[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                         THE FUTURE OF BANKING:
                       HOW CONSOLIDATION, NONBANK
                      COMPETITION, AND TECHNOLOGY
                    ARE RESHAPING THE BANKING SYSTEM

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON CONSUMER PROTECTION
                       AND FINANCIAL INSTITUTIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 29, 2021

                               __________

       Printed for the use of the Committee on Financial Services      
     

                           Serial No. 117-49
                           
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                                __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-008 PDF                 WASHINGTON : 2021                     
          
-----------------------------------------------------------------------------------  
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
     Subcommittee on Consumer Protection and Financial Institutions

                   ED PERLMUTTER, Colorado, Chairman

GREGORY W. MEEKS, New York           BLAINE LUETKEMEYER, Missouri, 
DAVID SCOTT, Georgia                     Ranking Member
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             BILL POSEY, Florida
AL GREEN, Texas                      ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JUAN VARGAS, California              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   TED BUDD, North Carolina
MICHAEL SAN NICOLAS, Guam            DAVID KUSTOFF, Tennessee, Vice 
SEAN CASTEN, Illinois                    Ranking Member
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
RITCHIE TORRES, New York             WILLIAM TIMMONS, South Carolina
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 29, 2021...........................................     1
Appendix:
    September 29, 2021...........................................    51

                               WITNESSES
                     Wednesday, September 29, 2021

Gonzalez-Brito, Paulina, Executive Director, California 
  Reinvestment Coalition.........................................     5
Henry-Nickie, Makada, Fellow, Governance Studies, Brookings 
  Institution....................................................     7
Hughes, Sarah Jane, University Scholar and Fellow in Commercial 
  Law, Maurer School of Law, Indiana University..................     9
Jackson, Desiree, Assistant Vice President, Treasury Management, 
  Beneficial State Bank..........................................    10
Reuter, Jim, Chief Executive Officer, FirstBank, on behalf of the 
  American Bankers Association...................................    12

                                APPENDIX

Prepared statements:
    McHenry, Hon. Patrick........................................    52
    Gonzalez-Brito, Paulina......................................    54
    Henry-Nickie, Makada.........................................    72
    Hughes, Sarah Jane...........................................    78
    Jackson, Desiree.............................................    92
    Reuter, Jim..................................................    97

              Additional Material Submitted for the Record

Perlmutter, Hon. Ed:
    Written statement of the American Financial Services 
      Association................................................   106
    Written statement of the Bank Policy Institute...............   108
    Written statement of the Credit Union National Association...   119
    Written statement of the Electronic Transactions Association.   122
    Written statement of the Financial Data and Technology 
      Association................................................   125
    Written statement of the Independent Community Bankers of 
      America....................................................   129
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   132
    Written statement of the National Armored Car Association....   139
    Written statement of Hon. Donald M. Payne, Jr., a 
      Representative in Congress from the State of New Jersey....   141

 
                         THE FUTURE OF BANKING:
                       HOW CONSOLIDATION, NONBANK
                      COMPETITION, AND TECHNOLOGY
                    ARE RESHAPING THE BANKING SYSTEM

                              ----------                              


                     Wednesday, September 29, 2021

             U.S. House of Representatives,
                Subcommittee on Consumer Protection
                        and Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2128, Rayburn House Office Building, Hon. Ed Perlmutter 
[chairman of the subcommittee] presiding.
    Members present: Representatives Perlmutter, Meeks, Scott, 
Velazquez, Sherman, Green, Foster, Vargas, Lawson, Casten, 
Pressley; Luetkemeyer, Posey, Barr, Williams of Texas, 
Loudermilk, Budd, Kustoff, Rose, and Timmons.
    Ex officio present: Representative Waters.
    Also present: Representatives Garcia of Illinois and Emmer.
    Chairman Perlmutter. The Subcommittee on Consumer 
Protection and Financial Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of this subcommittee are authorized to 
participate in today's hearing.
    With the hybrid format of this hearing, we have some 
Members and witnesses participating in-person and others on the 
Webex platform.
    I would like to remind all Members participating remotely 
to keep themselves muted when they are not being recognized by 
the Chair. The staff has been instructed not to mute Members, 
except when a Member is not being recognized by the Chair, and 
there is inadvertent background noise.
    Members are also reminded that that they may only 
participate in one remote proceeding at a time. And I am aware 
that there are several hearings going on even as we speak, but 
you can only participate in one at a time. If you are 
participating remotely today, please keep your camera on. And 
if you choose to attend a different remote proceeding, please 
turn your camera off.
    Today's hearing is entitled, ``The Future of Banking: How 
Consolidation, Nonbank Competition, and Technology are 
Reshaping the Banking System.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Following the financial crisis, former Federal Reserve 
Chair Paul Volcker was once asked about financial innovation 
and regulatory reform, and he said, ``The most important 
financial innovation that I have seen in the past 20 years is 
the automatic teller machine (ATM). It really helps people 
prevents visits to the bank, and it is a real convenience. How 
many other innovations can you tell me of that have been as 
important to the individual as the ATM, which is more of a 
mechanical innovation than a financial one?''
    I don't bring this up to say that financial innovation is 
bad, and bank technology needs to stop at ATMs, but there is a 
point to what Mr. Volcker said. From the consumer perspective, 
the ATM is a wildly-useful product, and it is not such a 
complicated idea.
    However, many so-called innovative and complex financial 
products, like credit default swaps or balloon mortgage 
payments, got us into a lot of trouble back in 2008.
    But in the dozen years since the financial crisis, there 
have been many real innovations in banking with clear benefits 
to consumers. You can access your accounts and transfer funds 
with your smartphone.
    Credit unions and banks have developed advanced fraud 
detection to address the rise in cybersecurity threats. I was 
recently notified that there had been some fraudulent activity 
on one of my accounts that was actually noticed within hours of 
the activity.
    New tools in analytics help consumers set and track savings 
and spending goals. We are also seeing more financial 
institutions use artificial intelligence, machine learning, and 
algorithmic-based decisions. These technologies offer a great 
deal of promise, but also raise new consumer protection issues.
    Another trend over the past decades has been the 
consolidation in the banking sector. In 1984, there were 18,000 
different banks across the country. Today, there are less than 
5,000, and the number of new bank charters has fallen to a 
record low.
    The number of credit unions has also fallen from about 
15,000 in 2004, to about 5,000 today.
    With fewer banks and credit unions, there is less consumer 
choice when it comes to depository institutions.
    But this is not to say that traditional financial 
institutions are completely without new competition. Financial 
technology companies, often referred to as fintech, have 
captured a larger and larger share of consumer mortgage and 
small business lending markets.
    These firms are often not subject to the same regulations 
that banks and credit unions are, but often compete in the same 
markets. In April, this subcommittee held a hearing on the 
trends of financial institution charters. We looked back in 
history at the powers of the National Bank Act, the original 
purpose of industrial loan companies in examining how banking 
laws are being used and, in some cases, stretched to fit an 
evolving financial services sector.
    As illustrated by that hearing, there are significant 
challenges for Congress and regulators to keep up with modern-
day trends.
    My time has expired, so I will now yield to Mr. 
Luetkemeyer, the ranking member of this subcommittee, for 5 
minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I would like to 
ask unanimous consent to insert Full Committee Ranking Member 
McHenry's statement into the record.
    Chairman Perlmutter. Without objection, it is so ordered.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you for 
having this important hearing today, and I thank our witnesses 
also for testifying before us. We look forward to your 
insightful information.
    This hearing asks us to consider the future of banking, a 
very broad subject. In order to understand where banking is 
going, we need to examine what has happened to banking in the 
past.
    At the turn of the century, there were 9,600 FDIC-insured 
banks. Today, there are a little more than 4,900. Potentially 
more troubling, the number of banks with less than a $100 
million in assets has declined by 92 percent since 1985.
    What are the leading factors driving consolidation in the 
banking sector? What are the practical impacts on consumers? 
And what are common-sense private-sector solutions to this 
problem? These are the questions we should be examining at this 
hearing today.
    Consolidation in the banking sector has been occurring for 
the past 3 decades. However, there is no doubt that the impacts 
of a post-Dodd-Frank Act regulatory regime are hurting small 
financial institutions.
    A 2020 FDIC study examined the per-unit costs associated 
with operating a community bank with below $10 billion in 
assets. They found that in the year 2000, the most efficient 
size for a community bank was $350 million. In 2019, the most 
efficient size of a bank was $3.2 billion. In short, the FDIC 
study found that the current regulatory landscape has created 
an ecosystem where size equals survival.
    While community banks continue to consolidate, non-bank 
firms, including fintechs, have risen sharply in their absence. 
It is clear that fintechs have spurred innovation in the 
financial services sector and increased access to credit for 
consumers.
    Much of this innovation and inclusion has come through 
bank-fintech partnerships. These relationships allow fintechs 
to innovate, while being regulated by bank regulators through 
their examination and supervision of a banks' third-party risk.
    All of this information begs the question, what should 
Congress do? First, we should examine what specifically is 
driving up the costs for community financial institutions and 
look at ways of alleviating those costs through regulatory 
reform.
    Second, we should examine the processes and requirements in 
place for de novo institutions. We saw the formation of 15 de 
novo institutions in 2020, a far cry from the 149 the year 
before Dodd-Frank.
    Third, we should ensure that a bank-fintech partnership 
model remains intact. Unfortunately, my colleagues on the other 
side of the aisle are dismantling the bank-fintech ecosystem by 
reversing the OCC's True Lender Rule.
    While Republicans are looking to solutions that allow the 
private sector to innovate in a manner that solves these 
problems, improves inclusion, and decreases banking deserts, my 
colleagues on the other side of the aisle have a very different 
view of the future of banking.
    In just this Congress, we have seen the Majority put 
forward proposals to turn the Consumer Financial Protection 
Bureau (CFPB) into a public credit bureau, establish postal 
banking, and establish government control of the banking system 
through FedAccounts.
    In fact, the recent Biden nomination for Comptroller of the 
Office of the Comptroller of the Currency (OCC) argued for 
FedAccounts even though, in her own words, it would, ``end 
banking as we know it.''
    A government takeover of the banking system is truly one of 
the most radical ideas I have heard in my time in Congress, and 
yet it has become a mainstream tenet of the Majority's 
platform. It truly terrifies me that these ideas are receiving 
serious consideration in this committee.
    At a time when the leaders of the House and the Senate are 
desperately pursuing Bernie Sanders' socialist agenda, and the 
President appointed an OCC Chair with hopes of ending banking, 
the future of banking couldn't be in more limbo.
    I thank the witnesses for being here today. I look forward 
to discussing how Congress can and should allow the private 
sector to improve the banking system.
    And with that, Mr. Chairman, I yield back.
    Chairman Perlmutter. I thank the gentleman.
    And seeing that the Chair of the Full Committee isn't here, 
I will take that last 49 seconds I had left for her to just 
say, given the challenges of keeping up with the present, I am 
excited for today's hearing. This hearing is about ensuring 
that 10 or 20 years down the road, we have a banking system 
that is innovative, consumer-driven, and competitive, and 
making sure it works for every American.
    I would now like to introduce our witnesses. And I thank 
you all for appearing virtually.
    First, I would like to begin with Paulina Gonzalez-Brito, 
who is the executive director of the California Reinvestment 
Coalition. Paulina has more than 20 years of experience working 
on economic justice and community empowerment issues, and 
currently serves on the board of directors for the National 
Association for Latino Community Asset Builders.
    Second, Dr. Makada Henry-Nickie, who is the Robert and 
Virginia Hartley Fellow in Governance Studies at the Brookings 
Institution. Makada is an expert in fintech issues and 
equitable access to financial services, and formerly worked as 
a senior analyst with the Consumer Financial Protection Bureau.
    Third, Sarah Jane Hughes is a university scholar and fellow 
in commercial law at Indiana University's School of Law. She is 
an expert on payment systems, online banking, and privacy 
issues.
    Fourth, Desiree Jackson is the assistant vice president for 
treasury management at Beneficial State Bank. She is a member 
of the Communication Workers of America Local 9412, and has 
worked in the financial services sector for more than 25 years.
    And finally, Jim Reuter is the chief executive of FirstBank 
headquartered in Colorado, and a friend of mine, who is 
testifying on behalf of the American Bankers Association. Jim 
started his career at FirstBank in 1987 and has worked in 
various departments within the bank including mortgage 
operations, IT, online banking, payments, contact center, and 
treasury management. He is the former Chair of the American 
Bankers Council.
    Witnesses, you are reminded that your oral testimony will 
be limited to 5 minutes. You should be able to see a timer at 
the bottom of your screen that will indicate how much time you 
have left. When you have 1 minute remaining, a yellow light 
will appear. I would ask you all to be mindful of the timer, 
and when the red light appears, to wrap up your testimony so we 
can be respectful of both the other witnesses' and the 
subcommittee members' time.
    And without objection, your written statements will be made 
a part of the record.
    We will begin with Paulina Gonzalez-Brito. You are now 
recognized for 5 minutes for your testimony.

   STATEMENT OF PAULINA GONZALEZ-BRITO, EXECUTIVE DIRECTOR, 
               CALIFORNIA REINVESTMENT COALITION

    Ms. Gonzalez-Brito. Good morning. Thank you for inviting me 
to join you today, Chairman Perlmutter and Ranking Member 
Luetkemeyer.
    My name is Paulina Gonzalez-Brito, and I go by the pronouns 
they/them. I am Purepecha, Chicane, and my people come from the 
original people of Michoacan and Zacatecas.
    I am the executive director of the California Reinvestment 
Coalition, or CRC, and we work to close the racial wealth gap.
    From the stealing of land to the enslavement of Black 
people through housing, lending, and financial policies, the 
U.S. has always profited from the labor of Black, Indigenous, 
and people of color (BIPOC), while simultaneously denying us 
wealth.
    As we continue to march down the path of mergers and 
acquisitions resulting in fewer financial institutions, the 
closure of branches, and less reinvestment, it is no surprise 
to anyone that communities of color are disproportionately 
impacted.
    With the support of Chairwoman Waters, President Biden 
recently issued an Executive Order meant to improve regulatory 
oversight of bank mergers. It is imperative that regulators not 
rubber-stamp merger applications but give the mergers the 
scrutiny they deserve.
    This year alone, in California, CRC and our members have 
negotiated three community benefits agreements to ensure that 
proposed bank mergers have a public benefit. The agreements 
with banks articulate community needs and how the bank will 
meet those needs and, therefore, further Community Reinvestment 
Act (CRA) implementation.
    Just last week, U.S. Bank announced plans to acquire Union 
Bank. Currently, neither bank has community benefits 
agreements. In addition to looking at whether a merger will 
create a public benefit, regulators must also evaluate the 
possibility of public harm.
    In the case of U.S. Bank's proposed merger with Union Bank, 
U.S. Bank plans to make cuts. These planned cuts are made 
possible by branch overlap in four big California counties--
L.A., Orange, San Diego, and Santa Clara--where more than 50 
percent of the Union's branches are located. It is our position 
that there should be no branch closures as a result of this 
merger.
    As we experience branch closures, we are told to embrace 
fintech. In our society, we like to think of technology as the 
great equalizer. This is certainly not the case.
    In fact, technology benefits financial institutions by 
lowering overhead costs, but the benefits to BIPOC communities 
are less clear. Case in point, the Federal Reserve of Kansas 
found that there are two reasons for the lack of adoption of 
financial services: financial exclusion; and individual 
exclusion.
    These findings are consistent with what we see in CRC's 
Economic Wellness Promotora Program, which supports the 
financial well-being of low-income BIPOC families.
    Black and Latinx participants reported experiencing poor 
and/or unfriendly service from banks. Participants expressed 
being made to feel not good enough or wrong or unwelcome when 
attempting to access banking products and services.
    The encroachment of fintech into banking bring concerns of 
hypercharged harm. Venmo, PayPal, Square, SoFi, Google, Apple, 
and the growing number of tech financial services companies use 
complicated and rapidly-changing algorithms that process mass 
amounts of data to make credit decisions.
    If technology advances faster than our understanding of it, 
regulation becomes very difficult, if not impossible, and the 
threat of resulting discrimination is greater.
    In pursuit of profits, financial institutions will take as 
many liberties as they are given. Let's take Amazon as an 
example. Amazon has long been in the fintech space and has done 
so without becoming a bank and without banking regulator 
oversight or CRA obligations.
    Amazon Lending advises sellers to apply for their loans and 
has effectively created a 21st Century company store. Amazon 
loans can only be used for inventory or marketing on the e-
commerce site. And if a merchant cannot make a payment, Amazon 
can seize the merchant's inventory and collateral to pay back 
the loan.
    Our communities lack access to safe, affordable credit and 
banking services. There is another solution to be considered.
    We must nurture public banking, either through the creation 
of local public banks that are tied to the Federal Reserve or 
the creation of postal banking. Every American has a post 
office in their community. They should have a bank too.
    Congress can stop the abuses of the foreseeable future by 
supporting a strong Community Reinvestment Act that explicitly 
considers race, enhances the role of community voices and 
community benefits agreements, downgrades banks that harm, and 
discourages further branch closures.
    We also urge all regulators to develop a coordinated and 
robust regulatory response to fintech that ensures strong 
compliance with consumer protection and fair lending laws. 
Thank you for this opportunity to address you today.
    [The prepared statement of Ms. Gonzalez-Brito can be found 
on page 54 of the appendix.]
    Chairman Perlmutter. Thank you, Director Gonzalez-Brito.
    Our next witness is Dr. Henry-Nickie. You are now 
recognized for 5 minutes for your testimony.

 STATEMENT OF MAKADA HENRY-NICKIE, FELLOW, GOVERNANCE STUDIES, 
                     BROOKINGS INSTITUTION

    Ms. Henry-Nickie. Chairman Perlmutter, Ranking Member 
Luetkemeyer, and distinguished members of the subcommittee, I 
am pleased to join today's hearing on the future of banking. I 
am Makada Henry-Nickie, a governance studies fellow at the 
Brookings Institution.
    My comments today will focus on market trends, the rise of 
fintechs as consequential market players, and the impacts of 
these shifts on marginalized consumers. My comments on these 
issues are my own and do not reflect any official position of 
the Brookings Institution.
    The U.S. is facing a major demographic transition driven 
exclusively by communities of color. In the last decade alone, 
Asian and Hispanic American populations grew by 36 and 23 
percent, respectively.
    But the financial services sector has yet to respond to 
these representational changes within the consumer financial 
market. Minority households systematically occupy status quo 
roles on the fringe, rather than sitting at the center of 
market models as gross drivers.
    According to the FDIC's 2019 Banking Survey, 7.1 million 
households remain unbanked. The overwhelming majority of these 
households, 64 percent to be precise, were Black and Hispanic.
    Indigenous communities have an unenviable, longstanding 
experience of exclusion. Despite modest progress in promoting 
financial inclusion, 16.3 percent of Indigenous Americans are 
unbanked, and are disproportionately exposed to alternative 
financial products such as predatorial payday and title loans.
    The prosperity of the U.S. is stifled when the future 
growth segments are excluded from fully participating in the 
economy.
    The Biden Administration has drawn on a comprehensive 
accountability model to orient the Federal Government's policy 
framework towards racial inclusion.
    Now, while President Biden's racial equity agenda marks a 
sea change, it is only a first step towards closing profound 
racial wealth gaps. Financial intermediaries and regulators 
must do their part to ensure that the financial services 
ecosystem responds to the unmet needs of minority communities.
    The Great Recession has dramatically altered the banking 
landscape as we know it. More than a decade after the subprime 
crisis, the banking infrastructure continues to contract.
    In the years since the housing bubble, the number of 
commercial banks has fallen sharply from 7,300 institutions in 
2007, to 4,375 in 2020. That is an astonishing 40-percent 
decline.
    This shrinkage is in large part due to consolidation 
through mergers and acquisitions, with larger banks absorbing 
small ones.
    The vast majority of these mergers and acquisitions 
unfolded in the community banking sector, which, according to 
the FDIC, accounted for 91 percent of this consolidation trend.
    It is important to know that acquired community banks 
tended to be less profitable than their peers and were often 
cited as problematic by the FDIC.
    Another concerning trend is a lack of new bank formation 
that has shaped the competition dynamics during the same time. 
A combination of enhanced regulatory oversight and market 
dynamics undermines bank formation and increases complexities 
in the post-crisis world.
    Contrary to broader trends in select segments within 
underserved communities, these communities disproportionately 
rely on physical retail outlets to connect with mainstream 
banking.
    This retail network is shrinking, contracting, and under 
threat with the increased and accelerated pace of mergers and 
acquisitions. The FDIC's 2019 survey underscored the importance 
of retail outlets to groups that visit branches more than 10 
times a year.
    Those are older Americans, people with disabilities, 
individuals experiencing regular income volatility, and Native 
peoples.
    The hollowing out of the retail bank footprint also impacts 
the small business community. Studies have shown that bank 
closures adversely affect small business lending, and bank 
branches that have lenders--excuse me--with all bank branches 
allocate less capital to small businesses and those with 
branches in low-income communities.
    Now, efficiency gains are celebrated, right? That is the 
mantra of merging institutions. But low-income communities 
rarely, if ever, realize these economies of scale.
    Instead, the mergers have resulted in a rise in FHA loan 
denials, and substantial increases in interest rate loans on 
non-agency mortgages, particularly for subprime borrowers.
    The lack of existing bank relationships is a defining 
characteristic for Black Paycheck Protection Program (PPP) 
applicants. Congress has a duty to create a framework to ensure 
that consumers remain protected during this dynamic innovation 
process in which fintechs and banks and nonbanks are vying to 
serve and find the right balance of a mix of products to bring 
to market.
    Congress can take clear steps to protect consumers and 
restore their ability to hold innovators and abdicators 
responsible for their decisions.
    This subcommittee should examine how to extend the 
authority of the Consumer Financial Protection Bureau (CFPB) to 
include oversight of the Community Reinvestment Act (CRA). 
Compliance with CRA is a crucial tool that allows regulators to 
hold lenders accountable, while deepening lending in low-income 
communities.
    Again, thank you for hosting this critical conversation on 
the future of banking.
    [The prepared statement of Dr. Henry-Nickie can be found on 
page 72 of the appendix.]
    Chairman Perlmutter. Thank you, Dr. Henry-Nickie.
    Professor Sarah Jane Hughes, you are now recognized for 5 
minutes.

 STATEMENT OF SARAH JANE HUGHES, UNIVERSITY SCHOLAR AND FELLOW 
  IN COMMERCIAL LAW, MAURER SCHOOL OF LAW, INDIANA UNIVERSITY

    Ms. Hughes. Good morning, Chairman Perlmutter, Ranking 
Member Luetkemeyer, and honorable members of the Subcommittee 
on Consumer Protection and Financial Institutions of the 
Committee on Financial Services. It is a great honor to appear 
before you today to discuss topics that are of great 
consequence--bank consolidation, nonbank competition, and 
technology--and the manner in which they are reshaping American 
banking, some pieces for the good and other pieces, as other 
witnesses have mentioned, with less desirable effects in some 
respects.
    My prepared statement touches upon many of these subjects, 
including just bank consolidation, the challenges that 
consolidation poses for small towns and rural communities that 
are still very important to us, including here in south central 
Indiana, how nonbank competition is changing banking, and the 
role that technology is playing in driving changes to banking 
services and availability, including for the partnerships that 
the chairman mentioned in his opening statement.
    In the interest of time, I think it is important to realize 
that we are in a perhaps more robust phase of nonbank 
competitors. But we have basically been in this space, with 
nonbank competitors taking over pieces of bank action, for 
approximately 40 years, if not longer, because the credit card 
industry might be claimed to do that as well.
    So, it is not like it is new. It is just that it is a 
little more robust, and it is based on the internet and other 
forms of online services that are available.
    Some nonbank competitors have been around for a hundred 
years, and they were beginning to be very robust in the late 
1950s and early 1960s, but not at the level we see today.
    I would like to speak about industrial loan companies 
(ILCs) for a moment, because industrial loan companies have 
been around for quite a long time, since Congress authorized 
them.
    The States and the FDIC are the regulators for industrial 
loan companies. They are subject to thorough investigation 
before they obtain their State charters and before they obtain 
FDIC deposit insurance.
    I have no reason to believe that it is less robust than 
what happens with other State banks that the FDIC is reviewing, 
and as one of the witnesses mentioned, there have been a few--
not very many--de novo banks, which we think of as rising to 
take the place often of what happens after banks consolidate.
    ILCs are not in that space. The States have expanded the 
powers of ILCs and industrial banks since the late 1980s so 
that their powers now are very close to, if not identical to, 
the lending powers that other State banks have, and the FDIC 
insures the nonretail deposits that are there.
    But it is the thorough supervision and examination by both 
the FDIC and the States that is very successful and has 
resulted in very few complaints of which I am aware. And, at 
least once a quarter, I review the complaint database for the 
CFPB just to be sure that I am still keeping current with that.
    It is very hard to estimate how many fintechs are out 
there. We know that the American Fintech Council earlier this 
year revealed that it had 75 members, and they have, as I 
described in my prepared statement, some specific sorts of 
responsibility.
    The fintechs also hold State licenses, either as lenders or 
as money transmitters, and like industrial loan companies, they 
are subject to examination and supervision by the States. They 
don't have FDIC insurance at this point, so they don't have the 
FDIC behind them.
    But because they have this same State, boots-on-the-ground, 
close-to-consumers orientation in many cases with State 
regulators being in charge, they are not unregulated. And I 
think it is very important to realize that they are not 
unregulated, just as ILCs and State-chartered banks are not 
unregulated.
    The Bank Service Corporation piece of my prepared statement 
is important because I am aware of the fact that Bank Service 
Corporation authority is pending in Congress, and with that, I 
would like to close my remarks by telling you that I am a big 
fan of State-chartered banks, and I am a big fan of State 
regulation of nonbank providers. I think they do a pretty good 
job.
    Thank you for including me today.
    [The prepared statement of Professor Hughes can be found on 
page 78 of the appendix.]
    Chairman Perlmutter. Thank you, Professor.
    The next witness is Ms. Desiree Jackson. You are now 
recognized for 5 minutes.

    STATEMENT OF DESIREE JACKSON, ASSISTANT VICE PRESIDENT, 
           TREASURY MANAGEMENT, BENEFICIAL STATE BANK

    Ms. Jackson. Thank you.
    Good morning, Subcommittee Chairman Perlmutter, and members 
of the subcommittee.
    My name is Desiree Jackson. I am an assistant vice 
president for treasury management services at Beneficial State 
Bank in Oakland, California. And I am also a proud member of 
the Communications Workers of America Local 9412.
    Last year, my coworkers and I made history when we became 
the first group of bank workers to organize a union in over 40 
years. And this past Sunday, we ratified our first union 
contract.
    I have worked in the banking industry for over 25 years, 
including 18 years at Wells Fargo, so I am excited to share my 
perspective on the future of our banking system.
    Frontline bank jobs are stressful. We are under extreme 
time pressures, and we know that mistakes can harm our 
customers. Whether or not a bank respects its workers' rights 
greatly impacts our stress levels. It is also a good predictor 
of whether a merger will impact us and our customers positively 
or negatively.
    During my time at Wells Fargo, I worked in a call center as 
a customer service representative where I was responsible for 
opening accounts after they were sold.
    When Wells Fargo bought other banks, like Norwest Bank and 
Wachovia Bank, it made our workload more intense. We had to do 
more with less. Our performance metrics got more excessive, 
meaning we had to complete all of our assigned work each day or 
we would get a talking-to by our manager.
    We had to answer our phone by the second ring. Emails had 
to be responded to within 2 hours, and we had strict deadlines 
for opening customer accounts. But there was no opportunity to 
get raises even though the expectations of our jobs had 
increased.
    Managers pressured us to work as many hours as necessary to 
complete our daily assigned tasks, like making sure every 
account was opened. But they didn't care how many hours we 
worked because the bank misclassified us as salaried employees 
so they didn't have to pay us overtime.
    On top of that, departments closed, and people were laid 
off, instilling even more stress and fear. Basically, Wells 
Fargo used mergers to cut staff, even if it meant getting rid 
of experienced staff who were skilled at serving the best 
interests of our customers.
    This management style is all too common in the industry. It 
means that bank workers often experience huge stress, and there 
are sometimes incentives for workers to take actions that harm 
consumers. That is why I strongly support the Financial 
Services Worker Bill of Rights.
    Luckily, my experience at Beneficial State Bank couldn't be 
more different. Beneficial is a mission-driven bank, owned by a 
nonprofit foundation, and is committed to serving communities 
that need access to financial services.
    When Beneficial has acquired small banks over the last few 
years, they have been like-minded community banks, enabling us 
to serve more communities in need. And no one lost their job, 
and there was an open communication process with much better 
transparency. We held monthly bank-wide meetings to explain 
what was going on.
    And now, with our union contract, we will have regular 
labor-management meetings where we can discuss a range of 
issues, including how we can improve customer service.
    The reality is there has been too much consolidation in the 
industry, and I want to make sure that small, mission-oriented 
banks like Beneficial can thrive and not be swallowed up by 
predatory megabanks.
    That is why I think Congress should strengthen the merger 
standards to ensure that mergers are in the public interest and 
improve wages and working conditions.
    Meanwhile, online banking is creating more cashless banks 
and reducing the number of brick-and-mortar branches, 
threatening the livelihood of 423,000 bank tellers in the 
country and possibly reducing access to banking for the 
underserved consumer who can't utilize the newer technology.
    From my 25 years of experience in banking, I think there is 
room to ensure that employees are taken care of when there are 
mergers, and that is through unionizing.
    Making sure frontline bank workers' rights are protected by 
empowering more of us to organize will not only reduce our 
unhealthy stress levels, but it will be better for our 
customers, better for our communities, and better for our 
entire financial system. Thank you for this opportunity.
    [The prepared statement of Ms. Jackson can be found on page 
92 of the appendix.]
    Chairman Perlmutter. Thank you for your testimony, Ms. 
Jackson.
    And our final witness is Mr. Jim Reuter. You are now 
recognized for 5 minutes for your testimony, sir.

STATEMENT OF JIM REUTER, CHIEF EXECUTIVE OFFICER, FIRSTBANK, ON 
           BEHALF OF THE AMERICAN BANKERS ASSOCIATION

    Mr. Reuter. Chairman Perlmutter, Ranking Member 
Luetkemeyer, and members of the subcommittee, thank you for the 
opportunity to testify today on the future of banking.
    As a banker for over 34 years, this hearing could not be 
more timely given the changes underway in our industry. I am 
pleased today to speak not only on the behalf of FirstBank and 
our 3,000 employees, but also on behalf of the American Bankers 
Association (ABA), which represents banks of all sizes, and the 
2 million women and men who work at those banks and serve your 
constituents every day.
    Founded in 1963, FirstBank has grown organically to more 
than 100 locations in Colorado and Arizona. We are currently 
the largest bank headquartered in Colorado.
    Despite our footprint, we were one of the first banks to 
join a real-time payments network and offer Zelle payment 
services to customers. While our business is banking, our 
commitment to the communities we serve goes well beyond that.
    Our 300 bank officers sit on 2 to 3 nonprofit boards each, 
and our most recent Colorado Gives Day raised over $50 million 
for more than 2,000 nonprofits in 24 hours.
    Before we look to the future, I would like to reflect for a 
moment on where banking stands today. As Federal regulators 
have noted, banks have been a source of strength during the 
pandemic, providing critical financial support for the economy 
while maintaining record levels of capital and deposits.
    At FirstBank, we were the number-one bank in Colorado for 
PPP loans, originating more than 20,000, which helped save over 
120,000 jobs in the State.
    We also realize that the ongoing pandemic is not over, and 
many Americans are still struggling. Like many banks around the 
country, we continue to prioritize financial inclusion.
    ABA has sounded the alarm on this issue and urged banks of 
all sizes to offer safe, low-fee, BankOn-certified accounts, 
which are helping to reduce the number of unbanked. Today, 
BankOn accounts are offered at more than half of the bank 
branches in this country.
    Our industry is optimistic about the future, but like all 
businesses, we face challenges. You encouraged us to focus on 
how consolidation, nonbank competition, and technology are 
reshaping the banking system.
    Bank consolidation is a long-term trend. Today, there are 
just under 5,000 banks in the U.S., down from nearly 18,000 in 
1984, and we expect consolidation to continue for a variety of 
reasons.
    The need for scale is the main driver. Banks at every level 
of the asset ladder are seeking to scale to invest in the 
ongoing digital transformation reshaping our industry.
    At FirstBank, our strategy has been to focus on organic 
growth without significant M&A, but other banks are taking 
different approaches.
    Bank consolidation has likely been accelerated by policy 
decisions, including a regulatory framework that imposes 
significant compliance costs and deters de novo bank creation.
    One troubling new trend we urge this committee to review is 
that tax-exempt credit unions are increasingly using their tax 
subsidy to buy up tax-paying banks. From 2018 to 2020, more 
than 28 banks were acquired by credit unions.
    Despite consolidation, banking remains a healthy, diverse, 
and highly competitive industry. As the banking industry 
consolidates, many of our biggest competitors have emerged 
outside the regulated banking space.
    The list includes tax-advantaged lenders like credit unions 
and the Farm Credit System, monoline fintech firms, nonbank 
payment providers, and decentralized finance technologies like 
cryptocurrency.
    Many of those competitors have business models that rely on 
a kind of regulatory arbitrage in which they can offer one or 
several aspects of banking services while avoiding the full 
banking regulatory framework.
    We see this most clearly in the rise of payments charters, 
or special purpose national bank charters that would aim to 
provide payment system access to companies but would not be 
subject to the same regulations as banks.
    In our view, the stringent rules in place for banks should 
be applied to others looking to offer bank-like services. 
Anything less than a level playing field will put consumers and 
financial systems at risk.
    The pandemic has only accelerated banking's digital 
transformation. At FirstBank, we have more than 400 people in 
our information technology unit, up from 250, 5 years ago. ABA 
firmly believes that banks in the private sector will continue 
to drive this technological revolution.
    The one innovation we don't need is the government trying 
to replace the nation's banks. We will continue to firmly 
oppose efforts to create direct consumer accounts at the 
Federal Reserve, or to turn the Postal Service into a consumer 
bank, or to create a central bank digital currency that 
disintermediates banks.
    These are solutions in search of a problem that, if 
implemented, would drain deposits out of banks and undermine 
the valued banks that deliver convenient funds access and loans 
to consumers to support local economic growth.
    Ultimately, these approaches would put at risk the many 
benefits of the modern banking system. Despite challenges, we 
believe the future of banking is bright, provided the policy 
environment continues to support growth and close gaps that 
promote regulatory arbitrage and put the financial system and 
consumers at risk.
    Thank you for the opportunity to testify, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Reuter can be found on page 
97 of the appendix.]
    Chairman Perlmutter. Thank you, Mr. Reuter. Thank you for 
your testimony.
    Now, I will recognize myself for 5 minutes for questions. 
And the first thing is, I will just say, being one of the older 
members of this committee, much of the consolidation, much of 
the reduction in the number of banks occurred in the late 1980s 
and 1990s when the savings and loan system failed, and many 
small and medium-sized banks across the country either went out 
of business or were acquired by others.
    But there has been a continued reduction and consolidation 
of the industry.
    Mr. Reuter, one of the principal reasons you cite is the 
need for financial institutions to scale up in order to invest 
in technology. As more banks and credit unions continue to 
scale up, either through mergers and acquisitions or organic 
growth, do you see the bar to entry becoming even greater for 
de novo banks?
    Mr. Reuter. Thank you for that question, Mr. Chairman. I do 
see the bar for entry for de novo charter to be higher. One of 
the reasons is the regulatory burden. We have a number of 
regulations that haven't been reviewed for decades, and some of 
them have not kept up with the changing times.
    The other one is investment in technology. I mentioned 
earlier that we went from 250 employees in technology up to 
over 500 in 5 years. Our annual spending has gone from $50 
million a year to over $110 million a year.
    Ranking Member Luetkemeyer pointed out a study that in 
2000, $350 million was the asset size to be efficient, and 
today that has climbed to $3.2 billion.
    So, when you think about someone starting a single-bank 
location or a two-bank location de novo charter, those barriers 
to entry are significant.
    Chairman Perlmutter. Let me follow up then. You have said 
that we expect this consolidation to continue, and the ability 
to get a de novo charter seems to be pretty difficult.
    Should we be concerned that we may be left with only a 
handful of banks and fintech companies in 10 or 20 years?
    Mr. Reuter. I think the banking industry, at nearly 5,000, 
is still very competitive, Mr. Chairman, and while I think 
there will be continued consolidation, I think there is a place 
for community banks.
    Clearly, we are one of those community banks, and you saw 
what we did with PPP. So, while I believe there will be 
continued consolidation to find efficiencies given the 
regulatory requirements, as well as the lift in technology, I 
think there will continue to be a diverse banking system.
    But one thing I think is really important is a level 
playing field from a regulatory perspective with the fintechs. 
Many of them purposely are picking off parts of our business, 
avoiding holding deposits and different things, so they can 
avoid the regulatory requirements.
    I think it is important that we have a level playing field, 
or you will drive even more bank consolidation.
    Chairman Perlmutter. Thank you.
    Dr. Henry-Nickie, can you talk about the role fintechs play 
as partners with small and medium-sized financial institutions, 
and do you think these partnerships help or hurt the smaller 
banks to compete with larger banks?
    Ms. Henry-Nickie. Thank you for your question. I think you 
point to an important externality, a potential upside for 
community banks that do partner with fintech institutions.
    As Mr. Reuter pointed out, the hurdles to transforming and 
modernizing community banks are substantial when it comes to 
transforming legacy infrastructure, old Cobalt Systems into new 
systems that can intersect with mobile banking that consumers 
have grown to expect and demand at their banks.
    So, in that regard, I think these partnerships with 
fintechs are helping to: one, reduce the technical barriers; 
and two, really drag along the community banking sector.
    And those benefits accrue to the communities, the local 
communities that these banks tend to serve.
    I think, moving forward, we really want to be careful and 
mindful about how these vendor contracts are structured. What 
are the implications for consumers? Do these banks have full 
capacity on their staff to fully vet, to fully stand up 
contracts that are beneficial to their longevity in the system 
that doesn't sort of set them up for perhaps a picking off in 
the future?
    I think, again, going back to where we started around these 
mergers and where fintechs are entering into the space, these 
community arrangements can be helpful, these partnerships, but 
always with a cautionary tag attached.
    Chairman Perlmutter. Thank you for your testimony.
    My time is about to expire, so I will recognize the ranking 
member of the subcommittee, the gentleman from Missouri, Mr. 
Luetkemeyer, for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And I thank the witnesses for being here today. It's an 
interesting discussion we are having this morning. I want to 
follow up a little bit on the chairman's question here with 
regard to banks and fintechs.
    As the ranking member on the House Small Business 
Committee, we saw the banks being very, very effective with the 
PPP loans, and any problems with regards to fraud or misuse of 
funds seems to be pretty well located in the fintech part of 
this.
    So, Mr. Reuter, let me just ask you this question: What 
about rules and regulations for fintech folks? I am not against 
innovation. I think it is important. We have to continue to do 
it.
    But at some point, the PPP program points out the inability 
to control fintechs and some of the things they are doing, and 
shows the amount of fraud that could be perpetrated in that 
area. What do you think about the rules and regulations around 
them?
    Mr. Reuter. Ranking Member Luetkemeyer, thank you for that 
question. I think the rules need to be much like a bank because 
their activities are very bank-like.
    As I mentioned earlier, we were the number-one bank in 
Colorado with PPP loans. We are on the phone with those 
customers. We are forging relationships. It is not just a 
transaction for us.
    With many of the online lenders, you fill everything out 
online, and you get a decision within minutes. So, you tell me 
how well they are vetting the business, how well they are 
understanding what the needs are of that business and taking a 
relationship approach?
    To me, that is a fundamental difference between banks and 
fintech providers, and I do think there needs to be more 
regulation in that space.
    Mr. Luetkemeyer. Thank you. This week in The Washington 
Times, there is an article entitled, ``The Death of Financial 
Privacy.''
    Now, the other party is wanting to weaponize the financial 
services system and the IRS to monitor all of the transactions 
of every bank account over $600. This is going to cause a 
tremendous amount of cost on all of the banks.
    So, Mr. Reuter, are you set up right now to be able to 
handle that situation, to where you can forward on to the IRS 
every transaction of every person and every business in your 
bank over $600?
    Mr. Reuter. We are not set up to be able to do that.
    Mr. Luetkemeyer. Do you have any idea what it would cost 
your bank to be able to do that?
    Mr. Reuter. It would be significant. And I think the bigger 
issue as well is the concerns our customers would have over 
privacy.
    Many people and the unbanked have chosen not to bank with 
banks because of trust, and I think reporting all the 
information to the government would not help us in that regard.
    Mr. Luetkemeyer. Even for the big banks, it is going to be 
a significant cost, but the community banks, it would seem to 
me, you are just going to actually run them out of business 
with an issue like this.
    Professor Hughes, you talked a little bit about some of the 
rules, regulations, and size. I want to run something by you 
really quickly. It would seem to me that if you are going to 
try and regulate the local hardware store or you are going to 
regulate Walmart, there would almost have to be two different 
sets of rules for those folks because you couldn't regulate the 
local folks the same way you would a regular Walmart.
    To take that analogy and put it into banking, a community 
bank with $100 million or $200 million versus JPMorgan, how can 
you use those same rules and regulations and apply it to the 
banks?
    To me, this is one of our problems in causing banks to 
really have to comply with all of these rules. The cost is just 
running away, just like this new rule that is being proposed 
would cause them probably to be unable to do that.
    So, do you agree that perhaps we need to size all of our 
regulations based on the size of the banks? In other words, 
small community banks would have one set of rules they would 
have to abide by but not necessarily every single rule that the 
big banks would have to abide by? Is that a reasonable 
expectation?
    Ms. Hughes. Yes. I think this is a very complicated 
question because we don't want to make community banks--and I 
have said in my prepared statement that I am a huge fan of 
community banks. They serve the community I live in and those 
around us very, very capably.
    I don't think we want to make them targets for bad behavior 
by customers. So, I think the scaling of it would have to be 
done with great care.
    I do think that there are rules that are being applied to 
community banks that make it harder for them to survive because 
of costs. And, to that extent, I heard Dr. Henry-Nickie and Ms. 
Jackson make claims that we need to be certain that we do not 
lose banks serving every community in the United States that 
can reasonably be served.
    I am in favor of looking for opportunities to reduce 
regulatory burdens on community banks and community national 
banks to the extent that those regulations--that they are not 
participating in some of the same kinds of transactions that 
the giants in this country are participating in--
    Mr. Luetkemeyer. Professor?
    Ms. Hughes. Yes?
    Mr. Luetkemeyer. Thank you for your comment, Professor. I 
am out of time.
    Chairman Perlmutter. Thank you, Professor.
    Mr. Luetkemeyer. I yield back.
    Chairman Perlmutter. The gentleman's time has expired.
    I would like to now recognize the Chair of the full 
Financial Services Committee, the gentlewoman from California, 
Chairwoman Waters, for 5 minutes.
    Chairwoman Waters. Thank you very much, Mr. Perlmutter, for 
this hearing. This is extraordinarily important. We have done 
considerable work dealing with our banks, but so much more has 
to be done.
    Let me just say that, of course, most of the banks in this 
country take credit for the work that they did with our PPP 
loans. But, if you can remember in the beginning of the PPP 
loans, many of the big banks set up special portals for their 
concierge clients, and we ran out of money for the PPP loans, 
and we came back and we put in another $60 billion so that our 
minority depository institutions (MDIs) and our credit unions 
and our community banks would have an opportunity to 
participate more fully with PPP.
    So, we thank those banks for having participated, but we 
still have to do work with the banks, when we are talking about 
PPP loans and the way that they were handled in the beginning 
with the portals, again, that served their concierge clients.
    But, on consolidation, back in the day, there used to be 
hearings that were held by the Federal Reserve, where they 
invited the community in on mergers, and we had an opportunity 
to get people from our communities who were very much involved 
with oversight in their own way of these banks. We had an 
opportunity to weigh in on the mergers.
    Now our committee, Mr. Perlmutter, must get back with the 
Federal Reserve, and we must open up this opportunity, because 
this business of mergers without real community involvement has 
to stop. And this is an issue that we must deal with.
    Not only that, I am concerned that we get many complaints 
about banks, but people feel helpless to absolutely correct the 
problems that are created within the banks.
    We have experienced a lot of this, and we know that a lot 
of work still has to be done in dealing with the servicing of 
these mortgages, where people find that fraud has been 
committed, and they have nowhere to turn, and on and on and on.
    So, we have to pay more attention to servicing, and I 
think, Mr. Perlmutter, I want us to take a look at advisory 
committees. Some of the banks say they have advisory 
committees, but I have been thinking about--and we will talk 
about this--whether or not we need to have advisory committees 
for every bank, and not only at the headquarters level but at 
all of the community levels for the banks, so that people get 
more involved.
    CRA kind of alludes to that in some way, that there should 
be advisory committees of some kind, and some of the banks say 
that they have them, but I don't think that they are real.
    And so, I want to look at how we can get, for these 
branches in the communities, advisory committees for all of 
them, so the communities are invited in and they can 
participate in what is going on at the banks.
    We know that some banks have improved their pay, their 
wages. We have had the banks in, and when we brought them in 
for oversight on our committee--they hadn't been in for 10 
years--they began to do things before they came to the hearing, 
in terms of wages.
    And, as you know, Bank of America, I think, is kind of the 
leader now in having increased the minimum wage up to about $20 
per hour. So, we need to do everything we can to encourage that 
in every way that we can.
    And when the banks--we will continue to bring them before 
us so that we can have them understand that we are very serious 
in this committee about doing what we need to do for all of the 
clients of the banks.
    Let me just ask Ms. Jackson, do you think that it is wise 
for us to ensure that the Federal Reserve has these open 
meetings when mergers are being proposed, and do you think we 
should have these advisory committees at every branch in all of 
the banks? What do you think?
    Ms. Jackson. Thank you, Chairwoman Waters. I totally agree. 
I think it would be beneficial. I sat on various advisory 
boards in other arenas, and I would definitely like to see that 
happen--
    Chairwoman Waters. Thank you very much.
    Ms. Jackson. I think we can all benefit from that.
    Chairwoman Waters. And thank you for your contribution here 
today, to everyone who came here today to help us learn more 
about what we could and should be doing.
    I yield back the balance of my time. Thank you.
    Chairman Perlmutter. The gentlelady yields back.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Thank you, Chairman Perlmutter, for your 
leadership in holding this very, very--
    Chairman Perlmutter. Mr. Barr, can I stop you?
    Mr. Barr. Sure.
    Chairman Perlmutter. Apparently, I was supposed to go to 
Mr. Posey.
    Mr. Barr. Sure.
    Chairman Perlmutter. Mr. Posey, you are now recognized. I 
am sorry I messed up the order--well, now he is going to leave 
us.
    Okay. You are recognized for 5 minutes. I will take away 
what I said about Mr. Barr.
    Mr. Posey. Thank you very much, Chairman Perlmutter. I 
appreciate it.
    Professor Hughes, how should we measure the delivery of 
financial services to U.S. consumers, and what does your 
research suggest about how well the U.S. financial system meets 
those metrics?
    Ms. Hughes. That is a very interesting question, 
Congressman. In preparing for this testimony, I was thinking 
about the importance of serving rural and small communities, 
because one of the strengths of our economy is specifically due 
to the fact that we had banking services available across the 
country pretty early in our nationwide economy, with the 
railroads and telegraphs and things of that sort.
    So, the lifelines of small communities include community 
banks and community national banks where people get loans, and 
small business lending is vital. Because we had an economy, 
when I was a child, where large corporations dominated the 
number of people who worked.
    But that is not true anymore. Startups and small 
businesses, battered badly through the pandemic but helped by 
banks and others--small business lending is vital to the 
continued prosperity in our communities, to the ability of 
people to recognize the American Dream by building new 
businesses.
    And Main Street cash services are also very important. We 
have heard from time to time that there have been problems with 
banks banking Main Street businesses that were cash-intensive. 
So, I would like very much to see the services that are needed 
by consumers and small businesses to be an important point of 
focus for the committee as a whole and for this subcommittee in 
particular.
    Mr. Posey. Thank you. Can you comment on how the course of 
financial system regulation has impacted the incentives for 
bank mergers over the last several years?
    Ms. Hughes. We see ebbs and flows in the interest of bank 
regulators in approving mergers and acquisitions, but mostly we 
have been seeing encouragement or not dissuasion from that.
    And I think that there is a concern that we are seeing a 
lot of mergers and acquisitions at the moment. There is a lot 
of money, capital around to assist with this, and that is fair. 
But I think we need to continue to have a well-balanced dual 
system which includes the States as charterers of banks and 
ILCs and licenses for other kinds of providers of these 
services.
    Mr. Posey. Have recent regulatory changes in bank capital 
requirements, such as risk-weighted capital, provided 
incentives for banks to merge?
    Ms. Hughes. I don't think there can be much question, 
although I do not have data to prove it. I think the capital 
requirements, especially as applied to small banks, may be a 
problem, but that is something for which I know there is some 
data, but I don't have the data. I suspect that the American 
Bankers Association would have some of that data, and that 
other organizations would as well; I just don't.
    Mr. Posey. Okay. Can you explain how scale economies in 
banking and other financial services have played a role in 
driving the bank mergers?
    Ms. Hughes. Certainly. As Mr. Reuter was testifying, the 
cost of technology, the cost in certain ways of compliance has 
continued to grow, and we have added responsibilities without 
necessarily looking at older requirements to see if they are 
still needed or if they are in some ways duplicative.
    So, scalability is a big factor, I believe. It is not just 
how many deposits you have or how much unimpaired capital and 
surplus you have to use for the bank measure of making a loan 
if you are using section 84 of the National Bank Act, for 
example, but it is a big factor driving consolidation, and it 
has been a big factor all the way back to the Supreme Court's 
first case, Philadelphia National Bank, which continues to be 
the standard for mergers, even when the market has change very 
dramatically.
    Mr. Posey. Thank you. I see my time is about to expire, and 
I yield back.
    Mr. Reuter. Mr. Chairman, could I make a--
    Chairman Perlmutter. Mr. Reuter, did you have something you 
wanted to add?
    Mr. Reuter. I just wanted to comment that the American 
Bankers Association has been very supportive of tailoring, 
which would make a huge difference in what we are talking about 
here.
    Chairman Perlmutter. Thank you. Thank you, Mr. Posey. The 
gentleman's time has expired.
    The gentleman from New York, Mr. Meeks, who is also the 
Chair of the House Foreign Affairs Committee, is now recognized 
for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman, and thank you for 
holding this very timely hearing.
    Let me ask Mr. Reuter first, in the past several years, we 
have seen that it is becoming more difficult for new banks to 
be created to help serve their communities. And this is 
especially true in communities where bank consolidations have 
led to access challenges for people of color, but, particularly 
in districts like mine, they are becoming banking deserts.
    So What do you believe is the biggest challenge to de novo 
bank charters, and what do you think that we can do in Congress 
to assist and ensure that de novo banks are successful?
    Mr. Reuter. Thank you for that question, Congressman Meeks. 
As I mentioned in my opening testimony, there are two things I 
think make a big difference: regulatory burden; and the 
investment required in technology. U.S. policymakers could make 
a big difference on the regulatory burden by tailoring. We as a 
bank are very different when compared to JPMorgan Chase and 
Bank of America, yet some of the compliance infrastructure and 
things we have to put in place are very much the same.
    From a technology standpoint, there are great opportunities 
for banks to partner with fintechs and we are doing that every 
day, but where it becomes an issue is when we are competing 
with those same organizations or like organizations and they 
are not regulated at the same level. That drives up our cost of 
business because we are competing with a branch infrastructure 
that they do not have.
    I agree with you wholeheartedly that branches are very 
important in the community, and it is something that we take 
very seriously.
    Mr. Meeks. Thank you. Thank you very much for that.
    Let me ask Ms. Gonzalez-Brito, your organization is very 
engaged in the process of bank mergers, particularly analyzing 
bank mergers and community benefits. How banks comply with the 
Community Reinvestment Act (CRA) is critical to that analysis. 
As you know, the banking regulators are rethinking the CRA's 
regulatory framework.
    So my question to you is, in what ways can CRA play a more 
meaningful role in the bank merger process, and are there 
specific policies this committee should advocate for regarding 
CRA's role in bank mergers?
    Ms. Gonzalez-Brito. Thank you for that question. In terms 
of CRA, we agree with Chairwoman Waters that hearings are 
extremely important for bank mergers, and we would ask that the 
CRA require hearings and require community benefit agreements 
in order to encourage banks to actually meet with the community 
and engage around community need.
    The other piece that I think is incredibly important is 
that CRA be race-conscious. It is something that would really 
ensure that we are meeting the needs of Black, Indigenous, and 
people of color. And so we really need to ensure that, as CRA 
moves forward, these things are included.
    And I would just add that the Bank Merger Act is also 
important to ensure that review of mergers and acquisitions is 
not harming communities.
    Mr. Meeks. Thank you for that.
    I will go to Ms. Hughes quickly, because there are a lot of 
issues and questions in regards to fintechs and fintech 
companies. And I heard some talk, for example, that fintech 
companies operate the way they were doing to help with the PPP 
loans efficiently and effectively. I agree with Chairwoman 
Waters and her statement. We had to do certain things on our 
side also.
    So, it is something that is important. But we have this 
debate going on oftentimes in regards to fintechs--I was 
talking to some members of my staff who actually say that they 
don't know the last time that they visited a physical bank. I 
talk to my daughters, who are young, and they are now doing 
things online with loans and basically utilizing fintechs.
    Nevertheless, as indicated, fintechs are largely dependent 
on banks to meet their commitments to their investors and their 
customers also. And just this past August, the FDIC and the OCC 
issued guidance for how banks and fintechs could partner and 
the concerns that existed, some of which were mentioned by the 
witnesses here today and other Members.
    So, Ms. Hughes, what is your reaction to that recently-
issued guidance, and are there legal or regulatory gaps with 
the bank-fintech partnership model that Congress should still 
consider looking at and possibly closing?
    Ms. Hughes. Thank you so much, Congressman Meeks, for that 
question, or Chairman Meeks for different purposes, for that 
question.
    The August 2021 guidance that was issued for community 
banks to use fintech partners, I think is going to be very 
valuable. I think Congress should pay careful attention to what 
it does and whether it begins to resolve the kinds of questions 
that community banks have had in this arena so that they can 
take advantage, as I mention in my prepared statement, of some 
of the facilities and bring them in as vendors. I am going to 
use, ``vendor,'' not, ``partner.''
    Chairman Perlmutter. Professor Hughes?
    Ms. Hughes. Yes.
    Chairman Perlmutter. I am going to have to cut you off. The 
gentleman's time has expired.
    And now, I would like to recognize the gentleman from 
Kentucky, Mr. Barr, and I mean it this time.
    Mr. Barr. I thank Chairman Perlmutter for that, and I thank 
him also again for his leadership, and for holding this very, 
very important hearing that underscores the problem that we are 
seeing in bank deserts, with bank consolidation, and with the 
lack of new bank formation that is impairing our local 
economies.
    I applaud my good friend, Greg Meeks, for identifying this 
problem in his area in a more urban congressional district. I 
have a similar problem with rural banking deserts in Kentucky. 
We have talked about the solution. I also want to applaud my 
friend, Mr. Auchincloss, for identifying this in a more 
suburban district.
    And the data on the dearth of de novo bank formation in 
recent years, combined with the trends in bank consolidation 
and closure, are troubling to all of us, because too many 
communities are left without access to traditional financial 
services.
    This committee advanced Mr. Auchincloss' bill that calls 
for a study, and I appreciate the American Bankers Association 
and Mr. Reuter for pointing out that the ABA endorsed Mr. 
Auchincloss' bill that would commission additional studies.
    But I would respectfully, Mr. Reuter, argue that another 
study is insufficient. You have identified yourself in your 
testimony that we know what the solution is. The solution is 
tailoring, regulatory tailoring.
    And my bill, which is also, Mr. Reuter, endorsed by the 
American Bankers Association but was not mentioned in your 
testimony, is the actual solution. It is the solution that you 
just prescribed. H.R. 2561, the Promoting Access to Capital in 
Underbanked Communities Act, would provide targeted temporary 
phase-in of regulatory capital requirements to fuel new bank 
formation and bring banking services to underserved areas.
    This is precisely the bill, Mr. Reuter, that your 
organization has endorsed. It goes beyond what Mr. Auchincloss 
has done. I applaud Mr. Auchincloss for his leadership. I 
applaud the ABA for endorsing his bill. But his bill, 
respectfully, is just another study. My legislation is the 
solution. It is the solution to the lack of new bank formation 
in Mr. Auchincloss' district. It is the solution to the lack of 
new bank formation in my rural district, and it is the solution 
to the lack of new bank formation in Mr. Meeks' district, an 
urban district.
    So my question to you is, why should we have another study? 
Why shouldn't we just go ahead and pass the ABA-, ICBA-endorsed 
legislation that actually implements the regulatory tailoring 
that is required, Mr. Reuter?
    Mr. Reuter. First of all, Congressman Barr, thank you for 
your sponsorship of that bill. And I agree with you. I think 
another study just lets more time go by and more bank 
consolidation occur. So, I agree 100 percent.
    Another thing I would like to point out in the cost of a de 
novo is one of the things you have to raise to start a bank is 
capital. And what you are seeing is some individuals and some 
groups form a fintech versus a bank because, due to the 
regulatory arbitrage, the market is valuing them higher.
    And anybody who is making an investment to run a bank or 
run any company needs to have a return, so, again, that's why a 
level playing field is very important. But thank you for your 
sponsorship of the bill, and I agree with you wholeheartedly.
    Mr. Barr. Thank you very much.
    And, Professor Hughes, let me talk about why this is so 
important. A recent FDIC study showed that large banks are much 
more likely than small community banks to have minimum 
requirements for small business loan amounts and less likely to 
offer tailored small business loan products. Often, small 
businesses rely on the relationship banking and the community 
ties of small banks, especially those banks that are de novo 
charters and smaller. PPP was an illustrative example of the 
value of small community banks for the smallest businesses.
    Professor Hughes, what impact does the trend in 
consolidation and the closure of community banks have on small 
businesses, particularly in rural, underserved areas, and what 
does it mean for small entrepreneurs and startups?
    Ms. Hughes. Thank you, Congressman Barr, for that question.
    It is very important to have lending facilities in 
communities of the types that we have just been discussing: 
inner city deserts small community and suburban areas; and 
rural communities. And we need to have robust opportunities for 
lending maintained in those communities so that all of the 
capital in the country doesn't flow to larger cities, as we 
have been seeing in some cases over the last 50 years.
    So we need to maintain the ability and we need to be 
certain that there are realistically tailored--I am going to 
use that word because I think it is the best word we have heard 
today for this--tailored ability for small banks to originate 
loans, smaller loans for startups, perhaps, than they might 
give other kinds of businesses because we need startups. We 
need small businesses. They are the growth opportunity. And we 
need to be certain that we have the best means of addressing 
the way in which startups and small businesses contribute to 
our economy, employ lots of people, provide benefits, but also 
keep our small communities alive--
    Chairman Perlmutter. Professor, I'm sorry; I have to cut 
you off again. Everybody keeps asking you their question right 
at the end of their 5 minutes. So, I apologize for cutting you 
off.
    I would like to now yield 5 minutes to the gentleman from 
Georgia, Mr. Scott, who is also the Chair of the House 
Agriculture Committee.
    Mr. Scott. Thank you, Chairman Perlmutter.
    Ladies and gentlemen on the panel, I am concerned about how 
technology and artificial intelligence is reshaping our banking 
system. And nowhere is my concern as great as it is impacting 
African Americans. Let me share with you why I say that.
    According to the Census Bureau, the rate of home ownership 
for African-American families sits at 44 percent, versus 74 
percent for White people. This huge and dramatic 30-point gap 
is a major contributor to racial economic disparities, and it 
is especially impactful in home ownership, which is where we 
develop and nurture our wealth consideration.
    So, I am concerned that this new technology, the use of 
artificial intelligence, and this inherent bias seem to be 
contributing factors in rejecting Black home loan approvals. 
And not only do Black home applicants receive higher loan 
rejections, they also suffer from race premiums on interest 
rates, paying as much as 8 percent or more on mortgage 
interest.
    Ms. Hughes, you and Ms. Henry-Nickie,tell me, in your 
opinion, am I right here? Can you all see this disparity? And 
how detrimental is this secret bias hidden in some fintechs' 
lending systems for African Americans and other minority 
consumers who may be seeking a mortgage? How impactful is this?
    Ms. Hughes. Congressman, would you like me to go first or 
Ms. Henry-Nickie to go first?
    Mr. Scott. Oh, I would love for either one. Go ahead, Ms. 
Hughes, and then Ms. Henry-Nickie. I want to get both of your 
points on this. I only have 2 minutes.
    Ms. Hughes. Fair lending laws in the United States apply to 
banks, and they should be not causing either unwarranted 
rejections of mortgage applications or race premiums in 
applications.
    I have not had an opportunity to study the degree to which 
fintechs and artificial intelligence may be contributing to a 
shift, but it is conceivable that Dr. Henry-Nickie has more 
data on that subject. So while I believe that we need to be 
sure that people are evaluated fairly, I don't have the data to 
give you a better response. I would ask--
    Mr. Scott. Ms. Henry-Nickie, would you comment, please?
    Ms. Henry-Nickie. Thank you. You raise a crucial, important 
question that nobody else has sort of addressed today, and that 
is, what is happening to the state of the banking system when 
it comes to broadening access to credit for African American 
and Hispanic communities? And at the heart of that, at the 
heart of your question stands fintech.
    To Mr. Reuter's point, leveling the playing field means 
that we need to figure out ways to ensure that our consumer 
protection framework applies equally to banks, nonbanks, and 
fintech lenders. There is a good amount of research coming up 
showing that fintechs have done an incredible job, I think a 
commendable job in expanding access to credit, but they are 
capable, just as their conventional lender counterparts, of 
reproducing particularly pricing disparities.
    At the heart of this is the kinds of data sources that they 
draw on to inform the machine learning algorithmic models. We 
have talked ad nauseam about machine learning bias here. And 
all of these are in play around suppressing that 44 percent 
number and driving it even lower.
    We need the CFPB to have a leg up when it comes to fairly 
protecting consumers across all of the means, particularly when 
it comes to fintechs. And they are shaping the market, but they 
are escaping their responsibility on the oversight around 
consumer protection. And that is what explains and is at the 
heart of how these disparities will continue to grow and not 
improve in the future.
    Mr. Scott. Thank you very much.
    Chairman Perlmutter. I thank the gentleman.
    Mr. Loudermilk from Georgia is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    I have been concerned about the future of our marketplace 
lending ever since the Majority made the misguided decision to 
restrict access to credit for low- and moderate-income 
consumers by replacing the OCC's True Lender Rule. Both the 
True Lender and the Valid-When-Made principles are essential to 
having a robust financial lending nationwide marketplace.
    Ms. Hughes, how have the bank-fintech partnerships been 
affected by this returning to the legal uncertainty that we 
were in a few years ago?
    Ms. Hughes. The True Lender Rule, as I said in my 
statement, had big support and lots of criticism. But the 
concept that was underlying it that was very important to me 
was the concept of assigning specific responsibility for 
complying with Federal and State law.
    So, the True Lender Rule had that benefit. It did have some 
pieces that particularly irritated the States from their 
traditional interest in consumer protection. And I think it is 
unclear right now how much the repeal will affect that 
marketplace, but I think it is worth paying attention to on a 
longer term.
    However, I would say that one of the reasons that makes 
this complicated is the True Lender Rule cannot come back 
unless Congress specifically authorizes the bank regulators to 
engage in regulation in that respect.
    My hunch is that the uncertainty that was expressed will 
continue to a degree, and one of the questions that is present 
in this is, should the partners of banks, as opposed to the 
banks themselves, be entitled to exportation of rates that we 
have had since the Civil War, in the National Bank Act?
    Mr. Loudermilk. Thank you for that. One of the things that 
any business needs is some level of stability, and uncertainty 
creates problems in the market, which basically hurts the 
consumer.
    Other concerns I have is--one is I have always thought that 
George Orwell's, ``1984,'' was a futuristic novel, but, based 
on some of the proposals that we have been seeing coming out of 
the other side, it appears that my colleagues on the other side 
of the aisle actually see it not as a novel, but as a best-
practices guide for Big Government.
    We have just heard about the proposal to monitor every 
American's bank accounts. That is truly Orwellian, in my 
opinion. One of the other proposals we have heard recently is 
having the Federal Reserve or the U.S. Postal Service become a 
bank. This would have the government essentially replace the 
private sector banking system and give the government in itself 
direct access to everyone's transactions.
    Apparently, this is what the Administration wants, because 
the President's nominee for Comptroller of the Currency said 
just a few months ago, ``We should end banking as we know it,'' 
which inevitably would be taking away the private sector from 
it.
    Ms. Hughes, what would the consequences be for consumers 
and the economy under these types of proposals?
    Ms. Hughes. Yes. Congressman, frankly, I am not certain 
that the idea of postal banking is a good one, when we have so 
many options currently in some communities and we need to 
build, through de novo applications and resistance to closing 
of branches. I don't see a need for postal banking to be 
allowed, even though it was a factor and it was still present 
in some way when I was a small child.
    I think that I would prefer to have the banking system, in 
many respects, be made more robust in these communities that 
some of your colleagues across the aisle have been discussing.
    I think that the banks already monitor the influx and outgo 
of every account. My understanding of the proposal is that it 
would require additional reporting, not additional 
recordkeeping, because the banks have to keep records of every 
transaction down to about $100, if not more, and they have been 
doing that for many years.
    But reporting at that level is a very different matter, and 
one that I understand at some level the interest in, and at 
other levels, I think that would be a crushing blow of 
compliance responsibility and cost for the banks that are 
serving rural, suburban, and small towns and small businesses. 
Especially for small businesses, that would be very burdensome, 
and it would bother me greatly.
    Mr. Loudermilk. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman Perlmutter. The gentleman yields back.
    Mr. Reuter. Mr. Chairman, could I make one comment?
    Chairman Perlmutter. Sure, Mr. Reuter, go ahead.
    Mr. Reuter. I would like to comment on the Federal Reserve 
holding direct consumer accounts and put a little exclamation 
point on the impact it would have for us as a bank. Sixty 
percent of our deposits are consumer retail deposits, and that 
is what we put into work into our community.
    And so, it is a bit mind-boggling for me to think that 
someone in Washington, D.C., would know better how to deploy 
those deposits in our community than the 3,000 employees I have 
who live here, work here, and send their kids to school here. 
So, I find that proposal very troubling.
    Chairman Perlmutter. Okay. Thank you, sir.
    The gentlewoman from New York, Ms. Velazquez, who is also 
the Chair of the House Committee on Small Business, is now 
recognized for 5 minutes.
    Ms. Velazquez. Thank you, Chairman Perlmutter. Thank you so 
much for this hearing.
    Ms. Gonzalez-Brito, in 2018, California became the first 
State in the country to enact Truth in Lending Act (TILA)-like 
requirements for business purpose loans. Senator Mendez and I 
are currently preparing to reintroduce small business TILA 
legislation here at the Federal level.
    First, can you please explain how the enactment of this 
legislation in California has brought some much-needed 
guardrails for small business loans, particularly those offered 
by nonbank lenders, without impacting the availability of 
credit?
    Ms. Gonzalez-Brito. Thank you, Congresswoman. This is a 
really important question. We are really proud of our State 
Truth in Lending Act in California. We helped to make that a 
reality, along with the Responsible Business Lending Coalition.
    So what this provides, what the law provides is, as small 
businesses have a hard time accessing credit with traditional 
banks, they often are stuck with looking at these very 
expensive, high-cost lenders.
    And so, it is imperative that this law does allow small 
businesses to know the details of the loan they are getting 
into so that they can make better decisions.
    I would say that TILA in California, through rent bank 
charters and industrial loan charters, banks are evading or 
trying to evade laws, so we have to be really careful about 
that, where they try to secure a charter outside of California 
in order to not have to be subject to the State laws.
    Ms. Velazquez. Can you also talk about why legislation at 
the Federal level is so necessary?
    Ms. Gonzalez-Brito. Because of the evasion by charters at 
the local level, it is really important to have Federal 
legislation in order to be able to stop that kind of evasion of 
consumer protection laws at the local level, and we support 
that.
    Ms. Velazquez. Thank you.
    Ms. Jackson, Mr. Reuter, what steps is the banking industry 
taking to increase the number of branches in low- and moderate-
income (LMI) communities and communities of color, and how can 
Congress help promote the number of branches in this community?
    Ms. Jackson, let me start with you.
    Ms. Jackson. Okay. Thank you for your question. And, 
basically, I am not that knowledgeable about it, but what I 
will say is that I think that the banking industry has taken 
steps to make banking easy and accessible for all, regardless 
of whether there are branch locations down the street.
    We just want to use online banking and mobile banking and 
bank from your business and office settings, and convenience 
and accessibility are all important.
    Ms. Velazquez. Mr. Reuter?
    Mr. Reuter. Congresswoman, I would answer with a couple of 
things. I would agree with Ms. Jackson. We are making lots of 
technological tools available. But I will also tell you that, 
in addition to branches, our officers and employees are on the 
ground in the community.
    One of the fundamental changes in banking is that people 
don't walk into a branch as often for a loan anymore, even a 
mortgage. We are meeting at their home, or whatever the case 
may be. At the same time, I would also tell you there is a very 
rigorous process with CRA, when we are going to open or close a 
branch, to look at the impact to an LMI community. So, there is 
existing regulation in that area.
    But part of the nature of this hearing is how banking is 
changing, and, as Ms. Jackson pointed out, it is technology, 
but that has also put us on the ground more. So, I would argue 
that feet on the ground, walking a neighborhood, is really 
powerful as well.
    Ms. Henry-Nickie. Can I just add a comment to the record 
there on this question? We have an opportunity to revisit the 
Community Reinvestment Act. And there are serious questions 
around the utility, the value that retail branches bring to 
communities of color and low-income communities in particular.
    The goal should be in this sort of discussion how to 
encourage the growth, but not just encourage the growth of 
banking, but also how to maintain the infrastructure that we 
already have. There is no one one-to-one replacement of, close 
a branch and then switch a consumer online to a mobile 
application.
    We know that relationship-building is so incredible for 
small businesses, particularly those that need to walk in with 
their bank statements and explain why perhaps during the last 2 
weeks, inventory was low and that impacted cash flow.
    So, as the Acting Comptroller has signaled, he is ready to 
revisit this Modernizing CRA Act, let's tailor the presence of 
the banking infrastructure to the communities that need it 
most.
    Ms. Velazquez. We saw it during COVID when all of those 
minority and underserved communities that didn't have branches 
of banks in their communities or preexisting relationships, how 
difficult it was for them to access the help that they needed.
    Thank you, Mr. Chairman, I yield back.
    Chairman Perlmutter. The gentlelady yields back.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes for his questions.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    As Democrats try to figure out how to pay for their massive 
expansion of government programs through the reconciliation 
process, they have come up with a proposal that would force 
banks and credit unions to report all inflows and outflows of 
customers' bank accounts over $600 to the IRS. When I first saw 
it, I thought it was a joke.
    Now, there are many issues with this type of proposal. I 
want to just name a few of them. From a privacy perspective, 
the IRS does not have a good track record of using Americans' 
tax data responsibly. We saw during the Obama Administration 
that conservative nonprofits were being targeted for their 
beliefs, and this proposal has the potential to take this kind 
of overreach even further.
    From a data security perspective, the IRS is the target of 
over a billion cyber attacks a year. We don't have the clarity 
on how all this additional data on Americans' financial 
transactions will be kept secure from the bad actors.
    From an administrative perspective, it would be extremely 
costly for financial institutions to implement, almost 
impossible. We would be better off if banks could do what they 
are supposed to do and be focused on hiring more loan officers 
to get more money to Main Street businesses, not dealing with 
increased compliance costs, hiring more compliance officers, 
and creating less opportunities for small business to borrow 
money.
    And, finally, the Democrats are claiming that this will 
generate over $200 billion in new tax revenue. Well, that is a 
bogus number. It is an absurd estimate, based on half-thought-
of and half-baked assumptions with no grounding in reality. But 
why should reality get in the way of a good story, right?
    So, as you can tell, I have a lot of issues with this 
proposal. But, Mr. Reuter, I wanted to get your thoughts on it 
as well, since you have been a banker for over 34 years. Can 
you discuss some of the negative consequences that this new 
reporting proposal would place on your bank--and you have done 
it a little bit today--and thousands of other financial 
institutions all across the country if it were to become law?
    Mr. Reuter. Thank you for that question, Congressman 
Williams. And you did a great job of summarizing my concerns, 
privacy being the first. I think a lot of individuals will 
rethink whether to have a bank account if they think everything 
they have is being reported to the IRS.
    Also, security--no matter how well the IRS does their job, 
they are a much bigger target. And if we increase the pot of 
gold, if you will, sitting there with everybody's transactional 
information, I only think the attacks will increase.
    And then, administratively, the cost would be significant. 
I know that Professor Hughes mentioned that we already track 
data, but it would still be costly to report it. We don't track 
it in the manner that is being contemplated here. We might look 
for anomalous activity or fraud, but we aren't tracking it in a 
way that meets the format of what the IRS is looking for.
    And putting this burden on the banking industry, the 
purpose of this hearing, one of the things I am hearing is 
branch closings, consolidation, all of those concerns. This is 
yet another regulatory burden that would only further 
consolidation in the industry, which I don't think anybody on 
this witness stand or in this hearing wants to see more of.
    Mr. Williams of Texas. Thank you. You did a great job with 
PPP, and everybody talked about it, and now we are going after 
you. It doesn't make sense.
    We heard in this hearing that innovation will help drive 
financial inclusion.I couldn't agree more and think we need to 
empower the private sector, new concept, empower the private 
sector to come up with new solutions to give more people access 
to financial services. Unfortunately, Democrats want to make 
this harder by increasing taxes on businesses and decreasing 
their incentive to bring these new innovations to the 
marketplace.
    So, Mr. Reuter, with the time we have left, I wanted to 
give you the opportunity to discuss the effects of increasing 
taxes in a time that it is just unbelievable that we think it 
would put more burden on the taxpayers and small business would 
have on innovation in the banking industry?
    Mr. Reuter. Any time you increase taxes, you take money out 
of the economy that is put to work. You reduce capital. You 
reduce retained earnings and funds available for investment. I 
am opposed to increased taxes, because I think it will act 
against the stimulus and the momentum we have in the economy 
right now. So, I just think it is a bad idea.
    Mr. Williams of Texas. Well, you are right. And the economy 
still is pretty good because many of the 2016 tax cuts are 
still in force. But to increase taxes is a total burden; it is 
a total downer for small businesses. Small businesses are 
already playing defense, because they don't know what the heck 
is down the road, and it gets into less jobs, less opportunity, 
basically less taxpayers. So, we need to cut taxes.
    With that in mind, Mr. Chairman, I yield back.
    Mr. Foster. [presiding]. The gentleman from California, Mr. 
Sherman, who is also the Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, is now 
recognized for 5 minutes.
    Mr. Sherman. Thank you. I will start with a few 
observations, and I actually have a question or two hidden in 
here somewhere.
    I want to commend the chairman of this subcommittee for the 
passage of the SAFE Act as a provision of the NDAA. Several of 
us have cosponsored that legislation. And the idea that those 
who engage in legal business actually carry around huge 
quantities of cash is absurd.
    I also want to point out that this is a [inaudible] 
Subcommittee in that I believe four--well, four of the people 
who have already asked questions are Chairs of their own 
committees in the House of Representatives.
    One of the bills we are considering here today that is 
listed for consideration in the UA is the Third Party Vendors 
Act. I have concerns about this. [Inaudible] the subject of a 
separate hearing. I think that we would want to know whether 
the existing authority to force credit unions to sever 
relationships with problematic vendors is sufficient.
    The questioner just before me talked about our efforts to 
enforce tax laws, and it is clear what some in the other party 
and maybe even a few in my party would like to see, which is 
that the new tax become a tax only on wages. Wage earners get a 
W-2 form to collect [inaudible].
    But an awful lot of the income in this country is raised 
through profits and capital gains, so to make sure that 
increasingly sophisticated mechanisms are available to hide 
that from the IRS and scuttle any effort for the IRS to keep up 
with those methods.
    Then, we see an effort to take the cryptocurrency 
alternative of hidden money. Who wants to hide their money? The 
[inaudible] occasional terrorist to evade taxes. We are on our 
way to a situation where the income tax nominally affects the 
wealthy, but actually affects only wage earners.
    I am concerned with the industrial loan company loophole to 
the basic rule in our economy, which is that we keep commerce 
separate from financial services. We see that [inaudible] are 
still looking toward creating a financial institution.
    I commend Chuy Garcia for his discussion draft. He has done 
a good job of grandfathering certain ILCs because they have 
been fine. But we see that Rakuten, in effect, the Amazon of 
Japan, is looking to create an ILC here in the United States.
    Ms. Henry-Nickie, what risks do you think are associated 
with having a Walmart or a Japanese alternative given an ILC 
and FDIC insurance [inaudible]?
    Ms. Henry-Nickie. Congressman Sherman, what I think I heard 
you ask is, what are the risks of having these nontraditional 
players, large players, now sort of show up and shape the 
financial services market? And I think the risk to consumers is 
great. These institutions do not come to this market with an 
organic culture of consumer protection, an organic culture of 
building and creating wealth for communities of color.
    And so, I try to think about systemic solutions and harken 
back to the CFPB's larger participant rule, that availability, 
that jurisdiction that is available to the CFPB, and hoping 
that they, under new leadership, will be more aggressive and 
assertive in revisiting the kinds of institutions that fall 
under a larger participant rulemaking, and be more flexible.
    When you have Amazon, to Ms. Brito's testimony, playing in 
the financial services space, deciding who gets credit, who 
gets to sell, and really sort of shaping the lives of startups, 
entrepreneurs, and small businesses, particularly for minority-
owned and women-owned businesses, we want those activities to 
be examined, and to be supervised.
    We want there to be substantive guidance around these 
fringe intermediaries that seem like they are on the edge of 
the market, but they are so large. They are shaping the market 
and changing all of the trends even as we speak here. So, I 
really want us to reexamine how the CFPB does its work there.
    Mr. Sherman. We have heard from many Members whose 
constituents are trapped in a banking desert. And if you are in 
a desert, you can become delirious. You can run toward a 
mirage. You can drink brackish water. And we have to make sure 
that those answers [inaudible] not mirages.
    I yield back.
    Mr. Foster. Thank you.
    The gentleman from North Carolina, Mr. Budd, is now 
recognized for 5 minutes.
    Mr. Budd. I thank the chairman, and I thank the panel as 
well.
    We have seen a lot of peer-to-peer payment services come on 
the scene in the last several years, including ones where they 
don't have to hold traditional bank accounts. They can make 
payments and transfer money. There is a lot of great promise 
here to help underserved communities.
    This question is for you, Ms. Hughes: How can fintechs and 
banks work together? How can they collaborate to expand access 
to financial services, especially for these underserved 
communities?
    Ms. Hughes. This is a very interesting question, 
Congressman Budd. I think that we have to be very careful to 
protect community banks and community national banks and 
smaller regional banks, as Mr. Reuter suggested, by not taking 
deposits away from them.
    I am concerned every time I see an advertisement that 
suggests that you can deposit money with somebody who isn't 
claiming to be a bank. I realize that they may have a bank 
supporting them, but I think we should be very cautious about 
that, even though there are opportunities for inclusion in some 
of those areas that fintechs can provide.
    But I would prefer to see a perpetuation and even 
strengthening of the opportunities that local banks with 
relationships with their depositors are offering. At the same 
time, I think we will see services that are provided. But among 
the services, because we don't let securities firms take 
deposits, insured deposits by the FDIC, I don't believe that we 
should have fintechs do that either. As much as they offer 
certain forms of promise, I think we risk undermining the 
capacity of regional and community banks with, both State and 
Federal charters, to provide lending opportunities in their own 
communities of service.
    Mr. Budd. Thank you for that. I would still want to look 
for opportunities for collaboration.
    I want to change the question up a little bit. Ms. Hughes, 
this is still for you. Earlier this year, Democrats led a joint 
resolution to revoke the OCC's final True Lender Rule. And we 
think that really restricted access to affordable credit, hurt 
small businesses, hurt consumers, and created a lot of 
uncertainty in an industry that ultimately negatively impacts 
borrowers.
    So, Ms. Hughes, how has the repeal of the True Lender Rule 
affected consumer choice and their access to credit?
    Ms. Hughes. Congressman, I regret to tell you that I think 
it is too early to answer that question. I think the prospect 
that there could be some shifts of not having a True Lender 
Rule are present. I think that the remarks that have been made 
about the opportunities for partnerships, because certainly 
fintechs can originate loans at much lower cost than banks can, 
but it is important to recognize that those loan originations 
may come with other costs to local communities.
    And I know that you, among others on the panel on both 
sides of the aisle, are passionate about keeping local 
opportunities available in rural areas, in suburban areas, and 
in urban bank deserts, and I think that this is one of the 
places where we have to be especially cautious.
    But, essentially, I have stopped paying attention to the 
True Lender Rule as it was because, until Congress reauthorizes 
it, it is a dead letter. I have been focused instead on how we 
can support the banks that still exist or that may become 
available in the three sets of communities that are currently 
experiencing the negative side of bank consolidation. And I 
just stopped paying attention on June 30th, when the rule was 
repealed.
    I also would say and could provide information to you 
separately that there are some costs to the lenders that may be 
attributable, that were not necessarily described by the OCC. 
So, if that needs to be an offline conversation, let's have it.
    Mr. Budd. Certainly. Thank you.
    In my remaining seconds, Mr. Reuter, is there anything you 
see driving the trend of closures and consolidation among rural 
community banks?
    Mr. Reuter. I think rural community banks--I grew up in a 
town of 500 people in Wisconsin, on a dairy farm. Rural 
community banks are very important, and I think they are on the 
ground making loans, doing things. So, I think rural banking 
remains strong. One of the challenges will be them garnering 
deposits.
    So, again, to the extent we allow fintechs to be able to 
draw deposits out of those communities without being regulated 
the same as banks, I think that is a threat for rural banking 
as we know it today.
    Mr. Budd. Thank you, sir.
    And thank you, Mr. Chairman. I yield back.
    Mr. Foster. Thank you.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is now 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    And I thank the witnesses for appearing. This is a very 
timely hearing.
    And, Mr. Budd, I want to thank you for your advocacy, 
because I, too, am concerned about rural banks. I have 
relatives who live in rural communities.
    But I am very much concerned about small banks. I have had 
at least two groups of persons who are trying to acquire a bank 
de novo, and they are having extreme difficulties with the de 
novo process.
    I am going to agree with you, Mr. Reuter; the process has 
to be reformed. It is very time-consuming. Money is on the 
line. The paperwork is enormous. And it just seems to take too 
long. I am not sure how we reform it, but there is something 
that has to be done to let us get more banks because, looking 
at the intelligence that has been shared with me by staff, in 
2014 and 2016, there were no de novo charters issued, zero. 
That is quite disturbing just to see that number, zero, for 2 
years.
    These fintechs don't have to comply with CRA. They don't 
have to have physical facilities located in communities, and 
they don't pay FDIC fees. So, we are making it pretty easy for 
them to create these deserts because they are not regulated to 
the same extent as banks are. I am very much concerned.
    Let me ask you, Ms. Hughes, to what extent do you think 
fintechs are contributing to the banking deserts?
    Ms. Hughes. Congressman Green, this is a really interesting 
question. And I don't know that we have data, but what we do 
have, as many witnesses have suggested this morning, is a 
significant unlevel playing field.
    And to the extent that we want to have banks--and banks 
perform many valuable functions in our economy--we need to be 
sure that they--I don't want to say that they are protected 
from competition, because that is not the right decision, but 
they need to not be undermined by people who can disrupt and 
disintermediate what we have used for all time in this country 
to support local economies and local economic growth.
    And that is as important today, and it is more important 
today in certain communities, rural communities, in inner-city 
communities that don't have many banks, so they can't get easy 
loans because they don't have relationships, and even suburban 
communities.
    I have lived in just about every one of those kinds of 
communities in my life, all along the northern tier, I would 
have to admit. My father was from Wenatchee, Washington, which 
is a small town; Wilmington, Indiana, is only a little bigger. 
My mother was originally from Donnybrook, North Dakota.
    So what I think is important is that we not turn our backs 
on those communities. And it is not clear to me that we have 
sufficient incentives for fintechs to continue to help in those 
communities. And, if we don't have sufficient incentives for 
them to help in those communities, then we have to be sure that 
we retain robust chartered--whether Federal or State--banks 
available to serve those communities, who are still responsible 
for job growth, startups, small businesses--
    Mr. Green. I hate to intercede, but I have to go to Mr. 
Reuter quickly.
    Mr. Reuter, same question: To what extent are fintechs 
contributing to the bank deserts that we are seeing?
    Mr. Reuter. I think the lack of a level playing field is 
absolutely contributing. We have talked about the online small 
lending capabilities they have where they are not regulated the 
same. They are taking deposits out of those communities.
    When I talk to rural bankers, one of their biggest 
challenges is source of funding to make loans in the community. 
So, to the extent we let those tech companies extract deposits 
and not be regulated the same, that is a negative.
    And, to the previous Congressman, I think the way you 
enhance more collaboration is you do make it a level playing 
field. I am not against competition. I just want to make sure 
that we lean into the trust that is already there in the 
banking system.
    And I think you, as policymakers, deserve a lot of credit 
for that trust and resiliency. So, let's not forget the 
history, and let's make sure the new technology abides by the 
same rule.
    Mr. Green. Mr. Chairman, I don't have my timepiece up, so I 
don't know how much time I have left, and I want to be 
respectful of you.
    I am going to simply close with this: We are at a point now 
where African-American banks are about to become an endangered 
species, and we have to do something. We have to do something 
to protect them and to assure us an opportunity to have more. 
And I want to stand with those who want rural banks protected. 
You have a friend in Al Green.
    We have to get together, Mr. Budd. Thank you, everybody.
    I yield back.
    Chairman Perlmutter. The gentleman yields back. Thank you.
    The gentleman from Tennessee, Mr. Kustoff, is now 
recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman. And thank you for 
calling today's hearing.
    Thank you also to the witnesses for being here.
    Ms. Jackson, I wanted to discuss a bill, the Payment Choice 
Act, which is H.R. 4395. It would require retail businesses to 
accept cash payments and would not allow retail businesses to 
charge a higher price to customers paying with cash.
    My question to you is, of course, there are rights to 
privacy when people make purchases and sales. I think that is 
an important part of cash. But could you talk about--you talked 
in your testimony, your written testimony, about cash, about 
the importance of cash as it relates to financial privacy. Ms. 
Jackson?
    Ms. Jackson. Thank you for your question.
    And I am not too certain on what I--I can't recall what I 
wrote in my statement, but I do believe in the bank that I am 
working for now, we do honor the privacy. The cashless, cash 
for retail, for retail banking is something that I think should 
continue to happen. I don't want to see it go away. And I am 
not sure if I am answering your question correctly.
    And so, we just stick by our model. We continue to do the 
best we can to reinvest into the community and we listen to the 
community. We listen to their needs.
    Mr. Kustoff. I don't know if you know if there is any data 
out there, but are Americans in rural communities and more 
urban communities more likely to use cash than people in other 
areas?
    Ms. Jackson. I would probably say yes. And you are correct, 
I don't have the data on that, but I would probably say, yes, 
that would be accurate.
    Mr. Kustoff. Thank you very much, Ms. Jackson.
    Mr. Reuter, in your banking system, and you have banks all 
over, do you know if there is any data or can you say 
subjectively that people in rural areas or more urban areas are 
more likely, to use cash than those in other areas?
    Mr. Reuter. I do not know whether there is a difference 
between rural and urban. I can tell you there is a difference 
in that minority communities and low- to moderate-income 
communities use more cash.
    Ms. Henry-Nickie. Can I just offer for the record one 
interject here, that the 2019 FDIC survey looks at different 
kinds of ways that consumers are transacting in the banking 
system. And what is really helpful is how they unpack the use 
of check cashing, and bill payment services by racial and 
socioeconomic demographics.
    If you look at those tables, you kind of get a sense that 
people who have disabilities, those who live in Indigenous 
American communities that tend to be rural, that tend to be 
remote and spatially isolated, overwhelmingly use these 
services more so than other groups.
    That gives you a sense that they probably--these are stores 
that you need cash to transact in are likely to be the kinds of 
communities that need to continue to have our retail sector 
accept our legal tender, cash, and then think of digital 
payments as some sort of supplement to expanding the way that 
we interact and engage with these communities.
    But that is a good source of data that helps you proxy 
which communities still rely heavily on transacting in cash.
    Mr. Kustoff. Thank you.
    Mr. Reuter, if I could, there have been several questions 
about the $600 IRS reporting question. I think Ranking Member 
Luetkemeyer and Congressman Williams asked you about that. And 
you talked about the--now, set aside the privacy concerns, just 
the administrative hurdles that that would place on your bank.
    And all I know is what the news reports are. Apparently, 
there is some negotiation in raising that limit from $600 maybe 
up to $10,000. Even if that were to change, does that affect 
your opinion on what that does to you administratively, 
administering these requirements for your banks?
    Mr. Reuter. No. We would still be opposed, because the 
effort would be the same, and all of the other issues, the 
privacy and security are in existence.
    And I would like to connect it back to the conversation we 
just had on cash. I think one of the things I heard is that 
people like the anonymity and the privacy of cash. This goes 
completely counter to that line of thinking.
    Mr. Kustoff. Thank you very much.
    I yield back my time. And thank you to the witnesses.
    Chairman Perlmutter. The gentleman yields back.
    The gentleman from Illinois, Mr. Foster, who is also the 
Chair of our Task Force on Artificial Intelligence, is now 
recognized for 5 minutes. And he actually is the person who 
wanted to talk about the future of banking, whether or not 
technology was going to cause the elimination of banking or 
whether mergers and acquisitions are too much government 
burden. But I will yield to the gentleman from Illinois.
    Mr. Foster. Thank you, Mr. Chairman, for stealing about 
half of my talking points for the beginning of my testimony.
    Chairman Perlmutter. Sorry.
    Mr. Foster. But you are actually correct. There is some of 
this existential banter going on between fintech at one end, 
and small, traditional community banks at the other. And the 
part of the fintech model that relies on regulatory arbitrage 
has very little support on either side of the aisle here. And 
leveling the playing field, in that sense, I think has to be 
one of our goals here.
    But the part of the business model for fintechs that relies 
on the efficiencies of scale, I think we have to look at much 
more carefully. For example, a lot has been said about the 
value of small community banks in the PPP program, but there 
were examples of small fintechs who were able to help tens of 
thousands of small businesses get loans, often with 15 minutes 
online.
    And so, there are advantages of the digital economy.
    Professor Hughes, you mentioned a couple of questions back, 
that if a fintech was capable of originating a lower-cost loan, 
that would be detrimental to the communities they serve. Could 
you go a little deeper into that, because it sort of confused 
me? How would a community be hurt by having an option of 
getting a lower-cost loan online?
    Ms. Hughes. I don't know that we are thinking necessarily 
about that, Congressman Foster. What I intended was to suggest 
that the origination piece of how fintechs work is a model that 
is very attractive.
    It may be because they do not have all of the regulatory 
requirements that are on banks, so they can perhaps originate 
loans faster and for less money.
    The problem is that, if you want banks to be in business--
and I am not opposed to fintechs by any means, this is a real 
struggle--banks have to make money. And one of the ways banks 
make money is through loans. They don't make money--they make 
money on fees, but they also make money on loans.
    The loan balance comes back into the bank, and because of 
fractional reserve requirements, the loan can be recycled into 
the community. So, a small amount can become $5,000 of new 
money in the community in a very short period of time.
    That is not necessarily going to happen if fintechs take 
over more of the lending, unless they are working in 
partnership with banks that would otherwise be doing the same.
    But we want to be sure they are not subject to fractional 
reserve banking. They are subject to corporate level if they 
are corporations, corporate level capital requirements that are 
very different.
    So, we don't get the synergy from lending that we get from 
lending under the fractional reserve requirement system that we 
have been using in this country for many years and that banks 
are observing.
    Mr. Foster. Right. I understand. And that is exactly an 
example of the sort of regulatory arbitrage advantage that the 
fintechs may have.
    Now, The Wall Street Journal was running a series of 
articles about the stress of rural banks, I don't know, 
probably about a year ago. They ran a series of very 
interesting articles, and they have examples, for example, of 
small rural banks that didn't want to continue in the small 
town they lived in, so they moved, and established a secondary 
branch in the nearest big city, and were holding onto the rural 
things just to extract deposits.
    Because frankly, the bind they were in is that there are no 
profitable business investments in small, dying rural towns, to 
put it bluntly.
    And so, they didn't see a future there, and they were 
actually extracting--even though these were traditional 
community banks, they ended up extracting deposits and then 
investing them at best in the nearest big city.
    How do we deal with that trend, or is that just part of the 
free market decision-making of banks? Does anyone want to 
respond to that? It is something I have struggled with--I have 
represented very rural areas, and I am trying to figure out 
what to do with that sort of dynamic. It has been a struggle 
with which I have dealt. Does anyone have any ideas how to--
yes?
    Ms. Henry-Nickie. I think there is no relationship between 
labeling a bank, the size of a bank, and the risk the bank 
poses to a community. Community banks are just as well-
positioned as a Wells Fargo to extract wealth out of any 
community, and we need to think about ways to empower them, I 
think, to work with collaborative partners like community 
development financial institutions (CDFIs) to reintroduce cash-
to-credit programs that help to repurpose the deposits that 
they control and invest it in low-cost, responsible credit 
products, particularly for small businesses.
    I would like to dismiss the notion that community banks, 
because they are community banks, do better in lower-risk work 
than other kinds of financial intermediaries. We need to think 
holistically about all of the systems, all of the loan products 
that are present in the community, and ways to encourage that 
legislatively as well as regulatorily.
    Mr. Foster. Thank you. And--
    Ms. Gonzalez-Brito. Can I just add something, Mr. Chairman?
    Mr. Foster. Yes.
    Ms. Gonzalez-Brito. Just in terms of rural communities, in 
California, our members are really concerned about the closure 
of branches and the impacts that has, for instance, on 
reinvestment back into those communities.
    So, it is really important that CRA require of banking 
institutions, a CRA investment back into communities, 
effectively those that are underserved like rural communities.
    I would add that broadband and the digital divide in these 
communities is great because of the lack of infrastructure. So, 
banking can help with that as well in terms of investing in 
broadband and the infrastructure in those communities.
    Mr. Foster. Okay. I am afraid the chairman has his finger 
on the gavel here, so I am out of time.
    Chairman Perlmutter. Yes. The gentleman's time has expired. 
I gave him--I have given everybody a little extra time. I gave 
him more, since this hearing was his idea.
    I now yield to the gentleman from Tennessee, Mr. Rose, for 
5 minutes.
    Mr. Rose. Chairman Perlmutter and Ranking Member 
Luetkemeyer, thank you for holding this hearing, and thank you 
to our witnesses for providing your expertise and your time 
today.
    I think that, as we work to shape the banking system of the 
future, we must look to innovation but also aim to implement a 
regulatory framework that allows banks of all sizes--of all 
sizes--to be successful.
    As a former community bank board member, I have seen and 
witnessed firsthand how the crush of regulation deters 
particularly our smaller banks from being able to succeed and 
thrive, and particularly to thrive in rural communities, as we 
have heard many of my colleagues say today.
    Between 2008 and 2020, over 13,000 bank branches closed in 
the U.S.--we have heard that data today--representing 14 
percent of all branches.
    Many communities report that, following a bank closure--and 
I have witnessed this firsthand--they also lose financial and 
community resources, including financial advisers and civil 
leadership. Sometimes, it is simple as the tee ball teams in 
your community not being able to find the resources to succeed.
    These losses leave communities with unanswered questions, 
instability, and less access to services. And, again, in the 
rural community, where my own farm is, I have witnessed this 
firsthand.
    Mr. Reuter, what factors do you see driving the trend of 
closures and consolidation among community banks?
    Mr. Reuter. I think you touched on one in your opening 
statement, Congressman, and that is the regulatory burden. We 
really need to look at tailoring so that it is lighter for a 
bank that is less complicated.
    What we operate at FirstBank, where we don't offer 
insurance or wealth management and other services, is much 
simpler. So, from a regulatory standpoint, it should have less 
regulatory burden.
    Also, I think the fintech, the level playing field, one of 
the benefits of doing that is, you get rid of the negative 
arbitrage that is there so that capital flows back into the 
banking industry and partnerships do form between tech 
companies and banks. And that also then, to me, leverages the 
trust and resiliency of the industry.
    So, I think those things would make a big difference in 
what is happening in rural markets.
    Mr. Rose. Thank you, and I certainly agree, as I have 
already said, about the regulatory framework. I think it is 
noteworthy that, when we implement huge regulatory expansions, 
that maybe in the eyes of folks sitting on high in Washington 
seem reasonable, when they make their way down to our local 
communities, they have a crushing impact on both the sustenance 
of our local small community banks and very much on new ones 
starting.
    Professor Hughes, what can we do in Congress to ensure the 
regulatory environment allows community banks to keep their 
doors open?
    Ms. Hughes. I think we have been talking about it all 
morning in terms of retaining the robustness of community 
banks, possibly by tailoring some of the requirements that they 
are operating under, that, as Mr. Reuter has suggested, are 
really designed to protect mostly the Deposit Insurance Fund 
from excessive risk-taking, which crops up every once in a 
while in every form of business. So, it is not unique to one.
    What I think we have, though, is a real crisis in bank 
deserts, and that, while we would like to think that there 
might be other models, like fintechs, that would address those, 
in some of those communities, the presence of a community bank 
that depends on relationships is going to be even more 
important going forward in helping small businesses and 
consumers get start-up money that they can't get from capital 
markets because they are too small, and getting loans to 
acquire business locations and things of the like that are 
important to building communities.
    So, unless we want to see a lot of desert ghost towns 
around the United States, we have to do what we can to lighten 
the load on community banks so that they can continue to be 
there because we do still have very valuable parts of our 
economy emanating from smaller communities, not tiny towns, but 
they are important.
    But we are seeing lots of startups in towns like 
Bloomington, Indiana, towns close to universities, and we need 
to be sure that there are adequate banking services on a 
relationship level, to protect the robustness of the economies 
in those communities on which we all actually depend.
    Mr. Rose. Thank you, Professor Hughes.
    I am pleased--and I might indulge the Chair for a few extra 
moments--to see that the Payment Choice Act is attached to this 
hearing. As an original cosponsor, I hope to see this 
legislation included in our next markup.
    Throughout the pandemic, we faced not only a coin shortage, 
but businesses were refusing to accept cash as a form of 
payment at an alarming rate, leaving many consumers unable to 
purchase necessities.
    Cashless policies disproportionately harm seniors, 
minorities, immigrants, low-income populations, and working-
class communities such as exist across the Sixth District of 
Tennessee.
    Consumers want the freedom to conduct transactions in a way 
that works best for them. Of the 80 percent of non-bill 
payments made in person in 2020, cash was used for 28 percent 
of these transactions, despite the pandemic-driven shift in 
shopping behaviors.
    I believe that all consumers should have the freedom to 
choose to pay with cash at grocery stores, restaurants, 
businesses, or anywhere they choose.
    And I might conclude just by saying that, if we see some of 
the heightened regulation about reporting by financial 
institutions, I think we will see more consumers, particularly 
in places like the district that I represent, closing their 
bank accounts, and going purely to cash.
    Thank you for your indulgence. I yield back.
    Chairman Perlmutter. The gentleman yields back.
    You can all see my chairing style is to kind of allow 
people to keep going.
    Mr. Lawson, the gentleman from Florida, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman, and Ranking Member 
Luetkemeyer, for hosting this hearing. This is a very, very 
important hearing that we are having today, and I want to thank 
all of the panelists for being here.
    There has been a considerable amount of discussion about 
banking deserts, almost like food deserts. And I know that 
between 2008 and 2016, about 25 percent of the banks and so 
forth have closed in rural areas which affect majority and 
minority during the Census tract.
    My question, to everyone is--because I don't see that there 
were any clear, distinct answers this morning, and maybe there 
are not any right now--since we are seeing this increase in the 
amount of bank deserts, what are the long-term consequences in 
majority and minority communities, regarding the economic 
opportunity and access to credit?
    What does this current trend in banking mean to low-income 
communities as we enter the economic recovery period of COVID-
19?
    And this is open to the whole panel, because I guess it is 
something that we have to deal with, but I know there have been 
more and more.
    And then, there is some criticism about all of these 
options that low-income individuals have to go to different 
areas to get access to capital, their payday loans, and 
everything else. And people say we don't need them, but what is 
going to happen? Can you give us any idea of what the future is 
going to be for our rural communities?
    I represent quite a few rural communities myself, always 
have, and I see this trend all over the place, and I just 
wanted to get each one of your perspectives on where we are 
going from here, because of what has happened in the last 
couple of years.
    Ms. Gonzalez-Brito. Congressman, in terms of the long-term 
consequences for rural banking closures, I would say we saw 
that with bank PPP loans; half of the PPP loans that banks made 
were with branches within 2 miles of the borrower. So, if we 
don't have a bank branch, those relationships are not there, 
and we saw it very clearly during COVID.
    I would say that also when we talk about regulatory burden 
for banks, we really need to center the burden of communities 
of not having banking. We need to remember that these banks are 
profit-driven, and we need to be able to think about 
alternatives to serve communities that have never been served 
by the market.
    And that could include postal banking and public banking, 
and mission-driven banking, which takes the profit-driven 
motive to close branches out of the picture. Thank you.
    Mr. Lawson. Would anyone else like to respond?
    Ms. Jackson. I would like to add to that.
    I do agree with--the Beneficial State Bank is a mission-
driven bank, just as the other panelists were saying, and I 
think just the fact that we always reinvest into our community 
is very important, it is very beneficial, and I think that will 
help out in some way if other banks can adopt our model that we 
are doing.
    Ms. Henry-Nickie. I would just add to these comments that 
banking deserts are a consequence of decisions, of banks saying 
that these markets are no longer valuable to me.
    To fill that gap, just like fintechs have done since the 
great financial subprime crisis, we need gap fillers to now 
come in and see the opportunities in this market.
    And to do that, we need to really lean in on encouraging de 
novo bank charters. Black-owned banks see the value in Black 
communities. Minority depository institutions have always seen 
the value in our communities.
    We need to encourage their growth, encourage them to hold 
on, as opposed to just sitting by as passive bystanders and 
letting them whittle away. We are 50 percent fewer in MDIs than 
we were in 2007.
    So, how do we replace the gap? By encouraging new physical 
branches and banks to grow in these communities, and whatever 
kinds of subsidies we can corral--because we can corral them--
to facilitate and subsidize their growth, that should be our 
mission.
    Mr. Reuter. And, Congressman Lawson, I share your concern. 
I think it is a challenging issue because one of the drivers 
for branch closures--and I would like to point out, branch 
closing, we talked about it earlier, we have 50 percent of the 
banks we had at one time.
    And, if you look, it is universal across all neighborhoods 
that there is a reduction in branches. And it is really because 
of how people are using their bank. Half of our deposits are 
now made with someone taking a picture of their check.
    And so, in order for us to adapt and make the technology 
investments, we have to look at how customers are choosing to 
do business.
    But I will tell you that we are mission-driven as a 
community bank, because we only grow if we are serving the 
community that we are part of. And so, I share the sentiments 
of others.
    I don't support postal bankingz, because it is already a 
struggling entity for the same reasons that we are talking 
today. Technology has changed its business model. So, to layer 
another industry that is being attacked by technology on top of 
that, I am not sure that is a good doubling down on the U.S. 
Postal Service.
    Mr. Lawson. Mr. Chairman, thanks for letting me go over.
    With that, I will yield back. This is a topic that we need 
to bring up again.
    Chairman Perlmutter. If I didn't let you go over, I would 
have been in real trouble, since I let everybody else go over.
    The gentleman from Illinois, Mr. Casten, who is also the 
Vice Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is now recognized for 5 
minutes.
    Mr. Casten. Thank you, Mr. Chairman.
    I feel like I am under a lot of obligation to try to make 
up all the time you have allowed us to all go over, but I will 
do my best.
    Mr. Reuter, I want to start with you, and I just want to 
give you an opportunity. We talked a lot about the decline in 
small, local bank branches and the rise in fintechs and, in 
particular, given a lot of those fintechs are not regulated 
under the Bank Holding Company Act.
    Are there any concerns you have with fintechs' ability to 
serve the underbanked so long as they remain not subject to the 
Banking Holding Company Act, that you haven't already covered? 
And I just want to give you a chance. I know we have corners of 
that so far. Is there anything else you would like to add to 
that?
    Mr. Reuter. Thank you, Congressman Casten. I do have 
concerns. One of the concerns I have, we talked a little bit 
about, with the ILC charter. While I think it is well-designed 
for the purpose originally intended, you are seeing some of 
these fintechs and technology companies wanting to creatively 
get that charter to get access to the payment system.
    They want that, because they want the data. Where do you 
buy? How do you spend your money? Because they want to use that 
data in the advertising side of their business.
    So, if you think about it, their motives are very 
different. As a bank, we have always been in the trust 
business. I know everything about our customers based on their 
account information. It is part of why I am nervous about 
shipping all of it to the IRS.
    The difference is that banks make their money by taking in 
deposits and making loans. Their core business is not data, 
like many of these tech companies.
    Our fiduciary responsibility is different, and our motive 
is different, and our behavior has been different. So, yes, I 
have a big concern about turning over the banking industry to 
some of these technology companies.
    Mr. Casten. I am glad you raised the industrial loan 
corporations, because you have sailed directly into my second 
question for Ms. Gonzalez-Brito.
    Ms. Gonzalez-Brito, you talked with Mr. Meeks about some of 
the CRA issues that come into play with fintechs. Can you talk 
about what CRA issues or concerns you may have if a fintech is 
registered as an ILC and uses that to enter the banking system? 
Are they subject to the same rules as other players in the 
banking sector?
    Ms. Gonzalez-Brito. This is a great question. No, they are 
not, and they often use these charters to be able to evade 
local State protections that they have in relation to, for 
instance, interest rate caps.
    So, I find myself agreeing with Mr. Reuter on the 
importance of regulatory rules being equal across the playing 
field.
    And I am going to sound like a broken record, but these 
ILCs that are forming in other parts--or any part of the 
country, are not subject to CRA. And we need those fintechs, if 
they are taking deposits, if they are making loans in our 
communities, which they are, to have a CRA requirement.
    And then, lastly, I would just say that fair lending 
algorithms are being used that we don't understand, and 
sometimes, the CEOs don't even understand.
    So, it is incredibly important that we have regulatory 
oversight, especially on fair lending and fair housing.
    Mr. Casten. Thank you.
    And, with the time I have left, I want to pivot a little 
bit away from fintechs, because these things are overlaid.
    But a number of the crypto-based companies like Paxos and 
Anchorage and Protego have been asking for, and receiving, 
Federal trust charters from the OCC. And we are creating this 
sort of blurry area between fintech and crypto.
    Dr. Henry-Nickie, with my remaining time, I welcome your 
thoughts on what factors we should be taking into account 
reviewing bank charters from crypto companies, and, in 
particular, with a real focus on the volatility.
    We are essentially giving, as I think of it, 4X risk on 
deposits. What is the right way for us to be thinking about 
those charters and, in particular, with respect to the 
volatility exposure that this might place on depositors?
    Ms. Henry-Nickie. Thanks for the question, Congressman 
Casten. While I think it is a really important issue, I, too, 
am concerned about how these cryptocurrencies are playing 
inside our economy without figuring out how to manage the 
volatility and the vulnerability.
    I don't follow these issues as a scholar, and I think 
perhaps Ms. Hughes might be better-positioned to render an 
opinion on the subject.
    Mr. Casten. Okay.
    Ms. Hughes, we seem to always curse you with 30 seconds to 
answer a 10-minute question, but I will give you your best 
shot.
    Ms. Hughes. I will be happy to answer it separately, 
Congressman, so we can have that conversation.
    The rigorous evaluation of anybody who gets a Federal trust 
charter, or from the States that are offering charters, is 
still present, and I do not think that these companies are 
getting less rigorous reviews when they are getting these 
permissions.
    But one of the differences is the scope of the operational 
powers that they have, and when the States have been offering 
opportunities to these businesses, they have been cabined in 
certain fields that are not necessarily going to be in direct 
competition with the kinds of banks, the community banks, that 
we have been talking about so much today.
    I have the same problem. This is a long answer. We need to 
have a separate conversation about it. And I do think that we 
have different management issues--different risk-management 
issues with cryptocurrency because of price volatility than we 
have with traditional banks and even with some of the larger 
fintechs, including some that are now acquiring.
    Mr. Casten. Okay. Thank you, and notwithstanding my initial 
promise, it looks like our chairman is going to be managing 
penalty time at the end of this hearing. But I appreciate you 
all, and I yield back my penalty time.
    Chairman Perlmutter. The gentleman yields back.
    We will go now to the gentlewoman from Massachusetts, Ms. 
Pressley, the Vice Chair of this subcommittee. She is 
recognized for 5 minutes.
    Then we will go to Mr. Emmer, and then, we will go to Mr. 
Garcia to close out.
    Ms. Pressley?
    Ms. Pressley. Thank you, Chairman Perlmutter, for convening 
this hearing. I, along with many of my colleagues, have been 
sounding the alarm for many years about rising bank branch 
closures in predominantly Black and Brown communities, and the 
negative impact that this will have on small businesses owned 
by people of color. That impact was certainly made abundantly 
clear during the pandemic.
    Congress created the Paycheck Protection Program to serve 
as a lifeline to small businesses and their employees, but we 
now know proximity to banks played a significant role in who 
actually received funds. Half of bank PPP loans came from banks 
with branches within 2 miles of the borrower. Borrowers using a 
nearby bank received credit sooner, which was a critical 
advantage, as PPP money ran out rapidly.
    It is no surprise, but egregious nonetheless, that Black-
owned businesses received only 2 percent of PPP loans from the 
CARES Act. According to the Boston Federal Reserve, one in five 
Black-owned small businesses had never even heard of the 
program.
    Ms. Gonzalez-Brito, nearly half of Black-owned businesses 
were wiped out in the early months of the pandemic. Can you 
briefly summarize the long-term impact these business closures 
will have on Black and Brown communities?
    Ms. Gonzalez-Brito. Thank you for that question. You are 
absolutely right; there was a disparate impact in terms of the 
way PPP loans were administered.
    And, if you think about the banks in communities of color, 
counties that are majority Black and Brown have about 27 
financial institutions per 100 people. For Indigenous Native-
American communities, it is even less. And for the White 
communities that are majority White, we have over 40 branches.
    So, when we close branches in these communities, small 
businesses really suffer. We know that they need local banks to 
be able to really have this relationship that they trust and to 
be able to get the kind of support that they need, especially 
in a financial crisis.
    Ms. Pressley. Thank you. So, the closure of branches and 
consolidation of banks limits opportunities for Black-owned 
small businesses and, as a result, our broader communities.
    It is critical that Black and Brown voices are heard during 
the bank merger process and that Congress pursues every 
solution to close these gaps, including public banking and 
postal banking.
    Democrats control the House, the Senate, and the White 
House, and together we have made strides to exact economic 
justice in our pandemic recovery efforts.
    But, from the priority application period for minority-
owned restaurants under the Restaurant Revitalization Fund, to 
the USDA loans for Black farmers, right-wing, private-interest 
groups have claimed reverse discrimination in the courts and 
blocked these overdue investments.
    Ms. Gonzalez-Brito, the Freedman's Savings Bank was created 
by Congress in 1865 to offer banking to newly-freed Black 
Americans. Can you please briefly summarize what happened to 
the Freedman's Bank and the millions of dollars that Black 
Americans deposited into it?
    Ms. Gonzalez-Brito. The Freedman's Bank is a good example 
of the way that wealth is extracted from Black Americans. And, 
unfortunately, when that bank was created, the mission and what 
it was created for was absolutely noble, but all of the 
trustees that were running that bank were White, they did not 
know the community, and not only did they not know, we are 
talking about a whole different timeframe in terms of White 
people in this country and the enslavement of Black Americans.
    And so, it is really important that as we think about the 
impact that this has, where the banks are actually run by 
people of color, that we have minority deposit institutions 
that are run by people of color, and that we support them with 
as much community support and government support that we can--
    Ms. Pressley. Thank you.
    Ms. Gonzalez-Brito. --in order to better serve the 
communities.
    Ms. Pressley. Thank you very much. And this is important 
history, which I think many are unaware of, and it just goes to 
show that there has been precise legislative harm done. From 
the Freedman's Bank to redlining to exclusion from the GI Bill 
and the Social Security Act, Black and Brown workers have been 
pushed out of our economic and financial systems for really far 
too long.
    So, race-conscious relief is necessary because the heart 
and harm was precise and race conscious. So, race-conscious 
relief is not discrimination; it is justice. It is a necessary 
step toward equality and liberation.
    Thank you, and I yield back.
    Ms. Gonzalez-Brito. Can I add one more thing? In terms of 
race-conscious initiatives, the special purpose credit program 
is one that banks really should be implementing. And we have 
been able to successfully work with some banks in California to 
be able to do that.
    It really focuses credit products on those communities that 
have been not only excluded but, as we talked about, had their 
wealth extracted from them. And so, we encourage banks to look 
at these kinds of programs, and we look forward to working with 
them to do that.
    Ms. Pressley. Thank you.
    Chairman Perlmutter. The gentlelady yields back.
    The gentleman from Minnesota, Mr. Emmer, is recognized for 
5 minutes.
    Mr. Emmer. Thank you, Chairman Perlmutter.
    Before I begin my remarks, I also want to thank Mr. 
Luetkemeyer and Mr. Reuter for bringing up the compliance and 
privacy concerns of requiring financial institutions to report 
transactional data to the IRS on all accounts with $600 or 
more.
    I led a letter with 141 of my colleagues on this issue, and 
we are watching it very closely.
    As we convene today to discuss modernizing financial 
services institutions, I implore my colleagues to think outside 
the box on how Congress can assist in improving the manner in 
which consumers access financial products and services, because 
that is what we are here for today.
    Congressman Perlmutter, I would like to recognize you for a 
moment for your work as the co-lead on our bill, the Credit 
Union Governance Modernization Act, a bill that thoughtfully 
revisits antiquated regulations that prevent credit unions from 
doing what they need to do: serve their communities.
    I am happy to see that this bill is noticed in this 
hearing, because it revises the procedure for expelling members 
from a Federal credit union to make it safer for the members 
and employees. It is imperative that we consider this 
bipartisan legislation in this committee.
    Financial institutions have the important responsibility of 
providing safe, reliable financial services for Americans 
across the country. But what happens when a credit union member 
makes threats of violence to other members or the credit 
union's employees? What happens when a credit union member 
repeatedly deposits fraudulent checks and jeopardizes the 
stability of their credit union? What happens when a member 
damages credit union property and places other members and 
employees in harm's way?
    Right now, due to the antiquated regulations that exist, it 
would be hard to remove members who make credit unions unsafe. 
My bill revises these regulations and crafts a process with an 
emphasis on due process and respect for members' ownership in 
the credit union to remove dangerous members so that credit 
unions can best carry out their obligation, again, to provide 
safe and reliable financial services for Americans.
    We really have to move banking into the future. And I guess 
with that, Ms. Hughes, if you don't mind--thank you, by the 
way, to all of the witnesses for being here today and for your 
time and participation and your expertise.
    Ms. Hughes, I want to direct this to you. Given the issues 
I just addressed, do you believe there is cause for a 
legislative solution, like the Credit Union Governance 
Modernization Act, to ensure credit unions' safety as credit 
unions provide financial services to their communities?
    Ms. Hughes. Congressman Emmer, I have to apologize and tell 
you that I have not read that bill, so I am not going to be 
able to comment about it very specifically.
    But I would say that the credit unions are a little bit 
different, but the idea that banks and credit unions cannot 
protect themselves from dangerous members is just appalling.
    The question then is, how do you establish parameters--if 
you want to legislate this--that will not have an unduly 
adverse effect on small businesses that have licenses from the 
States and the communities that are a part of the fabric on 
Main Street in many communities? How will we fashion this?
    And so, that is why I need to read the bill, and perhaps we 
can have an offline conversation about the bill if you remain 
interested in my views about it.
    Mr. Emmer. Just so everybody on this panel knows--because I 
know there has been a lot of techie stuff talked about, and 
this is kind of more like meat-and-potatoes stuff--the 
antiquated rules, as Chairman Perlmutter will tell you, and I 
am going to do this right now if I can do this in a streamlined 
fashion, would require a vote of the entire membership to deal 
with a member who is making violent threats against other 
members and/or credit union employees, who is threatening 
damage or committing damage to credit union property.
    This seems to be an antiquated way and, frankly, very 
difficult way to expel a member who is presenting these dangers 
to credit union employees and their customers.
    So, what this bill does is it streamlines that process 
while protecting the due process concerns so that they can make 
a quick decision under the right circumstances and make sure 
that everybody is safe and the credit union is protected.
    So, I do hope you have a chance to read it. I think you 
will be supportive of what we are doing.
    And, again, Chairman Perlmutter, I thank you for your work 
with us on this bill, and thank you for the time today. I yield 
back.
    Ms. Gonzalez-Brito. Chairman Perlmutter?
    Chairman Perlmutter. The gentleman yields back. I have read 
your bill, and it is meritorious, and it should be passed. That 
is my opinion.
    Mr. Emmer. Well, then it is done. Thank you.
    Chairman Perlmutter. Our final panelist is Mr. Garcia from 
Illinois, and he is now recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Chairman Perlmutter, 
and, of course, thank you to the ranking member for convening 
this important hearing.
    This hearing is called the, ``Future of Banking,'' but it 
is not just about CEOs and Wall Street. The future of banking 
is about the future of working-class neighborhoods like the 
ones I represent.
    My neighbors lost their homes in the Great Recession. Many 
lost small businesses during the COVID-19 pandemic. This isn't 
inevitable. Congress can create and enable a more equitable 
financial system.
    So today, I am introducing the Bank Merger Review 
Modernization Act, to strengthen oversight of bank mergers so 
our regulators aren't just a rubber stamp for creating mega 
banks.
    And soon, I will introduce the Close the ILC Loophole Act, 
to address the huge threat that the underregulated banks can 
pose to our markets and our financial systems.
    I would like to begin with a question for Ms. Gonzalez-
Brito. Yesterday, the Committee for Better Banks reported that 
BB&T and SunTrust merged. Their new combined bank, Truist, not 
only fell short of the CEO's promise to Congress to open 15 
bank branches in low- to moderate-income areas, the merger 
slowed down the pace of opening bank branches in lower-income 
areas and increased the pace of bank branches in higher-income 
areas.
    Banks can be hard to come by in my neighborhood, and that 
means my constituents often need to turn to riskier loans.
    Ms. Gonzalez-Brito, it looks like these mergers have 
reduced access to financial services for the people who need it 
most.
    Does this new report square with your own work? Do bank 
mergers tend to limit access to capital for working-class 
people, and who is hurt when regulators serve as rubber stamps 
for bank mergers?
    Ms. Gonzalez-Brito. Thank you so much. This is a really 
important question, and it also goes back to Congresswoman 
Pressley's statement about making sure that community voices in 
the most impacted communities, Black and Brown communities, are 
at the center of any discussions around mergers and 
acquisitions.
    We are seeing that mergers and acquisitions are leading to 
not only a closure of bank branches, but they are also leading 
to less reinvestment, because where you had two banks prior to 
the merger reinvesting back into communities, you now have only 
one. And one plus one also doesn't equal two; it equals less 
than two.
    So what we really need is to ensure that any merger, before 
it is approved, has a public benefit and does not have a public 
harm.
    And I really want to thank you for your work on the Bank 
Merger Review Modernization Act. It is exactly what we need.
    I would just add--I want to go back to the credit union 
discussion, because I was surprised it took us this long to get 
there. But credit unions are not subject to the Community 
Reinvestment Act, and so we actually don't know how much they 
are reinvesting back into communities, and that is critical for 
low-income communities and communities of color.
    And I would say in relation to, I am not sure where this 
conversation went in terms of violence, but really what credit 
unions should be concerned about and what we are concerned 
about is that their membership actually doesn't represent the 
communities that they are in. And that is critical for a 
successful community and economic development and community 
development.
    Mr. Garcia of Illinois. Thank you for that.
    Dr. Henry-Nickie, last year, the FDIC approved deposit 
insurance applications for two new ILCs, the first in many 
years. Of course, a lot has changed since the last ILCs were 
approved.
    In 2005, Walmart's ILC application sparked fears about 
anticompetitive practices and the potential for financial risk 
of large commercial ILCs.
    And now, in the new world of Amazon, Facebook, and Google, 
it seems to me that the potential for corporate monopoly and 
abuse is greater than ever.
    Do you think that granting ILC charters to Big Tech or 
large commercial firms could threaten competitive markets, 
consumer privacy, or financial stability?
    Ms. Henry-Nickie. Thank you for the question, and also for 
your work in bringing this incredible piece of legislation to 
the House Floor. I think you are right in calling out the 
scariness that involves putting these massive firms that are 
really good at sort of killing competition and monopolizing the 
entire landscape.
    I would be tremendously concerned about those kinds of 
firms getting access to ILC charters, but I just want to go 
back a little to the question around race-conscious policies.
    In this legislation, giving the CFPB a vote to stop these 
kinds of--a scaling of bad bank practices is actually really 
important to maintaining our hold for communities of color on 
the bank branches that are remaining. And also, it is a really 
impactful way to generate new bank branches.
    Part of the consumer restitution work that the CFPB does is 
to legislate where that presence should be reinstated to help 
rehabilitate the damage and disinvestment that is done to 
consumers.
    So, thank you again for the incredible work. I really want 
this piece of legislation to advance and to pass because the 
CFPB can do a fantastic job of holding institutions accountable 
and stopping the spread of banking deserts through branch 
losses.
    Mr. Garcia of Illinois. Thank you so much.
    And thank you, Mr. Chairman, for your indulgence.
    Chairman Perlmutter. You're welcome. The gentleman yields 
back.
    Without objection, statements will be entered into the 
record on behalf of the following Members of Congress and 
organizations: the Honorable Donald M. Payne, Jr.; the American 
Financial Services Association; the Bank Policy Institute; the 
Credit Union National Association; the Electronic Transactions 
Association; the Financial Data and Technology Association; the 
Independent Community Bankers of America; the National Armored 
Car Association; and the National Association of Federally-
Insured Credit Unions.
    I would like to thank our witnesses for your testimony 
today. Thank you for allowing me to be lenient with the Members 
in allowing their time to kind of run over. We appreciate the 
time that you have extended to us, and your expertise and your 
testimony today.
    The Chair notes that some Members may have additional 
questions for these witnesses, 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 these witnesses and to place their 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.
    Thank you very much. Thanks for your testimony.
    This hearing is now adjourned.
    [Whereupon, at 12:44 p.m., the hearing was adjourned.]

                            A P P E N D I X


                           September 29, 2021
                           
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