In remarks on the House floor today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, led Democrats in opposition to H.R. 766, the so-called “Financial Institution Customer Protection Act of 2015”, a dangerous measure that would severely limit the Justice Department’s ability to investigate and prosecute bank fraud.
In her remarks, Waters underscored that this measure would eliminate core provisions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), the Justice Department’s most effective tool to investigate and prosecute fraudulent financial activities at the largest bank, putting not only borrowers but the entire financial system at risk.
The Ranking Member also noted that a broad coalition of advocacy groups have come out in opposition to the H.R. 766, and that President Obama has indicated that he will likely veto the measure upon passage.
Full text of the remarks, as prepared for delivery, is below.
Mr. Chair and Members.
H.R. 766 eliminates core provisions of the Financial Institutions Reform, Recovery and Enforcement Act, or FIRREA, that the Justice Department has used to investigate and prosecute bank fraud. FIRREA has proven to be the Justice Department’s most effective tool for holding Wall Street accountable.
After using FIRREA to secure historic settlements against Wall Street, including a $7 billion settlement against Citibank, a $5 billion dollar settlement against Goldman Sachs, a $13 billion dollar settlement against JP Morgan Chase, and a historic $16 billion dollar settlement against Bank of America, H.R. 766 seeks to stifle the Justice Department’s investigative powers over financial fraud.
In fact, there are still ongoing settlement negotiations with banks like Wells Fargo and Goldman Sachs that were announced just this week. Without investigatory powers and the extended statute of limitations granted to the Justice Department by FIRREA, it would be impossible for us to identify and rectify the fraudulent activity that set us up for a crisis 10 years ago.
Apparently, H.R. 766’s supporters believe that actually holding banks accountable for fraud was too much of a burden for them replacing our system of “Too Big to Jail” with one where our biggest banks are now “Too Frail to Fine.”
H.R. 766 also invites the next crisis by imposing burdensome requirements on the Justice Department’s ability to investigate bank fraud - allowing fraud schemes to continue at the expense of consumers and the financial system. The Justice Department’s ability to identify and root out fraud will be critical in averting future crisis, and H.R. 766 would be a free pass to banks that make their money by breaking the law. That would include banks like Plaza, Commerce West and Four Oaks – all of whom knowingly aided fraudsters despite the many red flags raised by their financial activities.
At Commerce West in particular, the bank admitted fault for failing to file suspicious activity reports with regulators, even after the bank’s own employees determined that one of their customers was routinely submitting fraudulent checks to the bank. According to the Justice Department’s complaint, the bank also failed to heed the warning of other banks that pointed out to Commerce West that some of their customers were fraudulent businesses.
Furthermore, H.R. 766’s account closure provisions are a solution in search of a problem as regulators are not forcing financial institutions to close customer accounts. Every federal banking regulator has been clear: except for rare cases involving national security or systemic risk, the responsibility for closing accounts is a decision for financial institutions; some financial institutions are simply deciding that they would rather lose a customer than to invest the resources needed to ensure that our financial system is not being used for money laundering or other criminal activity.
In order to protect our economy from the next financial crisis, regulators have to have the necessary tools to prevent fraud and protect consumers. Americans are still reeling from the effects of the financial crisis, and we should be in the business of seeking ways to continue to hold banks more accountable for their misconduct – not rolling back the federal government’s most effective tool for protecting consumers, investors, and taxpayers from bank fraud.
Banks that break the law don’t deserve a “Get out of Jail Free” card.
The Administration will veto H.R. 766, and I would urge my Democratic colleagues to oppose H.R. 766.