan modifications.
(F) Engaging in unsafe or unsound banking practices related
to residential mortgage loan servicing and foreclosure
processing.
(G) Violating the Servicemembers Civil Relief Act.
Ms. MAXINE WATERS of California (during the reading). Mr. Speaker, I
ask unanimous consent to dispense with the reading of the motion.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from California?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
California is recognized for 5 minutes in support of her motion.
Ms. MAXINE WATERS of California. Mr. Speaker, this is the final
amendment to the bill which will not kill the bill or send it back to
committee. If adopted, the bill will immediately proceed to final
passage, as amended.
We have talked at length today about how H.R. 4296 is a bill for Wall
Street megabanks, and I deeply disagree with the bill's approach. So I
offer this motion to recommit not in a manner that sends the bill to
the committee and kills the bill, but, rather, to attempt to improve
the bill before the House votes on final passage of the measure.
Let's discuss the elephant in the room. We all know megabanks have
been given a free ride in Washington for far too long. During the
savings and loan crisis, the government had no problem throwing bankers
in jail for breaking the law. Over 1,000 bank executives were
prosecuted. But now megabanks just get a fine, a slap on the wrist, for
harming consumers.
Since 2010, megabanks have racked up over $160 billion worth of
fines, yet they keep breaking the law. We have talked about Wells
Fargo's growing list of illegal actions that have harmed millions of
consumers. Sure they have been fined, but these fines are just the cost
of doing business. This soft enforcement approach is just increasing
their operational risk and losses, which, at the end of the day, will
impact not only all of their customers, but the broader economy as
well.
I hope Republicans and Democrats can all agree that any megabank that
engages in a pattern or practice of unsafe or unsound banking practices
and other egregious violations that has resulted in profound consumer
harm in the last 10 years is not entitled to any benefit of regulatory
relief provided under this bill.
So my amendment excludes a megabank like Wells Fargo that has
fraudulently opened millions of accounts without their customers'
consent, enrolled consumers in life insurance policies without their
consent, and forced nearly 1 million Americans to purchase automobile
insurance that they didn't even need.
Since 2016, I have been calling for Wells Fargo to face real
penalties. Last year, I introduced H.R. 3937, the Megabank
Accountability and Consequences Act, to compel the Federal bank
regulators to fully utilize existing authorities to stop these
megabanks from repeatedly flouting the law and harming millions of
consumers.
So I was glad to see Janet Yellen on her last day at the Federal
Reserve take bold action to cap the bank's size until it cleans up its
act. I am talking about Wells Fargo. This is what Janet Yellen did on
her last day at the Federal Reserve.
But we must do more to send a strong message to all megabanks that
there will be real consequences for their bad actions that mislead,
abuse, or deceive its customers.
H.R. 4296, in its current form, would send the opposite message to
recidivist megabanks. They should not reap the profit of easier
operational capital requirements while their operational breakdowns are
only increasing.
Mr. Speaker, I urge my colleagues to adopt this motion to recommit so
that we do not reward a recidivist megabank like Wells Fargo for
repeated operational failures that ripped off millions of consumers.
Mr. Speaker, I yield back the balance of my time.
Mr. HENSARLING. Mr. Speaker, I claim the time in opposition.
The SPEAKER pro tempore. The gentleman from Texas is recognized for 5
minutes.
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.
{time} 1700
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
[[Page H1316]]
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.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Ms. MAXINE WATERS of California. Mr. Speaker, on that I demand the
yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 9 of rule XX, the Chair
will reduce to 5 minutes the minimum time for any electronic vote on
the question of passage of the bill.
The vote was taken by electronic device, and there were--yeas 185,
nays 228, not voting 17, as follows:
[Roll No. 88]
YEAS--185
Adams
Aguilar
Barragan
Bass
Beatty
Bera
Beyer
Bishop (GA)
Blumenauer
Blunt Rochester
Bonamici
Boyle, Brendan F.
Brady (PA)
Brown (MD)
Brownley (CA)
Bustos
Butterfield
Capuano
Carbajal
Cardenas
Carson (IN)
Cartwright
Castor (FL)
Castro (TX)
Chu, Judy
Cicilline
Clark (MA)
Clarke (NY)
Clay
Clyburn
Cohen
Connolly
Cooper
Correa
Costa
Courtney
Crist
Crowley
Cuellar
Davis (CA)
Davis, Danny
DeFazio
DeGette
Delaney
DeLauro
DelBene
Demings
DeSaulnier
Deutch
Dingell
Doggett
Doyle, Michael F.
Duncan (TN)
Ellison
Eshoo
Espaillat
Esty (CT)
Evans
Foster
Frankel (FL)
Fudge
Gabbard
Gallego
Garamendi
Gomez
Gonzalez (TX)
Gottheimer
Green, Al
Green, Gene
Grijalva
Gutierrez
Hanabusa
Hastings
Heck
Higgins (NY)
Himes
Hoyer
Huffman
Jackson Lee
Jayapal
Jeffries
Johnson (GA)
Johnson, E. B.
Jones
Kaptur
Keating
Kelly (IL)
Kennedy
Khanna
Kihuen
Kildee
Kilmer
Kind
Krishnamoorthi
Kuster (NH)
Langevin
Larsen (WA)
Larson (CT)
Lawrence
Lawson (FL)
Lee
Levin
Lewis (GA)
Lieu, Ted
Lipinski
Loebsack
Lofgren
Lowenthal
Lowey
Lujan Grisham, M.
Lujan, Ben Ray
Lynch
Maloney, Carolyn B.
Maloney, Sean
Matsui
McCollum
McEachin
McGovern
McNerney
Meeks
Meng
Moore
Moulton
Murphy (FL)
Nadler
Napolitano
Neal
Nolan
Norcross
O'Halleran
O'Rourke
Pallone
Panetta
Pascrell
Pelosi
Perlmutter
Peters
Peterson
Pingree
Pocan
Polis
Price (NC)
Quigley
Raskin
Rice (NY)
Richmond
Rosen
Roybal-Allard
Ruiz
Ruppersberger
Rush
Ryan (OH)
Sanchez
Sarbanes
Schakowsky
Schiff
Schneider
Schrader
Scott (VA)
Scott, David
Serrano
Sewell (AL)
Shea-Porter
Sherman
Sinema
Sires
Slaughter
Soto
Suozzi
Swalwell (CA)
Takano
Thompson (CA)
Thompson (MS)
Titus
Tonko
Tsongas
Vargas
Veasey
Vela
Visclosky
Wasserman Schultz
Waters, Maxine
Watson Coleman
Welch
Yarmuth
NAYS--228
Abraham
Aderholt
Allen
Amash
Amodei
Arrington
Babin
Bacon
Banks (IN)
Barletta
Barr
Barton
Bergman
Biggs
Bilirakis
Bishop (MI)
Bishop (UT)
Blackburn
Blum
Bost
Brady (TX)
Brat
Bridenstine
Brooks (AL)
Brooks (IN)
Buchanan
Buck
Bucshon
Budd
Burgess
Byrne
Calvert
Carter (GA)
Chabot
Cheney
Coffman
Cole
Collins (GA)
Collins (NY)
Comer
Comstock
Conaway
Cook
Costello (PA)
Crawford
Culberson
Curbelo (FL)
Curtis
Davidson
Davis, Rodney
Denham
Dent
DeSantis
DesJarlais
Diaz-Balart
Donovan
Duffy
Duncan (SC)
Dunn
Emmer
Estes (KS)
Farenthold
Faso
Ferguson
Fitzpatrick
Fleischmann
Flores
Fortenberry
Foxx
Frelinghuysen
Gaetz
Gallagher
Garrett
Gianforte
Gibbs
Gohmert
Goodlatte
Gosar
Gowdy
Granger
Graves (GA)
Graves (LA)
Graves (MO)
Griffith
Grothman
Guthrie
Handel
Harper
Harris
Hartzler
Hensarling
Herrera Beutler
Hice, Jody B.
Higgins (LA)
Hill
Holding
Hollingsworth
Hudson
Hultgren
Hunter
Hurd
Issa
Jenkins (KS)
Jenkins (WV)
Johnson (LA)
Johnson (OH)
Johnson, Sam
Jordan
Joyce (OH)
Katko
Kelly (MS)
Kelly (PA)
King (IA)
King (NY)
Kinzinger
Knight
Kustoff (TN)
Labrador
LaHood
LaMalfa
Lamborn
Lance
Latta
Lewis (MN)
LoBiondo
Loudermilk
Love
Lucas
Luetkemeyer
MacArthur
Marchant
Marino
Marshall
Massie
Mast
McCarthy
McCaul
McClintock
McHenry
McKinley
McMorris Rodgers
McSally
Meadows
Meehan
Messer
Mitchell
Moolenaar
Mooney (WV)
Mullin
Newhouse
Noem
Norman
Nunes
Olson
Palazzo
Palmer
Paulsen
Perry
Pittenger
Poe (TX)
Poliquin
Posey
Ratcliffe
Reed
Reichert
Renacci
Rice (SC)
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rohrabacher
Rokita
Rooney, Francis
Rooney, Thomas J.
Ros-Lehtinen
Roskam
Ross
Rothfus
Rouzer
Royce (CA)
Russell
Rutherford
Sanford
Scalise
Schweikert
Scott, Austin
Sensenbrenner
Sessions
Shimkus
Shuster
Simpson
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Smucker
Stefanik
Stewart
Stivers
Taylor
Tenney
Thompson (PA)
Thornberry
Tipton
Turner
Upton
Valadao
Wagner
Walberg
Walden
Walker
Walorski
Walters, Mimi
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Williams
Wilson (SC)
Wittman
Womack
Woodall
Yoder
Yoho
Young (AK)
Young (IA)
Zeldin
NOT VOTING--17
Black
Carter (TX)
Cleaver
Cramer
Cummings
Engel
Huizenga
Long
Payne
Pearce
Smith (WA)
Speier
Torres
Trott
Velazquez
Walz
Wilson (FL
{time} 1728
Messrs. RUTHERFORD, COLE, REED, GROTHMAN, YODER, STIVERS, and DIAZ-
BALART changed their vote from ``yea'' to ``nay.''
Messrs. COHEN, KHANNA, and RICHMOND changed their vote from ``nay''
to ``yea.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
Stated for:
Ms. WILSON of Florida. Mr. Speaker, had I been present, I would have
voted ``yea'' on rollcall No. 88.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. This is a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 245,
nays 169, not voting 16, as follows:
[Roll No. 89]
YEAS--245
Abraham
Aderholt
Allen
Amash
Amodei
Arrington
Babin
Bacon
Banks (IN)
Barletta
Barr
Barton
Bergman
Biggs
Bilirakis
Bishop (MI)
Bishop (UT)
Blackburn
Blum
Bost
Brady (TX)
Brat
Bridenstine
Brooks (AL)
Brooks (IN)
Buchanan
Buck
Bucshon
Budd
Burgess
Byrne
Calvert
Carson (IN)
Carter (GA)
Chabot
Cheney
Coffman
Cole
Collins (GA)
Collins (NY)
Comer
Comstock
Conaway
Cook
Correa
Costa
Costello (PA)
Crawford
Cuellar
Culberson
Curtis
Davidson
Davis, Rodney
Delaney
Denham
Dent
DeSantis
DesJarlais
Diaz-Balart
Donovan
Duffy
Duncan (SC)
Dunn
Emmer
Estes (KS)
Farenthold
Faso
Ferguson
Fitzpatrick
Fleischmann
Flores
Fortenberry
Foxx
Frelinghuysen
Gaetz
Gallagher
Garrett
Gianforte
Gibbs
Gohmert
Goodlatte
Gosar
Gottheimer
Gowdy
Granger
Graves (GA)
Graves (LA)
[[Page H1317]]
Graves (MO)
Griffith
Grothman
Guthrie
Handel
Harper
Harris
Hartzler
Hensarling
Herrera Beutler
Hice, Jody B.
Higgins (LA)
Hill
Holding
Hollingsworth
Hudson
Hultgren
Hunter
Hurd
Issa
Jenkins (KS)
Jenkins (WV)
Johnson (LA)
Johnson (OH)
Johnson, Sam
Jordan
Joyce (OH)
Katko
Kelly (MS)
Kelly (PA)
King (IA)
King (NY)
Kinzinger
Knight
Kustoff (TN)
Labrador
LaHood
LaMalfa
Lamborn
Lance
Latta
Lewis (MN)
LoBiondo
Loudermilk
Love
Lucas
Luetkemeyer
MacArthur
Marchant
Marino
Marshall
Massie
Mast
McCarthy
McCaul
McClintock
McHenry
McKinley
McMorris Rodgers
McSally
Meadows
Meehan
Meeks
Messer
Mitchell
Moolenaar
Mooney (WV)
Mullin
Murphy (FL)
Newhouse
Noem
Norman
Nunes
O'Halleran
Olson
Palazzo
Palmer
Paulsen
Perry
Peterson
Pittenger
Poe (TX)
Poliquin
Polis
Posey
Ratcliffe
Reed
Reichert
Renacci
Rice (NY)
Rice (SC)
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rohrabacher
Rokita
Rooney, Francis
Rooney, Thomas J.
Ros-Lehtinen
Roskam
Ross
Rothfus
Rouzer
Royce (CA)
Ruppersberger
Russell
Rutherford
Scalise
Schneider
Schrader
Schweikert
Scott, Austin
Scott, David
Sensenbrenner
Sessions
Shimkus
Shuster
Simpson
Sinema
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Smucker
Stefanik
Stewart
Stivers
Suozzi
Taylor
Tenney
Thompson (PA)
Thornberry
Tipton
Turner
Upton
Valadao
Veasey
Wagner
Walberg
Walden
Walker
Walorski
Walters, Mimi
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Williams
Wilson (SC)
Wittman
Womack
Woodall
Yoder
Yoho
Young (AK)
Young (IA)
Zeldin
NAYS--169
Adams
Aguilar
Barragan
Bass
Beatty
Bera
Beyer
Bishop (GA)
Blumenauer
Blunt Rochester
Bonamici
Boyle, Brendan F.
Brady (PA)
Brown (MD)
Brownley (CA)
Bustos
Butterfield
Capuano
Carbajal
Cardenas
Cartwright
Castor (FL)
Castro (TX)
Chu, Judy
Cicilline
Clark (MA)
Clarke (NY)
Clay
Clyburn
Cohen
Connolly
Cooper
Courtney
Crist
Crowley
Davis (CA)
Davis, Danny
DeFazio
DeGette
DeLauro
DelBene
Demings
DeSaulnier
Deutch
Dingell
Doggett
Doyle, Michael F.
Duncan (TN)
Ellison
Eshoo
Espaillat
Esty (CT)
Evans
Foster
Frankel (FL)
Fudge
Gabbard
Gallego
Garamendi
Gomez
Gonzalez (TX)
Green, Al
Green, Gene
Grijalva
Gutierrez
Hanabusa
Hastings
Heck
Higgins (NY)
Himes
Hoyer
Huffman
Jackson Lee
Jayapal
Jeffries
Johnson (GA)
Johnson, E. B.
Jones
Kaptur
Keating
Kelly (IL)
Kennedy
Khanna
Kihuen
Kildee
Kilmer
Kind
Krishnamoorthi
Kuster (NH)
Langevin
Larsen (WA)
Larson (CT)
Lawrence
Lawson (FL)
Lee
Levin
Lewis (GA)
Lieu, Ted
Lipinski
Loebsack
Lofgren
Lowenthal
Lowey
Lujan Grisham, M.
Lujan, Ben Ray
Lynch
Maloney, Carolyn B.
Maloney, Sean
Matsui
McCollum
McEachin
McGovern
McNerney
Meng
Moore
Moulton
Nadler
Napolitano
Neal
Nolan
Norcross
O'Rourke
Pallone
Panetta
Pascrell
Pelosi
Perlmutter
Peters
Pingree
Pocan
Price (NC)
Quigley
Raskin
Richmond
Rosen
Roybal-Allard
Ruiz
Rush
Ryan (OH)
Sanchez
Sanford
Sarbanes
Schakowsky
Schiff
Scott (VA)
Serrano
Sewell (AL)
Shea-Porter
Sherman
Sires
Slaughter
Soto
Swalwell (CA)
Takano
Thompson (CA)
Thompson (MS)
Titus
Tonko
Tsongas
Vargas
Vela
Velazquez
Visclosky
Wasserman Schultz
Waters, Maxine
Watson Coleman
Welch
Wilson (FL)
Yarmuth
NOT VOTING--16
Black
Carter (TX)
Cleaver
Cramer
Cummings
Curbelo (FL)
Engel
Huizenga
Long
Payne
Pearce
Smith (WA)
Speier
Torres
Trott
Walz
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Byrne) (during the vote). There are 2
minutes remaining.
{time} 1737
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________