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115TH CONGRESS " HOUSE OF REPRESENTATIVES 2d Session ! REPORT 115–980 FEDERAL RESERVE SUPERVISION TESTIMONY CLARIFICATION ACT SEPTEMBER 26, 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 [To accompany H.R. 4753] The Committee on Financial Services, to whom was referred the bill (H.R. 4753) to amend the Federal Reserve Act to require the Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System to provide a written report, and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass. The amendment is as follows: Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE. This Act may be cited as the ‘‘Federal Reserve Supervision Testimony Clarification Act’’. SEC. 2. VICE CHAIRMAN FOR SUPERVISION REPORT REQUIREMENT. Paragraph (12) of section 10 of the Federal Reserve Act (12 U.S.C. 247b) is amended— (1) by redesignating such paragraph as paragraph (11); and (2) in such paragraph— (A) by striking ‘‘shall appear’’ and inserting ‘‘shall provide written testimony and appear’’; and (B) by adding at the end the following: ‘‘If, at the time of any appearance described in this paragraph, the position of Vice Chairman for Supervision is vacant, the Chairman or their designee shall appear instead and provide the required written testimony.’’. SSpencer on DSKBBXCHB2PROD with REPORTS PURPOSE AND SUMMARY On January 10, 2018, Representative Frank Lucas introduced H.R. 4753, the ‘‘Federal Reserve Supervision Testimony Clarification Act’’, which clarifies Section 1108 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This legislation estab79–006 VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 2 lishes procedures to fulfill Section 1108’s semi-annual testimony mandate for the Federal Reserve’s Vice Chairman for Supervision. The legislation establishes that the Chairman of the Board of Governors of the Federal Reserve System (Federal Reserve), or the Chairman’s designee, will fulfill the testimony requirement for the Federal Reserve’s Vice Chairman for Supervision if the United States Senate has not confirmed an individual to serve as the Vice Chairman for Supervision. BACKGROUND AND NEED FOR LEGISLATION SSpencer on DSKBBXCHB2PROD with REPORTS Section 1108 of Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111–203) amended Section 10 of the Federal Reserve Act and created a new position at the Federal Reserve, the Vice Chairman for Supervision. The Vice Chairman for Supervision is a presidential appointee subject to the advice and consent of the Senate. This amendment to the Federal Reserve Act also requires the Vice Chairman for Supervision to testify semi-annually before Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing and Urban Affairs of the United States Senate. The testimony, as mandated by the amendment to the Federal Reserve Act, requires the Vice Chairman for Supervision to discuss ‘‘the efforts, activities, objectives, and plans of the Board with respect to the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Board.’’ During his tenure as a Federal Reserve Board Governor, Daniel Tarullo fulfilled this function in practice. However, the Obama Administration never nominated him (or anybody else) to formally serve as the Federal Reserve’s Vice Chairman for Supervision. The failure to nominate former Governor Tarullo or any other person to the Vice Chairman for Supervision avoided accountability measures that Congress established for that position, including the requirement to appear before Congress. During President Obama’s administration, Financial Services Committee Chairman Jeb Hensarling and former Senate Banking, Housing and Urban Affairs Committee Chairman, Richard Shelby, sent a letter on September 21, 2016 to former Federal Reserve Chair Janet Yellen to ‘‘appear semi-annually before both the Senate Committee on Banking, Housing, and Urban Affairs, and the House Committee on Financial Services to testify on the matters specified in Section 1108 of the Dodd-Frank Act, until the position of Vice Chairman for Supervision position is filled.’’ The Federal Reserve Supervision Testimony Clarification Act, H.R. 4753, requires the Vice Chairman for Supervision to provide as part of his or her statutorily required semi-annual testimony a report on the status of proposed and anticipated rulemakings. H.R. 4753 also requires that, if the Vice Chairman for Supervision position is vacant, then the Chairman of the Board of Governors or the Chairman’s designee must fulfill the statutory requirement for semi-annual testimony. HEARINGS The Subcommittee on Monetary Policy and Trade held a hearing titled ‘‘A Further Examination of Federal Reserve Reform Pro- VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 3 posals’’ to consider matters relating to H.R. 4753 on January 10, 2018. COMMITTEE CONSIDERATION The Committee on Financial Services met in open session on September 13, 2018, and ordered H.R. 4753 to be reported favorably to the House without amendment by a recorded vote of 49 yeas to 0 nays (recorded vote no. FC–203), a quorum being present. COMMITTEE VOTES SSpencer on DSKBBXCHB2PROD with REPORTS 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 49 yeas to 0 nays (Record vote no. FC–203), a quorum being present. VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 Insert graphic folio 5 HR980.001 SSpencer on DSKBBXCHB2PROD with REPORTS 4 5 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. 4753 will strengthen Congress’s ability to fulfill its statutory mandate to effectively supervise the Federal Reserve System. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, EXPENDITURES AND TAX The Committee has not received an estimate of new budget authority contained in the cost estimate prepared by the Director of the Congressional Budget Office pursuant to Sec. 402 of the Congressional Budget Act of 1974. In compliance with clause 3(c)(2) of rule XIII of the Rules of the House, the Committee opines that H.R. 4753 will not establish any new budget or entitlement authority or create any tax expenditures. CONGRESSIONAL BUDGET OFFICE ESTIMATES The cost estimate prepared by the Director of the Congressional Budget Office pursuant to Sec. 402 of the Congressional Budget Act of 1974 was not submitted timely to the Committee. 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. SSpencer on DSKBBXCHB2PROD with REPORTS 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. VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 6 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 rule makings: The Committee estimates that the bill requires no directed rule makings within the meaning of such section. SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION Section 1. Short title This Section cites H.R. 4753 as the Federal Reserve Supervision Testimony Clarification Act. Section 2. Vice Chairman for Supervision report requirement This section provides for the Federal Reserve Board Chair, or the Chair’s designee, to appear before Congress, in the event that the Vice Chairman for Supervision has not been confirmed. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman): CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman): FEDERAL RESERVE ACT * * * * * * * SSpencer on DSKBBXCHB2PROD with REPORTS BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SEC. 10. The Board of Governors of the Federal Reserve System (hereinafter referred to as the ‘‘Board’’) shall be composed of seven members, to be appointed by the President, by and with the advice VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 SSpencer on DSKBBXCHB2PROD with REPORTS 7 and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter provided, but each appointive member of the Federal Reserve Board in office on such date shall continue to serve as a member of the Board until February 1, 1936, and the Secretary of the Treasury and the Comptroller of the Currency shall continue to serve as members of the Board until February 1, 1936. In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. In selecting members of the Board, the President shall appoint at least 1 member with demonstrated primary experience working in or supervising community banks having less than $10,000,000,000 in total assets. The members of the Board shall devote their entire time to the business of the Board and shall each receive and annual salary of $15,000, payable monthly, together with actual necessary traveling expenses. The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank, except that this restriction shall not apply to a member who has served the full term for which he was appointed. Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. Of the persons thus appointed, 1 shall be designated by the President, by and with the advice and consent of the Senate, to serve as Chairman of the Board for a term of 4 years, and 2 shall be designated by the President, by and with the advice and consent of the Senate, to serve as Vice Chairmen of the Board, each for a term of 4 years, 1 of whom shall serve in the absence of the Chairman, as provided in the fourth undesignated paragraph of this section, and 1 of whom shall be designated Vice Chairman for Supervision. The Vice Chairman for Supervision shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board, and shall oversee the supervision and regulation of such firms. The chairman of the Board, subject to its supervision, shall be its active executive officer. Each member of the Board shall within fifteen days after notice of appointment make and subscribe to the oath of office. Upon the expiration of their terms of office, members of the Board shall continue to serve until their successors are appointed and have qualified. Any person appointed as a member of the Board after the date of enactment of the Banking Act of 1935 shall not be eligible for reappointment as such member after he shall have served a full term of fourteen years. The Board of Governors of the Federal Reserve System shall have power to levy semiannually upon the Federal reserve banks, VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 SSpencer on DSKBBXCHB2PROD with REPORTS 8 in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeeding the levying of such assessment, together with any deficit carried forward from the preceding half year, and such assessments may include amounts sufficient to provide for the acquisition by the Board in its own name of such site or building in the District of Columbia as in its judgment alone shall be necessary for the purpose of providing suitable and adequate quarters for the performance of its functions. After September 1, 2000, the Board may also use such assessments to acquire, in its own name, a site or building (in addition to the facilities existing on such date) to provide for the performance of the functions of the Board. After approving such plans, estimates, and specifications as it shall have caused to be prepared, the Board may, notwithstanding any other provision of law, cause to be constructed on any site so acquired by it a building or buildings suitable and adequate in its judgment for its purposes and proceed to take all such steps as it may deem necessary or appropriate in connection with the construction, equipment, and furnishing of such building or buildings. The Board may maintain, enlarge, or remodel any building or buildings so acquired or constructed and shall have sole control of such building or buildings and space therein. The principal offices of the Board shall be in the District of Columbia. At meetings of the Board the chairman shall preside, and, in his absence, the vice chairman shall preside. In the absence of the chairman and the vice chairman, the Board shall elect a member to act as chairman pro tempore. The Board shall determine and prescribe the manner in which its obligations shall be incurred and its disbursements and expenses allowed and paid, and may leave on deposit in the Federal Reserve banks the proceeds of assessments levied upon them to defray its estimated expenses and the salaries of its members and employees, whose employment, compensation, leave, and expenses shall be governed solely by the provisions of this Act, specific amendments thereof, and rules and regulations of the Board not inconsistent therewith; and funds derived from such assessments shall not be construed to be Government funds or appropriated moneys. No member of the Board of Governors of the Federal Reserve System shall be an officer or director of any bank, banking institution, trust company, or Federal Reserve bank or hold stock in any bank, banking institution, or trust company; and before entering upon his duties as a member of the Board of Governors of the Federal Reserve System he shall certify under oath that he has complied with this requirement, and such certification shall be filed with the secretary of the Board. Whenever a vacancy shall occur, other than by expiration of term, among the six members of the Board of Governors of the Federal Reserve System appointed by the President as above provided, a successor shall be appointed by the President, by and with the advice and consent of the Senate, to fill such vacancy, and when appointed he shall hold office for the unexpired term of his predecessor. The President shall have power to fill all vacancies that may happen on the Board of Governors of the Federal Reserve System during the recess of the Senate by granting commissions which shall expire with the next session of the Senate. VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR980.XXX HR980 9 Nothing in this Act contained shall be construed as taking away any powers heretofore vested by law in the Secretary of the Treasury which relate to the supervision, management, and control of the Treasury Department and bureaus under such department, and wherever any power vested by this Act in the Board of Governors of the Federal Reserve System or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary. The Board of Governors of the Federal Reserve System shall annually make a full report of its operations to the Speaker of the House of Representatives, who shall cause the same to be printed for the information of the Congress. The report required under this paragraph shall include the reports required under section 707 of the Equal Credit Opportunity Act, section 18(f)(7) of the Federal Trade Commission Act, section 114 of the Truth in Lending Act, and the tenth undesignated paragraph of this section. No Federal Reserve bank may authorize the acquisition or construction of any branch building, or enter into any contract or other obligation for the acquisition or construction of any branch building, without the approval of the Board. The Board of Governors of the Federal Reserve System shall keep a complete record of the action taken by the Board and by the Federal Open Market Committee upon all questions of policy relating to open-market operations and shall record therein the votes taken in connection with the determination of open-market policies and the reasons underlying the action of the Board and the Committee in each instance. The Board shall keep a similar record with respect to all questions of policy determined by the Board, and shall include in its annual report to the Congress a full account of the action so taken during the preceding year with respect to openmarket policies and operations and with respect to the policies determined by it and shall include in such report a copy of the records required to be kept under the provisions of this paragraph. ø(12)¿ (11) APPEARANCES BEFORE CONGRESS.—The Vice Chairman for Supervision øshall appear¿ shall provide written testimony and appear before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives and at semiannual hearings regarding the efforts, activities, objectives, and plans of the Board with respect to the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Board. If, at the time of any appearance described in this paragraph, the position of Vice Chairman for Supervision is vacant, the Chairman or their designee shall appear instead and provide the required written testimony. SSpencer on DSKBBXCHB2PROD with REPORTS * * * * * * * Æ VerDate Sep 11 2014 00:57 Oct 02, 2018 Jkt 079006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6611 E:\HR\OC\HR980.XXX HR980