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115th Congress    }                                     {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {     115-588

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



 
   TAKING ACCOUNT OF INSTITUTIONS WITH LOW OPERATION RISK ACT OF 2017

                                _______
                                

 March 6, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1116]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1116) to require the Federal financial 
institutions regulatory agencies to take risk profiles and 
business models of institutions into account when taking 
regulatory actions, and for other purposes, having considered 
the same, report favorably thereon without amendment and 
recommend that the bill do pass.

                          PURPOSE AND SUMMARY

    On February 16, 2017, Representative Scott Tipton 
introduced H.R. 1116, the ``Taking Account of Institutions with 
Low Operation Risk Act of 2017'' or ``TAILOR Act of 2017'', 
which directs the federal financial institutions regulatory 
agencies (the Office of the Comptroller of the Currency (OCC), 
the Board of Governors of the Federal Reserve System (Federal 
Reserve), the Federal Deposit Insurance Corporation (FDIC), the 
National Credit Union Administration (NCUA), and the Bureau of 
Consumer Financial Protection (CFPB)) to tailor their 
rulemakings in consideration of the risk profiles and business 
models of the financial institutions that are subject to such 
rules. The TAILOR Act also directs these agencies to annually 
report to Congress and testify before the Committee on 
Financial Services and the Committee on Banking, Housing, and 
Urban Affairs regarding the specific actions taken to tailor 
their regulatory actions.

                  BACKGROUND AND NEED FOR LEGISLATION

    The goal of H.R. 1116 is to have federal financial 
regulatory agencies that regulate financial institutions move 
away from a static or one-size-fits all approach when the 
agency implements regulations and instead engage in dynamic 
oversight of financial institutions and consider additional 
factors such of an institution such as its risk profile, 
unintended potential impact of implementation of such 
regulations, and underlying policy objectives of the statutory 
scheme which led to the regulation.
    The growing weight and complexity of regulation for 
community financial institutions affects their ability to 
provide the products and services necessary to allow small 
businesses to grow and consumers to access credit to realize 
their financial and personal goals. The regulatory burden falls 
into three major categories: (1) additional operational costs 
associated with compliance; (2) restrictions on fees, interest 
rates, or other revenue; and (3) unintentional barriers to 
offering a service due to regulatory complexity. Smaller 
institutions are disproportionately affected by increased 
regulation because they are less able to absorb additional 
costs. Compliance with new regulations is expensive. After a 
regulation has been finalized, an institution must hire lawyers 
to review its procedures and forms to ensure that it complies 
with the regulation; coordinate its compliance activities and 
design internal audit programs; train its employees; buy 
additional information technology; design, print, and mail or 
electronically deliver new forms and other disclosures; monitor 
its employees' compliance with new rules; and make records and 
employees available for regulatory examinations.
    Although the intent of the Dodd-Frank Wall Street Reform 
and Consumer Act's reforms was to reach large, global, 
interconnected and complex U.S. financial institutions, the 
Dodd-Frank Act and the resulting regulatory regime have had a 
demonstrable--and highly adverse--impact on small, community-
based financial institutions. For example, community bankers 
report a ``trickle-down effect, where regulation originally 
meant for big institutions is being applied to smaller banks,'' 
often in the form of bank examiners identifying those 
regulations as ``best practices'' that should be followed by 
institutions regardless of their size.
    Some federal financial regulators have acknowledged the 
need to tailor the regulatory regime to institutions. For 
example, in September 28, 2016, testimony before the Committee, 
former Federal Reserve Chair Janet Yellen stated: ``[W]hen it 
comes to bank regulation and supervision, one size does not fit 
all. To effectively promote safety and soundness and to ensure 
that institutions comply with applicable consumer protection 
laws without creating undue regulatory burden, rules and 
supervisory approaches should be tailored to different types of 
institutions such as community banks.'' And, in an April 30, 
2015, speech, former Federal Reserve Board Governor Daniel 
Tarullo noted ``the importance of differentiating prudential 
regulation and supervision based on the varying nature of the 
risks posed by different groups of banks . . . . At an analytic 
level, we need to be clear that prudential aims vary with the 
risks posed by diverse groups of banks.''
    A 2015 study from researchers at Harvard University's 
Kennedy School of Government entitled ``The State and Fate of 
Community Banking,'' noted the ``increasingly complex and 
uncoordinated regulatory system [embodied by Dodd-Frank] has 
created an uneven regulatory playing field that is accelerating 
consolidation [among community financial institutions] for the 
wrong reasons.'' The study described a post-financial crisis 
competitive landscape characterized by ``community banks' 
declining market share in several key lending markets, their 
decline in small business lending volume, and the 
disproportionate losses being realized by particularly small 
community banks.'' An April 2015 study by economists at Goldman 
Sachs reached a similar conclusion about the ``pass-through'' 
effects of post-crisis banking regulations on small businesses 
that rely heavily on the community banking sector for their 
funding:
    The weight and burden from increased bank regulation falls 
disproportionately bank customers, such as smaller businesses 
that have few alternative sources of finance. The muted 
recovery in bank lending to small businesses cannot be 
overemphasized. Outstanding commercial and industrial (C&I) 
loans for less than $1 million are still well below the peak 
2008 level and are only 10% above the trough seen in 2012. In 
contrast, larger C&I loans outstanding (above $1 million) are 
more than 25% higher than the peak in 2008. Moreover, the cost 
of the smallest C&I loans has risen by at least 10% from the 
pre-crisis average. The evidence suggests that smaller firms 
continue to borrow from banks--when they can get credit--
because they lack effective alternative sources of finance. It 
also suggests that they are paying notably more for credit 
today; this weighs on their ability to compete with larger 
firms and to create new jobs.
    The current Presidential administration supports regulatory 
tailoring. In President Trump's February 2017 Executive Order 
entitled ``Core Principles for Regulating the United States 
Financial System'' one of the seven principles was to ``make 
regulation efficient, effective, and appropriately tailored.'' 
In June 2017, the Department of the Treasury released its first 
report in response to the President's Executive Order to inform 
the Administration's perspective to regulate the financial 
system. The report entitled, ``A Financial System That Creates 
Economic Opportunities-Banks and Credit Unions'' found that 
``[b]anks and credit unions are confronted with a vast array of 
regulatory requirements, putting a substantial burden on 
financial and human capital. Most critically, regulatory 
burdens must be appropriately tailored based on the size and 
complexity of a financial organization's business model and 
take into account risk and impact.''
    H.R. 1116 requires the federal financial institution 
regulatory agencies (the OCC, Federal Reserve, FDIC, NCUA, and 
CFPB) to tailor any regulatory action that occurs after the 
legislation's enactment to appropriately apply to banks and 
credit unions. The agencies would be required to consider the 
risk profile and business model of the institutions and 
determine the necessity, appropriateness, and impact of 
applying such regulatory action to those institutions. Not only 
will the TAILOR Act ensure appropriately tailored compliance 
obligations for banks and credit unions of various risk 
profiles, but the legislation will also save valuable time and 
resources for bank and credit union examiners. It is important 
to foster a regulatory environment where banks and credit 
unions can focus their time and assets in their surrounding 
communities and make long-term investments, rather than devote 
their limited financial and human resources to comply with an 
ever-increasing and overly burdensome regulatory regime that 
reportedly was never supposed to impact smaller banks and 
credit unions.
    By allowing the federal regulators to weigh the compliance 
impact, cost, and liability risk, together with the unintended 
consequences of regulations in the aggregate, consumers will 
directly benefit. Tailored adjustments to appraisal and escrow 
provisions, for example, would encourage banks to make loans 
they currently cannot afford to make. Small business customers 
would see more efficient and expedited loan procedures, 
ultimately stimulating the local economy. Regulators would also 
have the flexibility to deem loans in portfolio as compliant 
with ``Qualified Mortgage'' and ``Ability to Repay'' rules, 
allowing loans not otherwise made to be accessed by low-income, 
rural, retiree, or the recently employed segments of the 
consumer lending market. H.R. 1116 is the embodiment of smart 
regulation, which will promote small financial institution 
competition and foster consumer choice and competitive lending.

                                HEARINGS

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 1116 on April 26, 2017, and 
April 28, 2017.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
October 11, 2017, October 12, 2017, and ordered H.R. 1116 to be 
reported favorably to the without amendment by a recorded vote 
of 39 yeas to 21 nays (Record vote no. FC-74), a quorum being 
present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 39 yeas to 21 nays 
(Record vote no. FC-74), a quorum being present.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1116 
will require federal financial institutions regulatory agencies 
tailor their regulatory actions as to take into consideration 
factors such as risk profile, unintended potential impact of 
implementation of such regulations, and underlying policy 
objectives.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, December 12, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1116, the TAILOR 
Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Sarah Puro 
and Stephen Rabent (for federal costs) and Nathaniel Frentz 
(for revenues).
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 1116--TAILOR Act of 2017

    Summary: H.R. 1116 would require the federal banking 
regulators--the Federal Deposit Insurance Commission (FDIC), 
the Office of the Comptroller of the Currency (OCC), the 
National Credit Union Administration (NCUA), the Consumer 
Financial Protection Bureau (CFPB), and the Federal Reserve--to 
adapt their regulatory actions to the specific risk profiles 
and business models of financial institutions that are subject 
to regulation. That requirement would apply to any new 
regulatory action. The bill also would require the federal 
banking regulators to review and revise regulatory actions from 
the past seven years, including those written under the Dodd 
Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act).
    CBO estimates that enacting the legislation would increase 
the deficit by $80 million over the 2018-2027 period. That 
amount comprises an increase in direct spending of $56 million 
and a reduction in revenues of $24 million. Because enacting 
the bill would affect direct spending and revenues, pay-as-you-
go procedures apply. CBO also estimates that reviewing rules 
issued by the Securities and Exchange Commission (SEC) and the 
Commodity Futures Trading Commission (CFTC) would cost $3 
million over the 2018-2022 period; such spending would be 
subject to the availability of appropriated funds.
    CBO estimates that enacting H.R. 1116 would not increase 
net direct spending or on-budget deficits by more than $2.5 
billion in any of the four consecutive 10-year periods 
beginning in 2028.
    H.R. 1116 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA). Additional fees 
imposed by the OCC, the NCUA, and the SEC increase the cost of 
the existing mandate on private entities that are required to 
pay those assessments. However, CBO estimates that the 
incremental cost of the mandate would fall well below the 
annual threshold established in UMRA for private-sector 
mandates ($156 million in 2017, adjusted for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 1116 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2018-2022  2018-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              INCREASES IN DIRECT SPENDING
 
Estimated Budget Authority........................       5      10      10       8       3       4       4       4       4       4        36         56
Estimated Outlays.................................       5      10      10       8       3       4       4       4       4       4        36         56
 
                                                                  DECREASES IN REVENUES
 
Estimated Revenues................................      -2      -3      -4      -3      -2      -2      -2      -2      -2      -2       -13        -24
 
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Effect on the Deficit.............................       7      13      14      11       5       6       6       6       6       6        49         80
 
                                                     INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Estimated Authorization Level.....................       1       1       1       0       0       0       0       0       0       0         3          3
Estimated Outlays.................................       1       1       1       *       0       0       0       0       0       0         3          3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding; * = between zero and $500,000.

    Basis of estimate: H.R. 1116 would require the federal 
banking regulators to consider the risk profiles and business 
models of financial institutions when determining which 
institutions are subject to regulatory action and to adapt 
regulations to the characteristics of individual financial 
institutions. The agencies would be required to review and 
analyze all regulations adopted during the prior seven years, 
in accordance with the requirements in H.R. 1116, and to revise 
those regulations, if necessary, to comply with the bill.
    Costs incurred by the FDIC, the NCUA, and the OCC are 
recorded in the budget as increases in direct spending. Those 
agencies are authorized to collect premiums and fees from 
insured depository institutions to fully cover such 
administrative expenses, although CBO expects that only a 
portion of the costs incurred by the FDIC would be recouped by 
2027.
    The CFPB is permanently authorized to spend amounts 
transferred from the Federal Reserve. Because that activity is 
not subject to appropriation, the CFPB's expenditures are 
recorded in the budget as direct spending. Costs to the Federal 
Reserve System reduce remittances to the Treasury; they are 
recorded in the budget as revenues.
    To develop this estimate, CBO consulted with the federal 
financial regulators about the number of people needed to 
review and revise regulations and about the regulations adopted 
over the past seven years.

Direct spending and revenues

    The financial regulators have completed more than 200 rules 
over the past seven years, many of them associated with the 
Dodd-Frank Act.\1\ The bill would require the financial 
regulators to review and possibly revise those rulemakings. In 
addition, CBO expects that H.R. 1116 could increase the amount 
of litigation that those regulators are subject to under the 
Administrative Procedures Act because regulated institutions 
would have additional grounds to challenge the application of 
financial regulations.
---------------------------------------------------------------------------
    \1\See DavisPolk, Dodd-Frank Progress Report: Six-Year Anniversary 
Report (July 2016), http://tinyurl.com/ycovbwpx (PDF, 1.2 MB).
---------------------------------------------------------------------------
    The cost to implement the bill has two components. First, 
CBO expects that the financial regulators would have to hire 
additional staff over the 2018-2021 period to complete the 
required review and revision of previous rulemakings. 
Subsequently, the regulators would require additional staff to 
support new rulemaking and to defend agency actions from 
additional litigation.
    CBO expects that over the 2018-2021 period each of the 
financial regulators would need to increase its legal staff by 
5 percent to 10 percent and certain other staff by less than 1 
percent to complete the analysis of the regulations promulgated 
over the past seven years. Currently, the agencies have a total 
of about 6,000 employees, including 600 attorneys, on staff in 
their Washington, D.C., offices. CBO expects that overall 
staffing would increase by 60 employees over the 2018-2021 
period.
    After 2020, CBO expects that the regulators would no longer 
need all of the additional staff that they needed to complete 
the review of existing regulations, however, spending by the 
financial regulators to carry out new rulemakings and to defend 
agency actions from new litigation would increase. Over the 
2020-2027 period CBO expects that implementing the bill would 
require roughly 25 additional employees across the federal 
financial regulators. The OCC and the NCUA likely would recover 
any implementation costs over the next ten years by increasing 
assessments on the institutions they regulate, and the FDIC 
would recover most of its costs after 2027.
    In total, CBO estimates that enacting the bill would 
increase deficits by $80 million over the 2018-2027 period. 
That amount includes an increase in net direct spending of $56 
million and a decrease in revenues of $24 million because the 
Federal Reserve would reduce its remittances to the Treasury.

Spending subject to appropriation

    Implementing H.R. 1116 would probably require the CFTC and 
the SEC to review regulations adopted under the Dodd-Frank Act. 
Using information from the affected agencies, CBO estimates 
that they would require four additional employees over the 
2018-2021 period. Because the SEC is authorized under current 
law to collect fees sufficient to offset its annual 
appropriation, we estimate that the net costs to the SEC would 
be negligible, assuming appropriation actions consistent with 
that authority. CBO expects that costs to the CFTC would total 
$3 million over the 2018-2022 period; such spending would be 
subject to the availability of appropriated funds.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

        CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1116, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON OCTOBER 12, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2018-2022  2018-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact....................       7      13      14      11       5       6       6       6       6       6        49         80
Memorandum:
    Changes in Outlays............................       5      10      10       8       3       4       4       4       4       4        36         56
    Changes in Revenues...........................      -2      -3      -4      -3      -2      -2      -2      -2      -2      -2       -13        -24
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting the legislation would not increase net 
direct spending or on-budget deficits by more than $2.5 billion 
in any of the four consecutive 10-year periods beginning in 
2028.
    Mandates: H.R. 1116 contains no intergovernmental mandates 
as defined in UMRA.
    CBO expects that the financial regulators would increase 
premiums or fees to offset the costs of implementing the 
additional regulatory activities required by the bill. Any 
increase in premiums or fees would increase the cost of the 
existing mandate on entities required to pay those assessments. 
Using information from the federal banking regulators and the 
SEC, CBO estimates that the incremental cost to comply with the 
mandate would fall well below the annual threshold established 
in UMRA for private-sector mandates ($156 million in 2017, 
adjusted for inflation).
    Estimate prepared by: Federal costs: Sarah Puro and Stephen 
Rabent; Revenues: Nathaniel Frentz; Mandates: Logan Smith.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         EARMARK IDENTIFICATION

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    DUPLICATION OF FEDERAL PROGRAMS

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   DISCLOSURE OF DIRECTED RULEMAKING

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 1116 as the ``Taking Account of 
Institutions with Low Operation Risk Act of 2017''

Section 2. Regulations appropriate to business models

    This section states the directives that the federal 
financial institutions regulatory agencies (Office of the 
Comptroller of the Currency (OCC), the Board of Governors of 
the Federal Reserve System (Fed), the Federal Deposit Insurance 
Corporation (FDIC), the National Credit Union Administration 
(NCUA), and the Consumer Financial Protection Bureau (CFPB) 
must consider when imposing regulations on institutions.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 1116 does not repeal or amend any section of a 
statute. Therefore, the Office of Legislative Counsel did not 
prepare the report contemplated by clause 3(e)(1)(B) of rule 
XIII of the House of Representatives.

                             MINORITY VIEWS

    H.R. 1116, the ``Taking Account of Institutions with Low 
Operation Risk (TAILOR) Act,'' would take a major step 
backwards on the progress made since the 2008 Financial Crisis 
to ensure our financial markets are stronger, more resilient, 
and more protective of consumers.
    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act) establishes a tiered and tailored 
regulatory framework for financial institutions. Instead of 
imposing a one-size-fits-all approach for regulating all firms, 
the Dodd-Frank Act focuses the toughest rules on the largest 
and most complex financial firms that, as evidenced in the 
2007-2009 financial crisis, can destabilize the financial 
system and inflict long-lasting damage to the economy and the 
constituents we serve.
    Congress has carefully monitored the implementation of the 
Dodd-Frank Act and, when warranted, has passed targeted 
legislation or encouraged regulators to further tailor rules to 
reduce unnecessary compliance requirements on community 
financial institutions while maintaining robust standards and 
appropriate protections that are in the public interest.
    If enacted, H.R. 1116 would undo these efforts by providing 
every financial institution overseen by agencies like the 
Federal Deposit Insurance Corporation (FDIC) or the Consumer 
Financial Protection Bureau with new opportunities to challenge 
rulemakings in court if they felt a regulation was not uniquely 
tailored to their individual firm. Moreover, the bill would not 
require regulators to consider the benefits of certain 
rulemakings, including the promotion of financial stability or 
the protection of consumers.
    H.R. 1116 would ignore the mandates and requirements of all 
other laws passed by Congress and would override decades of 
well-established administrative law requirements by subjecting 
all new financial rules to a vague, if not an impossible 
standard, to meet. This would include the determination of an 
undefined standard of ``appropriateness''' for each rule and 
how it would apply to every single institution. The bill would 
also require each regulatory action to be analyzed ``both by 
itself and in conjunction with the aggregate effect of other 
regulations''' for its impact on how each and every firm can 
``serve evolving and diverse customer needs.''
    Additionally, we are concerned that the level of 
institution-specific tailoring under the bill could result in a 
severe weakening of the nation's anti-money laundering and Bank 
Secrecy Act rules. By requiring that compliance costs and 
liability risk be considered a higher priority than protecting 
the integrity of the financial system, the bill could create a 
class of institutions with lowered compliance standards that 
might become an ideal target for drug cartel money laundering 
or terrorist financing.
    Finally, the TAILOR Act would ignore the substantial amount 
of work that agencies have done to ensure that rules are 
adopted in a way that considers the needs of smaller financial 
institutions. For example, the federal prudential banking 
agencies have worked to minimize supervision and compliance 
burdens for smaller sized institutions. After completing an 
extensive review that is required every 10 years, the federal 
prudential banking agencies recently issued a sweeping report 
under the Economic Growth and Regulatory Paperwork Reduction 
Act and are making further modifications to better tailor rules 
for smaller, less risky firms.
    We share the belief that regulators must take into account, 
and tailor rules, for smaller sized institutions when 
appropriate. Unfortunately, the TAILOR Act would only serve to 
put consumers and the financial system at risk by subjecting 
important regulations to endless litigation.
    For the foregoing reasons, we oppose H.R. 1116.

                                   Maxine Waters.
                                   Gregory W. Meeks.
                                   Keith Ellison.
                                   Al Green.
                                   Michael E. Capuano.
                                   Carolyn B. Maloney.
                                   Nydia M. Velazquez.
                                   Gwen Moore.
                                   Wm. Lacy Clay.
                                   Emanuel Cleaver.
                                   Brad Sherman.
                                   Joyce Beatty.
                                   Bill Foster.

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