Posted by Committee on Financial Services on March 31, 2017

As the following article from Real Clear Markets points out, the unaccountable and unconstitutional CFPB shows utter contempt for constitutional due process rights and tramples on the rule of law.  This abuse may grab headlines, but it does not achieve justice and ultimately harms the very consumers the Bureau is supposed to protect.

Prohibited by statute from regulating auto dealers, the agency targeted them anyway”

“Actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau”

“CFPB violated due process”

“The bureau assumed away the statute of limitations”

Business As Usual at the CFPB Is Not Good for Consumers
By Hester Peirce & Vera Soliman
Real Clear Markets

There has been quite a bit of buzz surrounding the future of the Bureau of Consumer Financial Protection, or CFPB, as the priorities of the new administration begin to take shape. Some in Congress are calling for the CFPB’s director to be fired, others want to reform the structure and funding of the agency, and still others want to eliminate the agency altogether. Underlying all of these calls for change is the growing realization of just how far off the rails this fledgling agency has gone.

The calls for reform have not fazed the CFPB, which has assured the public that nothing has changed. When asked during a Wall Street Journal interview how the new administration might affect the bureau, Director Richard Cordray answered that “it really shouldn’t change the job at all.” A Journal report neatly summarized the sentiment: “CFPB chief Cordray says it’s still business as usual.”

What does business as usual look like? For the CFPB, it often means limiting Americans’ options in the name of consumer protection. The bureau, for example, proposed such onerous restrictions on small-dollar lenders that many of them might simply stop making loans. As our colleagues suggested in a comment letter on the rule, the CFPB would do well to familiarize itself with the deep financial struggles of small-dollar borrowers before further diminishing their already scant credit options.

Business as usual for the CFPB means compromising customer privacy, too. The bureau collects a lot of information from consumers. Its 2016 strategic plan set a goal of maintaining “a credit card database, including both summary and de-identified loan-level data, covering over 80 percent of the credit card marketplace.” There’s no reason to collect so much data, as a much smaller sample would suffice.

Business as usual for the CFPB also means ignoring the legal boundaries Congress set for the agency. Prohibited by statute from regulating auto dealers, the agency targeted them anyway by bringing enforcement actions against the companies to which the dealers sell their car loans. An internal memorandum obtained by Congress shows the CFPB gaming out different options for getting around the statutory prohibition without inviting “legal and political” fallout.

And the CFPB is looking to expand its authority beyond consumer financial products. The bureau is in a dispute with the Accrediting Council for Independent Colleges and Schools, from which it demanded reams of information related to “whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges.”

The district court judge, in denying the CFPB’s authority to investigate the accrediting process, cautioned that “Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress.”

The CFPB’s business as usual means changing the rules in the middle of the game. The case that landed the bureau in an ongoing constitutional crisis arose out of its decision to impose on PHH, a mortgage lender, a $109 million fine. To get to such a big number, the bureau reinterpreted the law; actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau. The court explained, “even if the CFPB’s new interpretation were consistent with the statute (which it is not), the CFPB violated due process by retroactively applying that new interpretation to PHH’s conduct that occurred before the date of the CFPB’s new interpretation.” To make matters worse, the bureau assumed away the statute of limitations that made much of its case outdated.

Business as usual apparently means politicizing consumer protection as well. Former CFPB enforcement attorney Ronald Rubin described the bureau’s hiring decisions as being driven less by experience and merit than by factors such as the political affiliation of an applicant. Rubin points out that, although the CFPB made much of the Wells Fargo case, the real work was done by Los Angeles journalists and prosecutors. Last year, during a Senate Banking Committee hearing, Chairman Richard Shelby, R-Ala., noted that unauthorized accounts were opened at least as far back as 2011, and aptly asked, “Where were the federal regulators during these years?” He continued, “If there were ever a textbook case where consumers needed protection, this was it. How many millions of unauthorized accounts does it take before the CFPB notices? And while the bureau is billing this as the largest settlement in its history, it’s unclear whether it had any significant role in discovering or investigating the bank’s conduct.”

It’s no surprise that this unique agency—funded outside the appropriations process and led by a single, fixed-term director—finds itself in the middle of a heated debate over its future. For the sake of American consumers, let’s just hope its future is no longer business as usual.

Posted by on February 09, 2017

By: Jeb Hensarling
Wall Street Journal
February 9, 2017

The Obama presidency placed no greater burden on America’s growth potential than the avalanche of regulations that smother the U.S. economic system. The most destructive and dangerous of the new regulatory bureaucracies created by the Democrat-dominated 111th Congress is the Consumer Financial Protection Bureau.

The CFPB stands with ObamaCare as a crowning “achievement” of Mr. Obama’s transformation of America. With unprecedented automatic funding provided directly by the Federal Reserve, the agency is unanswerable to anyone. Democrats chose to insulate it from Congress, the president, voters and the democratic process. The U.S. Circuit Court of Appeals for the District of Columbia noted as much in its recent PHH v. CFPB decision, which ruled the bureau’s governing structure unconstitutional. The court said the unelected CFPB director “enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. Government, other than the President.”

The CFPB is arguably the most powerful, least accountable agency in U.S. history. CFPB zealots have the power to determine the “fairness” of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process. It requires lenders essentially to read their clients’ minds, know and weigh their clients’ comprehension levels, and forecast future risk. It can compel the production of reams of data and employ methodologies that “infer” harm without finding any specific instance of harm or knowing violation.

The regulatory web spun by the CFPB can make every provider of financial services guilty until proven innocent, inviting selective enforcement and financial shakedowns. The CFPB is the embodiment of James Madison’s warning in Federalist No. 47 that “the accumulation of all powers, legislative, executive and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny.”

This tyranny has harmed the very consumers it purports to help. Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased. Mortgage originations and auto loans have become more expensive for many Americans.

No corner of American finance is beyond the CFPB’s grasp, even auto dealers—which are specifically excluded from its jurisdiction by the Dodd-Frank Act. To dodge this legal constraint, the CFPB regulates auto dealers through enforcement “bulletins” on auto lenders, employing statistical analysis rather than specific acts to charge lenders with discriminatory lending. The race of borrowers is inferred based on the borrowers’ names and home addresses. Through this ruse they smear and shake down lenders.

The House in 2015 voted 332-96—with 88 Democrats in support—to force the CFPB to rescind its auto-lending guidance. Sen. Elizabeth Warren, the intellectual mother of the CFPB, led Senate Democrats’ opposition to the bipartisan bill. This is a sign the 52-member Senate Republican majority probably will be unable to overcome Democrat filibusters on legislation limiting the CFPB’s powers.

President Trump should immediately fire CFPB Director Richard Cordray, citing the president’s constitutional responsibility to take care that the laws are faithfully executed. A new director could first undo all harmful actions taken by the CFPB during the Obama era. He could then implement policies that actually benefit consumers, such as limits on class-action lawsuits wherein plaintiff law firms get fortunes but injured financial consumers get pennies.

The CFPB could also protect Americans from government abuses. A new director could penalize government bond issuers that fail to disclose unfunded pension liabilities. It could also put an end to government accounting and solvency standards that, if adopted by private companies, would result in fines or a firm’s closure.

Yet even with good policy, the CFPB would still be unconstitutional. For those who reject Sen. Warren’s view that the ends justify the means, the agency must be functionally terminated. Consumer protection can instead come through an accountable and constitutional process.

The Senate can achieve this with a simple majority vote. Dodd-Frank requires the Fed to fund all CFPB budget requests automatically—creating an estimated $6.6 billion funding stream over the next 10 years. Under a budget process known as reconciliation, the House Financial Services Committee, which I chair, and the Senate Banking Committee could be mandated to save $6.6 billion over 10 years of the budget. In the ensuing reconciliation bill the two committees could then direct the Fed to terminate CFPB funding. Senate Democrats could not filibuster the bill.

Congress could then transfer the CFPB’s consumer protection role to the Federal Trade Commission or back to traditional banking regulators, where it resided before the CFPB’s creation. A Senate point of order requiring 60 votes could be brought against these provisions, on the ground that they don’t belong in a reconciliation bill. The advantage of putting the restructuring language in the reconciliation bill is that if Democrats use the point of order to strike the language, they—not Republicans—would have elected to end all CFPB funding, leaving the new system of consumer financial protection to be decided in future legislation.

When Democrats sought to take consumer protection outside the democratic process, consumers were harmed by a reduction in competition. With fewer lenders serving fewer borrowers, fewer businesses employed fewer workers. A healthy economy is the first casualty of any war on credit, and a loan denied becomes a job lost. The CFPB has eroded freedom, trampled due process and killed jobs. It must go.


Posted by on February 08, 2017

‘Overregulation has caused costs to go through the roof, many banks have been shut down and that has hit small businesses’

‘We can’t afford to keep going the way we’re going’

By Joyce M. Rosenberg
Associated Press
Feb. 8, 2017

Small community banks say Dodd-Frank regulations too much of a burden.

NEW YORK — Community banks that can be vital to many small businesses are hopeful about changes that the Trump administration and Congress have promised to legislation passed after the financial crisis that tightened supervision of Wall Street and the banking industry.

The number of small, local banks has declined since the Great Recession, a change that advocates feel was intensified by the paperwork the increased oversight entails. That's disappointing to many small business owners, who find it easier to form relationships with community bank branch managers and bankers than with those at regional or international banks. A community banker can advise them and steer business their way, for example, connecting a company owner with a new accountant.

"I need someone I can talk to who can understand the dynamics of a small business," says Ken Yager, who owns Newpoint Advisors, a Schaumburg, Illinois-based consulting firm. "With a big bank, you just disappear into an account number."

Jeff Bridgman remembers when his community bank would cover an overdraft for his antiques business, knowing he'd have funds in the account within a few days. He had a close relationship with the employees even as the bank went through several mergers over 15 years. But a staff turnover at the bank, now one of the more than 200 branches of Northwest Bank, left him without the attention and support he had in the past.

"I don't know how a bank could help me today, so I don't even consider them as a tool for growth," says Bridgman, whose eponymous company is located in York, Pennsylvania. "The bank for me today is just a place for money to sit for a couple of days while I write checks."

The U.S. had 5,521 community banks as of Sept. 30, down more than 25 percent from 7,442 at the end of 2008, when the banking crisis was still in its early days, according to the Independent Community Bankers Association, an industry group. The Federal Deposit Insurance Corp. has reported nearly 500 bank failures since 2009, most of them small banks. Others have merged to cut costs and stay in business, but many have struggled even as the economy has recovered.

Industry groups blame increased regulation, including the Dodd-Frank bill passed by Congress in 2010. Last week, President Donald Trump signed an executive order directing the Treasury secretary to review Dodd-Frank and its thousands of regulations. Changes in the law would have to be made by Congress, and House Financial Services Committee Chairman Jeb Hensarling of Texas has proposed modifying portions that affect smaller banks.

Dodd-Frank has created additional procedures and paperwork for all banks, but community banks have a harder time meeting the requirements because they have far smaller staffs than regional or national financial institutions, says Paul Merski, the ICBA's chief economist.

"You can't say which provision it is that's causing you concern. It's more like death by a thousand cuts," says Tim Zimmerman, president of Standard Bank, a Pittsburgh-area community bank with nine branches. "It's exhausting management and staff of community banks around the country."

The ICBA is advocating for several banking laws to be repealed or modified. Among them:

  • Rules under the Home Mortgage Disclosure Act that sharply increased the amount of data banks must report to the government on each home mortgage application.
  • Regulations still to take effect under Dodd-Frank that would require banks to collect and report information to the government about each small business loan application.
  • Requirements on the amount of money community banks must hold in reserve to protect against losses from bad loans. Those requirements were put into effect after losses at the nation's biggest financial institutions threatened the world banking system.

The changes were intended to protect against failures like Lehman Brothers in 2008, and community banks don't pose a similar threat, the ICBA says. Community banks are likely to have several billions of dollars in assets each, according to the FDIC, while regional banks may have assets in the hundreds of billions of dollars and international banks like Bank of America and Wells Fargo have assets into the trillions. Small business advocates say they're feeling the reverberations.

“The overregulation has caused costs to go through the roof, many banks have been shut down and that has hit small businesses," says Javier Palomarez, president of the United States Hispanic Chamber of Commerce.

Yager, whose firm specializes in helping financially troubled small businesses, uses larger banks for tasks like money transfers, but depends on his community bank for most of his needs. He finds community bankers more willing than larger ones to try to help companies succeed.

"They'll ask questions like, what collateral do you have? Do you have a plan? What have you missed in your business that could help make things better?" he says.

In the meantime, struggling community banks are expected to continue merging. Standard, the Pittsburgh-area bank, is in the process of consolidating with another area community bank, Allegheny Valley Bancorp, which has eight branches.

"We can't afford to keep going the way we're going," Zimmerman says.


Posted by Staff on November 16, 2016

Financial Services Committee Chairman Jeb Hensarling (R-TX)

Remarks to the Exchequer Club, Nov. 16, 2016

*As Prepared for Delivery

Good afternoon, everyone.  I’m Jeb Hensarling – and I approve this message.

No, I think we’ve all had enough of that to last us for a while.  Our long national nightmare is finally over:  the 2016 campaign.  Don’t worry; it will be at least a couple of weeks before the next campaign season really picks back up again.  Just for fun, the other day I googled “2020 presidential election.”  It lists 49 potential candidates.  So get ready, America!  We’ve only got about 1,155 days to Iowa! 

Thank you for inviting me to speak today.  It’s been a while since I’ve spoken to the Exchequer Club, and it’s been a while since I’ve been in Washington.  As all of you know, members of Congress have been back in our home states for several weeks.  Some of you may know it as “flyover country.”

But it’s really the Heartland of America.  By electing Donald Trump our next president, the people of the Heartland rose up and sent a clear message to the ruling elites last week.  They’re not going to take it anymore and they expect change. 

And they have every right to be upset.  They see themselves working too hard and not getting ahead – like trying to run up the down escalator.  This economy is still not working for working people. 

They’re upset at seeing their dreams for their children’s future diminished. They’re upset at of seeing their values ridiculed and scorned by the establishment. 

And every day they see their liberties and opportunities slipping away as Washington grows larger, more intrusive, more distant, more powerful and more arrogant.

So a hard fought election may be over, but our work is just beginning.  We must now help bring our country together and advance the cause of a better, stronger, more prosperous America.  I believe if we adhere to the Founders’ principles, we can put in place policies that create the real change Americans so desperately want. 

The Founders believed “We the People” were capable of governing ourselves.  They distrusted unchecked power, so they limited government and promoted individual freedom, free enterprise and the rule of law. 

These principles are what enable equal opportunity, prosperity and civil society to flourish. 

And on the Financial Services Committee, these principles are embodied in the proposals we offer and which I’ll discuss later, such as the Financial CHOICE Act to promote economic growth for all and bank bailouts for none, the FORM Act to bring accountability and transparency to the Federal Reserve, the PATH Act to create a sustainable housing finance system, and numerous other ideas to help Americans on Main Street achieve financial independence and a better, more hopeful life.

Regrettably, when Americans look at Washington today, they see our federal government has drifted far from the Founders’ vision.  Instead of limited government comprised of three accountable branches, they see power concentrated into a large and intrusive centralized government, ruled not by “we the people” but by so-called experts in a new fourth branch that reaches further and deeper into our lives and tries to make decisions for us.

The rise of this fourth branch of government should concern every American.  Because the rise of agency government risks turning our elections into a hollow exercise.  As author and scholar Steven Hayward wrote, if we allow government to be run by unaccountable bureaucrats then “elections no longer change the character of…government” because “no matter who wins…the experts in the agencies rule and every day extend their rule further.”

And up until last Tuesday’s election of Donald Trump, millions have felt powerless to change it. 

As Professor Jonathan Turley, a nationally recognized legal scholar at George Washington University has pointed out, this unaccountable fourth branch “now has a larger practical impact on the lives of citizens than all the other branches combined.”

Very few government policies, for example, have a more profound impact on the lives of working men and women than those that affect their ability to have a secure retirement.

Yet no one elected by the people had a hand in developing the Department of Labor’s so-called fiduciary rule, which will affect how investment advice is provided to every 401(k) plan, every IRA, and every rollover or distribution to or from either. 

Altogether, the rule is going to impact about $3 trillion of hardworking Americans’ retirement assets.  It will make access to financial advice more costly and less available to millions of lower and middle income workers -- and no one in Congress voted for it.

The effects are already being felt months ahead of implementation.  Merrill Lynch has already announced its clients will no longer be able to buy mutual funds in certain retirement accounts.

Others have protested the rule’s particularly harmful impact on those who work at small businesses.

“This rule would put a significant burden on small businesses and their employees, making it less likely that we will be sufficiently prepared for retirement,” says John Raine, president of a small manufacturing firm in Indiana.

The Trump Administration, working with our Republican majority in Congress, should make sure this harmful, bureaucratic rule does not go into effect as planned in just five months.  This is just one example of how unelected, unaccountable government hurts working people.

Another example is the CFPB’s rule that would shut down small dollar lenders without a single vote ever being cast in Congress.

How important is small dollar lending? Let me tell you the story of Robert Sherrill.  He was a hardened drug dealer.  Eventually his crimes caught up with him and he spent several years in prison, but somehow he emerged with a resolve to build a better life for himself. 

The only problem was that no one would take a risk on Robert.  He couldn’t get a job.  He couldn’t get a loan.  He couldn’t even get a bank account.  The deck was stacked against him.  It was against these odds that Robert decided that if he was going to turn his life around, he needed to start his own business.

Enter a local small dollar lender who understood Robert’s situation and designed a financial product to fit his needs.

 “The payday loan I got…was a lifeline.  It enabled me to start a business,” Robert said.

Today he employs 20 people.  He is a member of his local Chamber of Commerce and Better Business Bureau.  He is a productive citizen of his community.  He went from serving hard time to making it possible for others to live better times. 

And it would not have been possible if he couldn’t access a small dollar loan that the CFPB today essentially wants to outlaw – again, without a vote by Congress. These are just two examples of rule promulgated by the unelected and the unaccountable. These are just two rules that hurt struggling citizens. And these are two examples of rules the House Financial Services Committee, working with a President Trump, hopes to reverse.

Article One, Section One of our Constitution states “all legislative powers herein granted shall be vested in a Congress.” 

It is time for Congress to take greater responsibility for federal regulations, because when Congress allows its legislative authority to be usurped, the people’s right to both self-government and due process is undermined.  Instead of being governed by the rule of law, citizens become more and more governed by the rule of rulers.

On the Financial Services Committee, one of our top priorities for the 115th Congress is to arrest this assault on the people’s constitutional right to self-rule.  They have been deprived of their voice for too long.  We will work to make government accountable again.

Accountability is at the heart of our Republican plan to repeal and replace Dodd-Frank, called the Financial CHOICE Act.  It demands greater accountability from both Washington and Wall Street.

It makes sure every financial regulation passes a cost-benefit test, also known as common sense, so we’ll know a proposed rule’s impact on economic growth before it takes effect. 

With the exception of the Federal Reserve’s conduct of monetary policy, it puts all financial regulatory agencies on budget, because the bare minimum level of accountability to “We the People” is to have their elected representatives in Congress control the power of the purse.

Our plan also holds Washington accountable by converting financial regulatory agencies presently headed by single directors – the CFPB, the Office of Comptroller of the Currency, and the Federal Housing Finance Agency – into bipartisan commissions. A bipartisan structure will result in better rulemakings as agencies start considering multiple viewpoints and perspectives.

Another critically important provision of the Financial CHOICE Act requires all major financial regulations to first be approved by Congress before they can take effect. 

This reform has already passed the House as the REINS Act, and it effectively returns Article 1 lawmaking to its rightful place:  Congress. 

Next, we repeal the Chevron doctrine.  This doctrine allows the bureaucrats to put their thumbs on the scales of justice, making sure the judiciary always gives deference to their interpretation of the law. The Chevron doctrine is unfair, it’s an affront to due process and justice, and if we’re going to make government truly accountable to the people, the Chevron doctrine has got to go.

At the same time the Financial CHOICE Act holds Washington accountable, it also holds Wall Street accountable.  It imposes the toughest penalties in history for those who commit financial fraud and deception.  We must ensure consumers and investors are protected, treated fairly and have access to competitive, transparent and innovative markets that are vigorously policed for fraud and deception.

In addition to greater accountability, another key part of our committee’s agenda is to end too big to fail once and for all.

Proponents of Dodd-Frank promised it would end too big to fail and taxpayer-funded bailouts.  But it did the exact opposite.  Dodd-Frank writes too big to fail and taxpayer-funded bailouts into law.

Republicans on the Financial Services Committee offer a simple answer to this problem:  bankruptcy, not bailouts. 

A new subchapter of the Bankruptcy Code tailored to specifically address the failure of a large, complex financial institution is part of our Financial CHOICE Act.  Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.

And while we’re on the subject of bailouts, another major focus for our committee in 2017 will be the reauthorization of the National Flood Insurance Program, which is set to expire at the end of September. 

Unfortunately, this government monopoly is beyond broke – it is bailout broke.  $23 billion in debt thanks to Byzantine rules, misguided subsidies and zero consumer choice.

To fix this unsustainable situation, we will pass a reauthorization bill that begins the transition to a competitive, innovative and sustainable flood insurance market where consumers have real choices.

At a time when the Richmond Federal Reserve’s “bailout barometer” shows that U.S. taxpayers stand behind 60 percent of all financial system liabilities, ending too big to fail and getting more private capital into the flood insurance program are paramount.

Our committee will also continue working to relieve financial institutions from regulations that create more burden than benefit.  Our Financial CHOICE Act replaces growth-strangling red tape with the reliable accountability of higher and simpler capital requirements. 

This approach not only helps unleash greater opportunities for small businesses, innovators and job creators, it also stops investors from betting with taxpayer money. 

For banks willing to put their investors in front of hardworking taxpayers in the event of a failure, the Republican plan will free banks to help more Americans finance their individual American dreams.

And for millions of Americans, the very definition of the American dream is owning a home of their own. 

Regrettably, Dodd-Frank and the CFPB make it harder for Americans to achieve that dream. 

They give Washington elites the power to decide who can qualify for a mortgage, and that’s why the Federal Reserve reports one-third of black and Hispanic borrowers will be hurt by the CFPB’s Qualified Mortgage rule when it is fully phased in, based solely on its rigid debt-to-income ratio.  And again, all without a vote by Congress.

The American people deserve a better path forward – one that leads to a sustainable and fair housing finance system, so everyone who works hard and plays by the rules can have opportunities and choices to buy homes they can afford to keep.

At its core, the housing market is not fundamentally different from the market for any other asset. Housing is not immune to the economic laws of supply and demand or risk and reward.

Thus, Republicans offered the PATH Act, which principally relies upon private capital and market discipline to create a sustainable housing finance system.  The PATH Act includes four fundamental goals essential to the development of any free market.

First, the role of government is clearly defined and limited.  Second, artificial barriers to private capital are removed to attract investment and encourage innovation.  Third, market participants are given clear, transparent, and enforceable rules to foster competition and restore market discipline.  Lastly, consumers are afforded informed choices in determining which mortgage products best suit their needs.

The PATH Act specifically:

  • Ends the costly Fannie and Freddie bailout;
  • Protects and restores the FHA by defining its mission;
  • Increases mortgage competition, enhances transparency, and maximizes consumer choice; and
  • Breaks down barriers to private investment capital.

It’s been more than 8 years since the financial crisis, which was largely caused by Washington’s misguided housing policies.  It’s been more than 6 years since Dodd-Frank failed to do anything about Fannie Mae and Freddie Mac. 

It’s not easy; it’s the very definition of a “heavy lift,” but our committee looks forward to working with the Trump administration, to finally building a housing finance system that is sustainable for homeowners, for hardworking taxpayers, and for our economy. 

Ladies and gentlemen, free enterprise has made America the fairest, most prosperous, most creative, most generous, and most compassionate society the world has ever known. 

Nothing else has lifted more people out of poverty.  And no other economic system allows people to earn their success through hard work, personal responsibility and individual initiative.

But instead of encouraging and helping people earn their success, Washington’s approach to poverty creates dependency on the state.  It strips people of the dignity that comes from earning their own way.  You would be hard pressed to create a system that is less compassionate. 

As the Dalai Lama recently reminded us in the pages of the New York Times:  “A compassionate society must protect the vulnerable while ensuring…policies do not trap people in misery and dependence.”

HUD was supposed to be one of Washington’s chief weapons in the War on Poverty launched by President Johnson more than 50 years ago.  Yet HUD’s public housing projects are typically any city’s most despairing places, where generations of poverty-stricken families are warehoused and sealed off from the best schools, best job opportunities and safest neighborhoods.

HUD symbolizes the Left’s top-down, command and control, centralized planning approach that measures compassion for the poor based on how many programs Washington creates and how much money it spends.

As chairman of the committee with jurisdiction over HUD, I am committed to bringing new ideas to the table on better ways to fight poverty.  There is without a doubt a proper and important role for government assistance.  We must always have a strong social safety net below which no one can fall. 

But right alongside that safety net, there needs to be – as former HUD Secretary Jack Kemp called it – “a ladder of opportunity on which everyone can climb.”

That ladder of opportunity is work.  The best anti-poverty program ever devised is a job, even a part-time job.  Of all adults who were living in poverty in 2014, almost two in three were not working at all.  Compare that to only 2.7 percent of full-time workers and only 17.5 percent of part-time workers living in poverty.

We have a moral responsibility to lift these Americans up. 

Let me tell you another story.  I’ll never forget the single mom I met who was working at a retail store in Dallas. 

Before getting her job, she told me she had lived her entire life in public housing in New Orleans until Hurricane Katrina hit and, like many, fled to safety in Texas with her children.  Away from public housing’s desperate environment for the first time, she was finally able to take control of her life.  “Now when there’s food on the table, my sons know I provided it through my hard work.  Now when there’s a roof over their heads, they know that’s because of me,” she said.

She reminds us all that a job is more than just a paycheck.  It’s about dignity and respect. 

And we want all those struggling in poverty to know the pride and dignity that comes with work. 

Under the leadership of Speaker Ryan, House Republicans have put forward a far-reaching blueprint to empower all Americans to achieve the American Dream. 

I was honored to be part of the task force that developed this plan, which includes reforms to ensure able-bodied adults work or prepare for work in exchange for receiving taxpayer benefits, including housing assistance. 

Such reforms are truly compassionate because they aim to liberate the poor from lives of hopeless dependency, to lives of independence and economic opportunity.

And speaking of economic opportunity, our economy would be healthier – and more Americans would have the opportunity to achieve success – if the Federal Reserve did not wander into fiscal policy, and were more predictable in its conduct of monetary policy and more transparent about its decision-making. 

Today we’re merely left with so-called “forward guidance,” which is unfortunately amorphous, opaque and improvisational.  It leaves hardworking taxpayers uncertain as they attempt to plan their economic future. 

History – not theory, but history – shows that when the Fed follows a monetary policy strategy of its own choosing, and transparently communicates that strategy to the rest of us, the economy performs better and more Americans get to wake up in the morning and go to work. 

Therefore, reform of the Fed remains a top priority.  The House-passed FORM Act protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but it has to give the American people a greater accounting of its actions.

Lastly, there is one other issue I want to discuss that doesn’t fall exclusively under the jurisdiction of the Financial Services Committee, but is such an enormous threat to the well-being of every American it must be on the agenda of every committee, and that’s our unsustainable national debt.

The number and trends could not be clearer.  Under President Obama, our national debt has nearly doubled to an astounding $19.8 trillion.  The portion of the debt owed to U.S. and foreign investors now represents the largest share of the economy since 1950 and is on track to hit the highest level in recorded history.  GAO reports our debt will grow to three times the size of the economy over the next 20 years.     

For over 200 years a core part of our collective American ethos was “we work hard today so our children can have a better life tomorrow.”  But Washington’s insatiable greed means we’re letting government live better today, so our children will have to work harder tomorrow.

My children Claire and Travis are the reason why I gave up a career in the private sector to serve in Congress.  And I will devote every ounce of my being, my heart and my soul to stopping Washington from mortgaging their futures and forfeiting the torch of liberty that rightfully belongs to my children and yours. 

We cannot allow the debt deniers in Congress to make them the first generation of Americans to live with less freedom, less opportunity, and a lower of standard of living.

In Washington, I’ve learned to go to work each day with high hopes and tempered expectations.  But the agenda I’ve just outlined – accountability for Washington and Wall Street, economic growth for all, regulatory relief, an end to taxpayer-funded bailouts, helping Americans escape poverty, and confronting the national debt – this should be a bipartisan agenda.  Democrats should be just as interested as Republicans in tackling each one of these challenges.

Even though Republicans will be nominally in charge of both ends of Pennsylvania Avenue soon, I remain painfully aware of the Senate’s cloture rules.  That means there will continue to be a need to work with the other party.  I’m certainly willing to negotiate in good faith on any proposal – from the Financial CHOICE Act to housing finance reform and anything else that comes before our committee.  And it is with great pride that I note that during the 114th Congress, our committee has successfully guided 76 bills to House passage.   That’s 66 percent of all measures reported out of our committee.  32 committee bills were signed into law, including 9 that make needed changes to Dodd-Frank.  All of them had bipartisan support.

I’m told that’s one of the best – if not the best – performance record of any major House committee.  With government so divided, that’s not bad at all – and I’m proud of the hard work of so many of our members who reached across the aisle and put forward good, common sense solutions.

I have an open mind, but it is not an empty mind.  And I never tire or falter in the advancement of the principles of freedom, free enterprise and limited constitutional government. 

Today, millions of our fellow citizens face stagnant wages, excessive tax burdens, rising health care costs, barriers to work and upward mobility, and an economy held back by hyper-regulation, cronyism and unsustainable debt. 

The work ahead will be hard and demands the best of us.  But that’s exactly what the American people deserve.  Let’s get started.  Thank you.

Posted by on October 26, 2016

CFPB seeks to silence investigation targets, drawing fire on free speech

By Lorraine Woellert \ VIEW ONLINE 

The CFPB wants to silence companies under investigation and is seeking greater freedom to share confidential information gathered as a result of those inquiries.

The bureau's proposal, part of a little-noticed update to its rules on records collection, drew unanimous fire from a broad coalition of financial companies, as well as from the American Bar Association and the American Civil Liberties Union, which called it unconstitutional.

The plan would prohibit targets of civil investigative demands or notice and opportunity to respond and advise letters — CIDs and NORA letters — from disclosing the receipt of such notifications. Legal experts called the proposal a restraint on free speech and warned that it could run afoul of laws that require companies to disclose material information to shareholders.

ACLU Legal Director Art Spitzer likened the proposal to National Security Letters, a product of the Patriot Act that give the FBI the power to collect customer records held by banks, telephone companies and internet service providers without a customer's knowledge.

"It's like the National Security Letter gag orders, except the compelling government interest is nowhere near what it is in a national security case," Spitzer said in an interview. "I'm not sure I see any compelling government interest."

On a practical level, the proposed rule would keep investors, shareholders and the public in the dark about federal investigations that might have a material impact on a company's operations. It also would give the bureau freedom to embark on "unwarranted fishing expeditions," said Jeb Hensarling, chairman of the House Financial Services Committee.

"Because of the potential for government abuse and First Amendment due process implications, Congress has typically limited such arrangements to investigations with national security implications," Hensarling wrote in a letter.

The bureau also drew criticism for a proposal that would allow it to share privileged information with any "federal, state, or foreign governmental authority, or an entity exercising governmental authority" whenever "it is relevant to the exercise of the agency's statutory or regulatory authority."

That provision could pierce attorney-client privilege, a "bedrock legal principle of our free society", and hobble companies seeking advice on regulatory compliance, said Linda Klein, president of the American Bar Association.

A CFPB spokesman declined to comment.

The proposal is an attempt by the bureau to clarify rules regarding the treatment of confidential investigative information.

Other financial regulators limit public disclosure of confidential information outside of the agency but don't distinguish between supervisory materials and enforcement materials. Current CFPB regulations make both categories confidential.

Posted by on September 06, 2016

$400 million in cash stacked on wooden pallets carried in secret by an unmarked cargo plane on the same day four American prisoners were released from Iran.

That’s what Chairman Sean Duffy and the Financial Services Oversight Subcommittee will be examining this Thursday, along with the impact of such a payment on terrorism financing.

Watch and share this video and be sure to tune in on Thursday morning at 10 a.m.

Posted by on August 19, 2016

Just last week the White House was claiming that the crushing regulatory burden of the Dodd-Frank Act wasn’t harming community banks – not one bit.

Community bankers, credit union leaders and small business owners told us that’s absolutely not true.

Today’s report from Bloomberg (Headline: Bank Mergers Heading for Seven-Year High, Pushed by Costly Rules) once again exposes how feeble the White House’s spin is:

Here’s an irony: U.S. regulators looking to avoid bailouts of too-big-to-fail banks have passed so many rules that regional and local lenders are combining to stomach the costs.

The result: Banks are bulking up.

Mergers and acquisitions by U.S. banks surged last year to about $18 billion, the highest level since 2009. This year, firms are set to fly past that mark, according to data compiled by Bloomberg. In nine of the 10 biggest deals completed in 2016, banks selling themselves cited heightened regulatory burdens as a driver, Securities and Exchange Commission filings show. The extension of low interest rates is compounding that pressure by eroding profits.

The regulatory pressures forcing small banks to sell can have an unfortunate effect on local economies, said Bill Hickey, a principal and co-head of investment banking at Sandler O’Neill.

“They’re the pillars in their communities,” Hickey said of the lenders. “When a community bank goes away, that generally is not a good thing.”

“Regulation has been a story of unintended consequences and bureaucrats rarely getting anything right,” said Jeff Davis, managing director at Mercer Capital, a business valuation and advisory firm.”

Contrary to what the White House would lead you to believe, the $400 million to Iran was ransom, you can’t keep your health care plan if you like it, and Dodd-Frank is hurting small community banks, credit unions and Americans who want to achieve financial independence.

Posted by on August 10, 2016

Like Captain Renault, Americans are shocked – SHOCKED – that a report by the White House says a law supported by the White House doesn’t hurt community banks, no matter what.

Well, over the last few years Republicans on the House Financial Services Committee have asked community bankers, credit union leaders, and small business operators what THEY think about the Dodd-Frank Act.  After all, as our nation loses one community financial institution each day, they are the ones who have to somehow comply with Dodd-Frank’s crushing regulatory burden.

Here are some of their voices:

“Community banks are resilient. We have found ways to meet our customers’ needs in spite of the ups and downs of the economy. But that job has become much more difficult by the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators. This—not the local economic conditions—is often the tipping point that drives small banks to merge with banks typically many times larger. The fact remains that there are 1,200 fewer community banks today than there were 5 years ago—a trend that will continue until some rational changes are made that will provide some relief to America’s hometown banks.” - Tyrone Fenderson, President and CEO of Commonwealth National Bank

“Managing this tsunami of regulation is a significant challenge for a bank of any size, but for a small bank with only 17 employees, it is overwhelming. Today, it is not unusual to hear bankers—from strong, healthy banks—say they are ready to sell to larger banks because the regulatory burden has become too much to manage. Since the passage of Dodd-Frank there are 80 fewer Texas banks. These banks did not fail. Texas has one of the healthiest economies in the country – we call it the Texas miracle. These were community bankers – and I have talked to many of them personally – that could not maintain profitability in an environment where the regulatory compliance costs are increasing between 50 and 200 percent.” - Dale Wilson, Chairman and CEO of the First State Bank of San Diego

“The regulatory costs are overwhelming…Virtually everyone in our bank now is involved to some extent or another in complying with regulations, and so it has taken away from their ability and their resources to work with both existing customers and also to go out and solicit new customers, helping other people get businesses off the ground.” - John A. Klebba, President and CEO, Legends Bank

“The growing regulatory burden on credit unions is the top challenge facing the industry today. All credit unions and their members are being impacted. This burden has been especially damaging to smaller institutions that are disappearing at an alarming rate.  The number of credit unions continues to decline, as the compliance requirements in a post Dodd-Frank environment have grown to a tipping point where it is hard for many smaller institutions to survive. Those that do are forced to cut back their service to members due to increased compliance costs.” - Peggy LaMascus, President and CEO of Patriot Federal Credit Union

“To put the question of size in further perspective, consider that each of the four largest banks in the United States has total assets greater than the combined assets of the entire credit union system.  The rules that the CFPB has promulgated so far have not taken this disparity -- and disproportionate burden -- into consideration as much as we feel it can or should under the law.  This is one of the primary reasons that small financial institutions are disappearing at an alarming rate.” - Patrick Miller, President and CEO of CBC Federal Credit Union

“In recent years, Centennial Bank has experienced a sharply increasing regulatory burden. The nature of our business has changed from lending and investing in our communities to compliance with ever-changing rules and guidance… In the past 10 years our compliance costs have grown from approximately five percent of overhead to 15 to 20 percent today.  I believe this increase in regulatory burden has contributed significantly to the decrease of 1,342 community banks in the U.S. since 2010.” – David Williams, Chairman and CEO of Centennial Bank

“Among some of the provisions of the Dodd-Frank Act, the new CFPB perhaps carries the most risk for community banks. We are already required to spend significant resources complying with consumer protection rules. Every hour I spend in compliance is an hour that could be spent with a small business owner or a consumer.” - Greg Ohlendorf, President and CEO, First Community Bank and Trust

“As I see it from my standpoint, we will see community banks continue to decline. We simply cannot afford the high costs of federal regulation. And as one banker I will tell you this, my major risks are not credit risks, risks of theft, risks of some robber coming in with a gun in my office; my number one risk is federal regulatory risk. And I have a greater risk of harm to my bank, my stockholders from the federal government than I have anything else in this whole world. That is obscene. ” - Les Parker, Chairman, President and CEO, United Bank of El Paso de Norte

“Over the last several years, banks have faced increased regulatory costs and will face hundreds of new regulations with the Dodd-Frank Act. These pressures are slowly but surely strangling the traditional community banks, and handicapping their ability to meet the credit needs of their communities.” - Matthew H. Williams, Chairman and President, Gothenburg State Bank

“As one who has worked in community banks for over four decades, I maintain that despite policymakers’ good intentions in implementing regulations, they are ultimately detrimental to banks’ ability to grow and create capital in other communities and to build communities through job creation.” - Ignacio Urrabazo, Jr., President, Commerce Bank

“There is no doubt that the increasing amount of new laws and regulations that credit unions face have become overwhelming. As the credit union president, I spend many hours reading each new law and regulation. I can’t afford to hire lawyers to interpret them for me. Most of these laws and regulations are created to address a problem caused by organizations other than credit unions. Yet, the regulators continue to impose the same requirements on small credit unions as they do on the largest financial institutions in the country. This just doesn’t make sense.” - Maria Martinez, President and CEO, Border Federal Credit Union

“The greatest challenge facing many credit unions is cumulative impact of the rapidly growing number of regulatory burdens in the wake of the financial crisis. While any one single regulation may not be particularly burdensome, the layering of new regulation on top of old and outdated regulation can completely overwhelm small financial service providers like credit unions. Unfortunately, every dollar spent on compliance, whether stemming from a new law or outdated regulation, is a dollar that could have been used to reduce cost or provide additional services or loans to members.” - Ed Templeton, President and CEO, SRP Federal Credit Union

“We are regulating community banks particularly down to the point where there is barely room to breathe. That is not how you get the economy going. And that is not how you lend money out.” - Tim Zimmerman, President and CEO, Standard Bank

“The amount, intensity and uncertainty of new Federal regulations, chiefly the Dodd-Frank Act, have forced banks to allocate an enormous amount of time and resources to compliance, and away from our primary mission of serving our customers.” - Todd Nagel, President, River Valley Bank

“To community banks like mine, regulation is a disproportionate expense, burden, and a real opportunity cost. My compliance staff is half as large as my lending staff. This is out of proportion to our primary business: lending in our communities to support the local economy.” - Salvatore Marranca, President and CEO, Cattaraugus County Bank

“The bigger banks can absorb it, the smaller banks can’t. I would not be surprised to see half of the community banks in this country go out of business if we don’t give some relief from Dodd-Frank for them. I think that Dodd-Frank is a terrible piece of financial legislation. It didn’t address any of the causes of the crisis that we just went through. It won’t prevent the next crisis. It heaped volumes and volumes of regulations…It’s hurting the people who need the money the most. It’s hurting small business. I think it is impeding economic growth.” - Bill Issac, Former FDIC Chairman and Chairman of Fifth Third Bancorp

“Each new rule requires significant time and money and builds upon volumes of existing regulations. This is putting an enormous strain on our staffs, and for community banks, which are disproportionately affected due to their more limited resources, diminishing revenue streams, and with limited access to capital—it is becoming a nearly insurmountable burden. When you add to this the more than two dozen proposals established under Dodd-Frank for a whole new class of regulation – mostly to be issued by yet another regulator– combined with the uncertainty and legal risks—it is plain to see how difficult it can be to achieve the right balance between satisfying loan demands and regulatory demands.” - William Bates, Jr., Executive Vice President and General Counsel, Seaway Bank and Trust Company

“Community banks have been the life blood of this country, and they’re responsible for more small business successes than any other resources including government programs. What’s troubling to me and to my bank is the impact of government regulation that has been based not upon common sense but on politics.” - George Hansard, President, Pecos County State Bank

“If Dodd-Frank is allowed to stand and proliferate as a monster regulatory overhaul, only the largest institutions will be able to navigate its requirements, and the community institution model will continue to diminish. The cost of regulatory compliance is simply staggering. I’m not talking about efforts to keep an institution out of trouble; I’m talking about a well-meaning community institution that has no intention of being unfair to members of their own town. These smaller institutions spend a disproportionate amount of money and time to just meet the reporting and manpower requirements of this new regulatory overkill.” - Cliff McCauley, Executive Vice President, Correspondent Banking, Frost Bank

“Most banks in the Midwest did not participate in the underwriting practices that contributed to the recent recession. Sadly, however, we are paying for the past through costly new regulatory burdens, anxious examiners, and customers that are unwilling to borrow. These remedies are hitting all hearts of our financial statements, as costs are going up, opportunities to earn revenue have been curtailed, and the amount and cost of capital we need is increasing.” - G. Courtney Haning, Chairman, President and CEO, Peoples National Bank

“We know that there will always be regulations that control our business – but the reaction to the financial crisis has layered on regulation after regulation that does nothing to improve safety or soundness and only raises the cost of providing credit to our customers. As a banker, I feel like Mickey Mouse as the Sorcerer’s Apprentice in Disney’s famous cartoon Fantasia. Just like Mickey with bucket after bucket of water drowning him, new rules, regulations, guidances, and requirements flood in to my bank page after page, ream after ream.” - William Grant, Chairman, President and CEO, First United Bank & Trust

“The role of community banks in advancing and sustaining the recovery is jeopardized by the increasing expense and distraction of regulation drastically out of proportion to any risk posed by community banks. We didn’t cause the recent financial crisis, and we should not bear the weight of new, overreaching regulation intended to address it.” - Samuel Vallandingham, Vice President and CIO, First State Bank

Posted by on June 08, 2016

Financial Services Committee Chairman Jeb Hensarling just rolled out the Financial CHOICE Act, a plan to replace the failed Dodd-Frank Act and grow the economy for all Americans.

And, like clockwork, left wing Democrats found the nearest possible microphone to trot out stale talking points about “Wall Street” and criticize the plan before they even knew what was in it.

Just like President Obama, we’re in “myth-busting” mode.  Here are some of their fact-free whoppers – and reality.


Claim: Senator Elizabeth Warren claimed the Financial CHOICE Act is nothing but a “wet kiss” for Wall Street full of “giveaways.”

Fact: The Big Banks on Wall Street oppose the Financial CHOICE Act (as the New York Times reported here).  And PoliticoPro reports that while big banks aren’t supporting the Financial CHOICE Act, “small banks, however, did not hesitate to get behind the plan.”

We remind Senator Warren that the CEO of Goldman Sachs said his big Wall Street firm would be “among the biggest beneficiaries” of Dodd-Frank and the CEO of JPMorgan Chase said Dodd-Frank benefits Big Banks by creating a “bigger moat” – “deterrents for small financial institutions to jump into new business lines and steal market share.”


Claim: Rep. Maxine Waters purported that the Financial CHOICE Act “
gives Wall Street a ‘get out of jail free’ card”

Fact: The Financial CHOICE Act imposes the toughest penalties in history for financial fraud, self-dealing, and deception to protect consumers and strengthen markets.  It demands real accountability from Wall Street. (Side note: It’s the Obama Justice Department – with its prosecutorial discretion and power – that has treated Wall Street as Too Big To Jail.)  


Claim: Senator Sherrod Brown claimed that we are attempting to “
make life easier for mega bankers and tougher for ordinary Americans.”

Fact: To use the Senator’s terminology, “mega bankers” are opposed to our plan. Why? Because Democrats gave them a competitive advantage with Dodd-Frank.  Today, Big Banks are the only ones with the manpower and resources to navigate Dodd-Frank’s regulatory maze. Community financial institutions don’t have the same luxury, which is why we’re losing an average of 1 per day.

And Senator Brown’s attack seems hypocritical since the Financial CHOICE Act takes a similar approach to one he proposed regarding capital standards.   

By the way, Senator:  It’s Dodd-Frank that has made life “tougher for ordinary Americans.” 

  • Before Dodd-Frank became law, 75 percent of banks offered free checking.  By 2015, just 37 percent of banks offered free checking.  Not in the 12 years Bankrate has been studying it have so few banks offered real free checking -- a checking account with no monthly fee, regardless of your balance or whether you do direct deposit.”
  • According to the Federal Reserve, when fully phased in, one-third of black and Hispanic mortgage borrowers will be hurt by Dodd-Frank’s Qualified Mortgage rule based solely on its rigid debt-to-income ratio; and one out of every five borrowers who borrowed to buy a home in 2010 will not meet the rule’s underwriting requirements.

Claim: White House Press Secretary Josh Earnest claimed the Dodd-Frank Act ensures “taxpayers will not be on the hook for bailing out the big banks.”

Fact:  The Orderly Liquidation Fund was created by Dodd-Frank and its sole purpose is to bail out Too Big To Fail banks. Here’s a pro-tip Josh, if it looks like a bailout and acts like a bailout, it’s a bailout. 


Claim:  “[T]here should be no more confusion about which party is on the side of big banks and large financial interests on Wall Street.” – White House Press Secretary Josh Earnest

Fact:  You got that right.  Unlike the failed Dodd-Frank Act, the Financial CHOICE Act will provide economic growth for all and bank bailouts for none.

Posted by on May 18, 2016

You’d be hard-pressed to find a consumer willing to pay more and wait longer only to receive a worse result. But that is what’s passing for consumer protection these days in the eyes of the CFPB and its new proposal to outlaw arbitration.

For the non-lawyers in the room, arbitration is a form of dispute resolution where parties agree to settle a claim with the help of an independent mediator, rather than hiring a lawyer, joining a class action lawsuit and waiting – sometimes for years – before our overcrowded court system can hear their case.  But the CFPB is trying to prohibit this more cost effective alternative and the many benefits it offers consumers. 

Without arbitration, consumers will be relegated to joining class action lawsuits, which is actually much worse for consumers according to a recent study from—wait for it—the CFPB. That’s right, the Bureau’s own 2015 study shows that only 13% of class actions are settled on a class-wide basis. And among the consumers eligible for relief in those 13% of cases, only 4% ever receive one red cent from the settlement.  In other words, class action lawsuits benefit just 0.5% of the class members…ONE-HALF OF 1%.  

Yet, that is what the federal government wants to force on consumers.

So what’s all this really about? Money.   

This CFPB rule is nothing but a big, wet kiss for trial lawyers who will reap the benefits of more litigation and exorbitant payoffs from class action lawsuits.

Seriously though, does anyone think that we need more litigation in America today?

The Bureau’s proposed rule would significantly increase costs, time-to-resolution, and the burden on our judicial system.

It may be a great deal for trial lawyers (like Saul), but it’s a bad deal for consumers.