McHenry to Prudential Regulators: The Stakes are Too High to Take Your Eye Off the Ball--Focus on Safety, Soundness, and Stability of Financial System

Hearing

"Good morning. I appreciate all of our witnesses for appearing today.

The last time you appeared before this Committee, we were facing significant turmoil in our regional banking system.

Since then, you have employed a never-let-a-crisis-go-to-waste mantra--attempting to use recent uncertainty to justify your sweeping rewrite of regulations for U.S. financial institutions.

No one is buying that spin. The most significant proposals--including the Basel III Endgame--are overwhelmingly dominated by provisions that have nothing to do with what happened in March.

Rather, it appears the onslaught of your agencies' regulatory proposals are intended to turn private banks and financial institutions into public utilities.

This would put unelected bureaucrats in charge of balance sheets, credit flows, and evaluation of what is and is not considered risky.

So let's start with the Basel III Endgame proposal, which involves hundreds of billions, or even trillions, of dollars in resource allocation. This initiative was put forward with no convincing rationale, no credible motivation, and a shocking lack of supporting quantitative economic analysis.

Even worse, the Basel III Endgame would stifle economic growth, limit lending, and hinder the American dream of homeownership for families across the country.

Additionally, banking regulators appear to have abandoned even the slightest notion of promoting American interests.

Instead, you have ceded your authority over U.S. financial regulation to opaque and unaccountable global governance bodies and NGOs--allowing European counterparts to set the agenda and put our financial system at a competitive disadvantage.

One need only look at the recently proposed federal principles for climate-related risk management. These principles align closely with those being pushed by global governance bodies, rather than the best interest of our financial system.

Regardless of whether you call it guidance or regulation, these principles are significant and did not go through the appropriate process as governed by the Administrative Procedures Act. That's why I will request the GAO examine whether they constitute a rule and would be subject to the Congressional Review Act.

Similarly, in a win for consumer protection, the GAO recently ruled the SEC's misguided SAB 121 does meet the APA's definition of a rule--making it subject to the CRA.

It seems the only area Biden's financial regulators don't take their cues from foreign counterparts is digital assets. While other jurisdictions implement robust consumer protections and clear regulatory frameworks, we continue to fall behind.

I'll finish with this, there appears to be a desire to remake the American financial system to better align with regulators' political preferences, rather than to dutifully implement the laws enacted by Congress.

These supposedly independent regulators are blindly following orders from the White House and political activists--leading to gross mismanagement of their agencies and the American economy.

Just this week, alleged widespread and entrenched misconduct by FDIC employees was reported by the Wall Street Journal, a severe departure from the agency's operations to execute its mission.

We often hear in the halls of Congress that things will happen because someone has the votes to make it happen.

Unelected banking regulators seem to be using a similar political calculus to push partisan agendas.

The stakes are too high to take your eyes off the ball. You must focus on the long-term safety, soundness, and stability of our financial system for the benefit of American families and workers--rather than a focus on partisanship, misleading rhetoric, and short-term political gains."

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