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Waters Statement in Opposition to Bill that Rolls Back Important Dodd-Frank Rules for Large Banks

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Washington, DC, December 17, 2017 | comments

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, gave the following floor statement in opposition to H.R. 3312, a bill that would deregulate some of the largest banks:

Mr. Chairman, I rise in strong opposition to H.R. 3312, the Systemic Risk Designation Improvement Act.

At a time when big banks are doing very well and the industry made record profits – more than $171 billion last year – and business lending has increased 75 percent since Dodd-Frank was signed into law, now is not the time to eliminate critical safeguards and reduce oversight of many of our largest banks. H.R. 3312 would roll back the enhanced prudential standards that currently apply to 30 of the largest banks with more than $50 billion in assets. These are some of the most important rules in Dodd-Frank, like enhanced capital and stress testing, that are critical to maintaining a safe and sound banking system that supports the broader economy.

Proponents of this bill argue that Dodd-Frank imposed a one-size-fits all approach to any bank over $50 billion. But the law makes clear that the Fed should tier and tailor its rules to differentiate between even these large banks “on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate.” There is no one-size-fits all mandate, and the Fed has indeed tailored these rules. For example, the prudential rules for a trillion dollar bank are much tougher compared to those that apply to a $250 billion bank, and considerably more so compared to a $50 billion bank.

And yet, after 18 months, this bill would exempt 30 of our largest banks from enhanced oversight and replaces the $50 billion threshold with a cumbersome, discretionary process led by the Federal Reserve along with the FSOC. We have a similar process for designating non-bank financial companies, like AIG, which have posed a systemic risk, so it is strange Republicans are now pushing a similar approach after they repeatedly blasted the same FSOC designation process for being arbitrary, opaque, unfair and unworkable. Those designations were heavily litigated if not blocked in court, as these new designations by the Federal Reserve and the FSOC would likely be. Currently, there is only one non-bank designated by FSOC through this process, so we should expect there would be hardly any designations through H.R. 3312.

Who are these 30 massive banks that stand to benefit? These banks collectively hold more than $5 trillion in assets, or one-fourth of all banking assets in the United States. Of the 30 banks, 12 of them are foreign banks, including Deutsche Bank, HSBC, Credit Suisse and UBS. These banks have violated a wide range of U.S. laws, including anti-money laundering and unlawful trading practices, so I have no clue why Congress should even consider doing those banks any favors.

For all the talk about helping out small, community banks that serve their customers well in our rural and underserved neighborhoods, there is not a single provision that helps out these thousands of community banks and their customers. While some characterize this bill as helping “medium-sized” banks, the median sized bank only has about $200 million in assets, or roughly 250 times less than the massive banks that benefit by this bill. More troubling, instead of helping community banks the bill would make it easier for the largest banks to acquire smaller ones, accelerating a 30-year consolidation trend. Reasonable people can disagree on how best to dial up or down some of these enhanced standards and tier them more effectively, and I know my colleagues have good intentions, but this proposal goes way, way too far in reversing strong oversight of the nation’s largest banks.

Even a Senate bill that resembles Chairman Hensarling’s Wrong Choice Act is far less aggressive, raising the $50 billion threshold to $250 billion, although even that proposal would be damaging.

Let me close by emphasizing that H.R. 3312 represents one of the largest rollbacks of sensible rules for many of our largest banks, including a dozen foreign banks, at a time when the industry is making record profits – and such a bill will hurt and make it harder for community banks to compete.

For these reasons, I strongly urge Members to oppose H.R. 3312, and I yield back my time.

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