September 09, 2014


WASHINGTON -  U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing entitled: “Wall Street Reform: Assessing and Enhancing the Financial Regulatory System.”

Thank you, Mr. Chairman.  Dodd-Frank requires approximately 400 new rules to be written and approved by the federal financial regulators. To date, slightly more than 50 percent of these rules have been finalized and nearly 25 percent are still in the proposed stage.  The remaining 25 percent are yet to be written.
With some 220 rulemakings finalized, we still have no idea what the cumulative cost of Dodd-Frank is or will be.  The Volcker rule and the conflict minerals rule alone will add approximately 4.6 million paperwork burden hours and over $1 billion for services of outside professionals, according to the regulators’ own Paperwork Reduction Act estimates, and that is just for two of the 220 rules finalized.  We cannot pretend that these additional costs are not passed on to consumers.  Without a cumulative analysis of the true costs and burdens of the rules we cannot understand their overall impact on the regulated entities, consumers and markets.
For example, while Dodd-Frank was intended to exempt small institutions from some regulations, what I hear back in Idaho is that regulatory demands trickle down even to the smaller banks and entities.  Community banks are disproportionately affected because they are less able to absorb additional costs.  Out of concern about what new regulations may be imposed next, financial institutions keep money for compliance costs set aside, rather than investing it in local communities.  We can and should make common-sense changes to lessen the regulatory burden.
In past hearings, the regulators have supported several Dodd-Frank fixes, including the end-user fix, swaps push out rule, and giving the Fed flexibility to tailor the capital standards it places on insurance companies.  Regarding the latter, the Senate passed by unanimous consent a fix so that insurance companies are not subject to bank-like capital requirements contrary to their business model.  I look forward to hearing from the witnesses what specific fixes should be made so that traditional banking services do not become so complicated or expensive that banks like those in Idaho and other rural communities can no longer offer such services.
I appreciate that some of your agencies have commenced the statutorily mandated interagency review of existing regulations to identify “outdated, unnecessary, or unduly burdensome regulations.”  A similar review led to the 2006 regulatory relief law and I encourage the remaining agencies to join in this effort.  I urge all of you to make this review a priority, to set up outreach meetings with regulated entities and others, and to provide a list of recommendations to Congress.  For example, several of our witnesses have discussed eliminating a paper version of the annual privacy notice, a measure that has passed the House by voice vote and currently has more than 70 co-sponsors in the Senate.
In addition to Dodd Frank regulatory mandates, the law also established the Financial Stability Oversight Council (FSOC).  At the July FSOC hearing, I reiterated my concerns to Secretary Lew about the lack of transparency of FSOC’s designation process.  Last week’s action by FSOC on MetLife only reinforces those concerns and threatens to disrupt a carefully forged regulatory balance for an industry that has been traditionally under the purview of state regulators.  The U.S. financial system and capital markets cannot remain the preferred destination for investors throughout the world if our regulators operate under a cloak of secrecy.
Secretary Lew stated that each of the designated nonbank SIFIs was given detailed explanations as to why they were designated.  But this information was provided only after they have been designated.  That is not how our regulatory framework ought to operate.  I urge you to publish indicator-based SIFI designation criteria in the Federal Register for public comment, and impose moratorium on new designations until there are objective metrics and increased transparency.  Only then can we restore accountability to the FSOC designation process.
All of your agencies should recognize the benefit in having an open and transparent regulatory process.  Transparency does not weaken rulemakings, it gives them much needed legitimacy.
Mr. Chairman, the issues we are discussing today are very important, especially as they relate to our community and regional banks.  I know that the Committee will be looking at these entities issue in the near future, and I thank you for that.