[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
CFPB BUDGET REVIEW
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 18, 2013
__________
Printed for the use of the Committee on Financial Services
Serial No. 113-33
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81-768 WASHINGTON : 2014
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California, Ranking
Chairman Member
SPENCER BACHUS, Alabama, Chairman CAROLYN B. MALONEY, New York
Emeritus NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota DAVID SCOTT, Georgia
KEVIN McCARTHY, California AL GREEN, Texas
STEVAN PEARCE, New Mexico EMANUEL CLEAVER, Missouri
BILL POSEY, Florida GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK, KEITH ELLISON, Minnesota
Pennsylvania ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Oversight and Investigations
PATRICK T. McHENRY, North Carolina, Chairman
MICHAEL G. FITZPATRICK, AL GREEN, Texas, Ranking Member
Pennsylvania, Vice Chairman EMANUEL CLEAVER, Missouri
PETER T. KING, New York KEITH ELLISON, Minnesota
MICHELE BACHMANN, Minnesota ED PERLMUTTER, Colorado
SEAN P. DUFFY, Wisconsin CAROLYN B. MALONEY, New York
MICHAEL G. GRIMM, New York JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee KYRSTEN SINEMA, Arizona
RANDY HULTGREN, Illinois JOYCE BEATTY, Ohio
DENNIS A. ROSS, Florida DENNY HECK, Washington
ANN WAGNER, Missouri
ANDY BARR, Kentucky
C O N T E N T S
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Page
Hearing held on:
June 18, 2013................................................ 1
Appendix:
June 18, 2013................................................ 41
WITNESSES
Tuesday, June 18, 2013
Agostini, Stephen, Chief Financial Officer, Consumer Financial
Protection Bureau (CFPB)....................................... 5
APPENDIX
Prepared statements:
Agostini, Stephen............................................ 42
Additional Material Submitted for the Record
Waters, Hon. Maxine:
Letter to Chairman Jeb Hensarling, dated April 23, 2013...... 47
CFPB BUDGET REVIEW
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Tuesday, June 18, 2013
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2128, Rayburn House Office Building, Hon. Patrick T.
McHenry [chairman of the subcommittee] presiding.
Members present: Representatives McHenry, Fitzpatrick,
Duffy, Fincher, Hultgren, Wagner, Barr, Rothfus; Green,
Cleaver, Ellison, Maloney, Sinema, Beatty, and Heck.
Ex officio present: Representatives Hensarling and Waters.
Also present: Representative Garrett.
Chairman McHenry. The Subcommittee on Oversight and
Investigations will come to order. Without objection, members
of the full Financial Services Committee who are not members of
the Oversight Subcommittee may sit on the dais and participate
in today's hearing.
And without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Our hearing today is a CFPB budget review. And I yield
myself 5 minutes for an opening statement.
Almost 3 years ago, under the enactment of the Dodd-Frank
Act, the Consumer Financial Protection Bureau (CFPB) was
created. Its stated purpose is to regulate and supervise the
offering and provision of consumer financial products or
services under the Federal consumer financial laws.
However, prior to its inception, when it was still but an
idea of one Harvard academic, the proposed Bureau was already
compared to an existing agency known as the Consumer Product
Safety Commission, or the CPSC. As the original architect of
the Bureau, Elizabeth Warren, stated, ``Just as the Consumer
Product Safety Commission protects buyers of goods and supports
a competitive market, we need the same for consumers of
financial products, a new regulatory regime, and even a new
regulatory body to protect consumers who use credit cards, home
mortgages, car loans, and a host of other products.''
However, the vision proposed was for an agency very
different than the CPSC. While the CPSC has three
Commissioners, the Bureau has a single-Director structure. And
while the CPSC is subject to the congressional appropriations
process and the OMB budget process, which our witness today is
very familiar with, the Bureau is not.
In the end, this single Director can disregard advice and
manage as he or she wishes. He has or she has little
accountability to the Administration and even less to Congress.
His or her budget is secure. As a result, it should come as no
surprise that the Bureau has operated with less transparency
and less concern for fiscal discipline than is appropriate for
a steward of taxpayer funds.
The Bureau need not listen to basic advice from the Office
of Management and Budget. For example, on May 31st of this
year, the OMB issued a controller alert related to conference
spending by agencies over which the OMB has jurisdiction. Given
the waste and abuse at GSA and IRS conferences, this was the
least we could hope for. However, based on Dodd-Frank, the
Bureau can simply ignore this controller alert.
As a result of this lack of accountability, certain
expenditures have been called into question, such as the $55
million that has been set aside for renovating the CFPB
headquarters building just steps from the White House.
Incidentally that number, $55 million, is more than the entire
annual construction and acquisition budget for GSA for the
totality of Federal buildings.
The Bureau has also refused to participate in the Office of
Personnel Management's Employee Viewpoint Survey. Despite its
auditor's specific recommendations that the Bureau join the OPM
survey in which 98 percent of Executive Branch agencies
participate, the Bureau has instead decided to do its own. By
taking this action, the Bureau avoided being ranked alongside
the other 98 percent of Federal agencies that do participate.
Nevertheless, the Bureau's in-house employee survey
revealed significant concerns regarding the management of the
Bureau's staff. The survey provided that only 35.6 percent of
employees agree that the Bureau takes steps to deal with a poor
performer who cannot or will not improve. So, only one-third of
the staff of the Bureau believe that the Bureau's staff is
providing real employee accountability. That is a major
concern.
Furthermore, the Bureau claims that it invests in world
class training for its employees. However, its own survey says
only 38.8 percent of employees agree that the training they
received was sufficient. That sounds like anything but world
class.
Last week, a news story reported that the Bureau is losing
senior staff faster than it can replace them. The report goes
on to say the Bureau imposed management techniques which put an
emphasis on ensuring all employees were considered equal
stakeholders. A former Bureau official expressed concern that,
``While it is good policy to get some people with no exposure,
you don't want them to drive policy decisions because they
don't understand the risk or cost involved.'' So thus, those
with little training and experience are seated alongside those
with greater training and experience and are considered equals.
These weaknesses may reflect broader management problems.
Last week, the CFPB employees voted to join the National
Treasury Employees Union, the same union that is noted for
representing the IRS employees as well.
When considering all this, coupled with the total lack of
accountability to the American people, I am deeply concerned
that the CFPB presents a substantial risk to the taxpayers. And
as the Chief Financial Officer of the CFPB, I welcome our
witness today and look forward to his testimony.
Now, I will yield to the ranking member of the full
Financial Services Committee, Ms. Waters, for 3 minutes.
Ms. Waters. Thank you very much, Mr. McHenry and Mr. Green,
for this hearing.
I must first begin by expressing my ongoing concern with
the Majority's refusal to allow Director Cordray to appear
before the Financial Services Committee. No court has addressed
the legitimacy of President Obama's appointment of Richard
Cordray. And the mere notion that some legal scholars dispute
the legitimacy of Director Cordray's appointment does not make
it legally invalid.
Contrary to what some of my colleagues view as a lack of
accountability and oversight, the CFPB has been transparent and
forthcoming about their budget and operations. CFPB officials
have testified before Congress at 36 hearings. Director Cordray
himself has testified before Congress 13 times. The CFPB's
operations and budgets are subject to independent private
audits. The Government Accountability Office is also required
to audit the CFPB. The Comptroller General is required to
annually audit the financial transactions at the CFPB. And the
agency is also held accountable by the Inspector General of the
Federal Reserve Board.
Current law requires the Director of the CFPB to appear
before Congress to testify biannually on the CFPB's budget and
rulemaking. And although Director Cordray is not statutorily
required to present testimony at today's hearing, he testified
on the CFPB's budget in this subcommittee last February.
Whether or not Republican Members support the mission of the
CFPB, the decisions to bar Director Cordray from testifying and
deny his confirmation in the Senate are the very actions that
impede congressional oversight of the Bureau and create
regulatory uncertainty for consumers and the industry.
I conveyed many of these concerns in a letter I sent to
Chairman Hensarling on April 23rd requesting that he reconsider
his position and schedule a hearing to allow Director Cordray
to deliver the CFPB's semiannual testimony to the committee as
required by statute. I ask unanimous consent that this letter
be entered into the record of today's subcommittee hearing.
Chairman McHenry. Without objection, it is so ordered.
Ms. Waters. In the aftermath of this crisis, we worked to
pass the Wall Street Reform Act, and now we are conducting
robust oversight of the agency's task to implement that law. I
would like to commend Director Cordray and his colleagues at
the CFPB, in particular for their transparency and willingness
to be forthcoming with the Congress about how they are
fulfilling their responsibility to implement the Act. The CFPB
has accomplished a great deal under extraordinary scrutiny and
the Bureau will continue to have my support for as long as it
continues to fulfill its statutory obligations to American
consumers.
I yield back the balance of my time.
Chairman McHenry. The ranking member of the subcommittee,
Mr. Green, is recognized for 3 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witness for
appearing as well. It is regrettable that Mr. Cordray is not
with us today.
When it comes to the CFPB there are, generally speaking,
two competing schools of thought. Should the CFPB be an
independent agency that is independent of politics and
accountable or should it be dependent upon politics and
accountable? Should it be independent similar to the FHFA and
the OCC with an executive officer and no board or should it be
dependent on politics, similar to the NLRB, which has a board
and cannot function efficaciously because of appointment
politics? Should it be independent similar to the FED, the OCC,
the FDIC, and the NCUA? They are funded, but they are funded
without congressional approval? Or should it be dependent upon
politics, similar to the SEC and the CFTC, which are funded
through Congress and consistently contend that they are being
underfunded?
I think that consumers merit and deserve an independent
agency, a watchdog if you will, that is independent of politics
to the extent that we can have it such. The CFPB should be and
is accountable. It is accountable, and this is why the Director
can be removed for cause, this is why the CFPB has to consult
with other Federal regulatory agencies during rulemaking, this
is why it must do a cost-benefit analysis, why testimony before
Congress twice a year is required, and thus far we have had 36
appearances. This is why the rules are subject to judicial
review. This is why it has to reassess its existing rules every
5 years. This is why it can have its rules vetoed by other
Federal regulators. This is why the rules are subject to
external review by the SBA and the OMB. This is why it can be
audited by the GAO, the IG, as well as an independent audit
mandated by Congress.
Consumers deserve an independent and accountable consumer
protection bureau. This is what we have now. The challenge is,
will we keep it this way?
I yield back the balance of my time.
Chairman McHenry. The ranking member yields back, and we
will now recognize our witness. Mr. Stephen Agostini has been
the Chief Financial Officer of the Consumer Financial
Protection Bureau since 2011. Previously, Mr. Agostini served
as the Chief Financial Officer of the U.S. Office of Personnel
Management, a role he started in September of 2010. He also
served as the Budget Director for the City of Philadelphia for
2\1/2\ years, and prior to that as Chief Financial Officer for
the Economics and Statistics Administration at the Commerce
Department.
Mr. Agostini, thanks so much for being here today. We will
recognize you for the purposes of summarizing your written
statement. We have a lighting system that I am sure you are
well aware of, and we will give you 5 minutes to summarize. You
are now recognized for 5 minutes.
STATEMENT OF STEPHEN AGOSTINI, CHIEF FINANCIAL OFFICER,
CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)
Mr. Agostini. Thank you, Chairman McHenry, Ranking Member
Waters, Ranking Member Green, and distinguished members of the
subcommittee for the opportunity to participate in today's
oversight hearing about the Consumer Financial Protection
Bureau's budget and workforce. The Bureau welcomes rigorous
congressional oversight, and we appreciate the opportunity to
testify before Congress for a 36th time today. My name is
Stephen Agostini and I am the Chief Financial Officer of the
Bureau.
The Consumer Bureau was created by the Dodd-Frank Act in
the wake of the worst financial crisis since the Great
Depression. We are the Nation's first Federal agency whose sole
focus is protecting consumers in the financial marketplace. In
the Dodd-Frank Act, Congress followed the long-established
precedent in providing the Bureau with funding outside of the
congressional appropriations process. This ensures full
independence as the Bureau carries out its statutory
responsibilities to supervise and regulate providers of
consumer financial products and services.
Congress has consistently provided for independent funding
for bank supervisors to allow for long-term planning, the
execution of complex initiatives, and to guarantee that banks
are examined regularly and thoroughly for compliance with the
law. The Bureau's Fiscal Year 2013 budget totals $541 million,
which supports ongoing operations and new investments in human
capital, technology, and facilities, as well as consumer
research and financial education activities. The Fiscal Year
2013 budget also includes a one-time expense to renovate our
headquarters in Washington, D.C.
The Fiscal Year 2014 estimate of $497 million reflects
continued growth in staff and new investments in technology,
data, and equipment. While our budget is small relative to
other banking agencies, we are committed to using our resources
wisely and carefully. We rely on performance information to
help inform our decisions and we will continue to do so as we
grow. The budget provides additional resources for all of our
programs over the next 2 fiscal years.
The Division of Supervision, Enforcement, and Fair Lending
will see the largest increase over the next 2 years to support
additional staff and systems development. We will also be
investing in those offices that work directly with consumers,
such as our Office of Consumer Response, and our offices
dedicated to servicemembers, students, and older Americans.
The Bureau employs talented professionals from diverse
backgrounds. They have ensured that the Bureau consistently
meets its deadlines, puts in place strong rules of the road to
fix the broken mortgage market, obtains millions of dollars in
restitution for consumers, and handles tens of thousands of
consumer complaints. The Bureau currently has approximately
1,200 employees. We continue to retain, as well as hire,
accomplished staff as we build the Bureau.
So far in Fiscal Year 2013, the Bureau has hired over 300
new employees. We will continue to staff up in order to carry
out our mission to make consumer financial markets work for
American consumers, honest businesses, and the economy as a
whole.
In order to ensure the Bureau's programs and strategies are
effective, the Bureau is subject to periodic reviews of its
performance, including studies and audits by the U.S.
Government Accountability Office and the Office of Inspector
General of the Board of Governors of the Federal Reserve
System, and the Consumer Financial Protection Bureau.
Additionally, as required by Congress, the Bureau orders an
annual independent audit of our budget and operations. The
independent audits of Fiscal Years 2012 and 2011 are available
on our Web site.
The Bureau is committed to public transparency in its
contract procurements and spending. We post contract
opportunities publicly on FedBizOpps.gov and contract award
data is reported to usaspending.gov. Our budget Web page
includes additional detail about our budget, including annual
budget justification and budget in brief documents and annual
financial reports. And we publish quarterly budget update
documents on our Web site as well.
We are committed to delivering tangible value to American
consumers. Budget numbers are important, but so are results.
With that in mind, I would like to share some additional
numbers: $425 million represents the amount of money being
refunded as a result of CFPB enforcement actions to consumers
who are subjected to deceptive practices; 6 million represents
the number of consumers receiving funds because of 2012 CFPB
enforcement actions; more than 130,000 represents the number of
complaints CFPB has handled from consumers in every State
around the country since the CFPB formally opened its doors in
July 2011; and 31,000 represents the number of military and
veteran consumers the Bureau's Office of Servicemember Affairs
communicated with in 2012 through 82 outreach events.
Chairman McHenry, Ranking Member Waters, Ranking Member
Green, and members of the subcommittee, thank you again for the
opportunity to testify before you today at this important
oversight hearing on the Bureau's budget and workforce. I will
be happy to answer your questions.
[The prepared statement of Mr. Agostini can be found on
page 42 of the appendix.]
Chairman McHenry. Thank you for your statement, and thank
you for testifying today.
I will now recognize myself for 5 minutes for questions.
Mr. Agostini, as I referenced, you were previously at the
Office of Personnel Management as the Chief Financial Officer,
correct?
Mr. Agostini. Mr. Chairman, that is correct.
Chairman McHenry. Okay. And at OPM, did the Office of
Management and Budget have authority with regard to the budget
process at OPM?
Mr. Agostini. Yes, they did.
Chairman McHenry. Okay. And so, you engaged with OMB
through that process?
Mr. Agostini. Yes, I did as the CFO at OPM.
Chairman McHenry. Does OMB have a similar function with the
CFPB?
Mr. Agostini. Mr. Chairman, as the Act has--
Chairman McHenry. So that would be a no, is that correct?
Mr. Agostini. Mr. Chairman, as the Act has laid out, OMB
does not have the same review.
Chairman McHenry. Okay. So other Executive Branch agencies
have a check and a balance with the OMB process, such as the
Securities and Exchange Commission does.
Section 1017 of Dodd-Frank specifically exempts the CFPB,
as you were referencing, ``any obligation on the part of the
Director to consult with or obtain the consent or approval of
the Director of the Office of Management and Budget with
respect to any report, plan, forecast, or other information
referred to in paragraph A,'' which is the additional
reference, ``or any jurisdiction or oversight over the affairs
or operations of the Bureau.'' Is that correct? That was the
point you were referencing?
Mr. Agostini. Mr. Chairman, that is correct.
Chairman McHenry. Okay. So you are exempt from the
Executive Branch budget process?
Mr. Agostini. Mr. Chairman, as the Act states, we do not
fall under the purview. We do submit, have submitted our budget
as part of the Executive Branch budget in the past.
Chairman McHenry. So, yes, and it is submitted, but you
draw down your funds from the Federal Reserve, correct?
Mr. Agostini. That is correct, Mr. Chairman.
Chairman McHenry. Okay. And with the Federal Reserve is
there a process by which they say yes or no to how you draw
down those funds?
Mr. Agostini. Mr. Chairman, as you may know, the Act also
specifies how we are to receive funding and--
Chairman McHenry. Which is just a cap of how much from the
Federal Reserve.
Mr. Agostini. It sets out a process, Mr. Chairman, for the
funding of the Bureau. It gives us a cap, and that cap we are
estimating for the current fiscal year to be somewhere in the
neighborhood of $600 million.
Chairman McHenry. Okay, $600 million. Now, with the
congressional appropriations process, a lot of other agencies
go through that process. Right? While I find it well and good
that the CFPB has willingly submitted themselves or accepted
our invitation to come before this committee for the purposes
of congressional oversight, you are exempt under this Act from
coming to this body for funding, correct?
Mr. Agostini. Mr. Chairman, I think that the Act, while
exempting us from that, does have us come before a number of
oversight entities, as well as Congress, on at least three
occasion: two as part of our semiannual reporting requirement;
and one as a report to the Appropriations Committee as well.
Chairman McHenry. So, a report to the Appropriations
Committee and they accept the report. And if they don't like
it, if they demand changes, what can they do? Can they
legislatively withhold funds or give additional funds, too? I
guess they could give additional funds, too, but with a $600
million cap, that seems like a pretty large way to run in order
to submit yourself to the congressional appropriations
processes just sort of willingly.
Obviously, you have an Inspector General who has some
oversight of your agency. Your Inspector General, who would
that be?
Mr. Agostini. Our Inspector General is shared with the
Federal Reserve Board.
Chairman McHenry. Okay. Who oversees the fullness of the
Federal Reserve Board, correct?
Mr. Agostini. That is correct.
Chairman McHenry. Okay. And so in this whole process what
it seems like to me, and what becomes very clear with how your
agency has been spending money, as we will get to with other
questions here today, is that you, while having a reputational
risk for free spending, you don't have an actual risk of losing
appropriations or having to submit yourself to the
congressional appropriations process.
That is of deep concern and it will come to bear in this
hearing, I believe, that it has led to mismanagement and
overspending by your agency and not appropriate checks and
balances to which other agencies have to submit themselves.
With that, we will now recognize Mr. Cleaver for 5 minutes
for the purpose of questioning the witness.
Mr. Cleaver. Thank you, Mr. Agostini, for being here. I
apologize for being late. I was over in the section of our
Federal Government that needs to be closed, the Senate. I am
very much interested, however, in finding out the regulators
who are subject to our appropriations process.
Mr. Agostini. Congressman, I am not necessarily an expert
on other regulatory agencies, but there are agencies that
receive, like the FDIC, like the OCC, funding from specific
dedicated sources that are not appropriations. So there are
instances, as is the case with our Bureau, where
nonappropriated sources are made available for the operations
of that particular entity over the span of a year.
Mr. Cleaver. The reason I raise the question is that there
have been some suggestions that we subject your Bureau to the
appropriations process. And so I am curious about regulators
who are subject to this process, and I can probably get that
answer after the hearing today. I am not sure that we can find
any regulators who are doing that, including the FDIC, the
Federal Reserve, or the OCC. Maybe there are some regulators
hidden out there somewhere that should be subjected to this
budget process. But if you can't, you don't know of any, and I
am--
Mr. Agostini. Most of our sister agencies, Congressman, are
indeed outside of the appropriations agency process. The most
significant, I would suggest is the Federal Reserve, since the
Federal Reserve is the benchmark stipulated in the Act by which
we do much of what we do in terms of organization, in terms of
salary, in terms of funding. And to your point, they are
clearly not in that appropriations process.
Mr. Cleaver. The big concern, and legitimately, is dealing
with our deficit and our spending. I have not heard anybody
express disinterest in trying to get spending under control or
that they are not interested in trying to deal with the
deficit. But considering budget constraints, if you had to make
a choice--you probably don't want to answer this question--on
what budget items you would choose to reduce, what do you think
we could make it without in the next fiscal year?
Mr. Agostini. Congressman, we are still a growing agency,
we are still building up our capacity to deliver the mission
that Congress gave to us with respect to American consumers, as
well as with our regulatory responsibilities. It is the case
that we are very careful stewards of our funding and make sure
that we are using those funds in a manner that is appropriate
to accomplishing that mission.
If there was a desire to either reduce or in some other
fashion constrain further our funding, it would require us to
make some decisions about what we would and would not do moving
forward. I don't have the ability to tell you exactly here
today what those things would be, but we would have to go back
and look at that carefully.
Mr. Cleaver. But the Bureau is struggling right now looking
at what it could reduce? You are examining the agency in terms
of your budget right now, is that accurate?
Mr. Agostini. Congressman, we are always looking at the
budget. I am always involved in a review of how we spend our
funds. I do that on a monthly and quarterly basis in order to
ensure that we are effective stewards of the funds and that
they are used in a manner that is appropriate with our mission.
We are still building the agency; we are not in a process
engaged in reducing the budget at the moment. We are still
trying to staff up and build the infrastructure necessary to
deliver our mission.
Mr. Cleaver. My concern is that your responsibilities could
be hurt without fulfilling them if you ended up not having the
budget to carry out what were you commissioned to do.
Thank you.
Chairman McHenry. The gentleman's time has expired.
We will now recognize the vice chairman of the
subcommittee, Mr. Fitzpatrick, for 5 minutes.
Mr. Fitzpatrick. I thank the chairman for the hearing.
And thank you, Mr. Agostini, for your testimony here today.
Sir, last year I joined with Mr. Neugebauer and Mr.
Renacci, who at the time were both members of this committee,
in writing a few letters to Mr. Cordray seeking additional
details about the CFPB budget. And, unfortunately, while we did
receive a pretty cordial reply, what we didn't receive were the
details that I believe that the taxpayers deserve, especially
when an agency is given a very unique ability to spend the
public's money without congressional approval and without
congressional authorization. And this is even more
disappointing given that the CFPB is an independent agency and
therefore you can release this budget information to Congress
without prior or previous approval from the Office of
Management and Budget. So I am going to make sure that we get
copies of those letters to you, sir, and I would ask that you
just take a look at them, get them to the appropriate people
within your agency, and perhaps provide some additional
information. Would you be willing to do that?
Mr. Agostini. I will, Congressman.
Mr. Fitzpatrick. Thank you.
Now, Mr. Agostini, I am also interested in learning more
about a substantial amount of money that the CFPB has spent on
employee travel, which will amount to nearly $12 million by the
end of this fiscal year. This is the kind of expense that
requires strong procedures and controls in order to prevent
waste and abuse, the kind of waste that we have seen in other
agencies across the Federal Government.
I am currently working on legislation that will require our
Federal agencies to consider alternatives to expensive travel,
such as video conferencing, as a way to reduce spending and
increase efficiency and productivity among the workforce. Do
you see any reason why the CFPB would not be able to
significantly reduce what you have in the line item right now
as employee travel and convert to video conferencing? It is
cleaner, greener, it is more efficient, it is safer, it is
better for the taxpayers.
Mr. Agostini. Congressman, we do take advantage of video
conferencing when possible. It is a technology that we think
has substantial promise, and allows us to do some things we
aren't able to do.
I would point out that we, unlike many of the other
regulators, are not resident, do not have offices in cities
across the country. There was a conscious decision when the
Bureau was stood up that we would not have bricks and mortar,
if you will, in cities across the country, much like either the
FDIC or the Federal Reserve does. And because of that we have a
distributed workforce and our ability do the work requires to
us to do a lot of traveling because of that distributed
workforce. That would be the explanation for the travel and the
level of travel.
Mr. Fitzpatrick. But you are willing to take a look at it?
Mr. Agostini. Absolutely, sir.
Mr. Fitzpatrick. Okay. Are you aware of an audit done of
the CFPB by ASR Analytics?
Mr. Agostini. Congressman, yes, they actually completed two
audits of the Bureau.
Mr. Fitzpatrick. ASR Analytics found that travel requests
within the CFPB are approved by a supervisor without any
knowledge of the estimated dollar amount to be expended on the
trip. And in addition, travel vouchers are not routed for
approval by the traveler's supervisor. Have you resolved this
control failure yet?
Mr. Agostini. Congressman, we go through a rigorous process
of reviewing both the authorization for travel, as well as the
voucher expenditure. My office has a very significant role in
that. I have actually spent time doing that myself. We are
always looking for improvements to that. We think that there
are improvements we can make moving forward. But we do subject
all of those travel, both vouchers and authorizations, and that
requires us most times to be talking directly with supervisors
so that they can assure us that travel was relevant and
purposeful.
Mr. Fitzpatrick. Does CFPB's staff continue to arrange for
trips without a supervisor's knowledge as to the cost of the
trip, which is an issue that was raised in the audit?
Mr. Agostini. Congressman, currently supervisors do sign
off on the trip itself, but we are about to make some
modifications where they will look at the budget for those
trips as well.
Mr. Fitzpatrick. As the CFO, do you consider the failure to
demand supervisors actually have knowledge of the travel costs
to be a significant failure in the financial controls of the
organization?
Mr. Agostini. Congressman, because of the manner in which
my office does the reviews and interacts with both regional
directors and supervisors, I believe that we have had a control
in place to prevent abuse. But there are improvements we can
make. And I think the one that you are suggesting about
supervisors reviewing is one that we are about to implement. So
I think it would be an improvement.
Mr. Fitzpatrick. I just want to say that I appreciate your
concern as well, your willingness to look at converting to
things like video conferencing in order to reduce travel
expenses. And we will get those letters over to you and look
forward to a reply. Thank you, sir.
I yield back.
Chairman McHenry. The ranking member of the full Financial
Services Committee, Ms. Waters, is recognized for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman.
I would like to basically ask you if you are aware that
Director Cordray continues to testify in the Senate and stands
ready to testify before Congress at any time? On April 30,
2013, the Director wrote to Chairman Hensarling, and he said,
``I personally stand ready to testify before Congress at any
time and have done so already on 13 occasions, including 6
times before House committees and subcommittees, including the
House Financial Services Committee.'' Are you aware of this?
Mr. Agostini. Yes, Congresswoman, we are aware of that.
Ms. Waters. And are you aware that he is prohibited from
testifying before this committee because the chairman of the
committee, Mr. Hensarling, believes that his appointment is
unconstitutional?
Mr. Agostini. I understand that he is not invited to
testify, Congresswoman.
Ms. Waters. Thank you very much. I just wanted to clarify
that and again put that in the record because I have been asked
by some of the staff and colleagues today whether or not he had
been invited here, and I thought I would just clarify that.
Having said that, I would like to ask you a few questions
about the budget. As I understand it, you have the smallest
budget of all of the banking agencies of the Federal
Government. Is that correct?
Mr. Agostini. Congresswoman, we do have one of the
smallest. I would need to do a little more research, but I do
believe among the large regulatory agencies, we do have one of
the smallest budgets.
Ms. Waters. I also understand that your budget is capped at
$598 million. Is that right?
Mr. Agostini. Congresswoman, we do have a transfer cap.
That transfer cap for Fiscal Year 2013 is $598 million and our
estimate for the subsequent fiscal year is $608 million.
Ms. Waters. And when I compare that with the other
agencies--for example, the 2009 budgets of the OCC, the FDIC,
and the Federal Reserve budgets were $775 million, $2.56
billion, and $4.98 billion, respectively, for those agencies.
Are you aware of that?
Mr. Agostini. Yes, I am.
Ms. Waters. I am also made aware that you have not utilized
your full budgetary authority. Is that correct?
Mr. Agostini. Congresswoman, that is correct.
Ms. Waters. Let me just ask, why has the CFPB not utilized
its full budgetary authority, and do you anticipate that the
Bureau will continue to operate on a budget somewhat less than
your allowable transfer cap in future years?
Mr. Agostini. Congresswoman, over the last 2 years, now 3
years, we have been building the agency, and as you will see,
we have gone from approximately $123 million in spending in
2011 to $300 million in 2012, and we anticipate it will be
something larger than that in the year coming.
While we did have the ability to transfer, request larger
transfer fund amounts from the Federal Reserve, we did not
think it was necessary, nor appropriate since there was no need
for us to spend those funds in either of those fiscal years. So
we refrained from asking for those funds.
Ms. Waters. I don't want to ask you to repeat too much, but
I was taken by some numbers that you gave in your testimony
earlier. Would you just repeat what you told this committee
about $25 million, 6 million, 130,000, I believe it was, and
31,000? What were you referring to in those numbers.
Mr. Agostini. Congresswoman, I would be happy to do that:
$425 million is the amount of money being refunded as a result
of CFPB enforcement actions.
Ms. Waters. I'm sorry, refunded?
Mr. Agostini. Refunded as a result of our enforcement
actions.
Ms. Waters. Okay.
Mr. Agostini. 6 million represents the number of consumers
receiving refunds because of enforcement actions as well.
Ms. Waters. All right.
Mr. Agostini. 130,000 represents the number of complaints
we have handled from consumers in every State around the
country since July of 2011.
Ms. Waters. Okay.
Mr. Agostini. And 31,000 is the number of military and
veteran consumers the Bureau's Office of Servicemember Affairs
communicated with in 2012.
Ms. Waters. Thank you very much.
Let me just say as I wrap up that I am very proud of the
work that the CFPB has been able to accomplish in a relatively
short period of time. I think that those numbers reflect how
effective you have been. I am very proud of the way that you
have managed your budget, and I hope that you continue in the
fashion that you have. And please communicate to Director
Cordray that he does have supporters over here.
Thank you very much.
Chairman McHenry. The gentlelady's time has expired.
The gentleman from Wisconsin, Mr. Duffy, is recognized for
5 minutes.
Mr. Duffy. Thank you, Mr. Chairman.
Was that 400-and-some-million dollars returned to Treasury,
is that what you said?
Mr. Agostini. Congressman, it is $425 million that was
refunded as a result of CFPB enforcement actions.
Mr. Duffy. Refunded to Treasury?
Mr. Agostini. These are refunds, Congressman, by private
entities to consumers.
Mr. Duffy. Okay, I just want to make sure you are not
sending that money back to the Treasury. That is going to
consumers. I just want to be clear on that.
In regard to your salaries at the CFPB, they are actually
set by the Director. Is that correct?
Mr. Agostini. That is correct, sir.
Mr. Duffy. And is it fair to say the top salary at the CFPB
is $259,000?
Mr. Agostini. Congressman, I believe that the top salary is
closer to $251,000, and that is as a result of the Director
setting the salaries as required in Dodd-Frank, that they are
comparable to the Federal Reserve.
Mr. Duffy. That is wonderful because I looked at the
Federal Reserve pay scale and the top of the Federal Reserve
pay scale is $205,000 and the top of your pay scale is
$259,000, $54,000 more than the Federal Reserve. How do you
account for a $54,000 difference if you are trying to make them
comparable?
Mr. Agostini. Congressman, I am not familiar directly with
the Federal Reserve.
Mr. Duffy. You just told me that you were trying to set up
a pay scale that was similar to the Federal Reserve; you just
used them as your example. So I assume that you are aware of
what their pay scale is and that yours is $54,000 more than the
Fed.
Mr. Agostini. I would like to go back and check that, sir,
I am not aware of that here. So I don't feel I can answer that.
Mr. Duffy. If you want, we can use Treasury, because
Treasury has the same pay scale as Congress and they top out at
$155,000, basically $100,000 less than the CFPB.
Do you have a budget for your interns, do you pay your
interns at the CFPB?
Mr. Agostini. For the period of time that they are actually
interning with us, yes.
Mr. Duffy. What is that budget?
Mr. Agostini. It depends on each of the--
Mr. Duffy. Not what you pay each of them, what is the
budget you have for your interns?
Mr. Agostini. I would have to get back to you. I know that
we have a number of about 65 or 70 interns who will spend the
summer with us.
Mr. Duffy. How many?
Mr. Agostini. 65 or 70.
Mr. Duffy. I think you have eight people here with you
today. Does one of them know what the budget is for the
interns?
Mr. Agostini. I would be happy to bring that number back to
you, Congressman.
Mr. Duffy. Wonderful. You have bonuses at the CFPB of
$750,000. How are those distributed? How do you decide how they
are distributed?
Mr. Agostini. The Bureau gave bonuses as part of its
performance plan that was implemented in 2013 to actually
recognize work that was done in Fiscal Year 2012.
Mr. Duffy. So what is the largest bonus that is given at
the CFPB, how much money?
Mr. Agostini. I believe that the largest bonus was $11,000
or $12,000.
Mr. Duffy. To whom was that given?
Mr. Agostini. I don't know. I could get back to you with
that information.
Mr. Duffy. That would be wonderful.
I want to take a look, if I heard you correctly--well,
let's go back. How many people work at the CFPB now?
Mr. Agostini. Just over 1,200, Congressman.
Mr. Duffy. Just over 1,200. And if I am not mistaken, I
believe that you at the CFPB spent $55 million on a renovation
for your new office space. Is that correct?
Mr. Agostini. Congressman, no, that is not correct. We have
not spent $55 million. We are still in the planning stages for
the headquarters renovation.
Mr. Duffy. How much have you budgeted for the renovation?
Mr. Agostini. For Fiscal Year 2013, we budgeted
approximately $95 million for that renovation.
Mr. Duffy. And how much total has been budgeted for the
renovation?
Mr. Agostini. I believe that $95 million has been budgeted
for Fiscal Year 2013, in addition to about $15 million in, I
think, Fiscal Year 2012. But again, it is budgeted; we have not
spent anything near that.
Mr. Duffy. As you deal with a lot of numbers, more than I
do, 1,200 people and $95 million for renovation. Now, this
isn't new construction. Do you know how much that is per
person?
Mr. Agostini. I could calculate it. I don't have it off the
top of my head.
Mr. Duffy. $75,000 per person, something like that?
Mr. Agostini. Again, I haven't calculated it, sir.
Mr. Duffy. Not new construction, but renovation.
Quickly, the CFPB is storing a lot of America's financial
data; there is a data grab going on at the CFPB. How much money
is budgeted to store the data that is being collected at the
CFPB?
Mr. Agostini. Congressman, that depends. We have storage
that we do as part of our natural activity, it is part of the
infrastructure for our Technology and Innovation section. And
then, there is storage that we purchase from private providers
as well.
Mr. Duffy. So in regard to the data that you take from
Americans on their financial records, how much do you spend,
whether it is internally or externally, on the storage of that
data?
Mr. Agostini. I think, Congressman, if you are referring to
purchases of data that we have done recently, I believe we have
3 contracts that total approximately $10 million for those
contracts.
Chairman McHenry. The gentleman's time has expired.
Mr. Duffy. I yield back.
Chairman McHenry. Mr. Ellison from Minnesota is recognized
for 5 minutes.
Mr. Ellison. Thank you, Mr. Chairman.
And also my thanks to the ranking member and to you, Mr.
Agostini.
So how much money was refunded to the American taxpayers
because of the CFPB?
Mr. Agostini. $425 million, Congressman.
Mr. Ellison. And that was distributed among, did you say,
130,000 families?
Mr. Agostini. No, those are slightly different, sir. The
130,000 represents complaints from--
Mr. Ellison. Okay.
Mr. Agostini. --consumers to the CFPB.
Mr. Ellison. But how many people got that $425,000 million?
Mr. Agostini. I don't have that number in front of me. That
number represents what entities, private entities who have gone
through enforcement actions with CFPB are in the process or
have begun paying back to consumers who have been harmed.
Mr. Ellison. But what I want to know is, and I think you
shared this, how many individuals or families are going to
benefit from the enforcement action?
Mr. Agostini. I believe it is 6 million.
Mr. Ellison. 6 million people?
Mr. Agostini. That is correct, sir.
Mr. Ellison. That is pretty good. I want to commend you all
for that. If the CFPB was not out there, if we didn't have any,
I just wonder what would happen, particularly in this
environment of high unemployment, rising tuition, and
fluctuating gas prices. That money, that $425 million, comes in
handy for those people, wouldn't you agree?
Mr. Agostini. Yes, sir, I would agree.
Mr. Ellison. Who were some of the market players, the firms
that you had to address to make sure the money was refunded?
Mr. Agostini. I will give you a brief list, sir: Capital
One Bank; Discover; and American Express represent three of the
largest entities. Payday Loan Debt Solution, United Guaranty,
Genworth, and Mortgage Guaranty are some of the others.
Mr. Ellison. Now, Mr. Agostini, let me ask you this. Let's
just say you are not one of those firms but you are a firm that
deals with commercial lending. Do you think a firm that is not
in that company of the ones you named can now feel that they
can offer an honest product at a fair price and not have to
worry that other people are sort of cutting corners to make a
profit?
Mr. Agostini. Congressman, I believe that is the intent of
our enforcement actions and our approach in delivering the
mission to ensure consumers are protected and get sort of a
fair shake, if you will, from the market.
Mr. Ellison. But consumers are getting a fair shake in that
and you have the numbers to prove it, but I am talking about
other firms. Say I am an honest firm trying to loan money at a
fair rate at good, fair terms, but I have competitors who are
doing deceptive things. I will compete with those deceptive
actors or I am going to have to start doing what they do. Do
you think the work you are doing actually benefits the market?
I am talking about the financial firms, not the consumers. Do
you understand my point?
Mr. Agostini. Yes, Congressman. I believe, and we at the
Bureau believe, that our actions are ensuring that the
marketplace is level and fair, level for consumers, level for
businesses that are attempting to provide products in a manner
that is forthright and honest and plays by the rules.
Mr. Ellison. Yes. Now, there were some questions raised
about things like pay. Do you have any idea about how much the
executives at some of those firms that you took enforcement
action against are paid?
Mr. Agostini. No, Congressman, I don't.
Mr. Ellison. Is it fair to say that it is more than
$250,000?
Mr. Agostini. If newspaper accounts are to be believed, I
would say yes.
Mr. Ellison. Yes. Maybe put a couple of zeros behind that
$250,000.
Do you have to try to attract the best talent you can in
order to be able to go toe to toe with some of these market
players?
Mr. Agostini. Absolutely, Congressman. I think that has
been a hallmark of the agency, that we have attempted to bring
on the best people possible in order to provide us with the
capacity to do our work and do it very well. And I think it is
instructive that in many instances we are competing with some
of these other regulatory agencies which have some of the same
tools, but in many instances other tools that we don't have in
order to bring that talent on board.
Mr. Ellison. I just want to wrap up, because I see my
yellow light is on, but I just want to ask you, these fines
that you have had to levy against some of these big firms which
have engaged in some poor practices, put it like that, do you
think that they have a shot at reforming themselves given that
they cannot operate with impunity anymore?
Chairman McHenry. The gentleman's time has expired. The
witness can answer.
Mr. Ellison. Thank you, Mr. Chairman.
Mr. Agostini. Congressman, I am not sure about the
motivations of those entities. I would offer that I expect they
are watching what we are doing and watching what the other
entities are engaging us with and hopefully paying attention to
that.
Mr. Ellison. Thank you, Mr. Chairman.
Chairman McHenry. The gentlemen's time has expired.
And the committee will stand in recess due to House Floor
votes. We certainly expect that the witness will still be here
when we return, as congressional votes do occasionally
interrupt committee hearings. And so with that, we stand in
recess.
[recess]
Chairman McHenry. The hearing will come to order. We will
continue with the line of questioning, and we will now
recognize Ms. Wagner from Missouri for 5 minutes.
Mrs. Wagner. Thank you very much, Mr. Chairman.
Mr. Agostini, the mean per capita income in the United
States of America is around $43,000. What percentage of CFPB
employees would you estimate make more than that amount?
Mr. Agostini. Congresswoman, I don't have that number off
the top of my head. I am happy to bring that back to you.
Mrs. Wagner. You don't have that number? I can tell you
that 98 percent of the CFPB employees make more than that
amount, according to FedScope data. You are not aware of that?
Mr. Agostini. Congresswoman, again, I don't have that
number off the top of my head.
Mrs. Wagner. Let me ask, you are the CFO, is that correct,
Mr. Agostini, of the CFPB?
Mr. Agostini. Yes, I am, Congresswoman.
Mrs. Wagner. And this was a hearing on the budget.
Chairman McHenry. If the witness will turn the microphone
on and pull it closer.
Mr. Agostini. My apologies.
Chairman McHenry. Thank you.
Mrs. Wagner. And this is a hearing on budgetary matters,
correct?
Mr. Agostini. Yes, Congresswoman.
Mrs. Wagner. And can any of the eight employees that you
brought with you discuss any of these budgetary matters at all,
sir?
Mr. Agostini. Congresswoman, again, I don't have that
number off the top of my head. I would be remiss if I gave you
an incorrect number--
Mrs. Wagner. An approximation perhaps, Mr. Agostini? Are
you aware how many CFPB employees make more than $100,000 per
year?
Mr. Agostini. Congresswoman, yes, I am.
Mrs. Wagner. And what would that be, sir?
Mr. Agostini. That is 700.
Mrs. Wagner. 700 employees, around 61 percent or more, make
more than $100,000 per year. Are you aware of how many CFPB
employees make more than a Cabinet Secretary, who makes
$199,700 per year?
Mr. Agostini. Congresswoman, I believe that number is about
58.
Mrs. Wagner. That would be an accurate number. So the CFPB,
which by my count is a controversial agency with, in my
estimation, a Director who has been unconstitutionally
appointed, is paying its employees more than almost every other
Federal agency. Why should Congress allow the CFPB to keep
paying its employees these very high salaries, especially when
millions of Americans are out of work and we are at nearly $17
trillion in debt?
Mr. Agostini. Congresswoman, we are paying people as was
anticipated in the Dodd-Frank Act. We are maintaining
comparability with the Federal Reserve, as was designated in
the Act. Actually, the Federal Reserve's top salary, I believe,
is $260,000 for its--
Mrs. Wagner. At the discretion of whom? Who has the
discretionary authority to set such high, high salaries when,
again, the annual mean per capita income in the United States
of America is $43,000? Whose discretion?
Mr. Agostini. Congresswoman, I think the Act speaks
specifically to comparability with the Federal Reserve.
Mrs. Wagner. Is it the Director?
Mr. Agostini. Congresswoman, the Director has set salaries,
again, comparable to the Federal Reserve and--
Mrs. Wagner. The Director has set salaries. Mr. Agostini,
according to FedScope data collected by the Office of Personnel
Management, the CFPB employs, as I understand it, two
psychologists who both make a six-figure salary. The CFPB Web
site offers a possible explanation for employing these
psychologists. And let me just state the Web site, ``We are
also developing and testing new financial education strategies
to build on insights from the field of behavioral psychology.
We are working on an initiative to help consumers overcome
common financial challenges they face on a regular basis. For
example, people who start a new job may feel overwhelmed and
fail to sign up for their employer-sponsored retirement
account. Behavioral psychology research has shown that if new
employees are automatically signed up but have the option to
opt out at any time, enrollment rates are much higher, and
those employees who are automatically signed up are pleased
about their participation. We will take a close look at what
other problems like these exist, what behavioral issues might
be swaying the decision and prototype solutions based on well-
researched hypotheses. We will then evaluate the effectiveness
of these solutions. As with other projects, we will share our
research with financial educators, policymakers, and the
public.'' This is all from the CFPB Web site.
Mr. Agostini, why does the CFPB need psychologists and what
exactly do they do?
Mr. Agostini. Congresswoman, I believe that at least one of
the psychologists works in our human capital area. One of the
items that I believe they are working on is the employee
survey, but I am happy to bring back the actual descriptions
and work of those individuals for you to review.
Mrs. Wagner. Please do. I have one more question.
Chairman McHenry. The gentlelady's time has expired.
Mrs. Wagner. Thank you.
Chairman McHenry. And so, the employee survey that would
have otherwise been done for free if you just had complied with
the OPM survey, just to note for the record.
We now recognize Ms. Maloney from New York for 5 minutes.
Mrs. Maloney. Thank you. Thank you so much, Chairman
McHenry. I thank you and Ranking Member Green for calling this
hearing.
And welcome to you, Mr. Agostini.
The creation of the CFPB, the Consumer Financial Protection
Bureau, was a major victory for consumers. We saw during the
financial crisis that often the concerns of the consumers were
not considered. The agencies had other primary goals, and
consumers were either a secondary thought, a third thought, a
fourth thought, or not thought about at all. So the creation of
an agency that focused on consumers and protecting them with an
independent source of funding and an independent bureau was a
priority of many Democrats, including myself, and many of us
believed that if we had had an agency focusing on protecting
consumers, then possibly we could have presented the subprime
crisis, as the abuses would have been pointed out and hopefully
stopped.
One of the first actions of the CFPB was to come out with a
simplified mortgage statement that consumers could understand,
that they could compare between financial institutions. And I
think that is an important step forward. Also, the help for our
men and women in the military, help for young people with their
credit. They have had a number of initiatives.
But one of the goals that I read about, Mr. Agostini, is
that you want to be very much a goal-driven agency and that you
want to use data-driven analysis of consumer finance markets
and consumer behavior to inform policymakers and the CFPB in
their own oversight and their own actions that they take.
Just last week, your agency came out with an overdraft fees
report which found that some financial institutions, not all,
but some financial institutions were not following best
practices and were following abusive overdraft practices to
maximize their overall fees, at the pain of consumers to the
point, I believe, of $30 billion, if I remember correctly. And
you used data-driven analysis to inform yourselves on that. I
would like you to comment about some of the items that you
learned in this report. It came out, I believe, on Monday. And
do you believe that the CFPB has the authority to address these
practices, to correct them on its own through rulemaking?
Mr. Agostini. Congresswoman, thank you for the question. I
believe there are others in the Bureau much more adept and
expert in answering questions like that on specific
programmatic aspects, and I would be happy to take your
question back and have them put together a response for you.
Mrs. Maloney. I would also say that the fact that you are
here today shows that you are accountable to Congress. Some of
my colleagues say the CFPB is not accountable to Congress, but
I would say your testimony and your presence here today shows
that you are responding and are accountable to Congress.
They also say that this is unusual, to have a financial
agency that is so independent, but as I understand it, all of
the agencies that deal with finance are independent. Is that
not correct, with independent funding sources, often fees?
Mr. Agostini. Congresswoman, many of the agencies that you
are referencing, like the Federal Reserve, like the FDIC, have
independent sources of funding and are not subject to the
appropriations process.
And with respect to accountability, I would say that we
have a great deal of accountability, ranging from reports of a
congressional arm, GAO, on our finances, independent audits
that are mandated by the Act, along with the reviews and work
of the IG, coupled with reports that are established on a
frequency to Congress for our semiannual reporting, as well as
for our annual report to the Appropriations Committee.
Mrs. Maloney. And there is a debate sometimes about what
the structure of it should be, but I believe you are the only
agency where the FSOC can overrule your actions, which is an
unprecedented power for the FSOC. Is that correct?
Mr. Agostini. It is the case that the FSOC can overrule. I
don't know, I don't believe that there are others that fall
under that review. Again, I would be happy to have others bring
that back to you.
Mrs. Maloney. Could you give us some of the accomplishments
of the CFPB?
Mr. Agostini. Congresswoman, I will speak from the sort of
financial controls and financial review aspect. We are very
proud of our ability to stand up an agency rather quickly, one
that has a very important mission with respect to consumers. We
are very proud of our internal controls review and the checks
and balances that we have set internally in order to be sure
that we are spending funds in an expeditious and appropriate
manner for our mission. I believe that the policies and
procedures that we have set in place, that even GAO has noted,
as well as the independent auditor has noted, speak to those
controls and the effectiveness and success we have had with--
Chairman McHenry. And the gentlelady's time has well
expired.
We will now go to Mr. Barr of Kentucky.
Mr. Barr. Thank you, Mr. Chairman.
As you know, Mr. Agostini, ASR Analytics, in its
independent performance audit results reported on November 12th
of last year, recommended that the CFPB should participate in
an OPM-led annual Employee Viewpoint Survey to provide a
mechanism for anonymous employee feedback. Despite this very
specific recommendation, and despite the fact that I am told
that 98 percent of all Executive Branch agencies participate in
these OPM annual Employee Viewpoint Surveys, the CFPB instead
decided to pick and choose 44 questions out of the 84 questions
required by this OPM Employee Viewpoint Survey.
So my first question is, why did your agency design its own
survey, selectively identify questions it chose to ask, instead
of participating in the OPM survey in which 98 percent of all
other Executive Branch agencies participate?
Mr. Agostini. Congressman, I believe that the reason we did
not participate in the FedView Survey is that as a brand-new
agency with an infrastructure that we were putting in place, we
had a sense that the OPM product, which I am familiar with,
having been at OPM, was not necessarily appropriate for us. You
referenced the 98 percent--
Mr. Barr. I am sorry to interrupt, but do other Executive
Branch agencies that are subject to more direct congressional
oversight, subject to the appropriations process, do they get
to tailor their own self-evaluations the way that the CFPB did?
Mr. Agostini. I believe, Congressman, if they decide to
participate with the OPM program, that they use that particular
survey instrument, but there are--I think you referenced that
98 percent--there are, I believe, a couple of agencies that
don't participate in the Fed Viewpoint Survey.
Mr. Barr. By designing your own survey, isn't it true the
CFPB was able to avoid being ranked alongside all of the other
agencies that are subject to this more standardized, uniform
OPM product, survey product that now makes us as congressional
oversight investigators have a more difficult time comparing
your performance to other Executive Branch agencies?
Mr. Agostini. Congressman, because we do not participate,
we are not ranked with other agencies.
Mr. Barr. Okay. In avoiding participation in the OPM
survey, the CFPB avoided asking at least 40 questions of their
staff that OPM asks of 98 percent of Federal agencies. Are you
aware why your agency sought to avoid those specific 40
questions required of virtually all other Federal agencies?
Mr. Agostini. Congressman, I think at the time when we were
doing our survey, we had done a number of surveys internally
already. We arguably had done a sizeable set of surveys in
advance. And our view was that putting the workforce through
another fairly sizeable survey that soon after some of the
internal surveys we had done was going to be burdensome and--
Mr. Barr. You say it is burdensome. You just testified that
your agency is, in fact, accountable. And one of the arguments
that you just made about why you are accountable to Congress is
that you subject yourselves to a variety of independent audits.
There was an independent audit. It was the ASR Analytics. And
that independent audit said that you all should submit to the
OPM survey. You didn't do that. So why on earth would we
believe you that you are accountable when you don't even follow
the recommendations of the independent auditor which you say
holds you accountable?
Mr. Agostini. Congressman, I believe the ASR audit came out
in November of 2012. I believe that we had done our AES survey
prior to that. We still have a survey which needs to be done
for this year. And as with all of the recommendations from
auditors, we will take those recommendations seriously to heart
and proceed with that information.
Mr. Barr. I would encourage you--obviously, you can tell my
position on this--to follow the recommendations of independent
auditors that you say are critical to holding you accountable.
Now, one final question. My time is expiring. I want to
know, of the 1,200 employees of your agency, what percentage,
approximately, of those employees have any experience in the
private sector working for either a bank or a credit union or a
financial institution which is subject to your regulatory
oversight? And I am not talking about attorneys or former
prosecutors; I am talking about bankers or credit union
employees.
Mr. Agostini. Congressman, I am happy to get back to you
and find out where, what the backgrounds are for those
individuals.
Mr. Barr. Would you say that less than 50 percent have
private sector backgrounds?
Mr. Agostini. Congressman, I don't know the answer to that
question.
Mr. Barr. Okay.
Chairman McHenry. The gentleman's time has expired. We will
now go to--
Mr. Barr. Thank you.
Chairman McHenry. --the ranking member of the subcommittee,
Mr. Green.
Mr. Green. Thank you, Mr. Chairman.
I didn't come prepared to deal with a course in comparative
salary analysis, however, I would like to make a few points.
Let us consider that the highest paid hedge fund manager in the
year 2007 made $3 billion. It would take a minimum wage worker
at that time 198,000 years to make $3 billion. This hedge fund
manager was making what a minimum wage worker makes in about 37
or 38 seconds.
Similar circumstance in 2009, a hedge fund manager made $4
billion. That is an amount which would require 265,252 years
for a minimum wage worker. It took the hedge fund manager about
28 seconds to make what a minimum wage worker makes in a year.
Numbers can be fascinating and they can be intriguing, but
they can also point out some things that are important. The
cost of the financial crisis is said to be $12.8 trillion. The
Consumer Financial Protection Bureau costs each taxpayer about
$2 per year. That is less than 17 cents per day week and about
a half a penny a day.
Moving on to your costs compared to the other agencies, my
research shows that the top salary at the OCC is about $260,000
and the top salary at the Fed is about $260,000 as well. So you
are within the range of these other agencies, and you are
mandated to have salaries that are comparable to these
agencies, is my understanding. As it relates to the salaries
with reference to the OCC and the Fed, does that help refresh
your memory to any extent, sir?
Mr. Agostini. Congressman, yes. I believe that the top
salaries at the Federal Reserve are up to $260,000 for their
executive individuals. So, yes, that does.
Mr. Green. Now, let's talk about interns. Just for
edification purposes, I don't believe any of the persons behind
you are interns, are they?
Mr. Agostini. That is correct, sir, they are not.
Mr. Green. Okay. If they are, while they are quite
youthful, they would be a little bit out of the range that I
have for most of the interns with whom I work.
But my information from our staff, which is quite good,
indicates that you have about 64 paid interns, that the range
of pay is from $14.72 to $20.22 per hour, and the average
salary is about $18.45 per hour. If they worked full-time for
10 weeks, we would be paying the interns about $5,800 to $8,100
each, an average of about $7,380. Now, if this is incorrect, I
am sure somebody will correct the record, but that is what our
research indicates on the question of interns.
Do you have persons who came over to your office from some
other Federal agency?
Mr. Agostini. Approximately 80 percent of our employees,
Congressman, are transferees from other agencies.
Mr. Green. And do they come with skills that they have
acquired as a result of working in these other agencies?
Mr. Agostini. Yes, sir.
Mr. Green. Okay. And quickly, tell me about your attrition
rates compared to other Federal agencies, if you can.
Mr. Agostini. Congressman, I believe our attrition rate is
almost exactly the same as the attrition rate that you would
see in other Federal agencies, roughly about 9 percent.
Mr. Green. And what about independent funding? How
important is it for you to have independent funding?
Mr. Agostini. Having the independent funding, Congressman,
allows us to focus in on what we are doing. It also creates a
situation where we are similar to many of the agencies that we
work with shoulder to shoulder.
Mr. Green. Thank you. I will leave with this. I don't
especially enjoy getting into salaries, because there are a
good many people who think that Congresspersons are slightly
overpaid. I yield back the balance of my time.
Chairman McHenry. We will now recognize Mr. Garrett for 5
minutes.
Mr. Garrett. And I think the chairman for holding this very
important hearing.
So I sat through for the last couple of hours that we have
been here on this and listened to your answers. And the
takeaway I have gotten so far is that we have an agency which
lacks oversight and lacks accountability. And from your
answers, I have yet to be able to pinpoint exactly who the
public can go to if they are looking for accountability.
We have discussed the issue of appropriations. And as far
as I understand it, there is no accountability to the Senate
Appropriations Committee, because it is not appropriated
through them. There is no accountability on your budget to
House appropriators, because this does not go through House
appropriations. Your funding comes to it through the Federal
Reserve. And by your testimony today, as I understand it, the
Federal Reserve is not subject to review as far as the funds
coming to it there as well.
And in addition, there is something called the Consumer
Financial Civil Penalty Fund, which the CFPB may use, in my
understanding, to selectively compensate victims in cases
brought not only by this Federal agency, but other Federal
agencies, State agencies, and State attorneys general or even
private plaintiffs, so there is no oversight outside of this
entity as well.
Are any of those facts incorrect which I stated with regard
to the funding?
Mr. Agostini. Congressman, the Act itself anticipated and
set forth--
Mr. Garrett. I understand, but are any of those facts
incorrect as far as oversight of your spending and your
appropriations?
Mr. Agostini. Congressman, we are proceeding as the Act has
established we should.
Mr. Garrett. So once again, just a simple yes or no, are
any of my facts incorrect?
Mr. Agostini. With respect to the funding and the transfer,
they represent the facts as was dictated in Dodd-Frank.
Mr. Garrett. Right. And I understand that is not your doing
as far as creation of the law, you are just implementing what
Congress in its wisdom or lack thereof did, but it seems ironic
in this day and age when we are trying to rein in runaway
spending that we would create an agency which would basically
have no constraints on it by any elected body whatsoever or by
the Federal Reserve, which is not an elected body, and then to
try, as the other side has done, to say, can't we equate this
to other independent agencies? We realize as well this agency
is unique in the fact that it does not have a commission, like
the SEC does, which has their funding coming from a different
stream as what have you.
So this is a unique agency unlike any other in the Federal
Reserve that is able to spend upwards of half a billion dollars
without any public accountability whatsoever. Now, this may be
arguably good if they were doing an extremely high amount of
benefit to the public, but the number that you gave us as far
as civil penalties that you have recovered was 400 and--
Mr. Agostini. 25 million, Congressman.
Mr. Garrett. $425 million. Now, how does that compare to
what the track record was when we had the FDIC, the FRB, the
OCC, and the OTS doing it prior to you? Do you know the answer
to that?
Mr. Agostini. No, Congressman, I don't.
Mr. Garrett. No. Wouldn't that be one thing you would want
to take a look at just to see how you compared to other
entities prior to your existence to see whether you are doing
it in a cost-efficient manner?
Mr. Agostini. We have not done that, to my knowledge.
Mr. Garrett. Let me give you the answers. It was on an
upward spiral or trajectory prior to this creation of this
entity. It went from 157, to 170, 170, 220, 318, and that was 2
years ago. So the $420 million that you are doing is basically
on the same trajectory of all the other agencies were doing
beforehand, and those agencies were doing it without the costs
that we are doing it right now of over $500 million coming
through the Federal Reserve, which basically means coming from
the taxpayers of this country, because if the money didn't go
there, it would come back to the general fund.
So I am not sure that we are getting anything, any
additional benefit from the CFPB, but it is coming out of the
cost of lack of accountability and also, as I say, cost of lack
of efficiency at the same time. Can you disagree with that
point?
Mr. Agostini. Congressman, we do have the accountability
that was established in Dodd-Frank.
Mr. Garrett. Okay. Let me understand that, then. Who is it
that you are actually accountable to directly?
Mr. Agostini. Congressman, in the Act, we have a unique
situation where the U.S. Government Accountability Office, an
arm of Congress, reviews our financial statements. We also have
a unique situation with an independent audit that is mandated
in the Act to go over our budget and other items that are
deemed--
Mr. Garrett. And if they find something wrong, they could
direct you to change the way you operate?
Mr. Agostini. Congressman, we take all of our audit
findings very seriously.
Mr. Garrett. Yes or no. Can they direct you to change your
operation if they find something wrong in your operation?
Mr. Agostini. If they were to find, Congressman, a finding
that would represent significance, we would indeed--
Mr. Garrett. Okay. The question is--if the chairman will
allow it--can they direct you to take action, or is it just you
decide whether you want to follow that direction or not?
Mr. Agostini. Congressman, when auditors find areas of--
Mr. Garrett. Just a yes or no, can they direct you to take
action?
Mr. Agostini. If they find items of significant deficiency
or material weakness, we would take action to resolve it.
Mr. Garrett. Can they direct you to take action? It was a
simple question. Can they direct you to take action?
Mr. Agostini. They can recommend to us.
Mr. Garrett. They cannot direct you to take action. So,
there is no one who can direct you to take action when they
find a failure by efficiency or otherwise in an audit or stream
of funding?
Mr. Agostini. Congressman, when the Government
Accountability Office--
Mr. Garrett. Yes or no, can anyone outside of your own
agency direct you to take any action?
Mr. Agostini. I believe that if the GAO were to come and
make recommendations to us, we would make those--
Mr. Garrett. Can the GAO direct you to take that action?
Mr. Agostini. They can make recommendations to us.
Mr. Garrett. Can they direct you to take that action?
Mr. Agostini. I don't believe so.
Mr. Garrett. So, is there anyone who can direct you to take
action?
Chairman McHenry. The gentleman's time has expired.
Mr. Garrett. Thank you.
Chairman McHenry. With that, we will now recognize Ms.
Beatty for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking
Member. And thank you to our witness today.
Before I ask my questions, I would certainly be remiss,
being from Ohio, if I did not welcome you, but join my
colleagues in saying I am somewhat disappointed that Director
Cordray could not be here. I had the opportunity to work with
him as one of the State of Ohio's co-chairs on financial
literacy. I do have a financial literacy question, but since we
have been asking you so many questions about your budget and
finance, I will come back to that.
One of the things that I have been most impressed with is
what you have been doing in the area of financial literacy and
also some of your productive and successful things that you
have listed. If we look at the total student loan debt, it has
recently passed the $1 trillion mark. It is the second-largest
type of consumer debt after home mortgages. Further, 11 percent
of all student loans are seriously delinquent, compared to just
6 percent if we go back to 2003. So saddled with immense
student loan debt, young people are struggling to begin their
professional lives. This in turn weighs on the economy as a
whole.
Can you explain how the CFPB has approached this critical
issue and how tools like the Financial Aid Shopping Sheet can
help young folks?
Mr. Agostini. Congresswoman, I would refer that question to
Rohit Chopra in our office, who handles much of our student
loan initiatives. I would say it is one of the areas that we
are very proud of in terms of the activities that we have
proceeded with, but he is much more expert and much more adept
at answering those questions. I would be happy to take that
back to him.
Mrs. Beatty. Thank you. So now, I will go back to the
financial questions like some of my colleagues.
Republicans in both the House and the Senate have argued
that the CFPB should be subject to the appropriations process
to ensure greater accountability for the agency. This is
despite the fact that Congress has consistently provided for
independent funding for other bank regulators.
In your own personal view, can you tell me how likely you
would explain why Congress gave all the bank regulators
independent funding and to what extent is it important for a
regulator with responsibility for examining large and complex
financial institutions to have stable and consistent funding?
Mr. Agostini. Congresswoman, I think your last point is the
point, that having that stable funding allows us to focus on
mission. It allows us to play an equally important role with
those other entities that have other sources of funding, which
allows us to be a significant actor in the markets and in the
areas of consumer protection that we are tasked with doing by
Congress.
Mrs. Beatty. And lastly, let me ask you this: We have heard
a lot of questions about the salaries, the size of the budget.
I have also read that you have a smaller budget.
Do you have any knowledge of people not being transparent
with salaries or any misappropriations within your own? I am
sure in an office this size, there are internal checkpoints on
if you spent the money for what it was supposed to have been
spent. I have not heard of any glaring things where you have
been challenged or any internal problems financially. Can you
talk, as an administrator, about how you feel about how you
have been spending the dollars?
Mr. Agostini. Congresswoman, yes. I would point to the
GAO's most recent audit of our financials, where not only were
we given a clean audit opinion by GAO, we also did not receive
a management letter from GAO, which is typically provided to
entities when there are matters for consideration that
management should take up in the opinion and given the review
of GAO. So not only did we get a clean audit opinion, but we
didn't have a management letter, and I think that speaks
volumes to our internal controls, our reviews of our finances,
and the manner in which we are spending our funds.
Mrs. Beatty. And lastly, has that been consistent over the
past 3 years? I am just looking at something and reading from
the GAO where it talks about 19 of 24 major agencies where we
do have some of the accountabilities in those agencies that you
don't have, and the GAO is saying that they could not render
clean opinions on their statements.
Mr. Agostini. Congresswoman, having a clean opinion is a
very important thing to us. Having it 2 years in a row has been
a testament to how we are operating.
Mrs. Beatty. Thank you.
Chairman McHenry. The gentlelady's time has expired.
We will now recognize Mr. Hultgren of Illinois for 5
minutes.
Mr. Hultgren. Thank you, Mr. Chairman.
Thank you, Mr. Agostini, for being here as well. I have a
quick question, just before we get started. I know you are the
only witness. I wonder, are there other employees from the CFPB
who are here as well today? I wonder if they could just raise
their hand if there are any other employees from CFPB. Okay. So
just kind of that row there behind you.
The question I would have is, I know there has been some
reporting recently of loss of employees, especially high-level
employees, management-level employees. That could be concerning
for a lot of reasons, but I think it is important for us to
discuss that for a couple of minutes. Literally, a dozen senior
officials have left the agency, I know, including Chief of
Staff Garry Reeder, COO Victor Prince, Raj Date, Bart Shapiro,
Nicholas Rathod, Leslie Parrish, Len Kennedy, Benjamin Olson,
and many others, I think, as well.
In interviews with American Banker, I know several former
CFPB officials offered different reasons for the flood of
departures, but many cited cultural clashes between the new
agency and the regulators where they used to work. They also
pointed to aggressive recruiting in the private market of
agency personnel, coupled with the expected turnover after an
intense early few years.
I wanted to talk about kind of the other side of this as
well and something I am hearing that is concerning to me. I had
a meeting with small and medium-sized banks from the Midwest
area talking to them and some of their frustrations. The
biggest frustration they have is uncertainty and really not
knowing the regulations with which they are going to have to
comply. One of the bankers there just had a line that really
just struck me, and I think it ties into the fact or concern
that we have with a loss of senior staff as well as people with
institutional knowledge there as well. But this banker said:
``I have been in banking for 30 years, I understand how to run
a bank, my bank is small, has never been a threat to any
financial viability of our Nation, but now I have regulators
coming in and telling me how to run my bank.'' And he said, ``A
lot of these regulators were playing hacky sack on the quad 2
years ago, and now they are in my bank telling me how to run my
bank. Something is wrong.'' And I think that has even increased
when we see the huge turnover that has happened.
So, just a question: Management clearly should accept some
responsibility or accept at least a share of the blame for the
recent large exodus of senior CFPB staff over the recent
months. Wouldn't you agree, wouldn't there be some questioning
there?
Mr. Agostini. Congressman, I believe that many of those
people have left for a variety of reasons, representing either
new opportunities, or a desire to do something different. The
first 2-plus years at the Bureau have been very intense periods
of time in standing up a Federal agency, and I think for many
folks it was time to do something different. I think that there
is just a range of reasons why folks--
Mr. Hultgren. No, I understand. I understand people make
decisions, but there seems to be more than just random
departures. There seems to be a pattern here that I think would
be wise for you all to address.
And then tied into that, when new employees in their own
survey are saying they are not receiving proper training to do
their job and yet our banks, my small and medium-sized banks
especially, just west of Chicago, are dealing with the
consequences of new people who are regulators who are saying
themselves that they haven't received adequate training to be
doing this and yet have significant authority. This is a
problem, and I think we have to address it.
Another problem that I think we have to address, and many
others today have discussed it, is this place and other
departments, so Congress and Washington really was set up by
our Founders to have checks and balances. And I would say most
places have those checks and balances. The one that doesn't
have checks and balances right now is the CFPB. It seems
completely unaccountable, and that is a very real concern I
have. And even as I see small and medium-sized banks who feel
like they have had adverse decisions or regulation or reports
placed on them, there is no place for them to go to have a
check on that--was this proper, did the person have the
training to be able to make this decision, how can we go back
and question that?
I think we do have to clear this up. And it is a real
problem, on top of the fact when people are saying themselves
they don't have adequate training to be doing the job that they
have been given to do, a lot of senior management has been
leaving, and yet the consequences falling back on small and
medium-sized banks are real. They are feeling it. They are
being crushed by this.
Just in the last couple of seconds I have, I know that we
also have some real questions about the number of
contributions. The CFPB is supposed to be an independent
agency, and yet 95 percent of CFPB employees who contributed to
the Presidential race in the last election cycle contributed to
President Obama. Given the IRS scandal, such a politically
imbalanced organization as the CFPB truly is at risk of acting
with similar political biases as the IRS, potentially
exercising its powerful regulatory authority to abuse.
My time has expired, but I think these are important
questions for us to ask with an independent agency that doesn't
have anybody to keep it in check and balance. With that, I
yield back.
Chairman McHenry. Those are indeed important questions.
We will now enter into a second round of questions. The
Chair will now recognize Mr. Duffy for 5 minutes.
Mr. Duffy. Thank you, Mr. Chairman.
I want to move back to our salary conversation, not to beat
a dead horse, but I believe the last salary update list we had
from the CFPB was from late last summer. Would you provide the
committee an updated salary breakdown from the CFPB?
Mr. Agostini. Congressman, yes, we will do that.
Mr. Duffy. Wonderful. We had a conversation earlier about
comparing the CFPB pay scale to that of the Federal Reserve and
also looking at the CFPB pay scale as it relates to the GS pay
scale, and the GS pay scale is one that the DOD uses, the FBI
uses, the Executive Branch uses. Would you have any objection
to the CFPB moving to the GS scale that most other government
entities are on?
Mr. Agostini. Congressman, if Congress deems that they wish
to change our salary scale so that the Act, which currently
speaks to comparability with the Federal Reserve, is altered or
modified in some fashion, we would of course follow the laws
that are set for us.
Mr. Duffy. Wonderful. I have dropped a bill to that effect,
so maybe we will see how much support we get from the CFPB. I
think it was yesterday we dropped it.
I want to move to the issue of how much is spent on the
renovation of the Office of Thrift Supervision building that
you are in right now. I think you indicated it was $15 million
in 2012, and $95 million in 2013, for a total of $110 million
so far in dollars budgeted for the renovation of that building.
Is that about correct?
Mr. Agostini. Actually, Congressman, it is $95 million. We
changed that number. Originally, it was $15 million and $40
million, for a total of $55 million. That number has now been
changed to $95 million.
Mr. Duffy. And do you anticipate any more budgeting
necessary in 2014 or is $95 million going to do the job?
Mr. Agostini. Congressman, we are at the early stages of
understanding what it would cost to renovate a building that is
30 years old and needs major system improvements, elevators,
HVAC. We are working with the General Services Administration
to understand that.
Mr. Duffy. Are you aware that we have $17 trillion in
national debt?
Mr. Agostini. Yes, Congressman, I am.
Mr. Duffy. And the OTS building was built in the 1970s,
right?
Mr. Agostini. I believe that is correct, sir.
Mr. Duffy. You may be surprised to learn that the Rayburn
Building in which we sit today hasn't had a major renovation
since it was built in 1965. On top of that, the building right
across the street, the Longworth Building, was built in 1933
and hasn't had a major renovation since 1933.
But here for the CFPB, a building that is newer than the
one we sit in today, deserves a $95 million renovation to the
tune of $90,000 for every single employee at the CFPB? How do
you justify that, when we owe $17 trillion in debt?
Mr. Agostini. Congressman, we have floors at 1700 G Street
where we cannot run telephone lines, run electrical lines, run
computer lines, because when the building was built, it was not
anticipated they would use those things. So we actually have
parts of at least two floors that cannot be occupied in a sort
of standard office configuration.
Mr. Duffy. $90,000 per employee. $17 trillion in debt.
I want to move to how much you are spending on the storage
of data collection. How much do you budget for the storage of
data collection?
Mr. Agostini. Congressman, what we budget is embedded in
what we purchase in service from Treasury currently for
purposes of running our network infrastructure. I can ask that
the number be broken out and given to you. I don't have that
number in front of me currently.
Mr. Duffy. So are you actually setting money aside to build
your own storage network or are you using another agency's
storage network? Because you are grabbing a lot of American
financial data. Are you storing it internally, at another
agency, or are you paying someone offsite to store the data?
Mr. Agostini. Congressman, we are doing a couple of things.
We are currently utilizing another Federal agency, Treasury, to
provide us with network services. We are in the process of
moving off of that network so that we can run our own network
and not be dependent on another Federal agency. We are also
purchasing services and information from private entities as
well, and part of that is storage on our network--
Mr. Duffy. So if you would do this for me, if you would
break down, and I am going to be very clear, how much you are
spending to store data, whether it is internally, at another
agency, or offsite, give me that number, and also how much the
Bureau is spending to secure that data.
My time has expired. I yield back.
Chairman McHenry. We will now recognize Ms. Beatty for 5
minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking
Member.
And, again, to our witness, thank you. I have a great
appreciation for your answers to some of these very technical
questions, so I took the liberty of looking at the table of
organization to see where you would fall within it. Probably
another reason for the questions and answer would be a good
reason to have our Director there, taking nothing away from
you, I think you are doing a fine job, but it gives me pause
when I hear people asking some of the questions that typically
I think a Director should answer. So I want you to relax. You
are doing a great job. You are not the Director. And he should
be here.
But with that, let me ask you this question. When I hear a
lot of the questions that are talking about the funding and the
finances and then I look at the outcomes of what you have done,
the number of consumers who have been affected, the number of
things that you have been doing with those dollars, so then my
question comes back to you, if you are working with any of the
other Federal regulators, like the Attorney General's Office or
State regulators to avoid any duplication effort? So, that is
the first part of the question.
Mr. Agostini. Congresswoman, we are constantly working with
all of the agencies that have a role to play. In some cases
that may be Justice, in some cases that may be some of the
other regulatory agencies. I believe there was a recent GAO
review on duplication that we are looking at very carefully to
be sure that we are not duplicating.
But I think it is the case that we work closely, we try not
to duplicate, and we do that in a range of areas, from
purchasing services from other Federal agencies so as not to
create a larger workforce than necessary, to working carefully
on things like our civil monetary penalty fund with other
agencies to be sure that we understand their comments and
concerns.
Mrs. Beatty. Let me go back to the question that I started
with in the beginning, because unlike the FDIC or the Federal
Reserve, and certainly we have heard this, your budget is
statutorily capped and it is much smaller than the other
budgets. But yet when we look at, I am going to call it cost
savings or what you have done in 2012, I was very pleased when
I was able to read, despite your limitations, smaller budget
going into 2014 than 2013, that with those limitations,
however, 6 million consumers are receiving refunds because of
your 2012 enforcement actions, and that you have also handled
more than 150,000 consumer complaints since you opened, all of
which I think is in part why you are there, to be able to serve
consumers.
So how would one of your core missions be affected if your
budget were to be severely capped, in light of maybe you did a
little renovation so you could be able to use IT and be able to
communicate and probably increase those 150,000 consumer
complaints? How would this affect the consumers?
Mr. Agostini. Congresswoman, I believe that changes in our
funding that would lower our funding would have the effect that
we would have to go back and rethink how we deliver the value
that we feel we have been able to deliver to American
consumers. I can't tell you what that would look like today,
but we would have to go back and carefully look at that.
Mrs. Beatty. You have also been hit very hard on people,
whether they resigned or they left. Can you also, in my seconds
left, tell me if you have hired people to fulfill the
vacancies, who brought on maybe even experience that would help
you in this field, or is it just that these people left and now
we don't have anyone there?
Mr. Agostini. Congresswoman, we have a very deep bench. We
have a very strong set of skills throughout the agency. And I
think it is the case that for all of those positions, as we
recruit to replace them, there have been individuals who have
been able to step in and act in capacities in such a seamless
manner that we are still focused and can still deliver on our
mission.
Mrs. Beatty. Thank you.
Chairman McHenry. The gentlelady's time has expired.
I will now recognize myself for 5 minutes.
According to the CFPB's annual employee survey, only 35.6
percent of employees agree or strongly agree that the CFPB
takes steps to deal with a poor performer who cannot or will
not improve. So, therefore, 64.4 percent are not satisfied at
the CFPB that managers will deal with a poor performer who
cannot or will not improve. Is this of concern?
Mr. Agostini. Mr. Chairman, we are still a new agency. We
are still getting, if you will, our legs. There are areas where
I think we can show some improvement. It is one of the reasons
that we do the surveys. And that is an area that we will be
working on and have started working on in terms of training for
managers. We are about to engage in a mandatory training for
all of our managers using the resources of both OPM and--
Chairman McHenry. Okay. And that goes right into my next
question. I understand the claim that the CFPB invests in world
class training, but the survey also asked employees, how
satisfied are you with the training you received for your
present job? Only 38.8 percent of your employees agreed that
the training they received was sufficient. A failure to train
employees reflects poor management, does it not?
Mr. Agostini. Mr. Chairman, again, I would say that at the
time of the survey, we were--
Chairman McHenry. When was the survey?
Mr. Agostini. I believe it was, Mr. Chairman, in the spring
or early summer of 2012.
Chairman McHenry. Okay. So a year later you are telling me
that you are just getting around to the idea of perhaps
training some people, since 38.8 percent are satisfied with the
training they received. Let me ask again: Does this reflect
poor management?
Mr. Agostini. Mr. Chairman, I don't think it reflects poor
management. I think it reflects--
Chairman McHenry. Does it reflect good management, then?
Mr. Agostini. I think, Mr. Chairman, what it reflects is
that we are learning how to be a Federal agency and learning
how to do our job.
Chairman McHenry. Okay. And how long has your agency
existed?
Mr. Agostini. I believe it is a little over 2\1/2\ years,
Mr. Chairman.
Chairman McHenry. Okay. And so, you asked this survey
question about 20 months into your agency's creation, and a
year later you are still talking about getting around to
implementing some of the things you found in your own survey.
Last month, the CFPB employees voted to join the National
Treasury Employees Union. Any understanding that we could have
from the Hill, does this show troubles within the agency,
because of employee dissatisfaction with their training and the
fact that managers won't deal with poor performers who cannot
or will not improve?
Mr. Agostini. Mr. Chairman, I believe that the vote to
establish a union simply demonstrates that our employees have
exercised their right to be represented.
Chairman McHenry. Right. And why do people institute
unions, because things are going great at their agency or
because they have grave concerns that are not being addressed?
Mr. Agostini. Mr. Chairman, I can't speak to the
motivation.
Chairman McHenry. Okay. Let me reference a Politico article
from May 15th of this year regarding the National Treasury
Employees Union, the CFPB employees agreeing to do this, it
says, ``The push to organize was driven in large part by news
that many employees in Washington would be forced to give up
their private offices while the Bureau renovates its
headquarters, according to several people familiar with the
situation.'' Some staffers were ``absolutely livid'' about
their current office space...with very, very thin walls.''
Do you understand that to be the case?
Mr. Agostini. Mr. Chairman, I have an office with very thin
walls. There are only two private offices in my area that seats
32 people. We get along well and do well.
Chairman McHenry. I understand your personal office. And
you have your full staff here or are these others?
Mr. Agostini. No, Mr. Chairman.
Chairman McHenry. Okay. It is not often we see folks come
before the committee, outside of well-heeled CEOs, who have a
panoply of individuals behind them while testifying, so that is
why some Members have been interested about that.
So the reason for unionizing is not, as you understand it,
a beef with office space?
Mr. Agostini. Mr. Chairman, I can't speak to the
motivations of why folks voted for the union.
Chairman McHenry. The point is a year after the survey was
taken, you are still trying to perhaps get around to
implementing some of the necessary reforms. What we have a
challenge with is getting the transparency so we can hold you
accountable, as we hold all the other regulatory agencies
accountable, and as the Founding Fathers intended with checks
and balances.
With that, we will go to Mr. Cleaver for 5 minutes.
Mr. Cleaver. Thank you. Mr. Chairman, thank you.
Look, we have different opinions on the CFPB, and that is
the way our system works. And I don't think our side has any
kind of unique position on always being right, nor does the
other side. This is a process that we go through, and I respect
it, and I respect the people who have a different view.
My wife is a psychologist, and I would be remiss if I did
not follow up on the issue that was raised earlier about hiring
psychologists to work with the Bureau in terms of trying to
detect what people are interested in. We have 300 million
Americans, and I am not sure that we have funded you enough
money to do a lot of focus groups, travel around the country.
You would get beat up if you had a big travel budget going
around doing focus groups. Do you agree that you won't get
praise for traveling around the country doing focus groups?
Do you think, Mr. Agostini, that you would be praised for
traveling around the country doing focus groups?
Mr. Agostini. Congressman, I really don't know if that
would be the case.
Mr. Cleaver. Okay. You won't be. So, I will answer my own
question. Okay. You won't be.
So I guess I am trying to say that we try to figure out the
best ways to help the citizens. Do you see your job as being
important, that you are actually in the business of preventing
businesses from engaging in fraudulent practices or unfair
practices?
In my real world, I am an ordained United Methodist
minister, and so we consider it a ministry to try to help
people and prevent people from being ripped off and hurt. So,
do you see this as a mission?
Mr. Agostini. Congressman, while we don't do focus groups,
and hadn't anticipated that, at least now, we have had a number
of listening sessions throughout the country, and in those
listening sessions what we have learned is how we might do our
jobs better, because of the range of people who come to those
listening sessions to provide us with feedback, both from
consumers to industry participants. So I think that our ability
to do that, go out and do that traveling and touch folks and
hear directly from them, is important for us as we deliver our
mission.
Mr. Cleaver. Is the existence of the CFPB linked to the
idea that consumers have rights?
Mr. Agostini. I believe so, Congressman.
Mr. Cleaver. If that is the case, and I think it is the
case, here we are over 200 years old as a Nation and we have
never had an agency protecting the consumers in the financial
service industry. And so I think it is kind of remarkable that
we have done it. We are tardy. And it may not be perfect; I am
not suggesting at all that what we have done was perfect.
I supported it. I was on the committee, I supported it very
strongly, and I still support it. But I am also respectful of
people who don't think that it exists, but it is important for
us to try to get as much evidence out as possible on how
important it is and that it is not, I don't think, an
ideological agency. I don't think that your agency is out
promoting a political ideology.
Mr. Agostini. No, sir, we are striving to fulfill the
mission that Congress gave us in Dodd-Frank.
Mr. Cleaver. Did you have a vote on Dodd-Frank?
Mr. Agostini. Did I have a vote on Dodd-Frank?
Mr. Cleaver. Yes, sir.
Mr. Agostini. No, sir, I did not.
Mr. Cleaver. Okay. So you had nothing to do with creating
the agency as it is currently structured?
Mr. Agostini. I joined the agency in November of 2011,
Congressman.
Mr. Cleaver. I was trying to find somebody to blame for
creating the agency. So the ranking member is the nearest
person to me, and I followed him in voting for it.
Mr. Hultgren [presiding]. The gentleman's time has expired.
The gentlemen from Kentucky, Mr. Barr, is recognized for 5
minutes.
Mr. Barr. Thank you. Mr. Agostini, I have a question about
the funding sources for your agency. Section 1017(a) of the
Dodd-Frank Act provides that the Director is authorized to
request amounts that he determines to ``be reasonably necessary
to carry out the authorities of the Bureau under the Federal
consumer financial law.'' The Act further provides the Federal
Reserve system shall--emphasis on shall--``transfer the amounts
requested by the CFPB Director.''
Are you aware of any other agency model in the entire
administrative state and in the entire Federal Government that
is structured in a manner in which the administrator or head of
the agency can unilaterally determine, effectively, the budget
of that particular agency?
Mr. Agostini. Congressman, I am not as knowledgeable about
the funding for the Federal Reserve or the Office of the
Comptroller of the Currency or the FDIC. I do know that they
have sources and resources that are outside of the
appropriation process, and so I would look there to try and
answer your question of comparability.
Mr. Barr. You testified earlier in response to a question
about accountability that policy justification for receiving
the agency's funding from the Federal Reserve System as opposed
to congressional appropriations was that, ``It allows us to
focus on what we are doing.'' I would submit that focus comes
only when the agency is actually accountable to Congress for
its appropriations.
In reference to an American Banker article recently, and
other articles in a variety of publications, there has been
much attention given to the fact that the CFPB has been losing
its senior staff and a variety of other employees since its
inception. One recent article, and I am quoting here, reports
that, ``In recent months more than a dozen senior officials
have left the agency. In interviews with American Banker,
several former CFPB officials offer differing reasons for the
flood of departures, but many cited cultural clashes between
their new agency and the regulators where they used to work.''
Question: Can you just briefly offer an explanation for the
rash of departures from your agency?
Mr. Agostini. Congressman, I believe that those people have
left for a variety of reasons.
Mr. Barr. Okay. Let's take one particular case and maybe
you can illuminate why this may be happening. The issue of Raj
Date, the former number two of the agency, please explain
whether the CFPB has confirmed the propriety of the consumer
finance consulting work currently performed by Mr. Date so
closely following his role as Deputy Director.
Mr. Agostini. Congressman, I am not involved in the review
that you are speaking of, but I would be happy to take that
back to our Legal Division to provide you with an answer.
Mr. Barr. With respect to Mr. Date and others who have left
your agency, others with high-ranking positions within your
agency, what policies are in place with regard to a cooling-off
period or work-related restrictions for those senior staff?
Here in Congress, former Members of Congress or staff here have
a cooling-off period before they can engage in consulting or
lobbying activities, as you presumably understand. It is a one-
year cooling-off period. Does your agency have in place a
similar cooling-off period restriction?
Mr. Agostini. Congressman, I believe that we follow the
laws and rules with respect to ethics. But again, I would refer
you to the Legal Division and have them provide you with an
answer.
Mr. Barr. I would ask that your Legal Division in fact
follow up with the subcommittee on that question.
And also, are you aware of what Mr. Date was making in
terms of compensation at the agency? And then a second
question, what is he making now as a consultant?
Mr. Agostini. Congressman, I have no idea what Mr. Date is
making now, and I believe his salary at the Bureau was a matter
of record and I am happy to provide that to you.
Mr. Barr. I would appreciate again if you would follow up
with that with the subcommittee.
Are you aware whether or not Mr. Date worked with the CFPB
to ensure that his transition is in fact in compliance not only
with CFPB rules but other Executive Branch ethics requirements,
and could you comment on that?
Mr. Agostini. Again, Congressman, I am not aware of the
process by which he was off-boarded, if you will, and all of
the ethics requirements associated with that. And again, I am
happy to take that back to our Legal Division to provide you
with an answer.
Mr. Barr. Are you aware of any departing staff having
inappropriately taken advantage of information gained within
their employment at the CFPB?
Mr. Agostini. Congressman, I am not aware of that.
Mr. Barr. Thank you. I yield back.
Mr. Hultgren. The gentleman's time has expired.
The gentleman from Texas, the ranking member of the
subcommittee, Mr. Green, is recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
I think that you have had a full day, but we will just take
one more round and cover a few more facts. It seems to me that
there is some concern about the turnover rate, and I think it
is a legitimate question. What is your turnover rate? What was
it said to be by the way?
Mr. Agostini. Congressman, the turnover rate for our agency
is slightly above 9 percent, I believe it is 9.2 or 9.3
percent. I believe that it is almost exactly the same as the
Federal turnover rate for the preceding year. I think it is
about roughly 9.3, 9.4 percent. So we appear to be experiencing
attrition that is comparable to the rest of the Federal
Government.
Mr. Green. The Federal Government, is that the entirety of
the Federal Government? Because I have a number that differs if
we are talking about the U.S. House of Representatives.
Mr. Agostini. Congressman, it would be the entire Federal
Government.
Mr. Green. All right. Because my information indicates that
the House has a turnover rate of 26 percent. That would be
slightly above the 9 percent that you have.
There is some concern about whether people like you or not.
I hate to get into congressional approval rates, especially
since I, like the rest of my colleagues, want to continue to do
what we do. But as I am looking at the number, it looks like it
is around 10 percent, which is pretty good for us by the way,
that is an improvement over what it was at one time, as I
understand it. It may have been a little bit less.
All of these things are great theater, but when you delve
into the numbers you can find rationale for why things are as
they are. The turnover rate in Congress has to do with the fact
that young people are upwardly mobile and they want to do
bigger and better things, and we hire some of the best and
brightest people who want to move on to do other things and
that is understandable. So I think that to be fair to you, we
have to look a little bit deeper into what actually happens to
cause your turnover rate to be what it is.
Now, in closing, let's do this. We talked about
accountability and it appears to me that you are exceedingly
accountable. Your Director can be removed for cause, you have
to consult with other regulators when making rules. Is this
true?
Mr. Agostini. That is true.
Mr. Green. You have to do a cost-benefit analysis, true?
Mr. Agostini. That is true.
Mr. Green. You have to testify before Congress twice a
year. Actually, the Director is supposed to do it. We have a
little bit of politics here, but the Director is supposed to do
it twice a year, true?
Mr. Agostini. That is true.
Mr. Green. I am showing that to date, someone from your
agency has testified about 36 times before Congress. Is that a
roundabout number, is that--
Mr. Agostini. That is the number that we have to date, sir.
Mr. Green. Thirty-six times. Your rules are subject to
judicial review, meaning if some entity is accorded a certain
ruling, it can be appealed, and it can be appealed through the
Judiciary, or an independent third body. Is this true?
Mr. Agostini. I believe that is correct, sir.
Mr. Green. You have to reassess your rules periodically. Is
this true?
Mr. Agostini. That is correct, sir.
Mr. Green. Every 5 years?
Mr. Agostini. I do not know the frequency, but I believe
that they have to be reviewed.
Mr. Green. Can your regulations, your rules be vetoed by
other regulators?
Mr. Agostini. I believe that is correct. I believe the FSOC
has that ability, sir.
Mr. Green. Are you subject to external review by the SBA
and OMB?
Mr. Agostini. I am not certain about that, sir. I would
like to get back to you. But I believe that may be true.
Mr. Green. All right. And let's talk about your audits. GAO
audit, correct.
Mr. Agostini. That is correct.
Mr. Green. The IG associated with the Fed can audit you as
well?
Mr. Agostini. That is correct.
Mr. Green. And then Congress has mandated an independent
audit. This is something that we require, an independent audit.
That means that you are not audited by another Federal agency.
You actually will bring in an agency or entity from outside the
government. Is this a fair statement?
Mr. Agostini. That is correct, sir.
Mr. Green. Mandated by Congress.
Mr. Agostini. Yes, sir.
Mr. Green. Done on an annual basis.
Mr. Agostini. Yes, sir.
Mr. Green. So, you do have accountability. The question is
whether you will be able to maintain it, and that is our job.
Thank you. I yield back.
Mr. Hultgren. The gentleman's time has expired.
I yield myself 5 minutes.
Do you believe your agency is more or less accountable to
Congress than the IRS?
Mr. Agostini. Mr. Chairman, I cannot speak to the IRS. I
would echo many of the comments made by others with respect to
the accountability, the reviews that we are subject to: the
GAO; an independent audit; semiannual reporting back to
Congress; and an annual report to the Appropriations Committee.
So we do feel that we are accountable, and we welcome that
accountability.
Mr. Hultgren. I talked earlier about the amount of
contributions. Of those who have made contributions, political
contributions, 95 percent of them who made contributions in the
Presidential election reported were given to President Obama.
Given the IRS scandal that we just heard recently, and given
the lopsided numbers, I wonder what safeguards does the CFPB
have in place to ensure that there is no political bias in
CFPB's decision-making.
Mr. Agostini. Mr. Chairman, I would offer that the Legal
Division would be better at comprehensively answering that.
Mr. Hultgren. That would be great. If you can get us a
response, then, of safeguards that are in place to make sure
there is no political bias in the decision-making process,
since there is a difference of opinion on the level of
accountability. But I think there certainly are some questions
there.
On a different subject, you had mentioned earlier that the
CFPB has not spent up to its statutory cap. Would you then
support a reduction in the statutory cap for the CFPB or would
you seek an increase or would you seek to keep it at the same
level?
Mr. Agostini. Mr. Chairman, if Congress decides that it
wishes to change either our funding mechanism or the level of
funding, we will of course abide by those changes. It is the
case that for us to proceed with the mission Congress has
currently given us with something significantly less than we
have would require us to make some choices as to what aspects
of that mission we could actually accomplish.
Mr. Hultgren. I hope we have that discussion, because I
think there are some real questions there, again, to make sure
is the mission really being done, why are so many people
leaving, especially people who have regulatory experience, who
had come into the agency with regulatory experience now are
leaving. I think there are some real questions, if that mission
could be getting done.
And the point I need to stress is that why this matters to
me is because it matters to my small and medium-sized financial
institutions who are afraid, they are absolutely afraid of what
regulators are doing to them, and specifically the CFPB, and a
question of is there going to be accountability there, how are
we going to comply, are the people who are coming in and
regulating us, do they have the experience or the training they
need? And again, the concerns seem to be justified since your
own staff are saying they don't have the training they need.
Let me wrap up with this, I think this is something that
you have dealt with more directly, so hopefully you can have
some answers on this.
The CFPB may use the Consumer Financial Civil Penalty Fund
to selectively compensate victims in cases that are independent
of the CFPB, such as by another Federal agency, State's
Attorney General, or even a private plaintiff. In effect, the
Chief Financial Officer, my understanding is yourself, can
selectively determine whether to intervene in cases brought
anywhere to compensate victims. The CFPB's Civil Penalty
Governance Board and the Chief Financial Officer have
discretion to intervene selectively in matters.
The question I have, Mr. Agostini, is, as the CFO, please
explain your role and responsibilities with regard to the
Consumer Financial Civil Penalty Fund and explain exactly how
that works and what safeguards, again, are there.
Mr. Agostini. Mr. Chairman, the Civil Penalty Fund was
established based on statutory direction in Dodd-Frank. We have
implemented a Governance Board. I sit as an advisor to that
Governance Board. There is also a Fund Administrator. That Fund
Administrator reports to me and I have the ability to select
and remove them.
I would offer that we have a notice of rulemaking that is
out currently. We are currently soliciting and have asked for
comments. That period of comment is open until July 8th. It
sets out rather precisely all of the expectations and rules for
the Civil Penalty Fund in that--
Mr. Hultgren. Let me wrap up with this. My time has almost
expired. But given the breadth of potential cases in which the
CFPB could intervene to compensate victims, such a tool could
easily be abused for political or other purposes. Wouldn't you
agree?
Mr. Agostini. Mr. Chairman, with the rules that we have put
in place and the rules that are reflected in the public notice
of rulemaking, I believe that we have a very accountable and
very structured manner in which to operate that fund.
Mr. Hultgren. My time has expired and we have had a chance
to get through all of the witnesses for a second round. I would
like to thank our witness for his testimony today.
The Chair notes that some Members may have additional
questions for this witness, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to this witness and to place his responses in the record. Also,
without objection, Members will have 5 legislative days to
submit extraneous materials to the Chair for inclusion in the
record.
Mr. Hultgren. Without objection, this hearing is adjourned.
[Whereupon, at 4:50 p.m., the hearing was adjourned.]
A P P E N D I X
June 18, 2013
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