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Ed Perlmutter: Everyone, the
subcommittee on consumer

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protection and financial
institutions will come to order.

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Without objection, the chair is
authorized to declare a recess

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of the subcommittee at any time.
And without objection, members

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of the full committee, not on
this subcommittee are authorized

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to participate in today's
hearing. As a reminder, I ask

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all members to keep themselves
muted when they are not being

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recognized to minimize
disturbances while members are

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asking questions of our
witnesses. The staff had been

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instructed not to mute members
except where a member is not

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being recognized and there is
inadvertent background noise.

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Members are reminded that all
house rules relating to order

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and decorum apply to this remote
hearing. Members are also

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reminded that they may
participate in only one remote

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proceeding at a time, Mr. Luke
De Meyer. If you are

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participating today, please keep
your camera on. And if you

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choose to attend a different
remote proceeding, please turn

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your camera off. If members wish
to be recognized during the

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hearing, please identify
yourself by name to facilitate

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recognition. We're in a very
busy time, but we have a subject

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that I think is particularly
important and really goes to the

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heart of our subcommittees
business. Today's title of our

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hearing is banking, innovation,
or regulation, evasion,

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exploring modern trends in
financial institution charters.

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I now recognize myself for four
minutes to give an opening statement.

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In 1863, President Lincoln
signed the national currency Act

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into law taking the first step
in establishing the national

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banking system. One of the
primary goals of the national

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currency Act and the subsequent
National Bank Act was the

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standardization of currency to
protect consumers against

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uncertainty in the valuation of
banknotes, rampid,

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counterfeiting and fraud and his
1864 address to Congress,

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President Lincoln said that the
government and the people will

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derive great benefit from this
change in the banking systems of

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the country can hardly be
questioned, the national system

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will create a reliable and
permanent influence in support

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of the National Credit and
protect people against losses

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and the use of paper money. At
the heart of our banking system

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is a promise of consumer
protection and benefit to the

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people President Lincoln knew
our national banking system

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needed to be reliable, stable,
honest, consistent across all

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states, and effective. Over the
last 150 years, the banking

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system has changed a great deal.
But its core mission to serve

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the people by taking deposits,
offering credit and facilitating

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transactions, and intermediating
transactions remains principally

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the same. In recent years, a
variety of non bank and fintech

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companies have sought to engage
in the business of banking or in

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activities very similar to
banking. Few of these companies

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have sought traditional banking
charters, either because they

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are weary of the additional
regulation and supervision that

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comes with being a bank or
because the structure of their

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business does not fit squarely
within a traditional charter.

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Many of the unconventional
charters do not come with the

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same level of regulation, and
supervision traditional charters

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require. Despite the innovations
of the last 10 years, many of

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the questions we will be
discussing today are not new.

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Industrial loan companies have
been around since 1910. And the

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debate over the separation of
banking and commerce predates

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even the National Currency Act.
In recent years, the Office of

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the Comptroller of currency has
granted FinTech companies

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banking charters, but the debate
about what constitute the what

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constitutes the business of
banking, and what makes banks

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special is a much older
conversation. We do not want to

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slow innovation, but it is the
Congress's duty to ensure change

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comes at the benefit and not the
detriment of the people. As the

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economy continues to reopen from
the pandemic, it is important

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our financial system remains
stable and strong, and consumers

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are treated fairly and honestly,
most banks and credit unions

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have been a source of strength
in the pandemic in part because

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of the stringent capital,
liquidity and other regulatory

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requirements we place on these
financial institutions. I look

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forward to the discussion. I
want to compliment the panel on

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their very thorough written
testimony and I'll be interested

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to see how all of you can stick
within five minutes based on

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your written materials. But this
is we're going to be dealing

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with financial stability risks
consumer protection issues,

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market fairness questions and
the potential benefits of non

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traditional banking charters.
Additionally, I would like to

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ask both the committee members
and the witnesses today to

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consider how we can encourage
innovation alongside strong

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consumer protections, diversity
and inclusion in our banking

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system. With that, I'll yield
back. And I'd like to now

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recognize Mr. Luke De Meyer, for
four minutes for his opening

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statement.

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Luke De Meyer: Thank you, Mr.
Chairman, for having this

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hearing on this important topic.
And thank you to our witnesses

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today. And I look forward to
your testimony. And many of you

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know, before coming to Congress,
I was in the banking business,

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both as a banker and as a
regulator for many, many years.

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While it may surprise some of
you know, I was not around

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during the Great Depression, I
have seen a lot of changes

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within the banking industry
during my 40 years of a

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regulator and banker. Mr.
Chairman, you don't need to be

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laughing at that you're not much
younger than I am. I remember

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the savings and loan crisis of
the 80s. I remember when people

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thought that innovation of
credit and debit card was

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optimized completely, would it
really eliminate checks. Also

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remember that when the community
Reinvestment Act was signed into

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law, like there was this
hearing, I remember the crash of

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'08. Throughout the years,
banking has been fluid that has

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changed with the times adapted
to become more capitalized,

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adapted to serve the communities
in which they operate and serve

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more Americans are having us
here today because the banking

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system is changing once again.
In the last decade, we have seen

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a rise in financial technology
or fintech companies that truly

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push innovation and banking of
the banking industry from mobile

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payments to algorithmic lending,
and much more. As these entities

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have grown significantly in the
last decade and become more

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permenant in our banking system,
they have begun to seek out

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charting options that are
consistent with the growth of

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their companies, the OCC has
been extremely active in this

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space and sought to provide a
chartering option for fintechs

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through a special purpose
National Bank Charter for

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fintechs. However, that decision
has been tied up in the courts

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in recent years. The OCC has
also discussed the idea of a

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National Charter for payment
companies and separately, has

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approved anchorage for a
National Trust charter made up

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the first digital asset bank, we
should examine the pros and cons

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of the OCC's actions. But we
should also examine the role of

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state banking regulators and
regulation charting of fintechs.

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It is the current state
regulatory regime and is the

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current state regulatory regime
adequate and is it necessary for

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the program to get involved.
Another pathway explored by

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numerous entities to interpret
the banking system is the

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industrial loan company IOC
charter but IOC's are regulated

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on a federal level by the FDIC
and supervised by state

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regulators. The parent company
is not considered a bank holding

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company or the bank holding
company act. This is a critical

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difference between bank holding
companies that are supervised by

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the Federal Reserve and are
restricted by law to activities

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closely related to banking. The
separation of banking and

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Commerce has been a key staple
of our dual banking system, and

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the rise of the ILC approvals
and applications this does raise

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questions of banking and
commerce separation, safety and

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soundness, and privacy.
Questions which I look forward

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to asking today. However, before
Congress acts rationally, to

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eliminate any charting options,
it was critical to look at the

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entire ecosystem of chartering
in the banking industry. For

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example, since 2010, there have
been only 43 to double banks.

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That same period of time, the
number of FDIC insured

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depositories has decreased by
roughly 2000 institutions.

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That's almost four banks per
week. In addition, the

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innovation of FinTech companies,
has largely increased access to

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credit and lowered the number of
unbanked and underbanked people

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in our society, the number of
bank fintech partnership, the

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current CD, the current bank,
bank, fintech partnership model

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has proven extremely successful
not only providing more services

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and access to businesses,
consumers, but also has

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significant consumer protections
and oversight to the regulation

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and supervision of banks.
Congress should examine all

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these issues when taking action
affecting the charter of

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institutions. I've always said
that if you want to be a bank,

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you need to be regulated like a
bank, we believe this can be

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accomplished by providing a
regulatory and chartering

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framework that allows fintech
companies to continue to thrive

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in the banking industry while
protecting the city of banks, as

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the bedrock of our financial
system. So be it on the court

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raising these questions in our
in our witnesses of our

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witnesses today. Is that, Mr.
Chairman, I yield back. Thank

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you so much for your.

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Ed Perlmutter: Thank the
gentleman. The Chair now

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recognizes the chairwoman of the
full committee, the gentlewoman

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from California for the balance
of our five minutes, which I

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think is about a minute and 23
seconds.

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Maxine Waters: Thank you very
much, Chairman Perlmutter for

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holding this very important
hearing. The pandemic has

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accelerated the way people use
technology to bank obtain a loan

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and make payments at the same
time state regulators, community

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banks, credit unions, and
consumer advocates have raised

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the alarm about how new entities
including big tech firms are

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receiving unconventional
charters and offering bank

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products and services while
evading regulations. Most banks,

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including community banks comply
with additionally, the OCC has

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overstepped its authority,
pretending that laws signed by

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Abraham Lincoln, were intended
to create charters for fintech

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or cryptocurrency. I look
forward to hearing from our

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panel on how Congress can
promote responsible innovation.

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That does not lead to a
regulatory race to the bottom

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where consumers get hurt. And
the safety and soundness of our

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financial system is once again
in peril, I yield back the

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balance of my time. And thank
you very much.

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Roger Williams: Thank you
Gentlelady yields back. Now I'd

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like to recognize the ranking
member of the full committee,

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Mr. McHenry from North Carolina
for the balance of his five

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minutes.

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Patrick McHenry: Thank you.
Thank you, Mr. Chairman. And,

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Mr. Brooks, I want to personally
thank you for your leadership in

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the OCC and for testifying
today. I wish you best in your

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future endeavors. It's clear
that my colleagues on the other

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side of the aisle want to relive
old debates here in the

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committee. And this is certainly
an old debate. In framing this

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discussion, I'll have to go back
to my talking points, my notes

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from 2005, 2006, and 2007. You
know, I've used this quote

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before, but to quote Tally Rand
and speaking about the bourbon

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dynasty, they have learned
nothing and forgotten nothing.

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It's all the same here. Yet
consumers and businesses have

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preferences and continue to
evolve. The private sector is

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innovating new ways to meet the
needs of all of our consumers.

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And we should be encouraging our
regulators to seek regulatory

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requirements that fit these
advancements, not hinder them,

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Republican sport, promoting an
up to date regulatory framework

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that sets clear rules of the
road for all participants. We

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want and will continue to work
for the most inclusive financial

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system possible, and I yield
back.

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Roger Williams: Gentleman yields
back. And that's the first time

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I've heard about tally Rand in
11 or 12 years. So thank you

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very much, Mr. McHenry. I'm now
pleased to welcome each of our

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witnesses and want to introduce
the panel and I will let you all

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know that there are three
Coloradans on this panel, which

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makes it a particularly
outstanding group to testify

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before the committee. First, we
have Raul Carrillo who is the

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Deputy Director of the LPE
project and Associate Research

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Scholar at Yale Law School. Mr.
Carrillo work focuses on the

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legal foundations of Money,
Banking and Finance, as a legal

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technology and mode of
governance. Prior to joining the

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00:13:00.810 --> 00:13:04.980
LPE project, Mr. Carrillo was
Policy Counsel at the Demand

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Progress Education Fund and a
fellow at the Americans for

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Financial Reform Education Fund.
Second, we have missed Professor

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Eric Gerding, who is a law
professor and Wolf scholar at

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00:13:19.560 --> 00:13:23.040
the University of Colorado Law
School. Professor Gerding's

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research interests include
banking law, the regulation of

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financial products and
institutions, payment systems,

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and corporate governance. And he
has written extensively on the

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interaction between asset price
bubbles and financial

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regulation. Professor Girding
previously taught at the

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University of New Mexico School
of Law, and he has practiced law

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in New York and Washington. Our
third panelist is Kristen

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Johnson, who is the Asia Briggs
Candler professor of law at

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Emory University School of Law.
Miss Johnson's recent work

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includes a focus on emergent
technologies, such as

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distributed digital ledger
technologies and enable the

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creation of digital assets and
intermediaries. Prior to her

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work at Emory University School
of Law, Miss Johnson served as

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00:14:13.290 --> 00:14:17.580
the McGlinchey Stafford
Professor of Law and Associate

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00:14:17.580 --> 00:14:22.050
Dean for the faculty research at
Tulane University Law School.

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Our fourth panelist is Carlos
Pacheco, who is the CEO of

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Premier members credit union in
Colorado testifying on behalf of

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the National Association of
federally insured credit unions

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00:14:34.680 --> 00:14:39.480
Matthew, Mr. Pacheco has been
CEO of Premier Members Credit

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00:14:39.480 --> 00:14:44.430
Unions since 2011. And he also
serves as the board director for

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00:14:44.430 --> 00:14:47.760
the Denver Boulder Better
Business Bureau and the Cabinet

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00:14:47.760 --> 00:14:52.230
campaign chair for the foothills
United Way. Finally, we have

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00:14:52.230 --> 00:14:57.030
former Comptroller of the
Currency. Brian Brooks, native

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Coloradan from Pueblo, Colorado,
Mr. Brookes acting as Acting

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00:15:01.560 --> 00:15:08.040
Comptroller from May 29 2020 to
January 14 2021, after serving

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00:15:08.040 --> 00:15:11.910
as Senior Deputy Comptroller and
Chief Operating Officer at the

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00:15:11.910 --> 00:15:16.050
OCC where he oversaw bank
supervision, systemic risk

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00:15:16.080 --> 00:15:19.050
identification, support,
innovation and other issues.

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00:15:19.470 --> 00:15:23.100
Prior to his work at the OCC,
Mr. Brooks served as Chief Legal

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00:15:23.100 --> 00:15:27.510
Officer of Coinbase global a
crypto currency exchange.

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Witnesses are reminded your oral
test and I should say to the two

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panelists not from Colorado,
we'd be happy if you and honored

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if you chose to come to
Colorado, witnesses are reminded

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00:15:41.100 --> 00:15:44.580
your oral testimony will be
limited to five minutes, you

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00:15:44.580 --> 00:15:47.460
should be able to see a timer on
your screen that will indicate

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00:15:47.460 --> 00:15:51.480
how much time you have left. And
a chime will go off at the end

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of your time, I would ask you to
be mindful of the timer and

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quickly wrap up your testimony.
If you hear the chime so we can

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00:15:58.680 --> 00:16:01.980
be respectful of both witnesses
and the committee's committee

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members time. Without objection,
your written statements will be

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00:16:05.490 --> 00:16:09.210
made part of the record. Once
the witness has finished their

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testimony, each member will have
five minutes to ask questions.

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So we'll begin with Mr. Carrillo
you are now recognized for five

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minutes to give an oral
presentation of your testimony.

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Raul Carrillo: Thank you
chairperson runner for the

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00:16:25.440 --> 00:16:28.740
invitation. Thank you to chair
Waters to ranking member Luke De

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00:16:28.740 --> 00:16:31.350
Meyer and Ranking Member
McCarthy and all members of the

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subcommittee. I offered my
testimony as an associate

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research scholar at the law
school. But most of my

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00:16:37.230 --> 00:16:42.690
principles here were created or
developed by me as an attorney

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00:16:42.690 --> 00:16:45.960
fighting and building on behalf
of low income and low income

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clients in New York City along
with a group called New Economy

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project. I echo my remarks to
the financial technology Task

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00:16:53.490 --> 00:16:57.420
Force last September and
humbling requesting that

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everyone consider the deeper
impacts of fintech on democracy,

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00:17:01.950 --> 00:17:05.280
there is now a need for serious
stewardship. The pandemic

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00:17:05.280 --> 00:17:08.700
response and the actions by
regulators have cast into relief

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the fundamental ways in which
governments shape money and

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00:17:11.940 --> 00:17:15.900
markets, there is no taking
politics out of tech, because

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00:17:15.900 --> 00:17:19.380
there is no taking the law out
of tech or vice versa. Like

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physical tools, humans create
and use legal tools with certain

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ideas for their use in mind.
This morning, I had the luxury

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of presenting alongside
Professor Johnson, Professor

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00:17:28.620 --> 00:17:32.250
Gerding. And I will thus defer
to them on many issues or

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00:17:32.250 --> 00:17:35.430
otherwise points in my written
testimony. I would like to focus

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00:17:35.430 --> 00:17:39.870
on one under emphasize dimension
of FinTech here today. And

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00:17:39.870 --> 00:17:43.410
that's privacy and security. I
hope to stress that the mass

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00:17:43.440 --> 00:17:47.580
perpetual, pre emptive and
predictive surveillance that is

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00:17:47.580 --> 00:17:50.370
perpetuated by both the
government and private

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00:17:50.370 --> 00:17:54.300
technology companies, often in
partnership, very much including

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00:17:54.330 --> 00:17:57.390
FinTech companies should be of
deep concern for everyone

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00:17:57.420 --> 00:18:00.630
regardless of party affiliation,
civil rights and civil

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00:18:00.630 --> 00:18:03.600
liberties, including our
fundamental freedoms under the

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00:18:03.600 --> 00:18:06.660
Fourth Amendment. The First
Amendment and the general love

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00:18:06.660 --> 00:18:09.240
warrants the parliament and the
commoners want against the

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00:18:09.240 --> 00:18:13.140
tyranny of King George. Certain
invasive product products and

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00:18:13.140 --> 00:18:15.570
partnerships should not be
allowed in our system,

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00:18:15.750 --> 00:18:18.450
regardless of whether they are
considered to be arbitrage or

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not my regulators. Treating
innovation as an unqualified

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00:18:21.960 --> 00:18:25.770
good does not lead us to
equitable, sustainable whopper

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00:18:25.770 --> 00:18:29.940
of innovation that allows us to
truly prosper together. As

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00:18:29.940 --> 00:18:32.640
Vanderbilt law professor Morgan
Rickson stressed and President

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00:18:32.640 --> 00:18:36.450
Lincoln might agree, money is
infrastructure. As scholars like

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00:18:36.450 --> 00:18:39.180
Christine design, and live Nan
stress, money is also part of

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00:18:39.180 --> 00:18:42.630
our constitutional order, and
regulation flows from Congress's

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00:18:42.630 --> 00:18:45.750
authority over the public purse.
On the corporate side

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00:18:45.750 --> 00:18:48.150
surveillance has now become the
business model of FinTech and

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00:18:48.150 --> 00:18:50.820
many other companies. Congress
should shift the burden of

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00:18:50.820 --> 00:18:54.180
privacy protection away from
consumers by establishing a

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00:18:54.180 --> 00:18:56.850
short list of permissible
purposes for data collection,

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00:18:56.940 --> 00:18:59.970
and banning all others. This is
envisioned by Senator Browns

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00:18:59.970 --> 00:19:03.420
DATA Act of 2020. This is
especially important because the

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00:19:03.420 --> 00:19:06.240
government currently deputized
as financial institutions as

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00:19:06.240 --> 00:19:10.710
anti money laundering cops on
the beat. In 1992. Congress

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00:19:10.710 --> 00:19:13.140
required the filing of
suspicious activity reports

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00:19:13.170 --> 00:19:17.190
SARS, relevant to any possible
violation of the law. This has

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00:19:17.190 --> 00:19:21.540
incentivized and burden firms
who must act as cops on the beat

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00:19:21.690 --> 00:19:24.540
and send data often
automatically to government

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00:19:24.540 --> 00:19:27.900
fusion centers at these fusion
centers, which serve as data

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00:19:27.900 --> 00:19:30.720
platforms for local and federal
law enforcement. Peter TEALS

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00:19:30.720 --> 00:19:34.350
Palantir aggregates information
and shares it more widely with

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00:19:34.350 --> 00:19:37.650
law enforcement around the
world. Unfortunately, there's a

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00:19:37.650 --> 00:19:40.950
hole in Fourth Amendment
doctrine. The court has claimed

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00:19:41.160 --> 00:19:43.560
that we cannot have an
expectation of privacy in

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00:19:43.560 --> 00:19:46.290
anything shared with the
business. This means as the

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00:19:46.290 --> 00:19:50.700
crypto community will tell you
that there is no privacy and

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00:19:50.700 --> 00:19:54.510
finance our infrastructure has
no place for privacy within it.

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00:19:54.840 --> 00:19:57.990
This impinges not only on our
Fourth Amendment rights, but on

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00:19:57.990 --> 00:20:01.500
our First Amendment values of
freedom of sociation and freedom

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00:20:01.500 --> 00:20:04.860
of speech, especially for
certain vulnerable communities.

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00:20:05.130 --> 00:20:09.060
In this context, it is deeply
troubling to me that FinTech

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00:20:09.060 --> 00:20:12.360
promotes financial inclusion via
increasingly invasive biometric

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00:20:12.360 --> 00:20:16.320
data. Moreover, an app or bank
account is not the answer to

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00:20:16.320 --> 00:20:19.440
every problem. As Berkeley Law
Professor Abby Atkinson has

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00:20:19.440 --> 00:20:22.500
recently stressed in concert
with community advocates. Credit

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00:20:22.500 --> 00:20:25.650
is not a structural cure for
poverty. It has downsides.

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00:20:25.710 --> 00:20:28.680
People need better wages and
better benefits. Just as

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00:20:28.680 --> 00:20:32.160
importantly, we should not
consign everyday folks including

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00:20:32.160 --> 00:20:35.280
necessarily ourselves to
unnecessary and dangerous

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00:20:35.280 --> 00:20:38.970
invasion of their privacy, our
privacy in order to participate

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00:20:38.970 --> 00:20:42.030
in the payment system. We
deserve to be one in the crowd.

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00:20:42.420 --> 00:20:45.780
SARS have not made us safer.
True money laundering often

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00:20:45.780 --> 00:20:49.740
occurs without notice the most
untoward exam. Excuse me, the

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00:20:49.740 --> 00:20:53.880
most notorious example is hspcs
actions in laundering money for

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00:20:53.880 --> 00:20:58.470
the Sinaloa cartel in Mexico.
Between 2010 and 20 1218

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00:20:58.470 --> 00:21:01.140
financial institutions have
received deferred prosecution

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00:21:01.140 --> 00:21:04.260
agreements, at least four of
them have broken the same AML

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00:21:04.260 --> 00:21:07.980
law again, and simply received
another fine. Buzzfeed News and

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00:21:07.980 --> 00:21:10.470
the International Consortium of
Investigative Journalists

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00:21:10.650 --> 00:21:14.520
recently released 1000s of
FinCEN files, showing that the

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00:21:14.520 --> 00:21:17.790
system does not work by its own
logic and again, does not make

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00:21:17.790 --> 00:21:22.140
us safer. I see the evolution of
digital cash as a middle ground

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00:21:22.140 --> 00:21:25.740
between proof privacy technology
like crypto, and folks who want

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00:21:25.740 --> 00:21:30.210
the banking system to spy on all
of us. I joined Rick's Minh and

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00:21:30.330 --> 00:21:33.750
John Crawford and Mr grata, Ron
Bob pocket Thalia marovo, and

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00:21:33.750 --> 00:21:37.170
many others in advocating for
public bank accounts at the

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00:21:37.170 --> 00:21:40.080
federal level. And I also joined
the activist is fighting for

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00:21:40.080 --> 00:21:42.810
this on the state and local
level. Just as importantly,

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00:21:42.810 --> 00:21:46.380
though, we need cash wallets
that replicate the true privacy,

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00:21:46.920 --> 00:21:50.010
that a closed container for a
cash is created the lead

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00:21:50.010 --> 00:21:53.190
technologist on this and the
best work is coming from Roland

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00:21:53.190 --> 00:21:55.470
Gray, who was privacy lead at
the International

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00:21:55.470 --> 00:21:58.620
Telecommunications Union. Mr.
Kareo very important for future

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00:21:58.620 --> 00:21:59.670
security. Thank you.

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00:22:00.930 --> 00:22:03.960
Roger Williams: Gentleman's time
has expired. Thank you, sir.

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00:22:04.290 --> 00:22:07.680
Professor Gerding you are now
recognized for five minutes to

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00:22:07.680 --> 00:22:11.010
give an oral presentation of
your testimony.

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00:22:12.020 --> 00:22:14.480
Erik Gerding: Thank you,
Chairman Perlmutter. Thank you

369
00:22:14.480 --> 00:22:18.650
ranking member De Meyer chair
Waters and Ranking Member

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00:22:18.650 --> 00:22:22.010
McHenry and members of the
committee for inviting me to

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00:22:22.010 --> 00:22:26.330
testify today. My name is Eric
Gerding. I'm a law professor at

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00:22:26.330 --> 00:22:30.230
the University of Colorado where
my research focuses on Banking

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00:22:30.230 --> 00:22:35.000
and Securities laws. I will
focus my testimony today on

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00:22:35.000 --> 00:22:41.120
three things. First, the FDIC
section to reopen applications

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00:22:41.120 --> 00:22:44.600
for deposit insurance for
industrial loan companies.

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00:22:45.230 --> 00:22:50.120
Second, the OCC radical new
fintech charter. And the third

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00:22:50.120 --> 00:22:54.110
and more broadly, why Banking
Law separates banking from

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00:22:54.110 --> 00:23:00.350
commerce and commercial firms
from banking. That last issue

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00:23:00.350 --> 00:23:05.810
came to a head in 2005. When
Walmart applied to the FDIC for

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00:23:05.810 --> 00:23:10.010
deposit insurance for a new ILC
that Walmart was seeking to

381
00:23:10.010 --> 00:23:15.530
charter, Walmart's application
set off a political and legal

382
00:23:15.530 --> 00:23:21.890
fight. This Firestorm is now
threatening to re erupt now that

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00:23:21.890 --> 00:23:28.040
the FDIC and OCC are reopening
Pandora's box for charters that

384
00:23:28.040 --> 00:23:32.330
will confer the powers and
privileges of banks on non

385
00:23:32.330 --> 00:23:37.070
banks. It's important that this
committee look not just at

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00:23:37.070 --> 00:23:41.180
initial Apple attempts for
charters because it is hard to

387
00:23:41.180 --> 00:23:47.090
see how the FDIC or OCC would
come up with legally defensible

388
00:23:47.120 --> 00:23:52.910
distinctions that would keep out
bigger companies, Amazon, Apple,

389
00:23:52.940 --> 00:23:58.310
Google, Walmart from one or both
of these non bank bank charges.

390
00:24:00.860 --> 00:24:05.480
But why do we separate banking
from commerce? What is the harm

391
00:24:05.480 --> 00:24:08.990
and then gowing banks with the
powers and privileges of

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00:24:08.990 --> 00:24:14.270
banking? The concerns are not
just progressive, but also

393
00:24:14.270 --> 00:24:18.710
deeply conservative concerns. We
should worry about commercial

394
00:24:18.710 --> 00:24:22.790
firms using bank charters to
undercut rivals without

395
00:24:22.790 --> 00:24:27.140
charters. We should worry about
conglomerates and retail and

396
00:24:27.140 --> 00:24:31.070
tech using the powers and
privileges of banks to entrench

397
00:24:31.070 --> 00:24:36.290
market dominant positions. We
should worry about small retail

398
00:24:36.320 --> 00:24:40.580
small retailers and small tech
startup tech firms not being

399
00:24:40.580 --> 00:24:43.670
able to compete with well
resourced and politically

400
00:24:43.670 --> 00:24:48.020
connected firms that have the
powers of a government charter

401
00:24:48.020 --> 00:24:52.610
behind them. We should worry
equally about banking

402
00:24:52.610 --> 00:24:58.130
conglomerates competing unfairly
in non bank markets. We should

403
00:24:58.130 --> 00:25:02.270
also worry about whether small
banks and credit unions can face

404
00:25:02.270 --> 00:25:07.430
distorted competition. most
troubling, we should worry about

405
00:25:07.430 --> 00:25:10.580
a banking system that could
quickly devolve into being

406
00:25:10.580 --> 00:25:15.050
dominated by the three bids, big
Wall Street, big tech and big

407
00:25:15.050 --> 00:25:19.700
retail. We shouldn't short worry
about the core reasons that we

408
00:25:19.700 --> 00:25:23.720
separate commerce and banking to
prevent concentrations of

409
00:25:23.720 --> 00:25:28.940
economic and political power to
prevent distortions in

410
00:25:28.940 --> 00:25:32.750
commercial markets that allow
unfair government subsidized

411
00:25:32.750 --> 00:25:36.920
competition, and to prevent
distortions in Banking Markets

412
00:25:36.920 --> 00:25:40.580
that clearly Banking Markets
destabilize and without the

413
00:25:40.580 --> 00:25:45.590
smallest community banks and
credit unions, non bank charters

414
00:25:45.590 --> 00:25:48.650
Converse undermine one of the
core missions that are purported

415
00:25:48.650 --> 00:25:51.920
to serve offering greater access
to financial services for

416
00:25:51.920 --> 00:25:55.430
underserved communities. There
are better ways to serve that

417
00:25:55.430 --> 00:25:55.850
goal.

418
00:25:58.380 --> 00:26:02.640
I turn quickly to the FDIC
chartered because one thing I

419
00:26:02.640 --> 00:26:07.530
want to the committee to
understand is that it's

420
00:26:07.530 --> 00:26:12.150
important that IOCs are not
subject to consolidated super

421
00:26:12.420 --> 00:26:15.990
supervision by the Federal
Reserve's consolidated

422
00:26:15.990 --> 00:26:19.920
supervision is the cornerstone
that allows bank regulators to

423
00:26:19.920 --> 00:26:23.250
ensure that large financial
conglomerates or large

424
00:26:23.250 --> 00:26:28.050
commercial conglomerates are not
playing games with subsidies

425
00:26:28.860 --> 00:26:32.700
that come with deposit insurance
are the other powers and

426
00:26:32.700 --> 00:26:36.960
privileges of banking.
Consolidated supervision is a

427
00:26:36.960 --> 00:26:41.010
world away from the ordinary
supervision that the FDIC and

428
00:26:41.010 --> 00:26:48.270
OCC apply to individual firms
and institutions. That critical

429
00:26:48.270 --> 00:26:52.680
distinction is something that
the committee must remember, I

430
00:26:52.680 --> 00:26:57.000
would urge the committee to
reverse a power grab by the OCC

431
00:26:57.630 --> 00:27:03.570
and foreclose and preclude the
OCC from issuing any new

432
00:27:03.600 --> 00:27:07.980
charters to institutions that do
not accept deposits. I would

433
00:27:07.980 --> 00:27:12.780
also urge the committee to close
the IOC loophole and pursue

434
00:27:12.780 --> 00:27:17.850
other options for for greater
access to banking by underserved

435
00:27:17.850 --> 00:27:18.600
communities.

436
00:27:22.289 --> 00:27:24.389
Roger Williams: Thank you,
Professor and the chime didn't

437
00:27:24.389 --> 00:27:28.469
go off. So when you hit it right
on five minutes, and obviously,

438
00:27:28.859 --> 00:27:31.649
the testimony of all our
panelists, they're dealing with

439
00:27:31.649 --> 00:27:34.019
the purpose of the banking
system, the history of the

440
00:27:34.019 --> 00:27:37.229
banking system, and the future
of the banking system. So this

441
00:27:37.229 --> 00:27:41.849
is a very comprehensive and
complex subject that we all have

442
00:27:41.849 --> 00:27:46.199
and I would recommend to the
committee that they really look

443
00:27:46.229 --> 00:27:49.709
deeply into the materials that
have been provided. Professor

444
00:27:49.709 --> 00:27:53.219
Johnson, you are now recognized
for five minutes to give your

445
00:27:53.249 --> 00:27:56.309
oral presentation of your
testimony.

446
00:27:56.309 --> 00:27:58.520
Kristin Johnson: Thank you so
much. Good morning Chair Waters,

447
00:27:58.520 --> 00:28:01.940
Chair Perlmutter, Ranking Member
Luke De Meyer and the members of

448
00:28:01.940 --> 00:28:04.550
the committee and subcommittee.
Thank you for inviting me to

449
00:28:04.550 --> 00:28:08.240
this hearing, examining making
innovation and regulatory

450
00:28:08.240 --> 00:28:11.510
evasion trends and financial
institution charters. As the

451
00:28:11.510 --> 00:28:15.140
Chair mentioned, I'm the ASA
Griggs Candler, Professor of Law

452
00:28:15.140 --> 00:28:17.750
at Emory University Law School
where I teach courses on

453
00:28:17.750 --> 00:28:20.630
corporations securities law,
emerging technologies and

454
00:28:20.630 --> 00:28:24.230
financial markets, including the
mouthful distributed digital

455
00:28:24.230 --> 00:28:27.050
ledger technologies, which we
commonly described as blockchain

456
00:28:27.050 --> 00:28:30.770
technologies, as well as the
assemblage of technologies

457
00:28:30.770 --> 00:28:35.420
commonly described as artificial
intelligence. I previously

458
00:28:35.420 --> 00:28:37.580
served as the McGlinchey,
staffer Professor of Law and

459
00:28:37.580 --> 00:28:40.190
associate dean of faculty
research at Tulane. That was

460
00:28:40.190 --> 00:28:43.010
also noted but I also served as
director of the program on

461
00:28:43.010 --> 00:28:45.470
financial markets stability in
the center for law in the

462
00:28:45.470 --> 00:28:50.090
economy. And if I may, I'm a
reformed capital markets and

463
00:28:50.090 --> 00:28:53.030
Mergers Acquisitions lawyer and
served as in house counsel and

464
00:28:53.030 --> 00:28:56.300
an analyst at two of the largest
investment banks and global

465
00:28:56.300 --> 00:28:59.450
financial markets. My research
promotes transparent, inclusive,

466
00:28:59.450 --> 00:29:03.680
responsible innovation and
intimate and focuses on the core

467
00:29:03.680 --> 00:29:06.740
values that intimate financial
markets regulation, promoting

468
00:29:06.740 --> 00:29:10.130
consumer protection, maintaining
fair and orderly markets and

469
00:29:10.130 --> 00:29:13.070
ensuring the safety and
soundness of financial markets.

470
00:29:13.340 --> 00:29:16.010
Over the last decade, a growing
number of digital startups have

471
00:29:16.010 --> 00:29:18.920
launched bids to lower business
away from the financial services

472
00:29:18.920 --> 00:29:23.360
industry. increasingly large
technology platforms engage,

473
00:29:23.600 --> 00:29:26.150
essentially engage in engaged in
essentially commercial

474
00:29:26.150 --> 00:29:30.050
activities as well as social
media platforms, right, seek

475
00:29:30.110 --> 00:29:33.770
opportunities to conduct bank
like activities. Amazon, Google,

476
00:29:33.800 --> 00:29:36.830
Facebook, among others have
launched a dizzying array of

477
00:29:36.830 --> 00:29:41.030
consumer credit and financial
services, to echo Mr. Gatto and

478
00:29:41.030 --> 00:29:44.990
also my colleague, Professor
girding these firms comprise a

479
00:29:44.990 --> 00:29:47.780
small subset of a burgeoning
spectrum of businesses

480
00:29:47.780 --> 00:29:51.350
integrating complex technologies
and financial services armed

481
00:29:51.350 --> 00:29:55.430
with vast quantities of data and
sophisticated algorithmic that

482
00:29:55.430 --> 00:29:58.040
would be supervised and
unsupervised machine elearning

483
00:29:58.040 --> 00:30:02.210
platforms, these are algorithms
right inspired. Also by the

484
00:30:02.210 --> 00:30:05.750
creation of potential blockchain
based technologies. These

485
00:30:05.780 --> 00:30:08.990
fintechech firms have revived
long standing debates regarding

486
00:30:09.020 --> 00:30:12.770
the architectural design,
regulatory framework and role of

487
00:30:12.770 --> 00:30:16.730
the financial services industry.
This important hearing explores

488
00:30:16.730 --> 00:30:19.070
the nature of relationships
among banking and non banking

489
00:30:19.070 --> 00:30:23.510
financial institutions, as well
as the promise and peril or

490
00:30:23.510 --> 00:30:26.570
perils of extending Special
Purpose non bank charters to non

491
00:30:26.570 --> 00:30:29.630
depository FinTech firms that do
not engage in certain

492
00:30:29.630 --> 00:30:32.390
activities, quintessentially
understood as core banking

493
00:30:32.390 --> 00:30:36.170
functions, as well as commercial
firms seeking to obtain licenses

494
00:30:36.170 --> 00:30:39.290
to operate as industrial banks.
As this committee discussed

495
00:30:39.290 --> 00:30:41.990
previously, in a hearing in the
fall, we're colleagues Raul

496
00:30:41.990 --> 00:30:45.650
Castillo Mr. Rocha studio here
and Professor art will mark

497
00:30:45.650 --> 00:30:49.730
testified the National Bank act
clearly limits the scope of the

498
00:30:49.730 --> 00:30:52.820
OCC has authority to issue
FinTech charters to deposit non

499
00:30:52.820 --> 00:30:55.880
depository institutions. To
quote others who have written

500
00:30:55.880 --> 00:30:58.610
extensively in research the
history of banking regulation,

501
00:30:59.360 --> 00:31:02.930
and the canons of statutory
interpretation. Non depository

502
00:31:02.960 --> 00:31:07.010
National Bank is an oxymoron,
I'm happy to say more citing

503
00:31:07.010 --> 00:31:10.250
National Bank Act, in particular
section 24. The feminists that

504
00:31:10.250 --> 00:31:13.280
OCC has authority to extend
charters, but I believe much of

505
00:31:13.280 --> 00:31:15.920
that is covered in the in the
written testimony provided by

506
00:31:15.920 --> 00:31:20.090
witnesses today. Coupled with
the movement by the OCC to

507
00:31:20.090 --> 00:31:24.770
expand charters, the industrial
loan companies, chartering

508
00:31:24.860 --> 00:31:29.600
question has emerged as this as
an essential issue in today's

509
00:31:29.630 --> 00:31:32.450
hearing, as well as
conversations and debates.

510
00:31:32.690 --> 00:31:35.450
Finally, this hearing, as the
Chair has noted, covers a scope

511
00:31:35.450 --> 00:31:38.870
of financial technology firms
and capture states that are

512
00:31:38.870 --> 00:31:43.070
issuing or distributing licenses
for blockchain based financial

513
00:31:43.070 --> 00:31:47.840
institutions or institutions
costing financial assets known

514
00:31:47.840 --> 00:31:52.280
as crypto assets. Also so bank
licenses to those entities Well,

515
00:31:52.550 --> 00:31:55.340
in my remaining time, I want to
point out just the following

516
00:31:55.730 --> 00:31:59.870
issue that is tremendously of
concern. These it these entities

517
00:31:59.870 --> 00:32:03.050
are operating with the promise
of inclusion. But this promise

518
00:32:03.050 --> 00:32:06.110
is often inaccurate, misleading,
and in some instances, a

519
00:32:06.110 --> 00:32:09.290
misrepresentation, where the
promise of exclusion and

520
00:32:09.290 --> 00:32:12.500
inclusion attaches to vulnerable
unbanked and underbanked

521
00:32:12.500 --> 00:32:16.550
populations. Consumers who are
in many instances families in

522
00:32:16.550 --> 00:32:19.580
fragile financial circumstances,
it is critical for us to

523
00:32:19.580 --> 00:32:23.540
carefully examine the truth is
behind the promises that have

524
00:32:23.540 --> 00:32:26.840
been made and installed
guardrails that would ensure any

525
00:32:26.840 --> 00:32:30.140
entity operating in the banking
space is subject to sufficient

526
00:32:30.140 --> 00:32:33.500
regulatory oversight for
families with fragile financial

527
00:32:33.500 --> 00:32:36.710
circumstances as role pointed
out or Mr. Carrillo pointed out

528
00:32:36.740 --> 00:32:39.920
credit may serve as a lifeline
enabling consumers to meet short

529
00:32:39.920 --> 00:32:43.190
term debt obligations and to pay
for education, transportation,

530
00:32:43.190 --> 00:32:47.150
housing, medicine, childcare,
and even food. Without access to

531
00:32:47.150 --> 00:32:49.850
credit on fair reasonable terms.
It can be extraordinarily

532
00:32:49.850 --> 00:32:52.970
expensive to be poor. I'd also
point out the surveillance

533
00:32:52.970 --> 00:32:56.390
questions and highlight that
COVID-19 has amplified these

534
00:32:56.390 --> 00:32:59.840
concerns. In the remaining time,
I just encourage the committee

535
00:33:00.410 --> 00:33:03.170
to support the limitation on
baking charters and IOC

536
00:33:03.170 --> 00:33:04.070
licenses.

537
00:33:09.240 --> 00:33:13.140
Roger Williams: Thank you,
Professor. Now we will have Mr.

538
00:33:13.140 --> 00:33:16.260
Pacheco speak you are now
recognized for five minutes to

539
00:33:16.260 --> 00:33:19.830
give your oral presentation of
your testimony.

540
00:33:19.920 --> 00:33:22.560
Carlos Pacheco: Thank you. Good
morning, Chairman Perlmutter and

541
00:33:22.560 --> 00:33:25.020
Ranking Member Luke De Meyer and
members of the subcommittee. My

542
00:33:25.020 --> 00:33:28.050
name is Carlos Pacheco, I am the
CEO of Premier members credit

543
00:33:28.050 --> 00:33:30.900
union, headquartered in Boulder,
Colorado. I'm pleased to be

544
00:33:30.900 --> 00:33:34.230
joining you today on behalf of
nap Q. To share our views on the

545
00:33:34.230 --> 00:33:37.200
trends and financial institution
charters. The nation's

546
00:33:37.200 --> 00:33:40.080
approximately 5000 federally
insured credit unions serve a

547
00:33:40.080 --> 00:33:42.120
different purpose and have a
fundamentally different

548
00:33:42.120 --> 00:33:45.630
structure than other types of
financial institutions. As not

549
00:33:45.630 --> 00:33:48.450
for profits existing solely to
provide financial services to

550
00:33:48.450 --> 00:33:51.360
our members. We are pleased to
be on the frontlines working

551
00:33:51.360 --> 00:33:53.730
with our members to help them
survive economic uncertainty

552
00:33:53.730 --> 00:33:57.120
from the pandemic. The growth of
financial technology in recent

553
00:33:57.120 --> 00:33:59.670
years offers new opportunities
for the delivery of financial

554
00:33:59.670 --> 00:34:03.090
services, the use of fintech can
have a positive effect on the

555
00:34:03.090 --> 00:34:05.790
credit union membership. Many
credit unions embrace

556
00:34:05.790 --> 00:34:08.130
innovations in technology in
order to improve member

557
00:34:08.130 --> 00:34:11.100
relationships. And that key
believes that this is important

558
00:34:11.100 --> 00:34:14.430
for regulators like the NCUA to
ensure that credit unions have

559
00:34:14.430 --> 00:34:17.640
the proper authority in this
space under their charters.

560
00:34:18.030 --> 00:34:21.030
However, the growth of FinTech
also presents threats and

561
00:34:21.030 --> 00:34:24.090
challenges as new entities
emerge in an environment that

562
00:34:24.090 --> 00:34:27.990
can be under regulated or under
supervised. As such when

563
00:34:27.990 --> 00:34:30.690
fintechs compete with regulated
financial institutions, they

564
00:34:30.690 --> 00:34:34.200
must do so on a level playing
field. While many fintechs are

565
00:34:34.200 --> 00:34:36.450
still subject to various
consumer protection and other

566
00:34:36.450 --> 00:34:40.290
laws. They are not examined nor
face the same oversight as other

567
00:34:40.290 --> 00:34:43.290
players in the financial
services marketplace, creating

568
00:34:43.290 --> 00:34:46.590
cracks in the system that could
pose risks to both the consumer

569
00:34:46.620 --> 00:34:49.890
and the financial system. For
example, under regulation of

570
00:34:49.890 --> 00:34:52.680
fintech companies can place a
greater burden on credit unions

571
00:34:52.860 --> 00:34:56.430
efforts to protect deposit
accounts. As a primary financial

572
00:34:56.430 --> 00:34:58.830
institution for our members. We
are often the preferred party

573
00:34:58.830 --> 00:35:01.470
for resolving it issues
involving unauthorized

574
00:35:01.470 --> 00:35:05.370
transactions, even when they
occur on other platforms. While

575
00:35:05.370 --> 00:35:08.010
credit union consumer complaint
processes are overseen by

576
00:35:08.010 --> 00:35:10.890
regulators, there is no
comparable oversight for FinTech

577
00:35:10.890 --> 00:35:14.190
companies that facilitate
payment transactions, even in

578
00:35:14.190 --> 00:35:16.740
instances where they share
responsibility for resolving

579
00:35:16.740 --> 00:35:20.790
errors under Reggy. A minimally
staffed call center may be all

580
00:35:20.790 --> 00:35:23.640
it takes to steer financial
FinTech users to the credit

581
00:35:23.640 --> 00:35:26.250
union, if there's a problem, and
that alone can create

582
00:35:26.250 --> 00:35:29.670
competitive imbalance. There's
been a recent trend in which

583
00:35:29.670 --> 00:35:32.040
FinTech companies are enjoying
liberalisation of banking

584
00:35:32.040 --> 00:35:35.640
charter rules to either acquire
or become banks. Recent

585
00:35:35.640 --> 00:35:38.550
developments with both the OCC
has new chartering options and

586
00:35:38.550 --> 00:35:41.370
the FDIC is Chartering and
approval of deposit insurance

587
00:35:41.640 --> 00:35:45.270
for a new wave of industrial
loan companies also present

588
00:35:45.270 --> 00:35:48.600
problems. In each case, a non
bank company can potentially

589
00:35:48.600 --> 00:35:51.960
evade regulation under the bank
holding company act, either

590
00:35:51.960 --> 00:35:55.650
because of a statutory loophole
unique to IOCs or because the

591
00:35:55.650 --> 00:35:58.410
entity is seeking a limited
purpose charter and will not

592
00:35:58.410 --> 00:36:02.910
accept deposits. Lack of be HCA
coverage raises concerns

593
00:36:02.910 --> 00:36:05.850
regarding the quality and extent
of supervision for these

594
00:36:05.850 --> 00:36:09.450
specialized banking entities. In
certain cases, specialized

595
00:36:09.450 --> 00:36:12.690
limited purpose bank charters
may allow a FinTech to operate

596
00:36:12.690 --> 00:36:15.660
with national banking
privileges, but without the same

597
00:36:15.660 --> 00:36:18.810
Prudential safeguards that apply
to traditional banks and credit

598
00:36:18.810 --> 00:36:21.720
unions. While some may
characterize these chartering

599
00:36:21.720 --> 00:36:24.840
initiatives as innovative, they
invite the potential for under

600
00:36:24.840 --> 00:36:27.840
regulation of novel risks and
could create an uneven playing

601
00:36:27.840 --> 00:36:31.530
field. Depending on the scale or
risk of activities which might

602
00:36:31.530 --> 00:36:34.050
involve facilitating
cryptocurrency transactions.

603
00:36:34.440 --> 00:36:37.260
Lack of consolidated supervision
by the Federal Reserve could

604
00:36:37.260 --> 00:36:40.950
create additional financial
stability risks. To address

605
00:36:40.950 --> 00:36:43.590
these concerns nephew support
steps such as imposing a

606
00:36:43.590 --> 00:36:48.150
moratorium on new IOC charter
approvals by the FDIC and

607
00:36:48.150 --> 00:36:51.960
closing the bank holding company
act loophole for existing IOC s.

608
00:36:52.590 --> 00:36:55.170
It is also important that
existing charters such as those

609
00:36:55.170 --> 00:36:58.320
for credit unions are kept up to
date to meet member needs.

610
00:36:59.040 --> 00:37:01.770
Congress should also ensure that
the data security and privacy

611
00:37:01.770 --> 00:37:04.890
requirements for financial
institutions and the gramm leach

612
00:37:04.890 --> 00:37:08.370
Bliley Act, including
supervision for compliance apply

613
00:37:08.370 --> 00:37:11.670
to all who are handling consumer
financial transactions.

614
00:37:12.180 --> 00:37:14.940
Regulators also have an
important role to play. For

615
00:37:14.940 --> 00:37:18.660
example, the CFPB should use its
larger participants authority to

616
00:37:18.660 --> 00:37:21.480
regulate and supervise
technology firms and fintech

617
00:37:21.480 --> 00:37:24.660
companies that enter into the
financial services marketplace.

618
00:37:25.320 --> 00:37:28.050
New chartering ideas should also
be subject to the notice and

619
00:37:28.050 --> 00:37:31.620
comment rulemaking process.
Congress should also consider

620
00:37:31.620 --> 00:37:35.610
creating an FF IEC Subcommittee
on emerging technology to

621
00:37:35.610 --> 00:37:39.180
monitor the risks posed by by
fin tech companies and develop a

622
00:37:39.180 --> 00:37:41.820
joint approach for facilitating
innovation and identifying

623
00:37:41.820 --> 00:37:45.990
regulatory gaps between new and
existing charter options. And

624
00:37:45.990 --> 00:37:48.090
conclusions. Credit unions look
forward to continuing to

625
00:37:48.090 --> 00:37:50.940
experience growth in the
technology space as a way for us

626
00:37:50.940 --> 00:37:53.940
to better serve our members.
However, as technology companies

627
00:37:53.940 --> 00:37:56.430
expand and new charters emerge
to compete in the financial

628
00:37:56.430 --> 00:37:59.490
services marketplace, it's
important that they compete on a

629
00:37:59.490 --> 00:38:02.490
level playing field of
regulation and supervision.

630
00:38:03.150 --> 00:38:05.460
Finally, it is important that
Congress ensures laws are

631
00:38:05.460 --> 00:38:08.310
modernized to allow credit
unions to keep up and compete

632
00:38:08.310 --> 00:38:11.550
with technological advances. I
thank you for the opportunity to

633
00:38:11.550 --> 00:38:13.710
appear before you today and I
welcome any questions you may

634
00:38:13.710 --> 00:38:14.070
have.

635
00:38:16.110 --> 00:38:19.110
Roger Williams: Thank you, Mr.
Pacheco. Is it snowing in

636
00:38:19.110 --> 00:38:21.210
Colorado? I should ask you that,
but

637
00:38:22.170 --> 00:38:24.150
Carlos Pacheco: Not this hour,
but maybe next hour.

638
00:38:25.230 --> 00:38:29.880
Roger Williams: Thank you, Mr.
Brooks. You are now recognized

639
00:38:29.880 --> 00:38:32.490
for five minutes for your oral
testimony.

640
00:38:33.840 --> 00:38:36.840
Brian Brooks: Well, Chairwoman
Waters Ranking Member McHenry,

641
00:38:37.020 --> 00:38:40.920
my fellow Colorado and Chairman,
Chairman Perlmutter and Ranking

642
00:38:40.920 --> 00:38:42.750
Member Luke De Meyer, thank you
so much for having me and for

643
00:38:42.750 --> 00:38:45.570
the opportunity to speak today.
I will say at the outset, I am

644
00:38:45.570 --> 00:38:48.990
the only representative of
southern Colorado here so we can

645
00:38:48.990 --> 00:38:52.290
have that conversation
afterwards. Let me just say

646
00:38:52.320 --> 00:38:54.360
we're fortunate to live in a
moment of extraordinary

647
00:38:54.360 --> 00:38:57.240
innovation that I believe can
actually expand access to

648
00:38:57.240 --> 00:39:00.450
credit, provide consumers
greater economic opportunity,

649
00:39:00.720 --> 00:39:04.290
and provide a more Justin robust
economy. As policymakers and

650
00:39:04.290 --> 00:39:06.720
participants in this evolution
of the financial services

651
00:39:06.720 --> 00:39:09.360
industry, we have a
responsibility to encourage

652
00:39:09.390 --> 00:39:12.660
responsible innovation, while
maintaining necessary safeguards

653
00:39:12.660 --> 00:39:15.270
to ensure that our system
operates in the safest, soundest

654
00:39:15.300 --> 00:39:18.570
and fairest way possible. Now
while my testimony goes into

655
00:39:18.570 --> 00:39:21.060
greater detail regarding what is
driving the changes in our

656
00:39:21.060 --> 00:39:23.250
financial system, and the
implications for chartering

657
00:39:23.250 --> 00:39:25.650
innovative financial companies,
I want to highlight a few

658
00:39:25.650 --> 00:39:29.130
thoughts in these remarks.
First, the rise of non bank

659
00:39:29.130 --> 00:39:32.370
financial services providers and
in particular fintechs is the

660
00:39:32.370 --> 00:39:35.400
result of market forces that
include the dramatic reduction

661
00:39:35.400 --> 00:39:38.580
of banks and branches, as has
been noted, already felt most in

662
00:39:38.580 --> 00:39:41.610
rural and urban, low and
moderate income communities. And

663
00:39:41.610 --> 00:39:44.490
at the same time as
consolidation, regulatory forces

664
00:39:44.490 --> 00:39:47.400
made certain consumer lending
less attractive for traditional

665
00:39:47.400 --> 00:39:49.620
banks, and that business
migrated toward non bank

666
00:39:49.620 --> 00:39:52.800
providers such as payday
lenders. It's against that

667
00:39:52.800 --> 00:39:55.710
backdrop that we think that
innovative technology emerged

668
00:39:55.740 --> 00:39:58.590
allowing FinTech companies to
develop solutions that provide

669
00:39:58.590 --> 00:40:01.680
consumers better alter relative
to traditional banks on the one

670
00:40:01.680 --> 00:40:04.890
hand, and strip mall financier
is like payday lenders on the

671
00:40:04.890 --> 00:40:07.710
other. The new products provided
more convenience, greater

672
00:40:07.710 --> 00:40:10.170
accessibility, and often were
tailored more closely to

673
00:40:10.170 --> 00:40:13.560
consumers personal needs and
situations. fintechs also emerge

674
00:40:13.560 --> 00:40:16.620
to provide back office solutions
such as payments processing that

675
00:40:16.620 --> 00:40:20.280
operate more efficiently than
comparable systems in legacy

676
00:40:20.370 --> 00:40:23.730
banks. As a result, many
products, services and

677
00:40:23.730 --> 00:40:26.640
activities that were once
exclusive to banks now occur

678
00:40:26.640 --> 00:40:29.670
outside of the banking system,
where once that activity was

679
00:40:29.670 --> 00:40:32.100
watched closely by bank
regulators today, much of it

680
00:40:32.100 --> 00:40:35.640
goes on outside their view. The
questions that this hearing asks

681
00:40:35.670 --> 00:40:38.550
are whether those companies
which undeniably are providing

682
00:40:38.550 --> 00:40:41.520
banking products and services
that historically were provided

683
00:40:41.520 --> 00:40:44.340
by banks should have an equal
means to compete with incumbent

684
00:40:44.340 --> 00:40:47.520
banks as chartered institutions,
and whether providing a path for

685
00:40:47.520 --> 00:40:50.130
the service providers to become
banks can be done in a safe,

686
00:40:50.130 --> 00:40:53.910
sound and fair manner. Based on
my experience and analysis, it's

687
00:40:53.910 --> 00:40:57.540
both necessary and advantageous
to support a dual banking system

688
00:40:57.540 --> 00:41:00.150
of state and federal banks in
which companies with novel and

689
00:41:00.150 --> 00:41:03.930
unique business models powered
by ever improving technology can

690
00:41:03.930 --> 00:41:06.510
compete with incumbents on a
level playing field. By

691
00:41:06.510 --> 00:41:09.360
providing a path and allowing
choice for innovators to become

692
00:41:09.360 --> 00:41:12.180
part of the chartered banking
system. The system avoid

693
00:41:12.180 --> 00:41:15.960
stagnation evolves to better
meet consumer preferences and to

694
00:41:15.990 --> 00:41:19.470
address business and community
needs. That view previously

695
00:41:19.470 --> 00:41:22.380
enjoyed bipartisan champions
because it's a safe and sound

696
00:41:22.380 --> 00:41:24.840
and thoughtful position that
puts the good of the nation

697
00:41:24.840 --> 00:41:27.540
first and recognizes the failure
to encourage responsible

698
00:41:27.540 --> 00:41:30.450
innovation and to welcome new
participants into the banking

699
00:41:30.450 --> 00:41:34.290
system stifles the system making
it both anachronistic and

700
00:41:34.290 --> 00:41:37.560
concentrated in the hands of
legacy large institutions, which

701
00:41:37.560 --> 00:41:40.710
have been criticized on a
bipartisan basis as well. After

702
00:41:40.710 --> 00:41:43.320
all, fintechs have not emerged
because the status quo has

703
00:41:43.320 --> 00:41:46.530
satisfactorily met all the needs
of the economy or all the needs

704
00:41:46.530 --> 00:41:49.890
of consumers. I am optimistic
about the progress being made to

705
00:41:49.890 --> 00:41:52.830
overcome bias and irrational
fears toward innovative ways of

706
00:41:52.830 --> 00:41:55.740
meeting consumers financial
needs, including progress made

707
00:41:56.100 --> 00:41:58.800
in transforming cryptocurrencies
and blockchain applications.

708
00:41:59.010 --> 00:42:01.710
From exotic concepts to more
mainstream financial and

709
00:42:01.710 --> 00:42:04.950
economic tools. I am proud to
have been involved in chartering

710
00:42:04.950 --> 00:42:08.160
the first true FinTech company,
Faro bank, and who have helped

711
00:42:08.160 --> 00:42:10.620
clarify National Bank
regulations as they relate to

712
00:42:10.620 --> 00:42:13.830
digital assets and stable coins.
These actions have expanded

713
00:42:13.830 --> 00:42:16.380
services to consumers. They've
allowed existing banks to

714
00:42:16.380 --> 00:42:18.960
explore how emerging
technologies can be incorporated

715
00:42:18.960 --> 00:42:21.330
into their strategies of serving
their customers. And they've

716
00:42:21.330 --> 00:42:23.460
helped provide a meaningful
counterweight to the

717
00:42:23.460 --> 00:42:26.100
concentrated power of the
largest banks in our system,

718
00:42:26.460 --> 00:42:29.760
still more rigorous and needs to
be done on other important

719
00:42:29.760 --> 00:42:32.130
issues, particularly the
appropriate measure of a

720
00:42:32.130 --> 00:42:35.250
sustainably profitable fintechs
contribution and obligation to

721
00:42:35.250 --> 00:42:38.340
its community. Whether it
becomes a chartered bank or not.

722
00:42:38.910 --> 00:42:41.430
Well, depositories, for example,
are subject to the Community

723
00:42:41.430 --> 00:42:43.650
Reinvestment Act. And it's
important civil rights

724
00:42:43.980 --> 00:42:47.670
provisions. Congress did not
apply the CRA to non depository

725
00:42:47.670 --> 00:42:50.700
financial services providers.
Policymakers thinking about

726
00:42:50.700 --> 00:42:53.070
chartering these non
depositories should explore

727
00:42:53.070 --> 00:42:56.010
alternatives to the CRA to
consider other advantages that

728
00:42:56.010 --> 00:42:58.590
federally chartered or state
licensed non depository

729
00:42:58.590 --> 00:43:01.980
financial companies enjoy and
what obligation that may entail

730
00:43:01.980 --> 00:43:04.470
to meet the important economic
justice and civil rights a

731
00:43:04.470 --> 00:43:08.100
spirit of the CRA, recognizing
that the economic inequities of

732
00:43:08.100 --> 00:43:10.230
the nation require the removal
of barriers in addition to

733
00:43:10.230 --> 00:43:14.100
reinvestment I found in Project
reach at the OCC in July 2020 to

734
00:43:14.100 --> 00:43:17.160
explore ways that technology
innovators, banks and civil

735
00:43:17.160 --> 00:43:20.070
rights leaders can work together
to solve the structural issues

736
00:43:20.070 --> 00:43:23.280
behind race disparities,
including the fact that large

737
00:43:23.280 --> 00:43:25.980
numbers of minorities lack
usable credit scores and have

738
00:43:25.980 --> 00:43:28.890
more difficulty than others in
saving for a house down payment.

739
00:43:29.100 --> 00:43:31.740
FinTech has something to say
about all of these things. And

740
00:43:31.740 --> 00:43:33.960
if we believe that an
unregulated FinTech poses

741
00:43:33.960 --> 00:43:36.660
challenges, we should welcome
them into the regulatory system.

742
00:43:36.900 --> 00:43:37.770
Thank you, Mr. Chairman.

743
00:43:39.330 --> 00:43:42.030
Roger Williams: Thank you, Mr.
Brooks. Thank you to all of our

744
00:43:42.090 --> 00:43:47.490
panelists. I now recognize
myself for my questions. I yield

745
00:43:47.490 --> 00:43:52.890
myself five minutes for my
questions. I guess, obviously,

746
00:43:52.890 --> 00:43:55.680
just looking at the written
materials that you all provided

747
00:43:55.740 --> 00:43:58.800
and coupled with your testimony,
I mean, we really are dealing

748
00:43:58.800 --> 00:44:02.670
with the length and breadth of
the financial services system,

749
00:44:02.670 --> 00:44:08.610
the banking system, its purpose,
its history, its future. And,

750
00:44:09.660 --> 00:44:12.750
you know, maybe that we need to
have a couple of follow on

751
00:44:13.950 --> 00:44:18.630
hearings after this because each
of us is going to come at this

752
00:44:18.630 --> 00:44:21.540
with our life experience. I'm
coming at it as a bankruptcy

753
00:44:21.540 --> 00:44:28.590
lawyer of 25 years, who saw a
lot of cycles where businesses

754
00:44:28.590 --> 00:44:33.330
failed and banks failed
Colorado, Texas, Mr. Williams,

755
00:44:33.330 --> 00:44:36.300
you know, we saw pretty much
every single Savings and Loan

756
00:44:36.300 --> 00:44:40.650
fail. But then we saw things
grow expand again and we saw

757
00:44:40.650 --> 00:44:46.320
another cycle and so I disagree
with Mr. McHenry. That jee wiz

758
00:44:46.320 --> 00:44:50.400
we're doing this all over again
is because the system grows and

759
00:44:50.400 --> 00:44:54.120
shrinks and gets excesses and
not and we've got to just

760
00:44:54.120 --> 00:44:57.510
determine how as a policy
matter, and I don't think this

761
00:44:57.510 --> 00:45:00.750
breaks along, you know, any
party wall And as to whether

762
00:45:00.750 --> 00:45:03.540
you're conservative about the
system or you're, you want to

763
00:45:03.540 --> 00:45:08.130
see it expand and take on some
additional risks. All of us need

764
00:45:08.130 --> 00:45:13.770
to chart to the path we want to
see our banking system. Follow

765
00:45:13.770 --> 00:45:17.100
over the next 1015 years. And I
think that's the purpose of

766
00:45:17.100 --> 00:45:21.150
today's hearing. And as we go
forward so, one of the big

767
00:45:21.150 --> 00:45:24.060
questions on industrial loan
companies is about the

768
00:45:24.060 --> 00:45:28.260
separation of banking and
commerce and in 2005 2006,

769
00:45:28.500 --> 00:45:33.000
Walmart and Home Depot
unsuccessfully pursued ILC

770
00:45:33.030 --> 00:45:36.360
charters, there was a great deal
of scrutiny from lawmakers and

771
00:45:36.360 --> 00:45:40.350
the public about large retail
corporations offering banking

772
00:45:40.350 --> 00:45:43.470
services, and what it could mean
for market fairness and

773
00:45:43.470 --> 00:45:48.000
financial stability. Last
December, the FDIC published a

774
00:45:48.000 --> 00:45:52.500
rule on IOCs clarifying the
parent company of the Industrial

775
00:45:52.500 --> 00:45:56.280
Bank must serve as a source of
strength for the Industrial

776
00:45:56.280 --> 00:46:01.740
Bank. Professor girding how well
suited is the FDIC or any other

777
00:46:01.740 --> 00:46:06.510
regulator to assess the strength
of a commercial company? And do

778
00:46:06.510 --> 00:46:10.380
you have concerns about the
continued blending of commerce

779
00:46:10.680 --> 00:46:11.520
and banking?

780
00:46:13.199 --> 00:46:15.539
Erik Gerding: Thank you, Chair
Perlmutter. I have grave

781
00:46:15.539 --> 00:46:21.089
concerns about the ability of
the FDIC to supervise IOCs and

782
00:46:21.089 --> 00:46:23.969
their parents. This goes back to
what I said at the end of my

783
00:46:23.969 --> 00:46:29.069
remarks. The FDIC does not have
the authority to conduct

784
00:46:29.069 --> 00:46:34.079
consolidated supervision over
not just the IOC and its parent

785
00:46:34.079 --> 00:46:38.759
but all other entities within
the corporate group. And that

786
00:46:38.759 --> 00:46:41.519
lack of consolidated
consolidated supervision

787
00:46:41.519 --> 00:46:46.289
advisory power does not allow
the FDIC to see potential games

788
00:46:46.289 --> 00:46:51.839
that conglomerates are playing
with FDIC subsidized financing.

789
00:46:52.649 --> 00:46:56.669
It also does not allow the FDIC
to see the buildup of risks

790
00:46:56.669 --> 00:47:01.019
within the conglomerate. And
this became a problem when in

791
00:47:01.019 --> 00:47:04.859
the financial crisis, when we
saw the parents of several IO

792
00:47:04.859 --> 00:47:10.499
C's require billions of dollars
of government assistance. It was

793
00:47:10.529 --> 00:47:15.209
Goldman Sachs, CIT, Merrill
Lynch, Morgan Stanley, GE

794
00:47:15.209 --> 00:47:21.149
Capital and key M A. C, all had
il C's. All of those parents did

795
00:47:21.149 --> 00:47:24.899
not serve as a source of
strength for ICs. And by

796
00:47:24.899 --> 00:47:27.809
contrast, actually requiring
billions of dollars of

797
00:47:27.809 --> 00:47:32.309
government intervention. So I
don't think that the source of

798
00:47:32.309 --> 00:47:37.859
strength argument gives us much
comfort.

799
00:47:38.850 --> 00:47:44.100
Roger Williams: Thank you.
Professor Johnson. Like to ask

800
00:47:44.100 --> 00:47:48.540
you a question. In 2019, the
state of Wyoming enacted a

801
00:47:48.540 --> 00:47:52.530
series of laws related to
cryptocurrency, including one

802
00:47:52.530 --> 00:47:56.610
authorizing the chartering of
special purpose depository

803
00:47:56.610 --> 00:48:01.290
institutions last year Wyoming
approved the first SEDI charters

804
00:48:01.290 --> 00:48:05.760
for Krakin bank and Avante bank
to cryptocurrency custodial

805
00:48:05.760 --> 00:48:10.110
firms planning to offer
services. It seems many

806
00:48:10.110 --> 00:48:13.890
cryptocurrency companies are
eager for a legal framework to

807
00:48:13.890 --> 00:48:16.860
operate. Do you believe bank
charters are the appropriate

808
00:48:16.860 --> 00:48:24.450
framework for these firms?
You're muted.

809
00:48:26.250 --> 00:48:28.380
Kristin Johnson: Thanks so much
for the question. Chair, I would

810
00:48:28.380 --> 00:48:31.830
echo Professor Gerdings,
comments and amplify those,

811
00:48:31.980 --> 00:48:34.530
right during the financial
crisis of 2008. We not only saw

812
00:48:34.530 --> 00:48:37.770
these challenges that were
endogenous with respect to

813
00:48:37.770 --> 00:48:40.920
regulated firms, but exogenous
challenges as well, that

814
00:48:40.920 --> 00:48:44.130
triggered systemic risks that
created losses across financial

815
00:48:44.130 --> 00:48:48.750
markets, I would encourage a
very careful evaluation of any

816
00:48:48.750 --> 00:48:51.510
extension of charters to
cryptocurrency based firms,

817
00:48:51.660 --> 00:48:54.960
because of the endogenous and
exogenous shocks that could

818
00:48:54.960 --> 00:48:58.320
create systemic risks and
destabilize financial markets.

819
00:48:58.949 --> 00:49:01.499
Roger Williams: Thank you,
Professor. My time has expired.

820
00:49:01.499 --> 00:49:04.799
I'd like to recognize the
gentleman from Missouri, the

821
00:49:04.799 --> 00:49:07.079
ranking member, Mr. Luke De
Meyer, for five minutes.

822
00:49:07.890 --> 00:49:10.290
Luke De Meyer: Thank you, Mr.
Chairman. And just as a comment,

823
00:49:10.680 --> 00:49:15.120
we're talking about today, the
headline of this hearing is

824
00:49:15.120 --> 00:49:18.330
banking, innovation, regulatory
evasion, exploring trends and

825
00:49:18.330 --> 00:49:21.120
financial institution charters,
and we have no representation

826
00:49:21.120 --> 00:49:24.390
from the banks here today. We've
got several bank think Ttank

827
00:49:24.420 --> 00:49:27.660
guys and professors and
whatever, but we have nobody

828
00:49:27.660 --> 00:49:29.820
representing any of the
associations or any of the banks

829
00:49:29.820 --> 00:49:34.920
themselves and kind of wondering
about that. But anyway, it's

830
00:49:34.920 --> 00:49:36.360
always nice to have somebody
from the real world.

831
00:49:36.360 --> 00:49:38.430
Roger Williams: If the gentleman
would yield for one second. I

832
00:49:38.430 --> 00:49:43.170
think they have to have more, a
couple more hearings on this.

833
00:49:43.620 --> 00:49:45.540
Luke De Meyer: Okay, that'd be
great. We look forward to having

834
00:49:45.540 --> 00:49:48.870
a real world expert on this as
well besides the theoretical

835
00:49:48.930 --> 00:49:54.960
part of this, but it's
interesting. Mr. Brooks, I want

836
00:49:54.960 --> 00:49:57.900
to start with you again,
appreciate your service to our

837
00:49:57.900 --> 00:50:01.290
country as a country. I think he
did a fantastic See job and look

838
00:50:01.290 --> 00:50:04.140
forward to continue working with
you. On the private sector side

839
00:50:04.140 --> 00:50:10.080
here. You're talking about, in
your testimony how the scope of

840
00:50:10.080 --> 00:50:12.600
a bank charter can adjust to
accommodate the safe and sound

841
00:50:12.600 --> 00:50:15.330
delivery, traditional banking
products and services, that

842
00:50:15.330 --> 00:50:20.130
companies that are not charter
as banks today. Do you think

843
00:50:20.130 --> 00:50:22.680
there's a way to provide a level
playing field for traditional

844
00:50:22.680 --> 00:50:25.560
depositories and non banks that
are providing the same services

845
00:50:25.560 --> 00:50:27.840
and products without requiring a
non banks to get the full

846
00:50:27.840 --> 00:50:31.050
National Bank Charter and follow
the rules and regulations?

847
00:50:31.919 --> 00:50:36.239
Brian Brooks: Well, so, so, let
me just say this. We're looking

848
00:50:36.239 --> 00:50:38.429
at Meijer, first of all, I'm
very much appreciated your

849
00:50:38.429 --> 00:50:41.609
engagement. During my time at
the OCC, we've had some of these

850
00:50:41.609 --> 00:50:44.399
conversations privately. And let
me just expand on that and

851
00:50:44.399 --> 00:50:48.959
answer to your question. I think
the answer is that we have seen

852
00:50:48.959 --> 00:50:52.559
on a fairly secular basis over
the last 10 years an unbundling

853
00:50:52.559 --> 00:50:55.589
of financial services that used
to be delivered together, and

854
00:50:55.589 --> 00:50:58.649
people want them deliver
differently today. So the

855
00:50:58.649 --> 00:51:02.399
question really isn't, do we
need to create some new

856
00:51:02.399 --> 00:51:05.669
framework? The question is, if
you have activities that have

857
00:51:05.699 --> 00:51:08.879
always been conducted by banks,
and are clearly permissible to

858
00:51:08.879 --> 00:51:12.719
banks, and are part of the core
of banking services, then the

859
00:51:12.719 --> 00:51:16.109
question is, why do they stop
being banks when they choose to

860
00:51:16.109 --> 00:51:18.989
only offer some financial
services? And so the way I think

861
00:51:18.989 --> 00:51:22.289
about the level playing field
question is, if Bank of America

862
00:51:22.289 --> 00:51:26.159
offers a payment processing
service, that is subject to a,

863
00:51:26.309 --> 00:51:30.119
an examination module that the
OCC has for payment processors,

864
00:51:30.479 --> 00:51:35.219
and if square is also providing
a payment processing service, it

865
00:51:35.219 --> 00:51:37.889
ought to be allowed to elect to
be subject to the very same

866
00:51:37.889 --> 00:51:41.369
supervision. I think the red
herring in the discussion often

867
00:51:41.369 --> 00:51:44.339
is the idea that somehow it's
not a level playing field

868
00:51:44.339 --> 00:51:48.689
because square wouldn't also be
subject to deposit regulation or

869
00:51:48.689 --> 00:51:51.329
any of a suite of other
regulations. But what I think of

870
00:51:51.329 --> 00:51:54.239
when I think of that issue is,
when I was a kid growing up in

871
00:51:54.239 --> 00:51:57.089
Pueblo, Colorado, I had my bank
account at a small thrift in

872
00:51:57.089 --> 00:52:00.299
Pueblo called American Federal
Savings, American federal things

873
00:52:00.329 --> 00:52:03.599
was a bank, they were regulated
by the OTs, but somehow they

874
00:52:03.599 --> 00:52:06.509
weren't subject to commodities
and derivatives regulation like

875
00:52:06.509 --> 00:52:09.689
JP Morgan was not because there
was an unlevel playing field,

876
00:52:09.719 --> 00:52:12.419
but because American Federal
Savings didn't offer commodities

877
00:52:12.419 --> 00:52:15.599
and derivatives, so for what
they did, they were subject to

878
00:52:15.599 --> 00:52:18.059
the very same rules and
regulations as the analogous

879
00:52:18.059 --> 00:52:20.969
services provided at JP Morgan.
But there were some things they

880
00:52:20.969 --> 00:52:23.819
elected not to provide, and they
weren't subject to those things.

881
00:52:24.089 --> 00:52:27.569
That's not an unlevel playing
field. And so my belief is that

882
00:52:27.569 --> 00:52:31.469
anything that is a banking
service, can be accommodated

883
00:52:31.469 --> 00:52:34.139
inside of one of the several
existing bank charters without

884
00:52:34.139 --> 00:52:36.959
the need for radical innovation.
To me, that's common sense.

885
00:52:37.710 --> 00:52:40.320
Luke De Meyer: Okay, let me let
me, don't Dr. Dr. Gerding made a

886
00:52:40.590 --> 00:52:45.450
comment here a minute ago with
regards to consolidation. Well,

887
00:52:45.750 --> 00:52:49.140
the separation of banks from
commerce said when I was running

888
00:52:49.140 --> 00:52:51.330
leaves, and in his testimony
says preventing consolidation of

889
00:52:51.330 --> 00:52:53.790
credit, concentration of
economic power and a

890
00:52:53.790 --> 00:52:56.910
concentration of political
power. And to me this is, this

891
00:52:56.910 --> 00:53:00.900
is why we eventually you'll have
this situation for 60 years and

892
00:53:00.900 --> 00:53:05.070
then we've slowly gotten away
from it. And to me, this is this

893
00:53:05.070 --> 00:53:09.870
is where you get the question of
on the ILCs do we do we want to

894
00:53:09.870 --> 00:53:15.750
allow another commercial entity
to own a banking entity,

895
00:53:16.410 --> 00:53:20.460
financial services entity and
let them creep into from the

896
00:53:20.460 --> 00:53:24.840
commercial side of this, the
banking sector? To address that,

897
00:53:24.840 --> 00:53:25.770
give me your thoughts on that.

898
00:53:26.159 --> 00:53:29.339
Brian Brooks: Yeah, so so so
this is the place where I I

899
00:53:29.339 --> 00:53:31.529
possibly you're asking me,
Representative Luke Meyer, or

900
00:53:31.529 --> 00:53:32.939
are you asking Professor
Gerding?

901
00:53:33.750 --> 00:53:37.170
Luke De Meyer: Mr. Brooks? Yeah.
Porter, Mr. gurning, because it

902
00:53:37.170 --> 00:53:41.160
really I think capsulize is the
concerns that some of the folks

903
00:53:41.160 --> 00:53:44.910
like myself have that for 60
years, we allowed. We kept the

904
00:53:44.910 --> 00:53:47.940
banking and commercial stuff
apart. And now we're allowing it

905
00:53:47.940 --> 00:53:50.280
to get mingled together. And
every day it gets mingled more

906
00:53:50.280 --> 00:53:53.280
and more. And I think the IOC
question is one that really

907
00:53:54.000 --> 00:53:56.820
solidifies this question. Do you
allow commercial folks to get

908
00:53:56.820 --> 00:53:57.900
into the banking or not?

909
00:53:58.050 --> 00:54:00.030
Brian Brooks: Yeah, so so so
what I've always said about that

910
00:54:00.030 --> 00:54:02.880
is, it's a very different
question to ask, should Walmart

911
00:54:02.880 --> 00:54:06.090
be able to get an IOC versus
should affirm or brex, which are

912
00:54:06.090 --> 00:54:09.090
lending companies be able to get
an IOC charter? I don't think

913
00:54:09.090 --> 00:54:11.850
the Walmart questions presented.
I'm personally comfortable with

914
00:54:11.850 --> 00:54:15.510
that. And I think babies are on
that stake.

915
00:54:15.510 --> 00:54:17.040
Luke De Meyer: Thank you very
much. I yield back. Mr.

916
00:54:17.040 --> 00:54:17.400
Chairman.

917
00:54:19.020 --> 00:54:21.450
Roger Williams: Thank you. The
gentleman's time has expired.

918
00:54:21.450 --> 00:54:24.120
And I say to Mr. Brooks, it's a
good thing. You don't have an

919
00:54:24.120 --> 00:54:26.970
accounted American federal,
because it's one of the many

920
00:54:26.970 --> 00:54:30.360
savings and loans that failed
back in the late 80s and early

921
00:54:30.360 --> 00:54:35.310
90s. Very true. So I would now
turn to the former chairman of

922
00:54:35.310 --> 00:54:40.860
our subcommittee, Mr. Meeks from
New York for five minutes.

923
00:54:42.030 --> 00:54:44.190
Gregory W. Meeks: I want to
thank you, Mr. Chairman, and

924
00:54:44.190 --> 00:54:48.210
recommend my look Amaya for
having this very important and

925
00:54:48.210 --> 00:54:52.230
critical hearing. This is
really, really just listening to

926
00:54:52.230 --> 00:54:55.860
the testimony of the witnesses
and some of the early questions

927
00:54:55.860 --> 00:55:01.770
both by you and Mr. Luke Amaya
is It's really important. And I

928
00:55:01.770 --> 00:55:06.120
understand also that there's a
debate as to whether the

929
00:55:06.120 --> 00:55:09.540
National Bank Act requires nasty
chartered institutions to take

930
00:55:09.540 --> 00:55:12.540
deposits, and or that's in the
course of the courts will decide

931
00:55:12.540 --> 00:55:17.820
that. But I go back and forth
myself, because one of the

932
00:55:17.820 --> 00:55:24.120
things that I know, is that
sometimes what we did 20 3040

933
00:55:24.150 --> 00:55:28.770
years ago, because of technology
or because of changes, you know,

934
00:55:28.770 --> 00:55:31.170
we've got to look at it again
and figure out how do we do

935
00:55:31.170 --> 00:55:36.540
certain things that push it
pushes us forward. And I get the

936
00:55:36.540 --> 00:55:39.780
questions and I want to make
sure that we still have

937
00:55:39.780 --> 00:55:45.330
regulatory authority so that
people don't run away with an

938
00:55:45.360 --> 00:55:50.190
and protected way with because
of technology. But I also want

939
00:55:50.190 --> 00:55:56.100
to make sure that access to
capital is available to to many

940
00:55:56.100 --> 00:55:59.160
small businesses, like the small
businesses in my community, I

941
00:55:59.160 --> 00:56:03.690
talked to many minority, small
minority businesses, etc. They

942
00:56:03.690 --> 00:56:06.720
tell me that the number one
issue they have is access to

943
00:56:06.720 --> 00:56:11.280
capital. So then, you know, I've
seen the banking industry

944
00:56:11.370 --> 00:56:15.210
consolidate over the last 20
years while technology is now

945
00:56:15.210 --> 00:56:18.660
allowing for new entrants in the
financial services area. And

946
00:56:18.660 --> 00:56:21.780
there are serious concerns that
the big tech companies could

947
00:56:21.780 --> 00:56:26.100
enter the financial system by
the IOC regime concerns that I

948
00:56:26.100 --> 00:56:31.050
definitely share among, but
banks and consumer groups alike.

949
00:56:31.440 --> 00:56:35.220
And then if the large non
financial companies can receive

950
00:56:36.300 --> 00:56:40.050
ILC charters, these companies
could potentially receive all of

951
00:56:40.050 --> 00:56:43.290
the banking privileges without
having to answer to the same

952
00:56:43.290 --> 00:56:46.110
prudential standards as
traditional banks, including,

953
00:56:46.110 --> 00:56:51.750
for example, MPIs and CDFIs. I
have also I also have, though,

954
00:56:51.750 --> 00:56:55.620
antitrust concerns when it comes
to the prospect of large nine

955
00:56:55.650 --> 00:57:00.360
non financial companies entering
the system through i LLC regime.

956
00:57:00.360 --> 00:57:04.620
So I guess, let me ask Mr. I
start with Mr. girding. And then

957
00:57:04.620 --> 00:57:08.850
maybe Mr. Pacheco can jump in
also, given that the FDIC is

958
00:57:08.850 --> 00:57:13.440
beginning to accept applications
for new IOCs for deposit

959
00:57:13.440 --> 00:57:17.760
insurance, can you speak to
whether and how such interest

960
00:57:17.940 --> 00:57:21.810
would have a competitive
advantage over, for example,

961
00:57:21.900 --> 00:57:23.910
credit unions or minority banks?

962
00:57:25.620 --> 00:57:27.900
Erik Gerding: Thanks have a
credit advantage in several

963
00:57:27.900 --> 00:57:33.810
ways. On the one hand, they
would get the benefits of FDIC

964
00:57:33.810 --> 00:57:37.620
deposit insurance which will
allow them a cheaper cost and

965
00:57:37.620 --> 00:57:42.780
financing, which they can then
spread to other parts of their

966
00:57:42.810 --> 00:57:48.780
corporate conglomerate. That
kind of game with FDIC insurance

967
00:57:48.780 --> 00:57:53.490
would allow them to undercut
commercial rivals, it would also

968
00:57:53.490 --> 00:57:58.620
allow them to enter into a
banking realm with all the

969
00:57:58.620 --> 00:58:03.540
powers and privileges of banking
than undercut credit and small

970
00:58:03.540 --> 00:58:07.740
credit unions and small
community banks. And again, they

971
00:58:07.740 --> 00:58:12.330
would not be subject as you, as
you fed representative Meeks to

972
00:58:12.330 --> 00:58:15.990
the same level of prudential
regulation, and that same all

973
00:58:15.990 --> 00:58:20.520
important consolidated
supervision that traditional

974
00:58:20.520 --> 00:58:21.900
banks are subjected to.

975
00:58:22.320 --> 00:58:25.320
Gregory W. Meeks: Thank you, Mr.
Brooks. Let me come to you, Mr.

976
00:58:25.320 --> 00:58:28.230
Pacheco. But let me go to Mr.
Brooks anyway, real quick to see

977
00:58:28.260 --> 00:58:30.450
how do you counter that with Mr.
Gerding just said.

978
00:58:31.170 --> 00:58:34.290
Brian Brooks: Well, the the
issue I see Congressman Meeks is

979
00:58:34.320 --> 00:58:38.220
the idea that I think all of us
here on the panel today are

980
00:58:38.220 --> 00:58:40.470
concerned about the level of
concentrated power that the

981
00:58:40.470 --> 00:58:44.070
biggest banks have. And so I'm a
believer that new entrants,

982
00:58:44.070 --> 00:58:46.560
whether they're fintechs, or
other kinds of companies, as

983
00:58:46.560 --> 00:58:48.540
long as they meet the statutory
requirements are a

984
00:58:48.540 --> 00:58:51.510
counterbalance to that. So
again, this is one of the points

985
00:58:51.510 --> 00:58:54.120
of project reach was to find
ways of bringing technology

986
00:58:54.120 --> 00:58:57.750
companies into the solution for
why isn't there more capital

987
00:58:57.750 --> 00:59:00.330
available in inner city
neighborhoods? And why have

988
00:59:00.330 --> 00:59:03.090
banks pulled more branches out
of inner city neighborhoods than

989
00:59:03.090 --> 00:59:06.630
out of rich suburbs, somebody's
got to fill that void. It hasn't

990
00:59:06.630 --> 00:59:09.570
been the big banks. So it needs
to be somebody. And to me, the

991
00:59:09.570 --> 00:59:12.420
safest way to do that is not to
allow fintechs to do it on a

992
00:59:12.420 --> 00:59:15.570
completely unsupervised and
unregulated basis is to bring

993
00:59:15.570 --> 00:59:19.560
them into the fold subject to
supervision, that sort of a

994
00:59:19.560 --> 00:59:20.610
common sense solution.

995
00:59:20.909 --> 00:59:22.739
Gregory W. Meeks: Let me get Mr.
Pacheco, jump in there Mr.

996
00:59:22.739 --> 00:59:23.279
Pacheco.

997
00:59:24.750 --> 00:59:26.310
Carlos Pacheco: I appreciate
that. Thank you for the

998
00:59:26.310 --> 00:59:30.240
question. Congressman, I would
say that I would agree with some

999
00:59:30.240 --> 00:59:33.660
of the testimony from Professor
Gerding and Mr. Brooks, by my

1000
00:59:33.660 --> 00:59:36.720
one deviation from that is that
organizations like credit

1001
00:59:36.720 --> 00:59:39.390
unions, like my size, a small
organization of just a billion

1002
00:59:39.390 --> 00:59:42.540
and a half assets, is out there
going in those communities that

1003
00:59:42.540 --> 00:59:44.880
might have been left behind by
other institutions who are out

1004
00:59:44.880 --> 00:59:48.450
there building relationships in
places like Pueblo and other

1005
00:59:48.450 --> 00:59:49.530
parts of Colorado.

1006
00:59:51.330 --> 00:59:53.520
Gregory W. Meeks: I might have
time. Thank you, Mr. Chair.

1007
00:59:54.570 --> 00:59:57.930
Ed Perlmutter: Thank you, Mr.
Meeks. Now the chair will

1008
00:59:57.930 --> 01:00:01.260
recognize the gentleman from
Kentucky Mr. Barr for five

1009
01:00:01.260 --> 01:00:01.650
minutes.

1010
01:00:02.520 --> 01:00:04.560
Andy Barr: Thank you, Mr.
Chairman. And as my friend did

1011
01:00:04.560 --> 01:00:09.120
Mr. Meeks focused on urban
banking deserts let me ask you a

1012
01:00:09.120 --> 01:00:13.230
few questions about rural
banking, deserts and in

1013
01:00:13.230 --> 01:00:17.460
particular, the decline in de
novo charters. since the

1014
01:00:17.460 --> 01:00:20.190
financial crisis de novo
formation has slowed

1015
01:00:20.190 --> 01:00:24.960
significantly, there were 181
charters granted in 2007. But

1016
01:00:24.960 --> 01:00:30.870
between 2010 and 2019, fewer
than 10 New banks on average

1017
01:00:30.900 --> 01:00:34.230
opened per year, more than half
of the counties in the United

1018
01:00:34.230 --> 01:00:37.800
States saw net declines in the
number of bank branches between

1019
01:00:37.830 --> 01:00:42.150
2012 and 2017. These declines
and bank branches

1020
01:00:42.150 --> 01:00:46.020
disproportionately hit rural
communities. The negative

1021
01:00:46.020 --> 01:00:48.630
financial impacts on rural
counties of bank branch

1022
01:00:48.630 --> 01:00:52.050
closures, closures are
perpetuated by continuing

1023
01:00:52.050 --> 01:00:55.710
difficulties due to burdensome
regulations and other roadblocks

1024
01:00:55.740 --> 01:00:59.010
of de novo Community Bank
formation. These trends lead

1025
01:00:59.040 --> 01:01:01.950
residents of rural counties
without access to much needed

1026
01:01:01.950 --> 01:01:05.640
financial services, and also
have negative downstream impacts

1027
01:01:05.820 --> 01:01:09.120
on those communities. I'm trying
to remedy that by introducing

1028
01:01:09.120 --> 01:01:12.750
today, the promoting access to
capital and underbanked

1029
01:01:12.750 --> 01:01:16.140
Communities Act, which would
encourage formation of new banks

1030
01:01:16.140 --> 01:01:19.680
in locations where bank branches
are scarce. It would give de

1031
01:01:19.680 --> 01:01:23.280
novo banks more time to meet
capital requirements and ease

1032
01:01:23.280 --> 01:01:25.980
other regulatory burdens on new
Community Financial

1033
01:01:25.980 --> 01:01:30.240
Institutions. Mr. Brooks, I
share and Mr. Luke De Meyer. So

1034
01:01:30.240 --> 01:01:33.930
praise of your service at the
OCC enjoyed working with you.

1035
01:01:34.140 --> 01:01:38.430
Can you tell us what some of the
biggest roadblocks are today

1036
01:01:38.430 --> 01:01:39.660
know about bank formation?

1037
01:01:40.620 --> 01:01:43.170
Brian Brooks: Well, that Thank
you, Congressman Barr, I very

1038
01:01:43.170 --> 01:01:45.540
much appreciated our
relationship and your mentorship

1039
01:01:45.540 --> 01:01:48.330
and guidance. So thanks for the
opportunity. I would just begin

1040
01:01:48.330 --> 01:01:51.990
by saying as in many things,
process in government is

1041
01:01:51.990 --> 01:01:55.110
everything. And so when I first
arrived at the OCC and looked at

1042
01:01:55.110 --> 01:01:59.010
the bank charter and prospects,
the process flow involved in

1043
01:01:59.010 --> 01:02:01.860
doing that involved something
like 58 steps, I'm making that

1044
01:02:01.860 --> 01:02:04.530
number up, there was a huge
number of steps where multiple

1045
01:02:04.530 --> 01:02:07.590
committees had to review charter
applications more than one time.

1046
01:02:08.100 --> 01:02:11.160
And that was just one of the
three agencies that charges

1047
01:02:11.160 --> 01:02:14.400
banks. So I think part of the
problem is that we have to

1048
01:02:14.400 --> 01:02:18.270
streamline the process by making
clear how one gets a de novo

1049
01:02:18.270 --> 01:02:21.090
charter and making clear what
the timeline expectations are

1050
01:02:21.090 --> 01:02:23.610
for getting those things
approved, even just inside of

1051
01:02:23.610 --> 01:02:26.760
the Charter, the OCC. The second
thing I would say to this

1052
01:02:26.760 --> 01:02:29.760
committee is we have an
incredibly complicated process

1053
01:02:29.760 --> 01:02:33.720
where three different agencies
have full discretion over

1054
01:02:33.720 --> 01:02:37.320
whether to approve or not banks,
because once you have a national

1055
01:02:37.320 --> 01:02:40.410
bank charter approved at the
OCC, you still need deposit

1056
01:02:40.410 --> 01:02:43.050
insurance approval. And
nowadays, the Federal Reserve is

1057
01:02:43.050 --> 01:02:45.750
exercising extraordinary
oversight over whether something

1058
01:02:45.750 --> 01:02:48.420
has been approved by those two
agencies should be allowed to

1059
01:02:48.420 --> 01:02:51.690
become a Fed member. That's why
it took Varro bank nearly three

1060
01:02:51.690 --> 01:02:56.370
years from initial approach to
charter plans. And we can't have

1061
01:02:56.370 --> 01:02:59.790
the kind of system we have 80s
90s If we're going to take three

1062
01:02:59.790 --> 01:03:04.020
years to counter every every new
bank. So I share your concern

1063
01:03:04.050 --> 01:03:07.380
that finding ways to shortcut
that process not not in the

1064
01:03:07.380 --> 01:03:10.230
sense of shortcutting important
substantive requirements. But

1065
01:03:10.230 --> 01:03:12.930
shortcutting bureaucratic red
tape, which takes an enormous

1066
01:03:12.930 --> 01:03:15.720
amount of time for good purpose
is really important. The other

1067
01:03:15.720 --> 01:03:18.330
thing I would tell you is in
rural communities, you know,

1068
01:03:18.360 --> 01:03:21.570
fintechs are the main source of
credit in certain respects. If

1069
01:03:21.570 --> 01:03:23.880
you want to get a mortgage or
sales, Kentucky, you're not

1070
01:03:23.880 --> 01:03:26.610
going to get it at a local
convention we're going to do is

1071
01:03:26.610 --> 01:03:29.070
find it on lending tree. And
that's why it's more important

1072
01:03:29.070 --> 01:03:31.950
that those companies be
encouraged and regulated so that

1073
01:03:31.950 --> 01:03:34.260
they can deliver those services
more effectively in places banks

1074
01:03:34.260 --> 01:03:35.250
don't have branches.

1075
01:03:36.330 --> 01:03:39.870
Andy Barr: Well, that's good
feedback. I will note, a recent

1076
01:03:39.870 --> 01:03:42.960
study from the FDIC that
citizens in rural communities

1077
01:03:42.960 --> 01:03:46.020
are more likely than people in
urban or suburban areas to visit

1078
01:03:46.020 --> 01:03:52.230
bank branches. Obviously, you
mentioned some online

1079
01:03:52.260 --> 01:03:57.630
opportunities, of course, rural
broadband is a challenge for

1080
01:03:57.660 --> 01:04:01.710
mobile banking. I've introduced
bills to combat both of these

1081
01:04:01.710 --> 01:04:04.320
issues, but the problems have
been exacerbated by the

1082
01:04:04.320 --> 01:04:07.650
pandemic, is there anything else
we can do to increase access to

1083
01:04:07.650 --> 01:04:09.780
the banking system for rural
populations?

1084
01:04:10.170 --> 01:04:13.200
Brian Brooks: What, so I would
say, Congressman, that

1085
01:04:14.070 --> 01:04:17.160
consistent with the bill that
you're introducing today, we

1086
01:04:17.160 --> 01:04:20.730
need to have a concept of kind
of like a CRA type of concept

1087
01:04:20.760 --> 01:04:23.670
where if you are serving an
underbanked community, it needs

1088
01:04:23.670 --> 01:04:26.820
to be a fast track to approval.
And I think you and I've talked

1089
01:04:26.820 --> 01:04:29.100
before about the fact that there
is there are rural communities

1090
01:04:29.100 --> 01:04:31.980
in Kentucky and Mississippi and
other parts of the south, where

1091
01:04:31.980 --> 01:04:36.330
the nearest bank branch is 75
miles away. So the way you're

1092
01:04:36.330 --> 01:04:39.000
going to allow those things as
local community leaders to form

1093
01:04:39.000 --> 01:04:41.640
your branches is if there is a
fast track option and we should

1094
01:04:41.640 --> 01:04:43.380
see that as community
reinvestments.

1095
01:04:43.740 --> 01:04:46.920
Andy Barr: Real quick, real
quick, Mr. Brooks, and my final

1096
01:04:47.160 --> 01:04:50.520
few seconds. Can you address
Professor Johnson's analysis

1097
01:04:50.520 --> 01:04:53.340
that a non depository National
Bank is an oxymoron?

1098
01:04:54.120 --> 01:04:55.860
Brian Brooks: Yeah, yeah look I
mean, I mean in the in the

1099
01:04:55.860 --> 01:04:59.520
National Bank act, deposit
taking is a power of a bank, not

1100
01:04:59.520 --> 01:05:02.250
a record My argument, it isn't a
requirement in the bank holding

1101
01:05:02.250 --> 01:05:05.460
company act, but it is a tower,
not a requirement in the

1102
01:05:05.460 --> 01:05:06.270
National Bank act.

1103
01:05:07.290 --> 01:05:10.530
Andy Barr: My time has expired.
I appreciate the answers and I

1104
01:05:10.530 --> 01:05:11.160
yield back.

1105
01:05:12.780 --> 01:05:15.600
Roger Williams: Thank the
gentleman for his questions now

1106
01:05:15.600 --> 01:05:19.590
like to turn to the gentleman
from California, Mr. Sherman.

1107
01:05:21.659 --> 01:05:26.369
Brad Sherman: Thank you, like to
first talk about the industrial

1108
01:05:26.369 --> 01:05:33.029
loan company loophole to what
has been in this country. Can I

1109
01:05:33.029 --> 01:05:33.479
be heard?

1110
01:05:36.960 --> 01:05:39.270
Roger Williams: You are you are
live and loud.

1111
01:05:39.510 --> 01:05:47.160
Brad Sherman: Live and loud.
Thank you. First, I look at the

1112
01:05:47.160 --> 01:05:51.450
industrial loan company loophole
to what has been a prohibition

1113
01:05:51.450 --> 01:05:54.690
in this country of mixing
Industry and Commerce on the one

1114
01:05:54.690 --> 01:05:59.070
hand and financial services on
another. Now a couple decades

1115
01:05:59.070 --> 01:06:02.370
ago, we did allow different
types of financial services

1116
01:06:02.370 --> 01:06:05.580
companies to be under one roof
and insurance company can also

1117
01:06:05.580 --> 01:06:13.230
own a bank, or vice versa. But,
Mr. korero, last month, it was

1118
01:06:13.230 --> 01:06:17.640
reported that Walmart had hired
a Goldman Sachs, head of

1119
01:06:17.640 --> 01:06:21.780
consumer banking and announced a
partnership with red ID capital,

1120
01:06:22.350 --> 01:06:26.100
trying to expand into financial
services, Walmart and other

1121
01:06:26.670 --> 01:06:31.260
major retailers have, at various
times sought a state issued

1122
01:06:31.320 --> 01:06:36.420
industrial loan company
charters. On just as the Trump

1123
01:06:36.420 --> 01:06:39.810
administration was on its way
out the door and December of

1124
01:06:39.810 --> 01:06:44.820
last year, FDIC adopted rules
that pave the way for non banks

1125
01:06:44.820 --> 01:06:48.390
to own ILC charter banks. And
here's the key part without

1126
01:06:48.390 --> 01:06:51.390
being subjected to the same
regulatory oversight

1127
01:06:51.390 --> 01:06:54.540
requirements that are applied to
traditional bank holding

1128
01:06:54.540 --> 01:06:58.230
companies. Do you see
inconsistencies in these

1129
01:06:58.230 --> 01:07:03.300
regulatory requirements? And is
it a good idea for us to copy a

1130
01:07:03.300 --> 01:07:07.770
system that has done tremendous
damage to Japan, of having

1131
01:07:07.770 --> 01:07:10.590
groups of companies that are
both in industry and commerce on

1132
01:07:10.590 --> 01:07:13.140
the one hand, in financial
services on the other?

1133
01:07:14.909 --> 01:07:16.439
Raul Carrillo: Thank you for
your question. Congressman

1134
01:07:16.439 --> 01:07:20.159
Sherman, I believe that the
Japanese example does provide

1135
01:07:20.159 --> 01:07:26.069
some lessons. They call Rakuten,
Japan's Amazon and it has

1136
01:07:26.069 --> 01:07:28.709
integrated into financial
services in a way that it will

1137
01:07:28.949 --> 01:07:33.719
never be on twisted. At this
point. I do want to highlight

1138
01:07:33.719 --> 01:07:37.649
one dimension regarding the ILC
issue that Professor grouping

1139
01:07:37.649 --> 01:07:40.499
and Professor Johnson did not
hit on, although I believe they

1140
01:07:40.499 --> 01:07:44.099
both point to it, at least in a
general way and their testimony

1141
01:07:44.099 --> 01:07:46.769
as well. It's that a lot of
these companies that will come

1142
01:07:46.769 --> 01:07:49.559
through this loophole will be
subject to different data

1143
01:07:49.559 --> 01:07:52.469
collection requirements, they
will not be subject to

1144
01:07:52.469 --> 01:07:55.949
regulation, why, or the
regulations of the BH ca in the

1145
01:07:55.949 --> 01:07:58.589
same way, and then won't even
provide the limited privacy

1146
01:07:58.589 --> 01:08:02.669
protections that current banks
do to their customers. So in

1147
01:08:02.669 --> 01:08:06.119
many ways, this is replicating
the problems of the past, as

1148
01:08:06.539 --> 01:08:10.079
member McHenry said, in the
sense that we are creating

1149
01:08:10.079 --> 01:08:12.749
things that look like deposits
act like deposits walk like

1150
01:08:12.749 --> 01:08:15.599
deposits talk like deposits, but
we don't treat like deposits.

1151
01:08:16.019 --> 01:08:18.209
And in the other sense, though,
this is totally new.

1152
01:08:18.209 --> 01:08:18.630
Andy Barr: And following.

1153
01:08:20.400 --> 01:08:21.060
Raul Carrillo: The collection.

1154
01:08:21.060 --> 01:08:24.720
Brad Sherman: We'd have a few
very small old lLCs out there.

1155
01:08:24.780 --> 01:08:28.410
But if Amazon exploits this,
they're going to be enormous.

1156
01:08:28.410 --> 01:08:32.250
They don't do anything small.
And the question would then be

1157
01:08:33.780 --> 01:08:36.930
would they be subject to the
Financial Stability Oversight

1158
01:08:36.930 --> 01:08:40.530
Council, if they were a
systemic, of systemic importance

1159
01:08:40.530 --> 01:08:41.520
to our financial system?

1160
01:08:43.469 --> 01:08:46.229
Raul Carrillo: Yeah, there are
all these giant macro questions,

1161
01:08:46.379 --> 01:08:49.559
which I believe Professor
Gerdling outlined quite well.

1162
01:08:49.829 --> 01:08:53.159
And the issue to me is certainly
one of power even behind that.

1163
01:08:53.819 --> 01:08:57.299
Congressman Sherman, the issue
is that entities like Amazon and

1164
01:08:57.299 --> 01:09:00.299
Facebook and Walmart, which is
launched, the FinTech, as you

1165
01:09:00.299 --> 01:09:04.199
said, has fired, you know,
people from outfits that don't

1166
01:09:04.199 --> 01:09:08.549
respect privacy to come in under
the cloak of providing access to

1167
01:09:08.549 --> 01:09:12.089
credit or financial inclusion
even. But to do so in a way that

1168
01:09:12.089 --> 01:09:15.689
fundamentally depends upon mass
surveillance and a violation of

1169
01:09:15.689 --> 01:09:18.419
our constitutional rights
consistently. There are other

1170
01:09:18.419 --> 01:09:21.359
ways to do this, in which we
respect privacy. There are other

1171
01:09:21.359 --> 01:09:23.969
ways even for private sector
companies to do this, let alone

1172
01:09:23.969 --> 01:09:27.449
the government itself. And we
are not addressing those ways.

1173
01:09:27.449 --> 01:09:30.479
I'd be really interested to hear
what for instance, Former Acting

1174
01:09:30.479 --> 01:09:33.179
Comptroller Brooks has to say
about the Fourth Amendment, and

1175
01:09:33.179 --> 01:09:36.239
again, the necessary violation
of privacy that is the business

1176
01:09:36.239 --> 01:09:38.159
model of these companies. It
works.

1177
01:09:38.459 --> 01:09:41.009
Brad Sherman: I do want to go on
to one other issue. And

1178
01:09:41.219 --> 01:09:44.039
Professor Garrett girding I'm
probably going to ask you to

1179
01:09:44.039 --> 01:09:48.089
respond for the record, but we
see that the state of Wyoming is

1180
01:09:48.089 --> 01:09:54.449
moving toward cryptocurrencies
and the OCC is granted

1181
01:09:54.449 --> 01:09:56.699
preliminary approval to the
anchorage Trust Company to

1182
01:09:57.029 --> 01:10:01.499
become a National Trust Bank. in
Anchorage, of course claims to

1183
01:10:01.499 --> 01:10:05.759
be a cryptocurrency asset
custodian. I have looked at

1184
01:10:06.179 --> 01:10:09.299
Bitcoin and wondered whether
there was a big enough market

1185
01:10:09.659 --> 01:10:14.339
among terrorists, drug dealers,
and it didn't seem to be enough.

1186
01:10:14.639 --> 01:10:19.439
And then I realized when the IRS
commissioner testified for $1

1187
01:10:19.439 --> 01:10:24.029
trillion, every year of
unreported taxes chiefly from

1188
01:10:24.029 --> 01:10:27.689
the wealthy, that and I made up
a little advertising site in my

1189
01:10:27.689 --> 01:10:32.459
hand help encourage a bitcoin is
not just for terrorists anymore.

1190
01:10:32.609 --> 01:10:36.779
It was activators to that's the
market for Bitcoin. I yield

1191
01:10:36.779 --> 01:10:37.139
back.

1192
01:10:39.270 --> 01:10:41.850
Roger Williams: The gentleman
yields back. The gentleman from

1193
01:10:41.850 --> 01:10:44.880
Texas, Mr. Williams is
recognized for five minutes.

1194
01:10:45.270 --> 01:10:48.270
Thank you, Mr. Chairman. I think
one of the greatest exports

1195
01:10:48.270 --> 01:10:52.200
America has are the products and
services that our entrepreneurs

1196
01:10:52.200 --> 01:10:54.510
and businesses bring to the
marketplace and share with the

1197
01:10:54.510 --> 01:10:58.080
world. I do not want to run the
risk of losing our pBrosition as

1198
01:10:58.080 --> 01:11:01.590
the world leader in innovation.
That being said, I do not think

1199
01:11:01.590 --> 01:11:05.280
we should have to or quite
frankly, need to add additional

1200
01:11:05.280 --> 01:11:07.890
risk into the financial system
to help foster the business

1201
01:11:07.890 --> 01:11:11.640
friendly regulatory environment
that we need. So Mr. Brooks, I

1202
01:11:11.670 --> 01:11:15.000
also want to add thank you for
your service to our country, and

1203
01:11:15.000 --> 01:11:19.680
also an ask, my first question
to you is how would eliminate

1204
01:11:19.680 --> 01:11:23.580
access to charting options like
an ILC impact fintech companies

1205
01:11:23.910 --> 01:11:26.730
from innovating and creating new
products and services? And do

1206
01:11:26.730 --> 01:11:30.840
you believe that these companies
would just move to other

1207
01:11:30.840 --> 01:11:34.200
jurisdictions outside of the US
to provide a more modernized

1208
01:11:34.230 --> 01:11:35.160
regulatory system?

1209
01:11:36.030 --> 01:11:38.160
Brian Brooks: Yeah, well, so
Congressman, I really appreciate

1210
01:11:38.160 --> 01:11:40.710
that question. And I guess I
would answer it in two different

1211
01:11:40.710 --> 01:11:43.890
ways. So before we talk about
offshoring technology, which is

1212
01:11:43.890 --> 01:11:46.830
a real risk, let's just talk
about the actual companies that

1213
01:11:46.830 --> 01:11:49.980
are actually applying for IOC
charters today. Okay, they're

1214
01:11:49.980 --> 01:11:53.130
not Walmart, they're not Amazon,
they're not Google. They're

1215
01:11:53.130 --> 01:11:56.280
financial companies. They're
affirm, which is a point of sale

1216
01:11:56.280 --> 01:11:59.310
lending company that is one of
the largest companies in that

1217
01:11:59.310 --> 01:12:02.280
space today. And all they do is
make loans. That's their entire

1218
01:12:02.280 --> 01:12:06.480
business, they'd like to be an
LLC. So you have two choices in

1219
01:12:06.480 --> 01:12:10.290
that world. That company can
come into the IOC world and be

1220
01:12:10.290 --> 01:12:14.910
supervised by a state regulator
and by the FDIC or not. Okay.

1221
01:12:15.000 --> 01:12:17.850
And so the question is, which is
a riskier scenario, letting them

1222
01:12:17.850 --> 01:12:20.790
in the system so they can be
supervised and remember that

1223
01:12:20.790 --> 01:12:23.970
federally supervised entities
fail and about half the rate of

1224
01:12:24.000 --> 01:12:27.090
non federally supervised
entities, or we can keep them

1225
01:12:27.120 --> 01:12:31.230
out of the system today? I would
argue that is riskier. Now, if

1226
01:12:31.230 --> 01:12:34.290
the US adopts the anti tech
posture, and I think one of the

1227
01:12:34.290 --> 01:12:36.990
comments made earlier is that we
can't take the politics out of

1228
01:12:36.990 --> 01:12:41.700
tech. What you already see is
significant aspects of tech

1229
01:12:41.700 --> 01:12:45.210
moving offshore primarily to
Asia, but even even to markets

1230
01:12:45.210 --> 01:12:47.460
with somewhat more unified
financial regulation like the

1231
01:12:47.460 --> 01:12:50.460
UK. So comments have been made
about cryptocurrency. Obviously,

1232
01:12:50.460 --> 01:12:53.580
I disagree that the market for
Bitcoin is terrorists and tax

1233
01:12:53.580 --> 01:12:56.280
evaders, we can have that
conversation separately. But the

1234
01:12:56.280 --> 01:12:59.010
position we've taken in this
country thus far about

1235
01:12:59.010 --> 01:13:01.830
blockchain and its
opportunities, has been a

1236
01:13:01.830 --> 01:13:04.410
position that's led many
exchanges to leave the United

1237
01:13:04.410 --> 01:13:07.500
States. Now, there's optimism
because of the Coinbase IPO

1238
01:13:07.500 --> 01:13:10.050
yesterday that the US markets
are very welcoming of that

1239
01:13:10.050 --> 01:13:13.230
business. But increasingly, that
activity is going to the UK, the

1240
01:13:13.230 --> 01:13:17.040
EU and Singapore. And those are
countries that still have an

1241
01:13:17.040 --> 01:13:20.550
idea that perhaps responsible
innovation with an appropriate

1242
01:13:20.610 --> 01:13:23.730
amount of risk oversight is a
good thing. Not a bad thing. So

1243
01:13:23.730 --> 01:13:25.230
I think we need to think
carefully about that.

1244
01:13:25.830 --> 01:13:28.020
Roger Williams: Appreciate that
answer. Secondly, my office has

1245
01:13:28.020 --> 01:13:30.960
been contacted by a variety of
stakeholders talking about the

1246
01:13:30.960 --> 01:13:34.650
importance of the true lender
rule. The fact that it is being

1247
01:13:34.650 --> 01:13:37.590
discussed as something that
could be invalidated with the

1248
01:13:37.590 --> 01:13:40.410
Congressional Review Act has
already caused some market

1249
01:13:40.770 --> 01:13:44.670
participants to get nervous as
they are working to provide

1250
01:13:44.670 --> 01:13:48.090
services to banks that they have
partnered with. I think that

1251
01:13:48.090 --> 01:13:51.420
when some of my Democratic
colleagues tried to simplify the

1252
01:13:51.420 --> 01:13:55.830
rule down to saying is just a
rented charter scheme. It missed

1253
01:13:55.830 --> 01:13:59.220
the intention of the rule. So
Mr. Brooks, again, can you talk

1254
01:13:59.220 --> 01:14:03.930
to us about how the true lender
rules assist the OCC and

1255
01:14:03.930 --> 01:14:07.110
protecting the safety and
stability of our nationally

1256
01:14:07.140 --> 01:14:08.490
chartered banks?

1257
01:14:09.090 --> 01:14:10.800
Brian Brooks: Yeah, so
Congressman, that's a great

1258
01:14:10.800 --> 01:14:13.680
question. And there were two
motivations behind the true

1259
01:14:13.680 --> 01:14:16.590
lender rule and its companion
rule, the valid when made rule.

1260
01:14:17.460 --> 01:14:22.050
The first idea was that when the
madam decision came down in the

1261
01:14:22.050 --> 01:14:25.380
Second Circuit Court of Appeals,
lending to low and moderate

1262
01:14:25.380 --> 01:14:27.900
income people living in New York
and Connecticut, the state's

1263
01:14:27.900 --> 01:14:32.040
subject to that rule fell by
64%. Let me just say that again,

1264
01:14:32.310 --> 01:14:35.280
when you don't have the valid,
but when made rule, the people

1265
01:14:35.280 --> 01:14:39.780
who get hurt are poor people.
And the point of the rule was to

1266
01:14:39.810 --> 01:14:43.530
reinstate access to credit for
those low and moderate income

1267
01:14:43.560 --> 01:14:46.800
Americans, our brothers and
sisters who were cut off from

1268
01:14:46.800 --> 01:14:49.320
credit when banks weren't
allowed to sell loans in the

1269
01:14:49.320 --> 01:14:52.560
secondary market. That was the
first reason. The second thing

1270
01:14:52.560 --> 01:14:56.250
we did in that rule is make very
clear that rental charter

1271
01:14:56.250 --> 01:14:59.460
schemes of the past which were
all about the idea that nobody

1272
01:14:59.460 --> 01:15:02.370
was accountable For those loans,
not the bank and not the FinTech

1273
01:15:02.370 --> 01:15:06.090
marketing partner, those were
over what we said our rule was

1274
01:15:06.090 --> 01:15:09.090
that in the true lender regime,
if the bank is the true lender

1275
01:15:09.090 --> 01:15:13.530
on the loan, it will be
responsible for all disclosure,

1276
01:15:13.560 --> 01:15:17.250
all anti discrimination rules,
all consumer protections, we

1277
01:15:17.250 --> 01:15:20.580
eliminated rental charter in
that rule. So it's a nice

1278
01:15:20.580 --> 01:15:23.400
talking point to say that
somehow this incentivizes rented

1279
01:15:23.400 --> 01:15:26.310
charter. But in fact, the text
of the rule solves rented

1280
01:15:26.310 --> 01:15:29.880
charter and staff and career
over, you know, supervisors at

1281
01:15:29.880 --> 01:15:32.430
the agency worked very hard to
make sure that was the case.

1282
01:15:33.330 --> 01:15:35.670
Roger Williams: Thank you for
that. And, Mr. Chairman, I yield

1283
01:15:35.670 --> 01:15:36.990
the remainder of my time back.

1284
01:15:38.310 --> 01:15:42.120
Thank you, Mr. Williams. Another
gentleman from Texas, Mr. Green

1285
01:15:42.120 --> 01:15:43.980
is recognized for five minutes.

1286
01:15:49.680 --> 01:15:51.660
Al Green: Thank you, Mr.
Chairman. I greatly appreciate

1287
01:15:51.660 --> 01:15:55.350
the opportunity to be heard and
Brittany, appreciate your having

1288
01:15:55.350 --> 01:16:01.140
this hearing. Very valuable to
me. Let me start with coin base

1289
01:16:01.140 --> 01:16:06.000
and lay a predicate for where
I'd like to ultimately on base

1290
01:16:06.000 --> 01:16:14.730
made its market debut Wednesday,
and its reference price was

1291
01:16:14.760 --> 01:16:23.010
$250. It ended up closing at
$328.28. The value of the

1292
01:16:23.010 --> 01:16:30.480
company at $5.7 billion. For
those I'm sure you know, but

1293
01:16:30.480 --> 01:16:36.420
some may not know that coin base
is a business that allows its

1294
01:16:36.450 --> 01:16:40.680
clients its customers to buy and
sell digital currency. I

1295
01:16:40.680 --> 01:16:44.160
mentioned this, because it's
just a matter of coincidence, I

1296
01:16:44.160 --> 01:16:47.910
suppose. And I don't want to be
mean anybody but Mr. Bernie

1297
01:16:47.910 --> 01:16:54.090
Madoff. He passed yesterday. And
Mr. Bernie Madoff, for those who

1298
01:16:54.090 --> 01:16:59.970
may have forgotten as a father
of a $20 billion Ponzi scheme. A

1299
01:16:59.970 --> 01:17:04.320
lot of people have consternation
about digital currency

1300
01:17:05.250 --> 01:17:09.570
cryptocurrency because they're
concerned that it might end up

1301
01:17:09.930 --> 01:17:14.550
being a Ponzi scheme. This is a
fear that people have people who

1302
01:17:14.550 --> 01:17:18.900
don't understand maybe, but some
people do understand very much

1303
01:17:18.900 --> 01:17:26.280
concern. My concern is this list
made off, made off with this

1304
01:17:26.280 --> 01:17:32.760
money. Persons who, generally
speaking could care less about

1305
01:17:32.760 --> 01:17:35.280
what Congress does, as long as
Congress kind of stays on their

1306
01:17:35.280 --> 01:17:39.240
business. They made their way to
Congress, and they wanted

1307
01:17:39.420 --> 01:17:43.020
Congress to help. They thought
we should have regulated to the

1308
01:17:43.020 --> 01:17:50.940
extent that this fraud should
not have occurred. And I think

1309
01:17:50.940 --> 01:17:53.370
that a lot of our concern and
consternation with

1310
01:17:53.400 --> 01:17:57.840
cryptocurrency emanates from
people who saw what happened,

1311
01:17:58.170 --> 01:18:01.740
and still are concerned about
what may happen. So here's my

1312
01:18:01.740 --> 01:18:06.750
first question. And I'd like to
take this question to Mr.

1313
01:18:06.750 --> 01:18:11.970
Brooks. Our first question is
this, Mr. Brooks? Is is

1314
01:18:11.970 --> 01:18:15.570
cryptocurrency an asset class?
Or is it a substitute for

1315
01:18:15.570 --> 01:18:19.200
currency? How do you see it? And
can you just give me a quick

1316
01:18:19.200 --> 01:18:21.810
answer? Maybe 10 or 15 seconds
because I have another question

1317
01:18:21.810 --> 01:18:22.080
for you.

1318
01:18:23.790 --> 01:18:25.500
Brian Brooks: Sure, so
Congressman Green, I really

1319
01:18:25.500 --> 01:18:28.920
appreciate the question. I
separate crypto into two worlds,

1320
01:18:28.950 --> 01:18:32.730
Bitcoin and everything else.
Bitcoin I think of as an asset

1321
01:18:32.730 --> 01:18:35.580
class. It is an anti
inflationary asset class that

1322
01:18:35.580 --> 01:18:37.920
some people believe as a
counterweight to inflationary

1323
01:18:37.920 --> 01:18:40.950
monetary policy by governments.
All of the other

1324
01:18:40.950 --> 01:18:43.740
cryptocurrencies that exist out
there are designed to create

1325
01:18:43.740 --> 01:18:46.920
networks. They're essentially
inducements to create internets,

1326
01:18:47.070 --> 01:18:49.410
on which various values can be
exchanged. I'm happy to talk

1327
01:18:49.410 --> 01:18:51.960
more about that. But it's an
intranet protocol. It has

1328
01:18:51.960 --> 01:18:54.540
nothing to do with Ponzi schemes
and tell me how much time you

1329
01:18:54.540 --> 01:18:55.920
want. I can give you more
information on that.

1330
01:18:56.100 --> 01:18:58.170
Al Green: I appreciate what
you've said thus far. Let me

1331
01:18:58.470 --> 01:19:03.240
move forward. The American
dollar is backed by the full

1332
01:19:03.240 --> 01:19:08.190
faith and credit of the United
States of America. That's a fair

1333
01:19:08.190 --> 01:19:11.670
statement. I think.
cryptocurrencies seem to be

1334
01:19:11.670 --> 01:19:15.750
backed by the people who hold
crypto currencies. Is that a

1335
01:19:15.750 --> 01:19:16.470
fair statement?

1336
01:19:17.160 --> 01:19:19.350
Brian Brooks: I don't think so.
Actually, I think I probably

1337
01:19:19.350 --> 01:19:20.760
disagree with both of those
statements.

1338
01:19:23.640 --> 01:19:24.660
Al Green: Explain please.

1339
01:19:25.100 --> 01:19:28.610
Brian Brooks: Okay. So sure, so
what's backed by the full faith

1340
01:19:28.610 --> 01:19:32.390
and credit of the United States
is US debt. Okay. $1 Bill is not

1341
01:19:32.390 --> 01:19:35.180
US debt. $1 Bill is just a unit
of exchange you use to buy

1342
01:19:35.180 --> 01:19:38.150
things with. If you look at
what's happened in monetary

1343
01:19:38.150 --> 01:19:41.300
policy, over the last 12 months,
the US has increased the m two

1344
01:19:41.300 --> 01:19:45.710
money supply by 40%, which
inherently devalues the amount

1345
01:19:45.710 --> 01:19:48.290
of the purchasing power of the
dollar. You saw that in the

1346
01:19:48.290 --> 01:19:51.470
inflation reports that were in
this morning's newspapers. So

1347
01:19:51.470 --> 01:19:53.990
that's an example of the dollar
not being backed by the full

1348
01:19:53.990 --> 01:19:57.140
faith and credit is backed by
American monetary policy at any

1349
01:19:57.140 --> 01:20:02.210
given moment. So there's another
currency real quick. Right, so

1350
01:20:02.210 --> 01:20:05.720
so so cryptocurrency, again put
Bitcoin aside just for a moment.

1351
01:20:06.110 --> 01:20:09.950
But cryptocurrency is about is
the belief that a particular

1352
01:20:09.950 --> 01:20:12.650
network will gain adoption. So
it's, you know, when you buy an

1353
01:20:12.650 --> 01:20:16.340
Aetherium token and eath token,
that's like saying, I believe

1354
01:20:16.370 --> 01:20:19.340
this network, which is a smart
contract protocol for building

1355
01:20:19.340 --> 01:20:22.160
financial applications, it
basically apps like on your cell

1356
01:20:22.160 --> 01:20:25.160
phone is going to have value. So
if you think Google stock has

1357
01:20:25.160 --> 01:20:27.410
value, because you think
internet traffic is going to go

1358
01:20:27.410 --> 01:20:30.230
up, and Google is a tracking
stock for the internet, like

1359
01:20:30.260 --> 01:20:34.040
eath tokens is like believing
that the Etherion protocol will

1360
01:20:34.040 --> 01:20:37.040
become the default protocol for
financial applications that

1361
01:20:37.040 --> 01:20:39.860
that's what it's backed by is
adoption rates of that product.

1362
01:20:40.770 --> 01:20:44.190
Al Green: if it's backed by the
belief, and I do concur with

1363
01:20:44.190 --> 01:20:49.860
this, is that the possibility of
believers at some point no

1364
01:20:49.860 --> 01:20:52.260
longer believing can take it to
zero.

1365
01:20:53.430 --> 01:20:55.860
Brian Brooks: Sure, just as
believer, you know, in general

1366
01:20:56.490 --> 01:20:59.640
can it's the past, was the
future. So I'm dumping my

1367
01:20:59.640 --> 01:21:00.210
General Motors.

1368
01:21:00.630 --> 01:21:02.490
Al Green: Thank you very much,
my time has expired.

1369
01:21:02.600 --> 01:21:04.700
Raul Carrillo: Representative
green may I clarify a point of

1370
01:21:04.700 --> 01:21:05.120
law?

1371
01:21:06.360 --> 01:21:08.580
Al Green: Well, the chairman
would have to allow you to do so

1372
01:21:08.580 --> 01:21:09.060
my time.

1373
01:21:09.630 --> 01:21:12.870
Ed Perlmutter: Without
objection, you got 30 seconds.

1374
01:21:13.560 --> 01:21:17.250
Raul Carrillo: Thank you. Former
Acting Comptroller Brooks said

1375
01:21:17.250 --> 01:21:19.680
that the US dollar is not
government debt that is

1376
01:21:19.680 --> 01:21:23.430
incorrect. It is a issue of the
US Federal Reserve, it is

1377
01:21:23.430 --> 01:21:27.360
classified as a liability on its
balance sheet. It comes from an

1378
01:21:27.360 --> 01:21:29.880
instrumentality of Congress,
although it is not considered

1379
01:21:29.880 --> 01:21:33.090
under the debt ceiling to be
treated the same way as the US

1380
01:21:33.090 --> 01:21:35.850
Treasury. It is very much a debt
of the United States government.

1381
01:21:35.850 --> 01:21:38.760
It is money we owe to ourselves.
It is our main payment tool

1382
01:21:38.760 --> 01:21:41.250
constitutionally and
administratively. Thank you.

1383
01:21:42.330 --> 01:21:45.990
Ed Perlmutter: I thank the
gentleman. I think next we have

1384
01:21:45.990 --> 01:21:50.400
the gentleman from Georgia. Mr.
Loudermilk, for five minutes.

1385
01:21:51.350 --> 01:21:53.990
Barry Loudermilk: Thank you, Mr.
Chairman. And Mr. Brooks, before

1386
01:21:53.990 --> 01:21:57.590
I get in my questions, I just
want to know if needed a moment

1387
01:21:57.590 --> 01:22:00.500
a few seconds to respond to the
previous gentleman.

1388
01:22:01.110 --> 01:22:04.110
Brian Brooks: Yeah, I mean, I
guess all I would say on that is

1389
01:22:04.110 --> 01:22:08.220
that dollars are created by
government credit operations.

1390
01:22:08.220 --> 01:22:11.430
And so the underlying thing that
has an obligation is the credit,

1391
01:22:11.460 --> 01:22:14.520
right? It's the buying and
selling of government debt. But

1392
01:22:14.550 --> 01:22:17.190
the dollar that you have in your
pocket, and any of us old enough

1393
01:22:17.190 --> 01:22:20.250
to remember the 70s know this,
it's only as valuable as

1394
01:22:20.250 --> 01:22:23.520
American monetary policy. I
remember 1980 when interest

1395
01:22:23.520 --> 01:22:28.110
rates were 13%, athletic cost
21% to take out a mortgage, your

1396
01:22:28.110 --> 01:22:30.930
dollar wasn't very valuable then
and nobody guaranteed its value.

1397
01:22:32.160 --> 01:22:33.930
Barry Loudermilk: I'd appreciate
the clarification on that. In

1398
01:22:33.930 --> 01:22:37.200
fact, recently I was at a
restaurant and the waitress had

1399
01:22:37.200 --> 01:22:41.490
just taken cash and she handed
me a bill and she said, can you

1400
01:22:41.490 --> 01:22:43.980
tell me if this is legal? It was
a silver certificate. I said,

1401
01:22:43.980 --> 01:22:46.620
I'll tell you what, I'll give
you a bill of equal value. And

1402
01:22:46.650 --> 01:22:52.620
I'll take it so. I do want to
follow up on the questions of

1403
01:22:52.620 --> 01:22:56.880
Mr. Williams regarding FinTech
and true lender, you know, bank,

1404
01:22:56.940 --> 01:22:59.520
fintech partnerships have
continued to grow. And the

1405
01:22:59.520 --> 01:23:03.240
question of which entity is the
true lender is the subject of

1406
01:23:03.240 --> 01:23:07.290
numerous court cases. And it's
been resolved on a case by case

1407
01:23:07.290 --> 01:23:10.680
basis. In a lot of instances,
some courts have developed

1408
01:23:10.680 --> 01:23:13.740
complicated multifactor tests to
determine who is the true

1409
01:23:13.740 --> 01:23:17.250
lender, but that causes
significant confusion and

1410
01:23:17.250 --> 01:23:20.760
uncertainty in lending markets.
So Mr. Brooks, can you discuss

1411
01:23:20.940 --> 01:23:25.410
why the OCC, OCC is true lender
rule is important to give

1412
01:23:25.410 --> 01:23:27.840
clarity and certainty to the
lending markets.

1413
01:23:27.840 --> 01:23:28.830
Brian Brooks: Well, so
Congressman, it's a great

1414
01:23:28.830 --> 01:23:31.530
question. And it's all about how
important you think clarity is.

1415
01:23:31.710 --> 01:23:35.550
So last, the I have, which I
articulated the OCC many times

1416
01:23:35.850 --> 01:23:38.340
was to quote Justice Brandeis
his famous statement when he

1417
01:23:38.340 --> 01:23:40.740
said that sometimes it's more
important that a question be

1418
01:23:40.740 --> 01:23:44.100
settled than that it'd be
settled, right. And so my belief

1419
01:23:44.100 --> 01:23:47.070
is that lending contracts in a
big global economy, like the

1420
01:23:47.070 --> 01:23:50.700
American economy need a rule,
you could pick a different rule.

1421
01:23:50.760 --> 01:23:53.940
But our point was to say someone
needs to be responsible, there

1422
01:23:53.940 --> 01:23:57.210
needs to be a clear bright line
test when a consumer takes out a

1423
01:23:57.210 --> 01:24:00.930
loan as to who he's taking the
loan out from. And so our belief

1424
01:24:00.930 --> 01:24:03.840
was, we'll have a two sentence
rule. The bank is the lender of

1425
01:24:03.840 --> 01:24:06.300
its names on the note or the
bank is the lender if it funded

1426
01:24:06.300 --> 01:24:09.090
the note on the date of
origination period, and we will

1427
01:24:09.090 --> 01:24:12.180
take enforcement action against
any bank who is the true lender

1428
01:24:12.210 --> 01:24:15.330
who violates the law, hard to
see how that's not a good thing.

1429
01:24:18.090 --> 01:24:20.280
Barry Loudermilk: Right. And,
you know, some of the other side

1430
01:24:20.280 --> 01:24:23.760
of you've heard over and over
again, today have alluded to

1431
01:24:23.760 --> 01:24:27.330
that the true lender rule will
allow predatory lenders to

1432
01:24:27.330 --> 01:24:30.000
engage in rented charter
schemes, and that is a concern

1433
01:24:30.000 --> 01:24:36.900
of even some bank, state level
bank examiners or directors. Can

1434
01:24:36.900 --> 01:24:40.080
you explain how that rule does
not allow for that?

1435
01:24:40.080 --> 01:24:42.210
Brian Brooks: Yeah, well, the
first thing is, you know, we

1436
01:24:42.210 --> 01:24:44.580
need to sort of take the
adjectives and adverbs out of

1437
01:24:44.580 --> 01:24:46.890
this discussion and start
defining some terms. So when

1438
01:24:46.890 --> 01:24:50.040
people call a loan, a predatory
loan, the question is, what do

1439
01:24:50.040 --> 01:24:53.700
they mean by that? And what they
generally mean is, it was a loan

1440
01:24:53.730 --> 01:24:56.760
that was originated at an
interest rate that exceeds the

1441
01:24:56.760 --> 01:25:00.000
borrower's home states usury
cap. Okay, let's let's just

1442
01:25:00.000 --> 01:25:02.460
define some terms. So with vast
what you mean by predatory

1443
01:25:02.460 --> 01:25:06.690
lending, Congress in the Supreme
Court between 1978 and 1980,

1444
01:25:06.720 --> 01:25:10.830
made clear that banks, both
national banks and state banks

1445
01:25:10.920 --> 01:25:13.920
have the ability to export their
home states interest rate to

1446
01:25:13.920 --> 01:25:17.310
other states. And why was that
important as a policy matter?

1447
01:25:17.460 --> 01:25:21.630
Because again, in the late 70s,
the market rate of money was in

1448
01:25:21.630 --> 01:25:25.080
the high double digits and the
state usury cap in some states

1449
01:25:25.080 --> 01:25:27.630
was in the single digits.
Meaning that if you lived in

1450
01:25:27.630 --> 01:25:30.090
that state, and you didn't have
interest rate exportation, you

1451
01:25:30.090 --> 01:25:34.470
literally couldn't borrow money.
That's not a good thing in the

1452
01:25:34.470 --> 01:25:37.950
market cycle. Right. And so that
I think the argument does, when

1453
01:25:37.950 --> 01:25:40.530
Congress decided that banks can
export their interest rate, they

1454
01:25:40.530 --> 01:25:43.620
decreed that that's not
predatory lending. So the

1455
01:25:43.620 --> 01:25:46.800
question is, why does it become
predatory lending? When a loan

1456
01:25:46.800 --> 01:25:50.100
that was legal when made is sold
to somebody else? The analogy I

1457
01:25:50.100 --> 01:25:52.170
give is, if you're renting an
apartment, and you have a lease

1458
01:25:52.170 --> 01:25:54.960
that says you have to pay $500 a
month, and then the building

1459
01:25:54.960 --> 01:25:57.540
owner sells it to a different
owner, and your lease is still

1460
01:25:57.540 --> 01:26:01.620
$500 a month. What's changed?
Did that rent suddenly become

1461
01:26:01.650 --> 01:26:04.740
unaffordable? Did it suddenly
become usurious? No, you live in

1462
01:26:04.740 --> 01:26:06.780
the same apartment and you
contracted to pay that amount.

1463
01:26:07.140 --> 01:26:10.050
And in the 70s, and 80s. We all
recognized it was a good thing.

1464
01:26:10.050 --> 01:26:13.500
And my testimony, I talked about
what a bipartisan consensus that

1465
01:26:13.500 --> 01:26:17.250
was to allow rate exportation
Altru lender does is make those

1466
01:26:17.250 --> 01:26:21.000
markets work better, provide
clarity, reduce litigation, and

1467
01:26:21.000 --> 01:26:24.150
make credit more available.
Remember, in the two states,

1468
01:26:24.480 --> 01:26:27.000
that rule for five years of
credit to low and moderate

1469
01:26:27.000 --> 01:26:31.560
income people fell by 64%. That
can't be what we want.

1470
01:26:33.180 --> 01:26:36.120
Barry Loudermilk: Well, access
to credit is really what the

1471
01:26:36.120 --> 01:26:39.360
issue is, especially in a
recovering economy when people

1472
01:26:39.360 --> 01:26:43.290
are trying to get back into the
workforce or become an

1473
01:26:43.290 --> 01:26:46.710
entrepreneur and start a new
business. And as you know, bank

1474
01:26:46.710 --> 01:26:49.590
FinTech Partnerships has
resulted in tremendous expansion

1475
01:26:49.590 --> 01:26:52.620
of the availability of credit,
not just for those who have good

1476
01:26:52.620 --> 01:26:57.540
credit, but also also those with
limited credit history. Can you

1477
01:26:57.540 --> 01:26:59.850
explain why adding more
uncertainty in the lending

1478
01:26:59.850 --> 01:27:02.340
markets will reduce access to
credit for consumers and

1479
01:27:02.340 --> 01:27:02.910
businesses?

1480
01:27:03.210 --> 01:27:04.290
Brian Brooks: Well I'd ask the
chairman.

1481
01:27:04.350 --> 01:27:07.110
Ed Perlmutter: The gentleman,
the gentleman's question. Look,

1482
01:27:07.110 --> 01:27:10.470
I gave 30 seconds last time, you
got another 30 seconds? Sorry.

1483
01:27:11.820 --> 01:27:13.530
Brian Brooks: Yeah, so thank
you, Mr. Chairman, I would just

1484
01:27:13.530 --> 01:27:17.430
quickly say that if a bank can't
engage in FinTech and other part

1485
01:27:17.430 --> 01:27:20.010
partnerships to sell loans in
the secondary market, the bank's

1486
01:27:20.010 --> 01:27:22.620
ability to provide credit is
limited by the size of its own

1487
01:27:22.620 --> 01:27:24.960
balance sheet, right, because it
can't sell that loan and then

1488
01:27:24.960 --> 01:27:27.960
use the proceeds to make the
next loan. When a bank is

1489
01:27:27.960 --> 01:27:30.750
limited by the size of its own
balance sheet. Not surprisingly,

1490
01:27:30.750 --> 01:27:33.360
it's going to focus on the
safest and most profitable

1491
01:27:33.360 --> 01:27:35.820
loans, which mean loans to the
richest people and the people

1492
01:27:35.820 --> 01:27:39.300
with the best credit scores. So
the first people who get hurt

1493
01:27:39.300 --> 01:27:42.450
when credit starts getting
ration are poor people. Again,

1494
01:27:42.480 --> 01:27:44.460
you know, the Federal Reserve
has done multiple studies

1495
01:27:44.460 --> 01:27:47.370
showing that more credit equals
less poverty, and my philosophy

1496
01:27:47.370 --> 01:27:50.010
is that making credit markets
work for everybody ought to be

1497
01:27:50.010 --> 01:27:51.060
our highest priority.

1498
01:27:51.690 --> 01:27:53.700
Barry Loudermilk: Well said, and
I yield back the remaining time

1499
01:27:53.700 --> 01:27:54.690
I no longer have.

1500
01:27:54.690 --> 01:27:57.690
Roger Williams: Gentleman's time
has expired. And, you know, if

1501
01:27:57.690 --> 01:28:00.390
we get a chance, maybe we'll do
a lightning round for everybody

1502
01:28:00.390 --> 01:28:03.390
after this. But we're basically
dealing with the whole banking

1503
01:28:03.390 --> 01:28:07.320
system and a number of different
issues related to it. So I now

1504
01:28:07.320 --> 01:28:10.560
would like to recognize the
gentleman from Illinois, Dr.

1505
01:28:10.560 --> 01:28:19.860
Foster for five minutes. Oh, you
got on mute.

1506
01:28:26.520 --> 01:28:29.430
Bill Foster: Apologies. So I'd
like to ask a couple of

1507
01:28:29.430 --> 01:28:31.920
questions about what's going on
in Wyoming, which seems to be a

1508
01:28:31.920 --> 01:28:34.800
state that has more senators
than they have actual people.

1509
01:28:35.460 --> 01:28:39.420
But in 2019, the state of
Wyoming enacted a series of laws

1510
01:28:39.420 --> 01:28:42.870
related to cryptocurrency,
including one authorizing the

1511
01:28:42.870 --> 01:28:47.160
charter of a special purpose
depository institutions were SPD

1512
01:28:47.160 --> 01:28:51.180
eyes. And in September, Wyoming
approved the first SPDIF

1513
01:28:51.180 --> 01:28:55.470
application for Kraken Bank,
which is a digital asset company

1514
01:28:55.470 --> 01:28:59.670
based in Cheyenne, the bank have
plans to offer services such as

1515
01:28:59.670 --> 01:29:03.660
digital asset custody, demand
deposit accounts, wire transfer

1516
01:29:03.660 --> 01:29:08.160
services. And at this time, it
seems that the Kraken bank is

1517
01:29:08.160 --> 01:29:12.480
not seeking deposit insurance
from the FDIC. And instead the

1518
01:29:12.480 --> 01:29:15.600
bank is promised that it will
maintain 100% reserves of

1519
01:29:15.600 --> 01:29:20.760
deposits and fiat currency and
in liquid assets. Now, the rules

1520
01:29:20.760 --> 01:29:24.720
of the Wyoming banking division
define liquid assets to include

1521
01:29:24.720 --> 01:29:29.070
investment grade corporate debt,
investment grade US state and

1522
01:29:29.070 --> 01:29:34.860
municipal securities and other
in and other investment grade

1523
01:29:35.640 --> 01:29:40.500
federal or state government
agency securities. So, under

1524
01:29:40.740 --> 01:29:43.620
stressful events, some of these
instruments would make that

1525
01:29:43.620 --> 01:29:46.950
arrangement inherently unstable,
such as when you have an

1526
01:29:46.950 --> 01:29:50.220
interest rate swing and Treasury
bond prices would fall or

1527
01:29:50.220 --> 01:29:54.870
corporate credit risk may
increase and causing capital

1528
01:29:54.870 --> 01:29:59.250
losses. And so, Ms. Johnson and
do you have concerns that this

1529
01:29:59.250 --> 01:30:03.240
model of CAP realization may not
be robust enough to withstand

1530
01:30:03.240 --> 01:30:04.740
periods of economic stress.

1531
01:30:06.210 --> 01:30:07.710
Kristin Johnson: Thank you so
much representative for the

1532
01:30:07.710 --> 01:30:11.430
question. I do have strong
concerns. And I'd like to sort

1533
01:30:11.430 --> 01:30:15.540
of situate this conversation in
reference to the 2008 financial

1534
01:30:15.540 --> 01:30:18.780
crisis. And in the moment, it
may not be the case that Kraken

1535
01:30:18.780 --> 01:30:23.340
is soliciting Federal Deposit
Insurance. But however, should

1536
01:30:23.370 --> 01:30:27.660
Kraken or other was referenced
earlier Coinbase other

1537
01:30:27.660 --> 01:30:30.300
cryptocurrency exchanges or
platforms operating in this

1538
01:30:30.300 --> 01:30:34.380
space experienced significant
solvency crises, we should not

1539
01:30:34.410 --> 01:30:37.230
assume that they would not be
eligible for some type of

1540
01:30:37.230 --> 01:30:40.020
relief, I would point in this
moment to the Fed's discount

1541
01:30:40.020 --> 01:30:44.520
window being made available to
AIG. And in the moment that the

1542
01:30:44.520 --> 01:30:47.160
Fed's discount window was being
made available to AIG to an

1543
01:30:47.160 --> 01:30:50.160
earlier point in conversation, I
was leaving a position as

1544
01:30:50.160 --> 01:30:53.850
Associate General Counsel at
JPMorgan Chase. It was within

1545
01:30:53.850 --> 01:30:57.300
weeks of us acquiring another
bank now defunct, but had a long

1546
01:30:57.300 --> 01:31:00.720
history Bear Stearns and I'd
like to just underscore that

1547
01:31:00.720 --> 01:31:03.240
there is more than sufficient
evidence in the cryptocurrency

1548
01:31:03.240 --> 01:31:06.330
space already, that exchanges
not only experienced solvency

1549
01:31:06.330 --> 01:31:09.990
crises, but they are subject to
cyber attacks that have left

1550
01:31:09.990 --> 01:31:15.390
them in a unable to satisfy
customer deposits. They've been

1551
01:31:15.420 --> 01:31:18.600
also subject to any number of
scams and misconduct more

1552
01:31:18.600 --> 01:31:19.110
broadly.

1553
01:31:19.110 --> 01:31:22.170
Bill Foster: Thank you. And I'd
like to also talk a little bit

1554
01:31:22.170 --> 01:31:26.730
about their their
capitalization. The Wyoming SBDI

1555
01:31:26.760 --> 01:31:30.210
guide capital guidance states
that a prospective SBDI should

1556
01:31:30.210 --> 01:31:33.690
consider one and a quarter to
one and three quarter percent of

1557
01:31:33.690 --> 01:31:38.310
proposed asset under management
or assets on asset or assets

1558
01:31:38.310 --> 01:31:41.820
under custody or $10 million,
whichever is greater as an

1559
01:31:41.820 --> 01:31:45.630
appropriate minimum requirement
for chartering. However, these

1560
01:31:45.630 --> 01:31:49.020
requirements are have been will
be developed on a case by case

1561
01:31:49.020 --> 01:31:52.410
basis. The banks under
supervision of a federal banking

1562
01:31:52.410 --> 01:31:55.470
agency are required to maintain
basic minimum capital

1563
01:31:55.470 --> 01:31:58.830
requirements that translate to a
percentage of assets. And

1564
01:31:58.830 --> 01:32:02.490
furthermore, traditional banks
have other key protections such

1565
01:32:02.490 --> 01:32:06.000
as deposit insurance or access
to a lender of last resort.

1566
01:32:06.300 --> 01:32:10.830
Professor girding since the SPD
eyes do not have deposit

1567
01:32:10.830 --> 01:32:14.790
insurance or lender of last
resort, would you consider SPDIs

1568
01:32:14.820 --> 01:32:18.300
to be adequately capitalized
under the Wyoming banking

1569
01:32:18.300 --> 01:32:19.650
divisions general formula.

1570
01:32:21.210 --> 01:32:25.170
Erik Gerding: It's very
difficult to say, representative

1571
01:32:25.170 --> 01:32:28.890
Foster because of that, that
critical phrase that you

1572
01:32:28.890 --> 01:32:33.870
mentioned in your remarks a case
by case basis. It's hard to know

1573
01:32:33.870 --> 01:32:40.200
whether the way in which Wyoming
regulators will actually look at

1574
01:32:40.200 --> 01:32:45.240
applicants for these charters in
a consistent way, and in a way

1575
01:32:45.240 --> 01:32:48.720
that actually makes sure ensures
that they're well capitalized.

1576
01:32:48.720 --> 01:32:52.830
And I wonder that I worry that a
lot of these decisions are going

1577
01:32:52.830 --> 01:32:56.970
to be made in a case by case
basis and in a very non

1578
01:32:56.970 --> 01:32:58.110
transparent way.

1579
01:33:00.690 --> 01:33:03.390
Bill Foster: All right. So
that's, that's actually a

1580
01:33:03.390 --> 01:33:08.040
valuable thing to keep our eyes
on. So I appreciate that. Just a

1581
01:33:08.070 --> 01:33:13.500
quick question. You know, a big
issue with crypto generally

1582
01:33:13.500 --> 01:33:16.770
fintech generally, is the whole
business of know your customer,

1583
01:33:16.860 --> 01:33:23.700
and your the ability to use to,
for customers to to basically

1584
01:33:23.700 --> 01:33:26.790
prove who they are online. And
there are proposals that are

1585
01:33:26.790 --> 01:33:32.190
being made and actually done in
some states that that consumers

1586
01:33:32.220 --> 01:33:35.370
will have access to so called
Digital driver's licenses to

1587
01:33:35.370 --> 01:33:39.600
prove who they are online. Do
you have any comments on how

1588
01:33:39.600 --> 01:33:44.520
that may make the whole KYC AML
situation approved? No matter

1589
01:33:44.520 --> 01:33:45.870
what the charter you adopt?

1590
01:33:46.470 --> 01:33:49.470
Roger Williams: The gentleman's
question will require a long

1591
01:33:49.470 --> 01:33:52.590
time to answer and I would ask
that either we do it in a

1592
01:33:52.590 --> 01:33:54.960
lightning round, or you
submitted in writing and the

1593
01:33:55.200 --> 01:33:56.850
panelists can answer your
question.

1594
01:33:57.570 --> 01:33:59.520
Bill Foster: I appreciate that.
Mr. Chairman, I yield back.

1595
01:33:59.520 --> 01:34:01.740
Roger Williams: Gentleman's time
has expired. Thank you.

1596
01:34:02.280 --> 01:34:05.970
Gentleman from Tennessee. Mr.
Kustoff, is recognized for five

1597
01:34:05.970 --> 01:34:06.360
minutes.

1598
01:34:07.860 --> 01:34:09.990
David Kustoff: Thank you, Mr.
Chairman. Thank you for holding

1599
01:34:09.990 --> 01:34:12.420
today's hearing. And I do want
to thank the witnesses for

1600
01:34:12.420 --> 01:34:18.000
appearing as well. Mr. Pacheco
if I if I can to you the

1601
01:34:18.150 --> 01:34:23.670
obviously the last 12 and 13
months has created a lot of new

1602
01:34:23.670 --> 01:34:27.090
normals a lot of new habits. Can
you talk about from your

1603
01:34:27.090 --> 01:34:30.990
customers perspective? What
you've seen in in terms of

1604
01:34:31.290 --> 01:34:36.000
changing a preference and maybe
changing up habits accelerated

1605
01:34:36.000 --> 01:34:37.530
by the by the pandemic?

1606
01:34:38.610 --> 01:34:40.980
Carlos Pacheco: Sure. Thank you
for the question. Congressman,

1607
01:34:41.430 --> 01:34:45.390
the last 12 or 14 months has
been very disruptive. It's been

1608
01:34:45.390 --> 01:34:48.450
disruptive for in Lobby
transactions and traffic, and

1609
01:34:48.450 --> 01:34:51.540
we've had to shift to other
avenues and sources and

1610
01:34:51.540 --> 01:34:54.090
solutions and that includes
things like mobile banking,

1611
01:34:54.390 --> 01:34:58.290
online banking, desktop banking,
certainly a higher utilization

1612
01:34:58.290 --> 01:35:02.100
of telephone banking and And,
you know, in a last resort

1613
01:35:02.100 --> 01:35:06.030
perspective, reefer, utilizing
drive thru banking, so it's been

1614
01:35:06.300 --> 01:35:08.790
very disruptive in each of those
cases, you know, we've used

1615
01:35:08.820 --> 01:35:11.310
solutions that we partner with
other companies on our mobile

1616
01:35:11.310 --> 01:35:14.250
banking platform would be a
great example. I think that's,

1617
01:35:14.790 --> 01:35:17.250
that's the current, that some of
the current things we're doing

1618
01:35:17.250 --> 01:35:20.580
relative to technology
innovation, to be able to drive

1619
01:35:20.580 --> 01:35:23.190
that and then also, including
mobile deposits on that

1620
01:35:23.190 --> 01:35:26.550
platform. And so the
partnerships that we've had have

1621
01:35:26.550 --> 01:35:31.110
been a welcome and received
benefits to our membership

1622
01:35:31.110 --> 01:35:32.040
during the pandemic.

1623
01:35:32.040 --> 01:35:35.610
David Kustoff: Thank you, Mr.
Pacheco. Mr. Brooks, I could for

1624
01:35:35.610 --> 01:35:40.290
you, I do an echo of the people
who, who thank you for your

1625
01:35:40.290 --> 01:35:44.760
prior service to the government.
I appreciate your opening

1626
01:35:44.760 --> 01:35:49.530
statement. I also appreciate
your written statement. Can you

1627
01:35:49.530 --> 01:35:54.000
talk about and kind of following
up on Mr. Pacheco, the change in

1628
01:35:54.000 --> 01:35:59.490
the way customers now operate in
this environment? And what does

1629
01:35:59.490 --> 01:36:01.530
it say about the future of the
financial industry?

1630
01:36:03.180 --> 01:36:05.370
Brian Brooks: Yeah, well, so. So
congressman, that is a great

1631
01:36:05.370 --> 01:36:08.640
question. And I appreciate Mr.
Pacheco, his comments as well. I

1632
01:36:08.640 --> 01:36:11.040
think one of the reasons it's
great to have a credit union

1633
01:36:11.040 --> 01:36:14.430
representative on this panel is
that it shows to meet the credit

1634
01:36:14.430 --> 01:36:17.280
needs of Americans, particularly
in a post pandemic, sort of

1635
01:36:17.280 --> 01:36:20.340
contactless environment, it's
going to be all hands on deck.

1636
01:36:20.520 --> 01:36:24.240
So the answer clearly is not
that the biggest banks alone can

1637
01:36:24.240 --> 01:36:27.390
solve all of our credit
problems. Indeed, Jamie Dimon

1638
01:36:27.390 --> 01:36:30.720
just said in his annual investor
letter last week, that the role

1639
01:36:30.720 --> 01:36:33.360
and relevance of banks in the
economy is the smallest it's

1640
01:36:33.360 --> 01:36:37.320
been at anytime in the last, you
know, number of decades, because

1641
01:36:37.320 --> 01:36:40.950
customers preferences have
changed. Most people and I think

1642
01:36:40.950 --> 01:36:43.200
Congressman Barr has it right,
there's a real urban rural

1643
01:36:43.200 --> 01:36:46.860
divide on this. But most people
in the United States have

1644
01:36:46.860 --> 01:36:49.290
elected not to visit bank
branches. I mean, just ask any

1645
01:36:49.290 --> 01:36:52.140
of you when was the last time
you went into a branch for a

1646
01:36:52.140 --> 01:36:55.350
significant transaction, and the
pandemic has accelerated that

1647
01:36:55.350 --> 01:36:58.860
kind of thing. So you have a
combination of many people want

1648
01:36:58.860 --> 01:37:01.860
to do things from home, like
we're doing this hearing today.

1649
01:37:02.100 --> 01:37:04.770
Many people don't want to
interact with other people that

1650
01:37:04.770 --> 01:37:08.430
they don't know in day to day
interactions. And a significant

1651
01:37:08.460 --> 01:37:11.040
amount of capital has fled the
banking system for other

1652
01:37:11.040 --> 01:37:14.010
applications. This is why
fintech valuations are now

1653
01:37:14.010 --> 01:37:17.490
higher than bank valuations on a
revenue multiple basis over the

1654
01:37:17.490 --> 01:37:20.970
last five year period. And so in
that world where capital has

1655
01:37:20.970 --> 01:37:23.460
left banking and consumer
preferences have shifted to

1656
01:37:23.460 --> 01:37:26.400
other kinds of platforms. The
policy question is, how do we

1657
01:37:26.400 --> 01:37:28.380
make sure the system is still
safe and sound a consumer

1658
01:37:28.380 --> 01:37:31.530
protections are respected?
That's the question. There's no

1659
01:37:31.530 --> 01:37:34.290
one answer. It's not going to be
to keep all fintechs out of

1660
01:37:34.290 --> 01:37:36.990
banking, that's not going to be
the answer. It's not going to be

1661
01:37:37.080 --> 01:37:39.990
to say crypto must be, you know,
banned, because it's a source of

1662
01:37:39.990 --> 01:37:42.240
terrorism financing. Now that
it's a two and a half trillion

1663
01:37:42.240 --> 01:37:45.390
dollar market, what it's going
to be as an all hands on deck

1664
01:37:45.390 --> 01:37:48.690
attempt to make sure that we
regulate similar activities.

1665
01:37:48.720 --> 01:37:52.200
Similarly, regardless of whether
that activity takes place on a

1666
01:37:52.200 --> 01:37:55.620
legacy bank platform, a fintech
platform, a crypto platform or

1667
01:37:55.620 --> 01:37:58.230
whatever, if you're doing
payments, you should be subject

1668
01:37:58.230 --> 01:38:00.930
to payments regulation. If
you're engaging in credit, you

1669
01:38:00.930 --> 01:38:03.150
should be subject to the fair
lending laws. And it shouldn't

1670
01:38:03.150 --> 01:38:06.240
matter whether you're a legacy
depository or something else,

1671
01:38:06.240 --> 01:38:09.090
consumer preferences change, and
the system you all regulate has

1672
01:38:09.090 --> 01:38:10.020
to evolve with that.

1673
01:38:11.310 --> 01:38:14.340
David Kustoff: Thank you, I and
you mentioned Congressman bar,

1674
01:38:14.340 --> 01:38:18.930
and I want to follow up on his
line of questioning and also the

1675
01:38:18.930 --> 01:38:21.510
comments that you made in your
in your written statement, at

1676
01:38:21.510 --> 01:38:26.940
least about the adobo banks and
the lack thereof over the last X

1677
01:38:26.940 --> 01:38:32.160
number of years and the closure
of bank branches. You know, my

1678
01:38:32.160 --> 01:38:35.940
district I represent part of
Memphis, but also fairly rural

1679
01:38:35.970 --> 01:38:40.380
part of Tennessee. I traveled
across the district quite a bit.

1680
01:38:41.250 --> 01:38:46.650
And what I heard was, we have a
lack of rural broadband. We have

1681
01:38:46.650 --> 01:38:51.510
a lack of broadband. And as we
talk about the continued

1682
01:38:51.510 --> 01:38:56.820
emergence of FinTech, and we
mash that together, how can how

1683
01:38:56.820 --> 01:39:01.020
can the fintechs fill the void
of some of these closures, and

1684
01:39:01.020 --> 01:39:02.760
yet our communities not have
broadband.

1685
01:39:03.180 --> 01:39:05.040
Brian Brooks: Congressman,
that's the all hands on deck

1686
01:39:05.040 --> 01:39:07.800
point, we need a combination of
it needs to be easier to charter

1687
01:39:07.800 --> 01:39:10.650
new banks, and it needs to be
easier for fintechs to fill

1688
01:39:10.650 --> 01:39:12.090
voids. We need all of that.

1689
01:39:13.050 --> 01:39:15.330
David Kustoff: Thank you very
much. My time is up and I yield

1690
01:39:15.330 --> 01:39:16.800
that. Thank you very much.

1691
01:39:18.300 --> 01:39:21.030
Ed Perlmutter: Thank you, Mr.
Kustoff. The gentleman from

1692
01:39:21.030 --> 01:39:24.480
Florida, Mr. Lawson is
recognized for five minutes.

1693
01:39:25.289 --> 01:39:27.539
Al Lawson: Thank you, Mr.
Chairman. I'd like to welcome

1694
01:39:27.599 --> 01:39:30.779
everybody to admitted it's been
a very good discussion. I'll

1695
01:39:30.779 --> 01:39:32.879
probably have to bathtime and go
back to Mr. Brooks in the

1696
01:39:32.939 --> 01:39:36.629
grocery mindset. Because, you
know, I have a lot of students

1697
01:39:37.019 --> 01:39:39.959
in my district, you know, and
they are much younger and they

1698
01:39:39.959 --> 01:39:43.169
don't want to go into banks but
somebody the other citizens

1699
01:39:44.339 --> 01:39:46.559
around my age and stuff. They
still want to go in the branch

1700
01:39:46.559 --> 01:39:49.889
bank banks and sit down and talk
to them but I really need to get

1701
01:39:49.889 --> 01:39:53.399
this message. I hope I can come
back to you. I noticed that

1702
01:39:53.399 --> 01:39:58.739
Professor Gerding and is really
testimony he stated that he

1703
01:39:58.739 --> 01:40:03.659
wrote in the separation between
banking and commerce proposed

1704
01:40:03.659 --> 01:40:07.379
risks for financial stability
and Consumer Protection have

1705
01:40:07.379 --> 01:40:11.459
threatened to distort of
financial market by allowing

1706
01:40:11.459 --> 01:40:16.589
commercial firms that can obtain
banking power and privilege to

1707
01:40:16.589 --> 01:40:21.569
compete unfairly with the firms
that cannot. And secondly, is

1708
01:40:21.569 --> 01:40:25.199
start Banking Markets by align
non banks to offer banking

1709
01:40:25.199 --> 01:40:29.279
services without facing the same
degree of supervision and

1710
01:40:29.279 --> 01:40:33.149
regulation as bank which in turn
would create incentives for

1711
01:40:33.149 --> 01:40:38.099
banks to take more risks. Lobby
for deregulation, can you please

1712
01:40:38.099 --> 01:40:39.449
explain those three points?

1713
01:40:41.250 --> 01:40:45.540
Erik Gerding: Oh, thank you. Let
me explain the last piece first,

1714
01:40:46.530 --> 01:40:51.540
when you undermine the bank
charter, when you allow

1715
01:40:51.540 --> 01:40:55.740
competitors to unfairly compete
with banks, without being

1716
01:40:55.740 --> 01:40:59.850
subjected to the same set of
regulations, and when you give

1717
01:40:59.850 --> 01:41:04.410
all of the powers and privileges
of a bank, to a non bank, that

1718
01:41:04.410 --> 01:41:09.030
has an effect on bank behavior,
as well. And it's just core

1719
01:41:09.030 --> 01:41:12.150
banking economics, when you
undermine the bank charter and

1720
01:41:12.150 --> 01:41:16.200
allow unfair competition, banks
are going to respond by taking

1721
01:41:16.200 --> 01:41:21.450
more risks. And that's partially
what we've seen in the last 20

1722
01:41:21.480 --> 01:41:24.900
years and part of the poor part
of what we saw on the global

1723
01:41:24.900 --> 01:41:30.450
financial crisis. So that's the
effect on the banking sector, on

1724
01:41:30.480 --> 01:41:34.830
the commercial sector, by
allowing non banks to get powers

1725
01:41:34.830 --> 01:41:38.730
and privileges of banks,
including exemptions from a

1726
01:41:38.730 --> 01:41:42.990
whole host of state laws, which
Mr. Brooks is not really

1727
01:41:42.990 --> 01:41:47.520
mentioned, you're allowing the
firms that have charters to

1728
01:41:47.520 --> 01:41:53.370
basically get to undercut their
rivals in commercial markets,

1729
01:41:54.210 --> 01:41:58.590
and allowing commercial firms
and non banks to have access to

1730
01:41:58.590 --> 01:42:02.250
things like Federal Reserve
emergency loans, and the Federal

1731
01:42:02.250 --> 01:42:07.830
Reserve payment systems. without
being subject to the same set of

1732
01:42:07.830 --> 01:42:11.700
regulations and the same duties
of banks and functions of banks.

1733
01:42:12.060 --> 01:42:16.500
You're basically distorting
commercial markets, non Banking

1734
01:42:16.500 --> 01:42:17.160
Markets.

1735
01:42:19.920 --> 01:42:25.080
Al Lawson: That's incredible.
That's impressive, before my

1736
01:42:25.080 --> 01:42:27.870
time ran out, and you talked
about the change in marketing

1737
01:42:27.870 --> 01:42:31.260
and way individual like to do
banking, and really don't

1738
01:42:31.380 --> 01:42:38.670
observe where, where people in
50 or 60. And above, you know, I

1739
01:42:38.670 --> 01:42:40.530
don't know where you address
those group. And maybe they're

1740
01:42:40.530 --> 01:42:43.860
coming along as much as the
young people, because I notice

1741
01:42:43.860 --> 01:42:46.110
and a lot of whatever, we have a
lot of students and stuff in my

1742
01:42:46.110 --> 01:42:49.410
area, maybe 50 or 60,000 of
them. It's a whole different

1743
01:42:49.410 --> 01:42:53.760
story, in terms of how to go
into pain in the future. And so

1744
01:42:53.910 --> 01:42:56.250
I don't care, I don't already
have time to comment on it and

1745
01:42:56.310 --> 01:42:59.760
looking at the trends. But I
better stop right now for my

1746
01:42:59.760 --> 01:43:01.440
time run out, give you a chance
to respond.

1747
01:43:02.100 --> 01:43:04.080
Brian Brooks: Absolutely. Well,
Congressman Lawson, I really

1748
01:43:04.080 --> 01:43:06.900
appreciate the question. So I'd
make a couple of comments. I

1749
01:43:06.900 --> 01:43:09.480
mean, first of all, there's
clearly generational changes in

1750
01:43:09.480 --> 01:43:12.000
preferences. So like, I'm the
youngest person, you know, who's

1751
01:43:12.000 --> 01:43:14.370
still writes checks. You know,
nobody does that anymore. My

1752
01:43:14.370 --> 01:43:16.770
kids aren't aware of what a
check is. So there's a little

1753
01:43:16.770 --> 01:43:18.960
bit of that, where people just
like doing things on their

1754
01:43:18.960 --> 01:43:21.120
phones. But there's also
something that's more

1755
01:43:21.120 --> 01:43:25.950
fundamental going on here. And
that is that banks, as part of a

1756
01:43:25.980 --> 01:43:29.760
business model division, have
retreated from areas that they

1757
01:43:29.760 --> 01:43:33.390
used to serve better than they
do today. So for example, more

1758
01:43:33.390 --> 01:43:36.990
consumer lending happens outside
of banks inside of banks, that

1759
01:43:36.990 --> 01:43:39.930
would have been shocking 25
years ago. But today, the

1760
01:43:39.930 --> 01:43:42.630
percentage of consumer bubbles
delivered is being done on

1761
01:43:42.690 --> 01:43:45.960
FinTech and other non bank
platforms, not supervised by the

1762
01:43:45.960 --> 01:43:49.980
OCC or any other federal
regulator. So why is that? It's

1763
01:43:49.980 --> 01:43:53.640
because the cost involved in a
big bank, underwriting somebody

1764
01:43:53.640 --> 01:43:56.850
for a $5,000 personal loan to
replace their hot water heater

1765
01:43:56.880 --> 01:44:01.170
isn't worth the input cost and
so on. And so, you know, what I

1766
01:44:01.170 --> 01:44:03.540
find interesting about the
discussion is there seems to be

1767
01:44:03.540 --> 01:44:06.930
a belief that legacy banks are
somehow the only legitimate

1768
01:44:06.930 --> 01:44:10.020
source of financing, and yet the
market tells us otherwise,

1769
01:44:10.020 --> 01:44:13.500
they're not serving the needs of
sort of average Americans the

1770
01:44:13.500 --> 01:44:15.870
way that they used to, and so
fintechs and others have come in

1771
01:44:15.870 --> 01:44:18.570
to fill the gap. My belief is
that activity ought to be

1772
01:44:18.570 --> 01:44:21.030
supervised, it ought to be safe
and sound the way that other

1773
01:44:21.030 --> 01:44:24.480
things are. And we shouldn't
fetishize what the word bank has

1774
01:44:24.480 --> 01:44:27.030
historically conjured up. It's
not what the statute says it's

1775
01:44:27.030 --> 01:44:29.400
not the way it's always
Congress.

1776
01:44:32.910 --> 01:44:33.930
Al Lawson: I yield back, Miss
Chairman.

1777
01:44:34.710 --> 01:44:38.910
Ed Perlmutter: Thank you, Mr.
Lawson. Now, we'll go to Mr.

1778
01:44:38.910 --> 01:44:41.250
Rose from Tennessee for five
minutes.

1779
01:44:43.230 --> 01:44:45.630
John Rose: Good morning. And
thank you, Chairman Perlmutter

1780
01:44:45.630 --> 01:44:48.690
and Ranking Member Luke De Meyer
for holding this hearing today.

1781
01:44:49.290 --> 01:44:52.980
Mr. Brooks, welcome back to the
committee and thank you to all

1782
01:44:52.980 --> 01:44:57.600
of our witnesses for being here
with us today. As we discussed

1783
01:44:57.600 --> 01:45:02.550
financial institution charters I
think it important that we avoid

1784
01:45:02.550 --> 01:45:06.990
revisiting outdated regulations
and instead look to the future.

1785
01:45:07.440 --> 01:45:10.710
Technology and Innovation have
increased access to financial

1786
01:45:10.710 --> 01:45:14.340
services for many Americans. And
it is important that we provide

1787
01:45:14.340 --> 01:45:18.120
clear rules of the road that
allow for continued growth in

1788
01:45:18.120 --> 01:45:22.560
this space. A large portion of
my district in Middle Tennessee

1789
01:45:22.560 --> 01:45:27.060
is rural. In addition to having
to travel further distances to

1790
01:45:27.090 --> 01:45:30.210
obtain banking services, rural
communities have seen increased

1791
01:45:30.210 --> 01:45:35.490
costs and accessing financial
services in part due to branch

1792
01:45:35.490 --> 01:45:38.910
closures. As of the third
quarter of 2020, there were

1793
01:45:38.940 --> 01:45:42.840
13,000 fewer banks and rural
communities than in the 1980s.

1794
01:45:43.410 --> 01:45:46.440
And although our community banks
are doing their absolute best to

1795
01:45:46.440 --> 01:45:50.310
serve our communities, rural
areas continue to face the long

1796
01:45:50.310 --> 01:45:54.090
term effects of these closings.
Mr. Brooks, could you discuss

1797
01:45:54.090 --> 01:46:00.120
how fintechs could help in could
step in to try and fill that

1798
01:46:00.120 --> 01:46:01.800
gaps in rural communities?

1799
01:46:02.550 --> 01:46:05.520
Brian Brooks: Yeah, absolutely.
So So congressman, first of all,

1800
01:46:05.520 --> 01:46:08.010
I'll just say and with no
offense to the Chairman, that

1801
01:46:08.070 --> 01:46:10.680
although I am from Colorado, I
did spend my first five years

1802
01:46:10.680 --> 01:46:13.440
living in just outside of Paris,
Tennessee. So these issues

1803
01:46:13.440 --> 01:46:16.530
actually sort of resonate with
me in a in a personal way. And I

1804
01:46:16.530 --> 01:46:19.500
would also say that Fintech is
not the solution for every

1805
01:46:19.500 --> 01:46:23.280
problem under the sun. But it is
a solution as part of an all

1806
01:46:23.280 --> 01:46:26.550
hands on deck approach. Okay? So
the thing about Fintech is

1807
01:46:26.550 --> 01:46:29.280
fintechs are able to bring
capital sources that are outside

1808
01:46:29.280 --> 01:46:32.100
of your community, into your
community. And historically, the

1809
01:46:32.100 --> 01:46:35.310
way that a rural area would be
served is you'd have a local

1810
01:46:35.310 --> 01:46:38.700
community bank, it would have a
couple of branches, its deposits

1811
01:46:38.700 --> 01:46:41.370
would all have been sourced from
the local community. And then

1812
01:46:41.370 --> 01:46:43.770
those deposits would be
reinvested into loans to

1813
01:46:43.800 --> 01:46:46.410
borrowers, whether they were,
you know, agricultural loans to

1814
01:46:46.410 --> 01:46:48.690
farmers, or whether they were
small business loans to the mom

1815
01:46:48.690 --> 01:46:52.890
and pop Cafe on Main Street or
whatever. The problem with that

1816
01:46:52.890 --> 01:46:56.070
is, as American has disinvested
from rural communities over the

1817
01:46:56.070 --> 01:46:59.760
last 30 years on kind of a long
term basis. That kind of

1818
01:46:59.760 --> 01:47:02.460
capital, even if you had a bank
branch is probably not

1819
01:47:02.460 --> 01:47:05.280
sufficient to serve the credit
needs of places like your

1820
01:47:05.280 --> 01:47:08.580
district. And so one of the
advantages that FinTech offers,

1821
01:47:08.580 --> 01:47:10.800
and I would argue, actually,
over the long term, one of the

1822
01:47:10.800 --> 01:47:14.400
advantages of crypto offers, is
it unlocks sources of capital

1823
01:47:14.400 --> 01:47:17.520
that are far far away from your
communities, right, and is able

1824
01:47:17.520 --> 01:47:20.340
to deliver them over the
Internet to any credit worthy

1825
01:47:20.340 --> 01:47:23.010
person who happens to live in
Middle Tennessee. And that is, I

1826
01:47:23.010 --> 01:47:25.710
guess, my main point is there
may not be enough capital there

1827
01:47:25.860 --> 01:47:29.040
to justify a de novo bank. And
yet there may be credit worthy

1828
01:47:29.040 --> 01:47:31.230
people who need to access
capital sourced elsewhere.

1829
01:47:32.670 --> 01:47:35.490
John Rose: During your time at
the OCC, you focused on

1830
01:47:35.490 --> 01:47:38.910
increasing access to charters
for fintechs. Could you describe

1831
01:47:38.910 --> 01:47:42.330
the barriers to entry for new
firms looking to get into

1832
01:47:42.330 --> 01:47:43.380
payments or lending?

1833
01:47:44.910 --> 01:47:47.640
Brian Brooks: Yeah, well, so if
you if you put aside the bank

1834
01:47:47.640 --> 01:47:50.280
charter, okay, and you wanted to
start a payments company, let's

1835
01:47:50.280 --> 01:47:53.670
say you wanted to start stripe
today, the first thing you have

1836
01:47:53.670 --> 01:47:56.370
to do is you have to go and
obtain 50 Money transmitter

1837
01:47:56.370 --> 01:48:00.240
licenses in all 50 states. And
that takes a lot of time. It's

1838
01:48:00.240 --> 01:48:03.000
incredibly expensive. The legal
compliance costs that are

1839
01:48:03.000 --> 01:48:05.610
different from state to state
become very difficult, because,

1840
01:48:05.700 --> 01:48:08.190
you know, some states mandate
things that are literally

1841
01:48:08.190 --> 01:48:12.420
prohibited in another state. And
so finding a way to do that is

1842
01:48:12.420 --> 01:48:15.690
extremely difficult, generally
speaking, and I and I guess I do

1843
01:48:15.690 --> 01:48:18.330
want to speak for a moment to
the state law preemption point

1844
01:48:18.330 --> 01:48:20.310
that was raised a moment ago,
just so that I can I can say

1845
01:48:20.310 --> 01:48:24.000
that I spoke to it. Back in the
early days of the Republic, when

1846
01:48:24.000 --> 01:48:27.720
there was a debate about whether
the federal government should

1847
01:48:27.720 --> 01:48:30.090
assume the state's revolutionary
war debts or whether we should

1848
01:48:30.090 --> 01:48:32.670
have the First Bank of the
United States, we have this

1849
01:48:32.670 --> 01:48:35.730
discussion. And the reason that
Alexander Hamilton won that

1850
01:48:35.730 --> 01:48:38.010
debate as opposed to the
Jeffersonians is because of a

1851
01:48:38.010 --> 01:48:40.860
belief that if we're going to
have a big economy, big enough

1852
01:48:40.860 --> 01:48:43.500
to compete with the powers of
Europe, or in these days, the

1853
01:48:43.500 --> 01:48:48.030
powers of Asia, we don't have
the luxury of suffocating our

1854
01:48:48.030 --> 01:48:51.660
businesses, our big businesses
anyway, with different state by

1855
01:48:51.660 --> 01:48:54.990
state regulation. That's why in
the 70s, Congress enacted rate

1856
01:48:54.990 --> 01:48:57.960
exportation is because of a
belief that you don't want

1857
01:48:58.170 --> 01:49:01.410
Illinois to be able to kill
commerce, because it I'm just

1858
01:49:01.410 --> 01:49:04.140
making up Illinois, it has a
different view of interest

1859
01:49:04.140 --> 01:49:06.600
rates, or banking charters or
anything else compared to

1860
01:49:06.600 --> 01:49:10.230
Indiana. Right? That doesn't
make sense. We're a big unified

1861
01:49:10.230 --> 01:49:13.110
nation. And as companies grow
and operate on an interstate

1862
01:49:13.110 --> 01:49:16.290
basis, the idea of getting 50
state charters to operate your

1863
01:49:16.290 --> 01:49:18.780
payment company doesn't really
make a ton of sense. I don't

1864
01:49:18.780 --> 01:49:20.640
think Hamilton would think it
made a ton of sense.

1865
01:49:21.930 --> 01:49:25.920
John Rose: In the few moments
that I have left, if you will,

1866
01:49:26.160 --> 01:49:28.680
out. I'll ask this question. In
your testimony, you emphasized

1867
01:49:28.680 --> 01:49:31.770
how there has been a lack of new
bank charters in 10 years, can

1868
01:49:31.770 --> 01:49:34.140
you explain the benefits of
increasing the number of

1869
01:49:34.140 --> 01:49:37.290
charters, whether for
traditional or online banks?

1870
01:49:37.380 --> 01:49:40.050
Brian Brooks: For sure. I mean,
most Americans still feel most

1871
01:49:40.050 --> 01:49:42.330
comfortable opening up their
account in a bank branch.

1872
01:49:42.330 --> 01:49:44.820
There's certain transactions
they need to talk to a banker.

1873
01:49:44.970 --> 01:49:47.040
It's not fair to see how we've
lost them.

1874
01:49:49.200 --> 01:49:54.210
Roger Williams: Thank you, Mr.
Chairman. I yield back. Thank

1875
01:49:54.210 --> 01:49:58.380
you very much. We will now go to
the gentleman from Illinois so

1876
01:49:58.380 --> 01:50:02.310
he can defend his state of I'm
cashed in for five minutes.

1877
01:50:04.380 --> 01:50:07.328
Sean Casten: Mr. Chairman, this
has really been a great hearing.

1878
01:50:07.386 --> 01:50:10.855
I think you undersold it when
you said we're trying to learn

1879
01:50:10.913 --> 01:50:14.035
about the whole banking
industry. We're also trying to

1880
01:50:14.093 --> 01:50:17.505
learn about monetary theory.
It's, it's hard to do this all

1881
01:50:17.562 --> 01:50:20.685
in five minutes. I want to just
start with sort of two

1882
01:50:20.742 --> 01:50:24.385
statements that I think we all
agree with on this panel. Number

1883
01:50:24.443 --> 01:50:28.085
one, there's been a tremendous
amount of good and necessary and

1884
01:50:28.143 --> 01:50:31.439
entrepreneurial innovation in
the fintech space, which is

1885
01:50:31.497 --> 01:50:34.793
fantastic and has, let's make
sure we don't squelch that.

1886
01:50:34.850 --> 01:50:38.146
Number two, there isn't a
company in the world that comes

1887
01:50:38.204 --> 01:50:41.789
before us and says, I would like
to have more regulation. And,

1888
01:50:41.847 --> 01:50:45.200
and I mentioned that because
particularly with some of the

1889
01:50:45.258 --> 01:50:48.785
emerging fintech players, we
hear all the time when they come

1890
01:50:48.843 --> 01:50:52.485
before us what they're not. I'm
not an ETF. I'm not a bank. I'm

1891
01:50:52.543 --> 01:50:56.070
not a credit rating agency. I'm
not a credit card company. We

1892
01:50:56.128 --> 01:50:59.597
very rarely hear them say what
they are, because for them to

1893
01:50:59.655 --> 01:51:03.008
say what they are would be for
them to implicitly say, and

1894
01:51:03.066 --> 01:51:06.420
therefore I would like to be
regulated under the following

1895
01:51:06.478 --> 01:51:10.178
structure. And I think the value
of this hearing is getting some

1896
01:51:10.236 --> 01:51:13.589
clarity on what they actually
are. Miss Johnson, I got two

1897
01:51:13.647 --> 01:51:17.059
kinds of big questions for you.
And I and I preface that by

1898
01:51:17.116 --> 01:51:20.701
saying I'm probably going to cut
you off before you finish the

1899
01:51:20.759 --> 01:51:24.344
first one, and I apologize in
advance for that. But in your in

1900
01:51:24.402 --> 01:51:27.986
your remarks, you said that the
the OCC and the FDIC has taken

1901
01:51:28.044 --> 01:51:31.398
steps to allow firms to engage
in banking activities while

1902
01:51:31.456 --> 01:51:34.636
being subjected to less
regulation and supervision. And

1903
01:51:34.694 --> 01:51:37.584
in that the OCC lacks the
authority to charter non

1904
01:51:37.642 --> 01:51:41.227
depository national banks. Now,
if we think just about sort of

1905
01:51:41.285 --> 01:51:44.870
the distinction between those
FinTech firms that are doing one

1906
01:51:44.928 --> 01:51:48.108
small thing, as Mr. Brooks
mentioned, you know, maybe a

1907
01:51:48.165 --> 01:51:51.692
payment processing firm, and
those in the big tech space that

1908
01:51:51.750 --> 01:51:54.930
are doing this whole array of
consumer credit financial

1909
01:51:54.988 --> 01:51:58.053
transaction services. Setting
aside the current legal

1910
01:51:58.110 --> 01:52:01.464
authority, who do you think
should regulate those? And how

1911
01:52:01.522 --> 01:52:05.222
would you think about that? And
in a minute or so so I get to my

1912
01:52:05.280 --> 01:52:06.090
next question.

1913
01:52:06.090 --> 01:52:08.457
Kristin Johnson: Representative
Casten And I think that's a

1914
01:52:08.513 --> 01:52:11.839
great question. I think the
first point is the one you made

1915
01:52:11.895 --> 01:52:15.446
what exactly is being regulated,
I think we must pin the firm's

1916
01:52:15.503 --> 01:52:18.603
down and in the very least
require them to describe the

1917
01:52:18.659 --> 01:52:21.929
regulatory regime they believe
they should be subjected to

1918
01:52:21.985 --> 01:52:24.916
based on their activities,
otherwise, they engage in

1919
01:52:24.972 --> 01:52:28.524
regulatory arbitrage, which is
the purpose of this hearing, you

1920
01:52:28.580 --> 01:52:32.018
can evade tax, you can evade
securities law, if you arbitrage

1921
01:52:32.075 --> 01:52:35.344
your activities in a manner that
avoids the application of

1922
01:52:35.400 --> 01:52:36.810
regulation to your point.

1923
01:52:39.150 --> 01:52:40.980
Sean Casten: So thank you. And
if you have more thoughts, I'd

1924
01:52:40.980 --> 01:52:43.140
love to follow up with you.
Because that is sort of that's

1925
01:52:43.200 --> 01:52:46.950
at the core of all these
conversations. The second

1926
01:52:46.950 --> 01:52:49.080
question gets into and I said at
the start, that we're having

1927
01:52:49.080 --> 01:52:51.690
conversations that are really
almost about monetary theory

1928
01:52:51.690 --> 01:52:55.470
right now, you know, I think
there's a lot of the underlying

1929
01:52:55.470 --> 01:52:58.740
logic for Bitcoin is you know,
that they're old hard money,

1930
01:52:58.740 --> 01:53:02.010
gold, gold bug kind arguments,
and we don't need to get into

1931
01:53:02.010 --> 01:53:06.360
all that right now. But we have
a financial regulatory structure

1932
01:53:06.810 --> 01:53:09.540
that is designed to ensure that
there's sufficient liquidity in

1933
01:53:09.540 --> 01:53:12.000
the market in your bank that
when you go to withdraw

1934
01:53:12.000 --> 01:53:15.840
something, the cash is there. If
you deposit tulip bulbs in your

1935
01:53:15.840 --> 01:53:18.750
bank, the bank doesn't loan out
80% of your tulip bulbs and make

1936
01:53:18.750 --> 01:53:23.070
sure it's all here. That's in
the safe deposit box. But, but

1937
01:53:23.070 --> 01:53:28.410
as we've had things like this
recent situation, in this bank

1938
01:53:28.410 --> 01:53:32.640
and Anchorage, that's, you know,
essentially a crypto company.

1939
01:53:34.170 --> 01:53:37.500
How should we be thinking about
what the role of the regulator

1940
01:53:37.500 --> 01:53:41.790
is to ensure that folding
increasingly volatile assets on

1941
01:53:41.790 --> 01:53:44.880
the balance sheet doesn't
compromise the liquidity of the

1942
01:53:44.880 --> 01:53:48.060
system, particularly as the
volume of those assets grows?

1943
01:53:49.320 --> 01:53:51.680
Kristin Johnson: Representative,
I think this is a great

1944
01:53:51.740 --> 01:53:55.432
question. And I think we only
have to look at the movement in

1945
01:53:55.492 --> 01:53:58.760
the price of Bitcoin from the
moment that COVID 19 was

1946
01:53:58.821 --> 01:54:02.573
declared a global pandemic today
and watch the movement in the

1947
01:54:02.633 --> 01:54:05.962
value of that single asset,
right and an asset class to

1948
01:54:06.022 --> 01:54:09.472
identify an example of the
problem you just described. If

1949
01:54:09.532 --> 01:54:13.163
we are allowing banks to hold in
count or calculate reserves

1950
01:54:13.224 --> 01:54:16.370
based on this asset class, I
think we really have to

1951
01:54:16.431 --> 01:54:19.215
fundamentally revisit,
interrogate and clearly

1952
01:54:19.275 --> 01:54:22.664
understand how we set those
valuations and the rules and

1953
01:54:22.725 --> 01:54:26.537
regulations that apply to this
new asset class. I say that as a

1954
01:54:26.598 --> 01:54:30.350
student, as a teacher, and as a
former practitioner engaged in

1955
01:54:30.410 --> 01:54:33.618
the development of credit
derivatives, which I credit

1956
01:54:33.678 --> 01:54:36.765
credit default swaps
specifically, are at the heart

1957
01:54:36.825 --> 01:54:40.335
of the most recent financial
crisis and part and parcel of

1958
01:54:40.396 --> 01:54:43.724
the problem. There was a
misunderstanding a fundamental

1959
01:54:43.785 --> 01:54:46.992
misunderstanding of the
potential liability that this

1960
01:54:47.052 --> 01:54:49.050
new class of assets could create.

1961
01:54:50.340 --> 01:54:52.560
Sean Casten: Well, thank you.
I'd love to follow up on that as

1962
01:54:52.605 --> 01:54:55.323
well. Mr. Mr. Carrillo with a
few moments left here. Did you

1963
01:54:55.368 --> 01:54:57.000
have any follow on thoughts on that?

1964
01:54:57.000 --> 01:55:00.116
Raul Carrillo: Yes, I would just
like to note that it's is all an

1965
01:55:00.179 --> 01:55:03.670
environment for volatility and
instability, as Professor

1966
01:55:03.732 --> 01:55:07.597
Johnson said, we keep hearing
about going back to the good old

1967
01:55:07.659 --> 01:55:11.462
days of the 80s. But that's why
thinking was the speculative,

1968
01:55:11.524 --> 01:55:15.390
wild to me, and it hurt
marginalized communities specifically.

1969
01:55:15.390 --> 01:55:16.410
Sean Casten: Thank you. I yield back.

1970
01:55:17.730 --> 01:55:21.356
Ed Perlmutter: Gentleman's time
has expired. Mr. Budd from North

1971
01:55:21.430 --> 01:55:24.390
Carolina is recognized for five minutes.

1972
01:55:24.390 --> 01:55:27.388
Ted Budd: Thank you, Chair. You
know, Mr. Brooks, today, we're

1973
01:55:27.446 --> 01:55:30.790
seeing a lot of innovative
products in the form of digital

1974
01:55:30.848 --> 01:55:34.480
assets, decentralized finance,
which could be revolutionary for

1975
01:55:34.538 --> 01:55:38.113
the banking system. You know, we
had coin bases direct listing

1976
01:55:38.170 --> 01:55:41.572
yesterday. So it's obvious that
this technology isn't going

1977
01:55:41.630 --> 01:55:44.801
away. And we're now at the
crossroads of embracing this

1978
01:55:44.859 --> 01:55:48.376
technology or falling behind
other countries, one of my great

1979
01:55:48.434 --> 01:55:51.432
concerns is that we get
surpassed by other countries

1980
01:55:51.490 --> 01:55:55.065
that are more willing to engage
on this. So Mr. Brooks, here's

1981
01:55:55.123 --> 01:55:58.294
my question is, do you see a
world where we can have an

1982
01:55:58.352 --> 01:56:01.984
intersection of legacy banking,
what we know of as banking, and

1983
01:56:02.042 --> 01:56:05.559
also defy by allowing banks to
use like blockchain protocols,

1984
01:56:05.617 --> 01:56:08.904
and use that to eliminate
inefficiencies and offer better

1985
01:56:08.961 --> 01:56:10.980
products and services to consumers?

1986
01:56:11.850 --> 01:56:16.020
Brian Brooks: Well, economist,
thank you for the question. And,

1987
01:56:16.050 --> 01:56:18.180
and also, thank you for all of
your engagement. During my time

1988
01:56:18.180 --> 01:56:20.430
at the OCC, I've I've always
loved these conversations, and

1989
01:56:20.430 --> 01:56:23.850
I've learned a lot from them.
Specifically, your question, let

1990
01:56:23.850 --> 01:56:27.150
me start with the legacy bank
part of things. Okay, so one of

1991
01:56:27.150 --> 01:56:30.450
the reasons that the OCC that we
started focusing on crypto

1992
01:56:30.450 --> 01:56:33.210
regulatory issues is because of
the fact that two or three of

1993
01:56:33.210 --> 01:56:36.840
the largest banks in the United
States were already exposed to

1994
01:56:36.840 --> 01:56:40.260
various crypto activities, to
the tune of billions of dollars.

1995
01:56:40.320 --> 01:56:43.590
So for example, at the time that
I walked into the OCC, JP

1996
01:56:43.590 --> 01:56:46.590
Morgan, you know, have deposits
of you know, exceeding a billion

1997
01:56:46.590 --> 01:56:49.290
dollars backing a stable coin
project, but there was no

1998
01:56:49.290 --> 01:56:51.780
federal guidance on how stable
coins ought to be thought about.

1999
01:56:52.170 --> 01:56:55.650
State Street was doing likewise
for another stable coin project.

2000
01:56:55.680 --> 01:56:58.920
And there were smaller banks,
silvergate and cross river and

2001
01:56:58.920 --> 01:57:01.560
some others that were providing
other kinds of support services

2002
01:57:01.560 --> 01:57:04.230
or for crypto assets. So it's
very clear that there's a lot of

2003
01:57:04.260 --> 01:57:07.830
interest from traditional
companies in crypto and you see

2004
01:57:07.830 --> 01:57:10.260
that from the fact that
intercontinental exchange has

2005
01:57:10.290 --> 01:57:13.800
started its own crypto exchange
that Goldman Sachs is now

2006
01:57:13.800 --> 01:57:16.830
restarting their crypto desk
with Fidelity has created a

2007
01:57:16.830 --> 01:57:19.530
digital asset, custodian, and
Anchorage, you know, another

2008
01:57:19.530 --> 01:57:21.870
bank that by the way, doesn't
have these assets on their

2009
01:57:21.870 --> 01:57:24.510
balance sheet. They are a
custody bank that holds those

2010
01:57:24.510 --> 01:57:27.810
assets for third parties. That's
a fee for service business, not

2011
01:57:27.810 --> 01:57:31.320
an asset heavy business. But the
point of all of those things is

2012
01:57:31.320 --> 01:57:34.470
to say that banks have
traditionally provided the role

2013
01:57:34.470 --> 01:57:37.560
of safeguarding and safekeeping
their clients assets. And crypto

2014
01:57:37.560 --> 01:57:40.590
is another asset that has come
along in the last 10 years and

2015
01:57:40.590 --> 01:57:43.620
has now achieved scale. So
clearly, the legacy institutions

2016
01:57:43.620 --> 01:57:47.370
have a role to play in terms of
technologies like defy and

2017
01:57:47.370 --> 01:57:50.040
payments in the form of stable
coins and other kinds of things.

2018
01:57:50.400 --> 01:57:52.920
These are the kinds of
technologies that bring internet

2019
01:57:52.920 --> 01:57:55.710
technology to finance the way
that the original internet

2020
01:57:55.980 --> 01:57:58.950
brought those decentralization
benefits to information sharing

2021
01:57:58.950 --> 01:58:02.640
first and to regular commerce
second. So I think one of the

2022
01:58:02.640 --> 01:58:06.360
biggest misunderstandings about
about crypto, which I think is

2023
01:58:06.360 --> 01:58:09.930
really important to understand
is, we're building a second

2024
01:58:09.930 --> 01:58:13.740
internet here, the whole point
of crypto tokens having value is

2025
01:58:13.740 --> 01:58:16.860
to induce people to provide
computing power to maintain a

2026
01:58:16.860 --> 01:58:19.710
decentralized network, that
otherwise we'd be maintained by

2027
01:58:19.710 --> 01:58:23.400
Google and Facebook, right. And
the way to reduce regular people

2028
01:58:23.400 --> 01:58:26.640
to connect computers to maintain
those Ledger's is to let them

2029
01:58:26.640 --> 01:58:29.520
take a native token that has
value on it, right. So that's

2030
01:58:29.520 --> 01:58:32.910
why we have a decentralized
ledger. It's not built for

2031
01:58:32.910 --> 01:58:36.240
terrorism financing, it's built
to allow us to have a truly

2032
01:58:36.240 --> 01:58:39.510
decentralized internet, that is
what it's all about. And so if

2033
01:58:39.510 --> 01:58:42.660
you believe that American soft
power in the world has a lot to

2034
01:58:42.660 --> 01:58:45.990
do with the fact that we control
ICANN and the Internet Protocol,

2035
01:58:46.170 --> 01:58:48.480
I think he would feel similarly
about the use of these internet

2036
01:58:48.480 --> 01:58:51.840
protocols in financial services
defy is one example of that,

2037
01:58:51.990 --> 01:58:54.990
where, you know, having open
source software, there's

2038
01:58:54.990 --> 01:58:57.840
allocating credit versus having
a credit officer sitting in an

2039
01:58:57.840 --> 01:59:01.110
office, you know, these are ways
of making sure that there's not

2040
01:59:01.110 --> 01:59:03.990
some renegade employee who's
discriminating or taking risks,

2041
01:59:04.140 --> 01:59:06.720
because the algorithm is visible
for everybody to see and can be

2042
01:59:06.720 --> 01:59:09.600
changed by other people on the
network. To me, that's a more

2043
01:59:09.630 --> 01:59:13.050
optimistic view of the future
than a future that comes to the

2044
01:59:13.050 --> 01:59:15.630
idea of individual bank credit
officers, you know, allocating

2045
01:59:15.630 --> 01:59:16.710
capital in our society.

2046
01:59:17.579 --> 01:59:19.979
Ted Budd: So you're talking here
with some examples of promoting

2047
01:59:19.979 --> 01:59:23.189
very forward thinking structures
and policies, rather than

2048
01:59:23.189 --> 01:59:26.339
revisiting outdated regulations,
which I don't think benefits

2049
01:59:26.339 --> 01:59:30.269
consumers. But in order to
maintain the supremacy of US

2050
01:59:30.299 --> 01:59:33.299
financial markets, we got to
work on modernizing charters,

2051
01:59:33.569 --> 01:59:37.679
and finding ways to increase
competition innovation. Many

2052
01:59:37.709 --> 01:59:40.199
finance modern financial
services providers and fintech

2053
01:59:40.199 --> 01:59:44.069
companies today face the choice
of either relying on regulated

2054
01:59:44.069 --> 01:59:47.399
partners or seeking existing
charter options that limit

2055
01:59:47.429 --> 01:59:50.129
technology development. You got
other governments like

2056
01:59:50.129 --> 01:59:55.139
Singapore, UK, the EU, and they
provide a modernized regulatory

2057
01:59:55.139 --> 01:59:57.959
options on top of traditional
banking charters, which allows

2058
01:59:57.959 --> 02:00:01.619
for more innovation. So what are
some of the ways Is that you

2059
02:00:01.619 --> 02:00:06.029
know that we can navigate the
system and promote innovation?

2060
02:00:06.510 --> 02:00:09.060
Brian Brooks: Well, that is a
great question. One obvious

2061
02:00:09.060 --> 02:00:12.390
example is to ask the question,
why in the United States do we

2062
02:00:12.420 --> 02:00:16.290
only allow banks but not other
financial systems or companies

2063
02:00:16.290 --> 02:00:19.980
to access the payment system in
the UK and in other places that

2064
02:00:19.980 --> 02:00:23.100
have open banking and E money
licenses, any payment company

2065
02:00:23.100 --> 02:00:25.680
can access the payment rails in
the US that we fetishize and

2066
02:00:25.680 --> 02:00:28.800
protect incumbent banks. That is
an advantage.

2067
02:00:30.060 --> 02:00:32.100
Ted Budd: Thank you, and I yield
back. Enjoy the time.

2068
02:00:34.350 --> 02:00:37.735
Ed Perlmutter: Thank you, Mr.
Bud. And I would just remind

2069
02:00:37.814 --> 02:00:42.459
everybody that 10 to 12 years
ago, everybody was relying on

2070
02:00:42.538 --> 02:00:47.026
our Federal Reserve in our
banking system to help kind of

2071
02:00:47.104 --> 02:00:51.513
correct the global banking
system. So Mr. Taurus, who is

2072
02:00:51.592 --> 02:00:55.608
the newest member of our
committee, and was looking

2073
02:00:55.686 --> 02:01:00.489
forward to this primer on the
banking system and currency and

2074
02:01:00.568 --> 02:01:04.662
I don't think he's been
disappointed. I yield to the

2075
02:01:04.741 --> 02:01:09.780
gentleman from New York for five
minutes. Ritchie, you're muted.

2076
02:01:12.990 --> 02:01:14.730
Ritchie Torres: Thank you, Mr.
Chair. It's certainly a primer.

2077
02:01:14.730 --> 02:01:17.340
I'm certainly new to these
issues. Obviously, one of the

2078
02:01:17.340 --> 02:01:20.790
issues before us is the
separation of banking and

2079
02:01:20.790 --> 02:01:23.220
commerce. You know, blurring the
line between banking and

2080
02:01:23.220 --> 02:01:28.080
commerce as IOC is do raises
concerns about systemic risk,

2081
02:01:28.110 --> 02:01:31.740
moral hazard and market
concentration. My question is,

2082
02:01:31.740 --> 02:01:35.580
have we seen any all of these
concerns borne out by the

2083
02:01:35.580 --> 02:01:38.940
experience of other countries
that allow for the intermingling

2084
02:01:38.940 --> 02:01:42.780
of banking and commerce? What
lessons can be learned from the

2085
02:01:42.780 --> 02:01:45.780
experience of those countries?
And anyone who knows the answer

2086
02:01:45.780 --> 02:01:47.490
can feel free to and weigh in.

2087
02:01:50.970 --> 02:01:52.350
Raul Carrillo: I'm happy to
speak to that as your

2088
02:01:52.350 --> 02:01:58.410
congressman notice. So I
wouldn't say that a good example

2089
02:01:58.440 --> 02:02:01.590
of the sort of thing, the
dangerous conglomeration that

2090
02:02:01.590 --> 02:02:06.060
can occur when we have loopholes
in the broader depository

2091
02:02:06.090 --> 02:02:10.560
infrastructure, or allow things
to exist, like stable coins that

2092
02:02:10.560 --> 02:02:15.180
act like deposits, but are not
regulated, like deposits, is, is

2093
02:02:15.180 --> 02:02:19.500
to be found in China, where the
company Tencent has been brought

2094
02:02:19.530 --> 02:02:22.680
further into the system, but in
a particular way that is not

2095
02:02:22.680 --> 02:02:26.130
particularly good for users, or
the people of China, especially

2096
02:02:26.130 --> 02:02:29.490
when it comes to privacy and
surveillance. Of course, this is

2097
02:02:29.490 --> 02:02:33.960
generally touted as bringing
efficient, but intermingling

2098
02:02:33.960 --> 02:02:38.010
intense case the social media
platform with banking has led to

2099
02:02:38.010 --> 02:02:41.370
again an unprecedented amount of
power that we have perhaps not

2100
02:02:41.370 --> 02:02:44.700
seen in human history, because
of the way the data collection

2101
02:02:44.700 --> 02:02:47.400
and surveillance works. Now,
we're getting that further to

2102
02:02:47.400 --> 02:02:50.250
our monetary infrastructure here
does not bode well.

2103
02:02:50.579 --> 02:02:53.677
Erik Gerding: Thanks. I could
add to that Representative

2104
02:02:53.751 --> 02:02:58.178
Torress, that Balkan bank in
Japan and in South Korea, there

2105
02:02:58.252 --> 02:03:02.827
is an intermingling of banking
and commerce. The problem there

2106
02:03:02.900 --> 02:03:07.106
in both of those countries is
that that intermingling has

2107
02:03:07.180 --> 02:03:11.017
served to entrench financial,
financial and business

2108
02:03:11.090 --> 02:03:15.444
conglomerates in both of those
countries. So if we want our

2109
02:03:15.518 --> 02:03:19.871
economies to have that high
degree of concentration that we

2110
02:03:19.945 --> 02:03:24.298
have in Korea and Japan, then we
would start to think about

2111
02:03:24.372 --> 02:03:27.840
erosion, the wall between
commerce and banking.

2112
02:03:29.310 --> 02:03:31.470
Kristin Johnson: I just add to
that representative, notice, if

2113
02:03:31.470 --> 02:03:35.910
I may, that we should also be
really mindful specifically, not

2114
02:03:35.910 --> 02:03:40.140
just about the theoretical
issues here. But the practical

2115
02:03:40.170 --> 02:03:43.920
Prudential regulatory oversight
that Professor girding raised

2116
02:03:43.920 --> 02:03:47.730
earlier, I also think is
imperative to think about who is

2117
02:03:47.730 --> 02:03:51.780
participating in which actions.
This committee and the broader

2118
02:03:51.810 --> 02:03:55.440
Financial Services Committee and
all of Congress, in fact, has

2119
02:03:55.440 --> 02:03:58.590
been thoughtful about the
implications of certain large

2120
02:03:58.590 --> 02:04:02.190
technology firms and their
continued consolidation and

2121
02:04:02.190 --> 02:04:05.850
growth in the industry. I would
like to underscore a point that

2122
02:04:05.970 --> 02:04:09.030
my colleague on the panel, Mr.
Kotter, you pointed out, which

2123
02:04:09.030 --> 02:04:12.900
is not solely a matter of the
prudential regulation that we

2124
02:04:12.900 --> 02:04:15.210
were talking about, in the
moment, the separation of, of

2125
02:04:15.210 --> 02:04:18.840
commerce and banking, but also
the specific consumer protection

2126
02:04:18.840 --> 02:04:22.440
concerns that will impact
citizens in every one of your

2127
02:04:22.470 --> 02:04:26.610
districts without fail and with
and without exclusion, rural,

2128
02:04:26.640 --> 02:04:32.640
urban, big city, small town, all
across the nation. These

2129
02:04:32.640 --> 02:04:38.010
companies monetize commodify
data about citizens, and we're

2130
02:04:38.010 --> 02:04:40.740
now thinking about giving them
access to data regarding the

2131
02:04:40.740 --> 02:04:46.590
financial transactions of all
citizens. And this is in a

2132
02:04:46.590 --> 02:04:49.650
moment when we are unsure about
what exact data protections

2133
02:04:49.650 --> 02:04:53.340
exist for consumer financial
data. This is an impending and

2134
02:04:53.340 --> 02:04:55.950
continuing conversation and I
don't want to take all of your

2135
02:04:55.950 --> 02:04:58.980
time I just want to underscore
that consumer financial data

2136
02:04:59.010 --> 02:05:03.870
protection Alongside the broader
Prudential regulatory issues, I

2137
02:05:03.870 --> 02:05:06.990
believe should be important to
everyone without respect to

2138
02:05:06.990 --> 02:05:07.650
partisanship.

2139
02:05:10.139 --> 02:05:12.869
Ritchie Torres: I know that much
of the regulation of these bank

2140
02:05:12.869 --> 02:05:16.229
like entities happens at the
state level, but a case could be

2141
02:05:16.229 --> 02:05:19.769
made, that as a general rule,
it's much better to have

2142
02:05:20.219 --> 02:05:24.149
uniformity in the law and to
have a cacophony of widely

2143
02:05:24.149 --> 02:05:29.399
varied state laws. So it seems
sensible to have a federal

2144
02:05:29.429 --> 02:05:32.189
framework for regulating FinTech
and cryptocurrencies and

2145
02:05:32.189 --> 02:05:36.959
blockchain. What's the argument
against uniformity of the law?

2146
02:05:38.700 --> 02:05:42.618
Erik Gerding: I could address if
you'd like. I think there is an

2147
02:05:42.697 --> 02:05:46.850
interest in uniformity and Mr.
Brooks mentioned money

2148
02:05:46.929 --> 02:05:51.945
transmission stack statutes, it
is difficult for payment systems

2149
02:05:52.023 --> 02:05:56.412
or payment companies to comply
with 50 different payment

2150
02:05:56.490 --> 02:06:01.349
statutes in different states.
But the better way to do that is

2151
02:06:01.428 --> 02:06:05.738
to have Congress act to create
or promote uniformity in

2152
02:06:05.817 --> 02:06:10.676
statutes not to have the OCC do
that in a backdoor manner, and

2153
02:06:10.754 --> 02:06:15.613
basically preempt state laws.
Look a four page policy document

2154
02:06:15.692 --> 02:06:20.237
that created a radical FinTech
charter. The district court

2155
02:06:20.316 --> 02:06:21.570
agrees with you.

2156
02:06:22.230 --> 02:06:22.770
Ritchie Torres: Thank you.

2157
02:06:24.960 --> 02:06:27.867
Ed Perlmutter: Gentleman's time
has expired. The gentleman from

2158
02:06:27.928 --> 02:06:31.320
Minnesota Mr. Emmer, is now
recognized for five minutes.

2159
02:06:31.320 --> 02:06:33.849
Tom Emmer: Well, thank you,
Chairman Perlmutter. I

2160
02:06:33.914 --> 02:06:37.742
appreciate that and ranking
Chairman looked my I appreciate

2161
02:06:37.806 --> 02:06:41.828
that you're hosting what is a
very important hearing, in which

2162
02:06:41.893 --> 02:06:45.591
we've been able to examine our
unique dual banking system

2163
02:06:45.656 --> 02:06:49.223
through a nonpartisan as
financial innovation advances,

2164
02:06:49.288 --> 02:06:52.791
it's important that we work to
provide appropriate and

2165
02:06:52.856 --> 02:06:56.554
considerate regulatory avenues
for FinTech companies, and

2166
02:06:56.618 --> 02:07:00.446
financial institutions to best
serve their customers. As we

2167
02:07:00.511 --> 02:07:04.014
know, access to financial
services greatly impacts the

2168
02:07:04.078 --> 02:07:08.035
American consumer in terms of
financial literacy, fair prices

2169
02:07:08.100 --> 02:07:11.928
for financial services and
convenience. Competitive FinTech

2170
02:07:11.992 --> 02:07:15.625
companies that offer these
affordable services to anyone

2171
02:07:15.690 --> 02:07:19.712
with a cell phone should not be
held back from deploying their

2172
02:07:19.777 --> 02:07:23.020
services to any and every
American, which is why I

2173
02:07:23.085 --> 02:07:26.718
appreciate the testimony
encouraged today, in support of

2174
02:07:26.783 --> 02:07:30.869
us as policymakers, we must keep
this focus at the forefront of

2175
02:07:30.934 --> 02:07:35.021
our attention. It's my hope that
the FinTech task force will be

2176
02:07:35.086 --> 02:07:39.173
renewed for the 117 Congress and
I look forward to carrying out

2177
02:07:39.238 --> 02:07:43.324
these policy issues further on
that task flirts. With that, Mr.

2178
02:07:43.389 --> 02:07:47.216
Brooks, it's great to see you
again. Thank you for all your

2179
02:07:47.281 --> 02:07:50.655
work over the past couple of
years as the OCC as the

2180
02:07:50.719 --> 02:07:54.417
Comptroller of the Currency,
you've demonstrated a strong

2181
02:07:54.482 --> 02:07:57.790
commitment to drafting a
regulatory environment are

2182
02:07:57.855 --> 02:08:01.034
creating a regulatory
environment that encourages

2183
02:08:01.098 --> 02:08:05.120
innovation and growth in this
FinTech space. And you've been a

2184
02:08:05.185 --> 02:08:09.012
leader in providing industry,
the industry with the clarity

2185
02:08:09.077 --> 02:08:13.164
that's so necessary to make sure
they can innovate confidently.

2186
02:08:13.229 --> 02:08:16.862
Question, Mr. Brooks, during
your tenure at the OCC, the

2187
02:08:16.927 --> 02:08:20.754
agency issued interpretive
letters clarifying that national

2188
02:08:20.819 --> 02:08:24.516
banks could offered services,
such as custody for digital

2189
02:08:24.581 --> 02:08:28.473
assets that they've historically
offered for traditional app

2190
02:08:28.538 --> 02:08:32.560
assets, and that national banks
can participate in independent

2191
02:08:32.625 --> 02:08:36.712
node verification networks that
facilitate payments. Why do you

2192
02:08:36.777 --> 02:08:40.604
believe these issues require
clarification? And what impact

2193
02:08:40.669 --> 02:08:44.172
do you believe these new
technologies will have on the

2194
02:08:44.236 --> 02:08:45.210
banking system?

2195
02:08:47.850 --> 02:08:50.790
Brian Brooks: Well, Congressman
Emmer, first of all, your your

2196
02:08:50.820 --> 02:08:54.120
partnership and guidance on the
issues dating back long before I

2197
02:08:54.120 --> 02:08:56.670
came to the OCC has been one of
the joys of my life. And I

2198
02:08:56.670 --> 02:08:58.890
really appreciate all the
dialogue that we've had over the

2199
02:08:58.890 --> 02:09:02.730
years about all these issues, I
would answer in two basic ways.

2200
02:09:03.390 --> 02:09:07.140
First of all, it became clear a
year ago, year and a half ago,

2201
02:09:07.440 --> 02:09:13.290
that assets have grown to bank
customers, and I have some

2202
02:09:13.290 --> 02:09:15.900
background noise. So maybe,
maybe you could feed our phones.

2203
02:09:16.020 --> 02:09:17.070
So you can all hear me.

2204
02:09:18.270 --> 02:09:21.090
Ed Perlmutter: Somebody, I think
if you're ever maybe you need to

2205
02:09:21.090 --> 02:09:21.450
be

2206
02:09:24.900 --> 02:09:27.368
Brian Brooks: Great. So, so, so
the point is, crypto is now a

2207
02:09:27.420 --> 02:09:30.677
two plus trillion dollar asset
class and the customers who are

2208
02:09:30.729 --> 02:09:33.513
owning crypto assets are the
same people who are also

2209
02:09:33.565 --> 02:09:36.401
depositors and checking account
customers and mortgage

2210
02:09:36.454 --> 02:09:39.868
borrowers, etc, of of banks. And
so it was no longer possible for

2211
02:09:39.920 --> 02:09:43.229
us to ignore the fact that the
assets that were growing in size

2212
02:09:43.282 --> 02:09:46.485
and scale on the crypto side,
were lacking a safe place to be

2213
02:09:46.538 --> 02:09:49.584
custody or a safe place to be
exchanged for value, the way

2214
02:09:49.637 --> 02:09:52.683
that all other assets can
transact on a bank. So the first

2215
02:09:52.735 --> 02:09:55.992
reason that we launched down the
path was the recognition that

2216
02:09:56.044 --> 02:09:59.143
the market had grown And that
banks traditionally provide a

2217
02:09:59.195 --> 02:10:02.504
safe custody location and safe
transaction rails for for people

2218
02:10:02.557 --> 02:10:05.708
engaged in those things. But as
we thought more deeply about

2219
02:10:05.760 --> 02:10:08.859
that, over time, what also
became clear and this comes back

2220
02:10:08.912 --> 02:10:12.220
to my point about how we sort of
tend to fetishize legacy banks

2221
02:10:12.273 --> 02:10:15.266
over other people who are
performing the same services in

2222
02:10:15.319 --> 02:10:18.418
a different way, is it became
clear at a certain point that

2223
02:10:18.470 --> 02:10:20.991
one of the things that
blockchains are, is their

2224
02:10:21.044 --> 02:10:24.458
payment networks, they are a set
of technologies for transmitting

2225
02:10:24.510 --> 02:10:27.766
value from person A to person B.
Now, as I said, in the United

2226
02:10:27.819 --> 02:10:30.865
States, unlike in our global
competitor countries, we only

2227
02:10:30.918 --> 02:10:33.596
allow banks as defined to
connect to the government

2228
02:10:33.649 --> 02:10:36.695
payment system at the Federal
Reserve or to connect to the

2229
02:10:36.747 --> 02:10:40.004
automated clearing house, which
is essentially the bank cartel

2230
02:10:40.056 --> 02:10:42.892
that runs its own payment
system. We don't allow other

2231
02:10:42.945 --> 02:10:46.043
companies and at the OCC, our
basic view was wait a minute,

2232
02:10:46.096 --> 02:10:49.142
there's nothing magic about
Fedwire. There's nothing magic

2233
02:10:49.195 --> 02:10:52.136
about ACH. The point is, banks
have a statutory power to

2234
02:10:52.188 --> 02:10:55.182
process payments. That's the
pain checks power and 12 USC

2235
02:10:55.234 --> 02:10:58.333
Section 24. And so if a new
technology has arisen, which is

2236
02:10:58.386 --> 02:11:01.642
an open blockchain platform for
transmitting payments, there's

2237
02:11:01.694 --> 02:11:04.898
no reason banks shouldn't be
allowed to take advantage of the

2238
02:11:04.951 --> 02:11:07.787
faster and more secure and more
certain environment of

2239
02:11:07.839 --> 02:11:10.886
blockchain if they can also
connect to Fedwire or Swift or

2240
02:11:10.938 --> 02:11:14.142
ACH. That's the point of what
innovation is always about. And

2241
02:11:14.194 --> 02:11:17.293
by the way, the OCC has always
used interpretive letters to

2242
02:11:17.346 --> 02:11:20.549
clarify the way that existing
bank powers can be conducted on

2243
02:11:20.602 --> 02:11:23.648
new technology platforms. Think
back to the 1960s when the

2244
02:11:23.700 --> 02:11:27.009
comptroller at the time issued
an interpretive letter that said

2245
02:11:27.062 --> 02:11:29.740
banks can engage in data
processing. No one thought

2246
02:11:29.793 --> 02:11:32.944
Congress had to act at that
time, but the point is computers

2247
02:11:32.997 --> 02:11:36.095
had been invented. And now a new
internet of finance called

2248
02:11:36.148 --> 02:11:39.404
blockchain has been invented.
And the OCC will always lead and

2249
02:11:39.457 --> 02:11:40.560
help bank technology.

2250
02:11:42.210 --> 02:11:44.970
Tom Emmer: Thank you. My time's
expired. Thank you, Mr. Chair.

2251
02:11:45.510 --> 02:11:47.970
Roger Williams: Thank you, Mr.
Emmer. The gentleman from

2252
02:11:48.030 --> 02:11:52.290
Illinois, Mr. Garcia is
recognized for five minutes.

2253
02:11:53.700 --> 02:11:56.520
Jesus "Chuy" Garcia: Thank you,
Chairman Perlmutter, and Ranking

2254
02:11:56.520 --> 02:12:00.870
Member Luqman for convening this
hearing. And thanks to all of

2255
02:12:00.870 --> 02:12:04.560
our witnesses today for shedding
light on a complicated but

2256
02:12:04.560 --> 02:12:09.810
important topic, I represent a
working class immigrant, largely

2257
02:12:09.810 --> 02:12:13.590
immigrant district, and my
district in Illinois needs the

2258
02:12:13.590 --> 02:12:17.490
same things as any other
district, we need investment in

2259
02:12:17.490 --> 02:12:19.470
our neighborhoods and
institutions, we need

2260
02:12:19.470 --> 02:12:22.890
opportunities for growth. And
all too often these things are

2261
02:12:22.890 --> 02:12:27.300
out of reach for communities
like mine. Unfortunately, that's

2262
02:12:27.300 --> 02:12:31.770
not new. But every time a
company wants to get out of

2263
02:12:31.770 --> 02:12:34.890
regulations, they say that
they're going to change that

2264
02:12:34.890 --> 02:12:37.860
they say that they're going to
help if they can just sell a

2265
02:12:37.860 --> 02:12:41.400
certain type of product or
market in a certain way. That's

2266
02:12:41.400 --> 02:12:45.090
not know either. What I'm
worried about is that the

2267
02:12:45.090 --> 02:12:50.130
business model of many companies
we're discussing today is either

2268
02:12:50.310 --> 02:12:54.600
take advantage of consumers or
take advantage of unregulated

2269
02:12:54.600 --> 02:12:59.250
competitors of regulated
competitors. I should say, since

2270
02:12:59.250 --> 02:13:02.700
my colleagues mentioned the two
lending rule, I want to clarify

2271
02:13:02.730 --> 02:13:06.660
that I introduced the resolution
to repeal the rule for that very

2272
02:13:06.660 --> 02:13:10.440
reason. The rule undermines the
ability of states like mine, and

2273
02:13:10.440 --> 02:13:14.580
more than a dozen others to
protect consumers from predatory

2274
02:13:14.580 --> 02:13:18.900
lending. But I turned back, Mr.
girding let's say a retail

2275
02:13:18.900 --> 02:13:22.410
company like WalMart, or Amazon
offered financial services

2276
02:13:22.410 --> 02:13:26.490
through an AI LLC. All of a
sudden, they know a lot about

2277
02:13:26.490 --> 02:13:30.000
you. They know how much money
you have, or whether you can pay

2278
02:13:30.000 --> 02:13:33.540
your credit card bill, they know
what you buy. So should

2279
02:13:33.540 --> 02:13:38.130
consumers worry about this kind
of blending of commercial and

2280
02:13:38.130 --> 02:13:41.340
financial companies in with
these companies have a

2281
02:13:41.340 --> 02:13:45.210
competitive advantage over other
businesses that don't have this

2282
02:13:45.210 --> 02:13:47.790
kind of data about their
customers?

2283
02:13:49.020 --> 02:13:52.260
Erik Gerding: Absolutely.
Representative Garcia gray

2284
02:13:52.260 --> 02:13:55.710
shouldn't be worried. One of the
things that the other panelists

2285
02:13:55.710 --> 02:14:00.090
have mentioned earlier is that
you're you have to worry not

2286
02:14:00.090 --> 02:14:04.530
only about financial stability,
but data privacy. And a lot of

2287
02:14:04.530 --> 02:14:08.190
the big tech and big retail
companies already have enormous

2288
02:14:08.190 --> 02:14:13.020
amounts of information about
consumers. Being able to combine

2289
02:14:13.020 --> 02:14:17.280
that with payment services,
banking services, and

2290
02:14:17.310 --> 02:14:20.190
information financial
information about customers

2291
02:14:20.460 --> 02:14:25.560
would exacerbate those problems.
I should note that there is one

2292
02:14:25.560 --> 02:14:29.070
way of dealing with that the
gramm leach Bliley act, one of

2293
02:14:29.070 --> 02:14:33.450
the bright spots of that act was
introducing privacy regulation.

2294
02:14:33.870 --> 02:14:38.160
But that privacy rules under
gramm leach Bliley only apply to

2295
02:14:38.160 --> 02:14:42.990
financial institutions. So if
large conglomerates are going to

2296
02:14:42.990 --> 02:14:46.740
be entering into the banking
space and being given bank

2297
02:14:46.740 --> 02:14:50.430
charters, I think we need to
start thinking about expanding

2298
02:14:50.430 --> 02:14:54.150
and applying the gramm leach
Bliley privacy provisions to a

2299
02:14:54.150 --> 02:14:57.870
whole host of larger
institutions and larger

2300
02:14:57.870 --> 02:14:58.680
conglomerates.

2301
02:14:59.100 --> 02:15:01.576
Jesus "Chuy" Garcia: Thank you,
sir. Mr. Carrillo, in your

2302
02:15:01.643 --> 02:15:05.726
testimony, you discussed how
companies and laws that claim to

2303
02:15:05.793 --> 02:15:09.742
expand financial access for
underserved communities can end

2304
02:15:09.809 --> 02:15:14.093
up preying on those communities.
Can you tell us about the risks

2305
02:15:14.160 --> 02:15:17.774
of allowing new FinTech
companies to offer unregulated

2306
02:15:17.841 --> 02:15:21.656
services? And how can Congress
promote economic inclusion

2307
02:15:21.723 --> 02:15:25.740
without leaving our constituents
vulnerable to exploitation?

2308
02:15:27.120 --> 02:15:30.210
Raul Carrillo: Thank you very
much, Representative Garcia, I

2309
02:15:30.210 --> 02:15:34.530
want to zoom out and say that,
to your point, the in this war

2310
02:15:34.530 --> 02:15:38.190
between the Neo Hamiltonians and
the Neo Jeffersonians was last

2311
02:15:38.190 --> 02:15:41.310
is the actual people who
currently use the US financial

2312
02:15:41.310 --> 02:15:44.550
system. And people do not need
to be included, if they're

2313
02:15:44.550 --> 02:15:48.270
included and in predatory
structure. They do not need to

2314
02:15:48.270 --> 02:15:51.630
be given access to credit if
what they're given access to is

2315
02:15:51.630 --> 02:15:54.630
something that actually hurts
the way that for instance, the

2316
02:15:54.630 --> 02:15:57.480
Former Acting Comptroller talks
about credit, you would think

2317
02:15:57.480 --> 02:16:00.600
that it had no downside. And
he's still has not addressed the

2318
02:16:00.600 --> 02:16:03.150
privacy issues, nor had any of
the Republican members of this

2319
02:16:03.150 --> 02:16:05.460
panel, despite the fact that
they go to our very

2320
02:16:05.460 --> 02:16:08.040
constitutional protections,
which would be important to

2321
02:16:08.040 --> 02:16:11.100
everyone in this room. I would
appreciate if we did not look at

2322
02:16:11.100 --> 02:16:14.490
this debate with one eye. Thank
you. Thank you, sir.

2323
02:16:16.830 --> 02:16:20.220
Kristin Johnson: May I just add
one tiny line to what Professor

2324
02:16:20.220 --> 02:16:22.950
girding just offered regarding
privacy protections and the

2325
02:16:22.950 --> 02:16:26.220
gramm leach Bliley Act. The Dodd
Frank Act also contains in

2326
02:16:26.220 --> 02:16:30.630
Section 1033, and opportunity
area for this Congress to act

2327
02:16:30.810 --> 02:16:34.920
and to protect consumer
financial data. I really think

2328
02:16:34.920 --> 02:16:38.100
that your commentary is
accurate, the marginalized hard

2329
02:16:38.100 --> 02:16:42.270
working, low income, low income,
struggling middle class

2330
02:16:42.270 --> 02:16:45.630
families. In many of these, the
districts represented by this

2331
02:16:45.630 --> 02:16:49.800
committee would be most
vulnerable. If some of the

2332
02:16:49.800 --> 02:16:53.910
conglomerates existing in big
tech gain access to additional

2333
02:16:53.910 --> 02:16:57.420
information, in fact, they will
form surveillance capitalism.

2334
02:16:58.140 --> 02:17:01.470
And that will most affect black
and brown individuals. Just to

2335
02:17:01.470 --> 02:17:02.820
be blunt and honest.

2336
02:17:02.940 --> 02:17:04.500
Jesus "Chuy" Garcia: Thank you
for chiming in Professor Ron

2337
02:17:04.500 --> 02:17:06.450
Johnson. Thank you. I yield
back. Mr. Chairman.

2338
02:17:08.070 --> 02:17:11.283
Ed Perlmutter: Thank you, Mr.
Garcia. I think that is the last

2339
02:17:11.352 --> 02:17:15.523
member to be here and to want to
ask questions. I think we've

2340
02:17:15.591 --> 02:17:19.489
gone on two and a half hours
now. So I will want to bring

2341
02:17:19.557 --> 02:17:23.592
this to a close. This has been
very interesting. And to the

2342
02:17:23.660 --> 02:17:27.831
ranking members point, I think
we're just really beginning to

2343
02:17:27.899 --> 02:17:32.071
get some idea of this subject
and the need for innovation, as

2344
02:17:32.139 --> 02:17:36.378
Mr. Brooks has talked about, so
that, you know, people use the

2345
02:17:36.447 --> 02:17:40.481
services and, you know, don't
skirt. Businesses don't skirt

2346
02:17:40.550 --> 02:17:44.516
around the edges of the system
where there's no regulation

2347
02:17:44.584 --> 02:17:48.482
whatsoever, but also the
detriments whether it's privacy,

2348
02:17:48.550 --> 02:17:52.242
or some kind of abusive
approaches that that a company

2349
02:17:52.311 --> 02:17:56.140
may take to, you know, to an
individual or to a business

2350
02:17:56.208 --> 02:18:00.106
we've got, there's nothing new
under the sun might happen

2351
02:18:00.174 --> 02:18:04.072
faster, or something might
happen in a different way. But

2352
02:18:04.140 --> 02:18:08.311
we need to make sure that we
have prudential regulations that

2353
02:18:08.380 --> 02:18:12.141
allow for businesses and
individuals to transact things

2354
02:18:12.209 --> 02:18:16.654
and without being harmed. And so
I think, Mr. Ranking Member, I'm

2355
02:18:16.722 --> 02:18:20.756
going to try to convince the
committee that we have another

2356
02:18:20.825 --> 02:18:24.996
couple hearings on this subject.
And so I'd like to thank our

2357
02:18:25.064 --> 02:18:29.235
panelists your your testimony,
both your oral testimony, your

2358
02:18:29.304 --> 02:18:33.612
written testimony, outstanding.
I wish Mr. Torres would here be

2359
02:18:33.680 --> 02:18:38.056
was here because if you read all
of those papers that you've all

2360
02:18:38.125 --> 02:18:42.364
written, you'll learn just about
everything there is about the

2361
02:18:42.433 --> 02:18:46.535
banking system from Hamilton and
Jefferson today. So without

2362
02:18:46.604 --> 02:18:50.570
objection, I like to enter
statements into the record, the

2363
02:18:50.638 --> 02:18:54.809
American Bankers Association,
the American Financial Services

2364
02:18:54.878 --> 02:18:58.980
Association, the bank policy
institute, the consumer Bankers

2365
02:18:59.049 --> 02:19:02.741
Association, Independent
Community Bankers of America,

2366
02:19:02.810 --> 02:19:06.160
National Association of
industrial bankers, I was

2367
02:19:06.229 --> 02:19:10.468
surprised nobody mentioned Glass
Steagall, in the commerce and

2368
02:19:10.536 --> 02:19:14.366
banking kind of context today.
But obviously, as we came

2369
02:19:14.434 --> 02:19:18.742
through the Depression, we want
to make sure that we didn't mix

2370
02:19:18.810 --> 02:19:22.845
commerce and banking. I want to
thank all the witnesses for

2371
02:19:22.913 --> 02:19:26.332
their testimony, and for
devoting their time their

2372
02:19:26.400 --> 02:19:30.572
talent, their intelligence, to
share your expertise with this

2373
02:19:30.640 --> 02:19:34.811
subcommittee. Your testimony
today will help advance the work

2374
02:19:34.879 --> 02:19:38.982
of our subcommittee and the US
House of Representatives. The

2375
02:19:39.051 --> 02:19:43.085
chair notes, some members may
have additional questions for

2376
02:19:43.153 --> 02:19:46.914
this panel, which they can
submit to you in writing and

2377
02:19:46.983 --> 02:19:51.290
without objection, the hearing
record will remain open for five

2378
02:19:51.359 --> 02:19:54.983
legislative days for members
Submit to submit written

2379
02:19:55.051 --> 02:19:59.291
questions to these witnesses and
to play as their responses in

2380
02:19:59.359 --> 02:20:03.257
the record, and also without
objection, members will have

2381
02:20:03.325 --> 02:20:07.360
five legislative days to submit
extraneous materials to the

2382
02:20:07.428 --> 02:20:11.120
chair for inclusion in the
record. I remind members to

2383
02:20:11.189 --> 02:20:15.291
submit written questions and
materials for the record to the

2384
02:20:15.360 --> 02:20:19.189
email address provided. Thank
you all very much for your

2385
02:20:19.257 --> 02:20:23.223
testimony to the Coloradans.
Good to have you here. But to

2386
02:20:23.292 --> 02:20:27.189
those of you not from Colorado,
we're very happy that you

2387
02:20:27.258 --> 02:20:31.566
participated as well. And with
that, this hearing is adjourned.

2388
02:20:31.634 --> 02:20:32.250
Thank you