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Hearing of the House Financial Services Committee - "Who's in Your Wallet?"


Location: Washington, DC

Thank you Mr. Chairman.

I am struck by what seems to me to be a nice irony in the title, "Who's in your wallet?" borrowing given the looseness of intellectual property constraints here from Capitol One's slogan, "What's in your wallet?" And we learned from one of the agencies, many in this panel wish never existed, the Consumer Bureau, that what was in the wallet of many consumers were the hands of Capitol One. So references of who's in whose wallet and for what purpose are very relevant to today's hearing.

The CFPB in coordination with the OCC just fined Capitol One, which agreed with the fact that it had violated basic consumer rules -- so there are all kinds of people in the wallet.

I see the testimony here by the Chamber of Commerce, déjà vu. In 2006 I was the Chairman in waiting of this committee in December, and I was asked to come to a session of the Chamber of Commerce in which the point was -- this was 2006 -- we are over-regulating the financial industry and we were told that we had to cut back, that if we did not cut back on Sarbanes-Oxley the likelihood of IPOs ever being issued in America would be substantially diminished. And of course they could not have been more wrong. One of the things we were told at the time by the Chamber and others was we should emulate the "light touch" regulation of the British Financial Services Authority -- the people who have done, by their own admission, a fairly poor job of not regulating when they should have regulated.

I look here and I see complaints that we are over-regulating mortgages. And there's a complaint from some of the people I think in the credit unions and elsewhere that we're being too tough in requiring payment standards for people who are taking out mortgages. I confess that I am surprised to hear that complaint. Given the unfortunate role that was been played by laxity in mortgage standards in helping to bring this crisis about, I am surprised by that. I have also heard -- I haven't seen it yet here -- some complaints that the bill's requirement that those who securitize mortgages retain some of the risk, that that is retarding mortgages. In fact, it's not in effect yet and it's not retroactive so it clearly cannot be blamed for retarding anything. But this resistance to tightening up mortgage standards is just odd to me given what had happened.

And then from the Chamber we also have complains about the over-regulation of the derivatives as if there ever was an AIG, as if the problems that recently surfaced with JPMorgan Chase and the manipulation of LIBOR hadn't existed. We've done some refinements and I will do some more, but this whole sale rejection of regulation of the financial industry -- I would have to say to my friend in the Chamber, going back to 2006, they remind me of the Bourbons when the Restoration came in the 19th century in France and people said, "they have forgotten nothing because they learned nothing." The notion that people would be repeating the argument from 2006 is really quite startling to me.

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