CSPAN - Financial Services Chair Discusses Financial Regulation

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Sept. 11, 2025 19:18-19:50 - CSPAN

31:56

Financial Services Chair Discusses Financial Regulation

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french hill

rep/r 23:33

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Speaker	Time	Text
unidentified		Able to come in and talk to you all the time and is terrible for everyone else.
		And so it erects a nice little fence around the industry and keeps everyone else out.
		And so one way to combat that is to have as principles-based rules as you can to say, here is the objective that we're trying to achieve.
		You go figure out how to achieve it.
		One firm might achieve it one way and another another way.
		And that makes it harder for any one firm to keep all its rivals out.
		But it is an important issue that we have to think about.
		Well, thank you very much, Commissioner Peirce, for taking the time to talk with us today.
		Great to be here.
		Thank you all.
		We will be back in 15 minutes at 11:45 for a panel talking about the Federal Reserve.
		House Financial Services Committee Chair French Hill also sat down with the Cato Institute to discuss the state of financial regulations.
		Cryptocurrency was a big topic in this portion, along with the work of the Consumer Financial Protection Bureau.
		This is about 30 minutes.
		Well, thank you, Jennifer.
		Anytime in Washington that you introduce somebody, you hear the terms honored and pleasure.
		I won't disappoint you.
		I will use those terms, but I really mean them.
		So, number one, it's a great pleasure to be with my dear friend and my former colleague, and a real honor to call you chairman of the House Financial Services Committee.
		And please believe me when I say, in the depths of my heart, of all the people who've ever served as chairman of that committee, you're my second favorite.
french hill ▲ ● ▼		That's good.
unidentified		Well, let me also say that French Hill is clearly the most qualified, knowledgeable, and capable individual to ever hold that gavel.
		And when the story comes to its final chapter, may be the most accomplished as well.
		So, number one, well, we could call each other Mr. Chairman for the rest of this session.
		Maybe we ought to do French and Jeb.
		So, French, speaking of accomplishments, for at least two Congresses now, the House Financial Services Committee has been trying to pass stablecoin legislation.
		You got it across the finish line.
		Now, a lot of the language I know came from the Senate, but tell me about that and give me your hopes and fears.
		Some of what you tried to do did not get into that legislation.
		Talk to me about that accomplishment.
french hill ▲ ● ▼		I will, but I've got to start because the two of us, our careers have been so intertwined over really four decades now, not ever working together until I was elected to Congress and came to the House Financial Services Committee with Jeb as my leader.
		But you have to go back in Texas banking history.
		In 1982, I went to work for John Tower of Texas, the senior most member of the Senate Banking Committee, and worked for him on that committee for two years and learned a lot from Texas's senior senator there.
		And Commissioner, with John leaving the Senate after the 1984 Reagan re-elect, Phil Graham, friend and mentor to Jeb, switched parties and became really what we know today as one of the most accomplished economic policymakers, I think, in the history of Congress and certainly in the 20th century.
		And so, Phil Graham became the distinguished Texan on the Senate Banking Committee, and his right hand was Jeb, and then Jeb has succeeded him in continuing his great work in economic policymaking in the House.
		And so, it's been a real pleasure for the past decade to be associated with that part of my roots of my resume.
		And Jeff, thank you for your leadership in the House very, very much.
		I mean that.
		Thank you, Trinidad.
		So you're right.
		Going back to basically the 2019 timeframe, 2018-2019, the House got very serious about digital finance, digital assets.
		Where was this going to go in Web3 in a blockchain application sense?
		Some from a very libertarian point of view, others from a practical aspect of reducing agency costs through new technology on a blockchain, which was very attractive to me as somebody who's always been involved in financial technology since the 1970s.
		And then you overlaid some trends on it.
		First, the IMF began promoting central bank digital currencies and research projects along with the Bank for International Settlements in Basel.
		Secondly, Zuckerberg attempts this premature sort of incomplete idea around Libra that was launched and then flopped.
		And then, thirdly, the third component of this learning episode, I think, for the members, particularly in the House, but also in the Senate, was the collapse and failure of FTX.
		So, all this, under both Patrick McHenry's leadership as chair and ranking member, and under former chair Maxine Waters, laid the groundwork of members really engaging here.
		And what's the right, what was the right point of view?
		How do we get this right?
		How do we keep America at the forefront of innovation, recognize that there's new technology coming that can make finance more available to more people at a lower cost with better audit standards, better programmability, more accessibility in terms of 24 hours, seven days a week, and yet how do we block it from being abused from self-dealing and disaster, as in the case of FTX,
		or aggrandizement by the corporate big tech companies, you know, as in the case of Facebook.
		Because that's the antithesis actually of Web3 and the internet.
		A corporate network dominance is not the intent behind a decentralized system.
		They're antithetical to one another.
		So over the past four years, then with that backstop, Patrick led the effort to try to find a landing spot on a dollar-back stablecoin.
		All that work in the 117th and 118th Congresses paved the way for then us to see in the last six months of 2024 engagement in the Senate, something that we'd really not had, other than Cynthia Lummis and Kristen Gillibrand from New York, who'd worked together both on the dollar-back payment stablecoin idea and the market structure idea, but it didn't broaden out from their pioneering efforts.
		And so Bill Haggerty of Tennessee, my old classmate friend at Vanderbilt, introduced a Senate version with some bells and whistles that were quite different from the McHenry version last October.
		And that allowed us in this Congress, the 119th Congress, to come in and start fresh and start strong on the stablecoin idea.
		And in the last Congress, I was able to pass FIT 21 with significant Democratic votes on the market structure issue.
		So Tim Scott and I were able to, before we were even sworn in in January and do our jobs, lay the groundwork for moving a dollar-back stablecoin bill forward in both houses.
		Brian Style carried the legislation in the House, our chairman of our FinTech subcommittee, and Haggerty pushed that along in the Senate.
		So I prefer the House version, but we were able to work between the two houses to outline a few changes that we would make to Genius, and we put them in the Clarity Act, which we passed in the House with 78 Democratic votes.
unidentified		Well, speaking of the Clarity Act, though, it appears that Senator Kennedy of Louisiana said your baby is ugly.
french hill ▲ ● ▼		Yeah.
french hill ▲ ● ▼		Well, I think coming from him, that's a compliment.
unidentified		So, given that so many believe that blockchain puts us on the cusp of this new industrial revolution, Hester Peirce, who was here, the commissioner of SEC, talked about permissionless innovation.
		But without the market structure bill, how are we going to go forward with the creativity of digitized financial assets?
		And what exactly is the problem on the Senate?
		Because I think we both know never underestimate the capacity of the Senate to do nothing.
		Yeah.
french hill ▲ ● ▼		Well, first, I'm not, John hadn't mentioned that to me.
		I've never heard him make that comment about clarity because, really, what I find both in traditional finance, in the venture capital innovator sector, and in the Blockchain Association, they fully endorse the Clarity Act.
		It's the balanced bill.
		It's the bill that both respects decentralized finance and the conversion of our existing financial system into a blockchain-based success story for exchanges and innovation.
		So, actually, I think that the Senate would be really best to use the Clarity Act as base text and mark it up.
		But that's a decision they've got to make for themselves.
unidentified		Well, out of fairness to Senator Kennedy, I think he said we're just not ready.
french hill ▲ ● ▼		Well, they don't have the benefit of this long-standing education campaign that I described a few minutes ago about what the House members have dealt with going back, as I said, to 2018 and 2019.
		But they were also not up to snuff and up to speed on dollar-back stablecoins, and they introduced it for the first time last October, and we signed it into law in July.
		So, I think they can get this done.
		Both the Senate Democrats and the Senate Republicans have special work teams who are working on this, who are collaborating to get to yes, and I think they can find their way to do that.
		If you pass just a dollar-back stablecoin, it's like passing in 1996 the authority to create a cell phone, but no cell towers.
		So, a dollar-back stable coin without market structure is just a thing, even though the state of New York effectively has a good regulatory structure for issuing a dollar-back stablecoin.
		I'm not taking anything away from that.
		I'm saying the ultimate benefits of trying to use this technology to maybe hit the goals and dreams and aspirations that Hester talked about, you need both.
		And you cannot do it by direct, you cannot do it by exemptive relief at the SEC.
		The CFTC needs statutory authority to do this.
		The CFTC needs statutory authority to do spot market regulation, say, for example, of Bitcoin.
		And then the bank regulators, the securities regulators, and the exchanges and the ATSs and the CFTC infrastructure all needs a statutory direction.
		You just, you cannot piecemeal it, in my judgment, by petitioning to the regulators for exemptive relief.
		So I believe market structure paired with a dollar-back stablecoin bill will unleash that programmable financial services capability, increase competition, and lower cost in a whole variety of both domestic and international transactions.
unidentified		So you had a series of bills, French, two passed on an extremely bipartisan basis.
		The CBDC bill, not so much so.
		Right.
		clearly appeared to be a party line vote, although on the other side of the aisle on different issues, there has been some consensus around privacy.
		So speak to me about the politics of that and where does that go going forward?
		Because it's a great concern of many in this auditorium and listening in.
french hill ▲ ● ▼		Yeah.
		Well, you're right.
		Tom Emmer, our majority whip in the House, introduced the anti-CBDC legislation that we did pass.
		It's similar to the legislation we passed in the previous Congress.
		You can make that topic bipartisan, but Tom's bill was more narrowly crafted.
		It didn't attract significant bipartisan support because of its breadth.
		But, you know, Americans don't need another way to be surveilled.
		And we put privacy first when it comes to this concept.
		I don't believe our very well-developed, very competitive, very open society needs to have people opening accounts at the Fed.
		And so I think there's consensus among center-right people that we shouldn't have the American people banking at the Fed.
		And so it was a vote.
		And we attached it yesterday to the National Defense Authorization Bill.
		It was in the base text of the NDAA, which we are transmitting to the Senate.
		So I hope that that could become law that way.
		And there are ways to modify it modestly, but still achieve the fact that Article 1 gives power to Congress to coin money.
		You and Phil just had an excellent op-ed in the Wall Street Journal along those lines.
		And so we just believe the Fed can't issue a CBDC without a direct approval by Congress.
		And if you said that and that alone, you would get broad Democratic support on that.
unidentified		Well, changing topics, if I did my homework properly, prior to Dodd-Frank, we had about 144 de novo banks each year.
		Post-Dodd-Frank, it went to four.
		You and I worked together and came to a meeting in the mines with the Senate on 2155.
		The good news is we've seen an astronomical increase in de novo bank charters.
		They've gone from five a year, I think, to 12 a year.
		Clearly, we didn't get the job fully done.
		So, French, I know it's a passion of yours.
		How are we going to make community banking great again?
french hill ▲ ● ▼		So, when I was campaigning to become the committee chairman, and a lot of people don't know that, and it's a competitive process to be elected a committee chair.
unidentified		I know that.
french hill ▲ ● ▼		At least one person in this room knows it intimately.
		And so, in meeting with the Republican leadership in the House, I said one of my core tenets, if I'm elected chair, is to make community banking great again in the theme of the work that Senator Trapo and Chairman Henserling did on S-2155,
		which is to lower the cost of regulatory burden on community banking so that they have more capital to lend to entrepreneurs in business and increase economic growth and have less pressure on consolidation.
		So we've combined that same regulatory theme in all the bills we've marked up thus far.
		We've reported to the House over 60 bills in the first eight months of the Congress.
		About 20 of those, and we have a big markup next week that will continue that.
		About 20 of those are in this theme of 2155 of truly tailoring regulations and also increasing access to capital for community banks, both in depository funding as well as in literal capital itself.
		How do you start a bank?
		First of all, you need to be in a, I've done it so I can give you, you know, you need to be in a community that you believe can support it economically, that you've got those economic signals that's yes.
		Secondly, it needs to be a growth community.
		You need to see the competitive opening of what services you'd be offering to be more competitive and certainly well-entrenched players.
		And then you need to show to your investors what?
		That over some reasonable timeframe, they're going to get a disproportionate return on investment pre-tax.
		And what I've argued since Sarbanes-Oxley and Dodd-Frank, two very expensive, difficult laws that overshot their mission in retrospect, we have the benefit of hindsight now to say that.
		When you're in an economic fight, resolving Enron and WorldCom in the case, first case, or resolving the global financial case in another, you know, you do what you have to do under those circumstances.
		But in retrospect, these bills have been so expensive, they make it unattractive to do certain things, and one of those is going to de novo banking.
		So we've tackled it: regulatory burden, capital raising capability, MA capability, and streamlining so that businesses can combine and create that growth across the whole banking sector.
		Alexander Hamilton told us our banks are our nurseries of our national wealth.
		And in a big multi-time zone, continental power like the U.S., the largest economy in the world, we need banks of all sizes.
		And we need to make sure that they can produce a quality return.
		And so that's our theme.
		You led the way.
		You had success in 2155, signed into law by President Trump back in 2018.
		And Tim Scott and I are, you know, on the hunt to do that, have that same thing in making community banking great again.
		But we want to do the same thing in capital markets and in housing, just as we have in digital.
unidentified		So you anticipated my next question, and that is, as you well know, we have maybe half the public companies we had 20 years ago.
		Those companies are going public later in their growth cycles, which means so many retail investors lose out on those investment opportunities.
		So how do you make IPOs great again?
french hill ▲ ● ▼		What is that?
unidentified		MIPOGON is anything.
french hill ▲ ● ▼		Unlikely role.
		I won't even try it.
		I won't even try it.
		A couple of sides on that, looking at that equation.
		One is we want to lower the quarterly and upfront cost of being public so that you don't have to be a unicorn to justify the expenses of going public because you're right.
		We don't have that many public companies.
		It's 50% down from my graduation date from college.
		And as I campaigned last fall for this job, I said, how many companies, it's a test question.
		How many companies are in the Wilshire 5,000 index?
		It's a little tougher than who's buried in Grant's tomb because we don't have enough companies to have 5,000 companies in the Wilshire 5,000.
		It's 3,700 is the answer.
		So our broadest index we can't even populate with qualified enterprises.
		So we do want to lower that cost and make sense.
		Yesterday we had a hearing on the proxy access and proxy process and that's one of the contributors.
		The expense of corporate governance and accounting and sarbanes all have driven up that cost.
		So how do we lower it?
		We've got bills to try to do that.
		How do we help crowdfunding?
		All the way to IPO.
		And we followed up on the JOBS Act work under your leadership and under Patrick's leadership over the years to expand that crowdfunding aspect of it.
		We now have bipartisan consensus on my work to change the definition of an accredited investor to let more people have access who have the expertise to go into private investing.
		And then finally, we have to recognize that I think we have something like 14 million Americans working for private businesses now because of what you say.
		They've delayed going public and they may not go public.
		Think about that for a minute.
		That means those companies may not ever appear in your 401k plan or your IRA.
		So that's, I mean, I want more public companies so there's more investment diversity and opportunity for more of our American citizens to build wealth.
		But that also means that all those 14 million people don't have an automatic participation in that stock in their profit sharing plan or their retirement plan, and they even work for the company.
		So we're trying to also advance the ability for people to invest in private businesses.
		And I believe we've had a decent 10 or 15 year benchmark to look at what that might look like in the public market context under a couple of different interest rate scenarios.
		Under the pandemic, you know, that's the BDCs, business development companies that have gone public, and then some of the private equity firms that have been public over the years, like, you know, Blackstone comes to mind or KKR, just to get a proxy for public company investors, in other words, individual investors, access to private investment opportunities.
		And President Trump just signed an executive order to try to encourage this by suggesting that 401k plans be open.
		This will be a Department of Labor issue principally.
unidentified		Great idea.
french hill ▲ ● ▼		Have some access to private investing, just like public pension funds have now.
		I'm not sure, somebody in the audience may know.
		I'm sure a third of private pension fund assets are in private equity, and that number may be quite a bit higher with a long means testing.
		I mean, this is not a recent trend.
		So we want to look at that carefully as well.
		So lowering the cost of being public, but providing also additional new access for individual investors to invest in private opportunities, you know, a combination because we've got to recognize the market as it is.
unidentified		Going back to banking, as you well know, one of the great challenges that banking has faced is what many believe to be the single most powerful unaccountable agency devised by the mind of men, the CFPB.
french hill ▲ ● ▼		Always on message.
unidentified		So do you reform it?
		Do you send it to Alligator Alcatraz?
		Do you deport it to El Salvador?
		Actually, I want to give you great credit because as I understand it, in the last reconciliation bill, you were able to constrict its funding, so there may be a reconciliation 2.0.
		And if you do have an, if you do, if the Supreme Court upholds so-called independent commissions, different debate, do you now have leverage to potentially at least get this thing on budget, get it under appropriations?
french hill ▲ ● ▼		Yeah, it's such a good question.
		So, yeah, we made the first signed into law major change to the CFPB since its formation when President Trump signed the budget reconciliation bill into law.
		We capped the unlimited, virtual unlimited funding the CFPB can get from the Fed to 6.5% from 12%.
		Dodd-Frank allowed it to have 12% of the Fed's operating budget.
		And in the House, we did a 5% cap, saying that that would allow it to do its statutory required responsibilities and nothing more.
		We also cut away their ability to carry over funding from year to year.
		They had built up quite a significant slush fund in that regard.
		And in the House bill, we ended the excess money in their penalty fund, in other words, their civil monetary damages type fund when they adjudicate a case for on behalf of consumers.
		We said when those are exhausted, those appeals are exhausted and all those consumers are paid, that money needs to go back to the Treasury.
		It's not some fishing expedition for CFPB.
		Those were not kept in the Senate bill.
		But the Senate was able to do the cap, not at 5%, but at 6.5%.
		What we're doing with the Trump administration now is trying to focus the CFPB, their staffing, their leadership on their core constitutionally, or I shouldn't say constitutionally, but their statutory responsibilities and nothing more.
		And we've given them a lot of assignments.
		We want them to re-propose the 1033 rule on open banking and access to information.
		We want them to severely curtail and repropose their Section 1071 rule on small business lending, which is an utter disaster.
		So we have work for them to do.
		In answer to your question, I think, yes, that by the time we get through with this and we continue our work with future reconciliations, I would love it if we could find a landing spot where Chairman Andy Barr's work that's continued from your chairmanship on a bipartisan commission on appropriations approach to CFPB could be achieved and put them in line with other regulatory agencies under using the Administrative Procedures Act.
		the like, but have them strictly focused post-elimination of Chevron deference to their statutory remate.
		And remember, this is important.
		I mean, people go, I want to, I mean, Elon texted, you know, rest in peace.
unidentified		But that's not the way the world works.
french hill ▲ ● ▼		A law was passed, and it said you will administer these consumer statutes for banks over $10 billion, and that's the law.
		And we don't have 60 votes in the Senate to repeal that law.
		So we're in for boxing, narrowing, focusing, tailoring, and overseeing their work, including putting them on appropriations.
unidentified		Possibly our last topic, Ronald Reagan famously once said, the closest thing to eternal life on earth is a temporary federal program.
		I wish I'd been born at GSE.
		The administration is talking about the GSEs.
		In my own opinion, it's kind of big on vision, small on details.
		But give me kind of your hopes and fears and visions and prognostication.
		As you well know, this was my white well when I was chairman at Jason trying to reform the GSEs.
		Give me your thoughts, Francis.
french hill ▲ ● ▼		Jeb's final act before he let the House go signed I under his chairmanship was to drag us all into a full committee hearing in the third week of December of whatever year that was to have a final whack at the pinata of the GSEs.
french hill ▲ ● ▼		You did a lot of good work and you had bicameral and bipartisan help.
unidentified		Indeed.
french hill ▲ ● ▼		Delaney and Himes and Corker over in the Senate.
		You know, we had some good people who intellectually wanted to work on this.
		And we've had Jack Lew, Steve Mnuchin, Janet Yellen, whom I'm leaving out, and now Scott Bessant.
		And I've never been invited to a meeting, a serious meeting about what to do about the GSEs by one of our Treasury Secretaries, but it might happen this time.
		Secretary Besson is doing his due diligence, which is exactly what we ought to ask, to be take a sober, diligent, careful assessment of the GSEs under the conservatorships, what the law says about administering in conservatorship, what the preferred stock agreement is with the Treasury, and think about what the alternatives are.
		In each instance, under your leadership, under, I'll say under Maxine's and under McHenry's, we have attempted to get the Treasury to engage on this, including we have an unanswered letter from Secretary Yellen, where she had committed to give us a work plan for the GSEs by September 30th of 2021.
		And I checked that mailbox every day.
		And it's not even come from Brookings, where I think she's hanging out now to name another brand name on the other side of the equation.
		So I think we should have that sober look.
		And if Secretary Turner and Secretary Besson, you know, are committed to doing the hard work on that, then I think they'll find Senator Scott and I are willing to meet with them and see what the right way to do it is.
		But it's not easy.
		I read in the newspaper or on social media, oh, we just snap our fingers and something happens here.
		That's not the case.
		First of all, they're almost $200 billion undercapitalized.
		So FYI, breaking news.
		I don't think that's breaking news to anyone who's actually looked at the math here.
		And there's some serious issues around the preferred stock agreement.
		And then there are members of Congress who have strong feelings about the role of the GSEs in the marketplace.
unidentified		I've met them all.
french hill ▲ ● ▼		I know you, and you've led them all.
		So I appreciate you volunteering to lead this work on behalf of House Republicans.
		Our people will be in touch with your people.
unidentified		Well, speaking of leading, if I want to keep my economics fellowship at Cato, I promised I would end this on time.
unidentified		I'm sorry we don't have more time.
french hill ▲ ● ▼		Awesome to be with you.
unidentified		But on behalf of the Cato Institute, we are honored that you would be here.
		Thank you very much.
		Appreciate it.
french hill ▲ ● ▼		Thank you all very much.
unidentified		This fall, C-SPAN invites you on a powerful journey through the stories that define a nation.
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		Among this season's remarkable guests, John Grisham, master storyteller of the American justice system.
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